(State or other jurisdiction of (I.R.S. employer x No o 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; 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; 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 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. . TOTAL EQUITY ATTRIBUTABLE Subordinate Voting Non- Interest Subordinate Voting Non- Interest Going Concern Recently Adopted Accounting Standards As of 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: The weighted-average remaining lease term and discount rate related to the Company’s finance and operating lease liabilities as of 2022 Non-Revolving Senior Secured Term Loan Facility Stock Options Long-Term Incentive Plan (“LTIP”) Units and LLC Redeemable Units . In November 2020, entities affiliated with former officers of the Company initiated arbitration against a subsidiary of the Company in Los Angeles, California asserting breach of contract, breach of the implied covenant of good faith and fair dealing, fraud, and unjust enrichment. The claimants are generally seeking damages and compensatory damages according to proof, including lost earnings and other 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 hearing has been rescheduled and the matter is Operation. revenue. and $6.3 million, or nil and 1443%, respectively. Non-Operating Expense loan origination fees. Cash Flow from Financing Activities Changes in Internal Control Over Financial Reporting 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 is incorporated herein by reference. ITEM 6. EXHIBITS FORM 10-Q☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934SeptemberDecember 24, 2022OR☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934British Columbia A198-1431779
incorporation or organization)
identification no.), Suite 105,,, California90045 (Address of principal executive offices) (Zip code) ☐ oNo x☒☒ No ☐Large Accelerated Filer ☐oAccelerated Filer ☒xNon-Accelerated Filer ☐oSmaller Reporting Company ☒xEmerging Growth Company ☒x☐o☐ oNo x☒October 31, 2022,January 30, 2023, the registrant had 1,308,619,247 Class B Subordinate Voting Shares outstanding.QUARTERLY PERIOD ENDED SEPTEMBERDECEMBER 24, 2022Page 12346384747494949494950515241iiiMEDMEN ENTERPRISES INC.December 24,
2022June 25,
2022(unaudited) (audited) ASSETS Current Assets: Cash and Cash Equivalents $ 15,605,362 $ 10,795,999 Accounts Receivable and Prepaid Expenses 5,415,701 7,539,767 Inventory 13,675,322 10,010,731 Assets Held for Sale 43,611,513 123,158,751 Receivable for Assets Held for Sale 11,500,000 — Other Assets 10,403,527 9,990,992 Total Current Assets 100,211,425 161,496,240 Operating Lease Right-of-Use Assets 34,275,701 47,649,270 Property and Equipment, Net 57,645,329 64,107,792 Intangible Assets, Net 32,653,134 35,746,114 Goodwill 9,810,049 9,810,049 Other Non-Current Assets 3,879,373 4,414,219 TOTAL ASSETS $ 238,475,011 $ 323,223,684 LIABILITIES AND SHAREHOLDERS’ EQUITY LIABILITIES: Current Liabilities: Accounts Payable and Accrued Liabilities $ 42,926,092 $ 38,905,818 Income Taxes Payable 67,472,697 58,646,291 Other Liabilities 16,591,825 16,704,283 Derivative Liabilities 3,642,777 6,749,563 Current Portion of Operating Lease Liabilities 11,897,467 10,925,128 Current Portion of Finance Lease Liabilities 4,294,333 4,061,273 Current Portion of Notes Payable 66,294,249 97,003,922 Liabilities Held for Sale 24,524,988 86,595,102 Total Current Liabilities 237,644,428 319,591,380 Operating Lease Liabilities 40,724,983 50,917,244 Finance Lease Liabilities 27,288,988 26,553,287 Other Non-Current Liabilities 2,846,182 3,082,277 Deferred Tax Liability 38,459,344 35,213,671 Senior Secured Convertible Credit Facility 146,193,049 132,005,663 Notes Payable 74,110,205 74,372,898 TOTAL LIABILITIES 567,267,179 641,736,420 SHAREHOLDERS’ EQUITY: Preferred Shares (no par value, unlimited shares authorized and no shares issued and outstanding) — — Subordinate Voting Shares (no par value, unlimited shares authorized, 1,302,129,084 and 1,301,423,950 shares issued and outstanding as of December 24, 2022 and June 25, 2022, respectively) — — Additional Paid-In Capital 1,060,236,631 1,057,228,873 Accumulated Deficit (913,798,904) (901,758,875) Total Equity Attributable to Shareholders of MedMen Enterprises Inc. 146,437,727 155,469,998 Non-Controlling Interest (475,229,895) (473,982,734) TOTAL SHAREHOLDERS’ EQUITY (328,792,168) (318,512,736) TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 238,475,011 $ 323,223,684 Balance SheetsFinancial Statements (Unaudited)AsTable of September 24, 2022 and June 25, 2022(Amounts Expressed in United States Dollars, Except for Share Data)ContentsThree Months Ended Six Months Ended December 24,
2022December 25,
2021December 24,
2022December 25,
2021Revenue $ 29,554,100 $ 35,517,161 $ 59,598,153 $ 72,253,065 Cost of Goods Sold 14,501,052 17,637,003 29,601,351 36,986,993 Gross Profit 15,053,048 17,880,158 29,996,802 35,266,072 Operating Expenses: General and Administrative 18,341,221 31,292,754 36,452,557 63,941,988 Sales and Marketing 551,106 1,007,255 994,897 1,600,479 Depreciation and Amortization 3,477,086 6,379,865 7,423,606 12,203,482 Realized and Unrealized Changes in Fair Value of Contingent Consideration — (301,459) (863,856) (301,459) Impairment Expense 5,052,995 — 6,716,906 435,241 Other Operating (Income) Expense (5,634,350) 630,971 (7,544,063) 2,829,999 Total Operating Expenses 21,788,058 39,009,386 43,180,047 80,709,730 Loss from Operations (6,735,010) (21,129,228) (13,183,245) (45,443,658) Non-Operating (Income) Expenses: Interest Expense 9,686,929 8,077,496 19,739,620 16,249,257 Interest Income (27,991) (22,907) (28,024) (45,915) Accretion of Debt Discount and Loan Origination Fees 1,543,896 1,277,827 2,885,912 7,625,298 Change in Fair Value of Derivatives (3,912,376) (14,106,370) (3,106,786) (16,211,785) Gain on Extinguishment of Debt — — — (10,233,607) Total Non-Operating Expenses 7,290,458 (4,773,954) 19,490,722 (2,616,752) Loss from Continuing Operations Before Provision for Income Taxes (14,025,468) (16,355,274) (32,673,967) (42,826,906) Provision for Income Tax Expense (1,060,808) 8,137,898 (6,752,886) (11,554,010) Net Loss from Continuing Operations (15,086,276) (8,217,376) (39,426,853) (54,380,916) Net Income (Loss) from Discontinued Operations, Net of Taxes (2,255,978) (12,140,600) 26,132,489 (26,587,091) Net Income (Loss) (17,342,254) (20,357,976) (13,294,364) (80,968,007) Net Loss Attributable to Non-Controlling Interest (1,134,849) (1,331,174) (1,247,161) (6,611,177) Net Income (Loss) Attributable to Shareholders of MedMen Enterprises Inc. $ (16,207,405) $ (19,026,802) $ (12,047,203) $ (74,356,830) Earnings (Loss) Per Share - Basic and Diluted: From Continuing Operations Attributable to Shareholders of MedMen Enterprises Inc. $ (0.01) $ (0.01) $ (0.03) $ (0.05) From Discontinued Operations Attributable to Shareholders of MedMen Enterprises Inc. $ (0.00) $ (0.01) $ 0.01 $ (0.02) Weighted-Average Shares Outstanding - Basic 1,301,874,615 1,198,515,279 1,301,767,158 1,070,605,666 Weighted-Average Shares Outstanding - Diluted 1,301,874,615 1,198,515,279 4,845,052,067 1,070,605,666 September 24, June 25, 2022 2022 (unaudited) (audited) ASSETS Current Assets: Cash and Cash Equivalents $ 21,097,057 $ 10,795,999 Accounts Receivable and Prepaid Expenses 5,376,069 7,539,767 Inventory 9,117,809 10,010,731 Assets Held for Sale 44,185,218 123,158,751 Receivable for Assets Held for Sale 11,500,000 - Other Assets 7,403,829 9,990,992 Total Current Assets 98,679,982 161,496,240 Operating Lease Right-of-Use Assets 44,461,062 47,649,270 Property and Equipment, Net 59,965,935 64,107,792 Intangible Assets, Net 34,057,051 35,746,114 Goodwill 9,810,049 9,810,049 Other Non-Current Assets 4,157,513 4,414,219 TOTAL ASSETS $ 251,131,592 $ 323,223,684 LIABILITIES AND SHAREHOLDERS’ EQUITY LIABILITIES: Current Liabilities: Accounts Payable and Accrued Liabilities $ 35,355,136 $ 38,905,818 Income Taxes Payable 64,710,033 58,646,291 Other Liabilities 17,121,093 16,704,283 Derivative Liabilities 7,555,153 6,749,563 Current Portion of Operating Lease Liabilities 12,199,351 10,925,128 Current Portion of Finance Lease Liabilities 4,150,484 4,061,273 Current Portion of Notes Payable 66,294,249 97,003,922 Liabilities Held for Sale 26,195,800 86,595,102 Total Current Liabilities 233,581,299 319,591,380 Operating Lease Liabilities 47,280,217 50,917,244 Finance Lease Liabilities 26,905,824 26,553,287 Other Non-Current Liabilities 2,987,812 3,082,277 Deferred Tax Liability 40,295,319 35,213,671 Senior Secured Convertible Credit Facility 138,746,070 132,005,663 Notes Payable 74,898,640 74,372,898 TOTAL LIABILITIES 564,695,181 641,736,420 SHAREHOLDERS’ EQUITY: Preferred Shares ( par value, unlimited shares authorized and shares issued and outstanding) - - Subordinate Voting Shares (no par value, unlimited shares authorized, and shares issued and outstanding as of September 24, 2022 and June 26, 2022, respectively) - - Additional Paid-In Capital 1,058,145,437 1,057,228,873 Accumulated Deficit (897,613,980 ) (901,758,875 ) Total Equity Attributable to Shareholders of MedMen Enterprises Inc. 160,531,457 155,469,998 Non-Controlling Interest (474,095,046 ) (473,982,734 ) TOTAL SHAREHOLDERS’ EQUITY (313,563,589 ) (318,512,736 ) TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 251,131,592 $ 323,223,684 For the Six Months Ended December 24, 2022 Units $ Amount Additional
Paid-In
CapitalAccumulated
DeficitTOTAL EQUITY
ATTRIBUTABLE
TO
SHAREHOLDERS
OF MEDMENNon-
Controlling
InterestTOTAL
SHAREHOLDERS’
DEFICIENCYSubordinate
Voting
SharesSubordinate
Voting
SharesBalance as of June 25, 2022 1,301,423,950 $ — $ 1,057,228,873 $ (901,758,875) $ 155,469,998 $ (473,982,734) $ (318,512,736) Net Income (Loss) — — — 4,160,212 4,160,212 (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 — $ 1,058,107,876 $ (897,576,420) $ 160,531,456 $ (474,095,046) $ (313,563,590) Net Income (Loss) — — — (16,207,405) (16,207,405) (1,134,849) (17,342,254) Controlling Interest Equity Transactions Partner Contributions — — — — — — — Redemption of MedMen Corp Redeemable Shares 445,320 — 15,079 (15,079) — — — Share-Based Compensation — — 2,113,676 — 2,113,676 — 2,113,676 Balance as of December 24, 2022 1,302,129,084 $ — $ 1,060,236,631 $ (913,798,904) $ 146,437,727 $ (475,229,895) $ (328,792,168) For the Six Months Ended December 25, 2021 Units $ Amount Additional
Paid-In
CapitalAccumulated
DeficitTOTAL EQUITY
ATTRIBUTABLE
TO
SHAREHOLDERS
OF MEDMENNon-
Controlling
InterestTOTAL
SHAREHOLDERS’
DEFICIENCYSubordinate
Voting
SharesSubordinate
Voting
SharesBALANCE AS OF JUNE 27, 2021 726,866,374 $ — $ 908,992,686 $ (717,232,706) $ 191,759,980 $ (445,393,599) $ (253,633,619) Net Loss — — — (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 — 73,393,745 — 73,393,745 — 73,393,745 Shares Issued to Settle Debt and Accrued Interest 20,833,333 — 4,030,000 — 4,030,000 — 4,030,000 Shares Issued to Settle Accounts Payable and Liabilities 4,182,730 — 700,000 — 700,000 — 700,000 Equity Component of Debt - New and Amended 0 — 41,388,048 — 41,388,048 — 41,388,048 Redemption of MedMen Corp Redeemable Shares 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 8,473,868 — — — — — — Shares Issued for Exercise of Warrants 8,807,605 — 1,273,679 — 1,273,679 — 1,273,679 Shares Issued for Conversion of Debt 16,014,665 — 2,371,100 — 2,371,100 — 2,371,100 Stock Grants for Compensation 1,455,415 — 1,421,400 — 1,421,400 — 1,421,400 Deferred Tax Impact On Conversion Feature — — (13,057,730) — (13,057,730) — (13,057,730) Share-Based Compensation — — 1,682,677 — 1,682,677 — 1,682,677 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) Net Loss — — — (19,026,802) (19,026,802) (1,331,174) (20,357,976) Controlling Interest Equity Transactions Shares Issued for Cash, Net of Fees — — — — — — — Shares Issued to Settle Debt and Accrued Interest — — — — — — — Shares Issued to Settle Accounts Payable and Liabilities 98,118 — 15,000 — 15,000 — 15,000 Equity Component of Debt - New and Amended — — — — — — — Redemption of MedMen Corp Redeemable Shares 84,605 — 18,627 6,835 25,462 (25,462) — Shares Issued for Vested Restricted Stock Units and Cashless Exercise of Options 2,283,972 — — — — — — Shares Issued for Exercise of Warrants — — — — — — — Shares Issued for Conversion of Debt — — — — — — — Stock Grants for Compensation 714,356 — 207,494 — 207,494 — 207,494 Deferred Tax Impact On Conversion Feature — — 1,345,580 — 1,345,580 — 1,345,580 Share-Based Compensation — — 500,612 — 500,612 — 500,612 BALANCE AS OF DECEMBER 25, 2021 1,200,119,292 $ — $ 1,025,404,359 $ (791,208,000) $ 234,196,359 $ (453,526,380) $ (219,330,021)
