10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

OR

☐ 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 000-56224

HARVEST HEALTH & RECREATION INC.

(Exact Name of Registrant as Specified in its Charter)

British Columbia	84-3264202
( State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1155 W. Rio Salado Parkway Suite 201 Tempe, Arizona	85281
(Address of principal executive offices)	(Zip Code)

(480) 494-2261

(Registrant’s telephone number, including area code)

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 August 6, 2021, there were 281,335,640 shares of the registrant’s Subordinate Voting Shares, 1,363,385 shares of the registrant’s Multiple Voting Shares, and 2,000,000 of the registrant’s Super Voting Shares issued and outstanding.

HARVEST HEALTH & RECREATION INC. 

QUARTERLY REPORT ON FORM 10-Q

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION	3
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Cash Flows	5
	Condensed Consolidated Statements of Changes in Stockholders’ Equity	7
	Notes to Unaudited Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	39
PART II.	OTHER INFORMATION	39
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 6.	Exhibits	42
Signatures		43

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

HARVEST HEALTH & RECREATION INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	June 30, 2021			December 31, 2020
	(In thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents	$	71,064		$	78,055
Restricted cash		3,000			4,542
Accounts receivable, net of allowance of $222 and $824, respectively		8,788			5,051
Notes receivable, current portion		9,593			21,556
Related party notes receivable, current portion		10,276			10,052
Inventory, net		44,608			36,862
Other current assets		8,125			5,280
Total current assets		155,454			161,398
Notes receivable, net of current portion		10,516			18,211
Property, plant and equipment, net		179,182			176,827
Right-of-use assets for operating leases, net		113,395			60,843
Related party right-of-use assets for operating leases, net		5,541			5,621
Intangible assets, net		272,083			272,118
Corporate investments		40,924			19,091
Acquisition deposits		50			50
Goodwill		115,541			116,041
Assets held for sale		3,689			6,585
Other assets		19,672			19,850
TOTAL ASSETS	$	916,047		$	856,635
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Current liabilities:
Accounts payable	$	7,988		$	10,755
Other current liabilities		30,434			28,896
Contingent consideration, current portion		10,398			17,985
Income tax payable		10,642			17,504
Operating lease liability, current portion		1,910			2,906
Related party operating lease liability, current portion		150			135
Notes payable, current portion		134,394			20,910
Total current liabilities		195,916			99,091
Notes payable, net of current portion		144,248			244,066
Warrant liability		3,438			20,908
Operating lease liability, net of current portion		112,731			58,637
Related party operating lease liability, net of current portion		5,518			5,595
Deferred tax liability		53,082			53,082
Total liabilities associated with assets held for sale		28			718
Other long-term liabilities		11			63
TOTAL LIABILITIES		514,972			482,160
Commitments and contingencies (Note 16)
STOCKHOLDERS’ EQUITY
Subordinate Voting Shares (Shares Authorized, Issued and Outstanding at    June 30, 2021: Unlimited, 255,991,500 and 255,991,500, respectively, at    December 31, 2020: Unlimited, 220,913,258 and 220,913,258, respectively)		—			—
Multiple Voting Shares (Shares Authorized, Issued and Outstanding at    June 30, 2021: Unlimited, 1,561,678 and 1,561,678, respectively, at    December 31, 2020: Unlimited, 1,828,422 and 1,828,422, respectively)		—			—
Super Voting Shares (Shares Authorized, Issued and Outstanding at    June 30, 2021: Unlimited, 2,000,000 and 2,000,000, respectively, at    December 31, 2020: Unlimited, 2,000,000 and 2,000,000, respectively)		—			—
Capital stock		736,901			667,248
Accumulated deficit		(336,234	)		(293,607	)
Stockholders’ equity attributed to Harvest Health & Recreation Inc.		400,667			373,641
Non-controlling interest		408			834
TOTAL STOCKHOLDERS’ EQUITY		401,075			374,475
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	916,047		$	856,635

The accompanying notes to the Condensed Consolidated Financial Statements (unaudited) are an integral part of these statements.

3

HARVEST HEALTH & RECREATION INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
	(In thousands, except share and per share data)
Revenue, net of discounts	$	102,463		$	55,661		$	191,289		$	99,896
Cost of goods sold		(50,201	)		(32,246	)		(91,109	)		(58,332	)
Gross profit		52,262			23,415			100,180			41,564
Expenses
General and administrative		33,126			26,940			59,202			53,172
General and administrative, related party operating lease expense		201			200			401			387
Sales and marketing		1,224			1,248			2,122			2,524
Share-based compensation		3,741			3,276			8,603			17,080
Depreciation and amortization		2,641			725			5,170			2,395
Total expenses		40,933			32,389			75,498			75,558
Operating income (loss)		11,329			(8,974	)		24,682			(33,994	)
Other (expense) income
Gain (loss) on sale of assets		(21	)		(2,783	)		1,774			(364	)
Other income		269			1,205			1,773			10,255
Fair value of liability adjustment		(8,353	)		(1,497	)		(32,787	)		5,448
Fair value of contingent consideration		(4,500	)		—			(4,500	)		—
Foreign currency gain (loss)		17			30			29			(108	)
Interest expense (includes related party interest income of less than $0.1 million for the three months ended June 30, 2021 and 2020, respectively and $0.2 million and $0.1 million for the six months ended June 30, 2021 and 2020, respectively)		(9,182	)		(9,169	)		(17,899	)		(13,719	)
Contract asset impairment		—			(2,420	)		—			(2,420	)
Loss before taxes and non-controlling interest		(10,441	)		(23,608	)		(26,928	)		(34,902	)
Income taxes		(6,834	)		(1,132	)		(13,315	)		(4,926	)
Net loss from continuing operations before non-controlling interest		(17,275	)		(24,740	)		(40,243	)		(39,828	)
Net income (loss) from discontinued operations, net of tax		(1,954	)		(905	)		(1,954	)		(1,289	)
Net loss before non-controlling interest		(19,229	)		(25,645	)		(42,197	)		(41,117	)
Net income attributed to non-controlling interest		(276	)		(1,929	)		(430	)		(1,841	)
Net loss attributed to Harvest Health & Recreation Inc.	$	(19,505	)	$	(27,574	)	$	(42,627	)	$	(42,958	)
Net loss per share - basic and diluted	$	(0.04	)	$	(0.07	)	$	(0.10	)	$	(0.12	)
Attributable to Harvest Health and Recreation Inc.	$	(0.05	)	$	(0.08	)	$	(0.10	)	$	(0.13	)
Attributable to discontinued operations, net of tax	$	—		$	—		$	—		$	—
Weighted-average shares outstanding - basic and diluted		413,103,779			364,580,737			410,383,008			334,380,082

The accompanying notes to the Condensed Consolidated Financial Statements (unaudited) are an integral part of these statements.

4

HARVEST HEALTH & RECREATION INC.

CONDENDSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Six Months Ended June 30,
	2021			2020
	(In thousands)
CASH FLOW FROM OPERATING ACTIVITIES
Net loss	$	(42,197	)	$	(41,117	)
Net loss from discontinued operations, net of tax		1,954			1,289
Adjustments to reconcile net loss to net cash from operating activities
Depreciation and amortization		7,051			4,257
Amortization of right-of-use assets		3,348			2,559
Amortization of debt issuance costs		1,755			1,997
Amortization of debt discount		754			2,585
Amortization of warrant expense		1,867			2,236
Noncash gain on earnout		—			(13,897	)
Noncash gain on deconsolidation		—			(6,244	)
Noncash loss on derecognition of asset		—			4,141
Gain on North Dakota divestment		(573	)		—
Gain on sale leaseback transaction		(1,058	)		—
Gain on legal settlements		(1,089	)		—
(Gain) loss on lease derecognition		(351	)		311
Change in fair value of financial liability		32,787			(5,448	)
Fair value of contingent consideration		4,500			—
Gain on held for sale		—			(2,150	)
Change in deferred income tax		—			(945	)
Share-based compensation		8,603			17,080
Noncash transaction expenses		544			—
Provision for bad debts and credit losses		115			2,420
Changes in operating assets and liabilities:
Accounts receivable		(3,854	)		(3,205	)
Inventory		(8,271	)		1,733
Other assets		2,384			(1,557	)
Income taxes payable		(6,862	)		1,354
Accrued expenses and other liabilities		(6,894	)		12,738
Accounts payable		(2,515	)		3,535
Operating lease liabilities		(1,818	)		(324	)
Prepaid expenses and other current assets		(2,393	)		(3,827	)
NET CASH USED IN CONTINUING OPERATING ACTIVITIES		(12,213	)		(20,479	)
NET CASH USED IN DISCONTINUED OPERATING ACTIVITIES		(1,954	)		(740	)
NET CASH USED IN OPERATING ACTIVITIES		(14,167	)		(21,219	)
CASH FLOW FROM INVESTING ACTIVITIES
Acquisition of businesses, net of cash acquired		—			(14,397	)
Sale leaseback transaction		22,280			—
Acquisitions/advances of intangibles		(2,022	)		(1,180	)
Divestment of California entities		—			(2,358	)
Prepayment of acquisition consideration		(50	)		4,697
Purchases of property, plant and equipment		(27,199	)		(16,993	)
Proceeds from divestments		2,122			—
Issuance of notes receivable		(1,617	)		(1,159	)
Payments received on notes receivable		963			825
NET CASH USED IN INVESTING ACTIVITIES		(5,523	)		(30,565	)
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from issuance of equity		—			58,999
Proceeds from exercise of warrants		10,262			—
Proceeds from issuance of notes payable		5,525			40,773
Repayment of notes payable		(4,603	)		(6,538	)
Proceeds from stock option exercises		664			—
Distributions from noncontrolling interests		(604	)		—
Payment of finance lease liabilities		(87	)		(24	)
Fees paid for debt financing activities		—			(1,894	)
NET CASH PROVIDED BY CONTINUING FINANCING ACTIVITIES		11,157			91,316
NET CASH USED IN DISCONTINUED FINANCING ACTIVITIES		—			(549	)
NET CASH PROVIDED BY FINANCING ACTIVITIES		11,157			90,767
NET INCREASE/(DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH		(8,533	)		38,983
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		78,055			22,685
RESTRICTED CASH, BEGINNING OF PERIOD		4,542			8,000
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF PERIOD		82,597			30,685
CASH AND CASH EQUIVALENTS, END OF PERIOD		71,064			61,668
RESTRICTED CASH, END OF PERIOD		3,000			8,000
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD	$	74,064		$	69,668

The accompanying notes to the Condensed Consolidated Financial Statements (unaudited) are an integral part of these statements.

5

HARVEST HEALTH & RECREATION INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Six Months Ended June 30,
	2021		2020
	(In thousands)
Supplemental disclosure with respect to cash flows
Interest paid	$	2,131	$	13,352
Taxes paid		20,218		4,833
Supplemental disclosure of non-cash activities
Shares issued for business acquisitions		—		59,627
Notes receivable issued upon North Dakota divestment		850		—
Notes receivable (net book value) settlement in exchange for investment		21,833		—
Financing obtained in exchange for property, plant, and equipment		5,996		—
Right-of-use assets obtained in exchange of operating lease liabilities		53,950		10,803

The accompanying notes to the Condensed Consolidated Financial Statements (unaudited) are an integral part of these statements.

6

HARVEST HEALTH & RECREATION INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

	Number of Shares							$ Amount
													Stockholders’
	Super		Multiple			Subordinate							Equity			Non-			TOTAL
	Voting		Voting			Voting		Capital		Accumulated			attributed			Controlling			STOCKHOLDERS’
(In thousands, except share data)	Shares		Shares			Shares		Stock		Deficit			to Harvest			Interest			EQUITY
BALANCE—March 31, 2021		2,000,000		1,636,065			245,336,531	$	686,899	$	(316,729	)	$	370,170		$	736		$	370,906
Shares issued		—		1,181			4,724		—		—			—			—			—
Warrants exercised for cash		—		26,000			271,742		3,420		—			3,420			—			3,420
Reclassification of warrant liability related to warrants exercised for cash		—		—			—		5,289		—			5,289			—			5,289
Reclassification of warrant liability to equity upon modification		—		—			—		36,888		—			36,888			—			36,888
Distributions		—		—			—		—		—			—			(604	)		(604	)
Exercise of stock options		—		—			221,680		664		—			664			—			664
Conversions to subordinate voting shares		—		(101,568	)		10,156,823		—		—			—			—			—
Share-based compensation		—		—			—		3,741		—			3,741			—			3,741
Net loss		—		—			—		—		(19,505	)		(19,505	)		276			(19,229	)
BALANCE—June 30, 2021		2,000,000		1,561,678			255,991,500	$	736,901	$	(336,234	)	$	400,667		$	408		$	401,075
BALANCE—March 31, 2020		2,000,000		2,501,993			109,770,577	$	614,795	$	(249,361	)	$	365,434		$	4,981		$	370,415
Shares issued		—		36,993			1,286,513		5,647		—			5,647			—			5,647
Conversions to subordinate voting shares		—		(211,323	)		21,132,382		—		—			—			—			—
Equity method investment adjustment		—		—			—		—		—			—			(125	)		(125	)
Share-based compensation		—		—			—		3,276		—			3,276			—			3,276
Net loss		—		—			—		—		(27,574	)		(27,574	)		1,929			(25,645	)
BALANCE—June 30, 2020		2,000,000		2,327,663			132,189,472	$	623,718	$	(276,935	)	$	346,783		$	6,785		$	353,568

7

	Number of Shares							$ Amount
														Stockholders’
	Super		Multiple			Subordinate								Equity			Non-			TOTAL
	Voting		Voting			Voting		Capital			Accumulated			attributed			Controlling			STOCKHOLDERS’
(In thousands, except share data)	Shares		Shares			Shares		Stock			Deficit			to Harvest			Interest			EQUITY
BALANCE—December 31, 2020		2,000,000		1,828,422			220,913,258	$	667,248		$	(293,607	)	$	373,641		$	834		$	374,475
Shares issued		—		16,762			19,245		—			—			—			—			—
Capital contribution		—		—			—		382			—			382			230			612
Shares returned and cancelled		—		(2,545	)		—		(1,000	)		—			(1,000	)		—			(1,000	)
Warrants exercised for cash		—		41,000			2,641,164		10,262			—			10,262			—			10,262
Reclassification of warrant liability related to warrants exercised for cash		—		—			—		13,369			—			13,369			—			13,369
Reclassification of warrant liability to equity upon modification		—		—			—		36,888			—			36,888			—			36,888
Distributions		—		—			—		—			—			—			(604	)		(604	)
Stock Option Exercises		—		—			221,680		664			—			664			—			664
Acquisition of NCI		—		—			—		485			—			485			(485	)		—
Divestiture of North Dakota assets		—		—			—		—			—			—			3			3
Conversions to subordinate voting shares		—		(321,961	)		32,196,153		—			—			—			—			—
Share-based compensation		—		—			—		8,603			—			8,603			—			8,603
Net loss		—		—			—		—			(42,627	)		(42,627	)		430			(42,197	)
BALANCE—June 30, 2021		2,000,000		1,561,678			255,991,500	$	736,901		$	(336,234	)	$	400,667		$	408		$	401,075
BALANCE—December 31, 2019		2,000,000		1,813,388			105,786,727	$	481,182		$	(233,977	)	$	247,205		$	3,681		$	250,886
Shares issued		—		455,432			1,286,513		64,646			—			64,646			—			64,646
Deconsolidation of Ohio entities		—		—			—		—			—			—			1,388			1,388
Shares issued in connection with acquisitions		—		307,169			283,550		59,785			—			59,785			—			59,785
Conversions to subordinate voting shares		—		(248,326	)		24,832,682		—			—			—			—			—
Equity method investment adjustment		—		—			—		—			—			—			(125	)		(125	)
Discount on notes payable		—		—			—		397			—			397			—			397
Conversion feature on note payable		—		—			—		628			—			628			—			628
Share-based compensation		—		—			—		17,080			—			17,080			—			17,080
Net loss		—		—			—		—			(42,958	)		(42,958	)		1,841			(41,117	)
BALANCE—June 30, 2020		2,000,000		2,327,663			132,189,472	$	623,718		$	(276,935	)	$	346,783		$	6,785		$	353,568

The accompanying notes to the Condensed Consolidated Financial Statements (unaudited) are an integral part of these statements.

8

1.      Business Description

Harvest Health & Recreation Inc., a British Columbia corporation (the “Company” or “Harvest”), is a vertically integrated cannabis company that operates from “seed to sale.” The Company holds licenses or provides services to cannabis dispensaries in Arizona, California, Florida, Maryland, Nevada, and Pennsylvania, with provisional licenses in Massachusetts. In addition, the Company owns CO2 extraction, distillation, purification and manufacturing technology used to produce a line of cannabis topicals, vapes and gems featuring cannabinoids and a hemp-derived product line sold in Colorado. The Company also owns, manufactures and distributes a portfolio of cannabis consumer packaged goods brands, including ROLL ONE, MODERN FLOWER, EVOLAB, CHROMA, CO2LORS, ALCHEMY, AVENUE, LOVELI, and CBX SCIENCES, to third-party licensed retail cannabis stores across the United States as well as to select retail stores the Company owns or operates, in addition to providing support services and financing to a Utah-licensed medical cannabis cultivator (on July 14, 2021, the Company completed the divestiture of its Utah cultivation and processing operations).

The Company operates in one segment, the cultivation, processing and sale of cannabis. The Company grows cannabis in outdoor, indoor, and greenhouse facilities for sale in its retail locations and for wholesale. In addition, the Company converts cannabis biomass into formulated oil using a variety of proprietary extraction techniques. The Company uses some of this oil to manufacture products such as vaporizer cartridges and edibles. Harvest sells cannabis, oil, and manufactured products in Harvest dispensaries and to third parties for resale. In addition, the Company collects licensing fees from third parties associated with operations at certain cultivation, manufacturing or retail facilities.

Harvest conducts business through wholly-owned and majority-owned operating subsidiaries, operating agreements and other commercial arrangements established to conduct the different business areas of each business (each an “Operating Subsidiary” and together, “Operating Subsidiaries”). The Company’s principal operating locations and type of operation are listed below:

State	Nature of Operations	Commencement Periods
Arizona - 15 locations	Retail Dispensary	September 2013 - September 2020
California - 4 locations	Retail Dispensary	December 2018 - October 2019
Florida - 10 locations	Retail Dispensary	February 2019 - June 2021
Maryland - 3 locations	Retail Dispensary	September 2018 - December 2019
Pennsylvania - 10 locations	Retail Dispensary	September 2018 - May 2021
Arizona	Greenhouse/Outdoor Grow/Processing Lab	July 2015 - February 2020
Colorado - 1 location	Processing	October 2020
Florida	Cultivation/Processing	February 2019 - December 2019
Maryland	Cultivation/Processing	September 2017 - July 2019
Nevada	Cultivation/Processing	August 2020
Pennsylvania	Cultivation/Processing	March 2020
Utah(1)	Indoor Grow	October 2020

(1)On July 14, 2021, the Company divested the indoor grow location located in Ogden, Utah for an immaterial amount of cash.

The Company is in various stages of expansion as it is growing its commercial footprint by focusing on acquiring and building additional retail, cultivation and processing locations for medical and adult use cannabis in its existing key markets.

Each Operating Subsidiary either holds the active and/or pending cannabis licenses associated with its activities, or has a commercial arrangement with the operating locations, and/or owns the real estate and primary fixed assets used in the cannabis businesses.

In certain states, cannabis licenses are typically divided into three categories: dispensary, cultivation, and processing. Dispensary licenses comprise the retail operations and allow a company to dispense cannabis to patients. Cultivation licenses allow a company to grow cannabis plants. Processing licenses allow for the processing of cannabis into other products (e.g., edibles, oil, etc.). Cultivation and processing licenses comprise the wholesale operations.

In other states, cannabis licenses are defined as vertically integrated, which allows the license holder the right to engage in dispensary, cultivation and processing activities.

The Company’s corporate headquarters is located at 1155 W. Rio Salado Parkway, Suite 201, Tempe, Arizona, 85281. The Company has one class of stock that is traded on the Canadian Stock Exchange (“CSE”) and on the OTCQX International tier of the OTC Markets in the U.S. (the “OTCQX”) under the symbols HARV and HRVSF, respectively. The stock price between the CSE and the OTCQX are identical after the U.S./Canadian currency exchange conversion.

9

2.       Significant Accounting Policies

(a)   Basis of Presentation

The accompanying Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, our condensed consolidated financial statements do not include all the information and footnotes required by GAAP for complete financial statements. Normal and recurring adjustments considered necessary for a fair statement of the results for the interim periods, in the opinion of the Company’s management, have been included. Operating results for the three months ended June 30, 2021, are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. The accompanying condensed consolidated financial statements and related footnote disclosures should be read in conjunction with the consolidated financial statements and notes thereto included in our 2020 Annual Report on Form 10-K filed with the SEC on March 30, 2021.

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results may differ from the estimates and assumptions used.

(b)   Basis of Measurement

These Unaudited Condensed Consolidated Financial Statements have been prepared on the going concern basis, under the historical cost convention, except for certain financial instruments that are measured at fair value as described herein.

(c)   Functional Currency

These Unaudited Condensed Consolidated Financial Statements are presented in United States dollars, which is also the functional currency of the Company and its affiliates.

(d)   Basis of Consolidation

These Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q include the accounts of the Company, all wholly-owned and majority-owned subsidiaries in which the Company has a controlling voting interest and, when applicable, variable interest entities in which the Company has a controlling financial interest or is the primary beneficiary. Investments in affiliates where the Company does not exert a controlling financial interest are not consolidated.

Subsidiaries over which the Company has a controlling financial interest are fully consolidated from the date control commences until the date control ceases. All of the consolidated entities were under common control during the entirety of the periods for which their respective results of operations were included in the consolidated statements (i.e., from the date of their acquisition). All intercompany accounts and transactions have been eliminated on consolidation.

(e)   Discontinued Operations

The Company followed Accounting Standard Codification (“ASC”) 360, Property, Plant, an Equipment, and ASC 205-20, Discontinued Operations, to report assets held for sale and discontinued operations.

The Company classifies assets and liabilities of a business or asset group as held for sale, and the results of its operations as income (loss) from discontinued operations, net, for all periods presented, when (i) we commit to a plan to divest a business or asset group, actively begin marketing it for sale, and when it is deemed probable of occurrence within the next twelve months, and (ii) when the business or asset group reflects a strategic shift that has, or will have, a major effect on the Company’s operations and its financial results. In measuring the assets and liabilities held for sale, the Company evaluates which businesses or asset groups are being marketed for sale.

See Note 4 for additional information.

(f)   Revenue Recognition

The Company accounts for customer contracts in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”), which includes the following five-step model:

Identification of the contract, or contracts, with a customer.

Identification of the performance obligations in the contract.

Determination of the transaction price.

Allocation of the transaction price to the performance obligations in the contract.

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Recognition of revenue when, or as, the Company satisfies a performance obligation.

Through application of the standard, 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 those goods or services.

Revenues consist primarily of wholesale and retail sales of cannabis, which are generally recognized at a point in time when control over the goods have been transferred to the customer and is recorded net of sales discounts. Payment is typically due upon transferring the goods to the customer or within a specified time period permitted under the Company’s credit policy. Sales discounts were not material during the three and six months ended June 30, 2021 and 2020, respectively.

The Company has agreements in place whereby third-parties provide services or license the right to operate certain aspects of cannabis facilities owned by the Company. Under the terms of these agreements, the service provider operates various aspects of the business including procurement, production, regulatory compliance, marketing and sales, subject to oversight by the Company. The Company pays the service provider a fee for its services or in the case of licenses, the licensee pays the Company a license fee. The Company recorded $0.3 million and $6.2 million on a gross basis for the three months ended June 30, 2021 and 2020, respectively. The Company recorded $0.6 million and $12.6 million on a gross basis for the six months ended June 30, 2021 and 2020, respectively. The determination that the Company was the principal under these agreements was made in accordance with ASC 606-10-55-36 through 55-40 and consists of the following analysis. The Company analyzed the agreements first to determine what the specified good or service is that is being provided. Secondly, whether the Company is in control of the goods prior to the goods being transferred to the customer. The specified goods consist of various cannabis products sold at either a retail location or wholesale. In order to determine whether the Company had control of the specified goods prior to transfer to the customer, the terms of the agreements to provide the goods to the customers were evaluated. Pursuant to the terms of the agreements, the Company is at all times the owner of the products which are the cannabis and cannabis concentrates. Further, the service provider would not be able to sell the products to the customer without the use the of the Company’s license which permits it to sell cannabis under state law.

The following represents disaggregated revenue information:

(In thousands)	Retail		Wholesale		Licensing and other		Consolidated
Revenue for the three months ended June 30, 2021	$	85,177	$	13,948	$	3,338	$	102,463
Revenue for the three months ended June 30, 2020	$	42,250	$	7,199	$	6,212	$	55,661
Revenue for the six months ended June 30, 2021	$	162,825	$	23,241	$	5,223	$	191,289
Revenue for the six months ended June 30, 2020	$	72,262	$	13,264	$	14,370	$	99,896

Our customer loyalty program enables participants to earn points for qualifying purchases that can be redeemed for discounts or product in the future. We allocate the transaction price between the goods delivered and the future goods that will be delivered, on a relative standalone selling price basis, and defer the revenues allocated to the points, less expected expirations, until such points are redeemed. The timing of loyalty point redemptions can vary significantly, and the loyalty points do not expire. As of June 30, 2021, the amount of revenue deferred related to the earned points, net of redemptions, is $2.3 million. The deferral is reflected as a current liability in our condensed consolidated balance sheets because it is expected to be earned within the next 12 months.

3.       Recently Adopted and Issued Accounting Pronouncements

We adopted the following standard during the six months ended June 30, 2021, which did not have a material impact on our financial statements or financial statement disclosures:

Date Issued	Standard	Effective Date
December 2019	ASU 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes	January 2021

The following standards were recently issued, and the Company is assessing the impact to the future consolidated financial statements:

Date Issued	Standard	Effective Date
May 2021	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)	January 2021
August 2020	ASU No. 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	January 2022

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The Company reviewed all other recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact to the condensed consolidated financial statements.

4.        Discontinued Operations

During the six months ended June 30, 2020, following the completion of the merger with Interurban Capital Group, LLC (formerly Interurban Capital Group, Inc.) (“ICG”), the Company sold ICG to a wholly owned subsidiary of Hightimes Holding Corp. (“Hightimes”) following the spinoff of certain assets. At the time of disposition, ICG’s primary assets consisted of rights to acquire eight “Have A Heart”-branded cannabis dispensaries in California (the “California HAH Dispensaries”). In addition, the Company agreed to sell Hightimes the equity of two additional entities controlled by Harvest that are seeking cannabis dispensary licenses in California (the “Harvest Dispensaries”). As a result, assets and liabilities allocable to these operations were classified as held for sale. In addition, revenue and expenses, gains and losses relating to the discontinuation of the California HAH Dispensaries operations were eliminated from profit or loss from the Company’s continuing operations for all periods presented.

The Company also entered into a plan to abandon certain product lines or lines of business to include CBD products or items of inventory, and the Company’s planned expansion in the state of Michigan. Any related assets and liabilities are classified as held for sale. In addition, the revenue, expenses, gains and losses related to the discontinuation of these activities were eliminated from profit or loss from the Company’s continuing operations for all periods presented.

Discontinued operations are presented separately from continuing operations in the Unaudited Condensed Consolidated Statements of Operations and the Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and June 30, 2020, respectively.

The following table is the Unaudited Condensed Consolidated Statements of Operations reflecting discontinued operations for the three months and six months ended June 30, 2020:

(In thousands)	Three Months Ended June 30, 2020			Six Months Ended June 30, 2020
Revenue, net of discounts	$	3,996		$	4,778
Cost of goods sold		(2,054	)		(2,711	)
Gross profit		1,942			2,067
Expenses
General and administrative		1,278			1,603
Sales and marketing		24			46
Depreciation and amortization		1,039			1,057
Total expenses		2,341			2,706
Operating income (loss)		(399	)		(639	)
Other (expense) income
Gain on sale of assets		2,574			2,574
Interest expense		(711	)		(717	)
Loss before taxes and non-controlling interest		1,464			1,218
Income taxes		(9	)		(147	)
Loss from continuing operations before non-controlling interest		1,455			1,071
Net loss from discontinued operations, net of tax		905			1,289
Net loss attributed to Harvest Health & Recreation Inc.	$	2,360		$	2,360

Discontinued operations for the three and six months ended June 30, 2021 was $1.9 million due to the abandoned expansion in Michigan.

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The following table is a summary of the assets and liabilities of discontinued operations:

(In thousands)	June 30, 2021		December 31, 2020
ASSETS
Inventory, net	$	344	$	93
Other current assets		-		33
Property, plant and equipment, net		3,110		1,747
Right-of-use asset, net		64		3,593
Intangibles assets, net		171		894
Other assets		—		225
Assets from discontinued operations	$	3,689	$	6,585
LIABILITIES
Lease liability, net of current portion		28		718
Liabilities from discontinued operations	$	28	$	718

5.       Inventory

The Company’s inventory consisted of:

(In thousands)	June 30, 2021			December 31, 2020
Raw materials	$	17,384		$	12,632
Work in progress		6,165			5,634
Finished goods		22,228			19,718
Total inventory		45,777			37,984
Reserve		(1,169	)		(1,122	)
Total inventory, net	$	44,608		$	36,862

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6.        Notes Receivable

The Company’s notes receivable consisted of:

(In thousands)	June 30, 2021			December 31, 2020
Secured promissory notes dated November 2020 in the principal amount of $12.0 million with a maturity date of November 9, 2025; monthly payments of $0.1 million, inclusive of principal and interest. Balloon payment of $8.4 million due at maturity. Interest rate of 7.5% per annum.	$	11,493		$	12,000
Secured promissory notes dated February 2020 through June 2021 in the principal amount of $15.1 million with maturity dates from August 2021 to February 2022; principal is due at maturity. Interest rates of 6 - 8% per annum, due at maturity.		15,088			13,471
Secured promissory notes, created from the CannaPharmacy acquisition, dated April and June of 2019 in the principal amount of $11.6 million with maturity dates in April and June of 2021; principal is due at maturity. Interest rate of 8% per annum, due quarterly.		—			456
Secured convertible promissory note, due from Falcon International Corp. (‘‘Falcon’’) and subsidiaries, dated June 7, 2019 in the principal amount of up to $40.4 million with maturity date of June 6, 2022; principal is due at maturity. Interest rate of 4% per annum, due at maturity.(1)		—			25,525
Unsecured convertible promissory notes, due from Falcon and its subsidiaries, dated October 2018 through February 2019 in the principal amount of $24.5 million with maturity dates of August to November 2019; principal is due at maturity. Interest rate of 8% per annum, due at maturity.(1)		—			24,499
Secured revolving notes dated December 2018 through January 2019 in the principal amount of up to $30.0 million with maturity dates of December 2019 to February 2020; principal is due at maturity. Interest rates of 8.25 - 8.5% per annum with interest payments due monthly.(2)		3,581			3,581
Secured promissory notes dated February 2021 in the principal of up to $0.9 million with a maturity date of February 19, 2022; principal is due at maturity. Interest rate of 10.0% per annum with interest payments due monthly.		850			—
Gross notes receivable		31,012			79,532
Less: provision for impairment of notes receivable		(627	)		(29,713	)
Total notes receivable, net of allowance		30,385			49,819
Less: current portion of notes receivable		(19,869	)		(31,608	)
Notes receivable, long-term portion	$	10,516		$	18,211

(1)These notes were settled as part of the Falcon Lawsuit settlement. $29.1 million of the provision for impairment of notes receivable related to these notes was written off in relation to this settlement. See Note 10 for additional information.

(2)These notes are currently in default. The Company negotiated a settlement agreement with the debtor and, at this time, expects to receive the full principal balance during fiscal year 2021. The Company’s provision for expected credit losses as of June 30, 2021 includes $0.3 million related to these notes.

Stated maturities of the notes receivable are as follows:

(In thousands)	Expected Principal Payments
2021 (6 months)	$	10,470
2022		9,918
2023		728
2024		784
2025		9,112
	$	31,012

7.       Leases

The Company primarily leases space for corporate offices, retail, cultivation and manufacturing under non-cancellable operating leases with initial terms typically ranging from 1 to 28 years. The Company had one finance lease at June 30, 2021.

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On January 11, 2021, the Company purchased a cultivation property located in Reading, Pennsylvania. The property consists of approximately 1.36 acres of land and close to 46,800 square feet of combined office and cultivation space. The purchase price of the property was $5.2 million and was considered a finance lease prior to the building purchase.

On January 20, 2021, the Company sold an industrial property totaling approximately 292,000 square feet for $23.8 million. Concurrent with the sale, Harvest entered into a triple net lease with Innovative Industrial Properties, Inc. (“IIP”) to lease back the property. The lease is for a term of 20 years with an extension option. At commencement, the Company was not reasonably certain to exercise the extension option. Harvest plans to continue to operate the property as a licensed cultivation and processing facility and expects to recover up to approximately $10.8 million in tenant improvements from IIP. The total proceeds for the transaction are expected to be approximately $34.6 million. The Company determined control of the assets transferred to IIP, the sale price represented the fair value of the underlying assets sold, and the Company does not have continuing involvement with the property sold other than a normal leaseback. The Company received net proceeds of $22.3 million from the sale, after deducting a security deposit of $1.2 million, other transactions costs of $0.3 million, and incurred a gain of $1.1 million. In June 2021, we amended our lease, increasing the tenant improvement allowance under the lease by $7.1 million to a total of approximately $17.9 million, which also resulted in a corresponding adjustment to the base rent for the lease at the property.

The following table presents lease assets and liabilities within the Condensed Consolidated Balance Sheets:

Lease and Classification	June 30, 2021		December 31, 2020
Operating Leases:	(In thousands)
Right-of-use asset, net	$	118,935	$	66,464
Lease liability, current portion	$	2,060	$	3,041
Lease liability, net of current portion	$	118,249	$	64,232
Finance Leases:
Property, plant and equipment, net(1)	$	405	$	5,523
Other current liabilities	$	92	$	5,504

(1)Finance lease assets are recorded net of accumulated amortization of less than $0.1 million as of June 30, 2021 and December 31, 2020, respectively.

The Company recognized the following amounts within the Condensed Consolidated Statements of Operations:

	Three Months Ended June 30				Six Months Ended June 30
	2021		2020		2021		2020
Operating lease expense	$	5,270	$	5,553	$	9,758	$	8,352
Interest on lease liabilities	$	2	$	384	$	6	$	387
Expenses related to short-term leases	$	19	$	487	$	228	$	950
Expenses related to variable payments	$	498	$	266	$	688	$	507

The Company’s sublease income is immaterial.

