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 March 31, ~~2021~~2022


☐			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, Canada			98-1463868
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

450 Lexington ~~Avenue,~~Ave, #3308	New York	New York	10163
(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	o☒
Non-accelerated filer	xo	Smaller reporting company	☒o
		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

AsThe Company has three classes of ~~May 3, 2021, there were 73,494,279~~issued and ~~32,114,122~~outstanding shares: the Class E subordinate voting shares ~~and~~(the “Fixed Shares”), the Class D subordinate voting shares ~~as converted,~~(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 May 3, 2022, there were 75,511,350 Fixed shares, 33,467,215 Floating Shares, and 117,600 Fixed Multiple Shares, in each case, issued and ~~outstanding, respectively.~~outstanding.

TABLE OF CONTENTS

Acreage Holdings, Inc.

Form 10-Q

For the Three Months Ended March 31, ~~2021~~2022


PART I	Financial Information

Item 1.	Condensed Consolidated Statements of Financial Position as of March 31,, ~~2021~~ 2022 (unaudited) and December 31, 20 20 2021 (audited)	41
	Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, ~~202~~1 2022 and 20 202021	53
	Unaudited Condensed Consolidated Statements of Shareholders’ Equity for the three months ended March 3 1 ~~, 202~~1 31, 2022 and 20 202021	64
	Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31,~~, 202~~1 2022 and 20 202021	75
	Notes to the Unaudited Condensed Consolidated Financial Statements	87
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of ~~Operation~~sOperations	3730
Item 3.	Quantitative and Qualitative Disclosures About Market Ri skRisk	4540
Item 4.	Controls and ~~Procedure~~sProcedures	4840


PART II	Other Information

Item 1.	Legal Proceedings	4942
Item 1A.	Risk Factors	4942
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4942
Item 3.	Defaults Upon Senior Securities	4942
Item 4.	Mine Safety Disclosures	4942
Item 5.	Other Information	4942
Item 6.	Exhibits, Financial Statement Schedules	4943


	SIGNATURES	49


ACREAGE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

PART I

Item 1. Financial Statements and Supplementary ~~Data~~Data.


(in thousands)	(in thousands)	March 31, 2021		December 31, 2020		(in thousands)	March 31, 2022		December 31, 2021
		(unaudited)		(audited)			(unaudited)		(audited)
ASSETS	ASSETS					ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	22,844	$	32,542	Cash and cash equivalents	$	32,619	$	43,180
Restricted cash	Restricted cash	23,097		22,097		Restricted cash	95		1,098

Accounts receivable, net						Accounts receivable, net	6,795		8,202
Inventory	Inventory	25,375		23,715		Inventory	48,698		41,804
Notes receivable, current	Notes receivable, current	8,892		2,032		Notes receivable, current	2,222		7,104
Short-term investments						Short-term investments	3,401		—
Assets held-for-sale	Assets held-for-sale	73,381		62,971		Assets held-for-sale	6,311		8,952
Other current assets	Other current assets	5,748		4,663		Other current assets	3,513		2,639
Total current assets	Total current assets	159,337		148,020		Total current assets	103,654		112,979
Long-term investments	Long-term investments	33,968		34,126		Long-term investments	36,014		35,226
Notes receivable, non-current	Notes receivable, non-current	94,392		97,901		Notes receivable, non-current	27,633		27,563
Capital assets, net	Capital assets, net	92,963		89,136		Capital assets, net	142,068		126,797
Operating lease right-of-use assets	Operating lease right-of-use assets	16,889		17,247		Operating lease right-of-use assets	24,571		24,598
Intangible assets, net	Intangible assets, net	137,624		138,983		Intangible assets, net	118,699		119,695
Goodwill	Goodwill	31,922		31,922		Goodwill	43,534		43,310

Other non-current assets	Other non-current assets	4,271		4,718		Other non-current assets	1,640		1,383
Total non-current assets	Total non-current assets	412,029		414,033		Total non-current assets	394,159		378,572
TOTAL ASSETS	TOTAL ASSETS	$	571,366	$	562,053	TOTAL ASSETS	$	497,813	$	491,551

LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY					LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	$	19,123	$	18,913	Accounts payable and accrued liabilities	$	26,255	$	23,861
Taxes payable	Taxes payable	18,857		14,780		Taxes payable	30,643		24,572
Interest payable	Interest payable	5,688		3,504		Interest payable	2,562		1,432
Operating lease liability, current	Operating lease liability, current	1,285		1,492		Operating lease liability, current	2,343		2,145
Debt, current	Debt, current	47,642		27,139		Debt, current	7,370		1,583
Non-refundable deposits on sale	Non-refundable deposits on sale	6,500		750		Non-refundable deposits on sale	1,000		1,000
Liabilities related to assets held-for-sale		19,167		18,154
Liabilities related to assets held for sale						Liabilities related to assets held for sale	1,669		1,867
Other current liabilities	Other current liabilities	12,534		13,010		Other current liabilities	11,298		10,333
Total current liabilities	Total current liabilities	130,796		97,742		Total current liabilities	83,140		66,793
Debt, non-current	Debt, non-current	132,870		153,318		Debt, non-current	169,282		169,151
Operating lease liability, non-current	Operating lease liability, non-current	16,331		16,609		Operating lease liability, non-current	24,146		24,255
Deferred tax liability	Deferred tax liability	34,276		34,673		Deferred tax liability	26,727		27,082
Other liabilities		0		2

Total non-current liabilities	Total non-current liabilities	183,477		204,602		Total non-current liabilities	220,155		220,488
TOTAL LIABILITIES	TOTAL LIABILITIES	314,273		302,344		TOTAL LIABILITIES	303,295		287,281
Commitments and contingencies		0		0
Common stock, no par value - unlimited authorized, 103,440 and 101,250 issued and outstanding, respectively		0		0
Additional paid-in capital		743,961		737,290
Treasury stock, 842 common stock held in treasury		(21,054)		(21,054)
Accumulated deficit		(483,014)		(475,205)
Total Acreage Shareholders' equity		239,893		241,031
Non-controlling interests		17,200		18,678
TOTAL EQUITY		257,093		259,709

TOTAL LIABILITIES AND EQUITY		$	571,366	$	562,053

See accompanying ~~notes~~Notes to Unaudited Condensed Consolidated Financial Statements

3F-1


ACREAGE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION


Commitments and contingencies	0		0
Common stock, no par value - unlimited authorized, 107,411 and 106,903 issued and outstanding, respectively	—		—
Additional paid-in capital	760,700		756,536
Treasury stock, 842 common stock held in treasury	(21,054)		(21,054)
Accumulated deficit	(550,909)		(538,215)
Total Acreage Shareholders' equity	188,737		197,267
Non-controlling interests	5,781		7,003
TOTAL EQUITY	194,518		204,270

TOTAL LIABILITIES AND EQUITY	$	497,813	$	491,551

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

F-2


ACREAGE HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


							Three Months Ended March 31,
		Three Months Ended March 31,
(in thousands, except per share amounts)	(in thousands, except per share amounts)	2021		2020		(in thousands, except per share amounts)	2022		2021
REVENUE	REVENUE					REVENUE
Retail revenue, net	Retail revenue, net	$	25,847	$	17,573	Retail revenue, net	$	41,427	$	25,847
Wholesale revenue, net	Wholesale revenue, net	10,016		6,548		Wholesale revenue, net	15,172		10,016
Other revenue, net	Other revenue, net	2,530		104		Other revenue, net	280		2,530
Total revenues, net	Total revenues, net	38,393		24,225		Total revenues, net	56,879		38,393
Cost of goods sold, retail	Cost of goods sold, retail	(13,082)		(10,889)		Cost of goods sold, retail	(20,768)		(13,082)
Cost of goods sold, wholesale	Cost of goods sold, wholesale	(4,690)		(3,382)		Cost of goods sold, wholesale	(6,601)		(4,690)
Total cost of goods sold	Total cost of goods sold	(17,772)		(14,271)		Total cost of goods sold	(27,369)		(17,772)
Gross profit	Gross profit	20,621		9,954		Gross profit	29,510		20,621

OPERATING EXPENSES	OPERATING EXPENSES					OPERATING EXPENSES
General and administrative	General and administrative	9,218		13,032		General and administrative	8,387		9,218
Compensation expense	Compensation expense	10,362		14,477		Compensation expense	14,195		10,362
Equity-based compensation expense	Equity-based compensation expense	6,042		34,737		Equity-based compensation expense	4,159		6,042
Marketing	Marketing	12		987		Marketing	697		12
Impairments, net	Impairments, net	818		187,775		Impairments, net	2,138		818
Loss on notes receivable		0		8,161
Recovery of assets held-for-sale		(8,616)		0
Legal settlements, net		10		0

Write down (recovery) of assets held-for-sale						Write down (recovery) of assets held-for-sale	874		(8,616)
Loss on legal settlements						Loss on legal settlements	(25)		10
Depreciation and amortization	Depreciation and amortization	969		2,067		Depreciation and amortization	1,807		969
Total operating expenses	Total operating expenses	18,815		261,236		Total operating expenses	32,232		18,815

Net operating income (loss)	Net operating income (loss)	$	1,806	$	(251,282)	Net operating income (loss)	$	(2,722)	$	1,806

(Loss) income from investments, net		(144)		234
Income (loss) from investments, net						Income (loss) from investments, net	1,133		(144)
Interest income from loans receivable	Interest income from loans receivable	1,465		1,647		Interest income from loans receivable	417		1,465
Interest expense	Interest expense	(4,857)		(1,226)		Interest expense	(4,781)		(4,857)
Other loss, net	Other loss, net	(1,566)		(174)		Other loss, net	(10)		(1,566)
Total other (loss) income		(5,102)		481
Total other loss						Total other loss	(3,241)		(5,102)

Loss before income taxes	Loss before income taxes	$	(3,296)	$	(250,801)	Loss before income taxes	$	(5,963)	$	(3,296)

Income tax (expense) benefit		(5,346)		28,572
Income tax expense						Income tax expense	(7,948)		(5,346)

Net loss	Net loss	$	(8,642)	$	(222,229)	Net loss	$	(13,911)	$	(8,642)

Less: net loss attributable to non-controlling interests	Less: net loss attributable to non-controlling interests	(833)		(50,275)		Less: net loss attributable to non-controlling interests	(1,217)		(833)

Net loss attributable to Acreage Holdings, Inc.	Net loss attributable to Acreage Holdings, Inc.	$	(7,809)	$	(171,954)	Net loss attributable to Acreage Holdings, Inc.	$	(12,694)	$	(7,809)

Net loss per share attributable to Acreage Holdings, Inc. - basic and diluted:	Net loss per share attributable to Acreage Holdings, Inc. - basic and diluted:	$	(0.07)	$	(1.85)	Net loss per share attributable to Acreage Holdings, Inc. - basic and diluted:	$	(0.12)	$	(0.08)	(1)

Weighted average shares outstanding - basic and diluted	Weighted average shares outstanding - basic and diluted	106,204		92,902		Weighted average shares outstanding - basic and diluted	106,900		102,343		(1)

(1) Presentation of March 31, 2021 figures have been revised.

See accompanying ~~notes~~Notes to Unaudited Condensed Consolidated Financial Statements

4F-3


ACREAGE HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY


				Attributable to shareholders of the parent															Attributable to shareholders of the parent
(in thousands)	(in thousands)	LLC Membership Units	Pubco Shares (as converted)	Share Capital		Treasury Stock		Accumulated Deficit		Shareholders’ Equity		Non-controlling Interests		Total Equity		(in thousands)	LLC Membership Units	Pubco Shares (as converted)	Share Capital		Treasury Stock		Accumulated Deficit		Shareholders’ Equity		Non-controlling Interests		Total Equity
December 31, 2019		0	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		0
Capital distributions, net		—	—	—		—		—		—		(18)		(18)

Equity-based compensation expense and related issuances		—	586	34,737		—		—		34,737		—		34,737
Net loss		—	—	0		—		(171,954)		(171,954)		(50,275)		(222,229)
March 31, 2020		0	97,430	$	671,738	$	(21,054)	$	(360,571)	$	290,113	$	45,058	$	335,171

December 31, 2020	December 31, 2020	3,861	101,250	$	737,290	$	(21,054)	$	(475,205)	$	241,031	$	18,678	$	259,709	December 31, 2020	3,861	101,250	$	737,290	$	(21,054)	$	(475,205)	$	241,031	$	18,678	$	259,709

Purchase of non-controlling interest in subsidiary	Purchase of non-controlling interest in subsidiary	—	—	(272)		—		—		(272)		(14)		(286)		Purchase of non-controlling interest in subsidiary	—		(272)		—		—		(272)		(14)		(286)
NCI adjustments for changes in ownership	NCI adjustments for changes in ownership	—	400	601		—		—		601		(601)		0		NCI adjustments for changes in ownership	—	400	601		—		—		601		(601)		—
Capital distributions, net	Capital distributions, net	—	—	—		—		—		—		(30)		(30)		Capital distributions, net	—	—	—		—		—		—		(30)		(30)

Other equity transactions	Other equity transactions	—	97	300		—		—		300		—		300		Other equity transactions	—	97	300		—		—		300		—		300
Equity-based compensation expense and related issuances	Equity-based compensation expense and related issuances	—	1,693	6,042		—		—		6,042		—		6,042		Equity-based compensation expense and related issuances	—	1,693	6,042		—		—		6,042		—		6,042
Net loss	Net loss	—	—	0		—		(7,809)		(7,809)		(833)		(8,642)		Net loss	—	—	—		—		(7,809)		(7,809)		(833)		(8,642)
March 31, 2021	March 31, 2021	3,861	103,440	$	743,961	$	(21,054)	$	(483,014)	$	239,893	$	17,200	$	257,093	March 31, 2021	3,861	103,440	$	743,961	$	(21,054)	$	(483,014)	$	239,893	$	17,200	$	257,093


			Attributable to shareholders of the parent
(in thousands)	LLC Membership Units	Pubco Shares (as converted)	Share Capital		Treasury Stock		Accumulated Deficit		Shareholders’ Equity		Non-controlling Interests		Total Equity

























December 31, 2021	3,861	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, 2022	3,861	107,411	$	760,700	$	(21,054)	$	(550,909)	$	188,737	$	5,781	$	194,518

See accompanying ~~notes~~Notes to Unaudited Condensed Consolidated Financial Statements

5F-4


ACREAGE HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


		Three Months Ended March 31,					Three Months Ended March 31,
(in thousands)	(in thousands)	2021		2020		(in thousands)	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:	CASH FLOWS FROM OPERATING ACTIVITIES:					CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	Net loss	$	(8,642)	$	(222,229)	Net loss	$	(13,911)	$	(8,642)
Adjustments for:	Adjustments for:					Adjustments for:
Depreciation and amortization	Depreciation and amortization	969		2,067		Depreciation and amortization	1,807		969
Depreciation and amortization included in COGS	Depreciation and amortization included in COGS	552		156		Depreciation and amortization included in COGS	1,084		552
Equity-based compensation expense	Equity-based compensation expense	6,042		34,737		Equity-based compensation expense	4,159		6,042

Loss on disposal of capital assets	Loss on disposal of capital assets	1,592		0		Loss on disposal of capital assets	49		1,592
Impairments, net		818		187,775
Loss on notes receivable		0		8,161
Loss on impairment						Loss on impairment	2,138		818

Non-cash other revenue		(2,500)		0
Bad debt expense						Bad debt expense	(96)		—
Non-cash interest expense	Non-cash interest expense	1,119		319		Non-cash interest expense	644		1,119
Non-cash operating lease adjustments		(391)		527
Deferred tax benefit		(400)		(31,694)
Non-cash operating lease expense						Non-cash operating lease expense	(9)		(391)
Deferred tax (income) expense						Deferred tax (income) expense	(279)		(400)
Non-cash income from investments, net	Non-cash income from investments, net	(157)		(234)		Non-cash income from investments, net	(788)		(157)
Recovery of assets held-for-sale		(8,616)		0

Other non-cash (income) expense, net						Other non-cash (income) expense, net	—		(2,500)
(Recovery) write-down of assets held-for-sale						(Recovery) write-down of assets held-for-sale	874		(8,616)

Change, net of acquisitions in:	Change, net of acquisitions in:					Change, net of acquisitions in:
Inventory	Inventory	(1,736)		(2,530)		Inventory	(7,002)		(1,736)
Other assets	Other assets	(1,289)		(835)		Other assets	(62)		(1,289)
Interest receivable	Interest receivable	292		882		Interest receivable	(417)		292
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	(1,328)		(5,226)		Accounts payable and accrued liabilities	(1,856)		(1,328)
Taxes payable	Taxes payable	4,618		2,729		Taxes payable	6,071		4,618
Interest payable	Interest payable	2,184		29		Interest payable	1,130		2,184
Other liabilities	Other liabilities	5,284		(35)		Other liabilities	1,101		5,284
Net cash used in operating activities	Net cash used in operating activities	$	(1,589)	$	(25,401)	Net cash used in operating activities	$	(5,363)	$	(1,589)
CASH FLOWS FROM INVESTING ACTIVITIES:	CASH FLOWS FROM INVESTING ACTIVITIES:					CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of capital assets	Purchases of capital assets	$	(5,421)	$	(7,790)	Purchases of capital assets	$	(8,290)	$	(5,421)
Investments in notes receivable	Investments in notes receivable	(1,229)		(11,560)		Investments in notes receivable	—		(1,229)
Collection of notes receivable	Collection of notes receivable	86		23		Collection of notes receivable	5,279		86
Cash paid for long-term investments	Cash paid for long-term investments	302		0		Cash paid for long-term investments	—		302

Proceeds from sale of capital assets	Proceeds from sale of capital assets	5		0		Proceeds from sale of capital assets	—		5
Business acquisitions, net of cash acquired	Business acquisitions, net of cash acquired	(286)		0		Business acquisitions, net of cash acquired	—		(286)

Distributions from investments	Distributions from investments	13		8		Distributions from investments	345		13

Cash paid for short-term investment						Cash paid for short-term investment	(3,400)		—
Net cash used in investing activities	Net cash used in investing activities	$	(6,530)	$	(19,319)	Net cash used in investing activities	$	(6,066)	$	(6,530)
CASH FLOWS FROM FINANCING ACTIVITIES:	CASH FLOWS FROM FINANCING ACTIVITIES:					CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from related party debt		$	0	$	5,000
Repayment of related party loan		0		(20,000)
Proceeds from debt financing		1,190		21,000

Proceeds from financing (refer to Note 14 for related party financing)						Proceeds from financing (refer to Note 14 for related party financing)	—		1,190
Deferred financing costs paid	Deferred financing costs paid	0		(1,531)		Deferred financing costs paid	(11)		—
Proceeds from equity transactions		301		27,887
Collateral received from financing agreement		0		22,000
Proceeds from issuance of private placement units and warrants, net						Proceeds from issuance of private placement units and warrants, net	—		301

Repayment of debt	Repayment of debt	(2,070)		(197)		Repayment of debt	—		(2,070)

Net cash (used in) provided by financing activities		$	(579)	$	54,159
Net (decrease) increase in cash, cash equivalents and restricted cash		$	(8,698)	$	9,439
Cash, cash equivalents and restricted cash - Beginning of period		54,639		26,600
Cash, cash equivalents and restricted cash - End of period		$	45,941	$	36,039
Net cash used in financing activities						Net cash used in financing activities	$	(11)	$	(579)
Net decrease in cash, cash equivalents, restricted cash, and cash held for sale						Net decrease in cash, cash equivalents, restricted cash, and cash held for sale	$	(11,440)	$	(8,698)
Cash, cash equivalents, restricted cash, and cash held for sale - Beginning of period						Cash, cash equivalents, restricted cash, and cash held for sale - Beginning of period	44,501		54,639
Cash, cash equivalents, restricted cash, and cash held for sale - End of period						Cash, cash equivalents, restricted cash, and cash held for sale - End of period	$	33,061	$	45,941

Three Months Ended March 31,
(in thousands) 2021 2020
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid - non-lease $ 1,555 $ 2
Income taxes paid 1,044 525
OTHER NON-CASH INVESTING AND FINANCING ACTIVITIES:
Capital assets not yet paid for $ 1,805 $ 4,377
Exchange of intangible assets to notes receivable (Note 4) 0 18,800
Holdback of Maine HSCP notes receivable (Note 6) 0 917

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	$	32,619	$	22,844
Restricted cash	95		23,097
Cash held for sale	$	347	$	—
Total cash, cash equivalents, restricted cash, and cash held for sale at end of period	$	33,061	$	45,941


	Three Months Ended March 31,
(in thousands)	2022		2021
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid - non-lease	$	2,446	$	1,555
Income taxes paid	2,065		1,044
OTHER NON-CASH INVESTING AND FINANCING ACTIVITIES:
Capital assets not yet paid for	$	3,631	$	1,805









Non-cash proceeds from finance lease	5,785		—

See accompanying ~~notes~~Notes to Unaudited Condensed Consolidated Financial Statements

6F-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”) ~~was originally incorporated under~~is a vertically integrated, multi-state operator in the ~~Business Corporations Act~~ ~~(Ontario) on July 12, 1989 as Applied Inventions Management Inc. On August 29, 2014,~~United States (“U.S.”) cannabis industry and has contractual relationships with cannabis cultivation facilities, dispensaries and other cannabis-related companies in the ~~Company changed its name~~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 ~~Applied Inventions Management Corp.~~consumers. The ~~Company continued into British Columbia~~Company’s products appeal to medical and ~~changed its name~~adult recreational use customers through brand strategies intended to ~~“Acreage Holdings, Inc.” on November 9, 2018.~~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. ~~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.

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 Companyin 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,~~Shares; and each outstanding MVS was exchanged for 0.7 of a Fixed Multiple Share and 0.3 of a Floating Share. Refer to Note 13 for further discussion.

7F-7


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

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. Refer to Note 10 for further discussion.

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 inon the health and safety of the Company’s employees, business continuity and supporting ~~its communities.~~the communities where the Company operates. The ~~Company~~company has implemented various measures to reduce the spread of the virus, including implementing social distancing measures at its 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.

Despite some impact to our day-to-day operations at select locations from time-to-time, COVID-19 has had a minimal impact overall on the Company’s performance.

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, ~~2021,~~2022, or any other period.

As reflected in the unaudited condensed consolidated financial statements, the Company had an accumulated deficit as of March 31, ~~2021,~~2022, as well as a net loss and ~~net~~negative cash ~~used in~~flow from operating activities for the ~~reporting period then ended.~~three months ended March 31, 2022. 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 the Company’s 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, (v) the ~~Standby Equity Distribution Agreement~~AFC-VRT credit facilities (refer to Note ~~13 and 17~~10 for further discussion), and (vi) the anticipated Non-Core Divestitures (refer to Note 3 for further discussion)., as well as access to the U.S. public equity markets.

If the Company is unable to raise additional capital whenever necessary, it may be forced to decelerate or curtail its footprint ~~buildout~~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 itthe Company will be successful in accomplishing any of ~~the Company’s~~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, 2020, dated March 25, 2021, as filed with the Securities and Exchange Commission (the “2020 Form 10-K”).~~

8F-8


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

~~Emerging growth company~~year ended December 31, 2021, dated March 11, 2022, as filed with the Securities and Exchange Commission (the “2021 Form 10-K”).

Use of estimates

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~~accompanying unaudited condensed consolidated financial statements ~~and~~have been prepared in accordance with accounting principles generally accepted in 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.~~

~~Use~~United States of ~~estimates~~

~~The preparation~~America (“GAAP”). 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 reported amounts ~~that are~~of assets and liabilities as of the dates presented and the reported inamounts of revenues and expenses during 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, actualperiods presented. Actual results ~~may~~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 ~~impairment~~ charges on goodwill, intangible assets and investments in equity and notes receivable.

