10-K: Vireo Growth Inc. 2025 Annual Report: Strategic Mergers Drive Revenue Growth Amidst Net Losses

Vireo Growth Inc. reports a significant 170% revenue increase in 2025 driven by strategic mergers, despite incurring net losses, as it navigates a complex and evolving cannabis market.

Summary

• Total revenue for the fiscal year ended December 31, 2025, was $268,769,268, marking a 170% increase from $99,384,221 in 2024.
• Retail revenue grew by 177% to $219,933,107 in 2025, while wholesale revenue increased by 146% to $48,836,161.
• The company reported a net loss of $68,113,908 in 2025, an increase from a net loss of $28,007,509 in 2024.
• Gross profit for 2025 was $127,095,377, representing a gross margin of 47%, down from 51% in 2024. Excluding non-cash inventory fair value step amortization of $17,805,282, the gross margin would have been approximately 54%.
• Operating loss before other income/expense and taxes was $1,048,483 in 2025, compared to an operating income of $13,563,364 in 2024.
• Adjusted EBITDA for 2025 was $74,680,081, a substantial increase from $25,145,435 in 2024.
• The company completed mergers with Deep Roots Holdings, Inc., Proper Holdings Management, Inc., and WholesomeCo, Inc. during 2025, significantly expanding operations into Utah, Nevada, and Missouri.
• Pending transactions include the acquisition of a majority of Schwazze's senior secured convertible notes, an asset purchase agreement to acquire Colorado dispensaries from PharmaCann Inc. for an estimated $49.0 million in subordinate voting shares, and the acquisition of Eaze Inc. for an estimated $47.0 million in subordinate voting shares, which would expand operations into California, Florida, and additional Colorado dispensaries.
• Working capital increased to $113,582,993 in 2025 from $94,903,896 in 2024.
• Net cash provided by operating activities was $3,711,491 in 2025, a significant improvement from net cash used of $10,234,550 in 2024.
• The company refinanced its debt in July 2025 with a $120,000,000 First Lien Term Loan and a $33,000,000 Chicago Atlantic Term Loan (with a $50,000,000 accordion feature), retiring existing debt obligations.
• A comprehensive settlement was reached in the Verano litigation for $9,172,587, comprising $8,172,587 in real property and $1,000,000 in cash.
• The company expects to lose its 'emerging growth company' status by the end of the current fiscal year (2026), which will lead to increased disclosure and compliance requirements.

Sentiment

Score: 5

Explanation: StockSavvy.ai views this as a neutral-to-slightly-negative report. While the company achieved significant revenue growth and positive operating cash flow, driven by strategic acquisitions, the substantial increase in net losses and operating expenses, coupled with ongoing regulatory uncertainties and the capital-intensive nature of the business, presents considerable challenges. The pending transactions and potential tax relief offer future upside, but current profitability remains a concern.

Positives

• Total revenue increased by 170% to $268.8 million in 2025, driven by strategic mergers and acquisitions.
• Adjusted EBITDA saw a significant increase to $74.7 million in 2025 from $25.1 million in 2024, indicating improved operational performance post-acquisitions.
• Net cash provided by operating activities turned positive at $3.7 million in 2025, a $13.9 million improvement from cash used in 2024.
• Successful completion of mergers with Deep Roots, Proper, and WholesomeCo expanded the company's footprint into Utah, Nevada, and Missouri, and increased its retail dispensary count to 36.
• Refinanced existing debt with new, larger credit facilities (First Lien Term Loan of $120M and Chicago Atlantic Term Loan of $33M with a $50M accordion feature), enhancing financial flexibility.
• Resolved significant litigation with Verano, resulting in a favorable settlement of $9.17 million, including real property and cash.
• Pending acquisitions of PharmaCann's Colorado dispensaries and Eaze Inc. are expected to further expand market presence into California and Florida, and add 14 dispensaries in Colorado.
• Potential federal tax relief is anticipated if cannabis is rescheduled to Schedule III, allowing deduction of ordinary business expenses under Section 280E.