Other information:

	Six Months Ended June 30,
	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:	(In thousands)
Operating cash flows from operating leases	$	7,831	$	2,556
Operating cash flows from finance leases	$	6	$	387
Financing cash flows from finance leases	$	87	$	24

The Company’s lease terms and discount rates were as follows:

Weighted average remaining term (in years):	June 30, 2021			June 30, 2020
Operating		14.5			3.6
Finance		34.5			9.9
Weighted average discount rate:
Operating		12.43	%		10.00	%
Finance		10.00	%		10.03	%

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8.       Divestitures

In February 2020, the Company divested of non-operating retail and cultivation entities, primarily consisting of two entities that hold cannabis licenses and various real estate and equipment. In accordance with ASC 810-10-40, Derecognition, control ceased, and the Company deconsolidated its interest in the entities. A related party to the Company holds an interest of 49% which it recognized as an equity method investment due to the related party’s significant influence. The carrying value of the assets was derecognized along with the corresponding recognition of the fair value of the equity method investment resulting in a gain of $3.2 million. In conjunction with the assets being deconsolidated, the Company issued a $12.0 million note receivable to the entities in exchange for the real property and other plant and equipment deconsolidated at the time. This resulted in an additional $8.7 million gain.

9.       Intangible Assets and Goodwill

Intangible assets, including goodwill, as of December 31, 2020 and June 30, 2021 consisted of the following:

Gross carrying amount (in thousands)	Weighted average useful lives (years)	December 31, 2020		Additions		Dispositions/ Adjustments			June 30, 2021
Definite life intangible assets:
Patient relationships	2.0	$	820	$	—	$	—		$	820
Technology	9.9		18,058		—		—			18,058
Software	5.0		241		320		(145	)		416
Other	3.0		410		730		(241	)		899
Indefinite life intangible assets:
Licenses and permits			253,866		519		(151	)		254,234
Internally developed			1,113		694		(643	)		1,164
Trade names			2,400		—		—			2,400
Total intangible assets			276,908		2,263		(1,180	)		277,991
Goodwill			116,041		—		(500	)		115,541
Total gross carrying amount		$	392,949	$	2,263	$	(1,680	)	$	393,532
Accumulated amortization (in thousands)		December 31, 2020		Amortization		Dispositions/ Adjustments			June 30, 2021
Definite life intangible assets:
Patient relationships		$	820	$	—	$	—		$	820
Technology			3,913		945		—			4,858
Software			57		19		(30	)		46
Other			—		184		—			184
Total accumulated amortization			4,790		1,148		(30	)		5,908
Total intangible assets, net and goodwill		$	388,159	$	1,115	$	(1,650	)	$	387,624

Intangible assets with definite lives are amortized over their estimated useful lives. The Company recorded amortization expense of $0.7 million and $0.5 million included in depreciation and amortization, in the Condensed Consolidated Statements of Operation, for the three months ended June 30, 2021 and 2020, respectively. The Company recorded amortization expense of $1.1 million and $1.0 million included in depreciation and amortization, in the Condensed Consolidated Statements of Operations, for the six months ended June 30, 2021 and 2020, respectively. Amortization periods for assets with definite lives are based on management’s estimates at the date of acquisition.

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Based solely on the amortizable intangible assets recorded at June 30, 2021, estimated amortization expense for the remainder of fiscal 2020 through fiscal 2025 and thereafter is as follows:

(In thousands)	Estimated Amortization Expense
2021 (6 months)	$	1,523
2022		2,108
2023		2,008
2024		1,787
2025		1,770
Thereafter		5,089
Total amortization expense	$	14,285

Actual amortization expense to be reported in future periods could differ from these estimates as a result of new intangible asset acquisitions, changes in useful lives, impairment charges or other relevant factors or changes.

10.       Corporate Investments

The carrying values of the Company’s investments are as follows:

(In thousands)	June 30, 2021		December 31, 2020
Investment in Hightimes	$	19,091	$	19,091
Investment in Falcon		21,833		—
Corporate investments	$	40,924	$	19,091

The Company is not able to readily determine the fair value of either of the Company’s equity investments listed in the table above. The investments are therefore accounted for under the measurement alternative whereby the investments are held at cost and adjusted for impairments and observable price changes, if any.

On March 13, 2021, the Company settled a lawsuit with Falcon International, Inc. (‘‘Falcon’’) whereby the Company received 10% equity ownership in Falcon and each share received came with a 10-year warrant to acquire two common shares of Falcon at an exercise price of $1.91 per warrant. In exchange, the Company settled the $50.0 million of notes receivable, including accrued interest receivable, due from Falcon. Based on the net book value of the notes receivable settled, the Company estimated the fair value of the equity and warrants received to be $21.8 million at settlement.

On June 22, 2020, the Company sold a wholly owned subsidiary to a subsidiary of Hightimes following the spinoff of certain assets. Consideration received by the Company included 600,000 of Series A Preferred Stock. The Series A Preferred Stock has a stated or liquidation value of $100 per share. The Company may convert all or a portion of the Series A Preferred Stock into shares of Hightimes Class A voting Common Stock at a conversion price per share of $11, subject to adjustment to $1 per share, based on the 11-for-one forward stock split of the Hightimes Common Stock to be consummated upon completion of Hightimes’ Regulation A+ initial public offering; provided, that in no event shall the number of shares of Hightimes Common Stock issuable upon full conversion of the Series A Preferred Stock, exceed 19% of the issued and outstanding shares of Hightimes Common Stock, after giving effect to such optional conversion. Based on the assets transferred, the Company estimated the fair value of the shares of Series A Preferred Stock received to be $19.1 million when the sale closed.

No impairments or observable price changes were identified during the six months ended June 30, 2021.

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11.       Other Current Liabilities

The Company’s other current liabilities consisted of:

(In thousands)	June 30, 2021		December 31, 2020
Accrued inventory purchases	$	7,671	$	7,886
Accrued expenses		7,724		5,607
Accrued payroll and benefits		5,146		4,353
Accrued capital expenditures		2,906		3,133
Finance lease liabilities(1)		92		5,504
Deferred revenue		2,285		—
Other		4,610		2,413
Total other current liabilities	$	30,434	$	28,896

(1)See Note 7 for additional information.

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12.     Notes Payable

The Company’s notes payable consisted of:

(In thousands)	June 30, 2021			December 31, 2020
Secured promissory note dated March 2020, in the principal amount of $10.0 million with a maturity of March 2022. Monthly interest payments of 9% per annum. Principal balance due at maturity.(1)	$	10,000		$	10,000
Unsecured promissory note dated February 2020, in the principal amount of $6.7 million with a maturity of February 2023. Monthly interest payments at 4% per annum. Annual payments of $2.2 million, inclusive of interest at 4%, due beginning February 2021 with remaining principal due at maturity.		4,699			6,650
Secured promissory notes dated December 2019, in the principal amount of $93.4 million with a maturity of December 2022. Semi-annual interest payments at 15% per annum. Principal balance due at maturity.(2)		93,390			93,390
Secured promissory notes dated December 2019, in the principal amount of $42.4 million with a maturity of December 2022. Semi-annual interest payments at 9.25% per annum. Principal balance due at maturity.(3)		42,404			42,404
Secured convertible promissory note dated December 2019, in the principal amount of $10.0 million with a maturity of December 2021. Semi-annual interest payments at 9% per annum. Principal balance due at maturity.(4)		10,000			10,000
Secured convertible promissory note dated April 2021, in the principal amount of $5.0 million with a maturity of April 2023. Semi-annual interest payments at 9% per annum. Principal balance due at maturity.		5,000			—
Secured promissory notes dated October 2019, in the principal amount of $6.5 million with a maturity of October 2021. Monthly interest payments at 8.95% per annum. Principal balance due at maturity.		6,500			6,500
Secured promissory notes dated September and October 2019, in the principal amount of $2.6 million with maturities of October 2024. Monthly interest payments at 5.5% and 8.75% per annum. Principal balance due at maturity.(5)		2,456			2,505
Secured promissory note dated June 2019, in the principal amount of $4.0 million with a maturity of June 2024. Interest at LIBOR plus 2.5% per annum, payable monthly. Principal balance due based on 25-year amortization schedule with balloon payment at maturity.(6)		3,916			4,000
Unsecured convertible debentures dated May 2019, in the principal amount of $100.0 million with a maturity of May 2022. Semi-annual interest payments at 7% per annum. Principal balance due at maturity.(7)		100,000			100,000
Other unsecured promissory notes		3,661			4,039
Other secured promissory notes		8,026			1,275
Total notes payable		290,052			280,763
Less: unamortized debt discounts and issuance costs		(11,410	)		(15,787	)
Net amount		278,642			264,976
Less: current portion of notes payable		(134,394	)		(20,910	)
Notes payable, net of current portion	$	144,248		$	244,066

(1)Carrying value includes debt discount of $0.7 million.

(2)Carrying value includes debt issuance costs of $2.3 million.

(3)Carrying value includes debt issuance costs of $1.2 million and warrants of $3.1 million.

(4)Carrying value includes debt discount of $0.2 million.

(5)Carrying value includes debt issuance costs of $0.1 million.

(6)Carrying value includes debt issuance costs of less than $0.1 million.

(7)Carrying value includes debt issuance costs of $1.4 million and warrants of $2.4 million.

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Stated maturities of debt obligations and expected interest payments are as follows:

(In thousands)	Expected Principal Payments		Expected Interest Payments
2021 (6 months)	$	19,360	$	14,470
2022		254,324		21,864
2023		10,229		660
2024		5,611		270
2025 and thereafter		528		334
	$	290,052	$	37,598

13.       Share-based Compensation

Stock options

During 2018, the Compensation Committee of the Company’s Board of Directors approved a share-based compensation plan. The purpose of the plan is to promote the interests of the Company and its stockholders by aiding the Company in attracting and retaining employees, officers, consultants, advisors and non-employee directors capable of assuring the future success of the Company. The stock options granted are non-qualified and generally vest in 25% increments over a four-year period and expire 10 years from the grant date.

The following table summarizes stock option activity during the period:

	Number of Stock Options			Weighted- Average Exercise Price		Aggregate Intrinsic Value
Balance as of December 31, 2020		14,380,875			5.02
Forfeited/Cancelled		(2,574,070	)		6.53
Exercised		(221,680	)		2.52
Granted		675,500			3.85
Balance as of June 30, 2021		12,260,625		$	4.69	$	10,174,894

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on June 30, 2021, and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their in-the-money options on June 30, 2021. This amount will change in future periods based on the fair market value of the Company’s stock and the number of options outstanding.

The total intrinsic value of stock options exercised during the six months ended June 30, 2021 was $0.4 million. Cash received from stock option exercises was $0.7 million during the six months ended June 30, 2021.

The following table summarizes the Subordinate Voting Shares stock options that remain outstanding as of June 30, 2021:

Security Issuable	Expiration Date	Number of Stock Options	Exercise Price	Stock Options Exercisable
Subordinate Voting Shares	November 2028 - February 2031	12,260,625	$1.09 - $8.75	4,866,313

The following table summarizes the Subordinate Voting Shares stock options that remain outstanding as of December 31, 2020:

Security Issuable	Expiration Date	Number of Stock Options		Exercise Price	Stock Options Exercisable
Subordinate Voting Shares	November 2028 - December 2030		14,380,875	$1.09 - $8.75		2,326,000

During the three months ended June 30, 2021 and 2020, the Company recorded $3.7 million and $3.3 million of share-based compensation expense for stock options granted and vested during the period, respectively. During the six months ended June 30, 2021 and 2020, the Company recorded $8.5 million and $17.1 million of share-based compensation expense for stock options granted and vested during the period, respectively.

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The fair value of the stock options granted was determined using the Black-Scholes option-pricing model with the following weighted-average assumptions at the time of grant:

	2021	2020
Risk-Free Annual Interest Rate	1.09% - 2.25%	2.00% - 2.25%
Expected Annual Dividend Yield	0%	0%
Expected Stock Price Volatility	99% - 197%	83% - 99%
Expected Life of Stock Options	6.25 Years	6.25 Years

Volatility was estimated by using the average historical volatility of comparable companies from a representative peer group of publicly traded cannabis companies. The expected life represents the period of time that the options issued are expected to be outstanding. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of issuance, using rates with a term approximately equal to the expected life of the options.

During the three months ended June 30, 2021 and 2020, the weighted-average fair value of stock options granted was $2.74 and $2.16 per option, respectively. During the six months ended June 30, 2021 and 2020, the weighted-average fair value of stock options granted was $3.16 and $2.16 per option, respectively. As of June 30, 2021 and 2020, stock options outstanding had a weighted-average remaining contractual life of 8.2 and 8.9 years, respectively. At June 30, 2021, the total unrecognized compensation cost related to the non-vested awards granted and expected to vest was $14.1 million. This cost is expected to be recognized over a weighted-average period of 2.0 years.

Restricted stock units

On December 31, 2020, the Company granted 208,348 restricted stock units. These restricted stock units vest in 2021. On April 6, 2020, the Company granted 98,765 restricted stock units. These restricted stock units vest throughout 2020 and 2021. The following table summarizes the status of the restricted stock units:

	Number of Restricted Stock Units			Weighted- Average Grant Price
Balance as of December 31, 2020		241,273		$	2.01
Vested		(136,952	)		1.83
Balance as of June 30, 2021		104,321		$	2.24

During the six months ended June 30, 2021, the Company recorded $0.1 million of share-based compensation expense for restricted stock units granted and vested during the period, respectively. No share-based compensation expense for restricted stock was recorded during the three months ended June 30, 2020.

14.     Stockholders’ Equity

Description of the company’s securities

The Company is authorized to issue an unlimited number of Subordinate Voting Shares (“SVS” or “Subordinate Voting Shares”), Multiple Voting Shares (“MVS” or “Multiple Voting Shares”) and Super Voting Shares, all with no par value. Each Multiple Voting Share converts into 100 Subordinate Voting Shares and each Super Voting Share converts into one Subordinate Voting Share. Holders of SVS are entitled to one vote in respect of each SVS held at stockholder meetings of the Company. Holders of MVS are entitled to 100 votes in respect of each MVS held at stockholder meetings of the Company. Holders of Super Voting Shares are entitled to 200 votes in respect of each Super Voting Share held at stockholder meetings of the Company.

Warrants

During the six months ended June 30, 2021, the Company issued 307,856 stock warrants to purchase the Company’s SVS. These warrants were issued upon exercise of compensation warrants held by underwriters of the bought deal completed by the Company on October 28, 2020. The company did not record any share-based compensation expense for stock warrants outstanding during the period. Prior to June 30, 2021, all of the Company’s outstanding stock warrants qualified for liability classification in accordance with ASC 815, Derivatives and Hedging. On June 30, 2021, the Company amended the terms of the 17,154,416 SVS warrants issued and outstanding to reflect the exercise price of such warrants in U.S. dollars. Following the conversion of the exercise price to U.S. dollars, the warrants were reclassified as equity. The Company recognized a $0.9 million change in fair value of the warrant liability upon

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modification and reclassified $36.9 million of the warrant liability to equity. One holder remains that did not convert, and the Company will continue to treat the warrant activity associated with that holder as liability classification.

A summary of the status of the stock warrants outstanding, on an as-converted basis for SVS, is as follows:

	Number of Stock Warrants			Weighted- Average Exercise Price
Balance as of December 31, 2020		24,407,114		$	4.11
Issued		307,856		$	2.40
Exercised		(6,125,454	)	$	1.52
Balance as of June 30, 2021		18,589,516		$	4.79

The following table summarizes the stock warrants that remain outstanding as of June 30, 2021:

Security Issuable	Expiration Date	Number of Stock Warrants		Exercise Price	Stock Warrants Exercisable
Subordinate Voting Shares	May 2022 - Dec 2025		17,154,516	$2.46 - $14.66		17,154,516
Multiple Voting Shares	April 1, 2023		14,350	106.17		14,350

The following table summarizes the stock warrants that remain outstanding as of December 31, 2020:

Security Issuable	Expiration Date	Number of Stock Warrants		Exercise Price	Stock Warrants Exercisable
Subordinate Voting Shares	May 2022 - April 2023		18,872,114	$2.40 - $14.27		18,872,114
Multiple Voting Shares	April 2021 - April 2023		55,350	103.36		55,350

The fair value of the stock warrants granted was determined using the Black-Scholes option-pricing model with the following weighted-average assumptions at the time of issuance:

	2021	2020
Risk-Free Annual Interest Rate	0.11% - 0.16%	2.15%
Expected Annual Dividend Yield	0%	0%
Expected Stock Price Volatility	95%	70% - 99%
Expected Term	2.2 - 2.3 Years	1.0 - 5.0 years

Expected volatility was estimated by using the Company’s historical share price volatility for a period similar to the expected life of the warrants. The expected term represents the period of time that the stock warrants issued are expected to be outstanding. The risk-free interest rate, using the expected life of the warrants, is based on the U.S. Treasury yield curve in effect at the time of issuance.

During the three months ended June 30, 2021, there were no stock warrants granted. During the six months ended June 30, 2021, the fair value of the stock warrants granted was $2.35 and $1.50 per warrant, respectively. As of June 30, 2021 and 2020, stock warrants outstanding have a weighted-average remaining contractual life of 0.8 and 2.2 years, respectively.

Warrants exercised for cash

During the three months ended June 30, 2021, the Company issued 26,000 MVS and 271,742 SVS as a result of warrant exercises and received cash proceeds of approximately $3.4 million. During the six months ended June 30, 2021, the Company issued 41,000 MVS and 2,641,164 SVS as a result of warrant exercises (including 615,710 SVS issued in relation to compensation warrants exercised) and received cash proceeds of approximately $10.3 million.

Shares held in escrow

As of June 30, 2021, the Company has 2,000,000 SVS held in escrow to be released on the achievement of certain milestones. The conditions for release were not met as of June 30, 2021. The shares are non-employee compensation for raising equity.

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The following presents the total outstanding SVS if converted as of June 30, 2021:

Share Class	Number of Shares at June 30, 2021		Conversion Factor		Total Subordinated Voting Shares if Converted
Super Voting Shares		2,000,000		1		2,000,000
Multiple Voting Shares		1,561,678		100		156,167,800
Subordinate Voting Shares		255,991,500		1		255,991,500
Total						414,159,300

15.       Net Loss Per Share

Calculation of net loss per common share attributable to Harvest Health & Recreation Inc. is as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands, except share and per share data)	2021			2020			2021			2020
Net loss attributable to Harvest Health & Recreation Inc.	$	(19,505	)	$	(27,574	)	$	(42,627	)	$	(42,958	)
Net loss attributable to discontinued operations, net of tax	$	(1,954	)	$	(905	)	$	(1,954	)	$	(1,289	)
Basic weighted-average number of shares outstanding		413,103,779			364,580,737			410,383,008			334,380,082
Net loss per share attributable to Harvest Health & Recreation Inc. - basic and diluted	$	(0.05	)	$	(0.08	)	$	(0.10	)	$	(0.13	)
Net loss per share attributable to discontinued operations, net of tax	$	—		$	—		$	—		$	—

As the Company is in a loss position for both the three and six months ended June 30, 2021 and 2020, the inclusion of shares issuable upon exercise of stock options, vesting of restricted stock, exercise of warrants, and conversion of debt in the calculation of diluted earnings per share would be anti-dilutive and, accordingly, were excluded from the diluted loss per share calculation. The weighted-average number of shares outstanding assumes the conversion of all MVS and Super Voting Shares to SVS.

The following table summarizes the potential SVS that were excluded as they were anti-dilutive:

	June 30,
	2021		2020
Stock options and restricted stock units		12,364,946		16,011,125
Warrants(1)		19,345,162		14,685,996
Convertible debt		13,823,603		32,041,357
		45,533,711		62,738,478

(1)Includes the outstanding compensation warrants issued for underwriting services in the October 2020 bought financing.

16.     Commitments and Contingencies

Regulatory environment

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 or licenses 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 regulation as of June 30, 2021, 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.

Contingencies

Claims & legal proceedings

From time to time, the Company may be involved in legal proceedings, including litigation or regulatory proceedings relating to claims arising out of operations in the normal course of business. In accordance with the current accounting standards for loss contingencies under ASC Topic 450, we establish reserves for litigation-related matters that arise from the ordinary course of our business activities

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when it is probable that a loss associated with a claim or proceeding has been incurred and the amount of the loss can be reasonably estimated. Litigation claims and proceedings of all types are subject to many uncertain factors that generally cannot be predicted with assurance. By their nature, the amount of the contingency and the timing of a contingent event and any resulting accounting recognition are subject to our judgment of such events and our estimates of the amounts. Below we provide a description of potentially material legal proceedings and claims.

Falcon International, Inc.

On January 6, 2020, the Company terminated the Agreement and Plan of Merger and Reorganization entered into among the Company, Harvest California Acquisition Corp., Falcon International Corp. and its shareholders dated February 14, 2019, as amended (the “Falcon Merger Agreement”). The Falcon Merger Agreement was terminated as a result of defaults by Falcon and its shareholders incapable of being cured, and other improper conduct of Falcon and its principal officers and directors, James Kunevicius and Edlin Kim. On January 6, 2020, the Company also filed suit in the U.S. District Court for the District of Arizona (Case No. 2:20-cv-00035-DLR) (the “Falcon Lawsuit”), which identified the grounds for termination and sought a court order compelling Falcon and its shareholders to arbitrate the Company’s claims. On February 7, 2020, an Amended Complaint was filed as a matter of course, providing greater specificity after certain defendants filed a motion to dismiss. On February 26, 2020, Falcon, its subsidiaries, and its founders all stipulated to the relief sought by the Amended Complaint, to refer the matter to binding, private arbitration before the American Arbitration Association (“AAA”).

On March 6, 2020, the U.S. District Court for the District of Arizona ordered the parties to the stipulation to binding, private arbitration of the matter before the AAA. The remedies the Company seeks in the AAA arbitration include rescission and/or termination of the Falcon Merger Agreement, all agreements entered into in connection with the Falcon Merger Agreement and the “Control Person Transaction” discussed below, an award of restitutionary damages from Falcon and its shareholders including repayment of funds advanced pursuant to promissory notes issued by Falcon and its subsidiaries in connection with the Falcon Merger Agreement, appointment of a receiver for Falcon and an award of attorneys’ fees, arbitration forum fees and costs. Remedies sought by the Company in arbitration also include rescission and/or termination remedies concerning the “Control Person Transaction” referenced in that certain Membership Interest Purchase Agreement entered into among James Kunevicius and Edlin Kim (collectively, the “Selling Owners”), Elemental Concepts, LLC and Compass Point, LLC (the “Sellers”) and Harvest of California, LLC (a wholly owned subsidiary of the “Company”) dated June 7, 2019 (the “MIPA”). Pursuant to the terms of the MIPA, the Company purchased 100% of the membership interests in two entities that hold commercial cannabis licenses in California (the “Purchased Interests”) for a purchase price of $4.1 million (the “Purchase Price”). These remedies include seeking an order which would effectively require the equivalent of the Selling Owners and the Sellers being required to repurchase from the Company all of the Purchased Interests for an amount equal to the Purchase Price as provided for in the MIPA.

On July 2, 2020, Falcon and two of its shareholders filed a counterclaim against the Company in the AAA arbitration proceeding. The counterclaim alleges that the Company breached the Falcon Merger Agreement, breached an implied covenant of good faith and fair dealing and intentionally interfered with Falcon’s prospective business relations and seeks monetary damages of $50.0 million pursuant to the Falcon Merger Agreement. On March 13, 2021, the parties entered into a binding settlement agreement, resulting in a final dismissal of all litigation and arbitration between them arising out of the 2019 merger agreement. In accordance with the settlement terms, Harvest owns a 10% equity interest in Falcon. Each share comes with a 10-year warrant entitling Harvest to purchase two (2) common shares of Falcon at an exercise price of $1.91, subject to customary anti-dilution adjustments in the event of stock splits, stock dividends and similar corporate events. See Note 10 for additional information.

AGRiMED Industries of PA, LLC

The Company appealed the Commonwealth of Pennsylvania Department of Health (“PDOH”), June 2019 denial of the renewal of a grower/processor permit issued to AGRiMED Industries of PA, LLC (“AGRiMED”) which the Company acquired through a Membership Interest Purchase Agreement on May 20, 2019. On August 28, 2019, AGRiMED filed a timely Notice of Appeal with the PDOH Docket No. 19-068 GP on the grounds that, among other things, the PDOH is equitably estopped and abused its discretion in refusing to renew AGRiMED’s permit, given AGRiMED’s recent change in ownership, the PDOH’s awareness of that change, and the limited scope of AGRiMED’s operations at the time of the non-renewal, of which the PDOH was similarly aware. Further, AGRiMED asserted that the PDOH had failed to provide AGRiMED with an opportunity to respond to or otherwise cure or correct any alleged violations identified by the PDOH. On May 6, 2021 the PDOH entered into a settlement agreement regarding the AGRiMED permit which allows for the conditional renewal of the permit and its operation by the Company as early as August 15, 2021. 

The AGRiMED permit is still subject to litigation from a third-party seeking revocation of the permit. The possible revocation is related to an administrative challenge filed by Bay LLC, which was the next highest scoring applicant when AGRiMED was awarded a permit. Bay LLC’s objection to the award of the AGRiMED permit is due to the fact that one of AGRiMED’s principals (pre-Harvest’s MIPA to operate the permit) failed to disclose a criminal conviction on the AGRiMED application. On November 9, 2020, the PDOH Deputy Secretary ruled that the AGRiMED permit should not be revoked based upon an equitable estoppel theory. On December 3, 2020 Bay

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LLC filed a Petition for Review of the November 9, 2020 PDOH determination in the Pennsylvania Commonwealth Court. Briefing of that appeal was completed in May 2021 and the Company is awaiting a ruling.

Rainbow lease and real estate litigation

On June 4, 2020, Rainbow HAH Council Bluffs LLC, Rainbow HAH Santa Cruz LLC, Rainbow HAH Coalinga LLC, Rainbow HAH LLC and Rainbow Realty Group LLC (collectively, the “Plaintiffs”) filed a complaint in the Supreme Court of the State of New York, County of Nassau (Index No.: 605323/2020) against the Company and certain of its subsidiaries and certain of its current officers and directors, including Scott Atkison (the “Harvest Defendants”), ICG and certain of its subsidiaries, Hightimes Holding Corp. and one of its subsidiaries, Ryan Kunkel (“Kunkel”) and James Dennedy (“Dennedy”). Mr. Atkison is a former shareholder and director of ICG and is a party to the Agreement and Plan of Merger and Reorganization, dated March 13, 2020, between a wholly-owned subsidiary of the Company and ICG (the “ICG Merger Agreement”) and as result thereof, he, along with other former ICG shareholders including Daniel Reiner, a shareholder of the Company and the beneficial owner of greater than 5% of our equity securities, may have indemnification obligations to the Company. On September 24, 2020, the Plaintiffs filed an amended complaint (the “Amended Rainbow Complaint”). The Amended Rainbow Complaint alleges, among other things, that the Plaintiffs were fraudulently induced by Kunkel and Dennedy and aided and abetted by the Harvest Defendants into paying $3.5 million to purchase three cannabis dispensaries that were leased by Have a Heart branded dispensaries in Council Bluffs, Iowa, Coalinga, California and Santa Cruz, California (the “Gerra Properties”). The properties were sold to the Plaintiffs by Gerra Capital Management which was owned and controlled by certain former ICG directors and shareholders which included Kunkel and Dennedy. The Amended Rainbow Complaint alleges breach of lease, breach of guaranty, breach of the implied covenant of good faith and fair dealing, fraud in the inducement, conspiracy to commit fraud, aiding and abetting fraud, violations of debtor creditor law and piercing the corporate veil (the “Rainbow Litigation”). In December 2020, the case transferred to the Commercial Division of the Supreme Court of the State of New York, County of New York (Index No.: 452625/2020).

On July 15, 2021, the Company, Harvest Enterprises, Inc., Harvest HAH WA, Inc., Steven M. White, M. Scott Atkison and Daniel T. Reiner (collectively, the “Defendants”), and the Plaintiffs entered into a Confidential Settlement Agreement and Release, pursuant to which, inter alia, the Company issued 150,000 SVS to the Plaintiffs in consideration for the final release (with prejudice) of all claims pending against the Defendants in the Commercial Division of the Supreme Court of the State of New York, County of New York (Index No.: 452625/2020).

TGS National Franchise, LLC arbitration

In the Matter of Arbitration between TGS National Franchise, LLC v. San Felasco Nurseries, Inc. (“SFN”) as assignee of Florida Compassionate Growers LLC (Case No: 01-18-0003-9481) (the “SFN Arbitration”).

Prior to the Company’s acquisition of SFN via a share exchange agreement dated October 25, 2018, TGS filed several arbitrations and civil lawsuits (the “TGS Lawsuits”) arising out of franchise agreements between TGS and SFN dated April 8, 2016 (“Franchise Agreements”). The TGS Lawsuits included a demand for arbitration filed with the American Arbitration Association filed on October 22, 2018 (the “SFN Arbitration”) seeking monetary damages arising from the termination of the Franchise Agreements. On March 28, 2019, the SFN Arbitration was stayed by agreement of the parties pending resolution of a TGS appeal, to the Colorado Court of Appeals, of a decision adverse to TGS in another of the TGS Lawsuits (the “TGS Appeal”).

On February 21, 2020, TGS moved to substitute Jushi FL SPV, LLC (“Jushi”) as Claimant in the SFN Arbitration (“Claimant”) and amend the case caption to In the Matter of Arbitration between Jushi FL SPV, LLC, as assignee of TGS National Franchise, LLC v. San Felasco Nurseries, Inc., as assignee of Florida Compassionate Growers LLC (Case No: 01-18-0003-9481). On May 15, 2020, the parties stipulated to substitute Jushi as Claimant and amend the case caption. On March 26, 2020, the Colorado Court of Appeals denied the TGS Appeal and held that certain terms in the Franchise Agreements evidence “a clear intent to limit the parties’ rights and remedies otherwise available.”

With the TGS Appeal decided, the SFN Arbitration re-commenced in August 2020. On November 9, 2020, the panel in the SFN Arbitration (the “AAA Panel”) denied SFN’s motion to dismiss, which had argued that the arbitration was precluded by the earlier TGS Lawsuits. On March 29, 2021, the AAA Panel denied SFN’s request to file a pre-hearing motion to dismiss the SFN Arbitration for failure to state recoverable damages. The final hearing in the SFN Arbitration was held the week of May 3, 2021. Post-hearing briefing was completed on June 29, 2021.

The AAA Panel issued its interim award (the “Interim Award”) on July 29, 2021. The AAA Panel ruled against Claimant on its legal and equitable claims for breach of a contractual right of first refusal (“ROFR”) under the Franchise Agreements in connection with a potential sale of SFN (the “ROFR Transaction”), holding that SFN had negotiated the ROFR Transaction in good faith. Claimant prevailed, however, on its claims for breach of contract and breach of the implied covenant of good faith and fair dealing arising from SFN’s termination of the Franchise Agreements. The AAA Panel awarded Claimant $10.6 million based on the supposed “present value”

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of “unpaid future royalties” in respect of these claims. The AAA Panel awarded an additional $3.7 million in pre-award interest on these damages, and post-award interest at a rate of 12% per annum.

The Panel further determined that Claimant was the prevailing party in the arbitration and that the Franchise Agreements entitled Claimant to recover its reasonable attorneys’ fees and costs, exclusive of certain arbitration costs. Claimant’s fee request currently is due to the Panel on August 12, 2021, and SFN’s response currently is due on August 26, 2021.

The Franchise Agreements provide that the Interim Award, once finalized, is subject to review by an independent panel of three arbitrators (the “Independent Panel”). The Company intends to appeal the decision to the Independent Panel on the grounds that, among other things, the damages awarded are not available under the contracts and applicable law. The appeal will be filed no later than 30 days after the Interim Award becomes final. The Company has adjusted its reserves in respect of the SFN Arbitration as a result of the Interim Award.

Litigation Arising Out of Proposed Transaction with Trulieve Cannabis Corp.

On May 10, 2021, the Company entered into an arrangement agreement (the “Arrangement Agreement”) with Trulieve Cannabis Corp. (“Trulieve”), pursuant to which Trulieve agreed, subject to the terms and conditions thereof, to acquire all of the issued and outstanding subordinate voting shares of the Company, multiple voting shares of the Company, and super voting shares of the Company. On July 13, 2021, the Company issued its Definitive Proxy Statement (the “Proxy”) soliciting stockholder approval of the proposed transaction. Since the issuance of the Proxy, a number of purported stockholders of the Company have sent demand letters to the Company’s Board of Directors and/or commenced litigation challenging the accuracy and/or completeness of the disclosures in the Proxy. To date, the following five lawsuits have been filed, bearing the following captions:

Oppen v. Harvest Health et al., C.A. No. 21-02048 (D. Col.)

Stout v. Harvest Health et al., C.A. No. 21-06398 (S.D.N.Y.)

Jenkins v. Harvest Health et al., C.A. No. 21-02045 (D. Col.)

Coffman v. Harvest Health et al., C.A. No. 21-02026 (D. Col.)

Wean v. Harvest Health et al., C.A. No. 21-06435 (S.D.N.Y.)

Finger v Harvest Health et al., C.A. No. 21-02086 (D. Col.)

Each lawsuit asserts claims under Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 and alleges that the Proxy omits and/or misrepresents material information concerning: (i) the Company’s and Trulieve’s financial projections; (ii) the financial analyses performed by the Company’s financial advisors, Moelis & Company LLC and Haywood Securities Inc. (“Haywood”), in connection with their fairness opinions; (iii) information regarding the nature of Haywood’s arrangement; and (iv) the sales process leading up to the proposed transaction. 

The Company vehemently denies these allegations, and intends to vigorously defend against these lawsuits. At this point, the Company is unable to state whether an outcome unfavorable to the Company is either probable or remote, or to estimate the range of possible loss in the event of an unfavorable outcome. The Company previously recorded a liability in the amount of $3.0 million during year ended December 31, 2020 and increased its liability by an additional $4.5 million during the three months ended June 30, 2021. 

Litigation assessment

The Company has evaluated its claims and the foregoing matters to assess the likelihood of any unfavorable outcome and to estimate, if possible, the amount of potential loss as it relates to the litigation discussed above. Based on this assessment and estimate, which includes an understanding of the Company’s intention to vigorously prosecute its claims, the Company believes that any defenses of any of the counterparties lack merit, and the likelihood of any recoveries by any of the counterparties against the Company appears remote. This assessment and estimate is based on the information available to management as of the date of these financial statements and involves a significant amount of management judgment, including the inherent difficulty associated with assessing litigation matters in their early stages. As a result, the actual outcome or loss may differ materially from those envisioned by the current assessment and estimate. Our failure to successfully prosecute or settle these claims could have a material adverse effect on our financial condition, revenue and profitability and could cause the market value of our subordinate voting shares to decline.

17.     Income Taxes

The Company accounts for income taxes in accordance with the provisions of ASC 740, Income Taxes (“ASC 740”), on a tax jurisdictional basis. The Company files a consolidated as well as several standalone company U.S. income tax returns and, at the federal level, its gross profits or income and losses are taxed at 21%. The Company’s effective tax rate varies from the U.S. Federal statutory rate due to permanent non-deductible IRS Section 280e differences, pass-through entities, and non-controlling interests. The Company recorded income tax expense of $6.8 million and $1.1 million for the three months ended June 30, 2021 and 2020, and $13.3 million and $4.9 million for the six months ended June 30, 2021 and 2020, respectively.

