SIGNIFICANT ACCOUNTING POLICIES (Policies) |
12 Months Ended | ||||||||||||||||||
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Dec. 31, 2025 | |||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||
| Cash and cash equivalents |
Cash and cash equivalents held in financial institutions have carrying values that approximate fair value.
The failure of any bank in which the Company deposits funds may reduce the amount of cash and cash equivalents available for operations or delay the ability to access such funds. The Company does not currently have a commercial relationship with a bank that has failed or has shown indications of experiencing operational distress, nor has the Company experienced delays or other issues in meeting its financial obligations. If banks and financial institutions where the Company’s cash and cash equivalents is held enter receivership or become insolvent in response to financial conditions affecting the banking system and financial markets, its ability to access cash and cash equivalents may be threatened and could have a material adverse effect on operations and financial condition of the Company.
As at December 31, 2025, the Company’s cash and cash equivalent balances exceeded federally insured limits by $10,081,792. |
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| Accounts receivable |
Accounts receivable are recorded at their net realizable value and represent amounts due from customers arising from the Company’s normal business activities. Accounts receivable do not bear interest and are generally due within contractual payment terms, which typically are 30 days. The Company evaluates the collectability of accounts receivable and records an allowance for credit losses based on expected losses over the contractual life of the receivables, in accordance with ASC 326, Financial Instruments – Credit Losses (“ASC 326”) as described below. |
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| Credit loss provision |
Trade receivable
The Company applies the Current Expected Credit Losses (“CECL”) model in ASC 326 to all trade receivables, which arise from the sale of goods and services under standard payment terms of 30 days. The Company has elected the practical expedient to assume the current conditions as of the balance sheet date do not change for the remaining life of the trade receivables. The Company measures expected credit losses at the time the trade receivables are initially recognized and updates the estimate at each reporting date based on historical loss experience, current conditions, and reasonable and supportable forecasts that affect the collectability of outstanding balances. Trade receivables are grouped into pools that share similar risk characteristics, and the Company uses an aging schedule that classifies balances as current, one to thirty days past due, thirty-one to sixty days past due, sixty-one to ninety days past due, and greater than ninety days past due. Historical loss rates are calculated for each aging bucket using the Company’s write-off experience over a representative period, and these rates are adjusted to reflect present economic conditions that differ from historical patterns as well as forward looking information such as changes in customer credit profiles, industry trends, macroeconomic indicators, or other factors expected to influence default risk. Forecast adjustments are applied for the period for which the Company can reasonably develop supported expectations, after which the estimate reverts to historical experience. The resulting allowance for credit losses is recorded as a valuation account that reduces the amortized cost basis of trade receivables, with changes recognized in credit loss expense as a component of selling, general and administrative expenses in the consolidated statements of income (loss) and comprehensive income (loss). Trade receivables are written off when they are deemed uncollectible based on specific facts and circumstances, and any recoveries of amounts previously written off are recognized when received.
Notes receivable
The Company recognizes an allowance for credit losses on notes receivable which represent the lifetime expected credit losses. The allowance is measured using a loss-rate method that considers historical loss experience current conditions, and reasonable and supportable forecasts of future economic conditions. As at December 31, 2025 and 2024, the allowance for credit losses was $nil and $nil, respectively. |
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| Inventory |
Inventory consists of (i) raw materials, consumables and packaging supplies used in the process to prepare inventory for sale, (ii) work in process consisting of pre-harvested cannabis plants, and (iii) finished goods.
Inventory is valued at the lower of cost and net realizable value, with cost determined using the weighted average cost method. Net realizable value is calculated as the estimated selling price in the ordinary course of business, less any estimated costs to complete and sell the goods. Costs are capitalized to inventory, until substantially ready for sale. Costs include direct and indirect labor, raw materials, consumables, packaging supplies, utilities, facility costs, quality and testing costs, production related depreciation and other overhead costs including operating lease costs.
The Company records inventory reserves for obsolete and slow-moving inventory. Inventory reserves are based on inventory obsolescence trends, and the historical and professional experience of management. The Company classifies cannabis inventory as a current asset, although, due to the duration of the cultivation, drying, and conversion process, certain inventory items may not be realized in cost of sales within one year. As at December 31, 2025 and 2024, the reserves for obsolete and slow moving inventory was $nil and $nil, respectively. |
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| Property and equipment |
Property and equipment are stated at cost net of accumulated depreciation and accumulated impairment losses, if any. Costs include borrowing costs for assets that require a substantial period of time to become ready for use. Costs incurred for routine repairs and maintenance that do not add value or extend the useful life of the assets are expensed as incurred.