Emerging growth company

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 ~~the Company has~~Acreage lacks control but is able to exercise significant influence ~~but less than a controlling~~over operating and financial ~~interest,~~policies are accounted for using the equity method. The Company’s proportionate share of net income or loss of the entity is recorded in Income (loss) from investments, net in the Unaudited Condensed Consolidated Statements of Operations.

~~The unaudited~~VIEs

In determining whether the Company is the primary beneficiary of a VIE, the Company assesses whether it has the power to direct matters that most significantly impact the activities of the VIE and ~~audited~~have the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. There were no material consolidated ~~financial statements~~VIEs as of March 31, 2022 or December 31, 2021.

Non-controlling interests (“NCI”)

Non-controlling interests represent ownership interests in consolidated subsidiaries by parties that are ~~referred to~~not shareholders of Pubco. They are shown as a component of Total equity in 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 “StatementsUnaudited Condensed Consolidated Statements of Financial ~~Position” herein. The unaudited condensed consolidated statements~~Position, and the share of ~~cash flows~~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 ~~referred to~~accounted for as ~~the “Statements of Cash Flows” herein.~~equity transactions.

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 Unaudited Condensed Consolidated Statements of Cash Flows, consists of $32,619 and $95 as of March 31, 2022, respectively, and $22,844 and $23,097 as of March 31, 2021, ~~respectively, and $13,944 and $22,095 as of March 31, 2020,~~ 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.

9F-9


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

~~Accounting for warrants~~Accounts receivable valuations and ~~convertible notes~~reclassifications

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.

~~If warrants do not meet~~Accounts receivable are stated at their net realizable value. The allowance against gross trade receivables reflects 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, irrespectivebest estimate 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 recordedprobable losses inherent in the ~~statements~~receivables portfolio determined on the basis 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~~historical experience, specific allowances 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 for further discussion.~~

~~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 buyerknown troubled accounts and other ~~actions required to complete~~currently available information. As of March 31, 2022 and December 31, 2021, 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~~Company’s allowance for ~~sale at a price that is reasonable in relation to its current fair value;~~doubtful accounts was $350 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,~~ $445, respectively.

~~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 March 31, 2022, 2021 and 2020, as the issuance of shares upon conversion, exercise or vesting of outstanding units would be anti-dilutive in each period. There were 39,522 and 44,466 ~~and 46,962 potentially dilutive~~anti-dilutive shares outstanding as of March 31, 2022 and 2021, respectively.

Accounting Pronouncements Recently Adopted

As of January 1, 2022, the Company adopted ASU 2019-12 - Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12). ASU 2019-12 attempts to simplify aspects of accounting for franchise taxes and ~~2020, respectively. Refer~~enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The adoption of ASU 2019-12 did not have a material effect on the Company’s unaudited condensed consolidated financial statements.

As of January 1, 2022, the Company adopted ASU 2020-01 - Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815). The new standard clarifies the interaction of accounting for the transition into and out of the equity method. The new standard also clarifies the accounting for measuring certain purchased options and forward contracts to ~~Note 16~~acquire investments. The adoption of ASU 2020-01 did not have a material effect on the Company’s unaudited condensed consolidated financial statements.

As of January 1, 2022, the Company adopted ASU 2021-04 - Earnings Per Share (Topic 260), Debt - Modifications and Extinguishments (Topic 470-50), Compensation - Stock Compensation (Topic 718), and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40), which clarifies existing guidance for ~~further discussion.~~freestanding written call options which are equity classified and remain so after they are modified or exchanged in order to reduce diversity in practice. The standard applies prospectively to modifications or exchanges that occur after it is adopted. The adoption of ASU 2021-04 did not have a material effect on the Company’s unaudited condensed consolidated 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.~~2020-02. The 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,The ASU ~~2016-13~~ will be effective for the Company’s first interim period of fiscal ~~2023, and the~~2023. The Company ~~is currently evaluating~~continues to evaluate the impact of ~~the new standard.~~this ASU on its unaudited condensed consolidated financial statements.

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.

10F-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

During the three ~~months~~month period ended March 31, 2022, the Company did not complete any business combinations. During the year ended December 31, 2021, the Company completed the following business combinations, and has allocated the purchase price as follows:


Purchase Price Allocation	CWG		Greenleaf		Total
Assets acquired:
Cash and cash equivalents	$	828	$	1,209	$	2,037
Inventory	1,200		2,692		3,892
Other current assets	347		1,520		1,867

Capital assets, net	3,312		22,923		26,235
Operating lease right-of-use asset	1,584		2,819		4,403
Goodwill	1,482		18,619		20,101
Intangible assets, net - cannabis licenses	3,200		—		3,200
Intangible assets, net - customer relationships	1,000		—		1,000

Other non-current assets	40		189		229
Liabilities assumed:
Accounts payable and accrued liabilities	(464)		(1,829)		(2,293)

Taxes payable	(68)		(33)		(101)
Operating lease liability, current	(193)		(315)		(508)

Other current liabilities	3		(294)		(291)


Operating lease liability, non-current	(1,391)		(2,504)		(3,895)
Fair value of net assets acquired	$	10,880	$	44,996	$	55,876

Consideration paid:



Settlement of pre-existing relationship	10,880		44,996		$	55,876

Total consideration	$	10,880	$	44,996	$	55,876

CWG

On April 30, 2021, a subsidiary of the Company acquired 100% of CWG Botanicals, Inc. (“CWG”), an adult-use cannabis cultivation and processing operations in the state of California. The completion of this acquisition expanded the Company’s footprint in California.

The consideration paid for CWG consisted of the settlement of a pre-existing relationship, which included a line of credit of $9,321 and the related interest receivable of $1,559, which were both previously recorded in Notes receivable, non-current on the Statements of Financial Position.

The purchase price allocation is based upon final valuations within the measurement period (generally one year from the acquisition date).

Greenleaf

On October 1, 2021, a subsidiary of the Company acquired of 100% of Greenleaf Apothecaries (“GLA”), Greenleaf Gardens (“GLG”), and Greenleaf Therapeutics (“GLT”), collectively known as “Greenleaf.” Greenleaf consists of cannabis cultivation, processing, and dispensary operations in the state of Ohio. The completion of this acquisition established Acreage’s footprint in the Ohio cannabis market.

F-11


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

On July 2, 2018, the Company entered into purchase agreements for Greenleaf for the total purchase price of approximately $8,245 in cash, $6,096 in seller notes payable and 1.2 million shares of HSCP with an average fair value of $7.73 per share, which are convertible into shares of the Company. In addition, the Company extended a $31,200 line of credit and issued $12,500 in promissory notes to the Greenleaf entities. The consideration paid was made in exchange for: (a) the rights to acquire the Greenleaf entities upon state regulatory approval and; (b) master services agreements (“MSAs”) to operate the entities until such approval was granted and ownership interests were transferred. The purchase consideration paid represents the fair value of the intangible asset related to the MSA that was recorded on the Company’s Statement of Financial Position at the time of the transaction. The intangible asset was amortized over the life of the MSAs.

Upon closing, the Company repaid the remaining $3,300 worth of sellers notes payable and accrued interest and assumed $42,043 in notes and interest receivable owed to the Company by Greenleaf that was eliminated upon consolidation. Total consideration for the asset transfer transaction was $44,996, representing the sum of the $2,953 carrying value of intangible assets from the 2018 transaction and the liabilities assumed. As the Company owns 100% of Greenleaf, the subsidiary is accounted for on a consolidated basis as of the closing date.

The purchase price allocation is based upon preliminary valuations and 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 tangible and intangible assets acquired and the residual goodwill resulting from the transaction.

NCCRE

On March 19, 2021, a subsidiary of the Company, HSC Solutions, LLC (“HSC Solutions”) entered into an assignment of membership agreement to acquire the remaining non-controlling interests of its subsidiary, NCC Real Estate, LLC (“NCCRE”), based primarily on the fair value of property held by NCCRE estimated in the amount of $850. The consideration paid to the non-controlling interest sellers of $286 was recorded in Additional paid-in capital and Non-controlling interests on the Statements of Financial ~~Position, as of March 31, 2021.~~Position. Additionally, the Company subsequently repaid the outstanding principal balance of the NCCRE secured loan. ~~Refer to Note 10 for further discussion.~~

Divestitures

During the three months ended March 31, ~~2021,~~2022 and ~~2020,~~2021, the Company did not complete any divestitures.

Assets Held for Sale

~~On June 30, 2020, the~~The Company determined certain businesses and assets met the held-for-sale criteria. The Company has identified the following businesses as their separate disposal groups: Acreage Florida, Inc. (“Acreage Florida”), Kanna, Inc., Maryland Medicinal Research & Caring, LLC (“MMRC”) and certain Oregon entities comprising 22nd & Burn, Inc., The Firestation 23, Inc., East 11th Incorporated and a dispensary in Springfield, Oregon, collectively (“Cannabliss”). As further disposal groups, the Company has identified certain assets owned in HSCP Oregon, LLC (comprising Medford and Powell) and Michigan as held-for-sale.

~~In accordance with ASC 205-20-45 -~~ ~~Discontinued Operations~~, a disposal of a component of an entity shall be reported in discontinued operations if the divestiture represents a strategic shift that will have a major effect on the entity’s operations and financial results. Management determined that the expected divestitures will not represent a strategic shift that will have a major effect on the Company’s operations and financial results and thus will not report the expected divestitures of these assets as discontinued operations.

Upon classification of the disposal groups as held for sale, the Company tested each disposal group for impairment and recognized charges (recovery) of ~~$11,003~~$874 for the ~~year~~three months ended ~~December~~March 31, ~~2020~~2022 related to ~~write~~ the Oregon disposal ~~groups down to its fair value less costs to sell. During~~group and $(8,616) for the three months ended March 31, 2021 ~~the Company recognized a recovery on~~related to the Acreage Florida disposal group ~~of $8,616~~ within ~~Recovery~~Write down (recovery) of assets held-for-sale on the Unaudited Condensed Consolidated Statements of ~~Operations as the estimated fair value less costs to sell increased.~~Operations. 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~~held for sale on the Unaudited Condensed Consolidated Statements of Financial Position ~~respectively~~ as of March 31, ~~2021 from each~~2022 and December 31, 2021. Furthermore, the Company was unsuccessful in finding a satisfactory buyer for all of ~~their previous respective financial statement captions. Refer~~its Michigan locations. As a result, the assets remaining in Michigan no longer meet the criteria for being classified as held-for sale and have been impaired (refer to ~~the table below~~Note 7 for further ~~details.~~discussion).

The tables below present the preliminary fair values of the assets and liabilities classified as held for sale on the Unaudited Condensed Consolidated Statements of Financial Position for the years ended March 31, 2022 and December 31, 2021, respectively, and are subject to change based on developments during the sales process.

11F-12


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

The preliminary fair values of the major classes of assets and liabilities of the businesses and assets classified as held-for-sale on the Statements of Financial Position are presented below and are subject to change based on developments during the sales process.
March 31, 2021
Acreage Florida(3)
Kanna, Inc.
MMRC(1)
Michigan Cannabliss
OR - Medford(2)
OR - Powell(2)
Total
Cash $ 212 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 212
Inventory 606 0 0 0 265 100 104 1,075
Notes receivable, current 0 0 0 0 0 62 0 62
Other current assets 169 0 10 0 1 0 0 180
Total current assets classified as held-for-sale 987 0 10 0 266 162 104 1,529
Capital assets, net 10,093 1,156 286 7,469 83 2,252 7 21,346
Operating lease right-of-use assets 16,796 944 362 0 1,354 321 164 19,941
Intangible assets, net 26,190 970 801 0 0 0 0 27,961
Goodwill 0 0 0 0 2,192 0 0 2,192
Other non-current assets 339 0 0 0 23 40 10 412
Total assets classified as held for sale $ 54,405 $ 3,070 $ 1,459 $ 7,469 $ 3,918 $ 2,775 $ 285 $ 73,381
Accounts payable and accrued liabilities $ (260) $ (127) $ (6) $ 0 $ (492) $ 0 $ (39) $ (924)
Taxes payable 0 (15) 0 0 (688) 0 0 (703)
Operating lease liability, current (509) (259) (29) 0 (257) (136) (126) (1,316)
Other current liabilities (134) 0 0 0 0 0 0 (134)
Total current liabilities classified as held-for-sale (903) (401) (35) 0 (1,437) (136) (165) (3,077)
Operating lease liability, non-current (13,979) (542) (317) 0 (1,004) (254) 0 (16,096)
Deferred tax liabilities 0 0 0 0 6 0 0 6
Total liabilities classified as held-for-sale $ (14,882) $ (943) $ (352) $ 0 $ (2,435) $ (390) $ (165) $ (19,167)


	March 31, 2022
	Oregon(1)
Cash	$	347
Accounts receivable, net	140
Inventory	309

Other current assets	4
Total current assets classified as held-for-sale	800
Capital assets, net	1,673
Operating lease right-of-use assets	1,556

Goodwill	2,191
Non-current assets	91
Total assets classified as held for sale	$	6,311

Accounts payable and accrued liabilities	$	(564)

Operating lease liability, current	(434)

Total current liabilities classified as held-for-sale	(998)

Operating lease liability, non-current	(671)

Total liabilities classified as held-for-sale	$	(1,669)

(1) In August 2020, the Company entered into a transaction of sale for MMRC for $1,500 with a buyer. The Company’s applicable subsidiary, when permitted by state law, will transfer all of the issued and outstanding membership interests of MMRC to the buyer. In the interim, and subject to regulatory approval, the buyer and MMRC will enter into a management services agreement for the management and operation of MMRC until such time as the Company can transfer the equity of MMRC to the buyer.

~~(2)~~ In February 2021, a subsidiary of the Company entered into a definitive agreement and management services agreement to sell an indoor cultivation facility in Medford, Oregon and a retail dispensary in Portland, Oregon, for total consideration of $3,000, to be paid in a series of tranches based on estimated regulatory approvals which are not expected ~~not~~ to exceed 18 months.

~~(3)~~ In ~~February~~March 2022, the total consideration was reduced to $2,000. Additionally, in September 2021, a subsidiary of the Company entered into a definitive agreement and management services agreements to sell, ~~its ownership interests~~upon regulatory approval, 4 retail dispensaries in ~~Acreage Florida~~Oregon for ~~an aggregate purchase price~~total consideration of ~~$60,000. Acreage Florida is licensed to operate medical marijuana dispensaries,~~$6,500, consisting of a ~~processing facility~~$250 cash payment at the time of signing and a ~~cultivation facility~~10-month secured promissory note.


	December 31, 2021
	Michigan(1)		Oregon		Total
Cash	$	—	$	223	$	223
Inventory	—		445		445
Notes receivable, current	—		31		31
Other current assets	—		9		9
Total current assets classified as held-for-sale	—		708		708
Capital assets, net	1,907		2,342		4,249
Operating lease right-of-use assets	—		1,695		1,695

Goodwill	—		2,191		2,191
Non-current assets	—		109		109
Total assets classified as held for sale	$	1,907	$	7,045	$	8,952

Accounts payable and accrued liabilities	$	—	$	(639)	$	(639)

Operating lease liability, current	—		(441)		(441)

Total current liabilities classified as held-for-sale	—		(1,080)		(1,080)

Operating lease liability, non-current	—		(787)		(787)

Total liabilities classified as held-for-sale	$	—	$	(1,867)	$	(1,867)

(1) As of December 31, 2021, the Company was unsuccessful in finding a satisfactory buyer for certain of its Michigan locations. As a result, the ~~state of Florida. The agreement also includes~~assets at these specific locations no longer meet the sale of property in Sanderson, Florida. The aggregate purchase price includes an upfront cash payment of $5,000, an additional $20,000 in cash, $7,000 of the buyer’s common stock and the issuance of $28,000 in promissory notes upon the closing. These terms were modified upon the closing of the transaction in April 2021, refer to Note 17criteria for ~~further discussion.~~being classified as held-for-sale.

12F-13


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:


Intangibles	Intangibles	March 31, 2021		December 31, 2020		Intangibles	March 31, 2022		December 31, 2021
Finite-lived intangible assets:	Finite-lived intangible assets:					Finite-lived intangible assets:
Management contracts	Management contracts	$	16,467	$	19,580	Management contracts	$	1,808	$	1,511

Customer relationships						Customer relationships	1,000		1,000

							2,808		2,511
Accumulated amortization on finite-lived intangible assets:	Accumulated amortization on finite-lived intangible assets:					Accumulated amortization on finite-lived intangible assets:
Management contracts	Management contracts	(3,508)		(5,262)		Management contracts	(639)		(493)

Customer relationships						Customer relationships	(550)		—

							(1,189)		(493)
Finite-lived intangible assets, net	Finite-lived intangible assets, net	12,959		14,318		Finite-lived intangible assets, net	1,619		2,018

Indefinite-lived intangible assets	Indefinite-lived intangible assets					Indefinite-lived intangible assets
Cannabis licenses	Cannabis licenses	124,665		124,665		Cannabis licenses	117,080		117,677

Total intangibles, net	Total intangibles, net	$	137,624	$	138,983	Total intangibles, net	$	118,699	$	119,695

The intangible assets balance as of March 31, 2022 and December 31, 2021 excludes intangible assets reclassified to assets ~~held for sale. Refer~~held-for-sale (refer to Note 3 for further ~~discussion.~~discussion). The average useful life of finite-lived intangible assets ranges from ~~one~~0.8 to ~~five years.~~2.0 years, with 0.8 and 2.0 years being the average useful life for customer relationships and management contracts, respectively.

Impairment of intangible assets

In December 2019, a novel strain of coronavirus emerged in Wuhan, China, which since then, has spread worldwide. As a result of the recent global economic impact and uncertainty due to the COVID-19 pandemic, the Company concluded a triggering event had occurred as of March 31, 2020, and accordingly, performed interim impairment testing.

The Company ~~performed a quantitative analysis and concluded certain of the indefinite-lived cannabis licenses had a fair value below the carrying value as of March 31, 2020. Accordingly, during~~assessed whether any events or changes in circumstances ("triggering events") indicated finite-lived intangible assets to be held-and-used would not be recovered. During the three months ended March 31, ~~2020,~~2022, the Company ~~recognized impairment charges of $92,798 with respect to~~did not identify any triggering events. During the three months ended March 31, 2021, the Company identified a triggering event for its ~~indefinite-lived intangible assets at Acreage Florida, Inc., Form Factory Holdings,~~management contract owned by Prime Alternative Treatment Center Consulting, LLC ~~(“Form Factory”~~("PATCC") ~~and Kanna, Inc. The charge is recognized in~~ ~~Impairments, net~~ ~~on the Statements of Operations.~~

. The Company evaluated the recoverability of the ~~related finite-lived intangible assets to be held and used~~asset by comparing the carrying ~~amount~~value of the ~~assets~~asset to the future net undiscounted cash flows expected to be generated by the ~~assets, or comparable market sales data to determine if the~~asset. The carrying value ~~is recoverable.~~

~~During~~was determined to not be recoverable and the ~~three months ended March 31, 2021,~~Company proceeded to test the asset for impairment. The Company recognized an impairment charge of $818 ~~related to its finite-lived intangible asset at Prime Alternative Treatment Center Consulting, LLC (“PATCC”),~~ due to changes in expected cash flows pursuant to a revised consulting services agreement. During the three months ended March 31, 2020, the Company recognized impairment charges of $8,324, with respect to its finite-lived intangible assets at Form Factory and CWG Botanicals, Inc. (“CWG”). These charges are recognized in Impairments, net on the Unaudited Condensed Consolidated Statements of Operations.

~~These impairments~~

The impairment resulted in the recognition of a tax provision benefit and an associated reversal of deferred tax liabilities of $205 ~~and $31,316~~ during the three months ended March 31, 2021.

Amortization expense recorded during the three months ended March 31, 2022 and 2021 was $696 and ~~2020,~~$541, respectively.

Expected annual amortization expense for existing intangible assets subject to amortization at March 31, 2022 is as follows for each of the next five fiscal years:


Amortization of Intangibles	2022		2023		2024		2025		2026
Amortization expense	$	889	$	585	$	145	$	—	$	—

F-14


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

~~WCM Refinancing~~

On March 6, 2020, a subsidiary of the Company closed on a refinancing, transaction and conversion related to Northeast Patients Group, operating as Wellness Connection of Maine (“WCM”), a medical cannabis business in Maine, resulting in ownership of WCM by 3 individuals. In connection with the transaction, WCM converted from a non-profit corporation to a for-profit corporation. Refer to Note 6 for further discussion. Concurrently, a portion of the management contract was converted into a promissory note of $18,800 in ~~Notes receivable, non-current~~ on the Statements of Financial Position in exchange for the previously held management contract. An impairment was determined as the differential between the net carrying value of the previously held management contract and the promissory note received in exchange. This resulted in an impairment loss to finite-lived intangible assets of $9,395 in ~~Impairments, net~~ ~~on the Statements of Operations for the three months ended March 31, 2020.~~

~~Amortization expense recorded during the three months ended March 31, 2021 and 2020 was $541 and $1,165, respectively.~~

During the three months ended March 31, 2021, the Company revised its estimated useful life related to its management services agreements with Greenleaf Apothecaries, LLC, Greenleaf Therapeutics, LLC and Greenleaf Gardens, LLC (together “Greenleaf), due to changes in the expected duration of the agreements.

~~Expected annual amortization expense for existing intangible assets subject to amortization at March 31, 2021 is as follows for each of the next five fiscal years:~~

Amortization of Intangibles 2021 2022 2023 2024 2025
Amortization expense $ 9,469 $ 815 $ 815 $ 815 $ 815

Goodwill

The following table details the changes in the carrying amount of goodwill:


Goodwill	Total
December 31, 2021	$	43,310


~~December 31, 2020~~Other Adjustments(1)	$		~~31,922~~
~~Acquisitions~~	0
~~Impairment~~	0
~~Less: Goodwill held for sale~~	0224
March 31, ~~2021~~2022	$	~~31,922~~43,534

~~Also as a result of the recent global economic impact and uncertainty due~~(1) Represents adjustments related to the ~~COVID-19 pandemic,~~remeasurement of certain deferred tax assets and related adjustments within the ~~Company concluded a triggering event had occurred as of March 31, 2020, and accordingly, performed interim impairment testing.~~

During the three months ended March 31, 2020, the Company recognized impairment charges of $65,304, with respect to its goodwill related to Form Factory. The Company applied the discounted cash flow approach to determine the fair value of Form Factory. The charge is recognized in ~~Impairments, net~~ ~~on the Statements of Operations.~~measurement period.

~~Pursuant to the WCM refinancing described above, the Company recognized an impairment loss to goodwill of $11,586 on~~ ~~Impairments, net~~ on the Statements of Operations for the three months ended March 31, 2020. This was determined as the differential between the net carrying value of the previously held management contract and the promissory note received in exchange.