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The net deferred income tax liability was $53.1 million as of both June 30, 2021 and December 31, 2020 and consists primarily of future tax impacts of the book and tax differences in fixed asset depreciation and intangibles acquired through purchase accounting.

During the three and six month ended June 30, 2021 and 2020, respectively, the Company recognized an immaterial amount of interest and penalties. The Company has not established valuation allowances against any U.S. Federal or state deferred tax assets.

18.     Related Party Transactions

Related party notes receivable

(In thousands)	June 30, 2021		December 31, 2020
Secured promissory notes dated February 2020(1)	$	6,695	$	6,471
Secured revolving notes dated December 2018 through January 2019(2)		3,581		3,581
Total due from related party (current portion notes receivable)	$	10,276	$	10,052

(1)Secured promissory note dated February 2020, and amended February 2021, in the aggregate principal amount of $6.7 million with maturity date February 2022; principal is due at maturity. Interest rate of 6% per annum, due at maturity. The secured note of $6.7 million is due from Harvest of Ohio LLC, an Ohio limited liability company owned 49% by Steve White, the Chief Executive Officer of the Company, and an entity in which the Company has an investment interest. The Company accounts for the investment interest under the equity method. During the six months ended June 30, 2021 and 2020, interest income was $0.2 million and $0.1 million, respectively. During the three months ended June 30, 2021 and 2020, interest income was $0.1 million and less than $0.1 million, respectively.

(2)Secured revolving notes dated December 2018 through January 2019 in the aggregate principal amount of $3.6 million which are due from AINA We Would LLC, the borrower, of which Harvest owns a 25% interest. The notes mature between December 2019 and February 2020 and the principal is due at maturity. The secured revolving notes which mature between December 2019 and February 2020 are currently in default. The Company negotiated a settlement agreement with the debtor and, at this time, expects to receive the full principal balance. The secured revolving notes have interest rates of 8.25 - 8.5% per annum with interest payments due monthly. AINA We Would LLC can draw up to $30.0 million, with each advance subject to the approval of AINA We Would LLC and the Company in their sole discretion. No interest income was recorded during the three or six months ended June 30, 2021 and $0.1 million of interest income was recorded during both the three and six months ended June 30, 2020.

Related party leases

Included in the Condensed Consolidated Balance Sheets are the following amounts recorded for leases with related parties:

(In thousands)	June 30, 2021			December 31, 2020
Right-of-use assets for operating leases, net	$	5,541		$	5,621
Operating lease liability, current portion		(150	)		(135	)
Operating lease liability, net of current portion		(5,518	)		(5,595	)

AZRE2, LLC owns a building located at 300 East Cherry Street, Cottonwood, Arizona 86326, which it leases to Harvest to use as a cultivation facility. The lease commenced on August 1, 2019 for a 15 year term and rent payments were approximately $0.3 million for the six months ended June 30, 2021 and 2020 respectively. Rent payments were $0.2 million for the three  months ended June  30, 2021 and 2020, respectively. The Company incurred rent expense of $0.3 million for the six months ended June 30, 2021 and 2020, respectively and $0.2 million in relation to this lease for  the three months ended June 30, 2021 and 2020, respectively. Jason Vedadi, the former Chairman of the Board of Harvest, is the sole owner of AZRE2, LLC. $1.4 million is due to Karma Capital, LLC, an entity wholly owned by Mr. Vedadi, to pay back the loan given to purchase the Cottonwood property.

Karma Capital, LLC owns a building located at 2726-2734 E. Grant Road Tucson, Arizona 85716, which it leases to Harvest to use as a dispensary. The lease commenced on July 1, 2017 for a 15 year term and rent payments were less than $0.1 million for the six and three months ended June 30, 2021 and 2020, respectively. The Company incurred rent expense of less than $0.1 million in relation to this lease for six and three months ended June 30, 2021 and 2020, respectively. Mr. Vedadi, the former Chairman of the Board of Harvest, is the sole owner of Karma Capital, LLC.

Earbuds, LLC owns a building located at 4370 Tonawanda Trail Beaver Creek, Ohio 45430, which it leases to Harvest to use as a dispensary. The lease commenced on April 1, 2020 for a 15 year term and rent payments were less than $0.1 million for the six and

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three months ended June 30, 2021 and 2020, respectively. There was also an additional fee paid of approximately $0.1 million provided to the landlord for previous costs incurred to purchase the building in 2020. The Company incurred rent expense of less than $0.1 million in relation to this lease for the six months and three months ended June 30, 2021 and 2020, respectively. Each of Mr. Vedadi, the former Chairman of the Board of Harvest, Joseph Sai, Harvest’s Chief of Staff and Howard Hintz, Harvest’s former Director of Contracts, are partners of Earbuds, LLC. Each of the three partners of Earbuds, LLC are entitled to an equal distribution share of the accrued rental income. $0.4 million is due to SMRE LLC (an entity owned by Mr. Sai), Things Change LLC (an entity owned by Mr. Hintz) and TJV-168 LLC (an entity owned by Mr. Vedadi) to pay back the loan given to purchase the Beaver Creek, OH property. Each partner loaned $0.1 to Earbuds, LLC to acquire the property.

On February 9, 2021, we cancelled 2,545 Multiple Voting Shares held by Jason Vedadi in exchange for extinguishing our right of first refusal under the Separation Agreement (as more fully described and qualified by reference to Exhibit 10.1 of this Quarterly Report on Form 10-Q, Amendment to Separation Agreement and General Release, by and between Jason Vedadi and Harvest Health & Recreation Inc., dated February 9, 2021). The number of Multiple Voting Shares is equal to an aggregate market value of $1,000,185 divided by the closing sales price of the Subordinate Voting Shares on February 5, 2021, which was $3.93. The Multiple Voting Shares were convertible to Subordinate Voting Shares on a 1:100 basis. This transaction with Mr. Vedadi is a transaction agreed with an “insider” and is considered to be a “related party transaction.”

19.     Subsequent Events

On July 21, 2021, Harvest Mass Holding I, LLC, a subsidiary of the Company, entered into a purchase agreement with Story of Massachusetts (“Story”), which is an entity majority-owned by Jason Vedadi. Harvest Mass Holding I, LLC owns all of the issued and outstanding membership interests in Suns Mass II, LLC, a Harvest subsidiary. Suns Mass II, LLC holds a dispensary license for a dispensary in Worcester, Massachusetts. Pursuant to such agreement, Story will acquire 100% of the membership interests of Suns Mass II, LLC for $1.0 million in cash and the assumption of a $1.0 million line of credit. The transaction with Story is a transaction agreed with an “insider” and is considered to be a “related party transaction,” and, accordingly, was approved by the Audit Committee of the Company’s Board of Directors.

As described under “Commitments and Contingencies,” on July 15, 2021, the Company entered into a Confidential Settlement Agreement and Release with the Rainbow Plaintiffs, pursuant to which, inter alia, the Company issued 150,000 Subordinate Voting Shares to the Rainbow Plaintiffs in exchange for full release of all claims against certain defendants, including the Company, Harvest Enterprises, Inc., Harvest HAH WA, Inc., Steven M. White, Michael Scott Atkison, a director of the Company, and Daniel T. Reiner. The release of claims against each of Messrs. White, Atkison and Reiner is a transaction agreed with “insiders” and is considered to be a “related party transaction,” and, accordingly, was approved by the Audit Committee of the Company’s Board of Directors.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s discussion and analysis of financial condition and results should be read in conjunction with the financial statements and accompanying notes in this report.

Forward-Looking Statements

This Quarterly  Report on Form 10-Q contains statements that we believe are, or may be considered to be, “forward-looking statements.” All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q regarding the prospects of our industry or our prospects, plans, financial position or business strategy may constitute forward- looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking words such as “may,” “will,” “expect,” “intend,” “estimate,” “foresee,” “project,” “anticipate,” “believe,” “plan,” “forecast,” “continue” or “could” or the negative of these terms or variations of them or similar terms. Furthermore, forward-looking statements may be included in subsequent annual, quarterly and other filings that we make with the United States Securities and Exchange Commission (the “SEC”) and Canadian securities regulators or press releases or oral statements made by or with the approval of one of our authorized executive officers. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that these expectations will prove to be correct. These forward-looking statements are subject to certain known and unknown risks and uncertainties, as well as assumptions that could cause actual results to differ materially from those reflected in these forward-looking statements. These include, but are not limited, to the material risks described more fully in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC and Canadian securities regulators on March 30, 2021, in Item 1A of this Quarterly Report on Form 10-Q, and in our subsequent filings in the U.S and Canada. All such risk factors are difficult to predict accurately and are generally beyond the direct control of the registrant. Readers are cautioned not to place undue reliance on any forward-looking statements contained in this Quarterly Report on Form 10-Q, which reflect management’s opinions only as of the date hereof. Forward-looking statements in this Quarterly

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Report on Form 10-Q, other than the statements regarding the proposed arrangement with Trulieve Cannabis Corp. (“Trulieve”), do not assume the consummation of such proposed arrangement unless specifically stated otherwise. Except as required by law, we undertake no obligation to revise or publicly release the results of any revision to any forward-looking statements. You are advised, however, to consult any subsequent  disclosures we make in our reports to the SEC and Canadian securities regulators. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained in our Annual Report on Form 10-K for the year ended December 31, 2020, this Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, and our subsequent filings in the U.S. and Canada.

Numerous factors could cause our actual results to differ materially from those described in such forward-looking statements, including, among other things:

There are various risks associated with the proposed arrangement with Trulieve which could impact our business operations, financial results and share price, including without limitation, the failure to complete or delays in completing the arrangement, termination of the arrangement, the payment of termination amounts in certain circumstances, the fixed nature of the deal consideration (subject to potential downward adjustment upon the occurrence of certain permitted Harvest debt refinancings), and fluctuations in Trulieve’s stock price.

Actions taken against us by the U.S. federal government for participation in the cannabis industry, as cannabis remains illegal under U.S. federal law.

Changes in the regulation of the cannabis industry at the U.S. federal, state, or local level.

Increased or heightened scrutiny by United States and Canadian authorities due to the industry in which we operate.

The uncertain application of laws and regulations that impact our operations owing to the legal status of cannabis.

Our ability to fully comply with applicable regulatory requirements in the jurisdictions where we carry on our business.

The results of future clinical research may be unfavorable to cannabis which may have a material adverse effect on the demand for our products.

The accuracy of various articles, reports and studies that support our beliefs regarding the medical benefits, viability, safety, efficacy and dosing of cannabis, and the impact of such reports on consumer perceptions.

Inconsistent public opinion and perception of the medical and adult-use use cannabis industry hinders market growth and state adoption.

The expansion of our cultivation facilities to support product sales in retail and wholesale channels.

Our continued success in improving product yield in our current and future growing facilities.

Our financial statements have been prepared on the going concern basis and we have incurred net losses in each of our past three fiscal years, we cannot provide assurance as to when, or if, we will become profitable.

Our ability to acquire anticipated needed additional financing to operate our business and difficulties we may face in acquiring additional financing on terms acceptable to us or at all.

Our ability to successfully integrate acquired businesses and personnel and exercise sufficient control to direct their operations. Our subsidiaries may not be able to obtain necessary permits and authorizations.

Disparate state-by-state regulatory landscapes and the constraints related to holding cannabis licenses in various states results in operational and legal structures for realizing the benefit from cannabis licenses that could result in materially detrimental consequences to us.

Security risks related to our physical facilities and cash transfers.

Our ability to generate revenue and be successful in the implementation of our business plan is dependent on consumer acceptance of and demand for our products.

Our business is subject to the risks inherent in agricultural operations, including supply chain reliability and contract disputes.

Cyberattacks, data or privacy breaches or technological malfunctions could undermine or inhibit our operations and expose us to losses, reputational harm, and liabilities.

Our insurance coverage may not cover all potential risks associated with our operations.

The inability of third-party suppliers to produce and ship certain products and orders in a timely manner, or at all.

We are dependent on key inputs, suppliers and skilled labor for the cultivation, extraction and production of cannabis products.

Our ability to attract and retain key personnel.

The outcome of any material litigation or regulatory proceedings in which we are, or may, be involved.

Difficulty protecting our intellectual property and enforcing claims related to our brands, trademarks, trade names, and proprietary processes.

Changes in Canadian or United States tax laws.

Our ability to raise further capital as the market price for our publicly traded shares is volatile (as well as for publicly traded cannabis companies generally), and our voting control is concentrated.

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Unfavorable coverage by securities or industry analysts.

Currency fluctuations in the U.S. dollar relative to the Canadian dollar.

The effects of the weather, natural disasters, and health pandemics, including the novel coronavirus (COVID-19), on customer demand, our supply chain as well as our condensed consolidated results of operation, financial position and cash flows.

Impacts related to the COVID-19 pandemic, including, consumer demand volatility, supply chain disruptions, retail and manufacturing disruptions or mandated closures, and regulatory delays, among others.

Use of Names

In this Quarterly Report on Form 10-Q, unless the context otherwise requires, the terms “we,” “us,” “our,” “Company” or “Harvest” refer to Harvest Health & Recreation Inc. together with its wholly owned subsidiaries.

Overview of the Business

We are one of the largest multi-state vertically integrated operators in the cannabis industry in the United States that operates from “seed to sale.”

Our business was established in Arizona and received its first license there in 2012. We were formed to own, operate and develop certain businesses related to the cultivation, processing, distribution and sale of cannabis and cannabis related products under the “Harvest” brand in jurisdictions where such cultivation, processing, distribution and sale is authorized under applicable state law.

We are one of the largest operators in the state of Arizona, which is one of the largest medical and recreational cannabis markets in the country and one of the oldest regulated cannabis markets in the world. Building on our success in Arizona, we have consistently grown our revenues and industry footprint every year since founding and currently operate facilities in Arizona, California, Florida, Maryland, Nevada, North Dakota and Pennsylvania. On February 19, 2021, we completed the divestiture of our North Dakota retail assets. Since 2013, we have won a variety of operating awards, including seven Best Dispensary awards issued by four independent organizations, four Best Medical Cannabis Strain awards, and one Best Medical Cannabis Product award.

During the remainder of 2021, we plan to expand cultivation facilities in key states, investing in new and existing operations for indoor, outdoor, and greenhouse cannabis to support product sales in retail and wholesale channels. We believe our approach to design, construction and implementation results in competitive production costs. More recently, we have shifted away from large acquisitions to focus on development of assets in core markets and streamlining operations as part of an overall plan to achieve profitability.

We conduct business through wholly owned and majority-owned operating subsidiaries, operating agreements and other commercial arrangements established to conduct the different business areas of each business (each an “Operating Subsidiary” and together, “Operating Subsidiaries”).

We operate in one segment, the cultivation, processing and sale of cannabis. We grow cannabis in outdoor, indoor, and greenhouse facilities for sale in our retail locations and for wholesale. In addition, we convert cannabis biomass into formulated oil using a variety of proprietary extraction techniques. We use some of this oil to manufacture products such as vaporizer cartridges and edibles. We sell cannabis, oil, and manufactured products in our dispensaries and to third parties for resale. In addition, we collect fees on contracts with third parties who provide services at certain cultivation facilities we are licensed to operate.

Our principal operating locations and type of operation are listed below as of June 30, 2021:

State	Nature of Operations	Commencement Periods
Arizona - 15 locations	Retail Dispensary	September 2013 - September 2020
California - 4 locations	Retail Dispensary	December 2018 - October 2019
Florida - 10 locations	Retail Dispensary	February 2019 - June 2021
Maryland - 3 locations	Retail Dispensary	September 2018 - December 2019
Pennsylvania - 10 locations	Retail Dispensary	September 2018 - May 2021
Arizona	Greenhouse/Outdoor Grow/Processing Lab	July 2015 - February 2020
Colorado - 1 location	Processing	October 2020
Florida	Cultivation/Processing	February 2019 - December 2019
Maryland	Cultivation/Processing	September 2017 - July 2019
Nevada	Cultivation/Processing	August 2020
Pennsylvania	Cultivation/Processing	March 2020
Utah(1)	Indoor Grow	October 2020

(1)On July 14, 2021, the Company divested the indoor grow location located in Ogden, Utah for an immaterial amount of cash.

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We are currently in various stages of expansion as we are growing our commercial footprint focusing on acquiring and building additional retail, cultivation and processing locations for medical and adult use cannabis. We expect to grow less through acquisitions and more through organic growth in the markets in which we already occupy.

Each Operating Subsidiary holds the active and/or pending cannabis licenses associated with its activities, staffs, manages or has a commercial arrangement with the operating locations, and/or owns the real estate and primary fixed assets used in the cannabis businesses.

In certain states, cannabis licenses are typically divided into three categories: dispensary, cultivation, and processing. Dispensary licenses comprise the retail operations and allow a company to dispense cannabis to patients. Cultivation licenses allow a company to grow cannabis plants and processing licenses allow for the conversion of cannabis into other products (e.g., edibles, oil, etc.). Cultivation and processing licenses comprise the wholesale operations. In other states, for example Arizona where our largest concentration of business activity is located, cannabis licenses are defined as vertically integrated, which allows the license holder the right to engage in dispensary, cultivation, and processing activities.

Arizona Proposition 207, also known as the Smart and Safe Arizona Act, was a voter initiative to legalize the adult recreational use of cannabis that was approved by voters on November 3, 2020. The Arizona Smart and Safe Act directed the Arizona State Department of Health Services to establish rules for retail cannabis sales by June 1, 2021, to allow cannabis to be subject to state and local sales taxes like other retail items, and would impose an additional 16% excise tax on cannabis products. On January 22, 2021, we recorded the first sale and started offering access to regulated and legal adult recreational use cannabis products to our customers.

Arrangement Agreement

On May 10, 2021, we entered into an Arrangement Agreement (the “Arrangement Agreement”) with Trulieve Cannabis Corp (“Trulieve”), pursuant to which Trulieve will acquire all of the issued and outstanding subordinate voting shares, multiple voting shares and super voting shares of Harvest pursuant to a plan of arrangement under the Business Corporations Act (British Columbia)  (the “Arrangement”). Subject to the terms and conditions in the Arrangement Agreement, each subordinate voting share, multiple voting share and super voting share of Harvest outstanding immediately prior to the effective time of the Arrangement will be converted into 0.1170 of a share of Trulieve subordinate voting shares, subject to certain adjustments based upon the occurrence of certain permitted Harvest debt refinancings. At the effective time of the Arrangement, the multiple voting shares and super voting shares will be treated on an as-converted basis to subordinate voting shares pursuant to their respective terms. The obligations of Trulieve and Harvest to consummate the Arrangement are subject to customary conditions, including, but not limited to, (a) obtaining the required approval of Harvest’s shareholders, (b) obtaining an approval of the Supreme Court of British Columbia (or any other court with appropriate jurisdiction) at a hearing upon the procedural and substantive fairness of the terms and conditions of the Arrangement, (c) the absence of any injunction or similar restraint prohibiting or making illegal the consummation of the Arrangement or any of the other transactions contemplated by the Arrangement Agreement, (d) the required regulatory approvals having been obtained, including approval under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (e) no material adverse effect having occurred, (f) subject to certain materiality exceptions, the accuracy of the representations and warranties of each party and (g) the performance in all material respects by each party of its obligations under the Arrangement Agreement.

The foregoing description of the Arrangement Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the agreement which is included as Exhibit 2.1 to our Current Report on Form 8-K, filed on May 12, 2021.

We have prepared this Quarterly Report on Form 10-Q and the forward-looking statements contained in this Quarterly Report on Form 10-Q as if we were going to remain an independent company. If the Arrangement Agreement is consummated, many of the forward-looking statements contained in this Quarterly Report on Form 10-Q will no longer be applicable.

Results of Operations

The following table presents selected financial information derived from our condensed consolidated financial statements:

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(In thousands, except per share data)	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Total Revenues	$	102,463		$	55,661		$	191,289		$	99,896
Less Cost of Goods Sold		50,201			32,246			91,109			58,332
Total Gross Profit	$	52,262		$	23,415		$	100,180		$	41,564
Total Expenses	$	40,933		$	32,389		$	75,498		$	75,558
Other Expense, Net	$	(21,770	)	$	(14,634	)	$	(51,610	)	$	(908	)
Net Loss Attributable to Harvest	$	(19,505	)	$	(27,574	)	$	(42,627	)	$	(42,958	)
Loss Per Share	$	(0.05	)	$	(0.08	)	$	(0.10	)	$	(0.13	)
Adjusted EBITDA (non-GAAP)	$	28,022		$	(395	)	$	54,938		$	(5,203	)

Revenue

We derive our revenue from both our wholesale and retail businesses from cannabis products we manufacture, sell and distribute to third-party retail customers, and from direct sales to end consumers in our retail stores. In addition, we collect fees on contracts with third parties who provide services at certain cultivation facilities we are licensed to operate.

Comparison between the three months ended June 30, 2021 and 2020:

Revenue was $102.5 million and $55.7 million, respectively, representing an increase of $46.8 million or 84%. Revenue growth was driven by a $43.0 million increase in retail operations and $7.9 million increase in wholesale. Approximately 89% of our revenue was derived from our core markets: Arizona, Florida, Maryland, and Pennsylvania during the three months ended June 30, 2021. Revenue growth was driven by the full quarter contribution of recreational sales in Arizona, growth in new and existing locations companywide, and contribution from cultivation and manufacturing expansion activities. The increase was partially offset by a $5.0 million planned decrease in licensing due to the cancelation and restructuring of margin dilutive contracts at the end of 2020.

Comparison between the six months ended June 30, 2021 and 2020:

Revenue was $191.3 million and $99.9 million, respectively, representing an increase of $91.4 million or 91%. Revenue growth was driven by the addition of newly opened and acquired dispensaries, growth in our existing cultivation, manufacturing, and retail operations and the legalization of adult recreational use of cannabis in Arizona. The launch of sales to adult use consumers in Arizona on January 22, 2021 in all 15 of the Company’s Arizona dispensaries contributed to retail revenue growth during the first quarter. During the three months ended June 30, 2021 we added five new retail locations and continued our expansion activities at several cultivation and manufacturing facilities. The Company generated revenue from 12 cultivation and processing facilities in the first quarter, including contributions from Colorado, Nevada, and Utah that did not contribute revenue during the prior year period. Revenue growth during the quarter was partly offset by the divestiture of retail assets in Arkansas and North Dakota and a decline in licensing fees due to the cancelation and restructuring of margin dilutive contracts at the end of 2020.

Cost of Goods Sold

Cost of goods sold are derived from costs related to the internal cultivation and production of cannabis and from retail purchases made from other licensed producers operating within our state markets. Cost of goods sold includes the costs directly attributable to product sales and includes amounts paid for finished goods, such as flower, edibles, and concentrates, as well as packaging and other supplies, fees for services and processing, and allocated overhead which includes allocations of rent, administrative salaries, utilities and related costs. Cannabis costs are affected by various state regulations that limit the sourcing and procurement of cannabis product, which may create fluctuations in gross profit over comparative periods as the regulatory environment changes.

Comparison between the three months ended June 30, 2021 and 2020:

Cost of goods sold was $50.2 million, an increase of $18.0 million or 56%, driven by increased sales as described above.

Comparison between the six months ended June 30, 2021 and 2020:

Cost of goods sold was $91.1 million, an increase of $32.8 million or 56%, driven by increased sales as described above.

Gross Profit & Gross Margin

Gross profit is revenue less cost of goods sold. Gross margin measures our gross profit as a percentage of revenue.

We have developed a strategy to focus primarily on revenue growth in our core markets while working to streamline the business and realize operational efficiencies. We expect to grow less through acquisitions and more through organic growth and continued

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development of the existing asset base in the remainder of 2021. Quarterly fluctuations in revenue mix may impact gross margins. Gross margins in our retail operations are the highest and most influential on reported results. As we continue to make investments in the cultivation and manufacturing of our own products for sale in our retail locations, we expect the percentage of revenue from retail operations to increase and drive a favorable impact on gross margin. While there are likely to be quarterly fluctuations in gross margin, we expect the overall trend will be upward in the near term as we focus more heavily on core markets with greater profit potential.

Comparison between the three months ended June 30, 2021 and 2020:

Gross profit was $52.3 million, an increase of $28.9 million over the prior year comparable period. This represented a total gross margin of 51%, an increase of 900 basis points as compared to a gross profit margin of 42% for the prior year comparable period.

Comparison between the six months ended June 30, 2021 and 2020:

Gross profit for was $100.2 million, an increase of $58.6 million over the prior year comparable period. This represented a total gross margin of 52%, an increase of 1,000 basis points as compared to a gross profit margin of 42% for the prior year comparable period.

The increase in gross margin is primarily driven by improved gross margin on retail sales due to a reduction in discounts. The reduction in discounts is a result of an increase in retail sales related to the recreational sales in Arizona as well as other initiatives implemented to reduce discounts. The increase in licensing gross margin is due to the cancellation of a significant licensing agreement with a 1% gross margin further contributed to overall increased gross margin.

The following table shows the total percentage of revenue generated by each of our revenue streams and the gross margin for each:

	Three months ended June 30,									Six Months Ended June 30,
	2021			2020			Increase/(Decrease)			2021			2020			Increase/(Decrease)
Retail revenue		83	%		76	%		7	%		85	%		72	%		13	%
Wholesale revenue		14	%		13	%		1	%		12	%		13	%		(1	)%
Licensing and other revenue		3	%		11	%		(8	)%		3	%		14	%		(12	)%
Retail gross margin		50	%		49	%		1	%		52	%		49	%		3	%
Wholesale gross margin		52	%		30	%		22	%		48	%		30	%		19	%
Licensing and other gross margin		73	%		9	%		63	%		77	%		15	%		62	%

Total Expenses

Total expenses other than the cost of goods sold consist of general and administrative, sales and marketing costs, share-based compensation expense, and depreciation and amortization.

General and administrative expenses include costs incurred at our retail sites and corporate offices, primarily related to personnel costs and operating costs, and other professional service costs. Sales and marketing costs include expenses related to marketing and branding activities and development and support of customer relationships.

As part of our ongoing efforts to achieve profitability we have implemented cost reduction measures across the organization. We expect to realize the benefits of scale and operational efficiencies and focus more heavily on our core markets. Furthermore, we expect to have fewer acquisition and transaction costs related to our opportunistic expansion plans.

Share-based compensation includes the straight-line expense recognition of the grant date fair value of equity awards granted to employees and directors over their vesting lives. Depreciation and amortization includes the straight-line expense recognition of depreciation of property, plant and equipment over their depreciable lives. In addition, this includes the amortization of finite lived intangible assets.

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The following table sets forth the components of our expenses:

(In thousands)	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Salaries and benefits	$	14,202	$	12,495	$	26,655	$	26,180
Rent and occupancy		6,236		7,926		11,584		13,114
Professional and legal fees		8,391		3,720		12,935		8,055
Licensing and administration		3,495		2,547		6,785		4,897
Travel and entertainment		285		212		401		814
Supplies and testing		718		240		1,243		499
Total general and administrative expenses	$	33,327	$	27,140	$	59,603	$	53,559
Sales and marketing		1,224		1,248		2,122		2,524
Share-based compensation		3,741		3,276		8,603		17,080
Depreciation and amortization		2,641		725		5,170		2,395
Total expenses	$	40,933	$	32,389	$	75,498	$	75,558

Certain prior year amounts in the table above have been reclassified for consistency with the current year presentation. These reclassifications are not material and had no effect on the reported results of operations.

Comparison between the three months ended June 30, 2021 and 2020:

Total expenses were $40.9 million compared to $32.4 million for the comparable period. The $8.5 million increase was primarily attributable to the following:

$4.7 million increase in professional fees related to mergers and acquisitions and other legal expenses

$1.9 million increase in depreciation and amortization primarily driven by new store openings

$1.7 million increase in salaries and benefits due to adjustments recorded to reflect anticipated higher attainment on our bonus plan and increased employee count

Comparison between the six months ended June 30, 2021 and 2020:

Total expenses remained relatively flat compared to the prior year. The following activity occurred:

$8.5 million decrease in share-based compensation expense primarily due to a $10.0 million charge for 2.4 million options surrendered by certain executives and redistributed by the Company in 2020 and fewer options issued in 2021, partially offset by a $0.9 million charge for 0.6 million options surrendered by certain executives by the Company in 2021 and fewer cancellations

$4.9 million increase in professional fees related to mergers and acquisitions and other legal expenses

$2.8 million increase in depreciation and amortization attributed to new store openings, Willcox, Arizona cultivation sites, and other capital improvements

$1.9 million increase in licensing and administration due to overall growth in the Company

Total Other (Expense) Income

Comparison between the three months ended June 30, 2021 and 2020:

Total other expense was $21.8 million, an increase of $7.2 million compared to total other expense of $14.6 million. The increase was primarily due to:

$6.9 million fair value adjustment to increase the warrant liability - see Note 14

$4.5 million adjustment for fair value contingent consideration - see Note 16

$2.8 million decrease in loss on sales due to the sale of ICG to Hightimes that occurred in the prior year

$2.4 million decrease in contract asset impairments

Comparison between the six months ended June 30, 2021 and 2020:

Total other expense was $51.6 million, an increase of $50.7 million compared to total other expense of $0.9 million. The increase was attributed to:

$38.2 million fair value adjustment to increase the warrant liability

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$8.5 million decrease in other income due to the prior year having a $12.6 million gain on a payment of contingent consideration due to former CBx owners partially offset by a $3.6 million loss to record a contingent liability related to the separation agreement between the Company and a former executive officer and director

$4.2 million increase in interest expense due to a decrease in interest income primarily driven by a $56.3 million decrease in notes receivable, as well as an increase in non-cash interest expense for the amortization of debt issuance costs and debt discounts, including discounts for warrants issued with debt

Provision for Income Taxes

For the three months ended June 30, 2021 and 2020, federal and state income tax expense totaled $6.8 million and $1.1 million, respectively. The increase was primarily due to the increase in gross profit.

For the six months ended June 30, 2021 and 2020, federal and state income tax expense totaled $13.3 million and $4.9 million, respectively. The increase was primarily due to the increase in gross profit.

We are subject to income taxes in the jurisdictions in which we operate, and, consequently, income tax expense is a function of the allocation of taxable income by jurisdiction and the various activities that impact the timing of taxable events. As we operate in the illegal cannabis industry, we are subject to the limitations in Section 280E of the Internal Revenue Code of 1986, as amended (the “Code”), under which taxpayers are only allowed to deduct expenses directly related to sales of product. This results in permanent differences between ordinary and necessary business expenses deemed non-allowable under Code Section 280E result in a higher effective tax rate than most industries. Therefore, the effective tax rate can be highly variable and may not necessarily correlate to pretax income or loss.

Discontinued Operations

Following the completion of the merger with Interurban Capital Group, LLC (formerly Interurban Capital Group, Inc.) (“ICG”), the Company sold ICG to a wholly owned subsidiary of Hightimes Holding Corp. (“Hightimes”) following the spinoff of certain assets. At the time of disposition, ICG’s primary assets consisted of rights to acquire eight “Have A Heart”-branded cannabis dispensaries in California (the “California HAH Dispensaries”). In addition, the Company agreed to sell Hightimes the equity of two additional entities controlled by Harvest that are seeking cannabis dispensary licenses in California (the “Harvest Dispensaries”). As a result, assets and liabilities allocable to these operations were classified as held for sale. In addition, revenue and expenses, gains and losses relating to the discontinuation of the California HAH Dispensaries operations were eliminated from profit or loss from the Company’s continuing operations for all periods presented.

The Company also entered into a plan to abandon certain product lines or lines of business to include CBD products or items of inventory, and the Company’s planned expansion in the state of Michigan. Any related assets and liabilities are classified as held for sale. In addition, the revenue, expenses, gains and losses related to the discontinuation of these activities were eliminated from profit or loss from the Company’s continuing operations for all periods presented.

Discontinued operations are presented separately from continuing operations in the condensed consolidated statements of operations for the three and six months ended June 30, 2021 and 2020 and the condensed consolidated statements of cash flows for the six months ended June 30, 2021 and 2020.

Net loss before discontinued operations and non-controlling interest for the three months ended June 30, 2021 and 2020 was a loss of $17.3 million and $24.7 million, respectively. Net loss before discontinued operations and non-controlling interest for the six months ended June 30, 2021 and 2020 was a loss of $40.2 million and $39.8 million, respectively.

Non-GAAP Financial Measures

Adjusted EBITDA

Adjusted EBITDA is calculated as net income (loss) before non-controlling interest before net interest and other financing costs, income taxes, depreciation and amortization expenses; fixed and intangible asset impairments; gain or loss on sale of assets; change in fair value adjustment of liability; other (income) expense; foreign exchange gain (loss); share-based compensation expense; contract asset (recovery) impairment; discontinued operations, net of tax; other expansion expenses (pre-open); and transaction and other special charges.

We use adjusted EBITDA in assessing the effectiveness of our business strategies and as a factor in making incentive compensation decisions. In addition to its use by management, we also believe adjusted EBITDA is a measure widely used by securities analysts, investors, and others to evaluate financial performance of our company relative to our competitors. Adjusted EBITDA should not be

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considered a substitute for earnings before income taxes, net income or other results reported in accordance with GAAP. Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.

The following table provides a reconciliation of net loss before non-controlling interest to adjusted EBITDA for the periods indicated.

(In thousands)	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Net loss (GAAP) before non-controlling interest	$	(19,229	)	$	(25,645	)	$	(42,197	)	$	(41,117	)
Add (deduct) impact of:
Net interest and other financing costs(1)		9,184			9,390			17,905			14,106
Income tax		6,834			1,132			13,315			4,926
Amortization and depreciation(2)		3,532			1,803			7,051			4,257
(Gain) loss on sale of assets		21			2,783			(1,774	)		364
Fair value adjustment of liability		8,353			1,497			32,787			(5,448	)
Fair value of contingent consideration		4,500			-			4,500			-
Other (income) expense(3)		(269	)		(1,205	)		(1,773	)		(10,255	)
Foreign currency (gain) loss		(17	)		(30	)		(29	)		108
Share-based compensation expense		3,741			3,276			8,603			17,080
Contract asset impairment		-			2,420			-			2,420
Discontinued operations, net of tax		1,954			905			1,954			1,289
Other expansion expenses (pre-open)(4)		3,371			2,323			6,543			5,664
Transaction & other special charges		6,047			956			8,053			1,403
Adjusted EBITDA (non-GAAP)(5)	$	28,022		$	(395	)	$	54,938		$	(5,203	)

(1)Includes less than $0.1 million and $0.2 million of interest reported in cost of sales for the three months ended June 30, 2021 and 2020, respectively. Includes less than $0.1 million and $0.4 million for the six months ended June 30, 2021 and 2020, respectively.

(2)Includes $1.1 million and $0.9 million of depreciation reported in cost of sales for the three months ended June 30, 2021 and 2020, respectively. Includes $1.9 million of depreciation reported in cost of sales for both the six months ended June 30, 2021 and 2020, respectively.

