Tilray Brands Inc

Notes to Consolidated Financial Statements

Note1. Basis of presentation and summary of significant accounting policies

The accompanying unaudited interim consolidated financial statements reflect the accounts of the Company for the quarterly period ended* November 30, 2024* (the “Financial Statements”). The Financial Statements were prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they donot include all of the information and notes required by U.S. GAAP and should be read in conjunction with the audited consolidated financial statements (the “Annual Financial Statements”) included in the Company’s Annual Report on Form10-K for the fiscal year ended* May 31, 2024* (the “Annual Report”). These 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 arenot necessarily indicative of results for a full fiscal year.

These Financial Statements have been prepared on a going concern basis, which assumes that the Company will continue in operation for the foreseeable future and, accordingly, will be able to realize its assets and discharge its liabilities in the normal course of operations as they come due, under the historical cost convention except for certain financial instruments that are measured at fair value, as detailed in the Company’s accounting policies.

All amounts in the Financial Statements, notes and tables have been rounded to the nearest thousand, except par values and per share amounts, and unless otherwise indicated.

Certain items of the comparative figures have been changed to conform to the presentation adopted in the current period. In limited cases, certain line items that were previously aggregated have been disaggregated within the Consolidated Statements of Cash Flows for the periods presented.

Basis of consolidation

Subsidiaries are entities controlled by the Company. Control exists when the Company either has a controlling voting interest or is the primary beneficiary of a variable interest entity. The financial statements of all subsidiaries are included in the Financial Statements from the date that control commences until the date that control ceases. All intercompany balances and transactions have been eliminated on consolidation. A complete list of our subsidiaries that existed as of our most recent fiscal year end is included in the Annual Report.

Impairment of goodwill and indefinite-lived intangible assets

Goodwill and indefinite-lived intangible assets are tested for impairment annually, or more frequently when events or circumstances indicate that impairment* mayhave occurred. As part of the impairment evaluation, we mayelect to perform an assessment of qualitative factors. If this qualitative assessment indicates that it is more likely thannot* that the fair value of the indefinite-lived intangible asset or the reporting unit (for goodwill) is less than its carrying value, a quantitative impairment test to compare the fair value to the carrying value is performed. An impairment charge is recorded if the carrying value exceeds the fair value. The assessment of whether an indication of impairment exists is performed at the end of each reporting period and requires the application of judgment, historical experience, and external and internal sources of information. We make estimates in determining the future cash flows and discount rates in the quantitative impairment test to compare the fair value to the carrying value.

During the quarter, the Company identified an indicator of impairment with respect to its cannabis and beverage reporting units and performed an interim impairment test, and determined that the fair value of these reporting units was greater than their carrying amounts and thus$nil impairment expense was recognized. Within the beverage reporting unit, a reasonably possible change in any of the inputs within the determination of fair value wouldnot result in a material change to this determination ofno impairment expense recognized during the period ended* November 30, 2024.Within the cannabis reporting unit, a key input into the determination of fair value is estimated probabilities associated with legalization of cannabis within the United States and internationally. Changes to those probabilities resulting in continued delays in legalization of cannabis within the United States and internationally, or adverse regulatory changes to existing legislation, could have an unfavorable impact on the estimated future cash flows, and ultimately, the fair value of the cannabis reporting unit, which mayresult in a material change to the determination ofno* impairment expense recognized in future reporting periods.

Convertible notes receivable

Convertible notes receivable includes various investments in which the Company has the right, or potential right to convert the indenture into Common Stock of the investee and are classified as available-for-sale and are recorded at fair value. Unrealized gains and losses during the year, net of the related tax effect, are excluded from income and reflected in other comprehensive income (loss), and the cumulative effect is reported as a separate component of shareholders' equity until realized. We use judgement to assess convertible notes receivables for impairment at each measurement date. Convertible notes receivables are impaired when a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded in the consolidated statements of loss and comprehensive loss and a new cost basis for the investment is established. We also evaluate whether there is a plan to sell the security, or it is more likely thannot that we will be required to sell the security before recovery. If neither of the conditions exist, then only the portion of the impairment loss attributable to credit loss is recorded in the statements of loss and the remaining amount is recorded in other comprehensive income (loss).

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Earnings (loss) per share

Basic earnings (loss) per share is computed by dividing reported net income (loss) attributable to stockholders of Tilray Brands, Inc. by the weighted average number of common shares outstanding during the year. Diluted earnings (loss) per share is computed by dividing reported net income (loss) attributable to stockholders of Tilray Brands, Inc. by the sum of the weighted average number of common shares and the number of dilutive potential common share equivalents outstanding during the period. Potential dilutive common share equivalents consist of the incremental common shares issuable upon the exercise of vested share options, warrants, and RSUs and the incremental shares issuable upon conversion of the convertible debentures and similar instruments. Shares of Common Stock outstanding under the share lending arrangement entered into in conjunction with the TLRY27 Notes, see Note13 (Convertible debentures payable) are excluded from the calculation of basic and diluted earnings per share because the borrower of the shares is required under the share lending arrangement to refund any dividends paid on the shares lent.

