Jushi Holdings Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

FINANCIAL INSTRUMENTS

FINANCIAL INSTRUMENTS

6 Months Ended

Jun. 30, 2022

Investments, All Other Investments [Abstract]


21. FINANCIAL INSTRUMENTS

The Company applies fair value accounting for all financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities that are required to be recorded at fair value, the Company considers all related factors of the asset by market participants in which the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions, and credit risk.

The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels, and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

(i) Level 1 – Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

(ii) Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by the observable market data for substantially the full term of the assets or liabilities;

(iii) Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following table sets forth the Company’s financial assets and liabilities, subject to fair value measurements on a recurring basis by level within the fair value hierarchy as of June 30, 2022:


	Level 1		Level 2		Level 3		Total
Financial assets:
Equity investment	$	—	$	—	$	1,500	$	1,500
	$	—	$	—	$	1,500	$	1,500
Financial liabilities:
Derivative liabilities (1)	$	—	$	—	$	26,289	$	26,289
Contingent consideration liabilities (2)	—		—		15,603		15,603
	$	—	$	—	$	41,892	$	41,892

The following table sets forth the Company’s financial assets and liabilities, subject to fair value measurements on a recurring basis by level within the fair value hierarchy as of December 31, 2021:


	Level 1		Level 2		Level 3		Total
Financial assets:
Equity investment	$	—	$	—	$	1,500	$	1,500
	$	—	$	—	$	1,500	$	1,500
Financial liabilities:
Derivative liabilities (1)	$	—	$	—	$	92,435	$	92,435
Contingent consideration liabilities (2)	—		—		8,223		8,223
	$	—	$	—	$	100,658	$	100,658

(1) Refer to Note 11 - Derivative Liabilities

(2) Refer to Note 7 - Acquisitions

The carrying amounts of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and certain accrued expenses, and certain other assets and liabilities held at amortized cost, approximate their fair values due to the short-term nature of these instruments. The equity investment approximates its fair value at June 30, 2022 and December 31, 2021. The carrying amounts of the promissory notes approximate their fair values as the effective interest rates are consistent with market rates. The fair value of the Senior Notes as of June 30, 2022 and December 31, 2021 approximated the principal amount.

There were no transfers between hierarchy levels during the six months ended June 30, 2022.