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

5. INVESTMENTS

The carrying values of the Company’s investments in the Unaudited Condensed Consolidated Statements of Financial Position as of March 31, ~~2021~~2022 and December 31, ~~2020~~2021 are as follows:


Investments	Investments	March 31, 2021		December 31, 2020		Investments	March 31, 2022		December 31, 2021

Total short-term investments						Total short-term investments	$	3,401	$	—

Investments held at FV-NI	Investments held at FV-NI	33,968		34,126		Investments held at FV-NI	36,014		35,226
Equity method investments		0		0

Total long-term investments	Total long-term investments	$	33,968	$	34,126	Total long-term investments	$	36,014	$	35,226

~~(Loss) income~~Income (loss) from investments, net in the Unaudited Condensed Consolidated Statements of Operations during the three months ended March 31, ~~2021~~2022 and ~~2020~~2021 is as follows:

Investment (loss) income Three Months Ended March 31,
2021 2020
Investments held at FV-NI (144) 240
Equity method investments 0 (6)
(Loss) income from investments, net $ (144) $ 234


Investment income (loss)	Three Months Ended March 31,
	2022		2021
Short-term investments	$	1	$	—

Investments held at FV-NI	1,132		(144)


Income (loss) from investments, net	$	1,133	$	(144)

Short-term investments

During the three months ended March 31, 2022, the Company made an investment in a Canadian guaranteed investment certificate (“GIC”) which bears an interest rate of 0.2% and has an original maturity of 1 year. GIC’s are a deposit investment generally sold by Canadian banks.

Investments held at FV-NI

The Company has investments in equity of several 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.

~~Equity method investments~~

~~With~~As further described under the “6.10% Secured debenture due September 2030” in Note 10, on September 23, 2020, a ~~portion~~subsidiary of the ~~proceeds for the 6.1% loan received by~~Company, Universal Hemp, LLC (“("Universal ~~Hemp~~”Hemp")~~, Acreage~~ 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, ~~(the “Investment Advisor~~”) which under the ~~Investment Advisor’s~~investment advisor's sole discretion, on September 28, 2020 invested $34,019 of these proceeds on behalf of Universal ~~Hemp $34,019 on September 28, 2020.~~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.

F-15


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

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)(1) the economic financial interest, and 2)(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 (“September 2020 Transactions”).~~

discussion. In December 2020, as the Company no longer held significant influence due to the removal of the Extraordinary Resolution entitlements and other revisions in the Investment Partnership ~~Agreement,~~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

Notes receivable as of March 31, ~~2021~~2022 and December 31, ~~2020~~2021 consisted of the following:

March 31, 2021 December 31, 2020
Notes receivable $ 97,817 $ 94,171
Interest receivable 5,467 5,762
Total notes receivable $ 103,284 $ 99,933
Less: Notes receivable, current 8,892 2,032
Notes receivable, non-current $ 94,392 $ 97,901


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


	March 31, 2022		December 31, 2021
Promissory notes receivable	$	27,262	$	27,260
Line of credit receivable	7,551		12,609
Interest receivable	3,300		2,834
Allowance for notes and interest receivables	(8,258)		(8,036)
Total notes receivable	$	29,855	$	34,667
Less: Notes receivable, current	2,222		7,104
Notes receivable, non-current	$	27,633	$	27,563

Interest income on notes receivable during the three months ended March 31, 2022 and 2021 totaled $417 and ~~2020 totaled~~ $1,465, ~~and $1,647,~~ respectively.

OnThe Company determined that the collectability of certain notes receivables is doubtful based on information available. As of March ~~6, 2020, a subsidiary of the Company closed on a refinancing transaction~~31, 2022 and conversion related to Northeast Patients Group, operating as WCM, a medical cannabis business in Maine, resulting in ownership of WCM by 3 individuals. In connection with the transaction, WCM converted from a non-profit corporation to a for-profit corporation. WCM previously had a series of agreements with Wellness Pain & Management Connection LLC (“WPMC”), which resulted in an outstanding balance of $18,800 due to WPMC as of closing of this transaction. A restated consulting agreement was put in place, whereby WCM agrees to pay a fixed annual fee of $120, payable monthly, in exchange for a suite of consulting services. In addition, a promissory note payable to WPMC was signed in the amount of $18,800 to convert the existing payment due into a fixed, secured debt obligation.

In order to fund the transaction of WCM, a subsidiary of the Company created a new Maine corporation, named Maine HSCP, Inc. (“Maine HSCP”). At closing, a subsidiary of the Company contributed $5,700 to Maine HSCP, and then sold 900 shares of Maine HSCP, constituting all of the outstanding equity interests of Maine HSCP, to 3 qualifying individuals in exchange for promissory notes of $1,900 each. Each note is secured by a pledge of the shares in Maine HSCP, and payment of the note is to be made solely from dividends paid to the shareholder by Maine HSCP, except for amounts to be paid to the shareholder to cover tax obligations. The Company’s relevant subsidiary has the option, exercisable at any time, to buy back the shares, at the higher of fair market value or the remaining balance under the promissory notes. The individuals also have the right at any time to put the shares toDecember 31, 2021, the Company’s ~~subsidiary on~~allowance for notes receivable of $8,258 and $8,036, respectively, included $6,046 of principal outstanding for both periods and $2,212 and $1,990 of accrued interest, respectively, and represents the ~~same terms. The net equity impact to the Company was NaN, and the option described above is only redeemable if permissible pursuant to Maine regulations.~~full value of such loan balances.

On July 1, 2019, a subsidiary of the Company entered into $8,000 convertible note receivable with a west coast social equity program. Upon certain conditions related to a subsequent capital raise, the Company’s applicable subsidiary will obtain the right to convert its financing receivable to an ownership interest. The line of credit matures in June 2022 and bears interest at a rate of 8% per annum. DuringActivity during the three months ended March 31, ~~2020,~~2022

On February 10, 2022, the Company ~~wrote off the note receivable and the accrued interest of $8,000 and $161, respectively, as the Company determined that the note was not collectible and recorded~~received a ~~loss~~$5,279 cash payment in full on ~~notes receivable of $8,161.~~

~~The Company provides revolving lines of credit to several entities under management services agreements which are included in notes receivable. The relevant terms and balances are detailed below.~~

Lines of Credit Balance as of
Counterparty Maximum Obligation Interest Rate March 31, 2021 December 31, 2020
Greenleaf (1)
$ 31,200 3.25% - 4.75% $ 29,422 $ 29,422
CWG Botanicals Inc. (“CWG”) (2)
12,000 8% 9,767 9,767
Compassionate Care Foundation, Inc. (“CCF”) (3)
12,500 18% 0 0
Prime Alternative Treatment Center, Inc. ("PATC") (4)
7,150 0% 7,150 4,650
Patient Centric of Martha’s Vineyard, Ltd. (“PCMV”) (5)
9,000 15% 7,161 6,873
Health Circle, Inc. (6)
8,000 15% 4,331 4,331
Total $ 79,850 $ 57,831 $ 55,043

~~(1) During the year ended December 31, 2018,~~ a ~~subsidiary of the Company extended lines of credit to Greenleaf Apothecaries, LLC, Greenleaf Therapeutics, LLC and Greenleaf Gardens, LLC (together, “Greenleaf”), which mature in June 2023.~~

~~(2) The revolving~~ line of credit due from ~~CWG matures in December 2021.~~

~~(3) In September 2018, a subsidiary of the Company entered into a management agreement to provide certain advisory~~Patient Centric Martha’s Vineyard (“PCMV”), and ~~consulting services to CCF for a monthly fee based on product sales.~~

In November 2019, certain changes in New Jersey state laws occurred to allow for-profit entities to hold cannabis licenses and certain regulatory approvals. Accordingly, a subsidiary of the Company entered into a Reorganization Agreement with CCF, whereby the management agreement will terminate and any outstanding obligations onsubsequently closed the line of ~~credit will convert to a direct ownership interest in CCF, which will convert to a for-profit entity. In June 2020,~~credit.

Activity during the ~~transactions contemplated~~three months ended March 31, 2021


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

~~by the Reorganization Agreement closed and the line of credit converted into equity in CCF’s successor entity. Refer to Note 3 for further discussion.~~

~~(4) PATC is a non-profit license holder in New Hampshire to which the Company’s consolidated subsidiary PATCC provides management or other consulting services.~~

In March 2021, ~~PATC~~the Company entered into a revised consulting services and line of credit agreement with PATCC, whereby previously unrecognized management fees were settled for $2,500, which was recognized in Other revenue, net on Unaudited Condensed Consolidated Statements of Operations during the three months ended March 31, 2021. Pursuant to the revised line of credit agreement, the line of credit is non-interest bearing and will be repaid on a payment schedule with 7 payments in the aggregate amount of $7,150 through June ~~30,~~ 2023.

~~(5) In November 2018, a subsidiary of the Company entered into a services agreement with PCMV. The line of credit matures in November 2023. The services agreement was terminated in February 2020.~~

(6) Health Circle, Inc. is a non-profit license holder in Massachusetts that formerly had a services agreement with the Company’s consolidated subsidiary MA RMD SCVS, LLC. The line of credit matures in November 2032. The services agreement was terminated in February 2020.

~~7. CAPITAL ASSETS, net~~

~~Net property and equipment consisted of:~~

March 31, 2021 December 31, 2020
Land $ 3,811 $ 3,811
Building 36,756 34,114
Right-of-use asset, finance leases 5,077 5,077
Construction in progress 15,620 13,697
Furniture, fixtures and equipment 17,658 18,062
Leasehold improvements 24,634 23,681
Capital assets, gross $ 103,556 $ 98,442
Less: accumulated depreciation (10,593) (9,306)
Capital assets, net $ 92,963 $ 89,136

~~Depreciation of capital assets for the three months ended March 31, 2021 and 2020, include $428 and $902 of depreciation expense, and $911 and $600, that was capitalized to inventory, respectively.~~

17F-16


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

7. CAPITAL ASSETS, net

Net property, plant and equipment consisted of:


	March 31, 2022		December 31, 2021
Land	$	3,758	$	3,777
Building	57,935		43,921
Right-of-use asset, finance leases	10,865		5,077
Construction in progress	17,866		7,644
Furniture, fixtures and equipment	31,590		31,325
Leasehold improvements	39,656		51,646
Capital assets, gross	$	161,670	$	143,390
Less: accumulated depreciation	(19,602)		(16,593)
Capital assets, net	$	142,068	$	126,797

Depreciation of capital assets for the three months ended March 31, 2022 and 2021 is comprised of $1,111 and $428 of depreciation expense, and $1,922 and $911 that was capitalized to inventory, respectively.

During the three months ended March 31, 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 three months ended March 31, 2022. Refer to Note 3 for further discussion on changes in held-for-sale entities.

F-17


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 ~~and~~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 Information Classification March 31, 2021 December 31, 2020
Right-of-use assets
Operating Operating lease right-of-use assets $ 16,889 $ 17,247
Finance Capital assets, net 4,712 4,776
Total right-of-use assets $ 21,601 $ 22,023
Lease liabilities
Current
Operating Operating lease liability, current $ 1,285 $ 1,492
Non-current
Operating Operating lease liability, non-current 16,331 16,609
Financing Debt, non-current 5,190 5,174
Total lease liabilities $ 22,806 $ 23,275

Statement of Operations Information Classification Three Months Ended March 31,
2021 2020
Short-term lease expense General and administrative $ 88 $ 317
Operating lease expense General and administrative 1,046 2,020
Finance lease expense:
Amortization of right of use asset Depreciation and amortization 63 95
Interest expense on lease liabilities Interest expense 184 215
Sublease income Other loss, net (3) (16)
Net lease cost $ 1,290 $ 2,314


Balance Sheet Information							Balance Sheet Information	Classification	March 31, 2022		December 31, 2021
Right-of-use assets							Right-of-use assets
Operating							Operating	Operating lease right-of-use assets	$	24,571	$	24,598
Finance							Finance	Capital assets, net	10,246		4,522
Total right-of-use assets							Total right-of-use assets		$	34,817	$	29,120

Lease liabilities							Lease liabilities
Current							Current
Operating							Operating	Operating lease liability, current	$	2,343	$	2,145
Financing							Financing	Debt, current	5,786		—
Non-current							Non-current
Operating							Operating	Operating lease liability, non-current	24,146		24,255
Financing							Financing	Debt, non-current	5,257		5,245
Total lease liabilities							Total lease liabilities		$	37,532	$	31,645

Statement of Operations Information							Statement of Operations Information	Classification	Three Months Ended March 31, 2022		Three Months Ended March 31, 2021
Short-term lease expense							Short-term lease expense	General and administrative	$	48	$	88

Operating lease expense							Operating lease expense	General and administrative	1,248		1,046
Finance lease expense:							Finance lease expense:
Amortization of right of use asset							Amortization of right of use asset	Depreciation and amortization	63		63
Interest expense on lease liabilities							Interest expense on lease liabilities	Interest expense	212		184
Sublease income							Sublease income	Other income (loss), net	—		(3)
Net operating and finance lease cost							Net operating and finance lease cost		$	1,523	$	1,290

Statement of Cash Flows Information	Statement of Cash Flows Information	Classification	Three Months Ended March 31,				Statement of Cash Flows Information	Classification	Three Months Ended March 31, 2022		Three Months Ended March 31, 2021
			2021		2020
Cash paid for operating leases	Cash paid for operating leases	Net cash used in operating activities	$	1,437	$	1,493	Cash paid for operating leases	Net cash used in operating activities	$	1,257	$	1,437
Cash paid for finance leases - interest	Cash paid for finance leases - interest	Net cash used in operating activities	$	169	$	196	Cash paid for finance leases - interest	Net cash used in operating activities	$	201	$	169

18F-18


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 March 31, ~~2021:~~2022:


Maturity of lease liabilities	Maturity of lease liabilities	Operating Leases		Finance Leases		Maturity of lease liabilities	Operating Leases(1)		Finance Leases
2021 (1)		$	2,992	$	511
2022	2022	2,949		701		2022	$	3,763	$	6,500
2023	2023	2,849		722		2023	4,823		722
2024	2024	2,912		743		2024	4,537		743
2025	2025	2,960		766		2025	4,554		766
2026						2026	4,453		789
Thereafter	Thereafter	14,184		13,276		Thereafter	20,470		12,486
Total lease payments	Total lease payments	$	28,846	$	16,719	Total lease payments	$	42,600	$	22,006
Less: imputed interest		10,920		11,529
Less: interest						Less: interest	15,006		10,963
Present value of lease liabilities	Present value of lease liabilities	$	17,926	$	5,190	Present value of lease liabilities	$	27,594	$	11,043

Weighted average remaining lease term (years)	Weighted average remaining lease term (years)	8		14		Weighted average remaining lease term (years)	8		2
Weighted average discount rate	Weighted average discount rate	11%		12%		Weighted average discount rate	9%		10%

(1) Includes minimum payments under existing operating leases currently classified as held-for-sale ~~(Refer~~(refer to Note 3 for further discussion).

As of March 31, ~~2021, there have been 0 leases~~2022, the Company entered into 3 lease agreements that have not yet commenced.

The Company will determine the classifications at the respective commencement dates for the leases, but currently expect all of the leases to be classified as operating leases. The lease terms range from
five to ten-year periods with initial payments ranging from $86 per year to $432 per year.

9. INVENTORY

March 31, 2021 December 31, 2020
Retail inventory $ 1,855 $ 1,803
Wholesale inventory 18,459 18,055
Cultivation inventory 3,444 2,317
Supplies & other 1,617 1,540
Total $ 25,375 $ 23,715
The Company’s inventory balance consists of the following:


	March 31, 2022		December 31, 2021
Retail inventory	$	3,630	$	3,331
Wholesale inventory	34,611		28,643
Cultivation inventory	6,988		6,367
Supplies & other	3,469		3,463
Total	$	48,698	$	41,804

19F-19


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

10. DEBT

The Company’s debt balances consist of the following:

Debt balances March 31, 2021 December 31, 2020
NCCRE loan $ 0 $ 470
Seller’s notes 2,581 2,581
Financing liability (related party) 15,253 15,253
Finance lease liabilities 5,190 5,174
3.55% Credit facility due 2021 20,215 20,043
3.55% Credit facility collateral (related party) 20,845 22,169
7.5% Loan due 2023 (related party) 32,203 32,124
6.1% Secured debenture due 2030 (related party) 46,185 46,085
Hempco Foros promissory note 2,000 2,000
Senior secured term loan facility 23,200 22,870
Construction financing loan 6,090 4,438
Canwell promissory note 6,750 7,250
Total debt $ 180,512 $ 180,457
Less: current portion of debt 47,642 27,139
Total long-term debt $ 132,870 $ 153,318


Debt balances	March 31, 2022		December 31, 2021
Financing liability (failed sale-leaseback)	$	15,253	$	15,253
Finance lease liabilities	11,043		5,245
7.50% Loan due April 2026	30,893		30,763
6.10% Secured debenture due September 2030	46,162		46,050
Note due December 2024	4,750		4,750
9.75% Credit facilities due January 2026	68,551		68,673
Total debt	$	176,652	$	170,734
Less: current portion of debt	7,370		1,583
Total long-term debt	$	169,282	$	169,151

~~The interest expense related to the Company’s~~Scheduled maturities of debt, ~~during~~excluding amortization of discount and issuance costs, are as follows:


2022	$	7,321
2023	1,583
2024	1,584
2025	—
2026	108,011
Thereafter	70,547
Total payments (excluding amortization of discount and issuance costs)	$	189,046

During the three months ended March 31, 2022 and 2021, the Company incurred interest expense of $4,781 and ~~2020 consists~~$4,857, respectively, on the Unaudited Condensed Consolidated Statements of Operations. Interest expense for the ~~following:~~

Interest Expense Three Months Ended March 31,
2021 2020
NCCRE loan $ 4 $ 5
Seller’s notes 78 72
Financing liability (related party) 351 591
Finance lease liabilities 184 215
3.55% Credit facility due 2021 599 89
3.55% Credit facility collateral (related party) 674 254
7.5% Loan due 2023 (related party) 689 0
6.1% Secured debenture due 2030 (related party) 863 0
Hempco Foros promissory note 49 0
Senior secured term loan facility 1,366 0
Total interest expense $ 4,857 $ 1,226

~~NCC Real Estate, LLC (“NCCRE”) loan~~

~~NCCRE,~~three months ended March 31, 2022 and 2021 included debt discount amortization of $373 and $260, respectively, and amortization of debt issuance costs of $266 and $852, respectively. As of March 31, 2022 and December 31, 2021, the Company had unamortized discount $5,821 and $6,320, respectively, and debt issuance costs of $6,573 and $6,194, respectively, which is ~~owned by~~netted against the ~~Company’s consolidated subsidiary HSC Solutions, entered into a $550 secured loan with a financial institution for the purchase~~gross carrying value of ~~a building~~long-term debt in ~~Rolling Meadows, Illinois. The building is leased to NCC LLC. The secured loan carries a fixed interest rate~~Debt, non-current on Unaudited Condensed Unaudited Condensed Consolidated Statements of ~~3.7%~~Financial Position. Additionally, as of March 31, 2022 and ~~is due in~~ December ~~2021. In connection with~~31, 2021, the Company ~~acquiring~~had accrued interest of $2,562 and $1,432, respectively, within Interest payable on the ~~remaining non-controlling interests in NCCRE, the secured loan was subsequently repaid in March 2021 (refer to Note 3 for further discussion).~~


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

~~Seller’s notes~~

~~The Company issued Seller’s notes payable in connection with several transactions, bearing interest at rates ranging from 3.5% to 10%.~~

~~Related party debt~~

~~During the year ended December 31, 2019, Kevin Murphy, the Chairman~~Unaudited Condensed Consolidated Statements of the board of directors, made a non-interest bearing loan of $15,000 to Acreage. In January 2020, Mr. Murphy made an additional non-interest bearing loan of $5,000 to Acreage. These amounts were subsequently repaid in March 2020.

~~In October 2020, Mr. Murphy made an interest bearing loan of $2,100 to the Company, bearing interest at 9.9% per annum. This amount was subsequently repaid in November 2020.~~

~~In addition, Mr. Murphy has an interest in the credit facility disclosed below under “3.55% Credit facility and collateral”, in connection with which he loaned $21,000 of the $22,000 borrowed by the Company to the Lender (as defined below), which amount remains outstanding.~~Financial Position.

Financing liability ~~(related party)~~(failed sales leaseback)

In connection with the Company’s failed sale-leaseback transaction (refer to Note 7 for further discussion), 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 ~~derecognized~~de-recognized upon expiration of the lease.

~~3.55% Credit facility and collateral~~

In March 2020, the Company borrowed $21,000 from an institutional lender pursuant to a credit facility. The credit facility permits the Company to borrow up to $100,000, which may be drawn down by the Company in 4 tranches, maturing two years from the date of the first draw down. On the first advance of debt with a term of two years, the Company will pay an annual interest rate of 3.55% for the first year and LIBOR+7% after the first year. Pursuant to the terms of the credit facility, any amounts borrowed are required to be fully collateralized by restricted cash of the aggregate principal amount plus $1,000, which was met as of March 31, 2021. On March 11, 2021, the Company accelerated the maturity date related to this borrowing to June 15, 2021.

~~Also in March 2020, the Company closed $22,000 in borrowings pursuant to a loan transaction with IP Investment Company, LLC (the “Lender~~”). The maturity date is 366 days from the closing date of the loan transaction. The Company will pay monthly interest on the collateral in the form of 27 SVS through the maturity date. The Lender may put any unsold interest shares to the Company upon maturity at a price of $4.50 per share. Mr. Murphy loaned $21,000 of the $22,000 borrowed by the Company to the Lender. The loan is secured by the non-U.S. intellectual property assets, a cannabis state license and 12,000 SVS shares of the Company.

Pursuant to the Amended Arrangement, the monthly interest on the collateral payable to Mr. Murphy was modified to cash payments for the remaining duration of the term at an interest rate of 12% per annum, payable upon maturity. The remaining interest will continue to be paid monthly in the form of 2 Fixed Shares and 1 Floating Share through the maturity date.6.10% Secured debenture due September 2030

~~The Company has determined such equity interest on collateral to be a mandatorily redeemable financial instrument that is recorded as a liability in accordance with ASC 480 -~~ ~~Distinguishing liabilities from equity~~ (“ASC 480”). The liability is calculated based upon the share interest multiplied by the maturity price of $4.50 per share. The equity and cash liability amounted to $28 and $621, respectively as of March 31, 2021 and was recorded in ~~Debt, current~~ ~~within the Statements of Financial Position.~~

On March 7, 2021, the Company extended the maturity date related to the $22,000 in borrowings with the Lender to March 31, 2021. On March 29, 2021, the Company further extended the maturity date of Tranche B of the loan transaction with the Lender, which is $21,000 of the $22,000 aggregate amount of the loan transaction, to June 30, 2021. Tranche A of the loan transaction with the Lender, which is $1,000 of the $22,000 aggregate amount of the loan transaction, was subsequently repaid in April 2021.


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

~~September 2020 Transactions~~

On September 23, 2020, pursuant to the implementation of the Amended Arrangement ~~(refer~~(Refer to Note ~~13)~~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~~”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 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

F-20


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

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.

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~~”“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.

~~Hempco Foros promissory note~~

~~In October 2020, Foros Securities LLC extended a promissory note of $2,000 to~~ On December 16, 2021, the Company ~~bearing interest at 10% per annum.~~paid an amendment fee of $413 to extend the maturity date from September 28, 2023 to April 2, 2026. The ~~promissory note matures at the earlier of July 5, 2021 or the date the principal is repaid in full.~~amendment was treated as a debt extinguishment.

~~Senior secured term loan facility~~

In October 2020, the Company’s subsidiary received initial commitments and funding from a syndicate of lenders for gross proceeds of $28,000 (before origination discounts and issuance costs of approximately $840 and $1,136, respectively) pursuant to a senior secured term loan facility at an annual interest rate of 15% with a maturity of 4 years from closing. The total amount available under the senior secured term loan facility is $70,000. Pursuant to the terms of the senior secured term loan facility, the Company is required to maintain a minimum cash liquidity position, which was met as of March 31, 2021.Note due December 2024

In connection with the advance, the Company issued the lenders an aggregate of 1,557 Fixed Share Warrants with each Fixed Share Warrant exercisable for 1 Fixed Share and 698 Floating Share Warrants with each Floating Share Warrant exercisable for 1 Floating Share. The exercise price of each Fixed Share Warrant is $3.15 and the exercise price of each Floating Share Warrant is $3.01. The warrants are exercisable for a period of 4 years.