In computing diluted earnings (loss) per share, common share equivalents arenot considered in periods in which a net loss is reported, as the inclusion of the common share equivalents would be anti-dilutive. For thethree months ended* November 30, 2024* and* November 30,* 2023, the dilutive potential common share equivalents outstanding consisted of the following:23,365,351 and 20,939,082 common shares from RSUs,3,060,318 and 6,280,065 common shares from share options,6,209,000 and 6,209,000 common shares for warrants and 58,757,057 and 77,181,260 common shares for convertible debentures, respectively.

Recently issued accounting pronouncementsnot* yet adopted*

In* August 2023,the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU")2023-05, Business Combination - Joint Venture Formations(Subtopic805*-60) Recognition and Initial Measurement (“ASU2023-05”), which is intended to address the accounting for contributions made to a joint venture. ASU2023-05 is effective for the Company beginning* June 1, 2026.*This update will be applied prospectively and the Company is currently evaluating the effect of adopting this ASU.

In* October**2023,* the FASB issued ASU2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative,which amends the disclosure or presentation requirements related to various subtopics in the FASB Accounting Standards Codification (the “Codification”). The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. If by June 30, 2027,the SEC hasnot removed the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the related amendment will be removed from the Codification and willnot become effective for any entity. The Company is currently evaluating the effect of adopting this ASU.

In* November**2023,* the FASB issued ASU2023-07, Segment Reporting (Topic280*) Improvements to Reportable Segment Disclosures,which requires public entities to disclose information about their reportable segments, including segments' significant expenses on an interim and annual basis. ASU2023*-07 is effective for the Company beginning with its fiscal year ended* May 31, 2025and will be disclosed retrospectively in the Financial Statements on Form10*-K filed with the SEC for such period. The Company is in the process of evaluating the impact of the financial statement disclosure requirements.

In* December 2023,the FASB issued ASU2023*-09, Income Taxes (Topic740*) Improvements to Income Tax Disclosures*, which requires public entities to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold on an annual basis. ASU2023-09 is effective for the Company beginning* June 1, 2025.*The Company is currently evaluating the effect of adopting this ASU.

In* November 2024,the FASB issued ASU2024*-03,* Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic220-40): Disaggregation of Income Statement Expenses,which requires disaggregated disclosure of income statement expenses for public business entities. ASU2024*-03 is effective for the Company beginning* June 1, 2025.*The Company is currently evaluating the effect of adopting this ASU.

In* November 2024,the FASB issued ASU2024*-04, Debt with Conversion and Other Options (Subtopic470*-20): Induced Conversions of Convertible Debt Instruments,which seeks to clarify the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. ASU2024*-04 is effective for the Company beginning* June 1, 2025.*The Company is currently evaluating the effect of adopting this ASU.

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Note2. Inventory

Inventory consisted of the following:

Note3. Capital assets

Capital assets consisted of the following:

Assets held for sale consisted of the following:

During the fiscal year ended* May 31, 2024,the Company classified the following assets from its Cannabis reporting segment as held for sale, including its Quebec cultivation facility, the Fort Collins, CO partially vacant warehouse facility, and the Broken Coast former cultivation facility located in Duncan, B.C. Following an assessment of facility capacity utilization, it was determined that these facilities would be exited and held for sale. It is expected that the sale of these assets will be completed withintwelve* months from the period in which they were classified as held for sale. Assets held for sale are measured at the lower of carrying amount and their fair value less costs to sell, and areno longer depreciated. Disposition of assets held for sale are recorded in the consolidated statement of loss and comprehensive loss, within the line, “Non-operating income (expense), net”.

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Note4. Leases

The table below presents the lease-related assets and liabilities recorded on the balance sheet.

The following table presents the future undiscounted payments associated with lease liabilities as of* November 30, 2024*:

Note5. Intangible Assets

Intangible assets consisted of the following items:

Included in licenses, permits & applications was $178,387 of indefinite-lived intangible assets as of* November 30, 2024*, compared to $182,851 as of* May 31, 2024*.

Expected future amortization expense for intangible assets as of* November 30, 2024* is as follows:

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Note6. Goodwill

The following table shows the carrying amount of goodwill by reporting units:

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Note7. Business a****cquisitions

Acquisition of Craft**Beverage Business Portfolio

On* September 29, 2023,*Tilray acquired a portfolio of beverage brands, assets and businesses comprising eight craft beer and beverage brands from Anheuser-Busch Companies, LLC, ("AB") including breweries and brewpubs associated with them (the “Craft Acquisition”). The acquired businesses/brands include Shock Top, Breckenridge Brewery, Blue Point Brewing Company,10 Barrel Brewing Company, Redhook Brewery, Widmer Brothers Brewing, Square Mile Cider Company, and HiBall Energy. The Company paid a total purchase price of $83,658 in cash, net of a working capital adjustment at closing of $1,342.

During the period ended* November 30, 2024,*the Company decreased the fair value of inventory by $500, increased the fair value of capital assets by $6,799, decreased the fair value of finance lease, right-of-use assets by $2,999 and increased accounts payable and accrued liabilities by $3,300 and thus completed the determination of the fair value of the net assets acquired. The table below summarizes the fair value of the assets acquired and liabilities assumed at the acquisition date:

In the event that the Craft Acquisition had occurred on* June 1, 2023,the Company would have had, on an unaudited proforma basis, additional net revenue of approximately $14,000 and $55,000 for thethree* andsix months ended* November 30,* 2023, respectively, and its consolidated net loss and comprehensive net loss would have increased by approximately $2,000 and $5,000 for thethree andsix months ended* November 30,* 2023, respectively. This unaudited pro forma financial information doesnot reflect the realization of any expected ongoing synergies relating to the integration of the Craft Acquisition.

Acquisition of Craft**Beverage Business Portfolio II

Effective* September 1, 2024,*the Company acquired four craft beer brands and breweries from Molson Coors Beverage Company ("Molson") including Atwater Brewery, Hop Valley Brewing Company, Terrapin Beer Co., and Revolver Brewing (the “Craft Acquisition II”). The purpose of the acquisition is to continue broadening Tilray's beverage brand strategy. In consideration for the acquisition, the Company paid a total purchase price of $23,079 in cash, which is subject to certain customary post-closing working capital adjustments.

The Company is in the process of assessing the fair value of the net assets acquired and, as a result, the fair value* may*be subject to adjustments pending completion of final valuations and post-closing adjustments. The table below summarizes the preliminary estimated fair value of the assets acquired and the liabilities assumed for the Craft Acquisition II at the effective acquisition date as follows:

In the event that the Craft Acquisition II had occurred on* June 1, 2023,the Company would have had, on an unaudited proforma basis, additional net revenue of approximately$nil and $13,700 for thethree* andsix months ended* November 30, 2024* and approximately $14,000 and $31,000 for thethree andsix months ended* November 30,* 2023, respectively, and its consolidated net loss and comprehensive net loss would have increased by approximately$nil and $4,000 for thethree andsix months ended* November 30, 2024* and approximately $5,500 and $9,600 for thethree andsix months ended* November 30,* 2023, respectively. This unaudited pro forma financial information doesnot reflect the realization of any expected ongoing synergies relating to the integration of the Craft Acquisition II.

Note8. Convertible notes receivable

Convertible notes receivable is comprised of the following:

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MedMen Convertible Note

On* August 31, 2021,the Company issued 9,817,061 shares valued at $117,804 to acquire 68% interest in Superhero Acquisition L.P. (“SH Acquisition”), which purchased a senior secured convertible note issued by MedMen (the "MedMen Convertible Note"), together with certain associated warrants to acquire Class B subordinate voting shares of MedMen, in the principal amount of $165,799. The MedMen Convertible Note bears interest at the Secured Overnight Financing Rate ("SOFR") plus 6%, with a SOFR floor of 2.5% with any accrued interest being added to the outstanding principal amount. The outstanding principal amount, together with accrued interest is to be paid on August 17, 2028,*the maturity date of the MedMen Convertible Note. SH Acquisition was also granted “top-up” rights enabling it (and its limited partners) to maintain its percentage ownership (on an “as-converted” basis) in the event that MedMen issues equity securities. SH Acquisition’s ability to convert the MedMen Convertible Note and exercise the Warrants is dependent upon U.S. federal legalization of cannabis or Tilray’s waiver of such requirement as well as any additional regulatory approvals.

During thethree andsix months ended* November 30, 2024* there wereno additional changes in fair value and the note remained valued at $32,000 as of* November 30, 2024compared to $32,000 as of May 31, 2024.*

The Company didnot derive any revenue or cash from MedMen's operations, and fully complies with all limitations imposed by applicable U.S. law and regulations in connection with its ownership of the MedMen Convertible Note. In addition, since the fiscal year ended* May 31, 2024,the Company hasnot recognized any interest income on the MedMen Convertible Note, nor did the Company recognize any interest income for thethree* andsix months ended* November 30, 2024*, which would have increased its value.

Note9. Long term investments

Long term investments consisted of the following:

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Note10. Bank indebtedness

Aphria Inc., a subsidiary of the Company, has an operating line of credit in the amount of C$1,000, which bears interest at the lender’s prime rate plus 75 basis points. As of* November 30, 2024*, the Company hasnot drawn on the line of credit. The operating line of credit is secured by a security interest on certain real property located at265 Talbot St. West, Leamington, Ontario.

CC Pharma GmbH, a subsidiary of the Company, hastwo operating lines of credit in the amounts of€7,000 and€500. These lines bear interest at Euro Short-Term Rate ("ESTR") plus 2.50% and Euro Interbank Offered Rate ("EURIBOR") plus 4.00%, respectively. As of* November 30, 2024*, a total of€7,313 ($7,751) was drawn down from the total available credit of€7,500. The operating line of credit for€7,000 is secured by an interest in the inventory of CC Pharma GmbH as well as the Densborn, Germany production facility and underlying real property. The operating line of credit for€500 is unsecured.

American Beverage Crafts Group Inc. ("ABC Group"), a subsidiary of the Company, has a revolving credit facility of $30,000, which bears interest at SOFR plus an applicable margin. As of* November 30, 2024*, the Company has drawn down $10,000 on the revolving line of credit. The revolving credit facility is secured by ABC Group's assets and includes a corporate guarantee by a subsidiary of the Company.

Note11. Accounts payable and accrued liabilities

Accounts payable and accrued liabilities are comprised of:

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Note12. Long-term debt

The following table sets forth the net carrying amount of long-term debt instruments:

Note13. Convertible debentures payable

The following table sets forth the net carrying amount of the convertible debentures payable:

TLRY27* Notes*

The TLRY27 convertible debentures were issued on* May 30, 2023and on June 9, 2023by way of overallotment, in the principal amount of $172,500 (the “TLRY27* Notes”). The TLRY27 Notes bear interest at a rate of 5.20% per annum, payable semi-annually in arrears on* June 15and December 15of each year, and mature on June 15, 2027,unless earlier converted. The TLRY27* Notes are Tilray’s general unsecured obligations and rank senior in right of payment to all of Tilray’s indebtedness that is expressly subordinated in right of payment to the notes; equal in right of payment with any of Tilray’s unsecured indebtedness that isnot so subordinated, including TLRY23 and APHA24, effectively junior in right of payment to any of Tilray’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables but excluding intercompany obligations) of Tilray’s current or future subsidiaries. Noteholders will have the right to convert their TLRY27 Notes into shares of Tilray’s Common Stock at their option, at any time, until the close of business on thesecond scheduled trading day immediately before* June 15, 2027.The initial conversion rate is 376.6478 shares per $1,000 principal amount of TLRY27* Notes, which represents a conversion price of approximately $2.66 per share. The conversion rate and conversion price will be subject to adjustment upon the occurrence of certain events.

The TLRY27 Notes will be redeemable, in whole andnot in part, at Tilray’s option at any time on or after* June 20, 2025at a cash redemption price equal to the principal amount of the notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, but only if the last reported sale price of Tilray’s Common Stock exceeds 130% of the conversion price for a specified period of time. If certain corporate events that constitute a fundamental change occur, then, subject to a limited exception, noteholders mayrequire Tilray to repurchase their TLRY27* Notes for cash. The repurchase price will be equal to the principal amount of the notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the applicable repurchase date. In connection with the Company’s offering of the TLRY27 Notes, the Company entered into a share lending agreement with an affiliate of Jefferies LLC (the “Share Borrower”), pursuant to which it lent to the Share Borrower 38,500,000 shares of the Company’s Common Stock (the "Borrowed Shares"). The Borrowed Shares were newly-issued shares, will be held as treasury shares until the expiration or early termination of the share lending agreement and* maybe used by purchasers of the TLRY27* Notes to sell up to 38,500,000 shares of the Company’s Common Stock. The fair value of the share lending agreement has been recorded as part of the unamortized discount on the debenture. The Company expects that the selling stockholders will use their position created by such sales to establish their initial hedge with respect to their investments in the TLRY27 Notes. The Company didnot receive any proceeds from the sale of the Borrowed Shares.

On* September 12, 2024and November 4, 2024**,* the Company exchanged $7,500 and $9,000 of its TLRY27 Notes for cancellation, respectively, by issuing 10,034,635 Common Stock and paying $290 of cash to settle both principal and accrued interest. Upon exchanging the TLRY27 Notes, a portion of the settlement consideration was allocated to the equity component of the instrument and was recognized as a $4,931 reduction of additional paid-in capital in the Consolidated Statements of Changes in Equity. Additionally, this repurchase resulted in a gain of $679 which was recorded in other non-operating (losses) gains, net as shown in Note24 (Non-operating income (expense)). Following consummation of the exchange, the number of outstanding Borrowed Shares of Common Stock was reduced by 3,682,609 shares which were then returned as Treasury Stock. As of* November**30,* 2024 and* May 31, 2024,*a total of 34,817,391 and 38,500,000 shares remained outstanding under the share lending arrangement, respectively.

During thethree andsix months ended* November 30, 2024*, the Company recognized interest expense of $2,133 and $4,375 and accretion of amortized discount interest of $2,919 and $5,985 respectively. During thethree andsix months ended* November 30,* 2023, the Company recognized interest expense of $2,423 and $4,485 and accretion of amortized discount interest of $2,829 and $5,624.

As at* November 30, 2024,there was $156,000 principal outstanding compared to $172,500 principal outstanding as at May 31,*2024.

APHA24* Notes*

The APHA24 convertible debentures, were entered into in* April 2019,in the principal amount of $350,000, bore interest at a rate of 5.25% per annum, and were payable semi-annually in arrears on June 1and December 1of each year, and matured on June 1, 2024 (the "APHA24* Notes"). On* June 1, 2024,the Company repaid the remaining principal of the APHA24* Notes in cash upon maturity.

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Note14. Warrant liability

As of* November 30, 2024* and* May 31, 2024,there were 6,209,000 warrants outstanding, with an original exercise price of $5.95 per warrant, expiring September 17, 2025.*Each warrant is exercisable forone Common Stock of the Company.

The warrants contain anti-dilution price protection features, which adjust the exercise price of the warrants if the Company subsequently issues Common Stock at a price lower than the exercise price of the warrants. In the event additional warrants or convertible debt are issued with a lower and/or variable exercise price, the exercise price of the warrants will be adjusted accordingly. During thesix months ended* November 30, 2024*, the Company issued shares of its Common Stock which triggered the anti-dilution price protection feature and, accordingly, lowered the exercise price of each warrant to $1.29. These warrants are classified as liabilities as they are to be settled in registered shares, and the registration statement is required to be active, unless such shares* maybe subject to an applicable exemption from registration requirements. The holders, at their sole discretion, mayelect to affect a cashless exercise, and be issued exempt securities in accordance with Section3*(a)(9) of the1933 Act. In the event the Company doesnot maintain an effective registration statement, the Company* maybe required to pay a daily cash penalty equal to 1% of the number of shares of Common Stock due to be issued multiplied by any trading price of the Common Stock between the exercise date and the share delivery date, as selected by the holder. Alternatively, the Company maydeliver registered Common Stock purchased by the Company in the open market. The Company mayalso be required to pay cash if it doesnot* have sufficient authorized shares to deliver to the holders upon exercise.

Using the Black Scholes pricing model (Level3), the Company has estimated the fair value of the warrants outstanding as of* November 30, 2024* to be $0.273 per warrant. In applying the Black Scholes pricing model (Level3), the Company utilized the following assumptions: a risk-free interest rate of 3.23%, an expected volatility of 50%, an expected term of 0.80 years, strike price of $1.29 and fair value of Common Stock of $1.34.

The expected volatility assumption utilized in the Black Scholes pricing model (Level3) was calculated using both the historical and implied volatility of the Company’s Common Stock.

Note15. Stockholders' equity

Issued and outstanding

Pursuant to its Fourth Amended and Restated Certificate of Incorporation, the total number of shares that the Company is authorized to issue is 1,208,000,000 shares, of which 1,198,000,000 shares shall be Common Stock (the “Common Stock”), and 10,000,000 shares of which shall be Preferred Stock (the “Preferred Stock”). As of* November 30, 2024*, the Company had issued and outstanding 929,257,945 shares of Common Stock,3,682,609 shares of Treasury Stock (the “Treasury Stock”) andno Preferred Stock. Historically, the Company has issued shares of its Common Stock in consideration for acquisitions and other strategic transactions, settlement of convertible notes, settlement of litigation claims, in connection with public offerings and as payment of dividends to non-controlling interests for profit distributions.

During thesix months ended* November 30, 2024*, the Company issued the following shares of Common Stock:

During thesix months ended* November 30, 2024*, the Company granted 13,346,266 time-based Restricted Stock Units ("RSUs"), andno performance-based RSUs. During thesix months ended* November 30,2023, the Company granted 11,588,537 time-based RSUs and 7,566,146 performance-based RSUs. In connection with the 7,566,146 performance-based RSUs that were issued, the performance conditions associated with such awards willnot be determined and adopted until a future date and, therefore, the grant date hasnot been met for accounting purposes andno amounts have been recorded within the Consolidated Statement of Loss. The Company's total stock-based compensation expense from RSUs incurred for thethree andsix months ended November 30, 2024* was $7,237 and $14,154, respectively, compared to $8,201 and $16,458 for thethree andsix months ended* November 30,* 2023, respectively.

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Note16. Accumulated other comprehensive income (loss)

Accumulated other comprehensive income (loss) is comprised of foreign currency translation gain (loss) as follows:

Note17. Non-controlling interests

The following are majority-owned subsidiaries of the Company and the percentage of ownership interest maintained by the Company is set forth in the parenthetical: SH Acquisition (68%), CC Pharma Nordic ApS (75%), Aphria Diamond (51%), and Colcanna S.A.S. (90%).

The following table provides a summary of certain balance sheet information before intercompany eliminations relating to the above referenced majority-owned subsidiaries of the Company in which there is a non-controlling interest as of* November 30, 2024*:

The following table provides a summary of certain balance sheet information before intercompany eliminations relating to the above referenced majority-owned subsidiaries of the Company in which there is a non-controlling interest as of* May 31, 2024*:

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The following table provides a summary of certain income statement information before intercompany eliminations relating to the above referenced majority-owned subsidiaries of the Company in which there is a non-controlling interest for thesix months ended* November 30, 2024*:

The following table provides a summary of certain income statement information before intercompany eliminations relating to the above referenced majority-owned subsidiaries of the Company in which there is a non-controlling interest for thesix months ended* November 30,* 2023:

Note18. Income taxes

The determination of the Company’s overall effective tax rate requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws. The effective tax rate reflects the income earned and taxed in various United States federal, state, and foreign jurisdictions. Tax law changes, increases, and decreases in temporary and permanent differences between book and tax items, valuation allowances against the deferred tax assets, stock compensation, and the Company’s change in income in each jurisdiction all affect the overall effective tax rate. It is the Company’s practice to recognize interest and penalties related to uncertain tax positions in income tax expense.

The Company reported income tax expense of $2,036 and $2,922 for thethree andsix months ended* November 30, 2024*, and income tax (recovery) expense of $(3,380) and $3,884 for thethree andsix months ended* November 30,* 2023. The income tax benefit in the current period varies from the US statutory income tax rate and prior period primarily due to the geographical mix of earnings and losses withno tax benefit resulting from valuation allowances in certain jurisdictions.

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Note19. Commitments and contingencies

Purchase and other commitments

The Company has financial commitments on long-term debt, refer to Note12 (Long-term debt), convertible notes, refer to Note13 (Convertible debentures payable), material purchase commitments and construction commitments as follows:

Legal proceedings

In the ordinary course of business, we are at times subject to various legal proceedings and disputes, including the proceedings specifically discussed below. We assess our liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. Where it is probable that we will incur a loss and the amount of the loss can be reasonably estimated, we record a liability in our consolidated financial statements. These legal reserves* maybe increased or decreased to reflect any relevant developments on a quarterly basis. Where a loss isnot* probable or the amount of loss isnot estimable, we donot accrue legal reserves. While the outcome of legal proceedings is inherently uncertain, based on information currently available and available insurance coverage, our management believes that it has established appropriate legal reserves. Any incremental liabilities arising from pending legal proceedings arenot expected to have a material adverse effect on our consolidated financial position, consolidated results of operations, or consolidated cash flows. However, it is possible that the ultimate resolution of these matters, if unfavorable,* may*be material to our consolidated financial position, consolidated results of operations, or consolidated cash flows.

There have beenno material changes in the legal proceedings since our Annual Report on Form10-K for the fiscal year ended* May 31, 2024*, except with respect to the legal proceedings disclosed below:

Authentic Brands Group Related Class Action (New York, United States)

On* May 4, 2020,Ganesh Kasilingam filed a lawsuit in the United States District Court for the Southern District of New York (“SDNY”), against Tilray Brands, Inc., Brendan Kennedy and Mark Castaneda, on behalf of himself and a putative class, seeking to recover damages for alleged violations of Sections10*(b) and20(a) of the Securities Exchange Act of1934 (the “Kasilingam litigation”). The complaint alleges that Tilray and the individual defendants overstated the anticipated advantages of the Company’s revenue sharing agreement with Authentic Brands Group (“ABG”), announced on* January 15, 2019,and that the plaintiff suffered losses when Tilray’s stock price dropped after Tilray recognized an impairment with respect to the ABG deal on March 2, 2020.*

On* September 27, 2021,the U.S. District Court entered an Opinion & Order granting the Defendants’ motion to dismiss the complaint in the Kasilingam litigation without prejudice. On December 3, 2021,the lead plaintiff filed asecond* amended complaint alleging similar claims against Tilray and Brendan Kennedy. The Defendants successfully moved to dismiss thesecond amended complaint on* February 2, 2022.In dismissing thesecond* amended complaint, the court granted the Plaintiff leave to amendone final time. On* September 27, 2023,*the Plaintiff filed its Third Amended Complaint.

On* September 30, 2024,*the U.S. District Court entered an Opinion & Order granting the Defendants’ motion to dismiss the Third Amended Complaint in the Kasilingam litigation with prejudice.

In the Matter of an Arbitration Between: K. Dickson v. Tilray, Inc.

In2021, Ms. Dickson, the former President of Manitoba Harvest, a wholly-owned subsidiary of Tilray, commenced an arbitration in Minneapolis, Minnesota against Tilray, alleging that Tilray materially breached her Employment Agreement with Tilray and asserted certain Washington statutory wage claims.

On* March 17, 2023,the arbitrator awarded Dickson $3,734 in damages, plus amounts for pre-judgment, and double damages under a Washington state wage payment statute (the “Arbitration Award”). Tilray’s counterclaim was denied by the Arbitrator. On May 23, 2023,the arbitrator issued a supplemental award which provided that Dickson was entitled to recover attorney fees and costs from Tilray in connection with the arbitration. On February 27, 2024,the U.S. District Court for the Western District of Washington dismissed as moot Tilray’s petition to vacate, modify or correct the Arbitration Award, granting Dickson’s responding motion to dismiss on the basis that the U.S. District Court for the Western District of Washington lacked personal jurisdiction over Dickson. On March 15, 2024,Tilray filed its notice of appeal of the decision of the U.S. District Court for the Western District of Washington to the U.S. Court of Appeals for the Ninth Circuit. On August 8, 2024,the District Court in Minnesota confirmed the Arbitration Award. A judgment on the Arbitration Award was entered by the Court on August 12, 2024,and, following a motion by Dickson to correct the judgment, became final on September 27, 2024.Tilray filed a notice of appeal to the U.S. Court of Appeals for the Eighth Circuit. In October 2024,*the parties entered into a settlement agreement and Tilray paid Dickson the amount of the Arbitration Award, concluding the litigation.

Nabil Salama v. Tilray Brands, Inc., et. al

On* November 6, 2024,Tilray disclosed in a Current Report on Form8*-K that a lawsuit was commenced against it and its directors, captioned Nabil Salama v. Tilray Brands, Inc., et. al (C.A.No. 2024-1124-JTL).

This lawsuit was filed on* October 31, 2024on behalf of a putative class of stockholders and alleged that (a) Tilray’s definitive proxy statement for its2024* Annual Meeting of Stockholders (the*“2024* Proxy Statement”) incorrectly applied a majority-of-votes-cast voting standard for approval of the proposal to increase the number of shares of Common Stock authorized for issuance (the*“2024* Authorized Shares Proposal”), (b) the proposal increasing the number of shares of Common Stock authorized for issuance (the*“2023* Authorized Shares Proposal” and together with the2024 Authorized Shares Proposal, the “Authorized Shares Proposals”) wasnot validly approved by the stockholders under a majority-of-votes-cast voting standard, and any related issuances of Common Stock were and arenot validly authorized, and (c) the named directors of Tilray have breached their fiduciary duties by failing to make accurate disclosures regarding the Authorized Shares Proposals in the2024 Proxy Statement and2023 Proxy Statement.

On* November 27, 2024,*the Court of Chancery of the State of Delaware ruled in favor of Tilray and granted summary judgment for Tilray and its directors. Specifically, the Court held that Tilray correctly applied a majority-of-votes-cast voting standard to its Authorized Shares Proposals.

On* December 4, 2024,*Plaintiff filed a notice of appeal from the Court’s order granting summary judgment. Tilray intends to contest this appeal, which it believes to be without merit.

Summary of litigation accruals

As described in Note11 (Accounts payable and accrued liabilities), the total estimated litigation expense accrual included in accrued liabilities as of* November 30, 2024* and* May 31, 2024*was $19,610. and $24,378 respectively. This estimated accrual is intended to cover various ongoing litigation matters with probable losses that can be reasonably estimated.

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Note20. Net revenue

The Company reports Net revenue infour reporting segments: beverage, cannabis, distribution, and wellness. Net Revenue for thethree andsix months ended* November 30, 2024* and* November 30, 2023*were as follows:

Note21. Cost of goods sold

The Company reports Cost of goods sold infour reporting segments: beverage, cannabis, distribution, and wellness. Cost of goods sold for thethree andsix months ended* November 30, 2024* and* November 30, 2023*were as follows:

Note22. General and administrative expenses

General and administrative expenses for thethree andsix months ended* November 30, 2024* and* November 30, 2023*were as follows:

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Note23. Restructuring charges

In connection with the execution of our acquisition strategy and strategic transactions, the Company has incurred restructuring and exit costs associated with the integration efforts of these transactions. In connection with these efforts, the Company recognized $6,869 and $11,116 of restructuring charges for thethree andsix months ended* November 30, 2024* compared to $2,655 and $3,570 for the prior year period. All restructuring plans are approved at the executive level, and their associated expenses are recognized in the period in which the plan is committed. All amounts incurred as of* November 30, 2024* have been paid.

Within the Cannabis segment, our restructuring costs predominantly related to the HEXO acquisition, which are expected to be completed within24 months from the original acquisition, which occurred* June 2023.In thesix* months ended* November 30, 2024,we recognized $5,892 of expenses related to employee termination severance and benefits and other costs related to the conversion of the HEXO Quebec cultivation facility from cannabis to produce (which is currently held for sale), the optimization of our Redecan facilities, and $619 of restructuring charges related to the remaining costs of exiting the Truss facility following its sale to athird* party in the fiscal year ended* May 31, 2024.Additionally, the Company recognized $357 of cost associated winding down the Fort Collins warehouse (which is currently held for sale), and $649 of cost associated with the winding down of our Avanti facility, the closure of which was announced during the quarter ended November 30, 2024*.

Within the beverage segment, the Company recognized $990 of expenses related to employee termination severance and benefits and $791 of costs associated with the consolidation of production sites through the integration of the Craft Acquisition and the Craft Acquisition II. Additionally, the Company recognized $500 of restructuring charges related to terminating a legacy storage agreement from the Craft Acquisition. We expect to transition to a new storage facility in thefourth quarter of fiscal year* May 31, 2025.*

Within the distribution segment, the Company recognized $234 of restructuring charges related to the divestiture of its retail pharmacy location in Argentina.

Lastly, for thethree andsix months ended* November 30, 2024*, the Company recognized $1,084 of costs associated with the investment held in Superhero Acquisition Corp. as a result of MedMen’s ongoing restructuring and liquidation undertakings.

Note24. Non-operating income (expense), net

Non-operating income (expense), net for thethree andsix months ended* November 30, 2024* and* November 30, 2023*were as follows:

The other non-operating (losses) gains, net for thethree andsix months ended* November 30, 2024*, were losses of ($293) and ($185), respectively. The other non-operating (losses) gains, net were mainly comprised of a gain of $679 resulting from the exchange transaction of the TLRY27 Note, see Note17 (Convertible debentures payable) and a loss of ($950) to settle outstanding notes with the non-controlling interest shareholder.

Note25. Fair value measurements

Financial instruments

The Company's classification of its financial instruments are described in Note3 (Significant accounting policies) in the Notes to our Annual Financial Statements.

The carrying values of marketable securities, accounts receivable, bank indebtedness and accounts payable and accrued liabilities approximate their fair values due to their short periods to maturity.

On* November 30, 2024* and* May 31, 2024*, the Company had long-term debt of $2,950 and $3,568, respectively, and the principal portion of convertible debentures payable of $156,000 and $172,830, respectively, subject to fixed interest rates. The Company’s long-term debt is valued based on discounting the future cash outflows associated with the long-term debt. The discount rate is based on the incremental premium above market rates for the U.S. Department of the Treasury securities of similar duration. In each period thereafter, the incremental premium is held constant while the U.S. Department of the Treasury security is based on the then current market value to derive the discount rate.

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The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of* November 30, 2024* and* May 31, 2024* and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value:

The Company’s financial assets and liabilities required to be measured on a recurring basis are its convertible notes receivable, equity investments measured at fair value, convertible debentures measured at fair value, acquisition-related contingent consideration, and warrant liability.

Convertible notes receivable and long-term investments are recorded at fair value. The estimated fair value is determined using, among others, the Black Scholes option pricing model, probability of legalization and is classified as Level3.

Convertible debentures payable are recorded at fair value when elected or required under US GAAP. Specifically, the APHA24 instrument's estimated fair value was determined using the Black-Scholes option pricing model and was classified as Level3.

Certain equity investments recorded at fair value have quoted prices in active markets for identical assets and are classified as Level1. The Company classified securities with observable inputs as Level2 and without a quoted market price as Level3.

The warrants associated with the warrant liability are classified as Level3 derivatives. Consequently, the estimated fair value of the warrant liability is determined using the Black-Scholes pricing model. Until the warrants are exercised, expire, or other facts and circumstances lead the warrant liability to be reclassified to stockholders’ equity, the warrant liability (which relates to warrants to purchase shares of Common Stock) is marked-to-market each reporting period with the change in fair value recorded as the change in fair value of warrant liability within the consolidated statements of loss and comprehensive loss. Any significant adjustments to the unobservable inputs disclosed in the table below would have a direct impact on the fair value of the warrant liability.

A portion of the consideration to be paid in connection with the Company’s acquisition of Montauk Brewing is contingent upon the achievement of certain financial measures as of* December 2025.If achieved, such contingent consideration is payable in cash. The contingent consideration amount was estimated by applying a probability of achievement of 100% on the $15,000 sales earn-out component and 0% on the remaining criteria, which isnot* expected to be achieved. The unobservable inputs into the future expected cash outflows result in a fair value measurement classified as Level3.

During thesix months ended* November 30, 2024*, a decrease in fair value of$nil was recognized compared to a decrease of fair value of $10,584 in the period ended* November 30,* 2023 for the contingent consideration from the SweetWater acquisition as a result ofnot achieving the incentive targets.

The balances of assets and liabilities categorized within Level3 of the fair value hierarchy measured at fair value on a recurring basis are reconciled, as follows:

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The unrealized gain (loss) on fair value for the convertible debenture, the warrant liability, contingent consideration, and debt securities classified under available-for-sale method is recognized in the consolidated statements of loss and comprehensive loss using the following inputs:

Items measured at fair value on a non-recurring basis

The Company's prepaids and other current assets, long lived assets, including property and equipment, goodwill and intangible assets are measured at fair value when there is an indicator of impairment and are recorded at fair value only when an impairment charge is recognized.

Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. There have beenno changes to the Company’s capital management approach in the period. The Company considers its cash and cash equivalents and marketable securities as capital.

Note26. Segment reporting

Information reported to the Chief Operating Decision Maker (“CODM”) for the purpose of resource allocation and assessment of segment performance focuses on the nature of the operations. The Company operates infour reportable segments: (1) beverage operations, which encompasses the production, marketing and sale of beverage and beverage products, (2) cannabis operations, which encompasses the cultivation, production, distribution, sale, co-manufacturing and advisory services of both medical and adult-use cannabis, (3) distribution operations, which encompasses the purchase and resale/distribution of pharmaceuticals products to wholesale and pharmacy customers, and (4) wellness products, which encompasses hemp foods and hemp-derived consumer products. This structure is in line with how our Chief Operating Decision Maker (“CODM”) assesses our performance and allocates resources.

Operating segments havenot been aggregated and asset information by segment isnot disclosed because such information isnot reported to or used by the Company’s CODM for purposes of assessing segment performance or allocating resources.

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Segment gross profit from external customers:

Channels of Cannabis revenue were as follows:

There wereno advisory services revenue associated with the HEXO commercial transaction agreements for thethree andsix months ended* November 30, 2024*. There were$nil and $1,500 in advisory services revenue associated with the HEXO commercial transaction agreements for thethree andsix months ended* November 30, 2023.*

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Geographic net revenue:

Geographic capital assets:

Major customers are defined as customers that are materially significant to the Company’s annual revenues. For thethree andsix months ended* November 30, 2024and2023*, there wereno major customers representing a material contribution to our quarterly revenues.

Note27. Subsequent Events

From* December**2,* 2024 to* December 11,*2024, the Company issued an additional 8,351,253 shares in connection with the Company’s ATM Program, thereby generating gross proceeds of $11,064. The Company netted proceeds of$10,843 after commissions and other fees associated with these issuances in the amount of $221.

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