0001762359-20-000073.txt : 20201218 0001762359-20-000073.hdr.sgml : 20201218 20201218075551 ACCESSION NUMBER: 0001762359-20-000073 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 102 CONFORMED PERIOD OF REPORT: 20200930 FILED AS OF DATE: 20201218 DATE AS OF CHANGE: 20201218 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Acreage Holdings, Inc. CENTRAL INDEX KEY: 0001762359 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-MISCELLANEOUS RETAIL [5900] IRS NUMBER: 000000000 STATE OF INCORPORATION: A1 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-56021 FILM NUMBER: 201398029 BUSINESS ADDRESS: STREET 1: 450 LEXINGTON AVENUE, #3308 CITY: NEW YORK STATE: NY ZIP: 10163 BUSINESS PHONE: 646-600-9181 MAIL ADDRESS: STREET 1: 450 LEXINGTON AVENUE, #3308 CITY: NEW YORK STATE: NY ZIP: 10163 10-Q 1 acrg-20200930.htm 10-Q acrg-20200930
falseDecember 31Q320200001762359100,74690,646100,74690,646842842P5Y3.254.753.553.557.56.1P5YP1YP1YP1YP5Y00017623592020-01-012020-09-300001762359acrg:ClassDSubordinateVotingSharesMember2020-01-012020-09-300001762359acrg:ClassESubordinateVotingSharesMember2020-01-012020-09-30xbrli:shares0001762359acrg:ClassESubordinateVotingSharesMember2020-12-150001762359acrg:ClassDSubordinateVotingSharesMember2020-12-15iso4217:USD00017623592020-09-3000017623592019-12-31iso4217:USDxbrli:shares0001762359us-gaap:RetailMember2020-07-012020-09-300001762359us-gaap:RetailMember2019-07-012019-09-300001762359us-gaap:RetailMember2020-01-012020-09-300001762359us-gaap:RetailMember2019-01-012019-09-300001762359acrg:WholesaleMember2020-07-012020-09-300001762359acrg:WholesaleMember2019-07-012019-09-300001762359acrg:WholesaleMember2020-01-012020-09-300001762359acrg:WholesaleMember2019-01-012019-09-300001762359acrg:OtherMember2020-07-012020-09-300001762359acrg:OtherMember2019-07-012019-09-300001762359acrg:OtherMember2020-01-012020-09-300001762359acrg:OtherMember2019-01-012019-09-3000017623592020-07-012020-09-3000017623592019-07-012019-09-3000017623592019-01-012019-09-300001762359acrg:HSCPLLCMembershipUnitsMember2018-12-310001762359us-gaap:CommonStockMember2018-12-310001762359us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2018-12-310001762359us-gaap:TreasuryStockMember2018-12-310001762359us-gaap:RetainedEarningsMember2018-12-310001762359us-gaap:ParentMember2018-12-310001762359us-gaap:NoncontrollingInterestMember2018-12-3100017623592018-12-310001762359us-gaap:CommonStockMember2019-01-012019-03-310001762359us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2019-01-012019-03-310001762359us-gaap:ParentMember2019-01-012019-03-310001762359us-gaap:NoncontrollingInterestMember2019-01-012019-03-3100017623592019-01-012019-03-310001762359us-gaap:RetainedEarningsMember2019-01-012019-03-310001762359acrg:HSCPLLCMembershipUnitsMember2019-03-310001762359us-gaap:CommonStockMember2019-03-310001762359us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2019-03-310001762359us-gaap:TreasuryStockMember2019-03-310001762359us-gaap:RetainedEarningsMember2019-03-310001762359us-gaap:ParentMember2019-03-310001762359us-gaap:NoncontrollingInterestMember2019-03-3100017623592019-03-310001762359us-gaap:CommonStockMember2019-04-012019-06-300001762359us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2019-04-012019-06-300001762359us-gaap:ParentMember2019-04-012019-06-300001762359us-gaap:NoncontrollingInterestMember2019-04-012019-06-3000017623592019-04-012019-06-300001762359us-gaap:RetainedEarningsMember2019-04-012019-06-300001762359acrg:HSCPLLCMembershipUnitsMember2019-06-300001762359us-gaap:CommonStockMember2019-06-300001762359us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2019-06-300001762359us-gaap:TreasuryStockMember2019-06-300001762359us-gaap:RetainedEarningsMember2019-06-300001762359us-gaap:ParentMember2019-06-300001762359us-gaap:NoncontrollingInterestMember2019-06-3000017623592019-06-300001762359us-gaap:CommonStockMember2019-07-012019-09-300001762359us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2019-07-012019-09-300001762359us-gaap:ParentMember2019-07-012019-09-300001762359us-gaap:NoncontrollingInterestMember2019-07-012019-09-300001762359us-gaap:RetainedEarningsMember2019-07-012019-09-300001762359acrg:HSCPLLCMembershipUnitsMember2019-09-300001762359us-gaap:CommonStockMember2019-09-300001762359us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2019-09-300001762359us-gaap:TreasuryStockMember2019-09-300001762359us-gaap:RetainedEarningsMember2019-09-300001762359us-gaap:ParentMember2019-09-300001762359us-gaap:NoncontrollingInterestMember2019-09-3000017623592019-09-300001762359acrg:HSCPLLCMembershipUnitsMember2019-12-310001762359us-gaap:CommonStockMember2019-12-310001762359us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2019-12-310001762359us-gaap:TreasuryStockMember2019-12-310001762359us-gaap:RetainedEarningsMember2019-12-310001762359us-gaap:ParentMember2019-12-310001762359us-gaap:NoncontrollingInterestMember2019-12-310001762359us-gaap:CommonStockMember2020-01-012020-03-310001762359us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2020-01-012020-03-310001762359us-gaap:ParentMember2020-01-012020-03-3100017623592020-01-012020-03-310001762359us-gaap:NoncontrollingInterestMember2020-01-012020-03-310001762359us-gaap:RetainedEarningsMember2020-01-012020-03-310001762359acrg:HSCPLLCMembershipUnitsMember2020-03-310001762359us-gaap:CommonStockMember2020-03-310001762359us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2020-03-310001762359us-gaap:TreasuryStockMember2020-03-310001762359us-gaap:RetainedEarningsMember2020-03-310001762359us-gaap:ParentMember2020-03-310001762359us-gaap:NoncontrollingInterestMember2020-03-3100017623592020-03-310001762359acrg:HSCPLLCMembershipUnitsMember2020-04-012020-06-300001762359us-gaap:CommonStockMember2020-04-012020-06-300001762359us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2020-04-012020-06-300001762359us-gaap:ParentMember2020-04-012020-06-300001762359us-gaap:NoncontrollingInterestMember2020-04-012020-06-3000017623592020-04-012020-06-300001762359us-gaap:RetainedEarningsMember2020-04-012020-06-300001762359acrg:HSCPLLCMembershipUnitsMember2020-06-300001762359us-gaap:CommonStockMember2020-06-300001762359us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2020-06-300001762359us-gaap:TreasuryStockMember2020-06-300001762359us-gaap:RetainedEarningsMember2020-06-300001762359us-gaap:ParentMember2020-06-300001762359us-gaap:NoncontrollingInterestMember2020-06-3000017623592020-06-300001762359us-gaap:CommonStockMember2020-07-012020-09-300001762359us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2020-07-012020-09-300001762359us-gaap:ParentMember2020-07-012020-09-300001762359us-gaap:NoncontrollingInterestMember2020-07-012020-09-300001762359us-gaap:RetainedEarningsMember2020-07-012020-09-300001762359acrg:HSCPLLCMembershipUnitsMember2020-09-300001762359us-gaap:CommonStockMember2020-09-300001762359us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2020-09-300001762359us-gaap:TreasuryStockMember2020-09-300001762359us-gaap:RetainedEarningsMember2020-09-300001762359us-gaap:ParentMember2020-09-300001762359us-gaap:NoncontrollingInterestMember2020-09-3000017623592019-06-272019-06-27xbrli:pure0001762359acrg:CommonStockFixedSharesMember2020-09-230001762359acrg:CommonStockFloatingSharesMember2020-09-230001762359acrg:ProportionateVotingSharesFixedSharesMember2020-09-230001762359acrg:ProportionateVotingSharesFloatingSharesMember2020-09-230001762359acrg:FixedMultipleShareMember2020-09-230001762359acrg:FloatingMultipleShareMember2020-09-230001762359acrg:DebentureMemberacrg:A11065220CanadaIncMemberacrg:CanopyGrowthMemberacrg:CanopyGrowthMember2020-09-232020-09-230001762359acrg:A61SecuredDebentureDue2030Member2020-09-300001762359acrg:CompassionateCareFoundationInc.Member2020-09-300001762359acrg:CompassionateCareFoundationInc.Memberacrg:CannabisLicenseMember2020-09-300001762359acrg:CompassionateCareFoundationInc.Member2020-01-012020-09-300001762359acrg:CompassionateCareFoundationInc.Member2020-06-260001762359us-gaap:NotesReceivableMemberacrg:CompassionateCareFoundationInc.Member2020-06-262020-06-260001762359acrg:CompassionateCareFoundationInc.Memberacrg:InterestReceivableMember2020-06-262020-06-260001762359acrg:ThamesValleyMember2019-09-300001762359acrg:NCCMember2019-09-300001762359acrg:FormFactoryMember2019-09-300001762359acrg:ThamesValleyMemberacrg:CannabisLicenseMember2019-09-300001762359acrg:NCCMemberacrg:CannabisLicenseMember2019-09-300001762359acrg:FormFactoryMemberacrg:CannabisLicenseMember2019-09-300001762359acrg:CannabisLicenseMember2019-09-300001762359us-gaap:CustomerRelationshipsMemberacrg:ThamesValleyMember2019-09-300001762359us-gaap:CustomerRelationshipsMemberacrg:NCCMember2019-09-300001762359us-gaap:CustomerRelationshipsMemberacrg:FormFactoryMember2019-09-300001762359us-gaap:CustomerRelationshipsMember2019-09-300001762359us-gaap:DevelopedTechnologyRightsMemberacrg:ThamesValleyMember2019-09-300001762359us-gaap:DevelopedTechnologyRightsMemberacrg:NCCMember2019-09-300001762359acrg:FormFactoryMemberus-gaap:DevelopedTechnologyRightsMember2019-09-300001762359us-gaap:DevelopedTechnologyRightsMember2019-09-300001762359acrg:ThamesValleyMember2019-01-012019-09-300001762359acrg:NCCMember2019-01-012019-09-300001762359acrg:FormFactoryMember2019-01-012019-09-300001762359acrg:ThamesValleyMember2019-01-290001762359acrg:NCCMember2019-03-040001762359us-gaap:NotesReceivableMemberacrg:NCCMember2019-03-042019-03-040001762359acrg:OtherReceivableMemberacrg:NCCMember2019-03-042019-03-040001762359acrg:FormFactoryMember2019-04-160001762359acrg:FormFactoryMemberus-gaap:DevelopedTechnologyRightsMember2019-04-162019-04-160001762359us-gaap:CustomerRelationshipsMemberacrg:FormFactoryMember2019-04-162019-04-160001762359acrg:FormFactoryMember2019-04-162019-04-160001762359acrg:FormFactoryMemberus-gaap:NotesReceivableMember2019-04-162019-04-160001762359acrg:FormFactoryMemberacrg:InterestReceivableMember2019-04-162019-04-160001762359us-gaap:DiscontinuedOperationsDisposedOfBySaleMemberacrg:AcreageNorthDakotaLLCMember2020-05-080001762359us-gaap:DiscontinuedOperationsDisposedOfBySaleMemberacrg:AcreageNorthDakotaLLCMember2020-01-012020-09-300001762359acrg:AcreageFloridaInc.Memberus-gaap:DisposalGroupHeldforsaleNotDiscontinuedOperationsMember2020-09-300001762359us-gaap:DisposalGroupHeldforsaleNotDiscontinuedOperationsMemberacrg:KannaMember2020-09-300001762359us-gaap:DisposalGroupHeldforsaleNotDiscontinuedOperationsMemberacrg:MMRCMember2020-09-300001762359acrg:MichiganAssetHeldForSaleMemberus-gaap:DisposalGroupHeldforsaleNotDiscontinuedOperationsMember2020-09-300001762359us-gaap:DisposalGroupHeldforsaleNotDiscontinuedOperationsMemberacrg:CannablissOregonMember2020-09-300001762359acrg:MedfordOregonMemberus-gaap:DisposalGroupHeldforsaleNotDiscontinuedOperationsMember2020-09-300001762359us-gaap:DisposalGroupHeldforsaleNotDiscontinuedOperationsMemberacrg:PowellOregonMember2020-09-300001762359us-gaap:DisposalGroupHeldforsaleNotDiscontinuedOperationsMemberacrg:SpringfieldOregonMember2020-09-300001762359us-gaap:DisposalGroupHeldforsaleNotDiscontinuedOperationsMember2020-09-300001762359us-gaap:DisposalGroupHeldforsaleNotDiscontinuedOperationsMemberacrg:MMRCMember2020-08-110001762359us-gaap:ManagementServiceMember2020-09-300001762359us-gaap:ManagementServiceMember2019-12-310001762359us-gaap:CustomerRelatedIntangibleAssetsMember2020-09-300001762359us-gaap:CustomerRelatedIntangibleAssetsMember2019-12-310001762359us-gaap:TechnologyBasedIntangibleAssetsMember2020-09-300001762359us-gaap:TechnologyBasedIntangibleAssetsMember2019-12-310001762359srt:MinimumMember2020-01-012020-09-300001762359srt:MaximumMember2020-01-012020-09-30acrg:individual00017623592020-03-060001762359acrg:WellnessConnectionOfMaineMember2020-01-012020-09-300001762359acrg:FormFactoryMember2020-01-012020-09-300001762359us-gaap:ShortTermDebtMember2020-07-012020-09-300001762359us-gaap:ShortTermDebtMember2019-07-012019-09-300001762359us-gaap:ShortTermDebtMember2020-01-012020-09-300001762359us-gaap:ShortTermDebtMember2019-01-012019-09-300001762359acrg:EquitysecuritiesFVNIMember2020-07-012020-09-300001762359acrg:EquitysecuritiesFVNIMember2019-07-012019-09-300001762359acrg:EquitysecuritiesFVNIMember2020-01-012020-09-300001762359acrg:EquitysecuritiesFVNIMember2019-01-012019-09-300001762359us-gaap:EquityMethodInvestmentsMember2020-07-012020-09-300001762359us-gaap:EquityMethodInvestmentsMember2019-07-012019-09-300001762359us-gaap:EquityMethodInvestmentsMember2020-01-012020-09-300001762359us-gaap:EquityMethodInvestmentsMember2019-01-012019-09-300001762359acrg:MBMelodyLPMember2020-09-280001762359acrg:ClassBUnitsMemberacrg:MBMelodyLPMember2020-09-280001762359us-gaap:SecuritiesFinancingTransactionCostMember2020-01-012020-09-300001762359acrg:MaineHSCPIncMember2020-03-060001762359acrg:MaineHSCPIncMemberus-gaap:CommonStockMember2020-03-062020-03-060001762359acrg:MaineHSCPIncMember2020-07-012020-09-300001762359acrg:WestCoastsocialequityentityMember2019-07-012019-07-010001762359acrg:WestCoastsocialequityentityMember2019-12-310001762359acrg:WestCoastsocialequityentityMember2020-01-012020-09-300001762359us-gaap:NotesReceivableMember2020-09-300001762359acrg:GreenleafMember2020-09-300001762359acrg:GreenleafMember2019-12-310001762359acrg:CWGMember2020-09-300001762359acrg:CWGMember2019-12-310001762359acrg:CCFMember2020-09-300001762359acrg:CCFMember2019-12-310001762359acrg:PATCMember2020-09-300001762359acrg:PATCMember2019-12-310001762359acrg:PCMVMember2020-09-300001762359acrg:PCMVMember2019-12-310001762359acrg:HealthCircleMember2020-09-300001762359acrg:HealthCircleMember2019-12-310001762359acrg:GreenleafMembersrt:MinimumMember2020-09-300001762359acrg:GreenleafMembersrt:MaximumMember2020-09-300001762359us-gaap:LandMember2020-09-300001762359us-gaap:LandMember2019-12-310001762359us-gaap:BuildingMember2020-09-300001762359us-gaap:BuildingMember2019-12-310001762359us-gaap:ConstructionInProgressMember2020-09-300001762359us-gaap:ConstructionInProgressMember2019-12-310001762359us-gaap:FurnitureAndFixturesMember2020-09-300001762359us-gaap:FurnitureAndFixturesMember2019-12-310001762359us-gaap:LeaseholdImprovementsMember2020-09-300001762359us-gaap:LeaseholdImprovementsMember2019-12-3100017623592020-05-082020-05-08acrg:lease0001762359acrg:A75LoanDue2023Member2020-09-300001762359acrg:A75LoanDue2023Member2019-12-310001762359acrg:A61SecuredDebentureDue2030Member2019-12-310001762359acrg:NCCRELoanMember2020-07-012020-09-300001762359acrg:NCCRELoanMember2019-07-012019-09-300001762359acrg:NCCRELoanMember2020-01-012020-09-300001762359acrg:NCCRELoanMember2019-01-012019-09-300001762359acrg:SellersnotesMember2020-07-012020-09-300001762359acrg:SellersnotesMember2019-07-012019-09-300001762359acrg:SellersnotesMember2020-01-012020-09-300001762359acrg:SellersnotesMember2019-01-012019-09-300001762359acrg:A75LoanDue2023Member2020-07-012020-09-300001762359acrg:A75LoanDue2023Member2019-07-012019-09-300001762359acrg:A75LoanDue2023Member2020-01-012020-09-300001762359acrg:A75LoanDue2023Member2019-01-012019-09-300001762359acrg:A61SecuredDebentureDue2030Member2020-07-012020-09-300001762359acrg:A61SecuredDebentureDue2030Member2019-07-012019-09-300001762359acrg:A61SecuredDebentureDue2030Member2020-01-012020-09-300001762359acrg:A61SecuredDebentureDue2030Member2019-01-012019-09-3000017623592016-12-310001762359acrg:NCCRELoanMember2016-12-310001762359acrg:SellersnotesMembersrt:MinimumMember2020-09-300001762359acrg:SellersnotesMembersrt:MaximumMember2020-09-3000017623592020-01-010001762359acrg:A355CreditFacilityDue2022Member2020-09-3000017623592020-03-11acrg:tranche0001762359acrg:A355CreditFacilityDue2022Member2020-03-1100017623592020-03-112020-03-110001762359us-gaap:RestrictedStockUnitsRSUMember2020-03-112020-03-110001762359us-gaap:ConvertibleDebtMemberacrg:SecuritiesPurchaseAgreementMember2020-05-290001762359us-gaap:ConvertibleDebtMemberacrg:SecuritiesPurchaseAgreementMember2020-05-292020-05-290001762359acrg:DebtInstrumentConvertiblePeriod1Memberus-gaap:ConvertibleDebtMemberacrg:SecuritiesPurchaseAgreementMember2020-05-2900017623592020-09-040001762359us-gaap:ConvertibleDebtMemberacrg:SecuritiesPurchaseAgreementMember2020-04-012020-06-3000017623592020-06-162020-06-1600017623592020-06-160001762359us-gaap:SubsequentEventMember2020-10-012020-10-310001762359acrg:DebentureMemberacrg:A11065220CanadaIncMemberacrg:CanopyGrowthMemberacrg:CanopyGrowthMember2020-09-230001762359acrg:ClassAUnitsMemberacrg:MBMelodyLPMember2020-09-280001762359acrg:A75LoanDue2023Member2020-09-282020-09-280001762359acrg:A75LoanDue2023Member2020-09-280001762359us-gaap:ConvertibleDebtMemberacrg:SecuritiesPurchaseAgreementMember2020-09-282020-09-2800017623592020-09-282020-09-280001762359acrg:A355CreditFacilityCollateralRelatedPartyMember2020-09-300001762359us-gaap:CommonClassAMember2019-12-310001762359us-gaap:TreasuryStockCommonMember2019-12-310001762359us-gaap:CommonClassBMember2019-12-310001762359us-gaap:CommonClassCMember2019-12-310001762359us-gaap:CommonClassAMember2020-01-012020-09-220001762359us-gaap:TreasuryStockCommonMember2020-01-012020-09-220001762359us-gaap:CommonClassBMember2020-01-012020-09-220001762359us-gaap:CommonClassCMember2020-01-012020-09-220001762359us-gaap:CommonStockMember2020-01-012020-09-220001762359us-gaap:CommonClassAMember2020-09-220001762359us-gaap:TreasuryStockCommonMember2020-09-220001762359us-gaap:CommonClassBMember2020-09-220001762359us-gaap:CommonClassCMember2020-09-220001762359us-gaap:CommonStockMember2020-09-220001762359us-gaap:TreasuryStockCommonMember2020-09-230001762359acrg:TreasuryStockFloatingMember2020-09-230001762359us-gaap:CommonClassCMember2020-09-230001762359us-gaap:CommonStockMember2020-09-230001762359acrg:CommonStockFixedSharesMember2020-09-242020-09-300001762359acrg:CommonStockFloatingSharesMember2020-09-242020-09-300001762359us-gaap:TreasuryStockCommonMember2020-09-242020-09-300001762359acrg:TreasuryStockFloatingMember2020-09-242020-09-300001762359us-gaap:CommonClassCMember2020-09-242020-09-300001762359us-gaap:CommonStockMember2020-09-242020-09-300001762359acrg:CommonStockFixedSharesMember2020-09-300001762359acrg:CommonStockFloatingSharesMember2020-09-300001762359us-gaap:TreasuryStockCommonMember2020-09-300001762359acrg:TreasuryStockFloatingMember2020-09-300001762359us-gaap:CommonClassCMember2020-09-300001762359acrg:CommonStockFixedSharesMember2020-01-012020-09-300001762359acrg:CommonStockFloatingSharesMember2020-01-012020-09-300001762359us-gaap:CommonClassAMember2020-05-292020-05-290001762359acrg:CommonStockFixedSharesMember2020-05-292020-05-290001762359acrg:CommonStockFloatingSharesMember2020-05-292020-05-290001762359us-gaap:CommonClassAMember2018-12-310001762359us-gaap:TreasuryStockCommonMember2018-12-310001762359us-gaap:CommonClassBMember2018-12-310001762359us-gaap:CommonClassCMember2018-12-310001762359us-gaap:CommonClassAMember2019-01-012019-09-300001762359us-gaap:TreasuryStockCommonMember2019-01-012019-09-300001762359us-gaap:CommonClassBMember2019-01-012019-09-300001762359us-gaap:CommonClassCMember2019-01-012019-09-300001762359us-gaap:CommonStockMember2019-01-012019-09-300001762359us-gaap:CommonClassAMember2019-09-300001762359us-gaap:TreasuryStockCommonMember2019-09-300001762359us-gaap:CommonClassBMember2019-09-300001762359us-gaap:CommonClassCMember2019-09-300001762359us-gaap:WarrantMember2019-12-310001762359acrg:WarrantFixedSharesMember2020-09-230001762359acrg:WarrantFloatingSharesMember2020-09-230001762359us-gaap:WarrantMember2020-01-012020-09-220001762359acrg:WarrantFixedSharesMember2020-09-242020-09-300001762359acrg:WarrantFloatingSharesMember2020-09-242020-09-300001762359us-gaap:WarrantMember2020-09-220001762359acrg:WarrantFixedSharesMember2020-09-300001762359acrg:WarrantFloatingSharesMember2020-09-300001762359us-gaap:WarrantMember2018-12-310001762359us-gaap:WarrantMember2019-01-012019-09-300001762359us-gaap:WarrantMember2019-09-3000017623592020-02-1000017623592020-02-102020-02-1000017623592020-03-022020-03-020001762359acrg:FixedWarrantsMember2020-01-012020-09-300001762359acrg:WarrantFloatingSharesMember2020-01-012020-09-300001762359acrg:HSCPLLCMember2020-09-300001762359acrg:HSCPLLCMember2019-12-310001762359acrg:HSCPLLCMemberacrg:HSCPUSCo2Member2020-09-300001762359acrg:HSCPLLCMemberacrg:HSCPUSCo2Member2019-12-310001762359acrg:HSCPLLCMember2020-07-012020-09-300001762359acrg:HSCPLLCMember2019-07-012019-09-300001762359acrg:HSCPLLCMember2020-01-012020-09-300001762359acrg:HSCPLLCMember2019-01-012019-09-300001762359acrg:ACRGOmnibusIncentivePlanMember2020-07-012020-09-300001762359acrg:ACRGOmnibusIncentivePlanMember2019-07-012019-09-300001762359acrg:ACRGOmnibusIncentivePlanMember2020-01-012020-09-300001762359acrg:ACRGOmnibusIncentivePlanMember2019-01-012019-09-300001762359acrg:PlanCGCAwardsMember2020-07-012020-09-300001762359acrg:PlanCGCAwardsMember2019-07-012019-09-300001762359acrg:PlanCGCAwardsMember2020-01-012020-09-300001762359acrg:PlanCGCAwardsMember2019-01-012019-09-300001762359acrg:OtherequityawardsMember2020-07-012020-09-300001762359acrg:OtherequityawardsMember2019-07-012019-09-300001762359acrg:OtherequityawardsMember2020-01-012020-09-300001762359acrg:OtherequityawardsMember2019-01-012019-09-3000017623592019-06-192019-06-190001762359us-gaap:RestrictedStockUnitsRSUMember2019-12-310001762359us-gaap:RestrictedStockUnitsRSUMember2020-01-012020-09-220001762359us-gaap:RestrictedStockUnitsRSUMember2020-09-220001762359acrg:RestrictedStockUnitsFixedMember2020-09-230001762359acrg:RestrictedStockUnitsFloatingMember2020-09-230001762359acrg:RestrictedStockUnitsFixedMember2020-09-242020-09-300001762359acrg:RestrictedStockUnitsFloatingMember2020-09-242020-09-300001762359acrg:RestrictedStockUnitsFixedMember2020-09-300001762359acrg:RestrictedStockUnitsFloatingMember2020-09-300001762359us-gaap:RestrictedStockUnitsRSUMember2020-01-012020-09-300001762359us-gaap:RestrictedStockUnitsRSUMember2020-07-012020-09-300001762359us-gaap:RestrictedStockUnitsRSUMember2020-09-300001762359us-gaap:RestrictedStockUnitsRSUMember2020-02-202020-02-200001762359us-gaap:RestrictedStockUnitsRSUMember2020-03-132020-03-13acrg:employee00017623592019-06-270001762359srt:ScenarioForecastMember2021-06-300001762359srt:ScenarioForecastMember2020-12-2300017623592019-07-312019-07-310001762359us-gaap:EmployeeStockOptionMember2019-12-310001762359us-gaap:EmployeeStockOptionMember2020-01-012020-09-220001762359us-gaap:EmployeeStockOptionMember2020-09-220001762359acrg:ShareBasedPaymentArrangementOptionFixedMember2020-09-230001762359acrg:ShareBasedPaymentArrangementOptionFloatingMember2020-09-230001762359acrg:ShareBasedPaymentArrangementOptionFixedMember2020-09-242020-09-300001762359acrg:ShareBasedPaymentArrangementOptionFloatingMember2020-09-242020-09-300001762359acrg:ShareBasedPaymentArrangementOptionFixedMember2020-09-300001762359acrg:ShareBasedPaymentArrangementOptionFloatingMember2020-09-300001762359us-gaap:EmployeeStockOptionMember2020-07-012020-09-300001762359us-gaap:EmployeeStockOptionMember2020-01-012020-09-300001762359acrg:LLCProfitsInterestsMember2019-12-310001762359acrg:LLCProfitsInterestsMember2020-01-012020-09-300001762359acrg:LLCProfitsInterestsMember2020-09-300001762359acrg:LLCProfitsInterestsMember2020-07-012020-09-300001762359us-gaap:RestrictedStockMember2019-04-160001762359us-gaap:RestrictedStockMember2020-07-012020-09-300001762359us-gaap:RestrictedStockMember2020-01-012020-09-300001762359us-gaap:RestrictedStockMember2019-01-012019-09-300001762359us-gaap:RestrictedStockMember2019-09-300001762359acrg:DeepRootsPendingMember2019-04-172019-04-170001762359acrg:GCCCPendingMember2018-01-012018-12-31acrg:company00017623592019-06-1900017623592019-06-262019-06-2600017623592020-06-2400017623592020-06-242020-06-240001762359us-gaap:RestrictedStockUnitsRSUMember2020-06-242020-06-240001762359acrg:CanopyGrowthMember2020-09-232020-09-230001762359acrg:ShareBasedPaymentArrangementOptionFloatingMemberacrg:CanopyGrowthMember2020-09-232020-09-230001762359acrg:ShareBasedPaymentArrangementOtherThanOptionsFloatingMemberacrg:CanopyGrowthMember2020-09-232020-09-230001762359acrg:CommonStockFixedSharesMemberacrg:CanopyGrowthMember2020-09-232020-09-230001762359acrg:CommonStockFixedSharesMemberacrg:CanopyGrowthMember2020-09-23acrg:segment0001762359acrg:CanopyGrowthMember2020-09-230001762359acrg:CanopyGrowthMemberacrg:DebtInstrumentTermOneMember2020-09-230001762359acrg:DebtInstrumentTermTwoMemberacrg:CanopyGrowthMember2020-09-23acrg:transaction0001762359acrg:DebtInstrumentTermThreeMemberacrg:CanopyGrowthMember2020-09-230001762359acrg:DebtInstrumentTermThreeMemberacrg:CanopyGrowthMember2020-09-232020-09-230001762359acrg:A11065220CanadaIncMemberacrg:CanopyGrowthMemberacrg:CanopyGrowthMember2020-09-230001762359us-gaap:FinancialGuaranteeMember2020-05-290001762359us-gaap:FinancialGuaranteeMemberus-gaap:CommonClassAMember2020-05-2900017623592020-05-292020-05-29acrg:defendant0001762359acrg:NewYorkOutstandingLitigationMember2018-11-022018-11-02acrg:proceeding0001762359acrg:CaliforniaEmploymentClaimMember2019-02-080001762359acrg:CanwellDisputeMember2020-09-300001762359acrg:CanwellDisputeMember2020-07-012020-09-300001762359acrg:CanwellDisputeMember2020-01-012020-09-30utr:sqftacrg:payment0001762359us-gaap:SubsequentEventMember2020-11-242020-11-240001762359us-gaap:SubsequentEventMember2020-11-012020-11-300001762359us-gaap:ConvertibleDebtMember2020-03-110001762359us-gaap:ConvertibleDebtMember2020-03-112020-03-110001762359us-gaap:ConvertibleDebtMemberus-gaap:RestrictedStockUnitsRSUMember2020-03-112020-03-110001762359us-gaap:ConvertibleDebtMember2020-07-012020-09-300001762359srt:BoardOfDirectorsChairmanMember2020-09-300001762359acrg:FixedWarrantsMember2020-01-012020-09-300001762359acrg:FloatingWarrantsMember2020-01-012020-09-300001762359acrg:RestrictedStockUnitsFixedMember2020-01-012020-09-300001762359acrg:RestrictedStockUnitsFloatingMember2020-01-012020-09-300001762359acrg:ShareBasedPaymentArrangementOptionFloatingMember2020-01-012020-09-300001762359acrg:ShareBasedPaymentArrangementOptionFixedMember2020-01-012020-09-300001762359us-gaap:ConvertiblePreferredStockMember2020-01-012020-09-300001762359us-gaap:WarrantMember2019-01-012019-09-300001762359us-gaap:RestrictedStockUnitsRSUMember2019-01-012019-09-300001762359us-gaap:EmployeeStockOptionMember2019-01-012019-09-300001762359us-gaap:ConvertiblePreferredStockMember2019-01-012019-09-300001762359acrg:PromissoryNoteMemberus-gaap:SubsequentEventMember2020-10-310001762359us-gaap:SubsequentEventMemberus-gaap:SeniorNotesMember2020-11-012020-11-130001762359us-gaap:SubsequentEventMemberus-gaap:SeniorNotesMember2020-11-130001762359us-gaap:SubsequentEventMemberacrg:WarrantFixedSharesMember2020-11-012020-11-130001762359us-gaap:SubsequentEventMemberacrg:ClassESubordinateVotingSharesMember2020-11-130001762359us-gaap:SubsequentEventMemberacrg:WarrantFloatingSharesMember2020-11-012020-11-130001762359us-gaap:SubsequentEventMemberacrg:ClassDSubordinateVotingSharesMember2020-11-130001762359us-gaap:SubsequentEventMemberacrg:WarrantFixedSharesMember2020-11-130001762359us-gaap:SubsequentEventMemberacrg:WarrantFloatingSharesMember2020-11-130001762359us-gaap:SubsequentEventMember2020-11-130001762359us-gaap:ConstructionLoansMemberus-gaap:SubsequentEventMember2020-12-020001762359us-gaap:ConstructionLoansMemberus-gaap:SubsequentEventMember2020-12-022020-12-02


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020

OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from  to


Commission file number 000-56021

ACREAGE HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
British Columbia, Canada98-1463868
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
450 Lexington Avenue, #3308New YorkNew York10163
(Address of Principal Executive Offices)
(Zip Code)
(646) 600-9181
Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act: None.

Securities registered pursuant to section 12(g) of the Act: Class D Subordinate Voting Shares, no par value; Class E Subordinate Voting Shares, no par value.

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  x   No  o 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
x
Smaller reporting company
Emerging growth company
                
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes    No  x

As of December 15, 2020, there were 71,460,986 and 30,626,930 Class E subordinate voting shares and Class D subordinate voting shares, as converted, issued and outstanding, respectively.
 
























TABLE OF CONTENTS
Acreage Holdings, Inc.
Form 10-Q
For the Three and Nine Months Ended September 30, 2020
PART IFinancial Information.
Item 1.
Item 2.
Item 3.
Item 4.
PART IIOther Information.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.





ACREAGE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
PART I
Item 1. Financial Statements and Supplementary Data.
(in thousands)September 30, 2020December 31, 2019
(unaudited)(audited)
ASSETS
Cash and cash equivalents$46,363 $26,505 
Restricted cash22,096 95 
Inventory21,761 18,083 
Notes receivable, current2,051 2,146 
Assets held-for-sale61,634  
Other current assets8,992 8,506 
Total current assets
162,897 55,335 
Long-term investments38,297 4,499 
Notes receivable, non-current96,287 79,479 
Capital assets, net96,563 106,047 
Operating lease right-of-use assets31,507 51,950 
Intangible assets, net139,524 285,972 
Goodwill31,922 105,757 
Other non-current assets3,267 2,638 
Total non-current assets
437,367 636,342 
TOTAL ASSETS$600,264 $691,677 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable and accrued liabilities$49,910 $32,459 
Taxes payable14,209 4,740 
Interest payable4,683 291 
Operating lease liability, current2,482 2,759 
Debt, current37,097 15,300 
Liabilities related to assets held-for-sale22,563  
Other current liabilities7,449 1,604 
Total current liabilities
138,393 57,153 
Debt, non-current121,703 28,186 
Operating lease liability, non-current30,182 47,522 
Deferred tax liability34,938 63,997 
Other liabilities2 25 
Total non-current liabilities
186,825 139,730 
TOTAL LIABILITIES325,218 196,883 
Commitments and contingencies (Note 13)
Common stock, no par value (Note 11) - unlimited authorized, 100,746 and 90,646 issued and outstanding, respectively  
Additional paid-in capital706,668 615,678 
Treasury stock, 842 common stock held in treasury(21,054)(21,054)
Accumulated deficit(438,311)(188,617)
Total Acreage Shareholders' equity
247,303 406,007 
Non-controlling interests27,743 88,787 
TOTAL EQUITY 275,046 494,794 
TOTAL LIABILITIES AND EQUITY$600,264 $691,677 
See accompanying notes to Unaudited Condensed Consolidated Financial Statements
3

ACREAGE HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended September 30,Nine Months Ended
September 30,
(in thousands, except per share amounts)2020201920202019
REVENUE
Retail revenue, net$23,914 $15,306 $61,362 $38,566 
Wholesale revenue, net7,798 6,696 21,513 13,639 
Other revenue, net30 400 164 839 
Total revenues, net31,742 22,402 83,039 53,044 
Cost of goods sold, retail(14,134)(9,548)(37,004)(23,622)
Cost of goods sold, wholesale(4,133)(3,160)(11,395)(6,795)
Total cost of goods sold(18,267)(12,708)(48,399)(30,417)
Gross profit13,475 9,694 34,640 22,627 
OPERATING EXPENSES
General and administrative14,819 12,977 40,237 41,039 
Compensation expense8,306 11,801 30,740 29,542 
Equity-based compensation expense10,445 28,174 65,369 67,844 
Marketing46 1,151 1,514 3,153 
Loss on impairment  187,775  
Loss on notes receivable  8,161  
Write down of assets held-for-sale2,893  11,003  
Loss from legal settlements14,150  14,150  
Depreciation and amortization1,396 2,182 4,888 5,313 
Total operating expenses52,055 56,285 363,837 146,891 
Net operating loss$(38,580)$(46,591)$(329,197)$(124,264)
(Loss) income from investments, net(433)(1,458)(195)770 
Interest income from loans receivable1,606 1,190 5,083 2,921 
Interest expense(6,147)(96)(11,106)(345)
Other loss, net(656)(220)(853)(2,528)
Total other (loss) income(5,630)(584)(7,071)818 
Loss before income taxes$(44,210)$(47,175)$(336,268)$(123,446)
Income tax (expense) benefit(3,826)(2,327)21,633 (6,125)
Net loss$(48,036)$(49,502)$(314,635)$(129,571)
Less: net loss attributable to non-controlling interests(7,488)(10,786)(64,941)(29,937)
Net loss attributable to Acreage Holdings, Inc.$(40,548)$(38,716)$(249,694)$(99,634)
Net loss per share attributable to Acreage Holdings, Inc. - basic and diluted:$(0.39)$(0.43)$(2.54)$(1.17)
Weighted average shares outstanding - basic and diluted103,450 89,262 98,304 84,817 