~~Construction financing loan~~

In November 2020, the Company entered into a loan agreement with a cannabis-focused real estate investment trust for a construction financing loan in the amount of $13,320 (with transaction costs of approximately $1,399). The loan agreement provides for an annual interest rate of 16% and a term of 18 months. The loan will be used to complete the expansion of the Company’s cultivation and processing factory in Illinois (the “Illinois Property”). The loan is secured by the Illinois Property and is subject to periodic advances to the Company to fund the completion of improvements or real property collateral or fund other amounts as permitted under the loan agreement.

~~CanWell promissory note~~

In November 2020, the Company issued a promissory note ~~to the Canwell LLC (“Canwell”),~~with a third party, which is non-interest bearing and payable based on a payment schedule with 10 payments in the aggregate amount of $7,750 through December 31, ~~2024.~~2024, as a result of a settlement described under the “CanWell Dispute” in Note 13.

9.75% Credit facilities due January 2026

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).


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

The loan is secured by pledged equity interests and substantially all of the assets of the Company. Advances under the facility bear interest at 9.75% per annum (plus an additional 1.0% per annum until certain collateral assignment agreements are delivered) and undrawn amounts (excluding the committed accordion facility until it is available) bear interest at 3.0% per annum.

The loan is subject to various financial covenants, including a fixed charge coverage ratio and two leverage ratios. The Company has obtained a waiver of these 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.

Commencing with the receipt of the of the loan, mandatory prepayments are required from net proceeds of certain sale or disposition activities provided these proceeds are not invested in additional capital assets within 12 months of the disposition date, as defined by the Credit Agreement.

As of March 31, 2022, the $25,000 delayed draw was not drawn upon. Refer to Note 14 for further discussion of the syndicated related party lender.

11. SHAREHOLDERS’ EQUITY AND NON-CONTROLLING INTERESTS

The table below details the change in Pubco shares outstanding by class for the three months ended March 31, ~~2021:~~2022:

Shareholders’ Equity Fixed Shares Floating Shares Fixed Shares Held in Treasury Floating Shares Held in Treasury Fixed Multiple Shares Total Shares Outstanding
December 31, 2020 71,346 30,628 (589) (253) 118 101,250
Issuances 890 900 0 0 0 1,790
NCI conversions 280 120 0 0 0 400
March 31, 2021 72,516 31,648 (589) (253) 118 103,440

~~During the three months ended March 31, 2021, the Company issued 61 Fixed Shares and 28 Floating Shares as compensation for consulting services expense of $300, recorded in~~ ~~Other equity transactions~~ on the Statements of Shareholders’ Equity. Additionally, during the three months ended March 31, 2021, the Company issued 5 Fixed Shares and 2 Floating Shares related to the 3.55% Credit facility and collateral borrowings, recorded in ~~Other equity transactions~~ ~~on the Statements of Shareholders’ Equity.~~

Pursuant to the Amended Arrangement, on September 23, 2020, Acreage completed a capital reorganization whereby (i) each existing SVS was exchanged for 0.7 of a Fixed Share and 0.3 of a Floating Share; (ii) each existing PVS was exchanged for 28 Fixed Shares and 12 Floating Shares; and (iii) each existing MVS was exchanged for 0.7 of a Fixed Multiple Share and 0.3 of a Floating Share. No fractional Fixed Shares, Fixed Multiple Shares or Floating Shares were issued pursuant to the Capital Reorganization. Refer to Note 13 for further discussion.

~~The table below details the change in Pubco shares outstanding by class for the three months ended March 31, 2020:~~

Shareholders’ Equity Subordinate Voting Shares Subordinate Voting Shares Held in Treasury Proportionate Voting Shares (as converted) Multiple Voting Shares Total Shares Outstanding
December 31, 2019 68,177 (842) 23,143 168 90,646
Issuances 6,671 0 0 0 6,671
NCI conversions 113 0 0 0 113
PVS conversions 294 0 (294) 0 0
March 31, 2020 75,255 (842) 22,849 168 97,430

~~Warrants~~

~~A summary of the warrants activity outstanding is as follows:~~

Warrants Three Months Ended
March 31, 2021 Three Months Ended
March 31, 2020
Fixed Shares Floating Shares SVS
Beginning balance 7,131 3,087 2,040
Granted 0 0 6,085
Expired 0 0 0
Ending balance 7,131 3,087 8,125

On February 10, 2020, the Company raised $27,887, net of issuance costs, from a private placement of 6,085 special warrants priced at $4.93 per unit. Each special warrant was automatically exercised on March 2, 2020 for no additional consideration, into one unit comprised of 1 SVS and 1 SVS purchase warrant with an exercise price of $5.80 and a five-year term. Pursuant to the Amended Arrangement, the exercise price was thereafter amended to $4.00. Refer to Note 13 for further discussion. The Company evaluated the warrants for liability or equity classification in accordance with ASC 480 and determined that equity treatment was appropriate as the warrants only require settlement through the issuance of the Company’s common stock, which are not redeemable, and do not represent an obligation to issue a variable number of shares. Accordingly, the warrants were classified as equity and are not subject to remeasurement at each balance sheet date.


Shareholders’ Equity	Fixed Shares	Floating Shares	Fixed Shares Held in Treasury	Floating Shares Held in Treasury	Fixed Multiple Shares	Total Shares Outstanding



December 31, 2021	74,665	32,962	(589)	(253)	118	106,903
Issuances	255	253	—	—	—	508

March 31, 2022	74,920	33,215	(589)	(253)	118	107,411

23F-21


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

~~In November 2020, in connection with~~Warrants

A summary of the senior secured credit term loan facility, the Company issued an aggregate of 1,557 Fixed Share Warrants with each Fixed Share Warrant exercisable for 1 Fixed Share and 698 Floating Share Warrants with each Floating Share Warrant exercisable for 1 Floating Share. warrants activity outstanding is as follows:


Warrants	Fixed Shares	Floating Shares
December 31, 2021	5,817	2,524

Expired	—	—

March 31, 2022	5,817	2,524

The exercise price of each Fixed and Floating Share ~~Warrant~~warrant is $3.15 and ~~the exercise price of each Floating Share Warrant is $3.01.~~$3.01, respectively. The warrants are exercisable for a period of 4 years. ~~Refer to Note 10 for further discussion.~~

Pursuant to the Amended Arrangement, the exercise price of all other warrants outstanding as of March 31, 2021 is $17.50 and $7.50 per Fixed Share and Floating Share, respectively. Refer to Note 13 for further discussion.

The weighted-average remaining contractual life of the warrants outstanding is approximately 32.9 years. ~~The aggregate intrinsic value for Fixed Share Warrants and Floating Share Warrants outstanding as of March 31, 2021~~There was ~~$8,886 and NaN, respectively.~~

~~The exercise price of all warrants outstanding as of March 31, 2020 was $25 per share and there was 0~~no aggregate intrinsic value for warrants outstanding as of March 31, ~~2020.~~2022.

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 March 31, ~~2021~~2022 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 reconciliation March 31, 2021 December 31, 2020
Current assets $ 149,321 $ 144,938
Non-current assets 415,196 410,269
Current liabilities (109,348) (80,649)
Non-current liabilities (150,765) (171,485)
Other NCI balances (702) (742)
Accumulated equity-settled expenses (212,656) (206,315)
Net assets $ 91,046 $ 96,016
HSCP/USCo2 ownership % of HSCP 18.12 % 18.68 %
Net assets allocated to USCo2/HSCP $ 16,498 $ 17,936
Net assets attributable to other NCIs 702 742
Total NCI $ 17,200 $ 18,678


HSCP net asset reconciliation							HSCP net asset reconciliation	March 31, 2022			December 31, 2021
Current assets							Current assets	$	103,620		$	113,011
Non-current assets							Non-current assets	391,449			375,807
Current liabilities							Current liabilities	(38,437)			(29,256)
Non-current liabilities							Non-current liabilities	(195,686)			(195,791)
Other NCI balances							Other NCI balances	(718)			(718)
Accumulated equity-settled expenses							Accumulated equity-settled expenses	(230,756)			(226,596)
Net assets							Net assets	$	29,472		$	36,457
HSCP/USCo2 ownership % of HSCP							HSCP/USCo2 ownership % of HSCP	17.18		%	17.24		%
Net assets allocated to USCo2/HSCP							Net assets allocated to USCo2/HSCP	$	5,063		$	6,285
Net assets attributable to other NCIs							Net assets attributable to other NCIs	718			718
Total NCI							Total NCI	$	5,781		$	7,003

		Three Months Ended March 31,				Three Months Ended March 31,
HSCP Summarized Statement of Operations	HSCP Summarized Statement of Operations	2021		2020			HSCP Summarized Statement of Operations	2022			2021
Net loss allocable to HSCP/USCo2	Net loss allocable to HSCP/USCo2	(4,549)		(235,203)			Net loss allocable to HSCP/USCo2	$	(7,080)		$	(4,549)
HSCP/USCo2 weighted average ownership % of HSCP	HSCP/USCo2 weighted average ownership % of HSCP	18.40	%	21.15	%		HSCP/USCo2 weighted average ownership % of HSCP	17.21		%	18.40		%
Net loss allocated to HSCP/USCo2	Net loss allocated to HSCP/USCo2	(837)		(49,745)			Net loss allocated to HSCP/USCo2	$	(1,218)		$	(837)
Net loss allocated to other NCIs	Net loss allocated to other NCIs	4		(530)			Net loss allocated to other NCIs	1			4
Net loss attributable to NCIs	Net loss attributable to NCIs	(833)		(50,275)			Net loss attributable to NCIs	$	(1,217)		$	(833)

As of March 31, ~~2021,~~2022, USCo2’s non-voting shares owned approximately ~~0.53%~~0.51% of HSCP units. USCo2’s capital structure is comprised of voting shares (approximately ~~71%~~71.33%), all of which are held by the Company, and of non-voting shares (approximately ~~29%~~28.67%) held by certain former HSCP members. Certain executive employees and profits interests holders own approximately ~~17.59%~~16.67% of HSCP units. The remaining ~~81.88%~~82.82% interest in HSCP is held by USCo and represents the members’ equity attributable to shareholders of the parent.

During the three months ended March 31, 2021, ~~and 2020,~~ the Company had several transactions with HSCP and USCo2 that changed its ownership interest in the subsidiaries but did not result in loss of control. These transactions included business acquisitions and the


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

redemption of HSCP and USCo2 convertible units for Pubco shares (as shown in the table below), and resulted in a $(601) ~~and $6,564~~ allocation from NCI to shareholders' equity for the three months ended March 31, ~~2021 and 2020, respectively.~~2021.

During the year ended December 31, 2020, Pubco, by way of Acreage CCF New Jersey, LLC, acquired 100% of the operations of CCF for total consideration of $20,087. Pubco subsequently transferred the ownership of Acreage CCF New Jersey, LLC to HSCP by way of issuance of $10,000 HSCP units at closing price.

F-22


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

A reconciliation of the beginning and ending amounts of convertible units is as follows:


		Three Months Ended March 31,			Three Months Ended March 31,
Convertible Units	Convertible Units	2021	2020	Convertible Units	2022	2021
Beginning balance	Beginning balance	24,142	25,035	Beginning balance	23,076	24,142

Vested LLC C-1s canceled	Vested LLC C-1s canceled	0	(1,310)	Vested LLC C-1s canceled	—	—
LLC C-1s vested	LLC C-1s vested	0	1,000	LLC C-1s vested	—	—

NCI units converted to Pubco	NCI units converted to Pubco	(400)	(113)	NCI units converted to Pubco	—	(400)
Ending balance	Ending balance	23,742	24,612	Ending balance	23,076	23,742

12. EQUITY-BASED COMPENSATION EXPENSE

~~Equity-based compensation expense recognized in the Statements of Operations for the periods presented is as follows:~~

Equity-based compensation expense Three Months Ended March 31,
2021 2020
Equity-based compensation - Plan $ 3,684 $ 19,290
Equity-based compensation - Plan (Plan of Arrangement Awards) (1)
2,358 0
Equity-based compensation - other 0 15,447
Total equity-based compensation expense $ 6,042 $ 34,737

~~(1)In accordance with the Prior Plan of Arrangement (as defined in Note 13) with Canopy Growth, awards were granted in July 2019, and amortized based on the vesting schedule set forth herein.~~

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 ~~May 7, 2019 and June 19, 2019 and~~ 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.


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

As of March 31, 2022, the Company had 11,595 shares authorized and available for grant under the Plan.

Restricted Share Units (“RSUs”)

Three Months Ended March 31, 2021
Fixed Shares Floating Shares
Restricted Share Units
(Fair value information expressed in whole dollars)
RSUs Weighted Average Grant Date Fair Value RSUs Weighted Average Grant Date Fair Value
Unvested, beginning of the period (1)
5,119 $ 9.24 2,688 $ 7.83
Granted 147 $ 5.34 182 $ 3.03
Forfeited (211) $ 3.68 (92) $ 3.60
Vested (706) $ 4.85 (387) $ 4.46
Unvested, end of period 4,349 $ 10.09 2,391 $ 8.17
Vested and unreleased 92 $ 14.22 40 $ 14.22
Outstanding, end of period 4,441 $ 10.17 2,431 $ 8.27


	Fixed Shares			Floating Shares
Restricted Share Units (Fair value information expressed in whole dollars)	RSUs	Weighted Average Grand Date Fair Value		RSUs	Weighted Average Grand Date Fair Value
Unvested, January 1, 2022	3,188	$	7.30	1,262	$	7.39
Granted	28	$	1.35	95	$	1.19
Forfeited	(177)	$	2.55	(21)	$	2.47
Vested	(841)	$	8.81	(395)	$	8.00
Unvested, March 31, 2022	2,198	$	7.03	941	$	6.62
Vested and unreleased(1)	718	$	10.70	310	$	10.37
Outstanding, March 31, 2022	2,916	$	7.94	1,251	$	7.55

(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 ~~are~~is based on the Company’s share price on the date of the grant. The Company recorded ~~$5,024~~$3,877 and $5,025 as Equity-based compensation expense on Unaudited Condensed Consolidated Statements of Operations during the three months ended March 31, ~~2021.~~2022 and 2021, respectively. The fair value of RSUs vested during the three months ended March 31, 2022 and 2021 was ~~$5,667.~~$1,882 and $5,667, respectively.

The total weighted average remaining contractual life and aggregate intrinsic value of unvested RSUs atas of March 31, ~~2021~~2022 was approximately ~~2 years~~1 year and ~~$29,888,~~$4,897, respectively. Unrecognized compensation expense related to these awards at March 31, ~~2021~~2022 was ~~$78,501~~$12,340 and is expected to be recognized over a weighted average period of approximately ~~2 years.~~

~~There were 92 Fixed RSUs and 40 Floating RSUs that were pending delivery or deferred as of March 31, 2021.~~

~~(1) Equity-based compensation - Plan (Plan of Arrangement Awards)~~

~~Included within the RSUs during the three months ended March 31, 2021 are “Plan of Arrangement Awards” issued in connection with the RSUs which were granted in June and July 2019:~~

On June 27, 2019, pursuant to the Original Arrangement Agreement (as defined in Note 13), 4,909 RSUs were awarded in total to 5 executive employees under the Plan. These awards vest as follows: 25% in June 2020, 25% in June 2021 and 50% three months following the Acquisition (as defined in Note 13). The Company recorded $1,908 as compensation during the three months ended March 31, 2021 in connection with these awards. A discount for lack of marketability was applied that correlates to the period of time certain of these shares are subject to restriction.

On July 31, 2019, the Company issued 1,778 RSUs to employees with unvested RSUs and stock options ("make-whole awards") as at the date of the Option Premium payment (as defined in Note 13). The RSUs were issued to provide additional incentive for employees that were not eligible to receive the full Option Premium and were subject to the same vesting terms as the unvested options and RSUs held as of the grant date. The Company recorded $450 as compensation expense during the three months ended March 31, 2021 in connection with these awards.1 year.

26F-23


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

Stock options

Three Months Ended March 31, 2021
Fixed Shares Floating Shares
Stock Options
(Exercise price expressed in whole dollars)
Options Weighted Average Exercise Price Options Weighted Average Exercise Price
Options outstanding, beginning of period 1,556 $ 11.18 1,818 $ 3.12
Granted 24 7.22 334 3.35
Forfeited (69) 9.64 (29) 4.13
Exercised 0 0 0 0
Options outstanding, end of period 1,511 $ 11.19 2,123 $ 3.14
Options exercisable, end of period 881 $ 15.01 1,346 $ 3.28


	Fixed Shares			Floating Shares
Stock Options (Exercise price expressed in whole dollars)	Options	Weighted Average Exercise Price		Options	Weighted Average Exercise Price
Options outstanding, January 1, 2022	1,529	$	11.07	2,414	$	3.06

Forfeited	(4)	$	13.14	(1)	$	5.63


Options outstanding, March 31, 2022	1,525	$	11.07	2,413	$	3.06

Options exercisable, March 31, 2022	1,195	$	13.06	1,894	$	3.15

Stock options of the Company generally vest over a period of three years and options granted to certain executives vest based on achievement of specific performance conditions. Stock options of the Company have an expiration period of 5 ~~years~~ or 10 years from the date of grant. The weighted average contractual life remaining for Fixed Share options outstanding and exercisable as of March 31, ~~2021~~2022 was approximately 6 ~~years.~~and 7 years, respectively. The weighted average contractual life remaining for Floating Share options outstanding and exercisable as of March 31, 2022 was approximately 5 and 5 years, respectively. The Company recorded $282 and $1,017 as Equity-based compensation expense on Unaudited Condensed Consolidated Statements of Operations during the three months ended March 31, 2022 and 2021, respectively, in connection with these awards.

As of March 31, ~~2021,~~2022, unamortized expense related to stock options totaled ~~$4,021~~$1,241 and is expected to be recognized over a weighted-average period of approximately 1 year. As of March 31, ~~2021,~~2022, the aggregate intrinsic value for unvested options and for vested and exercisable options was ~~$2,034.~~nil, respectively.

~~Equity-based compensation - other~~

~~HSCP C-1 Profits Interests Units (“Profits Interests”)~~

These membership units qualify as profits interests for U.S. federal income tax purposes and were accounted for in accordance with ASC 718, Compensation - Stock Compensation. HSCP amortizes awards over the related service periods and until awards are fully vested.

The Company recorded $70 as compensation expense in connection with these awards during the three months ended March 31, 2020. The fair value of Profits Interests vested during the three months ended March 31, 2020 was $1,239.

~~As of March 31, 2020, all Profits Interests were fully vested.~~

~~Restricted Shares (“RSs”)~~

In connection with the Company’s acquisition of Form Factory during 2019, 1,369 restricted shares with a grant date fair value of $20.45 were issued to former employees of Form Factory subject to future service conditions, which fully vest 24 months from the acquisition date. The fair value for RSs is based on the Company’s share price on the date of the grant. The Company recorded compensation expense of $15,377 during the three months ended March 31, 2020, in connection with these awards.

~~As of December 31, 2020, all RSs were fully vested.~~

13. COMMITMENTS AND CONTINGENCIES

Commitments

The Company provides revolving lines of credit to several third parties. As of ~~its portfolio companies. Refer~~March 31, 2022, the maximum obligation under these arrangements was $15,150 (refer to Note 6 for further ~~discussion.~~discussion).


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

Prior Plan of Arrangement with Canopy Growth

On June 19, 2019, the shareholders of the Company and of Canopy Growth separately approved the proposed plan of arrangement (the “Prior Plan of Arrangement”) involving the 2 companies, and on June 21, 2019, the Supreme Court of British Columbia granted a final order approving the Prior Plan of Arrangement. Effective June 27, 2019, the articles of the Company were amended pursuant to the Prior Plan of Arrangement to provide that, upon the occurrence (or waiver by Canopy Growth) of the Triggering Event, and subject to the satisfaction of the conditions set out in the arrangement agreement entered into between Acreage and Canopy Growth on April 18, 2019, as amended on May 15, 2019 (the “Original Arrangement Agreement”), Canopy Growth will acquire (the “Acquisition”) all of the issued and outstanding shares in the capital of the Company (each, an “Acreage Share”). Under the terms of the Original Arrangement Agreement, holders of Acreage Shares and certain securities convertible or exchangeable into SVS as of the close of business on June 26, 2019, received approximately $2.63, being their pro rata portion (on an as converted to SVS basis) of $300,000 (the “Option Premium”) paid by Canopy Growth.

~~HSCP unit holders are required to convert their units within three years following the closing of the Acquisition as will holders of non-voting shares of USCo2.~~

Second Amendment to the Arrangement Agreement with Canopy Growth

On June 24, 2020, Acreage and Canopy Growth entered into a proposal agreement (the “Proposal Agreement”) which set out, among other things, the terms and conditions upon which the parties were proposing to enter into an amending agreement (the “Amending Agreement”) to amend the Original Arrangement Agreement, amend and restate the Prior Plan of Arrangement (the “Amended Plan of Arrangement”) and implement the Amended Plan of Arrangement pursuant to the Business Corporations Act (British Columbia). The effectiveness of the amendment to the Original Arrangement Agreement and the implementation of the Amended Plan of Arrangement was subject to the conditions set out in the Proposal Agreement, which included, among others, approval by (i) the Supreme Court of British Columbia at a hearing upon the procedural and substantive fairness of the terms and conditions of the Amended Arrangement; and (ii) the shareholders of Acreage as required by applicable corporate and securities laws.

~~Following the satisfaction of various conditions set forth in the Proposal Agreement, on~~ September 23, 2020, Acreage and Canopy Growth entered into ~~the Amending Agreement~~an amending agreement (the “Amending Agreement” or “Amended Arrangement”) (and together with the Original Arrangement Agreement and any further amendments thereto, the ~~“Arrangement Agreement”~~“Amended Plan of Arrangement”) and ~~implemented~~ the Amended Arrangement became effective at 12:01 a.m. (Vancouver time) (the “Amendment Time”) on September 23, 2020 (the “Amendment Date”). Pursuant to the Amended Plan of Arrangement, Canopy Growth made a cash payment of $37,500 which was delivered to Acreage’s shareholders and certain holders of securities convertible or exchangeable into shares of Acreage. Acreage also completed a capital reorganization (the “Capital Reorganization”) effective as of the Amendment Time whereby: (i) each existing SVS was exchanged for 0.7 of a Fixed Share and 0.3 of a Floating Share; (ii) each issued and outstanding PVS was exchanged for 28 Fixed Shares and 12 Floating Shares; and (iii) each issued and outstanding MVS was exchanged for 0.7 of a Fixed Multiple Share and 0.3 of a Floating Share.

At the Amendment Time, ~~on the terms and subject to the conditions of the Amended Plan of Arrangement,~~ each option, restricted share unit, compensation option, and warrant to acquire existing SVS (each a “Security”) that was outstanding immediately prior to the Amendment Time was exchanged for a replacement ~~option, restricted stock unit, compensation option or warrant, as applicable,~~Security to acquire Fixed Shares (a “Fixed Share Replacement Security”) ~~and a replacement option, restricted stock unit, compensation option~~ or ~~warrant, as applicable, to acquire~~ Floating Shares (a “Floating Share Replacement Security”) ~~in order~~ to account for the Capital Reorganization.