Negatives

• Net loss increased significantly to $68.1 million in 2025 from $28.0 million in 2024.
• Operating income turned into an operating loss of $1.0 million in 2025, compared to an operating income of $13.5 million in 2024.
• Gross margin decreased from 51% in 2024 to 47% in 2025, primarily due to non-cash inventory fair value step-up amortization from mergers.
• Total operating expenses increased substantially to $128.1 million in 2025 from $37.2 million in 2024, driven by transaction expenses and stock-based compensation related to mergers.
• Income tax expense increased to $28.2 million in 2025 despite the net loss, likely due to the impact of Section 280E of the U.S. Internal Revenue Code.
• The company carries substantial secured indebtedness, with total long-term debt of $143.9 million and convertible debt of $9.9 million as of December 31, 2025.
• Cannabis remains illegal under U.S. federal law, exposing the company to significant enforcement risks and limiting access to traditional financial services.
• The 2026 Hemp Restrictions are expected to significantly narrow the federal definition of hemp, potentially impacting the company's hemp-derived product portfolio.
• The company expects to lose its 'emerging growth company' status by the end of 2026, which will result in increased disclosure, internal control, and compliance costs.

Risks

• Marijuana remains illegal under U.S. federal law, exposing the company to significant enforcement actions, including asset seizure and criminal charges for employees, directors, officers, managers, and investors.
• Operating in a highly regulated sector with complex and often opposing regulatory regimes across different jurisdictions, leading to increased compliance costs and operational complexity.
• Inability to enforce contracts, including those related to pending transactions, due to the federal illegality of cannabis activities.
• Restricted access to traditional banking and other financial services, increasing reliance on a limited number of institutions and raising risks of theft, fraud, and cash management issues.
• Potential inability to gain access to U.S. bankruptcy protections in the event of financial distress.
• U.S. state licensing regimes, collateral rules, and ownership limits could materially and adversely affect business operations and growth opportunities.
• Local regulations may impose additional or more restrictive requirements than state laws, impacting operations and expansion.
• Regulatory uncertainty and potential enforcement by the U.S. Food and Drug Administration (FDA) regarding hemp-derived products.
• The Continuing Appropriations, Agriculture, Legislative Branch, Military Construction and Veterans Affairs, and Extensions Act, 2026, and related federal restrictions on hemp-derived products could materially adversely affect the business by narrowing the definition of hemp.
• Pending transactions (Schwazze, PharmaCann, Eaze) are subject to numerous conditions, including regulatory approvals and termination rights, and may not be completed on anticipated terms or timelines.
• Challenges in successfully integrating the operations, systems, and personnel of acquired companies and assets, potentially hindering the realization of anticipated synergies and cost savings.
• Indemnities from counterparties in pending transactions may be insufficient to cover the full amount of damages incurred by the company.
• Uncertainty surrounding the pending transactions could negatively impact current and future operations, financial condition, and prospects.
• Servicing additional indebtedness incurred from mergers may be challenging, increasing interest expenses and reducing financial flexibility.
• Shareholder dilution from the issuance of subordinate voting shares as consideration for pending transactions and potential earn-out payments.
• Incurred net losses in fiscal years 2025 and 2024, with no assurance of achieving profitability or generating positive cash flow from operations.
• Anticipated need for additional financing to sustain operations and fund growth, with potential difficulties in acquiring such financing on acceptable terms.
• As a holding company, earnings are dependent on the earnings and distributions of subsidiaries, which are subject to various laws and contractual restrictions.
• Intense competition in the rapidly evolving cannabis industry from licensed, unlicensed, and well-capitalized market participants.
• Competition for the acquisition and leasing of suitable properties for cannabis operations may impede growth or increase costs.
• Public opinion, consumer perception, and adverse publicity regarding cannabis and its products may negatively affect demand and business.
• Reliance on management agreements with third-party license holders exposes the company to significant regulatory, operational, and counterparty risks.
• Security risks related to physical facilities and cash transfers due to the predominantly cash nature of the cannabis industry.
• Risks inherent in agricultural operations, including insect infestations, plant diseases, and dependence on key inputs, suppliers, and skilled labor.
• Substantial energy consumption for cultivation and production activities, with risks from increases or volatility in energy costs.
• Increasingly strict environmental regulation and associated permitting requirements, potentially increasing expenses or leading to enforcement actions.
• Risks related to information technology systems, including potential cyber-attacks and security and privacy breaches.
• Subject to HIPAA and other healthcare privacy and data security laws, with potential for significant penalties, litigation, and reputational harm for non-compliance.
• Loss of key management and other personnel, or an inability to attract new talent, could negatively impact business operations.
• Requirement to disclose personal information to government or regulatory entities for substantial shareholders.
• Risks related to insurance coverage and uninsurable risks, potentially leading to significant uninsured costs.
• Exposure to fraudulent or illegal activity by employees, contractors, consultants, and agents.
• Growth-related risks, including capacity constraints and pressure on internal systems and controls.
• Difficulty in protecting intellectual property due to the federal illegality of cannabis.
• Exposure to infringement or misappropriation claims by third parties.
• Significant product liability, health and safety, and misuse-related risks, including potential product recalls.
• Internal controls over financial reporting may not be effective, potentially leading to financial misstatements or reporting failures.
• The elimination of monetary liability against directors, officers, and employees under British Columbia law and indemnification rights may result in substantial expenditures.
• Doubt regarding the ability to enforce judgments in Canada or under Canadian law against U.S. subsidiaries, assets, and experts.
• Negative impact from challenging global economic conditions and events, such as wars, acts of terrorism, or public health crises.
• Heightened scrutiny by United States and Canadian authorities could lead to illiquidity in the market for Subordinate Voting Shares.
• As an emerging growth company, reduced disclosure requirements may make shares less attractive; increased costs will be incurred upon losing EGC status.
• Additional issuances of Subordinate Voting Shares or convertible securities may result in dilution for existing shareholders.
• Sales of substantial numbers of Subordinate Voting Shares could adversely affect their market price.
• Volatility and limited liquidity in the market for Subordinate Voting Shares may undermine investor confidence and impair capital raising ability.
• The Chief Executive Officer's significant influence as a major shareholder and affiliate of principal lending sources creates substantial actual and potential conflicts of interest.
• Concentration of ownership among existing executive officers, directors, and principal shareholders may prevent new investors from influencing significant corporate decisions.
• Credit facilities are secured by substantially all assets, and a default could result in foreclosure, acceleration of indebtedness, and loss of control over key assets.
• Interest rate fluctuations on variable-rate indebtedness could increase debt service obligations and reduce cash flow.
• Subject to Canadian and United States tax on worldwide income, potentially leading to double taxation.
• Significant tax liabilities and a reduction to tax attributes due to limitations on tax deductions and credits under Section 280E of the Internal Revenue Code.
• Dispositions of Subordinate Voting Shares are subject to Canadian and/or United States tax.
• Any audit by the IRS regarding the employee retention credit (ERC) could result in additional taxes or costs.
• Dividends (if paid) would be subject to Canadian and/or United States withholding tax.
• Taxation of Non-U.S. Holders upon disposition of Subordinate Voting Shares depends on whether the company is classified as a United States real property holding corporation (USRPHC).
• Changes in tax laws may affect the company and holders of Subordinate Voting Shares.
• Cannabis products are subject to substantial taxation, and any increases in cannabis-related taxes or adverse tax policy changes could materially impact sales and profitability.
• ERISA imposes additional obligations on certain investors, requiring consideration of plan documents, diversification, and potential unrelated business taxable income.

Future Outlook

The company's principal business objectives for the next 12 months include achieving positive operating cash flow through continued cost discipline, operational excellence, and product quality enhancements across its markets. It intends to optimize the performance of its cultivation, production, and retail operations and prudently manage its balance sheet to strengthen its credit profile and financial flexibility. The company will continue to evaluate strategic opportunities for disciplined, high-quality acquisitions and initiatives that align with its operating capabilities, expand geographic reach, and support long-term growth. Anticipated growth in its New York home delivery service and new product introductions, along with wholesale revenue streams, are expected to improve profit margins. The company also expects to lose its 'emerging growth company' status by the end of 2026, which will lead to increased compliance requirements. Potential federal tax relief from the rescheduling of cannabis to Schedule III is also a significant forward-looking development.

