
Introduction This section provides an overview of the report and the financial standards used, including IFRS and Non-IFRS Measures, and their intended use and limitations Overview of Report and Financial Standards This MD&A analyzes Organigram's Q2 Fiscal 2025 financial performance under IFRS, detailing Non-IFRS Measures and their limitations - Financial data is prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the IASB2 - The MD&A includes Non-IFRS Measures like Adjusted gross margin, Adjusted gross margin %, and Adjusted EBITDA, which management uses to evaluate operating results and performance48 - Non-IFRS Measures are not standardized and may not be directly comparable to those used by other companies; they should be considered as additional information, not a substitute for IFRS measures5 Cautionary Statement Regarding Forward-Looking Information This section outlines forward-looking information, emphasizing its inherent uncertainties and risks that could cause actual results to differ materially Nature and Scope of Forward-Looking Information This section outlines the nature of forward-looking information, including expectations about future events, operational capacities, strategic collaborations, market demand, and regulatory changes, emphasizing that such statements are not historical facts and involve inherent uncertainties and risks that could cause actual results to differ materially - Forward-looking information includes expectations regarding production capacity, facility licensing, collaboration with BAT, demand for cannabis products, and changes in legislation10 - Statements are based on management's beliefs about future events, which are inherently uncertain and beyond control, and do not guarantee future performance911 - Factors that could cause actual results to differ materially include financial risks, industry competition, global events, regulatory changes, supply risks, and the ability to maintain licenses or certifications12 Cautionary Statement Regarding Certain Non-IFRS Measures This section defines key Non-IFRS Measures like Adjusted Gross Margin and Adjusted EBITDA, explaining their utility and reiterating they are not standardized or substitutes for IFRS results Definitions and Utility of Non-IFRS Measures This section defines key Non-IFRS Measures used by Organigram, including Adjusted Gross Margin and Adjusted EBITDA, explaining their calculation methodologies and why management considers them useful indicators of operating performance, reiterating that these measures are not standardized and should not be viewed in isolation from IFRS results - Adjusted gross margin is calculated by subtracting cost of sales before specific non-cash fair value adjustments and inventory charges, providing a normalized view of operational profitability17 - Adjusted EBITDA is calculated as net income (loss) excluding various non-operating and non-cash items, serving as a proxy for operating cash flow and future financial performance1718 - Management changed the calculation of Adjusted EBITDA in Q2 Fiscal 2024 to include provisions for expected credit losses, conforming prior quarters for consistency17 Business Overview This section provides an overview of Organigram's business as a licensed cannabis cultivator and producer, detailing its facilities and recent entry into the U.S. hemp-derived THC beverage market Nature of the Company's Business Organigram is a licensed cannabis cultivator and producer of consumer packaged goods in Canada, distributing to recreational and medical markets, and exporting internationally, operating five facilities across Canada and recently acquiring CPL to enter the U.S. hemp-derived THC beverage market - Organigram is a licensed cannabis cultivator and producer of consumer packaged goods, authorized to manufacture and distribute to Canadian recreational and medical markets, and export internationally21 - The company operates five facilities across Canada: Moncton Campus, Winnipeg Facility, Lac-Supérieur Facility, Aylmer Facility, and London Facility2326 - On March 31, 2025, Organigram acquired CPL, marking its commercial entry into the U.S. hemp-derived THC beverage market and fast-tracking its entry into the Canadian cannabis beverage category23 Strategy Organigram's corporate strategy focuses on increasing market share, driving profitability, expanding internationally, and delivering long-term shareholder value through four pillars: Innovation, Consumer Focus, Efficiency, and Market Expansion, including product development with BAT, maintaining market leadership in key categories, optimizing operations, and pursuing strategic acquisitions and international exports - Organigram's strategy is built on four pillars: Innovation, Consumer Focus, Efficiency, and Market Expansion, aiming to increase market share, drive profitability, and expand internationally2427 - Innovation is driven by a Product Development Collaboration (PDC) with BAT, establishing a 'Centre of Excellence' (CoE) for next-generation cannabis products, with Organigram holding a worldwide, royalty-free license for developed IP25 - The company holds the 1 market position as of Q2 Fiscal 2025, with product category leadership in SHRED, Hash, SHRED'ems, Monjour, and Boxhot, demonstrating strong consumer appeal2835 - Efficiency initiatives include three-tier cultivation, proprietary IT tracking, automation in post-harvest production, and strategic investments in facilities like Motif and Phylos for seed-based production and cost reduction2932 - Market expansion is pursued through domestic acquisitions, international exports to Germany, Australia, and the UK, the 'Jupiter Pool' investment fund with BAT for international opportunities, and entry into the U.S. hemp-derived THC beverage market via CPL acquisition3436 Key Quarterly Financial and Operating Results This section summarizes Organigram's Q2 Fiscal 2025 financial and operating performance, highlighting key metrics like net revenue, gross margin, and Adjusted EBITDA compared to the prior year Summary of Q2 Fiscal 2025 Performance Organigram reported significant financial improvements in Q2 Fiscal 2025 compared to Q2 Fiscal 2024, with net revenue increasing by 74% to $65.6 million and Adjusted EBITDA turning positive at $4.9 million from a loss, while gross margin before fair value adjustments remained stable at 30%, Adjusted Gross Margin improved to 33%, and dried flower kilograms sold also increased by 17% Key Quarterly Financial and Operating Results (Q2 Fiscal 2025 vs. Q2 Fiscal 2024) | Metric | Q2-2025 ($ thousands) | Q2-2024 ($ thousands) | Change ($ thousands) | % Change | | :----------------------------------- | :-------------------- | :-------------------- | :------------------- | :------- | | Net revenue | 65,600 | 37,628 | 27,972 | 74 % | | Cost of sales | 45,813 | 26,366 | 19,447 | 74 % | | Gross margin before fair value adjustments | 19,787 | 