Flora Growth Corp.

Previous wording

Consistent profitability and positive operating cash flows. A key determinant of the Company's success is to deliver profitable results and positive cashflows from operating activities. The Company's results have not yet achieved the prerequisite consistency to achieve self-sufficiency. Since its inception, only the third quarter of 2023 yielded net income and positive cashflows from operating activities. There is no assurance that the Company will be able to produce adequate levels of sustained profitability and become cash flow positive. These factors, amongst others, raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are described in Note 2 of the Company's unaudited condensed interim consolidated financial statements for the three months ended March 31, 2025. For more information, see Item 1A "Risk Factors" in the Company's 2024 Annual Report.

Current wording

Consistent profitability and positive operating cash flows. A key determinant of the Company's success is to deliver profitable results and positive cashflows from operating activities. The Company's results have not yet achieved the prerequisite consistency to achieve self-sufficiency. Since its inception, only the third quarter of 2023 yielded net income and positive cashflows from operating activities. There is no assurance that the Company will be able to produce adequate levels of sustained profitability and become cash flow positive. These factors, amongst others, raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are described in Note 2 of the Company's unaudited condensed interim consolidated financial statements for the six months ended June 30, 2025. For more information, see Item 1A "Risk Factors" in the Company's 2024 Annual Report.

Previous wording

*Integration of acquired companies.*Our growth has been fueled substantially by the acquisition of JustCBD, Vessel and Phatebo. Our continued ability to extract incremental synergies from a group of diversified entities is a key determinant of our ability to expand organically.

Current wording

*Integration of acquired companies.*Our growth has been fueled substantially by the acquisitions of JustCBD, Vessel and Phatebo. Our continued ability to extract incremental synergies from a group of diversified entities is a key determinant of our ability to expand organically.

Previous wording

The Company's operates its manufacturing and distribution business through its subsidiaries in the United States, Germany and Australia.

Current wording

The Company operates its manufacturing and distribution business through its subsidiaries in the United States, Germany and Australia.

Previous wording

Revenue is recognized at the transaction price, which is the amount of consideration to which the Company expects to be entitled in exchange for transferring promised goods to a customer. Gross revenue excludes duties and taxes collected on behalf of third parties. Revenue is presented net of expected price discounts, sales returns, customer rebates and other incentives. The Company's cannabis consumption accessory products include a six-month warranty, which the Company accrues for the estimated liability based on historical and expected claim costs.

Current wording

Revenue is recognized at the transaction price, which is the amount of consideration to which the Company expects to be entitled in exchange for transferring promised goods to a customer. Gross revenue excludes duties and taxes collected on behalf of third parties. Revenue is presented net of expected price discounts, sales returns, customer rebates and other incentives. The Company's cannabis consumption accessory products include a six-month warranty, for which the Company accrues the estimated liability based on historical and expected claim costs.

Previous wording

Share-based compensation includes the cost of vesting of the Company's equity awards, including share options, restricted share awards, and stock appreciation rights.

Current wording

Share-based compensation includes the cost of vesting of the Company's equity awards, including share options, restricted share awards, and stock appreciation rights ("SARs").

Previous wording

Non-operating expenses include interest income and expenses, foreign exchange losses and unrealized losses and gains from changes in fair value. Interest is primarily related to the Company's lease liabilities and operating lines of credit. Foreign exchange is largely related to the revaluation of balances denominated in foreign currencies to U.S. dollars. Unrealized losses and gains from changes in fair value pertain to fluctuations in the fair values of the Company's investments and liabilities.

Current wording

Non-operating expenses include interest income and expenses, foreign exchange (gains) losses and unrealized losses and gains from changes in fair value. Interest is primarily related to the Company's lease liabilities and operating lines of credit. Foreign exchange is largely related to the revaluation of balances denominated in foreign currencies to U.S. dollars. Unrealized losses and gains from changes in fair value pertain to fluctuations in the fair values of the Company's digital assets, investments and liabilities.

Previous wording

The following tables provide sets forth the Company's consolidated results of operations for the three months ended March 31, 2025 and 2024 (in thousands). The period-to-period comparisons of the Company's historical results are not necessarily indicative of the results that may be expected in the future. The results of operations data have been derived from our unaudited condensed interim consolidated financial statements for the three months ended March 31, 2025 and 2024 included elsewhere in this Quarterly Report.

