Share Capital

12 Months Ended

Dec. 31, 2020

Stockholders' Equity Note [Abstract]

Share Capital

13. 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 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 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

(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 year ended December 31, 2020, the shareholders of the Company converted 333,061 Multiple Voting Shares into 33,306,100 Subordinate Voting Shares and 90,258 Super Voting Shares into 9,025,800 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 December 31, 2020, the Company had 40,289 issued and outstanding Multiple Voting Shares, which convert into 4,028,900 Subordinate Voting Shares. The Company is authorized to issue an unlimited number of Multiple Voting shares. During the year ended December 31, 2020, the shareholders of the Company converted 333,061 Multiple Voting Shares into 33,306,100 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 December 31, 2020, the Company had 312,031 issued and outstanding Super Voting Shares which convert into 31,203,100 Subordinate Voting Shares. The Company is authorized to issue an unlimited number of Super Voting Shares. During the year ended December 31, 2020, the shareholders of the Company converted 90,258 Super Voting Shares into 9,025,800 Subordinate 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, 2019		43,920,131		677,230			424,513
Issuance of shares under business combinations and investments		45,571,444		—			—
Noncontrolling Interests adjustment for change in ownership		—		31,000			—
Issuance of shares for redemption of noncontrolling interest		2,498,404		—			—
Issuance of shares upon vesting of RSUs		1,165,630		—			—
Issuance of shares upon exercise of broker options		114,080		—			—
Issuance of shares for professional fees		19,875		—			—
Exchange of shares		35,710,400		(334,880	)		(22,224	)
As at December 31, 2019		128,999,964		373,350			402,289
As at January 1, 2020		128,999,964		373,350			402,289
Issuance of shares under business combinations and investments		1,752,065		—			—
Distribution of contingent consideration		2,713,463		—			—
Distribution of deferred shares		1,220,548		—			—
Issuance of shares upon exercise of options and warrants		171,813		—			—
Issuances of shares upon vesting of RSUs		923,468		—			—
Exchange of shares		42,331,900		(333,061	)		(90,258	)
As at December 31, 2020		178,113,221		40,289			312,031

(i) Issuance of Shares Under Business Combinations and Investments

(1) Southern CT Wellness and Healing

On December 18, 2020, the Company issued 197,826 Subordinate Voting Shares with a value of $4,619,237 in connection with the Company’s acquisition of Southern CT Wellness and Healing, a Connecticut-based dispensary. The shares issued resulted in an increase in share capital and a corresponding increase in the net assets acquired. See Note 7—Acquisitions for details.

(2) MC Brands, LLC

On June 29, 2020, the Company issued 190,000 Subordinate Voting Shares with a value of $1,840,009 in connection with the Company’s June 27, 2019 acquisition of MC Brands, LLC. Such shares were held back as part of the transaction and resulted in an increase in share capital and a corresponding increase to intangible assets on the Company’s consolidated balance sheets. 

See also Note 7—Acquisitions for details.

(ii) Distribution of Contingent Consideration

As of December 31 2020, the Company issued 2,713,463 Subordinate Voting Shares to the previous owners of several entities in connection with acquisitions completed during 2019. Upon issuance, the Company recorded a reduction to contingent consideration payable and an increase in share capital. The following table represents the contingent shares issued during the year ended December 31, 2020 in relation to each acquisition:

Contingent Shares Issued
			December 31, 2020
Transaction	Date of Transaction		Units		Value
Advanced Grow Labs, LLC		February 12, 2019		1,396,533	$	11,544,855
For Success Holding Company		February 21, 2019		779,690		6,686,432
Integral Associates, LLC		June 5, 2019		537,240		4,654,526
				2,713,463	$	22,885,813

(iii) Deferred Shares—Issuances and Distributions

As part of the consideration exchanged in the Company’s acquisitions, Subordinate Voting Shares are held back or deferred until a specific date post acquisition. The deferred shares are issued to the former owners of the acquired entity upon the passage of twelve to twenty-four months from the close of each transaction as defined within each respective acquisition agreement. The following table summarizes the deferred shares held by the Company as of December 31, 2020 and 2019:

Deferred Shares Outstanding
			December 31, 2020				December 31, 2019
Transaction	Date of Transaction		Units		Value		Units		Value
Advanced Grow Labs, LLC		February 12, 2019		—	$	—		472,500	$	5,380,000
For Success Holding Company		February 21, 2019		147,095		1,835,330		793,448		9,900,000
Rise Canton		May 15, 2019		—		—		101,695		1,307,798
Southern CT Wellness and Healing		December 18, 2020		32,205		751,987		—		—
				179,300	$	2,587,317		1,367,643	$	16,587,798

On December 18, 2020, the Company issued 32,205 Subordinate Voting Shares with a value of $751,987 in connection with the Company’s acquisition of Southern CT Wellness and Healing. The issuance resulted in an increase in deferred share issuances on the Company’s consolidated statement of changes in shareholders’ equity and a corresponding increase in the net assets acquired.

On May 15, 2020, Green Thumb distributed 101,695 Subordinate Voting Shares with a value of $1,307,798 in connection with the Company’s May 15, 2019 acquisition of Rise Canton. On August 12, 2020, the Company distributed 472,500 Subordinate Voting Shares with a value of $5,380,00 in connection with the Company’s February 12, 2019 acquisition of Advanced Grow Labs, LLC. Additionally, on August 26, 2020, the Company distributed 646,353 Subordinate Voting Shares with a value of $8,064,668 in connection with the Company’s February 21, 2019 acquisition of For Success Holding Company. The three distributions discussed above resulted in a reduction to deferred share issuances and a corresponding increase to share capital on the Company’s consolidated statement of changes in shareholders’ equity. 

See also Note 7—Acquisitions for details.

(iv) Changes in Ownership and Noncontrolling Interests

(1.) Acquisition of Noncontrolling Interest in KW Ventures Holdings, LLC

Prior to January 1, 2019, KW Ventures Holdings, LLC (“Firefly”), which holds 100% of the equity interests in four Pennsylvania-based dispensaries, was owned by the noncontrolling interest members. However, Green Thumb controlled all the operating activities of the entity and was exposed to variable returns and losses through a management services agreement. As a result, the Company concluded that Firefly represented a variable interest entity and consolidated the entity in Green Thumb’s financial results.

On January 1, 2019, the Company acquired the noncontrolling interest members equity in Firefly through an all-stock transaction whereby consideration was satisfied through the issuance of 542,416 Subordinate Voting Shares at a fair value of $4,355,078. In addition to the shares issued on January 1, 2019; 48,450 Subordinate Voting Shares were held back as part of the closing agreement. On February 10, 2020, the remaining shares were issued at a fair value of $400,413. As control over the entity existed prior to the acquisition date, no gain or loss was recognized nor was there any excess purchase price recorded as a result of the transaction.

As of December 31, 2020, the transaction resulted in an increase in share capital and a corresponding reduction in accrued liabilities of $400,413.

(2.) Acquisition of Noncontrolling Interest in Ohio Investors 2017, LLC

On April 19, 2019, GTI Core, LLC, a wholly owned subsidiary of the Company entered into a membership interest purchase agreement with George Management Ltd. (George Management) to acquire 59% of the 60% interest that George Management held in the Retail and Processing License. On June 7, 2019, Green Thumb consummated the acquisitions through the issuance of 1,233,014 Subordinate Voting shares with a fair value of $13,854,550 as well as a $5,150,000 in cash of which $1,650,000 was contributed by George Management during 2019 as part of a capital call.

As part of the purchase agreement, and in consideration of the cultivation license for which Green Thumb held a 40% interest as of the date of the purchase agreement, the Company and George

(2.) Acquisition of Noncontrolling Interest in Ohio Investors 2017, LLC (Continued)

Management entered into a reciprocal purchase agreement that would allow Green Thumb to purchase the remaining 59% interest through a call option or, alternatively, allow George Management to put the 59% interest to Green Thumb. The exercise of the option was contingent upon the Ohio Department of Commerce’s approval of Green Thumb’s cultivation license application.

Green Thumb evaluated the reciprocal purchase option and determined that it represented a derivative liability that required remeasurement on a periodic basis with changes in value recorded through the statement of operations. As of the transaction date, the Company recorded a derivative liability of $4,526,401 using a Black Scholes option pricing model. During 2019, the Company recognized nominal gains as a result of changes in the fair value of the liability.

On December 29, 2019, subsequent to the Ohio Department of Commerce’s approval of Green Thumb’s license application, George Management exercised their put option allowing Green Thumb to purchase 59% of the remaining 60% interest in the cultivation license. As of December 31, 2019, the Company and George Management were unable to agree upon the value of the Ohio cultivation license. The Company derecognized the derivative liability and recorded a current liability of $5,500,000 representing management’s estimate of the expected value to be paid to George Management as of December 31, 2019.

As of December 31, 2019, the transactions resulted in an increase to share capital and a reduction to noncontrolling interest of $4,198,173.

On August 8, 2020, the Company and George Management reached an agreement allowing Green Thumb to purchase the remaining noncontrolling interest in Ohio Investors 2017, LLC. As a result, on August 31, 2020, the Company issued 1,315,789 Subordinate Voting Shares with a value of $20,078,940 in consideration for the noncontrolling partner’s interest in Ohio Investors 2017, LLC. Upon the closing of the transaction, the Company recorded a reduction to the current liability established for the purchase of the noncontrolling interest of $11,200,000, an increase in share capital for the fair value of the noncontrolling partners interest of $20,078,940 and a reduction to contributed capital of $8,878,940.

