~~Securities registered pursuant to Section 12(g) of the Act:~~ ~~Subordinate Voting Shares, no par value~~

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.

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,~~May 5, 2022, the registrant had ~~71,789,323~~135,001,544 Subordinate Voting Shares and ~~56,461,096~~49,217,899 Multiple Voting Shares (on an as converted basis), outstanding.

This Quarterly Report on Form 10-Q contains forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “may”, “will”, “would”, “could”, “should”, “believes”, “estimates”, “projects”, “potential”, “expects”, “plans”, “intends”, “anticipates”, “targeted”, “continues”, “forecasts”, “designed”, “goal”, or the negative of those words or other similar or comparable words. Any statements contained in this Quarterly Report on Form 10-Q that are not statements of historical facts may be deemed to be forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition, results of operations and future growth prospects. The forward-looking statements contained herein are based on certain key expectations and assumptions, including, but not limited to, with respect to expectations and assumptions concerning receipt and/or maintenance of required licenses and third party consents and the success of our operations, are based on estimates prepared by us using data from publicly available governmental sources, as well as from market research and industry analysis, and on assumptions based on data and knowledge of this industry that we believe to be reasonable. These forward-looking statements are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond our control. As a result, any or all of our forward-looking statements in this Quarterly Report on Form 10-Q may turn out to be inaccurate. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under “Risk Factors” and discussed elsewhere in this Quarterly Report on Form 10-Q and in “Part I, Item 1A – Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future. You should, however, review the factors and risks we describe in the reports we will file from time to time with the SEC after the date of this Quarterly Report on Form 10-Q.

The accompanying notes are an integral part of these ~~unaudited interim~~ condensed consolidated financial statements.

~~Unaudited Interim~~ Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income

The accompanying notes are an integral part of these ~~unaudited interim~~ condensed consolidated financial statements.

~~Unaudited Interim~~ Condensed Consolidated Statements of Changes in Shareholders’ Equity

Super Voting Shares

Multiple Voting Shares

Subordinate Voting Shares

Total Common Shares

Additional Paid-in-Capital

Warrants

Accumulated Earnings

Total

Balance, January 1, 2021

58,182,500

1,439,037

59,952,461

119,573,998

$
275,644

$
52,570

$
119,690

$
447,904

Share-based compensation

—

—

—

—

741

—

—

741

Shares issued for cash - warrant exercise

—

—

469,133

469,133

15,000

(8,139
)

—

6,861

Conversion of warrants to Subordinate Voting Shares

—

—

133,408

133,408

—

—

—

—

Conversion of Multiple Voting to Subordinate Voting Shares

—

(117,668
)

117,668

—

—

—

—

—

Conversion of Super Voting to Subordinate Voting Shares

(3,021,100
)

—

3,021,100

—

—

—

—

—

Conversion of Super Voting to Multiple Voting Shares

(55,161,400
)

55,161,400

—

—

—

—

—

—

Net income and comprehensive income

—

—

—

—

—

—

30,078

30,078

Balance, March 31, 2021

—

56,482,769

63,693,770

120,176,539

$
291,385

$
44,431

$
149,768

$
485,584

Share-based compensation

—

—

—

—

744

—

—

744

Shares issued for cash - warrant exercise

—

—

100,400

100,400

2,553

(1,742
)

—

811

Common stock issued upon cashless warrant exercise

—

—

661,614

661,614

—

—

—

—

Tax withholding related to net share settlement of equity awards

—

—

(15,734
)

(15,734
)

(595
)

—

—

(595
)
Issuance of shares in offering, net of issuance costs

—

—

5,750,000

5,750,000

217,896

—

—

217,896

Contingent consideration payable in shares

—

—

—

—

(2,800
)

—

—

(2,800
)
Adjustment of fair value of equity consideration for PurePenn, LLC

—

—

—

—

2,711

—

—

2,711

Adjustment of fair value of equity consideration for Keystone Relief Centers, LLC

—

—

—

—

1,004

—

—

1,004

Shares issued for Mountaineer Holding, LLC acquisition

—

—

60,342

60,342

3,000

—

—

3,000

Shares issued for Nature's Remedy of Massachusetts, Inc. acquisition

—

—

237,881

237,881

6,500

—

—

6,500

Shares issued for Solevo Wellness West Virginia, LLC acquisition

—

—

11,658

11,658

500

—

—

500

Conversion of Multiple Voting to Subordinate Voting shares

—

(21,673
)

21,673

—

—

—

—

—

Net income and comprehensive income

—

—

—

—

—

—

40,880

40,880

Balance, June 30, 2021

—

56,461,096

70,521,604

126,982,700

$
522,898

$
42,689

$
190,648

$
756,235

Super Voting Shares

Multiple Voting Shares

Subordinate Voting Shares

Total Common Shares

Additional Paid-in-Capital

Warrants

Accumulated Earnings

Total

Balance, January 1, 2020

67,813,300

6,661,374

35,871,672

110,346,346

$
76,192

$
—

$
56,691

$
132,883

Share-based compensation

—

—

—

—

1,222

—

—

1,222

Net income and comprehensive income

—

—

—

—

—

—

23,605

23,605

Balance, March 31, 2020

67,813,300

6,661,374

35,871,672

110,346,346

$
77,414

$
—

$
80,296

$
157,710

Share-based compensation

—

—

—

—

462

—

—

462

Shares issued for cash - warrant exercise

—

—

2,723,311

2,723,311

11,458

—

—

11,458

Net income and comprehensive income

—

—

—

—

—

—

18,938

18,938

Balance, June 30, 2020

67,813,300

6,661,374

38,594,983

113,069,657

$
89,334

$
—

$
99,234

$
188,568

The accompanying notes are an integral part of these ~~unaudited interim~~ condensed consolidated financial statements.

NOTE 4. ACQUISITIONS

(a) CP4 Group, LLC

On February 14, 2022, the Company acquired a cultivation operation from CP4 Group, LLC, in Phoenix, Arizona ("Watkins"). Total consideration was $27.5 million paid in cash. An additional $22.5 million was paid into escrow for four potential earnouts. The earnouts are based on the completion of certain milestones and contingent on the continued employment of the key employee shareholders ("Key Employees") of Watkins. As the earnouts are contingent on the continued employment of the Key Employees, the $22.5 million is compensation for post-combination services. The Company will accrue the compensation cost for each earnout as it becomes probable and estimable and over the most probable period of continued employment required for the specific earnouts. The Company reviewed the potential earnouts concluding three are probable and estimable as of March 31, 2022, recording an accrual of $2.1 million in contingencies and other long-term liabilities on the condensed consolidated balance sheets which was expensed during the three months ended March 31, 2022, in general and administrative expenses in the condensed consolidated statements of operations and comprehensive (loss) income. NaN liability was recorded for the fourth earnout as it was concluded to be reasonably possible but not probable as of March 31, 2022. The earnouts will be evaluated on a quarterly basis. The Company incurred $0.2 million of transaction costs related to the acquisition of Watkins. These costs were expensed as incurred and included in general and administrative expenses in the condensed consolidated statements of operations and comprehensive (loss) income for the quarter ended March 31, 2022.

Trulieve Cannabis Corp.

Notes to Condensed Consolidated Financial Statements

The ~~global outbreak~~Company analyzed the acquisition under ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, determining Watkins met the definition of a business as Watkins is an existing cultivation facility with inputs, processes, and outputs in place that constitute a business under Topic 805. As a result, the acquisition of Watkins has been accounted for as a business combination. Goodwill represents the premium the Company paid over the fair value of the ~~novel strain~~net tangible assets acquired. The primary reason for the acquisition was to expand the Company's cultivation capacity in Arizona. The goodwill of $24.5 million arising from the acquisition primarily consist of the ~~coronavirus known~~economies of scale expected from a vertical cannabis market in Arizona.

The following table summarizes the allocation of consideration exchanged for the estimated fair value of tangible assets acquired and liabilities assumed:


(in thousands)
Consideration
Cash	$	27,500
Fair value of consideration exchanged	$	27,500
Recognized amounts of identifiable assets acquired and liabilities assumed:
Inventories	$	2,266
Property and equipment		692
Right of use asset - operating		4,737
Goodwill		24,542
Operating lease liability		(4,737	)
Total net assets acquired	$	27,500

(b) Purplemed Healing Center

On December 28, 2021, the Company acquired 100% of certain assets of Purplemed Healing Center ("Purplemed") including the Medical Marijuana Dispensary License issued by the Arizona Department of Health Services ("ADHS") and the Marijuana Establishment License issued by the ADHS which collectively serve as ~~COVID-19 has resulted in governments worldwide enacting emergency measures~~the Purplemed license providing the ability to ~~combat~~operate a marijuana retail sales dispensary as well as the ~~spread~~assumption of the ~~virus.~~associated lease. The Company also acquired the right to operate an additional offsite cultivation business under the Arizona Adult Use Marijuana Act, and the option to purchase full ownership and management of Greenmed, Inc., the Greenmed license, and the Greenmed dispensary. As part of the transaction, the Company assumed the Purplemed loyalty program.

~~In response~~

The Company analyzed the acquisition under ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, determining Purplemed did not meet the definition of a business as Purplemed did not have inputs, processes, and outputs in place that constituted a business under Topic 805. As a result, the acquisition of Purplemed has been accounted for as an asset acquisition, whereby all of the assets acquired and liabilities assumed are assigned a carrying amount based on relative fair values. The total consideration was $15.0 million consisting of cash. The acquisition provided for indemnity for pre-closing liabilities. Accordingly, the Company recognized an indemnification asset of $0.5 million offset by associated liabilities based on the information that was available at the date of the acquisition, which is included in the net assets acquired.

Trulieve Cannabis Corp.

Notes to Condensed Consolidated Financial Statements

The net assets were acquired for an aggregate purchase price of $15.0 million.


(in thousands)
Consideration:
Cash	$	15,000
Transaction costs		12
Fair value of consideration exchanged	$	15,012
Recognized amounts of identifiable assets acquired and liabilities assumed:
Prepaid expenses and other current assets	$	531
Right of use asset - operating		271
Intangible asset		15,076
Other current liabilities		(531	)
Deferred revenue		(109	)
Operating lease liability		(226	)
Total net assets acquired	$	15,012

The acquired intangible asset includes a dispensary license which is treated as a definite-lived intangible asset amortized over a 15-year useful life.

On October 1, 2021, (the “Closing Date”), the ~~outbreak, governmental authorities~~Company acquired 100% of the common shares of Harvest Health & Recreation, Inc. (“Harvest”) and its portion of variable interest entities in exchange for Subordinate Voting Shares of the Company (the “Transaction”).

Harvest is one of the largest multi-state vertically integrated operators in the cannabis industry in the United States ~~Canada~~operating from “seed to sale". Harvest operates facilities or provides services to cannabis dispensaries in Arizona, California, Colorado, Florida, Maryland, Nevada, and ~~internationally have introduced various recommendations~~Pennsylvania, with two provisional licenses in Massachusetts. In addition, Harvest owns CO2 extraction, distillation, purification, and ~~measures~~manufacturing technology used to ~~try to limit the pandemic, including travel restrictions, border closures, non-essential business closures, quarantines, self-isolations, shelters-in-place~~produce a line of cannabis topicals, vapes, and ~~social distancing. Management has been closely monitoring the impact~~gems featuring cannabinoids and a hemp-derived product line sold in Colorado.

Total consideration was $1.4 billion consisting of ~~COVID-19,~~Trulieve Subordinate Voting Shares (“Trulieve Shares”) with a ~~focus~~fair value of $1.37 billion, stock options, equity classified warrants, restricted stock units and other outstanding equity instruments with a fair value of $18.4 million, and warrant liabilities convertible into equity with a fair value of $3.1 million at the time of the Transaction. The Company incurred $13.0 million in transaction costs related to the acquisition of Harvest as of December 31, 2021. NaN additional transaction costs have been incurred.

The acquisition was accounted for as a business combination in accordance with the Accounting Standards Codification (ASC) 805, Business Combinations. Goodwill represents the premium the Company paid over the fair value of the net tangible and intangible assets acquired. The primary reason for the acquisition was to expand the Company’s retail and cultivation footprint and gain access to new markets. The goodwill of $662.1 million arising from the acquisition primarily consisted of the synergies and economies of scale expected from combining the operations of Trulieve and Harvest including growing the Company's customer base, acquiring assembled workforces, and expanding its presence in new and existing markets. These benefits were not recognized separately from goodwill because they do not meet the recognition criteria for identifiable intangible assets. Goodwill is subject to the limits of IRC Section 280E under which the Company is only allowed to deduct expenses directly related to the cost of goods sold, therefore goodwill is not deductible.

Trulieve Cannabis Corp.

Notes to Condensed Consolidated Financial Statements

The following table summarizes the allocation of consideration exchanged for the estimated fair value of tangible and identifiable intangible assets acquired and liabilities assumed:


(in thousands)
Consideration:
Trulieve Subordinated Voting Shares	$	1,369,024
Fair value of other equity instruments		18,394
Fair value of warrants classified as liabilities		3,103
Fair value of consideration exchanged	$	1,390,521
Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash and cash equivalents	$	85,318
Restricted cash		3,072
Accounts receivable		3,645
Inventories		92,537
Prepaid expenses and other current assets		100,129
Notes receivable		9,805
Property and equipment		191,801
Right of use assets - operating		73,476
Intangible assets:
Dispensary license		946,000
Trademarks		27,430
Customer relationships		3,500
Other assets		5,289
Accounts payable and accrued liabilities		(58,887	)
Income tax payable		(24,863	)
Deferred revenue		(4,523	)
Operating lease liabilities		(76,558	)
Contingencies		(26,599	)
Notes payable		(285,238	)
Construction finance liabilities		(79,683	)
Other long-term liabilities		(1,085	)
Deferred tax liabilities		(253,986	)
	$	730,580
Non-controlling interest	$	(2,139	)
Goodwill		662,080
Total net assets acquired	$	1,390,521

The acquired intangible assets include dispensary licenses which are treated as definite-lived intangible assets amortized over a 15-year useful life, tradenames amortized over a one to five year useful life, and customer relationships amortized over a one year period.

On acquisition date there was consideration in the ~~health~~form of 1,266,641 stock options (as converted) that had been issued before the acquisition date to employees and ~~safety~~non-employees of Harvest. The pre-combination fair value of these awards is $6.2 million. There was consideration in the form of 1,011,095 warrants (1,009,416 equity classified SVS warrants and 1,679 liability classified MVS warrants, as converted) that had been issued before the acquisition date to employees and non-employees of Harvest. The pre-combination fair value of these awards is $7.7 million with $4.6 million representing the equity classified warrants and $3.1 million representing the liability classified warrants. There was consideration in the form of restricted stock units that had been issued before the acquisition date to non-employees of Harvest which vested for services performed pre-combination representing 18,297 SVS. The pre-combination fair value of these awards is $0.5 million. There was additional consideration in the form of other outstanding equity instruments issued before the acquisition date to non-employees which had a pre-combination fair value of $7.1 million.

As part of the ~~Company’s employees, business continuity~~acquisition, Harvest entered into a sale agreement to sell their Florida cannabis license for $55.0 million where Trulieve was legally prohibited from holding this license and ~~supporting its communities.~~ the sale occurred simultaneously with the Transaction. Therefore, a $55.0 million

Trulieve Cannabis Corp.

Notes to Condensed Consolidated Financial Statements

receivable for the sale proceeds was deemed acquired and recorded. The funds were received subsequent to the closing of the transaction on October 1, 2021.

The Company has ~~enacted various measures~~not yet finalized their accounting for non-controlling interests on the acquired entities but has recorded preliminary entries in this area. Any subsequent adjustments would be expected to ~~reduce~~impact non-controlling interest and goodwill. This accounting will be finalized during the ~~spread~~measurement period.

Supplemental pro forma information (unaudited)

The unaudited pro forma information for the periods set forth below gives effect to the acquisition of Harvest Health & Recreation Inc. and Keystone Shops, as if the acquisitions had occurred on January 1, 2021. This pro forma information is presented for informational purposes only and is not necessarily indicative of the ~~virus, including implementing social distancing~~results of operations that would have been achieved had the transactions been consummated as of that time nor does it purport to be indicative of future financial operating results.

•

Proforma net revenues for the period ending March 31, 2021 are $287.9 million. Proforma net loss and comprehensive loss attributable to common shareholders for the period ending March 31, 2021 are $2.5 million.

Unaudited pro forma net income reflects the adjustment of sales between the companies, and adjustments for alignment of significant differences in accounting principles and elections.

(d) Keystone Shops

On July 8, 2021, the Company acquired 100% of the membership interests of Anna Holdings, LLC, the sole member of Chamounix Ventures, LLC which holds a permit to operate dispensaries under Keystone Shops (“Keystone Shops”) with locations in Philadelphia, Devon and King of Prussia, Pennsylvania. Total consideration was $55.6 million consisting of $20.3 million in cash, inclusive of net working capital adjustments, and 1,009,336 in Trulieve Subordinate Voting Shares ("Trulieve Shares") with a fair value of $35.4 million. The agreement provides for an additional $5.0 million in consideration which is contingent on the enactment, adoption or approval of laws allowing for adult-use cannabis in Pennsylvania. NaN liability was recorded for this contingent consideration, as it was not estimated to be probable at ~~its cultivation facilities~~the time of acquisition nor as of March 31, 2022. The acquisition was accounted for as a business combination in accordance with the Accounting Standards Codification (ASC) 805, Business Combinations. Goodwill arose because the consideration paid for the business acquisition reflected the benefit of expected revenue growth and ~~dispensaries, enhancing cleaning protocols at such facilities~~future market development.

Trulieve Cannabis Corp.

Notes to Condensed Consolidated Financial Statements

The following table summarizes the allocation of consideration exchanged for the estimated fair value of tangible and ~~dispensaries~~identifiable intangible assets acquired and ~~encouraging employees~~liabilities assumed:


(in thousands)
Consideration:
Cash	$	20,251
Shares issued upon acquisition		35,385
Fair value of consideration exchanged	$	55,636
Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash	$	500
Inventories		1,766
Prepaid expenses and other current assets		240
Property and equipment		1,144
Right of use asset - finance		1,340
Intangible assets
Dispensary license		27,000
Tradename		100
Favorable leasehold interests, net		86
Goodwill		39,703
Other assets		40
Accounts payable and accrued liabilities		(878	)
Income tax payable		(2,892	)
Operating lease liabilities		(1,340	)
Other long-term liabilities		(2,179	)
Deferred tax liability		(8,994	)
Total net assets acquired	$	55,636

The acquired intangible assets include a dispensary license which is treated as a definite-lived intangible asset amortized over a 15-year useful life, as well as tradename and net favorable leasehold interests which were fully amortized in the period of acquisition due to ~~adhere to preventative measures recommended by local, state,~~useful life and ~~federal health officials.~~ materiality considerations.

