UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended ~~June 30, 2022~~March 31, 2024


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

For the transition period from to

Commission file number 000-56342

VERANO HOLDINGS CORP.

(Exact name of registrant as specified in its charter)


British Columbia, Canada		98-1583243
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

~~415 North Dearborn~~ 224 W Hill Street, ~~4th Floor,~~Suite 400, Chicago, Illinois		~~60654~~60610
(Address of Principal Executive Offices)	(Zip Code)

~~Registrant's telephone number, including area code:~~ (312) ~~265 0730~~265-0730


(Registrant's telephone number, including area code)


N/A
(Former name, former address and former fiscal year, if changes since last report)

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

Title of each class

Trading Symbol

Name of each exchange on which registered

N/A

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 ox No xo

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ such files). Yes x No o

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated ~~filer” and~~filer,” “smaller reporting ~~company”~~company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. ~~(Check one):~~

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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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. xo

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

~~The~~As of May 6, 2024, the registrant had ~~outstanding 318,946,319 Subordinate Voting Shares~~344,163,149 Class A subordinate voting shares and ~~136,726 Proportionate Voting Shares for a total of 332,618,962 Subordinate Voting Shares on an as converted basis as of August 14, 2022.~~no Class B proportionate voting shares outstanding.

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			Pages

Part I - Financial Information			1
	Item 1.	Unaudited Inte rim C ondensed Consolidated Financial Statements	1
		Condensed Consolidated Balance Sheets	12
		Unaudited Interim Condensed Consolidated Statements of Operations	23
		Unaudited Interim Condensed Consolidated Statements of Changes in Shareholders' Equity	34
		Unaudited Interim Condensed Consolidated Statements of Cash Flows	5
		Notes to Unaudited Interim Condensed Consolidated Financial Statements	76
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	3827
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5035
	Item 4.	Controls and Procedures	5035

Part II - Other Information			5236
	Item 1.	Legal Proceedings	5236
	Item 1A.	Risk Factors	5236
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5236
	Item 3.	Defaults Upon Senior Securities	5236
	Item 4.	Mine Safety Disclosures	5336
	Item 5.	Other Information	5336
	Item 6.	Exhibits	5437
Signatures			5538

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Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q (this “Form 10-Q”) contains “forward-looking information” and “forward-looking statements” within the meaning of United States securities laws (together, “forward-looking statements”). All statements, other than statements of historical fact, made by the Company or its affiliates that address activities, events or developments that the Company or its affiliates expect or anticipate will or may occur in the future are forward-looking statements, including, but not limited to, statements preceded by, followed by or that include words such as “may,” “will,” “would,” “could,” “should,” “believes,” “assumes,” “estimates,” “projects,” “potential,” “expects,” “plans,” “intends,” “anticipates,” “targeted,” “continues,” “forecasts,” “designed,” “goal,” “progress,” or the negative of those words or other similar or comparable words.

The forward-looking statements contained herein are based on certain key expectations and assumptions, including, but not limited to, expectations and assumptions concerning:

•our ability to obtain, maintain and renew licenses and other regulatory approvals in all states and localities of our operations and planned operations on a timely basis;

•government regulations, including future U.S. state and federal legislative and regulatory developments involving medical and adult-use cannabis and the timing thereof;

•our outlook on our expansion and growth of business and operations;

•our ability to achieve our goals, business plans and strategy;

•our ability to access capital and obtain necessary financing to pursue our growth and business plans;

•our operational results and other financial and business conditions and prospects;

•the timing and completion of acquisitions and other commercial transactions;

•the integration and operation of acquired businesses;

•the timing and amount of capital expenditures;

•the availability of facilities, equipment, skilled labor and services needed for cannabis operations;

•demand, developments and trends in the medical and adult-use cannabis industry;

•competition in the cannabis industry in the markets in which we operate or plan to operate;

•the medical benefits, viability, safety, efficacy, and dosing of cannabis;

•the size of the medical cannabis market and the adult-use cannabis market in each state; and

•conditions in general economic and financial markets.

Forward-looking statements may relate to future financial conditions, results of operations, plans, strategies, objectives, performance or business developments. These statements speak only as at the date they are made and are based on information currently available and on the then-current expectations of the party making the statement and assumptions concerning future events, which are subject to a number of known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from that which was expressed or implied by such forward-looking statements, including, but not limited to, risks and uncertainties related to:

•the illegality of cannabis under federal law, the U.S. federal regulatory landscape and enforcement related to medical or adult-use cannabis, including political risks, civil asset forfeiture and regulation by additional regulatory authorities;

•regulatory and political changes to U.S. federal, state and local laws related to medical or adult-use cannabis, including political risks and regulation by additional regulatory authorities;

•our limited operating history;

•the impacts of economic uncertainty stemming from disruptions in U.S. and global markets, inflation, rising interest rates, and changes in consumer and business confidence;

•our outstanding indebtedness and potential future indebtedness;

•any potential changes in our liquidity due to potential for instability in market and economic conditions and adverse developments to financial institutions;

•reliance on key management;

•market acceptance of existing and new products and potential returns or recalls of our products;

•customer acceptance of our brand portfolio;

•the accuracy of our forecasted demand for our products;

•the potential for fraudulent activity by employees, contractors and consultants;

•our exposure to growth-related operational and execution risks;

•potential negative findings in our clinical research with respect to our products;

•our ongoing litigation matter with Goodness Growth Holdings, Inc;

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•potential product liability claims;

•our exposure to natural phenomena and resulting potential uninsured or under insured losses;

•our structure and our resulting reliance on the performance of our subsidiaries and affiliates;

•our expansion-by-acquisition strategy;

•our ability to acquire businesses and cannabis licenses in desired markets and the integration and operation of acquired businesses;

•the typically limited operations of businesses we acquire;

•the unconventional due diligence process in the cannabis industry;

•our ability to acquire and lease properties suitable for the cultivation, production and sale of cannabis;

•potential limited representations and warranties of businesses we may acquire;

•our acquisition of businesses in developing cannabis markets;

•our lack of portfolio diversification;

•our use of joint ventures, strategic partnerships and alliances;

•our contractual relationships with our consolidated variable interest entities;

•existing competition and new market entrants;

•the introduction of synthetic alternatives to cannabis products by pharmaceutical and other companies;

•the immaturity of the cannabis industry and limited comparable, competitive and established industry best practices;

•the availability of and our reliance on third-party suppliers, service providers, contractors and manufacturers;

•wholesale and retail price fluctuations;

•public opinion and perception of the cannabis industry;

•the availability of raw or other materials;

•rising or volatile energy costs;

•agricultural and environmental risks and the impacts of environmental regulations on the cannabis industry and environmental protections;

•physical security risks, such as theft;

•potential scrutiny from Canadian authorities;

•disparate state-by-state regulatory landscapes and licensing regimes for medical and adult-use cannabis;

•the difficulties cannabis businesses face accessing and maintaining banking or financial services due to federal regulations;

•the cost and difficulty of complying with various regulatory schemes;

•the impact of state social equity legislation as it relates to the cannabis industry;

•the risk of high bonding and insurance costs;

•environmental regulations;

•effects of changes in laws and policies governing employees and by union organizing activity;

•potential divestment of licenses if required by regulatory authorities;

•our dependency on the banking industry;

•required public disclosure and governmental filings containing personal information of our officers, investors and other stakeholders;

•potential findings by regulatory authorities that one of shareholders is unsuitable;

•the risk that our directors, officers, employees or investors are barred from entering the U.S.;

•the ability to, and constraints on, promoting and marketing cannabis products;

•potential U.S. Food and Drug Administration governance of the cannabis industry;

•the potential limitations on our ability to enforce our contracts or any liens granted to us;

•the potential lack of access to federal bankruptcy protections in the U.S.;

•reliance on information technology systems, the potential disclosure of personal information of patients and customers and cybersecurity risks;

•our reliance on third-party software providers;

•cost related to preserving our brand identity;

•our ability to protect our intellectual property due to limited intellectual property protection available for cannabis products and the potential infringement by third parties;

•potential infringement or misappropriation claims;

•the risk of receiving no return on our securities;

•our elimination of monetary liability and indemnification rights against our directors, officers and employees under British Columbia law;

•our dual class capital structure with Class A subordinate voting shares and Class B proportionate voting shares;

•the time and resources necessary to comply with corporate governance practices and securities rules and regulations in the U.S. and Canada;

•our management’s ability to maintain effective internal controls;

iii

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•our remediation plan and ability to remediate the material weaknesses in our internal controls over financial reporting;

•potential dilution if we issue additional Subordinate Voting Shares or Proportionate Voting Shares;

•market perception of sales of a substantial amount of Subordinate Voting Shares;

•transfer restrictions on our Subordinate Voting Shares;

•price volatility of our Subordinate Voting Shares;

•our shareholders’ limited participation in our affairs;

•our expectation to not declare or pay out dividends;

•the concentration of our voting control;

•the taxation of cannabis companies in the U.S., including the impact of Section 280E of the Internal Revenue Code of 1986, as amended; and

•other risks described in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the U.S. Securities and Exchange Commission on March 15, 2024, as more particularly described under the heading “Item 1A. Risk Factors” therein.

Although we believe that the expectations and assumptions on which forward-looking statements are based are reasonable at the time made, undue reliance should not be placed on the forward-looking statements, because no assurance can be given that they will prove to be correct. Forward-looking statements address future events and conditions, and thus involve inherent risks and uncertainties. Readers are cautioned that the above list of cautionary statements is not exhaustive.

The cannabis industry involves risks and uncertainties that are subject to change based on various factors. Certain forward-looking statements contained herein concerning the cannabis industry and our general expectations concerning the cannabis industry are based on estimates prepared by us 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. Such data is inherently imprecise.

Consequently, all forward-looking statements made in this Form 10-Q and our other documents are qualified by such cautionary statements and there can be no assurance that the anticipated results or developments will actually be realized or, even if realized, that they will have the expected consequences to or effects on us. We do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, other than as required under applicable securities legislation.

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PART I - FINANCIAL INFORMATION

ITEM 1. UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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VERANO HOLDINGS CORP. Condensed Consolidated Balance Sheets ($ in Thousands)

June 30,
2022

December 31,
2021

(Unaudited)

(As Restated)

March 31,
2024

December 31,
2023

ASSETS

Current Assets:

Cash and Cash Equivalents

92,833

99,118

Accounts Receivable, net

13,253

17,410

Notes Receivable

—

285

Held for Sale Assets

Inventory

154,050

140,703

Prepaid Expenses and Other Current Assets

27,820

19,528

Total Current Assets

287,956

277,044

Total Current Assets

Property, Plant and Equipment, net

515,698

452,232

Right of Use Assets, net

71,472

61,346

Intangible Assets, net

1,343,371

1,379,913

Goodwill

376,637

368,130

Investment in Associates

7,252

7,491

Deposits and Other Assets

2,584

2,499

TOTAL ASSETS

2,604,970

2,548,655

TOTAL ASSETS

LIABILITIES AND SHAREHOLDERS’ EQUITY

LIABILITIES

Current Liabilities:

Accounts Payable

60,832

45,172

Accrued Liabilities

30,773

42,149

Income Tax Payable

161,430

154,512

Current Portion of Lease Liabilities

7,961

6,563

Current Portion of Notes Payable

258,880

13,771

Current Portion of Debt

Acquisition Consideration Payable

66,901

208,349

Total Current Liabilities

586,777

470,516

Total Current Liabilities

Long-Term Liabilities:

Deferred Revenue

271

1,183

Notes Payable, net of Current Portion

143,749

276,154

Long-Term Liabilities:

Debt, net of Current Portion

Lease Liabilities, net of Current Portion

66,122

56,812

Deferred Income Taxes

259,326

262,184

Other Long-Term Liabilities

Total Long-Term Liabilities

469,468

596,333

TOTAL LIABILITIES

1,056,245

1,066,849

TOTAL LIABILITIES

SHAREHOLDERS’ EQUITY

1,548,725

1,480,530

NON-CONTROLLING INTEREST

—

1,276

SHAREHOLDERS’ EQUITY

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

2,604,970

2,548,655

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

The accompanying notes are an integral part of these ~~unaudited interim condensed consolidated financial statements.~~Unaudited Interim Condensed Consolidated Financial Statements.

~~F-1~~2

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VERANO HOLDINGS CORP. Unaudited Interim Condensed Consolidated Statements of Operations ($ in Thousands except ~~share~~shares and per share amounts)

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Revenues, net of Discounts $ 223,662 $ 199,066 $ 425,897 $ 319,961
Cost of Goods Sold, net 125,547 129,856 229,165 196,461
Gross Profit 98,115 69,210 196,732 123,500
Selling, General, and Administrative Expenses 100,263 70,013 189,824 112,679
Income (Loss) from Investments in Associates (144) 645 1,860 1,448
Income (Loss) from Operations (2,292) (158) 8,768 12,269
Other Income (Expense):
Loss on Disposal of Property, Plant and Equipment (203) (429) (1,192) (429)
Gain (Loss) on Deconsolidation (73) — 9,485 —
Gain (Loss) on Previously Held Equity Interest (171) — 13,928 —
Interest Expense, net (11,624) (5,434) (22,295) (7,201)
Other Income (Expense), net 15,619 (131) 18,153 (997)
Total Other Income (Expense) 3,548 (5,994) 18,079 (8,627)
Net Income (Loss) Before Provision for Income Taxes and
Non-Controlling Interest 1,256 (6,152) 26,847 3,642
Provision For Income Taxes (11,103) (23,438) (36,617) (39,852)
Net Loss Before Non-Controlling Interest (9,847) (29,590) (9,770) (36,210)
Net Income Attributable to Non-Controlling Interest — 98 291 1,364
Net Loss Attributable to Verano Holdings Corp. $ (9,847) $ (29,688) $ (10,061) $ (37,574)
Net Loss per share – basic (0.03) (0.10) (0.03) (0.14)
Net Loss per share – diluted (0.03) (0.10) (0.03) (0.14)
Basic – weighted average shares outstanding 328,519,193 300,715,671 327,402,503 265,842,657
Diluted – weighted average shares outstanding 328,519,193 300,715,671 327,402,503 265,842,657


	For the Three Months Ended March 31,
	2024		2023
Revenues, net of Discounts	$	221,306	$	227,060
Cost of Goods Sold, net	108,346		117,875

Gross Profit	112,960		109,185

Selling, General, and Administrative Expenses	90,289		75,243

Loss from Investments in Associates	—		(160)

Income from Operations	22,671		33,782

Other Income (Expense):
Gain (Loss) on Disposal of Property, Plant and Equipment	(143)		67
Loss on Debt Extinguishment	—		(663)
Interest Expense, net	(15,114)		(15,906)
Other Income (Expense), net	(759)		1,803

Total Other Income (Expense), net	(16,016)		(14,699)

Income Before Provision for Income Taxes and Non-Controlling Interest	6,655		19,083

Provision For Income Taxes	(11,477)		(28,320)

Net Loss Before Non-Controlling Interest	(4,822)		(9,237)

Net Income Attributable to Non-Controlling Interest	—		—
Net Loss Attributable to Verano Holdings Corp. & Subsidiaries	$	(4,822)	$	(9,237)

Net Loss per share – basic & diluted	(0.01)		(0.03)

Basic & Diluted – weighted average shares outstanding	344,083,000		341,478,860

The accompanying notes are an integral part of these ~~unaudited interim condensed consolidated financial statements.~~Unaudited Interim Condensed Consolidated Financial Statements.

~~F-2~~3

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VERANO HOLDINGS CORP. Unaudited Interim Condensed Consolidated Statements of Changes in ~~Shareholders’~~Shareholders' Equity ($ in Thousands)

LLC
Membership
Units SVS Shares
(as converted) Share
Capital Accumulated
Earnings (Deficit) Non-Controlling
Interest Total
Balance as of April 1, 2021
(As Restated) — 293,199,219 $ 1,030,163 $ 1,361 $ 7,403 $ 1,038,927
Share-based compensation — — 14,483 — — 14,483
Issuance of shares in conjunction with acquisitions — 10,410,187 207,136 — — 207,136
Issuance of warrants — 3,510,000 — — — —
Contingent consideration & other adjustments to purchase accounting — 103,775 2,085 — — 2,085
Net income (loss) — — — (29,688) 98 (29,590)
Balance as of June 30, 2021 — 307,223,181 $ 1,253,867 $ (28,327) $ 7,501 $ 1,233,041


	Subordinate Voting Shares (as converted)	Share Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Earnings (Deficit)		Non-Controlling Interest		Total
Balance as of January 1, 2023	339,983,374	$	1,665,957	$	(8)	$	(324,399)	$	—	$	1,341,550

Share-based compensation	117,948	506		—		—		—		506

Issuance of shares to relieve liability obligations, net	603,396	3,653		—		—		—		3,653

Foreign Currency Translation Adjustment	—	—		(1)		—		—		(1)

Contingent consideration & other adjustments to purchase accounting	1,625,546	—		—		—		—		—

Net Loss	—	—		—		(9,237)		—		(9,237)

Balance as of March 31, 2023	342,330,264	$	1,670,116	$	(9)	$	(333,636)	$	—	$	1,336,471

LLC
Membership
Units SVS Shares
(as converted) Share
Capital Accumulated
Earnings (Deficit) Non-Controlling
Interest Total
Balance as of April 1, 2022
(As Restated) — 327,868,398 $ 1,578,232 $ (55,449) $ — $ 1,522,783
Share-based compensation — 26,570 12,523 — — 12,523
Issuance of shares in conjunction with acquisitions — 808,258 5,540 — — 5,540
Noncontrolling interest adjustment for change in ownership — — — — — —
Contingent consideration & other adjustments to purchase accounting — 2,115,438 17,726 — — 17,726
Net income (loss) — — — (9,847) — (9,847)
Balance as of June 30, 2022 — 330,818,664 $ 1,614,021 $ (65,296) $ — $ 1,548,725


	Subordinate Voting Shares (as converted)	Share Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Earnings (Deficit)		Non-Controlling Interest		Total
Balance as of January 1, 2024	344,074,096	$	1,681,840	$	(13)	$	(441,747)	$	—	$	1,240,080

Share-based compensation	57,872	3,643		—		—		—		3,643

Issuance of shares to relieve liability obligations, net	—	—		—		—		—		—

Foreign Currency Translation Adjustment	—	—		15		—		—		15

Contingent consideration & other adjustments to purchase accounting	31,181	—		—		—		—		—

Net Loss	—	—		—		(4,822)		—		(4,822)

Balance as of March 31, 2024	344,163,149	$	1,685,483	$	2	$	(446,569)	$	—	$	1,238,916

The accompanying notes are an integral part of these ~~unaudited interim condensed consolidated financial statements.~~Unaudited Interim Condensed Consolidated Financial Statements.

~~F-3~~

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~~VERANO HOLDINGS CORP.~~ ~~Unaudited Interim Condensed Consolidated Statements of Changes in Shareholders’ Equity (Continued)~~ ~~($ in Thousands)~~

LLC
Membership Units SVS Shares
(as converted) Share
Capital Accumulated
Earnings (Deficit) Non-Controlling
Interest Total
Balance as of January 1, 2021 279,900,000 — $ 137,914 $ 9,247 $ 6,237 $ 153,398
RTO-related issuances, net — — 652,217 — — 652,217
Issuance of Pubco shares in redemption of membership units (279,900,000) 279,900,000 — — — —
Reverse takeover (“RTO Financing”), net — 10,100,000 95,420 — — 95,420
Distributions to minority members — — — — (100) (100)
Share-based compensation — — 21,097 — — 21,097
Issuance of shares in conjunction with acquisitions — 13,609,406 270,034 — — 270,034
Warrants issued and exercised — 3,510,000 75,100 — — 75,100
Contingent consideration & other adjustments to purchase accounting — 103,775 2,085 — — 2,085
Net income (loss) — — — (37,574) 1,364 (36,210)
Balance as of June 30, 2021 — 307,223,181 $ 1,253,867 $ (28,327) $ 7,501 $ 1,233,041

LLC
Membership
Units SVS Shares
(as converted) Share
Capital Accumulated
Earnings (Deficit) Non-Controlling
Interest Total
Balance as of January 1, 2022
(As Restated) — 324,312,662 $ 1,535,765 $ (55,235) $ 1,276 $ 1,481,806
Share-based compensation — 797,907 24,265 — — 24,265
Issuance of shares in conjunction with acquisitions — 2,211,325 18,760 — — 18,760
Non-controlling interest adjustment for change in ownership — — — — (1,567) (1,567)
Contingent consideration & other adjustments to purchase accounting — 3,496,770 35,231 — — 35,231
Net income (loss) — — — (10,061) 291 (9,770)
Balance as of June 30, 2022 — 330,818,664 $ 1,614,021 $ (65,296) $ — $ 1,548,725

~~The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.~~

~~F-4~~4

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VERANO HOLDINGS CORP. Unaudited Interim Condensed Consolidated Statements of Cash Flows ($ in Thousands)

Six Months Ended June 30,
2022 2021
CASH FLOW FROM OPERATING ACTIVITIES
Net loss attributable to Verano Holdings Corp. and Subsidiaries $ (10,061) $ (37,574)
Net income attributable to non-controlling interest 291 1,364
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization 69,911 36,057
Non-cash interest expense 1,016 2,907
Non-cash interest income — (17)
Non-cash inventory step-up expense on acquisitions 6,707 52,189
Loss on disposal of property, plant and equipment 1,192 429
Gain on deconsolidation (9,485) —
Gain on disposal of investments in associates (13,928) —
Bad debt expense — 68
Amortization of debt issuance costs 3,160 517
Unrealized gain on marketable securities 2,148 —
Loss (income) from underlying investees (310) (7,319)
Stock earnout from acquisitions — 2,084
Loss (income) on share issuance (4,650) 1,236
Decrease in fair value of contingent consideration (9,102) —
Stock based compensation 24,405 18,333
Changes in operating assets and liabilities:
Accounts receivable 4,157 (900)
Inventory (19,927) (23,023)
Prepaid expenses and other current assets (6,333) 138
Deposits and other assets 4,384 2,935
Accounts payable 14,686 (9,242)
Accrued liabilities (9,880) (10,668)
Lease liabilities (6,468) (2,383)
Income tax payable 5,508 31,536
Deferred taxes (2,857) (531)
Deferred revenue (913) (1,305)
Other, net (3) 14
NET CASH PROVIDED BY OPERATING ACTIVITIES 43,648 56,845
CASH FLOW FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (86,851) (61,785)
Proceeds from disposal of assets 1,841 778
Distributions to minority members — (100)
Purchases of intangible assets — (8,378)
Acquisition of business, net of cash acquired (94,042) (102,138)
Proceeds from sale of deconsolidation and investment in associates 19,576 —
Purchase of interest in investment in associates — (3,350)
Dividend received from investments in associates — 10,275
Proceeds from note receivable — 4,215
Other, net — 41
NET CASH USED IN INVESTING ACTIVITIES (159,476) (160,442)


	Three Months Ended March 31,
	2024		2023
CASH FLOW FROM OPERATING ACTIVITIES
Net income (loss) attributable to Verano Holdings Corp. and Subsidiaries	$	(4,822)	$	(9,237)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	35,552		35,056
Right of use assets amortization	2,934		2,609
Non-cash interest expense	112		593
(Gain) Loss on disposal of property, plant and equipment	143		(67)
Loss on debt extinguishment	—		663
Unrealized (gain) loss on marketable securities	(693)		256
Decrease in fair value of contingent consideration	—		(3,466)
Stock based compensation	3,928		544
Other, net	1,778		1,193
Changes in operating assets and liabilities:
Accounts receivable	(3,232)		(1,670)
Inventory	(9,998)		10,885
Accounts payable	(4,031)		(11,316)
Income tax payable	9,597		(5,018)
Other assets, net	10,065		1,023
Other liabilities, net	(10,292)		(5,186)
NET CASH PROVIDED BY OPERATING ACTIVITIES	31,041		16,862

CASH FLOW FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment	(9,699)		(8,555)
Proceeds from disposal of assets	—		1,830
NET CASH USED IN INVESTING ACTIVITIES	(9,699)		(6,725)

CASH FLOW FROM FINANCING ACTIVITIES
Acquisition of business, net of cash acquired	$	(32)	$	(500)
Proceeds from issuance of debt	—		23,710
Principal repayments of debt	(2,150)		(22,759)
Debt issuance costs paid	—		(309)
Other financing activities	(136)		—
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES	(2,318)		142

NET INCREASE IN CASH AND CASH EQUIVALENTS	$	19,024	$	10,279

Effects of exchange rate fluctuations on cash and cash equivalents	$	15	$	(1)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	$	174,760	$	84,851

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	193,799	$	95,129

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Interest paid, net	$	15,002	$	15,313
Issuance of shares to relieve liability obligations, net	—		3,653

The accompanying notes are an integral part of these ~~unaudited interim condensed consolidated financial statements.~~

~~F-5~~

~~Table of Contents~~


~~VERANO HOLDINGS CORP.~~ ~~Unaudited Interim Condensed Consolidated Statements of Cash Flows (Continued)~~ ~~($ in Thousands)~~

Six Months Ended June 30,
2022 2021
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from issuance of notes payable 120,774 100,000
Principal repayments of notes payable (8,245) (8,527)
Debt issuance costs paid (2,986) (5,132)
Proceeds received from RTO Financing, net — 75,420
Cash received in warrant private placement — 75,100
NET CASH PROVIDED BY FINANCING ACTIVITIES 109,543 236,861
NET INCREASE (DECREASE) IN CASH (6,285) 133,264
CASH, BEGINNING OF PERIOD 99,118 16,402
CASH, END OF PERIOD $ 92,833 $ 149,666
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid $ 10,608 $ 1,761
NONCASH INVESTING AND FINANCING ACTIVITIES
Accrued capital expenditures $ 3,296 $ 3,627
Issuance of shares under business combinations $ 53,950 $ 896,795
Acquisitions
Tangible and intangible assets acquired, net of cash $ 17,533 $ 1,127,009
Liabilities assumed (4,362) (249,094)
Acquisition consideration payable 72,364 (1,038,668)
Goodwill 8,507 262,891
$ 94,042 $ 102,138
Unaudited Interim Condensed Consolidated Financial Statements.

~~The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.~~

~~F-6~~5

Table of Contents


VERANO HOLDINGS CORP. Notes to Unaudited Interim Condensed Consolidated Financial Statements ($ in Thousands except shares and per share amounts)


1.OVERVIEW AND BASIS OF PRESENTATION

(a)Description of Business

~~References~~Unless otherwise stated or the context requires otherwise, references herein to ~~“the Company,~~the “Company,” or “Verano,” ~~are intended to~~“we,” “us,” and “our” mean Verano Holdings Corp. and its direct and indirect subsidiaries, ~~licensees,~~ and controlled and managed entities.

The Company is a vertically integrated cannabis operator that focuses on limited-licensed markets in the United ~~States.~~States (“U.S.”). As a vertically integrated ~~provider,~~operator, the Company owns, operates, manages, controls, and/or has licensing, consulting or other commercial agreements with cultivation, processing, and retail ~~licensees~~licenses across 1413 state markets (Arizona, Arkansas, ~~California,~~ Connecticut, Florida, Illinois, Maryland, Massachusetts, Michigan, Nevada, New Jersey, Ohio, Pennsylvania, and West Virginia).

~~In addition to the states listed above, the~~The Company also conducts pre-licensing activities in ~~several~~ other markets. In these markets, the Company has either applied for licenses, or plans on applying for licenses, but does not currently own or manage any cultivation, processing, or retail licenses.

~~On February 11, 2021, the Company resulted from a reverse takeover transaction as further described in Note 3. Thereafter, the~~The Company’s Class A ~~Subordinate Voting Shares~~subordinate voting shares, no par value (the “Subordinate Voting ~~Shares) were~~Shares”) are listed on ~~the Canadian Securities Exchange (the “CSE”~~Cboe Canada ("Cboe") under the ticker symbol “VRNO” and ~~subsequently began to be~~are quoted in the United States on the OTCQX marketplace operated by the OTC Market Group, under the ticker symbol “VRNOF”.

The Company’s corporate headquarters is located at ~~415 North Dearborn St.,~~224 W Hill Street, Suite 400, Chicago, Illinois ~~60654.~~60610.

(b)Basis of Presentation

The accompanying ~~unaudited interim condensed consolidated financial statements~~Unaudited Interim Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and in accordance with the rules and regulations of the U.S. Securities &and Exchange Commission (“SEC”). Accordingly, certain information and disclosures required by GAAP for annual financial statements have been omitted. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. Unless otherwise indicated, all references to “$” or “US$” in this ~~document~~Form 10-Q refer to United States dollars, and all references to “C$” refer to Canadian dollars. These ~~unaudited interim condensed consolidated financial statements~~Unaudited Interim Condensed Consolidated Financial Statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto as of and for the year ended December 31, ~~2021~~2023 (the ~~"2021~~"2023 Annual Audited Financials"), included in the Company’s ~~registration statement~~Annual Report on Form ~~10 initially~~10-K filed with the SEC on ~~April 26, 2022, and amended on June 17, 2022 (as may~~March 15, 2024 (the "Form 10-K"). Certain prior year amounts have been reclassified to conform to the current year's presentation, which the Company does not consider to be ~~further amended, the "2021 Form 10").~~material. The accompanying ~~condensed consolidated financial statements~~Unaudited Interim Condensed Consolidated Financial Statements include the accounts of Verano Holdings Corp. and its direct and indirect subsidiaries as well as the accounts of any entities over which the Company has a controlling financial interest in accordance with Accounting Standards Codification ("ASC") 810 Consolidation. The preparation of the Company’s ~~condensed consolidated financial statements~~Unaudited Interim Condensed Consolidated Financial Statements requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenue and expenses and the disclosure of assets and liabilities in ~~the Company’s condensed consolidated~~such financial statements and in the accompanying notes. Actual results may differ materially from these estimates. The results of operations for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2024 are not necessarily indicative of the results to be expected for the 2024 full year or any future ~~interim or annual~~ periods. The accompanying ~~condensed~~ consolidated balance sheet as of December 31, ~~2021~~2023 has been derived from the audited consolidated balance sheet as of December 31, ~~2021~~2023 contained in the ~~2021~~2023 Annual Audited Financials included in the Form ~~10.~~

10-K.

~~F-7~~6

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VERANO HOLDINGS CORP. Notes to Unaudited Interim Condensed Consolidated Financial Statements ($ in Thousands except shares and per share amounts)

1.OVERVIEW AND BASIS OF PRESENTATION (Continued)

(c)~~Restatement of Previously Issued Consolidated Financial Statements~~

The notes included herein should be read in conjunction with the Company’s restated audited consolidated financial statements included in the Company’s 2021 Form 10 filed with the SEC on August 19, 2022. The Company restated each of the quarterly and year-to-date periods ended March 31, 2022, December 31, 2021, and March 31, 2021; collectively referred to as the "Restatement". Amounts as of or for the period ended December 31, 2021 depicted in these interim unaudited condensed consolidated financial statements as "As Restated" include the impact of the restatement included in the 2021 Form 10. See the December 31, 2021 consolidated financial statements included in the 2021 Form 10 for details of the restatement adjustments. As a result of the error related to stock-based compensation, the Company increased Inventory by $3,069 as of and for the year ended December 31, 2021. As a result of such understated stock-based compensation expense, the Company’s tax expense was overstated with corresponding adjustments to Income Tax Payable of $662 and a decrease of Deferred Income Taxes of ($800) as of and for the year ended December 31, 2021. As a result of the error related to stock-based compensation as of and for the quarter ended March 31, 2022, the Company increased Inventory by $3,898, Cost of Goods Sold, net by $1,052, and Salaries and Benefits expense by $9,572. As a result of the error related to stock-based compensation as of and for the quarter ended March 31, 2021, the Company increased Salaries and Benefits expense by $5,692. As a result of overstatement of tax expense due to a clerical error, the Company’s tax expense was overstated by $20,274 with corresponding adjustments to Income Tax Payable of ($23,071) and an increase to Deferred Income Taxes of $2,659 as of and for the year quarter ended March 31, 2022. There was no net cash impact to the audited consolidated financial statements for the year ended December 31, 2021 and no net cash impact to the unaudited interim condensed consolidated financial statements for the three months ended March 31, 2022 and 2021, for these restatement items. The Company’s accounting for distributions from a consolidated entity was corrected in the Restated Financials to reduce Investment in Associates and Non-controlling Interest Equity by ($1,675) for the year ended December 31, 2021, and ($100) for the quarter ended March 31, 2021. Also, the Investment in Associates was corrected to account for distributions in excess of investment resulting in an increase of Equity Income of $1,537 and $1,638 at, December 31, 2021 and March 31, 2022, respectively, with a reduction in Disposition of Investments of $3,176 at March 31, 20222. Additionally, The Company determined that it had information after March 31, 2022 but before the March 31, 2022 financials were publicly filed regarding the CT Pharma and THC acquisition earnouts. The Company recognized a $4,760 reduction in the expected earnouts which was recorded in the first quarter March 31, 2022 to reflect the subsequent information indicating a lower liability.

~~(d)~~Basis of Consolidation

The ~~condensed consolidated financial statements~~Unaudited Interim Condensed Consolidated Financial Statements have been prepared in accordance with GAAP and include the accounts of the Company and its subsidiaries, as well as the accounts of any entities over which the Company has a controlling financial interest in accordance with ASC 810 Consolidation. All transactions and balances between these entities have been eliminated upon consolidation.

(d)Significant Accounting Policies

There have been no changes to the Company’s significant accounting policies as described in Note 2 - Significant Accounting Policiesto the ~~2021~~2023 Annual Audited Financials included in the ~~2021~~ Form ~~10.~~10-K.

(e)Earnings (Loss) per Share

Basic earnings (loss) per share is calculated using the treasury stock method, by dividing the net earnings (losses) attributable to shareholders by the weighted average number of shares (including the Company's Class B ~~Proportionate Voting Shares~~proportionate voting shares, no par value (the "Proportionate Voting Shares") on an as converted to Subordinate Voting Shares basis of 100 Subordinate Voting Shares to one Proportionate Voting Share) outstanding during each of the ~~years~~periods presented. Contingently issuable shares (including shares held in escrow) are not considered outstanding shares and consequently are not included in the earnings (loss) per share calculations. Diluted income per share is calculated by adjusting the weighted average number of shares outstanding to assume conversion of all dilutive potential shares.

~~F-8~~

~~Table of Contents~~


~~VERANO HOLDINGS CORP.~~ ~~Notes to Unaudited Interim Condensed Consolidated Financial Statements~~ ~~($ in Thousands except shares and per share amounts)~~

1.~~OVERVIEW AND BASIS OF PRESENTATION(Continued)~~

To determine diluted income per share, ~~it is assumed~~the Company assumes that any proceeds from the exercise of dilutive share options would be used to repurchase shares at the average market price during the period. The diluted income per share calculation excludes any potential conversion of share options and convertible debt, if any, that would increase earnings per share or decrease loss per share. No potentially dilutive share equivalents were included in the computation of diluted loss per share for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2024 and ~~2021~~2023 because their impact would have been anti-dilutive.

(f)Recently Issued Accounting Standards

In November 2023, the Financial Accounting Standards Board issued Accounting Standards Update 2023-07 - ASC 280 Segment Reporting - Improvements to Reportable Segment Disclosures ("ASC 280"), which extends the existing requirements for annual disclosures to quarterly periods, and requires that both annual and quarterly disclosures present segment expenses using line items consistent with information regularly provided to the chief operating decision maker. ASU 280 is effective for annual periods beginning after December 15, 2023 and quarterly periods beginning after December 15, 2024. The Company ~~reviews recently issued accounting standards on~~does not expect implementation of the new disclosure guidance to have a ~~quarterly basis and has determined there are no standards yet~~material impact to ~~be adopted which are relevant to the Company’s business for disclosure.~~

~~(g)Coronavirus Pandemic~~

~~In June 2020, the World Health Organization categorized coronavirus disease 2019 (together with~~ its variants, “COVID-19”) as a pandemic. COVID-19 continues to spread throughout the U.S. and other countries across the world, and the duration and severity of its effects are currently unknown. The Company continues to implement and evaluate actions to strengthen its financial position and support the continuity of its business and operations.

~~The Company’s unaudited interim condensed~~ consolidated financial statements presented herein reflect estimates and assumptions made by management that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited interim condensed consolidated financial statements and reported amounts of revenue and expenses during the periods presented. Such estimates and assumptions affect, among other things, the Company’s goodwill; long-lived assets and intangible assets; operating lease right of use assets and operating lease liabilities; valuation of deferred income taxes; the allowance for doubtful accounts; assessment of the Company’s lease and non-lease contract expenses; and measurement of compensation cost for bonus and other compensation plans. While the Company’s revenue, gross profit and operating income were not impacted during the three and six months ended June 30, 2022, the uncertain nature of the spread of COVID-19 and the uncertainty of the impact of nationwide vaccine programs may impact the Company’s business operations for reasons including the potential quarantine of the Company’s employees or of its supply chain partners’ employees.


2.statements.~~REVERSE TAKEOVER TRANSACTION (“RTO”)~~

On December 14, 2020, Verano Holdings, LLC, a Delaware limited liability company, Majesta Minerals, Inc., an Alberta corporation (the “Public Corporation”), 1276268 B.C. Ltd., a British Columbia corporation (“Verano FinCo”), 1277233 B.C. Ltd, a British Columbia corporation, and 1278655 B.C. Ltd., a British Columbia corporation (“Majesta SubCo”), entered into an arrangement agreement (as amended January 26, 2021, the “Definitive Agreement”), pursuant to which the Company resulted from the reverse takeover transaction contemplated thereby (the “RTO”).

In accordance with the plan of arrangement forming part of the Definitive Agreement (the “Plan of Arrangement”), the Public Corporation changed its name to “Verano Holdings Corp.” and completed a consolidation of its common shares on the basis of 100,000 issued and outstanding common shares on a post-consolidation basis.

~~In accordance with the terms of the Plan of Arrangement, 10,000,000 subscription receipts (the “Subscription Receipts”) were issued on January 21, 2021, at a price per Subscription Receipt of $10~~1, for aggregate gross proceeds of $100,000 (the “RTO Financing”). In the RTO Financing, the Company issued a total of 10,000,000 Subordinate Voting Shares to the purchasers of the Subscription Receipts and 578,354 Subordinate Voting Shares and $4,580 in transactions costs to the offering agents as a broker fee, for a net RTO Financing amount of $95,420.


1 ~~Such amounts not in Thousands~~

~~F-9~~7

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VERANO HOLDINGS CORP. Notes to Unaudited Interim Condensed Consolidated Financial Statements ($ in Thousands except shares and per share amounts)

2.~~REVERSE TAKEOVER TRANSACTION (“RTO”)~~ ~~(Continued)~~INVENTORY

The Public Corporation reorganized capital by altering its notice of articles and articles to (i) attach special rights and restrictions to its common shares, (ii) change the identifying name of its common shares to “Class A Subordinate Voting Shares” and (iii) create a new class of shares identified as "Class B Proportionate Voting Shares". Pursuant to the Plan of Arrangement, thereafter Verano FinCo amalgamated with Majesta SubCo. Majesta SubCo was then liquidated, and the net proceeds of the RTO Financing transferred to the Company, as the resulting corporation in the RTO.

The members of Verano Holdings, LLC, and owners of certain of its subsidiaries, through a series of transactions, exchanged their ownership interests in Verano Holdings LLC and such subsidiaries for 96,892,040 Subordinate Voting Shares and 1,172,382 Proportionate Voting Shares. In connection with the Company’s acquisitions

(described in Note 8) of Alternative Medical Enterprises, LLC, Plants of Ruskin GPS, LLC, and RVC 360, LLC (collectively, the “AME Parties”), that occurred concurrently with the RTO, the members of the AME Parties, through a series of transactions, exchanged their membership interests in the AME Parties for 18,092,987 Subordinate Voting Shares and 470,984 Proportionate Voting Shares, plus cash consideration, as further described in Note 8(a). In addition, upon the consummation of the acquisition the members of the AME Parties received cash consideration of $20,000 which was funded with proceeds from the RTO Financing and were entitled to receive an additional $15,000 in cash installments.

~~In accordance with ASC 805,~~ ~~Business Combinations~~, the substance of the transaction is a reverse takeover of a nonoperating company. The transaction does not constitute a business combination because Majesta SubCo does not meet the definition of a business under the standard. As a result, the transaction is accounted for as a capital transaction with Verano Holdings, LLC being identified as the acquirer and the equity consideration being measured at fair value. The resulting consolidated statement of financial position is presented as a continuance of Verano Holdings, LLC and comparative figures presented in the consolidated financial statements prior to the RTO are those of Verano Holdings, LLC.

~~ASC 505-50, Equity-Based Payments to Non-Employees~~, applies to transactions where an entity grants equity instruments and cannot identify specifically some or all of the goods or services received in return. Because the Company issued shares with a value in excess of the assets received, the difference is recognized in RTO-related issuance cost through equity. The amount assigned to the transaction cost of $198 is the difference between the fair value of the consideration and the net identifiable assets of Majesta SubCo acquired by the Company.


3.~~INVENTORY~~

The Company’s inventory consists of the following ~~at June 30, 2022~~as of March 31, 2024 and December 31, ~~2021:~~2023:

June 30,
2022

December 31,
2021

March 31,
2024

December 31,
2023

(As Restated)

Raw Materials

8,369

5,767

Raw Materials

Work in Process

109,219

96,367

Packaging and Miscellaneous

Finished Goods

36,462

38,569

Total Inventories

154,050

140,703

Total Inventory

During the year ended December 31, 2023, the Company classified Packaging and Miscellaneous as a component of Prepaid Expenses and Other Current Assets on the Consolidated Balance Sheets as of December 31, 2023. Packaging and Miscellaneous has been reclassified to Inventory in the Unaudited Interim Condensed Consolidated Balance Sheets as of March 31, 2024, to better reflect the character of the underlying assets. Prior periods have been reclassified to conform to the current period presentation.

~~F-10~~8

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VERANO HOLDINGS CORP. Notes to Unaudited Interim Condensed Consolidated Financial Statements ($ in Thousands except shares and per share amounts)


4.3.PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment and related accumulated depreciation consists of the following as of ~~June 30, 2022~~March 31, 2024 and December 31, ~~2021:~~2023:


		June 30, 2022		December 31, 2021

	March 31, 2024					March 31, 2024	December 31, 2023
Land	Land	$	29,878	$	29,399
Buildings and Improvements	Buildings and Improvements	170,842		126,020
Furniture and Fixtures	Furniture and Fixtures	15,900		13,259
Computer Equipment and Software	Computer Equipment and Software	19,074		14,078
Leasehold Improvements	Leasehold Improvements	188,038		182,514
Tools and Equipment	Tools and Equipment	79,768		65,774
Vehicles	Vehicles	4,716		3,229
Assets Under Construction (1)	Assets Under Construction (1)	73,311		64,107

Total Property, Plant and Equipment		581,527		498,380
Total Property, Plant and Equipment, Gross
Total Property, Plant and Equipment, Gross
Total Property, Plant and Equipment, Gross
Less: Accumulated Depreciation	Less: Accumulated Depreciation	(65,829)		(46,148)

Property, Plant and Equipment, Net		$	515,698	$	452,232
Total Property, Plant and Equipment, Net
Total Property, Plant and Equipment, Net
Total Property, Plant and Equipment, Net

(1)Assets under construction represent construction in progress related to facilities not yet completed or otherwise not placed in service.

For the three months ended ~~June 30, 2022~~March 31, 2024 and ~~June 30, 2021,~~March 31, 2023, depreciation expense included in costs of goods sold totaled ~~$7,311~~$8,724 and ~~$5,923,~~$8,524, respectively. For the three months ended ~~June 30, 2022~~March 31, 2024 and ~~June 30, 2021,~~March 31, 2023, depreciation expense included in selling, general, and administrative expense totaled ~~$3,178~~$4,041 and $1,942, respectively. For the six months ended June 30, 2022 and June 30, 2021, depreciation expense included in costs of goods sold totaled $14,368 and $8,805, respectively. For the six months ended June 30, 2022 and June 30, 2021, depreciation expense included in selling, general, and administrative expense totaled $5,719 and $3,134,$3,667, respectively.

Table of Contents


VERANO HOLDINGS CORP. Notes to Unaudited Interim Condensed Consolidated Financial Statements ($ in Thousands except shares and per share amounts)
5.
4.INTANGIBLE ASSETS AND GOODWILL

Intangible assets are recorded at cost less accumulated amortization and impairment losses, if any. Intangible assets acquired in a business combination are measured at fair value atas of the acquisition date. Amortization of definite life ~~intangibles~~intangible assets is provided on a straight-line basis over their estimated useful lives. The estimated useful lives, residual values, and amortization methods for intangible assets are reviewed by the Company at each year end, and any changes in estimates are accounted for prospectively.

As of March 31, 2024, intangible assets consisted of the following:


	Licenses		Tradenames		Technology		Total
Cost
Balance as of January 1, 2024	$	1,269,326	$	54,166	$	6,431	$	1,329,923
Balance as of March 31, 2024	$	1,269,326	$	54,166	$	6,431	$	1,329,923

Accumulated Amortization
Balance as of January 1, 2024	225,751		15,001		3,025		243,777
Amortization	21,173		1,355		259		22,787
Balance as of March 31, 2024	$	246,924	$	16,356	$	3,284	$	266,564

Net Book Value
Balance as of January 1, 2024	1,043,575		39,165		3,406		1,086,146
Balance as of March 31, 2024	$	1,022,402	$	37,810	$	3,147	$	1,063,359

The following table outlines the estimated annual amortization expense related to intangible assets as of March 31, 2024:


Year Ending December 31,	Estimated Amortization
2024 (Remaining)	$	68,361
2025	91,149
2026	90,434
2027	90,360
2028	90,342
Thereafter	632,713
Total	$	1,063,359

The changes in the carrying amount of goodwill, by reportable segment, for the three months ended March 31, 2024 were as follows:


	January 1, 2024		Impairment		Adjustments to purchase price allocation		Acquisitions		March 31, 2024
Cultivation	$	49,318	$	—	$	—	$	—	$	49,318
Retail	181,973		—		—		—		181,973
Total	$	231,291	$	—	$	—	$	—	$	231,291

~~F-11~~

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VERANO HOLDINGS CORP. Notes to Unaudited Interim Condensed Consolidated Financial Statements ($ in Thousands except shares and per share amounts)

5.~~INTANGIBLE ASSETS AND GOODWILL~~ ~~(Continued)~~

~~As of June 30, 2022, intangible assets consisted of the following:~~

Licenses Tradenames Technology Total
Cost
Balance as of January 1, 2022 $ 1,386,131 $ 54,166 $ 11,603 $ 1,451,900
Purchases — — — —
Additions from business combination 13,281 — — 13,281
Adjustments to purchase price allocation — — — —
Disposals — — — —
Balance as of June 30, 2022 $ 1,399,412 $ 54,166 $ 11,603 $ 1,465,181
Accumulated Amortization
Balance as of January 1, 2022 66,703 4,158 1,126 71,987
Amortization 46,499 2,710 614 49,823
Balance as of June 30, 2022 $ 113,202 $ 6,868 $ 1,740 $ 121,810
Net Book Value
Balance as of January 1, 2022 1,319,428 50,008 10,477 1,379,913
Balance as of June 30, 2022 $ 1,286,210 $ 47,298 $ 9,863 $ 1,343,371

~~Amortization periods of assets with finite lives are based on management’s estimates at the date of acquisition.~~

~~The following table outlines the estimated annual amortization expense related to intangible assets as of June 30, 2022:~~

Year Ending December 31: Estimated Amortization
2022 (Remaining) $ 49,975
2023 99,948
2024 99,948
2025 99,948
2026 99,221
Thereafter 894,331
$ 1,343,371

~~The changes in the carrying amount of goodwill, by reportable segment, for the six months ended June 30, 2022 were as follows:~~

January 1, 2022 Impairment Adjustments to purchase price allocation Acquisitions June 30, 2022
Cultivation $ 91,116 $ — $ 1,050 $ — $ 92,166
Retail 277,014 — 912 6,545 284,471
Total $ 368,130 $ — $ 1,962 $ 6,545 $ 376,637

~~F-12~~

~~Table of Contents~~


~~VERANO HOLDINGS CORP.~~ ~~Notes to Unaudited Interim Condensed Consolidated Financial Statements~~ ~~($ in Thousands except shares and per share amounts)~~

5.~~INTANGIBLE ASSETS AND GOODWILL~~ ~~(Continued)~~

As of June 30, 2022, the Company recorded measurement period adjustments in connection with the December 28, 2021 acquisition of Connecticut Pharmaceutical Solutions, Inc. The net impact led to an increase of $1,050 to goodwill. The Company obtained additional information about the facts and circumstances that existed at the time of the acquisition date that led to changes in provisional amounts recognized in the initial opening financials for inventory, income taxes and accrued payables.

As of June 30, 2022, the Company recorded a purchase price adjustment in connection with the December 20, 2021 acquisition of Caring Nature, LLC. The net impact led to an increase of $56 to goodwill and acquisition price payable.

As of June 30, 2022, the Company recorded measurement period adjustments in connection with the March 11, 2022 acquisition of 420 Capital Management, LLC. The net impact led to an increase of $856 to goodwill. The Company obtained additional information about the facts and circumstances that existed at the time of the acquisition date that led to changes in provisional amounts recognized in the initial opening financials for cash and accounts payable.


6.EARNINGS (LOSSES) PER SHARE

The Company presents basic earnings (losses) per share. Basic earnings (losses) per share is calculated by dividing the earnings (loss) attributable to shareholders by the weighted average number of Subordinate Voting Shares ~~(on~~(with outstanding Proportionate Voting Shares, if any, accounted for on an as converted to Subordinate Voting Shares basis) outstanding during the periods presented. Diluted earnings (losses) per share is computed based on the weighted average number of Subordinate Voting Shares (with outstanding Proportionate Voting Shares, if any, accounted for on an as converted to Subordinate Voting Shares basis) outstanding, to the extent dilutive.

The computations of net earnings (loss) per share on a basic and diluted basis, including reconciliations of the numerators and denominators, for the three months ended March 31, 2024 and March 31, 2023 were as follows:


		Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021
	For the Three Months Ended March 31,										For the Three Months Ended March 31,
	2024									2024		2023
Numerator	Numerator
Net Loss attributable to Verano Holdings Corp.
Net Loss attributable to Verano Holdings Corp.
Net Loss attributable to Verano Holdings Corp.	Net Loss attributable to Verano Holdings Corp.	$	(9,847)	$	(29,688)	$	(10,061)	$	(37,574)

Denominator	Denominator
Denominator
Denominator
Basic	Basic
Pre-RTO weighted-average shares outstanding								158,203,932
Post-RTO weighted-average shares outstanding				300,715,671				297,365,427
Basic
Basic
Weighted-average shares outstanding – basic
Weighted-average shares outstanding – basic
Weighted-average shares outstanding – basic	Weighted-average shares outstanding – basic	328,519,193		300,715,671		327,402,503		265,842,657

Diluted	Diluted
Pre-RTO weighted-average shares outstanding								158,203,932
Post-RTO weighted-average shares outstanding				300,715,671				297,365,427
Diluted
Diluted
Weighted-average shares outstanding – diluted
Weighted-average shares outstanding – diluted
Weighted-average shares outstanding – diluted	Weighted-average shares outstanding – diluted	328,519,193		300,715,671		327,402,503		265,842,657

Basic earnings per share		$	(0.03)	$	(0.10)	$	(0.03)	$	(0.14)
Diluted earnings per share		$	(0.03)	$	(0.10)	$	(0.03)	$	(0.14)
Net Loss per share - basic & diluted
Net Loss per share - basic & diluted
Net Loss per share - basic & diluted

Potentially dilutive securities of approximately 4,580,744 and 365,774 for the three months ended March 31, 2024 and March 31, 2023, respectively, were not included in the computation of diluted earnings per share because their effect would have been anti-dilutive.

