jush-20220930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________________

FORM 10-Q

________________________________

(Mark One)

[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2022

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission file Number 000-56468

JUSHI HOLDINGS INC.

(Exact name of registrant as specified in its charter)

________________________________________________________________________________________________

British Columbia

98-1547061

(State or other jurisdiction of incorporation or organization)

(IRS Employer
Identification No.)

301 Yamato Road, Suite 3250

Boca Raton, FL

(Address of principal executive offices)

(561) 617-9100

Registrant’s telephone number, including area code

33431

(Zip Code)

(Former name, former address and former fiscal year, if changed since last report.)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No □

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No □

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐

Non-accelerated filer ☒ Smaller reporting company ☐

Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. □

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 17, 2022, the registrant had 195,776,372 subordinate voting shares, no par value per share, no multiple voting shares, no par value per share, no super voting shares, no par value per share, and no preferred shares, no par value per share, outstanding.

JUSHI HOLDINGS INC.

Table of Contents

For the quarterly period ended September 30, 2022


Part I	FINANCIAL INFORMATION		Page
Item 1	Financial Statements
		Interim Condensed Consolidated Balance Sheets	1
		Unaudited Interim Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)	2
		Unaudited Interim Condensed Consolidated Statements of Changes in Equity	3
		Unaudited Interim Condensed Consolidated Statements of Cash Flows	5
		Notes to the Unaudited Interim Condensed Consolidated Financial Statements	7
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations		35
Item 3	Quantitative and Qualitative Disclosures About Market Risk		46
Item 4	Controls and Procedures		46

Part II	OTHER INFORMATION		49
Item 1	Legal Proceedings		49
Item 1A	Risk Factors		49
Item 2	Unregistered Sale of Equity Securities and Use of Proceeds		50
Item 3	Defaults Upon Senior Securities		51
Item 4	Mine Safety Disclosures		51
Item 5	Other Information		51
Item 6	Exhibits		51

Signatures			53

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This document may contain “forward-looking statements” and “forward‐looking information” within the meaning of applicable securities laws, including Canadian securities legislation and United States (“U.S.”) securities legislation (collectively, “forward-looking information”) which are based upon the Company’s current internal expectations, estimates, projections, assumptions and beliefs. All information, other than statements of historical facts, included in this document that address activities, events or developments that Jushi expect or anticipate will or may occur in the future constitutes forward‐looking information. Forward‐looking information is often identified by the words, “may”, “would”, “could”, “should”, “will”, “intend”, “plan”, “anticipate”, “believe”, “estimate”, “expect” or similar expressions and includes, among others, information regarding: future business strategy, competitive strengths, goals, expansion and growth of Jushi’s business, operations and plans, including new revenue streams, the completion of contemplated acquisitions by Jushi of additional assets, the integration and benefits of recently acquired businesses or assets, roll out of new operations, the implementation by Jushi of certain product lines, implementation of certain research and development, the application for additional licenses and the grant of licenses that will be or have been applied for, the expansion or construction of certain facilities, the expansion into additional U.S. and international markets, any potential future legalization of adult use and/or medical marijuana under U.S. federal law; expectations of market size and growth in the U.S. and the states in which Jushi operates; expectations for other economic, business, regulatory and/or competitive factors related to Jushi or the cannabis industry generally; and other events or conditions that may occur in the future.

Readers are cautioned that forward‐looking information and statements are not based on historical facts but instead are based on reasonable assumptions and estimates of management of Jushi at the time they were provided or made and involve known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of Jushi, as applicable, to be materially different from any future results, performance or achievements expressed or implied by such forward‐looking information and statements. Such factors include, among others: risks relating to the ability to complete the pipeline transactions; risks relating to U.S. regulatory landscape and enforcement related to cannabis, including political risks; risks relating to anti‐money laundering laws and regulation; other governmental and environmental regulation; public opinion and perception of the cannabis industry; risks related to the economy generally; risks relating to pandemics and forces of nature including but not limited to the 2019 novel coronavirus (“COVID-19”); risks related to contracts with third party service providers; risks related to the enforceability of contracts; the limited operating history of Jushi; Jushi’s history of operating losses and negative operating cash flows; reliance on the expertise and judgment of senior management of Jushi; risks inherent in an agricultural business; risks related to co‐investment with parties with different interests to Jushi; risks related to proprietary intellectual property and potential infringement by third parties; the concentrated Founder voting control of the Jushi and the unpredictability caused by the anticipated capital structure; risks relating to the Company’s recent debt financing and other financing activities including leverage and issuing additional securities; risks relating to the management of growth; costs associated with Jushi being a publicly-traded company; the Company being a U.S. filer in addition to a Canadian filer; increasing competition in the industry; risks associated to cannabis products manufactured for human consumption including potential product recalls; reliance on key inputs, suppliers and skilled labor; reliance on manufacturers and contractors; risks of supply shortages or supply chain disruptions; cybersecurity risks; ability and constraints on marketing products; fraudulent activity by employees, contractors and consultants; tax and insurance related risks; risk of litigation; conflicts of interest; risks relating to certain remedies being limited and the difficulty of enforcement of judgments and effect service outside of Canada; risks related to executed or future acquisitions or dispositions, including potential future impairment of goodwill or intangibles acquired; sales by existing shareholders; the limited market for securities of the Company; risks related to the continued performance of existing operations in Pennsylvania, Illinois, Nevada, Virginia, California, Ohio and Massachusetts; risks related to the anticipated openings of additional dispensaries; the risks relating to the expansion and optimization of the grower-processor in Pennsylvania, the vertically integrated facilities in Virginia and Massachusetts and the facility in Nevada; the risks related to the opening of a new facilities, including but not limited to in Ohio and Illinois, which are subject to licensing approval; as well as limited research and data relating to cannabis; and risks related to the Company’s critical accounting policies and estimates.

Although Jushi has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such forward‐looking information and statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such information and statements. Accordingly, readers should not place undue reliance on forward‐looking information and statements. Forward‐looking information and statements are provided and made as of the date of this Quarterly Report on Form 10-Q and Jushi does not undertake any obligation to revise or update any forward‐looking information or statements other than as required by applicable law.

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PART I - FINANCIAL INFORMATION

1Item 1. Financial Statements

JUSHI HOLDINGS INC.

INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands of U.S. dollars, except share amounts)


	September 30, 2022 (unaudited)		December 31, 2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	31,063	$	94,962
Accounts receivable, net	3,375		3,200
Inventories, net	42,075		43,319
Prepaid expenses and other current assets	4,355		12,875
Total current assets	$	80,868	$	154,356
NON-CURRENT ASSETS:
Property, plant and equipment, net	$	181,134	$	137,280
Right-of use assets - finance leases	114,528		94,008
Other intangible assets, net	178,223		192,466
Goodwill	81,562		45,828
Other non-current assets	28,146		27,586
Non-current restricted cash	950		525
Total non-current assets	$	584,543	$	497,693
Total assets	$	665,411	$	652,049

LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable	$	18,062	$	10,539
Accrued expenses and other current liabilities	44,102		47,972
Income tax payable	15,808		6,614
Debt, net - current portion (including related party principal amounts of $3,476 as of September 30, 2022 and $3,384 as of December 31, 2021)	137,967		6,181
Finance lease obligations - current	12,735		12,620
Total current liabilities	$	228,674	$	83,926
NON-CURRENT LIABILITIES:
Non-current debt, net (including related party principal amounts of $0 as of September 30, 2022 and $1,194 as of December 31, 2021)	$	61,932	$	122,971
Finance lease obligations - non-current	98,089		88,297
Operating lease liabilities - non-current	15,637		15,163
Derivative liabilities	19,801		92,435
Income tax liabilities - non-current	62,402		60,051
Contingent consideration liabilities - non-current	1,418		8,223
Total non-current liabilities	$	259,279	$	387,140
Total liabilities	$	487,953	$	471,066
COMMITMENTS AND CONTINGENCIES (Note 21)
EQUITY:
Common stock, no par value; authorized shares - unlimited; issued and outstanding shares - 195,769,605 and 182,707,359 Subordinate Voting Shares as of September 30, 2022 and December 31, 2021, respectively	$	—	$	—
Paid-in capital	483,650		424,788
Accumulated deficit	(304,805)		(242,418)
Total Jushi shareholders' equity	$	178,845	$	182,370
Non-controlling interests	(1,387)		(1,387)
Total equity	$	177,458	$	180,983
Total liabilities and equity	$	665,411	$	652,049

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

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JUSHI HOLDINGS INC.

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(in thousands of U.S. dollars, except share and per share amounts)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
REVENUE, NET	$	72,817	$	53,981	$	207,462	$	143,400
COST OF GOODS SOLD	(45,075)		(30,657)		(133,940)		(79,717)
GROSS PROFIT	$	27,742	$	23,324	$	73,522	$	63,683

OPERATING EXPENSES
Selling, general and administrative	$	40,590	$	25,147	$	117,048	$	73,415
Indefinite-lived asset impairment	37,600		—		37,600		—
Total operating expenses	$	78,190	$	25,147	$	154,648	$	73,415

LOSS FROM OPERATIONS	$	(50,448)	$	(1,823)	$	(81,126)	$	(9,732)

OTHER (EXPENSE) INCOME:
Interest expense, net	$	(13,111)	$	(7,442)	$	(34,174)	$	(21,145)
Fair value gains on derivatives	6,352		55,059		63,233		66,800
Other, net	(291)		221		(361)		(3,643)
Total other (expense) income, net	$	(7,050)	$	47,838	$	28,698	$	42,012

(LOSS) INCOME BEFORE INCOME TAX	$	(57,498)	$	46,015	$	(52,428)	$	32,280
Income tax benefit (expense)	2,802		(6,333)		(9,959)		(21,012)
NET (LOSS) INCOME AND COMPREHENSIVE (LOSS) INCOME	$	(54,696)	$	39,682	$	(62,387)	$	11,268
Less: net loss attributable to non-controlling interests	—		(62)		—		(427)
NET (LOSS) INCOME AND COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO JUSHI SHAREHOLDERS	$	(54,696)	$	39,744	$	(62,387)	$	11,695
(LOSS) EARNINGS PER SHARE ATTRIBUTABLE TO JUSHI SHAREHOLDERS - BASIC	$	(0.28)	$	0.23	$	(0.33)	$	0.07
Weighted average shares outstanding - basic	192,880,468		168,801,193		189,119,282		163,345,527
(LOSS) EARNINGS PER SHARE ATTRIBUTABLE TO JUSHI SHAREHOLDERS - DILUTED	$	(0.30)	$	(0.08)	$	(0.61)	$	(0.28)
Weighted average shares outstanding - diluted	203,169,931		199,281,152		205,695,590		195,942,078

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

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JUSHI HOLDINGS INC.

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(in thousands of U.S. dollars, except share amounts)


