Planet 13 Holdings Inc. 10-K

Item 9A. Controls and Procedures. 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. 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. 70 Table of Contents 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 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). Our internal control over financial reporting is a process designed under the supervision of our co-CEOs and CFO to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. GAAP. Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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, 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. 71 Table of Contents 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 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. Item 9B. 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. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. Not applicable. 72 Table of Contents PART III Item 10. Directors, Executive Officers and Corporate Governance. 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 five directors. The following table sets forth our directors and executive officers and their respective positions: Name Age Position Robert Groesbeck 63 Director, Co-Chairman and Co-CEO Larry Scheffler 73 Director, Co-Chairman and Co-CEO Lee Fraser 46 Director, Chief Administrative Officer Adrienne O’Neal 64 Director Kevin Martin 50 Director Dennis Logan 56 Chief Financial Officer Chris Wren 41 Vice President of Operations Todd Hybels 44 Vice President of Midwestern Operations Tatev Oganyan 34 General Counsel Sara Adams 30 Secretary Director and Executive Officer Biographies Robert Groesbeck has served as Co-CEO and a director of the Company since June 2018. Prior to that, Mr. Groesbeck served as Co-President of MMDC, a subsidiary of the Company, from 2014 to June 2018. Mr. 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. Mr. Groesbeck earned his B.S. in Criminal Justice from the University of Nevada, a M.B.A. from National University and a J.D. from Western Michigan University. 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. Prior to that, Mr. 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. Mr. Scheffler also served as a councilman for the city of Henderson, Nevada from 1990 to 1995. Mr. Scheffler has also served as a commissioner on six major commissions in Southern Nevada government and has an extensive background in real estate. He has founded and is managing director of entities controlling over 1,000 acres in three states that are under some form of development. 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. Lee Fraser has served as Chief Administrative Officer of the Company since February 2024 and as a director of the Company since May 2023. Mr. 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. Mr. Fraser’s expertise also includes corporate finance and financial planning at Gemstar-TV Guide and Waste Management. Mr. 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. Fraser’s experience in business development and finance at publicly traded companies qualify him to serve on the Board. 73 Table of Contents 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. Mr. 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. Ms. 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. Ms. 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. She holds a B.S. in Marketing and an M.S. in Marriage and Family Therapy from the University of Nevada, Las Vegas. 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. He is currently the part-time Chief Financial Officer of BTU Metals Corp. (TSX-V: BTU), a junior exploration company, since August 2017, and is the part-time Chief Financial Officer or Sterling Metals Corp. (TSX-V: SAG), a mineral exploration company, since September 2017. Previously, Mr. Logan was the Chief Financial Officer, Director and Corporate Secretary of Almonty Industries Inc., a tungsten mining and processing company (TSX-V: AII), from September 2011 until March 2017. Mr. Logan was also the Chair of the Audit Committee of Magna Terra Minerals Inc. (TSX-V: MTT), a precious metals focused exploration company, from September 2017 until May 2021. From June 2015 until April 2018, he served as the Chairman of the Audit Committee of Eurocontrol Technics Group Ltd. (TSX-V: EUO), a detection and marking systems developer. Mr. Logan started his career in finance and accounting at Ernst & Young LLP in 1992. 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. Mr. 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. Mr. 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. Todd Hybels has served as Vice President of Midwestern Operations of the Company since March 2022. Prior to that, Mr. Hybels was the Chief Operating Officer of NGW (which was acquired by the Company on March 2, 2022) from January 2021 to March 2022. Mr. 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. Mr. Hybels’ insight and initiative were integral in scaling NGW operations to a fully operational premium cultivation facility. Prior to his time at NGW, Mr. Hybels provided executive leadership for multi-million dollar construction projects both domestically and internationally, provided strategic leadership to both for-profit and non-profit organizations, and envisioned and built the thriving teams and effective systems necessary to achieve profitable outcomes in each fast-paced, growth-oriented opportunity. Mr. 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. Ms. 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. 74 Table of Contents Sara Adams has been part of the legal department at Planet 13 since September 2021. Ms. Adams serves as the Company’s Secretary and is generally responsible for corporate governance and regulatory compliance matters. Ms. 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. Ms. Adams holds a Bachelor of Science in Business Administration, Accounting from the University of Nevada - Las Vegas. Board Committees We currently have an audit committee, compensation committee and a corporate governance and nominating committee. 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 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: Kevin Martin (Chair), Lee Fraser, and Adrienne O’Neal. Mr. 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 also has responsibility for fixing compensation levels for our executive officers. In addition, the Compensation Committee is charged with reviewing our incentive plans and proposing changes thereto, approving any awards of options under our incentive plans and recommending any other employee benefit plans, incentive awards and perquisites with respect to our executive officers. The Compensation Committee is also responsible for reviewing, approving and reporting to the Board annually (or more frequently as required) on our succession plans for our executive officers. The current members of the Compensation Committee include the following directors: 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. 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: Kevin Martin and Adrienne O’Neal (Chair). 75 Table of Contents 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. 76 Table of Contents Item 11. Executive Compensation. In accordance with reduced disclosure rules applicable to emerging growth companies as set forth in Item 402 of Regulation S-K, this section explains how our compensation program is structured for the Co-CEOs and NEOs, as defined below. Compensation Committee The Board as a whole determines the level of compensation in respect of our senior executives. The Compensation Committee is appointed by and reports to the Board. 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 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 ● 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. For the year ended December 31, 2023, we had four NEOs: Robert Groesbeck, Co-CEO; Larry Scheffler, Co-CEO; Dennis Logan, Chief Financial Officer; 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 In determining such compensation, the Compensation Committee will consider our performance and relative shareholder return and the compensation of CEOs and other senior executive officers at comparable companies. Additionally, the Compensation Committee may consider input from the Co-CEOs on senior executive compensation, but the Co-CEOs may not provide input with respect to their own compensation. A combination of fixed and variable compensation is used to motivate executives to achieve overall company goals. The basic components of the executive compensation program are: 1. 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. 77 Table of Contents 2. Short-Term Incentive Compensation . The short-term incentive compensation is intended to reward an executive officer for his or her yearly individual contribution and performance of personal objectives in the context of our overall annual performance. The short-term incentive compensation is designed to motivate executives annually to achieve their predetermined objectives. In determining compensation and, in particular, short-term incentive compensation, the Compensation Committee and the Board consider factors over which the executive officer can exercise control, such as their role in identifying and completing acquisitions and integrating such acquisitions into our business, meeting any budget targets established by controlling costs, taking successful advantage of business opportunities and enhancing our competitive and business prospects. 3. 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 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. The Compensation Committee and the Board also consider previous grants of stock options and the overall number of stock options that are outstanding relative to the number of outstanding securities in determining whether to make any new grants and the size and terms of any such grants. With respect to executive officers, the Compensation Committee and the Board also consider the level of effort, time, responsibility, ability, experience and level of commitment of the executive officer in determining the level of long-term equity incentive awards. With respect to directors, the Compensation Committee and the Board also consider committee assignments and committee chair responsibilities, as well as the overall time requirements of the Board members in determining the level of long-term equity incentive awards. 4. 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 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. In determining new grants of Restricted Share Units, the Compensation Committee and the Board consider factors similar to those contemplated when making new grants of stock options. It is expected that stock options and Restricted Share Units held by management will be taken into consideration by the Compensation Committee at the time of any subsequent grants under the compensation plan in determining the amount or terms of any such subsequent award grants. The Compensation Committee will further consider the base salary, bonuses and competitive market factors. The size of a grant of an award is anticipated to be proportionate to the deemed ability of the individual to make an impact on our success, as determined by the Board. We do not have a defined benefits plan, defined contribution plan, deferred compensation or pension or retirement plan applicable to our NEOs and no plans are currently in place in respect of change of control or termination. 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, 2023, and December 31, 2022. All amounts are expressed in US Dollars: 78 Table of Contents Salary Bonus Stock awards Option Non-equity incentive plan compensation Non-qualified deferred compensation earnings All other compensation Total Name and Principal Position(1) Year ($) ($) ($) awards ($) ($) ($) ($)(2) ($) Larry Scheffler 2023 500,000 - - - 0 - 57,407 (4) 557,407 Co-Chief Executive Officer 2022 500,000 - - - 254,000 (3) - 57,400 811,400 Robert Groesbeck 2023 500,000 - - - 0 - 68,429 (5) 568,429 Co-Chief Executive Officer 2022 500,000 - - - 254,000 (3) - 69,424 823,424 Dennis Logan 2023 300,000 - - - 0 - 20,914 (6) 320,914 Chief Financial Officer 2022 300,000 - - - 113,580 (3) - 20,857 434,437 Chris Wren 2023 415,000 - - - 0 - 58,414 (7) 473,414 Vice President of Operations 2022 415,000 - - - 102,339 (3) - 58,406 575,745 Notes: (1) 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. Mr. Fraser’s annual salary beginning at his February 7, 2024 appointment is $300,000. (2) 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 2022 USD$1.00=CAD$1.3013 and for 2023 USD$1.00=CAD$1.3495. (3) 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. (4) 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). (5) 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). (6) 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). (7) The amounts consist of car allowance ($15,170 for each of 2023 and 2022) and health benefits ($43,244 for 2023 and $43,236 for 2022). Narrative Discussion For a summary of the significant terms of each NEO’s employment agreement or arrangement, please see below under the heading “ Employment Agreements and Termination and Change of Control Benefits ”. 79 Table of Contents Outstanding Equity Awards at Fiscal Year-End Table The following table sets forth outstanding equity awards for the NEOs at December 31, 2023. All amounts are expressed in US Dollars: Option Awards Stock Awards Number of securities underlying unexercised options (#) Number of securities underlying unexercised option (#) Equity incentive plan awards: Number of securities underlying unexercised unearned Option exercise price Option expiration Number of shares or units of stock that have not vested Market value of shares of units of stock that have not Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested (#) Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested ($) Name exercisable unexercisable options (#) ($) date (#) vested ($) (1) (2) Robert Groesbeck - - - - - - - - - Larry Scheffler - - - - - - - - - Dennis Logan - - - - - - - - - Chris Wren - - - - - - - - - Notes: (1) For each named executive officer 100% of the listed incentive awards vested on December 1, 2023. (2) 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 Summary of Employment Agreements Larry Scheffler In June 2018, we entered into an employment agreement with Larry Scheffler, our Co-CEO, for an initial term of five years. The agreement provides for payment of an annual base salary to Mr. 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). 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. If Mr. 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. If Mr. 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. Scheffler 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. Scheffler 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 fully vest on the date of such termination of employment. 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. Scheffler’s employment. In March 2021, we entered into an amendment to the employment agreement with Mr. Scheffler extending the term through December 31, 2025. 80 Table of Contents Robert Groesbeck In June 2018, we entered into an employment agreement with Robert Groesbeck, our Co-CEO, for an initial term of five years. The agreement provides for payment of an annual base salary to Mr. 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). 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. If Mr. 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. If Mr. 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. Groesbeck 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. Groesbeck 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 fully vest on the date of such termination of employment. 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. Groesbeck’s employment. In March 2021, we entered into an amendment to the employment agreement with Mr. Groesbeck extending the term through December 31, 2025. Dennis Logan In June 2018, we entered into an employment agreement with Dennis Logan, our Chief Financial Officer, which agreement was amended in January 2019, for an initial term of five years. The amended agreement provides for payment of an annual base salary to Mr. 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). 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. If Mr. 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. If Mr. 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. Logan 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. Logan 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 fully vest on the date of such termination of employment. 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. Logan’s employment. Lee Fraser 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). Mr. 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. If Mr. 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. If Mr. 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. 81 Table of Contents Chris Wren 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). 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. If Mr. 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. If Mr. 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. Wren 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. Wren 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 fully vest on the date of such termination of employment. 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. Wren’s employment. In March 2021, we entered into an amendment to the employment agreement with Mr. Wren extending the term through December 31, 2025. Director Compensation Table We do not provide separate or additional compensation to directors who are also executives in connection with their services as a director. We adopted a director compensation plan effective January 1, 2021 which provides for the payment of annual base fees to non-employee directors of $100,000 each that is payable quarterly in arears. Other than as set out in the table below and prior to January 1, 2021, no non-employee director has received compensation pursuant to: (a) any standard arrangement for the compensation of directors for their services in their capacity as directors, including any additional amounts payable for committee participation or special assignments; (b) any other arrangement, in addition to, or in lieu of, any standard arrangement, for the compensation of directors in their capacity as directors; or (c) any arrangement for the compensation of directors for services as consultants or experts. The following table sets forth all compensation paid to or earned, or recognized as an expense in accordance ASC Topic 718, by each non-employee director during our fiscal year ended December 31, 2023. All amounts are expressed in US Dollars: Fees earned or paid in Stock awards Option awards Non-equity incentive plan compensation Non qualified deferred compensation earnings All other compensation Total Name cash($) ($) ($) ($) ($) ($) ($) Michael Harman 30,380 38,930 - - - - 69,310 Adrienne O’Neal 100,000 38,930 - - - - 138,930 Lee Fraser 60,773 - - - - - 60,773 Compensation Committee Interlocks and Insider Participation 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. 82 Table of Contents Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The following table sets forth the beneficial ownership of our voting securities as of March 13, 2024, for (i) each member of the Board, (ii) each named executive officer (as defined herein), (iii) each person known to us to be the beneficial owner of more than 5% of our voting securities and (iv) the members of the Board and our executive officers as a group. Beneficial ownership is determined according to the rules of the SEC. Generally, a person has beneficial ownership of a security if the person possesses sole or shared voting or dispositive power of that security, including any securities that a person has the right to acquire beneficial ownership within 60 days. 