☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐ ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financing accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No☒

As of ~~February 4,~~October 31, 2022, the registrant had ~~1,200,227,625~~1,301,683,764 Class B Subordinate Voting Shares outstanding.

In this Quarterly Report on Form 10-Q, unless the context otherwise requires, the terms “we,” “us,” “our,” “Company,” “Corporation” or “MedMen” refer to MedMen Enterprises Inc. together with its wholly-owned subsidiaries.

This Quarterly Report on Form 10-Q contains statements that we believe are, or may be considered to be, “forward-looking statements”. All statements other than statements of historical fact included in this document regarding the prospects of our industry or our prospects, plans, financial position or business strategy may constitute forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking words such as “may,” “will,” “expect,” “intend,” “estimate,” “foresee,” “project,” “anticipate,” “believe,” “plan,” “forecast,” “continue” or “could” or the negative of these terms or variations of them or similar terms. Furthermore, forward-looking statements may be included in various filings that we make with the Securities and Exchange Commission (the “SEC”), press releases or oral statements made by or with the approval of one of our authorized executive officers. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that these expectations will prove to be correct. These forward-looking statements are subject to certain known and unknown risks and uncertainties, as well as assumptions that could cause actual results to differ materially from those reflected in these forward-looking statements. These known and unknown risks include, without limitation: marijuana remains illegal under U.S. federal law, and enforcement of cannabis laws could change;, the Company may face limitations on ownership of cannabis licenses; the Company may become subject to U.S. Food and Drug Administration or the U.S. Bureau of Alcohol, Tobacco and Firearms; the Company may face difficulties acquiring additional financing; the Company operates in a highly regulated sector and may not always succeed in complying fully with applicable regulatory requirements in all jurisdictions where we carry on business; the Company is subject to general economic risks; the Company may be negatively impacted by challenging global economic condition; the Company is subject to risks arising from epidemic diseases, such as the recent outbreak of COVID-19; the Company may face difficulties in enforcing its contracts; the Company is subject to taxation in Canada and the United States; cannabis businesses are subject to unfavorable tax treatment; cannabis businesses may be subject to civil asset forfeiture; the Company is subject to proceeds of crime statutes; the Company faces security risks; ~~our use of joint ventures may expose us to risks associated with jointly owned investments;~~ competition for the acquisition and leasing of properties suitable for the cultivation, production and sale of medical and adult use cannabis may impede our ability to make acquisitions or increase the cost of these acquisitions, which could adversely affect our operating results and financial condition; the Company faces risks related to its products; the Company is dependent on the popularity of consumer acceptance of the Company’s brand portfolio; the Company faces risks related to its insurance coverage and uninsurable risks; the Company is dependent on key inputs, suppliers and skilled labor; the Company must attract and maintain key ~~personnel or our business will fail;~~personnel; the Company’s business is subject to the risks inherent in agricultural operations; the Company’s sales are difficult to forecast; the Company’s products may be subject to product recalls; the Company may face unfavorable publicity or consumer perception; the Company faces intense competition;; and additional issuances of Subordinate Voting Shares may result in dilution. Further information on these and other potential factors that could affect the Company’s business and financial condition and the results of operations are included in the “Risk Factors” section of the Company’s Annual Report on Form 10-K filed with the SEC on September ~~24, 2021,~~9, 2022, and elsewhere in the Company’s filings with the SEC, which are available on the SEC’s website or on the Company’s website at https://investors.medmen.com/. Readers are cautioned not to place undue reliance on any forward-looking statements contained in this document, which reflect management’s opinions only as of the date hereof. Except as required by law, we undertake no obligation to revise or publicly release the results of any revision to any forward-looking statements. You are advised, however, to consult any additional disclosures we make in our reports to the SEC. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained in this document.

(Amounts Expressed in ~~Thousands of~~ United States Dollars, Except for Share Data)

The accompanying notes are an integral part of these Condensed Consolidated Financial ~~Statements.~~Statements (Unaudited).

Three ~~and Six~~ Months Ended ~~December~~September 24, 2022 and September 25, 2021 ~~and December 26, 2020~~

(Amounts Expressed in ~~Thousands of~~ United States Dollars, Except for Share ~~and Per Share~~ Data)

The accompanying notes are an integral part of these Condensed Consolidated Financial ~~Statements.~~Statements (Unaudited).

Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)

~~Six~~Three Months Ended ~~December~~September 24, 2022 and September 25, 2021 ~~and December 26, 2020~~

(Amounts Expressed in ~~Thousands of~~ United States Dollars, Except for Share Data)

The accompanying notes are an integral part of these Condensed Consolidated Financial ~~Statements.~~Statements (Unaudited).

~~Six~~Three Months Ended ~~December~~September 24, 2022 and September 25, 2021 ~~and December 26, 2020~~

The accompanying notes are an integral part of these Condensed Consolidated Financial ~~Statements.~~Statements (Unaudited).

~~Six~~Three Months Ended ~~December~~September 24, 2022 and September 25, 2021 ~~and December 26, 2020~~

The accompanying notes are an integral part of these Condensed Consolidated Financial ~~Statements.~~Statements (Unaudited).

Three ~~and Six~~ Months Ended ~~December~~September 24, 2022 and September 25, 2021 ~~and December 26, 2020~~

(Amounts Expressed in ~~Thousands of~~ United States Dollars, Except for Share and Per Share Data)

MedMen Enterprises ~~Inc,~~Inc. and its ~~wholly owned~~ subsidiaries over which the company has control (collectively, “MedMen”, the “Company”, “we” or “us”) is a premier cannabis retailer based in the U.S. with an operational footprint in California, Nevada, Illinois, Arizona, Massachusetts, ~~Florida,~~ and New York. MedMen offers a robust selection of high-quality products, including MedMen-owned brands – MedMen Red and LuxLyte – through its premium retail stores, proprietary delivery service, as well as curbside and in-store pick up. MedMen Buds ~~an industry-first loyalty program,~~ provides exclusive access to promotions, product drops and content.

As of ~~December 25, 2021,~~September 24, 2022, the Company owns 2923 store locations across California ~~(12)~~(13), Nevada (3), Illinois (1), Arizona (1), Massachusetts (1), ~~Florida (7)~~ and New York (4). ~~In accordance with our planned growth strategy, during the second quarter we opened one new retail store~~The Company continues to market its assets in Boston’s famed Fenway Park area, officially entering Massachusetts cannabis market. Beginning on October 1, 2021, the Company no longer operates the cultivation and production facilities in California and Nevada pursuant to its management agreement with Foundry Works, Inc. In February 2021, the Company entered into an investment agreement to sell a controlling interest in MedMen NY, Inc.New York and thus ~~classified~~classifies all assets and liabilities and profit or loss allocable to its operations in the state of New York as discontinued operations. ~~On January 3,~~In August 2022, the Company ~~announced~~completed the ~~termination~~sale of ~~this investment agreement.~~its operations in the state of Florida of which all assets and liabilities and profit or loss allocable to Florida are classified as discontinued operations until the day of sale, or August 22, 2022. As of September 24, 2022, the remaining post-acquisition assets and liabilities and profit or loss allocable to Florida have been reclassified as continuing operations.

~~(Amounts Expressed in Thousands of United States Dollars, Except for Share and Per Share Data)~~

The accompanying Condensed Consolidated Financial Statements have been prepared on a going concern basis in accordance with generally accepted accounting principles in the United States of America (“GAAP”), which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business, and in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for interim financial information. The Condensed Consolidated Financial Statements include the accounts of MedMen Enterprises, its subsidiaries and variable interest entities (“VIEs”) where the Company is considered the primary beneficiary, if any, after elimination of intercompany accounts and transactions. Investments in entities in which the Company has significant influence, but less than a controlling financial interest, are accounted for using the equity method.

In the opinion of management, all adjustments considered necessary for a fair presentation of the consolidated financial position of the Company as of and for the interim periods presented have been included. The accompanying Condensed Consolidated Financial Statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from uncertainty related to our ability to continue as a going concern.

The accompanying Condensed Consolidated Financial Statements do not include all of the information required for full annual financial statements. Accordingly, certain information, footnotes and disclosures normally included in the annual financial statements have been condensed or omitted in accordance with SEC rules for interim financial information. The financial data presented herein should be read in conjunction with the audited Consolidated Financial Statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended June ~~26, 2021,~~25, 2022, as filed with the ~~SEC~~Securities and Exchange Commission on September ~~24, 2021~~9, 2022 (the ~~“2021~~“2022 Form 10-K”).

As of ~~December 25, 2021,~~September 24, 2022, the Company had cash and cash equivalents of $~~47.7~~21.1 million and ~~net~~ working capital deficit of $~~191.2~~134.9 million. The Company has incurred net losses from continuing operations of $~~23.0~~20.3 million and $~~57.5~~46.2 million for the three months ended September 24, 2022 and ~~six months then ended, respectively, used cash in continued operating activities of $45.6~~ million so far in the first half of the year and anticipates that the Company will continue to incur losses until such time as revenues exceed operating costs. On January 31, 2022, the Company’s term loans of $~~113.6~~ ~~million as of December~~September 25, 2021, became due and the Company entered into an agreement (the “Sixth Modification to Senior Secured Term Loan”, or the “Sixth Modification”) with the lender to extend the maturity date until July 31, 2022 and August 1, 2021 for the various loans included in the Senior Secured Term Loan Facility. See “~~Note 10 – Notes Payable~~~~”, for additional information about the Senior Secured Term Loan Facility, and “~~~~Note 23 – Subsequent Events~~~~” for more information about the Sixth Modification.~~respectively. The conditions described above raise substantial doubt with respect to the Company’s ability to meet its obligations for at least one year from the issuance of these Condensed Consolidated Financial Statements, and therefore, to continue as a going concern.

The Sixth Modification requires the Company to execute certain actions including the conditional purchase of the term loans by Superhero Acquisition, L.P., an existing lender in the Company’s Senior Secured Convertible Purchase Agreement dated August 7, 2021 (the “Convertible Facility”), also covenants related to strategic actions the Company must implement it if it is unable to pay the term loans by the extended maturity date. The Company plans to continue to fund its operations through the implementation of its ~~strategic~~ cost savings plan, ~~the~~and various strategic actions, ~~which may include divesting~~including the successful negotiations of lower costs of occupancy with its master lease landlord and other landlords, divesture of non-core assets including but not limited to the current asset group held for sale, New York, as well continuing its on-going revenue strategy of market expansion and retail revenue growth. The Company also needs to obtain an extension or a refinancing of its debt-in-default with the secured senior lender. The annual operating plan for fiscal year 2023 estimates the Company will be able to manage ongoing operations. However, its cash needs are significant and not achievable with the current cash flow from operations. If the above ~~conditional purchase of the term loans and/or the~~ strategic actions, for any reason, are inaccessible, it ~~would~~will have a significantly negative effect on the Company’s financial condition. Additionally, ~~we expect~~management expects to continue to manage the Company’s operating expenses and reduce its projected cash requirements through reduction of its expenses by delaying new store development, permanently or temporarily closing stores that are deemed to be performing below expectations, and/or implementing other restructuring activities. Furthermore, COVID-19 and the impact the global pandemic ~~has had and will continue to have~~ on the broader retail environment could also have a significant impact on the Company’s financial ~~operations.~~

position, results of operations, equity and or its access to capital and future financing.

As of December 25, 2021, the accompanying consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The accompanying consolidated condensed financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from uncertainty related to our ability to continue as a going concern.

~~Due~~In response to ~~impacts from~~ the COVID-19 pandemic, governmental authorities have enacted and implemented various recommendations and safety measures in an attempt to limit the ~~uncertain pace of recovery, including the impact~~spread and magnitude of the ~~Delta~~pandemic. During the current reporting period, aspects of the Company’s business continue to be affected by impacts of the COVID-19 pandemic, as the Company’s retail stores strive to operate within the local rules and ~~Omicron~~regulations of the states and localities in which the Company operates. While the Company saw continued recovery from the impacts of the COVID 19-pandemic during the first quarter of 2023, the Company continues to closely monitor the potential impact that a resurgence of the COVID-19 virus, including as a result of the emergence of new variants and strains, could have on the Company’s operations. In the event that the Company were to experience widespread transmission of the virus at one or more of the Company’s store or other facilities, the Company could suffer reputational harm or other potential liabilities. Further, the Company’s business operations may be materially and adversely affected if a significant number of the Company’s employees are impacted by the virus. ~~Operating results for the three and six months ended December 25, 2021 are not necessarily indicative of operating results for the entire year.~~

~~(Amounts Expressed in Thousands of United States Dollars, Except for Share and Per Share Data)~~

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 subsidiaries are included in the ~~consolidated financial statements~~Consolidated Financial Statements from the date that control commences until the date that control ceases. ~~A complete~~With the exception of MME Florida, LLC, which the Company disposed on August 22, 2022, the list of ~~our~~the Company’s subsidiaries ~~that existed prior to our most recent year-end is~~ included in the Company’s ~~2021~~2022 Form ~~10-K.~~

~~During the fiscal second quarter~~10-K remain complete as of 2022, the Company effectuated the Management Agreement with an unrelated third party and no longer has a controlling financial interest in previously consolidated entities, Manlin DHS Development, LLC (“DHS”) and Project Mustang Development, LLC (“Mustang”), and therefore these entities are no longer included in the Company’s financial statements. The deconsolidation did not have a material impact on the Company’s Condensed Financial Statements.September 24, 2022.

The significant accounting policies and critical estimates applied by the Company in these Condensed Consolidated Financial Statements are the same as those applied in the Company’s audited Consolidated Financial Statements and accompanying notes included in the Company’s ~~2021~~2022 Form 10-K, unless otherwise disclosed in these accompanying notes to the Condensed Consolidated Financial Statements for the interim period ended ~~December 25, 2021.~~September 24, 2022.

The Company calculates basic loss per share by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted ~~loss~~earnings per share is determined by adjusting profit or loss attributable to common shareholders and the weighted-average number of common shares outstanding, for the effects of all dilutive potential common shares, which comprise convertible debentures, restricted stock units, warrants and stock options issued.

~~In December 2019,~~Certain amounts reported in the ~~FASB issued ASU 2019-12,~~ ~~“Simplifying the Accounting for Income Taxes~~~~” (“ASU 2019-12”), which eliminates certain exceptions related~~Notes to the ~~approach for intraperiod tax allocation,~~Condensed Consolidated Financial Statements as of June 25, 2022 have non-material corrections and reclassified in order to conform to the ~~methodology for calculating income taxes~~current reporting period presentation. These non-material corrections and reclassifications impacted leasehold improvements and furniture and fixtures in ~~an interim period~~the amount of approximately $940,000 between the categories. Customer relationships and accumulated amortization of customer relationships in the ~~recognition~~amount of ~~deferred tax liabilities for outside basis differences. It~~$1,440,000 between the categories were reclassed between the two categories. Fully amortized management agreements and its related accumulated amortization in the amount of $964,000 were also ~~clarifies~~reclassed. Non-controlling interest and ~~simplifies other aspects~~accumulated deficit in the amount of approximately $3,662,000 have been reclassed between the accounting for income taxes. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company adopted ASU 2019-12 on June 27, 2021. The adoption of the standard did not have a material impact on the Company’s condensed consolidated financial statements.

two categories. In ~~January 2020, the FASB issued ASU 2020-01,~~ ~~“Investments — Equity Securities (Topic 321)”~~, ~~“Investments—Equity Method and Joint Ventures (Topic 323)”~~~~, and~~ ~~“Derivatives and Hedging (Topic 815)”~~ (“ASU 2020-01”), which is intended to clarify the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815. ASU 2020-01 is effective foraddition, the Company ~~for fiscal years beginning after December 15, 2020,~~reclassified short-term and ~~interim periods therein. The Company adopted ASU 2020-01 on June 27, 2021. The adoption~~long-term operating lease liabilities between the two categories in the amount of ~~the standard did not have~~approximately $6,825,000. There was no change to total current assets, total assets, total liabilities, total shareholders’ equity or cash flows as a ~~material impact on the Company’s condensed consolidated financial statements.~~result of these reclassifications and non-material corrections.

~~In August 2020, the FASB issued ASU 2020-06, “~~~~Debt — Debt With Conversion and Other Options (Subtopic 470-20)”~~ ~~and~~ ~~“Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”~~ (“ASU 2020-06”), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. ASU 2020-06 is effective for the Company for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Adoption is applied on a modified or full retrospective transition approach. The Company is currently evaluating the adoption date and impact, if any, adoption will have on its financial position and results of operations.

In May 2021, the FASB issued ~~ASU~~Accounting Standards Update (“ASU”) 2021-04, “Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)” (“ASU 2021-04”), which amends existing guidance for earnings per share (“EPS”) in accordance with Topic 260. ASU 2021-04 is effective prospectively for ~~the~~fiscal years beginning after December 15, 2021. The Company ~~beginning~~adopted ASU 2021-04 on June 1,26, 2022. ~~This update should be applied prospectively on or after the effective date~~The adoption of the ~~amendments.~~standard did not have a material impact on the Company’s Condensed Consolidated Financial Statements.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”), provides optional expedients and exceptions for applying GAAP to debt instruments, derivatives, and other contracts that reference London Interbank Offered Rate (“LIBOR”) or other reference rates expected to be discontinued as a result of reference rate reform. This guidance is optional and may be elected through December 31, 2022 using a prospective application on all eligible contract modifications. ASU 2020-04 provides optional expedients and exceptions for applying GAAP to instruments affected by reference rate reform if certain criteria are met. The Company did not modify any material contracts due to reference rate reform during the nine months ended September 30, 2022. The Company is currently evaluating the ~~effect~~adoption date and impact, if any, adoption will have on its financial position and results of ~~adopting this ASU.~~operations.

In ~~October 2021,~~September 2022, the FASB issued ASU ~~2021-08,~~2022-04, “~~Business Combinations~~Liabilities – Supplier Finance Programs (Subtopic ~~805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”~~405-50)” (“ASU ~~2021-08”~~2022-04”), which is intended to ~~improve the accounting for acquired revenue contracts~~enhance transparency with ~~customers in a business combination by addressing diversity in practice and inconsistency.~~supplier finance programs. ASU ~~2021-08~~2022-04 is effective for ~~the Company~~fiscal years beginning ~~June 1, 2023. This update should be~~after December 15, 2022, including interim periods within those fiscal years. Adoption is applied ~~prospectively~~ on ~~or after the effective date of the amendments.~~a retrospective approach. The Company is currently evaluating the ~~effect~~adoption date and impact, if any, adoption will have on its financial position and results of ~~adopting this ASU.~~operations.

~~(Amounts Expressed in Thousands of United States Dollars, Except for Share and Per Share Data)~~

During the three ~~and six~~ months ended ~~December~~September 24, 2022 and September 25, 2021, the Company recognized an impairment of ~~approximately~~ nil and $~~864~~864,314, respectively, to write down inventory to its net realizable value.

~~(Amounts Expressed in Thousands of United States Dollars, Except for Share and Per Share Data)~~

In October 2019 and in connection with the Company’s determination to termination certain business acquisition, the Company recorded as held for sale certain land and license related to its non-core operations in Staunton, Virginia. As of December 25, 2021, the Company continues to pursue its plan for sale.

In February 2021, the Company entered into an investment agreement with respect to its New York operations whereby a controlling interest would be acquired by a third party. The operations within the state of New York qualified as discontinued operations. The assets associated with the New York component were measured at the lower of the carrying amount or FVLCTS (Fair Value Less Cost to Sell ) upon classification as held for sale wherein the fair value based on the exit price of $~~73,000~~ ~~under ASC 820 was greater than the carrying value. See “~~~~Note 22 – Discontinued Operations~~~~” for further information. On January 3, 2022, the Company announced its termination of the investment agreement. Refer to “~~~~Note 23 – Subsequent Events~~”.

~~(Amounts Expressed in Thousands of United States Dollars, Except for Share and Per Share Data)~~

As of ~~December 25, 2021~~September 24, 2022 and June ~~26, 2021,~~25, 2022, property and equipment consists of the following:

Depreciation expense related to continuing operations of $~~4,390~~2,258,354 and $~~8,121~~3,031,080 was recorded for the three ~~and six~~ months ended ~~December~~September 24, 2022 and September 25, 2021, respectively, of which $~~609~~24,950 and $~~1,179~~433,300, respectively, is included in cost of goods sold. ~~Depreciation expense related to continuing operations~~The amount of depreciation recognized for the capital leases during the three months ended September 24, 2022 and September 25, 2021 was $~~3,759~~347,406 and $~~8,859~~283,406 ~~was recorded for the three and six months ended December 26, 2020, respectively, of which $496~~ ~~and $558~~, respectively, ~~is included in cost of goods sold.~~see “Note 9 – Leases” for further information.

~~During the three and six months ended December 25, 2021, borrowing costs totaling $440~~ ~~and $815, respectively, were capitalized using an average capitalization rate of~~ ~~12.37% and~~ ~~12.16%, respectively.~~ Borrowing costs were not capitalized as there were no active construction projects in progress during the three ~~and six~~ months ended ~~December 26, 2020.~~September 24, 2022. During the three months ended September 25, 2021, borrowing costs totaling $375,241 were capitalized using an average capitalization rate of 11.95%.

As of ~~December 25, 2021~~September 24, 2022 and June ~~26, 2021,~~25, 2022, intangible assets consist of the following:

The Company recorded amortization expense related to continuing operations of $~~3,853~~1,713,119 and $~~7,722~~3,225,837 for the three ~~and six~~ months ended ~~December~~September 24, 2022 and September 25, 2021, ~~respectively. The Company recorded amortization expense related to continuing operations of $5,608~~ ~~and $8,601~~ for the three and six months ended December 26, 2020, respectively. During the three and six months ended December 25, 2021, the Company recognized an impairment on an intellectual property asset in the amount of nil and $~~435~~, respectively.

~~(Amounts Expressed in Thousands of United States Dollars, Except for Share and Per Share Data)~~

As of ~~December 25, 2021~~September 24, 2022 and June ~~26, 2021,~~25, 2022, accounts payable and accrued liabilities consist of the following:

~~(Amounts Expressed in Thousands of United States Dollars, Except for Share and Per Share Data)~~

A reconciliation of the beginning and ending balance of derivative liabilities and change in fair value of derivative liabilities for the ~~six~~three months ended ~~December 25, 2021~~September 24, 2022 is as follows:

On August 17, 2021, in connection with the amended and restated senior secured convertible credit facility (the Sixth Amendment”), the Company provided the note holders top-up and preemptive rights which were bifurcated from the related notes and classified as a derivative due to the variability of the number and price of shares issuable under these rights. See ““Note 11 – Senior Secured Convertible Credit Facility” for further information.

~~On August 17, 2021, the Company completed an equity investment through a private placement of~~ ~~416,666,640~~ ~~units at a price of $0.24~~ per unit (the “Private Placement”). Each unit consisted of one Subordinate Voting Share and one-quarter of one share purchase warrant of the Company. Certain investors also received a portion of the Short-Term Warrant with an exercise price of $~~30,000~~ ~~and an expiration date of~~ ~~December 31, 2021~~. At the option of the holder, the Short-Term Warrant may be exercisable into equity or convertible promissory notes under the Convertible Facility, in which net cash settlement is outside of the Company’s control. See “~~Note 12 – Shareholders’ Equity~~~~” for further information. Accordingly, the Short-Term Warrant was accounted for as a derivative liability and measured at fair value, in the amount of $19,400~~ on August 17, 2021, with changes in fair value recognized in the Condensed Consolidated Statements of Operations. Subsequent to the fiscal second quarter of 2022, the Short-Term Warrant expired unexercised.

The fair value of the top-up provision in connection with Sixth Amendment of the Convertible Facility ~~and the Short-Term Warrant in connection with the Private Placement~~ was determined using the ~~Monte Carlo~~Black Scholes simulation model based on Level 3 inputs on the fair value hierarchy. The following assumptions were used at ~~period end:~~September 24, 2022:

~~(Amounts Expressed in Thousands of United States Dollars, Except for Share and Per Share Data)~~

The following are the warrants issued related to the equity financing transactions that were accounted for as derivative liabilities:

The fair value of the September 2018 and December 2018 bought deal warrants was measured based on Level 1 inputs on the fair value hierarchy since there are quoted prices in active markets for these warrants. The Company used the closing price of the publicly-traded warrants at the time of grant to estimate fair value of the derivative liability. The fair value of the March 2021 private placement warrants was measured based on Level 3 inputs on the fair value hierarchy using the Black-Scholes Option pricing model using the following variables:

~~(Amounts Expressed in Thousands of United States Dollars, Except for Share and Per Share Data)~~

The Company has various operating and finance leases for land, buildings, equipment and other assets that are used for corporate purposes as well as for the production and sale of cannabis products. These leases are subject to covenants and restrictions standard to the industry in which the Company operates.

The below are the details of the lease cost and other disclosures regarding the Company’s leases for the three ~~and six~~ months ended ~~December~~September 24, 2022 and September 25, ~~2021 and December 26, 2020:~~2021:

The weighted-average remaining lease term and discount rate related to the Company’s finance and operating lease liabilities as of ~~December~~September 24, 2022 and June 25, ~~2021 and December 26, 2020~~2022, is as follows:

Future lease payments under non-cancellable operating leases and finance leases as of ~~December 25, 2021~~September 24, 2022 are as follows:

The Company entered into a management agreement (the “Management Agreement”) with a third party to operate its cultivation facilities in California and Nevada (the “Cultivation Facilities”). On September 30, 2021, the landlord approved the third party to operate the leased facilities which effectuated the Management Agreement. The Management Agreement provides the third party an option to acquire all the assets used in the Cultivation Facilities, including the cannabis licenses and equipment, for $1 (the “Purchase Option”). The fee for the services under the Management Agreement is 100% and 30% of the California and Nevada Cultivation Facilities net revenue, respectively. The term of the Management Agreement remains in effect until the earlier of (a) the closing of any sale pursuant to the Purchase Option and (b) the expiration of the term, as applicable, of the master lease, at which time this Management Agreement shall automatically terminate without any further action of the Parties. As of ~~December 25, 2021,~~September 24, 2022, the Management Agreement remains in effect as neither termination condition has occurred. During the three months ended September 24, 2022, the Company recorded sublease income under the Management Agreement. See “Note 16 – Other Operating Income” for further information.

~~(Amounts Expressed in Thousands of United States Dollars, Except for Share and Per Share Data)~~

Refer to the 2022 Form 10-K for complete disclosure of current terms of notes payable included in the footnotes of the annual financial statements as of June 25, 2022. There were no amendments during the three months ended September 24, 2022.

As of ~~December 25, 2021~~September 24, 2022 and June ~~26, 2021,~~25, 2022, notes payable consist of the following:

~~(Amounts Expressed in Thousands of United States Dollars, Except for Share and Per Share Data)~~

A reconciliation of the beginning and ending balances of notes payable for the ~~six~~three months ended ~~December 25, 2021~~September 24, 2022 is as follows:

~~On October 1, 2018,~~In February 2022, the Company ~~closed a $73,275~~executed the Sixth Modification extending the maturity date of the senior secured term loan facility (the “Facility”) with ~~funds managed by~~ Hankey Capital and ~~with an affiliate of~~ Stable Road Capital (the “Lenders”)~~. On October 3, 2018, the Company closed an additional tranche of the Facility, which increased the principal amount of the loan~~ to $~~77,675. The principal amount under the Facility will accrue interest at a rate of~~ ~~7.5~~% per annum, paid monthly, with a maturity date of 24 months following the date of closing on October 1, 2018. The Company may repay the balance of the Facility at any time and from time to time, in whole or in part, with a prepayment penalty of 1% of the outstanding principal amount repaid if repaid before DecemberJuly 31, ~~2019. In connection with the Facility, the Company’s equity interests in MMOF SD LLC, MMOF VENICE LLC, MMOF DOWNTOWN COLLECTIVE LLC, MMOF BH LLC, and MMOF VEGAS 2 LLC were pledged as security.~~

~~Additionally, MM CAN issued to the Lenders~~ ~~8,105,642~~ ~~warrants, each being exercisable for one Class B Common Share of such company at a purchase price per share of $4.97~~ for 30 months. Such Class B Common Shares are redeemable in accordance with their terms for Class B Subordinate Voting Shares of the Company. In connection with the increased principal under the Facility, MM CAN issued to the Lenders an additional ~~511,628~~ ~~warrants, each being exercisable for one Class B Common Share of such affiliate at a purchase price per share of $4.73~~ ~~for a period of 30 months. Such Class B Common Shares are redeemable in accordance with their terms for Class B Subordinate Voting Shares of the Company.~~

In addition to providing a portion of the Facility, Stable Road Capital provided advisory services to the Company. Advisory services included introducing the Company to brands and various service providers, advice on the Facility and providing advice2022 with respect to the ~~Company’s planned structured~~Facility, and August 1, 2022 with respect to the incremental term loans (collectively, the “Term Loans”). The Sixth Modification required that the Company make a mandatory prepayment of at least $37,500,000 in the event the sale of ~~real estate assets. For its advisory services, MM CAN issued~~certain assets and imposed covenants in regards to ~~Stable Road Capital~~ ~~8,105,642~~ ~~warrants at a purchase price per share of $4.97~~ ~~and~~ ~~511,628~~ ~~warrants at a purchase price per share of $4.73~~, each being exercisable for one Class B Common Share of such company for a period of 30 months. Such Class B Common Shares are redeemable in accordance with their terms for Class B Subordinate Voting Shares of the Company.

~~On January 13, 2020,~~strategic actions the Company ~~completed an amendment of~~would have to implement if unable to pay the ~~Facility wherein~~Term Loans by the extended stated maturity ~~date was extended from October 1, 2020 to January 31,~~date.

During the three months ended September 24, 2022, ~~and the interest rate was increased from a fixed rate of~~ ~~7.5% per annum to~~ ~~15.5~~% per annum. In addition, the Company may prepay the amounts outstanding, on a non-revolving basis, at any time and from time to time, in whole or in part, without penalty. The amendment secured the Facility by a pledge of ~~100~~% of the equity interest in Project Compassion NY, LLC, which includes MedMen NY, Inc. and MMOF NY Retail, LLC. The amendment to the term loan facility was not deemed to be a substantial modification under ASC Subtopic 470-50, “~~Modifications and Extinguishments~~~~” (“ASC Subtopic 470-50”).~~

~~Further, the Company cancelled the existing~~ ~~16,211,284~~ ~~and~~ ~~1,023,256~~ ~~warrants issued to the lenders exercisable at $4.97~~ ~~and $4.73~~ ~~per share, respectively, representing~~ ~~100% of the loan amount. The Company issued new warrants to the lenders totaling~~ ~~40,455,729~~ ~~warrants exercisable at $0.60~~ ~~per share until December 31, 2022. The new warrants may be exercised at the election of their holders on a cashless basis. The warrants issued~~ in connection with the ~~term loan facility met~~sale of the ~~scope exception under ASC 815, “~~~~Derivatives and Hedging~~~~” and are classified as equity instruments. The warrants are measured at fair value and recorded as a debt discount in connection with the term loan facility. See “~~~~Note 13 – Share-Based Compensation~~~~” for further information regarding the valuation method and assumptions used in determining the fair value of these equity instruments.~~

~~(Amounts Expressed in Thousands of United States Dollars, Except for Share and Per Share Data)~~

~~On July 2, 2020,~~Company’s Florida-based operations, the Company ~~completed an amendment~~made a principal repayment of $31,599,999with proceeds from the sale. An additional $8,500,000 principal repayment will be made in 2023 upon receipt of the ~~Facility wherein the entirety of the interest at a rate of~~ ~~15.5~~% per annum shall accrue monthly to the outstanding principal as payment-in-kind effective March 1, 2020 through July 2, 2021. Thereafter until maturity on January 31, 2022, one-half of the interest (7.75% per annum) shall be payable monthly in cash and one-half of the interest (7.75% per annum) shall be paid-in-kind. In addition, the Company may request an increase to the Facility through December 31, 2020 to be funded through incremental term loans. Certain reporting and financial covenants were added, and the minimum liquidity covenant was waived until September 30, 2020 wherein the amount of required cash balance thereafter was amended. The amendment to the Facility was not deemed to be a substantial modification under ASC Subtopic 470-50.

~~The Company incurred an amendment fee of $834~~ ~~that was added to the outstanding principal balance. As consideration for the amendment to the Facility, the Company issued approximately~~ ~~20,227,863~~ ~~warrants exercisable at $0.34~~ ~~per share until July 2, 2025. The Company also cancelled~~ ~~20,227,863~~ ~~existing warrants held by the lenders exercisable at $0.60~~ per share until December 31, 2022. The warrants may be exercised at the election of their holders on a cashless basis. The warrants issued in connection with the term loan facility met the scope exception under ASC 815 and are classified as equity instruments. The change in fair value of the warrants was recorded as a debt discount in connection with the Facility. See “~~Note 13 – Share-Based Compensation~~~~” for further information regarding the valuation method and assumptions used in determining the fair value of these equity instruments.~~

~~On September 16, 2020, the Company entered into further amendments wherein the amount of funds available under the Facility was increased by $12,000, of which $5,700~~ ~~was fully committed by the lenders through October 31, 2020.~~ The additional amounts are funded through incremental term loans at an interest rate of 18.0% per annum wherein 12.0% shall be paid in cash monthly in arrears and 6.0% shall accrue monthly as payment-in-kind. In connection with each incremental draw under the amended Facility, the Company shall issue warrants equal to 200% of the incremental term loan amount, divided by the greater of (a) $0.20 per share and (b) 115% multiplied by the volume-weighted average trading price (“VWAP”) of the shares for the five consecutive trading days ending on the trading day immediately prior to the applicable funding date of the second tranche, which shall be the exercise price of the issued warrant. Such warrants are subject to a down round feature wherein the exercise price would be decreased in the event of the exercise of a down-round price reset of select warrants under the Convertible Facility. Refer to “~~Note 11 – Senior Secured Convertible Credit Facility~~” for further information. In addition, certain covenants and terms were added or amended, and the minimum liquidity covenant was waived until December 31, 2020. The amendment to the Facility was not deemed to be a substantial modification under ASC Subtopic 470-50. As consideration for the amendment, the Company issued approximately ~~20,227,863~~ ~~warrants exercisable at $0.34~~ ~~per share until September 16, 2025. The Company also cancelled~~ ~~20,227,863~~ ~~existing warrants held by the lenders exercisable at $0.60~~ ~~per share until December 31, 2022. The change in fair value of the warrants was recorded as a debt discount in connection with the Facility.~~

~~On September 16, 2020, the Company closed on an incremental term loan of $3,000~~ ~~under the amended Facility and issued~~ ~~30,000,000~~ ~~warrants with an exercise price of $0.20 per share until September 16, 2025. On October 30, 2020, the Company closed on an incremental term loan of $7,705~~ ~~under the amended Facility and issued~~ ~~77,052,790~~ ~~warrants with an exercise price of $0.20~~ ~~per share until September 14, 2025. The warrants may be exercised at the election of their holders on a cashless basis and are classified as equity instruments. See “~~~~Note 12 – Shareholders’ Equity~~~~” and “~~~~Note 13 – Share-Based Compensation~~~~” for further information.~~

~~On September 16, 2020 and September 28, 2020, the down round feature on the warrants issued in connection with the incremental term loan of $3,000~~ ~~on September 16, 2020 was triggered wherein the exercise price was adjusted to $0.17~~ ~~and $0.15~~ ~~per share, respectively. The value of the effect of the down round feature was determined to be $405~~ ~~and recognized as an increase in additional paid-in capital during the six months ended December 26, 2020.~~

On May 11, 2021, the Company completed an amendment of the Facility wherein certain covenants were added and amended. Specifically, the minimum liquidity covenant was amended to which the covenant will not apply if the Company pays and has paid the cash portion of interest accrued under the Facility when such cash interest becomes due and payable. Such covenant will continue to be applied in the event the Company has failed to make payments. The minimum liquidity balance was not amended. In addition, application of payments was added wherein proceedsfinal installment payment from the sale of the ~~New York disposal group shall be applied to the amended~~Company’s Florida-based operations. The Facility and ~~restated Facility~~Term Loans remain in default as of September 24, 2022 as the ~~amendment~~principal balance matured on July ~~2, 2020 in the principal amount~~31, 2022 and August 1, 2022, respectively. As of $~~83,123. As consideration for the amendment,~~September 24, 2022, the Company ~~incurred a modification fee of $1,000~~ ~~which~~ is ~~due from the earliest of (a) receipt of Level-Up proceeds, (b) the date of the Investment Agreement, and (c) the earlier of January 31, 2022. Fees paid to the Lender~~ in ~~connection~~ongoing discussions with the ~~amendment totaled $225. The amendment to the Facility was not deemed to be a substantial modification under ASC Subtopic 470-50.~~

~~On July 29, 2021, the Company entered into a short-term unsecured promissory note in the amount of $5,000~~ ~~with various investors led by Serruya Private Equity Inc. (“SPE”), a related party, wherein the note bears interest at a rate of~~ ~~6.0% per annum payable quarterly in arrears with a maturity date of August 18, 2021.~~

~~In connection with the equity investment on August 17, 2021,~~ the Company settled the promissory note by the issuance of 20,833,333 units, consisting of 20,833,333 Subordinate Voting Shares and 5,208,333 warrants, based on an issue price of $0.24 and the relative portion of the Short-Term Warrant~~. Refer to “~~~~Note 12 – Shareholders’ Equity~~~~” for further information on the equity investment through private placement. The fair value of the equity instruments allocated to the settlement of debt was $4,030~~ ~~and the fair value of the derivative liability allocated was $3,146. Accordingly, the Company recorded a loss on extinguishment of debt of $2,176~~ ~~in the first quarter of 2022.~~

~~(Amounts Expressed in Thousands of United States Dollars, Except for Share and Per Share Data)~~

Refer to the 2022 Form 10-K for complete disclosure of current terms of the senior secured convertible facility included in the footnotes of the annual financial statements as of June 25, 2022. There were no amendments during the three months ended September 24, 2022.

As of ~~December 25, 2021~~September 24, 2022 and June ~~26, 2021,~~25, 2022, senior secured convertible credit facility consists of the following:

~~(Amounts Expressed in Thousands of United States Dollars, Except for Share and Per Share Data)~~

A reconciliation of the beginning and ending balances of senior secured convertible credit facility for the ~~six~~three months ended ~~December 25, 2021~~September 24, 2022 is as follows:

On August 17, 2021, the Company announced that Tilray, Inc. (“Tilray”) acquired a majority of the outstanding senior secured convertible notes (the “Notes”) under the senior secured convertible credit facility (the “Convertible Facility”) with Gotham Green Partners (“GGP”). Under the terms of the transaction, a newly formed limited partnership (the “SPV”) established by Tilray and other strategic investors acquired an aggregate principal amount of approximately $~~165,800~~ of the Notes and warrants issued in connection with the Convertible Facility, representing 75% of the outstanding Notes and 65% of the outstanding warrants under the Convertible Facility. Specifically, Tilray’s interest in the SPV represents rights to 68% of the Notes and related warrants held by the SPV, which are convertible into, and exercisable for, approximately 21% of the outstanding Subordinate Voting Shares of MedMen upon closing of the transaction. Tilray also has the right to appoint two non-voting observers of the Company’s Board of Directors.

In connection with the sale of the Notes, the Company amended and restated the securities purchase agreement (“A&R 4”, or the “Sixth Amendment”) to, among other things, extend the maturity date to August 17, 2028, eliminate any cash interest obligations and instead provide for payment-in-kind (“PIK”) interest, eliminate certain repricing/down-round provisions, and eliminate and revise certain restrictive covenants. All or a portion of the Notes and unpaid accrued interest are convertible into Subordinate Voting Shares at the option of the Note holder prior to the Notes repayment. The conversion price of the Notes and unpaid and accrued PIK interest prior to A&R 4 ranges from $0.1529 to $0.3400. Accrued payment-in-kind interest on the Notes incurred after A&R 4 will be convertible at price equal to the higher of 1) the trailing 30-day volume weighted average price of the Subordinate Voting Shares, and 2) lowest discounted price available pursuant to the pricing policies of the Canadian Securities Exchange (the “CSE”). A&R 4 PIK was classified as a liability in accordance with ASC 480, “~~Distinguishing Liabilities from Equity”.~~ The Notes may not be prepaid until the federal legalization of cannabis. Under A&R 4, the Company is subject to certain financial covenants including minimum liquidity and maintenance of the annual budget, and certain negative covenants, including restrictions on incurring liens, debt and contingent obligations, sale of assets, conducting mergers, investments and affiliate transactions, making certain payments, organizational changes, and sale-leaseback transactions. The Company was in compliance with its covenants as of December 25, 2021. The Sixth Amendment was deemed to be a substantial modification under ASC Subtopic 470-50, “~~Modifications and Extinguishments~~~~” and the Company recorded a gain on extinguishment of debt in the amount of $12,410 in the first quarter of 2022.~~

The Notes will also provide the holders with a top-up (“Top-up”) right to acquire additional Subordinate Voting Shares and a preemptive (“Preemptive”) right with respect to future financings of the Company, subject to certain exceptions, upon the issuance by MedMen of certain Subordinate Voting Shares or Subordinate Voting Share-linked securities. Top-up rights provides the Note holders warrants for the number of Subordinate Voting Shares that maintains the Note holders their as-if converted ownership percentage of Subordinate Voting Shares (the “Top-up Warrants”). The Top-up Warrants exercise price is equal to the issue or conversion price of the Subordinate Voting Shares that triggered the Top-up Warrants. The Top-up Warrants expire at the earlier of five years or the date cannabis possession is federally legal. Preemptive rights allow the Note holders a first right to acquire its pro rata portion of certain future Subordinate Voting Share issuances at the price proposed by the Company. The Top-up and Preemptive rights were bifurcated from the Notes and classified as derivatives due to the variability in the number of shares and price in accordance with ASC 815, “~~Derivatives and Hedging~~~~”. See~~ ~~“Note 8 – Derivative Liabilities”~~ ~~for further discussion.~~

~~In connection with A&R 4, GGP has the ability to nominate an individual to serve on the Company’s Board of Directors for so long as GGP’s diluted ownership percentage is at least 10%.~~

~~(Amounts Expressed in Thousands of United States Dollars, Except for Share and Per Share Data)~~

A reconciliation of the beginning and ending issued and outstanding shares is as follows:

On August 17, 2021, the Company entered into subscription agreements with various investors led by Serruya Private Equity Inc. (“SPE”) to purchase $100,000 of units (each, a “Unit”) of the Company at a purchase price of $0.24 per Unit (the “Private Placement”) wherein each Unit consisted of one Class B Subordinate Voting Share and one-quarter share purchase warrant. Each warrant permits the holder to purchase one additional Subordinate Voting Share at an exercise price of $0.288 per share for a period of five years from the date of issuance. The warrants were classified within shareholders’ equity as additional paid-in capital in accordance with ASC 815-10, “~~Derivatives and Hedging~~” (“ASC 815-10”) and recorded at fair value. The Company issued a total of 416,666,640 Subordinate Voting Shares and 104,166,660 warrants for gross proceeds of $100,000 including the settlement of the unsecured promissory note of $5,000. The Company incurred stock issuance costs totaling $7,853, including the Backstop Commitment fee noted below, which were recorded as reductions in additional paid-in capital. Accordingly, the Company received proceeds totaling $92,147 net of fees in the first quarter of 2022. Refer to “~~Note 10 – Notes Payable~~” for further information. In connection with private placement, S5 Holdings LLC has the ability to nominate an individual to serve on the Company’s Board of Directors for so long as their diluted ownership percentage is at least 9%.

Each Unit issued to certain funds associated with SPE consisted of one Class B Subordinate Voting Share and one-quarter of one share purchase warrant, plus a proportionate interest in a short-term warrant (the “Short-Term Warrant”) which expires on December 31, 2021. At the option of the holders and upon payment of $30,000, the Short-Term Warrant entitles the holders to acquire (i) an aggregate of 125,000,000 Units at an exercise price of $0.24 per Unit, or (ii) $30,000 principal amount of notes at par, convertible into 125,000,000 Subordinate Voting Shares at a conversion price of $0.24 per share under the terms of the Convertible Facility. The proceeds from the exercise of the Short-Term Warrant, less fees and expenses, must be used to repay the senior secured term loan with Hankey Capital if any indebtedness is then outstanding. The Short-Term Warrant was classified as a liability in accordance with ASC 815-10 and recorded at fair value in the amount of $19,400. See “~~Note 8 – Derivative Liabilities~~~~” for further information.~~

Certain investors associated with SPE agreed to backstop the Private Placement (the “Backstop Commitment”). In consideration for providing the Backstop Commitment, the Company paid a fee of $2,500 in the form of 10,416,666 Class B Subordinate Voting Shares at a price of $0.24 per share.

~~(Amounts Expressed in Thousands of United States Dollars, Except for Share and Per Share Data)~~

Non-controlling interest represents the net assets of the subsidiaries that the holders of the Subordinate Voting Shares do not directly own. The net assets of the non-controlling interest are represented by the holders of MM CAN USA Redeemable Shares and the holders of MM Enterprises USA Common Units. Non-controlling interest also represents the net assets of the entities the Company does not directly own but controls through a management agreement. As of ~~December 25, 2021~~September 24, 2022 and June ~~26, 2021,~~25, 2022, the holders of the MM CAN USA Redeemable Shares represent approximately ~~7.05~~4.74% and ~~11.58~~4.76%, respectively, of the Company and holders of the MM Enterprises USA Common Units represent approximately ~~0.06~~0.05% ~~and~~ ~~0.09%, respectively,~~ of the Company.

The below information are entities the Company has concluded to be variable interest entities (“VIEs”) as the Company possesses the power to direct activities through management services agreements (“MSAs”). Through these MSAs, the Company can significantly impact the VIEs and thus holds a controlling financial interest. The following table represents the summarized financial information about the Company’s consolidated VIEs. VIEs include the balances of Venice Caregiver Foundation, Inc., LAX Fund II Group, LLC, and Natures Cure, Inc. This information represents amounts before intercompany eliminations.

As of and for the ~~six~~three months ended ~~December~~September 24, 2022, the balances and activities attributable to the VIEs consist of the following:

As of and for the fiscal year ended June 25, ~~2021,~~2022, the balances of the VIEs consists of the following:

~~(Amounts Expressed in Thousands of United States Dollars, Except for Share and Per Share Data)~~

~~As of the year ended June 26, 2021, the balances of the VIEs consists of the following:~~

The net change in the consolidated VIEs and other non-controlling interest are as follows for the ~~six~~three months ended ~~December 25, 2021:~~September 24, 2022:

Le Cirque Rouge, LP (the “OP”) is a Delaware limited partnership that holds substantially all of the real estate assets owned by the ~~REIT,~~Treehouse Real Estate Investment Trust (the “REIT”), conducts the REIT’s operations and is financed by the REIT. Under Accounting Standards Codification (“ASC”) Topic 810, “Consolidation” (“ASC ~~810,~~ ~~“Consolidation”~~Topic 810”), the OP was determined to be a variable interest entity in which the Company has ~~a variable interest. The Company was determined to have~~ an implicit variable interest ~~in the OP~~ based on the leasing relationship and arrangement with the REIT. ~~The~~However, the Company ~~was~~is not ~~determined to be~~ the primary beneficiary ofunder ASC Topic 810. Accordingly, Le Cirque Rouge, LP is not consolidated as a variable interest entity within the ~~VIE as the Company does not have the power to direct the activities of the VIE that most significantly affect its economic performance.~~Consolidated Financial Statements. As of ~~December 25, 2021,~~and during the three months ended September 24, 2022, the Company continues to have a variable interest in the ~~OP. During the six months ended December 25, 2021, the Company~~OP and did not provide any financial or other support to the REIT other than the completion of the sale and leaseback transactions and the REIT being a lessor on various leases as described in ““Note 9 – ~~Leases”~~Leases”. ~~Accordingly, Le Cirque Rouge, LP is not consolidated as a variable interest entity within the Condensed Consolidated Financial Statements.~~

~~MEDMEN ENTERPRISES INC.~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~Three and Six Months Ended December 25, 2021 and December 26, 2020~~

~~(Amounts Expressed in Thousands of United States Dollars, Except for Share and Per Share Data)~~

13.

SHARE-BASED COMPENSATION

The Company has a stock and equity incentive plan (the “Incentive Plan”) under which the Company may issue various types of equity instruments to any employee, officer, consultant, advisor or director. The types of equity instruments issuable under the Incentive Plan encompass, among other things, stock options, stock grants, and restricted stock units (together, “Awards”). Stock based compensation expenses are recorded as a component of general and administrative ~~to the extent that the Company has not appointed a Compensation Committee, all rights and obligations under the Incentive Plan shall be those of the full Board of Directors.~~expenses. The maximum number of Awards that may be issued under the Incentive Plan shall be determined by the Compensation Committee or the Board of Directors in the absence of a Compensation Committee. Any shares subject to an Award under the Incentive Plan that are forfeited, ~~canceled,~~cancelled, expire unexercised, are settled in cash or are used or withheld to satisfy tax withholding obligations, shall again be available for Awards under the Incentive Plan. Vesting of Awards will be determined by the Compensation Committee or Board of Directors in absence of ~~one.~~a Compensation Committee. The exercise price for Awards (if applicable) will generally not be less than the fair market value of the Award at the time of grant and will generally expire after 5 or 10years.

A summary of share-based compensation expense for the three ~~and six~~ months ended ~~December~~September 24, 2022 and September 25, 2021 ~~and December 26, 2020~~ is as follows:

Schedule of share-based compensation expense
	Three Months Ended
	September 24,		September 25,
	2022		2021
Stock Options	$	863,685	$	1,216,447
Stock Grants for Compensation		-		333,333
Restricted Stock Grants		-		1,554,297

Total Share-Based Compensation	$	863,685	$	3,104,077

Schedule of share-based compensation expense
Three Months Ended Six Months Ended
December 25, December 26, December 25, December 26,
2021 2020 2021 2020
Stock Options $ 98 $ 1,538 $ 1,314 $ 2,546
Stock Grants for Compensation 207 (60 ) 541 121
Restricted Stock Grants 403 280 1,957 437

Total Share-Based Compensation $ 708 $ 1,758 $ 3,812 $ 3,104

Stock Options

A reconciliation of the beginning and ending balance of stock options outstanding is as follows:

Schedule of stock options
Number of
Stock Options Weighted-
Average
Exercise Price
Balance as of June 26, 2021 14,752,960 $ 1.40

Granted 4,084,005 $ 0.28
Exercised (1,473,534 ) $ (0.17 )
Forfeited (2,766,781 ) $ (2.11 )

Balance as of December 25, 2021 14,596,650 $ 1.12

Stock Options Exercisable as of December 25, 2021 13,783,375 $ 1.07

Schedule of stock options
	Number of Stock Options			Weighted-Average Exercise Price
Balance as of June 25, 2022		8,649,673		$	1.35

Forfeited and Expired		(205,354	)	$	(3.39	)

Balance as of September 24, 2022		8,444,319		$	1.39

Stock Options Exercisable as of September 24, 2022		8,037,095		$	1.27

For the three and six months ended December 25, 2021, the fair value of stock options granted with a fixed exercise price was determined using the Black-Scholes option-pricing model with the following assumptions at the time of grant:

~~Schedule of Black-Scholes option-pricing model~~
~~Weighted-Average Risk-Free Annual Interest Rate~~	~~0.97~~	%
~~Weighted-Average Expected Annual Dividend Yield~~	~~0.0~~	%
~~Weighted-Average Expected Stock Price Volatility~~	~~131.7~~	%
~~Weighted-Average Expected Life in Years~~	~~5.00~~
~~Weighted-Average Estimated Forfeiture Rate~~	~~0.0~~	%

~~MEDMEN ENTERPRISES INC.~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~Three and Six Months Ended December 25, 2021 and December 26, 2020~~

~~(Amounts Expressed in Thousands of United States Dollars, Except for Share and Per Share Data)~~

Long-Term Incentive Plan (“LTIP”) Units and LLC Redeemable Units

A reconciliation of the beginning and ending balances of the LTIP Units and LLC Redeemable Units issued for compensation outstanding is as follows:

Schedule of LTIP Units and LLC Redeemable Units
Weighted
LTIP Units LLC Average
Issued and Redeemable Grant Date
Outstanding Units Fair Value
Balance as of June 26, 2021 and December 25, 2021 19,323,878 725,016 $ 0.52

Schedule of LTIP Units and LLC Redeemable Units

Weighted

LTIP Units

LLC

Average

Issued and

Redeemable

Grant Date

Outstanding

Units

Fair Value

Balance as of June 25, 2022 and September 24, 2022

19,323,878

725,016

0.52

Restricted Stock Units

A reconciliation of the beginning and ending balance of restricted stock units outstanding is as follows:

Schedule of Restricted Stock Grants
Issued and
Outstanding Vested ⁽¹⁾ Weighted-
Average
Fair Value
Balance as of June 26, 2021 20,888,394 897,294

Granted 19,288,397 - $ 0.32
Forfeiture of Restricted Stock ⁽²⁾ (5,218,765 ) - $ (0.37 )
Redemption of Vested Stock (9,284,306 ) (9,284,306 ) $ (0.44 )
Vesting of Restricted Stock - 9,004,649 $ 0.41

Balance as of December 25, 2021 25,673,720 617,667

Schedule of Restricted Stock Grants
	Issued and Outstanding			Vested ⁽¹⁾		Weighted-Average Fair Value
Balance as of June 25, 2022		10,998,483			4,030,460	$	0.20

Forfeiture of Restricted Stock ⁽²⁾		(1,405,788	)		-	$	(0.22	)
Vesting of Restricted Stock		-			1,117,081	$	0.22

Balance as of September 24, 2022		9,592,695			5,147,541	$	0.20

(1)

Restricted stock units were issued on September 24, 2021 and vests 37.5% on the first anniversary, 12.5% on the second anniversary, 37.5% on the third anniversary, and 12.5% on the fourth anniversary of the grant date.

(2)

Restricted stock units were forfeited upon resignation of certain employees prior to their vesting during the ~~six~~three months ended ~~December 25, 2021.~~September 24, 2022.

~~MEDMEN ENTERPRISES INC.~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~Three and Six Months Ended December 25, 2021 and December 26, 2020~~

~~(Amounts Expressed in Thousands of United States Dollars, Except for Share and Per Share Data)~~

Warrants

A reconciliation of the beginning and ending balance of warrants outstanding is as follows:

Schedule of Warrants
Number of Warrants Outstanding
Subordinate
Voting Shares MedMen Corp Redeemable
Shares TOTAL Weighted-
Average
Exercise Price
Balance as of June 26, 2021 259,462,609 97,430,456 356,893,065 $ 0.33

Issued 135,716,660 - 135,716,660 $ 0.29
Exercised (8,807,605 ) - (8,807,605 ) $ (0.18 )

Balance as of December 25, 2021 386,371,664 97,430,456 483,802,120 $ 0.32

Schedule of Warrants
	Number of Warrants Outstanding
	Subordinate Voting Shares			MM CAN USA Redeemable Shares		TOTAL			Weighted-Average Exercise Price
Balance as of June 25, 2022		352,704,355			97,430,456		450,134,811		$	0.25

Expired		(2,677,535	)		-		(2,677,535	)	$	(3.27	)

Balance as of September 24, 2022		350,026,820			97,430,456		447,457,276		$	0.23

~~The fair value of warrants exercisable for MedMen Corp Redeemable Shares was determined using the Black-Scholes option-pricing model with the following assumptions on the date of issuance:~~

~~Schedule of fair value of warrants~~
~~Weighted-Average Risk-Free Annual Interest Rate~~	~~0.13~~	%
~~Weighted-Average Expected Annual Dividend Yield~~	0	%
~~Weighted-Average Expected Stock Price Volatility~~	~~92.06~~	%
~~Weighted-Average Expected Life of Warrants~~	1 ~~year~~

The fair value of warrants exercisable for the Company’s Subordinate Voting Shares was determined using the Black-Scholes option-pricing model with the following assumptions on the latest modification of August 17, 2021:

~~Weighted-Average Risk-Free Annual Interest Rate~~	~~0.06~~	%
~~Weighted-Average Expected Annual Dividend Yield~~	0	%
~~Weighted-Average Expected Stock Price Volatility~~	~~175.50~~	%
~~Weighted-Average Expected Life of Warrants~~	1 ~~year~~

Stock price volatility was estimated by using the historical volatility of the Company’s Subordinate Voting Shares. The expected life in years represents the period of time that warrants issued are expected to be outstanding. The risk-free rate was based on U.S. Treasury bills with a remaining term equal to the expected life of the warrants.

2625

~~MEDMEN ENTERPRISES INC.~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~Three and Six Months Ended December 25, 2021 and December 26, 2020~~

~~(Amounts Expressed in Thousands of United States Dollars, Except for Share and Per Share Data)~~

14.

LOSS PER SHARE

The following is a reconciliation for the calculation of basic and diluted loss per share for the three ~~and six~~ months ended ~~December~~September 24, 2022 and September 25, ~~2021 and December 26, 2020:~~2021:

Schedule of basic and diluted loss per share
Three Months Ended Six Months Ended
December 25, December 26, December 25, December 26,
2021 2020 2021 2020
Net Loss from Continuing Operations Attributable to Shareholders of MedMen Enterprises Inc. $ (13,535 ) $ (43,306 ) $ (62,418 ) $ (58,977 )
Less Deemed Dividend - Down Round Feature of Warrants - (1,481 ) - (6,364 )

Net Loss from Continuing Operations Available to Shareholders of MedMen Enterprises Inc. (13,535 ) (44,787 ) (62,418 ) (65,341 )
Net Loss from Discontinued Operations (5,492 ) (6,390 ) (11,939 ) (12,639 )

Total Net Loss $ (19,027 ) $ (51,177 ) $ (74,357 ) $ (77,980 )

Weighted-Average Shares Outstanding - Basic and Diluted 1,198,515,279 482,903,106 1,070,605,666 452,806,117

Loss Per Share - Basic and Diluted:

From Continuing Operations Attributable to Shareholders of MedMen Enterprises Inc. $ (0.01 ) $ (0.09 ) $ (0.06 ) $ (0.14 )

From Discontinued Operations Attributable to Shareholders of MedMen Enterprises Inc. $ 0.00 $ (0.01 ) $ (0.01 ) $ (0.03 )

Schedule of basic and diluted loss per share
	Three Months Ended
	September 24,			September 25,
	2022			2021
Net Loss from Continuing Operations Attributable to Shareholders of MedMen Enterprises, Inc.	$	(20,146,436	)	$	(40,883,537	)
Net Income (Loss) from Discontinued Operations		24,306,649			(14,446,491	)

Total Net Income (Loss)	$	4,160,213		$	(55,330,028	)

Weighted-Average Shares Outstanding - Basic and Diluted		1,301,659,701			942,696,052

Earnings (Loss) Per Share - Basic and Diluted:
From Continuing Operations Attributable to Shareholders of MedMen Enterprises Inc.	$	(0.02	)	$	(0.04	)
From Discontinued Operations Attributable to Shareholders of MedMen Enterprises Inc.	$	0.02		$	(0.02	)

Diluted loss per share is the same as basic loss per share as the issuance of shares on the exercise of convertible debentures, LTIP share units, warrants and share options is anti-dilutive.

2726

~~MEDMEN ENTERPRISES INC.~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~Three and Six Months Ended December 25, 2021 and December 26, 2020~~

~~(Amounts Expressed in Thousands of United States Dollars, Except for Share and Per Share Data)~~

15.

GENERAL AND ADMINISTRATIVE EXPENSES

During the three ~~and six~~ months ended ~~December~~September 24, 2022 and September 25, 2021, ~~and December 26, 2020,~~ general and administrative expenses consisted of the following:

Schedule of general and administrative expenses
	Three Months Ended
	September 24,		September 25,
	2022		2021
Salaries and Benefits	$	6,858,048	$	9,911,488
Professional Fees		1,350,848		7,430,659
Rent		3,627,925		4,754,883
Licenses, Fees and Taxes		1,001,669		2,537,788
Share-Based Compensation		863,685		1,642,853
Deal Costs		429,272		1,637,587
Other General and Administrative		3,714,670		4,733,976

Total General and Administrative Expenses	$	17,846,117	$	32,649,234

Schedule of general and administrative expenses
Three Months Ended Six Months Ended
December 25, December 26, December 25, December 26,
2021 2020 2021 2020
Salaries and Benefits $ 10,957 $ 8,165 $ 21,616 $ 18,639
Professional Fees 7,954 3,593 15,512 7,200
Rent 6,832 5,872 13,802 15,527
Licenses, Fees and Taxes 1,502 1,387 4,329 4,790
Share-Based Compensation 2,370 2,644 2,370 2,644
Deal Costs 1,177 2,114 2,835 2,337
Restructuring Expenses 2,764 1,180 2,764 1,180
Other General and Administrative 1,747 6,855 8,566 9,732

Total General and Administrative Expenses $ 35,303 $ 31,810 $ 71,794 $ 62,049

16.

OTHER OPERATING (INCOME) EXPENSE

During the three ~~and six~~ months ended ~~December~~September 24, 2022 and September 25, 2021, ~~and December 26, 2020,~~ other operating (income) expense consisted of the following:

Schedule of other operating expenses
Three Months Ended Six Months Ended
December 25, December 26, December 25, December 26,
2021 2020 2021 2020
(Gain) Loss on Disposals of Assets $ (142 ) $ 528 $ (127 ) $ 385
Restructuring and Reorganization Expense 386 591 2,764 1,180
(Gain) Loss on Settlement of Accounts Payable - 1,186 (530 ) 1,026
Loss (Gain) on Lease Terminations 174 (1,280 ) 174 (17,909 )
Gain on Disposal of Assets Held For Sale - - - (12,415 )
Other Loss 213 1,676 196 1,360

Total Other Operating Expense (Income) $ 631 $ 2,702 $ 2,478 $ (26,374 )

Schedule of other operating expenses
	Three Months Ended
	September 24,			September 25,
	2022			2021
Loss on Disposals of Assets	$	205,595		$	15,146
Restructuring and Reorganization Expense		423,793			2,378,675
Gain on Settlement of Accounts Payable		(74,637	)		(177,990	)
Gain on Lease Terminations		(1,587,650	)		-
Other Income		(1,522,219	)		(16,803	)

Total Other Operating (Income) Expense	$	(2,555,118	)	$	2,199,028

During the three months ended September 24, 2022, the Company recorded $1,521,650 of sublease income related to the cultivation facilities in California and Nevada as a component of Other Operating Income in the Consolidated Statements of Operations.

~~MEDMEN ENTERPRISES INC.~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~Three and Six Months Ended December 25, 2021 and December 26, 2020~~

~~(Amounts Expressed in Thousands of United States Dollars, Except for Share and Per Share Data)~~

17.

PROVISION FOR INCOME TAXES AND DEFERRED INCOME TAXES

The following table summarizes the Company’s income tax expense and effective tax rates for the three ~~and six~~ months ended ~~December~~September 24, 2022 and September 25, ~~2021 and December 26, 2020:~~2021:

Schedule of income tax expense and effective tax rates
	Three Months Ended						Six Months Ended						Three Months Ended
	December 25,			December 26,			December 25,			December 26,			September 24,			September 25,
	2021			2020			2021			2020			2022			2021
Loss from Continuing Operations Before Provision for Income Taxes	$	(23,004	)	$	(39,912	)	$	(57,474	)	$	(54,226	)	$	(18,065,206	)	$	(26,471,632	)
Income Tax Benefit (Expense)	$	8,138		$	(22,560	)	$	(11,555	)	$	(34,843	)
Income Tax Expense														(2,193,542	)		(19,691,908	)
Effective Tax Rate		35	%		-57	%		-20	%		-64	%		-12	%		-74	%

~~For~~We have historically calculated the ~~three and six months ended December 25, 2021, the Company calculated its~~ provision for income taxes during ~~its~~ interim reporting periods by applying an estimate of the annual effective tax rate (“AETR”) for the full fiscal year to “ordinary” income or loss (pre-tax income or loss excluding unusual or infrequently occurring discrete items) for the ~~respective~~ reporting period. For the three months ended September 25, 2021, we determined we could no longer reliably estimate income taxes utilizing an AETR. The AETR estimate is highly sensitive to estimates of ordinary income (loss) and permanent differences such that minor fluctuations in these estimates could result in significant fluctuations of the Company’s AETR. Accordingly, we used our actual year-to-date effective tax rate to calculate income taxes for the three months ended September 25, 2022.

As the Company operates in the legal cannabis industry, the Company is subject to the limits of IRC Section 280E for U.S. federal, Illinois ~~state, Florida~~ state, Massachusetts state and New York state income tax purposes under which the Company is only allowed to deduct expenses directly related to sales of product. This results in permanent differences between ordinary and necessary business expenses deemed non-allowable under IRC Section 280E. However, the State of California does not conform to IRC Section 280E and, accordingly, the Company deducts all operating expenses on its California Franchise Tax Returns.

The Company has approximately gross ~~$8,500~~$12,230,000 (tax effected ~~$2,300)~~$3,240,000) of Canadian non-capital losses and ~~$6,915~~$6,000,000 (tax effected ~~$1,833)~~$1,620,000) of share issuance cost 20(1)(e) balance. The loss tax attribute has been determined to be more likely than not that the tax attribute would not yield any tax benefit. As such, the Company has recorded a full valuation allowance against the benefit. Since IRC Section 280E was not applied in the California Franchise Tax Returns, the Company has approximately ~~$210,000~~$22,000,000 of gross California net operating losses which begin expiring in 2033 as of June ~~26, 2021.~~25, 2022. The Company has evaluated the realization of its California net operating loss tax attribute and has determined under the more likely than not standard that ~~$207,000~~$217,300,000 will not be ~~realized~~.realized.

The effective tax rate for the three ~~and six~~ months ended ~~December 25, 2021 varies widely~~September 24, 2022 is different from the three ~~and six~~ months ended ~~December 26, 2020,~~September 25, 2021, respectively, primarily due to the Company’s ~~forecasted~~ income and related 280E expenditures. The ~~Company incurred a large amount of~~Company’s non-deductible expenses ~~that were not deductible due~~related to IRC Section 280E limitations ~~which resulted in income tax expense being incurred while there were pre-tax losses for the quarter.~~have remained relatively consistent.

The Company files income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions, and in Canada. The Company is generally subject to audit by taxing authorities in various U.S., state, and in foreign jurisdictions for fiscal years ~~2013~~2014 through the current fiscal year. As of ~~December 25, 2021,~~September 24, 2022, the Company had $~~16,600~~18,781,424 of unrecognized tax benefits, all of which would reduce income tax expense and the effective tax rate if recognized. During the three ~~and six~~ months ended ~~December 25, 2021,~~September 24, 2022, the Company recognized a net discrete tax expense of $~~140~~ 407,993primarily related on interest of past liabilities. During the next twelve months, the Company does not estimate any material reduction in its unrecognized tax benefits.

~~MEDMEN ENTERPRISES INC.~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~Three and Six Months Ended December 25, 2021 and December 26, 2020~~

~~(Amounts Expressed in Thousands of United States Dollars, Except for Share and Per Share Data)~~

18.

COMMITMENTS AND CONTINGENCIES

Contingencies

The Company’s operations are subject to a variety of local and state regulations. Failure to comply with one or more of these regulations could result in fines, restrictions on its operations, or losses of permits that could result in the Company ceasing operations. While management of the Company believes that the Company is in compliance with applicable local and state regulations as of ~~December 25, 2021~~September 24, 2022 and June ~~26, 2021,~~25, 2022, marijuana regulations continue to evolve and are subject to differing interpretations. As a result, the Company may be subject to regulatory fines, penalties or restrictions in the future.

Claims and Litigation

From time to time, the Company may be involved in litigation relating to claims arising out of operations in the normal course of business. As of ~~December 25, 2021,~~September 24, 2022, there were no pending or threatening lawsuits that could be reasonably assessed to have resulted in a probable loss to the Company in an amount that can be reasonably estimated. As such, no accrual has been made in the Condensed Consolidated Financial Statements relating to claims and litigations. As of ~~December 25, 2021,~~September 24, 2022, there are also no proceedings in which any of the Company’s directors, officers or affiliates is an adverse party to the Company or has a material interest adverse to the Company’s interest.

In July 2018, a legal claim was filed against the Company related to alleged misrepresentations in respect of a financing transaction completed in May 2018. During the year ended June 26, 2021, the claim was settled for a total of C$~~575~~ ~~of which C$250~~ ~~shall be paid in Class B Subordinate Voting Shares. The settlement liability has been accrued in the Consolidated Balance Sheet.~~

In late January 2019, the Company’s former Chief Financial Officer (“CFO”) filed a complaint against MM Enterprises in the Superior Court of California, County of Los Angeles, seeking damages for claims relating to his employment. The Company is currently defending against this lawsuit, which seeks damages for wrongful termination, breach of contract, and breach of implied covenant of good faith. The former CFO’s employment agreement provided for the payment of severance in the event of termination without cause. In November 2021, the lawsuit was ruled in favor of the Company on all claims and determined the Company did not owe any damages.

In March 2020, litigation was filed against the Company in the Superior Court of Arizona, Maricopa County, related to a purchase agreement for a previous acquisition. The Superior Court of Arizona, Maricopa County granted summary judgement in favor of the Company on all counts in July 2022. The Company is currently ~~defending against this~~in process of recovering certain fees and costs associated with the lawsuit ~~which seeks damages for fraudulent inducement and breach of contract.~~from the plaintiffs. The Company believes the likelihood of a loss contingency is neither probable nor estimable. As such, no amount has been accrued in these financial statements.

In April 2020, a complaint was filed against the Company in Los Angeles Superior Court related to a contemplated acquisition in which the plaintiffs are seeking damages for alleged breach of contract and breach of implied covenant of good faith and fair ~~dealing. While no amounts have been identified in the claim, the~~dealing seeking declaratory relief and specific performance. The Company ~~estimated this to be approximately $5,200~~.has filed counterclaims including for breach of contract, breach of promissory note, unjust enrichment and declaratory relief. The Company believes the likelihood of a loss contingency is remote. As such, no amount has been accrued in the financial statements.

In May 2020, litigation was filed against the Company related to a purchase agreement and secured promissory note for a previous acquisition. The Company is currently defending against this lawsuit, which claims for breach of contract, breach of implied covenant of good faith and fair dealing, common law fraud and securities fraud. The plaintiffs are seeking damages for such claims in which the amount is currently not reasonably estimable. ~~Therefore, pursuant to ASC 450, “~~~~Contingencies~~~~” (“ASC 450”), a liability has not been recorded in these financial statements.~~ In response, the Company filed a counterclaim and is seeking entitlement to proceeds of the sale, net of amounts owed under the secured promissory ~~note which is in dispute.~~note. The plaintiffs filed an appeal to the ruling on the entitlement of proceeds in excess of the secured promissory ~~note. In accordance with ASC 450, any~~note which was dismissed. The additionally claims and counterclaims are currently in dispute. Any loss recoveries related to the Company’s counterclaim have not been recorded. In addition, net proceeds resulting from the sale was not recognized as a receivable as the amount is not reasonably estimable.

In September 2020 aand May 2020, legal ~~dispute was~~disputes were filed against the Company related to the separation of a former ~~officer~~officers in which the severance issued is currently being disputed. The Company believes the likelihood of loss is remote. As a result, no amount has been set up for potential damages in these financial statements.

~~In February 2020, a legal dispute was filed against the Company and settled in December 2020 for approximately $2,400. As of December 25, 2021, the settlement was paid in full and no balance remains in the Consolidated Balance Sheet.~~30

In ~~December~~November 2020, ~~a lawsuit was filed against~~entities affiliated with former officers of the Company ~~related to~~initiated arbitration against a ~~previous acquisition alleging that~~subsidiary of the ~~plaintiffs were owed additional compensation. In the complaint, the plaintiffs allege~~Company in Los Angeles, California asserting breach of contract, breach of the implied covenant of good faith and fair ~~delaying,~~dealing, fraud, and unjust ~~enrichment, among other causes of actions.~~enrichment. The ~~plaintiffs~~claimants are generally seeking ~~the issuance of~~ ~~51,716,141~~ ~~shares, which has been accrued in the Consolidated Balance Sheet as of December 25, 2021,~~damages and compensatory damages according to proof, including lost earnings and other ~~monetary damages.~~benefits, past and future, interest on lost earnings and benefits, reasonable attorney’s fees, and such other and further relief as the court deems proper. The Company asserted counterclaims, including for breach of the same management agreements. The arbitration is currently set for hearing in December 2022. The litigation is at an early stage and the likelihood of a loss contingency is remote. ~~The amount of other monetary damages is not reasonably estimable and thus,~~As a result, no amount has been ~~accrued~~set up for potential damages in these financial statements. ~~During the six months ended December 25, 2021, the parties entered into a partial settlement in the amount of $1,050~~ ~~of which $245~~ ~~is remaining as of December 25, 2021 and has been accrued in the Consolidated Balance Sheet.~~

In ~~January~~October 2021, a ~~cross-complaint~~suit for premises liability and negligence seeking unspecified damages for pain and suffering, disability, mental and emotional distress, and loss of earnings was filed against the Company ~~related a lien foreclosure alleging breach~~in Los Angeles Superior Court. The matter is in the process of ~~contract, quantum merit and implied indemnity.~~being litigated. The Company believes the likelihood of loss is ~~actively defending the legal matter which the claimant is seeking payment of outstanding payables totaling approximately $11,000~~ ~~which~~remote. As a result, no amount has been ~~accrued~~set up for potential damages in these financial statements.

The Company is the defendant in several complaints filed by various of its landlords seeking rents and damages under leases. In 2020 a complaint was filed in Cook County Circuit Court, Illinois against the Company by a landlord claiming the Company had failed to meet its obligations to apply effort to obtain a retail cannabis license at a property and seeking rents and damages. The litigation is currently in the discovery phase. If the litigation is not settled or resolved, trial will likely take place During the fiscal year ended 2023. In July 2022, a complaint was filed against the Company in the United States District Court for the Southern District of New York by a landlord seeking damages under a lease on real estate located in Illinois. The Company is required to file an answer to the complaint by September 2022. Prior attempts to resolve the lease dispute with this landlord have failed. In June 2022, a complaint was filed against the Company by the Company’s landlord at its cultivation center in Utica, New York, related to an agreement to purchase land next to the cultivation center, which land was also owned by the landlord. Plaintiff seeks to enforce a land purchase agreement and seeks damages. In April 2022, the landlord at the Company’s dispensary location in Tampa, Florida, filed suit seeking damages under a lease, shortly after the Company announced its plans to sell its Florida business. The Company retained this lease and litigation following the sale of the Florida business and the litigation is at an early stage and the likelihood of a loss contingency is remote. As a result, no amount has been set up for potential damages in these financial statements.

3031

~~MEDMEN ENTERPRISES INC.~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~Three and Six Months Ended December 25, 2021 and December 26, 2020~~

~~(Amounts Expressed in Thousands of United States Dollars, Except for Share and Per Share Data)~~

19.

RELATED PARTY TRANSACTIONS

No related party balances due to the Company as of December 25, 2021 and June 26, 2021 had any formal contractual agreements regarding payment terms or interest. As of December 25, 2021 and June 26, 2021, other amounts due to related parties was $~~1,477~~ ~~and $1,477, respectively, were recorded in the Condensed Consolidated Balance Sheets.~~

On August 17, 2021, Superhero Acquisition, L.P., in which Tilray is an investor, acquired the majority of the outstanding senior secured convertible notes and warrants held by GGP and GGP no longer held significant influence over the Company and therefore as of September 25, 2021, was not considered a related party under ASC 850,~~“Related Party Disclosures”~~ (“ASC 850”), however GGP was during the fiscal year ended June 26, 2021. As of August 17, 2021, the Company determined Tilray to be a related party as a result of Tilray having significant influence over the Company. See ~~“Note 11 – Senior Secured Convertible Credit Facility”~~ ~~for a full disclosure of the SPV and A&R 4.~~

On August 17, 2021, the Company entered an equity investment through private placement led by SPE. In connection with the private placement, the Company appointed Michael Serruya, SPE’s Managing Director, as a member of its board of directors. As of August 17, 2021, the Company determined SPE to be a related party as a result of the private placement and involvement with the Board. See ~~“Note 12 – Shareholders’ Equity”~~ ~~for discussion on the private placement transaction. In November 2021, the Company appointed Mr. Serruya as Chairman of the Board and Interim Chief Executive Officer.~~

In March 2020, the Company entered into a restructuring plan and retained Sierra Constellation Partners LLC (“SCP”) wherein Tom Lynch of SCP was appointed as Chief Executive Officer and Chairman of the Board and Tim Bossidy of SCP was appointed as Chief Operating Officer. As of December 25, 2021, Mr. Lynch and Mr. Bossidy are no longer with the Company. In December 2020, Reece Fulgham of SCP was appointed as Chief Financial Officer. During the six months ended December 25, 2021, the Company had paid $~~1,897~~ ~~in fees to SCP for interim management and restructuring support. During the six months ended December 25, 2021, Mr. Lynch and Mr. Bossidy each received~~ ~~214,030~~ ~~stock options and~~ ~~850,036~~ ~~restricted stock units.~~

The Company’s Board of Directors each receive quarterly fees of $~~200~~200,000 of which one-third is paid in cash and two-thirds is paid in Class B Subordinate Voting Shares. ~~The Class B Subordinate Voting Shares is recorded as a restricted stock unit until settled.~~

3132

~~MEDMEN ENTERPRISES INC.~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~Three and Six Months Ended December 25, 2021 and December 26, 2020~~

~~(Amounts Expressed in Thousands of United States Dollars, Except for Share and Per Share Data)~~

20.

SEGMENT INFORMATION

The Company currently operates in one segment, the production and sale of cannabis products, which is how the Company’s Chief Operating Decision Maker manages the business and makes operating decisions. The Company’s cultivation operations are not considered significant to the overall operations of the Company. Intercompany sales and transactions are eliminated in consolidation.

21.

REVENUE

While the Company operates in one segment as disclosed in “Note 20 – Segment Information”, the Company is disaggregating its revenue by geographical region in accordance with ASC 606, “Revenue from Contracts with Customers”. Revenue by state for the periods presented are as follows:

Disaggregation of revenue
Schedule of Disaggregation of revenue
	Three Months Ended				Six Months Ended				Three Months Ended
	December 25,		December 26,		December 25,		December 26,		September 24,		September 25,
	2021		2020		2021		2020		2022		2021
California	$	23,368	$	19,775	$	47,994	$	40,508	$	19,928,985	$	24,626,555
Nevada		3,855		3,020		7,935		6,792		2,997,469		4,079,151
Florida		3,607		3,144		6,677		5,337
Illinois		4,105		4,909		8,434		11,723		3,542,071		4,328,602
Arizona		4,174		1,743		7,875		3,341		2,794,648		3,701,596
Massachusetts		15		-		15		-		780,875		-

Revenue from Continuing Operations	$	39,124	$	32,591	$	78,930	$	67,701	$	30,044,048	$	36,735,904

Revenue from Discontinued Operations		4,458		2,926		8,729		5,043		3,629,641		7,340,099

Total Revenue	$	43,582	$	2,926	$	8,729	$	5,043	$	33,673,689	$	44,076,003

3234

~~MEDMEN ENTERPRISES INC.~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~Three and Six Months Ended December 25, 2021 and December 26, 2020~~

~~(Amounts Expressed in Thousands of United States Dollars, Except for Share and Per Share Data)~~

22.

DISCONTINUED OPERATIONS

~~New York~~On February 28, 2022, MME Florida LLC and its parent, MM Enterprises USA, LLC, a wholly-owned subsidiary of the Company entered into an Asset Purchase Agreement (the “Agreement”) with Green Sentry Holdings, LLC, (“Buyer”) for the sale of substantially all of the Company’s Florida-based assets, including its license, dispensaries, inventory and cultivation operations, and assumption of certain liabilities.

~~In February 2021, management entered into a plan to sell MedMen NY, Inc. wherein~~On August 22, 2022, the Company ~~entered into a definitive investment agreement to sell a controlling interest in MedMen NY, Inc. Consequently, assets and liabilities allocable to~~closed the ~~operations within the state of New York were classified as a discontinued operation. The assets associated with the New York component were measured~~transaction at the ~~lower~~ final sales price of $67,000,000, which comprised of $63,000,000in cash and $4,000,000in liabilities to be assumed by the Buyer. The Buyer made a cash payment of $40,000,000 at closing, a cash payment of $11,500,000 on September 15, 2022 and is required to make one additional installment payment of $11,500,000 on or before March 15, 2023.During the three months ended September 24, 2022, $31,599,999 of the ~~carrying amount or fair value less cost~~cash proceeds was used to ~~sell.~~repay the Senior Secured Term Loan Facility and the Company received net cash proceeds of $19,558,947. As of September 24, 2022, the final cash payment of $11,500,000 remains due and payable. Accordingly, the Company recognized a gain on sale of assets of $31,719,833 included in Net Income from Discontinued Operations for the three months ended September 24, 2022. All profit or loss relating to the ~~New York~~Florida operations were eliminated from the Company’s continuing operations and are shown as a single line item in the ~~Condensed Consolidated Statements of Operations. Of the total sales price of $73,000~~, the cash purchase price was to be used to repay a portion of the Senior Secured Term Loan Facility. Accordingly, the total amount of interest expense and amortization of debt discounts allocated to discontinued operations was $~~5,560~~ ~~and $5,151~~ ~~for the three months ended December 25, 2021 and December 26, 2020, respectively, and $10,407~~ ~~and $9,391~~ ~~for the six months ended December 25, 2021 and December 26, 2020.~~

On January 3, 2022, the Company announced its termination of the investment agreement. As of December 25, 2021, the operations within the state of New York remained classified as discontinued operations. See “~~Note 23 – Subsequent Events~~”.

