GFG Resources Inc. — Interim / Quarterly Report 2024

Nov 14, 2024

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Gold Flora Corporation

Interim Condensed Consolidated Balance Sheets (Unaudited)

(In USD, in thousands, except for share and per share data)

	September 30, 2024 December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$ 10,166 $ 22,538
Accounts receivable, Net	4,743 1,773
Inventory	18,780 18,372
Current portion of notes receivable	326 459
Assets held for sale	237 362
Indemnification assets	3,194 3,194
Prepaid expenses and other current assets	8,946 6,165
Total current assets	46,392 52,863
Property and equipment, net	37,470 39,166
Finance lease asset	57,433 60,400
Notes receivable, net of current portion	208 208
Intangible assets, net	42,707 46,101
Operating lease right-of-use assets	21,414 23,655
Deposits and other long term assets	4,071 3,973
Total assets	$ 209,695 $ 226,366
Liabilities
Current liabilities:
Accounts payable and accrued liabilities	$ 54,617 $ 27,342
Accrued interest	1,372 1,365
Current portion of taxes payable	17,665 14,135
Due to related party	2,005 2,005
Consideration payable	4,128 4,342
Current portion of notes payable	24,084 18,952
Current portion of operating lease liabilities	3,070 2,562
Current portion of finance lease liabilities	3,508 2,990
Liabilities held for sale	151 282
Total current liabilities	110,600 73,975
Notes payable, net of current portion	4,768 9,189
Convertible notes payable	21,803 20,546
Operating lease liabilities, net of current portion	22,718 25,817
Finance lease liabilities, net of current portion	84,001 85,122
Taxes payable, net of current portion	26,277 13,751
Deferred tax liability	2,842 5,150
Security deposits and other long term liabilities	110 64
Total liabilities	$ 273,119 $ 233,614

2

Commitments and contingencies
Shareholders' deficit
Shares of common stock, par value $0.01 per share, 450,000,000 shares of common stock authorized 287,644,766 issued and outstanding at September 30, 2024 and 287,478,982 at December 31, 2023	2,876 2,874
Additional paid in capital	100,943 100,577
Accumulated deficit	(167,134) (110,833)
Total shareholders' deficit attributable to the Company	(63,315) (7,382)
Non-controlling interest	(109) 134
Total shareholders' deficit	(63,424) (7,248)
Total liabilities and shareholders' deficit	$ 209,695 $ 226,366

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

3

Gold Flora Corporation

Interim Condensed Consolidated Statements of Operations (Unaudited)

(In USD, in thousands, except for share and per share data)

	Three Months Ended	Three Months Ended	Nine Months Ended
	September 30, 2024	September 30, 2023	September 30, 2024 September 30, 2023
Revenues, net	$ 32,621	$ 31,960	$ 96,416 $ 62,569
Cost of goods sold	19,138	20,646	65,656 $ 43,269
Gross profit	13,483	11,314	30,760 $ 19,300
Selling, general, and administrative expenses	23,008	25,617	62,740 $ 43,222
Change in fair value of earn out liability	—	—	— $ 4,375
Total operating expenses	23,008	25,617	62,740 $ 47,597
Loss from operations	(9,525)	(14,303)	(31,980) $ (28,297)
Other (income) expense
Notes payable and convertible notes payable interest expense	1,261	3,181	2,831 $ 6,329
Finance lease liability interest expense	3,347	3,373	10,082 $ 8,549
Other interest expense	—	—	381 $ —
Amortization of debt discount	444	278	800 $ 1,495
Loss on extinguishment of debt	—	1,440	— $ 1,440
Gain on bargain purchase	—	(49,026)	— $ (49,026)
Other (income) expense, net	2,044	(3,316)	6,482 $ (4,918)
Total other (income) expense, net	7,096	(44,070)	20,576 $ (36,131)
Net income (loss) before income taxes	(16,621)	29,767	(52,556) $ 7,834
Income tax expense	(2,265)	(6,807)	(3,988)$ (8,321)
Net loss	(18,886)	22,960	(56,544)$ (487)
Net income (loss) attributable to non-controlling interest	(55)	19	(243)$ (44)
Net income (loss) attributable to Gold Flora Corporation	$ (18,831)	$ 22,941	$ (56,301) $ (443)
Dividend on preferred stock	$ —	$ (31)	$ — $ (825)
Net loss attributable to Gold Flora Corporation	$ (18,831)	$ 22,910	$ (56,301) $ (1,268)
Net income (loss) per share - Basic	$ (0.07)	$ 0.08	$ (0.20)$ (0.01)
Net income (loss) per share - diluted	$ (0.07)	$ 0.08	$ (0.20)$ (0.01)
Weighted average number of shares outstanding -Basic	287,643,120	273,642,363	287,590,030 154,766,984
Weighted average number of shares outstanding - diluted	287,643,120	300,318,094	287,590,030 154,766,984

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

4

Gold Flora Corporation

Interim Condensed Consolidated Statements of Changes in Shareholders’ Deficit (Unaudited)

(In USD, in thousands, except for share and per share data)

	Shares of Common Stock	Par Value	Additional Paid in Capital	Accumulated Deficit	Total Shareholders' Deficit Attributable to Gold Flora Corporation	Non- controlling Interest Total Shareholders' Deficit
Balance June 30, 2023	94,341,622	$ 943	$ 42,800	$ (91,566)	$ (47,823)	$ 111 $ (47,712)
Distributions, net	-	-	(7)	-	(7)	- (7)
Acquisition date true up	1,235,893	12	(12)	-	-	- -
Exercise of equity rights on prior acquisition	6,776,482	68	(68)	-	-	- -
Cancellation of common shares	(136,019)	(1)	1	-	-	- -
Shares Issued for vesting of RSU's, net	1,011	-	-	-	-	- -
Accrued preferred distribution to members	-	-	-	(31)	(31)	- (31)
Preferred distribution payable converted to shares	8,937,247	89	8,464	-	8,553	- 8,553
Fair value of shares issued in a business combination	132,811,589	1,328	19,990	-	21,318	- 21,318
Shares issued for conversion of debt	39,166,191	392	27,068	-	27,460	- 27,460
Conversion of broker units	251,858	3	294	-	297	- 297
Shares issued for contingent consideration amendment	1,096,776	11	164	-	175	- 175
Issuance of shares for debt extinguishment	3,808,250	38	571	-	609	- 609
Share-based compensation	-	-	469	-	469	- 469
Net loss	-	-	-	22,941	22,941	19 22,960
Balance September 30, 2023	288,290,900	$ 2,883	$ 99,734	$ (68,656)	$ 33,961	$ 130 $ 34,091

	Shares of Common Stock	Par Value	Additional Paid in Capital	Accumulated Deficit	Total Shareholders' Deficit Attributable to Gold Flora Corporation	Non- controlling Interest Total Shareholders' Deficit
Balance June 30, 2024	287,618,418	$ 2,876	$ 100,855	$ (148,303)	$ (44,572)	$ (54) $ (44,626)
Shares Issued for Option Exercises, Net	-	-	1	-	1	- 1
Shares Issued for Vesting of RSU's, Net	26,348	-	-	-	-	- -
Share-Based Compensation	-	-	87	-	87	- 87
Net Loss	-	-	-	(18,831)	(18,831)	(55) (18,886)
Balance September 30, 2024	287,644,766	$ 2,876	$ 100,943	$ (167,134)	$ (63,315)	$ (109) $ (63,424)