~~NOTE 3. ACQUISITIONS~~

~~(a)~~(e) Nature’s Remedy of Massachusetts, Inc.

On June 30, 2021, the Company completed an asset purchase agreement whereby Trulieve acquired a licensed, but not yet operating, adult-use dispensary location from Nature’s Remedy of Massachusetts, Inc. (“Nature’s Remedy”). The Company analyzed the acquisition under ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, determining Nature’s Remedy did not meet the definition of a business as Nature’s Remedy did not have inputs, processes, and outputs in place that constituted a business under Topic 805. As a result, the acquisition of Nature’s Remedy has been accounted for as an asset acquisition, whereby all of the assets acquired and liabilities assumed are assigned a carrying amount based on relative fair values. ~~The total~~Total consideration was ~~$13.5~~$16.2 million consisting of ~~$7.0~~$7.0 million in cash and ~~$6.5 million or~~ 237,881 in Trulieve ~~shares.~~ Shares, with a fair value of $9.1 million, and less than $0.1 million in transaction costs.

Trulieve Cannabis Corp.

Notes to Condensed Consolidated Financial Statements

The ~~net~~following table summarizes the allocation of consideration exchanged for the estimated fair value of tangible and identifiable intangible assets acquired ~~are as follows:~~and liabilities assumed:

(dollars in thousands)

(in thousands)
Consideration:
Cash	$	7,000		$	7,000
Shares issued upon issuance		6,500
Shares issued upon acquisition					9,139
Transaction costs		23			23
Fair value of consideration exchanged	$	13,523		$	16,162
Recognized amounts of identifiable assets acquired and liabilities assumed:
Prepaid expenses and other current assets	$	12		$	12
Property and equipment		749			1,006
Right of use asset - finance		594			799
Intangible assets					15,274
Dispensary license		18,757
Accounts payable and accrued liabilities		(335	)		(335	)
Finance lease liability		(594	)		(594	)
Deferred tax liability		(5,660	)
Total net assets acquired	$	13,523		$	16,162

The acquired intangible asset is represented by the adult-use license and is treated as a definite-lived intangible asset amortized over a 15-year useful life.

~~(b)~~

(f) Patient Centric of Martha's Vineyard

On July 2, 2021, the Company acquired certain assets of Patient Centric of Martha’s Vineyard (“PCMV”) including the rights to a Provisional Marijuana Retailers License from the Massachusetts Cannabis Control Commission, the right to exercise an option held by PCMV to lease real property in Framingham, Massachusetts for use as a marijuana retailer, and necessary municipal entitlements to operate as a marijuana retailer at the property. Total consideration was 258,383 in Trulieve Shares, of which 10,879 are subject to a holdback for six months as security for any indemnity claims by the Company under the asset purchase agreement. The fair value of the equity exchanged was $10.0 million. The Company analyzed the acquisition under ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, determining PCMV did not meet the definition of a business as PCMV did not have inputs, processes, and outputs in place that constituted a business under Topic 805. As a result, the acquisition of PCMV has been accounted for as an asset acquisition, whereby all of the assets acquired and liabilities assumed are assigned a carrying amount based on relative fair values.


(in thousands)
Consideration:
Shares issued upon acquisition	$	10,012
Transaction costs		18
Fair value of consideration exchanged	$	10,030
Recognized amounts of identifiable assets acquired and liabilities assumed:
Right of use asset - finance	$	1,756
Intangible asset		10,594
Finance lease liabilities		(2,320	)
Total net assets acquired	$	10,030

The acquired intangible asset is represented by the adult-use license and is treated as a definite-lived intangible asset amortized over a 15-year useful life.

(g) Solevo Wellness West Virginia, LLC

On June 8, 2021, the Company acquired ~~100%~~100% of the membership interests of Solevo Wellness West Virginia, LLC (“Solevo WV”) which holds three West Virginia dispensary licenses. The Company analyzed the acquisition under ASU 2017-01, Business

Trulieve Cannabis Corp.

Notes to Condensed Consolidated Financial Statements

Combinations (Topic 805): Clarifying the Definition of a Business, determining Solevo WV did not meet the definition of a business as substantially all of the fair value of the gross assets acquired are concentrated in a single identifiable asset. ~~The total~~Therefore, the transaction has been accounted for as an asset acquisition. Total consideration was ~~$0.8~~$0.8 million consisting of ~~$0.2~~$0.2 million in cash, ~~$0.5 million or~~ 11,658 in Trulieve ~~shares, $0.1~~Shares with a fair value of $0.4 million, $0.1 million in debt forgiveness and less than ~~$0.1~~$0.1 million in transaction costs. The consideration of ~~$0.8~~$0.8 million was allocated to acquired assets of ~~$1.1~~$0.8 million, which are treated as definite-lived intangible assets amortized over a 15-year useful ~~life, offset by a related deferred tax liability of $0.3 million.~~life.

~~(c)~~

(h) Mountaineer Holding, LLC

On May 6, 2021, the Company acquired ~~100%~~100% of the membership interests of Mountaineer Holding LLC (“Mountaineer”) which holds a cultivation permit and two dispensary permits in West Virginia. ~~Total consideration was $6.0 million consisting of $3.0 million in cash and $3.0 million or 60,342 in Trulieve shares.~~ The Company analyzed the acquisition under ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, determining Mountaineer did not meet the definition of a business as substantially all of the fair value of the gross assets acquired are concentrated in a single identifiable asset. Therefore, the transaction has been accounted for as an asset acquisition. Total consideration was $5.5 million, consisting of $3.0 million in cash and 60,342 in Trulieve Shares with a fair value of $2.5 million. The consideration of ~~$6.0~~$5.5 million has been allocated to the ~~$8.3~~$5.5 million of acquired assets which are treated as definite-lived intangible assets and amortized over a 15-year useful ~~life, offset by a related deferred tax liability~~life.

~~The following table summarizes the final allocation of consideration exchanged for the estimated fair value of tangible and identifiable intangible assets acquired and liabilities assumed:~~17

~~The Company’s inventory includes the following at June 30, 2021 and December 31, 2020:~~

~~At June 30, 2021 and December 31, 2020, Property and Equipment consisted of the following:~~

Capitalized interest for the three and six months ended June 30, 2021 totaled $1.8 million and $2.1 million, respectively. Capitalized interest for the three and six months ended June 30, 2020 totaled $0.6 million and $0.8 million, respectively.

Depreciation expense for the three and six months ended June 30, 2021 totaled $7.3 million and $12.9 million, respectively. Depreciation expense for the three and six months ended June 30, 2020 totaled $3.6 million and $6.8 million respectively.

~~Stated~~As of March 31, 2022, stated maturities of notes payable are as follows:

~~At June 30, 2021 and December 31, 2020, notes payable related party consisted of the following:~~

~~In March 2021, the 2 unsecured promissory notes (the “Traunch Four Note” and the “Rivers Note”) were amended to extend the maturity one year to May 2022, all other terms remain unchanged.~~

In 2019, the Company completed two private placement arrangements (the “June Notes” and the “November Notes”), each comprised of 5-year senior secured promissory notes with a face value of ~~$70.0~~$70.0 million and ~~$60.0~~$60.0 million, respectively. Both notes accrue interest at an annual rate of ~~9.75%~~9.75%, payable semi-annually, in equal installments, in arrears on June 18 and December 18 of each year. The purchasers of the June Notes received warrants to purchase 1,470,000 Subordinate Voting Shares and the purchasers of the November Notes received warrants to purchase 1,560,000 Subordinate Voting Shares, which can be exercised for three years after closing.

During the three months ended March 31, 2022 and 2021, accretion expense for the June Notes was ~~determined to~~$0.4 million and $0.4 million, respectively. During the three months ended March 31, 2022 and 2021, accretion expense for the November Notes was $0.4 million and $0.3 million, respectively.

On January 28, 2022, the Company closed on a second tranche private placement of 8% Senior Secured Notes (the "2026 Notes") for aggregate gross proceeds of $75.6 million. The 2026 Notes bear interest at a rate of 8% per annum, payable semi-annually in equal installments until the maturity date, unless earlier redeemed or repurchased. The 2026 Notes will mature on October 6, 2026, and may be ~~$63.9~~redeemed in whole or in part, at the Company's option, at any time, on or after October 6, 2023, at the applicable redemption price.TheCompanyintendstousethenetproceedsforcapitalexpendituresandothergeneralcorporatepurposes. Duringthe three months ended March 31, 2022,accretionexpensefortheJanuary2026Noteswaslessthan$0.1million.

On October 6, 2021, the Company closed its private placement of 8% Senior Secured Notes (the "2026 Notes") for aggregate gross proceeds of $350.0 million ~~using~~and net proceeds of $342.6 million. The 2026 Notes were issued at 100% face value, bear an interest rate of ~~13.32% which~~8% per annum payable semi-annually in equal installments until the maturity date, unless earlier redeemed or repurchased. The 2026 Notes mature on October 6, 2026, and may be redeemed in whole or in part, at the Company's option, at any time, on or after October 6, 2023, at the application redemption price set forth in the Indenture. The Company used a portion of the net proceeds to redeem certain outstanding indebtedness of Harvest and intends to use the remaining net proceeds for capital expenditures and other general corporate purposes. During the three months ended March 31, 2022 the Company ~~estimates would have been the coupon rate required to issue the June Notes had the financing not included the June Warrants. The fair value of the June Warrants was determined to be $4.7~~incurred $0.3 million ~~using the Black-Scholes option pricing model and the following assumptions:~~in accretion expense.

~~Share Price: C$14.48; Exercise Price: C$17.25; Expected Life: 3 years; Annualized Volatility: 49.96%; Dividend yield: 0%; Discount Rate: 1.92%; C$ Exchange Rate: 1.34.~~

Accretion expense on the ~~November Notes was determined to be $54.5 million using an interest rate of 13.43% which the Company estimates would have been the coupon rate required to issue the~~private placement notes had the financing not included the November Warrants. The fair value of the November Warrants was determined to be $4.4 million using the Black-Scholes option pricing model and the following assumptions: Share Price: C$14.29; Exercise Price: C$17.25; Expected Life: 2.6 years; Annualized Volatility: 48.57%; Dividend yield: 0%; Discount Rate: 1.92%; C$ Exchange Rate: 1.32.

~~For the three and six months ended June 30, 2021 accretion expense was~~ ~~$0.8 million and $1.5 million respectively. For the three and six months ended June 30, 2020, accretion expense was $0.7 million and $1.4 million, respectively. Accretion expense~~ is included in general and administrative expenses in the condensed consolidated statements of operations and comprehensive (loss) income.

In July 2019, the Company sold property it had recently acquired in Massachusetts for ~~$3.5~~$3.5 million, which was the cost to the Company. In connection with the sale of this location, the Company agreed to lease the location back for cultivation. This transaction was determined to be a finance lease, and therefore did not meet the definition of a sale because control was never transferred to the buyer-lessor. The transaction was treated as a failed sale-leaseback financing arrangement.

Included in the agreement, the Company completed the tenant improvements related to the property, for which the landlord has ~~agreed to provide~~provided a tenant improvement ~~allowanace~~allowance (“TI Allowance”) ~~of $40.0 million, which was dispensed in its entirety as~~for $40.0 million. As of December 31, ~~2020.~~2021, the entire TI Allowance had been provided. The initial term of the agreement is ten years, with 2five-year options to ~~extend the term for five years each.~~renew. The initial payments are equal to ~~11%~~11% of the sum of the purchase price for the property and will increase when a draw is made on the TI Allowance. In addition, a 3%3% increase in payments will be applied annually after the first year. As of ~~June 30,~~March 31, 2022, and December 31, 2021, the total finance liability associated with this transaction is ~~$44.3 million.~~$44.8 million and $44.6 million, respectively.

In October 2019, the Company sold property in Florida in exchange for cash of ~~$17.0~~$17.0 million. Concurrent with the closing of the purchase, the buyer entered into a lease agreement with the Company, for continued operation as a licensed medical cannabis cultivation facility. Control was never transferred to the buyer-lessor because the transaction was determined to be a finance lease and did not meet the requirements of a sale. The transaction was treated as a failed sale-leaseback financing arrangement.

The initial term of the agreement is ten years, with 2five-year options to ~~extend the term for five years each.~~renew. The initial annualized payments are equal to ~~11%~~11% of the purchase price for the property. A 3%3% increase in payments will be applied annually after the first year. As of ~~June 30,~~March 31, 2022, and December 31, 2021, the total finance liability associated with this transaction is ~~$17.3 million.~~$17.5 million and $17.4 million, respectively.

In October 2019, prior to acquisition by the Company, PurePenn, ~~LLC (“PurePenn”)~~ sold their cannabis cultivation facility in Pennsylvania for ~~$5.0~~$5.0 million. Simultaneously with the closing of the sale, PurePenn agreed to lease the cultivation facility back. The transaction was treated as a failed sale-leaseback financing arrangement.

The initial term of the lease is ~~fifteen~~15 years, with 2five-year options to renew. The landlord has agreed to provide a TI ~~allowance~~Allowance of ~~$21.0~~$21.0 million as an additional component of base rent. Payments are made based on one twelfth (1/12)of the TI allowance dispersed with ~~12.75%~~12.75% due for the first ~~$5.0~~$5.0 million, 13.25% for $5.0 million to $15.0 million and ~~13.75% thereafter. On March 8,~~13.50% for $15.0 to $21.0 million. In 2021, the Company entered into an amendment with the landlord to increase the tenant improvement allowance ~~to $36.5~~by an additional $15.5 million for a total of $36.5 million at a rate of ~~10.75%~~10.75% on the additional allowance in excess of ~~$21.0~~$21.0 million. As of ~~June 30,~~March 31, 2022, and December 31, 2021, ~~$23.8~~$29.5 million and $29.5 million of the TI allowance has been ~~provided.~~provided, respectively.

In October 2021, in connection with the acquisition of Harvest, the Company acquired a transaction in which Harvest sold a licensed cultivation and processing facility and simultaneously with the closing of the sale, agreed to lease the facility back. The transaction was treated as a failed sale-leaseback financing arrangement.

The initial term of the lease is 20 years, with 2five-year options to renew. The landlord has agreed to provide a TI Allowance of $17.9 million as an additional component of base rent. As of ~~June 30,~~March 31, 2022, and December 31, 2021, $17.9 million and $15.3 million of the ~~total finance liability~~TI allowance has been provided, respectively.

In the first quarter of 2022, the Company temporarily idled this facility. The Company is evaluating the future use of this facility and remains in compliance with the associated lease obligation.

In October 2021, in connection with ~~this~~the acquisition of Harvest, the Company acquired a transaction in which Harvest sold a licensed cultivation and processing facility and simultaneously with the closing of the sale, agreed to lease the facility back. The transaction was treated as a failed sale-leaseback financing arrangement.

The initial term of the lease is ~~$28.7~~ten years with 2options to extend the term the first providing a ten-year renewal option and the second providing a five-year renewal option. The landlord has agreed to provide a TI Allowance of $12.9 million as an additional component of base rent. As of .March 31, 2022, and December 31, 2021, $10.5 million and $5.7 million of the TI allowance has been provided, respectively.

Under the ~~failed-sales-leaseback~~failed-sale-leaseback accounting model, the Company is deemed ~~under GAAP~~ to own ~~the above mentioned~~this real estate ~~properties as financing arrangements since control was never transferred to~~and will reflect the ~~buyer-lessor. These agreements are presented~~properties on our condensed consolidated balance sheet ~~within Property~~ and ~~equipment, net and depreciated~~depreciate over the assets' remaining useful life.

For the three months ended March 31, 2022, the Company excluded 3,628,541 options, 1,078,324 RSUs, and 3,636,029 warrants, from the dilutive calculation as the Company is in a net loss position. For the three months ended March 31, 2021, the Company excluded 926,242 options from the dilutive calculation as they would have been anti-dilutive. For the three months ended March 31, 2021, the Company excluded 619,237 warrants as they would have been anti-dilutive. As of March 31, 2022, there are approximately 184 million issued and ~~2020:~~outstanding shares which excludes approximately 2.9 million of fully vested RSUs which are not contractually issuable until 2024.

The Company has computed its provision for income taxes based on the actual effective tax rate for the quarter as the Company believes this is the best estimate for the annual estimated effective tax rate.

The Company is subject to income taxes in the United States and Canada. Significant judgment is required in evaluating the Company’s uncertain tax positions and determining the provision for income taxes. The Company’s gross unrecognized tax benefits was approximately $44.9 million as of March 31, 2022 and December 31, 2021, ~~and 2020~~respectively, which is recorded in deferred tax liabilities in the condensed consolidated balance sheets.

The Company through its acquisition of Harvest and through the acquired Harvest subsidiaries has entered into operating agreements with various entities related to the purchase and operation of cannabis dispensary, cultivation, and production licenses, in several states.

The Company determined these entities to be variable interest entities ("VIEs") due to the financial relationship and as the Company is the primary beneficiary as of March 31, 2022, and December 31, 2021. The Company holds varying ownership interests in these entities and in certain cases may not directly hold ownership in the entities, but holds a significant interest through an agent. The Company's VIEs are not material to the consolidated financial position or operations as of March 31, 2022, or for the three month period ended March 31, 2022, or as of December 31, 2021. The Company did not have any VIEs prior to the acquisition of Harvest in October 2021.

We have determined these entities to be variable interest entities and that we are the primary beneficiary. We consolidate these entities due to the other holder’s equity investment being insufficient to finance its activities without additional subordinated financial support and the Company meeting the power and economics criteria. In particular, the Company controls the management decisions and activities most significant to certain VIEs, has provided a significant portion of the subordinated financial support provided to date, and holds membership interests exposing the Company to the risk of reward and/or loss. The Company allocates income and cash flows of the VIEs based on the outstanding ownership percentage in accordance with the underlying operating agreements, as amended. The Company has consolidated all identified variable interest entities for which the Company is the primary beneficiary in the accompanying consolidated financial statements.

During the three months ended March 31, 2022, the Company divested of it's minority ownership interest in one of it's VIEs and received cash of $1.6 million and recorded an insignificant loss on the divestment which is recorded in loss on divestment and sale of non-operating assets in the condensed consolidated statement of operations and comprehensive (loss) income. As of March 31, 2022, this VIE is no longer consolidated in the Company's condensed consolidated financial statements.

NOTE 19. RELATED PARTIES

The Company had raised funds by issuing notes to various related parties including directors, officers, and ~~shareholders and the~~shareholders. The related party notes were paid off in full in November 2021. The balance ~~at June 30,~~of related party notes was 0 as of December 31, 2021, and ~~December~~March 31, ~~2020 was $12.0 million and $12.0 million, respectively, as discussed in~~2022, respectively. The Company incurred interest expense for the three months ended March 31, 2021, on the related party notes ~~“Note 8 –~~ of $0.4 million.

