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 June 30, 2020March 31, 2021

OR

 

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to

For the transition period from to

LOGO

LOGO

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 412

700 Chicago, Illinois

 60654
(Address of principal executive offices) (zip code)

(312) 471-6720

(Registrant’s telephone number, including area code)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 registeredAct. Yes  ☒    No  ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 12(b)13 or Section 15(d) of the Act:Act. Yes  ☐    No  ☒

Title of each class

Trading

Symbol

Name of exchange

on which registered

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 days.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 ☐
Non-accelerated filer ☐☒  Smaller reporting company ☐
Emerging growth company ☒

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 August 11, 2020,May 1, 2021, there were 160,218,568185,434,044 shares of the registrant’s Subordinate Voting Shares, 12,218,4003,965,400 shares of the registrant’s Multiple Voting Shares (on an as converted basis) and 37,933,60030,103,100 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 JUNE 30, 2020March 31, 2021

TABLE OF CONTENTS

 

FINANCIAL

INFORMATION

  Page 
Part I  

ITEM 1:

 Unaudited Interim Condensed Consolidated Balance Sheets as of June 30,2020March 31, 2021 and December 31, 20192020   4 
 Unaudited Interim Condensed Consolidated Statements of Operations for the three and six months ended June 30,March 31, 2021 and 2020 and 2019   5 
 Unaudited Interim Condensed Consolidated Statements of Shareholders’ Equity for the sixthree months ended June 30,March 31, 2021 and 2020 and 2019   6 
 Unaudited Interim Condensed Consolidated Statements of Cash Flows for the sixthree months ended June 30,March 31, 2021 and 2020 and 2019   7 
 Notes to Unaudited Interim Condensed Consolidated Financial Statements   9 

ITEM 2:

 Management’s Discussion and Analysis of Financial Condition and Results of Operations   30 

ITEM 3:

 Quantitative and Qualitative Disclosure About Market Risk   4037 

ITEM 4:

 Controls and Procedures   41
Part II38 

OTHER INFORMATION

Part II		  

OTHER

INFORMATION

ITEM 1:

 Legal Proceedings   4239 

ITEM 1a:

 Risk Factors   4239 

ITEM 2:

Sale of Unregistered Securities39

ITEM 3:

Defaults Upon Senior Securities39

ITEM 4:

 Mine Safety Disclosure   4239 

ITEM 5:

Other Information39

ITEM 6:

 Exhibits   4340 

Signatures

   41

Use of Names

In this InterimQuarterly 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. 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: marijuanacannabis remains illegal under 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 regulation by the U.S. Food and Drug Administration or the U.S. Bureau of Alcohol, Tobacco Firearms and Firearms;Explosives regulation; cannabis businesses are subject to applicable antimoney laundering laws and regulations and have restricted access to banking and other financial services; the Company may face difficulties obtainingacquiring 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 carry on business; the Company is subject to general economic risks; the Company may be negatively impacted by challenging global economic conditions; the Company is subject to risks arising from epidemic diseases, such as the recent outbreak of the COVID-19 illness; the Company may face difficulties in enforcing its contracts; the Company is subject to taxation in Canada and the United States;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 security risks; ourexposure to fraudulent or illegal activity; the Company’s use of joint ventures may expose usit to risks associated with jointly owned investments; competition for the acquisition and leasing of properties suitable for the cultivation, production and sale of medical and adult use cannabis may impede our abilityCompany faces risks due to make acquisitionsindustry immaturity or increase the cost of these acquisitions, which could adversely affect our operating results and financial condition;limited comparable, competitive or established industry best practices; the Company faces risks related to its products; the Company is dependent on the popularity of consumer acceptance of the Company’s brand portfolio; the Company faces risks related to its insurance coverage and uninsurable risks; the Company is dependent on key inputs, suppliers and skilled labor; the Company must attract and maintain key personnel or our business will fail; the Company’s business is subject to the risks inherent in agricultural operations; the Company’s sales are difficult to forecast;Company may be adversely impacted by rising or volatile energy costs; 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 faces intense competition;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; and additional issuances of substantial amounts of Super Voting Shares, Multiple Voting Shares or Subordinate Voting Shares may result in dilution.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, 2019,2020, and elsewhere in the Company’s filings with the SEC, which are available on the SEC’s website or at https://investors.gtigrows.com.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 --3-

Green Thumb Industries Inc.

Unaudited Interim Condensed Consolidated Balance Sheets

As of June 30, 2020March 31, 2021 and December 31, 20192020

(Amounts Expressed in United States Dollars, Except for Share Amounts)Dollars)

 

 

   June 30,
2020		  December 31, 2019 
      (Audited) 
ASSETS   

Current Assets:

   

Cash and Cash Equivalents

  $82,942,672  $46,667,334 

Accounts Receivable

   9,746,890   7,530,253 

Inventories

   53,984,696   46,034,481 

Prepaid Expenses

   4,280,885   6,780,657 

Other Current Assets

   1,691,437   2,049,886 
  

 

 

  

 

 

 

Total Current Assets

   152,646,580   109,062,611 

Property and Equipment, Net

   166,967,394   155,596,675 

Right of Use Assets, Net

   101,612,443   63,647,812 

Investments

   14,051,786   14,068,821 

Investment in Associate

   10,900,000   10,350,000 

Notes Receivable

   —     815,937 

Intangible Assets, Net

   419,186,807   435,246,898 

Goodwill

   373,081,716   375,084,991 

Deposits and Other Assets

   2,274,403   3,662,879 
  

 

 

  

 

 

 

TOTAL ASSETS

  $ 1,240,721,129  $ 1,167,536,624 
  

 

 

  

 

 

 
LIABILITIES AND SHAREHOLDERS’ EQUITY   

LIABILITIES

   

Current Liabilities:

   

Accounts Payable

  $11,920,686  $8,745,821 

Accrued Liabilities

   44,447,365   37,184,406 

Current Portion of Notes Payable

   266,825   206,675 

Current Portion of Lease Liabilities

   3,988,489   3,833,268 

Liability for Acquisition of Noncontrolling Interest

   11,200,000   5,500,000 

Contingent Consideration Payable

   27,542,989   50,391,181 

Income Tax Payable

   34,078,640   5,505,904 
  

 

 

  

 

 

 

Total Current Liabilities

   133,444,994   111,367,255 

Long-Term Liabilities:

   

Lease Liabilities, Net of Current Portion

   103,427,201   61,115,737 

Notes Payable, Net of Current Portion and Debt Discount

   94,938,332   91,140,194 

Contingent Consideration Payable

   8,985,735   8,545,558 

Warrant Liability

   15,331,887   15,879,843 

Deferred Income Taxes

   33,194,661   36,279,361 
  

 

 

  

 

 

 

TOTAL LIABILITIES

   389,322,810   324,327,948 

COMMITMENTS AND CONTINGENCIES

   

SHARE HOLDERS’ EQUITY

   

Subordinate Voting Shares (Shares Authorized, Issued and Outstanding at June 30, 2020: Unlimited, 158,517,401 and 158,517,401, respectively, at December 31, 2019: Unlimited, 128,999,964 and 128,999,964, respectively)

   —     —   

Multiple Voting Shares (Shares Authorized, Issued and Outstanding at June 30, 2020: Unlimited, 126,712 and 126,712, respectively, at December 31, 2019: Unlimited, 373,350 and 373,350, respectively)

   —     —   

Super Voting Shares (Shares Authorized, Issued and Outstanding at June 30, 2020: Unlimited, 388,336 and 388,336, respectively, at December 31, 2019: Unlimited, 402,289 and 402,289, respectively)

   —     —   

Share Capital

   1,004,812,062   980,638,701 

Contributed Surplus

   6,545,712   3,960,854 

Deferred Share Issuances

   15,280,000   16,587,798 

Accumulated Deficit

   (177,607,359)   (160,491,590) 
  

 

 

  

 

 

 

Equity of Green Thumb Industries Inc.

   849,030,415   840,695,763 

Noncontrolling interests

   2,367,904   2,512,913 
  

 

 

  

 

 

 

TOTAL SHAREHOLDERS’ EQUITY

   851,398,319   843,208,676 
  

 

 

  

 

 

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

  $1,240,721,129  $1,167,536,624 
  

 

 

  

 

 

 

   March 31,  December 31, 
   2021  2020 
      (Audited) 

ASSETS

   

Current Assets:

   

Cash and Cash Equivalents

  $275,898,839  $83,757,785 

Accounts Receivable

   18,232,710   21,414,987 

Inventories

   72,280,372   69,542,953 

Prepaid Expenses

   7,681,878   6,445,393 

Other Current Assets

   6,864,840   2,782,887 
  

 

 

  

 

 

 

Total Current Assets

   380,958,639   183,944,005 

Property and Equipment, Net

   201,069,010   189,925,877 

Right of Use Assets, Net

   144,119,418   140,382,781 

Investments

   29,066,003   40,794,806 

Investment in Associate

   12,943,056   12,669,963 

Intangible Assets, Net

   396,014,963   406,242,034 

Goodwill

   382,697,467   382,697,467 

Deposits and Other Assets

   2,255,466   1,892,229 
  

 

 

  

 

 

 

TOTAL ASSETS

  $1,549,124,022  $1,358,549,162 
  

 

 

  

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

   

LIABILITIES

   

Current Liabilities:

   

Accounts Payable

  $9,313,021  $20,503,572 

Accrued Liabilities

   53,638,305   56,288,729 

Current Portion of Notes Payable

   344,380   341,983 

Current Portion of Lease Liabilities

   5,087,512   3,862,110 

Contingent Consideration Payable

   9,900,000   22,150,000 

Income Tax Payable

   30,161,086   16,142,041 
  

 

 

  

 

 

 

Total Current Liabilities

   108,444,304   119,288,435 

Long-Term Liabilities:

   

Lease Liabilities, Net of Current Portion

   150,679,584   146,426,760 

Notes Payable, Net of Current Portion and Debt Discount

   99,727,557   98,712,996 

Contingent Consideration Payable

   4,950,000   4,950,000 

Warrant Liability

   45,304,671   39,454,000 

Deferred Income Taxes

   37,248,013   35,557,630 
  

 

 

  

 

 

 

TOTAL LIABILITIES

   446,354,129   444,389,821 

COMMITMENTS AND CONTINGENCIES

   

SHARE HOLDERS’ EQUITY

   

Subordinate Voting Shares (Shares Authorized, Issued and Outstanding at March 31, 2021: Unlimited, 185,044,227, and 185,044,227, respectively, at December 31, 2020: Unlimited, 178,113,221, and 178,113,221, respectively)

   —     —   

Multiple Voting Shares (Shares Authorized, Issued and Outstanding at March 31 2021: Unlimited, 40,259 and 40,259, respectively, at December 31, 2020: Unlimited, 40,289 and 40,289, respectively)

   —     —   

Super Voting Shares (Shares Authorized, Issued and Outstanding at March 31, 2021: Unlimited, 301,031 and 301,031, respectively, at December 31, 2020: Unlimited, 312,031 and 312,031, respectively)

   —     —   

Share Capital

   1,236,987,614   1,048,640,398 

Contributed (Deficit) Surplus

   (2,788,150)   4,893,153 

Deferred Share Issuances

   751,988   2,587,317 

Accumulated Deficit

   (135,129,957)   (145,498,623) 
  

 

 

  

 

 

 

Equity of Green Thumb Industries Inc.

   1,099,821,495   910,622,245 

Noncontrolling interests

   2,948,398   3,537,096 
  

 

 

  

 

 

 

TOTAL SHAREHOLDERS’ EQUITY

   1,102,769,893   914,159,341 
  

 

 

  

 

 

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

  $1,549,124,022  $1,358,549,162 
  

 

 

  

 

 

 

 

 

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

 

- 4 --4-

Green Thumb Industries Inc.

Unaudited Interim Condensed Consolidated Statements of Operations

Three and Six Months Ended June 30,March 31, 2021 and 2020 and 2019

(Amounts Expressed in United States Dollars, Except Share Amounts)

 

 

   Three Months Ended June 30,  Six Months Ended June 30, 
   2020  2019  2020  2019 

Revenues, net of discounts

  $ 119,639,924  $44,726,777  $ 222,242,526  $72,639,940 

Cost of Goods Sold, net

   (55,946,010)   (23,223,025)   (105,561,198)   (38,346,967) 
  

 

 

  

 

 

  

 

 

  

 

 

 

Gross Profit

   63,693,914   21,503,752   116,681,328   34,292,973 
  

 

 

  

 

 

  

 

 

  

 

 

 

Expenses:

     

Selling, General, and Administrative

   49,643,211   30,830,482   95,077,968   57,249,363 
  

 

 

  

 

 

  

 

 

  

 

 

 

Total Expenses

   49,643,211   30,830,482   95,077,968   57,249,363 
  

 

 

  

 

 

  

 

 

  

 

 

 

Income (Loss) From Operations

   14,050,703   (9,326,730)   21,603,360   (22,956,390) 
  

 

 

  

 

 

  

 

 

  

 

 

 

Other Income (Expense):

     

Other Income, net

   (5,717,427)   (6,640,546)   1,068,683   (1,383,893) 

Interest Income, net

   16,410   535,894   104,525   892,724 

Interest Expense, net

   (4,734,908)   (5,398,054)   (9,776,350)   (5,849,932) 
  

 

 

  

 

 

  

 

 

  

 

 

 

Total Other Income (Expense)

   (10,435,925)   (11,502,706)   (8,603,142)   (6,341,101) 
  

 

 

  

 

 

  

 

 

  

 

 

 

Income (Loss) Before Provision for Income Taxes And Non-Controlling Interest

   3,614,778   (20,829,436)   13,000,218   (29,297,491) 
  

 

 

  

 

 

  

 

 

  

 

 

 

Provision For Income Taxes

   15,378,715   (154,333)   28,527,715   1,081,667 
  

 

 

  

 

 

  

 

 

  

 

 

 

Net Loss Before Non-Controlling Interest

   (11,763,937)   (20,675,103)   (15,527,497)   (30,379,158) 

Net Income Attributable to Non-Controlling Interest

   1,145,568   216,946   1,588,272   75,947 
  

 

 

  

 

 

  

 

 

  

 

 

 

Net Loss Attributable to Green Thumb Industries Inc.

  $ (12,909,505)  $ (20,892,049)  $ (17,115,769)  $ (30,455,105) 
  

 

 

  

 

 

  

 

 

  

 

 

 

Net Loss per share—basic and diluted

  $(0.06)  $(0.11)  $(0.08)  $(0.17) 
  

 

 

  

 

 

  

 

 

  

 

 

 

Weighted average number of shares outstanding—basic and diluted

   209,902,732   182,261,947   209,185,544   174,758,602 
  

 

 

  

 

 

  

 

 

  

 

 

 

   Three Months Ended March 31, 
   2021  2020 

Revenues, net of discounts

  $194,430,584  $102,602,602 

Cost of Goods Sold, net

   (83,565,084)   (49,615,188) 
  

 

 

  

 

 

 

Gross Profit

   110,865,500   52,987,414 
  

 

 

  

 

 

 

Expenses:

   

Selling, General, and Administrative

   59,331,251   45,434,757 
  

 

 

  

 

 

 

Total Expenses

   59,331,251   45,434,757 
  

 

 

  

 

 

 

Income (Loss) From Operations

   51,534,249   7,552,657 
  

 

 

  

 

 

 

Other Income (Expense):

   

Other Income (Expense), net

   (5,149,817)   6,786,110 

Interest Income, net

   49,890   88,115 

Interest Expense, net

   (4,123,176)   (5,041,442) 
  

 

 

  

 

 

 

Total Other Income (Expense)

   (9,223,103)   1,832,783 
  

 

 

  

 

 

 

Income (Loss) Before Provision for Income Taxes And Non-Controlling Interest

   42,311,146   9,385,440 
  

 

 

  

 

 

 

Provision For Income Taxes

   30,856,178   13,149,000 
  

 

 

  

 

 

 

Net Income (Loss) Before Non-Controlling Interest

   11,454,968   (3,763,560) 

Net Income Attributable to Non-Controlling Interest

   1,086,302   442,704 
  

 

 

  

 

 

 

Net Income (Loss) Attributable To Green Thumb Industries Inc.

  $10,368,666  $(4,206,264) 
  

 

 

  

 

 

 

Net Income (Loss) per share - basic

  $0.05  $(0.02) 
  

 

 

  

 

 

 

Net Income (Loss) per share - diluted

  $0.05  $(0.02) 
  

 

 

  

 

 

 

Weighted average number of shares outstanding - basic

   216,210,429   208,468,356 
  

 

 

  

 

 

 

Weighted average number of shares outstanding - diluted

   221,616,157   208,468,356 
  

 

 

  

 

 

 

 

 

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

 

- 5 --5-

Green Thumb Industries Inc.