~~F-13~~11

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~~VERANO HOLDINGS CORP.~~ ~~Notes to Unaudited Interim Condensed Consolidated Financial Statements~~ ~~($ in Thousands except shares and per share amounts)~~


7.~~NOTES RECEIVABLE~~

~~As of December 31, 2021, notes receivable consisted of 2 secured promissory notes.~~

The first note was a secured promissory note, dated August 13, 2020, with a third party in the original principal amount of $180. The note accrued interest at 8% per annum and had an original maturity date of February 13, 2021, which was subsequently extended at the discretion of the Company. As of December 31, 2021, the Company has received principal payments of $56 and the note had an outstanding principal of $124 plus accrued interest of $7. During the quarter ended March 31, 2022, the Company settled the outstanding note receivable balance as part of the Greengate transaction.

The second note was a secured promissory note, dated March 24, 2021, with a third party in the original principal amount of $147. The note accrued interest at 8% per annum and had an original maturity date of September 24, 2021, which was subsequently extended to March 24, 2022. During the quarter ended March 31, 2022, the Company settled the outstanding note receivable balance as part of the Greengate transaction.

~~As of June 30, 2022, the Company had 0 outstanding notes receivable.~~


8.~~TRANSACTIONS~~

~~(a)Merger Agreement~~

On November 6, 2020, Verano Holdings LLC entered into an agreement and plan of merger with the AME Parties, pursuant to which the Company, as the assignee of all of Verano Holdings LLC’s rights and obligations thereunder, would acquire the AME Parties and their subsidiaries and ownership and control interests (the “AME Group”) via a series of merger transactions (the “AME Mergers”). The AME Mergers were contingent upon, and closed contemporaneously with the RTO, resulting in the creation of the Company as a Canadian publicly-traded parent company of Verano Holdings LLC, the AME Parties and their respective subsidiaries.

The RTO and AME Mergers closed on February 11, 2021 and resulted in the AME Parties becoming wholly-owned subsidiaries of the Company. The members of the AME Parties, through the RTO and AME Mergers, exchanged their membership interests in the AME Parties for 18,092,988 Subordinate Voting Shares and 470,984 Proportionate Voting Shares valued at approximately $651,914, plus cash consideration of $35,000. The shares issued were assigned a value of $10 per share with the Proportionate Voting Shares valued on an as converted to Subordinate Voting Share basis. The share price is equivalent to the arm’s-length RTO Financing transaction of the Subscription Receipts of $10 per share. The share consideration and cash consideration of $20,000 was paid at the closing of the AME Mergers, $10,000 of cash consideration was paid on August 11, 2021, and the remaining $5,000 balance was paid in the first quarter of 2022. As of June 30, 2022, the total consideration had been paid in full.

~~F-14~~

~~Table of Contents~~


VERANO HOLDINGS CORP. Notes to Unaudited Interim Condensed Consolidated Financial Statements ($ in Thousands except shares and per share amounts)

8.6.TRANSACTIONS~~(Continued)~~

~~The Company accounted for the transaction as a business combination in accordance with ASC 805,~~ Business Combinations~~. The following table summarizes the provisional accounting estimates of the merger transaction:~~

AltMed
Florida AltMed Arizona Total
Cash $ 5,446 $ 507 $ 5,953
Accounts receivable, net 60 498 558
Inventory 83,205 5,827 89,032
Prepaids and other current assets 833 1,989 2,822
Property, plant and equipment, net 73,386 9,751 83,137
Right-of-use asset, net 9,651 — 9,651
Other assets 1,001 — 1,001
Accounts payable and accrued liabilities (8,935) (2,576) (11,511)
Notes payable (3,579) (3,343) (6,922)
Deferred taxes (123,720) (37,290) (161,010)
Lease liabilities (9,651) — (9,651)
Total identifiable net assets (liabilities) 27,697 (24,637) 3,060
Intangible assets 498,938 184,588 683,526
Net assets $ 526,635 $ 159,951 $ 686,586

The Company identified intangible assets related to the acquired cannabis license, tradenames and intellectual property for the patented encapsulation formulation used in the MÜV™ branded transdermal patches, gels, tinctures and capsules. The Company engaged an independent valuation expert that uses appropriate valuation techniques, generally based on the forecast of the present value of expected future net cash flows, to determine the intangible assets appropriate fair value. The Company determined the fair value of intangible assets as outlined below:

AltMed Florida AltMed Arizona Total
License $ 319,928 $ 130,670 $ 450,598
Tradename 36,278 8,980 45,258
Intellectual Property and Technology 10,603 885 11,488
Total intangible assets 366,809 140,535 507,344
Goodwill (residual purchase price) 8,409 6,763 15,172
Goodwill (deferred taxes) (a) 123,720 37,290 161,010
Total goodwill $ 132,129 $ 44,053 $ 176,182

(a) ~~Goodwill recognized related to deferred taxes associated with assets acquired that have no tax basis.~~

~~F-15~~

~~Table of Contents~~


~~VERANO HOLDINGS CORP.~~ ~~Notes to Unaudited Interim Condensed Consolidated Financial Statements~~ ~~($ in Thousands except shares and per share amounts)~~

8.~~TRANSACTIONS~~ ~~(Continued)~~

Selected line items from the Company’s unaudited condensed interim consolidated statements of operations for the six months ended June 30, 2021, adjusted as if the acquisition of AltMed, deemed to be the only acquisition with material operations in the period, had occurred on January 1, 2021, are presented below:

Consolidated Results AltMed Pre-acquisition Pro-forma Results
Revenues, net of discounts $ 319,961 $ 22,402 $ 342,363
Net income (loss) (37,574) 10,933 (26,641)

~~(b)Business Combinations~~

The Company has determined that the acquisitions described below are business combinations under ASC Topic 805, Business Combinations. Acquisitions that are determined to be the acquisition of a business are accounted for by applying the acquisition method, whereby the assets acquired, and the liabilities assumed are recorded at their fair values at the date of acquisition with any excess of the aggregate consideration over the fair values of the identifiable net assets allocated to goodwill. Operating results for the companies acquired have been included in these ~~unaudited interim condensed consolidated financial statements~~Unaudited Interim Condensed Consolidated Financial Statements from the date of the acquisition. Any goodwill recognized is attributed based on reporting units. Refer to the end of section (b) of this Note for the revenue and net income (loss) since the acquisition date included in the unaudited interim condensed consolidated statement of operations and pro forma revenue and earnings.

The purchase price allocations for the acquisitions reflect various fair value estimates and analyses which are subject to change within the measurement period, which is the ~~one year~~one-year period subsequent to the acquisition date. The primary areas of the purchase price allocation that are subject to change relate to the fair value of certain tangible assets, the value of intangible assets acquired, and residual goodwill. The Company expects to continue to obtain information to assist in determining the fair value of the net assets acquired at the acquisition date during the measurement period.

Measurement period adjustments that the Company determined to be material will be applied prospectively in the Company’s future consolidated financial statements, and depending on the nature of the adjustments, other periods subsequent to the period of acquisition could be affected.

~~2022 Business Combinations~~

~~420 Capital Management, LLC~~WSCC, Inc.

On ~~April 5,~~July 6, 2021, Verano entered into ana merger agreement to ~~purchase~~acquire 100% of the equity interests of ~~420 Capital Management, LLC~~WSCC, Inc (“~~Greengate”~~Sierra Well”). ~~Greengate is~~Sierra Well held cannabis licenses that allow it to cultivate, produce and sell medical and recreational cannabis products in the ~~license holder and operator~~state of ~~the Lombard and Roger’s Park~~Nevada, including sales through its retail dispensaries located in ~~Illinois.~~Carson City and Reno. The transaction ~~received state regulatory approval in February 2022 and subsequently~~ closed on September 7, 2022.

During the quarter ended March ~~11, 2022. Total consideration includes~~31, 2024, the Company paid cash ~~of $7,448, forgiveness of other receivables of $2,894, and equity~~ consideration of ~~1,403,067~~$32 and issued 31,181 Subordinate Voting Shares ~~valued at $13,221 based on~~to the ~~fair value~~former shareholders of ~~the Subordinate Voting Shares as traded on the CSE on the date~~Sierra Well, which had been held back to secure indemnification obligations of ~~the transaction, all of which was paid at the closing of the transaction.~~such shareholders. As of ~~June 30, 2022, total~~March 31, 2024, all consideration ~~had~~related to the acquisition has been ~~paid in full.~~paid.

~~F-16~~12

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VERANO HOLDINGS CORP. Notes to Unaudited Interim Condensed Consolidated Financial Statements ($ in Thousands except shares and per share amounts)

8.7.~~TRANSACTIONS~~ ~~(Continued)~~DEBT

~~The following table summarizes the provisional accounting estimates~~As of March 31, 2024 and December 31, 2023 debt consisted of the ~~acquisitions that occurred during~~following:



	March 31, 2024		December 31, 2023
Credit Facility	$	347,900	$	348,950
Secured Promissory Notes	1,567		1,582
Mortgage Loans	110,257		111,221
Vehicle and Equipment Loans	961		1,081
Unamortized Debt Issuance Costs	(15,999)		(17,192)

Total Debt	$	444,686	$	445,642

Less: Current Portion of Debt	53,412		52,005

Total Long-Term Debt, net	$	391,274	$	393,637

Credit Facility

On October 27, 2022, Verano and certain of its subsidiaries and affiliates from time-to-time party thereto (collectively, the ~~six months ended June 30, 2022:~~


	~~Greengate~~

~~Cash and cash equivalents~~	$	~~2,315~~
~~Inventory~~	~~1,021~~
~~Prepaid & other current Assets~~	~~324~~
~~Deposits and Other non-current assets~~	45
~~Property, plant and equipment, net~~	~~1,673~~
~~Right-of-use asset, Net~~	~~1,836~~
~~Accounts payable and accrued liabilities~~	~~(1,569)~~
~~Other liabilities~~	~~(72)~~
~~Lease liabilities~~	~~(1,836)~~

~~Total identifiable net assets (liabilities)~~	~~3,737~~
~~Total Intangible assets~~	~~19,826~~

“Borrowers”), entered into a Credit Agreement (the “2022 Credit Agreement”) with Chicago Atlantic Admin, LLC, as administrative agent for the lenders, and the lenders from time-to-time party thereto, pursuant to which the lenders advanced the Borrowers a $350,000 senior secured term loan, all of which was used to repay the principal indebtedness outstanding under the Company's previous senior secured term loan credit facility. In connection with such repayment, such previous credit facility was terminated and is no longer in force or effect.

The ~~consolidated statements~~2022 Credit Agreement provides the Borrowers with the right, subject to conditions, to request an additional incremental term loan in the aggregate principal amount of ~~operations includes net revenue~~up to $100,000; provided that the lenders elect to fund such incremental term loan. Beginning in October 2023, the loan requires scheduled amortization payments of ~~$5,091~~$350 per month and ~~net income~~the remaining principal balance is due in full on October 30, 2026.

The 2022 Credit Agreement also provides the Borrowers with the right to (a) incur up to $120,000 of ~~$59 related~~additional indebtedness from third-party lenders secured by real estate excluded as collateral under the 2022 Credit Agreement, (b) incur additional mortgage financing from third-party lenders secured by real estate acquired after the closing date, and (c) upon the SAFE Banking Act or similar legislation making banking services available to U.S. cannabis companies being passed by the United States Congress, incur up to $50,000 pursuant to a revolving credit facility from third-party lenders that is pari passu or subordinated to the ~~acquired operations~~2022 Credit Agreement obligations, each of ~~Greengate for the six months ended June 30, 2022.~~which are subject to customary conditions.

The ~~Company engaged an independent valuation expert that uses appropriate valuation techniques, generally based on~~obligations under the forecast of the present value of expected future net cash flows, to determine the intangible assets appropriate fair value. The Company recognized an intangible asset for the cannabis license acquired at a fair value of $13,281. The residual purchase price of $6,545 was recognized as goodwill.

~~The unaudited pro forma information set forth below gives effect to the Greengate acquisition as if it had occurred on January 1, 2021. These unaudited pro forma results~~2022 Credit Agreement are presented for informational purposes only and are not necessarily indicative of the results of operations that would have been achieved had the transaction been consummated as of that time nor does it purport to be indicative of future financial operation results.

Pro forma net revenues for the six months ended June 30, 2022 and 2021 are $428,709 and $324,739, respectively. Pro forma net loss for the six months ended June 30, 2022 and 2021 are ($9,574) and ($36,692).

~~2021 Business Combinations~~

~~Glass City Alternatives, LLC~~

~~On September 20, 2020, the Company entered into an agreement to acquire~~secured by substantially all of the ownership interest of Glass City Alternatives, LLC which operates a dispensary located in Ohio. The transaction closed on January 7, 2021. The total cash consideration was $2,700 plus a post-closing $329 purchase price adjustment. The Company issued $500 in Subordinate Voting Shares based on the fair valueassets of the ~~Subordinate Voting Shares as traded on the CSE on the date~~Borrowers, excluding vehicles, specified parcels of ~~issuance. As of June 30, 2022, the total consideration had been paid in full.~~real estate and other customary exclusions.

The ~~Company engaged~~2022 Credit Agreement provides for a floating annual interest rate equal to the prime rate then in effect plus 6.50%, which rate may be increased by 3.00% upon an ~~independent valuation expert~~event of default that ~~uses appropriate valuation techniques, generally based on forecast~~is not a material event of ~~the present value~~default or 6.00% upon a material event of expected future net cash flows, to determine the intangible assets appropriate fair value. The Company recognized an intangible asset for the cannabis license acquired at a fair value of $2,497. The residual purchase price of $224 was recognized as goodwill.default.

~~F-17~~13

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VERANO HOLDINGS CORP. Notes to Unaudited Interim Condensed Consolidated Financial Statements ($ in Thousands except shares and per share amounts)

8.7.~~TRANSACTIONS~~DEBT (Continued)

~~Perpetual Healthcare Inc.~~

~~On February 25, 2021,~~At any time, the Company ~~entered into an agreement~~may voluntarily prepay up to purchase control of Perpetual Healthcare Inc. (“Emerald”). Emerald is a non-profit entity that operates a marijuana dispensary in Arizona.. The Company, through a management service agreement (“MSA”) and control$100,000 of the board of directors, obtained control of Emerald’s dispensary operations and license. The transaction became effective on March 10, 2021, and the Company consolidated Emerald through the Voting Interest Model (“VOE”) in accordance with ASC 810, ~~Consolidations. On April 27, 2022, Emerald was converted~~principal balance, subject to a ~~for-profit entity, wholly-owned by~~one-time $1,000 prepayment premium upon the ~~Company,~~first prepayment, and may prepay the ~~MSA was terminated in connection with the closing of the transaction. Emerald is consolidated as~~remaining outstanding principal balance for a ~~fully owned entity as of June 30, 2022.~~

~~Total consideration included cash consideration of $11,250 plus a post-closing $326 purchase price adjustment and, 541,994 Subordinate Voting Shares valued~~prepayment premium at ~~approximately $10,002~~varying rates based on the ~~fair value~~timing of any subsequent prepayments. The Borrowers may not voluntarily prepay more than $100,000 of the ~~Subordinate Voting Shares as traded on~~principal balance without prepaying the ~~CSE on the date~~entire outstanding principal balance of the ~~transaction.~~ loan.

The ~~remaining obligation was settled in May 2021 through~~2022 Credit Agreement includes customary representations and warranties and customary events of default, including, without limitation, payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to material indebtedness, and events of bankruptcy and insolvency.

The 2022 Credit Agreement also includes customary negative covenants limiting the ~~issuance~~Borrowers’ ability to incur additional indebtedness and grant liens that are not otherwise permitted, and the ability to enter into or consummate acquisitions or dispositions that are not otherwise permitted, among others. Additionally, the 2022 Credit Agreement requires the Borrowers to meet certain financial tests regarding minimum cash balances, minimum levels of 350,644 Subordinate Voting Shares valued at approximately $6,992 based on the fair value of the Subordinate Voting Shares as traded on the CSE on the date of the share issuance. The share issuance resulted in a $817 loss includedAdjusted EBITDA (as defined in the ~~other income (loss) line of the unaudited interim condensed consolidated statement of operations.~~ 2022 Credit Agreement) and a minimum fixed charge coverage ratio.

As of ~~June 30, 2022, the total consideration had been paid in full.~~

The Company engaged an independent valuation expert that uses appropriate valuation techniques, generally based on forecast of the present value of expected future net cash flows, to determine the intangible assets appropriate fair value. The Company recognized an intangible asset for the cannabis license acquired at a fair value of $25,284. The residual purchase price of $1,555 was recognized as goodwill. The Company also recognized $6,548 to goodwill related to the deferred tax liability associated with the cannabis license.

~~The Herbal Care Center Inc.~~

~~On February 24, 2021,~~March 31, 2024, the Company ~~entered into an equity purchase agreement to acquire all equity interest~~was in EINJO, L.P. and SPSLE, Corp. to become the sole owner of The Herbal Care Center, Inc. (“The Herbal Care Center”), which holds licenses for 2 dispensaries in Illinois. The Company, through an MSA, obtained control of The Herbal Care Center’s operations and marijuana license. The transaction became effective on March 17, 2021, and the Company consolidated The Herbal Care Center through the Variable Interest Model (“VIE”) in accordancecompliance with ~~ASC 810,~~ ~~Consolidations~~. On May 11, 2022, the Company consummated the acquisition of The Herbal Care Center and terminated the MSA in connection therewith. As of June 30, 2022, The Herbal Care Center is consolidated as a fully owned entity.

Total consideration included cash consideration of $18,750, plus a $2,107 purchase price adjustment, of which $10,000 was paid upon entering into the MSA. The total consideration also included 90,464 Subordinate Voting Shares and 9,625 Proportionate Voting Shares valued at approximately $22,778 based on the fair value of the Subordinate Voting Shares and Proportionate Voting Shares, on an as converted to Subordinate Voting Shares basis, as traded on the CSE on the date of the transaction. As of June 30, 2022, the total consideration had been paid in full.

The Company engaged an independent valuation expert that uses appropriate valuation techniques, generally based on forecast of the present value of expected future net cash flows, to determine the intangible assets appropriate fair value. The Company recognized an intangible asset for the cannabis license acquired at a fair value of $39,062. The residual purchase price of $328 was recognized as goodwill. The Company also recognized $11,914 to goodwill related to the deferred tax liability associated with the cannabis license.such covenants.

~~F-18~~14

Table of Contents


VERANO HOLDINGS CORP. Notes to Unaudited Interim Condensed Consolidated Financial Statements ($ in Thousands except shares and per share amounts)

8.~~TRANSACTIONS~~ ~~(Continued)~~SHARE CAPITAL

~~Patient Alternative Relief Center, Inc.~~

On March 22, 2021, the Company entered into an agreement with Flower Launch LLC, to acquire the rights to manage Patient Alternative Relief Center, Inc. (“Local Joint”). Local Joint is a non-profit entity that operates a retail dispensary in Arizona. The Company, through a MSA and control of the board of directors, obtained control of Local Joint’s operations and its license. The transaction became effective on March 30, 2021, and the Company consolidated Local Joint through the VOE in accordance with ASC 810, ~~Consolidations~~. On April 27, 2022, Local Joint was converted to a for-profit entity, wholly-owned by the Company, and the MSA was terminated in connection therewith. Local Joint is consolidated as a fully owned entity as of June 30, 2022.

Total consideration included cash consideration of $13,500, with $10,000 paid on the closing date and $3,500 paid in July 2021, plus 179,767 Subordinate Voting Shares valued at approximately $3,031 based on the fair value of the Subordinate Voting Shares as traded on the CSE on the date of the transaction. As of June 30, 2022, the total consideration had been paid in full.

The Company engaged an independent valuation expert that uses appropriate valuation techniques, generally based on forecast of the present value of expected future net cash flows, to determine the intangible assets appropriate fair value. The Company recognized an intangible asset for the cannabis license acquired at a fair value of $15,819. The residual purchase price of $276 was recognized as goodwill.

~~BISHCO LLC~~

On February 23, 2021, the Company entered into a merger agreement to acquire BISHCO LLC, which holds the rights to manage 3 non-profit entities in Arizona through MSAs. The non-profit entities, AZGM3, Inc., Vending Logistics, LLC, and The Medicine Room, LLC, each hold an Arizona marijuana license. The agreement provided that executives of the Company were appointed as the sole members of the boards of directors that govern each non-profit entity. Through the acquisition of BISHCO LLC and its MSAs, as well as the Company’s appointment to the boards of directors of the non-profit entities, the Company obtained control of the non-profit entities’ operations and their respective licenses. The transaction became effective on April 8, 2021, and the Company consolidated the non-profit entities through the VOE in accordance with ASC 810, ~~Consolidations~~. On April 26 and 27, 2022, the 3 non profit entities were converted to for-profit entities, wholly-owned by the Company, and the MSAs were terminated in connection therewith. The former non-profit entities are consolidated as fully owned entities as of June 30, 2022.

Total consideration included $18,699 of cash paid upon closing, plus a $1,036 purchase price adjustment, 997,453 Subordinate Voting Shares and 29,924 Proportionate Voting Shares valued at approximately $78,916 based on the fair value of the Subordinate Voting Shares and Proportionate Voting Shares, on an as converted to Subordinate Voting Shares basis, as traded on the CSE on the date of the transaction. An additional $12,750 was paid in cash in April 2022 and the remaining $12,750 is payable in Subordinate Voting Shares or cash at the election of the recipient, due on March 31, 2023. As of June 30, 2022, the present value of unpaid deferred consideration of $10,972 is included in the acquisition price payable balance on the Company’s consolidated balance sheets.

The Company engaged an independent valuation expert that uses appropriate valuation techniques, generally based on forecast of the present value of expected future net cash flows, to determine the intangible assets appropriate fair value. The Company recognized an intangible asset for the cannabis license acquired at a fair value of $87,963. The residual purchase price of $14,559 was recognized as goodwill. The Company also recognized $23,598 to goodwill related to the deferred tax liability

~~TerraVida Holistic Center, LLC~~

On February 24, 2021, the Company entered into an agreement to acquire TerraVida Holistic Centers, LLC, which holds the rights to 3 active dispensaries in Pennsylvania. The transaction closed on May 11, 2021. Total

~~F-19~~

~~Table of Contents~~


~~VERANO HOLDINGS CORP.~~ ~~Notes to Unaudited Interim Condensed Consolidated Financial Statements~~ ~~($ in Thousands except shares and per share amounts)~~

8.~~TRANSACTIONS~~ ~~(Continued)~~

consideration included cash consideration of $64,316, plus a $1,993 purchase price adjustment, of which $18,809 was paid at closing and the remaining $47,500 was paid over the first six months after closing. The transaction also included consideration of 1,506,750 Subordinate Voting Shares and 15,067 Proportionate Voting Shares valued at approximately $59,732 based on the fair value of the Subordinate Voting Shares and Proportionate Voting Shares, on an as converted to Subordinate Voting Shares basis, as traded on the CSE on the date of the transaction. As of June 30, 2022, the total consideration had been paid in full.

The Company engaged an independent valuation expert that uses appropriate valuation techniques, generally based on forecast of the present value of expected future net cash flows, to determine the intangible assets appropriate fair value. The Company recognized an intangible asset for the cannabis license acquired at a fair value of $112,418. The residual purchase price of $3,635 was recognized as goodwill.

~~The Healing Center, LLC~~

On March 29, 2021, the Company entered into an agreement to acquire 3 active dispensaries in Pennsylvania by purchasing all the issued and outstanding equity interests of The Healing Center, LLC (“The Healing Center”). The transaction closed on May 14, 2021. At the time the transaction closed, The Healing Center leased the real estate where the dispensaries are located from 3 separate real estate entities (collectively referred to as “THC Real Estate”).

On September 3, 2021, the Company acquired the equity interests of THC Real Estate in cash transactions for an aggregate purchase price of $12,225, which was paid in full at closing. The acquisitions were accounted for as a single business combination in accordance with ASC 805, ~~Business Combinations~~.

Total consideration for The Healing Center included cash consideration of $56,892, plus a $2,355 purchase price adjustment, of which $31,463 was paid upon closing and an additional $27,784 was paid 60 days after the closing. In addition, the total consideration included 454,302 Subordinate Voting Shares and 25,744 Proportionate Voting Shares valued at approximately $61,108 based on the fair value of the Subordinate Voting Shares and Proportionate Voting Shares, on an as converted to Subordinate Voting Shares basis, as traded on the CSE on the date of the transaction, and $18,925 of contingent consideration that was to be settled through an even allocation of shares and cash. The Company recognized a $4,603 gain on the decrease in contingent consideration, which was included in the other income (loss) line of the consolidated operations for the period ended December 31, 2021. The Company paid $7,116 in the first quarter of 2022. The Company recognized gains of $1,061 and $2,595 on the decrease in contingent consideration in the first and second quarters of 2022 respectively, which are included in the other income (loss) line of the unaudited interim condensed consolidated statement of operations for the period June 30, 2022. As of June 30, 2022, The Healing Center’s present value of unpaid deferred consideration of $3,551, which is payable in Subordinate Voting Shares, is included in the acquisition price payable balance on the Company’s consolidated balance sheets.

The Company engaged an independent valuation expert that uses appropriate valuation techniques, generally based on forecast of the present value of expected future net cash flows, to determine the intangible assets appropriate fair value. The Company recognized an intangible asset for the cannabis license acquired at a fair value of $108,850. The residual purchase price of $24,954 was recognized as goodwill.

The Company funded the acquisition of the THC Real Estate through a credit facility with Chicago Atlantic Credit Company (together with its affiliated entities, “Chicago Atlantic”) for $12,650. Total consideration was paid directly to the sellers in the amount of $12,225. The Company received $20 in cash proceeds and incurred $405 in issuance costs and debt discounts on the Chicago Atlantic credit facility, which was paid net of proceeds upon closing. The Company amortizes debt issuance costs through interest expense over the life of the Chicago Atlantic credit agreement.