	Number of Shares			Paid-In Capital		Accumulated Deficit		Total Jushi Shareholders' Equity		Non-Controlling Interests		Total Equity
	Super Voting Shares	Multiple Voting Shares	Subordinate Voting Shares
Balances - January 1, 2022	—	—	182,707,359	$	424,788	$	(242,418)	$	182,370	$	(1,387)	$	180,983
Private placement offerings	—	—	3,717,392	13,680		—		13,680		—		13,680
Shares issued for Apothecarium acquisition	—	—	527,704	1,594		—		1,594		—		1,594
Shares issued for restricted stock grants	—	—	5,952	—		—		—		—		—
Shares issued upon exercise of warrants	—	—	2,676,303	9,693		—		9,693		—		9,693
Shares issued upon exercise of stock options	—	—	93,915	—		—		—		—		—
Share-based compensation	—	—	—	6,964		—		6,964		—		6,964
Net loss	—	—	—	—		(19,757)		(19,757)		—		(19,757)
Balances - March 31, 2022	—	—	189,728,625	$	456,719	$	(262,175)	$	194,544	$	(1,387)	$	193,157
Shares issued for NuLeaf acquisition	—	—	4,662,384	13,573		—		13,573		—		13,573
Shares issued for service received	—	—	101,082	294		—		294		—		294
Shares issued upon exercise of warrants	—	—	167,560	322		—		322		—		322
Shares issued upon exercise of stock options	—	—	1,294	—		—		—		—		—
Shares canceled upon forfeiture of non-vested restricted stock	—	—	(7,813)	—		—		—		—		—
Share-based compensation	—	—	—	4,684		—		4,684		—		4,684
Net income	—	—	—	—		12,066		12,066		—		12,066
Balances - June 30, 2022	—	—	194,653,132	$	475,592	$	(250,109)	$	225,483	$	(1,387)	$	224,096
Shares issued for settlement of NuLeaf contingent consideration	—	—	888,880	1,529		—		1,529		—		1,529
Shares issued for service received	—	—	13,334	23		—		23		—		23
Shares issued for restricted stock grants	—	—	81,000	—		—		—		—		—
Shares issued upon exercise of warrants	—	—	332,738	564		—		564		—		564
Shares issued upon exercise of stock options	—	—	20,000	26		—		26		—		26
Shares canceled upon forfeiture of non-vested restricted stock	—	—	(219,479)	—		—		—		—		—
Collection of note receivable from employee shareholder	—	—	—	450		—		450		—		450
Share-based compensation	—	—	—	5,466		—		5,466		—		5,466
Net loss	—	—	—	—		(54,696)		(54,696)		—		$	(54,696)
Balances - September 30, 2022	—	—	195,769,605	$	483,650	$	(304,805)	$	178,845	$	(1,387)	$	177,458

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

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JUSHI HOLDINGS INC.

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(in thousands of U.S. dollars, except share amounts)



	Number of Shares			Paid-In Capital		Accumulated Deficit		Total Jushi Shareholders' Equity		Non-Controlling Interests		Total Equity
	Super Voting Shares	Multiple Voting Shares	Subordinate Voting Shares
















Balances - January 1, 2021	149,000	4,000,000	132,396,064	$	262,145	$	(262,669)	$	(524)	$	2,947	$	2,423
Public offerings	—	—	13,685,000	85,660		—		85,660		—		85,660
Purchase of non-controlling interests	—	—	500,000	1,562		—		1,562		(1,562)		—
Shares issued for Grover Beach acquisition	—	—	49,348	368		—		368		—		368
Shares issued upon exercise of warrants	—	—	3,898,180	13,135		—		13,135		—		13,135
Shares issued upon exercise of stock options	—	—	15,000	30		—		30		—		30
Share-based compensation	—	—	—	4,013		—		4,013		—		4,013
Net loss	—	—	—	—		(30,876)		(30,876)		(175)		(31,051)
Balances - March 31, 2021	149,000	4,000,000	150,543,592	$	366,913	$	(293,545)	$	73,368	$	1,210	$	74,578
Shares issued for restricted stock grants	—	—	34,815	—		—		—		—		—
Shares issued upon exercise of warrants	—	—	1,476,869	3,144		—		3,144		—		3,144
Shares issued upon exercise of stock options	—	—	14,173	20		—		20		—		20
Share-based compensation	—	—	—	2,733		—		2,733		—		2,733
Net income (loss)	—	—	—	—		2,826		2,826		(190)		2,636
Balances - June 30, 2021	149,000	4,000,000	152,069,449	$	372,810	$	(290,719)	$	82,091	$	1,020	$	83,111
Conversion of Super Voting Shares and Multiple Voting Shares	(149,000)	(4,000,000)	18,900,000	—		—		—		—		—
Acquisition of Nature’s Remedy	—	—	8,700,000	35,670		—		35,670		—		35,670
Shares issued upon exercise of warrants	—	—	2,437,974	5,189		—		5,189		—		5,189
Shares issued upon exercise of stock options	—	—	96,851	62		—		62		—		62
Share-based compensation	—	—	—	2,234		—		2,234				2,234
Net income (loss)	—	—	—	—		39,744		39,744		(62)		39,682
Balances - September 30, 2021	—	—	182,204,274	$	415,965	$	(250,975)	$	164,990	$	958	$	165,948