Unaudited Interim Condensed Consolidated Statements of Changes in Shareholders’ Equity

SixThree Months Ended June 30,March 31, 2021 and 2020 and 2019

(Amounts Expressed in United States Dollars)

 

 

   Share Capital   Shares to Be
Issued		  Contributed
Surplus		  Deferred
Share Issuance		  Accumulated
Earnings
(Deficit)		  Non-Controlling
Interest		  Total 

Balance, January 1, 2019

  $397,590,465   $27,773,234  $14,202,659  $—    $ (100,876,937)  $3,497,459  $342,186,880 

Adoption of ASC 842, Leases

   —      —     —     —     (498,246)   —     (498,246) 

Noncontrolling interests adjustment for change in ownership

   27,773,234    (27,773,234)   4,200,382   —     —     —     4,200,382 

Contributions from limited liability company unit holders

   —      —     —     —     —     1,650,000   1,650,000 

Issuance of shares under business combinations and investments

   495,483,427    —     (23,813,481)   —     —     —     471,669,946 

Reciprocal derivative instrument

   —      —     (4,526,401)   —     —     —     (4,526,401) 

Issuance of shares for redemption of noncontrolling interests

   29,889,374    —     (4,820,527)   —     —     —     25,068,847 

Deferred share issuances

   —      —     —     16,587,798   —     —     16,587,798 

Stock based compensation

   —      —     9,759,988   —     —     —     9,759,988 

Distributions to limited liability company unit holders

   —      —     —     —     —     (5,616,061)   (5,616,061) 

Net (loss) income

   —      —     —     —     (30,455,105)   75,947   (30,379,158) 
  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance, June 30, 2019

  $950,736,500   $—    $ (4,997,380)  $ 16,587,798  $ (131,830,288)  $(392,655)  $ 830,103,975 
  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance, January 1, 2020

  $980,638,701   $—    $3,960,854  $16,587,798  $ (160,491,590)  $2,512,913  $843,208,676 

Noncontrolling interests adjustment for change in ownership

   —      —     (5,700,000)   —     —     —     (5,700,000) 

Contributions from limited liability company unit holders

   —      —     —     —     —     50,000   50,000 

Issuance of shares under business combinations and investments

   2,524,560    —     (2,678,489)   —     —     —     (153,929) 

Distribution of contingent consideration

   20,194,899    —     —     —     —     —     20,194,899 

Distribution of deferred shares

   1,307,798    —     —     (1,307,798)   —     —     —   

Issueance of warrants

   —      —     181,272   —     —     —     181,272 

Exercise of options

   146,104    —     61,568   —     —     —     207,672 

Stock based compensation

   —      —     10,773,884   —     —     —     10,773,884 

Distributions to third party and limited liability company unit holders

   —      —     (53,377)   —     —     (1,783,281)   (1,836,658) 

Net (loss) income

   —      —     —     —     (17,115,769)   1,588,272   (15,527,497) 
  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance, June 30, 2020

  $ 1,004,812,062   $—    $6,545,712  $15,280,000  $ (177,607,359)  $2,367,904  $851,398,319 
  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

   Share   Contributed  Deferred Share  Accumulated  Non-Controlling    
   Capital   Surplus (Deficit)  Issuance  Earnings (Deficit)  Interest  Total 

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 unit holders

   —      —     —     —     50,000   50,000 

Issuance of shares under business combinations and investments

   684,551    (678,489)   —     —     —     6,062 

Contingent consideration, and other adjustments to purchase accounting

   8,967,257    —     —     —     —     8,967,257 

Stock-based compensation

   —      5,073,742   —     —     —     5,073,742 

Distributions to third party and limited liability company unit holders

   —      (53,377)   —     —     (683,283)   (736,660) 

Net (loss) income

   —      —     —     (4,206,264)   442,704   (3,763,560) 
  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance, March 21, 2020

  $990,290,509   $8,302,730  $16,587,798  $(164,697,854)  $2,322,334  $852,805,517 
  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

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 under business combinations and investments

   1,038,307    (38,307)   —     —     —     1,000,000 

Shares issued as contingent consideration

   12,672,681    —     —     —     —     12,672,681 

Distribution of deferred shares

   1,825,597    —     (1,835,329)   —     —     (9,732) 

Issuance of registered shares pursuant to Form S-1

   155,803,084    (304,944)   —     —     —     155,498,140 

Exercise of options, RSUs and warrants

   17,007,547    (11,368,707)   —     —     —     5,638,840 

Stock-based compensation

   —      4,030,655   —     —     —     4,030,655 

Distributions to limited liability company unit holders

   —      —     —     —     (1,675,000)   (1,675,000) 

Net income

   —      —     —     10,368,666   1,086,302   11,454,968 
  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance, March 31, 2021

  $1,236,987,614   $(2,788,150)  $751,988  $(135,129,957)  $2,948,398  $1,102,769,893 
  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

 

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

 

- 6 --6-

Green Thumb Industries Inc.

Unaudited Interim Condensed Consolidated Statements of Cash Flows

SixThree Months Ended June 30,March 31, 2021 and 2020 and 2019

(Amounts Expressed in United States Dollars)

 

 

   Six Months Ended June 30, 
   2020  2019 

CASH FLOW FROM OPERATING ACTIVITIES

   

Net loss attributable to Green Thumb Industries Inc.

  $ (17,115,769)  $ (30,455,105) 

Net income attributable to non-controlling interest

   1,588,272   75,947 

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

   

Depreciation and amortization

   26,945,085   9,615,078 

Amortization of operating lease assets

   12,430,640   2,267,327 

Loss on disposal of property and equipment

   4,155   —   

(Gain) loss from investment in associate

   (550,000)   56,423 

Bad debt expense

   318,896   —   

Deferred income taxes

   (593,000)   (4,131,000) 

Stock based compensation

   10,773,886   9,759,988 

Decrease (increase) in fair value of investments

   17,035   (310,674) 

Changes in value of liabilities related to put option and purchase of noncontrolling interests

   —     (389,569) 

Interest on contingent consideration payable and acquisition liabilities

   769,217   2,175,957 

Increase in fair value of contingent consideration

   17,565   —   

Decrease in fair value of warrant liability

   (1,120,343)   —   

Decrease in fair value of note receivable

   815,937   1,996,185 

Amortization of debt discount

   2,959,016   1,189,346 

Changes in operating assets and liabilities:

   

Accounts receivable

   (2,535,533)   (542,879) 

Inventories

   (7,950,215)   (3,139,733) 

Prepaid expenses and other current assets

   2,858,221   (770,793) 

Deposits and other assets

   977,444   752,414 

Accounts payable

   3,174,865   14,205,312 

Accrued liabilities

   5,820,802   (4,270,799) 

Operating lease liabilities

   (7,928,586)   (1,885,327) 

Income tax payable

   28,572,736   (1,072,286) 
  

 

 

  

 

 

 

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

   60,250,326   (4,874,188) 
  

 

 

  

 

 

 

CASH FLOW FROM INVESTING ACTIVITIES

   

Purchases of property and equipment

   (34,033,957)   (36,839,428) 

Proceeds from disposal of assets

   11,799,025   —   

Repayment of debenture investments

   —     3,000,000 

Purchase of businesses, net of cash acquired

   —     (66,258,102) 
  

 

 

  

 

 

 

NET CASH USED IN INVESTING ACTIVITIES

   (22,234,932)   (100,097,530) 
  

 

 

  

 

 

 

CASH FLOW FROM FINANCING ACTIVITIES

   

Contributions from limited liability company unit holders

   50,000   1,650,000 

Distributions to third parties and limited liability company unit holders

   (1,836,658)   (5,616,061) 

Proceeds from exercise of options

   207,672   —   

Proceeds from issuance of notes payable

   —     117,435,724 

Principal repayment of notes payable

   (161,070)   (18,724,591) 
  

 

 

  

 

 

 

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES

   (1,740,056)   94,745,072 
  

 

 

  

 

 

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH:

   

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

   36,275,338   (10,226,646) 

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

   46,667,334   145,986,072 
  

 

 

  

 

 

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

  $82,942,672  $135,759,426 
  

 

 

  

 

 

 
  

 

 

  

 

 

 

   Three Months Ended March 31, 
   2021  2020 

CASH FLOW FROM OPERATING ACTIVITIES

   

Net income (loss) attributable to Green Thumb Industries Inc.

  $10,368,666  $(4,206,264) 

Net income attributable to non-controlling interest

   1,086,302   442,704 

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

   

Depreciation and amortization

   14,993,421   12,705,172 

Amortization of operating lease assets

   7,751,299   4,257,515 

Loss (gain) on disposal of property and equipment

   45,946   (239,096) 

Bad debt expense

   (74,092)   315,261 

Deferred income taxes

   1,690,383   (424,000) 

Stock-based compensation

   4,030,655   5,073,742 

(Increase) decrease in fair value of investments

   (1,014,652)   274,592 

Interest on contingent consideration payable and acquisition liabilities

   —     546,009 

Increase (decrease) in fair value of contingent consideration

   412,949   (170,990) 

Increase (decrease) in fair value of warrants

   5,850,671   (7,382,843) 

Decrease in fair value of note receivable

   —     810,337 

Amortization of debt discount

   1,102,632   1,585,322 

Changes in operating assets and liabilities:

   

Accounts receivable

   3,256,369   489,020 

Inventories

   (2,737,419)   (4,135,787) 

Prepaid expenses and other current assets

   (5,318,438)   (3,561,809) 

Deposits and other assets

   (363,237)   1,963,074 

Accounts payable

   (11,190,551)   7,955,363 

Accrued liabilities

   1,755,514   264,226 

Operating lease liabilities

   (6,009,710)   (3,086,451) 

Income tax payable

   14,019,045   13,573,000 
  

 

 

  

 

 

 

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

   39,655,753   27,048,097 
  

 

 

  

 

 

 

CASH FLOW FROM INVESTING ACTIVITIES

   

Purchases of property and equipment

   (19,421,367)   (13,246,608) 

Proceeds from disposal of assets

   60,000   11,799,025 

Investments in securities

   (6,002,302)   —   

Proceeds from sale of investments

   18,122,664   —   
  

 

 

  

 

 

 

NET CASH USED IN INVESTING ACTIVITIES

   (7,241,005)   (1,447,583) 
  

 

 

  

 

 

 

CASH FLOW FROM FINANCING ACTIVITIES

   

Contributions from limited liability company unit holders

   —     50,000 

Distributions to third parties and limited liability company unit holders

   (1,675,000)   (736,660) 

Distributions from unconsolidated subsidairies

   350,000   —   

Net proceeds from issuance of registered shares pursuant to Form S-1

   155,498,140   —   

Proceeds from exercise of options and warrants

   5,638,840   —   

Principal repayment of notes payable

   (85,674)   (59,234) 
  

 

 

  

 

 

 

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES

   159,726,306   (745,894) 
  

 

 

  

 

 

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH:

   

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

   192,141,054   24,854,620 

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

   83,757,785   46,667,334 
  

 

 

  

 

 

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

  $275,898,839  $71,521,954 
  

 

 

  

 

 

 

 

 

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

- 7 -

-7-

Green Thumb Industries Inc.

Unaudited Interim Condensed Consolidated StatementsStatement of Cash Flows

SixThree Months Ended June 30,March 31, 2021 and 2020 and 2019

(Amounts Expressed in United States Dollars)

 

 

   Six Months Ended June 30, 
   2020  2019 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

   

Interest paid

  $6,048,116  $1,955,015 
  

 

 

  

 

 

 

NONCASH INVESTING AND FINANCING ACTIVITIES

   

Accrued capital expenditures

  $(3,564,688)  $3,100,000 
  

 

 

  

 

 

 

Noncash increase in right of use asset

  $ (37,863,550)  $ (22,233,609) 
  

 

 

  

 

 

 

Noncash increase in lease liability

  $37,863,550  $22,731,855 
  

 

 

  

 

 

 

Net liability upon adoption of ASC 842, Leases

  $—    $(498,246) 
  

 

 

  

 

 

 

Exercise of put option

  $—    $4,200,382 
  

 

 

  

 

 

 

Warrants attributable to debt issuance

  $753,658  $11,334,657 
  

 

 

  

 

 

 

Mortgage associated with Illinois dispensary

  $1,814,000  $—   
  

 

 

  

 

 

 

Liability for purchase of noncontrolling interest

  $5,700,000  $—   
  

 

 

  

 

 

 

Liability associated with acquisition agreement

  $2,000,000  $—   
  

 

 

  

 

 

 

Issuance of shares under acquisition agreement

  $20,194,899  $—   
  

 

 

  

 

 

 

Deferred share issuances to prior owners of noncontrolling interest

  $(1,707,941)  $16,587,798 
  

 

 

  

 

 

 

Issuance of shares under business combinations

  $—    $471,409,462 
  

 

 

  

 

 

 

Acquisitions

   

Inventory

  $—    $12,705,211 

Accounts receivable

   —     2,117,412 

Property and equipment

   80,615   14,938,008 

Right of use assets

   —     2,717,014 

Identifiable intangible assets

   (145,000)   271,625,592 

Goodwill

   (2,003,275)   355,192,079 

Deposits and other assets

   603,988   2,582,251 

Liabilities assumed

   (1,302,604)   (9,739,467) 

Lease liabilities

   —     (2,717,014) 

Contingent liabilities

   —     (51,079,705) 

Deferred share issuances

   —     (16,587,798) 

Equity interests issued

   503,389   (471,409,462) 

Conversion of note receivable previously issued

   —     (14,132,800) 

Acquisition liability

   (228,813)   (2,106,908) 

Deferred income taxes

   2,491,700   (27,846,311) 
  

 

 

  

 

 

 
  $—    $66,258,102 
  

 

 

  

 

 

 

RECONCILIATION OF CASH, AND CASH EQUIVALENTS AND RESTRICTED CASH

   

Cash and cash equivalents

  $78,537,236  $135,759,426 

Restricted cash

   4,405,436   —   
  

 

 

  

 

 

 

TOTAL CASH, AND CASH EQUIVALENTS AND RESTRICTED CASH

  $82,942,672  $135,759,426 
  

 

 

  

 

 

 

   Three Months Ended March 31, 
   2021  2020 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

   

Interest paid

  $3,183,099  $2,910,111 
  

 

 

  

 

 

 

NONCASH INVESTING AND FINANCING ACTIVITIES

   

Accrued capital expenditures

  $(3,405,937)  $6,966,907 
  

 

 

  

 

 

 

Noncash increase in right of use asset

  $(5,769,937)  $(33,742,287) 
  

 

 

  

 

 

 

Noncash increase in lease liability

  $5,769,937  $33,742,287 
  

 

 

  

 

 

 

Issuance of shares under acquisition agreement

  $13,672,681  $8,967,257 
  

 

 

  

 

 

 

Deferred share issuances

  $1,835,329  $400,143 
  

 

 

  

 

 

 

Issuance of shares under business combinations

  $—    $6,062 
  

 

 

  

 

 

 

Acquisitions

   

Goodwill

  $—    $(2,865,992) 

Deposits and other assets

   —     1,015,020 

Liabilities assumed

   —     (302,604) 

Equity interests issued

   —     503,389 

Acquisition liability

   —     (228,813) 

Deferred income taxes

   —     1,879,000 
  

 

 

  

 

 

 
  $—    $—   
  

 

 

  

 

 

 

RECONCILIATION OF CASH, AND CASH EQUIVALENTS AND RESTRICTED CASH

   

Cash and cash equivalents

  $275,898,839  $64,613,618 

Restricted cash

   —     6,908,336 
  

 

 

  

 

 

 

TOTAL CASH, AND CASH EQUIVALENTS AND RESTRICTED CASH

  $275,898,839  $71,521,954 
  

 

 

  

 

 

 

 

 

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

 

- 8 --8-

Green Thumb Industries Inc.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)

1.

1.

Overview and Basis of Presentation

 

(a)

(a) Description of Business

Green Thumb Industries Inc. (“Green Thumb”Thumb” or the “Company”“Company”) is promoting well-being through the power of cannabis through branded consumer packaged goods and people-first retail experiences, while being committed to community and sustainable profitable growth. Green Thumb owns, manufactures, and distributes a portfolio of cannabis consumer packaged goods brands including Beboe, Dogwalkers, Dr. Solomon’s, incredibles, Rythm and The Feel Collection, primarily to third-party retail stores across the United States as well as to Green Thumb owned retail stores. The Company also owns and operates retail cannabis stores that include a rapidly growing national chain of retail cannabis stores called Rise™named Rise™ and ain the Las Vegas, Nevada areaand Pasadena, California areas, a chain of retail cannabis stores called Essence.named Essence as well as retail stores operating under other names, all of which sell our products and third-party products. As of June 30, 2020,March 31, 2021, Green Thumb has operating revenue in twelve markets (California, Colorado, Connecticut, Florida, Illinois, Maryland, Massachusetts, Nevada, New Jersey, New York, Ohio, and Pennsylvania).

On June 12, 2018,In addition to the states listed above, the Company completed a reverse takeover transaction (“RTO”) as further describedalso conducts pre-licensing activities in Note 3 of Green Thumb’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on April 15, 2020 (“2019 Form 10-K”). Following the RTO,other markets. In these markets, the Company was listedhas either applied for licenses, or plans on the Canadian Securities Exchange (the “CSE”) under ticker symbol “GTII” and on the OTCQX, part of the OTC Markets Group, under the ticker “GTBIF”.applying for licenses, but does not currently own any cultivation, production or retail licenses.

The Company’s registered office is located at 885 West Georgia250 Howe Street, Suite 2200,20th Floor, Vancouver, British Columbia, V6C 3E8, Canada.3R8. The Company’s U.S. headquarters are at 325 W. Huron St., Suite 412,700, Chicago, IL 60654.

(b)

(b) Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements include the accounts of Green Thumb Industries Inc. 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 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 and combined financial statements and accompanying notes included in the 20192020 Form 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. 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 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.

The results of operations for the three and six months ended June 30, 2020March 31, 2021 are not necessarily indicative of the results to be expected for the entire year ending December 31, 2020.

(c) Significant Accounting Policies

There have been no changes to the Company’s significant accounting policies as described in Note 2 of the Company’s 2019 Form 10-K.2021.

 

- 9 -

Green Thumb Industries Inc.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)

 

1.

1. Overview and Basis of Presentation (Continued)

 

 

(c)

Significant Accounting Policies

(d) LossThere have been no changes to the Company’s significant accounting policies as described in Note 2 of the Company’s 2020 annual report on Form 10-K.