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 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 Stock Number Right to Acquire Percent of Total Name of Beneficial Owner Beneficially Owned Within 60 Days(5) Common Stock Larry Scheffler 39,907,134 (1) 281,255 16.37 % Robert Groesbeck 38,255,864 (2) 281,255 16.10 % Dennis Logan 336,549 (3) 104,346 * Chris Wren 4,126,550 (4) 156,519 1.69 % Lee Fraser - - - Adrienne O’Neal 250,038 69,494 * All directors and executive officers as a group (10 persons) 82,876,135 892,869 34.40 % * Less than one percent ( 1) Mr. 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 1,328,164 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. (2) Mr. 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 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. (3) 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 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. (4) 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. Wren. Subject to the clarification in Footnote 5 to this table below, Mr. 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. (5) The number of shares beneficially owned includes these amounts of unissued shares relating to RSU awards that vested on December 31, 2023. 83 Table of Contents Equity Compensation Plans 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 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. 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, 2023: Number of Number of Weighted- securities securities to be average exercise remaining issued upon price of available for exercise of outstanding future issuance outstanding options and under equity options and rights (b) compensation Plan Category rights (a) (CAD) plans 2018 Stock Option Plan 603,125 $ 2.58 - 2018 Amended and Restated Share Unit Plan 1,122,429 - - 2023 Equity Incentive Plan - - 20,073,139 Total 1,725,554 - 20,073,139 84 Table of Contents Item 13. Certain Relationships and Related Transactions, and Director Independence. Transactions with Related Persons 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 ● 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, 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, 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. Related Person Transaction Policy We have adopted a written related person transactions policy that provides that our executive officers, directors, nominees for election as a director, beneficial owners of more than 5% of any class of our voting securities, and any members of the immediate family of the foregoing persons, are not permitted to enter into a material related person transaction with us without the review and approval of our Audit Committee. 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. 85 Table of Contents Director Independence 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. 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 Kevin Martin are each independent directors. Ms. 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. However, our shares are not currently quoted or listed on any U.S. national exchange or interdealer quotation system that has a requirement that a majority of our Board be independent. Code of Ethics 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.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. 86 Table of Contents Item 14. 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, 2023, and December 31, 2022: For the fiscal years ended December 31, December 31, 2023 2022 Audit Fees (1) $ 750,000 $ 750,000 Audit Related Fees (2) 111,594 105,000 Tax Fees (3) 22,270 25,000 Total Fees $ 883,864 $ 880,000 (1) Audit Fees consist of audit of annual financial statements and review of financial statements. (2) Audit Related Fees consist of the review and consents associated with prospectus offerings. (3) Tax Fees consist of preparation fees associated with preparing Corporate federal income tax returns. 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. 87 Table of Contents PART IV Item 15. Exhibits, Financial Statement Schedules. The financial statements required to be included in this Annual Report on Form 10-K appear immediately following the signature page to this Annual Report on Form 10-K beginning on page F-1. EXHIBIT INDEX Incorporated by Reference Exhibit No. Description Form Exhibit Filing Date Filed / Furnished Herewith 2.1*§ Acquisition Agreement, dated December 20, 2019, among BLC Management Company, LLC, Planet 13 Holdings Inc., Kyle Desmet, Newtonian Principles, Inc., Warner Management Group, LLC and Sarah Sibia, as amended by Amendment No. 1 to Acquisition Agreement, dated April 16, 2020, and Amendment No. 2 to Acquisition Agreement, dated May 20, 2020 10 2.1 12/13/2021 2.2§ Asset Purchase Agreement, dated July 17, 2020, among Planet 13 Holdings Inc., MM Development Company, Inc., W the Brand, LLC, West Coast Development Nevada, LLC and R. Scott Coffman 10 2.2 12/13/2021 2.3* Share Exchange Agreement, dated April 26, 2018, among MM Development Company, Inc., Carpincho Capital Corp., PRMN Investments Ltd., Thirteen, LLC and 4 Degrees Higher, LLC 10 2.3 12/13/2021 2.4 Master Agreement, dated April 26, 2018, among Carpincho Capital Corp., 10713791 Canada Inc. and 10653918 Canada Inc. 10 2.4 12/13/2021 2.5* License Purchase Agreement, dated August 31, 2021, among Buyer, Planet 13 Holdings Inc., Seller and Harvest Health & Recreation Inc. 10 2.5 12/13/2021 2.6* Arrangement Agreement, dated December 20, 2021, between Planet 13 Holdings Inc. and Next Green Wave Holdings Inc. 10/A 2.6 01/26/2022 2.7 Exercise Notice, dated February 7, 2023, from Planet 13 Holdings Inc. to Frank Cowan, IV 10-K 2.7 03/23/2023 2.8 Plan of Arrangement. 8-K 2.1 09/18/2023 3.1 Articles of Domestication. 8-K 3.1 09/18/2023 3.2 Articles of Incorporation of Planet 13 Holdings Inc., a Nevada corporation. 8-K 3.2 09/18/2023 3.3 Bylaws of Planet 13 Holdings Inc., a Nevada corporation. 8-K 3.3 09/18/2023 4.1 Warrant Indenture, dated July 3, 2020, between Planet 13 Holdings Inc. and Odyssey Trust Company 10 4.1 12/13/2021 4.2 Warrant Indenture, dated September 10, 2020, between Planet 13 Holdings Inc. and Odyssey Trust Company 10 4.2 12/13/2021 4.3 Warrant Indenture, dated November 5, 2020, between Planet 13 Holdings Inc. and Odyssey Trust Company 10 4.3 12/13/2021 4.4 Warrant Indenture, dated February 2, 2021, between Planet 13 Holdings Inc. and Odyssey Trust Company 10 4.4 12/13/2021 4.5 Warrant Indenture, dated December 4, 2018, between Planet 13 Holdings Inc. and Odyssey Trust Company 10 4.5 12/13/2021 4.6 Warrant Indenture, dated April 26, 2018, among 10653918 Canada Inc., Odyssey Trust Company and Carpincho Capital Corp 10 4.6 12/13/2021 4.7 Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 10-K 4.7 03/28/2022 4.8 Specimen Common Stock Certificate of Planet 13 Holdings Inc., a Nevada corporation. 8-K 4.1 09/18/2023 4.9 Warrant Agency Agreement, dated March 7, 2024, by and between Planet 13 Holdings Inc. and Odyssey Transfer US Inc. 8-K 4.1 03/07/2024 4.10 Form of Warrant to purchase common stock. 8-K 4.2 03/07/2024 10.1* Industrial Real Estate Lease, dated April 23, 2018, between MM Development Company, Inc. and Lessor 10 10.1 12/13/2021 88 Table of Contents 10.2§ Lease Agreement, dated August 30, 2014, between Fargo District Holdings, LLC and MM Development Company, Inc., as amended by Amendment to Lease, dated January 1, 2018, and Second Amendment to Lease Agreement, dated September 14, 2018 10 10.2 12/13/2021 10.3 Lease Agreement, dated July 17, 2020, between RX Land, LLC and MM Development Company, Inc., as amended by Amendment to Lease, dated November 27, 2020 10 10.3 12/13/2021 10.4* Standard Industrial/Commercial Multi-Tenant Lease - Net, dated May 1, 2018, between Lessor and BLC Management Company, LLC, as amended by First Amendment to Standard Industrial/Commercial Multi-Tenant Lease - Net, dated November 8, 2019, and Second Amendment to Standard Industrial/Commercial Multi-Tenant Lease - Net, dated April 17, 2020, and by Third Amendment to Standard Industrial/Commercial Multi-Tenant Lease - Net, dated September 8, 2020 10 10.4 12/13/2021 10.5 Agreement Regarding Release of Leasehold Estate, dated August 31, 2020, between LaBarre Chastang, Inc. and BLC Management Company, LLC 10 10.5 12/13/2021 10.6+ Planet 13 Holdings Inc. 2018 Stock Option Plan 10 10.6 12/13/2021 10.7+ Planet 13 Holdings Inc. 2018 Share Unit Plan, as amended on July 11, 2018 and May 20, 2020 10 10.7 12/13/2021 10.8+ Form of Stock Option Award Agreement 10 10.8 12/13/2021 10.9+ Form of Share Unit Plan Award Agreement 10 10.9 12/13/2021 10.10+ Employment Agreement, dated June 1, 2018, between Christopher Wren and MM Development Company, Inc., as amended by Amendment to Employment Agreement, dated March 10, 2021 10 10.10 12/13/2021 10.11+ Employment Agreement, dated June 1, 2018, between Larry Scheffler and MM Development Company, Inc., as amended by Amendment to Employment Agreement, dated March 10, 2021 10 10.11 12/13/2021 10.12+ Employment Agreement, dated June 1, 2018, between Robert Groesbeck and MM Development Company, Inc., as amended by Amendment to Employment Agreement, dated March 10, 2021 10 10.12 12/13/2021 10.13+ Employment Agreement, dated June 1, 2018, between Dennis Logan and Planet 13 Holdings Inc. 10 10.13 12/13/2021 10.14 Option Purchase Agreement, dated August 4, 2022, between Planet 13 Holdings Inc. and Frank Cowan, IV 8-K 10.1 08/05/2023 10.15 Planet 13 Holdings Inc. 2023 Equity Incentive Plan. 8-K 10.1 09/18/2023 10.16 Form of Incentive Stock Option Agreement under the Planet 13 Holdings Inc. 2023 Equity Incentive Plan . 8-K 10.2 09/18/2023 10.17 Form of Non-Qualified Stock Option Agreement under the Planet 13 Holdings Inc. 2023 Equity Incentive Plan . 8-K 10.3 09/18/2023 10.18 Form of Restricted Stock Unit Agreement under the Planet 13 Holdings Inc. 2023 Equity Incentive Plan. 8-K 10.4 09/18/2023 10.19§ 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. 10-Q 10.1 11/08/2023 10.20§ Stock Purchase Agreement, dated January 22, 2024, by and between Planet 13 Holdings Inc. and SGW FL Enterprises, LLC. 8-K 10.1 01/22/2024 10.21+ Employment Agreement, dated February 7, 2024, between Lee Fraser and BLC Management Company LLC. ✓ 21 List of Subsidiaries of Planet 13 Holdings Inc. ✓ 23.1 Consent of Independent Registered Public Accounting Firm ✓ 31.1 Certification of Principal Executive Officer (Robert Groesbeck) Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 ✓ 89 Table of Contents 31.2 Certification of Principal Executive Officer (Larry Scheffler) Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 ✓ 31.3 Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 ✓ 32.1 Certification of Principal Executive Officers and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ✓ 99.1 Description of Capital Stock. 