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Item 9A. Controls and Procedures

2024-03-13 compared with 2023-03-23 · 894 added, 788 removed, 1078 unchanged (61% of the section changed)

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Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended (the “

Exchange Act ”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our co-CEOs and Chief Financial Officer (CFO), as appropriate, to allow timely decisions regarding required disclosure.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our co-CEOs and Chief Financial Officer (“ CFO ”), as appropriate, to allow timely decisions regarding required disclosure.

In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and management necessarily was required to apply its judgment in evaluating the risk related to controls and procedures.

In connection with the preparation of this Form 10-K, as of December 31, 2023, an evaluation was performed under the supervision and with the participation of our management, including the co-CEOs and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act).

Based on that evaluation, our management concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of December 31, 2022.

Management ’

s Report on Internal Control Over Financial Reporting

Based on that evaluation, our management concluded that our disclosure controls and procedures were ineffective as of December 31, 2023 due to the identification of the material weaknesses discussed below.

Management ’ s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act).

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In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Management conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2022, based on the framework established in Internal Control –

Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

Based on the assessment, management has determined that our internal control over financial reporting as of December 31, 2022, was effective.

In accordance with guidance issued by the SEC, companies are permitted to exclude acquisitions from their final assessment of internal control over financial reporting for the first fiscal year in which the acquisition occurred.

Our management, with the participation of our co-CEOs and CFO, has limited the evaluation of our internal controls over financial reporting to exclude controls, policies and procedures and internal controls over financial reporting of the operations of Next Green Wave Holdings Inc.

which we acquired on March 2, 2022.

The operations of Next Green Wave Holdings Inc.

represent approximately 9.4% of our total assets and 8.7% of our gross revenues for the year ended December 31, 2022.

Independent Registered Accounting Firm's 

Report on Internal Control Over Financial Reporting

Management conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2023, based on the framework established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

Based upon that assessment, our management, including the co-CEOs and CFO, concluded that our internal controls over financial reporting were ineffective as of December 31, 2023 due to the identification of the material weaknesses discussed below.

Identified Material Weaknesses

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

We identified that certain process-level controls associated with third party vendor selection, retention and monitoring and well as processes designed to mitigate risks associated with fraud were not operated effectively.

These ineffective controls were attributable to insufficient policies and procedures and training that impaired our ability to timely discover potential third party fraudulent activity.

The control deficiencies described above created a reasonable possibility that a material misstatement to the consolidated financial statements would not be prevented or detected on a timely basis.

Therefore, we concluded that the deficiencies, in the aggregate, represent material weaknesses in our internal control over financial reporting.

Accordingly, we concluded that our internal controls over financial reporting and disclosure controls and procedures were not effective as of December 31, 2023.

These material weaknesses resulted in an increase to the net loss for the year ended December 31, 2022 by $10,300,000 and an increase to the net loss for the year ended December 31, 2023 by $2,000,000.

Management ’ s Plan to Remediate the Identified Material Weaknesses

The above-described material weaknesses have not been remediated as of the filing of this Annual Report on Form 10-K/A.

Since identifying the material weaknesses described above, management, with oversight from the Audit Committee, has already implemented and continues to implement enhanced policies and procedures intended to address both the identified material weaknesses and to enhance the Company’s overall internal control over financial reporting and disclosure controls and procedures.

As part of the remediation, we have also added an independent director to the Board who now serves as chairman of the audit committee.

The former chair of the audit committee has become an executive director and has taken on the role of Chief Administrative Officer and is overseeing the internal audit function for the Company.

As we continue to evaluate and improve our internal control over financial reporting and disclosure controls and procedures, management may determine to take additional measures to improve controls and determine to modify the remediation plan described above.

We are working to remediate the material weaknesses as efficiently and effectively as possible, but the material weaknesses cannot be considered fully remediated until the updated policies and training have been in place and operated for a sufficient period of time to enable management to conclude, through testing, that these controls are designed and operating effectively.

Accordingly, management will continue to monitor and evaluate the effectiveness of our internal control over financial reporting in the activities affected by the material weaknesses described above.

Independent Registered Accounting Firm's Report on Internal Control Over Financial Reporting

As an emerging growth company, as defined under the terms of the JOBS Act of 2012, our independent registered accounting firm is not required to issue a report on the internal control over financial reporting.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) identified in connection with the evaluation of our internal control performed during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Other than the material weaknesses and remediation plan discussed above, there were no changes in our internal control over financial reporting (as such term is defined by Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Other Information.

Insider Trading Arrangements and Policies

Certain of our officers or directors have made elections to participate in, and are participating in, our equity incentive plans and have made, and may from time to time make, elections to have shares withheld to cover withholding taxes, which may be designed to satisfy the affirmative defense conditions of Rule 10b5 - 1 under the Exchange Act or may constitute non-Rule 10b5 - 1 trading arrangements (as defined in Item 408 (c) of Regulation S-K).

During the year ended December 31, 2023 , no director or officer of the Company adopted or terminated a “Rule 10b5 - 1 trading arrangement” as such term is defined in Item 408 (a) of Regulation S-K.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

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Directors, Executive Officers and Corporate Governance.

The articles of the Company (the “

Articles ”) provide that the number of directors should not be fewer than three directors.

The bylaws of the Company (the “ Bylaws ”) provide that the number of directors should not be fewer than three nor more than nine directors.

Each director shall hold office until the close of our next annual general meeting, or until his or her successor is duly elected or appointed, unless his or her office is earlier vacated.

Our Board currently consists of four directors.

Our Board currently consists of five directors.

The following table sets forth our directors and executive officers and their respective positions:

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Director, Co-Chairman and Co-CEO

Michael Harman

Adrienne O’Neal

Director, Chief Administrative Officer

Adrienne O’Neal

Chief Financial Officer

Leighton Koehler

General Counsel

Vice President Operations

William Vargas

Vice President Finance

Vice President Sales and Marketing

Michael Jennings

President of East Coast Operations

Vice President of Operations

Vice President of Midwestern Operations

Tatev Oganyan

General Counsel

Director and Executive Officer Biographies

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Groesbeck served as General Counsel to Republic Services, a provider of comprehensive solid waste and recycling services, for its Nevada operations and was their western regional counsel from 1993 to 2001, and provided outside legal consulting to Republic Services from 2001 to 2008.

He also served as General Counsel to C&S Waste Solutions, a privately operated Nevada and California waste disposal company, from 2010 through 2015, and provided outside legal consulting to C&S Waste Solutions from 2008 through 2010, and 2015 through May 2018. He has practiced law for over 25 years and has also served as the mayor of the City of Henderson, Nevada from 1993 to 1997.

He has practiced law for over 25 years and has also served as the mayor of the City of Henderson, Nevada from 1993 to 1997.

Groesbeck earned his B.S.

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We believe that Mr.

Groesbeck’s experience as a long-time entrepreneur, starting and/or assisting in the creation of a number of businesses, qualifies him to serve on the Board.

Larry Scheffler has served as Co-CEO and a director of the Company since June 2018.

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Scheffler served as Co-President of MMDC, a subsidiary of the Company, from 2014 to June 2018.

He was also the Chairman and Founder of Las Vegas Color Graphics, Inc., a privately owned commercial printing company, where he served from 1978 through 2022.

He was also the Chairman and Founder of Las Vegas Color Graphics, Inc., a privately owned commercial printing company, where he served from 1978 through 2022.

Scheffler also served as a councilman for the city of Henderson, Nevada from 1990 to 1995.

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We believe that Mr.

Scheffler’s broad management experience and past success with guiding the growth of the Company qualifies him to serve on the Board.

Michael Harman, CPA , has been a director of the Company since June 2018.

He is the Managing Partner and senior audit partner with HRP CPAs, a certified public accounting and consulting firm, since July 2016.

Prior to that, Mr.

Harman was a Partner at LLB CPAs from 1998 to June 2016.

He holds FINRA series 27 and 63 licenses, serves as Financial Operations Principal for a Broker Dealer in Las Vegas, is a member of the American Institute of Certified Public Accountants, the Turnaround Management Association and the Nevada Society of Certified Public Accountants and is a CPA licensed in the State of Nevada.

Scheffler’s broad management experience and past success with guiding the growth of the Company qualifies him to serve on the Board.

Lee Fraser has served as Chief Administrative Officer of the Company since February 2024 and as a director of the Company since May 2023.

Fraser has previously held financial leadership roles at Fox Corp.

from 2019 to 2021 and Warner Bros.

from 2007 to 2019 where he developed business strategies and helped manage the construction and real estate portfolios for both companies.

At Warner Bros.

he was directly responsible for financial oversight of the worldwide Harry Potter Tour, and the Harry Potter Flagship Retail Stores.

Fraser’s expertise also includes corporate finance and financial planning at Gemstar-TV Guide and Waste Management.

Fraser has a Bachelor of Commerce degree from the University of Ottawa and received his Master’s degree in Business Administration from the Andersen School of Management at UCLA.

We believe that Mr.

Harman is qualified to serve on the Board due to his extensive accounting experience and his familiarity in working with management of a variety of companies in his role as a CPA.

Adrienne O ’

Neal has been a director of the Company since June 2019.

Fraser’s experience in business development and finance at publicly traded companies qualify him to serve on the Board.

Kevin Martin , CPA , joined Planet 13 as an independent director in February 2024.

Since November 2020, Mr.

Martin has held an audit leadership role at HSS Enterprises.

Previously, from 2005 to 2020, Mr.

Martin held senior risk and audit leadership roles at multinational private and public companies, including Irving Oil, Endeavour Mining Corporation, which operates gold mines in West Africa, and The Heico Companies LLP, which manufactures steel, heavy equipment and industrial construction.

Martin is a Chartered Public Accountant and Certified Fraud Examiner, and he has a Certification in Risk Management Assurance.

We believe that Mr.

Martin is qualified to serve on the Board due to his extensive accounting experience and his familiarity in working with management of a variety of companies in his role as an auditor.

Adrienne O ’ Neal has been a director of the Company since June 2019.

She has been the owner of Las Vegas Counselor LLC since 2004, where she provides marriage and family therapy services, and she is also the co-owner of Red Rock Counseling, a private practice agency which includes licensed therapists and training for pre-licensed graduate students since December 2018.

Prior to 2004, Ms.

O’Neal was an Account Manager at R&R Partners, an advertising, marketing, public relations, and public affairs firm, for 13 years between 1984 to 2004.

From June 2017 to February 2021, Ms.

O’Neal was appointed by former State of Nevada Governor Brian Sandoval and served on the Nevada State Board of Marriage & Family Therapy and Clinical Professional Counselors.

O’Neal has also served as a part-time instructor at the University of Nevada, Las Vegas School of Medicine’s Marriage and Family Therapy Graduate Program, where she has served since January 2017.

O’Neal has passed the Series 7 exam, which measures the degree to which a candidate possesses the knowledge needed to perform the critical functions of a general securities representative, including sales of corporate securities, municipal securities, investment company securities, variable annuities, direct participation programs, options and government securities, administered by the Financial Industry Regulatory Authority.

O’Neal was appointed by former State of Nevada Governor Brian Sandoval and served on the Nevada State Board of Marriage & Family Therapy and Clinical Professional Counselors.

O’Neal has also served as a part-time instructor at the University of Nevada, Las Vegas School of Medicine’s Marriage and Family Therapy Graduate Program, where she has served since January 2017.

She holds a B.S.

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We believe that Ms.

O’Neal’s expertise in securities matters and her background in a variety of types of business qualifies her to serve on the Board.

Dennis Logan has served as Chief Financial Officer of the Company since June 2018.

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Logan started his career in finance and accounting at Ernst & Young LLP in 1992.

Leighton Koehler has been the General Counsel of the Company since June 2018.

Koehler is a licensed attorney and CPA, whose previous experience includes working at Dickinson Wright, a U.S.-Canada law firm, as a transactional and tax attorney from October 2016 to May 2018, regional and local law firms Fabian VanCott and Gerrard Cox Larsen from 2013 through October 2016, the Internal Revenue Service as a senior revenue agent from 2007 to 2013, and at Ernst & Young in both the audit and tax divisions from 2004 to 2007.

He holds a B.A.

in Accounting from Southern Utah University, a J.D.

from the Boyd School of Law, and he is a U.S.

Army veteran.

Prior to joining the Company, Mr.

Koehler successfully represented his Fortune 500 company clients and other clients before federal, state, and local regulators, and served as Nevada counsel for the Company’s reverse takeover transaction.

Chris Wren has been the Vice President Operations of the Company since March 2014 and is responsible for the oversight of all production and cultivation operations.

He possesses more than 16 years of cannabis industry cultivation and extraction experience.

Wren also managed the construction of the Company’s dispensary, the Clark County cultivation facility and the Beatty complex, as well as design and implementation of the Company processes at those facilities.

Wren is an internationally recognized cannabis horticulturist and has won several awards for his cultivation efforts, including first place in the 2015 International Cannagraphic Growers Cup.

William Vargas has been the Vice President Finance of the Company since June 2018.

Vargas served as Chief Financial Officer and Senior Vice President of Las Vegas Color Graphics, Inc., a privately owned commercial printing company, from July 2000 to May 2022, and Vice President Finance, Chief Financial Officer and Corporate Secretary of LEC Technologies, Inc., a publicly-traded computer leasing company, from 1995 to 2000.

Vargas started his career in finance and accounting as audit manager with Arthur Andersen & Co.

David Farris has been Vice President Sales & Marketing of the Company since December 2019.

Prior to that, he was the Company’s Director of Sales and Marketing from June 2018 through December 2019, MMDC’s Director of Sales and Marketing from October 2017 through June 2018, MMDC’s General Manager from June 2017 through October 2017, and MMDC’s Marketing and Sales Coordinator from January 2016 through June 2017.

Farris has established branding and advertising initiatives in the cannabis marketplace focused on creating an unparalleled experience and patient education.

Farris oversees a multidisciplinary sales and marketing team responsible for advertising, events, promotions, product packaging, design, and web development/design.

In addition to creative efforts, he currently oversees the operations at three dispensaries in Nevada and California, including adult-use and medical sales, and wholesale sales in Nevada.

Farris holds a B.S.

in Business Administration - Marketing from University of Nevada, Las Vegas.

Since 2021, Mr.

Farris is the stepson of Mr.

Groesbeck, Co-CEO and Co-Chairman.

Michael Jennings has served as President of East Coast Operations of the Company since March 2022, where he is primarily focused on the immediate utilization and growth initiatives of the Company’s MMTC license in Florida.

Prior to that, Mr.

Jennings served as the Chief Executive Officer of NGW (which was acquired by the Company on March 2, 2022) from August 2019 to March 2022.

From August 2016 through August 2019, Mr.

Jennings managed the predecessor entities for NGW’s cultivation and processing operations and prepared that company to go public as its founder, including raising capital, branding, design and development, and overseeing operations.

Jennings oversaw retail and branding of several dispensaries and large cultivation projects in California during the California Compassionate Use Act era arising in 1996 and continuing through a more robust statutory and regulatory framework available under the California Medicinal and Adult Use Cannabis Regulation and Safety Act starting in January 2018. 

Todd Hybels has served as Vice President of Midwestern Operations of the Company since March 2022.

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Hybels was the Director of Development and Construction at NGW from October 2019 to January 2021 and a construction consultant to NGW from March 2019 to October 2019.

Hybels’

insight and initiative were integral in scaling NGW operations to a fully operational premium cultivation facility.

Hybels’ insight and initiative were integral in scaling NGW operations to a fully operational premium cultivation facility.

Prior to his time at NGW, Mr.

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Hybels has a financial background, with a focus on calculated, high-risk commodities.

Tatev Oganyan joined Planet 13 in February 2024 and is responsible for overseeing legal matters for the company.

Since February 2020, Ms.

Oganyan has owned and operated The Oganyan Agency, a cannabis consulting practice.

Prior to that, Ms.

Oganyan had oversight of legal affairs at GBL LLC from July 2017 to February 2020 and at EH Tech Inc.

from September 2016 to July 2017.

Before moving in-house in 2024, Ms.

Oganyan worked as an outside consultant for Planet 13, leading the licensing and permitting process for the successful opening of the Planet 13 Orange County and Planet 13 Waukegan stores.

She further led the regulatory due diligence for the Next Green Wave acquisition, allowing Planet 13 to broaden its popular brand portfolio in California.

Oganyan has a Bachelor of Arts in Political Science and History from UCLA and holds a law degree and Master’s in Dispute Resolution from Pepperdine Caruso School of Law.

Sara Adams has been part of the legal department at Planet 13 since September 2021.

Adams serves as the Company’s Secretary and is generally responsible for corporate governance and regulatory compliance matters.

Adams’ prior experience includes paralegal and accounting services for a sole proprietor attorney from June 2020 to July 2022, accounting and tax services at Barrick Gold Corporation and RubinBrown LLP from January 2019 to July 2020, and paralegal services at Fabian VanCott from 2015 to 2019.

Adams holds a Bachelor of Science in Business Administration, Accounting from the University of Nevada - Las Vegas.

Board Committees

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A brief description of each committee is set out below.

See also “ Director Independence .”

Audit Committee

The audit committee of the Board (the “

Audit Committee ”) assists the Board in fulfilling its responsibilities for oversight of financial, audit and accounting matters.

The Board has adopted a written charter for the Audit Committee, which sets out the Audit Committee’s responsibilities.

The audit committee of the Board (the “ Audit Committee ”) assists the Board in fulfilling its responsibilities for oversight of financial, audit and accounting matters.

The Board has adopted a written charter for the Audit Committee, which sets out the Audit Committee’s responsibilities.

The Audit Committee reviews the financial reports and other financial information provided by us to regulatory authorities and our shareholders, as well as reviews our system of internal controls regarding finance and accounting, including auditing, accounting and financial reporting processes.

The current members of the Audit Committee include the following directors:

Michael Harman (Chair), Adrienne O’Neal and Larry Scheffler.

Harman is an audit committee financial expert within the meaning of Item 407(d) of Regulation S-K under the Securities Act.

Kevin Martin (Chair), Lee Fraser, and Adrienne O’Neal.

Martin is an audit committee financial expert within the meaning of Item 407(d) of Regulation S-K under the Securities Act.

Compensation Committee

The compensation committee of the Board (the “

Compensation Committee ”) assists the Board in fulfilling its responsibilities for compensation philosophy and guidelines.

The compensation committee of the Board (the “ Compensation Committee ”) assists the Board in fulfilling its responsibilities for compensation philosophy and guidelines.

The Compensation Committee also has responsibility for fixing compensation levels for our executive officers.

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The current members of the Compensation Committee include the following directors:

Michael Harman and Adrienne O’Neal (Chair).

Kevin Martin and Adrienne O’Neal (Chair).

Corporate Governance and Nominating Committee

The corporate governance and nominating committee (the “

CG&N Committee ”) assists us in fulfilling our corporate governance responsibilities under applicable law and is responsible for reviewing and assessing the effectiveness of the Board, evaluating the Board and its directors and making policy recommendations aimed at enhancing Board effectiveness.

The corporate governance and nominating committee (the “ CG&N Committee ”) assists us in fulfilling our corporate governance responsibilities under applicable law and is responsible for reviewing and assessing the effectiveness of the Board, evaluating the Board and its directors and making policy recommendations aimed at enhancing Board effectiveness.

In addition to assisting us with the recruitment and education of new and current directors, the CG&N Committee reports to the Board to assist us in identifying and recommending individuals qualified to become members of the Board and evaluating the Board and its directors.

The current members of the CG&N Committee include the following directors:

Michael Harman and Adrienne O’Neal (Chair).

Kevin Martin and Adrienne O’Neal (Chair).

Changes to Security Holders Director Nomination Procedures

Pursuant to the Plan of Arrangement to domesticate the Company into Nevada as described in “ History of the Company ” in Item 1 above, the Company has adopted Bylaws which have changed the security holders director nomination procedures as follows:

Stockholders who wish to (1) submit director nominees for consideration or (2) present other items of business ‎directly at next year’s annual meeting must give written notice of their intention to do so, in accordance with the ‎deadlines described in our Bylaws under the heading “ Advance Notice Policy ” to our Secretary at 4675 W.

Teco Ave., Suite 250, Las Vegas, NV 89118.

Any such notice also must include the ‎information required by our Bylaws and the Exchange Act and ‎must be updated and supplemented as provided in the Bylaws.‎

Our Bylaws include an advance notice policy, pursuant to which, any additional director nomination for an annual meeting of Stockholders or a special meeting of the Stockholders (which is not also an annual meeting) must be received by the Secretary of the Company as described in our Bylaws under the heading “ Advance Notice Policy .”

In addition to satisfying the foregoing requirements under our Bylaws, to comply with the universal proxy rules, Stockholders who intend to solicit proxies in support of director nominees other than the Company’s nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than April 12, 2025.

However, if our 2025 annual meeting of Stockholders is not held between May 12, 2025 and July 11, 2025, then notice must be provided on the later of (a) 60 calendar days prior to the 2025 annual meeting of Stockholders or (b) the 10th day following the date on which notice of the date of the 2025 annual meeting of Stockholders is first made to the Stockholders.

Stockholders may recommend director candidates for consideration by the Board by writing to our ‎Secretary at the address set forth above in accordance with the notice provisions described above.

Subject to compliance with the Exchange Act and the Company’s Bylaws, to be in proper written form, such notice must (i) set forth all information relating to the nominee that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required pursuant to and in accordance with the Exchange Act, such nominee’s written consent to being named in the proxy statement as a nominee and to serving as a director of the Company if elected, and such other information regarding such nominee as may reasonably be requested by the Board in writing prior to the meeting of Stockholders at which such candidate’s nomination is to be acted upon in order for the Board of Directors to determine the eligibility of such candidate for nomination to be an independent director of the Company, (ii) include the completed and signed questionnaire, representation and agreement required by Section 3.13 of the Company’s Bylaws, (iii) as to the Stockholder giving the notice, set forth (a) the name and address of such Stockholder, as they appear on the Company’s books, and of such beneficial owner, (b) the class or series and number of Stock which are owned beneficially and of record by such Stockholder and such beneficial owner, except that such Stockholder shall in all events be deemed to beneficially own any shares of any class or series of Stock of the Corporation as to which such Stockholder has a right to acquire beneficial ownership at any time in the future, (c) a description of any agreement, arrangement or understanding with respect to the nomination or proposal between or among such Stockholder and/or such beneficial owner, any of their respective affiliates or associates, and any others acting in concert with any of the foregoing, including, in the case of a nomination, the nominee, (d) a description of any agreement, arrangement or understanding (including any derivative or short positions, profit interests, options, warrants, convertible securities, stock appreciation or similar rights, hedging transactions, and borrowed or loaned shares) that has been entered into as of the date of the Stockholder’s notice by, or on behalf of, such Stockholder and such beneficial owners, whether or not such instrument or right shall be subject to settlement in underlying Stock, the effect or intent of which is to mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of, such Stockholder or such beneficial owner, with respect to securities of the Corporation, (e) a representation that the Stockholder is a holder of record of Stock entitled to vote at such meeting and intends to appear in person or by proxy at the meeting, and (f) a representation that the Stockholder or the beneficial owner, if any, intends or is part of a group which intends (1) to solicit proxies or votes in support of such Director nominees or nomination in accordance with Rule 14a-19 promulgated under the Exchange Act, and (2) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Company’s outstanding capital stock required to approve or adopt the proposal or elect the nominee.

Executive Compensation.

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The Compensation Committee, on behalf of the Board, establishes policies with respect to the compensation of our Co-CEOs, CFO and other senior executive officers.

The Compensation Committee assists the Board in discharging the Board’s oversight responsibilities relating to the attraction, compensation, evaluation and retention of key senior management employees, and in particular the Co-CEOs, with the skills and expertise needed to enable us to achieve our goals and strategies at fair and competitive compensation and appropriate performance incentives.

The Compensation Committee is responsible to review and approve corporate goals and objectives relevant to the Co-CEOs and other senior executive officers’

compensation, evaluate the performance of the Co-CEOs and each senior executive officer’s performance in light of those goals and objectives, and recommend to the Board for approval the compensation level each senior executive officer based on this evaluation.

The Compensation Committee is responsible to review and approve corporate goals and objectives relevant to the Co-CEOs and other senior executive officers’ compensation, evaluate the performance of the Co-CEOs and each senior executive officer’s performance in light of those goals and objectives, and recommend to the Board for approval the compensation level each senior executive officer based on this evaluation.

The Compensation Committee is also responsible for the review of our compensation systems in order to ensure the fairness and appropriateness of the compensation of senior executive officers that may participate, including incentive compensation plans and equity-based plans.

Named Executive Officers

For the purpose of this Annual Report on Form 10-K, a named executive officer (“

NEO ”) of the Company means each of the following individuals:

each Co-CEO of the Company;

the two most highly compensated executive officers other than the Co-CEOs who were serving as executive officers at the end of the last completed fiscal year; and

For the purpose of this Annual Report on Form 10-K, a named executive officer (“ NEO ”) of the Company means each of the following individuals:

each Co-CEO of the Company;

the two most highly compensated executive officers other than the Co-CEOs who were serving as executive officers at the end of the last completed fiscal year; and

up to two additional individuals for whom disclosure would have been provided under the above but for the fact that the individual was not serving as an executive officer at the end of the last completed fiscal year.

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Dennis Logan, Chief Financial Officer;

and Chris Wren, Vice President, Operations.

and Chris Wren, Vice President of Operations.

Lee Fraser, Chief Administrative Officer, was not serving as an executive officer at December 31, 2023 but, as of February 7, 2024, is one of the two most highly compensated executive officers other than the Co-CEOs.

Elements of Compensation

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The basic components of the executive compensation program are:

Base Salary. 

Base salary is the fixed portion of each executive officer’s total compensation.

It is designed to provide income certainty and retain executives.

In determining the base level of compensation for the executive officers, weight is placed on the following objective factors:

the particular responsibilities related to the position;

salaries or fees paid by companies of similar size in the industry;

level of experience and expertise;

and subjective factors such as leadership, commitment and attitude.

the particular responsibilities related to the position; salaries or fees paid by companies of similar size in the industry; level of experience and expertise; and subjective factors such as leadership, commitment and attitude.

Short-Term Incentive Compensation .

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Stock Options .

Stock options are a form of long-term equity incentive compensation granted from time to time to align executives’

interests with those of the Company and its shareholders and reward executives for their contribution to the creation of shareholder value.

Participants benefit only if the market value of our Common Shares at the time of the stock option exercise is greater than the exercise price of the stock options at the time of grant.

Stock options are a form of long-term equity incentive compensation granted from time to time to align executives’ interests with those of the Company and its shareholders and reward executives for their contribution to the creation of shareholder value.

Participants benefit only if the market value of our Common Stock at the time of the stock option exercise is greater than the exercise price of the stock options at the time of grant.

In establishing the number of stock options that may be granted, reference is made to the recommendations made by the Compensation Committee as well as, from time to time, the number of similar awards granted to officers and directors of other publicly-traded companies of similar size in the same business as us.

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Restricted Share Units .

Restricted Share Units are a form of long-term equity incentive compensation granted from time to time to align executives’

interests with those of the Company and its shareholders and to attract and retain executives.

Restricted Share Units are notional shares that have the same value as Common Shares and earn dividend equivalents as additional units, at the same rate as dividends paid on Common Shares.

Restricted Share Units are a form of long-term equity incentive compensation granted from time to time to align executives’ interests with those of the Company and its shareholders and to attract and retain executives.

Restricted Share Units are notional shares that have the same value as shares of Common Stock and earn dividend equivalents as additional units, at the same rate as dividends paid on Common Stock.

No dividend equivalents will vest unless the associated Restricted Share Units also vest.

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Summary Compensation Table

The following table is a summary of annual compensation paid, or recognized as an expense in accordance with Accounting Standards Codification (“

ASC ”) Topic 718 (Compensation - Stock Compensation), to the NEOs for our two most recently completed fiscal years, December 31, 2022, and December 31, 2021.

All amounts are expressed in US Dollars: 

The following table is a summary of annual compensation paid, or recognized as an expense in accordance with Accounting Standards Codification (“ ASC ”) Topic 718 (Compensation - Stock Compensation), to the NEOs for our two most recently completed fiscal years, December 31, 2023, and December 31, 2022.

All amounts are expressed in US Dollars:

Non-equity incentive plan compensation

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Chief Financial Officer

Vice President, Operations

The amounts reported in the Stock Awards column reflect the aggregate grant date fair value computed in accordance with ASC Topic 718 (Compensation - Stock Compensation).

These amounts reflect our calculation of the value of these awards at the grant date and do not necessarily correspond to the actual value that may ultimately be realized by the named executive officer.

Assumptions used in the calculation of these amounts are included in Note 12 to our audited consolidated financial statements for the fiscal year ended December 31, 2022.

The values provided in this column are calculated based on the closing price of our Common Shares on the CSE on the date of grant. 

Vice President of Operations

Fraser’s annual salary beginning at his February 7, 2024 appointment is $300,000.

The values provided for Mr.

Logan in this column are converted to US Dollars using the average exchange rate for the year indicated as provided by the Bank of Canada.

For 2021 USD$1.00=CAD$1.2535 and for 2022 USD$1.00=CAD$1.3013.

Reflects actual base salary earnings for 2021 due to payroll timing.

For 2022 USD$1.00=CAD$1.3013 and for 2023 USD$1.00=CAD$1.3495.

The amounts listed for 2022 non-equity incentive compensation plan are amounts accrued for 2022.

Non-equity incentive plan compensation is weighted 80% for each Co-CEO and 60% for other executive officers and 20% for each Co-CEO and 40% for other executive officers, for 

corporate objectives and key metrics applicable to the executive, respectively, and is reviewed and approved by the Compensation Committee before payment.

Non-equity incentive plan compensation is weighted 80% for each Co-CEO and 60% for other executive officers and 20% for each Co-CEO and 40% for other executive officers, for corporate objectives and key metrics applicable to the executive, respectively, and is reviewed and approved by the Compensation Committee before payment.

The amounts consist of car allowance ($29,608 for 2023 and $29,608 for 2022) and health benefits ($27,800 for 2023 and $27,792 for 2022).

The amounts consist of car allowance ($29,608 for 2023 and $29,608 for 2022) and health benefits ($38,822 for 2023 and $39,816 for 2022).

The amounts consist of car allowance ($13,800 for 2022 and $14,880 for 2021) and health benefits ($7,057 for 2022 and $7,616 for 2021).

The amounts consist of car allowance ($13,800 for 2023 and $13,800 for 2022) and health benefits ($7,114 for 2023 and $7,057 for 2022).

The amounts consist of car allowance ($15,170 for each of 2023 and 2022) and health benefits ($43,244 for 2023 and $43,236 for 2022).

Narrative Discussion

For a summary of the significant terms of each NEO’s employment agreement or arrangement, please see below under the heading “

Employment Agreements and Termination and Change of Control Benefits ”.

For a summary of the significant terms of each NEO’s employment agreement or arrangement, please see below under the heading “ Employment Agreements and Termination and Change of Control Benefits ”.

Outstanding Equity Awards at Fiscal Year-End Table

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Larry Scheffler

For each named executive officer 100% of the listed incentive awards will vest on December 1, 2023.

Based on the closing share price of the Common Shares as traded on the CSE on December 31, 2022 of CAD$0.83 at an exchange rate of USD$1.00=CAD$1.3544.

For each named executive officer 100% of the listed incentive awards vested on December 1, 2023.

Based on the closing share price of the Common Stock as traded on the CSE on December 31, 2023 of CAD$0.86 at an exchange rate of USD$1.00=CAD$1.3226.

Employment Agreements and Termination and Change of Control Benefits

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Scheffler, which for the fiscal year ended December 31, 2023, was USD$500,000 (subject to any further increases as may be approved by the Compensation Committee).

Stock Option Plan ”) and other equity plans in effect from time to time.

Scheffler’s employment is terminated by us with “cause”

Scheffler without “good reason”

(as such terms are defined in the agreement), we will pay Mr.

Scheffler is also entitled to receive other benefits and perquisites, including participation in our benefit plans, an annual bonus, performance bonuses and participation in our 2023 Equity Incentive Plan, approved by a vote of our shareholders at the 2023 Annual General and Special Meeting of the Shareholders on July 27, 2023 (the “ Equity Incentive Plan ”) and other equity plans in effect from time to time.

Scheffler’s employment is terminated by us with “cause” or by Mr.

Scheffler without “good reason” (as such terms are defined in the agreement), we will pay Mr.

Scheffler any accrued but unpaid base salary, accrued but unused vacation and any earned but unpaid annual bonus with respect to any completed calendar year immediately preceding the date of termination, except in the event Mr.

Scheffler’s employment is terminated by us for cause in which case any such accrued but unpaid annual bonus shall be forfeited.

Scheffler’s employment is terminated by us without cause or by Mr.

Scheffler’s employment is terminated by us for cause in which case any such accrued but unpaid annual bonus shall be forfeited.

Scheffler’s employment is terminated by us without cause or by Mr.

Scheffler for good reason, including upon the change of control of the Company, we will, for the duration of the remaining term of the agreement, continue to pay Mr.

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The non-solicitation and non-competition covenants apply during the term of employment and for 12 months following resignation or the termination of Mr.

Scheffler’s employment.

In March 2021, we entered into an amendment to the employment agreement with Mr.

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Groesbeck, which for the fiscal year ended December 31, 2023, was USD$500,000 (subject to any further increases as may be approved by the Compensation Committee).

Groesbeck is also entitled to receive other benefits and perquisites, including participation in our benefit plans, an annual bonus, performance bonuses and participation in the Stock Option Plan and other equity plans in effect from time to time.

Groesbeck’s employment is terminated by us with “cause”

Groesbeck without “good reason”

(as such terms are defined in the agreement), we will pay Mr.

Groesbeck is also entitled to receive other benefits and perquisites, including participation in our benefit plans, an annual bonus, performance bonuses and participation in the Equity Incentive Plan and other equity plans in effect from time to time.

Groesbeck’s employment is terminated by us with “cause” or by Mr.

Groesbeck without “good reason” (as such terms are defined in the agreement), we will pay Mr.

Groesbeck any accrued but unpaid base salary, accrued but unused vacation and any earned but unpaid annual bonus with respect to any completed calendar year immediately preceding the date of termination, except in the event Mr.

Groesbeck’s employment is terminated by us for cause in which case any such accrued but unpaid annual bonus shall be forfeited.

Groesbeck’s employment is terminated by us without cause or by Mr.

Groesbeck’s employment is terminated by us for cause in which case any such accrued but unpaid annual bonus shall be forfeited.

Groesbeck’s employment is terminated by us without cause or by Mr.

Groesbeck for good reason, including upon the change of control of the Company, we will, for the duration of the remaining term of the agreement, continue to pay Mr.

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The non-solicitation and non-competition covenants apply during the term of employment and for 12 months following resignation or the termination of Mr.

Groesbeck’s employment.

In March 2021, we entered into an amendment to the employment agreement with Mr.

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Logan, which for the fiscal year ended December 31, 2023, was USD$300,000 (subject to any further increases as may be approved by the Compensation Committee).

Logan is also entitled to receive other benefits and perquisites, including participation in our benefit plans, an annual bonus, performance bonuses and participation in the Stock Option Plan and other equity plans in effect from time to time.

Logan’s employment is terminated by us with “cause”

Logan without “good reason”

(as such terms are defined in the agreement), we will pay Mr.

Logan is also entitled to receive other benefits and perquisites, including participation in our benefit plans, an annual bonus, performance bonuses and participation in the Equity Incentive Plan and other equity plans in effect from time to time.

Logan’s employment is terminated by us with “cause” or by Mr.

Logan without “good reason” (as such terms are defined in the agreement), we will pay Mr.

Logan any accrued but unpaid base salary, accrued but unused vacation and any earned but unpaid annual bonus with respect to any completed calendar year immediately preceding the date of termination, except in the event Mr.

Logan’s employment is terminated by us for cause in which case any such accrued but unpaid annual bonus shall be forfeited.

Logan’s employment is terminated by us without cause or by Mr.

Logan’s employment is terminated by us for cause in which case any such accrued but unpaid annual bonus shall be forfeited.

Logan’s employment is terminated by us without cause or by Mr.

Logan for good reason, including upon the change of control of the Company, we will, for a period of 18 months from the date of termination, continue to pay Mr.

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The non-solicitation and non-competition covenants apply during the term of employment and for 12 months following resignation or the termination of Mr.

Logan’s employment.

In June 2018, we entered into an employment agreement with Chris Wren, our Vice President, Operations, for an initial term of five years.

Logan’s employment.

In February 2024, we entered into an employment agreement with Lee Fraser, our Chief Administrative Officer, for an initial term through December 31, 2025.

The agreement provides for payment of an annual base salary to Mr.

Fraser, which, beginning with the fiscal year ended December 31, 2024, will be USD$300,000 (subject to any further increases as may be approved by the Compensation Committee).

Fraser is also entitled to receive other benefits and perquisites, including participation in our benefit plans, an annual bonus, performance bonuses and participation in the Equity Incentive Plan and other equity plans in effect from time to time.

Fraser’s employment is terminated by us with “cause” or by Mr.

Fraser without “good reason” (as such terms are defined in the agreement), we will pay Mr.

Fraser any accrued but unpaid base salary, accrued but unused vacation and any earned but unpaid annual bonus with respect to any completed calendar year immediately preceding the date of termination, except in the event Mr.

Fraser’s employment is terminated by us for cause in which case any such accrued but unpaid annual bonus shall be forfeited.

Fraser’s employment is terminated by us without cause or by Mr.

Fraser for good reason, including upon the change of control of the Company, we will, for the duration of the remaining term of the agreement, continue to pay Mr.

Fraser his base salary and continue to provide him with health care benefits at a substantially similar level to the benefits provided to him while he was employed by us.

In addition, Mr.

Fraser shall be paid any earned but unpaid annual bonus with respect to any completed calendar year immediately preceding the date of termination and all outstanding equity incentive awards granted to him would remain outstanding and would vest or be forfeited in accordance with the terms of the applicable award agreements.

The employment agreement also provides for, among other things, confidentiality, non-solicitation and non-competition covenants in favor of the Company.

The non-solicitation and non-competition covenants apply during the term of employment and for 12 months following resignation or the termination of Mr.

Fraser’s employment.

In June 2018, we entered into an employment agreement with Chris Wren, our Vice President of Operations, for an initial term of five years.

The agreement provides for payment of an annual base salary to Mr.

Wren, which for the fiscal year ended December 31, 2023, was USD$415,000 (subject to any further increases as may be approved by the Compensation Committee).

Wren is also entitled to receive other benefits and perquisites, including participation in our benefit plans, an annual bonus, performance bonuses and participation in the Stock Option Plan and other equity plans in effect from time to time.

Wren’s employment is terminated by us with “cause”

Wren without “good reason”

(as such terms are defined in the agreement), we will pay Mr.

Wren is also entitled to receive other benefits and perquisites, including participation in our benefit plans, an annual bonus, performance bonuses and participation in the Equity Incentive Plan and other equity plans in effect from time to time.

Wren’s employment is terminated by us with “cause” or by Mr.

Wren without “good reason” (as such terms are defined in the agreement), we will pay Mr.

Wren any accrued but unpaid base salary, accrued but unused vacation and any earned but unpaid annual bonus with respect to any completed calendar year immediately preceding the date of termination, except in the event Mr.

Wren’s employment is terminated by us for cause in which case any such accrued but unpaid annual bonus shall be forfeited.

Wren’s employment is terminated by us without cause or by Mr.

Wren’s employment is terminated by us for cause in which case any such accrued but unpaid annual bonus shall be forfeited.

Wren’s employment is terminated by us without cause or by Mr.

Wren for good reason, including upon the change of control of the Company, we will, for the duration of the remaining term of the agreement, continue to pay Mr.

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The non-solicitation and non-competition covenants apply during the term of employment and for 12 months following resignation or the termination of Mr.

Wren’s employment.

In March 2021, we entered into an amendment to the employment agreement with Mr.

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Other than as set out in the table below and prior to January 1, 2021, no non-employee director has received compensation pursuant to:

any standard arrangement for the compensation of directors for their services in their capacity as directors, including any additional amounts payable for committee participation or special assignments;

any other arrangement, in addition to, or in lieu of, any standard arrangement, for the compensation of directors in their capacity as directors; or

any other arrangement, in addition to, or in lieu of, any standard arrangement, for the compensation of directors in their capacity as directors; or

any arrangement for the compensation of directors for services as consultants or experts.

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Michael Harman

Adrienne O’Neal

Compensation Committee Interlocks and Insider Participation

During 2022, our Compensation Committee members were Adrienne O’Neal (Chair) and Michael Harman, neither of whom currently is, or formerly was, an officer or employee of the Company.

During 2023, our Compensation Committee members were Adrienne O’Neal (Chair) and Lee Fraser, neither of whom currently is, or formerly was, an officer or employee of the Company.

None of our executive officers served as a member of the Board or Compensation Committee of any other company that had one or more executive officers serving as a member of our board of directors or Compensation Committee.

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Except as indicated, all shares of our securities will be owned directly, and the person or entity listed as the beneficial owner has sole voting and dispositive power.

The percentage ownership in the below table is based on 221,533,438 Common Shares outstanding as of March 23, 2023.

To our knowledge, except as noted below, no person or entity is the beneficial owner of more than 5% of the Common Shares.

The percentage ownership in the below table is based on 223,317,270 shares of Common Stock outstanding as of March 13, 2024.

To our knowledge, except as noted below, no person or entity is the beneficial owner of more than 5% of the Common Stock.

The address for each director and executive officer is c/o Planet 13 Holdings Inc., 2548 West Desert Inn Road, Suite 100, Las Vegas, Nevada 89109.

Common Shares

Right to Acquire

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Within 60 Days(5)

Common Shares

Larry Scheffler

Robert Groesbeck

Michael Harman

Adrienne O’Neal

All directors and executive officers as a group (10 persons)

* Less than one percent

Based on Schedule 13G/A filed with the SEC by Mr.

Scheffler on February 14, 2023, Mr.

Scheffler's beneficial ownership includes 562,500 Common Shares owned by the Scheffler Family Limited Partnership (the “

Partnership ”) and 5,000,000 Common Shares owned by Thirteen, LLC (“

Thirteen ”) and 33,016,470 Common Shares owned by Scheffler RX LLC.

Scheffler’s beneficial ownership includes 562,500 shares of Common Stock owned by the Scheffler Family Limited Partnership (the “ Partnership ”) and 5,000,000 shares of Common Stock owned by Thirteen, LLC (“ Thirteen ”) and 33,016,470 shares of Common Stock owned by Scheffler RX LLC.

Subject to the clarification in Footnote 5 to this table below, Mr.

Scheffler has the sole voting power over 1,172,490 Common Shares, shared voting power over 38,578,970 Common Shares, sole dispositive power over 1,172,490 Common Shares and shared dispositive power over 38,578,970 Common Shares.

Based on Schedule 13G filed with the SEC by Mr.

Groesbeck on February 15, 2023, Mr.

Groesbeck's beneficial ownership includes 30,413,176 Common Shares owned by RAG Holdings LLC (“

RAG ”) and 7,603,294 Common Shares owned by PRMN Investments, LLC (“

PRMN ”).

Scheffler has the sole voting power over 1,328,164 shares of Common Stock, shared voting power over 38,578,970 shares of Common Stock, sole dispositive power over 1,328,164 shares of Common Stock and shared dispositive power over 38,578,970 shares of Common Stock.

Groesbeck’s beneficial ownership includes 30,413,176 shares of Common Stock owned by RAG Holdings LLC (“ RAG ”) and 7,603,294 shares of Common Stock owned by PRMN Investments, LLC (“ PRMN ”).

Subject to the clarification in Footnote 5 to this table below, Mr.

Groesbeck has the sole voting power over 1,083,720 Common Shares, shared voting power over 38,016,470 Common Shares, sole dispositive power over 1,083,720 Common Shares and shared dispositive power over 38,016,470 Common Shares.

Beneficial ownership includes 56,887 Common Shares owned through his registered retirement savings plan.

Groesbeck has the sole voting power over 1,083,720 shares of Common Stock, shared voting power over 38,016,470 shares of Common Stock, sole dispositive power over 1,083,720 shares of Common Stock and shared dispositive power over 38,016,470 shares of Common Stock.

Beneficial ownership includes 56,887 shares of Common Stock owned through his registered retirement savings plan.

Subject to the clarification in Footnote 5 to this table below, Mr.

Logan has the sole voting power over 287,874 Common Shares, shared voting power over no Common Shares, sole dispositive power over 287,874 Common Shares and shared dispositive power over no Common Shares.

Beneficial ownership includes 4,037,000 Common Shares owned by 4 Degrees Higher LLC (“

4 Degrees ”).

Logan has the sole voting power over 336,549 shares of Common Stock, shared voting power over no Common Stock, sole dispositive power over 336,549 shares of Common Stock and shared dispositive power over no Common Stock.

Beneficial ownership includes 3,705,700 shares of Common Stock owned by 4 Degrees Higher LLC (“ 4 Degrees ”).

4 Degrees is an entity owned and controlled by Mr.

Subject to the clarification in Footnote 5 to this table below, Mr.

Wren has the sole voting power over 362,745 Common Shares, shared voting power over 4,037,000 Common Shares, sole dispositive power over 362,745 Common Shares and shared dispositive power over 4,037,000 Common Shares.

Wren has the sole voting power over 461,350 shares of Common Stock, shared voting power over 3,705,700 shares of Common Stock, sole dispositive power over 461,350 shares of Common Stock and shared dispositive power over 3,705,700 shares of Common Stock.

The number of shares beneficially owned includes these amounts of unissued shares relating to RSU awards that vested on December 31, 2023.

Equity Compensation Plans

The shareholders and the Board approved the Stock Option Plan on May 22, 2018, and approved the Amended and Restated Share Unit Plan (“

Unit Plan ”

and together with the Stock Option Plan, collectively the “

Compensation Plans ”) on May 22, 2018, as amended on July 11, 2018.

The granting of awards under the Compensation Plans is intended to promote the interests of the Company and its shareholders by aiding us in attracting and retaining persons capable of assuring our future success, to offer such persons incentives to put forth maximum efforts for the success of our business and to compensate such persons through various stock based arrangements and provide them with opportunities for stock ownership in the Company, thereby aligning the interests of such persons with our shareholders.

Eligible participants under the Compensation Plans include non-employee directors, officers (including the named executive officers), employees, consultants and advisors of the Company and its subsidiaries.

The shareholders and the Board approved the Planet 13 Holdings Inc.

2023 Equity Incentive Plan on September 15, 2023, the date of the Company's domestication in the State of Nevada (“

2023 Equity Incentive Plan ”).

The 2023 Equity Incentive Plan is the successor to and continuation of the Compensation Plans (also known as “

Prior Plans ”).

As of September 15, 2023, (a) no additional awards may be granted under the Prior Plans, and (b) all outstanding awards granted under the Prior Plans will remain subject to the terms of the Prior Plans.

All Awards granted under the 2023 Equity Incentive Plan will be subject to the terms of the 2023 Equity Incentive Plan.

The 2023 Equity Incentive Plan is intended to promote the interests of the Company and its shareholders by aiding us in attracting and retaining persons capable of assuring our future success, to offer such persons incentives to put forth maximum efforts for the success of our business and to compensate such persons through various stock based arrangements and provide them with opportunities for stock ownership in the Company, thereby aligning the interests of such persons with our shareholders.

Eligible participants under the 2023 Equity Incentive Plan include non-employee directors, officers (including the named executive officers), employees, consultants and advisors of the Company and its subsidiaries.

No more than 22,000,000 shares of Common Stock may be issued in the aggregate pursuant to the exercise of Incentive Stock Options under the 2023 Equity Incentive Plan and all other security based compensation arrangements of the Company, including the Prior Plans.

As of December 31, 2023:

(i) options to purchase an aggregate of 792,518 Common Shares were outstanding, representing approximately 0.36% of the issued and outstanding Common Shares on such date;

(ii) Restricted Share Units to acquire an aggregate of 2,464,928 Common Shares were outstanding, representing approximately 1.12% of the issued and outstanding Common Shares on such date, for a total of 3,257,446 Common Shares issuable pursuant to outstanding awards.

As a result, Stock Options/ Restricted Share Units under our equity compensation plans to purchase/receive a total of 18,894,398 Common Shares, representing approximately 8.57% of the total issued and outstanding Common Shares, were available for grant as of December 31, 2022.

The following table provides information regarding compensation plans , previously approved by shareholders , under which securities of the Company are authorized for issuance in effect as of December 31, 2022: 

available for

future issuance

(i) options to purchase an aggregate of 603,125 shares of Common Stock were outstanding, representing approximately 0.25% of the issued and outstanding shares of Common Stock on such date; (ii) Restricted Share Units to acquire an aggregate of 1,122,429 shares of Common Stock were outstanding, representing approximately 0.46% of the issued and outstanding shares of Common Stock on such date, for a total of 1,725,553 shares of Common Stock issuable pursuant to outstanding awards.

As a result, Stock Options/ Restricted Share Units under our equity compensation plans to purchase/receive a total of 20,073,139 shares of Common Stock, representing approximately 7.75% of the total issued and outstanding shares of Common Stock, were available for grant as of December 31, 2023.

securities to be

average exercise

available for

future issuance

Plan Category

column (a))(c)

2018 Stock Option Plan

2018 Amended and Restated Share Unit Plan

2023 Equity Incentive Plan

Certain Relationships and Related Transactions, and Director Independence.

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The following is a description of each transaction since January 1, 2022, and each currently proposed transaction in which:

we have been or are to be a participant;

the amounts involved exceeded or will exceed the lesser of $120,000 or 1% of the average of the Company’s total assets at year end for the last two completed fiscal years; and

we have been or are to be a participant;

the amounts involved exceeded or will exceed the lesser of $120,000 or 1% of the average of the Company’s total assets at year end for the last two completed fiscal years; and

any of our directors, executive officers or holders of more than 5% of our capital stock, or an affiliate or immediate family member of the foregoing persons, had or will have a direct or indirect material interest.

Other than as described below, there have not been, nor are there any currently proposed, transactions or series of similar transactions to which we have been or will be a party other than compensation arrangements, which are described where required under the section entitled “Executive Compensation”

and “Director Compensation Table.”

Office Space Sublease and Storage Space

The Company is the sub-lessee of approximately 2,000 square feet of office space and purchases certain printed marketing collateral and stationery items from a company that was owned by one of the Company’s Co-CEOs, Larry Scheffler, until March 15, 2022.

Amounts paid for rent for each of the years ended December 31, 2022 and 2021 to the related party was $6,010 and $16,027, respectively.

Amounts paid for rent for each of the years ended December 31, 2023 and 2022 to the related party was $0 and $6,010, respectively.

Amounts paid for printed marketing collateral and stationery items to the related party were $0 and $183,914 for the years ended December 31, 2023 and 2022, respectively.

The Company previously leased a cultivation facility from an entity owned by the Company’s Co-CEOs. 

Rent paid for this facility for the years ended December 31, 2022 and 2021 was $nil and $301,894, respectively. 

On April 30, 2021, the Company’s Co-CEOs sold this building to an arm’s length third party who assumed the lease.

A company that was owned by one of the Company’s Co-CEOs, Larry Scheffler, until March 15, 2022 pays the Company for storage space. 

The Company previously leased a cultivation facility from an entity owned by the Company’s Co-CEOs.

Rent paid for this facility for the years ended December 31, 2023 and 2022 was $nil and $301,894, respectively.

On April 30, 2021, the Company’s Co-CEOs sold this building to an arm’s length third party who assumed the lease.

A company that was owned by one of the Company’s Co-CEOs, Larry Scheffler, until March 15, 2022 pays the Company for storage space.

Amounts paid to the Company for storage space were $0 and $5,968 for the years ended December 31, 2023 and 2022, respectively, and is recorded in Other Income.

As of December 31, 2023 and 2022, respectively, no amounts were due to or from related persons.

WCDN Acquisition

Concurrent with the first closing of the WCDN Acquisition previously described herein, RX Land, an entity that was owned by our Co-CEOs, acquired the WCDN Acquisition Facility for US$3.3 million and entered into Initial West Bell Lease.

In accordance with the terms of the WCDN Asset Acquisition Agreement and approvals by our independent directors, WCDN assigned the Initial West Bell Lease to MMDC on November 25, 2020, and MMDC subsequently entered into an amending agreement with RX Land on November 27, 2020, to amend certain terms of such lease agreement including increasing the lease payments, extending the duration of the lease and, if desired, allowing for second floor installation by MMDC without a corresponding lease rate increase due to an increase in facility size.

In April 2021, RX Land was sold to an arm’s length third party.

Related Person Transaction Policy

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The policy provides that any request for us to enter into a transaction with an executive officer, director, nominee for election as a director, beneficial owner of more than 5% of our common stock or with any of their immediate family members or affiliates in which the amount involved exceeds $120,000 will be presented to our Audit Committee for review, consideration and approval, subject to exceptions for certain transaction for which there is standing pre-approval as described in the policy, including for employment of executive officers and director compensation.

In approving or rejecting any such proposal, our Audit Committee shall take into account, among other factors it deems appropriate, (i) whether the transaction was undertaken in our ordinary course of business, (ii) whether the transaction was initiated by us, a subsidiary of us, or the related person, (iii) whether the transaction is proposed to be, or was, entered into on terms no less favorable to us than terms that could have been reached with an unrelated third party, (iv) the purpose of, and the potential benefits to us of, the transaction, (v) the approximate dollar value of the amount involved in the transaction, particularly as it relates to the related person, (vi) the related person’s interest in the transaction and (vii) any other information regarding the transaction or the related person that would be material to investors in light of the circumstances of the particular transaction.

Director Independence

Although the Common Shares are not listed on any U.S.

Although the Common Stock is not listed on any U.S.

national securities exchange, we use the definition of “independence” of Nasdaq to make the independence determination of our directors.

Our board of directors is composed of two “independent directors”

as defined under the rules of Nasdaq (“

Nasdaq Rules ”).

Nasdaq Rule 5605(a)(2) provides that an “independent director”

is a person other than an officer or employee of the Company or any other individual having a relationship which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

Our board of directors is composed of two “independent directors” as defined under the rules of Nasdaq (“ Nasdaq Rules ”).

Nasdaq Rule 5605(a)(2) provides that an “independent director” is a person other than an officer or employee of the Company or any other individual having a relationship which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

Nasdaq Rule 5605(a)(2) provides that a director cannot be considered independent if:

the director is, or at any time during the past three (3) years was, an employee of the company;

the director or a family member of the director accepted any compensation from the company in excess of $120,000 during any period of twelve (12) consecutive months within the three (3) years preceding the independence determination (subject to certain exemptions, including, among other things, compensation for board or board committee service);

the director or a family member of the director is a partner in, controlling shareholder of, or an executive officer of an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exemptions);

the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three (3) years, any of the executive officers of the company served on the compensation committee of such other entity; or

the director or a family member of the director is a current partner of the company’s outside auditor, or at any time during the past three (3) years was a partner or employee of the company’s outside auditor, and who worked on the company’s audit.

Under such definitions, Adrienne O’Neal and Michael Harman are each independent directors.

O’Neal and Mr.

Harman are also considered independent and meet the other requirements under Nasdaq Rule 5605(c)(A)(2)(i),(ii),(iii) and (iv) applicable to audit committee members and under Nasdaq Rule 5605(2)(A) applicable to compensation committee members.

the director is, or at any time during the past three (3) years was, an employee of the company;

Under such definitions, Adrienne O’Neal and Kevin Martin are each independent directors.

O’Neal and Mr.

Martin are also considered independent and meet the other requirements under Nasdaq Rule 5605(c)(A)(2)(i), (ii), (iii) and (iv) applicable to audit committee members and under Nasdaq Rule 5605(2)(A) applicable to compensation committee members.

We also meet the director independence requirements for our listing with the OTCQX Best Market, being a minimum of two independent directors and a majority of the audit committee being comprised of independent directors.

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We have adopted the Code of Business Conduct and Ethics of Planet 13 Holdings Inc.

(the “

Code of Ethics ”) to assist all directors, officers, employees, and where practical key consultants of the Company and its subsidiaries to maintain the highest standards of ethical conduct in business affairs.

A copy of the Code of Ethics can be found in the investors section of our website at www.planet13holdings.com/investors/ .

We intend to satisfy the disclosure requirements of the SEC regarding amendments to, or waivers from, the Code of Ethics, by posting such information on the same website. 

(the “ Code of Ethics ”) to assist all directors, officers, employees, and where practical key consultants of the Company and its subsidiaries to maintain the highest standards of ethical conduct in business affairs.

A copy of the Code of Ethics can be found in the investors section of our website at www.planet13.com/investors-information/ .

We intend to satisfy the disclosure requirements of the SEC regarding amendments to, or waivers from, the Code of Ethics, by posting such information on the same website.

Principal Accounting Fees and Services.

The following table provides information regarding the fees billed to us by Davidson & Company LLP in the fiscal years ended December 31, 2022, and December 31, 2021: 

The following table provides information regarding the fees billed to us by Davidson & Company LLP in the fiscal years ended December 31, 2023, and December 31, 2022:

For the fiscal years ended

5 unchanged sentences

Pre-Approval Policies and Procedures

The Audit Committee charter sets out procedures regarding the provision of non-audit services by the Company’s independent chartered professional accountants.

This policy encourages consideration of whether the provision of services other than audit services is compatible with maintaining the auditor’s independence and requires Audit Committee pre-approval of permitted non-audit and non-audit related services.

The Audit Committee charter sets out procedures regarding the provision of non-audit services by the Company’s independent chartered professional accountants.

Exhibits, Financial Statement Schedules.

16 unchanged sentences

to Frank Cowan, IV

Certificate of Amalgamation

Notice of Articles

Articles of Planet 13 Holdings Inc.

Plan of Arrangement.

Articles of Domestication.

Articles of Incorporation of Planet 13 Holdings Inc., a Nevada corporation.

Bylaws of Planet 13 Holdings Inc., a Nevada corporation.

Warrant Indenture, dated July 3, 2020, between Planet 13 Holdings Inc.

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Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934

Specimen Common Stock Certificate of Planet 13 Holdings Inc., a Nevada corporation.

Warrant Agency Agreement, dated March 7, 2024, by and between Planet 13 Holdings Inc.

and Odyssey Transfer US Inc.

Form of Warrant to purchase common stock.

Industrial Real Estate Lease, dated April 23, 2018, between MM Development Company, Inc.

16 unchanged sentences

and Frank Cowan, IV

Planet 13 Holdings Inc.

2023 Equity Incentive Plan.

Form of Incentive Stock Option Agreement under the Planet 13 Holdings Inc.

2023 Equity Incentive Plan .

Form of Non-Qualified Stock Option Agreement under the Planet 13 Holdings Inc.

2023 Equity Incentive Plan .

Form of Restricted Stock Unit Agreement under the Planet 13 Holdings Inc.

2023 Equity Incentive Plan.

Membership Interest Purchase Agreement, dated August 28, 2023, by and between Planet 13 Holdings Inc., VidaCann LLC, Loop’s Dispensaries, LLC, Ray of Hope 4 Florida, LLC, Loop’s Nursery & Greenhouses, Inc., David Loop and Mark Ascik and David Loop, solely in his capacity as Seller Representative.

Stock Purchase Agreement, dated January 22, 2024, by and between Planet 13 Holdings Inc.

and SGW FL Enterprises, LLC.

Employment Agreement, dated February 7, 2024, between Lee Fraser and BLC Management Company LLC.

List of Subsidiaries of Planet 13 Holdings Inc.

5 unchanged sentences

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Description of Capital Stock.

Inline XBRL Instance Document

4 unchanged sentences

Inline XBRL Taxonomy Extension Presentation Linkbase

Cover Page Interactive Data File - the cover page XBRL tags are embedded within the inline XBRL documents and contained in exhibit 101

Cover Page Interactive Data File - the cover page XBRL tags are embedded within the inline XBRL documents and contained in exhibit 101

Certain information has been excluded from this exhibit because it is both (i) not material and (ii) private or confidential.

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Form 10-K Summary

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized .

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized .

PLANET 13 HOLDINGS INC.

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(Principal Financial and Accounting Officer)

/s/ Michael Harman

/s/ Lee Fraser

Chief Administrative Officer and Director

March 13, 2024

Michael Harman

/s/ Adrienne O’Neal

/s/ Kevin Martin

March 13, 2024

Adrienne O’Neal

/s/ Adrienne O’Neal

March 13, 2024

Adrienne O’Neal

PLANET 13 HOLDINGS INC.

Index to Financial Statements

INDEPENDENT AUDITOR ’

S REPORT PCAOB # 731

INDEPENDENT AUDITOR ’ S REPORT PCAOB # 731

FINANCIAL STATEMENTS:

1 unchanged sentence

Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of Changes in Shareholders’ Equity

Consolidated Statements of Changes in Shareholders’ Equity

Consolidated Statements of Cash Flows

5 unchanged sentences

We have audited the accompanying consolidated balance sheets of Planet 13 Holdings Inc.

(the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations and comprehensive loss, changes in shareholder’

equity, and cash flows for the years ended December 31, 2022 and 2021, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years ended December 31, 2022 and 2021, in conformity with accounting principles generally accepted in the United States of America.

(the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations and comprehensive loss, changes in shareholders’ equity, and cash flows for the years ended December 31, 2023 and 2022, and the related notes and schedules (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of Planet 13 Holdings Inc.

as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years ended December 31, 2023 and 2022 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

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We believe that our audits provide a reasonable basis for our opinion.

We have served as the Company’s auditor since 2019.

/s/ DAVIDSON & COMPANY LLP

3 unchanged sentences

PLANET 13 HOLDINGS INC.

Consolidated Balance Sheets              

(In United States Dollars)  

Consolidated Balance Sheets

(In United States Dollars)

Current Assets:

$ 52,356,914  

$ 11,831,008 $ 38,789,604

Restricted Cash

Accounts Receivable

1,326,795  

13,004,839  

1,195,927 1,326,795

15,760,648 13,004,839

Asset held for sale

Prepaid Expenses and Other Current Assets

3,810,394  

4,072,820 3,810,394

Total Current Assets

70,498,942  

47,310,987 56,931,632

Property and Equipment

71,466,051  

67,551,697 71,466,051

Intangible Assets and Goodwill

69,288,007  

15,253,797 69,288,007

Right of Use Assets - Operating

21,168,171  

20,054,369 21,168,171

Long-term Deposits and Other Assets

862,545  

869,853 862,545

Deferred Tax Asset

346,257  

$ 233,629,973  

706,038 346,257

$ 151,746,741 $ 220,062,663

LIABILITIES AND SHAREHOLDERS' EQUITY

Accounts Payable

$ 3,112,820  

$ 2,850,922 $ 3,112,820

Accrued Expenses

8,072,224  

6,097,641 8,072,224

Income Taxes Payable

2,826,501  

4,782,538 2,826,501

Notes Payable - Current Portion

884,000  

884,000 884,000

Operating Lease Liabilities

479,161  

674,594 479,161

Total Current Liabilities

15,374,706  

15,289,695 15,374,706

Long-Term Liabilities:

Operating Lease Liabilities

25,833,071  

Warranty Liability

18,127  

25,271,706 25,833,071

Warrant Liability

Other Long-term Liabilities

28,000  

33,000 28,000

Deferred Tax Liability

1,487,204  

3,511,559 1,487,204

Total Liabilities

42,741,108  

44,105,960 42,741,108

Shareholders' Equity

Common Shares, no par value, unlimited Common Shares authorized, 220,470,061 issued and outstanding at December 31, 2022 and 198,687,950 at December 31, 2021

Common Stock, no par value, 1,500,000,000 shares authorized, 223,317,270 issued and outstanding at December 31, 2023 and 220,470,061 at December 31, 2022

Preferred Stock, no par value, 50,000,000 shares authorized, 0 issued and outstanding at December 31, 2023 and 0 at December 31, 2022

Additional Paid-In Capital

312,023,359  

( 121,134,494 )  

315,951,343 312,023,359

( 208,310,562 ) ( 134,701,804 )

Total Shareholders' Equity

190,888,865  

107,640,781 177,321,555

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$ 233,629,973  

$ 151,746,741 $ 220,062,663

The accompanying notes are an integral part of these consolidated financial statements

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

PLANET 13 HOLDINGS INC.

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Revenues, net of discounts

$ 98,505,170 $ 104,574,377

Cost of Goods Sold

( 53,682,026 ) ( 56,599,623 )

44,823,144 47,974,754

General and Administrative

42,421,172 49,395,500

Sales and Marketing

5,368,473 3,504,309

Lease Expense

3,105,996 2,744,532

Impairment loss

46,846,866 32,750,466

Depreciation and Amortization

8,180,465 8,337,476

Total Expenses

105,922,972 96,732,283

Loss From Operations

( 61,099,828 ) ( 48,757,529 )

Other Income (Expense):

Interest income (expense), net

195,722 189,473

Foreign exchange gain (loss)

Transaction costs

3,653 ( 25,528 )

Change in fair value of warrant liability

18,127 7,177,805

Gain on Sale-Leaseback

Provision for stolen funds

( 2,000,000 ) ( 10,300,000 )

Other Income, net

Total Other Income

807,023 413,029

Total Other Income (Expense)

( 975,475 ) ( 2,035,829 )

Loss Before Provision for Income Taxes

( 62,075,303 ) ( 50,793,358 )

Provision For Income Taxes

Current Tax Expense

( 9,868,881 ) ( 10,672,538 )

Deferred Tax Recovery

( 1,664,574 ) 1,920,177

( 11,533,455 ) ( 8,752,361 )

Net Loss and Comprehensive Loss

$ ( 73,608,758 ) $ ( 59,545,719 )

Loss per Share

Basic and diluted loss per share

Weighted Average Number of Common Shares

$ ( 0.33 ) $ ( 0.27 )

Weighted Average Number of Shares of Common Stock

Basic and diluted

The accompanying notes are an integral part of these consolidated financial statements

221,964,287 216,586,621

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

PLANET 13 HOLDINGS INC.

Consolidated Statements of Changes in Shareholders' Equity            

(In United States Dollars, except share amounts)     

Common Shares

Class A Restricted Shares

Consolidated Statements of Changes in Shareholders' Equity

(In United States Dollars, except share amounts)

Additional Paid-in Capital

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Balance, December 31, 2021

198,687,950 295,838 $ 245,861,704 $ ( 75,156,085 ) $ 170,705,619

Shares Issued on Settlement of RSUs

81,084 - - - -

Share based Compensation - RSUs

Shares Issued on Exercise of Broker Warrants

- - 7,459,267 - 7,459,267

Shares Issued on Acquisition

21,361,002 - 56,320,332 - 56,320,332

Replacement Options Issued on Acquisition

- - 1,239,818 - 1,239,818

Shares Issued on Exercise of Other Warrants

242,700 - 1,044,258 - 1,044,258

Shares Issued on Exercise of Options

Share Based Compensation - Options

Shares Issued on Bought Deal Financings, net

Shares Issued on Conversion of Class A Shares

97,325 - 97,980 - 97,980

Net Loss for the Year

- - - ( 59,545,719 ) ( 59,545,719 )

Balance, December 31, 2022

Shares Issued on Settlement of RSUs

220,470,061 295,838 $ 312,023,359 $ ( 134,701,804 ) $ 177,321,555

- ( 295,838 ) - - -

Share based Compensation - RSUs

Shares Issued on Acquisition

Replacement Options Issued on Acquisition

Shares Issued on Exercise of Other Warrants

Shares Issued on Exercise of Options

- - 2,520,407 - 2,520,407

Share based Compensation - RSUs - Taxes Paid in Lieu of Share Issuance

- - ( 267,529 ) - ( 267,529 )

Shares Issued on Settlement of RSUs

783,832 - - - -

Shares Issued on Exercise of Purchase Option-Illinois License

1,063,377 - 946,406 - 946,406

Shares Issued on SDC Settlement

1,000,000 - 728,700 - 728,700

Net Loss for the Year

- - - ( 73,608,758 ) ( 73,608,758 )

Balance, December 31, 2023

223,317,270 - $ 315,951,343 $ ( 208,310,562 ) $ 107,640,781

The accompanying notes are an integral part of these consolidated financial statements

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

PLANET 13 HOLDINGS INC.

Consolidated Statements of Cash Flows         

(In United States Dollars)  

Consolidated Statements of Cash Flows

(In United States Dollars)

December 31, 2023

1 unchanged sentence

CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

$ ( 73,608,758 ) $ ( 59,545,719 )

Adjustments for items not involving cash:

Shared based compensation expense

Share based compensation

2,520,407 7,459,267

Non-cash lease expense

4,974,644 4,737,162

12,147,052 11,258,697

Amortization of intangibles

Change in fair value of warrant liability

(Gain) loss on translation of warrant liability

Transaction costs

( 18,127 ) ( 7,177,805 )

Gain on translation of warrant liability

Deferred tax recovery

2,024,355 ( 1,736,724 )

Proceeds from lease incentive

Lease incentive amortization

Unrealized (gain) loss on foreign currency exchange

( 109,902 ) ( 239,133 )

Impairment of goodwill

Impairment of intangible assets

46,846,866 6,947,778

Gain on sale leaseback

- ( 509,392 )

Shares issued for SDC settlement

Loss on disposal of property and equipment

180,177 70,601

( 4,314,586 ) ( 11,470,475 )

Net Changes in Non-cash Working Capital Items

( 3,589,711 ) 8,273,643

Repayment of lease liabilities

( 4,141,221 ) ( 3,566,817 )

Total Operating

( 12,045,518 ) ( 6,763,649 )

FINANCING ACTIVITIES

Proceeds from private placements

Proceeds from exercise of warrants and options

Financing issuance expenses

Taxes paid in lieu of share issuance - RSUs

Total Financing

( 267,529 ) 1,142,238

INVESTING ACTIVITIES

Purchase of property, plant and equipment

( 8,393,593 ) ( 16,674,704 )

Proceeds from sale of fixed assets

Net cash acquired through NGW acquisition

Purchase of licenses

( 866,250 ) -

Proceeds from sale/lease back

1 unchanged sentence

Total Investing

Effect of foreign exchange on cash

( 9,194,965 ) ( 14,175,937 )

NET CHANGE IN CASH DURING THE YEAR

( 21,508,012 ) ( 19,797,348 )

CASH AND RESTRICTED CASH

Beginning of Year

38,789,604 58,586,952

$ 17,281,592 $ 38,789,604

Supplemental cash flow information (Note 16)

The accompanying notes are an integral part of these consolidated financial statements

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

PLANET 13 HOLDINGS INC.

3 unchanged sentences

Planet 13 Holdings Inc.

( “P13”

or the “Company”) was incorporated under the Canada Business Corporations Act on April 26, 2002 and continued under the British Columbia Business Corporations Act on September 24, 2019.

The Company is a vertically integrated cultivator and provider of cannabis and cannabis-infused products that is licensed under the laws of the States of Nevada, California, and Florida with a license lottery win-result in Illinois.

( “P13” or the “Company”) was incorporated under the Canada Business Corporations Act on April 26, 2002 and continued under the British Columbia Business Corporations Act on September 24, 2019 and on September 15, 2023 completed the Domestication to Nevada.

The Company is a vertically integrated cultivator and provider of cannabis and cannabis-infused products that is licensed under the laws of the States of Nevada, California, Illinois and Florida.

We are licensed in these jurisdictions as follows:

six Nevada licenses for cultivation ( three medical and three adult-use), six Nevada licenses for production ( three medical and three adult-use), three Nevada dispensary licenses ( one medical and two adult-use), two Nevada licenses for distribution ( one active, one conditional), one adult-use dispensary license in California, one distribution license in California, one Medical Marijuana Treatment Center license in Florida (unlimited medical dispensaries, cultivation and processing) and one lottery win for an adult-use dispensary license in Illinois.

As of March 2, 2022, by way of acquisition and in addition to the licenses listed above, we added three California cultivation licenses ( one medical and two adult-use), one California cultivation nursery license, one California distribution license, one California license for adult-use manufacture, and one pending California license for cultivation packaging.

P13 is a public company which is listed on the Canadian Securities Exchange (“CSE”) under the symbol PLTH and on the OTCQX exchange under the symbol “PLNHF”.

The Company’s registered office is located at Bentall 5, 550 Burrard Street, Suite 2501, Vancouver, BC V6C 285, and the head office address is 2548 W.

Desert Inn Road, Las Vegas, NV 89109.

six Nevada licenses for cultivation ( three medical and three adult-use), six Nevada licenses for production ( three medical and three adult-use), three Nevada dispensary licenses ( one medical and two adult-use), two Nevada licenses for distribution ( one active, one conditional), one medical and adult-use dispensary license in California, one distribution license in California, one event organizer license in California, one Medical Marijuana Treatment Center license in Florida (unlimited medical dispensaries, cultivation and processing) and one adult-use dispensary license in Illinois.

On March 2, 2022, by way of acquisition and in addition to the licenses listed above, we added three California cultivation licenses ( one medical and two adult-use), one California cultivation nursery license, one California distribution license, one California license for adult-use manufacture, and one pending California license for cultivation packaging.

P13 is a public company which is listed on the Canadian Securities Exchange (“CSE”) under the symbol PLTH and on the OTCQX exchange under the symbol “PLNH”.

The Company’s registered and head office address is 2548 W.

Desert Inn Road, Suite 100, Las Vegas, NV 89109.

While cannabis and CBD-infused products are legal under the laws of several U.S.

states (with varying restrictions applicable), the United States Federal Controlled Substances Act classifies all “marijuana”

as a Schedule I drug, whether for medical or recreational use.

states (with varying restrictions applicable), the United States Federal Controlled Substances Act classifies all “marijuana” as a Schedule I drug, whether for medical or recreational use.

federal law, a Schedule I drug or substance has a high potential for abuse, no accepted medical use in the United States, and a lack of safety for use under medical supervision.

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Basis of presentation

These consolidated financial statements reflect the accounts of the Company and have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and pursuant to the rules and regulation of the U.S.

Securities and Exchange Commission (“SEC”) for all periods presented.

These consolidated financial statements have been prepared on a going concern basis, which assumes that the Company will continue in operation for the foreseeable future and, accordingly, will be able to realize its assets and discharge its liabilities in the normal course of operations as they come due, under the historical cost convention except for certain financial instruments that are measured at fair value, as detailed in the Company’s accounting policies.

Securities and Exchange Commission (“SEC”) for all periods presented.

Failure to arrange adequate financing on acceptable terms and/or achieve profitability may have an adverse effect on the financial position, results of operations, cash flows and prospects of the Company.

2 unchanged sentences

These consolidated financial statements are presented in U.S.

dollars, which is also the Company’s and its subsidiaries’

functional currency.

dollars, which is also the Company’s and its subsidiaries’ functional currency.

These consolidated financial statements were authorized for issuance by the Board of Directors of the Company on March 13, 2024 .

35 unchanged sentences

100 % 49 % Illinois license holding company;

cannabis retail sales

BLC NV Food, LLC

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100 % 100 % Florida license holding company

Planet 13 Real Prop LLC

100 % N/A Holding company

Club One Three, LLC

ii) Variable interest entities

A variable interest entity (“VIE”) is an entity that does not have sufficient equity at risk to finance its activities without additional subordinated financial support or is structured such that equity investors lack the ability to control the entity’s activities or do not substantially participate in the gains and losses of the entity.

Upon inception of a contractual agreement, and thereafter, if a reconsideration event occurs, the Company performs an assessment to determine whether the arrangement contains a variable interest in an entity and whether that entity is a VIE.

The primary beneficiary of a VIE is the party that has both the power to direct the activities that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.

Where the Company concludes that it is the primary beneficiary of a VIE, the Company consolidates the accounts of that VIE.

iii) Functional currency

100 % N/A Inactive

ii) Functional currency

These consolidated financial statements are presented in U.S.

dollars (“USD”), which is the Company’s and its subsidiaries functional currency.

13 HOLDINGS INC.

Notes to the Consolidated Financial Statements

(in United States Dollars)

Foreign currency transactions are remeasured to the respective functional currencies of the Company’s entities at the exchange rates in effect on the date of the transactions.

dollars (“USD”), which is the Company’s and its subsidiaries functional currency.

Foreign currency transactions are remeasured to the respective functional currencies of the Company’s entities at the exchange rates in effect on the date of the transactions.

Monetary assets and liabilities denominated in foreign currencies are measured to functional currency at the foreign exchange rate applicable at the statement of balance sheets date.

2 unchanged sentences

Realized and unrealized foreign exchange gains and losses are recognized through profit or loss.

iv) Emerging growth company

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

Further, Section 102 (b) ( 1 ) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial reporting standards. 

The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. 

13 HOLDINGS INC.

Notes to the Consolidated Financial Statements

(in United States Dollars)

iii) Emerging growth company

Further, Section 102 (b) ( 1 ) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial reporting standards.

The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public and private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.

Significant accounting policies

Cash is comprised of cash deposits in financial institutions plus cash held at its retail locations and other deposits that are readily convertible to cash.

Cash is comprised of cash deposits in financial institutions plus cash held at its retail locations, other deposits that are readily convertible to cash, as well as any restricted cash.

Restricted Cash

Restricted cash is comprised of $ 5,450,584 in funds held by the Orange County, Sheriff's Office in the matter described in Note 21.

(b) Inventory

Inventory is comprised of raw materials, finished goods and work-in-progress.

Inventory is comprised of raw materials, finished goods, packaging and miscellaneous supplies and work-in-progress.

Cost includes expenditures directly related to the cultivation and manufacturing process as well as suitable portions or related production overheads, based on normal operating capacity.

5 unchanged sentences

Net realizable value is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.

At the end of each reporting period, the Company performs an assessment of inventory and records write-downs for excess and obsolete inventories based on the Company’s estimated forecast of product demand, production requirements, market conditions, regulatory environment, and spoilage.

Actual inventory losses may differ from management’s estimates and such differences could be material to the Company’s balance sheets, statements of net loss and comprehensive loss and statements of cash flows.

13 HOLDINGS INC.

Notes to the Consolidated Financial Statements

(in United States Dollars)

Actual inventory losses may differ from management’s estimates and such differences could be material to the Company’s balance sheets, statements of operations and comprehensive loss and statements of cash flows.

4 unchanged sentences

When assets are retired or disposed of, the cost and accumulated depreciation are removed from the respective accounts and any related gain or loss is recognized in the consolidated statements of operations.

13 HOLDINGS INC.

Notes to the Consolidated Financial Statements

(in United States Dollars)

Depreciation is calculated on a straight-line basis over the following expected useful lives:

7 unchanged sentences

Not depreciated

An assets residual value, useful life and depreciation method are reviewed at each reporting period with the effect of any changes in estimate accounted for on a prospective basis. 

Depreciation of property and equipment commences when the asset is available for use.

Construction in progress includes construction progress payments, deposits, engineering costs and other costs directly related to the construction of the facilities. 

Expenditures are capitalized during the construction period and construction in progress in transferred to the relevant class of property and equipment when the assets are available for use, at which point in time the depreciation of the asset commences.

4 unchanged sentences

Intangible assets acquired in a business combination are measured at fair value on the acquisition date.

When there is no foreseeable limit on the period of time over which an intangible asset is expected to contribute to the cash flows of the Company, an intangible asset is determined to have an indefinite life. 

Indefinite life intangible assets are tested for impairment annually, or more frequently when events or circumstances indicate that impairment may have occurred. 

As part of the impairment evaluation, the Company may elect to perform an assessment of qualitative factors. 

If this qualitative assessment indicates that it is more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying value, a quantitative impairment test is required to compare the fair value of the asset to its carrying value. 

Indefinite life intangible assets are tested for impairment annually, or more frequently when events or circumstances indicate that impairment may have occurred.

As part of the impairment evaluation, the Company may elect to perform an assessment of qualitative factors.

If the carrying value of an individual indefinite-lived intangible asset exceeds its fair value, such individual indefinite-life intangible asset is impaired by the amount of the excess.

The estimated useful life and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.

The Company's intangible assets have an indefinite life.

13 HOLDINGS INC.

Notes to the Consolidated Financial Statements

(in United States Dollars)

The Company's intangible assets have an indefinite life.

(e) Goodwill impairment test

3 unchanged sentences

The quantitative impairment test for goodwill compares the fair value of a reporting unit with the carrying value of its net assets, including goodwill.

If the fair value of the reporting unit is less than the carrying value of the reporting unit, an impairment charge would be recorded to the Company’s operations, for the amount in which the carrying amount exceeds the reporting unit’s fair value.

The estimate of fair value requires the use of significant unobservable inputs, representative of a Level 3 fair value measurement.

3 unchanged sentences

If multiple valuation methodologies are used, the results are weighted appropriately.

The Company performs an annual assessment of its goodwill as of December 31, or more frequently, to determine if any events or circumstances exist, such as an adverse change in business climate or a decline in overall industry demand, that would indicate that it would more likely than not reduce the fair value of a reporting unit below its carrying amount, including goodwill.

Impairment of long-lived assets

The Company reviews long-lived assets, including property and equipment and definite life intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. 

In order to determine if assets have been impaired, assets are grouped and tested at the lowest level for which identifiable independent cash flows are available (“asset group”). 

When indicators of potential impairment are present the Company prepares a projected undiscounted cash flow analysis for the respective asset or asset group. 

If the sum of the undiscounted cash flows is less than the carrying value of the asset or asset group, an impairment loss is recognized equal to the excess of the carrying value over the fair value, if any. 

Fair value can be determined using a market approach, income approach or cost approach. 

13 HOLDINGS INC.

Notes to the Consolidated Financial Statements

(in United States Dollars)

(f) Impairment of long-lived assets

In order to determine if assets have been impaired, assets are grouped and tested at the lowest level for which identifiable independent cash flows are available (“asset group”).

When indicators of potential impairment are present the Company prepares a projected undiscounted cash flow analysis for the respective asset or asset group.

Fair value can be determined using a market approach, income approach or cost approach.

The reversal of impairment losses is prohibited.

Share-based compensation

The Company has an equity incentive plan which includes issuances of stock options and restricted share units (“RSUs”). 

From time to time, the Company also enters into share-based compensation agreements with non-employees. 

(g) Share-based compensation

The Company has an equity incentive plan which includes issuances of stock options and restricted share units (“RSUs”).

From time to time, the Company also enters into share-based compensation agreements with non-employees.

The accounting for these arrangements typically aligns with those of employees.

The Company measures and recognizes compensation expense for stock options and RSUs to employees and non-employees on a straight-line basis over the vesting period based on their grant date fair values.

Prior to the adoption of ASU 2018 07 on January 1, 2019, the fair value of stock options to non-employees were re-measured at each reporting date until one of either of the counterparty’s commitment to perform is established or until the performance is complete.

After adopting ASU 2018 - 07 which made amendments to ASC Topic 718, Stock Compensation, an acquirer measures share-based compensation to non-employees in exchange for goods and services in the same manner as share-based payments to employees, using a fair-value based approach measured at the grant date. 

This guidance is followed if the acquirer considers the assets and goods to be used or consumed in its own operation. 

If not, the Company has elected to account for the equity interests issued in accordance with ASC 805, Business Combinations, based on the fair value of the equity interests issued.

1 unchanged sentence

Determining the estimated fair value of at the grant date requires judgment in determining the appropriate valuation model and assumptions, including the fair value of shares on the grant date, risk-free rate, volatility rate, annual dividend yield and the expected term.

The volatility rate is based on historical volatilities of public companies operating in a similar industry to the Company, as well as the Company’s historical volatility.

The expected life in years represents the period of time that options granted are expected to be outstanding.

The risk-free rate is based on the Government of Canada Bond yields on the date of the option grant with a remaining term equal to the expected life of the options.

The Company estimates the fair value of RSUs to be the closing market price of the Company’s stock on the grant date.

13 HOLDINGS INC.

Notes to the Consolidated Financial Statements

(in United States Dollars)

The Company estimates the fair value of RSUs to be the closing market price of the Company’s stock on the grant date.

For stock options granted, the Company uses the fair value of common stock at the date of grant.

3 unchanged sentences

Share-based compensation transactions with non-employees are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable.

Where fully vested, non-forfeitable equity instruments are granted to parties other than employees in exchange for notes or financing receivable, the note or receivable is presented in additional paid-in capital on the balance sheets. 

Warrant liability

Warrants are accounted for in accordance with the authoritative accounting guidance in ASC Topic 815, Derivatives and Hedging –

Contracts in Entity ’

s Own Equity (“ASC 815”

), as either derivative liabilities or as equity instruments depending on the specific terms of the warrant agreements. 

Liability-classified instruments are recorded at fair value at each reporting period with any change in fair value recognized as a component of change in fair value of derivative liabilities in the consolidated statements of operations and comprehensive loss. 

Transaction costs allocated to warrants that are presented as a liability are expensed immediately within other income (expense) in the consolidated statement of operations and comprehensive loss. 

(h) Warrant liability

Warrants are accounted for in accordance with the authoritative accounting guidance in ASC Topic 815, Derivatives and Hedging – Contracts in Entity ’ s Own Equity (“ASC 815” ), as either derivative liabilities or as equity instruments depending on the specific terms of the warrant agreements.

Transaction costs allocated to warrants that are presented as a liability are expensed immediately within other income (expense) in the consolidated statement of operations and comprehensive loss.

Refer to paragraph (n) below as well as Note 11 for a discussion on the change in the warrant liability value.

Revenue recognition

The Company earns revenue primarily from the sale of cannabis to eligible retail customers at the Company-owned dispensaries, in addition to the wholesale of cannabis products to dispensary locations. 

13 HOLDINGS INC.

Notes to the Consolidated Financial Statements

(in United States Dollars)

(i) Revenue recognition

The Company recognizes revenue to depict the transfer of promised goods or services to the customer in an amount that reflects the consideration to which the Company expects to be entitled in exchange for the performance obligations.

8 unchanged sentences

Retail revenues are recognized at the point of sale.

Discounts are recorded at the time of revenue recognition. 

Returns were not material during the years ended December 31, 2023, and 2022, but are recognized when the customer is refunded.

Revenues are presented net of discounts and returns.

At one of the Company’s entities, sales are made on consignment and revenue is not recognized until title passes upon delivery of the product by that distributor to their dispensary customers.

Revenue on these sales is recognized upon shipment to the customer.

3 unchanged sentences

The term between invoicing and when payment is due is not significant and the period between when the entity transfers the promised good or service to the customer and when the customer pays for that good or service is one year or less.

13 HOLDINGS INC.

Notes to the Consolidated Financial Statements

(in United States Dollars)

The following table represents the Company’s disaggregated revenue by sales channel:

$ 90,363,557  

$ 114,792,191  

14,210,820  

4,701,244  

$ 104,574,377  

$ 119,493,435  

The following table represents the Company’s disaggregated revenue by sales channel:

$ 81,323,306 $ 90,363,557

17,181,864 14,210,820

$ 98,505,170 $ 104,574,377

Loyalty Points Reward Programs

In certain of its markets, the Company offers a loyalty reward program to its dispensary customers that allows its customers to earn discounts on future purchases.

 Loyalty points are earned when a qualifying purchase is made. 

When a customer attains a certain number of points, the customer can redeem the credits on future in-store purchases. 

Loyalty points are earned when a qualifying purchase is made.

When a customer attains a certain number of points, the customer can redeem the credits on future in-store purchases.

Loyalty points do not have an expiration date.

A portion of the revenue generated in a sale is allocated to the loyalty points earned. 

The amount allocated to the points earned is deferred until the loyalty points are redeemed.

13 HOLDINGS INC.

Notes to the Consolidated Financial Statements

(in United States Dollars)

Deferred Income

Deferred income represents cash payments received in advance of the Company’s transfer of control of products or services to its customers and generally consists of unearned revenue from the Company’s loyalty programs. 

The Company’s deferred income balances were $ 1,047,781  and $ 759,060 as of December 31, 2022 and 2021 , respectively, and were recorded within accrued expenses in the consolidated balance sheets. 

During the years ended December 31, 2022 and 2021 , the Company recognized $ 1,082,994 and $ 1,136,135 , respectively, of net revenues from amounts recorded as deferred income. 

The Company’s deferred income balances were $ 1,248,595 and $ 1,047,781 as of December 31, 2023 and 2022 , respectively, and were recorded within accrued expenses in the consolidated balance sheets.

During the years ended December 31, 2023 and 2022 , the Company recognized $ 1,023,788 and $ 1,082,994 , respectively, of net revenues from amounts recorded as deferred income.

The deferred income balance as of December 31, 2023 is expected to be recognized as revenue within the next twelve months.

The Company determined that no provision for returns or refunds was necessary as at December 31, 2022 or 2021 . 

Cost of Sales

Cost of sales represents costs directly related to manufacturing and distribution of the Company’s products.

The Company determined that no provision for returns or refunds was necessary as at December 31, 2023 or 2022 .

(j) Cost of Sales

Cost of sales represents costs directly related to manufacturing and distribution of the Company’s products.

Primary costs include raw materials, packaging, direct labor, overhead, shipping and handling, the depreciation of certain property, plant and equipment, and tariffs.

3 unchanged sentences

The Company determines if an arrangement is a lease at inception.

Operating leases are included in operating lease right-of-use (“ROU”) assets and right-of-use liabilities (current and non-current) in the balance sheets.

Finance lease ROU assets and ROU liabilities (current and non-current), if any, are included finance lease in the balance sheets.

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

ROU assets are classified as a finance lease or an operating lease.

5 unchanged sentences

The Company classifies a lease as an operating lease when it does not meet any one of these criteria.

13 HOLDINGS INC.

Notes to the Consolidated Financial Statements

(in United States Dollars)

ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

As most of the Company’s leases do not provide an implicit rate, the incremental borrowing rate is used based on the information available at commencement date in determining the present value of lease payments.

The Company uses the implicit rate when readily determinable.

5 unchanged sentences

For operating leases, the lease expenses are generally recognized on a straight-line basis over the lease term and recorded to lease expenses or, in the case of leases directly related to the cultivation of cannabis, in cost of goods sold in the statements of operations and comprehensive loss.

The Company has elected to apply the practical expedient, for each class of underlying asset, except real estate leases, to not separate non-lease components from the associated lease components of the lessee’s contract and account for both components as a single lease component.

13 HOLDINGS INC.

Notes to the Consolidated Financial Statements

(in United States Dollars)

The Company has elected not to recognize ROU assets and lease liabilities for short-term leases that have a lease term of 12 months or less that do not include an option to purchase the underlying asset that the Company is reasonably certain to exercise.

Short-term leases include real estate and vehicles and are not significant in comparison to the Company’s overall lease portfolio.

The Company continues to recognize the lease payments associated with these leases as expenses on a straight-line basis over the lease term.

5 unchanged sentences

Management assesses the likelihood that a deferred tax asset will be realized, and a valuation allowance is provided to the extent that it is more likely than not that all or a portion of a deferred tax asset will not be realized.

If it is subsequently determined that the Company will be able to realize deferred tax assets in excess of the net recorded amount, then the valuation allowance will be adjusted accordingly in the period in which this determination is made. Current tax is recognized in connection with income for tax purposes, unrecognized tax benefits and the recovery of tax paid in a prior period and measured using the enacted tax rates and laws applicable to the taxation period during which the income for tax purposes arose.

Current tax is recognized in connection with income for tax purposes, unrecognized tax benefits and the recovery of tax paid in a prior period and measured using the enacted tax rates and laws applicable to the taxation period during which the income for tax purposes arose.

An unrecognized tax benefit may arise in connection with a period that has not yet been reviewed by the relevant tax authority.

5 unchanged sentences

As the Company operates in the cannabis industry, it is subject to the limits of U.S.

Internal Revenue Code (“IRC”) Section 280E (“Section 280E”

) under which the Company is only allowed to deduct expenses directly related to the cost of producing the products or cost of production.

Internal Revenue Code (“IRC”) Section 280E (“Section 280E” ) under which the Company is only allowed to deduct expenses directly related to the cost of producing the products or cost of production.

(m) Sales and marketing expenses

1 unchanged sentence

Sales and marketing expense was $ 5,368,473 for the year ended December 31, 2023 ( 2022 - $ 3,504,309 ).

13 HOLDINGS INC.

Notes to the Consolidated Financial Statements

(in United States Dollars)

(n) Fair value measurements

5 unchanged sentences

one or more significant inputs used in a valuation technique are unobservable in determining fair values of the asset or liability

13 HOLDINGS INC.

Notes to the Consolidated Financial Statements

(in United States Dollars)

Determination of fair value and the resulting hierarchy requires the use of observable market data whenever available.

The classification of an asset or liability in the hierarchy is based upon the lowest level of input that is significant to the measurement of fair value.

The carrying value of the Company’s cash, accounts receivable, deposits, accounts payable, accrued expenses, and notes payable approximate their fair value due to their short-term nature.

The carrying value of the Company’s cash, restricted cash, accounts receivable, deposits, accounts payable, accrued expenses, and notes payable approximate their fair value due to their short-term nature.

Warrant liability is measured based on level 1 inputs (Note 11 ).

The Company's prepaid and other current assets, long lived assets, including property and equipment, intangible assets and goodwill are measured at fair value when there is an indicator of impairment and are recorded at fair value only when an impairment charge is recognized.

(o) Loss per share

Basic net loss per share is computed by dividing reported net loss by the weighted average number of common shares outstanding for the reported period.

The Company's prepaid expenses and other current assets, long lived assets, including property and equipment, intangible assets and goodwill are measured at fair value when there is an indicator of impairment and are recorded at fair value only when an impairment charge is recognized.

(o) Loss per share

Basic net loss per share is computed by dividing reported net loss by the weighted average number of shares of common stock outstanding for the reported period.

Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock of the Company during the reporting period.

Diluted earnings per share is computed by dividing net loss by the sum of the weighted average number of common shares and the number of potentially dilutive common share equivalents outstanding during the period.

Potential dilutive common share equivalents consist of the incremental common shares issuable upon the exercise of vested share options.

When the Company is incurring losses, basic and diluted loss per share are the same since including the exercise of outstanding options and warrants in the diluted loss per share calculation would be antidilutive. 

Diluted earnings per share is computed by dividing net loss by the sum of the weighted average number of shares of common stock and the number of potentially dilutive common share equivalents outstanding during the period.

Potential dilutive common share equivalents consist of the incremental common stock issuable upon the exercise of vested share options.

(p) Operating segments

Operating segments are components of the Company that engage in business activities which generate revenues and incur expenses (including intercompany revenues and expenses related to transactions conducted with other components of the Company).

The operations of an operating segment are distinct, and the operating results are regularly reviewed by the chief operating decision maker (“CODM”) for the purposes of resource allocation decisions and assessing its performance.

The Company’s Co-Chief Executive Officers are the Company’s CODM.

The Company determined that each of its locations represents an operating segment.

These operating segments have been aggregated into a single reportable segment as the Company operates as a vertically integrated cannabis company with dispensary, cultivation, production and distribution operations in the state of Nevada and dispensary, cultivation and distribution operations in the state of California.

As at December 31, 2022 and 2021 , all the Company’s non-current assets were located in the United States and 100 % of the Company’s revenue was generated in the United States.

13 HOLDINGS INC.

Notes to the Consolidated Financial Statements

(in United States Dollars)

Critical accounting estimates and judgements

The preparation of consolidated financial statements in conformity with GAAP requires the Company’s management to make judgements, estimates and assumptions about future events that affect the amounts reported in the consolidated financial statements.

Although these estimates are based on management’s best knowledge of the amount, event or actions, actual results may differ from those estimates.

Estimates and judgements are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable. 

These operating segments have been aggregated into a single reportable segment as the Company operates as a vertically integrated cannabis company with dispensary, cultivation, production and distribution operations in the state of Nevada and dispensary, cultivation and distribution operations in the state of California.

As at December 31, 2023 and 2022 , all the Company’s non-current assets were located in the United States and 100 % of the Company’s revenue was generated in the United States.

(q) Critical accounting estimates and judgements

Although these estimates are based on management’s best knowledge of the amount, event or actions, actual results may differ from those estimates.

Estimates and judgements are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable.

Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

2 unchanged sentences

Depreciation and amortization of property and equipment, right-of-use assets and intangible assets are dependent upon estimates of useful lives, which are determined through the exercise of judgment.

Impairment of definite long-lived assets is influenced by judgment in defining a an asset group and determining the indicators of impairment, and estimates used to measure impairment losses.

Refer to Notes 6,  

7 and 8 for further information.

Impairment of definite long-lived assets is influenced by judgment in defining a an asset group and determining the indicators of impairment, and estimates used to measure impairment losses.

Refer to Notes 6, 7 and 8 for further information.

13 HOLDINGS INC.

Notes to the Consolidated Financial Statements

(in United States Dollars)

The Company applies judgement in determining whether a contract contains a lease and if a lease is classified as an operating lease or a finance lease.

The Company determines the lease term as the non-cancellable term of the lease, which may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

The lease term is used in determining classification between operating lease and finance lease, calculating the lease liability and determining the incremental borrowing rate. 

The Company has several lease contracts that include extension and termination options.

4 unchanged sentences

If that rate cannot be readily determined, the lessee is required to use its incremental borrowing rate.

The Company generally uses the incremental borrowing rate when initially recording real estate leases. 

Information from the lessor regarding the fair value of underlying assets and initial direct costs incurred by the lessor related to the leased assets is not available.

The Company determines the incremental borrowing rate as the interest rate the Company would pay to borrow over a similar term the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment.

Definition of a business

Determination of what constitutes a business for purposes of acquisition accounting requires significant judgement. 

ASC 805 notes that if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the set is not considered a business.

However, the exact quantitative threshold is not explicitly defined.

During the year ended December 31, 2022, the Company completed one acquisition, further described in Note 7.

Asset Impairment

2 unchanged sentences

The assessment of whether an indication of impairment exists is performed at the end of each reporting period and requires the application of judgment, historical experience, and external and internal sources of information.

13 HOLDINGS INC.

Notes to the Consolidated Financial Statements

(in United States Dollars)

Deferred tax assets and uncertain tax positions

4 unchanged sentences

In projecting future taxable income, the Company considers historical results and incorporates assumptions about the amount of future pretax operating income adjusted for items that do not have tax consequences.

The Company’s assumptions regarding future taxable income are consistent with the plans and estimates that are used to manage its underlying businesses.

In evaluating the objective evidence that historical results provide, the Company considers three years of cumulative operating income (loss).

The income tax expense, deferred tax assets and liabilities and liabilities for unrecognized tax benefits reflect the Company’s best assessment of estimated current and future taxes to be paid.

Deferred tax asset valuation allowances and liabilities for unrecognized tax benefits require significant judgment regarding applicable statutes and their related interpretation, the status of various income tax audits and the Company’s particular facts and circumstances.

The income tax expense, deferred tax assets and liabilities and liabilities for unrecognized tax benefits reflect the Company’s best assessment of estimated current and future taxes to be paid.

Although the Company believes that the judgments and estimates discussed herein are reasonable, actual results, including forecasted COVID- 19 business recovery, could differ, and the Company may be exposed to losses or gains that could be material.

To the extent the Company prevails in matters for which a liability has been established or is required to pay amounts in excess of the established liability, the effective income tax rate in a given financial statement period could be materially affected.

13 HOLDINGS INC.

Notes to the Consolidated Financial Statements

(in United States Dollars)

Key estimates in these consolidated financial statements include:

1 unchanged sentence

The Company uses the Black-Scholes valuation model to determine the fair value of options and warrants granted to employees and non-employees under share-based payment arrangements, where appropriate.

In estimating fair value, management is required to make certain assumptions and estimates such as the expected term of the instrument, volatility of the Company’s future share price, risk free rates, future dividend yields and estimated forfeitures at the initial grant date, by reference to the underlying terms of the instrument, and the Company’s experience with similar instruments.

Changes in assumptions used to estimate fair value could result in materially different results.

9 unchanged sentences

The Company makes estimates in determining the future cash flows and discount rates in the quantitative impairment test to compare the fair value to the carrying value.

13 HOLDINGS INC.

Notes to the Consolidated Financial Statements

(in United States Dollars)

(r) Accounting standards issued but not yet effective

Business Combinations

In October 2021, the FASB issued ASU 2021 - 08, Accounting for Contract Assets and Contact Liabilities from Contracts with Customers (“ASU 2021 - 08”

) (“ASC 805”

In October 2021, the FASB issued ASU 2021 - 08, Accounting for Contract Assets and Contact Liabilities from Contracts with Customers (“ASU 2021 - 08” ) (“ASC 805” ).

ASU 2021 - 08 requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities from acquired contracts using the revenue recognition guidance under ASC 606 in order to align the recognition of a contract liability with the definition of performance obligation.

7 unchanged sentences

The Company then accounts for the leaseback in accordance with its lease accounting policy.

13 HOLDINGS INC.

Notes to the Consolidated Financial Statements

(in United States Dollars)

If the transfer of the asset is determined not to be a sale at market terms, the Company accounts for the transaction as a financing arrangement, and accordingly no asset sale is recognized.

3 unchanged sentences

A portion of the lease payments is recognized as a reduction of the financing obligation and a portion is recognized as interest expense based on an imputed interest rate.

Inventory  

(t) Asset held for sale

The Company classifies its long-lived assets and related liabilities to be sold as held for sale in the period (i) it has approved and committed to a plan to sell the asset, (ii) the asset is available for immediate sale in its present condition, (iii) an active program to locate a buyer and other actions required to sell the asset have been initiated, (iv) the sale of the asset is probable, (v) the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value, and (vi) it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

The Company initially measures a long-lived asset that is classified as held for sale at the lower of its carrying value or fair value less any costs to sell.

Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are met.

Conversely, gains are not recognized on the sale of a long-lived asset until the date of sale.

Upon designation as an asset held for sale, the Company no longer records depreciation expense on the asset.

The Company assesses the fair value of a long-lived asset less any costs to sell at each reporting period and until the asset is no longer classified as held for sale.

Finished goods inventory consists of dried cannabis, concentrates, edibles, and other products that are complete and available for sale (both internally generated inventory and third -party products purchased in the wholesale market).

Work in process inventory consists of cannabis after harvest, in the processing stage.

Packaging and miscellaneous consist of consumables for use in the transformation of biological assets and other inventory used in production of finished goods, non-cannabis merchandise and food and beverage items. 

The Company’s inventory is comprised of:

Raw materials

$ 5,209,667  

$ 5,810,800 $ 5,209,667

Packaging and miscellaneous

1,584,659  

1,758,152 1,584,659

Work in progress

1,965,052  

3,375,296 1,965,052

Finished goods

4,245,461  

$ 13,004,839  

4,816,400 4,245,461

$ 15,760,648 $ 13,004,839

Cost of Inventory is recognized as an expense when sold and included in cost of goods sold.

5 unchanged sentences

Security deposits

$ 1,399,424  

$ 306,561 $ 1,399,424

Advertising and Marketing

348,433  

678,402  

776,717  

410,313 348,433

779,638 678,402

126,923 776,717

Miscellaneous

607,418  

$ 3,810,394  

2,422,163 607,418

$ 4,072,820 $ 3,810,394

Property and equipment

1 unchanged sentence

At December 31, 2021

$ 630,299 $ 1,707,894 $ 11,105,241 $ 54,718,371 $ 127,680 $ 68,289,485

5,843,295 12,756,048 1,703,190 2,722,710 9,515,734 32,540,977

- - - 6,114,711 ( 6,114,711 ) -

( 99,083 ) ( 500,917 ) ( 8,786 ) - - ( 608,786 )

At December 31, 2022

6,374,511 13,963,025 12,799,645 63,555,792 3,528,703 100,221,676

279,612 2,081,488 1,286,664 350,940 4,479,049 8,477,753

36,984 1,594,852 148,017 644,285 ( 2,424,138 ) -

- - ( 390,941 ) - - ( 390,941 )

At December 31, 2023

$ 6,691,107 $ 17,639,365 $ 13,843,385 $ 64,551,017 $ 5,583,614 $ 108,308,488

At December 31, 2021

$ 179,297 $ 246,447 $ 3,801,166 $ 13,284,298 $ - $ 17,511,208

52,225 303,593 2,537,587 8,365,292 - 11,258,697

Transfers & disposals

- ( 9,392 ) ( 4,888 ) - - ( 14,280 )

At December 31, 2022

231,522 540,648 6,333,865 21,649,590 - 28,755,625

30,737 373,788 2,615,455 9,127,072 - 12,147,052

Transfers & disposals

- - ( 145,886 ) - - ( 145,886 )

At December 31, 2023

$ 262,259 $ 914,436 $ 8,803,434 $ 30,776,662 $ - $ 40,756,791

Carrying amount

At December 31, 2022

$ 6,142,989 $ 13,422,377 $ 6,465,780 $ 41,906,202 $ 3,528,703 $ 71,466,051

At December 31, 2023

For the year ended December 31, 2022 depreciation expense was $ 11,258,697 ( 2021 - $ 7,213,096 ) of which $ 3,293,443 ( 2021 –

$ 1,922,713 ) was included in cost of goods sold.

During the year ended December 31, 2022 the Company transferred $ 6,114,711 ( 2021 - $ 13,680,522 ) and $nil ( 2021 - $ 1,927,109 ) of costs from Construction in Progress to Leasehold Improvements and Equipment, respectively, upon completion of the related projects.

$ 6,428,848 $ 16,724,929 $ 5,039,951 $ 33,774,355 $ 5,583,614 $ 67,551,697

For the year ended December 31, 2023 depreciation expense was $ 12,147,052 ( 2022 - $ 11,258,697 ) of which $ 3,966,587 ( 2022 - $ 3,293,443 ) was included in cost of goods sold.

During the year ended December 31, 2023 the Company transferred $ 2,424,138 ( 2022 - $ 6,114,711 ) of costs from Construction in Progress to Leasehold Improvements, Buildings, Equipment and Land Improvements upon completion of the related projects.

13 HOLDINGS INC.

1 unchanged sentence

(in United States Dollars)

During the year ended December 31,2023 the Company disposed of various equipment for proceeds of $ 64,878 ( 2022 - $nil ) with a net book value of $ 245,055 ( 2022 - $ 8,786 ) resulting in a net loss of $ 180,177 ( 2022 - net loss of $ 3,898 ).

Intangible assets and goodwill

3 unchanged sentences

Master License Florida

Illinois License

Cultivation Coalinga CA Other Intangibles

2 unchanged sentences

Balance, December 31, 2021

$ 6,151,343 $ 690,000 $ 709,798 $ 55,846,866 $ - $ - $ - $ - $ 63,398,007

- - - - - 13,180,000 25,802,688 30,000 39,012,688

Impairment loss

- - - - - ( 6,947,778 ) ( 25,802,688 ) - ( 32,750,466 )

Balance at December 31, 2022

$ 6,151,343 $ 690,000 $ 709,798 $ 55,846,866 $ - $ 6,232,222 $ - $ 30,000 $ 69,660,229

- - - - 1,812,656 - - - 1,812,656

Transfer to held for sale

- - - ( 9,000,000 ) - - - - ( 9,000,000 )

Impairment loss

- - - ( 46,846,866 ) - - - - ( 46,846,866 )

Balance at December 31, 2023

$ 6,151,343 $ 690,000 $ 709,798 $ - $ 1,812,656 $ 6,232,222 $ - $ 30,000 $ 15,626,019

At December 31, 2021

Transfers & disposals

$ - $ - $ - $ - $ - $ - $ - $ - $ -

- - - - - 372,222 - - 372,222

At December 31, 2022

$ - $ - $ - $ - $ - $ 372,222 $ - $ - $ 372,222

- - - - - - - - -

At December 31, 2023

$ - $ - $ - $ - $ - $ 372,222 $ - $ - $ 372,222

Carrying amount

Balance at December 31, 2022

$ 6,151,343 $ 690,000 $ 709,798 $ 55,846,866 $ - $ 5,860,000 $ - $ 30,000 $ 69,288,007

Balance at December 31, 2023

$ 6,151,343 $ 690,000 $ 709,798 $ - $ 1,812,656 $ 5,860,000 $ - $ 30,000 $ 15,253,797

13 HOLDINGS INC.

Notes to the Consolidated Financial Statements

(in United States Dollars)

NGW Acquisition

On March 2, 2022, the Company acquired 100 % ownership interest of Next Green Wave Holdings, Inc.

(“NGW”) and accounted for the transaction as a business combination pursuant to ASC 805.

NGW was incorporated in 2011 and was formed for the purpose of cultivating and selling cannabis products in the state of California, where it owns and operates a cultivation and manufacturing facility. 

(“NGW”) and accounted for the transaction as a business combination pursuant to ASC 805.

The Company executed the NGW transaction in order to introduce certain of its brands to the California market;

3 unchanged sentences

The share consideration was comprised of 21,361,002 common shares of the Company at a fair value of $C3.34 per common share, which were issued on March 2, 2022.

13 HOLDINGS INC.

Notes to the Consolidated Financial Statements

(in United States Dollars)

The following table summarizes the allocation of consideration exchanged to the estimated fair value of the tangible and intangible assets acquired:

9 unchanged sentences

Deferred tax liability

( 3,223,928 )

The purchase price allocations for the NGW transaction reflect various fair value estimates and analyses relating to the determination of fair value of certain tangible and intangible assets acquired and residual goodwill.

The Company determined the estimated fair value of the acquired working capital, and identifiable intangible assets and goodwill after review and consideration of relevant information including discounted cash flow analyses, market data and management’s estimates, prepared by an independent valuation firm.

The estimated fair value of acquired working capital was determined to approximate carrying value.

1 unchanged sentence

None of the goodwill is deductible for tax purposes.

NGW’s state cannabis licenses and brands represented identifiable intangible assets acquired in the amounts of $ 11,840,000 and $ 1,340,000 , respectively.

The NGW cannabis licenses acquired have an indefinite life and as such will not be subject to amortization while the brands have a definite useful life of three years.

As of December 31, 2022, the Company evaluated whether intangible assets and goodwill showed any indicators of impairment, and it was determined that such indicators existed. 

As a result of the Company’s analysis, it was determined that the brands and licenses were impaired, resulting in the Company recording an impairment charge of $ 6,947,778 .

In connection with the NGW transaction, the Company expensed $ 1,238,379 of acquisition-related costs, which have been included in general and administrative expenses on the Company’s consolidated statement of operations and comprehensive loss for the year ended December 31, 2022.

As of December 31, 2022, the Company evaluated whether intangible assets and goodwill showed any indicators of impairment, and it was determined that such indicators existed.

As a result of the Company’s analysis, it was determined that the brands and licenses were impaired, resulting in the Company recording an impairment charge of $ 6,947,778 .

13 HOLDINGS INC.

1 unchanged sentence

(in United States Dollars)

NGW’s post-acquisition revenues, gross profit and net income included in the Company’s results for the period since the closing of the transaction were $ 7,557,860 , $ 373,025 and ($ 37,555 ).

The following tables reflects the revenue, gross profit and comprehensive income (loss) that would have been reported if the acquisition had occurred at the beginning of the years indicated:

Year Ended December 31, 2022

The following table reflects the revenue, gross profit and comprehensive loss that would have been reported if the acquisition had occurred at the beginning of the year ended December 31, 2022.

Year Ended December 31, 2022

Revenue, net of discounts

$ 104,574,377 $ 870,651 $ 105,445,028

47,974,754 ( 131,700 ) 47,843,054

Comprehensive income (loss) for the period

( 59,545,719 ) ( 868,125 ) ( 60,413,844 )

The carrying value of goodwill in each reporting unit is indicative of the expected growth and development of the business.

In the fourth quarter of fiscal 2022, the Company identified qualitative indicators of impairment as a result of a downturn in the wholesale pricing of cannabis. 

The reduction in the price of wholesale cannabis resulted in a downward adjustment of the future financial forecasts for the Company’s NGW business, which indicated that impairment of the goodwill asset was a more-likely-than- not outcome.

In the fourth quarter of fiscal 2022, the Company identified qualitative indicators of impairment as a result of a downturn in the wholesale pricing of cannabis.

A qualitative step zero impairment test was performed on the NGW business which indicated a potential impairment.

20 unchanged sentences

Terminal value multiple

Based on the results of the goodwill impairment test, the carrying value of the NGW reporting unit exceeded the fair value and the Company recognized a pre-tax impairment loss of $ 25,802,688 during the year ended December 31, 2022, relating to the NGW reporting unit.

13 HOLDINGS INC.

1 unchanged sentence

(in United States Dollars)

Florida License Acquisition

On September 28, 2021, the Florida Department of Health’s Office of Medical Marijuana Use (“OMMU”) approved the Company to acquire a license to operate a Medical Marijuana Treatment Center issued by the Florida Department of Health from a subsidiary of Harvest Health & Recreation Inc. 

The acquisition closed with an effective date of October 1, 2021, and the Company released $ 55,000,000 of restricted cash that was being held in escrow to the seller in exchange for receipt of the Medical Marijuana Treatment Center license.

The Company has capitalized $ 846,866 in costs incurred to secure the license pursuant to the license acquisition.

The Company’s lease agreements are for cultivation, manufacturing, retail, and office premises and for vehicles.

Florida License

On January 22, 2024, the Company entered into a definitive agreement to sell its Planet 13 Florida, Inc.

entity for $ 9,000,000 which, at the time of sale will hold no assets other than a Florida medical marijuana treatment center (“ MMTC ”) license.

The value of the Florida license at December 31, 2023 was less than the carrying amount of the license.

Consequently, the Company recorded an impairment charge of $ 46,846,866 against the carrying value of its Florida MMTC license.

The impairment loss is reflected in the statement of operations and comprehensive loss under the caption “Impairment Loss.” During the fourth quarter of 2023, the Company committed to a plan to sell its Florida license.

Accordingly, the license held by the Company's Florida subsidiary was presented as an asset held for sale on the consolidated balance sheet as of December 31, 2023.

On August 28, 2023, the Company entered into a Membership Interest Purchase Agreement (“ Purchase Agreement ”) with VidaCann, LLC (“ VidaCann ”), Loop’s Dispensaries, LLC (“ Dispensaries ”), Ray of Hope 4 Florida, LLC (“ Ray of Hope ”) and Loops Nursery & Greenhouses, Inc.

(“ Nursery ” and together with Dispensaries and Ray of Hope, the “ Sellers ”), the Company will acquire from the Sellers all of the membership interests in VidaCann (the “ Transaction ”).

Pursuant to the Purchase Agreement, the Company will acquire VidaCann from the Sellers for agreed consideration at closing of the Transaction (the “ Closing ”) equal to the sum of:

(i) 78,461,538 shares of common stock of the Company (the “ Base Share Consideration ”), of which 1,307,698 shares will be issued to VidaCann’s industry advisor (the “ VC Advisor ”);

(ii) a cash payment of US$4,000,000 (the “ Closing Cash Payment ”);

and (iii) promissory notes to be issued by the Company to the Sellers in the aggregate principal amount of US$5,000,000, with each of the above components subject to adjustments as set out in the Purchase Agreement.

The sale of Planet 13 Florida Inc.

is contingent on the closing of the Transaction, both of which are subject to regulatory approval.

Illinois License

On February 7, 2023, the Company acquired the remaining 51 % stake in the Illinois adult use dispensary license for $ 1,812,656 .

Consideration included $ 866,250 in cash and 1,063,377 in Planet 13 common shares valued at $ 0.89 per share for a total of $ 946,406 in Planet 13 common shares.

The Illinois cannabis license acquired has as an indefinite life and as such will not be subject to amortization.

The Company’s lease agreements are for cultivation, manufacturing, retail, and office premises and for vehicles.

The property lease terms range between 5 years and 21 years depending on the facility and are subject to an average of 2 renewal periods of equal length as the original lease.

1 unchanged sentence

Rent expense for leases with escalation clauses is accounted for on a straight-line basis over the lease term.

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The following table provides the components of lease cost recognized in the consolidated statement of operations and comprehensive loss for 2023 and 2022 :

13 HOLDINGS INC.

Notes to the Consolidated Financial Statements

(in United States Dollars)

Operating lease costs

$ 4,584,550  

$ 5,004,484 $ 4,584,550

Finance lease costs:

3 unchanged sentences

Short term lease expense

12,406  

42,671 12,406

Total lease costs

$ 4,596,956  

$ 5,047,155 $ 4,596,956

Other information related to operating and finance leases as of and for the year end December 31, 2023 and 2022 are as follows:

2 unchanged sentences

Weighted average discount rate

15.00 %  

15.00 % 15.00 % 15.00 % 15.00 %

Weighted average remaining lease term

13 HOLDINGS INC.

Notes to the Consolidated Financial Statements

(in United States Dollars)

- 14.56 - 14.43

The maturity of the contractual undiscounted lease liabilities as of December 31, 2023 and 2022 is:

4,052,167  

4,214,502  

4,302,534  

4,303,434  

4,389,610  

4,566,581  

53,708,289  

$ - $ 4,052,167

4,226,472 4,214,502

4,318,603 4,302,534

4,323,725 4,303,434

4,414,249 4,389,610

4,585,323 4,566,581

46,355,092 53,708,289

Total undiscounted lease liabilities

79,537,117  

72,976,737 79,537,117

Interest on lease liabilities

( 53,224,885 )  

( 47,030,437 ) ( 53,224,885 )

Total present value of minimum lease payments

26,312,232  

25,946,300 26,312,232

Lease liability - current portion

( 479,161 )  

( 674,594 ) ( 479,161 )

Lease liability

$ 25,833,071  

Principally, all leases relate to real estate. 

For the year ended December 31, 2022 the Company incurred $ 4,584,550 of operating lease costs ( 2021 - $ 4,437,816 ), of which $ 1,840,018  ( 2021 - $ 1,829,800 ) was allocated to cost of goods sold.

$ 25,271,706 $ 25,833,071

Principally, all leases relate to real estate.

For the year ended December 31, 2023 the Company incurred $ 5,004,484 of operating lease costs ( 2022 - $ 4,584,550 ), of which $ 1,898,488 ( 2022 - $ 1,840,018 ) was allocated to cost of goods sold.

On December 22, 2022, the Company entered into a sale-leaseback transaction with an unrelated third -party related to certain real property acquired in connection with the NGW acquisition.

1 unchanged sentence

The following are the key terms of the related lease agreement:

13 HOLDINGS INC.

Notes to the Consolidated Financial Statements

(in United States Dollars)

Initial term:

3 unchanged sentences

See Note 16 for additional supplemental cash flow information related to leases.

13 HOLDINGS INC.

Notes to the Consolidated Financial Statements

(in United States Dollars)

Notes payable

1 unchanged sentence

Promissory note dated November 4, 2015, with semi-annual interest at 5.0% , secured by deed of trust, due December 1, 2019

884,000  

$ 884,000  

884,000 884,000

$ 884,000 $ 884,000

Less current portion

( 884,000 )  

( 884,000 ) ( 884,000 )

Stated maturities of debt obligations are as follow:

1 unchanged sentence

Share capital

The Company is authorized to issue an unlimited number of common shares and an unlimited number of Class A shares.

Number of Common Shares

Common Shares

The Company is authorized to issue 1,500,000,000 shares of common stock and 50,000,000 shares of preferred stock.

Balance at January 1

198,687,950  

220,470,061 198,687,950

Shares issued on settlement of RSUs

81,084  

783,832 81,084

Shares issued on exercise of options

97,325  

Shares issued on exercise of warrants

242,700  

Shares issued on financing - February 2021

Shares issued on conversion of Class A shares

Shares issued on acquisition (Note 7)

21,361,002  

Total common shares outstanding on December 31

220,470,061  

Shares issued on exercise of purchase option (Note 7)

Shares issued on legal settlement

Total shares of common stock outstanding on December 31

223,317,270 220,470,061

Shares issued for Restricted Share Units

During the year ended December 31, 2022 , the Company issued 81,084 common shares on the settlement of RSUs that had vested during the year.

During the year ended December 31, 2023 , the Company issued 783,832 common shares on the settlement of RSUs that had vested during the year.

The Company did not receive any cash proceeds on the settlement.

During the year ended December 31, 2021 , the Company issued 3,126,534 common shares on the settlement of RSUs that had vested during the year.

During the year ended December 31, 2022 , the Company issued 81,084 common shares on the settlement of RSUs that had vested during the year.

The Company did not receive any cash proceeds on the settlement.

Shares issued for Stock Options

During the year ended December 31, 2022 , the Company issued 97,325 common shares on the exercise of options that had a strike price of CAD$1.31  per common share resulting in cash proceeds of $ 97,980 ( CAD$127,496 ).

During the year ended December 31, 2021 , the Company issued 121,336 common shares on the exercise of options that had a strike price in the range of CAD$0.75 to CAD$1.55 per common share resulting in cash proceeds of $ 86,216 ( CAD$108,987 ).

13 HOLDINGS INC.

1 unchanged sentence

(in United States Dollars)

Shares issued for Stock Options

During the year ended December 31, 2023 , the Company issued nil common shares on the exercise of options.

During the year ended December 31, 2022 , the Company issued 97,325 common shares on the exercise of options that had a strike price of CAD$1.31 per common share resulting in cash proceeds of $ 97,980 ( CAD$127,496 ).

Shares issued on the exercise of Warrants

During the year ended December 31, 2022 , the Company issued 242,700 common shares to warrant holders who exercised 242,700 warrants resulting in cash proceeds of $ 1,044,258 ( CAD$1,407,660 ).

During the year ended December 31, 2023 , the Company issued nil common shares to warrant holders.

During the year ended December 31, 2022 , the Company issued 242,700 common shares to warrant holders who exercised 242,700 warrants resulting in cash proceeds of $ 1,044,258 ( CAD$1,407,660 ).

Shares issued on Financing –

February 2021

On February 2, 2021, the Company completed a bought deal financing for aggregate gross proceeds of $ 53,852,980 ( CAD$69,028,750 ) at a price of CAD$7.00 per unit.

The Company issued 9,861,250 units of the Company.

Each unit was comprised of one common share in the capital of the Company and one -half of one Common Share purchase warrant.

Each whole warrant entitles the holder to acquire one common share at an exercise price of CAD$9.00 per common share for a period of 24 months.

The Company also issued 591,676 broker warrants that entitle the holder to purchase one common share for a period of 24 months from the closing of the offering at a price of CAD$7.00 per common share.

The broker warrants were measured based on the fair market value of the warrants using a Black Scholes valuation model.

The Company incurred $ 3,494,930 in cash share issuance costs and $ 1,296,170 in broker warrant costs.

The warrants are initially measured at fair value (Note 11 ) with residual proceeds being allocated to the common shares.

Issuance costs have been allocated in the same proportion, with costs allocated to the warrant liability being expensed as incurred.

The net proceeds were allocated as follows:

Gross Proceeds

Issuance Costs

February 2, 2021 Financing

Common shares (APIC)

$ 50,967,999  

$ ( 4,534,434 )

Warrant liability (Note 11)

2,884,981  

$ 53,852,980  

$ ( 4,791,100 )

Shares issued on conversion of Class A Shares

The Class A restricted shares have equal ratable rights as the Company’s common shares to dividends, all of the Company’s assets that are available for distribution upon liquidation, dissolution or winding up of the Company’s affairs, do not have pre-emptive rights, are entitled to receive notice and attend shareholders meetings and to exercise one vote for each Class A share held at all meetings of shareholders of the Company other than with respect to the vote for the election or removal of directors.

Each Class A shareholder is able to convert each outstanding Class A share at the option of the holder thereof into one common share at any time provided that such conversion would not cause the Company to become a US Domestic Issuer.

The restriction on conversion of Class A shares are designed to prevent the Company from becoming a US Domestic Issuer.

Generally, a company will be considered to be a US Domestic Issuer if:

(A) 50 % or more of the holders of a company’s common voting shares are U.S.

and either (B) (i) the majority of the executive officers or directors of the Issuer are United States citizens or residents;

(ii) the company has 50 % or more of its assets located in the United States;

or (iii) the business of the company is principally administered in the United States.

During fiscal 2021, the Company failed the foreign private issuer (“FPI”) test and became a US domestic issuer effective January 1, 2022.

On May 6, 2021, the Company issued 55,232,940 common shares on the conversion of 55,232,940 Class A Shares. 

As of December 31, 2022 , there were no longer any Class A Shares outstanding. 

13 HOLDINGS INC.

Notes to the Consolidated Financial Statements

(in United States Dollars)

Number of Class A Shares

Class A Shares

Balance at January 1

Conversion of Class A Shares to Common

( 55,232,940 )

Total Class A Shares Outstanding

Shares issued in legal settlement

On November 14, 2024, pursuant to a settlement agreement, we issued 1,000,000 shares of common stock and paid $ 300,000 in consideration for settlement of claims advanced by the SDC parties against Next Green Wave Holdings, Inc.

As a result of our acquisition of Next Green Wave Holdings Inc.

on March 2, 2022, we assumed all the liabilities of Next Green Wave Holdings.

The value of the shares at time of settlement were CAD$1.00 with an exchange rate of 0.7287 CAD to USD for a total value of $ 728,700 .

The following table summarizes the fair value of the warrant liability at December 31, 2023 and 2022 :

Opening balance as at January 1

$ 7,206,049  

$ 13,204,211  

2,884,981  

$ 18,127 $ 7,206,049

Foreign exchange

( 10,117 )  

100,635  

Change in fair value

( 7,177,805 )  

( 18,127 ) ( 7,177,805 )

Closing balance as at December 31

$ 18,127  

$ 7,206,049  

The warrant liability is adjusted to fair value on the date the warrants are exercised and at the end of each reporting period. 

The amount that is reclassified to equity on the date of exercise is the fair value at that date.

5 unchanged sentences

Balance - beginning of year

8,861,951  

$ 7.46  

7,158,337  

$ 4.98  

5,522,301  

$ 8.79  

( 242,700 )  

$ 5.80  

( 3,772,640 )  

$ 4.73  

( 3,412,788 )  

$ 5.41  

( 46,047 )  

$ 3.75  

5,206,463 $ 8.88 8,861,951 $ 7.46

- $ - ( 242,700 ) $ 5.80

( 5,206,463 ) $ 8.88 ( 3,412,788 ) $ 5.41

Balance - end of year

5,206,463  

$ 8.88  

8,861,951  

$ 7.46  

- $ - 5,206,463 $ 8.88

The Company complies with ASC 820, Fair Value Measurement, for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.

Financial instruments recorded at fair value in the consolidated balance sheet are classified using a fair value hierarchy that reflects the observability of significant inputs used in making the measurements. 

13 HOLDINGS INC.

1 unchanged sentence

(in United States Dollars)

The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2022 and 2021 :

The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2023 and 2022 :

Quoted prices in active markets for identical asset (Level 1)

2 unchanged sentences

Warrant liability

$ ( 18,127 )  

December 31, 2022

Warrant liability

$ ( 7,206,049 )  

$ ( 18,127 ) $ - $ ( 18,127 )

Share based compensation

At the 2023 Annual General and Special Meeting, the shareholders of Planet 13 Holdings Inc., a British Columbia corporation (“ Planet 13 BC ”) voted to approve and adopt the Planet 13 Holdings Inc.

2023 Equity Incentive Plan (the “ 2023 Equity Plan ”), which was contingent upon the completion of the Domestication, and became effective on September 15, 2023.

As of September 15, 2023, the Company may not grant any new awards under the Planet 13 Holdings Inc.

2018 Stock Option Plan and Planet 13 Holdings Inc.

2018 Share Unit Plan (collectively, the “ Prior Plans ”), and the Prior Plans will continue to govern awards previously granted under them.

A total of 22,000,000 shares of Common Stock are available for grants under the 2023 Equity Plan and all other security based compensation arrangements of the Company, including the Prior Plans (the “ Total Share Reserve ”).

Any outstanding awards under the Prior Plans on the September 15, 2023 count towards the Total Share Reserve.

As of September 15, 2023, 1,926,861 awards issued under the Prior Plans remained outstanding and, as of December 31, 2023, a maximum number of 20,073,139 shares of Common Stock are available for issuance under the 2023 Equity Plan, subject to adjustment pursuant to the terms of the 2023 Equity Plan.

(a) Stock options

The Company has established an incentive stock option plan (the “Plan”) for employees, management, directors, and consultants of the Company, as designated and administered by a committee of the Company’s Board of Directors.

Under the Plan, the Company may grant options for up to 10 % of the issued and outstanding common shares of the Company. The maximum term of an option is five years and the related vesting period runs from immediate to the life of the grant.

During the years ended December 31, 2023 and 2022

1 unchanged sentence

The replacement options were fully vested upon issuance.

The following table summarizes information about stock options outstanding at December 31, 2022 and 2021 : 

The following table summarizes information about stock options outstanding at December 31, 2023 and 2022 :

Exercise price

3 unchanged sentences

December 31, 2022

CAD$ Outstanding

November 21, 2024

$ 1.31 185,203 185,203 185,203 185,203

February 27, 2025

$ 1.31 51,525 51,525 51,525 51,525

December 15, 2025

$ 3.06 269,075 269,075 269,075 269,075

September 30, 2026

$ 4.37 97,322 97,322 120,222 120,222

$ 1.31 - - 97,325 97,325

June 11, 2023

$ 0.80 - - 61,668 61,668

June 30, 2024

$ 2.60 - - 7,500 7,500

603,125 603,125 792,518 792,518

13 HOLDINGS INC.

6 unchanged sentences

Option life in years

Share based compensation expense attributable to employee options was $nil  for the year ended December 31, 2022 , ( 2021 :

The fair value of the replacement options issued during the year of $ 1,239,818 was recognized as part of the consideration paid related to the business combination of NGW (Note 7 ).

Share based compensation expense attributable to employee options was $nil for the year ended December 31, 2023 .

The fair value of the replacement options issued during 2022 of $ 1,239,818 was recognized as part of the consideration paid related to the business combination of NGW (Note 7 ).

The outstanding options have a weighted average CAD$ exercise price of:

$ 2.58 $ 2.34

Weighted average remaining life in years of outstanding options:

4 unchanged sentences

Balance - beginning of year

792,518 $ 2.34 169,168 $ 2.01

- - 1,106,925 2.58

- - ( 97,325 ) 1.31

( 189,393 ) 2.46 ( 386,250 ) 3.11

Balance - end of year

The total intrinsic value of stock options exercised, outstanding and exercisable as of December 31, 2022 , was $nil.

The total intrinsic value of stock options exercised, outstanding and exercisable as of December 31, 2021 , was $ 274,611 , $ 238,010 and $ 238,010 , respectively.

603,125 $ 2.58 792,518 $ 2.34

The total intrinsic value of stock options exercised, outstanding and exercisable as of December 31, 2023 and 2022 was $nil.

(b) Restricted Share Units

The Company has established a Restricted Share Unit incentive plan (the “RSU Plan”) for employees, management, directors, and consultants of the Company, as designated and administered by a committee of the Company’s Board of Directors.

Under the RSU Plan, the Company may grant RSUs and/or options for up to 10 % of the issued and outstanding common shares of the Company. 

13 HOLDINGS INC.

Notes to the Consolidated Financial Statements

(in United States Dollars)

The following table summarizes the RSUs that are outstanding as at December 31, 2023 and 2022 :

2 unchanged sentences

Balance - beginning of year

2,464,928 2,591,929

( 783,832 ) ( 81,084 )

Surrendered for taxes

( 477,506 ) -

( 81,161 ) ( 45,917 )

Balance - end of year

1,122,429 2,464,928

The Company recognized $ 2,520,407 in share-based compensation expense attributable to RSUs vesting during the year ended December 31, 2023 ($ 7,459,267 for the year ended December 31, 2022 ).

13 HOLDINGS INC.

Notes to the Consolidated Financial Statements

(in United States Dollars)

During the year ended December 31, 2023

No RSUs were granted during the year ended 

December 31, 2022 .

The Company issued 81,084 common shares on the exercise of 81,084 RSUs during the year ended 

December 31, 2022 .

During the year ended 

December 31, 2022 , 45,917 RSUs were forfeited.

No RSUs were granted during the year ended December 31, 2023 .

The Company issued 783,832 common shares on the exercise of 783,832 RSUs during the year ended December 31, 2023 .

In conjunction with exercise of these shares during the year ended December 31, 2023, 477,506 RSU shares were surrendered to the Company at a value of $ 267,529 in exchange for the Company remitting all withholding taxes resulting from the RSU exercise.

During the year ended December 31, 2023 , 81,161 RSUs were forfeited.

During the year ended December 31, 2022

On April 19, 2021, the Company granted 4,082,474 RSUs to officers, directors, and employees pursuant to the Company’s RSU Plan. 

The RSUs granted vest in three equal tranches on November 1, 2021, November 1, 2022, and November 1, 2023, unless otherwise varied pursuant to the terms of the plan. 

The value ascribed to the RSUs issued was CAD$8.12.

On June 10, 2021, the Company granted 3,704 RSUs to a consultant of the Company pursuant to the Company’s RSU Plan. 

The value ascribed to the RSUs issued was CAD$8.51.

The RSUs vested immediately and were exercised on June 10, 2021.

No RSUs were granted during the year ended December 31, 2022 .

The Company issued 81,084 common shares on the exercise of 81,084 RSUs during the year ended December 31, 2022 .

During the year ended December 31, 2022 , 45,917 RSUs were forfeited.

Loss per share

1 unchanged sentence

December 31, 2022

Loss available to common shareholders

$ ( 73,608,758 ) $ ( 59,545,719 )

Weighted average number of shares outstanding, basic and diluted

221,964,287 216,586,621

Basic and diluted loss per share

Approximately 8,463,909 and 11,623,051 of potentially dilutive securities for the years ended December 31, 2022  and 

December 31, 2021 respectively were excluded in the calculation of diluted EPS as their impact would have been anti-dilutive due to net loss in such years.

13 HOLDINGS INC.

Notes to the Consolidated Financial Statements

(in United States Dollars)

$ ( 0.33 ) $ ( 0.27 )

Approximately 1,725,554 and 8,463,909 of potentially dilutive securities for the years ended December 31, 2023 and December 31, 2022 respectively were excluded in the calculation of diluted EPS as their impact would have been anti-dilutive due to net loss in such years.

The components of income tax expense (benefit) of the Company are summarized as follows:

1 unchanged sentence

December 31, 2022

Current tax expense (recovery)

Current period

$ 10,672,538  

Deferred tax expense (recovery)

Origination and reversal of timing differences

( 5,492,926 )  

Current taxes:

$ 9,574,371 $ 10,672,538

Change in unrecognized temporary differences

3,572,749  

$ 8,752,361  

Current tax expense (benefit)

9,868,881 10,672,538

Deferred taxes:

211,127 ( 1,920,177 )

Deferred tax expense (benefit)

1,664,574 ( 1,920,177 )

Income tax expense (benefit)

$ 11,533,455 $ 8,752,361

13 HOLDINGS INC.

Notes to the Consolidated Financial Statements

(in United States Dollars)

The actual income tax provision differs from the expected amount calculated by applying the statutory income tax rate to the loss before tax.

2 unchanged sentences

December 31, 2022

Loss before income tax

$ ( 40,227,939 )  

Income (loss) before income taxes

$ ( 62,075,303 ) $ ( 50,793,358 )

Statutory income tax rate

21.0 %  

Income tax expense at statutory rate

( 8,447,867 )  

Income tax expense (benefit) at statutory rate

( 13,035,814 ) ( 10,666,605 )

Increase (reduction) in income taxes resulting from:

State income taxes

( 2,567,726 ) -

Change in fair value of warrant liability

( 1,507,339 )  

Other non-taxable amounts

14,542,266  

( 3,807 ) ( 1,507,339 )

Expenses disallowed under IRC Section 280E

9,972,094 10,932,013

Share based compensation

Nondeductible penalties

Other permanent differences

657,413 5,828,991

Change in valuation allowance

3,572,749  

Difference in rates

( 362,832 )  

16,675,011 3,572,749

955,384  

Difference in tax rates

- ( 362,832 )

Change in state rate

Prior period adjustments

( 1,837,217 ) -

Other adjustments

Income tax expense (benefit)

$ 8,752,361  

Section 280E prohibits businesses engaged in the trafficking of Schedule I or Schedule II controlled substances from deducting normal business expenses, such as payroll and rent, from gross income (revenue less cost of goods sold).

Section 280E was originally intended to penalize criminal market operators, but because cannabis remains a Schedule I controlled substance for Federal purposes, the Internal Revenue Service (“IRS”) has subsequently applied Section 280E to state-legal cannabis businesses.

$ 11,533,455 $ 8,752,361

Section 280E of the Internal Revenue Code prohibits businesses engaged in the trafficking of Schedule I or Schedule II controlled substances from deducting normal business expenses, such as payroll and rent, from gross income (revenue less cost of goods sold).

Cannabis businesses operating in states that align their tax codes with the IRC are also unable to deduct normal business expenses from taxable income subject to state taxes.

The non-taxable amounts shown in the effective rate reconciliation above include the impact of applying IRC Section 280E to the Company’s businesses that are involved in selling cannabis, along with other typical non-deductible expenses.

Therefore, the effective tax rate can be highly variable and may not necessarily correlate with pre-tax income or loss.

As the application and IRS interpretations on Section 280E continue to evolve, the impact of this cannot be reliably estimated.

Any changes to the application of Section 280E may have a material effect on the Company’s consolidated financial statements.

13 HOLDINGS INC.

1 unchanged sentence

(in United States Dollars)

Deferred tax assets and liabilities have been offset where they relate to income taxes levied by the same taxation authority and the Company has the legal right and intent to offset.

Deferred tax assets (liabilities) are attributable to the following:

The components of deferred tax assets and liabilities of the Company are summarized as follows:

December 31, 2023

December 31, 2022

Deferred tax assets:

Loss carryforwards

$ 11,769,754  

$ 18,302,796 $ 11,769,754

Share issue costs

834,063  

Stock compensation

2,203,368  

Share based compensation

1,562,759 2,203,368

Exchange rate difference on monetary assets

709,938  

Accrued expenses

343,416  

Property and equipment

( 1,842,051 )  

Loyalty points

280,182 220,034

( 1,774,379 )  

Deferred tax assets (liabilities)

12,244,109  

Inventory Reserve

28,705 23,385

Lease liabilities

Florida License

Gross deferred tax assets

32,674,139 15,860,539

Valuation allowance

( 13,385,056 )  

( 30,060,064 ) ( 13,385,056 )

Net deferred tax liability

$ ( 1,140,947 )  

As at December 31, 2022 , the Company has $ 29,518,011 ( December 31, 2021 - $ 19,139,273 ) in Canadian non-capital loss carryforwards that expire between 2037  and 2042.

In addition, as at December 31, 2022 , the Company has U.S.

federal Net Operating Losses of $ 60,454,476 ( December 31, 2021 - $ 49,079,058 ).

The US federal Net Operating Losses attributable to 2020  onward will have an indefinite carry forward.

As at December 31, 2022 , the Company has California State Net Operating Losses of $ 10,626,327 ( December 31, 2021 - $ 6,529,220 ).

The California state Net Operating Losses will expire in 2040.

In March 2020, the U.S.

enacted the Coronavirus Aid, Relief, and Economic Security Act (the “Act”).

The Act, among other provisions, reinstates the ability of corporations to carry net operating losses back to the five preceding tax years, has increased the excess interest limitation on modified taxable income from 30 percent to 50 percent.

The Company has made a reasonable estimate of the effects on existing deferred tax balances and has concluded that the Act has not had a significant effect on the deferred tax balances.

The Company believes that, pursuant to Section 7874 of the Code, even though it is organized as a Canadian corporation, the Company should be treated as a U.S.

domestic corporation for U.S.

federal income tax purposes.

Because the Company is a taxable corporation in Canada, it is likely to be subject to income taxation in both the United States and Canada on the same income, which in turn, may reduce the amount of income available for distribution to shareholders.

The balance of this discussion assumes the Company is a U.S.

domestic corporation for U.S.

federal income tax purposes.

However, no tax opinion or ruling from the Internal Revenue Service (“IRS”) concerning the U.S.

federal income tax characterization of the Company has been obtained and none will be requested.

Thus, there can be no assurance that the IRS will not challenge the characterization of the Company as a domestic corporation, or that if challenged, a U.S.

court would not agree with the IRS.

If the Company is not treated as a U.S.

domestic corporation, then the acquisition, ownership and disposition of common shares, warrants and common shares received on the exercise of warrants may have materially different implications for Non-U.S.

Net deferred tax assets

2,614,075 2,475,483

Deferred Tax Liabilities:

Property and equipment

94,959 1,842,051

Other Licenses

3,649,504 1,774,379

Right-of-use assets

Net deferred tax liabilities

5,419,596 3,616,430

Total net deferred tax assets (liabilities)

$ ( 2,805,521 ) $ ( 1,140,947 )

As at December 31, 2023 , the Company has $ 84,015,255 of gross U.S.

federal net operating losses and $ 7,409,852 of gross U.S.

state net operating losses.

The Company’s U.S.

federal net operating losses can be carried forward indefinitely.

The Company’s U.S.

state net operating losses have 20 -year carryforward periods and begin to expire in 2042.

On September 15, 2023, the Company changed its jurisdiction from the Province of British Columbia, Canada, to the State of Nevada.

As a result, the Company filed final Canadian income tax returns for the 2023 tax year and no longer has any Canadian income tax attributes as of December 31, 2023.

Deferred taxes arise from temporary differences in the recognition of certain expenses for tax and financial reporting purposes.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.

As of December 31, 2023 , management believes it its more-likely-than- not that the Company’s net deferred tax assets related to its loss carryforwards, stock compensation, and Florida license would not be realized in the near future and records a full valuation allowance on these deferred tax assets.

The Company’s valuation allowance represents the amount of tax benefits that are likely to not be realized.

The net change in the valuation allowance from December 31, 2022 was $ 16,675,008 .

Pursuant to Sections 382 of the Internal Revenue Code, Federal and state tax laws impose significant restrictions on the utilization of tax attribute carryforwards in the event of a change in ownership of the Company, as defined by IRC Section 382.

The Company does not expect IRC Section 382 to significantly impact the utilization of its net operating loss carryforwards, but plans to complete a formal analysis prior to releasing the valuation allowance on its net operating losses.

The Company files income tax returns in the U.S.

federal jurisdiction and various U.S.

state jurisdictions.

With the exception of net operating losses created in prior years that may potentially be adjusted, the federal statute of limitations remains open for the 2020 tax year to present, and the state statutes of limitations remain open for the 2019 tax year to present.

The Company filed a final Canadian income tax return for the 2023 tax year, but the Canadian statute of limitations remains open for the 2018 tax year to the 2023 tax year.

13 HOLDINGS INC.

Notes to the Consolidated Financial Statements

(in United States Dollars)

General and administrative

Salaries and wages

$ 15,231,997  

$ 13,945,103 $ 15,231,997

Share based compensation

7,459,267  

2,520,407 7,459,267

Executive compensation

3,008,508  

2,949,315 3,008,508

Licenses and permits

2,900,282  

2,541,183 2,900,282

Payroll taxes and benefits

4,124,049  

3,369,468 4,124,049

Supplies and office expenses

1,480,108  

1,518,102 1,480,108

Subcontractors

2,589,933  

2,714,424 2,589,933

Professional fees (legal, audit and other)

6,524,583  

7,484,017 6,524,583

Miscellaneous general and administrative expenses

6,076,773  

$ 49,395,500  

13 HOLDINGS INC.

Notes to the Consolidated Financial Statements

(in United States Dollars)

5,379,153 6,076,773

$ 42,421,172 $ 49,395,500

Supplemental cash flow information

1 unchanged sentence

HST Receivable

$ ( 79,012 )  

$ - $ ( 79,012 )

Accounts Receivable

1,342,487  

4,297,897  

130,868 1,342,487

( 2,755,809 ) 4,297,897

Prepaid Expenses and Other Assets

167,130  

( 262,426 ) 167,130

Long-term Deposits and Other Assets

199,334  

( 7,308 ) 199,334

Deferred Tax Assets

( 183,453 )  

( 359,781 ) ( 183,453 )

Accounts Payable

127,789  

( 346,059 ) 127,789

Accrued Expenses

826,664  

( 1,950,233 ) 826,664

Other Liabilities

Income Taxes Payable

1,574,807  

$ 8,273,643  

1,956,037 1,574,807

$ 3,720,587  

$ 7,925,000  

$ ( 3,589,711 ) $ 8,273,643

Interest Paid on Leases

$ 4,077,971 $ 3,720,587

$ 7,873,092 $ 7,925,000

Non-cash Financing and Investing Activities

Reclassify license to asset held for sale

$ 9,000,000 $ -

Shares issued in business combination

$ 56,320,332  

$ - $ 56,320,332

Shares Issued on Exercise of Purchase Option

$ 946,406 $ -

Issuance of NGW replacement options on acquisition

$ 1,239,818  

$ - $ 1,239,818

Lease additions

$ 2,972,252  

Lease terminations

$ 371,381  

$ 954,496 $ 2,972,252

Early Termination of Operating Lease

$ 1,182,877 $ 371,381

Fixed Asset Amounts in Accounts Payable

Warrant liability reclassified to APIC on settlement

Reclassification of long term lease liabilities to current

$ 55,588  

Related Party Transactions and Balances

Related party transactions are summarized as follows:

a) Building Lease

The Company is the sub-lessee of approximately 2,000 square feet of office space and purchases certain printed marketing collateral and stationery items from a company owned by one of the Company’s Co-CEOs.

Amounts paid for rent for each of the years ended December 31, 2022 and 2021 was $ 6,010 and $ 16,027 , respectively.

Amounts paid for printed marketing collateral and stationery items to the same company were $ 183,914 and $ 450,692 for the years ended December 31, 2022 and 2021 respectively.

The Company leased a cultivation facility from an entity owned by the Company’s co-CEOs. 

Rent paid for this facility for the years ended December 31, 2022 and 2021 was $nil, and $ 301,894 , respectively. 

On April 30, 2021, the Company’s Co-CEOs sold this building to an arm’s length third party who assumed the lease.

$ 195,433 $ 55,588

13 HOLDINGS INC.

1 unchanged sentence

(in United States Dollars)

A company owned by one of the Company’s executives pays the Company for storage space. 

Amounts paid to the Company for storage space were $ 5,968 and $ 171,895 for the years ended December 31, 2022 and 2021, respectively, and is recorded in Other Income.

For the years ended December 31, 2022 and 2021, no amounts were due to or from related parties.

PLANET 13 HOLDINGS INC.

Notes to the Consolidated Financial Statements

(in United States Dollars)

Related Party Transactions and Balances

Related party transactions are summarized as follows:

(a) Building Lease

Prior to March 15, 2022 , the Company was the sub-lessee of approximately 2,000 square feet of office space and purchased certain printed marketing collateral and stationery items from a company owned by one of the Company’s Co-CEOs.

This entity was sold to an unrelated third -party on March 15, 2022 .

Amounts paid for rent for the years ended December 31 , 2023 and 2022 to the related party equaled $nil and $ 6,010 , respectively.

Amounts paid for printed marketing collateral and stationery items to the related party were $nil and $ 183,914 for the years ended December 31 , 2023 and 2022, respectively.

A company previously owned by one of the Company’s Co-CEOs until March 15, 2022 paid the Company for storage space.

Amounts paid to the Company from the related party for storage space were $nil and $ 5,968 for the years ended December 31 , 2023 and 2022, respectively, and is recorded in Other Income for such period.

For the years ended December 31, 2023 and 2022, no amounts were due to related parties.

Commitments and contingencies

(a) Construction Commitments

The Company had no outstanding construction commitments as of December 31, 2022 .

(b)    

Contingencies

The Company had $ 3,140,447 of outstanding construction commitments as of December 31, 2023 payable as construction is completed over an estimated six month period.

(b) Contingencies

The Company's operations are subject to a variety of local and state regulation.

4 unchanged sentences

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 December 31, 2022  and 

2021 , there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of the Company’s 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.

At December 31, 2023 and 2022 , there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of the Company’s 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.

(d) Operating Licenses

Although the possession, cultivation, and distribution of marijuana for medical and adult use is permitted in Nevada, California, Florida and Illinois, marijuana is a Schedule-I controlled substance and its use remains a violation of federal law.

Since federal law criminalizing the use of marijuana pre-empts state laws that legalize its use, strict enforcement of federal law regarding marijuana would likely result in the Company’s inability to proceed with our business plans.

In addition, the Company’s assets, including real property, cash, equipment, and other goods, could be subject to asset forfeiture because marijuana is still federally illegal.

13 HOLDINGS INC.

Notes to the Consolidated Financial Statements

(in United States Dollars)

Credit risk is the risk that a third party might fail to discharge its obligations under the terms of a financial instrument.

2 unchanged sentences

The Company limits credit risk by entering into business arrangements with high credit-quality counterparties.

The Company further limits credit risk to a maximum of $100,000 to any individual counterparty at a given time.

The Company evaluates the collectability of its accounts receivable and maintains an allowance for credit losses at an amount sufficient to absorb losses inherent in the existing accounts receivable portfolio as of the reporting dates based on the estimate of expected net credit losses.

Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. 

The Company currently does not carry variable interest-bearing debt. 

It is management’s opinion that the Company is not exposed to significant interest rate risk.

13 HOLDINGS INC.

Notes to the Consolidated Financial Statements

(in United States Dollars)

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

The Company currently does not carry variable interest-bearing debt.

It is management’s opinion that the Company is not exposed to significant interest rate risk.

Price risk is the risk that the trading price of the Company's shares will fluctuate and result in an increase or decrease in the fair value of the warrant liability.

1 unchanged sentence

Liquidity risk

The Company’s approach to managing risk is to ensure that it will have sufficient liquidity to meet liabilities when due. 

As of December 31, 2022, the Company’s financial liabilities consist of accounts payable, accrued liabilities, obligations under operating leases and taxes. 

The Company manages liquidity risk by reviewing its capital requirements on an ongoing basis. 

Historically, the Company’s main source of funding has been the public issuance of common shares. 

The Company’s access to financing is always uncertain. 

The Company’s approach to managing risk is to ensure that it will have sufficient liquidity to meet liabilities when due.

As of December 31, 2023 , the Company’s financial liabilities consist of accounts payable, accrued liabilities, obligations under operating leases and taxes.

The Company manages liquidity risk by reviewing its capital requirements on an ongoing basis.

Historically, the Company’s main source of funding has been the public issuance of common stock.

The Company’s access to financing is always uncertain.

There can be no assurance of continued access to significant equity financing.

Concentration risk

The Company operates primarily in Southern Nevada and Southern California.

The Company operates primarily in Southern Nevada, Southern California and Illinois.

Should economic conditions deteriorate within that region, its results of operations and financial position would be negatively impacted.

6 unchanged sentences

Even if the owner of the property was never charged with a crime, the property in question could still be seized and subject to an administrative proceeding by which with minimal due process, it could be subject to forfeiture.

13 HOLDINGS INC.

Notes to the Consolidated Financial Statements

(in United States Dollars)

Currency rate risk

As at December 31, 2022 , a portion of the Company’s financial assets and liabilities held in Canadian dollars consist of cash of $ 1,172,859  ( 2021 - $ 165,943 ).

The Company’s objective in managing its foreign currency risk is to minimize its net exposure to foreign currency cash flows by transacting, to the greatest extent possible, with third parties in the functional currency.

As at December 31, 2023 , a portion of the Company’s financial assets and liabilities held in Canadian dollars consist of cash of $ 65,202 ( 2022 - $ 1,172,859 ).

The Company does not currently use foreign exchange contracts to hedge its exposure of its foreign currency cash flows as management has determined that this risk is not significant at this point in time.

The Company’s exposure to a 10% change in the foreign exchange conversion rate at December 31, 2022 equals $ 117,286 .

The Company’s exposure to a 10% change in the foreign exchange conversion rate at December 31, 2023 equals $ 6,520 .

Government Assistance Program

On March 18, 2020, the Families First Coronavirus Act was enacted (“ FFCRA ”).

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (“ CARES ”) was enacted.

Together, these acts created refundable payroll tax credits for paid sick leave, paid family leave and an employee retention credit.

The CARES Act was subsequently modified by the Taxpayer Certainty and Disaster Tax Relief Act of 2020, enacted December 27, 2020, which amended and extended the employee retention credit under the CARES Act for the first and second quarters of 2021.

The American Rescue Act of 2021 further modified and extended the CARES Act for the third and fourth quarters of 2021.

These acts provide for a refundable credit against certain employment taxes, including FICA, Medicare and deposits of employee payroll withholding taxes.

Income tax credits are not provided for under these acts.

The ERC credit, as modified by the foregoing, increased the available credit from 50 % of qualified wages of up $ 10,000 per quarter paid to an employee, or $ 5,000 per qualified employee per quarter, to 70 % of qualified wages of up to $ 10,000 per quarter, or $ 7,000 per qualified employee per quarter.

The Company qualifies for the ERC credit under the CARES Act, as modified.

On June 15, 2023, the Company’s wholly-owned subsidiary, MM Development Company, Inc., received and recorded payment from the Internal Revenue Service in the amount of $ 1,955,711 ( 2022 - $nil ) related to the ERC credit for the first quarter of 2021.

This amount is included in Other Income, Net on the Company’s Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2023.

The Company accounted for the ERC credit pursuant to the guidance established in ASC 450 - 30, Gain Contingencies.

Provision for stolen funds

As reported in a press release issued by the Company on November 17, 2023, on June 20, 2021, the Company engaged El Capitan Advisors, Inc.

(“ El Capitan ”), an investment advisor registered with the Securities and Exchange Commission (the “ SEC ”), for cash management services.

One of the Company’s accounts managed by El Capitan was held at Bridge Bank, a division of Western Alliance Bank (collectively “ WAB ”).

Pursuant to a dispute unrelated to the Company, Casa Verde Capital, L.P.

and Casa Verde Capital EF, L.P.

(collectively “ Casa Verde ”) obtained a $35.0 million default judgment against El Capitan, which is a portfolio company of Casa Verde.

Casa Verde then levied that judgment causing approximately $ 5.4 million of the Company’s funds held at WAB (the “ WAB Funds ”) and managed by El Capitan to be directed to the Orange County, California Sheriff’s Office (the “ Sheriff ’ s Office ”) on September 21, 2023.

The $5.4 million has been recorded as restricted cash as at December 31, 2023.

On or around October 24, 2023, the Company became aware of the levy against the WAB Funds and thereafter filed a third -party claim (the “ WAB Claim ”) of exemption asserting rightful ownership over the WAB Funds.

The Company has secured a partial settlement with Casa Verde for the release of $ 3.4 million of the WAB Funds, which the Company received on January 31, 2024.

The remaining approximately $ 2 million of the WAB Funds (the “ Remaining Levied Funds ”) is still in the possession of the Sheriff’s Office while litigation is ongoing.

The Company has not relinquished any right to the Remaining Levied Funds and continues to pursue their return.

A hearing on the ultimate disposition of the Remaining Levied Funds is scheduled for April 29, 2024.

After filing the WAB Claim in November 2023, the Company also took immediate action to withdraw the remaining approximately $ 16.5 million that the Company held in two additional Company accounts managed by El Capitan (the “ Additional Funds ”).

El Capitan has refused to honor the Company’s further withdrawal requests with respect to the Additional Funds and at this time it is unclear whether the Additional Funds will be returned.

Based on discussions with El Capitan to secure the withdrawal of the Additional Funds and purported bank statements provided by El Capitan, the Company has reason to believe that the Additional Funds were misappropriated by El Capitan.

13 HOLDINGS INC.

Notes to the Consolidated Financial Statements

(in United States Dollars)

On January 22, 2024, the Company initiated a lawsuit in Santa Monica, California against El Capitan, El Capitan’s founder and Chief Executive Officer—Andrew Nash, Casa Verde, Casa Verde’s Managing Member—Karan Wadhera, and Jamie Nash, the spouse of Andrew Nash (collectively, the “ Defendants ”) seeking approximately $16.5 million in compensatory damages and other relief.

The Company alleges that each Defendant is liable for their involvement in a scheme to defraud the Company of funds managed by El Capitan in its capacity as the Company’s fiduciary.

The loss provision for the year ended December 31, 2023 was $ 2,000,000 ( 2022 - $ 10,300,000 ).

Subsequent events

On February 3, 2023, the Company purchased land and a building in Waukegan, IL for $ 2,183,000 for its planned Illinois dispensary.

On February 7, 2023, the Company purchased the remaining 51 % ownership interest in Planet 13 Illinois from a third party for $ 866,250 cash and the issuance of 1,063,377 common shares of the Company pursuant to an option purchase agreement that was entered into between Frank Cowan, and individual, and the Company on August 4, 2022.

On March 6, 2024, the Company issued 166,952 shares of Common Stock on the vesting of RSU's to former employees.

The Company did not receive any cash proceeds from the issuance.

On March 7, 2024, the Company issued and sold 18,750,000 units of the Company (the “ Units ”) at a public offering price of $ 0.60 per Unit.

Each Unit consisted of one share (each, a “ Share ”) of common stock, no par value, of the Company (“ Common Stock ”) and one warrant.

Each warrant (a “ Warrant ”) entitles the holder to purchase one share of Common Stock for a period of 5 years following the closing date of the Offering at an exercise price of US$0.77, subject to adjustments in certain events.

Total gross proceeds to the Company were approximately US$11.3 million.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures