10-K: Vireo Growth Inc. Reports Fiscal Year 2024 Results; Outlines Strategic Initiatives

Vireo Growth Inc. files its 10-K report, detailing its financial performance for the year ended December 31, 2024, and outlining its strategic objectives for the coming year.

Summary

• Vireo Growth Inc., a cannabis company, has filed its Form 10-K for the fiscal year ended December 31, 2024.
• As of March 4, 2025, Vireo Growth operates in Maryland, Minnesota, and New York, with non-operating assets in Nevada and Massachusetts.
• The company retails cannabis products in 14 dispensaries and wholesales in Maryland, Minnesota, and New York.
• Vireo Growth is in the midst of a transformation to being significantly more customer-centric across its operations.
• The company entered into Merger Agreements with Deep Roots, Proper, and Wholesome in December 2024, with each merger being an all-share transaction.
• Reference EBITDA for Deep Roots, Proper and Wholesome are US$31.0 million, US$31.0 million, and US$16.0 million, respectively.
• The company intends to negotiate and enter into an Agreement and Plan of Merger with Bills Nursery, Inc.
• U.S. sales of legal cannabis are expected to reach over $50 billion by 2026, according to Brightfield Group.
• The company's principal business objectives include achieving positive operating cash flow, improving flower production, pursuing non-core asset divestitures, and managing the balance sheet.
• As of February 15, 2025, the company had 520 employees, with some employees in Maryland, Minnesota, and New York represented by the UFCW.
• The company incurred net losses of $28,007,509 in 2024 and $25,547,089 in 2023.
• The company had U.S. federal net operating loss carryforwards of $28,100,000 and state net operating loss carryforwards of $39,000,000 as of December 31, 2024.

Sentiment

Score: 5

Explanation: The document presents a mixed picture. While there's revenue growth and strategic initiatives, the company is still operating at a loss and faces significant risks. The mergers could be a positive step, but there's uncertainty around their completion and potential benefits.

Positives

• The company is evolving with the industry and is in the midst of a transformation to being significantly more customer-centric across its operations.
• The company's principal business objectives include achieving positive operating cash flow, improving flower production, pursuing non-core asset divestitures, and managing the balance sheet.

Negatives

• The company incurred net losses of $28,007,509 in 2024 and $25,547,089 in 2023.
• The company had an aggregate accumulated deficit of $231,435,561 as of December 31, 2024.

Risks

• Marijuana remains illegal under U.S. federal law, posing a significant risk to the company's operations.
• The company is involved in litigation with Verano, the outcome of which is uncertain.
• The company may face state limitations on ownership of cannabis licenses and may be required to divest certain licenses or entities that hold such license in order to comply with applicable regulations.
• The company may be subject to heightened scrutiny by United States and Canadian authorities, which could ultimately lead to the market for Subordinate Voting Shares becoming highly illiquid and our shareholders having no ability to effect trades in Subordinate Voting Shares in Canada.
• The company anticipates requiring additional financing to operate its business and may face difficulties acquiring additional financing on terms acceptable to us or at all.
• The company's senior secured credit facility contains covenant restrictions that may limit our ability to operate our business.
• Servicing our debt will require a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial debt.
• The company faces security risks related to its physical facilities and cash transfers due to the mostly cash nature of the cannabis industry.
• The company's internal controls over financial reporting may not be effective, and our independent auditors may not be able to certify as to their effectiveness, which could have a significant and adverse effect on our business.

Future Outlook

The company's principal business objectives over the next 12-month period include achieving positive operating cash flow through cost discipline, operational excellence, and product quality; improving the quality and efficiency of flower production in Maryland and Minnesota; pursuing non-core asset divestitures; managing the balance sheet with capital partners to grow into being a strong credit.

Industry Context

The cannabis industry is highly competitive with many operators, including large multi-state operators and smaller regional and local enterprises. The company faces competition from other companies that have greater resources, enhanced access to public equity and debt markets, superior cultivation and manufacturing capabilities, lower operating costs, better-located retail facilities, more experienced management, or that may be more mature as businesses.

Management Changes

Legal Proceedings

• On October 21, 2022, Vireo commenced an action in the Supreme Court of British Columbia against Verano after Verano wrongfully repudiated the Arrangement Agreement.
• The Company is seeking substantial damages, specifically US $860.9 million, as well as other costs and legal fees, based on Veranos breach of contract and of its duty of good faith and honest performance.

Related Party Transactions

• Mr. Mazarakis has approximately a 29% ownership interest in Chicago Atlantic Group, LP. Chicago Atlantic Group, LP and its affiliates control approximately 35% of the Companys subordinate voting shares.
• As of the filing date of this Form 10-K, our executive officers, directors, and current beneficial owners of 5% or more of our capital stock and their respective affiliates will, in the aggregate, beneficially own 46% of our outstanding subordinate voting shares on an as converted basis, based on 339,336,633 subordinate voting shares and 278,170 multiple voting shares outstanding.

Stakeholder Impact

• The uncertainty surrounding the Mergers could negatively impact Vireo's current and future operations, financial condition and prospects.
• The Company and the Merger targets may not integrate successfully.
• It may be challenging for the resulting Company after completion of the Mergers to service the additional indebtedness incurred.
• The Companys shareholders will have a reduced ownership and voting interest in, and will exercise less influence over the management of, a combined company following the completion of the Mergers as compared to their current ownership and voting interests.
• Our shareholders may not realize a benefit from the Mergers commensurate with the ownership dilution they will experience in connection with the Mergers.

Next Steps

• Achieving positive operating cash flow through cost discipline, operational excellence, and product quality.
• Improving the quality and efficiency of flower production in Maryland and Minnesota.
• Pursuing non-core asset divestitures.
• Managing the balance sheet with capital partners to grow into being a strong credit.

Key Dates