(3.) Acquisition of Noncontrolling Interest in GTI New Jersey, LLC

On April 23, 2019, the Company closed on its acquisition of GTI New Jersey, LLC to acquire the remaining 33% interest held by unrelated third parties. The acquisition was an all stock transaction whereby consideration was satisfied through the issuance of 671,317 Subordinate Voting Shares at a fair value of $5,766,613. Prior to April 23, 2019, 33% of GTI-NJ was owned by the noncontrolling interest members. However, Green Thumb considered GTI-NJ to be a variable interest entity and accordingly, consolidated GTI-NJ within Green Thumb’s consolidated financial statements as Green Thumb was determined to be the primary beneficiary of the operations of GTI-NJ and Green Thumb possessed the power to direct the activities of GTI-NJ through a management services agreement. Consequently, when Green Thumb acquired the noncontrolling interest, there was no change in control, and as a result, no gain or loss was

(3.) Acquisition of Noncontrolling Interest in GTI New Jersey, LLC (Continued)

recognized nor was there any excess purchase price recorded as a result of the transaction. The transaction resulted in an increase to share capital and a reduction to noncontrolling interest of $570,078.

As part of the acquisition of GTI New Jersey, LLC, the Company agreed to award the previous owners of the entity $1,000,000 in Subordinate Voting Shares for each additional dispensary successfully opened, up to a $3,000,000 cap. On May 7, 2020, the Company received approval from the New Jersey Department of Health to begin buildout of an additional retail dispensary. As a result, the Company recorded a current obligation and corresponding reduction to contributed surplus of $2,000,000 representing the maximum value of the shares to be issuable to the former minority shareholders of GTI New Jersey, LLC.

(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 shall measure 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 payments plans are ultimately recognized as an expense in profit or loss with a corresponding credit to reserve for stock-based payments, in 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 RSUs and options issued under the Plan shall not exceed 10% of the Company’s 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 Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Balance as at December 31, 2019		3,839,017			13.21		5.57	$	218,234
Granted		2,604,511			10.36
Exercised		(165,872	)		12.72
Forfeited		(613,250	)		13.27
Balance as at December 31, 2020		5,664,406			11.91		4.39	$	85,408,034
Vested		1,749,365			13.37
Exercisable at December 31, 2020		1,532,282			13.22		5.07	$	21,590,351

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 December 31, 2020 and December 31, 2019, 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 December 31, 2020 and December 31, 2019. 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 following table summarizes the weighted average grant date fair value and intrinsic value of options exercised for the years ended December 31, 2020, 2019 and 2018:

	Year Ended December 31,
	2020		2019		2018
Weighted average grant date fair value (per share) of stock option units granted (C$)		6.58		8.06		10.85
Intrinsic value of stock option units exercised, using market price at exercise date (USD)	$	1,184,089	$	88,010	$	31,604

The Company used the Black-Scholes option pricing model to estimate the fair value of the options at the grant dates during the years ended December 31, 2020 and 2019 using the following ranges of assumptions:

	Year Ended December 31,
	2020		2019
Risk-free interest rate		0.31% – 1.37%		1.18% – 1.84%
Expected dividend yield		0%		0%
Expected volatility		80%		80% – 100%
Expected option life		3 – 5 years		3 – 5 years

As the Company became publicly traded in June 2018, sufficient historical trading information was not available to determine an expected volatility rate. The volatility rate was based on comparable companies within the same industry. 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 nonvested RSU awards as of December 31, 2020 and 2019 and the changes during the year ended December 31, 2020:

	Number of Shares			Weighted Average Grant Date Fair Value (C$)
Nonvested Shares at December 31, 2019		1,399,762			9.30
Granted		286,880			13.90
Forfeited		(73,834	)		15.85
Vested		(923,468	)		15.21
Nonvested Shares at December 31, 2020		689,340			16.77

The following table summarizes the weighted average grant date fair value and total fair value of RSUs vested for the years ended December 31, 2020, 2019 and 2018:

	Year Ended December 31,
	2020		2019		2018
Weighted average grant date fair value (per share) of RSUs granted (C$)		13.90		11.70		10.28
Total fair value of RSUs vested, using market price at vest date (USD)	$	9,076,673	$	13,522,284	$	—

The stock-based compensation expense for the years ended December 31, 2020, 2019 and 2018 was as follows:

	For the Year Ended December 31,
	2020		2019		2018
Stock Options Expense	$	10,937,768	$	6,393,277	$	1,876,627
RSU Expense		8,398,950		11,892,100		4,748,444
Total Stock-Based Compensation Expense	$	19,336,718	$	18,285,377	$	6,625,071