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

5

Gold Flora Corporation

Interim Condensed Consolidated Statements of Changes in Shareholders’ Deficit (Unaudited)

(In USD, in thousands, except for share and per share data)

	Shares of Common Stock	Par Value	Additional Paid in Capital	Accumulated Deficit	Total Shareholders' Deficit Attributable to Gold Flora Corporation	Non- controlling Interest Total Shareholders' Deficit
Balance December 31, 2022	94,797,102	$ 948	$ 42,687	$ (67,388)	$ (23,753)	$ 174 $ (23,579)
Contributions, net	-	-	3	-	3	- 3
Cancellation of common stock related to participation units	(455,480)	(5)	5	-	-	- -
Acquisition date true up	1,235,893	12	(12)	-	-	- -
Exercise of equity rights on prior acquisition	6,776,482	68	(68)	-	-	- -
Cancellation of common shares	(136,019)	(1)	1	-	-	- -
Shares Issued for vesting of RSU's, net	1,011	-	-	-	-	- -
Accrued preferred distribution to members	-	-	-	(825)	(825)	- (825)
Preferred distribution payable converted to shares	8,937,247	89	8,464	-	8,553	- 8,553
Fair value of shares issued in a business combination	132,811,589	1,328	19,990	-	21,318	21,318
Shares issued for conversion of debt	39,166,191	392	27,068	-	27,460	- 27,460
Conversion of broker units	251,858	3	294	-	297	- 297
Shares issued for contingent consideration amendment	1,096,776	11	164	-	175	- 175
Issuance of shares for debt extinguishment	3,808,250	38	571	-	609	- 609
Share-based compensation	-	-	567	-	567	- 567
Net loss	-	-	-	(443)	(443)	(44) (487)
Balance September 30, 2023	288,290,900	$ 2,883	$ 99,734	$ (68,656)	$ 33,961	$ 130 $ 34,091

	Shares of Common Stock	Par Value	Additional Paid in Capital	Accumulated Deficit	Total Shareholders' Deficit Attributable to Gold Flora Corporation	Non- controlling Interest Total Shareholders' Deficit
Balance December 31, 2023	287,478,982	$ 2,874	$ 100,577	$ (110,833)	$ (7,382)	$ 134 $ (7,248)
Shares Issued for Option Exercises, Net	92,500	1	1	-	2	- 2
Cancellation of Common Shares	(10,074)	-	-	-	-	- -
Shares Issued for Vesting of RSU's, Net	83,358	1	(1)	-	-	- -
Share-Based Compensation	-	-	366	-	366	- 366
Net Loss	—	—	—	(56,301)	(56,301)	(243) (56,544)
Balance September 30, 2024	287,644,766	$ 2,876	$ 100,943	$ (167,134)	$ (63,315)	$ (109) $ (63,424)

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

6

Gold Flora Corporation

Interim Condensed Consolidated Statements of Cash Flows (Unaudited)

(In USD, in thousands, except for share and per share data)

	Nine Months Ended
	September 30, 2024 September 30, 2023
Operating activities:
Net loss	$ (56,544) $ (487)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	12,985 10,197
Gain on bargain purchase price	— (49,026)
Impairment expense	— —
Legal Settlement	892 —
Loss on extinguishment of debt	— 1,440
Non-cash operating lease expense	(356) 625
Non-cash interest expense on finance leases added to principal	1,087 1,903
Non-cash interest expense on convertible notes payable added to principal	— —
Gain on forgiveness of convertible debentures	— (301)
Change in fair value of earnout liability	— 4,375
Deferred income taxes	(2,308) 4,109
Reserve for inventory	760 —
Debt discount amortization	295 18
Debt issue cost amortization	505 1,477
Share-based compensation	366 567
Bad debt expense	707 328
Change in operating assets and liabilities:
Accounts receivable	(3,677) 619
Prepaid expenses and other current assets	(497) (165)
Deposits and other long term assets	(52) (39)
Inventory	(1,168) (1,024)
Accounts payable and accrued liabilities	24,530 (5,636)
Accrued interest and taxes payable	16,689 6,199
Net cash used in operating activities	(5,786) (24,821)
Investing activities:
Cash received from asset sale	— —
Receipt of cash from notes receivable	133 48
Issuance of notes receivable	— (38)
Purchase of property and equipment and construction costs	(2,183) (764)
Cash received from acquisition	— 55,306
Net cash (provided by) used in investing activities	(2,050) 54,552
Financing activities:
Proceeds from convertible notes, net of issue costs	— —
Proceeds from exercise of options	2 —
Payment of convertible notes	— (1,234)

7

Repayment of notes	(8,634) (4,696)
Proceeds from notes	5,786 5,000
Principal repayments of finance lease liability	(2,189) (1,095)
Payment of acquisition payable	— —
Contributions, net	— 3
Distributions, net	— —
Payment of earnout liability	— (2,000)
Proceeds from Lease incentive payments received	499 1,371
Net cash used in financing activities	(4,536) (2,651)
Net decrease in cash and cash equivalents	(12,372) 27,080
Cash and cash equivalents, beginning of period	22,538 5,217
Cash and cash equivalents, end of period	$ 10,166 $ 32,297

	Nine Months Ended
	September 30, 2024 September 30, 2023
Supplemental cash flow disclosure:
Cash paid for interest	$ 12,200 $ 14,112
Cash paid for taxes	$ 5,870 $ 8,321
Non-cash investing and financing activities:
Obtaining Property and Equipment relating to a Finance Lease Liability	$ — $ 3,383
Obtaining Property and Equipment relating to issuing Liability	$ 2,745 $ —
Other current assets reclassed to property and equipment	$ — $ 2,175
Termination of leases	$ 649 $ —
Equity issued to offset accrued expense	$ — $ 472
Reclass of equipment deposits to property and equipment	$ — $ 1,044
Conversion of preferred dividends payable to equity	$ — $ 8,553
Recognition of right-of-use assets and lease liabilities for operating leases	$ — $ 2,064
Accretion of dividends payable	$ — $ 825
Shares issued for conversion of debt	$ — $ 27,460
Conversion of earn out liability to notes payable	$ — $ 2,200
Accrued interest added to principle of notes payable	$ 840 $ 2,348
Debt issued to finance insurance premiums	$ 2,284 $ —

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

8

Gold Flora Corporation Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

(In USD, in thousands, except for share and per share data)

1. NATURE OF OPERATIONS

Gold Flora Corporation, the “Company”, "Gold Flora", and “GFC”, refer to Gold Flora Corporation, a holding company domesticated in the State of Delaware by way of corporate continuance from British Columbia, Canada on July 7, 2023. The Company’s registered office is located at 3165 Red Hill Avenue, Costa Mesa, CA 92626.

Gold Flora, LLC is a California limited liability company that was formed on November 15, 2016 and is a vertically integrated single-state operator that, through various subsidiaries, has cultivation, manufacturing, distribution and retail operations in California. While the nature of its operations is legalized and approved by the State of California, it is considered to be an illegal activity under the Controlled Substances Act of the United States of America (the “CSA”). Accordingly, certain additional risks and uncertainties are present as discussed in the following notes.

On July 7, 2023, the Company consummated a business combination involving TPCO Holding Corp., a publicly traded entity ("TPCO"), Gold Flora, LLC, Stately Capital Corporation, a newly formed British Columbia corporation and Golden Grizzly Bear LLC, which transaction resulted in the combination of TPCO and Gold Flora, LLC, in an all-stock transaction (the “Business Combination”). In connection with the Business Combination, the Company was deemed to be the accounting acquirer and TPCO was the legal acquirer, and for the purpose of facilitating the merger, a new entity, Gold Flora Corporation was formed. Pursuant to the merger, TPCO, Stately Capital Corporation and GFC amalgamated. The surviving amalgamated company was named Gold Flora Corporation and re-domiciled to Delaware, United States and serves as the parent entity for the Gold Flora group of companies.

The Company is a single state operator ("SSO") in California and operates as a vertically integrated, licensed, group of cannabis companies. The Company's long-term strategy is to continue to be one of the leading cannabis companies in California. The strategy is to build on the Company's strong integrated market position to pursue profitable organic and selective strategic opportunities with a focus on sustainable cash flow.

The Company reports its financial accounts and operations in three segments: retail, wholesale, and management. The retail segment consists of the sixteen operating dispensaries in California. The wholesale segment consists of our bulk flower cultivation operations and cannabis products manufacturing which are both sold to third parties. The Company's management segment represents its corporate office and central costs supporting both the retail and wholesale segments.

Certain prior year amounts for short-term and long-term tax payable have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported total assets, total liabilities, or results of operations.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Preparation and Statement of Compliance

The accompanying interim condensed consolidated financial statements have been prepared on a going concern basis in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and reflect the accounts and operations of the Company and those of the Company’s subsidiaries in which the Company has a controlling financial interest. Investments in entities in which the Company has significant influence, but less than a controlling financial interest, are accounted for using the equity method.

All intercompany transactions and balances have been eliminated in consolidation. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the interim condensed consolidated financial position of the Company as of September 30, 2024 and December 31, 2023, the interim condensed consolidated results of operations for three and nine months ended September 30, 2024 and 2023 and cash flows for the nine months ended September 30, 2024 and 2023 have been included.

The accompanying interim condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements (and notes thereto) in our Annual Report on Form 10-K for the year ended December 31, 2023 (the “Annual Report”), as filed with the United States Securities and Exchange Commission (“SEC”) and with the relevant Canadian securities regulatory authorities under its profile on the System for Electronic Document Analysis and Retrieval Plus (“SEDAR+”). Except as noted below, there have been no material changes to the Company’s significant accounting policies and estimates during the three and nine months ended September 30, 2024.

Basis of Measurement

These interim condensed consolidated financial statements have been prepared on the going concern basis, under the historical cost convention, except for certain financial instruments that are measured at fair value as described herein.

9

Gold Flora Corporation

Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

(In USD, in thousands, except for share and per share data)

Going Concern

Historically, the Company’s primary source of liquidity has been its operations, capital contributions made by members and debt financing. However, the Company has sustained annual losses since inception and may require additional capital in the future. As of September 30, 2024 and December 31, 2023, the Company had a total shareholders’ deficit of $63,424 and $7,248 and for the three months ended September 30, 2024 and 2023 a net loss attributable to the Company of $18,831 and $22,941, and net cash used in operating activities of $5,786 and $24,821, respectively. Because of these factors, there is substantial doubt about the Company’s ability to continue as a going concern.

As of September 30, 2024 and 2023, the accompanying interim condensed 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 interim 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 substantial doubt about the Company’s ability to continue as a going concern.

As described in Note 1, the Company consummated a reverse merger with TPCO on July 7, 2023, forming GFC. The Company plans to reduce operating expenses through various strategic initiatives and aggressive cost-cutting measures which the Company believes will allow it to operate for at least the next twelve months. In addition, the Company plans to raise additional financing if needed to help fund operations. However, there can be no assurance that the Company will be successful in achieving its objectives. These interim 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 substantial doubt about the Company’s ability to continue as a going concern.

Emerging Growth Company

The Company is an “Emerging Growth Company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it has taken advantage of certain exemptions from various reporting requirements that are not applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act 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 a 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 election to opt out is irrevocable. The Company has elected not 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.

Revenue Recognition

Revenue is recognized by the Company in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606). Through application of the standard, the Company recognizes revenue to depict the transfer of promised goods or services 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 ASU 2014-09, the Company applies the following five (5) steps:

• a. Identify a customer along with a corresponding contract;

• b. Identify the performance obligation(s) in the contract to transfer goods or provide distinct services to a customer;

• c. Determine the transaction price the Company expects to be entitled to in exchange for transferring promised goods or services to a customer;

• d. Allocate the transaction price to the performance obligation(s) in the contract; and

• e. Recognize revenue when or as the Company satisfies the performance obligation(s).

Revenues consist of wholesale and retail operations of cannabis, which are generally recognized at a point in time when control over the goods have been transferred to the customer and is recorded net of sales discounts. Payment is typically due upon transferring the goods to the customer or within a specified time period permitted under the Company’s credit policy.

10

Gold Flora Corporation

Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

(In USD, in thousands, except for share and per share data)

Revenue is recognized upon the satisfaction of the performance obligation. The Company satisfies its performance obligation and transfers control upon delivery and acceptance by the customer. Revenues, net, are disaggregated for the period ended September 30, 2024 and 2023 as follows:

	Three Months Ended	Three Months Ended	Nine Months Ended
	September 30, 2024	September 30, 2023	September 30, 2024 September 30, 2023
Wholesale	$ 8,215	$ 3,717	$ 18,906 $ 9,481
Retail	24,406	28,243	77,510 53,088
Total revenues, net	$ 32,621	$ 31,960	$ 96,416 $ 62,569

The Company has a customer loyalty program whereby customers are awarded points with in store and online delivery purchases. Once a customer achieves a certain point level, points can be used to pay for the purchase of product, up to a maximum number of points per transaction. Points expire after six months of no activity in a customer’s account.

Unredeemed awards are recorded as deferred revenue. At the time customers redeem points, the redemption is recorded as an increase to revenue. Deferred revenue is included in other accrued expenses within accounts payable and accrued liabilities.

The Company’s return policy conforms to the Medicinal and Adult-Use Cannabis Regulation and Safety Act (“MAUCRSA”), which was signed into law in September 2017 and creates the general framework for the regulation of commercial medicinal and adult-use cannabis in California. The Company determined that no provision for returns or refunds was necessary at September 30, 2024 and 2023.

Earnings (Loss) Per Share

Basic earnings (loss) per share (“Basic EPS”) is calculated by dividing the net earnings available to shareholders by the weighted average number of shares outstanding during the period. Diluted earnings per shares is calculated using the treasury method of calculating the weighted average number of shares outstanding. The treasury method assumes that outstanding options with an average exercise price below the market price of the underlying units are exercised, and the assumed proceeds are used to repurchase shares of the Company at the average price of the shares for the period. After adjustments as defined in ASC 260, if the Company is in a net loss position, diluted loss per share is the same as basic loss per share when the issuance of shares on the exercise of convertible debentures, warrants, and share options are anti-dilutive.

Recently Issued Accounting Pronouncements Not Yet Adopted

Segment Reporting

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which expands reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company is evaluating the impact on the consolidated financial statements and expects to adopt this guidance for our fiscal year ending December 31, 2024.

Income Taxes

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which enhances income tax disclosures, primarily through changes to the rate reconciliation and disaggregation of income taxes paid. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is evaluating the impact on the consolidated financial statements and expects to implement the provisions of ASU 2023-09 for our fiscal year ending December 31, 2025.

11

Gold Flora Corporation Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

(In USD, in thousands, except for share and per share data)

Reclassification

For consistency with the current period presentation, there has been a reclassification of certain prior period amounts from current portion of taxes payable to taxes payable, net of current portion with no effect on the reported total assets, total liabilities, or results of operations.

3. INVENTORY

	September 30, 2024 December 31, 2023
Raw materials	$ 2,574 $ 1,882
Work in progress	10,297 10,928
Finished goods	5,909 5,562
Total inventory	$ 18,780 $ 18,372

4. PREPAID AND OTHER CURRENT ASSETS

	September 30, 2024 December 31, 2023
Prepaid supplier payments	$ 2,355 $ —
Prepaid expenses other	$ 1,327 $ 1,131
Prepaid insurance	2,483 1,808
Prepaid inventory	— 515
Prepaid deposits	2,781 2,711
Total prepaid expenses and other current assets	$ 8,946 $ 6,165

5. PROPERTY AND EQUIPMENT

	September 30, 2024 December 31, 2023
Machinery and equipment	$ 15,815 $ 15,290
IT equipment	3,846 3,753
Vehicles	807 824
Leasehold improvements	35,918 32,902
Furniture and fixtures	971 971
Assets under construction	486 106
Total property and equipment, gross	57,843 53,846
Less: Accumulated depreciation and amortization	(20,373) (14,680)
Total property and equipment, net	$ 37,470 $ 39,166

Assets under construction represent construction in progress related to both cultivation, distribution and extraction facilities not yet completed or otherwise not ready for use.

Depreciation and amortization expense for the three and nine months ended September 30, 2024 totaled $2,738 and $6,624, respectively, of which $3,126 and $4,964, respectively, is included in cost of goods sold. Depreciation and amortization expense for the three and nine months ended September 30, 2023 totaled $1,874 and $4,075, respectively, of which $1,056 and $2,455, respectively, is included in cost of goods sold.

12

Gold Flora Corporation

Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

(In USD, in thousands, except for share and per share data)

6. INTANGIBLE ASSETS

	September 30, 2024 December 31, 2023
Trade name	$ 10,864 $ 10,864
Licenses	42,542 42,542
Non-compete	450 450
Total intangible assets, gross	53,856 53,856
Less: Accumulated amortization	(11,149) (7,755)
Total intangible assets, net	$ 42,707 $ 46,101

For the three and nine months ended September 30, 2024, amortization expense related to intangible assets totaled $1,140 and $3,394, respectively. For the three and nine months ended September 30, 2023, amortization expense related to intangible assets totaled $2,636 and $4,179, respectively. Additionally, during the period ended September 30, 2024, management noted no indications of impairment on its intangible assets.

7. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

	September 30, 2024 December 31, 2023
Accounts payable	$ 21,185 $ 13,339
Accrued payroll and related	2,369 2,588
Accrued purchases	9,593 2,839
Liability to dissenting shareholders	3,047 3,047
Other accrued expenses	18,423 5,529
Total accounts payable and accrued liabilities	$ 54,617 $ 27,342

8. LEASES

Operating Leases

The Company leases certain business facilities from related parties and third parties under non-cancellable operating lease agreements that specify minimum rentals. The operating leases require monthly payments ranging from $2 to $78 and expire through August 2038. Certain lease monthly payments may escalate up to 5.0% each year. In such cases, the variability in lease payments is included within the current and non-current operating lease liabilities.

All real estate leases are recorded on the balance sheet. Equipment and other non-real estate leases with an initial term of twelve months or less are not recorded on the balance sheet. Lease agreements for some locations provide for rent escalations and renewal options. Certain real estate leases require payment for taxes, insurance and maintenance which are considered non-lease components. The Company accounts for real estate leases and the related fixed non-lease components together as a single component.

The Company determines if an arrangement is a lease at inception. The Company must consider whether the contract conveys the right to control the use of an identified asset. Certain arrangements require significant judgment to determine if an asset is specified in the contract and if the Company directs how and for what purpose the asset is used during the term of the contract.

Finance Leases

The Company has certain finance leases from third parties and related parties as of September 30, 2024 and December 31, 2023 for property in Desert Hot Springs, CA, Long Beach, CA, Commerce, CA, Corona, CA, and certain vehicle finance leases, with up to 30 years terms.

13

Gold Flora Corporation

Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

(In USD, in thousands, except for share and per share data)

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

	Three Months Ended	Three Months Ended	Nine Months Ended
	September 30, 2024	September 30, 2023	September 30, 2024 September 30, 2023
Finance lease cost:
Amortization of finance lease right-of-use assets	$ 1,008	$ 1,411	$ 2,967 $ 2,399
Interest on lease liabilities	3,347	3,373	10,082 8,549
Sublease (Income)	(610)	(609)	(1,755) (1,840)
Operating lease cost	1,536	1,679	4,608 2,861
Total lease expenses	$ 5,281	$ 5,854	$ 15,902 $ 11,969

	Nine Months Ended
	September 30, 2024 September 30, 2023
Cash paid for amounts included in the measurement of lease liabilities:
Financing cash flows from finance lease, principal payment	$ 2,189 $ 1,095
Financing cash flows from finance lease, interest payment	8,982 6,633
Operating cash flows from operating leases, gross	4,881 2,211
Cash received for lease incentive payments	499 1,371
Non-cash additions to right-of-use assets and lease liabilities:
Reduction in lease liability and right-of-use asset due to termination	649 —
Recognition of right-of-use assets for finance lease	— 3,383
Right-of-use assets for finance lease assumed on business acquisition	$ — $ 7,775
Recognition of right-of-use assets for operating leases	$ — $ 2,064
Right-of-use assets for operating leases assumed on business acquisition	$ — $ 12,814

Other information related to operating and finance leases as of and for the nine months ended September 30, 2024 are as follows:

	Nine Months Ended
	September 30, 2024 September 30, 2023
Weighted-average remaining lease term (years) - Finance leases	23.13 23.37
Weighted-average remaining lease term (years) - Operating leases	7.25 7.78
Weighted-average discount Rate - Finance leases	15.63 % 16.00 %
Weighted-average discount rate - Operating leases	14.01 % 14.00 %

14

Gold Flora Corporation

Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

(In USD, in thousands, except for share and per share data)

The maturity of the contractual undiscounted lease liabilities as of September 30, 2024:

Year Ending December 31,	Operating Leases Finance Leases
2024 (Remaining)	$ 1,649 $ 3,809
2025	6,574 15,366
2026	6,622 15,761
2027	5,633 14,793
2028	4,356 11,178
Thereafter	17,337 337,419
Total future minimum lease payments	42,171 398,326
Less: Interest	(16,383) (310,817)
Present value of lease liabilities	25,788 87,509
Less: Current portion of lease liabilities	(3,070) (3,508)
Lease liabilities, net of current portion	$ 22,718 $ 84,001

15

Gold Flora Corporation

Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

(In USD, in thousands, except for share and per share data)

9. NOTES PAYABLE

	Interest rate	Maturity Date	Payment terms	September 30, 2024 December 31, 2023
Shelf Life, Inc. Promissory note - October 1, 20192	—%	December 31, 2022	Due at maturity	$ 5,837 $ 5,200
J.J. Astor & Co. Promissory Note (Initial Draw) - August 2024	—%	September 11, 2025	53 weekly payments	8,795 —
Acquisition note payable - December 2021	8.0%	December 31, 2025	Twelve quarterly payments of principal and interest beginning in March 2023	5,407 8,196
Equipment loan, secured by substantially all assets of the Company.	9.5% plus the Secured Overnight Financing Rate but not less than 2.99% or more than 5.5% ("SOFR"), plus a service fee of 2.0%	December 14, 2025	Principal and interest of $140 plus the SOFR payment paid monthly, remaining balance due at maturity	1,994 2,712
Acquisition note payable - September 2021	6.0%	September 30, 2025	Twelve quarterly payments of principal and interest beginning in December 2022	4,678 7,545
Promissory note - July 7, 2023	8.0%	July 7, 2027	Twelve quarterly payments of principal and interest beginning in October 2024	2,374 2,200
Short-term insurance financing	8.4%	April 1, 2025	Monthly payments of principal and interest	1,769 1,055
Promissory notes - various1	1.0%	Various	Interest and principal payments due monthly.	1,294 1,293
Other				— 22
Total notes payable				32,148 28,223
Less: Unamortized discount due to imputed interest				(3,296) (82)
Total notes payable, net of unamortized debt discount				28,852 28,141
Less: Current portion of notes payable				(24,084) (18,952)
Notes payable, net of current portion				$ 4,768 $ 9,189

1The Company entered into the Paycheck Protection Program (“PPP”) loans based on information available at the time. The Company has received multiple Civil Investigative Demands from the Department of Justice ("DOJ") with respect to approximately $1.3 million of PPP loans and potential additional penalty. The Company is engaged with the DOJ to determine its repayment obligations with respect to the PPP loans and is evaluating its options with respect to any repayment claims.

16

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Gold Flora Corporation Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

(In USD, in thousands, except for share and per share data)

2The Company was in active litigation with Shelf Life Inc. (“SLI”). There has been an interim judgement granted against Gold Flora for the $5.2 million balance owed on the applicable note. The arbitration was resolved on August 23, 2024 for a final judgment of $6.1 million. For additional information, refer to 14. Commitments and Contingencies – Claims and Litigation .

During the quarter ended September 30, 2024, Gold Flora entered into a Loan Agreement with J.J. Astor & Co. (the "Investor"), pursuant to which, among other things, the Company agreed to issue and sell to the Investor, in exchange for the payment by the Investor of $6.9 million, a senior secured promissory note in an aggregate principal amount of $9.3 million (the “Initial Note”). The Loan Agreement also provides for the future issuance of up to three additional notes (the “Additional Notes”) and together with the Initial Note, subject to certain conditions and on substantially the same terms as the initial closing. Each subsequent closing would result in the issuance of an Additional Note with an original principal amount of $2.8 million and a funded amount of $1.9 million.

The Initial Note is secured by a pledge of the Company’s stock and other equity interests in certain of its subsidiaries pursuant to a pledge agreement between the Company and the Investor, which will constitute a lien and security interest if the Investor accelerates the amount due under the Initial Note or any Additional Note during an event of default. The Initial Note may be prepaid, and the principal amount will be reduced to approximately $8.33 million if prepaid within 30 days of issuance, to approximately $8.55 million if prepaid between 30 and 60 days after issuance, and to approximately $8.84 million if prepaid between 60 and 90 days after issuance.

The Initial Note imposes certain customary affirmative and negative covenants upon the Company, as well as covenants that (i) restrict the Company and its subsidiaries from incurring any additional indebtedness or suffering any liens, subject to specified exceptions, (ii) restrict the issuance or repurchase of shares of the Company’s common stock, subject to specified exceptions, and (iii) restrict the declaration of any dividends or other distributions, subject to specified exceptions. If an event of default under the Initial Note or any Additional Note occurs, the principal amount will be multiplied by 110% and interest will begin accruing at a default rate of 10% per annum from the date of a default. Upon an event of default and following any applicable cure periods, the Investor may elect to accelerate the Initial Note or any Additional Note and thereafter convert all or a portion of the outstanding notes into shares of the Company’s common stock. The conversion price for any such conversion will be equal to 90% of the average of the four lowest volume weighted average closing prices of the Company’s common stock on the Cboe Canada exchange during the 20 trading days prior to the conversion, subject to adjustment in the event of any issuance of securities at a lower purchase, exercise or conversion price, and subject to applicable limitations of the Cboe Canada exchange.

10. CONVERTIBLE NOTES PAYABLE

	September 30, 2024 December 31, 2023
Convertible notes payable	$ 22,648 $ 21,896
Less: Unamortized discount due to imputed interest	(845) (1,350)
Total convertible notes payable, net	21,803 20,546

Higher Level of Care and Airfield Financing

On July 6, 2023, prior to the Business Combination, the Company entered into a debt modification with certain convertible debt holders above, representing approximately $22,515 in convertible debt. As consideration for the debt modification and voting support agreement, the Company issued 2,500,000 Class C member units to these convertible debt holders which were ultimately converted to common shares of the Company upon the merger. Management determined the debt modification was considered an extinguishment of debt and recorded a loss on extinguishment of debt in the amount of approximately $1,440. The modified unsecured convertible debt bears interest at 8 percent per annum, matures on December 31, 2025 and is convertible at the option of the debt holders at $0.7549 per share of common stock. The mandatory conversion feature, that was previously contained in the agreements, was removed and replaced with an optional conversion feature, at the Company's discretion, in the event the Company’s common stock exceeds a 20-day volume weighted average price ("VWAP") of $1.0175 per share of common stock. In the event the 20-day VWAP is met, the Company may elect to require that the holders of the convertible debt convert at a price of $0.7549 per share of common stock.

17

Gold Flora Corporation Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

(In USD, in thousands, except for share and per share data)

11. SHAREHOLDERS' EQUITY

Authorized Shares

Prior to the merger, each member’s interest in the Gold Flora LLC, including the member’s interest in income, gains, losses, deductions and expenses of Gold Flora LLC, was represented by units (“LLC Units”), which are further divided by Class from A through F. Upon a liquidation event, LLC Units were generally entitled to their pro-rata portion of net assets based on total equity instruments then outstanding to reduce the holders invested capital to zero and any remaining was shared pro rata share among the member LLC units holders. Gold Flora LLC was authorized to issue unlimited LLC Units.

There was an 8% simple non-compounded return to the holders of Class B Units. Gold Flora LLC had determined it was obligated to pay such amount, and accordingly accrued the return on the basis of outstanding investment amount quarterly.

The Company has total authorized shares of common stock of 450,000,000.

Issued and Outstanding

There were 287,644,766 and 287,478,982 shares of common stock issued and outstanding as of September 30, 2024 and December 31, 2023, respectively.

Equity Incentive Plans

The Company established the Gold Flora Corporation 2023 Equity Incentive Plan ("Gold Flora EIP") for certain qualified officers, employees, consultants and non-employee directors. The Gold Flora EIP establishes award units in various forms as allowed under the plan and is administered by the board of directors of the Company. Total shares reserved under the Gold Flora EIP available for grant and issuance will not exceed 15 percent of the Company's total issued and outstanding shares from time to time or as may be approved in accordance with the Cboe Canada exchange policies. The below is information pertaining to legacy and new awards outstanding.

Share based compensation expense consists of options for the nine months ended September 30, 2024 and profit interest for the nine months ended September 30, 2023. Share based compensation was $366 and $567 during the period ended September 30, 2024 and 2023, respectively. All profit interest units were exchanged to common stock upon the Business Combination and no profit interest units remain outstanding. The Company recognized forfeitures when they occurred.

Restricted Stock Units

	Issued and Outstanding Weighted Average Grant Date Fair Value
Balance as of December 31, 2023	217,298 $ 3.14
Vested and Settled	(101,260) 3.30
Forfeited	(11,281) 3.34
Balance as of September 30, 2024	104,757 $ 2.95

Options

Certain options outstanding relate to a legacy option plan from prior acquisitions. No further options will be issued under those legacy plans.

Gold Flora Corporation

Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

(In USD, in thousands, except for share and per share data)

	Number of Options	Weighted Average Exercise Price	Weighted Average Remaining Contractual Term Aggregate Intrinsic Value
Balance as of December 31, 2023	13,948,506	$ 0.17	9.85
Expired	(29,995)	0.83
Exercised	(92,500)	0.11
Forfeited	(72,946)	0.14
Balance as of September 30, 2024	13,753,065	$ 0.17	9.1 $ —
Vested and Expected to Vest	13,753,065	$ 0.17	9.1 $ —
Exercisable	5,626,927	$ 0.26	9.06 $ —

The aggregate intrinsic value is calculated as the difference between the Company’s closing stock price on September 30, 2024 and the exercise price of options, multiplied by the number of options. As of September 30, 2024, total unrecognized stock-based compensation was approximately $740, which are expected to be recognized over a weighted-average period of approximately 2.13 years as of September 30, 2024.

The Company recognizes compensation expense for stock option awards on a straight-line basis over the applicable service period of the award. The service period is generally the vesting period. There were no options issued during the nine months ended September 30, 2024.

Warrants

	Warrants Weighted - Average Exercise Price
Balance as of December 31, 2023	69,701,256 $ 6.27
Balance as of September 30, 2024	69,701,256 6.47

As of September 30, 2024 and December 31, 2023, the weighted-average remaining term for the outstanding warrants was 1.2 years and 1.73 years, respectively. No warrants were issued during the nine months ended September 30, 2024.

19

Gold Flora Corporation Notes to Interim Condensed Consolidated Financial Statements (Unaudited) (In USD, in thousands, except for share and per share data)

12. RELATED PARTY TRANSACTIONS AND BALANCES

Expenses incurred and contributions received from related parties, and amounts due to and (due from) related parties, which are included as components of accounts payable and accrued liabilities or (accounts receivables) in the accompanying interim condensed consolidated balance sheets as of September 30, 2024 and December 31, 2023 and the interim condensed consolidated statements of operations for the period ended September 30, 2024 and 2023 are as follows:

Related Party Name Relationship Nature of Transactions	Incurred(Received)	Incurred(Received)	Due To(From)
	September 30, 2024	September 30, 2023	September 30, 2024 December 31, 2023
127 Radio Road Partners, LLC Co-owned by a shareholder of the Company Facility Rent	$ 356	$ 389	$ 6 $ 6
BlackStar Contractors Inc. Co-owned by a shareholder of the Company Construction of Facilities	—	12	1,044 (1,252)
BlackStar Financial Inc. Co-owned by a shareholder of the Company Shared Services	16	150	66 50
BlackStar Industrial Properties LLC Co-owned by a shareholder of the Company Facility Rent and Advances	—	5	2,644 2,644
GF 5630 Partners LLC Managed by Directors and officers of Gold Flora Corporation Facility Rent	433	404	369 290
Gold Flora Capital LLC Managed by Directors and officers of Gold Flora Corporation Interest Expense	—	4	16 16
MasterCraft Homes Group LLC Co-owned by a shareholder of the Company Shared Services	—	7	81 39
Burr Property Management Management Consulting Fees	210	208	40 —
Skyfall Partners LLC Management Shared Services	$ —	$ —	$ 496 $ —
Total	$ 1,015	$ 1,179	$ 4,762 $ 1,793

In addition, to the above transactions, the Company entered into a promissory note with Skyfall Partners, LLC, an entity majority owned by a shareholder of the Company, dated December 31, 2020, which matured on December 22, 2021 and bears interest at an interest rate of 10% with principal and unpaid interest due at maturity. The balance of the note payable at September 30, 2024 and December 31, 2023 was $425. The note was amended to extend the maturity date to April 2023. The Company is currently in negotiations to extend the maturity date. Amounts due to Skyfall Partners, LLC is included as a component of due to related parties in the accompanying interim condensed consolidated balance sheets.

In addition, to the above transactions, the Company entered into a promissory note with BlackStar Capital Partners, LLC, an entity majority owned by a shareholder of the Company, dated December 15, 2021, which matured on June 14, 2023 and bears interest at an interest rate of 10% with principal and unpaid interest due at maturity. The Company is currently in negotiations to extend the maturity date. The balance of the note payable at September 30, 2024 and December 31, 2023 was both $1,580. Amounts due to Black Star Capital Partners, LLC is included as a component of due to related parties in the accompanying interim condensed consolidated balance sheets.

20

Gold Flora Corporation Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

(In USD, in thousands, except for share and per share data)

13. INCOME TAXES

The following table summarizes the Company’s income tax expense and effective tax rates for the period ended September 30, 2024, and 2023:

	Three Months Ended	Three Months Ended	Nine Months Ended
	September 30, 2024	September 30, 2023	September 30, 2024 September 30, 2023
Net Income (Loss) Before Income Taxes	$ (16,621)	$ 29,767	$ (52,556) $ 7,834
Income Taxes	$ (2,265)	$ (6,807)	$ (3,988) $ (8,321)
Effective Tax Rate	13.6%	(22.9%)	7.6% (106.2%)

For the three and nine months ended September 30, 2024 and 2023, the Company calculated its provision by applying the discrete method due to the inability to rely on forecasts. The Company believes the discrete method to calculate the interim tax provision is more appropriate. For the three and nine months ended September 30, 2024, income tax expense increased as compared to the same periods in the prior year resulting from the Business Combination that occurred on July 7, 2023.

Due to its cannabis operations, the Company is subject to the limitations of Internal Revenue Code (“IRC”) Section 280E. Under IRC Section 280E, the Company is only allowed to deduct expenses directly related to sales of its cannabis products. This results in permanent differences between ordinary and necessary business expenses deemed non-deductible under IRC Section 280E for the Company's expenses related to its plant-touching cannabis operations.

The effective tax rate for the period ended September 30, 2024, varies from the period ended September 30, 2023, primarily due to addition of penalties and interest and the change in nondeductible expenses under IRC Section 280E as a proportion of pre-tax loss during the period and true up to the beginning net deferred tax liability. The Company incurs expenses that are not deductible due to IRC Section 280E limitations which results in significant permanent book-to-tax differences that may not necessarily correlate with pretax income or loss.

The Company files income tax returns in the US and various state jurisdictions and is subject to examination of its income tax returns by tax authorities in these jurisdictions who may challenge any representations made on these returns. The statute of limitations for these jurisdictions may remain open for as far back as tax year 2019 to the present.

The Company recognizes the financial statement impact of a tax position only after determining that the relevant tax authority would more-likely-than-not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest impact that has a greater than fifty percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company’s federal and state income tax returns are subject to examination by income taxing authorities, generally for three years after the returns are filed.

The Company operates in a number of domestic tax jurisdictions and is subject to examination of its income tax returns by tax authorities in these jurisdictions who may challenge any item of those returns. Because tax matters that may be challenged by tax authorities are typically complex, the ultimate outcome of these challenges is uncertain. The Company accounts for uncertain tax positions by recognizing the financial statement effects of a tax position only when, based upon technical merits, it is more-likely-thannot that the position will be sustained upon examination.

The Company evaluates uncertain tax positions on a quarterly basis and adjusts the level of the liability to reflect any subsequent changes in the relevant facts surrounding the uncertain positions. The measurement of the uncertain tax position is based on the largest benefit amount to be realized upon settlement of the matter. If payment ultimately proves to be unnecessary, the reversal of the liabilities would result in tax benefits being recognized in the period when the Company determines the liabilities are no longer necessary. If the Company’s estimate of tax liabilities proves to be less than the ultimate assessment, a further charge to income tax expense may result.

As of September 30, 2024, the Company recorded an uncertain tax liability for uncertain tax positions primarily related to the treatment of certain transactions and deductions under IRC Section 280E based on legal interpretations that challenge the Company’s tax liability under IRC Section 280E. During Q3 of 2024, the Company filed amended tax returns for periods ending 2020 through 2022 to reflect this position. In Q4 of 2024, the Company filed its 2023 tax returns to reflect this position.

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Table of Contents

Gold Flora Corporation Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

(In USD, in thousands, except for share and per share data)

The Company does not expect any resolution to this uncertain tax position in the next 12 months. An estimate of the range of the possible change cannot be made until these tax matters are further developed or resolved. The following table shows a summary of uncertain tax positions, which are recorded on the balance sheet within "Taxes payable, net of current portion":

	Uncertain Tax Provision
Balance December 31, 2023	$ 13,751,000
Interest expense	344,000
Income tax payable	4,668,000
Penalties and interest	1,385,000
Income tax expense	4,959,000
Balance September 30, 2024	$ 25,107,000

14. COMMITMENTS AND CONTINGENCIES

Periodically, the Company reviews the status of each significant matter and assesses the potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable, and the amount can be reliably estimated, such amounts are recognized in other liabilities.

Contingent liabilities are measured at management’s best estimate of the expenditure required to settle the obligation at the end of the reporting period and are discounted to present value when the effect is material. The Company performs evaluations to identify onerous contracts and, where applicable, records contingent liabilities for such contracts.

Contingent consideration is measured upon acquisition and is estimated using probability weighting of potential payouts. Subsequent changes in the estimated contingent consideration from the final purchase price allocation are recognized in the Company’s interim condensed consolidated statements of operations.

Contingencies

The Company’s operations are subject to a variety of local and state regulations. Failure to comply with one or more of those regulations could result in fines, restrictions on its operations, or losses of permits that could result in the Company ceasing operations in that specific state or local jurisdiction. While management of the Company believes that the Company is in compliance with applicable local and state regulations at September 30, 2024 and December 31, 2023, cannabis 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.

The Company has a loyalty program whereby customers accumulate points through purchases, and the earned points can be used to reduce the price of future purchases. The points do not expire and are recorded as a component of accounts payable and accrued liabilities on the accompanying interim condensed consolidated balance sheets for amounts customers have earned but have not yet used.

In connection with the Business Combination in July 2023, certain TPCO shareholders dissented from the vote and were therefore entitled to the fair value of their common shares of TPCO ("TPCO Shares"). The fair value amount paid by the Company was calculated based on the closing share price of the TPCO Shares of $0.17696 on June 14, 2023 (being the last trading date prior to the date of the meeting of the shareholders of TPCO to approve the Business Combination. The amount was recorded as a component of accounts payable and accrued liabilities in the accompanying interim condensed consolidated balance sheet. Certain of the dissenting TPCO shareholders have asserted that the fair value of their TPCO Shares was higher than the trading price of June 14, 2023 and should have been determined to be at least US$0.9847 per TPCO Share. On September 8, 2023, those certain former TPCO shareholders filed a petition in the Supreme Court of British Columbia to be paid their asserted value per TPCO Share. However, the ultimate amount required to be paid by Gold Flora is subject to determination by the Supreme Court of British Columbia. The determination hearing is expected to occur in the fourth quarter of 2024, with a final judgement expected to be issued in due course thereafter.

Claims and Litigation

From time to time, the Company may be involved in litigation relating to claims arising out of operations in the normal course of business.

22

Gold Flora Corporation Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

(In USD, in thousands, except for share and per share data)

On or about August 30, 2020, Gold Flora parties filed an action against SLI in Orange County Superior Court in California, which actions was later submitted to binding arbitration pursuant to stipulation by the parties. In the action, Gold Flora disputed the amount of closing consideration owed to SLI following the acquisition of certain of its assets based on omission of relevant information, and SLI brought a cross-claim against Gold Flora seeking full payment of the $5.2 million note balance owed. The arbitrator in the matter issued an interim judgement awarding SLI $5.2 million, in addition to certain potential costs and interest. The arbitration was resolved on August 23, 2024 for a final judgment is for $6.1 million. The incremental amount was since added to the Shelf-Life note as disclosed in the notes payable footnote.

On or about October 28, 2022, Jeff and Shanna Droege filed a Notice of Arbitration alleging breach of contract and other business torts against Left Coast Ventures ("LCV") and three former LCV directors in front of JAMS Resolution Center in San Francisco. Subsequently, the claims against the indemnified LCV directors were moved to a separate action filed in the Superior Court of California, Santa Clara, which claims against two of the directors have now been dismissed with prejudice. Monetary relief is sought in each outstanding action. The arbitration decision is expected in the fourth quarter of 2024.

On or about March 30, 2021, former directors and shareholders of LCV filed a complaint in Delaware Chancery Court against multiple defendant parties, including three former directors of LCV, alleging breach of duties to the company and shareholders and other business torts and requesting monetary damages. Subsequently, plaintiffs filed a first amended complaint, adding new parties, including TPCO and a former TPCO director. LCV and the Company have certain indemnification obligations in connection with the defendant directors, which indemnification may be contested by LCV upon resolution of the action. The Company and LCV are subject to advancement actions brought with fees owed or claimed to be owed to counsel for the indemnified defendants.