(3)Primarily represents gains and losses associated with settlements of contingent consideration, litigation, and other non-recurring charges.

(4)These are set-up costs to prepare a location for its intended use. We adjust for this amount because we believe these expenses are not indicative of ongoing operations; therefore, this adjustment enhances comparability to prior periods.

(5)Adjusted EBITDA is a financial measure used by management that is not defined by U.S. GAAP and may not be comparable to similar measures presented by other companies. See discussion above for a definition of our adjusted EBITDA non-GAAP financial measure and reconciliation to the most directly comparable U.S. GAAP measure.

The adjusted EBITDA income during the three months ended June 30, 2021 was $28 million, as compared to an adjusted EBITDA loss of $0.4 million during the three months ended June 30, 2020. The period-over-period increase of $28.4 million in the adjusted EBITDA is primarily attributed to increase in gross profit period-over-period as discussed in greater detail above. The adjusted EBITDA income during the six months ended June 30, 2021 was $54.9 million, as compared to an adjusted EBITDA loss of $5.2 million during the six months ended June 30, 2020. The period-over-period increase of $60.1 million in the adjusted EBITDA is primarily attributed to increase in gross profit period-over-period as discussed in greater detail above.

Liquidity and Capital Resources

Working Capital

We use working capital and cash flow measures to evaluate the performance of our operations and our ability to meet our financial obligations. We define Working Capital as current assets less current liabilities. The calculation of Working Capital provides additional information and is not defined as a measure of financial performance under GAAP. This measure should not be considered in isolation or as a substitute for any standardized measure under GAAP. This information is intended to provide investors with information about our liquidity.

Other companies in our industry may calculate this measure differently than we do, limiting its usefulness as a comparative measure.

As of June 30, 2021, we had negative working capital of $40.5 million, a decrease of $102.8 million as compared to December 31, 2020, driven primarily by $113.5 million increase in current notes payable due to unsecured convertible debentures with the principal amount of $100.0 million with a maturity of May 2022 and $20.2 million for taxes paid attributed to overall growth in the company and

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specifically related Arizona Recreation. As of June 30, 2021 and December 31, 2020, we had total current liabilities of $195.9 million and $99.1 million, respectively, and cash and cash equivalents of $71.1 million and $78.1 million, respectively, to meet our current obligations.

On May 10, 2021, the Company entered into the Arrangement Agreement with Trulieve, pursuant to which Trulieve agreed, subject to the terms and conditions thereof, to acquire all of the issued and outstanding subordinate voting shares of the Company, multiple voting shares of the Company, and super voting shares of the Company. On July 13, 2021, the Company issued the Proxy soliciting stockholder approval of the proposed transaction. Upon completion of the transaction and change in control, the Company will have the ability to repay or refinance indebtedness.

Cash Flows

(in thousands)	Six Months Ended June 30,
	2021			2020
Net cash provided by (used in):
Operating activities	$	(14,167	)	$	(21,219	)
Investing activities		(5,523	)		(30,565	)
Financing activities		11,157			91,316
Net increase/(decrease) in cash and cash equivalents		(8,533	)		39,532
Cash, cash equivalents, and restricted cash, beginning of period		82,597			30,685
Cash, cash equivalents, and restricted cash, end of period	$	74,064		$	69,668

Operating activities

Net cash used in operating activities for the six months ended June 30, 2021 was $14.2 million and consisted the following:

$42.2 million net loss before non-controlling interest

$58.2 million net add-back of non-cash income statement items

$30.2 million net change in operating assets and liabilities

Included in the non-cash items were $32.8 million due to the change in fair value of warrant liabilities driven by increased stock price, $8.6 million for share-based compensation, and $7.1 million for depreciation and amortization.

Net cash used in operating activities for the six months ended June 30, 2020 of $21.2 million consisted of the following:

$41.1 million net loss before non-controlling interest

$8.9 million net add-back of non-cash income statement items

$10.4 million net change in operating assets and liabilities

Included in the non-cash items were $17.1 million for share-based compensation, $13.9 million gain on an earnout, $5.4 million gain for change in fair value of financial liability, and $6.2 million gain on deconsolidation of two Harvest entities.

Investing activities

Net cash used by investing activities for the six months ended June 30, 2021 was $5.5 million, compared to net cash used in investing activities for the six months ended June 30, 2020 of $30.6 million. The decrease of $25.1 million in cash provided was primarily due to proceeds of $22.3 million from the sale leaseback transaction during six months ended June 30, 2021, see Note 7 of our condensed consolidated financial statements in Item 1 for additional information, and $14.4 million in cash payments for business acquisitions during the six months ended June 30, 2020.

Financing activities

Net cash provided by financing activities for the six months ended June 30, 2021 and 2020 was $11.2 million and $91.3 million, respectively. The decrease of $79.6 million was primarily due to a decrease in proceeds from issuances of equity and proceeds received from non-convertible notes payable issued compared to prior year, partially offset by proceeds received from the exercise of warrants. During the six months ended June 30, 2021, there were proceeds from the exercise of warrants of $10.3 million. During the six months ended June 30, 2020, the Company raised additional funds from debt and equity financing transaction by issuing an aggregate of $20.1 million of debt in January 2020 and $59.0 million of Multiple Voting Shares on March 11, 2020.

Off-Balance Sheet Arrangements

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As of June 30, 2021, we do not have any off-balance-sheet arrangements that have, or are reasonably likely to have, a current or future effect on our results of operations or financial condition, including, and without limitation, such considerations as liquidity and capital resources.

Transactions with Related Parties

See Note 18 of our condensed consolidated financial statements in Item 1 for detail of our transactions with related parties.

Recently Issued Accounting Pronouncements

See Note 3 of our condensed consolidated financial statements in Item 1 for the impact of recently issued accounting pronouncements on the Company’s condensed consolidated financial statements.

Critical Accounting Estimates

The preparation of our condensed consolidated financial statements in conformity with GAAP requires management to make judgments, estimates and assumptions that impact the amounts reported in our condensed consolidated financial statements and accompanying notes that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates.

There have been no material changes to our critical accounting estimates from those discussed in Item 7 of our 2020 annual report on Form 10-K.

Financial Instruments and Financial Risk Management

Our financial instruments consist of cash and cash equivalents, accounts receivable, member contribution receivable, notes receivable, due from related parties, investments, accounts payable and accrued liabilities, notes payable, derivative liability, liability for acquisition of noncontrolling interest and contingent consideration payable.

Financial instruments recorded at fair value are classified using a fair value hierarchy that reflects the significance of the inputs to fair value measurements. The three levels of hierarchy are:

Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities;

Level 2—Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly and

Level 3—Inputs for the asset or liability that are not based on observable market data.

Financial Risk Management

We are exposed in varying degrees to a variety of financial instrument related risks. Our Board of Directors mitigates these risks by assessing, monitoring and approving our risk management processes.

Credit Risk

Credit risk is the risk of a potential loss to us if a customer or third party to a financial instrument fails to meet its contractual obligations. The maximum credit exposure at June 30, 2021 is the carrying amount of cash and cash equivalents. We do not have significant credit risk with respect to our customers. All cash and cash equivalents are placed with major U.S. financial institutions.

We provide credit to our customers in the normal course of business. We have established credit evaluation and monitoring processes to mitigate credit risk but have limited risk as the majority of our sales are transacted with cash.

Liquidity Risk

Liquidity risk is the risk that we will not be able to meet our financial obligations associated with financial liabilities. We manage liquidity risk through the effective management of our capital structure. Our approach to managing liquidity is to ensure that we will have sufficient liquidity at all times to settle obligations and liabilities when due.

Market Risk

Market risk is the potential economic loss arising from adverse changes in market rates and prices, such as interest rates, foreign exchange rates, raw material and other commodity prices. Each type of market risk affecting the Company is discussed in Item 3 of this Quarterly Report on Form 10-Q.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes to market risk exposures related to changes in currency exchange rates, interest rates, commodity costs and equity price from those discussed in Item 7A of our 2020 annual report on Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, and summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q was made under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer.

Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30, 2021, our disclosure controls and procedures (a) are effective to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is timely recorded, processed, summarized and reported and (b) include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control Over Financial Reporting

This Quarterly Report on Form 10-Q does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our independent registered public accounting firm due to a transition period established by the rules of the SEC for newly public companies.

Changes in Internal Control Over Financial Reporting

There have been no significant changes to the Company’s internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d‑15(f) under the Exchange Act) that occurred during the quarter ended June 30, 2021, that materially affected, or were reasonably likely to materially affect, our internal controls over financial reporting.

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are a party to various pending judicial and administrative proceedings that arose in the ordinary course of business. After reviewing the currently pending lawsuits and proceedings (including the probable outcomes, reasonably anticipated costs and expenses and our established reserves for uninsured liabilities), we do not believe that any liabilities that may result from these proceedings are reasonably likely to have a material adverse effect on our liquidity, financial condition or results of operations. Legal proceedings are also discussed in Note 16 to our consolidated financial statements in Item 1 of Part I of this Form 10-Q.

ITEM 1A. RISK FACTORS

The risk factors below should be read carefully in conjunction with those risk factors disclosed in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020.

Risks Related to the Arrangement Agreement

Failure to complete, or delays in completing, the Arrangement could materially and adversely affect our results of operations and our stock price.

The completion of the Arrangement is subject to a number of conditions precedent, some of which are outside Harvest’s and Trulieve’s control, including receipt of shareholder and regulatory approvals.

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To complete the Arrangement, each of Harvest and Trulieve must make certain filings with and obtain certain consents and approvals from various governmental and regulatory authorities, including approval of the Plan of Arrangement from the Supreme Court of British Columbia. Harvest and Trulieve have not yet obtained the regulatory approvals which are required to complete the Arrangement. The regulatory approval processes may take a lengthy period of time to complete, which could delay completion of the Arrangement. There can be no assurance as to the outcome of the approval processes, including the undertakings and conditions that may be required for approval, or whether the regulatory approvals will be obtained at all.

In addition, the completion of the Arrangement by Harvest and Trulieve is conditional on, among other things, no action or circumstance occurring that would result in a material adverse effect on Harvest’s and Trulieve’s business, operations, financial condition or results of operations.

There can be no certainty, nor can Harvest or Trulieve provide any assurance, that all conditions precedent to the Arrangement will be satisfied or waived, or, if satisfied or waived, when they will be satisfied or waived and, accordingly, the Arrangement may not be completed or may be delayed. If, for any reason, the Arrangement is not completed, its completion is materially delayed and/or the Arrangement Agreement is terminated, the market price of our Subordinate Voting Shares may be materially adversely affected. Our business, financial condition or results of operations could also be subject to various material adverse consequences, including that we would remain liable for costs relating to the Arrangement.

In addition, if the Arrangement is not completed for any reason, there are risks that the announcement of the Arrangement and the dedication of our resources to the completion thereof could have a negative impact on our relationships with our stakeholders and could have a material adverse effect on our current and future operations, financial condition and prospects. We may also incur significant transaction expenses in connection with the Arrangement, regardless of whether the Arrangement is completed.

We are subject to customary non-solicitation provisions under the Arrangement Agreement. The Arrangement Agreement also restricts us from taking specified actions until the Arrangement is completed without the consent of Trulieve. These restrictions may prevent us from pursuing attractive business opportunities that may arise prior to the completion of the Arrangement. 

Each of the parties may terminate the Arrangement if the closing has not occurred by the outside date specified in the Arrangement Agreement, and in certain other circumstances.

Each of Harvest and Trulieve has the right in certain circumstances, in addition to termination rights relating to the failure to satisfy the conditions of closing, to terminate the Arrangement. Accordingly, there can be no certainty, nor can Harvest provide any assurance that the Arrangement will not be terminated by either Harvest or Trulieve prior to the completion of the Arrangement. In addition, if the Arrangement is not completed by February 28, 2022, either Harvest or Trulieve may choose to terminate the Arrangement Agreement. The Arrangement Agreement also includes termination amounts payable if the Arrangement Agreement is terminated in certain circumstances. 

Litigation filed against Harvest could prevent or delay the completion of the Arrangement or result in the payment of damages following completion of the Arrangement.

Harvest and its Board of Directors currently are and may in the future be parties, among others, to various litigation related to the Arrangement, including shareholder actions. Six lawsuits have been filed against Harvest and its Board of Directors in federal court with respect to the Arrangement: Oppen v. Harvest Health et al., C.A. No. 21-02048 (D. Col.); Stout v. Harvest Health et al., C.A. No. 21-06398 (S.D.N.Y.); Jenkins v. Harvest Health et al., C.A. No. 21-02045 (D. Col.); Coffman v. Harvest Health et al., C.A. No. 21-02026 (D. Col.); Wean v. Harvest Health et al., C.A. No. 21-06435 (S.D.N.Y.); and Finger v. Harvest Health et al., C.A No. 21-02086 (D. Col.). Each lawsuit asserts claims under Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 14a-9 promulgated thereunder, and alleges that the Proxy omits and/or misrepresents material information concerning: (i) Harvest’s and Trulieve’s financial projections; (ii) the financial analyses performed by Harvest’s  financial advisors, Moelis & Company LLC and Haywood Securities Inc. (“Haywood”), in connection with their fairness opinions; (iii) information regarding the nature of Haywood’s arrangement; and (iv) the sales process leading up to the proposed Arrangement. The lawsuits generally sought, among other things, an injunction of the shareholder vote that took place on August 11, 2021 at which Harvest shareholders voted on a proposal to approve the Arrangement, rescission of the Arrangement if it is approved by Harvest’s shareholders, and damages.

While Harvest believes that the disclosures set forth in the Proxy comply fully with applicable law, and vigorously denies any wrongdoing or liability with respect to the allegations and claims asserted, or which could have been asserted, in the lawsuits, to resolve the purported shareholders’ claims and moot the disclosure claims, to avoid nuisance, potential expense, and delay, and to provide additional information to Harvest’s shareholders, Harvest determined to voluntarily supplement the Proxy with certain additional disclosures, such additional disclosures being made by Harvest in its Current Report on Form 8-K filed with the SEC on August 6, 2021.

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The results of complex legal proceedings are difficult to predict and could delay or prevent the Arrangement from becoming effective in a timely manner. Moreover, the pending litigation and any future additional litigation could be time consuming and expensive, could divert Harvest’s management’s attention away from its regular business, and, if any one of these lawsuits is adversely resolved against Harvest, could have a material adverse effect on Harvest’s financial condition or the condition of the combined company. Further, if a settlement or other resolution is not reached in the lawsuits referenced above or other lawsuits challenging the Arrangement and the plaintiffs secure injunctive or other relief prohibiting, delaying or otherwise adversely affecting Harvest’s ability to complete the Arrangement on the terms contemplated by the Arrangement Agreement, then the Arrangement may not become effective in a timely manner or at all.

The termination amounts provided under the Arrangement Agreement may discourage other parties from attempting to acquire Harvest or Trulieve.

Under the Arrangement Agreement, each of Harvest and Trulieve would be required to pay to the other a termination amount of US$100 million in the event the Arrangement Agreement is terminated in certain circumstances. This termination amount may discourage other parties from attempting to acquire Harvest or otherwise make an acquisition proposal to Harvest, even if those parties would be willing to offer our shareholders a benefit greater than what the Arrangement offers.

Uncertainty surrounding the Arrangement could adversely affect our retention of strategic partners and personnel and could negatively impact our future business and operations.

Because the Arrangement is dependent upon satisfaction of certain conditions, its completion is subject to uncertainty. In response to this uncertainty, our strategic partners may delay or defer decisions concerning our business. Any delay or deferral of those decisions by strategic partners could have a material adverse effect on our business and operations, regardless of whether the Arrangement is ultimately completed.

The transaction consideration is determined based upon a fixed exchange ratio, which will only be adjusted upon the occurrence of certain permitted Harvest debt refinancings. Additionally, the fluctuation in Trulieve’s stock price may impact the value of the Arrangement to Harvest’s securityholders.

The transaction consideration to be received by Harvest securityholders is fixed based upon an agreed upon exchange ratio set forth in the Arrangement Agreement. The exchange ratio is subject to downward adjustment upon the occurrence of certain permitted debt refinancings by Harvest, and in the event the exchange ratio is adjusted, the Harvest securityholders may receive less equity in Trulieve than they may receive under the exchange ratio initially set forth in the Arrangement Agreement, resulting in Harvest security holders holding less equity in Trulieve upon the effective time of the Arrangement.

Additionally, the market price of shares of Trulieve’s subordinate voting shares could fluctuate significantly prior to the effective date of the Arrangement in response to various factors and events, including, without limitation, as a result of the differences between Trulieve’s actual financial or operating results and those expected by investors and analysts, changes in analysts’ projections or recommendations, changes in general economic or market conditions, and broad market fluctuations. As a result of such fluctuations, historical market prices are not indicative of future market prices or the market value of the Trulieve subordinate voting shares that holders of Harvest shares may receive on the effective date of the Arrangement. Further, there can be no assurance that the trading price of Trulieve’s subordinate voting shares will not decline following the completion of the Arrangement.

ITEM 2. RECENT SALES OF UNREGISTERED EQUITY SECURITIES

On June 29, 2021, 1,181 Multiple Voting Shares were issued to a former owner of a private company in exchange for shares of Class B Common Stock of Banyan Acquisition Corp., our wholly owned subsidiary, for a price of $488 per share.

The issuance of Multiple Voting Shares originally and in connection with the exercise of warrants was made by the Company pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended, contained in Section 4(a)(2) and Regulation D promulgated thereunder or Regulation S promulgated thereunder, as applicable, each for transactions by an issuer not involving a public offering.

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ITEM 6. EXHIBITS

Exhibit Number	Description
2.1 3.1	Arrangement Agreement, by and between Trulieve Cannabis Corp. and Harvest Health & Recreation, Inc., dated as of May 10, 2021 (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K dated May 12, 2021) Amended and Restated Articles of Harvest Health & Recreation Inc. adopted as of September 11, 2020.(incorporated by reference to Exhibit 3.1 to the Company’s Form 10, filed with the SEC on November 5, 2020 (File No. 000-56224)
4.1	Coattail Agreement, dated November 14, 2018, by and among Karma Capital, LLC, Razor Investments, LLC, Harvest Health & Recreation Inc. and Odyssey Trust Company. (incorporated by reference to Exhibit 4.1 to the Company’s Form 10, filed with the SEC on November 5, 2020 (File No. 000-56224)
4.2	Form of 7% Unsecured Convertible Debenture, dated May 10, 2019, by Harvest Health & Recreation Inc. in favor of the Lenders thereto. (incorporated by reference to Exhibit 4.2 to the Company’s Form 10, filed with the SEC on November 5, 2020 (File No. 000-56224)
4.3	Form of Warrant to Purchase Subordinate Voting Shares of Harvest Health & Recreation Inc., dated May 10, 2019, issued to Purchasers of 7% Unsecured Convertible Debentures. (incorporated by reference to Exhibit 4.3 to the Company’s Form 10, filed with the SEC on November 5, 2020 (File No. 000-56224)
4.4	Warrant Indenture, dated as of December 20, 2019, between Harvest Health & Recreation Inc. and Odyssey Trust Company. (incorporated by reference to Exhibit 4.4 to the Company’s Form 10, filed with the SEC on November 5, 2020 (File No. 000-56224)
4.5	Trust Indenture, dated as of December 20, 2019, between Harvest Health & Recreation Inc. and Odyssey Trust Company related to 9.25% Senior Secured Notes due December 19, 2022 and 15% Senior Secured Notes due December 19, 2022.  (incorporated by reference to Exhibit 4.5 to the Company’s Form 10, filed with the SEC on November 5, 2020 (File No. 000-56224)
4.6	Form of 9% Convertible Promissory Note. (incorporated by reference to Exhibit 4.6 to the Company’s Form 10, filed with the SEC on November 5, 2020 (File No. 000-56224)
4.7	Warrant Indenture, dated as of October 28, 2020, between Harvest Health & Recreation Inc. and Odyssey Trust Company. (incorporated by reference to Exhibit 4.6 to the Company’s Form 10, filed with the SEC on November 5, 2020 (File No. 000-56224)
4.8*	Supplemental Warrant Indenture to Warrant Indenture dated December 20, 2019, by and between Harvest Health & Recreation Inc. and Odyssey Trust Company, dated June 30, 2021
4.9*	Amendment to Warrant Certificate dated May 10, 2019, by and between Harvest Health & Recreation Inc. and 1235 Fund, LP, dated June 30, 2021, issued to Purchaser of 7% Unsecured Convertible Debentures
4.10*	Supplemental Warrant Indenture to Warrant Indenture dated October 28, 2020, by and between Harvest Health & Recreation Inc. and Odyssey Trust Company, dated June 30, 2021
10.1	Form of Voting Support and Lock-Up Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated May 12, 2021)
10.2	Form of Voting Support Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated May 12, 2021)
31.1*	Certification of Principal Executive 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.
31.2*	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 Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

*               Filed herewith.

42

SIGNATURES

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

	HARVEST HEALTH & RECREATION, INC.
Date: August 13, 2021	By:	/s/ Steven M. White
		Steven M. White
		Chief Executive Officer
		(Principal Executive Officer)
Date: August 13, 2021	By:	/s/ Deborah K. Keeley
		Deborah K. Keeley
		Chief Financial Officer

43

EX-4.8

Exhibit 4.8

SUPPLEMENTAL WARRANT INDENTURE

THIS SUPPLEMENTAL WARRANT INDENTURE dated for reference as of June 30, 2021.

BETWEEN:

HARVEST HEALTH & RECREATION INC., a corporation existing under the laws of British Columbia (the “Corporation”)

AND:

ODYSSEY TRUST COMPANY, a trust company existing under the laws of Alberta and registered to carry on business in the provinces of British Columbia and Alberta (the “Warrant Agent”)

WHEREAS:

A.The Corporation and the Warrant Agent are parties to a warrant indenture dated as of December 20, 2019,(the “Indenture”) which provides for the issuance of an unlimited number of Warrants (as defined in the Indenture) subject to the conditions and limitations set forth in the Indenture;

B.Each Warrant entitles the holder thereof to acquire one (1) Subordinate Voting Share (as defined in the Indenture) upon payment of the ‎Exercise Price (as defined in the Indenture) prior to the Expiry Time (as defined in the Indenture), upon the terms and conditions set forth‎ in the Indenture; and

C.In accordance with Section 8.1(e) and Section 8.1(f) of the Indenture, the parties hereto agree to enter into this Supplemental Warrant Indenture to amend the Indenture to change the currency of the Exercise Price from Canadian dollars to the United States dollar equivalent thereof as at December 20, 2019, as set forth herein.

NOW THEREFORE in consideration of the mutual covenants herein and such other good and valuable consideration exchanged ‎between the Corporation and the Warrant Agent, the receipt and sufficiency of which is agreed to and acknowledged by ‎each of the parties, the Corporation and the Warrant Agent covenant and agree as follows‎:

1.Section 1.1 of the Indenture shall be amended by replacing the term “Exercise Price” with the following:

‎“Exercise Price” at any time means the price at which a whole Subordinate Voting Share ‎may be purchased by the exercise of a whole Warrant, which is initially USD$2.78 per ‎Subordinate Voting Share, payable in immediately available United States funds, subject ‎to adjustment in accordance with the provisions of Section 4.1‎;

2.The form of Warrant Certificate appended to the Indenture, including Schedule “B” - Exercise Form attached thereto, shall be amended to replace any reference to “CDN$3.66” to “USD$2.78”.

3.The Indenture shall be modified in accordance with this Supplemental Warrant Indenture, and this Supplemental Warrant Indenture shall form part of the Indenture for all purposes and every Warrantholder (as that term is defined in the Indenture) shall be bound thereby.

4.All capitalized terms not otherwise defined in this Supplemental Warrant Indenture shall have the same meanings ascribed thereto in the Indenture and any references herein to articles, section numbers and paragraphs shall refer to the articles, section numbers and paragraphs in the Indenture.

5.This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.

[Remainder of page intentionally left blank]

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Warrant Indenture to be duly executed as of the day and year first referenced above.

HARVEST HEALTH & RECREATION INC.

By:	/s/ Deborah K. Keeley
	Authorized Signatory

ODYSSEY TRUST COMPANY

By:
	Authorized Signatory
By:
	Authorized Signatory

EX-4.9

Exhibit 4.9

AMENDMENT TO WARRANT CERTIFICATE

THIS AMENDMENT TO WARRANT CERTIFICATE dated for reference as June 30, 2021.

BETWEEN:

HARVEST HEALTH & RECREATION INC., a corporation existing under the laws of British Columbia (the “Corporation”)

AND:

1235 FUND LP, a limited partnership formed under the laws of the province of Québec (the “Holder”)

WHEREAS:

A.The Corporation previously issued to the Holder 3,502,666 warrants to purchase Subordinate Voting Shares of the Corporation, evidenced by Warrant Certificate No. W-2019-01, dated as of May 10, 2019 (the “Warrant Certificate”);

B.The Warrant Certificate entitles the Holder to acquire one (1) Subordinate Voting Share (as defined in the Warrant Certificate) upon payment of the ‎Exercise Price (as defined in the Warrant Certificate) prior to the Expiry Time (as defined in the Warrant Certificate), upon the terms and conditions set forth‎ in the Warrant Certificate; and

C.The parties hereto agree to enter into this Amendment to Warrant Certificate to amend the Warrant Certificate to change the currency of the Exercise Price from Canadian dollars to the United States dollar equivalent thereof as at May 10, 2019, as set forth herein.

NOW THEREFORE in consideration of the mutual covenants herein and such other good and valuable consideration exchanged ‎between the Corporation and the Holder, the receipt and sufficiency of which is agreed to and acknowledged by ‎each of the parties, the Corporation and the Holder covenant and agree as follows‎:

1.The introductory paragraph to the Warrant Certificate shall be amended by replacing the term “$18.17” with “USD$13.71.”

2.The Warrant Certificate shall be modified in accordance with this Amendment to Warrant Certificate, and this Amendment to Warrant Certificate shall form part of the Warrant Certificate for all purposes and the Holder (as that term is defined in the Warrant Certificate) shall be bound thereby.

3.All capitalized terms not otherwise defined in this Amendment to Warrant Certificate shall have the same meanings ascribed thereto in the Warrant Certificate and any references herein to articles, section numbers and paragraphs shall refer to the articles, section numbers and paragraphs in the Warrant Certificate.

4.This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.

[Remainder of page intentionally left blank]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to Warrant Certificate to be duly executed as of the day and year first referenced above.

HARVEST HEALTH & RECREATION INC.

By:	/s/ Deborah K. Keeley
Name:	Deborah Keeley
Title:	Chief Financial Officer

1235 FUND LP

By:
	Authorized Signatory

EX-4.10

Exhibit 4.10

SUPPLEMENTAL WARRANT INDENTURE

THIS SUPPLEMENTAL WARRANT INDENTURE dated for reference as of June 30, 2021.

BETWEEN:

HARVEST HEALTH & RECREATION INC., a corporation existing under the laws of British Columbia (the “Corporation”)

AND:

ODYSSEY TRUST COMPANY, a trust company existing under the laws of Alberta and registered to carry on business in the provinces of British Columbia and Alberta (the “Warrant Agent”)

WHEREAS:

A.The Corporation and the Warrant Agent are parties to a warrant indenture dated as of October 28, 2020,(the “Indenture”) which provides for the issuance of up to 10,736,777 Warrants (as defined in the Indenture) subject to the conditions and limitations set forth in the Indenture;

B.Each Warrant entitles the holder thereof to acquire one (1) Subordinate Voting Share (as defined in the Indenture) upon payment of the ‎Exercise Price (as defined in the Indenture) prior to the Expiry Time (as defined in the Indenture), upon the terms and conditions set forth‎ in the Indenture; and

C.In accordance with Section 8.1(e) and Section 8.1(f) of the Indenture, the parties hereto agree to enter into this Supplemental Warrant Indenture to amend the Indenture to change the currency of the Exercise Price from Canadian dollars to the United States dollar equivalent thereof as at October 28, 2020, as set forth herein.

NOW THEREFORE in consideration of the mutual covenants herein and such other good and valuable consideration exchanged ‎between the Corporation and the Warrant Agent, the receipt and sufficiency of which is agreed to and acknowledged by ‎each of the parties, the Corporation and the Warrant Agent covenant and agree as follows‎:

1.Section 1.1 of the Indenture shall be amended by replacing the term “Exercise Price” with the following:

‎“Exercise Price” at any time means the price at which a whole Subordinate Voting Share ‎may be purchased by the exercise of a whole Warrant, which is initially USD$2.29 per ‎Subordinate Voting Share, payable in immediately available United States funds, subject ‎to adjustment in accordance with the provisions of Section 4.1‎;

2.The form of Warrant Certificate appended to the Indenture, including Schedule “B” - Exercise Form attached thereto, shall be amended to replace any reference to “CDN$3.05” to “USD$2.29”.

3.The Indenture shall be modified in accordance with this Supplemental Warrant Indenture, and this Supplemental Warrant Indenture shall form part of the Indenture for all purposes and every Warrantholder (as that term is defined in the Indenture) shall be bound thereby.

4.All capitalized terms not otherwise defined in this Supplemental Warrant Indenture shall have the same meanings ascribed thereto in the Indenture and any references herein to articles, section numbers and paragraphs shall refer to the articles, section numbers and paragraphs in the Indenture.

5.This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.

[Remainder of page intentionally left blank]

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Warrant Indenture to be duly executed as of the day and year first referenced above.

HARVEST HEALTH & RECREATION INC.

By:	/s/ Deborah K. Keeley
	Authorized Signatory

ODYSSEY TRUST COMPANY

By:
	Authorized Signatory
By:
	Authorized Signatory

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer Pursuant to Section 302 of the

Sarbanes-Oxley Act and Rule 13A-14(a) or 15d-14(a)

Under the Securities and Exchange Act of 1934

I, Steven M. White, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Harvest Health & Recreation Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, if any, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 13, 2021

/s/ Steven M. White

Steven M. White

Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer Pursuant to Section 302 of the

Sarbanes-Oxley Act and Rule 13a-14(a) or 15d-14(a)

Under the Securities and Exchange Act of 1934

I, Deborah K. Keeley, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Harvest Health & Recreation Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, if any, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 13, 2021

/s/ Deborah K. Keeley

Deborah K. Keeley

Chief Financial Officer

(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Steven M. White, the Chief Executive Officer (Principal Executive Officer) of Harvest Health & Recreation Inc. (the “Company”), hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my best knowledge, that:

1.the Quarterly Report on Form 10-Q for the three months ended June 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Form 10-Q”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.the information contained in the Form 10-Q of the Company for the three months ended June 30, 2021 fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 13, 2021

/s/ Steven M. White

Steven M. White

Chief Executive Officer

(Principal Executive Officer)

“This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Harvest Health & Recreation Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.”

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Deborah K. Keeley, the Chief Financial Officer (Principal Financial Officer) of Harvest Health & Recreation Inc. (the “Company”), hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my best knowledge, that:

1.The Quarterly Report on Form 10-Q of the Company for the three months ended June 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Form 10-Q”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.the information contained in the Form 10-Q of the Company for the three months ended June 30, 2021 fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 13, 2021

/s/ Deborah K. Keeley

Deborah K. Keeley

Chief Financial Officer

(Principal Financial Officer)

“This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Harvest Health & Recreation Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.”

