UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberJune 30, 20212022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to
Commission file number 000-56132
GREEN THUMB INDUSTRIES INC.
(Exact name of registrant as specified in its charter)
British Columbia | 98-1437430 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. employer identification no.) |
|
|
325 West Huron Street, Suite 700 Chicago, Illinois | 60654 |
(Address of principal executive offices) | (zip code) |
Registrant’s telephone number, including area code - (312) 471-6720
Securities registered pursuant to Section 12(g) of the Act:
Subordinate Voting Shares
Multiple Voting Shares
Super Voting Shares
(Title of each Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 day. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
| Accelerated filer | ☐ |
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Non-accelerated filer |
| Smaller reporting company | ☐ |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
As of NovemberAugust 1, 2021,2022, there were 194,781,223207,181,101 shares of the registrant’s Subordinate Voting Shares, 3,965,4003,853,100 shares of the registrant’s Multiple Voting Shares (on an as converted basis) and 29,503,10025,169,000 shares of the registrant’s Super Voting Shares (on an as converted basis).
GREEN THUMB INDUSTRIES INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SeptemberJune 30, 20212022
TABLE OF CONTENTS
FINANCIAL INFORMATION | Page | |
| Part I |
|
Unaudited Interim Condensed Consolidated Balance Sheets as of | 4 | |
| Unaudited Interim Condensed Consolidated Statements of Operations for the three and | 5 |
| Unaudited Interim Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three and | 6 |
| Unaudited Interim Condensed Consolidated Statements of Cash Flows for the | 8 |
| Notes to Unaudited Interim Condensed Consolidated Financial Statements | 10 |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 33 | |
Quantitative and Qualitative Disclosure About Market Risk |
| |
Controls and Procedures |
| |
| Part II |
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OTHER INFORMATION |
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Legal Proceedings |
| |
Risk Factors |
| |
Sale of Unregistered Securities |
| |
Defaults Upon Senior Securities |
| |
Mine Safety Disclosure |
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Other Information |
| |
Exhibits |
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Use of Names
In this Quarterly Report on Form 10-Q, unless the context otherwise requires, the terms “we,” “us,” “our,” “Company,” “Corporation” or “Green Thumb” refer to Green Thumb Industries Inc. together with its wholly-owned subsidiaries.
Currency
Unless otherwise indicated, all references to “$” or “US$” in this document refer to United States dollars, and all references to “C$” refer to Canadian dollars.
Disclosure Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains statements that we believe are, or may be considered to be, “forward-looking statements.” All statements other than statements of historical fact included in this document regarding the prospects of our industry or our prospects, plans, financial position or business strategy may constitute forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking words such as “may,” “will,” “expect,” “intend,” “estimate,” “foresee,” “project,” “anticipate,” “believe,” “plan,” “forecast,” “continue” or “could” or the negative of these terms or variations of them or similar terms.terms or expressions of similar meaning. Furthermore, forward-looking statements may be included in various filings that we make with the Securities and Exchange Commission (the “SEC”), and in press releases or oral statements made by or with the approval of one of our authorized executive officers. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that these expectations will prove to be correct. These forward-looking statements are subject to certain known and unknown risks and uncertainties, as well as assumptions that could cause actual results to differ materially from those reflected in these forward-looking statements. These known and unknown risks include, without limitation: cannabis remains illegal under U.S. federal law, and enforcement of cannabis laws could change; the Company may be subject to action by the U.S. federal government; state regulation of cannabis is uncertain; the Company may be subject to heightened scrutiny by Canadian regulatory authorities; the Company may face limitations on ownership of cannabis licenses; the Company may become subject to U.S. Food and Drug Administration or the U.S. Bureau of Alcohol, Tobacco Firearms and Explosives regulation; cannabis businesses are subject to applicable antimoneyanti-money laundering laws and regulations and have restricted access to banking and other financial services; the Company may face difficulties acquiring additional financing; the Company lacks access to U.S. bankruptcy protections; the Company operates in a highly regulated sector and may not always succeed in complying fully with applicable regulatory requirements in all jurisdictions where we carrythe Company carries on business; the Company may face difficulties in enforcing its contracts; the Company has limited trademark protection; cannabis businesses are subject to unfavorable tax treatment; cannabis businesses may be subject to civil asset forfeiture; the Company is subject to proceeds of crime statutes; the Company faces exposure to fraudulent or illegal activity; the Company’s use of joint ventures may expose it to risks associated with jointly owned investments; the Company faces risks due to industry immaturity or limited comparable, competitive or established industry best practices; the Company faces risks related to its products; the Company is dependent on the popularity of and consumer acceptance of the Company’s brand portfolio; the Company’s business is subject to the risks inherent in agricultural operations; the Company may be adversely impacted by rising or volatile energy costs; the Company faces risks related to its information technology systems and potential cyber-attacks and security breaches; the Company faces an inherent risk of product liability or similar claims; the Company’s products may be subject to product recalls; the Company may face unfavorable publicity or consumer perception; the Company’s voting control is concentrated; the Company’s capital structure and voting control may cause unpredictability; issuances of substantial amounts of Super Voting Shares, Multiple Voting Shares or Subordinate Voting Shares may result in dilution; and the Company is governed by corporate laws in British Columbia, Canada which in some cases have a different effect on shareholders than the corporate laws in Delaware, United States. Further information on these and other potential factors that could affect the Company’s business and financial condition and the results of operations are included in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020,2021, and elsewhere in the Company’s filings with the SEC, which are available on the SEC’s website or at https://investors.gtigrows.com. Readers are cautioned not to place undue reliance on any forward-looking statements contained in this document, which reflect management’s opinions only as of the date hereof. Except as required by law, we undertake no obligation to revise or publicly release the results of any revision to any forward-looking statements. You are advised, however, to consult any additional disclosures we make in our reports to the SEC. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained in this document.
3
Green Thumb Industries Inc.
Unaudited Interim Condensed Consolidated Balance Sheets
As of SeptemberJune 30, 20212022 and December 31, 20202021
(Amounts Expressed in United States Dollars)
| June 30, |
| December 31, |
| ||||||||||||
|
| September 30, |
| December 31, |
|
| 2022 |
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| 2021 |
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| 2021 |
| 2020 |
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| (Audited) |
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| (Audited) |
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| (in thousands) |
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ASSETS |
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Current Assets: |
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Cash and Cash Equivalents |
| $ | 285,792,378 |
| $ | 83,757,785 |
|
| $ | 145,277 |
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| $ | 230,420 |
| |
Accounts Receivable |
| 25,484,379 |
| 21,414,987 |
|
|
| 25,683 |
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|
| 22,099 |
| |||
Inventories |
| 92,981,561 |
| 69,542,953 |
|
|
| 123,245 |
|
|
| 95,471 |
| |||
Prepaid Expenses |
| 11,159,708 |
| 6,445,393 |
|
|
| 11,535 |
|
|
| 11,175 |
| |||
Other Current Assets |
|
| 5,333,213 |
|
| 2,782,887 |
|
|
| 5,786 |
|
|
| 5,065 |
| |
Total Current Assets |
| 420,751,239 |
| 183,944,005 |
|
|
| 311,526 |
|
|
| 364,230 |
| |||
Property and Equipment, Net |
| 325,302,931 |
| 189,925,877 |
|
|
| 467,252 |
|
|
| 409,074 |
| |||
Right of Use Assets, Net |
| 174,140,812 |
| 140,382,781 |
|
|
| 244,269 |
|
|
| 176,327 |
| |||
Investments |
| 50,627,826 |
| 40,794,806 |
|
|
| 81,783 |
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| 94,902 |
| |||
Investment in Associate |
| 30,067,409 |
| 12,669,963 |
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Investments in Associates |
|
| 27,474 |
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| 30,337 |
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Intangible Assets, Net |
| 549,184,352 |
| 406,242,034 |
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| 659,595 |
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| 675,491 |
| |||
Goodwill |
| 597,483,954 |
| 382,697,467 |
|
|
| 641,718 |
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|
| 632,849 |
| |||
Deposits and Other Assets |
|
| 2,870,954 |
|
| 1,892,229 |
|
|
| 2,786 |
|
|
| 2,641 |
| |
TOTAL ASSETS |
| $ | 2,150,429,477 |
| $ | 1,358,549,162 |
|
| $ | 2,436,403 |
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| $ | 2,385,851 |
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LIABILITIES AND SHAREHOLDERS' EQUITY |
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LIABILITIES |
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Current Liabilities: |
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Accounts Payable |
| $ | 9,811,144 |
| $ | 20,503,572 |
|
| $ | 19,875 |
|
| $ | 14,086 |
| |
Accrued Liabilities |
| 78,700,095 |
| 56,288,729 |
|
|
| 75,782 |
|
|
| 84,724 |
| |||
Acquisition Consideration Payable |
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| 0 |
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| 31,732 |
| ||||||||
Compensation Payable |
|
| 7,856 |
|
|
| 12,022 |
| ||||||||
Current Portion of Notes Payable |
| 777,275 |
| 341,983 |
|
|
| 1,002 |
|
|
| 783 |
| |||
Current Portion of Lease Liabilities |
| 7,604,460 |
| 3,862,110 |
|
|
| 10,011 |
|
|
| 9,221 |
| |||
Contingent Consideration Payable |
| 68,148,188 |
| 22,150,000 |
|
|
| 10,947 |
|
|
| 50,284 |
| |||
Income Tax Payable |
|
| 260,621 |
|
| 16,142,041 |
|
|
| 6,500 |
|
|
| 1,527 |
| |
Total Current Liabilities |
| 165,301,783 |
| 119,288,435 |
|
|
| 131,973 |
|
|
| 204,379 |
| |||
Long-Term Liabilities: |
|
|
|
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|
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|
|
| |||||
Lease Liabilities, Net of Current Portion |
| 180,857,800 |
| 146,426,760 |
|
|
| 249,149 |
|
|
| 182,539 |
| |||
Notes Payable, Net of Current Portion and Debt Discount |
| 205,760,797 |
| 98,712,996 |
|
|
| 252,429 |
|
|
| 239,151 |
| |||
Contingent Consideration Payable |
| 39,876,234 |
| 4,950,000 |
|
|
| 29,847 |
|
|
| 33,581 |
| |||
Warrant Liability |
| 34,003,000 |
| 39,454,000 |
|
|
| 3,105 |
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| 24,877 |
| |||
Deferred Income Taxes |
|
| 79,515,045 |
|
| 35,557,630 |
|
|
| 81,846 |
|
|
| 81,846 |
| |
TOTAL LIABILITIES |
| 705,314,659 |
| 444,389,821 |
|
|
| 748,349 |
|
|
| 766,373 |
| |||
COMMITMENTS AND CONTINGENCIES |
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SHARE HOLDERS' EQUITY |
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Subordinate Voting Shares (Shares Authorized, Issued and Outstanding at September 30, 2021: |
| 0 |
| 0 |
| |||||||||||
Multiple Voting Shares (Shares Authorized, Issued and Outstanding at September 30, 2021: |
| 0 |
| 0 |
| |||||||||||
Super Voting Shares (Shares Authorized, Issued and Outstanding at September 30, 2021: |
| 0 |
| 0 |
| |||||||||||
SHAREHOLDERS' EQUITY |
|
|
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Subordinate Voting Shares (Shares Authorized, Issued and Outstanding at June 30, 2022: |
|
| — |
|
|
| — |
| ||||||||
Multiple Voting Shares (Shares Authorized, Issued and Outstanding at June 30, 2022: |
|
| — |
|
|
| — |
| ||||||||
Super Voting Shares (Shares Authorized, Issued and Outstanding at June 30, 2022: |
|
| — |
|
|
| — |
| ||||||||
Share Capital |
| 1,500,863,236 |
| 1,048,640,398 |
|
|
| 1,659,000 |
|
|
| 1,633,672 |
| |||
Contributed Surplus |
| 8,578,127 |
| 4,893,153 |
|
|
| 9,165 |
|
|
| 21,245 |
| |||
Deferred Share Issuances |
| 28,645,809 |
| 2,587,317 |
|
|
| 36,262 |
|
|
| 36,262 |
| |||
Accumulated Deficit |
|
| (92,868,812 | ) |
|
| (145,498,623 | ) |
|
| (16,687 | ) |
|
| (70,063 | ) |
Equity of Green Thumb Industries Inc. |
| 1,445,218,360 |
| 910,622,245 |
|
|
| 1,687,740 |
|
|
| 1,621,116 |
| |||
Noncontrolling interests |
|
| (103,542 | ) |
|
| 3,537,096 |
|
|
| 314 |
|
|
| (1,638 | ) |
TOTAL SHAREHOLDERS' EQUITY |
|
| 1,445,114,818 |
|
| 914,159,341 |
|
|
| 1,688,054 |
|
|
| 1,619,478 |
| |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
| $ | 2,150,429,477 |
| $ | 1,358,549,162 |
|
| $ | 2,436,403 |
|
| $ | 2,385,851 |
|
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements
4
Green Thumb Industries Inc.
Unaudited Interim Condensed Consolidated Statements of Operations
Three and NineSix Months Ended SeptemberJune 30, 20212022 and 20202021
(Amounts Expressed in United States Dollars, Except Share Amounts)
| Three Months Ended June 30, |
|
|
| Six Months Ended June 30, |
| |||||||||||||||||||
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, |
| 2022 |
|
| 2021 |
|
|
| 2022 |
|
| 2021 |
| ||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| (in thousands) |
|
|
| (in thousands) |
| ||||||||||
Revenues, net of discounts |
| $233,676,881 |
| $157,103,841 |
| $649,979,277 |
| $379,346,367 | $ |
| 254,311 |
| $ |
| 221,872 |
|
| $ |
| 496,911 |
| $ |
| 416,302 |
|
Cost of Goods Sold, net |
| (104,159,371) |
| (70,146,676) |
| (286,685,443) |
| (175,707,874) |
|
| (128,513 | ) |
|
| (98,961 | ) |
|
|
| (248,173 | ) |
|
| (182,526 | ) |
Gross Profit |
| 129,517,510 |
| 86,957,165 |
| 363,293,834 |
| 203,638,493 |
|
| 125,798 |
|
|
| 122,911 |
|
|
|
| 248,738 |
|
|
| 233,776 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
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| ||||||||||||
Selling, General, and Administrative |
| 71,448,927 |
| 49,745,979 |
| 202,835,651 |
| 144,823,947 |
|
| 63,535 |
|
|
| 72,056 |
|
|
|
| 131,923 |
|
|
| 131,387 |
|
Total Expenses |
| 71,448,927 |
| 49,745,979 |
| 202,835,651 |
| 144,823,947 |
|
| 63,535 |
|
|
| 72,056 |
|
|
|
| 131,923 |
|
|
| 131,387 |
|
Income From Operations |
| 58,068,583 |
| 37,211,186 |
| 160,458,183 |
| 58,814,546 |
|
| 62,263 |
|
|
| 50,855 |
|
|
|
| 116,815 |
|
|
| 102,389 |
|
Other Income (Expense): |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Other Income, net |
| 8,124,613 |
| 6,432,883 |
| 9,805,073 |
| 7,501,566 | |||||||||||||||||
Other Income (Expense), net |
|
| 5,583 |
|
|
| 6,830 |
|
|
|
| 17,018 |
|
|
| 1,680 |
| ||||||||
Interest Income, net |
| 328,018 |
| 5,397 |
| 673,598 |
| 109,922 |
|
| 624 |
|
|
| 296 |
|
|
|
| 1,524 |
|
|
| 346 |
|
Interest Expense, net |
| (7,616,449) |
| (4,460,125) |
| (16,419,420) |
| (14,236,475) |
|
| (5,399 | ) |
|
| (4,680 | ) |
|
|
| (11,469 | ) |
|
| (8,803 | ) |
Total Other Income (Expense) |
| 836,182 |
| 1,978,155 |
| (5,940,749) |
| (6,624,987) |
|
| 808 |
|
|
| 2,446 |
|
|
|
| 7,073 |
|
|
| (6,777 | ) |
Income Before Provision for Income Taxes And Non-Controlling Interest |
| 58,904,765 |
| 39,189,341 |
| 154,517,434 |
| 52,189,559 |
|
| 63,071 |
|
|
| 53,301 |
|
|
|
| 123,888 |
|
|
| 95,612 |
|
|
| ||||||||||||||||||||||||
Provision For Income Taxes |
| 37,319,988 |
| 28,436,332 |
| 98,202,898 |
| 56,964,047 |
|
| 38,340 |
|
|
| 30,027 |
|
|
|
| 69,471 |
|
|
| 60,883 |
|
Net Income (Loss) Before Non-Controlling Interest |
| 21,584,777 |
| 10,753,009 |
| 56,314,536 |
| (4,774,488) | |||||||||||||||||
Net Income Before Non-Controlling Interest |
|
| 24,731 |
|
|
| 23,274 |
|
|
|
| 54,417 |
|
|
| 34,729 |
| ||||||||
Net Income Attributable to Non-Controlling Interest |
| 1,375,623 |
| 1,109,080 |
| 3,684,725 |
| 2,697,352 |
|
| 294 |
|
|
| 1,223 |
|
|
|
| 1,041 |
|
|
| 2,309 |
|
Net Income (Loss) Attributable To Green Thumb Industries Inc. |
| $20,209,154 |
| $9,643,929 |
| $52,629,811 |
| $(7,471,840) | |||||||||||||||||
Net Income (Loss) per share - basic |
| $0.09 |
| $0.04 |
| $0.24 |
| $(0.04) | |||||||||||||||||
Net Income (Loss) per share - diluted |
| $0.08 |
| $0.04 |
| $0.23 |
| $(0.04) | |||||||||||||||||
Net Income Attributable To Green Thumb Industries Inc. | $ |
| 24,437 |
| $ |
| 22,051 |
|
| $ |
| 53,376 |
| $ |
| 32,420 |
| ||||||||
Net Income per share - basic | $ |
| 0.11 |
| $ |
| 0.10 |
|
| $ |
| 0.23 |
| $ |
| 0.15 |
| ||||||||
Net Income per share - diluted | $ |
| 0.10 |
| $ |
| 0.10 |
|
| $ |
| 0.22 |
| $ |
| 0.15 |
| ||||||||
Weighted average number of shares outstanding - basic |
| 226,529,671 |
| 211,990,405 |
| 221,059,870 |
| 210,127,323 |
|
| 236,783,625 |
|
|
| 220,323,622 |
|
|
|
| 236,313,896 |
|
|
| 218,276,376 |
|
Weighted average number of shares outstanding - diluted |
| 230,879,437 |
| 214,212,292 |
| 225,411,773 |
| 210,127,323 |
|
| 237,762,903 |
|
|
| 224,843,155 |
|
|
|
| 237,869,300 |
|
|
| 222,927,120 |
|
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements
5
Unaudited Interim Condensed Consolidated Statements of Changes in Shareholders’ Equity
Three and NineSix Months Ended SeptemberJune 30, 20212022 and 20202021
(Amounts Expressed in United States Dollars)
|
| Share |
|
| Contributed |
|
| Deferred Share |
|
| Accumulated |
|
| Non-Controlling |
|
| Total |
| ||||||
Balance, July 1, 2020 |
| $ | 1,004,812,062 |
|
| $ | 6,545,712 |
|
| $ | 15,280,000 |
|
| $ | (177,607,359 | ) |
| $ | 2,367,904 |
|
| $ | 851,398,319 |
|
Noncontrolling interests adjustment for change in ownership |
|
| — |
|
|
| 5,700,000 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5,700,000 |
|
Issuance of shares for redemption of noncontrolling interest |
|
| 20,078,940 |
|
|
| (14,728,940 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5,350,000 |
|
Distribution of Contingent Consideration |
|
| 2,690,914 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,690,914 |
|
Distribution of deferred shares |
|
| 13,444,669 |
|
|
| — |
|
|
| (13,444,669 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Exercise of options |
|
| 744,332 |
|
|
| (295,908 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 448,424 |
|
Stock based compensation |
|
| — |
|
|
| 4,435,634 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,435,634 |
|
Distributions to third party and limited liability |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (700,000 | ) |
|
| (700,000 | ) |
Net (loss) income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 9,643,929 |
|
|
| 1,109,080 |
|
|
| 10,753,009 |
|
Balance, September 30, 2020 |
| $ | 1,041,770,917 |
|
| $ | 1,656,498 |
|
| $ | 1,835,331 |
|
| $ | (167,963,430 | ) |
| $ | 2,776,984 |
|
| $ | 880,076,300 |
|
Balance, January 1, 2020 |
| $ | 980,638,701 |
|
| $ | 3,960,854 |
|
| $ | 16,587,798 |
|
| $ | (160,491,590 | ) |
| $ | 2,512,913 |
|
| $ | 843,208,676 |
|
Contributions from limited liability company |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 50,000 |
|
|
| 50,000 |
|
Issuance of shares under business |
|
| 2,524,560 |
|
|
| (2,678,489 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (153,929 | ) |
Issuance of shares for redemption of noncontrolling interests |
|
| 20,078,940 |
|
|
| (14,728,940 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5,350,000 |
|
Distribution of Contingent Consideration |
|
| 22,885,813 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 22,885,813 |
|
Distribution of deferred shares |
|
| 14,752,467 |
|
|
| — |
|
|
| (14,752,467 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Issuance of warrants |
|
| — |
|
|
| 181,272 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 181,272 |
|
Exercise of options |
|
| 890,436 |
|
|
| (234,340 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 656,096 |
|
Stock based compensation |
|
| — |
|
|
| 15,209,518 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 15,209,518 |
|
Distributions to third party and limited liability |
|
| — |
|
|
| (53,377 | ) |
|
| — |
|
|
| — |
|
|
| (2,483,281 | ) |
|
| (2,536,658 | ) |
Net (loss) income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (7,471,840 | ) |
|
| 2,697,352 |
|
|
| (4,774,488 | ) |
Balance, September 30, 2020 |
| $ | 1,041,770,917 |
|
| $ | 1,656,498 |
|
| $ | 1,835,331 |
|
| $ | (167,963,430 | ) |
| $ | 2,776,984 |
|
| $ | 880,076,300 |
|
|
| Share |
|
| Contributed |
|
| Deferred Share |
|
| Accumulated |
|
| Non-Controlling |
|
| Total |
| ||||||
|
| (in thousands) |
| |||||||||||||||||||||
Balance, April 1, 2021 | $ |
| 1,236,988 |
| $ |
| (2,788 | ) | $ |
| 752 |
| $ |
| (135,130 | ) | $ |
| 2,948 |
| $ |
| 1,102,770 |
|
Issuance of shares under business combinations and investments |
|
| 56,755 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 56,755 |
|
Issuance of deferred shares |
|
| — |
|
|
| — |
|
|
| 7,814 |
|
|
| — |
|
|
| — |
|
|
| 7,814 |
|
Exercise of options, RSUs and warrants |
|
| 15,316 |
|
|
| (11,984 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,332 |
|
Stock-based compensation |
|
| — |
|
|
| 5,672 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5,672 |
|
Warrants and shares issued in association with note payable |
|
| 271 |
|
|
| 22,259 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 22,530 |
|
Shares issued for settlement of business obligation |
|
| 7,135 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7,135 |
|
Distributions to limited liability company unit holders |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (125 | ) |
|
| (125 | ) |
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 22,051 |
|
|
| 1,223 |
|
|
| 23,274 |
|
Balance, June 30, 2021 | $ |
| 1,316,465 |
| $ |
| 13,159 |
| $ |
| 8,566 |
| $ |
| (113,079 | ) | $ |
| 4,046 |
| $ |
| 1,229,157 |
|
Balance, January 1, 2021 | $ |
| 1,048,640 |
| $ |
| 4,893 |
| $ |
| 2,587 |
| $ |
| (145,499 | ) | $ |
| 3,537 |
| $ |
| 914,158 |
|
Issuance of shares under business combinations and investments |
|
| 57,793 |
|
|
| (38 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 57,755 |
|
Shares issued as contingent consideration |
|
| 12,673 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 12,673 |
|
Issuance of deferred shares |
|
| — |
|
|
| — |
|
|
| 7,814 |
|
|
| — |
|
|
| — |
|
|
| 7,814 |
|
Distribution of deferred shares |
|
| 1,826 |
|
|
| — |
|
|
| (1,835 | ) |
|
| — |
|
|
| — |
|
|
| (9 | ) |
Issuance of registered shares pursuant to Form S-1 |
|
| 155,803 |
|
|
| (305 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 155,498 |
|
Exercise of options, RSUs and warrants |
|
| 32,324 |
|
|
| (23,353 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 8,971 |
|
Stock-based compensation |
|
| — |
|
|
| 9,703 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 9,703 |
|
Warrants and shares issued in association with note payable |
|
| 271 |
|
|
| 22,259 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 22,530 |
|
Shares issued for settlement of business obligation |
|
| 7,135 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7,135 |
|
Distributions to limited liability company unit holders |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,800 | ) |
|
| (1,800 | ) |
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 32,420 |
|
|
| 2,309 |
|
|
| 34,729 |
|
Balance, June 30, 2021 | $ |
| 1,316,465 |
| $ |
| 13,159 |
| $ |
| 8,566 |
| $ |
| (113,079 | ) | $ |
| 4,046 |
| $ |
| 1,229,157 |
|
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements
6
Green Thumb Industries Inc.
Unaudited Interim Condensed Consolidated Statements of Changes in Shareholders’ Equity
Three and NineSix Months Ended SeptemberJune 30, 20212022 and 20202021
(Amounts Expressed in United States Dollars)
|
| Share |
|
| Contributed |
|
| Deferred Share |
|
| Accumulated |
|
| Non-Controlling |
|
| Total |
| ||||||
|
| (in thousands) |
| |||||||||||||||||||||
Balance, April 1, 2022 | $ |
| 1,653,703 |
| $ |
| 5,966 |
| $ |
| 36,262 |
| $ |
| (41,124 | ) | $ |
| 154 |
| $ |
| 1,654,961 |
|
Exercise of options, RSUs and warrants |
|
| 4,393 |
|
|
| (3,730 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 663 |
|
Stock-based compensation |
|
| — |
|
|
| 6,833 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6,833 |
|
Shares issued for settlement of business obligation |
|
| 904 |
|
|
| 96 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,000 |
|
Distributions to limited liability company unit holders |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (134 | ) |
|
| (134 | ) |
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 24,437 |
|
|
| 294 |
|
|
| 24,731 |
|
Balance, June 30, 2022 | $ |
| 1,659,000 |
| $ |
| 9,165 |
| $ |
| 36,262 |
| $ |
| (16,687 | ) | $ |
| 314 |
| $ |
| 1,688,054 |
|
Balance, January 1, 2022 | $ |
| 1,633,672 |
| $ |
| 21,245 |
| $ |
| 36,262 |
| $ |
| (70,063 | ) | $ |
| (1,638 | ) | $ |
| 1,619,478 |
|
Noncontrolling interests adjustment for change in ownership |
|
| 2,379 |
|
|
| (17,735 | ) |
|
| — |
|
|
| — |
|
|
| 15,356 |
|
|
| — |
|
Issuance of shares under business combinations and investments |
|
| 1,406 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,406 |
|
Shares issued as contingent consideration |
|
| 13,111 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 13,111 |
|
Exercise of options, RSUs and warrants |
|
| 7,528 |
|
|
| (5,925 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,603 |
|
Shares issued for settlement of business obligation |
|
| 904 |
|
|
| 96 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,000 |
|
Stock-based compensation |
|
| — |
|
|
| 11,484 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 11,484 |
|
Distributions to limited liability company unit holders |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (14,445 | ) |
|
| (14,445 | ) |
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 53,376 |
|
|
| 1,041 |
|
|
| 54,417 |
|
Balance, June 30, 2022 | $ |
| 1,659,000 |
| $ |
| 9,165 |
| $ |
| 36,262 |
| $ |
| (16,687 | ) | $ |
| 314 |
| $ |
| 1,688,054 |
|
|
| Share |
|
| Contributed |
|
| Deferred Share |
|
| Accumulated |
|
| Non-Controlling |
|
| Total |
| ||||||
Balance, July 1, 2021 |
| $ | 1,316,465,184 |
|
| $ | 13,159,133 |
|
| $ | 8,565,707 |
|
| $ | (113,077,966 | ) |
| $ | 4,045,889 |
|
| $ | 1,229,157,947 |
|
Issuance of shares for redemption of noncontrolling interest |
|
| 4,070,003 |
|
|
| (4,996,294 | ) |
|
| — |
|
|
| — |
|
|
| 926,291 |
|
|
| — |
|
Issuance of shares under business |
|
| 166,163,571 |
|
|
| 60,462 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 166,224,033 |
|
Shares issued as contingent consideration |
|
| 5,949,078 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5,949,078 |
|
Issuance of deferred shares |
|
| — |
|
|
| — |
|
|
| 21,382,385 |
|
|
| — |
|
|
| — |
|
|
| 21,382,385 |
|
Distribution of deferred shares |
|
| 1,318,888 |
|
|
| — |
|
|
| (1,302,283 | ) |
|
| — |
|
|
| — |
|
|
| 16,605 |
|
Exercise of options, RSUs and warrants |
|
| 6,896,512 |
|
|
| (4,640,016 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,256,496 |
|
Stock based compensation |
|
| — |
|
|
| 4,994,842 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,994,842 |
|
Distributions to limited liability company unit |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (6,451,345 | ) |
|
| (6,451,345 | ) |
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 20,209,154 |
|
|
| 1,375,623 |
|
|
| 21,584,777 |
|
Balance, September 30, 2021 |
| $ | 1,500,863,236 |
|
| $ | 8,578,127 |
|
| $ | 28,645,809 |
|
| $ | (92,868,812 | ) |
| $ | (103,542 | ) |
| $ | 1,445,114,818 |
|
Balance, January 1, 2021 |
| $ | 1,048,640,398 |
|
| $ | 4,893,153 |
|
| $ | 2,587,317 |
|
| $ | (145,498,623 | ) |
| $ | 3,537,096 |
|
| $ | 914,159,341 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Issuance of shares for redemption of noncontrolling interest |
|
| 4,070,003 |
|
|
| (4,996,294 | ) |
|
| — |
|
|
| — |
|
|
| 926,291 |
|
|
| — |
|
Issuance of shares under business |
|
| 223,956,834 |
|
|
| 22,155 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 223,978,989 |
|
Shares issued as contingent consideration |
|
| 18,621,759 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 18,621,759 |
|
Issuance of deferred shares |
|
| — |
|
|
| — |
|
|
| 29,196,104 |
|
|
| — |
|
|
| — |
|
|
| 29,196,104 |
|
Distribution of deferred shares |
|
| 3,144,485 |
|
|
| — |
|
|
| (3,137,612 | ) |
|
| — |
|
|
| — |
|
|
| 6,873 |
|
Issuance of registered shares pursuant to |
|
| 155,803,084 |
|
|
| (304,944 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 155,498,140 |
|
Exercise of options, RSUs and warrants |
|
| 39,220,813 |
|
|
| (27,992,731 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 11,228,082 |
|
Warrants and shares issued in association with notes payable |
|
| 270,660 |
|
|
| 22,258,608 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 22,529,268 |
|
Shares issued for settlement of business dispute |
|
| 7,135,200 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7,135,200 |
|
Stock based compensation |
|
| — |
|
|
| 14,698,180 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 14,698,180 |
|
Distributions to limited liability company unit holders |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (8,251,654 | ) |
|
| (8,251,654 | ) |
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 52,629,811 |
|
|
| 3,684,725 |
|
|
| 56,314,536 |
|
Balance, September 30, 2021 |
| $ | 1,500,863,236 |
|
| $ | 8,578,127 |
|
| $ | 28,645,809 |
|
| $ | (92,868,812 | ) |
| $ | (103,542 | ) |
| $ | 1,445,114,818 |
|
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements
7
Green Thumb Industries Inc.
Unaudited Interim Condensed Consolidated Statements of Cash Flows
NineSix Months Ended SeptemberJune 30, 20212022 and 20202021
(Amounts Expressed in United States Dollars)
| Six Months Ended June 30, |
| ||||||||||||||
|
| Nine Months Ended September 30, |
|
| 2022 |
|
| 2021 |
| |||||||
|
| 2021 |
|
| 2020 |
|
| (in thousands) |
| |||||||
CASH FLOW FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net income (loss) attributable to Green Thumb Industries Inc. |
| $ | 52,629,811 |
| $ | (7,471,840 | ) | |||||||||
Net income attributable to Green Thumb Industries Inc. |
| $ | 53,376 |
|
| $ | 32,420 |
| ||||||||
Net income attributable to non-controlling interest |
| 3,684,725 |
| 2,697,352 |
|
|
| 1,041 |
|
|
| 2,309 |
| |||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
|
|
|
|
|
| ||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
| |||||||||||
Depreciation and amortization |
| 47,239,479 |
| 38,479,960 |
|
|
| 47,188 |
|
|
| 30,066 |
| |||
Amortization of operating lease assets |
| 24,760,298 |
| 18,987,980 |
|
|
| 20,022 |
|
|
| 16,028 |
| |||
Loss on extinguishment of debt |
| 9,881,847 |
| — |
|
|
| 0 |
|
|
| 9,882 |
| |||
Loss on disposal of property and equipment |
| 822,306 |
| 29,858 |
|
|
| 100 |
|
|
| 64 |
| |||
Earnings from equity method investments |
| (1,330,196 | ) |
| (1,400,000 | ) | ||||||||||
Loss (earnings) on equity method investment |
|
| 1,941 |
|
|
| (1,646 | ) | ||||||||
Gain from lease modification |
|
| (3,330 | ) |
|
| 0 |
| ||||||||
Bad debt expense |
| 264,424 |
| 315,798 |
|
|
| 24 |
|
|
| 6 |
| |||
Deferred income taxes |
| 8,216,597 |
| 4,377,000 |
|
|
| 0 |
|
|
| 1,042 |
| |||
Stock-based compensation |
| 14,698,180 |
| 15,209,520 |
|
|
| 11,484 |
|
|
| 9,703 |
| |||
Increase in fair value of investments |
| (14,604,387 | ) |
| (8,142,178 | ) | ||||||||||
Decrease (increase) in fair value of investments |
|
| 3,201 |
|
|
| (18,754 | ) | ||||||||
Interest on contingent consideration payable and acquisition liabilities |
| 2,874,422 |
| 998,842 |
|
|
| 2,018 |
|
|
| 0 |
| |||
Increase (decrease) in fair value of contingent consideration |
| 662,027 |
| (425,424 | ) | |||||||||||
(Decrease) increase in fair value of contingent consideration |
|
| (31,978 | ) |
|
| 413 |
| ||||||||
(Decrease) increase in fair value of warrants |
| (5,451,000 | ) |
| 2,060,771 |
|
|
| (21,772 | ) |
|
| 8,011 |
| ||
Shares issued for settlement of business dispute |
| 7,135,200 |
| — |
| |||||||||||
Decrease in fair value of note receivable |
| 0 |
| 815,937 |
| |||||||||||
Shares issued for settlement of business obligation |
|
| 1,000 |
|
|
| 7,135 |
| ||||||||
Amortization of debt discount |
| 4,954,281 |
| 4,048,531 |
|
|
| 4,559 |
|
|
| 2,764 |
| |||
Changes in operating assets and liabilities: |
|
|
|
| — |
|
|
|
|
|
| |||||
Accounts receivable |
| (3,781,683 | ) |
| (5,616,054 | ) |
|
| (3,976 | ) |
|
| (2,793 | ) | ||
Inventories |
| (17,257,048 | ) |
| (9,129,777 | ) |
|
| (27,361 | ) |
|
| (10,373 | ) | ||
Prepaid expenses and other current assets |
| (5,992,713 | ) |
| (4,142,854 | ) |
|
| (996 | ) |
|
| (6,303 | ) | ||
Deposits and other assets |
| (978,725 | ) |
| 1,567,458 |
|
|
| (147 | ) |
|
| (1,398 | ) | ||
Accounts payable |
| (12,950,170 | ) |
| 2,242,553 |
|
|
| 5,779 |
|
|
| (6,074 | ) | ||
Accrued liabilities |
| 3,516,335 |
| 13,609,399 |
|
|
| (9,998 | ) |
|
| 3,995 |
| |||
Operating lease liabilities |
| (20,344,939 | ) |
| (12,674,176 | ) |
|
| (17,234 | ) |
|
| (12,586 | ) | ||
Income tax payable |
|
| (15,881,420 | ) |
|
| 14,617,544 |
|
|
| 4,973 |
|
|
| (15,614 | ) |
NET CASH PROVIDED BY OPERATING ACTIVITIES |
|
| 82,767,650 |
|
| 71,056,200 |
|
|
| 39,914 |
|
|
| 48,297 |
| |
CASH FLOW FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
| |||||
Purchases of property and equipment |
| (117,159,709 | ) |
| (49,221,442 | ) |
|
| (71,131 | ) |
|
| (44,157 | ) | ||
Proceeds from disposal of assets |
| 108,700 |
| 11,799,025 |
| |||||||||||
Proceeds from disposal of property and equipment |
|
| 32 |
|
|
| 60 |
| ||||||||
Investments in securities |
| (31,053,096 | ) |
| — |
|
|
| (5,453 | ) |
|
| (18,136 | ) | ||
Proceeds from sale of investments |
| 18,282,213 |
| — |
|
|
| 1,243 |
|
|
| 18,417 |
| |||
Settlement of acquisition consideration payable |
|
| (31,732 | ) |
|
| 0 |
| ||||||||
Purchase of businesses, net of cash acquired |
|
| (18,458,358 | ) |
|
| — |
|
|
| (7,255 | ) |
|
| 233 |
|
NET CASH USED IN INVESTING ACTIVITIES |
|
| (148,280,250 | ) |
|
| (37,422,417 | ) |
|
| (114,296 | ) |
|
| (43,583 | ) |
CASH FLOW FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
| |||||
Contributions from limited liability company unit holders |
| — |
| 50,000 |
| |||||||||||
Distributions to third parties and limited liability company unit holders |
| (8,251,654 | ) |
| (2,536,658 | ) |
|
| (14,445 | ) |
|
| (1,800 | ) | ||
Contributions from unconsolidated subsidiaries |
| 1,475,000 |
| — |
|
|
| 550 |
|
|
| 350 |
| |||
Net proceeds from issuance of registered shares pursuant to Form S-1 |
| 155,498,140 |
| — |
|
|
| 0 |
|
|
| 155,498 |
| |||
Proceeds from exercise of options and warrants |
| 11,228,082 |
| 656,096 |
|
|
| 1,603 |
|
|
| 8,971 |
| |||
Payment for purchase of noncontrolling interest |
| — |
| (150,000 | ) | |||||||||||
Proceeds from issuance of notes payable |
| 175,500,047 |
| — |
|
|
| 2,102 |
|
|
| 175,500 |
| |||
Principal repayment of notes payable |
| (64,702,508 | ) |
| (229,482 | ) |
|
| (571 | ) |
|
| (64,602 | ) | ||
Prepayment penalty and other costs associated with refinancing |
|
| (3,199,914 | ) |
|
| — |
|
|
| 0 |
|
|
| (3,200 | ) |
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES |
|
| 267,547,193 |
|
| (2,210,044 | ) | |||||||||
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES |
|
| (10,761 | ) |
|
| 270,717 |
| ||||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH: |
|
|
|
|
|
|
|
|
|
|
| |||||
NET INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH |
| 202,034,593 |
| 31,423,739 |
| |||||||||||
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH |
|
| (85,143 | ) |
|
| 275,431 |
| ||||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH BEGINNING OF PERIOD |
|
| 83,757,785 |
|
| 46,667,334 |
|
|
| 230,420 |
|
|
| 83,758 |
| |
CASH, CASH EQUIVALENTS AND RESTRICTED CASH END OF PERIOD |
| $ | 285,792,378 |
| $ | 78,091,073 |
|
| $ | 145,277 |
|
| $ | 359,189 |
|
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements
8
Green Thumb Industries Inc.
Unaudited Interim Condensed Consolidated Statements of Cash Flows
NineSix Months Ended SeptemberJune 30, 20212022 and 20202021
(Amounts Expressed in United States Dollars)
|
| Six Months Ended June 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
|
| (in thousands) |
| |||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION |
|
|
|
|
|
| ||
Interest paid |
| $ | 9,028 |
|
| $ | 6,825 |
|
NONCASH INVESTING AND FINANCING ACTIVITIES |
|
|
|
|
|
| ||
Accrued capital expenditures |
| $ | (3,761 | ) |
| $ | 13,808 |
|
Noncash increase in right of use asset |
| $ | (69,821 | ) |
| $ | (10,781 | ) |
Noncash increase in lease liability |
| $ | 69,821 |
|
| $ | 10,781 |
|
Warrant issuance associated with note payable |
| $ | 0 |
|
| $ | 22,530 |
|
Shares issued for purchase of noncontrolling interest |
| $ | 2,379 |
|
| $ | 0 |
|
Issuance of shares associated with contingent consideration |
| $ | 13,111 |
|
| $ | 12,673 |
|
Deferred share issuances |
| $ | 0 |
|
| $ | 7,814 |
|
Deferred share distributions |
| $ | 0 |
|
| $ | (1,835 | ) |
Issuance of shares under business combinations |
| $ | 1,406 |
|
| $ | 57,755 |
|
Acquisitions |
|
|
|
|
|
| ||
Inventory |
| $ | 413 |
|
| $ | 1,810 |
|
Accounts receivable |
|
| (370 | ) |
|
| 503 |
|
Prepaid expenses |
|
| 72 |
|
|
| 118 |
|
Property and equipment |
|
| 738 |
|
|
| 3,713 |
|
Right of use assets |
|
| 743 |
|
|
| 12,267 |
|
Intangible assets |
|
| 14,143 |
|
|
| 25,342 |
|
Goodwill |
|
| 8,869 |
|
|
| 40,143 |
|
Deposits and other assets |
|
| 12 |
|
|
| 350 |
|
Liabilities assumed |
|
| (466 | ) |
|
| (1,093 | ) |
Lease liabilities |
|
| (743 | ) |
|
| (12,267 | ) |
Noncontrolling interests |
|
| 17,735 |
|
|
| 0 |
|
Equity interests issued |
|
| (3,785 | ) |
|
| (64,569 | ) |
Fair value of previously held equity interest |
|
| (14,500 | ) |
|
| 0 |
|
Deferred cash |
|
| (250 | ) |
|
| 0 |
|
Deferred income taxes |
|
| 0 |
|
|
| (6,550 | ) |
Settlement of noncontrolling interests |
|
| (15,356 | ) |
|
| 0 |
|
|
| $ | 7,255 |
|
| $ | (233 | ) |
ADDITIONAL SUPPLEMENTAL INFORMATION |
|
|
|
|
|
| ||
Decrease (increase) in fair value of investments |
| $ | 17,320 |
|
| $ | (18,754 | ) |
Increase in fair value of equity method investments |
|
| (14,119 | ) |
|
| 0 |
|
TOTAL DECREASE (INCREASE) IN FAIR VALUE OF INVESTMENTS |
| $ | 3,201 |
|
| $ | (18,754 | ) |
|
| Nine Months Ended September 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION |
|
|
|
|
|
| ||
Interest paid |
| $ | 13,713,625 |
|
| $ | 9,418,727 |
|
NONCASH INVESTING AND FINANCING ACTIVITIES |
|
|
|
|
|
| ||
Accrued capital expenditures |
| $ | 12,868,898 |
|
| $ | (6,798,187 | ) |
Noncash increase in right of use asset |
| $ | (22,620,494 | ) |
| $ | (36,854,352 | ) |
Noncash increase in lease liability |
| $ | 22,620,494 |
|
| $ | 36,854,352 |
|
Warrant issuance associated with note payable |
| $ | 22,529,268 |
|
| $ | 753,658 |
|
Mortgages associated with dispensaries |
| $ | 6,830,000 |
|
| $ | 2,647,000 |
|
Liability for purchase of noncontrolling interest |
| $ | — |
|
| $ | (5,350,000 | ) |
Shares issued for purchase of noncontrolling interest |
| $ | 4,070,003 |
|
| $ | — |
|
Issuance of contingent consideration |
| $ | 18,621,759 |
|
| $ | — |
|
Deferred share issuances |
| $ | 29,196,104 |
|
| $ | — |
|
Deferred share distributions |
| $ | (3,137,612 | ) |
| $ | (14,752,467 | ) |
Issuance of shares under business combinations |
| $ | 223,978,989 |
|
| $ | 24,485,670 |
|
Acquisitions |
|
|
|
|
|
| ||
Inventory |
| $ | 6,181,560 |
|
| $ | — |
|
Accounts receivable |
|
| 552,133 |
|
|
| — |
|
Prepaid assets |
|
| 367,433 |
|
|
| — |
|
Property and equipment |
|
| 15,704,793 |
|
|
| 80,615 |
|
Right of use assets |
|
| 18,324,775 |
|
|
| — |
|
Identifiable intangible assets |
|
| 173,926,457 |
|
|
| (145,000 | ) |
Goodwill |
|
| 214,786,487 |
|
|
| (2,003,275 | ) |
Deposits and other assets |
|
| 904,495 |
|
|
| 603,988 |
|
Liabilities assumed |
|
| (11,032,483 | ) |
|
| (1,302,604 | ) |
Lease liabilities |
|
| (18,324,775 | ) |
|
| — |
|
Contingent liabilities |
|
| (61,853,000 | ) |
|
| — |
|
Equity interests issued |
|
| (285,338,699 | ) |
|
| 503,389 |
|
Acquisition liability |
|
| — |
|
|
| (228,813 | ) |
Deferred income taxes |
|
| (35,740,818 | ) |
|
| 2,491,700 |
|
|
| $ | 18,458,358 |
|
| $ | — |
|
RECONCILIATION OF CASH, AND CASH EQUIVALENTS AND |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 285,792,378 |
|
| $ | 75,116,621 |
|
Restricted cash |
|
| — |
|
|
| 2,974,452 |
|
TOTAL CASH, AND CASH EQUIVALENTS AND RESTRICED CASH |
| $ | 285,792,378 |
|
| $ | 78,091,073 |
|
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements
9
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
1. Overview and Basis of Presentation
(a)
Green Thumb Industries Inc. (“Green Thumb”Thumb” or the “Company”“Company”);, a national cannabis consumer packaged goods company and retailer, promotes well-being through the power of cannabis while being committed to community and sustainable, profitable growth. Green Thumb owns, manufactures, and distributes a portfolio of cannabis consumer packaged goods brands including &Shine, Beboe, Dogwalkers, Dr. Solomon’s, Good Green, incredibles, and Rythm,RYTHM, to third-party retailRetail stores across the United States as well as to Green Thumb owned retailRetail cannabis stores. The Company also owns and operates retailRetail cannabis stores that include a rapidly growing national chain named Rise™ Dispensaries, all ofRISE, which sell our products and third-party products. As of SeptemberJune 30, 2021,2022, Green Thumb has revenueoperations in fourteenfifteen markets (California, Colorado, Connecticut, Florida, Illinois, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New York, Ohio, Pennsylvania, Rhode Island and Virginia), employs approximately 3,4004,000 people and serves millionshundreds of thousands of patients and customers annually.
In addition to the states listed above, the Company also conducts pre-licensing activities in other markets. In these markets, the Company has either applied for licenses, or plans on applying for licenses, but does not currently own any cultivation, production or retail licenses.
The Company’s registered office is located at 250 Howe Street, 20th Floor, Vancouver, British Columbia, V6C 3R8. The Company’s U.S. headquarters are at 325 W. Huron St., Suite 700, Chicago, IL 60654.
(b)
The accompanying unaudited interim condensed consolidated financial statements include the accounts of Green Thumb and have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”GAAP”) for interim financial information and in accordance with the rules and regulations of the U.S. Securities & Exchange Commission ("SEC"(“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and, accordingly, certain information, footnotes and disclosures normally included in the annual financial statements, prepared in accordance with GAAP, have been condensed or omitted in accordance with SEC rules and regulations. The financial data presented herein should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2020, as amended2021, (the "2020"2021 Form 10-K"10-K”). In the opinion of management, the financial data presented includes all adjustments necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented. Certain previously reported amounts have been reclassified between line items to conform to the current period presentation. Results of interim periods should not be considered indicative of the results for the full year. These unaudited interim condensed consolidated financial statements include estimates and assumptions of management that affect the amounts reported in the unaudited interim condensed consolidated financial statements. Actual results could differ from these estimates.
Certain previously reported amounts have been reclassified between line items to conform to the current presentation. The reclassifications did not affect the Company’s previously reported consolidated balance sheets, consolidated statements of operations, statements of cash flows or statements of changes in shareholders’ equity.(c)
There have been no changes to the Company’s significant accounting policies as described in Note 2 of the 20202021 Form 10-K.
(d) Earnings per Share
Basic earnings (loss) per share is calculated using the treasury stock method, by dividing the net earnings (loss) attributable to shareholders by the weighted average number of common shares outstanding during each of the periods presented. Contingently issuable shares (including shares held in escrow) are not considered outstanding common shares and consequently are not included in the lossearnings per share calculation. Diluted earnings per share is calculated using the treasury stock method by adjusting the weighted average number of common shares outstanding to assume conversion of all dilutive potential common shares. The Company has three categories of potentially dilutive common share equivalents: restricted stock units, stock options and warrants. As of SeptemberJune 30, 2022, the Company had 6,036,849 options, 1,024,659 restricted stock units and 3,835,278 warrants outstanding. As of June 30, 2021, the Company had 5,625,6615,819,363 options, 352,936391,736 restricted stock units and 3,591,975 warrants outstanding. As of September 30, 2020, the Company had 5,782,599 options, 688,507 restricted stock units and 2,520,7943,644,085 warrants outstanding.
10
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
1. Overview and Basis of Presentation (Continued)
(d) Earnings per Share (Continued)
In order to determine diluted earnings per share, it is assumed that any proceeds from the exercisevesting of dilutive unvested restricted stock units, or exercise of unvested stock options and warrants would be used to repurchase common shares at the average market price during the period. Under the treasury stock method, the diluted earnings per share calculation excludes any potential conversion of stock options and convertible debt that would increase earnings per share or decrease loss per share. For the three months ended SeptemberJune 30, 2022, the computation of diluted earnings per share included 842,440 options, 34,451 restricted stock units and 102,387 warrants. For the six months ended June 30, 2022, the computation of diluted earnings per share included 1,310,817 options, 34,618 restricted stock units and 209,969 warrants. For the three months ended June 30, 2021, the computation of diluted earnings per share included 3,022,9733,191,752 options, 223,661234,042 restricted stock units and 1,103,1321,093,739 warrants. For the ninesix months ended SeptemberJune 30, 2021, the computation of diluted earnings per share included 3,041,2863,279,087 options, 196,043224,774 restricted stock units and 1,114,5741,146,883 warrants. For the three and six months ended SeptemberJune 30, 2020,2022, the weighted average number of anti-dilutive stock options excluded from the computation of diluted earnings per share includedwere 1,928,9471,643,117 options, 151,458 restricted stock units and 141,4821,400,582 warrants. No potentially dilutive common share equivalents were included in, respectively. For the three and six months ended June 30, 2021, the weighted average number of anti-dilutive stock options excluded from the computation of diluted lossearnings per share for the nine months ended September 30, 2021 because their impact was anti-dilutive.were 511,187 and 504,536, respectively.
(e)
(i)
In December 2019,August 2020, the Financial Accounting Standards Board ("FASB"(“FASB”) issued Accounting Standards Updated ("ASU"Update (“ASU”) 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes (“ASU 2019-12”). ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The Company adopted ASU 2019-12 on January 1, 2021. The adoption of the standard did not have a material impact on the Company’s unaudited interim condensed consolidated financial statements.
(f) Recently Issued Accounting Standards
The Company reviews recently issued accounting standards on a quarterly basis and has determined there are no standards yet to be adopted which are relevant to the business for disclosure.
(b)
(g) Coronavirus Pandemic
In March 2020, the World Health Organization categorized coronavirus disease 2019 (together with its variants, “COVID-19”“COVID-19”) as a pandemic. COVID-19 continues to spread throughout the U.S. and other countries across the world, and the duration and severity of its effects are currently unknown. The Company continues to implement and evaluate actions to strengthen its financial position and support the continuity of its business and operations.
The Company’s unaudited interim condensed consolidated financial statements presented herein reflect estimates and assumptions made by management that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited interim condensed consolidated financial statements and reported amounts of revenue and expenses during the periods presented. Such estimates and assumptions affect, among other things, the Company’s goodwill; long-lived assets and intangible assets; operating lease right of use assets and operating lease liabilities; valuation of deferred income taxes; the allowance for doubtful accounts; assessment of the Company’s lease and non-lease contract expenses; and measurement of compensation cost for bonus and other compensation plans. While the Company’s revenue, gross profit and operating income were not impacted during the first ninesix months of 2021,2022, the uncertain nature of the spread of COVID-19 and the uncertainty of the impact of nationwide vaccine programs may impact the Company’s business operations for reasons including the potential quarantine of the Company’s employees or those of its supply chain partners, and the Company’s continued designation as an “essential” business in states where the Company does business that currently or in the future impose restrictions on its business operations. partners.
11
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
2. INVENTORIES
The Company’s inventories include the following at SeptemberJune 30, 20212022 and December 31, 2020:2021:
| June 30, 2022 |
| December 31, 2021 | ||||||
|
| September 30, 2021 |
|
| December 31, |
| (in thousands) | ||
Raw Material | $ | 6,804,865 |
| $ | 6,372,659 | $ | 4,472 | $ | 5,278 |
Packaging and Miscellaneous |
| 8,250,653 |
| 8,592,153 |
| 10,945 |
| 8,622 | |
Work in Process |
| 36,188,258 |
| 25,488,806 |
| 50,370 |
| 42,403 | |
Finished Goods |
| 42,836,886 |
| 30,821,392 |
| 60,202 |
| 41,069 | |
Reserve for Obsolete Inventory |
| (1,099,101) |
|
| (1,732,057) |
| (2,744) |
| (1,901) |
Total Inventories | $ | 92,981,561 |
| $ | 69,542,953 | $ | 123,245 | $ | 95,471 |
3. PROPERTY AND EQUIPMENT
At SeptemberJune 30, 20212022 and December 31, 2020,2021, property and equipment consisted of the following:
| June 30, 2022 |
| December 31, 2021 | ||||||||||
|
| September 30, 2021 |
|
|
| December 31, 2020 |
|
| (in thousands) | ||||
Buildings and Improvements | $ |
| 75,669,250 |
|
| $ |
| 51,557,405 |
| $ | 129,597 | $ | 101,283 |
Equipment, Computers and Furniture |
| 72,635,125 |
|
|
| 49,097,109 |
|
| 105,280 |
| 83,281 | ||
Leasehold Improvements |
| 106,118,700 |
|
|
| 88,607,252 |
|
| 126,686 |
| 114,303 | ||
Land Improvements |
| 792 |
| 607 | |||||||||
Capitalized Interest |
| 5,237,167 |
|
|
|
| 2,988,681 |
|
| 10,659 |
| 6,523 | |
Total Property and Equipment |
| 259,660,242 |
|
|
| 192,250,447 |
|
| 373,014 |
| 305,997 | ||
Less: Accumulated Depreciation |
| (38,371,583 | ) |
|
|
| (24,192,900 | ) |
| (61,297) |
| (45,198) | |
Property and Equipment, net |
| 221,288,659 |
|
|
|
| 168,057,547 |
|
| 311,717 |
| 260,799 | |
Land |
| 14,670,675 |
|
|
| 2,879,376 |
|
| 23,743 |
| 20,258 | ||
Land Improvements |
| 194,000 |
|
|
|
| |||||||
Assets Under Construction |
| 89,149,597 |
|
|
|
| 18,988,954 |
|
| 131,792 |
| 128,017 | |
Property and equipment, net | $ |
| 325,302,931 |
|
| $ |
| 189,925,877 |
| ||||
Property and Equipment, net | $ | 467,252 | $ | 409,074 |
Assets under construction represent construction in progress related to both cultivation and dispensary facilities not yet completed or otherwise not ready for use.
Depreciation expense for the three and ninesix months ended SeptemberJune 30, 20212022 totaled $6,235,3189,101 thousand and $16,255,34017,149, thousand, respectively, of which $3,905,4875,918 thousand and $9,997,12810,964, thousand, respectively, is included in cost of goods sold. Depreciation expense for the three and ninesix months ended SeptemberJune 30, 20202021 totaled $2,003,5865,254 thousand and $11,193,57010,020, thousand, respectively, of which $311,3153,212 thousand and $5,571,4776,092, thousand, respectively, is included in cost of goods sold.
12
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
4. ACQUISITIONS
4. ACQUISITIONS
The Company has determined that the below acquisitions are business combinations under Accounting Standards Codification ("ASC"(“ASC”) 805, Business Combinations. They are accounted for by applying the acquisition method, whereby the assets acquired and the liabilities assumed are recorded at their fair values with any excess of the aggregate consideration over the fair values of the identifiable net assets allocated to goodwill. Operating results have been included in these unaudited interim condensed consolidated financial statements from the date of the acquisition. Supplemental pro forma financial information has not been presented as the impact was not material to the Company's consolidated financial statements. The goodwill recorded primarily includes the expected synergies resulting from combining the operations of the acquired entity with those of the Company.
On March 1, 2022, the Company acquired the remaining 50% ownership interests of ILDISP, LLC (“ILDISP”) from the Company's former membership interest partner for the purposes of expanding the Company's operational capacity in the Illinois market. Prior to March 1, 2022, one of the two Retail stores owned by ILDISP, RISE Effingham, was consolidated by Green Thumb as the Company was determined to be the primary beneficiary of the variable interest entity. The other retail dispensary was accounted for as an equity method investment given the Company's 50% ownership interest and its ability to significantly influence the Retail store's operations.
The total consideration exchanged included $18,623 thousand in cash, which included $250 thousand in deferred consideration, along with 204,036 Subordinate Voting Shares of Green Thumb valued at $3,785 thousand, based on the fair value of the securities on their date of issuance, which was the closing price of Green Thumb's Subordinate Voting Shares as traded on the Canadian Securities Exchange (“CSE”) on the date of the transaction.
The Company completedallocated the total consideration exchanged to each of the acquired Retail stores. Accordingly, the consideration allocated to RISE Effingham was approximately $11,857 thousand in cash along with 128,218 Subordinate Voting Shares of Green Thumb that had a fair value of $2,379 thousand. The remaining equity associated with the Company's purchase of the noncontrolling interest was closed to contributed surplus (deficit) of Green Thumb as of March 1, 2022.
The equity method investment associated with the other dispensary owned by ILDISP was remeasured at fair value of $14,500 thousand as of the date of the transaction, and resulted in a gain on the fair value of the equity method investment of $14,119 thousand, which was recorded in other income (expense) on the unaudited interim condensed consolidated statement of operations. In addition, the Company allocated consideration of $6,766 thousand in cash along with 75,818 Subordinate Voting Shares of Green Thumb, with a fair value of $1,406 thousand to the acquisition of the other Retail store. After completing the preliminary allocation of the purchase price ofaggregate consideration exchanged for the assets acquired and liabilities assumed. assumed, the Company recorded a license intangible asset of $14,143 thousand and non-tax deductible goodwill of $7,718 thousand. The weighted average amortization period for the license intangible is 15 years. Acquisition related expenses associated with the transaction were not material.
The preliminary valuation was based on management’smanagement's estimates and assumptions which are subject to change within the purchase price allocation period (generally one year from the acquisition date). The primary areas of the purchase price allocation that are not yet finalized relate to the valuation of the tangible and intangible assetsasset acquired, the previously held equity method investment, and the residual goodwill.The following table summarizes the initial accounting estimates:
| Dharma |
| Summit Medical Compassion Center, Inc. |
| Other |
| |||
Cash | $ | 150,066 |
| $ | 1,143,493 |
| $ | 651,434 |
|
Inventory |
| 508,361 |
|
| 1,828,848 |
|
| 3,844,351 |
|
Accounts receivable |
| 38,166 |
|
| 1,200 |
|
| 512,767 |
|
Prepaid expenses |
| 72,125 |
|
| 104,589 |
|
| 190,719 |
|
Property and equipment, net |
| 1,983,047 |
|
| 3,242,890 |
|
| 10,478,856 |
|
Right-of-use asset, net |
| 4,218,658 |
|
| 210,069 |
|
| 13,896,049 |
|
Deposits and other assets |
| 251,875 |
|
| 67,620 |
|
| 585,000 |
|
Intangible assets, net: |
|
|
|
|
|
| |||
Licenses and permits |
| 66,000,000 |
|
| 50,800,000 |
|
| 57,126,457 |
|
Liabilities assumed |
| (157,877 | ) |
| (4,407,319 | ) |
| (6,467,287 | ) |
Lease liabilities |
| (4,218,658 | ) |
| (210,069 | ) |
| (13,896,049 | ) |
Deferred income tax liabilities |
| (17,034,600 | ) |
| (13,111,880 | ) |
| (14,744,338 | ) |
Total identifiable net assets |
| 51,811,163 |
|
| 39,669,441 |
|
| 52,177,959 |
|
Goodwill (non-tax deductible) |
| 88,730,652 |
|
| 69,029,291 |
|
| 66,176,544 |
|
Net assets | $ | 140,541,815 |
| $ | 108,698,732 |
| $ | 118,354,503 |
|
As part of the initial purchase accounting for each of the above acquisitions, the Company recorded intangible assets of $173,926,457 all of which was associated with licenses and permits that allow for the processing, cultivation and retail sale of cannabis. The weighted-average amortization period for the licenses intangibles was 15 years. Acquisition related expenses incurred during the three and nine months ended September 30, 2021 were approximately $0.2 million and $1.3 million respectively.
Other Acquisitions consist of Liberty Compassion Inc. and GreenStar Herbals Inc. The details of the transactions are discussed below.
(i) Acquisition of Liberty Compassion Inc.
On June 1, 2021, the Company acquired 100% of the ownership interests of Liberty Compassion Inc. ("Liberty"), a Massachusetts-based medical cannabis cultivator and retailer, for the purposes of expanding the Company's operational capacity in the Massachusetts market. The acquisition was an all stock transaction whereby consideration was satisfied through the issuance of 2,146,565 Subordinate Voting Shares (including 259,765 deferred shares) valued at approximately $64.6 million, based on the fair value of the securities on their date of issuance, which was the closing price of Green Thumb's Subordinate Voting Shares as traded on the Canadian Securities Exchange ("CSE") on the date of the transaction.
13
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
4. ACQUISITIONS (Continued)
(ii) Acquisition of Dharma Pharmaceuticals, LLC
On July 1, 2021 Green Thumb Industries acquired 100% of Dharma Pharmaceuticals, LLC (“Dharma”), a Virginia-based medical cannabis cultivator, processor and retailer, for the purpose of expanding Green Thumb's national presence. Green Thumb exchanged $15,175,384 in cash along with 2,298,779 Subordinate Voting Shares (including 229,878 deferred shares) valued at approximately $75.9 million, based on the fair value of the securities on their date of issuance, which was the closing price of Green Thumb's Subordinate Voting Shares as traded on the CSE on the date of the transaction. The purchase agreement included additional consideration of up to $65.0 million in shares of Green Thumb depending upon the successful opening of 5 retail dispensaries in the Virginia area within the first three years following the signing of the purchase agreement and the legal sale of adult use cannabis in a retail dispensary by January 1, 2025.
On August 16, 2021, the Company issued 199,993 Subordinate Voting Shares to the former owners of Dharma in connection with the successful opening of one retail dispensary in Virginia. The shares had a fair value of $5,949,078 at the date of issuance. As of September 30, 2021, the estimated value of the contingent consideration associated with the acquisition of Dharma, which was valued based on a probability weighting of the potential payments, was $45.9 million, of which $19.8 million was included as a current liability on the Company's unaudited interim condensed consolidated balance sheets.
(iii) Acquisition of Mobley Pain Management and Wellness Center LLC and Canwell Processing LLC
On August 1, 2021, the Company acquired Mobley Pain Management and Wellness Center LLC and Canwell Processing LLC (collectively referred to as "Summit"), both of which have contractual interests in Summit Medical Compassion Center, Inc. a non-profit entity with vertically integrated cannabis operations in Rhode Island for the purpose of expanding GreenThumb's national presence. Green Thumb exchanged 2,387,807 Subordinate Voting Shares valued at approximately $71.0 million (including 303,599 deferred shares) based on the fair value of the securities on their date of issuance, which was the closing price of Green Thumb's Subordinate Voting Shares as traded on the CSE on the date of the transaction. The purchase agreement included additional consideration of up to 2,500,000 Subordinate Voting Shares of Green Thumb depending upon the achievement of certain earnings targets over the twelve month period following the close of the transaction. As of September 30, 2021, the estimated value of the contingent consideration associated with the acquisition of Summit, which was valued based on the probability weighting of the potential payments, was $38.4 million all of which was included as a current liability on the Company's unaudited interim condensed consolidated balance sheets.
(iv) Acquisition of GreenStar Herbals Inc.
On September 1, 2021, the Company acquired GreenStar Herbals Inc. ("GreenStar"), a Massachusetts-based adult-use cannabis retailer, for the purpose of expanding the Company's operational capacity in the Massachusetts market. Green Thumb exchanged $5,222,967 in cash along with 1,348,216 Subordinate Voting Shares (including 161,306 deferred shares) valued at approximately $39.7 million, based on the fair value of the securities on their date of issuance, which was the closing price of Green Thumb's Subordinate Voting Shares as traded on the CSE on the date of the transaction. The purchase agreement included additional consideration of up to 663,810 Subordinate Voting Shares of Green Thumb depending upon the achievement of certain revenue metrics of GreenStar over the twenty-four month period following the close of the transaction. As of September 30, 2021, the estimated value of the contingent consideration associated with the acquisition of GreenStar, which was valued based on the probability weighting of the potential payments, was $8.9 million, all of which was included as a non-current liability on the Company's unaudited interim condensed consolidated balance sheets.
14
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
5. INTANGIBLE ASSETS AND GOODWILL
(a) Intangible Assets
Intangible assets are recorded at cost less accumulated amortization and impairment losses, if any. Intangible assets acquired in a business combination are measured at fair value at the acquisition date. Amortization of definite life intangibles is provided on a straight-line basis over their estimated useful lives. The estimated useful lives, residual values, and amortization methods are reviewed at each year end, and any changes in estimates are accounted for prospectively.
At SeptemberJune 30, 20212022 and December 31, 2020,2021, intangible assets consisted of the following:
|
|
| September 30, 2021 |
|
| December 31, 2020 |
| ||||||||||||||||||
| Gross Carrying Amount |
|
| Accumulated Amortization |
|
| Net Book Value |
|
| Gross Carrying Amount |
|
| Accumulated Amortization |
|
| Net Book Value |
| ||||||||
Licenses and Permits | $ | 515,368,694 |
|
| $ | 59,514,065 |
|
| $ | 455,854,629 |
|
| $ | 343,135,736 |
|
| $ | 41,993,595 |
|
| $ | 301,142,141 |
| ||
Trademarks |
| 98,935,601 |
|
|
| 22,174,913 |
|
|
| 76,760,688 |
|
|
| 99,295,599 |
|
|
| 13,455,178 |
|
|
| 85,840,421 |
| ||
Customer Relationships |
| 24,438,000 |
|
|
| 9,071,493 |
|
|
| 15,366,507 |
|
|
| 25,258,000 |
|
|
| 7,583,005 |
|
|
| 17,674,995 |
| ||
Non-Competition Agreements |
| 2,565,000 |
|
|
| 1,362,472 |
|
|
| 1,202,528 |
|
|
| 2,585,480 |
|
|
| 1,001,003 |
|
|
| 1,584,477 |
| ||
Total Intangible Assets | $ | 641,307,295 |
|
| $ | 92,122,943 |
|
| $ | 549,184,352 |
|
| $ | 470,274,815 |
|
| $ | 64,032,781 |
|
| $ | 406,242,034 |
|
|
| June 30, 2022 |
|
| December 31, 2021 |
| ||||||||||||||||||
|
| Gross Carrying Amount |
|
| Accumulated Amortization |
|
| Net Book Value |
|
| Gross Carrying Amount |
|
| Accumulated Amortization |
|
| Net Book Value |
| ||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||||||
Licenses and Permits | $ |
| 670,043 |
| $ |
| 92,015 |
| $ |
| 578,028 |
| $ |
| 655,900 |
| $ |
| 69,812 |
| $ |
| 586,088 |
|
Trademarks |
|
| 98,936 |
|
|
| 30,938 |
|
|
| 67,998 |
|
|
| 98,936 |
|
|
| 25,096 |
|
|
| 73,840 |
|
Customer Relationships |
|
| 24,438 |
|
|
| 11,690 |
|
|
| 12,748 |
|
|
| 24,438 |
|
|
| 9,944 |
|
|
| 14,494 |
|
Non-Competition Agreements |
|
| 2,565 |
|
|
| 1,744 |
|
|
| 821 |
|
|
| 2,565 |
|
|
| 1,496 |
|
|
| 1,069 |
|
Total Intangible Assets | $ |
| 795,982 |
| $ |
| 136,387 |
| $ |
| 659,595 |
| $ |
| 781,839 |
| $ |
| 106,348 |
| $ |
| 675,491 |
|
The Company recorded amortization expense for the three and ninesix months ended SeptemberJune 30, 2022 of $15,097 thousand and $30,039 thousand, respectively. The Company recorded amortization for the three and six months ended June 30, 2021 of $10,937,7489,819 thousand and $30,984,139, respectively. The Company recorded amortization expense for the three and nine months ended September 30, 2020 of $9,531,29020,046 and $27,286,390,thousand, respectively.
The following table outlines the estimated annual amortization expense related to intangible assets as of SeptemberJune 30, 2021:2022:
| Estimated | ||||||
Year Ending December 31, | Year Ending December 31, | Estimated |
|
| (in thousands) | ||
Remainder of 2021 | $ | 12,527,442 |
| ||||
2022 |
| 50,079,212 |
| ||||
Remainder of 2022 | $ | 30,194 | |||||
2023 | 2023 |
| 50,076,435 |
|
| 60,388 | |
2024 | 2024 |
| 49,495,101 |
|
| 59,807 | |
2025 | 2025 |
| 49,397,435 |
|
| 59,709 | |
Thereafter |
| 337,608,727 |
| ||||
2026 |
| 51,697 | |||||
2027 and Thereafter |
| 397,800 | |||||
|
| $ | 549,184,352 |
| $ | 659,595 |
As of SeptemberJune 30, 2021,2022, the weighted average amortization period remaining for intangible assets was 12.3512.33 years.
(b) Goodwill
At SeptemberJune 30, 20212022 and December 31, 20202021 the balances of goodwill, by segment, consisted of the following:
|
|
| Retail |
| Consumer Package Goods |
| Total |
As of December 31, 2020 |
|
| 130,680,935 |
| 252,016,532 |
| 382,697,467 |
Acquisition of Dharma Pharmaceuticals, LLC |
|
| 43,378,626 |
| 45,352,026 |
| 88,730,652 |
Acquisition of Summit Medical Compassion Center, Inc. |
|
| 47,864,947 |
| 21,164,344 |
| 69,029,291 |
Other Acquisitions | 34,048,860 |
| 32,127,684 |
| 66,176,544 | ||
Adjustments to Purchase Price Allocations | (9,150,000) |
| 0 |
| (9,150,000) | ||
As of September 30, 2021 |
|
| $246,823,368 |
| $350,660,586 |
| $597,483,954 |
During the third quarter 2021, the Company made immaterial adjustments to the purchase price allocations associated with previously acquired entities that resulted in a reduction to goodwill and a corresponding reduction to deferred tax liabilities.
|
| Retail |
| Consumer Package Goods |
| Total |
|
| (in thousands) | ||||
As of December 31, 2021 | $ | 274,811 | $ | 358,038 | $ | 632,849 |
Acquisition of ILDISP, LLC |
| 7,718 |
| 0 |
| 7,718 |
Adjustments to Preliminary Purchase Price Allocations |
| 909 |
| 242 |
| 1,151 |
As of June 30, 2022 | $ | 283,438 | $ | 358,280 | $ | 641,718 |
15
14
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
6. INVESTMENTS
As of SeptemberJune 30, 20212022 and December 31, 2020,2021, the Company held various equity interests in privately held cannabis companies as well as investments in convertible notes that had a combined fair value of $50,627,82681,783 thousand and $40,794,80694,902 thousand as of each period end, respectively. The Company measures its investments that do not have readily determinable fair value at cost minus impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The Company performs an assessment on a quarterly basis to determine whether triggering events for impairment exist and to identify any observable price changes.
The following table summarizes the changechanges in the Company’s investments during the ninesix months ended SeptemberJune 30, 20212022 and year ending December 31, 2020:2021:
|
| September 30, 2021 |
|
|
| December 31, 2020 |
| ||
Beginning | $ |
| 40,794,806 |
|
| $ |
| 14,068,821 |
|
Additions |
|
| 31,053,096 |
|
|
|
| 525,000 |
|
Disposals |
|
| (18,282,213 | ) |
|
|
| (169,818 | ) |
Fair value adjustment |
|
| 14,604,387 |
|
|
|
| 26,370,803 |
|
Transfers out |
|
| (17,542,250 | ) |
|
|
| 0 |
|
Ending | $ |
| 50,627,826 |
|
| $ |
| 40,794,806 |
|
|
| June 30, 2022 |
| December 31, 2021 |
| (in thousands) | |||
Beginning | $ | 94,902 | $ | 40,795 |
Additions |
| 5,444 |
| 83,689 |
Disposals |
| (1,243) |
| (18,417) |
Fair value adjustment |
| (17,320) |
| 6,377 |
Transfers out |
| 0 |
| �� (17,542) |
Ending | $ | 81,783 | $ | 94,902 |
During the three and ninesix months ended SeptemberJune 30, 2021 and 2020,2022, the Company recorded fair value gains (losses) of $(4,074,9347,865) thousand and $$(14,604,38717,320) thousand, respectively, of which $(8,018) thousand and $(17,627) thousand was recorded within other income (expense), respectively, and $7,284,213153 thousand and $6,717,178307, respectively. thousand relates to various note receivable investments and was recorded to interest income, respectively, on the unaudited interim condensed consolidated statement of operations.
(a) Equity Investments
On January 15, 2021, the Company sold approximately half of its equity interest in a privately held entity for $18,112,500 in cash. Subsequently, the privately held entity became publicly traded. As of the three and nine months ended September 30, 2021, Green Thumb recorded a loss on the fair value of the equity interest of $3,948,841 and a gain of $9,568,348, respectively, based on the trading price of the securities. As of September 30, 2021 and December 31, 2020, the fair value of the equity interest was $28,705,037 and $37,249,189, respectively.
Separately, during the first half of 2021, the Company made an additional investment in a privately held entity in the amount of $12,335,635, recorded fair value adjustments of $4,110,378 and obtained representation on the entity's board of directors. Given Green Thumb's cumulative ownership interest and representation on the entity's board of directors, it was determined that the Company could exert significant influence over the entity. As of June 30, 2022 and December 31, 2021, the Company reclassified its investmentheld equity investments in publicly traded entities which have readily determinable fair values, which are classified as Level 1 investments, of $6,131 thousand and $20,583 thousand, respectively. During the privately held entity to investmentthree and six months ended June 30, 2022, the Company recorded net gains (losses) on the change in associatesfair value of such investments of $(6,396) thousand and $(14,293) thousand, respectively, within other income (expense) on the unaudited interim condensed consolidated balance sheets and began accounting for the investment as an equity method investment.
(b) Convertible Notes Receivable
statement of operations. During the first ninethree and six months ofended June 30, 2021, the Company made multiplerecorded net gains (losses) on the change in fair value of such investments of $13,645 thousand and $13,912 thousand, respectively, within other income (expense) on the consolidated statement of operations. During the six months ended June 30, 2022 and 2021, the Company received proceeds from the sale of such investments of $160 thousand and $18,417 thousand, respectively. These investments are classified as trading securities on the Company's unaudited interim condensed consolidated balance sheets.
As of June 30, 2022 and December 31, 2021, the Company held equity investments in the form of convertible notes receivable in the amountprivately held entities that did not have readily determinable fair values, which are classified as Level 3 investments, of $15,417,50042,326 thousand and an investment$33,066 thousand, respectively. During the three and six months ended June 30, 2022, the Company recorded net gains (losses) on the change in a note receivable without a conversion feature in the amountfair value of such investments of $1,500,00022. The interest thousand and $477 thousand, respectively, within other income (expense) on the convertible notes receivable range between 0.91% - 10% with terms between 15unaudited interim condensed consolidated statement of operations. During the three and six months to three years. The interest ended June 30, 2021, the Company recorded net gains (losses) on the note receivable without conversion feature is 3% annually with a 180 day term. The calculated fair values are recorded as a Level 3change in fair value investment as of September 30, 2021 and include the initial investment cost and contractual interestsuch investments of $207,5004,643. thousand and $4,767 thousand, respectively, within other income (expense) on the consolidated statement of operations. There were no sales of these investments during these periods. These investments are classified as trading securities on the Company's unaudited interim condensed consolidated balance sheets.
See Note 14 - Fair Value Measurements for additional details.
15
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
6. INVESTMENTS (Continued)
(a) Equity Investments (Continued)
Unrealized gains and (losses) recognized on equity investments held during the three and ninesix months ended SeptemberJune 30, 2021and 20202022 were $(4,140,2686,367) thousand and $(13,792) thousand, respectively. Unrealized gains and (losses) recognized on equity investments held during the three and six months ended June 30, 2021 were $18,352 thousand and $14,596,17418,733 and $8,134,213 and $8,117,178,thousand, respectively.
(b) Convertible Notes Receivable
The Company has made multiple investments in various note receivable instruments, including note receivable instruments with conversion features.
As of June 30, 2022 and December 31, 2021, the Company held note receivable instruments, which were classified as a Level 1 investment as they represent public debt of a publicly traded entity, and had a fair value of $21,796 thousand and $23,534 thousand, respectively. During the three and six months ended June 30, 2022 , the Company recorded net gains (losses) on the change in fair value of such investments of $(378) thousand and $(654) thousand, respectively, within other income (expense) on the unaudited interim condensed consolidated statement of operations. There were 0 gains or (losses) recognized on these investments during the three and six months ended June 30, 2021. The note receivable instruments have a stated interest rate of 13% and a maturity date of April 29, 2025. These notes did not contain conversion features and are currently classified as trading securities on the Company's unaudited interim condensed consolidated balance sheets.
As of June 30, 2022 and December 31, 2021, the Company held note receivable instruments which were classified as Level 3 investments as they represent loans provided to privately held entities that do not have readily determinable fair values. The note receivable instruments had a combined fair value of $11,530 thousand and $17,719 thousand, respectively, with stated interest ranging between 0.91% - 10% and terms between 15 months to five years. During the three and six months ended June 30, 2022, the Company recorded net gains (losses) on the change in fair value of such investments of $(1,266) thousand and $(3,157) thousand, respectively, within other income (expense) and accrued interest of $153 thousand and $307 thousand, respectively, within interest income on the unaudited interim condensed consolidated statement of operations. During the three and six months ended June 30, 2021, there were 0 gains or (losses) recognized on these investments within other income (expense), however the company recorded accrued interest of $38 thousand and $75 thousand, respectively, within interest income on the unaudited interim condensed consolidated statement of operations. These notes are classified as trading securities on the Company's unaudited interim condensed consolidated balance sheets.
See Note 14 - Fair Value Measurements for additional details.
16
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
7. LEASES
(a)
The Company has operating leases for certain Rise Dispensaries,its Retail stores and other retail dispensaries as well as many of the Company’s processing and cultivation facilities located throughout the U.S, and operating leasesas well as for corporate office space located in Illinois. Operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement date.
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 fixed and variable non-lease components, such as taxes, insurance and maintenance which are considered non-lease components.maintenance. The Company accounts for each real estate leaseslease 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. For the three and ninesix months ended SeptemberJune 30, 20212022, the companyCompany recorded operating lease expense of $8,732,60010,201 thousand and $24,760,29820,022 thousand, respectively compared to operating lease expense of $6,557,3408,276 thousand and $18,987,98016,028 thousand for the three and ninesix months ended SeptemberJune 30, 2020.2021, respectively.
Other information related to operating leases as of SeptemberJune 30, 20212022 and December 31, 20202021 were as follows:
|
| September 30, 2021 |
|
| December 31, 2020 |
| June 30, 2022 |
| December 31, 2021 |
Weighted avgerage remaining lease term (years) |
| 12.13 |
| 12.10 | |||||
Weighted average remaining lease term (years) |
| 12.30 |
| 11.82 | |||||
Weighted average discount rate |
| 13.67% |
| 13.70% |
| 12.47% |
| 13.60% |
Maturities of lease liabilities for operating leases as of SeptemberJune 30, 20212022 were as follows:
|
| Maturities of Lease Liability |
| Maturities of Lease Liability | |||||||||||
Year Ending December 31, |
| Third Party |
|
| Related Party |
|
| Total |
| Third Party |
| Related Party |
| Total | |
Remainder of 2021 | $ | 7,922,552 |
| $ | 275,855 |
| $ | 8,198,407 | |||||||
2022 |
| 32,128,809 |
|
| 1,119,130 |
|
| 33,247,939 | |||||||
|
| (in thousands) | |||||||||||||
Remainder of 2022 | $ | 20,307 | $ | 564 | $ | 20,871 | |||||||||
2023 |
| 32,058,049 |
|
| 1,144,320 |
|
| 33,202,369 |
| 40,976 |
| 1,144 |
| 42,120 | |
2024 |
| 31,508,225 |
|
| 1,026,677 |
|
| 32,534,902 |
| 40,472 |
| 1,027 |
| 41,499 | |
2025 |
| 29,190,223 |
|
| 947,727 |
|
| 30,137,950 |
| 38,138 |
| 948 |
| 39,086 | |
2026 and Thereafter |
| 294,266,749 |
|
| 8,035,397 |
|
| 302,302,146 | |||||||
2026 |
| 36,406 |
| 970 |
| 37,376 | |||||||||
2027 and Thereafter |
| 375,416 |
| 7,066 |
| 382,482 | |||||||||
Total Lease Payments |
| 427,074,607 |
|
| 12,549,106 |
|
| 439,623,713 |
| 551,715 |
| 11,719 |
| 563,434 | |
Less: Interest |
| (245,267,484) |
|
| (5,893,969) |
|
| (251,161,453) |
| (298,970) |
| (5,304) |
| (304,274) | |
Present Value of Lease Liability | $ | 181,807,123 |
| $ | 6,655,137 |
| $ | 188,462,260 | $ | 252,745 | $ | 6,415 | $ | 259,160 |
(b)
The Company entered into related party transactions with respect to its leasing arrangements for certain facilities in Florida, Maryland, Massachusetts and Nevada. Wendy Berger, a director of the Company, is a principal of WBS Equities, LLC, which is the Manager of Mosaic Real Estate, LLC, and owns certainthe facilities leased by the Company. Additionally, Mosaic Real Estate, LLC is indirectly owned in part by Ms. Berger (through the Wendy Berger 1998 Revocable Trust), Benjamin Kovler, the Chief Executive Officer and a director of the Company (through KP Capital, LLC), and Anthony Georgiadis, the Chief Financial Officer and a director of the Company (through Three One Four Holdings, LLC). The terms of these leases range from 7 years to 15 years. For the three and ninesix months ended SeptemberJune 30, 2021,2022, the Company recorded lease expense of $295,298296 thousand and $890,730589, thousand, respectively, compared to lease expense of $301 thousand and $595 thousand for the three and six months ended June 30, 2021, respectively, associated with these leasing arrangements. For the three
17
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
7. LEASES (Continued)
(c) Lease Modification
Danville Cultivation and nine months ended September 30, 2020,Processing Facility
On June 29, 2022 the Company recordedentered into the third amendment ("the Amendment") to its existing lease expenseagreement with Innovative Industrial Properties, Inc. ("IIP") associated with its Danville, Pennsylvania cultivation and processing facility. The Amendment provided an additional tenant improvement allowance of $353,53755,000 andthousand to be used on enhancements to the facility. In addition to the tenant improvement allowance of $1,146,24319,300, respectively associated with these leases. thousand received in prior years, the total tenant improvement allowance provided by IIP will be $74,300 thousand, and brings IIP's total investment in the property to $94,600 thousand. The Amendment to the lease was treated as a modification and resulted in a gain of $3,061 thousand as well as an increase in the right of use asset and related lease liability of $81,720 thousand.
1718
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
8. NOTES PAYABLE
At SeptemberJune 30, 20212022 and December 31, 2020,2021, notes payable consisted of the following:
|
|
|
|
|
| June 30, 2022 |
| December 31, 2021 | |
| September 30, 2021 |
| December 31, 2020 |
| (in thousands) | ||||
Charitable Contributions 1 | $ | 1,284,449 |
| $ | 717,430 | $ | 859 | $ | 1,238 |
Private placement debt dated May 22, 2019 2 |
| 0 |
| 94,955,094 | |||||
Private placement debt dated April 30, 20213 |
| 195,163,333 |
| 0 | |||||
Mortgage notes 4 |
| 10,090,290 |
| 3,382,455 | |||||
Private placement debt dated April 30, 20212 |
| 233,243 |
| 228,690 | |||||
Mortgage notes3 |
| 19,329 |
| 10,006 | |||||
Total notes payable |
| 206,538,072 |
|
| 99,054,979 |
| 253,431 |
| 239,934 |
Less: current portion of notes payable |
| (777,275) |
|
| (341,983) |
| (1,002) |
| (783) |
Notes payable, net of current portion | $ | 205,760,797 |
| $ | 98,712,996 | $ | 252,429 | $ | 239,151 |
____________________
1 In connection with acquisitions completed in 2017 and 2019, the Company is required to make quarterly charitable contributions of $50,00050 thousand through October 2024 and annual charitable contributions of $200,000250 per yearthousand through May 2024, respectively. The net present value of these required payments has been recorded as a liability with interest rates ranging between 2.17% - 7.00%.
2 On May 22, 2019, the Company issued private placement debt in an original amount of $105,466,429 with an interest rate of 12.00%, maturing on May 22, 2023. The debt was issued at a discount, the carrying value of which was $9,045,187 and $10,511,335 as of April 30, 2021, just prior to repayment, and December 31, 2020, respectively.
32 The April 30, 2021 private placement debt (the "Notes") was issued in an original amount of $216,734,258249,934 thousand with an interest rate of 7.00%, maturing on April 30, 2024. The debt was issued at a discount, the carrying value of which was $21,570,92516,691 thousand and $21,244 thousand as of SeptemberJune 30, 2021.2022 and December 31, 2021, respectively.
4
3 Mortgage notes in the original amount of $10,437,00019,947 thousand and $10,437 thousand as of June 30, 2022 and December 31, 2021, respectively, were issued by the Company in connection with various operating properties. These mortgage notes mature between August 20, 2025 and August 1, 2041 and were issued at a discount, the carrying value of which, as of June 30, 2022 and December 31, 2021, was $165,159156 thousand and $174,223162, thousand, respectively, and are presented net of principal payments of $181,551462 thousand and $50,322269 as of September 30, 2021thousand, respectively. The mortgage notes mature between August 20, 2025 and December 31, 2020, respectively.
.
On April 30, 2021, the Company closed a $
216,734,258 Senior Secured non-brokered private placement financing through the issuance(a) Extension of senior secured notes (the “Maturity Date on April 30, 2021 Notes
”). The
On July 14, 2022, the Company usedexercised its right to extend the proceeds to retire the Company’s existing $105,466,429, senior secured notes due May 22, 2023 (the "May 22, 2019 Notes") and the remaining proceeds for general working capital purposes as well as various growth initiatives. The Notes have a maturity date of the Notes by one year from April 30, 2024 and bear interest fromto April 30, 2025. The extension to the maturity date of issue of 7.00% per annum, payable quarterly, with an option, at the discretion of the Company,did not involve any amendment to extend for an additional 12 months. The financing permits the Company to borrow an additional $33,265,742 over the next twelve months. The purchasers of the Notes also received 1,459,044 warrants (the “Warrants”) which allowor any additional consideration to the holder to purchase one Subordinate Voting Share at an exercise price of $32.68 per share, for a period of 60 months from the date of issue.
The refinancing of the Notes involved multiple lenders who were considered members of a loan syndicate. In determining whether the refinancing of the Notes should be accounted for as a debt extinguishment or a debt modification, the Company considered whether, prior to and following the refinancing, creditors remained the same or changed, and whether the changes in debt terms were substantial. A change in the terms of the Notes was considered to be substantial if the present value of the remaining cash flows under the April 30, 2021 Notes were at least 10% different from the present value of the remaining cash flows under the May 22, 2019 Notes (commonly referred to as the “10% Test”). The Company performed a separate 10% Test for each individual lender participating in the loan syndication. Of the 30 lenders who participated in the original financing of the May 22, 2019 Notes, 18 were accounted for as a debt extinguishment, while 12 were treated as a modification. Additionally, 9 new lenders joined the loan syndicate.existing lenders.
(b) Related Parties
On October 15, 2021, the Company amended the Notes Purchase Agreement, for the purposes of borrowing an additional $33.2 million. The additional borrowings have terms consistent with the April 30, 2021 Notes and increase the total amount borrowed to $250 million. The Company intends to use the additional proceeds for general working capital purposes as well as various growth initiatives. The purchasers of the Notes received an additional 243,304 warrants which allow the holder to purchase one Subordinate Voting Share at an exercise price of $30.02 per share, for a period of 60 months from the date of issue.
18
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
8. NOTES PAYABLE (Continued)
A portion of the April 30, 2021 Notes are held by related parties as well as unrelated third-party lenders at a percentage of approximately 1% and 99%, respectively. The related parties consist of Benjamin Kovler, the Chief Executive Officer and a directorChairman of the Company (held through KP Capital, LLC and Outsiders Capital, LLC); Andrew Grossman, the Executive Vice President of Capital Markets of the Company (held through AG Funding Group, LLC); Anthony Georgiadis, the Chief Financial Officer and a director of the Corporation (held through Three One Four Holdings, LLC); and Anthony Georgiadis and William Gruver, a director of the Corporation (held through ABG, LLC).
19
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
9. WARRANTS
As part of the financing of the Company’s private placement financing,Notes, as well as other financing arrangements, the Company issued warrants to related parties, as well as unrelated third parties, which allow the holders to purchase Subordinate Voting Shares at an exercise price determined at the time of issuance.
The following table summarizes the number of warrants outstanding as of SeptemberJune 30, 20212022 and December 31, 2020:2021:
|
| Liability Classified |
|
| Equity Classified |
| ||||||||||||||||||
|
| Number of Shares |
|
| Weighted Average Exercise Price (C$) |
|
| Weighted Average Remaining Contractual Life |
|
| Number of Shares |
|
| Weighted Average Exercise Price (USD) |
|
| Weighted Average |
| ||||||
Balance as at December 31, 2020 |
|
| 2,485,794 |
| C$ |
| 18.45 |
|
|
| 3.40 |
|
|
| 35,000 |
|
|
| 9.10 |
|
|
| 3.68 |
|
Warrants Issued |
|
| 0 |
|
|
| 0 |
|
|
| — |
|
|
| 1,459,044 |
|
|
| 32.68 |
|
|
| 4.58 |
|
Warrants Exercised |
|
| (278,381 | ) |
|
| 18.16 |
|
|
| 2.70 |
|
|
| 0 |
|
|
| 0 |
|
|
| — |
|
Warrants Expired |
|
| (109,482 | ) |
|
| 22.90 |
|
|
| 1.03 |
|
|
| 0 |
|
|
| 0 |
|
|
| — |
|
Balance as at September 30, 2021 |
|
| 2,097,931 |
| C$ |
| 18.26 |
|
|
| 2.67 |
|
|
| 1,494,044 |
|
|
| 32.13 |
|
|
| 4.56 |
|
| Liability Classified |
| Equity Classified |
| ||||||||||||||||
| Number of Shares |
|
| Weighted Average Exercise Price (C$) |
| Weighted Average Remaining Contractual Life |
| Number of Shares |
|
| Weighted Average Exercise Price (USD) |
| Weighted Average |
| ||||||
Balance as of December 31, 2021 |
| 2,097,931 |
| C$ |
| 18.26 |
|
| 2.42 |
|
| 1,737,347 |
| $ |
| 31.83 |
|
| 4.38 |
|
Balance as of June 30, 2022 |
| 2,097,931 |
| C$ |
| 18.26 |
|
| 1.92 |
|
| 1,737,347 |
| $ |
| 31.83 |
|
| 3.88 |
|
(a)
The following table summarizes the fair value of the liability classified warrants at SeptemberJune 30, 20212022 and December 31, 2020:2021:
|
|
|
|
|
|
| Fair Value |
| ||||||||||
Warrant Liability |
| Strike Price |
| Warrants Outstanding |
|
| September 30, 2021 |
|
| December 31, 2020 |
|
| Change |
| ||||
Bridge Financing Warrants |
| C$22.90 |
|
| 100,723 |
|
| $ | 1,089,500 |
|
| $ | 2,544,500 |
|
| $ | (1,455,000 | ) |
Private Placement Financing Warrants |
| C$19.39 |
|
| 1,606,533 |
|
|
| 25,188,000 |
|
|
| 28,756,500 |
|
|
| (3,568,500 | ) |
Modification Warrants |
| C$12.04 |
|
| 316,947 |
|
|
| 6,293,000 |
|
|
| 6,630,000 |
|
|
| (337,000 | ) |
Additional Modification Warrants |
| C$14.03 |
|
| 73,728 |
|
|
| 1,432,500 |
|
|
| 1,523,000 |
|
|
| (90,500 | ) |
Totals |
|
|
|
| 2,097,931 |
|
| $ | 34,003,000 |
|
| $ | 39,454,000 |
|
| $ | (5,451,000 | ) |
|
|
|
|
| Fair Value |
| |||||||||
Warrant Liability | Strike Price |
| Warrants Outstanding |
| June 30, 2022 |
| December 31, 2021 |
|
| Change |
| ||||
|
|
|
|
| (in thousands) |
| |||||||||
Bridge Financing Warrants Issued April 2019 | C$22.90 |
|
| 100,723 |
| $ | 1 |
| $ | 676 |
|
| $ | (675 | ) |
Private Placement Financing Warrants Issued May 2019 | C$19.39 |
|
| 1,606,533 |
|
| 2,049 |
|
| 18,527 |
|
|
| (16,478 | ) |
Modification Warrants Issued November 2019 | C$12.04 |
|
| 316,947 |
|
| 858 |
|
| 4,603 |
|
|
| (3,745 | ) |
Additional Modification Warrants Issued May 2020 | C$14.03 |
|
| 73,728 |
|
| 197 |
|
| 1,071 |
|
|
| (874 | ) |
Totals |
|
|
| 2,097,931 |
| $ | 3,105 |
| $ | 24,877 |
|
| $ | (21,772 | ) |
During the three and ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, the Company recorded a gain of $13,461,75013,843 thousand and $5,451,00021,772, thousand, and a loss of $3,181,1142,160 thousand and $2,060,7718,011, thousand, respectively, on the change in the fair value of the warrant liability within other income (expense) on the unaudited interim condensed consolidated statements of operations.
The following table summarizes the significant assumptions used in determining the fair value of the warrant liability as of each reporting date (see Note 14 - Fair Value Measurements for additional details):
|
| September 30, |
| December 31, | June 30, |
| December 31, |
Significant Assumptions |
| 2021 |
| 2020 | 2022 |
| 2021 |
Volatility |
| 52.27% - 75.30% |
| 72.19% - 79.10% | 62.23% - 68.30% |
| 59.95% - 74.04% |
Remaining Term |
| 1.03 - 3.64 years |
| 1.78 - 4.39 years | 0.28 - 2.89 years |
| 0.78 - 3.39 years |
Risk Free Rate |
| 0.52% - 0.81% |
| 0.20% - 0.28% | 3.09% - 3.14% |
| 0.91% - 1.06% |
20
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
9. WARRANTS (Continued)
(b)
The following table summarizes the fair value of the equity classified warrants at SeptemberJune 30, 20212022 and December 31, 2020:2021:
|
|
|
|
|
|
|
| Fair Value |
| |||||||
|
|
|
|
| Warrants |
|
| September 30, |
|
| December 31, |
| ||||
Warrants Included in Contributed Surplus |
| Strike Price |
|
| Outstanding |
|
| 2021 |
|
| 2020 |
| ||||
Dispensary Mortgage Warrants |
| $ | 9.10 |
|
|
| 35,000 |
|
| $ | 181,272 |
|
| $ | 181,272 |
|
Private Placement Refinancing Warrants |
| $ | 32.68 |
|
|
| 1,459,044 |
|
|
| 22,258,608 |
|
|
| 0 |
|
Totals |
|
|
|
|
| 1,494,044 |
|
| $ | 22,439,880 |
|
| $ | 181,272 |
|
|
|
|
|
|
| Fair Value |
| ||||||
|
|
|
| Warrants |
| June 30, |
| December 31, |
| ||||
Warrants Included in Contributed Surplus | Strike Price |
|
| Outstanding |
| 2022 |
| 2021 |
| ||||
|
|
|
|
|
| (in thousands) |
| ||||||
Mortgage Warrants Issued June 2020 | $ | 9.10 |
|
|
| 35,000 |
| $ | 181 |
| $ | 181 |
|
Private Placement Refinance Warrants Issued April 2021 | $ | 32.68 |
|
|
| 1,459,044 |
|
| 22,259 |
|
| 22,259 |
|
Private Placement Refinance Warrants Issued October 2021 | $ | 30.02 |
|
|
| 243,303 |
|
| 2,616 |
|
| 2,616 |
|
Totals |
|
|
|
| 1,737,347 |
| $ | 25,056 |
| $ | 25,056 |
|
The equity warrants were valued as of the date of issuance using a Black Scholes Option Pricing model. The following table summarizes the significant assumptions used in determining the fair value of the warrants as of each respective issuance date:
Significant Assumptions |
| Private Placement Refinancing Warrants |
| Dispensary Mortgage Warrants | Private Placement Refinancing Warrants |
| Private Placement Refinancing Warrants | Dispensary Mortgage Warrants |
Date of Issuance |
| April 30, 2021 |
| June 5, 2020 | October 15, 2021 |
| April 30, 2021 | June 5, 2020 |
Volatility |
| 73% |
| 80% | 73% |
| 73% | 80% |
Estimated Term |
| 4 years |
| 5 years | 4 years |
| 4 years | 5 years |
Risk Free Rate |
| 0.74% |
| 0.37% | 1.12% |
| 0.74% | 0.37% |
21
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
10. SHARE CAPITAL
Common shares, which include the Company’s Subordinate Voting Shares, Multiple Voting Shares and Super Voting Shares, are classified as equity. Incremental costs directly attributable to the issuance of common shares are recognized as a deduction from equity. The proceeds from the exercise of stock options or warrants together with amounts previously recorded in reserves over the applicable vesting periods are recorded as share capital. Income tax relating to transaction costs of an equity transaction is accounted for in accordance with ASC 740, Income Taxes.
(a) Authorized
The Company has the following classes of share capital, with each class having no par value:
(i)
The holders of the Subordinate Voting Shares are entitled to receive dividends which may be declared from time to time and are entitled to one vote per share at meetings of the Company’s shareholders. All Subordinate Voting Shares are ranked equally with regard to the Company’s residual assets. The Company is authorized to issue an unlimited number of no par value Subordinate Voting Shares. During the ninesix months ended SeptemberJune 30, 2021,2022, the shareholders of the Company converted 6355,000 Multiple Voting Shares into 63,500 Subordinate Voting Shares and 17,000 Super Voting Shares into 1,700,000500,000 Subordinate Voting Shares.
(ii)
Each Multiple Voting Share is entitled to 100 votes per share at shareholder meetings of the Company and is exchangeable for 100 Subordinate Voting Shares. At SeptemberJune 30, 2021,2022, the Company had 39,65438,531 issued and outstanding Multiple Voting Shares, which convert into 3,965,4003,853,100 Subordinate Voting Shares. The Company is authorized to issue an unlimited number of Multiple Voting Shares. During the ninesix months ended SeptemberJune 30, 2021,2022, the shareholders of the Company converted 6355,000 Super Voting Shares into 5,000 Multiple Voting Shares and 5,000 Multiple Voting Shares into 63,500500,000 Subordinate Voting Shares.
(iii)
Each Super Voting Share is entitled to 1,000 votes per share at shareholder meetings of the Company and is exchangeable for 100 Subordinate Voting Shares or one Multiple Voting Share. At SeptemberJune 30, 2021,2022, the Company had 295,031280,031 issued and outstanding Super Voting Shares which convert into 29,503,10028,003,100 Subordinate Voting Shares. The Company is authorized to issue an unlimited number of Super Voting Shares. During the ninesix months ended SeptemberJune 30, 2021,2022, the shareholders of the Company converted 17,0005,000 Super Voting Shares into 1,700,0005,000 SubordinateMultiple Voting Shares.
(b)
A reconciliation of the beginning and ending amounts of the issued and outstanding shares by class is as follows:
|
| Issued and Outstanding |
| |||||||||
|
| Subordinate |
|
| Multiple |
|
| Super |
| |||
As at December 31, 2020 |
|
| 178,113,221 |
|
|
| 40,289 |
|
|
| 312,031 |
|
Issuance of common shares pursuant to S-1 |
|
| 4,693,991 |
|
|
|
|
|
|
| ||
Issuance of shares under business combinations and |
|
| 7,290,180 |
|
|
| 0 |
|
|
| 0 |
|
Distribution of contingent consideration |
|
| 612,737 |
|
|
| 0 |
|
|
| 0 |
|
Distribution of deferred shares |
|
| 190,263 |
|
|
| 0 |
|
|
| 0 |
|
Issuance of shares for redemption of noncontrolling interests |
|
| 136,075 |
|
|
|
|
|
|
| ||
Issuance of shares upon exercise of options and |
|
| 977,646 |
|
|
| 0 |
|
|
| 0 |
|
Issuances of shares upon vesting of RSUs |
|
| 357,756 |
|
|
| 0 |
|
|
| 0 |
|
Shares issued in association with notes payable |
|
| 8,514 |
|
|
|
|
|
|
| ||
Shares issued for settlement of business dispute |
|
| 240,000 |
|
|
| 0 |
|
|
| 0 |
|
Exchange of shares |
|
| 1,763,500 |
|
|
| (635 | ) |
|
| (17,000 | ) |
As at September 30, 2021 |
|
| 194,383,883 |
|
|
| 39,654 |
|
|
| 295,031 |
|
|
| Issued and Outstanding |
| |||||||||
|
| Subordinate |
|
| Multiple |
|
| Super |
| |||
As at January 1, 2022 |
|
| 201,768,312 |
|
|
| 38,531 |
|
|
| 285,031 |
|
Issuance of shares under business combinations and investments |
|
| 204,036 |
|
|
| — |
|
|
| — |
|
Distribution of contingent consideration |
|
| 667,080 |
|
|
| — |
|
|
| — |
|
Issuance of shares upon exercise of options and warrants |
|
| 177,044 |
|
|
| — |
|
|
| — |
|
Issuances of shares upon vesting of RSUs |
|
| 336,005 |
|
|
| — |
|
|
| — |
|
Shares issued for settlement of business obligation |
|
| 80,588 |
|
|
| — |
|
|
| — |
|
Exchange of shares |
|
| 500,000 |
|
|
| — |
|
|
| (5,000 | ) |
As at June 30, 2022 |
|
| 203,733,065 |
|
|
| 38,531 |
|
|
| 280,031 |
|
22
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
10. SHARE CAPITAL (Continued)
(b) Issued and Outstanding (Continued)
(i)
GTI New Jersey,ILDISP, LLC
In connection with the Company’s April 23, 2019 acquisition of the non-controlling interest in GTI New Jersey, LLC, the Company agreed to award the previous minority shareholders of the entity up to $3,000,000 in Subordinate Voting Shares. On May 7, 2020, the Company received approval from the New Jersey Department of Health to begin buildout of an additional retail dispensary. As of that date, the Company recorded a current obligation of $2,000,000 representing the maximum value of the shares to be issuable to the former minority shareholders of GTI New Jersey, LLC. On March 15, 2021 and September 16, 2021, retail dispensaries located in Paramus, New Jersey and Bloomfield, New Jersey were successfully opened. As a result,1, 2022, the Company issued 30,414 and 36,947204,036 Subordinate Voting Shares to the former minority shareholderswith a value of GTI New Jersey, LLC, with fair values ofapproximately $1,038,3073,785 and $thousand, based on a 939,53820 on the date of issuance, respectfully. As of September 30, 2021, and December 31, 2020, the Company carried an obligation of $0 and $2,000,000consecutive day volume weighted average price (“VWAP”), respectively, associatedin connection with the retail dispensary agreement withCompany's acquisition of the former minority shareholders of GTI New Jersey, LLC.
remaining ownership interests in Illinois-based Retail stores. The shares issued resulted in an increase in the Company's share capital and a corresponding increase in the net assets acquired. See also Note 4 - Acquisitions for additional details.
(ii)
Integral Associates, LLC
In connection with the Company’s 2019 acquisition of Integral Associates, LLC, the purchase agreement included contingent consideration which was dependent upon the awarding of conditional and final dispensary operating licenses. On March 22, 2021, the Company issued 412,744 Subordinate Voting Shares to the former owners of Integral Associates, LLC in connection with the awarding of a final retail dispensary license located in Pasadena, California. The shares had a fair value of $12,672,681 at the date of issuance and resulted in a loss of $8,172,681 which was recorded in other income (expense) in the unaudited interim condensed consolidated statement of operations. In addition, the Company determined that the likelihood that the Company will obtain retail dispensary operating licenses in either West Hollywood or Culver City, California, under commercially reasonable terms was remote. Consequently, the Company remeasured the contingent liability associated with these milestones which resulted in a reduction to the contingent liability of $7,750,000 with a corresponding increase to other income (expense) in the unaudited interim condensed consolidated statement of operations.
As of September 30, 2021 and December 31, 2020, the estimated fair value of the contingent consideration associated with the acquisition of Integral Associates, LLC, which was valued using a probability weighting of the potential payouts, was $14,850,000 and $27,100,000, respectively of which $4,950,000, in each period, was recorded as a non-current liability.
Dharma Pharmaceuticals, LLC
In connection with the Company's 2021 acquisition of Dharma Pharmaceuticals, LLC ("Dharma"(“Dharma”), the purchase agreement included contingent consideration of up to $65.065,000 millionthousand in Subordinate Voting Shares of Green Thumb, which was dependent upon the successful opening of up to 5 retail dispensariesRetail stores in the Virginia area within the first three years following the signing of the agreement and the legal sale of adult use cannabis in a retailRetail dispensary by January 1, 2025. On August 16, 2021,February 25, 2022, the Company issued 199,993667,080 Subordinate Voting Shares to the former owners of Dharma in connection with the successful opening of one retail dispensarytwo Retail stores in Virginia. The shares had a fair value of $5,949,07813,111 thousand at the date of issuance.
As of SeptemberJune 30, 2022 and December 31, 2021, the estimated fair value of the contingent consideration associated with the acquisition of Dharma, which was valued based on a probability weighting of the potential payments, was $45,872,66540,074, of which thousand and $19,883,43448,665 thousand, respectively. As of June 30, 2022 and December 31, 2021, $10,947 thousand and $20,884 thousand, respectively, was included as a current liability on the Company's unaudited interim condensed consolidated balance sheets.
23
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
10. SHARE CAPITAL (Continued)
(b) Issued and Outstanding(Continued)
For Success Holding Company
As part of the consideration exchanged in the Company’s 2019 acquisition of For Success Holding Company, deferred shares were held back for a period of twenty-four months from the close of the transaction. On February 22, 2021, the Company issued 146,315 Subordinate Voting Shares with a value of $1,825,597 in connection with the Company’s 2019 acquisition of For Success Holding Company. The issuance of the deferred shares represented the final payout to the former owners of For Success Holding Company and resulted in the cancelation of 780 shares valued at $9,732 representing certain reimbursable costs incurred by the Company.
See also Note 4 - Acquisitions for additional details.
(iv)Issuance of Registered Shares Pursuant to S-1
On February 8, 2021, the SEC declared effective the Company’s Registration Statement No. 333-248213 on Form S-1 filed on February 2, 2021. Shortly thereafter, the Company received an offer from a single institutional investor to purchase 3,122,074 of the Subordinate Voting Shares registered on the Form S-1 at a price of $32.03 per share for a total of $100,000,030. The transaction closed on February 9, 2021. On February 23, 2021, the Company accepted additional offers to purchase a total of 1,571,917 Subordinate Voting Shares at a price of $35.50 per share, for a total of $55,803,054. The Company is using the net proceeds from the sale of securities for general corporate purposes, which may include capital expenditures, working capital and general and administrative expenses. The Company also is using a portion of the net proceeds to acquire or invest in business and products that are complimentary to the Company’s own businesses and products. Additionally, the Company incurred legal, audit and other professional fees of $304,944 associated the issuance of the registered shares. Such fees have been recorded within contributed surplus (deficit) within the Company’s unaudited interim condensed consolidated statement of shareholders’ equity.
The Company operates equity settled stock-based remuneration plans for its eligible directors, officers, employees and consultants. All goods and services received in exchange for the grant of any stock-based payments are measured at their fair value unless the fair value cannot be estimated reliably. If the Company cannot estimate reliably the fair value of the goods and services received, the Company measures their value indirectly by reference to the fair value of the equity instruments granted. For transactions with employees and others providing similar services, the Company measures the fair value of the services by reference to the fair value of the equity instruments granted. Equity settled stock-based payments under stock-based payment plans are ultimately recognized as an expense in profit or loss with a corresponding credit to equity.
In June 2018, the Company established the Green Thumb Industries Inc. 2018 Stock and Incentive Plan, which was amended by Amendment No. 1 thereto (as amended, the “Plan”“Plan”). The maximum number of Restricted Stock Units (“RSUs”RSUs”) and options issued under the Plan shall not exceed 10% of the issued and outstanding shares on an as-converted basis.
24
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
10. SHARE CAPITAL (Continued)
(c) Stock-Based Compensation(Continued)
The Company recognizes compensation expense for RSUs and options on a straight-line basis over the requisite service period of the award. Non-market vesting conditions are included in the assumptions about the number of options that are expected to become exercisable. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from the previous estimate. Any cumulative adjustment prior to vesting is recognized in the current period with no adjustment to prior periods for expense previously recognized.
Option and RSU grantsawards generally vest over three years, and options typically have a life of five orto ten years. Option and RSU grants are determined by the Compensation Committee of the Company’s Board of Directors with the option price set at no less than 100% of the fair market value of a share on the date of grant.
23
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
10. SHARE CAPITAL (Continued)
(c) Stock-Based Compensation(Continued)
Stock option activity is summarized as follows:
| Number of Shares |
| Weighted Average Exercise Price C$ |
| Weighted Avereage Remaining Contractual Life |
| Aggregate Intrinsic Value |
| Number of Shares |
| Weighted Average Exercise Price C$ |
| Weighted Average Remaining Contractual Life |
| Aggregate Intrinsic Value |
| ||||||||
Balance as at December 31, 2020 |
| 5,664,406 |
| 11.91 |
| 4.39 |
| $ | 85,408,034 |
| ||||||||||||||
| (in thousands) |
| ||||||||||||||||||||||
Balance as of December 31, 2021 |
| 5,383,275 |
| 18.07 |
| 3.59 |
| $ | 48,803 |
| ||||||||||||||
Granted |
| 1,303,143 |
| 37.44 |
| 4.26 |
|
|
|
| 959,702 |
| 23.28 |
| 6.45 |
|
|
| ||||||
Exercised |
| (699,265 | ) |
| 13.13 |
|
|
|
| 13,566,825 |
|
| (177,044 | ) |
| 11.72 |
|
|
|
| 1,316 |
| ||
Forfeited |
| (642,623 | ) |
| 14.43 |
|
|
|
|
|
| (129,084 | ) |
| 22.70 |
|
|
|
|
| ||||
Balance as at September 30, 2021 |
| 5,625,661 |
| 17.38 |
| 3.73 |
| $ | 78,129,641 |
| ||||||||||||||
Balance as of June 30, 2022 |
| 6,036,849 |
| 18.99 |
| 3.58 |
| $ | 1,083 |
| ||||||||||||||
Vested |
| 3,335,293 |
| 12.66 |
|
|
|
|
|
| 4,515,359 |
| 14.44 |
|
|
|
|
| ||||||
Exercisable at September 30, 2021 |
| 2,396,807 |
| 12.41 |
| 3.66 |
| $ | 41,611,631 |
| ||||||||||||||
Exercisable of June 30, 2022 |
| 3,065,200 |
| 15.17 |
| 2.85 |
| $ | 704 |
|
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on SeptemberJune 30, 20212022 and December 31, 2020,2021, respectively, and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their in-the-money options on SeptemberJune 30, 20212022 and December 31, 2020.2021. This amount will change in future periods based on the fair market value of the Company’s Subordinate Voting Shares and the number of options outstanding.
The following table summarizes the weighted average grant date fair value and intrinsic value of options exercised for the ninesix months ended SeptemberJune 30, 20212022 and 2020:2021:
| Nine Months Ended September 30, |
| Six Months Ended June 30, |
| ||||||||
| 2021 |
| 2020 |
| 2022 |
| 2021 |
| ||||
Weighted average grant date fair value (per share) of stock option units granted (C$) |
| 14.89 |
| 4.46 |
|
| 9.21 |
| 14.80 |
| ||
Intrinsic value of stock option units exercised, using market price at vest date (US$) | $ | 13,566,825 |
| $ | 194,247 |
| ||||||
Intrinsic value of stock option units exercised, using market price at vest date (US$) (in thousands) | $ | 1,316 |
| $ | 10,969 |
|
The Company used the Black-Scholes option pricing model to estimate the fair value of the options granted during the ninesix months ended SeptemberJune 30, 20212022 and the year ended December 31, 2020,2021, using the following ranges of assumptions:
| September 30, | December 31, | June 30, | December 31, |
| 2021 | 2020 | 2022 | 2021 |
Risk-free interest rate | 0.33% - 0.87% | 0.31% - 1.37% | 1.18% - 2.87% | 0.33% - 1.39% |
Expected dividend yield | 0% | 0% | ||
Expected volatility | 73% | 80% | 60 - 64% | 73% |
Expected option life | 3 – 3.5 years | 3 - 5 years | 3 – 4.5 years | 3 – 3.5 years |
As permitted under ASC 718, the Company has made an accounting policy choice to account for forfeitures when they occur.
24
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
10. SHARE CAPITAL (Continued)
(c) Stock-Based Compensation(Continued)
The following table summarizes the number of unvested RSU awards as of June 30, 2022 and December 31, 2021 and the changes during the six months ended June 30, 2022:
|
| Number of Shares |
| Weighted Average Grant Date Fair Value (C$) |
Unvested Shares at December 31, 2021 |
| 376,127 |
| 20.39 |
Granted |
| 1,021,221 |
| 23.21 |
Forfeited |
| (36,684) |
| 23.71 |
Vested |
| (336,005) |
| 19.77 |
Unvested Shares at June 30, 2022 |
| 1,024,659 |
| 23.35 |
The following table summarizes the weighted average grant date fair value of RSUs granted and total fair value of RSUs vested for the six months ended June 30, 2022 and 2021:
|
| Six Months Ended June 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Weighted average grant date fair value (per share) |
|
| 23.21 |
|
|
| 38.37 |
|
Intrinsic value of RSUs vested, using market | $ |
| 5,697 |
| $ |
| 9,255 |
|
The stock-based compensation expense for the three and six months ended June 30, 2022 and 2021 was as follows:
|
|
|
|
| ||||
|
| Three Months Ended June 30, |
| Six Months Ended June 30, | ||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 |
|
| (in thousands) |
| (in thousands) | ||||
Stock options expense | $ | 3,775 | $ | 3,709 | $ | 6,982 | $ | 6,338 |
Restricted Stock Units |
| 3,058 |
| 1,963 |
| 4,502 |
| 3,365 |
Total Stock Based Compensation Expense | $ | 6,833 | $ | 5,672 | $ | 11,484 | $ | 9,703 |
As of June 30, 2022, $37,405 thousand of total unrecognized expense related to stock-based compensation awards is expected to be recognized over a weighted-average period of 2.32 years.
25
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
10. SHARE CAPITAL11. (Continued)INCOME TAX EXPENSE
(c) Stock-Based Compensation(Continued)
The following table summarizes the number of non-vested RSU awards as of September 30, 2021 and December 31, 2020 and the changes during the nine months ended September 30, 2021:
| Number of Shares |
| Weighted Average Grant Date Fair Value (C$) |
| ||
Nonvested Shares at December 31, 2020 |
| 689,340 |
|
| 16.77 |
|
Granted |
| 127,137 |
|
| 38.21 |
|
Forfeited |
| (105,785 | ) |
| 16.37 |
|
Vested |
| (357,756 | ) |
| 21.56 |
|
Nonvested Shares at September 30, 2021 |
| 352,936 |
|
| 19.57 |
|
The following table summarizes the weighted average grant date fair value of RSUs granted and total fair value of RSUs vested for the nine months ended September 30, 2021 and 2020:
| Nine Months Ended September 30, |
| ||||
| 2021 |
| 2020 |
| ||
Weighted average grant date fair value (per share) |
| 38.21 |
|
| 12.65 |
|
Intrinsic value of RSUs vested, using market | $ | 10,813,387 |
| $ | 8,955,783 |
|
The stock-based compensation expense for the three and nine months ended September 30, 2021 and 2020 was as follows:
|
|
|
|
|
| ||||||||||
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Stock options expense | $ | 3,483,587 |
|
| $ | 2,614,273 |
|
| $ | 9,821,525 |
|
| $ | 8,209,557 |
|
Restricted Stock Units |
| 1,511,255 |
|
|
| 1,821,361 |
|
|
| 4,876,655 |
|
|
| 6,999,963 |
|
Total Stock Based Compensation Expense | $ | 4,994,842 |
|
| $ | 4,435,634 |
|
| $ | 14,698,180 |
|
| $ | 15,209,520 |
|
As of September 30, 2021, $24,203,212 of total unrecognized expense related to stock-based compensation awards is expected to be recognized over a weighted-average period of 2.05 years.
26
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
11. INCOME TAX EXPENSE
The following table summarizes the Company’s income tax expense and effective tax rates for the three and ninesix months ended SeptemberJune 30, 20212022 and 2020: 2021:
| Three Months Ended June 30, |
|
| Six Months Ended June 30, | |||||||||||||||||||
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| 2022 |
| 2021 |
|
| 2022 |
| 2021 | |||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
| 2020 |
| (in thousands) |
|
| (in thousands) | ||||||||
Income before Income Taxes | $ | 58,904,765 |
| $ | 39,189,341 |
| $ | 154,517,434 |
| $ | 52,189,559 | $ | 63,071 | $ | 53,301 |
| $ | 123,888 | $ | 95,612 | |||
Income Tax Expense |
| 37,319,988 |
| 28,436,332 |
| 98,202,898 |
| 56,964,047 |
| 38,340 |
| 30,027 |
|
| 69,471 |
| 60,883 | ||||||
Effective Tax Rate |
| 63.4% |
| 72.6% |
| 63.6% |
| 109.1% |
| 60.8% |
| 56.3% |
|
| 56.1% |
| 63.7% |
The Company has computed its provision for income taxes under the discrete method which treats the year-to-date period as if it were the annual period and determines the income tax expense or benefit on that basis. The discrete method is applied when application of the estimated annual effective tax rate is impractical because it is not possible to reliably estimaterates for the annualthree and six months ended June 30, 2022 and 2021 were based on the Company’s forecasted annualized effective tax rate. We believerates and were adjusted for discrete items that at this time,occurred within the use of this discrete method is more appropriate than the annual effective tax rate method as the estimated annual effective tax rate method is not reliable due to the high degree of uncertainty in estimating annual pre-tax income due to the early growth stage of the business.periods presented.
Due to its cannabis operations, the Company is subject to the limitations of the U.S. Internal Revenue Code of 1986, as amended (“IRC”IRC”) Section 280E under which the Company is only allowed to deduct expenses directly related to sales of product. This results in permanent differences between ordinary and necessary business expenses deemed non-allowable under IRC Section 280E.
The Therefore, the effective tax rate can be highly variable and may not necessarily correlate with pre-tax income and provides for the three and nine months ended September 30, 2021 varies widely from the three and nine months ended September 30, 2020, primarily due to the reduction in non deductible expenses as a proportion of total expenses in the current year. The Company incurs expenseseffective tax rates that are not deductible due to IRC Section 280E limitations which resultswell in significant incomeexcess of statutory tax expense.
The Company is subject to income taxes in the United States and Canada. Significant judgment is required in evaluating the Company’s uncertain tax positions and determining the provision for income taxes. The Company’s gross unrecognized tax benefits were approximately $19.2 million and $10.3 million as of September 30, 2021 and December 31, 2020, respectively, recorded within Deferred Income Taxes.
The federal statute of limitation remains open for the 2018 tax year to the present. The state income tax returns generally remain open for the 2017 tax year through the present. Net operating losses arising prior to these years are also open to examination if and when utilized.rates.
Taxes paid during the ninesix months ended SeptemberJune 30, 20212022 and 20202021 were $109,702,55064,803 thousand and $37,820,22875,455, thousand, respectively.
2726
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
12. OTHER INCOME (EXPENSE)
For the three and ninesix months ended SeptemberJune 30, 20212022 and 20202021 other income (expense) was comprised of the following:
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||
|
| 2021 |
|
| 2020 |
|
|
| 2021 |
|
| 2020 |
| ||||
Fair value adjustments on equity investments | $ |
| (4,074,934 | ) | $ |
| 7,284,213 |
|
| $ |
| 14,604,387 |
| $ |
| 6,717,178 |
|
Fair value adjustments on variable note receivable |
|
| 0 |
|
|
| 0 |
|
|
|
| 0 |
|
|
| (815,937 | ) |
Loss on extinguishment of debt |
|
| 0 |
|
|
| 0 |
|
|
|
| (9,881,847 | ) |
|
| 0 |
|
Fair value adjustments on warrants issued |
|
| 13,461,750 |
|
|
| (3,181,114 | ) |
|
|
| 5,451,000 |
|
|
| (2,060,771 | ) |
Fair value adjustments on contingent consideration |
|
| (249,078 | ) |
|
| 442,991 |
|
|
|
| (662,027 | ) |
|
| 425,426 |
|
Earnings from equity method investments |
|
| (316,177 | ) |
|
| 850,000 |
|
|
|
| 1,330,196 |
|
|
| 1,400,000 |
|
Other |
|
| (696,948 | ) |
|
| 1,036,793 |
|
|
|
| (1,036,636 | ) |
|
| 1,835,670 |
|
Total Other Income (Expense) | $ |
| 8,124,613 |
| $ |
| 6,432,883 |
|
| $ |
| 9,805,073 |
| $ |
| 7,501,566 |
|
|
| Three Months Ended June 30, |
|
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
|
| 2022 |
|
| 2021 |
| ||||
|
| (in thousands) |
|
|
| (in thousands) |
| ||||||||||
Fair value adjustments on equity investments | $ |
| (8,018 | ) | $ |
| 18,288 |
|
| $ |
| (17,627 | ) | $ |
| 18,679 |
|
Fair value adjustments on equity method investments |
|
| 0 |
|
|
| 0 |
|
|
|
| 14,119 |
|
|
| 0 |
|
Loss on extinguishment of debt |
|
| 0 |
|
|
| (9,882 | ) |
|
|
| 0 |
|
|
| (9,882 | ) |
Fair value adjustments on warrants issued |
|
| 13,843 |
|
|
| (2,160 | ) |
|
|
| 21,772 |
|
|
| (8,011 | ) |
Earnings (loss) from equity method investments |
|
| (738 | ) |
|
| 1,023 |
|
|
|
| (1,941 | ) |
|
| 1,646 |
|
Other |
|
| 496 |
|
|
| (439 | ) |
|
|
| 695 |
|
|
| (752 | ) |
Total Other Income (Expense) | $ |
| 5,583 |
| $ |
| 6,830 |
|
| $ |
| 17,018 |
| $ |
| 1,680 |
|
13. COMMITMENTS AND CONTINGENCIES
13. COMMITMENTS AND CONTINGENCIES
The Company is subject to lawsuits, investigations and other claims related to employment, commercial and other matters that arise out of operations in the normal course of business. 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 amount is 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 where the effect is material. The Company performs evaluations to identify contingent liabilities for 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 unaudited interim condensed consolidated statement of operations.
(a) 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, sanctions, 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 believes thatThe Company may be subject to regulatory fines, penalties, or restrictions in the Company is in compliance with applicable local and state regulations at September 30, 2021 and December 31, 2020,future as cannabis and other 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.
(b)
From time to time, the Company may be involved in litigation relating to claims arising out of operations in the normal course of business. At SeptemberJune 30, 20212022 and December 31, 2020,2021, there were 0 pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of the Company’s consolidated operations. There are also no proceedings in which any of the Company’s directors, officers or affiliates is an adverse party or has a material interest adverse to the Company’s interest.
(c)
As of SeptemberJune 30, 2021,2022, the Company held approximately $51,404,00067,361 thousand of open construction commitments to contractors on work being performed.
2827
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
14. FAIR VALUE MEASUREMENTS
The Company applies fair value accounting for all financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities that are required to be recorded at fair value, the Company considers all related factors of the asset by market participants in which the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions, and credit risk.
The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels, and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities;
Level 2 – Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly; and
Level 3 – Inputs for the asset or liability that are not based on observable market data.
(a) Financial Instruments
The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, investments, accounts payable and accrued liabilities, notes payable, warrant liability, and contingent consideration payable.
For the Company's long-term notes payable (which consist of charitable contributions, private placement debt and mortgage notes), for which there were no quoted market prices or active trading markets, it was not practicable to estimate the fair value of these financial instruments. The carrying amount of notes payable at SeptemberJune 30, 20212022 and December 31, 20202021 was $206,538,072253,431 thousand and $99,054,979239,934, thousand, which includes $777,2751,002 thousand and $341,983783, thousand, respectively, of short-term debt due within one year.
Financial instruments recorded at fair value are classified using a fair value hierarchy that reflects the significance of the inputs to fair value measurements. The fair values of the Company’s financial instruments associated with each of the three levels of the hierarchy are:
|
| As of June 30, 2022 | ||||||
| (in thousands) | |||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
Cash and Cash Equivalents | $ | 145,277 | $ | 0 | $ | — | $ | 145,277 |
Investments |
| 27,927 |
| 0 |
| 53,856 |
| 81,783 |
Contingent Consideration Payable |
| — |
| 0 |
| (40,794) |
| (40,794) |
Warrant Liability |
| — |
| 0 |
| (3,105) |
| (3,105) |
| $ | 173,204 | $ | 0 | $ | 9,957 | $ | 183,161 |
28
|
| As of September 30, 2021 |
| |||||||||||||
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
Cash and Cash Equivalents |
| $ | 285,792,378 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 285,792,378 |
|
Investments |
|
| 29,520,367 |
|
|
| 0 |
|
|
| 21,107,459 |
|
|
| 50,627,826 |
|
Contingent Consideration Payable |
|
| 0 |
|
|
| 0 |
|
|
| (108,024,422 | ) |
|
| (108,024,422 | ) |
Warrant Liability |
|
| 0 |
|
|
| 0 |
|
|
| (34,003,000 | ) |
|
| (34,003,000 | ) |
|
| $ | 315,312,745 |
|
| $ | 0 |
|
| $ | (120,919,963 | ) |
| $ | 194,392,782 |
|
Green Thumb Industries Inc.
|
| As of December 31, 2020 |
| |||||||||||||
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
Cash and Cash Equivalents |
| $ | 83,757,785 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 83,757,785 |
|
Investments |
|
| 923,581 |
|
|
| 0 |
|
|
| 39,871,225 |
|
|
| 40,794,806 |
|
Contingent Consideration Payable |
|
| 0 |
|
|
| 0 |
|
|
| (27,100,000 | ) |
|
| (27,100,000 | ) |
Warrant Liability |
|
| 0 |
|
|
| 0 |
|
|
| (39,454,000 | ) |
|
| (39,454,000 | ) |
|
| $ | 84,681,366 |
|
| $ | 0 |
|
| $ | (26,682,775 | ) |
| $ | 57,998,591 |
|
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
14. FAIR VALUE MEASUREMENTS (Continued)
(a) Financial Instruments (Continued)
|
| As of December 31, 2021 | ||||||
| (in thousands) | |||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
Cash and Cash Equivalents | $ | 230,420 | $ | — | $ | — | $ | 230,420 |
Investments |
| 44,117 |
| — |
| 50,785 |
| 94,902 |
Contingent Consideration Payable |
| — |
| — |
| (83,865) |
| (83,865) |
Warrant Liability |
| — |
| — |
| (24,877) |
| (24,877) |
| $ | 274,537 | $ | — | $ | (57,957) | $ | 216,580 |
(b) Remeasurement of Contingent Consideration Arrangements
During the ninethree and six months ended SeptemberJune 30, 2021,2022, the Company held an investment in a privately held entity that became a publicly traded company. As a result,remeasured its contingent consideration arrangements associated with its 2021 acquisitions of Mobley Pain Management and Wellness Center LLC and Canwell Processing LLC (collectively “Summit”) and GreenStar Herbals Inc. (“GreenStar”) using Monte Carlo simulation models. During the Company received shares ofthree and six months ended June 30, 2022, the publicly traded entity in exchange for the shares in the privately held entity. The transactionremeasurement resulted in a transfernet gain of the investment from Level 3 to Level 1. As of September 30, 2021$15,501 thousand and December 31, 2020$34,480 thousand, respectively. The change in the fair value of the investmentcontingent consideration was $28,705,037 and $37,249,189, respectively.
Similarly, during the nine months ended September 30, 2020, the Company held an equity investment in a privately held entity that was subsequently acquireddriven by a publicly traded entity . As a resultchange in Management's estimates and projections of the acquisition,acquired entities' ability to achieve the Company received shares of the acquiring entity in exchange for the sharesperformance targets as agreed to in the privately held entity. The transaction resulted2021 acquisition agreements along with the change in a transfer of the investment from Level 3 to Level 1. As of September 30, 2020, the fair value of the Level 1 investment was $shares to be issued.675,594.
The amount was recorded, net, within selling, general, and administrative expenses on the unaudited interim condensed consolidated statement of operations. Significant assumptions used in the Company's June 30, 2022 remeasurement include Green Thumb's stock price as of June 30, 2022 and projected EBITDA and revenue targets as of such period then ended.
29
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
15. VARIABLE INTEREST ENTITIES
The following table presents the summarized financial information about the Company’s consolidated variable interest entities (“VIEs”VIEs”) which are included in the unaudited interim condensed consolidated balance sheet as of SeptemberJune 30, 20212022 and the consolidated balance sheet as of December 31, 2020.2021. All of these entities were determined to be VIEs as the Company possesses the power to direct activities through management services agreements (“MSAs”MSAs”):
| September 30, 2021 |
| December 31, 2020 |
| ||||||||||||||
| Chesapeake |
| Illinois |
| Other |
| Chesapeake |
| Illinois |
| Other |
| ||||||
| LLC |
| Disp, LLC |
| VIEs |
| LLC |
| Disp, LLC |
| VIEs |
| ||||||
Current assets | $ | 0 |
| $ | 902,868 |
| $ | 1,318,258 |
| $ | 32,307,718 |
| $ | 3,738,868 |
| $ | 2,592,803 |
|
Non-current assets |
| 0 |
|
| 3,391,185 |
|
| 1,822,624 |
|
| 3,367,360 |
|
| 3,657,392 |
|
| 2,281,839 |
|
Current liabilities |
| 0 |
|
| 5,404,327 |
|
| 368,221 |
|
| 23,362,255 |
|
| 336,970 |
|
| 1,563,224 |
|
Non-current liabilities |
| 0 |
|
| 425,678 |
|
| 720,001 |
|
| 768,573 |
|
| 461,926 |
|
| 783,356 |
|
Noncontrolling interests |
| 0 |
|
| (767,976 | ) |
| 664,434 |
|
| 0 |
|
| 3,173,683 |
|
| 363,413 |
|
Equity attributable to Green Thumb Industries Inc. |
| 0 |
|
| (767,976 | ) |
| 1,388,226 |
|
| 11,544,250 |
|
| 3,173,683 |
|
| 2,260,773 |
|
|
| ILDISP, |
| Other |
|
| ILDISP, |
| Other |
|
| June 30, 2022 |
|
| December 31, 2021 | ||||
|
| (in thousands) |
|
| (in thousands) | ||||
Current assets | $ | — | $ | 884 |
| $ | 4,118 | $ | 1,033 |
Non-current assets |
| — |
| 1,687 |
|
| 3,290 |
| 1,761 |
Current liabilities |
| — |
| 350 |
|
| 10,719 |
| 854 |
Non-current liabilities |
| — |
| 646 |
|
| 413 |
| 696 |
Noncontrolling interests |
| — |
| 314 |
|
| (1,862) |
| 224 |
Equity attributable to Green Thumb Industries Inc. |
| — |
| 1,261 |
|
| (1,862) |
| 1,020 |
On SeptemberMarch 1, 2021,2022, the Company acquired the remaining 50% minority interest in a retail dispensaryILDISP, LLC, for $850,00011,857 thousand in cash and the issuance of 136,075128,218 shares of Green Thumb, which had a fair value of $4,070,0032,379, based on the closing price of Green Thumb’s Subordinate Voting Shares as traded on the CSE on the date of the transaction. thousand. As a result, the remaining equity associated with the non controllingnoncontrolling interest was closed to share capitalaccumulated surplus (deficit) of Green Thumb as of SeptemberMarch 1, 2021. On December 31, 2020, the MSA2022. See Note 4 - Acquisitions for Chesapeake Alternatives, LLC was amended and restated to make GTI Maryland, LLC, the sole member of the entity. As a result, the remaining equity associated with the non controlling interest was closed to share capital of Green Thumb as of December 31, 2020.
The following tables present the summarized financial information about the Company’s VIEs which are included in the unaudited interim condensed consolidated statements of operations for the three and nine months ended September 30, 2021 and 2020:details.
| Three Months Ended |
| ||||||||||||||||
| September 30, 2021 |
| September 30, 2020 |
| ||||||||||||||
| Chesapeake |
| Illinois |
| Other |
| Chesapeake |
| Illinois |
| Other |
| ||||||
| LLC |
| Disp, LLC |
| VIEs |
| LLC |
| Disp, LLC |
| VIEs |
| ||||||
Revenues | $ | 0 |
| $ | 6,330,859 |
| $ | 3,981,488 |
| $ | 5,684,349 |
| $ | 5,224,583 |
| $ | 2,695,781 |
|
Net income attributable to noncontrolling interests |
| 0 |
|
| 1,016,881 |
|
| 358,742 |
|
| 26,134 |
|
| 897,494 |
|
| 185,452 |
|
Net income attributable to Green Thumb Industries Inc. |
| 0 |
|
| 1,016,882 |
|
| 712,482 |
|
| 1,033,650 |
|
| 897,494 |
|
| 294,969 |
|
Net income | $ | 0 |
| $ | 2,033,763 |
| $ | 1,071,224 |
| $ | 1,059,784 |
| $ | 1,794,988 |
| $ | 480,421 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
| Nine Months Ended |
| ||||||||||||||||
| September 30, 2021 |
| September 30, 2020 |
| ||||||||||||||
| Chesapeake |
| Illinois |
| Other |
| Chesapeake |
| Illinois |
| Other |
| ||||||
| LLC |
| Disp, LLC |
| VIEs |
| LLC |
| Disp, LLC |
| VIEs |
| ||||||
Revenues | $ | 0 |
| $ | 18,274,669 |
| $ | 11,115,034 |
| $ | 14,792,710 |
| $ | 13,170,514 |
| $ | 6,778,501 |
|
Net income attributable to noncontrolling interests |
| 0 |
|
| 2,658,340 |
|
| 1,026,385 |
|
| 206,929 |
|
| 2,170,912 |
|
| 319,511 |
|
Net income attributable to Green Thumb Industries Inc. |
| 0 |
|
| 2,658,340 |
|
| 1,601,578 |
|
| 3,812,121 |
|
| 2,170,913 |
|
| 661,341 |
|
Net income | $ | 0 |
| $ | 5,316,680 |
| $ | 2,627,963 |
| $ | 4,019,050 |
| $ | 4,341,825 |
| $ | 980,852 |
|
30
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
15. VARIABLE INTEREST ENTITIES (Continued)
The following tables present the summarized financial information about the Company’s VIEs which are included in the unaudited interim condensed consolidated statements of operations for the three and six months ended June 30, 2022 and 2021:
|
| Three Months Ended | |||||||
|
| June 30, 2022 |
|
| June 30, 2021 | ||||
|
| ILDISP, |
| Other |
|
| ILDISP, |
| Other |
|
| (in thousands) |
|
| (in thousands) | ||||
Revenues | $ | — | $ | 2,233 |
| $ | 6,217 | $ | 3,823 |
Net income attributable to noncontrolling interests |
| — |
| 294 |
|
| 858 |
| 365 |
Net income attributable to Green Thumb Industries Inc. |
| — |
| 251 |
|
| 858 |
| 473 |
Net income | $ | — | $ | 545 |
| $ | 1,716 | $ | 838 |
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended | |||||||
|
| June 30, 2022 |
|
| June 30, 2021 | ||||
|
| ILDISP, |
| Other |
|
| ILDISP, |
| Other |
|
| (in thousands) |
|
| (in thousands) | ||||
Revenues | $ | 3,543 | $ | 4,499 |
| $ | 11,944 | $ | 7,134 |
Net income attributable to noncontrolling interests |
| 462 |
| 579 |
|
| 1,641 |
| 668 |
Net income attributable to Green Thumb Industries Inc. |
| 462 |
| 492 |
|
| 1,641 |
| 889 |
Net income | $ | 924 | $ | 1,071 |
| $ | 3,282 | $ | 1,557 |
As of SeptemberJune 30, 2021 and 2020,2022 and December 31, 2020,2021, the VIE included in the Other Non-material VIEs is Bluepoint Wellness of Westport, LLC. As of June 30, 2021, VIEs included in the Other Non-material VIEs are Bluepoint Wellness of Westport, LLC and Meshow, LLC.
31
Green Thumb Industries Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)
16. SEGMENT REPORTING
The Company operates in two segments: the cultivation, production and sale of cannabis products to retailRetail stores (“Consumer Packaged Goods”Goods”) and retailing of cannabis to patients and consumers (“Retail”Retail”). The Company does not allocate operating expenses to these business units, nor does it allocate specific assets. Additionally, the Chief Operating Decision Maker does not review total assets or net income (loss) by segments; therefore, such information is not presented below.
The below table presents revenues by type for the three and ninesix months ended SeptemberJune 30, 20212022 and 2020:2021:
| Three Months Ended June 30, |
|
| Six Months Ended June 30, | ||||||||||||||||||||||
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| 2022 |
| 2021 |
|
| 2022 |
| 2021 | |||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| (in thousands) |
|
| (in thousands) | |||||||||
Revenues, Net of Discounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Consumer Packaged Goods | $ |
| 121,073,396 |
| $ |
| 74,702,069 |
|
| $ |
| 343,014,324 |
| $ |
| 177,355,614 |
| $ | 120,604 | $ | 117,864 |
| $ | 241,016 | $ | 221,941 |
Retail |
|
| 161,016,450 |
|
|
| 111,948,115 |
|
|
|
| 441,241,047 |
|
|
| 275,451,137 |
|
| 192,734 |
| 150,116 |
|
| 365,320 |
| 280,225 |
Intersegment Eliminations |
|
| (48,412,965 | ) |
|
| (29,546,343 | ) |
|
|
| (134,276,094 | ) |
|
| (73,460,384 | ) |
| (59,027) |
| (46,108) |
|
| (109,425) |
| (85,864) |
Total Revenues, net of discounts | $ |
| 233,676,881 |
| $ |
| 157,103,841 |
|
| $ |
| 649,979,277 |
| $ |
| 379,346,367 |
| $ | 254,311 | $ | 221,872 |
| $ | 496,911 | $ | 416,302 |
Depreciation and Amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Consumer Packaged Goods | $ |
| 9,132,095 |
| $ |
| 10,029,857 |
|
| $ |
| 25,546,006 |
| $ |
| 33,089,808 |
| $ | 14,071 | $ | 8,413 |
| $ | 27,228 | $ | 16,414 |
Retail |
|
| 8,040,971 |
|
|
| 1,505,019 |
|
|
|
| 21,693,473 |
|
|
| 5,390,152 |
|
| 10,127 |
| 6,660 |
|
| 19,960 |
| 13,652 |
Intersegment Eliminations |
|
| 0 |
|
|
| 0 |
|
|
|
| 0 |
|
|
| 0 |
|
| — |
| — |
|
| — |
| — |
Total Depreciation and Amortization | $ |
| 17,173,066 |
| $ |
| 11,534,876 |
|
| $ |
| 47,239,479 |
| $ |
| 38,479,960 |
| $ | 24,198 | $ | 15,073 |
| $ | 47,188 | $ | 30,066 |
Income Taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Consumer Packaged Goods | $ |
| 16,017,796 |
| $ |
| 12,928,449 |
|
| $ |
| 42,951,572 |
| $ |
| 23,553,449 |
| $ | 16,659 | $ | 13,207 |
| $ | 29,600 | $ | 30,494 |
Retail |
|
| 21,302,192 |
|
|
| 15,507,883 |
|
|
|
| 55,251,326 |
|
|
| 33,410,598 |
|
| 21,681 |
| 16,820 |
|
| 39,871 |
| 30,389 |
Intersegment Eliminations |
|
| 0 |
|
|
| 0 |
|
|
|
| 0 |
|
|
| 0 |
|
| — |
| — |
|
| — |
| — |
Total Income Taxes | $ |
| 37,319,988 |
| $ |
| 28,436,332 |
|
| $ |
| 98,202,898 |
| $ |
| 56,964,047 |
| $ | 38,340 | $ | 30,027 |
| $ | 69,471 | $ | 60,883 |
Goodwill assigned to the Consumer Packaged Goods segment as of SeptemberJune 30, 20212022 and December 31, 20202021 was $350,660,586358,280 thousand and $252,016,532358,038, thousand, respectively. Intangible assets, net assigned to the Consumer Packaged Goods segment as of SeptemberJune 30, 20212022 and December 31, 20202021 was $270,549,090303,923 thousand and $211,303,718317,454, thousand, respectively.
Goodwill assigned to the Retail segment as of SeptemberJune 30, 20212022 and December 31, 20202021 was $246,823,368283,438 thousand and $130,680,935274,811, thousand, respectively. Intangible assets, net assigned to the Retail segment as of SeptemberJune 30, 20212022 and December 31, 20202021 was $278,635,262355,672 thousand and $194,938,316358,037, thousand, respectively.
The Company’s assets are aggregated into two reportable segments (Retail and Consumer Packaged Goods). For the purposes of testing goodwill, Green Thumb has identified 2630 reporting units. The Company determined its reporting units by first reviewing the operating segments based on the geographic areas in which Green Thumb conducts business (or each market). The markets were then further divided into reporting units based on the market operations (Retail and Consumer Packaged Goods) which were primarily determined based on the licenses each market holds. All revenues are derived from customers domiciledsales occurring in the United States and all assets are located in the United States.
32
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
This management discussion and analysis (“MD&A”&A”) of the financial condition and results of operations of Green Thumb Industries Inc. (the “Company”“Company” or “Green Thumb”“Green Thumb”) is for the three and ninesix months ended SeptemberJune 30, 20212022 and 2020.2021. It is supplemental to, and should be read in conjunction with, the Company’s unaudited interim condensed consolidated financial statements as of SeptemberJune 30, 20212022 and the consolidated financial statements for the year ended December 31, 20202021 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 20202021 filed with the U.S. Securities and Exchange Commission on March 18, 20211, 2022 (the “Original 2020“2021 Form 10-K”10-K”) and the accompanying notes for each respective period, as amended by Amendment No. 1 on Form 10-K/A filed with the SEC on March 19, 2021, Amendment No. 2 on Form 10-K/A filed with the SEC on April 30, 2021 (the “Second Amendment”) and Amendment No. 3 on Form 10-K/A filed with the SEC on July 14, 2021. The Original 2020 Form 10-K as so amended is referred to herein as (the “2020 Form 10-K”).period. The Company’s financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”GAAP”). Financial information presented in this MD&A is presented in United States dollars (“$” or “US$“US$”), unless otherwise indicated.
This MD&A contains certain “forward-looking statements” and certain “forward-looking information” as defined under applicable United States securities laws. Please refer to the discussion of forward-looking statements and information set out under the heading “Disclosure Regarding Forward-Looking Statements,” identified in the ‘‘Risks and Uncertainties’’ section of this MD&A and in Part II, Item 1A, “Risk Factors.Factors of the 2021 Form 10-K.” As a result of many factors, the Company’s actual results may differ materially from those anticipated in these forward-looking statements and information.
COVID-19 Considerations
In March 2020, the World Health Organization categorized coronavirus disease 2019 (together with its variants “COVID-19”“COVID-19”) as a pandemic. COVID-19 continues to spread throughout the U.S. and other countries across the world, and the duration, and severity of its effects and those of its variants are currently unknown. The Company continues to implement and evaluate actions to strengthen its financial position and support the continuity of its business and operations in the face of this pandemic and other events.
The Company’s prioritiespriority during the COVID-19 pandemic areis protecting the health and safety of its employees and its customers, following the recommended actions of government and health authorities. In the future, the pandemic may cause reduced demand for the Company’s products and services if, for example, the pandemic results in a recessionary economic environment or potential new restrictions on business operations or the movement of individuals. However, given the Company’s operations have to date been deemed “essential” services in the states in which it does business, the Company believes that there will continue to be strong demand for Green Thumb products.
Operations of the Company are currently ongoing as the cultivation, processing and sale of cannabis products is currently considered an “essential” business by all states in which the Company operates with respect to all customers. The Company’s ability to continue to operate without any significant negative operational impact from the COVID-19 pandemic and any of its variants will in part depend on the Company’s ability to protect its employees, customers and supply chain and its continued designation as “essential” in states where it does business that currently or in the future impose restrictions on business operations.
The pandemic has not materially impacted the Company’s business operations or liquidity position to date. The Company continues to generate operating cash flows to meet its short-term liquidity needs. In all locations where applicable regulations limiting in-store retail activity have been enacted by governmental authorities, the Company has expanded consumer delivery options and curbside pickup to help further protect the health and safety of Green Thumb employees and customers.
33
During the first ninesix months of 20212022, the Company’s revenue, gross profit and operating income were not negatively impacted by COVID-19 and the Company generally maintained the consistency of its operations. However, the uncertain natureeffects of the spread of COVID-19 and its variants may impact its business operations for reasons including the potential quarantine of Green Thumb employees or those of its supply chain partners and its continued designation as “essential” in states where it does business that currently or in the future impose restrictions on business operations.partners.
For additional information on risk factors related to the pandemic or other risks that could impact Green Thumb’s results, please refer to “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q.
33
OVERVIEW OF THE COMPANY
Established in 2014 and headquartered in Chicago, Illinois, Green Thumb, a national cannabis consumer packaged goods company and retailer, promotes well-being through the power of cannabis while being committed to community and sustainable profitable growth. As of SeptemberJune 30, 2021,2022, Green Thumb has revenueoperations in 1415 U.S. markets, employs approximately 3,4004,000 people and serves millionshundreds of thousands of patients and customers annually.
Green Thumb’s core business is manufacturing, distributing and marketing a portfolio of owned cannabis consumer packaged goods brands (which we refer to as our Consumer Packaged Goods business), including &Shine, Beboe, Dogwalkers, Dr. Solomon’s, Good Green, incredibles and Rythm.RYTHM. The Company distributes and markets these products primarily to third-party licensed retailRetail cannabis stores across the United States as well as to Green Thumb-owned retailRetail stores (which we refer to as our Retail business).
The Company’s Consumer Packaged Goods portfolio is primarily generated from plant material that Green Thumb grows and processes itself, which we use to produce our consumer packaged goods in 1617 manufacturing facilities. This portfolio consists of stock keeping units (“SKUs”SKUs”) across a range of cannabis product categories, including flower, pre-rolls, concentrates, vape, capsules, tinctures, edibles, topicals and other cannabis-related products (none of which product categories are individually material to the Company). These Consumer Packaged Goods products are sold in retailRetail locations throughout the U.S. including at Green Thumb’sThumb's own Rise™RISE and other dispensaries.Retail stores.
Green Thumb owns and operates a national cannabis retail chain called RiseRISE™ which are relationship-centric retail experiences aimed to deliver a superior level of customer service through high-engagement consumer interaction, a consultative, transparent and education-forward selling approach and a consistently available assortment of cannabis products. In addition, Green Thumb owns Retail stores under other names, primarily where we co-own the stores or naming is subject to licensing or similar restrictions. The income from Green Thumb’s retailRetail stores is primarily from the sale of cannabis-related products, which includes the sale of Green Thumb produced products as well as those produced by third parties, with an immaterial (under 10%) portion of this income resulting from the sale of other merchandise (such as t-shirts and accessories for cannabis use). The RiseRISE stores are currently are located in nineten of the states in which we operate (including Nevada and Virginia).operate. As of SeptemberJune 30, 2021,2022, the Company had 6577 open and operating retailRetail locations. The Company’s new store opening plans will remain fluid depending on market conditions, obtaining local licensing, construction and other permissions and are subject to the Company’s capital allocation plans and the evolving situation with respect to the COVID-19 as described above and under the heading “Liquidity, Financing Activities During the Period, and Capital Resources” below.COVID-19.
34
Results of Operations – Consolidated
The following table sets forth the Company’s selected consolidated financial results for the periods, and as of the dates, indicated. The (i) unaudited interim condensed consolidated statements of operations for the three and ninesix months ended SeptemberJune 30, 20212022 and 20202021 and (ii) unaudited interim condensed consolidated balance sheet as of SeptemberJune 30, 20212022 and December 31, 20202021 have been derived from, and should be read in conjunction with, the unaudited interim condensed consolidated financial statements and accompanying notes presented in Item 1 of this Report.
The Company’s unaudited interim condensed consolidated financial statements have been prepared in accordance with U.S. GAAP and on a going-concern basis that contemplates continuity of operations and realization of assets and liquidation of liabilities in the ordinary course of business.
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
|
| QTD Change |
| YTD Change | |||||||||||||||||||||
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, |
| QTD Change |
| YTD Change |
| 2022 |
| 2021 |
|
| 2022 |
| 2021 |
|
| $ | % |
| $ | % | ||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| $ | % |
| $ | % |
| (in thousands, except share and per share amounts) |
|
| ||||||||||||
Revenues, net of discounts | $ | 233,676,881 | $ | 157,103,841 | $ | 649,979,277 | $ | 379,346,367 | $ | 76,573,040 | 49% | $ | 270,632,910 | 71% | $ | 254,311 | $ | 221,872 |
| $ | 496,911 | $ | 416,302 |
| $ | 32,439 | 15% | $ | 80,609 | 19% |
Cost of Goods Sold, net |
| (104,159,371) |
| (70,146,676) |
| (286,685,443) |
| (175,707,874) |
| (34,012,695) | (48)% |
| (110,977,569) | (63)% |
| (128,513) |
| (98,961) |
|
| (248,173) |
| (182,526) |
|
| (29,552) | (30)% |
| (65,647) | 36% |
Gross Profit |
| 129,517,510 |
| 86,957,165 |
| 363,293,834 |
| 203,638,493 |
| 42,560,345 | 49% |
| 159,655,341 | 78% |
| 125,798 |
| 122,911 |
|
| 248,738 |
| 233,776 |
|
| 2,887 | 2% |
| 14,962 | 6% |
Total Expenses |
| 71,448,927 |
| 49,745,979 |
| 202,835,651 |
| 144,823,947 |
| 21,702,948 | 44% |
| 58,011,704 | 40% |
| 63,535 |
| 72,056 |
|
| 131,923 |
| 131,387 |
|
| (8,521) | (12)% |
| 536 | 0% |
Income From Operations |
| 58,068,583 |
| 37,211,186 |
| 160,458,183 |
| 58,814,546 |
| 20,857,397 | 56% |
| 101,643,637 | 173% |
| 62,263 |
| 50,855 |
|
| 116,815 |
| 102,389 |
|
| 11,408 | 22% |
| 14,426 | 14% |
Total Other Income (Expense) |
| 836,182 |
| 1,978,155 |
| (5,940,749) |
| (6,624,987) |
| (1,141,973) | (58)% |
| 684,238 | 10% |
| 808 |
| 2,446 |
|
| 7,073 |
| (6,777) |
|
| (1,638) | (67)% |
| 13,850 | (204)% |
Income Before Provision for Income Taxes and Non-Controlling Interest |
| 58,904,765 |
| 39,189,341 |
| 154,517,434 |
| 52,189,559 |
| 19,715,424 | 50% |
| 102,327,875 | 196% | ||||||||||||||||
Income Before Provision for Income Taxes And Non-Controlling Interest |
| 63,071 |
| 53,301 |
|
| 123,888 |
| 95,612 |
|
| 9,770 | 18% |
| 28,276 | 30% | ||||||||||||||
Provision for Income Taxes |
| 37,319,988 |
| 28,436,332 |
| 98,202,898 |
| 56,964,047 |
| 8,883,656 | 31% |
| 41,238,851 | 72% |
| 38,340 |
| 30,027 |
|
| 69,471 |
| 60,883 |
|
| 8,313 | 28% |
| 8,588 | 14% |
Net Income (Loss) Before Non-Controlling Interest |
| 21,584,777 |
| 10,753,009 |
| 56,314,536 |
| (4,774,488) |
| 10,831,768 | 101% |
| 61,089,024 | 1,279% | ||||||||||||||||
Net Income Before Non-Controlling Interest |
| 24,731 |
| 23,274 |
|
| 54,417 |
| 34,729 |
|
| 1,457 | 6% |
| 19,688 | 57% | ||||||||||||||
Net Income Attributable to Non-Controlling Interest |
| 1,375,623 |
| 1,109,080 |
| 3,684,725 |
| 2,697,352 |
| 266,543 | 24% |
| 987,373 | 37% |
| 294 |
| 1,223 |
|
| 1,041 |
| 2,309 |
|
| (929) | (76)% |
| (1,268) | (55)% |
Net Income (Loss) Attributable to Green Thumb Industries Inc. | $ | 20,209,154 | $ | 9,643,929 | $ | 52,629,811 | $ | (7,471,840) | $ | 10,565,225 | 110% | $ | 60,101,651 | 804% | ||||||||||||||||
Net Income (Loss) per share – basic | $ | 0.09 | $ | 0.04 | $ | 0.24 | $ | (0.04) | $ | 0.05 | 125% | $ | 0.28 | 700% | ||||||||||||||||
Net Income (Loss) per share – diluted | $ | 0.08 | $ | 0.04 | $ | 0.23 | $ | (0.04) | $ | 0.04 | 128% | $ | 0.27 | 675% | ||||||||||||||||
Net Income Attributable To Green Thumb Industries Inc. | $ | 24,437 | $ | 22,051 |
| $ | 53,376 | $ | 32,420 |
| $ | 2,386 | 11% | $ | 20,956 | 65% | ||||||||||||||
Net Income per share - basic | $ | 0.11 | $ | 0.10 |
| $ | 0.23 | $ | 0.15 |
| $ | 0.01 | 10% | $ | 0.08 | 53% | ||||||||||||||
Net Income per share - diluted | $ | 0.10 | $ | 0.10 |
| $ | 0.22 | $ | 0.15 |
| $ | — | 0% | $ | 0.07 | 47% | ||||||||||||||
Weighted average number of shares outstanding – basic |
| 226,529,671 |
| 211,990,405 |
| 221,059,870 |
| 210,127,323 |
|
|
| 236,783,625 |
| 220,323,622 |
|
| 236,313,896 |
| 218,276,376 |
|
| |||||||||
Weighted average number of shares outstanding –diluted |
| 230,879,437 |
| 214,212,292 |
| 225,411,773 |
| 210,127,323 |
|
|
| 237,762,903 |
| 224,843,155 |
|
| 237,869,300 |
| 222,927,120 |
|
|
|
| June 30, 2022 |
| December 31, 2021 | ||||||||||
| September 30, 2021 |
| December 31, 2020 |
|
| (in thousands) | |||||||
Total Assets | $ |
| 2,150,429,477 |
|
| $ |
| 1,358,549,162 |
| $ | 2,436,403 | $ | 2,385,851 |
Long-Term Liabilities | $ |
| 540,012,876 |
|
| $ |
| 325,101,386 |
| $ | 616,376 | $ | 561,994 |
Three Months Ended SeptemberJune 30, 20212022 Compared to the Three Months Ended SeptemberJune 30, 20202021
Revenues, net of Discounts
Revenue for the three months ended SeptemberJune 30, 20212022 was $233,676,881,$254,311 thousand, up 49%15% from $157,103,841$221,872 thousand for the three months ended SeptemberJune 30, 2020;2021, driven by contributions from both Retail and Consumer Packaged Goods, largely due to continued growth in Illinois and Pennsylvania.sales. Key performance drivers for the Retail business for the quarter are:were: legalization of adult use sales in New Jersey, which began on April 21, 2022 as well as new store openings including acquired Retail stores, particularly in Illinois, Maryland, Massachusetts, Minnesota, Rhode Island and Virginia and increased store traffic to Green Thumb’s open and operating retailRetail stores, particularly in Illinois, and Pennsylvania, and new store openings including acquired stores, particularly in Massachusetts and Rhode Island.Illinois. The Company generated revenue from 6577 Retail locations during the quarter compared to 4858 in the same quarter of the prior year. During the three months ended SeptemberJune 30, 2022, the Company opened one new store in Minnesota. Since June 30, 2021, the Company acquired one newRetail store in Illinois, one in Maryland, two in Massachusetts, one in Rhode Island, one in Virginia, five in Minnesota and two in Massachusetts. Since September 30, 2020, the Company acquired one retail store in Connecticut, fouropened eight new Retail stores in Massachusetts, one in Rhode Island and one inNevada, Pennsylvania, New Jersey, Virginia and opened ten new Retail locations in Pennsylvania, Illinois, California, Florida, New Jersey and VirginiaMinnesota that contributed to the increase in Retail revenues.
35
The key driverdrivers for the increase in Consumer Packaged Goods increase in revenues was increased sales in New Jersey due to legalization of adult use sales, which began on April 21, 2022 and continued growth in Illinois. In addition, the sale of Green Thumb’s branded product portfolio to third-party retailers through the Company’s existing Consumer Packaged GoodsCompany also acquired cultivation and processing facilities in Illinois, Pennsylvania, Massachusetts, Maryland, Nevada, New Jersey, OhioMinnesota, Virginia and Connecticut due to increased scale and efficiency. The Company also added one cultivation and processing facility in Virginia through the acquisition of Dharma Pharmaceuticals, Inc. ("Dharma") and received a full quarters worth of operations from its cultivation and processing facility added through theRhode Island since June 1, 2021 acquisition of Liberty Compassion, Inc. ("Liberty").30, 2021.
Cost of Goods Sold, net
Cost of goods sold are derived from retailRetail purchases made by the Company from its third-party licensed producers operating within our state markets and costs related to the internal cultivation and production of cannabis. Cost of goods sold for the three months ended SeptemberJune 30, 20212022 was $104,159,371,$128,513 thousand, up 48%30% from $70,146,676$98,961 thousand for the three months ended SeptemberJune 30, 2020,2021, driven by increased volume infrom open and operating retail stores;Retail stores, new and acquired retailRetail store openings in Illinois, Maryland, Massachusetts, Virginia,Minnesota, Nevada, New Jersey, Pennsylvania, Rhode Island New Jersey and PennsylvaniaVirginia, and expansion of the consumer products sales primarily in Illinois Pennsylvania, Massachusetts and New Jersey as described above.
Gross Profit
Gross profit for the three months ended SeptemberJune 30, 20212022 was $129,517,510,$125,798 thousand, representing a gross margin on the sale of branded cannabis flower and processed and packaged products including concentrates, edibles, topicals and other cannabis products, of 55%49%. This is compared to gross profit for the three months ended SeptemberJune 30, 20202021 of $86,957,165$122,911 thousand, or a 55% gross margin. The increase in gross profit (dollars) was directly attributable to the revenue increase as described above.
Total Expenses
Total expenses for the three months ended SeptemberJune 30, 20212022 were $71,448,927$63,535 thousand, or 31%25% of revenues, net of discounts, resulting in an increasea decrease of $21,702,948.$(8,521) thousand over the same period in the prior year. Total expenses for the three months ended SeptemberJune 30, 20202021 were $49,745,979$72,056 thousand or 32% of revenues, net of discounts. The increasereduction in total expenses was primarily attributable to Retail salaries and benefits, depreciation expense and other operational and facility expenses mainly as a resultthe remeasurement of the Company’s addition of ten new and seven acquired retail dispensaries over the prior year period. In addition, an increaseCompany's contingent consideration arrangements associated with two acquisitions that occurred in intangible amortization expense and corporate staff salaries also contributed2021, due to the overall increase in total expenses. The reduction in expenses as a percent of revenue was attributable to measures deployed to control variable expensesthe Company's stock price as well as inherent operating leverage caused byoperational metrics of the significant increase in revenue.acquired entities as of June 30, 2022.
Total Other Income (Expense)
Total other income (expense) for three months ended SeptemberJune 30, 20212022 was $836,182,$808 thousand, a change of $(1,141,973), primarily$(1,638) thousand, due to an increase inunfavorable fair value adjustments associated with the Company's equity investments as well as increased interest expense onassociated with the Company's April 30, 2021 Private Placement Financing as well as contingent liabilities associated with various acquisitionsprivate placement financing offset by the change in the fair value of the warrant liability during the three months ended SeptemberJune 30, 2021.2022.
Income (Loss) Before Provision for Income Taxes and Non-Controlling Interest
Income before provision for income taxes and non-controlling interest for the three months ended SeptemberJune 30, 20212022 was $58,904,765,$63,071 thousand, an increase of $19,715,424$9,770 thousand compared to the three months ended SeptemberJune 30, 2020.2021.
As presented under the heading “Non-GAAP Measures” below, after adjusting for non-cash equity incentive compensation of $4,994,842$6,833 thousand and $4,435,634, adjusted operating Earnings Before Interest, Depreciation, and Amortization ("EBITDA") was $81,181,167 and $53,181,696 for$5,672 thousand in the three months ended SeptemberJune 30, 2022 and 2021, respectively, and 2020,other nonoperating (income) expenses, of $(14,557) thousand and $7,684 thousand in the three months ended June 30, 2022 and 2021, respectively, adjusted operating earnings before interest, depreciation, and amortization (“EBITDA”) was $78,737 thousand and $79,284 thousand, respectively.
Provision for Income Taxes
Income tax expense is recognized based on the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at year-end. For the three months ended SeptemberJune 30, 2021,2022, federal and state income tax expense totaled $37,319,988$38,340 thousand compared to expense of $28,436,332 $30,027 thousandfor the three months ended SeptemberJune 30, 2020.2021.
36
NineSix Months Ended SeptemberJune 30, 20212022 Compared to the NineSix Months Ended SeptemberJune 30, 20202021
Revenues, net of Discounts
Revenue for the ninesix months ended SeptemberJune 30, 2022 was $496,911 thousand, up 19% from $416,302 for the six months ended June 30, 2021 was $649,979,277, up 71% from $379,346,367 for the nine months ended September 30, 2020; driven by contributions from both Retail and Consumer Packaged Goods,sales largely due to legalization of adult use sales in New Jersey, which began on April 21, 2022, continued growth in Illinois, and Pennsylvania. Key performance drivers for the period are: launch of Cookies brand of cannabis products in Nevada, and increased store traffic to Green Thumb’s open and operating retail stores, particularly in Illinois and Pennsylvania and new and acquired store openings, particularly in Pennsylvania, Illinois,Maryland, Massachusetts, Minnesota, Rhode Island and Connecticut. During the nine months ended September 30, 2021, theVirginia. The Company generated revenue from 6577 Retail locations during the period compared to 4858 in the same period duringof the prior year. During the ninesix months ended SeptemberJune 30, 2022, the Company opened three new Retail stores. Since June 30, 2021, the Company opened eight new stores and acquired six stores. Since September 30, 2020, the Company acquired one retailRetail store in Connecticut, fourIllinois, one in Maryland, two in Massachusetts, five in Minnesota, one in Rhode Island, and one in Virginia, and opened teneight new Retail locationsstores in Pennsylvania, Illinois, California, Florida,Massachusetts, Minnesota, Nevada, New Jersey, Pennsylvania and Virginia that contributed to the increase in Retail revenues.Virginia.
The key driverdrivers for the increase in Consumer Packaged Goods revenue increaserevenues was increased sales in New Jersey due to legalization of adult use sales which began on April 21, 2022 and continued growth in Illinois. In addition, the opening of one cultivation and processing facility in Illinois as well as expansion of sales of Green Thumb’s branded product portfolio to third-party retailers through the Company’s existing Consumer Packaged GoodsCompany also acquired cultivation and processing facilities in Illinois, Pennsylvania, Massachusetts, Maryland, Nevada New Jersey, OhioMinnesota, Virginia and Connecticut due to increased scale and efficiency. The Company also added two cultivation and processing facilities through the acquisitions of Liberty and Dharma during the nine months ended SeptemberRhode Island since June 30, 2021.
Cost of Goods Sold, net
Cost of goods sold are derived from retailRetail purchases made by the Company from its third-party licensed producers operating within our state markets and costs related to the internal cultivation and production of cannabis. Cost of goods sold for the ninesix months ended SeptemberJune 30, 20212022 was $286,685,443,$248,173 thousand, up 63%36% from $175,707,874$182,526 thousand for the ninesix months ended SeptemberJune 30, 2020,2021, driven by increased volume infrom open and operating retail stores;Retail stores, new retailand acquired Retail store openings in Pennsylvania, Illinois, Maryland, Massachusetts, andMinnesota, Nevada, New Jersey, Pennsylvania, Rhode Island and Virginia, and expansion of the consumer products sales primarily in Illinois Pennsylvania, Massachusetts, Maryland, Nevada,and New Jersey Ohio and Connecticut as described above.
Gross Profit
Gross profit for the ninesix months ended SeptemberJune 30, 20212022 was $363,293,834,$248,738 thousand, representing a gross margin on the sale of branded cannabis flower and processed and packaged products including concentrates, edibles, topicals and other cannabis products, of 56%50%. This is compared to gross profit for the ninesix months ended SeptemberJune 30, 20202021 of $203,638,493$233,776 thousand or a 54%56% gross margin. The Company’s increase in gross margin percentage was mainly attributed to expanded capacity in the Company’s Consumer Packaged Goods segment. The increase in gross profit (dollars) was directly attributable to the revenue increase as described above.
Total Expenses
Total expenses for the ninesix months ended SeptemberJune 30, 20212022 were $202,835,651$131,923 thousand or 31%27% of revenues, net of discounts, resulting in an increase of $58,011,704.$536 thousand over the same period in the prior year. Total expenses for the ninesix months ended SeptemberJune 30, 20202021 were $144,823,947$131,387 thousand or 38%32% of revenues, net of discounts. The increasereduction in total expenses was primarily attributable to Retail salaries and benefits, depreciation expense and other operational and facility expenses mainly as a resultthe remeasurement of the Company’s addition of ten new and seven acquired retail dispensaries over the prior year period. In addition, an increaseCompany's contingent consideration arrangements associated with two acquisitions that occurred in intangible amortization expense and corporate staff salaries also contributed2021, due to the overall increase in total expenses. The reduction in expenses as a percent of revenue was attributable to measures deployed to control variable expensesthe Company's stock price as well as inherent operating leverage caused byoperational metrics of the significant increase in revenue.acquired entities as of June 30, 2022.
Total Other Income (Expense)
Total other income (expense) for the ninesix months ended SeptemberJune 30, 20212022 was $(5,940,749)$7,073 thousand a change of $684,238,$13,850 thousand, mainly due to favorable fair value adjustments associated with the Company’sCompany's acquisition of ILDISP as well as the change in the fair value of the warrant liability offset by unfavorable fair value adjustments on the Company's equity investments during the ninesix months ended SeptemberJune 30, 2021.2022.
Income (Loss) Before Provision for Income Taxes and Non-Controlling Interest
Income
Net operating income before provision for income taxes and non-controlling interest for the ninesix months ended SeptemberJune 30, 20212022 was $154,517,434,$123,888 thousand, an increase of $102,327,875$28,276 thousand compared to the ninesix months ended SeptemberJune 30, 2020.2021.
37
As presented under the heading “Non-GAAP Measures” below, after adjusting for non-cash equity incentive compensation of $14,698,180$11,484 thousand and $15,209,520,$9,703 thousand, and other nonoperating (income) expenses, of $(29,711) thousand and $8,480 thousand in the six months ended June 30, 2022 and 2021, respectively, adjusted operatingAdjusted Operating EBITDA was $231,820,863$145,776 thousand and $114,139,330 for the nine months ended September 30, 2021 and 2020,$150,638 thousand, respectively.
37
Provision for Income Taxes
Income tax expense is recognized based on the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at year-end. For the ninesix months ended SeptemberJune 30, 2021,2022, federal and state income tax expense totaled $98,202,898$69,471 thousand compared to expense of $56,964,047$60,883 thousand for the ninesix months ended SeptemberJune 30, 2020.
38
2021.
Results of OperationOperations by Segment
The following table summarizes revenues net of sales discounts by segment for the three and ninesix months ended SeptemberJune 30, 20212022 and 2020:2021:
| Three Months Ended June 30, |
|
| |||||||||||||||||||
|
| Three Months Ended September 30, |
|
|
| 2022 |
| 2021 |
| $ | % | |||||||||||
|
|
| 2021 |
|
| 2020 |
|
| $ | % |
| (in thousands) |
|
| ||||||||
Consumer Packaged Goods |
| $ | 121,073,396 |
| $ | 74,702,069 |
| $ | 46,371,327 | 62% | $ | 120,604 | $ | 117,864 | $ | 2,740 | 2% | |||||
Retail |
| 161,016,450 |
|
| 111,948,115 |
|
| 49,068,335 | 44% |
| 192,734 |
| 150,116 |
| 42,618 | 28% | ||||||
Intersegment Eliminations |
|
| (48,412,965) |
|
| (29,546,343) |
|
| (18,866,622) | 64% |
| (59,027) |
| (46,108) |
| (12,919) | 28% | |||||
Total Revenues, Net of Discounts |
| $ | 233,676,881 |
| $ | 157,103,841 |
| $ | 76,573,040 | 49% | $ | 254,311 | $ | 221,872 | $ | 32,439 | 15% | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
| Nine Months Ended September 30, |
|
|
| Six Months Ended June 30, |
|
| ||||||||||||||
|
|
| 2021 |
|
| 2020 |
|
| $ | % |
| 2022 |
| 2021 |
| $ | % | |||||
|
| (in thousands) |
|
| ||||||||||||||||||
Consumer Packaged Goods |
| $ | 343,014,324 |
| $ | 177,355,614 |
| $ | 165,658,710 | 93% | $ | 241,016 | $ | 221,941 | $ | 19,075 | 9% | |||||
Retail |
| 441,241,047 |
|
| 275,451,137 |
|
| 165,789,910 | 60% |
| 365,320 |
| 280,225 |
| 85,095 | 30% | ||||||
Intersegment Eliminations |
|
| (134,276,094) |
|
| (73,460,384) |
|
| (60,815,710) | 83% |
| (109,425) |
| (85,864) |
| (23,561) | 27% | |||||
Total Revenues, Net of Discounts |
| $ | 649,979,277 |
| $ | 379,346,367 |
| $ | 270,632,910 | 71% | $ | 496,911 | $ | 416,302 | $ | 80,609 | 19% |
Three Months Ended SeptemberJune 30, 20212022 Compared with the Three Months Ended SeptemberJune 30, 20202021
Revenues, net of discounts, for the Retail segment were $161,016,450,$192,734 thousand, an increase of $49,068,335$42,618 thousand or 44%28%, compared to the three months ended SeptemberJune 30, 2020.2021. The increase in Retail revenues, net of discounts, was primarily driven by legalization of adult use in New Jersey, which began on April 21, 2022 as well as new store openings including acquired Retail stores, particularly in Illinois, Maryland, Massachusetts, Minnesota, Rhode Island and Virginia and increased store traffic to Green Thumb’s open and operating retailRetail stores, particularly in Illinois, Pennsylvania, as well as acquired stores in Massachusetts and Rhode Island.Illinois.
Revenues, net of discounts, for the Consumer Packaged Goods Segment were $121,073,396,$120,604 thousand, an increase of $46,371,327$2,740 thousand or 62%2%, compared to the three months ended SeptemberJune 30, 2020.2021. The key drivers for the increase in Consumer Packaged Goods revenues netwas increased sales in New Jersey due to legalization of discounts,adult use sales, which began on April 21, 2022 and continued growth in Illinois. In addition, the Company also acquired cultivation and processing facilities in Minnesota, Virginia and Rhode Island since June 30, 2021.
Intersegment eliminations associated with the Consumer Packaged Goods Segment were $(59,027) thousand, an increase of $(12,919) thousand or 28% compared to the three months ended June 30, 2021. The increase in intersegment eliminations was primarily driven by increased intercompany sales volumeprimarily to Company-owned Retail stores in established markets such as Illinois Pennsylvania, Massachusetts and New Jersey.Jersey as well as to newly acquired Retail stores as discussed above. Consumer Packaged Goods revenues, net of intersegment eliminations, made up 24% of total revenues during the three months ended June 30, 2022 as compared to 32% during the three months ended June 30, 2021.
Due to the vertically integrated nature of the business, the Company reviews its revenue at the Retail and Consumer Packaged Goods level while reviewing its operating results on a consolidated basis.
Nine
38
Six Months Ended SeptemberJune 30, 20212022 Compared with the NineSix Months Ended SeptemberJune 30, 20202021
Revenues, net of discounts for the Retail segment were $441,241,047,$365,320, an increase of $165,789,910$85,095 or 60%30%, compared to the ninesix months ended SeptemberJune 30, 2020.2021. The increase in Retail revenues, net of discounts, was primarily driven by legalization of adult use sales in New Jersey, which began on April 21, 2022, continued growth in Illinois, and new and acquired store openings, particularly in Maryland, Massachusetts, Minnesota, Rhode Island and Virginia and increased store traffic to Green Thumb’s open and operating retailRetail stores, particularly in Pennsylvania and Illinois, as well as new store openings particularly in Illinois and Pennsylvania and new and acquired store openings, particularly in Pennsylvania, Illinois, Massachusetts, Rhode Island and Connecticut.Illinois.
Revenues, net of discounts, for the Consumer Packaged Goods Segment were $343,014,324,$241,016 thousand, an increase of $165,658,710$19,075 thousand or 93%9%, compared to the ninesix months ended SeptemberJune 30, 2020.2021. The key drivers for the increase in Consumer Packaged Goods revenues netwas increased sales in New Jersey due to legalization of discounts,adult use sales, which began on April 21, 2022 and continued growth in Illinois. In addition, the Company also acquired cultivation and processing facilities in Minnesota, Virginia and Rhode Island since June 30, 2021.
Intersegment eliminations associated with the Consumer Packaged vGoods Segment were $(109,425) thousand, an increase of $(23,561) thousand or 27% compared to the three months ended June 30, 2021.The increase in intersegment eliminations was primarily driven by increased intercompany sales volumeprimarily to Company-owned Retail stores in established markets such as Illinois Pennsylvania, Massachusetts, Nevada and New Jersey.Jersey as well as to newly acquired Retail stores as discussed above. Consumer Packaged Goods revenues, net of intersegment eliminations, made up 26% of total revenues during the six months ended June 30, 2022 as compared to 33% during the six months ended June 30, 2021.
Due to the vertically integrated nature of the business, the Company reviews its revenue at the Retail and Consumer Packaged Goods level while reviewing its operating results on a consolidated basis.
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Drivers of Results of Operations
Revenue
The Company derives its revenue from two revenue streams: a Consumer Packaged Goods business in which it manufactures, sells and distributes its portfolio of Consumer Packaged Goods brands including &Shine, Beboe, Dogwalkers, Dr. Solomon’s, Good Green, incredibles, and Rythm,RYTHM, primarily to third-party Retail customers; and a Retail business in which it sells finished goods sourced primarily from third-party cannabis manufacturers in addition to the Company’s own Consumer Packaged Goods products direct to the end consumer in its retailRetail stores, as well as direct-to-consumer delivery where applicable by state law.
For the three and ninesix months ended SeptemberJune 30, 2021,2022, revenue was contributed from Consumer Packaged Goods and Retail sales across California, Colorado, Connecticut, Florida, Illinois, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New York, Ohio, Pennsylvania, Rhode Island and Virginia.
Gross Profit
Gross profit is revenue less cost of goods sold. Cost of goods sold includes the costs directly attributable to product sales and includes amounts paid for finished goods, such as flower, edibles, and concentrates, as well as packaging and other supplies, fees for services and processing, and allocated overhead which includes allocations of rent, utilities and related costs. Cannabis costs are affected by various state regulations that limit the sourcing and procurement of cannabis product, which may create fluctuations in gross profit over comparative periods as the regulatory environment changes. Gross margin measures our gross profit as a percentage of revenue.
During the Nine Months Ended Septembersix months ended June 30, 2021,2022, the Company continued to be focused on creating sustainable, profitable growth of the Company’s business while pursuing expansion. Green Thumb expects to continue its growth strategy for the foreseeable future as the Company expands its Consumer Packaged Goods and Retail footprint within its current markets with acquisitions and partnerships, and scales resources into new markets.
Total Expenses
Total expenses other than the cost of goods sold consist of selling costs to support customer relationships and marketing and branding activities. It also includes a significant investment in the corporate infrastructure required to support the Company’s ongoing business.
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Retail selling costs generally correlate to revenue. As new locations begin operations, these locations generally experience higher selling costs as a percentage of revenue compared to more established locations, which experience a more constant rate of selling costs. As a percentage of sales, the Company expects selling costs to remain constant in the more established locations and increase in the newer locations as business continues to grow.
General and administrative expenses also include costs incurred at the Company’s corporate offices, primarily related to back office personnel costs, including salaries, incentive compensation, benefits, stock-based compensation and other professional service costs. The Company expects to continue to invest considerably in this area to support aggressive expansion plans and to support the business by attracting and retaining top-tier talent. Furthermore, the Company anticipates an increase in stock-based compensation expenses related to recruiting and hiring talent, along with legal and professional fees associated with being a publicly traded company in Canada and registered with the U.S. Securities and Exchange Commission.business.
Provision for Income Taxes
The Company is subject to income taxes in the jurisdictions in which it operates and, consequently, income tax expense is a function of the allocation of taxable income by jurisdiction and the various activities that impact the timing of taxable events. As the Company operates in the federally illegal cannabis industry, it is subject to the limitations of the U.S. Internal Revenue Code ("IRC"of 1986, as amended (“IRC”) Section 280E, under which taxpayers are only allowed to deduct expenses directly related to sales of product. This results in permanent differences between ordinary and necessary business expenses deemed non-allowable under IRC Section 280E and a higher effective tax rate than most industries. Therefore, the effective tax rate can be highly variable and may not necessarily correlate to pre-tax income or loss.
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Non-GAAP Measures
EBITDA, Adjusted Operating EBITDA, and Adjusted EBITDA are non-GAAP measures and do not have standardized definitions under GAAP. The following information provides reconciliations of the supplemental non-GAAP financial measures, presented herein to the most directly comparable financial measures calculated and presented in accordance with GAAP. The Company has provided the non-GAAP financial measures, which are not calculated or presented in accordance with GAAP, as supplemental information and in addition to the financial measures that are calculated and presented in accordance with GAAP. These supplemental non-GAAP financial measures are presented because management has evaluated the financial results both including and excluding the adjusted items and believe that the supplemental non-GAAP financial measures presented provide additional perspective and insights when analyzing the core operating performance of the business. These supplemental non-GAAP financial measures should not be considered superior to, as a substitute for or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented.
| Three Months Ended September 30, |
| Nine Months Ended September 30, |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, | |||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2022 |
| 2021 |
|
| 2022 |
| 2021 | |||||||
Net Income (Loss) Before Non-Controlling Interest | $ |
| 21,584,777 |
|
| $ |
| 10,753,009 |
|
| $ |
| 56,314,536 |
|
| $ |
| (4,774,488 | ) | |||||||||
|
| (in thousands) |
|
| (in thousands) | |||||||||||||||||||||||
Net Income Before Non-Controlling Interest | $ | 24,731 | $ | 23,274 |
| $ | 54,417 | $ | 34,729 | |||||||||||||||||||
Interest Income, net |
| (328,018 | ) |
|
| (5,397 | ) |
|
| (673,598 | ) |
|
| (109,922 | ) |
| �� (624) |
| (296) |
|
| (1,524) |
| (346) | ||||
Interest Expense, net |
| 7,616,449 |
|
|
| 4,460,125 |
|
|
| 16,419,420 |
|
|
| 14,236,475 |
|
| 5,399 |
| 4,680 |
|
| 11,469 |
| 8,803 | ||||
Provision For Income Taxes |
| 37,319,988 |
|
|
| 28,436,332 |
|
|
| 98,202,898 |
|
|
| 56,964,047 |
|
| 38,340 |
| 30,027 |
|
| 69,471 |
| 60,883 | ||||
Other (Income) Expense, net |
| (8,124,613 | ) |
|
| (6,432,883 | ) |
|
| (9,805,073 | ) |
|
| (7,501,566 | ) | |||||||||||||
Other Income (Expense), net |
| (5,583) |
| (6,830) |
|
| (17,018) |
| (1,680) | |||||||||||||||||||
Depreciation and amortization |
| 17,173,066 |
|
|
| 11,534,876 |
|
|
| 47,239,479 |
|
|
| 38,479,960 |
|
| 24,198 |
| 15,073 |
|
| 47,188 |
| 30,066 | ||||
Earnings before interest, taxes, depreciation and | $ |
| 75,241,649 |
|
| $ |
| 48,746,062 |
|
| $ |
| 207,697,662 |
|
| $ |
| 97,294,506 |
| $ | 86,461 | $ | 65,928 |
| $ | 164,003 | $ | 132,455 |
Stock-based compensation, non-cash |
| 4,994,842 |
|
|
| 4,435,634 |
|
|
| 14,698,180 |
|
|
| 15,209,520 |
|
| 6,833 |
| 5,672 |
|
| 11,484 |
| 9,703 | ||||
Acquisition, transaction and other non-operating costs |
| 944,676 |
|
|
| — |
|
|
| 9,425,021 |
|
|
| 1,635,304 |
| |||||||||||||
Acquisition, transaction and other non-operating (income) costs |
| (14,557) |
| 7,684 |
|
| (29,711) |
| 8,480 | |||||||||||||||||||
Adjusted Operating EBITDA (non-GAAP measure) | $ |
| 81,181,167 |
|
| $ |
| 53,181,696 |
|
| $ |
| 231,820,863 |
|
| $ |
| 114,139,330 |
| $ | 78,737 | $ | 79,284 |
| $ | 145,776 | $ | 150,638 |
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Liquidity, Financing Activities During the Period, and Capital Resources
As of SeptemberJune 30, 2021,2022, and December 31, 20202021 the Company had total current liabilities of $165,301,783$131,973 thousand and $119,288,435,$204,379 thousand, respectively, and cash and cash equivalents of $285,792,378$145,277 thousand and $83,757,785,$230,420 thousand, respectively, to meet its current obligations. The Company had working capital of $255,449,456$179,553 thousand as of SeptemberJune 30, 2021,2022, an increase of $190,793,886$19,702 thousand as compared to December 31, 2020.2021. This increase in working capital was primarily driven by an additional $55,000 thousand tenant improvement allowance provided as part of the $155,498,140 sale of registered Subordinate Voting Shares pursuantthird amendment to the Company’s Registration Statement on Form S-1 as well as the proceeds from issuancelease of notesone of $175,500,047, including the the Company's April 30, 2021 Notes, partially offset by principal repayments of notescultivation and mortgages of $64,702,508 including the May 22, 2019 Notes.
In the first nine months of 2021, Green Thumb generated revenue from all 14 of its markets: California, Colorado, Connecticut, Florida, Illinois, Maryland, Massachusetts, Nevada, New Jersey, New York, Ohio,processing facilities in Danville, Pennsylvania Rhode Island and Virginia. The Company’s Consumer Packaged Goods revenue grew approximately 3%, net of discounts, during the three months ended September 30, 2021 as compared to the three months ended June 30, 2021, primarily driven by organic growth across the Company’s Consumer Packaged Goods Business. The Company’s Retail revenue, net of discounts, increased 7% during the three months ended September 30, 2021 as compared to the three months ended June 30, 2021, primarily driven by and increased transaction activity across the Company’s 65 Retail store footprint, particularly in Illinois and Pennsylvania, as well as acquired stores in Massachusetts and Rhode Island.with Innovative Industrial Properties, Inc. ("IIP").
The Company is an early-stage growth company, generating cash from revenues deploying its capital reserves to acquire and develop assets capable of producing additional revenues and earnings over both the immediate and nearlong term. Capital reserves are primarily being utilized for capital expenditures, facility improvements, strategic investment opportunities, product development and marketing, as well as customer, supplier, and investor and industry relations.
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While ourthe Company's revenue, gross profit and operating income were not materially impacted by COVID-19 and wethe Company maintained the consistency of ourits operations during the first ninesix months of 2021,2022, the uncertain nature of the spreadeffects of COVID-19 may impact ourthe Company's business operations for reasons including the potential quarantine of our employees or those of our supply chain partners. Our ability to continue to operate without any significant negative operational impact from the COVID-19 pandemic will in part depend on our ability to protect our employees, customers and supply chain and our continued designation as an “essential” business in states where we do business that currently or in the future impose restrictions on business operations. The Company takes a cautious approach in allocating its capital to maximize its returns while ensuring appropriate liquidity. Given the current uncertainty of the future economic environment, the Company has taken additional measures in monitoring and deploying its capital to minimize the negative impact on its current operations and expansion plans.
Cash Flows
Cash Used in Operating Activities, Investing and Financing Activities
Net cash provided by (used in) operating, investing and financing activities for the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, were as follows:
| Six Months Ended June 30, | ||||||||||
| Nine Months Ended September 30, |
|
| 2022 |
| 2021 | |||||
| 2021 |
| 2020 |
|
| (in thousands) | |||||
Net Cash provided by Operating Activities | $ | 82,767,650 |
| $ | 71,056,200 |
| $ | 39,914 |
| $ | 48,297 |
Net Cash Used in Investing Activities | $ | (148,280,250 | ) | $ | (37,422,417 | ) | $ | (114,296) |
| $ | (43,583) |
Net Cash provided by (used in) Financing Activities | $ | 267,547,193 |
| $ | (2,210,044 | ) | $ | (10,761) |
| $ | 270,717 |
Off-Balance Sheet Arrangements
As of SeptemberJune 30, 2021,2022, the Company does not have any off-balance-sheet arrangements that have, or are reasonably likely to have, a current or future effect on the results of operations or financial condition of the Company, including, and without limitation, such considerations as liquidity and capital resources.
Changes in or Adoption of Accounting Practices
Refer to the discussion of recently adopted/issued accounting pronouncements under Part I, Item 1, Notes to Unaudited Interim Condensed Consolidated Financial Statements, Note 1—Overview and Basis of Presentation.
Critical Accounting Policies and Significant Judgements and Estimates
There were no material changes to our critical accounting policies and estimates from the information provided in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our 20202021 Form 10-K.
Emerging Growth Company Status
The Company is an “emerging growth company” as defined in the Section 2(a) of the Exchange Act, as modified by the Jumpstart Our Business Start-ups Act of 2012, or the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 13(a) of the Exchange Act for complying with new or revised accounting standards applicable to public companies. The Company has elected to take advantage of this extended transition period and as a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.
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ITEM 3. QUANTITAVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes to our market risk disclosures as set forth in Part II Item 7A of our 20202021 Form 10-K.
ITEM 4. CONTROLS AND PROCEDURES
The Company evaluatedCompany's management carried out an evaluation under the supervision and with the participation of the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as of September 30, 2021. Thesuch term “disclosure controls and procedures,” asis defined in Rules 13a-15(e) and 15d-15(e) underof the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures ofExchange Act). Based upon that evaluation, management identified a company that are designed to ensure that information required to bematerial weakness in our internal control over financial reporting which was also disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by2021 Form 10-K. As a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’sresult of this material weakness, management including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. The Company recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives. As required by Rule 13a-15(b) under the Exchange Act, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2021, the end of the period covered by this Quarterly Report on Form 10-Q. Based upon such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of such date.June 30, 2022.
Remediation Plan and Status for Material Weakness
In response to the identified material weakness in the 2021 Form 10-K, the Company's management, with the oversight of the Audit Committee, have developed a plan to remediate the material weakness, including designing and implementing improved processes and internal controls with the intent of ensuring proper application of relevant accounting guidance. The Company took steps during the first two quarters of 2022 to enhance the control environment and will continue to evaluate these controls over the remainder of the year.
Changes in Internal Control Over Financial Reporting
Except as noted above, there have been no changes in the Company's internal control over financial reporting during the second quarter of 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Control Systems
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, will be or have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.
4342
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a party to a variety of legal proceedings that arise out of operations in the normal course of business. While the results of these legal proceedings cannot be predicted with certainty, the Company believes that the final outcome of these proceedings will not have a material adverse effect, individually or in the aggregate, on our results of operations or financial condition.
ITEM 1A. RISK FACTORS
There have been no material changes to the risk factors disclosed in the 20202021 Form 10-K.
ITEM 2. UNREGISTERED SALE OF EQUITY SECURITIES
Recent Sales of Unregistered Securities
Subordinate Voting Shares
On July 12, 2021,June 9, 2022, the Company issued 52,11080,588 Subordinate Voting Shares for warrants exercised.as part of a business arrangement.
Since July 1, 2021, the Company issued 5,709,688 Subordinate Voting Shares associated with acquisition of and related commitments to the former owners of privately held companies that own cannabis licenses for, and are engaged in, the cultivation, production and/or sale of cannabis and related products in the United States.
On July 12, 2021, the Company converted 6,000 Multiple Voting Shares into 600,000 Subordinate Voting Shares.
Multiple Voting Shares
On July 12, 2021,There were no transactions involving the Company converted 6,000issuance of Multiple Voting Shares into 600,000 Subordinate Voting Shares.during the three months ended June 30, 2022.
Super Voting Shares
On July 12, 2021,There were no transactions involving the Company converted 6,000issuance of Super Voting Shares into 6,000 Multiple Voting Shares.during the three months ended June 30, 2022.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURE
Not Applicable.
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS
The following exhibits are filed with this report:
10.1 | |
31.1 | |
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|
31.2 | |
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32.1 | |
|
|
32.2 | |
|
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101.INS | Inline XBRL Instance Document |
|
|
101.SCH | Inline XBRL Taxonomy Extension Schema Document |
|
|
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
|
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document |
|
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101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 | Cover Page Interactive Data File (embedded with Inline XBRL File) |
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SIGNATURES
Pursuant to requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
GREEN THUMB INDUSTRIES INC. |
|
/s/Benjamin Kovler
|
By: Benjamin Kovler |
Title: Chief Executive Officer |
Date: November 12, 2021August 4, 2022
GREEN THUMB INDUSTRIES INC. |
|
/s/Anthony Georgiadis
|
By: Anthony Georgiadis |
Title: Chief Financial Officer |
Date: November 12, 2021August 4, 2022
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