0001762359-23-000072.txt : 20230809 0001762359-23-000072.hdr.sgml : 20230809 20230809171627 ACCESSION NUMBER: 0001762359-23-000072 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 99 CONFORMED PERIOD OF REPORT: 20230630 FILED AS OF DATE: 20230809 DATE AS OF CHANGE: 20230809 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: 231156273 BUSINESS ADDRESS: STREET 1: 366 MADISON AVENUE, 14TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 646-600-9181 MAIL ADDRESS: STREET 1: 366 MADISON AVENUE, 14TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10017 10-Q 1 acrg-20230630.htm 10-Q acrg-20230630
falseDecember 31Q220230001762359http://fasb.org/us-gaap/2023#PropertyPlantAndEquipmentAndFinanceLeaseRightOfUseAssetAfterAccumulatedDepreciationAndAmortizationhttp://fasb.org/us-gaap/2023#PropertyPlantAndEquipmentAndFinanceLeaseRightOfUseAssetAfterAccumulatedDepreciationAndAmortizationhttp://fasb.org/us-gaap/2023#DebtCurrenthttp://fasb.org/us-gaap/2023#DebtCurrenthttp://fasb.org/us-gaap/2023#LongTermDebtNoncurrenthttp://fasb.org/us-gaap/2023#LongTermDebtNoncurrent00017623592023-01-012023-06-300001762359acrg:ClassESubordinateVotingSharesMember2023-08-02xbrli:shares0001762359acrg:ClassDSubordinateVotingSharesMember2023-08-020001762359acrg:ClassFMultipleVotingSharesMember2023-08-0200017623592023-06-30iso4217:USD00017623592022-12-310001762359us-gaap:RetailMember2023-04-012023-06-300001762359us-gaap:RetailMember2022-04-012022-06-300001762359us-gaap:RetailMember2023-01-012023-06-300001762359us-gaap:RetailMember2022-01-012022-06-300001762359acrg:WholesaleMember2023-04-012023-06-300001762359acrg:WholesaleMember2022-04-012022-06-300001762359acrg:WholesaleMember2023-01-012023-06-300001762359acrg:WholesaleMember2022-01-012022-06-300001762359acrg:OtherMember2023-04-012023-06-300001762359acrg:OtherMember2022-04-012022-06-300001762359acrg:OtherMember2023-01-012023-06-300001762359acrg:OtherMember2022-01-012022-06-3000017623592023-04-012023-06-3000017623592022-04-012022-06-3000017623592022-01-012022-06-300001762359acrg:MedfordAndPowellOregonMemberus-gaap:DisposalGroupHeldforsaleNotDiscontinuedOperationsMember2022-01-012022-06-30iso4217:USDxbrli:shares0001762359acrg:HSCPLLCMembershipUnitsMember2021-12-310001762359us-gaap:CommonStockMember2021-12-310001762359us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2021-12-310001762359us-gaap:TreasuryStockCommonMember2021-12-310001762359us-gaap:RetainedEarningsMember2021-12-310001762359us-gaap:ParentMember2021-12-310001762359us-gaap:NoncontrollingInterestMember2021-12-3100017623592021-12-310001762359us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2022-01-012022-03-310001762359us-gaap:ParentMember2022-01-012022-03-310001762359us-gaap:NoncontrollingInterestMember2022-01-012022-03-3100017623592022-01-012022-03-310001762359us-gaap:CommonStockMember2022-01-012022-03-310001762359us-gaap:RetainedEarningsMember2022-01-012022-03-310001762359acrg:HSCPLLCMembershipUnitsMember2022-03-310001762359us-gaap:CommonStockMember2022-03-310001762359us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2022-03-310001762359us-gaap:TreasuryStockCommonMember2022-03-310001762359us-gaap:RetainedEarningsMember2022-03-310001762359us-gaap:ParentMember2022-03-310001762359us-gaap:NoncontrollingInterestMember2022-03-3100017623592022-03-310001762359us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2022-04-012022-06-300001762359us-gaap:ParentMember2022-04-012022-06-300001762359us-gaap:NoncontrollingInterestMember2022-04-012022-06-300001762359us-gaap:CommonStockMember2022-04-012022-06-300001762359us-gaap:RetainedEarningsMember2022-04-012022-06-300001762359acrg:HSCPLLCMembershipUnitsMember2022-06-300001762359us-gaap:CommonStockMember2022-06-300001762359us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2022-06-300001762359us-gaap:TreasuryStockCommonMember2022-06-300001762359us-gaap:RetainedEarningsMember2022-06-300001762359us-gaap:ParentMember2022-06-300001762359us-gaap:NoncontrollingInterestMember2022-06-3000017623592022-06-300001762359acrg:HSCPLLCMembershipUnitsMember2022-12-310001762359us-gaap:CommonStockMember2022-12-310001762359us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2022-12-310001762359us-gaap:TreasuryStockCommonMember2022-12-310001762359us-gaap:RetainedEarningsMember2022-12-310001762359us-gaap:ParentMember2022-12-310001762359us-gaap:NoncontrollingInterestMember2022-12-310001762359srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:RetainedEarningsMember2022-12-310001762359srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:ParentMember2022-12-310001762359srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2022-12-310001762359us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2023-01-012023-03-310001762359us-gaap:ParentMember2023-01-012023-03-310001762359us-gaap:NoncontrollingInterestMember2023-01-012023-03-3100017623592023-01-012023-03-310001762359us-gaap:CommonStockMember2023-01-012023-03-310001762359us-gaap:RetainedEarningsMember2023-01-012023-03-310001762359acrg:HSCPLLCMembershipUnitsMember2023-03-310001762359us-gaap:CommonStockMember2023-03-310001762359us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2023-03-310001762359us-gaap:TreasuryStockCommonMember2023-03-310001762359us-gaap:RetainedEarningsMember2023-03-310001762359us-gaap:ParentMember2023-03-310001762359us-gaap:NoncontrollingInterestMember2023-03-3100017623592023-03-310001762359us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2023-04-012023-06-300001762359us-gaap:ParentMember2023-04-012023-06-300001762359us-gaap:NoncontrollingInterestMember2023-04-012023-06-300001762359us-gaap:CommonStockMember2023-04-012023-06-300001762359us-gaap:RetainedEarningsMember2023-04-012023-06-300001762359acrg:HSCPLLCMembershipUnitsMember2023-06-300001762359us-gaap:CommonStockMember2023-06-300001762359us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2023-06-300001762359us-gaap:TreasuryStockCommonMember2023-06-300001762359us-gaap:RetainedEarningsMember2023-06-300001762359us-gaap:ParentMember2023-06-300001762359us-gaap:NoncontrollingInterestMember2023-06-3000017623592019-06-272019-06-27xbrli:pure0001762359acrg:CommonStockFixedSharesMember2020-09-230001762359acrg:CommonStockFloatingSharesMember2020-09-230001762359acrg:ProportionateVotingSharesFixedSharesMember2020-09-230001762359acrg:ProportionateVotingSharesFloatingSharesMember2020-09-230001762359acrg:FixedMultipleShareMember2020-09-230001762359acrg:FloatingMultipleShareMember2020-09-2300017623592020-09-230001762359acrg:UniversalHempMemberacrg:CanopyGrowthMemberacrg:CanopyGrowthMemberacrg:DebentureMemberacrg:UniversalHempMember2020-09-232020-09-230001762359acrg:UniversalHempMemberacrg:A61SecuredDebentureDue2030Member2023-06-300001762359acrg:AcreageHoldingsMemberacrg:CanopyGrowthAndCanopyUSALLCMember2022-10-242022-10-24utr:Rate0001762359acrg:NortheastPatientsGroupMember2023-01-022023-01-020001762359acrg:NortheastPatientsGroupMember2023-01-0200017623592022-01-012022-12-31acrg:businessacrg:divestiture0001762359acrg:CWGBotanicalsIncMemberus-gaap:DisposalGroupHeldforsaleNotDiscontinuedOperationsMember2023-06-300001762359us-gaap:CustomerRelatedIntangibleAssetsMember2023-06-300001762359us-gaap:CustomerRelatedIntangibleAssetsMember2022-12-310001762359us-gaap:ShortTermDebtMember2023-04-012023-06-300001762359us-gaap:ShortTermDebtMember2022-04-012022-06-300001762359us-gaap:ShortTermDebtMember2023-01-012023-06-300001762359us-gaap:ShortTermDebtMember2022-01-012022-06-300001762359acrg:EquitysecuritiesFVNIMember2023-04-012023-06-300001762359acrg:EquitysecuritiesFVNIMember2022-04-012022-06-300001762359acrg:EquitysecuritiesFVNIMember2023-01-012023-06-300001762359acrg:EquitysecuritiesFVNIMember2022-01-012022-06-300001762359acrg:A610SecuredDebentureDueSeptember2030Member2020-09-2300017623592020-09-232020-09-2300017623592020-09-282020-09-280001762359acrg:UniversalHempMemberacrg:InvestmentPartnershipMemberacrg:ClassBUnitsMember2020-09-280001762359acrg:UniversalHempMemberacrg:InvestmentPartnershipMemberacrg:InvestmentPartnershipMember2020-09-280001762359acrg:PromissoryNotesMember2023-06-300001762359acrg:PromissoryNotesMember2022-12-310001762359acrg:LineOfCreditReceivableMember2023-06-300001762359acrg:LineOfCreditReceivableMember2022-12-310001762359acrg:NotesReceivablePrincipalMember2023-06-300001762359acrg:NotesReceivablePrincipalMember2022-12-310001762359acrg:NotesReceivableAccruedInterestMember2023-06-300001762359acrg:NotesReceivableAccruedInterestMember2022-12-310001762359acrg:PrimeAlternativeTreatmentCenterIncPATCMemberacrg:PrimeAlternativeTreatmentCenterConsultingLLCNHPATCCMember2023-04-012023-04-300001762359acrg:GrownRogueMember2023-05-012023-05-310001762359acrg:PatientCentricMarthasVineyardMember2022-02-012022-02-280001762359us-gaap:LandMember2023-06-300001762359us-gaap:LandMember2022-12-310001762359us-gaap:BuildingMember2023-06-300001762359us-gaap:BuildingMember2022-12-310001762359us-gaap:FurnitureAndFixturesMember2023-06-300001762359us-gaap:FurnitureAndFixturesMember2022-12-310001762359us-gaap:LeaseholdImprovementsMember2023-06-300001762359us-gaap:LeaseholdImprovementsMember2022-12-310001762359us-gaap:ConstructionInProgressMember2023-06-300001762359us-gaap:ConstructionInProgressMember2022-12-310001762359acrg:AssetsRelatedToMichiganOperationsMember2022-06-300001762359acrg:AssetsRelatedToMichiganOperationsMember2022-01-012022-06-30acrg:lease0001762359acrg:A75LoanDue2026Member2023-06-300001762359acrg:A75LoanDue2026Member2022-12-310001762359acrg:A61SecuredDebentureDue2030Member2023-06-300001762359acrg:A61SecuredDebentureDue2030Member2022-12-310001762359acrg:NoteDueDecember2024Member2023-06-300001762359acrg:NoteDueDecember2024Member2022-12-310001762359acrg:PrimeRateCreditFacilitiesDueJanuary2026Member2023-06-300001762359acrg:PrimeRateCreditFacilitiesDueJanuary2026Member2022-12-310001762359acrg:NoteBackedByEmployeeRetentionTaxCreditsMember2023-06-300001762359acrg:NoteBackedByEmployeeRetentionTaxCreditsMember2022-12-310001762359acrg:UniversalHempMemberacrg:CanopyGrowthMemberacrg:CanopyGrowthMemberacrg:DebentureMemberacrg:UniversalHempMember2020-09-230001762359acrg:A11065220CanadaIncMemberacrg:CanopyGrowthMemberacrg:CanopyGrowthMemberacrg:DebentureMember2020-09-230001762359acrg:A11065220CanadaIncMemberacrg:CanopyGrowthMemberacrg:CanopyGrowthMemberacrg:DebentureMember2020-09-232020-09-230001762359acrg:UniversalHempMemberacrg:UniversalHempMember2020-09-282020-09-280001762359acrg:UniversalHempMemberacrg:InvestmentPartnershipMemberacrg:InvestmentPartnershipMemberacrg:ClassBUnitsMember2020-09-280001762359acrg:UniversalHempMemberacrg:ClassAUnitsMemberacrg:InvestmentPartnershipMember2020-09-280001762359acrg:A75LoanDue2026Member2020-09-280001762359acrg:A75LoanDue2026Member2020-09-282020-09-280001762359acrg:SecuritiesPurchaseAgreementMemberus-gaap:ConvertibleDebtMember2020-09-282020-09-2800017623592021-12-162021-12-1600017623592020-11-012020-11-30acrg:payment0001762359acrg:CanwellSettlementPromissoryNoteMember2020-11-012020-11-300001762359acrg:PrimeRateCreditFacilitiesDueJanuary2026Member2021-12-160001762359acrg:PrimeRateCreditFacilitiesDueJanuary2026InitialDrawMember2021-12-160001762359acrg:PrimeRateCreditFacilitiesDueJanuary2026DelayedDrawMember2021-12-160001762359acrg:PrimeRateCreditFacilitiesDueJanuary2026DelayedDrawMember2022-04-012022-04-300001762359acrg:PrimeRateCreditFacilitiesDueJanuary2026DelayedDrawMember2021-12-162021-12-160001762359acrg:PrimeRateCreditFacilitiesDueJanuary2026CommittedAccordionFacilityMember2021-12-160001762359acrg:PrimeRateCreditFacilitiesDueJanuary2026Member2021-12-162021-12-160001762359acrg:PrimeRateCreditFacilitiesDueJanuary2026CommittedAccordionFacilityMember2022-10-240001762359acrg:PrimeRateCreditFacilitiesDueJanuary2026CommittedAccordionFacilityMember2023-01-012023-03-310001762359acrg:PrimeRateCreditFacilitiesDueJanuary2026CommittedAccordionFacilityMember2023-01-010001762359acrg:AmendedCreditFacilityMember2022-10-240001762359acrg:AmendedCreditFacilityMember2023-04-280001762359us-gaap:PrimeMemberacrg:AmendedCreditFacilityMember2022-10-242022-10-240001762359acrg:PrimeRateCreditFacilitiesDueJanuary2026Memberus-gaap:PrimeMemberacrg:AmendedCreditFacilityMember2022-10-242022-10-24acrg:leverage_ratio0001762359acrg:NoteBackedByEmployeeRetentionTaxCreditsMemberacrg:EmployeeRetentionTaxCreditFactoringAgreementMember2023-04-112023-04-110001762359acrg:NoteBackedByEmployeeRetentionTaxCreditsMemberacrg:EmployeeRetentionTaxCreditFactoringAgreementMember2023-04-110001762359acrg:CommonStockFixedSharesMemberacrg:PubcoMember2022-12-310001762359acrg:CommonStockFloatingSharesMemberacrg:PubcoMember2022-12-310001762359us-gaap:TreasuryStockCommonMemberacrg:PubcoMember2022-12-310001762359acrg:TreasuryStockFloatingMemberacrg:PubcoMember2022-12-310001762359us-gaap:CommonClassCMemberacrg:PubcoMember2022-12-310001762359us-gaap:CommonStockMemberacrg:PubcoMember2022-12-310001762359acrg:CommonStockFixedSharesMemberacrg:PubcoMember2023-01-012023-06-300001762359acrg:CommonStockFloatingSharesMemberacrg:PubcoMember2023-01-012023-06-300001762359us-gaap:TreasuryStockCommonMemberacrg:PubcoMember2023-01-012023-06-300001762359acrg:TreasuryStockFloatingMemberacrg:PubcoMember2023-01-012023-06-300001762359us-gaap:CommonClassCMemberacrg:PubcoMember2023-01-012023-06-300001762359us-gaap:CommonStockMemberacrg:PubcoMember2023-01-012023-06-300001762359acrg:CommonStockFixedSharesMemberacrg:PubcoMember2023-06-300001762359acrg:CommonStockFloatingSharesMemberacrg:PubcoMember2023-06-300001762359us-gaap:TreasuryStockCommonMemberacrg:PubcoMember2023-06-300001762359acrg:TreasuryStockFloatingMemberacrg:PubcoMember2023-06-300001762359us-gaap:CommonClassCMemberacrg:PubcoMember2023-06-300001762359us-gaap:CommonStockMemberacrg:PubcoMember2023-06-300001762359acrg:WarrantFixedSharesMember2022-12-310001762359acrg:WarrantFloatingSharesMember2022-12-310001762359acrg:WarrantFixedSharesMember2023-01-012023-06-300001762359acrg:WarrantFloatingSharesMember2023-01-012023-06-300001762359acrg:WarrantFixedSharesMember2023-06-300001762359acrg:WarrantFloatingSharesMember2023-06-300001762359acrg:WarrantFixedSharesMembersrt:MinimumMember2023-06-300001762359acrg:WarrantFixedSharesMembersrt:MaximumMember2023-06-300001762359acrg:WarrantFloatingSharesMembersrt:MinimumMember2023-06-300001762359srt:MaximumMemberacrg:WarrantFloatingSharesMember2023-06-300001762359acrg:HSCPLLCMember2023-06-300001762359acrg:HSCPLLCMember2022-12-310001762359acrg:HSCPUSCo2Memberacrg:HSCPLLCMember2023-06-300001762359acrg:HSCPUSCo2Memberacrg:HSCPLLCMember2022-12-310001762359acrg:HSCPLLCMember2023-04-012023-06-300001762359acrg:HSCPLLCMember2022-04-012022-06-300001762359acrg:HSCPLLCMember2023-01-012023-06-300001762359acrg:HSCPLLCMember2022-01-012022-06-300001762359acrg:ACRGOmnibusIncentivePlanMember2023-01-012023-06-300001762359acrg:ACRGOmnibusIncentivePlanMember2023-06-300001762359acrg:RestrictedStockUnitsFixedMember2022-12-310001762359acrg:RestrictedStockUnitsFloatingMember2022-12-310001762359acrg:RestrictedStockUnitsFixedMember2023-01-012023-06-300001762359acrg:RestrictedStockUnitsFloatingMember2023-01-012023-06-300001762359acrg:RestrictedStockUnitsFixedMember2023-06-300001762359acrg:RestrictedStockUnitsFloatingMember2023-06-300001762359us-gaap:RestrictedStockUnitsRSUMember2023-01-012023-06-300001762359us-gaap:RestrictedStockUnitsRSUMember2023-04-012023-06-300001762359us-gaap:RestrictedStockUnitsRSUMember2022-04-012022-06-300001762359us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-06-300001762359us-gaap:RestrictedStockUnitsRSUMember2023-06-300001762359acrg:ShareBasedPaymentArrangementOptionFixedMember2022-12-310001762359acrg:ShareBasedPaymentArrangementOptionFloatingMember2022-12-310001762359acrg:ShareBasedPaymentArrangementOptionFixedMember2023-01-012023-06-300001762359acrg:ShareBasedPaymentArrangementOptionFloatingMember2023-01-012023-06-300001762359acrg:ShareBasedPaymentArrangementOptionFixedMember2023-06-300001762359acrg:ShareBasedPaymentArrangementOptionFloatingMember2023-06-300001762359us-gaap:EmployeeStockOptionMember2023-01-012023-06-300001762359srt:MinimumMemberus-gaap:EmployeeStockOptionMember2023-01-012023-06-300001762359srt:MaximumMemberus-gaap:EmployeeStockOptionMember2023-01-012023-06-300001762359us-gaap:EmployeeStockOptionMember2023-04-012023-06-300001762359us-gaap:EmployeeStockOptionMember2022-04-012022-06-300001762359us-gaap:EmployeeStockOptionMember2022-01-012022-06-30acrg:line_of_credit00017623592019-06-19acrg:company0001762359acrg:CanopyGrowthMember2020-09-232020-09-230001762359acrg:AcreageHoldingsMemberacrg:CanopyGrowthAndCanopyUSALLCMemberacrg:AmendedCreditFacilityMember2022-10-250001762359acrg:AcreageHoldingsMemberacrg:CanopyGrowthAndCanopyUSALLCMemberacrg:AmendedCreditFacilityMember2022-10-252022-10-250001762359acrg:CanopyGrowthCorporationMemberacrg:CurrentAndFormerUnitHoldersMemberacrg:CanopyGrowthAndCanopyUSALLCMember2022-10-242022-10-240001762359acrg:CanopyGrowthCorporationMemberacrg:DirectorsOfficersAndConsultantsMemberacrg:HighStreetCapitalPartnersLLCHSCPMember2022-10-242022-10-240001762359acrg:CanopyGrowthCorporationMemberacrg:DirectorsOfficersAndConsultantsMemberacrg:HighStreetCapitalPartnersLLCHSCPMember2022-10-240001762359acrg:CurrentHoldersMemberacrg:CanopyGrowthCorporationMemberacrg:TaxReceivableAgreementMemberacrg:HighStreetCapitalPartnersLLCHSCPMember2022-11-042022-11-040001762359acrg:CurrentHoldersMemberacrg:CanopyGrowthCorporationMemberacrg:TaxReceivableAgreementMemberacrg:HighStreetCapitalPartnersLLCHSCPMember2023-03-172023-03-170001762359acrg:CanopyGrowthCorporationMemberacrg:TaxReceivableAgreementEligibleParticipantsMemberacrg:CanopyGrowthAndCanopyUSALLCMember2022-10-242022-10-240001762359acrg:A11065220CanadaIncMemberacrg:CanopyGrowthMemberacrg:CanopyGrowthMember2020-09-2300017623592022-10-012022-12-310001762359acrg:CanwellSettlementPromissoryNoteMember2020-11-012023-06-300001762359acrg:NewYorkOutstandingLitigationMember2018-11-022018-11-02acrg:defendant0001762359acrg:AlfredsFinestIncMember2023-06-222023-06-220001762359acrg:A610SecuredDebentureDueSeptember2030Member2023-06-300001762359us-gaap:RelatedPartyMemberacrg:A610SecuredDebentureDueSeptember2030Member2023-04-012023-06-300001762359us-gaap:RelatedPartyMemberacrg:A610SecuredDebentureDueSeptember2030Member2023-01-012023-06-300001762359acrg:UniversalHempMemberacrg:InvestmentPartnershipMemberacrg:ClassBUnitsMemberacrg:MBMelodyLPMember2020-09-280001762359acrg:UniversalHempMemberacrg:InvestmentPartnershipMember2020-09-280001762359acrg:ViridescentRealtyTrustIncMemberacrg:AmendedCreditFacilityMember2022-10-240001762359acrg:ViridescentRealtyTrustIncMemberacrg:PrimeRateCreditFacilitiesDueJanuary2026Member2021-12-160001762359acrg:ViridescentRealtyTrustIncMemberacrg:PrimeRateCreditFacilitiesDueJanuary2026InitialDrawMember2021-12-160001762359acrg:PrimeRateCreditFacilitiesDueJanuary2026Memberacrg:ThirdPartySyndicatedAffiliatesMember2021-12-160001762359acrg:ViridescentRealtyTrustIncMemberacrg:PrimeRateCreditFacilitiesDueJanuary2026Memberus-gaap:RelatedPartyMember2023-01-012023-06-30acrg:segment0001762359acrg:FixedWarrantsMember2023-01-012023-06-300001762359acrg:FloatingWarrantsMember2023-01-012023-06-300001762359acrg:RestrictedStockUnitsFixedMember2023-01-012023-06-300001762359acrg:RestrictedStockUnitsFloatingMember2023-01-012023-06-300001762359acrg:ShareBasedPaymentArrangementOptionFixedMember2023-01-012023-06-300001762359acrg:ShareBasedPaymentArrangementOptionFloatingMember2023-01-012023-06-300001762359acrg:NonControllingInterestConvertibleUnitsMember2023-01-012023-06-300001762359acrg:FixedWarrantsMember2022-01-012022-06-300001762359acrg:FloatingWarrantsMember2022-01-012022-06-300001762359acrg:RestrictedStockUnitsFixedMember2022-01-012022-06-300001762359acrg:RestrictedStockUnitsFloatingMember2022-01-012022-06-300001762359acrg:ShareBasedPaymentArrangementOptionFixedMember2022-01-012022-06-300001762359acrg:ShareBasedPaymentArrangementOptionFloatingMember2022-01-012022-06-300001762359acrg:NonControllingInterestConvertibleUnitsMember2022-01-012022-06-30