15. FINANCIAL INSTRUMENTS

Credit Risk

Credit risk arises from deposits with banks, accounts receivable, security deposits and notes receivable. The balances were as follows as of:

	Gross as of September 30, 2024	Allowance Net as of September 30, 2024
Cash and cash equivalents	$ 10,166	$ — $ 10,166
Accounts receivable	5,395	(652) 4,743
Deposits and other long term assets	4,071	— 4,071
Notes receivables	534	— 534
Total	$ 20,166	$ (652) $ 19,514

	Gross as of December 31, 2023	Allowance Net as of December 31, 2023
Cash and cash equivalents	$ 22,538	$ — $ 22,538
Accounts receivable	2,009	(236) 1,773
Deposits and other long term assets	3,973	— 3,973
Notes receivables	667	— 667
Total	$ 29,187	$ (236) $ 28,951

23

Gold Flora Corporation Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

(In USD, in thousands, except for share and per share data)

16. SEGMENT REPORTING

The Company operates in three segments: wholesale, retail, and management. The below table presents financial information by type as of and for the years ended:

	September 30, 2024 December 31, 2023
Total assets
Wholesale	$ 57,696 $ 61,115
Retail	46,569 71,098
Management	105,430 93,926
Intercompany	— 227
Total assets	$ 209,695 $ 226,366

	Three Months Ended	Three Months Ended	Nine Months Ended
	September 30, 2024	September 30, 2023	September 30, 2024 September 30, 2023
Revenues, net
Wholesale	$ 8,215	$ 3,717	$ 18,906 $ 9,481
Retail	24,406	28,243	77,510 53,088
Total revenues, net	$ 32,621	$ 31,960	$ 96,416 $ 62,569
	Three Months Ended		Nine Months Ended
	September 30, 2024	September 30, 2023	September 30, 2024 September 30, 2023
Depreciation and amortization expense
Wholesale	$ 3,275	$ 2,024	$ 7,181 $ 4,153
Retail	330	783	1,922 1,721
Management	1,281	2,658	3,882 4,323
Total depreciation and amortization expense	$ 4,886	$ 5,465	$ 12,985 $ 10,197

	Three Months Ended	Three Months Ended	Nine Months Ended
	September 30, 2024	September 30, 2023	September 30, 2024 September 30, 2023
Interest expense
Wholesale	$ 2,569	$ 719	$ 7,369 $ 1,107
Retail	617	310	1,672 698
Management	1,866	5,803	5,053 14,568
Total interest expense	$ 5,052	$ 6,832	$ 14,094 $ 16,373

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Gold Flora Corporation Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

(In USD, in thousands, except for share and per share data)

	Three Months Ended	Three Months Ended	Nine Months Ended
	September 30, 2024	September 30, 2023	September 30, 2024 September 30, 2023
Income tax expense
Retail	—	54	— $ 1,568
Management	2,265	6,753	3,988 6,753
Total income tax expense	$ 2,265	$ 6,807	$ 3,988 $ 8,321

17. OPERATING EXPENSES

	Three Months Ended	Three Months Ended	Nine Months Ended
	September 30, 2024	September 30, 2023	September 30, 2024 September 30, 2023
General and administrative	$ 11,228	$ 12,978	$ 24,919 $ 23,269
Allowance for accounts receivable and notes receivable	296	4	707 328
Sales and marketing	1,098	1,151	2,782 1,738
Salaries and benefits	7,003	5,883	21,337 8,660
Share-based compensation	87	469	366 567
Lease expense	1,536	1,678	4,608 2,861
Depreciation of property and equipment and amortization of right-of-use assets under finance leases	620	818	4,627 1,620
Amortization of intangible expenses	1,140	2,636	3,394 4,179
Total selling, general and administrative expenses	$ 23,008	$ 25,617	$ 62,740 $ 43,222

18. LOSS PER SHARE

	Three Months Ended	Three Months Ended	Nine Months Ended
	September 30, 2024	September 30, 2023	September 30, 2024 September 30, 2023
Net income (loss) attributable to Gold Flora Corporation	$ (18,831)	$ 22,941	$ (56,301) $ (443)
Dividend on preferred stock	—	(31)	— (825)
Net income (loss) attributable to Gold Flora Corporation	$ (18,831)	$ 22,910	$ (56,301) $ (1,268)
Weighted average number of shares outstanding - basic	287,643,120	273,642,363	287,590,030 154,766,984
Weighted average number of shares outstanding - diluted	287,643,120	300,318,094	287,590,030 154,766,984
Net income (loss) per share - basic	$ (0.07)	$ 0.08	$ (0.20)$ (0.01)
Net income (loss) per share - diluted	$ (0.07)	$ 0.08	$ (0.20)$ (0.01)

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Gold Flora Corporation Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

(In USD, in thousands, except for share and per share data)

Approximately 105,434,265 of potentially dilutive securities at September 30, 2024 were excluded in the calculation of diluted loss per share as their impact would have been anti-dilutive.

19. SUBSEQUENT EVENTS

Receivership

On October 4, 2024, the Court of Chancery of the State of Delaware (the “Court”) granted an order advancing a motion for sanctions brought by former directors of LCV and TPCO (the “Order”) in Michael Auerbach v. Gold Flora Corporation (C.A. No. 2024-0225-MTZ) and D aniel Fireman, Christopher Akelman, Octavio Boccalandra v. Left Coast Ventures, Inc. (C.A. No. 2023-0588-MTZ). The Order held the Company and LCV in contempt for violation of advancement orders with respect to indemnification obligations for fees owed to counsel and related expenses, which amount is currently estimated at approximately $1.65 million.

Pursuant to the Order, the Court appointed Molly DiBianca of Clark Hill PLC (the “Limited Receiver”) as a limited purpose receiver to take such action that the Limited Receiver determines in good faith is appropriate to cause the Company and LCV to satisfy the amounts due under the Order, including accessing financial records and negotiation of a payment plan with the former directors (the “Charge”) pursuant to Title 8, Section 322 of the Delaware General Corporation Law (“Section 322”). The Order did not create a full, general receivership over the Company, and the Limited Receiver’s appointment is limited to the foregoing Charge. The Order provides that the Limited Receiver should first attempt to resort to resolving the Charge through operating cash flow. The Limited Receiver will have all powers generally available to a receiver under Section 322 solely with respect to the Charge, and the Limited Receiver will not have authority over the Company except in connection with the Charge. The initial term for the Limited Receiver was 59 days from the date of the Order. Additionally, Gold Flora and LCV would incur a daily fine of $1,000 until the contempt is cured, provided that the fine would not become due and payable if the Charge is satisfied or a payment plan is in place by October 31, 2024.

On November 4, 2024, the Court issued a stipulation and order (the “Stipulation”) and the Limited Receiver filed an interim report (the “Report”). The Stipulation requires the Company to pay an aggregate of $150,000 per month to the satisfy amounts due under the Order. Pursuant to the Report, the Limited Receiver stayed the limited receivership, conditioned upon the Company’s compliance with the payment plan and satisfaction of any future advancement demands brought by the former directors.

Additional Note

On November 6, 2024, the Company issued an Additional Note to the Investor pursuant to the Loan Agreement . The Additional Note has an original principal amount of $2.78 million and a funded amount of $1.9 million.

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