~~F-20~~

~~Table of Contents~~


~~VERANO HOLDINGS CORP.~~ ~~Notes to Unaudited Interim Condensed Consolidated Financial Statements~~ ~~($ in Thousands except shares and per share amounts)~~

8.~~TRANSACTIONS~~ ~~(Continued)~~

~~Mad River Remedies, LLC~~

On April 1, 2021, the Company entered into an agreement to acquire all of the outstanding equity interests in Mad River Remedies, LLC, which operates a dispensary in Ohio. The transaction closed on July 8, 2021. The consideration included cash consideration of $12,984, subject to a purchase price adjustment of $29, and 488,861 Subordinate Voting Shares value at approximately $7,814 based on the fair value of the Subordinate Voting Shares and Proportionate Voting Shares, on an as converted to Subordinate Voting Shares basis, as traded on the CSE on the date of the transaction. As of June 30, 2022, the total consideration had been paid in full.

The Company engaged an independent valuation expert that uses appropriate valuation techniques, generally based on forecast of the present value of expected future net cash flows, to determine the intangible assets appropriate fair value. The Company recognized an intangible asset for the cannabis license acquired at a fair value of $18,720. The residual purchase price of $498 was recognized as goodwill.

~~Agri-Kind, LLC & Agronomed Holdings Inc~~

On April 21, 2021, the Company entered into an agreement to acquire all of the issued and outstanding equity interests in Agri-Kind, LLC (“Agri-Kind”), an operator of a cultivation and production facility of medical marijuana located in Pennsylvania, and Agronomed Holdings Inc., the owner of the cultivation and processing facility operated by Agri-Kind. The transaction closed on July 12, 2021. The total consideration included cash consideration of $78,848, plus a $678 purchase price adjustment, of which $43,713 was paid at closing and the remaining $35,813 was paid three months after closing. In addition, the total consideration included the issuance of 3,208,035 Subordinate Voting Shares valued at approximately $50,994 based on the fair value of the Subordinate Voting Shares as traded on the CSE on the date of the transaction, and contingent consideration of $33,971.

The Company paid $31,500 of contingent consideration during the first quarter of 2022. The remaining contingent consideration is for the issuances of additional Subordinate Voting Shares for six month and 12 month stock price protection that were assigned an aggregate initial fair value of $2,483 using Monte Carlo simulation models. The fair value of the contingent consideration is remeasured on a quarterly basis with any changes in the fair value being recognized in the other income (loss) line of the consolidated statement of operations. During the first quarter of 2022, the Company issued an additional 82,731 Subordinate Voting Shares valued at approximately $952 based on the fair value of the Subordinate Voting Shares as traded on the CSE on the date of the transaction to satisfy the six month contingency. The Company recognized a $988 and $2,147 loss for the changes in the fair value of contingent consideration for the three and six months ended June 30, 2022, respectively. As of June 30, 2022, the present value of unpaid deferred consideration of $3,311 is included in the acquisition price payable balance on the Company’s consolidated balance sheets.

The Company engaged an independent valuation expert that uses appropriate valuation techniques, generally based on forecast of the present value of expected future net cash flows, to determine the intangible assets appropriate fair value. The Company recognized an intangible asset for the cannabis license acquired at a fair value of $134,563. The residual purchase price of $3,115 was recognized as goodwill.

~~Agronomed Biologics, LLC~~

On April 21, 2021, the Company entered into an agreement to acquire all the issued and outstanding equity interests in Agronomed Biologics, LLC (“Agronomed”), which holds a clinical registrant license that allows for cultivation, production, and operation of 6 dispensaries in Pennsylvania. As a clinical registrant, Agronomed has partnered with the Drexel University College of Medicine to conduct medical marijuana research. The transaction closed on July 12, 2021. Total consideration included cash consideration of $10,473 paid upon closing and an additional $42,493 of contingent consideration to be paid in cash or shares at the election of the seller. In addition, the consideration included 3,240,436 Subordinate Voting Shares valued at approximately $51,509 based upon the fair value of the Subordinate Voting Shares as traded on the CSE on the date of the transaction.

~~F-21~~

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~~VERANO HOLDINGS CORP.~~ ~~Notes to Unaudited Interim Condensed Consolidated Financial Statements~~ ~~($ in Thousands except shares and per share amounts)~~

8.~~TRANSACTIONS~~ ~~(Continued)~~

During the first quarter of 2022, the Company paid $3,000 in cash and issued 1,215,035 Subordinate Voting Shares valued at approximately $15,592 based upon the fair value of the Subordinate Voting Shares as traded on the CSE on the date of the transaction. The share issuance resulted in a $3,592 loss recognized in the other income (loss) line of the unaudited consolidated statement of operations.

As of June 30, 2022, the present value of unpaid deferred consideration of $28,344 is included in the acquisition price payable balance on the Company’s consolidated balance sheets. The majority of the remaining consideration is related to earnouts. A portion of the remaining contingent consideration is for the issuances of additional Subordinate Voting Shares for six month and 12 month share price protection that was assigned an initial fair value of $2,508 using Monte Carlo simulation models. The fair value of the contingent consideration is remeasured on a quarterly basis with any changes in the fair value being recorded in the other income (loss) line of the consolidated statement of operations. During the first quarter of 2022, the Company issued an additional 83,566 Subordinate Voting Shares valued at approximately $962 based on the fair value of the Subordinate Voting Shares as traded on the CSE on the date of the transaction to satisfy the six month contingency. The Company recognized a $998 and $2,168 loss for the changes in the fair value of contingent consideration for the three and six months ended June 30, 2022, respectively

The Company engaged an independent valuation expert that uses appropriate valuation techniques, generally based on forecast of the present value of expected future net cash flows, to determine the intangible assets appropriate fair value. The Company recognized an intangible asset for the cannabis license acquired at a fair value of $96,684. The residual purchase price of $2,625 was recognized as goodwill. The Company also recognized $29,913 to goodwill related to the deferred tax liability.

~~Willow Brook Wellness, LLC~~

On September 13, 2021, the Company entered into a definitive agreement to acquire all the issued and outstanding equity interests in Willow Brook Wellness, LLC, which operates a dispensary in Connecticut. The transaction closed on October 25, 2021. Total consideration included cash of $14,913, subject to a purchase price adjustment of $14, and 727,934 Subordinate Voting Shares valued at approximately $8,163 based upon the fair value of the Subordinate Voting Shares as traded on the CSE on the date of the transaction. As of June 30, 2022, the present value of unpaid deferred consideration of $7,280 is included in the acquisition price payable balance on the Company’s consolidated balance sheets and will be settled through a cash payment due in October 2022.

The Company engaged an independent valuation expert that uses appropriate valuation techniques, generally based on forecast of the present value of expected future net cash flows, to determine the intangible assets appropriate fair value. The Company recognized an intangible asset for the cannabis license acquired at a fair value of $21,267. The residual purchase price of $438 was recognized as goodwill.

~~Caring Nature, LLC~~

On November 10, 2021, the Company entered into an agreement to acquire all the issued and outstanding equity interests in Caring Nature LLC, which operates a dispensary in Connecticut. The transaction closed on December 20, 2021. The total consideration included cash of $12,331, subject to a purchase price adjustment and, $12,000 payable in Subordinate Voting Shares payable over 12 months. Additionally, the purchase agreement included $2,000 of contingent consideration to be paid in Subordinate Voting Shares. During the second quarter of 2022, the Company recognized a purchase price adjustment of $56, which was paid in May 2022. The adjustment was reflected in goodwill of the Consolidated Statement of Operations. In June of 2022, the Company issued 808,258 Subordinate Voting Shares, reducing the acquisition price payable by $6,000. The Subordinate Voting Shares were recorded at $5,540 based on the fair value of the Subordinate Voting Shares as traded on the CSE on the date of issuance. The Company recognized a $460 gain on the share issuance, which is included in the other income (loss) line of the unaudited interim condensed consolidated statement of operations for the period ended June 30, 2022. As

~~F-22~~

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~~VERANO HOLDINGS CORP.~~ ~~Notes to Unaudited Interim Condensed Consolidated Financial Statements~~ ~~($ in Thousands except shares and per share amounts)~~

8.~~TRANSACTIONS~~ ~~(Continued)~~

~~of June 30, 2022, the present value of unpaid deferred consideration of $7,985 is included in the acquisition price payable balance on the Company’s consolidated balance sheets.~~

The Company engaged an independent valuation expert that uses appropriate valuation techniques, generally based on forecast of the present value of expected future net cash flows, to determine the intangible assets appropriate fair value. The Company recognized an intangible asset for the cannabis license acquired at a fair value of $24,994. The residual purchase price of $761 was recognized as goodwill. The Company also recognized $7,123 to goodwill related to the deferred tax liability.

~~Connecticut Pharmaceutical Solutions, Inc.~~

On November 10, 2021, the Company entered into an agreement to acquire all the issued and outstanding equity interests in Connecticut Pharmaceutical Solutions, Inc., which holds a medical marijuana producer license in Connecticut. The transaction closed on December 28, 2021. Total consideration includes cash of $6,402 and 8,145,142 Subordinate Voting Shares valued at approximately $98,538 based upon the fair value of the Subordinate Voting Shares as traded on the CSE on the date of the transaction.

Additionally, at close there were 73,130 deferred Subordinate Voting Shares held back, subject to purchase price adjustments, and 1,128,441 deferred Subordinate Voting Shares held back that are to be issued in December 2022, collectively valued at approximately $14,483 based on the fair value of the Subordinate Voting Shares as traded on the CSE on the date of the transaction. As of June 30, 2022 it is anticipated that the Company will issue 989,747 Subordinate Voting Shares in December 2022, subject to other indemnity claim adjustments. The merger agreement also includes consideration of $19,622 to be paid in 1,625,546 deferred Subordinate Voting Shares payable upon the first sale of adult-use cannabis in the state of Connecticut. Both payments met equity classification at closing in accordance with ASC 815.

Contingent consideration related to 2021 financial performance metrics was settled in June 2022 through the issuance of 2,115,438 Subordinate Voting Shares valued at approximately $17,683 based upon the fair value of the Subordinate Voting Shares as traded on the CSE on the date of the transaction. The Company recognized a $7,023 gain on the share issuance, which is included in the other income (loss) line of the unaudited interim condensed consolidated statement of operations for the period ended June 30, 2022. As of June 30, 2022, the total consideration had been paid in full.

The Company engaged an independent valuation expert that uses appropriate valuation techniques, generally based on forecast of the present value of expected future net cash flows, to determine the intangible assets appropriate fair value. The Company recognized an intangible asset for the cannabis license and trade name acquired at a fair value of $116,063 and $8,829, respectively. The residual purchase price of $3,510 was recognized to goodwill. The Company also recognized $40,062 as goodwill related to the deferred tax liability.

The following tables summarize the revenue and net income (loss) since the acquisition date included in the Consolidated Statement of Operations for the period ending June 30, 2021, for the AME Merger and the other acquisitions that closed during the first six months of 2021:

Six Months Ended June 30, 2021
Verano Holdings AME Merger Other Acquisitions Total
Revenues, net $ 186,106 $ 89,400 $ 44,455 $ 319,961
Net loss (25,733) (9,570) (2,271) (37,574)

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~~VERANO HOLDINGS CORP.~~ ~~Notes to Unaudited Interim Condensed Consolidated Financial Statements~~ ~~($ in Thousands except shares and per share amounts)~~

8.~~TRANSACTIONS~~ ~~(Continued)~~

Three Months Ended June 30, 2021
Verano Holdings AME Merger Other Acquisitions Total
Revenues, net $ 99,294 $ 57,277 $ 42,495 $ 199,066
Net loss (23,619) (4,180) (1,889) (29,688)

The following table summarizes the unaudited pro forma information of the combined results of operations of the AME Merger and other acquisition transactions that closed during the first six months of 2021 and 2022 as if they occurred as of January 1, 2021. These unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of the results of operations that would have been achieved had the transaction been consummated as of that time nor does it purport to be indicative of future financial operation results.

Six Months Ended June 30, 2021
Verano Holdings AME Merger Other Acquisitions Total
Pro forma revenues, net $ 186,106 $ 111,802 $ 133,091 $ 430,999
Pro forma net income (loss) (25,733) 1,362 19,785 (4,586)
Pro forma adjustments
(a) intangible amortization — 14,899 6,712 21,611
(b) intangible amortization — 45,797 6,392 52,189
Total pro forma adjustments — 60,696 13,104 73,800
Total pro forma net income (loss) $ (25,733) $ 62,058 $ 32,889 $ 69,214

Three Months Ended June 30, 2021
Verano Holdings AME Merger Other Acquisitions Total
Pro forma revenues, net $ 99,294 $ 57,277 $ 60,001 $ 216,572
Pro forma net income (loss) (23,619) (4,180) 2,477 (25,322)
Pro forma adjustments
(a) intangible amortization — 8,939 6,224 15,163
(b) intangible amortization — 27,952 6,392 34,344
Total pro forma adjustments — 36,891 12,616 49,507
Total pro forma net income (loss) $ (23,619) $ 32,711 $ 15,093 $ 24,185

~~F-24~~

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~~VERANO HOLDINGS CORP.~~ ~~Notes to Unaudited Interim Condensed Consolidated Financial Statements~~ ~~($ in Thousands except shares and per share amounts)~~

8.~~TRANSACTIONS~~ ~~(Continued)~~

~~(c)Asset Acquisitions~~

~~2022 Asset Acquisitions~~

~~Real Estate~~

During the six months ended June 30, 2022, Verano entered into 2 real estate acquisitions in Pennsylvania and Illinois for $4,264 and $4,055, respectively. The acquisitions are accounted for as asset acquisitions in accordance with ASC 805, ~~Business Combinations. The consideration was paid in full at closing.~~

~~2021 Asset Acquisitions~~

~~NSE Holdings, LLC~~

On February 24, 2021, a subsidiary of the Company entered into an agreement pursuant to which it acquired all the equity interests of NSE Holdings, LLC (“NSE”), which holds 1 dispensary permit in Pennsylvania that gives NSE the ability to open 3 dispensaries. The transaction closed on March 9, 2021. The Company paid cash consideration of $7,350 upon closing and issued 666,587 Subordinate Voting Shares and 6,665 Proportionate Voting Shares valued at approximately $25,160 based upon the fair value of the Subordinate Voting Shares, on an as converted to Subordinate Voting Shares basis, as traded on the CSE on the date of the transaction. Consideration also includes contingent consideration of $22,514, which fluctuates based upon financial performance metrics of NSE Holdings. The Company recognized gains of $8,337 and $10,906 on the decrease in contingent consideration, which was included in the other income (loss) line of the consolidated operations for the periods ended December 31, 2021 and June 30, 2022 respectively.

~~The Company analyzed the transaction and accounted for the transaction as an asset acquisition in accordance with ASC 805,~~ ~~Business Combinations.~~ The Company capitalized licenses in the amount of $55,016. As of June 30, 2022, the present value of unpaid deferred consideration is 3,441 and is included in the acquisition price payable balance on the Company’s consolidated balance sheets. The unpaid consideration relates to earnouts that are expected to be settled in share issuances of Subordinate Voting Shares.

~~Ohio Grown Therapies, LLC~~

On June 30, 2021, the Company exercised and closed on its option to acquire an Ohio dispensary license from Ohio Grown Therapies, LLC, which was granted pursuant to an option purchase agreement entered into on January 14, 2019. The exercise and closing had no impact on operations as the Company already exerted control over the dispensary through a consulting agreement entered into in 2019. The Company capitalized the license in the amount of $760 to the intangible license value included on the Company’s consolidated balance sheets. As of June 30, 2022, the total consideration had been paid in full.

~~Real Estate~~

During the fourth quarter of the year ended December 31, 2021, the Company entered into real estate acquisitions in Maryland, Pennsylvania, Nevada and New Jersey for a total of $22,588. The Company funded 2 of the acquisitions through 2 promissory notes for $10,225 in the aggregate. The acquisitions were accounted for as asset acquisitions in accordance with ASC 805, ~~Business Combinations. The consideration was paid in full at closing.~~

~~(d)Dispositions~~

~~Canna Cuzzos, LLC~~

Canna Cuzzos, LLC (“Canna Cuzzos”) is a medical marijuana licensee for a retail dispensary in Waldorf, Maryland. In 2017, a subsidiary of the Company entered into a management services agreement with Canna Cuzzos and has

~~F-25~~

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~~VERANO HOLDINGS CORP.~~ ~~Notes to Unaudited Interim Condensed Consolidated Financial Statements~~ ~~($ in Thousands except shares and per share amounts)~~

8.~~TRANSACTIONS~~ ~~(Continued)~~

been providing operating and other services for Canna Cuzzos’ dispensary. In 2018, Verano LLC acquired options to purchase all the ownership interests of a Maryland limited liability company (the “LLC”), which held a 40% ownership interest in the sole owner of Canna Cuzzos, resulting in such options being exercisable for an indirect 40% ownership interest in Canna Cuzzos. On January 31, 2022, all of the ownership interests of the sole owner of Canna Cuzzos were sold to a non-related third party for a cash purchase price of $5,000, subject to adjustment based on working capital levels and outstanding liabilities. Upon consummation of the sale, the management services agreement with Canna Cuzzos was terminated. Prior to the sale being consummated, Verano LLC consented to the sale, amended the options to receive an assignment of the LLC’s sale proceeds thereunder and agreed to provide the LLC administrative services in connection with the transaction. Prior to the sale of its parent company, Canna Cuzzos was consolidated with the Company through the Variable Interest Model (“VIE”) in accordance with ASC 810, ~~Consolidations.~~ The assignment of the LLC’s sale proceeds resulted in a gain to the Company of $1,701 for the six months ended June 30, 2022 and is classified as a component of Other Income (Expense) in the Consolidated Statement of Operations.

~~ILDISP, LLC~~

On March 30, 2016, Verano entered into a joint venture agreement with GTI-Clinic Illinois Holdings, LLC (“GTI”) to acquire 50% of ILDISP, LLC (“ILDISP”). NH Medicinal Dispensaries, LLC, a wholly owned subsidiary of ILDISP, is the holder of 2 marijuana licenses which allows it to operate 2 retail dispensaries in Illinois: The Clinic Effingham dispensary (“TCE”) and the Charleston dispensary. The Company had an agreement in place with its joint venture partner to allocate the operational management of Charleston to Verano and TCE to the joint venture partner. As such, the Company had a controlling interest in Charleston and consolidated the entity through the Variable Interest Model (“VIE”) in accordance with ASC 810, ~~Consolidations.~~ ~~TCE was treated as an equity method investment in accordance with ASC 323,~~ ~~Investments~~.

~~(d)Dispositions~~ ~~(Continued)~~

~~ILDISP, LLC (Continued)~~

On March 1, 2022, the Company sold its 50% ownership interest in ILDISP to the joint venture partner for $22,393 subject to certain adjustments. The sale resulted in gains of $7,857 attributable to Charleston and $14,099 attributable to TCE for the three months ended March 31, 2022 which are classified as components of other income (expense) in the consolidated statement of operations. During the second quarter of 2022, the Company recognized working capital adjustments of $(73) and $(171) for Charleston and TCE respectively. The adjustments were reflected in other income (expense) in the consolidated statement of operations, resulting in year-to-date gains of $7,784 attributable to Charleston and $13,928 attributable to TCE for the six months ended June 30, 2022.

~~F-26~~

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~~VERANO HOLDINGS CORP.~~ ~~Notes to Unaudited Interim Condensed Consolidated Financial Statements~~ ~~($ in Thousands except shares and per share amounts)~~

~~9. DEBT~~

~~As of June 30, 2022, and December 31, 2021 notes payable consisted of the following:~~
June 30,
2022 December 31, 2021
Credit Facility $ 350,000 $ 250,000
Secured Promissory Notes 1,668 6,663
Mortgage Loans 56,122 38,856
Vehicle and Equipment Loans 2,209 1,951
Unamortized Debt Issuance Costs (7,370) (7,545)
Total Notes Payable $ 402,629 $ 289,925
Less: Current Portion of Notes Payable 258,880 13,771
Total Long-Term Debt, net $ 143,749 $ 276,154

~~Credit Facility~~

On July 2, 2020, the Company and certain subsidiaries and affiliates (collectively, the “Credit Parties”) entered into a Credit Agreement with Chicago Atlantic GIC Advisers, LLC (“Chicago Atlantic”) as administrative and collateral agent for an initial term loan commitment of $20,000 funded by various investors and an incremental loan not to exceed $10,000. Such loan bears interest at 15.25% per annum and had an original maturity date of June 30, 2022. The Company incurred $1,068 of debt issuance costs, which were paid net of loan proceeds and are amortized over the life of the debt instrument.

On May 10, 2021, the Credit Agreement was amended and restated (the “Amended and Restated Credit Agreement”), and the Company borrowed an additional $100,000 of term loans at an annual interest rate of 9.75%, which increased the Company’s total term loans outstanding under the Amended and Restated Credit Agreement to $130,000. The $100,000 senior secured term loans mature on May 30, 2023, and in accordance with ASC 470, Debt, is accounted for as a new credit facility. In addition, the Amended and Restated Credit Agreement extended the maturity date of the original $30,000 existing term loan from June 30, 2022 to May 30, 2023, which qualified as a debt modification pursuant to ASC 470, Debt. The original credit facility under the Credit Agreement had $644 of unamortized debt issuance costs at the time the Amended and Restated Credit Agreement was entered into and is now amortized through May 30, 2023. The Company incurred $5,132 in issuance costs and debt discounts on the Amended and Restated Credit Agreement, which were paid net of proceeds in May 2021 and are amortized over the life of the debt instrument.

On October 20, 2021, the Credit Parties entered into a third amendment to further amend the Amended and Restated Credit Agreement, pursuant to which an additional $120,000 was funded to the Company resulting in $250,000 of total term loan commitments funded and outstanding under the Amended and Restated Credit Agreement, as amended. The $120,000 term loan bears interest of 8.50% per annum and matures on April 28, 2023. In addition, the amendment included an option for the Company to request an incremental $100,000 loan in the future with 8.50% interest per annum, subject to certain restrictions and limitations. The liquidity financial covenant was modified to require that the Company maintain no less than an average of $20,000 in liquidity during any fiscal quarter and no less than $25,000 as of the last day of each fiscal quarter. In accordance with ASC 470, Debt, the $120,000 loan is

~~F-27~~

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~~VERANO HOLDINGS CORP.~~ ~~Notes to Unaudited Interim Condensed Consolidated Financial Statements~~ ~~($ in Thousands except shares and per share amounts)~~

9.~~DEBT~~ ~~(Continued)~~

~~accounted for as a new credit facility. The Company incurred debt issuance costs of $3,679, which were paid net of proceeds in October 2021 and are amortized over the life of the debt instrument.~~

On March 1, 2022, the Credit Parties entered into a fourth amendment to the Amended and Restated Credit Agreement. The fourth amendment provided an additional $100,000 of term loans with a maturity date of August 28, 2023 and an annual interest rate of 8.50%, resulting in an aggregate of $350,000 in term loans outstanding under the credit facility. As of June 30, 2022, the Amended and Restated Credit Agreement, as amended, contains financial covenants requiring the Company to maintain on a consolidated basis (i) a minimum liquidity balance to average no less than $20,000 during each fiscal quarter and at least $25,000 as of the last day of such quarter; (ii) a minimum consolidated EBITDA for each fiscal quarter of no less than $20,000; and (iii) a fixed charge coverage ratio of no less than 1.5:1.0 measured at the end of each fiscal quarter. As of June 30, 2022, the Company is in compliance with such financial covenants.

~~Mortgage~~

On June 29, 2022, the Company entered into an agreement with BCB Community Bank to borrow a principal amount of $18,000 associated with a mortgage on a building in Branchburg, NJ. The mortgage bears an interest rate of 4% and matures in July 2047.

~~Other~~

As of December 31, 2021 the Company issued promissory notes to accredited investors in the original principal amount of $3,670 with simple annual interest of 10% per annum. The notes matured in June 2022 and are an accumulation of 7 notes to finance construction of cultivation facilities in Florida and Arizona. There is one related party that accounts for $150 of the outstanding principal amount as of December 31, 2021. As of June 30, 2022, these promissory notes were repaid in full.


~~10. SHARE CAPITAL~~

Subordinate Voting Shares and Proportionate Voting Shares are classified as equity. Incremental costs directly attributable to the issuance of shares are recognized as a deduction from equity. The proceeds from the exercise of stock options or warrants together with amounts previously recorded in reserves over the vesting periods are recorded as share capital. Income tax relating to transaction costs of an equity transaction is accounted for in accordance with ASC 740, Income Taxes.

(a)Issued and Outstanding

As of ~~June 30, 2022,~~March 31, 2024, the Company had 313,746,238 Subordinate Voting Shares and 170,724 Proportionate Voting Shares issued and outstanding. Converting the Proportionate Voting Shares to Subordinate Voting Shares on the basis of 100 Subordinate Voting Shares for one Proportionate Voting Shares, results in a total of 330,818,664344,163,149 Subordinate Voting Shares issued and outstanding ~~as of such date.~~and no Proportionate Voting Shares outstanding. The Company has the following 2two classes of share capital, with each class having no par value:

(i)Subordinate Voting Shares

The holders of the Subordinate Voting Shares are entitled to receive dividends issued by the Company and 1one vote per share at shareholder meetings of the Company. All Subordinate Voting Shares are ranked equally regarding the Company’s residual assets. The Company is authorized to issue an unlimited number of Subordinate Voting Shares.

~~F-28~~

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~~VERANO HOLDINGS CORP.~~ ~~Notes to Unaudited Interim Condensed Consolidated Financial Statements~~ ~~($ in Thousands except shares and per share amounts)~~


~~10. SHARE CAPITAL~~ ~~(Continued)~~

(ii)Proportionate Voting Shares

Each Proportionate Voting Share is convertible into 100 Subordinate Voting Shares. The holders of the Proportionate Voting Share are entitled to receive dividends issued by the Company on an as converted to Subordinate Voting Share basis and 100 votes per share at shareholder meetings of the Company. The Proportionate Voting Shares are ranked equally on an as converted to Subordinate Voting Share basis regarding the Company's residual assets. The Company is authorized to issue an unlimited number of Proportionate Voting Shares.

During the six months ended June 30, 2022, the shareholders of the Company converted Proportionate Voting Shares to Subordinate Voting Shares for an impact of conversion of 140,311 Proportionate Voting Shares into 14,031,070 Subordinate Voting Shares.

(b)Stock-Based Compensation

In February 2021, the Company established the Verano Holdings Corp. ~~operates equity-settled~~Stock and Incentive Plan (the “Plan”), which provides for stock-based remuneration ~~plans~~ for its eligible directors, officers, employees, consultants, and advisors. The maximum number of restricted stock units ("RSUs"), options and other stock based awards that may be issued under the Plan cannot exceed 10% of the Company’s then issued and outstanding share capital, determined on an as converted to Subordinate Voting Shares basis. All goods and services received in exchange for the grant of any stock-based payments are measured at their fair value unless the fair value cannot be estimated reliably. If the Company cannot reliably estimate ~~reliably~~ the fair value of the goods and services received, the Company measures their value indirectly ~~by reference to the fair value of the equity instruments granted. The Company measures the fair value of the services~~ by reference to the fair value of the equity instruments granted. Equity-settled stock-based payments under stock-based payment plans are ultimately recognized as an expense in profit or loss with a corresponding credit to equity.

In February 2021, the Company established the Verano Holdings Corp. Stock and Incentive Plan (the “Plan”). The maximum number of restricted stock units ("RSUs") and options that may be issued under the Plan shall not exceed 10% of the Company’s then issued and outstanding Subordinate Voting Shares on an as converted to Subordinate Voting Shares basis.

The Company recognizes compensation expense on a straight-line basis over the requisite service period of the award. Estimates are subsequently revised if there is any indication that the number of shares expected to vest differs from the previous estimate. Any cumulative adjustment prior to vesting is recognized in the current period with no adjustment to prior periods for expense previously recognized.

Option and RSU grants generally vest in installments over ~~six~~12 to 30 months ~~to three years,~~ and options typically have a life of ten years.

~~Options~~

~~Option activity is summarized as follows:~~

Number of Shares Weighted Avg. Exercise Price
C$ Weighted Average Remaining Contractual Life
Balance as of December 31, 2021 56,078 30.60 9.16
Vested 18,798 30.60
Exercisable at June 30, 2022 24,167 30.60 8.67

~~As of June 30, 2022 and December 31, 2021, there were no in-the-money options.~~

~~The Company used the Black-Scholes option pricing model to estimate the fair value of the options granted. NaN options were granted, expired, or forfeited during the six months ended June 30, 2022.~~

~~F-29~~15

Table of Contents


~~VERANO HOLDINGS CORP.~~ ~~Notes to Unaudited Interim Condensed Consolidated Financial Statements~~ ~~($ in Thousands except shares and per share amounts)~~


~~10. SHARE CAPITAL~~ ~~(Continued)~~

~~Restricted Stock Units (“RSUs”)~~

~~The following table summarizes the number of unvested RSU awards as of June 30, 2022 and December 31, 2021 and the changes during the six months ended June 30, 2022:~~

Number of Shares Weighted Avg. Grant Date Fair Value
C$
Unvested Shares at December 31, 2021 2,413,887 30.49
Granted 2,748,440 10.57
Forfeited 975 23.97
Vested 1,189,055 30.65
Unvested Shares at June 30, 2022 3,972,297 16.66

~~The following table summarizes the weighted average grant date fair value of RSUs granted and total fair value of RSUs vested for the six months ended June 30, 2022 and 2021:~~

Six Months Ended June 30,
2022 2021
Weighted average grant date fair value (per share) of RSUs granted (C$) 16.66 30.60
Intrinsic value of RSUs vested, using market price at vest date (C$) (in thousands)
15.41 —

~~The stock-based compensation expense for the three and six months ended June 30, 2022 and 2021 was as follows:~~

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Stock Options Expense $ 62 $ 115 $ 125 $ 168
Restricted Stock Units 13,430 12,465 24,280 18,165
Total Stock Based Compensation Expense $ 13,492 $ 12,580 $ 24,405 $ 18,333


~~11.INCOME TAXES~~

~~The following table summarizes the Company’s income tax expense and effective tax rates for the three and six months ended June 30, 2022 and 2021:~~

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Income before Income Taxes $ 1,256 $ (6,152) $ 26,847 $ 3,642
Income Tax Expense (11,103) (23,438) (36,617) (39,852)
Effective Tax Rate 662.9 % 381.0 % 112.3 % 1093.8 %

The effective tax rates for the three and six months ended June 30, 2022 and 2021 were based on the Company’s forecasted annualized effective tax rates and were adjusted for discrete items that occurred within the periods presented.

~~F-30~~

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VERANO HOLDINGS CORP. Notes to Unaudited Interim Condensed Consolidated Financial Statements ($ in Thousands except shares and per share amounts)

~~11.~~8.~~INCOME TAXES~~SHARE CAPITAL (Continued)

Options

The Company had 37,711 fully vested and exercisable options, entitling the holder thereof to one Subordinate Voting Share per each option upon exercise, with a weighted average exercise price of C$30.11 and a weighted average remaining contractual life of 6.86 years as of March 31, 2024.

1,245 fully vested options, entitling the holder thereof to one Subordinate Voting Share per each option upon exercise, were cancelled during the three months ended March 31, 2024 due to termination of employment. No options were granted or forfeited during the three months ended March 31, 2024. As of March 31, 2024 and December 31, 2023, there were no in-the-money options.

RSUs

The following table summarizes the number of unvested RSU awards as of March 31, 2024 and December 31, 2023 and the changes during the three months ended March 31, 2024:


	Number of Shares	Weighted Avg. Grant Date Fair Value C$
Unvested RSUs at December 31, 2023	8,812,537	4.72
Granted	77,575	8.00
Forfeited	173,100	4.52
Vested	58,214	11.83
Unvested RSUs at March 31, 2024	8,658,798	4.72

The stock-based compensation expense for the three months ended March 31, 2024 and 2023 were as follows:


	Three Months Ended March 31,
	2024		2023
Stock Options	$	—	$	76
Restricted Stock Units	3,928		468
Total Stock Based Compensation Expense	$	3,928	$	544

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VERANO HOLDINGS CORP. Notes to Unaudited Interim Condensed Consolidated Financial Statements ($ in Thousands except shares and per share amounts)

9.INCOME TAXES

The following table summarizes the Company’s income tax expense and effective tax rates for the three months ended March 31, 2024 and 2023:


	For the Three Months Ended March 31,
	2024			2023
Income before Income Taxes	$	6,655		$	19,083
Income Tax Expense	(11,477)			(28,320)
Effective Tax Rate	172		%	148		%

The effective tax rates for the three months ended March 31, 2024 and 2023 were based on the Company’s forecasted annualized effective tax rates and were adjusted for discrete items that occurred within the periods presented. Net discrete tax items of $(236) and $4,847 were recorded during the three months ended March 31, 2024 and 2023, respectively. Discrete items recorded during the three months ended March 31, 2024 and 2023 primarily relate to penalties and interest on unpaid tax liabilities, impacts of prior period return to provision adjustments, remeasurement of deferred taxes for state tax rate changes, and book remeasurement adjustments not recognized for tax purposes.

Due to its cannabis operations, the Company is subject to the limitations of the U.S. Internal Revenue Code of 1986, as amended ~~(“IRC”~~(the “Code”) Section 280E, under which the Company is only allowed to deduct expenses directly related to sales of product. This results in permanent differences between ordinary and necessary business expenses deemed non-allowable under ~~IRC~~ Section ~~280E.~~280E of the Code. Therefore, the effective tax rate can be highly variable and may not necessarily correlate with pre-tax income and ~~provides for~~the Company's effective tax rates ~~that~~ are well in excess of statutory tax rates.

~~During~~Taxes paid during the three months ended ~~June 30, 2022~~March 31, 2024 and ~~2021 the Company paid $37,323~~2023 were $9,585 and ~~$16,325,~~$36,394, respectively.

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VERANO HOLDINGS CORP. Notes to Unaudited Interim Condensed Consolidated Financial Statements ($ in Thousands except shares and per share amounts)
~~12.~~
10.LEASES

The Company has operating leases for some of its retail dispensaries and processing and ~~cultivation~~production facilities located throughout the ~~U.S,~~U.S., as well as for its corporate ~~office space~~offices located in Chicago, Illinois. Operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement date.

Leases with an initial term of 12 months or less are not recorded on the Company's balance sheet. Certain leases require payments for taxes, insurance, and maintenance, and are considered non-lease components. The Company accounts for non-lease components separately.

The Company determines if an arrangement is a lease at inception. The Company must consider whether the contract conveys the right to control the use of an identified asset.

The Company leases certain business facilities from third parties under non-cancellable operating lease agreements that contain minimum rental ~~provision~~provisions that expire through 2037. ~~Certain~~Some leases also contain renewal ~~provision~~provisions and provide for rent abatement and escalating payments.

During the three months ended ~~June 30, 2022~~March 31, 2024 and ~~2021,~~2023, the Company recorded approximately ~~$3,734~~$4,999 and ~~$2,536~~$4,313 in operating lease expense, respectively, of which ~~$173~~$114 and $216 was included in cost of goods sold for the same periods, respectively. During the six months ended June 30, 2022 and 2021, the Company recorded approximately $7,120 and $3,908 in operating lease expense, of which $320 and $432$206 was included in cost of goods sold for the same periods, respectively.

Other information related to operating leases as of ~~June 30, 2022~~and for the periods ended March 31, 2024 and December 31, ~~2021~~2023, were as follows:


		June 30, 2022		December 31, 2021

Weighted average remaining lease term (years)		8.26		8.52
	March 31, 2024								March 31, 2024			December 31, 2023
Weighted average remaining lease term - years						Weighted average remaining lease term - years	8.09			8.19
Weighted average discount rate	Weighted average discount rate	8.03	%	8.11	%	Weighted average discount rate	9.62	%		9.52	%

Maturities of lease liabilities for operating leases as of March 31, 2024 were as follows:


Year Ending December 31,	Maturities of Lease Liability
2024 (Remaining)	$	13,680
2025	18,099
2026	17,096
2027	16,435
2028	15,876
Thereafter	61,412

Total Lease Payments	142,598

Less: Imputed Interest	(46,341)

Present Value of Lease Liability	$	96,257

~~F-31~~18

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VERANO HOLDINGS CORP. Notes to Unaudited Interim Condensed Consolidated Financial Statements ($ in Thousands except shares and per share amounts)

~~12.~~11.~~LEASES~~ ~~(Continued)~~CONTINGENCIES AND OTHER

~~Maturities of lease liabilities for operating leases as of June 30, 2022 were as follows:~~

Year Ending December 31,
Remainder 2022 $ 6,851 $ 11,457
2023 13,244 11,024
2024 12,519 10,348
2025 11,590 9,717
2026 10,722 8,818
2027 and Thereafter 47,894 38,177
Total Lease Payments 102,820 89,541
Less: Interest (28,737) (26,166)
Present Value of Lease Liability $ 74,083 $ 63,375


~~13.CONTINGENCIES~~

(a)Claims and Litigation

From time to time, the Company may be involved in litigation relating to claims arising out of operations in the normal course of business. ~~At June 30, 2022~~As of March 31, 2024, other than as set forth below, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of the Company’s consolidated operations. There are ~~also~~ no proceedings in which the Company is a party and any of the Company’s directors, officers or affiliates is an adverse party or has a material interest adverse to the Company’s interest.

On January 31, 2022, the Company entered into an Arrangement Agreement (the "GGH Arrangement Agreement") with Goodness Growth Holdings, Inc. ("GGH"), pursuant to which it agreed to acquire all of the issued and outstanding equity interests of GGH in exchange for equity interests in the Company, subject to the conditions set forth in the GGH Arrangement Agreement. On October 13, 2022, the Company provided written notice to GGH of GGH’s breach of the GGH Arrangement Agreement and exercised the Company’s termination rights under the GGH Arrangement Agreement. On October 21, 2022, GGH filed suit against the Company in the Supreme Court of British Columbia alleging that the Company breached (i) the GGH Arrangement Agreement through, among other things, the purported wrongful repudiation of the GGH Arrangement Agreement, (ii) the duty of good faith, and (iii) the duty of honest performance in contract. In addition, on November 14, 2022, the Company filed a counterclaim asserting that GGH owes it a termination fee in the amount of $14,875, or alternatively, the reimbursement of out-of-pocket fees and expenses of up to $3,000 as a result of our termination of the GGH Arrangement Agreement, which was based upon our belief that GGH breached covenants and representations in the GGH Arrangement Agreement and the occurrence of other termination events. GGH filed a response to such counterclaim on December 7, 2022, in which GGH denied it was obligated to pay any termination fee or transaction expenses. As of March 31, 2024, both the Company and GGH are engaged in ongoing discovery efforts. Please see Note 17 - Subsequent Events for an update on this matter. The Company can provide no guarantees or assurances that it will prevail or settle this lawsuit or its counterclaim on favorable terms, if at all, and an adverse outcome could have a material adverse effect on its business, results of operations and financial condition.

(b)Contingencies

During the first quarter of 2023, the Company discovered a potential liability related to a previous acquisition that was deemed to be both probable and estimable. Per ASC 450 Contingencies, when both of these criteria are present, a contingent liability should be recorded. Based on this, the Company recorded a corresponding charge in Other Income, net of $1,893 for the three months ended March 31, 2023.

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VERANO HOLDINGS CORP. Notes to Unaudited Interim Condensed Consolidated Financial Statements ($ in Thousands except shares and per share amounts)

11.CONTINGENCIES AND OTHER (Continued)

(c)Illegality of Cannabis at the U.S. Federal Level

Verano operates within states where cannabis use, medical or ~~adult-use~~adult use or both, has been approved by state and local regulatory bodies. Notwithstanding the permissive regulatory environment of medical, and in some cases also ~~adult-use marijuana~~adult use cannabis at the state level, under U.S. federal law cannabis (other than hemp) is a Schedule I controlled substance under the Controlled Substances Act (21 U.S.C. § 811) (the “Controlled Substances Act”) which means it is viewed by the U.S. federal government as a drug that has a high potential for abuse and no therapeutic value. Therefore, even in states or territories that have legalized cannabis to some extent, the cultivation, processing, distribution, possession and sale of cannabis violates the Controlled Substances Act. Moreover, individuals and entities may violate U.S. federal law if they aid and abet another in violating the Controlled Substances Act or conspire with another to violate the law. Violating the Controlled Substances Act is also a predicate for other crimes, including money laundering laws and the Racketeer Influenced and Corrupt Organizations Act. 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 federal government or private citizens, or criminal charges, including, but not limited to, disgorgement of profits, cessation of business activities, civil forfeiture or divestiture.

Strict compliance with state and local laws with respect to cannabis may neither absolve the Company of liability under U.S. federal law, nor may it provide a defense to any federal proceeding which may be brought against the ~~Company or any of its subsidiaries.~~Company. This could have a material adverse effect on the Company, including its reputation and ability to conduct business, its cannabis licenses in the U.S., the listing and trading of its securities on stock exchanges and platforms, its financial position, operating results, profitability, liquidity and the market price of its publicly traded shares. In addition, it is difficult for the Company 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 and resources could be substantial.

~~F-32~~

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~~VERANO HOLDINGS CORP.~~ ~~Notes to Unaudited Interim Condensed Consolidated Financial Statements~~ ~~($ in Thousands except shares and per share amounts)~~

~~13.CONTINGENCIES~~ ~~(Continued)~~

There can be no assurance that the comprehensive U.S. federal legislation that would de-schedule and de-criminalize cannabis will be passed in the near future or at all. If such legislation is passed, there is no guarantee that it will include provisions that preserve the current state-based cannabis programs under which the Company operates or that such legislation will otherwise be favorable to the Company and its business.

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VERANO HOLDINGS CORP. Notes to Unaudited Interim Condensed Consolidated Financial Statements ($ in Thousands except shares and per share amounts)
~~14.~~
12.SEGMENTS

The Company conducts and manages its business through 2two reportable segments, representing the major lines of its cannabis business: ~~Cultivation (Wholesale)~~cultivation (wholesale) and ~~Retail.~~retail. The ~~Cultivation (Wholesale)~~cultivation (wholesale) segment consists of the cultivation, production and sale of cannabis products to retail stores. The ~~Retail~~retail segment consists of the retailing of cannabis to patients and consumers. Summarized financial information for these segments is as follows:

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Revenue, net of discounts
Cultivation (Wholesale) $ 67,673 $ 59,312 $ 120,681 $ 108,473
Retail 185,308 156,873 349,642 236,068
Intersegment Eliminations (29,319) (17,119) (44,426) (24,580)
Total Revenue, net of discounts 223,662 199,066 425,897 319,961
Depreciation and Amortization
Cultivation (Wholesale) 19,089 13,963 38,814 22,282
Retail 16,388 10,311 31,097 13,775
Total Depreciation and Amortization 35,477 24,274 69,911 36,057
Income taxes
Cultivation (Wholesale) 1,265 8,080 12,502 11,776
Retail 9,838 15,358 24,115 28,076
Total Income Taxes 11,103 23,438 36,617 39,852

Goodwill assigned to the Cultivation (Wholesale) segment as of June 30, 2022 and December 31, 2021 was $92,166 and $91,116, respectively. Goodwill assigned to the Retail segment as of June 30, 2022 and December 31, 2021 was $284,471 and $277,014, respectively.


	For the Three Months Ended March 31,
	2024		2023
Revenue, net of Discounts
Cultivation (Wholesale)	$	85,906	$	80,267
Retail	168,588		184,242
Intersegment Eliminations	(33,188)		(37,449)
Total Revenue, net of Discounts	221,306		227,060

Gross Profit
Cultivation (Wholesale)	24,186		10,824
Retail	88,774		98,361
Total Gross Profit	112,960		109,185

Depreciation and Amortization
Cultivation (Wholesale)	19,088		18,522
Retail	16,464		16,534
Total Depreciation and Amortization	35,552		35,056

Income taxes
Cultivation (Wholesale)	5,907		10,257
Retail	5,570		18,063
Total Income Taxes	11,477		28,320

The ~~Company’s assets are aggregated into 2 reportable segments (Retail and Cultivation). For the purposes~~following table reconciles gross profit to consolidated income before provision for income taxes.


	For the Three Months Ended March 31,
	2024	2023
Gross Profit	112,960	109,185
Selling, General, and Administrative Expenses	(90,289)	(75,243)
Loss from Investments in Associates	—	(160)
Total Other Income (Expense), net	(16,016)	(14,699)
Income Before Provision for Income Taxes	6,655	19,083

Table of testing goodwill, the Company has identified 12 reporting units. The Company determined its reporting units by first reviewing the operating segments based on the geographic areas in which the Company conducts business (or each market). The markets were then further divided into reporting units based on the market operations (retail and cultivation) which were primarily determined based on the licenses each market holds. All revenues are derived from customers domiciled in the United States and all assets are located in the United States.

Contents


VERANO HOLDINGS CORP. Notes to Unaudited Interim Condensed Consolidated Financial Statements ($ in Thousands except shares and per share amounts)
~~15.~~
13.LOYALTY OBLIGATIONS

The Company has customer loyalty programs where retail customers accumulate points for each dollar of spending, net of tax. These points are recorded as a ~~contract~~contractual liability until customers redeem their points for discounts on ~~cannabis and vape~~eligible products as part of an in-store sales transaction. In addition, the Company records a performance obligation as a reduction of revenue based on the estimated probability of point obligation incurred.

The Company modified the loyalty program in 2022. The modified loyalty program has a calculated standalone selling price that ranges between $0.031 and $0.061 per loyalty point. Upon redemption, the loyalty program obligation is relieved, and the offset is recorded as revenue. The Company estimates that 20% of points will not be redeemed (breakage) prior to their six-month expiration dates. The Company continues to evaluate breakage and redemption values to determine the standalone selling price.

As of December 31, 2023, there were approximately 110,000,0001 points outstanding with an approximate value of $5,781. As of March 31, 2024, there were approximately 114,000,0001 points outstanding with an approximate value of $6,015. Such balances are included in accrued liabilities on the Company's Condensed Consolidated Balance Sheets.


1 Such amount not in Thousands

~~F-33~~22

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VERANO HOLDINGS CORP. Notes to Unaudited Interim Condensed Consolidated Financial Statements ($ in Thousands except shares and per share amounts)

~~15.LOYALTY OBLIGATIONS~~ ~~(Continued)~~

As of December 31, 2021, the loyalty program had a calculated standalone selling price that ranged between $0.05 and $0.08 per loyalty point. Upon redemption, the loyalty program obligation is relieved, and the offset is recorded as revenue. The Company estimates that 25% of points will not be redeemed (breakage) and expects the remaining outstanding loyalty points will be redeemed within one year. As of December 31, 2021, there were 111,475,4591 ~~points outstanding, with an approximate value of $2,620 which is included in accrued liabilities.~~

The Company modified the loyalty program in 2022. The new loyalty program has a calculated standalone selling price that ranges between $0.02 and $0.06 per loyalty point. Upon redemption, the loyalty program obligation is relieved and the offset is recorded as revenue. The Company estimates that 25% of points will not be redeemed as points expire after 6 months. As of June 30, 2022, there were 16,214,7861 ~~points outstanding with an approximate value of $2,044 which is included in accrued liabilities.~~


~~16.~~14.CONSOLIDATION

In accordance with ASC 810, the Company consolidates through the variable interest ~~model and the voting interest~~entity ("VIE") model. The following table presents the summarized financial information about the Company’s consolidated VIEs, ~~and VOEs,~~ which are included in the ~~consolidated balance sheets~~Company's Condensed Consolidated Balance Sheets as of ~~June 30, 2022~~March 31, 2024 and December 31, ~~2021.~~2023.


		Consolidated VIE		Consolidated VOE		Consolidated VIE		Consolidated VOE
		June 30, 2022				December 31, 2021
						(As Restated)
	March 31, 2024									March 31, 2024	December 31, 2023
Current Assets	Current Assets	$	43,362	$	—	$	43,045	$	20,464
Due To/(From)		(68,307)		—		(25,723)		14,228
Non-Current Assets	Non-Current Assets	96,342		—		207,908		226,108
Current Liabilities	Current Liabilities	14,359		—		32,934		22,659
Non-Current Liabilities	Non-Current Liabilities	11,134		—		45,873		45,603
Non-Controlling Interest		—		—		1,276		—
Equity attributable to Verano Holdings, Corp.		45,904		—		145,147		192,538
Equity attributable to Verano Holdings Corp.

Consolidated Variable Interest Entities

Consolidated VIEs occur when (a) the Company closes an acquisition while the state ~~is in-process~~has not finalized the transfer of ~~transferring~~ the cannabis ~~license.~~license or (b) the Company owns an equity interest in a joint venture, which it exercises control over.

Consolidation occurs on the effective date of the purchase agreement, or in the case of joint venture VIEs, on the effective date of a limited liability company agreement governing the applicable joint venture, and an MSA. The MSA grants the management company, Verano, the ability to make business operating decisions, manage and staff employees, determine product mix, and the authority to direct allocation of cash. The MSA or the limited liability company agreement also allows Verano to limit distributions of the entity at Verano’s discretion.

Certain VIE’s may require financing to build-out a dispensary. These financing requirements are typically met within three months of purchase and were less than $3 million in all periods presented. Certain statestates may limit the distribution or transfer of cash until license transfer.

The Company has entered into financing arrangements with certain VIEs to provide funding for potential capital expenditures including, but not limited to, the construction of dispensaries and other facilities.


1 ~~Such amounts not in Thousands~~

~~F-34~~

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~~VERANO HOLDINGS CORP.~~ ~~Notes to Unaudited Interim Condensed Consolidated Financial Statements~~ ~~($ in Thousands except shares and per share amounts)~~

~~16.CONSOLIDATION~~ ~~(Continued)~~

~~Verano~~The Company applies ASC 810-10-15 to determine control of the legal entity. ~~The~~With respect to VIEs acquired via acquisition, the purchase ~~agreement limits~~agreements limit the sellers involvement in future operations, and their risks of loss. With respect to joint venture VIEs, the limited liability company agreements limit the partners’ involvement in future operations and control over financial decisions, including distributions. In addition, Verano enters into an MSA with the legal entity that grants the Company strategic decision-making ability of the business operations.

The Company is involved in all qualitative and quantitative aspects of ~~the entity,~~each consolidated VIE, such as but not limited to, software choices, procurement, staffing and payroll, advertising, and use of cash flow. ~~The~~With respect to VIEs acquired via acquisition, the Company absorbs all risk of loss and receives expected future returns based on the purchase agreement and MSA, resulting in Verano being the primary beneficiary.

~~Non-controlling interests (“NCI”) represent equity interests~~Verano does not fully own all entities consolidated under ASC 810 and records a non-controlling interest for such non-owned portion in the Unaudited Interim Condensed Consolidated Financial Statements. The income of less-than-wholly owned by outside parties. NCI may be initially measured at the NCI’s proportionate share of the recognized amounts of the acquiree’s identifiable net assets. The share of net assets attributable to NCI are presented as a component of equity. Their share of net income or loss and comprehensive income or loss is recognized directly in equity. Total comprehensive income or loss of subsidiariesentities is attributed to non-controlling interest and Verano based on the ~~shareholders~~contractual arrangements between the other interest holders and Verano, or, in the absence of contractual arrangements, on a pro rata basis based on relative ownership percentage. As an exception to the aforementioned attribution method, during periods in which a less-than-wholly owned entity records an accumulated deficit, the net losses of the ~~Company and~~less-than-wholly owned subsidiary are, generally, attributed entirely to ~~the NCI, even if this results in the NCI having a deficit balance.~~Verano.

~~Variable Interest Entries Consolidated under Voting Interest Entities Model~~

Consolidated VOEs occur when the Company acquires a cannabis license held by a non-profit entity. Pursuant to the Arizona Medical Marijuana Act passed in 2012, cannabis companies in Arizona were initially required to operate under a non-profit structure.