~~Arizona~~

During the fiscal year ended June 26, 2021, the Company had a change in plan of sale for the remaining Arizona disposal group. As a result, the assets no longer meet the held for sale criteria and are required to be reclassified as held and used at the lower of adjusted carrying value or the fair value at the date of the subsequent decision not to sell. During the six months ended December 25, 2021, revenues, net income, net depreciation and amortization, in the amounts of $~~7,875, $1,656~~ ~~and $411~~, respectively, is included in continuing operations in the Condensed Consolidated Statements of Operations. During the six months ended December 26, 2020, revenues, net loss, net depreciation and amortization, in the amounts of $~~3,341, $1,013~~ ~~and $~~81~~, respectively, were reclassified to continuing operations and is included in the Condensed~~ Consolidated Statements of Operations.

The operating results of the discontinued operations are summarized as follows:

Schedule of net operating loss of discontinued operation
Three Months Ended Six Months Ended
December 25, December 26, December 25, December 26,
2021 2020 2021 2020
Revenue $ 4,458 $ 2,926 $ 8,729 $ 5,043
Cost of Goods Sold 3,427 1,260 5,669 2,680

Gross Profit 1,031 1,666 3,060 2,363

Expenses:
General and Administrative 2,318 2,479 4,095 4,898
Sales and Marketing 6 6 13 12
Depreciation and Amortization (65 ) 865 (49 ) 1,511
Other Income - - (245 ) -

Total Expenses 2,259 3,350 3,814 6,421

Loss from Operations (1,228 ) (1,684 ) (754 ) (4,058 )

Other Expense:
Interest Expense 3,172 2,586 5,994 4,944
Amortization of Debt Discount and Loan Origination Fees 2,406 2,120 4,450 3,636

Total Other Expense 5,578 4,706 10,444 8,580

Loss from Discontinued Operations Before Provision for Income Taxes (6,806 ) (6,390 ) (11,198 ) (12,638 )
Provision for Income Tax Benefit (Expense) 1,314 - (741 ) -

Net Loss from Discontinued Operations $ (5,492 ) $ (6,390 ) $ (11,939 ) $ (12,638 )

Schedule of net operating loss of discontinued operation
	Three Months Ended
	September 24,			September 25,
	2022			2021
Revenue	$	3,629,641		$	7,340,099
Cost of Goods Sold		2,103,298			5,227,553

Gross Profit		1,526,343			2,112,546

Expenses:
General and Administrative		4,983,995			5,617,595
Sales and Marketing		43,311			103,803
Depreciation and Amortization		872,895			1,221,759
Impairment Expense		(78,433	)		-
Gain on Disposal of Assets and Other Income		(35,659,761	)		(597,591	)

Total (Income) Expenses		(29,837,993	)		6,345,566

Income (Loss) from Discontinued Operations		31,364,336			(4,233,020	)

Other Expense:
Interest Expense		3,761,758			4,616,829
Accretion of Debt Discount and Loan Origination Fees		158,079			3,540,908

Total Other Expense		3,919,837			8,157,737

Income (Loss) from Discontinued Operations Before Provision for Income Taxes		27,444,499			(12,390,757	)
Provision for Income Tax Benefit (Expense)		(3,137,850	)		(2,055,734	)

Net Income (Loss) from Discontinued Operations	$	24,306,649		$	(14,446,491	)

3335

~~MEDMEN ENTERPRISES INC.~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~Three and Six Months Ended December 25, 2021 and December 26, 2020~~

~~(Amounts Expressed in Thousands of United States Dollars, Except for Share and Per Share Data)~~

The carrying amounts of assets and liabilities in the disposal group are summarized as follows:

Schedule of assets included in discontinued operation
December 25, June 26,
2021 2021
Carrying Amounts of the Assets Included in Discontinued Operations:
Cash and Cash Equivalents $ 1,328 $ 902
Restricted Cash 5 5
Accounts Receivable and Prepaid Expenses 193 234
Inventory 4,069 4,899
Property and Equipment, Net 12,712 12,683
Operating Lease Right-of-Use Assets 18,394 19,136
Intangible Assets, Net 10,583 10,583
Other Assets 457 457

TOTAL ASSETS OF THE DISPOSAL GROUP CLASSIFIED AS HELD FOR SALE $ 47,741 $ 48,899

Carrying Amounts of the Liabilities Included in Discontinued Operations:
Accounts Payable and Accrued Liabilities $ 2,251 $ 3,082
Income Taxes Payable 3,117 1,536
Other Current Liabilities - 125
Current Portion of Operating Lease Liabilities 2,892 2,326
Current Portion of Finance Lease Liabilities 1 1
Operating Lease Liabilities, Net of Current Portion 19,431 20,272
Finance Lease Liabilities, Net of Current Portion 350 349
Deferred Tax Liabilities 5,842 5,458

TOTAL LIABILITIES OF THE DISPOSAL GROUP CLASSIFIED AS HELD FOR SALE $ 33,884 $ 33,149

Schedule of assets included in discontinued operation
	September 24,			June 25,
	2022			2022
Carrying Amounts of the Assets Included in Discontinued Operations:

Cash and Cash Equivalents	$	355,378		$	1,124,076
Restricted Cash		5,280			5,280
Accounts Receivable and Prepaid Expenses		95,048			334,621
Inventory		2,915,345			6,866,833

TOTAL CURRENT ASSETS ⁽¹⁾

Property and Equipment, Net		9,713,565			41,273,597
Operating Lease Right-of-Use Assets		19,780,991			31,543,058
Intangible Assets, Net		10,582,559			40,799,146
Other Assets		458,383			1,181,795

TOTAL ASSETS OF THE DISPOSAL GROUP CLASSIFIED AS HELD FOR SALE	$	43,906,549		$	123,128,406

Carrying Amounts of the Liabilities Included in Discontinued Operations:

Accounts Payable and Accrued Liabilities	$	2,640,664		$	6,295,745
Income Taxes Payable		(27,904	)		1,671,380
Other Current Liabilities		-			89,069
Current Portion of Operating Lease Liabilities		2,605,317			4,209,512
Current Portion of Finance Lease Liabilities		-			174,000

TOTAL CURRENT LIABILITIES ⁽¹⁾

Operating Lease Liabilities, Net of Current Portion		19,067,840			56,410,071
Deferred Tax Liabilities		6,250,511			6,097,597
Notes Payable		-			11,100,000

TOTAL NON-CURRENT LIABILITIES ⁽¹⁾

TOTAL LIABILITIES OF THE DISPOSAL GROUP CLASSIFIED AS HELD FOR SALE	$	30,536,428		$	86,047,374

3436

~~MEDMEN ENTERPRISES INC.~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~Three and Six Months Ended December 25, 2021 and December 26, 2020~~

~~(Amounts Expressed in Thousands of United States Dollars, Except for Share and Per Share Data)~~

23.

SUBSEQUENT EVENTS

The Company has evaluated subsequent events through ~~February 8, 2022, which is~~ the date these Condensed Consolidated Financial Statements were issued and has concluded that ~~the following~~no subsequent events have occurred that would require recognition in the Condensed Consolidated Financial Statements or disclosure in the ~~notes~~Notes to the Condensed Consolidated Financial Statements.

~~Termination of Investment Agreement~~

~~On January 3, 2022, the Company announced the termination of the investment agreement to sell a controlling interest in the Company’s operations in the state of New York. Refer to “~~~~Note 22 – Discontinued Operations~~~~” for further information. Subsequently, the third party filed a complaint against the Company seeking specific performance of the investment agreement.~~

~~Sixth Modification to Senior Secured Term Loan Facility~~

On February 2, 2022, the Company executed the Sixth Modification to its Senior Secured Term Loan Facility, (the “Sixth Modification”), with Hankey Capital, LLC, (the “Lender) extending the maturity date and making certain amendments to the Commercial Loan Agreement, dated October 1, 2018, as amended, restated, supplemented, and/or as modified. As of December 25, 2021, the date of these financial statements, and as of February 2, 2022, the date of the Sixth Modification, the outstanding amounts due are approximately $~~113,600~~ ~~and $114,300~~, respectively. The Sixth Modification extends the stated maturity date of January 31, 2022 of the Facility for a period of six months; specifically, July 31, 2022 with respect to Facility, and August 1, 2022 with respect to the incremental term loans (collectively, the “Term Loans”). The Sixth Modification makes no modification to the current interest rate. The Sixth Modification provides that the definitive documentation with respect to the conditional purchase of the Term Loans by Superhero Acquisition, L.P., an existing lender under the Company’s Senior Secured Convertible Purchase Agreement dated August 7, 2021, must be entered within 45 days or the stated maturity date of the Term Loans become due. Refer to “~~Note 10 – Notes Payable~~~~” for further information about the debt due to the lender.~~

~~The Sixth Modification requires that the Company make a mandatory prepayment of at least $37,500~~ ~~in the event the sale of certain assets and imposes covenants in regards strategic actions the Company must implement if it is unable to pay the Term Loans by the extended stated maturity date.~~

~~The Company agreed to prepay $20,000~~ ~~on the Term Loans and pay a fee of $1,000~~ ~~to the~~ Term Loan lenders in consideration of the Sixth Modification, which fee will be paid in Class B Subordinate Voting Shares (“Shares”) with a deemed price of $0.1247 (C$0.1582) for a total of 8,021,593 Shares (the “Fee Shares”), with any difference in realized net proceeds that is less than $1,000 from the sale of the Fee Shares during a 30-day period, to the extent such Fee Shares are sold, reimbursed in cash. ~~The Company agreed to file with the Securities and Exchange Commission a registration statement on Form S-1 registering for resale the Fee Shares.~~

The issuance of the Fee Shares as part of the Sixth Modification triggered the right of holders of convertible notes under the Convertible Facility to be issued five-year warrants in order to maintain their pro rata ownership interest (on a partially diluted basis) in the Shares. A total of ~~6,682,567~~ ~~warrants (the “Top-up Warrants”), each entitling the holder to purchase~~ ~~one Share at a purchase price of $0.1247 (C$0.1582), will be issued to the holders of convertible notes under the Convertible Facility.~~ ~~Refer to “~~~~Note 8 – Derivative Liabilities~~~~” for further information.~~

3537

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

This management’s discussion and analysis (“MD&A”&A”) of the financial condition and results of operations of MedMen Enterprises Inc. (“MedMen ~~Enterprises~~”Enterprises”, “~~MedMen~~”“MedMen”, the “Company”, “we” or ~~the “~~~~Company~~”“our”) is for the three ~~and six~~ months ended ~~December 25, 2021.~~September 24, 2022. The following discussion should be read in conjunction with, and is qualified in its entirety by, the ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements and the accompanying notes presented in Item 1 of this Form 10-Q and those discussed in Item 158 of the Company’s Annual Report on Form 10-K (the “~~Form 10-K~~”“Form 10-K”) filed with the SEC on September ~~24, 2021.~~9, 2022. Except for historical information, the discussion in this section contains forward-looking statements that involve risks and uncertainties. Future results could differ materially from those discussed below for many reasons, including the risks described in “Disclosure Regarding Forward-Looking Statements,” Item ~~1A—”Risk~~1A. “Risk Factors” and elsewhere in this Form 10-Q.

~~Overview~~

MedMen is a cannabis retailer based in the U.S. with flagship locations in Los Angeles, Las Vegas, and Chicago. MedMen offers a robust selection of high-quality products, including MedMen-owned brands, LuxLyte, and MedMen Red through its premium retail stores, proprietary delivery service, as well as curbside and in-store pick up. As of December 25, 2021, the Company owns 29 store locations across California (12), Florida (7), Nevada (3), Illinois (1), Arizona (1), Massachusetts (1) and New York (4). On December 21, 2021, we announced the opening of our newest store location in Boston’s famed Fenway Park area. Occupying 4,725 square feet of prime retail space on 120 Brookline Avenue, MedMen Fenway marks the Company’s entry into Massachusetts’ booming adult-use market.

On September 30, 2021, the landlord of the California and Nevada Cultivation Facilities approved the third party to operate the leased facilities which effectuated the Management Agreement. The Management Agreement provides the third party an option to acquire all the assets used in the Cultivation Facilities, including the cannabis licenses and equipment, for $1 (the “~~Purchase Option~~”). The fee for the services under the Management Agreement is 100% and 30% of the California and Nevada Cultivation Facilities net revenue, respectively. The term of the Management Agreement remains in effect until the earlier of (a) the closing of any sale pursuant to the Purchase Option and (b) the expiration of the term, as applicable, of the master lease, at which time this Management Agreement shall automatically terminate without any further action of the Parties. As of December 25, 2021, the Management Agreement remains in effect as neither termination condition has occurred.. The Company determined that as of the effective date of the Management Agreement, or October 1, 2021, the Company no longer has a controlling interest in the Cultivation Facilities, and therefore these entities are no longer included in the Company’s financial statements. The deconsolidation did not have a material impact on the Company’s Condensed Financial Statements.

~~On February 25, 2021, the Company entered into a definitive investment agreement (the “~~~~Investment Agreement~~”) to sell a controlling interest in MedMen NY, Inc. equity of approximately 86.7% with the option to purchase the remaining equity of approximately 13.3% that the Company will retain in MedMen NY, Inc. following the sale for a total sales price of up to $73,000,000. In conjunction with the Investment Agreement, MedMen NY, Inc. would engage the services of the purchaser pursuant to a management agreement until regulatory approval has been obtained. The aggregate sales price consists of a cash purchase price of $35,000,000, subject to adjustments and a senior secured promissory note of $28,000,000 which shall be assigned to Hankey Capital in partial satisfaction of the outstanding debt, and within five business days after the first sale by MedMen NY, Inc. of adult-use cannabis products at one or more of its retail store locations, additional shares of MedMen NY, Inc. would be purchased for $10,000,000 in cash. The proceeds in cash would be used to repay a portion of the Hankey Capital notes payable due by the Company. Accordingly, the total amount of interest expense and amortization of debt discounts and loan origination fees related to the Senior Secured Term Loan Facility allocated to discontinued operations was $5,559,956 and $5,151,304 for the three months ended December 25, 2021 and December 26, 2020, respectively, and $10,407,258 and $9,391,363 for the six months ended December 25, 2021 and December 26, 2020. On January 3, 2022, we announced the termination of this Investment Agreement.

We are a smaller reporting company, as defined in Rule 12b-2 of the Exchange Act. Accordingly, we have omitted certain information called for by this Item as permitted by applicable scaled disclosure rules.

All references to “$” and “dollars” refer to U.S. dollars. References to C$ refer to Canadian dollars. Certain totals, subtotals and percentages throughout this MD&A may not reconcile due to rounding.

~~The Company’s~~Our fiscal year is a 52/53-week year ending on the last Saturday in ~~June.~~June or first Saturday in July. For the current interim period, the three ~~and six~~ months ended ~~December~~September 24, 2022 and September 25, 2021 ~~and December 26, 2020~~ refer to the 13 ~~and 26~~ weeks ended therein.

~~Selected Financial Data~~

The following table sets forth the Company’s selected consolidated financial data for the periods, and as of the dates, indicated. The Condensed Consolidated Statements of Operations data for the three and six months ended December 25, 2021 and December 26, 2020 have been derived from the Condensed Consolidated Financial Statements of the Company and its subsidiaries, which are included in Item 1 of this Quarterly Report on Form 10-Q (“~~Form 10-Q~~~~”).~~

~~The data set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” (“~~~~MD&A~~~~”) and the Condensed Consolidated Financial Statements and related notes presented in Item 1 of this Form 10-Q.~~

Three Months Ended Six Months Ended
December 25, December 26, December 25, December 26,
2021 2020 2021 2020
(unaudited) (unaudited) (unaudited) (unaudited)
Revenue $ 39.1 $ 32.6 $ 78.9 $ 67.7
Gross Profit $ 19.2 $ 16.8 $ 36.7 $ 33.3
Loss from Operations $ (25.1 ) $ (26.9 ) $ (54.2 ) $ (20.9 )
Total Other (Income) Expense $ (2.1 ) $ 13.1 $ 3.2 $ 33.3
Net Loss from Continuing Operations $ (14.9 ) $ (62.6 ) $ (69.0 ) $ (89.1 )
Net Loss from Discontinued Operations, Net of Taxes $ (5.5 ) $ (6.4 ) $ (11.9 ) $ (12.6 )
Net Loss $ (20.4 ) $ (69.0 ) $ (81.0 ) $ (101.7 )
Net Loss Attributable to Non-Controlling Interest $ (1.3 ) $ (19.2 ) $ (6.6 ) $ (30.1 )
Net Loss Attributable to Shareholders of MedMen Enterprises Inc. $ (19.1 ) $ (49.8 ) $ (74.4 ) $ (71.6 )

Adjusted Net Loss from Continuing Operations (Non-GAAP) $ (26.7 ) $ (57.0 ) $ (86.6 ) $ (92.1 )
EBITDA from Continuing Operations (Non-GAAP) $ (3.3 ) $ (19.0 ) $ 12.4 $ (14.7 )
Adjusted EBITDA from Continuing Operations (Non-GAAP) $ (15.2 ) $ (13.0 ) $ (29.8 ) $ (25.7 )

~~Factors Affecting Our Business~~

~~Management believes that the nascent cannabis industry represents an extraordinary opportunity in which the Company’s performance and success depend on a number of factors:~~

	●	~~Market Expansion~~. The Company’s success in achieving a desirable retail footprint is attributable to its market expansion strategy, which was a key driver of revenue growth. The Company exercises discretion in focusing on investing in retail locations that can deliver near term increased earnings to the Company.

	●	~~Retail Growth~~. MedMen stores are located in premium locations in markets such as California, Nevada, Arizona, Illinois, New York, Florida and Massachusetts. As we continue to drive to increase sales, management expects to leverage its retail footprint to develop a robust distribution model.

		Ø	On October 19, 2021, we announced the re-opening of our Tallahassee, Florida store location on 1126 Thomasville Road. The approximately 4,000-square-foot Tallahassee storefront occupies a critical hub in Florida’s capital city.

		Ø	On December 21, 2021, we announced the opening of our newest store location in Boston’s famed Fenway Park area. Occupying 4,725 square feet of prime retail space on 120 Brookline Avenue, MedMen Fenway marks the Company’s entry into Massachusetts’ booming adult-use market.

~~Our retail store count is as follows:~~

December 25, December 26,
2021 2020
Active Stores* 29 24
Temporarily Closed** 4 5
Total Stores 33 29

~~Number of active stores includes four in the state of New York which are classified as discontinued operations.~~

For the fiscal second quarter of 2022, four retail locations in the state of Florida have remained temporarily closed in order to redirect inventory from its Eustis cultivation facility to its highest performing stores. As of December 25, 2021, the Company had 25 active retail locations related to continuing operations.

●

~~Direct-to-Consumer Channel Rollout.~~ MedMen Delivery is available in California and Florida. The Company benefited from increased traction with in-store pickup as well as delivery service, curbside pickup and loyalty rewards program. During the second quarter, we invested $1,129,099 in sales and marketing of which $551,000 was in the support of new innovative direct-to-consumer initiatives.

●

~~COVID-19.~~ ~~We continuously address the effects of the COVID-19 pandemic, a discussion of which is available in sections entitled “~~~~Risk Factors”~~ ~~in Item 1A and “~~~~COVID-19 Pandemic”~~ in Item 7 under in our Annual Report on Form 10-K for the fiscal year ended June 26, 2021. Our business and operating results for the three and six months ended December 25, 2021, continue to be impacted by the COVID-19 pandemic, including the Omicron variant. During the second quarter, we experienced declines in traffic during key holidays, including the week of Thanksgiving and of Christmas, which typically drive volume as customers shop for the holidays. The overall impact on our business continues to depend on the length of time that the pandemic continues, the extent to which it affects our ability to raise capital, and the effect of governmental regulations imposed in response to the pandemic as well as uncertainty regarding all of the foregoing. At this time, it is unclear how long these measures may remain in place, what additional measures maybe imposed, or when our operations will be restored to the levels that existed prior to the COVID-19 pandemic. The Company continues to implement and evaluate actions to strengthen its financial position and support the continuity of its business and operations.

~~Trends~~Overview

MedMen is ~~subject to various trends that could have~~ a ~~material impact on~~cannabis retailer based in the U.S. offering a robust selection of high-quality products, including MedMen-owned brands, LuxLyte, and MedMen Red through its premium retail stores, proprietary delivery service, as well as curbside and in-store pick up. As of September 24, 2022, the Company ~~its financial performance~~operates 23 store locations across California (13), New York (4) Nevada (3), Illinois (1), Massachusetts (1) and condition, and its outlook as the company progresses into the future. A deviation from expectations for these trends could cause actual results to differ materially from those expressed or implied in forward-looking information included in this MD&A and the Company’s financial statements. These trends include, but are not limited to, the liberalization of cannabis laws, popular support for cannabis legalization, new and changing price discounting market practices and balanced supply and demand in states.Arizona (1).

On August 22, 2022, the Company completed the sale of its operations in the state of Florida, including its license, dispensaries, inventory and cultivation operations, to Green Sentry Holdings, LLC (“Buyer”) at the final sales price of $67,000,000 which comprised of $63,000,000 in cash and $4,000,000 in liabilities assumed by the Buyer. The Buyer made a cash payment of $40,000,000 at closing, a cash payment of $11,500,000 on September 15, 2022, and is required to make one additional installment payments of $11,500,000 on or before March 15, 2023. As of September 24, 2022, net proceeds to the Company were $19,500,000 after $31,599,999 of the cash proceeds was used to repay the Senior Secured Term Loans with Hankey Capital. Proceeds of the transaction to the Company will be used to fund operations and pay interest to Hankey Capital while the Senior Secured Term Loans remain outstanding and in default. In addition, the Company licensed the tradename “MedMen” to the Buyer for use in Florida for a period of two years, subject to termination rights, for a quarterly revenue-based fee. All purchased assets and assumed liabilities related to Florida are excluded from our Consolidated Balance Sheets as of September 24, 2022 and all profits or losses from our Florida operations subsequent to August 22, 2022 are included in the Consolidated Statements of Operations. Refer to “Note 22 – Discontinued Operations” of the Consolidated Financial Statements in Item 1 for further information.

COVID-19 Pandemic

We continuously address the effects of the COVID-19 pandemic, a discussion of which is available in Item 1A “Risk Factors” of the 2022 Form 10-K. Our business and operating results for the three months ended September 24, 2022, continue to be impacted by the COVID-19 pandemic. The overall impact on our business continues to depend on the length of time that the pandemic continues, the impact on consumer purchasing behavior, inflation, and the extent to which it affects our ability to raise capital, and the effect of governmental regulations imposed in response to the pandemic, which all remain uncertain at this time. We continue to implement and evaluate actions to strengthen our financial position and support the continuity of our business and operations.

Results of Operations

Our consolidated results, in millions, except for per share and percentage data, for the three ~~and six~~ months ended ~~December 25, 2021,~~September 24, 2022, compared to three ~~and six~~ months ended ~~December 26, 2020,~~September 25, 2021, are as follows:

	Three Months Ended												Six Months Ended												Three Months Ended
	December 25,			December 26,									December 25,			December 26,									September 24,			September 25,
($ in Millions)	2021			2020			$ Change			% Change			2021			2020			$ Change			% Change			2022			2021			$ Change			% Change
	(unaudited)			(unaudited)									(unaudited)			(unaudited)									(unaudited)			(unaudited)
Revenue	$	39.1		$	32.6		$	6.5			20	%	$	78.9		$	67.7		$	11.2			17	%	$	30.0		$	36.7		$	(6.7	)		(18	%)
Cost of Goods Sold		19.9			15.8			4.1			26	%		42.2			34.4			7.8			23	%		15.2			19.3			(4.1	)		(21	%)

Gross Profit		19.2			16.8			2.4			14	%		36.7			33.3			3.4			10	%		14.9			17.4			(2.5	)		(14	%)

Operating Expenses:
General and Administrative		35.3			31.8			3.5			11	%		71.8			62.0			9.8			16	%		17.8			32.6			(14.8	)		(45	%)
Sales and Marketing		1.1			0.2			0.9			450	%		1.8			0.4			1.4			350	%		0.4			0.6			(0.2	)		(33	%)
Depreciation and Amortization		7.6			8.9			(1.3	)		(15	%)		14.7			16.9			(2.2	)		(13	%)		3.9			5.8			(1.9	)		(33	%)
Realized and Unrealized Changes in Fair Value of Contingent Consideration		(0.3	)		0.1			(0.4	)		(400	%)		(0.3	)		0.4			(0.7	)		(175	%)
Unrealized Changes in Fair Value of Contingent Consideration																										(0.9	)		-			(0.9	)		-
Impairment Expense		-			-			-			100	%		0.4			0.8			(0.4	)		100	%		1.7			0.4			1.3			325	%
Other Operating Expense (Income)		0.6			2.7			(2.1	)		(78	%)		2.5			(26.4	)		28.9			(109	%)
Other Operating (Income) Expense																										(2.6	)		2.2			(4.8	)		(218	%)

Total Operating Expenses		44.3			43.7			0.6			1	%		90.9			54.2			36.8			68	%		20.5			41.7			(21.3	)		(51	%)

Loss from Operations		(25.1	)		(26.9	)		1.8			(7	%)		(54.2	)		(20.9	)		(33.3	)		159	%		(5.6	)		(24.3	)		18.7			(77	%)

Non-Operating Expense (Income):
Interest Expense		9.7			7.7			2.0			26	%		19.6			16.4			3.2			20	%		10.1			8.2			1.9			23	%
Interest Income		-			(0.5	)		0.5			(100	%)		-			(0.5	)		0.5			(100	%)
Amortization of Debt Discount and Loan Origination Fees		2.3			4.8			(2.5	)		(52	%)		10.2			6.5			3.7			57	%
Accretion of Debt Discount and Loan Origination Fees																										1.6			6.3			(4.7	)		(75	%)
Change in Fair Value of Derivatives		(14.1	)		0.2			(14.3	)		(7,150	%)		(16.2	)		(0.1	)		(16.1	)		16,100	%		0.8			(2.1	)		2.9			(138	%)
(Gain) Loss on Extinguishment of Debt		-			0.9			(0.9	)		(100	%)		(10.2	)		11.1			(21.3	)		(192	%)
Gain on Extinguishment of Debt																										-			(10.2	)		10.2			(100	%)

Total Non-Operating (Income) Expense		(2.1	)		13.1			(15.2	)		(116	%)		3.3			33.3			(30.0	)		(90	%)
Total Non-Operating Expense																										12.4			2.2			10.2			464	%

Loss from Continuing Operations Before Provision for Income Taxes		(23.0	)		(40.0	)		17.0			(43	%)		(57.5	)		(54.2	)		(3.3	)		6	%		(18.1	)		(26.5	)		8.4			(32	%)
Provision for Income Tax Benefit (Expense)		8.1			(22.6	)		30.7			(136	%)		(11.6	)		(34.8	)		23.2			(67	%)
Provision for Income Tax Expense																										(2.2	)		(19.7	)		17.5			(89	%)

Net Loss from Continuing Operations		(14.9	)		(62.6	)		47.7			(76	%)		(69.0	)		(89.1	)		20.1			(23	%)		(20.3	)		(46.2	)		25.9			(56	%)
Net Loss from Discontinued Operations, Net of Taxes		(5.5	)		(6.4	)		0.9			(14	%)		(11.9	)		(12.6	)		0.7			(6	%)
Net Income (Loss) from Discontinued Operations, Net of Taxes																										24.3			(14.4	)		38.7			(269	%)

Net Loss		(20.4	)		(69.0	)		48.6			(70	%)		(81.0	)		(101.7	)		20.8			(20	%)
Net Income (Loss)																										4.0			(60.6	)		64.6			(107	%)

Net Loss Attributable to Non-Controlling Interest		(1.3	)		(19.2	)		17.9			(93	%)		(6.6	)		(30.1	)		23.5			(78	%)		(0.1	)		(5.3	)		5.2			(98	%)

Net Loss Attributable to Shareholders of MedMen Enterprises Inc.	$	(19.1	)	$	(49.8	)	$	30.7			(62	%)	$	(74.4	)	$	(71.6	)	$	(2.8	)		4	%
Net Income (Loss) Attributable to Shareholders of MedMen Enterprises Inc.																									$	4.2		$	(55.3	)	$	59.5			(108	%)

Adjusted Net Loss from Continuing Operations (Non-GAAP)	$	(26.7	)	$	(57.0	)	$	30.3			(53	%)	$	(86.6	)	$	(92.1	)	$	5.5			(6	%)
EBITDA from Continuing Operations (Non-GAAP)	$	3.3		$	(19.0	)	$	15.7			(83	%)	$	(12.4	)	$	(14.7	)	$	2.3			(16	%)	$	(2.5	)	$	(5.7	)	$	3.2			(56	%)
Adjusted EBITDA from Continuing Operations (Non-GAAP)	$	(15.2	)	$	(13.0	)	$	(2.2	)		17	%	$	(29.8	)	$	(25.7	)	$	(4.1	)		16	%	$	(2.0	)	$	(12.2	)	$	10.2			(84	%)

Revenue

Revenue for the three ~~and six~~ months ended ~~December 25, 2021~~September 24, 2022 was ~~$39.1~~$30.0 million, ~~and $78.9 million, an increase~~a decrease of ~~$6.5 million and $11.2~~$(6.7) million, or ~~20% and 17%~~(18%), compared to revenue of ~~$32.6 million and $67.7~~$36.7 million for the three months ~~and six~~ ended ~~December 26, 2020.~~September 25, 2021.

