UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM

10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For th

the quarterly period ended ~~September~~June 30, ~~2021~~

2023

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission File Number:

000-56348

~~TPCO Holding Corp.~~

~~(Exact name of registrant as specified in its charter)~~

		Gold Flora Corporation
~~Canada~~ (Exact name of registrant as specified in its charter)

Delaware		~~98-1566338~~ 93-2261104
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3165 Red Hill Avenue, Costa Mesa, California		92626

~~1550 Leigh Avenue~~ ~~San Jose, California~~		~~95125~~
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (669)

279-5390

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
NONE	NONE	NONE

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐☒ No ☒

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T

(§ (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule

12b-2

of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated Filer	☒	Smaller reporting company	☒
Emerging growth company	☒
~~Large accelerated filer~~		☐		~~Accelerated filer~~	☐

~~Non-accelerated~~ ~~filer~~		☒		~~Smaller reporting company~~	☒

~~Emerging growth company~~		☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act). Yes ☐ No ☒

As of ~~November 9, 2021,~~August 11, 2023, there were ~~96,997,982~~288,426,413 shares of common ~~shares~~stock of the registrant issued and outstanding.

~~Table of Contents~~

Table of Contents

PART I-FINANCIAL INFORMATION			Page	~~Page~~
~~PART I.~~		~~FINANCIAL INFORMATION~~			1
Item 1.		Financial Statements		4	1
		Interim ~~Condensed Consolidated Balance Sheets~~condensed consolidated balance sheets as of June 30, 2023 (Unaudited) and December 31, 2022		F-2	1
	Unaudited interim condensed consolidated statements of operations and comprehensive (loss) for the three and six months ended June 30, 2023 and 2022	~~Interim Condensed Consolidated Statements of Operations and Comprehensive Income (loss)~~	F-3		2
	Unaudited interim condensed consolidated statements of changes in shareholders’ (deficit) equity for the three and six months ended June 30, 2023 and 2022	~~Interim Condensed Consolidated Statements of Shareholders’ (Deficit) Equity~~	F-4		3
	Unaudited interim condensed consolidated statements of cash flows for the six months ended June 30, 2023 and 2022	~~Interim Condensed Consolidated Statements of Cash Flows~~	F-6		4
		Notes to ~~Interim Condensed Consolidated Financial Statements~~the unaudited interim condensed consolidated financial statements		F-7	5
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations~~Operations.		5	49
Item 3.		Quantitative and Qualitative Disclosures About Market ~~Risk~~Risk.		30	73
Item 4.		Controls and ~~Procedures~~Procedures.		31	73
PART ~~II.~~ II-OTHER INFORMATION			~~OTHER INFORMATION~~ 32			74
Item 1.		Legal ~~Proceedings~~Proceedings.		32	74
~~Item 1A.~~		~~Risk Factors~~			74
Item 2.		Unregistered Sales of Equity Securities and Use of ~~Proceeds~~Proceeds.		56	74
Item 3.		Defaults Upon Senior ~~Securities~~Securities.		56	75
Item 4.	Mine Safety Disclosures.		56
Item 5.	Other Information.		56
Item 6.	Exhibits.		57
Signatures			58


~~Item 4.~~ 2
	~~Mine Safety Disclosures~~		75

~~Item 5.~~		~~Other Information~~		76
~~Item 6.~~		~~Exhibits~~		76
~~Signatures~~				77

10-Q

~~(the “Quarterly Report”~~ (this “Quarterly Report”), references to (i) the ~~“Company”~~“Company, ~~“The~~” “TPCO,” “The Parent ~~Company”~~Company, ~~“we”~~” “we, ~~“us”~~” “us” and ~~“our”~~“our” refer to TPCO Holding Corp. and its subsidiaries prior to the Business Combination, (ii) “Gold Flora” refer Gold Flora, LLC, which is now a wholly owned subsidiary of Gold Flora Corporation and ~~joint ventures~~(iii) “Gold Flora Corporation” refer to ~~which it is~~Gold Flora Corporation, the Delaware corporation resulting from the Business Combination.

As a ~~party.~~ result of the Business Combination, Gold Flora Corporation became the successor issuer to TPCO Holding Corp. pursuant to Rule 12g-3(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and, as a result, the common stock, par value of $0.01 per share (the “Gold Flora Common Stock”) of Gold Flora Corporation and the share purchase warrants exercisable for Gold Flora Common Stock at an exercise price of US$11.50 per share (the “Gold Flora Warrants”) are deemed registered under Section 12(g) of the Exchange Act as the common stock and warrants of the successor issuer.

References in this Quarterly Report Statement to “cannabis” mean all parts of the plant

cannabis sativa L.

containing more than 0.3 percent

tetrahydrocannabinol

(“~~THC”~~THC”), including all compounds, manufactures, salts, derivatives, mixtures, or preparations.

References in this Quarterly Report to the Company’s websites, social media pages or mobile application or third party websites or applications does not constitute incorporation by reference of the information contained at or available through the Company’s websites, social media pages or mobile application or third party websites or applications, and you should not consider such information to be a part of this Quarterly Report.

This Quarterly Report contains references to our trademarks and trade names and to trademarks and trade names belonging to other entities. Solely for convenience, trademarks and trade names referred to in this report may appear without the

™

symbols, but such references are not intended to indicate, in any way, that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend our use or display of other companies’ trademarks or trade names to imply a relationship with, or endorsement or sponsorship of us or our business by, any other companies.

~~Table of Contents~~

Table of Contents

PART ~~I—FINANCIAL~~I-FINANCIAL INFORMATION

Item 1. Financial ~~Statements~~

Statements.

Interim condensed consolidated financial statements

TPCO Holding Corp.

For the three and six months ended June 30, 2023 and 2022 (Unaudited)

Table of Contents

Contents

		Page
Interim condensed consolidated balance sheets as of June 30, 2023 (unaudited) and December 31, 2022		F- 2

Unaudited interim condensed consolidated statements of operations and comprehensive (loss) for the three and six months ended June 30, 2023 and 2022		F- 3

Unaudited interim condensed consolidated statements of changes in shareholders’ (deficit) equity for the three and six months ended June 30, 2023 and 2022		F- 4

Unaudited interim condensed consolidated statements of cash flows for the six months ended June 30, 2023 and 2022		F- 6

Notes to the unaudited interim condensed consolidated financial statements		F- 7

F-1

Table of Contents

TPCO Holding Corp.

Interim condensed consolidated balance sheets

(~~Unaudited, in~~In United States dollars)

As at
   Note
September 30, 2021
December 31, 2020
Assets

Current

Cash
$
206,677,145

$ 0—
Restricted cash and cash equivalents

13,354,531

582,622,025
Accounts receivable    32

4,943,064

0—
Other receivable    5

0—

24,977,765
Inventory    6

33,671,677

0—
Prepaid expenses

8,873,203

0—
Current portion of notes receivable    7

7,370,563

0—
Assets held for sale    16

2,615,440

0—
Other current assets

4,502,933

0—

Total current asset

282,008,556

607,599,790

Notes receivable    7

700,000

0—
Investments at fair value through profit and loss    8

2,740,696

—
Investment in
non-marketable
securities
   14

591,545

0��
Security deposits

1,016,052

0—
Prepaid expenses and other assets

43,484

81,333
Property and equipment    9

17,837,329

0
Right-of-use
assets – operating
   13

18,666,330

0
Right-of-use
assets – finance
   13

34,984,381

0
Goodwill and intangibles    10

211,322,718

0

Total assets

$
569,911,091

$ 607,681,123

Liabilities

Current
Accounts payable and accrued liabilities    12
$
37,199,408

$ 28,321,972
Consideration payable

5,555,778

0—
Operating lease liability – current portion    13

1,931,212

0—
Finance lease liability – current portion    13

5,091

0—
Share repurchase liability    17

2,233,000

0—
Cash settled share-based payments

4,433,771

0—
Contingent consideration    32

9,765,114

0—
Liabilities held for sale    16

2,359,887

0—

Total current liabilities

63,483,261

28,321,972

Operating lease liabilities    13

18,197,829

0—
Finance lease liabilities    13

36,770,703

0—
Deferred tax liabilities    24

44,785,647

0—

Total liabilities


163,237,440

28,321,972

Mezzanine equity

Class A Restricted Voting Shares, 0 par value; unlimited Class A restricted voting shares authorized, 57,500,000 issued and outstanding at December 31, 2020    18

0—

582,622,025
Subscription receipts    18

0—

25,087,000

Total mezzanine equity


0—

607,709,025

Shareholders’ (deficit) equity
      ��
Class B shares, 0 par value;
unlimited
Class B shares authorized, NaN issued and outstanding at September 30, 2021 and 15,218,750 December 31, 2020
   20

0

0
Common shares, 0 par value,
unlimited
Common Shares authorized, 97,179,378 issued and
outstanding at

September 30, 2021 and NaN at December 31, 2020
   20

0

0
Additional paid in capital

949,105,497

(21,886,268 )
Accumulated (deficit) equity

(542,431,846
) (6,463,606 )

Total shareholders’ (deficit) equity


406,673,651

(28,349,874 )

Total liabilities, mezzanine equity and shareholders’ (deficit) equity

$
569,911,091

$ 607,681,123

As at	Note		June 30, 2023 (unaudited)			December 31, 2022
Assets
Current
Cash			$	60,544,072		$	93,697,529
Accounts receivable, net		24		1,114,729			1,205,700
Inventory		3		6,183,033			8,727,858
Notes and other receivables, net		4		121,057			108,957
Prepaid expenses and other current assets		5		7,910,331			8,368,495
Assets held for sale		6		5,698,193			6,102,764
Total current assets				81,571,415			118,211,303

Investments		8		1,312,846			1,478,204
Security deposits				1,307,509			1,181,078
Prepaid expenses and other assets				260,906			844,239
Notes and other receivables, net		4		5,333,598			518,846
Property and equipment		9		13,618,281			15,146,084
Right-of-use assets – operating		10		16,431,134			20,689,086
Right-of-use assets – finance		10		22,287,811			23,070,846
Intangible assets		11		95,735,035			99,378,098
Total assets			$	237,858,535		$	280,517,784

Liabilities
Current
Accounts payable and accrued liabilities		13	$	26,109,146			24,560,359
Consideration payable – current portion				4,988,833			5,777,943
Operating lease liability – current portion		10		1,996,340			2,355,174
Finance lease liability – current portion		10		224,545			156,184
Note payable				-			931,103
Contingent consideration		24		3,534,774			1,611,843
Liabilities held for sale		6		1,104,425			1,309,077
Total current liabilities				37,958,063			36,701,683

Operating lease liabilities		10		21,264,943			24,803,815
Finance lease liabilities		10		36,472,977			36,618,530
Consideration payable				-			383,334
Deferred tax liabilities		14		19,868,631			20,972,629
Total liabilities				115,564,614			119,479,991

Shareholders’ equity
Common shares, no par value, unlimited Common shares authorized 120,158,606 issued and outstanding at June 30, 2023 and 107,516,333 at December 31, 2022		15		-			-
Additional paid in capital				998,775,061			996,697,299
Non-controlling interest				1			1
Accumulated deficit				(876,481,141	)		(835,659,507	)
Total shareholders’ equity				122,293,921			161,037,793
Total liabilities and shareholders’ equity			$	237,858,535			280,517,784

Commitments and contingencies (Note ~~31)~~

23)

Subsequent events (Note ~~35)~~

27)

See accompanying notes to the interim condensed consolidated financial statements

~~Table of Contents~~

F-2

Table of Contents

TPCO Holding Corp.

Interim condensed consolidated statements of operations and comprehensive ~~income~~ (loss)

(Unaudited, in United States dollars)

Three months ended

Nine months ended


Note

September 30,
2021

September 30,
2020

September 30,
2021

September 30,
2020

Sales, net of discounts    4(m)
$
39,665,059

$ —
$
133,785,604

$ —
Cost of sales

33,577,226

0—

115,873,627

0—

Gross profit

6,087,833

0—

17,911,977

0—

Impairment loss    16

570,300,047

0—

645,199,154

0—
Operating expenses    25

31,594,206

371,666

137,582,126

794,795

Loss from operations

(595,806,420
)
(371,666 )

(764,869,303
)
(794,795 )
Other income (expense)
Interest income

1,038,139

155,416

1,086,418

2,244,416
Interest expense    27

(1,133,341
)
—

(3,728,576
)
—
Gain on debt forgiveness    15

0—

0—

3,358,686

0—
Loss on disposal of assets    26

(137,042
)
—

(3,656,707
)
—
Change in fair value of investments at fair value through profit or loss    8

(768,030
)
0—

(418,818
)
0—
Change in fair value of
contingent consideration
   32

38,178,321

0—

220,997,087

0—
Other income

123,946

0—

2,748,843

0—



37,301,993

155,416

220,386,933

2,244,416

Income (loss) before income taxes

(558,504,427
)
(216,250 )

(544,482,370
)
1,449,621
Income tax recovery
(expense)
   24

(2,845,623
) —

8,018,073

—

Net income
(
loss
)

and comprehensive
I
ncome

(
loss
)

$
(561,350,050
)
$ (216,250 )
$
(536,464,297
)
$ 1,449,621

Earnings (loss) per share
Basic
and diluted
   23
$
(5.70
) $ (0.00 )
$
(5.72
) $ (0.05 )
Weighted average number of common shares
Basic
and diluted
   23

98,421,935

15,218,750

93,802,606

15,218,750

			Three months ended						Six months ended
	Note		June 30, 2023			June 30, 2022			June 30, 2023			June 30, 2022

Sales, net of discounts			$	19,410,764		$	21,673,714		$	37,464,976		$	44,114,014
Cost of sales				9,975,383			15,650,560			20,248,545			31,373,966
Gross profit				9,435,381			6,023,154			17,216,431			12,740,048

Impairment loss		12		403,271			2,429,530			403,271			2,429,530
Operating expenses		16		29,889,848			32,288,461			51,991,392			71,198,369

Loss from operations				(20,857,738	)		(28,694,837	)		(35,178,232	)		(60,887,851	)

Other income (expense)
Interest income				614,954			-			1,237,750			-
Interest expense				(1,208,949	)		(1,260,262	)		(2,472,877	)		(2,510,830	)
Loss on disposal of assets				-			(63,314	)		(93,944	)		(317,787	)
Change in fair value of investments		8		(170,358	)		(330,960	)		(170,358	)		(33,096	)
Change in fair value of contingent consideration		24		(1,177,730	)		249,973			(1,922,931	)		638,595
Other income				450,000			801,339			455,170			1,109,295

Loss before income taxes				(22,349,821	)		(29,298,061	)		(38,145,422	)		(62,001,674	)

Income tax recovery (expense)				(1,961,804	)		244,473			(2,676,212	)		(42,227	)
Loss and comprehensive loss from continuing operations				(24,311,625	)		(29,053,588	)		(40,821,634	)		(62,043,901	)

Loss from discontinued operations, net of income tax		7		-			(1,429,097	)		-			(1,975,316	)

Loss and comprehensive loss attributable to shareholders of the company			$	(24,311,625	)	$	(30,123,075	)	$	(40,821,634	)	$	(63,814,952	)
Loss and comprehensive loss attributable to redeemable non-controlling interest				-			(359,610	)		-			(204,265	)
Net loss			$	(24,311,625	)	$	(30,482,685	)	$	(40,821,634	)	$	(64,019,217	)

Per share – basic and diluted
Loss per share from continuing operations			$	(0.20	)	$	(0.29	)	$	(0.37	)	$	(0.62	)
Loss per share from discontinued operations				-			(0.01	)		-			(0.02	)
Loss per share			$	(0.20	)	$	(0.30	)	$	(0.37	)	$	(0.64	)
Weighted average number of common shares				120,070,367			101,102,391			111,208,235			99,967,824

See accompanying notes to the ~~interim condensed~~ consolidated financial statements

~~Table of Contents~~

F-3

Table of Contents

TPCO Holding Corp.

Interim condensed consolidated statements of changes in shareholders’ (deficit) equity

(Unaudited, in United States dollars)

Number of


Note

Common
Shares

Warrants

Class B
Shares

Shares to
be Issued

Additional

Paid in Capital

Accumulated
Deficit

Total

Balance, December 31, 2019       0   35,837,500    15,218,750 0      $ 589,044 $ 0
$
589,044

Net income       —   —      —   —      1,449,621

1,449,621

Adjustment to mezzanine equity    18    —   —      —   —      (794,795 ) (1,449,621 )

(2,244,416
)

Balance September 30, 2020       0   35,837,500    15,218,750 0      (205,751 ) —

(205,751
)

Balance December 31, 2020       0   35,837,500    15,218,750 0      (21,886,268 ) (6,463,606 )

(28,349,874
)
Conversion of Class B shares    20    14,655,547 —      (14,655,547 ) —      —   —

—

Founders’ shares forfeited    20    —   —      (563,203 ) —      (496,057 ) 496,057

—

Shares issued in a private placement    20    6,313,500 —      —   —      63,135,000 —

63,135,000

Conversion of Class A restricted voting shares    20    31,407,336 —      —   —      318,303,338 —

318,303,338

Shares issued for long-term strategic contracts    19,
20    2,376,425 —      —   —      25,000,000 —

25,000,000

Shares issued in a business acquisition    20    42,915,923 —      —   247,356    546,447,112 —

546,447,112

Shares issued to extinguish liabilities in a business
acquisition    20    336,856 —      —   —      4,264,597 —

4,264,597

Shares to be issued reclassified from contingent consideration    32    24,584 —      —   309,284    1,957,045 —

1,957,045

Contingent shares to be issued in a business acquisition    3    —   —      —   187,380    2,372,231 —

2,372,231

Replacement options issued in a business acquisition    3    —   —      —   —      3,489,501 —

3,489,501

Share repurchase obligation    17    —   —      —   —      (7,055,250 ) —

(7,055,250
)
Shares repurchased under share repurchase agreements    17,20    (1,037,500 ) —      —   —      —   —

—

Shares repurchased under NCIB    20    (157,600 ) —      —   —      (603,165 ) —

(603,165
)
Shares issued for options exercised    22    3,313 —      —   —      12,972 —

12,972

Shares issued for RSUs vested    20,22    340,994 —      —   —      —   —

—

Tax settlements associated with RSUs    22    —   —      —   —      (972,741 ) —

(972,741
)
Modification of RSUs    22    —   —      —   —      3,451,365 —

3,451,365

Share-based compensation    22    —   —      —   —      11,685,817 —

11,685,817

Net income       —   —      —   —      —   (536,464,297 )

(536,464,297
)


Balance September 30, 2021       97,179,378 35,837,500    0   744,020    $ 949,105,497 $ (542,431,846 )
$
406,673,651

	Note		Common Shares			Warrants		Common Shares to be issued / returned			Additional Paid in Capital			Accumulated Deficit			Non-controlling interest		Total

Balance December 31, 2022				107,516,333			35,837,500		(6,673,222	)	$	996,697,299		$	(835,659,507	)	$	1	$	161,037,793
Shares issued for RSUs vested		15		165,217			-		-			-			-			-		-
Tax settlements associated with RSUs				-			-		-			(16,799	)		-			-		(16,799	)
Share-based compensation		18		-			-		-			1,665,220			-			-		1,665,220
Shares returned to Treasury		15		(7,122,321	)		-		7,122,321			-			-			-		-
Shares issued in exchange for shares of subsidiary		15		18,268,094			-		-			-			-			-		-
Net loss				-			-		-			-			(16,510,009	)		-		(16,510,009	)
Balance March 31, 2023				118,827,323			35,837,500		449,099		$	998,345,720		$	(852,169,516	)	$	1	$	146,176,205

Shares issued for RSUs vested		15		768,177			-					-			-			-		-
Tax settlements associated with RSUs				-			-		-			(69,142	)		-			-		(69,142	)
Share-based compensation		18		-			-		-			498,483			-			-		498,483
Shares returned to Treasury		15		(2,517	)		-		-			-			-			-		-
Shares issued in exchange for shares of subsidiary		15		452,989			-		-			-			-			-		-
Share issuance for previous acquisitions		15		112,634			-		(112,634	)		-			-			-		-
Net loss				-			-		-			-			(24,311,625	)		-		(24,311,625	)
Balance June 30, 2023				120,158,606			35,837,500		336,465		$	998,775,061		$	(876,481,141	)	$	1	$	122,293,921

See accompanying notes to the ~~interim~~consolidated financial statements

F-4

Table of Contents

TPCO Holding Corp.

Interim condensed consolidated statements of changes in shareholders’ (deficit) equity

(Unaudited, in United States dollars)

	Note		Common Shares		Warrants		Common Shares to be issued / returned			Additional Paid in Capital			Accumulated Deficit			Total

Balance December 31, 2021				97,065,092		35,837,500		743,768		$	954,102,859		$	(593,027,673	)	$	361,075,186
Shares issued for long-term strategic contract				1,348,921		-		-			1,875,000			-			1,875,000
Shares issued to settle contingent consideration		14		569,939		-		(305,325	)		299,014			-			299,014
Shares issued for RSUs vested				201,380		-		-			-			-			-
Tax settlements associated with RSUs				-		-		-			(204,802	)		-			(204,802	)
Share-based compensation		18		-		-		-			2,242,077			-			2,242,077
Net loss				-		-		-			-			(33,691,877	)		(33,691,877	)
Balance March 31, 2022				99,185,332		35,837,500		438,443		$	958,314,148		$	(626,719,550	)	$	331,594,598

Shares issued for long-term strategic contract				1,441,093		-		-		$	1,875,000		$	-		$	1,875,000
Shares issued for RSUs vested				257,738		-		-			-			-			-
Tax settlements associated with RSUs				-		-		-			(215,445	)		-			(215,445	)
Share-based compensation		18		-		-		-			1,461,093			-			1,461,093
Net loss				-		-		-			-			(30,123,075	)		(30,123,075	)
Balance June 30, 2022				100,884,163		35,837,500		438,443		$	961,434,796		$	(656,842,625	)	$	304,592,171

See accompanying notes to the consolidated financial statements

~~Table of Contents~~

F-5

Table of Contents

TPCO Holding Corp.

Interim condensed consolidated statements of cash flows

(Unaudited, in United States dollars)

Nine months ended


Note

September 30, 2021

September 30, 2020

Cash provided by (used in)

Operating activities

Net income
$
(536,464,297
)
$ 1,449,621
Adjustments for items not involving cash
Impairment loss    16

645,199,154

—
Interest income

(993,639
)

Interest expense    27

3,728,576

—
Provision for bad debts    32

796,403

0—
Loss on disposal of assets    26

3,656,707
0—
Gain on debt forgiveness    15

(3,358,686
)
0—
Fair value change of investments at fair value through profit or loss    8

418,818

0—
Non-cash
portion of operating lease expense


(352,332
)
0—
Depreciation and amortization    25

18,825,226

0—
Shares issued for long-term strategic contracts    19

25,000,000

0—
Share-based compensation expense, net of withholding tax settlement    22

16,765,238

0—
Non-cash
marketing expense
   19

3,803,030

0—
Fair value change of contingent consideration    32

(220,997,087
)
0—
Deferred income tax recovery    24

(13,714,716
)
—

Net changes in
non-cash
working capital items
   28

(44,545,403
)
794,795

Total operating
activities


(102,233,008
)
2,244,416

Financing activities

Proceeds from private placement    20

51,635,000

0—
Redemption of Class A restricted voting shares

(264,318,686
)
0—
Proceeds from exercise of options    22

12,972

0—
Repayment of consideration payable

(872,021
)
0—
Repayment of finance lease liabilities

(3,429,846
)
0—
Repurchase of shares

(4,454,571
)
0—
Repayment of line of credit

(1,000,000
)
0—

Total financing
activities


(222,427,152
)
0—

Investing activities

Net cash paid in business combinations    3

(32,408,483
)
0—
Net cash paid in business combinations    11

(1,402,337
)
0—
Purchases of property and equipment    9

(8,725,860
)
0—
Advances for note receivable    7

(5,650,000
)
0—
Advances for investments at fair value through profit or loss    8

(1,000,000
)
0—
Proceeds from notes receivable    7

187,954

0—
Proceeds from sale of net assets

11,068,537

0—

Total investing
activities


(37,930,189
)
0—

Net change in cash during the period

(362,590,349
)
2,244,416
Cash, restricted cash and cash equivalents
Beginning of period
$
582,622,025

$ 580,271,713

End of period
$
220,031,676

$ 582,516,129

Cash

206,677,145

0—
Restricted cash and cash equivalents

13,354,531

582,516,129

Cash, restricted cash and cash equivalents
$
220,031,676

$ 582,516,129

			Six months ended
	Note		June 30, 2023			June 30, 2022

Cash provided by (used in)
Operating activities
Net loss from continuing operations			$	(40,821,634	)	$	(62,043,901	)
Adjustments for items not involving cash
Impairment				403,271			2,429,530
Interest expense				2,472,877			2,510,830
Non- cash Interest income				(153,755	)		(48,417	)
Loss on disposal of assets				93,944			317,787
Loss on lease termination				-			41,074
Allowance for accounts receivable and notes receivable				429,338			2,478,142
Fair value change of investments		8		170,358			33,096
Depreciation and amortization		16		5,436,989			12,195,210
Share-based compensation expense, net of withholding tax settlement				2,077,762			3,282,923
Non-cash marketing expense				565,000			2,727,272
Non-cash operating lease expense		10		2,515,095			3,704,397
Fair value change of contingent consideration		24		1,922,931			(638,595	)
Deferred income tax recovery				(1,103,998	)		(1,550,509	)
Repayment of operating lease liabilities				(3,572,578	)		(4,611,772	)
Net changes in non-cash working capital items		19		4,113,961			(1,473,083	)
Net cash used in continued operating activities				(25,450,439	)		(40,646,016	)
Net cash used in discontinued operating activities				-			(3,824,924	)
Total operating activities				(25,450,439	)		(44,470,940	)

Financing activities
Receipt of payments on notes receivables				-			1,572,712
Repayments of consideration payable				(766,667	)		(766,666	)
Repayments of finance lease liabilities				(2,295,363	)		(2,228,507	)
Total financing activities				(3,062,030	)		(1,422,461	)

Investing activities
Purchases of property and equipment				(69,928	)		(2,314,113	)
Proceeds from sale of property and equipment, net of selling costs				328,940			6,176,473
Advances for notes receivables				(5,000,000	)		-
Payments received on notes receivable				100,000			-
Acquisition of investments				-			(150,000	)
Total investing activities				(4,640,988	)		3,712,360

Net change in cash during the period				(33,153,457	)		(42,181,041	)

Cash, restricted cash and restricted cash equivalents
Beginning of period			$	93,697,529		$	174,892,298
End of period			$	60,544,072		$	132,711,257

Cash				60,544,072			125,993,248
Restricted cash and restricted cash equivalents				-			6,718,009
Cash, restricted cash and restricted cash equivalents			$	60,544,072		$	132,711,257

Supplemental cash-flow information (Note ~~28)~~

19)

See accompanying notes to the ~~interim condensed~~ consolidated financial statements

~~Table of Contents~~

~~TPCO Holding Corp.~~

~~Notes to the interim condensed consolidated financial statements~~

~~(Unaudited, in United States dollars)~~

~~For the three and nine months ended September 30, 2021 and 2020~~

F-6

Table of Contents

TPCO Holding Corp.

Notes to the interim condensed consolidated financial statements

(Unaudited, in United States dollars)

For the three and six months ended June 30, 2022 and 2023

1. Nature of operations

TPCO Holding Corp. ~~(formerly known as Subversive Capital Acquisition Corp.)~~ (“TPCO” or the “Company”) was a special purpose acquisition corporation incorporated on June 17, 2019 under the laws of the Province of British Columbia for the purpose of effecting, directly or indirectly, an acquisition of one or more businesses or assets, by way of merger, amalgamation, arrangement, share exchange, asset acquisition, share purchase, reorganization, or any other similar business combinations involving the Company (a “Qualifying Transaction”). As more fully described in the ~~notes to these interim condensed consolidated financial statements,~~Company’s Annual Report on Form 10-K for the year ended December 31, 2021, the Company completed the Qualifying Transaction on January 15, 2021 and at which time the Company changed its name to TPCO Holding Corp.

The Company’s registered office is located at 595 Burrard Street, Suite 2600, P.O. Box 49314, Vancouver, BC, V7X 1L3, Canada, and the Company’s head office is located at 1550 Leigh Avenue, San Jose, California, 95125, United States of America. Commencing on the date of the Qualifying Transaction, the Company became ~~vertically~~ integrated as a cultivator, retailer, manufacturer and distributor of adult use cannabis products through the sale to omni-channel retail ~~bulk~~ and wholesale customers under the “Medical Marijuana Programs Act” and the proposition 64 “The Adult Use of Marijuana Act”.

~~The common shares of~~

On July 7, 2023 the Company ~~are listed on the Aequitas NEO Exchange (“NEO”) and Over the Counter Market (“OTC”) under the trading symbols “GRAM.U” and “GRAMF”, respectively.~~was acquired via an all stock merger by Gold Flora LLC. The ~~warrants~~merged entity operates as Gold Flora Corporation. Refer to Note 27.

2. Basis of ~~the Company are listed on the NEO under the trading symbol “GRAM.WT.U”.~~

2.	~~Basis of presentation~~

presentation

These interim condensed consolidated financial statements reflect the accounts of the Company and were prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for ~~interim~~ financial information. ~~Certain information and footnote disclosures normally included in the audited annual consolidated financial statements prepared in accordance with GAAP have been omitted or condensed.~~

These interim condensed consolidated financial statements ~~should be read~~are presented in ~~conjunction with~~U.S. dollars, which is also the ~~audited consolidated financial statements for the year ended~~

~~December 31, 2020 in the Form 10.~~

Company’s and its subsidiaries’ functional currency.

These interim condensed consolidated financial statements are unaudited and reflect adjustments (consisting of normal recurring adjustments) that are, in the opinion of management, necessary to provide a fair statement of results for the interim periods in accordance with GAAP. The results reported in these interim condensed consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for an entire fiscal year. ~~The policies set out below are consistently applied to all periods presented, unless otherwise noted.~~

These interim condensed consolidated financial statements have been prepared on a going concern basis, which assumes that the Company will continue in operation for the foreseeable future and, accordingly, will be able to realize its assets and discharge its liabilities in the normal course of operations as they come due.

The Company is currently meeting its current operational obligations as they become due from its current working capital. However, the Company has sustained losses since inception and may require additional capital in the future. As at June 30, 2023, the Company had a total accumulated deficit of $876,364,989. For the three and six months’ ended June 30, 2023, the Company had a net loss of $24,311,625 and $40,821,634, respectively and net cash used in operating activities for the six months ended June 30, 2023 was $25,450,439. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

As described in Note 27, the Company consummated a business combination with Gold Flora LLC on July 7, 2023, forming Gold Flora Corporation (“GFC”). GFC anticipates realizing synergies from this acquisition, as well as plans to reduce operating expenses through various strategic initiatives and aggressive cost-cutting measures which the Company believes alleviates substantial doubt over going concern. In addition, GFC plans to raise additional financing if needed to help fund operations. However, there can be no assurance that the Company will be successful in achieving its objectives. These condensed consolidated interim financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from uncertainty related to substantial doubt about the Company’s ability to continue as a going concern.

Certain information and footnote disclosures normally included in the audited annual consolidated financial statements prepared in accordance with GAAP have been omitted or condensed. These interim condensed consolidated financial statements ~~are presented~~should be read in ~~U.S. dollars, which is also~~conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”) and ~~its subsidiaries’ functional currency.~~

i)have been prepared on a basis consistent with the accounting policies as described in the 2022 Form 10-K.

F-7

Table of Contents

TPCO Holding Corp.

Notes to the interim condensed consolidated financial statements

(Unaudited, in United States dollars)

For the three and six months ended June 30, 2022 and 2023

2. Basis of presentation (continued)

i) Basis of consolidation

These interim condensed consolidated financial statements include the accounts of the Company and all subsidiaries. Subsidiaries are entities in which the Company has a controlling voting interest or is the primary beneficiary of a variable interest entity. Subsidiaries are fully consolidated from the date control is transferred to the Company and are

de-consolidated

from the date control ceases. All intercompany accounts and transactions have been eliminated on consolidation. The interim condensed consolidated financial statements include all the assets, liabilities, revenues, expenses and cash flows of the Company and its subsidiaries after eliminating intercompany balances and transactions.

~~Table of Contents~~

~~TPCO Holding Corp.~~

~~Notes to the interim condensed consolidated financial statements~~

~~(Unaudited, in United States dollars)~~

~~For the three and nine months ended September 30, 2021 and 2020~~

~~2. Basis of presentation~~

~~(continued)~~

~~These interim condensed consolidated financial statements include the accounts of the Company and the following entities which are subsidiaries of the Company:~~

Subsidiaries

Jurisdiction of incorporation

Ownership interest

September 30, 2021

Ownership interest

December 31, 2020

TPCO US Holding LLC    California    100 % 100 %
Social Equity Ventures LLC    California    100 % 0
CMG Partners, Inc.    California    100 % 0
well. By Caliva LLC    California    100 % 0
well. By Caliva Centers    California    100 % 0
well. By Caliva
e-commerce,
LLC
   California    100 % 0
Live Zola, LLC    California    100 % 0
NC3 Systems, Inc.    California    100 % 0
NC4 Systems, Inc.    California    100 % 0
NC5 Systems, Inc.    California    100 % 0
NC6 Systems, Inc.    California    100 % 0
Caliva CADECC1, LLC    California    100 % 0
Caliva CARERC1, LLC    California    100 % 0
Caliva CAMISJ2, Inc.    California    100 % 0
OG California Branding, Inc.    California    100 % 0
Caliva CAREDELA1, LLC    California    42 % 0
G & C Staffing, LLC    California    100 % 0
Fresh Options, LLC    California    100 % 0
Alpha Staffing, LLC    California    100 % 0
Caliva CAREWH1, LLC    California    100 % 0
Caliva CARECE1, LLC    California    100 % 0
Caliva CADESA1, LLC    California    100 % 0
Caliva CADEEM1, LLC    California    100 % 0
Caliva CAREST1, LLC    California    100 % 0
Caliva MSA, LLC    California    100 % 0
Coast L Acquisition Corp    California    100 % 0
Left Coast Ventures, Inc.    Delaware    100 % 0
Sturdivant Ventures, LLC    California    100 % 0
LCV Holdings, HMB, LLC    California    100 % 0
Rever Holdings, LLC    California    100 % 0
Eko Holdings, LLC    California    100 % 0
Lief Holdings, LLC    California    100 % 0
LCV Holdings SISU 710, LLC    California    100 % 0
SISU Extraction, LLC    California    100 % 0
Fluid South, Inc.    California    100 % 0
Capitol Cocoa, Inc.    California    100 % 0

ii) ~~Variable interest entities~~

A variable interest entity (“VIE”) is an entity that does not have sufficient equity at risk to finance its activities without additional subordinated financial support or is structured such that equity investors lack the ability to control the entity’s activities or do not substantially participate in the gains and losses of the entity. Upon inception of a contractual agreement, and thereafter, if a reconsideration event occurs, the Company performs an assessment to determine whether the arrangement contains a variable interest in an entity and whether that entity is a VIE. The primary beneficiary of a VIE is the party that has both the power to direct the activities that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. Where the Company concludes that it is the primary beneficiary of a VIE, the Company consolidates the accounts of that VIE.

~~iii)~~ Use of estimates

The preparation of these interim condensed consolidated financial statements and accompanying notes in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ from those estimates.

~~TPCO Holding Corp.~~

~~Notes to the interim condensed consolidated financial statements~~

~~(Unaudited, in United States dollars)~~

~~For the three and nine months ended September 30, 2021 and 2020~~

~~2. Basis of presentation~~

~~(continued)~~

~~iv)~~

iii) Emerging growth company

The Company is an “Emerging Growth Company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it has taken advantage of certain exemptions from various reporting requirements that are not applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a Company can elect to opt out of the extended transition period and comply with the requirements that apply to

non-emerging

growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.

~~3. Business combinations~~

~~Qualifying Transaction~~

On November 24, 2020, the Company announced that it had entered into definitive transaction agreements in respect of each of CMG Partners, Inc. (“Caliva”) (the “Caliva Agreement”) and Left Coast Ventures, Inc. (“LCV”) (the “LCV Agreement”) pursuant to which the Company would acquire all of the equity of Caliva and LCV. At the same time, the Company executed an agreement with Caliva, OG Enterprises Branding, Inc. (“OGE”), SC Branding, LLC and SC Vessel 1, LLC to acquire the remaining shareholdings of OGE and entered into a Brand Strategy Agreement with SC Branding, LLC.

Additionally, concurrently with the completion of the LCV acquisition, LCV acquired SISU Extraction LLC (“SISU”) in accordance with the Agreement and Plan of Merger between LCV and SISU, dated November 24, 2020.

The above transactions closed on January 15, 2021, and the acquisition of SC Vessel 1, LLC’s interest in OGE closed on January 19, 2021. These acquisitions constituted the Company’s Qualifying Transaction.

~~Each of the acquisitions is a business combination accounted for using the acquisition method in accordance with ASC 805~~

~~Business Combinations~~

Due to the complexity associated with the valuation process and short period of time between the acquisition date and the period end, the identification and measurement of the assets acquired, and liabilities assumed, as well as the measurement of consideration and contingent consideration is provisional and subject to adjustment on completion of the valuation process and analysis of resulting tax effects. Management will finalize the accounting for the acquisitions no later than one year from the date of the respective acquisition date and will reflect these adjustments in the reporting period in which the adjustments are determined as required by ASC 805. Differences between these provisional estimates and the final acquisition accounting may occur and these differences could have a material impact on the Company’s future financial position and results of operations.

~~Total acquisition-related transaction costs incurred by the Company in connection with the acquisitions was approximately $493,584 (December 31, 2020 - $6,316,683).~~

~~Table of Contents~~

~~TPCO Holding Corp.~~

~~Notes to the interim condensed consolidated financial statements~~

~~(Unaudited, in United States dollars)~~

~~For the three and nine months ended September 30, 2021 and 2020~~

~~3. Business combinations~~

~~(continued)~~

A provisional estimate of the fair values of the assets to be acquired and the liabilities to be assumed by the Company in connection with the acquisitions is as follows (note the below numbers have been adjusted to take into consideration the measurement period adjustments disclosed at the end of this note):

Caliva/OGE

LCV

SISU

Total

Total consideration transferred
   $ 619,766,731    $ 120,651,941    $ 92,188,146
$
832,606,818


Assets acquired

Cash, restricted cash and cash equivalents    11,164,957    3,022,262    976,906

15,164,125

Accounts receivable    2,006,699    1,090,811    1,022,532

4,120,042

Inventory    13,105,532    7,548,844    5,580,258

26,234,634

Prepaid expenses    2,678,356    164,750    82,701

2,925,807

Other current assets    3,110,481    2,051,188    —

5,161,669

Property and equipment    7,785,157    3,305,145    1,163,902

12,254,204

Intangible assets    187,600,000    28,520,000    46,200,000

262,320,000

Right of use assets    48,702,768    4,461,809    1,183,451

54,348,028

Investment in associate    —      6,500,000    —

6,500,000

Investment in
non-marketable
securities
   591,545    —      —

591,545

Security deposits and other    869,238    137,051    34,175

1,040,464


Total assets acquired
   277,614,733    56,801,860    56,243,925

390,660,518


Liabilities assumed

Accounts payable and accrued liabilities    27,330,222    14,817,802    8,242,144

50,390,168

Consideration payable    2,458,844    2,348,970    —

4,807,814

Loans payable    3,060,250    298,436    —

3,358,686

Line of credit    —      —      1,000,000

1,000,000

Deferred tax liability    41,771,987    6,383,639    9,698,111

57,853,737

Lease liabilities    49,746,261    4,461,809    1,183,451

55,391,521


Total liabilities assumed
   124,367,564    28,310,656    20,123,706

172,801,926


Goodwill
   $ 466,519,562    $ 92,160,737    $ 56,067,927
$
614,748,226

~~Total consideration transferred is comprised of the following:~~

Caliva/OGE

LCV

SISU

Total

Upfront consideration
Cash    $ 465,140    $ 177,970    $ 11,089,535
$
11,732,645

Shares    408,178,567    57,529,825    63,581,153

529,289,545

Shares to be issued    1,567,549    5,897,750    9,692,268

17,157,567

Consideration payable    1,000    5,120    —

6,120

Contingent consideration (liability) – Trading price consideration    191,077,970    41,641,276    —

232,719,246

Contingent consideration (liability) – Other    0      —      —

0

Contingent consideration (equity)    2,372,231    —      —

2,372,231

Replacement options    3,489,501    —      —

3,489,501

Liabilities settled in cash as part of the Qualifying Transaction    12,614,773    15,400,000    7,825,190

35,839,963


Total consideration transferred    $ 619,766,731    $ 120,651,941    $ 92,188,146
$
832,606,818

~~Table of Contents~~

~~TPCO Holding Corp.~~

~~Notes to the interim condensed consolidated financial statements~~

~~(Unaudited, in United States dollars)~~

~~For the three and nine months ended September 30, 2021 and 2020~~

~~3. Business combinations~~

~~(continued)~~

Each of the acquisitions is subject to specific terms relating to satisfaction of the purchase price by the Company and incorporates payments in cash and shares as well as certain contingent consideration. Contingent consideration has been classified as either a financial liability or equity consistent with the principles in ASC 480

~~Distinguishing Liabilities from Equity~~

The table above summarizes the fair value of the consideration given and the fair values assigned to the assets acquired and liabilities assumed for each acquisition. Goodwill arose in these acquisitions because the cost of acquisition included a control premium. In addition, the consideration paid for the combination reflected the benefit of expected revenue growth and future market development. These benefits were not recognized separately from goodwill because they do not meet the recognition criteria for identifiable intangible assets.

~~The total consideration transferred for the acquisitions is summarized below:~~

~~Acquisition of Caliva and OGE~~

The acquisition of Caliva, including 50% interest in OGE, closed on January 15, 2021, and the acquisition of the additional 50% interest in OGE closed on January 19, 2021. However, the closing of the additional 50% interest in OGE

~~was automatic and contingent~~

~~on the closing of Caliva. As a result, the Company gained control of both Caliva and OGE on January 15, 2021.~~

The acquisitions of Caliva and OGE are being accounted for as one transaction as the contracts were negotiated at the same time and in contemplation of one another in order to achieve the overall objective of obtaining control of both companies. The Company acquired all of the issued and outstanding equity interests of Caliva and OGE from the existing shareholders for up to 32,241,593 common shares of the Company and $466,140 of cash, with certain shareholders receiving cash at $10.00 per share in lieu of shares for regulatory purposes. In addition, the consideration transferred includes contingent consideration and replacement stock options, as outlined below. The share consideration was valued based on the share price on the date of acquisition, January 15, 2021. As at September 30, 2021, the Company is still in the process of settling the issuance of shares and cash and the estimated remaining number of shares to be issued is presented in equity, while the estimated remaining cash to be paid is presented as consideration payable.

~~The Company also issued the following contingent consideration:~~

~~Trading price consideration~~

~~– The Caliva and OGE shareholders received a contingent right for up to 18,356,299 additional common shares (the “pool of common shares”) in the event the~~

~~20-day~~

~~volume weighted average trading price (“VWAP”) of the common shares reaches $13.00, $17.00 and $21.00 within three years of closing, with~~

~~one-third~~

issuable upon the achievement of each price threshold, respectively. The pool of common shares is to be shared with Caliva option holders who were employees of Caliva at the time of the transaction (“Caliva employee option holders”). In order to receive their share of the contingent consideration, Caliva employee option holders must be employed by the Company at the time the contingent consideration is paid out. The portion of the pool of common shares that may be paid to Caliva employee option holders is being accounted for as employee share-based compensation and is being expensed over the estimated vesting period. The portion of the pool of common shares that may be paid to former Caliva and OGE shareholders is being accounted for as contingent consideration in the amount of $191,077,970 and is included in the consideration transferred above. Refer to Note 32 for further details.

~~Earn-out~~

~~shares~~

– The Caliva shareholders received a contingent right for up to 3,929,327 additional common shares if the aggregate consolidated cash of the Company at closing, net of short-term indebtedness, was less than $225,000,000. As the consolidated cash at the time of closing was above this amount, no additional common shares will be issued, and no value has been attributed to this in the transaction.

~~Other~~

~~– The Company is holding back 304,000 shares related to Paycheck Protection Program (“PPP”) loans. The Company could be required to issue a~~

~~pro-rata~~

portion of the shares to the former shareholders of Caliva associated with any portion of the loans that are forgiven. The fair value associated with the contingent consideration at the transaction date is nil. Refer to Note 32 for further details.

187,380 shares of TPCO have been placed into escrow and will be issued when subsidiaries of Caliva receive their licenses. This is presented as contingent shares to be issued in equity. If the licenses are not obtained, the shares will be issued to Caliva former shareholders, and therefore have been included as part of consideration.

~~Refer to Note 20 for further details.~~

~~Table of Contents~~

~~TPCO Holding Corp.~~

~~Notes to the interim condensed consolidated financial statements~~

~~(Unaudited, in United States dollars)~~

~~For the three and nine months ended September 30, 2021 and 2020~~

~~3. Business combinations~~

~~(continued)~~

The Company issued replacement stock options to Caliva employee option holders as discussed in Note 22. The Company recognized $3,489,501 in consideration. This represents the fair value of the awards as at January 15, 2021 that relates to past service of those employees.

~~Lastly, as part of the~~

~~Qualifying~~

~~Transaction, certain liabilities of Caliva were extinguished. As a result, they have been included in consideration transferred and excluded from net assets acquired.~~

~~The goodwill acquired is associated with Caliva and OGE’s workforce and expected future growth potential and is not expected to be deductible for tax purposes.~~

~~Acquisition of LCV~~

The Company acquired all of the issued and outstanding equity interests of LCV from the existing shareholders of LCV for up to 4,544,220 common shares of the Company and $183,090 cash, with certain shareholders receiving cash at $10.00 per share in lieu of shares for regulatory purposes. The share consideration was valued based on the share price on the date of acquisition, January 15, 2021. As at September 30, 2021, the Company is still in the process of settling the issuance of shares and cash and the estimated remaining number of shares to be issued is presented in equity, while the estimated remaining cash to be paid is presented as consideration payable.

~~The Company also issued the following contingent consideration:~~

~~Trading price consideration~~

~~– The LCV shareholders will have a contingent right for up to 3,856,955 additional common shares in the event the~~

~~20-day~~

~~VWAP of the common shares reaches $13.00, $17.00 and $21.00 within three years of closing, with~~

~~one-third~~

~~issuable upon the achievement of each price threshold, respectively. The fair value of the contingent consideration on January 15~~

~~2021 was $41,641,276 and is included in consideration transferred above. Refer to Note 32 for further details.~~

~~Other~~

~~– The Company is holding back 299,800 of shares that is contingent on the outcome of certain events. The Company could be required to issue a~~

~~pro-rata~~

portion of the shares to the former shareholders of LCV associated with any portion of the liabilities that are forgiven or not required to be paid to tax authorities. The fair value associated with the contingent consideration at the transaction date is nil. Refer to Note 32 for further details.

~~Lastly, as part of the Qualifying Transaction, certain liabilities of LCV were extinguished. As a result, they have been included in consideration transferred and excluded from net assets acquired.~~

~~The goodwill acquired is associated with LCV’s workforce and expected future growth potential and is not expected to be deductible for tax purposes.~~

~~Acquisition of SISU~~

The Company acquired all of the issued and outstanding units of SISU from the existing members of SISU for 5,787,790 shares of the Company, of which 765,582 are shares to be issued, and $11,089,535 in cash. Shares to be issued represent a holdback related to general representations and warranties. The share consideration was valued based on the share price on the date of acquisition, January 15, 2021. The goodwill acquired is associated with SISU’s workforce and expected future growth potential and is expected to be fully deductible for tax purposes at the state level.

Lastly, as part of the Qualifying Transaction, certain liabilities of SISU were extinguished by issuance 336,856 common shares and cash. As a result, these have been included in consideration transferred and excluded from net assets acquired.

~~Table of Contents~~

~~TPCO Holding Corp.~~

~~Notes to the interim condensed consolidated financial statements~~

~~(Unaudited, in United States dollars)~~

~~For the three and nine months ended September 30, 2021 and 2020~~

~~3. Business combinations~~

~~(continued)~~

~~Measurement period adjustments~~

The Company adjusted the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of the acquisition date.

~~Caliva/OGE~~

~~During the three months ended September 30, 2021 the following~~

~~adjustments were made to the provisional amounts:~~

~~An adjustment was made to decrease the replacement option consideration by $710,287, resulting in an equal decrease of goodwill. The decrease is as a result of new~~

~~information regarding the outstanding replacement options for certain individuals.~~

An adjustment was made to decrease intangible assets by $86,300,000, due to new information regarding the fair value as at January 15, 2021. This resulted in a decrease to the deferred tax liability on initial recognition of $25,751,920 and a net increase to goodwill.

~~During the six months ende~~

~~June 30, 2021 the following~~

~~adjustment was~~

~~made to the provisional amounts:~~

~~An adjustment was made to increase accounts payable and accrued liabilities by $1,050,000, resulting in an offsetting increase in goodwill.~~

~~LCV~~

~~During the three months ended September 30, 2021~~

~~the following adjustment was made to the provisional amounts:~~

An adjustment was made to decrease intangible assets by $36,320,000, due to new information regarding the fair value as at January 15, 2021. This resulted in a decrease to the deferred tax liability on initial recognition of $9,035,729 and a net increase to goodwill.

~~During the six months ended June 30, 2021 the following adjustment was made to the provisional amounts:~~

~~An adjustment was made to decrease accounts payable and accrued liabilities by $650,871, resulting in an offsetting decrease in goodwill.~~

~~SISU~~

~~During the three months ended September 30, 2021~~

~~the following adjustments were made to the provisional amounts:~~

An adjustment was made to decrease intangible assets by $39,140,000, due to new information regarding the fair value as at January 15, 2021. This resulted in a decrease to the deferred tax liability on initial recognition of $8,219,400 and a net increase to goodwill.

~~During the three months ended September 30, 2021, as a result of the adjustments to the provisional amounts~~

~~discussed above~~

~~and updated useful lives~~

~~$3,227,788 of recovered~~

~~amortization,~~

~~$21,493,090~~

~~of recovered impairment on intangible assets and $44,235,784 of recovered impairment on goodwill has been recognized in the three months ended September 30, 2021.~~

~~4. Significant accounting policies~~

~~(a) Foreign currency transactions and translation~~

Foreign currency transactions are translated into the functional currency using exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the remeasurement of monetary items denominated in foreign currency at

~~year-end~~

~~exchange rates are recognized in profit or loss.~~

~~(b) Cash~~

~~Cash is comprised of bank balances held in banks and cash held at the Company’s operating premises in California.~~

~~Table of Contents~~

~~TPCO Holding Corp.~~

~~Notes to the interim condensed consolidated financial statements~~

~~(Unaudited, in United States dollars)~~

~~For the three and nine months ended September 30, 2021 and 2020~~

~~4. Significant accounting policies~~

~~(continued)~~

~~(c) Restricted cash and cash equivalents~~

~~The Company classifies restricted cash and cash equivalents outside of~~

~~cash~~

and cash equivalents when it is legally ring-fenced for a specific purpose, and the Company is not able to direct the cash to be used in its operations. Restricted cash equivalents include highly liquid investments with maturities of less than three months. As at September 30, 2021, $11,504,000 of

~~restricted~~

~~cash and cash equivalents was held in escrow (December 31, 2020 - $582,622,025).~~

~~(d) Accounts receivable and allowance for credit losses~~

Accounts receivable are stated at the amount management expects to collect from outstanding balances. The allowance for doubtful accounts is based on historical experience and management’s evaluation of outstanding receivables at the end of the period. Receivables are written off when deemed uncollectible.

~~(e) Inventories~~

Raw material inventory consists of dried cannabis either internally cultivated or acquired. Inventories of finished goods and packaging supplies are initially valued at cost, and subsequently at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs to sell. The Company reviews inventories for obsolete, redundant and slow-moving goods and any such inventories identified are written down to net realizable value. They also include manufacturing costs such as materials, labor and depreciation expense on equipment involved in processing, packaging, labelling and inspection to turn raw materials into finished goods. All direct and indirect costs related to inventory are capitalized as they are incurred, and they are subsequently recorded within cost of sales on the interim condensed consolidated statements of operations and comprehensive income at the time cannabis products are sold. The Company measures inventory cost using the

~~first-in~~

~~first-out~~

~~method.~~

~~(f) Property and equipment~~

Property and equipment are recorded at cost less accumulated depreciation. Major additions and improvements are capitalized, while maintenance and repairs are expensed as incurred. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the respective accounts and any related gain or loss is recognized in the interim condensed consolidated statements of operations and comprehensive income.

~~Depreciation is calculated on a straight-line basis over the expected useful lives of the assets, which are as follows:~~


~~Leasehold improvements~~		~~Shorter of lease term or estimated useful life~~
~~Production equipment~~		~~1 - 7 years~~
~~Furniture and fixtures~~		~~2 - 7 years~~
~~Office equipment~~		~~2 - 7 years~~
~~Vehicles~~		~~3 - 7 years~~
~~Building~~		~~30 years~~

~~An asset’s residual value, useful life and depreciation method are reviewed at each financial~~

~~year-end~~

~~and adjusted if appropriate. Depreciation of property and equipment commences when the asset is available for use.~~

~~Property and equipment acquired in a business combination is depreciated over the remaining useful life of the asset.~~

~~Gains and losses on disposal of an item of property and equipment are determined by comparing the proceeds from disposal with the carrying amount of the item and are recognized in profit or loss.~~

~~(g) Intangible assets~~

Intangible assets with finite lives are stated at the amount initially recognized less accumulated amortization and accumulated impairment losses. Intangible assets with finite life are amortized on a straight-line basis as follows:


~~Licenses~~		~~Greater of lease term or estimated useful life~~
~~Cultivation network~~		~~7 years~~
~~Brands~~		~~5 – 20 years~~
~~Customer relations~~		~~9 years~~

~~The estimated useful life and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.~~

~~Table of Contents~~

~~TPCO Holding Corp.~~

~~Notes to the interim condensed consolidated financial statements~~

~~(Unaudited, in United States dollars)~~

~~For the three and nine months ended September 30, 2021 and 2020~~

~~4. Significant accounting policies~~

~~(continued)~~

~~(h) Goodwill~~

Goodwill represents the excess of the purchase price paid for the acquisition of an entity over the fair value of the net tangible and intangible assets acquired. Goodwill is either assigned to a specific reporting unit or allocated between reporting units based on a reasonable and supportable basis.

A reporting unit is an operating segment, or a business unit one level below that operating segment, for which discrete financial information is prepared and regularly reviewed by segment management. Goodwill is not subject to amortization and is tested annually for impairment, or more frequently if events or changes in circumstances indicate that goodwill may be impaired. The Company reviews goodwill annually at fiscal

~~year-end~~

~~or at interim periods if events or circumstances indicate the carrying value may not be recoverable.~~

The Company assesses the fair values of its intangible assets, and its reporting units for goodwill testing purposes, as necessary, using an income-based approach. Under the income-based approach, fair value is based on the present value of estimated future cash flows.

The Company’s operations began on January 15, 2021 when it closed its Qualifying Transaction. Refer to Note 16 for further details on the Company’s provisional allocation of goodwill to its reporting units.

The Company evaluates goodwill for impairment once a year or more often when an event occurs, or circumstances indicate the carrying value may not be recoverable. The Company may elect to first perform a qualitative assessment to determine whether it is

~~more-likely-than-not~~

that the reporting unit’s fair value is less than its carrying value indicating the potential for goodwill impairment. If factors indicate this is the case, then a quantitative test is performed and an impairment is recorded for any excess carrying value above the reporting unit’s fair value, not to exceed the amount of goodwill.

~~(i) Business combinations~~

The Company accounts for business combinations using the acquisition method when it has obtained control. The Company measures goodwill as the fair value of the consideration transferred including the recognized amount of any

~~non-controlling~~

~~interest, less the net recognized amount (fair value) of the identifiable assets acquired and liabilities assumed, all measured as at the acquisition date. The Company elects on a~~

~~transaction-by-transaction~~

~~basis whether to measure~~

~~non-controlling~~

interest at its fair value, or at its proportionate share of the recognized amount of the identifiable net assets, at the acquisition date. Transaction costs, other than those associated with the issue of debt or equity securities, that the Company incurs in connection with a business combination are expensed as incurred.

Any contingent consideration is measured at fair value at the acquisition date. If the contingent consideration is classified as equity it is not remeasured. Otherwise, subsequent changes in the fair value of the contingent consideration is recognized in earnings.

When the initial accounting for a business combination has not been finalized by the end of the reporting period in which the transaction occurs, the Company reports provisional amounts. Provisional amounts are adjusted during the measurement period, which does not exceed one year from the acquisition date. These adjustments, or recognition of additional assets or liabilities, reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognized at that date

~~(j) Investments in~~

~~non-marketable~~

~~securities~~

Investments in equity securities of nonpublic entities without readily determinable fair values are carried at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

~~(k) Impairment of long-lived assets~~

The Company reviews long-lived assets, including property and equipment and definite life intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. In order to determine if assets have been impaired, assets are grouped and tested at the lowest level for which identifiable independent cash flows are available (“asset group”). When indicators of potential impairment are present the Company prepares a projected undiscounted cash flow analysis for the respective asset or asset group. If the sum of the undiscounted cash flow is less than the carrying value of the asset or asset group, an impairment loss is recognized equal to the excess of the carrying value over the fair value, if any. Fair value can be determined using a market approach, income approach or cost approach. Recognized impairment losses are not reversed.