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements (Unaudited).Six Months Ended December 24,
2022December 25,
2021CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss from Continuing Operations $ (39,426,853) $ (54,380,916) Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities: Deferred Tax Expense — (9,365,019) Depreciation and Amortization 7,471,055 13,121,707 Non-Cash Operating Lease Costs 6,200,503 8,854,752 Accretion of Debt Discount and Loan Origination Fees 2,885,912 7,625,298 Loss on Disposals of Assets 1,358,820 — Gain on Lease Terminations (3,464,947) — Accretion of Deferred Gain on Sale of Property (236,095) (283,314) Impairment of Assets 6,716,906 435,241 Realized and Unrealized Changes in Fair Value of Contingent Consideration 863,856 — Change in Fair Value of Derivative Liabilities (3,106,786) (16,211,785) Gain on Extinguishment of Debt — (10,233,610) Share-Based Compensation 2,977,361 3,812,183 Interest Capitalized to Senior Secured Convertible Debt and Notes Payable 12,319,509 13,008,234 Interest Capitalized to Finance Lease Liabilities 969,427 777,564 Changes in Operating Assets and Liabilities: Accounts Receivable and Prepaid Expenses 5,057,758 (1,830,219) Inventory (3,664,591) (3,139,817) Other Current Assets (412,535) 321,953 Other Assets 534,846 479,019 Accounts Payable and Accrued Liabilities 7,659,848 3,218,996 Interest Payments on Finance Leases (3,639,574) (3,510,293) Cash Payments - Operating Lease Liabilities (1,501,594) (5,777,739) Income Taxes Payable 12,072,079 17,776,242 Other Current Liabilities (976,314) (1,282,468) NET CASH PROVIDED BY (USED IN) CONTINUED OPERATING ACTIVITIES 10,658,591 — (36,583,991) Net Cash Used in Discontinued Operating Activities (18,992,355) (13,314,891) NET CASH USED IN OPERATING ACTIVITIES (8,333,764) (49,898,882) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of Property and Equipment (5,974,346) (3,974,462) Additions to Intangible Assets (30,999) (486,759) Proceeds from the Sale of Assets Held for Sale 51,500,000 — NET CASH PROVIDED BY (USED IN) CONTINUED INVESTING ACTIVITIES 45,494,655 — (4,461,221) Net Cash Used in Discontinued Investing Activities — (3,107,056) NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 45,494,655 (7,568,277) CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of Subordinate Voting Shares for Cash — 95,000,000 Payment of Stock Issuance Costs Relating to Private Placement — (5,352,505) Exercise of Warrants for Cash — 1,273,679 Payment of Debt Issuance Costs Relating to Senior Secured Convertible Credit Facility — (2,608,964) Proceeds from Issuance of Notes Payable — 5,000,000 Principal Repayments of Notes Payable (32,388,433) (152,887) Principal Repayments of Finance Lease Liability (666) (959) Distributions - Non-Controlling Interest 37,561 — NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (32,351,538) 93,158,364 NET INCREASE IN CASH AND CASH EQUIVALENTS 4,809,353 35,691,206 Cash Included in Assets Held for Sale — (275,178) Cash and Cash Equivalents, Beginning of Period 10,795,999 11,575,868 CASH AND CASH EQUIVALENTS, END OF PERIOD $ 15,605,352 $ 46,991,896 1MEDMEN ENTERPRISES INC.Condensed Consolidated StatementsTable of Operations (Unaudited)Three Months Ended September 24, 2022 and September 25, 2021Contents(Amounts Expressed in United States Dollars, Except for Share Data) Three Months Ended September 24, September 25, 2022 2021 Revenue $ 30,044,048 $ 36,735,904 Cost of Goods Sold 15,187,672 19,349,990 Gross Profit 14,856,376 17,385,914 Operating Expenses: General and Administrative 17,846,117 32,649,234 Sales and Marketing 443,790 593,224 Depreciation and Amortization 3,946,523 5,823,617 Realized and Unrealized Changes in Fair Value of Contingent Consideration (863,856 ) - Impairment Expense 1,663,911 435,241 Other Operating (Income) Expense (2,555,118 ) 2,199,028 Total Operating Expenses 20,481,367 41,700,344 Loss from Operations (5,624,991 ) (24,314,430 ) Non-Operating (Income) Expenses: Interest Expense 10,052,691 8,171,764 Interest Income (33 ) (23,008 ) Accretion of Debt Discount and Loan Origination Fees 1,581,967 6,347,471 Change in Fair Value of Derivatives 805,590 (2,105,415 ) Gain on Extinguishment of Debt - (10,233,610 ) Total Non-Operating Expenses 12,440,215 2,157,202 Loss from Continuing Operations Before Provision for Income Taxes (18,065,206 ) (26,471,632 ) Provision for Income Tax Expense (2,193,542 ) (19,691,908 ) Net Loss from Continuing Operations (20,258,748 ) (46,163,540 ) Net Income (Loss) from Discontinued Operations, Net of Taxes 24,306,649 (14,446,491 ) Net Income (Loss) 4,047,901 (60,610,031 ) Net Loss Attributable to Non-Controlling Interest (112,312 ) (5,280,003 ) Net Income (Loss) Attributable to Shareholders of MedMen Enterprises Inc. $ 4,160,213 $ (55,330,028 ) 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 ) Weighted-Average Shares Outstanding - Basic and Diluted 1,301,659,701 942,696,052 Six Months Ended December 24,
2022December 25,
2021SUPPLEMENTAL DISCLOSURE FOR CASH FLOW INFORMATION Cash Paid for Interest $ 5,078,605 $ 1,940,280 Non-Cash Investing and Financing Activities: Net Assets Transferred to Held for Sale — 4,476,993 Redemption of MedMen Corp Redeemable Shares 705,134 1,521,604 Derivative Liability Incurred on Convertible Facility and Equity Financing 805,590 30,500,000 Conversion of Convertible Debentures — 2,371,100 Shares Issued to Settle Debt and Lender Fees — 4,030,000 Shares Issued to Settle Accounts Payable and Liabilities — 715,000 Equity Component of Debt - New and Amended — 41,388,047 Deferred Tax Impact on Conversion Feature — 11,712,150 2MEDMEN ENTERPRISES INC.Condensed Consolidated StatementsTable of Changes in Shareholders’ Equity (Unaudited)Three Months Ended September 24, 2022 and September 25, 2021Contents(Amounts Expressed in United States Dollars, Except for Share Data) Units $ Amount
Shares Subordinate
Voting
Shares Additional
Paid-In
Capital Accumulated
Deficit TO
SHAREHOLDERS
OF MEDMEN
Controlling 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 ) Units $ Amount TOTAL EQUITY ATTRIBUTABLE
Shares Subordinate
Voting
Shares Additional
Paid-In
Capital Accumulated
Deficit TO
SHAREHOLDERS
OF MEDMEN
Controlling TOTAL
SHAREHOLDERS’
DEFICIENCY BALANCE AS OF JUNE 27, 2021 726,866,374 $ - $ 908,992,686 $ (717,232,706 ) $ 191,759,980 $ (445,393,599 ) $ (253,633,619 ) Net Loss - - - (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 - 73,393,745 - 73,393,745 - 73,393,745 Shares Issued to Settle Debt and Accrued Interest 20,833,333 - 4,030,000 - 4,030,000 - 4,030,000 Shares Issued to Settle Accounts Payable and Liabilities 4,182,730 - 700,000 - 700,000 - 700,000 Equity Component of Debt - New and Amended - - 41,388,048 - 41,388,048 - 41,388,048 Redemption of MedMen Corp Redeemable Shares 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 8,473,868 - - - - - - Shares Issued for Exercise of Warrants 8,807,605 - 1,273,679 - 1,273,679 - 1,273,679 Shares Issued for Conversion of Debt 16,014,665 - 2,371,100 - 2,371,100 - 2,371,100 Stock Grants for Compensation 1,455,415 - 1,421,400 - 1,421,400 - 1,421,400 Deferred Tax Impact On Conversion Feature - - (13,057,730 ) - (13,057,730 ) - (13,057,730 ) Share-Based Compensation - - 1,682,677 - 1,682,677 - 1,682,677 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 ) The accompanying notes are an integral part of these Condensed Consolidated Financial Statements (Unaudited).3MEDMEN ENTERPRISES INC.Condensed Consolidated Statements of Cash Flows (Unaudited)Three Months Ended September 24, 2022 and September 25, 2021(Amounts Expressed in United States Dollars) Three Months Ended September 24, September 25, 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss from Continuing Operations $ (20,258,748 ) $ (46,163,540 ) Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities: Deferred Tax Expense - (4,497,141 ) Depreciation and Amortization 3,971,473 6,256,917 Non-Cash Operating Lease Costs 3,453,863 4,442,077 Accretion of Debt Discount and Loan Origination Fees 1,581,970 6,347,471 Loss on Disposals of Assets 205,595 - Gain on Lease Terminations (1,587,670 ) - Accretion of Deferred Gain on Sale of Property (141,657 ) (141,657 ) Impairment of Assets 1,663,911 435,241 Realized and Unrealized Changes in Fair Value of Contingent Consideration 863,856 - Change in Fair Value of Derivative Liabilities 805,590 (2,105,415 ) Gain on Extinguishment of Debt - (10,233,610 ) Share-Based Compensation 863,685 3,104,077 Interest Capitalized to Senior Secured Convertible Debt and Notes Payable 6,416,426 7,837,693 Interest Capitalized to Finance Lease Liabilities 444,232 377,885 Changes in Operating Assets and Liabilities: Accounts Receivable and Prepaid Expenses 2,163,698 617,325 Inventory 892,922 (1,710,735 ) Other Current Assets 2,587,163 282,230 Other Assets 256,706 - Accounts Payable and Accrued Liabilities (1,746,175 ) 4,827,997 Interest Payments on Finance Leases (1,804,507 ) (1,784,541 ) Cash Payments - Operating Lease Liabilities (1,026,792 ) (3,478,891 ) Income Taxes Payable 11,145,390 21,707,961 Other Current Liabilities (447,046 ) (2,413,113 ) Other Non-Current Liabilities 47,192 - NET CASH PROVIDED BY (USED IN) CONTINUED OPERATING ACTIVITIES 10,351,077 (16,291,769 ) Net Cash Used in Discontinued Operating Activities (19,961,041 ) (6,684,431 ) NET CASH USED IN OPERATING ACTIVITIES (9,609,964 ) (22,976,200 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of Property and Equipment - (391,730 ) Additions to Intangible Assets (24,056 ) (461,456 ) Proceeds from the Sale of Assets Held for Sale 51,500,000 - Restricted Cash - 730 NET CASH PROVIDED BY (USED IN) CONTINUED INVESTING ACTIVITIES 51,475,944 (852,456 ) Net Cash Used in Discontinued Investing Activities - (2,764,417 ) NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 51,475,944 (3,616,873 ) CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of Subordinate Voting Shares for Cash - 95,000,000 Payment of Stock Issuance Costs Relating to Private Placement - (5,352,505 ) Exercise of Warrants for Cash - 1,273,679 Payment of Debt Issuance Costs Relating to Senior Secured Convertible Credit Facility - (2,608,964 ) Proceeds from Issuance of Notes Payable - 5,000,000 Principal Repayments of Notes Payable (31,599,999 ) (75,605 ) Principal Repayments of Finance Lease Liability (2,484 ) (959 ) Distributions - Non-Controlling Interest 37,561 - NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (31,564,922 ) 93,235,646 NET INCREASE IN CASH AND CASH EQUIVALENTS 10,301,058 66,642,573 Cash Included in Assets Held for Sale - (275,178 ) Cash and Cash Equivalents, Beginning of Period 10,795,999 11,575,138 CASH AND CASH EQUIVALENTS, END OF PERIOD $ 21,097,057 $ 77,942,533 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements (Unaudited).MEDMEN ENTERPRISES INC.Condensed Consolidated Statements of Cash Flows (Unaudited)Three Months Ended September 24, 2022 and September 25, 2021(Amounts Expressed in United States Dollars) Three Months Ended September 24, September 25, 2022 2021 SUPPLEMENTAL DISCLOSURE FOR CASH FLOW INFORMATION Cash Paid for Interest $ 1,260,562 $ 2,336,120 Non-Cash Investing and Financing Activities: Net Assets Transferred to Held for Sale $ - $ 4,476,993 Redemption of MedMen Corp Redeemable Shares $ - $ 1,496,142 Derivative Liability Incurred on Convertible Facility and Equity Financing $ - $ 30,500,000 Conversion of Convertible Debentures $ - $ 2,371,100 Shares Issued to Settle Debt and Lender Fees $ - $ 4,030,000 Shares Issued to Settle Accounts Payable and Liabilities $ - $ 700,000 Equity Component of Debt - New and Amended $ - $ 41,388,047 Deferred Tax Impact on Conversion Feature $ - $ 13,057,730 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements (Unaudited).5MEDMEN ENTERPRISES INC.Notes to Condensed Consolidated Financial Statements (Unaudited)Three Months Ended September 24, 2022 and September 25, 2021(Amounts Expressed in United States Dollars, Except for Share and Per Share Data)1. NATURE OF OPERATIONS SeptemberDecember 24, 2022, the Company ownsoperates 23 store locations across California (13), Nevada (3), Illinois (1), Arizona (1), Massachusetts (1), and New York (4). The Company continues to market its assets in New York and thus classifies all assets and liabilities and profit or loss allocable to its operations in the state of New York as discontinued operations. In August 2022, the Company completed the sale of its operations in the state of Florida of which all assets and liabilities and profit or loss allocable to Florida arewere classified as discontinued operations until the day of sale, oron August 22, 2022. As of September 24,Subsequent to August 22, 2022, the remaining post-acquisition assets and liabilities, which is primarily comprised of a current receivable for the portion of the sales proceeds due to us in March 2023, and profit or loss allocable to Florida have been reclassified as continuing operations.62. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES SeptemberDecember 24, 2022, the Company had cash and cash equivalents of $21.1 million$15,605,362 and working capital deficit of $134.9 million.$137,433,003. The Company has incurred net losses from continuing operations of $20.3 million$15,086,276 and $46.2 million$39,426,853 for the three and six months ended SeptemberDecember 24, 2022, and September 25, 2021, 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.divesturedivestiture 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 and vendor strategy of market expansion and retail revenue and gross margin 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 strategic actions, for any reason, are inaccessible, it will have a significantly negative effect on the Company’s financial condition. Additionally, 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 on the broader retail environment could also have a significant impact on the Company’s financial position, results of operations, equity and or its access to capital and future financing.7COVID-19DuringThe Company is continuously addressing the current reporting period, aspects of the Company’s business continue to be affected by impactseffects of the COVID-19 pandemic, as the Company’s retail stores strive to operate within the local rules and regulationsa discussion of which is available in Item 1A “Risk Factors” 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 continues2022 Form 10-K. The company’s operating results continue 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.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, macro-economic factors such as 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. The Company will continue to implement and evaluate actions to strengthen our financial position and support the continuity of our business and operations.SeptemberDecember 24, 2022.SeptemberDecember 24, 2022. the Notes to the Condensed Consolidated Financial Statements as of June 25, 2022 have non-material corrections and reclassified in order to conform to the current reporting period presentation. These non-material correctionsreclassifications impactedEquipment, the Company reclassified $940,000 to increase leasehold improvements and decrease furniture and fixtures infixtures. In the amount of approximately $940,000 betweenNote related to Intangibles, the categories. CustomerCompany reclassified $1,440,000 and $964,000 to decrease customer relationships and accumulated amortization of customer relationships in the amount of $1,440,000 between the categories were reclassed between the two categories. Fully amortized management agreements, and itsalong with the related accumulated amortization inamortization.amount of $964,000 were also reclassed. Non-controllingCondensed Consolidated Balance Sheet, the Company reclassified $3,662,000 between non-controlling interest and accumulated deficit in the amount of approximately $3,662,000 have been reclassed between the two categories.deficit. In addition, the Company reclassified $6,825,000 to decrease its short-term operating lease liabilities and increase its long-term operating lease liabilities between the two categories in the amount of approximately $6,825,000. liabilities.893. INVENTORY consistsas of the following: Schedule of inventories September 24, June 25, 2022 2022 Raw Materials $ 612,901 $ 521,777 Work-in-Process 1,142,397 671,541 Finished Goods 7,362,511 8,817,413 Total Inventory $ 9,117,809 $ 10,010,731 During the three months ended SeptemberDecember 24, 2022 and SeptemberJune 25, 2022:December 24,
2022June 25,
2022Raw Materials $ 736,389 $ 521,777 Work-in-Process 956,705 671,541 Finished Goods 11,982,228 8,817,413 Total Inventory $ 13,675,322 $ 10,010,731 $864,314,$900,000 respectively, to write down inventory to its net realizable value.104. ASSETS HELD FOR SALE 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 (1)Discontinued Operations & Other AssetsBalance as of June 25, 2022 $ See “Note 22 – Discontinued Operations” for further information.123,158,751Ongoing Activities (12,547,238) (67,000,000) Balance as of December 24, 2022 43,611,513 5. PROPERTY AND EQUIPMENT. 115.PROPERTY AND EQUIPMENTSeptemberDecember 24, 2022 and June 25, 2022, property and equipment consists of the following:Schedule of property and equipment September 24, June 25, 2022 2022 Land and Buildings $ 29,933,999 $ 29,933,999 Capital Leases 5,318,516 5,315,625 Furniture and Fixtures 8,325,228 8,776,994 Leasehold Improvements 33,625,893 33,069,524 Equipment and Software 16,316,334 16,897,649 Construction in Progress 4,528,762 6,828,923 Total Property and Equipment 98,048,732 100,822,714 Less Accumulated Depreciation (38,082,797 ) (36,714,922 ) Property and Equipment, Net $ 59,965,935 $ 64,107,792 December 24,
2022June 25,
2022Land and Buildings $ 29,933,999 $ 29,933,999 Capital Leases 5,318,516 5,315,625 Furniture and Fixtures 8,651,132 8,776,994 Leasehold Improvements 33,625,888 33,069,524 Equipment and Software 15,972,636 16,897,649 Construction in Progress 4,169,772 6,828,923 Total Property and Equipment 97,671,943 100,822,714 Less Accumulated Depreciation (40,026,614) (36,714,922) Property and Equipment, Net $ 57,645,329 $ 64,107,792 of $2,258,354 and $3,031,080 was recorded for the three months ended SeptemberDecember 24, 2022 and SeptemberDecember 25, 2021 respectively, of which $24,950 was $3,499,585 and $$6,864,790, respectively. Depreciation expense related to continuing operations for six months ended December 24, 2022 and December 25, 2021 was $7,471,055 and $13,121,707, respectively.433,300, respectively, is included in cost of goods sold. The amount of depreciation recognized for the capital leases during the three months ended SeptemberDecember 24, 2022 and SeptemberDecember 25, 2021 was $347,406 $267,312. The amount of depreciation recognized for capital leases during the six months ended December 24, 2022 and December 25, 2021 was $534,624. see and $283,406, respectively, see “Note 9 – Leases” for further information.SeptemberDecember 24, 2022. During the three and six months ended SeptemberDecember 25, 2021, borrowing costs totaling $375,241 $375,241 were capitalized using an average capitalization rate of 11.95%.SeptemberDecember 24, 2022 and June 25, 2022, intangible assets consist of the following: Schedule of Intangible assets September 24, June 25, 2022 2022 Dispensary Licenses $ 49,253,452 $ 49,253,452 Customer Relationships 16,409,600 16,409,600 Capitalized Software 7,413,470 7,413,470 Intellectual Property 4,016,597 4,016,597 Total Intangible Assets 77,093,119 77,093,119 Dispensary Licenses (17,477,268 ) (16,876,912 ) Customer Relationships (16,589,651 ) (15,870,284 ) Capitalized Software (4,681,748 ) (4,413,974 ) Intellectual Property (4,287,401 ) (4,185,835 ) Less Accumulated Amortization (43,036,068 ) (41,347,005 ) Intangible Assets, Net $ 34,057,051 $ 35,746,114 December 24,
2022June 25,
2022Dispensary Licenses $ 40,814,762 $ 49,253,452 Customer Relationships 16,409,600 16,409,600 Capitalized Software 7,413,470 7,413,470 Intellectual Property 12,455,287 4,016,597 Total Intangible Assets $ 77,093,119 $ 77,093,119 Dispensary Licenses $ (18,084,368) $ (16,876,912) Customer Relationships (15,378,567) (15,870,284) Capitalized Software (4,824,287) (4,413,974) Intellectual Property (6,152,763) (4,185,835) Less Accumulated Amortization (44,439,985) (41,347,005) Intangible Assets, Net $ 32,653,134 $ 35,746,114 of $1,713,119 and $3,225,837 for the three months ended SeptemberDecember 24, 2022 and SeptemberDecember 25, 2021 of $1,410,858 and $3,206,091, respectively and amortization expense related to continuing operations for the six months ended December 24, 2022 and December 25, 2021 of $3,123,979 and $6,431,928, respectively.137. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES SeptemberDecember 24, 2022 and June 25, 2022, accounts payable and accrued liabilities consist of the following:Schedule of accounts payable and accrued liabilities September 24, June 25, 2022 2022 Accounts Payable $ 19,078,177 $ 14,627,746 Accrued Liabilities 7,784,119 10,031,194 Accrued Inventory 3,129,868 5,868,831 Accrued Payroll 2,081,284 1,682,517 Local & State Taxes Payable 3,281,687 6,695,532 Total Accounts Payable and Accrued Liabilities $ 35,355,136 $ 38,905,818 14December 24,
2022June 25,
2022Accounts Payable $ 19,663,409 $ 14,627,746 Accrued Liabilities 9,862,983 9,464,567 Accrued Inventory 6,397,508 5,868,831 Accrued Payroll 1,405,253 1,682,517 Local & State Taxes Payable 5,030,310 6,695,532 Deferred Gain on Sale of Assets 566,627 566,627 Total Accounts Payable and Accrued Liabilities $ 42,926,090 $ 38,905,820 8. DERIVATIVE LIABILITIES SeptemberDecember 24, 2022 is as follows: Schedule of reconciliation of the beginning and ending balance of derivative liabilities and change in fair value of derivative liabilities September 24, 2022 Balance at Beginning of Period $ 6,749,563 Change in Fair Value of Derivative Liabilities 805,590 Balance at End of Period $ 7,555,153 TOTAL Balance as of June 25, 2022 $ 6,749,563 Change in Fair Value of Derivative Liabilities (3,106,786) Balance as of December 24, 2022 $ 3,642,777 Black ScholesBlack-Scholes simulation model based on Level 3 inputs on the fair value hierarchy. The following assumptions were used at SeptemberDecember 24, 2022:Schedule of assumptions to measure fair value Top-Up
Provision Average Stock Price $ Weighted-Average Probability % Term (in Years) Expected Stock Price Volatility % Top-Up
ProvisionAverage Stock Price $ 0.02 Weighted-Average Probability 50.00 % Term (in Years) 5 Expected Stock Price Volatility 121.15 % Number of
WarrantsExercise
Price (C$)Expiration
Date50,000,000 $0.50 March 27, 2024 50,000,000 Schedule of warrant issuedNumber of
WarrantsExercise
PriceExpiration
DateMarch 2021 Private Placement (1)50,000,000C$0.50March 27, 202450,000,000(1)See “Note 12 – Shareholders’ Equity” for further information.Schedule of assumptions to measure fair value Expected Stock Price Volatility % Risk-Free Annual Interest Rate % Expected Life (in Years) Share Price $ Exercise Price $ 159.Expected Stock Price VolatilityLEASES161.95%Risk-Free Annual Interest Rate 2.35% Expected Life (in Years) 0.25 Share Price $0.02 Exercise Price $0.37 9. LEASES SeptemberDecember 24, 2022 and SeptemberJune 25, 2021:2022:Three Months Ended Six Months Ended December 24,