8-K 99.1 09/18/2023 101.INS Inline XBRL Instance Document 101.SCH Inline XBRL Taxonomy Extension Schema 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase 101.LAB Inline XBRL Taxonomy Extension Label Linkbase 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase 104 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. § This filing omits exhibits and/or schedules pursuant to Item 601(a)(5) of Regulation S-K. + Indicates a management contract or compensatory plan, contract or arrangement in which directors or executive officers participate. Item 16. Form 10-K Summary None. 90 Table of Contents SIGNATURES 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. Date: March 13, 2024 By: /s/ Robert Groesbeck Robert Groesbeck Co-Chief Executive Officer By: /s/ Larry Scheffler Larry Scheffler Co-Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated. Name Title Date /s/ Robert Groesbeck Co-Chief Executive Officer and Director March 13, 2024 Robert Groesbeck (Principal Executive Officer) /s/ Larry Scheffler Co-Chief Executive Officer and Director March 13, 2024 Larry Scheffler (Principal Executive Officer) /s/ Dennis Logan Chief Financial Officer March 13, 2024 Dennis Logan (Principal Financial and Accounting Officer) /s/ Lee Fraser Chief Administrative Officer and Director March 13, 2024 Lee Fraser /s/ Kevin Martin Director March 13, 2024 Kevin Martin /s/ Adrienne O’Neal Director March 13, 2024 Adrienne O’Neal 91 Table of Contents PLANET 13 HOLDINGS INC. Index to Financial Statements Page(s) INDEPENDENT AUDITOR ’ S REPORT PCAOB # 731 F-2 FINANCIAL STATEMENTS: Consolidated Balance Sheets F-3 Consolidated Statements of Operations and Comprehensive Loss F-4 Consolidated Statements of Changes in Shareholders’ Equity F-5 Consolidated Statements of Cash Flows F-6 Notes to the Consolidated Financial Statements F-7 F-1 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Directors of Planet 13 Holdings Inc. Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Planet 13 Holdings Inc. (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 the Company’s 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. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. 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 Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. 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 Vancouver, Canada Chartered Professional Accountants March 13, 2024 F-2 Table of Contents PLANET 13 HOLDINGS INC. Consolidated Balance Sheets (In United States Dollars) December 31, December 31, 2023 2022 ASSETS Current Assets: Cash $ 11,831,008 $ 38,789,604 Restricted Cash 5,450,584 - Accounts Receivable 1,195,927 1,326,795 Inventory 15,760,648 13,004,839 Asset held for sale 9,000,000 - Prepaid Expenses and Other Current Assets 4,072,820 3,810,394 Total Current Assets 47,310,987 56,931,632 Property and Equipment 67,551,697 71,466,051 Intangible Assets and Goodwill 15,253,797 69,288,007 Right of Use Assets - Operating 20,054,369 21,168,171 Long-term Deposits and Other Assets 869,853 862,545 Deferred Tax Asset 706,038 346,257 TOTAL ASSETS $ 151,746,741 $ 220,062,663 LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Current: Accounts Payable $ 2,850,922 $ 3,112,820 Accrued Expenses 6,097,641 8,072,224 Income Taxes Payable 4,782,538 2,826,501 Notes Payable - Current Portion 884,000 884,000 Operating Lease Liabilities 674,594 479,161 Total Current Liabilities 15,289,695 15,374,706 Long-Term Liabilities: Operating Lease Liabilities 25,271,706 25,833,071 Warrant Liability - 18,127 Other Long-term Liabilities 33,000 28,000 Deferred Tax Liability 3,511,559 1,487,204 Total Liabilities 44,105,960 42,741,108 Shareholders' Equity 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 315,951,343 312,023,359 Deficit ( 208,310,562 ) ( 134,701,804 ) Total Shareholders' Equity 107,640,781 177,321,555 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 151,746,741 $ 220,062,663 The accompanying notes are an integral part of these consolidated financial statements. F-3 Table of Contents PLANET 13 HOLDINGS INC. Consolidated Statements of Operations and Comprehensive Loss (In United States Dollars, except share amounts) December 31, 2023 2022 Revenues, net of discounts $ 98,505,170 $ 104,574,377 Cost of Goods Sold ( 53,682,026 ) ( 56,599,623 ) Gross Profit 44,823,144 47,974,754 Expenses: 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) 3,653 ( 25,528 ) Change in fair value of warrant liability 18,127 7,177,805 Gain on Sale-Leaseback - 509,392 Provision for stolen funds ( 2,000,000 ) ( 10,300,000 ) Other Income, net 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 $ ( 0.33 ) $ ( 0.27 ) Weighted Average Number of Shares of Common Stock Basic and diluted 221,964,287 216,586,621 The accompanying notes are an integral part of these consolidated financial statements. F-4 Table of Contents PLANET 13 HOLDINGS INC. Consolidated Statements of Changes in Shareholders' Equity (In United States Dollars, except share amounts) Number of Common Stock Warrants Additional Paid-in Capital Accumulated Deficit Total Shareholders' Equity 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 - - 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 97,325 - 97,980 - 97,980 Net Loss for the Year - - - ( 59,545,719 ) ( 59,545,719 ) Balance, December 31, 2022 220,470,061 295,838 $ 312,023,359 $ ( 134,701,804 ) $ 177,321,555 Expirations - ( 295,838 ) - - - Share based Compensation - RSUs - - 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. F-5 Table of Contents PLANET 13 HOLDINGS INC. Consolidated Statements of Cash Flows (In United States Dollars) December 31, 2023 December 31, 2022 CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES Net loss $ ( 73,608,758 ) $ ( 59,545,719 ) Adjustments for items not involving cash: Share based compensation 2,520,407 7,459,267 Non-cash lease expense 4,974,644 4,737,162 Depreciation 12,147,052 11,258,697 Amortization of intangibles - 372,222 Change in fair value of warrant liability ( 18,127 ) ( 7,177,805 ) Gain on translation of warrant liability - ( 10,117 ) Deferred tax recovery 2,024,355 ( 1,736,724 ) Proceeds from lease incentive - 1,100,000 Lease incentive amortization ( 109,902 ) ( 239,133 ) Impairment of goodwill - 25,802,688 Impairment of intangible assets 46,846,866 6,947,778 Gain on sale leaseback - ( 509,392 ) Shares issued for SDC settlement 728,700 - 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 exercise of warrants and options - 1,142,238 Taxes paid in lieu of share issuance - RSUs ( 267,529 ) 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 64,878 - Net cash acquired through NGW acquisition - 1,479,134 Purchase of licenses ( 866,250 ) - Proceeds from sale/lease back - 1,049,633 Purchase of domain name - ( 30,000 ) Total Investing ( 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 End of Year $ 17,281,592 $ 38,789,604 Supplemental cash flow information (Note 16) The accompanying notes are an integral part of these consolidated financial statements. F-6 Table of Contents PLANET 13 HOLDINGS INC. Notes to the Consolidated Financial Statements (in United States Dollars) 1. Nature of operations 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 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 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. Under U.S. 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. The federal government currently is prohibited from prosecuting businesses that operate in compliance with applicable state and local medical cannabis laws and regulations; however, this does not protect adult use cannabis. In addition, if the federal government changes this position, it would be financially detrimental to the Company. 2. 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. 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. These consolidated financial statements do not give effect to adjustments to assets or liabilities that would be necessary should the Company be unable to continue as a going concern. Such adjustments could be material. These consolidated financial statements are presented in U.S. 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 . F- 7 Table of Contents PLANET 13 HOLDINGS INC. Notes to the Consolidated Financial Statements (in United States Dollars) i) Basis of consolidation The accompanying consolidated financial statements include the accounts of the Company and all subsidiaries. Subsidiaries are entities in which the Company has a controlling voting interest or is the primary beneficiary of a variable interest entity. Subsidiaries are fully consolidated from the date control is transferred to the Company and are deconsolidated from the date control ceases. All intercompany accounts and transactions have been eliminated upon consolidation. The consolidated financial statements include all the assets, liabilities, revenues, expenses and cash flows of the Company and its subsidiaries after eliminating intercompany balances and transactions. These consolidated financial statements include the accounts of the Company and the following entities which are subsidiaries of the Company: Subsidiaries as at December 31, 2023 Jurisdiction of Incorporation Ownership Interest 2023 Ownership Interest 2022 Nature of Business MM Development Company, Inc. ("MMDC") Nevada, USA 100 % 100 % Nevada license holding company; vertically integrated cannabis operations BLC Management Company LLC Nevada, USA 100 % 100 % Management/holding company LBC CBD LLC ("LBC") Nevada, USA 100 % 100 % CBD retail sales and marketing Newtonian Principles Inc. California, USA 100 % 100 % California license holding company; cannabis retail sales Crossgate Capital U.S. Holdings Corp. Nevada, USA 100 % 100 % Holding company Next Green Wave, LLC California, USA 100 % 100 % California license holding company; cannabis cultivation and processing Planet 13 Illinois, LLC Illinois, USA 100 % 49 % Illinois license holding company; cannabis retail sales BLC NV Food, LLC Nevada, USA 100 % 100 % Holding company for By The Slice LLC By The Slice, LLC Nevada, USA 100 % 100 % Subsidiary of BLC NV Food, LLC; restaurant and retail operations Planet 13 Chicago, LLC Illinois, USA 100 % 100 % Holding company Planet 13 Florida, Inc. Florida, USA 100 % 100 % Florida license holding company Planet 13 Real Prop LLC Florida, USA 100 % N/A Holding company Club One Three, LLC Nevada, USA 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. 