~~Table of Contents~~

~~TPCO Holding Corp.~~

~~Notes to the interim condensed consolidated financ~~

~~al statements~~

~~(Unaudited, in United States dollars)~~

~~For the three and nine months ended September 30, 2021 and 2020~~

~~4. Significant accounting policies~~

~~(continued)~~

~~(l) Share-based compensation~~

The Company has an equity incentive plan which includes issuances of incentive stock options, nonqualified stock options, share appreciation rights, restricted share units, deferred share units and performance share units. From time to time, the Company also enters into share-based compensation arrangements with

~~non-employees.~~

~~The accounting for these arrangements is consistent with those of employees.~~

The Company measures equity settled share-based payments based on their fair value at the grant date and recognizes compensation expense on a graded basis over the vesting period. The amount recognized as an expense is net of estimated forfeitures, such that the amount ultimately recognized is based on the number of awards that ultimately vest.

Share-based payment awards that are subject to market-based performance conditions consider the market-based performance condition in the valuation on the grant date. Compensation cost is not adjusted if the market condition is not met, so long as the requisite service is provided. If the market condition is met prior to the end of the service period, the Company would immediately recognize any unrecognized compensation cost based on the grant date fair value.

For share-based payment awards that are subject to performance-based conditions, the Company records compensation expense over the estimated service period once the achievement of the performance-based milestone is considered probable. At each reporting date, the Company assesses whether achievement of a milestone is considered probable, and if so, records compensation expense based on the portion of the service period elapsed to date with respect to that milestone, with a cumulative

~~catch-up,~~

~~net of estimated forfeitures. The Company will recognize remaining compensation expense with respect to a milestone, if any, over the remaining estimated service period.~~

~~The Company measures cash-settled share-based payments as liabilities at fair value. At each reporting date, obligations related to cash-settled share-based plans are~~

~~re-measured~~

at fair value with reference to the fair value of the Company’s share price and the number of units that have been vested. The corresponding share-based compensation expense or recovery is recognized on a graded basis over the vesting period.

The fair value of the share-based payments granted is measured using the Black Scholes option pricing model, taking into account the terms and conditions upon which the share-based payments were granted.

~~For share-based compensation granted to~~

~~non-employees~~

the compensation expense is measured at the fair value of the good and services received except where the fair value cannot be estimated in which case it is measured at the fair value of the equity instruments granted. The fair value of share-based compensation to

~~non-employees~~

~~is periodically~~

~~re-measured~~

until counterparty performance is complete, and any change therein is recognized over the period and in the same manner as if the Company had paid cash instead of paying with or using equity instruments.

~~(m) Revenue recognition~~

The Company earns revenue from the sale of cannabis to retail and wholesale customers. The Company has a diverse customer base across its wholesale and retail revenue streams in the state of California.

The Company recognizes revenue to depict the transfer of promised goods or services to the customer in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.

~~In order to recognize revenue, the Company applies the following five (5) steps:~~

~~1) Identify the contract with a customer~~

~~2) Identify the performance obligation(s)~~

~~3) Determine the transaction price~~

~~4) Allocate the transaction price to the performance obligations(s)~~

~~5) Recognize revenue when/as performance obligations(s) are satisfied~~

Revenue from the sale of cannabis to retail and wholesale customers is recognized at a point in time when control over the goods has transferred to the customer. This corresponds with when the Company satisfies its performance obligation. Revenue is recorded net of any point of sale discounts provided to the customer. The Company’s revenues are principally derived from arrangements with fixed consideration. Variable consideration, if any, is not material.

~~Table of Contents~~

~~TPCO Holding Corp.~~

~~Notes to the interim condensed consolidated financial statements~~

~~(Unaudited, in United States dollars)~~

~~For the three and nine months ended September 30, 2021 and 2020~~

~~4. Significant accounting policies~~

~~(continued)~~

~~(m) Revenue recognition~~

~~(continued)~~

~~Revenue earned from providing merchandising services is recognized each month as the Company satisfies its performance obligations.~~

~~Revenue earned from providing distribution services is recognized at a point in time~~

when the distribution process is complete and control over the goods has transferred to the end customer. In transactions where the Company acts as the principal the transaction revenue is presented gross.

The majority of the Company’s revenue is cash at point of sale. Payment is due upon transferring the goods or providing services to the customer or within a specified time period permitted under the Company’s credit policy. In those cases where the Company provides goods or services on credit, the Company considers whether or not collection is probable in determining if a contract exists under ASC 606

~~Revenue from Contracts with Customers~~

~~. Costs associated with goods or services are expensed in the year performance obligations are satisfied.~~

The Company has a customer loyalty program whereby customers are awarded points with online delivery purchases. Once a customer achieves a certain point level, the accumulated points can be used to pay for the purchase of product. Points expire after 6 months of no activity in a customer’s account.

~~Unredeemed awards are recorded as deferred revenue. At the time customers redeem points, the redemption is recorded as an increase to revenue.~~

~~The Company’s Return Policy conforms to the Medicinal and~~

~~Adult-Use~~

~~Cannabis Regulation and Safety Act (“MAUCRSA”), which was signed into law in September 2017 and creates the general framework for the regulation of commercial medicinal and~~

~~adult-use~~

~~cannabis in California. The Company determined that no provision for returns or refunds was necessary as at September 30, 2021.~~

Sales of products are for cash or otherwise agreed-upon credit terms. The Company’s payment terms vary by customer; however, the time period between when revenue is recognized and when payment is due is not significant. The Company estimates and reserves for its bad debt exposure based on its experience with past due accounts and collectability,

~~write-off~~

~~history, the aging of accounts receivable and an analysis of customer data.~~

~~The following table represents the Company’s disaggregated revenue by sales channel for the periods ended September 30, 2021:~~

Three months ended
September 30, 2021

Nine months ended
September 30, 2021

Direct to consumer    $ 12,793,900    $ 34,372,371
Wholesale    26,871,159    99,413,233


$
39,665,059


$
133,785,604

~~(n) Leases~~

~~The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease~~

~~right-~~

~~of-~~

~~use (“ROU”) assets and accrued obligations under operating lease (current and~~

~~non-current)~~

~~in the balance sheets. Finance lease ROU assets are included in finance ROU assets and accrued obligations under finance lease (current and~~

~~non-current)~~

~~in the balance sheets.~~

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets are classified as a finance lease or an operating lease. A finance lease is a lease in which 1) ownership of the property transfers to the lessee by the end of the lease term; 2) the lease grants the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise; 3) the lease is for a major part of the remaining economic life of the underlying asset; 4) the present value of the sum of the lease payments and any residual value guaranteed by the lessee that is not already included in the lease payments equals or exceeds substantially all of the fair value; or 5) the underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. The Company classifies a lease as an operating lease when it does not meet any one of these criteria.

~~Table of Contents~~

~~TPCO Holding Corp.~~

~~Notes to the interim condensed consolidated financial statements~~

~~(Unaudited, in United States dollars)~~

~~For the three and nine months ended September 30, 2021 and 2020~~

~~4. Significant accounting policies~~

~~(continued)~~

~~(n) Leases~~

~~(continued)~~

ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the incremental borrowing rate is used based on the information available at commencement date in determining the present value of lease payments. The Company uses the implicit rate when readily determinable. The ROU assets also include any lease payments made and excludes lease incentives. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

For finance leases, lease expenses are the sum of interest on the lease obligations and amortization of the ROU assets. ROU assets are amortized based on the lesser of the lease term and the useful life of the leased asset according to the property and equipment accounting policy. If ownership of the ROU assets transfers to the Company at the end of the lease term or if the Company is reasonably certain to exercise a purchase option, amortization is calculated using the estimated useful life of the leased asset, according to the property and equipment accounting policy. For operating leases, the lease expenses are generally recognized on a straight-line basis over the lease term and recorded to general and administrative expenses in the statements of net loss and comprehensive loss.

~~The Company has elected to apply the practical expedient in ASC 842~~

~~Leases~~

~~, for each class of underlying asset, except real estate leases, to not separate~~

~~non-lease~~

components from the associated lease components of the lessee’s contract and account for both components as a single lease component. Additionally, for certain equipment leases, the Company applies a portfolio approach to effectively account for the operating lease ROU assets and liabilities.

The Company has elected not to recognize ROU assets and lease liabilities for short-term leases that have a lease term of 12 months or less that do not include an option to purchase the underlying asset that the Company is reasonably certain to exercise. Short-term leases include real estate and vehicles and are not significant in comparison to the Company’s overall lease portfolio. The Company continues to recognize the lease payments associated with these leases as expenses on a straight-line basis over the lease term.

~~(o) Income taxes~~

Income taxes are comprised of current and deferred taxes. These taxes are accounted for using the liability method. Current tax is recognized in connection with income for tax purposes, unrealized tax benefits and the recovery of tax paid in a prior period and measured using the enacted tax rates and laws applicable to the taxation period during which the income for tax purposes arose. Deferred tax is recognized on the difference between the carrying amount of an asset or a liability, as reflected in the financial statements, and the corresponding tax base, used in the computation of income for tax purposes (“temporary difference”) and measured using the enacted tax rates and laws as at the balance sheet date that are expected to apply to the income that the Company expects to arise for tax purposes in the period during which the difference is expected to reverse. Management assesses the likelihood that a deferred tax asset will be realized, and a valuation allowance is provided to the extent that it is more likely than not that all or a portion of a deferred tax asset will not be realized. The determination of both current and deferred taxes reflects the Company’s interpretation of the relevant tax rules and judgement.

An unrealized tax benefit may arise in connection with a period that has not yet been reviewed by the relevant tax authority. A change in the recognition or measurement of an unrealized tax benefit is reflected in the period during which the change occurs.

Income taxes are recognized in the consolidated statement of operations and comprehensive income, except when they relate to an item that is recognized in other comprehensive income (loss) or directly in equity, in which case, the taxes are also recognized in other comprehensive income (loss) or directly in equity respectively. Where income taxes arise from the initial accounting for a business combination, these are included in the accounting for the business combination.

Interest and penalties in respect of income taxes are not recognized in the consolidated statement of operations and comprehensive income as a component of income taxes but as a component of interest expense.

~~Table of Contents~~

~~TPCO Holding Corp.~~

~~Notes to the interim condensed consolidated financial statements~~

~~(Unaudited, in United States dollars)~~

~~For the three and nine months ended September 30, 2021 and 2020~~

~~4. Significant accounting policies~~

~~(continued)~~

~~(o) Income taxes~~

~~(continued)~~

As the Company operates in the cannabis industry, it is subject to the limits of U.S. Internal Revenue Code (“U.S. IRC”) Section 280E (“Section 280E”) under which the Company is only allowed to deduct expenses directly related to the cost of producing the products or cost of production.

~~The Company recognizes uncertain income tax positions at the~~

~~largest amount that is~~

~~more-likely-than-not~~

to be sustained upon examination by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Recognition or measurement is reflected in the period in which the likelihood changes. Any interest and penalties related to unrecognized tax liabilities are presented within income tax expense (recovery) in the consolidated statements of operations and comprehensive income.

~~(p) Research and development~~

Research and development costs are expensed as incurred. Research and development expenses was approximately $4,552 and $30,743 for the three and nine months ended September 30, 2021, respectively (NaN – September 30, 2020).

~~(q) Advertising~~

~~The Company expenses advertising costs when the advertising first takes place. Advertising expense was approximately $2,893,031~~

~~and~~

~~$36,809,097 for the three and nine months ended September 30, 2021, respectively (NaN – September 30, 2020).~~

~~(r) Fair value~~

Fair value is the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. Fair value measurement for invested assets are categorized into levels within a fair value hierarchy based on the nature of the valuation inputs (Levels 1, 2 or 3). The three levels are defined based on the observability of significant inputs to the measurement, as follows:

~~Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;~~

~~Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and~~

~~Level 3: one or more significant inputs used in a valuation technique are unobservable in determining fair values of the asset or liability.~~

Determination of fair value and the resulting hierarchy requires the use of observable market data whenever available. The classification of an asset or liability in the hierarchy is based upon the lowest level of input that is significant to the measurement of fair value.

The carrying value of the Company’s cash, restricted cash and cash equivalents, accounts receivable, notes receivable, other receivables, security deposits, accounts payable and accrued expenses and consideration payable approximate their fair value due to their short-term nature.

~~Contingent consideration, investments at fair value through profit or loss and share repurchase liabilities are measured at fair value on a recurring basis.~~

~~(s) Cost of sales~~

Cost of sales represents costs directly related to manufacturing and distribution of the Company’s products. Primary costs include raw materials, packaging, direct labor, overhead, shipping and handling, the depreciation of manufacturing equipment and production facilities, and cultivation taxes and tariffs. Manufacturing overhead and related expenses include salaries, wages, employee benefits, utilities, maintenance and property taxes. Cost of sales also includes inventory valuation adjustments. The Company recognizes the cost of sales as the associated revenues are recognized.

~~Table of Contents~~

~~TPCO Holding Corp.~~

~~Notes to the interim condensed consolidated financial statements~~

~~(Unaudited, in United States dollars)~~

~~For the three and nine months ended September 30, 2021 and 2020~~

~~4. Significant accounting policies~~

~~(continued)~~

~~(t) Earnings (loss) per share~~

Basic earnings per share (“Basic EPS”) is calculated by dividing the net earnings available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share (“Diluted EPS”) is calculated using the treasury method of calculating the weighted average number of common shares outstanding. The treasury method assumes that outstanding stock options with an average exercise price below the market price of the underlying shares are exercised and the assumed proceeds are used to repurchase common shares of the Company at the average price of the common shares for the period.

~~(u) Operating segments~~

Operating segments are components of the Company that engage in business activities which generate revenues and incur expenses (including intercompany revenues and expenses related to transactions conducted with other components of the Company). The operations of an operating segment are distinct, and the operating results are regularly reviewed by the CODM for the purposes of resource allocation decisions and assessing its performance.

The Company’s operations began on January 15, 2021 when it closed its Qualifying Transaction (see Note 3). As the Company has been operating for less than nine months, the Chief Operating Decision Maker (“CODM”) is still in the process of determining the information that will be reviewed on a regular basis in order to make resource allocation decisions. As a result, the Company currently has one segment.

~~(v) Assets classified as held for sale~~

Assets are classified as held for sale when the Company commits to a plan to sell the asset, the asset is available for immediate sale in its present condition and an active program to locate a buyer at a reasonable price has been initiated. The sale of these assets is generally expected to be completed within one year. Once it has been determined that assets meet the criteria to be

~~classified~~

as held for sale, and prior to classifying as such, the Company considers whether the assets are impaired and recognizes any impairment. Assets classified as held for sale are not depreciated. However, interest attributable to the liabilities associated with assets classified as held for sale and other related expenses are recorded as expenses in the Company’s interim condensed consolidated statements of operations and comprehensive income.

~~(w) Critical accounting estimates and judgements~~

The preparation of interim condensed consolidated financial statements in conformity with GAAP requires the Company’s management to make judgements, estimates and assumptions about future events that affect the amounts reported in the interim condensed consolidated financial statements. Although these estimates are based on management’s best knowledge of the amount, event 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 management considers to be reasonable.

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

~~Variable interest entities~~

The Company assesses all variable interests in entities and uses judgement when determining if the Company is the primary beneficiary. Other qualitative factors that are considered include decision-making responsibilities, the VIE capital structure, risk and rewards sharing, contractual agreements with the VIE, voting rights and the level of involvement of other parties.

~~Business combinations~~

In determining the fair value of net identifiable assets acquired in a business combination, including any acquisition-related contingent consideration, estimates including market based and appraisal values are used. One of the most significant areas of judgement and estimation relates to the determination of the fair value of these assets and liabilities, including the fair value of contingent consideration, if applicable. If any intangible assets are identified, depending on the type of intangible asset and the complexity of determining its fair value, an independent external valuation expert may develop the fair value, using appropriate valuation techniques, which are generally based on a forecast of the total expected future net cash flows. These valuations are linked closely to the assumptions made by management regarding the future performance of the assets concerned and any changes in the discount rate applied. In addition, determining whether amounts should be included as part of consideration requires judgement.

~~Table of Contents~~

~~TPCO Holding Corp.~~

~~Notes to the interim condensed consolidated financial statements~~

~~(Unaudited, in United States dollars)~~

~~For the three and nine months ended September 30, 2021 and 2020~~

~~4. Significant accounting policies~~

~~(continued)~~

~~(w) Critical accounting estimates and judgements~~

~~(continued)~~

~~Leases~~

~~The Company applies judgement in determining whether a~~

~~contract contains a lease and whether a lease is classified as an operating lease or a finance lease. The Company determines the lease term as the~~

~~non-cancellable~~

term of the lease, which may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The lease term is used in determining classification between operating lease and finance lease, calculating the lease liability and determining the incremental borrowing rate.

The Company has several lease contracts that include extension and termination options. The Company applies judgement in evaluating whether it is reasonably certain to exercise the option to renew or terminate the lease. That is, it considers all relevant factors that create an economic incentive for it to exercise either the renewal or termination. After the commencement date of the lease, the Company reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise or not to exercise the option to renew or to terminate (e.g., construction of significant leasehold improvements or significant customization to the leased asset).

~~The Company also applies judgement in allocating the consideration in a contract between lease and~~

~~non-lease~~

~~components. It considers whether the Company can benefit from the~~

~~right-of-use~~

~~asset either on its own or together with other resources and whether the asset is highly dependent on or highly interrelated with another~~

~~right-of-use~~

~~asset.~~

The Company is required to discount lease payments using the rate implicit in the lease if that rate is readily available. If that rate cannot be readily determined, the lessee is required to use its incremental borrowing rate. The Company generally uses the incremental borrowing rate when initially recording real estate leases. Information from the lessor regarding the fair value of underlying assets and initial direct costs incurred by the lessor related to the leased assets is not available. The Company determines the incremental borrowing rate as the interest rate the Company would pay to borrow over a similar term the funds necessary to obtain an asset of a similar value to the

~~right-of-use~~

~~asset in a similar economic environment.~~

~~Share-based compensation~~

In determining the fair value of share-based payments, the Company makes assumptions, such as the expected life of the award, the volatility of the Company’s share price, the risk-free interest rate, and the rate of forfeitures. Refer to Note 22 for further information.

~~Goodwill~~

Goodwill is tested for impairment annually and whenever events or changes in circumstances indicate that the carrying amount of goodwill may have been impaired. In order to determine that the value of goodwill may have been impaired, the Company performs a qualitative assessment to determine whether it is

~~more-likely-than-not~~

that the reporting unit’s fair value is less than its carrying value, indicating the potential for goodwill impairment. A number of factors, including historical results, business plans, forecasts and market data are used to determine the fair value of the reporting unit. Changes in the conditions for these judgements and estimates can significantly affect the assessed value of goodwill. Refer to Note 10 for further information.

~~Long-lived assets~~

~~Depreciation and amortization of property and equipment,~~

~~right-of-use~~

assets and intangible assets are dependent upon estimates of useful lives, which are determined through the exercise of judgement. The assessment of any impairment of these assets is dependent upon estimates of recoverable amounts that consider factors such as economic and market conditions and the useful lives of assets.

The Company uses judgement in: (i) assessing whether there are impairment triggers affecting long-lived assets, (ii) determining the asset groups and (iii) determining the recoverable amount and if necessary, estimating the fair value. Refer to Notes 9, 10 and 13 for further information.

~~Fair value measurement~~

~~The Company uses valuation techniques to determine the fair value of financial instruments (where active market quotes are not available) and~~

~~non-financial~~

assets. This involves developing estimates and assumptions consistent with how market participants would price the instrument. The Company bases its assumptions on observable data as far as possible, but this is not always available. In that case, the Company uses the best information available. Estimated fair values may vary from the actual prices that would be achieved in an arm’s length transaction at the reporting date. Refer to Note 32 for further information on recurring fair value measurements.

~~Table of Contents~~

~~TPCO Holding Corp.~~

~~Notes to the interim condensed consolidated financial statements~~

~~(Unaudited, in United States dollars)~~

~~For the three and nine months ended September 30, 2021 and 2020~~

~~4. Significant accounting policies~~

~~(continued)~~

~~(w) Critical accounting estimates and judgements~~

~~(continued)~~

~~Deferred tax assets and uncertain tax positions~~

The Company recognizes deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the respective tax bases of its assets and liabilities. The Company measures deferred tax assets and liabilities using current enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to reverse. The Company routinely evaluates the likelihood of realizing the benefit of its deferred tax assets and may record a valuation allowance if, based on all available evidence, it determines that some portion of the tax benefit will not be realized.

In evaluating the ability to recover deferred tax assets within the jurisdiction from which they arise, the Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income,

~~tax-planning~~

strategies and results of operations. In projecting future taxable income, the Company considers historical results and incorporates assumptions about the amount of future state, federal and foreign pretax operating income adjusted for items that do not have tax consequences. The Company’s assumptions regarding future taxable income are consistent with the plans and estimates that are used to manage its underlying businesses. In evaluating the objective evidence that historical results provide, the Company considers three years of cumulative operating income/(loss). The income tax expense, deferred tax assets and liabilities and liabilities for unrecognized tax benefits reflect the Company’s best assessment of estimated current and future taxes to be paid. Deferred tax asset valuation allowances and liabilities for unrecognized tax benefits require significant judgement regarding applicable statutes and their related interpretation, the status of various income tax audits and the Company’s particular facts and circumstances. Although the Company believes that the judgements and estimates discussed herein are reasonable, actual results, including forecasted

~~COVID-19~~

business recovery, could differ, and the Company may be exposed to losses or gains that could be material. To the extent the Company prevails in matters for which a liability has been established or is required to pay amounts in excess of the established liability, the effective income tax rate in a given financial statement period could be materially affected.

~~Principal versus agent~~

The Company enters into certain transactions with suppliers whereby the Company obtains title immediately after quality testing. The Company has applied judgement in assessing whether the Company is acting as an agent or a principal in the transaction with the customer.

In management’s judgement, the Company is acting as the principal in these transactions. In applying its judgement, management has considered that the Company takes control (and title) to the product prior to sale to the end customer. In assessing the indicators that are laid out in ASC 606

~~management has considered the following:~~

From the customer’s perspective, the only party they interact with is the Company. The customer does not know the origin of the product and there is no brand recognition associated with the product (i.e., the products do not carry a brand name, and instead the labels only carry information with respect to the contents of the package).

If the customer returns the product, the Company will decide whether to take the product back and refund the customer, and the Company will have no right to compensation from the supplier. As a result, the Company has

~~back-end~~

~~inventory risk.~~

~~The Company has discretion in setting prices and in many cases the supplier does not know the amount the Company sold the products for.~~

~~(x)~~

iv) Accounting standards adopted

~~Disclosure framework – fair value measurement~~

~~In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) ASU~~
~~2018-13,~~
~~Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (ASC 820) (“ASC~~
~~2018-13”).~~
~~ASU~~
~~2018-13~~
removes (a) the prior requirement to disclose the amount and reason for transfers between Level 1 and Level 2 of the fair value hierarchy contained in ASC 820, (b) the policy for timing of transfers between levels, and (c) the valuation process used for Level 3 fair value measurements. ASU
~~2018-13~~
~~also adds, among other items, a requirement to disclose the range and weighted average of significant unobservable inputs used in Level 3 fair value measurements. The Company adopted ASU~~
~~2018-13~~
~~effective January 1, 2020 and such adoption did not have a material effect on its financial statements.~~

~~Table of Contents~~

~~TPCO Holding Corp.~~

~~Notes to the interim condensed consolidated financial statements~~

~~(Unaudited, in United States dollars)~~

~~For the three and nine months ended September 30, 2021 and 2020~~

~~4. Significant accounting policies~~

~~(continued)~~

~~(x) Accounting standards adopted~~

~~(continued)~~

~~Leases~~

~~The FASB issued ASU~~
~~2016-02~~
~~Leases (ASC 842) (“ASC~~
~~2016-02”)~~
~~which modifies the~~
~~classification criteria and requires lessees to recognize~~
~~right-of-use~~
~~assets and lease liabilities arising from most leases on the balance sheet with additional disclosures about leasing arrangements. The effective date was subsequently amended by ASU~~
~~2021-05~~
~~for~~
~~non-public~~
~~business entities to be effective for fiscal years beginning after December 31, 2021, with earlier application permitted.~~

~~The Company had no leases until it acquired subsidiaries in the business combination discussed in Note 3. As a result, the Company elected to early adopt ASC 842~~
~~Leases~~
~~in accordance with the transition provisions of ASU~~
~~2016-02,~~
~~with a date of initial application of January 1, 2021. There was no impact on its financial statements.~~

~~Income taxes~~

~~In December 2019, the FASB issued ASU~~
~~2019-12,~~
~~Income Taxes - Simplifying the Accounting for Income Taxes (ASC 740) (“ASU~~
~~2019-12”),~~
~~which is intended to simplify various aspects related to accounting for income taxes. ASU~~
~~2019-12~~
~~removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The standard is effective for~~
~~non-public~~
business entities for annual reporting periods beginning after December 15, 2021, with early adoption permitted for periods for which financial statements have not yet been made available for issuance. The Company elected to early adopt ASU
~~2019-12~~
~~effective January 1, 2021, in accordance with its transition provisions. The adoption did not have a material effect on its financial statements.~~

~~Investments~~

~~In January 2020, the FASB issued ASU~~
~~2020-01,~~
~~Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) (“ASU~~
~~2020-01”),~~
which is intended to clarify the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815. ASU
~~2020-01~~
~~is effective for the~~
~~non-public~~
business entities for fiscal years beginning after December 15, 2021, with early adoption permitted for periods for which financial statements have not yet been made available for issuance. The Company elected to early adopt ASU
~~2020-01~~
~~effective January 1, 2021, in accordance with its transition provisions. The adoption did not have a material effect on its financial statements.~~

~~(y) Accounting standards issued but not yet effective~~

~~Debt with conversion options and other options~~

~~In August 2020, the FASB issued ASU~~
~~2020-06,~~
~~Debt—Debt with Conversion and Other Options (Subtopic~~
~~470-20)~~
~~and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic~~
~~815-40):~~
~~Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU~~
~~2020-06”),~~
which is intended to address issues identified as a result of the complexity associated with applying generally accepted accounting principles (GAAP) for certain financial instruments with characteristics of liabilities and equity. ASU
~~2020-06~~
~~is effective for the Company beginning January 1, 2022. The Company is currently evaluating the effect of adopting this ASU.~~

Allowance for credit losses

In September 2016, the FASB issued

ASU

2016-13,

Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This guidance was subsequently amended by ASU

2018-19,

Codification Improvements, ASU ~~2019-04,~~2019- 04, Codification Improvements, ASU

2019-05,

Targeted Transition Relief, ASU

2019-10,

Effective Dates, and ASU

2019-11,

Codification Improvements. ~~These ASUs are effective for Smaller Reporting Companies for fiscal years beginning after December 15, 2022, including interim periods therein.~~ The Company ~~is currently evaluating the~~adopted this ASU effective Jan 1, 2023. The adoption did not have a material effect ~~of adopting this ASU.~~

~~Business combinations~~

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805)–Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”). The amendments in this update require contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with Topic 606, Revenue from Contracts with Customers, as if it had originated the contracts. Under the current business combinations guidance, such assets and liabilities are recognized by the acquirer at fair value on the acquisition date. These ASUs are effective for Smaller Reporting Companies for fiscal years beginning after December 15, 2023, including interim periods therein. The Company is currently evaluating the effect of adopting this ASU.

~~5. Other receivable~~

Other receivable is comprised of a cash account held by the Subversive Capital Sponsor LLC (the “Sponsor”) for the benefit of the Company. During the nine months ended September 30, 2021, the private placement closed, and the cash account held by the Sponsor was transferred to the Company.

~~Table of Contents~~

~~TPCO Holding Corp.~~

~~Notes to the~~its interim condensed consolidated financial ~~statements~~

~~(Unaudited, in United States dollars)~~

statements.

F-8

Table of Contents

TPCO Holding Corp.

Notes to the interim condensed consolidated financial statements

(Unaudited, in United States dollars)

For the three and six months ended June 30, 2022 and 2023

3. Inventory

	June 30, 2023		December 31, 2022
Packaging supplies	$	1,127,601	$	2,109,465
Biological assets		26,633		22,844
Raw materials		271,863		48,936
Work in progress		54,031		227,936
Finished goods		4,702,905		6,318,677
	$	6,183,033	$	8,727,858

4. Notes and ~~nine months ended September 30, 2021 and 2020~~

~~6. Inventory~~

September 30, 2021

Packaging supplies
$
19,269

Biological assets

1,203,531

Raw materials

7,065,136

Work in progress

4,478,045

Finished goods

20,905,696



$
33,671,677

other receivables, net

	June 30, 2023			December 31, 2022
Upfront payment	$	5,650,000		$	5,650,000
Prepayment		1,490,000			1,490,000
Promissory note receivables (i)		5,454,655			627,803
Total notes receivable		12,594,655			7,767,803
Less allowance for credit losses		(7,140,000	)		(7,140,000	)
Total notes receivable		5,454,655			627,803
Note receivable – current portion		121,057			108,957
Note receivable- non-current	$	5,333,598		$	518,846

(i) During the ~~three and nine months~~six-months ended ~~September~~June 30, ~~2021,~~2023, the Company ~~recorded a write-down~~entered into an arrangement to provide funding to Gold Flora, LLC (“Gold Flora”) with principal amounts of ~~$NaNand $1,227,669~~

~~, respectively,~~

~~on inventory with an initial cost~~up to $5,000,000. During the six-months ended, the Company advanced $5,000,000 of ~~$1,997,612.~~the committed funding. The ~~write-down~~note is secured by certain assets of Gold Flora, bears interest at 10% per annum and following the close of the transaction described in Note 27, has no set terms of repayment. The balance as at June 30, 2023 related to ~~purchased bulk flower inventory~~this promissory note, including accrued interest, is $5,125,114.

5. Prepaid expenses and other current assets

	June 30, 2023		December 31, 2022
Prepaid expenses	$	-	$	51,456
Prepaid insurance		180,325		771,752
Prepaid inventory		402,141		89,386
Prepaid rent		-		54,160
Other prepaid assets		1,283,710		1,357,586
Indemnification assets		6,044,155		6,044,155
	$	7,910,331	$	8,368,495

6. Assets held for ~~which the selling price decreased during the period and is included in cost of sales.~~

~~7. Notes receivable~~

~~Notes receivable is comprised of the following:~~

September 30, 2021

December 31, 2020


Soma Rosa (i)
$
5,650,000

   $ 0
Promissory note receivable (ii)

720,563

   0
Other receivable (iii)

1,700,000

   0

Total notes receivable

8,070,563

   0
Less: current portion of note receivable

(7,370,563
)
   0

Long term portion of note receivable
$
700,000

   $ 0

~~(i)~~
In May 2021, the Company entered into a series of arrangements to obtain the rights to four acres of land that is licensed for outdoor grow (“Mosaic.Ag”). The purchase price for Mosaic.Ag is $6,000,000 in cash (subject to holdbacks), shares with an estimated value of $2,500,000 to be issued when the transaction closes and up to 1,309,263 shares subject to earnouts. The upfront payment of $5,650,000, net of holdbacks of $350,000, is secured by a
~~non-interest-bearing~~
promissory note. The holdback amount will be paid on the first anniversary of the closing of the transaction. The closing of the transaction is dependent on the satisfaction of various conditions, which have not been met to date. In the event that the transaction does not close, the promissory note will be repaid to the Company. The outstanding balance of this note matures and is due and payable in full on the earlier of June 1, 2022 or five business days after the termination of the transaction.
~~The Company also entered into a cultivation and supply agreement with Mosaic.Ag to cultivate cannabis on its behalf for a period of three years, with the option to extend for two additional~~
~~one-year~~
~~terms under the same contractual terms.~~
~~As part of the agreement, the~~
~~Company has a minimum purchase commitment of 12,000~~
~~poun~~
ds
~~per growing period of conforming cannabis as defined in the cultivation and supply agreement, equal to approximately $3,500,000.~~
~~(ii)~~
~~During the nine months ended September 30, 2021, the Company disposed of its~~
~~non-THC~~
business. As part of the proceeds received, the Company entered into a promissory note. The note is unsecured, bearing interest at 2% per annum and payable in 5 equal quarterly instalments beginning on July 31, 2021. During the three months ended September 30, 2021, the Company received $187,954 representing the first payment.
~~(iii)~~
During the nine months ended September 30, 2021, the Company was successful in a legal matter and agreed to a settlement of $2,200,000, of which $500,000 was received prior to September 30, 2021. The remaining settlement is to be received in full by
~~December 2022 based on an agreed upon payment schedule.~~
22

~~Table of Contents~~

~~TPCO Holding Corp.~~

~~Notes to the interim condensed consolidated financial statements~~

~~(Unaudited, in United States dollars)~~

~~For the three and nine months ended September 30, 2021 and 2020~~

~~8. Investments at fair value through profit or loss~~

Level 1

Level 2

Level 3

Total


Balance, January 1, 2021    $ 0      $ 0      $ 0      $ 0
Acquired in the period    2,159,514    0      900,000    3,059,514
Change in fair value    339,234    0      9,978    349,212

Balance, June 30, 2021
$
2,498,748


$
0


$
909,978


$
3,408,726

Acquired in the period    0      0      100,000    100,000
Change in fair value    (786,030 )    0      18,000    (768,030 )

Balance, September 30, 2021
$
1,712,718


$
0


$
1,027,978


$
2,740,696


~~Level 1 – Refer to Note 26 for further details.~~
Level 3 – The Company determines the fair value of level 3 investments based on an appropriate equity pricing model that takes into account the investee’s dividends policy and its historical and expected future performance based on an appropriate growth factor for a similar listed entity and a risk adjusted discount rate.
23

~~Table of Contents~~
~~TPCO Holding Corp.~~
~~Notes to the interim condensed consolidated financial statements~~
~~(Unaudited, in United States dollars)~~
~~For the three and nine months ended September 30, 2021 and 2020~~
~~9. Property and equipment~~


Leasehold
improvements

Production
equipment

Furniture and
fixtures

Vehicles

Office
equipment

Building

Total

Gross carrying amount

Balance, December 31, 2020    $ 0   $ 0   $ 0   $ 0      $ 0   $ 0
$
0

Acquired in a business combination (Note 3)    7,776,866 3,053,047 436,963 372,774    614,554 0

12,254,204

Acquired in a business combination (Note 11)    16,033 0   0   0      0   0

16,033

Additions    1,360,421 312,130 119,227 198,410    186,183 6,549,489

8,725,860

Disposals    (327,699 ) (350,479 ) (52,895 ) 0      (31,509 ) 0

(762,582
)

Balance, September 30, 2021    $ 8,825,621 $ 3,014,698 $ 503,295 $ 571,184    $ 769,228 $ 6,549,489
$
20,233,515


Depreciation

Balance, December 31, 2020    $ 0   $ 0   $ 0   $ 0      $ 0   $ 0
$
0

Additions    1,169,976 961,702 154,207 74,124    126,278 21,833

2,508,120

Disposals    (19,934 ) (91,350 ) (650 ) 0      0   0

(111,934
)

Balance, September 30, 2021    $ 1,150,042 $ 870,352 $ 153,557 $ 74,124    $ 126,278 $ 21,833
$
2,396,186


Carrying amount December 31, 2020

$
0

$
0

$
0

$
0


$
0

0


$
0


Carrying amount September 30, 2021

$
7,675,579

$
2,144,346

$
349,738

$
497,060


$
642,950

$
6,527,656


$
17,837,329


~~As at September 30, 2021, the Company has leasehold improvements of $260,745 in progress which are not available for use and therefore not depreciated.~~
24

~~Table of Contents~~

~~TPCO Holding Corp.~~

~~Notes to the interim condensed consolidated financial statements~~

~~(Unaudited, in United States dollars)~~

~~For the three and nine months ended September 30, 2021 and 2020~~

~~10. Goodwill and intangibles~~

Goodwill

License

Cultivation
Network

Brand

Customer
Relationship

Total

Gross carrying amount

Balance, December 31, 2020    $ 0   $ 0   $ 0      $ 0   $ 0
$
0

Acquired in a business combination (Note 3)    614,748,226 145,240,000 5,020,000    109,140,000 2,920,000

877,068,226

Acquired in a business combination (Note 11)    1,135,040 1,640,000 —      950,000 —

3,725,040

Provisional impairment
prior to transfer to assets held for sale (Note 16)
   (52,796,616 ) (16,460,000 ) —      (5,233,771 ) —

(74,490,387
)
(Impairment) recovery
of provisional impairment
   (561,951,608 ) (17,785,910 )    9,510,000 —

(570,227,518
)
Transferred to assets held for sale (Note 16)    —   (400,000 ) —

(400,000
)
Disposals    —   (250,000 ) —      (8,756,229 ) —

(9,006,229
)

Balance, September 30, 2021    $ 1,135,042 $ 111,984,090 $ 5,020,000    $ 105,610,000 $ 2,920,000
$
226,669,132


Amortization

Balance, December 31, 2020    $ —   $ 0   $ 0      $ 0   $ 0
$
0

Additions    —   11,465,353 507,976    3,757,930 229,842

15,961,101

Pro
visional impa
irment
prior to transfer to assets held for sale (Note 16)
   —   (614,687 ) —

(614,687
)

Balance, September 30, 2021    $ —   $ 10,850,666 $ 507,976    $ 3,757,930 $ 229,842
$
15,346,414


Carrying amount December 31, 2020

$
0

$
0

$
0


$
0

$
0


$
0


Carrying amount September 30, 2021

$
1,135,042

$
101,133,424

$
4,512,024


$
101,852,070

$
2,690,158


$
211,322,718


~~Amortization expense for the three and nine months ended September 30, 2021 was $2,378,999 and $15,961,101, respectively ($NaN for the three and nine months ended September 30, 2020)~~
.

sale

The following table outlines the ~~estimated future annual amortization expense~~carrying amounts of major classes of assets and liabilities classified as held for sale:

	June 30, 2023			December 31, 2022
Current assets classified as held for sale
Right-of-use assets - operating	$	1,146,661		$	1,240,211
Intangible assets		9,822,809			11,443,681
Total carrying value of current assets		10,969,470			12,683,892
Impairment recognized on classification as held for sale		(5,271,277	)		(6,581,128	)
Total assets classified as held for sale	$	5,698,193		$	6,102,764

Current liabilities classified as held for sale
Operating lease liability – current portion	$	1,104,425		$	1,309,077
Total liabilities classified as held for sale	$	1,104,425		$	1,309,077

During the year ended December 31, 2022, the Company became committed to plans to sell four licenses and transfer certain right of use asset and lease liabilities related to ~~intangible assets as of September 30, 2021:~~

Estimated Amortization

2021    $ 18,478,118
2022    16,749,785
2023    16,038,118
2024    15,978,708
2025    15,496,990
Thereafter    127,445,957

   $ 210,187,676

~~Table of Contents~~

~~TPCO Holding Corp.~~

~~Notes to~~ the ~~interim condensed consolidated financial statements~~

~~(Unaudited, in United States dollars)~~

~~For the three and nine months ended September 30, 2021 and 2020~~

~~10. Goodwill and intangibles~~

~~(continued)~~

~~Goodwill and intangible assets – Impairment~~

~~Impairment of long-lived assets~~

At each reporting period end the Company considers if there have been any triggers that indicate that its long-lived assets are not recoverable. Based on the softening of the California cannabis market during the three months ended September 30, 2021, the Company determined that an impairment test was appropriate.

The impairment test for long-lived assets is a two-step test, whereby management first determines the recoverable amount (undiscounted cash flows) of each asset group. If the recoverable amount is lower than the carrying value of the asset group, impairment is indicated.

The recoverable amount was lower than the carrying amount for two of its asset groups. The Company then determined the fair value of each of those asset groups and allocated the impairment to the assets in the scope of Subtopic 360-10, being licenses. ~~The assets were not written down below their individual fair value.~~

As a result of this assessment, the Company determined that long-lived assets with a carrying amount of $41,803,000 were no longer recoverable and adjusted the carrying value to their estimated fair value of $12,034,000, resulting in a provisional impairment loss of $29,769,000.

The fair value of each asset group was determined using cash flows expected to be generated by market participants, discounted at a weighted average cost of capital. For the purposes of allocation of impairment, the fair value of the specific assets that were impaired was determined using a discounted cash flow technique based on the following key assumptions:

Asset

Discount Rate

Forecasted Sales Growth
Rate

Terminal Value Growth
Rate

Licenses
15.5 % - 20.5%
Average of -4
% to 24% 3 %

~~Impairment of goodwill~~

~~During the nine months ended September 30, 2021, the Company evaluated the net assets acquired (see Note 3) and began to integrate the operations.~~ During the six months ended June 30, ~~2021,~~2023, the Company ~~disposed~~sold an asset previously classified as held for sale and did not commit to plans to sell any additional assets.

F-9

Table of Contents

TPCO Holding Corp.

Notes to the interim condensed consolidated financial statements

(Unaudited, in United States dollars)

For the three and six months ended June 30, 2022 and 2023

7. Discontinued operations

On October 31, 2022, the Company sold its wholly owned subsidiary, SISU Extractions LLC (“SISU”). The disposition of the

~~non-THC~~

~~businesses acquired, as well as certain licenses and leases (Note 16).~~

~~As at September 30, 2021, the Company identified three reporting units and allocated the remaining provisional goodwill acquired as~~ operations represented a ~~result of~~major strategic shift in the business ~~combinations discussed in Note 3 as follows:~~

Direct-to-consumer
(“DTC”)
   $ 464,846,560
Wholesale – Branded products    $ 41,037,121
Wholesale –
Non-branded
products
   $ 56,067,927

and met the criteria of discontinued operations. The Company conducts goodwill impairment testing at least annually, or more often if events, changes or circumstances indicate that it is more likely than not that the fair value of a reporting unit is lower than its carrying amount. The Company determined that the existence of impairment on certain long-lived assets, together with the softening of the California cannabis market and changes in market expectations of cash flows since the Company acquired the goodwill, indicate the fair value of its reporting units might be lower than the carrying value. As a result, management tested all three reporting units for impairment.

The Company determined the fair value of each reporting unit and compared it to the carrying value. The fair value of each reporting unit was determined using a discounted cash flow technique based on the following key assumptions:

Reporting unit

Discount Rate

Forecasted Sales Growth
Rate

Terminal Value Growth
Rate

DTC
   13.5 % Average of 24 % 3 %
Wholesale – Branded products
   13.5 % Average of 17 % 3 %
Wholesale – Non-branded products
   18.5 % Average -4 % 3 %

~~As a result of the impairment tests, goodwill impairment of $561,951,608 was recognized for the three-months ended September 30, 2021.~~

~~Table of Contents~~

~~TPCO Holding Corp.~~

~~Notes to~~has re-presented the interim condensed consolidated ~~financial statements~~

~~(Unaudited, in United States dollars)~~

~~For~~statement of operations and comprehensive loss for the three and ~~nine months~~six-months ended ~~September~~June 30, ~~2021 and 2020~~

~~11. Acquisitions~~

~~On August 2, 2021, the Company, through its wholly owned subsidiary Caliva CARECE1 LLC, acquired all~~2022.

Summarized results of the ~~issued~~discontinued operations were as follows:

	Three months ended June 30, 2022			Six months ended June 30, 2022
Sales, net of discounts	$	5,704,716		$	16,495,607
Cost of sales		5,177,831			14,501,234
Gross profit		526,885			1,994,373

Operating expenses		(1,830,658	)		(3,536,193	)
Loss from operations		(1,303,773	)		(1,541,820	)

Other expense		(12,130	)		(12,130	)
Income tax expense		(113,194	)		(421,366	)

Loss from discontinued operations, net of income tax	$	(1,429,097	)	$	(1,975,316	)

8. Investments

	Marketable securities			Non-marketable securities		Available for sale securities			Other		Total
Balance, December 31, 2021	$	860,496		$	591,545	$	1,048,028		$	-	$	2,500,069
Acquired		-			-		-			150,000		150,000
Interest income		-			-		40,000			-		40,000
Change in fair value		(33,096	)		-		-			-		(33,096	)
Balance, June 30, 2022	$	827,400		$	591,545	$	1,088,028		$	150,000	$	2,656,973

Balance, December 31, 2022	$	-		$	591,545	$	736,659		$	150,000	$	1,478,204
Interest income		-			-		5,000			-		5,000
Change in fair value		-			-		(170,358	)		-		(170,358	)
Balance, June 30, 2023	$	-		$	591,545	$	571,301		$	150,000	$	1,312,846

F-10

Table of Contents

TPCO Holding Corp.

Notes to the interim condensed consolidated financial statements

(Unaudited, in United States dollars)

For the three and six months ended June 30, 2022 and 2023

9. Property and ~~outstanding equity interests of Kase’s Journey Inc., an operating retail dispensary located in~~

~~Ceres,~~

~~California, from the existing shareholders~~equipment

	June 30, 2023			December 31, 2022
Gross carrying amounts
Leasehold improvements	$	15,883,857		$	16,444,132
Production equipment		2,299,446			2,261,005
Furniture and fixtures		871,689			871,689
Vehicles		333,325			333,325
Office equipment		933,634			933,634
		20,321,951			20,843,785

Accumulated depreciation
Leasehold improvements		(4,189,557	)		(3,646,995	)
Production equipment		(1,401,868	)		(1,176,720	)
Furniture and fixtures		(460,194	)		(373,634	)
Vehicles		(134,735	)		(103,069	)
Office equipment		(517,316	)		(397,283	)
		(6,703,670	)		(5,697,701	)

Property and equipment, net	$	13,618,281		$	15,146,084

Depreciation expense for ~~$1,300,000 cash, subject to adjustments, and $1,221,902 of consideration payable.~~

On August 16, 2021, the Company, through its wholly owned subsidiary TPCO US Holding LLC, acquired all of the issued and outstanding membership interests of Martian Delivery LLC, an operating retail dispensary located in the City of Sacramento, California, from the existing shareholders for $237,500 cash and $237.500 in promissory notes payable

~~A provisional estimate of the fair values of the assets to be acquired and the liabilities to be assumed by the Company in connection with the acquisitions is as follows:~~

Kase’s Journey

Martian Delivery

Consideration

Cash    $ 1,198,050    $ 237,500
Consideration payable    1,221,902    237,500

Total consideration
   $ 2,419,952    $ 475,000
Assets acquired

Current assets
Cash    $ 33,213    $ 0
Inventory    98,050    0
Long-term assets
Brand    700,000    250,000
Licenses    1,450,000    190,000
Property and equipment    16,033    0
ROU asset    151,769    282,165

Total assets acquired
   2,449,065    722,165

Liabilities assumed

Accounts payable    204,528    0
Deferred tax
liability
   641,560    131,296
Lease liability
   151,769    282,165

Total liabilities assumed
   997,857    413,461

Goodwill
   $ 968,744    $ 166,296

~~Kase’s Journey~~

The consideration payable from the acquisition of Kase’s Journey is measured initially at fair value, and subsequently at amortized cost. The fair value has been determined by discounting future expected cash outflows at a discount rate of 6.30%. As at September 30, 2021, the carrying value of the contingent consideration was $1,234,317, expected to be paid in full by February 2023.

~~The goodwill acquired is primarily related to factors such as synergies and market opportunities and is not expected to be deductible for tax purposes.~~

~~Martian Delivery~~

~~The goodwill acquired is primarily related to factors such as synergies and market opportunities and is not expected to be deductible for tax purposes.~~

As at September 30, 2021, the Company is still in the process of assessing the fair value of the net assets acquired and, as a result, the fair value of the net assets acquired may be subject to adjustments pending completion of final valuations and post-closing adjustments.

~~Table of Contents~~

~~TPCO Holding Corp.~~

~~Notes to the interim condensed consolidated financial statements~~

~~(Unaudited, in United States dollars)~~

~~For~~ the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2023 was $499,110 and ~~2020~~

~~12. Accounts payable~~$1,010,892, respectively (three and ~~accrued~~

~~liabilities~~

September 30, 2021

December 31, 2020

Trade payables
$
7,698,988

   0
Other accrued expenses

7,179,310

   28,321,972
Accrued payroll expenses

2,203,452

   0
Accrued severance expenses

1,834,047

   0
Accrued sales, excise and other taxes

13,007,928

   0
Goods received but not yet invoiced

5,275,683

   0


37,199,408

   28,321,972

~~13.~~six months ended June 30, 2022 related to continuing operations - $801,667 and $1,762,367, respectively).

10. Leases

The Company leases real estate used for dispensaries, production plants, and corporate offices. Lease terms for real estate generally range from 10.17 to ~~16.5~~14.25 years. Most leases include options to renew for varying terms at the Company’s sole discretion. ~~Other leased assets include passenger vehicles. Lease terms for these assets generally range from 1 to 16.5 years.~~ Certain leases include escalation clauses or payment of executory costs such as property taxes, utilities, or insurance and maintenance. Rent expense for leases with escalation clauses is accounted for on a straight-line basis over the lease term. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The following table provides the components of lease ~~cost recognized in the interim condensed consolidated statements of operations and comprehensive income for the three and nine months ended September 30, 2021:~~

Three months ended

September 30, 2021

Nine months ended

September 30, 2021

Operating lease costs
$
1,087,812


$
3,276,333


Finance lease cost:
Amortization of lease assets

558,424



1,618,135

Interest on lease liabilities

1,120,925



3,385,978


Finance lease cost

1,679,349



5,004,113

Short term lease expense

41,100



179,249


Total lease costs
$
2,808,261


$
8,459,695

~~Other information related to operating and finance leases as of and for the nine months ended September 30, 2021 are as follows:~~

Operating Lease

Finance Lease

Weighted average discount rate

11.57
%

13.02
%
Weighted average remaining lease term (in years)

4.32

16.00

cost:

	Three months ended				Six months ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Operating lease costs	$	1,255,780	$	1,947,607	$	2,515,095	$	3,704,397
Short term lease expense		-		162,500		54,166		162,500
Lease expense		1,255,780		2,110,107		2,569,261		3,866,897
Finance lease cost:
Amortization of lease assets		391,517		392,190		783,035		785,724
Interest on lease liabilities		1,114,626		1,116,715		2,218,172		2,221,316
Finance lease cost		1,506,143		1,508,905		3,001,207		3,007,040
Total lease costs	$	2,761,923	$	3,619,012	$	5,570,468	$	6,873,937

The maturity of the contractual undiscounted lease liabilities as of ~~September~~June 30, ~~2021:~~

Operating Lease

Finance Lease

2021    $ 3,798,849    $ 4,462,265
2022    3,737,496    4,590,725
2023    3,263,541    4,728,447
2024    3,099,157    4,870,301
2025    2,664,505    5,016,410
Thereafter    21,325,724    66,176,624

Total undiscounted lease liabilities    37,889,272    89,844,772
Interest on lease liabilities    (17,760,231 )    (53,068,978 )

Total present value of minimum lease payments    20,129,041    36,775,794
Lease liability – current portion    (1,931,212 )    (5,091 )

Lease liability
$
18,197,829


$
36,770,703

~~Table of Contents~~

~~TPCO Holding Corp.~~

~~Notes to the interim condensed consolidated financial statements~~

~~(Unaudited, in United States dollars)~~

~~For the three and nine months ended September 30, 2021 and 2020~~

~~13.~~2023:

	Operating Lease		Finance Lease

Remainder of 2023	$	2,294,365	$	2,329,793
2024		4,302,015		4,763,910
2025		4,417,481		4,906,828
2026		4,544,592		5,054,033
2027		4,009,473		5,205,654
Thereafter		18,295,465		59,679,244
Total undiscounted lease liabilities		37,863,391		81,939,462
Interest on lease liabilities		14,602,108		45,241,940
Total present value of minimum lease payments		23,261,283		36,697,522
Lease liability – current portion		1,996,340		224,545
Lease liability	$	21,264,943	$	36,472,977

F-11

Table of Contents

TPCO Holding Corp.

Notes to the interim condensed consolidated financial statements

(Unaudited, in United States dollars)

For the three and six months ended June 30, 2022 and 2023

10. Leases

(continued)

Additional information on the

right-of-use

~~assets by class of~~ assets is as follows:

Operating lease

Finance lease

Gross carrying amount

Balance, December 31, 2020    $ 0      $ 0
Acquired in a business combination (Note 3)    17,856,058    $ 36,491,970
Acquired in a business combination (Note 11)    433,934    —
Lease reclassification    (782,208 )    782,208
Reassessment of purchase option and lease term (i)    —      5,850,523
Impairment loss (Note 16)    (1,095,936 )    —
Transfer to assets held for sale (Note 16)    (2,215,440 )    —
Additions    7,124,015    —
Disposals    (815,131 )    (6,522,185 )

Balance, September 30, 2021    $ 20,505,292    $ 36,602,516

Depreciation

Balance, December 31, 2020    $ 0      $ 0
Additions    1,838,962    1,618,135

Balance, September 30, 2021    $ 1,838,962    $ 1,618,135

Carrying amount December 31, 2020

$
0


$
0


Carrying amount September 30, 2021

$
18,666,330


$
34,984,381

	Operating lease			Finance lease

Gross carrying amount
Balance, December 31, 2022	$	25,119,489		$	26,258,698
Lease modification (i)		(2,709,129	)		-
Impairment (Note 12)		(403,271	)		-
Balance, June 30, 2023	$	22,007,089		$	26,258,698

Depreciation
Balance, December 31, 2022	$	4,430,402		$	3,187,852
Additions		1,145,553			783,035
Balance, June 30, 2023	$	5,575,955		$	3,970,887

Carrying amount June 30, 2023	$	16,431,134		$	22,287,811
Carrying amount December 31, 2022	$	20,689,086		$	23,070,846

(i)

During the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2023, the Company ~~determined that it was reasonably certain to exercise a purchase option~~decreased the square footage and extended the lease term for one of its ~~property~~ leases. As a result, the

Company recognized a reduction in its right-of-use

asset and ~~lease liability were adjusted to include~~ the ~~purchase option of $6,500,000 as well as a reduction to the lease term, the impact of which was $649,477 reduction in the carrying value~~

~~. During the three months ended September 30, 2021, the Company exercised the purchased option and acquired the building~~

associated liability.

The Company capitalized ~~$491,273 and $1,262,130~~$Nil of ~~depreciation~~amortization to inventory for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021, respectively (September 30, 2020 - $NaN).~~

~~14. Investment in~~

~~non-marketable~~

~~securities~~

~~at September 30, 2021, the Company’s investment in~~

~~non-marketable~~

~~securities totaled $591,545 (December 31, 2021 - $NaN).~~

The Company reviews its equity securities without readily determinable fair values on a regular basis to determine if the investment is impaired. For purposes of this assessment, the Company considers the investee’s cash position, earnings2023 ($352,367 and revenue outlook, liquidity and management ownership, among other factors, in its review. If management’s assessment indicates that an impairment exists, the Company estimates the fair value of the equity investment and recognizes in current earnings an impairment loss that is equal to the difference between the fair value of the equity investment and its carrying amount. As at September 30, 2021, the investment in

~~non-marketable~~

~~securities is not impaired.~~

~~15. Loans payable~~

In March 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was enacted. The CARES Act provides for financial assistance to businesses through the Small Business Administration (“SBA”) in the form of a Paycheck Protection Program (“PPP”). As part of the Qualifying Transaction, the Company assumed existing liabilities related to PPP loans.

During the nine months ended September 30, 2021, the Company was granted full forgiveness by the U.S. Bank and SBA for the PPP loans. A gain on debt forgiveness was recorded in the interim condensed consolidated statement of operations and comprehensive income of $3,358,686. The forgiveness of the PPP loans has resulted in contingent share consideration being granted to former shareholders as described in Note

~~Table of Contents~~

~~TPCO Holding Corp.~~

~~Notes to the interim condensed consolidated financial statements~~

~~(Unaudited, in United States dollars)~~

~~For~~$704,732 during the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 related to continuing operations, respectively).

11. Goodwill and ~~2020~~

~~16.~~intangible assets

	June 30, 2023			December 31, 2022
Opening gross goodwill		584,745,143			607,413,242
Measurement period adjustment		-			(22,633,099	)
Disposals		(24,351,801	)		(35,000	)
		560,393,342			584,745,143

Opening accumulated impairment		(584,745,143	)		(563,361,597	)
Impairment		-			(21,418,546	)
Disposals		24,351,801			35,000
		(560,393,342	)		(584,745,143	)

Goodwill, net	$	-		$	-

	June 30, 2023			December 31, 2022
Intangible assets gross carrying amounts (i)
License		82,563,527			82,563,527
Brand		50,400,559			50,400,559
Customer relations		2,920,000			2,920,000
		135,884,086			135,884,086

Intangible assets accumulated amortization
License		(28,864,369	)		(26,654,299	)
Brand		(10,489,592	)		(9,218,821	)
Customer relations		(795,090	)		(632,868	)
		(40,149,051	)		(36,505,988	)

Intangible assets, net	$	95,735,035		$	99,378,098

F-12

Table of Contents

TPCO Holding Corp.

Notes to the interim condensed consolidated financial statements

(Unaudited, in United States dollars)

For the three and six months ended June 30, 2022 and 2023

11. Goodwill and intangible assets (continued)

The Company recorded amortization expense related to the three and six months ended June 30, 2023 of $1,821,532 and $3,643,063, respectively (three and six months ended June 30, 2022 related to continuing operations - $5,107,255 and $10,136,910, respectively).

The following table outlines the estimated future annual amortization expense as of June 30, 2023:

	Estimated Amortization
Remainder of 2023	$	(3,614,820	)
2024		(7,191,983	)
2025		(7,191,983	)
2026		(7,191,983	)
2027		(7,174,094	)
Thereafter		(63,370,172	)
	$	(95,735,035	)

12. Impairment ~~and assets held for sale~~

Three months ended

Nine months ended


September 30,
2021

September 30,
2020

September 30,
2021

September 30,
2020

Right-of-use
assets (i)

$
72,529

   $ 0
$
820,616

   $ 0
Assets held for sale (ii)

0

   0

16,120,633

   0
Non-THC
business (iii)


0

   0

58,030,387

   0
Impairment (Note 10)

570,227,518

   0

570,227,518

   0


$
570,300,047

   $ 0
$
645,199,154

   $ 0

	Three months ended				Six months ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Right-of-use assets (i)	$	403,271	$	1,290,591	$	403,271	$	1,290,591
Assets held for sale (ii)		-		1,138,939		-		1,138,939
	$	403,271	$	2,429,530	$	403,271	$	2,429,530

(i)

During the ~~nine~~three and six months ended ~~September~~June 30, ~~2021,~~2023, the Company ~~recognized an~~recorded impairment ~~loss~~ of ~~$820,616 in operating expenses on two property leases where~~$403,271 related to one of its properties which is no longer being used by the Company and has ~~vacated~~been listed for sublease at an amount less than current rental payments. During the ~~premises.~~six months ended June 30, 2022, the Company recorded impairment of $1,290,591 related to two of its properties which are no longer being used by the Company and were subleased or listed for sublease at an amount less than current rental payments.

~~(ii)~~

(ii)

In ~~May 2021,~~June 2022, the Company became committed to a plan to sell ~~three~~two licenses and transfer the related right of use asset and lease ~~liability, which were acquired as part of the Caliva and OGE and LCV acquisitions on January 15, 2021 (Note 3).~~liability. Prior to reclassification to assets held for sale, the assets were tested for ~~impairment. As a result, the cost bases of the intangible assets were written down to $650,000,~~

impairment, resulting in ~~a provisional impairment loss~~

~~of $15,845,313.~~

~~During the three months ended September 30, 2021, the Company recognized measurement period adjustments related to these intangible assets (Note 3). The Company also recognized~~ an impairment loss of

~~$275,320~~$1,138,939 on

~~right-of-use~~

intangible assets. ~~During~~

13. Accounts payable and accrued liabilities

	June 30, 2023		December 31, 2022
Trade payables	$	5,982,108	$	4,249,794
Other accrued expenses		3,215,710		4,872,988
Accrued payroll expenses		640,942		2,666,974
Accrued severance expenses		982,217		692,220
Accrued income and other taxes		14,395,993		9,974,817
Goods received but not yet invoiced		892,176		2,103,566
	$	26,109,146	$	24,560,359

F-13

Table of Contents

TPCO Holding Corp.

Notes to the ~~three months ended September 30, 2021, the Company sold the license acquired from Caliva and OGE. Refer to Note 26 for further details.~~

~~The carrying amounts of assets in the disposal group are as follows:~~

September 30, 2021

Intangible assets
$
400,000

Right-of-use
assets


2,215,440



$
2,615,440

~~The carrying amounts of liabilities in the disposal group are as follows:~~

September 30, 2021

Current portion of lease liabilities
$
337,292

Deferred tax liability

64,456

Lease liabilities

1,958,139



$
2,359,887

~~The fair value of the disposal group of $255,553 is management’s best estimate and is based on negotiations that were occurring around the end of the reporting period.~~

As discussed in Note 3, the accounting for the acquisitions is provisional and subject to adjustment. Therefore, the intangible assets and deferred taxes in the disposal group are also provisional until management has finalized the accounting for the acquisitions.

~~(iii)~~

During the three months ended March 31, 2021, the Company became committed to a plan to sell its non-THC business, which was acquired as part of the Caliva and OGE and LCV acquisitions on January 15, 2021 (Note 3). As a result of the decision to sell, the assets were tested for impairment and a provisional impairment loss of

~~$52,796,616 of goodwill and $5,233,771 of intangible assets was recognized.~~

During the three months ended September 30, 2021, the Company recognized measurement period adjustments related to these intangible assets and goodwill (Note 3). The disposal group did not represent a separate major line of business, and for that reason it has not been disclosed as discontinued operations forinterim condensed consolidated financial statements

(Unaudited, in United States dollars)

For the three and ~~nine months ended September 30, 2021. During the nine months ended September 30, 2021, the Company disposed of the non-THC business. Refer to Note 26 for further details.~~

As discussed in Note 3, the accounting for the acquisitions is provisional and subject to adjustment. Therefore, the carrying amount of the goodwill, intangible assets and deferred taxes of the net assets disposed are also provisional until management has finalized the accounting for the acquisitions.

~~Table of Contents~~

~~TPCO Holding Corp.~~

~~Notes to the interim condensed consolidated financial statements~~

~~(Unaudited, in United States dollars)~~

~~For the three and nine months ended September 30, 2021 and 2020~~

~~17. Share repurchase~~

~~On July~~

, 2021, the Company entered into automatic share repurchase agreements with certain employees to repurchase no more than 1,725,000 common shares that had been issued as part of the Qualifying Transaction. The common shares will be repurchased at market value over a three-month period beginning September 1, 2021, and then subsequently cancelled.

~~The Company initially recognized the obligation to repurchase its shares at the market price on July~~

~~, 2021 for $7,055,250 with a corresponding entry to additional paid in capital.~~

~~The Company accounts for its share repurchases on the trade date and allocates any excess over par value of the originally issued shares to additional paid in capital.~~

~~The Company’s share repurchase activity was as follows:~~

   Nine months ended

September 30, 2021
   September 30, 2020
Shares repurchased


1,037,500

   0
Average price

$
3.71

   $ 0
Aggregate value

$
3,851,406

   $ 0

~~During the three and nine months ended September 30, 2021,~~

the Company recorded $970,844 of interest income related to the revaluation of the share repurchase liability. As at September 30, 2021, the Company revalued the share repurchase liability to $2,233,000

~~. The fair value was determined using the Company’s share price on September 30, 2021 and it relates~~

~~to 687,500 common shares.~~

~~18. Mezzanine equity~~

~~The following was included in mezzanine equity:~~

September 30, 2021
   December 31, 2020
Class A restricted voting shares (i)

$
—

   $ 582,622,025
Subscription receipts (ii)


—

   25,087,000





$
—

   $ 607,709,025

~~(i) Class A restricted voting shares~~

~~Authorization~~

~~The Company is authorized to issue an unlimited number of Class A restricted voting shares. The holders of Class A restricted voting shares have no~~

~~pre-emptive~~

~~rights or other subscription rights and there are no sinking fund provisions applicable to these shares.~~

~~Voting Rights~~

The holders of the Class A restricted voting shares are entitled to vote on and receive notice of meetings on all matters requiring shareholder approval (including any proposed extension to the permitted timeline and approval of a Qualifying Transaction if otherwise required under applicable law) other than the election and/or removal of directors and auditors prior to closing of a Qualified Transaction. Prior to a Qualifying Transaction, holders of the Class A restricted voting shares are not entitled to vote at (or receive notice of or meeting materials in connection with) meetings held only to consider the election and/or removal of directors and auditors.

~~Redemption Rights~~

Only holders of Class A restricted voting shares are entitled to have their shares redeemed and receive the escrow proceeds (net of applicable taxes and other permitted deductions) in the event a Qualifying Transaction does not occur within the permitted timeline, in the event of a Qualifying Transaction, and in the event of an extension to the permitted timeline. Given that the Class A restricted voting shares can be redeemed at the option of the holders, the Company has classified the Class A restricted voting shares as mezzanine equity on the consolidated balance sheets.

~~Table of Contents~~

~~TPCO Holding Corp.~~

~~Notes to the interim condensed consolidated financial statements~~

~~(Unaudited, in United States dollars)~~

~~For the three and nine months ended September 30, 2021 and 2020~~

~~18. Mezzanine equity~~

~~(continued)~~

~~Transactions~~

During the year ended December 31, 2019, the Company closed the Offering for gross proceeds of $575,000,000 and allocated the proceeds on a relative fair value basis. This resulted in initial recognition of $546,111,261, net of transaction costs associated with the Class A restricted voting shares of $12,004,426 and recognition of warrants at relative fair value of $16,884,313.

The Company’s underwriter is entitled to an underwriting commission up to $31,625,000 or 5.5% of the gross proceeds of the Class A Restricted Voting Units issued under the Offering. The Company paid $11,500,000 during the year ended December 31, 2019, to the Underwriter at the closing of the Offering included in the issuance costs noted above. The balance of the underwriting commission of $20,125,000 or 3.5% of the gross proceeds (the “Deferred Amount”) of the Class A Restricted Voting Units, has been accrued at December 31, 2020 and recorded as an adjustment to mezzanine equity in the

~~interim condensed consolidated~~

~~statement of shareholders’ equity. During the nine months ended September 30, 2021, the Company settled $11,500,000 of the Deferred Amount with common shares. Refer to Note 20 for further details.~~

In addition, during the nine months ended September 30, 2021, the Company recorded $NaN (September 30, 2020 - $2,244,416), of interest allocable to the Class A restricted voting shares. The above noted costs are reflected in the

~~interim condensed consolidated~~

~~statement of changes in shareholders’ equity.~~

~~The following summarizes the adjustments, which are included in the statement of changes in shareholders’ equity, to~~

~~re-measure~~

~~the Class A restricted voting shares to their redemption amount in mezzanine equity:~~

September 30, 2021
   September 30, 2020
Interest allocable to Class A restricted voting shares
$
—

   $ 2,244,416

~~(ii) Subscription receipts~~

In November 2020, the Company announced a private placement of subscription receipts by a subsidiary of the Company. Each subscription receipt entitles the holder to receive, without payment of any additional consideration or taking of any action by the purchaser, one common share of the Company upon the satisfaction or waiver of the escrow release conditions on or before the escrow deadline. The Company is authorized to issue an unlimited number of common shares. Each subscription receipt was sold for $10. As at December 31, 2020, $25,087,000 for 2,508,700 subscription receipts were received in cash from subscribers and held by the Sponsor. On January 15, 2021, the Company closed on $63,135,000 or 6,313,500 of subscription receipts on closing of the Qualifying Transaction and the subscription receipts were exchanged to common shares during the nine months ended September 30, 2021. Refer to Note 20 for further details.

The subscription receipts could have only been redeemed upon certain events that were not certain to occur and therefore, the subscription receipts were not required to be classified as a liability under ASC 480

~~Distinguishing Liabilities from Equity~~

as at December 31, 2020. However, as the subscription receipts could have been redeemed upon the occurrence of an event that is not solely within the Company’s control, the Company classified the subscription receipts as mezzanine equity on the consolidated balance sheets as at December 31, 2020.

~~19. Long term strategic contracts~~

~~Marketing Service Agreement (“MSA”)~~

On January 19, 2021, the MSA became effective whereby the Company engaged a third-party for strategic and promotional services. Over the term of the MSA, which is an initial period of three years, the Company will pay the following consideration in common shares:

~~(i)~~

~~$25,000,000 on the effective date and;~~

~~(ii)~~

~~$1,875,000 payable quarterly over the second year and third year terms.~~

The transaction is considered a share-based transaction as it will be settled in shares. During the nine months ended September 30, 2021 the Company issued 2,376,425 common shares in settlement of the initial $25,000,000. As the shares vested immediately, the full amount of the $25,000,000 has been recognized as an expense in operating expenses.

~~Table of Contents~~

~~TPCO Holding Corp.~~

~~Notes to the interim condensed consolidated financial statements~~

~~(Unaudited, in United States dollars)~~

~~For the three and nine months ended September 30, 2021 and 2020~~

~~19. Long term strategic contracts~~

~~(continued)~~

The Company has accounted for the quarterly payments as a liability-settled share-based payment transaction, measured at the fair value of the shares to be issued. The Company recognized an expense of $1,363,636 and $3,803,030 during the three and nine months ended September 30, 2021, respectively, in operating expenses as a sales and marketing expense. As at September 30, 2021, the cash-settled liability is $3,803,030 (December 31, 2020 - $

~~NaN~~

The arrangement can be terminated by the counterparty in certain circumstances, one of which is any change of control of the Company. In that case, the Company is required to settle the agreement in a lump sum payment that consists of all unpaid amounts. As at September 30, 2021, the amount that the Company would be liable for if the contract is terminated is $15,000,000.

~~Brand Strategy Agreement (“BSA”)~~

~~On January 15, 2021~~

~~, the BSA became effective whereby the Company was granted the right and license to use Shawn C. Carter p/k/a~~

~~JAY-Z’s~~

~~approved name, image and likeness for promoting and advertising for an initial~~

~~non-cancellable~~

~~period of 6 years.~~

~~The Company is committed to settling $26,500,000 in either cash or common shares at the option of the counterparty over the~~

~~non-cancellable~~

~~period of 6 years as follows:~~

~~(i)~~

~~$2,000,000 within 30 days (Year 1)~~

~~(ii)~~

~~$3,000,000 – Year 2~~

~~(iii)~~

~~$4,000,000 – Year 3~~

~~(iv)~~

~~$5,000,000 – Year 4~~

~~(v)~~

~~$6,000,000 – Year 5~~

~~(vi)~~

~~$6,500,000 – Year 6~~

The transaction is accounted for as a cash-settled share-based transaction as it may be settled in either cash or shares at the option of the counterparty. The Company is recognizing the cost associated with the arrangement over the same period it is receiving services, which is 6 years.

During the three and nine months ended September 30, 2021, the Company recognized an expense of $1,104,167 and $3,079,399, respectively, related to this arrangement and $1,079,398 accounts payable and accrued liabilities as at September 30, 2021.

~~The agreement can be terminated by the counterparty in certain circumstances, including a change in control of the Company or an involuntary~~

~~de-listing.~~

In these circumstances, the Company will be obligated to pay damages equal to $18,500,000 less the amount already paid under the arrangement. As at September 30, 2021, the amount of damages that the Company would be liable for if the contract is terminated was $16,500,000.

~~20. Share capital~~

~~Proportionate voting shares~~

a)	~~Authorized~~

~~The Company is authorized to issue an~~ ~~unlimited number of proportionate voting shares with 0 par value.~~

b)	~~Proportionate voting shares issued~~

~~The Company has 0 issued and outstanding proportionate voting shares.~~

~~Class A restricted voting shares~~

a)	~~Authorized~~

~~The Company is authorized to issue an unlimited number of Class A restricted voting shares with 0 par value.~~

b)	~~Class A restricted voting shares issued~~

~~The Company has 0 issued and outstanding Class A restricted voting shares.~~

~~Table of Contents~~

~~TPCO Holding Corp.~~

~~Notes to the interim condensed consolidated financial statements~~

~~(Unaudited, in United States dollars)~~

~~For the three and nine months ended September 30, 2021 and 2020~~

~~20. Share capital~~

~~(continued)~~

~~Common shares~~

a)	~~Authorized~~

~~The Company is authorized to issue an unlimited number of common shares with no par value.~~

b)	~~Common shares issued~~


	~~Number of common shares~~
~~Balance, December 31, 2020~~		0

~~(i) Conversion of Class B shares~~		~~14,655,547~~
~~(ii) Shares issued in a private placement~~		~~6,313,500~~
~~(iii) Conversion of Class A restricted voting shares~~		~~31,407,336~~
~~(iv) Shares issued for settlement of a liability~~		~~336,856~~
~~(v) Shares issued for acquisition of Caliva and OGE~~		~~32,249,666~~
~~(vi) Shares issued for acquisition of LCV~~		~~4,878,467~~
~~(vii) Shares issued for acquisition of SISU~~		~~5,787,790~~
~~(viii) Share repurchase~~		~~(1,037,500~~	)
~~(ix) Normal course issuer bid repurchase~~		~~(157,600~~	)
~~(x) Shares issued for contingent consideration~~		~~24,584~~
~~Shares issued for Marketing Service Agreement (Note 19)~~		~~2,376,425~~
~~Shares issued for vested RSUs (Note 20)~~		~~340,994~~
~~Shares issued for options exercised (Note 20)~~		~~3,313~~

~~Balance, September 30, 2021~~		~~97,179,378~~

~~(i)~~

~~Class B shares were converted into 14,655,547 common shares upon the closing of the Qualifying Transaction.~~

~~(ii)~~

On January 15, 2021, the Company closed a private placement of 6,313,500 shares for subscription receipts and Class A restricted voting shares for consideration of $63,135,000, of which 1,150,000 shares were issued to settle services rendered for underwriting fees related to the Class A restricted voting shares. The subscription receipts and Class A restricted voting shares converted to common shares upon the closing of the Qualifying Transaction.

~~(iii)~~

~~Class A restricted voting shares were converted into 31,407,336 common shares upon the closing of the Qualifying Transaction.~~

~~(iv)~~

~~The Company issued 336,856 common shares to settle a liability.~~

~~(v)~~

On January 15, 2021, the Company acquired Caliva and OGE as part of the Qualifying Transaction (Note 3). During the three and nine months ended September 30, 2021, the Company issued 25,000 and 32,272,617 common shares, respectively. The common shares issued during the three months ended September were included in shares to be issued as at June 30, 2021.

~~(vi)~~

On January 15, 2021, the Company acquired LCV as part of the Qualifying Transaction (Note 3). During the three and nine months ended September 30, 2021, the Company issued 2,049 and 4,855,516 common shares, respectively. The common shares issued during the three months ended September were included in shares to be issued as at June 30, 2021.

~~(vii)~~

On January 15, 2021, the Company acquired SISU as part of the Qualifying Transaction (Note 3). During the three and nine months ended September 30, 2021, the Company issued NaN and 5,787,790 common shares, respectively.

~~(viii)~~

~~During the three months ended September 30, 2021, the Company repurchased 1,037,500 common shares under the share repurchase agreements (Note 17).~~

~~(ix)~~

During the three months ended September 30, 2021, the Neo Exchange Inc. accepted the Company’s notice of intention to commence Normal Course Issuer Bids (“NCIBs”) for the Company’s common shares and warrants. Pursuant to the NCIBs, the Company may repurchase on the open market (or as otherwise permitted), up to 4,912,255 common Shares and 1,791,875 warrants, representing approximately 5% of the issued and outstanding of each of the common shares and the warrants subject to the normal terms and limitations of such bids and an aggregate cap of $25,000,000. Any common shares or warrants purchased under the NCIB will be cancelled. The NCIBs are effective commencing on August 18, 2021 and ending on the earlier of (i) August 17, 2022, (ii) $25,000,000 of purchases under the Bids, and (iii) the completion of purchases under the applicable Bid. Notwithstanding the foregoing, the Company may not commence purchases under the NCIBs until the expiry of its regular self-imposed quarterly blackout period. As at September 30, 2021, the Company repurchased 157,600 common shares.

~~(x)~~

As part of the acquisition of LCV, the Company could be required to issue shares to former shareholders based on certain liabilities, the final settlement of which is contingent on the outcome of certain events. During the threesix months ended June 30, ~~2021, the contingency was resolved~~2022 and ~~as a result, 24,584 shares~~

~~were~~

~~issued~~

~~during the three months ended September 30, 2021.~~

~~Table of Contents~~

~~TPCO Holding Corp.~~

~~Notes to the interim condensed consolidated financial statements~~

~~(Unaudited, in United States dollars)~~

~~For the three and nine months ended September 30, 2021 and 2020~~

~~20. Share capital~~

~~(continued)~~

During the nine months ended September 30, 2021, and in conjunction with the closing of the qualifying transaction described in Note 3, certain shareholders entered into a Lockup and Forfeiture Agreement (the “First Lockup Agreement”), that generally restricts their ability to transfer or trade their shareholdings for a period of nine-months. The trade and transfer restriction period ended on July 15, 2021.

In accordance with the First Lockup Agreement, certain shareholders have also agreed to forfeit up to 5,430,450 common shares of the Company upon the third anniversary of the Qualifying Transaction if certain trading targets are not met.

~~One-third~~

~~of such common shares will cease to be subject to forfeiture if the~~

~~20-Day~~

~~VWAP of the common shares is equal to or exceeds $13.00, an additional~~

~~one-third~~

~~will cease to be subject to forfeiture if the~~

~~20-Day~~

~~VWAP of the common shares is equal to or exceeds $17.00 and an additional~~

~~one-third~~

~~will cease to be subject to forfeiture if the~~

~~20-Day~~

~~VWAP of the common shares is equal to or exceeds $21.00.~~

~~On July 28, 2021, the Company entered into~~

~~lock-up~~

agreements (the “Second Lockup Agreements”) with certain members of the Company’s leadership team and the entire board of directors covering over approximately 33,000,000 million issued and outstanding common shares. Pursuant to the Second Lockup Agreements, each counterparty has agreed that, subject to certain exceptions, they will not, without the written consent of the Company, sell, pledge, grant any option, right or warrant for the sale of or otherwise lend, transfer assign or dispose of any of their

~~locked-up~~

~~shares until January 28, 2022.~~

~~Class B Shares~~

a)	~~Authorized~~

~~The Company is authorized to issue an unlimited number of Class B shares with 0 par value.~~

b)	~~Class B shares issued~~

			2023
	~~Number of common shares~~
~~Balance, December 31, 2020~~		~~15,218,750~~

~~Conversion of Class B shares~~		~~(14,655,547~~	)
~~Founders’ shares forfeited~~		~~(563,203~~	)

~~Balance, September 30, 2021~~		0

~~Pursuant to the Sponsor Lockup and Forfeiture Agreement, the Sponsor also forfeited 563,203 common shares to the Company for cancellation on closing of the Qualifying Transaction.~~

~~21. Warrants~~

14. Income taxes

The following table ~~reflects~~summarizes the ~~continuity of warrants for the nine months ended September 30, 2021~~Company’s income tax expense and ~~the year ended December 31, 2020:~~

Number of
Warrants

Weighted Average
Exercise Price

Balance, December 31, 2019


35,837,500

   $ 11.50
Granted    0—      0—
Exercised    0—      0—
Expired    0—      0—

Balance, December 31, 2020 and September 30, 2021


35,837,500


$
11.50

The Class A and Class B warrants were converted into one class of warrants on January 15, 2021 and became exercisable on March 22, 2021. The warrants expire on January 14, 2026. The Company has the right to accelerate expiry if for any 20 trading days in a

~~30-day~~

~~trading period the closing price of the shares is $18.00 or greater.~~

~~During the nine months ended September 30, 2021, and in conjunction with the closing of the~~

~~Qualifying Transaction~~

described in Note 3, certain shareholders entered into the Lockup and Forfeiture Agreement (the “First Lockup Agreement”), that generally restricts their ability to transfer or trade their warrants for a period of nine months. The trade and transfer restriction period ended July 15, 2021.

~~Table of Contents~~

~~TPCO Holding Corp.~~

~~Notes to the interim condensed consolidated financial statements~~

~~(Unaudited, in United States dollars)~~

~~For the three and nine months ended September 30, 2021 and 2020~~

~~22. Share-based compensation~~

Effective January 2021, the Company established the Equity Incentive Plan (the “Plan”), which provides for the granting of incentive stock options, nonqualified stock options, share appreciation rights (“SARs”), restricted share units (“RSUs”), deferred share units (“DSUs”) and performance share units (“PSUs”), herein collectively as “Awards”.

~~(a) Stock options~~

The Company grants options to purchase its common stock, generally at fair value as at the date of grant. The maximum number of common shares that may be issued under the Plan is fixed by the Board to be 10% of the Common shares outstanding, from time to time, subject to adjustments in accordance with the plan.

~~Options generally vest over a four-year period, specifically at a rate of 25% upon the first anniversary of the issuance date and 1/~~36~~th per month thereafter and expire after 10 years from the date of grant.~~

~~The following table reflects the continuity of the stock options granted during the nine months ended September 30, 2021:~~

September 30, 2021


Number of
options

Weighted average
exercise price $

Outstanding, beginning of period    0      0
Replacement options issued (i)    1,066,333    7.30
Granted during the period    0      0
Exercised    (3,313 )    3.92
Expired    (33,881 )    6.69
Forfeited    (232,647 )    7.36

Outstanding, end of period    796,492    7.31

In connection with the acquisition of Caliva and OGE, and in accordance with the sale and purchase agreements, the stock options held by former Caliva employees who became employees of TPCO were cancelled and replaced by TPCO stock options (“Replacement Options”). The Replacement Options were issued on the same terms and conditions as the options that they replaced, resulting in the fair value of the original options on January 15, 2021 being the same as the fair value of the Replacement Options.

~~The Company has allocated the fair value to~~

~~pre-acquisition~~

~~and post-acquisition services on the basis of the period of time vested as at January 15, 2021 as per the below:~~

Fair value

Allocated to
pre-acquisition
services (i)
   $ 3,847,633
Allocated to post-combination services    5,116,866

Total fair value of Replacement Options
$
8,964,499

~~(i)~~

~~The portion allocated to~~

~~pre-acquisition~~

services relates to options that were and were not yet legally vested. The Company has applied a forfeiture rate of approximately 20% to the options that have not legally vested to determine the amount to include in consideration. As a result, of the above amount, $3,489,501 has been included in consideration (Note 3).

~~The fair value allocated to post-combination services will be recognized in the interim condensed consolidated statement of operations and comprehensive income~~

~~(loss)~~

~~over the remaining vesting period.~~

~~The following table outlines stock options outstanding as at September 30, 2021:~~

Options Outstanding

Options Exercisable

Range of Exercise Prices    Number Outstanding    Weighted -Average
Exercise Price    Weighted- Average Life    Number Exercisable    Weighted-Average
Exercise Price
$ 6.67 – 8.30    796,492    $ 7.31    8.38 years    403,471    $ 6.15

~~Table of Contents~~

~~TPCO Holding Corp.~~

~~Notes to the interim condensed consolidated financial statements~~

~~(Unaudited, in United States dollars)~~

~~For the three and nine months ended September 30, 2021 and 2020~~

~~22. Share-based compensation~~

~~(continued)~~

~~(b) RSUs~~

~~(i) Cash-settled RSUs~~

~~The following table reflects the continuity of RSUs granted during the nine months ended September 30, 2021:~~

September 30, 2021


Number of
RSUs

Weighted average
remaining
contractual life

Outstanding, beginning of period    0      —
Granted    2,528,696    2.28
Modified    (1,446,196 )    3.34
Settled

(288,150
)

—

Vested    (82,500 )    —
Forfeited    (519,350 )    3.29

Outstanding, end of period    192,500    3.29

~~As the RSUs described above are cash-settled, they have been revalued as at September 30, 2021. As at September 30, 2021 the cash-settled liability is $630,741 (December 31, 2020 - $NaN).~~

During the three month period ended September 30, 2021, the Company modified a portion of the cash-settled RSUs such that they are being accounted for as equity-settled RSUs. Immediately prior to the modification date, these cash-settled RSUs were revalued, which formed the new fair value that was reclassified to equity-settled.

~~(ii) Equity-settled RSUs~~

~~The following table reflects the continuity of RSUs granted during the nine months ended September 30, 2021:~~

September 30, 2021


Number of
RSUs

Weighted average
remaining
contractual life

Outstanding, beginning of period    0      —
Granted    2,368,615    3.56
Modified    1,446,196    3.34
Vested    (468,972 )    —
Forfeited    (205,750 )    3.51

Outstanding, end of period    3,140,089    3.20

~~(c) Rights to trading price consideration (“Rights”)~~

In connection with the acquisition of Caliva and OGE, and in accordance with the sale and purchase agreements, former Caliva employees who owned stock options at January 15, 2021 and became employees of TPCO (“former Caliva employees”) were given the right to receive a portion of the trading price consideration discussed in Note 3 (“Rights”). These Rights are to be settled in TPCO shares in the event the

~~20-day~~

~~volume weighted average trading price of the common shares reaches $13.00, $17.00 and $21.00 within three years of closing, with~~

~~one-third~~

issuable upon the achievement of each price threshold, respectively. In order to receive the trading price consideration, former Caliva employees need to be employed by TPCO at the time the trading price consideration becomes payable.

~~The Rights vest 1/3 as each target date is met, and therefore the Rights have been fair valued on the grant date in three tranches:~~

Number
of shares

Fair value on
January 15,
2021

Tranche 1    215,608    $ 2,597,618
Tranche 2    215,608    2,314,652
Tranche 3    215,608    2,066,609



646,824


$
6,978,879

~~Each tranche is expensed over its vesting period, which is the date that the trading price targets are expected to be met.~~

~~Table of Contents~~

~~TPCO Holding Corp.~~

~~Notes to the interim condensed consolidated financial statements~~

~~(Unaudited, in United States dollars)~~

~~For the three and nine months ended September 30, 2021 and 2020~~

~~22. Share-based compensation~~

~~(continued)~~

~~The fair value of the Rights was determined at January 15, 2021 using the same assumptions that were used to determine the trading price consideration described in Note 32.~~

~~The following table reflects the continuity of the Rights during the nine months ended September 30, 2021:~~


	Number of Rights
~~Outstanding, beginning of period~~		0
~~Rights awarded~~		~~646,824~~
~~Forfeited~~		~~(269,760~~	)

~~Outstanding, end of period~~		~~377,064~~

~~The following table illustrates the inputs used in the measurement of the grant date fair values of the share-based compensation plans granted during the nine months ended September 30, 2021:~~

Replacement
Options

RSUs

equity-settled

RSUs

cash-settled

Dividend yield    —   —      —
Expected volatility    72 % —      —
Risk-free interest rate    0.17% - 0.71 % —      —
Share price    $ 12.66 —      —
Grant date fair value    $ 7.75 - $9.54 $ 3.60 – $9.94    N/A
Fair value on September 30, 2021    N/A N/A    $ 3.19

The Company estimated the expected term of its stock options based on the vesting and contractual terms. Volatility is estimated based on the average of the historical volatilities of the common stock of entities with characteristics similar to those of the Company. The Company uses the U.S. Treasury yield for its risk-free interest rate and a dividend yield of zero, as it does not have a stated dividend rate for common stock.

~~Share-based compensation expense is comprised of the following for the periods ended September 30, 2021:~~

Three months ended

September 30, 2021

Nine months ended

September 30, 2021

Replacement options    $ 518,725    $ 1,815,332
Equity-settled RSUs    2,900,036    4,810,532
Cash-settled RSUs    (72,588 )    5,765,003
Rights to contingent consideration    266,483    5,059,953


$
3,612,656


$
17,450,820

~~Table of Contents~~

~~TPCO Holding Corp.~~

~~Notes to the interim condensed consolidated financial statements~~

~~(Unaudited, in United States dollars)~~

~~For the three and nine months ended September 30, 2021 and 2020~~

~~23. Earnings per share~~

Three months ended

Nine months ended


September 30,
2021

September 30,
2020

September 30,
2021

September 30,
2020

Earnings (loss) available to common shareholders
$
(561,350,050
)    $ (216,250 )
$
(536,464,297
)    $ 1,449,621
Adjustments to mezzanine equity    0      155,416

0

   (2,244,416 )
Earnings (loss) available to common shareholders adjusted for the effect of dilution
$
(561,350,050
)    $ (60,834 )
$
(536,464,297
)    $ (794,795 )
Weighted average number of shares, basic
and diluted


98,421,935

   15,218,750

93,802,606

   15,218,750
Basic
and diluted
earnings (loss) per share

$
(5.70
)    $ (0.00 )
$
(5.72
)    $ (0.05 )

~~Approximately 51,852,186 of potentially dilutive securities~~effective tax rates for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2023 and 2022:

	Three months ended						Six months ended
	June 30, 2023			June 30, 2022			June 30, 2023			June 30, 2022
Loss before income taxes	$	(22,349,821	)	$	(29,298,061	)	$	(38,145,422	)	$	(62,001,674	)
Income tax (expense) recovery	$	(1,961,804	)	$	244,473		$	(2,676,212	)	$	(42,227	)
Effective tax rate		8.78	%	(0.83		%)		7.02	%		0.07	%

The Company has computed its provision for income taxes under the discrete method which treats the year-to-date period as if it were ~~excluded in~~ the ~~calculation~~annual period and determines the income tax expense or benefit on that basis. The discrete method is applied when application of ~~diluted EPS~~the estimated annual effective tax rate is impractical because it is not possible to reliably estimate the annual effective tax rate. The Company believes that, at this time, the use of this discrete method is more appropriate than the annual effective tax rate method as ~~their impact would have been anti-dilutive~~the estimated annual effective tax rate method is not reliable due to ~~net loss~~the high degree of uncertainty in ~~the period.~~

~~24. Income taxes~~

~~Net~~estimating annual pre-tax income ~~(loss) before income taxes was generated as follows:~~

Three months ended

Nine months ended


September 30,
2021

September 30,
2020

September 30,
2021

September 30,
2020

Domestic - Canada
$
30,026,836

   $ (216,250 )
$
158,278,930

   $ 1,449,621
Foreign – outside of Canada

(588,531,263
)
   0

(702,761,300
)
   0


$
(558,504,427
)
   $ (216,250 )
$

(544,482,370
)    $ 1,449,621

~~Income tax (recovery) expense is comprised of the following:~~

Three months ended

Nine months ended

September 30,
2021

September 30,
2020

September 30,
2021

September 30,
2020

Current tax expense
Domestic – Canada $ 0    $ 0   $ 0   $ 0
Foreign – outside of Canada 2,114,713 0   5,696,643 0

2,114,713

0

5,696,643

0

Deferred tax expense (recovery)
Domestic – Canada 0    0      0
Foreign – outside of Canada 730,910 0   (13,714,716 ) 0

730,910

0

(13,714,716
)
0

Income tax (recovery) expense
$
2,845,623

$ 0   $
(8,018,073
)
$ 0

~~Table of Contents~~

~~TPCO Holding Corp.~~

~~Notes~~due to the ~~interim condensed consolidated financial statements~~

~~(Unaudited,~~industry within which the Company operates.

Due to its cannabis operations, the Company is subject to the limitations of Internal Revenue Code (“IRC”) Section 280E under which the Company is only allowed to deduct expenses directly related to sales of product. This results in ~~United States dollars)~~

~~For~~permanent differences between ordinary and necessary business expenses deemed non-allowable under IRC Section 280E.

The effective tax rate for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021 and 2020~~

~~24. Income taxes~~

~~(continued)~~

~~The actual income tax provision differs~~2023 varies from ~~the expected amount calculated by applying the Canadian combined federal and provincial corporate tax rates to income before tax. These differences result from the following:~~

Three months ended

Nine months ended


September 30,

2021

September 30,
2020

September 30,

2021

September 30,
2020

(Loss) income before tax
$
(558,504,427
)
(216,250 )
$
(544,482,370
) $ 1,449,621
Statutory income tax rate

27
%
27 %

27
%
27 %
Income tax expense (recovery) based on statutory rate

(150,796,195
)
(58,388 )

(147,010,240
) 391,398
Increase (decrease) resulting from:
Non-taxable
items


163,390,934

0

137,906,638

0
Change in valuation allowance

5,623,212

58,388

19,187,002

(391,398 )
Other

1,790,314

0


1,790,314


0

Tax rate differences and tax rate changes

(17,162,642
) 0

(19,891,787
)
—

Income tax (recovery) expense
$
2,845,623

0
$
(8,018,073
)
$ 0

Deferred taxes result from the temporary differences between financial reporting carrying amounts and the tax basis of existing assets and liabilities. The table below summarizes the principal components of the deferred tax assets (liabilities) as follows:

September 30, 2021

December 31, 2020

Deferred tax assets

Loss carryforwards
$
26,593,000

   $ 3,470,820
Non-deductible
provisions and reserves


611,177

   0
Transaction costs

5,657,018

   7,045,365
Prepaid expenses

5,062,500

   0
Cash settled share-based payments

1,197,118

   0
Other

623,376

   394,875

Deferred tax assets


39,744,189

   10,911,060
Valuation allowance

(24,325,934
)
   (10,911,060 )

Net deferred tax asset


15,418,255

   0

Deferred tax liabilities

Intangible assets

(59,990,714
)
   0
Other

(277,644
)
   0

Deferred tax liabilities


(60,268,358
)
   0
Deferred tax assets

15,418,255

   0

Net deferred tax liability

$
(44,850,103
)    $ 0

~~Deferred tax liability consists of the following:~~

September 30, 2021

December 31, 2020

Deferred tax liability
$
(44,785,647
)
$ 0
Deferred tax liability held for sale (Note 16)

(64,456
)
0


$
(44,850,103
)
$ 0

Deferred income taxes have not been recorded on the basis differences for investments in consolidated subsidiaries as these basis differences are indefinitely reinvested or will reverse in a non-taxable manner. Quantification of the deferred income tax liability, if any, associated with indefinitely reinvested basis differences is not practicable.

~~Included in accounts payable and accrued liabilities is $4,723,306 (December 31, 2020 - $NaN) of current taxes payable.~~

~~Table of Contents~~

~~TPCO Holding Corp.~~

~~Notes to the interim condensed consolidated financial statements~~

~~(Unaudited, in United States dollars)~~

~~For~~ the three and ~~nine~~six months ended ~~September~~June 30, ~~2021 and 2020~~

~~24. Income taxes~~

~~(continued)~~

~~As at September 30, 2021,~~2022, primarily due to the ~~Company has Canadian federal and provincial~~

~~non-capital~~

~~loss carryforwards~~increase in non-deductible expenses as a proportion of ~~$40,265,359 (December 31, 2020 - $12,854,892). The Canadian~~

~~non-capital~~

~~loss carryforwards expire between 2039 and 2041.~~

~~As at September 30, 2021, the Company has the following U.S. federal and state losses carried forward available to reduce future years’ taxable income, which losses expire as follows:~~

Federal

State and Local

Total

2034    $ 0
$
48,671
$
48,671

2035    0      3,382,027

3,382,027

2036    0      8,787,634

8,787,634

2037    0      12,061,282

12,061,282

2038    0      31,194,997

31,194,997

2039    0      64,493,970

64,493,970

2040    0      50,417,887

50,417,887

2041    0      38,294,668

38,294,668

Indefinite    7,770,222    0

7,770,222



$
7,770,222


$
208,681,136


$
216,451,358

~~Section 280E prohibits businesses engaged~~total expenses in the ~~trafficking of Schedule I or Schedule II controlled substances from deducting normal business~~current year. The Company incurs expenses ~~such as payroll and rent, from gross income (revenue less cost of goods sold). Section 280E was originally intended~~that are not deductible due to penalize criminal market operators, but because cannabis remains a Schedule I controlled substance for Federal purposes, the Internal Revenue Service (“IRS”) has subsequently applied Section 280E to state-legal cannabis businesses. Cannabis businesses operating in states that align their tax codes with the IRC are also unable to deduct normal business expenses from taxable income subject to state taxes. The

~~non-deductible~~

~~expenses shown in the effective rate reconciliation above is comprised primarily of the impact of applying~~ IRC Section 280E ~~to the Company’s businesses that are involved~~limitations which results in ~~selling cannabis, along with other typical~~

~~non-deductible~~

expenses such as lobbying expenses. As the application and IRS interpretations on Section 280E continue to evolve, the impact of this cannot be reliably estimated. Any changes to the application of Section 280E may have a material effect on the Company’s interim condensed consolidated financial statements

~~The statute of limitations on~~significant income tax returns for the IRS and California Franchise Tax Board are 3 and 4 years respectively. Net operating losses remain open for examination beyond these statute of limitations for both the IRS and California Franchise Tax Board.

Utilization of net operating loss carryforwards may be subject to limitations in the event of a change in ownership as defined under U.S. IRC Section 382, and similar state provisions. An “ownership change” is generally defined as a cumulative change in the ownership interest of significant stockholders of more than 50 percentage points over a ~~three~~-year period. The Company experienced ownership change during 2017. Such ownership change could result in a limitation of the Company’s ability to reduce future income by net operating loss carryforwards. A formal Section 382 study has not been prepared, so the exact effects of the ownership change are not known at this time. The deferred tax assets include net operating losses of the Company as of the conversion date to a C corporation.

In March 2020, the U.S. enacted the Coronavirus Aid, Relief, and Economic Security Act (the “Act”). The Act, among other provisions, reinstates the ability of corporations to carry net operating losses back to the five preceding tax years, has increased the excess interest limitation on modified taxable income from 30 percent to 50 percent. The Company has made a reasonable estimate of the effects on existing deferred tax balances and has concluded that the Act has not had a significant on the deferred tax balances.

expense.

The Company operates in a number of tax jurisdictions and are subject to examination of its income tax returns by tax authorities in those jurisdictions who may challenge any item on ~~these~~those returns. ~~Because~~Significant judgment is required in evaluating the ~~tax matters challenged by tax authorities are typically complex, the ultimate outcome of these challenges is uncertain. The Company recognizes the effects of~~Company’s uncertain tax positions and determining the provision for income taxes.

The Company’s unrecognized tax assets were approximately $67,718,372 and $66,459,411 as at June 30, 2023 and December 31, 2022, respectively.

The federal statute of limitations remains open for the 2019 tax year to the present. The state income tax returns generally remain open for the 2018 tax year through the present. Net operating losses arising prior to these years are also open to examination if and when utilized.

F-14

Table of Contents

TPCO Holding Corp.

Notes to the interim condensed consolidated financial statements

(Unaudited, in United States dollars)

For the three and six months ended June 30, 2022 and 2023

15. Shareholders’ equity

Common shares

a) Authorized

The Company is authorized to issue an unlimited number of common shares with no par value.

b) Common shares issued

	Number of common shares
Balance December 31, 2022		107,516,333
Shares issued for Coast L exchange (i)		18,721,083
Shares issued for vested RSUs and PSUs		933,394
Shares issued previously classified as shares to be issued (ii)		112,634
Shares returned to Treasury (iii)		(7,124,838	)
Balance, June 30, 2023		120,158,606

(i)	On November 14, 2022, Coast L Acquisition Corp (“Coast L”) a wholly owned subsidiary of the Company issued 24,796,902 common shares of Coast L as part of the legal closing of the Company’s acquisition of Coastal Holding Company, LLC. During the six months ended June 30, 2023, an additional 106,290 shares of Coast L were issued. Each Coast L share is exchangeable at any time on a one-for-one basis into common shares of the Company. During the six months ended June 30, 2023, 18,721,083 Coast L shares were exchanged for 18,721,083 common shares of the Company. As at June 30, 2023, 6,182,109 exchangeable shares of Coast L are outstanding.

(ii)	During the six months ended June 30, 2023, 112,634 shares were issued in relation to a previous business combination which were sitting in “to be issued” at March 31, 2023 and December 31, 2022.

(iii)	Of the 7,124,838 shares returned to treasury during the six months ended June 30, 2023, 7,122,321 were sitting in “to be returned” at December 31, 2022. Of those shares, 7,121,239 related to the modification agreements that were entered into between the Company, a third-party, and Shawn C. Carter p/k/a JAY-Z.

16. Operating expenses

	Three months ended				Six months ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
General and administrative	$	13,542,776	$	8,751,232	$	21,496,719	$	21,837,374
Allowance for accounts receivable and notes receivable		641,984		168,704		683,854		2,581,335
Sales and marketing		3,400,113		3,718,017		4,771,414		7,124,375
Salaries and benefits		7,838,554		9,874,452		14,869,452		19,890,008
Share-based compensation (Note 18)		498,483		1,461,093		2,163,703		3,703,170
Lease expense (Note 10)		1,255,780		2,110,107		2,569,261		3,866,897
Depreciation of property and equipment and amortization of right-of-use assets under finance leases		890,628		882,659		1,793,928		1,843,359
Amortization of intangible assets (Note 11)		1,821,530		5,322,197		3,643,061		10,351,851
	$	29,889,848	$	32,288,461	$	51,991,392	$	71,198,369

F-15

Table of Contents

TPCO Holding Corp.

Notes to the interim condensed consolidated financial statements

(Unaudited, in United States dollars)

For the three and six months ended June 30, 2022 and 2023

17. Loss per share

	Three months ended						Six months ended
	June 30, 2023			June 30, 2022			June 30, 2023			June 30, 2022
Loss from continuing operations available to common shareholders	$	(24,311,625	)	$	(28,693,978	)	$	(40,821,634	)	$	(61,839,636	)
Loss from discontinued operations available to common shareholders		-			(1,429,097	)		-			(1,975,316	)
Loss available to common shareholders	$	(24,311,625	)	$	(30,123,075	)	$	(40,821,634	)	$	(63,814,952	)

Weighted average number of shares, basic and diluted		120,070,367			101,102,391			111,208,235			99,967,824

Basic and diluted loss per share from continuing operations	$	(0.20	)	$	(0.29	)	$	(0.37	)	$	(0.62	)
Basic and diluted loss per share from discontinued operations		-			(0.01	)		-			(0.02	)
Basic and diluted loss per share	$	(0.20	)	$	(0.30	)	$	(0.37	)	$	(0.64	)

Approximately 66,912,067 of potentially dilutive securities as at June 30, 2023 were excluded in the ~~interim condensed consolidated financial statements after determining~~calculation of diluted loss per share as their impact would have been anti-dilutive.

18. Share-based compensation

Effective January 2021, the Company established the Equity Incentive Plan (the “Plan”), which provides for the granting of incentive share options, nonqualified share options, share appreciation rights (“SARs”), restricted share units (“RSUs”), deferred share units (“DSUs”) and performance share units (“PSUs”), herein collectively referred to as “Awards”.

(a) Share options

The Company’s options outstanding relate to replacement options issued in a business combination that ~~it is~~

~~more-likely-than-not~~

occurred in 2021.

Six months ended June 30, 2023

Number of

options

Weighted

average

exercise price $

Weighted

average

remaining

contractual term

Aggregate

intrinsic

value

Outstanding, beginning of period

376,385

7.67

Expired

(148,698

)

7.52

Forfeited

(1,747

)

7.10

Outstanding, end of period

225,940

7.79

4.43

Vested and expected to vest in the future

225,940

7.79

Exercisable

200,948

7.81

4.43

As at June 30, 2023, there was $Nil of total unrecognized compensation cost related to non-vested replacement options.

F-16

Table of Contents

TPCO Holding Corp.

Notes to the interim condensed consolidated financial statements

(Unaudited, in United States dollars)

For the three and six months ended June 30, 2022 and 2023

18. Share-based compensation (continued)

(b) Equity-settled RSUs and PSUs

The following table reflects the ~~uncertain tax positions will be sustained.~~

~~The Company intends~~continuity of RSUs and PSUs granted during the six months ended June 30, 2023:

	June 30, 2023
	Number of RSUs			Weighted average grant date fair value $		Number of PSUs			Weighted average grant date fair value $
Outstanding, beginning of period		3,093,992			2.71		2,325,000			1.16
Vested		(1,299,917	)		2.55		(586,250	)		1.12
Forfeited		(434,449	)		2.03		(923,750	)		1.04
Modification (i)		187,515			0.16		100,000			0.16
Outstanding, end of period		1,547,141			2.55		915,000			1.14

(i)

During the three months ended June 30, 2023, the Company terminated certain individuals in anticipation of the upcoming acquisition that is discussed in Note 27. As part of the terminations, the Company modified some previously granted RSUs and PSUs such that they would continue to vest on change in control, irrespective of the termination.

As at June 30, 2023, there was $1,417,881 of total unrecognized compensation cost related to ~~be treated as a U.S. corporation for U.S. federal income tax purposes under section 7874~~non-vested RSUs and $825,494 of ~~the U.S.~~

~~IRC~~

~~and~~total unrecognized compensation cost related to non-vested PSUs. That cost is expected to be ~~subject~~recognized over a weighted average period of 1.63 years and 0.03 years respectively. The total fair value of RSUs and PSUs vested during the six months ended June 30, 2023 was $155,414 and $120,111, respectively.

Of the 1,886,167 RSUs and PSUs that vested, 899,328 were settled in shares, 715,504 were settled in cash to ~~U.S. federal income tax~~cover withholding taxes on ~~its worldwide income. However, the Company is expected, regardless of any application of section 7874~~behalf of the ~~U.S. Tax Code, to be treated as tax resident of Canada for Canadian income tax purposes. Accordingly, the Company will be subject to taxation both in Canada~~employees, and ~~the U.S.~~

~~Table of Contents~~

~~TPCO Holding Corp.~~

~~Notes to the interim condensed consolidated financial statements~~

~~(Unaudited, in United States dollars)~~

~~For~~271,335 were not yet settled.

During the three and ~~nine~~six months ended ~~September~~June 30, ~~2021 and~~

~~2020~~

~~25. Operating expenses~~

Three months ended

Nine months ended


September 30,
2021

September 30,
2020

September 30,
2021

September 30,
2020

General and administrative
$
9,917,406

   $ 371,666
$
32,557,840

   $ 794,795
Sales and marketing

4,584,375

   0

38,048,443

   0
Salaries and benefits

9,022,933

   0

27,244,215

   0
Share-based compensation (Note 22)

3,612,656

   0

17,450,820

   0
Lease expense

1,136,914

   0

3,455,582

   0
Depreciation

940,923

   0

2,864,125

   0
Amortization of intangible assets (Note 10)

2,378,999

   0

15,961,101

   0


$
31,594,206

   $ 371,666
$
137,582,126

   $ 794,795

~~26. Loss on disposal of assets~~

Three months ended

Nine months ended


September 30,
2021

September 30,
2020

September 30,
2021

September 30,
2020

Other assets
$
207,272

$ 0
$
378,011

$ 0
Non-THC
business (i)


—

0

3,348,926

0
Sale of licenses (ii)

(70,230
)
0

(70,230
)
0


$
137,042

$ 0
$
3,656,707

$ 0—

~~(i)~~

~~During~~2023, the ~~nine months ended September 30, 2021, the Company disposed of its~~

~~non-THC~~

business, which was acquired as part of the Caliva and OGE and LCV acquisitions on January 15, 2021 (Note 3). The assets were sold for proceeds of $7,363,733, which comprised: (1) $4,318,537 of cash, (2) $885,722 of a promissory note (Note 8) and (3) $2,159,514 worth of common shares of Arcadia Wellness LLC (Note 8).

~~The~~ Company recognized athe following total compensation expense, net ~~loss~~ of ~~$733,858, which is comprised of a loss on~~

~~disposal~~

~~of assets $3,348,926 offset by an associated deferred tax recovery of $2,615,068.~~

~~(ii)~~

~~During the nine months ended September 30, 2021, the Company sold~~

~~100~~

~~% of the shares of its subsidiary, which was acquired as part of the Caliva and OGE acquisition on January 15, 2021 (Note 3). The assets were sold for proceeds of $250,000 in cash.~~

~~The Company recognized a net gain of $70,230, which is comprised of a gain on disposal of assets $8,516 and a deferred tax recovery of $61,714.~~

During the nine months ended September 30, 2021, the Company disposed of its investment in associate that was acquired in a business combination (Note 3). The investment was sold for $6,500,000 cash, resulting in NaN gain or loss on disposal.

~~27. Interest expense~~

Three months ended

Nine months ended


September 30,
2021

September 30,
2020

September 30,
2021

September 30,
2020

Lease liability (Note 13)

$
1,120,925

   $ 0
$
3,385,978

   $ 0
Other


12,416

   0

342,598

   0









$
1,133,341

   $ 0
$
3,728,576

   $ 0

~~Table of Contents~~

~~TPCO Holding Corp.~~

~~Notes to the interim condensed consolidated financial statements~~

~~(Unaudited, in United States dollars)~~

~~For the three and nine months ended September 30, 2021 and 2020~~

~~28.~~estimated forfeitures:

	Three months ended				Six months ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Replacement options	$	-	$	48,013	$	-	$	279,507
Equity-settled RSUs and PSUs		498,483		1,413,080		2,163,703		3,423,663
	$	498,483	$	1,461,093	$	2,163,703	$	3,703,170

19. Supplemental cash flow information

Nine months ended


September 30,

2021

September 30,

2020

Change in working capital

Accounts receivable
$
(1,619,425
)
   $ 0
Other receivables

0

   272,092
Inventory


(7,722,755
)
   0
Prepaid expenses


(5,967,670
)
   0
Other current assets


658,734

   141,655
Security deposits


6,181

   0
Prepaid expenses and other assets


37,849

   0
Notes receivable


(1,700,000
)    0
Cash settled share-based payments


(1,682,898
)

Accounts payable and accrued liabilities
(26,555,419
)
   381,048


$
(44,545,403
)

$
794,795

Cash paid

Income taxes
$
3,400,000

   $ 0


Nine months ended


September 30,
2021

September 30,

2020

Non-cash
transactions

Settlement of a liability (Note 20 (ii))
$
11,500,000

   $ —

~~29.~~

	Six months ended
Change in working capital	June 30, 2023			June 30, 2022

Accounts receivable	$	(128,788	)	$	420,992
Income tax receivable		-			1,322,340
Inventory		2,544,825			6,746,295
Prepaid expenses and other current assets		427,380			725,974
Security deposits		(126,431	)		(111,875	)
Prepaid expenses and other assets		583,333			(86,969	)
Accounts payable and accrued liabilities		813,642			(10,489,840	)
	$	4,113,961		$	(1,473,083	)

F-17

Table of Contents

TPCO Holding Corp.

Notes to the interim condensed consolidated financial statements

(Unaudited, in United States dollars)

For the three and six months ended June 30, 2022 and 2023

20. Warrants

The following table reflects the continuity of warrants:

		Number of Warrants				Weighted Average Exercise Price
Balance, December 31, 2022 and June 30, 2023			35,837,500			$	11.50

The warrants expire on January 14, 2026. The Company has the right to accelerate expiry of the warrants (excluding the warrants held by the Subversive Capital Sponsor LLC in certain circumstances), if for any 20 trading days in a 30-day trading period the closing price of the share is $18.00 or greater.

21. Related party transactions and balances

~~a) Related party transactions~~

A director of the Company is a close family member to an owner of R&C Brown Associates, LP (“R&C”). The ~~following table outlines the amounts paid~~Company has 2 operating leases and 1 finance lease with R&C.

The Company made lease payments including interest and principal to a related ~~party:~~

Three months ended

Nine months ended


September 30,
2021

September 30,
2020

September 30,
2021

September 30,
2020

Lease payments – interest and principal (i)
$
1,307,015

   $ —
$
3,520,340

   $ —
Administrative fees (ii)

—

   —

5,000

   60,000


$
1,307,015

   $ —
$
3,525,340

   $ 60,000

~~(i)~~

A director of the Company is a close family member to an owner of R&C Brown Associates, LP (“R&C”). The Company has 3 leases with R&C. Included in lease liabilities as at September 30, 2021 is $41,136,936 (December 31, 2020 - $0nil) with respect to leases with R&C.

~~(ii)~~

Prior to the closing of the Qualifying Transaction, pursuant to an administrative services agreement between the Company and its Sponsor, dated July 16, 2019 (the “Administrative Services Agreement”), the Company provided a payment of $10,000 per month to the Sponsorparty of $1,389,384 and $2,777,367 for ~~the utilization of office space, utilities and administrative support. The Company further reimbursed the Sponsor for any~~

~~out-of-pocket~~

expenses incurred by directors, officers and consultants of the Company which were paid by the Sponsor relating to certain activities on the Company’s behalf, including identifying and negotiating the Qualifying Transaction. The Company recorded $NaN and $5,000 of administrative fees for the three and nine months ended September 30, 2021, respectively ($30,000 and $60,000 for the three and nine months ended September 30, 2020, respectively). The Administrative Services Agreement terminated upon consummation of the Qualifying Transaction.

~~In addition to the items described above, the Company entered into the following transactions with related parties:~~

~~(i)~~

~~R&C subscribed for 395,000 shares of the private placement that closed on January 15, 2021.~~

~~(ii)~~

~~A founder and director~~

of the Company had a 16.34% interest in LCV immediately prior to the Qualifying Transaction. The founder participated in the Qualifying Transaction, under the same terms and conditions as the other participants.

~~Table of Contents~~

~~TPCO Holding Corp.~~

~~Notes to the interim condensed consolidated financial statements~~

~~(Unaudited, in United States dollars)~~

~~For~~ the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2023, respectively ($1,356,286 and ~~2020~~

~~29. Related party transactions~~$2,213,325 for the three and ~~balances~~

~~(continued)~~

~~b) Key management personnel~~

~~Key management of the Company are its Board of Directors~~six months ended June 30, 2022, respectively).

Included in lease liabilities and ~~members of executive management. Key management personnel remuneration includes the following payments:~~

Three months ended

Nine months ended


September 30,
2021

September 30,
2020

September 30,
2021

September 30,
2020

Salaries and benefits
$
1,062,020

   $ 0
$
2,547,399

   $ 0
Share-based compensation

1,369,718

   0

7,772,610

   0

$
2,431,738

   $ 0
$
10,320,009

   $ 0

~~30. Segmented~~right-of-use assets as at June 30, 2023 is $38,255,126 (December 31, 2022 - $40,594,490) and $23,415,701 (December 31, 2022 - $24,324,186), respectively, with respect to leases with R&C.

22. Segment information

The Company’s operations ~~beginning January 15, 2021,~~ comprise a single operating segment engaged in the cultivation, manufacturing, distribution and sale of cannabis within the State of California. All revenues ~~are~~were generated in the State of California for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021 (September~~2023 and June 30, ~~2020 - $NaN)~~2022 and all property and equipment, right-of-use assets and intangible assets ~~are~~were located in the State of California.

~~31.~~

23. Commitments and contingencies

a) California operating licenses

The Company’s primary activity is engaging in state-legal commercial cannabis business, including the cultivation, manufacture, distribution, and sale of cannabis and cannabis products pursuant to California law. However, this activity is not in compliance with the United States Controlled Substances Act (the ~~CSA)~~“CSA”). The Company’s assets are potentially subject to seizure or confiscation by Federal governmental agencies, and the Company could face criminal and civil penalties for noncompliance with the CSA, although such events would be without relevant precedent. Management of the Company believes ~~they are~~the Company is in compliance with all California and local jurisdiction laws and monitor the regulatory environment on an ongoing basis along with counsel to ensure the continued compliance with all applicable laws and licensing agreements.

The Company’s operation is sanctioned by the State of California and local jurisdictions. There have been no instances of federal interference with those who adhere to ~~those guidelines.~~California laws and regulations governing cannabis. Due to the uncertainty surrounding the Company’s noncompliance with the CSA, the potential liability from any noncompliance cannot be reasonably estimated and the Company may be subject to regulatory fines, penalties or restrictions in the future.

Effective January 1, 2018, the State of California allowed for adult use cannabis sales. Beginning on January 1, 2018, the State began issuing temporary licenses that expired 120 days after issuance for retail, distribution, manufacturing and cultivation permits. Temporary licenses could be extended in

90-day

increments by the State upon submission of an annual license application. All temporary licenses had been granted extensions by the State during 2018.

F-18

Table of Contents

TPCO Holding Corp.

Notes to the interim condensed consolidated financial statements

(Unaudited, in United States dollars)

For the three and six months ended June 30, 2022 and 2023

23. Commitments and contingencies(continued)

In September 2019, Senate Bill 1459 (SB 1459) was enacted which enabled state licensing authorities to issue provisional licenses through 2021. A provisional license could be issued if an applicant submitted a completed annual license application to the ~~Bureau.~~Bureau of Cannabis Control. A completed application for purposes of obtaining a provisional license is not the same as a sufficient application to obtain an annual license. The provisional cannabis license, which is valid for 12 months from the date issued, is said to be in between a temporary license and an annual license and allows a cannabis business to operate as they would under local and state regulations.

Licensees issued a provisional license are expected to be diligently working toward completing all annual license requirements in order to maintain a provisional license. The Company obtained its provisional licenses in 2019 and continues to work with the State to obtain annual licensing.

The Company’s prior licenses obtained from the local jurisdictions it operated in have been continued by such jurisdictions and are necessary to obtain ~~state~~State licensing.

The Company has received annual licenses from each local jurisdiction in which it actively operates. Although the Company believes it will continue to receive the necessary licenses from the State and applicable local jurisdictions to conduct its business in a timely fashion, there is no guarantee its clients will be able to do so and any failure to do so may have a negative effect on its business and results of operations.

~~Table of Contents~~

~~TPCO Holding Corp.~~

~~Notes to the interim condensed consolidated financial statements~~

~~(Unaudited, in United States dollars)~~

~~For the three and nine months ended September 30, 2021 and 2020~~

~~31. Commitments and contingencies~~

~~(continued)~~

a)	~~California operating licenses~~ ~~(continued)~~

~~Additional regulations relating to testing that came into effect on July 1, 2018 (Phase II testing requirements) required the clients to sell products that would be~~

~~non-compliant~~

prior to that date, causing a loss of margin due to discounts that had to be provided to ensure that such products were sold prior to July 1, 2018. Due to the additional testing requirements effective July 1, 2018, the California market and the clients experienced a shortage in supply of compliant cannabis products.

b)	~~Other legal matters~~

b) Other legal matters

From time to time in the normal course of business, the Company may be subject to legal matters such as threatened or pending claims or proceedings. ~~We are~~The Company is not currently a party to any material legal proceedings or claims, nor are we aware of any pending or threatened litigation or claims that ~~could~~would be reasonably likely to have a material adverse effect on our business, operating results, cash flows or financial condition should such litigation or claim be resolved unfavorably.

c)	~~Social equity fund~~

c) Social equity fund

The Company formed Social Equity Ventures LLC ~~during the nine months ended September 30,~~(“SEV”) in 2021 as its social equity investment vehicle with a planned $10,000,000 investment and ~~is committed to an initial minimum commitment of $10,000,000 and~~a planned annual ~~contributions~~contribution of at least 2% of its net ~~income.~~income from the Company. During the

~~nine~~ six months

ended ~~September~~June 30, ~~2021, the Company invested $1,000,000. Refer to Note 8 for further details.~~

~~32.~~2023, SEV made social equity investments totalling $Nil (year ended December 31, 2022 - SEV made social equity investments totalling $350,000).

24. Financial instruments

a) Contingent consideration

Financial instruments recorded at fair value in the interim condensed consolidated balance sheet are classified using a fair value hierarchy that reflects the observability of significant inputs used in making the measurements.

The fair value hierarchy requires the use of observable market inputs whenever such inputs exist. A financial instrument is classified based on the lowest level of the hierarchy for which a significant input has been considered in measuring fair value.

~~The following table provides information about how~~

As at June 30, 2023, all contingent consideration is classified as level 1 in the fair value hierarchy (as at December 31, 2022, all contingent consideration was classified as a level 3).

The following provides a breakdown of contingent consideration ~~has been determined~~ as at ~~September~~June 30, ~~2021~~2023 and ~~January 15, 2021:~~

September 30, 2021

January 15, 2021

Fair value hierarchy and
technique

Contingent consideration – other    0Nil    0Nil    Level 3 – See (i) below
Contingent consideration – earn out shares    $ 9,765,114    $ 232,719,246    Level 3 – See (ii) below

2022:

	Contingent consideration
	Trading price consideration (i)			Other (ii)			Total
Balance December 31, 2021	$	574,687		$	368,444		$	943,131
Change in fair value		(569,165	)		(69,430	)		(638,595	)
Transferred to equity		-			(299,014	)		(299,014	)
Balance June 30, 2022	$	5,522		$	-		$	5,522

Balance December 31, 2022	$	1,611,843		$	-		$	1,611,843
Change in fair value		1,922,931			-			1,922,931
Balance, June 30, 2023	$	3,534,774		$	-		$	3,534,774

~~(i)~~

~~Contingent consideration – other~~

~~– As part~~F-19

Table of the acquisition of Caliva and LCV, the Company could be required to issue shares to former shareholders based on certain liabilities, the final settlement of which is contingent on the outcome of certain events. During the nine months ended September 30, 2021, a portion of the contingency was resolved and as a result, the number of shares to be issued related to that portion became fixed. This portion of the contingent consideration was remeasured to $1,957,045 based on the fixed number of shares to be issuedContents

TPCO Holding Corp.

Notes to the ~~former Caliva and LCV shareholders and reclassified as equity. The remeasurement is included in the change in fair value of contingent consideration in~~

~~the~~
interim condensed consolidated
~~statement~~

~~of income (loss) and comprehensive income (loss).~~

The remaining portion of contingent consideration could result in the issuance of a maximum number of shares of 270,000 and the fair value associated with the remaining contingent consideration is $NaN.

~~Table of Contents~~

~~TPCO Holding Corp.~~

~~Notes to the interim condensed consolidated financial statements~~

~~(Unaudited, in United States dollars)~~

financial statements

(Unaudited, in United States dollars)

For ~~the three and nine months ended September 30, 2021 and 2020~~

~~32. Financial instruments~~

~~(continued)~~

~~(ii)~~

~~Contingent consideration – earn out shares –~~

The fair value of the contingent consideration was determined using a Monte Carlo simulation methodology that included simulating the stock price using a risk-neutral Geometric Brownian Motion-based pricing model over 500,000 iterations. The methodology recorded the likelihood of the stock price achieving the price hurdle associated with the payout and calculated the discounted value of the payout based on the stock price on the date the price hurdle was met and the corresponding

~~20-day~~

~~volume-weighted average price. During~~ the three and ~~nine~~six months ended ~~September~~June 30, ~~2021, the Company recorded a gain on the change in fair value of the contingent consideration of $38,178,321~~

2022 and ~~$222,954,132, respectively.~~

2023

Key Inputs

September 30, 2021

January 15, 2021

Key unobservable inputs

Expected volatility    62 % 66 %
Key observable inputs

Share price    $ 3.19 $ 12.66
Risk-free interest rate    0.35 % 0.20 %
Dividend yield    0 % 0 %
Number of shares    16,979,235 16,709,476

24. Financial instruments (continued)

(i) Trading price consideration – As part of the acquisition of Caliva and OGE and LCV in 2021, the former shareholders received a contingent right for up to 18,356,299 and 3,856,955 additional common shares, respectively, in the event the 20-day volume weighted average trading price (“VWAP”) of the common shares reaches $13.00, $17.00 and $21.00 within three years of closing, with one-third issuable upon the achievement of each price threshold, respectively. In addition, the contingent consideration becomes issuable upon a change in control event. The trading price consideration has been valued assuming a 100% likelihood of a change in control. Refer to Note 27.

Key Inputs	June 30, 2023		December 31, 2022			June 30, 2022
Key unobservable inputs
Expected volatility		-		100	%		65	%

Key observable inputs
Share price	$	0.16	$	0.15		$	0.65
Risk-free interest rate		-		4.66	%		2.87	%
Dividend yield		-		0	%		0	%
Number of shares		22,092,339		22,080,037			21,969,238

A 15% change in the ~~following~~volatility assumption will have the following impact on the fair value of the contingent ~~consideration as at~~consideration:

Change in volatility			June 30, 2023		December 31, 2022		June 30, 2022
	+15	%	$	-	$	595	$	17,527,095
	-15	%	$	-	$	-	$	(20,712,326	)

(ii) Other – As part of the acquisition of LCV that occurred on January 15, ~~2021:~~

Original

+15%

-15%

Volatility    $ 232,719,246    $ 11,420,904    $ (17,250,641 )

~~A 15%~~2021, the Company could be required to issue shares to former shareholders based on certain liabilities, the final settlement of which is contingent on the outcome of certain events. During the three months ended March 31, 2022, the remaining contingency was resolved and as a result, the number of shares to be issued related to that portion became fixed. The contingent consideration was remeasured to $299,014 based on the fixed number of shares to be issued to the former LCV shareholders and reclassified as equity. The remeasurement is included in the change in ~~the following assumption will have the following impact on the~~ fair value of ~~the~~ contingent consideration

~~as at September 30, 2021:~~

Original

+15%

-15%

Volatility    $ 9,765,114    $ 9,237,376    $ (6,975,068 )

~~Interest risk~~

~~Interest rate risk is~~ in the ~~risk that the fair value or future cash flows~~interim condensed consolidated statement of ~~a financial instrument will fluctuate because of changes in market interest rates. The Company is subject to minimal interest rate risk.~~

operations and comprehensive loss.

b) Credit risk

Credit risk arises from deposits with banks, ~~and outstanding trade receivables. For~~security deposits, trade receivables, ~~the Company does not hold any collateral as security but mitigates this risk by dealing with counterparts that management believes to be financially sound~~notes receivable and ~~accordingly, does not anticipate significant loss due to~~

~~non-performance.~~

The maximum exposure to credit risk as at September 30, 2021 approximates $224,974,740 (December 31, 2020 - $582,622,025) of cash, restricted cash and cash equivalents and accounts receivable on the interim condensed balance sheet.

other receivables.

As at ~~September 30, 2021~~June, 2023, the balances were as follows:

	Gross		Allowance			Net
Cash	$	60,544,072	$	-		$	60,544,072
Accounts receivable		2,844,503		(1,729,774	)		1,114,729
Security deposits		1,307,509		-			1,307,509
Notes receivables		12,594,655		(7,140,000	)		5,454,655
	$	77,290,739	$	(8,869,774	)	$	68,420,965

The Company’s aging of receivables was as

~~follows~~

September 30, 2021

0-60
day

$
4,124,578

61-120
days


1,614,889


Gross receivables

5,739,467

Less allowance for doubtful accounts

(796,403
)


$
4,943,064

~~Table of Contents~~

~~TPCO Holding Corp.~~

follows:

	June 30, 2023
0 - 30 days	$	1,125,750
31 - 60 days		28,567
61 - 90 days		3,785
91 – 120 days		7,769
Over 120 days		1,678,632
Gross receivables		2,844,503
Less allowance for doubtful accounts		(1,729,774	)
	$	1,114,729

F-20

Table of Contents

TPCO Holding Corp.

Notes to the interim condensed consolidated financial statements

(Unaudited, in United States dollars)

For the three and six months ended June 30, 2022 and 2023

25. Fair value measurement

Recurring fair value measurements

The following table presents information about the ~~interim condensed consolidated financial statements~~

~~(Unaudited, in United States dollars)~~

~~For the three~~Company’s assets and ~~nine months ended September~~liabilities measured at fair value on a recurring basis as at June 30, ~~2021 and 2020~~

~~33.~~

2023:

Carrying amount

Level 1

Level 3

Fair value change

Debt securities and total investments

571,301

170,358

Total contingent consideration – trading price consideration (Note 24)

3,534,774

1,922,931

26. COVID-19

In March 2020, the World Health Organization categorized coronavirus disease 2019

(“COVID-19”)

as a pandemic.

~~COVID-19~~

COVID‑19 continues to impact the U.S. and other countries across the world, and the duration and severity of its effects ~~are currently~~remain unknown. The Company continues to implement and evaluate actions to maintain its financial position and support the continuity of its business and operations in the face of this pandemic and other events.

The Company’s priorities during the

COVID-19

pandemic ~~are~~continue to be protecting the health and safety of its employees and its customers, following the recommended actions of government and health authorities. In the future, the pandemic may cause reduced demand for the Company’s products and services if, for example, the pandemic results in a recessionary economic environment or potential new restrictions on business operations or the movement of individuals.

The

COVID-19

outbreak in the United States has caused business disruption both to the Company and throughout its customer base and supply chain through mandated and voluntary closings of many businesses. While this disruption is expected to negatively impact The Company’s operating results, the related financial impact and duration cannot be reasonably estimated at this time. The Company has taken and continues to take, important steps to protect its employees, customers and business operations since the beginning of the pandemic.

The Company has incurred incremental costs to implement proactive measures to prevent the spread of

~~COVID-19~~

~~and to mitigate the due to employee absenteeism and leaves of absence and have experienced fluctuations in our business results.~~ COVID-19. Additionally, the Company closely monitors its supply chain and third-party product availability in light of the pandemic. To date, the business has not experienced negative consequences due to interruptions in its supply chain. However, the Company continues to undertake preemptive measures to ensure alternate supply sources as needed.

~~34. Comparative figures~~

~~Certain comparative figures have been reclassified in Note 25 to conform~~

27. Subsequent events

Closing of transaction with ~~current period presentation relate.~~

~~35. Subsequent events~~

~~Calma West Hollywood (“Calma”) escrow~~

The Company is party to a definitive agreement to acquire 100% of the equity of Calma, an operating dispensary located in West Hollywood, California for total consideration of $11,500,000 comprised of $8,500,000 in cash and $3,000,000 in equity of the Company. During the three months ended September 30, 2021, the Company paid the initial deposit of $11,500,000
~~cash~~
~~into escrow.~~

Gold Flora LLC

On October 1, 2021, the Company completed the first closing whereby the Company acquired 85% of the equity interest. The remaining 15% will transfer when local regulations permit. After the first closing,

~~approximately~~

~~$8.3 million of the cash held in escrow was released to the seller and $1,500,000 was refunded to the Company. At the same time, equity of $1,500,000 was issued to the seller. The final~~

~~approximately~~

~~$1.7 million remains in escrow, and upon the final closing it will be released to~~July 7, 2023, the Company and Gold Flora, LLC consummated an all-stock business combination transaction resulting in the acquisition of the Company ~~will issue~~(the “Business Combination”). A newly formed British Columbia corporation (the “Resulting Issuer”), created to manage and hold the ~~final consideration amount of $1,500,000 in~~

~~shares and release any remaining funds currently held for the purposes of a customary acquisition holdback.~~

~~The Company is in the process of evaluating and determining the fair value~~combined business of the ~~assets~~Company and ~~liabilities acquired.~~

~~Acquisition of Coastal Companies~~

On October 1, 2021, the Company became party to a definitive agreement to acquire 100% of the equity of Coastal Holdings LLC (“Coastal”), including its subsidiaries. At the same time, the Company directlyGold Flora, acquired a minority stake in one of Coastal’s dispensaries, and entered into management services agreements (“MSAs”) related to six of the Coastal dispensaries/delivery locations. The Company is in the process of obtaining approval for two additional MSAs. The Company has determined that the MSAs provide it with a controlling financial interest in Coastal and its subsidiaries.

~~The closing of the transaction is subject to closing conditions, most notably municipal regulatory review and approval in the geographies of each of Coastal’s dispensaries/delivery~~

~~locations.~~

~~Table of Contents~~

~~TPCO Holding Corp.~~

~~Notes to the interim condensed consolidated financial statements~~

~~(Unaudited, in United States dollars)~~

~~For the three and nine months ended September 30, 2021 and 2020~~

~~35. Subsequent events~~

~~(continued)~~

~~Total estimated consideration is comprised of $20,700,000 in upfront cash, estimated share consideration of~~

~~up to~~

~~$39,880,000, and $4,500,000~~

to be paid when state and regulatory approvals are obtained. The upfront cash is in the form of a loan that will be forgiven over time based on obtaining regulatory approvals in various locations. If the transaction does not close, the loan will become repayable in full. The number of shares to be issued will be determined on various pricing dates as regulatory and state approval is obtained for each location, with all of the ~~shares becoming issuable at closing.~~

~~The Company is~~issued and outstanding Common Shares and all of the issued and outstanding membership units in the ~~process~~capital of ~~evaluating and determining~~Gold Flora. As part of the ~~fair value~~Business Combination, the Resulting Issuer redomiciled to the State of Delaware pursuant to Section 388 of the

~~consideration~~

~~transferred,~~ Delaware General Corporation Law under the name “Gold Flora Corporation”.

Gold Flora Corporation is a reporting issuer in Canada and the ~~assets~~United States. Gold Flora Corporation’s common stock is listed on the NEO Exchange Inc. under the ticker symbol “GRAM”, and ~~liabilities acquired.~~

~~Share issuance~~

~~Subsequent to September 30, 2021,~~Gold Flora Corporation’s share purchase warrants are listed on the ~~Company issued 506,065 common shares related to RSUs that vested~~NEO Exchange Inc. under the ticker symbol "GRAM.WT.U".

Gold Flora’s registered office and ~~the Calma West Hollywood transaction referred to above.~~

~~RSU Issuance~~

~~Subsequent to September 30, 2021, the Company issued 302,277~~

~~RSUs.~~

~~Share Repurchase Agreements~~

~~Subsequent to September 30, 2021 quarter, the Company completed its repurchase program by settling the remaining 687,500 Common Shares it was obligated to repurchase~~

~~Table~~head office is located at 3165 Red Hill Avenue, Costa Mesa, California, 92626, United States of ~~Contents~~

America.

F-21

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Introduction

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD~~&A”~~&A”) should be read together with other information, including our unaudited interim condensed consolidated financial statements and the related notes to those statements included in Part I, Item 1 of this Quarterly Report (the ~~“Interim~~“Interim Financial ~~Statements”~~Statements”). Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

~~Unless otherwise noted or the context indicates otherwise, in this Form~~

~~10-Q,~~

~~the “Company”, “The Parent Company”, “we”, “us” and “our” refer to TPCO Holding Corp. and its subsidiaries and joint ventures to which it is a party.~~

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report contains certain information that may constitute forward-looking information and forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the ~~Securities~~ Exchange Act ~~of 1934,~~ and under Canadian securities laws (collectively, ~~“Forward-Looking Statements”~~“Forward-Looking Statements”) which are based upon the Company’s current internal expectations, estimates, projections, assumptions and beliefs. Such statements can be identified by the use of forward-looking terminology such as ~~“expect”, “likely”, “may”, “will”, “should”, “intend”, “anticipate”, “potential”, “proposed”,~~“expect,” “likely,” “may,” “will,” “should,” “intend,” “anticipate,” “potential,” “proposed,” “estimate” and other similar words, including negative and grammatical variations thereof, or statements that certain events or conditions “may” or “will” happen, or by discussions of strategy. Forward-Looking Statements include estimates, plans, expectations, opinions, forecasts, projections, targets, guidance, or other statements that are not statements of fact. Forward-Looking Statements in this Quarterly Report include, but are not limited to, statements with respect to:

~~the performance of the Company’s business and operations;~~

~~the Company’s expectations regarding revenues, expenses, liquidity and anticipated cash needs;~~

~~the Company’s ability to complete future strategic alliances and the expected impact thereof;~~

the Company’s ability to source investment opportunities and complete future acquisitions, including in respect of entities in the United States, the ability to finance such acquisitions, and the expected impact thereof;

~~expected future sources of financing;~~

~~the expected acquisition of the remaining 15% of the equity of Calma West Hollywood and the timing and impact thereof;~~

~~the acquisition of Coastal (as defined herein) and the expected timing and impact thereof;~~

the expected future business strategy, competitive strengths, goals, expansion and growth of the Company’s business, including operations and plans, new revenue streams and cultivation and licensing assets;

~~the Company’s ability to grow revenue and reach long-term profitability;~~

~~the implementation and effectiveness of the Company’s distribution platform;~~

~~expectations with respect to future production costs;~~

~~the expected methods to be used by the Company to distribute cannabis;~~

~~the competitive conditions of the industry;~~

~~laws and regulations and any amendments thereto applicable to the business and the impact thereof;~~

~~the competitive advantages and business strategies of the Company;~~

~~the application for additional licenses and the grant of licenses or renewals of existing licenses that have been applied for;~~

~~the medical benefits, viability, safety, efficacy, dosing and social acceptance of cannabis;~~

~~the Company’s future product offerings;~~

~~the anticipated future gross margins of the Company’s operations;~~

~~the Company’s ability to source and operate facilities in the United States;~~

~~expansion into additional U.S. and international markets;~~

~~expectations of market size and growth in the United States and the states in which the Company operates or contemplates future operations;~~

~~expectations for regulatory and/or competitive factors related to the cannabis industry generally; and~~

~~general economic trends.~~

·	the performance of the Company’s business and operations;
·	the Company’s ability to grow revenue and reach long- term profitability;
·	the expected benefits of the Business Combination
·	Expected future sources of financing;
·	the implementation and effectiveness of the Company’s cost-cutting initiatives;
·	expectations with respect to future production costs;
·	the expected methods to be used by the Company to distribute cannabis;
·	the competitive conditions of the industry;
·	laws and regulations and any amendments thereto applicable to the business and the impact thereof;
·	the competitive advantages and business strategies of the Company;
·	the application for additional licenses and the grant of licenses or renewals of existing licenses that have been applied for;
·	the medical benefits, viability, safety, efficacy, dosing and social acceptance of cannabis;
·	the Company’s future product offerings;
·	the anticipated future gross margins of the Company’s operations;
·	expectations of market size and growth in the United States and the states in which the Company operates or contemplates future operations;
·	expectations for regulatory and/or competitive factors related to the cannabis industry generally; and
·	general economic trends.

Certain of the Forward-Looking Statements contained herein concerning the cannabis industry and the general expectations of the Company concerning the cannabis industry are based on estimates prepared by the Company using data from publicly available governmental sources as well as from market research and industry analysis and on assumptions based on data and knowledge of the cannabis industry which the Company believes to be reasonable. However, although generally indicative of relative market positions, market shares and performance characteristics, such data is inherently imprecise. While the Company is not aware of any misstatement regarding any industry or government data presented herein or information presented herein which is based on such data, the cannabis industry involves risks and uncertainties that are subject to change based on various factors, which factors are described further below.

Table of Contents

Forward-Looking Statements contained in this Quarterly Report reflect management’s current beliefs, expectations and assumptions and are based on information currently available to management, management’s historical experience, perception of trends and current business conditions, expected future developments and other factors which management considers appropriate. With respect to the Forward-Looking Statements contained in this Quarterly Report, the Company has made assumptions regarding, among other things:

(i) its ability to generate cash flows from operations and obtain ~~any~~ necessary financing on acceptable terms; (ii) general economic, financial market, regulatory and political conditions in which the Company operates; (iii) the output from the Company’s operations; (iv) consumer interest in the Company’s products; (v) competition; (vi) anticipated and unanticipated costs; (vii) government regulation of the Company’s activities and products and in the areas of taxation and environmental protection; (viii) the timely receipt of any required regulatory approvals; (ix) the Company’s ability to obtain qualified staff, equipment and services in a timely and cost efficient manner; (x) the Company’s ability to conduct operations in a safe, efficient and effective manner; (xi) the Company’s ability to meet its future objectives and priorities; (xii) the Company’s access to adequate capital to fund its future projects and plans; (xiii) the Company’s ability to execute on its future projects and plans as anticipated; (xiv) industry growth rates; and (xv) currency exchange and interest rates.

Readers are cautioned that the above list of cautionary statements is not exhaustive. Known and unknown risks, many of which are beyond the control of the Company, could cause actual results to differ materially from the Forward-Looking Statements in this Quarterly Report. Such lists include, without limitation, those discussed under the heading ~~“Item 1A.~~ “Risk ~~Factors”~~Factors” in ~~Amendment No. 3 to~~Item 1A of Part II of this Quarterly Report and in the Company’s ~~Registration Statement on Form 10~~periodic reports subsequently filed with the ~~Securities~~SEC and ~~Exchange Commission (the “SEC”)~~in the Company’s filings on ~~October 27, 2021 as updated by the amended risk factor included in Part II, Item 1A of this Form 10-Q and any subsequent quarterly reports on Form 10-Q.~~SEDAR at www.sedar.com. The purpose of Forward-Looking Statements is to provide the reader with a description of management’s expectations, and such Forward-Looking Statements may not be appropriate for any other purpose. You should not place undue reliance on Forward-Looking Statements contained in this Quarterly Report. Although the Company believes that the expectations reflected in such Forward-Looking Statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Forward-Looking Statements contained herein are made as of the date of this Quarterly Report and are based on the beliefs, estimates, expectations and opinions of management on the date such Forward-Looking Statements are made. The Company undertakes no obligation to update or revise any Forward-Looking Statements, whether as a result of new information, estimates or opinions, future events or results or otherwise or to explain any material difference between subsequent actual events and such Forward-Looking Statements, except as required by applicable law. The Forward-Looking Statements contained in this Quarterly Report are expressly qualified in their entirety by this cautionary statement.

Part ~~1 –~~ 1—Business Overview

The following business overview reflects our business as it existed through the end of the quarter ended June 30, 2023. As discussed below, we completed the Business Combination with Gold Flora on July 7, 2023. For information about Gold Flora’s operations, please see “—Gold Flora and The Parent Company isTransformational Merger” below. We are a ~~vertically-integrated~~consumer-focused cannabis company based in the United States focused on the recreational and wellness markets. ~~The Company’s portfolio consists of high quality vertically-integrated~~

~~seed-to-sale~~

Our operations in California ~~with a focus~~are focused on ~~differentiated branded products and~~

~~direct-to-consumer~~

~~distribution. The Company’s~~building winning brands supported by our omni-channel ecosystem. Our platform was designed to create ~~one of~~ the ~~largest,~~ most socially responsible and culturally impactful ~~companies~~cannabis company in ~~California,~~the United States, producing ~~consistently high quality,~~consistent, well-priced products and culturally relevant brands that are distributed to third-party retailers as well as

direct-to-consumer

via aour delivery service and strategically located storefront retail ~~locations.~~locations across California. A full portfolio of products and brands that ~~seek to~~ appeal to a broad range of user groups, need-states and occasions, offered at ~~all~~many price points, and with ~~unique~~various brand value propositions, are produced at ~~low cost and~~a high caliber of ~~quality through vertically-integrated cultivation, sourcing~~quality. We believe our delivery and ~~manufacturing. The Company believes its wholly-owned delivery and~~storefront retail outlets will allow itus to achieve high gross-margins on many of ~~its~~our products, forge

one-on-one

relationships between ~~its~~our brands and consumers and collect proprietary consumer data and insights. While the Company is focused on the recreational and wellness markets, a small portion (estimated to be less than 1%) of its revenues is derived from cannabis and products containing cannabis used by medical cannabis patients in accordance with applicable state law, but for which no drug approval has been granted by the United States Food and Drug Administration (where use may include inhalation, consumption, or application).

~~The Company’s~~

Our operational footprint spans ~~cultivation, extraction,~~production and manufacturing, ~~distribution,~~ brands, retail and delivery. ~~The~~Our management team and directors ~~of the Company~~ bring ~~together~~ deep expertise in cannabis, consumer packaged goods, investing and finance, from

start-ups

to publicly traded companies. ~~The Company aims~~We aim to leverage ~~its~~the collective industry experience ~~to ensure a highly synergistic~~of our management and ~~strategic transaction is executed.~~

~~As at September 30, 2021,~~directors.

Table of Contents

Following our exit from the ~~Company views its~~bulk wholesale business, we view our business as having one sales channel: omni-channel retail, comprised of brick and mortar retail, e-commerce pick up & delivery, as well as the ~~following two sales channels:~~

Direct to Consumer (retail, pick up and delivery): the Company currently operates five omni-channel retail locations: two in northern California, two in central California, one in southern California and four consumer delivery hubs. Further, on October 4, 2021, the Company announced that it had signed definitive agreements to acquire Coastal Holding Company, LLC (“Coastal”). Coastal is a retail dispensary license holder and operator with six retail licensed locations, five of which are currently operating and two delivery depots.

~~Wholesale: the Company directly sells first party and selected third party products into 450 dispensaries across California, leveraging a combined~~

~~in-house~~

sales team from its subsidiaries CMG Partners, Inc. (“Caliva”) and Left Coast Ventures, Inc. (“LCV”), as well as the two distribution centers in San Jose and Costa Mesa, respectively. Additional wholesale revenue comes from sales of sourced bulk flower and oil produced in house.

~~Revenues from these two sales channels were~~various branded wholesale products. As of June 30, 2023, we operated eleven omni-channel retail locations and one stand-alone delivery depot. We operate four store brands, Caliva, Deli by Caliva, Coastal and Calma.

Our continuing operations revenue for the three and six months ended June 30, 2023 was $19,410,764 and $37,464,976, as ~~follows:~~

Three-months ended

September 30, 2021

Nine-months ended

September 30, 2021

Direct to consumer    $
12,793,900

   $
34,372,371

Wholesale

26,871,159



99,413,233






$
39,665,059



133,785,604

compared to $21,673,714 and $44,114,014 in the three and six months ended June 30, 2022, representing decreases of 10.4% and 15.1% respectively. The decreases are due to the change in strategy and to focus on higher margin business. The Company also closed its Ceres location during the second quarter of 2023.The Company’s realized gross margin was 48.6% and 46.0% in the three and six months ended June 30, 2023, compared to 27.8% and 28.9% in the three and six months ended June 30, 2022.

As ~~the Company continues~~we continue to scale and integrate ~~its~~our business, ~~it is~~we are incurring operating losses. ~~The Company’s loss from operations~~Our operating losses for the three and six months ended ~~September~~June 30, ~~2021~~2023 totaled $20,857,738 and ~~September 30, 2020 totaled $595,806,420 (including impairment charges~~$35,178,232, compared to a loss of ~~$570,300,047)~~$28,694,837 and ~~$371,666, respectively,~~$60,887,851 in the three and ~~for the nine~~six months ended ~~September~~June 30, ~~2021~~2022. We continue to actively evaluate additional cost reductions and ~~September 30, 2020 totaled $764,869,303 (including impairment charges of $645,199,154)~~business optimization to reduce our cash burn in the near term, accelerate market share growth, improve our gross margin profile and $794,795, respectively. The comparative period results are not representative of the current operations as they were before the closing of the “qualifying transaction” whereby Subversive Capital Acquisition Corp, a special purpose acquisition company, acquired all of the equity of Caliva and LCV to form The Parent Company (the “Qualifying Transaction”). Accordingly, the comparative period results represent only the operating losses of the Company while it was a special purpose acquisition corporation. The Company is focused on reducing operating losses as it scales and integrates its businesses.

work toward generating sustained free cash flow.

Through a combination of (i) professional leadership, ~~including the addition of Troy Datcher on September 8, 2021,~~ (ii) ~~vertical~~omni-channel operations, (iii) technology and data driven practices, (iv) brand and product expertise, and (v) ~~as well as~~ social justice and equity advocacy, ~~the Company intends~~we intend to set the example globally as a

best-in-class

cannabis operation. ~~In addition, the Company plans to pursue a continued M&A strategy to accelerate growth, market share gains~~

Gold Flora and ~~profitability.~~

~~Third Quarter Highlights~~

~~New Chief Executive Officer~~

~~On August 16, 2021, the Company announced that it had appointed Troy Datcher to serve as the Company’s new Chief Executive Officer, effective September 8, 2021. Mr. Datcher joins~~ The Parent Company Transformational Merger

On July 7, 2023, the parties consummated the previously announced business combination transaction resulting in the combination of the TPCO Holding Corp. and Gold Flora, LLC, a leading vertically-integrated California cannabis company, in an all-stock transaction (the “Business Combination”). The entity resulting from ~~The Clorox Company, where he most recently served~~the Business Combination, which now operates as ~~Senior Vice President~~Gold Flora Corporation, creates a leading portfolio encompassing cultivation, distribution, product brands, and ~~Chief Customer Officer responsible for~~retail and delivery footprint – enabling the ~~Company’s worldwide sales organization. During his tenure, Mr. Datcher deployed global sales plans for over $6.7 billion in annual revenue~~business to operate at scale across ~~The Clorox Company’s vast~~California and control every aspect of the rapidly evolving supply chain.

Gold Flora Corporation is a female-led, vertically-integrated cannabis leader that owns and operates a robust portfolio of ~~brands. Mr. Datcher’s historic appointment represents~~9 cannabis brands, 16 retail dispensaries, and a number of companies, including Stately Distribution, throughout California. Its retail brands include Airfield Supply Company, Caliva, Coastal, Calma, King’s Crew, Varda, and Higher Level.

Gold Flora Corporation operates an indoor cultivation canopy of approximately 72,000 square feet across three campuses, with the ~~first time~~opportunity to expand to a ~~Black CEO will lead~~further approximately 240,000 square feet. Its 200,000 square-foot cannabis campus located in Desert Hot Springs, California – that has the ability to scale to 620,000 square feet – also houses the company’s manufacturing, and extraction facilities, as well as Stately Distribution.

Gold Flora Farms is located within the BlackStar Industrial Properties, a ~~major public U.S.~~620,000 sq. ft. indoor cannabis ~~organization.~~

~~New San Diego Location~~

campus at full build-out, located in Desert Hot Springs, CA. This state-of-the-art cannabis campus is fully licensed and houses some of the world’s leading cannabis brands and companies across all sectors.

With hubs throughout the state, Gold Flora Corporation sells and distributes for many prominent brands, including its own premium lines of Gold Flora, Monogram, Caliva, Mirayo by Santana, Cruisers, Roll Bleezy, Sword & Stoned, Aviation Cannabis, and Jetfuel Cannabis.

Transaction Summary

On July ~~16, 2021~~7, 2023, the Company ~~announced~~and Gold Flora, LLC consummated the ~~launch of its newest delivery hub in Chula Vista, California, to provide improved access to The Parent Company’s quality cannabis products through Caliva’s~~

~~on-demand~~

~~direct-to-consumer~~

~~platform. The new hub services an area covering an additional 3.3 million residents~~Business Combination. As part of the ~~greater San Diego area, expanding~~Business Combination, a newly formed British Columbia corporation (the “Resulting Issuer”), created to manage and hold the ~~reach~~combined business of the Company to directly service an area covering approximately 60% of California’s population. Located in California’s second largest city, the Chula Vista delivery hub reinforces the Company’s omnichannel growth strategy and efforts to improve accessibility of high-quality cannabis products throughout California. As a direct result of The Parent Company’s expansion plans throughout the state, its Caliva brand has seen an over 20% increase year-over-year (i.e. 60% coverage to 80% coverage with the entry into management service agreements in connection with the pending Coastal acquisition subsequent to September 30, 2021) in the number of customers they are able to service through its

~~direct-to-consumer~~

platform. The new Chula Vista delivery hub offers a promising market for the brand, with the city of San Diego itself representing a population that has spent over $200 million on cannabis over the past 12 months. The delivery hub will also provide 20 to 30 new job opportunities for the local Chula Vista community. Caliva’s customers will now be able to order products

~~on-demand~~

~~pre-order~~

up to a week in advance and select a time that is most convenient for them to receive their delivery. The Chula Vista delivery hub services an area that extends from San Juan Capistrano, though Oceanside and onto San Ysidro.

~~New DELI by Caliva Location~~

On August 13, 2021, the Company announced the opening of its latest DELI by Caliva location in Hanford. The new store will service the Central Valley in conjunction with the brand’s existing operational delivery hub, which increased the Company’s consumer reach to 65% of the largest legal cannabis market in the country. The opening of the new DELI by Caliva location marks the Company’s retail entrance into the Hanford community, which was previously supplied by the brand’s

~~in-house~~

delivery service via Caliva.com or through Caliva’s App. DELI’s expert wellness consultants are available to assist customers at every stage of their cannabis journey and advise which products are best suited to each individual’s needs. In addition to convenient contactless payment options, customers can also order ahead online through Caliva.com for

~~in-store~~

~~or curbside pickup. The retail location will cater to the Central Valley by offering the communities of Hanford and Fresno weekly special menus and daily demos and deals from top brands.~~

~~DELI by Caliva stores are modeled after old school delicatessens, with every detail from ticketed numbers to the iconic deli countertop~~

to bar stools all in place. DELI caters to those looking for quality cannabis at neighborhood-friendly prices. In addition to offering DELI by Caliva products, one of the Company’s house of brands, the retail store also carries other The Parent Company product lines such as Caliva, Fun Uncle and MONOGRAM, Shawn

~~‘JAY-Z’~~

~~Carter’s cannabis line, as well as other popular third party brands.~~

~~Launch of Fun Uncle Live Resin Cruisers~~

On July 12, 2021, the Company announced that it has extended its value product offerings with the introduction of Fun Uncle Cruisers with Live Resin full gram vape cartridges available in four strains at the affordable price point of $36.

The product line expansion features live resin — a premium ingredient valued for its retention of cannabinoid, terpene, and flavor profiles that delivers a full spectrum of effects — and launched as consumers celebrated “Oil Day” on 7/10. Cruisers vapes were introduced in late March 2021. According to data from BDSA, a provider of market research solutions for the global cannabinoid industry, for the month of September 2021 with respect to the California market, the Fun Uncle brand ranked #11 in brand sales, with the brand’s flavors of Berry Gelato ranking #2 and Strawberry Cough ranking #13 respectively in unit sales.

The launch of Cruisers with Live Resin extends this approachable and affordable product line to consumers seeking the robust flavor and enhanced experience that live resin products deliver. Cruisers with Live Resin are currently available to California consumers through Caliva.com, Distillate for Fun Uncle Cruisers is produced by leveraging The Parent Company’s

~~in-house~~

~~extraction operations, which sources high quality cannabis flower from a network of over 500 California growers in California.~~

Fun Uncle is a retro-stylized line of premium value cannabis, paying homage to marijuana’s early heyday, with low prices reminiscent of the past to match. The introduction of Fun Uncle Cruisers with Live Resin follows on the heels of the recent launch of Cruisers vapes, the brand’s first vape offering. Cruisers with Live Resin feature one full gram sold at retail for $36, packaged in reliable CCELL Universal Cartridges, and available in four strains:

~~Sour Tangie~~

~~Tropic Thunder~~

~~Golden Pineapple~~

~~and~~

~~Paris OG~~

~~. Cruisers with Live Resin leverage The Parent Company’s extraction process with the aim of delivering high-quality, potent distillate that is blended with high-terpene extract from~~

~~flash-frozen~~

flower. Incorporating this fresh and delicious live resin into the formula is intended to ensure that consumers enjoy a full-spectrum of cannabinoids, terpenes and flavor, while the distillate keeps both the price tag friendly and the potencies high, with each strain testing over 75% THC.

~~Expansion of Product Portfolio with Launch of “Well by Caliva” Lotions and Tinctures~~

On August 24, 2021, the Company announced the launch of a new line of wellness products, Well by Caliva. The line offers lotions and tinctures in three categories—Well Balanced, Well Rested and Well Relieved—allowing consumers to pick the products that best cater to their needs. Launched in August during National Wellness Month, The Parent Company’s new line of wellness focused products seek to meet consumers and their desired effects head on. The launch of the wellness line marks The Parent Company’s first

~~CBD-~~

and THC-based line of self-branded wellness geared products under the Caliva label, Well By Caliva. The line was created with the evolving needs of consumers in mind, with recent data demonstrating that the top reasons for cannabis use overwhelmingly include relaxation, improving sleep quality and pain management. This year alone, topicals and sublinguals have seen a 10% and 12% increase in revenue, respectively, as consumers seek out the benefits of cannabis in form factors that they can incorporate into their overall health and wellness regimen for relief and rest.

Well by Caliva lotions are THC rich and come in two forms: Muscle & Joint Lotion and Head, Neck & Shoulder Lotion. The brand’s Well Relieved Muscle & Joint Lotion offers a blended 1:2 CBD:THC ratio with the addition of clove and frankincense essential oils for a warm, spicy aroma. The Well Relieved Head, Neck & Shoulder Lotion offers the highest THC concentration of any Well by Caliva topical with a 0:1 CBD:THC ratio and lavender essential oil. Every 1.7oz bottle of Well lotion contains over 300mg of cannabinoids and retails for $29.50. The 15mL bottles include 30 doses each and are available in three different CBD:THC ratios for $29 each. Caliva’s Well Relieved

~~CBD-rich~~

formula, with a 20:1 CBD:THC ratio, is designed for those seeking to enhance their whole body wellness routine. Caliva’s Well Balanced Tincture features a 4:1 CBD:THC ratio to help consumers zero in on the task at hand and Caliva’s Well Rested Tincture, featuring a 1:1 CBD:THC ratio, is a more potent formula designed to help consumers wind down from the day.

~~Launch of Shoppable Cannabis App on Apple~~

On July 19, 2021 the Company announced the launch of an upgraded, shoppable app available through Apple’s App Store, allowing California-based consumers to make cannabis purchases through the app and to receive rewards through the Company’s integrated loyalty program, Caliva CLUB. The shoppable Caliva app is available for download now through the Apple App Store for consumers 21 and older throughout California.

~~Following Apple’s recent announcement allowing for~~

~~in-app~~

cannabis purchases, the Caliva app was among the first to be fully integrated with shopping capabilities, allowing customers to browse products, complete their purchase, schedule a delivery and track their order to see when it is out for delivery or ready for pickup. Throughout the shopping process, expert wellness consultants staff the online chat for questions. In addition to this new, convenient way to purchase cannabis products, the app includes a variety of rewards opportunities. It serves as a hub for the Company’s Caliva CLUB loyalty program, allowing customers to earn cash reward points through

~~in-app~~

~~purchases and referrals, in store and online.~~

~~In accordance with California state and local laws, all sales must be made by consumers aged 21 or older. Note that IDs are verified at several stages throughout the purchase and delivery process.~~

~~Corporate Development~~

~~Mercer Park Brand~~

On July 2, 2021, the Company announced that its previously announced conditional agreement to complete a $50,000,000 strategic investment in Glass House Group, Inc. through a private placement offering by Mercer Park Brand Acquisition Corp. had been terminated.

~~Lock-up~~

~~Agreements~~

~~On July 28, 2021, the Company entered into~~

~~lock-up~~

agreements with certain members of the Company’s leadership team and the entire board of directors who held approximately 33,000,000 issued and outstanding common shares of the Company (the “Common Shares”). Pursuant to the

~~lock-up~~

agreements, each counterparty has agreed that, subject to certain exceptions, they will not, without the written consent of the Company, sell, pledge, grant any option, right or warrant for the sale of or otherwise lend, transfer assign or dispose of any of their

~~locked-up~~

~~shares until January 28, 2022.~~

~~Jayden’s Journey~~

~~On August 2, 2021, the Company, through its wholly owned subsidiary Caliva CARECE1 LLC,~~Gold Flora, acquired all of the issued and outstanding ~~equity interests~~common shares of ~~Kase’s Journey Inc., an operating retail dispensary located in Ceres, California, from the existing shareholders for $1,300,000 cash, subject to adjustments, and $1,221,902 of consideration payable.~~

~~Share Repurchase Agreements~~

~~On July 29, 2021, the Company entered into automatic share repurchase agreements with certain employees to repurchase no more than 1,725,000~~ TPCO (the “Common Shares ~~that had been issued as part of the Qualifying Transaction. The Common Shares will be repurchased at market value over a three-month period beginning September 1, 2021,~~”) and then subsequently cancelled. As at September 30, 2021, 1,037,500 Common Shares had been purchased under these agreements. Subsequent to September 30, 2021 quarter, the Company completed its repurchase program for an aggregate of 1,725,000 Common Shares.

~~Sacramento Distribution Hub Acquisition~~

~~On August 16, 2021, the Company, through its wholly owned subsidiary TPCO US Holding LLC, acquired~~ all of the issued and outstanding membership ~~interests of Martian Delivery LLC, an operating retail dispensary located~~units in the ~~City~~capital of ~~Sacramento, California, from the existing shareholders for $237,500 cash and $237.500 in promissory notes payable.~~

The acquisition allowed the Company to further expand its distribution reach through the acquisition of an additional distribution hub located in Sacramento, California. The new hub will service an area covering an additional 2.4 million residentsGold Flora (“Gold Flora Units”). As part of the ~~greater Sacramento area. Delivery service is now available from~~Business Combination, the ~~new hub, offering consumers in the region access~~Resulting Issuer redomiciled to the ~~Company’s entire suite~~State of ~~high-quality products through caliva.com.~~

~~Normal Course Issuer Bid~~

~~On August 16, 2021, the Company announced that the Neo Exchange Inc. (the “Exchange”) had accepted the Company’s notice of intention~~Delaware pursuant to commence a Normal Course Issuer Bid (the “Common Share Bid”) for Common Shares and a Normal Course Issuer Bid (the “Warrant Share Bid” and, together with the Common Share Bid, the “Bids”) for the Company’s Share Purchase Warrants to acquire Common Shares (the “Warrants”).

~~Pursuant to the Bids, the Company may repurchase on the open market (or as otherwise permitted), up to 4,912,255 Common Shares and 1,791,875 Warrants, representing approximately 5%~~Section 388 of the ~~issued and outstanding of each~~Delaware General Corporation Law under the name “Gold Flora Corporation”.

Table of Contents

Holders of the Common Shares received one share of common stock of the Resulting Issuer (such shares, the “Resulting Issuer Shares”) for each Common Share held and holders of Gold Flora Units received 1.5233 Resulting Issuer Shares for each Gold Flora Unit held.

Gold Flora Corporation is a reporting issuer in Canada and the ~~Warrants (within~~United States. Gold Flora Common Stock (the “Gold Flora Common Stock”) is listed on the ~~meaning~~NEO Exchange Inc. under the ticker symbol "GRAM", and Gold Flora Corporation’s share purchase warrants are listed on the NEO Exchange Inc. under the ticker symbol "GRAM.WT.U".

The Resulting Issuer’s registered office and head office is located at 3165 Red Hill Avenue, Costa Mesa, California, 92626, United States of America.

Under the terms of the ~~rules~~Business Combination, Laurie Holcomb, the Founder and Chief Executive Officer of Gold Flora, has been named Chief Executive Officer of Gold Flora Corporation and Troy Datcher, the former Chief Executive Officer of TPCO and Chairman of the ~~Exchange)~~TPCO board of directors, serves as Chairman of the board of directors of Gold Flora Corporation. Gold Flora Corporation’s board of directors is comprised of seven directors, four of whom were nominated by Gold Flora, being Laurie Holcomb, Michael W. Lau, Heather Molloy and Jeffery Sears, and three of whom were nominated by TPCO, being Troy Datcher (Chairman), ~~subject~~Al Foreman and Mark Castaneda.

Key Transaction Benefits & Strategic Rationale

·	Increased size and scale to become a leading operator in the world’s largest cannabis market. The combined company operates a footprint of 15 retail stores, 12 house brands, three distribution centers, one manufacturing facility and six cultivation facilities, providing the size and scale to position the combined company as a leader in the California cannabis market.

·	Establishing a strongly positioned vertically-integrated platform to achieve financial and operational efficiency, as one of the largest indoor cultivators and retail operators in California. The combined company has an indoor cultivation canopy of approximately 72,000 square feet, with the opportunity to expand to a further approximately 420,000 square feet, critical to controlling its supply chain and inventory levels while providing consistent high-quality flower, as well as flower-driven products that leverage an exceptional proprietary genetics library to deliver exclusive offerings that align with consumer demands.

·		Significant synergies expected to drive margin improvement and enhance profitability across all verticals. Through the streamlining of retail operations, utilizing scale to access bulk purchasing power, and eliminating third-party contracts, the combined company is expected to achieve annualized cost savings of between $20 million and $25 million, to further improve gross margin and profitability while delivering value for shareholders.

·		Reduction in third-party costs through supply-chain optimization. The combined company will reduce third-party contracts when strategically and cost effectively appropriate by utilizing the capabilities of Gold Flora and controlling its value chain.

·		Combined company is well-positioned as a top 10 brand portfolio by revenue. As two of the premier operators in the state, the Business Combination is has created a diversified and highly complementary customer product offering, with a variety of form factors and brands for differentiated consumer profiles. Additionally, with only 13% overlap in current company retail store footprints, there is a significant opportunity for cross-selling brands into diverse customer bases to drive organic growth.

·		Enhanced financial profile with strong balance sheet. The combined company is expected to have pro forma revenue of approximately $199.6 million for the year ended December 31, 2023. Providing a robust foundation to accelerate growth, the combined company will be well-positioned to capitalize on the market opportunities ahead as a leading public cannabis company in California.

Table of Contents

Working Capital Facility Agreement with Gold Flora

In connection with the Business Combination, TPCO-US, a direct and wholly-owned subsidiary of TPCO, and Gold Flora entered into a working capital facility agreement, pursuant to which the TPCO-US agreed to advance to Gold Flora in a principal amount of up to $5,000,000, at an interest rate of 10% per annum, secured by certain assets of Gold Flora. During the three months ended June 30, 2023, $5,000,000 of the facility was advanced. The balance as at June 30, 2023, related to this promissory note including accrued interest was $5,125,113.

Second Quarter Highlights

Operational Update

Operations continues to focus on increasing gross margin and cost reduction, as well as commercializing new products in the R&D pipeline. The following initiatives continued to translate to realized margin improvement during our second quarter.

	■	To maintain gross margins on manufactured product, we forward purchased distillate, locking in a competitive price and limiting any upward cost exposure.
	■	We have transferred vape pen and non-infused pre-roll production to Gold Flora operations, capturing cost savings on implied labor margins from outsourcing partners.

We also continued to reduce operating expenses by achieving labor savings in the amount of $1.2 million in Q2 2023 as compared to Q2 2022, an additional 19% reduction since the beginning of 2023. As of June 30, 2023, we had reduced our workforce by approximately 50% from the beginning of 2022 and have realized annualized payroll savings of approximately $25 million.

The Company closed its Ceres retail dispensary during June 2023 to mitigate further losses at this location.

The Company will continue to focus on the following opportunities:

	·	Reducing cash burn
	·	Accelerating market share growth
	·	Improving gross margin profile
	·	Generating sustained free cash flow

Product Updates

In May 2023, the Company successfully launched its newest product format, hash infused gummies under the Mirayo brand, providing 3 unique, Latin-inspired flavors (Guava, Prickly Pear and Raspberry) to the ~~normal terms~~portfolio. As part of the product launch, Carlos Santana hosted a meet and ~~limitations~~greet with budtenders at the Company’s Calma West Hollywood dispensary. The hash rosin gummies each contain 10 mg of ~~such bids. Notwithstanding~~THC and are made from all-natural ingredients.

Table of Contents

Social Equity Venture’s Brand Success Program

During the ~~foregoing,~~first quarter of 2023, the ~~Bids~~Company launched a “Brand Success Program” designed to provide minority-owned brands with guaranteed shelf space and individualized mentorship from the Company’s sales, marketing, retail, and operational teams. Brands learn best practices, operational procedures, and tips that can be applied to any retail outlet nationwide. To June 30, 2023, the brand success program has been well received by the participating brands and the Company’s customers.

Subsequent Events

Formation of Stately Distribution – Focused on Building Category Leadership for its Curated Brand Portfolio and Partners

On July 26, 2023, Gold Flora announced that it has launched a new sales and distribution division, Stately Distribution (“Stately”), to provide premium service and support to the California cannabis market. Stately will operate comprehensive sales and management for Gold Flora Corporation’s rapidly growing first party brands, which with the closing of the Business Combination, includes 9 brands as well as a select group of strategically curated third-party partner brands.

With a curated assortment of third-party brands selected for their differentiated offerings, Stately is focused on driving account and sales growth for its partners, while also seamlessly integrating brands into Gold Flora Corporation’s rapidly growing retail footprint, which includes some of the leading dispensaries throughout the state. As a key company within a prominent vertically-integrated operation, Stately provides unparalleled insight and data that it can leverage for its partner brands in both owned and third-party placements and campaigns. Stately also distinguishes itself by creating accountability not seen in other distribution models – setting targets and expansion goals for each of its brands. Gold Flora Corporation is committed to providing services that go beyond traditional distribution, enabling its partners to succeed and thrive in the challenging and dynamic California cannabis landscape.

The formation of Stately coincides with several first-and-third-party brand developments, including the recent launch of Gold Flora Corporation’s Roll Bleezy concentrate line, and the onboarding of The Parent Company’s family of brands including Caliva, Mirayo by Santana, Monogram and Cruisers. Combined with the recent addition of leading third-party brand Henry’s Original to its product portfolio – a premium legacy brand from Mendocino County that has been growing the finest sun-grown cannabis for over 15 years - Stately is building a truly differentiated portfolio.

Table of Contents

Results of Operations

(Unaudited, in United States dollars)

	Three months ended						Six months ended
	June 30, 2023			June 30, 2022			June 30, 2023			June 30, 2022

Sales, net of discounts	$	19,410,764		$	21,673,714		$	37,464,976		$	44,114,014
Cost of sales		9,975,383			15,650,560			20,248,545			31,373,966
Gross profit		9,435,381			6,023,154			17,216,431			12,740,048

Impairment loss		403,271			2,429,530			403,271			2,429,530
Operating expenses		29,889,848			32,288,461			51,991,392			71,198,369

Loss from operations		(20,857,738	)		(28,694,837	)		(35,178,232	)		(60,887,851	)

Other income (expense)
Interest income		614,954			-			1,237,750			-
Interest expense		(1,208,949	)		(1,260,262	)		(2,472,877	)		(2,510,830	)
Loss on disposal of assets		-			(63,314	)		(93,944	)		(317,787	)
Change in fair value of investments		(170,358	)		(330,960	)		(170,358	)		(33,096	)
Change in fair value of contingent consideration		(1,177,730	)		249,973			(1,922,931	)		638,595
Other income		450,000			801,339			455,170			1,109,295

Loss before income taxes		(22,349,821	)		(29,298,061	)		(38,145,422	)		(62,001,674	)

Income tax recovery (expense)		(1,961,804	)		244,473			(2,676,212	)		(42,227	)
Loss and comprehensive loss from continuing operations		(24,311,625	)		(29,053,588	)		(40,821,634	)		(62,043,901	)

Loss from discontinued operations, net of income tax		-			(1,429,097	)		-			(1,975,316	)

Loss and comprehensive loss attributable to shareholders of the company	$	(24,311,625	)	$	(30,123,075	)	$	(40,821,634	)	$	(63,814,952	)
Loss and comprehensive loss attributable to redeemable non-controlling interest		-			(359,610	)		-			(204,265	)
Net loss	$	(24,311,625	)	$	(30,482,685	)	$	(40,821,634	)	$	(64,019,217	)

Sales Revenue

The Company’s continuing operations revenue for the three and six months ended June 30, 2023 was $19,410,764 and $37,464,976 compared to $21,673,714 and $44,114,014 in the three and six months ended June 30, 2022 representing decreases of 10.4% and 15.1% respectively. The decreases are ~~subject~~due to ~~an aggregate cap~~the change in strategy to focus on higher margin business. This included the winding-down of ~~$25,000,000.~~certain third party wholesale brand relationships and the closure and / or sale of lower volume delivery depots. The Company ~~may purchase~~also closed its ~~Common Shares and Warrants at its discretion~~Ceres location during the ~~period commencing on August 18, 2021,~~second quarter of 2023.

Table of Contents

The Company considers itself post the exit of the bulk wholesale business to have one sales channel: omni-channel retail (brick and ~~ending on~~mortar retail, e-commerce pick up & delivery, as well as the ~~earlier~~sale of ~~(i) August 17, 2022, (ii) $25,000,000 of purchases under~~various branded wholesale products). The Company directly sells first party and selected third party products into dispensaries across California, leveraging in-house sales teams, as well as the ~~Bids,~~two wholesale distribution centers in San Jose and ~~(iii) the completion of purchases under the applicable Bid. Notwithstanding the foregoing,~~Costa Mesa, respectively. As previously announced, the Company ~~did not commence purchases under~~has transitioned its wholesale distribution activities to Nabis.

As of June 30, 2023, the ~~Bids until~~Company operated eleven retail locations and one stand-alone delivery depot. We operate four store brands, Caliva, Deli by Caliva, Coastal and Calma.

Gross Profit

Gross Profit reflects our revenue less our cost of sales, which consist of costs primarily consisting of labor, materials, consumable supplies, overhead, amortization of production equipment, shipping, packaging and other expenses.

The Company’s continuing operations gross profit for the ~~expiry~~three and six months ended June 30, 2023 was $9,435,381 (48.6%) and $17,216,431 (46.0%) compared with $6,023,154 (27.8%) and $12,740,048 (28.9 %) in the three and six months ended June 30, 2022. The improved gross margins represent the results of the various margin enhancing initiatives the Company implemented as described in the “Operational Updates” section of this MD&A.

Impairment

	Three months ended				Six months ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Right-of-use assets (i)	$	403,271	$	1,290,591	$	403,271	$	1,290,591
Assets held for sale (ii)		-		1,138,939		-		1,138,939
	$	403,271	$	2,429,530	$	403,271	$	2,429,530

(i) During the three and six months ended June 30, 2023, the Company recorded impairment of $403,271 related to one of its ~~regular self-imposed quarterly blackout period.~~

~~Under~~properties which is no longer being used by the ~~Exchange rules, during~~Company and has been listed for sublease at an amount less than current rental payments. During the six months ended ~~July~~June 30, ~~2021,~~2022, the ~~average daily trading volume on all marketplaces~~Company recorded impairment of ~~the Common Shares and the Warrants was 540,578 and 67,477, respectively and, accordingly, daily purchases on the Exchange pursuant~~$1,290,591 related to ~~the Bids~~two of its properties which are limited to 135,144 Common Shares and 16,869 Warrants (other than purchases made pursuant to the block purchase exception) which represents 25% of the average daily trading volume. The actual number of Common Shares and Warrants which may be purchased pursuant to the Bids and the timing of any such purchases will be determinedno longer being used by the Company ~~subject~~and were subleased or listed for sublease at an amount less than current rental payments.

(ii) In June 2022, the Company became committed to ~~applicable law~~a plan to sell two licenses and transfer the related right of use asset and lease liability. Prior to reclassification to assets held for sale, the assets were tested for impairment, resulting in an impairment loss of $1,138,939 on intangible assets.

Operating Expenses

	Three months ended				Six months ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
General and administrative	$	13,542,776	$	8,751,232	$	21,496,719	$	21,837,374
Allowance for accounts receivable		641,984		168,704		683,854		2,581,335
Sales and marketing		3,400,113		3,718,017		4,771,414		7,124,375
Salaries and benefits		7,838,554		9,874,452		14,869,452		19,890,008
Share-based compensation		498,483		1,461,093		2,163,703		3,703,170
Lease expense		1,255,780		2,110,107		2,569,261		3,866,897
Depreciation		890,628		882,659		1,793,928		1,843,359
Amortization of intangible assets		1,821,530		5,322,197		3,643,061		10,351,851
	$	29,889,848	$	32,288,461	$	51,991,392	$	71,198,369

Operating expenses primarily include salaries and benefits, professional fees, rent and facilities expenses, travel-related expenses, advertising and promotion expenses, licenses, fees and taxes, office supplies and pursuit expenses related to outside services, stock-based compensation and other general and administrative expenses.

Table of Contents

For the three and six months ended June 30, 2023, the Company recorded operating expenses of $29,889,848 and $51,991,392, as compared to $32,288,461 and $71,198,369 in the three and six months ended June 30, 2022.

General and administrative costs were $13,542,776 and $21,496,719 in the three and six months ended June 30, 2023, as compared to $8,751,232 and $21,837,374 in the three and six months ended June 30, 2022. General and administrative expenses increased by $4,791,544 in Q2 2023 over Q2 2022 due mainly to Gold Flora transaction related costs being incurred.

The allowance for doubtful accounts were $641,984 and $683,854 in the three and six months ended June 30, 2023, as compared to $168,704 and $2,581,335 in the three and six months ended June 30, 2022. The decrease allowance reflects management’s estimates for credit losses on various trade receivables. The comparative period six month included an allowance on the Mosaic.Ag matter as described below in this MD&A.

Salaries and benefits totaled $7,838,554 and $14,869,452 in the three and six months ended June 30, 2023, respectively, as compared to $9,874,452 and $19,890,008 in the three and six months ended June 30 2022, respectively. The decreases of $2,035,898 (21%) and $5,0520,566 (25%) in the three and six months ended June 30, 2023, respectively, is the result of the significant restructuring undertaken with the pause in cultivation, outsourcing of wholesale activities and general staff retrenchments to reduce cost and reposition the business to be sustainable longer term. As of June 30, 2023, we had reduced our workforce by approximately 50% from the beginning of 2022 and have realized annualized payroll savings of approximately $25 million.

Share-based compensation totaled $498,483 and $1,461,093 in the three and six months ended June 30, 2023, respectively, as compared to $2,569,261 and $3,703,170 in the three and six months ended June 30, 2022, respectively. Share based compensation is a non-cash expense and fluctuates with the number of restricted stock units (“RSUs”) granted in a period and the ~~rules~~price of ~~the Exchange. As of September 30, 2021, the Company had 97,179,378~~our Common ~~Shares and 35,837,500 Warrants issued and outstanding.~~

~~Purchases pursuant~~Shares. The decrease in stock-based compensation expense was primarily attributable to the Bids are expected to be made through the facilities of the Exchange, or such other permitted means (including through alternative trading systems), at prevailing market prices or as otherwise permitted. The Bids will be funded using existing cash resources and any Common Shares and Warrants repurchased by the Company under the Bids will be cancelled.

The Parent Company may establish an automatic securities purchase plan in connection with the Bids under which a designated broker could purchase Common Shares and/or Warrants pursuant to the Bids during times when the Company would ordinarily not be permitted to purchase its Common Shares or Warrants due to regulatory restrictions or self-imposed blackout periods. Any such plan would be subject to the prior approval of the Exchange.

~~The Board believes~~fact that the market price of ~~the~~our Common Shares ~~may from time to time not reflect the underlying value of The Parent Company, specifically its growth opportunities, and that the proposed purchasing of its Common Shares is~~was lower in the ~~best interests~~second quarter of ~~The Parent Company and represents an appropriate use of corporate funds.~~

~~Since the commencement of the Bids, the Company has repurchased 157,600 Common Shares for approximately $600,000, excluding commissions.~~

~~ubsequent Events~~

~~Calma West Hollywood definitive agreement~~

~~The Company is party to a definitive agreement dated June 28, 2021 to acquire 100% of the equity of Calma West Hollywood, an operating dispensary located~~2023 than it was in West Hollywood, California for total consideration of $11,500,000 comprised of $8,500,000 in cash and $3,000,000 in equity of the Company. On October 1, 2021 the Company closed the first tranche of its acquisition of Calma West Hollywood with the acquisition of 85% of Calma’s outstanding equity which is the maximum allowed by the City of West Hollywood. The Company expects to complete the second ~~legal closing for the remaining 15%~~quarter of ~~Calma’s equity during 2022, as local regulations permit.~~

~~Acquisition of Coastal~~

Lease expense totaled $1,255,780 and ~~entered into management services agreements (“MSAs”) related to six of the Coastal dispensaries/delivery locations. The Company is~~$2,110,107 in the ~~process of obtaining approval for two additional MSAs. The Company has determined that the MSAs provide it with a controlling financial interest in Coastal~~three and ~~its subsidiaries. The closing of the transaction is subject~~six months ended June 30, 2023, respectively, as compared to ~~closing conditions, most notably municipal regulatory review~~$2,110,107 and ~~approval~~$3,866,897 in the ~~geographies of each of Coastal’s dispensaries/delivery locations.~~

Founded in 2018 in Santa Barbara, Coastal is a retail dispensary license holder and operator with six retail licensed locations, five of which are currently operating and two delivery depots. Coastal’s operating dispensaries are located in Santa Barbara, Pasadena, West Los Angeles, Stockton and Vallejo. Coastal is also engaged in construction for another retail license location in Northern California and operating delivery depots in Santa Barbara and San Luis Obispo. Coastal serves over 1,000 people per day, in their stores and online.

~~With the entry to the MSAs, The Parent Company’s current California retail store and delivery depot footprints are eleven~~three and six ~~respectively, giving~~months ended June 30, 2022, respectively. The decrease is primarily the ~~Parent Company one of the largest operating retail dispensary and delivery hubs in the State with an expanded reach to over 80% of California’s population.~~

~~Form 10 Registration Statement~~

On October 11, 2021, the Company announced that its amended registration statement on Form 10 (the “Registration Statement”) originally filed with the SEC on August 9, 2021, became effective on October 8, 2021. The Registration Statement registered the Common Shares and Warrants (collectively, the “Securities”) under Section 12(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) in advance of potentially being permitted to list the Common Shares and the Warrants on the New York Stock Exchange or the Nasdaq Stock Market. As a result of the ~~registration~~divesture of the ~~Securities,~~Culver City location and the closure of the Costa Mesa and Ceres locations.

Depreciation of property, plant & equipment totaled $890,628 and $882,659 in the three and six months ended June 30, 2023, respectively, as compared to $1,793,928 and $1,843,359 in the three and six months ended June 30, 2022, respectively. Depreciation is a non-cash expense and is materially consistent between the periods.

Amortization of intangible assets totaled $1,821,530 and $5,322,197 in the three and six months ended June 30, 2023, respectively, as compared to $3,643,061 and $10,351,851 in the three and six months ended June 30, 2022, respectively. Amortization is a non-cash expense. The decrease in amortization expense is due to the $98,024,797 impairment on various right of use, license and brand intangible assets during the 2022 financial year which reduced the amortization base of the associated intangible assets.

Other Items

Interest income

Interest income totaled $614,954 and $1,237,750 for the three and six months ended June 30, 2023, respectively, compared with $Nil and $Nil in the three and six months ended June 30, 2022. During three and six months ended June 30, 2023, the Company ~~will, among other things, now file periodic (Forms~~

~~10-K~~

~~and~~

~~10-Q)~~

generated interest income on its excess cash balances given higher interest rates and ~~current (Form~~

~~8-K)~~

~~reports~~interest on its note receivable from Gold Flora.

Table of Contents

Interest (expense)

Interest expense totaled $1,208,949 and $2,472,877 for the three and six months ended June 30, 2023, respectively, as compared to $1,260,262 and $2,510,830 in the three and six months ended June 30, 2022, respectively. The interest expense is primarily incurred on lease accounting for the Company’s right-of-use assets.

Loss on disposal of assets

Loss on disposal of assets totaled $Nil and $93,944 in the three and six months ended June 30, 2023, respectively, as compared to $63,314, and $317,787 in the three and six months ended June 30, 2022, respectively. Most of the loss in the comparative period was primarily the recognized loss on the sale and lease back of the Pullman property.

Change in fair value of contingent consideration

Change in fair value on contingent consideration was a loss of $1,177,730 and $1,922,931 in the three and six months ended June 30, 2023, respectively, as compared to a gains of $249,973 and $638,595 in the three and six months ended June 30, 2022, respectively. The Company recognized losses in the three and six months ended June 30, 2023 on contingent consideration as it increased the probability of a change in control occurring given the pending Business Combination with Gold Flora.

Net loss

The Company recorded net losses of $24,311,625 and $40,821,634 in the ~~SEC.~~

~~Share issuance~~

~~Subsequent~~three and six months ended June 30, 2023, respectively, as compared to ~~September~~$30,482,685 and $64,019,2171 in the three and six month periods ended June 30, ~~2021, the Company issued 506,065 common shares related~~2022, respectively. The reduction in net losses is due to ~~RSUs that vested~~higher realized margins and ~~the Calma West Hollywood transaction referred to above.~~

~~RSU Issuance~~

~~Subsequent to September 30, 2021, the Company issued 302,277 RSUs.~~

lower operating expenses.

Management’s Use of

Non-GAAP

Measures

This MD&A contains certain financial performance measures, including “EBITDA” and “Adjusted EBITDA,” that are not recognized under ~~GAAP~~generally accepted accounting principles in the United States (“GAAP”) and do not have a standardized meaning prescribed by GAAP. As a result, these measures may not be comparable to similar measures presented by other companies. For a reconciliation of these measures to the most directly comparable financial information presented in the Interim Financial Statements in accordance with GAAP, see the section entitled “Reconciliation of

Non-GAAP

Measures” ofbelow in this MD&A.

~~EBITDA~~

We believe EBITDA is a useful measure to assess the performance of the Company as it provides more meaningful operating results by excluding the effects of expenses that are not reflective of our underlying business performance and other

one-time

non-recurring

expenses. We define ~~EBITDA~~“EBITDA” as net income (loss) before (i) depreciation and amortization; (ii) income taxes; and (iii) interest expense and debt amortization.

Adjusted EBITDA

We believe Adjusted EBITDA is a useful measure to assess the performance of the Company as it provides more meaningful operating results by excluding the effects of expenses that are not reflective of our underlying business performance and other one-time or non-recurring expenses. We define ~~Adjusted EBITDA~~“Adjusted EBITDA” as EBITDA adjusted to exclude extraordinary items, non-recurring items and, other non-cash items, including, but not limited to (i) ~~stock-based~~share-based compensation expense, (ii) fair value change in contingent consideration and investments measured at ~~FVTPL~~Fair Value Through Profit and Loss (“FVPL”), (iii) non-recurring legal and professional fees, human-resources, inventory and collections-related expenses, (iv) ~~extra ordinary expenses related to COVID-19 (v)~~ intangible and goodwill impairments and loss on disposal of assets, ~~(vi)~~and (v) transaction costs related to merger and acquisition ~~activities, and (vii) non-cash sales and marketing expenses.~~

~~Results~~activities.

Table of Contents

Reconciliation of ~~Operations~~

Three-months ended

Nine-months ended


September 30, 2021
   September 30, 2020
September 30, 2021
   September 30, 2020
Sales

$
39,665,059
   $ —
$
133,785,604
   $ —
Cost of sales

33,577,226
   —
115,873,627
   —








Gross profit before fair value adjustments

6,087,833
   —
17,911,977
   —
Impairment loss


570,300,047

   —
645,199,154
   —
Operating expenses


31,594,206

   371,666
137,582,126
   794,795








Loss from operations


(595,806,420
)

(371,666
)

(764,869,303
)

(794,795
)

Other

Interest income

1,038,139
   155,416
1,086,418
   2,244,416
Interest expense

(1,133,341
)
   —
(3,728,576
)
   —
Gain on debt forgiveness

—
   —
3,358,686
   —
Loss on disposal of assets

(137,042
)
   —
(3,656,707
)
   —
Change in fair value of investments at FVTPL

(768,030
)
   —
(418,818
)

Change in fair value of contingent consideration

38,178,321
   —
220,997,087
   —
Other income

123,946
   —
2,748,843
   —









37,301,993
   155,416
220,386,933
   2,244,416








Income (loss) before income taxes


(558,504,427
)
   (216,250 )
(544,482,370
)
   1,449,621
Income tax benefit

(2,845,623
)
   —
8,018,073
   —








Net income (loss) and comprehensive income (loss)

$
(561,350,050
)
   $ (216,250 )
$
(536,464,297
)
   $ 1,449,621








Earnings (loss) per share

Basic and Diluted

$
(5.70
)
   $ (0.00 )
$
(5.72
)
   $ (0.05 )
Weighted average number of common shares

Basic and Diluted

98,421,935
   15,218,750
93,802,606
   15,218,750

Prior to the closing of the Qualifying Transaction on January 15, 2021, the Company was a special purpose acquisition company that did not conduct any commercial operations and had no revenues or significant operating expenses. The Company reminds readers that the operating results of Caliva and LCV included in the Company’s interim financial statements for the nine months ended September 30, 2021 are only from January 15, 2021 (the date of closing of the Qualifying Transaction).

~~Management focused its efforts during the nine months ended September 30, 2021 on integration activities for the Qualifying Transaction,~~

~~sub-leasing~~

~~non-core~~

~~real estate properties, strategic acquisitions and the disposition of~~

~~non-core~~

~~assets as well as the implementation of an approximate 10% head count reduction.~~

~~Sales Revenue~~

The Company’s sales revenues for the three and nine months ended September 30, 2021 was $39,665,059 and $133,785,604 compared to $nil an $nil in the corresponding periods in the prior year. The increase in revenue in the three and nine months ended September 30, 2021 is due to closing the Qualifying Transaction on January 15, 2021.

~~Revenue by sales channel for the three and nine months ended September 30, 2021 was as follows:~~

Three-months ended

September 30, 2021

Nine-months ended

September 30, 2021

Direct to consumer
   $
12,793,900

   $
34,372,371

Wholesale


26,871,159



99,413,233






$
39,665,059



133,785,604

~~Direct to Consumer (Retail, Pick up, Delivery)~~

~~As of September 30, 2021, the Company operated five omni-channel retail locations and four consumer delivery hubs. We have two store brands, our flagship store brand, Caliva, at 1695 S 7~~

~~St in San Jose, and our neighborhood store brand, Deli by Caliva, located at 92 Pullman Way in San Jose and at 9535 Artesia Blvd Bellflower. All~~

~~pick-up~~

~~and delivery online orders are through Caliva’s website.~~

Revenues earned from direct to consumer sales in the three and nine months ended September 30, 2021 totaled $12,793,900 and $34,372,371 respectively (three and nine months ended September 30, 2020: $nil and $nil).

As reflected in 3rd party data reports like Cannabis Benchmarks, the wholesale flower market pricing decreased in the third quarter of 2021. Indoor flower experienced an approximately 15% decrease in price per pound from July to October. Historically, the third calendar quarter has been the strongest quarter for wholesale flower pricing. The Company is subject to price fluctuations in flower, both indoor and outdoor. A chart showing price movements between August 27, 2021 and October 22, 2021 is below:

~~Wholesale~~

~~The Company directly sells first party and selected third party products into 450 dispensaries across California, leveraging a combined~~

~~in-house~~

~~sales team from Caliva and LCV, as well as the two wholesale distribution centers in San Jose and Costa Mesa, respectively.~~

~~Our Wholesale segment also includes the bulk business and consists of distillate oil manufacturing, bulk flower sales, flower processing and white label services.~~

Revenues earned from Wholesale sales in the three and nine months ended September 30, 2021 totaled $26,871,159 and $99,413,233 respectively (three and nine months ended September 30, 2020: $nil and $nil).

~~Gross Profit~~

Gross Profit reflects our revenue less our production costs primarily consisting of labor, materials, consumable supplies, overhead, amortization on production equipment, shipping, packaging and other expenses required to produce cannabis products.

The Company’s gross profit for the three and nine months ended September 30, 2021 was $6,087,833 and $17,911,977, an increase of $6,087,833 and $17,911,977 from the three and nine months ended September 30, 2020, a period when the Company had no meaningful operations. This increase was due to the closing of the Qualifying Transaction.

~~Operating Expenses~~

Three months ended

Nine-months ended


September 30,

2021

30-Sep-20

30-Sep-21

30-Sep-20


2021

2020

2021

2020

General and administrative

$
9,917,406

   $ 371,666
$
32,557,840

   $ 794,795
Sales and marketing


4,584,375

   —

38,048,443

   —
Salaries and benefits


9,022,933

   —

27,244,215

   —
Stock compensation expense


3,612,656

   —

17,450,820

   —
Lease expense


1,136,914

   —

3,455,582

   —
Depreciation


940,923

   —

2,864,125

   —
Amortization of intangible assets


2,378,999

   —

15,961,101

   —









$
31,594,206


$
371,666


$
137,582,126


$
794,795

The Company recorded operating expenses of $31,594,206 and $137,582,126 in the three and nine months ended of September 30, 2021 compared to $371,666 and $794,795 in the three and nine months ended September 30, 2020. The increased operating expenses is due to the closing of the Qualifying Transaction on January 15, 2021, whereas during the three and nine months ended September 30, 2020, the Company was a special purpose acquisition company with expenses consisting primarily of professional fees associated with its public listing and with seeking a qualifying transaction.

General and administrative costs increased to $9,917,406 and $32,557,840 respectively in the three and nine months ended September 30, 2021 from $371,666 and $794,795 due to the consolidation of businesses acquired in the Qualifying Transaction.

Salaries and benefits totaled $9,022,933 and $27,244,215 in the three and nine months ended September 30, 2021 compared to $nil and $nil in the comparative period also due to the first time consolidation of the businesses acquired in the Qualifying Transaction.

The Company incurred sales and marketing expenses of $4,584,375 and $38,048,443 in the three and nine months ended September 30, 2021, compared to $nil and $nil in the corresponding periods in the prior year. Of the $38,048,443 of sales and marketing expenses, $25,000,000 was settled in Common Shares (and thus a

~~non-cash~~

expense). Stock based compensation of $3,612,656 and $17,450,820 respectively, in the three and nine months ended September 30, 2021 and depreciation & amortization of $3,319,922 and $18,825,226, respectively, are also

~~non-cash~~

~~expenses.~~

~~Non-Cash~~

~~Impairment~~

In accordance with Accounting Standard Codification (ASC) Topic 350, the Company is required to assess its goodwill and other indefinite-lived intangible assets for impairment annually or in between tests if events or changes in circumstances indicate the carrying value of its assets may not be recovered. Further, under ASC 360, the Company is required to asset definite lived-intangible assets and long-lived assets whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.

~~Our third quarter of 2021 results include a non-cash goodwill and intangible asset impairment charge of $570,300,047 (September 30, 2020: $nil).~~

Based on the softening of the California cannabis market during the three months ended September 30, 2021, the Company determined that an impairment test was appropriate. As part of the impairment assessment, the Company’s future forecasts considered changes in cash flow estimates due to lower flower and oil prices realized during the third quarter of 2021. While the Company remains optimistic that cannabis legalization will occur, our expected future cash flows reflect the current tax and regulatory environment. The issues faced by the Company are not unique to our operations as the entire California cannabis market has been significantly impacted in the last quarter. The Company continues to focus on activities to create long term shareholder value with the signing of the Coastal and Calma transactions.

Furthermore, the Company would like to highlight that of the consideration paid for the Qualifying Transactions, $232,719,246 related to non-cash contingent consideration. This amount is potential additional consideration issuable, if and when, the stock price reaches certain thresholds. During the nine months ended September 30, 2021, the Company recorded a gain on contingent consideration of $220,997,087 which is reflected in the statement of operations.

~~The impairment charge is an adjustment that does not affect the Company’s cash position.~~

For the nine months ended September 30, 2021, the Company recorded impairment charges of $645,199,154 as the period includes an impairment loss related to the disposition of the Company’s hemp-derived CBD business earlier in the year compared to $nil in the nine months ended September 30, 2020. Impairment charges are an adjustment that do not affect the Company’s cash position or cash flow from operating activities. There is no guarantee as to whether further impairment charges will or will not occur in the future. Please review the Company’s disclosure under the heading “Risk Factors” in The Parent Company’s amended registration statement on Form 10 originally filed with the Securities and Exchange Commission (the “SEC”) on August 9, 2021, which is available on the SEC’s website at www.sec.gov and on SEDAR at

~~www.sedar.com~~

~~The following is a detailed summary of the impairment losses recorded by the Company:~~

Three months ended

Nine months ended


September 30,
2021

September 30,
2020

September 30,
2021

September 30,
2020


Right-of-use
assets (i)

$
72,529

   $ —
$
820,616

   $ —
Assets held for sale (ii)


—

   —

16,120,633

   —
Non-THC
business (iii)


—

   —

58,030,387

   —
Impairment (See Note 10 to financials)


570,227,518

   —

570,227,518

   —









$
570,300,047

   $ —
$
645,199,154

   $ —

~~(i) During the nine months ended September 30, 2021, the Company recognized an impairment loss of $820,616 in operating expenses on two property leases where the Company has vacated the premises.~~

(ii) In May 2021, the Company became committed to a plan to sell three licenses and transfer the related right of use asset and lease liability, which were acquired as part of the Caliva OG Enterprises Branding, Inc. (“OGE”) and LCV acquisitions on January 15, 2021. Prior to reclassification to assets held for sale, the assets were tested for impairment. As a result, the cost bases of the intangible assets were written down to $650,000, resulting in an impairment loss of $15,845,313. During the three months ended September 30, 2021, the Company recognized measurement period adjustments related to these intangible assets. Similarly, the Company recognized an impairment loss of $275,320 on

~~right-of-use~~

~~assets. During the three months ended September 30, 2021, the Company sold the license acquired from Caliva and OGE.~~

~~The carrying amounts of assets in the disposal group are as follows:~~

September 30, 2021

Intangible assets

$
400,000

Right-of-use
assets


2,215,440




$
2,615,440

~~The carrying amounts of liabilities in the disposal group are as follows:~~

September 30, 2021

Current portion of lease liabilities

$
337,292

Deferred tax liability


64,456

Lease liabilities


1,958,139




$
2,359,887

The fair value of the disposal group of $255,553 is management’s best estimate and is based on negotiations that were occurring around the end of the reporting period. The accounting for the acquisitions is provisional and subject to adjustment. Therefore, the intangible assets and deferred taxes in the disposal group are also provisional until management has finalized the accounting for the acquisitions.

~~(iii) During the three months ended March 31, 2021, the Company became committed to a plan to sell its~~

~~non-THC~~

business, which was acquired as part of the Caliva and OGE and LCV acquisitions on January 15, 2021. As a result of the decision to sell, the assets were tested for impairment and an impairment loss of $52,796,616 of goodwill and $5,233,771 of intangible assets was recognized. The disposal group did not represent a separate major line of business, and for that reason it has not been disclosed as discontinued operations for the three and nine months ended September 30, 2021. During the nine months ended September 30, 2021, the Company disposed of the

~~non-THC~~

business. The accounting for the acquisitions is provisional and subject to adjustment. Therefore, the carrying amount of the goodwill, intangible assets and deferred taxes of the net assets disposed are also provisional until management has finalized the accounting for the acquisitions.

~~Other Items~~

~~Interest (expense)~~

In the three and nine months ended September 30, 2021 the Company recorded interest expense of $1,113,341 and $3,728,576 respectively, the majority of which relates to interest expense on lease accounting for the Company’s right of use leases.

~~Gain on debt forgiveness~~

The Company recorded gain of $nil and $3,358,686 on the forgiveness of Payroll Protection Program (PPP) loans during the three and nine months ended September 30, 2021 (three and six months ended June 30, 2020: $nil).

~~Contingent consideration~~

In the three and nine months ended September 30, 2021, the Company recorded a gain on the change in the fair value of contingent consideration of $38,178,321 and $220,997,087 respectively due to a decline in its Common Share price from January 15, 2021 through to September 30, 2021 with no such item in the three and nine months ended September 30, 2020. The Company agreed to pay certain contingent consideration in connection with its Qualifying Transaction. This contingent consideration will be fair valued at each

~~quarter-end~~

~~and the gain or loss recorded in the statement of operations and comprehensive income (loss) will be inversely related to the movement in the Company’s Common Share price.~~

~~Net Income (loss) and Comprehensive Income (Loss)~~

In the three and nine months ended September 30, 2021, the Company recorded net loss of $561,350,050 and $536,464,297 compared with a loss of $216,250 and net income of $1,449,621 in the corresponding periods in the prior year. The significant losses reported in the three and nine months ended September 30, 2021 is due to impairment losses $570,300,047 and $645,199,154 respectively. These impairment losses were offset to some extent by gains in changes in contingent consideration of $38,178,321 and $220,997,087 in the three and nine months ended September 30, 2021 respectively.

Excluding impairment losses, the Company has otherwise generated a loss from operations of $25,506,373 and $119,670,149 respectively for the three and nine months ended September 30, 2021 (three and nine months ended September 30, 2020: $371,666 and $794,795 respectively).

~~Reconciliation of~~

Non-GAAP

Measures

A reconciliation of EBITDA and Adjusted EBITDA to the most directly comparable measure determined under GAAP is set out below.

Three-months ended

Nine-months ended


September 30, 2021

September 30, 2020

September 30, 2021

September 30, 2020

Net (income) loss and comprehensive (income) loss

$
(561,350,050 ) $ (216,250 ) $ (536,464,297 ) $ 1,449,621
Income tax
   2,845,623 —   (8,018,073 ) —
Depreciation and amortization
   3,319,922 —   18,825,226 —
Interest expense and debt amortization
   1,133,341 —   3,728,576 —


EBITDA


(554,051,164
)

(216,250
)

(521,928,568
)

1,449,621



Adjustments:

Share based compensation expense
   3,612,656 —   17,450,820 —
Other non-recurring items:

Fair value change of contingent consideration
   (38,178,321 ) —   (220,997,087 ) —
Loss on disposal of assets
   137,042 —   3,656,707 —
Change in fair value of investments at FVTPL
   768,030 —   418,818 —
Impairment loss
   570,300,047 —   645,199,154 —
Other taxes
   —   —   2,243,441 —
De-SPAC costs
   1,219,347 —   5,341,154 —
Restructuring costs
   —   —   3,878,782 —
Sales and marketing expense
   —   —   30,151,147 —


Adjusted EBITDA

$
(16,192,363
)

$
(216,250
)
$ (34,585,632 )
$
1,449,621

~~EBITDA~~

	Three-months ended						Six-months ended
	June 30, 2023			June 30, 2022			June 30, 2023			June 30, 2022

Net loss and comprehensive loss from continuing	$	(24,311,625	)	$	(29,053,588	)		(40,821,634	)		(62,043,901	)
Income taxes from continuing operations		1,961,804			(244,473	)		2,676,212			42,227
Depreciation and amortization from continuing operations		2,712,158			6,204,856			5,436,989			12,195,210
Interest expense from continuing operations		1,208,949			1,260,262			2,472,877			2,510,830
EBITDA		(18,428,714	)		(21,832,943	)		(30,235,556	)		(47,295,634	)
Adjustments:
Share based compensation expense		498,483			1,461,093			2,163,703			3,703,170
Other non-recurring items:
Fair value change of contingent consideration		1,177,730			(249,973	)		1,922,931			(638,595	)
Change in fair value of investments at fair value through profit or loss		170,358			330,960			170,358			33,096
Loss on disposal of assets		-			63,314			93,944			317,787
Impairment loss		403,271			-			403,271			-
Transaction costs		2,642,433			-			2,642,433			-
Restructuring costs		1,087,388			-			1,087,388			-

Adjusted EBITDA	$	(12,449,051	)	$	(20,227,549	)		(21,751,528	)		(43,880,176	)

The Company’s EBITDA loss was $18,428,714 and $30,235,556 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021 was $554,051,164~~2023, respectively, as compared to $21,832,943 and ~~$521,928,568 respectively, a decrease of $553,834,914 and $523,378,189 from~~$47,295,634 in the three and ~~nine~~six months ended ~~September~~June 30, ~~2020, a period when the Company had no meaningful operations. This increase was~~2022, respectively. The lower EBITDA losses are due to ~~the closing of the Qualifying Transaction and the impairment charges~~higher realized gross margins, lower operating losses in the ~~third quarter of 2021.~~

three and six months ended June 30, 2023 compared to the three months ended June 30, 2022.

Adjusted EBITDA

The Company’s Adjusted EBITDA loss was $12,449,051 and $21,751,528 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021 was $16,192,363 loss~~2023, as compared to $20,227,549 and ~~$34,585,632 loss respectively, a decrease of $15,976,113 and $36,035,253 from~~$43,880,176 in the three and ~~nine~~six months ended ~~September~~June 30, ~~2020, a period when the Company had no meaningful operations.~~2022. The ~~negative~~decreased Adjusted EBITDA islosses are due to ~~the closing of the Qualifying Transaction~~higher realized gross margins and ~~the integration initiatives undertaken since the closing. Adjusted EBITDA adjusts for~~

~~non-cash~~

~~adjustments for share based compensation, changes in fair value of contingent consideration, and losses on disposals of assets and impairment~~lower operating losses. The Company ~~also adjusted other items as itemized in the table above which management considered~~

~~non-recurring.~~

is focused on improving its margins and reducing operating costs.

The Company’s management views Adjusted EBITDA as the best measure of its underlying operating performance.

Liquidity and Capital Resources

~~We manage~~

Gold Flora Corporation manages liquidity risk by reviewing, on an ongoing basis, ~~our~~its sources of liquidity and capital requirements. As at ~~September~~June 30, ~~2021,~~2023, The Parent Company had restricted cash and cash equivalents of $220,031,676 compared with restricted cash and cash equivalents of $582,622,025 as at December 31, 2020. As of closing of the Qualifying Transaction on January 15, 2021, the Company had cash and cash equivalents of ~~$381,438,338, comprised~~$60,544,072 compared with cash and cash equivalents of (i) $318,303,338 of net proceeds from its initial public offering and interest received by the Company upon release of the net proceeds from the escrow on closing of the Qualifying Transaction after payments to redeeming holders of Class A Restricted Voting Shares in the aggregate amount of $264,318,686, including associated interest; and (ii) $63,135,000 in gross proceeds from the closing of the private placement prior to the closing of the Qualifying Transaction.

$93,697,529 as at December 31, 2022. Cash and cash equivalents are predominately invested in liquid securities issued by the United States government.

The Company completed its previously announced Business Combination on July 7, 2023. Gold Flora Corporation believes that the efficient vertical-integration and scale that the transaction is expected to provide further gross margin expansion and a path to longer-term profitability.

In evaluating ~~our~~Gold Flora Corporation’s capital requirements ~~including the impact, if any, on our business from the~~

~~COVID-19~~

~~pandemic,~~ and ~~our~~its ability to fund the execution of ~~our~~its strategy, ~~we believe we have~~Gold Flora Corporation believes it has adequate available liquidity to enable usit to meet ~~our~~its working capital and other operating requirements, fund growth initiatives and capital expenditures, settle ~~our~~its liabilities and repay scheduled principal and interest payments on debt for at least the next twelve months.

~~Our~~ Gold Flora has assumed it will realize significant synergies post-closing the Business Combination. To the extent these synergies are not achieved or not achieved on the timeframe expected, additional capital will be required.

Table of Contents

Gold Flora Corporation’s objective is to generate sufficient cash to fund ~~our~~its operating requirements and expansion plans. Since the closing of the Qualifying Transaction, we have incurred net operating losses. However, management is confident in the Company’s ability to grow revenue and reach long term profitability. WeGold Flora Corporation also ~~expect~~expects to have access to public capital markets through ~~our listing~~its listng on the NEO Exchange if the trading price of the Gold Flora Common Stock improves, and continue to review and pursue selected external financing sources to ensure adequate financial resources. These potential sources include, but are not limited to (i) obtaining financing from traditional or

non-traditional

investment capital organizations; (ii) obtaining funding from the sale of ~~our~~Gold Flora Common ~~Shares~~Stock or other equity or debt instruments; and (iii) obtaining debt financing with lending terms that more closely match ~~our~~Gold Flora Corporation’s business model and capital needs. There can be no assurance that weGold Flora Corporation will gain adequate market acceptance for ~~our~~its products or be able to generate sufficient positive cash flow to achieve ~~our~~tis business plans, that additional capital or other types of financing will be available when needed, or that these financings will be on terms favorable to ~~the Company~~Gold Flora Corporation or at all.

~~We expect~~ In addition, due to the price of the Gold Flora Common Stock, raising equity capital currently may not be feasible. Any additional equity financing may be on terms that are dilutive, or potentially dilutive, to the Company’s shareholders and debt financing, if available, may involve restrictive covenants with respect to the Company’s ability to pay dividends, raise additional capital or execute various other financial and operational plans.

Gold Flora expects to continue funding operating losses as we ~~ramp up~~appropriately scale our operations with our available ~~cash, cash equivalents and short-term investments.~~cash. Therefore, we are subject to risks including, but not limited to, our inability to raise additional funds through debt and/or equity financing to support our continued development, including capital expenditure requirements, operating requirements and to meet our liabilities and commitments as they come due.

Off-Balance Sheet Arrangements

As of the date hereof, ~~the Company~~Gold Flora Corporation does not have any

off-balance

sheet financing arrangements and has not guaranteed any debt or commitments of other entities or entered into any options on

non-financial

assets.

Contractual Obligations

~~Lease Obligations~~

~~The Company~~

Gold Flora Corporation leases real estate used for dispensaries, production plants, and corporate offices. Lease terms for real estate generally range from 1 to 16.5 years. Most leases include options to renew for varying terms at the ~~Company’s~~Gold Flora Corporation’s sole discretion. ~~Other leased assets include passenger vehicles. Lease terms for these assets generally range from 1 to 16.5 years.~~ Certain leases include escalation clauses or payment of executory costs such as property taxes, utilities, or insurance and maintenance. Rent expense for leases with escalation clauses is accounted for on a straight-line basis over the lease term. ~~The Company’s~~Gold Flora Corporation’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

~~Marketing Service Agreement (“MSA”)~~

~~On January 19, 2021,~~ the ~~MSA became effective whereby~~Company’s contractual undiscounted lease liabilities as of June 30, 2023:

	Operating Lease		Finance Lease

Remainder of 2023	$	2,294,365	$	2,329,793
2024		4,302,015		4,763,910
2025		4,417,481		4,906,828
2026		4,544,592		5,054,033
2027		4,009,473		5,205,654
Thereafter		18,295,465		59,679,244
Total undiscounted lease liabilities		37,863,391		81,939,462
Interest on lease liabilities		14,602,108		45,241,940
Total present value of minimum lease payments		23,261,283		36,697,522
Lease liability – current portion		1,996,340		224,545
Lease liability	$	21,264,943	$	36,472,977

Other Legal Matters

From time to time in the normal course of business, the Company ~~engaged~~may be subject to legal matters such as threatened or pending claims or proceedings. We are not currently a ~~third-party~~party to any material legal proceedings or claims, nor are we aware of any pending or threatened litigation or claims that could have a material adverse effect on our business, operating results, cash flows or financial condition should such litigation or claim be resolved unfavorably.

Table of Contents

Mosaic.Ag

On May 16, 2021, we entered into a membership interest purchase agreement (the “Membership Interest Purchase Agreement”) to obtain leasehold interests of approximately 10 years duration in each of four one-acre parcels of land that are licensed for ~~strategic~~outdoor cannabis grow (collectively, the “Outdoor Grow Properties”). On May 21, 2021 (the “Effective Date”), we entered into a series of cultivation and ~~promotional services. Over the term~~supply agreements with each of the ~~MSA,~~leaseholders of the Outdoor Grow Properties and Mosaic. AG, Inc. (“Mosaic.Ag”), pursuant to which ~~is an initial~~Mosaic.Ag agreed to cultivate cannabis on each of the Outdoor Grow Properties on our behalf for a period commencing on the Effective Date of and ending at least three years from the ~~Company will pay~~closing of the ~~following consideration~~transactions contemplated by the Membership Interest Purchase Agreement, with options to extend for up to five years (the “Cultivation and Supply Agreements”). Under the terms of the Membership Interest Purchase Agreement, as of the Effective Date, we and Mosaic.Ag obtained access to the Outdoor Grow Properties and began to commence cannabis cultivation activities under the Cultivation and Supply Agreements. The purchase price under the Membership Interest Purchase Agreement is $6,000,000 in cash, $2,500,000 in our Common ~~Shares:~~

~~(i) $25,000,000~~Shares payable on the ~~effective~~closing date ~~and;~~

~~(ii) $1,875,000 payable quarterly~~(with the number of shares issued based on the volume-weighted average price per Common Share for the ten consecutive trading days prior to the closing date) and up to 1,309,263 of our Common Shares subject to an earnout based on the production value of cannabis grown on the Outdoor Grow Properties over the ~~second year and third year terms.~~

twenty-four months following the Effective Date. The ~~transaction is considered a share-based transaction as it will be settled in Common Shares. During the nine months ended September 30, 2021 the Company issued 2,376,425 Common Shares in settlement~~closing of the ~~initial $25,000,000. As~~transactions contemplated by the ~~Common Shares vested immediately,~~Membership Interest Purchase Agreement are dependent on the ~~full amount~~satisfaction of various closing conditions, multiple of which were not met by the end of the ~~$25,000,000 has been recognized~~second quarter of 2022 as required by the Membership Interest Purchase Agreement. Further, Mosaic.Ag was unable to produce sufficient quantities of biomass according to Company quality standards and pursuant to the Cultivation Supply Agreements. For the foregoing reasons, we delivered to Mosaic on June 30, 2022, notice of our exercise of our contractual rights to terminate each of the Cultivation and Supply Agreements and the Membership Interest Purchase Agreement effective on such date and requested that Mosaic.Ag present an ~~expense in operating expenses.~~

~~The Company has accounted~~acceptable restructure to the arrangements and/or a payback plan for the ~~quarterly~~owed refund and for the upfront payment under the promissory note. Pursuant to the terms of the Membership Interest Purchase Agreement, on the Effective Date, we advanced to the seller $5,650,000 secured by a promissory note, which note is now past its maturity date. Pursuant to the terms of the Cultivation and Supply Agreements, we made payments asfor cannabis product in advance based on a ~~liability-settled share-based payment transaction,~~projected aggregate yield, with Mosaic owing a refund for any overpayment in the event of the actual yield (as measured at the ~~fair value~~conclusion of the ~~Common Shares to be issued. The Company recognized an expense~~growing season) being less than the projected yield, which event did transpire, triggering a refund owed us of $1,363,636 and $3,803,030 during the three and nine months ended September 30, 2021, respectively, in operating expenses as a sales and marketing expense. As at September 30, 2021, the cash-settled liability is $3,803,030 (December 31, 2020—$nil).

~~The arrangement can be terminated by the counterparty in~~approximately $1,500,000. Mosaic.Ag has contested certain ~~circumstances, one of which is any change of control~~ of the ~~Company. In that case,~~Company’s positions and has claimed an inability to pay the owed cash amounts. For the foregoing reasons, the Company ~~is required~~filed a lawsuit against Mosaic.Ag and related individuals on December 16, 2022, in the Superior Court of California, County of Santa Clara, alleging breach of contract and asking for declaratory relief. On March 21, 2023, the defendants removed the case to ~~settle~~ the ~~agreement~~United States District Court in ~~a lump sum payment that consists~~the Northern District of ~~all unpaid amounts. As at September 30, 2021,~~California on the ~~amount~~pled basis that the ~~Company would be liable for if~~litigation involves a “federal question” due to cannabis being controlled under the ~~contract~~Controlled Substances Act, a federal law, and thus is ~~terminated~~entitled to federal question jurisdiction. We have contested the removal and filed a motion to remand the case to Superior Court of California, which motion is ~~$15,000,000.~~

~~Brand Strategy Agreement (“BSA”)~~

~~On January 15, 2021,~~now in front of the ~~BSA became effective whereby the Company was granted the right and license to use Shawn C. Carter p/k/a~~

~~JAY-Z’s~~

~~approved name, image and likeness for promoting and advertising for an initial~~

~~non-cancellable~~

~~period of 6 years.~~

court.

Inflation

The Company is ~~committed~~not immune to ~~settling $26,500,000~~the widespread cost inflation experienced in ~~either cash or Common Shares at~~ the ~~option~~United States and many parts of the ~~counterparty over the~~

~~non-cancellable~~

~~period of 6 years as follows:~~

~~(i) $2,000,000 within 30 days (Year 1)~~

~~(ii) $3,000,000 – Year 2~~

~~(iii) $4,000,000 – Year 3~~

~~(iv) $5,000,000 – Year 4~~

~~(v) $6,000,000 – Year 5~~

~~(vi) $6,500,000 – Year 6~~

~~The transaction is accounted for as a cash-settled share-based transaction as it may be settled in either cash or Common Shares at the option of the counterparty.~~world. The Company ~~is recognizing the~~intends to continue to work to improve its gross margins despite cost ~~associated~~inflation through market pricing, greater cost efficiencies, advantageous vendor partnerships, and other measures.

Critical Accounting Policies and Estimates

For a description of our critical accounting policies and estimates, refer to Part II, Item 7. “Critical Accounting Policies and Estimates” in our annual report on Form 10-K filed with the ~~arrangement over~~Securities and Exchange Commission on April 3, 2023 (our “2022 Form 10-K”). There have been no material changes to our critical accounting estimates from the ~~same period it is receiving services, which is 6 years.~~

~~The agreement can be terminated by the counterparty~~information provided in ~~certain circumstances, including a change in control of the Company or an involuntary~~

~~de-listing.~~

our 2022 Form 10-K.

Table of Contents

Cash Flow

The table below highlights our cash flows for the periods indicated:

Nine-months ended


September 30, 2021
   September 30, 2020
Cash provided by (used in)

Operating activities

Net income (loss)

$
(536,464,297
)
   $ 1,449,621
Adjustments for items not involving cash

Impairment loss


645,199,154

   —
Loss on disposal of assets


3,656,707

   —
Gain on debt forgiveness


(3,358,686
)
   —
Change in fair value of investments at fair value through profit and loss


418,818

   —
Interest expense


3,728,576

   —
Interest income


(993,639
)
   —
Provision for bad debt


796,403

   —
Depreciation and amortization


18,825,226

   —
Shares issued for marketing services


25,000,000

   —
Stock compensation expense


16,765,238

   —
Non-cash sales and marketing expense


3,803,030

   —
Non-cash portion of operating lease expense


(352,332
)
   —
Fair value change of contingent consideration


(220,997,087
)
   —
Deferred taxes


(13,714,716
)
   —






(57,687,605
)


1,449,621





Net changed in non-cash working capital items


(44,545,403
)
   794,795




Total operating


(102,233,008
)


2,244,416





Financing activities

Proceeds from private placement


51,635,000

   —
Redemption of Class A restricted voting shares


(264,318,686
)
   —
Proceeds from exercise of options


12,972

   —
Repayment of consideration payable


(872,021
)
   —
Repayment of lease liabilities


(3,429,846
)
   —
Repurchase of shares


(4,454,571
)
   —
Repayment of line of credit


(1,000,000
)
   —




Total financing


(222,427,152
)

$
—





Investing activities

Net cash paid in business combinations


(32,408,483
)
   —
Net cash paid in business combinations (M & J)


(1,402,337
)
   —
Advances for notes receivable


(5,650,000
)
   —
Advances for investments at fair value through profit and loss


(1,000,000
)
   —
Proceeds from sale of net assets


11,068,537

   —
Proceeds from notes receivable


187,954


Purchases of property and equipment


(8,725,860
)
   —




Total investing


(37,930,189
)


—

Net change in cash during the year


(362,590,349
)


2,244,416

Cash

Beginning of year

$
582,622,025

   $ 580,271,713




End of year

$
220,031,676


$
582,516,129

	Six months ended
	June 30, 2023			June 30, 2022

Cash provided by (used in)
Operating activities
Net loss from continuing operations	$	(40,821,634	)	$	(62,043,901	)
Adjustments for items not involving cash
Impairment		403,271			2,429,530
Interest expense		2,472,877			2,510,830
Non- cash Interest income		(153,755	)		(48,417	)
Loss on disposal of assets		93,944			317,787
Loss on lease termination		-			41,074
Allowance for accounts receivable and notes receivable		429,338			2,478,142
Fair value change of investments		170,358			33,096
Depreciation and amortization		5,436,989			12,195,210
Share-based compensation expense, net of withholding tax		2,077,762			3,282,923
Non-cash marketing expense		565,000			2,727,272
Non-cash operating lease expense		2,515,095			3,704,397
Fair value change of contingent consideration		1,922,931			(638,595	)
Deferred income tax recovery		(1,103,998	)		(1,550,509	)
Repayment of operating lease liabilities		(3,572,578	)		(4,611,772	)
Net changes in non-cash working capital items		4,113,961			(1,473,083	)
Net cash used in continued operating activities		(25,450,439	)		(40,646,016	)
Net cash used in discontinued operating activities		-			(3,824,924	)
Total operating activities		(25,450,439	)		(44,470,940	)

Financing activities
Receipt of payments on notes receivables		-			1,572,712
Repayments of consideration payable		(766,667	)		(766,666	)
Repayments of finance lease liabilities		(2,295,363	)		(2,228,507	)
Total financing activities		(3,062,030	)		(1,422,461	)

Investing activities
Purchases of property and equipment		(69,928	)		(2,314,113	)
Proceeds from sale of property and equipment		328,940			6,176,473
Advances for notes receivables		(5,000,000	)		-
Payments received on notes receivable		100,000			-
Acquisition of investments		-			(150,000	)
Total investing activities		(4,640,988	)		3,712,360

Net change in cash during the period		(33,153,457	)		(42,181,041	)

Cash, restricted cash and restricted cash equivalents
Beginning of period	$	93,697,529		$	174,892,298
End of period	$	60,544,072		$	132,711,257

Cash		60,544,072			125,993,248
Restricted cash and restricted cash equivalents		-			6,718,009
Cash, restricted cash and restricted cash equivalents	$	60,544,072		$	132,711,257

Table of Contents

Operating Activities

Cash used in continued operating activities ~~before working capital changes~~ in the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2023 totaled ~~$57,687,605~~$25,450,439, as compared to cash ~~provided by~~used in continued operating activities ~~before working capital changes~~ of ~~$1,449,621~~$40,646,016 in the ~~nine~~six months ended ~~September~~June 30, ~~2020. The significant increase in~~2022. In the six months ended June 30, 2023, the cash used in operating activities ~~was due to the closing of the Qualifying Transaction on January 15, 2021 and financing our operating losses as we work to consolidate the California market and achieve critical scale. This~~ represents an average operating cash burn rate ~~before working capital changes~~ of ~~$6,409,739~~$4,241,740 per month, ~~year to date to September 30, 2021~~as compared to ~~average cash provided by operating activities of $161,069~~$6,774,336 per month in the ~~comparative period when~~six months ended June 30, 2022. Gold Flora Corporation believes that the ~~Company was~~efficient vertical-integration and scale resulting from the Business Combination will help improve Gold Flora Corporation’s operating results and is also evaluating a ~~special purposes acquisition corporation.~~ number of options to further improve operating results including: gross margin expansion, subleasing excess real estate, and general and administrative cost reductions.

Cash used in ~~working capital changes totaled $44,545,403 for~~discontinued operating activities in the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2023 totaled $Nil, as compared to cash provided by working capital changes of $794,795. The Company as an operating business requires substantially more working capital for items such as inventory than it did as a special purpose acquisition corporation in the comparative period. Of the $44,545,403$3,824,924 cash used in ~~working capital changes for~~discontinued operating activities in the ~~nine~~six months ended ~~September~~June 30, 2021, $16,223,431 was for working capital items to support our operations and their growth and $28,321,972 was used to settle accrued underwriting commissions and other transaction costs related to the closing of its Qualifying Transaction.

2022.

Financing Activities

Cash used in financing activities totaled ~~$222,427,152~~$3,062,030 in the ~~nine~~six months ended ~~September~~June 30, ~~2021, an increase~~2023, as compared to cash used of ~~$222,427,152 from~~$1,422,461 in the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2022. The ~~large outflow for~~cash used in the ~~nine~~six months ended ~~September~~June 30, ~~2021 is due to:~~2023 was primarily tofor repayment of notes associated with our acquisition of Coastal Holding Company, LLC and the ~~$264,318,686 for redemptions~~settlement of lease liabilities. In the ~~Class A Restricted Voting Shares in connection with the Qualifying Transaction. From the proceeds of the Company’s initial public offering of $575,000,000,~~six months ended June 30, 2022 the Company netted $318,303,339 including $7,622,025 of interest income earned during the period such proceeds were held in escrow prior to the closing of the Qualifying Transaction. Concurrent with closing the Qualifying Transaction, the Company also raised net proceeds of $51,635,000received $1,572,712 from a ~~private placement financing of $51,635,000 leaving it with total available cash of $381,438,338 on closing of the Qualifying Transaction.~~

legal settlement.

Investing Activities

Cash used in investing activities totaled $4,640,988 in the ~~nine~~six months ended ~~September~~June 30, ~~2021 totaled $37,930,189~~2023, as compared ~~$nil~~to $3,712,360 cash provided by investing activities in the ~~nine~~six month period ended June 30, 2022. During the six months ended ~~September~~June 30, ~~2020. In the nine months ended September 30, 2021,~~2023, the Company ~~invested~~advanced Gold Flora $5,000,000 as part of a ~~total of $49,186,680 in various acquisitions and~~$5,000,000 facility arrangement. It also received proceeds from excess property, plant and equipment of $328,940. In the comparative six months ended June 30, 2022, the Company received proceeds of $6,176,473 from the disposal of property, plant and equipment primarily related to ~~support~~its Pullman property sale and lease back transaction. The Company also purchased property, plant and equipment for its operations ~~($nil~~for $2,314,113 and made a $150,000 social equity investment in ~~the comparative period). This was offset by $11,068,537 of proceeds received from asset sales and $187,954 of proceeds of notes receivable.~~

Digistrains.

Commitments and Contingencies

California Operating Licenses

The Company’s primary activity is the cultivation, manufacturing and sale of adult use cannabis pursuant to California law. However, this activity is not in compliance with the United States Controlled Substances Act (the ~~“CSA”~~“CSA”). The Company’s assets are potentially subject to seizure or confiscation by governmental ~~agencies~~agencies. and the Company could face criminal and civil penalties for noncompliance with the CSA. Management of the Company believes the Company is in compliance with all California and local jurisdiction laws and ~~monitor~~monitors the regulatory environment on an ongoing basis along with counsel to ensure the continued compliance with all applicable laws and licensing agreements.

The Company’s operation is sanctioned by the State of California and local jurisdictions. Due to the uncertainty surrounding the Company’s noncompliance with the CSA, the potential liability from any

non-compliance

cannot be reasonably estimated, and the Company may be subject to regulatory fines, penalties or restrictions in the future.

Effective January 1, 2018, the State of California allowed ~~for~~ adult use cannabis sales. Beginning on January 1, 2018, the State began issuing temporary licenses that expired 120 days after issuance for retail, distribution, manufacturing and cultivation permits. Temporary licenses could be extended in

90-day

increments by the State upon submission of an annual license application. All temporary licenses had been granted extensions by the State during 2018.

Table of Contents

In September 2019, Senate Bill 1459 (SB 1459) was enacted which enabled state licensing authorities to issue provisional licenses through 2021. A provisional license could be issued if an applicant submitted a completed annual license application to the California Bureau of Cannabis Control. A completed application for purposes of obtaining a provisional license is not the same as a sufficient application to obtain an annual license. The provisional cannabis license, which is valid for 12 months from the date issued, is said to be in between a temporary license and an annual license and allows a cannabis business to operate as they would under local and state regulations. Licensees issued a provisional license are expected to be diligently working toward completing all annual license requirements in order to maintain a provisional license. The Company obtained its provisional licenses in 2019 and continues to work with the State to obtain annual licensing.

The Company’s prior licenses obtained from the local jurisdictions it operated in have been continued by such jurisdictions and are necessary to obtain state licensing.

The Company has received annual licenses from its local jurisdiction in which it actively operates. Although the Company believes it will continue to receive the necessary licenses from the State of California to conduct its business in a timely fashion, there is no guarantee the Company or its clients will be able to do so and any failure to do so may have a negative effect on ~~its~~the Company’s business and results of operations.

~~Additional regulations relating to testing that came into effect on July 1, 2018 (Phase II testing requirements) required the clients to sell products that would be~~

~~non-compliant~~

prior to that date, causing a loss of margin due to discounts that had to be provided to ensure that such products were sold prior to July 1. Due to the additional testing requirements effective July 1, 2018, the California market and the clients experienced a shortage in supply of compliant cannabis products.

~~Other Legal Matters~~

From time to time in the normal course of business, the Company may be subject to legal matters such as threatened or pending claims or proceedings. We are not currently a party to any material legal proceedings or claims, nor are we aware of any pending or threatened litigation or claims that could have a material adverse effect on our business, operating results, cash flows or financial condition should such litigation or claim be resolved unfavorably.

Social Equity Fund

The Company formed a ~~new~~wholly owned subsidiary to serve as its social equity fund, Social Equity Ventures LLC (“SEV”)during the ~~first quarter,~~during 2021 with ~~an initial commitment of $10 million~~a planned $10,000,000 investment and a planned annual ~~contributions~~contribution of at least 2% of net income from the Company. Through June 30, 2023, the Company has invested approximately $1,350,000 in three investments being Stanton Brands (d/b/a Josephine & Billie’s), Peakz LLC and Digistrains.

During the first quarter of 2023, SEV launched its “brand success program” (“BSP”). The BSP is a program implemented to provide minority owned brands with guaranteed shelf space and individualized mentorship by the Company’s ~~net income. During~~sales, marketing, retails and operational leaders. Brands will learn best practices, operational procedures and tips that can be applied to any retail outlet nationwide. The goal of the ~~nine months ended September 30, 2021,~~program is to empower each brand with the ~~Company invested approximately $1,000,000 in two investments.~~

knowledge and opportunity to scale their business, market efficiently, increase brand awareness while building customer loyalty, and boosting sales; thus, creating a solid, sustainable, and scalable business.

The BSP launched on January 19, 2023 with CRONJA, a social equity and veteran founded brand under the leadership of Co-Founder and CEO, Bryant Bowens. CRONJA’s launch was followed by Plaid America’s Substance and Skewville.

