ACQUISITIONS AND BUSINESS COMBINATIONS

12 Months Ended

Dec. 31, 2023

Business Combination and Asset Acquisition [Abstract]

There were no business combinations during the year ended December 31, 2023. A summary of business combinations completed during the year ended December 31, 2022 is as follows:


	NECC		Island (1)		Total
Cash consideration	$	25,000	$	—	$	25,000
Note to seller	2,000		10,000		12,000
Equity consideration - common stock	18,200		6,245		24,445
Equity consideration - warrants	—		732		732
Total Consideration	$	45,200	$	16,977	$	62,177

Assets acquired:
Cash	$	—	$	466	$	466
Accounts receivable	—		511		511
Inventory	1,435		3,599		5,034
Prepaid expenses and other current assets	3		147		150
Property, Plant and equipment, net	16,000		1,887		17,887
Operating lease - right of use asset	—		8,418		8,418
Intangible assets	12,000		7,700		19,700
Total assets acquired	$	29,438	$	22,728	$	52,166

Liabilities assumed:
Accounts payable	$	—	$	1,423	$	1,423
Accrued expenses and other liabilities	—		2,342		2,342
Contract liabilities	—		3,535		3,535
Deferred tax liabilities	2,890		2,181		5,071
Lease liabilities	—		8,418		8,418
Total liabilities assumed	2,890		17,899		20,789
Estimated fair value of net assets acquired	$	26,548	$	4,829	$	31,377

Estimated Goodwill	$	18,652	$	12,148	$	30,800

Net Income (Loss) (2)	$	(2,171)	$	(10,986)	$	(13,157)
Revenues (2)	$	—	$	(119)	$	(119)

(1) During the year ended December 31, 2023, Island Global Holdings was classified as discontinued operations. Refer to Note 18 for further information.

(2) The respective amounts are revenues and net income (loss) recognized in the consolidated statement of operations for the year ended December 31, 2022.

The following unaudited pro forma financial information presents the results of operations of the acquired entities for the years ended December 31, 2022 as if the acquisitions had occurred as of January 1, 2022. The pro forma information does not necessarily reflect the results of operations that would have occurred had the entities been a single company during those periods.


	Years Ended December 31,
	2022
Pro Forma Net Income (Loss)	$	(53,071)
Pro Forma Revenues	$	120,305

New England Cannabis Company ("NECC")

On January 28, 2022, the Company completed an acquisition for 100% of NECC (the "NECC Merger") for cash consideration of $9.0 million and 28,571,428 Class A Subordinate Voting Shares of the Company (the “SVS”) valued at $18.2 million based on the closing stock price of the SVS on the acquisition date. The acquisition increased the Company's presence in Massachusetts and the northeastern United States and provides additional opportunities for expansion in the Northeast.

In connection with the consummation of the NECC Merger on January 28, 2022, Mission Partners RE, LLC, a Delaware limited liability company wholly owned by the Company completed its acquisition of 100% of the issued and outstanding membership interests of 29 Everett Street LLC, a Massachusetts limited liability company (the “Everett LLC”) for cash consideration of $16.0 million and a promissory note of $2.0 million. The Everett LLC entity was solely comprised of property, plant and equipment that was leased to and used by NECC at the time of the transaction and consolidated into NECC operations post acquisition. The Merger and Purchase Agreement were recorded as one transaction (collectively, referred to as the "NECC Acquisitions"), as the entities were commonly owned by the same individual and the purchase of Everett LLC was contingent on the Merger with NECC.

Intangible assets acquired from NECC consist of cannabis licenses which are indefinite-lived assets. As a result of the NECC Acquisitions, the Company recognized $18.7 million of goodwill to the THC Cannabis segment based on the expected synergies from combining the acquired operations with the Company's existing operations in Massachusetts. Management does not expect acquired goodwill to be deductible for tax purposes.

As part of the NECC Acquisitions, the Company incurred $0.7 million in transaction and restructuring costs, which were included in transaction and restructuring related expenses and expensed as incurred during the year ended December 31, 2022.

Island Global Holdings

On April 25, 2022, the Company completed a merger acquisition for 100% of Island Global Holdings, Inc. ("Island") for non-cash consideration as follows: (i) 8,783,716 Class A Subordinated Voting Shares valued at $6.2 million based on the closing stock price of the SVS on the acquisition date; (ii) 6% 54-month, subordinated promissory notes (the “Island Merger Notes”) in the aggregate principal amount of $10.0 million; and (iii) warrants to purchase 2,999,975 SVS at a price of $1.00 per SVS. This acquisition enhanced the Company's growing brand portfolio, including diverse lines of pre-rolls, flower and infused products.

Intangible assets acquired from Island consist of cannabis licenses, trade names and trademarks. Utilizing like licenses as a benchmark, the Company determined that the licenses acquired are indefinite-lived assets and the trade names and trademarks have a life of ten years. As a result of the Island Merger, the Company recognized $12.1 million of goodwill to the THC Cannabis segment based on the expected enhancement to the Company's existing brand portfolio across synergies. Management does not expect acquired goodwill to be deductible for tax purposes.

As part of the Island Merger, the Company incurred $1.4 million in restructuring and transaction costs, which were included in transaction and restructuring related expenses and expensed as incurred during the year ended December 31, 2022.

During the year ended December 31, 2023, Island Global Holdings was classified as discontinued operations as part of the Company's California operations. Refer to Note 18 for further information.

Bloom Farms

On August 19, 2022, the Company completed an asset acquisition to acquire certain assets of Bloom Farms for stock consideration of 3,750,000 Class A Subordinate Voting Shares valued at $2.1 million based on the closing stock price of the SVS on the acquisition date. In addition to the contracted purchase price, the Company incurred $0.06 million in transactional costs that were capitalized as part of the asset acquisition. This transaction increased the Company's brand portfolio in the California market. The allocation of the asset acquisition cost is detailed below:


Share consideration	$	2,100
Transaction costs	6
Total Purchase Price	$	2,106

Assets acquired:
Accounts receivable	$	508
Inventory	534
Equipment	142
Intangible assets - tradenames	922
Total assets acquired	$	2,106

In addition to the consideration transferred, there is an earn-out consideration based on the actual revenue in excess of $2.1 million generated from the brands within California during the first 12 months after the closing. This earn-out consideration cannot exceed $5.0 million. As of the transaction date, it is not probable this consideration will become payable and no liability has been recognized. As of December 31, 2023, Bloom Farms was classified as discontinued operations as part of the Company's California operations. Refer to Note 18 for further information.

Euphoria, LLC

On March 27, 2023, the Company entered into a Membership Interest Purchase Agreement to acquire 100% of the issued and outstanding equity interests in Euphoria, LLC ("Euphoria") for a total purchase price of $4.5 million to be paid in cash, promissory notes, and Class A Subordinate Voting Shares. Euphoria holds a conditional adult use dispensary license in the state of Illinois which shall convert to a final license upon regulatory approval. The transfer of the license is subject to regulatory approval. As of December 31, 2023, the Company has paid $0.3 million in cash and issued 2,308,952 Class A Subordinate Voting Shares valued at $0.4 million based on the closing stock price of the SVS on the issuance date, which is included as a component of prepaid expenses and other assets on the consolidated balance sheet as of December 31, 2023. In certain events as defined in this agreement, such as, but not limited to the inability to obtain regulatory approval, all consideration paid by the Company to the sellers are refundable. The remaining consideration will be due upon regulatory approval at the closing date. In the event of termination by the Company under certain circumstances, the Company shall pay a breakup fee of $3.5 million to the sellers, less any portion of the purchase price already paid. Conversely, in the event of termination by the sellers under certain circumstances, the sellers shall pay a breakup fee of $3.5 million to the Company. A subsidiary of the Company entered into a conditional management services agreement to manage the operations of Euphoria until a final license is issued.

Westside Visionaries

On November 17, 2023, the Company entered into a Membership Interest Purchase Agreement to acquire 100% of the issued and outstanding equity interests in Westside Visionaries, LLC ("Westside") for a total purchase price of $2.4 million of which $1.1 million shall be paid in cash, $1.2 million shall be in the form of a promissory note, and $0.1 million in the form of Class A Subordinate Voting Shares. In addition, Westside has issued a $2.0 million secured promissory note to Linchpin Investors, LLC, a subsidiary of the Company, to fund the permitted expansion for the dispensary build-out with a maturity date of the earlier of the second anniversary of closing (license approval) or the third anniversary of the date on which the note was executed.

In the event of termination by mutual written consent of both parties or by the sellers based on the Company's breach, then any portion of the purchase price paid as of the termination date may be retained by the sellers. As of December 31, 2023, the Company has paid $0.6 million in cash which is included as a component of prepaid expenses and other assets on the consolidated balance sheet as of December 31, 2023.

Westside holds a conditional adult use dispensary license in the state of Illinois which shall convert to a final license upon regulatory approval. The transfer of the license is subject to regulatory approval. A subsidiary of the Company entered into a conditional management services agreement to manage the operations of Westside until a final license is issued.