GRUSF 10-Q
Grown Rogue International Inc. (GRUSF)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| For the quarterly period ended |
| or |
| For the transition period from _________ to _________ |
| Commission file number |
(Exact Name of Registrant as Specified in its charter)
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
|
| ||
| (Address of principal executive offices, Zip Code) | ||
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered under Section 12(g) of the Act:
Subordinate Voting Shares, no par value
(Title of Class)
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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
| Large Accelerated Filer | ☐ | Accelerated Filer | ☐ |
| ☒ | Smaller Reporting Company | ||
| Emerging Growth Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
As of August 4, 2026, the registrant had Subordinate Voting Shares and 0 Multiple Voting Shares outstanding.
TABLE OF CONTENTS
i
PART I – FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
GROWN ROGUE INTERNATIONAL INC.
Condensed Consolidated Financial Statements
For the three and six months ended June 30, 2026 and 2025
Expressed in United States Dollars
(Unaudited)
1
Grown Rogue International Inc.
Condensed Consolidated Balance Sheets
As at June 30, 2026 and December 31, 2025
(Expressed in United States Dollars) - Unaudited
| June 30, 2026 |
December 31, 2025 |
|||||||
| $ | $ | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | ||||||||
| Accounts receivable, net (Note 4) | ||||||||
| Inventory (Note 5) | ||||||||
| Prepaid expenses | ||||||||
| Derivative asset (Note 12) | ||||||||
| Current portion of notes receivable (Note 8) | ||||||||
| Total current assets | ||||||||
| Other long-term assets | ||||||||
| Warrants asset (Note 6) | ||||||||
| Other investments (Note 7) | ||||||||
| Notes receivable (Note 8) | ||||||||
| Lease receivable | ||||||||
| Property and equipment, net (Note 9) | ||||||||
| Right of use assets (Note 10) | ||||||||
| Deferred tax asset | ||||||||
| Intangible assets | ||||||||
| TOTAL ASSETS | ||||||||
| LIABILITIES | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued liabilities | ||||||||
| Current portion of operating lease liabilities (Note 10) | ||||||||
| Current portion of finance lease liabilities (Note 10) | ||||||||
| Current portion of long-term debt (Note 11) | ||||||||
| Current portion of business acquisition consideration payable | ||||||||
| Derivative liability | ||||||||
| Warrant liabilities (Note 12) | ||||||||
| Income tax payable | ||||||||
| Total current liabilities | ||||||||
| Operating lease liabilities (Note 10) | ||||||||
| Finance lease liabilities (Note 10) | ||||||||
| Long-term debt (Note 11) | ||||||||
| Business acquisition consideration payable | ||||||||
| Other non-current liabilities | ||||||||
| TOTAL LIABILITIES | ||||||||
| Commitments and contingencies (Note 23) | ||||||||
| Subsequent events (Note 24) | ||||||||
| SHAREHOLDERS’ EQUITY | ||||||||
| Subordinate voting common shares, convertible into multiple voting common shares, par value; unlimited shares authorized; and shares issued and outstanding as at June 30, 2026 and December 31, 2025, respectively | ||||||||
| Multiple voting common shares, par value; unlimited shares authorized; nil and nil shares issued and outstanding as at June 30, 2026 and December 31, 2025, respectively | ||||||||
| Accumulated other comprehensive loss | ( |
) | ( |
) | ||||
| Accumulated deficit | ( |
) | ( |
) | ||||
| Equity attributable to shareholders | ||||||||
| Non-controlling interests (Note 22) | ||||||||
| TOTAL SHAREHOLDERS’ EQUITY | ||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
The accompanying notes form an integral part of these condensed consolidated financial statements.
2
Grown Rogue International Inc.
Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
For the three and six months ended June 30, 2026 and 2025
(Expressed in United States Dollars, except share amounts) - Unaudited
| Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Revenue | ||||||||||||||||
| Product sales | ||||||||||||||||
| Total revenue | ||||||||||||||||
| Cost of goods sold | ||||||||||||||||
| Cost of finished cannabis inventory sold | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Total cost of goods sold | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Gross profit | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Amortization (Notes 9, 10) | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Share-based compensation (Note 15) | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Income (loss) from operations | ( |
) | ||||||||||||||
| Other income (expense) | ||||||||||||||||
| Interest expense (Note 11, 12) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Other income (expense) | ( |
) | ( |
) | ||||||||||||
| Interest income | ||||||||||||||||
| Unrealized gain (loss) on derivative liability (Note 12) | ( |
) | ( |
) | ||||||||||||
| Realized gain on derivative liability (Note 12) | ||||||||||||||||
| Unrealized loss on warrant asset (Note 6) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Unrealized gain (loss) on warrant liability (Note 12) | ( |
) | ||||||||||||||
| Loss on equity investment in associate (Note 7) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Total other income (expense), net | ( |
) | ( |
) | ||||||||||||
| Income (loss) before income tax expense | ( |
) | ( |
) | ||||||||||||
| Income tax expense (Note 17) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Net income (loss) | ( |
) | ( |
) | ||||||||||||
| Other comprehensive income | ||||||||||||||||
| Currency translation adjustment | ( |
) | ||||||||||||||
| Total comprehensive income (loss) | ( |
) | ( |
) | ||||||||||||
| Basic income (loss) per share | ( |
) | ( |
) | ||||||||||||
| Basic weighted average number of subordinate voting common shares outstanding | ||||||||||||||||
| Diluted income (loss) per share | ( |
) | ( |
) | ||||||||||||
| Diluted weighted average number of subordinate voting common shares outstanding | ||||||||||||||||
| Net income (loss) for the period attributable to: | ||||||||||||||||
| Shareholders | ( |
) | ( |
) | ||||||||||||
| Non-controlling interest | ||||||||||||||||
| Net income (loss) | ( |
) | ( |
) | ||||||||||||
| Total comprehensive income (loss) for the period attributable to: | ||||||||||||||||
| Shareholders | ( |
) | ( |
) | ||||||||||||
| Non-controlling interest | ||||||||||||||||
| Total comprehensive income (loss) | ( |
) | ( |
) | ||||||||||||
The accompanying notes form an integral part of these condensed consolidated financial statements.
3
Grown Rogue International Inc.
Condensed Consolidated Statements of Changes in Shareholders’ Equity
For the six months ended June 30, 2026 and 2025
(Expressed in United States Dollars, except share amounts) - Unaudited
| Subordinate voting common shares |
Paid in capital |
Accumulated other comprehensive loss |
Accumulated deficit |
Non-controlling interests |
Total shareholders’ equity |
|||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| # | $ | $ | $ | $ | $ | |||||||||||||||||||
| Balance - December 31, 2024 | ( |
) | ( |
) | ||||||||||||||||||||
| Exercise of stock options | ||||||||||||||||||||||||
| Settlement of July Convertible Debentures | ||||||||||||||||||||||||
| Settlement of restricted share units | ||||||||||||||||||||||||
| Share-based compensation expense | - | |||||||||||||||||||||||
| Currency translation adjustment | - | |||||||||||||||||||||||
| Net income | - | |||||||||||||||||||||||
| Balance - March 31, 2025 | ( | ) | ( | ) | ||||||||||||||||||||
| Exercise of stock options | ||||||||||||||||||||||||
| Settlement of July Convertible Debentures | ||||||||||||||||||||||||
| Dividend issued from Golden Harvests, LLC to minority owner | - | ( |
) | ( |
) | |||||||||||||||||||
| Share-based compensation expense | - | |||||||||||||||||||||||
| Currency translation adjustment | - | ( |
) | ( |
) | |||||||||||||||||||
| Net income | - | |||||||||||||||||||||||
| Balance - June 30, 2025 | ( |
) | ( |
) | ||||||||||||||||||||
| Balance - December 31, 2025 | ( |
) | ( |
) | ||||||||||||||||||||
| Sale of non-controlling interest in GRMA | - | |||||||||||||||||||||||
| Exercise of stock options | ||||||||||||||||||||||||
| Distributions to non-controlling interests in subsidiaries | - | ( |
) | ( |
) | |||||||||||||||||||
| Reclassification of warrants | - | ( |
) | ( |
) | |||||||||||||||||||
| Share-based compensation expense | - | |||||||||||||||||||||||
| Net income (loss) | - | ( |
) | ( |
) | |||||||||||||||||||
| Balance - March 31, 2026 | ( | ) | ( | ) | ||||||||||||||||||||
| Distributions to non-controlling interests in subsidiaries | - | ( | ) | ( | ) | |||||||||||||||||||
| Share-based compensation expense | - | |||||||||||||||||||||||
| Net income (loss) | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance - June 30, 2026 | ( |
) | ( |
) | ||||||||||||||||||||
The accompanying notes form an integral part of these condensed consolidated financial statements.
4
Grown Rogue International Inc.
Condensed Consolidated Statements of Changes in Cash Flows
For the six months ended June 30, 2026 and 2025
(Expressed in United States Dollars, unless otherwise indicated) - Unaudited
| 2026 | 2025 | |||||||
| $ | $ | |||||||
| Operating activities | ||||||||
| Net income (loss) | ( |
) | ||||||
| Adjustments for non-cash items in net income (loss) and earnings impact of warrant liability reclassification: | ||||||||
| Depreciation of property and equipment | ||||||||
| Depreciation of property and equipment included in costs of finished cannabis inventory sold | ||||||||
| Lease costs included in costs of finished cannabis inventory sold | ||||||||
| Share-based compensation | ||||||||
| Interest and accretion expense | ||||||||
| Other income | ( |
) | ||||||
| Interest income | ( |
) | ( |
) | ||||
| Unrealized (gain) loss on derivative liability | ( |
) | ||||||
| Realized (gain) loss on derivative liability | ( |
) | ||||||
| Unrealized loss on warrant asset | ||||||||
| Unrealized gain on warrant liability | ( |
) | ||||||
| Loss on equity investment in associate | ||||||||
| Deferred income taxes | ( |
) | ( |
) | ||||
| Changes in operating assets and liabilities (Note 18) | ( |
) | ||||||
| Net cash provided by (used in) operating activities | ( |
) | ||||||
| Investing activities | ||||||||
| Purchase of property and equipment | ( |
) | ( |
) | ||||
| Payments of business acquisition consideration payable | ( |
) | ( |
) | ||||
| Investment in Rogue EBC, LLC equity interest | ( |
) | ( |
) | ||||
| Net cash used in investing activities | ( |
) | ( |
) | ||||
| Financing activities | ||||||||
| Sale of non-controlling interest in GRMA, net of issuance costs | ||||||||
| Proceeds from exercise of stock options | ||||||||
| Proceeds from long-term debt | ||||||||
| Distributions to non-controlling interests in subsidiaries | ( |
) | ( |
) | ||||
| Debt issuance costs | ( |
) | ||||||
| Repayment of long-term debt | ( |
) | ( |
) | ||||
| Payment of interest on convertible debentures | ( |
) | ||||||
| Repayment of finance lease | ( |
) | ( |
) | ||||
| Net cash provided by financing activities | ||||||||
| Effect of foreign exchange on cash and cash equivalents | ||||||||
| Change in cash and cash equivalents | ||||||||
| Cash and cash equivalents, beginning of period | ||||||||
| Cash and cash equivalents, end of period | ||||||||
The accompanying notes form an integral part of these condensed consolidated financial statements.