11,262 | 8,525 | 76 % | | Gross margin % before fair value adjustments | 30 % | 30 % | — % | — % | | Operating expenses | 26,001 | 24,747 | 1,254 | 5 % | | Adjusted EBITDA | 4,908 | (1,045) | 5,953 | nm | | Net income (loss) | 42,456 | (27,075) | 69,531 | nm | | Net cash used in operating activities | (16,585) | (13,217) | (3,368) | 25 % | | Adjusted Gross Margin | 21,921 | 11,609 | 10,312 | 89 % | | Adjusted Gross Margin % | 33 % | 31 % | 2 % | | | Kilograms harvested - dried flower | 21,133 | 20,962 | 171 | 1 % | | Kilograms sold - dried flower | 19,701 | 16,811 | 2,890 | 17 % | Revenue Net revenue for Q2 Fiscal 2025 increased by 74% year-over-year to $65.6 million, primarily driven by a significant increase in recreational cannabis revenue, boosted by contributions from Motif, and higher international sales, with the volume of dried flower sales also rising by 17% - Net revenue for Q2 Fiscal 2025 was $65.6 million, a 74% increase from Q2 Fiscal 202439 - Recreational cannabis sales accounted for 87% ($56.7 million) of net revenue, international sales for 9% ($6.1 million), and other revenues for 4% ($2.9 million)39 - The increase in net revenue was primarily due to a $23.5 million increase in recreational cannabis revenue (driven by Motif) and a $3.9 million increase in international sales39 - Volume of flower sales increased by 17% to 19,701 kg in Q2 Fiscal 2025, attributed to large format value products, increased international sales, and higher infused pre-roll sales40 Cost of Sales Cost of sales for Q2 Fiscal 2025 increased to $45.8 million, mirroring the 74% rise in net revenue, and includes $0.5 million in inventory provisions for unsaleable items - Cost of sales increased to $45.8 million in Q2 Fiscal 2025 from $26.4 million in Q2 Fiscal 2024, a 74% increase, primarily due to the corresponding increase in net revenue41 - Included in Q2 Fiscal 2025 cost of sales are $0.5 million of inventory provisions for unsaleable inventories, compared to $0.3 million in Q2 Fiscal 202441 Gross Margin Before Fair Value Adjustments and Adjusted Gross Margin Gross margin before fair value adjustments for Q2 Fiscal 2025 was $19.8 million, maintaining a 30% margin, while Adjusted gross margin improved to $21.9 million, or 33% of net revenue, up from 31% in the prior year, driven by higher sales volumes and lower per-unit costs, with Organigram's standalone margin (excluding Motif) at 37% - Gross margin before fair value adjustments for Q2 Fiscal 2025 was $19.8 million, or 30% of net revenue, consistent with Q2 Fiscal 202442 - Adjusted gross margin for Q2 Fiscal 2025 was $21.9 million, or 33% of net revenue, an increase from 31% in Q2 Fiscal 202443 - The improvement in adjusted gross margin was largely due to higher overall sales volumes and a lower cost of sales per unit43 - Organigram's standalone adjusted gross margin, excluding Motif, was 37% in Q2 Fiscal 202543 Operating Expenses Total operating expenses increased by 5% to $26.0 million in Q2 Fiscal 2025, with sales and marketing expenses rising by 39% due to increased trade investment, while general and administrative and R&D costs remained flat, and share-based compensation decreased by 53% due to the timing of equity award vesting Operating Expenses (Q2 Fiscal 2025 vs. Q2 Fiscal 2024) | Expense Category | Q2-2025 ($ thousands) | Q2-2024 ($ thousands) | Change ($ thousands) | % Change | | :----------------------- | :-------------------- | :-------------------- | :------------------- | :------- | | General and administrative | 14,967 | 14,929 | 38 | nm | | Sales and marketing | 7,523 | 5,403 | 2,120 | 39 % | | Research & development | 2,662 | 2,606 | 56 | nm | | Share-based compensation | 849 | 1,809 | (960) | (53)% | | Total operating expenses | 26,001 | 24,747 | 1,254 | 5 % | - Sales and marketing expenses increased by 39% to $7.5 million, but decreased as a percentage of net revenue from 14% to 11%46 - Share-based compensation decreased by 53% to $0.8 million, primarily due to the timing of equity award vesting, with no new awards granted in Q2 Fiscal 202548 Other (Income) / Expenses Other (income)/expenses shifted significantly from an expense of $12.0 million in Q2 Fiscal 2024 to an income of $49.9 million in Q2 Fiscal 2025, primarily driven by a substantial gain from changes in the fair value of derivative liabilities, preferred shares, and other financial assets, as well as a gain from contingent consideration revaluation Other (Income)/Expenses (Q2 Fiscal 2025 vs. Q2 Fiscal 2024) | Item | Q2-2025 ($ thousands) | Q2-2024 ($ thousands) | Change ($ thousands) | % Change | | :---------------------------------------------------- | :-------------------- | :-------------------- | :------------------- | :------- | | Investment income, net of financing costs | (179) | (650) | (471) | (72)% | | Acquisition and transaction costs | 974 | (170) | (1,144) | nm | | Change in fair value of contingent consideration | (3,899) | — | 3,899 | (100)% | | Change in fair value of derivative liabilities, preferred shares and other financial assets | (47,155) | 12,529 | 59,684 | nm | | Total other (income)/expenses | (49,933) | 11,958 | (61,891) | (518)% | - A gain of $47.2 million was recognized from the change in fair value of derivative liabilities, preferred shares, and other financial assets in Q2 Fiscal 2025, compared to a $12.5 million loss in Q2 Fiscal 202454 - A gain of $3.9 million was recorded from the revaluation of contingent consideration related to the Motif acquisition in Q2 Fiscal 202553 - Acquisition and transaction costs increased to $1.0 million, primarily due to costs associated with the Motif and CPL acquisitions51 Adjusted EBITDA Adjusted EBITDA significantly improved to a positive $4.9 million in Q2 Fiscal 2025, a $6.0 million increase from a loss of $1.0 million in Q2 Fiscal 2024, with this turnaround primarily driven by higher net flower revenue, increased international sales, and improved adjusted gross margins - Adjusted EBITDA was $4.9 million in Q2 Fiscal 2025, compared to a loss of $1.0 million in Q2 Fiscal 2024, representing a $6.0 million increase55 - The increase in Adjusted EBITDA is primarily attributed to higher net flower revenue, increased international sales, and improved adjusted gross margins55 Net Income (Loss) Organigram achieved a net income of $42.5 million in Q2 Fiscal 2025, a substantial improvement from a net loss of $27.1 million in Q2 Fiscal 2024, with this positive shift mainly due to higher adjusted gross margins and significant fair value gains on derivative liabilities, contingent considerations, preferred shares, and other financial assets - Net income for Q2 Fiscal 2025 was $42.5 million, a significant improvement from a net loss of $27.1 million in Q2 Fiscal 202455 - The increase in net income is primarily due to higher adjusted gross margins and higher fair value gains on derivative liabilities, contingent considerations, preferred shares, and