Share Capital and Capital Management

As of ~~September~~June 30, ~~2021,~~2023, the Company had ~~97,179,378~~120,158,606 Common Shares and 35,837,500 Common Share purchase warrants (the “Warrants”) issued and outstanding. The Warrants are exercisable at an exercise price of $11.50 and will expire on January 15, 2026. The Company may accelerate the expiry date of the outstanding Warrants (excluding the Warrants held by ~~the~~ Subversive Capital Sponsor LLC in certain circumstances) by providing 30 days’ notice, if and only if, the closing price of the Common Shares equals or exceeds $18.00 per Common Share (as adjusted for stock splits or combinations, stock dividends, extraordinary dividends, reorganizations and recapitalizations) for any 20 trading days within a

30-trading

day period.

The Company has an equity incentive plan (the ~~“Equity~~“Equity Incentive ~~Plan”~~Plan”) that permits the grant of stock options, ~~restricted share units (“RSUs”),~~RSUs, deferred share units, performance share units (“PSUs”) and stock appreciation rights to

non-employee

directors and any employee, officer, consultant, independent contractor or advisor providing services to the Company or any affiliate. As of ~~September~~June 30, ~~2021,~~2023, a total of ~~3,472,301~~1,547,141 RSUs and 915,000 PSUs were ~~granted and~~ outstanding under the Equity Incentive Plan.

Prior to closing of the ~~Qualifying Transaction,~~acquisitions of each of CMG Partners, Inc. (“Caliva”) and Left Coast Ventures, Inc. (“LCV”) (such transactions collectively, the “Qualifying Transaction”), Caliva maintained the CMG Partners, Inc. 2019 Stock Option and Grant Plan (the ~~“Caliva EIP”~~“Caliva EIP”), which permitted awards of common stock in Caliva. In connection with the Qualifying Transaction, Caliva and the Company agreed that the Company would maintain the Caliva EIP and that outstanding awards thereunder ~~will~~would entitle the holder to receive Common Shares. ~~There are currently 796,492~~As of June 30, 2023, there were 280,568 options to purchase up to ~~796,492~~280,568 Common Shares under the Caliva EIP ~~outstanding.~~outstanding with a weighted average exercise price of $7.07 per share. No further awards will be granted under the Caliva EIP.

Table of Contents

Prior to closing of the Qualifying Transaction, LCV maintained the Amended and Restated 2018 Equity Incentive Plan (the ~~“LCV~~“LCV Equity ~~Plan”~~Plan”) which authorized LCV to grant to its employees, directors and consultants stock options and other equity-based awards. In connection with the Qualifying Transaction, LCV and the Company agreed that the Company would maintain the LCV Equity Plan and that outstanding awards thereunder ~~will~~would entitle the holder to receive Common Shares. ~~There are currently 16,948~~At June 30, 2023, there were 9,149 options to purchase up to ~~16,948~~9,149 Common Shares under the LCV Equity Plan ~~outstanding.~~outstanding with a weighted average exercise price of $26.73 per share. No further awards will be granted under the LCV Equity Plan.

The Company manages its capital with the following objectives:

~~To ensure sufficient financial flexibility to achieve the ongoing business objectives including of future growth opportunities, and pursuit of accretive acquisitions; and~~

~~To maximize shareholder return through enhancing the share value.~~

	·	To ensure sufficient financial flexibility to achieve the ongoing business objectives including of future growth opportunities, and pursuit of accretive acquisitions; and
	·	To maximize shareholder return through enhancing the value of the Common Shares.

The Company considers its capital to be total equity. The Company manages capital through its financial and operational forecasting processes. The Company reviews its working capital and forecasts its future cash flows based on operating expenditures, and other investing and financing activities. Selected information is provided to the Board of Directors of the Company. The Company’s capital management objectives, policies and processes have remained unchanged during the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2023 and year ended December 31, ~~2020.~~2022. The Company is not subject to any external capital requirements.

~~Social Equity~~

The Company believes in the paramount importance of promoting social equity in the cannabis industry as a core part of its business operations. As such, concurrent with the closing of the Qualifying Transaction, the Company launched a new social equity fund focused on investing in Black and other

~~people-of-color~~

cannabis entrepreneurs. The social equity venture fund identifies, conducts diligence on, and invests in such entrepreneurs as a means of directly impacting the issues of social equity and diversity in the cannabis industry. The social equity venture fund was initially seeded with $10,000,000 from the Company’s balance sheet, with a planned annual contribution of at least 2% of the Company’s net income. The social equity venture fund invests as a wholly integrated division of the Company under management of employees of the Company. The social equity fund, where possible, will leverage existing social equity programs as well as

~~not-for-profit~~

organizations engaged in social equity license application support, entrepreneur mentorship, workforce development, and entrepreneurial community-building. On May 27, 2021, the Company created a Social Equity Advisory Committee comprised of thought leaders across cannabis, civil rights activism, criminal justice reform, policy advocacy and impact investing. Subsequently, the Company announced its first two investments from the social equity fund being Stanton Brands (dba Josephine & Billie’s) and Peakz LLC.

~~Intellectual Property~~

The Company has a portfolio of industry leading products and brands. As part of the Company’s brand strategy, it strives to protect its proprietary products and brand elements and its brand as California’s premier consumer cannabis product company. Intellectual property (“IP”) protection is pursued both in its ability to sell products and brands through first “Freedom to Operate” searches and subsequently, reviewing proprietary and protectable claims, branding, technology, or design assets. The Company evaluates opportunities for IP protection from cultivation and strain development, in manufacturing and processes, and for its portfolio of finished goods. The Company’s IP protection ranges from trademarks to patents to trade secrets and covers anything from cultivation, genetics, product development, packaging development, claims, operations, information technology, and branding. Additionally, the Company from time to time partners with other companies and pursues further IP protection through licensing and collaboration with those partners.

The Company seeks to protect its proprietary information, in part, by executing confidentiality agreements with third parties and partners and non-disclosure and invention assignment agreements with its employees and consultants. These agreements are designed to protect its proprietary information and ensure ownership of technologies that are developed through its relationship with the respective counterparty. The Company cannot guarantee, however, that these agreements will afford it adequate protection of its intellectual property and proprietary information rights.

~~Competitive Conditions~~

As the Company is vertically integrated it competes on multiple fronts, from manufacturing to retail to delivery, and experience competition in each of these areas. From a retail perspective, the Company competes with other licensed retailers and delivery companies in the geographies where retail and delivery services are located. These other retailers range from small local operators to more significant operators with a presence throughout the State of California and other states in the United States. From a product perspective, the Company competes with other manufactures of brands for shelf space in third-party owned dispensaries throughout California. Similar to certain competitors in the retail space, the Company competes with manufacturers ranging in size from small local operators to significant operators with a larger presence. Indirectly, the Company competes with the illicit market, including many illegal dispensaries.

The Company’s platform has been designed with the intention to combine leading operations across the vertical supply chain with a scalable omnichannel e-commerce platform to create one of the largest and most scalable vertically-integrated platforms in the single largest market, California. The Company believe there are many opportunities to leverage its vertical platform and potential balance sheet to further expand its market share and accelerate profitability in California through mergers and acquisitions.

~~Specialized Knowledge, Skills, Resources & Equipment~~

Knowledge with respect to cultivating and growing cannabis is important in the medical cannabis industry. The nature of growing cannabis is not substantially different from the nature of growing other agricultural products. Variables such as temperature, humidity, lighting, air flow, watering and feeding cycles are meticulously defined and controlled to produce consistent product and to avoid contamination.

The Company grows or procures the primary component of its finished products, namely cannabis. The Company’s cultivation operations are dependent on a number of key inputs and their related costs including raw materials and supplies related to its growing operations, as well as electricity, water and other utilities.

Staff with suitable horticultural and quality assurance expertise are generally available on the open market. The Company also requires client care staff, which will grow as its business grows. Customer care staff are also generally available on the open market.

Equipment used is specialized but is readily available and not specific to the cultivation of cannabis. Subject to available funding, the Company does not anticipate any difficulty in obtaining equipment.

The Company anticipates an increased demand for skilled manpower, energy resources and equipment in connection with the Company’s expected continued growth. Because of this anticipation, the Company has entered into a series of arrangements to obtain the rights to four acres of land that is licensed for outdoor grow (“Mosaic.Ag”). In addition, the Company entered into a cultivation and supply agreement with a cultivator to cultivate cannabis on its behalf for a period of at least three years, with options to extend up to five years. The purchase price for Mosaic.Ag is $6,000,000 in cash, $2,500,000 in Common Shares when the transaction closes and up to 1,309,263 Common Shares subject to earnouts. The upfront payment of $6,000,000 is secured by a promissory note. The closing of the transaction is dependent on the satisfaction of various closing conditions, which have not been met to date. In the event that the transaction does not close, the promissory note will be repaid to the Company. The Cultivation Acquisition is expected to provide a turnkey operation and an immediate cannabis supply for use in the Company’s branded product lines. In addition to the synergies that are expected to generate sustained gross margin enhancement, the partnership also offers future expansion opportunities as consumer demand continues to grow.

UNITED STATES REGULATORY ENVIRONMENT

Cannabis Industry Regulation

On February 8, 2018, the Canadian Securities Administrators revised their previously released Staff Notice

51-352

–

~~Issuers~~ (Issuers with U.S. Marijuana-Related ~~Activities~~

(“Activities) (“Staff Notice

~~51-352”~~ 51-352”),

which provides specific disclosure expectations for issuers that currently have, or are in the process of developing, cannabis-related activities in the United States as permitted within a particular state’s regulatory framework. All issuers with U.S. cannabis-related activities are expected to clearly and prominently disclose certain prescribed information in prospectus filings and other required disclosure documents. As a result of ~~the Company’s~~our existing operations in California, ~~the Company is~~we are providing the following disclosure pursuant to Staff Notice

51-352.

~~The Company derives~~

We derive a substantial portion of ~~its~~our revenues from state legalized: (i) cannabis, and products containing cannabis, used by someone 21 or older that is not a medical cannabis patient (where use may include inhalation, consumption, or application) (“Adult-Use Cannabis”) and (ii) to a lesser extent, cannabis and products containing cannabis used by medical cannabis patients in accordance with applicable state law, but for which no drug approval has been granted by ~~The~~the United States Food and Drug Administration (where use may include inhalation, consumption, or application) (“Medical-Use Cannabis”) and (ii) cannabis, and products containing cannabis, used by someone 21 or older that is not a medical cannabis patient (where use may include inhalation, consumption, or application) (“Adult-Use Cannabis”Cannabis”) ((i) and (ii) collectively ~~“Regulated Cannabis”~~“Regulated Cannabis”). The Regulated Cannabis industry is illegal under U.S. ~~Federal Law. The Parent Company is~~federal law. We are directly involved (through ~~its~~our licensed subsidiaries) in both the

Adult-Use

Cannabis and

Medical-Use

Cannabis industry in the State of California, which has legalized and regulated such industries.

The United States federal government regulates certain drugs through the ~~Controlled Substances Act (21 U.S.C. §§~~

~~801-971)~~

~~(the “CSA”)~~CSA and through the Food, Drug & Cosmetic Act (21 U.S.C. §§

~~301-392)~~

~~(the “FDCA”~~ 301–392) (the “FDCA”). The CSA schedules controlled substances, including “marihuana” (defined as all parts of the plant

cannabis sativa L.

containing more than 0.3 percent THC), based on their approved medical use and potential for abuse. Marihuana (also referred to as cannabis) and THC (“except for tetrahydrocannabinols in hemp”) are each classified as Schedule I controlled substances (21 U.S.C. § 812(c)). The Drug Enforcement Administration, ~~(“DEA”),~~ an agency of the U.S. Department of Justice (the ~~“DOJ”~~“DOJ”) defines Schedule I drugs, substances or chemicals as “drugs with no currently accepted medical use and a high potential for abuse.” The United States Food and Drug Administration (the ~~“FDA”~~“FDA”), which implements and enforces the FDCA, regulates, among other things, drugs used for the diagnosis or treatment of diseases. The FDA has not approved cannabis as a safe and effective treatment for any medical condition, and regularly issues

cease-and-desist

letters to manufacturers of hemp-derived cannabidiol (“CBD”) products making health claims to consumers in contravention of the FDCA. The FDA has approved drugs containing THC and CBD, individual cannabinoids in the plant

cannabis sativa L.

, for a narrow segment of medical conditions.

Table of Contents

State laws that permit and regulate the cultivation, production, distribution, sale and use of

Medical-Use

Cannabis or

Adult-Use

Cannabis are in direct conflict with the CSA, which makes cannabis and THC distribution and possession federally illegal. Although certain states and territories of the U.S. authorize

Medical-Use

Cannabis or

Adult-Use

Cannabis production and distribution by licensed or registered entities, under U.S. federal law, the possession, cultivation, and/or transfer of cannabis and THC is illegal and any such acts are criminal acts under any and all circumstances under the CSA. Additionally, any cultivation, manufacture, possession, distribution and/or sale of cannabis accessories, in states without laws expressly permitting such activity, are also federally illegal activity under the CSA. Although ~~the Company’s~~our activities are believed to be compliant with applicable California state and local law, strict compliance with state and local laws with respect to cannabis does not absolve ~~the Company~~us of liability under United States federal law, nor does it provide a defense to any federal proceeding which may be brought against us.

However, in October 2022, President Biden directed the ~~Company.~~

Department of Justice and Department of Health & Human Services to conduct a review of the scheduling status of cannabis. While there can be no assurance, cannabis may be rescheduled or descheduled sometime in 2024 or 2025.

As of ~~the date of this Form 10-Q, 37~~July 31, 2023, 39 U.S. states, and the District of Columbia and the territories of Guam, Puerto Rico, the U.S. Virgin Islands, and the Northern Mariana Islands have ~~passed voter initiatives or enacted legislation legalizing~~legalized the cultivation and sale of Medical-Use Cannabis, with at least ~~six~~four of the remaining states expected to pass such legalization measures within the next 12 months. ~~Nineteen~~In 23 U.S. states, ~~have passed voter initiatives or enacted legislation legalizing~~ the sale and possession of both Medical-Use Cannabis and Adult-Use Cannabis has been legalized, though due to the time period between a state’s legalization of commercial cannabis activities and the completion of its regulatory framework and marketplace launch, the purchase of Adult-Use Cannabis is currently possible in 1219 states, with the remainder of the currently-legal states to commence sales activities ~~during the remainder of 2021~~in 2024 or ~~in 2022 or 2023.~~2025. The District of Columbia has legalized Adult-Use Cannabis but has not yet permitted the commercial sale of Adult Use Cannabis, however, Adult-Use sales are ~~expected~~likely to commence in ~~2022. Eleven~~2025. 10 states have also enacted low-THC / high-CBD only laws for medical cannabis patients. The sale and possession of both Medical-Use Cannabis and Adult-Use Cannabis is legal in the State of California, subject to applicable licensing requirements and compliance with applicable conditions. The numbers above include all state ballot initiatives which passed in November 2020, with Arizona commencing Adult-Use sales in January 2021, New Jersey and Montana to commence Adult-Use sales in 2022. South Dakota is expected to commence Adult-Use sales in 2023, pending a decision by the South Dakota Supreme Court upholding the validity of the voter initiative legalizing such sales; South Dakota legislators have also introduced legislation legalizing Adult-Use sales, should their state Supreme Court fail to uphold the will of its voters. Mississippi is also expected to enact Medical-Use cannabis legislation within the next 6 to 12 months, following a successful ballot initiative and subsequent invalidation on technical grounds by the Mississippi State Supreme Court, with the Governor currently negotiating with legislators over personal possession limits in any forthcoming legislation.

Under President Barack Obama, the U.S. administration attempted to address the inconsistencies between federal and state regulation of cannabis in a memorandum which then-Deputy Attorney General James Cole sent to all United States Attorneys on August 29, 2013 (the ~~“2013~~“2013 Cole ~~Memorandum”~~Memorandum”) outlining certain priorities for the DOJ relating to the prosecution of cannabis offenses. The 2013 Cole Memorandum noted that in jurisdictions that have enacted laws legalizing or decriminalizing Regulated Cannabis in some form and that have also implemented strong and effective regulatory and enforcement systems to control the cultivation, processing, distribution, sale and possession of Regulated Cannabis, conduct in compliance with those laws and regulations is less likely to be a priority at the federal level. The DOJ did not provide (and has not provided since) specific guidelines for what regulatory and enforcement systems would be deemed sufficient under the 2013 Cole Memorandum. In light of limited investigative and prosecutorial resources, the 2013 Cole Memorandum concluded that the DOJ should be focused on addressing only the most significant threats related to cannabis, a

non-exhaustive

list of which was enumerated therein.

On January 4, 2018, U.S. Attorney General Jeff Sessions formally issued a new memorandum (the ~~“Sessions Memorandum”~~“Sessions Memorandum”), which rescinded all “previous nationwide guidance specific to marijuana enforcement,” including the 2013 Cole Memorandum. The Sessions Memorandum stated, in part, that current law reflects “Congress’ determination that Cannabis is a dangerous drug and Cannabis activity is a serious ~~crime”,~~crime,” and Mr. Sessions directed all U.S. Attorneys to enforce the laws enacted by Congress by following well-established principles when pursuing prosecutions related to cannabis activities. There can be no assurance that the federal government will not enforce federal laws relating to cannabis in the future. As a result of the Sessions Memorandum, federal prosecutors are now free to utilize their prosecutorial discretion to decide whether to prosecute cannabis activities despite the existence of State-level laws that may be inconsistent with federal prohibitions. No direction was given to federal prosecutors in the Sessions Memorandum as to the priority they should ascribe to such cannabis activities, and resultantly it is uncertain how active U.S. federal prosecutors will be in relation to such activities.

~~The Company believes~~

Table of Contents

We believe it is still unclear what prosecutorial effects will be created by the rescission of the 2013 Cole Memorandum. ~~The Company believes~~We believe that the sheer size of the Regulated Cannabis industry, in addition to participation by state and local governments and investors, suggests that a large-scale enforcement operation would more than likely create unwanted political backlash for the DOJ and the Biden administration in certain states that heavily favor decriminalization and/or legalization. Regardless, cannabis and THC remain Schedule I controlled substances at the federal level, and neither the 2013 Cole Memorandum nor its rescission has altered that fact. The federal government of the United States has always reserved the right to enforce federal law in regard to the manufacture, distribution, sale and disbursement of

Medical-Use

Cannabis or

Adult-Use

Cannabis, even if state law permits such cultivation, manufacture, distribution, sale and disbursement. ~~The Company believes,~~We believe, from a purely legal perspective, that the criminal risk today remains similar to the risk on January 3, 2018. It remains unclear whether the risk of enforcement has been altered. Additionally, under United States federal law, it is a violation of federal money laundering statutes for financial institutions to take any proceeds from the sale of Regulated Cannabis or any other Schedule I controlled substance. Canadian banks are likewise hesitant to deal with cannabis companies, due to the uncertain legal and regulatory framework of the industry. Banks and other financial institutions, particularly those that are federally chartered in the United States, could be prosecuted and possibly convicted of money laundering for providing services to Regulated Cannabis businesses. While Congress is considering legislation that may address these issues, there can be no assurance that such legislation passes.

Despite these laws, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“~~FinCEN”~~FinCEN”) issued a memorandum on February 14, 2014 (the ~~“FinCEN Memorandum”~~“FinCEN Memorandum”) outlining the pathways for financial institutions to bank state-sanctioned Regulated Cannabis businesses in compliance with federal enforcement priorities. The FinCEN Memorandum echoed the enforcement priorities of the 2013 Cole Memorandum and stated that in some circumstances, it is possible for banks to provide services to cannabis-related businesses without risking prosecution for violation of federal money laundering laws. Under these guidelines, financial institutions must submit a Suspicious Activity Report (“~~SAR”~~SAR”) in connection with all cannabis-related banking activities by any client of such financial institution, in accordance with federal money laundering laws. These cannabis-related SARs are divided into three ~~categories—cannabis~~categories-cannabis limited, cannabis priority, and cannabis ~~terminated—based~~terminated-based on the financial institution’s belief that the business in question follows state law, is operating outside of compliance with state law, or where the banking relationship has been terminated, respectively. On the same day that the FinCEN Memorandum was published, the DOJ issued a memorandum (the ~~“2014~~“2014 Cole ~~Memorandum”~~Memorandum”) directing prosecutors to apply the enforcement priorities of the 2013 Cole Memorandum in determining whether to charge individuals or institutions with crimes related to financial transactions involving the proceeds of cannabis-related conduct. The 2014 Cole Memorandum has been rescinded as of January 4, 2018, along with the 2013 Cole Memorandum, removing guidance that enforcement of applicable financial crimes against state-compliant actors was not a DOJ priority.

However, former Attorney General Sessions’ rescission of the 2013 Cole Memorandum and the 2014 Cole Memorandum has not affected the status of the FinCEN Memorandum, nor has the Department of the Treasury given any indication that it intends to rescind the FinCEN Memorandum itself. Though it was originally intended for the 2014 Cole Memorandum and the FinCEN Memorandum to work in tandem, the FinCEN Memorandum is a standalone document which explicitly lists the eight enforcement priorities originally cited in the 2013 Cole Memorandum. As such, the FinCEN Memorandum remains intact, indicating that the Department of the Treasury and FinCEN intend to continue abiding by its guidance. However, FinCEN issued further guidance on December 3, 2019, in which it acknowledged that the Agricultural Improvement Act of 2018 (the ~~“Farm Bill”~~“Farm Bill”) removed hemp as a Schedule I controlled substance and authorized the United States Department of Agriculture ~~(“USDA”)~~ to issue regulations governing, among other things, domestic hemp production. The guidance states that because hemp is no longer a controlled substance under federal law, banks are not required to file SARs on these businesses solely because they are engaged in the growth or cultivation of hemp in accordance with applicable laws and regulations. The guidance further notes that for hemp-related customers, banks are expected to follow standard SAR procedures, and file a SAR if indicia of suspicious activity warrants. FinCEN noted in its December 2019 guidance that the 2014 SAR reporting structure for cannabis remains in place even with the passage of the Farm Bill and this additional guidance related to hemp. FinCEN confirmed this point in guidance issued on June 29, 2020, and clarified that, if proceeds from cannabis-related activities are kept separate, a SAR filing is only required for the cannabis-related part of a business that engages in both cannabis and hemp activity.

Although the 2013 Cole Memorandum has been rescinded, one legislative safeguard for the

Medical-Use

Cannabis industry has historically remained in place: Congress adopted a

so-called

~~“rider”~~ “rider” provision to the fiscal years 2015, 2016, 2017, ~~and~~ 2018, 2019, 2020 and ~~2020~~2021. Consolidated Appropriations Acts (currently referred to as the ~~“Rohrabacher/Blumenauer Amendment”~~“Joyce-Blumenauer Amendment”) to prevent the federal government from using congressionally appropriated funds to enforce federal cannabis laws against regulated

Medical-Use

Cannabis actors operating in compliance with state and local law. The Rohrabacher/Blumenauer Amendment was included in the consolidated appropriations bill signed into law by President Trump in December 2019 and expired on September 30, 2020. In signing the Rohrabacher/Blumenauer Amendment, President Trump issued a signing statement noting that the Rohrabacher/Blumenauer Amendment “provides that the Department of Justice may not use any funds to prevent implementation of medical marijuana laws by various States and territories,” and further stating “I will treat this provision consistent with the President’s constitutional responsibility to faithfully execute the laws of the United States.” While the signing statement can fairly be read to mean that the executive branch intends to enforce the CSA and other federal laws prohibiting the sale and possession of medical cannabis, the president did issue a similar signing statement in 2017 and no major federal enforcement actions followed. On December 27, 2020, the Rohrabacher/BlumenauerJoyce-Blumenauer Amendment was renewed through the signing of the fiscal year ~~2021 federal~~2022 omnibus ~~spending~~ bill, which extended the protections of the ~~Rohrabacher/Blumenauer~~ Amendment through ~~September 30, 2021.~~December 16, 2022. The ~~Rohrabacher/Blumenauer Amendment may or may not be~~fiscal year 2023 spending package included ~~in a subsequent omnibus appropriations package or a continuing budget resolution. Should~~ the ~~Rohrabacher/Blumenauer~~Joyce-Blumenauer rider, which extended the rider until fiscal year 2024.

Table of Contents

However, should the Joyce-Blumenauer Amendment not be renewed upon expiration in subsequent spending bills, there can be no assurance that the federal government will not seek to prosecute cases involving medical cannabis businesses that are otherwise compliant with ~~State~~state law. Such potential proceedings could involve significant restrictions being imposed upon us.

The United States Congress has passed appropriations bills each of the ~~Company.~~

cannabis offenses of individuals who are in compliance with state medical cannabis laws. American courts have construed these appropriations bills to prevent the U.S. federal government from prosecuting individuals when those individuals comply with state law relating to approved medical uses. However, because this conduct continues to violate U.S. federal law, American courts have observed that should Congress at any time choose to appropriate funds to fully prosecute the CSA, any individual or business—even those that have fully complied with state law—could be prosecuted for violations of U.S. federal law. And if Congress restores funding, the government will have the authority to prosecute individuals for violations of the law that took place before received funding under the CSA’s five-year statute of limitations.

Despite the legal, regulatory, and political obstacles the Regulated Cannabis industry currently faces, the industry has continued to grow. Under certain circumstances, the federal government may repeal the federal prohibition on cannabis and thereby leave the states to decide for themselves whether to permit Regulated Cannabis cultivation, production and sale, just as states are free today to decide policies governing the distribution of alcohol or tobacco. Until that happens, ~~the Company faces~~we face the risk of federal enforcement and other risks associated with ~~the Company’s~~our business.

To the knowledge of our management, ~~of the Company,~~ there have not been any statements or guidance made by federal authorities or prosecutors regarding the risk of enforcement action in California.

~~The Company’s~~

Our objective is to capitalize on the opportunities presented as a result of the changing regulatory environment governing the cannabis industry in the United States. Accordingly, there are a number of significant risks associated with ~~the business of the Company.~~our business. Unless and until the United States Congress amends the CSA with respect to

Medical-Use

Cannabis or

Adult-Use

Cannabis, there is a risk that federal authorities may enforce current federal law, and ~~the~~our business ~~of the Company~~ may be deemed to be producing, cultivating, extracting, or dispensing “marihuana” or aiding or abetting or otherwise engaging in a conspiracy to commit such acts in violation of U.S. federal law.

~~The Company has~~

We have received and ~~continues~~continue to receive legal input, in verbal and written form (including opinions when required), regarding (a) compliance with applicable state and local regulatory frameworks and (b) potential exposure and implications arising from U.S. federal law in certain respects.

The 2013 Cole Memorandum and the ~~Rohrabacher/Blumenauer~~Joyce-Blumenauer Amendment gave

Medical-Use

Cannabis operators and investors in states with legal regimes greater certainty regarding federal enforcement as to establish Regulated Cannabis businesses in those states. While the Sessions Memorandum has introduced some uncertainty regarding federal enforcement, the Regulated Cannabis industry continues to experience growth in legal

Medical-Use

Cannabis and

Adult-Use

Cannabis markets across the United States. U.S. Attorney General Jeff Sessions resigned on November 7, 2018. ~~Nonetheless,~~It is anticipated that the current Attorney General, Merrick Garland, will issue a memorandum resembling the Cole Memorandum in late 2023. Still, this is not guaranteed. More generally, there is no guarantee that state laws legalizing and regulating the sale and use of cannabis will not be repealed or overturned, even under a Biden Administration’s DOJ or that local governmental authorities will not limit the applicability of state laws within their respective jurisdictions. Unless and until the United States Congress amends the CSA with respect to cannabis and THC (and as to the timing or scope of any such potential amendments there can be no assurance), there is a risk that federal authorities may enforce current U.S. federal law.

Despite the expanding market for Regulated Cannabis, traditional sources of financing, including bank lending or private equity capital, are lacking which can be attributable to the fact that cannabis remains a Schedule I substance under the CSA. These traditional sources of financing are expected to remain scarce unless and until the federal government legalizes cannabis cultivation and sales.

Table of Contents

Below is a discussion of U.S. state-level regulatory regimes in those jurisdictions where we are, and will be, directly or indirectly involved through our subsidiaries. A discussion of the U.S. federal regulatory regime can be found above under the heading “—United States Regulatory Environment—Cannabis Industry Regulation.” We are directly engaged in the manufacture, possession, use, sale or distribution of cannabis and/or hold licenses in the Adult-Use Cannabis and/or Medical-Use Cannabis marketplace in the State of California. We will evaluate, monitor and reassess this disclosure, and any related risks, on an ongoing basis and the same will be supplemented and amended to investors in public filings, including in the event of government policy changes or the introduction of new or amended guidance, laws or regulations regarding cannabis regulation. We intend to cause our businesses to promptly remedy any known occurrences of non-compliance with applicable State and local cannabis rules and regulations, and intends to publicly disclose any non-compliance, citations or notices of violation which may have an impact on our licenses, business activities or operations.

Exposure to U.S. Marijuana Related Activities

~~The Company operates~~

We operate in the United States through various subsidiaries and other entities pursuant to arrangements with third-parties on arm’s length terms as more specifically described herein. As of the date ~~hereof,~~of this Quarterly Report, a majority of ~~the Company’s~~our business was directly derived from U.S. cannabis-related activities. As such, a majority of ~~the Company’s~~our balance sheet and operating statement for periods following closing of the Qualifying Transaction ~~will~~ reflects exposure to U.S. cannabis related activities.

California

California Regulatory Landscape

In 1996, California was the first state to legalize

Medical-Use

Cannabis through Proposition 215, the Compassionate Use Act of 1996. This legislation legalized the use, possession and cultivation of cannabis by patients with a physician recommendation for treatment of cancer, anorexia, AIDS, chronic pain, spasticity, glaucoma, arthritis, migraine, or any other illness for which cannabis provides relief.

In 2003, Senate Bill 420 was signed into law establishing

not-for-profit

medical cannabis collectives and dispensaries, and an optional identification card system for

Medical-Use

Cannabis patients.

In September 2015, the California legislature passed three bills collectively known as the Medical Cannabis Regulation and Safety Act (“~~MCRSA”~~MCRSA”). The MCRSA established a licensing and regulatory framework for

Medical-Use

Cannabis businesses in California. The system created multiple license types for dispensaries, infused products manufacturers, cultivation facilities, testing laboratories, transportation companies, and distributors. Edible infused product manufacturers would require either volatile solvent or

non-volatile

solvent manufacturing licenses depending on their specific extraction methodology. Multiple agencies would oversee different aspects of the program and businesses would require a state license and local approval to operate. However, in November 2016, voters in California passed Proposition 64, the Adult Use of Marijuana Act (“~~AUMA”~~AUMA”), creating an

Adult-Use

Cannabis program for adults 21 years of age or older. In June 2017, the California State Legislature passed Senate Bill No. 94, known as Medicinal and

Adult-Use

Cannabis Regulation and Safety Act (“~~MAUCRSA”~~MAUCRSA”), which amalgamated MCRSA and AUMA and provided for a set of regulations to govern a medical and

adult-use

licensing regime for cannabis businesses in the State of California. The four agencies that regulate cannabis at the state level are the Bureau of Cannabis Control (“~~BCC”~~BCC”), CalCannabis at the California Department of Food and Agriculture (“CalCannabis”), and the Manufactured Cannabis Safety Branch California Department of Public Health (“~~MCSB”~~MCSB”), and California Department of Tax and Fee Administration. MAUCRSA went into effect on January 1, 2018. MAUCRSA was then amended and restated in July 2021 through the annual budget trailer bill process to, among other things, consolidate the three state licensing ~~agencies—BCC,~~agencies-BCC, CalCannabis and ~~MCSB—into~~MCSB-into a single licensing authority known as the Department of Cannabis Control (“~~DCC”~~DCC”). ~~As of~~Subsequent to the ~~date of this Form 10-Q,~~agency consolidation, the newly formed DCC ~~is in the process of consolidating~~consolidated the three separate sets of BCC, CalCannabis, and MCSB regulations into a single set of state ~~regulations.~~

September 27, 2021.

Table of Contents

To legally operate a

Medical-Use

Cannabis or

Adult-Use

Cannabis business in California, the operator must generally have both a local and state license. This requires license holders to operate in cities with cannabis licensing programs. Therefore, counties and cities in California are allowed to determine the number of licenses they will issue to cannabis operators, or can choose to outright ban the siting of cannabis operations in their jurisdictions.

California Licensing Requirements

A storefront retailer license with an

~~“M-designation”~~

“M-designation” permits (i) the purchase of cannabis goods that are “For Medical Use Only” from licensed distributors (ii) the sale of such medicinal cannabis goods to medicinal cannabis patients age 18 years of age or older in California who possesses a physician’s recommendation. Only certified physicians may provide medicinal cannabis recommendations. A storefront retailer license with an

~~“A-designation”~~

“A-designation” permits the sale of cannabis and cannabis products to any individual age 21 years of age or older regardless of whether they possess a physician’s recommendation. A storefront retailer license with both the

M-

and

A-designations

is permitted to do all of the above described in this paragraph. Where the local jurisdiction permits, a state storefront retailer license allows the retailer to engage in delivery of cannabis goods to retail customers. A

non-storefront

license permits the same delivery activity, but does not permit the licensee to operate a retail storefront.

A distribution license permits the license holder to engage in the procurement, storage, required regulatory and compliance testing, sale to certain licensed entities within the State of California, and transport of cannabis and cannabis products between licensees.

adult-use

or medicinal cultivation license permits cannabis cultivation, which means any activity involving the planting, growing, harvesting, drying, curing, grading or trimming of cannabis. Such licenses further permit the production of a limited number of

~~“non-manufactured~~

“non-manufactured cannabis products” and the sales of cannabis to certain licensed entities within the State of California for resale or manufacturing purposes.

adult-use

or medical manufacturing license permits the manufacturing of “manufactured cannabis ~~products”.~~products.” Manufacturing includes the compounding, blending, extracting, post-processing refinement, infusion, packaging or repackaging, labeling or relabeling, remediation or other preparation of a cannabis ~~product. In~~product in the State of ~~California, only~~California. Only cannabis that is grown in the state by a licensed operator can be sold in the state. California neither mandates or prohibits vertical integration, and the state allows licensees to make wholesale purchase of cannabis from, or a distribution of cannabis and cannabis product to, another licensed entity within the state.

Holders of cannabis licenses in California are subject to a detailed regulatory scheme encompassing security, staffing, transport, sales, manufacturing standards, testing, inspections, inventory, advertising and marketing, product packaging and labeling, white labeling, records and reporting, and more. As with all jurisdictions, the full regulations, as promulgated by each applicable state agency, should be consulted for further information about any particular operational area.

California Reporting Requirements

The State of California uses METRC as the state’s

track-and-trace

system used to track commercial cannabis activity and movement across the distribution chain for all state-issued licensees. The system allows for other third-party system integration via application programming interface. Only licensees have access to METRC.

Table of Contents

California Storage and Security

To ensure the safety and security of cannabis business premises and to maintain adequate controls against the diversion, theft, and loss of cannabis or cannabis products, California’s retail cannabis businesses are generally required to do the following:

~~limit access to dispensary premises to medical cannabis patients and adults 21 and over;~~

~~maintain a fully operational security alarm system;~~

~~contract for security guard services;~~

~~maintain a video surveillance system that records continuously 24 hours a day;~~

~~ensure that the facility’s outdoor premises have sufficient lighting;~~

~~not dispense from its premises outside of permissible hours of operation;~~

~~limit the amount of cannabis goods dispensed to individual customers to prevent diversion;~~

~~store cannabis and cannabis product only in areas per the premises diagram submitted to the State of California during the licensing process;~~

store all cannabis and cannabis products in a secured, locked room or a vault; report to local law enforcement within 24 hours after being notified or becoming aware of the theft, diversion, or loss of cannabis; and

ensure the safe transport of cannabis and cannabis products between licensed facilities, maintain a delivery manifest in any vehicle transporting cannabis and cannabis products. Only vehicles registered with the BCC that meet BCC distribution requirements are to be used to transport cannabis and cannabis products.

·	limit access to storefront retail premises to medical cannabis patients at least 18 years and older, and adults 21 and over maintain a fully operational security alarm system;

·	contract for professionally-certified security guard services;

·	maintain a video surveillance system that records continuously 24 hours a day;

·	ensure that the facility’s outdoor premises have sufficient lighting;

·	not dispense from its premises outside of permissible hours of operation;

·	limit the daily amount of cannabis goods dispensed to individual customers to prevent diversion;

·	store cannabis and cannabis product only in areas per the premises diagram submitted to and approved by the State of California during the licensing process;

·	store all cannabis and cannabis products in a secured, locked room or a vault; report to local law enforcement and the DCC within 24 hours after discovering the theft, diversion, or loss of cannabis; and

·	ensure the safe transport of cannabis and cannabis products between licensed facilities, maintain a delivery manifest and QR-code scannable State license in any vehicle transporting cannabis and cannabis products. Only vehicles registered with the DCC that meet DCC distribution requirements are to be used to transport cannabis and cannabis products.

California Home Delivery Requirements

California law allows certain licensed retailers to deliver cannabis to adult customers at any private address within the state, including within those jurisdictions that have land use and zoning ordinances prohibiting the establishment of commercial cannabis businesses. At least 25 local jurisdictions where cannabis sales are banned sued the state, seeking to overturn the rule allowing home deliveries statewide. As of the date hereof, the suit was dismissed on procedural grounds, and the state regulation stands. To the knowledge of management, there have been no significant enforcement efforts mounted by local governments.

The State of California requires the satisfaction of various regulatory compliance obligations in order to operate a cannabis delivery service. The cannabis license that permits the operation of a storefront dispensary in the State of California (also referred to as a retail license) currently permits that entity to also establish a delivery operation. If an entity does not wish to set up and operate a storefront dispensary location at which it can sell products to customers in person, California has established a separate license which allows for a retail delivery operation (also referred to as a

non-storefront

retail license). California regulations regarding the delivery of cannabis products include the following requirements:

·	All deliveries of cannabis goods must be performed by a delivery employee (at least 21 years of age) who is directly employed by a licensed retailer.

·	All deliveries of cannabis goods must be made in person to a physical address that is not on publicly-owned land or to a building leased by a public agency.

·	Prior to providing cannabis goods to a delivery customer, a delivery employee must confirm the identity and age of the delivery customer (as is required if such customer was purchasing the product in the physical retail store) and ensure that all cannabis goods sold comply with the regulatory requirements.

·	A licensed cannabis entity is permitted to contract with a service that provides a technology platform to facilitate the sale and delivery of cannabis goods, in accordance with all of the following: (1) the licensed cannabis entity does not allow for delivery of cannabis goods by the technology platform service provider; (2) the licensed entity does not share in the profits of the sale of cannabis goods with the technology platform service provider, or otherwise provide for a percentage or portion of the cannabis goods sales to the technology platform service provider; (3) the licensed cannabis entity does not advertise or market cannabis goods in conjunction with the technology platform service provider, outside of the technology platform, and ensures that the technology platform service provider does not use the licensed cannabis entity’s license number or legal business name on any advertisement or marketing that primarily promotes the services of the technology platform; and (4) provides various disclosures to customers about the source of the delivered cannabis goods.

Table of Contents

In March 2022, the state of California issued notable new regulations pertaining to cannabis delivery. First, the state increased the total value of cannabis goods ~~must be performed by~~delivery employees can carry in their vehicle from $5,000 to $10,000. Second, for purposes of this limit, the state removed any distinction between “ordered” and “unordered” product. These changes will afford cannabis delivery operators considerably more flexibility, allowing them to carry a ~~delivery employee (at least 21 years~~broader array of ~~age) who is directly employed by~~products and serve a ~~licensed retailer.~~

~~All deliveries~~larger geographic area. These regulations took effect in November 2022.

California Cannabis Cultivation Tax

As of July 1, 2022, California has eliminated its cannabis ~~goods must be made in person.~~

cultivation tax. Prior to ~~providing~~this, cannabis ~~goods~~cultivated in California was subject to a ~~delivery customer, a delivery employee must confirm the identity and age~~$161/pound tax. In practice, this tax amounted to 30% or more of the ~~delivery customer (as is required if such customer was purchasing the product in the physical dispensary) and ensure that all cannabis goods sold comply with the regulatory requirements.~~

~~A licensed cannabis entity is permitted to contract with a service that provides a technology platform to facilitate the sale and delivery~~wholesale price of cannabis goods, in accordance with all of the following: (1) the licensed cannabis entity does not allow for delivery of cannabis goods by the technology platform service provider; (2) the licensed entity does not share in the profits of the sale of cannabis goods with the technology platform service provider, or otherwise provide for a percentage or portioncannabis. The elimination of the cannabis ~~goods sales to the technology platform service provider; (3) the licensed~~cultivation tax may make legal cannabis ~~entity does not advertise or market~~more competitive with California’s robust illicit cannabis goods in conjunction with the technology platform service provider, outside of the technology platform, and ensures that the technology platform service provider does not use the licensed cannabis entity’s license number or legal business name on any advertisement or marketing that primarily promotes the services of the technology platform; and (4) provides various disclosures to customers about the source of the delivered cannabis goods.

Cannabis may only be delivered to a physical address but cannot be delivered to an address located on publicly owned land or an address on land or in a building leased by a public agency, and the delivery cannot be to a location outside of the state of California.

~~The delivery operations must satisfy any local jurisdiction requirements for the delivery of cannabis products.~~

~~A delivery employee is not permitted to carry cannabis goods in the delivery vehicle with a value in excess of $5,000 at any time.~~

~~The delivery vehicle and its use must satisfy certain regulatory requirements such as continuous and dedicated GPS, use of locked containment units for the cannabis products, and unmarked vehicles.~~

market.

Laws Applicable to Financial Services for Regulated Cannabis Industry

All banks are subject to federal law, whether the bank is a national bank or state-chartered bank. At a minimum, most banks maintain federal deposit insurance which requires adherence to federal law. Violation of federal law could subject a bank to loss of its charter. Financial transactions involving proceeds generated by cannabis-related conduct can form the basis for prosecution under the federal money laundering statutes, unlicensed money transmitter statutes and the

Currency and Foreign Transactions Reporting Act of 1970

~~(31~~ (31 U.S.C. §§§ 5311

et ~~seq~~

seq.) (commonly known as the ~~“Bank~~“Bank Secrecy ~~Act”~~Act”). For example, under the Bank Secrecy Act, banks must report to the federal government any suspected illegal activity, which would include any transaction associated with a Regulated Cannabis-related business. These reports must be filed even though the business is operating in compliance with applicable state and local laws. Therefore, financial institutions that conduct transactions with money generated by Regulated Cannabis-related conduct could face criminal liability under the Bank Secrecy Act for, among other things, failing to identify or report financial transactions that involve the proceeds of cannabis-related violations of the CSA.

FinCEN issued guidance in February 2014 which clarifies how financial institutions can provide services to cannabis-related businesses consistent with their obligations under the Bank Secrecy Act. Concurrently with the FinCEN guidance, the DOJ issued supplemental guidance directing federal prosecutors to consider the federal enforcement priorities enumerated in the 2013 Cole Memorandum with respect to federal money laundering, unlicensed money transmitter and Bank Secrecy Act offenses based on cannabis-related violations of the CSA. The FinCEN guidance sets forth extensive requirements for financial institutions to meet if they want to offer bank accounts to cannabis-related businesses, including close monitoring of businesses to determine that they meet all of the requirements established by the DOJ, including those enumerated in the 2013 Cole Memorandum. This is a level of scrutiny that is far beyond what is expected of any normal banking relationship. Under the 2019 FinCEN guidance discussed above, banks are not required to file SARs on businesses solely because they are engaged in the growth or cultivation of hemp in accordance with applicable laws and regulations. However, the 2014 guidance remains in place with respect to Regulated Cannabis businesses. FinCEN confirmed this point in guidance issued on June 29, 2020, and clarified that, if proceeds from cannabis-related activities are kept separate, a SAR filing is only required for the cannabis-related part of a business that engages in both cannabis and hemp activity.

As a result, many banks are hesitant to offer any banking services to Regulated Cannabis-related businesses, including opening bank accounts. While ~~the Company~~we currently ~~has~~have bank accounts, ~~its~~our inability to maintain these accounts or the lack of access to bank accounts or other banking services in the future, would make it difficult for ~~the Company~~

us to operate ~~its~~our business, increase ~~its~~our operating costs, and pose additional operational, logistical and security challenges. Furthermore, it remains unclear what impact the rescission of the 2013 Cole Memorandum and 2014 Cole Memorandum will have, but federal prosecutors may increase enforcement activities against institutions or individuals that are conducting financial transactions related to cannabis activities.

The increased uncertainty surrounding financial transactions related to cannabis activities may also result in financial institutions discontinuing services to the cannabis industry.

Table of Contents

Ongoing Compliance

Overview

~~The Company~~

Gold Flora Corporation is subject to the general licensing and regulatory framework in California set out under the heading “

United States Regulatory ~~Environment~~

–
Environment—California
.”~~. The Company~~ Gold Flora Corporation has developed a compliance program designed to achieve its strategic business goals while protecting the organization and operations. ~~The Company’s~~Gold Flora Corporation’s compliance program integrates external regulations with internal rules and procedures to effectively lay out expectations for employee duties and behaviors; this aligns the goals of ~~its~~Gold Flora Corporation employees with ~~those of the Company~~Gold Flora Corporation’s goals and helps ~~the Company’s~~our operations run smoothly. ~~The Company focuses~~We focus on upholding policies and procedures that ensure the organization and ~~its~~our employees comply with applicable laws and regulations.

Employee Training

~~The Company is in process of~~

Gold Flora Corporation provides ongoing employee training, ~~employees,~~ and ~~in completing~~has completed development of and ~~instituting~~instituted a robust online training center for employees, in connection with ~~its~~the objectives of Gold Flora Corporation’s compliance ~~program’s objectives,~~program, regulatory and statutory requirements, relevant policies and procedures, and the basic components of the compliance program. All of the training modules available to employees in the online training center were created by Gold Flora Corporation’s in-house Compliance Team. Such training includes additional specialized training for various policies and procedures that are applicable to specific job functions and/or departments where needed to properly perform their jobs. Training is tracked, attested to, and documented. ~~Training is tracked, attested~~Further, all employees and management are encouraged to ~~and documented.~~

request new or refresher compliance training as often as necessary to compliantly fulfill their job duties.

Inventory and Security Policies

Maintaining security and inventory control is important to ~~the Company~~us and itGold Flora Corporation has adopted a number of policies, procedures, and practices in these areas:

Security: The Company has taken extensive security measures including implementing professionally vetted policies, procedures, and systems to provide comprehensive protection, not only for its physical plant and inventory, but also for its employees, customers, and the surrounding public. Every licensed facility has strict access control, thorough camera coverage, and burglar alarms. These controls are supported by

~~on-site~~

~~security personnel in certain instances.~~

Inventory: The Company maintains inventory control and reporting systems that document the present location, amount, and a description of all cannabis and cannabis products at all facilities. The traceability of cannabis goods is maintained using the California’s

~~“Track-and-Trace”~~

system, METRC, and the Company’s integrated enterprise resource planning system (“ERP”). Cannabis inventory is regularly manually reconciled against METRC according to the regulations. The Company conducts regular continuous cycle counts in addition to both quarterly and annual manual inventory reconciliations.

·	Security. Gold Flora Corporation has taken extensive security measures including implementing professionally vetted policies, procedures, and systems to provide comprehensive protection, not only for its physical facilities and inventory, but also for its employees, customers, and the surrounding public. Every licensed facility has strict and limited access controls, thorough video surveillance coverage, and burglar alarms linked to our remote security monitoring service, as well as a loss prevention policy and procedure. These controls are supported by professionally certified on-site security personnel in certain instances.

·	Inventory. Gold Flora Corporation maintains inventory control and reporting systems that document the present location, amount, and a description of all cannabis and cannabis products at all facilities. The traceability of cannabis goods is maintained using the California’s “Track-and-Trace” system, METRC, Gold Flora Corporation’s point-of-sales system, TREEZ, which provides application programming interface with METRC, and Gold Flora Corporation’s integrated enterprise resource planning system (“ERP”), Odoo. We conduct regular continuous cycle counts in addition to both quarterly and annual manual inventory reconciliations, in accordance with regulations and best practices.

Operational Compliance

Internal audits are conducted ~~quarterly.~~monthly in the normal course across all active licenses. These audits allow usGold Flora Corporation to identify and monitor ~~the Company’s~~our strengths and weaknesses, highlighting continuous opportunities for improvement. These internal audits also provide usGold Flora Corporation with an opportunity to reinforce best practices and to institute changes in areas that are identified as opportunities for improvement. The information discovered and obtained during these internal audits is used to improve the compliance programs, when necessary, by revising ~~policies,~~practices, strengthening training, and establishing better issue-spotting and reporting processes. The focus of ~~the Company’s~~Gold Flora Corporation’s internal compliance audit is to ensure itGold Flora Corporation is compliant with both state and local laws and regulations and internal policies and procedures.

Table of Contents

Big Data Analysis

~~The Company~~

Gold Flora Corporation has invested in a highly scalable data architecture and platform built using leading technologies and tools. By extracting data from ~~its~~Gold Flora Corporation’s ERP software, point-of-sales software, and the California METRC track and trace system and subsequently organizing it in ~~its~~our data warehouse, ~~the Company~~Gold Flora Corporation has enabled critical data and insights for its compliance efforts. ~~The Company’s~~Gold Flora Corporation’s data warehouse secures and stores all data and transactions at frequent intervals, allowing extensive access and analysis to information that is current. ~~The Company~~Gold Flora Corporation has the ability to understand precise movement of inventory or dollars, past or present, required for review or due diligence as related to compliance requirements or inquiries. ~~The Company~~Gold Flora Corporation is using this data infrastructure proactively to track, monitor and reconcile inventory levels and for ongoing reconciliation with METRC.

~~Ongoing~~External Compliance

~~The Company~~ Counsel and Consultants

Gold Flora Corporation prides itself on a robust internal compliance program encompassing both the compliance measures described above as well as monitoring compliance with U.S. state law on an ongoing basis. Key to those compliance efforts is the employment of individuals dedicated to monitoring California law for changes and updates to statutes and regulations, both at the state level and the local level, that impact business operations. Currently, ~~the Company~~Gold Flora Corporation employs ~~five~~several individuals whose job function includes some aspect of compliance. Further, ~~the Company~~Gold Flora Corporation employs a government relations employee whose primary job function is to monitor the changing landscape of state and local law while employing an external consultant and two external law firms that assist in the monitoring, notification, and interpretation of any changes. Additionally, ~~the Company currently~~Gold Flora Corporation implements and ~~maintains~~maintain standard operating procedures (“~~SOPs”~~SOPs”) that are designed for monitoring compliance with California law on an ongoing basis. These SOPs include regular review of current and anticipated statutes, regulations, and ordinances and the training of employees to maintain compliance with California law.

In addition to the internal compliance team and the consultants and law firms described above, ~~the Company~~Gold Flora Corporation also engages local regulatory compliance counsel and consultants in the jurisdictions in which it operates. Such counsel regularly provides legal advice to ~~the Company~~Gold Flora Corporation regarding compliance with state and local laws and regulation and ~~the Company’s~~its legal and compliance exposures under United States federal law.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Table of Contents

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and ~~Procedures.~~

~~We maintain~~Procedures

Based on an evaluation as of June 30, 2023, our management, including the Principal Executive Officer and Principal Financial Officer, has concluded that our disclosure controls and procedures (as ~~that term is~~ defined in ~~Rules~~

Rule 13a-15(e)

~~and~~

~~15d-15(e)~~

under the Exchange Act) ~~that are designed~~were not effective to ~~ensure that information required to be disclosed~~provide reasonable assurance because of a material weakness in our ~~reports under~~internal control over financial reporting described below.

Material Weakness

As reported in our Annual Reports on Form 10-K for the ~~Exchange Act is recorded, processed,~~years ended December 31, 2022 and ~~summarized~~2021, we and ~~reported within the time periods specified~~our independent registered public accounting firm identified control deficiencies in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. An evaluation of the effectiveness of the design and operation of our ~~disclosure~~internal control over financial reporting that constituted a material weakness.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected in a timely manner.

We did not design or maintain an effective control environment commensurate with financial reporting requirements. Specifically, we lack a sufficient number of adequately skilled professionals to appropriately analyze, record and disclose accounting matters timely and accurately while maintaining appropriate segregation of duties.

The above material weakness did not result in a material misstatement of our previously issued financial statements, However, it could result in a misstatement of our account balances or disclosures that would result in a material misstatement of our annual or interim financial statements that would not be prevented or detected.

Remediation Activities

We continue to work fully remediate the material weakness and are taking steps to strengthen our internal control over financial reporting. We are taking appropriate and reasonable steps to remediate the material weakness through the implementation of appropriate segregation of duties, formalization of accounting policies and controls (including evidence of review and ~~procedures as~~timeliness of completion) and retention of appropriate expertise for complex accounting transactions.

During the second quarter of 2023, we focused on preparing for a new ERP implementation with completion targeted by the end of our third quarter of 2023. It is expected that the ~~period covered by this quarterly report on Form~~

~~10-Q~~

~~was made under~~new ERP system will help address segregation of duty deficiencies with its more sophisticated user rights assignment capabilities. Appropriate information technology general controls are being followed. We believe that these changes will over time improve Gold Flora Corporation’s internal control over financial reporting.

Management expects to continue to review and make necessary changes to the ~~supervision and with the participation~~overall design of ~~our management, including our Chief Executive Officer and Chief Financial Officer.~~

~~Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that,~~Gold Flora Corporation’s internal control environment, as ~~of September 30, 2021, our disclosure controls~~well as policies and procedures ~~(a) were effective~~ to ~~ensure~~improve the overall effectiveness of Gold Flora Corporation’s internal control over financial reporting. The material weakness will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that ~~information required to be disclosed by us in reports filed or submitted under the Exchange Act is timely recorded, processed, summarized and reported and (b) include, without limitation,~~these controls and procedures designed to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

are operating effectively.

Changes in Internal Control over Financial Reporting

~~There have~~

Except as noted above, there has been no ~~changes~~change in our ~~“internal~~internal control over financial ~~reporting” (as defined in Rules~~

~~13a-15(f)~~

~~and~~

~~15d-15(f)~~

~~under the Exchange Act) that occurred~~reporting during the ~~period covered by this quarterly report on Form~~

~~10-Q~~

quarter ended June 30, 2023, that ~~have~~has materially affected, or ~~are~~is reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents

PART ~~II—OTHER~~II-OTHER INFORMATION

Item 1. Legal Proceedings.

To the knowledge of the Company, the Company is not a party to any material legal proceedings nor, to the Company’s knowledge, are any such proceedings contemplated by or against the Company.

Item 1A. Risk Factors.

Because Gold Flora Corporation is a successor registrant, we have set forth below a complete set of the ~~date of this Quarterly Report on~~

~~Form 10-Q,~~

~~there have been no material changes~~Gold Flora Corporation risk factors.

Risks Related to the ~~risk factors disclosed previously in our Amendment No. 3 to our Registration Statement on Form 10 filed with the SEC on October 27, 2021, except~~Business Combination

Each of TPCO and Gold Flora have a history of losses, and Gold Flora Corporation may never achieve profitability or generate positive cash flow.

TPCO had an operating loss of $35,178,232 (including an impairment loss of US$ 403,271) for the ~~below risk factor. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.~~

The Company may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on the financial condition, results of operations and Common Share price, which could cause investors to lose some or all of their investment.

Although the Company conducted due diligence on each of Caliva, OGE and LCV prior to closing of their respective acquisitions the Company cannot assure that this diligence revealed all material issues that may be present in the businesses of Caliva and LCV, that it would be possible to uncover all material issues through a customary amount of due diligence or that factors outside of either party’s control will not later arise. As a result, the Company may be forced in the future to write down or

~~write-off~~

assets, restructure its operations or incur impairment or other charges that could result in losses. Even if due diligence successfully identified certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with the Company’s preliminary risk analysis. Even though these charges may be

~~non-cash~~

items and not have an immediate impact on the Company’s liquidity, the fact that charges of this nature are reported could contribute to negative market perceptions. In addition, charges of this nature may cause the Company to be unable to obtain future financing on favorable terms or at all. In this regard, in February 2021, the Company became committed to a plan to sell its

~~non-THC~~

business, which was acquired as part of the Caliva and OGE and LCV acquisitions on January 15, 2021. As described in Note 15 to the Company’s unaudited interim condensed consolidated financial statements for the three and six months ended June 30, ~~2021 and 2020 and the notes thereto, the decision to sell the~~

~~non-THC~~

~~business resulted in~~2023, an operating loss of US$242,938,219 (including an impairment loss of ~~$58,030,387. Furthermore, as part~~US$130,566,825) for the year ended December 31, 2022 and an operating loss of US$733,885,024 (including an impairment loss of US$575,498,897) for the year ended December 31, 2021. Gold Flora had operating income of US$ 3,175,185 (including an impairment loss of $Nil) for the year ended December 31, 2022, and an operating loss of US$6,062,218 (including an impairment loss of $Nil) for the year ended December 31, 2021. Gold Flora Corporation may never achieve profitability or generate positive cash flow, which could cause Gold Flora Corporation to curtail its operations and could adversely affect your investment.