Current wording

The following tables provide sets forth the Company's consolidated results of operations for the three and six months ended June 30, 2025 and 2024 (in thousands). The period-to-period comparisons of the Company's historical results are not necessarily indicative of the results that may be expected in the future. The results of operations data have been derived from our unaudited condensed interim consolidated financial statements for the three and six months ended June 30, 2025 and 2024 included elsewhere in this Quarterly Report.

Previous wording

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 subsidiaries") made a voluntary assignment in bankruptcy pursuant to section 49 Bankruptcy and Insolvency Act (Canada) in the appropriate Canadian jurisdictions. On March 18, 2025, ACA Mueller ADAG Pharma Vertriebs GmbH, Sativa Verwaltungs GmbH, and Sativa Verwaltungs GmbH and Co. KG (together "the German insolvent subsidiaries") each made filings for insolvency proceedings under German insolvency laws in Kontanz, Germany. Each of the Canadian insolvent subsidiaries and the German insolvent subsidiaries was a direct or indirect subsidiary of the Company and was part of the Company's acquisition of FGH in December 2022. The Company supported the insolvencies as part of ongoing strategic changes to cut costs and streamline operations. The combined net loss and comprehensive loss of the Canadian insolvent subsidiaries and the German insolvent subsidiaries was less than $0.1 million and $0.3 million in the three months ended March 31, 2025 and 2024, respectively.

Current wording

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 subsidiaries") made a voluntary assignment in bankruptcy pursuant to section 49 Bankruptcy and Insolvency Act (Canada) in the appropriate Canadian jurisdictions. On March 18, 2025, ACA Mueller ADAG Pharma Vertriebs GmbH, Sativa Verwaltungs GmbH, and Sativa Verwaltungs GmbH and Co. KG (together "the German insolvent subsidiaries") each made filings for insolvency proceedings under German insolvency laws in Kontanz, Germany. Each of the Canadian insolvent subsidiaries and the German insolvent subsidiaries was a direct or indirect subsidiary of the Company and was part of the Company's acquisition of FGH in December 2022. The Company supported the insolvencies as part of ongoing strategic changes to cut costs and streamline operations. The combined net loss and comprehensive loss of the Canadian insolvent subsidiaries and the German insolvent subsidiaries was less than $0.1 million and $0.4 million in the six months ended June 30, 2025 and 2024, respectively.

Previous wording

The Company estimates that the disruption from these stop sale orders had an unfavorable impact of $0.7 million on revenue during the three months ended March 31, 2024.

Current wording

The Company estimates that the disruption from these stop sale orders had an unfavorable impact of $0.7 million on revenue during the six months ended June 30, 2024.

Previous wording

These decreases were partially offset by the acquisitions of AV and United, which contributed $0.2 million and $0.1 million, respectively, in the three months ended March 31, 2025, compared to $nil in the three months ended March 31, 2024.

Current wording

These decreases were partially offset by the acquisitions of TruHC and United, which contributed $0.2 million and $0.2 million, respectively, in the three months ended June 30, 2025, compared to $nil and $nil, respectively, in the three months ended June 30, 2024.

Previous wording

Gross profit totaled $2.9 million and $3.9 million for the three months ended March 31, 2025 and 2024, respectively. The decrease was primarily driven by the decreased sales at JustCBD, which contributed $1.6 million in the three months ended March 31, 2025 compared to $2.7 million in the three months ended March 31, 2024. As a percentage of net sales, or gross margin, the Company reported 25% and 21% for the three months ended March 31, 2025 and 2024, respectively. The increase is primarily due to favorable mix, with decreased sales at Phatebo which distributes relatively lower margin pharmaceuticals.

Current wording

Gross profit totaled $2.8 million and $3.2 million for the three months ended June 30, 2025 and 2024, respectively. The decrease was primarily driven by the decreased margins in the Commercial and Wholesale segment, where Phatebo contributed $0.6 million in the three months ended June 30, 2025 compared to $0.8 million in the three months ended June 30, 2024. JustCBD contributed $1.6 million in the three months ended June 30, 2025, compared to $1.5 million for the three months ended June 30, 2024. Vessel contributed $0.6 million in the three months ended June 30, 2025, compared to $0.8 million in the three months ended June 30, 2024. As a percentage of net sales, or gross margin, the Company reported 19% and 20% for the three months ended June 30, 2025 and 2024, respectively. The decrease is primarily due to unfavorable mix, with a higher percentage of sales at Phatebo which distributes relatively lower margin pharmaceuticals.

Previous wording

Consulting and management fees were $1.9 million for the three months ended March 31, 2025 compared to $2.3 million for the three months ended March 31, 2024. These fees are related to employment and consulting contracts with most of the Company's management, as well as directors. The decrease is primarily due to a reduction in the Company's total headcount across all its business units.

Current wording

Consulting and management fees were $2.2 million for the three months ended June 30, 2025 compared to $2.3 million for the three months ended June 30, 2024. These fees are related to employment and consulting contracts with most of the Company's management, as well as directors. The decrease is primarily due to a reduction in the Company's total headcount across all its business units.

Previous wording

General and administrative expenses totaled $0.5 million for the three months ended March 31, 2025 compared to $0.4 million for the three months ended March 31, 2024. The primary expenses included in both periods were filing services and shareholder communications, as well as professional dues and subscriptions.

Current wording

General and administrative expenses totaled $0.8 million for the three months ended June 30, 2025 compared to $0.6 million for the three months ended June 30, 2024. The primary expenses included in both periods were filing services and shareholder communications, as well as professional dues and subscriptions.

Previous wording

Share based compensation expenses totaled less than $0.2 million for the three months ended March 31, 2025 compared to less than $0.1 million for the three months ended March 31, 2024. These expenses represent the amortization of the fair value of share-based payments. The increase is due to the grant of stock appreciation rights to key employees during the year ended December 31, 2024.

Current wording

Share based compensation expenses totaled $0.2 million for the three months ended June 30, 2025 compared to less than $0.1 million for the three months ended June 30, 2024. These expenses represent the amortization of the fair value of share-based payments. The increase is due to the grants of SARs to key employees during the year ended December 31, 2024.

Previous wording

Operating lease expenses totaled $0.2 million for both the three months ended March 31, 2025 and March 31, 2024.

Current wording

Operating lease expenses totaled $0.2 million for both the three months ended June 30, 2025 and the three months ended June 30, 2024.

Previous wording

Depreciation and amortization expenses totaled $0.2 million for the three months ended March 31, 2025 compared to $0.1 million for the three months ended March 31, 2024. The increase is primarily due to the recent acquisitions of TruHC and United.

Current wording

Depreciation and amortization expenses totaled $0.2 million for the three months ended June 30, 2025 compared to $0.3 million for the three months ended June 30, 2024. The increase is primarily due to the recent acquisitions of TruHC and United.

Previous wording

Bad debt expense totaled $0.1 million for the three months ended March 31, 2025 compared to less than $0.1 million for the three months ended March 31, 2024. The amounts reflect the Company's estimate of lifetime expected losses related to outstanding trade receivables.

Current wording

Bad debt expense totaled $0.3 million for the three months ended June 30, 2025 compared to $0.2 million for the three months ended June 30, 2024. The amounts reflect the Company's estimate of lifetime expected losses related to outstanding trade receivables.

Previous wording

Other expense totaled $0.3 million for the three months ended March 31, 2025 compared to $0.7 million for the three months ended March 31, 2024. For both periods, this income and expense consists mainly of insurance, repairs and maintenance and royalties partially offset by miscellaneous incomes. The decrease in expense in the three months ended March 31, 2025 was driven by reduced royalty fees.

Current wording

Other income totaled $0.2 million for the three months ended June 30, 2025 compared to other expense of $0.5 million for the three months ended June 30, 2024. For both periods, this income and expense consists mainly of insurance, repairs and maintenance and royalties partially offset by miscellaneous incomes. The decrease in expense in the three months ended June 30, 2025 was driven by reduced royalty fees, as well as a gain recorded on a supplier agreement at TruHC.

Previous wording

Flora realized $0.3 million in non-operating income for the three months ended March 31, 2025 compared to non-operating expense of $0.8 million for the three months ended March 31, 2024. This income and expense consist of unrealized (gains) losses from changes in fair value, interest (income) expense and foreign exchange loss (gain). The increase in income is primarily due to a $0.3 million gain on the value of the contingent consideration related to the JustCBD and Original Hemp acquisitions during the three months ended March 31, 2025 compared to a $0.6 million loss during the three months ended March 31, 2024.

