MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2026 AND 2025 (Form 6-K)

For more information about risks related to the U.S. marijuana operations, refer to the discussion of risks and uncertainties set out under the heading "Risk Factors," located within the Company's Annual Information Form for the year ended December 31, 2025, filed on SEDAR+ and EDGAR. Additional information relating to the Company, including the Company's Annual Information Form for the year ended December 31, 2025, is available on SEDAR+ at www.sedarplus.ca.

RECENT DEVELOPMENTS

On October 30, 2026, the Company's shareholders approved, and the Board of Directors authorized, the creation of a new parent company ("TopCo"), which would become the new publicly listed entity, a proposed redomicile of TopCo from British Columbia to Delaware, and an amendment to extend the sunset date of the Company's multiple voting shares from the first to the third anniversary of a U.S. listing. The proposed transactions are intended to simplify the Company's capital structure in advance of accessing U.S. capital markets and remain subject to the satisfaction of applicable legal and regulatory requirements, the completion of applicable corporate procedures, and the filing of the requisite governing documents.

On June 5, 2026, the Company closed on a credit agreement providing the Company with a $50.0 million Revolving Credit Facility (the "Revolver"). Borrowings under the Revolver are available to fund growth initiatives, acquisitions, and general corporate purposes. The Revolver accrues interest at a rate of 7.99% and has a stated maturity date of August 13, 2030. As of September 30, 2026, the Company has drawn $28.4 million under the Revolver.

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On April 23, 2026, the Justice Department and the Drug Enforcement Administration announced the issuance of an order immediately placing both Food and Drug Administration-approved products containing marijuana and marijuana products regulated by a qualifying state medical marijuana license in Schedule III of the Controlled Substances Act, as well as the initiation of an expedited administrative hearing process to consider the broader rescheduling of marijuana from Schedule I to Schedule III. The administrative hearing process commenced on June 29, 2026 and concluded on July 15, 2026. Following the conclusion of the hearing process, the broader rescheduling proposal remains subject to the ongoing administrative rulemaking process, and the timing and outcome remain uncertain.

On March 9, 2026, a VIE of the Company entered into multiple agreements to acquire four (4) dispensaries. Total consideration is an estimated $14.7 million, subject to certain closing adjustments. Subsequently, on June 8, 2026, a VIE of the Company entered into multiple agreements that went into effect to operate one (1) additional adult-use dispensary for total consideration of an estimated $2.9 million, subject to certain closing adjustments.

During the first quarter of 2026, the Company entered into multiple agreements to acquire 100% of the outstanding equity interests in PharmaCann Penn, LLC ("PharmaCann"), which operates nine (9) retail medical marijuana dispensaries in Pennsylvania. On April 12, 2026, the Company entered into an agreement covering operation of these dispensaries and resulting in consolidation of PharmaCann. On September 1, 2026, the Company completed the business combination of PharmaCann for total consideration of $46.9 million.

COMPONENTS OF OUR RESULTS OF OPERATIONS

Revenue

For the three months ended September 30, 2026 and 2025, approximately 70.0% and 64.2%, respectively, of our revenue was derived from Company-owned retail dispensary locations. Retail revenue includes medical and adult-use cannabis sales. Revenue from the wholesale of cannabis products represents the remaining 30.0% and 35.8%, respectively, for the same periods. Sales discounts were approximately 32.4% and 28.7% of gross revenue for the three months ended September 30, 2026 and 2025, respectively. For the nine months ended September 30, 2026 and 2025, approximately 69.3% and 66.2%, respectively, of our revenue was derived from Company-owned retail dispensary locations. Revenue from the wholesale of cannabis products represents the remaining 30.7% and 33.8%, respectively, for the same periods. Sales discounts were approximately 31.6% and 29.2% of gross revenue for the nine months ended September 30, 2026 and 2025, respectively.

Gross profit

Gross profit is calculated as revenue less cost of goods sold ("COGS"). COGS includes the direct and indirect costs attributable to the cultivation and production of the products sold and is comprised of the following:

•Direct and indirect labor costs: Include all salaries, benefits, and taxes for all employees at the cultivation and manufacturing facilities.