F-24


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

Pursuant to the Amended Plan of Arrangement, upon the occurrence or waiver (at the discretion of Canopy Growth) of the Triggering Event (the “Triggering Event Date”), Canopy Growth will, subject to the satisfaction or waiver of certain closing conditions set out in the ~~Arrangement Agreement:~~Amended Plan of Arrangement: (i) acquire all of the issued and outstanding Fixed Shares (following the mandatory conversion of the Fixed Multiple Shares into Fixed Shares) on the basis of 0.3048 of a common share of Canopy Growth (each whole common share, a “Canopy Growth Share”) for each Fixed Share held (the “Fixed Exchange Ratio”) at the time of the acquisition of the Fixed Shares (the “Acquisition Time”), subject to adjustment in accordance with the terms of the Amended Plan of Arrangement (the “Canopy Call Option”); and (ii) have the right (but not the obligation) ~~(the “Floating Call Option”)~~, exercisable for a period of 30 days following the Triggering Event Date to acquire all of the issued and outstanding Floating Shares (the “Floating Call Option”) at a price to be determined based upon the 30 day volume-weighted average trading price of the Floating Shares, subject to a minimum price of $6.41, as may be adjusted in accordance with the terms of the Amended Plan of Arrangement, to be payable, at the option of Canopy Growth, in cash, Canopy Growth Shares, or a combination thereof. If any portion is paid in Canopy Growth Shares, the number of Canopy Growth Shares to be exchanged for each Floating Share shall


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

be determined on the basis of a 30 day volume-weighted average calculation using the Floating Shares (the “Floating Ratio”). The closing of the acquisition of the Floating Shares pursuant to the Floating Call Option, if exercised, will take place concurrently with the closing of the acquisition of the Fixed Shares pursuant to the Canopy Call Option, if exercised. The Canopy Call Option and the Floating Call Option will expire 10 years from the Amendment ~~Time.~~Date.

At the Acquisition Time ~~on the terms and subject to the conditions of the Amended Plan of Arrangement,~~ each Fixed Share Replacement Security will be exchanged for a replacement ~~option, restricted stock unit, compensation option or warrant, as applicable, to acquire~~Security from Canopy Growth ~~such number of Canopy Growth Shares as is~~ equal to: (i) the number of Fixed Shares that were issuable upon exercise of such Fixed Share Replacement Security immediately prior to the Acquisition Time, multiplied by (ii) the Fixed Exchange Ratio in effect immediately prior to the Acquisition Time ~~(provided that if~~(if the foregoing would result in the issuance of a fraction of a Canopy Growth Share, then the number of ~~Canopy Growth~~ Shares to be issued ~~will~~would be rounded down to the nearest whole number).

In the event that the Floating Call Option is exercised and Canopy Growth acquires the Floating Shares at the Acquisition Time, ~~on the terms and subject to the conditions of the Amended Plan of Arrangement,~~ each Floating Share Replacement Security will be exchanged for a replacement ~~option, restricted stock unit, compensation option or warrant, as applicable, to acquire~~Security from Canopy Growth ~~such number of Canopy Growth Shares as is~~ equal to: (i) the number of Floating Shares that were issuable upon exercise of such Floating Share Replacement Security immediately prior to the Acquisition Time, multiplied by (ii) the Floating Ratio ~~(provided that if~~(if the foregoing would result in the issuance of a fraction of a Canopy Growth Share, then the number of ~~Canopy Growth~~ Shares to be issued ~~will~~would be rounded down to the nearest whole number).

In the event that the Floating Call Option is exercised and Canopy Growth acquires the Floating Shares at the Acquisition Time, Acreage will be a wholly-owned subsidiary of Canopy Growth.

The ~~Amending Agreement also~~Amended Plan of Arrangement provides for, among other things, ~~amendments~~Amendments to the definition of Purchaser Approved Share Threshold (as defined ~~in the Arrangement Agreement)~~therein) to change the number of Acreage shares ~~of Acreage~~ available to be issued by Acreage without an adjustment in the Fixed Exchange Ratio such that Acreage may issue a maximum of 32,700 shares (or convertible securities in proportion to the foregoing), which will include (i) 3,700 Floating Shares which are to be issued solely in connection with the exercise of stock options granted toshares. Furthermore, Acreage management (the “Option Shares”); (ii) 8,700 Floating Shares other than the Option Shares; and (iii) 20,300 Fixed Shares. Notwithstanding the foregoing, the Amending Agreement provides that Acreagegenerally may not issue any equity securities without Canopy Growth’s prior ~~consent, other than: (i) upon~~consent. Additionally, the ~~exercise or conversion~~Amended Plan of convertible securities outstanding as of the Amendment Date; (ii) contractual commitments existing as of the Amendment Date; (iii) the Option Shares; (iv) the issuance of up to $3,000 worth of Fixed Shares pursuant to an at-the-market offering to be completed no more than four times during any one-year period; (v) the issuance of up to 500 Fixed Shares in connection with debt financing transactions that are otherwise in compliance with the terms of the Arrangement ~~Agreement, as amended by the Amending Agreement; or (vi) pursuant to 1 private placement or public offering of securities during any one-year period~~allows for ~~aggregate gross proceeds of up to $20,000, subject to specific limitations as set out in the Amending Agreement.~~

~~In addition, the Amending Agreement provides for, among other things: (i)~~ various Canopy Growth rights that extend beyond the Acquisition Date, ~~and continue until Canopy Growth ceases to hold at least 35% of the issued and outstanding Acreage shares (such date being the “End Date”),~~ including, among others, (i) rights to nominate a majority of Acreage’s Board of Directors ~~(the “Acreage Board”)~~ following the Acquisition ~~Time, restrictions on Acreage’s ability to incur certain indebtedness without Canopy Growth’s consent;~~Time; (ii) restrictive covenants in respect of the business conduct in favor of Canopy Growth; (iii) termination of non-competition and exclusivity rights granted to Acreage by Canopy Growth in the ~~Arrangement Agreement in the~~ event that Acreage does not meet certain specified financial ~~targets on an annual basis during the term of the Canopy Call Option as further described below;~~targets; (iv) implementation of further restrictions on Acreage’s ability to operate its business ~~including its ability to hire certain employees or make certain payments or incur any non-trade-payable debt without Canopy Growth’s consent~~ in the event that Acreage does not meet certain specified financial ~~targets on a quarterly basis during the term of the Canopy Call Option as further described below;~~targets; and (v) termination of the ~~Arrangement Agreement and Canopy Growth’s obligation to complete the acquisition~~Amended Plan of ~~the Fixed Shares pursuant to the Canopy Call Option~~Arrangement in the event that Acreage does not meet certain specified financial targets in the trailing 12 month ~~period as further described below. Each~~period. Further, the Amended Plan of ~~the financial targets referred to above is specified in the Amending Agreement and related to the performance of~~Arrangement imposes restrictions on Acreage ~~relative to a business plan for Acreage for each fiscal year ended December 31, 2020 through December 31, 2029 set forth in the Proposal Agreement (the “Initial Business Plan”).~~


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

~~The Amending Agreement precludes Acreage from~~ entering into any ~~contract~~contracts in respect of Company Debt ~~(as defined in the Arrangement Agreement) if, among other restrictions:~~if: (i) such contract would be materially inconsistent with market standards for companies operating in the United States cannabis industry; (ii) such contract prohibits a prepayment of the principal amount of such Company Debt, requires a make-whole payment for the interest owing during the remainder of the term of such contract or charges a prepayment fee in an amount greater than 3.0% of the principal amount to be repaid;Debt; and (iii) such contract would provide for interest payments to be paid through the issuance of securities as opposed to ~~cash; or (iv) such contract has a principal amount~~cash, among other restrictions. The Amended Plan of more than $10,000 or a Cost of Capital (as defined in the Amending Agreement) that is greater than 30.0% per annum; provided that, if such Company Debt is fully secured by cash in a blocked account, the Cost of Capital may not be greater than 3.0% per annum. Notwithstanding the foregoing, Canopy Growth’s consent will not be required for Acreage or any of its subsidiaries to enter into a maximum of 2 transactions for Company Debt that would require consent based on the foregoing during any one-year period, in accordance with the following terms: (i) the principal amount of the Company Debt per transaction may not exceed $10,000, (ii) the Company Debt is not convertible into any securities; and (iii) the contract does not provideArrangement also provides for the ~~issuance of more than 500 Acreage shares (or securities convertible into or exchangeable for 500 Acreage shares).~~

~~The Amending Agreement also provides for~~following: (i) certain financial reporting obligations ~~and that Acreage may not nominate or appoint any new director or appoint any new officer that does not meet certain specified criteria. The Amending Agreement also requires Acreage~~ to ~~submit a business plan to Canopy Growth on a quarterly basis that complies with~~Canopy; (ii) certain specified criteria including the Initial Business Plan. In the event that Acreage has not satisfied: (i) 90% of the minimum revenue and earnings targets set forth in the Initial Business Plan measured on a quarterly basis, certain additional restrictive covenants will become operative as austerity measures for Acreage’s business; (ii) 80% of the minimum revenue and earnings targets set forth in the Initial Business Plan, as determined on an annual basis, certain restrictive covenants applicablerelated to ~~Canopy Growth under the Arrangement Agreement will cease to apply in order to permit Canopy Growth to acquire,~~any new directors or ~~conditionally acquire, a competitor~~officers of Acreage, ~~in the United States should it wish~~(iii) a limit to do so; and (iii) 60% of the minimum revenue and earnings targets set forth in the Initial Business Plan for the trailing 12 month period ending on the date that is 30 days prior to the proposed Acquisition Time, a material adverse impact will be deemed to have occurred for purposes of Section 6.2(2)(h) of the Arrangement Agreement and Canopy Growth will not be required to complete the acquisition of the Fixed Shares pursuant to the Canopy Call Option.

~~The Amending Agreement also requires Acreage to limit its~~Acreage’s operations to the Identified States (as defined in the Amending Agreement). In connection with the execution of the Proposal Agreement, Acreage was provided with consent from Canopy Growth to divest of all assets outside of the Identified States (the “Non-Core Divestitures”)therein).

In addition, the Amending Agreement includes certain covenants that will apply following the Acquisition Time until the earlier of the date on which the Floating Shares are acquired by Canopy Growth or the End Date. Such covenants include, among others, pre-emptive rights and top-up rights in favor of Canopy Growth, restrictions on M&A activities, approval rights for Acreage’s quarterly business plan, nomination rights for a majority of the directors on the Acreage Board and certain audit and inspection rights.

Debenture

In connection with the implementation of the Amended Arrangement, pursuant to a secured debenture dated September 23, 2020 (the “Debenture”) issued by Universal Hemp, LLC, an affiliate of Acreage that operates solely in the hemp industry in full compliance with all applicable laws (the “Borrower”), to 11065220 Canada Inc., an affiliate of Canopy Growth (the “Lender”), the Lender agreed to provide a loan of up to $100,000 (the “Loan”), $50,000 of which was advanced on the Amendment Date (the “Initial Advance”), and $50,000 of the Loan will be advanced in the event that the following conditions, among others, are satisfied: (a) the Borrower’s EBITDA (as defined in the Debenture) for any 90 day period is greater than or equal to 2.0 times the interest costs associated with the Initial Advance; and (b) the Borrower’s business plan for the 12 months following the applicable 90 day period supports an Interest Coverage Ratio (as defined in the Debenture) of at least 2.00:1.

F-25


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

The principal amount of the Loan will bear interest from the date of advance, compounded annually, and be payable on each anniversary of the date of the Debenture in cash in U.S. dollars at a rate of 6.1% per annum. The Loan will mature 10 years from the date of the Initial Advance.

The Loan must be used exclusively for U.S. hemp-related operations and on the express condition that such amount will not be used, directly or indirectly, in connection with or for the operation or benefit of any of the Borrower’s affiliates other than subsidiaries of the Borrower exclusively engaged in U.S. hemp-related operations and not directly or indirectly, towards the


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

operation or funding of any activities that are not permissible under applicable law. The Loan proceeds must be segregated in a distinct bank account and detailed records of debits to such distinct bank account will be maintained by the Borrower.

No payment due and payable to the Lender by the Borrower pursuant to the Debenture may be made using funds directly or indirectly derived from any cannabis or cannabis-related operations in the United States, unless and until the Triggering Event Date.

The Debenture includes usual and typical events of default for a financing of this nature, including, without limitation, if: (i) Acreage is in breach or default of any representation or warranty in any material respect pursuant to the Arrangement Agreement; (ii) the Non-Core Divestitures are not completed within 18 months from the Amendment Date; and (iii) Acreage fails to perform or comply with any covenant or obligation in the Arrangement Agreement which is not remedied within 30 days after written notice is given to the Borrower by the Lender. The Debenture also includes customary representations and warranties, positive covenants and negative covenants of the Borrower.

Surety bonds

The Company has indemnification obligations with respect to surety bonds primarily used as security against non-performance in the amount of $5,000 as of March 31, ~~2021,~~2022, for which no liabilities are recorded on the Unaudited Condensed Consolidated Statements of Financial Position.

The Company is subject to other capital commitments and similar obligations. As of March 31, ~~2021~~2022 and ~~2020,~~2021, such amounts were not material.

~~Contingencies~~CanWell Settlement

In November 2020, the Company entered into a final confidential settlement agreement with CanWell, LLC for certain outstanding proceedings. As part of that agreement, the Company accrued for $7,750 in Legal settlements, net on the Statements of Operations for the year ended December 31, 2020. In connection with this settlement agreement, the Company issued a promissory note in the amount of $7,750 to CanWell, which is non-interest bearing and is payable in periodic payments through December 31, 2024. Through March 31, ~~2021,~~2022, the Company ~~had consulting fees payable in Fixed Shares and Floating Shares which are contingent upon successful acquisition~~has paid $3,000 of ~~certain state cannabis licenses. The Company had maximum obligations of $8,750 and 238 Fixed Shares and 102 Floating Shares. No reserve for~~ the ~~contingencies has been recorded as of March 31, 2021.~~promissory note.

Contingencies

The Company’s operations are subject to a variety of local and state regulations. Failure to comply with one or more of those regulations could result in fines, restrictions on its operations, or losses of permits that could result in the Company’s applicable subsidiaries ceasing operations. While management of the Company believes that the Company’s subsidiaries are in compliance with applicable local and state regulations as of March 31, ~~2021,~~2022, cannabis regulations continue to evolve and are subject to differing interpretations. As a result, the Company’s subsidiaries may be subject to regulatory fines, penalties, or restrictions in the future.

The Company and its subsidiaries may be, from time to time, subject to various administrative, regulatory and other legal proceedings arising in the ordinary course of business. Contingent liabilities associated with legal proceedings are recorded when a liability is probable, and the contingent liability can be reasonably estimated.

~~Standby Equity Distribution Definitive Agreement~~

On May 29, 2020, the Company entered into an agreement with an institutional lender for $50,000 of financing commitments under a Standby Equity Distribution Agreement (“SEDA”). The investor may, at its discretion, purchase, and the Company may, at its discretion, periodically sell to the investor, up to $50,000 of subordinate voting shares of the Company at a purchase price of 95% of the market price over the course of 24 months from the effective date. Pursuant to the SEDA, investor may, at its discretion, purchase, and the Company may, at its discretion, periodically sell to the investor, up to $35,000 and $15,000 of the Company’s Fixed Shares and Floating Shares, respectively. In consideration for entering the SEDA, the Company issued the investor 200 SVS as commitment shares. Pursuant to the Amended Arrangement, these SVS shares have since been exchanged for 140 Fixed Shares and 60 Floating Shares.

On each of September 28, 2020 and January 25, 2021, the Company entered into letter agreements (the “Letter Agreements”) with the institutional investor extending the termination deadline of the SEDA to the earliest of November 30, 2020 and June 30, 2021, respectively, and the date that the Company has obtained both a receipt from the Ontario Securities Commission for a short-form final base shelf prospectus and a declaration from the United States Securities and Exchange Commission that its registration statement is effective, in each case qualifying an At-The-Market equity offering program. On March 11, 2021, the SEDA termination deadline was further extended to April 15, 2022.


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

New York outstanding litigation

On November 2, 2018, EPMMNY LLC (“EPMMNY”) filed a complaint in the Supreme Court of the State of New York, County of New York, asserting claims against 16 defendants, including NYCANNA, Impire State Holdings LLC, NY Medicinal Research & Caring, LLC (each, a wholly-owned subsidiary of High Street) and High Street. The Index Number for the action is 655480/2018. EPMMNY alleges that it was wrongfully deprived of a minority equity interest and management

F-26


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

role in NYCANNA by its former partner, New Amsterdam Distributors, LLC, which attempted to directly or indirectly sell or transfer EPMMNY’s alleged interest in NYCANNA to other entities in 2016 and 2017, including Impire, NYMRC and High Street.

EPMMNY alleges that it is entitled to the value of its alleged minority interest in NYCANNA or minority ownership in NYCANNA. EPMMNY also alleges that certain defendants misused its alleged intellectual property and/or services, improperly solicited its employees, and aided and abetted or participated in the transfer of equity and/or business opportunities from EPMMNY.

High Street intends to vigorously defend this action, which the Company firmly believes is without merit. ~~EPMMNY alleges that it was improperly deprived of its equity stake in NYCANNA before NYCANNA was acquired by High Street.~~ High Street is also entitled to full indemnity from the claims asserted against it by EPMMNY pursuant to the purchase agreement pertaining to its acquisition of NYCANNA and personal guarantee by the largest shareholders of the seller. ~~The~~High Street, along with the other defendants filed a motion to dismiss on April 1, 2019. The motion was fully briefed and submitted to the Court onas of July 18, 2019, and oral argument was heard on September 6, 2019. The motion remains pending before the Court. ~~A Special Referee~~Following a hearing ~~relating~~held the week of April 25-29, 2022, the Court ruled that Plaintiff had the capacity to ~~the motion~~bring this action on behalf of EPMMNY. The motions to dismiss has been scheduled for September 2021. The plaintiff also filed a motion seeking a preliminary injunction of any transfer of the Company’s assets. This motion was fully briefed and the Company is awaiting the Court’s decision.

~~CanWell Dispute~~

~~The CanWell dispute is comprised of 5 separate proceedings:~~

~~i. CanWell's petition filed in Rhode Island Superior Court (C.A. KM-2019-0948) to compel arbitration of claims arising out of WPMC withdrawal as a member of the CanWell entities as well as~~remain pending on all other ~~disputes, including issues relating to termination of the Alternative Dosage Agreement (“ADA”) (relating to the Maine dispensary).~~

ii. CanWell's petition filed in Rhode Island Superior Court (C.A. No. KM-2019-1047) to compel arbitration of WPMC's redemption of the CanWell entity's interest in WPMC, including issues relating to termination of the ADA.

~~iii. An arbitration proceeding relating to WPMC's withdrawal from the CanWell entities. A procedural meeting with the arbitrator took place on November 5, 2019.~~

~~iv. An arbitration that will soon be underway with the American Arbitration Association on the issue of whether WPMC had the right to redeem CanWell's interest in WPMC.~~

v. A civil action pending in Maine (Docket No. CUMSC-CV-19-0357) which was filed by Northeast Patients Group d/b/a Wellness Connection of Maine against CanWell, LLC and CanWell Processing (Maine), LLC, relating to the termination of the ADA. While no Acreage affiliate is currently a party to this action, the issue being litigated relates to the termination of the ADA, which is one of the issues that CanWell is attempting to arbitrate in Rhode Island.

vi. A declaratory judgment action pending in Delaware, High Street Capital Partners, LLC v. CanWell, LLC, CanWell Processing (Maine), LLC, and CanWell Processing (Rhode Island), LLC (Court of Chancery, No. 2019-0957-MTZ) seeking a declaratory judgment that, as a matter of law, High Street is not subject to any non-compete provision with regard to the agreements detailed above. This case remains in the preliminary stages of litigation.

~~The Court issued an order on January 29, 2020 that determined that the arbitrability of the ADA Disputes is to be decided by an arbitrator, not the Court.~~grounds.

Following the parties’ entering into a Memorandum of Understanding (MOU) on proposed settlement terms that would settle each of the matters listed above, the parties have now reached a final confidential settlement agreement. As part of that agreement, the Company has accrued for $7,750 in ~~Legal settlements, net~~ on the Statements of Operations for the year ended December 31, 2020. In connection with this settlement agreement, the Company issued a promissory note in the amount of $7,750 to CanWell, which is non-interest bearing and is payable in periodic payments through December 31, 2024, of which the first and second payments of $500 were made in November 2020 and February 2021, respectively.


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

~~Lease Dispute~~

On or around December 2019, it is alleged that a wholly-owned subsidiary of HSCP entered into 3 five-year leases to occupy approximately 70 square feet of commercial space on a cannabis cultivation campus in California. As of November 24, 2020, HSCP and its wholly-owned subsidiary entered into a confidential settlement and release agreement with the commercial landlord, pursuant to which HSCP will make 6 payments to the commercial landlord totaling $6,336, which the Company has accrued for in ~~Legal settlements, net~~ on the Statements of Operations for the year ended December 31, 2020. The first and second payments of $1,000 were made in November 2020 and December 2020, respectively. The third payment of $1,084 was made in March 2021 and the remaining payments will become due through the year ended December 31, 2021.

Compass Neuroceuticals Litigation

In February 2021, a JAMS arbitration was initiated in Atlanta by Acreage Georgia LLC (“Acreage Georgia”) against its former consultant, Compass Neuroceuticals, Inc. (“Compass”), stemming from Compass’ breach of the consulting agreement entered into between the parties in June 2019, related to the preparation of an application for a Class 1 cultivation license in Georgia. Acreage Georgia is ~~alleging damages, including lost profits, of~~seeking approximately ~~$9,000.~~$1,000, plus attorney’s fees and costs. Compass has filed ~~counterclaims~~a counterclaim for breach ~~also~~ in the $9,000 range.

A final arbitration hearing took place from September 20 through September 24, in Atlanta, Georgia. On December 13, 2021, the arbitrator issued her interim award, finding in favor of the Company and denying Compass' counterclaim. A hearing took place on February 9, 2022 to determine the Company’s damages and attorney’s fees. On March 8, 2022, the arbitrator issued a final award of $694 to the Company. A contested action is currently ~~scheduled for August 2021. The matter is~~pending in ~~its early stages; therefore, it is too early~~Forsyth County, Georgia seeking to ~~ascertain~~confirm the ~~materiality of any potential settlement or judgment, but the Company plans to defend itself vigorously in this matter.~~arbitrator’s award.

14. RELATED PARTY TRANSACTIONS

Transactions with related parties are entered into in the normal course of business and are measured at the amount established and agreed to by the parties.

Related party notes receivable

Acreage has certain outstanding notes receivable with related parties. Refer to Note 6 for further discussion.

In May 2021, the Company sold 2 secured promissory notes totaling $28,000 received from the sale of Acreage Florida to Viridescent for cash proceeds of approximately $26,000. Viridescent is an entity controlled by Kevin Murphy, the Chairman of the board of directors. Refer to Note 3 for further discussion.

6.10% Secured debenture due September ~~2020 Transactions~~2030

As disclosed in Note 10, ~~to the unaudited condensed consolidated financial statements,~~ ”“6.10% Secured debenture due September ~~2020 Transactions”~~2030”, on September 23, 2020, pursuant to the implementation of the Amended Arrangement, 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. 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. Acreage then engaged an investment advisor (the “Investment Advisor”) which, under the Investment Advisor’s sole discretion, invested on behalf of Universal Hemp, $34,019 of the proceeds on September 28, 2020.

As a result, Universal Hemp, a subsidiary of the Company, 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 Institutional Investor as agent for Universal Hemp. On September 28, 2020, the Company received gross proceeds of $33,000 (less transaction costs of approximately ~~$959)~~

F-27


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

$959) from an affiliate of the Institutional Lender (the “~~Lender~~”“Lender”) and used a portion of the proceeds of this loan to retire its short-term $11,000 convertible note and its short-term note aggregating approximately $18,000 in October 2020, with the remainder being used for working capital purposes. The Lender is controlled by the Institutional Lender. The Investment Partnership is the investor in the Lender.

~~Related party debt~~

In December 2019, Kevin Murphy, the Chairman of the board of directors, loaned $15,000 to the Company. In January 2020, he made an additional loan of $5,000 to Acreage. These amounts were subsequently repaid in March 2020.

~~In October 2020, Mr. Murphy made an interest bearing loan of $2,100 to the Company, bearing interest at 9.9% per annum. This amount was subsequently repaid in November 2020.~~


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

~~Credit agreement collateral~~

On March 11, 2020, the Company closed $22,000 in borrowings pursuant to a loan transaction with the Lender. The maturity date is 366 days from the closing date of the loan transaction. The Company will pay monthly interest on the collateral in the form of 27 SVS through the maturity date. The Lender may put any unsold interest shares to the Company upon maturity at a price of $4.50 per share. Mr. Murphy loaned $21,000 of the $22,000 borrowed by the Company to the Lender. The loan is secured by the non-U.S. intellectual property assets, a cannabis state license and 12,000 SVS shares of the Company. Refer to Note 10 for further discussion.

Michigan consulting agreement

Pursuant to the Consulting Services Agreement by and between Kevin Michigan, LLC, a company controlled by Kevin Murphy, and High Street (the “Michigan Consulting Agreement”), High Street provides certain consulting services to Kevin Michigan, LLC, which includes, but is not limited to, services related to application support, provisioning center administration and operation, local and state regulatory filings, human resource matters, and marketing matters. The Michigan Consulting Agreement explicitly states that High Street is not able to direct or control the business of Kevin Michigan, LLC. Additionally, there are certain leases held by and between Kevin Michigan, LLC, as lessee and certain wholly owned subsidiaries of High Street, as lessors. As of March 31, ~~2021,~~2022, Kevin Michigan, LLC is not operational, and no consulting fees or rents has been paid to High Street or its wholly owned subsidiaries. Kevin Michigan, LLC is owned and controlled by the Company’s Chairman, Kevin Murphy.

9.75% Credit facilities due January 2026

On December 16, 2021, the Company entered into the 9.75% Credit facilities due January 2026 with a syndicate of lenders, including Viridescent Realty Trust, Inc. (“Viridescent”), an entity controlled by Kevin Murphy. Under the terms of the 9.75% Credit facilities due January 2026, a $75,000 initial draw was available immediately, an additional $25,000 delayed draw is available that must be advanced within 12 months, and a $50,000 committed accordion facility is available after December 1, 2022, provided certain financial covenants are met. Advances under the facilities bear interest at 9.75% per annum and undrawn amounts (excluding the committed accordion facility until it is available) bear interest at 3.0% per annum.

Viridescent has committed $30,000 of the $100,000 available for immediate use under the Credit Facility, with third-party syndicated affiliates committing the additional $70,000. During the year ended March 31, 2022, $108 of interest expense under the facilities was attributed to Viridescent. The loan is secured by first-lien mortgages on Acreage’s wholly owned real estate and other commercial security interests. A third-party syndicate served as Administrative Agent for the transaction.

15. REPORTABLE SEGMENTS

The Company prepares its segment reporting on the same basis that its Chief Operating Decision Maker manages the business, and makes operating decisions. The Company operates under 1 operating segment, which is its only reportable segment: the production and sale of cannabis products. The Company’s measure of segment performance is net income, and derives its revenue primarily from the sale of cannabis products, as well as related management or consulting ~~services.~~services which were not material in all periods presented. All of the Company’s operations are located in the United States.

16. EARNINGS PER SHARE

Basic earnings per share are computed by dividing net loss attributable to common shareholders of the Company by the weighted average number of outstanding shares for the period. Diluted earnings per share are calculated based on the weighted number of outstanding common shares plus the dilutive effect of stock options and warrants, as if they were exercised, and restricted stock units and profits interests, as if they vested and NCI convertible units, as if they converted.

Basic and diluted loss per share is as follows:


		Three Months Ended March 31,				Three Months Ended March 31,
		2021		2020				2022		2021
Net loss attributable to common shareholders of the Company	Net loss attributable to common shareholders of the Company	$	(7,809)	$	(171,954)		Net loss attributable to common shareholders of the Company	$	(12,694)	$	(7,809)
Weighted average shares outstanding - basic	Weighted average shares outstanding - basic	106,204		92,902			Weighted average shares outstanding - basic	106,900		102,343
Effect of dilutive securities	Effect of dilutive securities	0		0			Effect of dilutive securities	—		—

Weighted average shares - diluted	Weighted average shares - diluted	106,204		92,902			Weighted average shares - diluted	106,900		102,343
Net loss per share attributable to common shareholders of the Company - basic	Net loss per share attributable to common shareholders of the Company - basic	$	(0.07)	$	(1.85)		Net loss per share attributable to common shareholders of the Company - basic	$	(0.12)	$	(0.08)
Net loss per share attributable to common shareholders of the Company - diluted	Net loss per share attributable to common shareholders of the Company - diluted	$	(0.07)	$	(1.85)		Net loss per share attributable to common shareholders of the Company - diluted	$	(0.12)	$	(0.08)

During the three months ended March 31, 2022, 5,817 Fixed warrants, 2,524 Floating warrants, 2,916 Fixed Share RSUs, 1,251 Floating Share RSUs, 1,525 Fixed Share stock options, 2,413 Floating Share stock options and 23,076 NCI convertible units

F-28


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

were excluded from the calculation of net loss per share attributable to common shareholders of the Company - diluted, as they were anti-dilutive. During the three months ended March 31, 2021, 7,131 Fixed warrants, 3,087 Floating warrants, 4,441 Fixed Share RSUs, 2,431 Floating Share RSUs, 1,511 Fixed Share stock options, 2,123 Floating Share stock options and 23,742 NCI convertible units were excluded from the calculation of net loss per share attributable to common shareholders of the Company - diluted, as they


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

were anti-dilutive. During the three months ended March 31, 2020, 8,125 SVS warrants, 9,158 SVS restricted share units, 5,067 SVS stock options, 24,612 NCI convertible units were excluded from the calculation of net loss per share attributable to common share attributable to common shareholders of the Company - diluted as they were anti-dilutive.

17. SUBSEQUENT EVENTS

~~Sale of Acreage Florida~~

In ~~February~~December 2021, the Company ~~entered into~~secured a ~~definitive agreement to sell~~$150,000 Credit Facility with a syndicate of lenders. Under the terms of the Credit Facility, $100,000 was available for immediate use and a further $50,000 is available in future periods under a committed accordion option once certain, predetermined milestones are achieved. As of March 31, 2022, $75,000 was drawn under this facility and the remaining current availability was $25,000. In April 2022, the Company drew down on the remaining $25,000 under this facility.

On May 3, 2022, the Company announced the sale of its ownership interests in Acreage Florida, Inc. (“Acreage Florida”) for an aggregate purchase price of $60,000, which included an upfront cash payment of $5,000. Acreage Florida is licensed to operate medical marijuana dispensaries, acultivation and processing facility in Medford, Oregon for total consideration of $2.0 million, and ~~a cultivation facility~~closed its dispensary in Powell, Oregon.

Management has reviewed all other events subsequent to March 31, 2022 through the ~~state~~date of ~~Florida. On April 27, 2021, the definitive agreement was amended resulting in an aggregate remaining purchase price of approximately $16,500 in cash, $7,000 of the buyer’s common stock,~~issuing these financial statements and ~~the issuance of secured promissory notes totaling $31,500 and the sale transaction was consummated.~~determined that no further subsequent events require adjustment or disclosure.

35F-29

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations~~Operations.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to assist in the understanding and assessing the trends and significant changes in ~~the Company’s~~our results of operations and financial condition. Historical results may not be indicative of future performance. This discussion includes forward-looking statements that reflect ~~the Company’s~~our plans, estimates and beliefs. Such statements involve risks and uncertainties. ~~The Company’s~~Our actual results may differ materially from those contemplated by these forward-looking statements as a result of various factors, including those set forth in “Risk Factors” in Part I, Item 1A of the Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 (the ~~“2020~~“2021 Form 10-K”), and “Cautionary Statement Regarding Forward-Looking Statements” set forth below.

This MD&A should be read in conjunction with the Company’s unaudited condensed consolidated financial statements for the three month period ended March 31, ~~2021~~2022 and related notes appearing elsewhere in this Quarterly Report on Form 10-Q (this “Quarterly Report” or “Form 10-Q”) and the ~~2020~~2021 Form 10-K. Financial information presented in this MD&A is presented in thousands of U.S. dollars, unless otherwise indicated.

Cautionary Statement Regarding Forward Looking-Statements

This Quarterly Report of the Company contains statements that include forward-looking information and are forward-looking statements within the meaning of applicable Canadian and United States securities legislation (“forward-looking statements”), including the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. All statements, other than statements of historical fact, included herein are forward-looking statements, including, for greater certainty, the on-going implications of the novel coronavirus (“COVID-19”) and statements regarding the proposed transaction with Canopy Growth Corporation (“Canopy Growth”), including the anticipated benefits and likelihood of completion thereof.

Generally, forward-looking statements may be identified by the use of forward-looking terminology such as “plans”, “expects” or “does not expect”, “proposed”, “is expected”, “budgets”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases, or by the use of words or phrases which state that certain actions, events or results may, could, would, or might occur or be achieved. There can be no assurance that such forward-looking statements will prove to be accurate, and actual results and future events could differ materially from those anticipated in such forward-looking statements. Forward-looking statements reflect Acreage’s current beliefs and are based on information currently available to Acreage and on assumptions Acreage believes are reasonable. Forward-looking statements isare subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of Acreage to be materially different from those expressed or implied by such forward-looking statements. Such risks and other factors may include, but are not limited to:

•the future implications to the business, financial results and performance of the Company arising, directly or indirectly, from COVID-19;

•the anticipated benefits of the Amended ~~Arrangement;~~Arrangement with Canopy Growth;

•the occurrence or waiver of the Triggering Event, ~~(as described in Note 13 of the unaudited condensed consolidated financial statements);~~

•~~the ability of Acreage to satisfy the conditions to closing of the Acquisition;~~

•as defined below, the ability of Acreage to meets its performance targets and financial thresholds agreed upon with Canopy Growth as part of the Amended ~~Arrangement, including those that are conditions to closing the Acquisition;~~Arrangement;

•the likelihood of the Triggering Event occurring or being ~~satisfied or~~ waived by the outside date;

•the likelihood of Canopy Growth completing the acquisition of the Fixed Shares and/or Floating Shares;

•risks related to the ability of the Company to ~~financing Acreage’s~~finance its business and fund its obligations;

•other expectations and assumptions concerning the transactions contemplated between Canopy Growth and Acreage;

•the available funds of Acreage and the anticipated use of such funds;

•the availability of financing opportunities for Acreage and the risks associated with the completion thereof;

•regulatory and licensing risks;

•changes in general economic, business and political conditions, including changes in the financial and stock markets;

•risks related to infectious diseases, including the impacts of ~~the novel coronavirus;~~COVID-19;

•legal and regulatory risks inherent in the cannabis industry;

•risks associated with economic conditions, dependence on management and currency risk;

•risks relating to U.S. regulatory landscape and enforcement related to cannabis, including political risks;

•risks relating to anti-money laundering laws and regulation;

•risks relating to shortages in materials and increased costs for transportation, energy, and raw material due in part to the negative impact of the Russia-Ukraine war on the global economy;

•other governmental and environmental regulation;

•public opinion and perception of the cannabis industry;

•risks related to contracts with third-party service providers;

•risks related to the enforceability of contracts and lack of access to U.S. bankruptcy protections;

•reliance on the expertise and judgment of senior management of Acreage;

•risks related to proprietary intellectual property and potential infringement by third parties;

•the concentrated voting control of Acreage’s founder and the unpredictability caused by Acreage’s capital structure;

•risks relating to the management of growth;

•increasing competition in the industry;

•risks inherent in an agricultural business;

•risks relating to energy costs;

•risks associated towith cannabis products manufactured for human consumption including potential product recalls;

•reliance on key inputs, suppliers and skilled labor;

•cybersecurity risks;

•ability and constraints on marketing products;

•fraudulent activity by employees, contractors and consultants;

•tax and insurance related risks;

•risks related to the economy generally;

•risk of litigation;

•conflicts of interest;

•risks relating to certain remedies being limited and the difficulty of enforcement judgments and effecting service outside of Canada;

•risks related to future acquisitions or dispositions;

•sales by existing shareholders; and

•limited research and data relating to cannabis.

A description of additional assumptions used to develop such forward-looking statements and a description of additional risk factors that may cause actual results to differ materially from forward-looking statements can be found in Part I, Item 1A of the Company’s Annual Report on Form 10-K, under the heading “Risk Factors”, dated March ~~25, 2021,~~11, 2022, as filed with the Securities and Exchange Commission. Although Acreage has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. Readers are cautioned that the foregoing list of factors is not exhaustive. Readers are further cautioned not to place undue reliance on forward-looking statements as there can be no assurance that the plans, intentions or

expectations upon which they are placed will occur. Forward-looking statements contained in this Form 10-Q are expressly qualified by this cautionary statement. The forward-looking statements contained in this Form 10-Q represent the expectations of Acreage as of the date of this Form 10-Q and, accordingly, are subject to change after such date. However, Acreage expressly disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by applicable securities law.

Management’s discussion and analysis of financial condition and results of operations is intended to help provide an understanding of the Company’s financial condition, changes in financial condition and results of operations. This discussion is organized as follows:

•~~Overview~~—Overview—This section provides a general description of the Company’s businesses, its strategic objectives, as well as developments that occurred during the three months ended March 31, ~~2021~~2022 and ~~2020~~2021 that the Company believes are important in understanding its results of operations and financial condition or to disclose known trends.

•Results of ~~Operations~~—Operations—This section provides an analysis of the Company’s results of operations for the three months ended March 31, ~~2021~~2022 and ~~2020.~~2021. This analysis is presented on a consolidated basis. In addition, a brief description is provided of significant transactions and events that impact the comparability of the results being analyzed.

•Liquidity and Capital ~~Resources~~—Resources—This section provides an analysis of the Company’s cash flows for the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, as well as a discussion on the Company’s outstanding debt and commitments that existed as of March 31, ~~2021.~~2022. Included in the discussion of outstanding debt is a discussion of the amount of financial capacity available to fund the Company’s future commitments and obligations, as well as a discussion of other financing arrangements.

Overview

Acreage, a vertically integrated, multi-state operator of cannabis licenses and assets in the U.S, was continued into the Province of British Columbia under the Business Corporations Act (British Columbia). Acreage Fixed Shares and Floating Shares (as such terms are defined at Note 13 of the unaudited condensed consolidated financial statements) are each listed on the Canadian Securities Exchange under the symbols “ACRG.A.U” and “ACRG.B.U”, respectively, and are quoted on the OTCQX® Best Market by OTC Markets Group under the symbols “ACRHF” and “ACRDF”, respectively and on the Open Market of the Frankfurt Stock Exchange under the symbols “0VZ1” and “0VZ2”, respectively. Acreage operates through its consolidated subsidiary High Street Capital Partners, LLC (“~~HSCP~~”HSCP”), a Delaware limited liability company. HSCP, which does business as “Acreage Holdings”, was formed on April 29, 2014. The Company became an indirect parent of HSCP on November 14, 2018 in connection with a reverse takeover (“~~RTO~~”RTO”) transaction. The Company’s operations include (i) cultivating cannabis plants, (ii) manufacturing branded consumer products, (iii) distributing cannabis flower and manufactured products, and (iv) retailing high-quality, effective and dosable cannabis products to consumers. The Company appeals to medical and adult-use customers through brand strategies intended to build trust and loyalty.

As of March 31, 2022, Acreage owned and operated a total of 27 dispensaries - 5 dispensaries in Oregon, 4 in New York, 3 in New Jersey, 3 in Connecticut, 2 in Massachusetts, 2 in Illinois, 5 in Ohio, and 3 in Maine. Acreage also operated 1 dispensary in Maine under a managed services agreement. As of March 31, 2022, Acreage owned and operated a total of 10 cultivation and processing facilities, 1 each in California, Illinois, Maine, New Jersey, New York, Pennsylvania, respectively, and 2 each in Massachusetts and Ohio, respectively.

Strategic Priorities

The Company believes its refocused strategy is the key to continued improvements in its financial results and shareholder value. The Company remains focused on three key strategic objectives - accelerating growth in its core markets, driving profitability, and strengthening the balance sheet.

Accelerating Growth in Core Markets: Through prior acquisitions and capital expenditures, management believes Acreage is well positioned for future success in several key markets as regulations regarding the use of cannabis continue to evolve. The Company will continue to focus its growth on its core markets where it can take advantage of and expand on the presence already established.

Driving Profitability: The Company's focus on improving operational and financial results has generally resulted in improving profitability. Management continues to diligently control costs, improve operational efficiencies, and accelerate organic growth in its core markets to continue to report improved profitability going forward.

Strengthening the Balance Sheet: Strengthening the balance sheet is key to both providing the Company with the necessary capital to achieve its operational plans and building shareholder confidence. The Company has worked to ensure that sufficient capital is available when needed. Going forward, the Company will monitor the capital markets and utilize opportunities to access additional debt or equity, or both, when it is necessary and advantageous to do so.

Highlights from the three months ended March 31, 2022:

•The Company achieved total consolidated revenue growth of 48% as compared with the three months ended March 31, 2021.

•Adjusted EBITDA for the three months ended March 31, 2022 was $8.6 million compared to adjusted EBITDA of $1.6 million during the same period in 2021. This marks the fifth consecutive quarter of positive adjusted EBITDA, further validating management's refocused strategic plan. Refer to section “Non-GAAP Information” in this Item 2 for discussion of Adjusted EBITDA as a non-GAAP measure.

Highlights from the three months ended March 31, 2021:

•The Company achieved total consolidated revenue growth of 58% as compared with the three months ended March 31, 2020.

•The Company achieved positive adjusted EBITDA for the first time in its history.

•The Company opened a third The Botanist dispensary in Williamstown, New Jersey.

•The Company entered into an agreement to sell its operations in Florida, which is consistent with its overall strategy to focus on its core states.

•The Company extended the maturity date related to $21,000 of the $22,000 3.55% Credit facility collateral loan.

Operational and Regulation Overview

The Company believes its operations are in material compliance with all applicable state and local laws, regulations and licensing requirements in the states in which it operates. However, cannabis is illegal under U.S. federal law. Substantially all of the Company’s revenue is derived from U.S. cannabis operations. For information about risks related to U.S. cannabis operations, please refer to Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

38COVID-19

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.

Aside from minimal impact to our day-to-day operations at select locations, COVID-19 has had an immaterial impact overall on our Company’s performance as key performance metrics are trending positively, including, but not limited to, significant improvements to net revenue and net loss as well as positive adjusted EBITDA results.

Results of Operations

The following table presents selected financial data derived from the unaudited condensed consolidated financial statements of the Company for the three months ended March 31, ~~2021~~2022 and ~~2020.~~2021. The selected financial information set out below may not be indicative of the Company’s future performance.

Summary Results of Operations Better/(Worse)
in thousands, except per share amounts Three Months Ended March 31, 2021 vs. 2020
2021 2020 $ %
Revenues, net $ 38,393 $ 24,225 $ 14,168 58 %
Operating income (loss) 1,806 (251,282) 253,088 n/m
Net loss attributable to Acreage (7,809) (171,954) 164,145 95 %
Basic and diluted loss per share attributable to Acreage $ (0.07) $ (1.85) $ 1.78 96 %
Summary Results of Operations


					Better/(Worse)
in thousands, except per share amounts	Three Months Ended March 31,				2022 vs. 2021
	2022		2021		$		%
Revenues, net	$	56,879	$	38,393	$	18,486	48	%
Net operating income (loss)	(2,722)		1,806		(4,528)		n/m
Net loss attributable to Acreage	(12,694)		(7,809)		(4,885)		(63)
Basic and diluted loss per share attributable to Acreage	$	(0.12)	$	(0.08)	$	(0.04)	(50)	%

Revenues, ~~net, cost~~Cost of goods sold and ~~gross margin~~Gross profit

The Company derives its revenues from sales of cannabis and cannabis-infused products through retail dispensary, wholesale and manufacturing and cultivation businesses, as well as from management or consulting fees from entities for whom the Company provides management or consulting services. As of March 31, 2021, Acreage owned and operated five dispensaries in Oregon (three in Portland, one in Eugene and one in Springfield), four in New York (Buffalo, Farmingdale, Middletown, and Queens), three in New Jersey (Atlantic City, Egg Harbor and Williamstown), three in Connecticut (Bethel, South Windsor and Uncasville), two in Massachusetts (Worcester and Shrewsbury), two in Illinois (Chicago and Rolling Meadows), one in Maine (South Portland) and one in Florida (Spring Hill). As of March 31, 2021, Acreage had cultivation facilities in Sinking Spring, Pennsylvania, Sterling, Massachusetts, Syracuse, New York, Freeport, Illinois, Sanderson, Florida and Egg Harbor, New Jersey. Acreage also collected management services revenues, substantially all in Maine and New Hampshire.

Gross profit is revenue less cost of goods sold. Cost of goods sold includes costs directly attributable to inventory sold such as direct material, labor, and overhead, including depreciation. Such costs are further affected by various state regulations that limit the sourcing and procurement of cannabis and cannabis-related products, which may create fluctuations in gross profit over comparative periods as the regulatory environment changes.

Gross profit Better/(Worse)
in thousands Three Months Ended March 31, 2021 vs. 2020
2021 2020 $ %
Retail revenue, net $ 25,847 $ 17,573 $ 8,274 47 %
Wholesale revenue, net 10,016 6,548 3,468 53 %
Other revenue, net 2,530 104 2,426 n/m
Total revenues, net $ 38,393 $ 24,225 $ 14,168 58 %
Cost of goods sold, retail (13,082) (10,889) (2,193) (20) %
Cost of goods sold, wholesale (4,690) (3,382) (1,308) (39) %
Total cost of goods sold $ (17,772) $ (14,271) $ (3,501) (25) %
Gross profit $ 20,621 $ 9,954 $ 10,667 107 %
Gross margin 54 % 41 % 13 %


							Better/(Worse)
in thousands	Three Months Ended March 31,						2022 vs. 2021
	2022			2021			$		%
Retail revenue, net	$	41,427		$	25,847		$	15,580	60	%
Wholesale revenue, net	15,172			10,016			5,156		51
Other revenue, net	280			2,530			(2,250)		(89)
Total revenues, net	$	56,879		$	38,393		$	18,486	48	%
Cost of goods sold, retail	(20,768)			(13,082)			(7,686)		(59)
Cost of goods sold, wholesale	(6,601)			(4,690)			(1,911)		(41)
Total cost of goods sold	$	(27,369)		$	(17,772)		$	(9,597)	(54)	%
Gross profit	$	29,510		$	20,621		$	8,889	43	%
Gross margin	52		%	54		%			(2)	%
n/m - Not Meaningful

Three months ended March 31, 2022 vs. 2021

Total ~~revenue increased by $14,168 or 58%~~revenues for the three months ended March 31, ~~2021, as~~2022 grew by $18,486, or 48%, compared ~~to the corresponding period of fiscal 2020. Excluding the increase in other revenues, net, which was driven by increased management services revenue,~~with 2021. On a comparative basis, total revenue increased ~~49%~~by $16,921 due to the acquisitions of (i) certain Maine operations (ii) CWG in May 2021 and (iii) Greenleaf Ohio in October 2021 and was offset by decreases of $289 due to the divestiture of Acreage Florida in April 2021. Additionally, total revenues for the three months ended March 31, ~~2021,~~2022 for the Company’s operations in Oregon, which are considered non-core and are being held for sale, decreased by $621 as compared to fiscal 2021. Finally, total revenue for the ~~corresponding~~prior comparative three month period ended March 31, 2021 included $2,530 of ~~fiscal 2020.~~

~~Retail~~previously unrecognized management fees in New Hampshire, some of which related to prior periods consulting. Excluding these acquisitions and divestitures/closures, the impact of total revenue ~~saw an increase of 47%~~declines in the Company’s Oregon operations and the increased management fees earned in the comparable period, total revenue increased by $4,725, or 14%, for the three months ended March 31, ~~2021,~~2022, as compared to ~~the corresponding period of~~ fiscal ~~2020. The increase in retail~~2021.