Management Comments

• "Our mission is to provide safe access, quality products and value to its customers while supporting its local communities through active participation and restorative justice programs."
• "The Company is evolving with the industry and is in the midst of a transformation to being significantly more customer-centric across its operations."
• "We believe that our cultivation operations provide certain other benefits, including: Low Cost, Product Availability, Quality Assurance."
• "Our focus on quality, potency, strain diversity and scalable production is vital because we believe that the wholesale market for cannabis plant material will become increasingly price-competitive over time as more companies enter this industry segment."
• "We believe that manufacturers and retailers that source high-quality, low-cost plant material will have a significant advantage in the medium and long term."
• "We intend to manage our balance sheet prudently and work collaboratively with capital partners to strengthen our credit profile and financial flexibility."
• "We will continue to evaluate strategic opportunities to deploy capital in pursuit of disciplined, high-quality acquisitions and other initiatives that align with our operating capabilities, expand our geographic reach, and support long-term growth."

Industry Context

StockSavvy.ai notes that Vireo Growth's aggressive expansion through mergers and acquisitions, particularly into new states like California and Florida, aligns with a broader trend of consolidation and market share capture among multi-state operators (MSOs) in the fragmented U.S. cannabis industry. The company's focus on vertical integration and customer-centric operations is a common strategy to navigate intense competition and evolving regulatory landscapes. The anticipated federal rescheduling of cannabis to Schedule III, while not fully legalizing it, is a significant industry development that could provide substantial tax relief (Section 280E) and potentially open up traditional banking services, which would benefit all compliant operators like Vireo Growth. The company's challenges with gross margin compression due to non-cash adjustments and increased operating expenses reflect the high investment costs and competitive pressures inherent in scaling operations in this nascent but rapidly growing sector, projected to reach over $76 billion by 2030.

Comparison to Industry Standards

• Vireo Growth's 170% revenue growth in 2025, driven by strategic M&A, significantly outpaces the organic growth rates of many established cannabis MSOs, indicating successful integration and market penetration in newly acquired territories.
• The reported Adjusted EBITDA of $74.7 million suggests strong operational performance post-acquisition, a key metric for MSOs, demonstrating effective management of acquired assets.
• The continued net losses and a slight dip in gross margin (from 51% to 47%, though 54% excluding non-cash adjustments) highlight the ongoing capital-intensive nature of expansion and the impact of purchase accounting, which is a common characteristic across the industry for companies undergoing rapid M&A.
• The company's debt refinancing efforts are typical for MSOs seeking to optimize capital structure in a challenging financing environment where traditional banking services are limited due to federal cannabis prohibition.

Management Changes

Corporate Governance

Legal Proceedings

• On October 29, 2025, the company reached a comprehensive settlement dismissing all outstanding litigation matters with Verano. The settlement value to Vireo was $9,172,587, consisting of $8,172,587 in real property and $1,000,000 in cash. This resolved a lawsuit initiated by Vireo Growth on October 21, 2022, after Verano purportedly terminated an Arrangement Agreement from January 31, 2022, to acquire Vireo Growth, for which Vireo Growth had sought $860.9 million in damages.
• A D&O Claim is mentioned as arising in connection with the Eaze Technologies, Inc. 7 chapter bankruptcy filing in the Northern District of California bankruptcy court on March 21, 2025 (Case Number: 25-30219).

Related Party Transactions

• John Mazarakis, the company's CEO and Co-Executive Chairman, has approximately a 28% ownership interest in Chicago Atlantic Group, LP (Chicago Atlantic), which is an affiliate of the company's primary lending sources and a significant shareholder.
• The company assumed indebtedness due to Chicago Atlantic Admin, LLC (an affiliate of Chicago Atlantic) in connection with the Deep Roots Merger (approximately $19.2 million) and the Proper Mergers (approximately $27.4 million).
• On July 7, 2025, the company refinanced its outstanding indebtedness with Chicago Atlantic, entering into a $33,000,000 Chicago Atlantic Term Loan (with a $50,000,000 accordion feature) and a $10,000,000 New Convertible Note with Chicago Atlantic Opportunity Finance, LLC.
• During 2025, the company refinanced approximately $124,000,000 of principal held by Chicago Atlantic, paid approximately $9,300,000 in interest expense, paid approximately $330,000 in principal, and paid $3,700,000 in make-whole fees.
• In June 2025, Chicago Atlantic Advisers, LLC (an affiliate of Chicago Atlantic) entered into consulting agreements with acquired entities (WholesomeCo, Proper Holdings, Deep Roots Harvest) for underwriting, legal, accounting, data analytics, and real estate services, each for a fee of $8,333 per month.
• In June 2025, the company and its subsidiaries also entered into consulting agreements with Chicago Atlantic Advisers, LLC for similar services, with a total consulting fee of $91,666 per month.
• As of December 31, 2025, $1,994,930 was due to related parties, primarily Chicago Atlantic, including accrued interest on the Chicago Atlantic Term Loan.
• Tyson Macdonald, the company's CFO, represented Deep Roots in the Deep Roots Merger as a Managing Partner for TrueRise Capital (60% owned by Mr. Macdonald), which received a $1,500,000 fee at the closing of the Deep Roots Merger.

Stakeholder Impact

• Shareholders: Experience dilution from new share issuances for mergers and potential earn-outs. Benefit from potential increased company value due to strategic growth and federal tax relief. Face risks of illiquidity due to heightened regulatory scrutiny. The CEO's significant influence may limit the impact of minority shareholders on corporate decisions.
• Employees: The company's expansion through mergers leads to workforce growth. Employees in several states are represented by collective bargaining agreements. Stock-based compensation is a component of executive and director remuneration. Integration of acquired companies may lead to changes in roles or potential job losses.
• Customers: Benefit from expanded product availability and retail footprint across more states. The company's focus on customer-centric operations and quality products aims to enhance customer experience. Negative public perception or product recalls could adversely affect customer demand.
• Suppliers: The company relies on third-party suppliers for key inputs in cultivation, extraction, and production. Supply chain disruptions or changes in supplier relationships could impact operations.
• Creditors: The company has substantial secured indebtedness. Default on debt obligations could lead to lenders exercising remedies, including foreclosure on assets. Refinancing efforts aim to strengthen the company's credit profile and financial flexibility.

Next Steps

• Complete the pending Schwazze Transaction, PharmaCann Transaction, and Eaze Merger, subject to regulatory approvals and customary closing conditions.
• Deliver positive operating cash flow through continued cost discipline, operational excellence, and product quality enhancements over the next 12 months.
• Optimize the performance of cultivation, production, and retail operations.
• Manage the balance sheet prudently and strengthen credit profile and financial flexibility.
• Evaluate strategic opportunities for disciplined, high-quality acquisitions and other initiatives that align with operating capabilities, expand geographic reach, and support long-term growth.
• Grow home delivery service in New York and introduce new products and wholesale revenue streams to improve profit margins.
• Prepare for increased disclosure, internal control, and compliance requirements upon losing 'emerging growth company' status by the end of 2026.
• Monitor the DEA's rescheduling of marijuana to Schedule III for potential federal tax relief.
• Hold the 2026 annual general meeting of shareholders on May 29, 2026.

Key Dates

Recommendation

Vireo Growth Inc. is in a transformative phase, marked by aggressive M&A activity that has significantly boosted revenue and Adjusted EBITDA. The strategic expansion into new and existing cannabis markets positions the company for long-term growth in a rapidly evolving industry. However, the substantial net losses, increased operating expenses, and the inherent regulatory and federal illegality risks in the cannabis sector present significant headwinds. While the potential for federal rescheduling of cannabis offers a strong upside, its timing and impact remain uncertain. The company's high debt levels and the potential for further shareholder dilution from pending transactions also warrant caution. A 'hold' recommendation reflects the balance between the company's strong growth trajectory and the considerable risks and uncertainties it faces. Investors should monitor the successful integration of acquisitions, progress towards profitability, and regulatory developments closely.

Keywords

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