5
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 1. | NATURE OF THE ORGANIZATION AND BUSINESS |
Grown Rogue International Inc. (the “Company”) was incorporated under the Business Corporations Act (Ontario) on November 1, 2018. The primary cannabis product produced and sold is cannabis flower. The registered office is located at 40 King St W Suite 5800, Toronto, ON M5H 3S1.
The Company is a cannabis operator in Oregon, Michigan, New Jersey and with operations being provisioned in Illinois and Minnesota, USA and is engaged in the cultivation of and manufacturing of cannabis flower and extract products for wholesale and retail sales.
At the federal level, cannabis currently remains a Schedule I controlled substance under the Federal Controlled Substances Act of 1970. Under U.S. federal law, a Schedule I drug or substance has a high potential for abuse, no accepted medical use in the United States, and a lack of accepted safety for the use of the drug under medical supervision. As such, even in those states in which marijuana is legalized under state law, the manufacture, importation, possession, use or distribution of cannabis remains illegal under U.S. federal law. This has created a dichotomy between state and federal law, whereby many states have elected to regulate and remove state-level penalties regarding a substance which is still illegal at the federal level. There remains uncertainty about the US federal government’s position on cannabis with respect to cannabis-legal status. A change in its enforcement policies could impact the ability of the Company to continue as a going concern.
| 2. | BASIS OF PRESENTATION |
These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC. In the opinion of management, all adjustments considered necessary for a fair presentation of the results for the interim periods have been made. All such adjustments are of a normal recurring nature. The results for the three and six months ended June 30, 2026, are not necessarily indicative of the results to be expected for the full fiscal year.
During 2025, the Company determined that more than 50% of its outstanding common shares were held by U.S. stockholders and, as a result, no longer met the definition of a foreign private issuer under U.S. securities laws. Accordingly, commencing with the year ended December 31, 2025, the Company is required to present its financial statements in accordance with U.S. GAAP rather than IFRS® Accounting Standards as issued by the International Accounting Standards Board.
The Company has prepared audited consolidated financial statements in accordance with U.S. GAAP for the year ended December 31, 2025. These condensed consolidated financial statements and the accompanying note disclosures have been prepared on a basis consistent with the Company’s audited consolidated financial statements and reflect only those adjustments necessary, in the opinion of management, for fair presentation of the results for the interim periods.
6
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 2. | BASIS OF PRESENTATION (CONTINUED) |
| 2.1 | Functional and presentation currency |
The Company’s reporting currency is the United States Dollar (“USD”). Effective January 1, 2026, the Company changed its functional currency from the Canadian Dollar (“CAD”) to the USD based on management’s determination that the USD had become the Company’s primary economic environment due to changes in underlying transactions, events, and operating conditions. All subsidiaries have a functional currency of USD.
The change in functional currency was applied prospectively from January 1, 2026 in accordance with ASC 830, Foreign Currency Matters. Translated amounts of non-monetary assets and liabilities at December 31, 2025 became the historical accounting basis for those assets and liabilities at January 1, 2026. The cumulative translation adjustment recognized in accumulated other comprehensive loss prior to the change has not been reversed and continues to be reported in equity.
For the comparative period (six months ended June 30, 2025), when the Company’s functional currency was CAD, assets and liabilities were translated to USD at exchange rates prevailing at the end of the reporting period, and income and expense items were translated at the average exchange rates for the period. Exchange differences arising from translation were recognized in other comprehensive income (loss) and reported as currency translation reserve in shareholders’ equity.
| 2.2 | Use of estimates |
The preparation of the Company’s financial statements in conformity with U.S. GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts of certain assets, liabilities, revenue, and expenses as well as the related disclosures. The Company must often make estimates about effects of matters that are inherently uncertain and will likely change in subsequent periods. Actual results could differ materially from those estimates.
Areas requiring a significant degree of estimation and judgment relate to the assessment of transactions as business combinations or asset acquisitions, estimates used in valuation and costing of inventory, impairment of long-lived assets and indefinite lived intangible assets, fair value measurements, the recoverability and measurement of deferred tax assets and liabilities, share-based compensation, fair value of derivative assets and liabilities, and consolidation of entities in which the Company holds less than a majority of voting rights.
| 2.3 | Basis of consolidation |
These financial statements incorporate the accounts of the Company and all the entities in which the Company has a controlling voting interest and is deemed to be the primary beneficiary. All consolidated entities were under common control during the entirety of the periods for which their respective results of operations were included in the consolidated statements from the date of acquisition. All intercompany balances and transactions are eliminated upon consolidation.
7
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 2. | BASIS OF PRESENTATION (CONTINUED) |
| 2.3 | Basis of consolidation (CONTINUED) |
A summary of the Company’s subsidiaries included in these financial statements as at June 30, 2026 is as follows:
| Entity | Defined term | Location | Purpose | Percentage held |
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|---|---|---|---|---|---|---|---|---|---|---|
| % | ||||||||||
| % | ||||||||||
| % | ||||||||||
| % | ||||||||||
| % | ||||||||||
| %* | ||||||||||
| %** | ||||||||||
| % | ||||||||||
| % | ||||||||||
| %*** | ||||||||||
| % | ||||||||||
| %**** | ||||||||||
| * |
|
| ** |
|
| *** |
|
| **** |
|
All subsidiaries of the Company were incorporated in the United States of America and have USD as their functional currency.
8
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 3. | SIGNIFICANT ACCOUNTING POLICIES |
The accounting policies used in the preparation of these financial statements are consistent with those described in the Company’s audited consolidated financial statements for the year ended December 31, 2025. Material accounting policies applied in these condensed consolidated financial statements as follows:
Revenue
Revenue is recognized in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”) when goods or services are transferred to the customer in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.
In order to recognize revenue under ASC 606, the Company applies the following five steps:
| 1. | Identify a customer along with a corresponding contract |
| 2. | Identify the performance obligation(s) in the contract to transfer goods or provide distinct services to a customer |
| 3. | Determine the transaction price that the Company expects to be entitled to in exchange for transferring promised goods or services to a customer |
| 4. | Allocate the transaction price to the performance obligation(s) in the contract |
| 5. | Recognize revenue when or as the Company satisfies the performance obligation(s) in the contract |
Revenue from the sale of goods is generally recognized when control over the goods has been transferred to the customer. Payment for sales is typically due prior to shipment. The Company has elected to treat shipping and handling activities as a fulfillment activity, meaning these activities are not considered a separate performance obligation. Shipping and handling fees billed to customers are recognized as revenue at the time control of the goods passes to the customer. Costs incurred by the Company for shipping and handling are classified as cost of sales in the consolidated statements of income (loss) and comprehensive income (loss). Payment for wholesale transactions is due within a specified time period as permitted by the underlying agreement and the Company’s credit policy upon the transfer of goods to the customer. The Company generally satisfies its performance obligation and transfers control to the customer upon delivery and acceptance by the customer. Revenue is recorded at the estimated amount of consideration to which the Company expects to be entitled.
Inventory
Inventory consists of (i) raw materials, consumables and packaging supplies used in the process to prepare inventory for sale, (ii) work in process consisting of pre-harvested cannabis plants, and (iii) finished goods.
Inventory is valued at the lower of cost and net realizable value, with cost determined using the weighted average cost method. Net realizable value is calculated as the estimated selling price in the ordinary course of business, less any estimated costs to complete and sell the goods. Costs are capitalized to inventory, until substantially ready for sale. Costs include direct and indirect labor, raw materials, consumables, packaging supplies, utilities, facility costs, quality and testing costs, production related depreciation and other overhead costs including operating lease costs.
The Company records inventory reserves for obsolete and slow-moving inventory. Inventory reserves are based on inventory obsolescence trends, and the historical and professional experience of management. The Company classifies cannabis inventory as a current asset, although, due to the duration of the cultivation, drying, and conversion process, certain inventory items may not be realized in cost of sales within one year.
9
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 3. | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
Financial instruments
Financial instruments are contracts that give rise to a financial asset of one party and a financial liability or equity instrument of another party. Financial instruments are recorded initially at fair value, which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Subsequent measurement depends on how the financial instrument has been classified and may be at fair value or amortized cost. For financial instruments subsequently measured at fair value, the Company calculates the estimated fair value of financial instruments using quoted market prices whenever available. When quoted market prices are not available, the Company uses standard pricing models including the Black-Scholes option pricing model.
Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values. The three levels of the fair value hierarchy are:
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 (i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3 - Inputs that are not based on observable market data.
There have been no transfers between fair value hierarchy levels during the three and six months ended June 30, 2026 and 2025.
The Company’s cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities are recorded at cost. The carrying values of these financial instruments approximate their fair value due to their short-term maturities. The Company’s note receivable, long-term debt, business acquisition consideration payable, and convertible debentures are valued at amortized cost using the effective interest rate method. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest risks arising from these financial instruments. The Company’s warrant asset and derivative liability are measured using the Black-Scholes option pricing model (Notes 6 and 12, respectively).
Share-based compensation expense consists of the Company’s stock option and restricted share unit expense.
Stock options and restricted share units granted to employees and consultants are measured based on the grant-date fair value. Share-based compensation expense for stock options is generally recognized based on the straight-line basis over the requisite service period. The Company has elected to account for forfeitures of share-based awards as they occur rather than estimating forfeitures at the grant date. Accordingly, stock-based compensation expense is recognized assuming all awards will vest, and previously recognized compensation cost is reversed in the period in which an award is forfeited due to an employee’s failure to satisfy the applicable service conditions.
Share-based compensation for restricted share units is recognized at the time of grant by multiplying the share price on the date of grant by the number of restricted share units granted. Share-based compensation expense is included in share-based compensation expense or cost of finished cannabis inventory sold based on the employee’s function classification.
Consideration paid to the Company on the exercise of stock options is recorded as subordinate voting common shares (“SV Shares”).
10
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 3. | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
Income taxes
The Company uses the asset and liability method to account for income taxes. Deferred income tax assets and liabilities are determined based on enacted tax rates and laws for the years in which the differences are expected to reverse.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
As the Company operates in the cannabis industry, it is subject to the limits of IRC Section 280E, under which the Company is only allowed to deduct expenses directly related to the cost of producing the products or cost of production.
The Company recognizes uncertain income tax positions at the largest amount that is more-likely-than-not to be sustained upon examination by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than 50% likelihood of being sustained. Recognition or measurement is reflected in the period in which the likelihood changes. Any interest and penalties related to unrecognized tax liabilities are presented within income tax expense in the consolidated statements of loss and comprehensive loss.