(d)

Earnings (Loss) per Share

Basic lossearnings (loss) per share is calculated using the treasury stock method, by dividing the net lossearnings (loss) attributable to shareholders by the weighted average number of common shares (Subordinate Voting Shares, Multiple Voting Shares on an as converted basis, and Super Voting Shares on an as converted basis) 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 loss per share calculations.calculation. Diluted lossearnings 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. At June 30,As of March 31, 2021, the Company had 5,299,440 options, 592,535 restricted stock units and 2,294,523 warrants outstanding. As of March 31, 2020, the Company had 5,857,0455,974,938 options, outstanding, 906,1731,477,898 restricted stock units and 2,526,735 warrants outstanding. At June 30, 2019, the Company had 4,179,927 options outstanding, 1,711,101 restricted stock units outstanding and 2,041,7352,387,470 warrants outstanding.

In order to determine diluted lossearnings per share, it is assumed that any proceeds from the exercise of dilutive unvested restricted stock units, stock options, and warrants would be used to repurchase common shares at the average market price during the period. TheUnder the treasury stock method, the diluted lossearnings 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 March 31, 2021, the computation of diluted earnings per share included 3,702,372 options, 431,220 restricted stock units and 1,272,136 warrants. No potentially dilutive common share equivalents were included in the computation of diluted loss per share for the three and six months ended June 30,March 31, 2020 and 2019 because their impact was anti-dilutive.

(e)

(e) Recently Adopted Accounting Standards

 

 (i)

In June 2016,December 2019, the FinancialFASB issued ASU 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting Standards Boardfor Income Taxes, which is intended to simplify various aspects related to accounting for income taxes (“FASB”) issued an Accounting Standards Update (“ASU”) No. 2016-13,Financial Instruments—Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”2019-12”), which replaces. ASU 2019-12 removes certain exceptions to the incurred loss model with a current expected credit loss (“CECL”) modelgeneral principles in Topic 740 and requires consideration of a broader range of reasonablealso clarifies and supportable informationamends existing guidance to explain credit loss estimates. This standard applies to financial assets, measured at amortized cost, including loans, held-to-maturity debt securities, net investments in leases and trade accounts receivable. The guidance must be adopted using a modified retrospective transition method through a cumulative-effect adjustment to retained earnings in the period of adoption.improve consistent application. The Company adopted the new standard in the first quarter of 2020.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.

 

 (ii)

In January 2017,2020, the FASB issued Accounting Standards Update No. 2017-04 “Intangibles— GoodwillASU 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and OtherJoint Ventures (Topic 350): Simplifying the Test for Goodwill Impairment” (“323), and Derivatives and Hedging (Topic 815) (“ASU 2017-04”2020-01”), which simplifies is intended to clarify the interaction of the accounting for goodwill impairment. ASU 2017-04 requires entities to record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (Step 1equity securities under Topic 321 and investments accounted for under the current impairment test). The standard eliminates Step 2 fromequity method of accounting in Topic 323 and the current goodwill impairment test, which included determining the implied fair value of goodwillaccounting for certain forward contracts and comparing it with the carrying amount of that goodwill. ASU 2017-04 must be applied prospectively and is effective in the first quarter of 2020. Early adoption is permitted.purchased options accounted for under Topic 815. The Company adopted the new standard in the first quarter of 2020.ASU 2020-01 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.

 

- 10 -

Green Thumb Industries Inc.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)

 

1.

1. Overview and Basis of Presentation (Continued)

 

(e) Recently Adopted Accounting Standards (Continued)

 

 (iii)(f)

In August 2018, the FASB issued ASU 2018-13,Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (Topic 820). ASU 2018-13 adds, modifies, and removes certain fair value measurement disclosure requirements. ASU 2018-13 is effective for annual and interim periods beginning after December 15, 2019. The Company adopted the new standard in the first quarter of 2020. 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

(i)

In December 2019, the FASB issued 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 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for the Company beginning January 1, 2021. The Company is currently evaluating the effect of adopting this ASU on the Company’s financial statements.

 

 (ii)

In January 2020, the FASB issued ASU 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) (“ASU 2020-01”), which is intended to clarify the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815. ASU 2020-01 is effective for the Company beginning January 1, 2021. The Company is currently evaluating the effect of adopting this ASU on the Company’s financial statements.

(iii)(i)

On August 5, 2020, the FASB issued Accounting Standards UpdateASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, to improve financial reporting associated with accounting for convertible instruments and contracts in an entity’s own equity. The amendments in this Update are effective for public business entities that meet the definition of a Securities and Exchange Commission (SEC) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities,We do not expect the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Board specified that an entity should adopt theof this guidance as of the beginning of its annual fiscal year. The Company is currently evaluating the effect of adopting this ASUwill have a material impact on the Company’s unaudited interim condensed consolidated financial statements.

(g)

(g) Coronavirus Pandemic

In March 2020, the World Health Organization categorized coronavirus disease 2019 (“COVID-19”)COVID-19” together with its variants) 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 is implementingcontinues to implement and evaluatingevaluate 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,goodwill; long-lived assetassets and intangible assets; operating lease right of use assets and operating lease liabilities; assessment of the annual effective tax rate; 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 sixthree months of 2020,2021, 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 we dothe Company does business that currently or in the future impose restrictions on its business operations. The estimates and assumptions used in the unaudited interim condensed consolidated financial statements, which include but are not limited to certain judgmental reserves requiring management to makes estimates based on current information, the carrying value of the Company’s goodwill and other long-lived assets, for the three and six months ended June 30, 2020 may change in future periods as the expected impacts from COVID-19 are revised, resulting in further potential impacts to the Company’s financial statements.

 

- 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

2. INVENTORIES

 

The Company’s inventories include the following at June 30, 2020March 31, 2021 and December 31, 2019:2020:

 

  June 30,   December 31, 
  2020   2019   March 31,
2021		   December 31,
2020		 

Raw Material

  $2,888,356   $6,375,032   $6,867,319   $6,372,659 

Packaging and Miscellaneous

   5,654,661    4,887,970    6,916,026    8,592,153 

Work in Process

   24,036,171    20,162,723    28,887,069    25,488,806 

Finished Goods

   22,762,425    16,640,629    31,367,676    30,821,392 

Reserve for Obsolete Inventory

   (1,356,917)    (2,031,873)    (1,757,718)    (1,732,057) 
  

 

   

 

   

 

   

 

 

Total Inventories

  $53,984,696   $ 46,034,481   $72,280,372   $69,542,953 
  

 

   

 

   

 

   

 

 

3.

3.

PROPERTY AND EQUIPMENT

 

At June 30,March 31, 2021 and December 31, 2020, property and equipment consisted of the following:

 

   Land  Buildings and
Improvements		  Equipment,
Computers
and Furniture		   Leasehold
Improvements		   Capitalized
Interest		   Assets Under
Construction		  Total 

Cost

           

As at January 1, 2020

  $3,272,439  $33,377,471  $35,509,871   $68,681,497   $2,500,000   $21,372,116  $164,713,394 

Additions

   182,219   20,033,308   2,923,306    8,579,566    263,437    625,299   32,607,135 

Disposals

   (979,930)   (4,508,578)   —      —      —      (6,934,600)   (12,423,108) 
  

 

 

  

 

 

  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

As at June 30, 2020

  $2,474,728  $48,902,201  $38,433,177   $77,261,063   $2,763,437   $15,062,815  $184,897,421 
  

 

 

  

 

 

  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

Accumulated Depreciation

           

As at January 1, 2020

  $—    $2,236,254  $3,882,178   $2,998,287   $—     $—    $9,116,719 

As at June 30, 2020

  $—    $2,859,973  $6,870,663   $8,090,163   $109,228   $—    $17,930,027 

Net book value

           

As at January 1, 2020

  $3,272,439  $31,141,217  $31,627,693   $65,683,210   $2,500,000   $21,372,116  $155,596,675 

As at June 30, 2020

  $2,474,728  $46,042,229  $31,562,514   $69,170,899   $2,654,209   $15,062,815  $166,967,394 

At December 31, 2019, property and equipment consisted of the following:

   Land  Buildings and
Improvements		  Equipment,
Computers
and Furniture		  Leasehold
Improvements		   Capitalized
Interest		   Assets Under
Construction		   Total 

Cost

           

As at January 1, 2019

  $2,243,085  $20,861,988  $11,001,498  $18,435,893   $—     $16,664,958   $69,207,422 

Additions

   4,393,030   28,217,500   23,109,209   38,002,678    2,500,000    4,678,084    100,900,501 

Additions from acquisitions

   —     —     4,253,362   12,242,926    —      29,074    16,525,362 

Disposals

   (3,363,676)   (15,702,017)  $(2,854,198)   —      —      —      (21,919,891) 
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

   

 

 

   

 

 

 

As at December 31, 2019

  $3,272,439  $33,377,471  $35,509,871  $68,681,497   $2,500,000   $21,372,116   $164,713,394 
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated Depreciation

           

As at January 1, 2019

  $—    $1,351,230  $1,524,114  $1,007,998   $—     $—     $3,883,342 

As at December 31, 2019

  $—    $2,236,254  $3,882,178  $2,998,287   $—     $—     $9,116,719 

Net book value

           

As at January 1, 2019

  $2,243,085  $19,510,758  $9,477,384  $17,427,895   $—     $16,664,958   $65,324,080 

As at December 31, 2019

  $3,272,439  $31,141,217  $31,627,693  $65,683,210   $2,500,000   $21,372,116   $155,596,675 
   March 31,
2021		   December 31,
2020		 

Buildings and Improvements

  $51,351,319   $51,557,405 

Equipment, Computers and Furniture

   52,368,921    49,097,109 

Leasehold Improvements

   94,713,052    88,607,252 

Capitalized Interest

   3,151,236    2,988,681 
  

 

 

   

 

 

 

Total Property and Equipment

   201,584,528    192,250,447 

Less: Accumulated Depreciation

   (28,075,122)    (24,192,900) 
  

 

 

   

 

 

 

Property and Equipment, net

   173,509,406    168,057,547 
  

 

 

   

 

 

 

Land

   3,389,376    2,879,376 

Assets Under Construction

   24,170,228    18,988,954 
  

 

 

   

 

 

 

Property and Equipment, net

  $201,069,010   $189,925,877 
  

 

 

   

 

 

 

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 six months ended June 30,March 31, 2021 and 2020 totaled $5,402,980$4,766,350 and $9,189,985,$3,787,005, respectively of which $2,582,435$2,869,229 and $5,260,162, respectively, is included in cost of goods sold. Depreciation expense for the three and six months ended June 30, 2019 totaled $1,567,268 and $2,618,594, respectively of which $1,159,993 and $1,809,090,$2,677,727, 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)

 

3. PROPERTY AND EQUIPMENT (Continued)
4.

INTANGIBLE ASSETS AND GOODWILL

 

 

On January 31, 2020, the Company closed on a sale and lease back transaction to sell its Toledo, Ohio processing facility to Innovative Industrial Properties (IIP). Under the long-term agreement, the Company will lease back the facility and continue to operate and manage it. As a result of the sale, the Company disposed of $205,000 of land and $2,695,000 of construction in progress. There was no gain or loss on the sale.

On March 6, 2020, the Company closed on a sale and lease back transaction to sell its Oglesby, Illinois cultivation and processing facility to IIP. Under the long-term agreement, the Company will lease back the facility and continue to operate and manage it. As a result of the sale, the Company disposed of $774,930 of land, $4,508,578 of buildings and improvements and $3,813,636 of construction in progress. The Company recognized a gain on the sale of Oglesby facility of $239,096 which was recorded within other income (expense) on the unaudited interim condensed consolidated statement of operations.

For further information regarding these transactions, see Note 5—Leases.

4. INTANGIBLE ASSETS AND GOODWILL

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 June 30,March 31, 2021 and December 31, 2020, intangible assets consisted of the following:

 

   Licenses and
Permits		  Tradenames   Customer
Relationships		   Non-Competition
Agreements		   Total 

Cost

         

As at January 1, 2020

  $336,954,213  $97,455,590   $25,258,000   $2,585,480   $462,253,283 

Adjustments to Purchase Price Allocation

   (145,000)   1,840,009    —      —      1,695,009 
  

 

 

  

 

 

   

 

 

   

 

 

   

 

 

 

As at June 30, 2020

  $336,809,213  $99,295,599   $25,258,000   $2,585,480   $463,948,292 

Accumulated Amortization

         

As at January 1, 2020

  $18,477,500  $4,121,800   $3,932,416   $474,669   $27,006,385 

Amortization

   12,005,936   3,603,759    1,882,238    263,167    17,755,100 
  

 

 

  

 

 

   

 

 

   

 

 

   

 

 

 

As at June 30, 2020

  $30,483,436  $7,725,559   $5,814,654   $737,836   $44,761,485 

Net book value

         

As at January 1, 2020

  $318,476,713  $93,333,790   $21,325,584   $2,110,811   $435,246,898 

As at June 30, 2020

  $306,325,777  $91,570,040   $19,443,346   $1,847,644   $419,186,807 
   March 31, 2021   December 31, 2020 
   Gross Carrying
Amount		   Accumulated
Amortization		   Net Book
Value		   Gross Carrying
Amount		   Accumulated
Amortization		   Net Book
Value		 

Licenses and Permits

  $343,135,736   $48,295,200   $294,840,536   $343,135,736   $41,993,595   $301,142,141 

Tradenames

   99,295,599    16,376,274    82,919,325    99,295,599    13,455,178    85,840,421 

Customer Relationships

   25,258,000    8,455,792    16,802,208    25,258,000    7,583,005    17,674,995 

Non-Competition Agreements

   2,585,480    1,132,586    1,452,894    2,585,480    1,001,003    1,584,477 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Intangible Assets

  $470,274,815   $74,259,852   $396,014,963   $470,274,815   $64,032,781   $406,242,034 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The Company recorded amortization expense for the three months ended March 31, 2021 and 2020 of $10,227,071 and $8,918,167, respectively.

The following table outlines the estimated annual amortization expense related to intangible assets as of March 31, 2021:

Year Ending December 31,

  Estimated
Amortization
(Prior to Change in
Useful Life)		 

Remainder of 2021

  $29,035,583 

2022

   38,683,555 

2023

   38,680,777 

2024

   38,099,444 

2025

   38,001,777 

Thereafter

   213,513,827 
  

 

 

 
  $396,014,963 
  

 

 

 

Goodwill

At March 31, 2021 and December 31, 2020 the balances of goodwill, by segment, consisted of the following:

   March 31,
2021		   December 31,
2020		 

Retail

  $130,680,935   $130,680,935 

Consumer Package Goods

   252,016,532    252,016,532 
  

 

 

   

 

 

 

Total Goodwill

  $382,697,467   $382,697,467 
  

 

 

   

 

 

 

 

- 13 -

Green Thumb Industries Inc.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)

 

4. INTANGIBLE ASSETS AND GOODWILL (Continued)
5.

INVESTMENTS

 

 

AtAs of March 31, 2021 and December 31, 2019 intangible assets consisted2020, the Company held various equity interests in privately held cannabis companies as well as investments in convertible notes which had a combined fair value of $29,066,003 and $40,794,806 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 following: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 change in the Company’s investments during the three months ending March 31, 2021 and year ending December 31, 2020:

 

   Licenses and
Permits		   Tradenames   Customer
Relationships		   Non-Competition
Agreements		   Total 

Cost

          

As at January 1, 2019

  $89,705,213   $360,000   $820,000   $20,480   $90,905,693 

Additions from acquisitions

   247,249,000    97,095,590    24,438,000    2,565,000    371,347,590 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As at December 31, 2019

  $336,954,213   $97,455,590   $25,258,000   $2,585,480   $462,253,283 

Accumulated Amortization

          

As at January 1, 2019

  $2,322,715   $—     $204,500   $12,800   $2,540,015 

Amortization

   16,154,785    4,121,800    3,727,916    461,869    24,466,370 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As at December 31, 2019

  $18,477,500   $4,121,800   $3,932,416   $474,669   $27,006,385 

Net book value

          

As at January 1, 2019

  $87,382,498   $360,000   $615,500   $7,680   $88,365,678 

As at December 31, 2019

  $318,476,713   $93,333,790   $21,325,584   $2,110,811   $435,246,898 
   March 31,
2021		   December 31,
2020		 

Beginning Balance

  $40,794,806   $14,068,821 

Additions

   6,002,302    525,000 

Disposals

   (18,122,664)    (169,818) 

Fair value adjustments

   391,559    26,370,803 
  

 

 

   

 

 

 

Ending Balance

  $29,066,003   $40,794,806 
  

 

 

   

 

 

 

On January 15, 2021, the Company sold approximately half of its equity interest in a privately held entity for $18,112,500 in cash. As of March 31, 2021 and December 31, 2020, the fair value of this equity interest was $19,136,689 and $37,249,189, respectively.

6.

LEASES

(a) Operating Leases

The Company has operating leases for certain Rise, Essence and other retail dispensaries as well as many of the Company’s processing and cultivation facilities located throughout the US. Additionally, the Company has an operating lease for corporate office space 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 amortization expenseon the balance sheet. Equipment and other non-real estate leases with an initial term of twelve months or less are not recorded on the balance sheet. Lease agreements for some locations provide for rent escalations and renewal options. Certain real estate leases require payment for taxes, insurance and maintenance which are considered non-lease components. The Company accounts for real estate leases and the related fixed non-lease components together as a single component.

The Company determines if an arrangement is a lease at inception. The Company must consider whether the contract conveys the right to control the use of an identified asset. Certain arrangements require significant judgment to determine if an asset is specified in the contract and if the Company directs how and for what purpose the asset is used during the term of the contract. For the three and six months ended June 30, 2020 of $8,836,933March 31, 2021 and $17,755,100, respectively, and for the three and six months ended June 30, 2019 of $4,747,944, and $6,996,484, respectively. During the second quarter of 2020 the Company recorded a measurement period adjustment in connection with its June 27, 2019 acquisitionoperating lease expense of MC Brands, LLC of $1,840,009 which increased intangible assets$7,751,299 and share capital. The remainder of the adjustments to purchase price allocations relate to the finalization of several 2019 acquisitions.$4,257,515, respectively.

