Share Capital

6 Months Ended

Jun. 30, 2022

Stockholders' Equity Note [Abstract]

Share Capital

10. SHARE CAPITAL

Common shares, which include the Company’s Subordinate Voting Shares, Multiple Voting Shares and Super Voting Shares, are classified as equity. Incremental costs directly attributable to the issuance of common shares are recognized as a deduction from equity. The proceeds from the exercise of stock options or warrants together with amounts previously recorded in reserves over the applicable vesting periods are recorded as share capital. Income tax relating to transaction costs of an equity transaction is accounted for in accordance with ASC 740, Income Taxes.

(a) Authorized

The Company has the following classes of share capital, with each class having no par value:

(i) Subordinate Voting Shares

The holders of the Subordinate Voting Shares are entitled to receive dividends which may be declared from time to time and are entitled to one vote per share at meetings of the Company’s shareholders. All Subordinate Voting Shares are ranked equally with regard to the Company’s residual assets. The Company is authorized to issue an unlimited number of no par value Subordinate Voting Shares. During the six months ended June 30, 2022, the shareholders of the Company converted 5,000 Multiple Voting Shares into 500,000 Subordinate Voting Shares.

(ii) Multiple Voting Shares

Each Multiple Voting Share is entitled to 100 votes per share at shareholder meetings of the Company and is exchangeable for 100 Subordinate Voting Shares. At June 30, 2022, the Company had 38,531 issued and outstanding Multiple Voting Shares, which convert into 3,853,100 Subordinate Voting Shares. The Company is authorized to issue an unlimited number of Multiple Voting Shares. During the six months ended June 30, 2022, the shareholders of the Company converted 5,000 Super Voting Shares into 5,000 Multiple Voting Shares and 5,000 Multiple Voting Shares into 500,000 Subordinate Voting Shares.

(iii) Super Voting Shares

Each Super Voting Share is entitled to 1,000 votes per share at shareholder meetings of the Company and is exchangeable for 100 Subordinate Voting Shares or one Multiple Voting Share. At June 30, 2022, the Company had 280,031 issued and outstanding Super Voting Shares which convert into 28,003,100 Subordinate Voting Shares. The Company is authorized to issue an unlimited number of Super Voting Shares. During the six months ended June 30, 2022, the shareholders of the Company converted 5,000 Super Voting Shares into 5,000 Multiple Voting Shares.

(b) Issued and Outstanding

A reconciliation of the beginning and ending amounts of the issued and outstanding shares by class is as follows:

	Issued and Outstanding
	Subordinate Voting Shares		Multiple Voting Shares		Super Voting Shares
As at January 1, 2022		201,768,312		38,531		285,031
Issuance of shares under business combinations and investments		204,036		—		—
Distribution of contingent consideration		667,080		—		—
Issuance of shares upon exercise of options and warrants		177,044		—		—
Issuances of shares upon vesting of RSUs		336,005		—		—
Shares issued for settlement of business obligation		80,588		—		—
Exchange of shares		500,000		—		(5,000	)
As at June 30, 2022		203,733,065		38,531		280,031

10. SHARE CAPITAL (Continued)

(b) Issued and Outstanding (Continued)

(i) Issuance of Shares Under Business Combinations and Investments

ILDISP, LLC

On March 1, 2022, the Company issued 204,036 Subordinate Voting Shares with a value of approximately $3,785 thousand, based on a 20 consecutive day volume weighted average price (“VWAP”), in connection with the Company's acquisition of the remaining ownership interests in Illinois-based Retail stores. The shares issued resulted in an increase in the Company's share capital and a corresponding increase in the net assets acquired. See Note 4 - Acquisitions for additional details.

(ii) Distribution of Contingent Consideration

Dharma Pharmaceuticals, LLC

In connection with the Company's 2021 acquisition of Dharma Pharmaceuticals, LLC (“Dharma”), the purchase agreement included contingent consideration of up to $65,000 thousand in Subordinate Voting Shares of Green Thumb, dependent upon the successful opening of up to 5 Retail stores in the Virginia area within the first three years following the signing of the agreement and the legal sale of adult use cannabis in a Retail dispensary by January 1, 2025. On February 25, 2022, the Company issued 667,080 Subordinate Voting Shares to the former owners of Dharma in connection with the successful opening of two Retail stores in Virginia. The shares had a fair value of $13,111 thousand at the date of issuance.

As of June 30, 2022 and December 31, 2021, the estimated fair value of the contingent consideration associated with the acquisition of Dharma, which was valued based on a probability weighting of the potential payments, was $40,074 thousand and $48,665 thousand, respectively. As of June 30, 2022 and December 31, 2021, $10,947 thousand and $20,884 thousand, respectively, was included as a current liability on the Company's unaudited interim condensed consolidated balance sheets.