Payments in connection with the exercise of dissent rights could have an adverse effect on Gold Flora’s financial condition.

In connection with the Business Combination, holders of approximately 17 million TPCO Common Shares exercised dissent rights in accordance with the Business Corporations Act (British Columbia). These former TPCO shareholders have demanded payment of the ~~Company’s impairment tests as~~fair value of their TPCO Common Shares, in cash, in accordance with the Business Corporations Act (British Columbia). The determination of fair value for this purpose can be made through an agreement between Gold Flora Corporation and the applicable dissenting shareholders, or through an application to the British Columbia courts. Such determination may ultimately exceed the market price of the TPCO Common Shares at ~~September 30, 2021,~~ the ~~Company determined that current market conditions~~time the resolution approving the Business Combination was passed. Accordingly, a substantial cash payment may be required to be made to such dissenting shareholders, which may have ~~resulted~~an adverse effect on Gold Flora Corporation’s financial condition and cash resources.

Gold Flora Corporation, following the Transaction, may not realize the anticipated benefits of the Transaction.

The Business Combination was consummated to strengthen the position of each of Gold Flora and TPCO and to create the opportunity to realize certain benefits including, among other things, those set forth above under the heading “Part 1—Business Overview—Transaction Summary—Key Transaction Benefits & Strategic Rationale” in ~~a downward revision to its future cash flow estimates. Accordingly, the Company recorded a~~

~~non-cash~~

~~impairment charge of $570,300,047 during the three months ended September 30, 2021. See~~ “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of

~~Operations—Non-Cash~~

~~Impairment”~~ Operations.” Achieving the benefits of the Business Combination depends in ~~Part I~~part on the ability of Gold Flora Corporation to effectively capitalize on its scale, scope and leadership, to realize the anticipated operating synergies, and to maximize the potential of its growth opportunities. A variety of factors, including those risk factors set forth in this ~~Form~~

~~10-Q.~~

Quarterly Report, may adversely affect the ability to achieve the anticipated benefits of the Business Combination.

There are risks related to the integration of TPCO’s and Gold Flora’s existing businesses.

The ability to realize the benefits of the Business Combination will depend in part on successfully consolidating functions and integrating operations, procedures and personnel in a timely and efficient manner, as well as on Gold Flora Corporation’s ability to realize the anticipated growth opportunities and operating synergies from integrating TPCO’s and Gold Flora’s businesses. The integration process may result in the loss of key employees and the disruption of ongoing business, customer and employee relationships that may adversely affect the ability of Gold Flora Corporation to achieve the anticipated benefits of the Business Combination.

Table of Contents

Risks Related to the Cannabis Industry and the Gold Flora Corporation’s Business

Cannabis continues to be a controlled substance under the CSA.

Cannabis is regulated at the federal and state level in the United States. To Gold Flora Corporation’s knowledge, as of the date hereof, there are a total of 47 states, plus the District of Columbia, Puerto Rico and Guam that have legalized or decriminalized cannabis in some form (including hemp). Further, ballot initiatives to legalize Adult-Use Cannabis recently passed in Arizona, New Jersey, South Dakota, and Montana, and ballot initiatives to legalize Medical-Use Cannabis passed in South Dakota and Mississippi, with implementation of applicable regulations expected in those states in the near future. Notwithstanding the permissive regulatory environment of cannabis at the state level, cannabis and THC continue to be categorized as controlled substances under the CSA and as such, violate federal law in the United States.

The United States Congress has passed appropriations bills in recent years that have not appropriated funds for prosecution of cannabis offenses of individuals who are in compliance with state medical cannabis laws. American courts have construed these appropriations bills to prevent the U.S. federal government from prosecuting individuals when those individuals comply with state law relating to approved medical uses. However, because this conduct continues to violate U.S. federal law, American courts have observed that should Congress at any time choose to appropriate funds to fully prosecute the CSA, any individual or business – even those that have fully complied with state law – could be prosecuted for violations of U.S. federal law. And if Congress restores funding, the government will have the authority to prosecute individuals for violations of the law that took place before received funding under the CSA’s five-year statute of limitations.

Violations of any U.S. federal laws and regulations could result in significant fines, penalties, administrative sanctions, convictions or settlements arising from civil proceedings conducted by either the U.S. federal government or private citizens, or criminal charges, including, but not limited to, disgorgement of profits, cessation of business activities or divestiture. This could have a material adverse effect on Gold Flora Corporation, including its reputation and ability to conduct business, its holding (directly or indirectly) of cannabis licences in the United States, the listing of its securities on the NEO Exchange Inc. (the “Exchange”) or other applicable exchanges, its financial position, operating results, and profitability or liquidity. In addition, it is difficult to estimate the time or resources that would be needed for the investigation of any such matters or its final resolution because, in part, the time and resources that may be needed are dependent on the nature and extent of any information requested by the applicable authorities involved, and such time or resources could be substantial.

The approach to the enforcement of Regulated Cannabis laws may be subject to change or may not proceed as previously outlined.

As a result of the conflicting views between states and the federal government regarding cannabis, investments in regulated cannabis businesses in the United States are subject to inconsistent legislation and regulation. The response to this inconsistency was addressed on August 29, 2013 when then Deputy Attorney General, James Cole, authored the 2013 Cole Memorandum addressed to all United States district attorneys acknowledging that notwithstanding the designation of cannabis as a controlled substance at the federal level in the United States, several U.S. states have enacted laws relating to cannabis for medical purposes.

The 2013 Cole Memorandum outlined certain priorities for the Department of Justice (“DOJ”) relating to the prosecution of cannabis offenses. In particular, the 2013 Cole Memorandum noted that in jurisdictions that have enacted laws legalizing cannabis in some form and that have also implemented strong and effective regulatory and enforcement systems to control the cultivation, distribution, sale and possession of regulated cannabis, conduct in compliance with those laws and regulations is less likely to be a priority at the federal level. Notably, however, the DOJ has never provided specific guidelines for what regulatory and enforcement systems it deems sufficient under the 2013 Cole Memorandum standard.

Table of Contents

In light of limited investigative and prosecutorial resources, the 2013 Cole Memorandum concluded that the DOJ should be focused on addressing only the most significant threats related to cannabis. States where Medical-Use Cannabis had been legalized were not characterized as a high priority. In March 2017, then newly appointed Attorney General Jeff Sessions again noted limited federal resources and acknowledged that much of the 2013 Cole Memorandum had merit; however, he disagreed that it had been implemented effectively and, on January 4, 2018, Attorney General Jeff Sessions authored the Sessions Memorandum, which rescinded all “previous nationwide guidance specific to marijuana enforcement,” including the 2013 Cole Memorandum. The Sessions Memorandum rescinded previous nationwide guidance specific to the prosecutorial authority of United States attorneys relative to cannabis enforcement on the basis that they are unnecessary, given the well-established principles governing federal prosecution that are already in place. Those principles are included in chapter 9.27.000 of the United States Attorneys’ Manual and require federal prosecutors deciding which cases to prosecute to weigh all relevant considerations, including federal law enforcement priorities set by the Attorney General, the seriousness of the crime, the deterrent effect of criminal prosecution, and the cumulative impact of particular crimes on the community.

As a result of the Sessions Memorandum, federal prosecutors will now be free to utilize their prosecutorial discretion to decide whether to prosecute cannabis activities despite the existence of state-level laws that may be inconsistent with federal prohibitions. No direction was given to federal prosecutors in the Sessions Memorandum as to the priority they should ascribe to such cannabis activities, and resultantly it is uncertain how active federal prosecutors will be in relation to such activities. Furthermore, the Sessions Memorandum did not discuss the treatment of Medical-Use Cannabis by federal prosecutors.

Former U.S. Attorney General Jeff Sessions resigned on November 7, 2018. Nonetheless, there is no guarantee that state laws legalizing and regulating the sale and use of cannabis will not be repealed or overturned, even under a Biden Administration’s DOJ or that local governmental authorities will not limit the applicability of state laws within their respective jurisdictions. Unless and until the United States Congress amends the CSA with respect to cannabis and THC (and as to the timing or scope of any such potential amendments there can be no assurance), there is a risk that federal authorities may enforce current U.S. federal law.

In recent years, certain temporary federal legislative enactments that protect the Medical-Use Cannabis and industry have also been in effect. For instance, cannabis businesses that are in strict compliance with state law receive a measure of protection from federal prosecution by operation of a temporary appropriations measures that has been enacted into law as an amendment (or “rider”) to federal spending bills passed by Congress and signed by both Presidents Obama and Trump. First adopted in the Appropriations Act of 2015, Congress has included in successive budgets since a “rider” that prohibits the DOJ from expending any funds to enforce any law that interferes with a state’s implementation of its own medical cannabis laws. The rider, discussed above, is known as the “Joyce-Blumenauer Amendment”, and now known colloquially as the “Joyce Amendment” after its most recent sponsor. The Joyce-Blumenauer Amendment was included in the Consolidated Appropriations Act of 2020, which was signed by President Trump on December 20, 2019 and funded the departments of the federal government through the fiscal year ending September 30, 2020. In signing the act, President Trump issued a signing statement noting that the Act “provides that the DOJ may not use any funds to prevent implementation of medical cannabis laws by various States and territories,” and further stating “I will treat this provision consistent with the President’s constitutional responsibility to faithfully execute the laws of the United States.” While the signing statement can fairly be read to mean that the executive branch intends to enforce the CSA and other federal laws prohibiting the sale and possession of medical cannabis, the President did issue a similar signing statement in May 2017 and February 2019 and no federal enforcement actions followed. The Joyce-Blumenauer Amendment was renewed through the signing of the fiscal year 2022 omnibus bill, which extended the protections of the Joyce Amendment through December 16, 2022. The fiscal year 2023 spending package included the Joyce-Blumenauer rider, which extended the rider until fiscal year 2024.

Should the Joyce-Blumenauer Amendment not be renewed in subsequent spending bills, there can be no assurance that the federal government will not seek to prosecute cases involving medical cannabis businesses that are otherwise compliant with State law. Such potential proceedings could involve significant restrictions being imposed upon Gold Flora Corporation, while diverting the attention of executives. Such proceedings could have a material adverse effect on Gold Flora Corporation’s business, revenues, operating results and financial condition as well as Gold Flora Corporation’s reputation, even if such proceedings were concluded successfully in favor of Gold Flora Corporation.

Table of Contents

Moreover, unless and until the U.S. Congress amends the CSA with respect to Medical-Use Cannabis and/or Adult-Use Cannabis (and as to the timing or scope of any such potential amendments there can be no assurance), there is a risk that federal authorities may enforce current U.S. federal law. If the U.S. federal government begins to enforce U.S. federal laws relating to Regulated Cannabis in states where the sale and use of cannabis is currently legal, or if existing applicable state laws are repealed or curtailed, Gold Flora Corporation’s business, assets, revenues, operating results and financial condition as well as Gold Flora Corporation’s reputation may be material adversely effected. In the extreme case, such enforcement could ultimately involve the prosecution of key executives of Gold Flora Corporation or the seizure of its assets.

U.S. state regulatory uncertainty may adversely impact Gold Flora Corporation.

There is no assurance that state laws legalizing and regulating the sale and use of cannabis will not be repealed, amended or overturned, or that local governmental authorities will not limit the applicability of state laws within their respective jurisdictions. If the U.S. federal government begins to enforce U.S. federal laws relating to cannabis in states where the sale and use of cannabis is currently legal, or if existing state laws are repealed or curtailed, Gold Flora Corporation’s business or operations in those states or under those laws would be materially and adversely affected. Federal actions against any individual or entity engaged in the cannabis industry or a substantial repeal of cannabis related legislation could adversely affect Gold Flora Corporation, its business and its assets or investments.

Certain U.S. states where medical and/or Adult-Use Cannabis is legal have or are considering special taxes or fees on the cannabis industry. It is uncertain at this time whether other states are in the process of reviewing such additional taxes and fees. The implementation of special taxes or fees could have a material adverse effect upon the businesses, results of operations and financial condition of Gold Flora Corporation.

Gold Flora Corporation may be subject to applicable anti-money laundering laws and regulations.

Given the nature of its business, Gold Flora Corporation may be subject to a variety of laws and regulations in the United States that involve money laundering, financial recordkeeping and proceeds of crime, including the Bank Secrecy Act, as amended by Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act) and any related or similar rules, regulations or guidelines, issued, administered or enforced by governmental authorities in the United States. Banks often refuse to provide banking services to businesses involved in the U.S. cannabis industry due to the present state of the laws and regulations governing financial institutions in the United States. The lack of banking and financial services presents unique and significant challenges to businesses in the cannabis industry. The potential lack of a secure place in which to deposit and store cash, the inability to pay creditors through the issuance of cheques and the inability to secure traditional forms of operational financing, such as lines of credit, are some of the many challenges presented by the unavailability of traditional banking and financial services.

In February 2014, the FinCEN issued the FinCEN Memorandum, which states that in some circumstances, it is possible for banks to provide services to cannabis related businesses without risking prosecution for violation of U.S. federal money laundering laws. It refers to supplementary guidance that Deputy Attorney General Cole issued to U.S. federal prosecutors relating to the prosecution of U.S. money laundering offenses predicated on cannabis-related violations of the CSA. It is unclear at this time whether the current administration will follow the guidelines of the FinCEN Memorandum.

In the event that any of Gold Flora Corporation’s operations, or any proceeds thereof, any dividends or distributions therefrom, or any profits or revenues accruing from such operations in the United States were found to be in violation of money laundering legislation or otherwise, such transactions may be viewed as proceeds of crime under one or more of the statutes noted above or any other applicable legislation. This could restrict or otherwise jeopardize the ability of Gold Flora Corporation to declare or pay dividends or affect other distributions.

Table of Contents

FDA rulemaking related to Medical-Use Cannabis and the possible registration of facilities where Medical-Use Cannabis is grown could negatively affect the Medical-Use Cannabis industry, which would directly affect Gold Flora Corporation’s financial condition.

Should the federal government legalize Medical-Use Cannabis, it is possible that the FDA would be tasked by Congress to regulate it under the FDCA. Additionally, the FDA may issue rules and regulations including current good manufacturing practices, or GMPs, related to the growth, cultivation, harvesting and processing of Medical-Use Cannabis. Clinical trials may be needed to verify efficacy and safety. It is also possible that the FDA would require that facilities where Medical-Use Cannabis is grown register with the FDA and comply with certain federal regulations. In the event that some or all of these regulations are imposed, Gold Flora Corporation does not know what the impact would be on the Medical-Use Cannabis industry, including what costs, requirements and possible prohibitions may be enforced. If Gold Flora Corporation are unable to comply with any regulations or registration requirements that the FDA may prescribe, it may be unable to continue to operate its business in its current form or at all.

U.S. border officials could deny entry into the U.S. to employees of, or investors in companies with cannabis operations in the United States.

Because cannabis remains illegal under U.S. federal law, those non-U.S. citizens employed at or investing in legal and licensed cannabis companies could face detention, denial of entry or lifetime bans from the United States for their business associations with U.S. cannabis businesses. Entry of non-U.S. citizens happens at the sole discretion of the U.S. Customs and Border Protection (“CBP”) officers on duty, and these officers have wide latitude to ask questions to determine the admissibility of a foreign national.

On September 21, 2018, CBP released a statement outlining its current position with respect to enforcement of the laws of the United States. It stated that CBP enforcement of United States laws regarding controlled substances has not changed and because cannabis continues to be a controlled substance under United States law, working in or facilitating the proliferation of the legal cannabis industry in U.S. states where it is deemed legal may affect admissibility to the U.S. While the CBP under the Biden Administration has archived its website page covering the September 21, 2018 statement, the Biden Administration has not officially rescinded the policy in question.

Gold Flora Corporation may have difficulty accessing the services of banks, which may make it difficult to operate its business.

Gold Flora Corporation may have trouble accessing services of financial institutions. For example, in February 2014, FinCEN issued the FinCEN Memorandum (which is not law) that provides guidance with respect to financial institutions providing banking services to cannabis business, including burdensome due diligence expectations and reporting requirements. This guidance does not provide any safe harbors or legal defenses from examination or regulatory or criminal enforcement actions by the DOJ, FinCEN or other federal regulators. Thus, most banks and other financial institutions in the United States do not appear to be comfortable providing banking services to cannabis-related businesses, or relying on this guidance, which can be amended or revoked at any time by the executive branch. In addition to the foregoing, banks may refuse to process debit card payments and credit card companies generally refuse to process credit card payments for cannabis-related businesses. As a result, Gold Flora Corporation may have limited or no access to banking or other financial services in the United States. In addition, federal money laundering statutes and Bank Secrecy Act regulations discourage financial institutions from working with any organization that sells a controlled substance, regardless of whether the state it resides in permits cannabis sales. While the United States House of Representatives has passed the SAFE Banking Act, which would permit commercial banks to offer services to cannabis companies that are in compliance with state law, it remains under consideration by the Senate, and if Congress fails to pass the SAFE Banking Act, Gold Flora Corporation’s inability, or limitations on Gold Flora Corporation’s ability, to open or maintain bank accounts and/or obtain other banking services may make it difficult for Gold Flora Corporation to operate and conduct its business as planned or to operate efficiently.

Since the use of cannabis is illegal under U.S. federal law, and in light of concerns in the banking industry regarding money laundering and other federal financial crime related to cannabis, businesses involved in the cannabis industry often have difficulty finding a bank willing to accept their business. Likewise, cannabis businesses have limited access, if any, to credit card processing services. As a result, cannabis businesses in the United States are to a significant degree cash-based. This complicates the implementation of financial controls and increases security issues.

Table of Contents

Gold Flora Corporation may have difficulty accessing capital.

Commercial banks, private equity firms and venture capital firms have approached the cannabis industry cautiously to date. However, there are certain high net worth individuals and family offices that have made meaningful investments in companies and businesses similar to Gold Flora Corporation. There is neither a broad nor deep pool of institutional capital that is available to cannabis license holders and license applicants. There can be no assurance that additional financing, if raised privately, will be available to Gold Flora Corporation when needed or on terms which are acceptable to Gold Flora Corporation. Gold Flora Corporation’s inability to raise financing to fund capital expenditures or acquisitions could limit its growth and may have a material adverse effect upon future profitability and ability to continue its operations.

There may be a restriction on deduction of certain expenses.

Section 280E of the ~~Company~~United States Internal Revenue Code of 1986, as amended (the “Code”) generally prohibits businesses from deducting or claiming tax credits with respect to expenses paid or incurred in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of Schedule I and II of the CSA) which is prohibited by U.S. federal law or the law of any state in which such trade or business is conducted. Section 280E currently applies to businesses operating in the cannabis industry, irrespective of whether such businesses are licensed and operating in accordance with applicable state laws. The application of Code Section 280E generally causes such businesses to pay higher effective U.S. federal income tax rates than similar businesses in other industries due to the loss of certain deductions and credits. The impact of Code Section 280E on the effective tax rate of a cannabis business generally depends on how large the ratio of non-deductible expenses is to the business’s total revenues. Gold Flora Corporation expects to continue to be subject to Code Section 280E. The application of Code Section 280E to Gold Flora Corporation may adversely affect Gold Flora Corporation’s profitability and, in fact, may cause Gold Flora Corporation to operate at a loss when it would otherwise have a profit. While recent legislative proposals, if enacted into law, could eliminate or diminish the application of Code Section 280E to cannabis businesses, the enactment of any such law is uncertain. Accordingly, Code Section 280E may to apply to Gold Flora Corporation indefinitely.

Gold Flora Corporation may lack access to U.S. bankruptcy protections.

As discussed above, cannabis is illegal under U.S. federal law. Therefore, there is a compelling argument that the federal bankruptcy courts cannot provide relief for parties who engage in regulated cannabis businesses. Recent bankruptcy rulings have denied bankruptcies for dispensaries upon the justification that businesses cannot violate federal law and then claim the benefits of federal bankruptcy for the same activity and upon the justification that courts cannot ask a bankruptcy trustee to take possession of, and distribute Regulated Cannabis-related assets as such action would violate the CSA. Therefore, Gold Flora Corporation may not be able to seek the protection of the bankruptcy courts and this could materially affect its business or its ability to obtain credit.

Gold Flora Corporation’s operations in the U.S. cannabis market may be subject to heightened scrutiny by regulatory authorities.

For the reasons set forth above, Gold Flora Corporation’s existing operations in the United States, and any future operations or investments, may become the subject of heightened scrutiny by securities regulators, stock exchanges and other authorities in Canada and the United States. As a result, Gold Flora Corporation may be subject to significant direct and indirect interaction with public officials. There can be no assurance that this heightened scrutiny will not in turn lead to the imposition of certain restrictions on Gold Flora Corporation’s ability to invest or hold interests in other entities, or have consequences for its stock exchange listing or Canadian reporting obligations, in addition to those described herein. See “—Risks Related to the Cannabis Industry and Gold Flora Corporation’s Business—Cannabis continues to be a controlled substance under the CSA”.

Table of Contents

For example, to date, the New York Stock Exchange and the Nasdaq Stock Market have refused to list on their exchanges securities of companies, like Gold Flora Corporation, that are in the business of cultivating and selling cannabis in the United States.

On February 8, 2018, the Canadian Securities Administrators published Staff Notice 51-352 describing the Canadian Securities Administrators’ disclosure expectations for specific risks facing issuers with cannabis-related activities in the U.S. Staff Notice 51-352 confirms that a disclosure-based approach remains appropriate for issuers with U.S. cannabis-related activities. Staff Notice 51-352 includes additional disclosure expectations that apply to all issuers with U.S. cannabis-related activities, including those with direct and indirect involvement in the cultivation and distribution of cannabis, as well as issuers that provide goods and services to third parties involved in the U.S. cannabis industry.

CDS Clearing and Depositary Services Inc. (“CDS”) is Canada’s central securities depository, clearing and settling trades in the Canadian equity, fixed income and money markets. On February 8, 2018, following discussions with the Canadian Securities Administrators and recognized Canadian securities exchanges, the TMX Group, which is the owner and operator of CDS, announced the signing of a Memorandum of Understanding (“MOU”) with the Exchange, the Canadian Securities Exchange and the Toronto Stock Exchange confirming that it relies on such exchanges to review the conduct of listed issuers. The MOU notes that securities regulation requires that the rules of each of the exchanges must not be contrary to the public interest and that the rules of each of the exchanges have been approved by the securities regulators. Pursuant to the MOU, CDS will not ban accepting deposits of or transactions for clearing and settlement of securities of issuers with cannabis-related activities in the United States.

Even though the MOU indicated that there are no plans of banning the settlement of securities of issuers with U.S. cannabis related activities through CDS, there can be no guarantee that the settlement of securities will continue in the future. If such a ban were to be implemented, it would have a material adverse effect on the ability of holders of Gold Flora Common Stock to make and settle trades. In particular, the Gold Flora Common Stock would become highly illiquid until an alternative (if available) was implemented, and investors would have no ability to effect a trade of the Gold Flora Common Stock through the facilities of a stock exchange.

Gold Flora Corporation may be subject to the risk of civil asset forfeiture.

Because the cannabis industry remains illegal under U.S. federal law, any property owned by participants in the cannabis industry which are either used in the course of conducting such business, or are the proceeds of such business, could be subject to seizure by law enforcement and subsequent civil asset forfeiture. Even if the owner of the property was never charged with a crime, the property in question could still be seized and subject to an administrative proceeding by which, with minimal due process, it could be subject to forfeiture.

The laws and regulations affecting the cannabis industry are constantly changing.

The constant evolution of laws and regulations affecting the cannabis industry could detrimentally affect Gold Flora Corporation. The current and proposed operations of Gold Flora Corporation are subject to a variety of local, state and federal cannabis laws and regulations relating to the manufacture, management, transportation, storage and disposal of cannabis, as well as laws and regulations relating to consumable products health and safety, the conduct of operations and the protection of the environment. These laws and regulations are broad in scope and subject to evolving interpretations, which could require Gold Flora Corporation to incur substantial costs associated with compliance or alter certain aspects of its business plans. In addition, violations of these laws, or allegations of such violations, could disrupt certain aspects of the business plans of Gold Flora Corporation and result in a material adverse effect on certain aspects of their planned operations. These laws and regulations are rapidly evolving and subject to change with minimal notice. Regulatory changes may adversely affect Gold Flora Corporation’s profitability or cause it to cease operations entirely. The cannabis industry may come under the scrutiny or further scrutiny by the FDA, the SEC, the DOJ, the Financial Industry Regulatory Authority or other federal or applicable state or non-governmental regulatory authorities or self-regulatory organizations that supervise or regulate the production, distribution, sale or use of cannabis for medical or adult-use purposes in the United States. It is impossible to determine the extent of the impact of any new laws, regulations or initiatives that may be proposed, or whether any proposals will become law. The regulatory uncertainty surrounding the industry may adversely affect the business and operations of Gold Flora Corporation, including without limitation, the costs to remain compliant with applicable laws and the impairment of its business or the ability to raise additional capital. In addition, Gold Flora Corporation is not able to predict the nature of any future laws, regulations, interpretations or applications, and it is possible that regulations may be enacted in the future that will be directly applicable to its business.

Table of Contents

Gold Flora Corporation may be subject to the risks associated with governmental approvals, permits and compliance with applicable laws.

Government approvals and permits are currently, and may in the future be, required in connection with the operations of Gold Flora Corporation. To the extent such approvals are required and not obtained, Gold Flora Corporation may be curtailed or prohibited from its production, manufacture, and sale of Medical-Use Cannabis and Adult-Use Cannabis or from proceeding with the development of its operations as currently proposed.

Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. Gold Flora Corporation may be required to compensate those suffering loss or damage by reason of their operations and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations.

Gold Flora Corporation may not be able to obtain or maintain the necessary licenses, permits, certificates, authorizations or accreditations to operate its businesses, or may only be able to do so at great cost. In addition, Gold Flora Corporation may not be able to comply fully with the wide variety of laws and regulations applicable to the cannabis industry. Failure to comply with or to obtain the necessary licenses, permits, certificates, authorizations or accreditations could result in restrictions on Gold Flora Corporation’s ability to operate in the cannabis industry, which could have a material adverse effect on the business, results of operations and financial condition of Gold Flora Corporation.

Amendments to current laws, regulations and permits governing the production of medical and adult-use cannabis, or more stringent implementation thereof, could have a material adverse impact on Gold Flora Corporation and cause increases in expenses, capital expenditures or production costs, or reduction in levels of production, or require abandonment or delays in development.

There may be difficulty with the enforceability of contracts.

It is a fundamental principle of law that a contract will not be enforced if it involves a violation of law or public policy. Because cannabis remains illegal in the United States at a federal level, judges in multiple U.S. states have on a number of occasions refused to enforce contracts for the repayment of money when the loan was used in connection with activities that violate federal law, even if there is no violation of state law. It is possible that Gold Flora Corporation may not be able to legally enforce contracts it enters into if necessary, which means there can be no assurance that there will be a remedy for breach of contract, which would have a material adverse effect on Gold Flora Corporation’s business, assets, revenues, operating results, financial condition and prospects. For example, at least some federal courts have dismissed lawsuits seeking to enforce contracts involving the purchase or sale of regulated cannabis businesses.

The ability to grow a business with ties to cannabis operations in the United States depends on state laws pertaining to the cannabis industry.

Continued development of the regulated cannabis industry depends upon continued legislative authorization of cannabis at the state level. The status quo of, or progress in, the regulated cannabis industry is not assured and any number of factors could slow or halt further progress in this area. While there may be ample public support for legislative action permitting the manufacture and use of cannabis, numerous factors impact the legislative process. For example, many states that voted to legalize Medical-Use Cannabis and/or Adult-Use Cannabis have seen significant delays in the drafting and implementation of regulations and issuance of licenses. In addition, burdensome regulation at the state level could slow or stop further development of the regulated cannabis industry, such as limiting the medical conditions for which medical cannabis can be recommended by physicians for treatment, restricting the form in which medical cannabis can be consumed, imposing significant registration requirements on physicians and patients or imposing significant taxes on the growth, processing and/or retail sales of cannabis, which could have the impact of dampening growth for cannabis businesses and making it difficult for cannabis businesses to operate profitably in those states. Any one of these factors could slow or halt additional legislative authorization of medical and/or recreational-use cannabis, which could adversely affect Gold Flora Corporation’s business prospects.

Table of Contents

A revised statutory and regulatory framework implemented by a newly consolidated agency; cannabis tax relief under consideration in California.

In 2021, California consolidated the three state agencies licensing and regulating commercial cannabis activity in California, merging the Bureau of Cannabis Control, CalCannabis at the California Department of Food and Agriculture, and the Manufactured Cannabis Safety Branch at the Department of Public Health into a single Department of Cannabis Control (the “DCC”) effective July 1, 2021. The DCC in turn promulgated, consolidated and streamlined regulations, adopting the bulk of these on September 29, 2021. The consolidation of the three licensing divisions, development of a unified single licensing system for future cannabis business licenses and the transition of existing licensing data has yet to occur, but is contemplated in California Governor Gavin Newsom’s 2022-2023 Budget Proposal. Still, the enacted form of the uniform licensing protocols and regulatory clean-up as part of a short-term and longer term strategy are unknown. The foregoing changes will continue to impact the processes, procedures, administration, and generally the operations of commercial cannabis licenses in California.

Governor Newsom also recently announced that he is also considering tax relief and/or simplification, in connection with releasing his 2022-2023 Budget Proposal: “It is my goal to look at tax policy to stabilize markets.” The Newsom administration, in addition to potentially adjusting tax rates, could elect to shift the responsibilities of tax collection from the final distributor to the first for cultivation, and for the retail excise tax from the distributor to the retailer. While Gold Flora Corporation closely follows the Newsom administration’s budget proposals and revisions, the legislation, regulations and regulatory and tax impact on the licenses and operations therefrom is not currently known.

Political uncertainty may have an adverse impact on Gold Flora Corporation’s operating performance and results of operations.

General political uncertainty may have an adverse impact on Gold Flora Corporation’s operating performance and results of operations. In particular, the United States continues to experience significant political events that cast uncertainty on global financial and economic markets, especially in light of the upcoming presidential election. It is presently unclear exactly what actions the new administration in the United States will implement, and if implemented, how these actions may impact the cannabis industry in the United States. Any actions taken by the new United States administration may have a negative impact on the United States economies and on the businesses, financial conditions, results of operations and the valuation of United States cannabis companies, including Gold Flora Corporation.

Risks Related to Gold Flora Corporation’s Products and Services

Unfavorable publicity or consumer perception may affect the success of Gold Flora Corporation’s business.

The legal cannabis industry in the United States is at an early stage of its development. Cannabis has been, and is expected to continue to be, a regulated substance for the foreseeable future. Consumer perceptions regarding legality, morality, consumption, safety, efficacy and quality of cannabis are mixed and evolving. Consumer perception can be significantly influenced by scientific research or findings, regulatory investigations, litigation, media attention and other publicity regarding the consumption of cannabis products. There can be no assurance that future scientific research, findings, regulatory proceedings, litigation, media attention or other research findings or publicity will be favorable to the cannabis market or any particular product, or consistent with earlier publicity. Future research reports, findings, regulatory proceedings, litigation, media attention or other publicity that are perceived as less favorable than, or that question earlier research reports, findings or publicity could have a material adverse effect on the demand for cannabis and on the business, results of operations, financial condition and cash flows of Gold Flora Corporation. Further, adverse publicity, reports or other media attention regarding cannabis in general, or associating the consumption of cannabis with illness or other negative effects or events, could have such a material adverse effect.

Table of Contents

Public opinion and support for Medical-Use Cannabis and Adult-Use Cannabis use has traditionally been inconsistent and varies from jurisdiction to jurisdiction. While public opinion and support appears to be rising for legalizing Medical-Use Cannabis and Adult-Use Cannabis, it remains a controversial issue subject to differing opinions surrounding the level of legalization (for example, medical cannabis as opposed to legalization in general).

The ability to gain and increase market acceptance of Gold Flora Corporation’s products may require Gold Flora Corporation to establish and maintain its brand name and reputation. In order to do so, substantial expenditures on product development, strategic relationships and marketing initiatives may be required. There can be no assurance that these initiatives will be successful and their failure may have an adverse effect on Gold Flora Corporation.

Further, a shift in public opinion may also result in a significant influence over the regulation of the cannabis industry in the United States or elsewhere. A negative shift in the perception of the public with respect to cannabis in the United States or any other applicable jurisdiction could affect future legislation or regulation. Among other things, such a shift could cause state jurisdictions to abandon initiatives or proposals to legalize Adult-Use Cannabis, thereby limiting the number of new state jurisdictions into which Gold Flora Corporation could expand. Any inability to fully implement Gold Flora Corporation’s expansion strategy may have a material adverse effect on its business, financial condition and results of operations.

Gold Flora Corporation faces competition from the illegal cannabis market.

Gold Flora Corporation faces competition from illegal dispensaries and the illegal market that are unlicensed and unregulated, and that are selling cannabis and cannabis products, including products with higher concentrations of active ingredients, using flavors or other additives or engaging in advertising and promotion activities that Gold Flora Corporation is not permitted to. As these illegal market participants do not comply with the regulations governing the cannabis industry, their operations may also have significantly lower costs. The illegal cannabis market within California and other markets across the United States continues to thrive. The perpetuation of the illegal market for cannabis may have a material adverse effect on Gold Flora Corporation’s business, results of operations, as well as the perception of cannabis use.

Social media may impact Gold Flora Corporation’s reputation.

The increased usage of social media and other web-based tools used to generate, publish and discuss user-generated content and to connect with other users has made it increasingly easier for individuals and groups to communicate and share opinions and views in regard to issuers and their activities, whether true or not and the cannabis industry in general, whether true or not. Negative posts or comments about Gold Flora Corporation or its properties on any social networking website could damage Gold Flora Corporation’s reputation. In addition, employees or others might disclose non-public sensitive information relating to Gold Flora Corporation’s business through external media channels. The continuing evolution of social media will present Gold Flora Corporation with new challenges and risks.

Significant failure or deterioration of Gold Flora Corporation’s quality control systems may adversely impact Gold Flora Corporation.

The quality and safety of Gold Flora Corporation’s products are critical to the success of its business and operations. As such, it is imperative that Gold Flora Corporation’s quality control systems operate effectively and successfully. Quality control systems can be negatively impacted by the design of the quality control systems, the quality training program, and adherence by employees to quality control guidelines. Although Gold Flora Corporation strives to ensure that it and any of its service providers have implemented and adhere to high caliber quality control systems, any significant failure or deterioration of such quality control systems could have a material adverse effect on Gold Flora Corporation business, financial condition, results of operations or prospects.

Service providers could suspend or withdraw service, which could adversely affect Gold Flora Corporation’s business.

As a result of any adverse change to the approach in enforcement of U.S. cannabis laws, adverse regulatory or political changes, additional scrutiny by regulatory authorities, adverse changes in the public perception in respect of the consumption of cannabis or otherwise, third-party service providers to Gold Flora Corporation could suspend or withdraw their services, which may have a material adverse effect on the business, revenues, operating results, financial condition or prospects of Gold Flora Corporation. In this regard, on July 19, 2021, TPCO announced the launch of an updated Caliva app available through the Apple App Store, which allows California-based consumers to make cannabis purchases through the app and to receive rewards through its integrated loyalty program, Caliva CLUB. Previously, Apple had not allowed in-app cannabis purchases on apps sold through the Apple App Store. There can be no assurance that Apple will not change its policy and determine not allow in-app cannabis purchases, which would adversely affect Gold Flora Corporation’s business.

Table of Contents

Gold Flora Corporation may be subject to product liability claims.

Gold Flora Corporation manufactures, processes and/or distributes products designed to be ingested by humans, and therefore faces an inherent risk of exposure to product liability claims, regulatory action and litigation if products are alleged to have caused significant loss or injury. In addition, the manufacture and sale of cannabis products involve the risk of injury to consumers due to tampering by unauthorized third parties or product contamination. Previously unknown adverse reactions resulting from human consumption of cannabis products alone or in combination with other medications or substances could occur. Gold Flora Corporation may be subject to various product liability claims, including, among others, that the products produced by it caused injury or illness, include inadequate instructions for use, or include inadequate warnings concerning possible side effects or interactions with other substances. A product liability claim or regulatory action could result in increased costs, could adversely affect the reputation of Gold Flora Corporation and could have a material adverse effect on the business, results of operations and financial condition of Gold Flora Corporation. There can be no assurances that product liability insurance will be obtained or maintained on acceptable terms or with adequate coverage against potential liabilities.

Gold Flora Corporation may be subject to product recalls.

Cultivators, manufacturers and distributors of products are sometimes subject to the recall or return of their products for a variety of reasons, including product defects, such as contamination, unintended harmful side effects or interactions with other substances, packaging safety and inadequate or inaccurate labeling disclosure. If any of the products produced or sold by Gold Flora Corporation are recalled due to an alleged product defect or for any other reason, Gold Flora Corporation could be required to incur the unexpected expense of the recall and any legal proceedings that might arise in connection with the recall and may lose a significant amount of sales and may not be able to replace those sales at an acceptable margin or at all. Additionally, if one of the products produced by Gold Flora Corporation were subject to recall, the image of that product and Gold Flora Corporation could be harmed. A recall for any of the foregoing reasons could lead to decreased demand for products produced by Gold Flora Corporation and could have a material adverse effect on the business, results of operations and financial condition of Gold Flora Corporation.

Gold Flora Corporation is subject to risks inherent in an agricultural business.

Medical-Use Cannabis and Adult-Use Cannabis is an agricultural product. There are risks inherent in the cultivation business, such as insects, plant diseases and similar agricultural risks. Although the products are usually grown indoors or in green houses under climate-controlled conditions, with conditions monitored, there can be no assurance that natural elements will not have a material adverse effect on the production of Gold Flora Corporation’s products and, consequentially, on the business, financial condition and operating results of Gold Flora Corporation.

Gold Flora Corporation may be vulnerable to ~~take~~rising energy costs.

Cannabis growing operations consume considerable energy, making Gold Flora Corporation potentially vulnerable to rising energy costs. Rising or volatile energy costs may adversely impact the business, results of operations, financial condition or prospects of Gold Flora Corporation.

Gold Flora Corporation is reliant on key inputs.

The cannabis business is dependent on a number of key inputs and their related costs including raw materials and supplies related to growing operations, as well as electricity, water and other local utilities. Any significant interruption or negative change in the availability or economics of the supply chain for key inputs, including as a result of additional ~~impairment charges~~outbreaks of COVID-19 or future pandemics, could materially impact the business, financial condition, results of operations or prospects of Gold Flora Corporation. In this regard, California, where all of Gold Flora Corporation’s growing operations are located, experienced droughts in 2021 and 2022, and may experience droughts in the future, which may increase its costs and adversely affect its growing operations. Some of these inputs may only be available from a single supplier or a limited group of suppliers. If a sole source supplier was to go out of business, Gold Flora Corporation might be unable to find a replacement for such source in a timely manner or at all. If a sole source supplier were to be acquired by a competitor, that competitor may elect not to sell to Gold Flora Corporation in the future.

Any inability to secure a replacement for such source in a timely manner or at all could have a material adverse effect on the business, financial condition, results of operations or prospects of Gold Flora Corporation.

Table of Contents

The pricing of raw materials used in Gold Flora Corporation’s products and some of its products can be extremely volatile, which may have a material adverse effect on Gold Flora Corporation’s financial results.

Gold Flora Corporation purchases and sells certain raw materials. The pricing of these raw materials has been extremely volatile. For example, the price of both flower and distilled cannabis (oil) has fluctuated significantly and, in particular, decreased significantly in the second half of 2021. This volatility may be disruptive to Gold Flora Corporation’s supply chain and have an adverse effect on Gold Flora Corporation’s financial results.

Gold Flora Corporation may be subject to the risk of competition from synthetic production and technological advances.

The pharmaceutical industry may attempt to dominate the cannabis industry, through the development and distribution of synthetic products which emulate the effects and treatment of organic cannabis. If they are successful, the widespread popularity of such synthetic products could change the demand, volume and profitability of the cannabis industry. This could materially adversely affect the ability of Gold Flora Corporation to secure long-term profitability and success through the sustainable and profitable operation of its business.

Results of future clinical research may negatively impact the cannabis industry.

Research in the U.S. and internationally regarding the medical benefits, viability, safety, efficacy, dosing and social acceptance of cannabis or isolated cannabinoids (such as CBD and THC), and associated terpenoids remains in early stages. There have been relatively few clinical trials on the benefits of cannabis or isolated cannabinoids (such as CBD and THC). Although Gold Flora Corporation believes that the articles, reports and studies support its beliefs regarding the medical benefits, viability, safety, risks, efficacy, dosing and social acceptance of cannabis, future basic research and clinical trials may prove such statements to be incorrect, or could raise concerns regarding, and perceptions relating to, cannabis. Future research studies and clinical trials may reach negative conclusions regarding the medical benefits, viability, safety, efficacy, dosing, social acceptance or other facts and perceptions related to cannabis, which could have a material adverse effect on the demand for Gold Flora Corporation’s products with the potential to lead to a material adverse effect on Gold Flora Corporation’s business, financial condition, results of operations or prospects.

Investments made by Gold Flora Corporation’s social equity venture fund may result in losses for Gold Flora Corporation.

Concurrent with the closing of the Qualifying Transaction, the TPCO launched a new social equity venture fund focused on investing in Black and other people-of-color cannabis entrepreneurs with a planned $10,000,000 investment over time and a planned annual contribution of at least 2% of its net income. The social equity fund identifies, conducts diligence on, and invests in such entrepreneurs as a means of directly impacting the issues of social equity and diversity in the cannabis industry. While TPCO has historically made social equity fund investments with the intent of making a profit, investments in businesses, particularly the smaller businesses in which the social equity fund has invested and expects to invest in future, is risky, and Gold Flora Corporation could lose some or all of the capital TPCO has invested in these businesses.

Table of Contents

Controversy surrounding vaporizers and vaporizer products may materially and adversely affect the market for vaporizer products and expose Gold Flora Corporation to litigation and additional regulation.

There have been a number of highly publicized cases involving lung and other illnesses and deaths that appear to be related to vaporizer devices and/or products used in such devices (such as vaporizer liquids). The controversy surrounds the vaporizer devices, the manner in which the devices were used and the related vaporizer device products—THC, nicotine, other substances in vaporizer liquids, possibly adulterated products and other illegal unlicensed cannabis vaporizer products. Some states and cities in the United States have already taken steps to prohibit the sale or distribution of vaporizers, restrict the sale and distribution of such products or impose restrictions on flavors or use of such vaporizers. This trend may continue, accelerate and expand.

This controversy could well extend to non-nicotine vaporizer devices and other product formats. Any such extension could materially and adversely affect Gold Flora Corporation’s business, financial condition, operating results, liquidity, cash flow and operational performance. Litigation pertaining to vaporizer products is accelerating and that litigation could potentially expand to include Gold Flora Corporation’s products, which would materially and adversely affect Gold Flora Corporation’s business, financial condition, operating results, liquidity, cash flow and operational performance.

Other Regulatory Risks

We may have to pay back funds borrowed under the Paycheck Protection Program (“PPP”). As a result, the repayment of certain subsidiaries PPP loans and any potential penalties, could negatively impact Gold Flora Corporation’s business, financial condition and results of operations and prospects.

During 2020, Gold Flora Corporation participated in the Paycheck Protection Program as a part of the Coronavirus Aid, Relief and Economic Securities Act (“Cares Act”) which, in part, provides loans for qualifying businesses with the proceeds to be used for payroll costs, rent, utilities, and interest on other debt obligations. Gold Flora, LLC, through certain of its subsidiaries, borrowed approximately $1 million under the Cares Act. At the time Gold Flora Corporation borrowed funds under the Cares Act it received guidance that it was eligible to participate in the program. Subsequent to the receipt of funds, it was determined that the applicable Gold Flora entities may not have been eligible to participate in the program. The PPP loans have been forgiven, but Gold Flora Corporation is in the process of evaluating options regarding the PPP loans, which could include repaying the PPP loans. Any potential penalties in addition to the potential repayment of the forgiven PPP loans could negatively impact Gold Flora Corporation’s business, financial condition and results of operations and prospects.

Gold Flora Corporation may be subject to environmental regulations and risks.

Gold Flora Corporation’s operations are subject to environmental regulation in the jurisdictions in which it operates. These regulations mandate, among other things, the maintenance of air and water quality standards and land reclamation. They also set forth limitations on the generation, transportation, storage and disposal of solid and hazardous waste. Environmental legislation is evolving in a manner which will require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors (or the equivalent thereof) and employees. There is no assurance that future changes in environmental regulation, if any, will not adversely affect Gold Flora Corporation’s operations.

Government approvals and permits are currently, and may in the future, be required in connection with Gold Flora Corporation’s operations. To the extent such approvals are required and not obtained, Gold Flora Corporation may be curtailed or prohibited from its current or proposed production, manufacturing or sale of cannabis or from proceeding with the development of its operations as currently proposed. States mandate unique inventory tracking requirements and systems which may present implementation and adherence challenges for operators, such as California’s METRC track and trace inventory system, which requires integration with other systems and suffers frequent outages.

Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. Gold Flora Corporation may be required to compensate those suffering loss or damage by reason of its operations and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations.

Amendments to current laws, regulations and permits governing the production or manufacturing of cannabis, or more stringent implementation thereof, could have a material adverse impact on Gold Flora Corporation and cause increases in expenses, capital expenditures or production or manufacturing costs or reduction in levels of production or manufacturing or require abandonment or delays in development.

Gold Flora Corporation may be subject to constraints on the marketing of its products.

The development of Gold Flora Corporation’s business and operating results may be hindered by applicable restrictions on sales and marketing activities imposed by government regulatory bodies. The regulatory environment in the United States limits companies’ abilities to compete for market share in a manner similar to other industries. If Gold Flora Corporation is unable to effectively market its products and compete for market share, or if the costs of compliance with government legislation and regulation cannot be absorbed through increased selling prices for its products, Gold Flora Corporation’s sales and results of operations could be adversely affected.

Table of Contents

Risks Relating to Gold Flora Corporation’s Business Structure

Gold Flora Corporation is reliant on its management team.

The success of Gold Flora Corporation is dependent upon the ability, expertise, judgment, discretion and good faith of its senior management, including Laurie Holcomb, its CEO. While employment agreements or management agreements and equity incentives that vest over time are customarily used as a primary method of retaining the services of key employees, these agreements and equity incentives cannot assure the continued services of such employees. Any loss of the services of such individuals could have a material adverse effect on Gold Flora Corporation’s business, operating results, financial condition or prospects.

Gold Flora Corporation is a holding company.

Gold Flora is a holding company and essentially all of its assets, other than certain real property, constitute the capital stock of its subsidiaries. As a result, investors are subject to the risks attributable to Gold Flora Corporation’s subsidiaries. As a holding company, Gold Flora Corporation will conduct substantially all of its business through subsidiaries, which generate substantially all of Gold Flora Corporation’s revenues. Consequently, Gold Flora Corporation’s cash flows and ability to complete current or desirable future enhancement opportunities are dependent on the earnings of Gold Flora Corporation’s subsidiaries and the distribution of those earnings to Gold Flora Corporation. The ability of these entities to pay dividends and other distributions depends on their operating results and is subject to applicable laws and regulations, which require that solvency and capital standards be maintained by such subsidiaries and contractual restrictions are contained in the instruments governing their debt. In the event of a bankruptcy, liquidation or reorganization of any of Gold Flora Corporation’s material subsidiaries, holders of indebtedness and trade creditors may be entitled to payment of their claims from the assets of those subsidiaries before Gold Flora Corporation.

General Risks related to Gold Flora Corporation

Limited market for Gold Flora Corporation’s securities

The Gold Flora Common Stock and the 35,837,500 outstanding Gold Flora Warrants are listed on the Exchange. However, there can be no assurance that an active and liquid market for the Gold Flora Common Stock or the Gold Flora Warrants will develop or be maintained and an investor may find it difficult to resell any securities of Gold Flora Corporation. The daily average trading volume of the Common Shares and Warrants has historically been extremely volatile. It is likely such volatility, and therefore risk to Company investors, will continue.

Any equity financings undertaken or acquisitions by Gold Flora Corporation may dilute the interests of Gold Flora Corporation’s stockholders and further depress the price of the Gold Flora Common Stock.

If Gold Flora Corporation raises additional capital through the issuance of equity securities (including securities convertible or exchangeable into equity securities) or completes an acquisition or merger by issuing additional equity securities, such issuance may substantially dilute the interests of its stockholders and reduce the value of their investment. As of August 11, 2023, there were 288,425,908 shares of Gold Flora Common Stock outstanding, and Gold Flora Corporation’s certificate of incorporation provides that a total 450,000,000 shares of Gold Flora Common Stock may be issued. The board of directors of Gold Flora Corporation (the “Gold Flora Board”) has the discretion to determine the price and the terms of issue of future issuances. Moreover, additional shares of Gold Flora Common Stock may be issued upon the exercise or vesting of awards under Gold Flora Corporation 2023 Equity Incentive Plan and upon the exercise of outstanding Gold Flora Warrants. The market price of the Gold Flora Common Stock could decline as a result of issuances of new shares or sales of Gold Flora Common Stock in the market or the perception that such sales could occur. Sales by stockholders of Gold Flora Corporation might also make it more difficult for Gold Flora Corporation itself to sell equity securities at a time and price that it deems appropriate.

Table of Contents

There is no guarantee that the Gold Flora Warrants will ever be in-the-money, and the Gold Flora Warrants may expire worthless.

The Gold Flora Warrants became exercisable on March 22, 2021 at an exercise price of US$11.50 per Common Share and expire on January 15, 2026. The closing price of the Gold Flora Common Stock on the Exchange was C$0.17 on August 3, 2023. There is no guarantee that the Gold Flora Warrants will ever be in-the-money prior to their expiration, and as such, the Gold Flora Warrants may expire worthless.

Financial reporting obligations of being a public company in Canada and the United States are expensive and time-consuming, and Gold Flora Corporation management will be required to devote substantial time to compliance matters.

As a public company with securities listed on the Exchange, Gold Flora Corporation is subject to the reporting requirements of applicable securities rules and regulations of Canadian securities regulators and other requirements in Canada. Complying with these rules and regulations increases Gold Flora Corporation’s legal and financial compliance costs, makes some activities more difficult, time-consuming and costly, and increases demand on Gold Flora Corporation’s systems and resources. In addition, the obligations of being a public company in the United States require significant expenditures and place significant demands on Gold Flora Corporation’s management and other personnel, including costs resulting from public company reporting obligations under the Exchange Act and the rules and regulations regarding corporate governance practices, including those under the Sarbanes-Oxley Act of 2002, as amended (“Sarbanes-Oxley”) and the Dodd-Frank Wall Street Reform and Consumer Protection Act. These rules require the establishment and maintenance of effective disclosure controls and procedures and internal control over financial reporting among many other complex rules that are often difficult to implement, monitor and maintain compliance with. Moreover, despite recent reforms made possible by the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”), the reporting requirements, rules and regulations will make some activities more time-consuming and costly, particularly after Gold Flora Corporation is no longer deemed an “emerging growth company” or a “smaller reporting company.” In addition, Gold Flora Corporation expects these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance, and Gold Flora Corporation may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. Gold Flora Corporation management and other personnel will need to devote a substantial amount of time to ensure that Gold Flora Corporation complies with all of these requirements and to keep pace with new regulations, otherwise Gold Flora Corporation may fall out of compliance and risk becoming subject to litigation, among other potential problems. Compliance with these rules and regulations could also make it more difficult for us to attract and retain qualified members of the Gold Flora Board.

TPCO identified a material weakness in its internal control over financial reporting. If Gold Flora Corporation fails to comply with the rules under Sarbanes-Oxley related to accounting controls in the future, or, if Gold Flora Corporation discovers further material weaknesses or other deficiencies in its internal control over financial reporting or Gold Flora Corporation fails to maintain effective disclosure controls and procedures, the price of the Gold Flora Common Stock could decline, which would make raising capital could be more difficult.

Pursuant to Rule 13a-15(c) under the Exchange Act, Gold Flora Corporation is required to conduct annual management assessments of the effectiveness of its internal control over financial reporting. The term “internal control over financial reporting” is defined as a process designed by, or under the supervision of, the issuer’s principal executive and principal financial officers, or persons performing similar functions, and effected by the issuer’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the issuer; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer’s assets that could have a material effect on the financial statements.

In addition, pursuant to Rule 13a-15(b) under the Exchange Act, Gold Flora Corporation is required to evaluate the effectiveness of Gold Flora Corporation’s disclosure controls and procedures each quarter. the term “disclosure controls and procedures” means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Table of Contents

While TPCO and its independent registered public accounting firm did not and were not required to perform an audit of TPCO’s internal control over financial reporting with respect to 2021, in connection with the audit of TPCO’s 2021 consolidated financial statements, TPCO and its independent registered public accounting firm identified control deficiencies in the design and operation of its internal control over financial reporting that constituted a material weakness. TPCO did not design or maintain an effective control environment commensurate with financial reporting requirements. Specifically, TPCO lacked a sufficient number of adequately skilled professionals to appropriately analyze, record and disclose accounting matters timely and accurately while maintaining appropriate segregation of duties. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Despite the efforts TPCO has undertaken, it had not remediated this material weakness as of June 30, 2023. Gold Flora Corporation cannot assure you that the additional measures its expect to take in the future will be sufficient to remediate the material weakness identified by TPCO or avoid the identification of additional material weaknesses in the future. If the steps Gold Flora Corporation takes do not remediate the material weakness in a timely manner, there could continue to be a reasonable possibility that this material weakness or other control deficiencies could result in a material misstatement of Gold Flora Corporation’s annual or interim financial statements that would not be prevented or detected on a timely basis, which could in turn cause its stock price to decline significantly and make raising capital more difficult. If Gold Flora Corporation fails to remediate this material weakness, identify future material weaknesses in its internal control over financial reporting or fails to meet the demands placed on it as a public company, including the requirements of Sarbanes-Oxley, Gold Flora Corporation may be unable to accurately report its financial results or report them within the timeframes required by law or stock exchange regulations. Failure to comply with Section 404 of Sarbanes-Oxley could also potentially subject Gold Flora Corporation to sanctions or investigations by the SEC or other regulatory authorities. If additional material weaknesses exist or are discovered in the future, and Gold Flora Corporation is unable to remediate any such material weakness, its reputation, results of operations and financial condition could suffer.

Risks associated with recent or future acquisitions.

Prior to the Business Combination, as part of Gold Flora’s overall business strategy, Gold Flora recently completed its acquisitions of Captain Kirk Services Inc., including its core retail outlet, Airfield Supply, Higher Level of Care Seaside, Inc. and Higher Level of Care Hollister, Inc. . In addition, TPCO recently completed its acquisition of 100% of the equity of Coastal Holding Company, LLC, a California retail dispensary and delivery operator. Gold Flora Corporation intends to pursue strategic acquisitions which could provide additional product offerings, integrations, additional industry expertise or a stronger industry presence in both existing and new jurisdictions. Recent and future acquisitions may expose Gold Flora Corporation to potential risks, including risks associated with: (i) the integration of new operations, services and personnel; (ii) unforeseen or hidden liabilities; (iii) the diversion of resources from Gold Flora Corporation’s existing interests and business; (iv) potential inability to generate sufficient revenue to offset new costs; (v) the expenses of acquisitions; or (vi) the potential loss of or harm to relationships with both employees and existing users resulting from its integration of new businesses. In addition, any proposed acquisitions may be subject to regulatory approval.

Gold Flora Corporation may invest in cannabis companies, including pre-revenue companies, that may not be able to meet anticipated revenue targets in the future.

Gold Flora Corporation may make investments in companies with no significant sources of operating cash flow and no revenue from operations. Investments in such companies will be subject to risks and uncertainties that new companies with no operating history may face. In particular, there is a risk that Gold Flora Corporation’s investment in these pre-revenue companies will not be able to meet anticipated revenue targets or will generate no revenue at all. The risk is that underperforming pre-revenue companies may lead to these businesses failing, which could have a material adverse effect on Gold Flora Corporation’s business, prospects, revenue, results of operation and financial condition.

Table of Contents

Gold Flora Corporation may not be able to achieve sustainable revenues and profitable operations.

Gold Flora Corporation’s ability to carry out and implement its planned business objectives and strategies may be dependent upon, among other things, its ability to achieve sustainable revenues and profitable operations. There can be no assurance that Gold Flora Corporation will be able to generate positive cash flow from its operations in the future, that additional capital or other types of financing will be available when needed, or that these financings will be on terms favorable to Gold Flora Corporation. If Gold Flora Corporation is unable to maintain positive cash flow from its operations, its ability to carry out and implement its planned business objectives and strategies may be significantly delayed, limited, or may not occur.

Financial projections may prove materially inaccurate or incorrect.

Gold Flora Corporation does not currently provide any financial guidance or projections. Gold Flora Corporation may elect to provide financial projections in the future. Any of Gold Flora Corporation’s financial estimates, projections and other forward-looking information or statements were prepared by Gold Flora Corporation without the benefit of reliable historical industry information or other information customarily used in preparing such estimates, projections and other forward-looking information or statements. Such forward-looking information or statements are based on assumptions of future events that may or may not occur. Investors should inquire of Gold Flora Corporation and become familiar with the assumptions underlying any estimates, projections or other forward-looking information or statements. Projections are inherently subject to varying degrees of uncertainty and their achievability depends on the timing and probability of a complex series of future events. There is no assurance that the assumptions upon which these projections are based will be realized. Accordingly, investors should not rely on any projections to indicate the actual results Gold Flora Corporation might achieve.

There can be no assurance that Gold Flora Corporation’s strategic alliances or expansions of scope of existing relationships will have a beneficial impact on Gold Flora Corporation’s business, financial condition and results of operations.

Gold Flora Corporation may enter into strategic alliances and partnerships with third parties that Gold Flora Corporation believes will complement or augment its business. Gold Flora Corporation’s ability to complete strategic alliances is dependent upon, and may be limited by, the availability of suitable candidates and capital. In addition, strategic alliances could present unforeseen integration obstacles or costs, may not enhance Gold Flora Corporation’s business and may involve risks that could adversely affect Gold Flora Corporation, including significant amounts of management time that may be diverted from operations in order to pursue and complete such transactions or maintain such strategic alliances. Future strategic alliances could result in the incurrence of additional debt, costs and contingent liabilities, and there can be no assurance that such strategic alliances will achieve the expected benefits to Gold Flora Corporation’s business. Any of the foregoing could have a material adverse effect on Gold Flora Corporation’s business, financial condition and results of operations.

Competition in the cannabis industry is intense and increased competition by larger and better-financed competitors could materially and adversely affect the business, financial condition and results of operations of Gold Flora Corporation.

Gold Flora Corporation will face intense competition from other companies, some of which can be expected to have longer operating histories and more financial resources and experience than Gold Flora Corporation. Increased competition by larger and better financed competitors could materially and adversely affect the business, financial condition, results of operations or prospects of Gold Flora Corporation. Because of the early stage of the industry in which Gold Flora Corporation operates, Gold Flora Corporation expects to face additional competition from new entrants. To become and remain competitive, Gold Flora Corporation will require research and development, marketing, sales and support. Gold Flora Corporation may not have sufficient resources to maintain research and development, marketing, sales and support efforts on a competitive basis which could materially and adversely affect the business, financial condition, results of operations or prospects of Gold Flora Corporation.

Table of Contents

Gold Flora Corporation is dependent on equipment and skilled labor.

The ability of Gold Flora Corporation to compete and grow will be dependent on it having access, at a reasonable cost and in a timely manner, to skilled labor, equipment, parts and components. No assurances can be given that Gold Flora Corporation will be successful in maintaining its required supply of skilled labor, equipment, parts and components, including as a result of the COVID-19 pandemic. It is also possible that the final costs of the major equipment contemplated by Gold Flora Corporation’s capital expenditure plans may be significantly greater than anticipated by Gold Flora Corporation’s management, and may be greater than the funds available to Gold Flora Corporation, in which circumstance Gold Flora Corporation may curtail, or extend the timeframes for completing, its capital expenditure plans. This could have an adverse effect on the business, financial condition, results of operations or prospects of Gold Flora Corporation.

The cannabis industry is difficult to forecast.

Gold Flora Corporation must rely largely on its own market research to forecast sales as detailed forecasts are not generally obtainable from other sources at this early stage of the industry. The California cannabis industry experienced an unprecedented decline in the average price per pound of cannabis biomass throughout 2022, making historical data less reliable. Furthermore, mergers and acquisitions, which represent a material portion of Gold Flora Corporation’s strategy, are particularly difficult to forecast. If Gold Flora Corporation’s forecasts are not accurate as a result of competition, biomass commoditization, integration, deal-execution, technological change, change in the regulatory or legal landscape, change in consumer behavior, or other factors, the business, results of operations, financial condition or prospects of Gold Flora Corporation may be adversely affected. See “General Risk Factors – Financial projections may prove material inaccurate or incorrect”.

Gold Flora Corporation may be subject to the risk of litigation.

Gold Flora Corporation is a party to litigation from time to time in the ordinary course of business which could adversely affect its business. Should any litigation in which Gold Flora Corporation becomes involved be determined against Gold Flora Corporation, such a decision could adversely affect Gold Flora Corporation’s ability to continue operating. Even if Gold Flora Corporation is involved in litigation and wins, litigation can redirect significant company resources. Litigation may also create a negative perception of Gold Flora Corporation’s brand.

Gold Flora Corporation may be subject to risks related to information technology systems, including cyber-attacks.

Gold Flora Corporation’s operations depend, in part, on how well it and its suppliers protect networks, equipment, information technology systems and software against damage from a number of threats, including, but not limited to, cable cuts, damage to physical plants, natural disasters, intentional damage and destruction, fire, power loss, ransomware, hacking, computer viruses, vandalism and theft. Gold Flora Corporation’s operations also depend on the timely maintenance, upgrade and replacement of networks, equipment, information technology systems and software, as well as pre-emptive expenses to mitigate the risks of failures. Any of these and other events could result in information system failures, delays, theft and/or increase in capital expenses. The failure of information systems or a component of information systems could, depending on the nature of any such failure, adversely impact Gold Flora Corporation’s reputation and results of operations. Gold Flora Corporation, Gold Flora and TPCO have not experienced any material losses to date relating to cyber-attacks or other information security breaches, but there can be no assurance that Gold Flora Corporation will not incur such losses in the future. Gold Flora Corporation’s risk and exposure to these matters cannot be fully mitigated because of, among other things, the evolving nature of these threats. As a result, cyber security and the continued development and enhancement of controls, processes and practices designed to protect systems, computers, software, data and networks from attack, damage or unauthorized access is a priority. As cyber threats continue to evolve, Gold Flora Corporation may be required to expend additional resources to continue to modify or enhance protective measures or to investigate and remediate any security vulnerabilities.

Table of Contents

Gold Flora Corporation may be subject to risks related to security breaches.

Given the nature of Gold Flora Corporation’s products and its lack of legal availability outside of channels approved by the United States federal government, as well as the concentration of inventory in its facilities, and despite meeting or exceeding all legislative security requirements, there remains a risk of shrinkage as well as theft. A security breach at one of Gold Flora Corporation’s facilities could expose Gold Flora Corporation to additional liability and to potentially costly litigation, increase expenses relating to the resolution and future prevention of these breaches and may deter potential customers from choosing Gold Flora Corporation’s products. In addition, Gold Flora Corporation collects and stores personal information about its customers and is responsible for protecting that information from privacy breaches. A privacy breach may occur through procedural or process failure, information technology malfunction, or deliberate unauthorized intrusions. Theft of data for competitive purposes, particularly customer lists and preferences, is an ongoing risk whether perpetrated via employee collusion or negligence or through deliberate cyber-attack. Any such theft or privacy breach would have a material adverse effect on Gold Flora Corporation’s business, financial condition, results of operations and prospects.

Gold Flora Corporation may be subject to intellectual property risks.

Gold Flora Corporation has certain proprietary intellectual property, including but not limited to brands, trademarks, trade names, copyright protected materials, trade secrets, and proprietary and/or confidential processes and know-how. Gold Flora Corporation will rely on this intellectual property, know-how and other proprietary information, and require employees, consultants, partners and suppliers to sign confidentiality agreements as appropriate. However, confidentiality agreements may be breached, and Gold Flora Corporation’s remedies under law may not have the effect of fully mitigating or preventing damage stemming from a breach. Furthermore, Gold Flora Corporation may enter into agreements to license its intellectual property with third parties in states where Gold Flora Corporation currently does not operate. In such instances, Gold Flora Corporation will be reliant on third-party licensees to comply with trademark guidelines and otherwise be diligent stewards of Gold Flora Corporation’s intellectual property. Third party licensees may not protect Gold Flora Corporation’s intellectual property against counterfeit copies of Gold Flora Corporation brands or trademarks, for example.

Absent of breach, third parties may independently develop substantially equivalent proprietary information without infringing upon any proprietary technology. Third parties may otherwise gain access to Gold Flora Corporation’s proprietary information and adopt it in a competitive manner. Any loss of intellectual property protection may have a material adverse effect on Gold Flora Corporation’s business, results of operations or prospects.

As long as cannabis remains illegal under U.S. federal law as a Schedule I controlled substance pursuant to the CSA, the benefit of certain U.S. federal laws and protections which may be available to most businesses, such as federal trademark protection regarding the intellectual property of a business, may not be available to Gold Flora Corporation. For example, in the United States, registered federal trademark protection is only available for goods and services that can be lawfully used in interstate commerce; the U.S. Patent and Trademark Office is not currently approving any trademark applications for cannabis, or certain goods containing U.S. hemp-derived CBD (such as dietary supplements and food) until the FDA and the USDA provide clearer guidance on the regulation of such products. As a result, Gold Flora Corporation’s intellectual property may not be adequately or sufficiently protected against the use or misappropriation by third parties. In addition, since the regulatory framework of the cannabis industry is in a constant state of flux, Gold Flora Corporation can provide no assurance that it will obtain any protection of its intellectual property, whether on a federal, provincial, state or local level, despite its efforts to so do. While many states do offer the ability to protect and register trademarks independent of the federal government, and courts have recognized the legal validity of common law rights in cannabis-business trademarks, such common law rights and state-registered trademarks provide a lower degree of protection than would federally registered marks as the rights provided are state-by-state and not nationwide and are dependent on use rather than intent to use.

Table of Contents

Gold Flora Corporation’s intellectual property rights may be invalid or unenforceable under applicable laws, and Gold Flora Corporation may be unable to have issued or registered, and unable to enforce, its intellectual property rights.

The laws and positions of intellectual property offices administering such laws regarding intellectual property rights relating to cannabis and cannabis-related products are constantly evolving, and there is uncertainty regarding which countries will permit the filing, prosecution, issuance, registration and enforcement of intellectual property rights relating to cannabis and cannabis-related products. Gold Flora Corporation’s ability to obtain registered trademark protection for cannabis and cannabis-related goods and services (including hemp and hemp-related goods and services), may be limited in certain countries, including the United States, where registered federal trademark protection is currently unavailable for trademarks covering the sale of cannabis products or certain goods containing U.S. hemp-derived CBD (such as dietary supplements and foods) until the FDA provides clearer guidance on the regulation of such products. Accordingly, Gold Flora Corporation’s ability to obtain intellectual property rights or enforce intellectual property rights against third-party uses of similar trademarks may be limited.

Moreover, in any infringement proceeding, some or all of Gold Flora Corporation’s current or future trademarks, patents or other intellectual property rights or other proprietary know-how, or arrangements or agreements seeking to protect the same for Gold Flora Corporation’s benefit, may be found invalid, unenforceable, anti-competitive or not infringed. An adverse result in any litigation or defense proceedings could put one or more of Gold Flora Corporation’s current or future trademarks, patents or other intellectual property rights at risk of being invalidated or interpreted narrowly and could put existing intellectual property applications at risk of not being issued. Any or all of these events could materially and adversely affect Gold Flora Corporation’s business, financial condition and results of operations.

Gold Flora Corporation may be subject to allegations that it is in violation of third-party intellectual property rights, and Gold Flora Corporation may be found to infringe third-party intellectual property rights, possibly without the ability to obtain licenses necessary to use such third-party intellectual property rights.

Other parties may claim that Gold Flora Corporation’s products infringe on their intellectual property rights, including with respect to patents, and Gold Flora Corporation’s operation of its business, including its development, manufacture and sale of its goods and services, may be found to infringe third-party intellectual property rights. There is a risk that Gold Flora Corporation is infringing the proprietary rights of third parties because numerous United States and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields that are the focus of Gold Flora Corporation’s business, and which may cover the development, manufacturing, sale or use of Gold Flora Corporation’s products, processes or other aspects of its business operations. Others might have been the first to make the inventions covered by each of its pending patent applications and/or might have been the first to file patent applications for these inventions. In addition, because patent applications take many months to publish and patent applications can take many years to issue, there may be currently pending applications, unknown to Gold Flora Corporation, which may later result in issued patents that cover the production, manufacture, synthesis, commercialization, formulation or use of Gold Flora Corporation’s products. As a result, there may be currently pending patent applications, some of which may still be confidential, that may later result in issued patents that Gold Flora Corporation’s products or processes may infringe. In addition, the production, manufacture, synthesis, commercialization, formulation or use of Gold Flora Corporation’s products may infringe existing patents of which Gold Flora Corporation is not aware. In addition, third parties may obtain patents in the future and claim that use of Gold Flora Corporation’s inventions, trade secrets, technical know-how and proprietary information, or the manufacture, use or sale of its products infringes upon those patents. Third parties may also claim that Gold Flora Corporation’s use of its trademarks infringes upon their trademark rights.

Defending itself against third-party claims, including litigation in particular, would be costly and time consuming and would divert management’s attention from its business, which could lead to delays in Gold Flora Corporation’s development or commercialization efforts. Such claims, whether or not meritorious, may result in the expenditure of significant financial and managerial resources, legal fees, result in injunctions, temporary restraining orders, other equitable relief, and/or require the payment of damages, any or all of which may have an adverse impact on Gold Flora Corporation’s business. If third parties are successful in their claims, Gold Flora Corporation might have to pay substantial damages or take other actions that are adverse to Gold Flora Corporation’s business. In addition, Gold Flora Corporation may need to obtain licenses from third parties who allege that Gold Flora Corporation has infringed on their lawful rights. Such licenses may not be available on terms acceptable to Gold Flora Corporation, and Gold Flora Corporation may be unable to obtain any licenses or other necessary or useful rights under third-party intellectual property.

Table of Contents

Gold Flora Corporation receives licenses to use some third-party intellectual property rights, and the failure of the owner of such intellectual property to properly maintain or enforce the intellectual property underlying such licenses, or Gold Flora Corporation’s inability to maintain such licenses, could have a material adverse effect on Company’s business, financial condition and performance.

Gold Flora Corporation is party to licenses granted by third parties, including the certain brands and trademarks, that give Gold Flora Corporation rights to use third-party intellectual property that is necessary or useful to Gold Flora Corporation’s business. Gold Flora Corporation’s success will depend, in part, on the ability of the applicable licensor to maintain and enforce its licensed intellectual property against other third parties, particularly intellectual property rights to which Gold Flora Corporation has secured exclusive rights. Without protection for the intellectual property Gold Flora Corporation has licensed, other companies might be able to offer substantially similar products for sale, or utilize substantially similar processes, any of which could have a material adverse effect on Gold Flora Corporation’s business, financial condition and results of operations.

Any of Gold Flora Corporation’s licensors may allege that Gold Flora Corporation has breached its license agreements with those licensors, whether with or without merit, and accordingly seek to terminate Gold Flora Corporation’s applicable licenses. If successful, this could result in Gold Flora Corporation’s loss of the right to use applicable licensed intellectual property, which could adversely affect its ability to commercialize its products or services, as well as have a material adverse effect on its business, financial condition and results of operations.

Any of these outcomes could impair Gold Flora Corporation’s ability to prevent competition from third parties, which could materially and adversely affect its business, financial condition and results of operations.

Gold Flora Corporation may be subject to the risks associated with fraudulent or illegal activity by its employees, contractors and consultants.

Gold Flora Corporation is exposed to the risk that its employees, independent contractors and consultants may engage in fraudulent or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent unauthorized conduct that violates: (i) government regulations, including regulations of the DCC; (ii) manufacturing standards; (iii) federal, state and provincial healthcare fraud and abuse laws and regulations; (iv) laws that require the true, complete and accurate reporting of financial information or data; or (v) contractual arrangements, including confidentiality requirements. It may not always be possible for Gold Flora Corporation to identify and deter misconduct by its employees and other third parties, and the precautions taken by Gold Flora Corporation to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting Gold Flora Corporation from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with applicable laws or regulations or contractual requirements. If any such actions are instituted against Gold Flora Corporation, and it is not successful in defending itself or asserting its rights, those actions could have a significant impact on Gold Flora Corporation’s business, including the imposition of civil, criminal and administrative penalties, damages, monetary fines, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of Gold Flora Corporation’s operations, any of which could have a material adverse effect on Gold Flora Corporation’s business, financial condition, results of operations or prospects.

Gold Flora Corporation may be subject to risks related to high bonding and insurance coverage.

There is a risk that a greater number of state regulatory agencies will begin requiring entities engaged in certain aspects of the business or industry of legal cannabis to post a bond or significant fees when, for example, applying for a dispensary license or renewal as a guarantee of payment of sales and franchise tax. Gold Flora Corporation is not able to quantify at this time the potential scope for such bonds or fees in the states in which it currently or may in the future operate. Any bonds or fees of material amounts could have a negative impact on the ultimate success of Gold Flora Corporation’s business. Gold Flora Corporation’s business is subject to a number of risks and hazards generally, including adverse environmental conditions (such as droughts), accidents, labor disputes and changes in the regulatory environment. Such occurrences could result in damage to assets, personal injury or death, environmental damage, delays in operations, monetary losses and possible legal liability. Although Gold Flora Corporation maintains insurance to protect against certain risks in such amounts as it considers to be reasonable, insurance does not cover all the potential risks associated with its operations. Gold Flora Corporation may also be unable to maintain insurance to cover these risks at economically feasible premiums. Insurance coverage may not continue to be available or may not be adequate to cover any resulting liability. Moreover, insurance against risks such as environmental pollution or other hazards encountered in the operations of Gold Flora Corporation is not generally available on acceptable terms. Gold Flora Corporation might also become subject to liability for pollution, fire, explosion or other hazards which it may not be insured against or which Gold Flora Corporation may elect not to insure against because of premium costs or other reasons. Losses from these events may cause Gold Flora Corporation to incur significant costs that could have a material adverse effect upon its business, results of operations, financial condition or prospects.

Table of Contents

Global financial conditions and future economic shocks may impair Gold Flora Corporation’s financial condition.

Future economic shocks may be precipitated by a number of causes, including a rise in the price of oil, geopolitical instability, pandemics or outbreaks of new infectious diseases or viruses and natural disasters. Any sudden or rapid destabilization of global economic conditions, including the recent bank failures, could impact Gold Flora Corporation’s ability to obtain equity or debt financing in the future on terms favorable to Gold Flora Corporation, or at all. Additionally, any such occurrence could cause decreases in asset values that are deemed to be other than temporary, which may result in impairment losses. In such an event, Gold Flora Corporation’s operations and financial condition could be adversely impacted.

Furthermore, general market, political and economic conditions, including, for example, inflation, interest and currency exchange rates, structural changes in the cannabis industry, supply and demand for commodities, political developments, legislative or regulatory changes, social or labor unrest and stock market trends will affect Gold Flora Corporation’s operating environment and its operating costs and profit margins and the price of its securities. Any negative events in the global economy could have a material adverse effect on Gold Flora Corporation’s business, financial condition, results of operations or prospects.

Gold Flora Corporation’s operations may be adversely affected by changes in the economic environment, including the rise in inflation, an economic slowdown and impacts from recent bank failures.

Gold Flora Corporation’s operations could be affected by the economic environment in which it operates should the unemployment level, interest rates or inflation reach levels that influence consumer trends and, consequently, impact Gold Flora Corporation’s sales and profitability.

Gold Flora Corporation has experienced inflationary impacts on key production inputs, wages and other costs of labor, equipment, services, and other business expenses. Commodity prices in particular have risen significantly over the past year. Inflation and its negative impacts could escalate in future periods.

We may not be able to include these additional costs in the prices of the products we sell. As a result, inflation may have a material adverse effect on Gold Flora Corporation’s results of operations and financial condition.

Management of growth may prove to be difficult.

Gold Flora Corporation may be subject to growth-related risks including capacity constraints and pressure on its internal systems and controls. The ability of Gold Flora Corporation to manage growth effectively will require it to continue to implement and improve its operational and financial systems and to expand, train and manage its employee base. The inability of Gold Flora Corporation to deal with this growth may have a material adverse effect on Gold Flora Corporation’s business, financial condition, results of operations or prospects.

Gold Flora Corporation does not intend to pay dividends on the Gold Flora Common Stock. Thus, any returns will be limited to increases, if any, in the value of the Gold Flora Common Stock.

Gold Flora Corporation currently anticipates that it will retain future earnings for the development, operation and expansion of its business and does not anticipate declaring or paying any cash dividends for the foreseeable future. Any future determination to declare dividends will be made at the discretion of the Gold Flora Board and will depend on, among other factors, Gold Flora Corporation’s financial condition, operating results, capital requirements, general business conditions and other factors that the Gold Flora Board may deem relevant. Any return to stockholders will therefore be limited to the appreciation in the value of their shares of Gold Flora Common Stock, if any.

Table of Contents

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about Gold Flora Corporation or its business, the Gold Flora Common Stock trading price and volume could decline.

The trading market for the Gold Flora Common Stock depends in part on the research and reports that securities or industry analysts publish about Gold Flora Corporation or its business. If securities or industry analysts do not provide coverage on Gold Flora Corporation, the trading price for Gold Flora Common Stock could be negatively impacted. Additionally, if one or more of the analysts who cover Gold Flora Corporation downgrade the Gold Flora Common Stock or publish inaccurate or unfavorable research about Gold Flora Corporation’s business, the trading price of the Gold Flora Common Stock may decline.

Gold Flora Corporation may be subject to international or additional state regulatory risks.

While Gold Flora Corporation currently has no plans to expand internationally, it may in the future and, as a result, it would become further subject to the laws and regulations of (as well as international treaties among) the foreign jurisdictions in which it operates or imports or exports products or materials. In addition, Gold Flora Corporation may avail itself of proposed legislative changes in certain jurisdictions to expand its product portfolio outside of the state of California, which expansion may include business and regulatory compliance risks as yet undetermined. Failure by Gold Flora Corporation to comply with the current or evolving regulatory framework in any jurisdiction could have a material adverse effect on Gold Flora Corporation’s business, financial condition and results of operations. There is the possibility that any such international jurisdiction or state could determine that Gold Flora Corporation was not or is not compliant with applicable local regulations. If Gold Flora Corporation’s sales or operations were found to be in violation of such international regulations Gold Flora Corporation may be subject to enforcement actions in such jurisdictions including, but not limited to civil and criminal penalties, damages, fines, the curtailment or restructuring of Gold Flora Corporation’s operations or asset seizures and the denial of regulatory applications.

The market price of the Gold Flora Common Stock may be highly volatile.

Market prices for cannabis companies have at times been volatile and subject to substantial fluctuations. The stock market, from time-to-time, experiences significant price and volume fluctuations unrelated to the operating performance of particular companies, including as a result of the COVID-19 pandemic. Future announcements concerning Gold Flora Corporation or its competitors, including those pertaining to financial results, financing arrangements, government regulations, developments concerning regulatory actions affecting Gold Flora Corporation, litigation, additions or departures of key personnel, and economic conditions and political factors in the United States may have a significant impact on the market price of the Gold Flora Common Stock. In addition, there can be no assurance that the Gold Flora Common Stock will continue to be listed on the Exchange.

The price of the Gold Flora Common Stock may to fluctuate significantly due to Gold Flora Corporation’s financial results and other reasons, including those unrelated to Gold Flora Corporation’s specific performance, such as reports by industry analysts, investor perceptions, regulatory developments (or lack thereof) or negative announcements by its competitors or suppliers regarding their own performance, as well as general economic and industry conditions. For example, to the extent that other large companies within its industry experience declines in their stock price, the share price of the Gold Flora Common Stock may decline as well. In addition, when the market price of a company’s shares drops significantly, shareholders often institute securities class action lawsuits against the company. A lawsuit against Gold Flora Corporation could cause it to incur substantial costs and could divert the time and attention of its management and other resources.

Certain of Gold Flora Corporation’s officers and its manager are, and may continue to be, or may become, involved in other business ventures through their direct and indirect participation in, among other things, corporations, partnerships and joint ventures, that are or may become competitors of the products and services Gold Flora Corporation provides or intends to provide. Situations may arise in connection with potential acquisitions or opportunities where the other interests of these directors and officers conflict with or diverge from Gold Flora Corporation’s interests. In accordance with applicable law, officers and managers who have a material interest in a contract or transaction or a proposed contract or transaction with Gold Flora Corporation are required, subject to certain exceptions, to disclose that interest and generally abstain from voting on any resolution to approve the transaction. In addition, the directors and officers are required to act honestly and in good faith with a view to Gold Flora Corporation’s best interests.

However, in conflict of interest situations, Gold Flora Corporation’s managers and officers may owe the same duty to another company and will need to balance their competing interests with their duties to Gold Flora Corporation. Circumstances (including with respect to future corporate opportunities) may arise that may be resolved in a manner that is unfavorable to Gold Flora Corporation.

Anti-takeover provisions contained in Gold Flora Corporation’s certificate of incorporation and Gold Flora Corporation’s bylaws and under Delaware law could impair a takeover attempt

Certain provisions of Delaware law, as well as provisions in Gold Flora Corporation’s certificate of incorporation and bylaws, may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. These provisions may make it more difficult to remove management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for Gold Flora Corporation’s securities. Among other things, these provisions:

	·	allow the Gold Flora Board to authorize the issuance of undesignated preferred stock, the terms of which may be established and the shares of which may be issued without stockholder approval, and which may include supermajority voting, special approval, dividend, or other rights or preferences superior to the rights of other stockholders;

	·	prohibit stockholder action by written consent;

	·	provide that special meetings may only be called by (i) the Chairperson of the Gold Flora Board, (ii) the Gold Flora Board, or (iii) the Secretary of Gold Flora Corporation, following receipt of one or more written demands to call a special meeting of the stockholders from stockholders of record who own, in the aggregate, at least 25% of the voting power of the outstanding shares of Gold Flora Corporation then entitled to vote on the matter or matters to be brought before the proposed special meeting;

	·	provide that Gold Flora Corporation may indemnify Gold Flora Corporation’s directors and officers, in each case to the fullest extent permitted by Delaware law; and

	·	establish advance notice requirements for nominations for elections to the Gold Flora Board and for proposing matters that can be acted upon by stockholders at stockholder meetings.

Gold Flora Corporation’s certificate of incorporation provides that the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware) will be the exclusive forums for certain disputes between Gold Flora Corporation and its stockholders, which could make its securities less attractive and impose legal costs on us if such limitations are challenged.

Gold Flora Corporation’s certificate of incorporation provides that, unless Gold Flora Corporation otherwise consents in writing, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware) is, to the fullest extent permitted by law, the sole and exclusive forum for:

	·	any derivative action or proceeding brought on behalf of Gold Flora Corporation;

	·	any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of Gold Flora Corporation to Gold Flora Corporation or its stockholders;

	·	any action arising pursuant to any provision of the Delaware General Corporation Law or the Gold Flora Corporation certificate of incorporation or bylaws (as either may be amended from time to time); or

	·	any action asserting a claim governed by the internal affairs doctrine.

Table of Contents

Unless Gold Flora Corporation consents in writing to the selection of an alternative forum, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended (the “Securities Act”), or the Securities Exchange Act of 1934, as amended. Any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of Gold Flora Corporation shall be deemed to have notice of and consented to this provision of Gold Flora’s certificate of incorporation.

These exclusive forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with Gold Flora Corporation or Gold Flora Corporation’s directors, officers, or other employees and this limitation may make Gold Flora Corporation’s securities less attractive to investors. Further, while the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring such a claim arising under the Securities Act against Gold Flora Corporation or its directors, officers, or other employees in a venue other than in the federal district courts of the United States. In such instance, Gold Flora Corporation would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of its certificate of incorporation. This may require significant additional costs associated with resolving such action in other jurisdictions and Gold Flora Corporation cannot assure you that the provisions will be enforced by a court in those other jurisdictions. If a court were to find the exclusive-forum provisions in Gold Flora Corporation’s certificate of incorporation to be inapplicable or unenforceable in an action, Gold Flora Corporation may incur further significant additional costs associated with resolving the dispute in other jurisdictions, all of which could harm Gold Flora Corporation’s business.

Changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters could significantly affect Gold Flora Corporation’s reported financial results or financial condition.

Generally accepted accounting principles and related accounting pronouncements, implementation guidelines and interpretations with regard to a wide range of matters that are relevant to Gold Flora Corporation’s business, including but not limited to revenue recognition, impairment of goodwill and intangible assets, inventory, income taxes and litigation, are highly complex and involve many subjective assumptions, estimates and judgments. Changes in these rules or their interpretation, or changes in underlying assumptions, estimates or judgments, could significantly change Gold Flora Corporation’s reported financial performance or financial condition in accordance with generally accepted accounting principles.

Table of Contents

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

~~Recent Sales of Unregistered Securities~~

During the quarter ended September 30, 2021, we (i) granted to our directors, officers, and employees an aggregate of 836,642 restricted stock units under the TPCO Holding Corp. Equity Incentive Plan (the “Equity Plan”) and (ii) we issued and sold to our officers and employees an aggregate of 39 Common Shares upon the exercise of stock options issued under our applicable legacy equity plans at a weighted-average exercise price of $7.04 for an aggregate exercise price of $275. The RSUs and Common Shares issued upon exercise of options have been issued in reliance on either Rule 701 under the Securities Act or Section 4(a)(2) of the Securities Act.

~~Purchases of Equity Securities By the Issuer and Affiliated Purchasers~~
~~The following table sets forth certain information with respect to repurchases of our Common Shares and Warrants during the quarter ended September 30, 2021:~~

Period

Total Number
of Shares
Purchased

Average
Price Paid
Per Share

Total
Number of
Shares
Purchased
as Part of
Publicly
Announced
Plans or
Programs(2)

Maximum
Number of
Shares that
May Yet Be
Purchased
Under the
Plans or
Programs(2)

Total
Number of
Warrants
Purchased

Average
Price Paid
per
Warrant

Total
Number of
Warrants
Purchased
as part of
Publicly
Announced
Plans or
Programs(2)

Maximum Number
of Warrants that
May Yet Be
Purchased under
the Plans or
Programs(2)

July 1 - July 31, 2021
   —   —      —      —      —      —      —      —
August 1 - August 31, 2021
   143,600 $ 3.84    143,600    4,768,655    —      —      —      1,791,875
September 1 - September 30, 2021
   589,000 (1) $ 3.92    14,000    4,754,655    —      —      —      1,791,875
Total
   732,600 (1) N/A    157,600    4,754,655    —      —      —      1,791,875
~~(1)~~
Includes 575,000 Common Shares purchased pursuant to Share Repurchase Agreements (as defined below). On July 30, 2021, the Company announced that it had entered into automatic share repurchase agreements with certain employees (the “Share Repurchase Agreements”) to repurchase no more than 1,725,000 Common Shares that had been issued to such employees as part of the Qualifying Transaction for the purpose of funding such employees’ tax liabilities. Pursuant to the terms of the Share Repurchase Agreements, the Common Shares are to be repurchased at market value over a three-month period, which began on September 1, 2021. Repurchased Common Shares are cancelled. As of September 30, 2021, 575,000 Common Shares had been purchased from the employees for a total of approximately $2,257,000 under the Share Repurchase Agreements.
~~(2)~~
On August 16, 2021, the Company announced that the Neo Exchange Inc. had accepted the Company’s notice of intention to commence a Normal Course Issuer Bid (the “Common Share Bid”) for Common Shares and a Normal Course Issuer Bid (the “Warrant Share Bid” and, together with the Common Share Bid, the “Bids”) for the Company’s Share Purchase Warrants to acquire Common Shares (the “Warrants”). Pursuant to Bids, the Company may repurchase on the open market (or as otherwise permitted), up to 4,912,255 Common Shares and 1,791,875 Warrants, representing approximately 5% of the issued and outstanding of each of the Common Shares and the Warrants (within the meaning of the rules of the Exchange), subject to the normal terms and limitations of such bids. Notwithstanding the foregoing, the Bids are subject to an aggregate cap of $25,000,000. The Company may purchase its Common Shares and Warrants at its discretion during the period commencing on August 18, 2021, and ending on the earlier of (i) August 17, 2022, (ii) $25,000,000 of purchases under the Bids, and (iii) the completion of purchases under the applicable Bid. Notwithstanding the foregoing, the Company did not commence purchases under the Bids until the expiry of its regular self-imposed quarterly blackout period. For additional information regarding the Bids, see “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Normal Course Issuer Bid” in Part I of this Form
~~10-Q.~~

Not applicable.

Item 3. Defaults Upon Senior Securities.

~~None.~~

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Table of Contents

Item 6. Exhibits.

Exhibit

Number

Title of Document

Notes

     3.1    Notice of Articles of Subversive Capital Acquisition Corp., dated July 15, 2019    (1 )
     3.2    Articles of Subversive Capital Acquisition Corp., dated July 15, 2019    (1 )
     3.3    Certificate of Change of Name, dated January 15, 2021 by Subversive Capital Acquisition Corp.    (1 )
     4.1    Specimen Common Share Certificate    (1 )
     4.2    Warrant Agency Agreement between the Company and Odyssey Trust Company dated July 16, 2019    (1 )
   10.11+    Employment Letter Agreement, dated August 10, 2021 between TPCO Holding Corp. and Troy Datcher    (1 )
   10.12    Form of Lock-Up Agreement, dated as of July 28, 2021, by and between TPCO Holding Corp., on the one hand, certain members of its leadership team and the members of the board of directors of TPCO Holding Corp., on the other hand    (1 )
   10.14    CMG Partners, Inc. 2019 Stock Option and Grant Plan    (2 )
   10.15    Left Coast Ventures, Inc. Amended and Restated 2018 Equity Incentive Plan    (3 )
   31.1    Section 302 Certification of Principal Executive Officer    *
   31.2    Section 302 Certification of Principal Financial Officer    *
   32.1    Section 1350 Certification of Principal Executive Officer    *
   32.2    Section 1350 Certification of Principal Financial Officer    *
101.SCH    Inline XBRL Taxonomy Extension Schema Document    *
101.CAL    Inline XBRL Taxonomy Extension Calculation Linkbase Document    *
101.DEF    Inline XBRL Taxonomy Extension Definition Linkbase Document    *
101.LAB    Inline XBRL Taxonomy Extension Label Linkbase Document    *
101.PRE    Inline XBRL Taxonomy Extension Presentation Linkbase Document    *
104    Cover Page Interactive Data File (embedded within the Inline XBRL document)    *

		Incorporated by Reference From
Exhibit No.	Title of Document	Form	Date Filed	Exhibit Number	Filed/Furnished Herewith

2.8†*	Business Combination Agreement, dated February 21, 2023, by and among TPCO Holding Corp., Gold Flora, LLC, Stately Capital Corporation, Gold Flora Corporation and Golden Grizzly Bear LLC	8-K	2/27/2023	2.1	-
3.1	Certificate of Incorporation of Gold Flora Corporation	8-K	7/13/2023	3.1	-
3.2	Bylaws of Gold Flora Corporation	8-K	7/13/2023	3.2	-
4.1	Supplemental Warrant Indenture between Gold Flora Corporation and Odyssey Trust Company dated July 7, 2023	8-K	7/13/2023	4.1	-
10.1+	Gold Flora Corporation 2023 Equity Incentive Plan	8-K	7/13/2023	10.1	-
31.1	Section 302 Certification of Principal Executive Officer	-	-	-	X
31.2	Section 302 Certification of Principal Financial Officer	-	-	-	X
32.1††	Section 1350 Certification of Principal Executive Officer	-	-	-	X
32.2††	Section 1350 Certification of Principal Financial Officer	-	-	-	X
101.SCH	Inline XBRL Taxonomy Extension Schema Document	-	-	-	X
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document	-	-	-	X
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document	-	-	-	X
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document	-	-	-	X
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document	-	-	-	X
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)	-	-	-	X

~~Filed herewith.~~

Schedules and exhibits to this Exhibit omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request.

+
†		Certain identified portions of this Exhibit have been omitted pursuant to Item 601(b)(2) of Regulation S-K.

††	This exhibit shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that Section. Such exhibit shall not be deemed incorporated into any filing under the Securities Act of 1933, as amended, or the Exchange Act.

+		Management contract or compensatory plan or arrangement.

~~(1)~~

~~Incorporated by reference to same-numbered exhibit filed as an exhibit to Amendment No. 1 to the Company’s Registration Statement on Form 10 filed with the SEC on October 1, 2021.~~

~~(2)~~

~~Incorporated by reference to Exhibit 4.2 to Company’s Registration Statement on Form~~

~~S-8~~

~~filed with the SEC on November 12, 2021.~~

~~(3)~~Table of Contents

~~Incorporated by reference to Exhibit 4.3 to Company’s Registration Statement on Form~~

~~S-8~~

~~filed with the SEC on November 12, 2021.~~

The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on

its behalf by the undersigned thereunto duly authorized.

	GOLD FLORA CORPORATION
			~~TPCO HOLDING CORP.~~
Date: August 14, 2023	By:	/s/ Laurie Holcomb
~~Date: November 15, 2021~~		Laurie Holcomb	~~By:~~	~~/s/ Troy Datcher~~
				~~Troy Datcher~~
				Chief Executive Officer
		(Principal Executive Officer)

Date: ~~November 15, 2021~~August 14, 2023	By:		~~By:~~	/s/ ~~Mike Batesole~~Marshall Minor
		Marshall Minor		~~Mike Batesole~~
				Chief Financial Officer ~~(Principal~~ (Principal Financial Officer)


As at	Note		September 30, 2021				December 31, 2020
Assets
Current
Cash			$	206,677,145			$	0—
Restricted cash and cash equivalents				13,354,531				582,622,025
Accounts receivable		32		4,943,064				0—
Other receivable		5		0—				24,977,765
Inventory		6		33,671,677				0—
Prepaid expenses				8,873,203				0—
Current portion of notes receivable		7		7,370,563				0—
Assets held for sale		16		2,615,440				0—
Other current assets				4,502,933				0—

Total current asset				282,008,556				607,599,790

Notes receivable		7		700,000				0—
Investments at fair value through profit and loss		8		2,740,696				—
Investment in non-marketable securities		14		591,545				0��
Security deposits				1,016,052				0—
Prepaid expenses and other assets				43,484				81,333
Property and equipment		9		17,837,329				0
Right-of-use assets – operating		13		18,666,330				0
Right-of-use assets – finance		13		34,984,381				0
Goodwill and intangibles		10		211,322,718				0

Total assets			$	569,911,091			$	607,681,123

Liabilities
Current
Accounts payable and accrued liabilities		12	$	37,199,408			$	28,321,972
Consideration payable				5,555,778				0—
Operating lease liability – current portion		13		1,931,212				0—
Finance lease liability – current portion		13		5,091				0—
Share repurchase liability		17		2,233,000				0—
Cash settled share-based payments				4,433,771				0—
Contingent consideration		32		9,765,114				0—
Liabilities held for sale		16		2,359,887				0—

Total current liabilities				63,483,261				28,321,972

Operating lease liabilities		13		18,197,829				0—
Finance lease liabilities		13		36,770,703				0—
Deferred tax liabilities		24		44,785,647				0—

Total liabilities				163,237,440				28,321,972

Mezzanine equity
Class A Restricted Voting Shares, 0 par value; unlimited Class A restricted voting shares authorized, 57,500,000 issued and outstanding at December 31, 2020		18		0—				582,622,025
Subscription receipts		18		0—				25,087,000

Total mezzanine equity				0—				607,709,025

Shareholders’ (deficit) equity						��
Class B shares, 0 par value; unlimited Class B shares authorized, NaN issued and outstanding at September 30, 2021 and 15,218,750 December 31, 2020		20		0				0
Common shares, 0 par value, unlimited Common Shares authorized, 97,179,378 issued and outstanding at September 30, 2021 and NaN at December 31, 2020		20		0				0
Additional paid in capital				949,105,497				(21,886,268	)
Accumulated (deficit) equity				(542,431,846	)			(6,463,606	)

Total shareholders’ (deficit) equity				406,673,651				(28,349,874	)

Total liabilities, mezzanine equity and shareholders’ (deficit) equity			$	569,911,091			$	607,681,123


		Three months ended						Nine months ended
	Note	September 30, 2021			September 30, 2020			September 30, 2021			September 30, 2020
Sales, net of discounts	4(m)	$	39,665,059		$	—		$	133,785,604		$	—
Cost of sales			33,577,226			0—			115,873,627			0—

Gross profit			6,087,833			0—			17,911,977			0—

Impairment loss	16		570,300,047			0—			645,199,154			0—
Operating expenses	25		31,594,206			371,666			137,582,126			794,795

Loss from operations			(595,806,420	)		(371,666	)		(764,869,303	)		(794,795	)
Other income (expense)
Interest income			1,038,139			155,416			1,086,418			2,244,416
Interest expense	27		(1,133,341	)		—			(3,728,576	)		—
Gain on debt forgiveness	15		0—			0—			3,358,686			0—
Loss on disposal of assets	26		(137,042	)		—			(3,656,707	)		—
Change in fair value of investments at fair value through profit or loss	8		(768,030	)		0—			(418,818	)		0—
Change in fair value of contingent consideration	32		38,178,321			0—			220,997,087			0—
Other income			123,946			0—			2,748,843			0—

			37,301,993			155,416			220,386,933			2,244,416

Income (loss) before income taxes			(558,504,427	)		(216,250	)		(544,482,370	)		1,449,621
Income tax recovery (expense)	24		(2,845,623	)		—			8,018,073			—

Net income ( loss ) and comprehensive I ncome ( loss )		$	(561,350,050	)	$	(216,250	)	$	(536,464,297	)	$	1,449,621

Earnings (loss) per share
Basic and diluted	23	$	(5.70	)	$	(0.00	)	$	(5.72	)	$	(0.05	)
Weighted average number of common shares
Basic and diluted	23		98,421,935			15,218,750			93,802,606			15,218,750


		Number of
	Note	Common Shares			Warrants		Class B Shares			Shares to be Issued		Additional Paid in Capital			Accumulated Deficit			Total
Balance, December 31, 2019			0			35,837,500		15,218,750			0	$	589,044		$	0		$	589,044
Net income			—			—		—			—					1,449,621			1,449,621
Adjustment to mezzanine equity	18		—			—		—			—		(794,795	)		(1,449,621	)		(2,244,416	)

Balance September 30, 2020			0			35,837,500		15,218,750			0		(205,751	)		—			(205,751	)

Balance December 31, 2020			0			35,837,500		15,218,750			0		(21,886,268	)		(6,463,606	)		(28,349,874	)
Conversion of Class B shares	20		14,655,547			—		(14,655,547	)		—		—			—			—
Founders’ shares forfeited	20		—			—		(563,203	)		—		(496,057	)		496,057			—
Shares issued in a private placement	20		6,313,500			—		—			—		63,135,000			—			63,135,000
Conversion of Class A restricted voting shares	20		31,407,336			—		—			—		318,303,338			—			318,303,338
Shares issued for long-term strategic contracts	19, 20		2,376,425			—		—			—		25,000,000			—			25,000,000
Shares issued in a business acquisition	20		42,915,923			—		—			247,356		546,447,112			—			546,447,112
Shares issued to extinguish liabilities in a business acquisition	20		336,856			—		—			—		4,264,597			—			4,264,597
Shares to be issued reclassified from contingent consideration	32		24,584			—		—			309,284		1,957,045			—			1,957,045
Contingent shares to be issued in a business acquisition	3		—			—		—			187,380		2,372,231			—			2,372,231
Replacement options issued in a business acquisition	3		—			—		—			—		3,489,501			—			3,489,501
Share repurchase obligation	17		—			—		—			—		(7,055,250	)		—			(7,055,250	)
Shares repurchased under share repurchase agreements	17,20		(1,037,500	)		—		—			—		—			—			—
Shares repurchased under NCIB	20		(157,600	)		—		—			—		(603,165	)		—			(603,165	)
Shares issued for options exercised	22		3,313			—		—			—		12,972			—			12,972
Shares issued for RSUs vested	20,22		340,994			—		—			—		—			—			—
Tax settlements associated with RSUs	22		—			—		—			—		(972,741	)		—			(972,741	)
Modification of RSUs	22		—			—		—			—		3,451,365			—			3,451,365
Share-based compensation	22		—			—		—			—		11,685,817			—			11,685,817
Net income			—			—		—			—		—			(536,464,297	)		(536,464,297	)


Balance September 30, 2021			97,179,378			35,837,500		0			744,020	$	949,105,497		$	(542,431,846	)	$	406,673,651


Subsidiaries	Jurisdiction of incorporation		Ownership interest September 30, 2021			Ownership interest December 31, 2020
TPCO US Holding LLC		California		100	%		100	%
Social Equity Ventures LLC		California		100	%		0
CMG Partners, Inc.		California		100	%		0
well. By Caliva LLC		California		100	%		0
well. By Caliva Centers		California		100	%		0
well. By Caliva e-commerce, LLC		California		100	%		0
Live Zola, LLC		California		100	%		0
NC3 Systems, Inc.		California		100	%		0
NC4 Systems, Inc.		California		100	%		0
NC5 Systems, Inc.		California		100	%		0
NC6 Systems, Inc.		California		100	%		0
Caliva CADECC1, LLC		California		100	%		0
Caliva CARERC1, LLC		California		100	%		0
Caliva CAMISJ2, Inc.		California		100	%		0
OG California Branding, Inc.		California		100	%		0
Caliva CAREDELA1, LLC		California		42	%		0
G & C Staffing, LLC		California		100	%		0
Fresh Options, LLC		California		100	%		0
Alpha Staffing, LLC		California		100	%		0
Caliva CAREWH1, LLC		California		100	%		0
Caliva CARECE1, LLC		California		100	%		0
Caliva CADESA1, LLC		California		100	%		0
Caliva CADEEM1, LLC		California		100	%		0
Caliva CAREST1, LLC		California		100	%		0
Caliva MSA, LLC		California		100	%		0
Coast L Acquisition Corp		California		100	%		0
Left Coast Ventures, Inc.		Delaware		100	%		0
Sturdivant Ventures, LLC		California		100	%		0
LCV Holdings, HMB, LLC		California		100	%		0
Rever Holdings, LLC		California		100	%		0
Eko Holdings, LLC		California		100	%		0
Lief Holdings, LLC		California		100	%		0
LCV Holdings SISU 710, LLC		California		100	%		0
SISU Extraction, LLC		California		100	%		0
Fluid South, Inc.		California		100	%		0
Capitol Cocoa, Inc.		California		100	%		0


	Caliva/OGE		LCV		SISU		Total
Total consideration transferred	$	619,766,731	$	120,651,941	$	92,188,146	$	832,606,818

Assets acquired
Cash, restricted cash and cash equivalents		11,164,957		3,022,262		976,906		15,164,125
Accounts receivable		2,006,699		1,090,811		1,022,532		4,120,042
Inventory		13,105,532		7,548,844		5,580,258		26,234,634
Prepaid expenses		2,678,356		164,750		82,701		2,925,807
Other current assets		3,110,481		2,051,188		—		5,161,669
Property and equipment		7,785,157		3,305,145		1,163,902		12,254,204
Intangible assets		187,600,000		28,520,000		46,200,000		262,320,000
Right of use assets		48,702,768		4,461,809		1,183,451		54,348,028
Investment in associate		—		6,500,000		—		6,500,000
Investment in non-marketable securities		591,545		—		—		591,545
Security deposits and other		869,238		137,051		34,175		1,040,464

Total assets acquired		277,614,733		56,801,860		56,243,925		390,660,518

Liabilities assumed
Accounts payable and accrued liabilities		27,330,222		14,817,802		8,242,144		50,390,168
Consideration payable		2,458,844		2,348,970		—		4,807,814
Loans payable		3,060,250		298,436		—		3,358,686
Line of credit		—		—		1,000,000		1,000,000
Deferred tax liability		41,771,987		6,383,639		9,698,111		57,853,737
Lease liabilities		49,746,261		4,461,809		1,183,451		55,391,521

Total liabilities assumed		124,367,564		28,310,656		20,123,706		172,801,926

Goodwill	$	466,519,562	$	92,160,737	$	56,067,927	$	614,748,226


	Three months ended September 30, 2021		Nine months ended September 30, 2021
Direct to consumer	$	12,793,900	$	34,372,371
Wholesale		26,871,159		99,413,233

	$	39,665,059	$	133,785,604


	September 30, 2021
Packaging supplies	$	19,269
Biological assets		1,203,531
Raw materials		7,065,136
Work in progress		4,478,045
Finished goods		20,905,696

	$	33,671,677


	September 30, 2021			December 31, 2020

Soma Rosa (i)	$	5,650,000		$	0
Promissory note receivable (ii)		720,563			0
Other receivable (iii)		1,700,000			0

Total notes receivable		8,070,563			0
Less: current portion of note receivable		(7,370,563	)		0

Long term portion of note receivable	$	700,000		$	0


	Level 1			Level 2		Level 3		Total

Balance, January 1, 2021	$	0		$	0	$	0	$	0
Acquired in the period		2,159,514			0		900,000		3,059,514
Change in fair value		339,234			0		9,978		349,212

Balance, June 30, 2021	$	2,498,748		$	0	$	909,978	$	3,408,726
Acquired in the period		0			0		100,000		100,000
Change in fair value		(786,030	)		0		18,000		(768,030	)

Balance, September 30, 2021	$	1,712,718		$	0	$	1,027,978	$	2,740,696


	Leasehold improvements			Production equipment			Furniture and fixtures			Vehicles		Office equipment			Building		Total
Gross carrying amount
Balance, December 31, 2020	$	0		$	0		$	0		$	0	$	0		$	0	$	0
Acquired in a business combination (Note 3)		7,776,866			3,053,047			436,963			372,774		614,554			0		12,254,204
Acquired in a business combination (Note 11)		16,033			0			0			0		0			0		16,033
Additions		1,360,421			312,130			119,227			198,410		186,183			6,549,489		8,725,860
Disposals		(327,699	)		(350,479	)		(52,895	)		0		(31,509	)		0		(762,582	)

Balance, September 30, 2021	$	8,825,621		$	3,014,698		$	503,295		$	571,184	$	769,228		$	6,549,489	$	20,233,515

Depreciation
Balance, December 31, 2020	$	0		$	0		$	0		$	0	$	0		$	0	$	0
Additions		1,169,976			961,702			154,207			74,124		126,278			21,833		2,508,120
Disposals		(19,934	)		(91,350	)		(650	)		0		0			0		(111,934	)

Balance, September 30, 2021	$	1,150,042		$	870,352		$	153,557		$	74,124	$	126,278		$	21,833	$	2,396,186

Carrying amount December 31, 2020	$	0		$	0		$	0		$	0	$	0			0	$	0

Carrying amount September 30, 2021	$	7,675,579		$	2,144,346		$	349,738		$	497,060	$	642,950		$	6,527,656	$	17,837,329


	Goodwill			License			Cultivation Network		Brand			Customer Relationship		Total
Gross carrying amount
Balance, December 31, 2020	$	0		$	0		$	0	$	0		$	0	$	0
Acquired in a business combination (Note 3)		614,748,226			145,240,000			5,020,000		109,140,000			2,920,000		877,068,226
Acquired in a business combination (Note 11)		1,135,040			1,640,000			—		950,000			—		3,725,040
Provisional impairment prior to transfer to assets held for sale (Note 16)		(52,796,616	)		(16,460,000	)		—		(5,233,771	)		—		(74,490,387	)
(Impairment) recovery of provisional impairment		(561,951,608	)		(17,785,910	)				9,510,000			—		(570,227,518	)
Transferred to assets held for sale (Note 16)		—			(400,000	)		—							(400,000	)
Disposals		—			(250,000	)		—		(8,756,229	)		—		(9,006,229	)

Balance, September 30, 2021	$	1,135,042		$	111,984,090		$	5,020,000	$	105,610,000		$	2,920,000	$	226,669,132

Amortization
Balance, December 31, 2020	$	—		$	0		$	0	$	0		$	0	$	0
Additions		—			11,465,353			507,976		3,757,930			229,842		15,961,101
Pro visional impa irment prior to transfer to assets held for sale (Note 16)		—			(614,687	)		—							(614,687	)

Balance, September 30, 2021	$	—		$	10,850,666		$	507,976	$	3,757,930		$	229,842	$	15,346,414

Carrying amount December 31, 2020	$	0		$	0		$	0	$	0		$	0	$	0

Carrying amount September 30, 2021	$	1,135,042		$	101,133,424		$	4,512,024	$	101,852,070		$	2,690,158	$	211,322,718


	Estimated Amortization
2021	$	18,478,118
2022		16,749,785
2023		16,038,118
2024		15,978,708
2025		15,496,990
Thereafter		127,445,957

	$	210,187,676


Direct-to-consumer (“DTC”)	$	464,846,560
Wholesale – Branded products	$	41,037,121
Wholesale – Non-branded products	$	56,067,927


Reporting unit	Discount Rate			Forecasted Sales Growth Rate			Terminal Value Growth Rate
DTC		13.5	%		Average of 24	%		3	%
Wholesale – Branded products		13.5	%		Average of 17	%		3	%
Wholesale – Non-branded products		18.5	%		Average -4	%		3	%


	Kase’s Journey		Martian Delivery
Consideration
Cash	$	1,198,050	$	237,500
Consideration payable		1,221,902		237,500

Total consideration	$	2,419,952	$	475,000
Assets acquired
Current assets
Cash	$	33,213	$	0
Inventory		98,050		0
Long-term assets
Brand		700,000		250,000
Licenses		1,450,000		190,000
Property and equipment		16,033		0
ROU asset		151,769		282,165

Total assets acquired		2,449,065		722,165

Liabilities assumed
Accounts payable		204,528		0
Deferred tax liability		641,560		131,296
Lease liability		151,769		282,165

Total liabilities assumed		997,857		413,461

Goodwill	$	968,744	$	166,296


	Three months ended September 30, 2021		Nine months ended September 30, 2021
Operating lease costs	$	1,087,812	$	3,276,333

Finance lease cost:
Amortization of lease assets		558,424		1,618,135
Interest on lease liabilities		1,120,925		3,385,978

Finance lease cost		1,679,349		5,004,113
Short term lease expense		41,100		179,249

Total lease costs	$	2,808,261	$	8,459,695


	Operating Lease			Finance Lease
Weighted average discount rate		11.57	%		13.02	%
Weighted average remaining lease term (in years)		4.32			16.00


	September 30, 2021
Intangible assets	$	400,000
Right-of-use assets		2,215,440

	$	2,615,440


	September 30, 2021
Current portion of lease liabilities	$	337,292
Deferred tax liability		64,456
Lease liabilities		1,958,139

	$	2,359,887


	Nine months ended
	September 30, 2021		September 30, 2020
Shares repurchased		1,037,500		0
Average price	$	3.71	$	0
Aggregate value	$	3,851,406	$	0


	September 30, 2021		December 31, 2020
Class A restricted voting shares (i)	$	—	$	582,622,025
Subscription receipts (ii)		—		25,087,000

	$	—	$	607,709,025


	September 30, 2021		September 30, 2020
Interest allocable to Class A restricted voting shares	$	—	$	2,244,416


	Number of Warrants		Weighted Average Exercise Price
Balance, December 31, 2019		35,837,500	$	11.50
Granted		0—		0—
Exercised		0—		0—
Expired		0—		0—

Balance, December 31, 2020 and September 30, 2021		35,837,500	$	11.50


	September 30, 2021
	Number of options			Weighted average exercise price $
Outstanding, beginning of period		0			0
Replacement options issued (i)		1,066,333			7.30
Granted during the period		0			0
Exercised		(3,313	)		3.92
Expired		(33,881	)		6.69
Forfeited		(232,647	)		7.36

Outstanding, end of period		796,492			7.31


	Fair value
Allocated to pre-acquisition services (i)	$	3,847,633
Allocated to post-combination services		5,116,866

Total fair value of Replacement Options	$	8,964,499


Options Outstanding						Options Exercisable
Range of Exercise Prices		Number Outstanding		Weighted -Average Exercise Price		Weighted- Average Life		Number Exercisable		Weighted-Average Exercise Price
$	6.67 – 8.30		796,492	$	7.31		8.38 years		403,471	$	6.15


	September 30, 2021
	Number of RSUs			Weighted average remaining contractual life
Outstanding, beginning of period		0			—
Granted		2,528,696			2.28
Modified		(1,446,196	)		3.34
Settled		(288,150	)		—
Vested		(82,500	)		—
Forfeited		(519,350	)		3.29

Outstanding, end of period		192,500			3.29


	Number of shares		Fair value on January 15, 2021
Tranche 1		215,608	$	2,597,618
Tranche 2		215,608		2,314,652
Tranche 3		215,608		2,066,609

		646,824	$	6,978,879


	Replacement Options			RSUs equity-settled		RSUs cash-settled
Dividend yield		—			—		—
Expected volatility		72	%		—		—
Risk-free interest rate		0.17% - 0.71	%		—		—
Share price	$	12.66			—		—
Grant date fair value	$	7.75 - $9.54		$	3.60 – $9.94		N/A
Fair value on September 30, 2021		N/A			N/A	$	3.19


	Three months ended						Nine months ended
	September 30, 2021			September 30, 2020			September 30, 2021			September 30, 2020
(Loss) income before tax	$	(558,504,427	)		(216,250	)	$	(544,482,370	)	$	1,449,621
Statutory income tax rate		27	%		27	%		27	%		27	%
Income tax expense (recovery) based on statutory rate		(150,796,195	)		(58,388	)		(147,010,240	)		391,398
Increase (decrease) resulting from:
Non-taxable items		163,390,934			0			137,906,638			0
Change in valuation allowance		5,623,212			58,388			19,187,002			(391,398	)
Other		1,790,314			0			1,790,314			0
Tax rate differences and tax rate changes		(17,162,642	)		0			(19,891,787	)		—

Income tax (recovery) expense	$	2,845,623			0		$	(8,018,073	)	$	0