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. Non-monetary items are carried at historical rates. Non-monetary items carried at fair value denominated in foreign currencies are remeasured to the functional currency at the date when the fair value was determined. Realized and unrealized foreign exchange gains and losses are recognized through profit or loss. F- 8 Table of Contents PLANET 13 HOLDINGS INC. Notes to the Consolidated Financial Statements (in United States Dollars) iii) 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. 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. 3. Significant accounting policies (a) 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, 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. Cannabis: Inventory cost includes pre-harvest, post-harvest and shipment and fulfillment, as well as related accessories. Pre-harvest costs include labor and direct materials to grow cannabis, which includes water, electricity, nutrients, integrated pest management, growing supplies and allocated overhead. Post-harvest costs include costs associated with drying, trimming, blending, extraction, purification, quality testing and allocated overhead. Shipment and fulfillment costs include the costs of packaging, labeling, courier services and allocated overhead. Inventory is stated at the lower of cost or net realizable value, determined using weighted average cost. 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 operations and comprehensive loss and statements of cash flows. (c) Property and equipment Property and equipment are stated at cost, net of accumulated depreciation and impairment losses, if any. Additions and improvements that materially increase the life of the assets are capitalized while maintenance and repairs are expensed as incurred. Significant expenditures, which extend the useful lives of assets or increase productivity are capitalized. When significant parts of one of our property and equipment have different useful lives, they are accounted for as separate items or components of property and equipment. 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. F- 9 Table of Contents PLANET 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: Land Not depreciated Land improvements (in years) 5 Building (in years) 5 – 40 Equipment (in years) 5 – 7 Leasehold improvements Shorter of estimated useful life or remaining lease term Construction in progress 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. Property and equipment acquired in a business combination is depreciated over the remaining useful life of the asset. (d) Intangible assets Intangible assets include licenses acquired as part of business combinations, asset acquisitions and other business transactions. The Company records intangible assets at cost, net of accumulated amortization and accumulated impairment losses, if any. 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. 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. (e) Goodwill impairment test In accordance with the accounting standards, an entity has the option first to assess qualitative factors to determine whether events and circumstances indicate that it is more likely than not that goodwill or an indefinite-lived intangible asset is impaired. If after such assessment an entity concludes that the asset is not impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then it is required to determine the fair value of the asset using a quantitative impairment test, and if impaired, the associated assets must be written down to fair value. 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. The Company determines fair values for each reporting unit using the income approach, when available and appropriate, the market approach, or a combination of both. The income approach involves forecasting projected financial information (such as revenue growth rates, profit margins, tax rates, working capital and capital expenditures) and selecting a discount rate that reflects the risk inherent in estimated future cash flows. Under the market approach, the fair value is based on observed market data. If multiple valuation methodologies are used, the results are weighted appropriately. F- 10 Table of Contents PLANET 13 HOLDINGS INC. Notes to the Consolidated Financial Statements (in United States Dollars) (f) 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. The reversal of impairment losses is prohibited. (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. The Company estimates the fair value of stock options on the date of grant using the Black-Scholes option pricing model. 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. For stock options granted, the Company uses the fair value of common stock at the date of grant. The Company does not estimate forfeiture rates when calculating compensation expense for stock options or RSUs. The Company records forfeitures as they occur. Fully vested, non-forfeitable equity instruments issued to parties other than employees are measured on the date they are issued where there is no specific performance required by the grantee to retain those equity instruments. 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. (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. 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. Refer to paragraph (n) below as well as Note 11 for a discussion on the change in the warrant liability value. F- 11 Table of Contents PLANET 13 HOLDINGS INC. Notes to the Consolidated Financial Statements (in United States Dollars) (i) 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. 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. In order to recognize revenue, the Company applies the following five ( 5 ) steps: 1 ) Identify the contract with the customer 2 ) Identify the performance obligation(s) 3 ) Determine the transaction price 4 ) Allocate the transaction price to the performance obligation(s) 5 ) Recognize revenue when/as performance obligation(s) are satisfied Revenue is recognized when control of the promised goods or services, through performance obligations by the Company, is transferred to the customer in an amount that reflects the consideration it expects to be entitled to in exchange for the performance obligations. More specifically, wholesale revenues are recognized upon delivery and acceptance by wholesale customers. 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. Sales taxes collected from customers are remitted to the appropriate taxing jurisdictions and are excluded from sales revenue as the Company considers itself a pass-through conduit for collecting and remitting sales taxes. Excise duties that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer are included in revenue. Freight revenues on all product sales, when applicable, are also recognized, on a consistent manner, at a point in time. 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. The following table represents the Company’s disaggregated revenue by sales channel: December 31, December 31, 2023 2022 Retail $ 81,323,306 $ 90,363,557 Wholesale 17,181,864 14,210,820 Net revenues $ 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 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. F- 12 Table of Contents PLANET 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 $ 1,248,595 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, 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. Manufacturing overhead and related expenses include salaries, wages, employee benefits, utilities, maintenance, and property taxes. Cost of sales also includes inventory valuation adjustments. The Company recognizes the cost of sales as the associated revenues are recognized. (k) Leases 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. A finance lease is a lease in which 1 ) ownership of the property transfers to the lessee by the end of the lease term; 2 ) the lease grants the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise; 3 ) the lease is for a major part of the remaining economic life of the underlying asset; 4 ) The present value of the sum of the lease payments and any residual value guaranteed by the lessee that is not already included in the lease payments equals or exceeds substantially all of the fair value; or 5 ) the underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. The Company classifies a lease as an operating lease when it does not meet any one of these criteria. 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. The ROU assets also include any lease payments made and excludes lease incentives. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. For finance leases, lease expenses are the sum of interest on the lease obligations and amortization of the ROU assets, resulting in a front-loaded expense pattern. ROU assets are amortized based on the lesser of the lease term and the useful life of the leased asset according to the property and equipment accounting policy. If ownership of the ROU assets transfers to the Company at the end of the lease term or if the Company is reasonably certain to exercise a purchase option, amortization is calculated using the estimated useful life of the leased asset, according to the property and equipment accounting policy. 