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.

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 six months ended June 30, 2021, the shareholders of the Company converted 635 Multiple Voting Shares into 63,500 Subordinate Voting Shares and 11,000 Super Voting Shares into 1,100,000 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 June 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 six months ended June 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 June 30, 2021, the Company had 301,031 issued and outstanding Super Voting Shares which convert into 30,103,100 Subordinate Voting Shares. The Company is authorized to issue an unlimited number of Super Voting Shares. During the six months ended June 30, 2021, the shareholders of the Company converted 11,000 Super Voting Shares into 1,100,000 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		1,917,214		—			—
Distribution of contingent consideration		412,744		—			—
Distribution of deferred shares		146,315		—			—
Issuance of shares upon exercise of options and warrants		783,415		—			—
Issuances of shares upon vesting of RSUs		307,768		—			—
Shares issued in association with notes payable		8,514		—			—
Shares issued for settlement of business dispute		240,000		—			—
Exchange of shares		1,163,500		(635	)		(11,000	)
As at June 30, 2021		187,786,682		39,654			301,031

10. SHARE CAPITAL

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, one of the retail dispensaries, located in Paramus, New Jersey, was successfully opened. As a result, the Company issued 30,414 Subordinate Voting Shares to the former minority shareholders of GTI New Jersey, LLC. The shares had a fair value of $1,038,307 on the date of issuance. As of June 30, 2021, and December 31, 2020, the Company carried an obligation of $1,000,000 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 there is a remote likelihood that the Company will obtain retail dispensary operating licenses in either West Hollywood or Culver City, California, under commercially reasonable terms. 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 reduction to other income (expense) in the unaudited interim condensed consolidated statement of operations.

As of June 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.

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 intends to use 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 may also use a portion of the net proceeds to acquire or invest in business and products that are complimentary to the Company’s own business 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		1,095,544			37.32		4.66
Exercised		(557,144	)		13.13				10,968,914
Forfeited		(383,443	)		12.59
Balance as at June 30, 2021		5,819,363			16.53		4.05	$	114,062,498
Vested		2,635,677			12.72
Exercisable at June 30, 2021		1,852,007			12.42		4.01	$	42,582,624

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 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 June 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.

The following table summarizes the weighted average grant date fair value and intrinsic value of options exercised for the six months ended June 30, 2021 and 2020:


		Six Months Ended June 30,
		2021			2020
Weighted average grant date fair value (per share) of stock option units granted (C$)	C$		14.80	C$		4.41
Intrinsic value of stock option units exercised, using market price at vest date (US$)	$		10,968,914	$		24,293

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, 2021 and the year ended December 31, 2020, using the following ranges of assumptions:


	June 30,	December 31,
	2021	2020
Risk-free interest rate	0.33% - 0.74%	0.31% - 1.37%
Expected dividend yield	0%	0%
Expected volatility	73%	80%
Expected option life	3 - 3.5 years	3 - 5 years

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 June 30, 2021 and December 31, 2020 and the changes during the six months ended June 30, 2021:


	Number of Shares			Weighted Average Grant Date Fair Value (C$)
Nonvested Shares at December 31, 2020		689,340			16.77
Granted		89,666			38.37
Forfeited		(79,502	)		14.99
Vested		(307,768	)		21.39
Nonvested Shares at June 30, 2021		391,736			18.55

The following table summarizes the weighted average grant date fair value and total fair value of RSUs vested for the six months ended June 30, 2021 and 2020:


		Six Months Ended June 30,
		2021			2020
Weighted average grant date fair value (per share) of granted (C$)	C$		38.37	C$		10.87
Intrinsic value of RSUs vested, using market price at vest date (US$)	$		9,254,928	$		650,463

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



	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2021		2020		2021		2020
Stock options expense	$	3,709,080	$	2,904,127	$	6,337,938	$	5,595,284
Restricted Stock Units		1,963,603		2,796,017		3,365,400		5,178,602
Total Stock Based Compensation Expense	$	5,672,683	$	5,700,144	$	9,703,338	$	10,773,886

As of June 30, 2021, $28,327,907 of total unrecognized expense related to stock-based compensation awards is expected to be recognized over a weighted-average period of 2.05 years.