For interim reporting purposes, the Company computes its income tax provision using an estimated annual effective tax rate method, as required under ASC 740, Income Taxes. Under this method, the Company estimates its annual effective income tax rate and applies that rate to year-to-date ordinary income or loss to determine the interim tax provision. The estimated annual effective tax rate reflects expected annual taxable income or loss, permanent items and discrete items identifiable to specific periods, which are recognized in the period in which they occur. The estimated annual effective tax rate is reviewed and updated at each interim reporting date, with any adjustment recognized in the period of change.
Recently adopted accounting pronouncements
In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, which requires enhanced disclosures regarding the nature and composition of certain expense captions presented on the income statement. The guidance is effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. Early adoption is permitted. Because the standard only affects disclosures, the Company does not expect adoption to have a material impact on its consolidated financial position, results of operations, or cash flows; however, it expects additional footnote disclosures will be required upon adoption. The Company is currently evaluating the disclosure requirements of the standard.
In July 2025, the Financial Accounting Standards Board issued Accounting Standards Update 2025-05, Measurement of Credit Losses for Accounts Receivable and Contract Assets. The objective of this update is to reduce the cost and complexity of applying the current expected credit loss model to short-term accounts receivable and contract assets. ASU 2025-05 addresses these challenges by introducing a practical expedient that allows entities to assume that current conditions as of the balance sheet date do not change over the remaining life of the asset. ASU 2025-05 is effective for annual reporting periods beginning after December 15, 2025, including interim periods within those fiscal years. The Company adopted ASU 2025-05 as of January 1, 2026.
| 4. | ACCOUNTS RECEIVABLE |
The Company’s accounts receivable composition is as follows:
| June 30, 2026 |
December 31, 2025 |
|||||||
| $ | $ | |||||||
| Trade receivables, net of provision for expected credit losses | ||||||||
| Taxes receivable | ||||||||
| Total accounts receivable, net | ||||||||
As at June 30, 2026, trade receivables was presented net of an allowance for expected credit losses of $
11
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 5. | INVENTORY |
The Company’s inventory composition is as follows:
| June 30, 2026 |
December 31, 2025 |
|||||||
| $ | $ | |||||||
| Raw materials | ||||||||
| Work in process | ||||||||
| Finished goods | ||||||||
| Total Inventory | ||||||||
| 6. | WARRANTS ASSET |
The Vireo Warrants are remeasured at fair value through profit and loss at each reporting period using the Black-Scholes option pricing model. The fair value of the Vireo Warrants at June 30, 2026, was estimated to be $
| Date | Expected dividends | Expected volatility | Risk-free rate of interest |
Expected term (years) |
Closing price per common share |
|||||||||||||||
| December 31, 2025 | % | % | % | $ | (CAD$ | ) | ||||||||||||||
| June 30, 2026 | % | % | % | $ | (CAD$ | ) | ||||||||||||||
On June 5, 2026 Vireo Growth Inc. enacted a 30-1 reverse split. The number of warrants and comparative closing price per common share have been retroactively applied.
During the three and six months ended June 30, 2026, the Company recorded an unrealized loss on the change in fair value of the warrants asset of $
12
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 7. | OTHER INVESTMENTS |
On March 5, 2024, the Company signed a definitive agreement to form Rogue EBC, a joint venture with EBC Ventures. Rogue EBC holds a craft growers license with the Illinois Department of Agriculture. Grown Rogue owns 79% of the joint venture and has contributed capital to support the development of the facility. The joint venture agreement includes multiple purchase options, which ultimately give the Company the ability to acquire 100% of the membership interests of the joint venture subject to approval by the Illinois Department of Agriculture. The Company does not have the unilateral ability to direct activities of Rogue EBC and therefore the investment constitutes a joint venture in accordance with ASC 323, Investments – Equity Method and Joint Ventures.
The investment in Rogue EBC has been accounted for using the equity method as follows:
| June 30, 2026 |
December 31, 2025 |
|||||||
| $ | $ | |||||||
| Balance, beginning of period | ||||||||
| Investment in Rogue EBC | ||||||||
| Loss on equity investment in associate | ( |
) | ( |
) | ||||
| Deposit on purchase of remaining Rogue EBC | ||||||||
| Balance, end of period | ||||||||
The following table presents summarized financial information for Rogue EBC:
| June 30, 2026 |
December 31, 2025 |
|||||||
| $ | $ | |||||||
| Current assets | ||||||||
| Non-current assets | ||||||||
| Total assets | ||||||||
| Current liabilities | ||||||||
| Non-current liabilities | ||||||||
| Total liabilities | ||||||||
| Net Assets | ||||||||
| Company share of net assets | ||||||||
| Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Revenue | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Net loss | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Company share of net loss | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
13
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 8. | NOTES RECEIVABLE |
Transactions related to the Company’s notes receivable for the six months ended June 30, 2026 and year ended December 31, 2025, include the following:
| June 30, 2026 |
December 31, 2025 |
|||||||
|---|---|---|---|---|---|---|---|---|
| $ | $ | |||||||
| Balance, Beginning of period | ||||||||
| Advances | ||||||||
| Accrued interest | ||||||||
| Balance, end of period | ||||||||
Accrued interest for the three and six months was $
| 9. | PROPERTY AND EQUIPMENT |
| June 30, 2026 |
December 31, 2025 |
|||||||
|---|---|---|---|---|---|---|---|---|
| $ | $ | |||||||
| Computer and office equipment | ||||||||
| Production equipment and other | ||||||||
| Land | ||||||||
| Construction in progress | ||||||||
| Leasehold improvements | ||||||||
| Gross property and equipment | ||||||||
| Less: Accumulated amortization | ( |
) | ( |
) | ||||
| Property and equipment, net | ||||||||
Finance lease right-of-use assets are included within property and equipment, net in the accompanying condensed consolidated balance sheets. Accumulated amortization associated with finance lease right-of-use assets was $
Depreciation and amortization
expense recognized in cost of revenues through inventory sold was approximately $
14
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 10. | RIGHT OF USE ASSET AND LEASE LIABILITY |
The Company’s leases consist of land and buildings and equipment used in the cultivation, processing, and warehousing of its products. The leases were classified as either operating leases or finance leases in accordance with ASC 842, Leases.
A summary of the maturity of contractual undiscounted liabilities associated with the Company’s operating leases and finance leases as of June 30, 2026 is as follows:
| Operating leases | Finance leases | |||||||
| $ | $ | |||||||
| 2026 | ||||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 | ||||||||
| 2030 | ||||||||
| Thereafter | ||||||||
| Total lease payments | ||||||||
| Less: Unamortized interest | ( |
) | ( |
) | ||||
| Total lease liability | ||||||||
| Current portion | ||||||||
| Non-current portion | ||||||||
A summary of the Company’s weighted average discount rate used in calculating lease liabilities and weighted average remaining lease term is as follows:
| June 30, 2026 |
December 31, 2025 |
|||||||
| Operating leases: | ||||||||
| Weighted average discount rate | % | % | ||||||
| Weighted average remaining lease term (years) | ||||||||
| Finance leases: | ||||||||
| Weighted average discount rate | % | % | ||||||
| Weighted average remaining lease term (years) | ||||||||
For the three and six months ended June 30, 2026, operating lease costs of $
On April 8, 2026, the Company executed an amendment to extend one of its commercial facility leases and recognized additions to right-of-use assets and operating lease liabilities of $
15
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 11. | LONG-TERM DEBT |
Transactions related to the Company’s long-term debt for the six months ended June 30, 2026 and year ended December 31, 2025 include the following:
| June 30, 2026 |
December 31, 2025 |
|||||||
| $ | $ | |||||||
| Balance, beginning of period | ||||||||
| Advances | ||||||||
| Debt issuance costs | ( |
) | ||||||
| Interest and accretion expense | ||||||||
| Payments | ( |
) | ( |
) | ||||
| Balance, end of period | ||||||||
| Current portion | ||||||||
| Non-current portion | ||||||||
A summary of the maturity of contractual undiscounted liabilities associated with the Company’s long-term debt as of June 30, 2026 is as follows:
| Amount ($) |
||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | - | |||
| Thereafter | - | |||
| Total payments | ||||
| Less: Unamortized interest | ( |
) | ||
| Total long-term debt | ||||
16
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 12. | DERIVATIVE ASSETS AND LIABILITIES |
| 12.1 | Western Alliance Credit Interest Rate Swap |
The Company measures the interest rate swaps at fair value on a recurring basis. The fair value measurements are categorized within Level 2 of the fair value hierarchy. The Company estimates the fair value of the interest rate swaps using a discounted cash flow model and significant inputs including observable Secured Overnight Financing Rate (“SOFR”) forward curve, discount rates, credit valuation adjustments, counterparty credit risk, and non-performance risk. There were no transfers between fair value hierarchy levels during the six months ended June 30, 2026.
On March 27, 2025, the Company entered and closed a $
On May 14, 2025, the Company executed an interest rate swap transaction with WAB for Tranche 1. The Company will bear interest of 8.07% per annum whereas WAB bears 4.32520% plus 400 bps interest per annum. The interest rate swap gives rise to a derivative liability, which was initially recorded at $
On September 15, 2025, the Company executed an interest rate swap transaction with WAB for Tranche 2. The Company will bear interest of 7.53% per annum whereas WAB bears 4.1739% plus 400 bps interest per annum. The interest rate swap gives rise to a derivative liability, which was initially recorded at $
The interest rate swaps were remeasured at June 30, 2026 and were estimated to be a net derivative asset of $
The following is a summary of movements in the interest rate swap during the six months ended June 30, 2026 and year ended December 31, 2025:
| Interest rate swap | $ | |||
| Balance, December 31, 2024 | ||||
| Initial recognition | ( |
) | ||
| Unrealized loss | ( |
) | ||
| Balance, December 31, 2025 | ( |
) | ||
| Unrealized gain | ||||
| Balance, June 30, 2026 | ||||
17
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 12. | DERIVATIVE ASSETS AND LIABILITIES (CONTINUED) |
| 12.2 | Warrant liabilities |
On January 1, 2026, as a result of the change in functional currency from CAD to USD (Note 2.1), certain warrants previously classified in equity no longer met the criteria for equity classification as the warrants possess exercise prices in CAD and no longer represent an instrument for providing the Company with fixed proceeds in exchange for a fixed number of its shares due to foreign exchange. As such, the warrants are accounted for as derivative liabilities measured at fair value. The previously recorded equity balances associated with these warrants were derecognized at their fair value measured on January 1, 2026 with the resulting difference recorded within paid in capital. No gain or loss was recognized in earnings upon reclassification.
The warrant liabilities are subsequently measured at fair value at each reporting date, with changes in fair value recognized through profit or loss. The fair value of the warrant liabilities was determined using a Black-Scholes option pricing model, which incorporates significant unobservable inputs (expected stock price volatility and estimated term) and is classified within Level 3 of the fair value hierarchy.
| June 30, 2026 |
December 31, 2025 |
|||||||
| $ | $ | |||||||
| Balance, beginning of period | ||||||||
| Fair value of warrants on reclassification | ||||||||
| Unrealized gain on changes in fair value | ( |
) | ||||||
| Balance, end of period | ||||||||
During the three and six months ended June 30, 2026, the Company recorded an unrealized loss of $
The warrant liabilities were measured using the following inputs in the Black-Scholes option pricing model:
| Date | Expected dividends | Expected volatility | Risk-free rate of interest |
Expected term (years) |
Exercise price | Closing price per common share |
||||||||||||||||||
| January 1, 2026 | % | % | % | $ | ) | $ | (CAD$ | ) | ||||||||||||||||
| June 30, 2026 | % | % | % | $ | ) | $ | (CAD$ | ) | ||||||||||||||||
As at June 30, 2026 and December 31, 2025, the following warrants were issued and outstanding:
| Expiry date | Number of warrants outstanding |
Weighted average exercise price |
||||||
| $ | ) | |||||||
18
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 13. | SHARE CAPITAL |
| 13.1 | Capital stock |
The Company is authorized to issue an unlimited number of Subordinate Voting Shares (“SV Shares”) and Multiple Voting shares (“MV Shares”) at no par value and an unlimited number of preferred shares issuable in series.
| 13.2 | Dividends |
The directors may declare dividends on one or more class of shares to the exclusion of the others or declare dividends at different rates on different classes of shares, at their discretion. No dividends shall be declared on SV Shares or the MV Shares if to do so would reduce the value of the net assets of the Company to less than the paid in capital of the common stock.
During the three and six months ended June 30, 2026, the Company’s subsidiary Golden Harvests, LLC, declared and paid dividends of $
During the three and six months ended June 30, 2026, the Company’s subsidiary, GRMA, declared and paid preferred return distributions on the voting preferred units of GRMA (the “GRMA Units”) of $nil and $
| 14. | WARRANTS CLASSIFIED AS EQUITY |
The following table summarizes the warrant activities for the six months ended June 30, 2026 and the year ended December 31, 2025:
| Number of warrants outstanding |
Weighted average exercise price |
Weighted average remaining life (years) |
Aggregate intrinsic value ($) |
|||||||||||||
| Balance, December 31, 2024 | $ | ) | ||||||||||||||
| Exercise to SV shares for December warrants | ) | $ | (CAD$ | ) | ||||||||||||
| Exercise to SV shares for July warrants | ) | $ | (CAD$ | ) | ||||||||||||
| Exercise to SV shares for August warrants | ) | $ | (CAD$ | ) | ||||||||||||
| Forfeit and return of cancelled warrants | ( |
) | $ | ) | - | |||||||||||
| Balance, December 31, 2025 | $ | ) | ||||||||||||||
| Reclassified to warrant liabilities (Note 12.2) | ( |
) | $ | ) | - | |||||||||||
| Balance, June 30, 2026 | - | |||||||||||||||
19
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 15. | STOCK OPTIONS AND RESTRICTED STOCK UNITS |
The Company’s board of directors adopted the 2020 Equity Incentive Plan (the “Plan”) on July 21, 2020. The maximum number of common shares that may be issued in respect of awards under the Plan is equal to 20% of the total SV Shares outstanding. The Company may issue stock options, stock appreciation rights, restricted stock and restricted stock units (“RSU’s”).
| 15.1 | Stock options |
The following table summarizes the stock option movements for the six months ended June 30, 2026 and year ended December 31, 2025:
| Number of stock options |
Weighted average exercise price |
Aggregate intrinsic value ($USD) |
|||||||||||
| Balance, December 31, 2024 | $ | (CAD$ | ) | $ | |||||||||
| Granted | $ | (CAD$ | ) | - | |||||||||
| Exercised | ) | $ | (CAD$ | ) | |||||||||
| Forfeited | ) | $ | (CAD$ | ) | - | ||||||||
| Balance, December 31, 2025 | $ | (CAD$ | ) | $ | |||||||||
| Granted(1)(2) | $ | (CAD$ | ) | - | |||||||||
| Exercised(3) | ) | $ | (CAD$ | ) | |||||||||
| Forfeited | ) | $ | (CAD$ | ) | - | ||||||||
| Balance, June 30, 2026 | $ | (CAD$ | ) | $ | |||||||||
| (1) |
| |
| (2) |
| |
| (3) |
|
20
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 15. | STOCK OPTIONS AND RESTRICTED STOCK UNITS (CONTINUED) |
| 15.1 | Stock options (continued) |
The following is a summary of the outstanding stock options as at June 30, 2026:
| Expiry Date | Outstanding (#) |
Aggregate intrinsic value ($) |
Exercisable (#) |
Aggregate intrinsic value ($) |
Exercise price ($) |
Remaining contractual life (years) |
||||||||||||||||||
| $ | (CAD$ | ) | ||||||||||||||||||||||
| $ | (CAD$ | ) | ||||||||||||||||||||||
| $ | (CAD$ | ) | ||||||||||||||||||||||
| $ | (CAD$ | ) | ||||||||||||||||||||||
| $ | (CAD$ | ) | ||||||||||||||||||||||
| $ | (CAD$ | ) | ||||||||||||||||||||||
| $ | (CAD$ | ) | ||||||||||||||||||||||
| $ | (CAD$ | ) | ||||||||||||||||||||||
| $ | (CAD$ | ) | ||||||||||||||||||||||
| $ | (CAD$ | ) | ||||||||||||||||||||||
| $ | (CAD$ | ) | ||||||||||||||||||||||
| $ | (CAD$ | ) | ||||||||||||||||||||||
| $ | (CAD$ | ) | ||||||||||||||||||||||
| Balance, June 30, 2026 | $ | (CAD$ | ) | |||||||||||||||||||||
During the three and six months ended June 30, 2026, the Company recognized share-based compensation expense of $ and $, respectively (three and six months ended June 30, 2025 - $ and $ respectively) related to vesting of stock options. As at June 30, 2026, the Company has unrecognized stock-based compensation expense of $ associated with outstanding stock options.
The Company computes the fair value of stock options granted using the Black-Scholes option pricing model. The expected term used for options issued to non-employees is the contractual life and the expected term used for options issued to employees and directors is the estimated period of time that options granted are expected to be outstanding. The Company utilizes the “simplified” method to develop an estimate of the expected term of “plain vanilla” employee share purchase option grants. The Company is utilizing an expected volatility figure based on a review of the historical volatilities, over a period of time, equivalent to the expected life of the instrument being valued, of similarly positioned public companies within its industry. The risk-free interest rate was determined from the implied yields from U.S. Treasury zero-coupon bonds with a remaining term consistent with the expected term of the instrument being valued.
21
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 15. | STOCK OPTIONS AND RESTRICTED STOCK UNITS (CONTINUED) |
| 15.1 | Stock options (continued) |
The Company applied the following inputs in the Black-Scholes option pricing model for the six months ended June 30, 2026 and year ended December 31, 2025:
| June 30, 2026 |
December 31, 2025 |
|||||||
| Share price | $ | (CAD$ | ) | $ | (CAD$ | ) | ||
| Expected life options (years) | ||||||||
| Expected volatility | % | % | ||||||
| Expected dividend yield | % | % | ||||||
| Risk-free interest rate | % | % | ||||||
| Black-Scholes value of each option | $ | $ | ||||||
| 15.2 | Restricted stock units |
The following table summarizes the RSU’s movements for the six months ended June 30, 2026 and year ended December 31, 2025:
| Number of RSUs (#) |
Weighted average issue price ($) |
Aggregate intrinsic value ($) |
||||||||||
| Balance, December 31, 2024 | $ | (CAD$ | ) | |||||||||
| Granted to employees | $ | (CAD$ | ) | |||||||||
| Exercised | ) | $ | (CAD$ | ) | ||||||||
| Balance, December 31, 2025 | $ | (CAD$ | ) | |||||||||
| Balance, June 30, 2026 | $ | (CAD$ | ) | |||||||||
The following is a summary of the outstanding RSU’s as at June 30, 2026:
| Expiry Date | Outstanding at June 30, 2026 |
Weighted average grant date fair value ($) |
Weighted average remaining vesting period (years) |
|||||||||
| $ | (CAD$ | ) | ||||||||||
| $ | (CAD$ | ) | ||||||||||
| $ | (CAD$ | ) | ||||||||||
The Company computes the fair value of RSU’s granted based on the Company’s share price at the grant date. During the three and six months ended June 30, 2026, share-based compensation expense includes $nil and $nil , respectively, related to RSU’s (three and six months ended June 30, 2025 – $nil and $, respectively). As of June 30, 2026, there was no unrecognized compensation cost related to outstanding RSU’s.
22
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 16. | EARNINGS PER SHARE |
The calculation of earnings per share for the three and six months ended June 30, 2026 and 2025 is as follows:
| Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Net Income (loss) attributable to shareholders | ( |
) | ( |
) | ||||||||||||
| Weighted average number of SV Shares outstanding | ||||||||||||||||
| Dilutive effect of stock options outstanding | ||||||||||||||||
| Dilutive effect of RSU’s outstanding | ||||||||||||||||
| Dilutive effect of warrants outstanding | ||||||||||||||||
| Diluted weighted average number of SV Shares outstanding | ||||||||||||||||
| Basic net income (loss) per share | ( |
) | ( |
) | ||||||||||||
| Diluted net income (loss) per share | ( |
) | ( |
) | ||||||||||||
The following table displays the securities that have been excluded from the computation because their effects would be anti-dilutive:
| Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| # | # | # | # | |||||||||||||
| Stock options | ||||||||||||||||
| RSU’s | ||||||||||||||||
| Warrants | ||||||||||||||||
| Total | ||||||||||||||||
23
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 17. | INCOME TAXES |
The Company is a Canadian resident company, as defined in the Income Tax Act (Canada) (the “ITA”), for Canadian income tax purposes. However, it has subsidiaries that are treated as United States corporations for US federal income tax purposes per the Internal Revenue Code (US) (“IRC”) and are thereby subject to federal income tax on their worldwide income. As a result, the Company is subject to taxation both in Canada and the United States.
The Company has computed its provision for income taxes based on the actual effective tax rate for the quarter as management believes this is the best estimate for the annual effective tax rate. Significant judgment is required in evaluating the Company’s uncertain tax position and determining the provision for income taxes.
A summary of the Company’s income tax expense and effective tax rate is as follows:
| Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Income (loss) before income taxes and noncontrolling interest | ( |
) | ( |
) | ||||||||||||
| Income tax expense | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Effective tax rate | % | ( |
)% | % | ( |
)% | ||||||||||
As at June 30, 2026, the Company recorded an uncertain tax liability of $
The Company recognizes accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes. There are no positions for which it is reasonably possible that the uncertain tax benefit will significantly increase or decrease within twelve months. The Company files income tax returns in the United States, including various state jurisdictions, and in Canada, which remain open to examination by the respective jurisdictions for the 2018 tax year to the present.