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2021	Aug. 06, 2021
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2021
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q2
Document Transition Report	false
Entity File Number	000-56224
Entity Registrant Name	HARVEST HEALTH & RECREATION INC.
Entity Central Index Key	0001760439
Current Fiscal Year End Date	--12-31
Entity Incorporation, State or Country Code	A1
Entity Tax Identification Number	84-3264202
Entity Address, Address Line One	1155 W. Rio Salado Parkway
Entity Address, Address Line Two	Suite 201
Entity Address, City or Town	Tempe
Entity Address, State or Province	AZ
Entity Address, Postal Zip Code	85281
City Area Code	480
Local Phone Number	494-2261
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	true
Entity Ex Transition Period	true
Entity Shell Company	false
Subordinate Voting
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		281,335,640
Multiple Voting
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		1,363,385
Super Voting
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		2,000,000

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Current assets:
Cash and cash equivalents	$ 71,064	$ 78,055
Restricted cash	3,000	4,542
Accounts receivable, net of allowance of $222 and $824, respectively	8,788	5,051
Notes receivable, current portion	9,593	21,556
Related party notes receivable, current portion	10,276	10,052
Inventory, net	44,608	36,862
Other current assets	8,125	5,280
Total current assets	155,454	161,398
Notes receivable, net of current portion	10,516	18,211
Property, plant and equipment, net	179,182	176,827
Right-of-use assets for operating leases, net	113,395	60,843
Related party right-of-use assets for operating leases, net	5,541	5,621
Intangible assets, net	272,083	272,118
Corporate investments	40,924	19,091
Acquisition deposits	50	50
Goodwill	115,541	116,041
Assets held for sale	3,689	6,585
Other assets	19,672	19,850
TOTAL ASSETS	916,047	856,635
Current liabilities:
Accounts payable	7,988	10,755
Other current liabilities	30,434	28,896
Contingent consideration, current portion	10,398	17,985
Income tax payable	10,642	17,504
Operating lease liability, current portion	1,910	2,906
Related party operating lease liability, current portion	150	135
Notes payable, current portion	134,394	20,910
Total current liabilities	195,916	99,091
Notes payable, net of current portion	144,248	244,066
Warrant liability	3,438	20,908
Operating lease liability, net of current portion	112,731	58,637
Related party operating lease liability, net of current portion	5,518	5,595
Deferred tax liability	53,082	53,082
Total liabilities associated with assets held for sale	28	718
Other long-term liabilities	11	63
TOTAL LIABILITIES	514,972	482,160
Commitments and contingencies (Note 16)
STOCKHOLDERS' EQUITY
Capital stock	736,901	667,248
Accumulated deficit	(336,234)	(293,607)
Stockholders' equity attributed to Harvest Health & Recreation Inc.	400,667	373,641
Non-controlling interest	408	834
TOTAL STOCKHOLDERS' EQUITY	401,075	374,475
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	916,047	856,635
Subordinate Voting Shares
STOCKHOLDERS' EQUITY
Common stock, value	0	0
Multiple Voting Shares
STOCKHOLDERS' EQUITY
Common stock, value	0	0
Super Voting Shares
STOCKHOLDERS' EQUITY
Common stock, value	$ 0	$ 0

XML

Condensed Consolidated Balance Sheets (Parenthetical) (Unaudited) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2021	Dec. 31, 2020
Accounts Receivable, Allowance for Credit Loss, Current	$ 222	$ 824
Subordinate Voting
Common Stock, Shares Authorized	Unlimited	Unlimited
Common Stock, Shares, Issued	255,991,500	220,913,258
Common Stock, Shares, Outstanding	255,991,500	220,913,258
Multiple Voting
Common Stock, Shares Authorized	Unlimited	Unlimited
Common Stock, Shares, Issued	1,561,678	1,828,422
Common Stock, Shares, Outstanding	1,561,678	1,828,422
Super Voting
Common Stock, Shares Authorized	Unlimited	Unlimited
Common Stock, Shares, Issued	2,000,000	2,000,000
Common Stock, Shares, Outstanding	2,000,000	2,000,000

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Income Statement [Abstract]
Revenue, net of discounts	$ 102,463	$ 55,661	$ 191,289	$ 99,896
Cost of goods sold	(50,201)	(32,246)	(91,109)	(58,332)
Gross profit	52,262	23,415	100,180	41,564
Expenses
General and administrative	33,126	26,940	59,202	53,172
General and administrative, related party operating lease expense	201	200	401	387
Sales and marketing	1,224	1,248	2,122	2,524
Share-based compensation	3,741	3,276	8,603	17,080
Depreciation and amortization	2,641	725	5,170	2,395
Total expenses	40,933	32,389	75,498	75,558
Operating income (loss)	11,329	(8,974)	24,682	(33,994)
Other (expense) income
Gain on sale of assets	(21)	(2,783)	1,774	(364)
Other income	269	1,205	1,773	10,255
Fair value of liability adjustment	(8,353)	(1,497)	(32,787)	5,448
Fair value of contingent consideration	(4,500)	0	(4,500)	0
Foreign currency gain (loss)	17	30	29	(108)
Interest expense (includes related party interest income of less than $0.1 million for the three months ended June 30, 2021 and 2020 respectively and $0.2 million and and $0.1million for the six months ended June 30, 2021 and 2020 respectively)	(9,182)	(9,169)	(17,899)	(13,719)
Contract asset impairment	0	(2,420)	0	(2,420)
Loss before taxes and non-controlling interest	(10,441)	(23,608)	(26,928)	(34,902)
Income taxes	(6,834)	(1,132)	(13,315)	(4,926)
Net loss from continuing operations before non-controlling interest	(17,275)	(24,740)	(40,243)	(39,828)
Net income (loss) from discontinued operations, net of tax	(1,954)	(905)	(1,954)	(1,289)
Net loss before non-controlling interest	(19,229)	(25,645)	(42,197)	(41,117)
Net income attributed to non-controlling interest	(276)	(1,929)	(430)	(1,841)
Net loss attributed to Harvest Health & Recreation Inc.	$ (19,505)	$ (27,574)	$ (42,627)	$ (42,958)
Net loss per share - basic and diluted	$ (0.04)	$ (0.07)	$ (0.10)	$ (0.12)
Attributable to Harvest Health and Recreation Inc.	(0.05)	(0.08)	(0.10)	(0.13)
Attributable to discontinued operations, net of tax	$ 0	$ 0	$ 0	$ 0
Weighted-average shares outstanding - basic and diluted	413,103,779	364,580,737	410,383,008	334,380,082

XML

Condensed Consolidated Statements of Operations (Parenthetical) (Unaudited) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Income Statement [Abstract]
Related party interest income	$ 0.1	$ 0.1	$ 0.2	$ 0.1

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
CASH FLOW FROM OPERATING ACTIVITIES
Net loss	$ (42,197)	$ (41,117)
Net loss from discontinued operations, net of tax	1,954	1,289
Adjustments to reconcile net loss to net cash from operating activities
Depreciation and amortization	7,051	4,257
Amortization of right-of-use assets	3,348	2,559
Amortization of debt issuance costs	1,755	1,997
Amortization of debt discount	754	2,585
Amortization of warrant expense	1,867	2,236
Noncash gain on earnout	0	(13,897)
Noncash gain on deconsolidation	0	(6,244)
Noncash loss on derecognition of asset	0	4,141
Gain on North Dakota divestment	(573)	0
Gain on sale leaseback transaction	(1,058)	0
Gain on legal settlements	(1,089)	0
(Gain) loss on lease derecognition	(351)	311
Change in fair value of financial liability	32,787	(5,448)
Fair value of contingent consideration	4,500	0
Gain on held for sale	0	(2,150)
Change in deferred income tax	0	(945)
Share-based compensation	8,603	17,080
Noncash transaction expenses	544	0
Provision for bad debts and credit losses	115	2,420
Changes in operating assets and liabilities:
Accounts receivable	(3,854)	(3,205)
Inventory	(8,271)	1,733
Other assets	2,384	(1,557)
Income taxes payable	(6,862)	1,354
Accrued expenses and other liabilities	(6,894)	12,738
Accounts payable	(2,515)	3,535
Operating lease liabilities	(1,818)	(324)
Prepaid expenses and other current assets	(2,393)	(3,827)
NET CASH USED IN CONTINUING OPERATING ACTIVITIES	(12,213)	(20,479)
NET CASH USED IN DISCONTINUED OPERATING ACTIVITIES	(1,954)	(740)
NET CASH USED IN OPERATING ACTIVITIES	(14,167)	(21,219)
CASH FLOW FROM INVESTING ACTIVITIES
Acquisition of businesses, net of cash acquired	0	(14,397)
Sale leaseback transaction	22,280	0
Acquisitions/advances of intangibles	(2,022)	(1,180)
Divestment of California entities	0	2,358
Prepayment of acquisition consideration	(50)	4,697
Purchases of property, plant and equipment	(27,199)	(16,993)
Proceeds from divestments	2,122	0
Issuance of notes receivable	(1,617)	(1,159)
Payments received on notes receivable	963	825
NET CASH USED IN INVESTING ACTIVITIES	(5,523)	(30,565)
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from issuance of equity	0	58,999
Proceeds from exercise of warrants	10,262	0
Proceeds from issuance of notes payable	5,525	40,773
Repayment of notes payable	(4,603)	(6,538)
Proceeds from stock option exercises	664	0
Distributions from noncontrolling interests	(604)
Payment of finance lease liabilities	(87)	(24)
Fees paid for debt financing activities	0	(1,894)
NET CASH PROVIDED BY CONTINUING FINANCING ACTIVITIES	11,157	91,316
NET CASH USED IN DISCONTINUED FINANCING ACTIVITIES	0	(549)
NET CASH PROVIDED BY FINANCING ACTIVITIES	11,157	90,767
NET INCREASE/(DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	(8,533)	38,983
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	78,055	22,685
RESTRICTED CASH, BEGINNING OF PERIOD	4,542	8,000
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD	82,597	30,685
CASH AND CASH EQUIVALENTS, END OF PERIOD	71,064	61,668
RESTRICTED CASH, END OF PERIOD	3,000	8,000
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD	74,064	69,668
Supplemental disclosure with respect to cash flows
Interest paid	2,131	13,352
Taxes paid	$ 20,218	$ 4,833
Supplemental disclosure of non-cash activities
Shares issued for business acquisition	0	59,627
Notes receivables issued upon North Dakota divestment	$ 850	$ 0
Notes receivable (net book value) settlement in exchange for investment	21,833
Financing obtained in exchange for property, plant, and equipment	5,996
Right-of-use assets obtained in exchange of operating lease liabilities	$ 53,950	$ 10,803

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Condensed Consolidated Statements of Changes In Stockholders Equity (Unaudited) - USD ($) $ in Thousands	Total	Super Voting	Multiple Voting	Subordinate Voting	Capital Stock	Accumulated Deflicit	Stock holders equity attributable to Harvest	Non-controlling interest
Balance at Dec. 31, 2019	$ 250,886				$ 481,182	$ (233,977)	$ 247,205	$ 3,681
Shares, Outstanding, Beginning Balance at Dec. 31, 2019		2,000,000	1,813,388	105,786,727
Shares issued	64,646				64,646		64,646
Shares issued, shares			455,432	1,286,513
Deconsolidation of Ohio entities	1,388							1,388
Shares issued in connection with acquisitions	59,785				59,785		59,785
Shares issued in connection with acquisitions, shares			307,169	283,550
Conversions to subordinate voting shares			(248,326)	24,832,682
Equity method investment adjustment	(125)							(125)
Discount on notes payable	397				397		397
Conversion feature on note payable	628				628		628
Share-based compensation	17,080				17,080		17,080
Net loss	(41,117)					(42,958)	(42,958)	1,841
Balance at Jun. 30, 2020	353,568				623,718	(276,935)	346,783	6,785
Shares, Outstanding, Ending Balance at Jun. 30, 2020		2,000,000	2,327,663	132,189,472
Balance at Mar. 31, 2020	370,415				614,795	(249,361)	365,434	4,981
Shares, Outstanding, Beginning Balance at Mar. 31, 2020		2,000,000	2,501,993	109,770,577
Shares issued	5,647				5,647		5,647
Shares issued, shares			36,993	1,286,513
Conversions to subordinate voting shares			(211,323)	21,132,382
Equity method investment adjustment	(125)							(125)
Share-based compensation	3,276				3,276		3,276
Net loss	(25,645)					(27,574)	(27,574)	1,929
Balance at Jun. 30, 2020	353,568				623,718	(276,935)	346,783	6,785
Shares, Outstanding, Ending Balance at Jun. 30, 2020		2,000,000	2,327,663	132,189,472
Balance at Dec. 31, 2020	374,475				667,248	(293,607)	373,641	834
Shares, Outstanding, Beginning Balance at Dec. 31, 2020		2,000,000	1,828,422	220,913,258
Shares issued, shares			16,762	19,245
Capital contribution	612				382		382	230
Shares returend and cancelled	(1,000)				(1,000)		(1,000)
Shares returend and cancelled, shares			2,545
Warrants exercised for cash	10,262				10,262		10,262
Warrants exercised for cash, shares			41,000	2,641,164
Reclassification of warrant liability related to warrants exercised for cash	13,369				13,369		13,369
Reclassification of Warrant Liability To Equity Upon Modification	36,888				36,888		36,888
Distributions	(604)							(604)
Stock option exercised, value	664				664		664
Stock option exercised, share				221,680
Acquistion of NCI					485		485	(485)
Divestiture of North Dakota assets	3							3
Conversions to subordinate voting shares			(321,961)	32,196,153
Share-based compensation	8,603				8,603		8,603
Net loss	(42,197)					(42,627)	(42,627)	430
Balance at Jun. 30, 2021	401,075				736,901	(336,234)	400,667	408
Shares, Outstanding, Ending Balance at Jun. 30, 2021		2,000,000	1,561,678	255,991,500
Balance at Mar. 31, 2021	370,906				686,899	(316,729)	370,170	736
Shares, Outstanding, Beginning Balance at Mar. 31, 2021		2,000,000	1,636,065	245,336,531
Shares issued, shares			1,181	4,724
Warrants exercised for cash	3,420				3,420		3,420
Warrants exercised for cash, shares			26,000	271,742
Reclassification of warrant liability related to warrants exercised for cash	5,289				5,289		5,289
Reclassification of Warrant Liability To Equity Upon Modification	36,888				36,888		36,888
Distributions	(604)							(604)
Stock option exercised, value	664				664		664
Stock option exercised, share				221,680
Conversions to subordinate voting shares			(101,568)	10,156,823
Share-based compensation	3,741				3,741		3,741
Net loss	(19,229)					(19,505)	(19,505)	276
Balance at Jun. 30, 2021	$ 401,075				$ 736,901	$ (336,234)	$ 400,667	$ 408
Shares, Outstanding, Ending Balance at Jun. 30, 2021		2,000,000	1,561,678	255,991,500

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Business description

6 Months Ended

Jun. 30, 2021

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Business Description

1.      Business Description

Harvest Health & Recreation Inc., a British Columbia corporation (the “Company” or “Harvest”), is a vertically integrated cannabis company that operates from “seed to sale.” The Company holds licenses or provides services to cannabis dispensaries in Arizona, California, Florida, Maryland, Nevada, and Pennsylvania, with provisional licenses in Massachusetts. In addition, the Company owns CO2 extraction, distillation, purification and manufacturing technology used to produce a line of cannabis topicals, vapes and gems featuring cannabinoids and a hemp-derived product line sold in Colorado. The Company also owns, manufactures and distributes a portfolio of cannabis consumer packaged goods brands, including ROLL ONE, MODERN FLOWER, EVOLAB, CHROMA, CO2LORS, ALCHEMY, AVENUE, LOVELI, and CBX SCIENCES, to third-party licensed retail cannabis stores across the United States as well as to select retail stores the Company owns or operates, in addition to providing support services and financing to a Utah-licensed medical cannabis cultivator (on July 14, 2021, the Company completed the divestiture of its Utah cultivation and processing operations).

The Company operates in one segment, the cultivation, processing and sale of cannabis. The Company grows cannabis in outdoor, indoor, and greenhouse facilities for sale in its retail locations and for wholesale. In addition, the Company converts cannabis biomass into formulated oil using a variety of proprietary extraction techniques. The Company uses some of this oil to manufacture products such as vaporizer cartridges and edibles. Harvest sells cannabis, oil, and manufactured products in Harvest dispensaries and to third parties for resale. In addition, the Company collects licensing fees from third parties associated with operations at certain cultivation, manufacturing or retail facilities.

Harvest conducts business through wholly-owned and majority-owned operating subsidiaries, operating agreements and other commercial arrangements established to conduct the different business areas of each business (each an “Operating Subsidiary” and together, “Operating Subsidiaries”). The Company’s principal operating locations and type of operation are listed below:

State	Nature of Operations	Commencement Periods
Arizona - 15 locations	Retail Dispensary	September 2013 - September 2020
California - 4 locations	Retail Dispensary	December 2018 - October 2019
Florida - 10 locations	Retail Dispensary	February 2019 - June 2021
Maryland - 3 locations	Retail Dispensary	September 2018 - December 2019
Pennsylvania - 10 locations	Retail Dispensary	September 2018 - May 2021
Arizona	Greenhouse/Outdoor Grow/Processing Lab	July 2015 - February 2020
Colorado - 1 location	Processing	October 2020
Florida	Cultivation/Processing	February 2019 - December 2019
Maryland	Cultivation/Processing	September 2017 - July 2019
Nevada	Cultivation/Processing	August 2020
Pennsylvania	Cultivation/Processing	March 2020
Utah(1)	Indoor Grow	October 2020

(1)On July 14, 2021, the Company divested the indoor grow location located in Ogden, Utah for an immaterial amount of cash.

The Company is in various stages of expansion as it is growing its commercial footprint by focusing on acquiring and building additional retail, cultivation and processing locations for medical and adult use cannabis in its existing key markets.

Each Operating Subsidiary either holds the active and/or pending cannabis licenses associated with its activities, or has a commercial arrangement with the operating locations, and/or owns the real estate and primary fixed assets used in the cannabis businesses.

In certain states, cannabis licenses are typically divided into three categories: dispensary, cultivation, and processing. Dispensary licenses comprise the retail operations and allow a company to dispense cannabis to patients. Cultivation licenses allow a company to grow cannabis plants. Processing licenses allow for the processing of cannabis into other products (e.g., edibles, oil, etc.). Cultivation and processing licenses comprise the wholesale operations.

In other states, cannabis licenses are defined as vertically integrated, which allows the license holder the right to engage in dispensary, cultivation and processing activities.

The Company’s corporate headquarters is located at 1155 W. Rio Salado Parkway, Suite 201, Tempe, Arizona, 85281. The Company has one class of stock that is traded on the Canadian Stock Exchange (“CSE”) and on the OTCQX International tier of the OTC Markets in the U.S. (the “OTCQX”) under the symbols HARV and HRVSF, respectively. The stock price between the CSE and the OTCQX are identical after the U.S./Canadian currency exchange conversion.

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Significant Accounting Policies

6 Months Ended

Jun. 30, 2021

Accounting Policies [Abstract]

Significant Accounting Policies

2.       Significant Accounting Policies

(a)   Basis of Presentation

The accompanying Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, our condensed consolidated financial statements do not include all the information and footnotes required by GAAP for complete financial statements. Normal and recurring adjustments considered necessary for a fair statement of the results for the interim periods, in the opinion of the Company’s management, have been included. Operating results for the three months ended June 30, 2021, are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. The accompanying condensed consolidated financial statements and related footnote disclosures should be read in conjunction with the consolidated financial statements and notes thereto included in our 2020 Annual Report on Form 10-K filed with the SEC on March 30, 2021.

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results may differ from the estimates and assumptions used.

(b)   Basis of Measurement

These Unaudited Condensed Consolidated Financial Statements have been prepared on the going concern basis, under the historical cost convention, except for certain financial instruments that are measured at fair value as described herein.

(c)   Functional Currency

These Unaudited Condensed Consolidated Financial Statements are presented in United States dollars, which is also the functional currency of the Company and its affiliates.

(d)   Basis of Consolidation

These Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q include the accounts of the Company, all wholly-owned and majority-owned subsidiaries in which the Company has a controlling voting interest and, when applicable, variable interest entities in which the Company has a controlling financial interest or is the primary beneficiary. Investments in affiliates where the Company does not exert a controlling financial interest are not consolidated.

Subsidiaries over which the Company has a controlling financial interest are fully consolidated from the date control commences until the date control ceases. All of the consolidated entities were under common control during the entirety of the periods for which their respective results of operations were included in the consolidated statements (i.e., from the date of their acquisition). All intercompany accounts and transactions have been eliminated on consolidation.

(e)   Discontinued Operations

The Company followed Accounting Standard Codification (“ASC”) 360, Property, Plant, an Equipment, and ASC 205-20, Discontinued Operations, to report assets held for sale and discontinued operations.

The Company classifies assets and liabilities of a business or asset group as held for sale, and the results of its operations as income (loss) from discontinued operations, net, for all periods presented, when (i) we commit to a plan to divest a business or asset group, actively begin marketing it for sale, and when it is deemed probable of occurrence within the next twelve months, and (ii) when the business or asset group reflects a strategic shift that has, or will have, a major effect on the Company’s operations and its financial results. In measuring the assets and liabilities held for sale, the Company evaluates which businesses or asset groups are being marketed for sale.

See Note 4 for additional information.

(f)   Revenue Recognition

The Company accounts for customer contracts in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”), which includes the following five-step model:

Identification of the contract, or contracts, with a customer.

Identification of the performance obligations in the contract.

Determination of the transaction price.

Allocation of the transaction price to the performance obligations in the contract.

Recognition of revenue when, or as, the Company satisfies a performance obligation.

Through application of the standard, 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 those goods or services.

Revenues consist primarily of wholesale and retail sales of cannabis, which are generally recognized at a point in time when control over the goods have been transferred to the customer and is recorded net of sales discounts. Payment is typically due upon transferring the goods to the customer or within a specified time period permitted under the Company’s credit policy. Sales discounts were not material during the three and six months ended June 30, 2021 and 2020, respectively.

The Company has agreements in place whereby third-parties provide services or license the right to operate certain aspects of cannabis facilities owned by the Company. Under the terms of these agreements, the service provider operates various aspects of the business including procurement, production, regulatory compliance, marketing and sales, subject to oversight by the Company. The Company pays the service provider a fee for its services or in the case of licenses, the licensee pays the Company a license fee. The Company recorded $0.3 million and $6.2 million on a gross basis for the three months ended June 30, 2021 and 2020, respectively. The Company recorded $0.6 million and $12.6 million on a gross basis for the six months ended June 30, 2021 and 2020, respectively. The determination that the Company was the principal under these agreements was made in accordance with ASC 606-10-55-36 through 55-40 and consists of the following analysis. The Company analyzed the agreements first to determine what the specified good or service is that is being provided. Secondly, whether the Company is in control of the goods prior to the goods being transferred to the customer. The specified goods consist of various cannabis products sold at either a retail location or wholesale. In order to determine whether the Company had control of the specified goods prior to transfer to the customer, the terms of the agreements to provide the goods to the customers were evaluated. Pursuant to the terms of the agreements, the Company is at all times the owner of the products which are the cannabis and cannabis concentrates. Further, the service provider would not be able to sell the products to the customer without the use the of the Company’s license which permits it to sell cannabis under state law.

The following represents disaggregated revenue information:

(In thousands)	Retail		Wholesale		Licensing and other		Consolidated
Revenue for the three months ended June 30, 2021	$	85,177	$	13,948	$	3,338	$	102,463
Revenue for the three months ended June 30, 2020	$	42,250	$	7,199	$	6,212	$	55,661
Revenue for the six months ended June 30, 2021	$	162,825	$	23,241	$	5,223	$	191,289
Revenue for the six months ended June 30, 2020	$	72,262	$	13,264	$	14,370	$	99,896

Our customer loyalty program enables participants to earn points for qualifying purchases that can be redeemed for discounts or product in the future. We allocate the transaction price between the goods delivered and the future goods that will be delivered, on a relative standalone selling price basis, and defer the revenues allocated to the points, less expected expirations, until such points are redeemed. The timing of loyalty point redemptions can vary significantly, and the loyalty points do not expire. As of June 30, 2021, the amount of revenue deferred related to the earned points, net of redemptions, is $2.3 million. The deferral is reflected as a current liability in our condensed consolidated balance sheets because it is expected to be earned within the next 12 months.

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Recently Issued Accounting Pronouncements

6 Months Ended

Jun. 30, 2021

Recently Issued Accounting Pronouncements [Abstract]

Recently Issued Accounting Pronouncements

3.       Recently Adopted and Issued Accounting Pronouncements

We adopted the following standard during the six months ended June 30, 2021, which did not have a material impact on our financial statements or financial statement disclosures:

Date Issued	Standard	Effective Date
December 2019	ASU 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes	January 2021

The following standards were recently issued, and the Company is assessing the impact to the future consolidated financial statements:

Date Issued	Standard	Effective Date
May 2021	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)	January 2021
August 2020	ASU No. 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	January 2022

The Company reviewed all other recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact to the condensed consolidated financial statements.

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Discontinued Operations

6 Months Ended

Jun. 30, 2021

Disposal Group Not Discontinued Operation Income Statement Disclosures [Abstract]

Discontinued Operations

4.        Discontinued Operations

During the six months ended June 30, 2020, following the completion of the merger with Interurban Capital Group, LLC (formerly Interurban Capital Group, Inc.) (“ICG”), the Company sold ICG to a wholly owned subsidiary of Hightimes Holding Corp. (“Hightimes”) following the spinoff of certain assets. At the time of disposition, ICG’s primary assets consisted of rights to acquire eight “Have A Heart”-branded cannabis dispensaries in California (the “California HAH Dispensaries”). In addition, the Company agreed to sell Hightimes the equity of two additional entities controlled by Harvest that are seeking cannabis dispensary licenses in California (the “Harvest Dispensaries”). As a result, assets and liabilities allocable to these operations were classified as held for sale. In addition, revenue and expenses, gains and losses relating to the discontinuation of the California HAH Dispensaries operations were eliminated from profit or loss from the Company’s continuing operations for all periods presented.

The Company also entered into a plan to abandon certain product lines or lines of business to include CBD products or items of inventory, and the Company’s planned expansion in the state of Michigan. Any related assets and liabilities are classified as held for sale. In addition, the revenue, expenses, gains and losses related to the discontinuation of these activities were eliminated from profit or loss from the Company’s continuing operations for all periods presented.

Discontinued operations are presented separately from continuing operations in the Unaudited Condensed Consolidated Statements of Operations and the Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and June 30, 2020, respectively.

The following table is the Unaudited Condensed Consolidated Statements of Operations reflecting discontinued operations for the three months and six months ended June 30, 2020:

(In thousands)	Three Months Ended June 30, 2020			Six Months Ended June 30, 2020
Revenue, net of discounts	$	3,996		$	4,778
Cost of goods sold		(2,054	)		(2,711	)
Gross profit		1,942			2,067
Expenses
General and administrative		1,278			1,603
Sales and marketing		24			46
Depreciation and amortization		1,039			1,057
Total expenses		2,341			2,706
Operating income (loss)		(399	)		(639	)
Other (expense) income
Gain on sale of assets		2,574			2,574
Interest expense		(711	)		(717	)
Loss before taxes and non-controlling interest		1,464			1,218
Income taxes		(9	)		(147	)
Loss from continuing operations before non-controlling interest		1,455			1,071
Net loss from discontinued operations, net of tax		905			1,289
Net loss attributed to Harvest Health & Recreation Inc.	$	2,360		$	2,360

Discontinued operations for the three and six months ended June 30, 2021 was $1.9 million due to the abandoned expansion in Michigan.

The following table is a summary of the assets and liabilities of discontinued operations:

(In thousands)	June 30, 2021		December 31, 2020
ASSETS
Inventory, net	$	344	$	93
Other current assets		-		33
Property, plant and equipment, net		3,110		1,747
Right-of-use asset, net		64		3,593
Intangibles assets, net		171		894
Other assets		—		225
Assets from discontinued operations	$	3,689	$	6,585
LIABILITIES
Lease liability, net of current portion		28		718
Liabilities from discontinued operations	$	28	$	718

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Inventory

6 Months Ended

Jun. 30, 2021

Inventory Disclosure [Abstract]

Inventoy

5.       Inventory

The Company’s inventory consisted of:

(In thousands)	June 30, 2021			December 31, 2020
Raw materials	$	17,384		$	12,632
Work in progress		6,165			5,634
Finished goods		22,228			19,718
Total inventory		45,777			37,984
Reserve		(1,169	)		(1,122	)
Total inventory, net	$	44,608		$	36,862

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Note Receivable

6 Months Ended

Jun. 30, 2021

Loans And Leases Receivable Disclosure [Abstract]

Notes Receivable

6.        Notes Receivable

The Company’s notes receivable consisted of:

(In thousands)	June 30, 2021			December 31, 2020
Secured promissory notes dated November 2020 in the principal amount of $12.0 million with a maturity date of November 9, 2025; monthly payments of $0.1 million, inclusive of principal and interest. Balloon payment of $8.4 million due at maturity. Interest rate of 7.5% per annum.	$	11,493		$	12,000
Secured promissory notes dated February 2020 through June 2021 in the principal amount of $15.1 million with maturity dates from August 2021 to February 2022; principal is due at maturity. Interest rates of 6 - 8% per annum, due at maturity.		15,088			13,471
Secured promissory notes, created from the CannaPharmacy acquisition, dated April and June of 2019 in the principal amount of $11.6 million with maturity dates in April and June of 2021; principal is due at maturity. Interest rate of 8% per annum, due quarterly.		—			456
Secured convertible promissory note, due from Falcon International Corp. (‘‘Falcon’’) and subsidiaries, dated June 7, 2019 in the principal amount of up to $40.4 million with maturity date of June 6, 2022; principal is due at maturity. Interest rate of 4% per annum, due at maturity.(1)		—			25,525
Unsecured convertible promissory notes, due from Falcon and its subsidiaries, dated October 2018 through February 2019 in the principal amount of $24.5 million with maturity dates of August to November 2019; principal is due at maturity. Interest rate of 8% per annum, due at maturity.(1)		—			24,499
Secured revolving notes dated December 2018 through January 2019 in the principal amount of up to $30.0 million with maturity dates of December 2019 to February 2020; principal is due at maturity. Interest rates of 8.25 - 8.5% per annum with interest payments due monthly.(2)		3,581			3,581
Secured promissory notes dated February 2021 in the principal of up to $0.9 million with a maturity date of February 19, 2022; principal is due at maturity. Interest rate of 10.0% per annum with interest payments due monthly.		850			—
Gross notes receivable		31,012			79,532
Less: provision for impairment of notes receivable		(627	)		(29,713	)
Total notes receivable, net of allowance		30,385			49,819
Less: current portion of notes receivable		(19,869	)		(31,608	)
Notes receivable, long-term portion	$	10,516		$	18,211

(1)These notes were settled as part of the Falcon Lawsuit settlement. $29.1 million of the provision for impairment of notes receivable related to these notes was written off in relation to this settlement. See Note 10 for additional information.

(2)These notes are currently in default. The Company negotiated a settlement agreement with the debtor and, at this time, expects to receive the full principal balance during fiscal year 2021. The Company’s provision for expected credit losses as of June 30, 2021 includes $0.3 million related to these notes.

Stated maturities of the notes receivable are as follows:

(In thousands)	Expected Principal Payments
2021 (6 months)	$	10,470
2022		9,918
2023		728
2024		784
2025		9,112
	$	31,012

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Leases

6 Months Ended

Jun. 30, 2021

Leases [Abstract]

Leases

7.       Leases

The Company primarily leases space for corporate offices, retail, cultivation and manufacturing under non-cancellable operating leases with initial terms typically ranging from 1 to 28 years. The Company had one finance lease at June 30, 2021.

On January 11, 2021, the Company purchased a cultivation property located in Reading, Pennsylvania. The property consists of approximately 1.36 acres of land and close to 46,800 square feet of combined office and cultivation space. The purchase price of the property was $5.2 million and was considered a finance lease prior to the building purchase.

On January 20, 2021, the Company sold an industrial property totaling approximately 292,000 square feet for $23.8 million. Concurrent with the sale, Harvest entered into a triple net lease with Innovative Industrial Properties, Inc. (“IIP”) to lease back the property. The lease is for a term of 20 years with an extension option. At commencement, the Company was not reasonably certain to exercise the extension option. Harvest plans to continue to operate the property as a licensed cultivation and processing facility and expects to recover up to approximately $10.8 million in tenant improvements from IIP. The total proceeds for the transaction are expected to be approximately $34.6 million. The Company determined control of the assets transferred to IIP, the sale price represented the fair value of the underlying assets sold, and the Company does not have continuing involvement with the property sold other than a normal leaseback. The Company received net proceeds of $22.3 million from the sale, after deducting a security deposit of $1.2 million, other transactions costs of $0.3 million, and incurred a gain of $1.1 million. In June 2021, we amended our lease, increasing the tenant improvement allowance under the lease by $7.1 million to a total of approximately $17.9 million, which also resulted in a corresponding adjustment to the base rent for the lease at the property.

The following table presents lease assets and liabilities within the Condensed Consolidated Balance Sheets:

Lease and Classification	June 30, 2021		December 31, 2020
Operating Leases:	(In thousands)
Right-of-use asset, net	$	118,935	$	66,464
Lease liability, current portion	$	2,060	$	3,041
Lease liability, net of current portion	$	118,249	$	64,232
Finance Leases:
Property, plant and equipment, net(1)	$	405	$	5,523
Other current liabilities	$	92	$	5,504

(1)Finance lease assets are recorded net of accumulated amortization of less than $0.1 million as of June 30, 2021 and December 31, 2020, respectively.

The Company recognized the following amounts within the Condensed Consolidated Statements of Operations:

	Three Months Ended June 30				Six Months Ended June 30
	2021		2020		2021		2020
Operating lease expense	$	5,270	$	5,553	$	9,758	$	8,352
Interest on lease liabilities	$	2	$	384	$	6	$	387
Expenses related to short-term leases	$	19	$	487	$	228	$	950
Expenses related to variable payments	$	498	$	266	$	688	$	507

The Company’s sublease income is immaterial.

Other information:

	Six Months Ended June 30,
	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:	(In thousands)
Operating cash flows from operating leases	$	7,831	$	2,556
Operating cash flows from finance leases	$	6	$	387
Financing cash flows from finance leases	$	87	$	24

The Company’s lease terms and discount rates were as follows:

Weighted average remaining term (in years):	June 30, 2021			June 30, 2020
Operating		14.5			3.6
Finance		34.5			9.9
Weighted average discount rate:
Operating		12.43	%		10.00	%
Finance		10.00	%		10.03	%

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Divestitures

6 Months Ended

Jun. 30, 2021

Divestitures [Abstract]

Divestitures

8.       Divestitures

In February 2020, the Company divested of non-operating retail and cultivation entities, primarily consisting of two entities that hold cannabis licenses and various real estate and equipment. In accordance with ASC 810-10-40, Derecognition, control ceased, and the Company deconsolidated its interest in the entities. A related party to the Company holds an interest of 49% which it recognized as an equity method investment due to the related party’s significant influence. The carrying value of the assets was derecognized along with the corresponding recognition of the fair value of the equity method investment resulting in a gain of $3.2 million. In conjunction with the assets being deconsolidated, the Company issued a $12.0 million note receivable to the entities in exchange for the real property and other plant and equipment deconsolidated at the time. This resulted in an additional $8.7 million gain.

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Intangible Assets and Goodwill

6 Months Ended

Jun. 30, 2021

Goodwill And Intangible Assets Disclosure [Abstract]

Intangible Assets and Goodwill

9.       Intangible Assets and Goodwill

Intangible assets, including goodwill, as of December 31, 2020 and June 30, 2021 consisted of the following:

Gross carrying amount (in thousands)	Weighted average useful lives (years)	December 31, 2020		Additions		Dispositions/ Adjustments			June 30, 2021
Definite life intangible assets:
Patient relationships	2.0	$	820	$	—	$	—		$	820
Technology	9.9		18,058		—		—			18,058
Software	5.0		241		320		(145	)		416
Other	3.0		410		730		(241	)		899
Indefinite life intangible assets:
Licenses and permits			253,866		519		(151	)		254,234
Internally developed			1,113		694		(643	)		1,164
Trade names			2,400		—		—			2,400
Total intangible assets			276,908		2,263		(1,180	)		277,991
Goodwill			116,041		—		(500	)		115,541
Total gross carrying amount		$	392,949	$	2,263	$	(1,680	)	$	393,532
Accumulated amortization (in thousands)		December 31, 2020		Amortization		Dispositions/ Adjustments			June 30, 2021
Definite life intangible assets:
Patient relationships		$	820	$	—	$	—		$	820
Technology			3,913		945		—			4,858
Software			57		19		(30	)		46
Other			—		184		—			184
Total accumulated amortization			4,790		1,148		(30	)		5,908
Total intangible assets, net and goodwill		$	388,159	$	1,115	$	(1,650	)	$	387,624

Intangible assets with definite lives are amortized over their estimated useful lives. The Company recorded amortization expense of $0.7 million and $0.5 million included in depreciation and amortization, in the Condensed Consolidated Statements of Operation, for the three months ended June 30, 2021 and 2020, respectively. The Company recorded amortization expense of $1.1 million and $1.0 million included in depreciation and amortization, in the Condensed Consolidated Statements of Operations, for the six months ended June 30, 2021 and 2020, respectively. Amortization periods for assets with definite lives are based on management’s estimates at the date of acquisition.

Based solely on the amortizable intangible assets recorded at June 30, 2021, estimated amortization expense for the remainder of fiscal 2020 through fiscal 2025 and thereafter is as follows:

(In thousands)	Estimated Amortization Expense
2021 (6 months)	$	1,523
2022		2,108
2023		2,008
2024		1,787
2025		1,770
Thereafter		5,089
Total amortization expense	$	14,285

Actual amortization expense to be reported in future periods could differ from these estimates as a result of new intangible asset acquisitions, changes in useful lives, impairment charges or other relevant factors or changes.

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Corporate investments

6 Months Ended

Jun. 30, 2021

Investments Debt And Equity Securities [Abstract]

Corporate Investments

10.       Corporate Investments

The carrying values of the Company’s investments are as follows:

(In thousands)	June 30, 2021		December 31, 2020
Investment in Hightimes	$	19,091	$	19,091
Investment in Falcon		21,833		—
Corporate investments	$	40,924	$	19,091

The Company is not able to readily determine the fair value of either of the Company’s equity investments listed in the table above. The investments are therefore accounted for under the measurement alternative whereby the investments are held at cost and adjusted for impairments and observable price changes, if any.

On March 13, 2021, the Company settled a lawsuit with Falcon International, Inc. (‘‘Falcon’’) whereby the Company received 10% equity ownership in Falcon and each share received came with a 10-year warrant to acquire two common shares of Falcon at an exercise price of $1.91 per warrant. In exchange, the Company settled the $50.0 million of notes receivable, including accrued interest receivable, due from Falcon. Based on the net book value of the notes receivable settled, the Company estimated the fair value of the equity and warrants received to be $21.8 million at settlement.

On June 22, 2020, the Company sold a wholly owned subsidiary to a subsidiary of Hightimes following the spinoff of certain assets. Consideration received by the Company included 600,000 of Series A Preferred Stock. The Series A Preferred Stock has a stated or liquidation value of $100 per share. The Company may convert all or a portion of the Series A Preferred Stock into shares of Hightimes Class A voting Common Stock at a conversion price per share of $11, subject to adjustment to $1 per share, based on the 11-for-one forward stock split of the Hightimes Common Stock to be consummated upon completion of Hightimes’ Regulation A+ initial public offering; provided, that in no event shall the number of shares of Hightimes Common Stock issuable upon full conversion of the Series A Preferred Stock, exceed 19% of the issued and outstanding shares of Hightimes Common Stock, after giving effect to such optional conversion. Based on the assets transferred, the Company estimated the fair value of the shares of Series A Preferred Stock received to be $19.1 million when the sale closed.

No impairments or observable price changes were identified during the six months ended June 30, 2021.

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Other Current Liabilities

6 Months Ended

Jun. 30, 2021

Other Liabilities Disclosure [Abstract]

Other Current Liabilities

11.       Other Current Liabilities

The Company’s other current liabilities consisted of:

(In thousands)	June 30, 2021		December 31, 2020
Accrued inventory purchases	$	7,671	$	7,886
Accrued expenses		7,724		5,607
Accrued payroll and benefits		5,146		4,353
Accrued capital expenditures		2,906		3,133
Finance lease liabilities(1)		92		5,504
Deferred revenue		2,285		—
Other		4,610		2,413
Total other current liabilities	$	30,434	$	28,896

(1)See Note 7 for additional information.

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Notes Payable

6 Months Ended

Jun. 30, 2021

Debt Disclosure [Abstract]

Notes payable

12.     Notes Payable

The Company’s notes payable consisted of:

(In thousands)	June 30, 2021			December 31, 2020
Secured promissory note dated March 2020, in the principal amount of $10.0 million with a maturity of March 2022. Monthly interest payments of 9% per annum. Principal balance due at maturity.(1)	$	10,000		$	10,000
Unsecured promissory note dated February 2020, in the principal amount of $6.7 million with a maturity of February 2023. Monthly interest payments at 4% per annum. Annual payments of $2.2 million, inclusive of interest at 4%, due beginning February 2021 with remaining principal due at maturity.		4,699			6,650
Secured promissory notes dated December 2019, in the principal amount of $93.4 million with a maturity of December 2022. Semi-annual interest payments at 15% per annum. Principal balance due at maturity.(2)		93,390			93,390
Secured promissory notes dated December 2019, in the principal amount of $42.4 million with a maturity of December 2022. Semi-annual interest payments at 9.25% per annum. Principal balance due at maturity.(3)		42,404			42,404
Secured convertible promissory note dated December 2019, in the principal amount of $10.0 million with a maturity of December 2021. Semi-annual interest payments at 9% per annum. Principal balance due at maturity.(4)		10,000			10,000
Secured convertible promissory note dated April 2021, in the principal amount of $5.0 million with a maturity of April 2023. Semi-annual interest payments at 9% per annum. Principal balance due at maturity.		5,000			—
Secured promissory notes dated October 2019, in the principal amount of $6.5 million with a maturity of October 2021. Monthly interest payments at 8.95% per annum. Principal balance due at maturity.		6,500			6,500
Secured promissory notes dated September and October 2019, in the principal amount of $2.6 million with maturities of October 2024. Monthly interest payments at 5.5% and 8.75% per annum. Principal balance due at maturity.(5)		2,456			2,505
Secured promissory note dated June 2019, in the principal amount of $4.0 million with a maturity of June 2024. Interest at LIBOR plus 2.5% per annum, payable monthly. Principal balance due based on 25-year amortization schedule with balloon payment at maturity.(6)		3,916			4,000
Unsecured convertible debentures dated May 2019, in the principal amount of $100.0 million with a maturity of May 2022. Semi-annual interest payments at 7% per annum. Principal balance due at maturity.(7)		100,000			100,000
Other unsecured promissory notes		3,661			4,039
Other secured promissory notes		8,026			1,275
Total notes payable		290,052			280,763
Less: unamortized debt discounts and issuance costs		(11,410	)		(15,787	)
Net amount		278,642			264,976
Less: current portion of notes payable		(134,394	)		(20,910	)
Notes payable, net of current portion	$	144,248		$	244,066

(1)Carrying value includes debt discount of $0.7 million.

(2)Carrying value includes debt issuance costs of $2.3 million.

(3)Carrying value includes debt issuance costs of $1.2 million and warrants of $3.1 million.

(4)Carrying value includes debt discount of $0.2 million.

(5)Carrying value includes debt issuance costs of $0.1 million.

(6)Carrying value includes debt issuance costs of less than $0.1 million.

(7)Carrying value includes debt issuance costs of $1.4 million and warrants of $2.4 million.

Stated maturities of debt obligations and expected interest payments are as follows:

(In thousands)	Expected Principal Payments		Expected Interest Payments
2021 (6 months)	$	19,360	$	14,470
2022		254,324		21,864
2023		10,229		660
2024		5,611		270
2025 and thereafter		528		334
	$	290,052	$	37,598

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Share-based compensation

6 Months Ended

Jun. 30, 2021

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Share-based compensation

13.       Share-based Compensation

Stock options

During 2018, the Compensation Committee of the Company’s Board of Directors approved a share-based compensation plan. The purpose of the plan is to promote the interests of the Company and its stockholders by aiding the Company in attracting and retaining employees, officers, consultants, advisors and non-employee directors capable of assuring the future success of the Company. The stock options granted are non-qualified and generally vest in 25% increments over a four-year period and expire 10 years from the grant date.

The following table summarizes stock option activity during the period:

	Number of Stock Options			Weighted- Average Exercise Price		Aggregate Intrinsic Value
Balance as of December 31, 2020		14,380,875			5.02
Forfeited/Cancelled		(2,574,070	)		6.53
Exercised		(221,680	)		2.52
Granted		675,500			3.85
Balance as of June 30, 2021		12,260,625		$	4.69	$	10,174,894

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on June 30, 2021, and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their in-the-money options on June 30, 2021. This amount will change in future periods based on the fair market value of the Company’s stock and the number of options outstanding.

The total intrinsic value of stock options exercised during the six months ended June 30, 2021 was $0.4 million. Cash received from stock option exercises was $0.7 million during the six months ended June 30, 2021.

The following table summarizes the Subordinate Voting Shares stock options that remain outstanding as of June 30, 2021:

Security Issuable	Expiration Date	Number of Stock Options	Exercise Price	Stock Options Exercisable
Subordinate Voting Shares	November 2028 - February 2031	12,260,625	$1.09 - $8.75	4,866,313

The following table summarizes the Subordinate Voting Shares stock options that remain outstanding as of December 31, 2020:

Security Issuable	Expiration Date	Number of Stock Options		Exercise Price	Stock Options Exercisable
Subordinate Voting Shares	November 2028 - December 2030		14,380,875	$1.09 - $8.75		2,326,000

During the three months ended June 30, 2021 and 2020, the Company recorded $3.7 million and $3.3 million of share-based compensation expense for stock options granted and vested during the period, respectively. During the six months ended June 30, 2021 and 2020, the Company recorded $8.5 million and $17.1 million of share-based compensation expense for stock options granted and vested during the period, respectively.

The fair value of the stock options granted was determined using the Black-Scholes option-pricing model with the following weighted-average assumptions at the time of grant:

	2021	2020
Risk-Free Annual Interest Rate	1.09% - 2.25%	2.00% - 2.25%
Expected Annual Dividend Yield	0%	0%
Expected Stock Price Volatility	99% - 197%	83% - 99%
Expected Life of Stock Options	6.25 Years	6.25 Years

Volatility was estimated by using the average historical volatility of comparable companies from a representative peer group of publicly traded cannabis companies. The expected life represents the period of time that the options issued are expected to be outstanding. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of issuance, using rates with a term approximately equal to the expected life of the options.

During the three months ended June 30, 2021 and 2020, the weighted-average fair value of stock options granted was $2.74 and $2.16 per option, respectively. During the six months ended June 30, 2021 and 2020, the weighted-average fair value of stock options granted was $3.16 and $2.16 per option, respectively. As of June 30, 2021 and 2020, stock options outstanding had a weighted-average remaining contractual life of 8.2 and 8.9 years, respectively. At June 30, 2021, the total unrecognized compensation cost related to the non-vested awards granted and expected to vest was $14.1 million. This cost is expected to be recognized over a weighted-average period of 2.0 years.

Restricted stock units

On December 31, 2020, the Company granted 208,348 restricted stock units. These restricted stock units vest in 2021. On April 6, 2020, the Company granted 98,765 restricted stock units. These restricted stock units vest throughout 2020 and 2021. The following table summarizes the status of the restricted stock units:

	Number of Restricted Stock Units			Weighted- Average Grant Price
Balance as of December 31, 2020		241,273		$	2.01
Vested		(136,952	)		1.83
Balance as of June 30, 2021		104,321		$	2.24

During the six months ended June 30, 2021, the Company recorded $0.1 million of share-based compensation expense for restricted stock units granted and vested during the period, respectively. No share-based compensation expense for restricted stock was recorded during the three months ended June 30, 2020.

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Stockholders' Equity

6 Months Ended

Jun. 30, 2021

Stockholders Equity Note [Abstract]

Stockholders' Equity

14.     Stockholders’ Equity

Description of the company’s securities

The Company is authorized to issue an unlimited number of Subordinate Voting Shares (“SVS” or “Subordinate Voting Shares”), Multiple Voting Shares (“MVS” or “Multiple Voting Shares”) and Super Voting Shares, all with no par value. Each Multiple Voting Share converts into 100 Subordinate Voting Shares and each Super Voting Share converts into one Subordinate Voting Share. Holders of SVS are entitled to one vote in respect of each SVS held at stockholder meetings of the Company. Holders of MVS are entitled to 100 votes in respect of each MVS held at stockholder meetings of the Company. Holders of Super Voting Shares are entitled to 200 votes in respect of each Super Voting Share held at stockholder meetings of the Company.

Warrants

During the six months ended June 30, 2021, the Company issued 307,856 stock warrants to purchase the Company’s SVS. These warrants were issued upon exercise of compensation warrants held by underwriters of the bought deal completed by the Company on October 28, 2020. The company did not record any share-based compensation expense for stock warrants outstanding during the period. Prior to June 30, 2021, all of the Company’s outstanding stock warrants qualified for liability classification in accordance with ASC 815, Derivatives and Hedging. On June 30, 2021, the Company amended the terms of the 17,154,416 SVS warrants issued and outstanding to reflect the exercise price of such warrants in U.S. dollars. Following the conversion of the exercise price to U.S. dollars, the warrants were reclassified as equity. The Company recognized a $0.9 million change in fair value of the warrant liability upon

modification and reclassified $36.9 million of the warrant liability to equity. One holder remains that did not convert, and the Company will continue to treat the warrant activity associated with that holder as liability classification.

A summary of the status of the stock warrants outstanding, on an as-converted basis for SVS, is as follows:

	Number of Stock Warrants			Weighted- Average Exercise Price
Balance as of December 31, 2020		24,407,114		$	4.11
Issued		307,856		$	2.40
Exercised		(6,125,454	)	$	1.52
Balance as of June 30, 2021		18,589,516		$	4.79

The following table summarizes the stock warrants that remain outstanding as of June 30, 2021:

Security Issuable	Expiration Date	Number of Stock Warrants		Exercise Price	Stock Warrants Exercisable
Subordinate Voting Shares	May 2022 - Dec 2025		17,154,516	$2.46 - $14.66		17,154,516
Multiple Voting Shares	April 1, 2023		14,350	106.17		14,350

The following table summarizes the stock warrants that remain outstanding as of December 31, 2020:

Security Issuable	Expiration Date	Number of Stock Warrants		Exercise Price	Stock Warrants Exercisable
Subordinate Voting Shares	May 2022 - April 2023		18,872,114	$2.40 - $14.27		18,872,114
Multiple Voting Shares	April 2021 - April 2023		55,350	103.36		55,350

The fair value of the stock warrants granted was determined using the Black-Scholes option-pricing model with the following weighted-average assumptions at the time of issuance:

	2021	2020
Risk-Free Annual Interest Rate	0.11% - 0.16%	2.15%
Expected Annual Dividend Yield	0%	0%
Expected Stock Price Volatility	95%	70% - 99%
Expected Term	2.2 - 2.3 Years	1.0 - 5.0 years

Expected volatility was estimated by using the Company’s historical share price volatility for a period similar to the expected life of the warrants. The expected term represents the period of time that the stock warrants issued are expected to be outstanding. The risk-free interest rate, using the expected life of the warrants, is based on the U.S. Treasury yield curve in effect at the time of issuance.

During the three months ended June 30, 2021, there were no stock warrants granted. During the six months ended June 30, 2021, the fair value of the stock warrants granted was $2.35 and $1.50 per warrant, respectively. As of June 30, 2021 and 2020, stock warrants outstanding have a weighted-average remaining contractual life of 0.8 and 2.2 years, respectively.

Warrants exercised for cash

During the three months ended June 30, 2021, the Company issued 26,000 MVS and 271,742 SVS as a result of warrant exercises and received cash proceeds of approximately $3.4 million. During the six months ended June 30, 2021, the Company issued 41,000 MVS and 2,641,164 SVS as a result of warrant exercises (including 615,710 SVS issued in relation to compensation warrants exercised) and received cash proceeds of approximately $10.3 million.

Shares held in escrow

As of June 30, 2021, the Company has 2,000,000 SVS held in escrow to be released on the achievement of certain milestones. The conditions for release were not met as of June 30, 2021. The shares are non-employee compensation for raising equity.

The following presents the total outstanding SVS if converted as of June 30, 2021:

Share Class	Number of Shares at June 30, 2021		Conversion Factor		Total Subordinated Voting Shares if Converted
Super Voting Shares		2,000,000		1		2,000,000
Multiple Voting Shares		1,561,678		100		156,167,800
Subordinate Voting Shares		255,991,500		1		255,991,500
Total						414,159,300

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Net Loss Per Share

6 Months Ended

Jun. 30, 2021

Earnings Per Share [Abstract]

Net Loss Per Share

15.       Net Loss Per Share

Calculation of net loss per common share attributable to Harvest Health & Recreation Inc. is as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands, except share and per share data)	2021			2020			2021			2020
Net loss attributable to Harvest Health & Recreation Inc.	$	(19,505	)	$	(27,574	)	$	(42,627	)	$	(42,958	)
Net loss attributable to discontinued operations, net of tax	$	(1,954	)	$	(905	)	$	(1,954	)	$	(1,289	)
Basic weighted-average number of shares outstanding		413,103,779			364,580,737			410,383,008			334,380,082
Net loss per share attributable to Harvest Health & Recreation Inc. - basic and diluted	$	(0.05	)	$	(0.08	)	$	(0.10	)	$	(0.13	)
Net loss per share attributable to discontinued operations, net of tax	$	—		$	—		$	—		$	—

As the Company is in a loss position for both the three and six months ended June 30, 2021 and 2020, the inclusion of shares issuable upon exercise of stock options, vesting of restricted stock, exercise of warrants, and conversion of debt in the calculation of diluted earnings per share would be anti-dilutive and, accordingly, were excluded from the diluted loss per share calculation. The weighted-average number of shares outstanding assumes the conversion of all MVS and Super Voting Shares to SVS.

The following table summarizes the potential SVS that were excluded as they were anti-dilutive:

	June 30,
	2021		2020
Stock options and restricted stock units		12,364,946		16,011,125
Warrants(1)		19,345,162		14,685,996
Convertible debt		13,823,603		32,041,357
		45,533,711		62,738,478

(1)Includes the outstanding compensation warrants issued for underwriting services in the October 2020 bought financing.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2021

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

16.     Commitments and Contingencies

Regulatory environment

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 or licenses 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 regulation as of June 30, 2021, 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.

Contingencies

Claims & legal proceedings

From time to time, the Company may be involved in legal proceedings, including litigation or regulatory proceedings relating to claims arising out of operations in the normal course of business. In accordance with the current accounting standards for loss contingencies under ASC Topic 450, we establish reserves for litigation-related matters that arise from the ordinary course of our business activities

when it is probable that a loss associated with a claim or proceeding has been incurred and the amount of the loss can be reasonably estimated. Litigation claims and proceedings of all types are subject to many uncertain factors that generally cannot be predicted with assurance. By their nature, the amount of the contingency and the timing of a contingent event and any resulting accounting recognition are subject to our judgment of such events and our estimates of the amounts. Below we provide a description of potentially material legal proceedings and claims.

Falcon International, Inc.

On January 6, 2020, the Company terminated the Agreement and Plan of Merger and Reorganization entered into among the Company, Harvest California Acquisition Corp., Falcon International Corp. and its shareholders dated February 14, 2019, as amended (the “Falcon Merger Agreement”). The Falcon Merger Agreement was terminated as a result of defaults by Falcon and its shareholders incapable of being cured, and other improper conduct of Falcon and its principal officers and directors, James Kunevicius and Edlin Kim. On January 6, 2020, the Company also filed suit in the U.S. District Court for the District of Arizona (Case No. 2:20-cv-00035-DLR) (the “Falcon Lawsuit”), which identified the grounds for termination and sought a court order compelling Falcon and its shareholders to arbitrate the Company’s claims. On February 7, 2020, an Amended Complaint was filed as a matter of course, providing greater specificity after certain defendants filed a motion to dismiss. On February 26, 2020, Falcon, its subsidiaries, and its founders all stipulated to the relief sought by the Amended Complaint, to refer the matter to binding, private arbitration before the American Arbitration Association (“AAA”).

On March 6, 2020, the U.S. District Court for the District of Arizona ordered the parties to the stipulation to binding, private arbitration of the matter before the AAA. The remedies the Company seeks in the AAA arbitration include rescission and/or termination of the Falcon Merger Agreement, all agreements entered into in connection with the Falcon Merger Agreement and the “Control Person Transaction” discussed below, an award of restitutionary damages from Falcon and its shareholders including repayment of funds advanced pursuant to promissory notes issued by Falcon and its subsidiaries in connection with the Falcon Merger Agreement, appointment of a receiver for Falcon and an award of attorneys’ fees, arbitration forum fees and costs. Remedies sought by the Company in arbitration also include rescission and/or termination remedies concerning the “Control Person Transaction” referenced in that certain Membership Interest Purchase Agreement entered into among James Kunevicius and Edlin Kim (collectively, the “Selling Owners”), Elemental Concepts, LLC and Compass Point, LLC (the “Sellers”) and Harvest of California, LLC (a wholly owned subsidiary of the “Company”) dated June 7, 2019 (the “MIPA”). Pursuant to the terms of the MIPA, the Company purchased 100% of the membership interests in two entities that hold commercial cannabis licenses in California (the “Purchased Interests”) for a purchase price of $4.1 million (the “Purchase Price”). These remedies include seeking an order which would effectively require the equivalent of the Selling Owners and the Sellers being required to repurchase from the Company all of the Purchased Interests for an amount equal to the Purchase Price as provided for in the MIPA.

On July 2, 2020, Falcon and two of its shareholders filed a counterclaim against the Company in the AAA arbitration proceeding. The counterclaim alleges that the Company breached the Falcon Merger Agreement, breached an implied covenant of good faith and fair dealing and intentionally interfered with Falcon’s prospective business relations and seeks monetary damages of $50.0 million pursuant to the Falcon Merger Agreement. On March 13, 2021, the parties entered into a binding settlement agreement, resulting in a final dismissal of all litigation and arbitration between them arising out of the 2019 merger agreement. In accordance with the settlement terms, Harvest owns a 10% equity interest in Falcon. Each share comes with a 10-year warrant entitling Harvest to purchase two (2) common shares of Falcon at an exercise price of $1.91, subject to customary anti-dilution adjustments in the event of stock splits, stock dividends and similar corporate events. See Note 10 for additional information.

AGRiMED Industries of PA, LLC

The Company appealed the Commonwealth of Pennsylvania Department of Health (“PDOH”), June 2019 denial of the renewal of a grower/processor permit issued to AGRiMED Industries of PA, LLC (“AGRiMED”) which the Company acquired through a Membership Interest Purchase Agreement on May 20, 2019. On August 28, 2019, AGRiMED filed a timely Notice of Appeal with the PDOH Docket No. 19-068 GP on the grounds that, among other things, the PDOH is equitably estopped and abused its discretion in refusing to renew AGRiMED’s permit, given AGRiMED’s recent change in ownership, the PDOH’s awareness of that change, and the limited scope of AGRiMED’s operations at the time of the non-renewal, of which the PDOH was similarly aware. Further, AGRiMED asserted that the PDOH had failed to provide AGRiMED with an opportunity to respond to or otherwise cure or correct any alleged violations identified by the PDOH. On May 6, 2021 the PDOH entered into a settlement agreement regarding the AGRiMED permit which allows for the conditional renewal of the permit and its operation by the Company as early as August 15, 2021. 

The AGRiMED permit is still subject to litigation from a third-party seeking revocation of the permit. The possible revocation is related to an administrative challenge filed by Bay LLC, which was the next highest scoring applicant when AGRiMED was awarded a permit. Bay LLC’s objection to the award of the AGRiMED permit is due to the fact that one of AGRiMED’s principals (pre-Harvest’s MIPA to operate the permit) failed to disclose a criminal conviction on the AGRiMED application. On November 9, 2020, the PDOH Deputy Secretary ruled that the AGRiMED permit should not be revoked based upon an equitable estoppel theory. On December 3, 2020 Bay

LLC filed a Petition for Review of the November 9, 2020 PDOH determination in the Pennsylvania Commonwealth Court. Briefing of that appeal was completed in May 2021 and the Company is awaiting a ruling.

Rainbow lease and real estate litigation

On June 4, 2020, Rainbow HAH Council Bluffs LLC, Rainbow HAH Santa Cruz LLC, Rainbow HAH Coalinga LLC, Rainbow HAH LLC and Rainbow Realty Group LLC (collectively, the “Plaintiffs”) filed a complaint in the Supreme Court of the State of New York, County of Nassau (Index No.: 605323/2020) against the Company and certain of its subsidiaries and certain of its current officers and directors, including Scott Atkison (the “Harvest Defendants”), ICG and certain of its subsidiaries, Hightimes Holding Corp. and one of its subsidiaries, Ryan Kunkel (“Kunkel”) and James Dennedy (“Dennedy”). Mr. Atkison is a former shareholder and director of ICG and is a party to the Agreement and Plan of Merger and Reorganization, dated March 13, 2020, between a wholly-owned subsidiary of the Company and ICG (the “ICG Merger Agreement”) and as result thereof, he, along with other former ICG shareholders including Daniel Reiner, a shareholder of the Company and the beneficial owner of greater than 5% of our equity securities, may have indemnification obligations to the Company. On September 24, 2020, the Plaintiffs filed an amended complaint (the “Amended Rainbow Complaint”). The Amended Rainbow Complaint alleges, among other things, that the Plaintiffs were fraudulently induced by Kunkel and Dennedy and aided and abetted by the Harvest Defendants into paying $3.5 million to purchase three cannabis dispensaries that were leased by Have a Heart branded dispensaries in Council Bluffs, Iowa, Coalinga, California and Santa Cruz, California (the “Gerra Properties”). The properties were sold to the Plaintiffs by Gerra Capital Management which was owned and controlled by certain former ICG directors and shareholders which included Kunkel and Dennedy. The Amended Rainbow Complaint alleges breach of lease, breach of guaranty, breach of the implied covenant of good faith and fair dealing, fraud in the inducement, conspiracy to commit fraud, aiding and abetting fraud, violations of debtor creditor law and piercing the corporate veil (the “Rainbow Litigation”). In December 2020, the case transferred to the Commercial Division of the Supreme Court of the State of New York, County of New York (Index No.: 452625/2020).

On July 15, 2021, the Company, Harvest Enterprises, Inc., Harvest HAH WA, Inc., Steven M. White, M. Scott Atkison and Daniel T. Reiner (collectively, the “Defendants”), and the Plaintiffs entered into a Confidential Settlement Agreement and Release, pursuant to which, inter alia, the Company issued 150,000 SVS to the Plaintiffs in consideration for the final release (with prejudice) of all claims pending against the Defendants in the Commercial Division of the Supreme Court of the State of New York, County of New York (Index No.: 452625/2020).

TGS National Franchise, LLC arbitration

In the Matter of Arbitration between TGS National Franchise, LLC v. San Felasco Nurseries, Inc. (“SFN”) as assignee of Florida Compassionate Growers LLC (Case No: 01-18-0003-9481) (the “SFN Arbitration”).

Prior to the Company’s acquisition of SFN via a share exchange agreement dated October 25, 2018, TGS filed several arbitrations and civil lawsuits (the “TGS Lawsuits”) arising out of franchise agreements between TGS and SFN dated April 8, 2016 (“Franchise Agreements”). The TGS Lawsuits included a demand for arbitration filed with the American Arbitration Association filed on October 22, 2018 (the “SFN Arbitration”) seeking monetary damages arising from the termination of the Franchise Agreements. On March 28, 2019, the SFN Arbitration was stayed by agreement of the parties pending resolution of a TGS appeal, to the Colorado Court of Appeals, of a decision adverse to TGS in another of the TGS Lawsuits (the “TGS Appeal”).

On February 21, 2020, TGS moved to substitute Jushi FL SPV, LLC (“Jushi”) as Claimant in the SFN Arbitration (“Claimant”) and amend the case caption to In the Matter of Arbitration between Jushi FL SPV, LLC, as assignee of TGS National Franchise, LLC v. San Felasco Nurseries, Inc., as assignee of Florida Compassionate Growers LLC (Case No: 01-18-0003-9481). On May 15, 2020, the parties stipulated to substitute Jushi as Claimant and amend the case caption. On March 26, 2020, the Colorado Court of Appeals denied the TGS Appeal and held that certain terms in the Franchise Agreements evidence “a clear intent to limit the parties’ rights and remedies otherwise available.”

With the TGS Appeal decided, the SFN Arbitration re-commenced in August 2020. On November 9, 2020, the panel in the SFN Arbitration (the “AAA Panel”) denied SFN’s motion to dismiss, which had argued that the arbitration was precluded by the earlier TGS Lawsuits. On March 29, 2021, the AAA Panel denied SFN’s request to file a pre-hearing motion to dismiss the SFN Arbitration for failure to state recoverable damages. The final hearing in the SFN Arbitration was held the week of May 3, 2021. Post-hearing briefing was completed on June 29, 2021.

The AAA Panel issued its interim award (the “Interim Award”) on July 29, 2021. The AAA Panel ruled against Claimant on its legal and equitable claims for breach of a contractual right of first refusal (“ROFR”) under the Franchise Agreements in connection with a potential sale of SFN (the “ROFR Transaction”), holding that SFN had negotiated the ROFR Transaction in good faith. Claimant prevailed, however, on its claims for breach of contract and breach of the implied covenant of good faith and fair dealing arising from SFN’s termination of the Franchise Agreements. The AAA Panel awarded Claimant $10.6 million based on the supposed “present value”

of “unpaid future royalties” in respect of these claims. The AAA Panel awarded an additional $3.7 million in pre-award interest on these damages, and post-award interest at a rate of 12% per annum.

The Panel further determined that Claimant was the prevailing party in the arbitration and that the Franchise Agreements entitled Claimant to recover its reasonable attorneys’ fees and costs, exclusive of certain arbitration costs. Claimant’s fee request currently is due to the Panel on August 12, 2021, and SFN’s response currently is due on August 26, 2021.

The Franchise Agreements provide that the Interim Award, once finalized, is subject to review by an independent panel of three arbitrators (the “Independent Panel”). The Company intends to appeal the decision to the Independent Panel on the grounds that, among other things, the damages awarded are not available under the contracts and applicable law. The appeal will be filed no later than 30 days after the Interim Award becomes final. The Company has adjusted its reserves in respect of the SFN Arbitration as a result of the Interim Award.

Litigation Arising Out of Proposed Transaction with Trulieve Cannabis Corp.

On May 10, 2021, the Company entered into an arrangement agreement (the “Arrangement Agreement”) with Trulieve Cannabis Corp. (“Trulieve”), pursuant to which Trulieve agreed, subject to the terms and conditions thereof, to acquire all of the issued and outstanding subordinate voting shares of the Company, multiple voting shares of the Company, and super voting shares of the Company. On July 13, 2021, the Company issued its Definitive Proxy Statement (the “Proxy”) soliciting stockholder approval of the proposed transaction. Since the issuance of the Proxy, a number of purported stockholders of the Company have sent demand letters to the Company’s Board of Directors and/or commenced litigation challenging the accuracy and/or completeness of the disclosures in the Proxy. To date, the following five lawsuits have been filed, bearing the following captions:

Oppen v. Harvest Health et al., C.A. No. 21-02048 (D. Col.)

Stout v. Harvest Health et al., C.A. No. 21-06398 (S.D.N.Y.)

Jenkins v. Harvest Health et al., C.A. No. 21-02045 (D. Col.)

Coffman v. Harvest Health et al., C.A. No. 21-02026 (D. Col.)

Wean v. Harvest Health et al., C.A. No. 21-06435 (S.D.N.Y.)

Finger v Harvest Health et al., C.A. No. 21-02086 (D. Col.)

Each lawsuit asserts claims under Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 and alleges that the Proxy omits and/or misrepresents material information concerning: (i) the Company’s and Trulieve’s financial projections; (ii) the financial analyses performed by the Company’s financial advisors, Moelis & Company LLC and Haywood Securities Inc. (“Haywood”), in connection with their fairness opinions; (iii) information regarding the nature of Haywood’s arrangement; and (iv) the sales process leading up to the proposed transaction. 

The Company vehemently denies these allegations, and intends to vigorously defend against these lawsuits. At this point, the Company is unable to state whether an outcome unfavorable to the Company is either probable or remote, or to estimate the range of possible loss in the event of an unfavorable outcome. The Company previously recorded a liability in the amount of $3.0 million during year ended December 31, 2020 and increased its liability by an additional $4.5 million during the three months ended June 30, 2021. 

Litigation assessment

The Company has evaluated its claims and the foregoing matters to assess the likelihood of any unfavorable outcome and to estimate, if possible, the amount of potential loss as it relates to the litigation discussed above. Based on this assessment and estimate, which includes an understanding of the Company’s intention to vigorously prosecute its claims, the Company believes that any defenses of any of the counterparties lack merit, and the likelihood of any recoveries by any of the counterparties against the Company appears remote. This assessment and estimate is based on the information available to management as of the date of these financial statements and involves a significant amount of management judgment, including the inherent difficulty associated with assessing litigation matters in their early stages. As a result, the actual outcome or loss may differ materially from those envisioned by the current assessment and estimate. Our failure to successfully prosecute or settle these claims could have a material adverse effect on our financial condition, revenue and profitability and could cause the market value of our subordinate voting shares to decline.

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Income Taxes

6 Months Ended

Jun. 30, 2021

Income Tax Disclosure [Abstract]

Income Taxes

17.     Income Taxes

The Company accounts for income taxes in accordance with the provisions of ASC 740, Income Taxes (“ASC 740”), on a tax jurisdictional basis. The Company files a consolidated as well as several standalone company U.S. income tax returns and, at the federal level, its gross profits or income and losses are taxed at 21%. The Company’s effective tax rate varies from the U.S. Federal statutory rate due to permanent non-deductible IRS Section 280e differences, pass-through entities, and non-controlling interests. The Company recorded income tax expense of $6.8 million and $1.1 million for the three months ended June 30, 2021 and 2020, and $13.3 million and $4.9 million for the six months ended June 30, 2021 and 2020, respectively.

The net deferred income tax liability was $53.1 million as of both June 30, 2021 and December 31, 2020 and consists primarily of future tax impacts of the book and tax differences in fixed asset depreciation and intangibles acquired through purchase accounting.

During the three and six month ended June 30, 2021 and 2020, respectively, the Company recognized an immaterial amount of interest and penalties. The Company has not established valuation allowances against any U.S. Federal or state deferred tax assets.

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Related Party Transactions

6 Months Ended

Jun. 30, 2021

Related Party Transactions [Abstract]

Related Party Transactions

18.     Related Party Transactions

Related party notes receivable

(In thousands)	June 30, 2021		December 31, 2020
Secured promissory notes dated February 2020(1)	$	6,695	$	6,471
Secured revolving notes dated December 2018 through January 2019(2)		3,581		3,581
Total due from related party (current portion notes receivable)	$	10,276	$	10,052

(1)Secured promissory note dated February 2020, and amended February 2021, in the aggregate principal amount of $6.7 million with maturity date February 2022; principal is due at maturity. Interest rate of 6% per annum, due at maturity. The secured note of $6.7 million is due from Harvest of Ohio LLC, an Ohio limited liability company owned 49% by Steve White, the Chief Executive Officer of the Company, and an entity in which the Company has an investment interest. The Company accounts for the investment interest under the equity method. During the six months ended June 30, 2021 and 2020, interest income was $0.2 million and $0.1 million, respectively. During the three months ended June 30, 2021 and 2020, interest income was $0.1 million and less than $0.1 million, respectively.

(2)Secured revolving notes dated December 2018 through January 2019 in the aggregate principal amount of $3.6 million which are due from AINA We Would LLC, the borrower, of which Harvest owns a 25% interest. The notes mature between December 2019 and February 2020 and the principal is due at maturity. The secured revolving notes which mature between December 2019 and February 2020 are currently in default. The Company negotiated a settlement agreement with the debtor and, at this time, expects to receive the full principal balance. The secured revolving notes have interest rates of 8.25 - 8.5% per annum with interest payments due monthly. AINA We Would LLC can draw up to $30.0 million, with each advance subject to the approval of AINA We Would LLC and the Company in their sole discretion. No interest income was recorded during the three or six months ended June 30, 2021 and $0.1 million of interest income was recorded during both the three and six months ended June 30, 2020.

Related party leases

Included in the Condensed Consolidated Balance Sheets are the following amounts recorded for leases with related parties:

(In thousands)	June 30, 2021			December 31, 2020
Right-of-use assets for operating leases, net	$	5,541		$	5,621
Operating lease liability, current portion		(150	)		(135	)
Operating lease liability, net of current portion		(5,518	)		(5,595	)

AZRE2, LLC owns a building located at 300 East Cherry Street, Cottonwood, Arizona 86326, which it leases to Harvest to use as a cultivation facility. The lease commenced on August 1, 2019 for a 15 year term and rent payments were approximately $0.3 million for the six months ended June 30, 2021 and 2020 respectively. Rent payments were $0.2 million for the three  months ended June  30, 2021 and 2020, respectively. The Company incurred rent expense of $0.3 million for the six months ended June 30, 2021 and 2020, respectively and $0.2 million in relation to this lease for  the three months ended June 30, 2021 and 2020, respectively. Jason Vedadi, the former Chairman of the Board of Harvest, is the sole owner of AZRE2, LLC. $1.4 million is due to Karma Capital, LLC, an entity wholly owned by Mr. Vedadi, to pay back the loan given to purchase the Cottonwood property.

