ZeroStack Corp.

Flora Growth Corp.

Notes to the unaudited condensed interim consolidated financial statements

For the three months ended March 31, 2025 and 2024

(In thousands of United States dollars, except shares and per share amounts)

1. NATURE OF OPERATIONS

Flora Growth Corp. (the "Company" or "Flora") was incorporated under the laws of the Province of Ontario, Canada on March 13, 2019. The Company is a manufacturer and distributor of global cannabis and pharmaceutical products and brands, building a connected, design-led collective of plant-based wellness and lifestyle brands. The Company's registered office is located at 40 King Street, W Suite 5800, Toronto, Ontario, M5H 3S1, Canada and our principal place of business in the United States is located at 3230 W. Commercial Boulevard, Suite 180, Fort Lauderdale, Florida 33309.

2. BASIS OF PRESENTATION

These unaudited condensed interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP") pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for interim financial information. Accordingly, they do not include all of the information and notes required by U.S. GAAP. The Company believes that the disclosures made are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report filed on Form 10-K for the year ended December 31, 2024. These unaudited condensed interim consolidated financial statements reflect all adjustments, which, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year.

These unaudited condensed interim consolidated financial statements apply the same accounting policies as those used in the financial statements included in the Company's Annual Report filed on Form 10-K for the year ended December 31, 2024.

Going concern

The accompanying unaudited condensed interim consolidated financial statements have been prepared assuming the Company will continue as a going concern. The going concern basis of presentation assumes that the Company will continue one year after the date these unaudited condensed interim consolidated financial statements are issued and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business.

The Company had cash of $3.7 million at March 31, 2025, net loss of $0.8 million for the three months ended March 31, 2025, and an accumulated deficit of $158.9 million at March 31, 2025. Current economic and market conditions have put pressure on the Company's growth plans. The Company's ability to continue as a going concern is dependent on its ability to obtain additional capital. The Company believes that its current level of cash is not sufficient to continue investing in growth, while at the same time meeting its obligations as they become due. These conditions raise substantial doubt regarding the Company's ability to continue as a going concern for a period of at least one year from the date of issuance of these unaudited condensed interim consolidated financial statements. To alleviate these conditions, management is currently evaluating various cost reductions and other alternatives and may seek to raise additional funds through the issuance of equity, debt securities, through arrangements with strategic partners, through obtaining credit from financial institutions or otherwise. The actual amount that the Company may be able to raise under these alternatives will depend on market conditions and other factors. As it seeks additional sources of financing, there can be no assurance that such financing would be available to the Company on favorable terms or at all. The Company's ability to obtain additional financing in the debt and equity capital markets is subject to several factors, including but not limited to market and economic conditions, the Company's performance and investor sentiment with respect to it and its industry. The unaudited condensed interim consolidated financial statements do not include any adjustments for the recovery and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Basis of consolidation

These unaudited condensed interim consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany balances and transactions were eliminated on consolidation. Subsidiaries are entities the Company controls when it is exposed, or has rights, to variable returns from its involvement in the entity and can affect those returns through its power to direct the relevant activities of the entity. Subsidiaries are included in the consolidated financial results of the Company from the date of acquisition up to the date of disposition or loss of control. At March 31, 2025, the Company's subsidiaries and respective ownership percentage have not changed from the year ended December 31, 2024, except as noted below.

Flora Growth Corp.Notes to the unaudited condensed interim consolidated financial statements For the three months ended March 31, 2025 and 2024 (In thousands of United States dollars, except shares and per share amounts)

On February 4, 2025, the Company completed the closing of the acquisition of 100% of the issued and outstanding shares of United Beverage Distribution Inc., a United States corporation with a function currency of the United States dollar. See discussion of the acquisition in Note 7.

During the three months ended March 31, 2025, each of Franchise Global Health Inc. ("FGH"), Franchise Cannabis Corp., CBDMed Therapeutics Inc., Harmony Health One Inc., 1200325 B.C. Ltd., Fayber Technologies Inc., ACA Mueller ADAG Pharma Vertriebs GmbH, Sativa Verwaltungs GmbH, and Sativa Verwaltungs GmbH and Co. KG (together, the "Insolvent Subsidiaries") made insolvency filings in the appropriate jurisdictions. Each of the Insolvent Subsidiaries was a direct or indirect subsidiary of the Company and was part of the Company's acquisition of FGH in December 2022. See discussion in Note 3.

Minimum bid price requirement

On February 25, 2025, the Company was notified by the Nasdaq Stock Market, LLC ("Nasdaq") that it was not in compliance with the minimum bid price requirement of $1.00 per share for 30 consecutive business days as set forth in Rule 5550(a)(2) of the Nasdaq Listing Rules (the "Minimum Bid Price Requirement"). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company has 180 calendar days, or until August 25, 2025, to regain compliance with the Minimum Bid Price Requirement. To regain compliance, the Company will need to maintain a minimum closing bid price of $1.00 or more for at least 10 consecutive trading days before August 25, 2025, unless Nasdaq Listing Qualifications Department exercises its discretion to extend this ten-day period pursuant to Nasdaq Listing Rule 5810(c)(3)(H). If the Common Shares do not achieve compliance by August 25, 2025, the Company may be eligible for an additional 180-day period to regain compliance, provided that it meets the continued listing requirement for market value of publicly held shares and all other initial listing standards of the Nasdaq Capital Market, with the exception of the Minimum Bid Price Requirement, and provides written notice to Nasdaq of its intention to cure the deficiency during the second compliance period, for example, by effecting a reverse stock split, if necessary.

