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 September 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 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 Act. Yes  ☒    No  ☐

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 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 November 5, 2020,May 1, 2021, there were 175,040,286185,434,044 shares of the registrant’s Subordinate Voting Shares, 6,779,3003,965,400 shares of the registrant’s Multiple Voting Shares (on an as converted basis) and 31,203,10030,103,100 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 SEPTEMBER 30, 2020March 31, 2021

TABLE OF CONTENTS

 

FINANCIAL

INFORMATION

  Page 
 Part I  

ITEM 1:

 Unaudited Interim Condensed Consolidated Balance Sheets as of September 30, 2020March 31, 2021 and December 31, 20192020   4 
 Unaudited Interim Condensed Consolidated Statements of Operations for the three and nine months ended September 30,March 31, 2021 and 2020 and 2019   5 
 Unaudited Interim Condensed Consolidated Statements of Shareholders’ Equity for the ninethree months ended September 30,March 31, 2021 and 2020 and 2019   6 
 Unaudited Interim Condensed Consolidated Statements of Cash Flows for the ninethree months ended September 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  37

ITEM 4:

 Controls and Procedures  38
 Part II  

OTHER

INFORMATION

   

ITEM 1:

 Legal Proceedings   4439 

ITEM 1a:

 Risk Factors   4439

ITEM 2:

Sale of Unregistered Securities39

ITEM 3:

Defaults Upon Senior Securities39 

ITEM 4:

 Mine Safety Disclosure   4539

ITEM 5:

Other Information39 

ITEM 6:

 Exhibits   4540 

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 -

Green Thumb Industries Inc.       
Unaudited Interim Condensed Consolidated Balance Sheets       
As of September 30, 2020 and December 31, 2019       
(Amounts Expressed in United States Dollars, Except for Share Amounts)       
          
   September 30,
2020		  December 31,
2019		 
      (Audited) 

ASSETS

   

Current Assets:

   

Cash and Cash Equivalents

  $78,091,073  $46,667,334 

Accounts Receivable

   13,121,285   7,530,253 

Inventories

   55,164,258   46,034,481 

Prepaid Expenses

   6,990,373   6,780,657 

Other Current Assets

   5,692,248   2,049,886 
  

 

 

  

 

 

 

Total Current Assets

   159,059,237   109,062,611 

Property and Equipment, Net

   177,725,092   155,596,675 

Right of Use Assets, Net

   99,447,497   63,647,812 

Investments

   22,210,999   14,068,821 

Investment in Associate

   11,750,000   10,350,000 

Notes Receivable

   —     815,937 

Intangible Assets, Net

   409,655,517   435,246,898 

Goodwill

   373,081,716   375,084,991 

Deposits and Other Assets

   1,684,389   3,662,879 
  

 

 

  

 

 

 

TOTAL ASSETS

  $1,254,614,447  $1,167,536,624 
  

 

 

  

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

   

LIABILITIES

   

Current Liabilities:

   

Accounts Payable

  $10,988,374  $8,745,821 

Accrued Liabilities

   46,311,550   37,184,406 

Current Portion of Notes Payable

   301,027   206,675 

Current Portion of Lease Liabilities

   4,654,032   3,833,268 

Liability for Acquisition of Noncontrolling Interest

   —     5,500,000 

Contingent Consideration Payable

   27,100,000   50,391,181 

Income Tax Payable

   16,543,826   5,505,904 
  

 

 

  

 

 

 

Total Current Liabilities

   105,898,809   111,367,255 

Long-Term Liabilities:

   

Lease Liabilities, Net of Current Portion

   102,408,462   61,115,737 

Notes Payable, Net of Current Portion and Debt Discount

   96,758,233   91,140,194 

Contingent Consideration Payable

   9,215,360   8,545,558 

Warrant Liability

   18,513,000   15,879,843 

Deferred Income Taxes

   41,744,283   36,279,361 
  

 

 

  

 

 

 

TOTAL LIABILITIES

   374,538,147   324,327,948 

COMMITMENTS AND CONTINGENCIES SHARE HOLDERS’ EQUITY

   

Subordinate Voting Shares (Shares Authorized, Issued and Outstanding at September 30, 2020: Unlimited, 162,999,921 and 162,999,921, respectively, at December 31, 2019: Unlimited, 128,999,964 and 128,999,964, respectively)

   —     —   

Multiple Voting Shares (Shares Authorized, Issued and Outstanding at September 30, 2020: Unlimited, 120,910 and 120,910, respectively, at December 31, 2019: Unlimited, 373,350 and 373,350, respectively)

   —     —   

Super Voting Shares (Shares Authorized, Issued and Outstanding at September 30, 2020: Unlimited, 379,336 and 379,336, respectively, at December 31, 2019: Unlimited, 402,289 and 402,289, respectively)

   —     —   

Share Capital

   1,041,770,917   980,638,701 

Contributed Surplus

   1,656,498   3,960,854 

Deferred Share Issuances

   1,835,331   16,587,798 

Accumulated Deficit

   (167,963,430)   (160,491,590) 
  

 

 

  

 

 

 

Equity of Green Thumb Industries Inc.

   877,299,316   840,695,763 

Noncontrolling interests

   2,776,984   2,512,913 
  

 

 

  

 

 

 

TOTAL SHAREHOLDERS’ EQUITY

   880,076,300   843,208,676 
  

 

 

  

 

 

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

  $1,254,614,447  $1,167,536,624 
  

 

 

  

 

 

 
          

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

 

- 4 --3-

Green Thumb Industries Inc.

Unaudited Interim Condensed Consolidated StatementsBalance Sheets

As of OperationsMarch 31, 2021 and December 31, 2020

Three and Nine Months Ended September 30, 2020 and 2019

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

 

 

 

   Three Months Ended September 30,  Nine Months Ended September 30, 
   2020  2019  2020  2019 

Revenues, net of discounts

  $157,103,841  $67,990,907  $379,346,367  $140,630,847 

Cost of Goods Sold, net

   (70,146,676)   (35,849,783)   (175,707,874)   (74,196,750) 
  

 

 

  

 

 

  

 

 

  

 

 

 

Gross Profit

   86,957,165   32,141,124   203,638,493   66,434,097 
  

 

 

  

 

 

  

 

 

  

 

 

 

Expenses:

     

Selling, General, and Administrative

   49,745,979   30,764,406   144,823,947   88,013,769 
  

 

 

  

 

 

  

 

 

  

 

 

 

Total Expenses

   49,745,979   30,764,406   144,823,947   88,013,769 
  

 

 

  

 

 

  

 

 

  

 

 

 

Income (Loss) From Operations

   37,211,186   1,376,718   58,814,546   (21,579,672) 
  

 

 

  

 

 

  

 

 

  

 

 

 

Other Income (Expense):

     

Other Income (Expense), net

   6,432,883   (6,585,540)   7,501,566   (7,969,433) 

Interest Income, net

   5,397   407,509   109,922   1,300,233 

Interest Expense, net

   (4,460,125)   (5,912,290)   (14,236,475)   (11,762,222) 
  

 

 

  

 

 

  

 

 

  

 

 

 

Total Other Income (Expense)

   1,978,155   (12,090,321)   (6,624,987)   (18,431,422) 
  

 

 

  

 

 

  

 

 

  

 

 

 

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

   39,189,341   (10,713,603)   52,189,559   (40,011,094) 
  

 

 

  

 

 

  

 

 

  

 

 

 

Provision For Income Taxes

   28,436,332   3,624,333   56,964,047   4,706,000 
  

 

 

  

 

 

  

 

 

  

 

 

 

Net Income (Loss) Before Non-Controlling Interest

   10,753,009   (14,337,936)   (4,774,488)   (44,717,094) 

Net Income Attributable to Non-Controlling Interest

   1,109,080   252,857   2,697,352   328,804 
  

 

 

  

 

 

  

 

 

  

 

 

 

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

  $9,643,929  $(14,590,793)  $(7,471,840)  $(45,045,898) 
  

 

 

  

 

 

  

 

 

  

 

 

 

Net Income (Loss) per share - basic

  $0.04  $(0.07)  $(0.04)  $(0.24) 
  

 

 

  

 

 

  

 

 

  

 

 

 

Net Income (Loss) per share - diluted

  $0.04  $(0.07)  $(0.04)  $(0.24) 
  

 

 

  

 

 

  

 

 

  

 

 

 

Weighted average number of shares outstanding - basic

   211,990,405   204,709,085   210,127,323   184,851,805 
  

 

 

  

 

 

  

 

 

  

 

 

 

Weighted average number of shares - outstandingdiluted

   214,212,292   204,709,085   210,127,323   184,851,805 
  

 

 

  

 

 

  

 

 

  

 

 

 
   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

 

- 5 --4-

Green Thumb Industries Inc.

Unaudited Interim Condensed Consolidated Statements of Operations

Three Months Ended March 31, 2021 and 2020

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

   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

-5-

Green Thumb Industries Inc.