24
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 18. | SUPPLEMENTAL CASH FLOW INFORMATION |
The changes to the Company’s operating assets and liabilities for the six months ended June 30, 2026 and 2025 are as follows:
| Six months ended June 30, |
||||||||
| 2026 | 2025 | |||||||
| $ | $ | |||||||
| Accounts receivable | ( |
) | ( |
) | ||||
| Inventory | ( |
) | ( |
) | ||||
| Prepaid expenses | ( |
) | ||||||
| Accounts payable and accrued liabilities | ( |
) | ||||||
| Income tax payable | ( |
) | ||||||
| Uncertain tax position liability | ||||||||
| Total | ( |
) | ||||||
Interest and income taxes paid in cash for the six months ended June 30, 2026 and 2025 were as follows:
| Six months ended June 30, |
||||||||
| 2026 | 2025 | |||||||
| $ | $ | |||||||
| Income taxes paid in cash | ||||||||
| Interest paid in cash | ||||||||
Non-cash investing and financing activities for the six months ended June 30, 2026 and 2025 are as follows:
| Six months ended June 30, |
||||||||
| 2026 | 2025 | |||||||
| $ | $ | |||||||
| Fair value of SV Shares issued to settle convertible debentures | ||||||||
| Property, plant and equipment acquired through finance leases | ||||||||
| Reclassification of warrants to warrant liability from equity | ||||||||
| Right-of-use assets arising from lease liabilities | ||||||||
25
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 19. | RELATED PARTY TRANSACTIONS |
During the three and six months ended June 30, 2026 and 2025, the Company incurred the following related party transactions.
Transactions with related parties
Related parties of the Company include affiliates, entities for which investments are accounted for by the equity method, officers, and directors of the Company and members of their immediate families, and management involved in the financial statement preparation and members of their immediate families.
Transactions with related parties are presented in the following table:
| Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Salaries and consulting fees | ||||||||||||||||
| Lease payments made to CEO | ||||||||||||||||
| Fees paid to entity controlled by spouse of majority owner | ||||||||||||||||
| Share-based compensation expense | ||||||||||||||||
| Total | ||||||||||||||||
As of June 30, 2026, the Company had amounts due to related parties of $
Debt balances and movements with related parties
The following table sets out portions of debt pertaining to related parties which are included in consideration payable on business acquisitions and long-term debt:
| CEO(1) | Director(1) | GM(1) | ABCO Holdings, Inc.(2) | Total | ||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||
| Balance, December 31, 2024 | ||||||||||||||||||||
| Interest | ||||||||||||||||||||
| Payments | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
| Balance, December 31, 2025 | ||||||||||||||||||||
| Interest | ||||||||||||||||||||
| Payments | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
| Balance, June 30, 2026 | ||||||||||||||||||||
| (1) |
|
| (2) |
|
26
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 19. | RELATED PARTY TRANSACTIONS (CONTINUED) |
As part of the agreements transacted during the year ended October 31, 2020, to acquire interest in GR Michigan and Canopy, the Company incurred consideration payable on business acquisitions of $
Pursuant to the Canopy purchase agreement executed on April 24, 2024, the Company, through GR Unlimited, acquired the remaining 13% of the membership units in Canopy. As part of this transaction, the Company purchased a
During April 2024, the Company, through Canopy, acquired an additional
On May 29, 2025, Canopy Management LLC was dissolved, and all existing agreements and obligations were assigned and transferred to Grown Rogue Unlimited, LLC.
| 20. | FINANCIAL INSTRUMENTS |
The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring basis, categorized within the fair value hierarchy:
| Level in Fair Value Hierarchy |
June 30, 2026 |
December 31, 2025 |
||||||||
| $ | $ | $ | ||||||||
| Financial Assets: | ||||||||||
| Warrants asset | Level 2 | |||||||||
| Derivative asset | Level 2 | |||||||||
| Financial Liabilities: | ||||||||||
| Derivative liability | Level 2 | |||||||||
| Warrant liabilities | Level 3 | |||||||||
The fair value of the warrants asset is measured using the Black-Scholes option pricing model with inputs including the underlying share price, risk-free interest rate, expected volatility, and remaining term, consistent with the valuation methodology applied in the Company’s audited consolidated financial statements for the year ended December 31, 2025.
27
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 21. | SEGMENT REPORTING |
The reportable segments are those operations whose operating results are reviewed by the chief operating decision maker (“CODM”) to make decisions about resources to be allocated. The Company’s CODM is the CEO and is responsible for the management of the Company. Operating results are reviewed with respect to resource allocation and for which discrete financial information is available. Inter-segment transactions are recorded at amounts that reflect normal third-party terms and conditions, with inter-segment profits eliminated from the cost base of the segment incurring the charge. The Company has identified three operating segments:
| ● | Oregon segment represents cannabis production and sales activities in Oregon; |
| ● | Michigan segment represents cannabis production and sales activities in Michigan; and |
| ● | New Jersey segment represents cannabis production and sales activities in New Jersey. |
The Company’s general corporate administration expenses are included within “Corporate” to reconcile the reportable segments to the financial statements. The Company’s CODM reviews the results of the Company’s operating segments based on the total revenues, gross profit and net income (loss) in his evaluation of the performance of the operating segments to make decisions regarding resource allocations within the Company.
Segmented operational activity for the three months ended June 30, 2026 is as follows:
| Segments | Oregon | Michigan | New Jersey | Corporate | Total | |||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||
| Total revenue | ||||||||||||||||||||
| Gross profit | ||||||||||||||||||||
| Net income (loss) | ( |
) | ( |
) | ||||||||||||||||
Segmented operational activity for the six months ended June 30, 2026 is as follows:
| Segments | Oregon | Michigan | New Jersey | Corporate | Total | |||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||
| Total revenue | ||||||||||||||||||||
| Gross profit | ||||||||||||||||||||
| Net income (loss) | ( |
) | ( |
) | ||||||||||||||||
28
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 21. | SEGMENT REPORTING (continued) |
Entity-wide disclosures
All revenue for three and the six months ended June 30, 2026 was earned in the United States. For the three and six months ended June 30, 2026 no customer represented more than 10% of the Company’s net revenue. As at June 30, 2026, no customer represented more than 10% of the Company’s receivables.
A summary of the Company’s long-lived assets disaggregated by geographic area is as follows:
| Segments | Oregon | Michigan | New Jersey | Corporate | Total | |||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||
| Non-current assets other than financial instruments: | ||||||||||||||||||||
| As at June 30, 2026 | ||||||||||||||||||||
| 22. | NON-CONTROLLING INTERESTS |
The activity in non-controlling interest for six months ended June 30, 2026 and year ended December 31, 2025 are as follows:
| June 30, 2026 |
December 31, 2025 |
|||||||
| $ | $ | |||||||
| Balance, beginning of period | ||||||||
| Sale of 20% ownership of GRMA | ||||||||
| Dividends issued from Golden Harvest to minority owner | ( |
) | ( |
) | ||||
| Dividends issued from GRMA to minority owner | ( |
) | ||||||
| Net income for the period attributed to non-controlling interest | ||||||||
| Balance, end of period | ||||||||
During the six months ended June 30, 2026, the Company sold 20% of its ownership in GRMA through the sale of 20 GRMA Units at a par value of $ per unit for gross proceeds of $
29
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 23. | COMMITMENTS AND CONTINGENCIES |
On September 22, 2022, the Securities Exchange Commission (“SEC”) issued an Order Instituting Proceedings (OIP) pursuant to Section 12(j) of Securities Exchange Act of 1934 (“1934 Act”), against the Company alleging violations of the 1934 Act, as amended, and the rules promulgated thereunder, by failing to timely file periodic reports. Section 12(j) authorizes the SEC as it deems necessary or appropriate for the protection of investors to suspend for a period not exceeding 12 months, or to revoke, the registration of a security if the SEC finds, on the record after notice and opportunity for hearing, that the issuer of such security has failed to comply with any provision of the 1934 Act, as amended, or the rules promulgated thereunder. As of June 22, 2026 this order has been dismissed.
On December 8, 2025, ABCO, entered into an agreement with Blackwell & Associates, (“Blackwell”) for the construction of the Grandview Phase II project located at 1425 Grandview Avenue, Paulsboro, New Jersey. Under the agreement, payment is structured on a cost-plus-a-fee basis without a guaranteed maximum price. The total estimated cost of the project is approximately $1,430,000 which includes the cost of the work plus Blackwell’s fee. Blackwell’s fee is comprised of 6% overhead and 9% profit applied to the cost of the work as defined in the agreement. Because the agreement does not include a guaranteed maximum price, the final cost of the work may differ from this estimate, and the Company’s ultimate obligation under the contract could be higher or lower than the estimated amount depending on actual costs incurred. Work is largely complete as of June 30, 2026 and the final stages of the contract will be complete before September 30, 2026. Blackwell is considered a related party as it is controlled by the spouse of the majority owner of ABCO Holdings.
On April 22, 2026, Grown Rogue Unlimited, LLC (the “Company”) entered into an agreement with Grow America Builders, LLC (“Grow America”) for the construction of the Phase 1 cultivation and processing facility located at 40 77th Avenue NE, Fridley, Minnesota. Under the agreement, payment is structured on a cost-plus-a-fee basis, with Grow America’s fee equal to 5.7% of the cost of the work as defined in the agreement. The contract value as stipulated in the agreement, including subsequent revisions, is $3,861,899. Although the form of agreement contemplates a guaranteed maximum price, no guaranteed maximum price was stated; accordingly, the final cost of the work may differ from this estimate, and the Company’s ultimate obligation under the contract could be higher or lower than the estimated amount depending on actual costs incurred. To date, work completed totaled $2,492,200, or approximately 65% of the revised contract sum, leaving a remaining cost to complete of $1,369,699 plus retainage of $84,283, or total remaining payments of approximately $1,454,000 as of June 30, 2026. Work is meaningfully underway, with completion expected by the end of September 2026. Either party may terminate the contract for cause or convenience; if the Company terminates for convenience, it is obligated to pay for work in place, non-refundable deposits, one month of general conditions and approximately one additional month of fees, and any subcontractor termination fees.
On January 24, 2026, Grown Rogue Unlimited, LLC (the “Company”) entered into a Master Terms and Conditions Agreement, together with a Service Level Agreement and a Site Specific Agreement (collectively, the “Agreement”), with Harvest Air LLC dba Harvest Integrated (“Harvest”) for the provision of climate-control services to approximately 22,300 square feet of cultivation, drying, and ancillary space at the Company’s facility located at 40 77th Avenue NE, Fridley, Minnesota. Under the Agreement, Harvest owns, installs, operates, and maintains HVAC and dehumidification equipment specified by model and room, and delivers controlled temperature and humidity to the Company at agreed setpoints. The Company is responsible for installation, utilities, electrical and natural gas capacity, and upkeep of the premises. The monthly recurring fee is $40,000 over a non-cancellable minimum term of 120 months, representing total undiscounted committed consideration of approximately $4,800,000.
As of June 30, 2026, the Agreement had not commenced and no amounts have been recognized in the consolidated financial statements. Under the Site-Specific Agreement, the term begins upon the installation and commissioning of equipment on a room by room basis. The Company expects the all rooms to be installed and commissioned during the third quarter of 2026 and at which time it will record the contract as a finance type lease. Accordingly, the amounts and timing of any amounts ultimately recognized, and the classification thereof, may differ from the committed consideration disclosed above.