3. INSOLVENCY AND DECONSOLIDATION OF CERTAIN SUBSIDIARIES

On March 14, 2025, each of Franchise Global Health Inc., Franchise Cannabis Corp., CBDMed Therapeutics Inc., Harmony Health One Inc., 1200325 B.C. Ltd., and Fayber Technologies Inc. (collectively, the "Canadian insolvent entities") made a voluntary assignment in bankruptcy pursuant to section 49 Bankruptcy and Insolvency Act (Canada) in the Ontario Superior Court of Justice (the "Ontario Court"). On March 14, 2025, the Ontario Court appointed a trustee of the estate of each of the Canadian insolvent entities.

On March 18, 2025, ACA Mueller ADAG Pharma Vertriebs GmbH, Sativa Verwaltungs GmbH, and Sativa Verwaltungs GmbH and Co. KG (together "the German insolvent entities") each made filings for insolvency proceedings under German insolvency laws in the Constance Regional Court (the "German Court"). On March 18, 2025, the German Court appointed a trustee of the estate of each of the German insolvent entities.

The trustees have been appointed by the respective courts and the trustees have assumed and will continue to exercise control over all assets and liabilities of the Insolvent Subsidiaries. The assets of the Insolvent Subsidiaries will be liquidated for distribution in accordance with the priorities established by the courts. The Company expects that no distributions will be available in the Insolvent Subsidiaries' liquidation.

Each of the Canadian insolvent entities and the German insolvent entities was a direct or indirect subsidiary of the Company and was part of the Company's acquisition of FGH in December 2022. As a result of the insolvencies, the Company concluded that it no longer controls the Insolvent Subsidiaries for accounting purposes as of March 14, 2025, in accordance with ASC Topic 810, and, therefore, deconsolidated all assets and liabilities of the Insolvent Subsidiaries during the three months ended March 31, 2025 from the Company's financial statements. Subsequent to the deconsolidation, the Company accounted for its investment in the Insolvent Subsidiaries using the cost method of accounting, which was recorded at $nil in the Company’s condensed interim consolidated statements of financial position as of March 31, 2025. The Insolvent Subsidiaries results of operations were removed from the Company’s condensed interim consolidated statements of loss and comprehensive loss beginning March 14, 2025. The historical financial results for the Insolvent Subsidiaries have not been classified as a discontinued operation because it does not represent a strategic shift with a major effect on the Company’s operations and financial results.

The following table provides the combined carrying value of assets and liabilities of Insolvent Subsidiaries that have been deconsolidated during the three months ended March 31, 2025:

The gain on deconsolidation of Insolvent Subsidiaries is recorded in gain on disposal of insolvent subsidiaries in the unaudited condensed interim consolidated statements of loss and comprehensive loss. The Insolvent Subsidiaries reported a combined net loss and comprehensive loss of less than $0.1 million and $0.3 million in the three months ended March 31, 2025 and 2024, respectively.

Flora Growth Corp.Notes to the unaudited condensed interim consolidated financial statements For the three months ended March 31, 2025 and 2024 (In thousands of United States dollars, except shares and per share amounts)

As part of the deconsolidation of the Insolvent Subsidiaries, the Company reported a gain of $0.6 million related to currency translation adjustments, recorded in comprehensive loss in the three months ended March 31, 2025.

As discussed in Note 14, the contingencies and indemnification receivables relate to a legal claim filed against FGH, which was covered under an indemnification agreement between the Company and the former Chief Executive Officer and shareholder of FGH. The voluntary assignment in bankruptcy of FGH triggered an automatic stay on the related legal proceedings.

4. TRADE AND AMOUNTS RECEIVABLE

The Company's trade and amounts receivable are recorded at amortized cost. The trade and other receivables balance as at March 31, 2025 and December 31, 2024 consists of trade accounts receivable, amounts recoverable from the Government of Canada for Harmonized Sales Taxes ("HST"), as well as Value Added Tax ("VAT") from various jurisdictions, and other receivables.

Changes in the trade accounts receivable allowance in the three months ended March 31, 2025 relate to establishing an allowance for expected credit losses. There were $0.1 million and $nil write-offs of trade receivables during the three months ended March 31, 2025 and 2024, respectively. The Company has no amounts written-off that are still subject to collection enforcement activity as at March 31, 2025. The Company's aging of trade accounts receivable is as follows:

5. INVENTORY

Inventory is comprised of the following:

During the three months ended March 31, 2025, the Company recorded inventory impairment as a write-down to cost of sales in the amount of $0.2 million (2024 - $0.2 million).

6. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

Flora Growth Corp.Notes to the unaudited condensed interim consolidated financial statements For the three months ended March 31, 2025 and 2024 (In thousands of United States dollars, except shares and per share amounts)

Depreciation expense for the three months ended March 31, 2025 was less than $0.1 million, (March 31, 2024 - less than $0.1 million) and was recorded in depreciation and amortization in the unaudited condensed interim consolidated statements of loss and comprehensive loss.

7. BUSINESS COMBINATIONS

United Beverage Distribution Inc. business combination

On January 30, 2025, the Company and United Beverage Distribution Inc. ("United"), a South Dakota corporation, entered into a Share Purchase Agreement (the "Purchase Agreement") pursuant to which the Company purchased 100% of the issued and outstanding common shares of United (the "United Common Shares"). Under the terms of the Purchase Agreement, Flora agreed to purchase the United Common Shares from the group of sellers listed in the Purchase Agreement (the "Sellers"), which included Clifford Starke and Sammy Dorf, each of whom are directors of Flora (the "Flora Directors"), and Flora's chief financial officer, Dany Vaiman (together with the Flora Directors, the "Related Parties") for (i)923,744 shares of the Company, valued at $0.8 million utilizing the $0.88 share price on February 4, 2025, and representing 4.99% of the outstanding shares of common stock of Flora as of January 30, 2025, issued to the Sellers who are not Related Parties and (ii) promissory notes with five year maturities that accrue interest at a rate of 6% per annum in an aggregate principal amount of $2.1 million issued to the Sellers. Total consideration for the United acquisition was $2.9 million.

United was founded in 2024 and is a distributor of cannabis-infused drinks. The acquisition will allow the Company to drive synergies with its existing portfolio of brands.

The purchase is accounted for as a business combination with amounts recognized as at the February 4, 2025 acquisition date for each major class of assets acquired and liabilities assumed are as follows:

Since the acquisition date through March 31, 2025, United reported revenue of $0.1 million and net loss and comprehensive loss of $0.1 million.

The goodwill is attributable to the significant synergies expected to arise after its acquisition. The Company does not expect the goodwill to be deductible for United States income tax purposes. The goodwill is assigned to the house of brands segment.

If United was acquired at January 1, 2024, the combined revenue of United and the Company would have increased approximately $0.1 million and $nil for the three months ended March 31, 2025 and 2024, respectively (unaudited). The combined net loss of United and the Company would have decreased by approximately $0.1 million and $nil for the three months ended March 31, 2025, and 2024, respectively (unaudited).

The Company incurred acquisition related costs of less than $0.1 million which were expensed as incurred in professional fees on the unaudited condensed interim consolidated statements of loss and comprehensive loss.

Flora Growth Corp.Notes to the unaudited condensed interim consolidated financial statements For the three months ended March 31, 2025 and 2024 (In thousands of United States dollars, except shares and per share amounts)

8. INTANGIBLE ASSETS AND GOODWILL

A continuity of intangible assets for the three months ended March 31, 2025 is as follows:

Amortization expense for the three months ended March 31, 2025 was $0.2 million (March 31, 2024 - less than$0.1) and was recorded in depreciation and amortization in the unaudited condensed interim consolidated statements of loss and comprehensive loss.

At March 31, 2025, the weighted average amortization period remaining for intangible assets was 4.0 years.

At March 31, 2025, the estimated future amortization expense related to intangible assets is as follows:

9. ASSET IMPAIRMENT

As discussed in Note 10, the Company had been subleasing retail space in Miami, Florida to a third party since the third quarter of 2023. The Company is leasing this retail space pursuant to a lease agreement that expires in November 2026, which is the same term as the sublease agreement. In March 2025, the sublessor informed the Company that it planning to terminate the sublease agreement, effective in May 2025. The Company considers this to be an indicator of impairment, and, thus, performed a quantitative analysis as of March 31, 2025 to determine if impairment existed by comparing the carrying amount of the operating lease right of use asset to the future undiscounted cash flows the asset is expected to generate over its remaining life. This analysis indicated the asset values may not be recoverable. The Company then calculated the fair value of this asset using an income approach. As a result, the Company recorded an impairment of operating lease right of use assets within its corporate asset group and segment totaling less than $0.1 million. These charges were recorded in the asset impairment caption on the unaudited condensed interim consolidated statements of loss and comprehensive loss.