(c) Stock-Based Compensation

The Company operates equity settled stock-based remuneration plans for its eligible directors, officers, employees and consultants. All goods and services received in exchange for the grant of any stock-based payments are measured at their fair value unless the fair value cannot be estimated reliably. If the Company cannot estimate reliably the fair value of the goods and services received, the Company measures their value indirectly by reference to the fair value of the equity instruments granted. For transactions with employees and others providing similar services, the Company measures the fair value of the services by reference to the fair value of the equity instruments granted. Equity settled stock-based payments under stock-based payment plans are ultimately recognized as an expense in profit or loss with a corresponding credit to equity.

In June 2018, the Company established the Green Thumb Industries Inc. 2018 Stock and Incentive Plan, which was amended by Amendment No. 1 thereto (as amended, the “Plan”). The maximum number of Restricted Stock Units (“RSUs”) and options issued under the Plan shall not exceed 10% of the issued and outstanding shares on an as-converted basis.

The Company recognizes compensation expense for RSUs and options on a straight-line basis over the requisite service period of the award. Non-market vesting conditions are included in the assumptions about the number of options that are expected to become exercisable. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from the previous estimate. Any cumulative adjustment prior to vesting is recognized in the current period with no adjustment to prior periods for expense previously recognized.

Option and RSU awards generally vest over three years, and options typically have a life of five to ten years. Option and RSU grants are determined by the Compensation Committee of the Company’s Board of Directors with the option price set at no less than 100% of the fair market value of a share on the date of grant.

10. SHARE CAPITAL (Continued)

(c) Stock-Based Compensation (Continued)

Stock option activity is summarized as follows:

	Number of Shares			Weighted Average Exercise Price C$		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value
	(in thousands)
Balance as of December 31, 2021		5,383,275			18.07		3.59	$	48,803
Granted		959,702			23.28		6.45
Exercised		(177,044	)		11.72				1,316
Forfeited		(129,084	)		22.70
Balance as of June 30, 2022		6,036,849			18.99		3.58	$	1,083
Vested		4,515,359			14.44
Exercisable of June 30, 2022		3,065,200			15.17		2.85	$	704

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, 2022 and December 31, 2021, respectively, 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, 2022 and December 31, 2021. This amount will change in future periods based on the fair market value of the Company’s Subordinate Voting Shares and the number of options outstanding.

The following table summarizes the weighted average grant date fair value and intrinsic value of options exercised for the six months ended June 30, 2022 and 2021:

	Six Months Ended June 30,
	2022		2021
Weighted average grant date fair value (per share) of stock option units granted (C$)		9.21		14.80
Intrinsic value of stock option units exercised, using market price at vest date (US$) (in thousands)	$	1,316	$	10,969

The Company used the Black-Scholes option pricing model to estimate the fair value of the options granted during the six months ended June 30, 2022 and the year ended December 31, 2021, using the following ranges of assumptions:

	June 30,	December 31,
	2022	2021
Risk-free interest rate	1.18% - 2.87%	0.33% - 1.39%
Expected dividend yield	0%	0%
Expected volatility	60 - 64%	73%
Expected option life	3 – 4.5 years	3 – 3.5 years

As permitted under ASC 718, the Company has made an accounting policy choice to account for forfeitures when they occur.

10. SHARE CAPITAL (Continued)

(c) Stock-Based Compensation (Continued)

The following table summarizes the number of unvested RSU awards as of June 30, 2022 and December 31, 2021 and the changes during the six months ended June 30, 2022:

	Number of Shares	Weighted Average Grant Date Fair Value (C$)
Unvested Shares at December 31, 2021	376,127	20.39
Granted	1,021,221	23.21
Forfeited	(36,684)	23.71
Vested	(336,005)	19.77
Unvested Shares at June 30, 2022	1,024,659	23.35

The following table summarizes the weighted average grant date fair value of RSUs granted and total fair value of RSUs vested for the six months ended June 30, 2022 and 2021:

		Six Months Ended June 30,
		2022			2021
Weighted average grant date fair value (per share) of RSUs granted (C$)			23.21			38.37
Intrinsic value of RSUs vested, using market    price at vest date (US$) (in thousands)	$		5,697	$		9,255

The stock-based compensation expense for the three and six months ended June 30, 2022 and 2021 was as follows:

		Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021
		(in thousands)				(in thousands)
Stock options expense	$	3,775	$	3,709	$	6,982	$	6,338
Restricted Stock Units		3,058		1,963		4,502		3,365
Total Stock Based Compensation Expense	$	6,833	$	5,672	$	11,484	$	9,703

As of June 30, 2022, $37,405 thousand of total unrecognized expense related to stock-based compensation awards is expected to be recognized over a weighted-average period of 2.32 years.