In addition, the Company reviewed the estimated useful lives of its Retail segment intangible assets as a result of the Company’s plans to rebrand one of its retail stores. Based on that review, the Company determined that certain intangible assets, associated with the Company’s retail tradenames have a useful life shorter than initially estimated. Beginning July 1, 2020, the Company expects to shorten the useful life of certain tradenames associated with its acquisition of the Essence retail brand from 15 years to 7 years. The change in useful life will be made as a prospective adjustment and result in an increase in amortization expense by $2,482,289 for the remainder of 2020, $4,964,578 annually for years 2021 through 2024, and a net reduction in amortization expense by $22,340,601 thereafter.

The following table outlines the estimated annual amortization expense related to intangible assets as of June 30, 2020 and illustrates the effect of the change in useful life of the Essence tradename discussed above:

Year Ending December 31,

  Estimated
Amortization		   Increase
(Decrease)
from
Change in
Useful Life		   Estimated
Amortization
(Adjusted)		 

Remainder of 2020

  $16,648,055   $2,482,289   $19,130,344 

2021

   33,230,554    4,964,578    38,195,132 

2022

   32,799,813    4,964,578    37,764,391 

2023

   32,716,998    4,964,578    37,681,576 

2024

   32,135,665    4,964,578    37,100,243 

Thereafter

   271,655,722    (22,340,601)    249,315,121 
  

 

 

   

 

 

   

 

 

 
  $419,186,807   $—     $419,186,807 
  

 

 

   

 

 

   

 

 

 

 

- 14 -

Green Thumb Industries Inc.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)

 

6.

LEASES (Continued)

4. INTANGIBLE ASSETS AND GOODWILL (Continued)

 

 

Goodwill

At June 30, 2020, Goodwill consisted of the following:

   Retail   Consumer
Packaged Goods		   Total 

As at January 1, 2020

  $119,873,759   $255,211,232   $375,084,991 

Adjustments to Purchase Price Allocations

   1,191,425    (3,194,700)    (2,003,275) 
  

 

 

   

 

 

   

 

 

 

As at June 30, 2020

  $121,065,184   $252,016,532   $373,081,716 
  

 

 

   

 

 

   

 

 

 

At December 31, 2019, Goodwill consisted of the following:

   Retail   Consumer
Packaged Goods		   Total 

As at January 1, 2019

  $15,286,360   $23,918,000   $39,204,360 

Acquisition of Advanced Grow Labs, LLC

   16,756,250    44,572,349    61,328,599 

Acquisition of Integral Associates, LLC

   46,655,753    69,323,570    115,979,323 

Other Acquisitions

   32,936,590    120,963,598    153,900,188 

Adjustments to Purchase Price Allocations

   8,238,808    (3,566,285)    4,672,523 
  

 

 

   

 

 

   

 

 

 

As at December 31, 2019

  $119,873,759   $255,211,232   $375,084,991 
  

 

 

   

 

 

   

 

 

 

As of June 30, 2020, the Company recorded measurement period adjustments resulting in a net decrease in goodwill of $2,003,275 associated various acquisitions. In regard to the Consumer Packaged Goods segment, the Company recorded measurement period adjustments associated with its acquisition of For Success Holdings Company and Advanced Grow Labs, LLC of $1,687,700 and $1,507,000, respectively, which represented a reduction in the value of goodwill and deferred tax liabilities. In regard to the Retail segment, the Company recorded measurement period adjustments associated with its acquisition of Fiorello Pharmaceuticals, Inc. of $1,000,000 which represented an increase in the value of goodwill and corresponding adjustment to current liabilities. The remainder of the adjustments to the Retail segment represent the finalization of purchase price allocations related to other 2019 acquisitions.

5. LEASES

(a) Operating Leases Under Accounting Standards Update No. 2016-02

In February 2016, the FASB issued Accounting Standards Update No. 2016-02 “Leases (Topic 842)” (“ASU 2016-02”), which requires lessees to put most leases on the balance sheet but recognize expense on the income statement in a manner similar to current accounting. On January 1, 2019, the Company adopted the standard and all related amendments, using the optional transition method (modified retrospective approach) applied to leases at the adoption date. Under the modified retrospective approach, comparative periods have not been restated and continue to be reported under the accounting standards in effect for those periods. Additionally, an adjustment was recorded to accumulated deficit to account for the initial adoption of the standard.

For additional information regarding the adoption of Account Standards Updated No. 2016-02, “Leases (Topic 842)” see Note 9 – Leases in the 2019 Form 10-K.

Other information related to operating leases as of and for the three and six months ending June 30,March 31, 2021 and year ending December 31, 2020 were as follows:

 

As of
June 30, 2020

Weighted average remaining lease term

10.91

Weighted average discount rate

13.1% 

- 15 -

Green Thumb Industries Inc.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)

5. LEASES (Continued)

   As of
March 31,
2021		   As of
December 31,
2020		 

Weighted average remaining lease term (years)

   13.31     12.10  

Weighted average discount rate

   14.0%    13.7% 

Maturities of lease liabilities for operating leases as of June 30, 2020March 31, 2021 were as follows:

 

  Maturities of Lease Liability 
  Maturities of Lease Liability   Third Party   Related Party   Total 

Year Ending December 31,

  Third Party   Related Party   Total       

Remainder of 2020

  $9,508,748   $644,060   $10,152,808 

2021

   22,589,952    1,307,183    23,897,135 

Remainder of 2021

  $19,315,251   $984,896   $20,300,147 

2022

   22,569,154    1,337,130    23,906,284    26,749,723    1,337,130    28,086,853 

2023

   22,349,279    1,367,771    23,717,050    26,615,165    1,367,771    27,982,936 

2024

   21,503,153    1,255,713    22,758,866    26,122,891    1,255,714    27,378,605 

2025 and Thereafter

   180,958,478    10,345,330    191,303,808 

2025

   24,099,497    1,182,489    25,281,986 

2026 and Thereafter

   248,109,371    9,162,841    257,272,212 
  

 

   

 

   

 

   

 

   

 

   

 

 

Total Lease Payments

   279,478,764    16,257,187    295,735,951    371,011,898    15,290,841    386,302,739 
  

 

   

 

   

 

   

 

   

 

   

 

 

Less: Interest

   (180,229,514)    (8,090,747)    (188,320,261)    (223,197,788)    (7,337,855)    (230,535,643) 
  

 

   

 

   

 

   

 

   

 

   

 

 

Present Value of Lease Liability

  $99,249,250   $8,166,440   $107,415,690   $147,814,110   $7,952,986   $155,767,096 
  

 

   

 

   

 

   

 

   

 

   

 

 

For the three and six months ended June 30, 2020 the Company recorded operating lease expense of $8,173,122 and $12,430,637, respectively. For the three and six months ended June 30, 2019, the Company recorded operating lease expenses of $1,357,957 and $2,263,013, respectively.

(b)

(b) Related Party Operating Leases

The Company entered into related party transactions with respect to its leasing arrangements for certain facilities in Florida, Illinois, 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, whichand owns thecertain facilities leased by the Company. Additionally, Mosaic Real Estate, LLC is 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 six months ended June 30,March 31, 2021 and 2020, the Company recorded lease expense of $360,467$295,203 and $773,267, respectively, associated with these leasing arrangements. For the three and six month ended June 30, 2019, the Company recorded operating lease expenses of $308,108 and $467,990,$222,339, respectively, associated with these leasing arrangements.

On June 5, 2020, a wholly owned subsidiary of the Company purchased the building and building improvements of the Company’s dispensary located in Joliet, Illinois for $1,814,000 from Mosaic Real Estate Joliet, LLC. The transaction resulted in the termination of the Illinois related party leasing arrangement. For additional information see Note 6 – Notes Payable.

In connection with the Company’s acquisition of Integral Associates, LLC, the Company, through a subsidiary, leases property from Durango Teco Partners, LLC, which commenced on June 27, 2020 for an Essence retail store in Nevada. Durango Teco Partners, LLC is owned in part by Armenco Capital LLC, which is in turn owned in part by Alejandro Yemenidjian, a former owner of Integral Associates, LLC and a current director of the Company. The lease has a ten year term. For the three and six months ended June 30, 2020, the Company recorded lease expense of $19,444 each, associated with this lease.

 

- 1615 -

Green Thumb Industries Inc.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)

 

5. LEASES (Continued)
7.

NOTES PAYABLE

 

 

(c) Sales Lease Back Transactions

On JanuaryAt March 31, 2020, the Company closed on a sale and lease back transaction to sell its Toledo, Ohio processing facility to IIP. Under a long-term agreement, the Company has leased back the facility and continues to operate and manage it. The purchase price for the property was $2,900,000, excluding transaction costs. The Company is making certain improvements to the property that will significantly enhance production capacity, for which IIP has agreed to provide reimbursement of up to $4,300,000. Assuming full reimbursement for such improvements, IIP’s total investment in the property will be $7,200,000. The lease has a term of 15 years and was recorded as an operating lease and resulted in a right of use asset and lease liability of $3,583,263 and was recorded net of the improvements allowance of $4,300,000.

On March 6, 2020, the Company closed on a sale and lease back transaction to sell its Oglesby, Illinois cultivation and processing facility to IIP. Under a long-term agreement, the Company has leased back the facility and continues to operate and manage it. The purchase price for the property was $9,000,000, excluding transaction costs. The Company is making certain improvements to the property that will significantly enhance production capacity, for which IIP has agreed to provide reimbursement of up to $41,000,000. Assuming full reimbursement for such improvements, IIP’s total investment in the property will be $50,000,000. The lease has a term of 16 years and was recorded as an operating lease and resulted in a right of use asset and related lease liability of $26,828,221 and was recorded net of the improvements allowance of $41,000,000.

6. NOTES PAYABLE

At June 30, 20202021 and December 31, 2019,2020, notes payable consisted of the following:

 

  June 30,   December 31, 
  2020   2019   March 31,
2021		   December 31,
2020		 

In connection with an acquisition completed in 2017, the Company is required to make quarterly charitable contributions of $50,000 through October 2024. The net present value of these required payments has been recorded as a liability with an interest rate of 2.17%.

  $809,887   $970,957   $671,328   $717,430 

Private placement debt dated May 22, 2019, in the original amount of $105,466,429 with an interest rate of 12.00%, matures on May 22, 2023. The debt was issued at a discount, the carrying value of which is $12,703,887 as of June 30, 2020.

   92,762,542    90,375,912

Rise Joliet mortgage dated June 5, 2020, in the original amount of $1,814,000 with an interest rate of 5.00%, matures on June 5, 2035. The debt was issued at a discount, the carrying value of which is $181,272 as of June 30, 2020.

   1,632,728    —   

Private placement debt dated May 22, 2019, in the original amount of $105,466,429 with an interest rate of 12.00%, matures on May 22, 2023. The debt was issued at a discount, the carrying value of which is $9,411,725 and $10,511,335 as of March 31, 2021 and December 31, 2020, respectively.

   96,054,704    94,955,094 

Rise Joliet mortgage dated June 5, 2020, in the original amount of $1,814,000 with an interest rate of 5.00%, matures on June 5, 2035. The debt was issued at a discount, the carrying value of which is $171,201 and $174,222, and is presented net of principal payments of $61,964 and $40,806 as of March 31, 2021 and December 31, 2020, respectively.

   1,580,835    1,598,972 

Rise Lakewood mortgage dated August 20, 2020, in the original amount of $833,000 with an interest rate of 7.25%, matures on August 20, 2025, and is presented net of principal payments of $17,682 and $9,524 as of March 31, 2021 and December 31, 2020, respectively.

   815,318    823,483 

Rise Mundelein mortgage dated December 6, 2020, in the original amount of $960,000 with an interest rate of 6.95%, matures on December 06, 2025, and is presented net of principal payments of $10,248 and $0 as of March 31, 2021 and December 31, 2020, respectively.

   949,752    960,000 
  

 

   

 

   

 

   

 

 

Total notes payable

   95,205,157    91,346,869    100,071,937    99,054,979 

Less: current portion of notes payable

   (266,825)    (206,675)    (344,380)    (341,983) 
  

 

   

 

   

 

   

 

 

Notes payable, net of current portion

  $94,938,332   $91,140,194   $99,727,557   $98,712,996 
  

 

   

 

   

 

   

 

 

 

(a)

- 17 -

Green Thumb Industries Inc.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)

6. NOTES PAYABLE (Continued)

(a) Extension of Private Placement Financing

On May 21, 2020, the Company exercised its option to extend the maturity date of its senior secured notes (the “Notes”) pursuant to the Note Purchase Agreement, dated May 22, 2019, as amended (the “Note Purchase Agreement”) for an additional year. Following this exercise, which was in the Company’s sole discretion under the Note Purchase Agreement, the new maturity date for the Notes is May 22, 2023.

(b) Mortgage on Joliet, Illinois Dispensary

On June 5, 2020, the Company closed on a secured promissory note (the “Mortgage”) of $1,814,000. The Mortgage bears interest of 5% per annum and matures on June 5, 2035. The Mortgage provided by the lender was used to purchase the building and building improvements of one of the Company’s dispensaries located in Joliet, Illinois that the Company previously leased from Mosaic Real Estate Joliet, LLC, a related party. As part of the transaction, the Company issued 35,000 warrants valued at $181,272 using a Black Scholes Option Pricing model which was recorded as a discount on the Mortgage.

(c) Related Parties

The private placement debt is 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 director of the CorporationCompany (through KP Capital, LLC); Andrew Grossman, the Executive Vice President of Capital Markets of the Company (through AG Funding Group, LLC); and Anthony Georgiadis, the Chief Financial Officer and a director of the Corporation (through Three One Four Holdings, LLCLLC); and Anthony Georgiadis and William Gruver, a director of the Corporation (through ABG, LLC).

7. WARRANTS

As part of the Company’s private placement financing and Mortgage on the Joliet, Illinois dispensary, the Company issued warrants to related parties, as well as un-related 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 warrants issued as of June 30, 2020 and December 31, 2019:

   Number of
Shares		       Weighted
Average
Exercise Price
(C$)		   Weighted
Average
Contractual
Life		   Number
of Shares		   Weighted
Average
Exercise
Price
(USD)		   Weighted
Average
Contractual
Life		 
   Liability Classified   Equity Classified 

Balance as at December 31, 2019

   2,406,811   C$     18.59    4.86    —     $—      —   

Additional Modification Warrants

   84,924      14.03    5.00    —      —      —   

Dispensary Mortgage Warrants

   —        —      —      35,000    9.10    5.00 
  

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as at June 30, 2020

   2,491,735   C$     18.44    4.87    35,000   $9.10    5.00 
  

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

- 1816 -

Green Thumb Industries Inc.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)

 

8.

7. WARRANTS(Continued)

 

 

(a) Additional Modification Warrants

As part of the November 9, 2019 modification of the Notes, the Company agreed to issue 84,924 additional warrants by May 22, 2020 to participating lenders in the event the Company decided to raise additional capital or to the original lenders involved in the May 22, 2019Company’s private placement financing inand Mortgage on the event the Company did not. On May 21, 2020, the Company issued the warrants to the original lenders involved in the private placement financing which allows the holder to purchase 84,924 Subordinate Voting Shares. The warrants are denominated in CAD. Upon issuance, the Company recorded an additional amount to debt discount with a corresponding amount to the warrant liability of $572,387, which was measured at fair value.

(b) Dispensary Mortgage Warrants

On June 5, 2020, as part of the $1,814,000 promissory note,Joliet, Illinois dispensary, the Company issued warrants that allowsto related parties, as well as un-related third parties, which allow the promissory noteholderholders to purchase 35,000 Subordinate Voting Shares. TheseShares at an exercise price determined at the time of issuance.

The following table summarizes the number warrants are denominated in USD, which is the Company’s functional currency. As such, upon issuance, the Company recorded an additional amount to debt discount with a corresponding amount to contributed surplusoutstanding as of $181,272 which was measured at fair value using a Black Scholes Options Pricing model. The Company did not incur any other material fees related to the promissory note.March 31, 2021 and December 31, 2020:

   Number of Shares  Weighted
Average
Exercise
Price (C$)		   Weighted
Average
Remaining
Contractual
Life		   Number
of
Shares		   Weighted
Average
Exercise
Price
(USD)		   Weighted
Average
Contractual
Life		 
   Liability Classified   Equity Classified 

Balance as at December 31, 2020

   2,485,794  C$18.45    3.40    35,000   $9.10    4.43 

Warrants Exercised

   (226,271)   18.01    3.26    —      —      —   
  

 

 

  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as at March 31, 2021

   2,259,523  C$18.18    3.14    35,000   $9.10    4.18 
  

 

 

  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(a)

Liability Classified Warrants Outstanding

The following table summarizes the fair value of the liability classified warrants at June 30, 2020March 31, 2021 and December 31, 2019:2020:

 

      March 31, 2021   December 31, 2020 

Warrant Liability

  Strike
Price		   Warrants
Issued		   June 30,
2020		   December 31,
2019		   Strike
Price		   Warrants
Outstanding		   Fair Value   Warrants
Outstanding		   Fair Value 

Bridge Financing Warrants

  C$22.90    218,964   $866,000   $1,385,400   C$22.90    218,964   $3,385,500    218,964   $2,544,500 

Private Placement Financing Warrants

  C$19.39    1,822,771    11,148,000    12,189,169   C$19.39    1,641,301    32,858,000    1,822,771    28,756,500 

Modification Warrants

  C$12.04    365,076    2,745,500    2,305,274 

Additional Modification Warrants

  C$14.03    84,924    572,387    —   

Modification Warrants

Additional Modification Warrants

  C$

C$

12.04

14.03

 

 

   

323,910

75,348

 

 

   

7,389,782

1,671,389

 

 

   

360,256

83,803

 

 

   

6,630,000

1,523,000

 

 

  

 

   

 

   

 

   

 

     

 

   

 

   

 

   

 

 

Totals

     2,491,735   $15,331,887   $15,879,843      2,259,523   $45,304,671    2,485,794   $39,454,000 
    

 

   

 

   

 

     

 

   

 

   

 

   

 

 

During the three and six months ended June 30,March 31, 2021 and 2020, the Company recorded a loss of $6,262,500$5,850,671 and a gain of $1,120,343,$7,382,843, 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. Seedate (see Note 13 - Fair Value Measurements for additional details:details):

 

Significant Assumptions

  June 30,March 31,
20202021		   December 31,
20192020		 

Volatility

   94.73%73.80% - 111.66%79.62%    117.43%72.19% - 123.64%79.1% 

Remaining Term

   2.281.53 - 4.364.14 years    2.781.78 - 4.864.39 years 

Risk Free Rate

   0.28%0.22% - 0.36%0.78%    1.68%0.20% - 1.69%0.28% 

The following table summarizes the fair value of the equity classified warrants at June 30, 2020 and December 31, 2019:

Warrants Included in Contributed Surplus

  Strike
Price		   Warrants
Issued		   June 30,
2020		   December 31,
2019		 

Dispensary Mortgage Warrants

  $9.10    35,000   $181,272   $—   

 

- 1917 -

Green Thumb Industries Inc.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)

 

8.

WARRANTS (Continued)

7. WARRANTS (Continued)

 

 

(b)

Equity Classified Warrants Outstanding

The following table summarizes the significant assumptions used in determining the fair value of the equity classified warrants asat March 31, 2021 and December 31, 2020:

   

 

   March 31, 2021   December 31, 2020 

Warrants Included in Contributed Surplus (Deficit)

  Strike
Price		   Warrants
Outstanding		   Balance   Warrants
Outstanding		   Balance 

Dispensary Mortgage Warrants

  $9.10    35,000   $181,272    35,000   $181,272 

The equity warrants were valued at the date of each reporting date:issuance using a volatility rate of 80%, a term of 5 years and a risk free rate of 0.37%.

 

9.

Significant Assumptions

June 30,
2020		December 31,
2019

Volatility

80% —  

Remaining Term

5 years—  

Risk Free Rate

0.37% —  

8. INCOME TAXES

The following table summarizes the Company’s income tax expense and effective tax rates for the three and six months ended June 30, 2020 and June 30, 2019:

   Three Months Ended June 30,  Six Months Ended June 30, 
   2020  2019  2020  2019 

Income before Income Taxes

  $3,614,778  $(20,829,436)  $13,000,218  $(29,297,491) 

Income Tax Expense

  $15,378,715  $(154,333)  $28,527,715  $1,081,667 

Effective Tax Rate

   425.4%   0.7%   219.4%   -3.7% 

The effective tax rates for the three and six months ended June 30, 2020 and June 30, 2019 were based on the Company’s forecasted annualized effective tax rates and were adjusted for discrete items that occurred within the periods presented.

Due to its cannabis operations, the Company is subject to the limitations of Internal Revenue Code (“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 effective tax rate for the three and six months ended June 30, 2020 varies widely from the three and six months ended June 30, 2019 primarily due to the Company reporting pre-tax loss in 2019 as opposed to pre-tax income in 2020. The large amount of nondeductible expenses incurred by the Company subject to IRC Section 280E, resulted in income tax expense being incurred in a pre-tax loss quarter for 2019.

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 $6,181,000 and $2,113,263 as of June 30, 2020 and December 31, 2019, respectively.

The federal statute of limitation remains open for the 2017 tax year to the present. The state income tax returns generally remain open for the 2016 tax year through the present. Net operating losses arising prior to these years are also open to examination if and when utilized. Taxes paid during the six months ended June 30, 2020 and 2019 were $541,264 and $5,445,729, respectively.

- 20 -

Green Thumb Industries Inc.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)

9. INVESTMENTS

The Company holds investments in convertible notes which matured August 1, 2020 and converted into 613,875 preferred shares. At June 30, 2020 and December 31, 2019, the fair value of these investments was $7,533,000 at the end of each period. The Company also holds direct equity investments in cannabis companies. At June 30, 2020 and December 31, 2019, the fair value of these investments was $6,518,786 and $6,535,821, respectively.

The following table summarizes the change in the Company’s investments as of June 30, 2020:

   Convertible Notes
Receivable		   Equity   Total 

Balance at January 1, 2020

  $7,533,000   $6,535,821   $14,068,821 

Fair value adjustment

   —      (17,035)    (17,035) 
  

 

 

   

 

 

   

 

 

 

Balance at June 30, 2020

  $7,533,000   $6,518,786   $14,051,786 
  

 

 

   

 

 

   

 

 

 

The following table summarizes the change in the Company’s investments as of December 31, 2019:

   Convertible Notes
Receivable		   Equity   Total 

Balance at January 1, 2019

  $30,336,000   $10,597,283   $40,933,283 

Fair value adjustment

   (1,398,000)    (4,061,462)    (5,459,462) 

Applied to consideration in business combination

   (21,405,000)    —      (21,405,000) 
  

 

 

   

 

 

   

 

 

 

Balance at December 31, 2019

  $7,533,000   $6,535,821   $14,068,821 
  

 

 

   

 

 

   

 

 

 

The calculated fair values are recorded as a Level 3 fair value investment as of June 30, 2020 and December 31, 2019. See Note 13 - Fair Value Measurements for additional details. The convertible notes receivable were valued using the Binomial Lattice Model, which is based on a generalized binomial option pricing formula, using the following assumptions:

   Six Months Ended
June 30, 2020		  Year Ended
December 31, 2019		 

Risk free rate

   1.58% - 2.46%   1.58% - 2.46% 

Equity Volatility

   58% - 106%   58% - 106% 

Market Yield

   15% - 18%   15% - 18% 

Probability of Qualified Financing

   0%   0% 

Probability of Sale

   30%   30% 

Probability of No Event

   70%   70% 

- 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 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 vesting periods are recorded as share capital. Income tax relating to transaction costs of an equity transaction is accounted for in accordance with Accounting Standards Codification (ASC)(“ASC”) 740, Income Taxes.Taxes.

(a)

(a)

Authorized

The Company has the following classes of share capital, with each class having no par value:

(i) Subordinate Voting Shares

(i)

Subordinate Voting Shares

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 sixthree months ending June 30, 2020,March 31, 2021, the shareholders of the Company converted 246,63830 Multiple Voting Shares into 24,663,8003,000 Subordinate Voting Shares and 13,95311,000 Super Voting Shares into 1,395,3001,100,000 Subordinate Voting Shares.

(ii)

(ii)

Multiple Voting Shares

Each Multiple Voting Share is entitled to one hundred100 votes per share at shareholder meetings of the Company and is exchangeable for 100 Subordinate Voting Shares. At June 30, 2020,March 31, 2021, the Company has 126,712had 40,259 issued and outstanding Multiple Voting Shares, which convert into 12,671,2004,025,900 Subordinate Voting Shares. The Company is authorized to issue an unlimited number of Multiple Voting Shares. During the sixthree months ending June 30, 2020,March 31, 2021, the shareholders of the Company converted 246,63830 Multiple Voting Shares into 24,663,800 Subordinate Voting Shares.

(iii) Super Voting Shares

Each Super Voting Share is entitled to one thousand votes per share at shareholder meetings of the Company and is exchangeable for 100 Subordinate Voting Shares or one Multiple Voting Share. At June 30, 2020, the Company has 388,336 issued and outstanding Super Voting Shares which convert into 38,833,600 Subordinate Voting Shares. The Company is authorized to issue an unlimited number of Super Voting Shares. During the six months ending June 30, 2020, the shareholders of the Company converted 13,953 Super Voting Shares into 1,395,3003,000 Subordinate Voting Shares.

 

- 2218 -

Green Thumb Industries Inc.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)

 

9.

SHARE CAPITAL (Continued)

10. SHARE CAPITAL (Continued)

 

 

(a)

Authorized (continued)

(b)

(iii)

Super Voting Shares

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 March 31, 2021, the Company had 301,031 issued and outstanding Super Voting Shares which convert into 30,103,100 Subordinate Voting Shares. The Company is authorized to issue an unlimited number of Super Voting Shares. During the three months ending March 31, 2021, the shareholders of the Company converted 11,000 Super Voting Shares into 1,100,000 Subordinate Voting Shares.

(b)

Issued and Outstanding

A reconciliation of the beginning and ending amounts of the issued and outstanding shares by class is as follows:

 

   Issued and Outstanding 
   Subordinate
Voting
Shares		   Multiple
Voting
Shares		   Super
Voting
Shares		 
      

As at December 31, 2019

   128,999,964    373,350    402,289 

Issuance of shares under business combinations and investments

   238,450    —      —   

Distribution of contingent consideration

   2,444,843    —      —   

Distribution of deferred shares

   101,695    —      —   

Issuance of shares upon exercise of options

   32,112    —      —   

Issuances of shares upon vesting of RSUs

   641,237    —      —   

Exchange of shares

   26,059,100    (246,638)    (13,953) 
  

 

 

   

 

 

   

 

 

 

As at June 30, 2020

   158,517,401    126,712    388,336 
  

 

 

   

 

 

   

 

 

 

1. Issuance of Shares Under Business Combinations and Investments

In connection with the Company’s acquisition of MC Brands, LLC the Company issued 190,000 Subordinate Voting Shares with a value of $1,840,009 on June 29, 2020. The shares issued resulted in an increase in share capital and a corresponding increase to intangible assets on the Company’s unaudited interim condensed consolidated balance sheets.

On February 10, 2020, the Company issued 48,450 Subordinate Voting Shares which were issued at a value of $400,413 in connection with its January 1, 2019 acquisition of KW Ventures, LLC. Such shares were held back as part of the transaction and resulted in an increase in share capital and a reduction in accrued liabilities.

2. Distribution of Contingent Consideration

As of June 30, 2020, the Company issued 2,444,843 Subordinate Voting Shares to the previous owners of several entities in connection with acquisitions completed during 2019. Upon issuance, the Company recorded a reduction to contingent consideration payable and an increase in share capital. The following table represents the contingent shares issued as of June 30, 2020 in relation to each acquisition:

Contingent Shares Issued     June 30, 2020 

Transaction

  Date of Transaction  Units   Value 

Advanced Grow Labs, LLC

  February 12, 2019   1,396,533   $11,544,855 

For Success Holdings Company

  February 21, 2019   779,690    6,686,432 

Integral Associates, LLC

  June 5, 2019   268,620    1,963,612 
    

 

 

   

 

 

 
     2,444,843   $20,194,899 
    

 

 

   

 

 

 

In addition to the amounts above, the Company reclassified $2,690,914 from the contingent liability to accrued liabilities as a result of the successful opening of an Essence retail location on June 27, 2020. On July 10, 2020, the Company issued 268,620 Subordinate Voting Shares to the former owners of Integral Associates, LLC in satisfaction of the liability.

   Issued and Outstanding 
   Subordinate
Voting
Shares		   Multiple
Voting
Shares		   Super
Voting
Shares		 

As at December 31, 2020

   178,113,221    40,289    312,031 

Issuance of shares under business combinations and investments

   30,414    —      —   

Distribution of contingent consideration

   412,744    —      —   

Distribution of deferred shares

   146,315    —      —   

Issuance of registered shares pursuant to S-1

   4,693,991    —      —   

Issuance of shares upon exercise of options and warrants

   449,665    —      —   

Issuances of shares upon vesting of RSUs

   94,877    —      —   

Exchange of shares

   1,103,000    (30)    (11,000) 
  

 

 

   

 

 

   

 

 

 

As at March 31, 2021

   185,044,227    40,259    301,031 
  

 

 

   

 

 

   

 

 

 

 

- 2319 -

Green Thumb Industries Inc.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)

 

9.

SHARE CAPITAL(Continued)

10. SHARE CAPITAL (Continued)

 

(b) Issued and Outstanding

(i)

Issuance of Shares Under Business Combinations and Investments

(Continued)GTI New Jersey, LLC

3. DistributionIn connection with the Company’s April 23, 2019 acquisition of Deferred Shares

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, one of the retail dispensaries, located in Paramus, New Jersey, was successfully opened. As a result, of several acquisitions that occurred during 2019, the Company held 1,367,643 deferredissued 30,414 Subordinate Voting Shares to the former minority shareholders of GTI New Jersey, LLC. The shares had a fair value of $1,038,307 on the date of issuance. As of March 31, 2021, and December 31, 2020, the Company carried an obligation of $1,000,000 and $2,000,000, respectively, associated with the retail dispensary agreement with the former minority shareholders of GTI New Jersey, LLC.

(ii)

Distribution of Contingent Consideration

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 there is a remote likelihood that the Company will obtain retail dispensary operating licenses in either West Hollywood or Culver City, California, under commercially reasonable terms. 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 reduction to other income (expense) in the unaudited interim condensed consolidated statement of operations.

As of March 31, 2021 and December 31, 2020, the estimated fair value of $16,587,798the 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.

(iii)

Distribution of Deferred Shares

For Success Holding Company

As part of December 31, 2019.the consideration exchanged in the Company’s 2019 acquisitions, Subordinate Voting Shares are held back or deferred until a specific date post acquisition. The deferred shares wereare issued to be issuedthe former owners of the acquired entity upon the passage of 12-24twelve to twenty-four months from the close of each transaction as defined within each respective acquisition agreement. On May 15, 2020 Green ThumbFebruary 22, 2021, the Company issued 101,695146,315 Subordinate Voting Shares with a value of $1,307,798$1,825,597 in connection with the Company’s May 15, 2019 acquisition of Salveo.For Success Holding Company. The distributionissuance 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.

(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 reductionsingle institutional investor to deferredpurchase 3,122,073 of the Subordinate Voting Shares registered on the Form S-1 at a price of $32.03 per share issuancesfor 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 intends to use 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 may also use a corresponding increaseportion of the net proceeds to share capital onacquire or invest in business and products that are complimentary to the Company’s own business 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 changes in shareholders’ equity.

(c)

- 20 -

Green Thumb Industries Inc.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)

9.

SHARE CAPITAL(Continued)

(c)

Stock-Based Compensation

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 shall measuremeasures 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”). The maximum number of Restricted Stock Units (“RSUs”) and options issued under the Plan shall not exceed 10% of the issued and outstanding shares on an as-converted basis.

The Company recognizes compensation expense for Restricted Stock Units (“RSUs”)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.

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”). The maximum number of RSUs and Options issued under the Plan shall not exceed 10% of the issued and outstanding shares.

Option and RSU grants generally vest over three years, and options typically have a life of five or ten years. Option 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.

Stock option activity is summarized as follows:

 

  Number of
Shares		   Weighted Average
Exercise Price
(CAD)		   Weighted Average
Contractual Life
(Years)		   Aggregate
Intrinsic Value		   Number of
Shares		   Weighted
Average Exercise
Price (C$)		   Weighted
Average
Remaining
Contractual
Life (Years)		   Aggregate
Intrinsic Value		 

Balance as at December 31, 2019

   3,839,017    13.21    5.81   $218,234 

Balance as at December 31, 2020

   5,664,406    11.91    4.39   $85,408,034 

Granted

   2,443,975    9.65    5.00      43,968    32.74     

Exercised

   (32,112)    9.00    3.40      (223,394)    14.04     

Forfeited

   (393,835)    14.32    5.21      (185,540)    10.68     
  

 

   

 

   

 

     

 

   

 

   

 

   

 

 

Balance as at June 30, 2020

   5,857,045    11.67    5.52   

Balance as at March 31, 2021

   5,299,440    12.03    3.97   $106,221,476 

Vested

   880,127    14.29    7.15      1,749,365    13.37     

Exercisable at June 30, 2020

   2,057,758    9.22    5.00   $1,178,695 

Exercisable at March 31, 2021

   2,122,671    12.15    4.20   $42,431,312 

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 March 31, 2021 and December 31, 2020, 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 March 31, 2021 and December 31, 2020. 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.

 

- 2421 -

Green Thumb Industries Inc.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)

9.

SHARE CAPITAL (Continued)

(c)

Stock-Based Compensation (Continued)

The following table summarizes the weighted average grant date fair value and intrinsic value of options exercised for the three months ended March 31, 2021 and 2020:

   For the Three Months Ended
March 31,		 
   2021   2020 

Weighted average grant date fair value (per share) of stock option units granted (C$)

  C$13.06       C$4.37 

Intrinsic value of stock option units exercised, using market price at vest date (USD)

  $4,573,378   $—   

The Company used the Black-Scholes option pricing model to estimate the fair value of the options granted during the three months ended March 31, 2021 and the year ended December 31, 2020, using the following ranges of assumptions:

   March 31,
2021		 December 31,
2020

Risk-free interest rate

  0.33% - 0.74% 0.31% - 1.37%

Expected dividend yield

  0% 0%

Expected volatility

  73% 80%

Expected option life

  3 – 3.5 years 3-5 years

As permitted under ASC 718, the Company has made an accounting policy choice to account for forfeitures when they occur.

The following table summarizes the number of non-vested RSU awards as of March 31, 2021 and December 31, 2020 and the changes during the three months ended March 31, 2021:

   Number of
Shares		   Weighted
Average
Grant Date
Fair Value
(C$)		 

Nonvested Shares at December 31, 2020

   689,340    16.77 

Granted

   16,739    39.63 

Forfeited

   (18,667)    16.48 

Vested

   (94,877)    18.35 
  

 

 

   

 

 

 

Nonvested Shares at March 31, 2021

   592,535    17.19 

The following table summarizes the weighted average grant date fair value and total fair value of RSUs vested for the three months ended March 31, 2021 and 2020:

   For the Three Months Ended
March 31,		 
   2021   2020 

Weighted average grant date fair value (per share) of granted (C$)

  C$39.63       C$10.86   

Intrinsic value of RSUs vested, using market price at vest date (USD)

  $3,105,640   $511,150 

- 22 -

Green Thumb Industries Inc.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)

 

10.9. SHARE CAPITAL(Continued)

(c) Stock-Based Compensation (Continued)

 

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 June 30, 2020 and December 31, 2019, 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 June 30, 2020 and December 31, 2019. 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 Company used the Black-Scholes option pricing model to estimate the fair value of the options at the grant date using the following ranges of assumptions:

 

(c)

Risk-free interest rateStock-Based Compensation (Continued)

0.37% - 2.33% 

Expected dividend yield

0% 

Expected volatility

80% - 100% 

Expected option life

3 - 10 years

As the Company became publicly traded in June 2018, sufficient historical trading information was not available to determine an expected volatility rate. The volatility rate was based on comparable

companies within the same industry. As permitted under ASC 718, the Company has made an accounting policy choice to account for forfeitures when they occur.

The following table summarizes the number of non-vested RSU awards as of June 30, 2020 and December 31, 2019 and the changes during the six months ended June 30, 2020:

   Number of
Shares		   Weighted Average Grant
Date Fair Value (CAD)		 

Nonvested Shares at December 31, 2019

   1,399,762    9.30 

Granted

   200,150    10.87 

Forfeited

   (51,500)    15.40 

Vested

   (642,239)    15.29 
  

 

 

   

 

 

 

Nonvested Shares at June 30, 2020

   906,173    5.07 

The stock-based compensation expense for the three and six months ended June 30,March 31, 2021 and 2020 and 2019 was as followed:

 

   For the Three Months Ended   For the Six Months Ended 
   June 30,   June 30, 
   2020   2019   2020   2019 

Stock options expense

  $2,904,127   $995,663   $5,595,284   $5,254,130 

Restricted Stock Units

   2,796,017    2,919,525    5,178,602    4,505,858 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Stock Based Compensation Expense

  $5,700,144   $3,915,188   $10,773,886   $9,759,988 
  

 

 

   

 

 

   

 

 

   

 

 

 
   For the Three Months Ended
March 31,		 
   2021   2020 

Stock Options Expense

  $2,628,858   $2,691,157 

RSUs

   1,401,797    2,382,585 
  

 

 

   

 

 

 

Total Stock-Based Compensation Expense

  $4,030,655   $5,073,742 
  

 

 

   

 

 

 

As of June 30, 2020, $29,648,926March 31, 2021, $19,996,039 of total unrecognized expense related to Stock Based Compensationstock-based compensation awards is expected to be recognized over a weighted-average period of 2.141.59 years.

 

10.

INCOME TAXES

- 25 -

The following table summarizes the Company’s income tax expense and effective tax rates for the three months ended March 31, 2021 and 2020:

   For the Three Months Ended
March 31,		 
   2021   2020 

Income before Income Taxes

  $42,311,146   $9,385,440 

Income Tax Expense

   30,856,178    13,149,000 

Effective Tax Rate

   72.9%    140.1% 

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 estimate the annual effective tax rate. We believe that, at this time, 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.

Due to its cannabis operations, the Company is subject to the limitations of Internal Revenue Code (“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 effective tax rate for the three months ended March 31, 2021 varies widely from the three month ended March 31, 2020, primarily due to the reduction in non deductible expenses as a proportion of total expenses in the current year. This variation also includes a change in methodology from an annualized effective tax rate method for the three months ended March 31, 2020 compared to the discrete method for the period ending March 31, 2021 described above. The Company incurs expenses that are not deductible due to IRC Section 280E limitations which results in significant income 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 $38.6 million and $4.3 million as of March 31, 2021 and 2020, respectively, recorded within Deferred Income Taxes.

-23-

Green Thumb Industries Inc.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)

 

10.

INCOME TAXES (Continued)

10. SHARE CAPITAL (Continued)

 

 

The federal statute of limitation remains open for the 2017 tax year to the present. The state income tax returns generally remain open for the 2016 tax year through the present. Net operating losses arising prior to these years are also open to examination if and when utilized.

Taxes paid during the three months ended March 31, 2021 and 2020 were $15,146,750 and $0, respectively.

(d)11.

Liability for Purchase of Ohio Investors 2017, LLC Noncontrolling InterestOTHER INCOME (EXPENSE)

Subsequent to quarter end, on August 8, 2020, the Company and its joint venture partner in Ohio Investors 2017, LLC reached an agreement allowing Green Thumb to purchase the remaining noncontrolling interest in Ohio Investors 2017, LLC. As a result, the Company will issue 1,315,789 Subordinate Voting Shares in consideration for the noncontrolling partner’s interest in Ohio Investors 2017, LLC. Upon the closing of the transaction, which is subject to applicable regulatory approvals, the fair value of the joint venture buyout transaction will result in a reduction to the current liability established for the purchase of the noncontrolling interest of $11,200,000 and an increase in share capital for the fair value amount of noncontrolling partners interest of approximately $18,700,000.

11. OTHER INCOME (EXPENSE)

 

For the three and six months ended June 30,March 31, 2021 and 2020 and 2019 other income (expense) was comprised of the following:

 

  For the Three Months Ended
June 30,		   For the Six Months Ended
June 30,		   Three Months Ended
March 31,		 
  2020   2019   2020   2019   2021   2020 

Fair value adjustments on equity investments

  $198,572   $(339,271)   $(17,035)   $263,693   $391,559   $(215,607) 

Fair value adjustments on variable note receivable

   (5,600)    (6,105,979)    (815,937)    (1,996,185)    —      (810,337) 

Fair value adjustments on warrants issued

   (6,262,500)    —      1,120,343    —   

Fair value adjustment on warrants issued

   (5,850,671)    7,382,843 

Fair value adjustments on contingent consideration

   (188,554)    —      (17,565)    —      (412,949)    170,990 

Equity earnings in joint ventures

   623,093    250,000 

Other

   540,655    (195,296)    798,877    348,599    99,151    8,221 
  

 

   

 

   

 

   

 

 
  

 

   

 

   

 

   

 

   

 

   

 

 

Total Other Income (Expense)

  $(5,717,427)   $(6,640,546)   $1,068,683   $(1,383,893)   $(5,149,817)   $6,786,110 
  

 

   

 

   

 

   

 

   

 

   

 

 

12.

12.

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 that the Company is in compliance with applicable local and state regulations at June 30, 2020March 31, 2021 and December 31, 2019,2020, 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.

 

- 26 --24-

Green Thumb Industries Inc.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)

 

12.

COMMITMENTS AND CONTINGENCIES(Continued)

12. COMMITMENTS AND CONTINGENCIES (Continued)

 

 

(b)

(b) Claims and Litigation

From time to time, the Company may be involved in litigation relating to claims arising out of operations in the normal course of business. At June 30, 2020March 31, 2021 and December 31, 2019,2020, there were no 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)

(c)

Construction Commitments

As of June 30, 2020,March 31, 2021, the Company held approximately $5,069,000$11,745,258 of open construction commitments to contractors on work being performed.

13.

-25-

Green Thumb Industries Inc.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)

13.

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.

Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, notes receivable, due from related parties, investments, accounts payable and accrued liabilities, notes payable, derivative liability, liability for acquisition of noncontrolling interest and contingent consideration payable.

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, 2020   As of March 31, 2021 
  Level 1   Level 2   Level 3   Total   Level 1   Level 2   Level 3   Total 

Cash and Cash Equivalents

  $82,942,672   $—     $—     $82,942,672   $275,898,839   $—     $—     $275,898,839 

Investments

   —      —      14,051,786    14,051,786    1,181,146    —      27,884,857    29,066,003 

Liability of Redemption of Noncontrolling Interest

   —      —      (11,200,000)    (11,200,000) 

Contingent Consideration Payable

   —      —      (36,528,724)    (36,528,724)    —      —      (14,850,000)    (14,850,000) 

Warrant Liability

   —      —      (15,331,887)    (15,331,887)    —      —      (45,304,671)    (45,304,671) 
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 
  $82,942,672   $—     $(49,008,825)   $33,933,847   $277,079,985   $—     $(32,269,814)   $244,810,171 
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

   As of December 31, 2021 
   Level 1   Level 2   Level 3   Total 

Cash and Cash Equivalents

  $83,757,785   $—     $—     $83,757,785 

Investments

   923,581    —      39,871,225    40,794,806 

Contingent Consideration Payable

   —      —      (27,100,000)    (27,100,000) 

Warrant Liability

   —      —      (39,454,000)    (39,454,000) 
  

 

 

   

 

 

   

 

 

   

 

 

 
  $84,681,366   $—     $(26,682,775)   $57,998,591 
  

 

 

   

 

 

   

 

 

   

 

 

 

 

- 27 --26-

Green Thumb Industries Inc.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)

 

14.

13. FAIR VALUE MEASUREMENTS (Continued)

   As of December 31, 2019 
   Level 1   Level 2   Level 3   Total 

Cash and Cash Equivalents

  $46,667,334   $—     $—     $46,667,334 

Notes Receivable

   —      —      815,937    815,937 

Investments

   —      —      14,068,821    14,068,821 

Liability of Redemption of Noncontrolling Interest

   —      —      (5,500,000)    (5,500,000) 

Contingent Consideration Payable

   —      —      (58,936,739)    (58,936,739) 

Warrant Liability

   —      —      (15,879,843)    (15,879,843) 
  

 

 

   

 

 

   

 

 

   

 

 

 
  $46,667,334   $—     $(65,431,824)   $(18,764,490) 
  

 

 

   

 

 

   

 

 

   

 

 

 

There have been no transfers between fair value levels during the periods ended June 30, 2020 and December 31, 2019.

14. VARIABLE INTEREST ENTITIES

 

The following tables representtable 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 sheetssheet as of June 30, 2020March 31, 2021 and the consolidated balance sheet as of December 31, 2019 and statements2020. All of operations for the three and six months ended June 30, 2020 and June 30, 2019. All these entities were determined to be VIEs as the Company possesses the power to direct activities through management services agreements.agreements (“MSAs”).:

 

  June 30, 2020 December 31, 2019   March 31, 2021   December 31, 2020 
  Chesapeake
Alternatives, LLC		   Illinois
Disp, LLC		   Other Non-material
VIEs		 Chesapeake
Alternatives, LLC		   Illinois
Disp, LLC		   Other Non-material
VIEs		   IL Disp, LLC   Other Non-
material VIEs		   Chesapeake
Alternatives,
LLC		   IL Disp, LLC   Other Non-
material VIEs		 

Current assets

  $26,092,713    1,990,475    2,138,766  $19,455,533    1,381,716   $1,352,935   $3,453,766   $2,411,739   $32,307,718   $3,738,868   $2,362,572 

Non-current assets

   2,876,080    3,854,524    2,378,075  22,384,663    3,083,659    2,534,297    3,566,193    2,210,239    3,367,360    3,657,392    2,281,839 

Current liabilities

   18,185,825    1,336,087    1,071,811  14,219,204    149,498    783,682    1,156,208    1,142,340    23,362,255    336,970    1,563,224 

Non-current liabilities

   1,087,114    483,935    820,888  1,169,989    137,736    855,440    450,291    762,865    768,573    461,926    783,356 

Equity attributable to noncontrolling interests

   272,118    2,012,489    (12,827)  350,206    2,089,071    (22,488) 

Noncontrolling interests

   2,581,731    270,544    —      3,173,683    267,289 

Equity attributable to Green Thumb Industries Inc.

   9,423,735    2,012,488    2,636,968  6,645,263    2,089,070    2,270,598    2,581,731    2,446,229    11,544,250    3,173,683    2,030,542 

On December 31, 2020, the MSA 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 noncontrolling interest was closed to share capital of Green Thumb as of December 31, 2020.

The Following tables presents the summarized financial information about the Company’s VIEs which are included in the unaudited interim condensed consolidated statements of operations for the three months ended March 31, 2021 and 2020:

 

  Three Months Ended 
  June 30, 2020   June 30, 2019 

Revenues

  $4,799,732   $5,164,316   $2,370,069   $4,159,813   $1,391,786   $1,005,554 

Net income (loss) attributable to noncontrolling interests

   139,386    909,302    96,880    489,993    165,862    (438,909) 

Net income (loss) attributable to Green Thumb Industries Inc.

   1,639,408    909,301    306,999    —      165,861    (642,161) 
  

 

   

 

   

 

   

 

   

 

   

 

 

Net income (loss)

  $1,778,794   $1,818,603   $403,879   $489,993   $331,723   $(1,081,070) 
  

 

   

 

   

 

   

 

   

 

   

 

 
  Three Months Ended March 31, 
  Six Months Ended   2021   2020 
  June 30, 2020   June 30, 2019   IL Disp, LLC   Other Non-
material VIEs		   Chesapeake
Alternatives,
LLC		   IL Disp, LLC   Other Non-
material VIEs		 

Revenues

  $9,108,361   $7,945,931   $4,082,719   $8,088,991   $2,553,980   $1,683,945   $5,727,274   $3,311,283   $4,308,630   $2,781,616   $1,712,651 

Net income (loss) attributable to noncontrolling interests

   180,795    1,273,418    134,059    437,152    321,042    (682,247)    783,048    303,255    41,409    364,116    37,179 

Net income (loss) attributable to Green Thumb Industries Inc.

   2,778,471    1,273,418    366,372    971,880    321,041    (1,059,653)    783,047    415,688    1,139,063    364,117    59,373 
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Net income (loss)

  $2,959,266   $2,546,836   $500,431   $1,409,032   $642,083   $(1,741,900)   $1,566,095   $718,943   $1,180,472   $728,233   $96,552 
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

As of June 30,March 31, 2021 and 2020, and December 31, 2019,2020, VIEs included in the Other Non-material VIEs are Bluepoint Wellness of Westport LLC and Meshow, LLC. As of June 30, 2019, VIEs included in the Other Non-material VIEs are Meshow, LLC, KW Ventures Holdings, LLC and Ohio Investors 2017, LLC.

 

- 28 --27-

Green Thumb Industries Inc.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)

 

15.

15. SEGMENT REPORTING

 

The Company operates in two segments: the cultivation, production and sale of cannabis products to retail 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 six months ended June 30, 2020March 31, 2021 and 2019:2020:

 

  Three Months Ended June 30,   Six Months Ended June 30,   Three Months Ended
March 31,		 
  2020   2019   2020   2019   2021   2020 
Revenues, Net of Discounts                    

Consumer Packaged Goods

  $56,331,517   $23,063,374   $102,653,545   $36,558,111   $104,077,438   $46,322,028 

Retail

   87,541,572    25,851,990    163,503,022    41,969,358    130,108,718    75,961,450 

Intersegment Eliminations

   (24,233,165)    (4,188,587)    (43,914,041)    (5,887,529)    (39,755,572)    (19,680,876) 
  

 

   

 

   

 

   

 

   

 

   

 

 

Total Revenues, net of discounts

  $119,639,924   $44,726,777   $222,242,526   $72,639,940   $194,430,584   $102,602,602 
  

 

   

 

   

 

   

 

   

 

   

 

 

Depreciation and Amortization

            

Consumer Packaged Goods

  $12,551,460   $5,980,268   $23,059,951   $8,874,021   $8,000,947   $7,594,366 

Retail

   3,087,856    454,435    3,885,134    741,057    6,992,474    5,110,806 

Intersegment Eliminations

   (1,399,403)    (80,958)    —      —      —      —   
  

 

   

 

   

 

   

 

   

 

   

 

 

Total Depreciation and Amortization

  $14,239,913   $6,353,745   $26,945,085   $9,615,078   $14,993,421   $12,705,172 
  

 

   

 

   

 

   

 

   

 

   

 

 

Income Taxes

            

Consumer Packaged Goods

  $6,398,000   $461,000   $10,625,000   $689,000   $17,287,094   $4,227,000 

Retail

   8,980,715    2,420,000    17,902,715    3,900,000    13,569,084    8,922,000 

Intersegment Eliminations and Corporate

   —      (3,035,333)    —      (3,507,333)    —      —   
  

 

   

 

   

 

   

 

   

 

   

 

 

Total Income Taxes

  $15,378,715   $(154,333)   $28,527,715   $1,081,667   $30,856,178   $13,149,000 
  

 

   

 

   

 

   

 

   

 

   

 

 

Goodwill assigned to the Consumer Packaged Goods segment as of June 30, 2020March 31, 2021 and December 31, 20192020 was $252,016,532 and $255,211,232, respectively.at each period end. Intangible assets, net assigned to the Consumer Packaged Goods segment as of June 30, 2020March 31, 2021 and December 31, 20192020 was $220,669,988$206,620,582 and $228,244,254,$211,303,718, respectively.

Goodwill assigned to the Retail segment as of June 30, 2020March 31, 2021 and December 31, 20192020 was $121,065,184 and $119,873,759, respectively.$130,680,935 at each period end. Intangible assets, net assigned to the Retail segment as of June 30, 2020March 31, 2021 and December 31, 20192020 was $198,516,819$189,394,381 and $207,002,644,$194,938,316, 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 22 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 domiciled in the United States and all assets are located in the United States.

 

- 29 --28-

Green Thumb Industries Inc.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)

16.

SUBSEQUENT EVENTS

On April 30, 2021, the Company closed on a $216,734,258 Senior Secured non-brokered private placement financing through the issuance of senior secured notes (the “Notes”). The Company used the proceeds to retire the Company’s existing $105,466,429, senior secured note due May 2023 and the remaining proceeds for general working capital purposes as well as various growth initiatives. The Notes have a maturity date of April 30, 2024 and will bear interest from the date of issue at 7% per annum, payable quarterly, with an option, at the discretion of the Company, to extend an additional 12 months. The financing permits the Company to borrow an additional $33,265,741 over the next twelve months. The purchasers of the Notes also received 1,459,044 warrants (the “Warrants”) which allows the holder to purchase one Subordinate Voting Share of Green Thumb at an exercise price of $32.68 per share, for a period of 60 months from the date of issue.

Certain related parties participated in the financing, purchasing an aggregate of approximately US $3 million of notes.

-29-

ITEM 2.

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” or “Green Thumb”) is for the three and six months ended June 30, 2020March 31, 2021 and 2019.2020. It is supplemental to, and should be read in conjunction with, the Company’s unaudited interim condensed consolidated financial statements as of June 30, 2020March 31, 2021 and the consolidated financial statements for the year ended December 31, 20192020 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 20192020 filed with the U.S. Securities and Exchange Commission on April 15, 2019March 18, 2021 (the “2019 “2020 Form 10-K”10-K”) and the accompanying notes for each respective periods. 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 “Cautionary Note“Disclosure Regarding Forward-Looking Information,Statements,” identified in the ‘‘Risks and Uncertainties’’ section of this MD&A and in Part II, Item 1A, “Risk Factors.” 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 (“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 priorities during the COVID-19 pandemic are 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“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“essential” business by all states in which the Company operates with respect to all customers (except in Massachusetts where cannabis was deemed essential only for medical patients, leading to a state-wide suspension of sales of recreational cannabis from March 24, 2020 to May 25, 2020).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.

While duringDuring the first sixthree months of 2020,2021 the Company’s revenue, gross profit and operating income were not negatively impacted by COVID-19 and the Company generally maintained the consistency of our operations,its operations. However, the uncertain nature 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 we doit does business that currently or in the future impose restrictions on business operations.

 

- 30 -

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.

OVERVIEW OF THE COMPANY

Established in 2014 and headquartered in Chicago, Illinois, Green Thumb is promoting well-being through the power of cannabis, while being committed to community and sustainable profitable growth. As of June 30, 2020,March 31, 2021, Green Thumb has operations across 12 U.S. markets, employs approximately 1,800over 2,200 people and serves hundreds of thousandsmillions of patients and customers quarterly.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 Beboe, Dogwalkers, Dr. Solomon’s, incredibles, Rhythm, and The Feel Collection. The Company distributes and markets these products primarily to third-party licensed retail cannabis stores across the United States as well as to Green Thumb-owned retail 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 13 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 over 700 retail locations throughout the 12 U.S. markets Green Thumb operates including Green Thumb’s own Rise and Essence dispensaries.

Green Thumb owns and operates a national cannabis retail chain called Rise™, and in the Las Vegas, Nevada area,and Pasadena, California areas, a chain of stores called Essence, 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, we own stores under other names, primarily where we co-own the stores or naming is subject to licensing or similar restrictions. The income from Green ThumbThumb’s retail 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 Rise stores currently are located in eight of the states in which we operate (including Nevada). The Essence stores were acquired in connection with the 2019 acquisition of Integral Associates and are located in Nevada.Nevada and beginning in March 2021, California. The Essence stores differ from the Rise stores mainly in geographic location. As of June 30, 2020,March 31, 2021, the Company had 4856 open and operating retail locations and expects to have 50 to 55 open stores at year-end.locations. The Company’s new store opening plans will remain fluid depending on market conditions, obtaining local licensing, construction and other permissions and 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.

Revenue Streams

The Company has consolidated financial statements across its operating businesses with revenue from the manufacture, sale and distribution of branded cannabis products to third-party retail customers as well as the sale of finished products to consumers in its retail stores.

As of June 30, 2020, Green Thumb has operating revenue in its 12 markets (California, Colorado, Connecticut, Florida, Illinois, Maryland, Massachusetts, Nevada, New Jersey, New York, Ohio and Pennsylvania).

- 31 -

Results of Operations – Consolidated

The following table sets forth the Company’s selected consolidated financial dataresults for the periods, and as of the dates, indicated. The (i) unaudited condensed consolidated statements of operations for the three and six months ended June 30,March 31, 2021 and 2020 and 2019 and (ii) unaudited interim condensed consolidated balance sheet data as of June 30, 2020March 31, 2021 and the consolidated balance sheet as of December 31, 20192020 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.

- 31 -

The Company’s unaudited interim condensed consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”)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.

 

   As of and for the 
   Three Months Ended June 30,   Six Months Ended June 30, 
   2020   2019   2020   2019 

Total Revenues, net of discounts

  $119,639,924   $44,726,777   $222,242,526   $72,639,940 

Cost of Goods Sold

  $(55,946,010)   $(23,223,025)   $(105,561,198)   $(38,346,967) 

Gross Profit

  $63,693,914   $21,503,752   $116,681,328   $34,292,973 

Total Expenses

  $49,643,211   $30,830,482   $95,077,968   $57,249,363 

Other Income (Expense)

  $(10,435,925)   $(11,502,706)   $(8,603,142)   $(6,341,101) 

Net Income (Loss) Attributable to Green Thumb

  $(12,909,505)   $(20,892,049)   $(17,115,769)   $(30,455,105) 
   Three Months Ended March 31,         
   2021   2020   $
Change		   %
Change		 

Revenues, net of discounts

  $194,430,584   $102,602,602   $91,827,982    89% 

Cost of Goods Sold, net

   (83,565,084)    (49,615,188)    (33,949,896)    68% 
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross Profit

   110,865,500    52,987,414    57,878,086    109% 

Total Expenses

   59,331,251    45,434,757    13,896,494    31% 
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (Loss) From Operations

   51,534,249    7,552,657    43,981,592    582% 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Other Income (Expense)

   (9,223,103)    1,832,783    (11,055,886)    (603%) 
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (Loss) Before Provision for Income Taxes and Non-Controlling Interest

   42,311,146    9,385,440    32,925,706    351% 

Provision for Income Taxes

   30,856,178    13,149,000    17,707,178    135% 
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Income (Loss) Before Non-Controlling Interest

   11,454,968    (3,763,560)    15,218,528    404% 

Net Income (Loss) Attributable to Non-Controlling Interest

   1,086,302    442,704    643,598    145% 
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Income (Loss) Attributable to Green Thumb Industries Inc.

  $10,368,666   $(4,206,264)   $14,574,930    347% 
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Income (Loss) per share – basic

  $0.05   $(0.02)   $0.07    338% 
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Income (Loss) per share – diluted

  $0.05   $(0.02)   $0.07    332% 
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average number of shares outstanding – basic

   216,210,429    208,468,356     
  

 

 

   

 

 

     

Weighted average number of shares outstanding - diluted

   221,616,157    208,468,356     
  

 

 

   

 

 

     

 

  As of   March 31,   December 30, 
  June 30, 2020   December 31, 2019   2021   2020 

Total Assets

  $1,240,721,129   $1,167,536,624   $1,549,124,022   $1,358,549,162 

Long-Term Liabilities

  $255,877,816   $212,960,693   $337,909,825   $325,101,386 

Three Months Ended June 30,March 31, 2021 Compared to the Three Months Ended March 31, 2020 vs 2019

Revenues, net of Discounts

Revenue for the three months ended June 30, 2020March 31, 2021 was $119,639,924,$194,430,584, up 167%89% from $44,726,777$102,602,602 for the three months ended June 30, 2019March 31, 2020 driven by contributions from both Retail and Consumer Packaged Goods, largely due to growth in Illinois and Pennsylvania. Key performance drivers are: increased store traffic to Green Thumb’s open and operating retail stores, particularly in Illinois and Pennsylvania and new store openings, particularly in Pennsylvania. The Company generated revenue from 4856 Retail locations during the quarter compared to 2542 in the same quarter of the prior year. During the three months ended June 30,March 31, 2021, the Company opened 5 new stores. Since March 31, 2020, the Company opened 6 stores as compared to 6 stores opened and 4 stores acquired during the same periodone retail store in 2019. Since June 30, 2019, the following stores were acquired andConnecticut that contributed to the increase in Retail revenues: one Connecticut storerevenues and three New York stores. Since June 30, 2019, the Company also opened 1913 new Retail locations in Pennsylvania, Illinois, Nevada, California, Florida, Illinois, Ohio, Nevada, Connecticut,New Jersey and New Jersey.Ohio.

The key driver for the Consumer Packaged Goods revenue increase was the expansion of sales of Green Thumb’s branded product portfolio to third-party retailers through the Company’s existing Consumer Packaged Goods cultivation and processing facilities in Illinois, Pennsylvania, Massachusetts, Maryland, Nevada, New Jersey and MarylandConnecticut due to increased scale and efficiency.

- 32 -

Cost of Goods Sold, net

Cost of goods sold are derived from retail purchases made by the Company from otherits third-party licensed producers operating within the Company’sour state markets and costs related to the internal cultivation and production of cannabis. Cost of goods sold for the three months ended June 30, 2020March 31, 2021 was $55,946,010,$83,565,084, up 141%68% from $23,223,025$49,615,188 for the three months ended June 30, 2019March 31, 2020, driven by increased volume in open and operating retail stores; new retail store openings in Illinois and Pennsylvania and expansion of the consumer products sales primarily in Illinois, Pennsylvania, Massachusetts, Maryland, Nevada and MarylandConnecticut as described above.

- 32 -

Gross Profit

Gross profit for the three months ended June 30, 2020March 31, 2021 was $63,693,914,$110,865,500, 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 53%57%. This is compared to gross profit for the three months ended June 30, 2019March 31, 2020 of $21,503,752$52,987,414 or a 48%52% 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 three months ended June 30, 2020March 31, 2021 were $49,643,211$59,331,251 or 41%31% of total revenues, net of discounts, resulting in an increase of $18,812,729.$13,896,494. Total expenses for the three months ended June 30, 2019March 31, 2020 were $30,830,482$45,434,757 or 69%44% of total revenues, net of discounts.

The increase in total expenses was attributable to Retail salaries and benefits, depreciation expense and other operational and facility expenses mainly as a result of the Company’s 23addition of 14 new and acquired retail facilities over the prior year period. In addition, an increase in intangible amortization expense and corporate staff salaries and non-cash equity incentive compensation expense also contributed to the overall increase in total expenses. The reduction in expenses as a percent of revenue was attributable to measures deployed to control variable expenses as well as inherent operating leverage caused by the significant increase in revenue.

Total Other Income (Expense)

Total other expenseincome (expense) for three months ended June 30, 2020March 31, 2021 was $(10,435,925)($9,223,103), a decreasechange of $1,066,781,($11,055,886), mainly due to favorableunfavorable fair value adjustments recorded in 2020.associated with the Company’s warrant liability as of March 31, 2021.

Income (Loss) Before Provision for Income Taxes and Non-Controlling Interest

Net operating income before provision for income taxes and non-controlling interest for three months ended June 30, 2020March 31, 2021 was $3,614,778,$42,311,146, an increase of $24,444,214$32,925,706 compared to the three months ended June 30, 2019.March 31, 2020.

As presented under the heading “Non-GAAP Measures” below, after adjusting for non-cash equity incentive compensation of $5,700,144 as well as other non-operating items,$4,030,655 and $5,073,742, adjusted operating EBITDA was $35,412,711$71,355,281 and $2,284,983$25,544,924 for the three months ended June 30,March 31, 2021 and 2020, and 2019, 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 June 30, 2020,March 31, 2021, federal and state income tax expense totaled $15,378,715$30,856,178 compared to expense of $(154,333)$13,149,000 for the three months ended June 30, 2019.

The effective tax rate for the three months ended June 30, 2020 varies widely from the three months ended June 30, 2019 primarily due to the change from pre-tax loss in 2019 to pre-tax income inMarch 31, 2020. The large amount of nondeductible expenses incurred by the Company being subjected to Internal Revenue Code (“IRC”) Section 280E, was the driver for income tax expense being incurred in a pre-tax loss quarter for 2019.

 

- 33 -

Six Months Ended June 30, 2020 vs 2019

Revenue, net of Discounts

Revenue for the six months ended June 30, 2020 was $222,242,526 up 206% from $72,639,940 for the six months ended June 30, 2019 driven by contribution from both Retail and Consumer Packaged Goods largely due to growth in Illinois and Pennsylvania. Key performance drivers are: increased store traffic to Green Thumb’s open and operating retail stores, particularly in Illinois and Pennsylvania. The Company generated revenue from 48 Retail locations during the quarter compared to 25 in the prior year. During the six months ended June 30, 2020, the Company opened 9 stores as compared to 7 stores opened and 4 stores acquired during the same period in 2019. Since June 30, 2019, the following stores were acquired and contributed to the increase in Retail revenues: one Connecticut store and three New York stores. Since June 30, 2019, the Company also opened 19 new Retail locations in Pennsylvania, Florida, Illinois, Ohio, Nevada, Connecticut, and New Jersey.

The key drivers for the Consumer Packaged Goods revenue increase was the expansion of Green Thumb’s branded product portfolio to third-party retailers through the Company’s existing Consumer Packaged Goods cultivation and processing facilities in Illinois, Pennsylvania, Nevada, Massachusetts and Connecticut due to increased scale and efficiency.

Cost of Goods Sold, net

Cost of goods sold are derived from cost related to the internal cultivation and production of cannabis and from retail purchases made from other licensed producers operating within the Company’s state markets.

Cost of goods sold for the six months ended June 30, 2020 was $105,561,198, up 175% from $38,346,967 for the six months ended June 30, 2019, driven by increased volume in open and operating retail stores; new retail store openings in Illinois, Pennsylvania and Nevada and expansion of the consumer products sales in Illinois, Pennsylvania, Nevada, Massachusetts and Connecticut.

Gross Profit

Gross profit for the six months ended June 30, 2020 was $116,681,328, representing a gross margin on the sale of finished cannabis consumer packaged goods of 53%. This is compared to gross profit for the six months ended June 30, 2019 of $34,292,973 or a 47% 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 six months ended June 30, 2020 were $95,077,968 or 43% of total revenues, net of discounts. Total expenses for the six months ended June 30, 2019 were $57,249,363 or 79% of Total Revenues, net of discounts.

The increase in total expenses was attributable to Retail salaries and benefits, depreciation expense and other operational and facility expenses mainly as a result of the Company’s new and acquired Retail facilities. In addition, an increase in intangible amortization expense, corporate staff salaries and non-cash equity incentive compensation expense also contributed to the overall increase in total expenses. The reduction in expenses as a percent of revenue was attributable to measures deployed to control variable expenses as well as inherent operating leverage caused by the significant increase in revenue.

- 34 -

Total Other Income (Expense)

Total other expense for the six months ended June 30, 2020 was ($8,603,142), compared to expense of ($6,341,101), for the six months ended June 30, 2019, mainly due to favorable fair value adjustments recorded in 2020.

Income (Loss) Before Provision for Income Taxes and Non-Controlling Interest

Net operating income before provision for income taxes and non-controlling interest for the six months ended June 30, 2020 was $13,000,218 compared to loss of ($29,297,491) for the six months ended June 30, 2019.

As presented under the heading “Non-GAAP Measures” below, after adjusting for non-cash equity incentive compensation of $10,773,886 as described above, as well as other non-operating items, adjusted operating EBITDA was $60,957,635 and $168,938 for the six months ended June 30, 2020 and 2019, 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 at year-end. For the six months ended June 30, 2020, federal and state income tax expense totaled $28,527,715 compared to $1,081,667 for the six months ended June 30, 2019.

The net expense of $28,527,715 for the six months ended June 30, 2020 includes current tax expense of $29,120,715 and deferred tax benefit of $593,000 in the current period. The deferred tax benefit is mainly driven by changes in the fair value of investments and amortization of intangibles.

Results of Operation by Segment

The following table summarizes revenues net of sales discounts by segment for the three months ended June 30, 2020March 31, 2021 and 2019:2020:

 

   Three Months Ended June 30,     
   2020   2019   $ Change   % Change 

Consumer Packaged Goods

  $56,331,517   $23,063,374   $33,268,143    144% 

Retail

   87,541,572    25,851,990    61,689,582    239% 

Intersegment Eliminations

   (24,233,165)    (4,188,587)    (20,044,578)    n.m. 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Revenues, Net of Discounts

  $119,639,924   $44,726,777   $74,913,147    167% 
  

 

 

   

 

 

   

 

 

   

 

 

 

   Six Months Ended June 30,     
   2020   2019   $ Change   % Change 

Consumer Packaged Goods

  $102,653,545   $36,558,111   $66,095,434    181% 

Retail

   163,503,022    41,969,358    121,533,664    290% 

Intersegment Eliminations

   (43,914,041)    (5,887,529)    (38,026,512)    n.m. 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Revenues, Net of Discounts

  $222,242,526   $72,639,940   $149,602,586    206% 
  

 

 

   

 

 

   

 

 

   

 

 

 

n.m. – not meaningful

   Three Months Ended
March 31,		        
   2021   2020   $
Change		   %
Change

Consumer Packaged Goods

  $104,077,438   $46,322,028   $57,755,410   125%

Retail

   130,108,718    75,961,450    54,147,268   71%

Intersegment Eliminations

   (39,755,572)    (19,680,876)    (20,074,696)   102%
  

 

 

   

 

 

   

 

 

   

 

Revenues, Net of Discounts

  $194,430,584   $102,602,602   $91,827,982   89%
  

 

 

   

 

 

   

 

 

   

 

Three Months Ended June 30,March 31, 2021 Compared with the Three Months Ended March 31, 2020 vs 2019

Revenues, net of discounts for the Retail segment were $87,541,572,$130,108,718, an increase of $61,689,582$54,147,268 or 239%71%, compared to the three months ended June 30, 2019.March 31, 2020. The increase in Retail revenues, net of discounts, was primarily driven by legalization of adult-useincreased store traffic to Green Thumb’s open and operating retail stores, particularly in Illinois on January 1, 2020and Pennsylvania, as well as new store openings particularly in Illinois and Pennsylvania.