Current wording

We realized $0.1 million in non-operating income for the three months ended June 30, 2025 compared to non-operating income of $0.8 million for the three months ended June 30, 2024. This income and expense consist of unrealized (gains) losses from changes in fair value, interest (income) expense and foreign exchange loss (gain). The increase in income is primarily due to a less than $0.1 million gain on the value of the contingent consideration related to the JustCBD and Original Hemp acquisitions during the three months ended June 30, 2025 compared to a $0.8 million gain during the three months ended June 30, 2024.

Previous wording

Vessel contributed $1.2 million in the three months ended March 31, 2025, compared to $1.3 million in the three months ended March 31, 2024.

Current wording

Gross profit totaled $5.7 million and $7.0 million for the six months ended June 30, 2025 and 2024, respectively. The decrease was primarily driven by the decreased sales at JustCBD, which contributed $3.2 million in the six months ended June 30, 2025 compared to $4.2 million in the six months ended June 30, 2024. Phatebo contributed $1.2 million in the six months ended June 30, 2025, compared to $1.4 million in the six months ended June 30, 2024. Vessel contributed $1.2 million in the six months ended June 30, 2025, compared to $1.3 million in the six months ended June 30, 2024. As a percentage of net sales, or gross margin, the Company reported 22% and 21% for the six months ended June 30, 2025 and 2024, respectively. The increase is primarily due to slight increases in margins at both Phatebo and Just CBD.

Previous wording

Operating expenses totaled $3.9 million and $6.3 million for the three months ended March 31, 2025 and March 31, 2024, respectively. The decrease is driven by a $1.2 million gain on the disposal and deconsolidation of insolvent subsidiaries, as well as lower headcount-related costs and asset impairments.

Current wording

Operating expenses totaled $9.3 million and $13.0 million for the six months ended June 30, 2025 and 2024, respectively. The decrease is driven by a $1.2 million gain on the disposal and deconsolidation of insolvent subsidiaries, as well as lower headcount-related costs and asset impairments.

Previous wording

Professional fees totaled $0.6 million for the three months ended March 31, 2025 compared to less than $0.5 million for the three months ended March 31, 2024. These expenses are associated with legal, accounting and audit services.

Current wording

Professional fees totaled $1.3 million for the six months ended June 30, 2025 compared to $1.6 million for the six months ended June 30, 2024. These expenses are associated with legal, accounting and audit services.

Previous wording

Research and development expenses totaled $0.1 million for the three months ended March 31, 2025 compared to less than $0.1 million for the three months ended March 31, 2024. Research and development expenses consist primarily of contract research fees, manufacturing, consultant fees, and costs related to the launch of new brands for the Vessel business.

Current wording

Research and development expenses totaled $0.2 million for the six months ended June 30, 2025 compared to $0.1 million for the six months ended June 30, 2024. Research and development expenses consist primarily of contract research fees, manufacturing, consultant fees, and costs related to the launch of new brands for the Vessel business.

Previous wording

Asset impairment totaled less than $0.1 million for the three months ended March 31, 2025 compared to $0.9 million for the three months ended March 31, 2024. The amount in 2025 represents impairment of an operating lease right of use asset in Florida. The amount in 2024 represents impairment of operating lease right of use assets and property, plant and equipment at Vessel.

Current wording

Asset impairment totaled less than $0.1 million for the six months ended June 30, 2025 compared to $1.1 million for the six months ended June 30, 2024. The amount in 2025 represents impairment of an operating lease right of use asset in Florida. The amount in 2024 represents impairment of the long-lived assets at Vessel and JustCBD.

Previous wording

Gain on disposal of insolvent subsidiaries totaled $1.2 million for the three months ended March 31, 2025 compared to $nil for the three months ended March 31, 2024. The gain was the result of certain subsidiaries of the Company filing for bankruptcy during the three months ended March 31, 2025. The Company deconsolidated these subsidiaries when it lost control upon each subsidiaries’ filing for bankruptcy.

Current wording

Gain on disposal of insolvent subsidiaries totaled $1.2 million for the six months ended June 30, 2025 compared to $nil for the six months ended June 30, 2024. The gain was the result of certain subsidiaries of the Company filing for bankruptcy during March 2025. The Company deconsolidated these subsidiaries when it lost control upon each subsidiaries' filing for bankruptcy.