Upon purchase, the Company establishes a MSA with the non-profit to grant Verano the ability to make business operating decisions, manage and staff employees, determine product mix, and the authority to direct allocation

Table of cash. In addition, the purchase agreement grants the Company the right to appoint the officers and boards of directors of the non-profits and the Company has appointed certain of the Company’s named officers to the boards of the non-profits.

In accordance with ASC 810-10-15, the Company determines consolidation is appropriate when the Company has majority of control of the legal entity and the ability to make business operating decisions. The Company does not have required financing associated with VOEs and abides by state regulations regarding cash restrictions. For the year ended December 31, 2021, the Company’s VOEs are limited to the state of Arizona. As of June 30, 2022, the Company no longer has VOEs.

Contents


VERANO HOLDINGS CORP. Notes to Unaudited Interim Condensed Consolidated Financial Statements ($ in Thousands except shares and per share amounts)
~~17.~~
15.FAIR VALUE MEASUREMENTS

The Company applies fair value accounting for all financial assets and liabilities that are recognized or disclosed at fair value in the ~~financial statements~~Consolidated Financial Statements on a recurring basis. Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities that are required to be recorded at fair value, the Company considers all related factors of the asset by market participants in which the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions, and credit-risk.

The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels, and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities;

Level 2 – Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly; and

Level 3 – Inputs for the asset or liability that are not based on observable market data.

~~F-35~~

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~~VERANO HOLDINGS CORP.~~ ~~Notes to Unaudited Interim Condensed Consolidated Financial Statements~~ ~~($ in Thousands except shares and per share amounts)~~

~~17.FAIR VALUE MEASUREMENTS~~ ~~(Continued)~~

Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, ~~notes payable,~~debt, and acquisition consideration payable.

For the Company’s long-term ~~notes payable~~debt (which ~~consist~~primarily consists of a credit facility and mortgage loans), for which there were no quoted market prices of active trading markets, it was not practicable to estimate the fair value of these financial instruments. The carrying amount of ~~notes payable at June 30, 2022~~debt as of March 31, 2024 and December 31, ~~2021~~2023 was ~~$402,629~~$444,686 and ~~$289,925,~~$445,642, which included ~~$258,880~~$53,412 and ~~$13,771,~~$52,005, respectively, of short-term debt due within one year.

Financial instruments recorded at fair value are classified using a fair value hierarchy that reflects the significance of the inputs to fair value measurements. The fair value of the Company’s financial instruments associated with each of the three levels of the hierarchy are:


		As of June 30, 2022
		Level 1		Level 2		Level 3		Total
	As of March 31, 2024											As of March 31, 2024
	Level 1									Level 1	Level 2	Level 3	Total
Cash and Cash Equivalents	Cash and Cash Equivalents	$	92,833	$	—	$	—	$	92,833
Investments	Investments	3,842		—		—		3,842
Acquisition Consideration Payable	Acquisition Consideration Payable	—		—		(66,901)		(66,901)
Total	Total	$	96,675	$	—	$	(66,901)	$	29,774


		As of December 31, 2021
		Level 1		Level 2		Level 3		Total
	As of December 31, 2023											As of December 31, 2023
	Level 1									Level 1	Level 2	Level 3	Total
Cash and Cash Equivalents	Cash and Cash Equivalents	$	99,118	$	—	$	—	$	99,118
Investments
Acquisition Consideration Payable	Acquisition Consideration Payable	—		—		(208,349)		(208,349)
Total	Total	$	99,118	$	—	$	(208,349)	$	(109,231)

~~During the six months ended June 30, 2022,~~As of March 31, 2024, the Company remeasured its consideration arrangements associated with its 2021 acquisitions of Agri-Kind, LLC, and Agronomed Biologics, using Monte Carlo simulation models. The remeasurement resulted in a net loss of ($2,329) which was driven by a change in management’s estimates and projections of the acquired entities' ability to achieve performance targets along with the change in fair value of the shares to be issued.

The amount was recorded, net, within other income/(expense) on the unaudited interim condensed consolidated statement of operations. Significant assumptions used in the Company’s June 30, 2022, remeasurement include the price of the Subordinate Voting Shares asheld publicly traded ~~on the CSE as of June 30, 2022.~~

~~Additionally, during the six months ended June 30, 2022, the Company sold its 50% ownership interest in ILDISP, LLC and as part of the disposition, the Company received~~ shares of ~~a publicly traded entity. As of June 30, 2022, the fair value of the investment was $3,842,~~$2,988 which is included in other assets in the accompanying ~~condensed consolidated balance sheets~~Condensed Consolidated Balance Sheet, and is as a Level 1 financial instrument.


~~18.SUBSEQUENT EVENTS~~

~~Acquisition - Pharmacann Virginia LLC~~

On July 7, 2022, the Company entered into an agreement to acquire all of the issued and outstanding equity interests in PharmaCann Virginia LLC, a Virginia limited liability company, and certain real property. The total consideration is $5,000,000, which is payable in cash. Closing of the acquisition is subject to certain conditions, contingencies, and approvals, including regulatory approval.

~~F-36~~

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VERANO HOLDINGS CORP. Notes to Unaudited Interim Condensed Consolidated Financial Statements ($ in Thousands except shares and per share amounts)

~~18.~~16.~~SUBSEQUENT EVENTS~~ ~~(Continued)~~RELATED PARTY TRANSACTIONS

2022 Credit Agreement

George Archos, the Chairman, Chief Executive Officer and Founder of the Company, participated in the 2022 Credit Agreement as a lender funding $1,000 of the $350,000 principal amount. Mr. Archos is excluded from certain approval rights of the lenders and any penalties and fees due to Mr. Archos under the 2022 Credit Agreement are immaterial to the Company.

Two Pointo

~~Mortgage Loan~~In October 2022, the Company entered into a conditional management and services agreements with each of Americana Dream, LLC and Green Therapy, LLC, operators of dispensaries in Illinois pursuant to social equity licenses issued by Illinois regulatory authorities (together, the “LLCs”), and in 2023 the Company received an aggregate of $10 for services rendered under the agreements. The Company sold products to the LLCs and two associated entities on a wholesale basis in the aggregate amounts of $424, net of discounts, in the first quarter of 2023 and $854, net of discounts, for the first quarter of 2024. Two Pointo, LLC (“Two Point”) has contractual rights to purchase ownership interests in the LLCs and associated entities, subject to submitting a request for and receiving applicable Illinois regulatory approvals and other conditions. The existing owners of the LLCs and associated entities will maintain ownership interests together with Two Point. In 2023, Darren Weiss, the Company’s President, received in connection with application support services rendered to an LLC in 2019, (i) a 2.73% profit interest in Two Point subject to Two Point’s purchase of ownership interests in the LLCs, and (ii) a profit interest in Two Point of 0.30%, and David Spreckman, the Company’s Chief Marketing Officer, received a profit interest in Two Point of 0.30% for services. All profit interests issued to Messrs. Weiss and Spreckman were voluntarily forfeited in 2024 as if they were never granted. Maria Fragias, an immediate family member of George Archos, the Company’s Chief Executive Officer, is the beneficiary of a trust that holds a 7.92% ownership interest and a 3.95% profit interest in Two Point. None of the trust or such persons has received any distributions, payments, or proceeds from Two Point. As of March 31, 2024, and December 31, 2023, the amounts due from the LLCs and two associated entities were $783 and $443, respectively.

Leases

The Company leases real property for a retail dispensary in Aurora, Illinois from 740 Rte. 59, LLC (“740”). Pursuant to the lease agreement, the Company made payments totaling $46 in the first quarter of 2023 and $46 during the first quarter of 2024, which payments consist of base rent, real estate taxes and customary tenant charges. George Archos, the Company’s Chief Executive Officer, holds an indirect 50% ownership interest in 740. Pursuant to the lease agreement, the initial term expires on June 30, 2030.

The Company leases real property for a retail dispensary in Lombard, Illinois from 783 Butterfield LLC (“783”). Pursuant to the lease agreement, the Company made payments to 783 totaling $90 in the first quarter of 2023 and $91 during the first quarter of 2024, which payments consist of base rent, real estate taxes and customary tenant charges. George Archos, the Company’s Chief Executive Officer, holds a 50% indirect ownership interest in 783. Pursuant to the lease agreement, the initial term expires on January 11, 2031.

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VERANO HOLDINGS CORP. Notes to Unaudited Interim Condensed Consolidated Financial Statements ($ in Thousands except shares and per share amounts)

17.SUBSEQUENT EVENTS

On April 30, 2024, the Company made a voluntary prepayment of the outstanding principal and interest under the 2022 Credit Facility in the amount of $50,000 plus a $1,000 prepayment premium. In connection with such voluntary prepayment, liens over certain collateral pledged by the Company were released and certain subsidiaries of the Company were released as “Credit Parties” under the 2022 Credit Facility.

On ~~July 11, 2022,~~May 2, 2024, GGH filed an application with the Supreme Court of British Columbia seeking an order granting summary trial in the ongoing litigation between the Company ~~repaid~~and GGH regarding the GGH Arrangement Agreement. In the application, GGH stated it is seeking $860,900 in full all outstanding indebtedness related to the loan with 100 Mile Fund, LLC. The Company assumed the loan on July 11, 2021 with a principal amount of $13,000 as part of the acquisition of Agronomed Holdings, Inc.damages, plus costs and interest.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This management discussion and analysis (this “MD&A”) of the financial condition and results of operations of ~~Verano~~the Company is for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2024 and ~~June 30, 2021.~~March 31, 2023. It is supplemental to, and should be read in conjunction with, the Company’s ~~unaudited interim condensed consolidated financial statements~~Unaudited Interim Condensed Consolidated Financial Statements and the accompanying notes for the three months ended March 31, ~~2022.~~2024 and with the Company’s ~~audited consolidated financial statements~~Audited Consolidated Financial Statements and the accompanying notes for the years ended December 31, 2023, 2022 and 2021 ~~2020 and 2019.~~included in the Form 10-K. The financial statements referenced in this MD&A are prepared in accordance with GAAP. Financial information presented in this MD&A is presented in United States dollars (“$” or “US$”) and expressed in thousands, unless otherwise indicated. This MD&A contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those projected, forecasted, or expected in these forward-looking statements as a result of various factors, including, but not limited to, those discussed in the ~~2021~~ Form ~~10.~~10-K. See “Cautionary Statement Regarding Forward-Looking Statements” above and “Risk Factors” in Part I, Item 1A. "Risk Factors" in the ~~2021~~ Form ~~10.~~10-K. The Company's management believes the assumptions underlying the Company’s financial statements and accompanying notes are reasonable. However, the Company’s financial statements and accompanying notes may not be an indication of the Company's financial condition and results of operations in the future.

OVERVIEW OF THE COMPANY

Verano, ~~is a leading vertically-integrated multi-state cannabis operator in the United States as~~ one of the ~~top five publicly traded~~U.S. cannabis industry’s leading companies based on historical revenue, geographical scope and brand performance, is a vertically integrated, multi-state ~~operators in~~operator embracing a mission of saying Yes to plant progress and the ~~United States by reported annual revenue for the year ended December 31, 2021.~~bold exploration of cannabis. An operator of licensed cannabis cultivation, processing, wholesale distribution and retail facilities, our goal is the ongoing development of communal wellness by providing responsible access to regulated medical and adult-use cannabis products to discerning ~~high-end~~ customers. As of ~~June 30, 2022~~May 6, 2024, through our subsidiaries and affiliates we operate businesses in 13 US states, including ~~101~~139 retail dispensaries and ~~13 cultivation facilities, processing and manufacturing~~14 production facilities with over 1,000,000 square feet of ~~cultivation.~~cultivation capacity. We produce a ~~suite~~wide variety of ~~premium, artisanal~~high quality cannabis products sold under our portfolio of consumer brands, including Encore™, Avexia™, MÜV™, Savvy™, BITS™ and Verano™. We also design, build and operate branded ~~dispensary~~retail environments including Zen Leaf™ and MÜV™ dispensaries that deliver a cannabis shopping experience in both medical and adult-use markets, including through Cabbage Club, an annual membership program offering exclusive benefits for cannabis consumers.

Notwithstanding the permissive regulatory environment of medical, and in some cases, ~~recreational marijuana,~~also adult-use (i.e., recreational) cannabis, at the state level, it remains illegal under USU.S. federal law to cultivate, manufacture, distribute, sell or possess ~~marijuana~~cannabis in the ~~US.~~U.S. Because federal law prohibits transporting any federally restricted substance across state lines, cannabis cannot be transported across state lines. As a result of current federal law prohibitions, the USU.S. cannabis industry is conducted on a state-by-state basis. To date, in the U.S.~~, 37~~ 38 states plus the District of Columbia and the USU.S. territories of Puerto Rico, Guam, the Commonwealth of Northern Marina Islands, and the USU.S. Virgin Islands have authorized comprehensive medical ~~marijuana~~cannabis programs, 1924 states plus the District of Columbia and the USU.S. territories of Guam, ~~and~~ the Commonwealth of Northern Mariana Islands, and the U.S. Virgin Islands have authorized comprehensive programs for medical and adult-use (i.e., recreational) ~~marijuana,~~cannabis, and 11 states allow the use of low ~~THC,~~tetrahydrocannabinol and high ~~CBD~~cannabidiol products for specified medical uses. Verano operates within states where cannabis use, medical or both medical and adult-use, has been approved by state and local regulatory bodies. Strict compliance with state and local laws with respect to cannabis may neither absolve the Company of liability under USU.S. federal law, nor may it provide a defense to any federal proceeding which may be brought against the ~~Company.~~Company or any of its subsidiaries.

Our strategy is to vertically integrate as a single cohesive company in multiple states through the consolidation of seed-to-sale cultivating, manufacturing, distributing, and dispensing ~~premium~~cannabis brands and products at scale. Our cultivation, processing and wholesale distribution of cannabis consumer packaged goods are designed to ~~guarantee shelf-space in~~support our national retail dispensary ~~chain, as well as~~chains, and to develop and foster ~~long term~~long-term wholesale supply relationships with third-party retail ~~operators though sales arrangements.~~dispensary operators. Our ~~model~~strategy includes geographic diversity by establishing a footprint ~~that enables~~to enable us to adapt to changes in both industry and market ~~conditions seamlessly and profitably. All~~conditions.

Table of ~~the Company’s business, operating results and financial condition relate to US cannabis-related activities.~~

~~As part of the RTO described in “FN 2 - Reverse Takeover Transaction ("RTO")~~” in February 2021, the Company resulted from a reverse takeover transaction, and at such time Verano Holdings LLC and AltMed became subsidiaries of the Company with the other members of the AME Group and Plants of Ruskin becoming subsidiaries of AltMed. Prior to the RTO, Verano Holdings LLC, AltMed and its subsidiaries (collectively, “~~AME”) and Plants of Ruskin were not consolidated and were not combined.~~Contents

SELECTED RESULTS OF OPERATIONS

The following presents selected financial data derived from the (i) ~~unaudited interim condensed consolidated financial statements~~Unaudited Interim Condensed Consolidated Financial Statements for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2024 and ~~2021~~2023 and (ii) ~~condensed consolidated balance sheet~~the Condensed Consolidated Balance Sheets as of

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~~June 30, 2021~~ March 31, 2024 and December 31, ~~2021 have been derived from,~~2023, and should be read in conjunction with the ~~unaudited interim condensed consolidated financial statements~~Unaudited Interim Condensed Consolidated Financial Statements and accompanying notes presented in Item 1 of this ~~Report.~~Form 10-Q. The selected ~~unaudited interim condensed consolidated~~Unaudited Interim Condensed Consolidated financial information below may not be indicative of the Company's future performance.

Three Months Ended ~~June 30, 2022,~~March 31, 2024, as Compared to Three Months Ended ~~June 30, 2021~~March 31, 2023


			For the Three Months Ended June 30,
		For the Three Months Ended March 31,											For the Three Months Ended March 31,
($ in thousands)	($ in thousands)		2022		2021		$ Change		($ in thousands)	2024	2023	$ Change
Revenue, net of discounts			$	223,662	$	199,066	$	24,596
Revenues, net of discounts
Gross Profit	Gross Profit		98,115		69,210		28,905
Net Loss attributable to Verano Holdings Corp.			(9,847)		(29,688)		19,841

Net Loss Attributable to Verano Holdings Corp. & Subsidiaries
Net Loss per share – basic & diluted	Net Loss per share – basic & diluted		(0.03)		(0.10)		0.07

~~Revenue,~~Revenues, net of discounts

~~Revenue~~Revenues, net of discounts, for the three months ended ~~June 30, 2022~~March 31, 2024 was ~~$223,662, an increase~~$221,306, a decrease of ~~$24,596~~$(5,754) or ~~12.4%~~(2.5)%, compared to revenue of ~~$199,066~~$227,060 for the three months ended ~~June 30, 2021.~~March 31, 2023. Key performance drivers for retail revenue for the quarter were primarily driven by market expansion into ~~New Jersey~~the Maryland adult-use market which began permitting adult-use sales during July 2023, and new Zen Leaf™ store openings in the ~~three months ended June 30, 2022.~~Connecticut market during the third and fourth quarters of 2023. During the three months ended ~~June 30, 2022,~~March 31, 2024, the Company opened ~~seven~~two new stores, one in Florida ~~Pennsylvania,~~ and ~~West Virginia.~~ one in Pennsylvania. Additionally, consistent with other multi-state cannabis operators, the Company has seen increased competition and promotional activity in select retail markets, specifically in New Jersey and Illinois. Retail revenue for the three months ended ~~June 30, 2022~~March 31, 2024 was approximately ~~73.2%~~66.2% of total revenue compared to ~~72.6%~~69.7% of total revenue for the three months ended ~~June 30, 2021.~~March 31, 2023, in each case, excluding intersegment eliminations. Key performance drivers for cultivation (wholesale) revenues were ~~significant cultivation expansion into~~increased third-party wholesale sales in the New Jersey market and increased adult-use third-party wholesale sales in the Maryland market, both, of which attributed to increased production output and sales of cannabis flower and cannabis related products, ~~including intercompany sales. Continued expansion in~~when compared to the ~~Pennsylvania market also further increased revenue.~~three months ended March 31, 2023. Cultivation (wholesale) revenue for the three months ended ~~June 30, 2022~~March 31, 2024 was ~~26.8%~~33.8% of total revenue compared to ~~27.4%~~30.3% of total revenue for the three months ended ~~June 30, 2021.~~March 31, 2023, in each case, excluding intersegment eliminations.

Gross Profit

Gross profit for the three months ended ~~June 30, 2022~~March 31, 2024 was ~~$98,115,~~$112,960, representing a gross margin on the sale of cannabis, cannabis extractions, edibles and related accessories of ~~43.9%~~51.0%. This is compared to gross profit for the three months ended ~~June 30, 2021~~March 31, 2023 of ~~$69,210,~~$109,185, which represented a ~~34.8%~~48.1% gross margin on the sale of cannabis, cannabis extractions, edibles and related accessories. The increase in gross profit ~~is primarily due to top-line growth catalyzed by strong overall market growth, specifically in New Jersey due~~during the three months ended March 31, 2024 compared to the ~~approval~~three months ended March 31, 2023, was attributable to higher third-party wholesale sales of ~~adult-use sales.~~Verano products, which was partially offset by increased competition and continued pricing pressure in the retail markets.

Net Loss

Net Loss attributable to the Company for the three months ended ~~June 30, 2022~~March 31, 2024 was ~~$(9,847)~~$(4,822), ~~an increase~~a decrease of ~~$19,841,~~$4,415, compared to a net loss of ~~$(29,688)~~$(9,237) for the three months ended ~~June 30, 2021.~~March 31, 2023. The ~~variance~~decrease in net loss was ~~mainly~~largely driven by an ~~increase in other income partially offset by a~~overall decrease in the provision for income ~~tax expense.~~

Three Months Ended June 30, 2022-2021
($ in thousands) 2022 2021 $ Change
Cost of Goods Sold, net $ 125,547 $ 129,856 $ (4,309)
Selling, General, and Administrative Expenses 100,263 70,013 30,250
Other Income (Expense) 3,548 (5,994) 9,542
Provision for Income Taxes (11,103) (23,438) 12,335
taxes for the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

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	For the Three Months Ended March 31,
($ in thousands)	2024		2023		$ Change
Cost of Goods Sold, net	$	108,346	$	117,875	$	(9,529)

Selling, General, and Administrative Expenses	90,289		75,243		15,046

Other Income (Expense)	(16,016)		(14,699)		(1,317)

Provision for Income Taxes	(11,477)		(28,320)		16,843

Cost of Goods Sold, net

Cost of goods sold, net includes the costs directly attributable to cultivating and processing cannabis and for retail purchases of finished goods, such as flower, edibles, and concentrates. Cost of goods sold, net for the three months ended ~~June 30, 2022,~~March 31, 2024 was ~~$125,547,~~$108,346, a decrease of ~~$(4,309)~~$(9,529) or ~~(3.3)~~(8.1)%, ~~from~~as compared to the three months ended ~~June 30, 2021.~~March 31, 2023. The ~~variance~~decrease was primarily driven by ~~production costs~~decreased top-line revenue within the retail markets due to pricing pressure in select markets, partially offset by increased wholesale sales of Verano products to third-parties in select markets, specifically in the New Jersey ~~and Florida, as well as recognized inventory write-off of $13,100 related to unmet quality control standards.~~adult-use market.

Selling, General, and Administrative Expenses

~~Total selling,~~Selling, general and administrative expenses ("SG&A") for the three months ended ~~June 30, 2022,~~March 31, 2024 were ~~$100,263,~~$90,289, an increase of ~~$30,250~~$15,046 or ~~43.2%~~20.0%, compared to ~~total selling, general and administrative~~SG&A expenses of ~~$70,013~~$75,243 for the three months ended ~~June 30, 2021. Total selling, general and administrative~~March 31, 2023. SG&A expenses as a percentage of revenue was ~~44.8%~~40.8% and ~~35.2%~~33.1% for the three months ended ~~June 30, 2022,~~March 31, 2024, and ~~2021,~~March 31, 2023, respectively. The increase was primarily due to a ~~$12,176~~$6,405 increase in salaries and benefits, due to increased headcounts related to new store openings, and a ~~$10,885~~$7,711 increase in general and administrative expenses primarily driven ~~largely~~ by ~~increased operating costs related to new dispensaries~~enhancements in ~~Florida~~processes and ~~Pennsylvania.~~

~~The Company expects to continue to invest organically and in new markets to support expansion plans and adapt~~technology, during the three months ended March 31, 2024 compared to the ~~increasing complexity of~~three months ended March 31, 2023. Additionally, SG&A expenses for the ~~cannabis business. Furthermore,~~three months ended March 31, 2023 included lower stock based compensation expense compared to the ~~Company expects to continue to incur acquisition~~three months ended March 31, 2024, driven by a prior period expense acceleration benefit during the three months ended March 31, 2023 and ~~transaction costs related to expansion.~~lower award grants during the three months ended March 31, 2023.

~~Total~~ Other Income (Expense)

~~Total other~~Other income (expense) for the three months ended ~~June 30, 2022,~~March 31, 2024, was ~~$3,548, an increase~~$(16,016), a decrease of ~~$9,542~~$1,317 as compared to the three months ended ~~June 30, 2021.~~March 31, 2023. The ~~increase in~~ other income (expense) increase was primarily ~~driven by an~~due to less earn out ~~accrual adjustment~~activity during the three months ended ~~June 30, 2022, of $10,900 related~~March 31, 2024 when compared to ~~an acquisition of a license in Pennsylvania.~~the three months ended March 31, 2023.

Provision for Income Taxes

Income tax expense is recognized based on the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at year-end. Income tax expense for the three months ended ~~June 30, 2022,~~March 31, 2024, was ~~$11,103,~~$(11,477), a decrease of ~~$12,335~~$16,843 or ~~(52.6)~~(59.5)% asprimarily due to impacts of prior period return to provision adjustments and a decrease in pre-tax earnings when compared to the three months ended ~~June 30, 2021.~~

~~Six Months Ended June 30, 2022, as compared to Six Months Ended June 30, 2021~~

For the Six Months Ended
June 30,
($ in thousands) 2022 2021 $ Change
Revenue, net of discounts $ 425,897 $ 319,961 $ 105,936
Gross Profit 196,732 123,500 73,232
Net Loss attributable to Verano Holdings Corp. (10,061) (37,574) 27,513
Net Loss per share – basic & diluted (0.03) (0.14) 0.11

~~Revenue, net of discounts~~

Revenue for the six months ended June 30, 2022 was $425,897 an increase of $105,936 or 33.1%, compared to revenue of $319,961 for the six months ended June 30, 2021. Key performance drivers for retail revenue were largely attributable to an increased dispensary count from new store openings in Arizona, Connecticut, Florida, Illinois New Jersey, West Virginia, and Pennsylvania markets. Market expansion into New Jersey, which began adult-use sales, further increased retail revenue. Retail revenue for the six months ended June 30, 2022 was approximately 74.3% of total revenue compared to 68.5% of total revenue for the six months ended June 30, 2021. Key performance drivers for cultivation (wholesale) revenues were primarily driven by acquisition activities, in particular, the acquisition of Connecticut Pharmaceutical Solutions, Inc. and significant cultivation expansion into the Arizona, Connecticut, Florida, New Jersey and Pennsylvania markets. In addition, production output and sales of flower expanded in the Illinois, Maryland, New Jersey, Pennsylvania and Ohio markets, which further increased revenue~~. Cultivation expansion into the New Jersey adult-use market attributed to increased production~~March 31, 2023.

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output and sales of cannabis flower and cannabis related products, including intercompany sales. Cultivation (wholesale) revenue for the six months ended June 30, 2022 was 25.7% of total revenue compared to 31.5% of total revenue for the six months ended June 30, 2021.