Retail revenue ~~net of $8,274~~ for the three months ended March 31, ~~2021,~~2022 grew by $15,580, or 60%, compared with 2021. Excluding the impact of acquisitions and divestitures/closures, retail revenue increased by $814 for the three months ended March 31, 2022 compared to fiscal 2021. This organic growth was primarily driven by increased demand and production across various states ~~of $5,344 (primarily Illinois, Massachusetts, New York, Maine, Connecticut~~ and Florida), along with CCF ($4,363) driven by its acquisition in June 2020. Specific drivers of increased demand included, i) the opening of another adult-use dispensary in Illinois, ii) the launching of new The Botanist branded products into

~~the retail channel in Ohio and New York, iii) the opening of new stores in New York and iv) increased business in Massachusetts and Connecticut. These increases were~~was partially offset by ~~the net impact~~retail revenue declines of ~~the divestitures and decreased demand and production~~$621 in ~~non core states.~~non-core states (Oregon).

Wholesale ~~revenue increased 53% for the three months ended March 31, 2021, as compared to the corresponding periods of fiscal 2020. The increases in wholesale~~ revenue for the three months ended March 31, ~~2021 were~~2022 grew by $5,156, or 51%, compared to fiscal 2021. The increased wholesale revenue was primarily due to increased capacity, coupled with maturing operations at the Company’s Pennsylvania ~~Massachusetts,~~ and Illinois cultivation facilities. This resulted in higher yields and product mix in each of the respective markets.

~~Other~~ Additionally, wholesale revenue ~~increased~~ for the three months ended March 31, ~~2021, as compared to the corresponding period of fiscal 2020, primarily~~2022 increased by $1,866 due to acquisitions that have occurred over the ~~recognition of previously unrecognized management fees in New Hampshire, some of which relates to~~ prior ~~periods.~~24 months.

~~While total revenues increased 58%, total costs~~Retail cost of goods sold ~~only~~ increased ~~25%~~$7,686, or 59%, for the three months ended March 31, 2022 compared to 2021, ~~as compared~~which was generally consistent with the ~~corresponding periods of fiscal 2020.~~60% increase in retail revenue. Price compression in select markets was offset by cost efficiencies.

~~Retail~~Wholesale cost of goods sold increased ~~20%~~$1,911, or 41%, for the three months ended March 31, ~~2021, as~~2022 compared to 2021, which was outpaced by the corresponding period of fiscal 2020, and below the 47% increase in retail revenue. While retail cost of goods sold increased due to the volume increase associated with the retail revenue growth, the rate of growth was lower primarily as a result of the Company’s vertically integrated sales and distribution channels.

~~Wholesale cost of goods sold increased 39% for the three months ended March 31, 2021, as compared to the corresponding period of fiscal 2020, and below the 53%~~51% increase in wholesale revenue. While wholesale cost of goods sold increased due to the volume increase associated with the wholesale revenue growth, the rate of growth was lower as a result of production efficiencies being achieved. ~~In addition, wholesale cost of goods sold~~

Gross profit increased $8,889, or 43%, for the ~~comparative period were driven by the initial set up costs~~three months ended March 31, 2022 to $29,510 from $20,621 in 2021, and ~~consequential expansion impact~~Gross margin decreased from 54% of various cultivation facilities that did not occur in the current period. Finally, the suspension of operations at Form Factory Holdings, LLC (“Form Factory”), a manufacturer and distributor of cannabis-based edibles and beverages, since March 2020 partially offset the increase in costs of wholesale goods sold in the current period, as a result of consequential inventory write-offs that were recognized in the comparable period.

~~Gross margin~~revenue for the three months ended March 31, 2021 ~~was 53.7%~~to 52% of revenue in 2022, or (2)%, ~~compared~~due to ~~41.1%~~the factors discussed above. Excluding other revenue which has no associated costs of goods sold, gross margin improved from 50% for the three months ended March 31, ~~2020. The increase in gross margin was driven by~~2021 to 52% for the ~~factors discussed above.~~three months ended March 31, 2022.

Revenue by geography

While the Company operates under one operating segment for the production and sale of cannabis products, the below revenue breakout by geography is included as management believes it provides relevant and useful information to investors.

Revenue by region Better/(Worse)
in thousands Three Months Ended March 31, 2021 vs. 2020
2021 2020 $ %
New England $ 18,056 $ 11,323 $ 6,733 59 %
Mid-Atlantic 12,135 7,086 5,049 71 %
Midwest 5,872 2,943 2,929 100 %
West 1,859 2,803 (944) (34) %
South 471 70 401 573 %
Total revenues, net $ 38,393 $ 24,225 $ 14,168 58 %
n/m - Not Meaningful


Revenue by region					Better/(Worse)
in thousands	Three Months Ended March 31,				2022 vs. 2021
	2022		2021		$		%
New England	$	16,426	$	18,056	$	(1,630)	(9)	%
Mid-Atlantic	15,355		12,135		3,220		27
Midwest	23,169		5,872		17,297		295
West	1,929		1,859		70		4
South	—		471		(471)		(100)
Total revenues, net	$	56,879	$	38,393	$	18,486	48	%

n/m - Not Meaningful

Total operating expenses

Total operating expenses consist primarily of loss on impairments, compensation expense at ~~the Company’s~~our corporate offices as well as operating subsidiaries, ~~impairment losses,~~ professional fees, which includes, but is not limited to, legal and accounting services, depreciation and other general and administrative expenses.


Operating expenses					Better/(Worse)
in thousands	Three Months Ended March 31,				2022 vs. 2021
	2022		2021		$		%
General and administrative	$	8,387	$	9,218	$	(831)	(9)	%
Compensation expense	14,195		10,362		3,833		37
Equity-based compensation expense	4,159		6,042		(1,883)		(31)
Marketing	697		12		685		n/m
Impairments, net	2,138		818		1,320		161

Write down (recovery) of assets held-for-sale	874		(8,616)		9,490		n/m
Loss on legal settlements	(25)		10		(35)		n/m
Depreciation and amortization	1,807		969		838		86
Total operating expenses	$	32,232	$	18,815	$	13,417	71	%

n/m - Not Meaningful

Operating expenses Better/(Worse)
in thousands Three Months Ended March 31, 2021 vs. 2020
2021 2020 $ %
General and administrative $ 9,218 $ 13,032 $ 3,814 29 %
Compensation expense 10,362 14,477 4,115 28 %
Equity-based compensation expense 6,042 34,737 28,695 83 %
Marketing 12 987 975 99 %
Impairments, net 818 187,775 186,957 100 %
Loss on notes receivable — 8,161 8,161 n/m
Recovery of assets held-for-sale (8,616) — 8,616 n/m
Legal settlements, net 10 — (10) n/m
Depreciation and amortization 969 2,067 1,098 53 %
Total operating expenses $ 18,815 $ 261,236 $ 242,421 93 %
n/m - Not Meaningful
Three months ended March 31, 2022 vs. 2021

Total operating expenses for the three months ended March 31, ~~2021~~2022 were ~~$18,815, a decrease~~$32,232, an increase of ~~$242,421~~$13,417, or ~~93% from the corresponding period of fiscal 2020.~~71%, compared with 2021. The primary drivers of the decrease in operating expenses were as follows:

•General and administrative expenses decreased $831 during the three months ended March 31, ~~2021, as~~2022 compared ~~to the corresponding period of fiscal 2020,~~with 2021, primarily due to ~~a reduction of legal fees and rental and lease expenses incurred.~~decreases in professional fees.

•Compensation expense ~~decreased~~increased $3,833 during the three months ended March 31, ~~2021,~~2022 as compared ~~to the corresponding period of fiscal 2020,~~with 2021, primarily due to ~~a reduction in costs related~~increased headcount required to ~~reorganization efforts undertaken in~~manage the ~~previous~~Company’s expanded operations, including the acquisitions of certain Maine operations, CWG, and Greenleaf during the period.

•Equity-based compensation expense decreased $1,883, or 31%, during the three months ended March 31, ~~2021,~~2022 as compared ~~to the corresponding period of fiscal 2020,~~with 2021, primarily due to ~~costs related to the~~benefits associated with reorganization efforts undertaken in ~~the previous period,~~prior periods, resulting in the acceleration of restricted share vesting for ~~Form Factory~~certain employees and previously issued awards becoming fully vested and cancelled in ~~the~~ prior ~~period.~~periods.

•~~Marketing~~Impairments, net of $2,138 for the three months ended March 31, 2022 was primarily driven by an impairment of $1,907,000 related to certain Michigan locations as the Company was unsuccessful in finding a satisfactory buyer for these assets which were previously classified as held-for-sale.

•Write down (recovery) of assets held-for-sale of $874 for the three months ended March 31, 2022 related to the Company’s Oregon operations, Write down (recovery) of assets held-for-sale of for the three months ended March 31, 2021 were due to a recovery that was attributable to the Company agreeing on terms to sell Acreage Florida, and

determining that the fair value less costs to sell its Acreage Florida disposal group increased $8,616 in excess of its previously written down value.

•Depreciation and amortization expenses ~~decreased~~increased $838 during the three months ended March 31, ~~2021, as~~2022 compared ~~to the corresponding period of fiscal 2020,~~with 2021, primarily due to ~~significantly reduced marketing activities~~an acceleration of the amortization of certain intangible assets as a result of a reduction in the ~~current period.~~expected useful lives of such assets.

•~~Impairment expenses, net for the corresponding three~~Total other income (loss)


Other income (loss)					Better/(Worse)
in thousands	Three Months Ended March 31,				2022 vs. 2021
	2022		2021		$		%
Income (loss) from investments, net	$	1,133	$	(144)	$	1,277	n/m
Interest income from loans receivable	417		1,465		(1,048)		(72)
Interest expense	(4,781)		(4,857)		76		2
Other loss, net	(10)		(1,566)		1,556		99
Total other loss	$	(3,241)	$	(5,102)	$	1,861	36	%

n/m - Not Meaningful

Three months ended March 31, 2020 included impairment charges related interim intangible and goodwill impairment testing undertaken in the prior period due to the triggering event caused by the COVID-19 pandemic, as further discussed in Note 4 in the unaudited condensed consolidated financial statements. No such impairment charge was required in2022 vs. 2021

Total other loss for the three months ended March 31, 2022 was $3,241, a decrease of $1,861, or 36%, compared with 2021. The primary drivers of the decrease in Total other loss were as follows:

•Income from investments, net of $1,133 for the three months ended March 31, 2022 was primarily due to increases in the fair market value of investments in entities where the Company does not have significant influence or control of $788 in addition to distributions received from certain investments of $345.

•~~Loss on notes~~Interest income from loans receivable of $417 for the three months ended March 31, 2022 has declined $1,048 as compared with 2021 due to a reduction in loans receivable outstanding during the period.

•Other loss, net for the three months ended March 31, 2022 of $10 decreased ~~during~~by 1,556 as compared with 2021. Other loss for the three months ended March 31, 2021 ~~as compared to the corresponding period of fiscal 2020, as there were no similar write-offs of notes receivable in the current period.~~

•~~During the year ended December 31, 2020, the Company determined certain businesses and assets met the held-for-sale criteria. In accordance with ASC 360-10,~~ ~~Property, Plant and Equipment~~, the assessed disposal groups for such assets held-for-sale were written down to fair value less costs to sell, resulting in the recognition of write down charges. During the three months ended March 31, 2021, the Company entered in a definitive agreement to sell its Acreage Florida disposal group at a purchase price in excess of the previously estimated fair value less costs to sell. Accordingly, the Company recognized a recovery of assets held-for-sale related to its Acreage Florida disposal group related to the previously recognized write-down of assets held-for-sale. Refer to Notes 3 and 17 in the unaudited condensed consolidated financial statements for further discussion.

•Depreciation and amortization expenses decreased during the three months ended March 31, 2021, compared to the corresponding period of fiscal 2020, due a lower net carrying value of certain fixed assets and intangible assets on which depreciation and amortization expense is determined as a result of prior period impairment charges.

~~Total other (loss) income~~

Other (loss) income Better/(Worse)
in thousands Three Months Ended March 31, 2021 vs. 2020
2021 2020 $ %
(Loss) income from investments, net $ (144) $ 234 $ (378) n/m
Interest income from loans receivable 1,465 1,647 (182) (11) %
Interest expense (4,857) (1,226) (3,631) (296) %
Other loss, net (1,566) (174) (1,392) (800) %
Total other (loss) income $ (5,102) $ 481 $ (5,583) n/m
n/m - Not Meaningful

Interest expense, net increased during the three months ended March 31, 2021, compared to the corresponding period of fiscal 2020, due to the Company’s increased debt financing transactions primarily undertaken subsequent to the three months ended March 31, 2020. The increase in ~~Other loss, net~~ ~~was primarily related to higher losses on~~ the disposal of capital assets related to Form ~~Factory incurred during the three months ended March 31, 2021.~~Factory.

Net loss


Net loss	Net loss					Better/(Worse)						Net loss				Better/(Worse)
in thousands	in thousands	Three Months Ended March 31,				2021 vs. 2020				in thousands	Three Months Ended March 31,			2022 vs. 2021
		2021		2020		$		%						2022		2021		$		%
Net loss	Net loss	$	(8,642)	$	(222,229)	$	213,587	96	%				Net loss	$	(13,911)	$	(8,642)	$	(5,269)	(61)	%
Less: net loss attributable to non-controlling interests	Less: net loss attributable to non-controlling interests	(833)		(50,275)		49,442		98	%				Less: net loss attributable to non-controlling interests	(1,217)		(833)		(384)		(46)
Net loss attributable to Acreage Holdings, Inc.	Net loss attributable to Acreage Holdings, Inc.	$	(7,809)	$	(171,954)	$	164,145	95	%				Net loss attributable to Acreage Holdings, Inc.	$	(12,694)	$	(7,809)	$	(4,885)	(63)	%

n/m - Not Meaningful													n/m - Not Meaningful

The changes in net loss are driven by the factors discussed above.

Non-GAAP Information

This statement includes Adjusted EBITDA, which is a non-GAAP performance measure that we use to supplement our results presented in accordance with U.S. GAAP. The Company uses Adjusted EBITDA to evaluate its actual operating performance and for planning and forecasting future periods. The Company believes that the adjusted results presented provide relevant and useful information for investors because they clarify the Company’s actual operating performance, make it easier to compare our results with those of other companies and allow investors to review performance in the same way as our management. Since these measures are not calculated in accordance with U.S. GAAP, they should not be considered in isolation of, or as a substitute for, net loss or our other reported results of operations as reported under U.S. GAAP as indicators of our performance, and they may not be comparable to similarly named measures from other companies.

The Company defines Adjusted EBITDA as net income before interest, income taxes and, depreciation and amortization and excluding the following: (i) income from investments, net (the majority of the Company's investment income relates to remeasurement to fair value of previously-held interests in connection with our roll-up of affiliates, and the Company expects income from investments to be a non-recurring item as its legacy investment holdings diminish), (ii) equity-based compensation expense, (iii) non-cash impairment losses, (iv) transaction costs and (v) other non-recurring expenses (other expenses and income not expected to recur).


Adjusted EBITDA						Better/(Worse)
in thousands	Three Months Ended March 31,	2022 vs. 2021
		2022		2021			$		%
Net loss (U.S. GAAP)		$	(13,911)	$	(8,642)
Income tax expense		7,948		5,346
Interest expense, net		4,364		3,392
Depreciation and amortization(1)		2,891		1,522
EBITDA (non-GAAP)		$	1,292	$	1,618		$	(326)	(20)	%
Adjusting items:
Loss (income) from investments, net		(1,133)		144
Impairments, net		1,956		818
Loss on Sewell facility		182		—

Write down (recovery) of assets held-for-sale		874		(8,616)
Legal settlements, net		(25)		10
Gain on business divestiture		(4)		—
Equity-based compensation expense		4,159		6,042

Other non-recurring expenses(2)		1,326		1,579
Adjusted EBITDA (non-GAAP)		$	8,627	$	1,595		$	7,032	441	%

n/m - Not Meaningful

(1) Depreciation and amortization as of March 31, 2021 contains depreciation and amortization included in cost of goods sold.

(2)Other non-recurring expenses relates to certain compensation, general and administrative, and other miscellaneous expenses. The Company excludes these items as they are not expected to recur.

The increases in ~~net loss~~adjusted EBITDA are driven by the factors discussed above.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Sources and uses of cash

The Company’s primary uses of capital include operating expenses, capital expenditures and the servicing of outstanding debt. The Company’s primary sources of capital include funds generated by cannabis sales as well as financing activities. Through March 31, ~~2021,~~2022, the Company had primarily used private financing as a source of liquidity for short-term working capital needs and general corporate purposes.

InAs of March ~~2021,~~31, 2022, the Company ~~extended~~had cash of $32,619 (not including $95 of restricted cash or $347 of cash held for sale within current Assets held-for-sale on the ~~maturity date related to $21,000~~Unaudited Condensed Consolidated Statements of Financial Position). As of March 31, 2022, the ~~$22,000 aggregate amount~~Company also had short-term investments of ~~the loan transaction to June 30, 2021, as described in Note 10 to the unaudited condensed consolidated financial statements.~~

$3,401 which can be readily be converted into cash. The Company’s ability to fund its operations, capital expenditures, acquisitions, and other obligations depends on its future operating performance and ability to obtain financing, which are subject to prevailing economic conditions, as well as financial, business and other factors, some of which are beyond the Company’s control.

The Company’s future contractual obligations include the following:

Leases

As of March 31, 2022, the Company had future operating lease obligations and future finance lease obligations of $42,600 and $22,006, respectively, with $3,763 and $6,500 payable within 12 months, respectively. 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. Refer to Note 8 of the Unaudited Condensed Consolidated Financial Statements for further discussion.

Debt

As of March 31, 2022, the Company had outstanding debt with varying maturities for an aggregate principal amount of $176,652, with $7,321 payable within the remaining 9 months. The Company has related future interest payments of $64,219, with $10,374 payable within the remaining 9 months. Refer to Note 10 of the Unaudited Condensed Consolidated Financial Statements for further discussion.

The Company expects that its total readily available funds of $57,619 at March 31, 2022, including cash on hand of $32,619 and ~~cash flows from operations, along with~~the undrawn $25,000 delayed draw term loan, and its ability to obtain private and/or public financing, will be adequate to support the future obligations discussed above as well as the capital needs of the existing operations ~~as well as~~and expansion plans ~~for~~over the next 12twelve months. While the Company’s liquidity risk has increased since its RTO transaction as a result of the Company’s rapid growth and continued expansion, which resulted in negative operating cash flow for the year ended December 31, 2020, the Company believes it has alleviated the risk. Please see the disclosures under “~~Basis of presentation and going concern” in Note 2 to the unaudited condensed consolidated financial statements.~~

Cash flows

Cash and cash equivalents, ~~and~~ restricted cash, and cash held for sale were ~~$45,941~~$33,061 as of March 31, ~~2021, an increase~~2022, a decrease of ~~$9,902~~$11,440 from March 31, ~~2020.~~2021. The following table ~~summarizes~~details the change in cash, cash equivalents, ~~and~~ restricted cash and cash related to assets held for sale for the three months ended March 31, ~~2021~~2022 and ~~2020.~~2021.


Cash flows	Cash flows					Better/(Worse)				Cash flows								Better/(Worse)
in thousands	in thousands	Three Months Ended March 31,				2021 vs. 2020				in thousands	Three Months Ended March 31,						2022 vs. 2021
		2021		2020		$		%					2022		2021				$		%
Net cash used in operating activities	Net cash used in operating activities	$	(1,589)	$	(25,401)	$	23,812	94	%			Net cash used in operating activities	$	(5,363)	$	(1,589)			$	(3,774)	(238)	%
Net cash used in investing activities	Net cash used in investing activities	(6,530)		(19,319)		12,789		66				Net cash used in investing activities	(6,066)		(6,530)				464		7
Net cash (used in) provided by financing activities		(579)		54,159		(54,738)		n/m
Net (decrease) increase in cash, cash equivalents and restricted cash		$	(8,698)	$	9,439	$	(18,137)	n/m
Net cash used in financing activities												Net cash used in financing activities	(11)		(579)				568		98
Net decrease in cash, cash equivalents, restricted cash, and cash held for sale												Net decrease in cash, cash equivalents, restricted cash, and cash held for sale	$	(11,440)	$	(8,698)			$	(2,742)	(32)

n/m - Not Meaningful	n/m - Not Meaningful											n/m - Not Meaningful

Net cash used in operating activities

~~The decrease in cash used in operating activities was primarily driven by the improvement in the net operating income (loss) for~~During the three months ended March 31, ~~2021 as~~2022, the Company used $5,363 of net cash in operating activities, which represents an increase of $3,774, or 238%, when compared with 2021. Although the reported net loss increased during the three months ended March 31, 2022 when compared to the ~~corresponding~~same period of ~~fiscal 2020. Excluding~~2021, the net loss excluding non-cash items such as impairments, equity based compensation, write-offs and recoveries, gains and losses on disposals and depreciation and amortization improved by $4,862. This improvement was more than offset by an increase in the ~~net operating income (loss), this improved operating income was~~cash flow required to fund working capital, in particular an increase in inventories as a result of ~~revenue increases exceeding increases in costs of goods sold~~the expanded operations and a decrease in ~~compensation, marketing and general and administrative expenses. Additionally, improvements in working capital help~~other liabilities due to ~~drive~~ the ~~decrease in cash used in operating activities.~~timing of payments.

Net cash used in investing activities

During the three months ended March 31, 2022, the Company used $6,066 of net cash through investing activities. This represented an improvement of $464 when compared with 2021. Cash used in investing activities during the year ended March 31, 2022 primarily consisted of (i) cash paid for short-term investments of $3,400 and (ii) $8,290 in cash paid related to capital asset purchases and was somewhat offset by (iii) the collection of notes receivable. Cash used in investing activities during the three months ended March 31, 2021 ~~was~~ primarily ~~driven by~~consisted of (i) investments in notes receivable of $1,229 and (ii) $5,421 ~~spent on~~in cash paid related to capital ~~expenditures to build out the Company’s owned operations and $1,143 advanced to entities, net of collections, with which the Company has a management or consulting services arrangement.~~asset purchases.