Trulieve Cannabis Corp.

Notes ~~Payable Related Party”~~to Condensed Consolidated Financial Statements

J.T. Burnette, the spouse of Kim Rivers, the Chief Executive Officer and Chair of the board of directors of the Company, iswas a minority owner of a company (the “Supplier”) that provides construction and related services to the Company. As of January 1, 2022, the Supplier is no longer a related party of the Company. The Supplier is responsible for the construction of the Company’s cultivation and processing facilities, and provides labor, materials and equipment on a cost-plus basis. ~~At June 30,~~For the year ended December 31, 2021, ~~and 2020,~~related party property and equipment purchases totaled ~~$76.4 million, and $35.9 million, respectively.~~$148.4 million. As of ~~June 30, 2021 and~~ December 31, ~~2020, $13.8~~2021, $11.4 million ~~and $10.4 million~~ of related party property and equipment purchases was included in accounts payable in the condensed consolidated balance sheets. The use of the Supplier was reviewed and approved by the independent members of the Company’s board of directors, and all invoices of the Supplier are reviewed by the office of the Company’s Chief Legal Officer.

The Company ~~has many~~ leases a cultivation facility and corporate office facility from an entity that is directly or indirectly owned by Kim Rivers, our Chief Executive Officer and Chair of the board of directors, George Hackney, a former member of our board of directors, and Richard May, a member of our board of directors. The Company also leases various ~~real estate holding~~properties from companies that are managed by ~~various related parties including~~ Benjamin Atkins, a former director and ~~current~~ shareholder of the Company, and the Supplier. As of ~~June 30, 2021,~~January 1, 2022, Benjamin Atkins is no longer a related party of the Company due to the time that has passed since Mr. Atkins held a director position.

As of March 31, 2022, and December 31, ~~2020,~~2021, under ASC 842, the Company had the following related party leases in the condensed consolidated balance ~~sheet:~~sheets:

As of June 30, 2021

As of December 31, 2020

Finance

Operating

Finance

Operating

(dollars in thousands)

(dollars in thousands)

Right-of-use asset, net

$
3,213

$
10,720

$
3,425

$
12,003

Lease liability:

Lease liability - current portion

301

1,381

281

1,539

Lease liability

3,344

9,980

3,500

11,083

Total related parties lease liability

$
3,645

$
11,361

$
3,781

$
12,622


	As of March 31, 2022		As of December 31, 2021
	Operating		Operating		Finance
	(in thousands)		(in thousands)
Right-of-use assets, net	$	899	$	2,082	$	2,009
Lease liabilities:
Lease liabilities - current portion	$	103	$	418	$	215
Lease liabilities		837		1,862		2,127
Total related parties lease liabilities	$	940	$	2,280	$	2,342

Expenses recognized for related party leases was $0.1 million and $0.1 million for the three months ended March 31, 2022 and 2021, respectively.

NOTE 20. REVENUE DISAGGREGATION

Net revenues are comprised of the following for the period ending March 31, 2022 and 2021:~~17.~~


	For the Three Months Ended March 31,
	2022		2021
	(in thousands)
Retail	$	290,614	$	181,264
Wholesale, licensing and other		27,734		12,559
Revenues, net of discounts	$	318,348	$	193,823

NOTE 21. COMMITMENTS AND CONTINGENCIES

~~(a)~~

Operating Licenses

Although the possession, cultivation and distribution of cannabis for medical use is permitted in Arizona, California, Colorado, Connecticut, Florida, Maryland, Massachusetts, ~~California, Connecticut,~~Nevada, Pennsylvania and West Virginia, cannabis is a Schedule-I controlled substance and its use and possession remains a violation of federal law. Since federal law criminalizing the use of cannabis preempts state laws that legalize its use, strict enforcement of federal law regarding cannabis would likely result in the Company’s inability to proceed with our business plans. In addition, the Company’s assets, including real property, cash and cash equivalents, equipment and other goods, could be subject to asset forfeiture because cannabis is still federally illegal.

~~(b)~~

Trulieve Cannabis Corp.

Notes to Condensed Consolidated Financial Statements

Claims and Litigation

From time to time, the Company may be involved in litigation relating to claims arising out of operations in the normal course of business. ~~Except as disclosed below, at June 30, 2021,~~As of March 31, 2022, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of the Company’s ~~condensed~~ consolidated statements of operations and comprehensive income. There are also no proceedings in which any of the Company’s directors, officers or affiliates is an adverse party or has a material interest adverse to the Company’s interest.

~~On December 30, 2019, a securities class-action complaint,~~ ~~David McNear v. Trulieve Cannabis Corp. et al., Case No. 1:19-cv-07289, was filed against the Company in the United States District Court for the Eastern District of New York. On February 12, 2020, a second securities class-action complaint,~~ ~~Monica Acerra v. Trulieve Cannabis Corp. et al.~~, Case No. 1:20-cv-00775, which is substantially similar to the complaint filed on December 30, 2019, was filed against the Company in the United States District Court for the Eastern District of New York. Both complaints name the Company, Kim Rivers, and Mohan Srinivasan as defendants for allegedly making materially false and misleading statements regarding the Company’s previously reported financial statements and public statements about its business, operations, and prospects. The complaint alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and SEC Rule 10b-5 promulgated thereunder. The complaint sought unspecified damages, costs, attorneys’ fees, and equitable relief. On March 20, 2020, the Court consolidated the two related actions under ~~In re Trulieve Cannabis Corp. Securities Litigation~~, No. 1:19-cv-07289, and appointed William Kurek, John Colomara, David McNear, and Monica Acerra as Lead Plaintiffs. After consultation with legal council, the Company believes that the suit is immaterial and that the claims are without merit and intends to vigorously defend against them.

~~(c)~~Contingencies~~Arrangement Agreement~~

On May 10, 2021, Trulieve Cannabis Corp. (the “Company”) entered into an arrangement agreement (the “Arrangement Agreement”) with Harvest Health & Recreation Inc. (“Harvest”), pursuant to which, the Company has agreed, subject to the terms and conditions thereof, to acquire all of the issued and outstanding subordinate voting shares of Harvest (“Subordinate Voting Shares”), multiple voting shares of Harvest (“Multiple Voting Shares”) and super voting shares of Harvest (the “Super Voting Shares” and, together with the Subordinate Voting Shares and Multiple Voting Shares, the “Harvest Voting Shares”), pursuant to a plan of arrangement (the “Plan of Arrangement”) under the Business Corporations Act (British Columbia) (the “Arrangement”).

Subject to the terms and conditions set forth in the Arrangement Agreement and Plan of Arrangement, holders of Harvest Voting Shares will receive 0.1170 of a subordinate voting share of the Company (each a “Company Subordinate Voting Share”), subject to adjustment as described as (the “Exchange Ratio”) within the Arrangement Agreement, for each Harvest Voting Share outstanding immediately prior to the effective time of the Arrangement (the “Effective Time”), with the Super Voting Shares and Multiple Voting Shares treated on an as if converted basis to Subordinate Voting Shares pursuant to their respective terms; provided, the Exchange Ratio may potentially be adjusted upon the occurrence of certain permitted Harvest debt refinancing’s. The Arrangement is intended to qualify as a reorganization for U.S. federal income tax purposes.

The ~~Arrangement Agreement includes customary representations, warranties and covenants of Trulieve and Harvest and each party has agreed~~Company records contingent liabilities with respect to ~~customary covenants, including, among others, covenants relating to the conduct of its business during the interim period between execution of the Arrangement Agreement~~litigation on various claims in which we believe a loss may be probable and the ~~Effective Time~~loss in estimable. As of March 31, 2022, and December 31, 2021, $11.0 million and $8.8 million was included in contingent liabilities in the condensed consolidated balance sheets related to pending litigation. As of March 31, 2022 and December 31, 2021, $1.6 million and $2.3 million was included in contingent liabilities in the condensed consolidated balance sheets for estimates related to various sales tax matters. As of March 31, 2022, the Company recorded $2.1 million in liabilities related to potential earn-outs on the Watkins acquisition, that were determined to probable and estimable as ~~defined within~~of March 31, 2022, with $1.2 million included in contingent liabilities and $0.9 million included in other long term liabilities in the ~~Arrangement Agreement.~~condensed consolidated balance sheets, respectively.

Regulatory Compliance

The ~~Arrangement Agreement provides for customary non-solicitation covenants,~~Company’s compliance with state and other rules and regulations may be reviewed by state and federal agencies. If the Company fails to comply with these regulations, the Company could be subject to loss of licenses, substantial fines or penalties and other sanctions.

NOTE 22. FINANCIAL INSTRUMENTS

The Company’s financial instruments that are measured at fair value on a recurring basis consist of money market funds and a warrant liability. Our financial instruments where carrying value approximates the ~~right~~fair value include cash, accounts payable and accrued liabilities, 0tes payable, 0tes payable related party, operating lease liabilities, finance lease liabilities, other long-term liabilities and construction finance liabilities. Excluding the money market funds and warrant liability classified at fair value, the carrying values of these financial instruments approximate their fair values as of March 31, 2022, and December 31, 2021, due to their short-term nature or because the effective interest rate applied to the balance approximates the market rate.

Financial instruments recorded at fair value are classified using a fair value hierarchy that reflects the significance of the ~~board of directors of Harvest (the “Board”)~~inputs to ~~consider and accept a superior proposal (as defined in~~fair value measurements. There have been 0 transfers between hierarchy levels during the Arrangement Agreement), and the right of the Company to match any such proposal within five business days. The Arrangement Agreement also provides for the payment by Harvest to the Company of a $100,000,000 termination fee if the Arrangement Agreement is terminated in certain specified circumstances, including, among other things, in the event that (i) the Board withholds, withdraws, modifies or qualifies any of its recommendations or determinations with respect to the special resolution approving the Arrangement; (ii) the Board, in accordance with certain procedures set forth in the Arrangement Agreement, accepts, recommends, approves or enters into an agreement to implement a superior proposal (as defined in the Arrangement Agreement), or (iii) the Arrangement Agreement is terminated in certain circumstances, including in the event the resolution approving the Arrangement is not approved by Harvest Voting Shareholders, the Arrangement is not consummated on or prior to February 28, 2022 (subject to modification by the parties and extension in certain circumstances), or in the event Harvest willfully failed to fulfill or comply with all covenants contained in the Arrangement Agreement required to be fulfilled or complied with it on or prior to the effective time of the Arrangement, and if (x) prior to the date of termination an acquisition proposal meeting certain requirements has been publicly announced or otherwise communicated to Harvest, and (y) within 12three months of the date of such termination the transaction is completed or Harvest has entered into a definitive agreement with respect to such transaction and such transaction is later consummated or effected (whether or not within such 12 month period). The Arrangement Agreement also provides for the payment by the Company to Harvest of a $100,000,000 termination fee if the Arrangement Agreement is terminated due to the fact that the Arrangement is not consummated on or prior to February 28, 2022 (subject to modification by the parties and extension in certain circumstances) solely due to the failure to obtain certain required regulatory approvals.

In the event the Arrangement has not been completed on or before February 28, 2022, the Company has agreed to lend Harvest $25,000,000. In addition, the Company has agreed to lend Harvest an additional amount of $25,000,000 on each of May 31, 2022, Augustended March 31, 2022, and ~~November 30,~~the year ended December 31, 2021.

The following tables present information about the Company’s financial instruments and their classifications as of March 31, 2022, ifand December 31, 2021, and indicate the Arrangement has not been completed by the business day preceding each of those respective dates. Such loans will be subject to acceleration in certain customary or to be negotiated events, which include terminationfair value hierarchy of the ~~Arrangement Agreement in order~~valuation inputs utilized to ~~enter into an alternative transaction agreement for a superior proposal.~~determine such fair value.

~~The Transaction will be consummated subject to the deliverables~~

Fair Value Measurements as of March 31, 2022, using:


	Level 1		Level 2		Level 3		Total
	(in thousands)
Financial Assets:
Money market funds (1)	$	94,784	$	—	$	—	$	94,784
Financial Liabilities:
Warrant liabilities (2)	$	—	$	2,075	$	—	$	2,075

(1) Money market funds are included within cash and ~~provisions as further described~~cash equivalents in the ~~Arrangement Agreement. Refer~~Company’s condensed consolidated balance sheets. As a short-term, highly liquid investments readily convertible to known amounts of cash, the ~~Quarterly Report on Form 10-Q filed on May 13, 2021, for additional details including the Arrangement Agreement within Exhibit 2.1.~~Company’s money market funds have carrying values that is fair value.

~~NOTE~~ ~~18. SUBSEQUENT EVENTS~~

~~The Company has evaluated subsequent events through August 12,~~(2) Warrant liabilities represent liability classified warrants acquired from Harvest in October 2021 ~~which is the date these consolidated financial statements were issued.~~

~~On July 2, 2021, the Company acquired certain assets of Patient Centric of Martha’s Vineyard (“PCMV”~~("Harvest liability warrants") including the rights to a Provisional Marijuana Retailers License from the Massachusetts Cannabis Control Commission, the right to exercise an option held by PCMV to lease real property in Framingham, Massachusetts for useand included as a marijuana retailer, and necessary municipal entitlements to operate as a marijuana retailer at the property. Total consideration was $4.8 million or 258,383 in Trulieve Shares, of which 10,879 are subject to a holdback for six months as security for any indemnity claims by the Company under the asset purchase agreement. The acquisition will be accounted for as an asset acquisition. The initial accounting for the asset acquisition is incomplete at the time of this filing due to the limited amount of time since the acquisition date and the ongoing statuspart of the ~~valuation. We anticipate that we will complete the initial accounting for the asset acquisition during the third quarter of 2021.~~

On July 8, 2021, the Company acquired 100% of the membership interests of Anna Holdings, LLC, a company who is the sole equity holder in Chamounix Ventures, LLC which holds a permit to operate dispensaries under Keystone Shops (“Keystone Shops”) with locations in Philadelphia, Devon and King of Prussia, Pennsylvania. Total consideration ~~was $60.0 million consisting of $20.0 million in cash and $40.0 million or 1,009,336 in Trulieve shares.~~transferred. See Note 4. Acquisitions. The deal does not carry a deferred payments or earn-out period and provides for an additional $5.0 million in consideration which is contingent on the enactment, adoption or approval of laws allowing for adult-use cannabis in the state of Pennsylvania. The acquisition will be accounted for as a business combination. The initial accounting for the business combination is incomplete at the time of this filing due to the limited amount of time since the acquisition date and the ongoing status of the valuation. As such, we are unable to disclose certain information with respect to the Keystone Shops acquisition including the preliminary estimated fair value of the ~~assets~~Harvest acquired warrants is determined

Trulieve Cannabis Corp.

Notes to Condensed Consolidated Financial Statements

using the Black-Scholes options pricing model. March 31, 2022 inputs: Share Price: C$26.30; Exercise Price: C$11.25; Remaining term: 1.06 years; Annualized Volatility: 51.81%; Dividend yield: 0%; Discount Rate: 1.63%; C$ Exchange Rate: 0.8003.

Fair Value Measurements as of December 31, 2021, using:


	Level 1		Level 2		Level 3		Total
	(in thousands)
Financial Assets:
Money market funds (1)	$	94,161	$	—	$	—	$	94,161
Financial Liabilities:
Warrant liabilities (2)	$	—	$	2,895	$	—	$	2,895

(1) Money market funds are included within cash and cash equivalents in the Company’s condensed consolidated balance sheets. As a short-term, highly liquid investments readily convertible to known amounts of cash, the Company’s money market funds have carrying values that is fair value.

(2) Warrant liabilities ~~assumed. We anticipate that we will complete~~represent liability classified warrants acquired from Harvest in October 2021 ("Harvest liability warrants") and included as part of the ~~initial accounting for~~consideration transferred. See Note 4. Acquisitions. The fair value of the ~~business combination during~~Harvest acquired warrants is determined using the ~~third quarter of 2021.~~Black-Scholes options pricing model. December 31, 2021, inputs: Share Price: C$32.91; Exercise Price: C$11.25; Remaining term: 1.31 years; Annualized Volatility: 49.57%; Dividend yield: 0%; Discount Rate: 0.56%; C$ Exchange Rate: 0.788.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion of our financial condition and results of operations should be read together with our consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q and the consolidated financial statements and accompanying notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our ~~Annual Report on~~2021 Form ~~10-K for the fiscal year ended December 31, 2020, filed with the Securities and Exchange Commission, or SEC, on March 23, 2021 (the “2020 Form 10-K”).~~10-K. This discussion contains forward-looking statements and involves numerous risks and uncertainties, including but not limited to those described in the “Risk Factors” section of this Quarterly Report on Form 10-Q and in “Part I, Item 1A—Risk Factors” in our ~~2020~~2021 Form ~~10-~~K.10-K. Actual results may differ materially from those contained in any forward-looking statements. You should read “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” contained herein and in our ~~2020~~2021 Form 10-K.

Overview

We are a vertically integrated cannabis company and multi-state ~~cannabis~~ operator ~~with~~which currently holds licenses to operate in ~~six states.~~ten states and has received notice of intent to award a license in an eleventh state. Headquartered in Quincy, Florida, we are the market leader for quality medical cannabis products and services in Florida and we have market leading retail operations in Arizona and Pennsylvania. By providing innovative, high-quality products across our brand portfolio, we aim to be the brand of choice for medical and adult-use customers in all of the markets that we serve. We operate in highly regulated markets that require expertise in cultivation, manufacturing, retail and logistics. We have developed proficiencies in each of these functions and are committed to expanding access to high quality cannabis products and delivering exceptional customer experiences.

All of the states in which we operate have adopted legislation to permit the use of cannabis products for medicinal purposes to treat specific conditions and diseases, which we refer to as medical cannabis. Recreational marijuana, or adult-use cannabis, is legal marijuana sold in licensed dispensaries to adults ages 21 and older. Thus far, of the states in which we operate, only Arizona, California, Colorado, Connecticut, Massachusetts and ~~Massachusetts,~~Nevada have adopted legislation permitting commercialization of adult-use cannabis products.

As previously disclosed, on October 1, 2021, we completed our previously announced acquisition of Harvest Health & Recreation Inc. (“Harvest”) and, as a result of the acquisition, our operations have expanded significantly effective as of such date. As of ~~June 30, 2021,~~May 2, 2022, we operated 165 dispensaries, with 115 dispensaries in Florida, 19 affiliated dispensaries in Pennsylvania, 17 dispensaries in Arizona, five dispensaries in California, three dispensaries in Maryland, three dispensaries in Massachusetts, two dispensaries in West Virginia and one dispensary in Connecticut, and we operated cultivation and processing facilities in Arizona, Colorado, Florida, Maryland, Massachusetts, Nevada, Pennsylvania, and West Virginia.