See accompanying notes to Unaudited Condensed Consolidated Financial Statements
4

ACREAGE HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Attributable to shareholders of the parent
(in thousands)LLC Membership UnitsPubco Shares (as converted)Share CapitalTreasury StockAccumulated DeficitShareholders’ EquityNon-controlling InterestsTotal Equity
December 31, 2018 79,164 $414,757 $(21,054)$(38,349)$355,354 $130,922 $486,276 
Issuances for business acquisitions/purchases of intangible assets— 211 3,948 — — 3,948 4,000 7,948 
NCI adjustments for changes in ownership— 643 3,640 — — 3,640 (3,640) 
Other equity transactions— 12 264 — — 264 — 264 
Equity-based compensation expense and related issuances— 190 16,187 — — 16,187 — 16,187 
Net loss— — — — (23,377)(23,377)(7,427)(30,804)
March 31, 2019 80,220 $438,796 $(21,054)$(61,726)$356,016 $123,855 $479,871 
Issuances for business acquisitions/purchases of intangible assets— 4,770 95,266 — — 95,266 356 95,622 
NCI adjustments for changes in ownership— 388 (15,820)— — (15,820)15,820  
Capital distributions, net— — — — — — (4,298)(4,298)
Other equity transactions— 294 5,201 — — 5,201 — 5,201 
Equity-based compensation expense and related issuances— 288 15,574 — — 15,574 — 15,574 
Net loss— — — — (37,541)(37,541)(11,724)(49,265)
June 30, 2019 85,960 $539,017 $(21,054)$(99,267)$418,696 $124,009 $542,705 
Issuances for business acquisitions/purchases of intangible assets 383 5,534 — — 5,534  5,534 
NCI adjustments for changes in ownership 1,452 7,392 — — 7,392 (7,392) 
Capital distributions, net — — — — — (65)(65)
Other equity transactions 261 3,353 — — 3,353 — 3,353 
Equity-based compensation expense and related issuances 1,608 26,356 — — 26,356 — 26,356 
Net loss— — — — (38,716)(38,716)(10,786)(49,502)
September 30, 2019 89,664 $581,652 $(21,054)$(137,983)$422,615 $105,766 $528,381 
See accompanying notes to Unaudited Condensed Consolidated Financial Statements
5

ACREAGE HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Attributable to shareholders of the parent
(in thousands)LLC Membership UnitsPubco Shares (as converted)Share CapitalTreasury StockAccumulated DeficitShareholders’ EquityNon-controlling InterestsTotal Equity
December 31, 2019 90,646 $615,678 $(21,054)$(188,617)$406,007 $88,787 $494,794 
Issuances for private placement— 6,085 27,887 — — 27,887 — 27,887 
NCI adjustments for changes in ownership— 113 (6,564)— — (6,564)6,564  
Capital distributions, net— — — — — — (18)(18)
Equity-based compensation expense and related issuances— 586 34,737 — — 34,737 — 34,737 
Net loss— —  — (171,954)(171,954)(50,275)(222,229)
March 31, 2020 97,430 $671,738 $(21,054)$(360,571)$290,113 $45,058 $335,171 
NCI adjustments for changes in ownership3,861 272 977 — — 977 (977) 
Beneficial conversion feature on convertible note (See Note 10)— — 523 — — 523 — 523 
Other equity transactions— — — — — — 44 44 
Equity-based compensation expense and related issuances— 864 20,187 — — 20,187 — 20,187 
Net loss— — — — (37,192)(37,192)(7,178)(44,370)
June 30, 20203,861 98,566 $693,425 $(21,054)$(397,763)$274,608 $36,947 $311,555 
Issuances upon conversion of debenture— 327 550 — — 550 — 550 
NCI adjustments for changes in ownership— 198 1,716 — — 1,716 (1,716) 
Other equity transactions— 212 532 — — 532 — 532 
Equity-based compensation expense and related issuances— 1,443 10,445 — — 10,445 — 10,445 
Net loss— —  — (40,548)(40,548)(7,488)(48,036)
September 30, 20203,861 100,746 $706,668 $(21,054)$(438,311)$247,303 $27,743 $275,046 
See accompanying notes to Unaudited Condensed Consolidated Financial Statements
6

ACREAGE HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30,
(in thousands)20202019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss$(314,635)$(129,571)
Adjustments for:
Depreciation and amortization4,888 5,313 
Equity-settled expenses, including compensation65,901 73,047 
Gain on business divestiture(217) 
(Gain) loss on disposal of capital assets(75)10 
Loss on impairment187,775  
Loss on notes receivable8,161  
Bad debt expense194  
Non-cash interest expense3,754  
Non-cash operating lease expense709 1,064 
Deferred tax benefit(32,141)(407)
Non-cash loss from investments, net195 22 
Write-down of assets held-for-sale11,003  
Change, net of acquisitions in:
Inventory(1,914)(5,346)
Other assets1,110 (3,908)
Interest receivable(1,286)(3,179)
Accounts payable and accrued liabilities7,384 6,477 
Taxes payable9,742 2,279 
Interest payable4,392 (320)
Other liabilities852 (1,184)
Net cash used in operating activities$(44,208)$(55,703)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of capital assets$(7,904)$(32,276)
Investments in notes receivable(14,193)(24,557)
Collection of notes receivable235 3,138 
Cash paid for long-term investments(34,019)(4,158)
Proceeds from business divestiture997  
Proceeds from sale of capital assets1,160 172 
Business acquisitions, net of cash acquired(9,983)(21,205)
Purchases of intangible assets (58,488)
Deferred acquisition costs and deposits 2,076 
Distributions from investments26 137 
Proceeds from purchase of short-term investments 149,828 
Net cash (used in) provided by investing activities$(63,681)$14,667 
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from related party debt$5,000 $ 
Repayment of related party loan(20,000) 
Proceeds from financing129,000  
Deferred financing costs paid(3,317) 
Proceeds from issuance of private placement units, net27,887  
Collateral received from financing agreement22,000  
Settlement of taxes withheld (9,727)
Repayment of debt(10,822)(12,179)
Capital distributions, net (4,363)
Net cash provided by (used in) financing activities$149,748 $(26,269)
Net increase (decrease) in cash, cash equivalents and restricted cash$41,859 $(67,305)
Cash, cash equivalents and restricted cash - Beginning of period26,600 105,038 
Cash, cash equivalents and restricted cash - End of period$68,459 $37,733 
Nine Months Ended September 30,
(in thousands)20202019
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid - non-lease$988 $593 
Income taxes paid867 4,253 
OTHER NON-CASH INVESTING AND FINANCING ACTIVITIES:
Capital assets not yet paid for$5,625 $281 
Issuance of Class D units for land 264 
Issuance of SVS for operating lease 3,353 
Exchange of intangible assets to notes receivable (Note 4)18,800  
Holdback of Maine HSCP notes receivable (Note 6)917  
Promissory note conversion to equity (Note 6)10,087  
Deferred tax liability related to business acquisition (Note 3)3,077 18,377 
Beneficial conversion feature (Note 10)523  
Convertible note conversion550  
Unpaid debt issuance costs4,968  


See accompanying notes to Unaudited Condensed Consolidated Financial Statements
7

ACREAGE HOLDINGS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)

1.    NATURE OF OPERATIONS
Acreage Holdings, Inc. (the “Company”, “Pubco” or “Acreage”) was originally incorporated under the Business Corporations Act (Ontario) on July 12, 1989 as Applied Inventions Management Inc. On August 29, 2014, the Company changed its name to Applied Inventions Management Corp. The Company continued into British Columbia and changed its name to “Acreage Holdings, Inc.” on November 9, 2018. The Company’s Class E subordinate voting shares (“Fixed Shares”) and Class D subordinate voting shares (“Floating Shares”) are listed on the Canadian Securities Exchange under the symbols “ACRG.A.U” and “ACRG.B.U”, respectively, quoted on the OTCQX under the symbols “ACRHF” and “ACRDF”, respectively, and traded on the Frankfurt Stock Exchange under the symbols “0VZ1” and “0VZ2”, respectively. The Company indirectly owns, operates and has contractual relationships with cannabis cultivation facilities, dispensaries and other cannabis-related companies in the United States (“U.S.”).
High Street Capital Partners, LLC, a Delaware limited liability company doing business as “Acreage Holdings” (“HSCP”), was formed on April 29, 2014. The Company became the indirect parent of HSCP on November 14, 2018 in connection with the reverse takeover (“RTO”) transaction described below.
The Company’s principal place of business is located at 450 Lexington Avenue, #3308, New York, New York in the U.S. The Company’s registered and records office address is Suite 2800, Park Place, 666 Burrard Street, Vancouver, British Columbia in Canada.
The RTO transaction

On September 21, 2018, the Company, HSCP, HSCP Merger Corp. (a wholly-owned subsidiary of the Company), Acreage Finco B.C. Ltd. (a special purpose corporation) (“Finco”), Acreage Holdings America, Inc. (“USCo”) and Acreage Holdings WC, Inc. (“USCo2”) entered into a business combination agreement (the “Business Combination Agreement”) whereby the parties thereto agreed to combine their respective businesses, which would result in the RTO of Pubco by the security holders of HSCP, which was deemed to be the accounting acquiror. On November 14, 2018, the parties to the Business Combination Agreement completed the RTO. The RTO transaction is described in detail in Note 1 to the Consolidated Financial Statements of the Company in the Company’s Annual Report on Form 10-K, filed with the SEC on May 29, 2020.
Canopy Growth Corporation transaction

On June 27, 2019, the Company and Canopy Growth Corporation (“Canopy Growth” or “CGC”) implemented the Prior Plan of Arrangement (as defined in Note 13) contemplated by the Original Arrangement Agreement (as defined in Note 13). Pursuant to the Prior Plan of Arrangement, Canopy Growth was granted an option to acquire all of the issued and outstanding shares of the Company in exchange for the payment of 0.5818 of a common share in the capital of Canopy Growth for each Class A subordinate voting share (each, a “SVS”) held (with the Class B proportionate voting shares (the “PVS”) and Class C multiple voting shares (the “MVS”) being automatically converted to SVS immediately prior to consummation of the Acquisition (as defined in Note 13), which original exchange ratio was subject to adjustment in accordance with the Original Arrangement Agreement. Canopy Growth was required to exercise the option upon a change in federal laws in the United States to permit the general cultivation, distribution and possession of marijuana (as defined in the relevant legislation) or to remove the regulation of such activities from the federal laws of the United States (the “Triggering Event”) and, subject to the satisfaction or waiver of certain closing conditions set out in the Original Arrangement Agreement, Canopy Growth was required to acquire all of the issued and outstanding SVS (following the mandatory conversion of the PVS and MVS into SVS).

On June 24, 2020, Canopy Growth and the Company entered into an agreement to, among other things, amend the terms of the Original Arrangement Agreement and the terms of the Prior Plan of Arrangement (the “Amended Arrangement”). On September 16, 2020, the Company’s shareholders voted in favor of a special resolution authorizing and approving the terms of, among other things, the Amended Arrangement. Subsequently, on September 18, 2020, the Company obtained a final order from the Supreme Court of British Columbia approving the Amended Arrangement, and on September 23, 2020 the Company and Canopy Growth entered into the Amending Agreement (as defined in Note 13) and implemented the Amended Arrangement. Pursuant to the Amended Arrangement, the Company’s articles were amended to create the Fixed Shares, the Floating Shares and the Class F multiple voting shares (the “Fixed Multiple Shares”), and each outstanding SVS was exchanged for 0.7 of a Fixed Share and 0.3 of a Floating Share, each outstanding PVS was exchanged for 28 Fixed Shares and 12 Floating Shares, and each outstanding MVS was exchanged for 0.7 of a Fixed Multiple Share and 0.3 of a Floating Share. Please refer to Note 13 for further discussion.

Pursuant to the implementation of the Amended Agreement, on September 23, 2020, a subsidiary of Canopy Growth advanced gross proceeds of $50,000 to Universal Hemp, LLC, an affiliate of the Company. The debenture bears interest at a rate of 6.1% per annum. Please refer to Note 10 for further discussion.
8

ACREAGE HOLDINGS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)

COVID-19

In December 2019, a novel strain of coronavirus (“COVID-19”) emerged in Wuhan, China. Since then, it has spread to other countries and infections have been reported around the world. On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic.

In response to the outbreak, governmental authorities in the United States, Canada and internationally have introduced various recommendations and measures to try to limit the pandemic, including travel restrictions, border closures, non-essential business closures, quarantines, self-isolations, shelters-in-place and social distancing. The COVID-19 outbreak and the response of governmental authorities to try to limit it are having a significant impact on the private sector and individuals, including unprecedented business, employment and economic disruptions. Management has been closely monitoring the impact of COVID-19, with a focus in the health and safety of our employees, business continuity and supporting our communities. We have implemented various measures to reduce the spread of the virus, including implementing social distancing measures at our cultivation facilities, manufacturing facilities, and dispensaries, enhancing cleaning protocols at such facilities and dispensaries and encouraging employees to adhere to preventative measures recommended by local, state, and federal health officials.


2.    SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation and going concern

The Unaudited Condensed Consolidated Financial Statements of Acreage have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments consisting only of normal recurring adjustments necessary for a fair presentation have been reflected in these Unaudited Condensed Consolidated Financial Statements. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2020.

As reflected in the financial statements, the Company had an accumulated deficit as of September 30, 2020, as well as a net loss and net cash used in operating activities for the reporting period then ended. These factors raise substantial doubt about the Company’s ability to continue as a going concern for at least one year from the issuance of these financial statements.

However, management believes that substantial doubt about the Company’s ability to meet its obligations for the next twelve months from the date these financial statements were issued has been alleviated due to, but not limited to, (i) access to future capital commitments, (ii) continued sales growth from our consolidated operations, (iii) latitude as to the timing and amount of certain operating expenses as well as capital expenditures, (iv) restructuring plans that have already been put in place to improve the Company’s profitability (see Note 3), (v) the Standby Equity Distribution Agreement described in Note 13 of the Unaudited Condensed Consolidated Financial Statements and (vi) the anticipated Non-Core Divestitures as described in Note 3.

If the Company is unable to raise additional capital whenever necessary, it may be forced to decelerate or curtail its footprint buildout or other operational activities until such time as additional capital becomes available. Such limitation of the Company’s activities would allow it to slow its rate of spending and extend its use of cash until additional capital is raised. However, management cannot provide any assurances that it will be successful in accomplishing any of the Company’s plans. Management also cannot provide any assurance as to unforeseen circumstances that could occur at any time within the next twelve months or thereafter which could increase the Company’s need to raise additional capital on an immediate basis.

Use of estimates

The preparation of the Company’s Unaudited Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the amounts that are reported in the Unaudited Condensed Consolidated Financial Statements and accompanying disclosures. Although these estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future, actual results may differ from those estimates. Significant estimates inherent in the preparation of the accompanying Unaudited Condensed Consolidated Financial Statements include the fair value of assets acquired and liabilities assumed in business combinations, assumptions relating to equity-based compensation expense, estimated useful lives for property, plant and equipment and
9

ACREAGE HOLDINGS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
intangible assets, the valuation allowance against deferred tax assets and the assessment of potential impairment charges on goodwill, intangible assets and investments in equity and notes receivable.
These interim Unaudited Condensed Consolidated Financial Statements and notes thereto should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 dated May 29, 2020 and the amendment thereto on Form 10-K/A dated August 14, 2020, as filed with the Securities and Exchange Commission (the “2019 Form 10-K”).
Emerging growth company

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies.
Functional and presentation currency

The Unaudited Condensed Consolidated Financial Statements and the accompanying notes are expressed in U.S. dollars. Financial metrics are presented in thousands. Other metrics, such as shares outstanding, are presented in thousands unless otherwise noted.
Basis of consolidation

Our Unaudited Condensed Consolidated Financial Statements include the accounts of Acreage, its subsidiaries and variable interest entities (“VIEs”) where we are considered the primary beneficiary, if any, after elimination of intercompany accounts and transactions. Investments in entities in which the Company has significant influence, but less than a controlling financial interest, are accounted for using the equity method. Our proportionate share of net income or loss of the entity is recorded in Income (loss) from investments, net in the Consolidated Statements of Operations.
The unaudited and audited consolidated financial statements are referred to as the “Financial Statements” herein. The unaudited condensed consolidated statements of operations are referred to as the “Statements of Operations” herein. The unaudited and audited condensed consolidated statements of financial position are referred to as the “Statements of Financial Position” herein. The unaudited condensed consolidated statements of cash flows are referred to as the “Statements of Cash Flows” herein.
Restricted cash

Restricted cash represents funds contractually held for specific purposes (Refer to Note 10) and, as such, not available for general corporate purposes. Cash and restricted cash, as presented on the Statements of Cash Flows, consists of $46,363 and $22,096 as of September 30, 2020, respectively, and $37,638 and $95 as of September 30, 2019, respectively.

Impairment of long-lived assets

Goodwill and indefinite-lived intangible assets are not subject to amortization and are tested for impairment annually or more frequently if events or changes in circumstances indicate that they might be impaired. Goodwill and indefinite-lived intangible assets are tested at the individual business level. The Company may first assess qualitative factors and, if it determines it is more likely than not that the fair value is less than the carrying value, then proceed to a quantitative test if necessary.
Finite-lived intangible assets and other long-lived assets are tested for impairment based on undiscounted cash flows when events or changes in circumstances indicate that the carrying amount may not be recoverable.

Accounting for warrants and convertible notes

The Company determines the accounting classification of warrants it issues, as either liability or equity classified, by first assessing whether the warrants meet liability classification in accordance with ASC 480-10, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, then in accordance with ASC 815-40, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock. Under ASC 480, warrants are considered liability classified if the warrants are mandatorily redeemable, obligate the Company to settle the warrants or the underlying shares by paying cash or other assets, or warrants that must or may require settlement by issuing a variable number of shares.

10

ACREAGE HOLDINGS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
If warrants do not meet the liability classification under ASC 480-10, the Company assesses the requirements under ASC 815-40, which states that contracts that require or may require the issuer to settle the contract for cash are liabilities recorded at fair value, irrespective of the likelihood of the transaction occurring that triggers the net cash settlement feature. If the warrants do not require liability classification under ASC 815-40, and in order to conclude equity classification, the Company also assesses whether the warrants are indexed to its common stock and whether the warrants are classified as equity under ASC 815-40 or other applicable GAAP. After all relevant assessments, the Company concludes whether the warrants are classified as liability or equity. Liability classified warrants require fair value accounting at issuance and subsequent to initial issuance with all changes in fair value after the issuance date recorded in the statements of operations. Equity classified warrants only require fair value accounting at issuance with no changes recognized subsequent to the issuance date.

The Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the difference between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. The debt discounts under these arrangements are amortized over the earlier of (i) the term of the related debt using the straight line method which approximates the interest rate method or (ii) redemption of the debt. The amortization of debt discounts is included as a component of Interest expense in the accompanying Statements of Operations. Refer to Note 10.

Assets held for sale

The Company classifies long-lived assets or disposal groups as held for sale in the period when the following held for sale criteria are met: (i) the Company commits to a plan to sell; (ii) the long-lived asset or disposal group is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such long-lived assets or disposal groups; (iii) an active program to locate a buyer and other actions required to complete the plan to sell have been initiated; (iv) the sale is probable within one year; (v) the asset or disposal group is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and (vi) it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. In accordance with ASC 360-10, Property, Plant and Equipment, long-lived assets and disposal groups classified as held for sale are measured at the lower of their carrying amount or fair value less costs to sell.

Net loss per share

Net loss per share represents the net loss attributable to shareholders divided by the weighted average number of shares outstanding during the period on an as converted basis. Basic and diluted loss per share are the same as of September 30, 2020 and 2019 as the issuance of shares upon conversion, exercise or vesting of outstanding units would be anti-dilutive in each period. There were 44,056 and 41,642 anti-dilutive shares outstanding as of September 30, 2020 and 2019, respectively. Refer to Note 16 for further details.
Accounting Pronouncements Recently Adopted
As of December 2019, the Company early adopted ASU 2017-04 - Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). The objective of ASU 2017-04 is to simplify how an entity is required to test goodwill for impairment. Under previous GAAP, entities were required to test goodwill for impairment using a two-step approach. Under the amendments in ASU 2017-04, an entity performs its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. The adoption of ASU 2017-04 did not have an effect on the Company’s Financial Statements.
Accounting Pronouncements Not Yet Adopted
In June 2016, the FASB issued ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which was subsequently revised by ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-11, ASU 2020-02 and ASU 2020-03. ASU 2016-13 introduces a new model for assessing impairment on most financial assets. Entities will be required to use a forward-looking expected loss model, which will replace the current incurred loss model, which will result in earlier recognition of allowance for losses. As an emerging growth company, the Company has elected to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Securities and Exchange Act of 1934. Accordingly, ASU 2016-13 will be effective for the Company’s first interim period of fiscal 2023, and the Company is currently evaluating the impact of the new standard.

11

ACREAGE HOLDINGS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
3.    ACQUISITIONS, DIVESTITURES AND ASSETS HELD FOR SALE
Acquisitions

During the nine months ended September 30, 2020, the Company completed the following business combination below. The preliminary purchase price allocation is as follows:
Purchase Price AllocationCCF (1)
Assets acquired:
Cash and cash equivalents$17 
Inventory1,969 
Other current assets3,164 
Capital assets, net4,173 
Operating lease ROU assets4,455 
Goodwill5,247 
Intangible assets - cannabis licenses10,000 
Other non-current assets10 
Liabilities assumed:
Accounts payable and accrued liabilities(228)
Taxes payable(17)
Other current liabilities(4,248)
Operating lease liability(4,455)
Fair value of net assets acquired$20,087 
Consideration paid:
Cash$10,000 
Settlement of pre-existing relationship10,087 
Total consideration$20,087 

(1) On June 26, 2020, a subsidiary of the Company acquired 100% of Compassionate Care Foundation, Inc. (“CCF”), a New Jersey vertically integrated medical cannabis nonprofit corporation.

The settlement of pre-existing relationship included in the transaction price includes a $7,952 line of credit as well as interest receivable of $2,135 which were both previously recorded in Notes receivable, non-current in the Statements of Financial Position. The carrying value of these amounts approximated their fair value.
12

ACREAGE HOLDINGS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS