Exhibit 99.1

CRESCO LABS INC.

UNAUDITED CONDENSED INTERIM CONSOLIDATED

FINANCIAL STATEMENTS

THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2022 AND 2021

(Expressed in United States Dollars)

Cresco Labs Inc.

INDEX TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS:
Unaudited Condensed Interim Consolidated Balance Sheets	2
Unaudited Condensed Interim Consolidated Statements of Operations	3
Unaudited Condensed Interim Consolidated Statements of Comprehensive Loss	4
Unaudited Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity	5
Unaudited Condensed Interim Consolidated Statements of Cash Flows	7
Notes  to the Unaudited Condensed Interim Consolidated Financial Statements	9

1

Cresco Labs Inc.

Unaudited Condensed Interim Consolidated Balance Sheets

As of September 30, 2022 and December 31, 2021

(In thousands of United States Dollars, except share and per share amounts)

	September 30,			December 31,
	2022			2021
ASSETS
Current assets:
Cash and cash equivalents	$	130,042		$	223,543
Restricted cash		2,278			2,559
Accounts receivable, net		51,649			43,379
Inventory, net		152,591			136,643
Loans receivable, short-term		—			1,312
Other current assets		18,641			14,319
Total current assets		355,201			421,755
Non-current assets:
Property and equipment, net		377,941			369,092
Right-of-use assets		128,135			88,017
Intangible assets, net		431,446			437,644
Loans receivable, long-term		1,255			505
Investments		1,670			5,912
Goodwill		448,376			446,767
Deferred tax asset		7,873			6,561
Other non-current assets		4,394			4,210
Total non-current assets		1,401,090			1,358,708
TOTAL ASSETS	$	1,756,291		$	1,780,463
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES
Current liabilities:
Accounts payable	$	29,194		$	32,278
Accrued liabilities		58,589			95,442
Short-term borrowings		28,847			19,928
Income tax payable		82,289			46,949
Current portion of lease liabilities		21,575			20,792
Deferred consideration, contingent consideration and other payables, short-term		50,066			71,833
Derivative liabilities, short-term		—			1,172
Total current liabilities		270,560			288,394
Non-current liabilities:
Long-term notes payable and loans payable		468,064			465,079
Lease liabilities		158,153			118,936
Deferred tax liability		77,009			85,666
Deferred consideration, long-term		4,058			17,651
Other long-term liabilities		7,000			7,001
Total non-current liabilities		714,284			694,333
TOTAL LIABILITIES		984,844			982,727
COMMITMENTS AND CONTINGENCIES (Note 15)
SHAREHOLDERS’ EQUITY
Super Voting Shares, no par value; 500,000 shares authorized, issued and outstanding at September 30, 2022 and December 31, 2021, respectively
Subordinate Voting Shares, no par value; unlimited shares authorized; 280,988,200 and 270,033,270 issued and outstanding at September 30, 2022 and December 31, 2021, respectively
Proportionate Voting Shares1, no par value; unlimited shares authorized, 20,082,384 and 20,667,206 issued and outstanding at September 30, 2022 and December 31, 2021, respectively
Special Subordinate Voting Shares2, no par value; 639 shares authorized, issued and outstanding at September 30, 2022 and December 31, 2021, respectively
Share capital		1,704,809			1,597,715
Accumulated other comprehensive loss		(239	)		(254	)
Accumulated deficit		(915,258	)		(841,907	)
Equity of Cresco Labs Inc.		789,312			755,554
Non-controlling interests		(17,865	)		42,182
TOTAL SHAREHOLDERS’ EQUITY		771,447			797,736
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,756,291		$	1,780,463

¹  Proportionate Voting Shares (“PVS”) presented on an “as-converted” basis to Subordinate Voting Shares (“SVS”) (1-to-200)

² Special Subordinate Voting Shares (“SSVS”) presented on an “as-converted” basis to SVS (1-to-0.00001)

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

2

Cresco Labs Inc.

Unaudited Condensed Interim Consolidated Statements of Operations

For the Three and Nine Months Ended September 30, 2022 and 2021

(In thousands of United States Dollars, except share and per share amounts)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Revenue, net	$	210,484		$	215,483		$	643,101		$	603,895
Costs of goods sold		111,372			107,162			323,792			307,570
Gross profit		99,112			108,321			319,309			296,325
Operating expenses:
Selling, general and administrative		82,872			81,390			260,125			238,284
Impairment loss		—			290,949			—			290,949
Total operating expenses		82,872			372,339			260,125			529,233
Income (loss) from operations		16,240			(264,018	)		59,184			(232,908	)
Other (expense) income:
Interest expense, net		(15,554	)		(13,577	)		(41,933	)		(36,360	)
Other income, net		14,797			1,735			12,706			2,120
Loss from equity method investments		—			—			—			(1,196	)
Total other expense, net		(757	)		(11,842	)		(29,227	)		(35,436	)
Income (loss) before income taxes		15,483			(275,860	)		29,957			(268,344	)
Income tax (expense) recovery		(18,732	)		12,408			(65,177	)		(16,579	)
Net loss		(3,249	)		(263,452	)		(35,220	)		(284,923	)
Net income attributable to non-controlling interests, net of tax		6,539			7,193			15,490			19,942
Net loss attributable to Cresco Labs Inc.	$	(9,788	)	$	(270,645	)	$	(50,710	)	$	(304,865	)
Net loss per share - attributable to Cresco Labs Inc. shareholders:
Basic and diluted loss per share	$	(0.03	)	$	(1.00	)	$	(0.17	)	$	(1.19	)
Basic and diluted weighted-average number of shares outstanding		301,118,445			271,183,423			296,750,663			256,335,128

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

3

Cresco Labs Inc.

Unaudited Condensed Interim Consolidated Statements of Comprehensive Loss For the Three and Nine Months Ended September 30, 2022 and 2021

(In thousands of United States Dollars)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Net loss	$	(3,249	)	$	(263,452	)	$	(35,220	)	$	(284,923	)
Foreign currency translation differences, net of tax		189			138			15			285
Total comprehensive loss for the period		(3,060	)		(263,314	)		(35,205	)		(284,638	)
Comprehensive income attributable to non-controlling interests, net of tax		6,539			7,193			15,490			19,942
Total comprehensive loss attributable to Cresco Labs Inc.	$	(9,599	)	$	(270,507	)	$	(50,695	)	$	(304,580	)

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

4

Cresco Labs Inc.

Unaudited Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity

For the Nine Months Ended September 30, 2022 and 2021

(In thousands of United States Dollars)

	Share capital			Accumulated deficit			Accumulated other comprehensive loss, net of tax			Non-controlling interests			Total
Balance as of January 1, 2021	$	802,264		$	(328,380	)	$	(647	)	$	102,095		$	575,332
Exercise of options and warrants		1,956			—			—			—			1,956
Equity-based compensation		6,207			—			—			—			6,207
Employee taxes on certain share-based payment arrangements		13,139			—			—			—			13,139
Income tax reserve		—			80			—			—			80
Equity issued related to acquisitions		2,000			—			—			—			2,000
Private placement issuance, net of costs		123,469			—			—			—			123,469
Equity issuances		15,790			—			—			—			15,790
Distributions to non-controlling interest holders		(2,165	)		—			—			(3,980	)		(6,145	)
Cresco LLC shares redeemed and other adjustments		93,264			(85,538	)		—			(5,403	)		2,323
Foreign currency translation		—			—			354			—			354
Net income (loss)		—			(29,393	)		—			5,269			(24,124	)
Balance as of March 31, 2021	$	1,055,924		$	(443,231	)	$	(293	)	$	97,981		$	710,381
Exercise of options and warrants		2,564			—			—			—			2,564
Equity-based compensation		9,723			—			—			—			9,723
Employee taxes on certain share-based payment arrangements		(698	)		—			—			—			(698	)
Income tax reserve		—			87			—			—			87
Net impact pursuant to tax receivable agreement		611			—			—			—			611
Equity issued related to acquisitions		213,558			—			—			—			213,558
Equity issuances		(387	)		—			—			—			(387	)
Distributions to non-controlling interest holders		48,708			—			—			(53,930	)		(5,222	)
Cresco LLC shares redeemed and other adjustments		87,932			(86,682	)		—			(3,685	)		(2,435	)
Foreign currency translation		—			—			(207	)		—			(207	)
Net income (loss)		—			(4,827	)		—			7,480			2,653
Balance as of June 30, 2021	$	1,417,935		$	(534,653	)	$	(500	)	$	47,846		$	930,628
Exercise of options and warrants		770			—			—			—			770
Equity-based compensation		6,753			—			—			—			6,753
Employee taxes on certain share-based payment arrangements		(736	)		—			—			—			(736	)
Income tax reserve		—			11			—			—			11
Payable pursuant to tax receivable agreements		(1,522	)		—			—			—			(1,522	)
Tax benefit from shareholder redemptions		1,052			—			—			—			1,052
Equity issued related to acquisitions		44,810			—			—			—			44,810
Equity issuances		118			—			—			—			118
Distributions to non-controlling interest holders		5,263			—			—			(11,655	)		(6,392	)
Cresco LLC shares redeemed and other adjustments		9,354			(7,773	)		—			(1,476	)		105
Foreign currency translation		—			—			138			—			138
Net (loss) income		—			(270,645	)		—			7,193			(263,452	)
Balance as of September 30, 2021	$	1,483,797		$	(813,060	)	$	(362	)	$	41,908		$	712,283

5

Cresco Labs Inc.

Unaudited Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity

For the Nine Months Ended September 30, 2022 and 2021

(In thousands of United States Dollars)

	Share capital			Accumulated deficit			Accumulated other comprehensive loss, net of tax			Non-controlling interests			Total
Balance as of January 1, 2022	$	1,597,715		$	(841,907	)	$	(254	)	$	42,182		$	797,736
Exercise of options and warrants		358			—			—			—			358
Equity-based compensation		7,727			—			—			—			7,727
Employee taxes on certain share-based payment arrangements		(87	)		—			—			—			(87	)
Income tax reserve		—			78			—			—			78
Payable pursuant to tax receivable agreements		(163	)		—			—			—			(163	)
Tax benefit from shareholder redemptions		186			—			—			—			186
Distributions to non-controlling interest holders		(9,992	)		—			—			(8,233	)		(18,225	)
Cresco LLC shares redeemed and other adjustments		11,708			(11,185	)		—			(523	)		—
Foreign currency translation		—			—			(190	)		—			(190	)
Net income (loss)		—			(27,381	)		—			3,706			(23,675	)
Balance as of March 31, 2022	$	1,607,452		$	(880,395	)	$	(444	)	$	37,132		$	763,745
Exercise of options		369			—			—			—			369
Equity-based compensation		7,547			—			—			—			7,547
Employee taxes on certain share-based payment arrangements		(326	)		—			—			—			(326	)
Equity issuances related to acquisitions		34,708			—			—			—			34,708
Distributions to non-controlling interest holders		50,258			(6,095	)		—			(58,302	)		(14,139	)
Foreign currency translation		—			—			16			—			16
Net income (loss)		—			(13,541	)		—			5,245			(8,296	)
Balance as of June 30, 2022	$	1,700,008		$	(900,031	)	$	(428	)	$	(15,925	)	$	783,624
Exercise of options		(28	)		—			—			—			(28	)
Equity-based compensation		3,174			—			—			—			3,174
Employee taxes on certain share-based payment arrangements		(5	)		—			—			—			(5	)
Income tax reserve		—			70			—			—			70
Payable pursuant to tax receivable agreements		(135	)		—			—			—			(135	)
Tax benefit from shareholder redemptions		153			—			—			—			153
Distributions to non-controlling interest holders		(3,638	)		—			—			(8,708	)		(12,346	)
Cresco LLC shares redeemed and other adjustments		5,280			(5,509	)		—			229			—
Foreign currency translation		—			—			189			—			189
Net income (loss)		—			(9,788	)		—			6,539			(3,249	)
Balance as of September 30, 2022	$	1,704,809		$	(915,258	)	$	(239	)	$	(17,865	)	$	771,447

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

6

Cresco Labs Inc.