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

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JUSHI HOLDINGS INC.

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands of U.S. dollars)


	Nine Months Ended September 30,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$	(62,387)	$	11,268
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization, including amounts in cost of goods sold	15,663		5,285
Share-based compensation	17,114		8,981
Fair value changes in derivatives	(63,233)		(66,800)
Non-cash interest expense, including amortization of deferred financing costs	15,599		11,593
Deferred income taxes	(13,155)		(6,571)
Loss on debt modification/extinguishment/redemption	—		3,815
Indefinite-lived asset impairment	37,600		—
Other non-cash items, net	1,890		(1,535)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable	(69)		(812)
Inventory	8,843		(16,202)
Prepaid expenses and other current assets	1,657		(435)
Other assets	966		601
Accounts payable, accrued expenses and other current liabilities	13,313		27,032
Net cash flows used in operating activities	$	(26,199)	$	(23,780)
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for acquisitions, net of cash acquired	$	(20,892)	$	(47,308)
Payments for settlement of contingent consideration liability	(3,000)		—
Payments for property, plant and equipment	(49,230)		(55,285)
Proceeds from investments and financial asset	—		3,252
Net cash flows used in investing activities	$	(73,122)	$	(99,341)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of shares, net	$	13,680	$	85,660

Proceeds from exercise of warrants and options	1,248		16,438

Collection of note receivable from employee shareholder	450		—
Proceeds from acquisition facility, net of financing costs of $793	24,207		—
Redemptions of senior notes (including related party redemptions of $8 and $3,072 for nine months ended September 30, 2022 and 2021, respectively)	(258)		(8,134)
Payments of acquisition promissory notes	—		(1,689)
(Payments of) proceeds from finance leases, net of tenant allowance of $10,065 and $15,146 for the nine months ended September 30, 2022 and 2021, respectively	(7,948)		(3,343)
Proceeds from other debt	5,233		3,160
Repayments of other debt	(532)		(298)


Net cash flows provided by financing activities	$	36,080	$	91,794
Effect of currency translation on cash and cash equivalents	(233)		42
NET CHANGE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH	$	(63,474)	$	(31,285)
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD	95,487		85,857
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD	$	32,013	$	54,572

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JUSHI HOLDINGS INC.

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands of U.S. dollars)


	Nine Months Ended September 30,
	2022		2021
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest (excluding capitalized interest)	$	19,793	$	10,445
Cash paid for income taxes	$	11,205	$	6,082
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Capital expenditures	$	11,173	$	4,640
Right of use assets from finance lease liabilities (excluding from acquisitions), net of tenant allowance receivable of $0 and $6,701 for the nine months ended September 30, 2022 and 2021, respectively	$	2,960	$	46,142
Debt and equity issued for services received	$	702	$	—

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

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JUSHI HOLDINGS INC. Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Amounts Expressed in Thousands of United States Dollars, Unless Otherwise Stated)