~~Gross Profit~~

Gross profit for the six months ended June 30, 2022 was $196,732 representing a gross margin on the sale of cannabis, cannabis extractions, edibles and related accessories of 46.2%. This is compared to gross profit for the six months ended June 30, 2021 of $123,500, which represented a 38.6% gross margin on the sale of cannabis, cannabis extractions, edibles and related accessories. The increase in gross profit is primarily due to continued top-line growth catalyzed by strong market growth in Illinois and expansion into the Connecticut, Florida, New Jersey, and Pennsylvania markets for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021.

~~Net Loss~~

Net Loss attributable to the Company for the six months ended June 30, 2022 was $(10,061), an increase of $27,513, compared to a net loss of $(37,574) for the six months ended June 30, 2021. The variance in net loss was driven by an increase in other income partially offset by a decrease in income tax expense.

Six Months Ended June 30, 2022-2021
($ in thousands) 2022 2021 $ Change
Cost of goods sold, net $ 229,165 $ 196,461 $ 32,704
Selling, General, and Administrative Expense 189,824 112,679 77,145
Other Income (Expense) 18,079 (8,627) 26,706
Provision for Income Taxes (36,617) (39,852) 3,235

~~Cost of Goods Sold, net~~

Cost of goods sold includes the costs directly attributable to cultivating and processing cannabis and for retail purchases of finished goods, such as flower, edibles, and concentrates. Cost of goods sold for the six months ended June 30, 2022, was $229,165 an increase of $32,704 or 16.6%, from the six months ended June 30, 2021. The increase was primarily driven by overall higher volumes of production for cannabis and cannabis related products coupled with a lower comparative impact related to the inventory step-up from acquisitions. Additionally, for the six months ended June 30, 2022 compared to the six months ended June 30, 2021, cost of goods sold increased as a result of the acquisitions of the AltMed cultivation facilities in Arizona and Florida, the Territory cultivation facility in Arizona, the Agri-Kind cultivation facility in Pennsylvania and continued expansion at existing facilities.

~~Selling, General, and Administrative Expenses~~

Total selling, general and administrative expenses for the six months ended June 30, 2022 were $189,824, an increase of $77,145, or 68.5%, compared to total selling, general and administrative expenses of $112,679 for the six months ended June 30, 2021. Total selling, general and administrative expenses as a percentage of revenue was 44.6% and 35.2% for the six months ended June 30, 2022 and 2021, respectively. The increase was primarily due to a $35,356 increase in salaries and

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benefits and a $21,275 increase in general and administrative expenses driven by overall footprint expansion in established markets including increases in employee headcount and fixed assets in Florida and Pennsylvania.

For the six months ended June 30, 2022, the Company expects to continue to invest organically and in new markets to support expansion plans and adapt to the increasing complexity of the cannabis business. Furthermore, the Company expects to continue to incur acquisition and transaction costs related to expansion.

~~Total Other Income (Expense)~~

Total other income (expense) for the six months ended June 30, 2022, was $18,079, an increase of $26,706 as compared to the six months ended June 30, 2021. The increase in other income (expense) was primarily due to a gain on the disposal of three dispensaries of $17,104 and an earn out accrual adjustment during the three months ended June 30, 2022, of $10,900 related to an acquisition of a license in Pennsylvania. This is partially offset by an increase in interest costs as a result of new debt issuance costs related to the Credit Facility with Chicago Atlantic.

~~Provision for Income Taxes~~

Results of Operations by Segment

The Company has two reportable segments: (i) ~~Cultivation (Wholesale)~~cultivation (wholesale) and (ii) ~~Retail.~~retail. Due to the vertically integrated nature of its business, the Company reviews its revenue at the cultivation (wholesale) and retail levels while reviewing its operating results on a consolidated basis.

The following tables summarize revenues, net of ~~sales~~ discounts, by segment for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2024 and ~~2021:~~2023:

Three Months Ended June 30,
($ in thousands) 2022 2021 % Change
Revenues, net of discounts
Cultivation (Wholesale) $ 67,673 $ 59,312 14.1 %
Retail $ 185,308 $ 156,873 18.1 %
Intersegment Eliminations $ (29,319) $ (17,119) 71.3 %
Total Revenues, net of discounts $ 223,662 $ 199,066 12.4 %


	For the Three Months Ended March 31,
($ in thousands)	2024		2023		% Change
Revenues, net of Discounts
Cultivation (Wholesale)	$	85,906	$	80,267	7.0	%
Retail	168,588		184,242		(8.5)	%
Intersegment Eliminations	(33,188)		(37,449)		(11.4)	%
Total Revenues, net of Discounts	$	221,306	$	227,060	(2.5)	%

Revenues, net of discounts, for the cultivation (wholesale) segment were ~~$67,673~~$85,906 for the three months ended ~~June 30, 2022,~~March 31, 2024, an increase of ~~$8,361~~$5,639 or ~~14.1% excluding intersegment eliminations,~~7.0%, compared to the three months ended ~~June 30, 2021.~~March 31, 2023, in each case, excluding intersegment eliminations. The increase in cultivation (wholesale) revenues, net of discounts, was primarily driven by ~~cultivation expansion into~~increased third-party wholesale sales in the New Jersey market coupled with increased adult-use ~~market and continued cultivation expansion~~third-party wholesale sales in the ~~established Pennsylvania market.~~Maryland market, both, of which attributed to increased production output of cannabis flower and cannabis related products.

Revenues, net of discounts for the retail segment were ~~$185,308~~$168,588 for the three months ended ~~June 30, 2022, an increase~~March 31, 2024, a decrease of ~~$28,435~~$(15,654) or ~~18.1%~~(8.5)%, ~~excluding intersegment eliminations,~~ compared to the three months ended ~~June 30, 2021.~~March 31, 2023, in each case, excluding intersegment eliminations. The ~~increase~~decrease in retail revenues, net of discounts, was primarily driven by ~~the Company’s expansion into~~increased competition and promotional activity in select retail markets, specifically in New Jersey and ~~increased Florida operations, which are treated exclusively as retail income due~~Illinois. Additionally, continued pricing pressure contributed to the ~~vertical nature of the Florida business. The increase was also driven by additional retail store openings~~decrease in ~~Pennsylvania and West Virginia.~~

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Six Months Ended June 30,
($ in thousands) 2022 2021 % Change
Revenues, net of discounts
Cultivation (Wholesale) $ 120,681 $ 108,473 11.3 %
Retail $ 349,642 $ 236,068 48.1 %
Intersegment Eliminations $ (44,426) $ (24,580) 80.7 %
Total Revenues, net of discounts $ 425,897 $ 319,961 33.1 %

Revenues, net of discounts for the cultivation (wholesale) segment were $120,681 for the six months ended June 30, 2022, an increase of $12,208 or 11.3% excluding intersegment eliminations, compared to the six months ended June 30, 2021. The increase in cultivation (wholesale) revenues, net of discounts, ~~was primarily driven by market expansion in Pennsylvania and New Jersey, and increases in revenues in established markets such as Arizona, Florida, and Connecticut.~~

~~Revenues, net of discounts for~~when comparing the ~~retail segment were $349,642 for the six~~three months ended ~~June 30, 2022, an increase of $113,574 or 48.1%, excluding intersegment eliminations, compared~~March 31, 2024 to the ~~six~~three months ended June 30, 2021. The increase in retail revenues, net of discounts, was primarily driven by the Company’s New Jersey and Florida operations. Florida sales are treated exclusively as retail income due to the vertical nature of the Florida business. The increase was also driven by additional retail store openings in Florida, Pennsylvania, West Virginia, New Jersey and Connecticut.March 31, 2023.

Drivers of Operational Performance

Revenue

The Company derives its revenue from both its cultivation (wholesale) business in which it cultivates, produces and sells cannabis products to third-party retail customers, and its retail business, in which it directly sells cannabis products to retail patients and consumers. For the three months ended ~~June 30, 2022,~~March 31, 2024, approximately ~~26.8%~~33.8% of the Company’s revenue was generated from the cultivation (wholesale) business, excluding intersegment eliminations, and approximately ~~73.2%~~66.2% from the retail ~~business.~~business, excluding intersegment eliminations. For the three months ended ~~June 30, 2021,~~March 31, 2023, approximately ~~27.4%~~30.3% of revenue was generated from the cultivation (wholesale) business and approximately ~~72.6%~~69.7% from the retail business.

Gross Profit

Gross profit is revenue less cost of goods ~~sold.~~sold, net. Cost of goods sold, net includes the costs directly attributable to product sales and includes amounts paid for finished goods, such as flower, edibles, and concentrates, as well as packaging and other supplies, fees for services and processing, rent, utilities, and related costs. Cannabis costs are affected by various state regulations that limits the sourcing and procurement of cannabis ~~product,~~products, which may create fluctuations in gross profit over comparative periods as the regulatory environment changes. Gross profit margin measures the Company’s gross profit as a percentage of revenue. Furthermore, during the six months ended June 30, 2022, the Company recorded an increase to cost of goods sold, net, of $6,707 that was attributable to acquired inventory that was stepped-up to fair value, and subsequently recognized through cost of goods sold. Additionally, the Company recognized an inventory write-off, included in cost of goods sold, of $13,100 related to unmet quality control standards during the six months ended June 30, 2022.

The Company’s expansion strategy and revenue growth have taken priority and will continue to do so for the foreseeable future as it expands its footprint, inby exploring new markets ~~through acquisition~~and opening or acquiring new dispensary locations, and scales production within current markets. In the core markets in which the Company is already operational ~~it does not expect price compression in the near-term. However,~~and, as the state markets mature, the Company anticipates that there will be pressure on margins in the cultivation (wholesale) and retail channels. The Company’s current production capacity has not been fully realized and it is expected that price compression at the cultivation (wholesale) level, will be ~~more than~~ offset by ~~increased production volume.~~operational optimization. As a result, the Company expects overall consolidated gross profit margins to gradually increase in the future.

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Total Expenses

Total expenses, other than the cost of goods sold, consist of selling costs to support customer relationships and to deliver product to the Company’s retail stores. It also includes a significant investment in the corporate infrastructure required to support ongoing business.

Selling costs generally correlate to revenue. As a percentage of sales, selling costs are expected to increase slightly in currently operational markets (Arizona, Arkansas, ~~California,~~ Connecticut, Florida, Illinois, Maryland, Massachusetts, Michigan, Nevada, New Jersey, Ohio, Pennsylvania, and West Virginia) as facility and market expansion occurs. The

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increase is expected to be driven primarily by the growth of the Company’s retail and cultivation (wholesale) channels and the ramp up from ~~pre-revenue to sustainable market share.~~new retail openings.

~~Selling, general, and administrative (“~~SG&A”) expenses also include costs incurred at the Company’s corporate offices, primarily related to ~~back office~~back-office personnel costs, including salaries, incentive compensation, benefits, stock-based compensation and ~~other~~ professional service costs. Going forward, SG&A expenses are expected to continue in line with the Company’s expansion plans. Furthermore, the Company expects to continue to incur acquisition and transaction costs related to these expansion plans and anticipates ~~an increase in~~ stock compensation expenses related to recruiting and hiring talent, along with legal and professional fees associated with being a ~~publicly-traded company.~~public-reporting company and publicly traded in Canada and a public-reporting company in the U.S.

Provision for Income Taxes

The Company is subject to income taxes in the jurisdictions in which it operates and, consequently, income tax expense is a function of the allocation of taxable income by jurisdiction and the various activities that impact the timing of taxable events. As the Company operates in the cannabis industry, it is subject to the limits of Section 280E of the ~~Internal Revenue~~ Code ~~of 1986, as amended (the "Code")~~ under which the Company is only allowed to deduct expenses directly related to the sale of products. This results in permanent differences between ordinary and necessary business expenses deemed non-allowable under Section 280E of the Code and a higher effective tax rate than most industries.

During the second quarter of 2023, Connecticut, Illinois, and New Jersey enacted tax legislation to exempt, or decouple, from Section 280E of the Code, all of which became retroactively effective as of January 1, 2023. The Company has significant operations in these states and is now permitted to deduct ordinary and necessary cannabis business expenses in these states.

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LIQUIDITY, FINANCING ACTIVITIES AND CAPITAL RESOURCES

As of ~~June 30, 2022~~March 31, 2024 and December 31, ~~2021,~~2023, the Company had total current liabilities of ~~$586,777~~$414,975 and ~~$470,516,~~$412,188, respectively. As of ~~June 30, 2022~~March 31, 2024 and December 31, ~~2021,~~2023, the Company had cash and cash equivalents of ~~$92,833~~$193,799 and ~~$99,118,~~$174,760, respectively, to meet its current obligations. The Company had a working capital ~~deficit~~ of ~~$(298,821)~~$3,804 as of ~~June 30, 2022, a decrease~~March 31, 2024, an increase of working capital of ~~$(105,349)~~$21,796 as compared to December 31, ~~2021.~~2023. This ~~decrease~~increase in working capital was primarily driven by ~~$250,000~~increased cash flow from operations of $31,041 during the ~~Amended and Restated Credit Facility coming due within the next 12~~three months a $13,465 net increase in inventories related to new store openings, a $245,109 increase to the current portion of notes payable for debt maturing in the next 12 months related to the Credit Facility with Chicago Atlantic, which is offset by $95,982 of cash payments related to acquisition consideration payable.ended March 31, 2024.

The Company is an early-stage growth company, generating cash from revenues and deploying its capital ~~reserves~~ to acquire and develop assets capable of producing additional revenues and earnings over both the immediate and long term. Capital ~~reserves are~~is primarily being utilized for capital expenditures, facility improvements, strategic investment opportunities, product development and marketing, as well as customer, supplier, and investor and industry relations.

While our revenue, gross profit and operating income were not materially impacted by COVID-19 and we maintained the consistency of our operations during the first six months of 2022, the uncertain nature of the spread of COVID-19 may impact our business operations for reasons including the potential quarantine of our employees or those of our supply chain partners. Our ability to continue to operate without any significant negative operational impact from the COVID-19 pandemic will in part depend on our ability to protect our employees, customers and supply chain partners. The Company takes a cautious approach in allocating its capital to maximize its returns while ensuring appropriate liquidity. ~~Given~~While inflation and higher interest rates have not yet materially impacted the Company’s business, results of operations or financial statements, given current inflation and the uncertainty of the future economic environment, the Company has taken additional measures in monitoring and deploying its capital to minimize the negative impact on its operations and expansion plans.

Liquidity Requirements

Our short-term liquidity requirements consist primarily of funds necessary to pay for our ~~ongoing~~ acquisitions, to repay borrowings, maintain our operations and other general business needs. We believe that internally generated funds and other sources of liquidity discussed below will be sufficient to meet working capital needs, capital expenditures, and other business requirements for at least the next 12 months. We believe we will meet known or reasonably likely future cash requirements through the combination of cash generated from operating activities, available cash balances and available borrowings. If these sources of liquidity need to be augmented, additional cash requirements would likely be financed through the issuance of equity securities or additional ~~borrowings~~borrowings; however, there can be no assurances that we will be able to obtain additional equity financing or debt financing on acceptable terms in the future.

Our long-term liquidity requirements consist primarily of completing additional acquisitions, scheduled debt payments, future payments of income tax payables, maintaining and expanding our operations and other general business needs. We expect to meet our long-term liquidity requirements through various sources of capital, which may include future debt or equity issuances, net cash provided by operations and other secured and unsecured borrowings. We believe that the foregoing sources of capital will provide sufficient funds for our operations, anticipated expansion and scheduled debt payments for the long-term. Our ability to fund

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our operating needs will depend on our future ability to continue to generate positive cash flow from operations and our ability to obtain debt or equity financing on acceptable terms.

~~Credit Facility~~

Verano Holdings Corp. and certain of its subsidiaries are credit parties as co-borrowers and joint guarantors under the Amended and Restated Credit Agreement, as amended (the "Amended and Restated Credit Agreement"). A total of $350,000 in fully funded term loan commitments is currently outstanding under the Credit Agreement, with an option to request, one time, an additional aggregate amount not exceeding $175,000,000, subject to the satisfaction of the conditions precedent set forth in the Credit Agreement.

The Amended and Restated Credit Agreement provides for, among other things, (i) the term loans being secured by a first priority lien on specified assets of Verano Holdings Corp. and its subsidiaries that are parties to the Amended and Restated Credit Agreement, including ownership interests in credit parties, cash, accounts receivable, inventory, equipment, licenses and designated real estate, (ii) the original $30,000 loan bearing interest at a rate of 15.25% per annum, the incremental $100,000 loan funded in May 2021 bearing interest at a rate of 9.75% per annum and the remaining $220,000 in term loans bearing interest at a rate of 8.50% per annum; (iii) no principal amortization with $120,000 plus applicable interest being due in full on the stated maturity date of April 28, 2023, $130,000 plus applicable interest being due in full on the stated maturity date of May 30, 2023 and the balance of the remaining $100,000 being due in full on the stated maturity date of August 31, 2023; (iv) prepayment fees generally of 1% of any principal amount being prepaid during a specified period after funding; (v) restrictive covenants which apply to the operations of Verano Holdings Corp. and its subsidiaries that are parties to the Amended and Restated Credit Agreement, including limitations on their ability to incur additional debt, grant liens on assets,

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~~advance~~Credit Facility

In October 2022, Verano and certain of its subsidiaries and affiliates, as the Borrowers, entered into the 2022 Credit Agreement with the lenders party thereto, pursuant to which the lenders advanced the Borrowers a $350,000 senior secured term loan, and which also provides the Borrowers with the right, subject to conditions, to request an additional incremental term loan of up to $100,000; provided that the lenders elect to fund such incremental term loan. At funding, all the proceeds of the loans made under the 2022 Credit Agreement were used to repay the amounts owing under the Company's previous senior secured term loan credit facility. In connection with such repayment, such previous credit facility was terminated and is no longer in force or ~~contribute funds~~effect.

The 2022 Credit Agreement allows the Borrowers to ~~non-credit parties~~(i) incur up to $120,000 of additional indebtedness from third-party lenders secured by real estate excluded as collateral under the 2022 Credit Agreement, (ii) incur additional mortgage financing from third-party lenders secured by real estate acquired after the initial funding of the 2022 Credit Agreement, and (iii) upon the SAFE Banking Act or similar legislation making banking services available to U.S. cannabis companies being passed by the United States Congress, incur up to $50,000 under a revolving credit facility from third-party lenders that is pari passu or subordinated to the 2022 Credit Agreement obligations, all of which are subject to customary conditions.

The obligations under the 2022 Credit Agreement are secured by substantially all of the assets of the Borrowers, excluding vehicles, specified parcels of real estate and other customary exclusions. The 2022 Credit Agreement provides for a floating annual interest rate equal to the prime rate then in effect plus 6.50%, which rate may be increased by 3.00% upon an event of default that is not a material event of default or 6.00% upon a material event of default as provided in the 2022 Credit Agreement. The initially funded $350,000 loan requires scheduled amortization payments of $350 per month beginning in October 2023 with the remaining principal balance due in full on October 30, 2026.

At any time, the Credit Agreement Borrowers may voluntarily prepay up to $100,000 of the principal balance, subject to a one-time $1,000 prepayment premium upon the first prepayment, and may prepay the remaining outstanding principal balance for a prepayment premium at varying rates based on the timing of any subsequent prepayments. The Borrowers may not voluntarily prepay more than $100,000 of the principal balance without prepaying the entire outstanding principal balance of the loan.

The 2022 Credit Agreement includes customary representations, warranties and covenants and customary events of default, including payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to material indebtedness, and events of bankruptcy and insolvency.

The 2022 Credit Agreement also includes customary negative covenants limiting the Credit Agreement Borrowers’ ability to incur additional indebtedness and grant liens, and the ability to enter into ~~acquisitions;~~definitive documents or consummate acquisitions or dispositions that are not otherwise permitted thereunder, among others. Additionally, the 2022 Credit Agreement requires the Credit Agreement Borrowers to meet financial tests regarding minimum cash balances, minimum levels of Adjusted EBITDA (as defined in the 2022 Credit Agreement) and ~~(vi) financial covenants requiring the Company to maintain on~~ a ~~consolidated basis:~~

•minimum ~~liquidity averaging at least $20,000 during any fiscal quarter and at least $25,000 as of the last day of each fiscal quarter;~~

•~~minimum consolidated EBITDA for any fiscal quarter of at least $20,000; and~~

•a fixed charge coverage ~~ratio of no less than 1.5:1.0 measured at the end of each fiscal quarter.~~ratio.

As of ~~June 30, 2022,~~March 31, 2024, the Company was in compliance with such financial covenants.

~~Mortgage Loans~~

~~On May 14, 2021,~~George Archos, the Chairman and Chief Executive Officer of the Company, ~~acquired The Healing Center, which operates three dispensaries on three separate leased real estate parcels~~participated in the ~~greater Pittsburgh area~~2022 Credit Agreement as a lender funding $1,000 of the $350,000 principal amount. Mr. Archos is excluded from certain approval rights of the lenders and ~~on September 3, 2021, Verano acquired these three parcels from~~any penalties and fees due to Mr. Archos under the ~~owners.~~ 2022 Credit Agreement are immaterial to the Company.

Tax Liabilities

The Company ~~funded the real estate acquisitions through a credit facility with Chicago Atlantic~~has U.S. income tax payable liabilities. These income tax payable liabilities will require payment from our liquidity sources, and we believe we have sufficient liquidity for ~~$12,650~~both short-term and interest of 9.75% per annum that matures in September 2023. Total consideration was paid directly to the sellers in the amount of $12,225. The Company received $20 in cash proceeds and incurred $405 in issuance costs and debt discounts on the credit facility, which was paid net of proceeds upon closing.

~~On July 17, 2021, the Company assumed a loan with 100 Mile Fund, LLC for a principal amount of $13,000 as part of the acquisition of Agronomed Holdings, Inc. The loan bore interest only~~long-term payments of ~~13% per annum due monthly~~our income tax payable liabilities and ~~matures on July 11, 2022. The note is secured by first-priority blanket liens on the property, assets, and ownership interests of Agri-Kind and Agronomed Holdings Inc.~~

~~On June 29, 2022, the Company entered into an agreement with BCB Community Bank to borrow a principal amount of $18,000 associated with a mortgage on a building~~ in ~~Branchburg, NJ. The mortgage bears an interest rate of 4% and matures in July 2047.~~

~~Funding Needs and Sources~~

Historically, we have relied on a combination of cash flows provided by operations, draw-downs under the Amended and Restated Credit Agreement and the incurrence of additional debt and/or the refinancing of our existing debt to fund our obligations. The Company continues to identify and evaluate further actions to improve its liquidity. These include, but are not limited to, increased reductions in capital expenditures, operating expenses and administrative costs and additional debt. Additionally, we will continue to pursue opportunities to raise additional capital to fund obligations associated with future debt maturities and/or extend the maturity dates associated with our existing debt. Such opportunities to raise additional capital may include incurring or issuing new debt or extending the maturity date of existing debt.

~~During the next 12 months, approximately $250,000 of our debt related to the Amended and Restated Credit Agreement will become due. Refer to Note 9.~~ ~~Debt~~ addition to our ~~unaudited interim consolidated financial statements for further information.~~

As discussed in Note 9. Debt, a total of $350,000 in fully funded term loan commitments are currently outstanding under the Amended and Restated Credit Agreement, with an option to request, one time, an additional aggregate amount not exceeding $175,000, subject to the satisfaction of the conditions precedent set forth in the Credit Agreement. Additionally, the Company has entered into an engagement agreement with certain parties, including Chicago Atlantic, to refinance the debt for an additional term of up to three years. The refinancing will be dependent on, among other ~~things, overall market conditions.~~

Based on our assumptions and estimates and our financial condition, we believe that the liquidity resulting from the actions mentioned above will be sufficient to fund our liquidity requirements over at least the next 12 months. However, there is no assurance that our assumptions and estimates are accurate due to possible unknown variables and, as such, there is inherent uncertainty in our ability to predict future liquidity requirements.

obligations.

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Sources and Uses of Cash

Cash Provided by (Used in) Operating Activities, Investing and Financing Activities

Net cash provided by (used in) operating, investing, and financing activities for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2024 and ~~2021~~2023 were as follows:


		Six Months Ended June 30,
		2022		2021		$ Change
	For the Three Months Ended March 31,								For the Three Months Ended March 31,
	2024						2024	2023		$ Change
Net Cash Provided by Operating Activities	Net Cash Provided by Operating Activities	$	43,648	$	56,845	(13,197)
Net Cash Used in Investing Activities	Net Cash Used in Investing Activities	(159,476)		(160,442)		966
Net Cash Provided by Financing Activities		109,543		236,861		(127,318)
Net Cash Provided by (Used In) Financing Activities

Cash flows from Operating Activities. During the ~~six~~three months ended ~~June 30, 2022~~March 31, 2024 and ~~2021,~~2023, the Company had net cash inflows of ~~$43,648~~$31,041 and ~~$56,845,~~$16,862, respectively. The ~~$(13,197) change~~$14,179 increase was mainly driven by ~~an increase~~a decrease in ~~non-cash stock based compensation expense for~~income taxes coupled with the ~~six~~tax payments made during the three months ended ~~June 30, 2022.~~March 31, 2024.

Cash Flows from Investing Activities. During the ~~six~~three months ended ~~June 30, 2022~~March 31, 2024 and ~~2021,~~2023, the Company had net cash outflows of ~~$(159,476)~~$(9,699) and ~~$(160,442)~~$(6,725), respectively. The ~~$966 change was primarily due to increased capital expenditures offset by~~$2,974 increase in net cash ~~received on the Canna Cuzzos, LLC and ILDSIP, LLC dispositions~~outflows during the ~~six~~three months ended ~~June 30, 2022.~~March 31, 2024 compared to the three months ended March 31, 2023 is partially driven by purchases of property, plant and equipment of $(9,699) during the three months ended March 31, 2024, compared to purchases of property, plant and equipment of $(8,555) during the three months ended March 31, 2023. Additionally, proceeds from the disposal of property, plant and equipment of $1,830 during the three months ended March 31, 2023 attributed to the increase in net cash outflows when compared to March 31, 2024.

Cash Flows from Financing Activities. During the ~~six~~three months ended ~~June 30, 2022~~March 31, 2024 and ~~2021,~~2023, the Company had net cash outflows of $(2,318) and net cash inflows of ~~$109,543 and $236,861,~~$142, respectively. The ~~$(127,318) change~~$(2,460) decrease was ~~primarily due to RTO related~~driven by proceeds ~~during~~from the ~~six months ended June 30, 2021,~~issuance of debt of $23,710, partially offset by principal repayments of debt of $(22,759) during the ~~proceeds from the debt upsize of $100,000 with Chicago Atlantic and the proceeds from the Branchburg mortgage loan in New Jersey, of $18,000, both of which occurred during for the six~~three months ended ~~June 30, 2022.~~March 31, 2023, For the three months ended March 31, 2024 principal repayments of debt totaled $(2,150).

~~Off-Balance Sheet Arrangements~~

Table of the date of this filing, the Company does not have any off-balance-sheet arrangements that have, or are reasonably likely to have, a current or future effect on the results of operations or financial condition of the Company, including, and without limitation, such considerations as liquidity and capital resources.Contents

Changes in or Adoption of Accounting Practices

Refer to the discussion of recently adopted/issued accounting pronouncements under Part I, Item 1, Notes to Unaudited Interim Condensed Consolidated Financial Statements, Note 1—1 - Overview and Basis of Presentation.

Critical Accounting Policies and Significant Judgements and Estimates

There were no material changes to our critical accounting policies and estimates from the information provided in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in the ~~2021~~ Form ~~10.~~

~~Cautionary Note Regarding Forward-Looking Statements~~

This Quarterly Report contains “forward-looking information” and “forward-looking statements” within the meaning of United States securities laws (together, “forward-looking statements”). All statements, other than statements of historical fact, made by the Company or its affiliates that address activities, events or developments that the Company or its affiliates expect or anticipate will or may occur in the future are forward-looking statements, including, but not limited to, statements preceded by, followed by or that include words such as “may,” “will,” “would,” “could,” “should,” “believes,” “assumes,” “estimates,” “projects,” “potential,” “expects,” “plans,” “intends,” “anticipates,” “targeted,” “continues,” “forecasts,” “designed,” “goal,” or the negative of those words or other similar or comparable words.

~~The forward-looking statements contained herein are based on certain key expectations and assumptions, including, but not limited to, expectations and assumptions concerning:~~

•~~the ability of the Company and its affiliates to obtain, maintain and renew regulatory approvals in all states and localities of its operations and planned operations on a timely basis;~~

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•~~government regulations, including future legislative and regulatory developments involving medical and adult-use cannabis and the timing thereof;~~

•~~the Company’s outlook on its expansion and growth of business and operations;~~

•~~the Company’s ability to achieve its goals, business plans and strategy;~~

•~~the ability of the Company to access capital and obtain necessary financing to pursue its growth and business plans;~~

•~~operational results and other financial and business conditions and prospects of the Company;~~

•~~the timing and completion of acquisitions and other commercial transactions;~~

•~~the integration and operation of acquired businesses;~~

•~~the timing and amount of capital expenditures;~~

•~~the availability of equipment, skilled labor and services needed for cannabis operations;~~

•~~demand, developments and trends in the medical and adult-use cannabis industry;~~

•~~competition in the cannabis industry in the markets in which the Company operates or plans to operate;~~

•~~the medical benefits, viability, safety, efficacy, and dosing of cannabis;~~

•~~the size of the medical cannabis market and the adult-use cannabis market in each state;~~

•~~conditions in general economic and financial markets; and~~

•~~the impacts of the coronavirus (COVID-19) pandemic and future steps to be taken in response to COVID-19.~~

Forward-looking statements may relate to future financial conditions, results of operations, plans, objectives, performance or business developments. These statements speak only as at the date they are made and are based on information currently available and on the then current expectations of the party making the statement and assumptions concerning future events, which are subject to a number of known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from that which was expressed or implied by such forward-looking statements, including, but not limited to, risks and uncertainties related to:

•the impacts of economic uncertainty stemming from inflation, rising interest rates, supply shortages, changes in consumer and business confidence, political unrest and conflicts and disruptions in U.S. and global markets;

•~~the impacts of COVID-19 on the Company, the U.S. and global markets;~~

•~~the Company’s limited operating history;~~

•~~the Company is an SEC reporting company in addition to a public reporting company in Canada;~~

•~~heightened scrutiny from Canadian government authorities;~~

•~~the Company’s outstanding indebtedness and potential future indebtedness;~~

•~~reliance on management and the potential for fraudulent activity by employees, contractors and consultants;~~

•~~uninsured or under insured losses;~~

•~~potential product liability and recalls;~~

•~~the Company’s reliance on the performance of its subsidiaries and affiliates;~~

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•~~the Company’s expansion-by-acquisition strategy;~~

•~~the unconventional due diligence process in the medical and adult-use cannabis industry;~~

•~~the integration and operation of acquired businesses;~~

•~~the Company’s lack of portfolio diversification;~~

•~~existing competition and new market entrants;~~

•~~the introduction of synthetic alternatives by pharmaceutical and other companies;~~

•~~the immaturity of the cannabis industry and limited comparable, competitive and established industry best practices;~~

•~~the availability of third-party suppliers, contractors and manufacturers, and availability of raw or other materials;~~

•~~wholesale and retail price fluctuations;~~

•~~public opinion and perception of the cannabis industry;~~

•~~agricultural and environmental risks and the impacts of regulations on the agriculture industries and environmental protections;~~

•~~the U.S. federal regulatory landscape and enforcement related to medical or adult-use cannabis, including political risks, civil asset forfeiture and regulation by additional regulatory authorities;~~

•~~the difficulties cannabis businesses face accessing and maintaining banking or financial services due to federal regulations;~~

•~~regulatory and political changes to U.S. state and local laws related to medical or adult-use cannabis, including political risks and regulation by additional regulatory authorities;~~

•~~disparate state-by-state regulatory landscapes and licensing regimes for medical and adult-use cannabis;~~

•~~the requirements to abide by anti-money laundering laws and regulations;~~

•~~required public disclosure and governmental filings containing personal information of the Company’s officers, investors and other stakeholders;~~

•~~the ability to, and constraints on, promoting and marketing cannabis products;~~

•~~the potential limitations on the Company’s ability to enforce its contracts or any liens granted to it;~~

•~~the ability to access capital markets and the availability of financing opportunities;~~

•~~the lack of access to federal bankruptcy protections in the United States;~~

•~~limited intellectual property protection available for cannabis products and the potential infringement by third parties;~~

•~~reliance on information technology systems, the potential disclosure of personal information of patients and customers and cybersecurity risks;~~

•~~the Company’s elimination of monetary liability and indemnification rights against its directors, officers and employees under British Columbia law;~~

•~~the Company’s dual class capital structure with Subordinate Voting Shares and Proportionate Voting Shares;~~

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•~~the Company’s shareholders’ limited participation in the Company’s affairs;~~

•~~the Company’s expectation to not declare or pay out dividends;~~

•~~the taxation of cannabis companies in the U.S.; and~~

•~~other risks described in the 2021 Form 10, as more particularly described under the heading “Item 1A.Risk Factors” therein.~~

Although the Company believes that the expectations and assumptions on which forward-looking statements are based are reasonable at the time made, undue reliance should not be placed on the forward-looking statements, because no assurance can be given that they will prove to be correct. Forward-looking statements address future events and conditions, and thus involve inherent risks and uncertainties.

The cannabis industry involves risks and uncertainties that are subject to change based on various factors. 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. Such data is inherently imprecise.

Consequently, all forward-looking statements made in this Quarterly Report and other documents of the Company are qualified by such cautionary statements and there can be no assurance that the anticipated results or developments will actually be realized or, even if realized, that they will have the expected consequences to or effects on the Company. The Company does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, other than as required under applicable securities legislation.10-K.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes to our market risk disclosures as set forth in Part II, Item 7A of ~~our 2021~~the Form ~~10.~~10-K.

ITEM 4. CONTROLS AND PROCEDURES

~~Transition Period to Comply with Management’s Assessment of Internal Controls over Financial Reporting~~

In accordance with the SEC’s requirements for Emerging Growth Companies, the Company is not required to include a report of management’s assessment regarding internal controls over financial reporting, and the Company's independent public accounting firm is not required to provide an attestation report on the effectiveness of our internal controls over financial reporting.

On the Effective Date of our 2021 Form 10 and continuing during a transition period provided by the SEC for newly public reporting companies in Section 404 of SOX, the Company will be exempted from the requirement that it include management’s report on its assessment of the Company’s internal controls over financial reporting until its second Annual Report on Form 10-K is filed with the SEC.

Evaluation of Disclosure Controls and Procedures

Our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are designed to ensure that information we are required to ~~be disclosed~~disclose in reports that we file or submit under the ~~Securities~~ Exchange Act ~~of 1934, as amended (the "Exchange Act~~") is recorded, processed, summarized, and reported within the time periods specified in SEC 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 for timely decisions regarding required disclosure.

As required by Rule 13a-15(b) ~~and Rule 15d-15(b)~~ under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (who is our principal executive officer) and Chief Financial Officer ~~evaluated, as~~(who is our principal financial officer), of ~~June 30, 2022,~~ the effectiveness of the design and operation of our disclosure controls and procedures, as ~~defined in Exchange Act Rule 13a-15(e) and Rule 15d-15(e).~~of March 31, 2024, the end of the period covered by this Form 10-Q. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this Form 10-Q, our disclosure controls and procedures were not effective to provide reasonable assurance that information required to be disclosed by us in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Exchange Act and is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures due to ~~certain accounting errors that required~~ the ~~restatement of previously issued financial statements.~~

We have created new positions and will need to hire additional accounting, finance and other personnel in connection with our efforts to comply with the requirements of being a US public reporting company, including complying with Section 404(a) of SOX regarding internal control over financial reporting. The US labor market is competitive, and the professionals

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and other personnel we desire to hire will be sought after by other public companies. We may not be able to attract, hire and retain a sufficient number of qualified management, accounting and other personnel to enable us to implement and maintain sufficient internal control over financial reporting and comply with other public company requirements. We have identified material weaknesses in connection with the restatement of previously issued financial statements for the quarter ended March 31, 2021, the fiscal year ended December 31, 2021, and the quarter ended March 31, 2022 (see Explanatory Note - Restatement Background for more information on the 2021 Form 10), which have not been remediated. 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~~identified as of ~~a company's annual or interim financial statements will not be prevented or detected~~December 31, 2023 and ~~corrected on a timely basis. The material weaknesses we identified pertain to our internal control environment~~as described in Item 9A. Controls and information and communication with respect to the accounting treatment and calculation of stock-based compensation, the calculation of tax expense, acquisition earnouts, and the accounting treatment of consolidated entity distributions.

Any deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses may require prospective or retrospective changes to our consolidated financial statements, or identify other areas for further attention or improvement. If we fail to remediate these material weaknesses or experience additional material weaknessesProcedures in the future or fail to otherwise maintain effective financial reporting systems and processes, we may be unable to accurately and timely report our financial results or comply with the requirements of being a public company. The processes and systems we have developed to date may not be adequate, and we cannot assure that the measures we have taken, and are continuing to implement, will be sufficient to avoid potential future material weaknesses. Moreover, we cannot be certain that we will not in the future have additional material weaknesses in our internal control over financial reporting, or that we will successfully remediate any that we find.

As described above, management has developed a plan to remediate the effectiveness of our disclosure controls and procedures, including designing and implementing improved processes and internal controls with the intent of ensuring proper application of relevant accounting guidance. In 2022, the Company has been taking steps to enhance the control environment, including the hiring of additional accounting personnel, organizational restructuring of the accounting function, revising processes for the accounting of acquired businesses, and management will continue to improve and evaluate these controls over the remainder of the year.

Form 10-K. We believe, ~~however,~~ that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls systems are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud or error, if any, within a company have been detected.

Changes in Internal Control over Financial Reporting

~~In 2022, the Company’s management, under the supervision of the Company’s Chief Executive Officer~~We previously identified and ~~Chief Financial Officer, has been taking steps to assess, design and implement changes to its~~disclosed material weaknesses in internal control over financial reporting ~~(as defined~~as described in Item 9A. Controls and Procedures in the Exchange Act) focusing on the control environment, risk assessment, control activities, information and communication, and monitoring. The steps taken include creating additional positions within accounting and implementing enhanced policies and procedures. During the quarter ended June 30, 2022 and subsequent to June 30, 2022, the Company filled the position of corporate controller and positionsForm 10-K. These material weaknesses are currently in the ~~internal controls function. The Company intends~~process of being remediated, as of March 31, 2024. Other than the previously identified and ~~believes that~~disclosed plans to remediate the ~~steps it is taking will improve the effectiveness of its~~material weaknesses in internal control over financial reporting as described in Item 9A. Controls and ~~to date such steps~~Procedures in the Form 10-K, there have not been any changes in our internal control over financial reporting during the quarter ended March 31, 2024, that have materially affected, or are reasonably likely to materially affect, ~~the Company’s~~our internal control over financial reporting. Management, under the direction and supervision of the Company’s Chief Executive Officer and Chief Financial Officer, will continue to implement, improve and evaluate these internal controls over the remainder of the year.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, the Company may be subject to legal proceedings, claims, investigations and government inquiries in the ordinary course of business. The Company has received, and may in the future continue to receive, claims from third parties. ~~Neither~~

Please see the ~~Company nor any of its subsidiaries is a party~~Notes to ~~any legal proceedings which~~the Unaudited Interim Condensed Consolidated Financial Statements, Note 11 – Contingencies and Other – Claims and Litigation, individually or in the aggregate, would be expected to have a material effect on its business, financial condition, results of operations, or financial statements, taken as a whole, if determined adversely to the Company.which is incorporated herein by reference.

ITEM 1A. RISK FACTORS.

Part I, Item 1A. “Risk Factors” in our ~~2021~~ Form ~~10 for the year ended December 31, 2021 filed on August 19, 2022,~~10-K includes a discussion of our risk factors. ~~The information presented below supplements, and should be read in conjunction with, the risk factors and information disclosed in our 2021 Form 10. Except as presented below, there~~There have been no material changes from the risk factors described in ~~our 2021~~the Form ~~10.~~10-K. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future SEC filings.

~~We may not be able to refinance or renew our indebtedness, which may have a material adverse effect on our financial condition.~~

We may not be able to renew or refinance our indebtedness, including indebtedness under the Amended and Restated Credit Agreement, on substantially similar terms, or at all. Our ability to access short-term and long-term lending and capital markets to obtain, and the availability of acceptable terms and conditions of, financing are impacted by many factors, including: (i) our credit ratings; (ii) the liquidity and volatility of the overall lending and capital markets; and (iii) the current state of the economy, including the cannabis industry. There can be no assurances that we will be able to access the lending and capital markets to refinance our indebtedness. We may have to pay additional fees and expenses that we might not have to pay under normal circumstances, and we may have to agree to terms that could increase the cost of our debt structure. If we are unable to renew or refinance our indebtedness on terms that are not materially less favorable than the terms currently available to us or obtain alternative or additional financing arrangements, we may not be able to timely repay certain of our indebtedness, which may result in a default under our indebtedness. Failure to refinance or renew any material indebtedness would have a material adverse effect on our financial condition.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Recent Sales of Unregistered Securities

Subordinate Voting Shares

On ~~June 7, 2022,~~March 19, 2024, pursuant to a merger agreement, the Company issued ~~2,115,438~~31,181 Subordinate Voting Shares to the previous shareholders of WSCC, Inc, which were held back to secure indemnity obligations in connection with the Company's acquisition of ~~Connecticut Pharmaceutical Solutions Holdings, LLC.~~

~~On June 22, 2022, the Company issued 808,258~~WSCC, Inc. All of such Subordinate Voting Shares were issued in ~~connection with~~reliance upon the ~~acquisition~~exemptions from registration afforded by Section 4(a)(2) and Rule 506(b) promulgated under the Securities Act of ~~Caring Nature, LLC.~~

~~Proportionate Voting Shares~~

~~On April 8, 2022,~~1933, because (i) the ~~Company converted 29 Proportionate Voting Shares into 2,900 Subordinate Voting Shares.~~

~~On May 6, 2022,~~issuance were not made by general solicitation or advertising and (ii) the ~~Company converted 434 Proportionate Voting Shares into 43,400 Subordinate Voting Shares.~~

~~On May 20, 2022,~~issuances were made only to “accredited investors” (as such term is defined in Rule 501(a) of Regulation D under the ~~Company converted 321 Proportionate Voting Shares into 32,100 Subordinate Voting Shares.~~

~~On May 31, 2022, the Company converted 2,171 Proportionate Voting Shares into 217,100 Subordinate Voting Shares.~~

~~On June 8, 2022, the Company converted 241 Proportionate Voting Shares into 24,100 Subordinate Voting Shares.~~

~~On June 15, 2022, the Company converted 36,641 Proportionate Voting Shares into 3,664,100 Subordinate Voting Shares.~~

~~On June 23, 2022, the Company converted 17,358 Proportionate Voting Shares into 1,735,800 Subordinate Voting Shares.~~

~~On June 27, 2022, the Company converted 423 Proportionate Voting Shares into 42,300 Subordinate Voting Shares.~~Securities Act of 1933).

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

~~Table of Contents~~

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5. OTHER INFORMATION

~~None.~~Rule 10b5-1 Trading Plans

On March 28, 2024, Destiny Thompson, the Company’s Chief People Officer, terminated a prearranged share trading plan, which was intended to satisfy the affirmative defenses of Rule 10b5-1(c) under the Exchange Act and the Company’s policies regarding insider transactions. On October 9, 2023, Cristina Nuñez, a director of the Company, terminated a prearranged share trading plan, which was intended to satisfy the affirmative defenses of Rule 10b5-1(c) under the Exchange Act and the Company’s policies regarding insider transactions.

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ITEM 6. EXHIBITS


Exhibit Number						Description of Exhibit

3.1*						Articles of Verano Holdings Corp., dated February 11, ~~2021.~~2021 (filed as Exhibit 3.1 to our Registration Statement on Form 10 filed on April 26, 2022 (File No. 000-56342) and incorporated herein by reference).

3.2*						Notice of Articles of Verano Holdings Corp., dated February 11, ~~2021.~~2021 (filed as Exhibit 3.2 to our Registration Statement on Form 10 filed April 26, 2022 (File No. 000-56342) and incorporated herein by reference).

10.1*						Cash Incentive Plan (filed as Exhibit 10.1 to our Current Report on Form 8-K filed on March 26, 2024 (File No. 000-56342) and incorporated herein by reference).

10.2*						Form of Cash Award Agreement (filed as Exhibit 10.2 to our Current Report on Form 8-K filed on March 26, 2024 (File No. 000-56342) and incorporated herein by reference).

31.1**						Certification of Chief Executive Officer ~~pursuant~~Pursuant to ~~Section 302~~Rule 13a-14(a) and Rule 15d-14(a) of the ~~Sarbanes-Oxley~~Securities Exchange Act of ~~2002.~~1934, as amended

31.2**						Certification of Chief Financial ~~officer pursuant~~Officer Pursuant to ~~Section 30~~2 Rule 13a-14(a) and Rule 15d-14(a) of the ~~Sarbanes-Oxley~~Securities Exchange Act of ~~2002.~~1934, as amended

32.1***						Certification of Chief Executive Officer ~~pursuant~~Pursuant to 18 U.S.C. Section 1350, as ~~adopted pursuant~~Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2***						Certification of Chief Financial Officer ~~pursuant~~Pursuant to 18 U.S.C. Section 1350, as ~~adopted pursuant~~Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

~~101~~101.INS						Inline XBRL Instance Document

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 ~~(formatted as~~(embedded within the Inline XBRL ~~and contained in Exhibit 101)~~Document)

* Previously filed.

** Filed herewith

*** Furnished herewith

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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.

Dated: ~~August 19, 2022~~May 8, 2024


			VERANO HOLDINGS CORP.

			By:			/s/ George Archos
			Name:			George Archos
			Title:			Chief Executive Officer


			By:			/s/ Brett Summerer
			Name:			Brett Summerer
			Title:			Chief Financial Officer

5538


	LLC Membership Units	SVS Shares (as converted)	Share Capital		Accumulated Earnings (Deficit)		Non-Controlling Interest		Total
Balance as of April 1, 2021 (As Restated)	—	293,199,219	$	1,030,163	$	1,361	$	7,403	$	1,038,927

Share-based compensation	—	—	14,483		—		—		14,483

Issuance of shares in conjunction with acquisitions	—	10,410,187	207,136		—		—		207,136

Issuance of warrants	—	3,510,000	—		—		—		—

Contingent consideration & other adjustments to purchase accounting	—	103,775	2,085		—		—		2,085

Net income (loss)	—	—	—		(29,688)		98		(29,590)

Balance as of June 30, 2021	—	307,223,181	$	1,253,867	$	(28,327)	$	7,501	$	1,233,041


	LLC Membership Units	SVS Shares (as converted)	Share Capital		Accumulated Earnings (Deficit)		Non-Controlling Interest		Total
Balance as of January 1, 2021	279,900,000	—	$	137,914	$	9,247	$	6,237	$	153,398

RTO-related issuances, net	—	—	652,217		—		—		652,217

Issuance of Pubco shares in redemption of membership units	(279,900,000)	279,900,000	—		—		—		—

Reverse takeover (“RTO Financing”), net	—	10,100,000	95,420		—		—		95,420

Distributions to minority members	—	—	—		—		(100)		(100)

Share-based compensation	—	—	21,097		—		—		21,097

Issuance of shares in conjunction with acquisitions	—	13,609,406	270,034		—		—		270,034

Warrants issued and exercised	—	3,510,000	75,100		—		—		75,100

Contingent consideration & other adjustments to purchase accounting	—	103,775	2,085		—		—		2,085

Net income (loss)	—	—	—		(37,574)		1,364		(36,210)

Balance as of June 30, 2021	—	307,223,181	$	1,253,867	$	(28,327)	$	7,501	$	1,233,041


Year Ending December 31:	Estimated Amortization
2022 (Remaining)	$	49,975
2023	99,948
2024	99,948
2025	99,948
2026	99,221
Thereafter	894,331
	$	1,343,371


	January 1, 2022		Impairment		Adjustments to purchase price allocation		Acquisitions		June 30, 2022
Cultivation	$	91,116	$	—	$	1,050	$	—	$	92,166
Retail	277,014		—		912		6,545		284,471
Total	$	368,130	$	—	$	1,962	$	6,545	$	376,637


	AltMed Florida		AltMed Arizona		Total

Cash	$	5,446	$	507	$	5,953
Accounts receivable, net	60		498		558
Inventory	83,205		5,827		89,032
Prepaids and other current assets	833		1,989		2,822
Property, plant and equipment, net	73,386		9,751		83,137
Right-of-use asset, net	9,651		—		9,651
Other assets	1,001		—		1,001
Accounts payable and accrued liabilities	(8,935)		(2,576)		(11,511)
Notes payable	(3,579)		(3,343)		(6,922)
Deferred taxes	(123,720)		(37,290)		(161,010)
Lease liabilities	(9,651)		—		(9,651)

Total identifiable net assets (liabilities)	27,697		(24,637)		3,060
Intangible assets	498,938		184,588		683,526

Net assets	$	526,635	$	159,951	$	686,586


	AltMed Florida		AltMed Arizona		Total

License	$	319,928	$	130,670	$	450,598
Tradename	36,278		8,980		45,258
Intellectual Property and Technology	10,603		885		11,488

Total intangible assets	366,809		140,535		507,344

Goodwill (residual purchase price)	8,409		6,763		15,172
Goodwill (deferred taxes) (a)	123,720		37,290		161,010

Total goodwill	$	132,129	$	44,053	$	176,182


	Consolidated Results		AltMed Pre-acquisition		Pro-forma Results

Revenues, net of discounts	$	319,961	$	22,402	$	342,363
Net income (loss)	(37,574)		10,933		(26,641)


	Six Months Ended June 30, 2021
	Verano Holdings		AME Merger		Other Acquisitions		Total

Revenues, net	$	186,106	$	89,400	$	44,455	$	319,961
Net loss	(25,733)		(9,570)		(2,271)		(37,574)


	Three Months Ended June 30, 2021
	Verano Holdings		AME Merger		Other Acquisitions		Total

Revenues, net	$	99,294	$	57,277	$	42,495	$	199,066
Net loss	(23,619)		(4,180)		(1,889)		(29,688)


	Number of Shares	Weighted Avg. Exercise Price C$	Weighted Average Remaining Contractual Life
Balance as of December 31, 2021	56,078	30.60	9.16
Vested	18,798	30.60
Exercisable at June 30, 2022	24,167	30.60	8.67


	Number of Shares	Weighted Avg. Grant Date Fair Value C$
Unvested Shares at December 31, 2021	2,413,887	30.49
Granted	2,748,440	10.57
Forfeited	975	23.97
Vested	1,189,055	30.65
Unvested Shares at June 30, 2022	3,972,297	16.66


Year Ending December 31,
Remainder 2022	$	6,851	$	11,457
2023	13,244		11,024
2024	12,519		10,348
2025	11,590		9,717
2026	10,722		8,818
2027 and Thereafter	47,894		38,177
Total Lease Payments	102,820		89,541
Less: Interest	(28,737)		(26,166)
Present Value of Lease Liability	$	74,083	$	63,375


	Three Months Ended June 30,				2022-2021
($ in thousands)	2022		2021		$ Change
Cost of Goods Sold, net	$	125,547	$	129,856	$	(4,309)

Selling, General, and Administrative Expenses	100,263		70,013		30,250

Other Income (Expense)	3,548		(5,994)		9,542

Provision for Income Taxes	(11,103)		(23,438)		12,335


	For the Six Months Ended June 30,
($ in thousands)	2022		2021		$ Change
Revenue, net of discounts	$	425,897	$	319,961	$	105,936
Gross Profit	196,732		123,500		73,232
Net Loss attributable to Verano Holdings Corp.	(10,061)		(37,574)		27,513

Net Loss per share – basic & diluted	(0.03)		(0.14)		0.11