Report of Independent Registered Public Accounting Firm |
2 |
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CONSOLIDATED FINANCIAL STATEMENTS: |
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Consolidated Balance Sheets |
3 |
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Consolidated Statements of Operations |
4 |
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Consolidated Statements of Comprehensive Loss |
5 |
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Consolidated Statements of Changes in Shareholders’ Equity |
6 |
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Consolidated Statements of Cash Flows |
7 |
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Notes to the Consolidated Financial Statements |
9 |
December 31, |
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2021 |
2020 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
$ |
$ |
||||||
Restricted cash |
||||||||
Accounts receivable, net |
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Inventory, net |
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Loans receivable, short-term |
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Other current assets |
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Total current assets |
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Non-current assets: |
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Property and equipment, net |
||||||||
Right-of-use |
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Intangible assets, net |
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Loans receivable, long-term |
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Investments |
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Goodwill |
||||||||
Deferred tax asset |
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Other non-current assets |
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Total non-current assets |
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TOTAL ASSETS |
$ |
$ |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ |
$ |
||||||
Accrued liabilities |
||||||||
Short-term borrowings |
||||||||
Income tax payable |
||||||||
Current portion of lease liabilities |
||||||||
Deferred consideration, contingent consideration and other payables, short-term |
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Derivative liabilities, short-term |
— |
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Total current liabilities |
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Non-current liabilities: |
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Long-term notes payable and loans payable |
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Derivative liabilities, long-term |
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Lease liabilities |
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Deferred tax liability |
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Deferred consideration and contingent consideration, long-term |
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Other long-term liabilities |
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Total non-current liabilities |
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TOTAL LIABILITIES |
$ |
$ |
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COMMITMENTS AND CONTINGENCIES (Note 15) |
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SHAREHOLDERS’ EQUITY |
||||||||
Super Voting Shares, |
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Subordinate Voting Shares, outstanding at December 31, 2021 and 2020, respectively |
||||||||
Proportionate Voting Shares 1 , |
||||||||
Special Subordinate Voting Shares 2 , |
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Share capital |
||||||||
Accumulated other comprehensive loss |
( |
) |
( |
) | ||||
Accumulated deficit |
( |
) |
( |
) | ||||
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|
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Equity of Cresco Labs Inc. |
||||||||
Non-controlling interests |
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TOTAL SHAREHOLDERS’ EQUITY |
||||||||
|
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|
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TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
$ |
$ |
||||||
|
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|
1 |
Proportionate Voting Shares (“PVS”) presented on an “as-converted” basis to Subordinate Voting Shares (“SVS”) ( |
2 |
Special Subordinate Voting Shares (“SSVS”) presented on an “as-converted” basis to SVS ( |
Year ended December 31, |
||||||||
2021 |
2020 |
|||||||
Revenue, net |
$ | $ | ||||||
Costs of goods sold |
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Gross profit |
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Operating expenses: |
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Selling, general and administrative |
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Impairment loss |
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Total operating expenses |
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|
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Loss from operations |
( |
) | ( |
) | ||||
Other (expense) income: |
||||||||
Interest expense, net |
( |
) | ( |
) | ||||
Other income (expense), net |
( |
) | ||||||
(Loss) from equity method investments |
( |
) | ( |
) | ||||
|
|
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|
|||||
Total other (expense), net |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Loss before income taxes |
( |
) | ( |
) | ||||
Income tax (expense) |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Net (loss) |
$ | ( |
) | $ | ( |
) | ||
Net income attributable to non-controlling interests, net of tax |
||||||||
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Net (loss) attributable to Cresco Labs Inc. |
$ |
( |
) |
$ |
( |
) | ||
|
|
|
|
|||||
Net (loss) per share-attributable to Cresco Labs Inc. shareholders: |
||||||||
Basic and diluted (loss) per share |
$ | ( |
) | $ | ( |
) | ||
Basic and diluted weighted-average number of shares outstanding |
Year ended December 31, |
||||||||
2021 |
2020 |
|||||||
Net (loss) |
$ |
( |
) |
$ |
( |
) | ||
Foreign currency translation differences, net of tax |
( |
) | ||||||
|
|
|
|
|||||
Total comprehensive (loss) for the period |
$ |
( |
) |
$ |
( |
) | ||
Comprehensive income attributable to non-controlling interests, net of tax |
||||||||
|
|
|
|
|||||
Total comprehensive (loss) attributable to Cresco Labs Inc. |
$ |
( |
) |
$ |
( |
) | ||
|
|
|
|
Share capital |
Accumulated deficit |
Accumulated other comprehensive loss, net of tax |
Non-controlling interests |
Total |
||||||||||||||||
Balance as of January 1, 2020 |
$ | $ | ( |
) | $ | — | $ | $ | ||||||||||||
Exercise of options and warrants |
— | — | — | |||||||||||||||||
Equity-based compensation |
— | — | — | |||||||||||||||||
Employee taxes on certain share-based payment arrangements |
— | — | — | |||||||||||||||||
Change in ownership interest |
— | — | — | ( |
) | ( |
) | |||||||||||||
Income tax reserve |
— | ( |
) | — | — | ( |
) | |||||||||||||
Payable pursuant to tax receivable agreements |
( |
) | — | — | — | ( |
) | |||||||||||||
Tax benefit from shareholder redemptions |
— | — | — | |||||||||||||||||
Equity issued related to acquisitions |
— | — | — | |||||||||||||||||
Distributions to non-controlling interest holders |
( |
) | — | — | ( |
) | ( |
) | ||||||||||||
Equity issuances |
— | — | — | |||||||||||||||||
Cresco LLC shares redeemed |
( |
) | — | ( |
) | — | ||||||||||||||
Foreign currency translation |
— | — | ( |
) | — | ( |
) | |||||||||||||
Net income (loss) |
— | ( |
) | — | ( |
) | ||||||||||||||
|
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Ending Balance as of December 31, 2020 |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
$ |
|||||||||||
|
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|
|
|
|
|
|||||||||||
Exercise of options and warrants |
— | — | — | |||||||||||||||||
Equity-based compensation |
— | — | — | |||||||||||||||||
Employee taxes on certain share-based payment arrangements |
— | — | — | |||||||||||||||||
Income tax reserve |
— | — | — | |||||||||||||||||
Payable pursuant to tax receivable agreements |
( |
) | — | — | — | ( |
) | |||||||||||||
Tax benefit from shareholder redemptions |
— | — | — | |||||||||||||||||
Equity issued related to acquisitions |
— | — | — | |||||||||||||||||
Private placement issuance, net of costs |
— | — | — | |||||||||||||||||
Equity issuances |
— | — | — | |||||||||||||||||
Distributions to non-controlling interest holders |
( |
) | — | ( |
) | ( |
) | |||||||||||||
Cresco LLC shares redeemed |
( |
) | — | ( |
) | — | ||||||||||||||
Foreign currency translation |
— | — | — | |||||||||||||||||
Net income (loss) |
— | ( |
) | — | ( |
) | ||||||||||||||
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Ending Balance as of December 31, 2021 |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
$ |
|||||||||||
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Year ended December 31, |
||||||||
2021 |
2020 |
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
Net loss |
$ | ( |
) | $ | ( |
) | ||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
||||||||
Depreciation and amortization |
||||||||
Amortization of operating lease assets |
||||||||
Bad debt expense and provision expense for expected credit loss |
||||||||
Shared-based compensation expense |
||||||||
(Gain) loss on investments |
( |
) |
||||||
(Gain) on changes in fair value of deferred and contingent consideration |
( |
) |
( |
) | ||||
(Gain) loss on derivative instruments and warrants |
( |
) |
||||||
(Gain), net of losses, on loans receivable |
( |
) | ||||||
Impairment loss |
||||||||
Loss on inventory write-offs and provision |
||||||||
Change in deferred taxes |
( |
) |
( |
) | ||||
Accretion of discount and deferred financing costs on debt arrangements |
||||||||
Loss on debt extinguishment |
||||||||
Foreign currency loss |
||||||||
Other losses, net of gains |
||||||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable |
( |
) |
( |
) | ||||
Inventory |
( |
) |
( |
) | ||||
Other assets |
( |
) |
( |
) | ||||
Accounts payable and accrued expenses |
||||||||
Operating lease liabilities |
( |
) |
( |
) | ||||
Other liabilities |
( |
) |
||||||
Income tax payable |
||||||||
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|||||
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES |
( |
) | ||||||
|
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|
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|||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
Purchases of property and equipment |
( |
) |
( |
) | ||||
Purchase of intangibles |
( |
) |
( |
) | ||||
Proceeds from sale and leaseback transactions and tenant improvement allowances |
||||||||
Payment of acquisition consideration, net of cash acquired |
( |
) |
( |
) | ||||
Proceeds from divestiture, net of cash transferred |
||||||||
Receipts from collections of loans and advances |
||||||||
Loans and advances for entities to be acquired |
( |
) |
( |
) | ||||
|
|
|
|
|||||
NET CASH (USED IN) INVESTING ACTIVITIES |
( |
) |
( |
) | ||||
|
|
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|||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
Proceeds from January Offering |
||||||||
Proceeds from exercise of stock options, warrants and sell-to-cover |
||||||||
Proceeds from at-the-market |
||||||||
Proceeds from the issuance of long-term debt |
||||||||
Payment of debt, financing issuance costs, and non-extending lender fees |
( |
) |
( |
) | ||||
Payment of debt prepayment and debt extinguishment costs |
( |
) |
||||||
Repayment of debt |
( |
) |
( |
) | ||||
Payment of acquisition-related contingent consideration |
( |
) | ||||||
Acquisition of non-controlling interests |
( |
) | ||||||
Distributions to non-controlling interest redeemable unit holders and other members |
( |
) |
( |
) | ||||
Payments for taxes related to net share settlements of restricted stock units |
( |
) |
( |
) | ||||
Proceeds from financing lease transactions |
||||||||
Principal payments on finance lease obligations |
( |
) |
( |
) | ||||
|
|
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|
|||||
NET CASH PROVIDED BY FINANCING ACTIVITIES |
||||||||
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|
|||||
Effect of exchange rate changes on cash and cash equivalents |
( |
) |
( |
) | ||||
Net increase in cash and cash equivalents |
||||||||
Cash and cash equivalents and restricted cash, beginning of year |
||||||||
Cash and cash equivalents, end of year |
||||||||
Restricted cash, end of year |
||||||||
|
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|
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Cash and cash equivalents and restricted cash, end of year |
$ |
$ |
||||||
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
||||||||
CASH PAID DURING THE YEAR: |
||||||||
Income tax, net |
$ |
$ |
||||||
Interest |
Year ended December 31, |
||||||||
2021 |
2020 |
|||||||
NON-CASH TRANSACTIONS: |
||||||||
Issuance of shares, stock options, and warrants under business combinations and acquisitions |
$ |
$ |
||||||
Non-cash consideration for business combination |
||||||||
Non-controlling interests redeemed for equity |
||||||||
Increase to net lease liability |
||||||||
Liability incurred to purchase property and equipment and intangibles |
||||||||
Cashless exercise of stock options and warrants |
||||||||
Unpaid declared distributions to non-controlling interest redeemable unit holders |
||||||||
Liability incurred for debt, financing issuance costs and non-extending lender fees |
||||||||
Issuance of shares for non-solicitation intangible asset |
||||||||
Issuance of shares for settlement |
(a) |
Basis of Preparation |
(b) |
Basis of Measurement |
(c) |
Functional and Presentation Currency |
(d) |
Basis of Consolidation |
Entity |
Location |
Purpose |
Percentage Held |
|||||
Cresco Labs Inc. |
British Columbia, Canada |
Parent Company |
||||||
CannaRoyalty Corp. (Origin House) |
Ontario, Canada |
Holding Company |
% | |||||
Cali-AntiFragile Corp. |
California |
Holding Company |
% | |||||
Alta Supply Inc. (Continuum) |
California |
Distribution |
% | |||||
Kaya Management Inc. |
California |
Production |
% | |||||
River Distributing Co., LLC |
California |
Distribution |
% | |||||
FloraCal Farm s |
California |
Cultivation |
% | |||||
Cub City, LLC |
California |
Cultivation |
% | |||||
CRHC Holdings Corp. |
Ontario, Canada |
Holding Company |
% | |||||
Laurel Harvest Labs, LLC |
Pennsylvania |
Cultivation and Dispensary Facility |
% | |||||
JDRC Mount Joy, LLC |
Illinois |
Holding Company |
% | |||||
JDRC Scranton, LLC |
Holding Company |
% |
Entity |
Location |
Purpose |
Percentage Held |
|||||
Bluma Wellness Inc. |
British Columbia, Canada |
Holding Company |
% | |||||
CannCure Investments Inc. |
Ontario, Canada |
Holding Company |
% | |||||
Cannabis Cures Investments, LLC |
Florida |
Holding Company |
% | |||||
3 Boys Farm, LLC (One Plant Florida) |
Florida |
Cultivation, Production and Dispensary Facility |
% | |||||
Farm to Fresh Holdings, LLC |
Florida |
Cultivation, Production and Dispensary Facility |
% | |||||
Cresco U.S. Corp . |
Illinoi s |
Manager of Cresco Labs, LLC |
% | |||||
MedMar Inc. |
Illinois |
Holding Company |
% | |||||
MedMar Lakeview, LLC |
Dispensary |
% | ||||||
MedMar Rockford, LLC |
Illinois |
Dispensary |
% | |||||
Gloucester Street Capital, LLC |
New York |
Holding Company |
% | |||||
Valley Agriceuticals, LLC |
New York |
Operating Entity |
% | |||||
CMA Holdings, LLC |
Illinois |
Holding Company |
% | |||||
BL Real Estate, LLC |
Massachusetts |
Holding Company |
% | |||||
Cultivate Licensing LLC |
Massachusetts |
Cultivation, Production and Dispensary Facility |
% | |||||
Cultivate Worcester, Inc |
Massachusetts |
Dispensary |
% | |||||
Cultivate Leicester, Inc |
Massachusetts |
Cultivation, Production and Dispensary Facility |
% | |||||
Cultivate Framingham, Inc |
Massachusetts |
Dispensary |
% | |||||
Cultivate Burncoat, Inc |
Massachusetts |
Holding Company |
% | |||||
Cultivate Cultivation, Inc |
Massachusetts |
Cultivation and Production Entity |
% | |||||
Good News Holdings, LLC |
Illinois |
Holding Company |
% | |||||
Wonder Holdings, LLC |
Illinois |
Holding Company |
% | |||||
BW Maryland Holdings, LLC |
Illinois |
Holding Company |
% | |||||
CP Pennsylvania Holdings, LLC |
Illinois |
Holding Company |
% | |||||
Bay, LLC |
Pennsylvania |
Holding Company |
% | |||||
Bay Asset Management, LLC |
Pennsylvania |
Holding Company |
% | |||||
Ridgeback, LLC |
Colorado |
Holding Company |
% | |||||
Cresco Labs, LLC |
Illinois |
Operating Entity |
% | |||||
Cresco Labs Notes Issuer, LLC |
Illinois |
Holding Company |
||||||
Cresco Labs Ohio, LLC |
Ohio |
Cultivation, Production and Dispensary Facility |
% | |||||
Wellbeings, LLC |
Delaware |
CBD Wellness Product Development |
% | |||||
Cresco Labs SLO, LLC |
California |
Holding Company |
% | |||||
SLO Cultivation Inc. |
California |
Cultivation and Production Facility |
% | |||||
Cresco Labs Joliet, LLC |
Illinois |
Cultivation and Production Facility |
% | |||||
Cresco Labs Kankakee, LLC |
Illinois |
Cultivation and Production Facility |
% | |||||
Cresco Labs Logan, LLC |
Illinois |
Cultivation and Production Facility |
% | |||||
Cresco Labs PA, LLC |
Illinois |
Holding Company |
% | |||||
Cresco Yeltrah, LLC |
Pennsylvania |
Cultivation, Production and Dispensary Facility |
% | |||||
JDC Newark, LLC |
Ohio |
Holding Company |
% | |||||
Verdant Creations Newark, LLC |
Ohio |
Dispensary |
% | |||||
JDC Marion, LLC |
Ohio |
Holding Company |
% | |||||
Verdant Creations Marion, LLC |
Ohio |
Dispensary |
% | |||||
JDC Chillicothe, LLC |
Ohio |
Holding Company |
% | |||||
Verdant Creations Chillicothe, LLC |
Ohio |
Dispensary |
% | |||||
JDC Columbus, LLC |
Ohio |
Holding Company |
% | |||||
Care Med Associates, LLC |
Ohio |
Dispensary |
% | |||||
Cresco Labs Arizona, LLC |
Arizona |
Holding Company |
% | |||||
Arizona Facilities Supply, LLC |
Arizona/Maryland |
Cultivation, Production and Dispensary Facility |
% | |||||
Cresco Labs Tinad, LLC |
Illinois |
Holding Company |
% | |||||
PDI Medical III, LLC |
Illinois |
Dispensary |
% | |||||
Cresco Labs Phoenix Farms, LLC |
Illinois |
Holding Company |
% | |||||
Phoenix Farms of Illinois, LLC |
Illinois |
Dispensary |
% | |||||
JDC Elmwood, LLC |
Illinois |
Holding Company |
% | |||||
FloraMedex, LLC |
Illinois |
Dispensary |
% | |||||
Cresco Edibles, LLC |
Illinois |
Holding Company |
% | |||||
TSC Cresco, LLC |
Illinois |
Licensing |
% | |||||
Cresco HHH, LLC |
Massachusetts |
Cultivation, Production and Dispensary Facility |
% | |||||
Cresco Labs Michigan, LLC (a) |
Michigan |
Cultivation and Production Facility |
% |
(a) | Cresco Labs Michigan, LLC is |
(e) |
Cash and Cash Equivalents |
(f) |
Restricted Cash |
(g) |
Accounts Receivable |
(h) |
Inventory |
(i) |
Property and Equipment |
Category |
Methodology |
Estimated Useful Life | ||
Leasehold Improvements | useful life of the improvement |
|||
Machinery and Equipment | ||||
Furniture and Fixtures | ||||
Vehicles | ||||
Website and Software | ||||
Computer Equipment | ||||
Buildings and Building Improvements |
(j) |
Intangible Assets |
Category |
Estimated Useful Life | |
Customer Relationships | ||
Non-Compete Agreements |
||
Trade Names | ||
Permit Application Fees | ||
Non-Solicitation Agreements |
(k) |
Equity Method Investments |
(l) |
Goodwill |
(m) |
Income Taxes |
(i) |
Current Tax |
(ii) |
Deferred Tax |
(n) |
Fair Value of Financial Instruments |
• | Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities; |
• | Level 2 – Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly |
• | Level 3 – Inputs for the asset or liability that are not based on observable market data. |
(o) |
Loans Receivable |
(p) |
Leases |
(i) |
Fixed payments, including in-substance fixed payments, less any lease incentives receivable; |
(ii) |
The exercise price of a purchase option if the Company is reasonably certain to exercise that option; and |
(iii) |
Penalties for early termination of the lease, if the lease term reflects the Company exercising an option to terminate the lease. |
(i) | The amount of the initial measurement of lease liability; |
(ii) | Lease payments made at or before the commencement date less any lease incentives received; |
(iii) | Any initial direct costs; and |
(iv) | An estimate of costs of dismantling and removing the underlying asset, restoring the site on which it is located or the underlying asset, if applicable. |
(q) |
Revenue Recognition |
• | Identify a customer along with a corresponding contract; |
• | Identify the performance obligation(s) in the contract to transfer goods to a customer; |
• | Determine the transaction price the Company expects to be entitled to in exchange for transferring promised goods to a customer; |
• | Allocate the transaction price to the performance obligation(s) in the contract; and |
• | Recognize revenue when or as the Company satisfies the performance obligation(s). |
(r) |
Excise Tax |
(s) |
Share-Based Compensation |
(t) |
Earnings (Loss) Per Share |
(in thousands) |
2021 |
2020 |
||||||
|
|
|
|
|||||
Redeemable shares |
||||||||
Options |
||||||||
Warrants |
||||||||
RSUs |
||||||||
|
|
|
|
|||||
Total potentially dilutive shares |
||||||||
|
|
|
|
(w) |
Critical Accounting Estimates, Judgments, and Assumptions |
(i) |
Expected Credit Loss (“ECL”) on Loans Receivable |
(ii) |
Inventory |
(iii) |
Estimated Useful Lives, Depreciation of Property and Equipment, and Amortization of Intangible Assets |
(iv) |
Property and Equipment Impairment |
(v) |
Goodwill and Indefinite-Lived Intangible Asset Impairment |
(vi) |
Business Combinations and Asset Acquisitions |
a. | Business Combinations |
b. | Asset Acquisitions |
(vii) |
Share-Based Compensation |
(viii) |
Income Tax |
(ix) |
Measurement of ROU Assets and Sale and Leaseback Accounting |
(x) |
Fair Value Measurements |
(xi) |
Contingencies |
(x) |
Recasts and Adjustments |
(y) |
Recently Adopted Accounting Pronouncements |
(z) |
Recently Issued Accounting Standards |
($ in thousands) |
2021 |
2020 |
||||||
Raw materials |
$ |
$ |
||||||
Raw materials— non-cannabis |
||||||||
Work-in-process |
||||||||
Finished goods |
||||||||
|
|
|
|
|||||
Total Inventory |
$ |
$ |
||||||
|
|
|
|
($ in thousands) |
Land and Buildings |
Machinery and Equipment |
Furniture and Fixtures |
Leasehold Improvements |
Website, Computer Equipment and Software |
Vehicles |
Construction In Progress |
Total |
||||||||||||||||||||||||
Cost |
||||||||||||||||||||||||||||||||