Revenue in various states in which we operate is as follows:

	Three Months Ended										Six Months Ended										Three Months Ended
	December 25,		December 26,								December 25,		December 26,								September 24,		September 25,
	2021		2020		$ Change			% Change			2021		2020		$ Change			% Change
($ in Millions)																					2022		2021		$ Change			% Change
California	$	23.4	$	19.8	$	3.6			18	%	$	48.0	$	40.5	$	7.5			19	%	$	19.9	$	24.6	$	(4.7	)		(19	%)
Nevada		3.9		3.0		0.9			30	%		7.9		6.8		1.1			16	%		3.0		4.1		(1.1	)		(27	%)
Florida		3.6		3.1		0.5			16	%		6.7		5.3		1.4			26	%
Illinois		4.1		4.9		(0.8	)		(16	%)		8.4		11.7		(3.3	)		(28	%)		3.5		4.3		(0.8	)		(19	%)
Arizona		4.2		1.7		2.5			147	%		7.9		3.3		4.6			139	%		2.8		3.7		(0.9	)		(24	%)
Massachusetts																						0.8		-		0.8			-

Consolidated Revenue		39.1		32.6		6.5			20	%		78.9		67.7		11.2			17	%
Continuing Operations																						30.0		36.7		(6.7	)		(18	%)

New York - Discontinued Operations		4.5		2.9		1.6			55	%		8.7		5.0		3.7			74	%
Discontinued Operations																						3.6		7.3		(3.7	)		(51	%)

Total Revenue	$	43.6	$	35.5	$	8.1			23	%	$	99.4	$	59.7	$	39.7			66	%	$	33.6	$	44.0	$	(10.4	)		(24	%)

~~The~~Overall, across all markets, for the periods presented, we experienced declines in revenue across all markets.

In California, we experienced a decline of $(4.7) million or (19%) over the same prior year period primarily driven by lower basket size, inconsistent traffic to the stores which was slightly partially offset by flat conversion rates. We believe we were also affected by the status of the cannabis supply in this State. California is currently experiencing high levels of cannabis production which we believe has flooded the illegal market with quality cannabis flower that illicit operators are offering to cannabis consumers at lower selling prices. In addition, the increase in new dispensaries within key markets, especially West Hollywood, and the more aggressive promotional cadence these dispensaries are promoting, has resulted in a saturated market wherein the California cannabis consumer has an increased number of choices for cannabis products at discounted pricing. During this first fiscal quarter, we increased our focus on product portfolio and product selection, expanding vendor relationships, engaging in allowable marketing strategies, and continued efforts to develop our private label products.

In Nevada, revenue ~~was~~for the three months declined $(1.1) million or (27%). We experienced a decline in basket size as well as traffic and conversion rates. Nevada noted an overall decline in legal cannabis sales primarily related to ~~the Company’s initiatives as it recovers from the COVID-19 impact~~a maturing industry, lower disposable income and a revenue base heavily reliant on business and occupancy restrictions. During the three months ended December 25, 2021, the Company continued to elevate its product offering, revamp its pricing and assortment strategy, and focus on driving retail traffic. Specifically in California, where retailtourism.

In Illinois, revenue ~~increased $3.6~~declined $(0.8) million during the current period compared to the prior year quarter, the Company saw increased engagement through its customer relationship strategy and focused on marketing and advertising initiatives as COVID-19 restrictions began to lift. In addition, revenue in Arizona increased $2.5 million compared to the three months ended December 26, 2020 as a result of the Company’s focus on driving retail traffic after the state-wide transition to adult-use during the spring of calendar year 2021. Previously modified store operations based on Centers for Disease Control and Prevention guidelines and local ordinances, which limit in-store traffic for certain locations, began to operate at a less restrictive scale since the fiscal fourth quarter of 2021 as COVID-19 related restrictions began to lift, resulting in increased tourism and normalizing retail traffic levels. As the Company’s key marketsor (19%). We continue to ~~recover~~face market pressure from additional licenses issued by surrounding municipalities as part of Illinois’ efforts to promote equality and accessible locations for the ~~pandemic, MedMen expects~~consumer. We have made great efforts in testing new promotional messaging that, if marketed properly, can increase foot traffic and revenue.

In Arizona, revenue for the period decreased $(0.9) million or (24%). This decrease resulted from a decline in medical-use sales because of a maturing recreational cannabis industry. Arizona is also experiencing an increase in new dispensary openings, that similar to California, has resulted in a saturated market. Exacerbating the increase in dispensary openings, is the increase in aggressive promotional cadences by these dispensaries. We continue ~~utilizing their tailored marketing initiatives~~our efforts to finding the optimal product selection that can meet the demands of both medical and ~~revised assortment~~recreational customers as well as planning for additional private label products from our own cultivation facility in Mesa.

In Massachusetts, our store near Fenway Park opened December 2021 with no comparable sales for this reporting period.

During our first fiscal quarter, we completed the sale of our Florida-based assets. We continue to ~~drive and serve retail traffic at a much higher volume and rate.~~hold for sale our New York-based assets which are presented as discontinued operations.

Cost of Goods Sold and Gross Profit

Cost of goods sold for the three ~~and six~~ months ended ~~December 25, 2021~~September 24, 2022 was ~~$19.9~~$15.2 million ~~and $42.2~~compared to $19.3 million, ~~an increase~~a decrease of ~~$4.1 million and $7.8~~$(4.1) million, or ~~26% and 23%~~(21%), for the three months ended September 25, 2021. Gross profit for the fiscal first quarter was $14.9 million, representing a gross margin of 50%, as compared ~~with $15.8~~to $17.4 million, ~~and $34.4 million~~representing a gross margin of 47%, for the same prior year period. The improvement in gross margin resulted from our continuous efforts to develop vendor programs that reduced our cost of goods sold, ~~for the three and six months ended December 26, 2020. Gross profit for the three and six months ended December 25, 2021 was $19.2 million and $36.7 million compared with gross profit~~as well as our success in lowering costs of ~~$16.8 million and $33.3 million, for the three and six months ended December 26, 2020. The increase in gross profit is primarily due to~~production at our ~~revenue growth offset by an increase in promotional discounts and a one-time write down of inventory at one of its~~ cultivation facilities. MedMen expects gross profit to improve slightly during the remaining of fiscal year 2022. During the second quarter of 2022, the Company completed its strategic partnership for its cultivation and production facilities in California and Nevada where the Company had incurred significant fixed costs, wherein licensed operations will be carried on under management agreements while also supplying product for the Company’s private label in California and Nevada.centers.

Operating Expenses

Operating expenses for the three months ended ~~December 25, 2021 increased to $44.3~~September 24, 2022 were $20.5 million, ~~from $43.7~~a decrease of $(21.3) million, asor (51%), compared to $41.7 million for the ~~same period prior year, and increased to $90.9 million from $54.2 million as compared to six~~three months ended ~~December 26, 2020.~~September 25, 2021. These changes were attributable to the factors ~~described~~discussed below.

General and administrative expenses (“G&A”) for the three ~~and six~~ months ended ~~December 25, 2021~~September 24, 2022 were ~~$35.5 million and $71.8~~$17.8 million, compared to ~~$31.8~~$32.6 million ~~and $62.0 million, an increase of $3.5 million and $9.8 million, or 11% and 16% as compared to~~for the same prior year ~~periods.~~period. The overall ~~increase~~decrease in the ~~comparable periods~~three months period is primarily due to ~~an increase~~the Company’s corporate cost saving strategy. Key drivers of the decrease in G&A include reductions in professional fees ~~which is a direct result of litigation~~($6.1) million, payroll expenses ($3.0) million, licenses and fees ($1.5) million, deal costs ~~associated with previous officers of the Company. On a sequential quarter basis, we achieved a reduction of $1.2~~($1.2) million ~~from $36.5 million reported in our first fiscal quarter.~~and rental payments ($1.1) million. Management continues to focus inon reducing company-wide ~~selling, general and administrative expenses (“~~SGG&A. We expect G&A~~”).~~ will continue to decrease in fiscal year 2023 as compared to prior year.

Sales and marketing expenses remained relatively consistent for the three ~~and six~~ months ended ~~December~~September 24, 2022 and September 25, 2021 ~~were $1.1~~in the amount of $0.4 million and $1.8 million, compared to $0.2 million and $0.4 million. In comparison to the prior year periods, the increase in sales and marketing expenses is primarily attributed to an increase in marketing and advertising of $0.6 million, and $0.9 million and an increase in customer relationship tools of $0.2 million and $0.3 million from increased marketing initiatives to drive retail traffic as COVID-19 restrictions began to lift, tourism increased, and certain states moved towards regulatory approval of recreational marijuana.respectively.

Depreciation and amortization for the three ~~and six~~ months ended ~~December 25, 2021~~September 24, 2022 was ~~$7.6~~$3.9 million, ~~and $14.7 million, as~~ compared to ~~$8.9~~$5.8 million ~~and $16.9 million.~~for the same prior year period. The overall decrease is attributable to the ~~reduction~~impairment of assets recorded in Q4 2022 and delay in new capital ~~expenditures resulting~~projects. We are currently evaluating the long-term benefits of continuing to pursue the build out of some of our locations not yet opened or constructed. We are in negotiations with the landlords of our unfinished locations in California, Illinois and Massachusetts in an effort to reach the best outcome for all parties including the communities that live and work near these unfinished locations possibly deterring from ~~a delay and in capital-intensive projects as part of the Company’s turnaround plan and the COVID-19 pandemic.~~market values.

~~Realized and unrealized changes in fair value of contingent consideration~~Impairment expense for the three ~~and six~~ months ended ~~December 25, 2021~~September 24, 2022 was ~~$(0.3)~~$1.7 million, as compared to ~~$0.1 million and~~ $0.4 million for the three ~~and six~~ months ended ~~December 26, 2020, respectively. The increase~~September 25, 2021. During the current period, the Company wrote off approximately $1.7 million of construction in ~~fair value of the contingent liabilities was due to the increase in the Company’s share price compared to prior year.~~progress.

~~Impairment~~Other operating (income) expense for the ~~six~~three months ended ~~December 25, 2021 related an impairment on an intellectual property asset in the amount of $0.4 million.~~

~~Other operating expense (income) for the three and six months ended December 25, 2021~~September 24, 2022 was ~~$0.6~~$(2.6) million, ~~and $2.5 million, as~~ compared to ~~$2.7 million and $(26.1)~~$2.2 million for the three ~~and six~~ months ended ~~December 26, 2020, respectively. For the six months ended December~~September 25, ~~2021, the change~~2021. The decrease of $(4.8) million in other operating (income) expense was primarily ~~attributable~~due to ~~the $16.3~~a decrease of $(2.0) million ~~gain related to the lease deferral~~in restructuring expenses coupled with ~~the REIT and $2.9 million~~a gain on lease ~~terminations~~termination of $1.6 million and sublease income of $1.5 million recognized during the fiscal first quarter of 2023, versus none in the comparative ~~prior~~ period. ~~For the six months ended December 25, 2021, other operating expense (income) included restructuring and reorganizational expenses of $2.2 million.~~

Non-Operating Expense

Non-operating ~~(income)~~ expense for the three ~~and six~~ months ended ~~December 25, 2021,~~September 24, 2022, was ~~$(2.1)~~$12.4 million, ~~and $3.3 million as~~ compared to ~~$13.1 million and $33.3~~$2.2 million in the prior year ~~periods.~~period. The ~~decrease~~increase in ~~total other~~non-operating expense ~~includes~~was primarily due a ~~loss on extinguishment of debt of $10.1 million in the comparative prior period, compared to the net gain on extinguishment of debt of~~ $10.2 ~~million in the current period as a result of the $12.4~~ million gain on extinguishment of debt ~~related~~recognized in prior fiscal first quarter versus none in the current period. This was offset by a $(4.7) million decrease in accretion of debt discount due to the ~~Sixth Amendment, offset by~~principal repayment of $31.6 million on the $2.2 million loss on extinguishment of debt related to the settlement of the unsecured promissory note in connection with the Private Placement. In addition, a gain on changes in fair value of derivatives of $14.1 million and $16.2 million for the three and six months ended December 25, 2021 contributed to the decrease in total non-operating expenses as a result of the derivative liabilities recognized inSenior Secured Term Loan during the fiscal first quarter of ~~2022.~~2023 and a $(2.9) million decrease in change in fair value of derivatives.

Provision for Income Taxes

MedMen is subject to income taxes in the jurisdictions in which it operates and, consequently, income tax expense is a function of the allocation of taxable income by jurisdiction and the various activities that impact the timing of taxable events. As ~~the Company operates~~we operate in the legal cannabis industry, ~~the Company is~~we are subject to the limits of Internal Revenue Code (“~~IRC~~”IRC”) Section 280E under which ~~the Company is~~we are only allowed to deduct expenses directly related to sales of product. This results in permanent differences between ordinary and necessary business expenses deemed non-allowable under IRC Section 280E and a higher effective tax rate than most industries. However ~~the state of~~ California does not conform to IRC Section 280E and, accordingly, ~~the Company deducts~~we deduct all operating expenses on ~~its~~MedMen’s California Franchise Tax Returns.

The provision for income taxes for the three ~~and six~~ months ended ~~December 25, 2021~~September 24, 2022 was ~~a benefit of $8.1~~$2.2 million, ~~and an expense of $11.6 million, respectively,~~ compared to the provision for income tax expense of ~~$22.6 million and $34.8~~$19.7 million for the three months ended ~~December 26, 2020,~~September 25, 2021, primarily due to the Company’s forecasted income and related IRC Section 280E expenditures and interest due to the Internal Revenue Service. The Company incurred a large amount of expenses that were not deductible due to IRC Section 280E limitations which resulted in income tax expense being incurred while there were pre-tax losses for the current period.expenditures.

Net Loss

Net loss from continuing operations for the three months ended ~~December 25, 2021~~September 24, 2022 was ~~$14.9~~$20.3 million, a decrease of $(25.9) million compared to ~~a net loss from continuing operations of $62.6~~$46.2 million for the ~~same period prior year. The improvement in~~three months ended September 25, 2021. For the fiscal first quarter of 2023, net loss from continuing operations was ~~mainly attributable~~favorably impacted by the Company’s continued efforts to optimize selling, general and administrative costs and right-size the changes in fair value of derivatives of $14.1 million during the fiscal second quarter of 2021, and a decrease in our provision for income taxes. Net loss from continuing operations for the six months ended December 25, 2021 also decreased to $69.0 million from $89.1 million for the same period prior year. The decrease during the six months period as compared to the same period prior year was primarily as result of the effects of non-operating activities that occurred in the prior year, including a loss in extinguishment of debt which did not occur in 2022.

Company’s corporate infrastructure.

Non-GAAP Financial Measures

In addition to providing financial measurements based on GAAP, the Company provides additional financial metrics that are not prepared in accordance with GAAP. Management uses non-GAAP financial measures, in addition to GAAP financial measures, to understandEBITDA from Continuing Operations and compare operating results across accounting periods, for financial and operational decision-making, for planning and forecasting purposes and to evaluate the Company’s financial performance. These non-GAAP financial measures are here in collectively referred to us the “~~non-GAAP financial measures~~”.

~~Non-GAAP financial measures~~Adjusted EBITDA from Continuing Operations are financial measures that are not defined under GAAP. ~~Management believes that these non-GAAP~~We define EBITDA as net income (loss), or “earnings”, before interest, income taxes, depreciation and amortization. We define Adjusted EBITDA as EBITDA before: (i) transaction costs and restructuring costs; (ii) non-cash share-based compensation expense; (iii) fair value changes in derivative liabilities and contingent consideration; (iv) (gains) losses on disposal of assets, assets held for sale, extinguishment of debt and lease terminations; and (v) other one-time charges for non-cash operating costs. These financial measures ~~assess~~are metrics that have been adjusted from the ~~Company’s ongoing business~~GAAP net income (loss) measure in an effort to provide readers with a ~~manner that allows for~~normalized metric in making comparisons more meaningful ~~comparisons and analysis of trends in~~across the business, as they facilitate comparing financial results across accounting periods and to those of peer companies. The Company uses these non-GAAP financial measures and believes they enhance an investors’ understanding of the Company’s financial and operating performance from period to period. Management also believes that these non-GAAP financial measures enable investors to evaluate the Company’s operating results and future prospects in the same manner as management.

~~In particular, the Company continues to make investments in its~~ cannabis properties and management resources to better position the organization to achieve its strategic growth objectives which have resulted in outflows of economic resources. Accordingly, the Company uses these metrics to measure its core financial and operating performance for business planning purposes. In addition, the Company believes investors use both GAAP and non-GAAP measures to assess management’s past and future decisions associated with its priorities and allocation of capital,industry, as well as to ~~analyze how~~remove non-recurring, irregular and one-time items that may otherwise distort the ~~business operates in, or responds to, swings in economic cycles or to other events that impact the cannabis industry. However, these measures do not have any standardized meaning prescribed by~~ GAAP and may not be comparable to similar measures presented by other companies in the Company’s industry. Accordingly, these non-GAAP financial measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.

These non-GAAP financial measures exclude certain material non-cash items and certain other adjustments the Company believes are not reflective of its ongoing operations and performance. These non-GAAP financial measures are not intended to represent and should not be considered as alternatives to net income operating income or any other performance measures derived in accordance with GAAP as measures of operating performance or operating cash flows or as measures of liquidity. These non-GAAP financial measures have important limitations as analytical tools and should not be considered in isolation or as a substitute for any standardized measure under GAAP. For example, certain of these non-GAAP financial measures:

●

~~exclude certain tax payments that may reduce cash available to the Company;~~

●

~~do not reflect any cash capital expenditure requirements for the assets being depreciated and amortized that may have to be replaced in the future;~~

●

~~do not reflect changes in, or cash requirements for, working capital needs; and~~

●

~~do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments on debt.~~

measure. Other companies in ~~the cannabis~~our industry may calculate ~~these measures~~this measure differently, ~~than the Company does,~~ limiting their usefulness as comparative measures.

4342

Reconciliations of GAAP Measures to Non-GAAP Financial Measures ~~to GAAP Measures~~

~~Retail Performance Non- GAAP Financial Measures~~

Within the cannabis industry, MedMen is uniquely focused on the retail component of the value chain. On a sequential quarter basis, the Company is providing detail with respect to earnings before interest, taxes, depreciation and amortization (“~~EBITDA~~”) attributable to the Company’s national retail operations to show how it is leveraging its retail footprint and strategically investing in the future. The table below highlights the Company’s national Retail Adjusted EBITDA Margin (Non-GAAP), which excludes corporate marketing expenses, distribution expenses, inventory adjustments, and local cannabis and excise taxes. Entity-wide Adjusted EBITDA (Non-GAAP) follows our Retail Performance non-GAAP financial measures.

~~Retail Gross Margin (Non-GAAP)~~

Fiscal Quarter Ended
December 25, September 25,
2021 2021 $ Change % Change
Gross Profit $ 19.2 $ 17.5 $ 1.7 10 %

Gross Margin Rate 49 % 44 % 5 % 12 %

Cultivation & Wholesale Revenue (1.3 ) (1.3 ) - 100 %
Cultivation & Wholesale Cost of Goods Sold (1.3 ) (4.0 ) 2.7 (68 %)
Non-Retail Gross Margin - (2.7 ) 2.7 (100 %)

Retail Gross Margin (Non-GAAP) $ 19.2 $ 20.2 $ (1.0 ) (5 %)
Retail Gross Margin Rate (Non-GAAP) 51 % 52 % -2 % (3 %)
44
~~Retail Adjusted EBITDA Margin (Non-GAAP)~~
Fiscal Quarter Ended
December 25, September 25,
2021 2021 $ Change % Change
Net Loss $ (20.4 ) $ (60.6 ) $ 40.2 (66 %)
Net Loss from Discontinued Operations, Net of Taxes 5.5 6.4 (0.9 ) (14 %)
Provision for Income Tax (Benefit) Expense (8.1 ) 19.7 (27.8 ) (141 %)
Other (Income) Expense (2.1 ) 5.5 (7.6 ) (138 %)
Excluded Items ⁽¹⁾ 0.3 2.2 (1.9 ) (86 %)
Loss from Operations Before Excluded Items $ (24.8 ) $ (26.7 ) $ 1.9 (7 %)

Non-Retail Gross Margin - (2.7 ) 2.7 (100 %)
Non-Retail Operating Expenses ⁽²⁾ (29.4 ) (30.7 ) 1.3 (4 %)
Non-Retail EBITDA Margin (29.4 ) (33.4 ) 4.0 (12 %)

Retail Adjusted EBITDA Margin (Non-GAAP) $ 4.6 $ 6.7 $ (2.1 ) (31 %)
Retail Adjusted EBITDA Margin Rate (Non-GAAP) 12 % 17 % (7 %) (40 %)
~~(1)~~
~~Items adjusted from Net Loss for the fiscal quarters ended December 25, 2021 and September 25, 2021 include:~~
December 25, September 25,
2021 2021
Realized and Unrealized Loss on Changes in Fair Value of Contingent Consideration $ (0.3 ) $ -
Impairment Expense - 0.4
(Gain) Loss On Disposals of Assets, Restructuring Fees and Other Expenses 0.6 1.8
Total Excluded Items $ 0.3 $ 2.2
~~(2)~~ ~~Non-Retail Operating Expenses Included in Retail Adjusted EBITDA Margin (Non-GAAP) is comprised of the following items:~~
Fiscal Quarter Ended
December 25, September 25,
2021 2021 $ Change % Change
Cultivation & Wholesale $ 1.1 $ 0.9 $ 0.2 22 %
Corporate SG&A 18.9 18.9 - -
Depreciation & Amortization 7.6 7.0 0.6 9 %
Other ⁽³⁾ 1.8 3.9 (2.1 ) (54 %)
Non-Retail Operating Expenses 29.4 30.7 (1.3 ) (4 %)

Direct Store Operating Expenses ⁽⁴⁾ 14.6 13.5 1.1 8 %
Excluded Items ⁽¹⁾ 0.3 2.3 (2.0 ) (87 %)
Total Expenses $ 44.3 $ 46.5 $ (2.2 ) (5 %)
~~(3)~~ Other non-retail operating expenses excluded from Retail Adjusted EBITDA Margin (Non-GAAP) for the fiscal quarters ended December 25, 2021 and September 25, 2021 primarily consist of transaction costs and restructuring costs of $1.6 million and $5.2 million, respectively, and share-based compensation of $0.7 million and $1.6 million, respectively, as commonly excluded from Adjusted EBITDA from Continuing Operations (Non-GAAP).
~~(4)~~ For the fiscal quarters ended December 25, 2021 and September 25, 2021, direct store operating expenses include, but are not limited to, rent, utilities, payroll and payroll related expenses, employee benefits, and security, totaling $13.7 million and $12.9 million, local taxes of nil and $0.3 million, and distribution expenses of $0.9 million and $0.8 million, respectively. Local taxes include cannabis sales and excise taxes imposed by municipalities in which the Company has active retail operations and vary by jurisdiction. Distribution expenses relate to additional porter fees.
45
The non-GAAP retail performance measures demonstrate the Company’s four-wall margins which reflect the sales of the Company’s retail operations relative to the direct costs required to operate such dispensaries. Retail revenue is related to net sales from the Company’s stores, excluding non-retail revenue, such as cultivation and manufacturing revenue. Similarly, retail cost of goods sold and direct store operating expenses are directly related to the Company’s retail operations. Non-Retail Revenue includes revenue from third-party wholesale sales. Non-Retail Cost of Goods Sold includes costs directly related to third-party wholesale sales produced by the Company’s cultivation and production facilities, such as packaging, materials, payroll, rent, utilities, security, etc. While third-party sales were not significant for the fiscal quarter ended December 25, 2021, Non-Retail Cost of Goods Sold related to cultivation and wholesale operations was $1.3 million due to unallocated overages from increased production burn rate. Non-Retail Operating Expenses include ongoing costs related to the Company’s cultivation and wholesale operations, corporate spending, and depreciation and amortization. Non-Retail EBITDA Margin reflects the gross margins of the Company’s cultivation and wholesale operations excluding any related operating expenses. To determine the Company’s four-wall margins, certain costs that do not directly support the Company’s retail function are excluded from Retail Adjusted EBITDA Margin (Non-GAAP).
For the fiscal second quarter of 2022, retail revenue was $37.8 million across the Company’s continuing operations in California, Nevada, Arizona, Illinois and Florida. This represents a 2% decrease, or $0.7 million, over the fiscal first quarter of 2022 of $38.5 million. The decrease in retail revenue from continuing operations was primarily driven by a decrease of $1.2 million in California offset by an increase of $0.5 million in Florida. While there were multiple reasons for the decrease in retail revenue, we believe the primary factors were heightened restrictions due to the Delta and Omicron variant of COVID-19 and increased competition in certain markets.
Retail Gross Margin Rate (Non-GAAP), which is Retail Gross Margin (Non-GAAP) divided by Retail Revenue (Non-GAAP), for the fiscal second quarter of 2022 was 51% compared to the fiscal first quarter of 2022 of 52%. Retail Gross Margin (Non-GAAP) is Retail Revenue (Non-GAAP) less the related Retail Cost of Goods Sold (Non-GAAP). The Company had an aggregate Retail Adjusted EBITDA Margin Rate (Non-GAAP), which is Retail Adjusted EBITDA Margin (Non-GAAP) divided by Retail Revenue (Non-GAAP), of 12% for the fiscal second quarter of 2022 which represents a decrease compared to the 17% realized in the fiscal first quarter of 2022 primarily due to increased marketing to drive retail traffic and increased payroll expenses as a result of incremental payroll from stores reopening and the impact of COVID-19 on staffing.
~~Corporate SG&A as a Component of Adjusted EBITDA from Continuing Operations (Non-GAAP)~~
Corporate-level general and administrative expenses across various functions including Marketing, Legal, Retail Corporate, Technology, Accounting and Finance, Human Resources and Security (collectively referred to as “~~Corporate SG&A~~”) are combined to account for a significant proportion of the Company’s total general and administrative expenses. Corporate SG&A also includes pre-opening expenses related to general and administrative expenses incurred by the Company at non-operational retail locations, which such expenses would be classified as direct store operating expenses following its opening.
Fiscal Quarter Ended
December 25, September 25,
($ in Millions) 2021 2021 $ Change % Change
General and Administrative $ 35.3 $ 36.5 $ (1.2 ) (3 %)
Sales and Marketing 1.1 0.7 0.4 57 %