1. NATURE OF OPERATIONS

Jushi Holdings Inc. (the “Company” or “Jushi”) is incorporated under the British Columbia’s Business Corporations Act. The Company is a vertically integrated, multi-state cannabis operator engaged in retail, distribution, cultivation, and processing operations in both medical and adult-use markets. As of September 30, 2022, Jushi, through its subsidiaries, owns or manages cannabis operations and/or holds licenses in the adult-use and/or medicinal cannabis marketplace in Illinois, Pennsylvania, Virginia, Massachusetts, Nevada, California and Ohio. The Company’s head office is located at 301 Yamato Road, Suite 3250, Boca Raton, Florida 33431, U.S.A., and its registered address is Suite 1700, Park Place, 666 Burrard Street, Vancouver, British Columbia V6C 2X8, Canada.

The Company is listed on the Canadian Securities Exchange (“CSE”) and trades its subordinate voting shares (“SVS”) under the ticker symbol “JUSH", and trades on the United States Over the Counter Stock Market (“OTCQX”) under the symbol JUSHF. The Company’s Registration Statement on Form S-1, initially filed with the U.S. Securities and Exchange Commission (“SEC”) on July 22, 2022, as amended on August 8, 2022, was declared effective by the SEC on August 12, 2022 (the “S-1”).


2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Consolidation

The accompanying unaudited interim condensed consolidated financial statements present the consolidated financial position and operations of Jushi Holdings Inc. and its subsidiaries and entities over which the Company has control, in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and in accordance with the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and footnotes. Actual results could differ materially from those estimates.

In the opinion of management, the unaudited interim condensed consolidated financial statements include all adjustments, of a normal recurring nature, that are necessary to present fairly the financial position, results of operations and cash flows of the Company for the periods, and at the dates, presented. The results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year.

These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2021, which are included in the Company’s S-1, and was also filed on the System for Electronic Document Analysis and Retrieval (“SEDAR”) on November 21, 2022. Consolidated balance sheet information as of December 31, 2021 presented herein is derived from the Company’s audited consolidated financial statements for the year ended December 31, 2021.

These unaudited interim condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. GAAP requires an entity to look forward 12 months from the date the financial statements are issued, (the “look-forward” period) when assessing whether the going concern assumption can be used. The going concern assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

As reflected in these unaudited interim condensed consolidated financial statements, the Company has incurred losses from operations for the nine months ended September 30, 2022, and has an accumulated deficit of $304,805 as of September 30, 2022. As discussed in Note 10 - Debt, the Company’s 10% senior notes (the “Senior Notes”), which as of September 30, 2022 had an aggregate principal amount outstanding of $74,935, mature on January 15, 2023, and the Acquisition Facility, which as of September 30, 2022 had an outstanding balance of $65,000 (refer to Note 10 - Debt), required the Company to maintain certain covenants which the Company may not have been in compliance with if the

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JUSHI HOLDINGS INC. Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Amounts Expressed in Thousands of United States Dollars, Unless Otherwise Stated)

Swiss courts accepted Jushi Europe’s petition for bankruptcy (refer to Note 16 - Non-Controlling Interests). Prior to the amendment with the lender of the Acquisition Facility, the Company was also projected to violate certain financial covenants. In April 2022, the Company entered into an amendment with the lender of the Acquisition Facility, which included a waiver related to Jushi Europe’s bankruptcy and a change to the terms of the Total Leverage Ratio, as defined in the Acquisition Facility agreement, and deferred the commencement date of leverage testing under the Acquisition Facility to the quarter ending March 31, 2023. Additionally, the overall slowdown in the cannabis industry during 2022 has resulted in lower forecasted earnings for the Company during the look-forward period. The look-forward period also contemplates favorable regulatory changes in certain states in which the Company operates. The Company is at risk of not meeting its forecasted earnings and as a result may not be in compliance with certain financial covenants under the Acquisition Facility, as amended, during the look-forward period. As a result, the Company has classified the outstanding balance of $65,000 under the Acquisition Facility as of September 30, 2022 as a current liability. These conditions raise substantial doubt regarding the Company’s ability to continue as a going concern during the look-forward period.