Depreciation is recognized so as to recognize the cost of assets less their residual values over their useful lives. Depreciation begins when an asset is available for use, meaning that it is in the location and condition necessary for it to be used in the manner intended by management. The estimated useful lives, residual values and method of depreciation are reviewed at each period end, with the effect of any changes in estimated useful lives and residual values accounted for on a prospective basis.
Depreciation is calculated on a straight-line basis over the following estimated useful lives:
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| Intangible assets |
The Company’s indefinite lived intangible assets consist primarily of cultivation licenses. These assets are capitalized at fair value at the acquisition date. They are not amortized because the Company has determined that there is no foreseeable limit to the period over which these assets are expected to generate cash flow. The Company reviews the useful life of these intangible assets each reporting period to determine whether events or circumstances continue to support their indefinite useful life. Intangible assets with indefinite useful lives are tested for impairment at least annually, and more frequently if events or changes in circumstances indicate that impairment may exist. |
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| Impairment of long-lived assets |
Long-lived assets, except for intangible assets with indefinite useful lives, are reviewed when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Such indicators include, among other factors, operating losses, unused capacity, market value declines, and obsolescence. If an indication of impairment is present, the Company compares the estimated undiscounted future cash flows to be generated by the asset group to the asset group’s carrying amount. If the undiscounted future cash flows are less than the carrying amount of the asset group, the Company records an impairment loss equal to the amount by which the asset group’s carrying amount exceeds its fair value. The fair value is determined based on valuation techniques such as a comparison to fair values of similar assets or a discounted cash flow analysis. |
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| Convertible debentures |
Convertible debt is recorded at amortized cost, net or issuance costs and discounts. The Company evaluates conversion and other embedded features to determine whether such features require separate accounting as derivatives or equity components. Equity-classified conversion features are recorded in additional paid-in capital, whole derivative-classified features are recorded at fair value with changes recognized in earnings. |
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| Derivative assets and liabilities |
The Company accounts for derivative instruments in accordance with ASC 815, Derivatives and Hedging (“ASC 815”), which establishes accounting and reporting standards for derivative instruments and hedging activities, including certain derivative instruments embedded in other financial instruments or contracts, and requires recognition of all derivatives on the balance sheet at fair value. Fair value changes in the derivative instruments are recorded through profit and loss. As at December 31, 2025 and 2024, the Company recorded the warrants as a derivative asset (Note 7) and conversion feature and warrants associated with the convertible debentures as derivative liabilities (Note 17 and Note 18). |
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| Financial instruments |
Financial instruments are contracts that give rise to a financial asset of one party and a financial liability or equity instrument of another party. Financial instruments are recorded initially at fair value, which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Subsequent measurement depends on how the financial instrument has been classified and may be at fair value or amortized cost. For financial instruments subsequently measured at fair value, the Company calculates the estimated fair value of financial instruments using quoted market prices whenever available. When quoted market prices are not available, the Company uses standard pricing models including the Black-Scholes option pricing model.
Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values. The three levels of the fair value hierarchy are:
Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities;
Level 2 - Inputs other than quoted prices that are observable for the asset or liability either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3 - Inputs that are not based on observable market data.
There have been no transfers between fair value hierarchy levels during the years ended December 31, 2025 and 2024.
The Company’s cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities are recorded at cost. The carrying values of these financial instruments approximate their fair value due to their short-term maturities. The Company’s note receivable, long-term debt, and convertible debentures are valued at amortized cost using the effective interest rate method. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest risks arising from these financial instruments. The Company’s warrant asset and derivative liability are measured using the Black-Scholes option pricing model (Notes 7 and 16). |
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| Concentration of Risk |
Credit risk is the risk of potential loss to the Company if the counterparty to a financial instrument fails to meet its contractual obligations. The financial instruments that potentially subject the Company to a significant concentration of credit risk consist of cash and cash equivalents, trade receivables and note receivable. The Company mitigates its exposure to credit loss associated with cash by placing its cash in major financial institutions. As at December 31, 2025, the Company had cash of $11,371,834 (December 31, 2024 - $4,917,708). The counterparties to the trade receivables and note receivable have a strong credit profile, and as such, the Company has assessed the associated credit risk as moderate to low. No customer accounts for more than 10% of trade receivables at December 31, 2025 and 2024.