•Direct supplies: Include direct material costs for maintenance of the plant, supplies and nutrients, production expenses including inventory purchases, packaging costs, and equipment used to process marijuana.

•Facility expenses: The facility expenses for the cultivation operations are the cost for the facility, utilities, property taxes, maintenance, and costs associated with monitoring the security systems.

•Other operating expenses: Include all costs associated with the facility itself, including insurance, community benefit fees, professional services related to licenses and compliance, uniforms, employee training programs, tracking and inventory management systems, product testing, business development, information technology, license renewal fees, and certain excise taxes.

In addition to market fluctuations, cannabis costs are affected by various state regulations that limit the sourcing and procurement of cannabis products. The changes in regulatory environments may create fluctuations in gross profit over comparative periods. Additionally, gross profit may include the cost of inventory required to be marked to fair value as part of purchase accounting in a business combination.

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Selling, general, and administrative expenses ("SG&A")

SG&A consist of employee salary and benefit costs, depreciation and amortization, professional and legal fees, finance costs, advertising and marketing, office and retail operation costs, share-based compensation, certain excise taxes, technology, insurance, security, travel and entertainment, and rent expense. SG&A is a component of Total operating expenses as discussed in the "Selected Financial Information" section below.

For the three and nine months ended September 30, 2026 and 2025, SG&A was comprised of the following:

						Three Months Ended September 30,												Nine Months Ended September 30,
($ in thousands)						2026						2025						2026						2025
Salaries and benefits						$	33,671					$	31,282					$	100,961					$	98,465
Occupancy and facility expense						7,661						6,958						21,220						20,862
Depreciation and amortization						7,392						5,636						19,268						15,212
Professional and legal fees						4,161						3,163						17,820						11,094
Selling and marketing expense						3,523						2,861						10,080						7,996
Office and general expense						3,254						2,178						8,543						7,340
Share-based compensation						3,695						1,891						11,958						5,998
Other expense						5,467						5,198						16,836						15,091
Total SG&A						$	68,824					$	59,167					$	206,686					$	182,058

Other income (expense), net

Other income (expense), net consists mainly of recurring gains (losses) on investments, foreign currency, loss on provision for loan receivables, gain (loss) on disposition of assets, changes in fair value of deferred and contingent consideration, as well as ad hoc expenses, such as gain (loss) on lease termination, and loss on debt extinguishment. These gains (losses) do not generally correlate to revenue. Other income (expense), net is added to Interest expense, net, to sum to Total other expense, net discussed in the "Selected Financial Information" section below.

For the three and nine months ended September 30, 2026 and 2025, Other income (expense), net consisted of the following:

						Three Months Ended September 30,												Nine Months Ended September 30,
($ in thousands)						2026						2025						2026						2025
Loss on debt extinguishment						$	-					$	(16,363)					$	-					$	(16,363)
Loss on disposal of assets						(73)						(1,422)						(2,005)						(2,227)
(Loss) gain on foreign currency						(24)						227						393						(415)
(Loss) gain on provision - loan receivable						(84)						27						(505)						(88)
Changes in fair value of deferred and contingent considerations						(450)						(428)						(1,159)						62
Gain on asset acquisition						-						-						228						-
Other income, net						812						4,170						2,336						5,212
Other income (expense), net						$	181					$	(13,789)					$	(712)					$	(13,819)

Interest expense, net

Interest expense, net consists mainly of interest on notes and loans payable, financing activities, leases, accretion of debt discount and amortization of deferred financing fees, and interest income. Interest expense, net is included in Total other expense, net discussed in the "Selected Financial Information" section below.

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For the three and nine months ended September 30, 2026 and 2025, Interest expense, net consisted of the following:

						Three Months Ended September 30,												Nine Months Ended September 30,
($ in thousands)						2026						2025						2026						2025
Interest expense - notes and loans payable						$	(11,795)					$	(10,354)					$	(34,334)					$	(30,288)
Interest expense - financing activities						(2,717)						(2,809)						(8,224)						(8,478)
Accretion of debt discount and amortization of deferred financing fees						(881)						(943)						(2,214)						(3,413)
Interest expense - leases						(659)						(731)						(2,015)						(2,215)
Interest income						388						699						1,202						2,385
Other interest expense						(2)						(2)						(113)						(6)
Interest expense, net						$	(15,666)					$	(14,140)					$	(45,698)					$	(42,015)

Income Taxes

The Company is classified for U.S. federal income tax purposes as a U.S. corporation under Section 7874 of the Internal Revenue Code ("IRC"). The Company is subject to income taxes in the jurisdictions in which it operates and, consequently, income tax expense is a function of the allocation of taxable income by jurisdiction and the various activities that impact the timing of taxable events. 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 state income tax purposes. Under IRC Section 280E, the Company is only allowed to deduct expenses directly related to the COGS for operations relating to adult-use cannabis. Effective April 22, 2026, SG&A and COGS expenses are deductible for operations relating to medical cannabis. This results in permanent differences between ordinary and necessary business expenses deemed non-allowable under IRC Section 280E.

However, beginning in 2024, the Company began taking an uncertain tax position on its tax returns (beginning with 2023 originally filed tax returns) that its operations are not subject to IRC Section 280E and therefore intends to deduct such expenses with a related uncertain tax liability offsetting such deductions. The Company continues to take this position for the full year 2026 for both state licensed medical and adult-use cannabis. Additionally, certain states including Arizona, California, Illinois, Massachusetts, Michigan, Pennsylvania, and New York do not conform to IRC Section 280E and, accordingly, the Company generally deducts all operating expenses on its income tax returns in these states.

The April 2026 federal rescheduling order has a material effect on our future results of operations, cash flows, and liquidity, particularly because it eliminates the application of IRC Section 280E to our state-licensed medical cannabis operations effective April 22, 2026. Such impact depends on, among other things, the scope of our qualifying medical cannabis activities, our ability to substantiate deductions attributable to those activities, future Treasury, Internal Revenue Service, Department of Justice, Drug Enforcement Administration ("DEA"), and state regulatory guidance, and the outcome of pending DEA proceedings regarding broader rescheduling for adult-use cannabis. The Company has adjusted its income tax provision during the quarter ended June 30, 2026 to reflect an effective date of April 22, 2026 for state-licensed medical cannabis no longer being subject to IRC Section 280E. We continue to wait for guidance on whether the change to medical cannabis will be applied retroactively and for the results of the rescheduling hearings for adult-use cannabis. As more guidance becomes available, we will continue to evaluate whether to file amended returns and whether changes to our systems, controls, and cost allocation methodologies are required. At this time, we cannot be certain of the amount of tax benefit that will be realized, that the order will improve our access to capital or banking services, or that additional federal regulatory changes will occur.

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SELECTED FINANCIAL INFORMATION

The Company reports results of operations of its affiliates from the date that control commences, either through the purchase of the business, through a management agreement, or through other arrangements that grant such control. The following selected financial information includes only the results of operations after the Company established control of its affiliates. Accordingly, the information included below may not be representative of the results of operations if such affiliates had included their results of operations for the entire reporting period. For discussion of our fiscal 2025 results of operations and comparison with fiscal 2024 results of operations, please refer to "Management's Discussion and Analysis of Financial Conditions and Results of Operations" filed on SEDAR+ on March 5, 2026 and EDGAR on March 6, 2026.

Summary of Unaudited Quarterly Results

($ in thousands, except per share amounts)						2026												2025															2024
						Q3			Q2			Q1						Q4			Q3			Q2			Q1						Q4
Revenues, net						$	172,782		$	173,341		$	151,325					$	161,553		$	164,913		$	163,624		$	165,757					$	175,909
Income (loss) from operations						10,662			13,361			11,173						(75,545)			17,828			16,141			13,589						19,406
Net (loss) income attributable to Cresco Labs Inc.						(12,441)			16,796			(13,072)						(87,588)			(17,054)			(16,334)			(14,432)						(4,372)
Basic EPS						$	(0.03)		$	0.05		$	(0.04)					$	(0.25)		$	(0.05)		$	(0.05)		$	(0.04)					$	(0.01)
Diluted EPS						(0.03)			0.04			(0.04)						(0.25)			(0.05)			(0.05)			(0.04)						(0.01)

Results of Operations

Three Months Ended September 30, 2026 Compared to the Three Months Ended September 30, 2025

The following tables set forth selected consolidated financial information for the periods indicated that are derived from our Unaudited Condensed Interim Consolidated Financial Statements and the respective accompanying notes prepared in accordance with GAAP.

The selected unaudited consolidated financial information set out below may not be indicative of the Company's future performance:

						Three Months Ended September 30,
($ in thousands)						2026						2025						$ Change						% Change
Revenues, net						$	172,782					$	164,913					$	7,869					4.8		%
Cost of goods sold						93,296						85,553						7,743						9.1		%
Gross profit						79,486						79,360						126						0.2		%
Selling, general, and administrative						68,824						59,167						9,657						16.3		%
Impairment loss						-						2,365						(2,365)						(100.0)		%
Total operating expenses						68,824						61,532						7,292						11.9		%
Total other expense, net						(15,485)						(27,929)						12,444						(44.6)		%
Income tax expense						(9,710)						(11,867)						2,157						(18.2)		%
Net loss1						$	(14,533)					$	(21,968)					$	7,435					(33.8)		%

1Net loss includes amounts attributable to non-controlling interests.

Revenues, net

Revenue for the three months ended September 30, 2026, increased $7.9 million, or 4.8%, compared to the three months ended September 30, 2025. The increase in revenue was primarily driven by dispensary acquisitions in Pennsylvania, retail and wholesale growth in Ohio due to new store openings. The increase was partially offset by reduced operations in California compared to the prior year period as well as price compression and increased competition in Illinois.

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COGS and Gross profit

COGS for the three months ended September 30, 2026, increased $7.7 million, or 9.1%, compared to the three months ended September 30, 2025. The increase was primarily attributable to increased sales in Pennsylvania driven by dispensary acquisitions as well as increased production in Ohio to meet demand and higher costs in Massachusetts, partially offset by reduced operations in California compared to the prior year period.

Gross profit increased by $0.1 million, or 0.2%, for the three months ended September 30, 2026, compared to the three months ended September 30, 2025. The increase in gross profit was primarily driven by increased sales in Pennsylvania and Ohio, partially offset by lower gross profit in certain higher margin states. As a percentage of revenue, gross profit was 46.0% and 48.1% for the three months ended September 30, 2026 and September 30, 2025, respectively. The decrease in gross profit as a percentage of revenue was driven by compressed margins from higher margin states.

Total operating expenses

Total operating expenses for the three months ended September 30, 2026, increased $7.3 million, or 11.9%, compared to the three months ended September 30, 2025. The increase was primarily attributable to increased operations from acquisitions and capital expenditures resulting in increases in other operating expenses. The increase was partially offset by $2.4 million of impairment charges recognized during the three months ended September 30, 2025, with no impairment charges recognized for the three months ended September 30, 2026.

Total other expense, net

Total other expense, net for the three months ended September 30, 2026, decreased $12.4 million, or 44.6%, compared to the three months ended September 30, 2025. The decrease was primarily attributable to a loss on debt extinguishment recognized during the three months ended September 30, 2025 as a result of the Company retiring its Senior Loan, with no loss on debt extinguishment recognized during the three months ended September 30, 2026. The decrease was partially offset by an increase in interest expense recognized during the three months ended September 30, 2026 compared to the prior year period.

Provision for income taxes

Income tax expense for the three months ended September 30, 2026 was $9.7 million, compared to $11.9 million of income tax expense for the three months ended September 30, 2025. The $2.2 million change was primarily a result of the change to qualifying state licensed medical cannabis.

Net loss

Net loss for the three months ended September 30, 2026, decreased $7.4 million compared to the three months ended September 30, 2025. The change was primarily driven by a decrease in total other expense, net discussed above.

Nine Months Ended September 30, 2026 Compared to the Nine Months Ended September 30, 2025

The following tables set forth selected consolidated financial information for the periods indicated that are derived from our Unaudited Condensed Interim Consolidated Financial Statements and the respective accompanying notes prepared in accordance with GAAP.

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The selected consolidated financial information set out below may not be indicative of the Company's future performance:

						Nine Months Ended September 30,
($ in thousands)						2026						2025						$ Change						% Change
Revenues, net						$	497,448					$	494,294					$	3,154					0.6		%
Cost of goods sold						255,566						253,047						2,519						1.0		%
Gross profit						241,882						241,247						635						0.3		%
Selling, general, and administrative						206,686						182,058						24,628						13.5		%
Impairment loss						-						11,630						(11,630)						(100.0)		%
Total operating expenses						206,686						193,688						12,998						6.7		%
Total other expense, net						(46,410)						(55,834)						9,424						(16.9)		%
Income tax expense						(4,964)						(42,820)						37,856						(88.4)		%
Net loss1						$	(16,178)					$	(51,095)					$	34,917					(68.3)		%

1Net loss includes amounts attributable to non-controlling interests.

Revenues, net

Revenue for the nine months ended September 30, 2026, increased $3.2 million, or 0.6%, compared to the nine months ended September 30, 2025. The increase in revenue was primarily driven by retail growth in Pennsylvania due to dispensary acquisitions, retail and wholesale growth in Ohio due to new store openings and market expansion, as well as wholesale growth in Massachusetts. The increase was partially offset by reduced operations in California compared to the prior year period as well as increased competition and price compression in the Illinois retail and wholesale markets, Florida retail market, Pennsylvania wholesale market, and disruption in the Michigan market following the introduction of an excise tax.

COGS and Gross profit

COGS for the nine months ended September 30, 2026, increased $2.5 million, or 1.0%, compared to the nine months ended September 30, 2025. The increase was primarily attributable to increased sales in Pennsylvania driven by dispensary acquisitions as well as increased sales in Massachusetts. The increase in COGS was partially offset by reduced operations in California compared to the prior year period.

Gross profit increased by $0.6 million, or 0.3%, for the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025. The slight increase in gross profit was primarily driven by increased sales in Ohio, partially offset by lower sales in Illinois and lower gross profit in Michigan. As a percentage of revenue, gross profit was 48.6% and 48.8% for the nine months ended September 30, 2026 and September 30, 2025, respectively. The slight decrease in gross profit as a percentage of revenue was driven by margin compression from higher margin states.

Total operating expenses

Total operating expenses for the nine months ended September 30, 2026, increased $13.0 million, or 6.7%, compared to the nine months ended September 30, 2025. The increase was primarily attributable to an increase in professional and legal fees, share-based compensation, depreciation and amortization, salaries and benefits, and selling and marketing expenses. The increase was partially offset by $11.6 million of impairment charges recognized for the nine months ended September 30, 2025, with no impairment charges recognized during the nine months ended September 30, 2026.

Total other expense, net

Total other expense, net for the nine months ended September 30, 2026, decreased $9.4 million, or 16.9%, compared to the nine months ended September 30, 2025. The decrease was primarily attributable to a loss on debt extinguishment recognized during the nine months ended September 30, 2025 as a result of the Company retiring its Senior Loan, with no loss on debt extinguishment recognized during the nine months ended September 30, 2026. The decrease was partially offset by an increase in interest expense recognized during the nine months ended September 30, 2026 compared to the prior year period.

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Provision for income taxes

Income tax expense for the nine months ended September 30, 2026 was $5.0 million, compared to $42.8 million of income tax expense for the nine months ended September 30, 2025. The $37.9 million change was primarily a result of the change to qualifying state licensed medical cannabis.

Net loss

Net loss for the nine months ended September 30, 2026, decreased $34.9 million compared to the nine months ended September 30, 2025. The decrease in net loss was primarily driven by the decrease in income tax expense discussed above.

NON-GAAP FINANCIAL MEASURES

Earnings before interest, taxes, depreciation, and amortization ("EBITDA") and Adjusted EBITDA (defined below) are non-GAAP financial measures and do not have standardized definitions under GAAP and may not be comparable to similar measures presented by other issuers. The Company has provided the non-GAAP financial measures, which are not calculated or presented in accordance with GAAP, as supplemental information and in addition to the financial measures that are calculated and presented in accordance with GAAP. These supplemental non-GAAP financial measures are presented because management has evaluated the financial results both including and excluding the adjusted items and believe that the supplemental non-GAAP financial measures presented provide additional perspectives and insights when analyzing the core operating performance of the business. This provides useful information for investors, allowing them to gain a clearer understanding of the Company's operating performance and make more informed investment decisions. These supplemental non-GAAP financial measures should not be considered superior to, as a substitute for, or as an alternative to and should only be considered in conjunction with, the GAAP financial measures presented herein. Accordingly, the Company has included below reconciliations of the supplemental non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP.

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			Three Months Ended September 30,																								Nine Months Ended September 30,
($ in thousands)			2026						2025						$ Change						% Change						2026						2025						$ Change						% Change
Net loss1			$	(14,533)					$	(21,968)					$	7,435					(33.8)		%				$	(16,178)					$	(51,095)					$	34,917					(68.3)		%
Depreciation and amortization			15,423						12,858						2,565						19.9		%				40,293						37,953						2,340						6.2		%
Interest expense, net			15,666						14,140						1,526						10.8		%				45,698						42,015						3,683						8.8		%
Income tax expense			9,710						11,867						(2,157)						(18.2)		%				4,964						42,820						(37,856)						(88.4)		%
EBITDA (non-GAAP)2			$	26,266					$	16,897					$	9,369					55.4		%				$	74,777					$	71,693					$	3,084					4.3		%
Other (income) expense, net			(181)						13,789						(13,970)						(101.3)		%				712						13,819						(13,107)						(94.8)		%
Fair value mark-up for acquired inventory			628						-						628						100.0		%				2,533						-						2,533						100.0		%
Adjustments for acquisition and other non-core costs			4,010						4,443						(433)						(9.7)		%				16,109						12,192						3,917						32.1		%
Impairment loss			-						2,365						(2,365)						(100.0)		%				-						11,630						(11,630)						(100.0)		%
Share-based compensation			4,173						2,311						1,862						80.6		%				13,201						7,580						5,621						74.2		%
Adjusted EBITDA (non-GAAP)			$	34,896					$	39,805					$	(4,909)					(12.3)		%				$	107,332					$	116,914					$	(9,582)					(8.2)		%

1Net loss includes amounts attributable to non-controlling interests.

2Certain immaterial prior period amounts were reclassified to conform to the current presentation.

Adjusted EBITDA, a non-GAAP financial measure, is defined as EBITDA, excluding Other (income) expense, net; fair value mark-up for acquired inventory; adjustments for acquisition and other non-core costs; impairment and share-based compensation. Non-core costs include non-operating costs, such as costs related to acquisitions and restructuring, unique legal expenses, and other expenses that are mostly one-time in nature. Adjusted EBITDA was $34.9 million for the three months ended September 30, 2026, compared to $39.8 million for the three months ended September 30, 2025. The decrease in adjusted EBITDA of $4.9 million is primarily driven by an increase in operating expenses such as salaries and benefits expenses and office and general expenses. Adjusted EBITDA was $107.3 million for the nine months ended September 30, 2026, compared to $116.9 million for the nine months ended September 30, 2025. The decrease in adjusted EBITDA of $9.6 million is primarily driven by an increase in operating expenses such as professional and legal fees and salaries and benefits expenses.

LIQUIDITY AND CAPITAL RESOURCES

Overview

Our primary sources of liquidity are cash and cash equivalents from the operations of our business, debt, and equity offerings. Our principal uses of cash include working capital related items, capital expenditures, debt, and tax related payments. Additionally, we may use cash for acquisitions and other investing or financing activities.

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As of September 30, 2026, the Company held $41.2 million in Cash and cash equivalents and $34.7 million in Restricted cash, included in both Restricted cash and Other non-current assets on the Unaudited Condensed Interim Consolidated Balance Sheets, compared to $57.9 million in Cash and Cash equivalents, and $36.4 million in Restricted cash at December 31, 2025.

The Company is generally able to access private and/or public financing through, but not limited to, institutional lenders, such as the agreement for the Senior Secured Term Loan of $325.0 million, which closed on August 13, 2025, that bears an interest rate of 12.5% and matures on August 13, 2030. Additionally, on June 5, 2026, the Company closed on the Revolver of $50.0 million, which matures on August 13, 2030 and bears a 7.99% interest rate. JDRC Ellenville, LLC ("Ellenville"), an indirect subsidiary of the Company, entered into a $25.3 million loan on September 26, 2023, and amended on October 3, 2025, secured by real estate and improvements thereto. In addition, the Company has received and has access to private loans through individual investors and private and public equity raises. As of September 30, 2026, the Company was in compliance with all covenants.

The Company expects cash on hand and cash flows from operations, along with the private and/or public financing options discussed above, will be adequate to meet capital requirements and operational needs for the next twelve months. We cannot guarantee this will be the case, or that our assumptions regarding revenues and expenses underlying this belief will be accurate. If, in the future, we require more liquidity than contemplated, we may need to raise additional funds through debt and/or equity offerings. Adequate funds may not be available when needed or may not be available on terms favorable to us. If additional funds are raised by issuing equity securities, dilution to existing shareholders may result. If we raise additional funds by obtaining loans from third parties, the terms of those financing arrangements may include negative covenants or other restrictions on our business that could impair our operational flexibility and would also require us to fund additional interest expense.

If funding is insufficient at any time in the future, we may be unable to develop or enhance our products or services, take advantage of business opportunities, or respond to competitive pressures, any of which could have a material adverse effect on our business, financial condition, and results of operations.

Cash Flows

Operating Activities

Net cash provided by operating activities was $35.9 million for the nine months ended September 30, 2026, a decrease of $9.5 million compared to $45.5 million of net cash provided by operating activities during the nine months ended September 30, 2025. The $9.5 million decrease was primarily attributable to a net benefit from improved collections of accounts receivables in the prior year period and an increase in accounts payable and accrued liabilities payments due to the Senior Secured Term Loan refinancing. The decrease was offset by favorable changes in inventory and a reduction in income tax payments.

Investing Activities

Net cash used in investing activities was $67.1 million for the nine months ended September 30, 2026, an increase of $39.6 million compared to $27.5 million during the nine months ended September 30, 2025. The increase in net cash used in investing activities was primarily driven by acquisitions and increased purchases of intangibles, partially offset by a reduction in capital expenditure.

Financing Activities

Net cash provided by financing activities was $12.6 million for the nine months ended September 30, 2026, an increase of $92.9 million compared to $80.3 million used by financing activities for the nine months ended September 30, 2025. The increase was primarily driven by the Senior Secured Term Loan refinancing in 2025 and drawn down in 2026 from our Revolver.

OFF-BALANCE SHEET ARRANGEMENTS

The Company does not have any off-balance sheet arrangements that have, or are reasonably likely to have a current or future effect on financial performance or financial condition, including without limitation, such considerations as liquidity and capital resources.

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CONTRACTUAL OBLIGATIONS

The Company has the following contractual obligations as of September 30, 2026:

($ in thousands)			< 1 Year						1 to 3 Years						3 to 5 Years						> 5 Years						Total
Deferred and contingent consideration, short-term			$	4,957					$	-					$	-					$	-					$	4,957
Operating leases liabilities			17,730						63,500						61,863						108,768						251,861
Finance lease liabilities			1,460						10,374						8,186						9,979						29,999
Deferred and contingent consideration, long-term			-						8,273						-						-						8,273
Short-term borrowings and Long-term notes and loans payable			22,804						132,206						436,425						76,092						667,527
Tax receivable agreement liability			5,513						11,271						12,019						42,826						71,629
Other long-term liabilities			-						1,000						-						-						1,000
Total obligations as of September 30, 2026			$	52,464					$	226,624					$	518,493					$	237,665					$	1,035,246

RELATED PARTY TRANSACTIONS

See Note 11 "Related Party Transactions" in the Unaudited Condensed Interim Consolidated Financial Statements for the Company's disclosures on related party transactions.

FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT

The Company is exposed in varying degrees to a variety of financial instrument-related risks. The Board of Directors and Company 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, 2026 and December 31, 2025 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 the Senior Secured Term Loan is not variable and therefore, is not materially impacted by interest rate increases enacted by the Federal Reserve. The interest rate on our Mortgage Loans is based on the FHLB Five Year Classic Regular Advance Rates which matures every five (5) years and does not pose a significant credit risk. 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 require additional reforms and protections. In 2023, the Senate Banking Committee passed the SAFER Banking Act with bipartisan support, but it was not taken up on the Senate floor and died at the end of the 118th Congress. In June 2026, the SAFE Banking Act bill was reintroduced in both the Senate and House of Representatives. However, as of the date of this MD&A, the SAFE Banking Act has not been brought to a vote in the Senate or the House of Representatives and remains under consideration at the committee level. 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. While recent federal rescheduling actions may reduce risks associated with state-licensed medical cannabis activities, cannabis remains subject to significant federal regulation, and adult-use cannabis activities remain federally prohibited. Accordingly, uncertainty regarding access to banking and other financial services persists.

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(b)Asset Forfeiture Risk

Cannabis remains subject to regulation under U.S. federal law, and certain cannabis related activities may continue to violate the federal Controlled Substances Act. Accordingly, 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. Although recent federal rescheduling actions may reduce risks associated with state-licensed medical cannabis activities, cannabis-related assets remain subject to potential federal enforcement and forfeiture, and the extent to which such actions may affect asset forfeiture risk remains uncertain.

(c)Liquidity Risk

The accompanying unaudited condensed interim consolidated financial statements have been prepared assuming that the Company will continue as a going concern. For the nine months ended September 30, 2026, the Company generated positive cash flows from operations.

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, 2026, the Company had working capital (defined as current assets less current liabilities) of $138.0 million. The Company also expects to be able to continue to raise debt or equity based capital, or sell certain assets, if needed, to fund operations and the expansion of its business.

(d)Market Risk

(i)Currency Risk

The operating results and balance sheet of the Company are reported in USD. As of September 30, 2026 and December 31, 2025, 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. During the three and nine months ended September 30, 2026, the Company recorded an immaterial loss and $0.4 million gain in foreign currency exchange, respectively. The Company recorded a $0.2 million gain and $0.4 million loss in foreign currency exchange during the three and nine months ended September 30, 2025, respectively.

As of September 30, 2026 and December 31, 2025, 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.

(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 interest expense, net. The Company's Senior Secured Term Loan accrues interest at a rate of 12.5% per annum and has an effective interest rate of 13.8%. The Company's Revolving Credit Facility accrues interest at a rate of 7.99% per annum. The Company's Mortgage Loans accrue interest at a rate of 8.4% per annum and have an effective interest rate of 10.2%.

(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 deferred and contingent considerations 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 and contingent considerations with a corresponding change to Other income (expense), net.

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(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 on adult-use cannabis due to IRC Section 280E, which bars businesses from deducting all expenses except their COGS 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 17 "Provision for Income Taxes and Deferred Income Taxes" 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 operations, 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, any unforeseen regulatory changes could have a material adverse impact on the goals and operations of the Company's business.

(vi) Economic Risk

The Company's business, financial condition, and operating results may be negatively impacted by challenging global economic conditions. A global economic slowdown would cause disruptions and extreme volatility in global financial markets, increased rates of default and bankruptcy and declining consumer and business confidence, which can lead to decreased levels of consumer spending. These macroeconomic developments could negatively impact the Company's business, which depends on the general economic environment and levels of consumer spending. As a result, the Company may not be able to maintain its existing customers or attract new customers, or the Company may be forced to reduce the price of its products. The Company is unable to predict the likelihood of the occurrence, duration, or severity of such disruptions in the credit and financial markets or adverse global economic conditions. Any general or market-specific economic downturns could have a material adverse effect on our business, financial condition, and operating results.

(vii) Inflation Risk

The Company anticipates inflationary pressures to continue throughout 2026. 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.

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SUMMARY OF OUTSTANDING SHARE AND SHARE-BASED DATA

Cresco Labs has the following securities issued and outstanding, as of September 30, 2026:

Securities						Number of Shares (in thousands)
Super Voting Shares						500
Subordinate Voting Shares1						361,071
Proportionate Voting Shares2						16,108
Special Subordinate Voting Shares3						2
Redeemable Units4						84,299

1Subordinate Voting Shares includes shares pending issuance or cancellation

2Proportionate Voting Shares presented on an "as-converted" basis to Subordinate Voting Shares (1-to-200)

3Special Subordinate Voting Shares presented on an "as-converted" basis to Subordinate Voting Shares (1-to-0.00001)

4 Redeemable units of Cresco Labs, LLC, each of which is exchangeable for one (1) Subordinate Voting Shares

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