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 June 30, 2023

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.)
366 Madison Ave, 14th floor
New YorkNew York10017
(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 if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes o No x

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
Non-accelerated filer
o
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

The Company has three classes of issued and outstanding shares: the Class E subordinate voting shares (the “Fixed Shares”), the Class D subordinate voting shares (the “Floating Shares”) and the Class F multiple voting shares (the “Fixed Multiple Shares”). The Fixed Shares and Floating Shares each entitle the holders to notice of and to attend at any meeting of the shareholders of the Company, except a meeting of which only holders of another particular class or series of shares of the Company have the right to vote. Each Fixed Share is entitled to one vote per Fixed Share, each Floating Share is entitled to one vote per Floating Share and each Fixed Multiple Share is entitled to 4,300 votes per Fixed Multiple Share on all matters upon which the holders of shares are entitled to vote. As of August 2, 2023, there were 80,652,047 Fixed shares, 34,274,128 Floating Shares, and 117,600 Fixed Multiple Shares, in each case, issued and outstanding.




























TABLE OF CONTENTS
Acreage Holdings, Inc.
Form 10-Q
For the Three and Six Months Ended June 30, 2023
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.















PART I
Item 1. Financial Statements and Supplementary Data.
ACREAGE HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in thousands)June 30, 2023December 31, 2022
(unaudited)(audited)
ASSETS
Cash and cash equivalents$16,401 $24,067 
Restricted cash13,628  
Accounts receivable, net8,953 10,512 
Inventory47,938 49,446 
Notes receivable, net 29,191 
Assets held-for-sale1,788  
Other current assets5,418 4,977 
Total current assets94,126 118,193 
Long-term investments33,287 34,046 
Capital assets, net136,085 133,405 
Operating lease right-of-use assets19,067 22,443 
Intangible assets, net35,124 35,124 
Goodwill38,694 13,761 
Other non-current assets3,531 3,601 
Total non-current assets265,788 242,380 
TOTAL ASSETS$359,914 $360,573 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable and accrued liabilities$31,078 $29,566 
Taxes payable33,959 24,226 
Interest payable2,824 2,575 
Operating lease liability, current2,268 2,443 
Debt, current13,805 1,584 
Liabilities related to assets held for sale1,288  
Other current liabilities9,071 11,939 
Total current liabilities94,293 72,333 
Debt, non-current230,163 213,496 
Operating lease liability, non-current18,839 21,692 
Deferred tax liability10,620 9,623 
Other liabilities3,004 3,250 
Total non-current liabilities262,626 248,061 
TOTAL LIABILITIES356,919 320,394 
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements
F-1

ACREAGE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Commitments and contingencies
Common stock, no par value - unlimited authorized, 113,203 and 112,437 issued and outstanding, respectively
  
Additional paid-in capital758,702 760,529 
Treasury stock, 842 common stock held in treasury
(21,054)(21,054)
Accumulated deficit(709,204)(678,091)
Total Acreage Shareholders' equity28,444 61,384 
Non-controlling interests(25,449)(21,205)
TOTAL EQUITY2,995 40,179 
TOTAL LIABILITIES AND EQUITY$359,914 $360,573 
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements
F-2

ACREAGE HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended June 30,Six Months Ended June 30,
(in thousands, except per share amounts)2023202220232022
REVENUE
Retail revenue, net$44,913 $46,685 $86,794 $88,112 
Wholesale revenue, net13,202 14,360 27,200 29,532 
Other revenue, net 306 84 586 
Total revenues, net58,115 61,351 114,078 118,230 
Cost of goods sold, retail(23,484)(23,466)(43,898)(44,234)
Cost of goods sold, wholesale(13,509)(7,271)(22,473)(13,872)
Total cost of goods sold(36,993)(30,737)(66,371)(58,106)
Gross profit21,122 30,614 47,707 60,124 
OPERATING EXPENSES
General and administrative7,073 8,922 17,585 17,309 
Compensation expense13,203 12,579 25,406 26,774 
Equity-based compensation expense694 1,655 1,678 5,814 
Marketing656 964 1,400 1,661 
Impairments, net 329  2,467 
Write down of assets held-for-sale3,557  3,557 874 
Legal recoveries (310) (335)
Depreciation and amortization994 3,165 1,991 4,972 
Total operating expenses26,177 27,304 51,617 59,536 
Net operating income (loss)$(5,055)$3,310 $(3,910)$588 
Income (loss) from investments, net322 (996)(20)137 
Interest income (loss) from loans receivable(6)365 10 782 
Interest expense(8,862)(5,520)(16,936)(10,301)
Other income (loss), net1,355 286 (198)276 
Total other loss(7,191)(5,865)(17,144)(9,106)
Loss before income taxes$(12,246)$(2,555)$(21,054)$(8,518)
Income tax expense(5,994)(8,048)(13,343)(15,996)
Net loss$(18,240)$(10,603)$(34,397)$(24,514)
Less: net loss attributable to non-controlling interests(2,084)(674)(3,651)(1,891)
Net loss attributable to Acreage Holdings, Inc.$(16,156)$(9,929)$(30,746)$(22,623)
Net loss per share attributable to Acreage Holdings, Inc. - basic and diluted:$(0.14)$(0.09)
(1)
$(0.27)$(0.21)
Weighted average shares outstanding - basic and diluted112,810 108,230 
(1)
112,679 107,569 

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements
F-3

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, 20213,861 106,903 $756,536 $(21,054)$(538,215)$197,267 $7,003 $204,270 
NCI adjustments for changes in ownership— — 5 — — 5 (5) 
Equity-based compensation expense and related issuances— 508 4,159 — — 4,159 — 4,159 
Net loss— — — — (12,694)(12,694)(1,217)(13,911)
March 31, 20223,861 107,411 $760,700 $(21,054)$(550,909)$188,737 $5,781 $194,518 
NCI adjustments for changes in ownership— — (4,524)— — (4,524)4,524  
Capital distributions, net— — — — — — (5,534)(5,534)
Equity-based compensation expense and related issuances— 1,778 1,655 — — 1,655 — 1,655 
Net loss— — — — (9,929)(9,929)(674)(10,603)
June 30, 20223,861 109,189 $757,831 $(21,054)$(560,838)$175,939 $4,097 $180,036 

Attributable to shareholders of the parent
(in thousands)LLC Membership UnitsPubco Shares (as converted)Share CapitalTreasury StockAccumulated DeficitShareholders’ EquityNon-controlling InterestsTotal Equity
December 31, 20223,861 112,437 $760,529 $(21,054)$(678,091)$61,384 $(21,205)$40,179 
Cumulative effect of change in accounting principle for current expected credit losses, net of tax— — — (367)(367)— (367)
NCI adjustments for changes in ownership— — 14 — — 14 (14) 
Equity-based compensation expense and related issuances— 287 984 — — 984 — 984 
Net loss— — — — (14,590)(14,590)(1,567)(16,157)
March 31, 20233,861 112,724 $761,527 $(21,054)$(693,048)$47,425 $(22,786)$24,639 
NCI adjustments for changes in ownership— — (3,389)— — (3,389)3,389  
Capital distributions, net— — — — — — (3,968)(3,968)
Other equity transactions— — (130)— — (130)— (130)
Equity-based compensation expense and related issuances— 479 694 — — 694 — 694 
Net loss— — — — (16,156)(16,156)(2,084)(18,240)
June 30, 20233,861 113,203 $758,702 $(21,054)$(709,204)$28,444 $(25,449)$2,995 



See accompanying Notes to Unaudited Condensed Consolidated Financial Statements
F-4

ACREAGE HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30,
(in thousands)20232022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss$(34,397)$(24,514)
Adjustments for:
Depreciation and amortization1,991 4,972 
Depreciation and amortization included in COGS8,935 2,877 
Equity-based compensation expense1,678 5,814 
Gain on business divestiture (290)
Loss on disposal of capital assets 49 
Loss on impairment 2,467 
Bad debt expense339 14 
Non-cash interest expense2,457 1,470 
Non-cash operating lease expense(112)(55)
Loss on lease termination(200)338 
Deferred tax income(18)(791)
Non-cash loss from investments, net759 552 
Write-down of assets held-for-sale3,557 874 
Change, net of acquisitions in:
Accounts receivable, net6,068 (2,304)
Inventory(5,194)(10,460)
Other assets(469)(197)
Interest receivable(360)(782)
Accounts payable and accrued liabilities(5,670)(2,331)
Taxes payable8,540 (3,246)
Interest payable249 2,022 
Other liabilities(3,260)55 
Net cash used in operating activities$(15,107)$(23,466)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of capital assets$(3,232)$(11,876)
Collection of notes receivable2,000 5,999 
Business acquisitions, net of cash acquired516  
Purchases of intangible assets (900)
Distributions from investments 689 
Cash paid for short-term investment (3,400)
Net cash used in investing activities$(716)$(9,488)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from financing (refer to Note 14 for related party financing)$27,121 $25,000 
Deferred financing costs paid(500)(511)
Repayment of debt(868)(938)
Capital distributions - non-controlling interests(3,968)(5,534)
Net cash provided by financing activities$21,785 $18,017 
Net increase (decrease) in cash, cash equivalents, restricted cash, and cash held for sale$5,962 $(14,937)
Cash, cash equivalents, restricted cash, and cash held for sale - Beginning of period24,067 44,501 
Cash, cash equivalents, restricted cash, and cash held for sale - End of period$30,029 $29,564 
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements
F-5

ACREAGE HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
RECONCILIATION OF CASH FLOW INFORMATION:
Cash and cash equivalents$16,401 $29,235 
Restricted cash13,628 95 
Cash held for sale$ $234 
Total cash, cash equivalents, restricted cash, and cash held for sale at end of period$30,029 $29,564 

Six Months Ended June 30,
(in thousands)20232022
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid - non-lease$14,222 $5,586 
Income taxes paid4,280 21,476 
OTHER NON-CASH INVESTING AND FINANCING ACTIVITIES:
Capital assets not yet paid for$3,729 $5,505 
Non-cash proceeds from business divestiture 2,000 
Non-cash proceeds from finance lease 5,785 
Reclassification of assets held-for-sale to in-use  
Cumulative effect of change in accounting principle for current expected credit losses, net of tax121  
NCI adjustments for changes in ownership(14) 


See accompanying Notes to Unaudited Condensed Consolidated Financial Statements
F-6

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”) is a vertically integrated, multi-state operator in the United States (“U.S.”) cannabis industry and has contractual relationships with cannabis cultivation facilities, dispensaries and other cannabis-related companies in the U.S. The Company’s operations include (i) cultivating and processing cannabis plants, (ii) manufacturing branded consumer products, (iii) distributing cannabis flower and manufactured products, and (iv) retailing dosable cannabis products to consumers. The Company’s products appeal to medical and adult recreational use customers through brand strategies intended to build trust and loyalty. 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.
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 366 Madison Ave, 14th floor, 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.
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. Pursuant to the Amended Arrangement, Canopy Growth was granted the option to acquire all of the issued and outstanding Fixed Shares on the basis of 0.3048 (the “Fixed Exchange Ratio”) of a common share of Canopy Growth (each, a “Canopy Share”) for each Fixed Share held at the time of the acquisition of the Fixed Shares (the “Acquisition” or “Acquisition Time”), subject to
F-7

ACREAGE HOLDINGS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
adjustment in accordance with the terms of the Amended Arrangement (the “Canopy Call Option”), which Canopy Growth is required to exercise upon the occurrence, or waiver (at the discretion of Canopy Growth), of 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 the date on which the Triggering Event occurs, the “Triggering Event Date”). Refer to Note 13 for further discussion.
Pursuant to the implementation of the Amended Arrangement, 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. Refer to Note 10 for further discussion.
On October 24, 2022, the Company entered into an arrangement agreement (the “Floating Share Agreement”) with Canopy Growth and Canopy USA, LLC (“Canopy USA”), Canopy Growth’s newly-created U.S. domiciled holding company, pursuant to which, subject to approval of the holders of the Class D subordinate voting shares of Acreage (the “Floating Shares”) and the terms and conditions of the Floating Share Agreement, Canopy USA will acquire all of the issued and outstanding Floating Shares by way of court-approved plan of arrangement (the “Floating Share Arrangement”) for consideration of 0.4500 of a common share of Canopy Growth (each whole share a “Canopy Share”) in exchange for each Floating Share. On March 15, 2023, the Company received the required approval of the holders of Floating Shares in connection with the Floating Share Arrangement at its special meeting of holders of Floating Shares. On March 21, 2023, the Corporation obtained a final order form from the Supreme Court of British Columbia approving the Floating Share Arrangement. Upon the satisfaction or waiver of all other conditions set out in the Floating Share Arrangement Agreement, which the parties continue to work towards, the parties will complete the Floating Share Arrangement. Refer to Note 13 for further discussion.
2.    SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation and going concern

The accompanying unaudited condensed consolidated financial statements 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, 2023, or any other period.

As reflected in the unaudited condensed consolidated financial statements, the Company had an accumulated deficit as of June 30, 2023, as well as a net loss and negative cash flow from operating activities for the six months ended June 30, 2023. 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 are issued, can be mitigated by, but not limited to, (i) expected long-term sales growth from the Company’s consolidated operations, (ii) latitude as to the timing and amount of certain operating expenses as well as capital expenditures, (iii) expense reduction plans that have already been put in place to improve the Company’s results, (iv) access to the U.S. and Canadian public equity markets.

If the Company is unable to raise additional capital whenever necessary, it may be forced to decelerate or curtail its footprint build-out 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 the Company will be successful in accomplishing any of its 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.

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 year ended December 31, 2022, dated May 1, 2023, as filed with the Securities and Exchange Commission (the “2022 Form 10-K”).

F-8

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

Preparation of financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities as of the dates presented and the reported amounts of revenues and expenses during the periods presented. Actual results could 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 intangible assets, the valuation allowance against deferred tax assets and the assessment of potential charges on goodwill, intangible assets and investments in equity and notes receivable.
Emerging growth company
The Company is 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

The Company’s unaudited condensed consolidated financial statements include the accounts of Acreage, its subsidiaries and variable interest entities (“VIEs”) where the Company is considered the primary beneficiary, if any, after elimination of intercompany accounts and transactions. Investments in business entities in which Acreage lacks control but is able to exercise significant influence over operating and financial policies are accounted for using the equity method. The Company’s proportionate share of net income or loss of the entity is recorded in Loss from investments, net in the Unaudited Condensed Consolidated Statements of Operations.
Non-controlling interests (“NCI”)

Non-controlling interests represent ownership interests in consolidated subsidiaries by parties that are not shareholders of Pubco. They are shown as a component of Total equity in the Unaudited Condensed Consolidated Statements of Financial Position, and the share of loss attributable to non-controlling interests is shown as a component of Net loss in the Unaudited Condensed Consolidated Statements of Operations. Changes in the parent company’s ownership that do not result in a loss of control are accounted for as equity transactions.
Cash and cash equivalents

The Company defines cash equivalents as highly liquid investments held for the purpose of meeting short-term cash commitments that are readily convertible into known amounts of cash, with original maturities of three months or less. The Company maintains cash with various U.S. banks and credit unions with balances in excess of the Federal Deposit Insurance Corporation and National Credit Union Share Insurance Fund limits, respectively. The failure of a bank or credit union where the Company has significant deposits could result in a loss of a portion of such cash balances in excess of the insured limit, which could materially and adversely affect the Company’s business, financial condition, results of operations and the market price of the Company’s Fixed Shares and Floating Shares. Cash and cash equivalents belonging to entities the Company has classified as held-for-sale have been reclassified to Assets held-for-sale on the Unaudited Condensed Consolidated Statements of Financial Position. Refer to Note 3 for further discussion.
Restricted cash
Restricted cash represents funds contractually held for specific purposes and, as such, not available for general corporate purposes.
Cash and restricted cash, as presented on the Unaudited Condensed Consolidated Statements of Cash Flows, consists of $16,401 and $13,628 as of June 30, 2023, respectively, and $29,235 and $95 as of June 30, 2022, respectively.
F-9

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

Accounts receivable and notes receivable valuations

The Company reports accounts receivable at their net realizable value, which is management’s best estimate of the cash that will ultimately be received from customers. The Company's notes receivable represent notes due from various third parties. The Company maintains an allowance for expected credit losses to reflect the expected uncollectability of accounts receivable and notes receivable based on historical collection data and specific risks identified among uncollected accounts, as well as management’s expectation of future economic conditions. The Company also considers relevant qualitative and quantitative factors to assess whether historical loss experience should be adjusted to better reflect the risk characteristics of the companies receivables and the expected future losses. If current or expected future economic trends, events, or changes in circumstances indicate that specific receivable balances may be impaired, further consideration is given to the collectability of those balances and the allowance is adjusted accordingly. Trade accounts receivable and notes receivable are written off after exhaustive collection efforts occur and the receivable is deemed uncollectible. As of June 30, 2023, the Company’s allowance for doubtful accounts was $373, all of which relates to the allowance for credit losses over accounts receivable. As of June 30, 2023, the allowance on loans receivable was $15,095, of which the allowance for credit losses over notes receivable was nil as the receivables were fully reserved for. Refer to Note 6 for further discussion.

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 June 30, 2023, 2022 and 2021, as the issuance of shares upon conversion, exercise or vesting of outstanding units would be anti-dilutive in each period. There were 46,243 and 37,472 anti-dilutive shares outstanding as of June 30, 2023 and 2022, respectively.
Accounting Pronouncements Recently Adopted
As of January 1, 2023, the Company adopted 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 and ASU 2020-02. This standard applies to financial assets, measured at amortized cost, including loans, held-to-maturity debt securities, net investments in leases and trade accounts receivable. The guidance must be adopted using a modified retrospective transition method through a cumulative-effect adjustment to retained earnings in the period of adoption. The adoption of ASU 2016-13 did not have a material effect on the Company’s unaudited condensed consolidated financial statements.

Accounting Pronouncements Not Yet Adopted
In October 2021, the FASB issued ASU 2021-08 - Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The new standard improves the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency. The new standard requires an entity to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606 - Revenue from Contracts with Customers. The ASU will be effective for the Company’s first interim period of fiscal 2024. The standard should be applied prospectively to business combinations occurring on or after the effective date of the amendments. The Company does not anticipate a material impact on the Company’s unaudited condensed consolidated financial statements upon adoption.
F-10

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

On January 2, 2023, a subsidiary of the Company acquired cultivation, processing and retail operations in Maine from a third party who provided cultivation, manufacturing, processing, distribution and handling, recordkeeping, compliance, and other services to the Company’s operations in Maine. Under the terms of the agreement, the consideration paid consisted of the settlement of a pre-existing relationship, which included a line-of credit, other advances and the related interest receivable, all totaling $27,691, which were previously recorded in Notes receivable, net on the Statements of Financial Position.
The purchase price allocation is based upon preliminary valuations, estimates and assumptions which are subject to change within the measurement period, generally one year from the acquisition date. The primary areas of the purchase price allocation that are not yet finalized relate to the valuation of the capital assets, tangible assets acquired and the residual goodwill resulting from the transaction.
Purchase Price AllocationNortheast Patients Group
Assets acquired:
Cash and cash equivalents$516 
Inventory384 
Other current assets5,580 
Capital assets2,404 
Operating lease right-of-use asset1,695 
Goodwill24,933 
Liabilities assumed:
Accounts payable and accrued liabilities(3,679)
Taxes payable(1,112)
Operating lease liability, current(160)
Operating lease liability, non-current(1,844)
Notes payable(11)
Deferred tax liability(1,015)
Fair value of net assets acquired$27,691 
Consideration paid:
Settlement of pre-existing relationship27,691 
Total consideration$27,691 
During the year ended December 31, 2022, the Company did not complete any business acquisitions.
Divestitures
During the three and six months ended June 30, 2023 and 2022, the Company did not complete any divestitures.
Assets Held for Sale
The Company determined certain businesses and assets met the held-for-sale criteria. As such, the related assets and liabilities within these disposal groups were transferred into Assets held-for-sale and Liabilities related to assets held for sale on the Unaudited Condensed Consolidated Statements of Financial Position.

The tables below present the assets and liabilities classified as held for sale on the Unaudited Condensed Consolidated Statements of Financial Position as of June 30, 2023, and are subject to change based on developments during the sales process. As of December 31, 2022, the Company did not have any business or assets that met the held-for-sale criteria.

F-11

ACREAGE HOLDINGS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
June 30, 2023
CWG
Cash165 
Accounts receivable, net53 
Inventory685 
Other current assets64 
Total current assets classified as held-for-sale967 
Capital assets, net471 
Operating lease right-of-use assets310 
Non-current assets40 
Total assets classified as held for sale1,788 
Accounts payable and accrued liabilities(242)
Taxes payable81 
Operating lease liability, current(271)
Total current liabilities classified as held-for-sale(432)
Operating lease liability, non-current(856)
Total liabilities classified as held-for-sale(1,288)
The Company determined certain businesses and assets met the held-for-sale criteria. Upon classification of the disposal groups as held for sale, the Company tested each disposal group for impairment and recognized charges of $3,557 within Write down of assets held-for-sale on the Unaudited Condensed Consolidated Statements of Operations related to CWG for three and six months ended June 30, 2023, respectively. Additionally, all assets and liabilities determined within these disposal groups were transferred into Assets held-for-sale and Liabilities related to assets held for sale on the Consolidated Statements of Financial Position as of June 30, 2023

During the three and six months ended June 30, 2022, the Company recognized a write down of assets held-for-sale of $874 related to its Oregon operations within Write down of assets held-for-sale on the Unaudited Condensed Consolidated Statements of Operations.

F-12

ACREAGE HOLDINGS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
4.    INTANGIBLE ASSETS AND GOODWILL
Intangible assets
The following table details the intangible asset balances by major asset classes:
IntangiblesJune 30, 2023December 31, 2022
Finite-lived intangible assets:
Customer relationships1,000 1,000 
Total finite-lived intangible assets1,000 1,000 
Accumulated amortization on finite-lived intangible assets:
Customer relationships(1,000)(1,000)
Total accumulated amortization on finite-lived intangible assets(1,000)(1,000)
Finite-lived intangible assets, net  
Indefinite-lived intangible assets
Cannabis licenses35,124 35,124 
Total intangibles, net$35,124 $35,124 
During the year ended December 31, 2022, the Company amended the purchase price allocation related to its acquisition of certain Ohio operations based upon final valuations within the measurement period. As a result, $17,000 was re-allocated from Goodwill to Intangible assets, net on the Unaudited Condensed Consolidated Statements of Financial Position.

There was no amortization expense recorded for the six months ended June 30, 2023. Amortization expense associated with the Company’s intangible assets was $296 and $992 for the three and six months ended June 30, 2022, respectively.
Goodwill
The following table details the changes in the carrying amount of goodwill:
GoodwillTotal
December 31, 2022$13,761 
Acquisitions24,933 
June 30, 2023$38,694 
During the six months ended June 30, 2023, the Company recognized $24,933 of goodwill based on the preliminary purchase price allocation related to the acquisition of Northeast Patients Group. Refer to Note 3 for further discussion.
5.    INVESTMENTS
The carrying values of the Company’s investments in the Unaudited Condensed Consolidated Statements of Financial Position as of June 30, 2023 and December 31, 2022 are as follows:
InvestmentsJune 30, 2023December 31, 2022
Investments held at FV-NI$33,287 $34,046 
Total long-term investments$33,287 $34,046 
F-13

ACREAGE HOLDINGS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
Loss from investments, net in the Unaudited Condensed Consolidated Statements of Operations during the three and six months ended June 30, 2023 and 2022 is as follows:
Investment income (loss)Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Short-term investments$ $2 $ $3 
Investments held at FV-NI322 (998)(20)134 
Income (loss) from investments, net$322 $(996)$(20)$137 
Investments held at FV-NI
The Company has investments in equity of other companies that do not result in significant influence or control. These investments are carried at fair value, with gains and losses recognized in the Unaudited Condensed Consolidated Statements of Operations.
As further described under the “6.10% Secured debenture due September 2030” in Note 10, on September 23, 2020, a subsidiary of the Company, Universal Hemp, LLC ("Universal Hemp") was advanced gross proceeds of $50,000 (less transaction costs) pursuant to the terms of a secured debenture. The Company subsequently engaged an investment advisor, which under the investment advisor's sole discretion, on September 28, 2020 invested $34,019 of these proceeds on behalf of Universal Hemp. As a result, Universal Hemp acquired 34,019 class B units, at $1 par value per unit, which represented 100% financial interest in an Investment Partnership, a Canada-based limited partnership. An affiliate of the institutional investor holds Class A units of the Investment Partnership. The general partner of the Investment Partnership is also an affiliate of the Institutional Investor. The Class B units are held by the Investment Advisor as an agent for Universal Hemp.
Universal Hemp, through its investment with the Investment Advisor, was originally determined to hold significant influence in the Investment Partnership in accordance with ASC 810 due to (1) the economic financial interest, and (2) the entitlement to matters as they pertain to ‘Extraordinary Resolution’ items as defined within the Investment Partnership Agreement. As a result, the Company accounted for the investment in the Investment Partnership under the equity method until December 2020. Refer to Note 10 for further discussion. In December 2020, the Company no longer held significant influence due to the removal of the Extraordinary Resolution entitlements and other revisions in the Investment Partnership Agreement. As a result, the Company changed its accounting for the Investment Partnership to recognize the investment at fair value, with gains and losses recognized in the Unaudited Condensed Consolidated Statements of Operations.
6.     NOTES RECEIVABLE, NET

Notes receivable as of June 30, 2023 and December 31, 2022 consisted of the following:
June 30, 2023December 31, 2022
Promissory notes receivable$7,212 $34,088 
Line of credit receivable4,3315,831
Interest receivable3,552 4,147 
Allowance for notes and interest receivable(15,095)(14,875)
Total notes receivable$ $29,191 
Less: Notes receivable, current 29,191 
Notes receivable, non-current$ $ 
Interest income (loss) from loans receivable during the three and six months ended June 30, 2023 was $(6) and $10, respectively, and $365 and $782 for the three and six months ended June 30, 2022, respectively.
At each reporting date, the Company applies its judgment to evaluate the collectability of the note receivable and makes a provision based on the assessed amount of expected credit loss. This judgment is based on parameters such as interest rates, market conditions and creditworthiness of the creditor.
F-14

ACREAGE HOLDINGS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
The Company determined that the collectability of certain notes receivables is doubtful based on information available. As of June 30, 2023 and December 31, 2022, the Company’s allowance for notes receivable of $15,095 and $14,875, respectively, included $11,543 and $12,041 of principal outstanding and $3,552 and $2,834 of accrued interest, respectively, and represents the full value of such loan balances.
Activity during the six months ended June 30, 2023

In January 2023, a subsidiary of the Company acquired cultivation, processing and retail operations in Maine from a third party who provided cultivation, manufacturing, processing, distribution and handling, recordkeeping, compliance, and other services to the Company’s operations in Maine and the amounts outstanding under the promissory notes receivable were converted into equity in Northeast Patients Group. Refer to Note 3 for further discussion.

In April 2023, the Company’s subsidiary Prime Alternative Treatment Center Consulting, LLC (“NH-PATCC”) received $1,500 from Prime Alternative Treatment Center, Inc. ("PATC") in settlement of the principal balance related to a promissory note that was extended to “PATC”.

In May 2023, the Company received a $500 cash payment towards the principal balance on a promissory note receivable from Grown Rogue.

Activity during the six months ended June 30, 2022

In February 2022, the Company received a $5,279 cash payment in full on a line of credit due from Patient Centric Martha’s Vineyard, and subsequently closed the line of credit.

7.    CAPITAL ASSETS, NET
Net property, plant and equipment consisted of:
June 30, 2023December 31, 2022
Land$9,778 $9,605 
Building58,524 58,334 
Right-of-use asset, finance leases6,297 5,077 
Furniture, fixtures and equipment40,698 46,811 
Leasehold improvements49,587 6,178 
Construction in progress11,415 34,435 
Capital assets, gross$176,299 $160,440 
Less: accumulated depreciation and amortization(40,214)(27,035)
Capital assets, net$136,085 $133,405 
Depreciation of capital assets for the three and six months ended June 30, 2023 is comprised of $994 and $1,991 of depreciation expense, and $2,090 and $4,377 that was capitalized to inventory, respectively, and $2,868 and $3,980 of depreciation expense and $1,794 and $3,716 that was capitalized to inventory for the three and six months ended June 30, 2022, respectively.
During the six months ended June 30, 2022, the Company determined that it was unable to find a satisfactory buyer for the held-for-sale assets related to its Michigan operations and, as such, these assets were reclassified as held-and-used. This conclusion was considered a triggering event for capital asset impairment testing. Upon assessment, these specific capital assets were not considered to have future economic value. As such, the fair value of the assets was considered to be nil and the Company recognized an impairment charge of $1,907 within Impairments, net on the Statements of Operations during the six months ended June 30, 2022. Refer to Note 3 for further discussion on changes in held-for-sale entities.

F-15

ACREAGE HOLDINGS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
8.    LEASES
The Company leases land, buildings, equipment and other capital assets which it plans to use for corporate purposes in addition to the production and sale of cannabis products. Leases with an initial term of 12 months or less are not recorded on the Unaudited Condensed Consolidated Statements of Financial Position and are expensed in the Unaudited Condensed Consolidated Statements of Operations on the straight-line basis over the lease term. The Company does not have any material variable lease payments and accounts for non-lease components separately from leases.
Balance Sheet InformationClassificationJune 30, 2023December 31, 2022
Right-of-use assets
OperatingOperating lease right-of-use assets$19,067 $22,443 
FinanceCapital assets, net4,690 4,269 
Total right-of-use assets$23,757 $26,712 
Lease liabilities
Current
OperatingOperating lease liability, current$2,268 $2,443 
FinancingDebt, current109 1 
Non-current
OperatingOperating lease liability, non-current18,839 21,692 
FinancingDebt, non-current5,860 5,305 
Total lease liabilities$27,076 $29,441 
Three Months Ended June 30,Six Months Ended June 30,
Statement of Operations InformationClassification2023202220232022
Short-term lease expenseGeneral and administrative$58 $170 $209 $218 
Operating lease expenseGeneral and administrative1,277 1,144 2,615 2,392 
Finance lease expense:
Amortization of right of use assetDepreciation and amortization92 64 185 127 
Interest expense on lease liabilitiesInterest expense211 329 420 541 
Net operating and finance lease cost$1,580 $1,537 $3,220 $3,060 
Six Months Ended June 30,
Statement of Cash Flows InformationClassification20232022
Cash paid for operating leasesNet cash used in operating activities$2,727 $2,447 
Cash paid for finance leases - interestNet cash used in operating activities$493 $522 
F-16

ACREAGE HOLDINGS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
The following represents the Company’s future minimum payments required under existing leases with initial terms of one year or more as of June 30, 2023:
Maturity of lease liabilitiesOperating LeasesFinance Leases
2023$2,030 $453 
20244,153 923 
20254,098 946 
20264,307 969 
20273,890 992 
Thereafter13,267 11,705 
Total lease payments$31,745 $15,988 
Less: interest10,638 10,019 
Present value of lease liabilities$21,107 $5,969 
Weighted average remaining lease term (years)812
Weighted average discount rate10%12%
As of June 30, 2023, there have been no leases entered into that have not yet commenced.
9.    INVENTORY
The Company’s inventory balance consists of the following:
June 30, 2023December 31, 2022
Retail inventory$3,714 $3,255 
Wholesale inventory36,478 35,885 
Cultivation inventory5,070 7,133 
Supplies & other2,676 3,173 
Total$47,938 $49,446 
Inventory is valued at the lower of cost and net realizable value (“NRV”), defined as estimated selling price in the ordinary course of business, less estimated costs of disposal. During the six months ended June 30, 2023, the Company analyzed its inventory balances, and recorded wholesale inventory adjustments as a result of (i) having excess or obsolete inventory and (ii) reducing the carrying value to ensure inventory balances are properly recorded at the lower of cost and NRV. The Company recognized $4,484 and $6,721 of wholesale inventory adjustments within Cost of goods sold, wholesale on the Statements of Operations for the three and six months ended June 30, 2023, respectively.
10.    DEBT
The Company’s debt balances consist of the following:
Debt balancesJune 30, 2023December 31, 2022
Financing liability (failed sale-leaseback)$15,253 $15,253 
Finance lease liabilities5,969 5,306 
7.50% Loan due April 2026
31,549 31,288 
6.10% Secured debenture due September 2030
46,727 46,502 
Note due December 20242,375 3,167 
Prime rate credit facilities due January 2026, as amended129,982 113,564 
Note backed by ERTC12,113  
Total debt$243,968 $215,080 
Less: current portion of debt13,805 1,584 
Total long-term debt$230,163 $213,496 
F-17

ACREAGE HOLDINGS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
Scheduled maturities of debt, excluding amortization of discount and issuance costs, are as follows:
2023$12,904 
20241,584 
2025 
2026173,011 
202739 
Thereafter71,172 
Total payments (excluding amortization of discount and issuance costs)
$258,710 
During the three and six months ended June 30, 2023, the Company incurred interest expense of $8,862 and $16,936, respectively, and $5,520 and $10,301 during the three and six months ended June 30, 2022, respectively, on the Unaudited Condensed Consolidated Statements of Operations. Interest expense for the three and six months ended June 30, 2023 included debt discount amortization of $525 and $1,015, respectively, and amortization of debt issuance costs of $698 and $1,388, respectively. Interest expense for the three and six months ended June 30, 2022 included debt discount amortization of $377 and $751, respectively, and amortization of debt issuance costs of $294 and $552, respectively. As of June 30, 2023 and December 31, 2022, the Company had unamortized discount $5,578 and $6,093, respectively, and debt issuance costs of $9,164 and $10,522, respectively, which is netted against the gross carrying value of long-term debt in Debt, non-current on Unaudited Condensed Unaudited Condensed Consolidated Statements of Financial Position. Additionally, as of June 30, 2023 and December 31, 2022, the Company had accrued interest of $2,824 and $2,575, respectively, within Interest payable on the Unaudited Condensed Consolidated Statements of Financial Position.
Financing liability (failed sales leaseback)
In connection with the Company’s failed sale-leaseback transaction in November 2020, a financing liability was recognized equal to the cash proceeds received. The Company will recognize the cash payments made on the lease as interest expense, and the principal will be de-recognized upon expiration of the lease.

6.10% Secured debenture due September 2030
On September 23, 2020, pursuant to the implementation of the Amended Arrangement (Refer to Note 13 for further discussion), a subsidiary of Canopy Growth advanced gross proceeds of $50,000 (less transaction costs of approximately $4,025) to Universal Hemp, an affiliate of the Company, pursuant to the terms of a secured debenture (“6.1% Loan”). In accordance with the terms of the debenture, the funds cannot be used, directly or indirectly, in connection with or for any cannabis or cannabis-related operations in the United States, unless and until such operations comply with all applicable laws of the United States. An additional $50,000 may be advanced pursuant to the debenture subject to the satisfaction of certain conditions by Universal Hemp. The debenture bears interest at a rate of 6.1% per annum, matures 10 years from the date hereof or such earlier date in accordance with the terms of the debenture and all interest payments made pursuant to the debenture are payable in cash by Universal Hemp. The debenture is secured by substantially all of the assets of Universal Hemp and its subsidiaries and, further, is not convertible and is not guaranteed by Acreage.
With a portion of the proceeds for the 6.1% Loan received by Universal Hemp, Acreage engaged an Investment Advisor which, under the Investment Advisor’s sole discretion, invested on behalf of Universal Hemp $34,019 on September 28, 2020. As a result, Universal Hemp acquired 34,019 class B units, at $1.00 par value per unit, which represented 100% financial interest in the Investment Partnership, a Canada-based limited partnership. An affiliate of the Institutional Investor holds class A units of the Investment Partnership. The general partner of the Investment Partnership is also an affiliate of the Institutional Investor. The class B units are held by the Investment Advisor as an agent for Universal Hemp. Upon execution of the limited partnership agreement, $1,019 was distributed to the class A unit holders of the Investment Partnership.
F-18

ACREAGE HOLDINGS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
7.50% Loan due April 2026
On September 28, 2020, the Company received gross proceeds of $33,000 (less transaction costs of approximately $959) from an affiliate of the Institutional Investor (the “Lender”) and used a portion of the proceeds of this loan to retire its short-term $11,000 convertible note (as described above) and its short-term note aggregating approximately $18,000 in October 2020, with the remainder being used for working capital purposes. The loan is unsecured, matures in 3 years and bears interest at a 7.5% annual interest rate. The Lender is controlled by the Institutional Investor. The Investment Partnership is the investor in the Lender. On December 16, 2021, the Company paid an amendment fee of $413 to extend the maturity date from September 28, 2023 to April 2, 2026. The amendment was treated as a debt extinguishment.

Note due December 2024

In November 2020, the Company issued a promissory note with a third party, which is non-interest bearing and payable based on a payment schedule with ten payments in the aggregate amount of $7,750 through December 31, 2024, as a result of a settlement described under the “CanWell Dispute” in Note 13.
Prime rate credit facilities due January 2026, as amended
On December 16, 2021, the Company entered into a $150,000 senior secured credit facility with a syndicate of lenders consisting of a $75,000 initial draw, a $25,000 delayed draw that must be advanced within 12 months and a $50,000 committed accordion facility that is available after December 1, 2022, provided certain financial covenants are met, and with a maturity of January 1, 2026. Upon closing, gross proceeds of $75,000 were drawn (before origination discounts and issuance costs of approximately $4,000 and $1,500, respectively, which were capitalized). In April 2022, the Company drew down on the $25,000 delayed draw. Refer to Note 14 for further discussion of the syndicated related party lender.

The Company obtained a waiver of the financial covenants for the three month periods ended March 31, 2022 and June 30, 2022. This waiver included a $500 waiver fee that was paid to the lenders

On October 24, 2022, the Company amended the senior secured credit facility such that $25,000 of the committed accordion was available for immediate draw by Acreage, which was drawn down in the fourth quarter of 2022, with the remaining $25,000 available from January 1, 2023, provided certain predetermined milestones are achieved. The Company paid an amendment fee of $1,250 to the syndicate of lenders and the amendment was treated as a debt modification.

On April 28, 2023, the Company reached an agreement with the lenders of the Prime rate credit facilities due January 2026 that would allow it to draw a further $15,000 under its current Credit Agreement, but such funds would be maintained in a segregated account until dispersed and be restricted for use to only eligible capital expenditures. As part of this agreement, the Company agreed to limit the total amounts outstanding under the Credit Agreement to $140,000 and to at all times subsequent to the amendment, maintain collateral (as defined in the Credit Agreement) equal to or greater than the outstanding amount under the Credit Agreement.

The loan is secured by pledged equity interests and substantially all of the assets of the Company. Advances under the facility bear interest at a variable rate of U.S. prime (“Prime”) plus 5.75% per annum, payable monthly in arrears, with a Prime floor of 5.50% plus an additional 1.0% per annum until certain collateral assignment agreements are delivered.

The facility has a maturity date of January 1, 2026 and the Company has the option to extend the maturity date to January 1, 2027 prior to January 1, 2024, for a fee equal to 1.0% of the total loan amount. If the Company chooses to extend the maturity date, it will also be required to make monthly installment payments, each of which shall be an amount equal to five percent per year of the outstanding amount of the loan.

The loan is subject to various financial covenants, including (i) a fixed charge coverage ratio and two leverage ratios in respect of all periods beginning on or after December 31, 2023 and (ii) a minimum cash requirement of $9.0 million at each quarter end of the Company. Finally, the Amended Credit Facility includes approval for Canopy USA to acquire control of Acreage without requiring repayment of all amounts outstanding under the Amended Credit Facility, provided certain conditions are satisfied. As of June 30, 2023 the Company was in compliance with all covenants.

ERTC Factoring Agreement
On April 11, 2023, the Company received $12,113 pursuant to a financing agreement with a third-party lender (the “Financing Agreement”), which is included in “Debt, current” as of June 30, 2023. The Company assigned to the lender its interests in
F-19

ACREAGE HOLDINGS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
Employee Retention Tax Credits (“ERTC”) that it submitted for a claim of approximately $14,251. If the Company does not receive the ERTC, in whole or in part, the Company is required to repay the related portion of the funds received plus 10% interest accrued from the date of the Financing Agreement through the repayment date. The Financing Agreement does not have a stated maturity date and the discount is being accreted to interest expense over an expected term. The Company’s obligations under the Financing Agreement will be satisfied upon receipt of the ERTC or other full repayment. Finally, the Company determined the ERTC did not meet the criteria to record as a receivable as of June 30, 2023 due to the uncertain nature of such claims.
11.    SHAREHOLDERS’ EQUITY AND NON-CONTROLLING INTERESTS
The table below details the change in Pubco shares outstanding by class for the three and six months ended June 30, 2023:

Shareholders’ EquityFixed SharesFloating SharesFixed Shares Held in TreasuryFloating Shares Held in TreasuryFixed Multiple SharesTotal Shares Outstanding
December 31, 202279,047 34,114 (589)(253)118 112,437 
Issuances607 159    766 
NCI conversions      
June 30, 202379,654 34,273 (589)(253)118 113,203 
Warrants
A summary of the warrants activity outstanding is as follows:

WarrantsFixed SharesFloating Shares
December 31, 20225,817 2,524 
Expired  
June 30, 20235,817 2,524 

The exercise price of each Fixed Share warrant ranged from $3.15 to $4.00, respectively, and the exercise price of each Floating Share warrant ranged from $3.01 to $4.00, respectively. The warrants are exercisable for a period of 4 years. The weighted-average remaining contractual life of the warrants outstanding is approximately 1.5 years. There was no aggregate intrinsic value for warrants outstanding as of June 30, 2023.
Non-controlling interests - convertible units
The Company has NCIs in consolidated subsidiaries USCo2 and HSCP. The non-voting shares of USCo2 and HSCP units make up substantially all of the NCI balance as of June 30, 2023 and are convertible for either 0.7 of a Fixed Share and 0.3 of a Floating Share of Pubco or cash, as determined by the Company. Summarized financial information of HSCP is presented below. USCo2 does not have discrete financial information separate from HSCP.
HSCP net asset reconciliationJune 30, 2023December 31, 2022
Current assets$94,126 $118,193 
Non-current assets261,072 237,665 
Current liabilities(6,986)(9,141)
Non-current liabilities(266,212)(239,525)
Other NCI balances(726)(725)
Accumulated equity-settled expenses(242,438)(240,760)
Net assets$(161,164)$(134,293)
HSCP/USCo2 ownership % of HSCP16.24 %16.33 %
Net assets allocated to USCo2/HSCP$(26,175)$(21,930)
Net assets attributable to other NCIs726 725 
Total NCI$(25,449)$(21,205)
F-20

ACREAGE HOLDINGS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
Three Months Ended June 30,Six Months Ended June 30,
HSCP Summarized Statement of Operations2023202220232022
Net loss allocable to HSCP/USCo2$(12,801)$(3,958)$(22,403)$(11,040)
HSCP/USCo2 weighted average ownership % of HSCP16.28 %16.98 %16.29 %17.13 %
Net loss allocated to HSCP/USCo2$(2,084)$(672)$(3,650)$(1,891)
Net loss allocated to other NCIs (2)(1) 
Net loss attributable to NCIs$(2,084)$(674)$(3,651)$(1,891)
As of June 30, 2023, USCo2’s non-voting shares owned approximately 0.22% of HSCP units. USCo2’s capital structure is comprised of voting shares, all of which are held by the Company, and of non-voting shares held by certain former HSCP members. Certain executive employees and profits interests holders own approximately 16.07% of HSCP units. The remaining 83.71% interest in HSCP is held by USCo and represents the members’ equity attributable to shareholders of the parent.
A reconciliation of the beginning and ending amounts of convertible units is as follows:
Convertible UnitsJune 30, 2023December 31, 2022
Beginning balance22,698 23,076 
NCI units converted to Pubco (378)
Ending balance22,698 22,698 
12.    EQUITY-BASED COMPENSATION EXPENSE
Amended Arrangement with Canopy Growth
On September 23, 2020, the Company announced the implementation of the Amended Arrangement (as defined in Note 13). Pursuant to the Amended Arrangement, the Company’s articles have been amended to create new Fixed Shares, Floating Shares and Fixed Multiple Shares. Consequently, the Company’s equity-based compensation was modified into new equity awards of the Company. Refer to Note 13 for further discussion.

Equity-based compensation - Plan (Acreage Holdings, Inc. Omnibus Incentive Plan)
In connection with the RTO transaction, the Company’s Board of Directors adopted an Omnibus Incentive Plan, as amended September 23, 2020 (the “Plan”), which permits the issuance of stock options, stock appreciation rights, stock awards, share units, performance shares, performance units and other stock-based awards up to an amount equal to 15% of the issued and outstanding Subordinate Voting Shares of the Company.
Pursuant to the Amended Arrangement, the Company retained the Plan described above, the upper limit of issuances being up to an amount equal to 15% of the issued and outstanding Fixed Shares and Floating Shares of the Company. As of June 30, 2023, the Company had 5,308 shares authorized and available for grant under the Plan.
Restricted Share Units (“RSUs”)

Fixed SharesFloating Shares
Restricted Share Units
(Fair value information expressed in whole dollars)
RSUsWeighted Average Grant Date Fair ValueRSUsWeighted Average Grant Date Fair Value
Unvested, January 1, 20236,324 $1.80 464 $6.68 
Granted $  $ 
Forfeited(245)$1.00 (1)$2.15 
Vested(711)$2.50 (228)$2.59 
Unvested, June 30, 2023
5,368 $1.75 235 $10.65 
Vested and unreleased(1)
21 $15.31 11 $17.35 
Outstanding, June 30, 2023
5,389 $1.80 246 $10.94 
F-21

ACREAGE HOLDINGS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
(1) RSUs that are vested and unreleased represent RSUs that are pending delivery.
RSUs of the Company generally vest over a period of three years and RSUs granted to certain executives vest based on achievement of specific performance conditions. In certain situations for specified individuals, RSUs vest on an accelerated basis on separation. The fair value for RSUs is based on the Company’s share price on the date of the grant. The Company recorded $470 and $1,228 as Equity-based compensation expense on Unaudited Condensed Consolidated Statements of Operations during the three and six months ended June 30, 2023, respectively, and $1,512 and $