Lowell Farms (LOWLF) 10-Q 15 Nov 21 2021 Q3 Quarterly report Financial data

Cover

Cover - shares	9 Months Ended
	Sep. 30, 2021	Nov. 12, 2021
Cover [Abstract]
Entity Registrant Name	LOWELL FARMS INC.
Entity Central Index Key	0001838128
Document Type	10-Q
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Small Business	true
Entity Shell Company	false
Entity Emerging Growth Company	true
Entity Current Reporting Status	Yes
Document Period End Date	Sep. 30, 2021
Entity Filer Category	Non-accelerated Filer
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2021
Entity Ex Transition Period	false
Entity Common Stock Shares Outstanding		99,408,010
Document Quarterly Report	true
Document Transition Report	false
Entity File Number	000-56254
Entity Incorporation State Country Code	Z4
Entity Address Address Line 1	19 Quail Run Circle - Suite B
Entity Address Address Line 2	Suite B
Entity Address City Or Town	Salinas
Entity Address State Or Province	CA
Entity Address Postal Zip Code	93907
City Area Code	831
Local Phone Number	998-8214
Entity Interactive Data Current	Yes

CONDENSED CONSOLIDATED BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)	Sep. 30, 2021	Dec. 31, 2020
Current assets:
Cash and cash equivalents	$ 16,995,000	$ 25,751,000
Accounts receivable - net of allowance for doubtful accounts of $879 and $1,389 at September 30, 2021 and December 31, 2020, respectively	6,631,000	4,529,000
Inventory	15,542,000	9,933,000
Prepaid expenses and other current assets	3,740,000	6,391,000
Total current assets	42,908,000	46,604,000
Property and equipment, net	64,991,000	49,243,000
Goodwill	0	357,000
Other intangibles, net	40,837,000	736,000
Other assets	544,000	476,000
Total assets	149,280	97,416
Current liabilities:
Accounts payable	3,745,000	2,137,000
Accrued payroll and benefits	439,000	1,212,000
Notes payable, current portion	227,000	1,213,000
Lease obligation, current portion	2,411,000	2,301,000
Other current liabilities	5,078,000	8,860,000
Total current liabilities	11,900	15,723
Notes payable	14,000	303,000
Lease obligation	34,679,000	36,533,000
Convertible debentures	13,811,000	13,701,000
Mortgage obligation	8,910,000	0
Total liabilities	69,314	66,260
STOCKHOLDERS' EQUITY
Share capital	189,035,000	125,540,000
Accumulated deficit	(109,069,000)	(94,384,000)
Total stockholders' equity	79,966,000	31,156,000
Total liabilities and stockholders' equity	$ 149,280	$ 97,416

CONDENSED CONSOLIDATED BALANC_2

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
CONDENSED CONSOLIDATED BALANCE SHEETS
Allowance for doubtful accounts	$ 879	$ 1,389

CONDENSED CONSOLIDATED STATEMEN

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (Unaudited) - USD ($) shares in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (Unaudited)
Net revenue	$ 12,467,000	$ 14,131,000	$ 38,653,000	$ 33,467,000
Cost of goods sold	12,403,000	9,152,000	34,317,000	31,480,000
Gross profit	64,000	4,979,000	4,336,000	1,987,000
Operating expenses
General and administrative	4,211,000	2,559,000	10,496,000	8,575,000
Sales and marketing	2,544,000	1,274,000	6,210,000	3,684,000
Depreciation and amortization	260,000	374,000	751,000	853,000
Total operating expenses	7,015,000	4,207,000	17,457,000	13,112,000
Income (loss) from operations	(6,951,000)	772,000	(13,121,000)	(11,125,000)
Other income/(expense)
Other income (expense)	(219,000)	56,000	1,633,000	81,000
Loss on termination of investment	0	(843,000)	0	(4,367,000)
Unrealized gain (loss) on change in fair value of investment	(90,000)	(199,000)	35,000	192,000
Interest expense	(1,365,000)	(838,000)	(3,019,000)	(2,414,000)
Total other income (expenses)	(1,674)	(1,824)	(1,351,000)	(6,508,000)
Loss before provision for income taxes	(8,625,000)	(1,052,000)	(14,472,000)	(17,633,000)
Provision for income taxes	75,000	119,000	213,000	169,000
Net loss	$ (8,700,000)	$ (1,171,000)	$ (14,685,000)	$ (17,802,000)
Net loss per share:
Basic	$ (0.10)	$ (0.04)	$ (0.15)	$ (0.54)
Diluted	$ (0.10)	$ (0.04)	$ (0.15)	$ (0.54)
Weighted average shares outstanding:
Basic	84,922	33,398	98,949	33,048
Diluted	84,922	33,398	98,949	33,048

CONDENDSED CONSOLIDATED STATEME

CONDENDSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (Unaudited) - USD ($)	Total	Subordinate Voting Shares	Super Voting Shares	Share Capital	Accumulated Deficit
Balance, shares at Dec. 31, 2019		32,844,000	203,000
Balance, amount at Dec. 31, 2019	$ 23,686,000			$ 96,160,000	$ (72,474,000)
Net loss	(17,802,000)	$ 0	$ 0	0	(17,802,000)
Shares issued in connection with convertible debenture offering, shares		250,000
Shares issued in connection with convertible debenture offering, amount	62,000			62,000	0
Shares issued in connection with conversion of convertible debentures, shares		54,000
Shares issued in connection with conversion of convertible debentures, amount	11,000			11,000	0
Issuance of shares associated with acquisitions, amount	77,000				0
Issuance of stock warrants, amount	1,556,000				0
Exercise of warrants, shares		106,000
Exercise of warrants, amount	30,000				0
Share-based compensation expense, shares		248,000
Share-based compensation expense, amount	2,012,000				0
Balance, shares at Sep. 30, 2020		33,502,000	203,000
Balance, amount at Sep. 30, 2020	9,632,000				(90,276,000)
Balance, shares at Jun. 30, 2020		33,342,000	203,000
Balance, amount at Jun. 30, 2020	10,498,000			99,603,000	(89,105,000)
Net loss	(1,171,000)	$ 0	$ 0	0	(1,171,000)
Shares issued in connection with convertible debenture offering, shares		250,000
Shares issued in connection with convertible debenture offering, amount	62,000			62,000	0
Shares issued in connection with conversion of convertible debentures, shares		54,000
Shares issued in connection with conversion of convertible debentures, amount	11,000			11,000	0
Issuance of shares associated with acquisitions, amount	77,000			77,000	0
Issuance of stock warrants, amount	1,556,000				0
Exercise of warrants, shares		106,000
Exercise of warrants, amount	30,000				0
Share-based compensation expense, shares		248,000
Share-based compensation expense, amount	187,000				0
Balance, shares at Sep. 30, 2020		33,502,000	203,000
Balance, amount at Sep. 30, 2020	9,632,000				(90,276,000)
Balance, shares at Dec. 31, 2020		57,617,000	203,000
Balance, amount at Dec. 31, 2020	31,156,000			125,540,000	(94,384,000)
Net loss	(14,685,000)	$ 0	$ 0	0	(14,685,000)
Shares issued in connection with conversion of convertible debentures, shares		2,580,000
Shares issued in connection with conversion of convertible debentures, amount	514,000			514,000	0
Issuance of shares associated with acquisitions, amount	43,259,000			43,259,000	0
Exercise of warrants, shares		1,511,000
Exercise of warrants, amount	718,000				0
Share-based compensation expense, shares		460,000
Share-based compensation expense, amount	986,000				0
Issuance of shares associated with acquisitions, shares		30,641,000
Issuance of shares associated with subordinate voting share offering, shares		18,000,000
Issuance of shares associated with subordinate voting share offering, amount	$ 17,970,000				0
Exercise of options, shares	0	78,000
Exercise of options, amount	$ 48,000				0
Balance, shares at Sep. 30, 2021		110,887,000	203,000
Balance, amount at Sep. 30, 2021	79,966,000				(109,069,000)
Balance, shares at Jun. 30, 2021		92,423,000	203,000
Balance, amount at Jun. 30, 2021	70,244,000			170,613,000	(100,369,000)
Net loss	(8,700,000)	$ 0	$ 0	0	(8,700,000)
Shares issued in connection with conversion of convertible debentures, shares		187,000
Shares issued in connection with conversion of convertible debentures, amount	37,000			37,000	0
Exercise of warrants, shares		186,000
Exercise of warrants, amount	52,000				0
Share-based compensation expense, shares		89,000
Share-based compensation expense, amount	361,000				0
Issuance of shares associated with subordinate voting share offering, shares		18,000,000
Issuance of shares associated with subordinate voting share offering, amount	17,970,000			$ 17,970,000	0
Exercise of options, shares		2,000
Exercise of options, amount	2,000				0
Balance, shares at Sep. 30, 2021		110,887,000	203,000
Balance, amount at Sep. 30, 2021	$ 79,966,000				$ (109,069,000)

CONDENSED CONSOLIDATED STATEM_2

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
CASH FLOW FROM OPERATING ACTIVITIES
Net loss	$ (14,685,000)	$ (17,802,000)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	2,894,000	1,762,000
Amortization of debt issuance costs	643,000	0
Share-based compensation expense	986,000	1,825,000
Provision for doubtful accounts	657,000	720,000
Goodwill impairment	357,000	0
Termination of branding rights agreement	152,000	0
Unrealized gain on change in fair value of investments	(125,000)	(395,000)
Changes in operating assets and liabilities:
Accounts receivable	(2,418,000)	1,390,000
Inventory	(2,307,000)	1,980,000
Prepaid expenses and other current assets	(149)	(333)
Other assets	57,000	0
Accounts payable and accrued expenses	(4,525,000)	2,307,000
Other current and long-term liabilities	0	(98,000)
Net cash used in operating activities	(18,463)	(8,644)
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from asset sales	1,979,000	0
Purchases of property and equipment	(2,057,000)	(4,110,000)
Disposition of business interest, net of cash received	0	2,743,000
Acquisition of business assets, net	(6,643,000)	0
Net cash used in investing activities	(6,721,000)	(1,367,000)
CASH FLOW FROM FINANCING ACTIVITIES
Principal payments on lease obligations	(1,744,000)	(1,053,000)
Payments on notes payable	(563,000)	(31,000)
Proceeds from convertible notes, net of financing costs	0	13,663,000
Issuance of warrants associated with convertible notes offering	0	1,556,000
Proceeds from brokered private placement	0	62,000
Proceeds from subordinate voting share offering	18,000,000	0
Issuance costs related to subordinate voting share offering	(30)	0
Proceeds from exercise of warrants and options	765,000	0
Net cash provided by financing activities	16,428,000	14,197,000
Change in cash and cash equivalents and restricted cash	(8,756,000)	4,186,000
Cash and cash equivalents-beginning of year	25,751,000	1,344,000
Cash, cash equivalents and restricted cash-end of period	16,995,000	5,530,000
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest	2,995,000	1,403,000
Cash paid during the period for income taxes	227,000	0
OTHER NONCASH INVESTING AND FINANCING ACTIVITIES
Property and equipment acquired via capital lease	0	578,000
Disposition of business interests	0	2,743,000
Issuance of warrants	0	1,556
Shares issued for services in connection with convertible debenture offering	0	62,000
Issuance of subordinate voting shares in exchange for net assets acquired	43,259,000	0
Liabilities assumed and receivable forgiveness in exchange for net assets acquired	2,910,000	0
Debt and associated accrued interest converted to subordinate voting shares	$ 514,000	$ 0

BASIS OF PRESENTATION AND SUMMA

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	9 Months Ended
	Sep. 30, 2021
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The interim unaudited condensed consolidated financial statements included herein have been prepared by Lowell Farms Inc. (the “Company” or “Lowell”) pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), including the instructions to the Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. The interim unaudited condensed consolidated financial statements reflect, in the opinion of management, all adjustments necessary (consisting only of normal recurring adjustments), to present a fair statement of results for the interim periods presented. The operating results for any interim period are not necessarily indicative of the results that may be expected for other interim periods or the full fiscal year. The accompanying interim unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto in the Company’s Form 10 filed for the year ended December 31, 2020. There have been no material changes to our significant accounting policies as of and for the nine months ended September 30, 2021. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries after the elimination of all intercompany balances and transactions. The condensed consolidated balance sheet at December 31, 2020, has been derived from the audited consolidated financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. All dollar amounts in the notes to condensed consolidated financial statements are expressed in thousands of United States dollars ("$" or "US$"), unless otherwise indicated. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates in these financial statements include allowance for doubtful accounts and credit losses, carrying value of inventory, revenue recognition, accounting for stock-based compensation expense, and income taxes. Actual results could differ from those estimates. The global COVID-19 pandemic has impacted the operations and purchasing decisions of companies worldwide. It also has created and may continue to create significant uncertainty in the global economy. The Company has undertaken measures to protect its employees, partners, customers, and vendors. In addition, the Company’s personnel are subject to various travel restrictions, which limit the ability of the Company to provide services to customers and affiliates. This impacts the Company's normal operations. To date, the Company has been able to provide uninterrupted access to its products and services, including certain employees that are working remotely, and its pre-existing infrastructure that supports secure access to the Company’s internal systems. If, however, the COVID-19 pandemic has a substantial impact on the productivity of the Company’s employees or its partners’ or customers’ decision to use the Company’s products and services, the results of the Company’s operations and overall financial performance may be adversely impacted. The duration and extent of the impact from the COVID-19 pandemic depends on future developments that cannot be accurately predicted at this time. As of the date of issuance of the financial statements, the Company is not aware of any specific event or circumstance that would require updates to the Company’s estimates and judgments or revisions to the carrying value of its assets or liabilities. These estimates may change, as new events occur and additional information is obtained, and are recognized in the condensed consolidated financial statements as soon as they become known. Actual results could differ from those estimates and any such differences may be material to the financial statements. Recently Adopted Accounting Standards In May 2020, the SEC adopted the final rule under SEC release No. 33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses, amending Rule 1- 02(w)(2) which includes amendments to certain of its rules and forms related to the disclosure of financial information regarding acquired or disposed businesses. Among other changes, the amendments impact SEC rules relating to (1) the definition of “significant” subsidiaries, (2) requirements to provide financial statements for “significant” acquisitions, and (3) revisions to the formulation and usage of pro forma financial information. The final rule became effective on January 1, 2021; however, voluntary early adoption was permitted. The Company early adopted the provisions of the final rule in 2020. The guidance did not have a material impact on the Company’s condensed consolidated financial statements and disclosures. In February 2016, FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use (ROU) asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases and ASU 2018-11, Leases Topic 842 Target improvements, which provides an additional (and optional) transition method whereby the new lease standard is applied at the adoption date and recognized as an adjustment to retained earnings. In March 2019, the FASB issued ASU 2019-01, Leases (Topic 842) Codification Improvements, which further clarifies the determination of fair value of the underlying asset by lessors that are not manufacturers or dealers and modifies transition disclosure requirements for changes in accounting principles and other technical updates. The Company adopted the standard effective January 1, 2019 using the modified retrospective adoption method which allowed it to initially apply the new standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of accumulated deficit. In connection with the adoption of the new lease pronouncement, the Company recorded a charge to accumulated deficit of $847. Refer to the Summary of Effects of Lease Accounting Standard Update Adopted in First Quarter of 2019 in the audited consolidated financial statements and notes thereto in the Company’s Form 10 filed for the year ended December 31, 2020. In September 2016, the FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” and subsequent amendments to the initial guidance: ASU 2018-19 “Codification Improvements to Topic 326, Financial Instruments-Credit Losses”, ASU 2019-04 “Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments”, ASU 2019-05 “Financial Instruments-Credit Losses”, ASU 2019-11 “Codification Improvements to Topic 326, Financial Instruments - Credit Losses” (collectively, Topic 326),ASU 2020-02 Financial Instruments-Credit Losses (Topic 326) and Leases (Topic 842) and ASU 2020-03 Codification Improvements to Financial Instruments. Topic 326 requires measurement and recognition of expected credit losses for financial assets held. This guidance is effective for the year ended December 31, 2020. The Company believes that the most notable impact of this ASU will relate to its processes around the assessment of the adequacy of its allowance for doubtful accounts on trade accounts receivable and the recognition of credit losses. We continue to monitor the economic impact of the COVID-19 pandemic, however based on current market conditions, the adoption of the ASU did not have a material impact on the condensed consolidated financial statements. In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808), Clarifying the Interaction between Topic 808 and Topic 606. This guidance amended Topic 808 and Topic 606 to clarify that transactions in a collaborative arrangement should be accounted for under Topic 606 when the counterparty is a customer for a distinct good or service (i.e., unit of account). The amendments preclude an entity from presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction. This guidance was effective for the year ended December 31, 2020. The adoption of this guidance did not have a material impact on our condensed consolidated financial statements. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This guidance removes certain exceptions to the general principles in Topic 740 and enhances and simplifies various aspects of the income tax accounting guidance, including requirements such as tax basis step-up in goodwill obtained in a transaction that is not a business combination, ownership changes in investments, and interim-period accounting for enacted changes in tax law. This standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2020. This guidance was effective for the Company in our fiscal year and interim periods beginning on January 1, 2021 and did not have a material impact on our condensed consolidated financial statements. In January 2020, the FASB issued ASU 2020-01 Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. This guidance addresses accounting for the transition into and out of the equity method and provides clarification of the interaction of rules for equity securities, the equity method of accounting, and forward contracts and purchase options on certain types of securities. This standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2020. We evaluated the impact of ASU 2020-01 on our Consolidated Financial Statements, which was effective for the Company in our fiscal year and interim periods beginning on January 1, 2021 and it did not have a material impact on our condensed consolidated financial statements. Accounting standards not yet adopted In August 2020, the FASB issued ASU 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). This update amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity's own equity and improves and amends the related EPS guidance for both Subtopics. This standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2021, which means it will be effective for our fiscal year beginning January 1, 2022. Early adoption is permitted. We are currently evaluating the impact of ASU 2020-06 on our condensed consolidated financial statements. No other recently issued accounting pronouncements had or are expected to have a material impact on our condensed consolidated financial statements.

ACQUISITIONS

ACQUISITIONS	9 Months Ended
	Sep. 30, 2021
ACQUISITIONS
2. ACQUISITIONS	2. ACQUISITIONS Completed Acquisitions (1 ) (2 ) (3 ) (4 ) Kaizen The Humble The Hacienda Lowell Farm (in thousands) Inc. Flower Co. Company, LLC Services Total CONSIDERATION Contingent Payment $ 50 $ 44 $ - $ - $ 94 Cash - - 4,019 - 4,019 Transaction costs - - 428 190 618 Note payable and other obligations 200 65 3,115 9,000 12,380 Fair value of subordinate voting shares 62 55 34,358 9,610 44,085 Total consideration $ 312 $ 164 $ 41,920 $ 18,800 $ 61,196 PURCHASE PRICE ALLOCATION Assets Acquired Inventories $ - $ 6 $ 3,300 $ - $ 3,306 Accounts receivable - net - - 1,312 - 1,312 Land - - - 8,261 8,261 Buildings - - - 6,268 6,268 Equipment - - - 1,221 1,221 Other tangible assets - - 739 - 739 Intangible assets - brands and tradenames 104 80 37,299 - 37,483 Intangible assets - technology and know-how and other 208 78 - 3,050 3,336 Liabilities assumed Payables and other liabilities - - (730 ) - (730 ) Fair value of net assets acquired $ 312 $ 164 $ 41,920 $ 18,800 $ 61,196 The Company completed the following asset acquisitions, and allocated the purchase price as follows: The Kaizen Inc. and The Humble Flower Co. acquisitions qualified as a business combination under ASC 805. The fair value of the assets acquired and the liabilities assumed for Kaizen Inc. and the Humble Flower Company were finalized in the quarter ended September 30, 2020. The Hacienda Company, LLC acquisition and the Lowell Farm Services acquisition qualified as asset acquisitions under ASU 2017.01. Consideration has been allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. No goodwill was recognized. The results of these acquisitions are included in the Company’s net earnings from the date of acquisition. · Kaizen Inc. On May 1, 2019, the Company acquired all of the assets, global rights and business interests of Kaizen Inc. for a purchase price of $556 that will be paid as and if financial performance targets are met during the period beginning on May 1, 2019 and ending on April 30, 2023. Kaizen is a premium brand offering a full spectrum of cannabis concentrates. Effective July 15, 2020 the asset purchase agreement was modified, eliminating payments associated with meeting financial performance targets in exchange for the issuance of 225 thousand options to purchase Subordinate Voting Shares and a note payable of $200, with payments over two years. Had the modifications been reflected as of the date of acquisition, net assets would have decreased $223 at December 31, 2019 and net loss in 2019 would have been reduced by $21. · The Humble Flower Co. On April 18, 2019, the Company acquired all of the assets, global rights and business interests associated with the brand Humble Flower Co. for a purchase price of $ 472 that will be paid as and if financial performance targets are met during the period beginning on April 19, 2019 and ending on April 18, 2023. The acquisition marks the Company’s expansion into cannabis-infused topical creams, balms, and oils. Effective September 1, 2020 the asset purchase agreement was modified, eliminating payments associated with meeting financial performance targets in exchange for the issuance of 225 thousand options to purchase Subordinate Voting Shares and a note payable of $65, with payments commencing on January 1, 2021 for 24 months. Had the modifications been reflected as of the date of acquisition, net assets would have decreased $308 at December 31, 2019 and net loss in 2019 would have been reduced by $34. · The Hacienda Company, LLC. On February 25, 2021, the Company acquired substantially all of the assets of the Lowell Herb Co. and Lowell Smokes trademark brands, product portfolio, and production assets from The Hacienda Company, LLC for a purchase price of $41,920. Lowell Herb Co. is a leading California cannabis brand that manufactures and distributes distinctive and highly regarded premium packaged flower, pre-roll, concentrates, and vape products. The acquisition consideration was comprised of $4.1 million in cash and the issuance of 22,643,678 subordinate voting shares and obligations assumed. In connection with this acquisition, the Company completed a change in its corporate name to Lowell Farms Inc. effective March 1, 2021. · Lowell Farm Services On June 29, 2021, we acquired real property and related assets of a first-of-its-kind cannabis drying and midstream processing facility located in Monterey County for a purchase price of $18,800. The 10-acre, 40,000 square foot processing facility will provide drying, bucking, trimming, sorting, grading, and packaging operations for up to 250,000 lbs. of wholesale cannabis flower annually. The new facility will process nearly all the cannabis that we grow at our existing cultivation operations. Additionally, we commissioned a new business unit called Lowell Farm Services (“LFS”), which will engage in fee-based processing services for regional growers from the Salinas Valley area. The acquisition consideration was comprised primarily of a note payable of $9.0 million and the issuance of 7,997,520 subordinate voting shares and obligations assumed. LFS operations became operational during the third quarter of 2021. Terminated Acquisition On May 14, 2019, the Company entered into a definitive agreement to acquire the assets of W The Brand (“W Vapes”), a manufacturer and distributor in Nevada and Oregon of cannabis concentrates, cartridges and disposable pens, in a cash and stock transaction. Under the terms of the agreement, the purchase consideration to W Vapes shareholders consisted of $10 million in cash and $10 million in Subordinate Voting Shares (based on a deemed value of CDN$15.65 per share). In November 2019, the definitive agreement was amended whereby the Company advanced $2 million in non-recourse funds to the seller in exchange for release of $10 million of cash held in escrow related to the acquisition and in December 2019, the Company purchased the Las Vegas, Nevada facility for $4.1 million. On July 17, 2020, the Company announced the termination of the definitive agreement with W Vapes and the obligation to acquire the assets of W Vapes was terminated. The termination coincided with an asset acquisition announcement between W Vapes and Planet 13 Holdings Inc. (“Planet 13”). Additionally, the Company sold the Las Vegas facility to certain affiliates of Planet 13 for a cash payment of approximately $500, and an additional cash payment of approximately $2.8 million upon regulatory approval of the W Vapes and Planet 13 transaction which was received in January 2021, and in the third quarter the Company finalized a note payable of $843 to the owners of W Vapes, payable coinciding with the receipt of the $2.8 million payment from the facility sale, which was paid in January 2021. As a result, the Company reflected a $4.4 million loss in loss on termination of investments, net on its consolidated statement of operations for the year ended December 31, 2020.

PREPAID AND OTHER CURRENT ASSET

PREPAID AND OTHER CURRENT ASSETS	9 Months Ended
	Sep. 30, 2021
PREPAID AND OTHER CURRENT ASSETS
3. PREPAID EXPENSES AND OTHER CURRENT ASSETS	3. PREPAID AND OTHER CURRENT ASSETS Prepaid and other current assets were comprised of the following items: September 30, December 31, (in thousands) 2021 2020 Deposits $ 533 $ 572 Insurance 924 593 Supplier advances 1,920 504 Nevada building sale proceeds - 2,800 Other 363 1,922 Total prepaid and other current assets $ 3,740 $ 6,391

INVENTORY

INVENTORY	9 Months Ended
	Sep. 30, 2021
INVENTORY
4. INVENTORY	4. INVENTORY Inventory was comprised of the following items: September 30, December 31, (in thousands) 2021 2020 Raw materials $ 12,686 $ 7,950 Work in process 521 - Finished goods 2,335 1,983 Total inventory $ 15,542 $ 9,933

OTHER CURRENT LIABILITIES

OTHER CURRENT LIABILITIES	9 Months Ended
	Sep. 30, 2021
OTHER CURRENT LIABILITIES
5. OTHER CURRENT LIABILITIES	5. OTHER CURRENT LIABILITIES Other current liabilities were comprised of the following items: September 30, December 31, (in thousands) 2021 2020 Excise and cannabis tax $ 3,393 $ 5,780 Third party brand distribution accrual 180 584 Insurance and professional fee accrual 1,262 746 Other 243 1,750 Total other current liabilities $ 5,078 $ 8,860

PROPERTY AND EQUIPMENT

PROPERTY AND EQUIPMENT	9 Months Ended
	Sep. 30, 2021
PROPERTY AND EQUIPMENT
6. PROPERTY AND EQUIPMENT	6. PROPERTY AND EQUIPMENT A reconciliation of the beginning and ending balances of property and equipment and accumulated depreciation during the nine months ended September 30, 2021 and property and equipment, net as of December 31, 2020 are as follows: Land and Leasehold Furniture Construction Right of (in thousands) Buildings Improvements and Fixtures Equipment Vehicles in Process Use Assets Total Costs Balance-December 31, 2020 $ - $ 10,799 $ 50 $ 1,276 $ 854 $ 2,528 $ 41,530 $ 57,037 Additions - 82 - 517 - 2,005 - 2,604 Business Acquisitions 15,538 - - 404 - - - 15,942 Disposals - - - - - - - - Balance-September 30, 2021 $ 15,538 $ 10,881 $ 50 $ 2,197 $ 854 $ 4,533 $ 41,530 $ 75,583 Accumulated Depreciation Balance-December 31, 2020 $ - $ (634 ) $ (47 ) $ (427 ) $ (411 ) $ - $ (6,275 ) $ (7,794 ) Depreciation (52 ) (243 ) (1 ) (120 ) (114 ) - (2,268 ) (2,798 ) Disposals - - - - - - - - Balance-September 30, 2021 $ (52 ) $ (877 ) $ (48 ) $ (547 ) $ (525 ) $ - $ 8,543 ) $ (10,592 ) Net Book Value-September 30, 2021 $ 15,486 $ 10,004 $ 2 $ 1,650 $ 329 $ 4,533 $ 32,987 $ 64,991 Net Book Value -December 31, 2020 $ - $ 10,165 $ 3 $ 849 $ 443 $ 2,528 $ 35,255 $ 49,243 Construction in process represent assets under construction related to cultivation, manufacturing, and distribution facilities not yet completed or otherwise not placed in service. Depreciation expense of $1,040 and $1,047 were recorded for the three months ended September 30, 2021 and 2020, respectively, of which $584 and $13 respectively, were included in cost of goods sold. Depreciation expense of $196 was also recorded in other income (expense) for the three months ended September 30, 2021. Depreciation expense of $2,798 and $3,021 were recorded for the nine months ended September 30, 2021 and 2020, respectively, of which $1,752 and $238 respectively, were included in cost of goods sold. Depreciation expense of $391 was also recorded in other income (expense) for the nine months ended September 30, 2021.

GOODWILL AND INTANGIBLE ASSETS

GOODWILL AND INTANGIBLE ASSETS	9 Months Ended
	Sep. 30, 2021
GOODWILL AND INTANGIBLE ASSETS
7. GOODWILL AND INTANGIBLE ASSETS	7. GOODWILL AND INTANGIBLE ASSETS Goodwill A reconciliation of the beginning and ending balances of goodwill during the nine months ended September 30, 2021 is as follows: (in thousands) Costs Balance - December 31, 2020 $ 357 Additions - Business Acquisitions - Impairment (357 ) Balance - September 30, 2021 $ - The Company evaluates goodwill for impairment annually during the fiscal third quarter and when an event occurs, or circumstances change such that it is reasonably possible that impairment may exist. The Company accounts for goodwill and evaluates its goodwill balances and tests them for impairment in accordance with related accounting standards. As a result of its annual impairment assessment in the third quarter of fiscal 2021, the Company realized a $357 impairment of goodwill related to its investment in the assets of Acme Inc., a manufacturer of vape cartridges and disposable pens, which is recorded in general and administrative expenses in our condensed consolidated financial statements for three and nine months ended September 30, 2021. Other Intangible Assets A reconciliation of the beginning and ending balances of intangible assets and accumulated amortization during the nine months ended September 30, 2021 and intangible assets, net as of December 31, 2020 are as follows: Definite Life Intangibles Indefinite Life Intangibles Branding Technology/ Brands & (in thousands) Rights Know How Tradenames Total Costs Balance-December 31, 2020 $ 250 $ 208 $ 408 $ 866 Business acquisition - 3,050 37,299 40,349 Agreement termination (250 ) - - (250 ) Balance-September 30, 2021 $ - $ 3,258 $ 37,707 $ 40,965 Accumulated Amortization Balance-December 31, 2020 $ (93 ) $ (37 ) $ - $ (130 ) Agreement termination 98 - - 98 Amortization (5 ) (91 ) - (96 ) Other - - - - Balance-September 30, 2021 $ - $ (128 ) $ - $ (128 ) Net Book Value September 30, 2021 $ - $ 3,130 $ 37,707 $ 40,837 Net Book Value December 31, 2020 $ 157 $ 171 $ 408 $ 736 Intangible assets with finite lives are amortized over their estimated useful lives. Amortization periods of assets with finite lives are based on management's estimates at the date of acquisition. The Company recorded amortization expense of $82 and $10 for the three months ended September 30, 2021, and 2020, respectively. The Company recorded amortization expense of $96 and $54 for the nine months ended September 30, 2021, and 2020, respectively. The Company estimates that amortization expense for our existing other intangible assets will be approximately $325 annually for each of the next ten fiscal years. Actual amortization expense to be reported in future periods could differ from these estimates as a result of new intangible asset acquisitions, changes in useful lives or other relevant factors or changes.

SHAREHOLDERS' EQUITY

SHAREHOLDERS' EQUITY	9 Months Ended
	Sep. 30, 2021
STOCKHOLDERS' EQUITY
8. SHAREHOLDERS' EQUITY	8. SHAREHOLDERS’ EQUITY Shares Outstanding The table below details the change in Company shares outstanding by class during the nine months ended September 30, 2021: Subordinate Super (in thousands) Voting Shares Voting Shares Balance-December 31, 2020 57,617 203 Shares issued in connection with exercise of warrants 1,511 - Shares issued in connection with conversion of convertible debentures 2,580 - Shares issued in connection with asset acquisition 30,641 - Issuance of shares associated with subordinate voting share offering 18,000 - Issuance of vested restricted stock units 460 - Stock issued in connection with exercise of stock options 78 - Balance-September 30, 2021 110,887 203 (in thousands) Balance-December 31, 2020 93,898 Warrants issued in conjunction with broker option exercise (1) 163 Warrants issued in conjunction with subordinate voting share offering 9,000 Warrants expired (358 ) Warrants converted into subordinate voting shares (1,186 ) Balance-September 30, 2021 101,517 ______________ (1) Excluded 390 warrants issuable should underwriter options be exercised.

DEBT

DEBT	9 Months Ended
	Sep. 30, 2021
DEBT
9. DEBT	9. DEBT Debt at September 30, 2021 and December 31, 2020, was comprised of the following: September 30, December 31, (in thousands) 2021 2020 Current portion of long-term debt Vehicle loans (1) $ 95 $ 170 Mortgage payable (2) 49 Note payable (3) 83 1,043 Total short-term debt 227 1,213 Long-term debt, net Vehicle loans (1) 14 233 Note payable (4) - 65 Note payable (3) - 5 Mortgage payable (2) 8,910 - Convertible debenture (5) 13,811 13,701 Total long-term debt 22,735 14,004 Total Indebtedness $ 22,962 $ 15,217 (1) Primarily fixed term loans on transportation vehicles. Weighted average interest rate at September 30, 2021 was 7.8%. (2) Net of deferred financing costs of $401. (3) Note payable in connection with Humble Flower and Kaizen acquisitions and termination of the W Vapes acquisition. Weighted average interest rate at September 30, 2021 was 4%. (4) Note payable in connection with Acme acquisition. (5) Net of deferred financing costs of $1,678. Stated maturities of debt obligations are as follows as of September 30, 2021: September 30, (in thousands) 2021 2021 $ 66 2022 250 2023 15,839 2024 377 2025 421 2026 and thereafter 8,088 Total debt obligations $ 25,041

LEASES

LEASES	9 Months Ended
	Sep. 30, 2021
LEASES
10. LEASES	10. LEASES A reconciliation of lease obligations for the nine months ended September 30, 2021, is as follows: (in thousands) Lease Liability December 31, 2020 $ 38,834 Lease principal payments (1,744 ) September 30, 2021 $ 37,090 September 30, 2021 Lease obligation, current portion $ 2,411 Lease obligation, long-term portion 34,679 Total $ 37,090 All extension options that are reasonably certain to be exercised have been included in the measurement of lease obligations. The Company reassesses the likelihood of extension option exercise if there is a significant event or change in circumstances within its control. The components of lease expense for the three and nine months ended September 30, 2021 and 2020 are as follows: Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, (in thousands) 2021 2020 2021 2020 Amortization of leased assets (1) $ 741 $ 839 $ 2,268 $ 1,631 Interest on lease liabilities (2) 531 491 1,728 964 Total $ 1,272 $ 1,330 $ 3,996 $ 2,595 ____________ (1) Included in cost of goods sold and general and administrative expenses in the consolidated statement of operations. (2) Included in interest expense in the consolidated statement of operations. The key assumptions used in accounting for leases as of September 30, 2021 were a weighted average remaining lease term of 15.2 years and a weighted average discount rate of 6%. The key assumptions used in accounting for leases as of December 31, 2020 were a weighted average remaining lease term of 18.1 years and a weighted average discount rate of 6%. The future lease payments with initial remaining terms in excess of one year as of September 30, 2021 were as follows: September 30, (in thousands) 2021 Balance of 2021 $ 607 2022 - 2023 5,137 2024 - 2025 3,844 2026 and beyond 27,502 Total $ 37,090

SHARE-BASED COMPENSATION

SHARE-BASED COMPENSATION	9 Months Ended
	Sep. 30, 2021
SHARE-BASED COMPENSATION
11. SHARE-BASED COMPENSATION	11. SHARE-BASED COMPENSATION During 2019 the Company’s Board of Directors adopted the 2019 Stock and Incentive Plan (the “Plan”), which was amended in April 2020 and March 2021. The Plan permits the issuance of stock options, stock appreciation rights, stock awards, share units, performance shares, performance units and other stock-based awards, and, as of September 30, 2021, 13.2 million shares have been authorized to be issued under the Plan and 4.5 million are available for future grant. The Plan provides for the grant of options as either non-statutory stock options or incentive stock options and restricted stock units to employees, officers, directors, and consultants of the Company to attract and retain persons of ability to perform services for the Company and to reward such individuals who contribute to the achievement by the Company of its economic objectives. The awards granted generally vest in 25% increments over a four-year period and option awards expire 6 years from grant date. The Plan is administered by the Board or a committee appointed by the Board, which determines the persons to whom the awards will be granted, the type of awards to be granted, the number of awards to be granted, and the specific terms of each grant, including the vesting thereof, subject to the provisions of the Plan. During the three and nine months ended September 30, 2021 and 2020, the Company granted shares to certain employees as compensation for services. These shares were accounted for in accordance with ASC 718 - Compensation - Stock Compensation. The Company amortizes awards over the service period and until awards are fully vested. For the three and nine months ended September 30, 2021 and 2020, share-based compensation expense was as follows: Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, (in thousands) 2021 2020 2021 2020 Cost of goods sold $ - $ - $ - $ - General and administrative expense 361 187 986 2,012 Total share-based compensation $ 361 $ 187 $ 986 $ 2,012 The following table summarizes the status of stock option grants and unvested awards at and for the nine months ended September 30, 2021: Weighted-Average Stock Weighted-Average Remaining Aggregate (in thousands except per share amounts) Options Exercise Price Contractual Life Intrinsic Value Outstanding-December 31, 2020 6,260 $ 0.97 4.7 $ 3,162 Granted 2,330 1.35 Exercised - - Cancelled (1,692 ) 1.42 Outstanding-September 30, 2021 6,898 $ 0.99 4.5 Exercisable-September 30, 2021 1,796 $ 1.33 1.8 $ 424 Vested and expected to vest-September 30, 2021 6,898 $ 0.99 4.5 $ 1,372 The weighted-average fair value of options granted during the three and nine months ended September 30, 2021, estimated as of the grant date, were $1.08 and $1.35, respectively. As of September 30, 2021, there was $1,156 of total unrecognized compensation cost related to non-vested options, which is expected to be recognized over a remaining weighted-average vesting period of 1.9 years. The following table summarizes the status of restricted stock unit (“RSU”) grants and unvested awards at and for the nine months ended September 30, 2021: Weighted-Average (in thousands except per share amounts) RSUs Fair Value Outstanding-December 31, 2020 450 $ 0.33 Granted 1,395 1.15 Vested - - Cancelled (70 ) 1.11 Outstanding-September 30, 2021 1,775 $ 0.99 As of September 30, 2021, there was $719 of total unrecognized compensation cost related to non-vested restricted stock units, which is expected to be recognized over a remaining weighted-average vesting period of 17 months. The fair value of the stock options and RSUs granted were determined using the Black-Scholes option-pricing model with the following weighted average assumptions at the time of grant. Stock Options Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, 2021 2020 2021 2020 Expected volatility 50 % 50 % 50 % 50 % Dividend yield 0 % 0 % 0 % 0 % Risk-free interest rate 1.0 % 0.4 % 0.9 % 0.5 % Expected term in years 4.25 6.00 4.25 6.00 RSUs Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, 2021 2020 2021 2020 Expected volatility 50 % 50 % 50 % 50 % Dividend yield 0 % 0 % 0 % 0 % Risk-free interest rate 0.9 % 0.9 % 0.9 % 0.9 % Expected term in years 0.74 0.60 0.74 0.60

INCOME TAXES

INCOME TAXES	9 Months Ended
	Sep. 30, 2021
INCOME TAXES
12. INCOME TAXES	12. INCOME TAXES Coronavirus Aid, Relief and Economic Security Act On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted and signed into law in response to the market volatility and instability resulting from the COVID-19 pandemic. It includes a significant number of tax provisions and lifts certain deduction limitations originally imposed by the Tax Cuts and Jobs Act of 2017 (the “2017 Act”). The changes are mainly related to: (1) the business interest expense disallowance rules for 2019 and 2020; (2) net operating loss rules; (3) charitable contribution limitations; (4) employee retention credit; and (5) the realization of corporate alternative minimum tax credits. The Company continues to assess the impact and future implication of these provisions; however, it does not anticipate any amounts that could give rise to a material impact to the overall consolidated financial statements. The provision for income tax expense for the three months ended September 30, 2021, was $75, representing an effective tax rate of (.87)%, compared to an income tax expense of $119 for the three months ended September 30, 2020, representing an effective tax rate of (11.31)%. The provision for income tax expense for the nine months ended September 30, 2021, was $213, representing a effective tax rate of (1.47)% compared to an income tax expense of $169 for the nine months ended September 30, 2020, representing an effective tax rate of (0.96)%.

NET INCOME (LOSS) PER SHARE

NET INCOME (LOSS) PER SHARE	9 Months Ended
	Sep. 30, 2021
NET INCOME (LOSS) PER SHARE
13. NET INCOME (LOSS) PER SHARE	13. NET INCOME (LOSS) PER SHARE Net income (loss) per share represents the net earnings/loss attributable to shareholders divided by the weighted average number of shares outstanding during the period on an as converted basis. Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, (in thousands except per share amounts) 2021 2020 2021 2020 Net loss $ (8,700 ) $ (1,171 ) $ (14,685 ) $ (17,802 ) Net loss per share: Basic $ (0.10 ) $ (0.04 ) $ (0.15 ) $ (0.54 ) Diluted $ (0.10 ) $ (0.04 ) $ (0.15 ) $ (0.54 ) Weighted average shares outstanding: Basic 84,922 33,398 98,949 33,048 Diluted 84,922 33,398 98,949 33,048 Weighted average potentially diluted shares (1): Basic shares 84,922 33,398 98,949 33,048 Options - - - - Warrants - - - - Convertible debentures - - - - Restricted stock units - - - - Total weighted average potentially diluted shares: 84,922 33,398 98,949 33,048 ___________________________ (1) For the above net loss periods, the inclusion of options, warrants, convertible debentures and restricted stock units in the calculation of diluted earnings per share would be anti-dilutive, and accordingly, were excluded from the diluted loss per share calculation.

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS	9 Months Ended
	Sep. 30, 2021
FAIR VALUE MEASUREMENTS
14. FAIR VALUE MEASUREMENTS	14. FAIR VALUE MEASUREMENTS Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value. An asset’s or liability’s level is based on the lowest level of input that is significant to the fair value measurement. Assets and liabilities carried at fair value are valued and disclosed in one of the following three levels of the valuation hierarchy: Level 1: Quoted market prices in active markets for identical assets or liabilities. Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data. Level 3: Unobservable inputs reflecting the reporting entity’s own assumptions. At September 30, 2021, and December 31, 2020 the carrying value of cash and cash equivalents, accounts receivable, prepaid expense and other current assets, accounts payable and other current liabilities approximate fair value due to the short-term nature of such instruments. The carrying value of the Company's debt approximates fair value based on current market rates (Level 2). Nonrecurring fair value measurements The Company uses fair value measures when determining assets and liabilities acquired in an acquisition as described above in the Notes to Condensed Consolidated Financial Statements, which are considered a Level 3 measurement.

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES	9 Months Ended
	Sep. 30, 2021
COMMITMENTS AND CONTINGENCIES
15. COMMITMENTS AND CONTINGENCIES	15. COMMITMENTS AND CONTINGENCIES Commitments As of September 30, 2021 the Company has no commitments. Contingencies The Company’s operations are subject to a variety of local and state regulation. Failure to comply with one or more of those regulations could result in fines, restrictions on its operations, or losses of permits that could result in the Company ceasing operations. While management of the Company believes that the Company is in compliance with applicable local and state regulation as of September 30, 2021, cannabis regulations continue to evolve and are subject to differing interpretations. As a result, the Company may be subject to regulatory fines, penalties or restrictions in the future. In 2020, the Company entered into a payment plan offered by California regulatory authorities to pay certain excise and cultivation taxes over a 12 month period. If such taxes are not paid in accordance with the agreed payment plan, the Company could be subject to certain late payment penalties. Litigation and Claims 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, 2021, 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 have a material interest adverse to the Company’s interest. Insurance Claims In September 2020 the Company experienced a small fire at its manufacturing facility which resulted in suspending certain operations until the facility was repaired. As a result, the company filed a business interruption claim which resulted in a payment of $1.4 million from the insurance carrier in March 2021. The proceeds from the claim were reflected in other income on the consolidated statement of operations for the year ended December 31, 2020. In August 2020 the Company experienced adverse air quality conditions that resulted in the Company closing the air vents in its greenhouse facilities at a time when extreme temperatures existed. As a result, plant health suffered due to the situation. The Company filed a business interruption claim which resulted in a payment of $ 2.65 million from the insurance carrier being recorded in the quarter ended June 30, 2021, and is included in other income (expense) in the accompanying condensed consolidated statements of income (loss).

GENERAL AND ADMINISTRATIVE EXPE

GENERAL AND ADMINISTRATIVE EXPENSES	9 Months Ended
	Sep. 30, 2021
GENERAL AND ADMINISTRATIVE EXPENSES
16. GENERAL AND ADMINISTRATIVE EXPENSES	16. GENERAL AND ADMINISTRATIVE EXPENSES For the three and nine months ended September 30, 2021 and 2020, general and administrative expenses were comprised of: Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, (in thousands) 2021 2020 2021 2020 Salaries and benefits $ 2,142 $ 1,175 $ 4,540 $ 3,151 Professional fees 413 444 1,672 1,294 Share-based compensation 361 187 986 2,012 Administrative 1,295 753 3,298 2,118 Total general and administrative expenses $ 4,211 $ 2,559 $ 10,496 $ 8,575

RELATED-PARTY TRANSACTIONS

RELATED-PARTY TRANSACTIONS	9 Months Ended
	Sep. 30, 2021
RELATED-PARTY TRANSACTIONS
17. RELATED-PARTY TRANSACTIONS	17. RELATED -PARTY TRANSACTIONS Transactions with related parties are entered into in the normal course of business and are measured at the amount established and agreed to by the parties. Lowell received certain administrative, operational and consulting services through a Management Services Agreement with Edible Management, LLC (“EM”). EM is a limited liability company owned by the co-founders of Lowell and was formed to provide Lowell with certain administrative functions comprising: cultivation, distribution, and production operations support; general administration; corporate development; human resources; finance and accounting; marketing; sales; legal and compliance. The agreement provided for the dollar-for-dollar reimbursement of expenses incurred by EM in performance of its services. Amounts paid to EM for the three and nine months ended September 30, 2020 were $2,201 and $5,041, respectively. The Management Services Agreement with EM was terminated as of December 31, 2020. In April 2015, Lowell entered into a services agreement with Olympic Management Group (“OMG”), for advisory and technology support services, including the access and use of software licensed to OMG to perform certain data processing and enterprise resource planning (ERP) operational services. OMG is owned by one of the Company’s co-founders. The agreement provides for the dollar-for-dollar reimbursement of expenses incurred by OMG in performance of its services. There were no amounts paid to OMG for the quarters ended September 30, 2021 and 2020. Amounts paid to OMG for the nine months ended September 30, 2021 and 2020, were $nil and $5, respectively.

SEGMENT INFORMATION

SEGMENT INFORMATION	9 Months Ended
	Sep. 30, 2021
SEGMENT INFORMATION
18. SEGMENT INFORMATION	18. SEGMENT INFORMATION The Company's operations are comprised of a single reporting operating segment engaged in the production and sale of cannabis products in the United States. As the operations comprise a single reporting segment, amounts disclosed in the financial statements also represent a single reporting segment.

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS	9 Months Ended
	Sep. 30, 2021
SUBSEQUENT EVENTS
19. SUBSEQUENT EVENTS	19. SUBSEQUENT EVENTS The Company has evaluated subsequent events through November 15, 2021, the date the financial statements were available to be issued.

BASIS OF PRESENTATION AND SUM_2

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	9 Months Ended
	Sep. 30, 2021
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation	The interim unaudited condensed consolidated financial statements included herein have been prepared by Lowell Farms Inc. (the “Company” or “Lowell”) pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), including the instructions to the Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. The interim unaudited condensed consolidated financial statements reflect, in the opinion of management, all adjustments necessary (consisting only of normal recurring adjustments), to present a fair statement of results for the interim periods presented. The operating results for any interim period are not necessarily indicative of the results that may be expected for other interim periods or the full fiscal year. The accompanying interim unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto in the Company’s Form 10 filed for the year ended December 31, 2020. There have been no material changes to our significant accounting policies as of and for the nine months ended September 30, 2021. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries after the elimination of all intercompany balances and transactions. The condensed consolidated balance sheet at December 31, 2020, has been derived from the audited consolidated financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. All dollar amounts in the notes to condensed consolidated financial statements are expressed in thousands of United States dollars ("$" or "US$"), unless otherwise indicated.
Use of Estimates	The preparation of financial statements in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates in these financial statements include allowance for doubtful accounts and credit losses, carrying value of inventory, revenue recognition, accounting for stock-based compensation expense, and income taxes. Actual results could differ from those estimates. The global COVID-19 pandemic has impacted the operations and purchasing decisions of companies worldwide. It also has created and may continue to create significant uncertainty in the global economy. The Company has undertaken measures to protect its employees, partners, customers, and vendors. In addition, the Company’s personnel are subject to various travel restrictions, which limit the ability of the Company to provide services to customers and affiliates. This impacts the Company's normal operations. To date, the Company has been able to provide uninterrupted access to its products and services, including certain employees that are working remotely, and its pre-existing infrastructure that supports secure access to the Company’s internal systems. If, however, the COVID-19 pandemic has a substantial impact on the productivity of the Company’s employees or its partners’ or customers’ decision to use the Company’s products and services, the results of the Company’s operations and overall financial performance may be adversely impacted. The duration and extent of the impact from the COVID-19 pandemic depends on future developments that cannot be accurately predicted at this time. As of the date of issuance of the financial statements, the Company is not aware of any specific event or circumstance that would require updates to the Company’s estimates and judgments or revisions to the carrying value of its assets or liabilities. These estimates may change, as new events occur and additional information is obtained, and are recognized in the condensed consolidated financial statements as soon as they become known. Actual results could differ from those estimates and any such differences may be material to the financial statements.
Recent Accounting Standards	In May 2020, the SEC adopted the final rule under SEC release No. 33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses, amending Rule 1- 02(w)(2) which includes amendments to certain of its rules and forms related to the disclosure of financial information regarding acquired or disposed businesses. Among other changes, the amendments impact SEC rules relating to (1) the definition of “significant” subsidiaries, (2) requirements to provide financial statements for “significant” acquisitions, and (3) revisions to the formulation and usage of pro forma financial information. The final rule became effective on January 1, 2021; however, voluntary early adoption was permitted. The Company early adopted the provisions of the final rule in 2020. The guidance did not have a material impact on the Company’s condensed consolidated financial statements and disclosures. In February 2016, FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use (ROU) asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases and ASU 2018-11, Leases Topic 842 Target improvements, which provides an additional (and optional) transition method whereby the new lease standard is applied at the adoption date and recognized as an adjustment to retained earnings. In March 2019, the FASB issued ASU 2019-01, Leases (Topic 842) Codification Improvements, which further clarifies the determination of fair value of the underlying asset by lessors that are not manufacturers or dealers and modifies transition disclosure requirements for changes in accounting principles and other technical updates. The Company adopted the standard effective January 1, 2019 using the modified retrospective adoption method which allowed it to initially apply the new standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of accumulated deficit. In connection with the adoption of the new lease pronouncement, the Company recorded a charge to accumulated deficit of $847. Refer to the Summary of Effects of Lease Accounting Standard Update Adopted in First Quarter of 2019 in the audited consolidated financial statements and notes thereto in the Company’s Form 10 filed for the year ended December 31, 2020. In September 2016, the FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” and subsequent amendments to the initial guidance: ASU 2018-19 “Codification Improvements to Topic 326, Financial Instruments-Credit Losses”, ASU 2019-04 “Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments”, ASU 2019-05 “Financial Instruments-Credit Losses”, ASU 2019-11 “Codification Improvements to Topic 326, Financial Instruments - Credit Losses” (collectively, Topic 326),ASU 2020-02 Financial Instruments-Credit Losses (Topic 326) and Leases (Topic 842) and ASU 2020-03 Codification Improvements to Financial Instruments. Topic 326 requires measurement and recognition of expected credit losses for financial assets held. This guidance is effective for the year ended December 31, 2020. The Company believes that the most notable impact of this ASU will relate to its processes around the assessment of the adequacy of its allowance for doubtful accounts on trade accounts receivable and the recognition of credit losses. We continue to monitor the economic impact of the COVID-19 pandemic, however based on current market conditions, the adoption of the ASU did not have a material impact on the condensed consolidated financial statements. In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808), Clarifying the Interaction between Topic 808 and Topic 606. This guidance amended Topic 808 and Topic 606 to clarify that transactions in a collaborative arrangement should be accounted for under Topic 606 when the counterparty is a customer for a distinct good or service (i.e., unit of account). The amendments preclude an entity from presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction. This guidance was effective for the year ended December 31, 2020. The adoption of this guidance did not have a material impact on our condensed consolidated financial statements. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This guidance removes certain exceptions to the general principles in Topic 740 and enhances and simplifies various aspects of the income tax accounting guidance, including requirements such as tax basis step-up in goodwill obtained in a transaction that is not a business combination, ownership changes in investments, and interim-period accounting for enacted changes in tax law. This standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2020. This guidance was effective for the Company in our fiscal year and interim periods beginning on January 1, 2021 and did not have a material impact on our condensed consolidated financial statements. In January 2020, the FASB issued ASU 2020-01 Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. This guidance addresses accounting for the transition into and out of the equity method and provides clarification of the interaction of rules for equity securities, the equity method of accounting, and forward contracts and purchase options on certain types of securities. This standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2020. We evaluated the impact of ASU 2020-01 on our Consolidated Financial Statements, which was effective for the Company in our fiscal year and interim periods beginning on January 1, 2021 and it did not have a material impact on our condensed consolidated financial statements.
Accounting standards not yet adopted	In August 2020, the FASB issued ASU 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). This update amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity's own equity and improves and amends the related EPS guidance for both Subtopics. This standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2021, which means it will be effective for our fiscal year beginning January 1, 2022. Early adoption is permitted. We are currently evaluating the impact of ASU 2020-06 on our condensed consolidated financial statements. No other recently issued accounting pronouncements had or are expected to have a material impact on our condensed consolidated financial statements.