As of March 31, 2022, we employed over ~~7,200~~9,000 people, and we are committed to providing patients and adult consumers, which we refer to herein as ~~“patients” or~~ “customers,” a consistent and welcoming retail experience across Trulieve branded stores. We have nine material subsidiaries: Trulieve, Inc., or Trulieve US, Leef Industries, LLC, or Leef Industries, Life Essence, Inc., or Life Essence, Trulieve Holdings, Inc., or Trulieve Holdings,stores and Trulieve Bristol, Inc. (formerly The Healing Corner, Inc. and referred to herein as “Healing Corner”), PurePenn LLC, Keystone Relief Centers, LLC (which we refer to as “Solevo Wellness”), and Trulieve WV, Inc., or Trulieve WV and Trulieve GA, Inc., or Trulieve GA. Each of Trulieve US, Leef Industries, Life Essence, Trulieve Holdings, Healing Corner, PurePenn LLC, Solevo Wellness and Trulieve WV is wholly owned (directly or indirectly) by Trulieve Cannabis Corp. Trulieve GA, Inc. is 40% owned (indirectly) by Trulieve Cannabis Corp.affiliated retail locations. As of ~~June 30, 2021, substantially all~~March 31, 2022, the majority of our revenue was generated from the sale of medical cannabis products in the State of ~~Florida.~~Florida and to a lesser extent Arizona and the Commonwealth of Pennsylvania. To date, neither the sale of adult-use cannabis products, nor our operations in ~~Massachusetts,~~ California, Connecticut, ~~Pennsylvania, and~~Colorado, Maryland, Massachusetts, Nevada, or West Virginia, have been material to our business.

~~Florida~~

Our business and operations center around the Trulieve ~~US is~~brand philosophy of “Customers First” which permeates our culture beginning with high- quality and efficient cultivation and manufacturing practices, focus on the consumer experience at Trulieve branded and affiliated retail locations, at our in-house call center and where available at customer residences through a robust home delivery program. Our investments in vertically integrated ~~“seed~~operations in several of our markets afford us ownership of the entire supply chain which mitigates third-party risks and allows us to ~~sale” cannabis company~~completely control product quality and ~~is the largest licensed medical marijuana company~~brand experience. We believe that this contributes to high customer retention and brand loyalty. We successfully operate our core business functions of cultivation, production and distribution at scale, and are skilled at rapidly increasing capacity without any interruption to existing operations.

Trulieve has identified five regional geographic hubs in the ~~State~~U.S. and has established cannabis operations in three of the five hubs: Southeast, Northeast, and Southwest. In each of our three regional hubs we have market leading positions in cornerstone states and additional operations and assets in other state markets. Our hubs are managed by national and regional management teams supported by our corporate headquarters in Florida.

Southeast Hub

Our southeast hub operations are anchored by our cornerstone market of Florida. ~~As of June 30, 2021, publicly~~Trulieve was the first licensed operator in the medical market in Florida with initial sales in 2016. Publicly available reports filed with the Florida Office of Medical Marijuana Use show Trulieve ~~US to have~~has the most dispensing locations and the greatest dispensing volume across product categories out of all licensed medical marijuana businesses in the ~~state.~~state as of December 31, 2021. Trulieve US cultivates and produces all of its products in-house and distributes those products to ~~patients~~customers in Trulieve branded stores (dispensaries) throughout ~~the State of~~ Florida, as well as ~~directly to patients~~ via home delivery. Our experience in the vertically integrated Florida market has given us the ability to scale and penetrate in all necessary business segments (cultivation, production, sales, and distribution). Trulieve US has the experience necessary to increase market leadership in Florida and employ that expertise effectively in other regulated markets.

As of ~~June 30, 2021,~~March 31, 2022, Trulieve US operated ~~approximately 2.2 million square feet of~~ cultivation and processing facilities across ~~six sites.~~thirteen sites and 113 retail dispensaries throughout the state. In accordance with Florida law, Trulieve US grows all of its cannabis in secure enclosed indoor facilities and greenhouse structures.

~~Massachusetts~~

~~Life Essence operates~~ In furtherance of our customer-first focus, we have developed a co-located medical and adult-use dispensary in Northampton and Medical Marijuana cultivation and product manufacturing facility in Holyoke. Life Essence also has been awarded Final Licenses for Adult-Use cultivation and processing at the same facility in Holyoke, and provisional certificates of registration for medical marijuana dispensaries in Holyoke and Cambridge. Upon entry of its existing plant stock into the state’s seed to sale tracking system and clearance from the Massachusetts Cannabis Control Commission, Life Essence will be able to fully operate under its adult-use cultivation and processing licenses, including in the wholesale market. The completion of these licensing processes will further enable Life Essence to capitalize on its investment in infrastructure and engage in vertically integrated operations in both adult-use and medical markets in Massachusetts.

On July 2, 2021, Life Essence closed a transaction with Patient Centric of Martha’s Vineyard Ltd., or PCMV, in which Life Essence purchased certain assets of PCMV, including the rights to a Provisional Marijuana Retailer License from the Massachusetts Cannabis Control Commission in Framingham, Massachusetts, and necessary municipal entitlements and a leasehold interest to operate as a marijuana retailer at the property. On June 29, 2021, Life Essence closed a transaction with Nature’s Remedy of Massachusetts, Inc., or Nature’s Remedy, and Sammartino Investments, LLC, pursuant to which Life Essence agreed to purchase certain assets of Nature’s Remedy including a Final Marijuana Retailer License from the Cannabis Control Commission, assignment of a long-term lease for real property in Worcester, Massachusetts for use as a marijuana retailer, and necessary municipal entitlements to operate as a marijuana retailer at the property. Following a satisfactory post final license inspection from the Massachusetts Cannabis Control Commission, this marijuana retailer location in Worcester, Massachusetts may commence operations.

~~California~~

Leef Industries operates a licensed medical and adult-use cannabis dispensary located in Palm Springs, California. Trulieve believes Leef Industries has demonstrated encouraging growth in the market, offering in-store and online shopping, along with product home delivery. Leef Industries is in the processsuite of Trulieve ~~rebranding~~branded products, including flower, edibles, vaporizer cartridges, concentrates, topicals, capsules, tinctures, dissolvable powders, and ~~alignment with corporate operational standards, which we believe will increase consumer appeal and operational efficiency. The dispensary helps us stay abreast~~nasal sprays. This wide variety of ~~trends on~~products gives customers the ~~west coast~~ability to select the product that consistently delivers the desired effect and in ~~a robust and innovative cannabis market distinguished by local competition between diverse and numerous operators.~~their preferred method of delivery.

~~Connecticut~~

The Healing Corner is a licensed pharmacist-managed medical cannabis dispensary located in Bristol, Connecticut. Healing Corner was founded in 2014 and provides a range of medical marijuana products produced by high quality licensed suppliers. At the dispensary, a licensed pharmacist and trained staff provide on-site counseling and education to patients. Patients may reserve their medical marijuana order through Healing Corner’s innovative Canna-Fill online system. Under Connecticut’s adult-use cannabis legislation, which was enacted July 1, 2021, Healing Corner will have an opportunity to convert to hybrid adult-use and medical sales.

~~Pennsylvania~~

On November 12, 2020, we completed the acquisition of 100% of the membership interests of: (i) PurePenn LLC and Pioneer Leasing & Consulting LLC, which we refer to collectively as PurePenn, and (ii) Keystone Relief Centers, LLC, which does business as and we refer to herein as Solevo Wellness. PurePenn operates cannabis cultivation and manufacturing facilities in the Pittsburgh, Pennsylvania area and currently wholesales to 100% of the operating dispensaries in Pennsylvania. Solevo Wellness operates three medical marijuana dispensaries in the Pittsburgh, Pennsylvania area. On July 8, 2021, we completed the acquisition of 100% of the membership interest of Anna Holdings LLC, which does business as Keystone Shops and operates three dispensaries in the Philadelphia area.

~~West Virginia~~

~~On November 13, 2020,~~In Georgia, Trulieve WV was awarded a processor permit by the West Virginia Office of Medical Cannabis. On January 29, 2021, Trulieve WV was notified that it has been awarded four dispensary permits by the West Virginia Office of Medical Cannabis. On March 22, 2021, we entered into a membership interest purchase agreement with Mountaineer Holding, LLC (“Mountaineer”). Mountaineer holds a West Virginia cultivation license and two dispensary licenses. The acquisition of Mountaineer was completed on May 5, 2021. On June 8, 2021, we completed the acquisition of Solevo Wellness West Virginia LLC and its three West Virginia dispensary permits. On June 29, 2021, we received approval from the West Virginia Office of Medical Cannabis to begin cultivation operations, making Trulieve the first in the state of West Virginia to begin cultivating medical cannabis. We are actively working to obtain approval for processing and dispensing operations as soon as reasonably practicable, which will vary by location depending on permitting and construction timelines.

~~Georgia~~

~~On July 24, 2021, Trulieve GA~~ received a Notice of Intent to award a Class 1 Production License from the Georgia Access to Medical Cannabis ~~Commission.~~Commission in July 2021. The Notice of Intent to award is a notice of the Georgia Access to Medical Cannabis Commission’s expected contract award to Trulieve GA pending resolution of a ~~potential~~ protest process. If the contract is awarded, Trulieve GA will hold one of two Class 1 Production Licenses in the state and will be permitted to cultivate cannabis for the manufacture of low tetrahydrocannabinol, or THC oil.

Northeast Hub

Our northeast hub operations are anchored by our cornerstone market of Pennsylvania.

We conduct cultivation, processing, and retail operations through its direct and indirect subsidiaries with permits for retail operations and grower/processor operations in Pennsylvania. These subsidiaries operate cultivation and processing facilities in McKeesport, Reading, and Carmichael, Pennsylvania to support our affiliated network of retail dispensaries and wholesale distribution network across the state.

We operate three medical dispensaries in Maryland and conduct wholesale sales supported by cultivation and processing in Hancock, Maryland. As of May 2, 2022, we operate three retail dispensaries in Massachusetts, serving medical and adult use customers in Northampton and adult use customers in Worcester and Framingham as of May 2, 2022. Our retail operations are supported by cultivation and manufacturing operations in Holyoke. We commenced wholesale sales in September 2021. Trulieve was the first to offer sales of clones supporting home grow for residents in the Massachusetts market in August 2021.

We operate a medical cannabis dispensary located in Bristol, Connecticut. Under Connecticut’s adult-use cannabis legislation, which was enacted July 1, 2021, Trulieve can seek regulatory approval to expand sales at this dispensary to include adult use sales.

We operate two medical dispensaries in Morgantown, and Weston, West Virginia, supported by cultivation and processing operations in Huntington, West Virginia. As of May 2, 2022, Trulieve has been awarded and has acquired permits to operate up to a total of ten dispensaries in West Virginia.

Southwest Hub

Our southwest hub operations are anchored by our cornerstone market of Arizona. In Arizona, Trulieve holds a market-leading position, offering medical and adult use customers a wide range of branded and third-party products, including brand partner products. We also serve medical and adult use customers in California. Trulieve conducts wholesale operations in Nevada and Colorado, serving the medical and adult use markets in each state.

Recent Developments

~~Harvest Acquisition~~

On ~~May 10, 2021, we entered into~~January 28, 2022, the Company closed on a second tranche private placement of 8% Senior Secured Notes (the "2026 Notes") for aggregate gross proceeds of $75.6 million. The 2026 Notes bear interest at a rate of 8% per annum, payable semi-annually in equal installments until the maturity date, unless earlier redeemed or repurchased. The 2026 Notes mature on October 6, 2026, and may be redeemed in whole or in part, at the Company's option, at any time, on or after October 6, 2023, at the applicable redemption price set forth in the agreement.

On February 14, 2022, the Company completed an ~~Arrangement Agreement with Harvest Health & Recreation Inc.,~~acquisition whereby Trulieve acquired a ~~British Columbia corporation (“Harvest”~~cultivation operation from CP4 Group, LLC, in Phoenix, Arizona ("Watkins")~~, pursuant to~~. Total consideration was $27.5 million consisting of cash.

Components of Results of Operations

Revenue

We derive our revenue from cannabis products which we ~~will acquire~~manufacture, sell, and distribute to our customers by home delivery and in our dispensaries, as well as sales of cannabis products to wholesale customers in select markets.

Gross Profit

Gross profit includes the costs directly attributable to product sales and includes amounts paid to produce finished goods, such as flower, and concentrates, as well as packaging and other supplies, fees for services and processing, 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 margins over comparative periods as the regulatory environment changes.

Sales and Marketing

Sales and marketing expenses consist primarily of personnel costs related to the dispensaries as well as marketing programs for our products. As we continue to expand and open additional dispensaries, we expect our sales and marketing expenses to continue to increase.

General and Administrative

General and administrative expenses represent costs incurred at our corporate offices, primarily related to personnel costs, including salaries, incentive compensation, benefits, and other professional service costs, including legal and accounting. We expect to continue to invest considerably in this area to support our expansion plans and to support the increasing complexity of the cannabis business. Furthermore, we expect to continue to incur acquisition, transaction, and integration costs related to our expansion plans, and we anticipate a significant increase in compensation expenses related to recruiting and hiring talent, accounting, and legal and professional fees associated with becoming compliant with the Sarbanes-Oxley Act and other public company corporate expenses.

Depreciation and Amortization

Depreciation expense is calculated on a straight-line basis using the estimated useful life of each asset. Estimated useful life is determined by asset class and is reviewed on an annual basis and revised if necessary. Amortization expense is recognized using the straight-line method over the estimated useful life of the intangible assets. Useful lives for intangible assets are determined by type of asset with the initial determination of useful life derived during the valuation of the business combination. On an annual basis, the useful lives of each intangible class of assets are evaluated for appropriateness and adjusted if appropriate.

Other Income (Expense), Net

Other income (expense), net consist primarily of interest expense, interest income, loss on sale of non-operational assets, and the revaluation of derivative liabilities.

Provision for Income Taxes

Provision for income taxes is calculated using the asset and liability method. Deferred income tax assets and liabilities are determined based on enacted tax rates and laws for the years in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the ~~issued~~deferred tax assets will not be realized.

As we operate in the cannabis industry, we are subject to the limits of IRC Section 280E under which we are only allowed to deduct expenses directly related to the cost of producing the products or cost of production.

Results of Operations

Revenue


	Three Months Ended
	March 31,				Change
	2022		2021		%
	(in thousands)
Revenues, net of discounts	$	318,348	$	193,823	64%

Revenue for the three months ended March 31, 2022 was $318.3 million, an increase of $124.5 million, from $193.8 million for the three months ended March 31, 2021. The increase in revenue is the result of an increase in organic growth in retail sales due to an

increase in products available for purchase and ~~outstanding equity securities of Harvest. Under the terms~~overall patient count, increased retail locations, as well as expansion of the ~~Arrangement Agreement, shareholders~~wholesale business. During the period the Company made acquisitions such as Harvest and Keystone Shops, expanded business into new states such as Massachusetts and West Virginia, and opened additional dispensaries in existing markets such as Florida, all of ~~Harvest will receive 0.1170~~which contributed to the increase in revenue.

Cost of Goods Sold


	Three Months Ended
	March 31,						Change
	2022			2021			%
	(in thousands)
Cost of goods sold	$	140,198		$	58,559		139%
% of total revenues		44	%		30	%

Cost of goods sold for the three months ended March 31, 2022, was $140.2 million, an increase of $81.6 million, from $58.6 million for the three months ended March 31, 2021. Cost of goods sold increased due to expansion of the business and increased revenue. Cost of goods sold as a percentage of revenue increased from 30% for the three months ended March 31, 2021, to 44% for the three months ended March 31, 2022 due to increased depreciation related to capital expenditures to support business growth, and expansion into new markets which are not fully vertical, resulting in the sale of third party products, and therefore yield lower margin than our vertical markets.

Gross Profit


	Three Months Ended
	March 31,						Change
	2022			2021			%
	(in thousands)
Gross profit	$	178,150		$	135,264		32%
% of total revenues		56	%		70	%

Gross profit for the three months ended March 31, 2022, was $178.2 million, up $42.9 million or 32% from $135.3 million for the three months ended March 31, 2021. Gross profit as a percentage of revenue decreased from 70% for the three months ended March 31, 2021, to 56%, for the three months ended March 31, 2022. The decrease is due to increased wholesale business which is generally lower margin than retail sales, increased depreciation related to capital expenditures to support business growth, and expansion into new markets which are not fully vertical, resulting in the sale of third party products, and therefore yield lower margin than our vertical markets.

Sales and Marketing Expenses


	Three Months Ended
	March 31,						Change
	2022			2021			%
	(in thousands)
Sales and marketing expenses	$	72,862		$	44,558		64%
% of total revenues		23	%		23	%

Sales and marketing expense increased by 64% from $44.6 million for the three months ended March 31, 2021 to $72.9 million for the three months ended March 31, 2022. The increase in sales and marketing expense is the result of a ~~Subordinate Voting Share~~higher headcount for the year, as we continue to add additional dispensaries in efforts to maintain and further drive higher growth in sales and market share as well as expanding into new markets. This increased headcount resulted in higher personnel costs, which is the primary driver for the increase year over year.

General and Administrative Expenses


	Three Months Ended
	March 31,						Change
	2022			2021			%
	(in thousands)
General and administrative expenses	$	33,546		$	12,709		164%
% of total revenues		11	%		7	%

General and administrative expense for the three months ended March 31, 2022, increased by 164% to $33.5 million from $12.7 million for the three months ended March 31, 2021. The increase in general and administrative expense is the result of ~~Trulieve~~entering new markets, ramping our infrastructure to support growth initiatives, continued acquisitions resulting in additional transaction and integration costs and increased go-forward compliance costs. General and administrative expenses included acquisition and transaction costs of $3.3 million for ~~each Harvest~~the three months ended March 31, 2022.

Depreciation and Amortization Expenses


	Three Months Ended
	March 31,						Change
	2022			2021			%
	(in thousands)
Depreciation and amortization expenses	$	29,305		$	5,434		439%
% of total revenues		9	%		3	%

Depreciation and amortization expense for the three months ended March 31, 2022, was $29.3 million, up $23.9 million from $5.4 million for the three months ended March 31, 2021. The overall increase in depreciation and amortization expenses was due to investment in infrastructure that resulted in a higher number of capitalized assets from the additional dispensaries and cultivation facilities. Furthermore, amortization expense increased due to acquisitions and acquired intangibles.

Impairment and Disposal of Long-lived Assets


	Three Months Ended
	March 31,					Change
	2022			2021		%
	(in thousands)
Loss on impairment and disposal of long-lived assets	$	13,780		$	—	100%
% of total revenues		4	%		—

Loss on impairment and disposal of long-lived assets for the quarter ended March 31, 2022, increased to $13.8 million from zero for the three months ended March 31, 2021. The increase is primarily due to the write off of certain leases due to market changes in our Southeast hub and the disposal of certain long-lived assets.

Total Other Expense, Net


	Three Months Ended
	March 31,						Change
	2022			2021			%
	(in thousands)
Total other expense, net	$	18,823		$	7,936		137%
% of total revenues		6	%		4	%

Total other expense, net for the three months ended March 31, 2022, was expense of $18.8 million, an increase of $10.9 million from expense of $7.9 million for the three months ended March 31, 2021. The overall increase is primarily the result of an increase in interest expense related to additional finance leases to support business growth and loss on disposal of non-operational assets during the three months ended March 31, 2022.

Provision for Income Taxes


	Three Months Ended
	March 31,				Change
	2022		2021		%
	(in thousands)
Provision for income taxes	$	42,316	$	34,549	22%

Income tax expense for the three months ended March 31, 2022, increased to $42.3 million from $34.5 million for the three months ended March 31, 2021. Under IRC Section 280E, cannabis companies are only allowed to deduct expenses that are directly related to production of the products. The Company's quarterly tax provision is subject to change resulting from several factors, including regulations and administrative practices, principles, and interpretations related to tax. The increase in income tax expense is primarily due to the increase in gross profit as a result of increased revenue.

Net Income


	Three Months Ended March 31,
	2022			2021		Change
	(in thousands)
Net (loss) income and comprehensive income	$	(32,482	)	$	30,078	-208%

Net loss for the three months ended March 31, 2022, was $32.5 million a decrease of $62.6 million, from net income of $30.1 million for the three months ended March 31, 2021. The decrease was driven primarily by lower gross margin, increased sales and marketing and general and administrative costs related to the expanded organization, losses on disposal of long-lived assets, increased other expense, and increased tax expense, as due to the restrictions of 208E, the Company is not able to deduct many of their operating expenses for tax purposes.

Liquidity and Capital Resources

Sources of Liquidity

Since our inception, we have funded our operations and capital spending through cash flows from product sales, loans from affiliates and entities controlled by our affiliates, third-party debt, and proceeds from the sale of our capital stock. We are generating cash from sales and are deploying our capital reserves to acquire and develop assets capable of producing additional revenues and earnings over both the immediate and long term to support our business growth and expansion.Our current principal sources of liquidity are our cash and cash equivalents provided by our operations and debt and equity offerings. Cash and cash equivalents consist primarily of cash on deposit with banks and money market funds. Cash and cash equivalents were $267.2 million as of March 31, 2022.

We believe our existing cash balances will be sufficient to meet our anticipated cash requirements from the report issuance date through at least the next twelve months.

Our primary uses of cash are for working capital requirements, capital expenditures and debt service payments. Additionally, from time to time, we may use capital for acquisitions and other investing and financing activities. Working capital is used principally for our personnel as well as costs related to the growth, manufacture, and production of our products. Our capital expenditures consist primarily of additional facilities and dispensaries, improvements in existing facilities and product development.

To the extent additional funds are necessary to meet our long-term liquidity needs as we continue to execute our business strategy, we anticipate that they will be obtained through incurrence of additional indebtedness, additional equity financings or a combination of these potential sources of funds. There can be no assurance that we will be able to obtain additional funds on terms acceptable to us, on a timely basis, or at all. The failure to obtain sufficient funds on acceptable terms when needed could have a material adverse effect on the results of operations and financial condition.

Cash Flows

The table below highlights our cash flows for the periods indicated.


	Three Months Ended March 31,
	2022			2021
	(in thousands)
Net cash provided by operating activities	$	45,147		$	59,591
Net cash used in investing activities		(83,828	)		(53,362	)
Net cash provided by financing activities		72,248			9,508
Net increase in cash and cash equivalents		33,567			15,737
Cash, cash equivalents, and restricted cash, beginning of period		233,659			146,713
Cash, cash equivalents, and restricted cash, end of period	$	267,226		$	162,450

Cash Flow from Operating Activities

Net cash provided by operating activities was $45.1 million for the three months ended March 31, 2022, a decrease of $14.4 million, compared to $59.6 million net cash provided by operating activities during the three months ended March 31, 2021. This is primarily due to the current net loss versus net income in the prior year period, and increases in net working capital requirements, including inventory, as we ramp the business to support our growth.

Cash Flow from Investing Activities

Net cash used in investing activities was $83.8 million for the three months ended March 31, 2022, an increase of $30.5 million, compared to the $53.4 million net cash used in investing activities for the three months ended March 31, 2021. The increase is primarily due to the acquisition completed during the period.

Cash Flow from Financing Activities

Net cash provided by financing activities was $72.2 million for the three months ended March 31, 2022, an increase of $62.7 million, compared to the $9.5 million net cash provided by financing activities for the three months ended March 31, 2021. The increase was primarily due to proceeds from the closing of the second tranche of the Senior Secured Notes.

Funding Sources

Private Placement Note Liabilities - “June Warrants” and “November Warrants”

On June 18, 2019, we completed an offering using our Canadian prospectus of 70,000 units (the “June Units”), comprised of an aggregate principal amount of US$70.0 million of 9.75% senior secured notes maturing in 2024 (the “June Notes”) and an aggregate amount of 1,470,000 subordinate voting share ~~(or equivalent) held (the “Exchange Ratio”~~warrants (each individual warrant being a “June Warrant”)~~, representing total consideration of approximately $2.1 billion based on the closing~~ at a price of US$980 per June Unit for gross proceeds of US$68.6 million. Each June Unit was comprised of one June Note issued in denominations of $1,000 and 21 June Warrants.

On November 7, 2019, we completed an offering using our ~~Subordinate Voting Shares~~Canadian prospectus of 60,000 units (the “November Units”), comprised of an aggregate principal amount of US$60.0 million of 9.75% senior secured notes maturing in 2024 (the “November Notes”) and an aggregate amount of 1,560,000 subordinate voting share warrants (each individual warrant being a “November Warrant”) at a price of US$980 per November Unit for gross proceeds of US$61.1 million. Each November Unit was comprised of one November Note issued in denominations of $1,000 and 26 November Warrants.

Private Placement Note Liabilities - Secured Promissory Notes

On October 6, 2021, the Company closed on ~~May 7, 2021.~~a private placement of 8% Senior Secured Notes (the "“Notes") for aggregate gross proceeds of $350.0 million and net proceeds of $342.6 million. The ~~Exchange Ratio is subject~~Notes were issued at 100% face value, bear an interest rate of 8% per annum payable semi-annually in equal installments until the maturity date, unless earlier redeemed or repurchased. The Notes mature on October 6, 2026 and may be redeemed in whole or in part, at any time from time to ~~adjustment~~time, on or after October 6, 2023 at the applicable redemption price set forth in the ~~event that Harvest completes certain interim period refinancing measures, with~~trust indenture dated as of June 18, 2019 (the “Base Indenture”), as supplemented by a supplemental trust indenture dated as of October 6, 2021 (the “Supplemental Indenture” and, the ~~potential adjustment in proportion to the incremental costs from such financing relative to the transaction value. The Transaction was unanimously approved~~Base Indenture as supplemented by the ~~boards of directors of each of Trulieve~~Supplemental Indenture, the “Indenture”), by and ~~Harvest. Harvest shareholders holding more than 50%~~between the Company and Odyssey Trust Company, as trustee. The Company used a portion of the ~~voting power~~net proceeds to redeem certain outstanding indebtedness of Harvest, and intends to use the remaining net proceeds for capital

expenditures and other general corporate purposes. The Indenture governing the Notes contains covenants that, among other things, limit the ability of the ~~issued~~Company and ~~outstanding Harvest Shares have entered into voting support agreements with Trulieve to vote in favor of the transaction.~~

The Arrangement Agreement provides for certain customary provisions, including covenants in respect of non-solicitation of alternative transactions, a right to match superior proposals, US$100 million reciprocal termination fees under certain circumstances and reciprocal expense reimbursement provisions in certain circumstances. The Transaction is subjectits restricted subsidiaries to, among other things, ~~the approval~~declare or pay dividends or make certain other payments; purchase, redeem or otherwise acquire or retire for value any equity interests or otherwise make any restricted payments; conduct certain asset sales or consolidate, merge or transfer all or substantially all of the ~~necessary approvals~~assets of the ~~Supreme Court~~Company and its subsidiaries on a consolidated basis; make certain restricted investments, incur certain indebtedness or grant certain liens, or enter into certain affiliate transactions. These covenants are subject to a number of ~~British Columbia,~~other limitations and exceptions as set forth in the ~~approval~~Indenture.

On January 28, 2022, the Company closed on a second tranche private placement of ~~two-thirds~~8% Senior Secured Notes for aggregate gross proceeds of $75.6 million. The Notes bear an interest rate of 8% per annum payable semi-annually in equal installments until the maturity date, unless earlier redeemed or repurchased. The Notes will mature on October 6, 2026, and may be redeemed in whole or in part, at the Company's option, at any time, on or after October 6, 2023, at the application redemption price set forth in the Indenture.

Balance Sheet Exposure

As of March 31, 2022, the entirety of our condensed consolidated balance sheet is exposed to U.S. cannabis-related activities. We believe our operations are in material compliance with all applicable state and local laws, regulations, and licensing requirements in the states in which we operate. However, cannabis remains illegal under U.S. federal law. Substantially all our revenue is derived from U.S. cannabis operations. For information about risks related to U.S. cannabis operations, please refer to the “Risk Factors” section of this Quarterly Report on Form 10-Q and "Part I, Item 1A - Risk Factors" in our 2021 Form 10-K.

Contractual Obligations

As of March 31, 2022, we had the following contractual obligations to make future payments, representing contracts and other commitments that are known and committed:


	<1 Year		1 to 3 Years		3 to 5 Years		>5 Years		Total
	(in thousands)
Accounts payable and accrued liabilities	$	109,810	$	—	$	—	$	—	$	109,810
Notes payable		9,543		2,525		15		930		13,013
Private placement notes		1,874		130,000		425,000		—		556,874
Operating lease liabilities		23,079		44,439		42,739		113,321		223,578
Finance lease liabilities		13,043		27,877		22,816		44,327		108,063
Construction finance liabilities		22,892		47,341		48,980		421,629		540,842
Total	$	180,241	$	252,182	$	539,550	$	580,207	$	1,552,180

Off-Balance Sheet Arrangements

As of the ~~votes cast by Harvest shareholders at its special meeting~~date of ~~shareholders, receipt~~this filing, we do not have any off-balance-sheet arrangements that have, or are reasonably likely to have, a current or future effect on the results of ~~the required regulatory approvals~~operations or financial condition of, including, and ~~other customary conditions of closing. Approval of our shareholders is not required.~~without limitation, such considerations as liquidity and capital resources.

~~Other Developments~~

~~On July 8, 2021, we closed the acquisition of Keystone Shops, which holds a dispensary license and operates dispensaries in Philadelphia, Devon, and King of Prussia, Pennsylvania.~~

On July 2 and June 28, 2021, we closed of the acquisition of certain assets of PCMV and Nature’s Remedy, respectively, including the rights to a Provisional Marijuana Retailer License from the Massachusetts Cannabis Control Commission for an adult-use marijuana retailer in Framingham and a Final Marijuana Retailer License from the Cannabis Control Commission for an adult-use marijuana retailer in Worcester, and accompanying leasehold interests, permits and entitlements.

~~On June 10, 2021, at the annual general meeting of our shareholders, two new directors, Giannella Alvarez and Jane Morreau, were elected to our Board of Directors.~~

On June 9, 2021, we announced the closing of the acquisition of Solevo Wellness West Virginia LLC and its three West Virginia dispensary permits, including two permits in Morgantown and one in Parkersburg.

~~On June 3, 2021, Life Essence opened its first dispensary in the Commonwealth of Massachusetts in the City of Northampton. The dispensary serves both adult-use and medical marijuana patients.~~

~~On May 6, 2021, we announced the closing of the acquisition of Mountaineer Holding LLC, including its cultivation permit and two dispensary permits.~~

On April 12, 2021, we announced the closing of an underwritten, marketed public offering of 5,750,000 Subordinate Voting Shares at a public offering price of C$50.00 per share ($39.63 per share after giving effect to the conversion rate published by Bloomberg at 4:30pm ET on April 7, 2021 to convert Canadian dollars to U.S. dollars). The gross proceeds from the offering, before deducting underwriting discounts and commissions and offering expenses payable by us, were C$287.5 million (or $227.9 million after giving effect to the conversion rate denoted above).

~~Management’s~~Management's Use of Non-GAAP Measures

Our management uses financial measures that are not in accordance with generally accepted accounting principles in the ~~United States,~~U.S., or GAAP, in addition to financial measures in accordance with GAAP to evaluate our operating results. These non-GAAP financial measures should be considered supplemental to, and not a substitute for, our reported financial results prepared in accordance with GAAP. Adjusted EBITDA is a financial measure that is not defined under GAAP. Our management uses this non-GAAP financial measure and believes it enhances an investor’s understanding of our financial and operating performance from period to period because it excludes certain material non-cash items and certain other adjustments management believes are not reflective of our ongoing operations and performance. Adjusted EBITDA excludes from net income as reported interest, ~~share-based compensation, tax,~~provision for income taxes, and depreciation and amortization to arrive at EBITDA. This is then adjusted for items that do not represent the operations of the core business such as inventory step-up for fair value adjustments in purchase accounting, integration and transition costs, acquisition and transaction costs, ~~fair value step-up~~other non-recurring costs, expenses related to the COVID-19 pandemic, impairments and disposals of ~~inventory from acquisitions, COVID related expenses, non-cash expenses~~long-lived assets, the results of entities consolidated as VIEs but not legally controlled and operated by the Company, and other ~~income.~~ income and expense items. Integration and transition costs include those costs related to integration of acquired entities and to transition major systems or processes. Acquisition and transaction costs relate to specific transactions such as acquisitions whether contemplated or completed and regulatory filings and costs related to equity and debt issuances. Other non-recurring costs includes miscellaneous items which are not expected to reoccur

frequently such as inventory adjustments related to specific issues and unusual litigation. Adjusted EBITDA for the period ended March 31, 2021, has been adjusted to reflect this current definition. Additionally, certain reclassifications have been made to Adjusted EBITDA for prior periods to conform to the current period presentation.

Trulieve reports ~~adjusted~~Adjusted EBITDA to help investors assess the operating performance of the ~~Corporation’s~~Company’s business. The financial measures noted above are metrics that have been adjusted from the GAAP net income measure in an effort to provide readers with a normalized metric in making comparisons more meaningful across the cannabis industry, as well as to remove non-recurring, irregular and one-time items that may otherwise distort the GAAP net income measure.

As noted above, our Adjusted EBITDA is not prepared in accordance with GAAP, and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP. There are a number of limitations related to the use of Adjusted EBITDA rather than net income, which is the most directly comparable financial measure calculated and presented in accordance with GAAP. Because of these limitations, we consider, and you should consider, Adjusted EBITDA together with other operating and financial performance measures presented in accordance with GAAP. A reconciliation of Adjusted EBITDA from net income, the most directly comparable financial measure calculated in accordance with GAAP, has been included ~~herein.~~

~~Components~~herein immediately following our discussion of ~~Results of Operations~~

~~Revenue~~

~~We derive our revenue from cannabis products which we manufacture, sell, and distribute to our customers by home delivery and in our dispensaries.~~

~~Gross Profit~~

~~Sales and Marketing~~

~~General and Administrative~~

“Adjusted EBITDA”.~~Depreciation and Amortization~~

~~Other Income (Expense), Net~~Adjusted EBITDA

~~Interest and other income (expense), net consist primarily of interest income and interest expense and the impact of the revaluation of the debt warrants.~~


	Three Months Ended March 31,
	2022		2021		Change
	(in thousands)
Adjusted EBITDA	$	105,544	$	90,797	16%

~~Provision for Income Taxes~~

~~Provision for income taxes is calculated using the asset and liability method. Deferred income tax assets and liabilities are determined based on enacted tax rates and laws~~Adjusted EBITDA for the years in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

~~Results of Operations~~

~~Revenue~~

Three Months Ended

Six Months Ended

June 30,

Change

June 30,

Change

2021

2020

%

2021

2020

%

(dollars in thousands)

(dollars in thousands)

Revenues, net of discounts

$
215,122

$
120,765

78%

$
408,945

$
216,821

89%

~~Revenue for the three~~Three months ended ~~June 30, 2021~~March 31, 2022 was ~~$215.1~~$105.5 million, an increase of ~~$94.3~~$14.7 million from ~~$120.8~~$90.8 million for the three months ended June 30, 2020. Revenue for the six months ended June 30, 2021 was $408.9 million, an increase of $192.1 million, from $216.8 million for the six months ended June 30, 2020. The increase in revenue is the result of an increase in organic growth in retail sales due to an increase in products available for purchase and overall patient count. Between June 30, 2021 and June 30, 2020, we opened or acquired forty dispensaries, which also contributed to the increased retail sales year over year.

~~Cost of Goods Sold~~

Three Months Ended

Six Months Ended

June 30,

Change

June 30,

Change

2021

2020

%

2021

2020

%

(dollars in thousands)

(dollars in thousands)

Cost of goods sold

$
70,639

$
30,233

134%

$
129,198

$
52,459

146%

% of total revenues

33
%

25
%

32
%

24
%

Cost of goods sold for the three months ended June 30, 2021 was $70.6 million, an increase of $40.4 million, from $30.2 million for the three months ended June 30, 2020. Cost of goods sold for the six months ended June 30, 2021 was $129.2 million, an increase of $76.7 million, from $52.5 million for the six months ended June 30, 2020, due to an increase in retail sales as a result of an increase in dispensaries and patient count. Cost of goods sold as a percentage of revenue increased from 24% for the six months ended June 30, 2020 to 32% for the six months ended June 30, 2021 due to our expansion into new markets, timing of inventory flow-through and product mix.

~~Gross Profit~~

Three Months Ended

Six Months Ended

June 30,

Change

June 30,

Change

2021

2020

%

2021

2020

%

(dollars in thousands)

(dollars in thousands)

Gross profit

$
144,483

$
90,532

60%

$
279,747

$
164,362

70%

% of total revenues

67
%

75
%

68
%

76
%

Gross profit for the three months ended June 30, 2021 was $144.5 million, up 60% from $90.5 million for the three months ended June 30, 2020. Gross profit for the six months ended June 30, 2021 was $279.7 million, up $115.4 million or 70% from $164.4 million for the six months ended June 30, 2020, as a result of an increase in retail sales due to the additional number of dispensaries, products available for sale and patient count. Gross profit as a percentage of revenue decreased from 76% for the six months ended June 30, 2020 to 68%, for the six months ended June 30,March 31, 2021. ~~The decrease is caused by expansion into new markets, timing of inventory flow-through, product mix and macro-economic factors centered around prices and labor.~~

~~Sales and Marketing Expenses~~

Three Months Ended

Six Months Ended

June 30,

Change

June 30,

Change

2021

2020

%

2021

2020

%

(dollars in thousands)

(dollars in thousands)

Sales and marketing expenses

$
46,576

$
27,009

72%

$
91,135

$
49,873

83%

% of total revenues

22
%

22
%

22
%

23
%

Sales and marketing expense increased by 72% from $27.0 million for the three months ended June 30, 2020 to $46.6 million for the three months ended June 30, 2021. Sales and marketing expense increased from $49.9 million for the six months ended June 30, 2020, to $91.1 million for the six months ended June 30, 2021, an increase of $41.2 million, or 83%. The increase in sales and marketing expense is the result of a higher head count for the year, as we continue to add additional dispensaries in efforts to maintain and further drive higher growth in sales and market share as well as expanding into new markets. This increased head count resulted in higher personnel costs, which is the primary driver for the increase year over year.

~~General and Administrative Expenses~~

Three Months Ended

Six Months Ended

June 30,

Change

June 30,

Change

2021

2020

%

2021

2020

%

(dollars in thousands)

(dollars in thousands)

General and administrative expenses

$
14,942

$
7,936

88%

$
27,650

$
14,195

95%

% of total revenues

7
%

7
%

7
%

7
%

General and administrative expense for the three months ended June 30, 2021 increased by 88% to $14.9 million from $7.9 million for the three months ended June 30, 2020. General and administrative expense for the six months ended June 30, 2021 increased to $27.7 million from $14.2 million for the six months ended June 30, 2020, an increase of $13.5 million, or 95%. The increase in general and administrative expense is the result of entering new markets, ramping our infrastructure to support growth initiatives, continued acquisitions resulting in additional transaction and integration costs and go-forward compliance.

~~Depreciation and Amortization Expense~~

Three Months Ended

Six Months Ended

June 30,

Change

June 30,

Change

2021

2020

%

2021

2020

%

(dollars in thousands)

(dollars in thousands)

Depreciation and amortization expenses

$
6,667

$
3,104

115%

$
12,101

$
5,298

128%

% of total revenues

3
%

3
%

3
%

2
%

Depreciation and amortization expense for the three months ended June 30, 2021 was $6.7 million, up $3.6 million from $3.1 million for the three months ended June 30, 2020. Depreciation and amortization expenses for the six months ended June 30, 2021 was $12.1 million, up $6.8 million, from $5.3 million for the six months ended June 30, 2020. The overall increase in depreciation and amortization

expenses was due to investment in infrastructure that resulted in a higher number of capitalized assets from the additional dispensaries and cultivation facilities. Furthermore, amortization expense increased due to acquisitions and acquired intangibles.

~~Total Other Expense, Net~~

Three Months Ended

Six Months Ended

June 30,

Change

June 30,

Change

2021

2020

%

2021

2020

%

(dollars in thousands)

(dollars in thousands)

Total other expense, net

$
6,316

$
10,271

(39%)

$
14,253

$
11,285

26%

% of total revenues

3
%

9
%

3
%

5
%

Total other income (expense), net for the three months ended June 30, 2021 was expense of $6.3 million, a decrease of $4.0 million from expense of $10.3 million for the three months ended June 30, 2020. Total other expense, net for the six months ended June 30, 2021 was expense of $14.3 million, an increase of $3.0 million from expense of $11.3 million for the six months ended June 30, 2020. The overall increase is the result of an increase in interest expense related to additional finance leases to support business growth, partially offset by $1.0 million revaluation of debt warrants for the six months ended June 30, 2020.

On December 10, 2020, the Company entered into a Supplemental Warrant Indenture with Odyssey Trust Company pursuant to which it amended the terms of the issued and outstanding subordinate voting share purchase warrants of the Company (the “Public Warrants”) to convert the exercise price of the Public Warrants to $13.47 per share, the U.S. dollar equivalent of the Canadian dollar exercise price of the Public Warrants of C$17.25. As a result of this, the Public Warrants converted to equity in December 2020, eliminating revaluation expense in future periods.

~~Provision for Income Taxes~~

Three Months Ended

Six Months Ended

June 30,

Change

June 30,

Change

2021

2020

%

2021

2020

%

(dollars in thousands)

(dollars in thousands)

Provision for income taxes

$
29,102

$
23,274

25%

$
63,650

$
41,168

55%

Income tax expense for the three months ended June 30, 2021 increased to $29.1 million from $23.3 million for the three months ended June 30, 2020. Income tax expense for the six months ended June 30, 2021 increased to $63.7 million from $41.2 million for the six months ended June 30, 2020, an increase of $22.5 million, or 55% as a result of a $115.4 million increase in gross profit for the same periods. Under IRC Section 280E, Cannabis Companies are only allowed to deduct expenses that are directly related to production of the products. The increase in income tax expense is due to the increase in gross profit as a result of the increase in retail sales partially offset by an increase in production costs as a percentage of revenue.

~~Net Income~~

Three Months Ended
June 30,

Six Months Ended
June 30,

2021

2020

Change

2021

2020

Change

(dollars in thousands)

(dollars in thousands)

Net income and comprehensive income

$
40,880

$
18,938

116%

$
70,958

$
42,543

67%

Net income for the three months ended June 30, 2021 was $40.9 million, an increase of $21.9 million, from $18.9 million for the three months ended June 30, 2020. Net income for the six months ended June 30, 2021 was $71.0 million, an increase of $28.4 million or 67%, from $42.5 million for the six months ended June 30, 2020. The increase in net income was driven primarily by the opening of additional dispensaries, an increase in products available for purchase and overall patient count. This net increase to net income was offset by cost of goods sold which was driven by timing of inventory flow-through and product mix. In addition, increases in sales and marketing and general and administrative expenses such as personnel costs, dispensary expenses, depreciation, interest expense, costs of entering new markets, ramping infrastructure, acquisition and transaction costs, integration costs, and go-forward compliance, all contributed to the offset in net income. Income taxes also significantly increased period over period due to higher profit. Lastly, other

expense increased as a result of the revaluation of our debt warrants and an increase in interest expense for the six months ended June 30, 2021. As previously noted, the revaluation is no longer applicable for the six months ended June 30, 2021.

~~Adjusted EBITDA~~

Three Months Ended
June 30,

Six Months Ended
June 30,

2021

2020

Change

2021

2020

Change

(dollars in thousands)

(dollars in thousands)

Adjusted EBITDA

$
94,872

$
61,394

55%

$
185,668

$
109,944

69%

Adjusted EBITDA for the three months ended June 30, 2021 was $94.9 million, an increase of $33.5 million from $61.4 million for the three months ended June 30, 2020. Adjusted EBITDA for the six months ended June 30, 2021, was $185.7 million, an increase of $75.8 million or 69%, from $109.9 million for the six months ended June 30, 2020. The following table presents a reconciliation of GAAP net income to non-GAAP Adjusted EBITDA, for each of the periods presented:

Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

2021

2020

(dollars in thousands)

(dollars in thousands)

Net income and comprehensive income

$
40,880

$
18,938

$
70,958

$
42,543

Add impact of:

Depreciation and amortization

6,667

3,104

12,101

5,298

Depreciation included in cost of goods sold

5,020

2,386

8,687

4,891

Interest expense, net

6,649

5,302

14,548

11,214

Provision for income taxes

29,102

23,274

63,650

41,168

EBITDA

88,318

53,004

169,944

105,114

Share-based compensation

744

462

1,485

1,685

Other expense (income), net

(333
)

4,969

(295
)

71

Acquisition and transaction costs

4,453

—

6,495

—

Inventory step up, fair value

—

—

2,528

—

COVID related expenses

1,690

2,959

5,511

3,074

Total adjustment

6,554

8,390

15,724

4,830

Adjusted EBITDA

$
94,872

$
61,394

$
185,668

$
109,944

~~Liquidity and Capital Resources~~

~~Sources of Liquidity~~

Since our inception, we have funded our operations and capital spending through cash flows from product sales, loans from affiliates and entities controlled by our affiliates, third-party debt, and proceeds from the sale of our capital stock. We are generating cash from sales and are deploying our capital reserves to acquire and develop assets capable of producing additional revenues and earnings over both the immediate and long term to support our business growth and expansion. Our current principal sources of liquidity are our cash and cash equivalents provided by our operations and debt and equity offerings. Cash and cash equivalents consist primarily of cash on deposit with banks and money market funds. Cash and cash equivalents were $289.2 million as of June 30, 2021.

~~We believe our existing cash balances will be sufficient to meet our anticipated cash requirements from the report issuance date through at least the next twelve months.~~


	Three Months Ended March 31,
	2022			2021
	(in thousands)
Net (loss) income and comprehensive (loss) income attributable to common shareholders	$	(31,975	)	$	30,078
Add impact of:
Interest expense		17,877			7,899
Provision for income taxes		42,316			34,549
Depreciation and amortization		29,305			5,434
Depreciation included in cost of goods sold		10,692			3,667
EBITDA		68,215			81,627
Inventory step up, fair value		385			2,528
Integration and transition costs		5,274			390
Acquisition and transaction costs		3,297			1,652
Share-based compensation		4,564			741
Other non-recurring costs		8,629			—
COVID related expenses		431			3,822
Loss on impairment and disposal of long-lived assets		13,780			—
Loss on divestment and sale of non-operating assets		2,681			—
Results of entities not legally controlled		23			—
Other (income) expense, net		(915	)		37
Change in fair value of derivative liabilities - warrants		(820	)		—
Total adjustments		37,329			9,170
Adjusted EBITDA	$	105,544		$	90,797

~~The following table presents our cash and outstanding debt as of the dates indicated:~~

Six Months Ended June 30,

Year Ended
December 31,

2021

2020

(dollars in thousands)

Cash and cash equivalents

$
289,238

$
146,713

Outstanding debt:

Notes payable

6,000

6,000

Notes payable - related party

12,000

12,011

Private placement notes

130,000

130,000

Operating lease liability

32,964

29,604

Finance lease liability

44,417

38,935

Construction finance liability

$
90,263

$
82,047

~~Cash Flows~~

~~The table below highlights our cash flows for the periods indicated.~~

Six Months Ended June 30,

2021

2020

(dollars in thousands)

Net cash provided by operating activities

$
49,194

$
77,671

Net cash used in investing activities

(136,688
)

(46,431
)
Net cash provided by financing activities

230,019

27,260

Net increase in cash and cash equivalents

142,525

58,500

Cash and cash equivalents, beginning of period

146,713

91,813

Cash and cash equivalents, end of period

$
289,238

$
150,313

~~Cash Flow from Operating Activities~~

Net cash provided by operating activities was $49.2 million for the six months ended June 30, 2021, a decrease of $28.5 million, compared to $77.7 million net cash provided by operating activities during the six months ended June 30, 2020. This is primarily due to increases in net working capital requirements, including inventory, as we ramp the business to support our growth.

~~Cash Flow from Investing Activities~~

Net cash used in investing activities was $136.7 million for the six months ended June 30, 2021, an increase of $90.3 million, compared to the $46.4 million net cash used in investing activities for the six months ended June 30, 2020. The increase is due to the increase of property and equipment purchases for the construction of additional dispensaries and continued expansion of our cultivation and processing facilities, as well as acquisitions completed during the period.

~~Cash Flow from Financing Activities~~

Net cash provided by financing activities was $230.0 million for the six months ended June 30, 2021, an increase of $202.7 million, compared to the $27.3 million net cash provided by financing activities for the six months ended June 30, 2020. The increase was primarily due to proceeds from the closing of an underwritten, marketed public offering of 5,750,000 Subordinate Voting Shares

resulting in gross proceeds, before deducting underwriting discounts and commissions and offering expenses payable by us, of $227.9 million (after giving effect to the conversion rate on April 7, 2021).

~~Funding Sources~~43

~~Promissory Notes~~

In 2017, we entered into three unsecured promissory notes with a 12% annual interest rate, which was amended in January 2019 to extend the maturity by three years to 2022. The balance of these notes is $4.0 million. On December 17, 2017, we entered into a promissory note with a 12% annual interest rate and a balance of $2.0 million, which will mature December 2021.

~~Related Party Promissory Notes~~

In February 2019, we entered into a 24-month unsecured loan with an 8% annual interest rate with Benjamin Atkins, a former director and shareholder of Trulieve for $257,337. In March 2018, the Company entered into a 24-month unsecured loan with an 8% annual interest rate with Benjamin Atkins for $158,900. In June 2018, the Company entered into a 24-month unsecured loan with an 8% annual interest rate with Benjamin Atkins for $262,010. In November 2018, the Company entered into two separate 24-month unsecured loans each with an 8% annual interest rate with a former director and shareholder for a total of $474,864. As of March 31, 2021, all loans with Benjamin Atkins have matured and been paid in full.

In May 2018, the Company entered into two separate unsecured promissory notes (the “Traunch Four Note” and the “Rivers Note”) for a total of $12.0 million. The Traunch Four Note is held by Traunch Four, LLC, an entity whose direct and indirect owners include Kim Rivers, the Chief Executive Officer and Chair of the Board, as well as Thad Beshears, Richard May, who are each directors of Trulieve, George Hackney, a former director of Trulieve, and certain of Richard May’s family members. The Rivers Note is held by Kim Rivers. Each promissory note has a 24-month maturity and 12% annual interest rate. The two unsecured promissory notes were amended in March 2021 to extend the maturity one year to May 2022, all other terms remain unchanged.

~~Balance Sheet Exposure~~

At June 30, 2021 and 2020, the entirety of our balance sheet is exposed to U.S. cannabis-related activities. We believe our operations are in material compliance with all applicable state and local laws, regulations, and licensing requirements in the states in which we operate. However, cannabis remains illegal under U.S. federal law. Substantially all our revenue is derived from U.S. cannabis operations. For information about risks related to U.S. cannabis operations, please refer to “Risk Factors” in this prospectus.

~~Contractual Obligations~~

~~At June 30, 2021, we had the following contractual obligations to make future payments, representing contracts and other commitments that are known and committed:~~

<1 Year

1 to 3 Years

3 to 5 Years

>5 Years

Total

(dollars in thousands)

Accounts payable and accrued liabilities

$
45,579

$
—

$
—

$
—

$
45,579

Notes payable

4,667

1,333

—

—

6,000

Notes payable - related party

12,000

—

—

—

12,000

Private placement notes

—

—

130,000

—

130,000

Operating lease liability

3,141

12,196

11,241

18,577

45,155

Finance lease liability

4,117

15,777

14,009

28,166

62,069

Construction finance liability

$
12,217

$
38,700

$
27,605

$
167,980

$
246,502

~~Off-Balance Sheet Arrangements~~

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

There have been no material changes to our market risk disclosures as set forth in Part II Item 7A of our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

Item 4. Controls and Procedures

~~a. Conclusion Regarding~~

Material Weakness in Internal Control Over Financial Reporting

Evaluation of Internal Controls Over Financial Reporting

We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed under the ~~Effectiveness~~Securities Exchange Act of ~~Disclosure Controls~~1934, as amended (the “Exchange Act”), is recorded, processed, summarized and ~~Procedures.~~

~~Our~~reported within the specified time periods and accumulated and communicated to our management, ~~with the participation of the~~including our principal executive officer and principal accounting officer, as appropriate to allow timely decisions regarding disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and management necessarily was required to apply its judgment in evaluating the risk related to controls and procedures.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial ~~officer, has~~reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

Management of the Company, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of ~~our~~its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of ~~the end of the period covered by this quarterly report. Based on this evaluation, the principal executive officer~~March 31, 2022. Our Chief Executive Officer and ~~principal financial officer~~Chief Financial Officer have concluded that, ~~these~~due to the material weaknesses identified in the prior period which are currently in the process of being remediated, as of March 31, 2022, we did not maintain effective disclosure controls and procedures ~~are effective~~because of the material weaknesses in internal control as described in Item 9A. Controls and ~~designed to ensure~~Procedures in the 2021 Annual Report on Form 10-K, filed with the SEC on March 30, 2022.

Notwithstanding the material weaknesses described in the 2021 Annual Report on Form 10-K, we have concluded that the ~~information required~~condensed consolidated financial statements included in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with U.S. GAAP.

Management’s Remediation Measures

Management is committed to ~~be disclosed~~maintaining a strong internal control environment. In response to the identified material weaknesses in ~~our reports filed or submitted under~~ the ~~Exchange Act is recorded, processed, summarized, and reported within~~overall control environment, management, with the ~~requisite time periods.~~oversight of the Audit Committee of the Board of Directors, has taken actions toward the remediation of the respective material weakness in internal control over financial reporting as outlined below.

~~b. Changes in Internal Control Over~~

•

Added additional positions including Chief Accounting Officer (“CAO”), Executive Director of Financial Reporting, Tax Director, and Assistant Corporate and Regional Controllers, among others, to provide enhanced oversight and technical experience in certain areas important to financial reporting.

•

Engaged third party experts to assist management in assessing current processes and designing improved processes and controls for the consolidated Company.

•

Added a Chief Technology Officer (“CTO”) to enhance the information technology environment including automation of processes and controls and finalization of an ongoing SAP implementation.

•

Reviewed business processes surrounding leases, acquisitions, and other complex financial reporting areas to identify and implement enhanced procedures related to internal controls.

•

Additional program change management controls over information technology systems implemented and are in the process of adding additional access and segregation of duties controls over financial relevant systems.

~~There was no change in~~While significant progress has been made to enhance our internal control over financial reporting, ~~(as defined~~we are still in ~~Rules 13a-15(f)~~the process of building and ~~15d-15(f) under~~enhancing our processes, procedures, and controls. Additional time is required to complete the ~~Exchange Act) identified~~remediation of the material

weaknesses and the assessment to ensure the sustainability of these remediation actions. We believe the above actions as well as those being implemented currently, when complete, will be effective in ~~connection with~~ the ~~evaluation~~remediation of ~~our~~the material weaknesses described above.

Changes in Internal Controls Over Financial Reporting

There have been no changes in internal ~~control performed~~controls over financial reporting during the ~~last fiscal quarter~~ three months ended March 31, 2022, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. Management believes these actions will help remediate internal control deficiencies related to the Company’s financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act).

PART II - OTHER INFORMATION

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “may”, “will”, “would”, “could”, “should”, “believes”, “estimates”, “projects”, “potential”, “expects”, “plans”, “intends”, “anticipates”, “targeted”, “continues”, “forecasts”, “designed”, “goal”, or the negative of those words or other similar or comparable words. Any statements contained in this Quarterly Report on Form 10-Q that are not statements of historical facts may be deemed to be forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition, results of operations and future growth prospects. The forward-looking statements contained herein are based on certain key expectations and assumptions, including, but not limited to, with respect to expectations and assumptions concerning receipt and/or maintenance of required licenses and third party consents and the success of our operations, are based on estimates prepared by us using data from publicly available governmental sources, as well as from market research and industry analysis, and on assumptions based on data and knowledge of this industry that we believe to be reasonable. These forward-looking statements are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond our control. As a result, any or all of our forward-looking statements in this Quarterly Report on Form 10-Q may turn out to be inaccurate. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under “Risk Factors” and discussed elsewhere in this Quarterly Report on Form 10-Q and in “Part I, Item 1A – Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future. You should, however, review the factors and risks we describe in the reports we will file from time to time with the SEC after the date of this Quarterly Report on Form 10-Q. These factors and risks include, among other things, the following:

Risks Related to Our Business and Industry

•

the illegality of cannabis under federal law;

•

the uncertainty regarding the regulation of cannabis in the U.S.;

•

the effect of constraints on marketing our products;

•

the risks related to the newness of the cannabis industry;

•

the effect of risks due to industry immaturity;

•

the risk we may not be able to grow our product offerings and dispensary services;

•

the effect of risks related to material acquisitions, investments, dispositions and other strategic transactions;

•

the effect of risks related to growth management;

•

the effect of restricted access to banking and other financial services by cannabis businesses and their clients;

•

our ability to comply with potential future FDA regulations;

•

the effect of restrictions under U.S. border entry laws;

•

the effect of heightened scrutiny that we may face in the U.S. and Canada and the effect it could have to further limit the market of our securities for holders in the U.S.;

•

our expectation that we will incur significant ongoing costs and obligations related to our infrastructure, growth, regulatory compliance and operations;

•

the effect of a limited market for our securities for holders in the U.S.;

•

the effect of outbreaks of pandemic diseases, fear of such outbreaks or economic disturbances due to such outbreaks, particularly the impact of the COVID-19 pandemic;

•

our ability to locate and obtain the rights to operate at preferred locations;

•

the effect of unfavorable tax treatment for cannabis businesses;

•

the effect of taxation on our business in the U.S. and Canada;

•

the effect of the lack of bankruptcy protections for cannabis businesses;

•

the effect of risks related to being a holding company;

•

our ability to enforce our contracts;

•

the effect of intense competition in the cannabis industry;

•

our ability to obtain cannabis licenses or to maintain such licenses;

•

the risks our subsidiaries may not be able to obtain their required licenses;

•

our ability to accurately forecast operating results and plan our operations;

•

the effect of agricultural and environmental risks;

•

our ability to adequately protect our intellectual property;

•

the effect of risks of civil asset forfeiture of our property;

•

the effect of risks related to ineffective internal controls over financial reporting;

•

the effect of risks related to a known material weakness in our internal control over financial ~~reporting.~~reporting;

•

our dependency on key personnel;

•

the risks of a greater likelihood of an IRS audit of cannabis-related businesses;

•

the effect of product liability claims;

•

the effect of unfavorable publicity or consumer perception;

•

the effect of product recalls;

•

potential criminal prosecution or civil liabilities under RICO;

•

the effect of security risks related to our products and our information technology systems;

•

the effect of risks related to misconduct by our service providers and business partners;

•

the effect of risks related to labor union activity;

•

the effect of risks related to our products;

•

the effect of risks related to our significant indebtedness;

•

our ability to obtain adequate insurance coverage;

•

the effect of risks related to key utility services on which we rely;

Risks Related to Owning Subordinate Voting Shares

•

the possibility of no positive return on our securities;

•

the effect of additional issuances of our securities in the future;

•

the effect of sales of substantial amounts of our shares in the public market;

•

volatility of the market price and liquidity risks on our shares;

~~PART II—OTHER INFORMATION~~

•

the lack of sufficient liquidity in the markets for our shares;

Risks Related to Being a Public Company

•

the increased costs as a result of being a U.S. reporting company;

•

the effect of being an “emerging growth company.”

Item 1. Legal Proceedings.

~~Except as set forth below, there~~

There are no actual or to our knowledge contemplated legal proceedings material to us or to which any of our or any of our subsidiaries’ property is the subject matter.

~~On December 30, 2019, a securities class-action complaint,~~ ~~David McNear v. Trulieve Cannabis Corp. et al., Case No. 1:19-cv-07289, was filed against us in the United States District Court for the Eastern District of New York. On February 12, 2020, a second securities class-action complaint,~~ ~~Monica Acerra v. Trulieve Cannabis Corp. et al.~~, Case No. 1:20-cv-00775, which is substantially similar to the complaint filed on December 30, 2019, was filed against us in the United States District Court for the Eastern District of New York. Both complaints name Trulieve, Kim Rivers, and Mohan Srinivasan as defendants for allegedly making materially false and misleading statements regarding our previously reported financial statements and public statements about our business, operations, and prospects. The complaint alleges violations of Sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5 promulgated thereunder. The complaints sought unspecified damages, costs, attorneys’ fees, and equitable relief. On March 20, 2020, the Court consolidated the two related actions under ~~In re Trulieve Cannabis Corp. Securities Litigation~~, No. 1:19-cv-07289, and appointed William Kurek, John Colomara, David McNear, and Monica Acerra as Lead Plaintiffs. The Company believes that the suit is immaterial and that the claims are without merit and intends to vigorously defend against them.

Item 1A. Risk Factors.

Investing in our Subordinate Voting Shares involves a high degree of risk. Our Annual Report on Form 10-K for the year ended December 31, 2021 includes a detailed discussion of our risk factors under the heading “Part I, Item 1A—Risk Factors.” There have been no material changes tofrom such risk factors during the quarter ended March 31, 2022. You should consider carefully the risk factors ~~disclosed~~discussed in our Annual Report on Form 10-K for the year ended December 31, 2021 and all other information contained in or incorporated by reference in this Quarterly Report on Form 10-Q before making an investment decision. If any of the risks discussed in the ~~2020~~Annual Report on Form ~~10-K.~~10-K for the year ended December 31, 2021 actually occur, they may materially harm our business, financial condition, operating results, cash flows or growth prospects. As a result, the market price of our Subordinate Voting Shares could decline, and you could lose all or part of your investment. Additional risks and uncertainties that are not yet identified or that we think are immaterial may also materially harm our business, financial condition, operating results, cash flows or growth prospects and could result in a complete loss of your investment.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

~~(a) Keystone Shops Acquisition~~

On April 2, 2021, we entered into an acquisition agreement pursuant to which we agreed to acquire 100% of the membership interests of Anna Holdings LLC and its wholly owned subsidiary, Chamounix Ventures, LLC, which we refer to collectively as Keystone Shops, in exchange for $20.0 million in cash and 1,009,336 Subordinate Voting Shares. The transaction closed on July 8, 2021. For purposes of our acquisition of Keystone Shops, the agreed upon value of our Subordinate Voting Shares was $39.63 per share. The Subordinate Voting Shares were issued to the equity holder(s) of Keystone Shops.

No underwriters were used in the foregoing transactions. These sales of securities were made in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act or Regulation D promulgated thereunder for transactions by an issuer not involving a public offering.

~~(b) Solevo Wellness West Virginia Acquisition~~

On April 13, 2021, we entered into an acquisition agreement pursuant to which we agreed to acquire 100% of the membership interests of Solevo Wellness West Virginia LLC, in exchange for $150,000 in cash and 11,658 Subordinate Voting Shares. The transaction closed on June 9, 2021. For purposes of our acquisition of Solevo Wellness West Virginia LLC, the agreed upon value of our Subordinate Voting Shares was $42.87 per share. The Subordinate Voting Shares were issued to the equity holder(s) of Solevo Wellness West Virginia LLC.

~~(c) Mountaineer Holdings Acquisition~~

On March 22, 2021, we entered into a membership interest purchase agreement to purchase all of the outstanding membership interests of Mountaineer Holding, LLC, in exchange for $3.0 million in cash and 60,342 Subordinate Voting Shares. The transaction closed on May 6, 2021. For purposes of our acquisition of Mountaineer Holding, LLC, the agreed upon value of our Subordinate Voting Shares was $49.72 per share. The Subordinate Voting Shares were issued to the equity holder(s) of Mountaineer Holding, LLC.None.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

~~None.~~

None.

Item 6. Exhibits.

~~Furnish the exhibits required by Item 601 of Regulation S-K (§ 229.601 of this chapter).~~

~~Exhibit~~ ~~Number~~		~~Description~~
Exhibit Number		Description
~~2.1~~
4.1		~~Arrangement Agreement,~~Trust Indenture, dated ~~May 10, 2021,~~as of June 18, 2019, between Trulieve Cannabis Corp. and ~~Harvest Health & Recreation Inc.~~Odyssey Trust Company (incorporated by reference to Exhibit ~~2.1 to the Company’s Quarterly Report on Form 10-Q (File No. 000-56248)).~~

~~3.1~~		~~Articles of Trulieve Cannabis Corp., as amended (incorporated by reference to Exhibit 3.1~~4.7 to the Company’s Registration Statement on Form S-1 (File No. 333-252052)).

~~4.1~~4.2		Supplemental Trust Indenture, dated as of October 6, 2021, between Trulieve Cannabis Corp. ~~2021 Omnibus Incentive Plan~~and Odyssey Trust Company (incorporated by reference to Exhibit ~~10.1~~4.1 to the Company’s Current Report on Form 8-K (File No. 000-56248)).

10.1*4.3		~~Second Amendment to Promissory Note, dated May 3, 2021, by and between George Hackney, Inc. d/b/a Trulieve and Kim Rivers (included herewith).~~

10.2*		~~Second Amendment to Promissory Note, dated May 3, 2021, by and between George Hackney, Inc. d/b/a Trulieve and Traunch Four, LLC (included herewith).~~

~~10.3~~		Form of ~~Voting Support and Lock-Up Agreement (incorporated by reference to~~2026 Note (included in Exhibit ~~10.1 to the Company’s Quarterly Report on Form 10-Q (File No. 000-56248)).~~4.2)

~~10.4~~31.1 *		~~Form of Voting Support Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q (File No. 000-56248)).~~

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.~~2002

31.231.2		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.~~2002

32.132.1		Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002.~~2002

101.INS*101.INS		Inline XBRL Instance Document
101.SCH*101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL*101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

* Filed herewith.

SIGNATURES

~~Filed herewith.~~

~~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.


	TRULIEVE CANNABIS CORP.

Date: ~~August~~May 12, ~~2021~~2022	By:	/s/ Kim Rivers
		Kim Rivers
		Chief Executive Officer
		(Principal Executive Officer)
~~Date: August 12, 2021~~	~~By:~~
Date: May 12, 2022	By:	/s/ Alex D’Amico
		Alex D’Amico
		Chief Financial Officer
		(Principal Financial Officer)

Date: May 12, 2022	By:	/s/ Rebecca Young
		Rebecca Young Chief Accounting Officer
		(Principal Accounting Officer)


British Columbia	84-2231905
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

6749 Ben Bostic Road Quincy, FL	32351
(Address of principal executive offices)	(Zip Code)


					March 31, 2022		December 31, 2021
	June 30, 2021		December 31, 2020		(unaudited)		(audited)
ASSETS
Current assets:
Cash and cash equivalents	$	289,238	$	146,713	$	267,226	$	230,646
Restricted cash						—		3,013
Accounts receivable, net		3,754		308		12,782		8,854
Inventories, net		112,628		98,312		236,427		212,188
Income tax receivable		8,157		—
Notes receivable - current portion						634		1,530
Prepaid expenses and other current assets		28,313		19,815		76,182		68,189
Total current assets		442,090		265,148		593,251		524,420
Property and equipment, net		427,666		314,045		805,999		779,916
Right of use asset - operating, net		31,254		28,171
Right of use asset - finance, net		41,521		36,904
Right of use assets - operating, net						121,972		125,973
Right of use assets - finance, net						70,225		66,764
Intangible assets, net		123,106		93,800		1,098,278		1,117,982
Goodwill		71,123		74,100		789,900		765,358
Notes receivable, net						12,188		12,147
Other assets		9,547		3,944		34,041		18,312
TOTAL ASSETS	$	1,146,307	$	816,112	$	3,525,854	$	3,410,872
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Current liabilities:
Accounts payable and accrued liabilities	$	45,579	$	41,903		109,810		94,073
Income tax payable		—		5,875		77,687		27,610
Deferred revenue		6,186		7,178		6,514		7,168
Notes payable - current portion		4,667		2,000
Notes payable - related party - current portion		12,000		12,011
Operating lease liability - current portion		3,583		3,154
Finance lease liability - current portion		4,723		3,877
Notes payable - current portion, net						9,481		10,052
Private placement notes - current portion						1,874		—
Operating lease liabilities - current portion						10,553		9,840
Finance lease liabilities - current portion						6,905		6,185
Construction finance liabilities - current portion						1,154		991
Contingencies						13,826		13,017
Total current liabilities		76,738		75,998		237,804		168,936
Long-term liabilities:
Notes payable		1,333		4,000		3,476		6,456
Operating lease liability		29,381		26,450
Finance lease liability		39,694		35,058
Private placement notes liability, net		118,673		117,165
Private placement notes, net						537,703		462,929
Warrant liabilities						2,075		2,895
Operating lease liabilities						128,575		122,130
Finance lease liabilities						69,167		65,244
Construction finance liabilities						175,032		175,198
Deferred tax liabilities						243,395		251,311
Other long-term liabilities		4,145		3,915		9,433		8,400
Construction finance liability		90,263		82,047
Deferred tax liability		29,845		23,575
TOTAL LIABILITIES		390,072		368,208		1,406,660		1,263,499

Commitments and contingencies (see Note 17)

Common stock, no par value; unlimited shares authorized as of June 30, 2021 and December 31, 2020, 126,982,700 and 119,573,998 issued and outstanding as of June 30, 2021 and December 31, 2020, respectively		—		—
Commitments and contingencies (see Note 21)
SHAREHOLDERS' EQUITY
Common stock, no par value; unlimited shares authorized. 184,184,142 issued and outstanding as of March 31, 2022 and 180,504,172 issued and outstanding as of December 31, 2021.						—		—
Additional paid-in-capital		522,898		275,644		2,012,564		2,008,100
Warrants		42,689		52,570
Accumulated earnings		190,648		119,690		105,746		137,721
Non-controlling interest						884		1,552
TOTAL SHAREHOLDERS' EQUITY		756,235		447,904		2,119,194		2,147,373
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	1,146,307	$	816,112	$	3,525,854	$	3,410,872


							Three Months Ended March 31, 2022			Three Months Ended March 31, 2021
	June 30, 2021			June 30, 2020			(unaudited)
Cash flow from operating activities
Net income and comprehensive income	$	70,958		$	42,543
Adjustments to reconcile net income and comprehensive income to net cash provided by operating activities:
Net (loss) income and comprehensive (loss) income							$	(32,482	)	$	30,078
Adjustments to reconcile net (loss) income and comprehensive (loss) income to net cash provided by operating activities:
Depreciation and amortization		12,101			5,298			29,305			5,434
Depreciation and amortization included in cost of goods sold		8,687			4,891
Depreciation included in cost of goods sold								10,692			3,667
Non-cash interest expense		1,507			1,434			1,232			(41	)
Non-cash interest income								(163	)		—
Loss on impairment and disposal of long-lived assets								13,780			—
Loss on settlement of held for sale assets, net								1,862			—
Loss on lease terminations								819			—
Amortization of operating lease right of use assets		1,910			1,508			2,892			1,573
Share-based compensation		1,485			1,685			4,564			741
Accretion of construction finance liability		1,068			430
Loss on fair value of warrants		—			1,021
Accretion of construction finance liabilities								293			711
Change in fair value of derivative liabilities - warrants								(820	)		—
Change in legal contingencies								(1,248	)		—
Allowance for credit losses								42			—
Deferred income tax expense		(1,986	)		(915	)		—			(1,487	)
Changes in operating assets and liabilities:
Inventories		(14,316	)		(7,820	)		(21,957	)		(5,598	)
Accounts receivable		(3,446	)		—			(3,970	)		(2,309	)
Prepaid expenses and other current assets		(8,896	)		(4,539	)		(8,094	)		(1,673	)
Other assets		(5,603	)		(2,196	)		(16,216	)		(7,298	)
Income tax payable / receivable		(14,032	)		42,838
Accounts payable and accrued liabilities		2,152			(8,666	)		22,093			595
Income tax payable								42,210			36,540
Operating lease liabilities		(1,633	)		(1,233	)		(2,106	)		(943	)
Deferred revenue		(992	)		1,392			(654	)		(399	)
Other current liabilities								2,057			—
Other long-term liabilities		230			—			1,016			—
Net cash provided by operating activities		49,194			77,671			45,147			59,591
Cash flow from investing activities
Purchases of property and equipment		(115,302	)		(27,923	)		(48,118	)		(48,387	)
Purchases of property and equipment related to construction finance liability		(7,147	)		(17,694	)
Cash paid for internal use software		(1,951	)		—
Purchases of property and equipment related to construction finance liabilities								(7,334	)		(3,687	)
Capitalized interest								(1,487	)		(365	)
Acquisitions, net of cash acquired		(10,158	)		—			(27,500	)		91
Capitalized interest		(2,130	)		(814	)
Purchases of internal use software								(2,214	)		(1,014	)
Proceeds from sale of variable interest entity								1,604			—
Proceeds from sale of held for sale assets								203			—
Proceeds received from notes receivable								1,018			—
Net cash used in investing activities		(136,688	)		(46,431	)		(83,828	)		(53,362	)
Cash flow from financing activities
Proceeds from share warrant exercise		7,672			11,458
Proceeds from construction finance liability		7,148			18,600
Proceeds from shares issued pursuant to private placement		217,896			—
Proceeds from private placement notes, net of discounts								76,420			—
Proceeds from construction finance liabilities								—			3,687
Proceeds from warrant exercises								22			6,861
Proceeds from stock option exercises								108			—
Payments on notes payable								(2,285	)		—
Payments on finance lease obligations		(2,091	)		(2,056	)		(1,421	)		(1,028	)
Payments on construction finance liabilities								(297	)		—
Payments for debt issuance costs								(19	)		—
Payments on notes payable - related party		(11	)		(742	)		—			(12	)
Payments for taxes related to net share settlement of equity awards		(595	)		—			(230	)		—
Distributions								(50	)		—
Net cash provided by financing activities		230,019			27,260			72,248			9,508
Net increase in cash and cash equivalents		142,525			58,500			33,567			15,737
Cash and cash equivalents, beginning of period		146,713			91,813
Cash and cash equivalents, end of period	$	289,238		$	150,313
Cash, cash equivalents, and restricted cash, beginning of period								233,659			146,713
Cash, cash equivalents, and restricted cash, end of period							$	267,226		$	162,450
Supplemental disclosure of cash flow information
Cash paid during the period for
Interest	$	15,047		$	10,362		$	6,949		$	540
Income taxes	$	79,950		$	115		$	46		$	—
Other noncash investing and financing activities
Adjustment to PurePenn, LLC and Keystone Relief Centers, LLC contingent consideration	$	2,800		$	—
ASC 842 lease additions - operating and finance leases	$	12,383		$	13,520		$	10,852		$	10,697
Shares issued for acquisitions	$	10,000		$	—
Purchase of property and equipment financed with accounts payable	$	13,751		$	5,919
Purchases of property and equipment financed with accounts payable							$	10,985		$	13,155