30
Grown Rogue International Inc.
Notes to the Condensed Consolidated Financial Statements
Unaudited
| 24. | SUBSEQUENT EVENTS |
The Company evaluated subsequent events through the date the financial statements were issued, and determined that the following subsequent events occurred as of that date:
Rogue EBC
On July 14, 2026 the Company
received notice that its pending acquisition of the remaining
Stock Option and RSU grants
On July 21, 2026, the Company’s board of directors approved the grant of stock options and RSUs to directors, officers and employees under the Plan, and reserved SV Shares for issuance in respect of these awards. The stock options have an exercise price of $ (CAD$) and expire on
31
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
You should read the following discussion and analysis of the Company’s financial condition and results of operations together with the Company’s financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements and related footnotes included in our Annual Report on Form 10-K for the year ended December 31, 2025.
Special Note Regarding Forward-Looking Statements
Certain of the information included in this Quarterly Report on Form 10-Q (this “Quarterly Report”) is based upon express or implied estimates, projections or other “forward-looking statements” within the meaning of the U.S. federal securities laws. Such forward-looking statements include any projections or estimates made by Grown Rogue International, Inc. (“we,” “us,” “our,” or the “Company”) and our management in connection with our business operations. These statements may relate to future events or our future financial performance. This Quarterly Report may also contain estimates, projections data, and other information concerning our industry, our business and the markets for our products, including data regarding the estimated size of those markets and their projected growth rates, derived from reports, research surveys, studies and similar materials prepared by third parties, industry and general publications, government data and similar sources.
In some cases you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of those terms or other comparable terminology that does not relate strictly to historical or factual matters. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results may vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested therein. Such forward-looking statements involve various risks and uncertainties and other factors, including those risks described in Item 1A – “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025 (the “Annual Report”), as may be updated from time to time in our periodic filings with the SEC which are accessible on the SEC’s website at www.sec.gov, and which may cause our actual results, levels of activities, performance or achievements to be materially different from any projected results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. You should evaluate all forward-looking statements made in this Quarterly Report in the context of these risks and uncertainties. All forward-looking statements in this Quarterly Report apply only as of the date made and are expressly qualified in their entirety by the cautionary statements included in this Quarterly Report and in other filings we make with the SEC. Except as required by applicable law, including federal securities laws, we do not undertake to update or revise any of forward-looking statements to reflect subsequent events or conform those statements to actual results.
Business Overview
The Company is a vertically integrated, multi-state cannabis operator focused on high-quality, low-cost production of premium flower and pre-roll products. Through its subsidiaries, the Company cultivates, manufactures, possesses, and distributes cannabis in the United States, with operations spanning Oregon, Michigan, New Jersey, and Illinois. Flower-based products, including indoor flower, sungrown (outdoor) flower, and pre-rolls, remain the Company’s strategic focus, reflecting management’s view that flower continues to lead category share in most state markets.
The Company manages indoor and outdoor cultivation in the Rogue Valley of Southern Oregon, an indoor cultivation facility in Bay City, Michigan operated through Golden Harvests, LLC, indoor cultivation in Paulsboro, New Jersey operated through ABCO Garden State, LLC, and joint-venture operations in Illinois through Rogue EBC, LLC, with additional Illinois activity initiated in the first quarter of 2026 as discussed under “Recent Developments” below.
For a more detailed description of our business, history, products, brand strategy, and competitive positioning, refer to “Part I, Item 1. Business” in our Annual Report.
Recent Developments
In addition to events discussed elsewhere in this Quarterly Report, the following developments occurred during, or have a direct bearing on, the three and six months ended June 30, 2026:
32
Illinois expansion. On March 12, 2026, the Company announced that it had taken operational control of a cannabis production facility in Dwight, Illinois, through its affiliate Grown Rogue Management Associates, LLC (“GRMA”), an 80% owned subsidiary of the Company, and entered into a Membership Interest Purchase Agreement to acquire a 49% interest in SEA Craft, the holder of an Illinois Adult Use Cannabis Craft Grower License. The agreement provides GRMA with an option, subject to regulatory approval and performance-based conditions, to acquire the remaining 51% of SEA Craft, and concurrently grants the holder of those remaining interests an option, subject to certain conditions precedent, to require GRMA to purchase those remaining interests. The transaction is subject to regulatory approval by the Illinois Department of Agriculture. As of June 30, 2026, the status of the required regulatory approvals and the closing of the SEA Craft acquisition remain outstanding.
Concurrently, SEA Craft entered into a three-year lease with Innovative Industrial Properties, Inc. (“IIP”) for a 43,000 square foot facility in Dwight, Illinois, including approximately 10,000 square feet of indoor flowering canopy, with capacity to expand to the 14,000 square feet permitted under the craft grow license. The lease is supported by a corporate guarantee provided by the Company.
To support the projected capital needs of the Illinois operation, the Company sold a 20% non-controlling interest in GRMA for gross proceeds of $3,000,000, less issuance costs of $15,000, resulting in net proceeds of $2,985,000. The outside investor’s interest takes the form of 20 non-voting preferred units of GRMA (the “GRMA Units”) that are reported as non-controlling interest in the Company’s condensed consolidated financial statements. The GRMA Units carry a cumulative non-compounded preferred return of 15% per annum on unreturned capital contributions, escalating to 20% per annum compounded quarterly if required quarterly distributions are not paid within the specified grace period. At the holders’ discretion, for a period of up to three years, the GRMA Units may be converted into SV Shares of the Company at a conversion price of $0.65 per SV Share. For further discussion, see Note 23 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
ABCO Phase II construction. As previously disclosed in our Annual Report, on December 8, 2025, ABCO entered into an agreement with Blackwell & Associates (“Blackwell”) for the construction of the Grandview Phase II project located at 1425 Grandview Avenue, Paulsboro, New Jersey, on a cost-plus-a-fee basis without a guaranteed maximum price. The total estimated cost is approximately $1,430,000, which includes the cost of the work plus Blackwell’s fee, subject to adjustments under the contract documents. Construction continued through the date of this report. Blackwell is considered a related party as it is controlled by the spouse of the majority owner of ABCO Garden State, LLC.
Functional currency change. Effective January 1, 2026, the Company changed its functional currency from the Canadian Dollar to the U.S. dollar based on management’s determination that the U.S. dollar had become the Company’s primary economic environment due to changes in underlying transactions, events, and operating conditions. The change was applied prospectively in accordance with ASC 830, Foreign Currency Matters. Translated amounts of non-monetary assets and liabilities at December 31, 2025 became the historical accounting basis for those assets and liabilities at January 1, 2026, and the cumulative translation adjustment previously recognized in accumulated other comprehensive loss has not been reversed. For further discussion, see Note 2.1 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Reclassification of warrants to derivative liability. As a result of the change in functional currency described above, 4,000,000 warrants previously classified within shareholders’ equity no longer met the criteria for equity classification under U.S. GAAP and were reclassified to a warrant liability measured at fair value, with subsequent changes in fair value recognized through profit or loss. On January 1, 2026, the Company recognized $1,539,665 of warrant liability with a corresponding decrease in share capital. During the six months ended June 30, 2026, the Company recorded a net unrealized gain of $433,547 on changes in the fair value of the warrant liability (comprising an unrealized gain of $770,714 in the first quarter and an unrealized loss of $337,167 in the second quarter), resulting in a warrant liability balance of $1,106,118 at June 30, 2026. For further discussion, see Note 12.2 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Stock option exercise. On January 12, 2026, the Company issued 200,000 SV Shares pursuant to the exercise of stock options for total proceeds of approximately $21,615 (CAD$30,000). As a result, total SV Shares issued and outstanding increased from 249,738,980 at December 31, 2025 to 249,938,980 on June 30, 2026.
Equity Incentive Awards. On July 21, 2026, the Company’s board of directors approved the grant of 400,000 stock options and 2,490,000 restricted share units (“RSU’s”) to directors, officers and employees, and reserved 2,890,000 SV Shares for issuance in respect of these awards. The stock options have an exercise price of $0.42 (CAD$0.60) and expire on July 21, 2030. The options vest as to 50% on June 30, 2027 and 50% on June 30, 2028. The RSUs vest as follows: 100,000 on January 1, 2027; 150,000 on June 30, 2028; 1,240,000 on January 1, 2029; and 1,000,000 in three equal annual tranches on January 1 of 2027, 2028 and 2029. Certain of the awards provide for immediate vesting upon termination of the holder’s engagement with the Company.
33
Results of Operations
Comparison of the Three and Six Months Ended June 30, 2026 and 2025
Significant items contributing to the change in net income (loss) are summarized below.
Total Revenues
All revenue for the three and six months ended June 30, 2026 and 2025 was earned from product sales of cannabis flower and pre-roll products. Total revenue for the three months ended June 30, 2026 was $11,273,837, an increase of $3,263,850 or approximately 41% as compared to $8,009,987 for the three months ended June 30, 2025. For the six months ended June 30, 2026, total revenue was $20,429,495, an increase of $5,269,325 or approximately 35% as compared to $15,160,170 for the six months ended June 30, 2025. The increase in revenue was driven primarily by continued growth at our New Jersey operations, which contributed $4,369,698 to revenue in the current quarter (as compared to $2,655,954 in the prior-year quarter) and $7,785,066 for the year-to-date period (as compared to $4,427,674 in the prior-year period), supplemented by year-over-year growth in the Oregon and Michigan operations.
Cost of Revenues and Gross Profit
Cost of finished cannabis inventory sold for the three months ended June 30, 2026 was $5,903,860, an increase of $1,448,358 or approximately 33% as compared to $4,455,502 for the three months ended June 30, 2025. For the six months ended June 30, 2026, cost of finished cannabis inventory sold was $11,101,884, an increase of $2,859,946 or approximately 35% as compared to $8,241,938 for the six months ended June 30, 2025. Cost of revenues grew broadly in line with revenue, reflecting product and market mix.
Gross profit for the three months ended June 30, 2026 was $5,369,977 (a gross margin of approximately 48%), an increase of $1,815,492 or approximately 51% as compared to $3,554,485 for the three months ended June 30, 2025 (a gross margin of approximately 44%). For the six months ended June 30, 2026, gross profit was $9,327,611 (a gross margin of approximately 46%), an increase of $2,409,379 or approximately 35% as compared to $6,918,232 for the six months ended June 30, 2025 (a gross margin of approximately 46%).
Operating Expenses
Total operating expenses for the three months ended June 30, 2026 were $4,533,321, an increase of $1,410,197 or approximately 45% as compared to $3,123,124 for the three months ended June 30, 2025. For the six months ended June 30, 2026, total operating expenses were $8,391,300, an increase of $1,195,028 or approximately 17% as compared to $7,196,272 for the six months ended June 30, 2025.
The three months ended June 30, 2026 increase was driven principally by higher general and administrative expenses ($4,318,584 for the three months ended June 30, 2026 as compared to $2,678,372 in the prior-year quarter) reflecting headcount and infrastructure additions in support of growth and expansion activities, partially offset by lower share-based compensation expense ($149,087 for the three months ended June 30 2026 as compared to $336,825 in the prior-year quarter) reflecting the timing of restricted share unit and stock option vesting and lower depreciation expense ($65,650 for the three months ended June 30 2026 as compared to $107,927 in the prior-year quarter).