Unaudited Condensed Interim Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, 2022 and 2021

(In thousands of United States Dollars)

	Nine Months Ended September 30,
	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(35,220	)	$	(284,923	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		37,468			30,443
Amortization of operating lease assets		4,177			5,018
Bad debt expense and provision expense for expected credit losses		926			1,416
Share-based compensation expense		17,950			22,604
Loss (gain) on investments		4,165			(1,481	)
Loss (gain) on changes in fair value of deferred and contingent consideration		5,667			(6,947	)
Gain on derivative instruments and warrants		(1,184	)		(10,668	)
Loss on inventory write-offs and provision		1,281			2,926
Impairment loss		—			290,949
Change in deferred taxes		(9,048	)		(40,570	)
Accretion of discount and deferred financing costs on debt arrangements		2,913			10,376
Loss on debt extinguishment		—			10,342
Foreign currency loss		267			777
Loss on disposal of property, plant and equipment		1,954			—
Gain on lease termination and sale and leaseback transaction		(19,990	)		—
(Gains) net of losses, on other adjustments to net income		—			(1,678	)
Settlement gain		—			(810	)
Loss on divestiture		—			1,149
Changes in operating assets and liabilities:
Accounts receivable		(9,706	)		(14,102	)
Inventory		(14,610	)		(20,467	)
Other assets		(5,395	)		(3,218	)
Accounts payable and other accrued expenses		14,682			9,790
Operating lease liabilities		(15,417	)		(11,958	)
Other current liabilities		—			(91	)
Income tax payable		34,230			(12,043	)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		15,110			(23,166	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(69,894	)		(76,539	)
Purchases of intangibles		(2,918	)		(2,666	)
Proceeds from sale and leaseback transactions and tenant improvement allowances		47,440			25,485
Payment of acquisition consideration, net of cash acquired		(1,135	)		(21,883	)
Proceeds from divestiture, net of cash transferred		—			69
Proceeds from disposals of property and equipment		930			—
Receipts from collections of loans and advances		2,654			2,000
Loans and advances for entities expected to be acquired		(1,200	)		(26,292	)
NET CASH USED IN INVESTING ACTIVITIES		(24,123	)		(99,826	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from January offering		—			124,105
Proceeds from the issuance of long-term debt		—			387,000
Payment of debt, financing issuance costs and non-extending lender fees		—			(6,461	)
Payment of debt prepayment and debt extinguishment costs		—			(16,202	)
Proceeds from exercise of stock options, warrants and sell-to-cover shares		3,215			18,443
Payments for taxes related to net share settlements of restricted stock units		—			(143	)
Payment of acquisition-related contingent consideration		(4,927	)		—
Distributions to non-controlling interest redeemable unit holders		(81,139	)		(66,183	)
Repayment of debt		—			(200,000	)
Principal payments on finance lease obligations		(1,761	)		(3,179	)
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES		(84,612	)		237,380
Effect of foreign currency exchange rate changes on cash		(157	)		(365	)
Net change in cash and cash equivalents and restricted cash		(93,782	)		114,023
Cash and cash equivalents and restricted cash, beginning of period		226,102			140,774
Cash and cash equivalents, end of period		130,042			252,838
Restricted cash, end of period		2,278			1,959

7

Cresco Labs Inc.

Unaudited Condensed Interim Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, 2022 and 2021

(In thousands of United States Dollars)

	Nine Months Ended September 30,
	2022			2021
Cash and cash equivalents and restricted cash, end of period	$	132,320		$	254,797
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
CASH PAID DURING THE PERIOD:
Income tax, net	$	39,990		$	70,010
Interest		30,212			37,508
NON-CASH INVESTING AND FINANCING TRANSACTIONS:
Other share issuances	$	—		$	273,158
Non-cash consideration for business combination		34,708			46,641
Non-controlling interests redeemed for equity		382			10,563
Increase to net lease liability		22,112			20,611
Liability incurred to purchase property and equipment and intangibles		7,654			5,536
Cashless exercise of stock options and warrants		(1,813	)		951
Unpaid declared distributions to non-controlling interest redeemable unit holders		10,962			6,277
Receivable due from financing lease transactions		1,086			—
Liability incurred in accordance with tax receivable agreement		298			1,522
Issuance of shares for non-solicitation intangible asset		—			3,000
Issuance of shares for settlement		—			12,790

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

8

Cresco Labs Inc.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2022 and 2021

NOTE 1. NATURE OF OPERATIONS

Cresco Labs Inc. (“Cresco Labs” or the “Company”), formerly known as Randsburg International Gold Corp. (“Randsburg”) was incorporated in the Province of British Columbia under the Company Act (British Columbia) on July 6, 1990. The Company is one of the largest vertically-integrated multi-state cannabis operators in the United States licensed to cultivate, manufacture and sell retail and medical cannabis products primarily through Sunnyside*^®, Cresco Labs’ national dispensary brand and third-party retail stores. Employing a consumer-packaged goods approach to cannabis, Cresco Labs’ house of brands is designed to meet the needs of all consumer segments and includes Cresco^®, Cresco Reserve^®, High Supply^®, Mindy’s^TM, Good News^®, Remedi^TM, Wonder Wellness Co.^® and FloraCal^® Farms. The Company operates in and/or has ownership interests in Illinois, Pennsylvania, Ohio, California, Arizona, New York, Massachusetts, Michigan, Florida and Maryland pursuant to the Illinois Compassionate Use of Medical Cannabis Pilot Program Act and the Illinois Cannabis Regulation and Tax Act; the Pennsylvania Compassionate Use of Medical Cannabis Act; the Ohio Medical Marijuana Control Program; the California Medicinal and Adult-Use Cannabis Regulation and Safety Act; the Arizona Medical Marijuana Act and the Smart and Safe Arizona Act; the New York Compassionate Care Act and the New York Marijuana Regulation and Tax Act; the Massachusetts Regulation and Taxation of Marijuana Act and the Medical Use of Marijuana Act; the Michigan Medical Marihuana Act, the Michigan Medical Marihuana Facilities Licensing Act and the Michigan Regulation and Taxation of Marihuana Act; the Florida Compassionate Medical Cannabis Act; and the Maryland Medical Marijuana Act, respectively.

On November 30, 2018, in connection with a reverse takeover (the “Transaction”), the Company (i) consolidated its outstanding Randsburg common shares on an 812.63 old for one (1) new basis and (ii) filed an alteration to its Notice of Articles with the British Columbia Registrar of Companies to change its name from Randsburg to Cresco Labs Inc. and to amend the rights and restrictions of its existing classes of common shares, redesignate such classes as the class of SVS and create the classes of PVS and Super Voting Shares (“MVS”).

Pursuant to the Transaction, among the Company (then Randsburg) and Cresco Labs, LLC, a series of transactions were completed on November 30, 2018, resulting in a reorganization of Cresco Labs, LLC and Randsburg in which Randsburg became the indirect parent and sole voting unitholder of Cresco Labs. The Transaction constituted a reverse takeover of Randsburg by Cresco Labs, LLC, under applicable securities laws. Cresco Labs, LLC was formed as a limited liability company under the laws of the state of Illinois on October 8, 2013 and is governed by the Cresco LLC limited liability agreement (“Pre-Combination LLC Agreement”). The Pre-Combination LLC Agreement was further amended and restated in connection with the completion of the Transaction.

The Company trades on the Canadian Securities Exchange under the ticker symbol “CL,” on the Over-the-Counter Market under the ticker symbol “CRLBF” and on the Frankfurt Stock Exchange under the symbol “6CQ.”

The Company’s head office is located at Suite 110, 400 W Erie St, Chicago, IL 60654. The registered office is located at Suite 2500, 666 Burrard Street, Vancouver, BC V6C 2X8.

9

Cresco Labs Inc.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2022 and 2021

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Preparation

The accompanying unaudited condensed interim consolidated financial statements of the Company have been prepared in accordance with accounting standards generally accepted in the United States (“GAAP”) for interim financial information. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to Accounting Standards Codification (“ASC”) 270 Interim Reporting. The financial data presented herein should be read in conjunction with the Company’s audited annual consolidated financial statements and accompanying notes as filed on SEDAR. Consolidated Balance Sheets for the year ended December 31, 2021, are derived from audited financial statements filed on SEDAR on March 25, 2022. In the opinion of management, the unaudited financial data presented includes all adjustments necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented. Operating results for the three and nine months ended September 30, 2022, are not necessarily indicative of results that may be expected for any other reporting period. These unaudited condensed interim consolidated financial statements include estimates and assumptions of management that affect the amounts reported. Actual results could differ from these estimates.

(b) Basis of Measurement

The accompanying unaudited condensed interim consolidated financial statements have been prepared on a going concern basis, under the historical cost convention, except for certain loans receivable, investments, derivative instruments, deferred consideration and contingent consideration, which are recorded at fair value. Historical cost is generally based upon the fair value of the consideration given in exchange for assets acquired and the contractual obligation for liabilities incurred.

(c) Functional and Presentation Currency

The Company’s functional currency and that of the majority of its subsidiaries is the United States (“U.S.”) dollar. The Company’s reporting currency is the U.S. dollar (“USD”). All references to “C$” refer to Canadian dollars. Foreign currency denominated assets and liabilities are re-measured into the functional currency using period-end exchange rates. Gains and losses from foreign currency transactions are included in Other income, net in the Unaudited Condensed Interim Consolidated Statements of Operations.

Assets and liabilities of foreign operations having a functional currency other than USD (e.g., C$) are translated at the rate of exchange prevailing at the reporting date; revenues and expenses are translated at the monthly average rate of exchange during the period. Gains or losses on translation of foreign subsidiaries and net investments in foreign operations are included in Foreign currency translation differences, net of tax in the Unaudited Condensed Interim Consolidated Statements of Comprehensive Loss and in Accumulated other comprehensive loss on the Unaudited Condensed Interim Consolidated Balance Sheets.

(d) Basis of Consolidation

The unaudited condensed interim consolidated financial statements include the accounts of the Company and its subsidiaries with intercompany balances and transactions eliminated upon consolidation. Subsidiaries are those entities over which the Company has power over the investee, is exposed, or has rights, to variable involvement with the investee; and has the ability to use its power to affect its returns.

10

Cresco Labs Inc.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2022 and 2021

The following are Cresco Labs’ wholly-owned or controlled entities as of September 30, 2022:

Entity	Location		Purpose		Percentage Held
Cresco Labs Inc.		British Columbia, Canada		Parent Company
CannaRoyalty Corp. (Origin House)		Ontario, Canada		Holding Company		100	%
Cali-AntiFragile Corp.		California		Holding Company		100	%
Alta Supply Inc. (Continuum)		California		Distribution		100	%
Kaya Management Inc.		California		Production		100	%
River Distributing Co., LLC		California		Distribution		100	%
FloraCal Farms		California		Cultivation		100	%
Cub City, LLC		California		Cultivation		100	%
CRHC Holdings Corp.		Ontario, Canada		Holding Company		100	%
Laurel Harvest Labs, LLC		Pennsylvania		Cultivation and Dispensary Facility		100	%
JDRC Mount Joy, LLC		Illinois		Holding Company		100	%
JDRC Scranton, LLC		Illinois		Holding Company		100	%
Bluma Wellness Inc.		British Columbia, Canada		Holding Company		100	%
CannCure Investments Inc.		Ontario, Canada		Holding Company		100	%
Cannabis Cures Investments, LLC		Florida		Holding Company		100	%
3 Boys Farm, LLC (One Plant Florida)		Florida		Cultivation, Production and Dispensary Facility		100	%
Farm to Fresh Holdings, LLC		Florida		Cultivation, Production and Dispensary Facility		100	%
Cresco U.S. Corp.		Illinois		Manager of Cresco Labs, LLC		100	%
MedMar Inc.		Illinois		Holding Company		100	%
MedMar Lakeview, LLC		Illinois		Dispensary		88	%
MedMar Rockford, LLC		Illinois		Dispensary		75	%
Gloucester Street Capital, LLC		New York		Holding Company		100	%
Valley Agriceuticals, LLC		New York		Operating Entity		100	%
JDRC Ellenville, LLC		Illinois		Holding Company		100	%
CMA Holdings, LLC		Illinois		Holding Company		100	%
BL Real Estate, LLC		Massachusetts		Holding Company		100	%
Cultivate Licensing LLC		Massachusetts		Cultivation, Production and Dispensary Facility		100	%
Cultivate Worcester, Inc		Massachusetts		Dispensary		100	%
Cultivate Leicester, Inc		Massachusetts		Cultivation, Production and Dispensary Facility		100	%
Cultivate Framingham, Inc		Massachusetts		Dispensary		100	%
Cultivate Burncoat, Inc		Massachusetts		Holding Company		100	%
Cultivate Cultivation, Inc		Massachusetts		Cultivation and Production Entity		100	%
Good News Holdings, LLC		Illinois		Holding Company		100	%
Wonder Holdings, LLC		Illinois		Holding Company		100	%
JDRC Seed, LLC		Illinois		Holding Company		100	%
CP Pennsylvania Holdings, LLC		Illinois		Holding Company		100	%
Bay, LLC		Pennsylvania		Holding Company		100	%
Bay Asset Management, LLC		Pennsylvania		Holding Company		100	%
Ridgeback, LLC		Colorado		Holding Company		100	%
Cresco Labs, LLC		Illinois		Operating Entity		58	%
Cresco Labs Notes Issuer, LLC		Illinois		Holding Company
Cresco Labs Ohio, LLC		Ohio		Cultivation, Production and Dispensary Facility		99	%
Wellbeings, LLC		Delaware		CBD Wellness Product Development		100	%
Cresco Labs SLO, LLC		California		Holding Company		100	%
SLO Cultivation Inc.		California		Cultivation and Production Facility		80	%
Cresco Labs Joliet, LLC		Illinois		Cultivation and Production Facility		100	%
Cresco Labs Kankakee, LLC		Illinois		Cultivation and Production Facility		100	%

11

Cresco Labs Inc.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2022 and 2021

Entity	Location		Purpose		Percentage Held
Cresco Labs Logan, LLC		Illinois		Cultivation and Production Facility		100	%
Cresco Labs PA, LLC		Illinois		Holding Company		100	%
Cresco Yeltrah, LLC		Pennsylvania		Cultivation, Production and Dispensary Facility		100	%
JDC Newark, LLC		Ohio		Holding Company		100	%
Verdant Creations Newark, LLC		Ohio		Dispensary		100	%
JDC Marion, LLC		Ohio		Holding Company		100	%
Verdant Creations Marion, LLC		Ohio		Dispensary		100	%
JDC Chillicothe, LLC		Ohio		Holding Company		100	%
Verdant Creations Chillicothe, LLC		Ohio		Dispensary		100	%
JDC Columbus, LLC		Ohio		Holding Company		100	%
Care Med Associates, LLC		Ohio		Dispensary		100	%
Cresco Labs Arizona, LLC		Arizona		Holding Company		100	%
Arizona Facilities Supply, LLC		Arizona/Maryland		Cultivation, Production and Dispensary Facility		100	%
Cresco Labs Tinad, LLC		Illinois		Holding Company		100	%
PDI Medical III, LLC		Illinois		Dispensary		100	%
Cresco Labs Phoenix Farms, LLC		Illinois		Holding Company		100	%
Phoenix Farms of Illinois, LLC		Illinois		Dispensary		100	%
JDC Elmwood, LLC		Illinois		Holding Company		100	%
FloraMedex, LLC		Illinois		Dispensary		100	%
Cresco Edibles, LLC		Illinois		Holding Company		100	%
TSC Cresco, LLC		Illinois		Licensing		75	%
Cresco HHH, LLC		Massachusetts		Cultivation, Production and Dispensary Facility		100	%
Cresco Labs Michigan, LLC (a)		Michigan		Cultivation and Production Facility		85	%

(a) Cresco Labs Michigan, LLC is 85% owned by related parties within management of the Company.

Cresco U.S. Corp., which is wholly owned by the Company, is the sole manager of Cresco Labs, LLC; Cresco Labs, LLC is the sole owner and manager of Cresco Labs Notes Issuer, LLC. Therefore, the Company controls Cresco Labs Notes Issuer, LLC and has consolidated its results into the unaudited condensed interim consolidated financial statements.

Non-controlling interests (“NCI”) represent ownership interests in consolidated subsidiaries by parties that are not shareholders of the Company. They are shown as a component of total equity in the Unaudited Condensed Interim Consolidated Balance Sheets and the share of net income attributable to NCI is shown as a component of Net loss in the Unaudited Condensed Interim Consolidated Statements of Operations and in the Unaudited Condensed Interim Consolidated Statement of Comprehensive Loss. Changes in the parent company’s ownership that do not result in a loss of control are accounted for as equity transactions.

(e) Earnings (Loss) Per Share

Earnings (loss) per share (“EPS”) is calculated by dividing the net earnings or loss attributable to shareholders by the weighted-average shares outstanding during the period. The Company presents basic and diluted EPS in the Unaudited Condensed Interim Consolidated Statements of Operations. Basic EPS is calculated by dividing the profit or loss attributable to shareholders by the weighted-average number of shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to shareholders and the weighted-average number of shares outstanding for the effects of all dilutive potential shares, which are comprised of redeemable Cresco Labs, LLC shares; options, warrants and restricted stock units (“RSUs”) issued. Shares with anti-dilutive impacts are excluded from the calculation. The number of shares included with respect to redeemable shares, options, warrants and RSUs is computed using the treasury stock method.

12

Cresco Labs Inc.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2022 and 2021

Potentially dilutive shares as of September 30, 2022 and September 30, 2021, which were excluded from the calculation of diluted EPS for the periods presented consisted of the following:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In thousands)	2022		2021		2022		2021
Redeemable shares		107,039		111,216		107,864		116,824
Options		23,546		11,921		23,546		13,839
Warrants		2,086		4,796		2,086		4,106
RSUs		4,114		726		4,114		814
Total potentially dilutive shares		136,785		128,659		137,610		135,583

(f) Recently Adopted Accounting Pronouncements

In May 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2021-04 Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). ASU No. 2021-04 clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options due to a lack of explicit guidance in the FASB Codification. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The adoption of this guidance has not had a material impact on the Company’s unaudited condensed interim consolidated financial statements.

(g) Recently Issued Accounting Standards

In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). ASU No. 2020-06 simplifies and adds disclosure requirements for the accounting and measurement of convertible instruments and the settlement assessment for contracts in an entity’s own equity. The amendments in this update are effective for all business entities for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. We do not expect the adoption of this guidance will have a material impact on the Company’s unaudited condensed interim consolidated financial statements.

13

Cresco Labs Inc.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2022 and 2021

NOTE 3. INVENTORY

Inventory as of September 30, 2022 and December 31, 2021, consisted of the following:

($ in thousands)	September 30, 2022		December 31, 2021
Raw materials	$	36,362	$	38,618
Raw materials - non-cannabis		30,809		22,260
Work-in-process		44,651		26,561
Finished goods		40,769		49,204
Total Inventory	$	152,591	$	136,643

The Company wrote-off $0.9 million and $1.2 million of inventory during the three and nine months ended September 30, 2022, respectively, and wrote off $1.5 million and $1.7 million during the three and nine months ended September 30, 2021, respectively. These write-offs are included in Cost of goods sold presented on the Unaudited Condensed Interim Consolidated Statements of Operations.

NOTE 4. PROPERTY AND EQUIPMENT

As of September 30, 2022 and December 31, 2021, Property and equipment consisted of the following:

($ 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, 2022	$	146,884		$	38,968		$	26,227		$	152,778		$	8,148		$	3,258		$	42,847		$	419,110
Additions		29,826			2,622			1,812			2,993			296			134			31,770			69,453
Transfers		108			2,220			1,035			(282	)		1,131			—			(4,212	)		—
Disposals		—			(105	)		(61	)		(251	)		—			(14	)		(2,639	)		(3,070	)
Sale related to sale and leaseback transaction		(2,305	)		(3,333	)		(2,188	)		(29,857	)		—			—			—			(37,683	)
Measurement period adjustments		1,829			(210	)		929			(1,348	)		—			—			—			1,200
Effect of foreign exchange and other adjustments		252			(1	)		7			(288	)		(6	)		33			—			(3	)
As of September 30, 2022	$	176,594		$	40,161		$	27,761		$	123,745		$	9,569		$	3,411		$	67,766		$	449,007
Accumulated depreciation
Balance as of January 1, 2022	$	(7,498	)	$	(6,821	)	$	(7,579	)	$	(23,149	)	$	(3,927	)	$	(1,044	)	$	—		$	(50,018	)
Depreciation		(4,792	)		(4,745	)		(4,664	)		(12,752	)		(1,717	)		(503	)		—			(29,173	)
Disposals		—			26			24			91			—			—			—			141
Sale related to sale and leaseback transaction		36			736			950			6,262			—			—			—			7,984
As of September 30, 2022	$	(12,254	)	$	(10,804	)	$	(11,269	)	$	(29,548	)	$	(5,644	)	$	(1,547	)	$	—		$	(71,066	)
Net book value
As of December 31, 2021	$	139,386		$	32,147		$	18,648		$	129,629		$	4,221		$	2,214		$	42,847		$	369,092
As of September 30, 2022	$	164,340		$	29,357		$	16,492		$	94,197		$	3,925		$	1,864		$	67,766		$	377,941

As of September 30, 2022 and December 31, 2021, costs related to construction at the Company’s facilities and dispensaries were capitalized in construction in progress and not depreciated. Depreciation will commence when construction is completed and the facilities and dispensaries are available for their intended use. Land costs at each balance sheet date are included in Land and Buildings.

14

Cresco Labs Inc.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2022 and 2021

In the second quarter of 2022, the Company determined that approximately $2.4 million of materials held in construction in progress would not be used. The assets were classified as held for sale as of June 30, 2022. Based on an analysis of fair value for these materials, the book value of these assets was written down to $0.9 million during the second quarter of 2022, with a $1.5 million loss on sale recorded to Selling, general and administrative expenses in the Unaudited Condensed Interim Consolidated Statements of Operations. The materials were sold in July of 2022 for $0.9 million.

During the second quarter of 2022, the Company initiated a plan to shut down a cultivation facility and a production facility in California. As a result of this plan, the Company exercised its early termination right to reduce the existing lease terms to 180 days at these locations and determined that the useful life of impacted leasehold improvements had essentially ended. As such, the Company accelerated depreciation on these leasehold improvements to reduce the associated net book value down to $nil, with additional depreciation expense taken on these leasehold improvements in the amount of $2.7 million during the second quarter of 2022. During the three months ended September 30, 2022, the Company recorded additional accelerated depreciation on other remaining assets at the facility in the amount of $0.6 million. The Company is currently in the process of determining a disposal plan for the remaining assets at these locations.

On September 1, 2022, the Company closed on a sale and leaseback transaction to sell its Brookville, Pennsylvania facility to Aventine Property Group (“Aventine”). Concurrent with the closing of the sale, the Company, entered into a long-term, triple-net lease agreement with Aventine and will continue to operate the facility as a permitted cannabis cultivation and processing facility. In connection with this transaction, the Company disposed of fixed assets with a net book value of $29.7 million and recorded a net gain on sale of assets of $14.7 million to Other income, net, in the Unaudited Condensed Interim Consolidated Statements of Operations.

In addition to the depreciation expense on long-lived assets shown above of $29.2 million, additional depreciation expense was recorded during the three months ended September 30, 2022 related to an abandoned construction in progress project of $0.6 million. Total depreciation of $9.5 million and $7.1 million was incurred during the three months ended September 30, 2022 and 2021, respectively, of which $2.4 million and $1.6 million, respectively, is included in Selling, general and administrative expenses, with $7.1 million and $5.5 million in Cost of goods sold and ending inventory, respectively. Total depreciation of $29.8 million and $18.3 million was incurred during the nine months ended September 30, 2022 and 2021, respectively, of which $7.0 million and $4.6 million, respectively, is included in Selling, general and administrative expenses, with $22.8 million and $13.7 million in Cost of goods sold and ending inventory, respectively.

As of September 30, 2022 and December 31, 2021, ending inventory includes $11.4 million and $9.1 million of capitalized depreciation, respectively. For the three months ended September 30, 2022 and 2021, $8.1 million and $4.1 million, respectively, of depreciation was recorded to Cost of goods sold, which includes $6.5 million and $2.7 million, respectively, related to depreciation capitalized to inventory in prior quarters. For the nine months ended September 30, 2022 and 2021, $20.5 million and $11.1 million, respectively, of depreciation was recorded to Cost of goods sold, which includes $8.9 million and $3.6 million, respectively, related to depreciation capitalized to inventory in prior years.

15

Cresco Labs Inc.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2022 and 2021

NOTE 5. LEASES

The Company is the lessee in all of its leasing arrangements and has entered into leases primarily for its corporate office, cultivation and processing facilities and dispensaries. Depending upon the type of lease, the original lease terms generally range from 1 year to 20 years. Certain leases include renewal options ranging from less than one year to 25 years. The Company is reasonably certain to exercise renewal options ranging from 1 year to 10 years on certain leases.

The Company also has long-term financing liabilities associated with certain properties. See Note 11 for additional details on these transactions.

During the second quarter of 2022, the Company initiated a plan to shut down a cultivation facility and a production facility in California. As a result of this plan, the Company has terminated the existing leases at these locations. A termination notice was issued to the landlord of these locations, which included two long-term greenhouse leases and a short-term rental of a housing facility. Due to differences between the carrying amounts of the right-of-use (“ROU”) assets and lease liabilities associated with these leases, a gain on lease termination of $5.2 million was recorded for the nine months ended September 30, 2022 and is included in Other income, net, in the Unaudited Condensed Interim Consolidated Statements of Operations.

On September 1, 2022, the Company closed on a sale and leaseback transaction to sell its Brookville, Pennsylvania, facility to Aventine. Concurrent with the closing of the sale, the Company entered into a long-term, triple-net lease agreement with Aventine and will continue to operate the facility as the permitted cannabis cultivation and processing facility. The selling price for the property was $43.7 million, net of transaction costs and a net gain on sale of assets of $14.7 million was recorded to Other income, net, in the Unaudited Condensed Interim Consolidated Statements of Operations. The lease has a term of 10 years and was recorded as an operating lease which resulted in a ROU asset and lease liability of $29.7 million.

As of both September 30, 2022 and December 31, 2021, ending inventory includes $0.1 million of capitalized lease depreciation. For both the three months ended September 30, 2022 and 2021, $0.1 million of lease depreciation was recorded to Cost of goods sold which includes $0.1 million of lease depreciation capitalized to inventory in prior quarters. For both the nine months ended September 30, 2022 and 2021, $0.3 million of lease depreciation was recorded to Cost of goods sold, which includes $0.1 million and $0.2 million, respectively, of lease depreciation capitalized to inventory in prior years.

NOTE 6. INVESTMENTS

The Company has investments in five entities: 420 Capital Management, LLC (“420 Capital”), a cannabis investment company; Lighthouse Strategies, LLC (“Lighthouse”), a diversified cannabis investment company; Infamy Brews, LLC (“Two Roots Brewing Co.”), a non-alcoholic brewing company; IM Cannabis Corp. (“IMC”), a pharmaceutical manufacturer that specializes in cannabis and OLD PAL LLC (“Old Pal”), a cannabis operator/licensor.

The 420 Capital, Lighthouse and Old Pal investments are held at fair value and are classified as equity securities without a readily determinable value. The IMC investment is classified as a marketable security with a readily determinable fair value.

During the nine months ended September 30, 2022, Lighthouse, in conjunction with a spin-off transaction, issued Lighthouse shareholders a prorated interest in Infamy Brews, LLC, DBA Two Roots Brewing Co. As a result, the Company now holds an 0.8% ownership interest in Two Roots Brewing Co. The investment is held at fair value and classified as an equity security without a readily determinable value.

16

Cresco Labs Inc.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2022 and 2021

The following is a summary of the investments held at fair value as of September 30, 2022 and December 31, 2021:

($ in thousands)	September 30, 2022		December 31, 2021
420 Capital	$	68	$	68
Lighthouse		339		542
Two Roots Brewing Co.		93		—
Old Pal		592		592
IMC		578		4,710
Total Investments	$	1,670	$	5,912

The Company recorded mark-to-market losses of $0.3 million and $2.9 million for the three months ended September 30, 2022 and 2021, respectively, and mark-to-market losses of $4.2 million and $6.8 million for the nine months ended September 30, 2022 and 2021, respectively.

NOTE 7. INTANGIBLE ASSETS AND GOODWILL

As of September 30, 2022 and December 31, 2021, Intangible assets and Goodwill consisted of the following:

($ in thousands)	Customer Relation- ships			Trade Names			Permit Application Costs			Licenses			Other Intangibles (a)			Goodwill		Total
Cost
Balance at January 1, 2022	$	31,879		$	2,100		$	11,921		$	404,307		$	6,284		$	446,767	$	903,258
Additions		—			—			2,906			—			—			—		2,906
Measurement period adjustments		—			—			—			(1,000	)		—			1,609		609
Balance at September 30, 2022	$	31,879		$	2,100		$	14,827		$	403,307		$	6,284		$	448,376	$	906,773
Accumulated amortization
Balance at January 1, 2022	$	(4,197	)	$	(695	)	$	(10,448	)	$	—		$	(3,507	)	$	—	$	(18,847	)
Amortization		(3,006	)		(897	)		(2,505	)		—			(1,696	)		—		(8,104	)
Balance at September 30, 2022	$	(7,203	)	$	(1,592	)	$	(12,953	)	$	—		$	(5,203	)	$	—	$	(26,951	)
Net book value
December 31, 2021	$	27,682		$	1,405		$	1,473		$	404,307		$	2,777		$	446,767	$	884,411
September 30, 2022	$	24,676		$	508		$	1,874		$	403,307		$	1,081		$	448,376	$	879,822

(a) Other Intangibles includes non-compete agreements, non-solicitation agreements and related amortization.

Amortization of $2.4 million and $4.2 million was recorded for the three months ended September 30, 2022 and 2021, respectively, of which $1.4 million and $3.6 million, respectively, is included in Selling, general and administrative expenses, with $1.0 million and $0.6 million in Cost of goods sold and ending inventory, respectively. Amortization of $8.1 million and $12.6 million was recorded for the nine months ended months ended September 30, 2022 and 2021, respectively, of which $5.8 million and, $10.7 million, respectively, is included in Selling, general and administrative expenses, with $2.3 million and $1.9 million in Cost of goods sold and ending inventory, respectively.

17

Cresco Labs Inc.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2022 and 2021

The following table outlines the estimated annual amortization expense related to intangible assets as of September 30, 2022:

($ in thousands)
2022	$	2,405
2023		5,724
2024		4,233
2025		4,093
2026		3,968
Thereafter		7,716
Total estimated amortization	$	28,139

As of September 30, 2022 and December 31, 2021, ending inventory includes $1.4 million and $1.1 million of capitalized amortization, respectively. For the three months ended September 30, 2022 and 2021, $0.8 million and $0.5 million, respectively, of amortization expense was recorded to Cost of goods sold, which includes $0.6 million and $0.4 million, respectively, related to amortization capitalized to inventory in prior quarters. For the nine months ended September 30, 2022 and 2021, $2.1 million and $1.9 million, respectively, of amortization expense was recorded to Cost of goods sold, which includes $1.0 million and $0.9 million, respectively, related to amortization capitalized to inventory in prior years.

During the three and nine months ended September 30, 2021, the Company mutually terminated the agreement for exclusive distribution rights with a third-party vendor which resulted in the impairment of the remaining net book value of the market-related intangible of $0.8 million. Management determined that the Company’s shift in strategy to reduce third-party distribution in California was an indicator of impairment as of September 30, 2021 for associated assets. Certain trade names and customer relationship intangibles with remaining net book values of $32.2 million and $57.1 million, respectively, were determined to be fully impaired due to updated cash flow projections associated with these assets. Additionally, $200.6 million in goodwill impairment was recorded to the California reporting unit during the three and nine months ended September 30, 2021.

NOTE 8. SHARE CAPITAL

(a) Authorized

The authorized share capital of the Company, which has no par value, is comprised of the following:

i. Unlimited Number of Subordinate Voting Shares

Holders of SVS will be entitled to notice of and to attend any meeting of the shareholders of the Company, except a meeting of which only holders of another particular class or series of shares of the Company will have the right to vote. At each such meeting, holders of SVS will be entitled to one vote in respect of each SVS held. As long as any SVS remain outstanding, the Company will not, without the consent of the holders of the SVS by separate special resolution, prejudice or interfere with any right attached to the SVS. Holders of SVS will be entitled to receive as and when declared by the directors of the Company, dividends in cash or property of the Company.

18

Cresco Labs Inc.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2022 and 2021

ii. Unlimited Number of Proportionate Voting Shares

Holders of PVS will be entitled to notice of and to attend any meeting of the shareholders of the Company, except a meeting of which only holders of another particular class or series of shares of the Company will have the right to vote. At each such meeting, holders of PVS will be entitled to one vote in respect of each SVS into which such PVS could ultimately be converted to 200 votes per PVS. As long as any PVS remain outstanding, the Company will not, without the consent of the holders of the PVS and MVS by separate special resolution, prejudice or interfere with any right or special right attached to the PVS. The holder of PVS have the right to receive dividends, out of any cash or other assets legally available therefore, pari passu as to dividends and any declaration or payment of any dividend on the SVS.

iii. 500,000 Super Voting Shares

Holders of MVS shall be entitled to notice of and to attend any meeting of the shareholders of the Company, except a meeting of which only holders of another particular class or series of shares of the Company shall have the right to vote. At each such meeting, holders of MVS shall be entitled to 2 thousand votes in respect of each MVS held.

iv. Unlimited Number of Special Subordinate Voting Shares

Holders of SSVS will be entitled to notice of and to attend any meeting of the shareholders of the Company, except a meeting of which only holders of another particular class or series of shares of the Company will have the right to vote. At each such meeting, holders of SSVS will be entitled to a 0.00001 vote in respect of each SSVS held. As long as any SSVS remain outstanding, the Company will not, without the consent of the holders of the SSVS by separate special resolution, prejudice or interfere with any right attached to the SSVS. Holders of SSVS will be entitled to receive dividends in cash or property of the Company, if and when declared by the Board of Directors (the “Board”).

v. Redeemable Units

As part of the Transaction, unit holders of Cresco Labs, LLC exchanged their units for a new class of redeemable units in Cresco Labs, LLC. Each redeemable unit is only exchangeable for the equivalent of one SVS in Cresco Labs Inc. (without any obligation to redeem in cash). These unit holders hold an interest only in Cresco Labs, LLC; they participate in the earnings of only Cresco Labs, LLC and not the earnings of the combined entity.

19

Cresco Labs Inc.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2022 and 2021

(b) Issued and Outstanding

As of September 30, 2022 and 2021, issued and outstanding shares and units consisted of the following:

(In thousands)	Redeemable Units			SVS*		PVS**			MVS		SSVS***
Beginning balance, January 1, 2022		109,441			269,971		20,667			500		1
Options and warrants exercised		—			1,277		—			—		—
RSUs issued		—			320		—			—		—
Issuance of shares related to acquisitions		—			5,340		—			—		—
Cresco LLC redemption		(3,201	)		3,201		—			—		—
PVS converted to SVS		—			585		(585	)		—		—
Issuances related to employee taxes on certain share-based payment arrangements		—			140		—			—		—
Ending balance, September 30, 2022		106,240			280,834		20,082			500		1

* SVS includes shares pending issuance or cancellation

** PVS presented on an “as-converted” basis to SVS (1-to-200)

*** SSVS presented on an “as-converted” basis to SVS (1-to-0.00001)

(In thousands)	Redeemable Units			SVS*		PVS**			MVS		SSVS***
Beginning balance, January 1, 2021		126,338			194,231		29,311			500		1
Options and warrants exercised		—			2,196		—			—		—
RSUs issued		—			375		—			—		—
Issuance of shares related to acquisitions		—			20,904		—			—		—
Cresco LLC redemption		(15,497	)		15,497		—			—		—
PVS converted to SVS		—			8,534		(8,534	)		—		—
Issuances related to employee taxes on certain share-based payment arrangements		—			148		—			—		—
Share issuances		—			11,469		—			—		—
Ending balance, September 30, 2021		110,841			253,354		20,777			500		1

* SVS includes shares pending issuance or cancellation

** PVS presented on an “as-converted” basis to SVS (1-to-200)

*** SSVS presented on an “as-converted” basis to SVS (1-to-0.00001)

(i) Share Issuances - Equity Distribution Agreement

In December 2019, the Company entered into an agreement with Canaccord Genuity Corp (“Canaccord”) to sell up to C$55 million SVS at an at-the-market price. In April 2021, the Company announced a new agreement with Canaccord to sell up to $100.0 million of SVS to replace the prior agreement which was set to expire in August 2021. No shares were issued during the three and nine months ended September 30, 2022 and 2021, respectively, under the new agreement.

20

Cresco Labs Inc.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2022 and 2021

(ii) Issuance of Shares - Acquisitions

During the nine months ended September 30, 2022 and the year ended December 31, 2021, the Company issued shares in conjunction with acquisitions* as follows:

(In thousands)	Acquisition date	SVS shares issued		Replacement shares issued		Equity-based consideration
Nine Months Ended September 30, 2022:
Cultivate - Contingent Consideration	September 2, 2021		5,340		—	$	34,708
Year Ended December 31, 2021:
Verdant	February 16, 2021		127		—	$	2,004
Bluma	April 14, 2021		15,061		814		193,310
Cultivate	September 2, 2021		4,818		—		46,643
Cure Penn	November 24, 2021		6,167		—		54,240
Laurel Harvest	December 09, 2021		8,354		—		65,844

* Verdant Creations, LLC (“Verdant”); Bluma Wellness, Inc. (“Bluma”); Cultivate Licensing, LLC (“Cultivate”); Bay, LLC (“Cure Penn”) and Laurel Harvest, LLC (“Laurel Harvest”)

(iii) Shares Issuances - Private Placement

In January 2021, the Company closed an offering of 9.9 million SVS at a price of C$16.00 ($12.67) per share. The Company received cash proceeds of $120.7 million, net of $3.4 million in commission and other fees, with a corresponding increase to share capital of $124.1 million.

(iv) Share Issuances - Arrangement

In February 2021, a binding settlement was reached with a former executive of the Company for payment of 1.3 million SVS to the counterparty relating to certain equity awards previously held by the counterparty in exchange for a number of covenants, including non-solicitation, non-hire, certain provisions surrounding voting rights and limitations on future sales of Company shares.

(c) Stock Purchase Warrants

Each whole warrant entitles the holder to purchase one SVS or PVS of the Company. A summary of the status of the warrants outstanding as of September 30, 2022 and 2021, is as follows:

	Number of warrants* (In thousands)			Weighted-average exercise price
Balance as of January 1, 2022		9,842		$	9.63
Exercised		(12	)		4.24
Forfeited		(7,744	)		10.27
Balance as of September 30, 2022		2,086		$	6.64

* PVS presented on an “as-converted” basis to SVS (1-to-200)

21

Cresco Labs Inc.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2022 and 2021

	Number of warrants* (In thousands)			Weighted-average exercise price
Balance as of January 1, 2021		6,183		$	7.80
Bluma replacement warrants		4,665			11.64
Exercised		(709	)		6.18
Forfeited		(285	)		11.64
Balance as of September 30, 2021		9,854		$	9.62

* PVS presented on an “as-converted” basis to SVS (1-to-200)

During the nine months ended September 30, 2022, the Company recorded $0.1 million of warrant exercises into share capital. There were no warrant exercises during the three months ended September 30, 2022. During the three and nine months ended September 30, 2021, the Company recorded $42 thousand and $5.1 million, respectively, of warrant exercises into share capital.

As part of the Bluma acquisition in the second quarter of 2021, the Company issued 4.7 million Cresco warrants valued at $18.4 million in exchange for Bluma warrants that were issued and outstanding on the acquisition date. The issued warrants are equity-classified. In the second quarter of 2021, 0.2 million warrants related to the Bluma acquisition were exercised for $2.2 million, resulting in an increase to share capital of $2.9 million.

During the three and nine months ended September 30, 2022, 5.5 million and 7.7 million warrants expired, respectively, related to issuances to underwriters associated with the September 2019 financing (“September 2019 Financing”) and a portion of the Bluma acquisition replacement warrants. The expired September 2019 Financing warrants consisted of all the outstanding liability-classified warrants, as such, there are no outstanding warrants classified as liabilities as of September 30, 2022. The 2.1 million outstanding warrants as of September 30, 2022, are related to issuances to the sellers from the Valley Agriceuticals, LLC (“Valley Ag”) acquisition and replacement awards issued related to the Bluma acquisition and are equity classified. The remaining 2.1 million outstanding warrants are set to expire during the fourth quarter of 2022.

(d) Distribution to Non-controlling Interest Holders

As of September 30, 2022 and December 31, 2021, the Company had an asset of $0.2 million for tax-related distributions to the 2022 and 2021 unit holders of Cresco Labs, LLC and an accrual of $36.4 million for tax-related distributions to the 2021 and 2020 unit holders of Cresco Labs, LLC, respectively. The accrual for tax-related distributions is recorded based on the year-to-date tax liability attributable to non-controlling interests and the quarterly distributions that are paid are based on the prior year liability, in accordance with the IRS safe harbor rules, which resulted in an asset as of September 30, 2022. These distributions will reduce non-controlling interest upon payment.

In accordance with the underlying operating agreements, the Company declared and paid required distribution amounts to the 2022 and 2021 unit holders of Cresco Labs, LLC and other minority interest holders of $8.7 million and $81.3 million during the three and nine months ended September 30, 2022. Similarly, the Company paid required tax distribution amounts to the 2021 and 2020 unit holders of Cresco Labs, LLC and other minority interest holders of $14.0 million and $69.6 million during the three and nine months ended September 30, 2021.

22

Cresco Labs Inc.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2022 and 2021

(e) Changes in Ownership and Non-controlling Interests

During the three and nine months ended September 30, 2022, redemptions of 1.5 million and 3.2 million redeemable units occurred, respectively, which were converted into an equivalent number of SVS. These redemptions resulted in a decrease of 0.6% and 1.3%, respectively, in non-controlling interest in Cresco Labs, LLC.

During the three and nine months ended September 30, 2021, redemptions of 1.0 million and 15.5 million redeemable units occurred, respectively, which were converted into an equivalent number of SVS. These redemptions resulted in a decrease of 0.4% and 6.2%, respectively, in non-controlling interest in Cresco Labs, LLC.

As of and for the nine months ended September 30, 2022, Non-controlling interest included the following amounts before intercompany eliminations:

($ in thousands)	TSC Cresco, LLC			MedMar Inc. (Lakeview)			MedMar Inc. (Rockford)			Cresco Labs Ohio, LLC			SLO Cultivation Inc.			Other entities including Cresco Labs, LLC1,3			Eliminations			Total
Non-current assets	$	4,988		$	31,286		$	23,000		$	17,866		$	13,523		$	1,310,427		$	—		$	1,401,090
Current assets		70,919			135,531			208,108			73,526			97,308			69,847			(300,038	)		355,201
Non-current liabilities		—			(11,088	)		(3,903	)		(12,367	)		(2,734	)		(684,192	)		—			(714,284	)
Current liabilities		(53,770	)		(120,916	)		(155,412	)		(86,619	)		(158,309	)		(7,169	)		311,635			(270,560	)
Net assets (liabilities)	$	22,137		$	34,813		$	71,793		$	(7,594	)	$	(50,212	)	$	688,913		$	11,597		$	771,447
Net assets (liabilities) attributable to NCI	$	2,710		$	3,704		$	5,325		$	(7	)	$	(10,338	)	$	(19,259	)	$	—		$	(17,865	)
Revenue	$	25,624		$	40,375		$	67,439		$	13,364		$	6,160		$	513,025		$	(22,886	)	$	643,101
Gross profit		16,624			27,527			47,124			1,810			(11,639	)		234,904			2,959			319,309
Net income (loss)	$	13,372		$	9,419		$	30,777		$	(2,441	)	$	(5,976	)	$	(80,371	)	$	—		$	(35,220	)
Net income (loss) allocated to NCI	$	3,343		$	1,168		$	7,694		$	(24	)	$	(1,195	)	$	4,504		$	—		$	15,490
NCI percentage as of September 30, 2022		25.0	%1		12.4	%2		25.0	%2		1.0	%1		20.0	%1		42.1	%

¹  The NCI percentage reflects the NCI that exists at Cresco Labs, LLC. There is a further 42.1% NCI related to NCI for Cresco Labs Inc.

²  The NCI percentage reflects the NCI that exists at Cresco U.S. Corp.

³ Includes the effect of LLC unit redemptions and other adjustments.

23

Cresco Labs Inc.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2022 and 2021

As of December 31, 2021, Non-controlling interest included the following amounts before intercompany eliminations:

($ in thousands)	TSC Cresco, LLC			MedMar Inc. (Lakeview)			MedMar Inc. (Rockford)			Cresco Labs Ohio, LLC			SLO Cultivation Inc.			Other entities including Cresco Labs, LLC1,3			Eliminations			Total
Non-current assets	$	5,208		$	33,698		$	22,934		$	16,093		$	23,422		$	1,257,353		$	—		$	1,358,708
Current assets		54,506			95,522			154,929			64,897			97,276			250,029			(295,404	)		421,755
Non-current liabilities		—			(11,213	)		(3,443	)		(12,286	)		(14,071	)		(653,320	)		—			(694,333	)
Current liabilities		(49,726	)		(92,049	)		(124,597	)		(73,441	)		(147,993	)		(107,143	)		306,555			(288,394	)
Net assets (liabilities)	$	9,988		$	25,958		$	49,823		$	(4,737	)	$	(41,366	)	$	746,919		$	11,151		$	797,736
Net assets (liabilities) attributable to NCI	$	2,850		$	3,910		$	6,123		$	18		$	(9,143	)	$	38,424		$	—		$	42,182
NCI percentage as of December 31, 2021		25.0%	1		12.4%	2		25.0%	2		1.0%	1		20.0%	1		43.3%

¹ The NCI percentage reflects the NCI that exists at Cresco Labs, LLC. There is a further 43.3% NCI related to NCI for Cresco Labs Inc. as of December 31, 2021.

²  The NCI percentage reflects the NCI that exists at Cresco U.S. Corp.

³ Includes the effect of LLC unit redemptions and other adjustments.

24

Cresco Labs Inc.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2022 and 2021

NOTE 9. SHARE-BASED COMPENSATION

The Company has a share-based compensation plan (the “Plan”) for employees and service providers. Under the Plan, options issued have no voting rights and vest proportionately over periods ranging from the grant date to four years from the issuance date. Stock options exercised are converted to SVS. The maximum number of shares issued under the Plan shall not exceed 10% of the issued and outstanding shares.

A summary of the status of the options outstanding as of September 30, 2022, consisted of the following:

(Shares in thousands)	Number of stock options outstanding			Weighted- average exercise price		Weighted- average remaining contractual life (years)		Aggregate intrinsic value
Outstanding – January 1, 2022		23,610		$	5.54		7.70	$	53,455
Granted		4,393			4.46
Exercised		(1,606	)		1.49
Forfeited		(2,851	)		7.16
Outstanding - September 30, 2022		23,546		$	5.43		7.44	$	4,622
Exercisable - September 30, 2022		13,676		$	4.35		6.66	$	4,515

During the three months ended September 30, 2022 and 2021, options were exercised for gross proceeds of $0.3 million and $0.7 million, respectively. During the nine months ended September 30, 2022 and 2021, options were exercised for gross proceeds of $2.9 million and $2.4 million, respectively.

The following table summarizes the weighted-average grant date fair value and total intrinsic value of options exercised for the nine months ended September 30, 2022:

($ in thousands, except per share data)	Nine Months Ended September 30, 2022
Weighted-average grant date fair value (per share) of stock option units granted	$	3.03
Intrinsic value of stock option units exercised, using market price at exercise date	$	5,097

Weighted-average stock price of options on the dates on which options were exercised for the three and nine months ended September 30, 2022, was $3.69 and $4.66 per option, respectively.

The fair value of stock options granted under the Plan for the nine months ended September 30, 2022, was determined using the Black-Scholes option-pricing model with the following range of assumptions at the time of the grant:

	September 30, 2022
Risk-free annual interest rate	1.4% - 2.7%
Expected annual dividend yield	0%
Expected stock price volatility	74.9% to 79.4%
Expected life of stock options	5.5 to 7 years
Forfeiture rate	9.4% - 21.3%
Fair value at grant date	$1.67 to $4.90
Stock price at grant date	$2.53 to $6.91
Exercise price range	$2.53 to $6.91

25

Cresco Labs Inc.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2022 and 2021

Volatility was estimated by using the average historical volatility of comparable companies from a representative peer group of direct and indirect peers of publicly traded companies, as the Company and the cannabis industry have minimal historical share price history available. An increase in volatility would result in an increase in fair value at grant date. The expected life in years represents the period of time that options issued are expected to be outstanding. The risk-free rate is based on U.S. treasury bills with a remaining term equal to the expected life of the options. The forfeiture rate is estimated based on historical forfeitures experienced by the Company.

Restricted Stock Units

The Company has an RSU program to provide employees an additional avenue to participate in the successes of the Company. The fair value of RSUs granted was determined by the fair value of the Company’s share price on date of grant.

A summary of outstanding RSUs as of September 30, 2022, is provided below:

(Shares in thousands)	Number of RSUs outstanding			Weighted- average fair value		Weighted- average remaining contractual life (years)		Aggregate intrinsic value
Outstanding - January 1, 2022		1,093		$	8.83		3.50	$	9,657
Granted		4,167			5.53
Vested and settled		(424	)		5.44
Forfeited		(641	)		6.82
Outstanding - September 30, 2022		4,195		$	5.88		4.00	$	24,669

The following table summarizes the total fair value of RSUs vested and settled for the nine months ended September 30, 2022:

($ in thousands)	Nine Months Ended September 30, 2022
Weighted-average grant date fair value (per share) of restricted stock units issued	$	8.60
Total fair value of RSUs vested, using market price at vest date	$	2,331

Expense Attribution

The Company recorded compensation expense for option awards in the amount of $1.5 million and $5.6 million for three months ended September 30, 2022 and 2021, respectively. For the three months ended September 30, 2022 and 2021, the Company expensed $1.1 million and $5.0 million, respectively, to Selling, general and administrative expenses, with the remaining $0.4 million and $0.6 million, respectively, in Cost of goods sold and ending inventory. The Company recorded compensation expense for option awards in the amount of $11.2 million and $16.4 million for the nine months ended September 30, 2022 and 2021, respectively. For the nine months ended September 30, 2022 and 2021, the Company expensed $9.6 million and $14.4 million, respectively, to Selling, general and administrative expenses, with the remaining $1.6 million and $2.0 million, respectively, in Cost of goods sold and ending inventory. Unrecognized compensation expense as of September 30, 2022 for option awards is $16.5 million and will be recorded over the course of the next 4 years.

26

Cresco Labs Inc.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2022 and 2021

The Company recorded compensation expense for RSU awards in the amount of $2.0 million and $1.1 million for the three months ended September 30, 2022 and 2021, respectively, of which $1.5 million and $1.1 million, respectively, is included in Selling, general and administrative expenses, with the remaining $0.5 million and an immaterial amount, respectively, in Cost of goods sold and ending inventory. The Company recorded compensation expense for RSU awards in the amount of $7.5 million and $6.0 million for the nine months ended September 30, 2022 and 2021, respectively, of which $6.0 million and $5.5 million, respectively, is included in Selling, general and administrative expenses. The 2021 selling, general and administrative amount includes $2.1 million and $0.2 million of expense for Bluma replacement awards and Bluma replacement shares, respectively, which were incurred as part of the Bluma acquisition in the second quarter of 2021. The remaining $1.5 million and $0.5 million is included in Cost of goods sold and ending inventory for the nine months ended September 30, 2022 and 2021, respectively. Unrecognized compensation expense for RSU awards as of September 30, 2022, is $11.4 million and will be recognized over the course of the next 4 years.

During the second quarter of 2021, the Company issued 0.1 million subscription awards as compensation to a former member of key management personnel at a weighted average fair value of $11.25 per share. The Company recognized $0.7 million in share-based compensation expense, which was recorded to Selling, general, and administrative expenses.

As of September 30, 2022 and December 31, 2021 ending inventory includes $1.6 million and $1.2 million, respectively, of capitalized compensation expense related to both options and RSUs. For both the three months ended September 30, 2022 and 2021, $0.7 million of compensation expense was recorded to Cost of goods sold, which includes $0.6 million and $0.5 million, respectively, related to compensation expense capitalized to inventory in prior quarters. For the nine months ended September 30, 2022 and 2021, $2.6 million and $2.1 million, respectively, of compensation expense was recorded to Cost of goods sold, which includes $1.1 million and $0.2 million, respectively, related to compensation expense capitalized to inventory in prior years.

NOTE 10. ACQUISITIONS

(a) Business Combinations

No business combinations were completed during the nine months ended September 30, 2022. Current period measurement period adjustments (“MPAs”), along with a discussion of areas where MPAs are most likely to occur in the future, related to acquisitions completed in previous periods are as follows:

(i) Bluma

During the nine months ended September 30, 2022, the Company recorded MPAs related to deferred taxes and income taxes payable, which resulted in a net increase in goodwill of $1.8 million. As the measurement period ended April 14, 2022, no amounts are subject to additional adjustments.

(ii) Cultivate

During the nine months ended September 30, 2022, the Company recorded MPAs related to property and equipment, deferred consideration, licenses and deferred taxes, which resulted in a net increase in goodwill of $0.4 million. As the measurement period ended September 2, 2022, no amounts are subject to additional adjustments.

27

Cresco Labs Inc.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2022 and 2021

(iii) Cure Penn

During the nine months ended September 30, 2022, the Company recorded an MPA related to a working capital adjustment, which resulted in a net increase in goodwill of $0.1 million.

While all amounts remain subject to adjustments, the areas subject to the most significant potential adjustments are intangible assets and short-term liabilities. Any changes to the preliminary estimates of the fair value of the assets and liabilities assumed will be recorded as adjustments to those assets and liabilities and residual amounts will be allocated to goodwill.

(iv) Laurel Harvest

During the nine months ended September 30, 2022, the Company recorded MPAs related to deferred taxes and income taxes payable, which resulted in a net reduction in goodwill of $0.7 million.

While all amounts remain subject to adjustments, the areas subject to the most significant potential adjustments are intangibles, deferred tax asset and liabilities, consideration (working capital adjustment), fixed assets and short-term liabilities. Any changes to the preliminary estimates of the fair value of the assets and liabilities assumed will be recorded as adjustments to those assets and liabilities and residual amounts will be allocated to goodwill.

(b) Deferred and Contingent Consideration, Short-term

The following is a summary of Deferred and contingent consideration balances as of September 30, 2022 and December 31, 2021, which are classified as short-term:

($ in thousands)	September 30, 2022		December 31, 2021
Cultivate contingent consideration	$	—	$	33,969
Laurel Harvest deferred consideration		45,636		37,847
Valley Ag operating cash flows deferred consideration		4,414		—
Total Deferred and contingent consideration, short-term	$	50,050	$	71,816

The Company recorded contingent consideration in conjunction with the acquisition of Cultivate in the third quarter of 2021. The former owners of Cultivate were entitled to an earnout, based on Cultivate’s adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”), a non-GAAP financial measure, of up to $68.0 million. During the first quarter of 2022, the Company remeasured the fair value of the contingent consideration, increasing the value from $34.0 million to $39.6 million. The loss related to the earnout adjustment is included in Other income, net in the Unaudited Condensed Interim Consolidated Statements of Operations. During the second quarter of 2022, the Company paid the former owners of Cultivate a total of $39.6 million, settled in cash of $4.8 million and 5.3 million SVS.

In the fourth quarter of 2021, the Company recorded $37.9 million short-term deferred consideration and $9.0 million long-term deferred consideration, for a total of $46.9 million deferred consideration related to the Laurel Harvest acquisition. Total deferred consideration is payable on or before the 18-month anniversary of the acquisition, with accelerated payments required for each of five new dispensaries opened during the 18-month earnout period. In the first quarter of 2022, the Company reclassified $9.0 million of deferred

28

Cresco Labs Inc.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2022 and 2021

consideration from long-term deferred consideration to short-term due to projected dispensary opening dates. Based on an increase in the associated discount rate, the present value was subsequently reduced to $45.6 million, as of September 30, 2022, with a $1.3 million decrease in value recorded to Interest expense, net in the Unaudited Condensed Interim Consolidated Statements of Operations, in the current period. See Note 19 for additional information.

In the third quarter of 2022, the Company reclassified $4.4 million of long-term Valley Ag operating cash flows consideration from long-term to short-term, due to the timing of expected payouts.

(c) Deferred Consideration, Long-term

The following is a summary of Deferred consideration as of September 30, 2022 and December 31, 2021, which is classified as long-term:

($ in thousands)	September 30, 2022		December 31, 2021
Valley Ag operating cash flows deferred consideration	$	4,058	$	8,577
Laurel Harvest deferred consideration		—		9,074
Total Deferred consideration, long-term	$	4,058	$	17,651

In the third quarter of 2022, the Company reclassified $4.4 million of Valley Ag operating cash flow deferred consideration to short-term, as noted above, with $4.1 million remaining in long-term. As of September 30, 2022, the total estimated liability related to the Valley Ag acquisition of $8.5 million is based on the present value of expected payments associated with future cash flows of Valley Ag. During the nine months ended September 30, 2022, the Company recorded a $0.1 million decrease in value recorded to Interest expense, net.

In the fourth quarter of 2021, the Company recorded $9.0 million of long-term deferred consideration, related to the Laurel Harvest acquisition. During the first quarter of 2022, the Company reclassified $9.0 million of long-term deferred consideration to short-term deferred consideration, as noted above.

(d) Pending Acquisitions

On March 23, 2022, the Company announced it had entered into a definitive arrangement agreement (“Arrangement Agreement”) with Columbia Care Inc. (“Columbia Care”) to acquire all of the issued and outstanding shares of Columbia Care pursuant to a statutory plan of arrangement (the “Arrangement”), in an all-share transaction with an equity value of approximately $2.0 billion, as valued at the date of the Arrangement Agreement (the “Columbia Care Transaction”). Under the terms of the Arrangement Agreement, holders of common shares of Columbia Care will receive 0.5579 SVS of Cresco Labs for each Columbia Care share, subject to adjustment. The shareholders of Columbia Care voted in favor of a special resolution to approve the Arrangement on July 8, 2022. The Columbia Care Transaction is expected to close around the end of the first quarter of 2023. While divestitures are anticipated to be required for state regulatory approval of the Columbia Care Transaction, the scope and financial impact of any divestitures cannot be quantified at this time. The Company continues to work toward successful regulatory approvals to complete the transaction, including required divestitures identified in several states and will provide an update regarding the timing and proceeds from divestitures pending the signing of definitive agreements.

29

Cresco Labs Inc.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2022 and 2021

NOTE 11. LONG-TERM NOTES AND LOANS PAYABLE

The following table represents the Company’s Long-term notes and loans payable balances as of September 30, 2022 and December 31, 2021:

($ in thousands)	September 30, 2022			December 31, 2021
Senior Loan	$	400,000		$	400,000
Interest payable		19,317			9,711
Financing liability - leases		97,181			97,797
Total borrowings and interest payable		516,498			507,508
Less: unamortized debt issuance costs		(19,587	)		(22,501	)
Less: short-term borrowings and interest payable		(19,317	)		(9,711	)
Less: current portion of financing liability - leases		(9,530	)		(10,217	)
Total Long-term notes and loans payable	$	468,064		$	465,079

(a) Senior Loan and Amended Term Loan

On February 2, 2020, the Company closed on a senior secured term loan agreement (the “Term Loan”) for an aggregate principal amount of $100.0 million, with the option to increase the principal amount to $200.0 million. Of the $100.0 million Term Loan commitment, $92.4 million was committed by Tranche A lenders (the “Tranche A Commitment”) and $7.6 million was committed by Tranche B lenders (the “Tranche B Commitment”).

The Tranche A Commitment accrued interest at a rate of 12.7% per annum, payable in cash quarterly and had a stated maturity of July 22, 2021. The Tranche B Commitment accrued interest at a rate of 13.2% per annum, payable in cash quarterly and had a stated maturity of January 22, 2022. The Company’s effective interest rates for the Tranche A Commitment and Tranche B Commitment of the Term Loan were 17.0% and 16.1%, respectively.

On December 11, 2020, the Company entered into an amendment to exercise the mutual option to increase the principal amount to $200.0 million and refinance the existing Term Loan and the Opaskwayak Cree Nation Loan (the “OCN Loan”), resulting in one amended term loan (the “Amended Term Loan”). Of the $200.0 million Amended Term Loan commitment, $11.7 million was committed by non-extending lenders (the “Non-Extending Lenders Commitment”), $97.3 million was committed by extending lenders (the “Extending Lenders Commitment”) and $91.0 million was committed by increasing lenders (the “Increasing Lenders Commitment”). The Company accelerated principal repayments of $5.4 million and $1.0 million to the OCN Loan lender and certain exiting Term Loan lenders, respectively.

The Non-Extending Lenders Commitment accrued interest at a rate of 12.7% per annum, payable in cash quarterly. The Extending Lenders Commitment and Increasing Lenders Commitment (the “Extending and Increasing Lenders Commitment”) accrued interest at a rate of 12.0% per annum, payable in cash quarterly. The Company’s effective interest rates for the Non-Extending Lenders Commitment and the Extending and Increasing Lenders Commitment were 17.7% and 15.8%, respectively.

30

Cresco Labs Inc.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2022 and 2021

On August 12, 2021, the Company closed on an agreement for a senior secured term loan with an undiscounted principal balance of $400.0 million (the “Senior Loan”) and an original issue discount of $13.0 million. A portion of proceeds from the Senior Loan were used to retire the existing Amended Term Loan, with the remainder to fund capital expenditures and pursue other targeted growth initiatives within the U.S. cannabis sector.

The Senior Loan accrues interest at a rate of 9.5% per annum, payable in cash semi-annually and has a stated maturity of August 2026. The Company’s effective interest rate for the Senior Loan is 11.0%. The Company capitalized $10.9 million of borrowing costs related to the Senior Loan, of which $7.0 million is payable upon principal repayment of the Senior Loan and thus, is reflected within Other long-term liabilities.

The Senior Loan is secured by a guarantee from substantially all material subsidiaries of the Company, as well as by a security interest in certain assets of the Company and such material subsidiaries. The Senior Loan also contains negative covenants, which restrict the actions of the Company and its subsidiaries during the term of the loan, including restrictions on paying dividends, making investments and incurring additional indebtedness. In addition, the Company is required to maintain a minimum cash balance of $50.0 million and to ensure that the Fixed Charge Coverage Ratio; defined as the ratio of (a) consolidated EBITDA less non-financed capital expenditures; restricted payments, as defined by the loan agreement; and federal, state, provincial, local and foreign income taxes (b) consolidated fixed charges; is not less than 2 to 1. As of November 15, 2022, the Company was in compliance with all covenants.

The Company may prepay in whole or in part the Senior Loan at any time prior to the stated maturity date, subject to certain conditions, upon the payment of the outstanding principal amount (plus a specified prepayment premium) and all accrued and unpaid interest and fees. Interest expense is discussed in Note 19.

As discussed in Note 10, on March 23, 2022, the Company announced it had entered into the Arrangement Agreement with Columbia Care to acquire all of the issued and outstanding shares of Columbia Care. On March 23, 2022, Cresco entered into a consent agreement with respect to the Senior Loan pursuant to which certain amendments were made to the Senior Loan which are conditional and effective on the closing of the Arrangement (the “Amended Senior Loan”). The Amended Senior Loan permits the Arrangement, Cresco’s assumption of certain Columbia Care debt and certain proposed asset sales in connection with the Arrangement, in each case, on and subject to the terms and conditions of the Amended Senior Loan.

(b) Financing Liabilities

The Company recognized financing liabilities in relation to sale and leaseback transactions for which the incremental borrowing rates range from 11.3% to 17.5% with remaining terms between 7.3 and 17.8 years, consistent with the underlying lease liabilities. The interest expense associated with financing liabilities is disclosed in Note 19.

31

Cresco Labs Inc.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2022 and 2021

NOTE 12. REVENUE AND LOYALTY PROGRAMS

(a) Revenue

The following table represents the Company’s disaggregated revenue by source, due to the Company’s contracts with its customers, for the three and nine months ended September 30, 2022 and 2021:

	Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	2022		2021		2022		2021
Wholesale	$	92,638	$	109,330	$	282,938	$	313,685
Dispensary		117,846		106,153		360,163		290,210
Total Revenue	$	210,484	$	215,483	$	643,101	$	603,895

The Company generates revenue, net of sales discounts, at the point in time the control of the product is transferred to the customer, as the Company has a right to payment and the customer has assumed significant risks and rewards of such product without any remaining performance obligation. Sales discounts were approximately 10.3% and 6.3% of gross revenue for the three months ended September 30, 2022 and 2021, respectively. Sales discounts were approximately 9.9% and 5.4% of gross revenue for the nine months ended September 30, 2022 and 2021, respectively.

(b) Loyalty Programs

In the states of Illinois, Arizona, Pennsylvania, New York and Florida; the Company has customer loyalty programs where retail customers accumulate points based on their level of spending. These points are recorded as a contract liability until customers redeem their points for discounts on cannabis products as part of an in-store sales transaction. In addition, the Company records a performance obligation as a reduction of revenue that ranges between $0.01 and $0.04 per loyalty point. Upon redemption, the loyalty program obligation is relieved and the offset is recorded as revenue. As of September 30, 2022 and 2021, there were 124.9 million and 71.3 million points outstanding, with an approximate value of $2.0 million and $0.9 million, respectively. The Company expects outstanding loyalty points to be redeemed within one year.

32

Cresco Labs Inc.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2022 and 2021

NOTE 13. OTHER INCOME, NET

For the three and nine months ended September 30, 2022 and 2021, Other income, net consisted of the following:

	Three Months Ended September 30,						Nine Months Ended September 30,
($ in thousands)	2022			2021			2022			2021
Gain (loss) on disposition of assets	$	14,659		$	(2,515	)	$	14,680		$	(6	)
Unrealized gain on derivative liabilities—warrants		—			7,956			1,184			10,672
Gain (loss) on derivative instruments		—			14,982			(5,698	)		16,080
(Loss) gain on provision—loan receivable		(56	)		(332	)		626			(87	)
Unrealized loss on investments held at fair value		(276	)		(2,647	)		(4,162	)		(6,587	)
Loss on debt extinguishment		—			(17,987	)		—			(17,987	)
Gain (loss) on conversion of investment		22			2,509			22			(880	)
Loss on foreign currency		(237	)		(249	)		(264	)		(1,274	)
Gain (loss) on lease termination		—			3			5,243			(43	)
Other income		685			15			1,075			2,232
Total Other income, net	$	14,797		$	1,735		$	12,706		$	2,120

NOTE 14. RELATED PARTY TRANSACTIONS

(a) Transactions with Key Management Personnel

Related parties, including key management personnel, hold 90.0 million redeemable units of Cresco Labs, LLC, which is equal to a deficit of $16.3 million of Non-controlling interests as of September 30, 2022. During the three and nine months ended September 30, 2022, 79.7% and 74.4%, respectively, of required tax distribution payments to holders of Cresco Labs, LLC were made to related parties including to key management personnel. During the three and nine months ended September 30, 2021, 83.4% and 88.0%, respectively, of required tax distribution payments to holders of Cresco Labs, LLC were made to related parties including to key management personnel.

(b) Related Parties - Leases

For the three and nine months ended September 30, 2022 and 2021, the Company had lease liabilities for real estate lease agreements in which the lessors have a minority interest in SLO Cultivation, Inc. (“SLO”) and MedMar, Inc. (“MedMar”). The lease liabilities were incurred in January 2019 and May 2020 and will expire in 2027 through 2030, except for the leases associated with SLO minority interest holders (“SLO Leases”). During the second quarter of 2022, the Company exercised its early termination right to reduce the SLO Leases term to 180 days. This early termination resulted in a reduction in lease liability and ROU assets. The ROU asset was reduced to $nil due to differences in carrying value between the lease asset and liability and a gain on lease termination of $5.2 million has been recorded for the nine months ended September 30, 2022, which is included in Other income (expense), net, in the Unaudited Condensed Interim Consolidated Statements of Operations. The remaining liability for the SLO Leases will expire in the fourth quarter of 2022.

The Company has liabilities for real estate leases and other financing agreements in which the lessor is Clear Heights Properties, where Dominic Sergi, MVS shareholder, is Chief Executive Officer. The liabilities were incurred by entering into operating leases, finance leases and other financing transactions with terms that will

33

Cresco Labs Inc.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2022 and 2021

expire in 2030. During both the three months ended September 30, 2022 and 2021, the Company received tenant improvement allowance reimbursements of $nil. During the nine months ended September 30, 2022 and 2021, the Company received tenant improvement allowance reimbursements of $1.4 million and $nil, respectively. The Company expects to receive further reimbursements of $0.8 million as of September 30, 2022.

Below is a summary of the expense resulting from the related party lease liabilities for the three and nine months ended September 30, 2022 and 2021:

			Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	Classification		2022		2021		2022		2021
Operating Leases
Lessor has minority interest in SLO		Rent expense	$	1	$	389	$	513	$	1,180
Lessor has minority interest in MedMar		Rent expense		73		57		217		170
Lessor is an MVS shareholder		Rent expense		296		296		890		871
Finance Leases
Lessor has minority interest in MedMar		Depreciation expense	$	76	$	70	$	229	$	206
Lessor has minority interest in MedMar		Interest expense		67		80		204		231
Lessor is an MVS shareholder		Depreciation expense		21		19		60		55
Lessor is an MVS shareholder		Interest expense		19		21		58		63

Additionally, below is a summary of the ROU assets and lease liabilities attributable to related party lease liabilities as of September 30, 2022 and December 31, 2021:

	As of September 30, 2022				As of December 31, 2021
($ in thousands)	ROU Asset		Lease Liability		ROU Asset		Lease Liability
Operating Leases
Lessor has minority interest in SLO	$	—	$	21	$	6,996	$	11,938
Lessor has minority interest in MedMar		1,444		1,481		1,525		1,549
Lessor is an MVS shareholder		5,966		6,008		6,314		4,867
Finance Leases
Lessor has minority interest in MedMar	$	2,111	$	2,506	$	2,137	$	2,457
Lessor is an MVS shareholder		616		586		616		1,063

During both the three months ended September 30, 2022 and 2021, the Company recorded interest expense on finance liabilities of $0.1 million. During both the nine months ended September 30, 2022 and 2021, the Company recorded interest expense on finance liabilities of $0.2 million. As of September 30, 2022 and December 31, 2021, the Company had finance lease liabilities totaling $1.5 million, respectively. All finance liabilities outstanding are due to an entity controlled by an MVS shareholder.

34

Cresco Labs Inc.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2022 and 2021

NOTE 15. COMMITMENTS AND CONTINGENCIES

(a) 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. As of September 30, 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 operations. There are also no proceedings in which any of the Company’s directors, officers, or affiliates are an adverse party or has a material interest adverse to the Company’s interest.

(b) Contingencies

The Company’s operations are subject to a variety of federal, state and local regulations. Failure to comply with one or more of those regulations could result in fines, restrictions on the Company’s operations, suspension or revocation permits, or other disciplinary actions (collectively, “Disciplinary Actions”) that could adversely affect the Company’s financial position and results of operations. While management believes that the Company is in substantial compliance with applicable regulations as of September 30, 2022, these regulations continue to evolve and are subject to differing interpretations and enforcement. As a result, the Company may be subject to Disciplinary Actions in the future.

(c) Commitments

As of September 30, 2022, the Company had total commitments of $11.7 million related to material construction projects. During the first quarter of 2022, pursuant to the Illinois Cannabis Regulation and Tax Act, the Company issued an additional $0.2 million in loans to an Illinois company which has secured Craft Grower Licenses to operate in the state and $1.0 million in loans to groups that have been identified by the state of Illinois as having the opportunity to receive Conditional Adult Use Dispensing Organization Licenses. These loans are discussed in Note 16. These loans fully satisfy the Company’s funding requirements under Illinois Cannabis Regulation and Tax Act; however, the Company may elect to fund similar loans in the future.

The Company has employment agreements with key management personnel which include severance in the event of termination totaling approximately $4.6 million with additional equity and/or benefit compensation.

35

Cresco Labs Inc.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2022 and 2021

NOTE 16. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT

Financial Instruments

The Company’s financial instruments are held at amortized cost (adjusted for impairments or expected credit losses as applicable) or fair value. The carrying values of financial instruments held at amortized cost approximate their fair values as of September 30, 2022 and December 31, 2021 due to their nature and relatively short maturity date. Financial assets and liabilities with embedded derivative features are carried at fair value.

Financial instruments recorded at fair value are classified using a fair value hierarchy that reflects the significance of the inputs to fair value measurements. The three levels of hierarchy are:

• 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.

There have been no transfers between fair value levels valuing these assets during the three and nine months ended September 30, 2022.

The following tables summarize the Company’s financial instruments as of September 30, 2022 and December 31, 2021:

	September 30, 2022
($ in thousands)	Amortized Cost		Level 1		Level 2		Level 3		Total
Financial Assets:
Cash and cash equivalents	$	130,042	$	—	$	—	$	—	$	130,042
Restricted cash1		2,278		—		—		—		2,278
Accounts receivable, net		51,649		—		—		—		51,649
Loans receivable, long-term		1,255		—		—		—		1,255
Investments		—		578		432		660		1,670
Security deposits		4,366		—		—		—		4,366
Financial Liabilities:
Accounts payable	$	29,194	$	—	$	—	$	—	$	29,194
Accrued liabilities		58,589		—		—		—		58,589
Short-term borrowings		28,847		—		—		—		28,847
Current portion of lease liabilities		21,575		—		—		—		21,575
Deferred consideration, contingent consideration and other payables, short-term		5		11		—		50,050		50,066
Lease liabilities		158,153		—		—		—		158,153
Deferred consideration, long-term		—		—		—		4,058		4,058
Long-term notes payable and loans payable		468,064		—		—		—		468,064
Other long-term liabilities		7,000		—		—		—		7,000

¹  Restricted cash balances include various escrow accounts related to investments, acquisitions, facility requirements and building improvements.

36

Cresco Labs Inc.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2022 and 2021

	December 31, 2021
($ in thousands)	Amortized Cost		Level 1		Level 2		Level 3		Total
Financial Assets:
Cash and cash equivalents	$	223,543	$	—	$	—	$	—	$	223,543
Restricted cash1		2,559		—		—		—		2,559
Accounts receivable, net		43,379		—		—		—		43,379
Loans receivable, short-term		747		—		—		565		1,312
Loans receivable, long-term		505		—		—		—		505
Investments		—		4,710		542		660		5,912
Security deposits		3,941		—		—		—		3,941
Financial Liabilities:
Accounts payable	$	32,278	$	—	$	—	$	—	$	32,278
Accrued liabilities		95,442		—		—		—		95,442
Short-term borrowings		19,928		—		—		—		19,928
Current portion of lease liabilities		20,792		—		—		—		20,792
Deferred consideration, contingent consideration and other payables, short-term		5		12		—		71,816		71,833
Derivative liabilities, short-term		—		—		—		1,172		1,172
Lease liabilities		118,936		—		—		—		118,936
Deferred consideration, long-term		—		—		—		17,651		17,651
Long-term notes payable and loans payable		465,079		—		—		—		465,079
Other long-term liabilities		7,001		—		—		—		7,001

¹  Restricted cash balances include various escrow accounts related to investments, acquisitions and facility licensing requirements.

The December 31, 2021 Level 3 asset balance of $1.2 million decreased by $0.5 million to a September 30, 2022 balance of $0.7 million. The decrease was driven by the settlement of the Lighthouse loan, which was classified as Loans receivable, short-term.

The December 31, 2021 Level 3 liability balance of $90.6 million, decreased by $36.5 million compared to the September 30, 2022 balance of $54.1 million. The decrease was primarily driven by payment of the Cultivate contingent consideration earnout of $39.6 million in the second quarter of 2022. Additionally, the fair value of warrants decreased by $1.2 million, to $nil, driven by the expiration of the instruments and the Laurel Harvest deferred consideration decreased by $1.3 million, based on an increase in the associated discount rate. These decreases were partially offset by a $5.6 million increase to the fair value of the Cultivate contingent consideration balance during the first quarter of 2022. During the nine months ended September 30, 2022, amounts of $9.0 million and $4.4 million were reclassified from long-term to short-term related to the Laurel Harvest deferred consideration liability and the Valley Ag operating cash flows deferred consideration liability, respectively. See Note 10 for additional discussion of the reclassifications.

37

Cresco Labs Inc.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2022 and 2021

(a) Loans receivable, short-term

The following is a summary of Loans receivable, short-term balances and valuation classifications (discussed further below) as of September 30, 2022 and December 31, 2021:

($ in thousands)	Valuation classification	September 30, 2022		December 31, 2021
Short-term loans receivable - Lighthouse, net of ECL1	Fair value	$	—	$	565
Interest receivable	Amortized cost		—		747
Total Loans receivable, short-term		$	—	$	1,312

¹ Expected Credit Loss (“ECL”)

On August 12, 2019, the Company issued a secured convertible promissory note that was convertible, at the Company’s discretion, into additional membership units approximating 1% ownership of the parent company of Lighthouse. The loan was amended in March 2021 to extend the maturity date from February 2021 to February 2022. During the first quarter of 2022, the Company received payment for the outstanding balance and accrued interest.

(b) Loans receivable, long-term

The following is a summary of Loans receivable, long-term balances and valuation classifications (discussed further below) as of September 30, 2022 and December 31, 2021:

($ in thousands)	Valuation classification	September 30, 2022		December 31, 2021
Long-term loans receivable - Illinois Incubator, net of ECL	Amortized cost	$	819	$	100
Long-term loans receivable - other, net of ECL	Amortized cost		436		405
Total Loans receivable, long-term		$	1,255	$	505

(i) Illinois Incubator Loan

Pursuant to the Illinois Cannabis Regulation and Tax Act, the Company has issued $0.3 million in loans to an Illinois company which has secured a Craft Grower License to operate in the state and $1.0 million in loans to groups that have been identified by the state of Illinois as having the opportunity to receive Conditional Adult Use Dispensing Organization Licenses. One $0.1 million loan related to the Craft Grower License, was fully funded on July 20, 2021 and matures on July 20, 2026. The remaining loans of $1.2 million were fully funded on March 21, 2022 and matures on July 20, 2027. The loans are measured at amortized cost and bear no interest.

(ii) Other Loans

In connection with the acquisition of CannaRoyalty Corp., the Company assumed a loan receivable with a balance of $0.4 million as of September 30, 2022 and December 31, 2021.

38

Cresco Labs Inc.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2022 and 2021

(c) Share Purchase Warrants

At September 30, 2022, the Company had 2.1 million warrants outstanding, none of which are classified as current liabilities.

In the second quarter of 2022, the Company reduced the liability classified warrants to $nil, resulting in a mark-to-market gain of $1.2 million for the three months ended June 30, 2022. The gain was driven by changes in the Company’s share price, volatility and the remaining expected life of the warrants. During the three months ended September 30, 2022, all 4.2 million liability-classified warrants expired.

For the three months ended September 30, 2021, the Company recorded a mark-to-market gain of $8.0 million, primarily due to a decrease in the Company’s share price, a decrease in remaining expected life and a decrease in the volatility; additionally, the Company recorded a $0.2 million unrealized gain on foreign exchange. For the nine months ended September 30, 2021, the Company recorded a mark-to-market gain of $10.7 million, primarily due to a decrease in the Company’s share price, volatility and remaining expected life; additionally, the Company recorded a $0.3 million unrealized loss on foreign exchange.

All warrants classified as derivative liabilities are measured at fair value. As of December 31, 2021, the fair value of liability-classified warrants was determined using the Black-Scholes option-pricing model utilizing the following assumptions:

	December 31, 2021
Risk-free annual interest rate	0.15%
Expected annual dividend yield	0%
Expected stock price volatility	47.3%
Expected life of stock warrants	< 1 year
Forfeiture rate	0%
Share price at period end	$6.62
Strike price at period end	$9.86

Volatility was calculated by using the Company’s historical share volatility. The expected life in years represented the period of time before warrants expired. The risk-free rate was based on U.S. treasury bills with a remaining term equal to the expected life of the warrants. The Company did not estimate forfeitures on warrants.

39

Cresco Labs Inc.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2022 and 2021

Financial Risk Management

The Company is exposed in varying degrees to a variety of financial instrument related risks. The Board and the Company’s management mitigate these risks by assessing, monitoring and approving the Company’s risk management processes:

(a) Credit and Banking Risk

Credit risk is the risk of a potential loss to the Company if a customer or a third-party to a financial instrument fails to meet its contractual obligations. The maximum credit exposure as of September 30, 2022 and December 31, 2021 is the carrying amount of cash, accounts receivable and loans receivable. The Company does not have significant credit risk with respect to its growth in its key retail markets, as payment is typically due upon transferring the goods to the customer at our dispensaries. which currently accept only cash and debit cards. Additionally, the Company does not have significant credit risk with respect to its loan counterparties as the interest rate on our Senior Loan is not variable and therefore, is not materially impacted by interest rate increases enacted by the Federal Reserve. Although all deposited cash is placed with U.S. financial institutions in good standing with regulatory authorities, changes in U.S. federal banking laws related to the deposit and holding of funds derived from activities related to the cannabis industry have passed the U.S. House of Representatives but have not yet been voted on within the U.S. Senate. Given that current U.S. federal law provides that the production and possession of cannabis is illegal, there is a strong argument that banks cannot accept or deposit funds from businesses involved with the cannabis industry, leading to an increased risk of legal actions against the Company and forfeitures of the Company’s assets.

The Company’s aging of Accounts receivables as of September 30, 2022 and December 31, 2021 was as follows:

($ in thousands)	September 30, 2022		December 31, 2021
0 to 60 days	$	46,882	$	37,750
61 to 120 days		3,092		4,309
120 days +		5,298		3,540
Total accounts receivable, gross	$	55,272	$	45,599
Allowance for doubtful accounts		3,623		2,220
Total Accounts receivable, net	$	51,649	$	43,379

For the nine months ended September 30, 2022 and 2021, the Company recorded bad debt expense of $1.4 million and $1.0 million, respectively, to account for ECL and recorded an additional $0.1 million and $0.3 million, respectively, in bad debt related to invoice write-offs.

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Cresco Labs Inc.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2022 and 2021

(b) Asset Forfeiture Risk

Because the cannabis industry remains illegal under U.S. federal law, any property owned by participants in the cannabis industry which are either used in the course of conducting such business, or are the proceeds of such business, could be subject to seizure by law enforcement and subsequent civil asset forfeiture. Even if the owner of the property was never charged with a crime, the property in question could still be seized and subject to an administrative proceeding by which, with minimal due process, it could be subject to forfeiture.

(c) Liquidity Risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations associated with financial liabilities. The Company primarily manages liquidity risk through the management of its capital structure by ensuring that it will have sufficient liquidity to settle obligations and liabilities when due. As of September 30, 2022, the Company had working capital (defined as current assets less current liabilities) of $84.6 million. The Company will continue to raise capital as needed to fund operations and expansion.

In addition to the commitments outlined in Note 15, the Company has the following contractual obligations as of September 30, 2022:

($ in thousands)	< 1 Year		1 to 3 Years		3 to 5 Years		Total
Accounts payable and Accrued liabilities	$	87,783	$	—	$	—	$	87,783
Deferred consideration, contingent consideration and other payables, short-term		50,066		—		—		50,066
Deferred consideration, long-term		—		4,058		—		4,058
Long-term notes payable and loans payable and Short-term borrowings		28,847		—		468,064		496,911
Other long-term liabilities		—		—		7,000		7,000
Total obligations as of September 30, 2022	$	166,696	$	4,058	$	475,064	$	645,818

(d) Market Risk

(i) Currency Risk

The operating results and balance sheet of the Company are reported in USD. As of September 30, 2022 and December 31, 2021, the Company’s financial assets and liabilities are primarily in USD. However, from time to time, some of the Company’s financial transactions are denominated in currencies other than USD. The results of the Company’s operations are subject to currency transaction and translation risks. The Company recorded $0.2 million and $0.3 million in foreign exchange losses during the three and nine months ended September 30, 2022, respectively. The Company recorded $0.2 million and $1.3 million in foreign exchange losses during the three and nine months ended September 30, 2021, respectively.

As of September 30, 2022 and December 31, 2021, the Company had no hedging agreements in place with respect to foreign exchange rates. The Company has not entered into any agreements or purchased any instruments to hedge possible currency risks at this time.

41

Cresco Labs Inc.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2022 and 2021

(ii) Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. An increase or decrease in the Company’s incremental borrowing rate would result in an associated increase or decrease in Deferred consideration, contingent consideration and other payables and Interest expense, net. The Company’s Senior Loan accrues at a rate of 9.5% per annum and has an effective interest rate of 11.0%.

(iii) Price Risk

Price risk is the risk of variability in fair value due to movements in equity or market prices. The Company is subject to price risk related to derivative liabilities and contingent consideration that are valued based on the Company’s own stock price. An increase or decrease in stock price would result in an associated increase or decrease to Deferred consideration, contingent consideration and other payables and Derivative liabilities, short-term with a corresponding change to Other income, net.

(iv) Tax Risk

Tax risk is the risk of changes in the tax environment that would have a material adverse effect on the Company’s business, results of operations and financial condition. Currently, state-licensed marijuana businesses are assessed a comparatively high effective federal tax rate due to Internal Revenue Code (“IRC”) Section 280E, which bars businesses from deducting all expenses except their cost of goods sold when calculating federal tax liability. Any increase in tax levies resulting from additional tax measures may have a further adverse effect on the operations of the Company, while any decrease in such tax levies will be beneficial to future operations. See Note 20 for the Company’s disclosure of uncertain tax positions.

(v) Regulatory Risk

Regulatory risk pertains to the risk that the Company’s business objectives are contingent, in part, upon the compliance of regulatory requirements. Due to the nature of the industry, the Company recognizes that regulatory requirements are more stringent and punitive in nature. Any delays in obtaining, or failure to obtain regulatory approvals can significantly delay operational and product development and can have a material adverse effect on the Company’s business, results of operation and financial condition. The Company is cognizant of the advent of regulatory changes occurring in the cannabis industry on the city, state and national levels. Although the regulatory outlook on the cannabis industry has been moving in a positive trend, the Company is aware that unforeseen regulatory changes could have a material adverse impact on the goals and operation of the business as a whole.

(vi) Novel Coronavirus (“COVID-19”) Risk

COVID-19 was declared a pandemic by the World Health Organization on March 12, 2020. During the fourth quarter of 2020, the first vaccine utilized to prevent coronavirus infection was approved by the U.S. Food and Drug Administration. As of September 30, 2022, the vaccine is widely available, however, there remains significant economic uncertainty and consequently, it is difficult to reliably measure the potential impact of this uncertainty on the Company’s future financial results.

42

Cresco Labs Inc.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2022 and 2021

(vii) Inflation Risk

Inflation risk is the risk that rising inflation will increase our cultivation costs, distribution costs and operating expenses; thus, impacting our operating results. The Company maintains strategies to mitigate the impact of higher raw material, energy and commodity costs, which include cost reduction, sourcing and other actions, which may help to offset a portion of the adverse impact.

43

Cresco Labs Inc.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2022 and 2021

NOTE 17. VARIABLE INTEREST ENTITIES

The following table presents the summarized financial information about the Company’s consolidated variable interest entities (“VIEs”) which are included in the Unaudited Condensed Interim Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021. Cresco Labs Michigan, LLC was determined to be a VIE as the Company possesses the power to direct activities through written agreements. See Note 2 for additional information.

	September 30, 2022			December 31, 2021
($ in thousands)	Cresco Labs Michigan, LLC			Cresco Labs Michigan, LLC
Current assets	$	44,670		$	36,850
Non-current assets		35,252			36,320
Current liabilities		(84,696	)		(72,476	)
Non-current liabilities		(23,356	)		(23,124	)
Equity (deficit) attributable to Cresco Labs Inc.		(28,130	)		(22,430	)

The following table presents the summarized financial information about the Company’s consolidated VIEs which are included in the Unaudited Condensed Interim Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
($ in thousands)	Cresco Labs Michigan, LLC			Cresco Labs Michigan, LLC			Cresco Labs Michigan, LLC			Cresco Labs Michigan, LLC
Revenue	$	4,406		$	860		$	7,901		$	2,974
Net loss attributable to Cresco Labs Inc.		(805	)		(2,423	)		(5,821	)		(6,332	)
Net loss		(805	)		(2,423	)		(5,821	)		(6,332	)

NOTE 18. SEGMENT INFORMATION

The Company operates in one segment, the cultivation, manufacturing, distribution and sale of cannabis. The Chief Executive Officer, the Chief Financial Officer, the Chief Operating Officer and the Chief Commercial Officer of the Company have been identified as the Chief Operating Decision Makers (“CODM”) and manage the Company’s operations as a whole. For the purpose of evaluating financial performance and allocating resources, the CODM review certain financial information presented on a consolidated basis accompanied by information by customer and geographic region.

For the three and nine months ended September 30, 2022, the Company generated 100% of its revenue in the United States. For the three and nine months ended September 30, 2021, the Company generated 100.0% and 99.5%, respectively, of its revenue in the United States with the remainder generated in Canada.

44

Cresco Labs Inc.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2022 and 2021

NOTE 19. INTEREST EXPENSE, NET

Interest expense, net, consisted of the following for the three and nine months ended September 30, 2022 and 2021:

	Three Months Ended September 30,						Nine Months Ended September 30,
($ in thousands)	2022			2021			2022			2021
Interest expense – leases	$	(989	)	$	(1,070	)	$	(2,973	)	$	(3,029	)
Interest expense – notes and loans payable		(9,711	)		(7,895	)		(28,817	)		(19,950	)
Accretion of debt discount and amortization of deferred financing fees		(1,009	)		(1,242	)		(2,913	)		(4,225	)
Interest expense – financing activities and sale and leasebacks		(2,961	)		(2,988	)		(8,920	)		(8,620	)
Other interest (expense) income1		(1,042	)		(578	)		1,312			(1,275	)
Interest income		158			196			378			739
Total Interest expense, net	$	(15,554	)	$	(13,577	)	$	(41,933	)	$	(36,360	)

¹  During the nine months ended September 30, 2022, the Company recorded reductions in interest expense of $1.3 million and $0.1 million related to Laurel Harvest deferred consideration and Valley Ag operating cash flows deferred consideration, respectively; resulting in interest income and partially offset by $0.1 million of interest expense. See Note 10 for additional information.

See Note 11 for additional information on Interest expense – notes and loans payable and accretion of debt discount and amortization of deferred financing fees.

45

Cresco Labs Inc.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2022 and 2021

NOTE 20. PROVISION FOR INCOME TAXES AND DEFERRED INCOME TAXES

As the Company operates in the cannabis industry, the Company is subject to the limits of IRC Section 280E for U.S. federal income tax purposes as well as some state income tax purposes. Under IRC Section 280E, the Company is only allowed to deduct expenses directly related to sales of product. This results in permanent differences between ordinary and necessary business expenses deemed non-allowable under IRC Section 280E. However, certain states including California, Maryland and New York do not conform to IRC Section 280E and, accordingly, the Company deducts all operating expenses on its income tax returns in these states.

The Company is treated as a United States corporation for U.S. federal income tax purposes under IRC Section 7874 and is subject to U.S. federal income tax on its worldwide income. However, for Canadian tax purposes, the Company, regardless of any application of IRC Section 7874, is treated as a Canadian resident company, as defined in the Income Tax Act (Canada), for Canadian income tax purposes. As a result, the Company is subject to taxation both in Canada and the United States.

During the third quarter of 2022, the Company identified certain expenses classified as selling, general and administrative for financial statement purposes that could be considered costs related to sales of product for tax purposes. The Company plans to continue with this treatment for the year ended 2022. The Company has determined that this tax treatment does not meet the more likely than not threshold under ASC 740 Income Taxes due to the evolving interpretations of IRC Section 280E, and, as a result, a reserve for an uncertain tax position of $5.7 million related to the 2022 tax year has been recorded as of September 30, 2022. The Company expects to record an additional reserve related to the 2021 tax year during the fourth quarter of 2022, once all 2021 income tax returns have been filed.

The following table summarizes the Company’s income tax expense and effective tax rates for the three and nine months ended September 30, 2022 and 2021:

	Three Months Ended September 30,						Nine Months Ended September 30,
($ in thousands)	2022			2021			2022			2021
Income (loss) before income taxes	$	15,483		$	(275,860	)	$	29,957		$	(268,344	)
Income tax expense (recovery)		18,732			(12,408	)		65,177			16,579
Effective tax rate		121.0	%		4.5	%		217.6	%		(6.2	)%

NOTE 21. SUBSEQUENT EVENTS

The Company has evaluated subsequent events through November 15, 2022, which is the date on which these financial statements were issued.

On November 4, 2022, the Company announced that it had entered into a definitive agreement to divest certain New York, Illinois, and Massachusetts assets (the “Assets”) to entities owned and controlled by Sean “Diddy” Combs, (the “Combs Transaction”) for total consideration of $185.0 million (the “Purchase Price”). The divestiture of the Assets is required for Cresco Labs to close its previously announced acquisition of Columbia Care and is expected to close concurrently with the closing of the Columbia Care Transaction. The purchasing entities will acquire certain Cresco Labs and Columbia Care assets in New York, Illinois, and Massachusetts. A portion of the Purchase Price is payable upon closing of the Combs Transaction, subject to adjustments contained in the definitive agreements, and will be

46

Cresco Labs Inc.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2022 and 2021

comprised of approximately $110.0 million in cash and approximately $45.0 million of seller notes. The remaining portion of the Purchase Price is payable post-closing of the Combs Transaction upon achievement of certain short-term, objective, and market-based milestones. The following combination of Cresco Labs (“CL”) and Columbia Care (“CC”) assets will be divested in the Combs Transaction:

• New York: Brooklyn (CC), Manhattan (CC), New Hartford (CL), and Rochester (CC) retail assets and Rochester (CC) production asset.

• Massachusetts: Greenfield (CC), Worcester (CL), and Leicester (CL) retail assets and Leicester (CL) production asset.

• Illinois: Chicago – Jefferson Park (CC) and Villa Park (CC) retail assets and Aurora (CC) production asset.

The closing of the Combs Transaction is subject to certain closing conditions in the definitive agreements, including the receipt of all required regulatory approvals; clearance under the Hart-Scott-Rodino Antitrust Improvements Act; and the closing of the Columbia Care Acquisition.

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