	March 31, 2022		December 31, 2021
	(in thousands)
Trade accounts payable	$	18,958	$	14,330
Accrued payroll		27,245		24,728
Accrued property and equipment		10,985		6,507
Accrued property and equipment - related party		—		11,353
Accrued inventory		11,039		8,373
Accrued insurance		3,449		6,620
Accrued interest		17,673		6,787
Accrued utilities		317		990
Sales tax payable		5,508		5,352
Other payables and accrued liabilities		14,636		9,033
Total accounts payable and accrued liabilities	$	109,810	$	94,073


	March 31, 2022		December 31, 2021
	(in thousands)
Prepaid insurance	$	6,073	$	10,175
Prepaid expenses		10,677		10,325
Prepaid payroll		12,809		—
Tenant improvement receivables		9,539		16,853
Held for sale assets, net		9,460		8,719
Deposits		11,185		16,969
Current portion of acquisition earnouts		9,999		—
Other current assets		6,440		5,148
Total prepaids and other current assets	$	76,182	$	68,189


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


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


		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021	1
	Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the three months ended March 31, 2022 and 2021	2
	Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three months ended March 31, 2022 and 2021	3
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021	4
	Notes to ~~Unaudited~~ Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2235
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3244
Item 4.	Controls and Procedures	3244

PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	3347
Item 1A.	Risk Factors	3347
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3347
Item 3.	Defaults Upon Senior Securities	3447
Item 4.	Mine Safety Disclosures	3447
Item 5.	Other Information	3447
Item 6.	Exhibits	3548
	Signatures	3649


													Three Months Ended
	Three Months Ended						Six Months Ended						March 31, 2022			March 31, 2021
	June 30, 2021			June 30, 2020			June 30, 2021			June 30, 2020			(unaudited)
Revenues, net of discounts	$	215,122		$	120,765		$	408,945		$	216,821		$	318,348		$	193,823
Cost of goods sold		70,639			30,233			129,198			52,459			140,198			58,559
Gross profit		144,483			90,532			279,747			164,362			178,150			135,264
Expenses:
Sales and marketing														72,862			44,558
General and administrative		14,942			7,936			27,650			14,195			33,546			12,709
Sales and marketing		46,576			27,009			91,135			49,873
Depreciation and amortization		6,667			3,104			12,101			5,298			29,305			5,434
Impairment and disposal of long-lived assets														13,780			—
Total expenses		68,185			38,049			130,886			69,366			149,493			62,701
Income from operations		76,298			52,483			148,861			94,996			28,657			72,563
Other income (expense):
Interest expense, net		(6,649	)		(5,302	)		(14,548	)		(11,214	)		(17,877	)		(7,899	)
Other (expense) income, net		333			(4,969	)		295			(71	)
Change in fair value of derivative liabilities - warrants														820			—
Loss on divestment and sale of non-operating assets														(2,681	)		—
Other income (expense), net														915			(37	)
Total other expense		(6,316	)		(10,271	)		(14,253	)		(11,285	)		(18,823	)		(7,936	)
Income before provision for income taxes		69,982			42,212			134,608			83,711			9,834			64,627
Provision for income taxes		29,102			23,274			63,650			41,168			42,316			34,549
Net income and comprehensive income		40,880			18,938			70,958			42,543
Basic net income per common share	$	0.33		$	0.17		$	0.59		$	0.38
Diluted net income per common share	$	0.31		$	0.16		$	0.55		$	0.37
Weighted average number of common shares used in computing net income per common share:
Net (loss) income and comprehensive (loss) income														(32,482	)		30,078
Less: Net loss and comprehensive loss attributed to non-controlling interest														(507	)		—
Net (loss) income and comprehensive (loss) income attributed to common shareholders													$	(31,975	)	$	30,078

Net (loss) income per share:
Basic		125,631,725			111,573,332			120,351,366			110,959,839		$	(0.17	)	$	0.25
Diluted		133,002,231			115,307,313			127,884,913			114,468,339		$	(0.17	)	$	0.24
Weighted average number of common shares used in computing net (loss) income per common share:
Basic														187,054,916			119,892,507
Diluted														187,054,916			127,589,096

	Super Voting Shares			Multiple Voting Shares			Subordinate Voting Shares			Total Common Shares			Additional Paid-in-Capital			Warrants			Accumulated Earnings		Total
Balance, January 1, 2021		58,182,500			1,439,037			59,952,461			119,573,998		$	275,644		$	52,570		$	119,690	$	447,904
Share-based compensation		—			—			—			—			741			—			—		741
Shares issued for cash - warrant exercise		—			—			469,133			469,133			15,000			(8,139	)		—		6,861
Conversion of warrants to Subordinate Voting Shares		—			—			133,408			133,408			—			—			—		—
Conversion of Multiple Voting to Subordinate Voting Shares		—			(117,668	)		117,668			—			—			—			—		—
Conversion of Super Voting to Subordinate Voting Shares		(3,021,100	)		—			3,021,100			—			—			—			—		—
Conversion of Super Voting to Multiple Voting Shares		(55,161,400	)		55,161,400			—			—			—			—			—		—
Net income and comprehensive income		—			—			—			—			—			—			30,078		30,078
Balance, March 31, 2021		—			56,482,769			63,693,770			120,176,539		$	291,385		$	44,431		$	149,768	$	485,584
Share-based compensation		—			—			—			—			744			—			—		744
Shares issued for cash - warrant exercise		—			—			100,400			100,400			2,553			(1,742	)		—		811
Common stock issued upon cashless warrant exercise		—			—			661,614			661,614			—			—			—		—
Tax withholding related to net share settlement of equity awards		—			—			(15,734	)		(15,734	)		(595	)		—			—		(595	)
Issuance of shares in offering, net of issuance costs		—			—			5,750,000			5,750,000			217,896			—			—		217,896
Contingent consideration payable in shares		—			—			—			—			(2,800	)		—			—		(2,800	)
Adjustment of fair value of equity consideration for PurePenn, LLC		—			—			—			—			2,711			—			—		2,711
Adjustment of fair value of equity consideration for Keystone Relief Centers, LLC		—			—			—			—			1,004			—			—		1,004
Shares issued for Mountaineer Holding, LLC acquisition		—			—			60,342			60,342			3,000			—			—		3,000
Shares issued for Nature's Remedy of Massachusetts, Inc. acquisition		—			—			237,881			237,881			6,500			—			—		6,500
Shares issued for Solevo Wellness West Virginia, LLC acquisition		—			—			11,658			11,658			500			—			—		500
Conversion of Multiple Voting to Subordinate Voting shares		—			(21,673	)		21,673			—			—			—			—		—
Net income and comprehensive income		—			—			—			—			—			—			40,880		40,880
Balance, June 30, 2021		—			56,461,096			70,521,604			126,982,700		$	522,898		$	42,689		$	190,648	$	756,235

	Super Voting Shares			Multiple Voting Shares			Subordinate Voting Shares			Total Common Shares			Additional Paid-in-Capital			Warrants			Accumulated Earnings		Total
Balance, January 1, 2020		67,813,300			6,661,374			35,871,672			110,346,346		$	76,192		$	—		$	56,691	$	132,883
Share-based compensation		—			—			—			—			1,222			—			—		1,222
Net income and comprehensive income		—			—			—			—			—			—			23,605		23,605
Balance, March 31, 2020		67,813,300			6,661,374			35,871,672			110,346,346		$	77,414		$	—		$	80,296	$	157,710
Share-based compensation		—			—			—			—			462			—			—		462
Shares issued for cash - warrant exercise		—			—			2,723,311			2,723,311			11,458			—			—		11,458
Net income and comprehensive income		—			—			—			—			—			—			18,938		18,938
Balance, June 30, 2020		67,813,300			6,661,374			38,594,983			113,069,657		$	89,334		$	—		$	99,234	$	188,568


	March 31, 2022			December 31, 2021
	(in thousands)
Promissory note acquired from Harvest maturing in November 2025. Secured by certain assets.	$	8,659		$	8,827
Convertible note receivable dated November 2021 maturing in November 2024.		4,276			4,124
Promissory notes acquired from Harvest maturing in February 2022. Secured by certain assets.		—			850
Notes receivable		12,935			13,801
Less: discount on notes receivable		(113	)		(124	)
Total notes receivable, net of discounts		12,822			13,677
Less: current portion of notes receivable		(634	)		(1,530	)
Notes receivable	$	12,188		$	12,147


	Expected principal payments
	(in thousands)
Remaining 2022	$	454
2023		728
2024		5,060
2025		6,693
2026		—
Thereafter		—
Total		12,935
Less: discount on notes receivable		(113	)
Total	$	12,822

	June 30, 2021
(dollars in thousands)	Net amount		Adjustments to purchase price allocation		Additions		Amortization expense		Net amount
Licenses	$	84,517	$	3,683	$	28,195	$	3,125	$	113,270
Moxie brand		2,828		—		—		494		2,334
Tradenames		2,109		—		—		428		1,681
Customer relationship		683		—		—		100		583
Non-compete		7		—		—		7		—
Internal use software		3,656		—		1,952		370		5,238
	$	93,800	$	3,683	$	30,147	$	4,524	$	123,106


	March 31, 2022
	Gross Carrying Amount		Accumulated Amortization		Net Book Value
	(in thousands)
Licenses	$	1,106,658	$	42,819	$	1,063,839
Trademarks		27,430		5,617		21,813
Internal use software		9,588		1,496		8,092
Tradenames		4,862		2,512		2,350
Customer relationships		4,536		2,352		2,184
Total	$	1,153,074	$	54,796	$	1,098,278


	March 31, 2022		December 31, 2021
	(in thousands)
Raw material
Cannabis plants	$	34,271	$	31,279
Packaging and supplies		41,453		40,326
Total raw material		75,724		71,605
Work in process		99,671		94,249
Finished goods-unmedicated		9,213		4,824
Finished goods-medicated		51,819		41,510
Total inventories	$	236,427	$	212,188

	June 30, 2021		December 31, 2020
	(dollars in thousands)
Raw material
Cannabis plants	$	17,577	$	10,661
Harvested cannabis and packaging		17,093		11,233
Total raw material		34,670		21,894
Work in process		56,822		54,780
Finished goods-unmedicated		4,039		3,908
Finished goods-medicated		17,097		17,730
Total inventories	$	112,628	$	98,312

	December 31, 2020
(dollars in thousands)	Net amount		Acquired license agreements		Additions		Amortization expense		Net amount
Licenses	$	24,538	$	887	$	61,400	$	2,308	$	84,517
Moxie brand		—		—		2,960		132		2,828
Tradenames		800		—		1,510		201		2,109
Customer relationship		883		—		—		200		683
Non-compete		25		—		—		18		7
Trademarks		134		—		—		134		—
Internal use software		3,656		—		—		—		3,656
	$	30,036	$	887	$	65,870	$	2,993	$	93,800


	Estimated amortization
	(in thousands)
Remaining 2022	$	64,964
2023		82,161
2024		80,419
2025		78,392
2026		76,894
Thereafter		715,448
	$	1,098,278

	Estimated amortization
	(dollars in thousands)
Remaining 2021	$	5,359
2022		11,134
2023		10,348
2024		9,376
2025		8,923
Thereafter		77,966
	$	123,106


	Three Months Ending March 31, 2022
	(in thousands)
As of December 31, 2021	$	765,358
Acquisition of Watkins		24,542
As of March 31, 2022	$	789,900

(dollars in thousands)
At January 1, 2020	$	7,316
Acquisition of PurePenn, LLC and Pioneer Leasing & Consulting, LLC		47,311
Acquisition of Solevo Wellness		19,473
At December 31, 2020	$	74,100
Measurement period purchase price allocation adjustments of Solevo Wellness		(2,639	)
Measurement period purchase price allocation adjustments of PurePenn, LLC and Pioneer Leasing & Consulting, LLC		(338	)
At June 30, 2021	$	71,123


	(in thousands)
Remaining 2022	$	6,697
2023		4,711
2024		657
2025		14
2026		4
Thereafter		930
Total	$	13,013

As of June 30,	(dollars in thousands)
2021	$	2,000
2022		4,000
	$	6,000


		For the Three Months Ended March 31,
	Statement of operations and comprehensive (loss) income location	2022		2021
		(in thousands)
Operating lease cost	Cost of goods sold, sales and marketing, general and administrative	$	6,093	$	1,573
Finance lease cost:
Amortization of lease assets	Cost of goods sold, sales and marketing, general and administrative		2,515		1,570
Interest on lease liabilities	Interest expense		1,579		779
Finance lease cost			4,094		2,349
Variable lease cost	Cost of goods sold, sales and marketing, general and administrative		1,934		395
Short term lease expense	Cost of goods sold, sales and marketing, general and administrative		99		—
Total lease cost		$	12,220	$	4,317

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
Lease Cost	2021		2020		2021		2020
	(dollars in thousands)
Operating lease cost		1,695		1,548		3,267		2,543
Finance lease cost:
Amortization of lease assets		1,797		1,336		3,367		2,192
Interest on lease liabilities		958		612		1,737		1,019
Finance lease cost		2,755		1,948		5,104		3,211
Variable lease cost		215		189		610		282
Total lease cost	$	4,665	$	3,685	$	8,981	$	6,036


	Operating leases			Finance leases
	(in thousands)
Remainder of 2022	$	17,371		$	9,852
2023		22,465			15,930
2024		22,145			12,160
2025		21,792			11,747
2026		21,259			11,325
Thereafter		118,546			47,049
Total undiscounted lease liabilities		223,578			108,063
Interest on lease liabilities		(84,450	)		(31,991	)
Total present value of minimum lease payments		139,128			76,072
Lease liabilities- current portion		(10,553	)		(6,905	)
Lease liabilities	$	128,575		$	69,167

	Finance leases			Operating leases
	(dollars in thousands)
Remainder of 2021	$	4,117		$	3,141
2022		8,086			6,191
2023		7,691			6,005
2024		7,188			5,644
2025		6,821			5,597
Thereafter		28,166			18,577
Total undiscounted lease liabilities		62,069			45,155
Interest on lease liabilities		(17,652	)		(12,191	)
Total present value of minimum lease payments		44,417			32,964
Lease liability - current portion		(4,723	)		(3,583	)
Lease liability	$	39,694		$	29,381


	(in thousands)
Remaining 2022	$	17,068
2023		23,406
2024		23,737
2025		24,176
2026		24,595
Thereafter		427,860
Total future payments		540,842
Less: Interest		(364,656	)
Total present value of minimum payments		176,186
Construction finance liabilities - current portion		(1,154	)
Construction finance liabilities	$	175,032


	Number of Warrants		Weighted average exercise price ($CAD)		Weighted average remaining contractual life (Yrs)
Outstanding and exercisable as of December 31, 2020		—		—		—
Granted		1,679		1,125		1.31
Exercised		—
Outstanding and exercisable as of December 31, 2021		1,679		1,125		1.31
Granted		—		—		—
Exercised		—		—		—
Outstanding and exercisable as of March 31, 2022		1,679		1,125		1.31


	For the Three Months Ended March 31, 2022	For the Three Months Ended March 31, 2021
Fair value at grant date	$8.39-11.01	$11.20
Stock price at grant date	$21.48-$25.41	$33.42
Exercise price at grant date	$21.48-$25.41	$33.42
Expected life in years	3.50 - 4.46	3.00
Expected volatility	51.81% - 52.87%	49.88%
Expected annual rate of dividends	0%	0%
Risk free annual interest rate	1.20% - 1.79%	0.11%

	For the Six Months Ended June 30, 2021		For the Six Months Ended June 30, 2020
Fair value at grant date	$11.20		$3.11 - $3.26
Stock price at grant date	$33.42		$11.52 - $12.50
Exercise price at grant date	$33.42		$11.52 - $12.50
Expected life in years		3.00	1.58 - 2.00
Expected volatility	49.88%		49.10% - 50.15%
Expected annual rate of dividends	0%		0%
Risk free annual interest rate	0.16%		1.40 - 1.58%

	Number of options		Weighted average exercise price		Weighted average remaining contractual life (yrs)		Aggregate intrinsic value
Outstanding at January 1, 2021		1,129,774		11.72		4.01		—
Granted		326,872		33.42		4.52		—
Exercised		—		—		—		—
Forfeited		—		—		—		—
Outstanding, June 30, 2021		1,456,646	$	16.59		3.80	$	20.91
Exercisable, June 30, 2021		554,459	$	11.70		3.59	$	25.80


	Number of restricted stock units			Weighted average grant price
Unvested balance as of January 1, 2022		332,428		$	26.86
Granted		821,800			21.51
Vested		(24,444	)		21.48
Forfeited		(51,460	)		26.00
Unvested balance as of March 31, 2022		1,078,324		$	22.94


	Number of warrants			Weighted average exercise price ($CAD)		Weighted average remaining contractual life (yrs)
Outstanding, December 31, 2020		6,061,561			6.00		0.72
Granted		—			—		—
Exercised		(133,408	)		—		—
Forfeited		(16,592	)		—		—
Outstanding, March 31, 2021		5,911,561			6.00		0.48


	For the Three Months Ended March 31,
	2022			2021
	(in thousands)
Income before provision for income taxes	$	9,834		$	64,627
Provision for income taxes		42,316			34,549
Effective tax rate		430	%		53	%

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2021			2020			2021			2020
	(dollars in thousands)						(dollars in thousands)
Income before provision for income taxes	$	69,982		$	42,212		$	134,608		$	83,711
Provision for income taxes		29,102			23,274			63,650			41,168
Effective tax rate		42	%		55	%		47	%		49	%

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company