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due. As at December 31, 2025, the Company had working capital of $16,453,938 (December 31, 2024 – working capital deficiency of $6,472,127). The Company primarily relies on cash generated from its cannabis operations, as well as proceeds from debt financing to fulfil its financial commitments. The Company’s ability to service its debt depends on sustaining the profitability of its operations and obtaining sufficient financing on acceptable terms.
Foreign currency risk is the risk that the fair values of future cash flows of a financial instrument will fluctuate because they are denominated in currencies that differ from the respective functional currency. The Company is not exposed to significant foreign currency risk as its operations and cash flows are all denominated in USD. The Canadian parent has a functional currency of Canadian dollars but does not routinely engage in financing activities in alternate currencies and during the years ended December 31, 2025 and 2024 had minimal exposure to foreign currency risk. |
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| Leases |
Upon commencement of a contract containing a lease, the Company classifies leases other than short-term leases as either an operating lease or a finance lease according to the criteria prescribed by ASU 842, Leases. The lease classification is reassessed only when: (a) the contract is modified and the modification is not accounted for as a separate contract, and (b) there is a change in the lease term or the assessment of whether the lessee is reasonably certain to exercise an option to purchase the underlying asset. The Company has elected to recognize lease payments in earnings on a straight-line basis over the term of the lease and variable lease payments in the period in which the obligation for the payments are incurred. For both finance leases and operating leases, the Company recognizes right-of-use assets and lease liabilities which are initially measured as the present value of remaining lease payments and initial direct costs discounted at the interest rate implicit in the lease, or if that rate is not readily determinable, the Company’s incremental borrowing rate.
Finance lease payment included in the lease liability is apportioned between the repayment of the liability and a finance cost. The finance cost is recognized in interest expense in the consolidated statements of net income (loss) and comprehensive income (loss) over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Operating lease payment is included in the lease liability is apportioned between the repayment of the liability and an operating lease expense. The operating lease payment is recognized as an operating lease cost within inventory and cost of goods sold in the consolidated statements of net income (loss) and comprehensive income (loss) over the lease period so as to produce a constant periodic operating lease cost over the term of the lease.
Right-of-use assets are measured at cost, which is calculated as the amount of the initial measurement of lease liability plus any initial direct costs. The right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the useful life of the underlying asset. The depreciation is recognized from the commencement date of the lease. For finance leases, the amortization is recognized as amortization expense in the consolidated statements of net income (loss) and comprehensive income (loss). For operating leases, the amortization is recognized as a component of operating lease cost within inventory and cost of goods sold in the consolidated statements of net income (loss) and comprehensive income (loss).
Payments associated with short-term leases and leases of low-value assets are recognized as an expense on a straight-line basis in general and administration expense in the consolidated statements of net income (loss) and comprehensive income (loss). Short-term leases are defined as leases with a lease term of 12 months or less.
The Company has elected not to separate lease components from non-lease components when allocating contract consideration for all land and building leases. |
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| Revenue |
Revenue is recognized in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”) when goods or services are transferred to the customer in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.
In order to recognize revenue under ASC 606, the Company applies the following five steps:
Revenue From Sales of Goods
Revenue from the sale of goods is generally recognized when control over the goods has been transferred to the customer. Payment for sales is typically due prior to shipment. The Company has elected to treat shipping and handling activities as a fulfillment activity, meaning these activities are not considered a separate performance obligation. Shipping and handling fees billed to customers are recognized as revenue at the time control of the goods passes to the customer. Costs incurred by the Company for shipping and handling are classified as cost of sales in the consolidated statements of income (loss) and comprehensive income (loss). Payment for wholesale transactions is due within a specified time period as permitted by the underlying agreement and the Company’s credit policy upon the transfer of goods to the customer. The Company generally satisfies its performance obligation and transfers control to the customer upon delivery and acceptance by the customer. Revenue is recorded at the estimated amount of consideration to which the Company expects to be entitled.
Service Revenue
Revenues from services consist of one performance obligation, being the provision of the agreed upon services. The Company recognize service revenue when the contracted services have been provided and the income is determinable. The Company’s contract terms do not include a provision for significant post-service delivery obligations. |
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| Share-based compensation |
Share-based compensation expense consists of the Company’s stock option and restricted share unit expense.
Stock options and restricted share units granted to employees and consultants are measured based on the grant-date fair value. Share-based compensation expense for stock options is generally recognized based on the straight-line basis over the requisite service period. The Company has elected to account for forfeitures of share-based awards as they occur rather than estimating forfeitures at the grant date. Accordingly, stock-based compensation expense is recognized assuming all awards will vest, and previously recognized compensation cost is reversed in the period in which an award is forfeited due to an employee’s failure to satisfy the applicable service conditions.