ACQUISITIONS (Tables)

ACQUISITIONS (Tables)	9 Months Ended
	Sep. 30, 2021
ACQUISITIONS
Schedule of Acquisitions	(1 ) (2 ) (3 ) (4 ) Kaizen The Humble The Hacienda Lowell Farm (in thousands) Inc. Flower Co. Company, LLC Services Total CONSIDERATION Contingent Payment $ 50 $ 44 $ - $ - $ 94 Cash - - 4,019 - 4,019 Transaction costs - - 428 190 618 Note payable and other obligations 200 65 3,115 9,000 12,380 Fair value of subordinate voting shares 62 55 34,358 9,610 44,085 Total consideration $ 312 $ 164 $ 41,920 $ 18,800 $ 61,196 PURCHASE PRICE ALLOCATION Assets Acquired Inventories $ - $ 6 $ 3,300 $ - $ 3,306 Accounts receivable - net - - 1,312 - 1,312 Land - - - 8,261 8,261 Buildings - - - 6,268 6,268 Equipment - - - 1,221 1,221 Other tangible assets - - 739 - 739 Intangible assets - brands and tradenames 104 80 37,299 - 37,483 Intangible assets - technology and know-how and other 208 78 - 3,050 3,336 Liabilities assumed Payables and other liabilities - - (730 ) - (730 ) Fair value of net assets acquired $ 312 $ 164 $ 41,920 $ 18,800 $ 61,196

PREPAID AND OTHER CURRENT ASS_2

PREPAID AND OTHER CURRENT ASSETS (Tables)	9 Months Ended
	Sep. 30, 2021
PREPAID AND OTHER CURRENT ASSETS
Summary of Prepaid expenses and other current assets	September 30, December 31, (in thousands) 2021 2020 Deposits $ 533 $ 572 Insurance 924 593 Supplier advances 1,920 504 Nevada building sale proceeds - 2,800 Other 363 1,922 Total prepaid and other current assets $ 3,740 $ 6,391

INVENTORY (Tables)

INVENTORY (Tables)	9 Months Ended
	Sep. 30, 2021
INVENTORY
Summary of Inventory	September 30, December 31, (in thousands) 2021 2020 Raw materials $ 12,686 $ 7,950 Work in process 521 - Finished goods 2,335 1,983 Total inventory $ 15,542 $ 9,933

OTHER CURRENT LIABILITIES (Tabl

OTHER CURRENT LIABILITIES (Tables)	9 Months Ended
	Sep. 30, 2021
OTHER CURRENT LIABILITIES
Schedule of Other current liabilities	September 30, December 31, (in thousands) 2021 2020 Excise and cannabis tax $ 3,393 $ 5,780 Third party brand distribution accrual 180 584 Insurance and professional fee accrual 1,262 746 Other 243 1,750 Total other current liabilities $ 5,078 $ 8,860

PROPERTY AND EQUIPMENT (Tables)

PROPERTY AND EQUIPMENT (Tables)	9 Months Ended
	Sep. 30, 2021
PROPERTY AND EQUIPMENT
Schedule of Property and equipment	Land and Leasehold Furniture Construction Right of (in thousands) Buildings Improvements and Fixtures Equipment Vehicles in Process Use Assets Total Costs Balance-December 31, 2020 $ - $ 10,799 $ 50 $ 1,276 $ 854 $ 2,528 $ 41,530 $ 57,037 Additions - 82 - 517 - 2,005 - 2,604 Business Acquisitions 15,538 - - 404 - - - 15,942 Disposals - - - - - - - - Balance-September 30, 2021 $ 15,538 $ 10,881 $ 50 $ 2,197 $ 854 $ 4,533 $ 41,530 $ 75,583 Accumulated Depreciation Balance-December 31, 2020 $ - $ (634 ) $ (47 ) $ (427 ) $ (411 ) $ - $ (6,275 ) $ (7,794 ) Depreciation (52 ) (243 ) (1 ) (120 ) (114 ) - (2,268 ) (2,798 ) Disposals - - - - - - - - Balance-September 30, 2021 $ (52 ) $ (877 ) $ (48 ) $ (547 ) $ (525 ) $ - $ 8,543 ) $ (10,592 ) Net Book Value-September 30, 2021 $ 15,486 $ 10,004 $ 2 $ 1,650 $ 329 $ 4,533 $ 32,987 $ 64,991 Net Book Value -December 31, 2020 $ - $ 10,165 $ 3 $ 849 $ 443 $ 2,528 $ 35,255 $ 49,243

GOODWILL AND INTANGIBLE ASSETS

GOODWILL AND INTANGIBLE ASSETS (Tables)	9 Months Ended
	Sep. 30, 2021
GOODWILL AND INTANGIBLE ASSETS
Schedule of Goodwill	(in thousands) Costs Balance - December 31, 2020 $ 357 Additions - Business Acquisitions - Impairment (357 ) Balance - September 30, 2021 $ -
Schedule of Intangible assets	Definite Life Intangibles Indefinite Life Intangibles Branding Technology/ Brands & (in thousands) Rights Know How Tradenames Total Costs Balance-December 31, 2020 $ 250 $ 208 $ 408 $ 866 Business acquisition - 3,050 37,299 40,349 Agreement termination (250 ) - - (250 ) Balance-September 30, 2021 $ - $ 3,258 $ 37,707 $ 40,965 Accumulated Amortization Balance-December 31, 2020 $ (93 ) $ (37 ) $ - $ (130 ) Agreement termination 98 - - 98 Amortization (5 ) (91 ) - (96 ) Other - - - - Balance-September 30, 2021 $ - $ (128 ) $ - $ (128 ) Net Book Value September 30, 2021 $ - $ 3,130 $ 37,707 $ 40,837 Net Book Value December 31, 2020 $ 157 $ 171 $ 408 $ 736

SHAREHOLDERS EQUITY (Tables)

SHAREHOLDERS EQUITY (Tables)	9 Months Ended
	Sep. 30, 2021
STOCKHOLDERS' EQUITY
Schedule of Shares outstanding	Subordinate Super (in thousands) Voting Shares Voting Shares Balance-December 31, 2020 57,617 203 Shares issued in connection with exercise of warrants 1,511 - Shares issued in connection with conversion of convertible debentures 2,580 - Shares issued in connection with asset acquisition 30,641 - Issuance of shares associated with subordinate voting share offering 18,000 - Issuance of vested restricted stock units 460 - Stock issued in connection with exercise of stock options 78 - Balance-September 30, 2021 110,887 203 (in thousands) Balance-December 31, 2020 93,898 Warrants issued in conjunction with broker option exercise (1) 163 Warrants issued in conjunction with subordinate voting share offering 9,000 Warrants expired (358 ) Warrants converted into subordinate voting shares (1,186 ) Balance-September 30, 2021 101,517 ______________ (1) Excluded 390 warrants issuable should underwriter options be exercised.

DEBT (Tables)

DEBT (Tables)	9 Months Ended
	Sep. 30, 2021
DEBT
Schedule of Debt	September 30, December 31, (in thousands) 2021 2020 Current portion of long-term debt Vehicle loans (1) $ 95 $ 170 Mortgage payable (2) 49 Note payable (3) 83 1,043 Total short-term debt 227 1,213 Long-term debt, net Vehicle loans (1) 14 233 Note payable (4) - 65 Note payable (3) - 5 Mortgage payable (2) 8,910 - Convertible debenture (5) 13,811 13,701 Total long-term debt 22,735 14,004 Total Indebtedness $ 22,962 $ 15,217
Schedule of Maturities of debt obligations	September 30, (in thousands) 2021 2021 $ 66 2022 250 2023 15,839 2024 377 2025 421 2026 and thereafter 8,088 Total debt obligations $ 25,041

LEASES (Tables)

LEASES (Tables)	9 Months Ended
	Sep. 30, 2021
LEASES
Schedule of Lease obligations	(in thousands) Lease Liability December 31, 2020 $ 38,834 Lease principal payments (1,744 ) September 30, 2021 $ 37,090 September 30, 2021 Lease obligation, current portion $ 2,411 Lease obligation, long-term portion 34,679 Total $ 37,090
Schedule of Lease expense	Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, (in thousands) 2021 2020 2021 2020 Amortization of leased assets (1) $ 741 $ 839 $ 2,268 $ 1,631 Interest on lease liabilities (2) 531 491 1,728 964 Total $ 1,272 $ 1,330 $ 3,996 $ 2,595 September 30, (in thousands) 2021 Balance of 2021 $ 607 2022 - 2023 5,137 2024 - 2025 3,844 2026 and beyond 27,502 Total $ 37,090

SHARE-BASED COMPENSATION (Table

SHARE-BASED COMPENSATION (Tables)	9 Months Ended
	Sep. 30, 2021
SHARE-BASED COMPENSATION
Schedule of Share-based compensation expense	Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, (in thousands) 2021 2020 2021 2020 Cost of goods sold $ - $ - $ - $ - General and administrative expense 361 187 986 2,012 Total share-based compensation $ 361 $ 187 $ 986 $ 2,012
Schedule of Stock option activity	Weighted-Average Stock Weighted-Average Remaining Aggregate (in thousands except per share amounts) Options Exercise Price Contractual Life Intrinsic Value Outstanding-December 31, 2020 6,260 $ 0.97 4.7 $ 3,162 Granted 2,330 1.35 Exercised - - Cancelled (1,692 ) 1.42 Outstanding-September 30, 2021 6,898 $ 0.99 4.5 Exercisable-September 30, 2021 1,796 $ 1.33 1.8 $ 424 Vested and expected to vest-September 30, 2021 6,898 $ 0.99 4.5 $ 1,372
Schedule of Restricted stock unit activity	Weighted-Average (in thousands except per share amounts) RSUs Fair Value Outstanding-December 31, 2020 450 $ 0.33 Granted 1,395 1.15 Vested - - Cancelled (70 ) 1.11 Outstanding-September 30, 2021 1,775 $ 0.99
Schedule of Weighted average assumptions	Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, 2021 2020 2021 2020 Expected volatility 50 % 50 % 50 % 50 % Dividend yield 0 % 0 % 0 % 0 % Risk-free interest rate 1.0 % 0.4 % 0.9 % 0.5 % Expected term in years 4.25 6.00 4.25 6.00 Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, 2021 2020 2021 2020 Expected volatility 50 % 50 % 50 % 50 % Dividend yield 0 % 0 % 0 % 0 % Risk-free interest rate 0.9 % 0.9 % 0.9 % 0.9 % Expected term in years 0.74 0.60 0.74 0.60

NET INCOME (LOSS) PER SHARE (Ta

NET INCOME (LOSS) PER SHARE (Tables)	9 Months Ended
	Sep. 30, 2021
NET INCOME (LOSS) PER SHARE
Schedule of Net earnings/(loss) per share	Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, (in thousands except per share amounts) 2021 2020 2021 2020 Net loss $ (8,700 ) $ (1,171 ) $ (14,685 ) $ (17,802 ) Net loss per share: Basic $ (0.10 ) $ (0.04 ) $ (0.15 ) $ (0.54 ) Diluted $ (0.10 ) $ (0.04 ) $ (0.15 ) $ (0.54 ) Weighted average shares outstanding: Basic 84,922 33,398 98,949 33,048 Diluted 84,922 33,398 98,949 33,048 Weighted average potentially diluted shares (1): Basic shares 84,922 33,398 98,949 33,048 Options - - - - Warrants - - - - Convertible debentures - - - - Restricted stock units - - - - Total weighted average potentially diluted shares: 84,922 33,398 98,949 33,048

GENERAL AND ADMINISTRATIVE EX_2

GENERAL AND ADMINISTRATIVE EXPENSES (Tables)	9 Months Ended
	Sep. 30, 2021
GENERAL AND ADMINISTRATIVE EXPENSES
Schedule of General and administrative expense	Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, (in thousands) 2021 2020 2021 2020 Salaries and benefits $ 2,142 $ 1,175 $ 4,540 $ 3,151 Professional fees 413 444 1,672 1,294 Share-based compensation 361 187 986 2,012 Administrative 1,295 753 3,298 2,118 Total general and administrative expenses $ 4,211 $ 2,559 $ 10,496 $ 8,575