Karma Capital, LLC owns a building located at 2726-2734 E. Grant Road Tucson, Arizona 85716, which it leases to Harvest to use as a dispensary. The lease commenced on July 1, 2017 for a 15 year term and rent payments were less than $0.1 million for the six and three months ended June 30, 2021 and 2020, respectively. The Company incurred rent expense of less than $0.1 million in relation to this lease for six and three months ended June 30, 2021 and 2020, respectively. Mr. Vedadi, the former Chairman of the Board of Harvest, is the sole owner of Karma Capital, LLC.

Earbuds, LLC owns a building located at 4370 Tonawanda Trail Beaver Creek, Ohio 45430, which it leases to Harvest to use as a dispensary. The lease commenced on April 1, 2020 for a 15 year term and rent payments were less than $0.1 million for the six and

three months ended June 30, 2021 and 2020, respectively. There was also an additional fee paid of approximately $0.1 million provided to the landlord for previous costs incurred to purchase the building in 2020. The Company incurred rent expense of less than $0.1 million in relation to this lease for the six months and three months ended June 30, 2021 and 2020, respectively. Each of Mr. Vedadi, the former Chairman of the Board of Harvest, Joseph Sai, Harvest’s Chief of Staff and Howard Hintz, Harvest’s former Director of Contracts, are partners of Earbuds, LLC. Each of the three partners of Earbuds, LLC are entitled to an equal distribution share of the accrued rental income. $0.4 million is due to SMRE LLC (an entity owned by Mr. Sai), Things Change LLC (an entity owned by Mr. Hintz) and TJV-168 LLC (an entity owned by Mr. Vedadi) to pay back the loan given to purchase the Beaver Creek, OH property. Each partner loaned $0.1 to Earbuds, LLC to acquire the property.

On February 9, 2021, we cancelled 2,545 Multiple Voting Shares held by Jason Vedadi in exchange for extinguishing our right of first refusal under the Separation Agreement (as more fully described and qualified by reference to Exhibit 10.1 of this Quarterly Report on Form 10-Q, Amendment to Separation Agreement and General Release, by and between Jason Vedadi and Harvest Health & Recreation Inc., dated February 9, 2021). The number of Multiple Voting Shares is equal to an aggregate market value of $1,000,185 divided by the closing sales price of the Subordinate Voting Shares on February 5, 2021, which was $3.93. The Multiple Voting Shares were convertible to Subordinate Voting Shares on a 1:100 basis. This transaction with Mr. Vedadi is a transaction agreed with an “insider” and is considered to be a “related party transaction.”

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Subsequent Events

6 Months Ended

Jun. 30, 2021

Subsequent Events [Abstract]

Subsequent Events

19.     Subsequent Events

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Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2021

Accounting Policies [Abstract]

Basis of Presentation

(a)   Basis of Presentation

The accompanying Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, our condensed consolidated financial statements do not include all the information and footnotes required by GAAP for complete financial statements. Normal and recurring adjustments considered necessary for a fair statement of the results for the interim periods, in the opinion of the Company’s management, have been included. Operating results for the three months ended June 30, 2021, are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. The accompanying condensed consolidated financial statements and related footnote disclosures should be read in conjunction with the consolidated financial statements and notes thereto included in our 2020 Annual Report on Form 10-K filed with the SEC on March 30, 2021.

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results may differ from the estimates and assumptions used.

Basis of Measurement

(b)   Basis of Measurement

These Unaudited Condensed Consolidated Financial Statements have been prepared on the going concern basis, under the historical cost convention, except for certain financial instruments that are measured at fair value as described herein.

Functional Currency

(c)   Functional Currency

These Unaudited Condensed Consolidated Financial Statements are presented in United States dollars, which is also the functional currency of the Company and its affiliates.

Basis of Consolidation

(d)   Basis of Consolidation

These Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q include the accounts of the Company, all wholly-owned and majority-owned subsidiaries in which the Company has a controlling voting interest and, when applicable, variable interest entities in which the Company has a controlling financial interest or is the primary beneficiary. Investments in affiliates where the Company does not exert a controlling financial interest are not consolidated.

Subsidiaries over which the Company has a controlling financial interest are fully consolidated from the date control commences until the date control ceases. All of the consolidated entities were under common control during the entirety of the periods for which their respective results of operations were included in the consolidated statements (i.e., from the date of their acquisition). All intercompany accounts and transactions have been eliminated on consolidation.

Discontinued Operations

(e)   Discontinued Operations

The Company followed Accounting Standard Codification (“ASC”) 360, Property, Plant, an Equipment, and ASC 205-20, Discontinued Operations, to report assets held for sale and discontinued operations.

The Company classifies assets and liabilities of a business or asset group as held for sale, and the results of its operations as income (loss) from discontinued operations, net, for all periods presented, when (i) we commit to a plan to divest a business or asset group, actively begin marketing it for sale, and when it is deemed probable of occurrence within the next twelve months, and (ii) when the business or asset group reflects a strategic shift that has, or will have, a major effect on the Company’s operations and its financial results. In measuring the assets and liabilities held for sale, the Company evaluates which businesses or asset groups are being marketed for sale.

See Note 4 for additional information.

Revenue Recognition

(f)   Revenue Recognition

The Company accounts for customer contracts in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”), which includes the following five-step model:

Identification of the contract, or contracts, with a customer.

Identification of the performance obligations in the contract.

Determination of the transaction price.

Allocation of the transaction price to the performance obligations in the contract.

Recognition of revenue when, or as, the Company satisfies a performance obligation.

Through application of the standard, 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 those goods or services.

Revenues consist primarily of wholesale and retail sales of cannabis, which are generally recognized at a point in time when control over the goods have been transferred to the customer and is recorded net of sales discounts. Payment is typically due upon transferring the goods to the customer or within a specified time period permitted under the Company’s credit policy. Sales discounts were not material during the three and six months ended June 30, 2021 and 2020, respectively.

The Company has agreements in place whereby third-parties provide services or license the right to operate certain aspects of cannabis facilities owned by the Company. Under the terms of these agreements, the service provider operates various aspects of the business including procurement, production, regulatory compliance, marketing and sales, subject to oversight by the Company. The Company pays the service provider a fee for its services or in the case of licenses, the licensee pays the Company a license fee. The Company recorded $0.3 million and $6.2 million on a gross basis for the three months ended June 30, 2021 and 2020, respectively. The Company recorded $0.6 million and $12.6 million on a gross basis for the six months ended June 30, 2021 and 2020, respectively. The determination that the Company was the principal under these agreements was made in accordance with ASC 606-10-55-36 through 55-40 and consists of the following analysis. The Company analyzed the agreements first to determine what the specified good or service is that is being provided. Secondly, whether the Company is in control of the goods prior to the goods being transferred to the customer. The specified goods consist of various cannabis products sold at either a retail location or wholesale. In order to determine whether the Company had control of the specified goods prior to transfer to the customer, the terms of the agreements to provide the goods to the customers were evaluated. Pursuant to the terms of the agreements, the Company is at all times the owner of the products which are the cannabis and cannabis concentrates. Further, the service provider would not be able to sell the products to the customer without the use the of the Company’s license which permits it to sell cannabis under state law.

The following represents disaggregated revenue information:

(In thousands)	Retail		Wholesale		Licensing and other		Consolidated
Revenue for the three months ended June 30, 2021	$	85,177	$	13,948	$	3,338	$	102,463
Revenue for the three months ended June 30, 2020	$	42,250	$	7,199	$	6,212	$	55,661
Revenue for the six months ended June 30, 2021	$	162,825	$	23,241	$	5,223	$	191,289
Revenue for the six months ended June 30, 2020	$	72,262	$	13,264	$	14,370	$	99,896

Our customer loyalty program enables participants to earn points for qualifying purchases that can be redeemed for discounts or product in the future. We allocate the transaction price between the goods delivered and the future goods that will be delivered, on a relative standalone selling price basis, and defer the revenues allocated to the points, less expected expirations, until such points are redeemed. The timing of loyalty point redemptions can vary significantly, and the loyalty points do not expire. As of June 30, 2021, the amount of revenue deferred related to the earned points, net of redemptions, is $2.3 million. The deferral is reflected as a current liability in our condensed consolidated balance sheets because it is expected to be earned within the next 12 months.

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Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2021

Accounting Policies [Abstract]

Summary of Disaggregation of Revenue

The following represents disaggregated revenue information:

(In thousands)	Retail		Wholesale		Licensing and other		Consolidated
Revenue for the three months ended June 30, 2021	$	85,177	$	13,948	$	3,338	$	102,463
Revenue for the three months ended June 30, 2020	$	42,250	$	7,199	$	6,212	$	55,661
Revenue for the six months ended June 30, 2021	$	162,825	$	23,241	$	5,223	$	191,289
Revenue for the six months ended June 30, 2020	$	72,262	$	13,264	$	14,370	$	99,896

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Recently Issued Accounting Pronouncements (Tables)

6 Months Ended

Jun. 30, 2021

Recently Issued Accounting Pronouncements [Abstract]

Schedule of Recently Issued Accounting Pronouncements

We adopted the following standard during the six months ended June 30, 2021, which did not have a material impact on our financial statements or financial statement disclosures:

Date Issued	Standard	Effective Date
December 2019	ASU 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes	January 2021

The following standards were recently issued, and the Company is assessing the impact to the future consolidated financial statements:

Date Issued	Standard	Effective Date
May 2021	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)	January 2021
August 2020	ASU No. 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	January 2022

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Discontinued Operations (Tables)

6 Months Ended

Jun. 30, 2021

Disposal Group Not Discontinued Operation Income Statement Disclosures [Abstract]

Schedule of Statement of Operations, Assets and liabilities of Discontinued Operations

The following table is the Unaudited Condensed Consolidated Statements of Operations reflecting discontinued operations for the three months and six months ended June 30, 2020:

(In thousands)	Three Months Ended June 30, 2020			Six Months Ended June 30, 2020
Revenue, net of discounts	$	3,996		$	4,778
Cost of goods sold		(2,054	)		(2,711	)
Gross profit		1,942			2,067
Expenses
General and administrative		1,278			1,603
Sales and marketing		24			46
Depreciation and amortization		1,039			1,057
Total expenses		2,341			2,706
Operating income (loss)		(399	)		(639	)
Other (expense) income
Gain on sale of assets		2,574			2,574
Interest expense		(711	)		(717	)
Loss before taxes and non-controlling interest		1,464			1,218
Income taxes		(9	)		(147	)
Loss from continuing operations before non-controlling interest		1,455			1,071
Net loss from discontinued operations, net of tax		905			1,289
Net loss attributed to Harvest Health & Recreation Inc.	$	2,360		$	2,360

The following table is a summary of the assets and liabilities of discontinued operations:

(In thousands)	June 30, 2021		December 31, 2020
ASSETS
Inventory, net	$	344	$	93
Other current assets		-		33
Property, plant and equipment, net		3,110		1,747
Right-of-use asset, net		64		3,593
Intangibles assets, net		171		894
Other assets		—		225
Assets from discontinued operations	$	3,689	$	6,585
LIABILITIES
Lease liability, net of current portion		28		718
Liabilities from discontinued operations	$	28	$	718

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Inventory (Tables)

6 Months Ended

Jun. 30, 2021

Inventory Disclosure [Abstract]

Schedule of Inventory

The Company’s inventory consisted of:

(In thousands)	June 30, 2021			December 31, 2020
Raw materials	$	17,384		$	12,632
Work in progress		6,165			5,634
Finished goods		22,228			19,718
Total inventory		45,777			37,984
Reserve		(1,169	)		(1,122	)
Total inventory, net	$	44,608		$	36,862

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Notes Receivable (Tables)

6 Months Ended

Jun. 30, 2021

Loans And Leases Receivable Disclosure [Abstract]

Schedule of Receivables with Imputed Interest

The Company’s notes receivable consisted of:

(In thousands)	June 30, 2021			December 31, 2020
Secured promissory notes dated November 2020 in the principal amount of $12.0 million with a maturity date of November 9, 2025; monthly payments of $0.1 million, inclusive of principal and interest. Balloon payment of $8.4 million due at maturity. Interest rate of 7.5% per annum.	$	11,493		$	12,000
Secured promissory notes dated February 2020 through June 2021 in the principal amount of $15.1 million with maturity dates from August 2021 to February 2022; principal is due at maturity. Interest rates of 6 - 8% per annum, due at maturity.		15,088			13,471
Secured promissory notes, created from the CannaPharmacy acquisition, dated April and June of 2019 in the principal amount of $11.6 million with maturity dates in April and June of 2021; principal is due at maturity. Interest rate of 8% per annum, due quarterly.		—			456
Secured convertible promissory note, due from Falcon International Corp. (‘‘Falcon’’) and subsidiaries, dated June 7, 2019 in the principal amount of up to $40.4 million with maturity date of June 6, 2022; principal is due at maturity. Interest rate of 4% per annum, due at maturity.(1)		—			25,525
Unsecured convertible promissory notes, due from Falcon and its subsidiaries, dated October 2018 through February 2019 in the principal amount of $24.5 million with maturity dates of August to November 2019; principal is due at maturity. Interest rate of 8% per annum, due at maturity.(1)		—			24,499
Secured revolving notes dated December 2018 through January 2019 in the principal amount of up to $30.0 million with maturity dates of December 2019 to February 2020; principal is due at maturity. Interest rates of 8.25 - 8.5% per annum with interest payments due monthly.(2)		3,581			3,581
Secured promissory notes dated February 2021 in the principal of up to $0.9 million with a maturity date of February 19, 2022; principal is due at maturity. Interest rate of 10.0% per annum with interest payments due monthly.		850			—
Gross notes receivable		31,012			79,532
Less: provision for impairment of notes receivable		(627	)		(29,713	)
Total notes receivable, net of allowance		30,385			49,819
Less: current portion of notes receivable		(19,869	)		(31,608	)
Notes receivable, long-term portion	$	10,516		$	18,211

(1)These notes were settled as part of the Falcon Lawsuit settlement. $29.1 million of the provision for impairment of notes receivable related to these notes was written off in relation to this settlement. See Note 10 for additional information.

(2)These notes are currently in default. The Company negotiated a settlement agreement with the debtor and, at this time, expects to receive the full principal balance during fiscal year 2021. The Company’s provision for expected credit losses as of June 30, 2021 includes $0.3 million related to these notes.

Notes Receivable Maturities Analysis

Stated maturities of the notes receivable are as follows:

(In thousands)	Expected Principal Payments
2021 (6 months)	$	10,470
2022		9,918
2023		728
2024		784
2025		9,112
	$	31,012

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Leases (Tables)

6 Months Ended

Jun. 30, 2021

Leases [Abstract]

Summary of Supplemental Balance Sheet Information Related to Leases

The following table presents lease assets and liabilities within the Condensed Consolidated Balance Sheets:

Lease and Classification	June 30, 2021		December 31, 2020
Operating Leases:	(In thousands)
Right-of-use asset, net	$	118,935	$	66,464
Lease liability, current portion	$	2,060	$	3,041
Lease liability, net of current portion	$	118,249	$	64,232
Finance Leases:
Property, plant and equipment, net(1)	$	405	$	5,523
Other current liabilities	$	92	$	5,504

(1)Finance lease assets are recorded net of accumulated amortization of less than $0.1 million as of June 30, 2021 and December 31, 2020, respectively.

Summary of Supplemental Statement of Operations Related to Leases

The Company recognized the following amounts within the Condensed Consolidated Statements of Operations:

	Three Months Ended June 30				Six Months Ended June 30
	2021		2020		2021		2020
Operating lease expense	$	5,270	$	5,553	$	9,758	$	8,352
Interest on lease liabilities	$	2	$	384	$	6	$	387
Expenses related to short-term leases	$	19	$	487	$	228	$	950
Expenses related to variable payments	$	498	$	266	$	688	$	507

The Company’s sublease income is immaterial.

Schedule of Cash Flow Information Related to Leases

Other information:

	Six Months Ended June 30,
	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:	(In thousands)
Operating cash flows from operating leases	$	7,831	$	2,556
Operating cash flows from finance leases	$	6	$	387
Financing cash flows from finance leases	$	87	$	24

Schedule of Lease Terms and Discount Rate

The Company’s lease terms and discount rates were as follows:

Weighted average remaining term (in years):	June 30, 2021			June 30, 2020
Operating		14.5			3.6
Finance		34.5			9.9
Weighted average discount rate:
Operating		12.43	%		10.00	%
Finance		10.00	%		10.03	%

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Intangible Assets and Goodwill (Tables)

6 Months Ended

Jun. 30, 2021

Goodwill And Intangible Assets Disclosure [Abstract]

Schedule of Intangible Assets and Goodwill

Intangible assets, including goodwill, as of December 31, 2020 and June 30, 2021 consisted of the following:

Gross carrying amount (in thousands)	Weighted average useful lives (years)	December 31, 2020		Additions		Dispositions/ Adjustments			June 30, 2021
Definite life intangible assets:
Patient relationships	2.0	$	820	$	—	$	—		$	820
Technology	9.9		18,058		—		—			18,058
Software	5.0		241		320		(145	)		416
Other	3.0		410		730		(241	)		899
Indefinite life intangible assets:
Licenses and permits			253,866		519		(151	)		254,234
Internally developed			1,113		694		(643	)		1,164
Trade names			2,400		—		—			2,400
Total intangible assets			276,908		2,263		(1,180	)		277,991
Goodwill			116,041		—		(500	)		115,541
Total gross carrying amount		$	392,949	$	2,263	$	(1,680	)	$	393,532
Accumulated amortization (in thousands)		December 31, 2020		Amortization		Dispositions/ Adjustments			June 30, 2021
Definite life intangible assets:
Patient relationships		$	820	$	—	$	—		$	820
Technology			3,913		945		—			4,858
Software			57		19		(30	)		46
Other			—		184		—			184
Total accumulated amortization			4,790		1,148		(30	)		5,908
Total intangible assets, net and goodwill		$	388,159	$	1,115	$	(1,650	)	$	387,624

Schedule of Estimated Amortization Expense

Based solely on the amortizable intangible assets recorded at June 30, 2021, estimated amortization expense for the remainder of fiscal 2020 through fiscal 2025 and thereafter is as follows:

(In thousands)	Estimated Amortization Expense
2021 (6 months)	$	1,523
2022		2,108
2023		2,008
2024		1,787
2025		1,770
Thereafter		5,089
Total amortization expense	$	14,285

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Corporate investments (Tables)

6 Months Ended

Jun. 30, 2021

Investments Debt And Equity Securities [Abstract]

Summary of Carrying Values of Investments

The carrying values of the Company’s investments are as follows:

(In thousands)	June 30, 2021		December 31, 2020
Investment in Hightimes	$	19,091	$	19,091
Investment in Falcon		21,833		—
Corporate investments	$	40,924	$	19,091

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Other Current Liabilities (Tables)

6 Months Ended

Jun. 30, 2021

Other Liabilities Disclosure [Abstract]

Summary of Other Current Liabilities

The Company’s other current liabilities consisted of:

(In thousands)	June 30, 2021		December 31, 2020
Accrued inventory purchases	$	7,671	$	7,886
Accrued expenses		7,724		5,607
Accrued payroll and benefits		5,146		4,353
Accrued capital expenditures		2,906		3,133
Finance lease liabilities(1)		92		5,504
Deferred revenue		2,285		—
Other		4,610		2,413
Total other current liabilities	$	30,434	$	28,896

(1)See Note 7 for additional information.

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Notes Payable (Tables)

6 Months Ended

Jun. 30, 2021

Debt Disclosure [Abstract]

Schedule of Notes Payable

The Company’s notes payable consisted of:

(In thousands)	June 30, 2021			December 31, 2020
Secured promissory note dated March 2020, in the principal amount of $10.0 million with a maturity of March 2022. Monthly interest payments of 9% per annum. Principal balance due at maturity.(1)	$	10,000		$	10,000
Unsecured promissory note dated February 2020, in the principal amount of $6.7 million with a maturity of February 2023. Monthly interest payments at 4% per annum. Annual payments of $2.2 million, inclusive of interest at 4%, due beginning February 2021 with remaining principal due at maturity.		4,699			6,650
Secured promissory notes dated December 2019, in the principal amount of $93.4 million with a maturity of December 2022. Semi-annual interest payments at 15% per annum. Principal balance due at maturity.(2)		93,390			93,390
Secured promissory notes dated December 2019, in the principal amount of $42.4 million with a maturity of December 2022. Semi-annual interest payments at 9.25% per annum. Principal balance due at maturity.(3)		42,404			42,404
Secured convertible promissory note dated December 2019, in the principal amount of $10.0 million with a maturity of December 2021. Semi-annual interest payments at 9% per annum. Principal balance due at maturity.(4)		10,000			10,000
Secured convertible promissory note dated April 2021, in the principal amount of $5.0 million with a maturity of April 2023. Semi-annual interest payments at 9% per annum. Principal balance due at maturity.		5,000			—
Secured promissory notes dated October 2019, in the principal amount of $6.5 million with a maturity of October 2021. Monthly interest payments at 8.95% per annum. Principal balance due at maturity.		6,500			6,500
Secured promissory notes dated September and October 2019, in the principal amount of $2.6 million with maturities of October 2024. Monthly interest payments at 5.5% and 8.75% per annum. Principal balance due at maturity.(5)		2,456			2,505
Secured promissory note dated June 2019, in the principal amount of $4.0 million with a maturity of June 2024. Interest at LIBOR plus 2.5% per annum, payable monthly. Principal balance due based on 25-year amortization schedule with balloon payment at maturity.(6)		3,916			4,000
Unsecured convertible debentures dated May 2019, in the principal amount of $100.0 million with a maturity of May 2022. Semi-annual interest payments at 7% per annum. Principal balance due at maturity.(7)		100,000			100,000
Other unsecured promissory notes		3,661			4,039
Other secured promissory notes		8,026			1,275
Total notes payable		290,052			280,763
Less: unamortized debt discounts and issuance costs		(11,410	)		(15,787	)
Net amount		278,642			264,976
Less: current portion of notes payable		(134,394	)		(20,910	)
Notes payable, net of current portion	$	144,248		$	244,066

(1)Carrying value includes debt discount of $0.7 million.

(2)Carrying value includes debt issuance costs of $2.3 million.

(3)Carrying value includes debt issuance costs of $1.2 million and warrants of $3.1 million.

(4)Carrying value includes debt discount of $0.2 million.

(5)Carrying value includes debt issuance costs of $0.1 million.

(6)Carrying value includes debt issuance costs of less than $0.1 million.

(7)Carrying value includes debt issuance costs of $1.4 million and warrants of $2.4 million.

Schedule of Stated Maturities of Debt Obligations and Expected Interest Payments

Stated maturities of debt obligations and expected interest payments are as follows:

(In thousands)	Expected Principal Payments		Expected Interest Payments
2021 (6 months)	$	19,360	$	14,470
2022		254,324		21,864
2023		10,229		660
2024		5,611		270
2025 and thereafter		528		334
	$	290,052	$	37,598

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Share-based compensation (Tables)

6 Months Ended

Jun. 30, 2021

Summary of Stock Options Activity

:

	Number of Stock Options			Weighted- Average Exercise Price		Aggregate Intrinsic Value
Balance as of December 31, 2020		14,380,875			5.02
Forfeited/Cancelled		(2,574,070	)		6.53
Exercised		(221,680	)		2.52
Granted		675,500			3.85
Balance as of June 30, 2021		12,260,625		$	4.69	$	10,174,894

Summary of Stock Option, Exercise Price Range

The following table summarizes the Subordinate Voting Shares stock options that remain outstanding as of June 30, 2021:

Security Issuable	Expiration Date	Number of Stock Options	Exercise Price	Stock Options Exercisable
Subordinate Voting Shares	November 2028 - February 2031	12,260,625	$1.09 - $8.75	4,866,313

The following table summarizes the Subordinate Voting Shares stock options that remain outstanding as of December 31, 2020:

Security Issuable	Expiration Date	Number of Stock Options		Exercise Price	Stock Options Exercisable
Subordinate Voting Shares	November 2028 - December 2030		14,380,875	$1.09 - $8.75		2,326,000

Summary of Restricted Stock Units Activity

These restricted stock units vest throughout 2020 and 2021. The following table summarizes the status of the restricted stock units:

	Number of Restricted Stock Units			Weighted- Average Grant Price
Balance as of December 31, 2020		241,273		$	2.01
Vested		(136,952	)		1.83
Balance as of June 30, 2021		104,321		$	2.24

Stock Options [Member]

Summary of Assumptions Applied to Establish Fair Value of Option Granted using Black Scholes Option Pricing Model

The fair value of the stock options granted was determined using the Black-Scholes option-pricing model with the following weighted-average assumptions at the time of grant:

	2021	2020
Risk-Free Annual Interest Rate	1.09% - 2.25%	2.00% - 2.25%
Expected Annual Dividend Yield	0%	0%
Expected Stock Price Volatility	99% - 197%	83% - 99%
Expected Life of Stock Options	6.25 Years	6.25 Years

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Stockholders' Equity (Tables)

6 Months Ended

Jun. 30, 2021

Summary of Status of Stock Warrants Outstanding

A summary of the status of the stock warrants outstanding, on an as-converted basis for SVS, is as follows:

	Number of Stock Warrants			Weighted- Average Exercise Price
Balance as of December 31, 2020		24,407,114		$	4.11
Issued		307,856		$	2.40
Exercised		(6,125,454	)	$	1.52
Balance as of June 30, 2021		18,589,516		$	4.79

The following table summarizes the stock warrants that remain outstanding as of June 30, 2021:

Security Issuable	Expiration Date	Number of Stock Warrants		Exercise Price	Stock Warrants Exercisable
Subordinate Voting Shares	May 2022 - Dec 2025		17,154,516	$2.46 - $14.66		17,154,516
Multiple Voting Shares	April 1, 2023		14,350	106.17		14,350

The following table summarizes the stock warrants that remain outstanding as of December 31, 2020:

Security Issuable	Expiration Date	Number of Stock Warrants		Exercise Price	Stock Warrants Exercisable
Subordinate Voting Shares	May 2022 - April 2023		18,872,114	$2.40 - $14.27		18,872,114
Multiple Voting Shares	April 2021 - April 2023		55,350	103.36		55,350

Summary of Subordinated Voting Share

The following presents the total outstanding SVS if converted as of June 30, 2021:

Share Class	Number of Shares at June 30, 2021		Conversion Factor		Total Subordinated Voting Shares if Converted
Super Voting Shares		2,000,000		1		2,000,000
Multiple Voting Shares		1,561,678		100		156,167,800
Subordinate Voting Shares		255,991,500		1		255,991,500
Total						414,159,300

Warrants

Summary of Assumptions Applied to Establish Fair Value of Option Granted using Black Scholes Option Pricing Model

The fair value of the stock warrants granted was determined using the Black-Scholes option-pricing model with the following weighted-average assumptions at the time of issuance:

	2021	2020
Risk-Free Annual Interest Rate	0.11% - 0.16%	2.15%
Expected Annual Dividend Yield	0%	0%
Expected Stock Price Volatility	95%	70% - 99%
Expected Term	2.2 - 2.3 Years	1.0 - 5.0 years

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Net Loss Per Share (Tables)

6 Months Ended

Jun. 30, 2021

Earnings Per Share [Abstract]

Summary of Calculation of Net Loss per Common Share Attributable

Calculation of net loss per common share attributable to Harvest Health & Recreation Inc. is as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands, except share and per share data)	2021			2020			2021			2020
Net loss attributable to Harvest Health & Recreation Inc.	$	(19,505	)	$	(27,574	)	$	(42,627	)	$	(42,958	)
Net loss attributable to discontinued operations, net of tax	$	(1,954	)	$	(905	)	$	(1,954	)	$	(1,289	)
Basic weighted-average number of shares outstanding		413,103,779			364,580,737			410,383,008			334,380,082
Net loss per share attributable to Harvest Health & Recreation Inc. - basic and diluted	$	(0.05	)	$	(0.08	)	$	(0.10	)	$	(0.13	)
Net loss per share attributable to discontinued operations, net of tax	$	—		$	—		$	—		$	—

Summary of Potentially Dilutive Shares Excluded from Computation of Net Loss Per Share

The following table summarizes the potential SVS that were excluded as they were anti-dilutive:

	June 30,
	2021		2020
Stock options and restricted stock units		12,364,946		16,011,125
Warrants(1)		19,345,162		14,685,996
Convertible debt		13,823,603		32,041,357
		45,533,711		62,738,478

(1)Includes the outstanding compensation warrants issued for underwriting services in the October 2020 bought financing.

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Related Party Transactions (Tables)

6 Months Ended

Jun. 30, 2021

Related Party Transactions [Abstract]

Schedule of Related Party Notes Receivable

Related party notes receivable

(In thousands)	June 30, 2021		December 31, 2020
Secured promissory notes dated February 2020(1)	$	6,695	$	6,471
Secured revolving notes dated December 2018 through January 2019(2)		3,581		3,581
Total due from related party (current portion notes receivable)	$	10,276	$	10,052

(1)Secured promissory note dated February 2020, and amended February 2021, in the aggregate principal amount of $6.7 million with maturity date February 2022; principal is due at maturity. Interest rate of 6% per annum, due at maturity. The secured note of $6.7 million is due from Harvest of Ohio LLC, an Ohio limited liability company owned 49% by Steve White, the Chief Executive Officer of the Company, and an entity in which the Company has an investment interest. The Company accounts for the investment interest under the equity method. During the six months ended June 30, 2021 and 2020, interest income was $0.2 million and $0.1 million, respectively. During the three months ended June 30, 2021 and 2020, interest income was $0.1 million and less than $0.1 million, respectively.

(2)Secured revolving notes dated December 2018 through January 2019 in the aggregate principal amount of $3.6 million which are due from AINA We Would LLC, the borrower, of which Harvest owns a 25% interest. The notes mature between December 2019 and February 2020 and the principal is due at maturity. The secured revolving notes which mature between December 2019 and February 2020 are currently in default. The Company negotiated a settlement agreement with the debtor and, at this time, expects to receive the full principal balance. The secured revolving notes have interest rates of 8.25 - 8.5% per annum with interest payments due monthly. AINA We Would LLC can draw up to $30.0 million, with each advance subject to the approval of AINA We Would LLC and the Company in their sole discretion. No interest income was recorded during the three or six months ended June 30, 2021 and $0.1 million of interest income was recorded during both the three and six months ended June 30, 2020.

Summary of Related Party Leases

Included in the Condensed Consolidated Balance Sheets are the following amounts recorded for leases with related parties:

(In thousands)	June 30, 2021			December 31, 2020
Right-of-use assets for operating leases, net	$	5,541		$	5,621
Operating lease liability, current portion		(150	)		(135	)
Operating lease liability, net of current portion		(5,518	)		(5,595	)

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Business Description - Additional Information (Details)	6 Months Ended
	Jun. 30, 2021 Segment
Organization Consolidation And Presentation Of Financial Statements [Abstract]
Number of segments	1

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Significant Accounting Policies - Additional Information (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020	Dec. 31, 2020
Accounting Policies [Abstract]
Sales Discounts	$ 0	$ 0	$ 0	$ 0
Proceeds From Services And Licenses	300,000	$ 6,200,000	600,000	$ 12,600,000
Deferred Revenue Net of Redemptions	$ 2,285,000		$ 2,285,000		$ 0

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Significant Accounting Policies - Summary of Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Revenue	$ 102,463	$ 55,661	$ 191,289	$ 99,896
Retail
Revenue	85,177	42,250	162,825	72,262
Wholesale
Revenue	13,948	7,199	23,241	13,264
Licensing and Other
Revenue	$ 3,338	$ 6,212	$ 5,223	$ 14,370

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Recently Issued Accounting Pronouncements - Schedule of Recently Issued Accounting Pronouncements (Details)	6 Months Ended
	Jun. 30, 2021
Accounting Standards Update 2020-06
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Date Issued	August 2020
Standard	ASU No. 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 i
Effective Date	January 2022
Accounting Standards Update 2019-12
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Date Issued	December 2019
Standard	ASU 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes
Effective Date	January 2021
Accounting Standards Update 2021-04
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Date Issued	May 2021
Standard	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)
Effective Date	January 2021

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Discontinued Operations - Summary of Unaudited Condensed Consolidated Statements of Operations of Discontinued Operations (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Other (expense) income
Loss from continuing operations before non-controlling interest	$ (1,954)	$ (905)	$ (1,954)	$ (1,289)
Net loss	(19,229)	(25,645)	(42,197)	(41,117)
Net loss attributed to Harvest Health & Recreation Inc.	$ (19,505)	(27,574)	$ (42,627)	(42,958)
ICG
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Revenue, net of discounts		3,996		4,778
Cost of goods sold		(2,054)		(2,711)
Gross profit		1,942		2,067
General and administrative		1,278		1,603
Sales and marketing		24		46
Depreciation and amortization		1,039		1,057
Total expenses		2,341		2,706
Operating income (loss)		(399)		(639)
Other (expense) income
Gain on sale of assets		2,574		2,574
Interest expense		(711)		(717)
Loss before taxes and non-controlling interest		1,464		1,218
Income taxes		(9)		(147)
Loss from continuing operations before non-controlling interest		1,455		1,071
Net loss		905		1,289
Net loss attributed to Harvest Health & Recreation Inc.		$ 2,360		$ 2,360

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Discontinued Operations - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2021
Michigan
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Discontinued operations due to the abandoned expansion	$ 1.9	$ 1.9

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Discontinued Operations - Summary of the Assets and Liabilities of Discontinued Operations (Details) - ICG - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
ASSETS
Inventory, net	$ 344	$ 93
Other current assets	0	33
Property, plant and equipment, net	3,110	1,747
Right-of-use asset, net	64	3,593
Intangibles assets, net	171	894
Other assets	0	225
Assets from discontinued operations	3,689	6,585
LIABILITIES
Lease liability, net of current portion	28	718
Liabilities from discontinued operations	$ 28	$ 718

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Inventory - Schedule of Inventory (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Inventory Disclosure [Abstract]
Raw materials	$ 17,384	$ 12,632
Work in progress	6,165	5,634
Finished goods	22,228	19,718
Total inventory	45,777	37,984
Reserve	(1,169)	(1,122)
Total inventory, net	$ 44,608	$ 36,862

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Notes Receivables - Schedule of Notes Receivables (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Accounts Notes And Loans Receivable [Line Items]
Gross notes receivable	$ 31,012	$ 79,532
Less: provision for impairment of notes receivable	(627)	(29,713)
Total notes receivable, net of allowance	30,385	49,819
Less: current portion of notes receivable	(19,869)	(31,608)
Notes receivable, long-term portion	10,516	18,211
Secured Promissory Note November 2020
Accounts Notes And Loans Receivable [Line Items]
Gross notes receivable	11,493	12,000
Secured Promissory Note February 2020
Accounts Notes And Loans Receivable [Line Items]
Gross notes receivable	15,088	13,471
Secured Promissory Note April and June 2019
Accounts Notes And Loans Receivable [Line Items]
Gross notes receivable		456
Secured Promissory Note June 7, 2019
Accounts Notes And Loans Receivable [Line Items]
Gross notes receivable		25,525
Unsecured Convertible Promissory Notes October 2018 through February 2019
Accounts Notes And Loans Receivable [Line Items]
Gross notes receivable		24,499
Secured Revolving Note December 2018 Through January 2019
Accounts Notes And Loans Receivable [Line Items]
Gross notes receivable	3,581	$ 3,581
Secured Promissory Notes Dated February 2021
Accounts Notes And Loans Receivable [Line Items]
Gross notes receivable	$ 850

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Notes Receivables - Schedule of Notes Receivables (Parenthetical) (Details) $ in Millions	6 Months Ended
	Jun. 30, 2021 USD ($)
Secured Promissory Note November 2020
Accounts Notes And Loans Receivable [Line Items]
Notes receivable principle amount	$ 12.0
Notes receivable maturity date	November 9, 2025
Notes receivable monthly payment	$ 0.1
Notes receivable on maturity	$ 8.4
Notes receivable rate of interest	7.50%
Secured Promissory Note February 2020
Accounts Notes And Loans Receivable [Line Items]
Notes receivable principle amount	$ 15.1
Notes receivable maturity date	August 2021 to February 2022
Secured Promissory Note February 2020 | Minimum
Accounts Notes And Loans Receivable [Line Items]
Notes receivable rate of interest	6.00%
Secured Promissory Note February 2020 | Maximum
Accounts Notes And Loans Receivable [Line Items]
Notes receivable rate of interest	8.00%
Secured Promissory Note April and June 2019
Accounts Notes And Loans Receivable [Line Items]
Notes receivable principle amount	$ 11.6
Notes receivable maturity date	April and June of 2021
Notes receivable rate of interest	8.00%
Secured Promissory Note June 7, 2019
Accounts Notes And Loans Receivable [Line Items]
Notes receivable principle amount	$ 40.4
Notes receivable maturity date	June 6, 2022
Notes receivable rate of interest	4.00%
Unsecured Convertible Promissory Notes October 2018 through February 2019
Accounts Notes And Loans Receivable [Line Items]
Notes receivable principle amount	$ 24.5
Notes receivable maturity date	August to November 2019
Notes receivable rate of interest	8.00%
Secured Revolving Note December 2018 Through January 2019
Accounts Notes And Loans Receivable [Line Items]
Notes receivable principle amount	$ 30.0
Notes receivable maturity date	December 2019 to February 2020
Secured Revolving Note December 2018 Through January 2019 | Minimum
Accounts Notes And Loans Receivable [Line Items]
Notes receivable rate of interest	8.25%
Secured Revolving Note December 2018 Through January 2019 | Maximum
Accounts Notes And Loans Receivable [Line Items]
Notes receivable rate of interest	8.50%
Secured Promissory Notes Dated February 2021
Accounts Notes And Loans Receivable [Line Items]
Notes receivable principle amount	$ 0.9
Notes receivable maturity date	February 19, 2022
Notes receivable rate of interest	10.00%

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Notes Receivables - Schedule of Notes Receivables 1 (Parenthetical) (Details) $ in Millions	6 Months Ended
	Jun. 30, 2021 USD ($)
Receivables [Abstract]
Loan and Lease Losses, Write-offs	$ 29.1
Receivable, Allowance for Credit Loss	$ 0.3

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Notes Receivable - Stated Maturities of Notes Receivable (Details) $ in Thousands	Jun. 30, 2021 USD ($)
Accounts Notes And Loans Receivable [Line Items]
2021 (6 months)	$ 19,360
2022	254,324
2023	10,229
2024	5,611
2025 and thereafter	528
Total	290,052
Notes Receivable
Accounts Notes And Loans Receivable [Line Items]
2021 (6 months)	10,470
2022	9,918
2023	728
2024	784
2025 and thereafter	9,112
Total	$ 31,012

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Leases - Additional Information (Details) $ in Thousands			6 Months Ended
	Jan. 20, 2021 USD ($)	Jan. 11, 2021 USD ($) a ft²	Jun. 30, 2021 USD ($) ft²	Jun. 30, 2020 USD ($)
Lessee Lease Description [Line Items]
Payments To Acquire Property Plant And Equipment		$ 5,200	$ 27,199	$ 16,993
Area of industrial property sold | ft²			292,000
Proceeds from sale of industrial property	$ 23,800
Lease term	20 years
Tenant improvements			$ 10,800
Proceeds for the transaction	$ 34,600
Proceeds from sale of leaseback property	22,300		22,280	0
Sale leaseback transaction, security deposit	1,200
Other transaction cost			300
Gain on sale leaseback transaction	$ 1,100		$ 1,058	$ 0
Finance lease remaining term			34 years 6 months	9 years 10 months 24 days
Land and Building
Lessee Lease Description [Line Items]
Area of land | a		1.36
Area of combined office and warehouse space | ft²		46,800
Minimum
Lessee Lease Description [Line Items]
Lease term			1 year
Maximum
Lessee Lease Description [Line Items]
Lease term			28 years
Lease Amendment
Lessee Lease Description [Line Items]
Tenant improvements			$ 17,900
Increasing tenant improvement allowance			$ 7,100

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Leases - Summary of Supplemental Balance Sheet Information Related to Leases (Details) - USD ($) $ in Thousands		Jun. 30, 2021	Dec. 31, 2020
Operating Leases:
Right-of-use asset, net		$ 118,935	$ 66,464
Lease liability, current portion		2,060	3,041
Lease liability, net of current portion		118,249	64,232
Property, plant and equipment, net	[1]	405	5,523
Other current liabilities		$ 92	$ 5,504

[1] Finance lease assets are recorded net of accumulated amortization of less than $0.1 million as of June 30, 2021 and December 31, 2020, respectively.

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Leases - Summary of Supplemental Balance Sheet Information Related to Leases - (Paranthetical) (Details) - USD ($) $ in Millions	Jun. 30, 2021	Dec. 31, 2020
Maximum
Lessee Lease Description [Line Items]
Finance lease assets, net of accumulated amortization	$ 0.1	$ 0.1

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Leases - Summary of Supplemental Statement of Operations Related to Leases (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Leases [Abstract]
Operating lease expense	$ 5,270	$ 5,553	$ 9,758	$ 8,352
Interest on lease liabilities	2	384	6	387
Expenses related to short-term leases	19	487	228	950
Expenses related to variable payments	$ 498	$ 266	$ 688	$ 507

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Leases - Schedule of Cash Flow Information Related to Leases (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Leases [Abstract]
Operating cash flows from operating leases	$ 7,831	$ 2,556
Operating cash flows from finance lease	6	387
Financing cash flows from finance leases	$ 87	$ 24

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Leases - Schedule of Lease Terms and Discount Rate (Details)	Jun. 30, 2021	Jun. 30, 2020
Weighted average remaining term (in years):
Operating	14 years 6 months	3 years 7 months 6 days
Finance	34 years 6 months	9 years 10 months 24 days
Weighted average discount rate:
Operating	12.43%	10.00%
Finance	10.00%	10.03%

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Divestitures - Additional Information (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended	6 Months Ended
	Feb. 29, 2020	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Divestitures [Abstract]
Equity method investment ownership, percentage	49.00%
Equity method investment, realized gain on disposal	$ 3,200	$ (125)		$ (125)
Issuance of note receivables at deconsolidation	$ 12,000
Gain on deconsolidation			$ 8,700

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Intangible Assets and Goodwill - Schedule of Intangible Assets and Goodwill (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020	Dec. 31, 2020
Indefinite Lived Intangible Assets By Major Class [Line Items]
Intangible assets gross carrying amount	$ 14,285		$ 14,285
Goodwill	115,541		115,541		$ 116,041
Total gross carrying amount	393,532		393,532		392,949
Total Accumulated amortization	5,908		5,908		4,790
Amortization expense	700	$ 500	1,148	$ 1,000
Dispositions/ Adjustments Accumulated amortization			(30)
Total intangible assets, net and goodwill	387,624		387,624		388,159
Additions			1,115
Intangible assets dispositions/ adjustments, net			(1,650)
Intangible assets balance	277,991		277,991		276,908
Additions			2,263
Dispositions/ Adjustments	(500)		(500)
Dispositions/ Adjustments	(1,680)		(1,680)
Dispositions/ Adjustments			(1,180)
Licensing Agreements
Indefinite Lived Intangible Assets By Major Class [Line Items]
Intangible assets balance	254,234		254,234		253,866
Additions			519
Dispositions/ Adjustments			(151)
Internally Developed
Indefinite Lived Intangible Assets By Major Class [Line Items]
Intangible assets balance	1,164		1,164		1,113
Additions			694
Dispositions/ Adjustments			(643)
Trade Names
Indefinite Lived Intangible Assets By Major Class [Line Items]
Intangible assets balance	2,400		$ 2,400		2,400
Patient Relationships
Indefinite Lived Intangible Assets By Major Class [Line Items]
Definite life intangible assets weighted average useful lives			2 years
Intangible assets gross carrying amount	820		$ 820		820
Total Accumulated amortization	820		$ 820		820
Technology-Based Intangible Assets
Indefinite Lived Intangible Assets By Major Class [Line Items]
Definite life intangible assets weighted average useful lives			9 years 10 months 24 days
Intangible assets gross carrying amount	18,058		$ 18,058		18,058
Total Accumulated amortization	4,858		4,858		3,913
Amortization expense			$ 945
Computer Software, Intangible Asset
Indefinite Lived Intangible Assets By Major Class [Line Items]
Definite life intangible assets weighted average useful lives			5 years
Intangible assets gross carrying amount	416		$ 416		241
Additions intangible assets gross carrying amount			320
Dispositions/ Adjustments intangible assets gross carrying amount			(145)
Total Accumulated amortization	46		46		57
Amortization expense			19
Dispositions/ Adjustments Accumulated amortization			$ (30)
Other Intangible Assets
Indefinite Lived Intangible Assets By Major Class [Line Items]
Definite life intangible assets weighted average useful lives			3 years
Intangible assets gross carrying amount	899		$ 899		$ 410
Additions intangible assets gross carrying amount			730
Dispositions/ Adjustments intangible assets gross carrying amount			(241)
Total Accumulated amortization	$ 184		184
Amortization expense			$ 184

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Intangible Assets and Goodwill - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Goodwill And Intangible Assets Disclosure [Abstract]
Amortization expense	$ 700	$ 500	$ 1,148	$ 1,000

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Intangible Assets and Goodwill - Schedule of Finite Lived Intangible Assets Estimated Amortization Expense (Details) $ in Thousands	Jun. 30, 2021 USD ($)
Goodwill And Intangible Assets Disclosure [Abstract]
2021 (6 months)	$ 1,523
2022	2,108
2023	2,008
2024	1,787
2025	1,770
Thereafter	5,089
Total amortization expense	$ 14,285

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Corporate Investments - Summary of Carrying Values of Investments (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Marketable Securities [Line Items]
Investments	$ 40,924	$ 19,091
Hightimes Holdings Corp.
Marketable Securities [Line Items]
Investments	19,091	$ 19,091
Falcon International, Inc.
Marketable Securities [Line Items]
Investments	$ 21,833

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Corporate investments - Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands			6 Months Ended
	Mar. 13, 2021	Jun. 22, 2020	Jun. 30, 2021	Dec. 31, 2020	Feb. 29, 2020
Marketable Securities [Line Items]
Equity method investment ownership, percentage					49.00%
Related party notes receivable, current portion			$ 10,276	$ 10,052
Asset Impairment Charges			$ 0
Falcon International, Inc.
Marketable Securities [Line Items]
Equity method investment ownership, percentage	10.00%
Warrants Term	10 years
Warrant, Exercise Price	$ 1.91
Related party notes receivable, current portion	$ 50,000
Fair value of the equity and warrants received	$ 21,800
Series A Preferred Stock [Member] | Hightimes Holdings Corp.
Marketable Securities [Line Items]
Preferred stock		600,000
Liquidation value		$ 100
Conversion price		11
Conversion price adjustment		$ 1
Preferred stock shares issued and outstanding exceeds		19.00%
Preferred Stock, Value, Issued		$ 19,100

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Other Current Liabilities - Summary of Other Current Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Other Liabilities Disclosure [Abstract]
Accrued inventory purchases	$ 7,671	$ 7,886
Accrued expenses	7,724	5,607
Accrued payroll and benefits	5,146	4,353
Accrued capital expenditures	2,906	3,133
Finance lease liabilities	92	5,504
Deferred revenue	2,285	0
Other	4,610	2,413
Total other current liabilities	$ 30,434	$ 28,896

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Notes Payable - Schedule of Notes Payable (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Debt Instrument [Line Items]
Total notes payable	$ 290,052	$ 280,763
Less: unamortized debt discounts and issuance costs	(11,410)	(15,787)
Net amount	278,642	264,976
Less: current portion of notes payable	(134,394)	(20,910)
Notes payable, net of current portion	144,248	244,066
Secured Promissory Note March 2020
Debt Instrument [Line Items]
Total notes payable	10,000	10,000
Unsecured Promissory Note February 2020
Debt Instrument [Line Items]
Total notes payable	4,699	6,650
Secured Promissory Note One December 2019
Debt Instrument [Line Items]
Total notes payable	93,390	93,390
Secured Promissory Note Two December 2019
Debt Instrument [Line Items]
Total notes payable	42,404	42,404
Secured Convertible Promissory Note One December 2019
Debt Instrument [Line Items]
Total notes payable	10,000	10,000
Secured Convertible Promissory Note April 2021
Debt Instrument [Line Items]
Total notes payable	5,000	0
Secured Promissory Note October 2019
Debt Instrument [Line Items]
Total notes payable	6,500	6,500
Secured Promissory Note September and October 2019
Debt Instrument [Line Items]
Total notes payable	2,456	2,505
Secured Promissory Note June 2019
Debt Instrument [Line Items]
Total notes payable	3,916	4,000
Unsecured Convertible Debenture May 2019
Debt Instrument [Line Items]
Total notes payable	100,000	100,000
Other Unsecured Promissory Notes
Debt Instrument [Line Items]
Total notes payable	3,661	4,039
Other Secured Promissory Notes
Debt Instrument [Line Items]
Total notes payable	$ 8,026	$ 1,275

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Notes Payable - Schedule of Notes Payable (Details) (Parenthetical)	6 Months Ended
	Jun. 30, 2021 USD ($)
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	4.00%
Secured Promissory Note March 2020
Debt Instrument [Line Items]
Debt Instrument, Face Amount	$ 10,000,000.0
Debt Instrument, Maturity Date	2022-03
Debt Instrument, Interest Rate, Stated Percentage	9.00%
Debt Instrument, Unamortized Discount	$ 700,000
Secured Promissory Note One December 2019
Debt Instrument [Line Items]
Debt Instrument, Face Amount	$ 93,400,000
Debt Instrument, Maturity Date	2022-12
Debt Instrument, Interest Rate, Stated Percentage	15.00%
Unamortized Debt Issuance Expense	$ 2,300,000
Unsecured Promissory Note February 2020
Debt Instrument [Line Items]
Debt Instrument, Face Amount	$ 6,700,000
Debt Instrument, Maturity Date	2023-02
Debt Instrument, Interest Rate, Stated Percentage	4.00%
Debt Instrument, Annual Principal Payment	$ 2,200,000
Warrant liability	3,100,000
Secured Promissory Note Two December 2019
Debt Instrument [Line Items]
Debt Instrument, Face Amount	$ 42,400,000
Debt Instrument, Maturity Date	2022-12
Debt Instrument, Interest Rate, Stated Percentage	9.25%
Unamortized Debt Issuance Expense	$ 1,200,000
Secured Convertible Promissory Note One December 2019
Debt Instrument [Line Items]
Debt Instrument, Face Amount	$ 10,000,000.0
Debt Instrument, Maturity Date	2021-12
Debt Instrument, Interest Rate, Stated Percentage	9.00%
Debt Instrument, Unamortized Discount	$ 200,000
Secured Convertible Promissory Note April 2021
Debt Instrument [Line Items]
Debt Instrument, Face Amount	$ 5,000,000.0
Debt Instrument, Maturity Date	2023-04
Debt Instrument, Interest Rate, Stated Percentage	9.00%
Secured Promissory Note October 2019
Debt Instrument [Line Items]
Debt Instrument, Face Amount	$ 6,500,000
Debt Instrument, Maturity Date	2021-10
Debt Instrument, Interest Rate, Stated Percentage	8.95%
Secured Promissory Note September and October 2019
Debt Instrument [Line Items]
Debt Instrument, Face Amount	$ 2,600,000
Debt Instrument, Maturity Date	2024-10
Unamortized Debt Issuance Expense	$ 100,000
Secured Promissory Note September and October 2019 | Minimum
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	5.50%
Secured Promissory Note September and October 2019 | Maximum
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	8.75%
Secured Promissory Note June 2019
Debt Instrument [Line Items]
Debt Instrument, Face Amount	$ 4,000,000.0
Debt Instrument, Maturity Date	2024-06
Debt Instrument, Interest Rate, Stated Percentage	2.50%
Unamortized Debt Issuance Expense	$ 100,000
Unsecured Convertible Debenture May 2019
Debt Instrument [Line Items]
Debt Instrument, Face Amount	$ 100,000.0
Debt Instrument, Maturity Date	2022-05
Debt Instrument, Interest Rate, Stated Percentage	7.00%
Unamortized Debt Issuance Expense	$ 1,400,000
Warrant liability	$ 2,400,000

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Notes Payable - Schedule of Stated Maturities of Debt Obligations and Expected Interest Payments (Details) $ in Thousands	Jun. 30, 2021 USD ($)
Expected principal payments
2021 (6 months)	$ 19,360
2022	254,324
2023	10,229
2024	5,611
2025 and thereafter	528
Total	290,052
Expected interest payments
2021 (6 months)	14,470
2022	21,864
2023	660
2024	270
2025 and thereafter	334
Total	$ 37,598

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Share-Based Compensation - Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands			3 Months Ended		6 Months Ended
	Dec. 31, 2020	Apr. 06, 2020	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Award vesting rights, percentage					25.00%
Expiration period					10 years
Vesting period					4 years
Total intrinsic value of stock options exercised					$ 400
Cash received from stock options exercises					664	$ 0
Share based compensation expense for grants			$ 3,700	$ 3,300	8,500	17,100
Share based compensation expense for vested			3,700	$ 3,300	8,500	$ 17,100
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount			$ 14,100		$ 14,100
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition					2 years
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value			$ 2.74	$ 2.16	$ 3.16	$ 2.16
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term					8 years 2 months 12 days	8 years 10 months 24 days
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Granted	208,348	98,765
Compensation expense				$ 0	$ 100

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Share-Based Compensation - Summary of Stock Options Activity (Details) $ / shares in Units, $ in Thousands	6 Months Ended
	Jun. 30, 2021 USD ($) $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Number of stock options, Beginning balance	14,380,875
Number of stock options, Ending balance	12,260,625
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Number of stock options, Beginning balance	14,380,875
Number of stock options, Forfeited/Cancelled	(2,574,070)
Number of stock options, Exercised	(221,680)
Number of stock options, Granted	675,500
Number of stock options, Ending balance	12,260,625
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Abstract]
Weighted average exercise price, Beginning balance | $ / shares	$ 5.02
Weighted average exercise price, forfeited/cancelled | $ / shares	6.53
Weighted average exercise price, Exercised | $ / shares	2.52
Weighted average exercise price, Granted | $ / shares	3.85
Weighted average exercise price, Ending balance | $ / shares	$ 4.69
Share Based Compensation Arrangement By Share Based Payment Award Options Intrinsic Value [Abstract]
Aggregate Intrinsic Value, Ending Balance | $	$ 10,174,894

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Share-Based Compensation - Summary of Stock Option, Exercise Price Range (Details) - $ / shares	6 Months Ended	12 Months Ended
	Jun. 30, 2021	Dec. 31, 2020
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Expiration Date	November 2028 - February 2031	November 2028 - December 2030
Number of stock warrants	12,260,625	14,380,875
Stock warrants exercisable	4,866,313	2,326,000
Minimum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Exercise Price	$ 1.09	$ 1.09
Maximum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Exercise Price	$ 8.75	$ 8.75

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Share-Based Compensation - Summary of Assumptions Applied to Establish Fair Value of Option Granted Using Black Scholer Option Pricing Model (Details) - Stock Options [Member]	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Expected Annual Dividend Yield	0.00%	0.00%
Expected Life of Stock Options	6 years 3 months	6 years 3 months
Minimum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Risk-Free Annual Interest Rate	1.09%	2.00%
Expected Stock Price Volatility	99.00%	83.00%
Maximum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Risk-Free Annual Interest Rate	2.25%	2.25%
Expected Stock Price Volatility	197.00%	99.00%

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Share-Based Compensation - Summary of Restricted Stock Units Activity (Details) - Restricted Stock Units	6 Months Ended
	Jun. 30, 2021 $ / shares shares
Restricted Stock Units Roll Forward
Balance as of December 31, 2020 | shares	241,273
Number of Restricted Stock Units, Vested | shares	(136,952)
Balance as of June 30, 2021 | shares	104,321
Grant Fair Value Roll Forward
Weighted- Average Grant Price, Beginning Balance | $ / shares	$ 2.01
Weighted Average Grant Price, Vested | $ / shares	1.83
Weighted- Average Grant Price, Ending Balance | $ / shares	$ 2.24

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Stockholders' Equity - Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended			6 Months Ended
	Jun. 30, 2021	Mar. 31, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Description of the company's securities		The Company is authorized to issue an unlimited number of Subordinate Voting Shares (“SVS” or “Subordinate Voting Shares”), Multiple Voting Shares (“MVS” or “Multiple Voting Shares”) and Super Voting Shares, all with no par value. Each Multiple Voting Share converts into 100 Subordinate Voting Shares and each Super Voting Share converts into one Subordinate Voting Share. Holders of SVS are entitled to one vote in respect of each SVS held at stockholder meetings of the Company. Holders of MVS are entitled to 100 votes in respect of each MVS held at stockholder meetings of the Company. Holders of Super Voting Shares are entitled to 200 votes in respect of each Super Voting Share held at stockholder meetings of the Company.
Stock warrants issued to purchase	307,856			307,856
Compensation warrants held by underwriters completion deal, Date	Oct. 28, 2020			Oct. 28, 2020
Share based compensation expense			$ 0	$ 100
Stock warrants granted	0
Weighted-average remaining contractual life				9 months 18 days	2 years 2 months 12 days
Reclassification of warrant liability to equity upon modification	$ 36,888			$ 36,888
Proceeds from exercise of warrants	$ 3,400			10,300
Warrants
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share based compensation expense				$ 0
Fair value of stock warrants granted, per warrant				$ 2.35	$ 1.50
Multiple Voting Shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Warrants issued during period	26,000			41,000
Subordinate Voting Shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Warrants issued during period	271,742			2,641,164
Warrants issued and outstanding				17,154,416
Reclassification of warrant liability to equity upon modification				$ 36,900
Change in fair value of warrant liability				$ 900
Issued in relation to compensation warrants exercised	615,710			615,710
Shares held in escrow	2,000,000			2,000,000

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Stockholders' Equity - Schedule of Status of Stock Warrants Outstanding (Details)	6 Months Ended
	Jun. 30, 2021 $ / shares shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of stock options, Beginning balance	14,380,875
Number of stock options, Ending balance	12,260,625
Warrants
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of stock options, Beginning balance	24,407,114
Number of stock options, Granted	307,856
Number of stock options, Exercised	(6,125,454)
Number of stock options, Ending balance	18,589,516
Weighted average exercise price, Beginning balance | $ / shares	$ 4.11
Weighted average exercise price, Granted | $ / shares	2.40
Weighted average exercise price, Exercised | $ / shares	1.52
Weighted average exercise price, Ending balance | $ / shares	$ 4.79

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Stockholders' Equity - Summary of Stock Warrants Remains Outstanding (Details) - $ / shares	6 Months Ended	12 Months Ended
	Jun. 30, 2021	Dec. 31, 2020
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of stock warrants	12,260,625	14,380,875
Stock warrants exercisable	4,866,313	2,326,000
Warrants
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of stock warrants	18,589,516	24,407,114
Exercise price	$ 4.79	$ 4.11
Subordinate Voting Shares | Warrants
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of stock warrants	17,154,516	18,872,114
Stock warrants exercisable	17,154,516	18,872,114
Subordinate Voting Shares | Warrants | Minimum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Security Issuable, Expiration date	2022-05	2022-05
Exercise price	$ 2.46	$ 2.40
Subordinate Voting Shares | Warrants | Maximum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Security Issuable, Expiration date	2025-12	2023-04
Exercise price	$ 14.66	$ 14.27
Multiple Voting Shares | Warrants
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of stock warrants	14,350	55,350
Exercise price	$ 106.17	$ 103.36
Stock warrants exercisable	14,350	55,350
Multiple Voting Shares | Warrants | Minimum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Security Issuable, Expiration date	2001-04	2021-04
Multiple Voting Shares | Warrants | Maximum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Security Issuable, Expiration date		2023-04

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Stockholders' Equity - Summary of Weighted-Average Assumptions used Black-Scholes Option Pricing Model to Determine Fair Value (Details) - Stock Warrants	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Risk-Free Annual Interest Rate		2.15%
Risk-Free Annual Interest Rate, Minimum	0.11%
Risk-Free Annual Interest Rate, Maximum	0.16%
Expected Annual Dividend Yield	0.00%	0.00%
Expected Stock Price Volatility	95.00%
Expected Stock Price Volatility, Minimum		70.00%
Expected Stock Price Volatility, Maximum		99.00%
Minimum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Expected Life of Stock Options	2 years 2 months 12 days	1 year
Maximum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Expected Life of Stock Options	2 years 3 months 18 days	5 years

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Stockholders' Equity - Summary of Subordinated Voting Share (Details)	6 Months Ended
	Jun. 30, 2021 shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Total Subordinated Voting Shares if Converted	414,159,300
Super Voting Shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of Shares	2,000,000
Share class, Conversion Factor	1
Total Subordinated Voting Shares if Converted	2,000,000
Multiple Voting Shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of Shares	1,561,678
Share class, Conversion Factor	100
Total Subordinated Voting Shares if Converted	156,167,800
Subordinate Voting Shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of Shares	255,991,500
Share class, Conversion Factor	1
Total Subordinated Voting Shares if Converted	255,991,500

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Net Loss Per Share - Summary of Calculation of Net Loss per Common Share Attributable (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Earnings Per Share [Abstract]
Net loss attributable to Harvest Health & Recreation Inc.	$ (19,505)	$ (27,574)	$ (42,627)	$ (42,958)
Net loss attributable to discontinued operations, net of tax	$ (1,954)	$ (905)	$ (1,954)	$ (1,289)
Basic weighted-average number of shares outstanding	413,103,779	364,580,737	410,383,008	334,380,082
Net loss per share attributable to Harvest Health & Recreation Inc. - basic and diluted	$ (0.05)	$ (0.08)	$ (0.10)	$ (0.13)
Net loss per share attributable to discontinued operations, net of tax	$ 0	$ 0	$ 0	$ 0

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Net Loss Per Share - Summary of Potentially Dilutive Shares Excluded from Computation of Net Loss Per Share (Details) - shares		6 Months Ended
		Jun. 30, 2021	Jun. 30, 2020
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share		45,533,711	62,738,478
Stock Options and Restricted Stock Units
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share		12,364,946	16,011,125
Warrants
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share	[1]	19,345,162	14,685,996
Convertible Debt
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share		13,823,603	32,041,357

[1] Includes the outstanding compensation warrants issued for underwriting services in the October 2020 bought financing.

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Commitments and Contingencies - Additional Information (Details) - USD ($) $ / shares in Units, $ in Millions			3 Months Ended	6 Months Ended	12 Months Ended
	Sep. 24, 2020	Jul. 02, 2020	Jun. 30, 2021	Jun. 30, 2021	Dec. 31, 2020	Mar. 13, 2021	Jun. 04, 2020	Feb. 29, 2020
Restructuring Cost And Reserve [Line Items]
Equity method investment ownership, percentage								49.00%
AGRiMED Industries of PA, LLC
Restructuring Cost And Reserve [Line Items]
Litigation Settlement, Expense	$ 3.5
AGRiMED Industries of PA, LLC | Harvest Health & Recreation Inc.
Restructuring Cost And Reserve [Line Items]
Equity method investment ownership, percentage							5.00%
TGS National Franchise, LLC
Restructuring Cost And Reserve [Line Items]
Litigation Settlement, Expense				$ 3.7
Awarded claim, value				$ 10.6
Interest rate, accrued damages for product			12.00%	12.00%
Trulieve Cannabis Corp.
Restructuring Cost And Reserve [Line Items]
Litigation liability					$ 3.0
Increased in additional litigation liability			$ 4.5
Membership Interest Purchase Agreement | Membership | Falcon International, Inc.
Restructuring Cost And Reserve [Line Items]
Percantage of membership interests purchased purchased			100.00%	100.00%
Purchase price of membership interests				$ 4.1
2019 Merger Agreement | Falcon International, Inc.
Restructuring Cost And Reserve [Line Items]
Monetary damages sought value		$ 50.0
Warrants Term						10 years
Number of common stock purchased						2
Common stock exercise price						$ 1.91
Loss contingency, settlement sgreement, term				On March 13, 2021, the parties entered into a binding settlement agreement, resulting in a final dismissal of all litigation and arbitration between them arising out of the 2019 merger agreement. In accordance with the settlement terms, Harvest owns a 10% equity interest in Falcon. Each share comes with a 10-year warrant entitling Harvest to purchase two (2) common shares of Falcon at an exercise price of $1.91, subject to customary anti-dilution adjustments in the event of stock splits, stock dividends and similar corporate events. See Note 10 for additional information.
2019 Merger Agreement | Falcon International, Inc. | Harvest Health & Recreation Inc.
Restructuring Cost And Reserve [Line Items]
Equity method investment ownership, percentage			10.00%	10.00%

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Income Taxes - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020	Dec. 31, 2020
Income Tax Disclosure [Abstract]
Income tax expense	$ 6,834	$ 1,132	$ 13,315	$ 4,926
Deferred tax liability	$ 53,082		$ 53,082		$ 53,082
U.S. federal statutory income tax rate			21.00%

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Related Party Transactions - Schedule of Related Party Notes Receivable (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Related Party Transaction [Line Items]
Notes Receivable Related Parties Current, Total	$ 10,276	$ 10,052
Secured
Related Party Transaction [Line Items]
Secured promissory notes dated February 2020	6,695	6,471
Revolving Credit Facility
Related Party Transaction [Line Items]
Secured revolving notes dated December 2018 through January 2019	$ 3,581	$ 3,581

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Related Party Transactions - Schedule of Related Party Notes Receivable (Parenthetical) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Related Party Transaction [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	4.00%		4.00%
Related party interest income	$ 100	$ 100	$ 200	$ 100
AINA We Would LLC
Related Party Transaction [Line Items]
Principal drawn amount			30,000
Secured
Related Party Transaction [Line Items]
Promissory Note Principal Amount			$ 6,700
Debt Instrument, Interest Rate			6.00%
Promissory note expiration or due date month and year			2022-02
Secured | Harvest of Ohio LLC
Related Party Transaction [Line Items]
Related party interest income	$ 100	$ 100	$ 200	$ 100
Revolving Credit Facility
Related Party Transaction [Line Items]
Promissory Note Principal Amount			$ 3,600
Revolving Credit Facility | Minimum
Related Party Transaction [Line Items]
Promissory note expiration or due date month and year			2019-12
Debt Instrument, Interest Rate, Stated Percentage	8.25%		8.25%
Revolving Credit Facility | Maximum
Related Party Transaction [Line Items]
Promissory note expiration or due date month and year			2020-02
Debt Instrument, Interest Rate, Stated Percentage	8.50%		8.50%
Revolving Credit Facility | AINA We Would LLC
Related Party Transaction [Line Items]
Related party interest income	$ 0		$ 0

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Related Party - Summary of Related Party Leases (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Related Party Transactions [Abstract]
Right-of-use assets for operating leases, net	$ 5,541	$ 5,621
Operating lease liability, current portion	150	135
Operating lease liability, net of current portion	$ 5,518	$ 5,595

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Related party - Additional Information (Details)			3 Months Ended			6 Months Ended
	Feb. 09, 2021 shares	Jan. 11, 2021 USD ($)	Jun. 30, 2021 USD ($)	Mar. 31, 2021	Jun. 30, 2020 USD ($)	Jun. 30, 2021 USD ($) shares	Jun. 30, 2020 USD ($)	Feb. 05, 2021 USD ($) $ / shares
Related Party Transaction [Line Items]
Money lend to acquire property		$ 5,200,000				$ 27,199,000	$ 16,993,000
Conversion basis, description				The Multiple Voting Shares were convertible to Subordinate Voting Shares on a 1:100 basis
AZRE2, LLC
Related Party Transaction [Line Items]
Lessee operating lease term			15 years			15 years
Rent payments			$ 200,000		$ 200,000	$ 300,000
Rent expense			$ 200,000		200,000	300,000	300,000
Money lend to acquire property						$ 1,400,000
Karma Capital, LLC
Related Party Transaction [Line Items]
Lessee operating lease term			15 years			15 years
Rent payments			$ 100,000		100,000	$ 100,000	100,000
Rent expense			$ 100,000		100,000	$ 100,000	100,000
Earbuds, LLC
Related Party Transaction [Line Items]
Lessee operating lease term			15 years			15 years
Rent payments			$ 100,000		100,000	$ 100,000	100,000
Rent expense			$ 100,000		$ 100,000	100,000	$ 100,000
Accrued rental income						$ 400,000
Multiple Voting [Member]
Related Party Transaction [Line Items]
Closing sales price | $ / shares								$ 3.93
Shares cancelled | shares	2,545					(2,545)
Aggregate amount of shares								$ 1,000,185
Subordinate Voting [Member]
Related Party Transaction [Line Items]
Conversion ratio						0.01

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Subsequent Events - Additional Information (Details) - Subsequent Event - USD ($) $ in Millions	Jul. 21, 2021	Jul. 15, 2021
Suns Mass II LLC
Subsequent Event [Line Items]
Purchase price of membership interests	$ 1.0
Percentage of membership interests	100.00%
Definitive Arrangement Agreement
Subsequent Event [Line Items]
Assumption of Line of Credit	$ 1.0
Subordinate Voting Shares | Confidential Settlement Agreement
Subsequent Event [Line Items]
Common Stock, Shares, Issued		150,000