As discussed in Note 14, on May 7, 2024, Just Brands agreed to a settlement and general release, whereby Just Brands will remove the products subject to the stop sales orders from the state of Florida and accept a five-year revocation of its food permit in the state of Florida. As a result of this settlement, the Company began negotiations to exit its current warehouse lease in Pompano Beach, FL, and searching for a new warehousing facility in a different state. The Company considered this to be an indicator of impairment and, thus, performed a quantitative analysis as of March 31, 2024 to determine if impairment existed by comparing the carrying amount of the operating lease right of use asset and related leasehold improvements to the future undiscounted cash flows the asset is expected to generate over its remaining life. This analysis indicated the asset values may not be recoverable. The Company then calculated the fair value of this asset using an income approach. As a result, the Company recorded an impairment of operating lease right of use assets and property, plant and equipment within its Vessel asset group within the house of brands segment totaling $0.9 million. These charges were recorded in the asset impairment caption on the unaudited condensed interim consolidated statements of loss and comprehensive loss.

Flora Growth Corp.Notes to the unaudited condensed interim consolidated financial statements For the three months ended March 31, 2025 and 2024 (In thousands of United States dollars, except shares and per share amounts)

9. DEBT

Euro credit facility

The Company, through Phatebo, has credit facilities totaling 2.4 million Euro ($2.6 million USD), at three different banks in Germany. These arrangements are open ended without predetermined maturity dates. Principal and interest payments are due at the end of each term. Interest rates can change with each new amount drawn. As of March 31, 2025, the total outstanding amount on these credit facilities was 2.0 million Euro ($2.2 million USD) with interest rates ranging from 5.15% to 5.19% and due within the next twelve months. These credit facilities were secured by various guarantees, including payment guarantees upon default.

United promissory notes (Related Parties)

As discussed in Note 7, the Company issued promissory notes with five-year maturities that accrue interest at a rate of 6% per annum in an aggregate principal amount of $2.1 million to the Sellers of United on January 30, 2025. The promissory notes require the first payments of principal and interest to be made in February 2026. At March 31, 2025, the total outstanding amount of these promissory notes was $2.2 million, $0.1 million of which was due within the next 12 months. Of the total amount outstanding at March 31, 2025, $1.9 million was owed to the Related Parties. These promissory notes were secured by payments guarantees and a default interest rate of 11% upon default.

10. LEASES

The Company's leases primarily consist of administrative real estate leases in Germany and the United States. Management has determined all the Company's leases are operating leases through March 31, 2025. Information regarding the Company's leases is as follows:

Maturities of operating lease liabilities as of March 31, 2025 are as follows:

Flora Growth Corp.Notes to the unaudited condensed interim consolidated financial statements For the three months ended March 31, 2025 and 2024 (In thousands of United States dollars, except shares and per share amounts)

Some of the Company's leases contain renewal options to continue the leases for another term equivalent to the original term, which are generally up to five years. The lease liabilities above include renewal terms that management has executed or is reasonably certain of renewing, which only included leases that would have expired in 2025.

In March 2025, the Company began leasing 10,400 sq. ft. of warehouse and office space in Hilzingen, Germany, for $1,000 a month, pursuant to a lease agreement that expires in February 2030.

The Company began subleasing warehousing and office space in Carlsbad, CA to a third party during the fourth quarter of 2023. The sublease is effective through August 31, 2027 and does not contain renewal options.

The Company began subleasing retail space in Miami, Florida to a third party during the third quarter of 2023. The sublease agreement is effective through November 30, 2026 and contains one option to renew for five more years. As discussed in Note 8, the Company received notification from the sublessor in March 2025 of its intention to exit the sublease.

11. SHARE CAPITAL

The Company had the following significant common share transactions:

Three months ended March 31, 2025

FEBRUARY PAYMENT TO UNITED OWNERS

As discussed in Note 7, the Company issued 923,744 of its common shares valued at $0.8 million to certain prior owners of United, who were also Related Parties, as part of the Company's acquisition of 100% of the issued and outstanding common shares of United on February 4, 2025.

See Note 18 for subsequent issuance of shares.

Three months ended March 31, 2024

OTHER ISSUANCES

On March 8, 2024, the Company entered into a settlement agreement with a third party pursuant to which the Company issued 50,000 common shares of the Company, valued at $0.1 million, to a third party to settle outstanding amounts owed.

12. SHARE BASED COMPENSATION

The Company's 2022 Incentive Compensation Plan (the "2022 Plan") and its previous "'rolling" stock option plan (the "Prior Plan") are described in the Company's 2024 Form 10-K.

OPTIONS

Stock options granted under the Prior Plan are non-transferable and non-assignable and may be granted for a term not exceeding five years. Under the 2022 Plan, stock options may be granted with a term of up to ten years and in the case of all stock options, the exercise price may not be less than 100% of the fair market value of a Common Share on the date the award is granted. Stock option vesting terms are subject to the discretion of the Compensation Committee of the Company's Board of Directors. Common shares are newly issued from available authorized shares upon exercise of awards. The Company no longer makes new grants of stock options under the Prior Plan.

Information relating to share options outstanding and exercisable as at March 31, 2025 and December 31, 2024 is as follows:

Flora Growth Corp.Notes to the unaudited condensed interim consolidated financial statements For the three months ended March 31, 2025 and 2024 (In thousands of United States dollars, except shares and per share amounts)

The total expense related to the options granted in the three months ended March 31, 2025 was $nil (2024 total expense - less than $0.1 million). This expense is included in the share-based compensation line on the unaudited condensed interim consolidated statements of loss and comprehensive loss. Generally, the options granted in 2023 vest one to two years following the date of grant provided that the recipient is still employed or engaged by the Company.