Share-based compensation for restricted share units is recognized at the time of grant by multiplying the share price on the date of grant by the number of restricted share units granted. Share-based compensation expense is included in share-based compensation expense or cost of finished cannabis inventory sold based on the employee’s function classification.
Consideration paid to the Company on the exercise of stock options is recorded as subordinate voting common shares (“SV Shares”). |
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| Income taxes |
The Company uses the asset and liability method to account for income taxes. Deferred income tax assets and liabilities are determined based on enacted tax rates and laws for the years in which the differences are expected to reverse.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
As the Company operates in the cannabis industry, it is subject to the limits of IRC Section 280E, under which the Company is only allowed to deduct expenses directly related to the cost of producing the products or cost of production.
The Company recognizes uncertain income tax positions at the largest amount that is more-likely-than-not to be sustained upon examination by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Recognition or measurement is reflected in the period in which the likelihood changes. Any interest and penalties related to unrecognized tax liabilities are presented within income tax expense in the consolidated statements of loss and comprehensive loss. |
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| Earnings per share |
The Company presents basic and diluted loss per share data for its common shares. Basic loss per share is calculated using the weighted average number of shares outstanding during the respective years. Diluted loss per share is computed by dividing net loss by the weighted average shares outstanding adjusted for additional shares from the assumed exercise of stock options, restricted share units, or warrants, if dilutive.
The number of additional shares is calculated by assuming the outstanding dilutive convertible instruments, options, and warrants are exercised and that the assumed proceeds are used to acquire common shares at the average market price during the year. |
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| Business Combinations and Asset Acquisitions |
The Company accounts for acquisitions in accordance with ASC 805, Business Combinations.
Transactions are evaluated at inception to determine whether they represent a business combination or an asset acquisition. Transactions meeting the definition of a business are accounted for using the acquisition method of accounting; otherwise, it is accounted for as an asset acquisition.
Business combinations are accounted for using the acquisition method, whereby identifiable assets acquired and liabilities assumed are recognized at their estimated fair values as of the acquisition date. Goodwill is recognized for the excess of consideration transferred over the net fair value of identifiable assets acquired and liabilities assumed. Acquisition‑related costs are expensed as incurred. Asset acquisitions are recorded by allocating the cost of the acquisition, including transaction costs, to the assets acquired and liabilities assumed based on their relative fair values. No goodwill is recognized.
The Company recognizes contingent consideration arrangements at their acquisition-date fair value as part of the consideration transferred in a business combination. Subsequent changes in fair value of contingent considerations classified as a liability are recognized in earnings. The Company remeasures the fair value of the contingent consideration at each reporting date until the contingency is resolved, with changes in fair value recorded in earnings. |
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| Recently adopted accounting pronouncements |
Emerging Growth Company
The Company is an emerging growth company as defined in Section 102 (b)(1) of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), which exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards.
The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has not elected to opt out of such extended transition period, which means that when a standard is issued or revised, and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make the comparison of the Company’s consolidated financial statements with another public company difficult or impossible because of the potential differences in accounting standards used.
In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, Improvements to Reportable Segment Disclosures (Topic 280). The Company adopted ASU 2023-07 as of April 1, 2024. This update enhances the disclosure requirements for reportable segments, including significant segment expenses and interim period disclosures. The Company have disclosed the title and position of our Chief Operating Decision Maker (CODM) to provide clarity on who is responsible for making operating decisions. These disclosures aim to enhance transparency and provide more decision-useful information to investors and other stakeholders.
In December 2023, the FASB issued Accounting Standards Update 2023-09 (“ASU 2023-09”), Income Taxes (Topic 740): Improvements to Income Tax Disclosures, requiring entities to disclose more detailed information about income tax expense (benefit), significant components of income tax expense (benefit), separate disclosure of income tax expense (benefit) for domestic and foreign jurisdictions and by major jurisdictions. The Company adopted ASU 2023-09 as of January 1, 2024.
In November 2024, the Financial Accounting Standards Board issued Accounting Standards Update 2024-03 (“ASU 2024-03”), Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosure (Subtopic 220-40): update required disclosure of specified information about certain costs and expenses. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026. The Company has early adopted this standard.
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new pronouncements that have been issued that might have a material impact on its financial position or results of operations.
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