2022December 25,
2021December 24,
2022December 25,
2021Finance Lease Cost: Amortization of Finance Lease Right-of-Use Assets $ 267,312 $ 251,221 $ 534,624 $ 534,627 Interest on Lease Liabilities 1,835,068 1,725,752 3,639,574 3,510,293 Operating Lease Cost 2,746,638 4,412,675 6,200,503 8,854,752 Total Lease Expenses $ 4,849,018 $ 6,389,648 $ 10,374,701 $ 12,899,672 $ (1,521,651) $ (1,444,234) $ (3,043,302) $ (1,444,234) Cash Paid for Amounts Included in the Measurement of Lease Liabilities: Financing Cash Flows from Finance Leases $ (1,818) $ — $ 666 $ 959 Operating Cash Flows from Operating Leases $ 474,802 $ 2,298,848 $ 1,501,594 $ 5,777,739 Schedule of lease cost Three Months Ended September 24, September 25, 2022 2021 Finance Lease Cost: Amortization of Finance Lease Right-of-Use Assets $ 347,406 $ 283,406 Interest on Lease Liabilities 1,804,507 1,784,541 Operating Lease Cost 3,453,863 6,595,652 Sublease Income (1) (1,521,693 ) - Total Lease Expenses $ 5,605,776 $ 8,663,599 Cash Paid for Amounts Included in the Measurement of Lease Liabilities: Financing Cash Flows from Finance Leases $ 2,484 $ 959 Operating Cash Flows from Operating Leases $ 1,026,792 $ 3,478,891 (1)See “Note 16 – Other Operating Income” for further information. SeptemberDecember 24, 2022 and June 25, 2022, is as follows: September 24, June 25, 2022 2022 Weighted-Average Remaining Lease Term (Years) - Finance Leases 47 46 Weighted-Average Remaining Lease Term (Years) - Operating Leases 7 8 Weighted-Average Discount Rate - Finance Leases 24.78 % 24.33 % Weighted-Average Discount Rate - Operating Leases 15.96 % 18.70 % 16December 24,
2022June 25,
2022Weighted-Average Remaining Lease Term (Years) - Finance Leases 46 46 Weighted-Average Remaining Lease Term (Years) - Operating Leases 7 8 Weighted-Average Discount Rate - Finance Leases 24.81 % 24.33 % Weighted-Average Discount Rate - Operating Leases 16.66 % 18.70 % SeptemberDecember 24, 2022 are as follows: 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 Fiscal Year Ending Operating
LeasesFinance
LeasesJuly 1, 2023 (remaining) $ 4,692,026 $ 2,934,524 June 29, 2024 12,931,089 10,961,495 June 28, 2025 9,311,213 7,087,736 June 27, 2026 9,495,658 7,300,368 June 26, 2027 9,466,730 7,519,379 Thereafter 26,267,466 1,061,283,374 Total Lease Payments 72,164,182 1,097,086,876 Less Interest (19,541,732) (1,065,503,555) Lease Liability Recognized $ 52,622,450 $ 31,583,321 SeptemberDecember 24, 2022, the Management Agreement remains in effect as neither termination condition has occurred. During the three and six months ended SeptemberDecember 24, 2022, the Company recorded sublease income under the Management Agreement. See “Note 16 – Other Operating Income” for further information.1710. NOTES PAYABLE threesix months ended SeptemberDecember 24, 2022.SeptemberDecember 24, 2022 and June 25, 2022, notes payable consist of the following: Schedule of notes payable September 24, June 25, 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. $ 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 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. 2,057,207 2,057,207 Other 15,691 15,691 Total Notes Payable 141,192,889 171,534,899 Less Unamortized Debt Issuance Costs and Loan Origination Fees - (158,079 ) Net Amount $ 141,192,889 $ 171,376,820 Less Current Portion of Notes Payable (66,294,249 ) (97,003,922 ) Notes Payable, Net of Current Portion $ 74,898,640 $ 74,372,898 18December 24,
2022June 25,
2022Financing liability incurred on various dates between January 2019 through September 2019 with implied interest rates ranging from 0.7% to 17.0% per annum. $ 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 August 1, 2022 and July 31, 2022, and bear interest at a rate of 15.5% and 18.0% per annum. 66,169,035 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% per annum and require minimum monthly payments of $15,660 and $18,471. 2,057,207 2,057,207 Other 15,691 15,691 Total Notes Payable 140,541,933 171,534,899 Less Unamortized Debt Issuance Costs and Loan Origination Fees (137,478) (158,079) Net Amount 140,404,455 171,376,820 Less Current Portion of Notes Payable (66,294,249) (97,003,922) Notes Payable, Net of Current Portion $ 74,110,206 $ 74,372,898 threesix months ended SeptemberDecember 24, 2022 is as follows:December 24,
2022Balance at Beginning of Period $ 171,376,820 Paid-In-Kind Interest Capitalized 1,257,988 Cash Payments (32,388,433) Accretion of Debt Discount (239,953) Accretion of Debt Discount Included in Discontinued Operations 398,032 Balance at End of Period $ 140,404,454 Less Current Portion of Notes Payable $ (66,294,249) Notes Payable, Net of Current Portion $ 74,110,205 Schedule of Reconciliation of Notes payable September 24, 2022 Balance at Beginning of Period $ 171,376,820 Paid-In-Kind Interest Capitalized 1,257,988 Cash Payments (31,599,999 ) Accretion of Debt Discount Included in Discontinued Operations 158,079 Balance at End of Period 141,192,889 Less Current Portion of Notes Payable (66,294,249 ) Notes Payable, Net of Current Portion $ 74,898,640 $37,500,000 $37,500,000 in the event the sale of certain assets and imposed covenants in regardsregard to strategic actions the Company would have to implement if unable to pay the Term Loans by the extended stated maturity date.threesix months ended SeptemberDecember 24, 2022, in connection with the sale of the Company’s Florida-based operations, the Company made a principal repayment of $31,599,999$31,600,000 with proceeds from the sale. An additional $8,500,000$ 8,500,000 principal repayment will be made in 2023 upon receipt of the final installment payment from the sale of the Company’s Florida-based operations. The Facility and Term Loans remain in default as of SeptemberDecember 24, 2022 as the principal balance matured on July 31, 2022 and August 1, 2022, respectively. Beginning in December 2022, the interest assessed on the Facility and Term Loans include a default interest rate of 5%. As of SeptemberDecember 24, 2022, the Company is in ongoing discussions with the Lenders.1911. SENIOR SECURED CONVERTIBLE CREDIT FACILITY SeptemberDecember 24, 2022.SeptemberDecember 24, 2022 and June 25, 2022, senior secured convertible credit facility consists of the following: Schedule of senior secured convertible credit facility September 24, June 25, Tranche 2022 2022 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 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 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 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 14,911,453 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. - 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 3,346,889 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 6,472,344 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. - 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. - 2,237,875 2,190,380 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 243,063,216 237,904,778 Less Unamortized Debt Discount (104,317,146 ) (105,899,115 ) Senior Secured Convertible Credit Facility, Net $ 138,746,070 $ 132,005,663 20Tranche December 24,
2022June 25, 2022 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 $ 23,944,485 $ 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 103,124,572 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 33,534,018 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 12,985,058 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 15,273,641 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. — 24,512,781 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 3,428,182 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 6,629,552 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. — 10,348,746 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. — 2,292,231 2,190,380 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. — 12,893,031 12,320,154 Total Drawn on Senior Secured Convertible Credit Facility 248,966,298 237,904,778 Less Unamortized Debt Discount (102,773,249) (105,899,115) Senior Secured Convertible Credit Facility, Net $ 146,193,049 $ 132,005,663 threesix months ended SeptemberDecember 24, 2022 is as follows: Schedule of reconciliation senior secured convertible credit facility 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 25, 2022 $ 80,178,586 $ 21,218,356 $ 8,217,079 $ 1,051,827 $ 224,585 $ 433,598 $ 842,981 $ 15,512,409 $ 2,211,711 $ 2,114,531 $ 132,005,663 Paid-In-Kind Interest Capitalized 2,632,858 694,821 269,049 316,468 71,032 137,364 267,141 507,786 214,424 47,495 5,158,438 Accretion of Debt Discount 988,849 260,580 100,902 - - - - 190,486 37,165 3,987 1,581,969 Balance as of September 24, 2022 $ 83,800,293 $ 22,173,757 $ 8,587,030 $ 1,368,295 $ 295,617 $ 570,962 $ 1,110,122 $ 16,210,681 $ 2,463,300 $ 2,166,013 $ 138,746,070 21Tranche 1 Tranche 2 Tranche 3 Tranche 4 Incremental Advance
- 1Incremental Advance
- 23rd Advance Amendment
Fee NotesRestatement Fee Notes 2nd Restatement Fee
NotesTOTAL Balance as of June 25, 2022 $ 80,178,586 $ — $ 21,218,356 $ — $ 8,217,079 $ — $ 1,051,827 $ — $ 224,585 $ — $ 433,598 $ — $ 842,981 $ — $ 15,512,409 $ 2,211,711 $ 2,114,531 $ — $ 132,005,663 $ — Paid-In-Kind Interest Capitalized 5,646,079 1,490,022 576,967 678,656 152,325 294,572 572,878 1,088,344 459,827 101,851 11,061,521 Accretion of Debt Discount 1,954,788 514,561 199,249 — — — — 376,148 73,578 7,541 3,125,865 Balance as of December 24, 2022 $ 87,779,453 $ 23,222,939 $ 8,993,295 $ 1,730,483 $ 376,910 $ 728,170 $ 1,415,859 $ 16,976,901 $ 2,745,116 $ — $ 2,223,923 $ 146,193,049 12. SHAREHOLDERS’ EQUITY Schedule of Shares issued and outstanding Subordinate
Voting Shares MM CAN USA
Class B
Redeemable Units MM Enterprises USA
Common Units Balance as of June 25, 2022 1,301,423,950 65,066,106 725,016 Redemption of MedMen Corp Redeemable Shares 259,814 (259,814 ) - Balance as of September 24, 2022 1,301,683,764 64,806,292 725,016 Subordinate
Voting SharesMM CAN USA
Class B
Redeemable UnitsMM Enterprises USA
Common UnitsBalance as of June 25, 2022 1,301,423,950 65,066,106 725,016 Redemption of MedMen Corp Redeemable Shares 259,814 (259,814) — Balance as of September 24, 2022 1,301,683,764 64,806,292 725,016 Redemption of MedMen Corp Redeemable Shares 445,320 (445,320) — Balance as of December 24, 2022 1,302,129,084 64,360,972 725,016 SeptemberDecember 24, 2022 and June 25, 2022, the holders of the MM CAN USA Redeemable Shares represent approximately 4.74%4.71% and 4.76%4.76%, respectively, of the Company and holders of the MM Enterprises USA Common Units represent approximately 0.05%0.05% of the Company.threesix months ended SeptemberDecember 24, 2022, the balances and activities attributable to the VIEs consist of the following: 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 ) 22Venice Caregivers
Foundation, Inc.LAX Fund II Group, LLC Natures Cure, Inc. TOTAL Current Assets $ 1,471,651 $ — $ 27,171,414 $ 28,643,065 Non-Current Assets 8,482,483 3,011,882 4,874,353 16,368,718 Total Assets $ 9,954,134 $ 3,011,882 $ 32,045,767 $ 45,011,783 Current Liabilities $ 10,984,598 $ 16,687,993 $ 10,031,350 $ 37,703,941 Non-Current Liabilities 6,957,566 1,922,553 1,342,632 10,222,751 Total Liabilities $ 17,942,164 $ 18,610,546 $ 11,373,982 $ 47,926,692 Non-Controlling Interest $ (7,988,030) $ (15,598,664) $ 20,671,785 $ (2,914,909) Revenues $ 3,766,847 $ — $ 6,562,185 $ 10,329,032 Net (Loss) Income Attributable to Non-Controlling Interest $ (944,589) $ (1,622,510) $ 1,917,227 $ (649,872) Venice Caregivers Foundation, Inc. LAX Fund II Group, LLC Natures Cure, Inc. TOTAL Current Assets $ 1,735,304 $ 1,067,636 $ 23,557,168 $ 26,360,108 Non-Current Assets 10,073,880 3,379,412 4,973,459 18,426,751 Total Assets $ 11,809,184 $ 4,447,048 $ 28,530,627 $ 44,786,859 Current Liabilities $ 9,238,460 $ 16,238,249 $ 8,433,436 $ 33,910,145 Non-Current Liabilities 9,614,164 2,184,953 1,342,633 13,141,750 Total Liabilities $ 18,852,624 $ 18,423,202 $ 9,776,069 $ 47,051,895 Non-Controlling Interest $ (7,043,440 ) $ (13,976,154 ) $ 18,754,558 $ (2,265,036 ) Revenues $ 8,732,449 $ 1,857 $ 16,157,388 $ 24,891,694 Net (Loss) Income Attributable to Non-Controlling Interest $ (1,384,751 ) $ (4,868,632 ) $ 7,190,809 $ 937,426 Venice Caregivers