other financial assets55 Key Developments During the Quarter and Subsequent to March 31, 2025 This section outlines key strategic investments and corporate actions, including the final BAT Investment tranche, company rebranding, and the CPL acquisition for U.S. hemp-derived THC beverage market entry Strategic Investments and Corporate Actions Organigram completed the final tranche of the $124.6 million Follow-on BAT Investment in February 2025, securing approximately $41.5 million, rebranded to Organigram Global Inc., and entered the U.S. and Canadian beverage categories through the acquisition of CPL in April 2025, with CPL beverages already available in multiple states and provinces - In February 2025, Organigram closed the third and final tranche of the $124.6 million Follow-on BAT Investment, receiving approximately $41.5 million56 - In March 2025, shareholders approved the company's name change and rebranding to Organigram Global Inc., reflecting its market leadership and international presence57 - In April 2025, Organigram acquired CPL for an upfront consideration of approximately $6.2 million, entering the U.S. hemp-derived THC beverage market and the Canadian cannabis beverage category58 - CPL beverages are currently available in six Canadian provinces and 10 U.S. states, with further expansion planned by the end of calendar 202558 Discussion of Operations This section details Organigram's operational facilities, production capabilities, and ongoing research and product development initiatives, including the Centre of Excellence collaboration with BAT Operational Facilities and Production Capabilities Organigram operates five key facilities, each specialized for different aspects of cannabis production, with the Moncton Campus harvesting 21,133 kg of dried flower in Q2 Fiscal 2025, the Winnipeg Facility producing over 4 million gummies monthly, Lac-Supérieur focusing on craft flower and hash, the Aylmer Facility handling advanced extraction and pre-roll production, and the London Facility serving as a centralized distribution hub - Moncton Campus, the flagship facility, harvested 21,133 kg of dried flower in Q2 Fiscal 2025, equipped for in-house extraction, testing, and automated production5961 - Winnipeg Facility is highly automated, capable of producing over 4 million gummies monthly, including products utilizing nanoemulsion technology62 - Lac-Supérieur Facility produces 2,400 kg of flower and over 2 million packaged units of hash annually, including SHRED X Rip Strip Hash63 - Aylmer Facility has advanced extraction capabilities (hydrocarbon and CO2) and an estimated monthly production capacity of 1,200 kg of distillate, 600 kg of hydrocarbon extract, and 1.6 million pre-rolls64 - London Facility is a centralized warehouse and distribution hub in Ontario, aimed at optimizing fulfillment and reducing logistics costs65 Research and Product Development Organigram emphasizes product innovation through R&D, including a collaboration with BAT at the Centre of Excellence (CoE) for next-generation cannabis products and fundamental science, which has developed nanoemulsion technology, clinically validated for faster onset in edibles, and is exploring minor cannabinoids and novel formulations, while plant science R&D focuses on unique, high-terpene, and high-THC cultivars, supported by a collaboration with Phylos - The Centre of Excellence (CoE), a collaboration with BAT, focuses on R&D for next-generation cannabis products and fundamental cannabis science, with costs funded equally by Organigram and BAT67 - The CoE's BioLab conducts advanced plant science research, leading to the introduction of minor cannabinoids into the product portfolio and the development of emulsions, vapor formulations, and flavor innovations68 - A pharmacokinetics (PK) study validated nanoemulsion technology (FAST™), enabling the commercial launch of Edison Sonics gummies with faster onset and higher peak cannabinoid levels, with plans to extend to beverages69 - Plant science R&D in Moncton focuses on developing unique, high-terpene, and high-THC cultivars, leveraging the BioLab for quality, potency, and disease-resistance marker discovery, supported by Phylos collaboration70 Outlook This section provides Organigram's market outlook, including projected cannabis sales, international export growth, and the rapidly expanding U.S. hemp-derived beverage market, alongside business strategy and industry trends Market Size Organigram maintains a positive outlook on the cannabis market, projecting Canada-wide legal sales to reach $5.3 billion by 2028, with Canadian cannabis exports significantly growing to $218 million in 2024, driven by global reform and the pursuit of higher margins, and the company also entered the rapidly growing U.S. hemp-derived beverage market, projected to reach $4 billion by 2028 - Canada-wide legal cannabis sales are expected to total $5.3 billion in calendar 202872 - Canada's cannabis exports increased from $8 million in 2020 to approximately $218 million in 2024, driven by global cannabis reform and the pursuit of higher margins72 - The U.S. hemp-derived beverages market is experiencing rapid growth, generating over $1 billion in retail sales and projected to reach $4 billion by 202873 Business Outlook Organigram anticipates revenue growth from innovative products, particularly FAST™ nanoemulsion technology in gummies and future beverages, offering a competitive edge, with international sales expected to increase, supported by investments in Sanity Group and anticipated EU-GMP certification, and the company targets an average adjusted gross margin of 35% for Fiscal 2025, aiming for 40% in H2 Fiscal 2026, along with positive full-year Adjusted EBITDA and cash flow from operations - Organigram expects revenue growth from innovative products, especially through the commercialization of FAST™ nanoemulsion technology in Edison Sonics gummies, which offer faster onset and higher cannabinoid concentration74 - International sales are projected to increase throughout Fiscal 2025, driven by diversified supply partners, investment in Germany's Sanity Group, and anticipated EU-GMP certification for the Moncton Campus74 - The company expects adjusted gross margin to average approximately 35% for Fiscal 2025, targeting 40% in the second half of Fiscal 202675 - Organigram anticipates positive full-year Fiscal 2025 Adjusted EBITDA, surpassing Fiscal 2024 levels, and positive cash flow from operations before working capital changes75 - Margin improvement opportunities include increased sales of higher-margin ready-to-consume products, growth in high-margin international sales (especially Germany), and continued operational efficiencies from Motif integration and seed-based production77 Industry Trends The cannabis industry remains highly competitive but is seeing stabilizing supply-demand dynamics due to consolidation and international