At March 31, 2024 the total remaining stock option cost for nonvested awards is $nil.

RESTRICTED STOCK AWARDS

Restricted stock is a grant of common shares which may not be sold or disposed of, and which is subject to such risks of forfeiture and other restrictions as the Committee, in its discretion, may impose. A participant granted restricted stock generally has all of the rights of a shareholder of the Company, unless otherwise determined by the Committee. Subject to certain exceptions, the vesting of restricted stock awards is subject to the holder's continued employment or engagement through the applicable vesting date. Unvested restricted stock awards will be forfeited if the holder's employment or engagement ceases during the vesting period and may, in certain circumstances, be accelerated. The Company values restricted stock awards based on the closing share price of the Company's common shares as of the date of grant. The fair value of the restricted stock award is recorded as expense over the vesting period.

Information relating to restricted stock awards outstanding as at March 31, 2025 and December 31, 2024:

The total expense related to the restricted stock awards in the three months ended March 31, 2025 was less than $0.1 million (less than $0.1 million in the three months ended March 31, 2024). This expense is included in the share based compensation line on the unaudited condensed interim consolidated statements of loss and comprehensive loss.

The outstanding restricted stock awards vest over the next two years provided the award holder is still employed or engaged by the Company. As of March 31, 2025, the Company had less than $0.1 million of unrecognized compensation expense related to restricted stock awards which will be recognized over the next year.

STOCK APPRECIATION RIGHTS ("SARs")

SARs grant a right to receive, upon exercise thereof, the excess of the fair market value of one common share on the date of exercise over the grant price of the SAR. The grant price of a SAR shall not be less than 100% of the fair market value of a common share on the date of the grant. SARs generally vest over a period of zero to three years and have a term of ten or eleven years. The SARS granted by the Company to date are only payable in the Company's common shares and have no cash payments options.

On August 14, 2024, the Company granted 1,603,984 and 534,661 SARs to its Chief Executive Officer and Chief Financial Officer, respectively, which was approved by a majority of the Company's shareholders at the Company's annual meeting held on August 14, 2024. The fair value of the SARs at August 14, 2024 was determined using a Monte Carlo simulation incorporating Brownian motion with 100,000 trials through a binomial model. The significant inputs to the valuation include an 11-year term to maturity, the Company's closing share price at August 14, 2024 ($0.91), estimated volatility (110%) based on the Company's common share and comparable companies' historical volatilities, and risk-free rate of 3.8% to discount the ending result to present value. The valuation also includes a derived service period, which is the median time to vest, as calculated by the model. This derived service period inherently contains some degree of estimation uncertainty.

On December 15, 2024, the Company granted 440,000 SARS to officers, directors, employees and consultants of the Company pursuant to the 2022 Plan. The fair value of the SARS at December 15, 2024 was determined using a Black Scholes pricing model with the following assumptions: the $1.30 price of the Company's common shares; expected dividend yield of 0%; expected volatility of 110% based on the Company's common share and comparable companies' historical volatilities; risk-free interest rate of 4.35% and an expected life of 10.0 years.

Flora Growth Corp.Notes to the unaudited condensed interim consolidated financial statements For the three months ended March 31, 2025 and 2024 (In thousands of United States dollars, except shares and per share amounts)

Information relating to SARs outstanding at March 31, 2025 and December 31, 2024 is as follows:

The total expense related to SARs granted in the three months ended March 31, 2025 was $0.2 million ($nil for the three months ended March 31, 2024). This expense is included in the share based compensation line on the unaudited condensed interim consolidated statements of loss and comprehensive loss. The SARs granted in 2024 will vest in tranches based on the derived service period, ranging from zero to three years, provided that the recipient is still employed or engaged by the Company.

13. WARRANTS

The following summarizes the number of warrants outstanding as of March 31, 2025:

See Note 18 for subsequent issuance of warrants.

14. COMMITMENTS AND CONTINGENCIES

Provisions

The Company's current known provisions and contingent liabilities consist of the following as of March 31, 2025:

The legal disputes balance as of March 31, 2025, relate to the settlement of a contractual dispute involving the Company. It involves a former shareholder of ACA Mueller, an entity that was part of the Company's acquisition of FGH in December 2022, who filed a statement of claim against FGH, a wholly owned subsidiary of the Company, in the Constance Regional Court in Germany. In March 2024, the Constance Regional Court in Germany ordered FGH to pay the plaintiff $3.0 million plus interest thereon at arate of 5% above the prime rate since September 6, 2020 in addition to 83% of the legal fees. FGH has since filed an appeal. While the Company believes that this claim is without merit, at this time the Company believes it is probable that a liability has been incurred and the Company is able to reasonably estimate the loss of $4.3 million, including $0.1 million of interest accrued in the three months ended March 31, 2025. As a result, without acknowledgement (explicitly or implicitly) of any amount of liability arising from this claim, the Company recognized a provision of $4.3 million to reflect the value of the claim. This dispute is covered under an indemnification agreement between the Company and the former Chief Executive Officer and shareholder of FGH. The Company intends to vigorously defend itself through appropriate legal proceedings. As discussed in Note 3, on March 14, 2025, FGH made a voluntary assignment in bankruptcy pursuant to section 49 Bankruptcy and Insolvency Act (Canada), which triggered an automatic stay on these legal proceedings. The Company lost control of FGH to the bankruptcy court upon the assignment in bankruptcy, requiring it to derecognize all assets and liabilities associated with FGH. Prior to the voluntary assignment in bankruptcy, the related amounts were recorded within contingencies and within indemnification receivables on the unaudited condensed consolidated statements of financial position.

Flora Growth Corp.Notes to the unaudited condensed interim consolidated financial statements For the three months ended March 31, 2025 and 2024 (In thousands of United States dollars, except shares and per share amounts)

The Sales tax relates to estimated amounts owed to certain jurisdictions in the Unites States for sales from the Company's JustCBD operations. The ending balance is recorded within contingencies on the unaudited condensed interim consolidated statement of financial position, and additions to the provision as a reduction of revenue on the unaudited condensed interim consolidated statements of loss and comprehensive loss.

On April 30, 2024, a group representing the sellers of Just Brands LLC to Flora in February 2022 (the "Plaintiffs") brought an action against the Company in the United States District Court for the Southern District of New York (the "Court") claiming that the Company failed to promptly issue additional shares in accordance with a specific formula set forth in the securities purchase agreement after the two-year anniversary of the closing, which occurred on February 24, 2024. The plaintiffs claim that they are entitled to 182,889 common shares and $38.0 million to complete the acquisition of Just Brands LLC. On March 27, 2025, the Court dismissed both the claims brought under the securities laws without prejudice and the state law claims for lack of subject matter jurisdiction because the parties did not have diversity of citizenship in order to maintain those claims in the Court. The Plaintiffs did not amend their complaint against the Company within the thirty-day period allotted by the Court, and, thus, as of April 28, 2025, this litigation is no longer active. On May 9, 2025, the Plaintiffs filed a new action in New York State Supreme Court claiming that the Company failed to issue additional shares in accordance with a specific formula set forth in the securities purchase agreement after the two-year anniversary of the closing, which occurred on February 24, 2024. The Plaintiffs seek specific performance of the issuance of shares as well as monetary damages. The Company has assessed the claims and concluded that it is probable that a liability has been incurred and that the Company is able to reasonably estimate the loss based on the fair value of 632,484 common shares of the Company. As at March 31, 2025, this value is $0.4 million and has been recorded in the contingent purchase considerations on the unaudited condensed interim consolidated statement of financial position.

Legal proceedings

The Company records liabilities for legal proceedings in those instances where it can reasonably estimate the amount of the loss and where liability is probable. The Company is engaged from time to time in various legal proceedings and claims that have arisen in the ordinary course of business. The outcome of all the proceedings and claims against the Company is subject to future resolution, including the uncertainties of litigation. Based on information currently known to the Company and after consultation with outside legal counsel, management believes that the probable ultimate resolution of any such proceedings and claims, individually or in the aggregate, will not have a material adverse effect on the financial condition of the Company, taken as a whole as at March 31, 2025.

On November 1, 2023, Just Brands filed an Emergency Complaint for Declaratory Judgment and Injunctive Relief in the Southern District of Florida against the Florida Department of Agriculture and Consumer Services (the "Department") stemming from stop sale orders issued by the Department whereby the Department prohibited Just Brands from selling and moving most of its products. Relying on Florida Statute Section 581.217, which includes the definition of "attractive to children," the Department determined Just Brand's product could not be sold or moved because the products were manufactured in the shape of humans, cartoons, or animals; in a form that bears a reasonable resemblance to an existing candy product; and containing color additives. The court ruled in favor of the Department and that Order was being appealed to the Eleventh Circuit Court of Appeals. Since then, the Department has initiated an Administrative Action claiming Just Brands moved product outside the State of Florida in violation of the stop sale orders. The statute provides for a penalty of up to $5,000 per violation. The Department sought to assess penalties on what they claimed to be a total of 215,154 violations (one for each package). The Company disputed the Department's claim and vigorously defended against this action. The total cost of inventory impacted by the stop sale orders was $1.9 million. On May 7, 2024, Just Brands and the Department agreed to a settlement and general release, whereby Just Brands will remove the products subject to the stop sales orders from the state of Florida, pay the Department $60,500 to reimburse the Department's attorney's fees, and accept a five-year revocation of its food permit in the state of Florida. By signing the release, Just Brands waived, settled and released all claims it had or might have against the Department. Similarly, on June 27, 2024, Just Brands and the Department agreed to a settlement and general release, whereby High Roller will remove the products subject to the Stop Sales Orders from the state of Florida, destroy products containing controlled substances, pay the Department $5,000 to reimburse the Department's attorney's fees, and accept a two-year suspension of the manufacture, distribution and sale of gummy hemp extract products in the state of Florida. By signing the release, High Roller waived, settled and released all claims it had or might have against the Department.