Foundation, Inc.LAX Fund II Group, LLC Natures Cure, Inc. TOTAL Current Assets $ 1,735,304 $ 1,067,636 $ 23,557,168 $ 26,360,108 Non-Current Assets 10,073,880 3,379,412 4,973,459 18,426,751 Total Assets $ 11,809,184 $ — $ 4,447,048 $ — $ 28,530,627 $ 44,786,859 Current Liabilities $ 9,238,460 $ 16,238,249 $ 8,433,436 $ 33,910,145 Non-Current Liabilities 9,614,164 2,184,953 1,342,633 13,141,750 Total Liabilities $ 18,852,624 $ — $ 18,423,202 $ — $ 9,776,069 $ 47,051,895 Non-Controlling Interest $ (7,043,440) $ — $ (13,976,154) $ — $ 18,754,558 $ — $ (2,265,036) Revenues $ 4,815,688 $ — $ 8,816,113 $ 13,631,801 Net (Loss) Income Attributable to Non-Controlling Interest $ (607,858) $ (2,206,450) $ 3,911,125 $ 1,096,817 threesix months ended SeptemberDecember 24, 2022: 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 25, 2022 $ (7,043,440 ) $ (13,976,154 ) $ 18,754,558 $ (471,717,698 ) $ (473,982,734 ) Net (Loss) Income (494,845 ) (810,965 ) 885,605 307,893 (112,312 ) Balance as of September 24, 2022 $ (7,538,285 ) $ (14,787,119 ) $ 19,640,163 $ (471,409,805 ) $ (474,095,046 ) Le Cirque Rouge, LP (the “OP”) is a Delaware limited partnership that holds substantially all of the real estate assets owned by the 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 Topic 810”), the OP was determined to be a variable interest entity in which the Company has an implicit variable interest based on the leasing relationship and arrangement with the REIT. However, the Company is not the primary beneficiary under ASC Topic 810. Accordingly, Le Cirque Rouge, LP is not consolidated as a variable interest entity within the Consolidated Financial Statements. As of and during the three months ended September 24, 2022, the Company continues to have a variable interest in the 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”.23Venice Caregivers
Foundation, Inc.LAX Fund II Group, LLC Natures Cure, Inc. Other Non- Controlling
InterestsTOTAL Balance as of June 25, 2022 $ (7,043,440) $ (13,976,154) $ 18,754,558 $ (471,717,698) $ (473,982,734) Net (Loss) Income $ (944,589) $ (1,622,510) $ 1,917,227 $ (597,289) $ (1,247,161) Balance as of December 24, 2022 $ (7,988,029) $ (15,598,664) $ 20,671,785 $ (472,314,987) $ (475,229,895) 13. SHARE-BASED COMPENSATION SeptemberDecember 24, 2022 and SeptemberDecember 25, 2021 is as follows:Three Months Ended Six Months Ended December 24,
2022December 25,
2021December 24,
2022December 25,
2021Stock Options $ 1,912,792 $ 97,746 $ 2,625,581 $ 1,314,193 Stock Grants for Compensation — 207,494 — 540,827 Restricted Stock Grants 200,884 402,866 351,780 1,957,163 Total Share-Based Compensation $ 2,113,676 $ 708,106 $ 2,977,361 $ 3,812,183 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 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 24Number of
Stock OptionsWeighted-Average
Exercise PriceOutstanding at June 25, 2022 8,649,673 $ 1.35 Granted 92,382,965 0.05 Forfeited (312,032) 3.60 Outstanding at December 24, 2022 100,720,606 $ 0.15 Stock Options Exercisable as of December 24, 2022 8,037,095 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 LTIP Units LLC
Redeemable
UnitsWeighted
Average
Grant Date
Fair ValueIssued and
OutstandingBalance as of June 25, 2022 and December 24, 2022 19,323,878 725,016 $ 0.52 Issued and
OutstandingVested Weighted-Average
Fair ValueBalance as of June 25, 2022 10,998,483 4,030,460 $ 0.20 Granted — — — Vested — 490,661 0.21 (1,813,408) — (0.22) Non-vested at December 24, 2022 9,185,075 4,521,121 $ 0.30 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 three months ended September 24, 2022. 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 25Number of Warrants Outstanding Subordinate
Voting SharesMM CAN USA
Redeemable SharesTOTAL Weighted-Average
Exercise PriceBalance as of June 25, 2022 352,704,355 97,430,456 450,134,811 $ 0.25 Expired (6,023,696) — (6,023,696) $ 2.03 Balance as of December 24, 2022 346,680,659 97,430,456 444,111,115 $ 0.22 14. LOSS PER SHARE SeptemberDecember 24, 2022 and SeptemberDecember 25, 2021:2021 is as follows:Three Months Ended Six Months Ended December 24,
2022December 25,
2021December 24,
2022December 25,
2021Net Loss from Continuing Operations Attributable to Shareholders of MedMen Enterprises, Inc. $ (15,086) $ (8,217) $ (39,427) $ (54,381) Net Income (Loss) from Discontinued Operations (2,256) (12,141) 26,132 (26,587) Total Loss $ (17,342) $ (20,358) $ (13,294) $ (80,968) Denominator: Weighted-Average Shares Outstanding - Basic 1,301,874,615 1,198,515,279 1,301,767,158 1,070,605,666 Dilutive effect of LTIP and LLC Redeemable Units issued for compensation 19,323,878 19,323,878 19,323,878 19,323,878 Dilutive effect of restricted stock granted under the Equity Plan 9,185,075 25,673,720 9,185,075 25,673,720 Dilutive effect of warrants and top-up warrants 194,720,261 138,498,284 258,878,685 175,668,177 Dilutive effect of convertible debentures 3,255,897,270 1,007,089,116 3,255,897,270 1,007,089,116 4,781,001,100 2,389,100,278 4,845,052,067 2,298,360,557 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 ) DilutedFor all periods presented wherein the Company incurred net losses from continuing operations and/or discontinued operations, the calculation of diluted net loss per share gives no consideration to the potentially anti-dilutive securities shown in the above reconciliation, and as such is the same as basic net loss per share as the issuanceshare.15. GENERAL AND ADMINISTRATIVE EXPENSES SeptemberDecember 24, 2022 and SeptemberDecember 25, 2021, 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 27Three Months Ended Six Months Ended December 24,
2022December 25,
2021December 24,
2022December 25,
2021Salaries and Benefits $ 6,536,411 $ 9,991,545 $ 13,468,859 $ 19,903,033 Professional Fees 2,137,010 7,815,185 3,509,420 15,245,844 Rent 3,021,217 4,712,476 6,649,162 9,467,359 Licenses, Fees and Taxes 1,823,436 1,293,194 3,866,945 3,830,982 Share-Based Compensation 2,113,676 722,802 2,977,361 2,370,111 Deal Costs — 1,174,357 429,272 2,811,944 Other General and Administrative 2,709,471 5,583,195 5,551,538 10,312,715 Total General and Administrative Expenses $ 18,341,221 $ 31,292,754 $ 36,452,557 $ 63,941,988 16. OTHER OPERATING (INCOME) EXPENSE SeptemberDecember 24, 2022 and SeptemberDecember 25, 2021, other operating (income) expense consisted of the following: 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 Three Months Ended Six Months Ended December 24,
2022December 25,
2021December 24,
2022December 25,
2021Other Operating (Income) Expense: Loss (Gain) on Disposals of Assets $ 1,153,225 $ (141,662) $ 1,358,820 $ (126,516) Restructuring and Reorganization Expense — 385,652 423,793 2,764,327 Gain on Settlement of Accounts Payable 215,659 — 141,022 (177,990) (Gain) Loss on Lease Terminations (1,877,298) 173,765 (3,464,947) 173,765 (Gain) Loss on Disposal of Assets Held for Sale (112,225) — 532,598 — Legal Settlements (3,491,431) — (3,491,431) — Other Income (1,522,280) 213,216 (3,043,918) 196,413 Total Other Operating (Income) Expense $ (5,634,350) $ 630,971 $ (7,544,063) $ 2,829,999 SeptemberDecember 24, 2022, the Company recorded $1,521,650 $1,521,651 and $3,043,302, respectively 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.2817. PROVISION FOR INCOME TAXES AND DEFERRED INCOME TAXES SeptemberDecember 24, 2022 and SeptemberDecember 25, 2021:2021Schedule of income tax expense and effective tax rates Three Months Ended September 24, September 25, 2022 2021 Loss from Continuing Operations Before Provision for Income Taxes $ (18,065,206 ) $ (26,471,632 ) Income Tax Expense (2,193,542 ) (19,691,908 ) Effective Tax Rate -12 % -74 % Three Months Ended Six Months Ended December 24,
2022December 25,
2021December 24,
2022December 25,
2021Loss from Continuing Operations Before Provision for Income Taxes $ (14,025,468) $ (16,355,274) $ (32,673,967) $ (42,826,906) Provision for Income Tax Expense (1,060,808) 8,137,898 (6,752,886) (11,554,010) Effective Tax Rate 8 % -50 % 21 % 27 % SeptemberDecember 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 and six months ended September 25, 2022.December 24, 2022SeptemberDecember 24, 2022 is different from the three months ended September 25, 2021, respectively, primarily due to the Company’s income and related 280E expenditures. The Company’s non-deductible expenses related to IRC Section 280E limitations have remained relatively consistent.SeptemberDecember 24, 2022, the Company had $18,781,424 $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 SeptemberDecember 24, 2022, the Company recognized a net discrete tax expense of $407,993$407,993 primarily related on interest of past liabilities. During the next twelve months, the Company does not estimate any material reduction in its unrecognized tax benefits.2918. COMMITMENTS AND CONTINGENCIES SeptemberDecember 24, 2022 and June 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.As of September 24, 2022, there were noThe Company recognizes legal settlement expense when litigation losses related to 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 madeThe Company recognizes legal settlement gains when a favorable settlement is awarded to the Company and payment is received. Gain and losses related to claims and litigation are recorded as a component of Other Operating (Income) Expense in the Condensed Consolidated Financial Statements relating to claims and litigations.Statements. As of SeptemberDecember 24, 2022, there are also no proceedings in which any of the Company’s current directors, officers or affiliates is an adverse party to the Company or has a material interest adverse to the Company’s interest.plaintiffs.plaintiffs, and the plaintiffs have filed an appeal of the summary judgment decision. 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.has filed counterclaims including for breach of contract, breach of promissory note, unjust enrichment and declaratory relief. TheAfter the end of the quarter ending December 24, 2022, the parties reached a tentative agreement to resolve the litigation; however, the probable loss to the Company believes the likelihood of a loss contingency is remote.cannot be reasonably estimated. 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. 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. The plaintiffs filed an appeal to the ruling on the entitlement of proceeds in excess of the secured promissory 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 and May 2020, legal disputes were filed against the Company related to the separation of former 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.30currently set for hearing in December 2022.being disputed. The litigation isremains at an early stage and the likelihood of a loss contingency is remote. As a result,such, no amount has been set up for potential damagesaccrued in these financial statements.a result,such, no amount has been set up for potential damagesaccrued in these financial statements.leases. Inlease arrangements. First, 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, andfor which the landlord is seeking rents and damages. The litigation is currently in the discovery phase.Plaintiff has filed a motion for summary judgment which remains pending. If the litigation is not settled or resolved, trial will likely take place Duringduring the fiscal year ended 2023. In2023 or possibly the fiscal year ended 2024. This matter is preliminary and the Company believes the likelihood of loss is remote. As such, no amount has been accrued in these financial statements. Second, 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 filefiled an answer to the complaint arguing that the subject matter of theSeptember 2022. Prior attemptsa federal court in New York. The court thereafter permitted the action to resolvebe dismissed without prejudice, after which the lease dispute with this landlord have failed. Inplaintiff refiled the case in California against the Company as guarantor of the lease. The matter is in the process of being litigated in the Los Angeles Superior Court. The Company believes the likelihood of loss is remote. As such, no amount has been accrued in these financial statements. Third, 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 seekssought to enforce a land purchase agreement and seeksis seeking damages. The Company settled this dispute during the quarter ending December 24, 2022 in the amount of $350,000. In April 2022, the landlord at the Company’s dispensary location in Tampa, Florida, filed suit seeking damages under a lease, shortly after which the Company announced its plans to sell its Florida business.operations. The Company retained this lease and the associated litigation following the sale of theits Florida business and theoperations. The litigation is at an early stage and the likelihood of a loss contingency is remote. As a result,such, no amount has been set up for potential damagesaccrued in these financial statements.3119. RELATED PARTY TRANSACTIONS $200,000 $200,000 of which one-third is paid in cash and two-thirds is paid in Class B Subordinate Voting Shares.3220. SEGMENT INFORMATION 3321. REVENUE Schedule of Disaggregation of revenue Three Months Ended September 24, September 25, 2022 2021 California $ 19,928,985 $ 24,626,555 Nevada 2,997,469 4,079,151 Illinois 3,542,071 4,328,602 Arizona 2,794,648 3,701,596 Massachusetts 780,875 - Revenue from Continuing Operations $ 30,044,048 $ 36,735,904 Revenue from Discontinued Operations 3,629,641 7,340,099 Total Revenue $ 33,673,689 $ 44,076,003 34Three Months Ended Six Months Ended December 24,
2022December 25,
2021December 24,
2022December 25,
2021California $ 19,575,393 $ 23,368,439 $ 39,504,378 $ 47,994,994 Nevada 2,812,902 3,855,371 5,810,371 7,934,522 Illinois 3,082,089 4,104,970 6,624,159 8,433,572 Arizona 3,343,592 4,173,609 6,138,238 7,875,206 Massachusetts 734,394 14,772 1,515,277 14,771 Revenue from Continuing Operations 29,548,370 35,517,161 59,592,423 72,253,065 Revenue from Discontinued Operations 2,282,288 8,065,341 5,911,927 15,405,440 Total Revenue $ 31,830,658 $ 43,582,502 $ 65,504,350 $ 87,658,505 22. DISCONTINUED OPERATIONS Three Months Ended Six Months Ended December 24,
2022December 25,
2021December 24,
2022December 25,
2021Revenue $ 2,282,288 $ 8,065,341 $ 5,911,927 $ 15,405,440 Cost of Goods Sold 439,466 5,672,043 2,630,135 10,899,596 Gross Profit 1,842,822 2,393,298 3,281,792 4,505,844 Expenses: General and Administrative 2,134,342 6,329,144 6,853,135 11,946,739 Sales and Marketing 15,015 127,844 58,326 231,647 Depreciation and Amortization 21,107 1,189,331 894,002 2,411,090 Impairment Expense — — (78,433) — Gain on Disposal of Assets and Other Income — — (36,305,166) (597,591) Total (Income) Expenses $ 2,170,464 $ 7,646,319 $ (28,578,136) $ 13,991,885 Income (Loss) from Discontinued Operations (327,642) (5,253,021) 31,859,928 (9,486,041) Other Expense: Interest Expense 1,783,685 4,755,126 5,545,446 9,371,955 Accretion of Debt Discount and Loan Origination Fees — 3,446,949 398,032 6,987,857 Total Other Expense 1,783,685 8,202,075 5,943,478 16,359,812 Income (Loss) from Discontinued Operations Before Provision for Income Taxes (2,111,327) (13,455,096) 25,916,450 (25,845,853) Provision for Income Tax Benefit (Expense) (144,651) 1,314,496 216,039 (741,238) Net Income (Loss) from Discontinued Operations $ (2,255,978) $ (12,140,600) $ 26,132,489 $ (26,587,091) December 24,
2022June 25,
2022Carrying Amounts of the Assets Included in Discontinued Operations: Cash and Cash Equivalents $ 540,828 $ 1,124,076 Restricted Cash 5,280 5,280 Accounts Receivable and Prepaid Expenses 22,019 334,621 Inventory 4,483,051 6,866,833 Property and Equipment, Net 9,569,610 41,273,597 Operating Lease Right-of-Use Assets 19,111,359 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 44,773,089 123,128,406 Carrying Amounts of the Liabilities Included in Discontinued Operations: Accounts Payable and Accrued Liabilities $ 979,864 $ 6,295,745 Income Taxes Payable 389,677 1,671,380 Other Current Liabilities (5,641) 89,069 Current Portion of Operating Lease Liabilities 2,812,765 4,209,512 Current Portion of Finance Lease Liabilities — 174,000 Operating Lease Liabilities, Net of Current Portion 18,398,345 56,410,071 Deferred Tax Liabilities 5,977,580 6,097,597 Notes Payable — 11,100,000 TOTAL LIABILITIES OF THE DISPOSAL GROUP CLASSIFIED AS HELD FOR SALE $ 28,552,590 $ 86,047,374 February 28,August 22 2022, MME Florida LLC and its parent, MM Enterprises USA, LLC, a wholly-owned subsidiary of the Company entered into anclosed on the 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.On August 22, 2022, the Company closed the transaction at the The final sales price of $67,000,000,was $67,000,000, which was comprised of $63,000,000$63,000,000 in cash and $4,000,000$4,000,000 in 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 The Company used $31,599,999 of the cash proceeds was used to 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.$19,558,947. Accordingly, the Company recognized a gain on sale of assets of $31,719,833 $31,719,833, which is included in Net Income from Discontinued Operations for the threesix months ended SeptemberDecember 24, 2022. All profit or loss relating to the Florida operations were eliminated from the Company’s continuing operations and are shown as a single line item in the Condensed Consolidated StatementsStatement of Operations.The operating resultsTable of the discontinued operations are summarized as follows: 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 ) 35The carrying amounts of assets and liabilities in the disposal group are summarized as follows: 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 3623. SUBSEQUENT EVENTS 37SeptemberDecember 24, 2022. The following discussion should be read in conjunction with, and is qualified in its entirety by, the Condensed Consolidated Financial Statements and the accompanying notes presented in Item 1 of this Form 10-Q and those discussed in Item 8 of the Company’s Annual Report on Form 10-K (the “Form 10-K”) filed with the SEC on September 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 Factors” and elsewhere in this Form 10-Q.SeptemberDecember 24, 2022 and SeptemberDecember 25, 2021 refer to the 13 weeks ended therein.SeptemberDecember 24, 2022 the Company operates 23 store locations across California (13), New York (4) Nevada (3), Illinois (1), Arizona (1), Massachusetts (1), and Arizona (1)New York (4).$67,000,000$67.0 million which comprised of $63,000,000$63.0 million in cash and $4,000,000$4.0 million in liabilities assumed by the Buyer. The Buyer made a cash payment of $40,000,000$40.0 million at closing, a cash payment of $11,500,000$11.5 million on September 15, 2022, and is required to make one additional installment payments of $11,500,000$11.5 million on or before March 15, 2023. As of SeptemberDecember 24, 2022, net proceeds to the Company were $19,500,000$19.5 million after $31,599,999$31.6 million of the cash proceeds was used to repay the Senior Secured Term Loans with Hankey Capital. Proceeds of the transaction to the Company will beare used to fund operations and pay interest to Hankey Capital while the Senior Secured Term Loans remain outstanding and in default. In addition, the Company licensed the tradename “MedMen” to the Buyer for use in Florida for a period of two years, subject to termination rights, for a quarterly revenue-based fee. Proceeds from the licensure of the trade name have been minimal. All purchased assets and assumed liabilities related to Florida are excluded from our Condensed Consolidated Balance Sheets as of SeptemberDecember 24, 2022 and all profits or losses from our Florida operations subsequent to August 22, 2022 are included in the Condensed Consolidated Statements of Operations. Refer to “Note 22 – Discontinued Operations” of the Condensed Consolidated Financial Statements in Item 1 of this Form 10-Q for further information.SeptemberDecember 24, 2022, continue to be impacted by the COVID-19 pandemic. The overall impact on our business continues to depend on the length of time that the pandemic continues, the impact on consumer purchasing behavior, macro-economic factors such as inflation, and the extent to which it affects our ability to raise capital, and the effect of governmental regulations imposed in response to the pandemic, which all remain uncertain at this time. We continue to implement and evaluate actions to strengthen our financial position and support the continuity of our business and operations.38($ in Millions) December 24,
2022June 25,
2022$ Change % Change Cash and Cash Equivalents $ 15.6 $ 10.8 $ 4.8 45 % Total Current Assets $ 100.2 $ 161.5 $ (61.3) (38 %) Total Assets $ 238.5 $ 323.2 $ (84.7) (26 %) Total Current Liabilities $ 237.6 $ 319.6 $ (81.9) (26 %) Notes Payable, Net of Current Portion $ 74.1 $ 74.4 $ (0.3) — % Total Liabilities $ 567.3 $ 641.7 $ (74.5) (12 %) Total Shareholders’ Equity $ (328.8) $ (318.5) $ (10.3) 3 % Working Capital Deficit $ (137.4) $ (158.1) $ 20.7 (13 %) SeptemberDecember 24, 2022, compared to the three and six months ended SeptemberDecember 25, 2021, are as follows: Three Months Ended September 24, September 25, ($ in Millions) 2022 2021 $ Change % Change (unaudited) (unaudited) Revenue $ 30.0 $ 36.7 $ (6.7 ) (18 %) Cost of Goods Sold 15.2 19.3 (4.1 ) (21 %) Gross Profit 14.9 17.4 (2.5 ) (14 %) Operating Expenses: General and Administrative 17.8 32.6 (14.8 ) (45 %) Sales and Marketing 0.4 0.6 (0.2 ) (33 %) Depreciation and Amortization 3.9 5.8 (1.9 ) (33 %) Unrealized Changes in Fair Value of Contingent Consideration (0.9 ) - (0.9 ) - Impairment Expense 1.7 0.4 1.3 325 % Other Operating (Income) Expense (2.6 ) 2.2 (4.8 ) (218 %) Total Operating Expenses 20.5 41.7 (21.3 ) (51 %) Loss from Operations (5.6 ) (24.3 ) 18.7 (77 %) Non-Operating Expense (Income): Interest Expense 10.1 8.2 1.9 23 % Accretion of Debt Discount and Loan Origination Fees 1.6 6.3 (4.7 ) (75 %) Change in Fair Value of Derivatives 0.8 (2.1 ) 2.9 (138 %) Gain on Extinguishment of Debt - (10.2 ) 10.2 (100 %) Total Non-Operating Expense 12.4 2.2 10.2 464 % Loss from Continuing Operations Before Provision for Income Taxes (18.1 ) (26.5 ) 8.4 (32 %) Provision for Income Tax Expense (2.2 ) (19.7 ) 17.5 (89 %) Net Loss from Continuing Operations (20.3 ) (46.2 ) 25.9 (56 %) Net Income (Loss) from Discontinued Operations, Net of Taxes 24.3 (14.4 ) 38.7 (269 %) Net Income (Loss) 4.0 (60.6 ) 64.6 (107 %) Net Loss Attributable to Non-Controlling Interest (0.1 ) (5.3 ) 5.2 (98 %) Net Income (Loss) Attributable to Shareholders of MedMen Enterprises Inc. $ 4.2 $ (55.3 ) $ 59.5 (108 %) EBITDA from Continuing Operations (Non-GAAP) $ (2.5 ) $ (5.7 ) $ 3.2 (56 %) Adjusted EBITDA from Continuing Operations (Non-GAAP) $ (2.0 ) $ (12.2 ) $ 10.2 (84 %) 39 Three Months Ended Six Months Ended ($ in Millions) December 24,
2022December 25,
2021$ Change % Change December 24,
2022December 25,
2021$ Change % Change (unaudited) (unaudited) (unaudited) (unaudited) Revenue $ 29.6 $ 35.5 $ (5.9) (17 %) $ 59.6 $ 72.3 $ (12.7) (18 %) Cost of Goods Sold 14.5 17.6 (3.1) (18 %) 29.6 37.0 (7.4) (20 %) Gross Profit 15.1 17.9 (2.8) (16 %) 30.0 35.3 (5.3) (15 %) Operating Expenses: General and Administrative 18.3 31.3 (13.0) (42 %) 36.5 63.9 (27.4) (43 %) Sales and Marketing 0.6 1.0 (0.4) (40 %) 1.0 1.6 (0.6) (38 %) Depreciation and Amortization 3.5 6.4 (2.9) (45 %) 7.4 12.2 (4.8) (39 %) Realized and Unrealized Changes in Fair Value of Contingent Consideration — (0.3) 0.3 — (0.9) (0.3) (0.6) — Impairment Expense 5.1 — 5.1 — % 6.7 0.4 6.3 1575 % Other Operating (Income) Expense (5.6) 0.6 (6.2) (1033 %) (7.5) 2.8 (10.3) (368 %) Total Operating Expenses 21.8 39.0 (21.3) (55 %) 43.2 80.7 (21.3) (26 %) Loss from Operations (6.7) (21.1) 14.4 (68 %) (13.2) (45.4) 32.2 (71 %) Non-Operating (Income) Expenses: Interest Expense 9.7 8.1 1.6 20 % 19.7 16.2 3.5 22 % Accretion of Debt Discount and Loan Origination Fees 1.5 1.3 0.2 16 % 2.9 7.6 (4.7) (62 %) Change in Fair Value of Derivatives (3.9) (14.1) 10.2 (72 %) (3.1) (16.2) 13.1 (81 %) Gain on Extinguishment of Debt — — — (10.2) Total Non-Operating Expense 7.3 (4.8) 12.1 (252 %) 19.5 (2.6) 22.1 (850 %) Loss from Continuing Operations Before Provision for Income Taxes (14.0) (16.4) 2.4 (15 %) (32.7) (42.8) 10.1 (24 %) Provision for Income Tax Expense (1.1) 8.1 (9.2) (114 %) (6.8) (11.6) 4.8 (41 %) Net Loss from Continuing Operations (15.1) (8.2) (6.9) 84 % (39.4) (54.4) 15.0 (28 %) Net Income (Loss) from Discontinued Operations, Net of Taxes (2.3) (12.1) 9.8 (81 %) 26.1 (26.6) 52.7 (198 %) Net Income (Loss) (17.3) (20.4) 3.1 (15 %) (13.3) (81.0) 67.7 (84 %) Net Loss Attributable to Non-Controlling Interest (1.1) (1.3) 0.2 (15 %) (1.2) (6.6) 5.4 (82 %) Net Loss Attributable to Shareholders of MedMen Enterprises Inc. $ (16.2) $ (19.0) $ 2.8 (15 %) $ (12.0) $ (74.4) $ 62.4 (84 %) EBITDA from Continuing Operations (Non-GAAP) $ 0.7 $ (0.1) $ 0.8 (800 %) $ (2.6) $ (5.8) $ 3.2 (55 %) Adjusted EBITDA from Continuing Operations (Non-GAAP) $ — $ (12.0) $ 12.0 (100 %) $ 0.2 $ (14.2) $ 14.4 (101 %) SeptemberDecember 24, 2022 was $30.0$29.6 million, a decrease of $(6.7)$6.0 million, or (18%)17%, compared to revenue of $36.7$35.5 million for the three months ended SeptemberDecember 24, 2021. Revenue for the six months ended December 24, 2022 was $59.6 million, a decrease of $12.7 million, or 18%, compared to revenue of $72.3 million for the six months ended December 25, 2021. Three Months Ended September 24, September 25, ($ in Millions) 2022 2021 $ Change % Change California $ 19.9 $ 24.6 $ (4.7 ) (19 %) Nevada 3.0 4.1 (1.1 ) (27 %) Illinois 3.5 4.3 (0.8 ) (19 %) Arizona 2.8 3.7 (0.9 ) (24 %) Massachusetts 0.8 - 0.8 - Continuing Operations 30.0 36.7 (6.7 ) (18 %) Discontinued Operations 3.6 7.3 (3.7 ) (51 %) Total Revenue $ 33.6 $ 44.0 $ (10.4 ) (24 %) Three Months Ended Six Months Ended ($ in Millions) December 24,
2022December 25,
2021$ Change % Change December 24,
2022December 25,
2021$ Change % Change California $ 19.6 $ 23.4 $ (3.8) (16) % $ 39.5 $ 48.0 $ (8.5) (18) % Nevada 2.8 3.9 (1.1) (28) % 5.8 7.9 (2.1) (27) % Illinois 3.1 4.1 (1.0) (24) % 6.6 8.4 (1.8) (21) % Arizona 3.3 4.2 (0.9) (21) % 6.1 7.9 (1.8) (23) % Massachusetts 0.7 — 0.7 — % 1.5 — 1.5 — % Revenue from Continuing Operations $ 29.5 $ 35.5 $ (6.0) (17) % $ 59.6 $ 72.3 $ (12.7) (18) % Revenue from Discontinued Operations $ 2.3 $ 8.1 $ (5.8) (72) % $ 5.9 $ 15.4 $ (9.5) (62) % Total Revenue $ 31.8 $ 43.6 $ (11.8) (27) % $ 65.5 $ 87.7 $ (22.2) (25) % revenue across all markets.werevenue for the three and six months ended December 24, 2022 experienced a decline of $(4.7)$3.8 million or (19%)16% and $8.5 million or 18%, respectively, over the same prior year periodperiod. The change is primarily driven by lower basket size, inconsistent and / or lower 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 experiencingcontinues to deal with high levels of cannabis production, which we believe has flooded the legal and illegal market with quality cannabis flower that illicit operators are offering to cannabis consumers at lower selling prices.increasing competition and decreasing market share. In addition, the increase in new dispensaries within key markets, especially West Hollywood, and the more aggressive promotional cadence theseby all dispensaries, are promoting,including ours, 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 fiscalthe quarter, we increasedcontinued to increase 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.declined $(1.1)ended December 24, 2022 experienced a decline of $1.0 million or (27%).27% and $2.1 million or 27%, respectively, over the same prior year period. 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 a maturing industry, lower disposable income and a revenue base heavily reliant on tourism.declined $(0.8)for the three and six months ended December 24, 2022 experienced a decline of $1.0 million or (19%).25% and $1.8 million or 21%, respectively, over the same prior year period. We continue to face market pressure from additional licenses issued by surrounding municipalities as part of Illinois’ efforts to promote equality and accessible locations for the consumer. We have made great efforts in testing new promotional messaging that, if marketed properly, can increase foot traffic and revenue. We have plans to open a second store in Illinois in the Spring of 2023 located 15 miles northwest of Chicago and within similar proximity to our existing store in Oak Park, in a dense suburban area near restaurants, coffee shops and parks.period decreased $(0.9)three and six months ended December 24, 2022 experienced a decline of $0.8 million or (24%).20% and $1.7 million or 22% respectively over the same prior year period. 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 our efforts to finding the optimal product selection that can meet the demands of both medical and recreational customers as well as planning for additionalincluding the launch of our private label products, Moss™, from our own cultivation facility in Mesa.40ourrevenue for the three and six months ended December 24, 2022 experienced an increase of $0.7 million and $1.5 million, respectively. Our store near Fenway Park opened December 2021 with no comparable sales for this reporting period.SeptemberDecember 24, 2022 was $15.2$14.5 million and $29.6 million compared to $19.3$17.6 million and $37.0 million for the three and six months ended December 25, 2021 respectively, with a decrease of $(4.1)$3.1 million, or (21%), for the three months ended September 25, 2021. 18% and $7.4 million or 20% respectively.fiscal first quarterthree and six months ended December 24, 2022 was $14.9$15.1 million representingand $30.0 million compared to $17.9 million and $35.3 million for the three and six months ended December 25, 2021 respectively, with a decrease of $2.8 million, or 16% and $5.3 million or 15%, respectively. Gross margin for the three and six months ended December 24, 2022 was 51% and 50%, respectively, compared to gross margin of 50%, as compared to $17.4 million, representing a gross margin of 47%, and 49% for the same prior year period.three and six months ended December 25, 2021 respectively. The improvement in gross margin resulted from our continuous efforts to develop vendor programs that reduced our cost of goods sold, as well as our success in lowering costs of production at our cultivation centers.SeptemberDecember 24, 2022 were $20.5was $21.8 million a decrease of $(21.3)and $43.2 million or (51%), compared to $41.7$39.0 million and $80.7 million for the three and six months ended SeptemberDecember 25, 2021.2021 respectively, with a decrease of $17.2 million, or 44% and $37.5 million or 46% respectively. These changes were primarily attributable to our efforts and focus on our cost management strategy as well as the factors discussed below.SeptemberDecember 24, 2022 were $17.8was $18.3 million and $36.5 million compared to $32.6$31.3 million and $63.9 million for the same prior year period. The overallthree and six months ended December 25, 2021 respectively, with a decrease in the three months period is primarily due to the Company’s corporate cost saving strategy.of $13.0 million, or 41% and $27.5 million or 43% respectively. Key drivers of the decrease in G&A for the three months ended December 24, 2022 include reductions in rent expense of $1.7 million, salaries of $3.5 million, professional fees ($6.1) million, payroll expenses ($3.0) million, licenses and fees ($1.5)of $5.7 million, deal costs ($1.2)of $1.2 million and rental payments ($1.1)other general expenses of $2.9 million, partially offset by an increase in share-based compensation of $1.4 million. Management continues to focus on reducing company-wide G&A. We expect G&A will continue to decrease in fiscal year 2023 as compared to prior year.remained relatively consistent for the three and six months ended SeptemberDecember 24, 2022 was $0.6 million and September$1.0 million compared to $1.0 million and $1.6 million for the three and six months ended December 25, 2021 in the amountrespectively, with a decrease of $0.4$0.5 million, or 45% and $0.6 million or 38% respectively.SeptemberDecember 24, 2022 was $3.9$3.5 million and $7.4 million compared to $5.8$6.4 million and $12.2 million for the same prior year period.three and six months ended December 25, 2021 respectively, with a decrease of $2.9 million, or 45% and $4.8 million or 39% respectively. The overall decrease is attributable toa lower carrying basis of our long-lived assets as a result of the impairment of assetscharge recorded in Q4the fourth quarter of 2022 and a delay in new capital projects. We are currently evaluating the long-term benefits of continuing to pursue the build out of some of our locations that are 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 market values.SeptemberDecember 24, 2022 was $1.7$5.1 million and $6.7 million compared to nil and $0.4 million for the three and six months ended SeptemberDecember 25, 2021. During the current period, the Company wrote off approximately $1.72021 respectively, with an increase of $5.1 million of construction in progress.SeptemberDecember 24, 2022 was $(2.6)other operating income of $5.6 million and $7.5 million compared to $2.2other operating expense of $0.6 million and $2.8 million for the three and six months ended December 25, 2021 respectively, with a decrease in other operating expense of $6.3 million, or 993% and $10.4 million or 367% respectively. The decrease in other operating expense of $6.3 million for the three months ended September 25, 2021. The decrease of $(4.8) million in other operating (income) expenseDecember 24, 2022 was primarily due to a decrease of $(2.0)$2.1 million increase in restructuring expenses coupled with a gain on lease termination of $1.6terminations, a net $3.5 million gain on legal settlements and sublease incomerecognition of $1.5 million recognized duringin sublease income, partially offset by a $1.3 million increase in loss onfiscal first quartersix months ended December 24, 2022 was primarily due to the net $3.5 million gain on legal settlements, recognition of 2023, versus none$3.0 million in the comparative period.41SeptemberDecember 24, 2022 was $12.4 million, compared to $2.2 million in the prior year period. The increase in non-operating expense was primarily due a $10.2 million devaluation in the fair value of our derivatives. The increase in non-operating expense for the six months ended December 24, 2022 was primarily due to a $13.1 million devaluation in the fair value of our derivatives coupled with a decrease in gain on extinguishment of debt recognizedof $10.2 million and increase in prior fiscal first quarter versus none in the current period. This wasinterest expense of $3.5 million, partially offset by a $(4.7)decrease of $4.7 million decrease in the accretion of our debt discount due to the principal repayment of $31.6 million on the Senior Secured Term Loan during the fiscal first quarter of 2023 and a $(2.9) million decrease in change in fair value of derivatives.SeptemberDecember 24, 2022 was $2.2$(1.1) million and $(6.8) million compared to the provision for income tax expense of $19.7$8.1 million and $(11.6) million for the three and six months ended SeptemberDecember 25, 2021 respectively, with a decrease of $9.2 million, or 113% and $4.8 million or 