~~Cash~~Net cash used in ~~investing~~financing activities ~~during~~

During the three months ended March 31, ~~2020, was primarily driven by $7,790 spent on capital expenditures to build out the Company’s owned operations and $11,560 advanced to entities, net of collections, with which~~2022, the Company ~~has a management or consulting services arrangement.~~

~~Net~~used $11 of net cash ~~(used in) provided by financing activities~~

~~Cash used~~ in financing ~~activities during the three months ended March 31,~~activities. This represented a decrease of $568 when compared with 2021, ~~was primarily driven by the repayment~~which included (i) $2,070 of repayments of debt ~~of $2,070, partially~~ offset by (ii) $1,190 ~~related to financing proceeds.~~

~~Cash provided by financing activities during the three months ended March 31, 2020 was primarily driven by~~of proceeds from ~~raising $27,887 through~~financing that didn’t occur in the issuance of warrants, $19,438 related to a draw down associated with a credit facility, as well as $22,000 related to the collateral received pursuant to the draw down. This was partially offset by the repayment of short-term related party debt of $15,000.current period.

4338

Capital Resources

Capital structure and debt

~~The Company’s~~Our debt outstanding as of March 31, 2022 and December 31, 2021 ~~was~~is as follows:


~~Debt balances~~	~~March 31, 2021~~

~~Seller’s notes~~	~~2,581~~

~~Financing liability (related party)~~	~~15,253~~
~~Finance lease liabilities~~	~~5,190~~
~~3.55% Credit facility due 2021~~	~~20,215~~
~~3.55% Credit facility collateral (related party)~~	~~20,845~~


~~7.5% Loan due 2023 (related party)~~	~~32,203~~
~~6.1% Secured debenture due 2030 (related party)~~	~~46,185~~
~~Hempco Foros promissory note~~	~~2,000~~
~~Senior secured term loan facility~~	~~23,200~~
~~Construction financing loan~~	~~6,090~~
~~Canwell promissory note~~	~~6,750~~
~~Total debt~~	$	~~180,512~~
~~Less: current portion of debt~~	~~47,642~~
~~Total long-term debt~~	$	~~132,870~~


Debt balances	March 31, 2022		December 31, 2021
Financing liability (failed sale-leaseback)	$	15,253	$	15,253
Finance lease liabilities	11,043		5,245
7.50% Loan due April 2026	30,893		30,763
6.10% Secured debenture due September 2030	46,162		46,050
Note due December 2024	4,750		4,750
9.75% Credit facilities due January 2026	68,551		68,673
Total debt	$	176,652	$	170,734
Less: current portion of debt	7,370		1,583
Total long-term debt	$	169,282	$	169,151

Commitments and contingencies

Commitments

The Company provides revolving lines of credit to several third parties. Refer to Note 6 of the Unaudited Condensed Consolidated Financial Statements for further discussion.

In connection with the CanWell settlement discussed in Note 13 of the Unaudited Condensed Consolidated Financial Statements, the Company issued a promissory note in the amount of $7,750, which is non-interest bearing and is payable in periodic payments through December 31, 2024.

Definitive agreements

During the year ended December 31, 2021, a subsidiary of the Company entered into a definitive agreement and management services agreement to sell an indoor cultivation facility in Medford, Oregon and a retail dispensary in Portland, Oregon, for total consideration of $3,000, to be paid in a series of tranches based on estimated regulatory approvals which are not expected to exceed 18 months. In March 2022, the total consideration was reduced to $2,000. This sale is expected to close in 2022.

During the year ended December 31, 2021, a subsidiary of the Company entered into a definitive agreement and management services agreements to sell, upon regulatory approval, four retail dispensaries in Oregon for total consideration of $6,500, consisting of a $250 cash payment at the time of signing and a 10-month secured promissory note. This sale is expected to close in 2022.

Arrangement with Canopy Growth

On June 19, 2019, the shareholders of the Company and of Canopy Growth separately approved the Prior Plan of Arrangement involving the two companies. Subsequently, on September 23, 2020, Acreage and Canopy Growth entered into an amending agreement and the Amended Arrangement became effective on September 23, 2020. Refer to Note 13 of the ~~unaudited condensed~~Unaudited Condensed Consolidated Financial Statements for further discussion.

Surety bonds

The Company has indemnification obligations with respect to surety bonds primarily used as security against non-performance in the amount of $5,000 as of March 31, 2022, for which no liabilities are recorded on the Unaudited Condensed Consolidated Statements of Financial Position.

The Company is subject to other capital commitments and similar obligations. As of March 31, 2022, such amounts were not material.

Contingencies

subsidiaries ceasing operations. While management of the Company believes that the Company’s subsidiaries are in compliance with applicable local and state regulations as of March 31, 2022, cannabis regulations continue to evolve and are subject to differing interpretations. As a result, the Company’s subsidiaries may be subject to regulatory fines, penalties, or restrictions in the future.

Critical accounting policies and estimates

We have adopted various accounting policies to prepare the Unaudited Condensed Consolidated Financial Statements in accordance with GAAP. Certain of our accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. In our 2021 Annual Report on Form 10-K, we identified the critical accounting policies which affect our more significant estimates and assumptions used in preparing our consolidated financial statements.

As of March 31, 2022 there have been no material changes to our critical accounting policies and estimates from those previously disclosed in our 2021 Annual Report on Form 10-K for the year ended December 31, 2021.

Item 3. Quantitative and Qualitative Disclosures About Market Risk (presented in thousands, except share amounts).

The Company has exposure to ~~the following~~certain risks, ~~from its use of financial instruments~~including market, credit, liquidity, asset forfeiture, banking and ~~other risks to which it is exposed~~interest rate risk, and assesses the impact and likelihood of those risks. ~~These risks include~~However, there have been no material changes in our market ~~credit, liquidity, asset forfeiture, banking and interest rate risk.~~

~~Market~~ risk during the three months ended March 31, 2022. For additional information, refer to our 2021 Annual Report on Form 10-K for the year ended December 31, 2021.

Strategic and operational risks arise if the Company fails to carry out business operations and/or to raise sufficient equity and/or debt financing. These strategic opportunities or threats arise from a range of factors that might include changing economic and political circumstances and regulatory approvals and competitor actions. The risk is mitigated by consideration of other potential development opportunities and challenges which management may undertake.

~~Credit risk~~

The Company’s exposure to non-payment or non-performance by its counterparties is a credit risk. The maximum credit exposure as of March 31, 2021, is the carrying amount of cash and cash equivalents, restricted cash, and accounts, notes and other receivables. The Company does not have significant credit risk with respect to customers. The Company mitigates its credit risk on its notes and other receivables by securing collateral, such as capital assets, and by its review of the counterparties and their businesses. The Company considers a variety of factors when determining interest rates for notes receivable, including the creditworthiness of the counterparty, market interest rates prevailing at the note’s origination, and duration and terms of the note. The Company determined expected credit losses to be immaterial due to collateral held. Analysis of collateral held and future expected cash flows within the cannabis industry were considered in its expected credit loss assessment.

~~Liquidity risk~~

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company endeavors to ensure that there is sufficient liquidity in order to meet short-term business requirements, after taking into account the Company’s cash holdings. As of March 31, 2021, the Company’s financial liabilities consist of accounts payable and accrued liabilities, lease liabilities and long-term debt. The Company manages its liquidity risk by reviewing its capital requirements on an ongoing basis.

As reflected in the unaudited condensed consolidated financial statements, the Company had an accumulated deficit as of March 31, 2021, as well as a net loss and negative cash flow from 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 of the Company’s ability to meet its obligations for the next twelve months from the date these financial statements were first made available has been alleviated due to, but not limited to, (i) access to future capital commitments, (ii) continued sales growth from the Company’s 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, (v) the Standby Equity Distribution Agreement (refer to Note 13 of the unaudited condensed consolidated financial statements for further discussion) and (vi) the anticipated Non-Core Divestitures (refer to Note 3 of the unaudited condensed consolidated financial statements for further discussion).

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 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.

~~Asset forfeiture risk~~

Because the cannabis industry remains illegal under U.S. federal law, any property owned by participants in the cannabis industry which are either used in the course of conducting such business, or are the proceeds of such business, could be subject to seizure by law enforcement and subsequent civil asset forfeiture. Even if the owner of the property were never charged with a crime, the property in question could still be seized and subject to an administrative proceeding by which, with minimal due process, it could be subject to forfeiture.

~~Banking risk~~

Notwithstanding that a majority of states have legalized medical marijuana, there has been no change in U.S. federal banking laws related to the deposit and holding of funds derived from activities related to the marijuana industry. Given that U.S. federal law provides that the production and possession of cannabis is illegal, there is a strong argument that banks cannot accept for deposit funds from businesses involved with the marijuana industry. Consequently, businesses involved in the marijuana industry often have difficulty accessing the U.S. banking system and traditional financing sources. The inability to open bank accounts with certain institutions may make it difficult to operate the businesses of the Company, its subsidiaries and investee companies, and leaves their cash holdings vulnerable. The Company has banking relationships in all jurisdictions in which it operates.

In addition, 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 Subordinate Voting Shares.

~~Interest rate risk~~

Interest rate risk is the risk that the fair value or the future cash flows of a financial instrument will fluctuate as a result of changes in market interest rates. The Company’s interest-bearing loans and borrowings are all at fixed interest rates. The Company considers cash flow interest rate risk to be immaterial.

~~Capital risk management~~

The Company considers its capital structure to include contributed capital, accumulated deficit, non-controlling interests and any other component of equity. The Company’s objectives when managing its capital are to safeguard its ability to continue as a going concern, to meet its capital expenditures for its continued operations and to maintain a flexible capital structure which optimizes the cost of capital within a framework of acceptable risk. The Company manages its capital structure and adjusts it as appropriate given changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust its

~~capital structure, the Company may issue new shares, issue new debt, or acquire or dispose of assets. The Company is not subject to externally imposed capital requirements.~~

~~Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable.~~

Item 4. Controls and ~~Procedures~~Procedures.

Evaluation of Disclosure Controls and Procedures

Based on an evaluation under the supervision and with the participation of the Company’s management, and due to the material weakness in internal controls over financial reporting described below, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were not effective for the period ending March 31, ~~2021~~2022 to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Inherent Limitations Over Internal Controls

The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. The Company’s internal control over financial reporting includes those policies and procedures that:

(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that the Company’s receipts and expenditures are being made only in accordance with authorizations of the Company’s management and directors; and

(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Management, including the Company’s Chief Executive Officer and Chief Financial Officer, does not expect that the Company’s internal controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be

considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls in future periods are subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In accordance with guidance issued by the SEC, companies are permitted to exclude acquisitions from their final assessment of internal control over financial reporting for the first fiscal year in which the acquisition occurred. Management, including the Chief Executive Officer and Chief Financial Officer, has limited the evaluation of the Company’s internal controls over financial reporting to exclude controls, policies and procedures and internal controls over financial reporting of the recently acquired operations of:

•~~Compassionate Care Foundation,~~CWG Botanicals, Inc. (“~~CCF”~~CWG”) (acquired ~~June 26, 2020)~~April 30, 2021); and

•Greenleaf Apothecaries, Greenleaf Gardens, and Greenleaf Therapeutics, collectively “Greenleaf” (acquired October 1, 2021).

The operations of ~~CCF~~CWG represents approximately 5%3% of the Company’s total assets as of March 31, ~~2021~~2022 and ~~12%~~1% of the Company’s gross revenue for the three months ended March 31, ~~2021.~~2022.

The operations of Greenleaf represents approximately 10% of the Company’s total assets as of March 31, 2022 and 26% of the Company’s gross revenue for the three months ended March 31, 2022.

Material Weaknesses in Internal Control Over Financial Reporting

A material weakness in internal controls over financial reporting is a deficiency, or a combination of deficiencies, in internal controls over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The review, testing and evaluation of key internal controls over financial reporting completed by the Company resulted in the Company’s principal executive officer and principal financial officer concluding that as of March 31, 2022, a material weakness existed in the Company’s internal controls over financial reporting. Specifically, as a result of turnover and the availability of resources with the appropriate level of technical capabilities (including the impacts on staffing and recruiting and the general global labor shortage brought about by the global COVID-19 pandemic), the Company did not have effective staffing levels and adequate segregation of duties within several finance and accounting processes. Further, and as a result of this material weakness, the Company’s financial disclosures for the quarterly period ending June 30, 2021 incorrectly disclosed certain debt that was due 11 months after the balance sheet date as long-term rather than as current liabilities. Additionally, and as a result of this material weakness, the Company’s financial disclosures for the quarterly and annual periods ended June 30, 2020, September 30, 2020, December 31, 2020, March 31, 2021, June 30, 2021, and September 30, 2021 incorrectly reported the weighted average shares outstanding which resulted in an incorrect determination of earnings per share and diluted earnings per share.

The Company has begun to address the material weakness described above through the following actions, which are expected to be completed by the second quarter of 2022:

a.Engaging third-party consultants with appropriate expertise to assist the finance and accounting department on an interim basis until key roles are filled;

b.Assessing finance and accounting resources to identify the areas and functions that lack sufficient personnel and recruiting for experienced personnel to assume these roles;

c.Further centralization of key accounting processes to enable greater segregation of duties;

d.Developing further training on segregation of duties; and

e.Designing and implementing additional compensating controls where necessary.

While we are working diligently to remediate this material weakness, there is no assurance that this material weakness will be fully remediated by the second quarter of 2022 given continuing lasting impacts of COVID-19 on staffing and labor for companies within our industry and otherwise.

Changes in Internal Control Over Financial Reporting

~~There~~Other than the changes discussed above in connection with our implementation of the remediation plan, there were no changes in ~~the Company’s~~our internal control over financial reporting ~~during the first quarter of 2021, which were identified~~(as such term is defined in ~~connection with management’s evaluation required by paragraph (d) of~~ Rules ~~13a-15~~13a–15(f) and ~~15d-15~~15d–15(f) under the Exchange ~~Act,~~

Act) that ~~have~~occurred during our most recent quarter, that has materially affected, or ~~are~~is reasonably likely to materially affect, ~~the Company’s~~our internal control over financial reporting.

PART II

Item 1. Legal ~~Proceedings~~Proceedings.

For information on legal proceedings, refer to Note 13 to the ~~condensed consolidated financial statements~~Unaudited Condensed Consolidated Financial Statements included this report.

Item 1A. Risk ~~Factors~~Factors.

There have been no material changes to the risk factors described in the section titled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020.~~

2021.

Item 2. Unregistered Sales of Equity Securities and Use of ~~Proceeds~~

~~None.~~Proceeds.

None.

Item 3. Defaults Upon Senior ~~Securities~~

~~None.~~Securities.

None.

Item 4. Mine Safety ~~Disclosures~~Disclosures.

Not applicable.

Item 5. Other ~~Information~~Information.

Not applicable.

Item 6. Exhibits.

Incorporated by Reference
Exhibit No. Description of Document Schedule Form File Number Exhibit Filing Date Filed or Furnished Herewith
10.1
Letter amending the Standby Equity Distribution Agreement by and between the Institutional Investor and Acreage Holdings, Inc., dated January 25, 2021
8-K
000-56021
10.2 1/28/21
10.2
Letter amending the Standby Equity Distribution Agreement by and between the Institutional Investor and Acreage Holdings, Inc., dated March 11, 2021
10-K
000-56021
10.31 3/25/21
10.2
Stock Purchase Agreement by and among RWB Florida LLC, Red, White & Bloom Inc., High Street Capital Partners, LLC and Acreage Florida, Inc. dated February 24, 2021
10-K
000-56021
10.28 3/25/21
10.3
Amendment No. 3 to Credit Agreement by and among Acreage Finance Delaware, LLC, Acreage IP Holdings, LLC and IP Investment Company, LLC, originally dated as of March 11, 2020.
8-K
000-56021
10.2 3/11/21
10.4
Amendment to Stock Purchase Agreement dated as of April 27, 2021 by and among High Street Capital Partners, LLC, RWB Florida LLC and Red White & Bloom Brands Inc.
X
10.8
Separation Agreement between Tyson Macdonald and Acreage Holdings, Inc., effective March 9, 2020
S-1
333-252828
10.22 2/8/21
10.10
Offer of Employment Letter, dated February 15, 2021, by and between Acreage Holdings, Inc. and Steve Goertz
8-K
000-56021
10.1 2/26/21
10.11
Amendment No. 2 to Credit Agreement by and among Acreage Finance Delaware, LLC, Acreage IP Holdings, LLC and IP Investment Company, LLC, originally dated as of March 11, 2020.
8-K
000-56021
10.1 3/11/21
31.1
Certification of Periodic Report by Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
X
31.2
Certification of Periodic Report by Principal Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
X
32.1
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
X
101 Attached as Exhibit 101 to this report are the following documents formatted in iXBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Statements of Financial Position as of March 31, 2021 (unaudited) and December 31, 2020 (audited), (ii) Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2021 and March 31, 2020, (iii) Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and March 31, 2020, (iv) Unaudited Condensed Consolidated Statements of Shareholders’ Equity for the three months ended March 31, 2021 and March 31, 2020 and (v) Notes to Unaudited Condensed Consolidated Financial Statements. X

Incorporated by Reference

Exhibit No.

Description of Document

Schedule Form

File Number

Exhibit/Form

Filing Date

Filed or Furnished Herewith

10.1

Consulting Agreement, dated as of April 1, 2022, by and between the Company and R4 Holdings, LLC.

8-K

000-56021

10.1

4/6/2022

31.1

Certification of Periodic Report by Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Periodic Report by Principal Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

101

Attached as Exhibit 101 to this report are the following documents formatted in iXBRL (Extensible Business Reporting Language):): (i) Consolidated Statements of Financial Position as of March 31, 2022 (unaudited) and December 31, 2021 (audited), (ii) Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2022 and March 31, 2021, (iii) Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and March 31, 2021, (iv) Unaudited Condensed Consolidated Statements of Shareholders’ Equity for the three months ended March 31, 2022 and March 31, 2021 and (v) Notes to Unaudited Condensed Consolidated Financial Statements.

* Document has been furnished, is not deemed filed and is not to be incorporated by reference into any of the Company’s filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, irrespective of any general incorporation language contained in any such filing.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the ~~registrant~~Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: May 10, ~~2021~~2022


			Acreage Holdings, Inc.
			~~(Registrant)~~

			By:						/s/ Steve Goertz
									Steve Goertz
									Chief Financial Officer

4844


	March 31, 2021
	Acreage Florida(3)		Kanna, Inc.		MMRC(1)		Michigan		Cannabliss		OR - Medford(2)		OR - Powell(2)		Total
Cash	$	212	$	0	$	0	$	0	$	0	$	0	$	0	$	212
Inventory	606		0		0		0		265		100		104		1,075
Notes receivable, current	0		0		0		0		0		62		0		62
Other current assets	169		0		10		0		1		0		0		180
Total current assets classified as held-for-sale	987		0		10		0		266		162		104		1,529
Capital assets, net	10,093		1,156		286		7,469		83		2,252		7		21,346
Operating lease right-of-use assets	16,796		944		362		0		1,354		321		164		19,941
Intangible assets, net	26,190		970		801		0		0		0		0		27,961
Goodwill	0		0		0		0		2,192		0		0		2,192
Other non-current assets	339		0		0		0		23		40		10		412
Total assets classified as held for sale	$	54,405	$	3,070	$	1,459	$	7,469	$	3,918	$	2,775	$	285	$	73,381

Accounts payable and accrued liabilities	$	(260)	$	(127)	$	(6)	$	0	$	(492)	$	0	$	(39)	$	(924)
Taxes payable	0		(15)		0		0		(688)		0		0		(703)
Operating lease liability, current	(509)		(259)		(29)		0		(257)		(136)		(126)		(1,316)
Other current liabilities	(134)		0		0		0		0		0		0		(134)
Total current liabilities classified as held-for-sale	(903)		(401)		(35)		0		(1,437)		(136)		(165)		(3,077)

Operating lease liability, non-current	(13,979)		(542)		(317)		0		(1,004)		(254)		0		(16,096)
Deferred tax liabilities	0		0		0		0		6		0		0		6
Total liabilities classified as held-for-sale	$	(14,882)	$	(943)	$	(352)	$	0	$	(2,435)	$	(390)	$	(165)	$	(19,167)


Investment (loss) income	Three Months Ended March 31,
	2021		2020


Investments held at FV-NI	(144)		240
Equity method investments	0		(6)

(Loss) income from investments, net	$	(144)	$	234


	March 31, 2021		December 31, 2020
Notes receivable	$	97,817	$	94,171
Interest receivable	5,467		5,762
Total notes receivable	$	103,284	$	99,933
Less: Notes receivable, current	8,892		2,032
Notes receivable, non-current	$	94,392	$	97,901


Lines of Credit				Balance as of
Counterparty	Maximum Obligation		Interest Rate	March 31, 2021		December 31, 2020
Greenleaf (1)	$	31,200	3.25% - 4.75%	$	29,422	$	29,422
CWG Botanicals Inc. (“CWG”) (2)	12,000		8%	9,767		9,767
Compassionate Care Foundation, Inc. (“CCF”) (3)	12,500		18%	0		0
Prime Alternative Treatment Center, Inc. ("PATC") (4)	7,150		0%	7,150		4,650
Patient Centric of Martha’s Vineyard, Ltd. (“PCMV”) (5)	9,000		15%	7,161		6,873
Health Circle, Inc. (6)	8,000		15%	4,331		4,331
Total	$	79,850		$	57,831	$	55,043


Shareholders’ Equity	Subordinate Voting Shares	Subordinate Voting Shares Held in Treasury	Proportionate Voting Shares (as converted)	Multiple Voting Shares	Total Shares Outstanding
December 31, 2019	68,177	(842)	23,143	168	90,646
Issuances	6,671	0	0	0	6,671
NCI conversions	113	0	0	0	113
PVS conversions	294	0	(294)	0	0
March 31, 2020	75,255	(842)	22,849	168	97,430


Warrants	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
	Fixed Shares	Floating Shares	SVS
Beginning balance	7,131	3,087	2,040
Granted	0	0	6,085
Expired	0	0	0

Ending balance	7,131	3,087	8,125


	Three Months Ended March 31, 2021
	Fixed Shares			Floating Shares
Restricted Share Units (Fair value information expressed in whole dollars)	RSUs	Weighted Average Grant Date Fair Value		RSUs	Weighted Average Grant Date Fair Value
Unvested, beginning of the period (1)	5,119	$	9.24	2,688	$	7.83
Granted	147	$	5.34	182	$	3.03
Forfeited	(211)	$	3.68	(92)	$	3.60
Vested	(706)	$	4.85	(387)	$	4.46
Unvested, end of period	4,349	$	10.09	2,391	$	8.17
Vested and unreleased	92	$	14.22	40	$	14.22
Outstanding, end of period	4,441	$	10.17	2,431	$	8.27


Summary Results of Operations					Better/(Worse)
in thousands, except per share amounts	Three Months Ended March 31,				2021 vs. 2020
	2021		2020		$		%
Revenues, net	$	38,393	$	24,225	$	14,168	58	%
Operating income (loss)	1,806		(251,282)		253,088		n/m
Net loss attributable to Acreage	(7,809)		(171,954)		164,145		95	%
Basic and diluted loss per share attributable to Acreage	$	(0.07)	$	(1.85)	$	1.78	96	%


Other (loss) income					Better/(Worse)
in thousands	Three Months Ended March 31,				2021 vs. 2020
	2021		2020		$		%
(Loss) income from investments, net	$	(144)	$	234	$	(378)	n/m
Interest income from loans receivable	1,465		1,647		(182)		(11)	%
Interest expense	(4,857)		(1,226)		(3,631)		(296)	%
Other loss, net	(1,566)		(174)		(1,392)		(800)	%
Total other (loss) income	$	(5,102)	$	481	$	(5,583)	n/m

n/m - Not Meaningful