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. F- 13 Table of Contents PLANET 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. (l) Income taxes Income taxes are comprised of current and deferred taxes. These taxes are accounted for using the asset and liability method of accounting for income taxes under ASC 740 Income Taxes . Deferred tax is recognized on the difference between the carrying amount of an asset or a liability, as reflected in the consolidated financial statements, and the corresponding tax base used in the computation of income for tax purposes ("temporary difference") and measured using the enacted tax rates and laws as at the balance sheet date that are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. 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. An unrecognized tax benefit may arise in connection with a period that has not yet been reviewed by the relevant tax authority. A change in the recognition or measurement of an unrecognized tax benefit is reflected in the period during which the change occurs. The Company recognizes uncertain income tax positions at the largest amount that is more-likely-than- not to be sustained upon examination by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Recognition or measurement is reflected in the period in which the likelihood changes. Interest and penalties in respect of income taxes are not recognized in the consolidated statement of operations and comprehensive loss as a component of income taxes but as a component of interest expense. 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. (m) Sales and marketing expenses The Company expenses sales and marketing costs when incurred. Sales and marketing expense was $ 5,368,473 for the year ended December 31, 2023 ( 2022 - $ 3,504,309 ). (n) Fair value measurements Fair value is the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. Fair value measurement for invested assets are categorized into levels within a fair value hierarchy based on the nature of the valuation inputs (Levels 1, 2 or 3 ). The three levels are defined based on the observability of significant inputs to the measurement, as follows: ● Level 1: quoted prices (unadjusted) in active markets for identical or liabilities; ● Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and ● Level 3: one or more significant inputs used in a valuation technique are unobservable in determining fair values of the asset or liability F- 14 Table of Contents PLANET 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, 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 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 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. 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. (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, 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 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. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Financial statement areas that require significant judgments are as follows: Estimated useful lives and depreciation of property and equipment, right-of-use assets 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. F- 15 Table of Contents PLANET 13 HOLDINGS INC. Notes to the Consolidated Financial Statements (in United States Dollars) Leases 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. The Company applies judgement in evaluating whether it is reasonably certain to exercise the option to renew or terminate the lease. That is, it considers all relevant factors that create an economic incentive for it to exercise either the renewal or termination. After the commencement date of the lease, the Company reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise or not to exercise the option to renew or to terminate (e.g., construction of significant leasehold improvements or significant customization to the leased asset). The Company is required to discount lease payments using the rate implicit in the lease if that rate is readily available. 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. Asset Impairment Asset impairment tests require the allocation of assets to asset groups, where appropriate, which requires significant judgment and interpretation with respect to the integration between the assets and shared resources. Asset impairment tests require the determination of whether there is an indication of impairment. 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. Deferred tax assets and uncertain tax positions The Company recognizes deferred tax assets and liabilities based on the differences between the consolidated financial statement carrying amounts and the respective tax bases of its assets and liabilities. The Company measures deferred tax assets and liabilities using current enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to reverse. The Company routinely evaluates the likelihood of realizing the benefit of its deferred tax assets and may record a valuation allowance if, based on all available evidence, it determines that some portion of the tax benefit will not be realized. In evaluating the ability to recover deferred tax assets within the jurisdiction from which they arise, the Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies and results of operations. 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. 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. F- 16 Table of Contents PLANET 13 HOLDINGS INC. Notes to the Consolidated Financial Statements (in United States Dollars) Key estimates in these consolidated financial statements include: Share-based compensation 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. Refer to Note 12 for further information. Valuation of inventory Inventory is comprised of raw materials, work-in-progress and finished goods. Cannabis and hemp costs include expenditures directly related to the manufacturing process as well as suitable portions of related production overheads, based on normal operating capacity. At the end of each reporting period, the Company performs an assessment of inventory and records inventory valuation adjustments for excess and obsolete inventories based on the estimated forecast of product demand, production requirements, market conditions, regulatory environment, and spoilage. A reserve is estimated to ensure the inventory balance at the end of the year reflects the estimates of product the Company expects to sell in the next year. Changes in the regulatory structure, lack of retail distribution locations or lack of consumer demand could result in future inventory reserves. Impairment of indefinite life intangible assets and goodwill 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. 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. (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” ). 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. This approach differences from the current requirement to measure contract assets and contract liabilities acquired in a business combination at fair value. ASU 2021 - 08 is effective for financial statements of non-public business entities issued for fiscal years beginning after December 15, 2023 and early adoption is permitted. The Company is currently evaluating the effect of adopting this ASU. (s) Sale-leaseback transactions From time to time, the Company may enter into sale-leaseback transactions to finance certain property acquisitions and capital expenditures, pursuant to which the Company sells the property to a third party and agrees to lease the property back for a certain period of time. To determine whether the transfer of the property should be accounted for as a sale, the Company evaluates whether it has transferred control to the third party in accordance with the revenue recognition guidance set forth in ASC 606. If the transfer of the asset is deemed to be a sale at market terms, the Company recognizes the transaction price for the sale based on the cash proceeds received, derecognizes the carrying amount of the underlying asset and recognizes a gain or loss in the consolidated statements of operations and comprehensive loss for any difference between the carrying value of the asset and the transaction price. The Company then accounts for the leaseback in accordance with its lease accounting policy. F- 17 Table of Contents PLANET 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. The Company retains the historical costs of the property and the related accumulated depreciation on its books and continues to depreciate the property over the lesser of its remaining useful life or its initial lease term. The asset is presented within property and equipment, net on the consolidated balance sheets. All proceeds from these transactions are accounted for as finance obligations and presented as non-current obligations on the consolidated balance sheets. 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. (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. 4. Inventory 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: December 31, December 31, 2023 2022 Raw materials $ 5,810,800 $ 5,209,667 Packaging and miscellaneous 1,758,152 1,584,659 Work in progress 3,375,296 1,965,052 Finished goods 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. During the year ended December 31, 2023 , the Company recognized $ 53,682,026 ( 2022 - $ 56,599,623 ) of inventory expensed to cost of goods sold. F- 18 Table of Contents PLANET 13 HOLDINGS INC. Notes to the Consolidated Financial Statements (in United States Dollars) 5. Prepaid expenses and other current assets December 31, December 31, 2023 2022 Security deposits $ 306,561 $ 1,399,424 Advertising and Marketing 27,222 - Prepaid rent 410,313 348,433 Insurance 779,638 678,402 License fees 126,923 776,717 Miscellaneous 2,422,163 607,418 $ 4,072,820 $ 3,810,394 6. Property and equipment Land and Leasehold Construction Improvements Buildings Equipment Improvements in Progress Total Gross carrying amount At December 31, 2021 $ 630,299 $ 1,707,894 $ 11,105,241 $ 54,718,371 $ 127,680 $ 68,289,485 Additions 5,843,295 12,756,048 1,703,190 2,722,710 9,515,734 32,540,977 Transfers - - - 6,114,711 ( 6,114,711 ) - Disposals ( 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 Additions 279,612 2,081,488 1,286,664 350,940 4,479,049 8,477,753 Transfers 36,984 1,594,852 148,017 644,285 ( 2,424,138 ) - Disposals - - ( 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 Depreciation At December 31, 2021 $ 179,297 $ 246,447 $ 3,801,166 $ 13,284,298 $ - $ 17,511,208 Additions 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 Additions 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 $ 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. F- 19 Table of Contents PLANET 13 HOLDINGS INC. Notes to the Consolidated Financial Statements (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 ). 7. Intangible assets and goodwill Retail Dispensary Santa Ana Retail Dispensary Clark County Cultivation and Production Clark County Master License Florida Illinois License Cultivation Coalinga CA Other Intangibles Cultivation Coalinga CA Goodwill Other Total Gross carrying amount Balance, December 31, 2021 $ 6,151,343 $ 690,000 $ 709,798 $ 55,846,866 $ - $ - $ - $ - $ 63,398,007 Additions - - - - - 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 Additions - - - - 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 Amortization At December 31, 2021 $ - $ - $ - $ - $ - $ - $ - $ - $ - Additions - - - - - 372,222 - - 372,222 At December 31, 2022 $ - $ - $ - $ - $ - $ 372,222 $ - $ - $ 372,222 Additions - - - - - - - - - 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 F- 20 Table of Contents PLANET 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. The Company executed the NGW transaction in order to introduce certain of its brands to the California market; complement its dispensary operations in Santa Ana, California; and expand its California revenue base. The aggregate purchase price for the NGW transaction was $ 57,574,938 and consisted of $ 14,788 in cash consideration, $ 1,239,818 in replacement options and $ 56,320,332 in share consideration. 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. The following table summarizes the allocation of consideration exchanged to the estimated fair value of the tangible and intangible assets acquired: Consideration paid: Cash $ 14,788 Issuance of 21,361,002 Class A Shares 56,320,332 Issuance of 1,106,925 replacement options 1,239,818 $ 57,574,938 Fair value of net assets acquired: Cash $ 1,493,922 Inventory 3,077,367 Accounts Receivable 1,374,142 Property, plant and equipment 16,229,350 Intangible assets 13,180,000 Goodwill 25,802,688 Accounts Payable and Accrued Liabilities ( 233,158 ) Income taxes payable ( 125,445 ) Deferred tax liability ( 3,223,928 ) $ 57,574,938 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. The goodwill arising from the NGW transaction consists of expected synergies from combining operations of the Company and NGW, and intangible assets not qualifying for separate recognition such as formulations, proprietary technologies and acquired know-how. 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 . F- 21 Table of Contents PLANET 13 HOLDINGS INC. Notes to the Consolidated Financial Statements (in United States Dollars) 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. 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 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 As Reported NGW Pro Forma Revenue, net of discounts $ 104,574,377 $ 870,651 $ 105,445,028 Gross Profit 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. A qualitative step zero impairment test was performed on the NGW business which indicated a potential impairment. The Company conducted a quantitative impairment analysis of its NGW reporting unit using the income approach as at December 31, 2022. The recoverable amount of the reporting unit to which goodwill is allocated and the asset group to which indefinite life intangibles are allocated were determined based on fair value using Level 3 inputs in a discounted cash flow analysis. Management tested the NGW asset group for the definite lived assets impairment. The result was impairment for the definite lived assets of the NGW asset group. Where applicable, the Company uses its market capitalization and comparative market multiples to corroborate discounted cash flow results. The significant assumptions applied in the determination of the recoverable amount are described below: ● Cash flows: Estimated cash flows were projected based on actual operating results from internal sources as well as industry and market trends. Estimated cash flows are primarily driven by sales volumes, selling prices and operating costs. The forecasts are extended to a total of six years (and a terminal year thereafter); ● Terminal value growth rate: The terminal growth rate was based on historical and projected consumer price inflation, historical and projected economic indicators and projected industry growth; ● Post-tax discount rate: The post-tax discount rate is reflective of the reporting unit's Weighted Average Cost of Capital ("WACC"). The WACC was estimated based on the risk-free rate, equity risk premium, beta adjustment to the equity risk premium based on a direct comparison approach, an unsystematic risk premium, and after-tax cost of debt based on corporate bond yields; and ● Tax rate: The tax rates used in determining the future cash flows were those substantively enacted at the respective valuation date. The following table outlines the key assumptions used in calculating the recoverable amount for each CGU and operating segment tested for impairment as at December 31, 2022: Goodwill impairment testing Significant estimates used by management NGW Years of cash flows before terminal value 6 Discount rate 19.25 % Terminal value multiple 5.8x F- 22 Table of Contents PLANET 13 HOLDINGS INC. Notes to the Consolidated Financial Statements (in United States Dollars) 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. 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. 8. Leases 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. Certain leases include escalation clauses or payment of executory costs such as property taxes, utilities, or insurance and maintenance. 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 : F- 23 Table of Contents PLANET 13 HOLDINGS INC. Notes to the Consolidated Financial Statements (in United States Dollars) December 31, December 31, 2023 2022 Operating lease costs $ 5,004,484 $ 4,584,550 Finance lease costs: Amortization of lease assets - - Interest on lease liabilities - - Finance lease costs - - Short term lease expense 42,671 12,406 Total lease costs $ 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: December 31, 2023 December 31, 2022 Finance Operating Finance Operating Lease Lease Lease Lease Weighted average discount rate 15.00 % 15.00 % 15.00 % 15.00 % Weighted average remaining lease term - 14.56 - 14.43 The maturity of the contractual undiscounted lease liabilities as of December 31, 2023 and 2022 is: 2023 2022 Operating Operating Lease Lease 2023 $ - $ 4,052,167 2024 4,226,472 4,214,502 2025 4,318,603 4,302,534 2026 4,323,725 4,303,434 2027 4,414,249 4,389,610 2028 4,585,323 4,566,581 2029 4,753,273 - Thereafter 46,355,092 53,708,289 Total undiscounted lease liabilities 72,976,737 79,537,117 Interest on lease liabilities ( 47,030,437 ) ( 53,224,885 ) Total present value of minimum lease payments 25,946,300 26,312,232 Lease liability - current portion ( 674,594 ) ( 479,161 ) Lease liability $ 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. The Company received cash proceeds of $ 1,049,633 and recorded a gain on sale-leaseback of $ 509,392 . The following are the key terms of the related lease agreement: F- 24 Table of Contents PLANET 13 HOLDINGS INC. Notes to the Consolidated Financial Statements (in United States Dollars) ● Initial term: 15 years ● Renewal options: 3 additional terms of five years each ● Monthly payment: $ 7,847 ● Other: Triple net See Note 16 for additional supplemental cash flow information related to leases. 9. Notes payable Non-related parties December 31, December 31, 2023 2022 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 Less current portion ( 884,000 ) ( 884,000 ) $ - $ - Stated maturities of debt obligations are as follow: Next 12 months Promissory Note $ 884,000 10. Share capital The Company is authorized to issue 1,500,000,000 shares of common stock and 50,000,000 shares of preferred stock. Common Stock December 31, December 31, 2023 2022 Common Stock Balance at January 1 220,470,061 198,687,950 Shares issued on settlement of RSUs i. 783,832 81,084 Shares issued on exercise of options ii. - 97,325 Shares issued on exercise of warrants iii. - 242,700 Shares issued on acquisition (Note 7) iv. - 21,361,002 Shares issued on exercise of purchase option (Note 7) v. 1,063,377 - Shares issued on legal settlement vi. 1,000,000 - Total shares of common stock outstanding on December 31 223,317,270 220,470,061 i. Shares issued for Restricted Share Units 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, 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. F- 25 Table of Contents PLANET 13 HOLDINGS INC. Notes to the Consolidated Financial Statements (in United States Dollars) ii. 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 ). iii. Shares issued on the exercise of Warrants 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 ). vi. 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 . 11. Warrants The following table summarizes the fair value of the warrant liability at December 31, 2023 and 2022 : 2023 2022 Opening balance as at January 1 $ 18,127 $ 7,206,049 Foreign exchange - ( 10,117 ) Change in fair value ( 18,127 ) ( 7,177,805 ) Closing balance as at December 31 $ - $ 18,127 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. The following table summarizes the number of warrants outstanding at December 31, 2023 and 2022 : December 31, 2023 Weighted Average Exercise Price - CAD December 31, 2022 Weighted Average Exercise Price - CAD Balance - beginning of year 5,206,463 $ 8.88 8,861,951 $ 7.46 Exercised - $ - ( 242,700 ) $ 5.80 Expired ( 5,206,463 ) $ 8.88 ( 3,412,788 ) $ 5.41 Balance - end of year - $ - 5,206,463 $ 8.88 Fair values 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. F- 26 Table of Contents PLANET 13 HOLDINGS INC. Notes to the Consolidated Financial Statements (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, 2023 and 2022 : Quoted prices in active markets for identical asset (Level 1) Significant unobservable inputs (Level 3) Total December 31, 2023 Warrant liability $ - $ - $ - December 31, 2022 Warrant liability $ ( 18,127 ) $ - $ ( 18,127 ) 12. 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 During the years ended December 31, 2023 and 2022 No incentive stock options were granted during the years ended December 31, 2023 and 2022 , and 1,106,925 replacement options were issued in connection with the NGW acquisition (see Note 7 ). The replacement options were fully vested upon issuance. The following table summarizes information about stock options outstanding at December 31, 2023 and 2022 : Exercise price December 31, 2023 December 31, 2023 December 31, 2022 December 31, 2022 Expiry Date CAD$ Outstanding Exercisable Outstanding Exercisable 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 July 6, 2025 $ 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 F- 27 Table of Contents PLANET 13 HOLDINGS INC. Notes to the Consolidated Financial Statements (in United States Dollars) The following assumptions were used to arrive at the value ascribed to the options issued using a Black Scholes Option Pricing model: December 31, 2023 2022 Share price - $ 3.34 Risk-free rate - 1.12 % Expected dividend yield - 0.00 % Expected volatility - 69.67 % Option life in years - 1.20 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 ). December 31, 2023 2022 The outstanding options have a weighted average CAD$ exercise price of: $ 2.58 $ 2.34 Weighted average remaining life in years of outstanding options: 1.69 2.51 December 31, 2023 Weighted Average Exercise Price - CAD December 31, 2022 Weighted Average Exercise Price - CAD Balance - beginning of year 792,518 $ 2.34 169,168 $ 2.01 Issued - - 1,106,925 2.58 Exercised - - ( 97,325 ) 1.31 Expired ( 189,393 ) 2.46 ( 386,250 ) 3.11 Balance - end of year 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 following table summarizes the RSUs that are outstanding as at December 31, 2023 and 2022 : December 31, 2023 December 31, 2022 Balance - beginning of year 2,464,928 2,591,929 Exercised ( 783,832 ) ( 81,084 ) Surrendered for taxes ( 477,506 ) - Forfeited ( 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 ). F- 28 Table of Contents PLANET 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, 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 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. 13. Loss per share December 31, 2023 December 31, 2022 Loss $ ( 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 $ ( 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. 14. Income taxes The components of income tax expense (benefit) of the Company are summarized as follows: December 31, 2023 December 31, 2022 Current taxes: Federal $ 9,574,371 $ 10,672,538 State 294,510 - Foreign - - Current tax expense (benefit) 9,868,881 10,672,538 Deferred taxes: Federal 211,127 ( 1,920,177 ) State 1,453,447 - Foreign - - Deferred tax expense (benefit) 1,664,574 ( 1,920,177 ) Income tax expense (benefit) $ 11,533,455 $ 8,752,361 F- 29 Table of Contents PLANET 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. These differences result from the following: December 31, 2023 December 31, 2022 Income (loss) before income taxes $ ( 62,075,303 ) $ ( 50,793,358 ) Statutory income tax rate 21 % 21 % Income tax expense (benefit) at statutory rate ( 13,035,814 ) ( 10,666,605 ) State income taxes ( 2,567,726 ) - Change in fair value of warrant liability ( 3,807 ) ( 1,507,339 ) Expenses disallowed under IRC Section 280E 9,972,094 10,932,013 Share based compensation 1,519,346 - Nondeductible penalties 154,155 - Other permanent differences 657,413 5,828,991 Change in valuation allowance 16,675,011 3,572,749 Difference in tax rates - ( 362,832 ) Change in state rate - - Prior period adjustments ( 1,837,217 ) - Other adjustments - 955,384 Income tax expense (benefit) $ 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). 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. 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. F- 30 Table of Contents PLANET 13 HOLDINGS INC. Notes to the Consolidated Financial Statements (in United States Dollars) 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 $ 18,302,796 $ 11,769,754 Share issue costs - 834,063 Share based compensation 1,562,759 2,203,368 Exchange rate difference on monetary assets - 709,938 Accrued expenses - 99,997 Loyalty points 280,182 220,034 Inventory Reserve 28,705 23,385 Lease liabilities 2,305,188 - Florida License 10,194,509 - Gross deferred tax assets 32,674,139 15,860,539 Valuation allowance ( 30,060,064 ) ( 13,385,056 ) 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 1,675,133 - 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. F- 31 Table of Contents PLANET 13 HOLDINGS INC. Notes to the Consolidated Financial Statements (in United States Dollars) 15. General and administrative December 31, 2023 2022 Salaries and wages $ 13,945,103 $ 15,231,997 Share based compensation 2,520,407 7,459,267 Executive compensation 2,949,315 3,008,508 Licenses and permits 2,541,183 2,900,282 Payroll taxes and benefits 3,369,468 4,124,049 Supplies and office expenses 1,518,102 1,480,108 Subcontractors 2,714,424 2,589,933 Professional fees (legal, audit and other) 7,484,017 6,524,583 Miscellaneous general and administrative expenses 5,379,153 6,076,773 $ 42,421,172 $ 49,395,500 16. Supplemental cash flow information December 31, Change in Working Capital 2023 2022 HST Receivable $ - $ ( 79,012 ) Accounts Receivable 130,868 1,342,487 Inventory ( 2,755,809 ) 4,297,897 Prepaid Expenses and Other Assets ( 262,426 ) 167,130 Long-term Deposits and Other Assets ( 7,308 ) 199,334 Deferred Tax Assets ( 359,781 ) ( 183,453 ) Accounts Payable ( 346,059 ) 127,789 Accrued Expenses ( 1,950,233 ) 826,664 Other Liabilities 5,000 - Income Taxes Payable 1,956,037 1,574,807 $ ( 3,589,711 ) $ 8,273,643 Cash Paid Interest Paid on Leases $ 4,077,971 $ 3,720,587 Income Taxes $ 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 Shares Issued on Exercise of Purchase Option $ 946,406 $ - Issuance of NGW replacement options on acquisition $ - $ 1,239,818 Lease additions $ 954,496 $ 2,972,252 Early Termination of Operating Lease $ 1,182,877 $ 371,381 Fixed Asset Amounts in Accounts Payable $ 84,160 $ - Reclassification of long term lease liabilities to current $ 195,433 $ 55,588 F- 32 Table of Contents PLANET 13 HOLDINGS INC. Notes to the Consolidated Financial Statements (in United States Dollars) Table of Contents PLANET 13 HOLDINGS INC. Notes to the Consolidated Financial Statements (in United States Dollars) 17. 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. (b) Other 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. 18. Commitments and contingencies (a) Construction Commitments 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. Failure to comply with one or more of those regulations could result in fines, restrictions on its operations, or losses of permits that could result in the Company ceasing operations. While management of the Company believes that the Company is in compliance with applicable local and state regulations at December 31, 2023 , medical and adult use cannabis regulations continue to evolve and are subject to differing interpretations. As a result, the Company may be subject to regulatory fines, penalties, or restrictions in the future. (c) Claims and Litigation From time to time, the Company may be involved in litigation relating to claims arising out of operations in the normal course of business. At 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. F- 33 Table of Contents PLANET 13 HOLDINGS INC. Notes to the Consolidated Financial Statements (in United States Dollars) 19. Risks Credit risk Credit risk is the risk that a third party might fail to discharge its obligations under the terms of a financial instrument. Credit risk arises from cash with banks and financial institutions. It is management's opinion that the Company is not exposed to significant credit risk arising from these financial instruments. 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. Price 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. The Company is not exposed to significant price risk. 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, 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, Southern California and Illinois. Should economic conditions deteriorate within that region, its results of operations and financial position would be negatively impacted. Banking Risk Notwithstanding that a majority of states have legalized medical marijuana, there has been no change in US federal banking laws related to the deposit and holding of funds derived from activities related to the marijuana industry. Given that US federal law provides that the production and possession of cannabis is illegal, there is a strong argument that banks cannot accept for deposit funds from businesses involved with the marijuana industry. Consequently, businesses involved in the marijuana industry often have difficulty accessing the US banking system and traditional financing sources. The inability to open bank accounts with certain institutions may make it difficult to operate the business of the Company and leaves their cash holdings vulnerable. Asset Forfeiture Risk Because the cannabis industry remains illegal under US federal law, any property owned by participants in the cannabis industry which are either used in the course of conducting such business, or are the proceeds of such business, could be subject to seizure by law enforcement and subsequent civil asset forfeiture. 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. F- 34 Table of Contents PLANET 13 HOLDINGS INC. Notes to the Consolidated Financial Statements (in United States Dollars) Currency rate risk 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’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. 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, 2023 equals $ 6,520 . 20. 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. 21. 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. F- 35 Table of Contents PLANET 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 ). 22. Subsequent events 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. F-36