42% respectively. The change is primarily due to the Company’s forecasted income and related IRC Section 280E expenditures.SeptemberDecember 24, 2022 was $20.3$15.1 million a decrease of $(25.9)and $39.4 million compared to $46.2$8.2 million and $54.4 million for three and six months ended December 25, 2021 respectively. For the three and six months ended September 25, 2021. For the fiscal first quarter of 2023,December 24, 2022, net loss from continuing operations was favorably impacted by the Company’s continued efforts to optimize selling, general and administrative costs and right-size the Company’s corporate infrastructure.42 Three Months Ended Six Months Ended ($ in Millions) December 24, 2022 December 25, 2021 December 24, 2022 December 25, 2021 Net Loss $ (17.3) $ (20.4) $ (13.3) $ (81.0) Less: Net (Income) Loss from Discontinued Operations, Net 2.3 12.1 (26.1) 26.6 Add (Deduct) Impact of: 11.2 9.4 22.6 23.9 Provision for Income taxes 1.1 (8.1) 6.8 11.6 Amortization and Depreciation 3.5 6.9 7.5 13.1 EBITDA from Continuing Operations $ 0.8 $ (0.1) $ (2.5) $ (5.8) Other Operating (Income) Expense: Share-based Compensation $ 2.1 $ 0.7 3.0 2.4 Change in Fair Value of Derivative Liabilities (3.9) (14.1) (3.1) (16.2) Change in Fair Value of Contingent Consideration — (0.3) (0.9) (0.3) Impairment Expense 5.1 — 6.7 0.4 (Gain) Loss on Disposals of Assets 1.2 (0.1) 1.4 (0.1) Restructuring and Reorganization Expense — 1.6 0.9 5.6 Gain on Lease Terminations (1.9) 0.2 (3.5) 0.2 (Gain) Loss on Disposal of Assets Held for Sale (0.1) — 0.5 — Legal Settlements (3.5) — (3.5) — Non-Cash Rent Expense 0.9 — 1.6 — Other Non-Cash Operating Costs (0.6) 0.2 (0.4) (0.3) Total Adjustments (0.7) (11.8) 2.7 (8.3) Adjusted EBITDA from Continuing Operations $ 0.1 $ (11.9) $ 0.2 $ (14.1) Three Months Ended September 24, September 25, ($ in Millions) 2022 2021 Net Income (Loss) $ 4.0 $ (60.6 ) 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) 11.6 14.5 Provision for Income Taxes 2.2 19.7 Amortization and Depreciation 4.0 6.3 Total Adjustments 17.8 40.5 EBITDA from Continuing Operations $ (2.5 ) $ (5.7 ) Add (Deduct) Impact of: Transaction Costs & Restructuring Costs $ 0.9 $ 4.0 Share-Based Compensation 0.9 1.6 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 $ 0.5 $ (6.5 ) Adjusted EBITDA from Continuing Operations $ (2.0 ) $ (12.2 ) (1)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 three months ended September 24, 2022. The prior year amount of $6.3 million for the three months ended September(1)For the current period, net interest and other financing costs now include accretion of debt discount and loan origination fees of $1.5 million for the three months ended December 24, 2022 and $2.9 million for the six months ended December 24, 2022. The prior year amount of $1.3 million for the three months ended December 25, 2021 and $7.6 million for the six months ended December 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.43September 24, 2022 compared to $(5.7)December 25, 2021 respectively, with an increase of $0.9 million, for the comparative prior period.or 900% and $3.3 million or 57% respectively. The changeimprovement in EBITDA from Continuing Operations was primarily due to the Company’s continued cost-saving strategies, and lower operating costs at the cultivation facilitiesfacility in Arizona and elimination of California and Nevada as a result ofhigh operating costs from the licensing and management agreement with an unrelated third party now operating the previously owned cultivation centers in California and Nevada, which includes lower rents.For the three months ended September 24, 2022, $(2.0)$0.1 million and $0.2 million compared to $(12.2)$(11.9) million and $(14.1) million for the three and six months ended SeptemberDecember 25, 2021.2021 respectively. The improvement is primarily due to the decrease in general and administrative expenses. The financial performance of the Company is expected to further improve as the Company works towards profitability and coupled with significant deleveraging of its balance sheet, will reposition the Company for growth.threesix months ended SeptemberDecember 24, 2022 and SeptemberDecember 25, 2021: Three Months Ended September 24, September 25, ($ in Millions) 2022 2021 $ Change % Change Net Cash Used in Operating Activities $ (9.6 ) $ (23.0 ) $ 13.4 (58 %) 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 in Cash and Cash Equivalents 10.3 66.6 (56.3 ) (85 %) Cash Included in Assets Held for Sale - (0.3 ) 0.3 100 % Cash and Cash Equivalents, Beginning of Period 10.8 11.6 (0.8 ) (7 %) Cash and Cash Equivalents, End of Period $ 21.1 $ 77.9 $ (56.8 ) (73 %) Six Months Ended ($ in Millions) December 24, 2022 December 25, 2021 $ Change % Change Net Cash Used in Operating Activities $ (8.3) $ (49.9) $ 41.6 (83 %) Net Cash Provided by (Used in) Investing Activities 45.5 (7.6) 53.1 (701 %) Net Cash (Used in) Provided by Financing Activities (32.4) 93.2 (125.5) (135 %) Net Increase in Cash and Cash Equivalents 4.8 35.7 (30.9) (87 %) Cash Included in Assets Held for Sale — (0.3) 0.3 (100 %) Cash and Cash Equivalents, Beginning of Period 10.8 11.6 (0.8) (7 %) Cash and Cash Equivalents, End of Period $ 15.6 $ 47.0 $ (31.4) (67 %) was $9.6 million for the threesix months ended SeptemberDecember 24, 2022 a decrease of $13.4was $8.3 million compared to $23.0$49.9 million net cash used for operating activities for the threesix months ended SeptemberDecember 25, 2021. The decrease was primarily driven by the decrease in general and administrative expenses as described in “Results of Operations” above.was $51.5 million for the threesix months ended SeptemberDecember 24, 2022 was $45.5 million compared to the $3.6$7.6 million of net cash used in investing activities in the prior year.six months ended December 25, 2021. This was primarily due to the $51.5 million in cash proceeds from the sale of the Company’s operations in the state of Florida during the current period.44was $31.6 million for the threesix months ended SeptemberDecember 24, 2022 was $32.4 million compared to $93.2 million net cash provided by financing activities for the threesix months ended SeptemberDecember 25, 2021. During the current period, the Company used $31.6 million of the cash proceeds from the 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 an equity investment of $100.0 million.Financial Condition and Going ConcernAs of September 24, 2022, the Company had cash and cash equivalents of $21.1 million and working capital deficit of $134.9 million. The Company has incurred net losses from continuing operations of $20.3 million and $46.2 million for the three months ended September 24, 2022 and September 25, 2021, 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 Company plans to continue to fund its operations through the implementation of its cost savings plan, and various strategic actions, 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 strategic actions, for any reason, are inaccessible, it 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 on the broader retail environment could also have a significant impact on the Company’s financial position, results of operations, equity and or its access to capital and future financing.As of September 24, 2022, 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 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 September 24, 2022 and June 25, 2022: September 24, June 25, ($ in Millions) 2022 2022 $ Change % Change Cash and Cash Equivalents $ 21.1 $ 10.8 $ 10.3 95 % Total Current Assets $ 98.7 $ 161.5 $ (62.8 ) (39 %) Total Assets $ 251.1 $ 323.2 $ (72.1 ) (22 %) Total Current Liabilities $ 233.6 $ 319.6 $ (86.0 ) (27 %) Notes Payable, Net of Current Portion $ 74.9 $ 206.4 $ (131.5 ) (64 %) Total Liabilities $ 564.7 $ 641.7 $ (77.0 ) (12 %) Total Shareholders’ Equity $ (313.6 ) $ (318.5 ) $ 4.9 (2 %) Working Capital Deficit $ (134.9 ) $ (158.1 ) $ 23.2 (15 %) 45In August 2022, the Company completed the sale of its operations in the state of Florida at the final sales price of $67,000,000 which comprised of $63,000,000 in cash and $4,000,000 in liabilities to be assumed by the Buyer. The Buyer made a cash 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 third quarter of 2022, net proceeds to the Company 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 receivable as of September 24, 2022. The Senior Secured Term Loans remains outstanding and in default as of September 24, 2022.The $23.2 million improvement in working capital deficit was primarily related to the $31.6 million principal repayment on the Senior Secured Term Loans that matured on July 31, 2022 and August 1, 2022. The Company’s working capital will be significantly impacted by continued operations and growth in retail operations 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 and execute cost savings plans.SeptemberDecember 24, 2022. See “Note 2 – Summary of Significant Accounting Policies” in the 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 “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 25, 2022. In addition, a detailed description of our critical accounting policies and recent accounting pronouncements are detailed in Part I, “Item 8. Financial Statements and Supplementary Data” of the Annual Report on Form 10-K for the fiscal year ended June 25, 2022.46SeptemberDecember 24, 2022 and June 25, 2022 there were no amounts due from or due to related parties that were recorded in the Consolidated Balance Sheets. Refer to “Note 19 – Related Party Transactions” of the Consolidated Financial Statements for the three months ended September 24, 2022under Part I, “Item 1. Notes to Condensed Consolidated Financial Statements”, which is incorporated in Item 1.this item by reference.SeptemberDecember 24, 2022, the Company has drawn down a total of $165.0 million on the Convertible Facility, has accrued paid-in-kind interest of $45.2$51.1 million with an aggregate weighted average conversion price of approximately $0.24 per share, and an aggregate of 196,327,593192,981,432 warrants with a weighted average exercise price of $0.17$0.15 per share.SeptemberDecember 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.47●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.SeptemberDecember 24, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.48Other than noted below, there have been no material developments during the fiscal quarter covered by this Report forthat were disclosed in our Annual Report on Form 10-K filed on September 9, 2022.On October 6, 2022please see the Company 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 complaint filed by these parties on May 26, 2020 and counterclaim by the Company (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 Thor Equities Group, filed a complaintdescription set forth in the United States District Court for“Claims and Litigation” section in Note 18 - Commitments and Contingencies in the Southern Districtnotes to consolidated financial statements in Item 1 of New York against Future Transactions Holdings, LLC, an affiliatePart I of the Company, MM Enterprises USA, LLC, and the Company seeking approximately $950,960 in damages relating to a lease of commercial property located in Illinois,this Form 10‑Q, 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 the Company filed a complaint under the federal Declaratory Judgment Act against Thor 942 Fulton Street, LLC.49On 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.50*Incorporated by ReferenceExhibit No. This exhibit shall not be deemed “filed” for purposesExhibit DescriptionForm File No. Exhibit Filing Date Filed/
Furnished
Herewith31.1 ✓ 31.2 ✓ 32.1* ✓ 101.INS XBRL Instance Document - the instance document does not appear in any filings.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.) ✓ 51Dated: November 3, 2022February 2, 2023MEDMEN ENTERPRISES INC /s/ Ana BowmanBy: Ana Bowman Its: Chief Financial Officer 52