Tilray Brands, Inc.
For the period ended Feb 28, 2026. Filed Apr 1, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Feb 28, 2026 · Filed Apr 1, 2026
TLRY$2.92+3.9%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-11-30; filed 2026-01-08.
0001437749-26-000902
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-02-28; filed 2026-04-01.
0001437749-26-010907
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 137 previous paragraphs and 159 current paragraphs.
77 unchanged; 52 reworded; 30 added; 8 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 47 previous and 50 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (30)
Current report
BrewDog Acquisitions:
Current report
Subsequent to the period ended February 28, 2026, on March 2, 2026, Tilray UK, a wholly owned subsidiary of the Company, entered into the BrewDog BASA. Under the BrewDog BASA, Tilray UK acquired certain business operations and assets of BrewDog plc and certain of its subsidiary undertakings (collectively, the “BrewDog Group”) through a pre-packaged administration process in Scotland under the Insolvency Act 1986, with the intent for Tilray UK to carry on the acquired business operations and assets as a going concern. The assets acquired included the UK Brewery, the online business, the retail business, 11 of the BrewDog strategic brewpubs in Scotland, England and Ireland and all the intellectual property rights relating to the BrewDog brand, including well known sub-brands such as Punk IPA, Hazy Jane, Wingman, Elvis Juice and Dead Pony Club. The purchase price was £33.0 million (approximately $44.1 million).
Current report
In a separate transaction completed on March 9, 2026, the Company acquired BrewDog Brewing Australia Pty Ltd., which included BrewDog’s Australian brewery, along with two hospitality venues in Australia for a nominal consideration.
Current report
On March 16, 2026, Tilray BrewDog U.S., Inc., a wholly-owned subsidiary of the Company, entered into an asset purchase agreement to acquire certain strategic BrewDog assets in the U.S., including a brewery, pub, and hotel in Columbus, Ohio, as well as pubs located in New Albany, Ohio, Cleveland, Ohio, and Las Vegas, Nevada. The purchase price for BrewDog’s U.S. assets is equal to $9.3 million.
Current report
On March 23, 2026, the Company acquired 5 additional BrewDog brewpubs in Scotland and England for a purchase price of £0.3 million (approximately $0.5 million). See Note 26 (Subsequent Events).
Current report
One of the world’s most recognized names in craft beer, BrewDog is a brand-powered, vertically integrated beverage and hospitality platform. Founded in 2007, BrewDog quickly became one of the largest independent craft beer brands in the United Kingdom with its portfolio of iconic craft, premium and low and no alcohol beer brands, including Punk IPA, Hazy Jane, Lost Lager and Wingman. From its beginnings in the UK, it developed its strong global brand awareness through its global expansion via international breweries, localized brewpubs and strategic partnerships.
Current report
These acquisitions present an important step for the Company as it executes against its previously announced strategic initiative to expand its beverage platform into the international markets, The strong global awareness of the BrewDog brand, together with its international brewing infrastructure and experiential pubs, presents an opportunity for growth in the UK, Europe and previously untapped international markets, including the Asia Pacific region. Further, the acquisition of the BrewDog U.S. aligns with our “regional jewel” strategy as BrewDog has built a strong brand in Ohio, which supports and strengthens our presence in the Midwest and provides us with a highly visible presence in Las Vegas, including a flagship brewpub located on a premier stretch of the Las Vegas Strip.
Current report
Net revenue from our Beverage segment decreased to $42.6 million and to $148.4 million for the three and nine months ended February 28, 2026, compared to revenue of $55.9 million and $175.0 million for the prior year periods. The decline was primarily attributable to continued industry-wide challenges across the craft beer, spirits, and brewpub categories and broader competitive pressures, which resulted in lower volumes sold. Additionally, the decline was driven in part by margin‑focused actions, which reduced net revenue by approximately $3.0 million and $13.6 million during the three and nine month periods, respectively. Lastly, the HD-D9 category was negatively impacted by U.S. federal legislation that was recently enacted which will restrict the future production and sale of our HD‑D9 beverages and reduced net revenue by approximately $1.0 million during the three and nine month periods, respectively.
Current report
***Revenue from Canadian adult-use cannabis:***During the three and nine months ended February 28, 2026, our gross revenue from Canadian adult-use cannabis increased to $52.6 million and to $179.1 million, compared to gross revenue of $49.3 million and $165.6 million for the prior year periods, respectively. On a constant currency basis, our gross revenue from Canadian adult-use cannabis increased to $50.2 million and increased to $178.4 million for the three and nine months ended February 28, 2026, respectively. The currency adjusted increase in gross adult‑use revenue for the three month period was primarily driven by a $2.7 million increase in the traditional pre‑roll category, reflecting the successful launch of innovation SKUs, including Good Supply Double Dutchies. This growth was partially offset by a $2.1 million decline in the whole flower category, primarily due to the commencement of strain rotation within our cultivation program, which temporarily constrained supply. In addition, certain inventory was redirected to international markets, which would otherwise have generated approximately $0.9 million of revenue in the Canadian market. For the nine month period, the currency adjusted increase in gross adult‑use revenue was predominantly attributable to a $7.3 million increase in traditional pre‑rolls, driven by the aforementioned product innovations, and a $1.7 million increase in whole flower sales, as the strain rotation did not begin until our third quarter. Notably, the Company has continued to invest in its cultivation footprint, including the decision to restart cultivation at its Quebec facility, to support growing demand in both the Canadian and international markets. Given the higher margins generally realized on international cannabis sales, the Company may, when advantageous, continue to allocate inventory to international markets, which could negatively impact Canadian adult‑use and wholesale cannabis revenue in future periods as the Company continues to scale its infrastructure.
Current report
International cannabis revenue:** **Net revenue from International cannabis increased to $24.1 million and to $57.7 million for the three and nine months ended February 28, 2026, compared to net revenue of $13.9 million and $41.0 million for the prior year periods, respectively. On a constant currency basis, given the strengthening of the Euro against the U.S. Dollar when compared to the prior year quarter, net revenue from international cannabis increased to $21.4 million and increased to $53.1 million for the three and nine months ended February 28, 2026, respectively. The increase in net revenue from International cannabis markets during the three and nine months ended February 28, 2026, was primarily attributable to growth in the German medical cannabis market, which increased by $4.0 million and $9.8 million, respectively, the receipt of previously backlogged permits, and an enhanced supply chain. During the three month period, this growth was further supported by a $4.4 million increase in Poland, driven by patient adoption of an in‑person prescription model, and a $1.7 million increase in the United Kingdom through our targeted expansion into emerging markets. Despite increased gram equivalents sold, international cannabis revenue was negatively impacted by price compression of approximately $7.0 million and $16.0 million for the three and nine months ended February 28, 2026, respectively. Notwithstanding this pricing pressure, international cannabis sales continue to generate higher margins than Canadian cannabis sales, and the Company remains focused on optimizing its product mix and geographic allocation to maximize profitability.
Current report
Cannabis gross margin: For the three and nine months ended February 28, 2026, our cannabis segment generated gross margin of 40% and 38%, respectively, which decreased from 41% and remained consistent at 38% generated in the prior year periods, respectively. Although both cannabis net revenue and gross profit increased during the three and nine month periods, gross margin remained largely unchanged. This was primarily due to price compression in international markets, which negatively impacted international cannabis revenue during the three and nine month periods by approximately $7.0 million and $16.0 million, respectively, despite having increased the gram equivalents sold.
Current report
Salaries and wages remained consistent and increased by 3% during the three and nine months ended February 28, 2026, when compared to the prior year periods. Included in salaries and wages for the three and nine months ended February 28, 2026, were $0.5 million and $2.3 million, respectively, of retention payments compared to $1.5 million and $3.2 million for the prior year period, respectively. Additionally, period-over‑period variability was also impacted by changes in estimates related to discretionary compensation accruals.
Current report
Office and general increased by 34% and by 3% during the three and nine months ended February 28, 2026, when compared to the prior year period respectively. The increase in the three and nine months ended February 28, 2026 was primarily due to a $0.7 million increase in bad debt provisions within the distribution business, the inclusion of a full period of costs related to Craft Acquisition II, which was effective September 1, 2024 and contributed approximately $0.6 million to the period‑over‑period variance, and the absence of a $0.3 million property tax refund recorded in the prior year quarter.
Current report
A portion of the total consideration to be paid in connection with the Company’s acquisition of Montauk Brewing Company (“Montauk”) was contingent upon the achievement by Montauk of certain financial measures as of December 31, 2025. In the event that Montauk achieved either the pre-determined sales volume target or EBITDA target, then $15.0 million of contingent consideration would be deemed earned and payable. If both the sales volume target and the EBITDA target were achieved, an additional $3.0 million would be deemed earned and payable for a total contingent consideration payment of $18.0 million.
Current report
For the year ended, May 31, 2025, the Company assessed the estimated value of the contingent consideration liability as $15.0 million, which was estimated to be achieved based on management’s forecast, applying a probability of achievement of 100% for the sales volume target and 0% on the remaining criteria, which was not expected to be achieved as EBITDA targets were not forecasted to be met.
Current report
During the three months ended August 31, 2025, the Company reassessed the estimated fair value of the contingent consideration liability as $nil, based on subsequent information regarding Montauk’s operating results and revised expectations for the remainder of the earn‑out period. As a result of lower‑than‑anticipated sales volumes during the peak selling periods of June, July and August 2025, and the loss of certain national retail programs, management concluded that Montauk no longer had a viable path to achieving the sales volume target or the EBITDA target within the earn‑out period. Accordingly, the Company applied a probability of achievement of 0% to the sales volume target and 0% to the remaining criteria. The resulting $15.0 million change in fair value of the contingent consideration liability was recorded within the statement of profit and loss and contributed to the Company’s net income generated during the period ended August 31, 2025, despite historically reporting a net loss.
Current report
During the three months ended February 28, 2026, the earn-out period concluded and neither financial measure was achieved. Accordingly, no further changes to the fair value of the contingent consideration liability were recognized during the three months ended February 28, 2026 as no contingent consideration obligation was payable.
Current report
Impairments
Current report
During the fiscal quarter ended February 28, 2026, the Company assessed for indicators of impairment and concluded that there were no indicators and accordingly, no further impairment testing was required and no impairment charges were recognized during the period.
Current report
In the prior year period, based upon a combination of factors including a sustained decline in the Company’s market capitalization stemming from the uncertainty resulting from certain changes in U.S. global economic policy, including slower than anticipated progress in global cannabis legalization and overall declines in the craft beer industry sector, the Company concluded that it is more likely than not, that the fair value of our reporting units were less than their carrying amounts as of February 28, 2025. Accordingly, the Company utilized the income approach, which uses future discounted cash flows, to determine the fair value of each reporting unit. As a result, the Company recorded non-cash impairment charges of $570.0 million of cannabis goodwill, $100.0 million of beverage goodwill, $25.0 million of wellness goodwill and $4.2 million of distribution goodwill for the three and nine months ended February 28, 2025. The non-cash impairment charge had no impact on the Company’s compliance with debt covenants, its cash flows or available liquidity.
Current report
In the Company’s cannabis goodwill assessment performed during the three and nine months ended February 28, 2025, the Company used a discount rate of 12.00%, a terminal growth rate of 5%, and an average revenue growth rate of 34% over 5 years, based on an 88% and 40% average probability of anticipated EU and U.S. cannabis legalization, respectively and/or changes in drug policy in various countries within the next 5 years. A 1% increase in the discount rate would result in an additional $285.0 million in impairment, a 1% decrease in the terminal growth rate would result in an additional $210.0 million in impairment, a 5% decrease in the average growth rate would result in an additional $170.0 million in impairment, a 5% decrease in the probability of EU cannabis legalization would result in an additional $80.0 million in impairment and a 5% decrease in the probability of US cannabis legalization would result in an additional $7.0 million in impairment. Changes to those probabilities resulting in continued delays in or cessation of 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 may result in a material impairment expense recognized in future reporting periods.
Current report
In the Company’s beverage goodwill assessment performed during the three and nine months ended February 28, 2025, the Company used a discount rate of 9.25%, a terminal growth rate of 2%, and an average revenue growth rate of 12% over 5 years. A 1% increase in the discount rate would result in an additional $70.0 million in impairment, a 1% decrease in the terminal growth rate would result in an additional $50.0 million in impairment and a 1% decrease in the average growth rate would result in an additional $40.0 million in impairment.
Current report
In the Company’s wellness goodwill assessment performed during the three and nine months ended February 28, 2025, the Company used a discount rate of 10.50%, a terminal growth rate of 2%, and an average revenue growth rate of 7% over 5 years. A 1% increase in the discount rate would result in an additional $5.0 million in impairment, a 1% decrease in the terminal growth rate would result in an additional $3.0 million in impairment and a 1% decrease in the average growth rate would result in an additional $2.0 million in impairment.
Current report
In the Company’s distribution goodwill assessment performed during the three and nine months ended February 28, 2025, the Company recorded $4.2 million of impairments which brought the remaining distribution goodwill balance to $nil.
Current report
Other than temporary write-down of convertible notes receivable
Current report
For the three and nine months ended February 28, 2026, the Company no longer held MedMen Convertible Notes, and thus did not recognize any further changes in fair value.
Current report
During the three and nine months ended February 28, 2025, the Company recognized an other-than-temporary change in fair value, which resulted in a non-cash expense of $20.0 million and $20.0 million. The MedMen Convertible Note was valued based upon the estimated fair value of the collateral assets net of estimated disposal costs and has been reduced to reflect recent developments in restructuring efforts.
Current report
Subsequent to the impairment recorded during the three and nine months ended February 28, 2025, MedMen exited receivership and substantially all of its remaining assets were transferred to a new entity owned by MedMen’s secured creditors, including SH Acquisition. In connection with the foregoing, the Company disposed of its MedMen Convertible Note in exchange for on option to acquire a 68% membership interest in SH Acquisition for $1.00 upon U.S. federal cannabis legalization. See Note 8 (Long-term investments). This option was recorded as a Level 3 equity investment measured at fair value by assessing the discounted cash flows of SH Acquisition.
Current report
Within the consolidated statements of cash flows, cash and cash equivalents includes $44.9 million of restricted cash as of February 28, 2026, and $nil as of February 28, 2025.
Current report
The change in net cash used in operating activities was ($21.9) million and ($31.8) million for three and nine months ended February 28, 2026, compared to ($5.8) million and ($81.8) million for the prior year periods. Excluding the impact of changes in working capital, operating cash flow was $3.4 million and $11.1 million for three and nine months ended February 28, 2026, compared to cash used in operations of ($9.4) million and ($30.3) million in the prior year periods, which were negatively impacted by the integration of Craft Acquisition I and II. The increase in cash used for working capital during the three months ended February 28, 2026 primarily reflects preparation for a seasonally higher fourth quarter.
Removed paragraphs (8)
Previous report
Net revenue from our Beverage segment decreased to $50.1 million and to $105.8 million for the three and six months ended November 30, 2025, compared to revenue of $63.1 million and $119.1 million for the prior year periods. The decline in revenue was primarily driven by continued category challenges within the craft beer segment and competitive pressures. Additionally, our portfolio optimization efforts under Project 420, which include SKU rationalization and margin-focused initiatives, contributed to the year-over-year decrease.
Previous report
***Revenue from Canadian adult-use cannabis:***During the three and six months ended November 30, 2025, our gross revenue from Canadian adult-use cannabis increased to $62.4 million and to $126.5 million, compared to gross revenue of $59.1 million and $116.3 million for the prior year periods, respectively. On a constant currency basis, our gross revenue from Canadian adult-use cannabis increased to $63.9 million and increased to $128.2 million for the three and six months ended November 30, 2025, respectively. The increase in gross adult-use revenue was primarily attributed to sales growth in our flower and non-infused pre-roll categories where we have begun to see positive results from our continued innovation and enhanced cultivation capacity. Additionally, we have started to re-enter price-compressed categories that were previously margin prohibitive but are now generating positive gross margins due to our ongoing cost savings initiatives. Lastly, we have continued to invest in our cultivation footprint, including the decision to restart cultivation in our Quebec facility, to support the growing demand in both the Canadian and international markets. Given the higher margin that can be earned on international cannabis sales, we may, when advantageous to do so, continue to redirect inventories to international markets, which may negatively impact Canadian adult-use and wholesale cannabis revenue in future periods while we scale up our infrastructure.
Previous report
International cannabis revenue:** **Net revenue from International cannabis increased to $20.2 million and to $33.5 million for the three and six months ended November 30, 2025, compared to net revenue of $14.9 million and $27.1 million for the prior year periods, respectively. On a constant currency basis, given the strengthening of the Euro against the U.S. Dollar when compared to the prior year quarter, net revenue from international cannabis increased to $19.1 million and to $31.7 million for the three and six months ended November 30, 2025, respectively. The increase in net revenue from International cannabis markets during the three and six months ended November 30, 2025, was attributed to growth in the German medical cannabis market, receipt of previously backlogged permits and expansion into emerging medical markets. International cannabis net revenue may fluctuate from quarter to quarter based upon the timing of the receipt of export/import permits as well as the timing of shipments from one quarter to the next. Notably, International cannabis revenue in the first fiscal quarter ended August 31, 2025, was temporarily reduced due to permit‑related delays. As these delays were resolved, revenue levels in the second fiscal quarter ended November 30, 2025, which were consistent with those achieved in the fourth fiscal quarter ended May 31, 2025, of the prior fiscal year, are more indicative of our expected ongoing run rate than the lower revenue realized in the first quarter.
Previous report
Cannabis gross margin: For the three and six months ended November 30, 2025, our cannabis segment generated gross margin of 39% and 37%, respectively, which increased from 35% and remained consistent at 37% generated in the prior year periods, respectively. The change in gross margin for the three and six months ended November 30, 2025 was driven by a higher proportion of our sales being generated from international markets which has higher margins and lower participation in Canadian wholesale markets which generates lower margins. These favorable impacts were offset by our increased participation in lower margin product categories in the Canadian adult-use cannabis market, as we continue to optimize our cost structure to eliminate negative margins in price competitive categories.
Previous report
Salaries and wages increased by 9% and by 5% during the three and six months ended November 30, 2025 when compared to the prior year periods, respectively. The increase during the three and six months ended November 30, 2025 was primarily due to the inclusion of employees from our Craft Acquisition II, which was effective as of September 1, 2024 and therefore, its salaries and wages were not included in the prior year first quarter and as a result of changes in estimates related to timing of compensation accruals. In addition, included in the six month period ended November 30, 2025, was $1.8 million of retention payments compared to $1.7 million in the prior year six month period ended November 30, 2024.
Previous report
Office and general decreased by 12% and by 9% during the three and six months ended November 30, 2025 when compared to the prior year period respectively. The decrease was driven by our ongoing cost saving initiatives despite the inclusion of costs from our Craft Acquisition II, which was effective as of September 1, 2024.
Previous report
The Company measures contingent consideration at fair value classified as Level 3, as discussed in Note 24 (Financial risk management and financial instruments). During the six months ended November 30, 2025, the Company recognized $15.0 million of change in the fair value of contingent consideration as the likelihood of achievement decreased to 0% of such contingent consideration related to the Montauk Brewing acquisition.
Previous report
The change in net cash used in operating activities was ($8.5) million and ($9.9) million for three and six months ended November 30, 2025, compared to ($40.7) million and $($76.0) million for the prior year periods. The prior year periods were impacted by the integration of Craft Acquisition I, which required working capital investments and have now normalized.
Reworded paragraphs (52)
Previous wording
In the spirits category, Breckenridge Distillery combines premium craftsmanship, award-winning quality, and experiential tourism appeal, reinforcing its niche as a lifestyle-driven spirits brand. The distillery has earned multiple prestigious accolades across Whiskey, Gin, and Vodka, including three Icons of Whisky awards, ten Best American Blended Whiskey honors at the World Whiskies Awards, and recognition as Colorado Distillery of the Year. Recent achievements include Breckenridge Reserve Port Cask Finish being named the World’s Best Finished Bourbon at the 2024 World Whiskies Awards. Breckenridge Distillery products are available in all 50 states, with continued planned expansion and product innovations. Recent launches include Mock One – a non-alcoholic spirits line, Mountain Shot – flavored whiskey in convenient pouches, and Casa Breck Tequila, all underscoring our commitment to innovation and evolving consumer preferences. Despite prevailing challenges within the overall spirits market, we believe our focus on whiskey—a resilient segment—combined with our award-winning portfolio and innovative product introductions, positions Breckenridge Distillery for sustained growth and enhanced market presence.
Current wording
In the spirits category, Breckenridge Distillery combines premium craftsmanship, award-winning quality, and experiential tourism appeal, reinforcing its niche as a lifestyle-driven spirits brand. Recently included in Newsweek's “Best Bourbon 2026” list, the distillery has earned multiple prestigious accolades across Whiskey, Gin, and Vodka, including three Icons of Whisky awards, ten Best American Blended Whiskey honors at the World Whiskies Awards, and recognition as Colorado Distillery of the Year. Breckenridge Distillery products are available in all 50 states, with continued planned expansion and product innovations. Recent launches include Mock One – a non-alcoholic spirits line, Mountain Shot – flavored whiskey in convenient pouches, and Casa Breck Tequila, all underscoring our commitment to innovation and evolving consumer preferences. Despite prevailing challenges within the overall spirits market, we believe our focus on whiskey—a resilient segment—combined with our award-winning portfolio and innovative product introductions, positions Breckenridge Distillery for sustained growth and enhanced market presence.
Previous wording
We are a global leader in the development, production, distribution, marketing and sale of pharmaceutical-grade medical cannabis products. The cannabis industry in Europe is still in its early stages of development and countries within Europe are at different stages of medical and adult-use cannabis legalization. The most meaningful progress to date has been the legalization and regulation of cannabis for medical purposes, which has now taken place in more than 19 countries representing a population of more than 477 million people (Germany, UK, Italy, Poland, Netherlands, Czech Republic, Greece, Portugal, Austria, Switzerland, Denmark, Croatia, Malta, Luxembourg, Ukraine, Sweden, Norway, Türkiye, Ireland, and Israel). Beyond this, some countries have expressed a clear political ambition to legalize adult-use cannabis (Portugal and Luxembourg), some are engaging in experiments for adult-use legalization (Germany, Netherlands, Malta, Czech Republic and Switzerland) and some are debating regulations for cannabinoid-based medicine (France and Spain). In Europe, we believe that, despite continuing recessionary economic conditions, political uncertainty in various countries and the continuing Russian conflict with Ukraine, cannabis legalization (both medicinal and adult-use) will continue to gain traction albeit more slowly than originally expected. This is evidenced by the cannabis regulations in Germany adopted on April 1, 2024, which we believe will serve as a catalyst for continued changes in drug policy throughout Europe. Outside of Europe and North America, the cannabis industry is also in its early stages of development with Australia representing one of the larger markets and with some Latin American countries also growing their respective medical cannabis markets, such as Argentina, Panama, Colombia and Brazil.
Current wording
We are a global leader in the development, production, distribution, marketing and sale of pharmaceutical-grade medical cannabis products. The cannabis industry in Europe is still in its early stages of development and countries within Europe are at different stages of medical cannabis legalization. Meaningful progress in the legalization and regulation of cannabis for medical purposes, has now taken place in more than 21 countries representing a population of more than 526 million people (Germany, UK, Italy, Poland, Netherlands, Czech Republic, Greece, Portugal, Austria, Switzerland, Denmark, Croatia, Malta, Luxembourg, Ukraine, Sweden, Norway, Türkiye, Ireland, Spain and Israel). Beyond this, some countries have expressed a clear political ambition to legalize adult-use cannabis (Portugal and Luxembourg), some are engaging in programs for adult-use legalization (Germany, Netherlands, Malta, Czech Republic and Switzerland) and some are debating regulations for cannabinoid-based medicine (France). In Europe, we believe that, despite continuing recessionary economic conditions, political uncertainty in various countries and the continuing Russian conflict with Ukraine, cannabis legalization (both medicinal and adult-use) will continue to gain traction albeit more slowly than originally expected. This is evidenced by the cannabis regulations in Germany adopted on April 1, 2024, which we believe will serve as a catalyst for continued changes in drug policy throughout Europe. Outside of Europe and North America, the cannabis industry is also continuing to develop with Australia representing one of the larger markets and with some Latin American countries also growing their respective medical cannabis markets, such as Argentina, Panama, Colombia and Brazil.
Previous wording
We continue to believe that Tilray remains uniquely well-positioned to maintain and gain significant market share in the markets in which we participate. We benefit from our end-to-end vertically-integrated infrastructure and well-placed investments, which are comprised of two EU-GMP cultivation facilities located in Portugal and Germany; our fully owned route-to-market encompassing sales, marketing and distribution infrastructure in Germany, Australia and Italy; a network of leading distributors who we work with in the various other countries in which we participate; and, our extensive genetics portfolio and demonstrated commitment and expertise related to the cultivation and production of high-quality, safe cannabis products. Tilray’s International business also benefits from the depth and breadth of knowledge, experience, relationships and infrastructure we have gleaned from our leading participation and investment into the Canadian medical and adult-use markets. Tilray is proudly pioneering the effort to further understand the therapeutic value of cannabis through the guidance of its independent Medical Advisory board and through partnerships with leading research institutions globally, Tilray is currently supporting clinical trials around the world studying the efficacy of cannabis in treading various indications. We believe that these assets and attributes, combined with our ability to navigate complex regulatory environments, will continue to drive our leadership in international medical markets and allow us to successfully enter new markets as they adopt medical cannabis and potentially adult-use regulations and may also serve to support a potential U.S. participation.
Current wording
We continue to believe that Tilray remains uniquely well-positioned to maintain and gain significant market share in the markets in which we participate. We benefit from our end-to-end vertically-integrated infrastructure in major markets and well-placed investments, which are comprised of two EU-GMP cultivation facilities located in Portugal and Germany; our fully owned route-to-market encompassing sales, marketing and distribution infrastructure in Germany, Australia and Italy; a network of leading distributors who we work with in the various other countries in which we participate; and, our extensive genetics portfolio and demonstrated commitment and expertise related to the cultivation and production of high-quality, safe cannabis products. Tilray’s International business also benefits from the depth and breadth of knowledge, experience, relationships and infrastructure we have gleaned from our leading participation and investment into the Canadian medical and adult-use markets. Tilray is proudly pioneering the effort to further understand the therapeutic value of cannabis through strategic partnerships with leading research institutions globally where Tilray is currently supporting clinical trials around the world studying the efficacy of cannabis in treading various indications. We believe that these assets and attributes, combined with our ability to navigate complex regulatory environments, will continue to drive our leadership in international medical markets and allow us to successfully enter new markets as they adopt medical cannabis and potentially adult-use regulations and may also serve to support a potential U.S. participation.
Previous wording
We continue to believe that Tilray is well-positioned in Germany, especially considering the enactment of MedCanG and given that we are one of only three manufacturers of medical cannabis in Germany since our wholly owned subsidiary, Aphria RX, was awarded the first license for the cultivation of medical cannabis in Germany by the BfArM under the liberalized regime. Said license will improve our ability to meet the needs of patients and provide cannabis of the utmost quality and enhanced availability to a broader market.
Current wording
We continue to believe that Tilray is well-positioned in Germany, especially considering the enactment of MedCanG and given that we are one of only three manufacturers of medical cannabis in Germany since our wholly owned subsidiary, Aphria RX, was awarded the first license for the cultivation of medical cannabis in Germany by the BfArM under the liberalized regime. Said license improves our ability to meet the needs of patients and provides cannabis of the utmost quality and enhanced availability to a broader market.
Previous wording
As the market continues to mature, we have seen increased demands and differentiation specifically with medical cannabis flowers. In response, we have launched Redecan and Good Supply brands and related medical cannabis products, which provides the patient with a segmented portfolio of products while we continue to deliver on the trust, safety and consistency that has become expected from our Tilray Medical brand.
Current wording
As the market continues to mature, we have seen increased demands and differentiation specifically with medical cannabis flowers. In response, we have launched ARX and Good Supply brands and related medical cannabis products, which provides the patient with a segmented portfolio of products while we continue to deliver on the trust, safety and consistency that has become expected from our Tilray Medical brand.
Previous wording
United Kingdom. Since November 2018, doctors in the UK have been able to prescribe medical cannabis for medicinal use for patients with medical conditions that had failed to respond to first-line medications. The market today is predominantly all self-pay and prescriptions are facilitated by private clinics. Today, we supply the UK market with mainly whole flower products from both the Tilray Medical and Broken Coast brands through our distributor partners with sights on growing our portfolio to extracts and other formats.
Current wording
United Kingdom. Since November 2018, doctors in the UK have been able to prescribe medical cannabis for medicinal use for patients with medical conditions that had failed to respond to first-line medications. The market today is predominantly all self-pay and prescriptions are facilitated by private clinics. Today, we supply the UK market with mainly whole flower products from brands such as Good Supply through our distributor partners with sights on growing our portfolio to extracts and other formats.
Previous wording
Italy. In May 2023, Tilray Medical received authorization from Italy’s Ministry of Health to distribute three new medical cannabis compounds. These medical cannabis compounds are distributed by FL Group, our wholly-owned subsidiary, to pharmacies across Italy. With FL Group, we have an established broad national pharmaceutical distribution network in Italy, where medical cannabis is prescribed by doctors and reimbursed by the healthcare system to eligible patients. In 2025, Tilray has received additional cannabis flower and extract product authorizations and has formed a strategic partnership with Molteni Farmaceutici with the commitment to broaden the availability of Tilray Medical products for patients across Italy.
Current wording
Italy. In May 2023, Tilray Medical received authorization from Italy’s Ministry of Health to distribute three new medical cannabis compounds. These medical cannabis compounds are distributed by Tilray medical Italia to pharmacies across Italy. We have an established broad national pharmaceutical distribution network in Italy, where medical cannabis is prescribed by doctors and reimbursed by the healthcare system to eligible patients. In 2025, Tilray has received additional cannabis flower and extract product authorizations and has formed a strategic partnership with Molteni Farmaceutici with the commitment to broaden the availability of Tilray Medical products for patients across Italy.
Previous wording
Australia. In 2016, the Australian Government legalized medicinal cannabis, which is regulated by the Therapeutic Goods Administration. Medical cannabis is prescribed by a doctor but there is no coverage under the Pharmaceutical Benefits Scheme. Tilray Medical supplies the market with wide portfolio of medical cannabis extracts as well as whole flower products. As the market continues to mature, we have seen increased demands and differentiation specifically with medical cannabis flowers. In response, we launched the Broken Coast, Redecan and Good Supply brands and products, which provides the patient with a segmented portfolio of products while we continue to deliver on the trust, safety and consistency that has become expected from our Tilray Medical brand.
Current wording
Australia. In 2016, the Australian Government legalized medicinal cannabis, which is regulated by the Therapeutic Goods Administration. Medical cannabis is prescribed by a doctor but there is no coverage under the Pharmaceutical Benefits Scheme. Tilray Medical supplies the market with a wide portfolio of medical cannabis extracts as well as whole flower products. As the market continues to mature, we have seen increased demands and differentiation specifically with medical cannabis flowers. In response, we launched the Broken Coast, Redecan and Good Supply brands and products, which provides the patient with a segmented portfolio of products while we continue to deliver on the trust, safety and consistency that has become expected from our Tilray Medical brand.
Previous wording
Portugal. Portugal legalized medical cannabis in July 2018. The regulatory framework is overseen by INFARMED, requiring Market Placement Authorization (ACM) for all non-pharmaceutical cannabis products, with strict GACP and GMP compliance. While domestic patient access remains limited due to stringent product approvals and the absence of public reimbursement, Portugal has emerged as a leading European producer and exporter of medical cannabis, supplying high-value markets such as Germany, Poland, and Australia. In 2021, Tilray received the first Authorization for Placement on the Market for dried flower, with additional product approvals in 2024, reinforcing our pioneering role in Portugal’s medical cannabis sector. Our strategic investments in cultivation and manufacturing, combined with robust compliance and documentation standards, enable Tilray to deliver EU-GMP quality products to both domestic and international markets. As Portugal explores adult-use reform, Tilray’s established reputation and operational excellence position us to capitalize on future regulatory developments and market expansion.
Current wording
Portugal. Portugal legalized medical cannabis in July 2018. The regulatory framework is overseen by INFARMED, requiring Market Placement Authorization (ACM) for all non-pharmaceutical cannabis products, with strict GACP and GMP compliance. While domestic patient access remains limited due to stringent product approvals and the absence of public reimbursement, Portugal has emerged as a leading European producer and exporter of medical cannabis, supplying high-value markets such as Germany, Poland, and Australia. In 2021, Tilray received the first Authorization for Placement on the Market for dried flower, with additional product approvals in 2024, reinforcing our pioneering role in Portugal’s medical cannabis sector. Our strategic investments in cultivation and manufacturing, combined with robust compliance and documentation standards, enable Tilray to deliver EU-GMP quality products to both domestic and international markets. As Portugal explores adult-use reform, we expect that Tilray’s established reputation and operational excellence position us to capitalize on future regulatory developments and market expansion.
Previous wording
Tilray Wellness’s branded business continues to grow across brick-and-mortar retail as well as ecommerce, further establishing its leading market share position in better-for-you categories. The Company continues to focus on value-added innovation within natural and organic food and beverages across branded and ingredient sales. We continue to participate in multiple growing categories including super-seeds, better for you breakfast, better for you snacking, and natural energy drinks. Within our Ingredients sales business, we have expanded our range of offerings in hemp protein and hemp oil, helping us further develop our business in North America and Asia.
Current wording
Tilray Wellness’s branded business continues to grow across brick-and-mortar retail as well as ecommerce, which we believe further establishes its leading market share position in better-for-you categories. The Company continues to focus on value-added innovation within natural and organic food and beverages across branded and ingredient sales. We continue to participate in multiple growing categories including super-seeds, better for you breakfast, better for you snacking, and natural energy drinks. Within our Ingredients sales business, we have expanded our range of offerings in hemp protein and hemp oil, helping us further develop our business in North America and Asia.
Previous wording
We strive to continue to expand our business, on a consolidated basis, through a combination of organic growth and acquisition. While we continue to execute against our strategic initiatives that we believe will result in long-term, sustainable growth and value to our stockholders, we continue to evaluate potential acquisitions and other strategic transactions of businesses that we believe complement our existing portfolio, infrastructure and capabilities or provide us with the opportunity to enter attractive new geographic markets and product categories as well as expand our existing capabilities. In addition, we have exited certain businesses and continue to evaluate certain businesses within our portfolio that are dilutive to profitability and cash flow. As a result, we incur transaction costs in connection with identifying and completing acquisitions and strategic transactions, as well as ongoing integration and restructuring costs as we combine acquired companies and continue to achieve synergies, which is offset by income generated in connection with the execution of these transactions. For the six months ended November 30, 2025, we incurred $1.0 million of transaction expenses, as discussed further below.
Current wording
We strive to continue to expand our business, on a consolidated basis, through a combination of organic growth and acquisition. While we continue to execute against our strategic initiatives that we believe will result in long-term, sustainable growth and value to our stockholders, we continue to evaluate potential acquisitions and other strategic transactions of businesses that we believe complement our existing portfolio, infrastructure and capabilities or provide us with the opportunity to enter attractive new geographic markets and product categories as well as expand our existing capabilities. In addition, we have exited certain businesses and continue to evaluate certain businesses within our portfolio that are dilutive to profitability and cash flow. As a result, we incur transaction costs in connection with identifying and completing acquisitions and strategic transactions, as well as ongoing integration and restructuring costs as we combine acquired companies and continue to achieve synergies, which is offset by income generated in connection with the execution of these transactions. For the nine months ended February 28, 2026, we incurred $2.9 million of transaction expenses, as discussed further below in the results of operations assessment.
Previous wording
Our results of operations may continue to be affected by economic, political, legislative, regulatory, legal actions, global volatility and general market disruption resulting from geopolitical tensions, such as Russia's continued incursion into Ukraine, the ongoing events in the Middle East and political uncertainty in certain countries in Europe. Economic conditions, such as recessionary trends, inflation, supply chain disruptions, interest and monetary exchange rates, government fiscal policies, and the recent economic uncertainties resulting from certain changes in U.S. global economic policy, including changes on global trade policies can have a significant effect on operations. More specifically, there are no expected impacts on revenue from the recently enacted U.S. tariffs and foreign enacted retaliatory tariffs (“Tariffs”). From a cost perspective, we believe the recently enacted Tariffs could impact input materials such as aluminum, hops, barley, malt and vape componentry, which are partially imported but we intend to mitigate these impacts to the extent possible.
Current wording
Our results of operations may continue to be affected by economic, political, legislative, regulatory, legal actions, global volatility and general market disruption resulting from geopolitical tensions, such as Russia's continued incursion into Ukraine, the ongoing events in the Middle East, including the conflict involving Iran, and political uncertainty in certain countries in Europe. Escalation of hostilities in the Middle East, including involving Iran, could further disrupt global energy markets, fuel prices, transportation networks, and supply chains, particularly in Europe, which may indirectly impact operating costs and consumer demand. Economic conditions, such as recessionary trends, inflation, supply chain disruptions, interest and monetary exchange rates, government fiscal policies, and the recent economic uncertainties resulting from certain changes in U.S. global economic policy, including changes on global trade policies can have a significant effect on operations. More specifically, there are no expected impacts on revenue from the recently enacted U.S. tariffs and foreign enacted retaliatory tariffs (“Tariffs”). From a cost perspective, we believe the recently enacted Tariffs could impact input materials such as aluminum, hops, barley, malt and vape componentry, which are partially imported but we intend to mitigate these impacts to the extent possible.
Previous wording
No fractional shares were issued in connection with the Reverse Stock Split. Fractional shares resulting from the Reverse Stock Split were rounded down to the nearest whole share and stockholders received cash in lieu of any fractional shares that were created by the Reverse Stock Split. Each stockholder's percentage ownership interest in the Company and proportional voting power remained unchanged as a result of the Reverse Stock Split, except for adjustments that resulted from rounding fractional shares down to whole shares.
Current wording
No fractional shares were issued in connection with the Reverse Stock Split. Fractional shares resulting from the Reverse Stock Split were rounded down to the nearest whole share and stockholders received cash in lieu of any fractional shares that were created by the Reverse Stock Split, see Note 14 (Stockholder’s equity) for additional details. Each stockholder's percentage ownership interest in the Company and proportional voting power remained unchanged as a result of the Reverse Stock Split, except for adjustments that resulted from rounding fractional shares down to whole shares.
Previous wording
Cash and Marketable Securities
Current wording
Cash, restricted cash and Marketable Securities
Previous wording
The Company combines the Cash and cash equivalent financial statement line item and the Marketable securities financial statement line item as an aggregate total as reconciled in the liquidity and capital resource section below. The Company’s management believes that this presentation provides useful information to management, analysts and investors regarding certain additional financial and business trends relating to its short-term liquidity position by combining these two GAAP metrics.
Current wording
The Company combines the Cash and cash equivalent financial statement line item, the restricted cash financial statement line and the Marketable securities financial statement line item as an aggregate total as reconciled in the liquidity and capital resource section below. The Company’s management believes that this presentation provides useful information to management, analysts and investors regarding certain additional financial and business trends relating to its short-term liquidity position by combining these three GAAP metrics.
Previous wording
(1)Adjusted EBITDA, adjusted gross profit (excluding PPA step-up) and adjusted gross margin (excluding PPA step-up) for each of our segments, and cash and marketable securities are non-GAAP financial measures. See “Use of Non-GAAP Measures” above for a discussion of these Non-GAAP measures and “Reconciliation of Non-GAAP Financial Measures to GAAP Measures” below for a reconciliation of these Non-GAAP Measures to our most comparable GAAP measure and the discussion above captioned “Cash and Marketable Securities.”
Current wording
(1)Adjusted EBITDA, adjusted gross profit (excluding PPA step-up) and adjusted gross margin (excluding PPA step-up) for each of our segments, and cash, restricted cash and marketable securities are non-GAAP financial measures. See “Use of Non-GAAP Measures” above for a discussion of these Non-GAAP measures and “Reconciliation of Non-GAAP Financial Measures to GAAP Measures” below for a reconciliation of these Non-GAAP Measures to our most comparable GAAP measure and the discussion above captioned “Cash and Marketable Securities.”
Previous wording
For the three and six months ended November 30, 2025 and November 30, 2024, respectively, our reporting segments net revenue was comprised of net revenues from our beverage, cannabis, distribution, and wellness operations as follows:
Current wording
For the three and nine months ended February 28, 2026 and February 28, 2025, respectively, our reporting segments net revenue was comprised of net revenues from our beverage, cannabis, distribution, and wellness operations as follows:
Previous wording
For the three and six months ended November 30, 2025 and November 30, 2024, respectively, our reporting segment net revenue on a constant currency(1) basis was as follows:
Current wording
For the three and nine months ended February 28, 2026 and February 28, 2025, respectively, our reporting segment net revenue on a constant currency(1) basis was as follows:
Previous wording
For the three and six months ended November 30, 2025 and November 30, 2024, respectively, our geographic net revenue was as follows:
Current wording
For the three and nine months ended February 28, 2026 and February 28, 2025, respectively, our geographic net revenue was as follows:
Previous wording
For the three and six months ended November 30, 2025 and November 30, 2024, respectively, our geographic net revenue on a constant currency(1) basis was as follows:
Current wording
For the three and nine months ended February 28, 2026 and February 28, 2025, respectively, our geographic net revenue on a constant currency(1) basis was as follows:
Previous wording
For the six month period ended November 30, 2025, these impacts were partially offset by the inclusion of sales from Craft Acquisition II, effective September 1, 2024, which were not reflected in the full prior-year comparative period.
Current wording
For the three and nine months ended February 28, 2026, these impacts were partially offset by the inclusion of sales from Craft Acquisition II, effective September 1, 2024, which were not reflected in the full comparative period and would have increased the nine month revenue for the period ended February 28, 2025 by approximately $13.6 million.
Previous wording
For the three and six months ended November 30, 2025 and November 30, 2024, respectively, cannabis net revenue based on market channel was as follows:
Current wording
For the three and nine months ended February 28, 2026 and February 28, 2025, respectively, cannabis net revenue based on market channel was as follows:
Previous wording
For the three and six months ended November 30, 2025 and November 30, 2024, respectively, cannabis net revenue based on market channel on a constant currency(1) basis was as follows:
Current wording
For the three and nine months ended February 28, 2026 and February 28, 2025, respectively, cannabis net revenue based on market channel on a constant currency(1) basis was as follows:
Previous wording
***Revenue from Canadian medical cannabis:***Gross revenue from Canadian medical cannabis decreased to $6.2 million and to $12.4 million for the three and six months ended November 30, 2025 compared to gross revenue of $6.7 million and $12.9 million for the prior year periods, respectively. On a constant currency basis, gross revenue from Canadian medical cannabis decreased to $6.4 million and to $12.6 million for the three and six months ended November 30, 2025, respectively. The decrease in gross revenue from medical cannabis, on a constant currency basis, was primarily driven by uninsured patient attrition to the adult-use recreational market, which was partially offset by new insured patient acquisition.
Current wording
***Revenue from Canadian medical cannabis:***Gross revenue from Canadian medical cannabis increased to $6.0 million and decreased to $18.4 million for the three and nine months ended February 28, 2026 compared to gross revenue of $5.8 million and $18.8 million for the prior year periods, respectively. On a constant currency basis, gross revenue from Canadian medical cannabis decreased to $5.7 million and to $18.3 million for the three and nine months ended February 28, 2026, respectively. The decrease in gross revenue from medical cannabis, on a constant currency basis, was primarily driven by uninsured patient attrition to the adult-use recreational market, which was partially offset by new insured patient acquisition.
Previous wording
***Wholesale cannabis revenue:***Gross revenue from wholesale cannabis decreased to $1.3 million and to $5.5 million and for the three and six months ended November 30, 2025, compared to gross revenue of $6.6 million and $12.1 million for the prior year periods respectively. On a constant currency basis, gross revenue from wholesale cannabis decreased to $1.4 million and decreased to $5.5 million for the three and six months ended November 30, 2025, respectively. Due to the transition by many licensed producers in the Canadian market to asset-light business models, the Canadian cannabis industry has experienced a reduction in excess inventory resulting in price increases in the B2B market. As a result of this shift in market dynamics and demand, we continue to evaluate the market and may opportunistically sell into the wholesale market where it makes sense. Specifically, during the three and six month periods ended November 30, 2025, our wholesale cannabis revenue was lower than the prior year comparative periods due to our strategic decision to channel more of our volume into the other markets in which we participate.
Current wording
***Wholesale cannabis revenue:***Gross revenue from wholesale cannabis decreased to $1.2 million and to $6.7 million and for the three and nine months ended February 28, 2026, compared to gross revenue of $3.9 million and $16.0 million for the prior year periods respectively. On a constant currency basis, gross revenue from wholesale cannabis decreased to $1.1 million and to $6.7 million for the three and nine months ended February 28, 2026, respectively. Due to the transition by many licensed producers in the Canadian market to asset-light business models, the Canadian cannabis industry has experienced a reduction in excess inventory resulting in price increases in the B2B market. As a result of this shift in market dynamics and demand, we continue to evaluate the market and may opportunistically sell into the wholesale market where it makes sense. Specifically, during the three and nine months ended February 28, 2026, wholesale cannabis revenue declined compared to the prior year periods as the Company strategically redirected product to other markets, resulting in a 49% and 47% decrease in wholesale gram equivalents sold, respectively.
Previous wording
Net revenue from our Distribution segment increased to $85.3 million and increased to $159.3 million for the three and six months ended November 30, 2025, compared to revenue of $67.6 million and $135.7 million for the prior year periods, respectively. On a constant currency basis, given the change in the Euro and Argentine Peso against the U.S. Dollar in the quarter, revenue from Distribution increased to $80.0 million and to $149.7 million for the three and six months ended November 30, 2025, respectively. The increase in distribution revenue in the period was driven by a focus on competitive pricing, prioritizing high velocity SKUs and the favorable impacts of foreign exchange.
Current wording
Net revenue from our Distribution segment increased to $83.0 million and increased to $242.3 million for the three and nine months ended February 28, 2026, compared to revenue of $61.5 million and $197.2 million for the prior year periods, respectively. On a constant currency basis, given the change in the Euro and Argentine Peso against the U.S. Dollar in the fiscal quarter, revenue from Distribution increased to $74.0 million and $223.6 million for the three and nine months ended February 28, 2026, respectively. The increase in Distribution revenue for the three month period was primarily driven by a focus on competitive pricing, as evidenced by a 13% increase in average selling price, and a 7% increase in units sold, reflecting greater emphasis on higher‑velocity SKUs, as well as favorable foreign exchange impacts. The increase in Distribution revenue for the nine month period was primarily attributable to a 4% increase in average selling price, an 11% increase in volume, and favorable foreign exchange impacts.
Previous wording
Our Wellness segment net revenue remained consistent at $14.6 million and increased to $29.8 million for the three and six months ended November 30, 2025 compared to $14.6 million and $29.4 million from the prior year periods, respectively. On a constant currency basis for the three and six months ended November 30, 2025, Wellness segment net revenue increased to $14.7 million and to $30.0 million, respectively. The increase in revenue was driven by our strategic focus on value-add innovations, including high protein super-seeds, better-for-you breakfast products, better-for-you snacking, and the continued success of our Hi-Ball clean energy drinks. Additionally, there was continued growth experienced in the ingredient channel as a result of new customer acquisitions. These trends were partially offset by challenges in the club retailer channel, which we are actively addressing through targeted initiatives.
Current wording
Our Wellness segment net revenue increased to $16.4 million and to $46.2 million for the three and nine months ended February 28, 2026 compared to $14.1 million and $43.5 million from the prior year periods, respectively. On a constant currency basis for the three and nine months ended February 28, 2026, Wellness segment net revenue increased to $16.1 million and to $46.1 million, respectively. The increase in revenue was driven by our strategic focus on value-add innovations, including high protein super-seeds, better-for-you breakfast products, better-for-you snacking, and the continued success of our Hi-Ball clean energy drinks which contributed approximately $0.5 million and $2.6 million of incremental revenue during the three and nine months, respectively. In addition, the acquisition of Blue Sky Hemp Venture’s customer list contributed to the growth of our ingredients sales channel by approximately $1.1 million and $3.0 million of incremental revenue during the three and nine month periods, respectively. The remaining Wellness portfolio contributed approximately $0.6 million of revenue growth during the three month period, reflecting improved demand across certain product lines. However, for the nine month period, revenue from the remaining sales channels declined by approximately $2.1 million, primarily due to a shift in one of our supply agreements within the Club retailer channel. We are actively addressing these challenges through targeted initiatives aimed at improving distribution, assortment optimization, and promotional execution across our Club and Retail sales channels.
Previous wording
For the three and six months ended November 30, 2025 and November 30, 2024, respectively, our gross profit and gross margin were as follows:
Current wording
For the three and nine months ended February 28, 2026 and February 28, 2025, respectively, our gross profit and gross margin were as follows:
Previous wording
Beverage gross margin: For the three and six months ended November 30, 2025, our beverage segment generated gross margin of 31% and 35%, respectively, which decreased from 40% and 40% generated in the prior year periods, respectively. Adjusted gross margin was 31% and 35%, which decreased from 42% and 42% generated in the prior year periods, respectively. The change in the beverage gross margin and adjusted beverage gross margin for the three and six months ended November 30, 2025 was driven by several factors, including our Craft Acquisition II, which historically has operated at a lower gross margin, declining overhead utilization as our revenue levels have declined, and timing delays in realizing the full benefits of our Project 420 cost savings initiatives.
Current wording
Beverage gross margin: For the three and nine months ended February 28, 2026, our beverage segment generated gross margin of 32% and 34%, respectively, which decreased from 36% and 39% generated in the prior year periods, respectively. Adjusted gross margin was 32% and 34%, which decreased from 36% and 40% generated in the prior year periods, respectively. The change in the beverage gross margin and adjusted beverage gross margin for the three and nine months ended February 28, 2026 was driven by several factors, including our Craft Acquisition II, which historically has operated at a lower gross margin of approximately 25%, declining overhead utilization as our revenue levels have declined, higher input costs and timing delays in realizing the full benefits of our Project 420 cost savings initiatives. Additionally, increased discounting to support sales volume resulted in discounts of 7.2% for the three month period compared to 4.7% in the prior quarter, and 6.6% for the nine month period compared to 4.1% in the prior year period, which negatively impacted margins and was partially offset by reductions in marketing expenditures.
Previous wording
Distribution gross margin: For the three and six months ended November 30, 2025, our distribution segment generated gross margin of 13% and 12%, respectively, which increased from 12% and remained consistent at 12% generated in the prior year periods, respectively, which was attributed to a change in product mix combined with foreign exchange rate improvements, as well as initiatives undertaken to reduce input costs.
Current wording
Distribution gross margin: For the three and nine months ended February 28, 2026, our distribution segment generated gross margin of 12% and 12%, respectively, which increased from 9% and 11% generated in the prior year periods, respectively. The increase was primarily attributable to a favorable change in product mix, as evidenced by increases in average selling price of approximately 13% and 4% during the three and nine month periods, respectively, as well as initiatives undertaken to reduce input costs.
Previous wording
Wellness gross margin: For the three and six months ended November 30, 2025, our wellness segment generated gross margin of 32% and 32%, respectively, which increased from 31% and 31% in the prior year periods, respectively, as a result of a change in product mix.
Current wording
Wellness gross margin: For the three and nine months ended February 28, 2026, our wellness segment generated gross margin of 33% and 32%, respectively, which increased from 32% and 31% in the prior year periods, respectively. Gross margin remained relatively consistent period over period as strategic price increases largely offset unfavorable changes in sales mix.
Previous wording
During the three and six months ended November 30, 2025 and November 30, 2024, respectively, the changes in operating expenses were as follows:
Current wording
During the three and nine months ended February 28, 2026 and February 28, 2025, respectively, the changes in operating expenses were as follows:
Previous wording
Operating expenses are comprised of general and administrative, selling, amortization, marketing and promotion, research and development, change in fair value of contingent consideration, litigation costs, net of recoveries, restructuring costs and transaction costs (income), net. For the three and six months ended November 30, 2025, operating expenses decreased by $23.7 million and by $64.6 million to $79.8 million and $135.2 million when compared to $103.4 million and $199.7 for the prior year periods, respectively. This decrease was primarily attributed to the lower amortization expense in the current period, which resulted from the intangible asset reduction recorded during the fiscal quarter ended May 31, 2025, as well as, a gain from the change in fair value of the Montauk contingent consideration, and, to a lesser extent, a reduction in non-recurring litigation, restructuring and transaction costs, as well as selling costs.
Current wording
Operating expenses are comprised of general and administrative, selling, amortization, marketing and promotion, research and development, change in fair value of contingent consideration, impairment of intangible assets and goodwill, other than temporary changes in fair value of convertible notes receivable, litigation costs, net of recoveries, restructuring costs and transaction costs (income), net. For the three and nine months ended February 28, 2026, operating expenses decreased by $730.6 million and by $795.2 million to $81.3 million and $216.5 million when compared to $811.9 million and $1,011.7 million for the prior year periods, respectively. These decreases were primarily attributable to $699.2 million of non‑cash impairments of goodwill and intangible assets and a $20.0 million other‑than‑temporary decrease in the fair value of the MedMen convertible note recorded in the prior year quarter, which did not repeat in the current period. In addition, the nine month period ended February 28, 2026, had lower amortization expense following the intangible asset impairment recorded during the fiscal quarter ended May 31, 2025, a $15.0 million gain related to the change in fair value of the Montauk contingent consideration, and lower selling and non‑recurring litigation, and restructuring costs. These decreases were partially offset by higher general and administrative costs.
Previous wording
During the three and six months ended November 30, 2025 and November 30, 2024, respectively, the changes in general and administrative costs when compared to the prior year period were as follows:
Current wording
During the three and nine months ended February 28, 2026 and February 28, 2025, respectively, the changes in general and administrative costs when compared to the prior year period were as follows:
Previous wording
The Company recognized stock-based compensation expense of $12.3 million and $17.3 million for the three and six months ended November 30, 2025 compared to $7.2 million and $14.2 million for the prior year period respectively. Stock-based compensation expense is based on the time-based vesting schedules and varies according to the assumptions used in the vesting model. During the three and six months ended November 30, 2025, stock-based compensation increased as a result of the recognition of expenses related to the performance-based grants following the establishment of their performance criteria during the fiscal quarter.
Current wording
The Company recognized stock-based compensation expense of $13.7 million and $31.1 million for the three and nine months ended February 28, 2026, compared to $4.0 million and $18.2 million for the prior year period respectively. Stock-based compensation expense is primarily driven by time-based vesting schedules and may vary based on assumptions used in valuation and vesting models. The increase during the three and nine month periods was primarily due to the recognition of expense related to performance-based awards following the establishment and approval of their performance criteria during the second fiscal quarter. As a result, performance-based awards contributed approximately $6.3 million and $12.1 million of expense during the three and nine month periods, respectively. Stock based compensation expense in the prior year periods was lower primarily due to the cancellation of certain performance-based awards.
Previous wording
Insurance expense decreased by 22% and decreased by 14% for the three and six months ended November 30, 2025 to $2.5 million and $4.8 million from $3.2 million and $5.6 million for the prior year period respectively due to lower premiums as a result of management’s decision to self-insure a portion of our property and casualty insurance.
Current wording
Insurance expense decreased by 36% and by 21% for the three and nine months ended February 28, 2026 to $1.9 million and $6.7 million from $2.9 million and $8.6 million for the prior year period, respectively due to lower premiums as a result of management’s decision to self-insure a portion of our property and casualty insurance.
Previous wording
Rent expense increased by 14% and decreased by 10% for the three and six months ended November 30, 2025 to $1.2 million and $2.1 million compared to $1.0 million and $2.3 million for the prior year periods, respectively. Rent expense is predominantly comprised of operating lease expenses for our brew pubs and office spaces and varies period-over-period based on lease amortization schedules and common area maintenance costs.
Current wording
Rent expense increased by 8% and decreased by 6% for the three and nine months ended February 28, 2026 to $0.8 million and $2.9 million compared to $0.7 million and $3.0 million for the prior year periods, respectively. Rent expense is predominantly comprised of operating lease expenses for our brew pubs and office spaces and varies period-over-period based on lease amortization schedules and common area maintenance costs.
Previous wording
For the three and six months ended November 30, 2025, the Company incurred selling costs of $11.8 million or 5% of net revenue and $24.7 million or 6% of net revenue as compared to $16.2 million or 8% of net revenue and $27.9 million or 7% of net revenue in the prior year period respectively. These costs relate to third-party shipping costs for all segments, in addition to distributor commission incurred by the cannabis segment, Health Canada cannabis fees, and patient acquisition and maintenance costs. The decrease in selling costs for the three and six months ended November 30, 2025 is from the lower freight costs incurred in the beverage segment as a result of Project 420 cost saving initiatives and lower commission rates experienced in the Canadian cannabis sales channels.
Current wording
For the three and nine months ended February 28, 2026, the Company incurred selling costs of $10.6 million or 5% of net revenue and $35.3 million or 6% of net revenue as compared to $13.9 million or 7% of net revenue and $41.8 million or 7% of net revenue in the prior year period respectively. These costs relate to third-party shipping costs for all segments, in addition to distributor commission incurred by the cannabis segment, Health Canada cannabis fees, and patient acquisition and maintenance costs. The decrease in selling costs for the three and nine months ended February 28, 2026 was primarily driven by lower freight costs in the beverage segment resulting from Project 420 cost‑saving initiatives, which improved freight as a percentage of sales by approximately 90 and 144 basis points for the three and nine month periods, respectively. In addition, lower freight costs in the Canadian cannabis segment following contract renegotiations improved freight as a percentage of sales by approximately 180 and 210 basis points for the three and nine month periods, respectively, and were further supported by lower commission rates in the Canadian cannabis sales channels.
Previous wording
The Company incurred non-production related amortization charges of $4.4 million and $8.3 million for the three and six months ended November 30, 2025, compared to $22.9 million and $44.7 million in the prior year periods respectively based on depreciable capital and intangible assets useful lives. The decrease in the amortization expense is due to the lower carrying value of intangible assets as a result of the impairment charges recognized during the fiscal year ended May 31, 2025.
Current wording
The Company incurred non-production related amortization charges of $5.1 million and $13.4 million for the three and nine months ended February 28, 2026, compared to $23.2 million and $67.9 million in the prior year periods, respectively, based on depreciable capital and intangible assets useful lives. The decrease in the amortization expense is due to the lower carrying value of intangible assets as a result of the impairment charges recognized during the fiscal year ended May 31, 2025.
Previous wording
For the three and six months ended November 30, 2025, the Company incurred marketing and promotion costs of $10.0 million and $20.1 million compared to $9.7 million and $21.3 million for the prior year periods, respectively and was driven by variability in discretionary marketing spend.
Current wording
For the three and nine months ended February 28, 2026, the Company incurred marketing and promotion costs of $8.7 million and $28.8 million compared to $6.8 million and $28.1 million for the prior year periods, respectively and was driven by variability in discretionary marketing spend.
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