The Company is pursuing strategies to obtain the required additional funding primarily to fund the Senior Notes and future operations. These strategies may include, but are not limited to: (i) ongoing efforts with various lenders to refinance the Senior Notes (refer to Note 23 - Subsequent Events for updates on the refinancing); (ii) renegotiating the financial covenants contained in the Acquisition Facility, including the removal of the Total Leverage Ratio requirement; (iii) deferral of certain expenditures, including capital projects, and reallocation of funds for debt repayment, if the need arises; and (iv) obtaining alternative sources of financing, including debt financing through secured borrowings and equity financing through a base shelf prospectus, which allows the Company to offer up to C$500,000 in securities in Canada through the end of 2023. However, there can be no assurance that the Company will be able to refinance the Senior Notes, renegotiate the financial covenants under the Acquisition Facility, as amended, generate positive results from operations, or obtain additional liquidity when needed or under acceptable terms, if at all.

Correction of Errors in Previously Issued Financial Statements

In November 2022, the Company identified an error in the appraised value of the business licenses acquired in connection with the acquisition of Nature’s Remedy in September 2021, which was used in the purchase price allocation (Refer to Note 7 - Acquisitions for additional information). The appraised value of the business licenses was determined with the assistance of a third-party valuation firm, which used an incorrect input in the valuation model. The impact of the error was a $10,000 understatement of indefinite-lived intangible assets - license, a $7,092 overstatement of goodwill, and a $2,908 understatement of income tax liabilities – non-current on the Company’s audited consolidated financial statements as of and for the year ended December 31, 2021, unaudited interim condensed consolidated financial statements as of and for the three months ended March 31, 2022, and unaudited interim condensed consolidated financial statements as of and for the three and six months ended June 30, 2022.

The Company revised its condensed consolidated balance sheet as of December 31, 2021, March 31, 2022 and June 30, 2022 as summarized in the table below:

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JUSHI HOLDINGS INC. Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Amounts Expressed in Thousands of United States Dollars, Unless Otherwise Stated)


	December 31, 2021				March 31, 2022 (unaudited)				June 30, 2022 (unaudited)
	As Previously Reported		As Revised		As Previously Reported		As Revised		As Previously Reported		As Revised
Other intangible assets, net	$	182,466	$	192,466	$	189,931	$	199,931	$	206,742	$	216,742
Goodwill	$	52,920	$	45,828	$	61,392	$	54,300	$	88,654	$	81,562
Total non-current assets	$	494,785	$	497,693	$	534,011	$	536,919	$	610,586	$	613,494
Total assets	$	649,141	$	652,049	$	656,644	$	659,552	$	707,858	$	710,766
Income tax liabilities - non-current	$	57,143	$	60,051	$	58,372	$	61,280	$	68,193	$	71,101
Total non-current liabilities	$	384,232	$	387,140	$	315,148	$	318,056	$	327,186	$	330,094
Total liabilities	$	468,158	$	471,066	$	463,487	$	466,395	$	483,762	$	486,670
Total liabilities and equity	$	649,141	$	652,049	$	656,644	$	659,552	$	707,858	$	710,766

Summary of Significant Accounting Policies

The Company’s significant accounting policies are described in Note 2 in the audited consolidated financial statements and notes thereto for the year ended December 31, 2021, which is included in the Company’s S-1, and was also filed on SEDAR. There have been no material changes to the Company’s significant accounting policies.

COVID-19

During the three and nine months ended September 30, 2022, the Company’s financial condition and results of operations were not materially impacted by COVID-19. The extent to which the COVID-19 pandemic impacts the Company’s future results will depend on future developments, which are highly uncertain and cannot be predicted with certainty, including possible future outbreaks of new strains of the virus and governmental and consumer responses to such future developments.