Unaudited Interim Condensed Consolidated Statements of Changes in Shareholders’ Equity

NineThree Months Ended September 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, July 1, 2019

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

Issuance of shares under business combinations and investments

  14,085,238   —     88   —     —     —     14,085,326 

Stock based compensation

  —     —     3,564,095   —     —     —     3,564,095 

Shares withheld in lieu of cash

  —     —     (125,060)   —     —     —     (125,060) 

Distributions to limited liability company unit holders

  —     —     —     —     —     (1,900,000)   (1,900,000) 

Net (loss) income

  —     —     —     —     (14,590,793)   252,857   (14,337,936) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance, September 30, 2019

 $964,821,738  $—    $(1,558,257)  $16,587,798  $(146,421,081)  $(2,039,798)  $831,390,400 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

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

  509,568,665   —     (23,813,393)   —     —     —     485,755,272 

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

  —     —     13,324,083   —     —     —     13,324,083 

Shares withheld in lieu of cash

  —     —     (125,060)   —     —     —     (125,060) 

Distributions to limited liability company unit holders

  —     —     —     —     —     (7,516,061)   (7,516,061) 

Net (loss) income

  —     —     —     —     (45,045,898)   328,804   (44,717,094) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance, September 30, 2019

 $964,821,738  $—    $(1,558,257)  $16,587,798  $(146,421,081)  $(2,039,798)  $831,390,400 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance, July 1, 2020

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

Noncontrolling interests adjustment for change in ownership

  —     —     5,700,000   —     —     —     5,700,000 

Issuance of shares for redemption of noncontrolling interests

  20,078,940   —     (14,728,940)   —     —     —     5,350,000 

Distribution of contingent consideration

  2,690,914   —     —     —     —     —     2,690,914 

Distribution of deferred shares

  13,444,669   —     —     (13,444,669)   —     —     —   

Exercise of options and warrants

  744,332   —     (295,908)   —     —     —     448,424 

Stock based compensation

  —     —     4,435,634   —     —     —     4,435,634 

Distributions to third party and limited liability company unit holders

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

Net income

  —     —     —     —     9,643,929   1,109,080   10,753,009 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance, September 30, 2020

 $1,041,770,917  $—    $1,656,498  $1,835,331  $(167,963,430)  $2,776,984  $880,076,300 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance, January 1, 2020

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

Contributions from limited liability company unit holders

  —     —     —     —     —     50,000   50,000 

Issuance of shares under business combinations and investments

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

Issuance of shares for redemption of noncontrolling interests

  20,078,940   —     (14,728,940)   —     —     —     5,350,000 

Distribution of contingent consideration

  22,885,813   —     —     —     —     —     22,885,813 

Distribution of deferred shares

  14,752,467   —     —     (14,752,467)   —     —     —   

Issueance of warrants

  —     —     181,272   —     —     —     181,272 

Exercise of options and warrants

  890,436   —     (234,340)   —     —     —     656,096 

Stock based compensation

  —     —     15,209,518   —     —     —     15,209,518 

Distributions to third party and limited liability company unit holders

  —     —     (53,377)   —     —     (2,483,281)   (2,536,658) 

Net (loss) income

  —     —     —     —     (7,471,840)   2,697,352   (4,774,488) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance, September 30, 2020

 $1,041,770,917  $—    $1,656,498  $1,835,331  $(167,963,430)  $2,776,984  $880,076,300 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

- 6 -

Green Thumb Industries Inc.

Unaudited Interim Condensed Consolidated Statements of Cash Flows

Nine Months Ended September 30, 2020 and 2019

(Amounts Expressed in United States Dollars)

   Nine Months Ended September 30, 
   2020  2019 

CASH FLOW FROM OPERATING ACTIVITIES

   

Net loss attributable to Green Thumb Industries Inc.

  $(7,471,840)  $(45,045,898) 

Net income attributable to non-controlling interest

   2,697,352   328,804 

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

   

Depreciation and amortization

   38,479,960   17,528,891 

Amortization of operating lease assets

   18,987,980   4,229,889 

Loss on disposal of property and equipment

   29,858   —   

(Gain) loss from investment in associate

   —     56,423 

Bad debt expense

   315,798   —   

Deferred income taxes

   4,377,000   (5,712,000) 

Stock based compensation

   15,209,520   13,324,083 

Decrease (increase) in fair value of investments

   (9,542,178)   886,002 

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

   —     (823,550) 

Interest on contingent consideration payable and acquisition liabilities

   998,842   3,258,804 

Decrease in fair value of contingent consideration

   (425,424)   —   

Increase in fair value of warrant liability

   2,060,771   —   

Decrease in fair value of note receivable

   815,937   7,424,727 

Amortization of debt discount

   4,048,531   2,100,738 

Changes in operating assets and liabilities:

   

Accounts receivable

   (5,616,054)   1,165,271 

Inventories

   (9,129,777)   (9,478,848) 

Prepaid expenses and other current assets

   (4,142,854)   (3,237,772) 

Deposits and other assets

   1,567,458   1,045,821 

Accounts payable

   2,242,553   1,707,947 

Accrued liabilities

   13,609,399   14,451,557 

Operating lease liabilities

   (12,674,176)   (4,184,228) 

Income tax payable

   14,617,544   260,535 
  

 

 

  

 

 

 

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

   71,056,200   (712,804) 
  

 

 

  

 

 

 

CASH FLOW FROM INVESTING ACTIVITIES

   

Purchases of property and equipment

   (49,221,442)   (66,875,245) 

Proceeds from disposal of assets

   11,799,025   —   

Repayment of debenture investments

   —     3,000,000 

Purchase of businesses, net of cash acquired

   —     (108,067,892) 
  

 

 

  

 

 

 

NET CASH USED IN INVESTING ACTIVITIES

   (37,422,417)   (171,943,137) 
  

 

 

  

 

 

 

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

   (2,536,658)   (7,516,061) 

Proceeds from exercise of options and warrants

   656,096   —   

Proceeds from issuance of notes payable

   —     117,435,724 

Payment for purchase of noncontrolling interest

   (150,000)   —   

Principal repayment of notes payable

   (229,482)   (18,778,140) 
  

 

 

  

 

 

 

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES

   (2,210,044)   92,791,523 
  

 

 

  

 

 

 

CASH, CASH EQUIVALENTS AND RESTRICED CASH:

   

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

   31,423,739   (79,864,418) 

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

   46,667,334   145,986,072 
  

 

 

  

 

 

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

  $78,091,073  $66,121,654 
  

 

 

  

 

 

 
   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-

Green Thumb Industries Inc.

Unaudited Interim Condensed Consolidated Statements of Cash Flows

Three Months Ended March 31, 2021 and 2020

(Amounts Expressed in United States Dollars)

 

 

- 7 -

   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

-7-

Green Thumb Industries Inc.

Unaudited Interim Condensed Consolidated StatementsStatement of Cash Flows

NineThree Months Ended September 30,March 31, 2021 and 2020 and 2019

(Amounts Expressed in United States Dollars)

 

 

 

  Nine Months Ended September 30,   Three Months Ended March 31, 
  2020 2019   2021 2020 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

      

Interest paid

  $9,418,727  $5,964,621   $3,183,099  $2,910,111 
  

 

  

 

   

 

  

 

 

NONCASH INVESTING AND FINANCING ACTIVITIES

      

Accrued capital expenditures

  $(6,798,187)  $4,232,914   $(3,405,937)  $6,966,907 
  

 

  

 

 
  

 

  

 

 

Noncash increase in right of use asset

  $(36,854,352)  $(22,233,609)   $(5,769,937)  $(33,742,287) 
  

 

  

 

   

 

  

 

 

Noncash increase in lease liability

  $36,854,352  $22,731,855   $5,769,937  $33,742,287 
  

 

  

 

 

Net liability upon adoption of ASC 842, Leases

  $—    $(498,246) 
  

 

  

 

 

Exercise of put option

  $—    $4,200,382 
  

 

  

 

 

Warrants attributable to debt issuance

  $753,658  $—   
  

 

  

 

 

Mortgages associated with dispensaries

  $2,647,000  $—   
  

 

  

 

 

Liability for purchase of noncontrolling interest

  $(5,350,000)  $—   
  

 

  

 

 

Liability associated with acquisition agreement

  $2,000,000  $—   
  

 

  

 

 
  

 

  

 

 

Issuance of shares under acquisition agreement

  $22,485,670  $(485,476,925)   $13,672,681  $8,967,257 
  

 

  

 

   

 

  

 

 

Deferred share issuances

  $(14,752,467)  $16,587,798   $1,835,329  $400,143 
  

 

  

 

   

 

  

 

 

Issuance of shares under business combinations

  $—    $6,062 
  

 

  

 

 

Acquisitions

      

Inventory

  $—    $13,602,245 

Accounts receivable

   —    2,117,412 

Property and equipment

   80,615  17,341,103 

Right of use assets

   —    4,154,672 

Identifiable intangible assets

   (145,000)  305,625,592 

Goodwill

   (2,003,275)  393,278,807   $—    $(2,865,992) 

Deposits and other assets

   603,988  1,694,533    —     1,015,020 

Liabilities assumed

   (1,302,604)  (9,489,616)    —     (302,604) 

Lease liabilities

   —    (4,154,672) 

Contingent liabilities

   —    (52,864,000) 

Equity interests issued

   503,389  (485,476,925)    —     503,389 

Deferred share issuances

   —    (16,587,798) 

Conversion of note receivable previously issued

   —    (27,025,800) 

Acquisition liability

   (228,813)  (1,630,893)    —     (228,813) 

Deferred income taxes

   2,491,700  (32,448,100)    —     1,879,000 
  

 

  

 

   

 

  

 

 
  $—    $—     $—    $—   
  

 

  

 

   

 

  

 

 

RECONCILIATION OF CASH, AND CASH EQUIVALENTS AND RESTRICTED CASH

      

Cash and cash equivalents

  $75,116,621  $66,121,654   $275,898,839  $64,613,618 

Restricted cash

   2,974,452   —      —     6,908,336 
  

 

  

 

   

 

  

 

 

TOTAL CASH, AND CASH EQUIVALENTS AND RESTRICTED CASH

  $275,898,839  $71,521,954 
  

 

  

 

 

TOTAL CASH, AND CASH EQUIVALENTS AND RESTRICED CASH

  $78,091,073  $66,121,654 
  

 

  

 

 

 

 

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.

Overview and Basis of Presentation

 

 

 (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 named Rise™ and ain the Las Vegas, Nevada areaand Pasadena, California areas, a chain of retail cannabis stores named Essence.Essence as well as retail stores operating under other names, all of which sell our products and third-party products. As of September 30, 2020,March 31, 2021, Green Thumb has 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 700, Chicago, IL 60654.

 

 (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 nine months ended September 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.

Overview and Basis of Presentation (Continued)

 

 

(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 2020 annual report on Form 10-K.

 (d)

Earnings (Loss) per Share

Basic earnings (loss) per share is calculated using the treasury stock method, by dividing the net incomeearnings (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 basic earnings (loss)loss per share calculations.calculation. Diluted earnings (loss) 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 September 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 5,782,5995,974,938 options, 688,5071,477,898 restricted stock units and 2,520,794 warrants outstanding. At September 30, 2019, the Company had 6,031,833 options, 1,479,038 restricted stock units and 2,041,7352,387,470 warrants outstanding.

In order to determine diluted earnings (loss) 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. Under the treasury stock method, the diluted lossearnings per share calculation excludes any potential exerciseconversion of restricted stock units, stock options or warrantsand convertible debt that would increase earnings per share or decrease loss per share. For the three months ended September 30, 2020,March 31, 2021, the computation of diluted lossearnings per share included 1,928,9463,702,372 options, 151,458431,220 restricted stock units and 141,4821,272,136 warrants. No potentially dilutive common share equivalents were included in the computation of diluted loss per share for the three months ended September 30, 2019 and nine months ended September 30,March 31, 2020 and 2019 because their impact was anti-dilutive.

 

 (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 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 simplifiesis 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.

Overview and Basis of Presentation (Continued)

 

 

(e)

Recently Adopted Accounting Standards (Continued)

(iii)

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”). 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”). 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)

On August 5, 2020, the FASB issued Accounting Standards UpdateASU No. 2020-06, Debt -  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 FASB 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.

- 11 -

Green Thumb Industries Inc.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

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

1.

Overview and Basis of Presentation (Continued)

 

 (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 assets 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 ninethree 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 the 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 for the three and nine months ended September 30, 2020 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, 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.

2.

INVENTORIES

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

   September 30,   December 31, 
   2020   2019 

Raw Material

  $3,603,977   $6,375,032 

Packaging and Miscellaneous

   6,173,017    4,887,970 

Work in Process

   24,945,006    20,162,723 

Finished Goods

   22,430,016    16,640,629 

Reserve for Obsolete Inventory

   (1,987,758)    (2,031,873) 
  

 

 

   

 

 

 

Total Inventories

  $55,164,258   $46,034,481 
  

 

 

   

 

 

 

 

- 1211 -

Green Thumb Industries Inc.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

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

 

2.

INVENTORIES

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

   March 31,
2021		   December 31,
2020		 

Raw Material

  $6,867,319   $6,372,659 

Packaging and Miscellaneous

   6,916,026    8,592,153 

Work in Process

   28,887,069    25,488,806 

Finished Goods

   31,367,676    30,821,392 

Reserve for Obsolete Inventory

   (1,757,718)    (1,732,057) 
  

 

 

   

 

 

 

Total Inventories

  $72,280,372   $69,542,953 
  

 

 

   

 

 

 

3.

PROPERTY AND EQUIPMENT

 

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

 

Cost

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

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

   586.867   21,128,482   4,794,342    12,413,970    342,966    6,118,878   45,385,505 

Disposals

   (979,930)   (4,507,086)   —      —      —      (6,978,389)   (12,465,405) 
  

 

 

  

 

 

  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

As at September 30, 2020

  $2,879,376  $49,998,867  $40,304,213   $81,095,467   $2,842,966   $20,512,605  $197,633,494 
  

 

 

  

 

 

  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

Accumulated Depreciation

           

As at January 1, 2020

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

As at September 30, 2020

  $—    $2,939,951  $8,375,318   $8,426,333   $166,800   $—    $19,908,402 

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 September 30, 2020

  $2,879,376  $47,058,916  $31,928,895   $72,669,134   $2,676,166   $20,512,605  $177,725,092 

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

Cost

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

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 nine months ended September 30,March 31, 2021 and 2020 totaled $2,003,585$4,766,350 and $11,193,570,$3,787,005, respectively of which $311,315$2,869,229 and $5,571,477, respectively, is included in cost of goods sold. Depreciation expense for the three and nine months ended September 30, 2019 totaled $2,494,601 and $5,113,195, respectively of which $1,732,146 and $3,541,236,$2,677,727, respectively, is included in cost of goods sold.

On January 31, 2020, the Company closed 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 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, $4,507,086 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.

 

- 1312 -

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

 

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 September 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 September 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

   17,701,556   6,412,282    2,777,802    394,750    27,286,390 
  

 

 

  

 

 

   

 

 

   

 

 

   

 

 

 

As at September 30, 2020

  $36,179,056  $10,534,082   $6,710,218   $869,419   $54,292,775 

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 September 30, 2020

  $300,630,157  $88,761,517   $18,547,782   $1,716,061   $409,655,517 

At December 31, 2019 intangible assets consisted of the following:

   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 
   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 and nine months ended September 30,March 31, 2021 and 2020 of $9,531,290$10,227,071 and $27,286,390, respectively,$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)

5.

INVESTMENTS

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

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

The Company determines if an arrangement is a lease at inception. The Company must consider whether the contract conveys the right to control the use of an identified asset. Certain arrangements require significant judgment to determine if an asset is specified in the contract and if the Company directs how and for what purpose the asset is used during the term of the contract. For the three and nine months ended September 30, 2019 of $5,419,212,March 31, 2021 and $12,415,696, 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.

In addition, the Company reviewed the estimated useful lives of its intangible assets as part 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.$4,257,515, respectively.

 

- 14 -

Green Thumb Industries Inc.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

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

 

4.6.

INTANGIBLE ASSETS AND GOODWILL (LEASES Continued)

Beginning July 1, 2020, the Company adjusted the useful life of its retail tradename associated with the acquisition of Essence from 15 years to 7 years. The change in useful life was made as a prospective adjustment and resulted in an increase in amortization expense of $1,266,880 for the remainder of 2020, $5,067,520 annually for years 2021 through 2024, and a net reduction in amortization expense of $21,536,960 thereafter.

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

Year Ending December 31,

  Estimated
Amortization
(Prior to
Change in
Useful Life)		   Increase
(Decrease)
from Change
in
Useful Life		   Estimated
Amortization
(After Change
in Useful Life)		 

Remainder of 2020

  $8,426,261   $1,266,880   $9,693,141 

2021

   33,705,044    5,067,520    38,772,564 

2022

   33,274,305    5,067,520    38,341,825 

2023

   33,191,489    5,067,520    38,259,009 

2024

   32,610,156    5,067,520    37,677,676 

Thereafter

   268,448,262    (21,536,960)    246,911,302 
  

 

 

   

 

 

   

 

 

 
  $409,655,517   $—     $409,655,517 
  

 

 

   

 

 

   

 

 

 

Goodwill

At September 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 September 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 
  

 

 

   

 

 

   

 

 

 

During the nine months ended September 30, 2020, the Company recorded measurement period adjustments resulting in a net decrease in goodwill of $2,003,275 associated with 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. Regarding 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.

- 15 -

Green Thumb Industries Inc.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

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

5.

LEASES

 

 

(a)

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

In February 2016, the FASB issued ASU 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 ASU 2016-02 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 ASU 2016-02, see Note 9 – Leases in the 2019 Form 10-K.

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

 

As of
September 30, 2020

Weighted average remaining lease term

10.81

Weighted average discount rate

13.2% 
   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 September 30, 2020March 31, 2021 were as follows:

 

   Maturities of Lease Liability 
   Third Party   Related Party   Total 

Remainder of 2020

  $4,767,957   $322,287   $5,090,244 

2021

   22,243,662    1,307,183    23,550,845 

2022

   22,285,836    1,337,130    23,622,966 

2023

   22,092,882    1,367,771    23,460,653 

2024

   21,387,294    1,255,714    22,643,008 

2025 and Thereafter

   183,998,689    10,345,330    194,344,019 
  

 

 

   

 

 

   

 

 

 

Total Lease Payments

   276,776,320    15,935,415    292,711,735 
  

 

 

   

 

 

   

 

 

 

Less: Interest

   (177,811,636)    (7,837,605)    (185,649,241) 
  

 

 

   

 

 

   

 

 

 

Present Value of Lease Liability

  $98,964,684   $8,907,810   $107,062,494 
  

 

 

   

 

 

   

 

 

 

For the three and nine months ended September 30, 2020 the Company recorded operating lease expense of $6,590,553 and $19,021,190, respectively. For the three and nine months ended September 30, 2019, the Company recorded operating lease expenses of $1,962,561 and $4,229,889, respectively.

   Maturities of Lease Liability 
   Third Party   Related Party   Total 

Year Ending December 31,

      

Remainder of 2021

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

2022

   26,749,723    1,337,130    28,086,853 

2023

   26,615,165    1,367,771    27,982,936 

2024

   26,122,891    1,255,714    27,378,605 

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

   371,011,898    15,290,841    386,302,739 
  

 

 

   

 

 

   

 

 

 

Less: Interest

   (223,197,788)    (7,337,855)    (230,535,643) 
  

 

 

   

 

 

   

 

 

 

Present Value of Lease Liability

  $147,814,110   $7,952,986   $155,767,096 
  

 

 

   

 

 

   

 

 

 

 

(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, and owns certain 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 months ended March 31, 2021 and 2020, the Company recorded lease expense of $295,203 and $222,339, respectively, associated with these leasing arrangements.

 

- 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)

(b)

Related Party Operating Leases (Continued)

and nine months ended September 30, 2020, the Company recorded lease expense of $157,076 and $601,753, respectively, associated with these leasing arrangements. For the three and nine month ended September 30, 2019, the Company recorded operating lease expenses of $148,226 and $339,961, 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 nine months ended September 30, 2020, the Company recorded lease expense of $58,332 and $77,776, respectively, associated with this lease.

(c)

Sales Lease Back Transactions

On January 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.

Following the end of the third quarter of 2020, on October 1, 2020, the Company and IIP agreed to amend the lease on the Toledo, Ohio processing facility. Under the amendment, IIP will provide an additional $25,000,000 in funding to be used for the construction of a cannabis cultivation facility at the property, which currently houses a separate cannabis processing facility. Assuming full payment of the additional funding, IIP’s total investment in the property pursuant to the sale and leaseback transaction and related amendment will be $32,200,000. The Company is in process of evaluating the lease amendment and will conclude on the classification, and value of the right of use asset and related lease liability in the following quarter.

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.

- 17 -

Green Thumb Industries Inc.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

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

6.7.

NOTES PAYABLE

 

At September 30, 2020March 31, 2021 and December 31, 2019,2020, notes payable consisted of the following:

 

  September 30,
2020		 December 31,
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%.

  $763,284  $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 $11,618,400 as of September 30, 2020

   93,848,029  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 $177,244 as of September 30, 2020.

   1,616,606   —   

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.

   831,341   —   

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

   97,059,260  91,346,869    100,071,937    99,054,979 

Less: current portion of notes payable

   (301,027)  (206,675)    (344,380)    (341,983) 
  

 

  

 

   

 

   

 

 

Notes payable, net of current portion

  $96,758,233  $91,140,194   $99,727,557   $98,712,996 
  

 

  

 

   

 

   

 

 

 

 (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 were accounted for as equity and recorded as a discount on the Mortgage.

- 18 -

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)

(c)

Mortgage on Lakewood, Ohio Dispensary

On August 20, 2020, the Company closed on a secured promissory note (the “Lakewood Mortgage”) of $833,000. The Lakewood Mortgage bears interest of 7.25% per annum and matures on August 20, 2025. The Lakewood Mortgage provided by the lender was used to purchase the land, building and building improvements of one of the Company’s dispensaries located in Lakewood, Ohio that the company previously leased.

(d)

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 Company (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).

 

- 16 -

Green Thumb Industries Inc.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

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

7.8.

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 outstanding as of September 30, 2020March 31, 2021 and December 31, 2019:2020:

 

   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 

Warrants Exercised

   (5,941)     12.42    5.00    -    -    - 
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as at September 30, 2020

   2,485,794  C$     18.45    4.87    35,000   $9.10    5.00 
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   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)

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, 2019 private placement financing in 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 using the following assumptions:

- 19 -

Green Thumb Industries Inc.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

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

7.

WARRANTS (Continued)

(a)

Additional Modification Warrants (continued)

Significant Assumptions

May 21, 2020
(Date of Issuance)

Volatility

100% 

Remaining Term

5 years

Risk Free Rate

0.42% 

(b)

Dispensary Mortgage Warrants

On June 5, 2020, as part of the $1,814,000 promissory note, the Company issued warrants that allow the promissory noteholder to purchase 35,000 Subordinate Voting Shares. These 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 surplus 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.

(c)

Liability Classified Warrants Outstanding

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

 

      March 31, 2021   December 31, 2020 

Warrant Liability

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

Bridge Financing Warrants

  C$22.90    218,964   $1,065,000   $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    13,457,000    12,189,169   C$19.39    1,641,301    32,858,000    1,822,771    28,756,500 

Modification Warrants

Additional Modification Warrants

  C$

C$

12.04

14.03

 

 

   

360,256

83,803

 

 

   

3,251,500

739,500

 

 

   

2,305,274

—  

 

 

  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

     2,485,794   $18,513,000   $15,879,843      2,259,523   $45,304,671    2,485,794   $39,454,000 
    

 

   

 

   

 

     

 

   

 

   

 

   

 

 

During the three and nine months ended September 30,March 31, 2021 and 2020, the Company recorded a loss of $3,181,114$5,850,671 and a lossgain of $2,060,771,$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 (see Note 13 - Fair Value Measurements for additional details):

 

Significant Assumptions

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

Volatility

   85.36%73.80% - 89.50%79.62%    117.43%72.19% - 123.64%79.1% 

Remaining Term

   2.031.53 - 4.644.14 years    2.781.78 - 4.864.39 years 

Risk Free Rate

   0.25%0.22% - 0.34%0.78%    1.68%0.20% - 1.69%0.28% 

 

- 20 -

Green Thumb Industries Inc.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

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

7.

WARRANTS (Continued)

(e)

Equity Classified Warrants Outstanding

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

Warrants Included in Contributed Surplus

  Strike
Price		   Warrants
Outstanding		   September 30,
2020		   December 31,
2019		 

Dispensary Mortgage Warrants

  $9.10    35,000   $181,272   $—   

The following table summarizes the significant assumptions used in determining the fair value of the equity classified warrants as of each reporting date:

Significant Assumptions

September 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 nine months ended September 30, 2020 and September 30, 2019:

   Three Months Ended
September 30,		  Nine Months Ended
September 30,		 
   2020  2019  2020  2019 

Income/(Loss) before Income Taxes

  $39,189,341  $(10,713,603)  $52,189,559   (40,011,094) 

Income Tax Expense

  $28,436,332  $3,624,333  $56,964,047   4,706,000 

Effective Tax Rate

   72.6%   -33.8%   109.1%   -11.8% 

Historically, the Company has calculated its provision for income taxes during its interim reporting periods by applying an estimate of the annual effective tax rate for the full year “ordinary” income or loss for the respective reporting period. For the nine months ended September 30, 2020, 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 and nine months ended September 30, 2020 varies widely from the three and nine months ended September 30, 2019, respectively, primarily due to the Company reporting pre-tax loss in 2019 as opposed to pre-tax income in 2020. The Company incurred a large amount of expenses that were not deductible due to IRC Section 280E limitations which resulted in income tax expense being incurred while there were pre-tax losses for the three and nine months ended September 2019.

- 2117 -

Green Thumb Industries Inc.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

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

 

8.

INCOME TAXESWARRANTS (Continued)

 

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 $16,264,727 and $2,113,263 as of September 30, 2020 and December 31, 2019, respectively, recorded within Deferred Income Taxes.

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 nine months ended September 30, 2020 and 2019 were $37,820,228 and $10,534,408, respectively.

 

9.(b)

INVESTMENTSEquity Classified Warrants Outstanding

The Company holds direct equity investments in cannabis companies, some of which converted from notes which matured August 1, 2020. The following table summarizes the change in the Company’s investments as of September 30, 2020:

   Convertible
Notes
Receivable		  Equity   Total 

Balance at January 1, 2020

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

Additions

   —     25,000    25,000 

Conversion of notes receivable

   (7,533,000)   7,533,000    —   

Fair value adjustment

   —     8,117,178    8,117,178 
  

 

 

  

 

 

   

Balance at September 30, 2020

  $—    $22,210,999   $ 22,210,999 
  

 

 

  

 

 

   

 

 

 

As of September 30, 2020, the Company updated its valuation for the notes that converted to equity as well as certain equity investments. The equity investments were valued using a market approach using the following significant assumptions:

September 30, 2020

Discount for lack of control

13%

Discount for lack of marketability

10%-30%

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 September 30, 2020the equity classified warrants at March 31, 2021 and December 31, 2019. See Note 13 - Fair Value Measurements for additional details. As of December 31, 2019, the convertible notes receivable2020:

   

 

   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 issuance using the Binomial Lattice Model, which is based on a generalized binomial option pricing formula, using the following assumptions:

- 22 -

Green Thumb Industries Inc.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

(Amounts Expressed in United States Dollars, Except Where Stated Otherwise)volatility rate of 80%, a term of 5 years and a risk free rate of 0.37%.

 

9.

INVESTMENTS (Continued)SHARE CAPITAL

 

December 31, 2019

Risk free rate

1.58% -2.46%

Equity Volatility

58% - 106%

Market Yield

15% - 18%

Probability of Qualified Financing

0%

Probability of Sale

30%

Probability of No Event

70%

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.

 

 (a)

Authorized

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

 

 (i)

SubordinateSubordinate 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 ninethree months ending September 30, 2020,March 31, 2021, the shareholders of the Company converted 252,44030 Multiple Voting Shares into 25,244,0003,000 Subordinate Voting Shares and 22,95311,000 Super Voting Shares into 2,295,3001,100,000 Subordinate Voting Shares.

 

 (ii)

Multiple Voting Shares

Each Multiple Voting Share is entitled to 100 votes per share at shareholder meetings of the Company and is exchangeable for 100 Subordinate Voting Shares. At September 30, 2020,March 31, 2021, the Company had 120,91040,259 issued and outstanding Multiple Voting Shares, which convert into 12,091,0004,025,900 Subordinate Voting Shares. The Company is authorized to issue an unlimited number of Multiple Voting Shares. During the ninethree months ending September 30, 2020,March 31, 2021, the shareholders of the Company converted 252,44030 Multiple Voting Shares into 25,244,0003,000 Subordinate Voting Shares.

- 18 -

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)

(a)

Authorized (continued)

 

 (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 September 30, 2020,March 31, 2021, the Company had 379,336301,031 issued and outstanding Super Voting Shares which convert into 37,933,60030,103,100 Subordinate Voting Shares. The Company is authorized to issue an unlimited number of Super Voting Shares. During the ninethree months ending September 30, 2020,March 31, 2021, the shareholders of the Company converted 22,95311,000 Super Voting Shares into 2,295,3001,100,000 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, 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)

 

10.9.

SHARE CAPITAL(Continued)

 

 

 (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

   2,713,463    —     —   

Distribution of deferred shares

   1,220,548    —     —   

Issuance of shares for redemption of noncontrolling interests

   1,315,789    —     —   

Issuance of shares upon exercise of options and warrants

   71,384    —     —   

Issuances of shares upon vesting of RSUs

   901,023    —     —   

Exchange of shares

   27,539,300    (252,440)   (22,953) 
  

 

 

   

 

 

  

 

 

 

As at September 30, 2020

   162,999,921    120,910   379,336 
  

 

 

   

 

 

  

 

 

 

1.(i)

Issuance of Shares Under Business Combinations and Investments

MC Brands, LLC

On June 29, 2020, the Company issued 190,000 Subordinate Voting Shares with a value of $1,840,009 in connection with the Company’s June 27, 2019 acquisition of MC Brands, LLC. 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.

KW Ventures, LLC

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.

GTI New Jersey, LLC

In connection with the Company’s April 23, 2019 acquisition of the non-controlling interest in GTI New Jersey, LLC, the Company agreed to award the previous minority shareholders of the entity up to $3,000,000 in Subordinate Voting Shares. On May 7, 2020, the Company received approval from the New Jersey Department of Health to begin buildout of an additional retail dispensary. As a result,of that date, the Company recorded a current obligation and corresponding reduction to contributed surplus 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, the Company issued 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 the contingent consideration associated with the acquisition of Integral Associates, LLC, which was valued using a probability weighting of the potential payouts, was $14,850,000 and $27,100,000, respectively of which $4,950,000, in each period, was recorded as a non-current liability.

(iii)

Distribution of Deferred Shares

For Success Holding Company

As part of 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 are issued to the former owners of the acquired entity upon the passage of twelve to twenty-four months from the close of each transaction as defined within each respective acquisition agreement. On February 22, 2021, the Company issued 146,315 Subordinate Voting Shares with a value of $1,825,597 in connection with the Company’s 2019 acquisition of For Success Holding Company. The issuance 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 single institutional investor to purchase 3,122,073 of the Subordinate Voting Shares registered on the Form S-1 at a price of $32.03 per share for a total of $100,000,030. The transaction closed on February 9, 2021. On February 23, 2021, the Company accepted additional offers to purchase a total of 1,571,917 Subordinate Voting Shares at a price of $35.50 per share, for a total of $55,803,054. The Company 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 portion of the net proceeds to acquire 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 shareholders’ equity.

 

- 2420 -

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)

 

 

2.

Distribution of Contingent Consideration

As of September 30, 2020, the Company issued 2,713,463 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 September 30, 2020 in relation to each acquisition:

Contingent

Shares Issued

      September 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   537,240    4,654,526 
    

 

 

   

 

 

 
     2,713,463   $22,885,813 
    

 

 

   

 

 

 

3.

Distribution of Deferred Shares

As a result of several acquisitions that occurred during 2019, the Company held 1,367,643 deferred shares with a value of $16,587,798 as of December 31, 2019. The deferred shares were to be issued upon the passage of twelve to twenty-four months from the close of each transaction as defined within each respective acquisition agreement. On May 15, 2020, Green Thumb issued 101,695 Subordinate Voting Shares with a value of $1,307,798 in connection with the Company’s May 15, 2019 acquisition of Salveo. On August 12, 2020, the Company issued 472,500 Subordinate Voting Shares with a value of $5,380,00 in connection with the Company’s February 12, 2019 acquisition of Advanced Grow Labs, LLC. Additionally, on August 26, 2020, the Company issued 646,353 Subordinate Voting Shares with a value of $8,064,668 in connection with the Company’s February 21, 2019 acquisition of For Success Holdings Company. The three distributions discussed above resulted in a reduction to deferred share issuances and a corresponding increase to share capital on the Company’s unaudited interim condensed consolidated statement of changes in shareholders’ equity.

 

 (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 measures their value indirectly by reference to the fair value of the equity instruments granted. For transactions with employees and others providing similar services, the Company measures the fair value of the services by reference to the fair value of the equity instruments granted. Equity settled stock-based payments under stock-based payment plans are ultimately recognized as an expense in profit or loss with a corresponding credit to equity.

In June 2018, the Company established the Green Thumb Industries Inc. 2018 Stock and Incentive Plan, which was amended by Amendment No. 1 thereto (as amended, the “Plan”“Plan”). The maximum number of Restricted Stock Units (“RSUs”RSUs”) and options issued under the Plan shall not exceed 10% of the issued and outstanding shares on an as-converted basis.

- 25 -

Green Thumb Industries Inc.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

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

10.

SHARE CAPITAL (Continued)

(c)

Stock-Based Compensation (Continued)

The Company recognizes compensation expense for RSUs and options on a straight-line basis over the requisite service period of the award. Non-market vesting conditions are included in the assumptions about the number of options that are expected to become exercisable. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from the previous estimate. Any cumulative adjustment prior to vesting is recognized in the current period with no adjustment to prior periods for expense previously recognized.

Option and RSU 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

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

   2,496,511  9.76    5.00      43,968    32.74     

Exercised

   (65,443)  11.02    3.98      (223,394)    14.04     

Forfeited

   (487,486)  13.82    5.22      (185,540)    10.68     

  

 

  

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Balance as at September 30, 2020

   5,782,599  11.69    5.53   

Balance as at March 31, 2021

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

Vested

   1,635,030  13.36    6.65      1,749,365    13.37     

Exercisable at September 30, 2020

   1,516,872  13.22    6.73   $4,601,129 

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 September 30, 2020March 31, 2021 and December 31, 2019,2020, 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 September 30, 2020March 31, 2021 and December 31, 2019.2020. 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.

- 21 -

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 ninethree months ended September 30,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

Risk-free interest rate

0.36% - 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 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 

 

- 2622 -

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

   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 March 31, 2021, $19,996,039 of total unrecognized expense related to stock-based compensation awards is expected to be recognized over a weighted-average period of 1.59 years.

10.

INCOME TAXES

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.

SHARE CAPITALINCOME TAXES (Continued)(Continued)

 

 

(c)

Stock-Based Compensation (Continued)

The following table summarizesfederal statute of limitation remains open for the number of non-vested RSU awards as of September 30, 20202017 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 December 31, 2019 and the changeswhen utilized.

Taxes paid during the ninethree months ended September 30, 2020:

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

Nonvested Shares at December 31, 2019

   1,399,762    9.30 

Granted

   254,268    12,65 

Forfeited

   (64,500)    15.60 

Vested

   (901,023)    14.85 
  

 

 

   

 

 

 

Nonvested Shares at September 30, 2020

   688,507    16.77 

The stock-based compensation expense for the threeMarch 31, 2021 and nine months ended September 30, 2020 were $15,146,750 and 2019 was as followed:

   For the Three Months Ended   For the Nine Months Ended 
   September 30,   September 30, 
   2020   2019   2020   2019 

Stock options expense

  $2,614,273   $1,666,465   $8,209,557   $4,248,461 

RSUs

   1,821,054    1,897,630    6,999,963    9,075,622 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Stock Based Compensation Expense

  $4,435,634   $3,564,095   $15,209,520   $13,324,083 
  

 

 

   

 

 

   

 

 

   

 

 

 

As of September 30, 2020, $25,815,117 of total unrecognized expense related to Stock Based Compensation awards is expected to be recognized over a weighted-average period of 1.93 years.

(d)

Issuance of Shares for Redemption of Noncontrolling Interest

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 from the partner. As a result, on August 31, 2020, the Company issued 1,315,789 Subordinate Voting Shares with a value of $20,078,940 in consideration for the noncontrolling partner’s interest in Ohio Investors 2017, LLC. Upon the closing of the transaction, the Company recorded a reduction to the current liability established for the purchase of the noncontrolling interest of $11,200,000, an increase in share capital for the fair value of the noncontrolling partners interest of $20,078,940 and a reduction to contributed capital of $8,878,940.$0, respectively.

 

11.

OTHER INCOME (EXPENSE)

 

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

 

   For the Three Months Ended
September 30,		  For the Nine Months Ended
September 30,		 
   2020  2019  2020  2019 

Fair value adjustments on equity investments

  $8,134,213  $(1,196,676)  $8,117,178  $(932,983) 

Fair value adjustments on variable note receivable

   —     (5,428,542)   (815,937)   (7,424,727) 

Fair value adjustments on warrants issued

   (3,181,114)   —     (2,060,771)   —   

Fair value adjustments on contingent consideration

   442,991   —     425,426   —   

Other

   1,036,793   39,678   1,835,670   388,277 
  

 

 

  

 

 

  

 

 

  

 

 

 

Total Other Income (Expense)

  $6,432,883  $(6,585,540)  $7,501,566  $(7,969,433) 
  

 

 

  

 

 

  

 

 

  

 

 

 

- 27 -

Green Thumb Industries Inc.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

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

   Three Months Ended
March 31,		 
   2021   2020 

Fair value adjustments on equity investments

  $391,559   $(215,607) 

Fair value adjustments on variable note receivable

   —      (810,337) 

Fair value adjustment on warrants issued

   (5,850,671)    7,382,843 

Fair value adjustments on contingent consideration

   (412,949)    170,990 

Equity earnings in joint ventures

   623,093    250,000 

Other

   99,151    8,221 
  

 

 

   

 

 

 

Total Other Income (Expense)

  $(5,149,817)   $6,786,110 
  

 

 

   

 

 

 

 

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 September 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.

-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)

 

 (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 September 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)

Construction Commitments

As of September 30, 2020,March 31, 2021, the Company held approximately $25,600,000$11,745,258 of open construction commitments to contractors primarily associated with improvementson work being madeperformed.

-25-

Green Thumb Industries Inc.

Notes to one of the Company’s cultivation and processing facilities. The Company expects to be reimbursed for approximately $22,500,000 of the open commitment as part of its sale and lease back agreement with IIP.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.

- 28 -

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 (Continued)

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

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 September 30, 2020 
  Level 1   Level 2   Level 3 Total   As of March 31, 2021 
  Level 1   Level 2   Level 3   Total 

Cash and Cash Equivalents

  $78,091,073   $—     $—    $78,091,073   $275,898,839   $—     $—     $275,898,839 

Investments

   675,594    —      21,535,406  22,210,999    1,181,146    —      27,884,857    29,066,003 

Liability of Redemption of Noncontrolling Interest

   —      —      —     —   

Contingent Consideration Payable

   —      —      (36,315,360)  (36,315,360)    —      —      (14,850,000)    (14,850,000) 

Warrant Liability

   —      —      (18,513,000)  (18,513,000)    —      —      (45,304,671)    (45,304,671) 
  

 

   

 

   

 

  

 

   

 

   

 

   

 

   

 

 
  $78,766,667   $—     $(33,292,954)  $45,473,712   $277,079,985   $—     $(32,269,814)   $244,810,171 
  

 

   

 

   

 

  

 

   

 

   

 

   

 

   

 

 

 

   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) 
  

 

 

   

 

 

   

 

 

  

 

 

 

As of December 31, 2019, the Company held an equity investment in a privately held entity that was subsequently acquired by a publicly traded entity during the third quarter of 2020. As a result of the acquisition, the Company received shares of the acquiring entity in exchange for the shares in the privately held entity. Further, the transaction resulted in a transfer of the investment from Level 3 to Level 1. As of September 30, 2020, the value of the Level 1 investment was $675,594.

   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 
  

 

 

   

 

 

   

 

 

   

 

 

 

 

- 29 --26-

Green Thumb Industries Inc.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

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

 

14.

VARIABLE INTEREST ENTITIES

 

The following table presents the summarized financial information about the Company’s consolidated variable interest entities (“VIEs”VIEs”) which are included in the unaudited interim condensed consolidated balance sheetssheet as of September 30, 2020March 31, 2021 and the consolidated balance sheet as of December 31, 2019:2020. All of these entities were determined to be VIEs as the Company possesses the power to direct activities through management services agreements (“MSAs”).:

 

  September 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

  $29,728,652   $2,489,118   $2,261,685   $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

   3,041,401    3,752,645    2,353,991    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

   21,228,691    898,661    1,108,292    14,219,204    149,498    783,682    1,156,208    1,142,340    23,362,255    336,970    1,563,224 

Non-current liabilities

   785,724    473,136    802,823    1,169,989    137,736    855,440    450,291    762,865    768,573    461,926    783,356 

Equity attributable to noncontrolling interests

   298,252    2,309,983    85,561    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.

   10,457,386    2,309,983    2,619,001    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 and nine months ended September 30, 2020March 31, 2021 and 2019:2020:

 

   Three Months Ended 
   September 30, 2020   September 30, 2019 
   Chesapeake
Alternatives, LLC		   Illinois Disp, LLC   Other Non-material
VIEs		   Chesapeake
Alternatives, LLC		  Illinois
Disp, LLC		   Other Non-material
VIEs		 

Revenues

  $5,684,349   $5,224,583   $2,695,781   $4,369,436  $1,620,065   $689,097 

Net income (loss) attributable to noncontrolling interests

   26,134    897,494    185,452    1,807,394   185,930    (1,624,850) 

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

   1,033,650    897,494    294,969    (971,880)   185,931    1,059,653 
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

   

 

 

 

Net income (loss)

  $1,059,784   $1,794,988   $480,421   $835,514  $371,860   $(565,197) 
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

   

 

 

 

  Nine Months Ended   Three Months Ended March 31, 
  September 30, 2020   September 30, 2019   2021   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		 

Revenues

  $14,792,710   $13,170,514   $6,778,501   $12,458,427   $4,174,045   $2,373,042   $5,727,274   $3,311,283   $4,308,630   $2,781,616   $1,712,651 

Net income (loss) attributable to noncontrolling interests

   206,929    2,170,912    319,511    2,244,546    506,972    (2,307,097)    783,048    303,255    41,409    364,116    37,179 

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

   3,812,121    2,170,913    661,341    —      506,972    —      783,047    415,688    1,139,063    364,117    59,373 
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Net income (loss)

  $4,019,050   $4,341,825   $980,852   $2,244,546   $1,013,943   $(2,307,097)   $1,566,095   $718,943   $1,180,472   $728,233   $96,552 
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

As of September 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 September 30, 2019, VIEs included

-27-

Green Thumb Industries Inc.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

(Amounts Expressed in the Other Non-material VIEs are Meshow, LLC, KW Ventures Holdings, LLC and Ohio Investors 2017, LLC. All of these entities were determined to be VIEs as the Company possesses the power to direct activities through management services agreements.United States Dollars, Except Where Stated Otherwise)

 

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.

- 30 -

Green Thumb Industries Inc.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

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

15.

SEGMENT REPORTING (Continued)

The below table presents revenues by type for the three and nine months ended September 30, 2020March 31, 2021 and 2019:2020:

 

  Three Months Ended
September 30,		 Nine Months Ended
September 30,		   Three Months Ended
March 31,		 
  2020 2019 2020 2019   2021   2020 

Revenues, Net of Discounts

         

Consumer Packaged Goods

  $74,702,069  $35,093,858  $177,355,614  $71,651,968   $104,077,438   $46,322,028 

Retail

   111,948,115  43,532,286  275,451,137  85,501,646    130,108,718    75,961,450 

Intersegment Eliminations

   (29,546,343)  (10,635,237)  (73,460,384)  (16,522,767)    (39,755,572)    (19,680,876) 
  

 

  

 

  

 

  

 

   

 

   

 

 

Total Revenues, net of discounts

  $157,103,841  $67,990,907  $379,346,367  $140,630,847   $194,430,584   $102,602,602 
  

 

  

 

  

 

  

 

   

 

   

 

 

Depreciation and Amortization

         

Consumer Packaged Goods

  $10,029,857  $7,226,614  $33,089,808  $16,100,635   $8,000,947   $7,594,366 

Retail

   1,505,019  687,199  5,309,152  1,428,256    6,992,474    5,110,806 

Intersegment Eliminations

   —     —     —     —      —      —   
  

 

  

 

  

 

  

 

   

 

   

 

 

Total Depreciation and Amortization

  $11,534,876  $7,913,813  $38,479,960  $17,528,891   $14,993,421   $12,705,172 
  

 

  

 

  

 

  

 

   

 

   

 

 

Income Taxes

         

Consumer Packaged Goods

  $12,928,449  $1,072,333  $23,553,449  $1,761,333   $17,287,094   $4,227,000 

Retail

   15,507.883  5,128,000  33,410,598  9,028,000    13,569,084    8,922,000 

Intersegment Eliminations and Corporate

   —    (2,576,000)   —    (6,083,333)    —      —   
  

 

  

 

  

 

  

 

   

 

   

 

 

Total Income Taxes

  $28,436,332  $3,624,333  $56,964,047  $4,706,000   $30,856,178   $13,149,000 
  

 

  

 

  

 

  

 

   

 

   

 

 

Goodwill assigned to the Consumer Packaged Goods segment as of September 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 September 30, 2020March 31, 2021 and December 31, 20192020 was $215,986,854$206,620,582 and $228,244,254,$211,303,718, respectively.

Goodwill assigned to the Retail segment as of September 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 September 30, 2020March 31, 2021 and December 31, 20192020 was $193,668,663$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.

 

- 31 --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 nine months ended September 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 September 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” services in the states in which it does business, the Company believes that there will continue to be strong demand for Green Thumb products.

Operations of the Company are currently ongoing as the cultivation, processing and sale of cannabis products is currently considered an “essential” business by all states in which the Company operates with respect to all customers. The Company’s ability to continue to operate without any significant negative operational impact from the COVID-19 pandemic and any of its variants will in part depend on the Company’s ability to protect its employees, customers and supply chain and its continued designation as “essential” in states where it does business that currently or in the future impose restrictions on business operations.

The pandemic has not materially impacted the Company’s business operations or liquidity position to date. The Company continues to generate operating cash flows to meet its short-term liquidity needs. In all locations where applicable regulations limiting in-store retail activity have been enacted by governmental authorities, the Company has expanded consumer delivery options and curbside pickup to help further protect the health and safety of Green Thumb employees and customers.

While duringDuring the first ninethree months of 20202021 the Company’s revenue, gross profit and operating income were not negatively impacted by COVID-19 and the Company generally maintained the consistency of its operations,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 ourits continued designation as “essential” in states where we doit does business that currently or in the future impose restrictions on business operations.

 

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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 September 30, 2020,March 31, 2021, Green Thumb has operations across 12 U.S. markets, employs approximately 2,000over 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 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 Thumb’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 September 30, 2020,March 31, 2021, the Company had 4856 open and operating retail 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 September 30, 2020, Green Thumb has revenue in its 12 markets (California, Colorado, Connecticut, Florida, Illinois, Maryland, Massachusetts, Nevada, New Jersey, New York, Ohio and Pennsylvania).

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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 nine months ended September 30,March 31, 2021 and 2020 and 2019 and (ii) unaudited interim condensed consolidated balance sheet data as of September 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.

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The Company’s unaudited interim condensed consolidated financial statements have been prepared in accordance with U.S. GAAP and on a going-concern basis that contemplates continuity of operations and realization of assets and liquidation of liabilities in the ordinary course of business.

 

  As of and for the   Three Months Ended March 31,         
  Three Months Ended
September 30,		 Nine Months Ended
September 30,		   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% 
  2020 2019 2020 2019   

 

   

 

   

 

   

 

 

Total Revenues, net of discounts

  $157,103,841  $67,990,907  $379,346,367  $140,630,847 

Cost of Goods Sold, net

  $(70,146,676)  $(35,849,783)  $(175,707,874)  $(74,196,750) 

Gross Profit

  $86,957,165  $32,141,124  $203,638,493  $66,434,097    110,865,500    52,987,414    57,878,086    109% 

Total Expenses

  $49,745,979  $30,764,406  $144,823,947  $88,013,769    59,331,251    45,434,757    13,896,494    31% 

Other Income (Expense)

  $1,978,155  $(12,090,321)  $(6,624,987)  $(18,431,422) 

Net Income (Loss) Attributable to Green Thumb

  $9,643,929  $(14,590,793)  $(7,471,840)  $(45,045,898) 
  

 

   

 

   

 

   

 

 

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, 
  September 30, 2020   December 31, 2019   2021   2020 

Total Assets

  $1,254,614,447   $1,167,536,624   $1,549,124,022   $1,358,549,162 

Long-Term Liabilities

  $268,639,338   $212,960,693   $337,909,825   $325,101,386 

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

Revenues, net of Discounts

Revenue for the three months ended September 30, 2020March 31, 2021 was $157,103,841,$194,430,584, up 131%89% from $67,990,907$102,602,602 for the three months ended September 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 3242 in the same quarter of the prior year. During the three months ended September 30, 2020, the Company did not open any new stores whereas during the same period in 2019,March 31, 2021, the Company opened 4 stores and acquired 35 new stores. Since September 30, 2019,March 31, 2020, the Company acquired one retail store in Connecticut that contributed to the increase in Retail revenues and opened 1513 new Retail locations in Pennsylvania, Illinois, Nevada, California, Florida, Illinois, Ohio, Nevada, ConnecticutNew 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.

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Cost of Goods Sold, net

Cost of goods sold are derived from retail purchases made by the Company from its third-party licensed producers operating within our state markets and costs related to the internal cultivation and production of cannabis. Cost of goods sold for the three months ended September 30, 2020March 31, 2021 was $70,146,676,$83,565,084, up 96%68% from $35,849,783$49,615,188 for the three months ended September 30, 2019,March 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.

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Gross Profit

Gross profit for the three months ended September 30, 2020March 31, 2021 was $86,957,165,$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 55%57%. This is compared to gross profit for the three months ended September 30, 2019March 31, 2020 of $32,141,124$52,987,414 or a 47%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 September 30, 2020March 31, 2021 were $49,745,979$59,331,251 or 32%31% of total revenues, net of discounts, resulting in an increase of $18,981,573.$13,896,494. Total expenses for the three months ended September 30, 2019March 31, 2020 were $30,764,406$45,434,757 or 45%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 addition of 1614 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 income (expense) for three months ended September 30, 2020March 31, 2021 was $1,978,155, an increase($9,223,103), a change of $14,068,476,($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 September 30, 2020March 31, 2021 was $39,189,341,$42,311,146, an increase of $49,902,944$32,925,706 compared to the three months ended September 30, 2019.March 31, 2020.

As presented under the heading “Non-GAAP Measures” below, after adjusting for non-cash equity incentive compensation of $4,435,634,$4,030,655 and $5,073,742, adjusted operating EBITDA was $53,181,696$71,355,281 and $13,786,391$25,544,924 for the three months ended September 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 September 30, 2020,March 31, 2021, federal and state income tax expense totaled $(28,436,332)$30,856,178 compared to expense of $(3,624,333)$13,149,000 for the three months ended September 30, 2019.

The effective tax rate for the three months ended September 30, 2020 varies widely from the three months ended September 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.

 

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Nine Months Ended September 30, 2020 Compared with Nine Months Ended September 30, 2019

Revenue, net of Discounts

Revenue for the nine months ended September 30, 2020 was $379,346,367 up 170% from $140,630,847 for the nine months ended September 30, 2019 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. The Company generated revenue from 48 Retail locations during the quarter compared to 32 in the prior year. During the nine months ended September 30, 2020, the Company opened 9 new stores as compared to 11 new stores opened and 7 stores acquired during the same period in 2019. Since September 30, 2019, the Company acquired one retail store in Connecticut and opened 15 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 our state markets.

Cost of goods sold for the nine months ended September 30, 2020 was $175,707,874, up 137% from $101,511,125 for the nine months ended September 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 nine months ended September 30, 2020 was $203,638,493, representing a gross margin on the sale of finished cannabis consumer packaged goods of 54%. This is compared to gross profit for the nine months ended September 30, 2019 of $66,434,097 or a 47% gross margin. The Company’s increase in gross margin percentage was mainly attributed to an overall increase in Retail sales as a proportion of total sales. In addition, Consumer Packaged Goods also contributed to the increase in gross profit through expanded capacity. The increase in gross profit was directly attributable to the revenue increase as further described above.

Total Expenses

Total expenses for the nine months ended September 30, 2020 were $144,823,947 or 38% of total revenues, net of discounts. Total expenses for the nine months ended September 30, 2019 were $88,013,769 or 63% 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, back-office personnel costs 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.

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Total Other Income (Expense)

Total other expense for the nine months ended September 30, 2020 was ($6,624,987), compared to expense of ($18,431,422), for the nine months ended September 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 nine months ended September 30, 2020 was $52,189,559 compared to loss of ($40,011,094) for the nine months ended September 30, 2019.

As presented under “Non-GAAP Measures” below, after adjusting for non-cash equity incentive compensation of $15,209,520 as described above, as well as other non-operating items, adjusted operating EBITDA was $114,139,331 and $13,955,329 for the nine months ended September 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 nine months ended September 30, 2020, federal and state income tax expense totaled $56,964,047 compared to $4,706,000 for the nine months ended September 30, 2019.

The net expense of $56,964,047 for the nine months ended September 30, 2020 includes current tax expense of $52,587,047 and deferred tax expense of $4,377,000 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 and nine months ended September 30, 2020March 31, 2021 and 2019:2020:

 

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

Consumer Packaged Goods

  $74,702,069   $35,093,857   $39,608,212    113% 

Retail

   111,948,115    43,532,288    68,415,827    157% 

Intersegment Eliminations

   (29,546,343)    (10,635,238)    (18,911,105)    n.m. 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Revenues, Net of Discounts

  $157,103,841   $67,990,907    89,112,934    131% 
  

 

 

   

 

 

   

 

 

   

 

 

 
   Nine Months Ended September 30,     
   2020   2019   $ Change   % Change 

Consumer Packaged Goods

  $177,355,614   $71,651,968   $105,703,646    148% 

Retail

   275,451,137    85,501,646    189,949,491    222% 

Intersegment Eliminations

   (73,460,384)    (16,522,767)    (56,937,617)    n.m. 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Revenues, Net of Discounts

  $379,346,367   $140,630,847   $238,715,520    170% 
  

 

 

   

 

 

   

 

 

   

 

 

 

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

Revenues, net of discounts for the Retail segment were $111,948,115,$130,108,718, an increase of $68,415,827$54,147,268 or 157%71%, compared to the three months ended September 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.

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Revenues, net of discounts for the Consumer Packaged Goods Segment were $74,702,069,$104,077,438, an increase of $39,608,212$57,755,410 or 113%125%, compared to the three months ended September 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 in Illinois on January 1, 2020, along with 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.

Nine Months Ended September 30, 2020 Compared with the Nine Months Ended September 30, 2019

Revenues, net of discounts for the Retail Segment were $275,451,137, an increase of $189,949,491 or 222%, compared to the nine months ended September 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 2020 full period effect of the acquisition of the Essence stores in Nevada in June 2019.

Revenues, net of discounts for the Consumer Packaged Goods Segment were $177,355,614, an increase of $105,703,646 or 148%, compared to the nine months ended September 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 2020 full period effect of 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 Beboe, Dogwalkers, Dr. Solomon’s, incredibles, Rythm, and The Feel Collection, 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 ninethree months ended September 30, 2020,March 31, 2021, revenue was contributed from Consumer Packaged Goods and Retail sales across twelve markets, which consist of 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 our gross profit as a percentage of revenue.

Over

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During the ninethree months ended September 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 with acquisitions and partnerships, and scales resources into new markets.

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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.Asrevenue. 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.Ascosts. 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 registered with the U.S. Securities and Exchange 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.

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Non-GAAP Measures

EBITDA, Adjusted Operating EBITDA, and Adjusted EBITDA are non-GAAP measures and do not have standardized definitions under GAAP. The following information provides reconciliations of the supplemental non-GAAP financial measures, presented herein to the most directly comparable financial measures calculated and presented in accordance with GAAP. The Company has provided the non-GAAP financial measures, which are not calculated or presented in accordance with GAAP, as supplemental information and in addition to the financial measures that are calculated and presented in accordance with GAAP. These supplemental non-GAAP financial measures are presented because management has evaluated the financial results both including and excluding the adjusted items and believe that the supplemental non-GAAP financial measures presented provide additional perspective and insights when analyzing the core operating performance of the business. These supplemental non-GAAP financial measures should not be considered superior to, as a substitute for or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented.

 

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  Three Months Ended Nine Months Ended 
  September 30, September 30, 
  2020 2019 2020 2019   Three Months Ended
March 31,		 
  2021   2020 

Net Income (Loss) Before Non-Controlling Interest

  $10,753,009  $(14,337,936)  $(4,774,488)  $(44,717,094)   $11,454,968   $(3,763,560) 

Interest Income

   (5,397)  (407,509)  (109,922)  (1,300,233)    (49,890)    (88,115) 

Interest Expense

   4,460,125  5,912,290  14,236,475  11,762,222    4,123,176    5,041,442 

Provision For Income Taxes

   28,436,332  3,624,333  56,964,047  4,706,000    30,856,178    13,149,000 

Other (Income) Expense, net

   (6,432,883)  6,585,540  (7,501,566)  7,969,433 

Other Income

   5,149,817    (6,786,110) 

Depreciation and amortization

   11,534,876  7,685,428  38,479,960  17,198,731    14,993,421    12,705,172 
  

 

  

 

  

 

  

 

   

 

   

 

 

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

  $48,746,062  $9,062,146  $97,294,506  $(4,380,941)   $66,527,670   $20,257,829 
  

 

  

 

  

 

  

 

   

 

   

 

 

Stock-based compensation, non-cash

   4,435,634  3,564,095  15,209,520  13,324,083    4,030,655    5,073,742 

Acquisition, transaction and other non-operating costs

   —    1,160,150  1,635,304  5,012,187    796,956    213,353 
  

 

  

 

  

 

  

 

   

 

   

 

 

Adjusted Operating EBITDA (non-GAAP measure)

  $53,181,696  $13,786,391  $114,139,331  $13,955,329   $71,355,281   $25,544,924 
  

 

  

 

  

 

  

 

   

 

   

 

 

Liquidity, Financing Activities During the Period, and Capital Resources

As of September 30, 2020,March 31, 2021, and December 31, 20192020 the Company had total current liabilities of $105,898,809$108,444,304 and $111,367,255,$119,288,435, respectively, and cash and cash equivalents of $78,091,073$275,898,839 and $46,667,334,$83,757,785, respectively to meet its current obligations. The Company had working capital of $53,160,428$272,514,335 as of September 30, 2020,March 31, 2021, an increase of $55,465,072$207,858,765 as compared to December 31, 2019.2020. This increase in working capital was primarily driven by the $81,302,083 increase in revenue experienced in the third quarter$155,498,140 sale of 2020 over the fourth quarter of 2019. 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 ninethree 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 33%8%, net of discounts, during the three months ended September 30, 2020March 31, 2021 as compared to the three months ended June 30, 2020. As of September 30,December 31, 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 revenue, net of discounts, increased 28%8% during the three months ended September 30, 2020March 31, 2021 as compared to the three months ended June 30,December 31, 2020, primarily driven by increased transaction activity across the Company’s 48 retail56 Retail store 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.

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While our revenue, gross profit and operating income were not materially impacted by COVID-19 and we maintained the consistency of our operations during the first ninethree months of 2020,2021, the uncertain nature of the spread of COVID-19 may impact our business operations for reasons including the potential quarantine of our employees or those of our supply chain partners. Our ability to continue to operate without any significant negative operational impact from the COVID-19 pandemic will in part depend on our ability to protect our employees, customers and supply chain and our continued designation as an “essential” business in states where we do business that currently or in the future impose restrictions on business operations. The Company takes a cautious approach in allocating its capital to maximize its returns while ensuring appropriate liquidity. Given the current uncertainty of the future economic environment, the Company has taken additional measures in monitoring and deploying its capital to minimize the negative impact on its current operations and expansion plans.

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Cash Flows

Cash Used in Operating Activities,

Net cash used in operating activities for the nine months ended September 30, 2020 Investing and 2019, were as follows:

   Nine Months Ended September 30, 
   2020   2019 

Net Cash provided by (used in) Operating Activities

  $71,056,200   $(712,804) 

Cash Flow from Investing Activities

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

   Nine Months Ended September 30, 
   2020  2019 

Net Cash (used in) provided by Investing Activities

  $(37,422,417)  $(171,943,137) 

Cash Flow from Financing Activities

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

 

   Nine Months Ended September 30, 
   2020  2019 

Net Cash (used in) provided by Financing Activities

  $(2,210,044)  $92,791,523 

Contractual Cash Obligations and Other Commitments and Contingencies

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

   Total   2020   2021   2022   2023   2024   Thereafter 

Notes Payable(a)

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

Charitable Contributions

   763,284    45,846    185,887    189,953    194,109    147,490    —   

Mortgage Payable(b)

   1,862,857    28,522    117,794    124,662    131,943    139,299    1,320,638 

Interest Due on Notes Payable

   33,460,307    3,155,324    12,655,971    12,655,971    4,933,041    —      —   

Interest Due on Mortgage Payable

   1,022,953    37,565    146,552    139,684    132,403    125,047    441,702 

Operating Leases—Third Party

   276,776,320    4,767,957    22,243,662    22,285,836    22,092,882    21,387,294    183,998,689 

Operating Leases—Related Parties

   15,935,415    322,287    1,307,183    1,337,130    1,367,771    1,255,714    10,345,330 

Contingent Consideration

   36,315,361    27,100,000    9,215,361    —      —      —      —   

Construction Commitments(c)

   25,640,072    25,640,072    —      —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total as of September 30, 2020

  $497,242,999   $61,097,574   $45,872,410   $36,733,237   $134,378,579   $23,054,844   $196,106,359 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(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 $11,618,400 of unamortized debt discount as of September 30, 2020. See Note 6 - Notes Payable to our unaudited interim condensed consolidated financial statements for the period for details.

(b) -

The amount excludes $177,244 of unamortized debt discount as of September 30, 2020. See Note 6 - Notes Payable to our unaudited interim condensed consolidated financial statements for the period for details.

(c) -

The Company expects to be reimbursed for approximately $22,500,000 of the construction commitment as part of its sale and lease back agreement with IIP. See Note 5 - Leases to our unaudited interim condensed consolidated financial statements for the period for details.

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   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) 

Off-Balance Sheet Arrangements

As of September 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 - 1—Overview and Basis of Presentation.

Critical Accounting Policies and Significant Judgements and Estimates

There were no material changes to our critical accounting policies and estimates from the information provided in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our 20192020 Form 10-K.

Emerging Growth Company Status

The Company is an “emerging growth company” as defined in the Section 2(a) of the Exchange Act, as modified by the Jumpstart Our Business Start-ups Act of 2012, or the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 13(a) of the Exchange Act for complying with new or revised accounting standards applicable to public companies. The Company has elected to take advantage of this extended transition period and as a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.

ITEM 3.

ITEM 3. QUANTITAVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes to our market risk disclosures as set forth in Part II Item 7A of our Annual Report on2020 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. Our ability to continue to operate without any significant negative operational impact from COVID-19 pandemic will in part depend on our ability to protect our employees, customers and supply chain and continued designation as “essential” in states where we do business that currently or in the future impose restrictions on business operations.10-K.

 

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ITEM 4.

ITEM 4. CONTROLS AND PROCEDURES

 

(a)

Disclosure Controls and Procedures

The Company evaluated the effectiveness of our disclosure controls and procedures as of September 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 September 30, 2020.March 31, 2021. As an emerging growth company, Green Thumb iswas 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 our 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 our 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 September 30, 2020.March 31, 2021.

 

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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 our 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 for the period 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 our 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.

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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.

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.

On July 10, 2020, the Company issued 268,620 Subordinate Voting Shares as contingent consideration associated with the Company’s 2019 acquisition of Integral Associates, LLC.

On August 12, 2020, the Company issued 472,500 Subordinate Voting Shares as deferred share issuances associated with the Company’s 2019 acquisition of Advanced Grow Labs.

On August 26, 2020, the Company issued 646,353 Subordinate Voting Shares as deferred share issuances associated with the Company’s 2019 acquisition of For Success Holdings Company.

On August 31, 2020, the Company issued 1,315,789 Subordinate Voting Shares in consideration for the noncontrolling partner’s interest in Ohio Investors 2017, LLC

On September 17, 2020, the Company issued 5,941 Subordinate Voting Shares associated with the exercise of warrants issued as part of the purchase of one of its retail dispensaries.

Beginning on January 9, 2020February 1, 2021 and continuing through September 15, 2020,February 8, 2021, the Company converted 275,39311,030 Multiple Voting Shares into 27,539,3001,103,000 Subordinate Voting Shares.

From January 1, 2020 through February 19, 2020 (the effective date of the filing of our 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 our 2018 Stock and Incentive Plan, which vested over the same period.

Multiple Voting Shares

Beginning January 15, 2020On February 1, 2021 and continuing through July 2, 2020,February 8, 2021, the Company converted 22,95311,030 Super Voting Shares were converted into 22,95311,030 Multiple Voting Shares.

Beginning on January 9, 2020On February 1, 2021 and continuing through September 15, 2020,February 8, 2021, the Company converted 275,39311,030 Multiple Voting Shares into 27,539,3001,103,000 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

- 45 -

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.

- 4640 -

SIGNATURES

Pursuant to requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

GREEN THUMB INDUSTRIES INC.

/s/Benjamin Kovler

By: Benjamin Kovler

Title: Chief Executive Officer

Date: November 12, 2020May13, 2021

 

GREEN THUMB INDUSTRIES INC.

/s/Anthony Georgiadis

By: Anthony Georgiadis

Title: Chief Financial Officer

Date: November 12, 2020May 13, 2021

 

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