ACQUISITIONS (Details)

ACQUISITIONS (Details)	9 Months Ended
	Sep. 30, 2021USD ($)
Assets Acquired
Contingent payment	$ 94,000
Cash	4,019,000
Transaction costs	618,000
Note payable and other obligations	12,380,000
Fair value of subordinate voting shares	44,085,000
Total consideration	61,196,000
Inventories	3,306,000
Accounts receivable - net	1,312,000
Land	8,261
Buildings	6,268
Equipment	1,221
Other tangible assets	739,000
Intangible assets - brands and tradenames	37,483,000
Intangible assets - technology and know-how	3,336,000
Liabilities Assumed
Payables and other liabilities	(730,000)
Total identifiable net assets	61,196,000
Kaizen Inc,
Assets Acquired
Contingent payment	50,000
Cash	0
Transaction costs	0
Note payable and other obligations	200,000
Fair value of subordinate voting shares	62,000
Total consideration	312,000
Inventories	0
Accounts receivable - net	0
Land	0
Buildings	0
Equipment	0
Other tangible assets	0
Intangible assets - brands and tradenames	104,000
Intangible assets - technology and know-how	208,000
Liabilities Assumed
Payables and other liabilities	0
Total identifiable net assets	312,000
The Humble Flower Co.
Assets Acquired
Contingent payment	44,000
Cash	0
Transaction costs	0
Note payable and other obligations	65,000
Fair value of subordinate voting shares	55,000
Total consideration	164,000
Inventories	6,000
Accounts receivable - net	0
Land	0
Buildings	0
Equipment	0
Other tangible assets	0
Intangible assets - brands and tradenames	80,000
Intangible assets - technology and know-how	78,000
Liabilities Assumed
Payables and other liabilities	0
Total identifiable net assets	164,000
The Hacienda Company, LLC
Assets Acquired
Contingent payment	0
Cash	4,019,000
Transaction costs	428,000
Note payable and other obligations	3,115,000
Fair value of subordinate voting shares	34,358,000
Total consideration	41,920,000
Inventories	3,300,000
Accounts receivable - net	1,312,000
Land	0
Buildings	0
Equipment	0
Other tangible assets	739,000
Intangible assets - brands and tradenames	37,299,000
Intangible assets - technology and know-how	0
Liabilities Assumed
Payables and other liabilities	(730,000)
Total identifiable net assets	41,920,000
LowellFarmService [Member]
Assets Acquired
Contingent payment	0
Cash	0
Transaction costs	190,000
Note payable and other obligations	9,000,000
Fair value of subordinate voting shares	9,610,000
Total consideration	18,800,000
Inventories	0
Accounts receivable - net	0
Land	8,261
Buildings	6,268
Equipment	1,221
Intangible assets - brands and tradenames	0
Intangible assets - technology and know-how	3,050,000
Liabilities Assumed
Payables and other liabilities	0
Total identifiable net assets	$ 18,800,000

ACQUISITIONS (Details Narrative

ACQUISITIONS (Details Narrative) - USD ($)	Jul. 15, 2020	May 14, 2019	Jun. 29, 2021	Feb. 25, 2021	Jul. 17, 2020	Nov. 30, 2019	Apr. 18, 2019	Sep. 30, 2021	Dec. 30, 2020	Dec. 31, 2019	Jan. 31, 2021
Purchase price of assets								$ 61,196,000
The Hacienda Company, LLC
Purchase price of assets								41,920,000
Issuance of subordinate voting shares				22,643,678
Cash Consideration				$ 4,100,000
LowellFarmService [Member]
Purchase price of assets								$ 18,800,000
Real property area descriptions			The 10-acre, 40,000 square foot processing facility will provide drying, bucking, trimming, sorting, grading, and packaging operations for up to 250,000 lbs. of wholesale cannabis flower annually.
Issuance of subordinate voting shares			7,997,520,000
Notes payable			$ 9,000,000
Maturity date of assets								Apr. 30, 2023
Las Vegas | Purchase Agreement [Member]
Notes payable											$ 843
Cash payment for acquire asset					$ 500					$ 4,100,000
Additional cash payment					$ 2,800,000
Loss on termination of investment									$ 4,400,000
The Humble Flower Co
Purchase price of assets								$ 164,000
The Humble Flower Co | Asset Purchase Agreement [Member]
Issuance of subordinate voting shares							225,000
Notes payable							$ 65
Maturity date of assets							Apr. 18, 2023
Purchase price of assets							$ 472
Net loss										34
Net assets										308
W Vapes | Purchase Agreement [Member]
Cash purchase consideration		$ 10,000,000
Subordinated voting shares, consideration		$ 10,000,000
Advance received from non recourse fund						$ 2,000,000
Cash held in Escrow						$ 10,000,000
Kaizen Inc,
Purchase price of assets								312,000
Kaizen Inc, | Asset Purchase Agreement [Member] | May 1, 2019
Issuance of subordinate voting shares	225,000
Notes payable	$ 200
Purchase price of assets								$ 556
Net loss										21
Net assets										$ 223

PREPAID AND OTHER CURRENT ASS_3

PREPAID AND OTHER CURRENT ASSETS (Details) - USD ($)	Sep. 30, 2021	Dec. 31, 2020
PREPAID AND OTHER CURRENT ASSETS
Deposits	$ 533,000	$ 572,000
Insurance	924,000	593,000
Supplier advances	1,920,000	504,000
Nevada building sale proceeds	0	2,800,000
Other	363,000	1,922,000
Total prepaid expenses and other current assets	$ 3,740,000	$ 6,391,000

INVENTORY (Details)

INVENTORY (Details) - USD ($)	Sep. 30, 2021	Dec. 31, 2020
INVENTORY
Raw materials	$ 12,686,000	$ 7,950,000
Work in process	521,000	0
Finished goods	2,335,000	1,983,000
Total inventory	$ 15,542,000	$ 9,933,000

OTHER CURRENT LIABILITIES (Deta

OTHER CURRENT LIABILITIES (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
OTHER CURRENT LIABILITIES
Excise and cannabis tax	$ 3,393	$ 5,780
Third party brand distribution accrual	180	584
Insurance and professional accrual	1,262	746
Other	243	1,750
Total accrued liabilities	$ 5,078	$ 8,860

PROPERTY AND EQUIPMENT (Details

PROPERTY AND EQUIPMENT (Details) - USD ($)	9 Months Ended
	Sep. 30, 2021	Dec. 31, 2020
Property and equipment cost, beginning	$ 57,037,000
Additions	2,604,000
Business acquisitions	15,942,000
Disposals	0
Property and equipment cost, ending	75,583,000
Accumulated depreciation, beginning	(7,794,000)
Depreciation	(2,798,000)
Disposals	0
Accumulated depreciation, ending	(10,592,000)
Net book value	64,991,000	$ 49,243,000
Land and Buildings
Property and equipment cost, beginning	0
Additions	0
Business acquisitions	15,538,000
Disposals	0
Property and equipment cost, ending	15,538,000
Accumulated depreciation, beginning	0
Depreciation	(52,000)
Accumulated depreciation, ending	(52,000)
Net book value	15,486,000	0
Leasehold Improvements
Property and equipment cost, beginning	10,799,000
Additions	82,000
Business acquisitions	0
Disposals	0
Property and equipment cost, ending	10,881,000
Accumulated depreciation, beginning	(634,000)
Depreciation	(243,000)
Accumulated depreciation, ending	(877,000)
Net book value	10,004,000	10,165,000
Furniture and Fixtures
Property and equipment cost, beginning	50,000
Additions	0
Business acquisitions	0
Disposals	0
Property and equipment cost, ending	50,000
Accumulated depreciation, beginning	(47,000)
Depreciation	(1,000)
Accumulated depreciation, ending	(48,000)
Net book value	2,000	3,000
Equipment [Member]
Property and equipment cost, beginning	1,276,000
Additions	517,000
Business acquisitions	404,000
Disposals	0
Property and equipment cost, ending	2,197,000
Accumulated depreciation, beginning	(427,000)
Depreciation	(120,000)
Accumulated depreciation, ending	(547,000)
Net book value	1,650,000	849,000
Vehicles
Property and equipment cost, beginning	854,000
Additions	0
Business acquisitions	0
Disposals	0
Property and equipment cost, ending	854,000
Accumulated depreciation, beginning	(411,000)
Depreciation	(114,000)
Accumulated depreciation, ending	(525,000)
Net book value	329,000	443,000
Construction in Process
Property and equipment cost, beginning	2,528,000
Additions	2,005,000
Business acquisitions	0
Disposals	0
Property and equipment cost, ending	4,533,000
Accumulated depreciation, beginning	0
Depreciation	0
Accumulated depreciation, ending	0
Net book value	4,533,000	2,528,000
Right of Use Assets
Property and equipment cost, beginning	41,530,000
Additions	0
Business acquisitions	0
Disposals	0
Property and equipment cost, ending	41,530,000
Accumulated depreciation, beginning	(6,275,000)
Depreciation	(2,268,000)
Accumulated depreciation, ending	(8,543,000)
Net book value	$ 32,987,000	$ 35,255,000

PROPERTY AND EQUIPMENT (Detai_2

PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Depreciation	$ 1,040	$ 1,047	$ 2,798	$ 3,021
Other income	196		391
Cost of Goods Sold
Depreciation	$ 584	$ 13	$ 1,752	$ 238

GOODWILL AND INTANGIBLE ASSET_2

GOODWILL AND INTANGIBLE ASSETS (Details)	9 Months Ended
	Sep. 30, 2021USD ($)
GOODWILL AND INTANGIBLE ASSETS
Goodwill, beginning	$ 357,000
Additions	0
Business acquisitions	0
Goodwill, ending	0
Impairment	$ (357,000)

GOODWILL AND INTANGIBLE ASSET_3

GOODWILL AND INTANGIBLE ASSETS (Details 1) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Definite life intangibles cost, beginning			$ 866,000
Business acquisition			40,349,000
Agreement termination			(250,000)
Definite life intangibles cost, ending	$ 40,965		40,965
Accumulated amortization, beginning			(130,000)
Agreement termination, amortization			98,000
Amortization	(82,000)	$ (10,000)	(96,000)	$ (54,000)
Other Accumulated Amortization			0
Accumulated amortization, ending			(128,000)
Net book value	40,837,000		40,837,000		$ 736,000
Brands & Tradenames
Definite life intangibles cost, beginning			408,000
Definite life intangibles cost, ending	37,707		37,707
Accumulated amortization, beginning			0
Agreement termination, amortization			0
Amortization			0
Other Accumulated Amortization			0
Accumulated amortization, ending			0
Net book value	37,707,000		37,707,000		408,000
Business acquisition			37,299,000
Agreement termination			0
Branding Rights
Definite life intangibles cost, beginning			250,000
Definite life intangibles cost, ending	0		0
Accumulated amortization, beginning			(93,000)
Agreement termination, amortization			98,000
Amortization			(5,000)
Other Accumulated Amortization			0
Accumulated amortization, ending			0
Net book value	0		0		157,000
Business acquisition			0
Agreement termination			(250,000)
Technology/KnowHow
Definite life intangibles cost, beginning			208,000
Definite life intangibles cost, ending	3,258		3,258
Accumulated amortization, beginning			(37,000)
Agreement termination, amortization			0
Amortization			(91,000)
Other Accumulated Amortization			0
Accumulated amortization, ending			(128,000)
Net book value	$ 3,130,000		3,130,000		$ 171,000
Business acquisition			3,050,000
Agreement termination			$ 0

GOODWILL AND INTANGIBLE ASSET_4

GOODWILL AND INTANGIBLE ASSETS (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
GOODWILL AND INTANGIBLE ASSETS
Amortization	$ 82,000	$ 10,000	$ 96,000	$ 54,000
Impairment	$ 357,000
Future amortization expense			$ 325

SHAREHOLDERS EQUITY (Details)

SHAREHOLDERS EQUITY (Details)	9 Months Ended
	Sep. 30, 2021shares
Issuance of shares associated with subordinate voting share offering	9,000
Subordinate Voting Shares [Member]
Beginning balance, shares	57,617,000
Shares issued in connection with exercise of warrants	1,511,000
Shares issued in connection with conversion of convertible debentures	2,580,000
Shares issued in connection with asset acquisition	30,641,000
Issuance of shares associated with subordinate voting share offering	18,000
Issuance of vested restricted stock units	460,000
Stock issued in connection with exercise of stock options	78,000
Ending balance, shares	110,887,000
Super Voting Shares [Member]
Beginning balance, shares	203,000
Ending balance, shares	203,000

SHAREHOLDERS EQUITY (Details 1)

SHAREHOLDERS EQUITY (Details 1)	9 Months Ended
	Sep. 30, 2021shares
STOCKHOLDERS' EQUITY
Warrants, beginning balance	93,898,000
Warrants issued in conjunction with broker option exercise	163,000
Issuance of shares associated with subordinate voting share offering	9,000
Warrants expired	(358,000)
Warrants converted into subordinate voting shares	(1,186,000)
Warrants, ending balance	101,517,000

DEBT (Details)

DEBT (Details) - USD ($)	Sep. 30, 2021	Dec. 31, 2020
Short-term debt	$ 227,000	$ 1,213,000
Long-term debt	22,735,000	14,004,000
Total Indebtedness	22,962,000	15,217,000
Convertible Debenture
Long-term debt	13,811,000	13,701,000
Vehicle Loans
Short-term debt	95,000	170,000
Long-term debt	14,000	233,000
Note Payable
Short-term debt	83,000	1,043,000
Long-term debt	0	5,000
Note Payable 1
Long-term debt	0	65,000
Mortgage Payable [Member]
Short-term debt	49,000
Long-term debt	$ 8,910,000	$ 0

DEBT (Details 1)

DEBT (Details 1) $ in Thousands	Sep. 30, 2021USD ($)
DEBT
2021	$ 66
2022	250
2023	15,839
2024	377
2025	421
2026 and thereafter	8,088
Total debt obligations	$ 25,041

LEASES (Details)

LEASES (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2021	Dec. 31, 2020
LEASES
Lease liability, beginning	$ 38,834
Lease principal payments	(1,744)
Lease liability, ending	37,090
Lease obligation, current portion	2,411	$ 2,301
Lease obligation, long-term portion	34,679	$ 36,533
Total	$ 37,090

LEASES (Details 1)

LEASES (Details 1) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
LEASES
Amortization of leased assets	$ 741,000	$ 839,000	$ 2,268,000	$ 1,631,000
Interest on lease liabilities	531,000	491,000	1,728,000	964,000
Total	$ 1,272,000	$ 1,330,000	$ 3,996,000	$ 2,595,000

LEASES (Details 2)

LEASES (Details 2) $ in Thousands	Sep. 30, 2021USD ($)
LEASES
Balance of 2021	$ 607
2022 - 2023	5,137
2024 - 2025	3,844
2026 - and beyond	27,502
Total	$ 37,090

LEASES (Details Narrative)

LEASES (Details Narrative)	6 Months Ended	12 Months Ended
	Jun. 30, 2021	Dec. 30, 2020	Sep. 30, 2021	Dec. 31, 2020
LEASES
Weighted average remaining lease term	15 years 2 months 12 days	18 years 1 month 6 days
Weighted average discount rate			6.00%	6.00%

SHARE-BASED COMPENSATION (Detai

SHARE-BASED COMPENSATION (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Share-based compensation expense	$ 361,000	$ 187,000	$ 986,000	$ 2,012,000
Cost of Goods Sold
Share-based compensation expense	0	0	0	0
General and Administrative Expense
Share-based compensation expense	$ 361,000	$ 187,000	$ 986,000	$ 2,012,000

SHARE-BASED COMPENSATION (Det_2

SHARE-BASED COMPENSATION (Details 1) $ / shares in Units, $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2021USD ($)$ / sharesshares	Sep. 30, 2021USD ($)$ / sharesshares
SHARE-BASED COMPENSATION
Stock options outstanding, beginning | shares		6,260,000
Stock options granted | shares		2,330,000
Stock options exercised | shares		0
Stock options cancelled | shares		(1,692,000)
Stock options outstanding, ending | shares	6,898,000	6,898,000
Stock options exercisable | shares	1,796,000	1,796,000
Stock options vested and expected to vest | shares	6,898,000	6,898,000
Weighted-average exercise price outstanding, beginning | $ / shares		$ 0.97
Weighted-average exercise price granted | $ / shares	$ 1.08	1.35
Weighted-average exercise price exercised | $ / shares		0
Weighted-average exercise price cancelled | $ / shares		1.42
Weighted-average exercise price outstanding, ending | $ / shares	0.99	0.99
Weighted-average exercise price exercisable | $ / shares	1.33	1.33
Weighted-average exercise price vested and expected to vest | $ / shares	$ 0.99	$ 0.99
Weighted-average remaining contactual life outstanding, beginning balance		4 years 8 months 12 days
Weighted-average remaining contactual life outstanding, ending balance		4 years 6 months
Weighted-average remaining contactual life exercisable		1 year 9 months 18 days
Weighted-average remaining contactual life vested and expected to vest		4 years 6 months
Aggregate intrinsic value outstanding | $	$ 3,162	$ 3,162
Aggregate intrinsic value exercisable | $	424	424
Aggregate intrinsic value vested and expected to vest | $	$ 1,372	$ 1,372

SHARE-BASED COMPENSATION (Det_3

SHARE-BASED COMPENSATION (Details 2)	9 Months Ended
	Sep. 30, 2021$ / sharesshares
SHARE-BASED COMPENSATION
RSUs outstanding, beginning balance | shares	450,000
RSUs granted | shares	1,395,000
RSUs vested | shares	0
RSUs cancelled | shares	70,000
RSUs outstanding, ending balance | shares	1,775,000
Weighted-average fair value outstanding, beginning balance | $ / shares	$ 0.33
Weighted-average fair value granted | $ / shares	1.15
Weighted-average fair value vested | $ / shares	0
Weighted-average fair value cancelled | $ / shares	1.11
Weighted-average fair value outstanding, ending balance | $ / shares	$ 0.99

SHARE-BASED COMPENSATION (Det_4

SHARE-BASED COMPENSATION (Details 3)	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Expected volatility	50.00%	50.00%	50.00%	50.00%
Dividend yield	0.00%	0.00%	0.00%	0.00%
Risk-free interest rate	0.90%	0.90%	0.90%	0.90%
Expected term in years	8 months 26 days	7 months 6 days	8 months 26 days	7 months 6 days
Stock Option [Member]
Expected volatility	50.00%	50.00%	50.00%	50.00%
Dividend yield	0.00%	0.00%	0.00%	0.00%
Risk-free interest rate	1.00%	0.40%	0.90%	0.50%
Expected term in years	4 years 3 months	6 years	4 years 3 months	6 years

SHARE-BASED COMPENSATION (Det_5

SHARE-BASED COMPENSATION (Details Narrative) $ / shares in Units, $ in Thousands, shares in Millions	3 Months Ended	9 Months Ended
	Sep. 30, 2021USD ($)$ / sharesshares	Sep. 30, 2021USD ($)$ / sharesshares
Weighted-average exercise price granted | $ / shares	$ 1.08	$ 1.35
Unrecognized compensation cost related to nonvested options | $	$ 1,156	$ 1,156
Proceeds from issuance of stock options | shares	13.2	13.2
Stock option for future grant | shares	4.5	4.5
Vesting period descriptions		The awards granted generally vest in 25% increments over a four-year period and option awards expire 6 years from grant date.
Vesting period		1 year 10 months 24 days
Unrecognized compensation cost related to nonvested restricted stock units | $	$ 719	$ 719
Restricted Stock Units (RSUs) [Member]
Vesting period		17 years

INCOME TAXES (Details Narrative

INCOME TAXES (Details Narrative) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
INCOME TAXES
Provision for income taxes	$ 75	$ 119	$ 213	$ 169
Effective tax rate	0.87%	11.31%	1.47%	0.96%

NET INCOME (LOSS) PER SHARE (De

NET INCOME (LOSS) PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
NET INCOME (LOSS) PER SHARE
Net loss	$ (8,700)	$ (1,171)	$ (14,685)	$ (17,802)
Net loss per share:
Basic	$ (0.10)	$ (0.04)	$ (0.15)	$ (0.54)
Diluted	$ (0.10)	$ (0.04)	$ (0.15)	$ (0.54)
Weighted average shares outstanding:
Basic	84,922,000	33,398,000	98,949,000	33,048,000
Diluted	84,922,000	33,398,000	98,949,000	33,048,000
Effects of Potential Dilutive Shares:
Basic shares	84,922,000	33,398,000	98,949,000	33,398,000
Total weighted average potentially diluted shares	84,922,000	33,398,000	98,949,000	33,048,000

COMMITMENTS AND CONTINGENCIES (

COMMITMENTS AND CONTINGENCIES (Details Narrative) $ in Thousands	9 Months Ended
	Sep. 30, 2021USD ($)
August 2020
Insurance maturity date	June 30, 2021
Payment for insurance claim	$ 2,650
September 2020
Insurance maturity date	March 2021
Payment for insurance claim	$ 1,400

GENERAL AND ADMINISTRATIVE EX_3

GENERAL AND ADMINISTRATIVE EXPENSES (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Total general and administrative expenses	$ 4,211	$ 2,559	$ 10,496	$ 8,575
Salaries and Benefits
Total general and administrative expenses	2,142	1,175	4,540	3,151
Professional Fees
Total general and administrative expenses	413	444	1,672	1,294
Share-based Compensation
Total general and administrative expenses	361	187	986	2,012
Administrative
Total general and administrative expenses	$ 1,295	$ 753	$ 3,298	$ 2,118

RELATED-PARTY TRANSACTIONS (Det

RELATED-PARTY TRANSACTIONS (Details Narrative) - USD ($)	3 Months Ended	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2020
EM
Related party transactions	$ 2,201,000	$ 5,041,000
OMG
Related party transactions	$ 0	$ 5,000