Consolidated SG&A 36.4 37.2 (0.8 ) (2 %)

Direct Store Operating Expenses ⁽¹⁾ 14.6 13.5 1.1 8 %
Cultivation & Wholesale 1.1 0.9 0.2 22 %
Other ⁽²⁾ 1.8 3.9 (2.1 ) (54 %)
Less: Non-Corporate SG&A 17.5 18.3 (0.8 ) (4 %)

Corporate SG&A as a Component of Adjusted EBITDA from Continuing Operations (Non-GAAP) $ 18.9 $ 18.9 $ - -
~~(1)~~ Other non-Corporate SG&A for the fiscal quarters ended December 25, 2021 and September 25, 2021 primarily consist of transaction costs and restructuring costs of $1.6 million and $5.2 million, respectively, and share-based compensation of $0.7 million and $1.6 million, respectively, as commonly excluded from Adjusted EBITDA (Non-GAAP).
For the fiscal second quarter of 2022, Adjusted EBITDA from Continuing Operations (Non-GAAP) includes Corporate SG&A (Non-GAAP) of $18.9 million, which is consistent with the fiscal first quarter of 2022.
46
~~Adjusted Net Loss from Continuing Operations (Non-GAAP)~~

The table below reconciles Net Loss to ~~Adjusted Net Loss~~EBITDA from Continuing Operations ~~(Non-GAAP)~~and Adjusted EBITDA from Continuing Operations for the periods indicated.
Three Months Ended Six Months Ended
December 25, December 26, December 25, December 26,
($ in Millions) 2021 2020 2021 2020
Net Loss $ (20.4 ) $ (69.0 ) $ (81.0 ) $ (101.7 )

Less: Net Loss from Discontinued Operations, Net of Taxes 5.5 6.4 11.9 12.6
Add (Deduct) Impact of:
Transaction Costs & Restructuring Costs 1.6 2.7 6.8 3.5
Share-Based Compensation 0.7 1.6 2.4 2.6
Other Non-Cash Operating Costs ⁽¹⁾ (14.2 ) 1.7 (26.6 ) (17.1 )
Income Tax Effects ⁽²⁾ 0.1 (0.4 ) (0.1 ) 8.0

Total Adjustments (11.8 ) 5.6 (17.5 ) (3.0 )

Adjusted Net Loss from Continuing Operations (Non-GAAP) $ (26.7 ) $ (57.0 ) $ (86.6 ) $ (92.1 )
Adjusted Net Loss from Continuing Operations (Non-GAAP) represents the profitability of the Company excluding unusual and infrequent expenditures and non-cash operating costs. The improvements in Adjusted Net Loss from Continuing Operations (Non-GAAP) were primarily due to the increase revenue and gross profit as the Company recovers from the COVID-19 impact compared to the prior period and changes in the provision for income taxes as described above.
~~EBITDA and Adjusted EBITDA from Continuing Operations (Non-GAAP)~~
~~The table below reconciles Adjusted Net Loss to EBITDA from Continuing Operations (Non-GAAP) and Adjusted EBITDA from Continuing Operations (Non-GAAP) for the periods indicated.~~
Three Months Ended Six Months Ended Three Months Ended
December 25, December 26, December 25, December 26, September 24, September 25,
($ in Millions) 2021 2020 2021 2020 2022 2021
Net Loss $ (20.4 ) $ (69.0 ) $ (81.0 ) $ (101.7 )
Net Income (Loss) $ 4.0 $ (60.6 )

Less: Net Loss from Discontinued Operations, Net of Taxes 5.5 6.4 11.9 12.6
Less: Net (Income) Loss from Discontinued Operations, Net of Taxes (24.3 ) 14.4
Add (Deduct) Impact of:
Net Interest and Other Financing Costs(1) 9.6 7.1 19.6 15.9 11.6 14.5
Provision for Income Taxes (8.1 ) 22.6 11.6 34.8 2.2 19.7
Amortization and Depreciation 10.1 13.9 25.5 23.7 4.0 6.3

Total Adjustments 11.6 43.6 56.7 74.4 17.8 40.5

EBITDA from Continuing Operations (Non-GAAP) $ (3.3 ) $ (19.0 ) $ (12.4 ) $ (14.7 )
EBITDA from Continuing Operations $ (2.5 ) $ (5.7 )

Add (Deduct) Impact of:
Transaction Costs & Restructuring Costs 1.6 2.7 6.8 3.5 $ 0.9 $ 4.0
Share-Based Compensation 0.7 1.6 2.4 2.6 0.9 1.6
Other Non-Cash Operating Costs ⁽¹⁾ (14.2 ) 1.7 (26.6 ) (17.1 )
Change in Fair Value of Derivative Liabilities 0.8 (2.1 )
Change in Fair Value of Contingent Consideration (0.9 ) -
(Gain) Loss on Lease Termination (1.6 ) -
(Gain) Loss on Extinguishment of Debt - (10.2 )
(Gain) Loss from Disposal of Assets 0.2 -
Sublease Income (1.5 ) -
Impairment Expense 1.7 0.4
Other Non-Cash Operating Costs - (0.2 )

Total Adjustments (11.9 ) 6.0 (17.4 ) (11.0 ) $ 0.5 $ (6.5 )

Adjusted EBITDA from Continuing Operations (Non-GAAP) $ (15.2 ) $ (13.0 ) $ (29.8 ) $ (25.7 )
Adjusted EBITDA from Continuing Operations $ (2.0 ) $ (12.2 )

(1) ~~Other non-cash operating~~For the current period, net interest and other financing costs now include accretion of debt discount and loan origination fees of $1.6 million for the ~~periods presented were as follows:~~three months ended September 24, 2022. The prior year amount of $6.3 million for the three months ended September 25, 2021 have been reclassified for consistency with the current year presentation. Accretion of debt discount was previously excluded from the reconciliation of Net Loss to EBITDA from Continuing Operations and Adjusted EBITDA from Continuing Operations.

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Three Months Ended Six Months Ended
December 25, December 26, December 25, December 26,
($ in Millions) 2021 2020 2021 2020
Change in Fair Value of Derivative Liabilities $ (14.1 ) $ 0.2 $ (16.2 ) $ (0.1 )
Gain on Disposal of Assets Held For Sale - 2.0 - (10.5 )
Change in Fair Value of Contingent Consideration (0.3 ) 0.1 (0.3 ) 0.4
Gain/Loss on Lease Termination 0.2 (1.3 ) 0.2 (17.9 )
Gain/Loss on Extinguishment of Debt - 0.9 (10.2 ) 11.1
Gain/Loss from Disposal of Assets (0.1 ) 0.5 (0.1 ) 0.4
Impairment Expense - - 0.4 0.8
Other Non-Cash Operating Costs 0.2 (0.7 ) (0.3 ) (1.2 )

Total Other Non-Cash Operating Costs $ (14.2 ) $ 1.7 $ (26.6 ) $ (17.1 )
~~(2)~~ Income tax effects to arrive at Adjusted Net Loss from Continuing Operations (Non-GAAP) are related to temporary tax differences in which a future income tax benefit exists, such as changes in fair value of investments, assets held for sale and other assets, changes in fair value of contingent consideration, loss from disposal of assets, and impairment expense. The income tax effect is calculated using the federal statutory rate of 21.0% and statutory rate for the state in which the related asset is held or the transaction occurs, most of which is in California with a statutory rate of 8.84%.

EBITDA from Continuing Operations ~~(Non-GAAP)~~ represents the Company’s current operating profitability and ability to generate cash flow and includes significant non-cash operating costs. Net Loss is adjusted for interest and financing costs as a direct result of debt financings, income taxes, and amortization and depreciation expense to arrive at EBITDA from Continuing Operations (Non-GAAP). Considering these adjustments, the Company had EBITDA from Continuing Operations ~~(Non-GAAP)~~ of ~~$(3.3) million and $(12.4)~~$(2.5) million for the three ~~and six~~ months ended ~~December 25, 2021~~September 24, 2022 compared to ~~$(19.0) million and $(14.7)~~$(5.7) million for the comparative prior period. The change in EBITDA from Continuing Operations ~~(Non-GAAP)~~ was primarily due to ~~other non-cash~~the Company’s continued cost-saving strategies and lower operating costs ~~for~~at the ~~changes in fair value~~cultivation facilities of ~~derivative liabilities~~California and ~~extinguishments~~Nevada as a result of ~~debt as described above.~~ the licensing and management agreement which includes lower rents.
For the three ~~and six~~ months ended ~~December 25, 2021,~~September 24, 2022, Adjusted EBITDA from Continuing Operations ~~(Non-GAAP) of $(15.2) million and $(29.8)~~was $(2.0) million compared to ~~$(13.0) million and $(25.7)~~$(12.2) million for the three ~~and six~~ months ended ~~December 26, 2020, respectively.~~September 25, 2021. The ~~increase of $1.9 million for the six months ended December 25, 2021 and December 26, 2020~~improvement is primarily due to ~~an increase~~the decrease in general and administrative ~~expenses affecting Net Loss, offset by the increase in revenue and gross profit.~~expenses. The financial performance of the Company is expected to further improve as the Company ~~has a clear path~~works towards profitability and coupled with significant deleveraging of its ~~stabilized liquidity, is properly repositioned~~balance sheet, will reposition the Company for growth.
Refer to Item 2 ““Liquidity and Capital Resources” for further discussion of management’s future outlook.
~~Refer to Item 2~~ ~~“Retail Performance”~~ ~~above for reconciliations of Retail Adjusted EBITDA.~~

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Cash Flows

The following table summarizes the Company’s consolidated cash flows for the ~~six~~three months ended ~~December~~September 24, 2022 and September 25, ~~2021 and December 26, 2020:~~2021:
Six Months Ended Three Months Ended
December 25, December 26, September 24, September 25,
($ in Millions) 2021 2020 $ Change % Change 2022 2021 $ Change % Change
Net Cash Used in Operating Activities $ (49.5 ) $ (30.3 ) $ (19.2 ) 63 % $ (9.6 ) $ (23.0 ) $ 13.4 (58 %)
Net Cash (Used in) Provided by Investing Activities (7.6 ) 15.7 (23.3 ) (148 %)
Net Cash Provided by Financing Activities 93.2 11.8 81.4 690 %
Net Cash Provided by (Used in) Investing Activities 51.5 (3.6 ) 55.1 (1,531 %)
Net Cash (Used in) Provided by Financing Activities (31.6 ) 93.2 (124.8 ) (134 %)

Net Increase (Decrease) in Cash and Cash Equivalents 36.1 (2.8 ) 38.9 (1,389 %)
Net Increase in Cash and Cash Equivalents 10.3 66.6 (56.3 ) (85 %)
Cash Included in Assets Held for Sale (0.3 ) - (0.3 ) 100 % - (0.3 ) 0.3 100 %
Cash and Cash Equivalents, Beginning of Period 11.9 9.6 2.3 24 % 10.8 11.6 (0.8 ) (7 %)

Cash and Cash Equivalents, End of Period $ 47.7 $ 6.8 $ 40.9 601 % $ 21.1 $ 77.9 $ (56.8 ) (73 %)

Cash Flow from Operating Activities

Net cash used in operating activities was ~~$49.5~~$9.6 million for the three months ended ~~December 25, 2021, an increase~~September 24, 2022, a decrease of ~~$19.2~~$13.4 million, ~~or 63%,~~ compared to ~~$30.3~~$23.0 million for the ~~six~~three months ended ~~December 26, 2020.~~September 25, 2021. The ~~increase~~decrease was primarily driven by ~~an increase~~the decrease in ~~cash used for income taxes.~~general and administrative expenses as described in “Results of Operations” above.

Cash Flow from Investing Activities

Net cash ~~used in~~provided by investing activities was ~~$7.6~~$51.5 million for the ~~six~~three months ended ~~December 25, 2021, a decrease of $23.3 million, from~~September 24, 2022 compared to the ~~$15.7~~$3.6 million of net cash ~~provided from~~used in investing activities in the prior year. ~~The decrease in net cash provided in investing activities~~This was primarily ~~in the prior period~~ due to the ~~Company’s strategic plan to divest non-core assets during the comparative prior period, resulting~~$51.5 million in ~~$18.8 million received from~~cash proceeds from the sale of ~~assets held for sale. In~~ the ~~prior period net cash used was also impacted by an increase in purchases of property and equipment~~Company’s operations in the state of Florida during the current ~~period of $7.1 million as compared to $1.2 million in the prior year as the Company reopened construction-in-progress in fiscal year 2022.~~period.
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Cash Flow from Financing Activities

Net cash ~~provided by~~used in financing activities was ~~$93.2~~$31.6 million for the three months ended ~~December 25, 2021, an increase of $81.4 million,~~September 24, 2022 compared to ~~$11.8~~$93.2 million ~~for the six months ended December 26, 2020. The increase in change of~~ net cash provided by financing activities ~~was primarily due to the $95.0 million~~ for the ~~issuance~~three months ended September 25, 2021. During the current period, the Company used $31.6 million of ~~equity instruments for~~the cash ~~and the $5.0 million~~proceeds from the ~~unsecured promissory note. The increase~~sale of its Florida-based operations to make principal repayments on the Senior Secured Term Loan. Whereas during the comparative prior period, the Company completed a private placement with Serruya Private Equity Inc. (“SPE”) resulting in ~~debt~~an equity investment of $100.0 million.
Financial Condition and ~~equity financings was offset by payments of stock issuance costs of $5.4 million in connection with such capital transactions.~~Going Concern

49
~~Financial Condition, Liquidity and Going Concern~~
As of ~~December 25, 2021,~~September 24, 2022, the Company had cash and cash equivalents of ~~$47.7~~$21.1 million and ~~net~~ working capital deficit of ~~$191.2~~$134.9 million. The Company has incurred net losses from continuing operations of ~~$23.0~~$20.3 million and ~~$57.5~~$46.2 million for the three months ended September 24, 2022 and six months then ended, respectively, used cash in continued operating activities of $45.6 million so far in the first half of the year and anticipates that the Company will continue to incur losses until such time as revenues exceed operating costs. On January 31, 2022, the Company’s term loans of $113.6 million as of DecemberSeptember 25, 2021, ~~became due and the Company entered into an agreement (the “~~~~Sixth Modification to Senior Secured Term Loan~~~~”, or the “~~~~Sixth Modification~~~~”) with the lender to extend the maturity date until July 31, 2022 and August 1, 2021 for the various loans included in the Senior Secured Term Loan Facility. See “~~~~Note 10 – Notes Payable~~~~”, for additional information about the Senior Secured Term Loan Facility, and “~~~~Note 23 – Subsequent Events~~~~” for more information about the Sixth Modification.~~respectively. The conditions described above raise substantial doubt with respect to the Company’s ability to meet its obligations for at least one year from the issuance of these Condensed Consolidated Financial Statements, and therefore, to continue as a going concern.
The Sixth Modification requires the Company to execute certain actions including the conditional purchase of the term loans by Superhero Acquisition, L.P., an existing lender in the Company’s Convertible Facility, also covenants related to strategic actions the Company must implement it if it is unable to pay the term loans by the extended maturity date. The Company plans to continue to fund its operations through the implementation of its ~~strategic~~ cost savings plan, ~~the~~and various strategic actions, ~~which may include divesting~~including the successful negotiations of lower costs of occupancy with our master lease landlord and other landlords, divesture of non-core assets including but not limited to the current asset group held for sale, New York, as well continuing its on-going revenue strategy of market expansion and retail revenue growth. We also need to obtain an extension or a refinancing of our debt-in-default with the secured senior lender. Our annual operating plan for fiscal year 2023 estimates we will be able to manage our ongoing operations. However, our cash needs are significant and not achievable with the current cash flow from operations. If the above ~~conditional purchase of the term loans and/or the~~ strategic actions, for any reason, are inaccessible, it ~~would~~will have a significantly negative effect on the Company’s financial condition. Additionally, we expect to continue to manage the Company’s operating expenses and reduce its projected cash requirements through reduction of its expenses by delaying new store development, permanently or temporarily closing stores that are deemed to be performing below expectations, and/or implementing other restructuring activities. Furthermore, COVID-19 and the impact the global pandemic ~~has had and will continue to have~~ on the broader retail environment could also have a significant impact on the Company’s financial ~~operations.~~position, results of operations, equity and or its access to capital and future financing.
As of ~~December 25, 2021,~~September 24, 2022, the accompanying ~~consolidated financial statements~~Consolidated Financial Statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The accompanying ~~consolidated condensed financial statements~~Condensed Consolidated Financial Statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from uncertainty related to our ability to continue as a going concern.

The following table summarizes certain aspects of the Company’s financial condition as of ~~December 25, 2021~~September 24, 2022 and June ~~26, 2021:~~25, 2022:

December 25, June 26, September 24, June 25,
($ in Millions) 2021 2021 $ Change % Change 2022 2022 $ Change % Change
Cash and Cash Equivalents $ 47.7 $ 11.9 $ 35.8 301 % $ 21.1 $ 10.8 $ 10.3 95 %
Total Current Assets $ 134.8 $ 96.7 $ 38.1 39 % $ 98.7 $ 161.5 $ (62.8 ) (39 %)
Total Assets $ 490.9 $ 472.5 $ 18.4 4 % $ 251.1 $ 323.2 $ (72.1 ) (22 %)
Total Current Liabilities $ 333.6 $ 288.6 $ 45.0 16 % $ 233.6 $ 319.6 $ (86.0 ) (27 %)
Notes Payable, Net of Current Portion $ 78.0 $ 87.6 $ (9.6 ) (11 %) $ 74.9 $ 206.4 $ (131.5 ) (64 %)
Total Liabilities $ 710.2 $ 726.1 $ (15.9 ) (2 %) $ 564.7 $ 641.7 $ (77.0 ) (12 %)
Total Shareholders’ Equity $ (219.3 ) $ (253.6 ) $ 34.3 (14 %) $ (313.6 ) $ (318.5 ) $ 4.9 (2 %)
Working Capital Deficit $ (191.2 ) $ (191.9 ) $ (0.7 ) 0 % $ (134.9 ) $ (158.1 ) $ 23.2 (15 %)
45

~~As of December 25, 2021,~~In August 2022, the Company ~~had $47.7 million~~completed the sale of ~~cash and cash equivalents and $191.2 million~~its operations in the state of ~~working capital deficit, compared to $11.9 million~~Florida at the final sales price of ~~cash and cash equivalents and $191.9 million~~$67,000,000 which comprised of ~~working capital deficit as of June 26, 2021. The increase~~$63,000,000 in cash and $4,000,000 in liabilities to be assumed by the Buyer. The Buyer made a cash ~~equivalents was primarily due the $100.0 million Private Placement during~~payment of $40,000,000 at closing, $11,500,000 on September 15, 2023, and is required to make an additional installment payment of $11,500,000 on or before March 15, 2023. During the fiscal ~~first~~third quarter of 2022, ~~which helped stabilize liquidity and will allow~~net proceeds to the Company ~~to prioritize new market opportunities~~were $19,558,947 after a principal repayment of $31,599,999 on the Senior Secured Term Loans with Hankey Capital. The final cash payment of $11,500,000 remains due and ~~existing operations over near-term balance sheet management. In addition, on August 17, 2021, the Company amended the Convertible Facility wherein the maturity date was extended to August 17, 2028~~receivable as of September 24, 2022. The Senior Secured Term Loans remains outstanding and ~~any cash interest obligation was eliminated, instead providing for paid-in-kind interest.~~in default as of September 24, 2022.

The ~~$6.8~~$23.2 million ~~decrease~~improvement in working capital deficit was primarily related to ~~an increase of $35.8~~the $31.6 million ~~in cash as described above~~principal repayment on the Senior Secured Term Loans that matured on July 31, 2022 and an increase of $1.6 million in accounts receivable and prepaid expenses. The increase in current liabilities was due to an increase of $14.3 million in derivative liabilities related to the top-up provision of the Convertible Facility and the Short-Term Warrant under the Private Placement recognized during the fiscal first quarter of 2022, an increase of $18.4 million in current notes payable primarily related to the existing senior secured term loan, and an increase of $15.7 million in income taxes payable, offset by a $3.4 million decrease in other current liabilities related to a decrease in acquisition payable as a result of settlements during the current period and a decrease in accrued interest payable as a result of the Sixth Amendment of the Convertible Facility.
August 1, 2022. The Company’s working capital will be significantly impacted by continued operations and growth in retail operations ~~the operationalization of existing licenses,~~ and the continued stewardship of the Company’s financial resources. The ability to fund working capital needs will also be dependent on the Company’s ability to raise additional debt and equity ~~financing.~~financing and execute cost savings plans.

50
Liquidity and Capital Resources

The primary need for liquidity is to fund working capital requirements of the business, including operationalizing existing licenses, capital expenditures, debt service and acquisitions. The primary source of liquidity has primarily been private and/or public financing and to a lesser extent by cash generated from sales. The ability to fund operations, to make planned capital expenditures, to execute on the growth/acquisition strategy, to make scheduled debt and rent payments and to repay or refinance indebtedness depends on the Company’s future operating performance and cash flows, which are subject to prevailing economic conditions and financial, business and other factors, some of which are beyond its control. Liquidity risk is the risk that the Company will not be able to meet its financial obligations associated with financial liabilities. The Company manages liquidity risk through the management of its capital structure. ~~The Company’s approach to managing liquidity is to ensure that it will have sufficient liquidity to settle obligations and liabilities when due.~~

~~Amendment and Extension of Convertible Facility~~
~~On April 23, 2019, the Company secured a senior secured convertible credit facility (the “~~~~Convertible Facility~~~~”) to provide up to $250,000,000 in gross proceeds, arranged by Gotham Green Partners (“~~~~GGP~~~~”). The Convertible Facility has been accessed to date through issuances to the lenders of convertible senior secured notes (“~~~~GGP Notes~~~~”, or the “~~~~Notes~~~~”) co-issued by the Company and MM Can USA, Inc. (“~~~~MM CAN~~~~” or “~~~~MedMen Corp~~.”). As of December 25, 2021, the Company has drawn down on a total of $165,000,000 on the Convertible Facility. The principal amount of the Convertible Facility has been and is anticipated to be used for ongoing operations, capital expenditures and other corporate purposes.
~~On August 17, 2021, the Company announced that Superhero Acquisition, L.P. (“~~~~Superhero~~~~”), a newly formed limited partnership established by Tilray, Inc. (“~~~~Tilray~~”) and other strategic investors , acquired a majority of the outstanding GGP Notes. Under the terms of the transaction Superhero acquired an aggregate principal amount of approximately $165,800,000 of the Notes and warrants issued in connection with the Convertible Facility, all of which were originally issued by MedMen and held by GGP, representing 75% of the outstanding Notes and 65% of the outstanding warrants under the Convertible Facility. Specifically, Tilray’s interest in the SPV represents rights to 68% of the Notes and related warrants held by the SPV, which are convertible into, and exercisable for, approximately 21% of the outstanding Class B Subordinate Voting Shares of MedMen upon closing of the transaction. Tilray’s ability to convert the Notes 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. Tilray also has the right to appoint two non-voting observers of the Company’s Board of Directors.
51
~~In connection with the sale of the Notes, the Company amended and restated the Convertible Facility (the “~~~~Sixth Amendment~~”) to, among other things, extend the maturity date to August 17, 2028, eliminate any cash interest obligations, and instead provide for payment-in-kind interest, eliminate certain repricing provisions, and eliminate and revise certain restrictive covenants. The amendments are intended to provide MedMen the flexibility to execute on its growth priorities and explore additional strategic opportunities. In connection with the Sixth Amendment, accrued payment-in-kind interest on the Notes will be convertible at price equal to the higher of: (a) trailing 30-day volume weighted average price (“~~VWAP~~~~”) of the Company’s Subordinate Voting Shares or (b) the lowest discounted price available pursuant to the pricing policies of the Canadian Securities Exchange (“~~~~CSE~~”). The Notes may not be prepaid until the federal legalization of marijuana. The Notes, as amended, provide the holders with a top-up right to acquire additional Subordinate Voting Shares and a pre-emptive right with respect to future financings of the Company, subject to certain exceptions, upon the issuance by MedMen of certain equity or equity-linked securities. No changes have been made to the conversion and exercise prices of the Notes or related Warrants. In connection with the Sixth Amendment, GGP can nominate an individual to serve on the Company’s Board of Directors so long as GGP’s diluted ownership percentage is at least 10%. Refer to “~~Note 11 – Senior Secured Convertible Credit Facility~~~~” of the condensed consolidated financial statements in Item 1 for further information.~~
~~Backstopped Equity Investment~~
~~On August 17, 2021, the Company entered into subscription agreements with various investors led by Serruya Private Equity Inc. (“~~~~SPE~~~~”) to purchase $100,000,000 of units (each, a “~~~~Unit~~~~”) of the Company at a purchase price of $0.24 per Unit (the “~~~~Private Placement~~~~”) wherein certain investors associated with SPE agreed to backstop the Private Placement (the “~~~~Backstop Commitment~~”). Each Unit consisted of one Class B Subordinate Voting Share and one-quarter share purchase warrant. Each warrant permits the holder to purchase one Subordinate Voting Share at an exercise price of $0.288 per share for a period of five years from the date of issuance. The Company issued a total of 416,666,640 Subordinate Voting Shares and 104,166,660 warrants for gross proceeds of $100,000,000. The proceeds from the Private Placement will allow MedMen to expand its operations in key markets such as California, Florida, Illinois and Massachusetts and identify and accelerate further growth opportunities across the United States.
Each Unit issued to certain funds associated with SPE consisted of one Class B Subordinate Voting Share and one-quarter of one share purchase warrant, plus a proportionate interest in a short-term warrant (the “~~Short-Term Warrant~~”) which expired on December 31, 2021. At the option of the holders and upon payment of $30,000,000, the Short-Term Warrant entitles the holders to acquire (i) an aggregate of 125,000,000 Units at an exercise price of $0.24 per Unit, or (ii) $30,000,000 principal amount of notes at par, convertible into 125,000,000 Subordinate Voting Shares at a conversion price of $0.24 per share under the terms of the Convertible Facility. The Company will use any proceeds, less fees and expenses, from exercise of the Short-Term Warrant to pay down the existing senior secured term loan with Hankey Capital if any indebtedness is then outstanding.
In consideration for the Backstop Commitment, the Company paid a fee of $2,500,000 in the aggregate to such parties in the form of 10,416,666 Class B Subordinate Voting Shares at a deemed price of $0.24 per share. In connection with the equity financing, the Company granted SPE the right to designate one individual to be nominated to serve as a director of the Company.
~~Unsecured Promissory Note~~
On July 29, 2021, the Company entered into a short-term unsecured promissory note in the amount of $5,000,000 with various investors led by SPE wherein the note bears interest at a rate of 6.0% per annum payable quarterly in arrears with a maturity date of August 18, 2021. On August 17, 2021, the Company settled the promissory note by the issuance of 20,833,333 Units, consisting of 20,833,333 Subordinate Voting Shares and 5,208,333 warrants based on an issue price of $0.24 and the relative portion of the Short-Term Warrant, issued as part of the Private Placement.
~~Unsecured Convertible Facility~~
~~On September 16, 2020, the Company entered into an unsecured convertible debenture facility (the “~~~~Unsecured Convertible Facility~~”) for total available proceeds of $10,000,000 callable in tranches of $1,000,000 each. The debentures provide for the automatic conversion into Subordinate Voting Shares in the event that the VWAP is 50% above the conversion price on the CSE for 45 consecutive trading days.
On June 28, 2021, the remaining balance of the Unsecured Convertible Facility of $2,500,000 was automatically converted into 16,014,664 Class B Subordinate Voting Shares in the amount of $2,007,620. In addition, 8,807,605 of the outstanding warrants under the Unsecured Convertible Facility were exercised at varying prices for a net exercise price of $1,622,377. As of December 25, 2021, the outstanding balance of the Unsecured Convertible Facility was nil.
52
~~Partnership with Foundry Works, Inc.~~
~~On October 1, 2021, the Company announced that LitHouse Farms, a subsidiary of Foundry Works, Inc. (“~~~~Foundry~~~~”), will manage its cultivation and manufacturing operations at its facilities in Desert Hot Springs, California (“~~~~DHS~~~~”) and Sparks, Nevada (“~~~~Sparks~~”). Licensed operations at the facilities will be carried on under management agreements which include purchase options for nominal consideration, subject to regulatory approval. Concurrent with the transaction, Foundry entered into a sublease agreement for DHS worth approximately $3,200,000 per year beginning in its first year, increasing to approximately $4,600,000 per year in its sixth year, subject to 3% annual escalators thereafter through March 2039. Foundry also entered into a sublease agreement for Sparks worth approximately $2,400,000 per year beginning in its first year, increasing to approximately $3,400,000 per year in its sixth year, subject to 3% annual escalators thereafter through January 2039. The cash flow accretive partnership will help reduce the significant fixed costs associated with the facilities.
For the six months ended December 25, 2021, the Company’s monthly burn rate, which was calculated as cash spent per month in operating activities, was approximately $8.3 million compared to a monthly burn rate of approximately $5.1 million for the six months ended December 26, 2020. During the fiscal first quarter of 2022, the Company shifted its focus from a turnaround plan that took place during fiscal year 2021, which resulted in the divestiture of non-core assets and lease modifications, and turned to a growth plan with new capital to capitalize on further opportunities. As of December 25, 2021, cash generated from ongoing operations may not be sufficient to fund operations and, in particular, to fund the Company’s growth strategy in the short-term or long-term.
The restructuring of the Convertible Facility and the successful closing of the Private Placement with investors led by SPE during the fiscal first quarter of 2022 stabilized the Company’s liquidity and properly positions the Company for growth to profitability. Management evaluated its financial condition as of December 25, 2021 in conjunction with recent transactions which free up capital subsequent to the current reporting period as discussed below.
~~Subsequent Events~~
~~Refer to Part I, Financial Information, Note 23, “~~~~Subsequent Events~~~~” of this interim report.~~
Off-Balance Sheet Arrangements

The Company has no material undisclosed off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on its results of operations, financial condition, revenues or expenses, liquidity, capital expenditures or capital resources that are material to investors.

Critical Accounting Policies, Significant Judgments and Estimates and Recent Accounting Pronouncements

There have been no changes in critical accounting policies, estimates and assumptions from the information provided in “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” included in the Form 10 for the fiscal year ended June ~~26, 2021~~25, 2022 that have a significant effect on the amounts recognized in the ~~interim consolidated financial statements~~Condensed Consolidated Financial Statements as of and for the fiscal quarter ended ~~December 25, 2021.~~September 24, 2022. See “Note 2 – Summary of Significant Accounting Policies” in the ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements in Item 1 for recently adopted accounting standards. For more information on the Company’s critical accounting estimates, refer to the ~~annual MD&A~~“Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Annual Report on Form 10-K for the fiscal year ended June ~~26, 2021. A~~25, 2022. In addition, a detailed description of our critical accounting policies and recent accounting pronouncements are detailed in Part I, “Item 88. Financial Statements and Supplementary Data” of the ~~2021~~Annual Report on Form ~~10.~~10-K for the fiscal year ended June 25, 2022.
5346

Transactions with Related Parties

~~All related party balances~~As of September 24, 2022 and June 25, 2022, there were no amounts due from or due to ~~the Company as of December 25, 2021 and June 26, 2021 did not have any formal contractual agreements regarding payment terms or interest. For amounts due from and to~~ related parties ~~refer~~that were recorded in the Consolidated Balance Sheets. Refer to ““Note 19 – Related Party Transactions” of the Consolidated Financial Statements for the three ~~and six~~ months ended ~~December 25, 2021~~September 24, 2022 in Item 1.

The Company’s Board of Directors each receive quarterly fees of $200,000 of which one-third is paid in cash and two-thirds is paid in Class B Subordinate Voting Shares.
~~Gotham Green Partners~~Senior Secured Convertible Credit Facility

As ~~discussed in Item 2 “~~~~Liquidity and Capital Resources~~~~” and Item 2 “~~~~Quarterly Highlights~~~~”, the Company has engaged in a strategic partnership with Gotham Green Partners, a related party. The arrangement is to provide financing to the Company in the form~~ of ~~a credit facility up to $250,000,000 accessed through issuances of convertible senior secured notes (the “~~~~Notes~~”) co-issued by the Company and MM CAN USA, Inc. The Notes are convertible, at the option of the holder, into Subordinate Voting Shares at any time prior to the close of business on the last business day immediately preceding the maturity date of April 23, 2022. In addition, upon issuance of any Notes, the lenders are issued share purchase warrants (the “~~Warrants~~”) of the Company, each of which are exercisable to purchase one Subordinate Voting Share for 36 months from the date of issue. The Notes and the Warrants, and any Subordinate Voting Shares issuable as a result of a conversion of the Notes or exercise of the Warrants, will be subject to a four-month hold period from the date of issuance of such Notes or such Warrants, as applicable, in accordance with applicable Canadian securities laws. While the Notes are outstanding, the lenders will be entitled to the collective rights to appoint a representative to attend all meetings of the Board of Directors in a non-voting observer capacity. GGP has the ability to nominate an individual to serve on the Company’s Board of Directors for so long as GGP’s diluted ownership percentage is at least 10%. The convertible facility bears interest at a rate of LIBOR plus 6.0% per annum. All convertible notes will have a maturity date of 36 months from the maturity date, with a twelve-month extension feature available to the Company on certain conditions. As of February 3,September 24, 2022, the Company has drawn down a total of $165.0 million on ~~approximately $165,000,000 of~~ the Convertible ~~Facility. Refer to~~ ~~“Note 11 – Senior Secured Convertible Credit Facility”~~Facility, has accrued paid-in-kind interest of ~~the Consolidated Financial Statements for the three~~$45.2 million with an aggregate weighted average conversion price of approximately $0.24 per share, and ~~six months ended December 25, 2021 in Item 1.~~
~~Tilray, Inc.~~
~~In August 2021, Superhero,~~an aggregate of 196,327,593 warrants with a ~~newly formed limited partnership established by Tilray and other strategic investors acquired the majority~~weighted average exercise price of the outstanding Notes and Warrants held by GGP by acquiring 75% of the outstanding Notes and 65% of the outstanding warrants under the Convertible Facility. Specifically, Tilray’s interest in the SPV represents rights to 68% of the Notes and related Warrants held by the Superhero, which are convertible into, and exercisable for, approximately 21% of the outstanding Class B Subordinate Voting Shares of MedMen. While the Notes are outstanding, Tilray will have the right to appoint two representatives to attend all meetings of the Board of Directors in a non-voting observer capacity.
$0.17 per share.
~~Serruya Private Equity, Inc.~~
In August 2021, the Company executed an equity offering with various investors led by Serruya Private Equity, Inc. in which the Company issued 416,666,640 Subordinate Voting Shares and 104,166,660 warrants for gross proceeds of $100,000,000. SPE can nominate one member to the Board of Directors so long as SPE has at least 9% of the Class B Subordinate Voting Shares on fully-diluted basis. In connection with the Private Placement, the Company appointed Michael Serruya, SPE’s Managing Director, as a member of its board of directors. In November 2021, the Company appointed Michael Serruya, SPE’s Managing Director, as its Chairman and Interim Chief Executive Officer.
~~SierraConstellation Partners~~
~~In March 2020, the Company entered into restructuring plan and retained SierraConstellation Partners (“~~~~SCP~~”) wherein Tom Lynch, a Partner and Senior Managing Director at SCP, was appointed as Chief Executive Officer and Chairman of the Board and Tim Bossidy, a Director at SCP, was appointed as Chief Operating Officer. As of December 25, 2021, Mr. Lynch and Mr. Bossidy are no longer with the Company. In December 2020, Reece Fulgham, a Managing Director at SCP, was appointed as Interim Chief Financial Officer. As of December 25, 2021, the Company had paid $1,896,760 in fees to SCP for interim management and restructuring support during the current fiscal year. In addition, during the six months ended December 25, 2021, Mr. Lynch and Mr. Bossidy each received 214,030 stock options and 850,036 restricted stock units.

Emerging Growth Company Status

The Company is an “emerging growth company” as defined in the Section 2(a) of the Exchange Act, as modified by the Jumpstart Our Business Start-ups Act of 2012, or the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 13(a) of the Exchange Act for complying with new or revised accounting standards applicable to public companies. The Company has elected to take advantage of this extended transition period and as a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.

54
ITEM 3. ~~QUANTITAVE~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information not required to be filed by smaller reporting companies.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Pursuant to Rules 13a-15(b) and 15-d-15(b) under the Securities Exchange Act of 1934, as amended (“Exchange ~~Act~~”Act”), as of ~~December 25, 2021,~~September 24, 2022, the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer of the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report.
The term “disclosure controls and procedures”, as defined under Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Based upon that evaluation and the identification of the material weakness described herein, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective, at the reasonable assurance level, as of the end of our last fiscal year end, June 25, 2022, and continues as such as of the end of the period covered by this report.
47

Changes in Internal Control Over Financial Reporting

~~There~~For fiscal year 2022, management identified a material weakness determining that the Company’s financial recordkeeping process was deficient and that it does not have effective controls over the period-end reconciliation process. The reconciliation process was not being performed in a manner that will detect and correct errors on a timely basis, including:
● general ledgers are not being reviewed regularly for assets that may not be recoverable or viable,
● review procedures for balance sheet account reconciliations and manual journal entries were not performed, and
●
some accounts and balances are not being reconciled regularly, and/or account reconciliations that are being completed do not properly address or adjust reconciling items.
Management plans to implement measures designed to improve its internal control over financial reporting to remediate material weaknesses described above by standardizing the monthly reconciliation process for material accounts and balances with formalized procedures. Material non-standard journal entries recorded in the accounting system will be reviewed for the various applicable accounting assertions including recoverability and validity. While the Company is actively engaged in the implementation of its remediation efforts to address this internal control weakness, the actions we have taken are subject to continued review, supported by confirmation and testing by management. Accordingly, the material weakness will not be considered fully remediated until the new control procedures are implemented for a sufficient period of time and management has concluded that these controls are operating effectively which we anticipate will occur in the ensuing months.
Except as noted above, there were no changes in our internal control over financial reporting during the three months ended ~~December 25, 2021~~September 24, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements attributable to error or fraud will not occur or that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Assessments of any evaluation of controls’ effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements as a result of error or fraud may occur and not be detected.

5548

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Other than noted below, there have been no material developments during the fiscal quarter covered by this Report for our legal proceedings that were disclosed in our Annual Report on Form 10-K filed on September ~~24, 2021.~~9, 2022.

On ~~November 23, 2021,~~October 6, 2022 the Company ~~announced that it had prevailed~~entered into a Settlement and Mutual Release Agreement with Charles Coburn, Daryll DeSantis, Unisys Technical Solutions, LLC and Delsantro Investments LLC in connection with a ~~lawsuit brought~~complaint filed by ~~former CFO James Parker. In 2019, Parker filed suit against~~these parties on May 26, 2020 and counterclaim by the Company ~~alleging wrongful termination, breach~~(the “Unisys Litigation”). The agreement resolved the Unisys Litigation and preserved the Company’s right to a pro rata distribution from plaintiff and cross defendant Charles Coburn’s bankruptcy estate as may be ordered by the bankruptcy court.
On July 11, 2022 Thor 952 Fulton Street, LLC, an affiliate of contract and retaliation, seeking in excess of $20,000,000.00 in damages. The jury determined that the lawsuit and claims were baseless and without merit, ruling in favor of the Company on all claims and determining that the Company does not owe Parker any damages. The Company also asserted affirmative claims against Parker. The jury found that Parker breached his contract, his fiduciary duty, his duty of loyalty, misappropriated trade secrets, and committed conversion, but that there was no harm/damage resulting from his misconduct.
~~On January 13, 2022, Ascend Wellness Holdings, Inc. and AWH New York, LLC~~Thor Equities Group, filed a complaint in the ~~Supreme~~United States District Court offor the ~~State~~Southern District of New York ~~New York County, Commercial Division,~~ against ~~MedMen NY, Inc.,~~Future Transactions Holdings, LLC, an affiliate of the Company, MM Enterprises USA, LLC, ~~Project Compassion NY,~~and the Company seeking approximately $950,960 in damages relating to a lease of commercial property located in Illinois, which lease specified use as a cannabis dispensary, claiming diversity jurisdiction. On September 16, 2022 the Company moved to dismiss the case on the basis that the subject matter of the contract was illegal under federal law, and plaintiffs thereafter moved for a voluntary dismissal. On October 17, 2022 the United States District court granted plaintiff’s motion for voluntary dismissal of the complaint without prejudice. On October 19, 2022 Future Transactions Holdings, LLC, MM Enterprises USA, LLC, and ~~Project Compassion Capital, LLC seeking specific performance and~~the Company filed a ~~declaratory judgement relating to~~complaint under the ~~Investment Agreement dated February 25, 2021 between the parties.~~federal Declaratory Judgment Act against Thor 942 Fulton Street, LLC.

ITEM 1A. RISK FACTORS.

Smaller reporting companies are not required to provide the information required by this ~~item.~~Item.

ITEM 2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS

~~During the fiscal quarter ended December 25, 2021, in addition to issuances previously reported on Form 8-K, the Company issued the securities listed below:~~
● ~~On October 28, 2021. the Company issued 98,118 Class B Subordinate Voting Shares to Runway Strategies in connection with a vendor settlement.~~
● On December 9, 2021, the Company issued an aggregate of 714,356 Class B Subordinate Voting Shares to non-employee directors of the Board of Directors in connection with their fees that are paid on a quarterly basis.
Such securities were issued and sold in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act. Each of the investors has represented to the Company, among other things, that it is an “accredited investor” (as such term is defined in Rule 501(a) of Regulation D under the Securities Act). The offer and sale of such securities and the Shares issuable upon exercise thereof, as applicable, if any, have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.None.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES

~~None.~~See discussion of Senior Secured Term Loan in “Note 10 – Notes Payable” under Part I, “Item 1. Notes to Condensed Consolidated Financial Statements”, which is incorporated in this item by reference.

ITEM 4. MINE SAFETY DISCLOSURE

Not applicable.

49
ITEM 5. OTHER INFORMATION

~~None.~~By resolution dated as of September 21, 2022, as consideration for Mr. Record’s service to the Company since April 24, 2022, when he was appointed as Chief Executive Officer, including successfully guiding the Company through the sale of its Florida assets, the Board effectively approved a cash bonus of $171,429. This payment represents the amount already due to Mr. Record pursuant to the terms of his employment entered at the time of his appointment; except that he shall now receive cash in lieu of RSUs for the period beginning on the date of his appointment through and until the date of the Board resolution. The Board also approved the grant to Mr. Record under the Company’s 2018 Stock and Incentive Plan of $3,000,000 worth of options with a term of five years to purchase Subordinate Voting Shares at an exercise price per share of $0.051968 and with one-third vesting on the date of grant and one-third vesting on each of April 24, 2023 and April 24, 2024. The resolution directs the Company to determine the number of options to be issued through the application of the Black Scholes option pricing model. The options will vest automatically upon a change of control or Mr. Record’s termination as CEO, unless the Board determines that Mr. Record is terminated based on his conduct or performance. A change of control generally includes the acquisition of 50% of the voting securities of the Company, a merger, or sale of all or substantially all of the Company’s assets. Pursuant to his employment terms, Mr. Record will continue to receive an annual salary of $416,000 and is eligible to receive up to an additional $8,000 per week during his service as CEO (the “Bonus”), one half of which will be paid in cash and one half will be paid in RSUs. The Bonus will be paid quarterly at the approval of the Board and not contingent on any specific requirements unless the Board determines reasonably that Mr. Record’s performance did not meet minimal acceptable standards or Mr. Record is terminated based on conduct or performance. The number of RSUs granted will be based on the trailing 10-day volume weighted average price of the Subordinate Voting Shares trading on the Canadian Securities Exchange or any National Securities Exchange prior to the date of grant.

On October 18, 2022, the Company’s Board of Directors approved a change to director compensation with regards to calculating the number of Subordinate Voting Shares issued to non-employee directors. The Company’s non-employee directors will continue to receive an annual fee of $250,000, of which one-third is paid in cash on a quarterly basis and two-thirds is paid in Subordinate Voting Shares. Each director will now receive on an annual basis 3,453,802 Subordinate Voting Shares, of which 864,200 Subordinate Voting Shares will vest quarterly, with retroactive effect to April 21, 2022.
In February 2022, the Company executed the Sixth Modification extending the maturity date of senior secured term loan facility (the “Facility”) with Hankey Capital and Stable Road Capital (the “Lenders”) to July 31, 2022 with respect to the Facility, and August 1, 2022 with respect to the incremental term loans (collectively, the “Term Loans”). The Sixth Modification makes no modification to the current interest rate. The Sixth Modification provides that the definitive documentation with respect to the conditional purchase of the Term Loans by Superhero Acquisition, L.P., an existing lender under the Company’s Senior Secured Convertible Purchase Agreement dated August 7, 2021, must be entered within 45 days or the stated maturity date of the Term Loans become due. The Sixth Modification requires that the Company make a mandatory prepayment of at least $37,500,000 in the event the sale of certain assets and imposes covenants in regards strategic actions the Company must implement if it is unable to pay the Term Loans by the extended stated maturity date. During the three months ended September 24, 2022, in connection with the sale of the Company’s Florida-based operations, the Company made a principal repayment of $31,599,999 with proceeds from the sale. The Facility remains in default as of September 24, 2022 and the Company is in ongoing discussions with the Lenders.
5650

ITEM 6. EXHIBITS

Incorporated by Reference
Exhibit No. Exhibit Description Form File No. Exhibit Filing Date Filed/
Furnished
Herewith
10.1 First Amendment to Asset Purchase Agreement dated July 31, 2022 among MME Florida, LLC, MM Enterprises USA, LLC, and Green Sentry Holdings, LLC. 8-K 000-56199 10.1 8/26/22
10.2 Second Amendment to Asset Purchase Agreement dated August 22, 2022 among MME Florida, LLC, MM Enterprises USA, LLC, and Green Sentry Holdings, LLC. 8-K 000-56199 10.2 8/26/22
10.3 Compensation Terms for CEO (Ed Record) approved by Board on September 22, 2022 ✓
31.1 Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934. ✓
31.2 Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934. ✓
32.1* Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ✓
101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH XBRL Taxonomy Extension Schema Document. ✓
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document. ✓
101.DEF XBRL Taxonomy Extension Definition Linkbase Document. ✓
101.LAB XBRL Taxonomy Extension Label Linkbase Document. ✓
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document. ✓
104 Cover Page Interactive Data File. (Formatted as Inline XBRL and contained in Exhibit 101.) ✓

~~Incorporated by Reference~~
~~Exhibit No.~~ ~~Exhibit Description~~ ~~Form~~ ~~File No.~~ ~~Exhibit~~ ~~Filing Date~~
~~Filed/~~
~~Furnished~~
~~Herewith~~
~~31.1~~ ~~Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934.~~ ✓
~~31.2~~ ~~Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934.~~ ✓
32.1* ~~Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~ ✓
~~101.INS~~ ~~XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.~~
~~101.SCH~~ ~~XBRL Taxonomy Extension Schema Document.~~ ✓
~~101.CAL~~ ~~XBRL Taxonomy Extension Calculation Linkbase Document.~~ ✓
~~101.DEF~~ ~~XBRL Taxonomy Extension Definition Linkbase Document.~~ ✓
~~101.LAB~~ ~~XBRL Taxonomy Extension Label Linkbase Document.~~ ✓
~~101.PRE~~ ~~XBRL Taxonomy Extension Presentation Linkbase Document.~~ ✓
~~104~~ ~~Cover Page Interactive Data File. (Formatted as Inline XBRL and contained in Exhibit 101.)~~ ✓

* This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.

51
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: ~~February 8,~~November 3, 2022 MEDMEN ENTERPRISES INC

/s/ ~~Reece Fulgham~~Ana Bowman
By: ~~Reece Fulgham~~Ana Bowman
Its: Chief Financial Officer
5852

British Columbia A1		98-1431779
(State or other jurisdiction of incorporation or organization)		(I.R.S. employer identification no.)

~~10115 Jefferson Boulevard~~8740 S Sepulveda Blvd, Suite 105, ~~Culver City~~Los Angeles, California		~~90232~~90045
(Address of principal executive offices)		(Zip code)

		Page
FINANCIAL INFORMATION
Part I
ITEM 1:	Condensed Consolidated Balance Sheets (Unaudited)		1
	Condensed Consolidated Statements of Operations (Unaudited)		2
	Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)		3
	Condensed Consolidated Statements of Cash Flows (Unaudited)		4
	Notes to Condensed Consolidated Financial Statements (Unaudited)		6
ITEM 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations		3638
ITEM 3:	Quantitative and Qualitative Disclosure About Market Risk		5547
ITEM 4:	Controls and Procedures		5547

OTHER INFORMATION
Part II
ITEM 1:	Legal Proceedings		5649
ITEM 1A:	Risk Factors		5649
ITEM 2:	Unregistered Sales of Equity Securities		5649
ITEM 3:	Defaults Upon Senior Securities		5649
ITEM 4:	Mine Safety Disclosure		5649
ITEM 5:	Other Information		5650
ITEM 6:	Exhibits		5751
Signatures				5852


	December 25,			June 26,			September 24,			June 25,
	2021			2021			2022			2022
	(unaudited)			(audited)			(unaudited)			(audited)
ASSETS

Current Assets:
Cash and Cash Equivalents	$	47,724		$	11,874		$	21,097,057		$	10,795,999
Accounts Receivable and Prepaid Expenses		9,369			7,791			5,376,069			7,539,767
Inventory		20,735			20,093			9,117,809			10,010,731
Assets Held for Sale		48,048			49,051			44,185,218			123,158,751
Receivable for Assets Held for Sale								11,500,000			-
Other Assets		8,939			7,870			7,403,829			9,990,992

Total Current Assets		134,815			96,679			98,679,982			161,496,240

Operating Lease Right-of-Use Assets		69,354			77,422			44,461,062			47,649,270
Property and Equipment, Net		134,563			137,830			59,965,935			64,107,792
Intangible Assets, Net		107,578			115,380			34,057,051			35,746,114
Goodwill		32,900			32,900			9,810,049			9,810,049
Other Assets		11,662			12,252
Other Non-Current Assets								4,157,513			4,414,219

TOTAL ASSETS	$	490,872		$	472,463		$	251,131,592		$	323,223,684

LIABILITIES AND SHAREHOLDERS’ EQUITY

LIABILITIES:
Current Liabilities:
Accounts Payable and Accrued Liabilities	$	54,250		$	57,139		$	35,355,136		$	38,905,818
Income Taxes Payable		77,163			61,463			64,710,033			58,646,291
Other Liabilities		12,300			15,678			17,121,093			16,704,283
Derivative Liabilities		21,224			6,935			7,555,153			6,749,563
Current Portion of Operating Lease Liabilities		9,147			9,236			12,199,351			10,925,128
Current Portion of Finance Lease Liabilities		205			205			4,150,484			4,061,273
Current Portion of Notes Payable		114,339			103,496			66,294,249			97,003,922
Liabilities Held for Sale		35,919			32,978			26,195,800			86,595,102
Due to Related Party		1,477			1,477

Total Current Liabilities		326,024			288,607			233,581,299			319,591,380

Operating Lease Liabilities		94,998			99,976			47,280,217			50,917,244
Finance Lease Liabilities		29,825			29,047			26,905,824			26,553,287
Other Liabilities		3,366			3,649
Other Non-Current Liabilities								2,987,812			3,082,277
Deferred Tax Liability		50,800			46,378			40,295,319			35,213,671
Senior Secured Convertible Credit Facility		119,655			170,821			138,746,070			132,005,663
Notes Payable		85,533			87,619			74,898,640			74,372,898

TOTAL LIABILITIES		710,201			726,097			564,695,181			641,736,420

SHAREHOLDERS’ EQUITY:
Preferred Shares (0 par value, unlimited shares authorized and 0 shares issued and outstanding)		-			-
Subordinate Voting Shares (no par value, unlimited shares authorized, 1,200,119,292 and 726,866,374 shares issued and outstanding as of December 25, 2021 and June 26, 2021, respectively)		-			-
Preferred Shares (no par value, unlimited shares authorized and no shares issued and outstanding)								-			-
Subordinate Voting Shares (no par value, unlimited shares authorized, 1,301,683,764 and 1,301,423,950 shares issued and outstanding as of September 24, 2022 and June 26, 2022, respectively)								-			-
Additional Paid-In Capital		1,025,405			908,993			1,058,145,437			1,057,228,873
Accumulated Deficit		(791,208	)		(717,233	)		(897,613,980	)		(901,758,875	)

Total Equity Attributable to Shareholders of MedMen Enterprises Inc.		234,197			191,760			160,531,457			155,469,998
Non-Controlling Interest		(453,526	)		(445,394	)		(474,095,046	)		(473,982,734	)

TOTAL SHAREHOLDERS’ EQUITY		(219,329	)		(253,634	)		(313,563,589	)		(318,512,736	)

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	490,872		$	472,463		$	251,131,592		$	323,223,684


	Mezzanine Equity																TOTAL EQUITY
	Units			$ Amount			Units		$ Amount								ATTRIBUTABLE
	Super			Super			Subordinate		Subordinate		Additional						TO			Non-			TOTAL
	Voting			Voting			Voting		Voting		Paid-In			Accumulated			SHAREHOLDERS			Controlling			SHAREHOLDERS’
	Shares			Shares			Shares		Shares		Capital			Deficit			OF MEDMEN			Interest			EQUITY
BALANCE AS OF JUNE 28, 2020		815,295		$	83			403,907,218	$	-	$	791,173		$	(631,366	)	$	159,889		$	(336,778	)	$	(176,888	)

Net Loss		-			-			-		-		-			(71,615	)		(71,615	)		(30,093	)		(101,708	)