Revenues, net of discounts for the Consumer Packaged Goods Segment were $56,331,517,$104,077,438, an increase of $33,268,143$57,755,410 or 144%125%, compared to the three months ended June 30, 2019.March 31, 2020. The increase in Consumer Packaged Goods revenues, net of discounts, was primarily driven by the legalization of adult-use of cannabis

- 35 -

in Illinois on January 1, 2020, as well as increased sales volume in established markets such as Illinois, Pennsylvania, Massachusetts, Nevada and Maryland.

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.

Six Months Ended June 30, 2020 vs 2019

Revenues, net of discounts for the Retail Segment were $163,503,022, an increase of $121,533,664 or 290%, compared to the six months ended June 30, 2019. The increase in Retail revenues, net of discounts, was primarily driven by legalization of adult-use in Illinois on January 1, 2020 as well as new store openings particularly in Illinois and Pennsylvania, and the acquisition of the Essence stores in Nevada in June 2019.

Revenues, net of discounts for the Consumer Packaged Goods Segment were $102,653,545, an increase of $66,095,434 or 181%, compared to the six months ended June 30, 2019. The increase in Consumer Packaged Goods revenues, net of discounts, was primarily driven by the legalization of adult-use of cannabis in Illinois on January 1, 2020, increased sales volume in established markets such as Pennsylvania, Massachusetts and Maryland and the acquisition of Desert Grown Farms and Cannabiotix in Nevada in June 2019.

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.

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 brandsBeboe, Dogwalkers, Dr. Solomon’s, incredibles, Rythm, Dogwalkers,and The Feel Collection, and Beboe, among others, 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 retail stores, as well as direct-to-consumer delivery where applicable by state law.

For the sixthree months ended June 30, 2020,March 31, 2021, revenue was contributed from Consumer Packaged Goods and Retail sales across all twelve markets, which include California, Colorado, Connecticut, Florida, Illinois, Maryland, Massachusetts, Nevada, New Jersey, New York, Ohio and Pennsylvania.

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 the Company’sour gross profit as a percentage of revenue.

Over

- 34 -

During the sixthree months ended June 30, 2020,March 31, 2021, the Company continued to be focused on executingcreating 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 subject to the Company’s capital allocation planswith acquisitions and the evolving situation with respect to the impact of COVID-19.partnerships, and scales resources into new markets.

- 36 -

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.

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 stockstock-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 aregistered with the U.S. Securities and Exchange Commission registrant.Commission.

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 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.

-35-

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.

 

- 37 -

  Three Months Ended   Six Months Ended 
  June 30,   June 30,   Three Months Ended
March 31,		 
  2020   2019   2020   2019   2021   2020 

Net Income (Loss) Before Non-Controlling Interest

  $(11,763,937)   $(20,675,103)   $(15,527,497)   $(30,379,158)   $11,454,968   $(3,763,560) 

Interest Income

   (16,410)    (535,894)    (104,525)    (892,724)    (49,890)    (88,115) 

Interest Expense

   4,734,908    5,398,054    9,776,350    5,849,932    4,123,176    5,041,442 

Provision For Income Taxes

   15,378,715    (154,333)    28,527,715    1,081,667    30,856,178    13,149,000 

Other Income

   5,717,427    6,640,546    (1,068,683)    1,383,893    5,149,817    (6,786,110) 

Depreciation and amortization

   14,239,915    6,251,970    26,945,085    9,513,303    14,993,421    12,705,172 
  

 

   

 

   

 

   

 

   

 

   

 

 

Earnings before interest, taxes, depreciation and amortization (EBITDA) (non-GAAP measure)

  $28,290,618   $(3,074,760)   $48,548,445   $(13,443,087)   $66,527,670   $20,257,829 
  

 

   

 

   

 

   

 

   

 

   

 

 

Stock-based compensation, non-cash

   5,700,144    3,915,188    10,773,886    9,759,988    4,030,655    5,073,742 

Acquisition, transaction and other non-operating costs

   1,421,949    1,444,555    1,635,304    3,852,037    796,956    213,353 
  

 

   

 

   

 

   

 

   

 

   

 

 

Adjusted Operating EBITDA (non-GAAP measure)

  $35,412,711   $2,284,983   $60,957,635   $168,938   $71,355,281   $25,544,924 
  

 

   

 

   

 

   

 

   

 

   

 

 

Liquidity, Financing Activities During the Period, and Capital Resources

As of June 30, 2020,March 31, 2021, and December 31, 20192020 the Company had total current liabilities of $133,444,995$108,444,304 and $111,367,255,$119,288,435, respectively, and cash and cash equivalents of $82,942,672$275,898,839 and $46,667,334,$83,757,785, respectively to meet its current obligations. The Company had working capital of $19,201,585$272,514,335 as of June 30, 2020,March 31, 2021, an increase of $21,506,229$207,858,765 as compared to December 31, 2019.2020. This increase in working capital was primarily driven by the $43,838,166 increase in revenue experienced in the second quarter$155,498,140 sale of 2020 over the fourth quarter of 2019 and the corresponding working capital impact from this increase. The Company’s quarterly results were driven by organic growth acrossregistered Subordinate Voting Shares pursuant to the Company’s Consumer Packaged Goods and Retail businesses, particularly in Illinois following the commencement of adult use salesRegistration Statement on January 1, 2020, and in Pennsylvania along with the settlement of certain contingent consideration during the quarter.Form S-1.

In the first sixthree months of 2020,2021, Green Thumb generated revenue from all 12 of its markets: California, Colorado, Connecticut, Florida, Illinois, Maryland, Massachusetts, Nevada, New Jersey, New York, Ohio and Pennsylvania. The Company’s Consumer Packaged Goods revenue grew approximately 20%8%, net of intersegment salesdiscounts, during the three months ended June 30, 2020March 31, 2021 as compared to the three months ended MarchDecember 31, 2020. As of June 30, 2020, Green Thumb’s branded products were sold in over 700 retail stores, includingprimarily driven by organic growth across the Company’s Rise and Essence retail stores.Consumer Packaged Goods Business. The Company’s Retail gross revenue, net of discounts, increased 15%8% during the three months ended June 30, 2020March 31, 2021 as compared to the three months ended MarchDecember 31, 2020, primarily driven by increased transaction activity across the Company’s 48 retail56 Retail store footprint, which includes two retail stores opened in Illinois and the one retail store opened in Pennsylvania during the quarter.footprint.

The Company is an early-stage growth company, which is generating cash from revenues and is deploying its capital reserves to acquire and develop assets capable of producing additional revenues and earnings over both the immediate and near 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.

- 36 -

While the Company’sour revenue, gross profit and operating income were not materially impacted by COVID-19 and we maintained the consistency of our operations during the first and second quarterthree months of 2020,2021, the uncertain nature of the spread of COVID-19 may impact the Company’sour business operations for reasons including the potential quarantine of Green Thumbour employees or those of the Company’sour supply chain partnerspartners. 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 the Company doeswe 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.

- 38 -

Cash Flows

Cash Used in Operating Activities, Investing and Financing Activities

Net cash used inprovided by (used in) operating, investing and financing activities for the sixthree months ended June 30,March 31, 2021 and 2020, and 2019, were as follows:

 

                                                            
   Six Months Ended June 30, 
   2020   2019 

Net Cash provided by (used in) Operating Activities

  $60,250,326   $(4,874,188) 
   Three Months Ended
March 31,		 
   2021   2020 

Net cash provided by operating activities

  $39,655,753   $27,048,097 

Net cash used in investing activities

  $(7,241,005)   $(1,447,583) 

Net cash provided by (used in) financing activities

  $159,726,306   $(745,894) 

Cash Flow from Investing Activities

Net cash used in investing activities for the six months ended June 30, 2020 and 2019, were as follows:

                                                
   Six Months Ended June 30, 
   2020   2019 

Net Cash (used in) provided by Investing Activities

  $(22,234,932)   $(100,097,530) 

Cash Flow from Financing Activities

Net cash (used in) provided by financing activities for the six months ended June 30, 2020 and 2019, were as follows:

                                                
   Six Months Ended June 30, 
   2020   2019 

Net Cash (used in) provided by Financing Activities

  $(1,740,056)   $94,745,072 

Contractual Cash Obligations and Other Commitments and Contingencies

The following table quantifies the Company’s future contractual obligations as of June 30, 2020:

   Total   2020   2021   2022   2023   2024   Thereafter 

Notes Payable(a)

  $105,466,429   $—     $—     $—     $105,466,429   $—     $—   

Charitable Contributions

   809,887    183,918    187,942    192,054    196,256    49,717    —   

Mortgage Payable(b)

   1,814,000    82,907    87,209    91,734    96,285    101,490    1,354,375 

Interest Due on Notes Payable

   36,615,633    6,310,649    12,655,971    12,655,971    4,993,041    —      —   

Interest Due on Mortgage Payable

   780,475    45,677    87,928    83,516    78,874    74,207    410,273 

Operating Leases—Third Party

   279,478,764    9,508,748    22,589,952    22,569,154    22,349,279    21,503,153    180,958,478 

Operating Leases—Related Parties

   16,257,187    644,060    1,307,183    1,337,130    1,367,771    1,255,713    10,345,330 

Contingent Consideration

   36,528,724    27,542,989    8,985,735    —      —      —      —   

Construction Commitments

   5,069,000    5,069,000    —      —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total as of June 30, 2020

  $482,820,099   $49,387,948   $45,901,920   $36,929,559   $134,547,935   $22,984,280   $193,068,456 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(a)-On May 21, 2020, the Company exercised its option to extend the maturity date of its senior secured notes for an additional year. The new maturity date is May 22, 2023. Additionally, this amount excludes $12,703,887 of unamortized debt discount as of June 30, 2020. See Note 6 - Notes Payable for details.
(b)-The amount excludes $181,272 of unamortized debt discount as of June 30, 2020. See Note 6 - Notes Payable for details.

- 39 -

Off-Balance Sheet Arrangements

As of June 30, 2020,March 31, 2021, 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 the Company’sour critical accounting policies and estimates from the information provided in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in the Company’s 2019our 2020 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, the Company’sour financial statements may not be comparable to companies that comply with public company effective dates.

ITEM 3.

ITEM 3. QUANTITAVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes to the Company’sour market risk disclosures as set forth in Part II Item 7A of the Company’s Annual Report onour 2020 Form 10-K for the year ended December 31, 2019 except as described below.

COVID-19

The Company is monitoring COVID-19 closely, and although operations have not been materially affected by the COVID-19 outbreak to date, the ultimate severity of the outbreak and its impact on the economic environment is uncertain. Operations of the Company are currently ongoing as the cultivation, processing and sale of cannabis products is currently considered an essential business by the States in which we operate with respect to all customers (except for Massachusetts, where cannabis has been deemed essential only for medical patients, leading to a state-wide suspension of sales of recreational cannabis from March 24, 2020 to May 25, 2020). The Company’s ability to continue to operate without any significant negative operational impact from COVID-19 pandemic will in part depend on the Company’s ability to protect Green Thumb employees, customers and supply chain and continued designation as “essential” in states where the Company does business that currently or in the future impose restrictions on business operations.10-K.

 

- 4037 -

ITEM 4.

CONTROLS AND PROCEDURES

ITEM 4. CONTROLS AND PROCEDURES

(a)

(a) Disclosure Controls and Procedures

The Company evaluated the effectiveness of itsour disclosure controls and procedures as of June 30, 2020.March 31, 2021. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be 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 by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s 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. Management, including the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(b) and Rule 15d-15(e) of the Exchange Act) as of June 30, 2020.March 31, 2021. As of December 31, 2019, Green Thumb, as an emerging growth company, Green Thumb was not required to include management’s assessment of Internal Controls over Financial Reporting (“ICFR”) or an attestation report of the Company’s registered public accounting firm in its 2019our 2020 Form 10-K. However, management has developed and is in the process of enhancing the Company’s ICFR and its disclosure controls and procedures in preparation for the annual audit of the Company for the 2021 fiscal year. Green Thumb expects to be required to include both management’s assessment of ICFR and the attestation of the Company’s independent registered public accounting firm regarding the Company’s ICFR in the Company’sour 2021 annual report on Form 10-K. Management, including the Chief Executive Officer and Chief Financial Officer, have carefully considered the Company’s progress in the development of the disclosure controls and procedures to date and determined that they were reasonably effective at the assurance level as of June 30, 2020.March 31, 2021.

 

- 4138 -

PART II — OTHER INFORMATION

ITEM 1.

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 the Company’sour results of operations or financial condition.

ITEM 1A.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors disclosed in the 20192020 Form 10-K.

ITEM 2.

ITEM 2. UNREGISTERED SALE OF EQUITY SECURITIES

Recent Sales of Unregistered Securities

The following information represents securities sold by the Company duringfor the six months ended June 30, 2020period covered by this Quarterly Report on Form 10-Q which were not registered under the Securities Act. Included are new issues, securities issued in exchange for property, services or other securities, securities issued upon conversion from other share classes and new securities resulting from the modification of outstanding securities. The Company sold all of the securities listed below pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act, or Regulation D or Regulation S promulgated thereunder, or, in the case of shares in connection with the Company’sour 2018 Share and Incentive Plan, in reliance upon Rule 701 promulgated under Section 3(b) of the Securities Act as transactions by an issuer pursuant to benefit plans and contracts related to compensation.

Subordinate Voting Shares

On January 3, 2020, the CompanyBetween February 22, 2021 and March 22, 2021, we issued, 287,478 Subordinate Voting Shares as contingent consideration associated with the Company’s 2019 acquisition of Advanced Grow Labs.

On January 15, 2020, the Company converted 127,730 Multiple Voting Shares into 12,773,000 Subordinate Voting Shares.

On February 11, 2020, the Company converted 2,480 Multiple Voting Shares into 248,000 Subordinate Voting Shares.

On February 12, 2020, the Company issued 48,450 Subordinate Voting Shares as deferred share issuances associated with the Company’s 2019 acquisition of KW Ventures Holdings, LLC minority interest.

On February 26, 2020, the Company issued 779,690 Subordinate Voting Shares as contingent consideration associated with the Company’s 2019 acquisition of For Success Holding Company.

On May 15, 2020, the Company issued 101,695 Subordinate Voting Shares as deferred share issuances associated with the Company’s 2019 acquisition of Salveo (Rise Canton).

On May 18, 2020, the Company issued 1,109,055 Subordinate Voting Shares as contingent consideration associated with the Company’s 2019 acquisition of Advanced Grow Labs, LLC.

On May 20, 2020, the Company issued 17,112176,729 Subordinate Voting Shares associated with acquisition related commitments to the exerciseformer owners of broker options issued as part of the Company’s June 12, 2018 reverse takeover of Bayswater Uranium Corporation.privately held companies.

- 42 -

On May 25, 2020,March 22, 2021, the Company issued 268,620412,744 Subordinate Voting Shares as contingent consideration associated with the Company’s 2019 acquisition of Integral Associates, LLC.

On June 29, 2020, the Company issued 190,000 Subordinate Voting Shares as deferred share issuances associated with the Company’s 2019 acquisition of MC Brands, LLC.

Beginning on January 9, 2020February 1, 2021 and continuing through June 26, 2020,February 8, 2021, the Company converted 260,59111,030 Multiple Voting Shares into 26,059,1001,103,000 Subordinate Voting Shares.

From January 1, 2020 through February 19, 2020 (the effective date of the filing of the Company’s registration statement on Form S-8), the Company issued, in total, 77,500 Subordinate Voting Shares to holders of the Company’s RSU’s issued under the Company’s 2018 Stock and Incentive Plan, which vested over the same period.

Multiple Voting Shares

Beginning January 15, 2020On February 1, 2021 and continuing through June 26, 2020,February 8, 2021, the Company converted 13,95311,030 Super Voting Shares were converted into 13,95311,030 Multiple Voting Shares.

Beginning on January 9, 2020On February 1, 2021 and continuing through June 26, 2020,February 8, 2021, the Company converted 260,59111,030 Multiple Voting Shares into 26,059,1001,103,000 Subordinate Voting Shares.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.

ITEM 4. MINE SAFETY DISCLOSURE

Not Applicable.

ITEM 5.

OTHER INFORMATION

None.

- 39 -

ITEM 6.

ITEM 6. EXHIBITS

The following exhibits are filed with this report:

 

  10.1*2021 Executive Annual Bonus Plan
31.1  CERTIFICATE OF CHIEF EXECUTIVE OFFICER
31.2  CERTIFICATE OF CHIEF FINANCIAL OFFICER
32.1  CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
32.2  CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002c
101.INS  XBRL Instance Document
101.SCH  XBRL Taxonomy Extension Schema Document
101.CAL  XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF  XBRL Taxonomy Extension Definition Linkbase Document
101.LAB  XBRL Taxonomy Extension Label Linkbase Document
101.PRE  XBRL Taxonomy Extension Presentation Linkbase Document

 

*

- Certain confidential information has been excluded from this exhibit because it would be competitively harmful if publicly disclosed.

- 4340 -

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: August 13, 2020May13, 2021

 

GREEN THUMB INDUSTRIES INC.

/s/Anthony Georgiadis

By: Anthony Georgiadis
Title: Chief Financial Officer

Date: AugustMay 13, 2020

2021

 

- 4441 -