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.

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

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 nine months ended September 30, 2021, the shareholders of the Company converted 635 Multiple Voting Shares into 63,500 Subordinate Voting Shares and 17,000 Super Voting Shares into 1,700,000 Subordinate 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 September 30, 2021, the Company had 39,654 issued and outstanding Multiple Voting Shares, which convert into 3,965,400 Subordinate Voting Shares. The Company is authorized to issue an unlimited number of Multiple Voting Shares. During the nine months ended September 30, 2021, the shareholders of the Company converted 635 Multiple Voting Shares into 63,500 Subordinate 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 September 30, 2021, the Company had 295,031 issued and outstanding Super Voting Shares which convert into 29,503,100 Subordinate Voting Shares. The Company is authorized to issue an unlimited number of Super Voting Shares. During the nine months ended September 30, 2021, the shareholders of the Company converted 17,000 Super Voting Shares into 1,700,000 Subordinate Voting Shares.

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 December 31, 2020		178,113,221		40,289			312,031
Issuance of common shares pursuant to S-1		4,693,991
Issuance of shares under business combinations and investments		7,290,180		—			—
Distribution of contingent consideration		612,737		—			—
Distribution of deferred shares		190,263		—			—
Issuance of shares for redemption of noncontrolling interests		136,075
Issuance of shares upon exercise of options and warrants		977,646		—			—
Issuances of shares upon vesting of RSUs		357,756		—			—
Shares issued in association with notes payable		8,514
Shares issued for settlement of business dispute		240,000		—			—
Exchange of shares		1,763,500		(635	)		(17,000	)
As at September 30, 2021		194,383,883		39,654			295,031

10. SHARE CAPITAL (Continued)

In connection with the Company’s April 23, 2019 acquisition of the non-controlling interest in GTI New Jersey, LLC, the Company agreed to award the previous minority shareholders of the entity up to $3,000,000 in Subordinate Voting Shares. On May 7, 2020, the Company received approval from the New Jersey Department of Health to begin buildout of an additional retail dispensary. As of that date, the Company recorded a current obligation of $2,000,000 representing the maximum value of the shares to be issuable to the former minority shareholders of GTI New Jersey, LLC. On March 15, 2021 and September 16, 2021, retail dispensaries located in Paramus, New Jersey and Bloomfield, New Jersey were successfully opened. As a result, the Company issued 30,414 and 36,947 Subordinate Voting Shares to the former minority shareholders of GTI New Jersey, LLC, with fair values of $1,038,307 and $939,538 on the date of issuance, respectfully. As of September 30, 2021, and December 31, 2020, the Company carried an obligation of $0 and $2,000,000, respectively, associated with the retail dispensary agreement with the former minority shareholders of GTI New Jersey, LLC.

In connection with the Company’s 2019 acquisition of Integral Associates, LLC, the purchase agreement included contingent consideration which was dependent upon the awarding of conditional and final dispensary operating licenses. On March 22, 2021, the Company issued 412,744 Subordinate Voting Shares to the former owners of Integral Associates, LLC in connection with the awarding of a final retail dispensary license located in Pasadena, California. The shares had a fair value of $12,672,681 at the date of issuance and resulted in a loss of $8,172,681 which was recorded in other income (expense) in the unaudited interim condensed consolidated statement of operations. In addition, the Company determined that the likelihood that the Company will obtain retail dispensary operating licenses in either West Hollywood or Culver City, California, under commercially reasonable terms was remote. Consequently, the Company remeasured the contingent liability associated with these milestones which resulted in a reduction to the contingent liability of $7,750,000 with a corresponding increase to other income (expense) in the unaudited interim condensed consolidated statement of operations.

As of September 30, 2021 and December 31, 2020, the estimated fair value of the contingent consideration associated with the acquisition of Integral Associates, LLC, which was valued using a probability weighting of the potential payouts, was $14,850,000 and $27,100,000, respectively of which $4,950,000, in each period, was recorded as a non-current liability.

In connection with the Company's 2021 acquisition of Dharma Pharmaceuticals, LLC ("Dharma"), the purchase agreement included contingent consideration of up to $65.0 million in Subordinate Voting Shares of Green Thumb, which was dependent upon the successful opening of up to 5 retail dispensaries 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 August 16, 2021, the Company issued 199,993 Subordinate Voting Shares to the former owners of Dharma in connection with the successful opening of one retail dispensary in Virginia. The shares had a fair value of $5,949,078 at the date of issuance.

As of September 30, 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 $45,872,665, of which $19,883,434 was included as a current liability on the Company's unaudited interim condensed consolidated balance sheets.

As part of the consideration exchanged in the Company’s 2019 acquisition of For Success Holding Company, deferred shares were held back for a period of twenty-four months from the close of the transaction. On February 22, 2021, the Company issued 146,315 Subordinate Voting Shares with a value of $1,825,597 in connection with the Company’s 2019 acquisition of For Success Holding Company. The issuance of the deferred shares represented the final payout to the former owners of For Success Holding Company and resulted in the cancelation of 780 shares valued at $9,732 representing certain reimbursable costs incurred by the Company.

On February 8, 2021, the SEC declared effective the Company’s Registration Statement No. 333-248213 on Form S-1 filed on February 2, 2021. Shortly thereafter, the Company received an offer from a single institutional investor to purchase 3,122,074 of the Subordinate Voting Shares registered on the Form S-1 at a price of $32.03 per share for a total of $100,000,030. The transaction closed on February 9, 2021. On February 23, 2021, the Company accepted additional offers to purchase a total of 1,571,917 Subordinate Voting Shares at a price of $35.50 per share, for a total of $55,803,054. The Company is using the net proceeds from the sale of securities for general corporate purposes, which may include capital expenditures, working capital and general and administrative expenses. The Company also is using a portion of the net proceeds to acquire or invest in business and products that are complimentary to the Company’s own businesses and products. Additionally, the Company incurred legal, audit and other professional fees of $304,944 associated the issuance of the registered shares. Such fees have been recorded within contributed surplus (deficit) within the Company’s unaudited interim condensed consolidated statement of shareholders’ equity.

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 grants generally vest over three years, and options typically have a life of five or ten years. Option 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.

Stock option activity is summarized as follows:


	Number of Shares			Weighted Average Exercise Price C$		Weighted Avereage Remaining Contractual Life		Aggregate Intrinsic Value
Balance as at December 31, 2020		5,664,406			11.91		4.39	$	85,408,034
Granted		1,303,143			37.44		4.26
Exercised		(699,265	)		13.13				13,566,825
Forfeited		(642,623	)		14.43
Balance as at September 30, 2021		5,625,661			17.38		3.73	$	78,129,641
Vested		3,335,293			12.66
Exercisable at September 30, 2021		2,396,807			12.41		3.66	$	41,611,631

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 September 30, 2021 and December 31, 2020, 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 September 30, 2021 and December 31, 2020. 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.

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

The following table summarizes the number of non-vested RSU awards as of September 30, 2021 and December 31, 2020 and the changes during the nine months ended September 30, 2021:


	Number of Shares			Weighted Average Grant Date Fair Value (C$)
Nonvested Shares at December 31, 2020		689,340			16.77
Granted		127,137			38.21
Forfeited		(105,785	)		16.37
Vested		(357,756	)		21.56
Nonvested Shares at September 30, 2021		352,936			19.57

The stock-based compensation expense for the three and nine months ended September 30, 2021 and 2020 was as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Stock options expense	$	3,483,587	$	2,614,273	$	9,821,525	$	8,209,557
Restricted Stock Units		1,511,255		1,821,361		4,876,655		6,999,963
Total Stock Based Compensation Expense	$	4,994,842	$	4,435,634	$	14,698,180	$	15,209,520

As of September 30, 2021, $24,203,212 of total unrecognized expense related to stock-based compensation awards is expected to be recognized over a weighted-average period of 2.05 years.