market diversion, with consumer preferences favoring large-format value products, high THC potency, and innovation in formats like infused pre-rolls, vapes, and beverages, while regulatory scrutiny on THC potency labeling is increasing, pushing for greater transparency, and Organigram holds strong market positions in flower, pre-rolls, hash, and vapes, and is expanding into beverages - The cannabis industry is highly competitive, but supply and demand dynamics are stabilizing due to industry consolidation and diversion of surplus cultivation to international markets78 - Consumer preferences show sustained demand for large-format value products, higher THC potency (especially in dried flower), and innovation in formats like infused pre-rolls, vapes, beverages, and edibles78 - Regulatory efforts are intensifying to address inflated THC potency labeling, with initiatives from CSAC, Health Canada, and OCS to establish consistent testing protocols and verify potency claims79 - Organigram holds the 3 market share in the flower category, 2 in infused pre-rolls, 1 in all pre-rolls, 1 in hash, and 3 in the gummy category as of March 31, 20258081 - Through the Motif acquisition, Organigram leads in the vape category and is leveraging Greentank technology, while the CPL acquisition has given Organigram 5.6% of the Canadian beverage category and entry into the U.S. hemp-derived THC beverage market8284 International Market Organigram serves international medical supply customers in Australia, Germany, and the UK, with a strategic investment in Germany's Sanity Group to establish a foothold in the European market, and has submitted its EU-GMP certification application for its Moncton Campus, while the $124.6 million Follow-on BAT Investment includes $83 million earmarked for the 'Jupiter Pool' investment fund for future international expansion - Organigram serves international medical supply customers in Australia, Germany, and the UK, with a strategic investment in Germany's Sanity Group to establish a foothold in the European market86 - The company submitted its EU-GMP certification application for its Moncton Campus in Q1 Fiscal 2024, completed the audit in November 2024, and is awaiting final certification87 - The $124.6 million Follow-on BAT Investment includes $83 million earmarked for the 'Jupiter Pool' investment fund, with approximately $23 million already deployed into OBX and Sanity Group, and $59 million remaining for future international expansion8889 Financial Results and Review of Operations This section provides a detailed review of Organigram's financial results for the six months ended March 31, 2025, covering net revenue, gross margin, operating expenses, and net income, with a cautionary note on Non-IFRS Measures Cautionary Note Regarding Non-IFRS Financial Measures This section reiterates the cautionary statement regarding Non-IFRS Measures like Adjusted EBITDA and adjusted gross margin, emphasizing that these are not IFRS-compliant, may not be comparable across companies, and should be used as supplementary information, not as substitutes for IFRS measures - Non-IFRS Measures (Adjusted EBITDA, adjusted gross margin) are not calculated in accordance with IFRS and may not be comparable to similar data from other companies91 - These measures are intended to provide additional information and should not be considered in isolation or as a substitute for IFRS performance measures91 Financial Highlights (Six Months Ended March 31, 2025 vs. 2024) For the six months ended March 31, 2025, Organigram reported a significant increase in net revenue by 46% to $108.3 million and a turnaround to net income of $19.5 million from a loss, with Adjusted Gross Margin improving to 32%, Adjusted EBITDA turning positive at $6.3 million, and total assets growing by 62% to $537.9 million Financial Highlights (Six Months Ended March 31, 2025 vs. 2024) | Financial Results | 2025 ($ thousands) | 2024 ($ thousands) | $ Change | % Change | | :------------------------------------ | :----------------- | :----------------- | :------- | :------- | | Gross revenue | 169,569 | 113,695 | 55,874 | 49 % | | Net revenue | 108,330 | 74,083 | 34,247 | 46 % | | Cost of sales | 74,428 | 53,310 | 21,118 | 40 % | | Gross margin before fair value adjustments | 33,902 | 20,773 | 13,129 | 63 % | | Gross margin % before fair value adjustments | 31 % | 28 % | 3 % | | | Gross margin | 32,232 | 16,300 | 15,932 | 98 % | | Operating expenses | 46,616 | 46,786 | (170) | nm | | Net income (loss) | 19,499 | (42,825) | 62,324 | nm | | Net earnings (loss) per common share, basic | 0.161 | (0.497) | 0.658 | nm | | Net cash used in operating activities | (20,765) | (1,291) | 19,474 | 1,508 % | | Adjusted Gross Margin | 34,614 | 22,805 | 11,809 | 52 % | | Adjusted Gross Margin % | 32 % | 31 % | 1 % | | | Adjusted EBITDA | 6,318 | (909) | 7,227 | nm | | Financial Position | | | | | | Working capital | 182,879 | 138,228 | 44,651 | 32 % | | Inventory and biological assets | 115,049 | 83,264 | 31,785 | 38 % | | Total assets | 537,903 | 331,778 | 206,125 | 62 % | | Non-current financial liabilities | 43,266 | 34,439 | 8,827 | 26 % | Net Revenue For the six months ended March 31, 2025, net revenue increased by 46% to $108.3 million, primarily due to higher international and recreational cannabis sales, including contributions from the Motif acquisition, with the average selling price of recreational flower also increasing to $1.72 per gram, reflecting a more balanced supply and demand - Net revenue for the six months ended March 31, 2025, was $108.3 million, a 46% increase from $74.1 million in the comparative period96 - The increase was primarily driven by higher international revenue, recreational revenue, and contributions from Motif's sales post-acquisition96 - The average selling price (ASP) of recreational flower increased to $1.72 per gram from $1.65 per gram, indicating a more balanced supply and demand dynamic97 - Sales volumes of all flower in grams increased by 17% to 36,961 kg, primarily due to increased adult-use recreational and international sales98 Revenue Composition For the six months ended March 31, 2025, recreational flower remained the largest revenue category at $46.4 million, while recreational vapes saw a substantial increase to $22.5 million, and international flower and oil sales nearly tripled to $9.4 million, with recreational edibles and ingestible extracts/oil experiencing declines Net Revenue Composition by Product Category (Six Months Ended March 31, 2025 vs. 2024) | Product Category | 2025 ($ thousands) | 2024 ($ thousands) | | :------------------------------------ | :----------------- | :----------------- | | Recreational Flower, net of excise duty | 46,402 | 39,401 | | Recreational Vapes, net of excise duty | 22,488 | 1,832 | | Recreational Hash, net of excise duty | 5,622 | 5,694 | | Recreational Infused Pre-rolls, net of excise duty | 9,905 | 5,794 | | Recreational Edibles, net of excise duty | 10,453 | 11,398 | | Recreational Ingestible Extracts and Oil, net of excise duty | 348 | 3,426 | | Medical, net of excise duty | 1,206 | 894 | | International Flower and Oil | 9,399 | 3,209 | | Wholesale and Other | 2,507 | 2,435 | | Total Net Revenue | 108,330 | 74,083 | - Recreational Vapes revenue saw a significant increase from $1.8 million in 2024 to $22.5 million in 202599 - International Flower and Oil revenue nearly tripled from $3.2 million to $9.4 million99 Cost of Sales and Gross Margin Gross margin for the six months ended March 31, 2025, nearly doubled to $32.2 million, driven by higher recreational cannabis and international sales, lower cultivation costs, and increased unrealized gains on biological assets, however, Motif's sales contributed lower margins post-acquisition, and the adjusted gross margin for Q2 Fiscal 2025 was 33%, with Organigram's standalone margin at 37% - Gross margin for the six months ended March 31, 2025, was $32.2 million, a 98% increase from $16.3 million in the comparative period100 - Key factors impacting gross margin include higher recreational cannabis revenue, increased international sales, lower cultivation and post-harvest costs, and higher unrealized gains on biological assets100 - Unrealized gain on changes in the fair value of biological assets was $25.6 million for the six months ended March 31, 2025, up from $18.5 million101 - Adjusted gross margin for Q2 Fiscal 2025 was 33%, reflecting Motif's margin before full synergy realization, while Organigram's standalone margin was 37%105 Operating Expenses Total operating expenses for the six months ended March 31, 2025, remained flat at $46.6 million, with sales and marketing expenses increasing by 33% due to higher trade investments, while R&D costs decreased by 29% due to reduced activity under the BAT PDC Agreement and Motif acquisition synergies, and share-based compensation also decreased by 41% due to fewer immediate vesting equity awards Operating Expenses (Six Months Ended March 31, 2025 vs. 2024) | Expense Category | 2025 ($ thousands) | 2024 ($ thousands) | Change ($ thousands) | % Change | | :----------------------- | :----------------- | :----------------- | :------- | :------- | | General and administrative | 26,200 | 26,206 | (6) | nm | | Sales and marketing | 13,327 | 9,998 | 3,329 | 33 % | | Research and development | 5,031 | 7,073 | (2,042) | (29)% | | Share-based compensation | 2,058 | 3,509 | (1,451) | (41)% | | Total operating expenses | 46,616 | 46,786 | (170) | nm | - Sales and marketing expenses increased by 33% to $13.3 million, driven by higher trade investments with retail partners108 - R&D costs decreased by 29% to $5.0 million, primarily due to reduced activity under the PDC Agreement with BAT and headcount reductions from Motif acquisition synergies109 - Share-based compensation expense decreased by 41% to $2.1 million, mainly due to the absence of immediate vesting equity awards granted in the prior period110 Other (Income) Expenses Other (income)/expenses shifted from a $12.4 million expense in the prior six-month period to a $33.8 million income for the six months ended March 31, 2025, with this significant change primarily driven by a substantial fair value gain on derivative liabilities, preferred shares, and other financial assets, despite increased acquisition and transaction costs Other (Income)/Expenses (Six Months Ended March 31, 2025 vs. 2024) | Item | 2025 ($ thousands) | 2024 ($ thousands) | Change ($ thousands) | % Change | | :---------------------------------------------------- | :----------------- | :----------------- | :------- | :------- | | Investment income, net of financing costs | (1,004) | (1,172) | (168) | (14)% | | Acquisition and transaction costs | 5,478 | 420 | 5,058 | 1,204 % | | Change in fair value of contingent consideration | (3,899) | (50) | 3,849 | 7,698 % | | Change in fair value of derivative liabilities, preferred shares and other financial assets | (32,660) | 12,985 | 45,645 | nm | | Total other (income)/expenses | (33,777) | 12,369 | (46,146) | nm | - A fair value gain of $32.7 million was recognized on derivative liabilities, preferred shares, and other financial assets, a significant improvement from a $13.0 million loss in the prior period116 - Acquisition and transaction costs increased substantially to $5.5 million, mainly due to due diligence, regulatory filings, and integration expenses for the Motif and CPL acquisitions115 Net Income Organigram reported a net income of $19.5 million for the six months ended March 31, 2025, a significant turnaround from a net loss of $42.8 million in the prior year, with this primarily driven by higher gross margins and substantial fair value gains on derivative liabilities, preferred shares, and other financial assets - Net income for the six months ended March 31, 2025, was $19.5 million ($0.161 per Common Share basic), compared to a net loss of $42.8 million ($0.497 per Common Share basic and diluted) in the comparative period117 - The increase in net income is primarily attributable to higher gross margins and higher fair value gains recognized on Top-Up-Rights, preferred shares, share warrants, and other financial assets117 Summary of Quarterly Results This section summarizes Organigram's quarterly financial and operational trends, including net revenue, net income, and Adjusted EBITDA, highlighting fluctuations and key drivers over the past eight quarters Quarterly Financial and Operational Trends Organigram's net revenue showed fluctuations, with Q2 Fiscal 2025 reaching the highest level in eight quarters at $65.6 million, driven by record international sales and increased recreational revenue, while net income also saw a significant positive shift to $42.5 million in Q2 Fiscal 2025, primarily due to higher gross margins and fair value gains on financial instruments, contrasting with prior quarters' losses Summary of Quarterly Financial and Operational Results | Metric | Q3-F23 | Q4-F23 | Q1-F24 | Q2-F24 | Q3-F24 | Q4-F24 | Q1-F25 | Q2-F25 | | :------------------------------------ | :----- | :----- | :----- | :----- | :----- | :----- | :----- | :----- | | Recreational cannabis revenue (net of excise) ($ thousands) | 29,202 | 44,596 | 34,425 | 33,118 | 36,467 | 38,839 | 38,558 | 56,658 | | Medical, international, wholesale and other revenue ($ thousands) | 3,583 | 1,444 | 2,030 | 4,510 | 4,593 | 5,859 | 4,172 | 8,942 | | Net revenue ($ thousands) | 32,785 | 46,040 | 36,455 | 37,628 | 41,060 | 44,698 | 42,730 | 65,600 | | Net income (loss) ($ thousands) | (213,451) | (32,991) | (15,750) | (27,075) | 2,818 | (5,433) | (22,957) | 42,456 | | Net earning (loss) per common share, basic ($) | (2.708) | (0.420) | (0.194) | (0.297) | 0.027 | (0.050) | (0.202) | 0.329 | | Harvest (kg) - dried flower | 18,604 | 28,071 | 19,946 | 20,962 | 21,420 | 23,323 | 21,087 | 21,133 | | Employee headcount () | 923 | 935 | 984 | 987 | 914 | 875 | 1,241 | 1,150 | - Net revenue in Q2 Fiscal 2025 reached its highest level in the preceding eight quarters, driven by record international sales and increased recreational net revenue119 - Net income in Q2 Fiscal 2025 was $42.5 million, a significant increase from a net loss of $22.9 million in Q1 Fiscal 2025, primarily due to higher gross margins and fair value gains on derivative liabilities and other financial assets120 Adjusted EBITDA Adjusted EBITDA showed a positive trend, reaching $4.9 million in Q2 Fiscal 2025, up from $1.4 million in Q1 Fiscal 2025 and a loss in Q2 Fiscal 2024, with this improvement primarily due to higher international sales and improved adjusted gross margins, following periods of losses and fluctuations Adjusted EBITDA Reconciliation (Quarterly) | Metric | Q3-F23 | Q4-F23 | Q1-F24 | Q2-F24 | Q3-F24 | Q4-F24 | Q1-F25 | Q2-F25 | | :------------------------------------ | :----- | :----- | :----- | :----- | :----- | :----- | :----- | :----- | | Net (loss) income as reported ($ thousands) | (213,451) | (32,991) | (15,750) | (27,075) | 2,818 | (5,433) | (22,957) | 42,456 | | Adjusted EBITDA ($ thousands) | (2,914) | (1,890) | 136 | (1,045) | 3,465 | 5,860 | 1,410 | 4,908 | | Adjusted EBITDA Margin % | (9)% | (4)% | — % | (3)% | 8 % | 13 % | 3 % | 7 % | - Adjusted EBITDA increased to $4.9 million in Q2 Fiscal 2025, driven by higher international sales and improved adjusted gross margins126 - The company returned to a positive Adjusted EBITDA position in Q1 Fiscal 2024 due to higher adjusted gross margin from lower cultivation costs and Edison Jolts sales126 Balance Sheet, Liquidity and Capital Resources This section reviews Organigram's financial position, including cash flows, working capital, and total assets as of March 31, 2025, highlighting changes due to acquisitions and financing activities Financial Position and Cash Flows As of March 31, 2025, Organigram's total cash decreased to $83.4 million, primarily due to $64.9 million in cash payments for the Motif and CPL acquisitions, while total assets increased by 32% to $537.9 million, and working capital decreased by 12%, with cash used in operating activities increasing significantly, mainly due to working capital investments for anticipated business requirements Selected Balance Sheet Highlights (March 31, 2025 vs. September 30, 2024) | Metric | March 31, 2025 ($ thousands) | September 30, 2024 ($ thousands) | % Change | | :------------------------------------ | :--------------------------- | :----------------------------- | :------- | | Cash, restricted cash and short-term investments | 83,373 | 133,426 | (38)% | | Inventories | 101,341 | 67,351 | 50 % | | Working capital | 182,879 | 208,897 | (12)% | | Total assets | 537,903 | 407,860 | 32 % | | Total current and long-term debt | 55 | 85 | (35)% | | Non-current financial liabilities | 43,266 | 34,439 | 26 % | | Total shareholders' equity | 390,566 | 305,989 | 28 % | - Total cash (including restricted cash and short-term investments) decreased by 38% to $83.4 million, primarily due to a $64.9 million cash payment for the Motif and CPL acquisitions128 - Cash used in operating activities after working capital changes increased to $16.6 million for the three months and $20.8 million for the six months ended March 31, 2025, mainly due to incremental working capital investments132 - Cash provided by financing activities was $40.7 million for the three months and $40.5 million for the six months, primarily from the Follow-on BAT Investment133 - Cash used in investing activities increased significantly to $71.9 million for the six months, mainly due to $59.2 million in cash consideration for subsidiary acquisitions134 Off Balance Sheet Arrangements This section confirms the absence of any off-balance sheet arrangements for Organigram during the three and six months ended March 31, 2025 Absence of Off-Balance Sheet Arrangements Organigram reported no off-balance sheet arrangements during the three and six months ended March 31, 2025 - There were no off-balance sheet arrangements during the three and six months ended March 31, 2025135 Related Party Transactions This section details Organigram's related party transactions, including key management compensation and significant transactions with associates like BAT under the Product Development Collaboration Agreement Management and Board Compensation Total key management compensation decreased for both the three and six months ended March 31, 2025, primarily due to a reduction in share-based compensation as fewer equity awards were granted compared to the prior year Key Management and Board of Directors Compensation | Compensation Type | Three Months Ended March 31, 2025 ($ thousands) | Three Months Ended March 31, 2024 ($ thousands) | Six Months Ended March 31, 2025 ($ thousands) | Six Months Ended March 31, 2024 ($ thousands) | | :------------------------ | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Salaries and bonus | 1,324 | 1,479 | 2,626 | 3,050 | | Share-based compensation | 646 | 1,450 | 1,421 | 2,387 | | Total key management compensation | 1,970 | 2,929 | 4,047 | 5,437 | - Share-based compensation for key management decreased significantly, with no stock options, RSUs, or PSUs granted in the three months ended March 31, 2025, compared to the prior year137 Significant Transactions with Associates and Joint Operations Organigram engages in transactions with related parties, including BAT under the Product Development Collaboration (PDC) Agreement, with both companies contributing equally to the Centre of Excellence (CoE), and Organigram's direct expenses for the CoE decreasing in the current period, while the final tranche of the $124.6 million Follow-on BAT Investment was closed in February 2025, resulting in the issuance of Common and Preferred Shares to BAT - Under the PDC Agreement with BAT, Organigram incurred $1.5 million (three months) and $2.9 million (six months) in direct expenses for the Centre of Excellence (CoE) in 2025, a decrease from 2024140 - The balance receivable from BAT as at March 31, 2025, was $2.0 million141 - In February 2025, Organigram closed the third and final tranche of the $124.6 million Follow-on BAT Investment, issuing 7,562,447 Common Shares and 5,330,728 Preferred Shares to BAT142 Fair Value Measurements This section explains Organigram's fair value measurements for financial instruments and biological assets, detailing the three-level hierarchy and unobservable inputs used for valuation models (i) Financial Instruments Organigram classifies financial instruments at fair value using a three-level hierarchy, with many key valuations (e.g., investments in WHC, Phylos, OBX, Sanity Group, Top-up Rights, Motif's contingent consideration, CPL contingent consideration, Preferred Shares) relying on Level 3 unobservable inputs and complex models like binomial lattice and Monte Carlo, while derivative warrant liabilities are classified as Level 1 and 2, with fair value changes recognized in the statement of operations - Fair value measurements are classified into a three-level hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than quoted prices), and Level 3 (unobservable inputs)143148 - Investments in WHC, Phylos, OBX, Sanity Group, Top-up Rights, and contingent considerations for Motif and CPL are primarily based on Level 3 unobservable inputs, using models like market-based approach, Cox-Ross-Rubinstein binomial lattice, and Monte Carlo pricing144145146147149150152153 - Derivative warrant liabilities are based on Level 1 and 2 inputs using a Black-Scholes option pricing model, with fair value changes recognized in the statement of operations151159 - The fair value of Top-up Rights for BAT was revalued to $4.8 million as of March 31, 2025, with a decrease in estimated fair value change of $20.5 million for the three months168 - The commitment to issue Preferred Shares and the Preferred Shares themselves are classified as derivative liabilities and liabilities, respectively, measured at FVTPL, with fair value gains recognized in the current period174176177178 (ii) Biological Assets Biological assets, consisting of cannabis plants, are measured at fair value less costs to sell up to harvest, forming the basis for finished goods inventory cost, with the fair value determined using a model that estimates harvest yield, average selling price, wastage, post-harvest costs, and stage of completion, all relying on Level 3 unobservable inputs, and as of March 31, 2025, expected yield was 28,651 kg, with an unrealized gain on fair value changes of $25.6 million - Biological assets (cannabis plants) are measured at fair value less costs to sell up to harvest, which then becomes the cost basis for finished goods inventories180 - The fair value model uses Level 3 unobservable inputs: average selling price per gram ($1.63), expected average yield per plant (169 grams), wastage, post-harvest costs, and stage of completion183184 - As of March 31, 2025, the expected yield from biological assets is 28,651 kg, and an unrealized gain on changes in fair value of biological assets of $25.6 million was recognized181182 Outstanding Share Data This section summarizes Organigram's outstanding share data, including common shares, preferred shares, options, warrants, and other securities, as of March 31, 2025, and May 7, 2025 (i) Outstanding Shares, Warrants and Options and Other Securities As of March 31, 2025, Organigram had 133.8 million Common Shares issued and outstanding, along with 13.8 million Preferred Shares, with the total fully diluted shares standing at 177.4 million, including options, warrants, Top-up Rights, RSUs, and PSUs Outstanding Shares, Warrants and Options and Other Securities | Security Type | March 31, 2025 | May 7, 2025 | | :------------------------------------ | :------------- | :---------- | | Common shares issued and outstanding | 133,835,963 | 133,883,932 | | Preferred shares | 13,794,163 | 13,794,163 | | Options | 2,621,774 | 2,595,099 | | Warrants | 4,450,500 | 4,450,500 | | Top-up Rights | 17,533,616 | 17,498,926 | | Restricted share units | 3,505,128 | 3,443,280 | | Performance share units | 1,704,931 | 1,679,640 | | Total fully diluted shares | 177,446,075 | 177,345,540 | - Preferred shares are eligible for conversion into Common Shares, with 13,794,163 original preferred shares converting into one common share each, plus accretion amounts186 Critical Accounting Estimates and Judgments This section discusses Organigram's critical accounting estimates and judgments, noting no significant changes except for the Motif acquisition, and the non-material impact of recent IFRS amendments Accounting Estimates and New Pronouncements The preparation of financial statements requires management to make significant judgments and estimates, which are reviewed continuously, with no changes to critical accounting estimates in Q2 Fiscal 2025, except for a new estimate related to the Motif acquisition, and recent IFRS amendments regarding liability classification (IAS 1) and lease liability in sale and leaseback (IFRS 16) did not materially impact the company, nor did amendments to IAS 7 and IFRS 7 on supplier finance arrangements - No changes in critical accounting estimates occurred during the three months ended March 31, 2025, except for a new estimate and judgment related to the Motif acquisition189 - Amendments to IAS 1 (Classification of Liabilities) and IFRS 16 (Lease Liability in Sale and Leaseback) did not have a material impact on the Company's interim financial statements191192 - Amendments to IAS 7 and IFRS 7 (Supplier Finance Arrangements) are not expected to impact the Company's consolidated financial statements194 Product Development Collaboration This section details Organigram's Product Development Collaboration (PDC) with BAT, outlining the joint operation for the Centre of Excellence (CoE) and equal funding contributions BAT Product Development Collaboration Organigram's Product Development Collaboration (PDC) with BAT involves a joint operation for the Centre of Excellence (CoE), with both companies contributing equally to costs, and a portion of BAT's initial investment is reserved for Organigram's funding obligations, with Organigram recognizing $1.1 million and $2.1 million, respectively, in CoE expenses for the three and six months ended March 31, 2025 - The PDC Agreement with BAT involves a joint operation for the Centre of Excellence (CoE), with costs funded equally by Organigram and BAT195196 - A balance of $7.3 million in restricted funds related to the CoE remained as of March 31, 2025195 - Organigram recognized $1.1 million (three months) and $2.1 million (six months) of CoE expenses within research and development in the interim statements of operations196 Acquisition of Subsidiaries This section details Organigram's acquisitions of Motif and CPL, outlining the consideration, assets, liabilities, and goodwill, along with their strategic implications i. Acquisition of Motif On December 6, 2024, Organigram acquired Motif for $90 million upfront ($50 million cash, $40 million in common shares), plus potential contingent consideration of $10 million, with this acquisition aiming to leverage combined competitive advantages and generate economies of scale, and Motif contributed $42.8 million in gross revenue and $1.2 million in net income for the three months ended March 31, 2025 - Organigram acquired 100% of Motif on December 6, 2024, for $90 million upfront ($50 million cash, $40 million in common shares), plus potential contingent consideration of $10 million197 - Motif contributed $42.8 million in gross revenue and $1.2 million in net income to consolidated results for the three months ended March 31, 2025198 - The fair value of the 17,233,950 Common Shares issued was $39.1 million199 Provisional Recognition of Motif Assets Acquired and Liabilities Assumed | Item | Fair Value on Acquisition ($ thousands) | | :------------------------------------ | :------------------------------------ | | Assets | | | Accounts and other receivable | 21,618 | | Cash | 5,055 | | Inventories | 24,474 | | Property, plant and equipment | 19,864 | | Right-of-use assets | 5,744 | | Intangible assets | 34,330 | | Prepaid expenses and deposits | 1,338 | | Total assets | 112,423 | | Liabilities | | | Accounts payable and accrued liabilities | 27,708 | | Lease liability | 5,681 | | Other liabilities | 12,056 | | Loan payable | 236 | | Deferred income taxes | 10,100 | | Total liabilities | 55,781 | | Total identifiable net assets at fair value | 56,642 | | Consideration transferred | | | Cash consideration | 52,171 | | Equity instruments (17,233,950 Common Shares) | 39,121 | | Contingent consideration | 4,472 | | Settlement of pre-acquisition relationship | (89) | | Working capital adjustment | (541) | | Total consideration transferred | 95,134 | | Goodwill arising on acquisition | 38,492 | - Goodwill of $38.5 million arose from the acquisition, representing expected synergies, future income, and growth201 - A gain of $3.9 million was recognized from the change in fair valuation of Motif's contingent consideration during the three and six months ended March 31, 2025203 ii. Acquisition of CPL On March 31, 2025, Organigram acquired CPL for $6 million upfront, with potential additional contingent consideration of up to $24 million tied to sales milestones and earnout targets, with this acquisition representing a business combination under IFRS 3, bringing in formulations, distributor relationships, and an organized workforce, and goodwill of $11.3 million arose from the acquisition - Organigram acquired 100% of CPL on March 31, 2025, for $6 million upfront, with potential contingent consideration of up to $24 million based on sales milestones and earnout targets204205 - The acquisition was determined to be a business under IFRS 3, including inputs (formulations), distributor relationships, and an organized workforce206 Provisional Recognition of CPL Assets Acquired and Liabilities Assumed | Item | Fair Value on Acquisition ($ thousands) | | :------------------------------------ | :------------------------------------ | | Assets | | | Accounts and other receivable | 1,243 | | Cash | 118 | | Inventories | 1,072 | | Intangible assets | 15,166 | | Prepaid expenses and deposits | 13 | | Total assets | 17,612 | | Liabilities | | | Accounts payable and accrued liabilities | 1,119 | | Deferred income taxes | 3,564 | | Total liabilities | 4,683 | | Total identifiable net assets at fair value | 12,929 | | Consideration transferred | | | Cash consideration | 4,893.199 | | Contingent consideration | 18,397 | | Working capital adjustment | 957 | | Total consideration transferred | 24,247 | | Goodwill arising on acquisition | 11,318 | - Goodwill of $11.3 million arose from the acquisition, representing expected synergies, future income, and growth208 - The contingent consideration includes milestone payments of $2 million each for achieving US$500 and US$1 million in cumulative U.S. hemp-derived beverage sales by June 30, 2025, and September 30, 2025, respectively209210 - Earnout payments are based on 2.5 times trailing twelve months' net revenue to September 30, 2025, and September 30, 2026, with 50% payable in cash and 50% in company shares218 Contingent Liabilities This section describes Organigram's policy for recognizing and estimating loss contingency provisions, emphasizing the use of reasonable estimates and continuous review at each reporting date Recognition and Estimation of Loss Contingencies Organigram recognizes loss contingency provisions for probable losses when a reasonable estimate can be made, using the best estimate within a range or the mid-point if no single amount is better, with these estimates reviewed and revised at each reporting date - Loss contingency provisions are recognized for probable losses when management can reasonably estimate the loss213 - Estimates are based on the best probable loss within a range, or the mid-point if no single amount is superior, and are reviewed and revised at each reporting date213 Disclosure Controls and Procedures and Internal Control Over Financial Reporting This section reports on the ineffectiveness of Organigram's Disclosure Controls and Procedures (DCP) and Internal Control Over Financial Reporting (ICFR) due to material weaknesses, particularly in general IT controls, and ongoing remediation efforts Effectiveness of Controls and Remediation Efforts Organigram's Disclosure Controls and Procedures (DCP) and Internal Control Over Financial Reporting (ICFR) were deemed ineffective as of March 31, 2025, due to identified material weaknesses, particularly in general IT controls, and while a material weakness related to biological assets and inventory spreadsheets was remediated, efforts continue to address the remaining IT control deficiencies, with full remediation expected by the end of Fiscal 2025 - The Company's independent registered public accounting firm, PKF O'Connor Davies, issued an adverse report on the effectiveness of ICFR for the year ended September 30, 2024215 - Management concluded that DCP were not effective as of March 31, 2025, due to material weaknesses in ICFR216 - A material weakness was identified in ineffective general IT controls related to security, administration, and monitoring of service organizations224 - A material weakness related to management review controls over biological assets and inventory complex spreadsheets was successfully remediated in Q1 Fiscal 2025222226 - Remedial activities for remaining material weaknesses are in progress, with full remediation expected before the end of Fiscal 2025225228 - The scope of evaluation for DCP and ICFR excluded controls over recently acquired entities: Motif (acquired December 6, 2024), CPL, and CPL USA (both acquired March 31, 2025)219 Risk Factors This section outlines Organigram's key risk factors, including credit, liquidity, market, and concentration risks, as well as risks related to trade policies, third-party data, international operations, and information systems (i) Credit Risk Organigram faces credit risk from deposits, investments, and receivables, but mitigates this by dealing with financially sound counterparties and obtaining guarantees for other receivables, with the maximum exposure to credit risk for cash, investments, and receivables being approximately $180.9 million as of March 31, 2025 - Credit risk arises from deposits, short-term investments, trade and other receivables, and restricted cash232 - Risk is mitigated by dealing with financially sound counterparties and obtaining guarantees for non-trade receivables232 - Maximum exposure to credit ri