Summary of Significant Accounting Policies

Revision of Previously Issued Financial Statements

During the year ended December 31, 2021, management identified an error related to the accounting treatment of warrants with a Canadian dollar exercise price issued in connection with the Credit Facility. The Company initially recorded these Canadian denominated warrants as a derivative liability subject to revaluation at each period end, when they should have received equity treatment. Additionally, the Company identified errors related to the valuation of stock issued in the acquisition of MJ Distributing, and stock issued to our former Executive Chairman, Bruce Linton. In both instances the stock issued carried certain lock up provisions. The Company initially recorded the equity value of the stock issued at market value on the date of issuance, rather than applying a discount for lack of marketability to account for the lock up provisions.

To correct the immaterial misstatements for the three and nine month periods ended September 30, 2021, the Company elected to revise its previously issued interim unaudited condensed consolidated statements of net loss and comprehensive loss, stockholders’ equity, and cash flows. The Company will present the revision of its previously issued interim unaudited condensed consolidated financial statements in connection with the future filing of its Quarterly Reports on Form 10-Q.

The impact of the revisions on the Company’s interim unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2021 is reflected in the following table:


Statement of Net Loss and Comprehensive Loss for the nine months ended September 30, 2021 (unaudited)	As Previously Reported		Adjustment		As Revised
Operating expenses:
Stock-based compensation expenses	$	4,557,777	$	(267,957)	$	4,289,820
Total operating expenses		30,134,871		(267,957)		29,866,914

Loss from operations		(12,491,153)		267,957		(12,223,196)

Other income (expense):
Derivative gain (loss)		2,317,065		(2,317,065)		—
Other income (expenses), net		(3,249,254)		(2,317,065)		(5,566,319)

Loss before income taxes		(15,740,407)		(2,049,108)		(17,789,515)

Net income (loss) and comprehensive income (loss)	$	(18,710,407)	$	(2,049,108)	$	(20,759,515)

Statement of Net Loss and Comprehensive Loss for the three months ended September 30, 2021 (unaudited)	As Previously Reported		Adjustment		As Revised
Other income (expense):
Derivative gain (loss)	$	627,165	$	(627,165)	$	—
Other income (expenses), net		(1,552,370)		(627,165)		(2,179,535)

Loss before income taxes		(5,683,231)		(627,165)		(6,310,396)

Net income (loss) and comprehensive income (loss)	$	(6,243,231)	$	(627,165)	$	(6,870,396)

Consolidated Statement of Changes in Stockholders' Equity as of September 30, 2021 (unaudited)	As Previously Reported		Adjustment		As Revised
Shares issued in Nevada acquisition	$	1,564,500	$	(179,261)	$	1,385,239
Stock-based compensation		4,557,777		(267,957)		4,289,820
Warrants issued in financing activities		—		5,395,759		5,395,759
Net Loss		(18,710,407)		(2,049,108)		(20,759,515)
Balance at September 30, 2021	$	50,911,036	$	2,899,433	$	53,810,469

Consolidated Statement of Cash Flows for the nine months ended September 30, 2021 (unaudited)	As Previously Reported		Adjustment		As Revised
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(18,710,407)	$	(2,049,108)	$	(20,759,515)
Derivative gain		(2,317,065)		2,317,065		—
Share-based payments		4,557,777		(267,957)		4,289,820

Recently adopted accounting pronouncements and New accounting pronouncements not yet adopted

Recently adopted accounting pronouncements

In November of 2021 FASB issued ASU 2021 -10 - Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance. The update is intended to increase the transparency of government assistance including the disclosure of the types of assistance, an entity’s accounting for the assistance, and the effect of the assistance on an entity’s financial statements. The Company adopted Topic 832 on January 1, 2022. The adoption of the standard did not have a material impact on the Company's results of operations or cash flows.

New accounting pronouncements not yet adopted

In October of 2021 FASB issued ASU 2021-08 Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The update is intended to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to the recognition of an acquired contract liability and payment terms and their effect on subsequent revenue recognized by the acquirer. The required date of adoption is January 1, 2023, and the Company is evaluating potential future impacts on the Company’s financial statements.

Revenue Recognition

The Company’s primary source of revenue is from wholesale of cannabis products to dispensary locations and direct retail sales to eligible customers at the Company-owned dispensaries. Substantially all of the Company’s retail revenue is from the direct sale of cannabis products to medical customers.

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


	Nine Months Ended September 30,				Three Months Ended September 30,
	2022		2021		2022		2021
Retail	$	45,842,941	$	33,247,058	$	16,389,226	$	11,562,440
Wholesale		9,739,880		7,543,163		2,464,875		1,806,992
Total	$	55,582,821	$	40,790,221	$	18,854,101	$	13,369,432