On May 31, 2023, Maria Beatriz Fernandez Otero and Sara Cristina Jacome De Torres brought an action against the Company in the Ontario Superior Court of Justice claiming that the Company is obligated to issue 500,000 common shares (pre-splits) each for a purchase price of $0.05 per share. The plaintiffs claim that they are entitled to such shares as compensation for alleged consulting services performed. The Company disputes their claim and intends to vigorously defend against this action. The Company believes that an unfavorable settlement in this matter is remote, and, as such, has not accrued a liability as of March 31, 2025.

Flora Growth Corp.Notes to the unaudited condensed interim consolidated financial statements For the three months ended March 31, 2025 and 2024 (In thousands of United States dollars, except shares and per share amounts)

On May 31, 2023, Ramon Ricardo Castellanos Saenz and Miriam Ortiz brought an action against the Company in the Ontario Superior Court of Justice claiming that the Company is obligated to issue 1,500,000 common shares (pre-splits) each for a purchase price of $0.05 per share. The plaintiffs claim that they are entitled to such shares as compensation for alleged consulting services performed. The Company disputes their claim and intends to vigorously defend against this action. The Company believes that an unfavorable settlement in this matter is remote, and, as such, has not accrued a liability as of March 31, 2025.

In connection with the Company's acquisition of FGH, the Company's current CEO and the former Chief Executive Officer of FGH, together with certain affiliated entities under his control, entered into an agreement pursuant to which they agreed to indemnify the Company for certain potential liabilities of FGH and its subsidiaries, up to a maximum of $5.0 million. In addition to the matter regarding the former shareholder of ACA Mueller, discussed above, the following actions are pending as of the date hereof:

On February 3, 2023, an action was brought in the Ontario Superior Court of Justice by Nathan Shantz and Liberacion e Inversiones S.A. against various parties including Clifford Starke, the Company's current CEO and FGH's former Chief Executive Officer, and FGH. The statement of claim alleges that, prior to the closing of the Arrangement,8,831,109 FGH shares purportedly owned by the plaintiffs were wrongfully transferred to third parties, in part through alleged unauthorized steps taken by Mr. Starke. Plaintiffs seek, among other things, a declaration that they are the rightful owners of the shares or, in the alternative, damages. Against FGH, they claim a declaration that, by virtue of the alleged unauthorized transfer of shares, FGH acted oppressively and seek damages in the amount of $4.0 million. The defendants have brought motions to stay the proceedings on the grounds that the Ontario court lacks jurisdiction over the claim. In the event FGH should incur any losses in connection with this matter, such losses are to be indemnified by Mr. Starke subject to the maximum threshold of the indemnity agreement. The Company believes that an unfavorable settlement in this matter is remote, and, as such, has not accrued a liability as of March 31, 2025. As discussed in Note 3, on March 14, 2025, FGH made a voluntary assignment in bankruptcy pursuant to section 49 Bankruptcy and Insolvency Act (Canada), which triggered an automatic stay on these legal proceedings.

The total amount claimed against the former entities of FGH currently exceeds the maximum $5.0 million of the indemnification agreement. However, the Company is estimating the likelihood of loss in these cases will not exceed $4.3 million.

15. LOSS PER SHARE

The Company calculates basic earnings per share based upon the weighted average number of common shares outstanding during the period, while the calculation of diluted earnings per share includes the dilutive effect of potential common shares outstanding during the period. The calculation of diluted earnings per share excludes all potential common shares if their inclusion would have an anti-dilutive effect. Restricted stock award recipients under the 2022 Plan have a non-forfeitable right to receive dividends declared by the Company and are therefore included in computing earnings per share.

16. FINANCIAL INSTRUMENTS

Fair value

The Company's financial instruments measured at amortized cost as at March 31, 2025 and December 31, 2024 consist of cash, trade and amounts receivable, loans receivable, trade payables, contingencies, accrued liabilities, lease liabilities, and debt and loans payable. The amounts reflected in the unaudited condensed interim consolidated statements of financial position approximate fair value due to the short-term maturity of these instruments.

Financial instruments recorded at the reporting date at fair value are classified into one of three levels based upon the fair value hierarchy. Items are categorized based on inputs used to derive fair value based on:

Flora Growth Corp.Notes to the unaudited condensed interim consolidated financial statements For the three months ended March 31, 2025 and 2024 (In thousands of United States dollars, except shares and per share amounts)

Level 1 - quoted prices that are unadjusted in active markets for identical assets or liabilities

Level 2 - inputs other than quoted prices included in level 1 that are observable for the asset/liability either directly or indirectly; and

Level 3 - inputs for the instruments are not based on any observable market data.