Controlling Interest Equity Transactions
Shares Issued to Settle Accounts Payable and Liabilities		-			-			7,205,754		-		1,159			-			1,159			-			1,159
Equity Component of Debt - New and Amended		-			-			-		-		33,590			-			33,590			-			33,590
Redemption of MedMen Corp Redeemable Shares		-			-			88,945,434		-		13,655			34,925			48,580			(48,580	)		-
Shares Issued for Vested Restricted Stock Units		-			-			7,173,256		-		437			-			437			-			437
Shares Issued for Acquisition Costs		-			-			2,082,890		-		318			-			318			-			318
Stock Grants for Compensation		-			-			3,001,282		-		817			-			817			-			817
Deemed Dividend - Down Round Feature of Warrants		-			-			-		-		6,364			(6,364	)		-			-			-
Deferred Tax Impact On Conversion Feature		-			-			-		-		(10,023	)		-			(10,023	)		(1,210	)		(11,233	)
Share-Based Compensation		-			-			-		-		2,546			-			2,546			-			2,546
Cancellation of Super Voting Shares		(815,295	)		(83	)		-		-		83			-			-			-			-
					-
Non-Controlling Interest Equity Transactions:					-
Equity Component on Debt and Debt Modification		-			-			-		-		-			-			-			4,055			4,055

BALANCE AS OF DECEMBER 26, 2020		-		$	-			512,315,834	$	-	$	840,119		$	(674,420	)	$	165,698		$	(412,606	)	$	(246,907	)


	Units		$ Amount							TOTAL EQUITY ATTRIBUTABLE
	Subordinate Voting Shares		Subordinate Voting Shares		Additional Paid-In Capital		Accumulated Deficit			TO SHAREHOLDERS OF MEDMEN		Non- Controlling Interest			TOTAL SHAREHOLDERS’ DEFICIENCY
BALANCE AS OF JUNE 26, 2022		1,301,423,950	$	-	$	1,057,228,873	$	(901,758,875	)	$	155,469,998	$	(473,982,734	)	$	(318,512,736	)

Net Income (Loss)		-		-		-		4,160,213			4,160,213		(112,312	)		4,047,901

Controlling Interest Equity Transactions
Partner Contributions		-		-		37,561		-			37,561		-			37,561
Redemption of MedMen Corp Redeemable Shares		259,814		-		15,318		(15,318	)		-		-			-
Share-Based Compensation		-		-		863,685		-			863,685		-			863,685

BALANCE AS OF SEPTEMBER 24, 2022		1,301,683,764	$	-	$	1,058,145,437	$	(897,613,980	)	$	160,531,457	$	(474,095,046	)	$	(313,563,589	)

	Large Accelerated Filer	☐	Accelerated Filer	☐
	~~Non-Accelerated Filer~~	☒	~~Smaller Reporting Company~~	☒
Non-Accelerated Filer	☐	Smaller Reporting Company	☒
		Emerging Growth Company	☒

	Mezannine Equity														TOTAL EQUITY
	Units		$ Amount		Units		$ Amount								ATTRIBUTABLE
	Super		Super		Subordinate		Subordinate		Additional						TO			Non-			TOTAL
	Voting		Voting		Voting		Voting		Paid-In			Accumulated			SHAREHOLDERS			Controlling			SHAREHOLDERS’			Units		$ Amount								TOTAL EQUITY ATTRIBUTABLE
	Shares		Shares		Shares		Shares		Capital			Deficit			OF MEDMEN			Interest			EQUITY			Subordinate Voting Shares		Subordinate Voting Shares		Additional Paid-In Capital			Accumulated Deficit			TO SHAREHOLDERS OF MEDMEN			Non- Controlling Interest			TOTAL SHAREHOLDERS’ DEFICIENCY
BALANCE AS OF JUNE 27, 2021		-				726,866,374	$	-	$	908,993		$	(717,233	)	$	191,760		$	(445,394	)	$	(253,634	)		726,866,374	$	-	$	908,992,686		$	(717,232,706	)	$	191,759,980		$	(445,393,599	)	$	(253,633,619	)
																			-
Net Loss		-		-		-		-		-			(74,357	)		(74,357	)		(6,611	)		(80,968	)		-		-		-			(55,330,028	)		(55,330,028	)		(5,280,003	)		(60,610,031	)

Controlling Interest Equity Transactions
Shares Issued for Cash, Net of Fees						406,249,973		-		73,394			-			73,394			-			73,394			406,249,973		-		73,393,745			-			73,393,745			-			73,393,745
Shares Issued to Settle Debt and Accrued Interest						20,833,333		-		4,030			-			4,030			-			4,030			20,833,333		-		4,030,000			-			4,030,000			-			4,030,000
Shares Issued to Settle Accounts Payable and Liabilities						4,280,848		-		715			-			715			-			715			4,182,730		-		700,000			-			700,000			-			700,000
Equity Component of Debt - New and Amended						-		-		41,388			-			41,388			-			41,388			-		-		41,388,048			-			41,388,048			-			41,388,048
Redemption of MedMen Corp Redeemable Shares						4,138,883		-		1,139			382			1,521			(1,521	)		-			4,054,278		-		1,121,441			374,701			1,496,142			(1,496,142	)		-
Shares Issued for Vested Restricted Stock Units and Cashless Exercise of Options						10,757,840		-		-			-			-			-			-			8,473,868		-		-			-			-			-			-
Shares Issued for Exercise of Warrants						8,807,605		-		1,274			-			1,274			-			1,274			8,807,605		-		1,273,679			-			1,273,679			-			1,273,679
Shares Issued for Conversion of Debt						16,014,665		-		2,371			-			2,371			-			2,371			16,014,665		-		2,371,100			-			2,371,100			-			2,371,100
Stock Grants for Compensation						2,169,771		-		1,629			-			1,629			-			1,629			1,455,415		-		1,421,400			-			1,421,400			-			1,421,400
Deferred Tax Impact On Conversion Feature						-		-		(11,712	)		-			(11,712	)		-			(11,712	)		-		-		(13,057,730	)		-			(13,057,730	)		-			(13,057,730	)
Share-Based Compensation						-		-		2,184			-			2,184			-			2,184			-		-		1,682,677			-			1,682,677			-			1,682,677

BALANCE AS OF DECEMBER 25, 2021		-				1,200,119,292	$	-	$	1,025,405		$	(791,208	)	$	234,197		$	(452,426	)	$	(219,329	)
BALANCE AS OF SEPTEMBER 25, 2021																									1,196,938,241	$	-	$	1,023,317,046		$	(772,188,033	)	$	251,129,013		$	(452,169,744	)	$	(201,040,731	)

Schedule of inventories
	December 25,		June 26,		September 24,		June 25,
	2021		2021		2022		2022
Raw Materials	$	361	$	670	$	612,901	$	521,777
Work-in-Process		2,345		5,174		1,142,397		671,541
Finished Goods		18,029		14,249		7,362,511		8,817,413

Total Inventory	$	20,735	$	20,093	$	9,117,809	$	10,010,731

Schedule of asset held for sale
	PharmaCann Assets			Available for Sale Subsidiaries			Discontinued Operations			TOTAL
Balance as of June 26, 2021	$	152		$	-		$	48,899		$	49,051
Transferred In		-			4,478			-			4,478
Ongoing Activities		-			(2,297	)		(1,158	)		(3,455	)
Transferred to Investments		-			(1,966	)		-			(1,966	)
Other		(60	)		-			-			(60	)

Balance as of December 25, 2021	$	92		$	215		$	47,741		$	48,048

Schedule of asset held for sale
	Discontinued Operations ⁽¹⁾			Other Assets		TOTAL
Balance as of June 25, 2022	$	123,128,406		$	30,345	$	123,158,751
Ongoing Activities		(47,881,618	)		248,324		(47,633,294	)
Proceeds from Sale		(67,000,000	)		-		(67,000,000	)
Gain on Sale of Assets Held for Sale		35,659,761			-		35,659,761

Balance as of September 24, 2022	$	43,906,549		$	278,669	$	44,185,218

Schedule of property and equipment
	December 25,			June 26,			September 24,			June 25,
	2021			2021			2022			2022
Land and Buildings	$	36,180		$	37,400		$	29,933,999		$	29,933,999
Finance Lease Right-of-Use Assets		7,554			9,154
Capital Leases								5,318,516			5,315,625
Furniture and Fixtures		12,544			12,525			8,325,228			8,776,994
Leasehold Improvements		68,726			68,438			33,625,893			33,069,524
Equipment and Software		25,419			26,832			16,316,334			16,897,649
Construction in Progress		31,147			27,145			4,528,762			6,828,923

Total Property and Equipment		181,570			181,494			98,048,732			100,822,714

Less Accumulated Depreciation		(47,007	)		(43,664	)		(38,082,797	)		(36,714,922	)

Property and Equipment, Net	$	134,563		$	137,830		$	59,965,935		$	64,107,792

Schedule of Intangible assets
	December 25,			June 26,			September 24,			June 25,
	2021			2021			2022			2022
Dispensary Licenses	$	121,292		$	121,292		$	49,253,452		$	49,253,452
Customer Relationships		17,748			17,748			16,409,600			16,409,600
Management Agreement		7,595			7,595
Capitalized Software		10,158			9,697			7,413,470			7,413,470
Intellectual Property		5,534			6,277			4,016,597			4,016,597

Total Intangible Assets		162,327			162,609			77,093,119			77,093,119

Dispensary Licenses		(24,941	)		(22,127	)		(17,477,268	)		(16,876,912	)
Customer Relationships		(19,290	)		(16,463	)		(16,589,651	)		(15,870,284	)
Management Agreement		(864	)		(765	)
Capitalized Software		(5,843	)		(4,667	)		(4,681,748	)		(4,413,974	)
Intellectual Property		(3,811	)		(3,207	)		(4,287,401	)		(4,185,835	)

Less Accumulated Amortization		(54,749	)		(47,229	)		(43,036,068	)		(41,347,005	)

Intangible Assets, Net	$	107,578		$	115,380		$	34,057,051		$	35,746,114

Schedule of accounts payable and accrued liabilities
	December 25,		June 26,		September 24,		June 25,
	2021		2021		2022		2022
Accounts Payable	$	32,566	$	35,064	$	19,078,177	$	14,627,746
Accrued Liabilities		7,260		7,348		7,784,119		10,031,194
Accrued Deal Costs		4,123		4,123
Accrued Inventory						3,129,868		5,868,831
Accrued Payroll		3,162		2,716		2,081,284		1,682,517
Local & State Taxes Payable		6,573		7,321		3,281,687		6,695,532
Other Accrued Liabilities		566		567

Total Accounts Payable and Accrued Liabilities	$	54,250	$	57,139	$	35,355,136	$	38,905,818

Schedule of reconciliation of the beginning and ending balance of derivative liabilities and change in fair value of derivative liabilities
	December 25,			September 24,
	2021			2022
Balance at Beginning of Period	$	6,935		$	6,749,563

Initial Recognition of Derivative Liabilities		30,501
Change in Fair Value of Derivative Liabilities		(16,212	)		805,590

Balance at End of Period	$	21,224		$	7,555,153

Schedule of assumptions to measure fair value
		Top-Up Provision			Short-Term Warrant
Average Stock Price	$	0.18		$	0.18
Weighted-Average Probability		75.00	%		nil
Term (in Years)		5.00			0.02
Expected Stock Price Volatility		115.00	%		115.00	%

Schedule of future leases payments
Fiscal Year Ending	Operating Leases			Finance Leases
July 1, 2023 (remaining)	$	9,155,365		$	4,387,279
June 29, 2024		16,183,010			10,961,495
June 28, 2025		25,224,922			14,020,131
June 27, 2026		12,675,441			7,300,368
June 26, 2027		12,716,234			7,519,379
Thereafter		20,832,425			1,054,354,990

Total Lease Payments		96,787,396			1,098,543,643
Less Interest		(37,307,828	)		(1,067,487,335	)

Lease Liability Recognized	$	59,479,568		$	31,056,308

Schedule of warrant issued
	Number of Warrants			Exercise Price	Expiration Date
~~September 2018 Bought Deal Equity Financing~~		~~7,840,909~~	⁽¹⁾
~~December 2018 Bought Deal Equity Financing~~		~~13,640,000~~	⁽²⁾
March 2021 Private Placement⁽¹⁾		50,000,000	⁽³⁾	C$0.50	March 27, 2024

		~~71,480,909~~50,000,000

Schedule of assumptions to measure fair value
Expected Stock Price Volatility		52.60	%		106.25	%
Risk-Free Annual Interest Rate		0.06	%		2.51	%
Expected Life (in Years)		0.23			0.50
Share Price	$	0.23		$	0.04
Exercise Price	$	0.39		$	0.37

Schedule of lease cost
	Three Months Ended					Six Months Ended					Three Months Ended
	December 25,			December 26,		December 25,			December 26,		September 24,			September 25,
	2021			2020		2021			2020		2022			2021
Finance Lease Cost:
Amortization of Finance Lease Right-of-Use Assets	$	251		$	83	$	535		$	398	$	347,406		$	283,406
Interest on Lease Liabilities		1,726			460		3,510			1,984		1,804,507			1,784,541
Operating Lease Cost		6,456			6,310		13,051			13,051		3,453,863			6,595,652
Sublease Income(1)		(1,444	)		-		(1,444	)		-		(1,521,693	)		-

Total Lease Expenses	$	6,989		$	6,853	$	15,652		$	15,433	$	5,605,776		$	8,663,599

Cash Paid for Amounts Included in the Measurement of Lease Liabilities:
Financing Cash Flows from Finance Leases	$	-		$	-	$	-		$	40	$	2,484		$	959
Operating Cash Flows from Operating Leases	$	4,045		$	6,222	$	9,788		$	14,633	$	1,026,792		$	3,478,891

Schedule of future leases payments
Fiscal Year Ending	Operating Leases			Finance Leases
June 25, 2022 (remaining)	$	10,735		$	2,676
June 24, 2023		21,753			5,484
June 29, 2024		28,122			9,860
June 28, 2025		21,988			6,517
June 27, 2026		22,407			6,713
Thereafter		97,303			1,070,693

Total Lease Payments		202,308			1,101,943
Less Interest	$	(98,163	)	$	(1,071,913	)

Lease Liability Recognized	$	104,145		$	30,030

Schedule of notes payable
	December 25,			June 26,			September 24,			June 25,
	2021			2021			2022			2022
Financing liability incurred on various dates between January 2019 through September 2019 with implied interest rates ranging from 0.7% to 17.0% per annum.	$	83,400		$	83,400		$	72,300,000		$	72,300,000

Non-revolving, senior secured term notes dated between October 1, 2018 and October 30, 2020, issued to accredited investors, which mature on January 31, 2022, and bear interest at a rate of 15.5% and 18.0% per annum.		113,590			109,318

Convertible debentures dated between September 16, 2020 through January 29, 2021, issued to accredited investors and qualified institutional buyers, which mature two years from issuance, and bear interest at a rate of 7.5% per annum.		-			2,500

Promissory notes dated between January 15, 2019 through March 29, 2019, issued for deferred payments on acquisitions, which mature on varying dates from July 31, 2021 to April 1, 2022 and bear interest at rates ranging from 8.0% to 9.0% per annum.		2,148			2,204
Non-revolving, senior secured term notes dated between October 1, 2018 and October 30, 2020, issued to accredited investors, which mature on August 1, 2022 and July 31, 2022, and bear interest at a rate of 15.5% and 18.0% per annum.								66,819,991			97,162,001

Promissory notes dated November 7, 2018, issued to Lessor for tenant improvements as part of sales and leaseback transactions, which mature on November 7, 2028, bear interest at a rate of 10.0% per annum and require minimum monthly payments of $15,660 and $18,471.		2,120			2,196			2,057,207			2,057,207

Other		16			16			15,691			15,691

Total Notes Payable		201,274			199,634			141,192,889			171,534,899
Less Unamortized Debt Issuance Costs and Loan Origination Fees		(1,402	)		(8,519	)		-			(158,079	)

Net Amount	$	199,872		$	191,115		$	141,192,889		$	171,376,820
Less Current Portion of Notes Payable		(114,339	)		(103,496	)		(66,294,249	)		(97,003,922	)

Notes Payable, Net of Current Portion	$	85,533		$	87,619		$	74,898,640		$	74,372,898

Schedule of Reconciliation of Notes payable
	December 25,			September 24,
	2021			2022
Balance at Beginning of Period	$	191,115		$	171,376,820

Cash Additions		5,000
Paid-In-Kind Interest Capitalized		4,287			1,257,988
Cash Payments		(153	)		(31,599,999	)
Conversion of Convertible Debentures		(2,371	)
Derivative Liability Incurred on Settlement of Debt		(3,145	)
Shares Issued to Settle Debt		(4,030	)
Non-Cash Loss on Extinguishment of Debt		2,176
Accretion of Debt Discount		2,543
Accretion of Debt Discount Included in Discontinued Operations		4,450			158,079

Balance at End of Period		199,872			141,192,889

Less Current Portion of Notes Payable		(114,339	)		(66,294,249	)

Notes Payable, Net of Current Portion	$	85,533		$	74,898,640

Schedule of senior secured convertible credit facility
		December 25,			June 26,				September 24,			June 25,
	Tranche	2021			2021			Tranche	2022			2022
Senior secured convertible notes dated April 23, 2019, issued to accredited investors, which mature on August 17, 2028 and bear interest at LIBOR plus 6.0% per annum.	1A	$	21,952		$	21,113
Senior secured convertible notes dated August 17, 2019, issued to accredited investors, which mature on August 17, 2028 and bear interest at LIBOR plus 6.0% per annum.								1A	$	23,376,684		$	22,880,556

Senior secured convertible notes dated May 22, 2019, issued to accredited investors, which mature on August 17, 2028 and bear interest at LIBOR plus 6.0% per annum.	1B		94,545			91,185		1B		100,679,152			98,542,422

Senior secured convertible notes dated July 12, 2019, issued to accredited investors, which mature on August 17, 2028 and bear interest at LIBOR plus 6.0% per annum.	2		30,744			29,580		2		32,738,817			32,043,996

Senior secured convertible notes dated November 27, 2019, issued to accredited investors, which mature on August 17, 2028 and bear interest at LIBOR plus 6.0% per annum.	3		11,905			11,454		3		12,677,140			12,408,091

Senior secured convertible notes dated March 27, 2020, issued to accredited investors, which mature on August 17, 2028 and bear interest at LIBOR plus 6.0% per annum.	4		14,003			13,497		4		14,911,453			14,594,985

Amendment fee converted to senior secured convertible notes dated October 29, 2019, which mature on August 17, 2028 and bear interest at LIBOR plus 6.0% per annum.	-		22,474			21,624		-		23,932,224			23,424,438

Senior secured convertible notes dated April 24, 2020, issued to accredited investors, which mature on August 17, 2028 and bear interest at LIBOR plus 6.0% per annum.	IA-1		3,143			3,027		IA-1		3,346,889			3,275,857

Senior secured convertible notes dated September 14, 2020, issued to accredited investors, which mature on August 17, 2028 and bear interest at LIBOR plus 6.0% per annum.	IA-2		6,078			5,848		IA-2		6,472,344			6,334,980

Restatement fee issued in senior secured convertible notes dated March 27, 2020, which mature on August 17, 2028 and bear interest at LIBOR plus 6.0% per annum.	-		9,488			9,105		-		10,103,343			9,888,919

Second restatement fee issued in senior secured convertible notes dated July 2, 2020, which mature on August 17, 2028 and bear interest at LIBOR plus 6.0% per annum.	-		2,102			2,022		-		2,237,875			2,190,380

Third restatement advance issued in senior secured convertible notes dated January 11, 2021, which mature on August 17, 2028 and bear interest at LIBOR plus 6.0% per annum.	-		11,820			11,373
Third restatement fee issued in senior secured convertible notes dated January 11, 2021, which mature on August 17, 2028 and bear interest at LIBOR plus 6.0% per annum.								-		12,587,295			12,320,154

Total Drawn on Senior Secured Convertible Credit Facility			228,254			219,828				243,063,216			237,904,778

Less Unamortized Debt Discount			(108,599	)		(49,007	)			(104,317,146	)		(105,899,115	)

Senior Secured Convertible Credit Facility, Net		$	119,655		$	170,821			$	138,746,070		$	132,005,663

Schedule of reconciliation senior secured convertible credit facilty
	Tranche 1			Tranche 2			Tranche 3			Tranche 4			Incremental Advance - 1			Incremental Advance - 2			3rd Advance			Amendment Fee Notes			Restatement Fee Notes			2nd Restatement Fee Notes			TOTAL
Balance as of June 26, 2021	$	97,900		$	25,266		$	9,716		$	2,407		$	1,392		$	3,195		$	4,081		$	18,973		$	5,866		$	2,023		$	170,819

Paid-In-Kind Interest Capitalized		4,363			1,199			464			522			117			226			439			876			394			121			8,721
Net Effect on Debt from Extinguishment		730			1,036			464			(6,023	)		(1,634	)		(1,529	)		(3,386	)		176			(2,244	)		-			(12,410	)
Equity Component Debt - New and Amended		(25,909	)		(6,957	)		(2,694	)		3,710			218			(1,684	)		(805	)		(5,086	)		(2,181	)		-			(41,388	)
Net Effect on Debt from Derivative		(5,665	)		(1,495	)		(579	)		(681	)		(153	)		(296	)		(575	)		(1,093	)		(461	)		(102	)		(11,100	)
Cash Paid for Debt Issuance Costs		(1,332	)		(351	)		(136	)		(160	)		(36	)		(69	)		(135	)		(257	)		(108	)		(24	)		(2,608	)
Amortization of Debt Discounts		3,461			776			307			685			193			344			745			648			460			2			7,621

Balance as of December 25, 2021	$	73,548		$	19,474		$	7,542		$	460		$	97		$	187		$	364		$	14,237		$	1,726		$	2,020		$	119,655

Schedule of Shares issued and outstanding
	Subordinate Voting Shares		Super Voting Shares		MM CAN USA Class B Redeemable Units			MM Enterprises USA Common Units
Balance as of June 26, 2021		726,866,374		-		95,212,601			725,016

Shares Issued for Cash, Net of Fees		406,249,973		-		-			-
Shares Issued to Settle Debt and Accrued Interest		20,833,333		-		-			-
Shares Issued to Settle Accounts Payable and Liabilities		4,280,848		-		-			-
Redemption of MedMen Corp Redeemable Shares		4,138,883		-		(4,138,883	)		-
Shares Issued for Vested Restricted Stock Units and Cashless Exercise of Options		10,757,840		-		-			-
Shares Issued for Exercise of Warrants		8,807,605		-		-			-
Shares Issued for Conversion of Debt		16,014,665		-		-			-
Stock Grants for Compensation		2,169,771		-		-			-

Balance as of December 25, 2021		1,200,119,292		-		91,073,718			725,016

Schedule of VIE
	Venice Caregivers Foundation, Inc.			LAX Fund II Group, LLC			Natures Cure, Inc.		TOTAL
Current Assets	$	1,180,136		$	-		$	24,602,018	$	25,782,154
Non-Current Assets		8,763,511			3,233,062			4,891,725		16,888,298

Total Assets	$	9,943,647		$	3,233,062		$	29,493,743	$	42,670,452

Current Liabilities	$	10,477,448		$	16,016,119		$	8,510,967	$	35,004,534
Non-Current Liabilities		7,004,484			2,004,062			1,342,632		10,351,178

Total Liabilities	$	17,481,932		$	18,020,181		$	9,853,599	$	45,355,712

Non-Controlling Interest	$	(7,538,285	)	$	(14,787,119	)	$	19,640,163	$	(2,685,241	)

Revenues	$	1,959,080		$	-		$	3,317,299	$	5,276,379
Net (Loss) Income Attributable to Non-Controlling Interest	$	(494,845	)	$	(810,965	)	$	885,605	$	(420,205	)

Schedule of VIE
	Venice Caregivers Foundation, Inc.			LAX Fund II Group, LLC			Natures Cure, Inc.		TOTAL
Current Assets	$	1,520		$	1,006		$	18,001	$	20,527
Non-Current Assets		11,886			3,433			5,012		20,331

Total Assets	$	13,406		$	4,439		$	23,013	$	40,858

Current Liabilities	$	8,681		$	13,611		$	3,662	$	25,954
Non-Current Liabilities		9,481			2,413			1,146		13,040

Total Liabilities	$	18,162		$	16,024		$	4,808	$	38,994

Non-Controlling Interest	$	(4,756	)	$	(11,585	)	$	18,205	$	1,864

Revenues	$	4,816		$	-		$	8,816	$	13,632
Net (Loss) Income Attributable to Non-Controlling Interest	$	(608	)	$	(2,206	)	$	3,911	$	1,097

Schedule of other non-controlling interest
	Venice Caregivers Foundation, Inc.			LAX Fund II Group, LLC			Natures Cure, Inc.		Other Non- Controlling Interests			TOTAL
Balance as of June 26, 2021	$	(4,149	)	$	(9,379	)	$	14,294	$	(446,160	)	$	(445,394	)

Net (Loss) Income		(607	)		(2,206	)		3,911		(7,708	)		(6,610	)

Redemption of MedMen Corp Redeemable Shares		-			-			-		(1,522	)		(1,522	)

Balance as of December 25, 2021	$	(4,756	)	$	(11,585	)	$	18,205	$	(455,390	)	$	(453,526	)

Schedule of stock options
	Number of Stock Options			Weighted- Average Exercise Price
Balance as of June 26, 2021		14,752,960		$	1.40

Granted		4,084,005		$	0.28
Exercised		(1,473,534	)	$	(0.17	)
Forfeited		(2,766,781	)	$	(2.11	)

Balance as of December 25, 2021		14,596,650		$	1.12

Stock Options Exercisable as of December 25, 2021		13,783,375		$	1.07

Schedule of Restricted Stock Grants
	Issued and Outstanding			Vested ⁽¹⁾			Weighted- Average Fair Value
Balance as of June 26, 2021		20,888,394			897,294

Granted		19,288,397			-		$	0.32
Forfeiture of Restricted Stock ⁽²⁾		(5,218,765	)		-		$	(0.37	)
Redemption of Vested Stock		(9,284,306	)		(9,284,306	)	$	(0.44	)
Vesting of Restricted Stock		-			9,004,649		$	0.41

Balance as of December 25, 2021		25,673,720			617,667

	Fiscal Quarter Ended
	December 25,			September 25,
	2021			2021			$ Change			% Change
Gross Profit	$	19.2		$	17.5		$	1.7			10	%

Gross Margin Rate		49	%		44	%		5	%		12	%

Cultivation & Wholesale Revenue		(1.3	)		(1.3	)		-			100	%
Cultivation & Wholesale Cost of Goods Sold		(1.3	)		(4.0	)		2.7			(68	%)
Non-Retail Gross Margin		-			(2.7	)		2.7			(100	%)

Retail Gross Margin (Non-GAAP)	$	19.2		$	20.2		$	(1.0	)		(5	%)
Retail Gross Margin Rate (Non-GAAP)		51	%		52	%		-2	%		(3	%)

	●	general ledgers are not being reviewed regularly for assets that may not be recoverable or viable,

	●	review procedures for balance sheet account reconciliations and manual journal entries were not performed, and

	●	some accounts and balances are not being reconciled regularly, and/or account reconciliations that are being completed do not properly address or adjust reconciling items.

Dated: ~~February 8,~~November 3, 2022	MEDMEN ENTERPRISES INC

	/s/ ~~Reece Fulgham~~Ana Bowman
	By:	~~Reece Fulgham~~Ana Bowman
	Its:	Chief Financial Officer