Previous wording

We recognized less than $0.1 million and $0.1 million in income tax expense for the three months ended March 31, 2025 and 2024, respectively. Our effective tax rate during the periods ended March 31, 2025 and 2024 was -5.3% and -3.9%, respectively. We maintain valuation allowances when it is more likely than not that all or a portion of a deferred tax asset will not be realized. Changes in valuation allowances from period to period are included in the tax provision in the period of change. In determining whether a valuation allowance is required, we consider such factors as prior earnings history, expected future earnings, carry-back and carry-forward periods, and tax strategies that could potentially enhance the likelihood of realization of a deferred tax asset. We continue to believe our deferred tax assets are not more-likely-than-not to be realized and a full valuation allowance remains recorded against net deferred taxes as of March 31, 2025 and 2024.

Current wording

We recognized less than $0.1 million in income tax benefit and $0.1 million in income tax expense for the six months ended June 30, 2025 and 2024, respectively. Our effective tax rate during the periods ended June 30, 2025 and 2024 was 0.3% and -1.6%, respectively. We maintain valuation allowances when it is more likely than not that all or a portion of a deferred tax asset will not be realized. Changes in valuation allowances from period to period are included in the tax provision in the period of change. In determining whether a valuation allowance is required, we consider such factors as prior earnings history, expected future earnings, carry-back and carry-forward periods, and tax strategies that could potentially enhance the likelihood of realization of a deferred tax asset. We continue to believe our deferred tax assets are not more-likely-than-not to be realized and a full valuation allowance remains recorded against net deferred taxes as of June 30, 2025 and 2024.

Previous wording

Flora recorded a net loss of $0.8 million for the three months ended March 31, 2025 compared to a net loss of $3.4 million for the three months ended March 31, 2024. This decrease in net loss is driven by a $1.2 million gain on the disposal and deconsolidation of insolvent subsidiaries as well as lower operating expenses of $1.3 million.

Current wording

We recorded a net loss of $3.2 million for the six months ended June 30, 2025 compared to a net loss of $6.0 million for the six months ended June 30, 2024. This decrease in net loss is driven by a $1.2 million gain on the disposal and deconsolidation of insolvent subsidiaries as well as lower operating expenses of $2.6 million.

Previous wording

The reconciliation of the Company's Adjusted EBITDA, a non-U.S. GAAP financial measure, to net income (loss), the most directly comparable U.S. GAAP financial measure, for the three months ended March 31, 2025 is presented in the table below:

Current wording

The reconciliation of the Company's Adjusted EBITDA, a non-U.S. GAAP financial measure, to net income (loss), the most directly comparable U.S. GAAP financial measure, for the six months ended June 30, 2025 is presented in the table below:

Previous wording

(2) Unrealized (gain) loss from changes in fair value includes changes in the value of the Company's contingent consideration associated with its acquisition of JustCBD.

Current wording

(2) Unrealized gain from changes in fair value includes changes in the value of the Company's contingent consideration associated with its acquisition of JustCBD.

Previous wording

Since the Company's inception, we have funded our operations and capital spending through cash flows from product sales and proceeds from the sale of our capital stock. The Company is generating cash from sales and is deploying its capital reserves to acquire and develop assets capable of producing additional revenues and earnings over both the immediate and near term to support our business growth and expansion. We have generated significant operating losses and negative cash flows from operations as reflected in our accumulated deficit and unaudited condensed interim consolidated statements of cash flows. We expect to continue to incur operating losses and negative cash flows in the foreseeable future. Our current principal sources of liquidity are cash and cash equivalents provided by our operations and prior equity offerings. Cash consists primarily of cash on deposit with banks. Cash was $3.7 million and $6.1 million as of March 31, 2025, and December 31, 2024, respectively. As of March 31, 2025, the Company's current working capital, anticipated operating expenses and net losses, and the uncertainties surrounding its ability to raise additional capital as needed, raise substantial doubt as to whether existing cash and cash equivalents will be sufficient to meet its obligations as they come due within twelve months from the date the unaudited condensed interim consolidated financial statements were issued. 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.

Current wording

Since the Company's inception, we have funded our operations and capital spending through cash flows from product sales and proceeds from the sale of our capital stock. The Company is generating cash from sales and is deploying its capital reserves to acquire and develop assets capable of producing additional revenues and earnings over both the immediate and near term to support our business growth and expansion. We have generated significant operating losses and negative cash flows from operations as reflected in our accumulated deficit and unaudited condensed interim consolidated statements of cash flows. We expect to continue to incur operating losses and negative cash flows in the foreseeable future. Our current principal sources of liquidity are cash and cash equivalents provided by our operations and prior equity offerings. Cash consists primarily of cash on deposit with banks. Cash was $1.5 million and $6.1 million as of June 30, 2025, and December 31, 2024, respectively. As of June 30, 2025, the Company's current working capital, anticipated operating expenses and net losses, and the uncertainties surrounding its ability to raise additional capital as needed, raise substantial doubt as to whether existing cash and cash equivalents will be sufficient to meet its obligations as they come due within twelve months from the date the unaudited condensed interim consolidated financial statements were issued. 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.

Previous wording

Net cash used in operating activities in the three months ended March 31, 2025 was $2.7 million compared to net cash used in operating activities of $1.3 million for the three months ended March 31, 2024. Cash flows used in operating activities for the periods ended March 31, 2025 and 2024 were due primarily to operating expenses exceeding the gross profit for the periods.

Current wording

Net cash used in operating activities in the six months ended June 30, 2025 was $5.6 million compared to net cash used in operating activities of $1.6 million for the six months ended June 30, 2024. Cash flows used in operating activities for the periods ended June 30, 2025 and 2024 were due primarily to operating expenses exceeding the gross profit for the periods.

Previous wording

Net cash provided by financing activities for the three months ended March 31, 2025 totaled $nil compared to $1.2 million for the three months ended March 31, 2024. During the three months ended March 31, 2025, net borrowings on the credit facilities in Germany through the Company's Phatebo subsidiary were $nil. Cash flows provided from financing activities for the period ending March 31, 2024 were due to net borrowings on the credit facilities in Germany through the Company's Phatebo subsidiary.

Current wording

Net cash provided by financing activities for the six months ended June 30, 2025 totaled $1.5 million compared to $3.4 million for the six months ended June 30, 2024. Cash flows provided from financing activities for the period ending June 30, 2025 were due to the sale of common shares of the Company in May 2025 as well as net borrowings on the credit facilities in Germany through the Company's Phatebo subsidiary. Cash flows provided from financing activities for the period ending June 30, 2024 were due to the sale of common shares of the Company in April 2024 as well as net borrowings on the credit facilities in Germany through the Company's Phatebo subsidiary.

Previous wording

Cash provided (used) in Investing Activities

Current wording

Cash used in Investing Activities

Previous wording

Net cash provided by investing activities for the three months ended March 31, 2025 totaled $0.4 million compared to net cash used in investing activities during the three months ended March 31, 2024 of $0.1 million. Cash flows provided by investing activities for the period ended March 31, 2025 were primarily related to the acquisition of United. Cash flows used in investing activities for the period ended March 31, 2024 were primarily related to the purchases of property, plant and equipment.

Current wording

Net cash used in investing activities for the six months ended June 30, 2025 totaled $0.6 million compared to net cash used in investing activities during the six months ended June 30, 2024 of less than $0.1 million. Cash flows used in investing activities for the period ended June 30, 2025 were primarily related to the acquisition of digital assets. Cash flows used in investing activities for the period ended June 30, 2024 were primarily related to the purchases of property, plant and equipment.

Previous wording

As of March 31, 2025, we had working capital of $0.6 million, including $3.7 million of cash. The Company's primary cash flow needs are for the development of its operating activities, administrative expenses and for general working capital to support growing sales with related receivables and payables.

Current wording

As of June 30, 2025, we had working capital of ($0.6) million, including $1.5 million of cash. The Company's primary cash flow needs are for the development of its operating activities, administrative expenses and for general working capital to support growing sales with related receivables and payables.

Previous wording

Our continued existence is dependent on our ability to generate positive cash flows through synergies within our operations, expanding our production capacity and geographic footprint, exploring strategic partnerships, and pursuing accretive acquisitions to supplement our organic growth. We are committed to attaining a level of sustained growth that will effectively offset our overhead costs, thereby paving the path to achieving profitability. We will be required in the future to raise additional capital through either equity or debt financings. To date, we have raised capital through multiple equity offerings. There were no equity offerings in the periods ended March 31, 2025 and March 31, 2024. On May 2, 2025, the Company closed a private placement offering of 3,133,011 units of the Company at a price of $0.30 per unit for gross proceeds of $1.2 million, of which the Company immediately invested $1.0 million in cryptocurrencies. On December 16, 2024, the Company closed a registered direct offering of 2,850,000 units of the Company at a price of $1.25 per unit for gross proceeds of $3.6 million. On December 10, 2024 and December 11, 2024, the Company sold an aggregate of 425,000 of the Company's common shares at a price of $1.67 per Common Share for gross proceeds of $0.7 million pursuant to separate subscription agreements entered into between the Company and certain institutional investors. On April 8, 2024, the Company closed a registered direct offering of 1,700,000 Common Shares of the Company at a price of $1.90 per Common Share for gross proceeds of $3.2 million.

Current wording

Our continued existence is dependent on our ability to generate positive cash flows through synergies within our operations, expanding our production capacity and geographic footprint, exploring strategic partnerships, and pursuing accretive acquisitions to supplement our organic growth. We are committed to attaining a level of sustained growth that will effectively offset our overhead costs, thereby paving the path to achieving profitability. We will be required in the future to raise additional capital through either equity or debt financings. To date, we have raised capital through multiple equity offerings. On May 2, 2025, the Company closed a private placement offering of 3,133,011 common shares of the Company at a price of $0.30 per common share and 726,992 pre-funded warrants at a price of $0.2999 per warrant for gross proceeds of $1.2 million, of which the Company immediately invested $1.0 million in digital assets. On December 16, 2024, the Company closed a registered direct offering of 2,850,000 units of the Company at a price of $1.25 per unit for gross proceeds of $3.6 million. On December 10, 2024 and December 11, 2024, the Company sold an aggregate of 425,000 of the Company's common shares at a price of $1.67 per common share for gross proceeds of $0.7 million pursuant to separate subscription agreements entered into between the Company and certain institutional investors. On April 8, 2024, the Company closed a registered direct offering of 1,700,000 common shares of the Company at a price of $1.90 per common share for gross proceeds of $3.2 million. There were no other equity offerings in the periods ended June 30, 2025 and June 30, 2024.

Previous wording

In addition to the equity offerings described above, the Company also has access to credit facilities through its Phatebo subsidiary. The credit facilities total*€2.4 million with three different German banks and are secured by default guarantees. On March 31, 2025, the outstanding amount was€*2.0 million ($2.2 million USD) and was due within the next twelve months. The credit facilities have interest rates ranging from 5.15% to 5.19% per year and does not have a set maturity date. The interest rate is reset every time a new amount is drawn.

Current wording

In addition to the equity offerings described above, the Company also has access to credit facilities through its Phatebo subsidiary. The credit facilities total*€2.4 million with three different German banks and are secured by default guarantees. On June 30, 2025, the outstanding amount was€2.3* million ($2.7 million USD) and was due within the next twelve months. The credit facilities have interest rates ranging from 4.76% to 5.19% per year and does not have a set maturity date. The interest rate is reset every time a new amount is drawn.

Previous wording

As part of the acquisition of United on February 4, 2025, 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 issued to a group of shareholders of United on January 30, 2025. The promissory notes require the first payments of principal and interest to be made in February 2026. As of March 31, 2025, the total outstanding amount of these promissory notes was $2.2 million, $0.1 million of which is due within the next 12 months as of the date hereof. Of the total amount outstanding at March 31, 2025, $1.3 million was owed to the Related Parties. These promissory notes were secured by payments guarantees and a default interest rate of 11% upon default.

Current wording

As part of the acquisition of United on February 4, 2025, 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 issued to a group of shareholders of United on January 30, 2025. The promissory notes require the first payments of principal and interest to be made in February 2026. As of June 30, 2025, the total outstanding amount of these promissory notes was $2.2 million, $0.3 million of which is due within the next 12 months as of the date hereof. Of the total amount outstanding at June 30, 2025, $1.9 million was owed to related parties. These promissory notes were secured by payments guarantees and a default interest rate of 11% upon default.

Previous wording

There were no new accounting standards issued during the three months ended March 31, 2025 that impacted the Company. See Note 3, Significant Accounting Policies, of the notes to the consolidated financial statements for the year ended December 31, 2024 for a discussion of recently issued accounting standards.

Current wording

Except as discussed below, there were no new accounting standards issued during the six months ended June 30, 2025 that impacted the Company. See Note 3, Significant Accounting Policies, of the notes to the consolidated financial statements for the year ended December 31, 2024 for a discussion of recently issued accounting standards.