Emerging Growth Company

As an emerging growth company (“EGC”), the Jumpstart Our Business Startups Act (“JOBS Act”) allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are applicable to private companies. The Company has elected to use this extended transition period under the JOBS Act until such time the Company is no longer considered to be an EGC. The adoption dates discussed below reflect this election.

Recent Accounting Pronouncements

Adoption of New Accounting Standards

In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (ASU 2017-04). The FASB issued guidance eliminates the performance of Step 2 from the goodwill impairment test. In performing its annual or interim impairment testing, an entity will instead compare the fair value of the reporting unit with its carrying amount and recognize any impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. Additionally, an entity should consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss. The amendments in this ASU are effective for the Company for fiscal years beginning after December 15, 2022 with early adoption permitted, as amended by ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) and ASU 2021-03, Intangibles—Goodwill and Other (Topic 350).

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JUSHI HOLDINGS INC. Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Amounts Expressed in Thousands of United States Dollars, Unless Otherwise Stated)

The Company early adopted ASU 2017-04 in 2022. See Note 8 - Goodwill and Other Intangible Assets for additional information.

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. The FASB issued guidance to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The amendments in this ASU are effective for annual and interim periods beginning after December 15, 2021. The adoption of the standard did not have a material impact on the Company’s consolidated financial statements.

Accounting Standards Issued But Not Yet Adopted

In June 2020, the FASB issued ASU 2020-06 Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. This ASU also removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and simplifies the diluted earnings per share calculation in certain areas. The amendments in this ASU are effective for annual and interim periods beginning after December 15, 2023, although early adoption is permitted. The Company is in the process of evaluating the impact of this new guidance on its consolidated financial statements.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The FASB issued guidance requires that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts. To achieve this, an acquirer may assess how the acquiree applied Topic 606 to determine what to record for the acquired revenue contracts. Generally, this should result in an acquirer recognizing and measuring the acquired contract assets and contract liabilities consistent with how they were recognized and measured in the acquiree’s financial statements (if the acquiree prepared financial statements in accordance with generally accepted accounting principles). The amendments in this ASU are effective for annual and interim periods beginning after December 15, 2023, although early adoption is permitted. The Company is in the process of evaluating the impact of this new guidance on its consolidated financial statements.

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The FASB issued guidance clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. The amendments in this ASU are effective for annual and interim periods beginning after December 15, 2023, although early adoption is permitted. The Company is in the process of evaluating the impact of this new guidance on its consolidated financial statements.

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JUSHI HOLDINGS INC. Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Amounts Expressed in Thousands of United States Dollars, Unless Otherwise Stated)


3. REVENUE

The Company has three revenue streams: (i) cannabis retail, (ii) cannabis wholesale and (iii) other. The Company’s retail revenues are comprised of cannabis operations for medical and adult-use dispensaries. The Company’s wholesale revenues are comprised of cannabis cultivation, processing, production and distribution of cannabis for medical and adult-use. The Company’s other operations primarily include the Company’s hemp/cannabidiol (“CBD”) retail operations. Any intercompany revenue and any costs between entities are eliminated to arrive at consolidated totals.

The following table summarizes the Company’s revenue from external customers, disaggregated by revenue stream:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Retail cannabis	$	67,038	$	50,681	$	192,268	$	135,155
Wholesale cannabis	5,769		3,185		15,085		7,934
Other	10		115		109		311
Total revenue, net	$	72,817	$	53,981	$	207,462	$	143,400


4. INVENTORIES

The components of inventories, net, are as follows:


	September 30, 2022 (unaudited)		December 31, 2021
Cannabis plants	$	3,240	$	6,347
Harvested cannabis and packaging	11,948		5,180
Total raw materials	$	15,188	$	11,527
Work in process	9,468		8,756
Finished goods	17,419		23,036
Total inventories, net	$	42,075