Balance as of January 1, 2020 |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Additions |
||||||||||||||||||||||||||||||||
Transfers |
( |
) | ||||||||||||||||||||||||||||||
Disposals |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||
Sales related to sale and leaseback transactions |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||
Additions from acquisition |
||||||||||||||||||||||||||||||||
Effect of foreign exchange and other adjustments |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
As of December 31, 2020 |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Additions |
||||||||||||||||||||||||||||||||
Transfers |
( |
) | ( |
) | ||||||||||||||||||||||||||||
Disposals |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||
Additions from acquisition |
||||||||||||||||||||||||||||||||
Effect of foreign exchange and other adjustments |
( |
) | ( |
) | ( |
) |
||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
As of December 31, 2021 |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Accumulated depreciation |
| |||||||||||||||||||||||||||||||
Balance as of January 1, 2020 |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
$ |
( |
) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Depreciation |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||
Sales related to sale and leaseback transactions |
||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
As of December 31, 2020 |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
$ |
( |
) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Depreciation |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||
Disposals |
— | |
||||||||||||||||||||||||||||||
Adjustments |
— | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
As of December 31, 2021 |
$ |
( |
) | $ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
$ |
( |
) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net book value |
||||||||||||||||||||||||||||||||
As of December 31, 2020 |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
As of December 31, 2021 |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
• |
Yellow Springs, Ohio—Cultivation and processing facilities (financing) |
• |
Elmwood Park, Illinois—Dispensary (financing) |
• |
Marshall, Michigan—Cultivation and processing facility (sale and leaseback) |
• |
Chicago, Illinois—Retail facility (sale and leaseback) |
• |
Fall River, Massachusetts—Cultivation and dispensary facility (sale and leaseback) |
• | On January 24, 2020, the Company closed on a financing transaction to sell its Yellow Springs, Ohio processing facility to Innovative Industrial Properties, Inc. (“IIP”). Under a long-term agreement, the Company has leased back the facility and continues to operate and manage it. The selling price for the property was $ |
• | On April 2, 2020, the Company closed on a financing transaction to sell its Elmwood Park, Illinois dispensary to CHP Elmwood Park. Under a long-term agreement, the Company has leased back the dispensary and continues to operate and manage it. The selling price for the property was $ |
• | On April 22, 2020, the Company closed on a sale and leaseback transaction to sell its Marshall, Michigan processing facility to IIP. Under a long-term agreement, the Company has leased back the facility and continues to operate and manage it. The selling price for the property was $ |
significantly enhance production capacity, for which IIP has agreed to provide reimbursement of up to $ |
• | On June 26, 2020, the Company closed on a sale and leaseback transaction to sell its Chicago, Illinois retail facility to Clear Height Properties (“CHP”). Under a long-term agreement, the Company has leased back the retail facility and continues to operate and manage it. The selling price for the property was $ |
• | On June 30, 2020, the Company closed on a sale and leaseback transaction to sell its Fall River, Massachusetts processing facility to IIP. Under a long-term agreement, the Company has leased back the facility and continues to operate and manage it. The selling price for the property was $ transaction, the Company settled the Hope Heal Health loan totaling $ |
($ in thousands) |
Total |
Operating Leases |
Finance Leases |
|||||||||
2022 |
$ | $ | $ | |||||||||
2023 |
||||||||||||
2024 |
||||||||||||
2025 |
||||||||||||
2026 |
||||||||||||
Thereafter |
||||||||||||
|
|
|
|
|
|
|||||||
Total lease payments |
$ |
$ |
$ |
|||||||||
|
|
|
|
|
|
|||||||
Less: imputed interest |
( |
) |
( |
) | ( |
) | ||||||
Less: tenant improvement allowance |
( |
) | ( |
) |
( |
) | ||||||
|
|
|
|
|
|
|||||||
Present value of lease liabilities |
||||||||||||
|
|
|
|
|
|
|||||||
Less: current lease liabilities |
( |
) | ( |
) | ( |
) | ||||||
|
|
|
|
|
|
|||||||
Present value of long-term lease liabilities |
$ |
$ |
$ |
|||||||||
|
|
|
|
|
|
($ in thousands) |
Financing Liabilities |
|||
2022 |
$ | |||
2023 |
||||
2024 |
||||
2025 |
||||
2026 |
||||
Thereafter |
||||
|
|
|||
Total finance payments |
$ | |||
|
|
|||
Less: interest |
( |
) | ||
Less: tenant improvement allowance |
( |
) | ||
|
|
|||
Present value of finance liabilities |
||||
|
|
|||
Less: short-term finance liabilities |
( |
) | ||
|
|
|||
Present value of long-term finance liabilities |
$ |
|||
|
|
2021 |
2020 |
|||||||||||||||
($ in thousands) |
Operating Leases |
Finance Leases |
Operating Leases |
Finance Leases |
||||||||||||
Right-of-use |
$ | $ | $ | $ | ||||||||||||
Lease liabilities (current) |
||||||||||||||||
Lease liabilities (non-current) |
||||||||||||||||
Weighted average remaining lease term 1 |
||||||||||||||||
Weighted average remaining discount rate |
% | % | % | % |
1 |
Note that Weighted average remaining lease term does not include extensions which we are reasonably certain to enter into. |
($ in thousands) |
2021 |
2020 |
||||||
Interest paid on finance leases |
$ | $ |
(a) |
Fair Value Investments |
($ in thousands) |
2021 |
2020 |
||||||
420 Capital |
$ | $ | ||||||
Lighthouse |
||||||||
Fleurish |
||||||||
Old Pal |
||||||||
IMC |
||||||||
|
|
|
|
|||||
Total Investments |
$ |
$ |
||||||
|
|
|
|
(b) |
Equity Method Investments |
($ in thousands) |
Customer Relation- ships |
Trade Names |
Permit Application Costs |
Licenses |
Other Intangibles (a) |
Goodwill |
Total |
|||||||||||||||||||||
Cost |
| |||||||||||||||||||||||||||
Balance at January 1, 2020 |
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Additions |
||||||||||||||||||||||||||||
Additions from acquisitions |
||||||||||||||||||||||||||||
Foreign exchange |
||||||||||||||||||||||||||||
Impairment |
( |
) | ( |
) | ||||||||||||||||||||||||
Measurement period adjustments |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance at December 31, 2020 |
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
Additions |
||||||||||||||||||||||||||||
Additions from acquisitions |
||||||||||||||||||||||||||||
Foreign exchange |
||||||||||||||||||||||||||||
Impairment |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||
Measurement period adjustments |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||
Disposals |
( |
) | ( |
) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance at December 31, 2021 |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Accumulated amortization |
| |||||||||||||||||||||||||||
Balance at January 1, 2020 |
$ | ( |
) | $ | $ | ( |
) | $ | $ | ( |
) | $ | $ | ( |
) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Amortization |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2020 |
( |
) | ( |
) | ( |
) | ( |
) | $ | ( |
) | |||||||||||||||||
Amortization |
( |
) | ( |
) | ||||||||||||||||||||||||
Disposal s |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance at December 31, 2021 |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
$ |
( |
) |
$ |
$ |
( |
) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Net book value |
| |||||||||||||||||||||||||||
December 31, 2020 |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
December 31, 2021 |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in thousands) |
Estimated Amortization |
|||
2022 |
$ | |||
2023 |
||||
2024 |
||||
2025 |
||||
2026 |
||||
Thereafter |
||||
|
|
|||
Total estimated amortization |
$ |
|||
|
|
• |
Cash flows were projected based on the Company’s long-term business plan for each reporting unit for the periods |
|
• |
Cash flows beyond 2026 were projected to grow at a perpetual growth rate, which was estimated to be |
• | The business plan contains forecasts based on past experience of actual operating results in conjunction with anticipated future growth opportunities. While the forecast does assume some organic growth, largely related to synergies gained through further incorporation of recent acquisitions into the Company’s infrastructure, the primary engine of growth is strategic in nature . |
|
• |
Discount rates applied in determining the recoverable amount of the reporting units range between pre-tax weighted average cost of capital of each reporting unit and other peers in the industry. The values assigned to the key assumptions represent Management’s assessment of future trends in the industries in which the reporting units operate and are based on both external and internal sources and historical trend data. |
(a) |
Authorized |
i. |
Unlimited Number of Subordinate Voting Shares |
ii. |
Unlimited Number of Proportionate Voting Shares |
iii. |
500,000 Super Voting Shares |
iv. |
Unlimited Number of Special Subordinate Voting Shares |
v. |
Redeemable Units |
(b) |
Issued and Outstanding |
(in thousands) |
Redeemable Units |
Subordinate Voting Shares (SVS)* |
Proportionate Voting Shares (PVS)** |
Super Voting Shares (MVS) |
Special Subordinate Voting Shares (SSVS)*** |
|||||||||||||||
Beginning balance, January 1, 2020 |
— | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Options and warrants exercised |
— | — | — | |||||||||||||||||
RSU issued |
— | — | — | — | ||||||||||||||||
Issuance of shares related to acquisitions |
— | — | — | |||||||||||||||||
Issuance of shares related to distribution agreements |
— | 24 9 |
— | — | — | |||||||||||||||
Cresco LLC redemption |
( |
) | — | — | — | |||||||||||||||
PVS converted to SVS |
— | ( |
) | — | — | |||||||||||||||
Issuances related to employee taxes on certain share-based payment arrangements |
— | — | — | — | ||||||||||||||||
Share issuances |
— | — | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Ending balance, December 31, 2020 |
||||||||||||||||||||
Options and warrants exercised |
— | — | — | — | ||||||||||||||||
RSUs issued |
— | — | — | — | ||||||||||||||||
Issuance of shares related to acquisitions |
— | — | — | — | ||||||||||||||||
Issuance of shares related to distribution agreements |
— | ( |
) |
— | — | — | ||||||||||||||
Cresco LLC redemption |
( |
) | — | — | ||||||||||||||||
PVS converted to SVS |
— | ( |
) | — | — | |||||||||||||||
Issuances related to employee taxes on certain share-based payment arrangements |
— | — | — | — | ||||||||||||||||
Share issuances |
— | — | — | — | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Ending balance, December 31, 2021 |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
* |
SVS includes shares pending issuance or cancellation |
** |
PVS presented on an “as-converted” basis to SVS ( |
*** | SSVS presented on an “as-converted” basis to SVS ( |
(i) |
Share Issuances |
(ii) |
Issuance of Shares - Private Placement |
(iii) |
Issuance of Shares - Arrangement |
(iv) |
Issuance of Shares - 2021 Acquisitions |
(in thousands) |
Acquisition date |
SVS shares issued |
Replacement shares issued |
Equity-based consideration |
||||||||||
Verdant |
$ | |||||||||||||
Bluma |
||||||||||||||
Cultivate |
||||||||||||||
Cure Penn |
||||||||||||||
Laurel Harvest |
(v) |
Issuance of Shares - Origin House |
(vi) |
Issuance of Shares - |
(vii) |
Issuance of Shares – MedMar Lakeview |
(viii) |
Issuance of Shares – Tryke Companies, LLC |
(c) |
Stock Purchase Warrants |
Number of warrants* (in thousands) |
Weighted- average exercise price |
|||||||
Balance as of January 1, 2020 |
$ | |||||||
Exercised |
( |
) | ||||||
|
|
|||||||
Balance as of December 31, 2020 |
$ |
|||||||
|
|
|||||||
Bluma replacement warrants |
||||||||
Exercised |
( |
) | ||||||
Forfeited |
( |
) | ||||||
|
|
|||||||
Balance as of December 31, 2021 |
$ |
|||||||
|
|
* |
PVS presented on an “as-converted” basis to SVS (1-to-200) |
|
(d) |
Distribution to Non-controlling Interest Holders |
(e) |
Changes in Ownership and Non-controlling Interests |
($ in thousands) |
TSC Cresco, LLC |
MedMar Inc. (Lakeview) |
MedMar Inc. (Rockford) |
Cresco Labs Ohio, LLC |
SLO Cultivation Inc. |
Other entities including Cresco Labs LLC 1,3 |
Eliminations |
Total |
||||||||||||||||||||||||
Non-current assets |
$ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Current assets |
( |
) | ||||||||||||||||||||||||||||||
Non-current liabilities |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||
Current liabilities |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net assets |
$ |
$ |
$ |
$ |
( |
) | $ |
( |
) | $ |
$ |
$ |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net assets attributable to NCI |
$ | $ | $ | $ | $ | ( |
) | $ | $ | $ | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
— |
||||||||||||||||||||||||||||||||
Revenue |
$ | $ | $ | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||||||||||
Gross profit |
( |
) | ( |
) | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net income (loss) |
$ |
$ |
$ |
$ |
( |
) | $ |
( |
) | $ |
( |
) | $ |
$ |
( |
) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net income (loss) allocated to NCI |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | $ | $ | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
NCI percentage at December 31, 2021 |
% 1 |
% 2 |
% 2 |
% 1 |
% 1 |
% |
1 |
The NCI percentage reflects the NCI that exists at Cresco Labs, LLC. There is a further |
2 |
The NCI percentage reflects the NCI that exists at Cresco Labs Inc. |
3 |
Includes the effect of LLC unit redemptions and other adjustments |
($ in thousands) |
TSC Cresco, LLC |
MedMar Inc. (Lakeview) |
MedMar Inc. (Rockford) |
Cresco Labs Ohio, LLC |
SLO Cultivation Inc. |
Other entities including Cresco Labs LLC 1,3 |
Eliminations |
Total |
||||||||||||||||||||||||
Non-current assets |
$ | $ | $ | $ | $ | $ | $ | — | $ | |||||||||||||||||||||||
Current assets |
( |
) | ||||||||||||||||||||||||||||||
Non-current liabilities |
— | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | — | ( |
) | ||||||||||||||||||
Current liabilities |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net assets |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | $ | $ | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net assets attributable to NCI |
$ | $ | $ | $ | $ | ( |
) | $ | $ | — | $ | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Revenue |
$ | $ | $ | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||||||||||
Gross profit |
( |
) | ( |
) | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net income (loss) |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | — | $ | ( |
) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net income (loss) allocated to NCI |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | $ | — | $ | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
NCI percentage at December 31, 2020 |
% 1 |
% 2 |
% 2 |
% 1 |
% 1 |
% |
1 |
The NCI percentage reflects the NCI that exists at Cresco Labs, LLC. There is a further |
2 |
The NCI percentage reflects the NCI that exists at Cresco Labs Inc. |
3 |
Includes the effect of LLC unit redemptions and other adjustments |
(Shares in thousands) |
Number of stock options outstanding |
Weighted- average exercise price |
Weighted- average remaining contractual life (years) |
Aggregate intrinsic value |
||||||||||||
Outstanding – January 1, 2020 |
$ | $ | ||||||||||||||
Granted |
||||||||||||||||
Exercised |
( |
) | ||||||||||||||
Origin House replacement awards |
||||||||||||||||
Forfeited |
( |
) | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Outstanding – December 31, 2020 |
$ |
$ |
||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Exercisable - December 31, 2020 |
$ |
$ |
||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Granted |
||||||||||||||||
Exercised |
( |
) | ||||||||||||||
Forfeited |
( |
) | ||||||||||||||
|
|
|||||||||||||||
Outstanding - December 31, 2021 |
$ |
$ |
||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Exercisable - December 31, 2021 |
$ |
$ |
||||||||||||||
|
|
|
|
|
|
|
|
Year Ended December 31, |
||||||||
(In thousands, except per share data) |
2021 |
2020 |
||||||
Weighted average grant date fair value (per share) of stock option units granted |
$ | $ | ||||||
Intrinsic value of stock option units exercised, using market price at exercise date |
$ | $ |
2021 |
2020 | |||
Risk-free annual interest rate |
||||
Expected annual dividend yield |
% | |||
Expected stock price volatility |
||||
Expected life of stock options |
||||
Forfeiture rate |
||||
Fair value at grant date |
$ |
$ | ||
Stock price at grant date |
$ |
$ | ||
Exercise price range |
$ |
$ |
(Shares in thousands) |
Number of RSUs outstanding |
Weighted average fair value |
||||||
Outstanding - January 1, 2020 |
$ | |||||||
Granted |
||||||||
Origin House replacement awards |
||||||||
Vested and settled |
( |
) | ||||||
Forfeited |
( |
) | ||||||
|
|
|||||||
Outstanding – December 31, 2020 |
$ | |||||||
|
|
|||||||
Granted |
||||||||
Bluma replacement awards |
||||||||
Vested and settled |
( |
) | ||||||
Forfeited |
( |
) | ||||||
|
|
|||||||
Outstanding - December 31, 2021 |
$ |
|||||||
|
|
|
|
|||||
Liability-classified as of December 31, 2021 |
$ |
Year Ended December 31, |
||||||||
($ in thousands) |
2021 |
2020 |
||||||
Total fair value of RSUs vested, using market price at vest date |
$ | $ |
(In thousands, except per share data) |
Shares issued |
Fair value (per share) |
Compensation expense |
|||||||||
Bluma replacement shares |
$ |
$ |
||||||||||
Subscription award |
$ |
$ |
(a) |
Business Combinations - 2021 |
($ in thousands) |
Verdant (i) |
Bluma (ii) |
Cultivate (iii) |
Cure Penn (iv) |
Laurel Harvest (v) |
Total |
||||||||||||||||||
Total consideration |
||||||||||||||||||||||||
Common shares issued |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||
Cash |
— |
— |
||||||||||||||||||||||
Cashless exercise option on loan |
— |
— |
— |
— |
||||||||||||||||||||
Settlement of leases |
— |
— |
— |
— |
||||||||||||||||||||
Loan settlement |
— |
|||||||||||||||||||||||
Warrants issued |
— |
— |
— |
— |
||||||||||||||||||||
Replacement RSU awards |
— |
— |
— |
— |
||||||||||||||||||||
Payment of acquisition-related transaction costs on behalf of the acquiree |
— |
|||||||||||||||||||||||
Payment of 3rd-party debt on behalf of the acquiree |
— |
— |
— |
— |
||||||||||||||||||||
Deferred consideration |
— |
— |
— |
|||||||||||||||||||||
Contingent consideration |
— |
— |
— |
— |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total consideration |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||
Net identifiable assets (liabilities) acquired |
||||||||||||||||||||||||
Cash |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||
Accounts receivable |
— |
— |
— |
|||||||||||||||||||||
Inventory |
||||||||||||||||||||||||
Loans receivable, short-term |
— |
— |
— |
— |
||||||||||||||||||||
Other current assets |
||||||||||||||||||||||||
Property & equipment |
||||||||||||||||||||||||
Right-of-use |
||||||||||||||||||||||||
Other non-current assets |
— |
— |
— |
— |
||||||||||||||||||||
Customer relationships |
||||||||||||||||||||||||
License |
||||||||||||||||||||||||
Trade name |
— |
— |
— |
— |
||||||||||||||||||||
Non-compete agreements |
— |
— |
||||||||||||||||||||||
Investments |
— |
— |
— |
— |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total identifiable assets acquired |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Short-term liabilities |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) | ||||||||||||
Lease liability |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) | ||||||||||||
Contract liability-loyalty program |
— |
( |
) |
— |
( |
) |
— |
( |
) | |||||||||||||||
Deferred tax liability |
( |
) |
( |
) |
( |
) |
— |
( |
) |
( |
) | |||||||||||||
Total identifiable liabilities acquired |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net identifiable assets acquired |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||
Purchase price allocation |
||||||||||||||||||||||||
Net identifiable assets acquired |
||||||||||||||||||||||||
Goodwill |
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total consideration |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
($ in thousands) |
Verdant (i) |
Bluma (ii) |
Cultivate (iii) |
Cure Penn (iv) |
Laurel Harvest (v) |
Total |
||||||||||||||||||
Contributed revenue |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||
Net (loss) income |
( |
) |
( |
) |
( |
) |
$ |
For the year ended December 31, 2021 |
||||||||||||||||||||||||||||
Cresco Labs Inc. |
Verdant (i) |
Bluma (ii) |
Cultivate (iii) |
Cure Penn (iv) |
Laurel Harvest (v) |
Total |
||||||||||||||||||||||
($ in thousands) |
(unaudited) |
(unaudited) |
(unaudited) |
(unaudited) |
(unaudited) |
(unaudited) |
||||||||||||||||||||||
Pro forma revenue |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||
Pro forma net income: |
||||||||||||||||||||||||||||
Pre-acquisition net income |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||
Pro forma adjustments: |
||||||||||||||||||||||||||||
(a) Transaction costs |
||||||||||||||||||||||||||||
(b) Post-acquisition share-based compensation |
— |
— |
— |
— |
||||||||||||||||||||||||
(c) Intangible amortization |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) |
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total pro forma adjustments |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||||
Total pro forma net income |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
(a) |
includes removal of transaction costs as they will be reflected as of the beginning of the earliest period presented (January 1, 2020). These costs were included as Selling, general, and administrative expenses in the Consolidated Statements of Operations. |
(b) |
includes removal of post combination share-based compensation expense related to warrants issued, replacement shares and replacement RSU awards recorded related to the. Bluma, acquisition. These costs were included as Selling, general, and administrative expenses in the Consolidated Statements of Operations. |
(c) |
includes estimated amortization expense on intangible assets acquired. Th ese costs were recorded in Cost of goods sold and Selling, general, and administrative expenses in the Consolidated Statements of Operations. |
For the year ended December 31, 2020 |
||||||||||||||||||||||||||||
Cresco Labs Inc. |
Verdant (i) |
Bluma (ii) |
Cultivate (iii) |
Cure Penn (iv) |
Laurel Harvest (v) |
Total |
||||||||||||||||||||||
($ in thousands) |
(unaudited) |
(unaudited) |
(unaudited) |
(unaudited) |
(unaudited) |
(unaudited) |
||||||||||||||||||||||
Pro forma revenue |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||
Pro forma net income: |
||||||||||||||||||||||||||||
Pre-acquisition net income |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||
Pro forma adjustments: |
||||||||||||||||||||||||||||
(a) Transaction costs |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) |
||||||||||||||||||
(b) Post-acquisition share-based compensation |
— |
( |
) |
— |
— |
— |
||||||||||||||||||||||
(c) Intangible amortization |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) |
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total pro forma adjustments |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
|||||||||||||
Total pro forma net income |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
$ |
( |
) |
$ |
( |
) |
(a) |
includes transaction costs related to acquisitions (reflected as of January 1, 2020). |
(b) |
includes post combination share-based compensation expense related to warrants issued, replacement shares and replacement RSU awards recorded related to the. Bluma, acquisition. |
(c) |
includes estimated amortization expense on intangible assets acquired. |
( b ) |
Business Combinations - 2020 |
($ in thousands) |
Origin House (ii) |
|||
Total consideration |
||||
Common shares issued |
$ | |||
Replacement awards |
||||
|
|
|||
Total consideration |
$ | |||
|
|
|||
Net identifiable assets (liabilities) acquired |
||||
Cash |
$ | |||
Accounts receivable |
||||
Inventory |
||||
Other current assets |
||||
Property and equipment |
||||
Right-of-use |
||||
Loans receivable, long-term |
||||
Equity method investment |
||||
Investments |
||||
Customer relationships |
||||
Trade names |
||||
Licenses |
||||
Market related intangibles |
||||
Internally developed software |
||||
|
|
|||
Total identifiable assets acquired |
$ | |||
|
|
|||
Short-term liabilities |
$ | ( |
) | |
Lease liabilities |
( |
) | ||
Deferred and contingent consideration |
( |
) | ||
Notes payable |
( |
) | ||
Deferred tax liabilities |
( |
) | ||
|
|
|||
Net identifiable assets acquired |
$ | |||
|
|
|||
Purchase price allocation |
||||
Net identifiable assets acquired |
$ | |||
Goodwill |
||||
|
|
|||
Total consideration |
$ | |||
|
|
(c) |
Deferred Consideration, Contingent Consideration and Other Payables |
($ in thousands) |
2021 |
2020 |
||||||
Valley Ag contingent consideration |
$ |
$ | ||||||
Cultivate contingent consideration |
||||||||
Laurel Harvest deferred consideration, short term |
||||||||
|
|
|
|
|||||
Total Deferred consideration, contingent consideration and other payables, short-term - acquisition related |
$ |
$ |
||||||
|
|
|
|
(d) |
Long-term Deferred and Contingent Consideration |
($ in thousands) |
2021 |
2020 |
||||||
Valley Ag operating cash flows consideration |
$ |
$ | ||||||
Laurel Harvest deferred consideration, long ter m |
||||||||
|
|
|
|
|||||
Total Long-term deferred and contingent consideration |
$ |
$ |
||||||
|
|
|
|
(e) |
Dispositions |
($ in thousands) |
2021 |
2020 |
||||||
Senior Loan, net of unamortized debt issuance costs |
$ |
$ |
||||||
Amended Term Loan |
||||||||
Interest payable |
||||||||
Financing liability - |
||||||||
Less: Unamortized debt issuance costs – Senior Loan |
|
|
( |
) |
|
|
|
|
Less: Unamortized debt issuance costs – Amended Term Loan |
|
|
|
|
|
|
( |
) |
|
|
|
|
|||||
Total borrowings and interest payable |
$ |
$ |
||||||
|
|
|
|
|||||
Less: Short-term borrowings and interest payable |
( |
) |
( |
) | ||||
Less: Current portion of Financing liability - |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Total Long-term notes and loans payable |
$ |
$ |
||||||
|
|
|
|
(a) |
Senior Loan and Amended Term Loan |
(b) |
OCN Loan |
(c) |
Financing Liabilities |
(a) |
Revenue |
($ in thousands) |
2021 |
2020 |
||||||
Wholesale |
$ | $ | ||||||
Dispensary |
||||||||
|
|
|
|
|||||
Total Revenue |
$ |
$ |
||||||
|
|
|
|
(b) |
Loyalty Programs |
($ in thousands) |
2021 |
2020 |
||||||
Unrealized gain (loss) on derivative liabilities - warrants |
$ | $ | ( |
) | ||||
Gain on derivative instruments |
||||||||
Loss on provision - loan receivable |
( |
) | ( |
) | ||||
Unrealized loss on investments held at fair value |
( |
) | ( |
) | ||||
Loss on debt extinguishment |
( |
) | ( |
) | ||||
Loss on disposal of assets |
( |
) |
( |
) | ||||
Loss on foreign currency |
( |
) | ( |
) | ||||
Other income (loss), net |
||||||||
|
|
|
|
|||||
Total Other income (expense), net |
$ |
$ |
( |
) | ||||
|
|
|
|
(a) |
Transactions with Key Management Personnel |
(b) |
Related Parties – Debt |
(c) |
Related Parties – L eases |
Year Ended December 31, |
||||||||||||
($ in thousands) |
Classification |
2021 |
2020 |
|||||||||
Operating Leases |
||||||||||||
Lessor has minority interest in SLO |
Rent expense | $ | $ | |||||||||
Lessor has minority interest in MedMar |
Rent expense | |||||||||||
Lessor is an MVS shareholder |
Rent expense | |||||||||||
Finance Leases |
||||||||||||
Lessor has minority interest in MedMar |
Depreciation expense | $ | $ | |||||||||
Lessor has minority interest in MedMar |
Interest |
|||||||||||
Lessor is an MVS shareholder |
Depreciation |
|||||||||||
Lessor is an MVS shareholder |
Interest |
As of December 31, 2021 |
As of December 31, 2020 |
|||||||||||||||
($ in thousands) |
ROU Asset |
Lease Liability |
ROU Asset |
Lease Liability |
||||||||||||
Operating Leases |
||||||||||||||||
Lessor has minority interest in SLO |
$ | $ | $ | $ | ||||||||||||
Lessor has minority interest in MedMar |
||||||||||||||||
Lessor is an MVS shareholder |
||||||||||||||||
Finance Leases |
||||||||||||||||
Lessor has minority interest in MedMar |
$ | $ | $ | $ | ||||||||||||
Lessor is an MVS shareholder |
(a) |
Claims and Litigation |
(b) |
Contingencies |
(c) |
Commitments |
• |
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities; |
• |
Level 2 – Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly; and |
• |
Level 3 – Inputs for the asset or liability that are not based on observable market data. |
December 31, 2021 |
||||||||||||||||||||
($ in thousands) |
Amortized Cost |
Level 1 |
Level 2 |
Level 3 |
Total |
|||||||||||||||
Financial Assets: |
||||||||||||||||||||
Cash and cash equivalents |
$ | $ | — | $ | — | $ | — | $ | ||||||||||||
Restricted cash 1 |
— | — | — | |||||||||||||||||
Security deposits |
— | — | — | |||||||||||||||||
Accounts receivable, net |
— | — | — | |||||||||||||||||
Loans receivable, short-term |
— | — | ||||||||||||||||||
Loans receivable, long-term |
— | — | — | |||||||||||||||||
Investments |
— | |||||||||||||||||||
Financial Liabilities: |
||||||||||||||||||||
Accounts payable |
$ | $ | — | $ | — | $ | — | $ | ||||||||||||
Accrued liabilities |
— | — | — | |||||||||||||||||
Short-term borrowings |
— | — | — | |||||||||||||||||
Current portion of lease liabilities |
— | — | — | |||||||||||||||||
Deferred consideration, contingent consideration and other payables, short-term |
— | |||||||||||||||||||
Derivative liabilities, short -term |
— | — | — | |||||||||||||||||
Lease liabilities |
— | — | — | |||||||||||||||||
Deferred consideration and contingent consideration, long-term |
— | — | — | |||||||||||||||||
Long-term notes payable and loans payable |
— | — | — |
1 Restricted |
cash balances include various escrow accounts related to investments, acquisitions, facility requirements and building improvements. |
December 31, 2020 |
||||||||||||||||||||
($ in thousands) |
Amortized Cost |
Level 1 |
Level 2 |
Level 3 |
Total |
|||||||||||||||
Financial Assets: |
||||||||||||||||||||
Cash and cash equivalents |
$ | $ | — | $ | — | $ | — | $ | ||||||||||||
Restricted cash 1 |
— | — | — | |||||||||||||||||
Security deposits |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Accounts receivable, net |
— | — | — | |||||||||||||||||
Loans receivable, short-term |
— | |||||||||||||||||||
Loans receivable, long-term |
— | — | ||||||||||||||||||
Investments 2 |
— | |||||||||||||||||||
Financial Liabilities: |
||||||||||||||||||||
Accounts payable |
$ | $ | — | $ | — | $ | — | $ | ||||||||||||
Accrued liabilities |
— | — | — | |||||||||||||||||
Short-term borrowings |
— | — | — | |||||||||||||||||
Current portion of lease liabilities |
— | — | — | |||||||||||||||||
Deferred consideration, contingent consideration and other payables, short-term |
— | — | ||||||||||||||||||
Derivative liabilities - long-term |
— | — | — | |||||||||||||||||
Lease liabilities |
— | — | — | |||||||||||||||||
Deferred consideration and contingent consideration, long-term |
— | — | — | |||||||||||||||||
Long- T erm N otes P ayable and L oans P ayable |
— | — | — |
1 |
Restricted cash balances include various escrow accounts related to investments, acquisitions and facility licensing requirements. |
2 |
Investment balances in the amortized cost column represent equity method investments. |
(a) |
Loans receivable, short-term |
($ in thousands) |
Valuation classification |
12/31/2021 |
12/31/2020 |
|||||||||
Short-term loans receivable - Lighthouse |
Fair value | $ | $ | |||||||||
Interest receivable |
Amortized cost | |||||||||||
|
|
|
|
|||||||||
Total Loans receivable, short-term |
$ |
$ |
||||||||||
|
|
|
|
(i) |
Lighthouse Loan |
(ii) |
Other Loans |
(b) |
Loans receivable, long-term |
($ in thousands) |
Valuation classification |
12/31/2021 |
12/31/2020 |
|||||||||
Long-term loans receivable - Verdant |
Fair value | $ | $ | |||||||||
Long-term loans receivable - Illinois Incubator |
Amortized cost | |||||||||||
Long-term loans receivable - Other |
Amortized cost | |||||||||||
Interest receivable |
Amortized cost | |||||||||||
|
|
|
|
|||||||||
Total Loans receivable, long-term |
$ |
$ |
||||||||||
|
|
|
|
(i) |
Verdant Loan |
(ii) |
Loans for Pending Acquisitions - Other |
(iii) |
Illinois Incubator Loan |
(iv) |
Other Loans |
(c) |
Share Purchase Warrants |
2021 |
2020 |
|||||||
Risk-free annual interest rate |
% | % | ||||||
Expected annual dividend yield |
% | % | ||||||
Expected stock price volatility |
% | % | ||||||
Expected life of stock warrants |
< |
|||||||
Forfeiture rate |
% | % | ||||||
Share price at period end |
$ | $ | ||||||
Strike price at period end |
$ | $ |
(a) |
Credit and Banking Risk |
($ in thousands) |
2021 |
2020 |
||||||
0 to 60 days |
$ | $ | ||||||
61 to 120 days |
||||||||
120 days + |
||||||||
|
|
|
|
|||||
Total accounts receivable, gross |
||||||||
Allowance for doubtful accounts |
||||||||
Total accounts receivable, net |
$ |
$ |
||||||
|
|
|
|
(b) |
Asset Forfeiture Risk |
(c) |
Liquidity Risk |
($ in thousands) |
< 1 Year |
1 to 3 Years |
3 to 5 Years |
Total |
||||||||||||
Accounts payable & Accrued liabilities |
$ | $ | $ | $ | ||||||||||||
Deferred consideration, contingent consideration and other payables |
||||||||||||||||
Deferred consideration and contingent consideration |
||||||||||||||||
Long-term notes payable and loans payable and Short-term borrowings |
||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total obligations as of December 31, 2021 |
$ |
$ |
$ |
$ |
||||||||||||
|
|
|
|
|
|
|
|
(d) |
Market Risk |
(i) |
Currency Risk |
(ii) |
Interest Rate Risk |
(iii) |
Price Risk |
(iv) |
Tax Risk |
(v) |
Regulatory Risk |
(vi) |
COVID-19 Risk |
December 31, 2021 |
December 31, 2020 |
|||||||||||
($ in thousands) |
Cresco Labs Michigan, LLC |
Cresco Labs Michigan, LLC |
Cresco Labs, LLC |
|||||||||
Current assets |
$ | $ | $ | |||||||||
Non-current assets |
||||||||||||
Current liabilities |
( |
) | ( |
) | ( |
) | ||||||
Non-current liabilities |
( |
) | ( |
) | ( |
) | ||||||
Non-controlling interests |
||||||||||||
Deficit attributable to Cresco Labs Inc. |
( |
) |
( |
) | ( |
) |
December 31, 2021 |
December 31, 2020 |
|||||||||||
($ in thousands) |
Cresco Labs Michigan, LLC |
Cresco Labs Michigan, LLC |
Cresco Labs, LLC |
|||||||||
Revenue |
$ | $ | $ | |||||||||
Net income (loss) attributable to non-controlling interests |
||||||||||||
Net income (loss) attributable to Cresco Labs Inc. |
( |
) | ( |
) | ||||||||
Net income (loss) |
( |
) |
( |
) |
($ in thousands) |
2021 |
2020 |
||||||
Interest expense – leases |
$ | ( |
) | $ | ( |
) | ||
Interest expense – notes and loans payable |
( |
) | ( |
) | ||||
Accretion of debt discount and amortization of deferred financing fees |
( |
) | ( |
) | ||||
Interest expense – financing activities and sale and leasebacks |
( |
) | ( |
) | ||||
Other interest expense |
( |
) | ( |
) | ||||
Interest income |
||||||||
|
|
|
|
|||||
Total Interest expense, net |
$ |
( |
) | $ |
( |
) | ||
|
|
|
|
($ in thousands) |
2021 |
2020 |
||||||
Current |
||||||||
Federal |
$ | $ | ||||||
State |
||||||||
Foreign |
||||||||
|
|
|
|
|||||
Total current |
$ | $ | ||||||
|
|
|
|
|||||
Deferred |
||||||||
Federal |
$ | ( |
) | $ | ( |
) | ||
State |
( |
) |
( |
) | ||||
Foreign |
( |
) | ||||||
|
|
|
|
|||||
Total deferred |
$ | ( |
) | $ | ( |
) | ||
|
|
|
|
|||||
Change in valuation allowance |
$ | $ | ||||||
|
|
|
|
|||||
Total |
$ |
$ |
||||||
|
|
|
|
($ in thousands) |
2021 |
2020 |
||||||
Deferred tax assets |
||||||||
Share-based compensation |
$ | $ | ||||||
Financing f ees |
||||||||
Net operating losses |
||||||||
Inventory |
||||||||
Capital losses |
||||||||
Lease liabilities |
||||||||
Other |
||||||||
|
|
|
|
|||||
Total deferred tax assets |
$ | $ | ||||||
|
|
|
|
|||||
Deferred tax liabilities |
||||||||
ROU assets |
$ | ( |
) |
$ | ( |
) | ||
Property, plant and equipment |
( |
) |
( |
) | ||||
Intangible assets |
( |
) | ( |
) | ||||
Other |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Total deferred tax liabilities |
$ | ( |
) | $ | ( |
) | ||
|
|
|
|
|||||
Valuation allowance |
$ | ( |
) | $ | ( |
) | ||
|
|
|
|
|||||
Net deferred tax liabilities |
$ |
( |
) | $ |
( |
) | ||
|
|
|
|
($ in thousands) |
2021 |
2020 |
||||||
Expected income tax expense at statutory tax rate |
$ | ( |
) | $ | ( |
) | ||
Tax rate differences |
( |
) | ( |
) | ||||
Pass through and non-controlling entities |
( |
) | ( |
) | ||||
State tax expense, net |
||||||||
IRC Section 280E disallowance |
||||||||
Changes in value of deferred consideration |
( |
) | ||||||
Loss on debt modification |
||||||||
Uncertain tax treatment |
( |
) | ||||||
Share-based compensation |
||||||||
Goodwill impairment |
||||||||
Change in valuation allowance |
||||||||
Other |
$ |
|||||||
|
|
|
|
|||||
Income tax expense |
$ |
$ |
||||||
|
|
|
|
|||||
Effective tax rate |
( |
%) |
( |
%) |
($ in thousands) |
2021 |
2020 |
||||||
Balance at January 1 |
$ | $ | ||||||
Additions based on tax positions related to the current year |
||||||||
Additions for tax positions of prior years |
||||||||
Reductions for tax positions of prior year s |
( |
) | ||||||
|
|
|
|
|||||
Balance at the end of the year |
$ |
$ |
||||||
|
|
|
|