The Company's contingent purchase considerations consist of the estimated fair value of contingent purchase consideration from the acquisitions of JustCBD in February 2022 and Original Hemp in March 2023. The amount for JustCBD is measured at FVPL as a Level 2 fair value financial instrument within the fair value hierarchy as at March 31, 2025. The fair value was determined using a simplified calculation which took the expected shares to be issued (632,484) multiplied by the Company's closing share price at March 31, 2025 ($0.61). The amount for Original Hemp are measured at FVPL as a Level 3 fair value financial instrument within the fair value hierarchy as at March 31, 2025. The fair value was determined using discounted cash flow models utilizing two different rates, high (25.5%) and low (20.3%), to estimate the present value of the future cash outflows. As valuations of investments for which market quotations are not readily available are inherently uncertain, may fluctuate within short periods of time and are based on estimates, determination of fair value may differ materially from the values that would have resulted if a ready market existed for the investments. Such changes may have a significant impact on the Company's financial condition or operating results.

The following tables present information about the Company's financial instruments and their classifications as at March 31, 2025 and December 31, 2024 and indicate the fair value hierarchy of the valuation inputs utilized to determine such fair value.

The less than $0.1 million change in the Level 3 contingent purchase consideration from the Original Hemp acquisition was recorded as a gain in the unrealized (gain) loss from changes in fair value on the unaudited condensed interim consolidated statements of loss and comprehensive loss.

17. SEGMENTED INFORMATION

The Company reports its financial results for the followingtwo operating segments, which are also its reportable segments: commercial and wholesale (primarily the Phatebo and TruHC subsidiaries), which sell pharmaceutical products, and house of brands (primarily JustCBD and Vessel subsidiaries), which sells a mix of products across multiple categories including food and beverage, cannabis accessories and technology, personal care and wellness. TruHC, acquired in April 2024, is included in commercial and wholesale, while, AV, acquired in June 2024, and United, acquired in February 2025, are included in house of brands. These segments reflect how the Company's operations are managed, how the Company Chief Executive Officer, who is the chief operating decision maker, allocates resources and evaluates performance, and how the Company's internal management financial reporting is structured. The chief operating decision maker uses net income to evaluate income generated from segment assets in deciding whether to reinvest profits into the segment or into other parts of the Company, such as for acquisitions. Net income is used to monitor actual results versus budget and prior year, which is used to assess the performance of the segment.

The Company's operates its manufacturing and distribution business within its United States, Germany and Australia subsidiaries. Management has defined the reportable segments of the Company based on this internal business unit reporting, which is by major product line, and aggregates similar businesses into the house of brands segment below. The Corporate segment reflects balances and expenses that do not directly influence business unit operations and includes the Company's long-term investments. The eliminations represent sales within the house of brands segment.

The following table shows information regarding the Company's segments for the three months ended March 31, 2025.

Flora Growth Corp.Notes to the unaudited condensed interim consolidated financial statements For the three months ended March 31, 2025 and 2024 (In thousands of United States dollars, except shares and per share amounts)

The following table shows information regarding the Company's segments for the three months ended March 31, 2024.

(1) Other segment items include professional fees, general and administrative, travel expenses, research and development, operating lease expense, bad debt expense, other expenses (net), and foreign exchange loss (income).

Other significant items and disaggregation by geographic area:

Flora Growth Corp.Notes to the unaudited condensed interim consolidated financial statements For the three months ended March 31, 2025 and 2024 (In thousands of United States dollars, except shares and per share amounts)

18. SUBSEQUENT EVENTS

MAY PRIVATE PLACEMENT

On May 2, 2025, the Company entered into a securities purchase agreement with certain investors (the "Investors") in connection with the issuance and sale by the Company to the Investors via a private placement (the "Private Placement") of an aggregate of 3,133,011 common shares of the Company, no par value per share at a purchase price of $0.30 per share (the "Common Shares") and 726,992 pre-funded warrants of the Company at a purchase price of $0.2999 per warrant (the "Pre-funded Warrants") each to purchase one Common Share which shall be immediately exercisable and expire when exercised in full, at an exercise price of $0.0001 per share. The Company has agreed to file a registration statement on Form S-3 within fifteen (15) calendar days following the closing date of the Private Placement.

The Company will reimburse the Investors a non-accountable amount of less than $0.1 million for all costs and expenses of outside counsel and disbursements of Bevilacqua PLLC, counsel to one of the Investors, which shall be withheld by such Investor from its purchase price at the closing date of the Private Placement.

The net proceeds from the sale of the Common Shares and Pre-funded Warrants were approximately $1.1 million after deducting estimated expenses relating to the Private Placement. The Company intends to use $0.4 million of the net proceeds from the Private Placement to purchase Solana, $0.4 million to purchase Ethereum, $0.1 million to purchase Sui, $0.1 million to purchase Ripple, and the balance for general corporate and working capital purposes and to pay any fees and expenses in connection with the issuance of the Common Shares and the Pre-funded Warrants.