The year-to-date increase was driven principally by higher general and administrative expenses ($7,930,407 for the six months ended June 30, 2026 as compared to $5,210,626 for the prior-year period), reflecting headcount and infrastructure additions in support of growth and expansion activities, together with certain Golden Harvests-related taxes, partially offset by lower share-based compensation expense ($304,081 for the six months ended June 30, 2026 as compared to $1,772,735 for the prior-year period), reflecting the timing of restricted share unit and stock option vesting and lower depreciation expense ($156,812 for the six months ended June 30, 2026 as compared to $212,911 for the prior-year period).
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Other Income (Expense)
Total other income (expense) was and expense of $1,446,349 for the three months ended June 30, 2026 as compared to income of $2,144,054 for the three months ended June 30, 2025, and was an expense of $3,242,524 for the six months ended June 30, 2026 as compared to income of $4,227,634 for the six months ended June 30, 2025.
The year-over-year changes were driven principally by unrealized losses on the Vireo Growth warrant asset of $556,583 in the current quarter and $2,747,667 year-to-date (as compared to unrealized losses of $168,162 and $1,340,654, respectively, in the prior-year periods), reflecting the decline in Vireo Growth’s share price, and by the absence in 2026 of the large realized and unrealized loss on the convertible-debenture derivative liability recognized in 2025 upon the extinguishment of the convertible debentures. These were partially offset by an unrealized gain on the reclassified warrant liability of $433,547 year-to-date and by higher interest income of $104,356 in the current quarter and $146,543 year-to-date (as compared to $36,337 and $72,274, respectively). Interest and accretion expense was $429,240 in the current quarter and $979,220 year-to-date (as compared to $432,553 and $690,724, respectively), with the year-to-date increase reflecting the larger average outstanding balance under the Western Alliance Bank credit facility.
Income Tax Expense
Income tax expense was $871,331 for the three months ended June 30, 2026 as compared to income of $920,037 for the three months ended June 30, 2025. Income tax expense was $1,388,202 for the six months ended June 30, 2026, as compared to $1,551,347 for the six months ended June 30, 2025. The effective tax rate continues to be heavily influenced by the Company’s uncertain tax positions related to the treatment of certain transactions and deductions under Section 280E of the Internal Revenue Code. As at June 30, 2026, the uncertain tax liability, inclusive of penalties and interest, was approximately $9,830,257 (December 31, 2025 - $8,383,888) and is included in other non-current liabilities.
Net Income (Loss)
Net loss for the three months ended June 30, 2026 was $1,481,024, as compared to net income of $1,655,378 for the three months ended June 30, 2025. For the six months ended June 30, 2026, net loss was $3,694,415 as compared to net income of $2,398,248 for the six months ended June 30, 2025. Net loss attributable to shareholders was $1,692,836 for the current quarter and $4,395,053 year-to-date, with net income attributable to non-controlling interests of $211,812 and $700,638, respectively.
Segment Reporting
The Company operates in three reportable segments – Oregon, Michigan, and New Jersey – with general corporate and administrative expenses included within “Corporate” to reconcile the reportable segments to the financial statements. The following summarizes performance by segment for the three and six months ended June 30, 2026 and 2025:
For the three months ended June 30, 2026: net revenue of $3,511,544 (Oregon), $3,392,595 (Michigan), and $4,369,698 (New Jersey); gross profit of $1,209,207 (Oregon), $1,586,755 (Michigan), and $2,574,015 (New Jersey); and net income (loss) of $459,258 (Oregon), $439,146 (Michigan), $1,559,291 (New Jersey), and $(3,938,719) (Corporate).
For the three months ended June 30, 2025: net revenue of $3,075,599 (Oregon), $2,278,434 (Michigan), and $2,655,954 (New Jersey); gross profit of $1,069,878 (Oregon), $1,020,427 (Michigan), and $1,464,180 (New Jersey); and net income (loss) of $453,385 (Oregon), $467,694 (Michigan), $851,533 (New Jersey), and $(117,234) (Corporate). Michigan segment revenue includes approximately $402,309 of excise taxes collected following the implementation of Michigan’s cannabis excise tax effective January 1, 2026.
For the six months ended June 30, 2026: net revenue of $6,508,307 (Oregon), $6,136,122 (Michigan), and $7,785,066 (New Jersey); gross profit of $1,760,370 (Oregon), $2,912,018 (Michigan), and $4,655,223 (New Jersey); and net income (loss) of $538,327 (Oregon), $788,724 (Michigan), $2,604,114 (New Jersey), and $(7,625,580) (Corporate).
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For the six months ended June 30, 2025: net revenue of $5,948,946 (Oregon), $4,783,550 (Michigan), and $4,427,674 (New Jersey); gross profit of $2,373,710 (Oregon), $2,149,513 (Michigan), and $2,395,009 (New Jersey); and net income (loss) of $1,135,409 (Oregon), $976,350 (Michigan), $1,560,796 (New Jersey), and $(1,274,307) (Corporate). Michigan segment revenue for the six-month period includes approximately $748,242 of Michigan cannabis excise taxes.
All revenue for the three and six months ended June 30, 2026 and 2025 was earned in the United States. For the three and six months ended June 30, 2026 and 2025, no customer represented more than 10% of the Company’s net revenue, and as at June 30, 2026 and December 31, 2025, no customer represented more than 10% of the Company’s accounts receivable.
Non-GAAP Financial Measures (EBITDA and Adjusted EBITDA)
In addition to financial measures presented in accordance with U.S. GAAP, management uses non-GAAP financial measures, including EBITDA and Adjusted EBITDA, to evaluate operating performance, for financial and operational decision-making, planning and forecasting purposes, and to compare results across accounting periods. EBITDA is defined as net income or loss before interest, taxes, depreciation and amortization, further adjusted to remove transaction costs, share-based compensation expense, accretion expense, gain or loss on derecognition of derivative liabilities, and other non-cash items or items not representative of operational performance. Adjusted EBITDA is EBITDA further adjusted for the impact of significant or unusual transactions, including, where applicable, costs associated with business acquisitions and pre-opening operating costs of new production locations.
These non-GAAP financial measures do not have any defined meaning under U.S. GAAP and may not be comparable to similarly titled measures presented by other companies. They should be considered in addition to, and not as a substitute for, financial measures prepared in accordance with U.S. GAAP. Adjusted EBITDA is intended to provide a proxy for the Company’s operating cash flow before changes in non-cash working capital.
The following table provides a reconciliation of net income (loss), as reported, to EBITDA and Adjusted EBITDA (non-GAAP) for the three and six months ended June 30, 2026 and 2025:
| Adjusted EBITDA Reconciliation Table (Unaudited) (US$) | ||||||||||||||||
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Net income (loss) | (1,481,024 | ) | 1,655,378 | (3,694,415 | ) | 2,398,249 | ||||||||||
| Add back amortization of property and equipment included in cost of sales | 754,506 | 658,232 | 1,577,037 | 1,092,435 | ||||||||||||
| Add back interest and accretion expense | 429,240 | 432,553 | 979,220 | 690,724 | ||||||||||||
| Add back amortization of property and equipment | 65,650 | 107,927 | 156,812 | 212,911 | ||||||||||||
| Add back loss on equity investment in associate | 193,593 | 114,686 | 293,250 | 268,420 | ||||||||||||
| Add back income tax expense | 871,331 | 920,037 | 1,388,202 | 1,551,347 | ||||||||||||
| Deduct gain on derivative liability | (82,006 | ) | (2,997,005 | ) | (148,383 | ) | (5,832,090 | ) | ||||||||
| Deduct interest and other income (expense) | 11,772 | 137,550 | (195,683 | ) | (695,343 | ) | ||||||||||
| Add back changes in FV on warrants asset and liability | 893,750 | 168,162 | 2,314,120 | 1,340,654 | ||||||||||||
| EBITDA | 1,656,812 | 1,197,520 | 2,670,160 | 1,027,306 | ||||||||||||
| Add back share-based compensation | 149,087 | 336,825 | 304,081 | 1,772,735 | ||||||||||||
| Deduct GAAP bad debt conversion adjustment | - | (79,000 | ) | - | (158,000 | ) | ||||||||||
| Add back Golden Harvests acquisition costs | - | 60,000 | - | 60,000 | ||||||||||||
| Add back pre-operational startup costs1 | 250,997 | - | 647,162 | - | ||||||||||||
| Adjusted EBITDA | 2,056,896 | 1,515,345 | 3,621,403 | 2,702,041 | ||||||||||||
| 1 | During the three and six months ended June 30, 2026, we incurred approximately $250,997 and $647,162, respectively, in pre-operational startup costs associated with the build-out of new production locations inclusive of occupancy and pre-operational costs related to the Fridley Minnesota production facility offset by reimbursements to SEA Craft LLC; no such costs were incurred in the comparable 2025 periods. |
These figures are management’s preliminary calculations and remain subject to finalization by the finance team for any one-time adjustments (including, without limitation, transaction or acquisition costs, pre-opening operating costs of new production locations, and other items not representative of operational performance) consistent with the methodology applied in our Annual Report.
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Liquidity and Capital Resources
Sources of Liquidity
Our ability to generate cash in the short term is based upon sales from production and financing proceeds, and in the long term is based upon sales from production (including production from investments to increase output), growth by business acquisitions, or a combination thereof. Investments to increase production or acquire businesses may require further financing. We generate operating cash flows from sales of cannabis products, the margins on which contribute to coverage of our other operating costs. Historically, we have raised financing through debt and equity, which has been and is expected to continue to be invested in the business in order to improve yields, fund operating costs, and facilitate strategic expansion.
We are typically able to sell inventory shortly after it reaches finished goods, with sales primarily made on cash-on-delivery terms or with short net terms. Our ability to fund operations, to plan capital expenditures, and to plan acquisitions, depends on future operating performance and cash flows and the availability of capital by way of debt or equity investment in the Company, which are subject to prevailing economic conditions and financial, business, and other factors, some of which are beyond our control.
We believe that our cash on hand at June 30, 2026, projected cash flows from current and future anticipated sales of finished goods, and net proceeds from current and anticipated financing activities, will be sufficient to meet our liquidity and capital resource requirements for the next twelve months from the date of issuance of this Quarterly Report on Form 10-Q.
Working Capital
At June 30, 2026 and December 31, 2025, our working capital was approximately $14,940,478 and $16,590,979, respectively, calculated as current assets less current liabilities (excluding the derivative liability and the warrant liabilities, in each case representing non-cash fair value items). Cash and cash equivalents were $11,532,826 at June 30, 2026 as compared to $11,371,834 at December 31, 2025. Total current assets were $22,554,876 at June 30, 2026 as compared to $22,178,714 at December 31, 2025.
Total current liabilities were $8,709,174 at June 30, 2026 as compared to $5,724,776 at December 31, 2025, with the increase reflecting growth in accounts payable and accrued liabilities ($2,544,834 at June 30, 2026 as compared to $1,262,519 at December 31, 2025), a higher current portion of long-term debt ($3,002,684 as compared to $2,576,228), the reclassification of warrant liabilities of $1,106,118 to current liabilities effective January 1, 2026 in connection with the change in functional currency, and an increase in income tax payable to $412,770 at June 30, 2026 (December 31, 2025 - $296,018).
We expect significant ongoing fluctuations in working capital over time as we continue to invest in expansion of cultivation capacity at ABCO Garden State, LLC and the initial build-out of operations in Dwight, Illinois. We have historically been able to meet commitments, modify debt maturities, and raise new financing as required to respond to changes in our liquidity position, although there is no guarantee we will be able to do so in the future.
Cash Flows
Cash and cash equivalents increased by $160,992 during the six months ended June 30, 2026 to $11,532,826, as compared to an increase of $4,681,969 during the six months ended June 30, 2025 (from $4,917,708 at January 1, 2025 to $9,599,677 at June 30, 2025).
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Operating Activities
Net cash provided by operating activities was $4,247,865 for the six months ended June 30, 2026, as compared to net cash used in operating activities of $656,881 for the six months ended June 30, 2025. The current-period result reflects operating profitability and approximately $2,280,732 in favorable changes in non-cash working capital, principally driven by increases in accounts payable and accrued liabilities and in the uncertain tax position liability, partially offset by an increase in accounts receivable.
Investing Activities
Net cash used in investing activities was $6,291,761 for the six months ended June 30, 2026, as compared to $964,360 for the six months ended June 30, 2025. The current-period use was driven principally by $5,498,773 in property and equipment additions (as compared to $241,532 in the prior-year period), supporting the build-out of cultivation capacity at ABCO Garden State, LLC through the Grandview Phase II project and the Company’s ongoing expansion activities, together with $415,000 advanced on the purchase of the remaining Rogue EBC, LLC equity interest and $377,988 in payments of business acquisition consideration payable.
Financing Activities
Net cash provided by financing activities was $2,204,888 for the six months ended June 30, 2026, as compared to $6,301,925 for the six months ended June 30, 2025. Significant financing activities for the current period included: net proceeds of $2,985,000 from the sale of a 20% non-controlling interest in GRMA (gross proceeds of $3,000,000 less $15,000 of issuance costs); $1,000,000 in proceeds from long-term debt; $21,839 in proceeds from stock option exercises; $1,529,295 in repayment of long-term debt; $37,500 in repayment of finance leases; and $235,156 of distributions to non-controlling interests in subsidiaries.
Indebtedness
Our long-term debt and related obligations consist primarily of: (i) a senior secured credit facility (the “Credit Facility”) with Bridge Bank, a division of Western Alliance Bank (“WAB”), entered into on March 27, 2025 and amended and upsized on September 9, 2025, providing for maximum borrowings of up to $12,000,000 (fully drawn as of December 31, 2025), with a four-year term and bearing interest at the greater of (a) the Secured Overnight Financing Rate plus 4.9% and (b) 9.0% per annum; (ii) a secured note of GRU Properties, LLC dated January 12, 2024 in the principal amount of $1,285,000, maturing December 1, 2027; (iii) secured promissory notes of ABCO Garden State, LLC issued from time to time under a $1,100,000 advance facility with PMW LLC, bearing interest at 16% per annum; and (iv) a $450,000 convertible promissory note of ABCO dated October 17, 2024, bearing interest at 15% per annum and maturing October 17, 2027 (subject to extensions tied to the receipt of approval by the New Jersey Cannabis Regulatory Commission of GR Unlimited’s option to acquire equity of Nile of NJ LLC). On May 13, 2025 and September 15, 2025, we entered into interest rate swap agreements with respect to each of the $7,000,000 and $5,000,000 tranches of the Credit Facility, resulting in a blended interest rate of approximately 7.84%.
The Credit Facility contains negative covenants requiring that we maintain a fixed charge coverage ratio (as defined therein) of less than 1.5 to 1.0 and a leverage ratio (as defined therein) of no more than 2.0 to 1.0, in each case as of the last day of any fiscal quarter. As of December 31, 2025, we were in compliance with all such covenants.
As of June 30, 2026, the Company believes it was in compliance with all financial covenants under the Credit Facility, including the fixed charge coverage ratio and leverage ratio (each as defined therein).
In addition, as described under “Recent Developments” above, during the first quarter of 2026 the Company sold a 20% non-controlling interest in GRMA for net proceeds of $2,985,000.
For a complete description of our long-term debt, derivative liability, and consideration payable on business acquisitions, refer to Notes 13, 14, 15, and 16 to the audited consolidated financial statements included in our Annual Report, and to Notes 11 and 12 in the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
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Contractual Obligations and Commitments
Set out below are undiscounted minimum future lease payments after June 30, 2026 based on the Company’s operating and finance leases. Total operating lease payments are approximately $27,633,880 (consisting of $1,312,195 for the remainder of 2026, $2,751,620 in 2027, $2,791,191 in 2028, $2,883,971 in 2029, $2,494,052 in 2030, and $15,400,851 thereafter), less unamortized interest of approximately $13,209,345, resulting in a total operating lease liability of approximately $14,424,535. Total finance lease payments are approximately $216,374 (consisting of $142,500 for the remainder of 2026 and $73,874 in 2027), less unamortized interest of approximately $17,590, resulting in a total finance lease liability of approximately $198,784.
As of June 30, 2026, total long-term debt was approximately $12,733,162 (comprising a current portion of $3,002,684 and a non-current portion of $9,730,478), as compared to $12,682,124 at March 31, 2026. Total long term debt payments are approximately $15,510,053 (consisting of $2,453,014 for the remainder of 2026, $3,815,153 in 2027, $2,934,466 in 2028, and $6,307,420 in 2029), less unamortized interest of approximately $2,776,891, resulting in a total long term debt liability of approximately $12,733,162. For a complete description of the Company’s debt obligations, refer to Note 11 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Off-Balance Sheet Arrangements
During the three and six months ended June 30, 2026 and 2025, we did not have, nor do we currently have, any off-balance sheet arrangements as defined in the applicable rules of the SEC.
Critical Accounting Policies and Estimates
The preparation of our unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses, and the disclosure of contingent assets and liabilities at the date of the financial statements. Significant areas requiring estimation and judgment include the assessment of transactions as business combinations or asset acquisitions; the valuation and costing of inventory; the impairment of long-lived and indefinite-lived intangible assets; fair value measurements (including share-based compensation, derivative assets and liabilities, and warrant assets and liabilities); the recoverability and measurement of deferred tax assets and liabilities; the recognition and measurement of uncertain tax positions, including those arising under Section 280E of the Internal Revenue Code; and the consolidation of entities in which we hold less than a majority of voting rights or in which we are deemed to be the primary beneficiary of a variable interest entity.
There have been no material changes to our critical accounting policies and estimates from those disclosed under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates” in our Annual Report.
Recently Issued Accounting Pronouncements
For a discussion of recently issued and recently adopted accounting pronouncements and their expected impact, if any, on our consolidated financial statements, refer to Note 3 - Significant Accounting Policies in the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, and to Note 3 to the audited consolidated financial statements included in our Annual Report.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
At the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out under the supervision of and with the participation of the Company’s management, including our chief executive officer (“CEO”) and chief financial officer (“CFO”), of the effectiveness of the design and operations of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act). Based on that evaluation, the CEO and the CFO have concluded that as of the end of the period covered by this Quarterly Report on Form 10-Q, the Company’s disclosure controls and procedures were effective as of June 30, 2026.
Changes to Internal Controls and Procedures over Financial Reporting
Management, with the participation of the CEO and CFO, concluded that there were no changes in our internal control over financial reporting during the three months ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II. OTHER INFORMATION.
Item 1. Legal Proceedings.
On September 22, 2022, the SEC instituted administrative proceedings against the Company alleging violations of the Exchange Act for failing to timely file its periodic reports. We have responded and are working toward resolving the matter. At present, we are current in our Exchange Act reporting, we have also filed a registration statement with the SEC to re-register our SV Shares under the Securities Act of 1933, as amended, and, once effective, we intend to seek a resolution of the administrative proceeding on the merits of our proactive registration. On June 22, 2026 this matter was dismissed.
There are no additional pending legal proceedings to which we or our subsidiaries are a party or of which any of our property or assets is subject. There are no legal proceedings to which any of the directors, officers or affiliates or any associate of any such directors, officers or affiliates of either our company or our subsidiary is a party or has a material interest adverse to us.
We may, from time to time, become involved in disputes and proceedings arising in the ordinary course of business. In addition, as a public company, we are also potentially susceptible to litigation, such as claims asserting violations of securities laws. Any such claims, with or without merit, if not resolved, could be time-consuming and result in costly litigation. There can be no assurance that an adverse result in any future proceeding would not have a potentially material adverse effect on our business, results of operations, and financial condition.
Item 1A. Risk Factors
There have been no material changes from the risk factors as previously disclosed in the Annual Report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following SV Shares were issued pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), afforded by Section 4(a)(2) thereof for the sale of securities not involving a public offering:
On January 12, 2026, the Company issued 200,000 SV Shares pursuant to the exercise of stock options for total proceeds of approximately $21,615 (CAD$30,000).
During the six months ended June 30, 2026, the Company sold a 20% non-controlling interest in its subsidiary GRMA, in the form of 20 non-voting preferred units of GRMA, for gross proceeds of $3,000,000. The GRMA Units may be converted, at the holders’ discretion and for a period of up to three years, into subordinate voting shares of the Company at a conversion price of $0.65 per share, representing 4,615,384 subordinate voting shares on an as-converted basis.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
During the three months ended June 30, 2026, no director or Section 16 officer of the Company
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EXHIBIT INDEX
42
|
Incorporated by Reference | ||||||||||
|
Exhibit Number |
Exhibit Description | Form | File Number | Exhibit | Filing Date | |||||
| 31.1* | Certification Pursuant to Rule 13a-14(a) or 15d-14(a) of the U.S. Securities Exchange Act of 1934 of the Principal Executive Officer | |||||||||
| 31.2* | Certification Pursuant to Rule 13a-14(a) or 15d-14(a) of the U.S. Securities Exchange Act of 1934 of the Principal Financial Officer | |||||||||
| 32.1* | Section 1350 Certification of the Principal Executive Officer | |||||||||
| 32.2* | Section 1350 Certification of the Principal Financial Officer | |||||||||
| 101.INS | Inline XBRL Instance Document–the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL 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 Inline XBRL and contained in Exhibit 101). | |||||||||
| * | Filed herewith. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
GROWN ROGUE INTERNATIONAL INC.
| /s/ Obie Strickler | |
| By: Obie Strickler | |
| President and Chief Executive Officer and Director (Principal Executive Officer) |
|
| Dated:August 4, 2026 |
| /s/ Andrew Marchington | |
| By: Andrew Marchington | |
| Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | |
| Dated: August 4, 2026 |
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