~~Compassionate Care Foundation, Inc. (“CCF”)~~

In 2020, we completed the acquisition of Compassionate Care Foundation, Inc. (“CCF”), a vertically integrated medical cannabis operator in New Jersey with licenses to conduct growing, processing, wholesale, and dispensary operations. On November 15, 2019, we entered into an agreement to acquire CCF, which closed on June 26, 2020. CCF operates a medicinal cultivation and processing facility and medicinal dispensaries in Egg Harbor and Atlantic City. A third dispensary is planned to be constructed in Monroe.

Canopy Growth Corporation Arrangement

Historical Arrangement Agreements

On June 19, 2019, the shareholders of the Company and of Canopy Growth Corporation (“Canopy ~~Growth~~”Growth”) separately approved ~~the~~an arrangement between the two companies, and on June 21, 2019, the Supreme Court of British Columbia granted a final order approving ~~the~~such arrangement. Effective June 27, 2019, the Articles of the Company were amended to provide Canopy Growth with the option (the “Canopy ~~Growth~~ Call ~~Option~~”Option”) to acquire all of the issued and outstanding shares of the Company (each, an “~~Acreage Share~~”“Acreage Share”), with a requirement to do so 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, subject to the satisfaction of the conditions (the “Acquisition Closing 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~~“Original Arrangement ~~Agreement~~”Agreement”).

On June 24, 2020, we entered into a proposal agreement (the “~~Proposal Agreement~~”“Proposal Agreement”) with Canopy Growth which set out ~~among other things,~~ the terms and conditions upon which us and Canopy Growth were proposing to enter into an ~~amending~~ agreement (the “~~Amending Agreement~~”“Amending Agreement”) ~~which, among other things, provided for certain amendments to~~, amending the Original Arrangement Agreement ~~and,~~ as ~~further~~same was amended on September 23, 2020 (the “~~Arrangement Agreement~~”“Amending Agreement”), and the amendment and restatement of the plan of arrangement implemented by us on June 24, 2019 ((pursuant to the “~~Amended~~Original Arrangement Agreement (the “Amended Plan of ~~Arrangement~~”Arrangement”) to implement the arrangement contemplated in the Existing Arrangement Agreement (the “~~Amended Arrangement”) pursuant to the~~ ~~Business Corporations Act~~ ~~(British Columbia) (“BCBCA~~”)“Existing Arrangement”). The effectiveness of the Amending 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 (the “~~Court~~”“Court”) at a hearing upon the procedural and substantive fairness of the terms and conditions of the ~~Amended~~Existing Arrangement; and (ii) our shareholders, as required by applicable corporate and securities laws.

The ~~Amended~~Existing Arrangement was approved by our shareholders at our special meeting held on September 16, 2020 and a final order approving the ~~Amended~~Existing Arrangement was obtained from the Court on September 18, 2020.

Following the satisfaction of various conditions set forth in the Proposal Agreement, on September 23, 2020, we entered into the ~~Amending~~Existing Agreement with Canopy Growth and implemented the Amended Plan of Arrangement effective at 12:01 a.m. (Vancouver time) (the “~~Amendment Time~~”“Amendment Time”) on September 23, 2020 (the “~~Amendment Date~~”“Amendment Date”).

Pursuant to the Amended Plan of Arrangement, among other things, Canopy Growth made a cash payment of ~~$37,500,024~~$37.5 million (the “~~Aggregate~~“Aggregate Amendment Option ~~Payment~~”Payment”), to our shareholders and certain holders of securities convertible or exchangeable into our shares. Holders of our then outstanding Class A subordinate voting shares (the “~~SVS~~”“SVS”), Class B proportionate voting shares (the “~~PVS~~”“PVS”), Class C multiple voting shares (the “~~MVS~~”“MVS”), and certain other parties, received approximately $0.30 per SVS, being their pro rata portion (on an as-converted to SVS basis) of the Aggregate Amendment Option Payment, based on the number of our outstanding shares and certain holders of securities convertible or exchangeable into our shares, as of the close of business on September 22, 2020, the record date for payment of the Aggregate Amendment Option Payment. The Aggregate Amendment Option Payment was distributed to such holders of record on or about September 25, 2020.

Upon implementation of the Amended Plan of Arrangement, our ~~articles~~Articles were amended to, among other things, create three new classes of shares in our authorized share structure, being Fixed Shares, Floating Shares and Class F multiple voting shares (the “~~Fixed~~“Fixed Multiple ~~Shares~~”Shares”), and, in connection with such amendment, we completed a capital reorganization (the “~~Capital Reorganization~~”“Capital Reorganization”) effective as of the Amendment Time whereby: (i) each then outstanding SVS was exchanged for 0.7 of a Fixed Share and 0.3 of a Floating Share; (ii) each then outstanding PVS was exchanged for 28 Fixed Shares and 12 Floating Shares; and (iii) each then 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 SVS that was outstanding immediately prior to the Amendment Time was exchanged for a replacement option, restricted stock unit, compensation option or warrant, as applicable, to acquire Fixed Shares (a “~~Fixed~~“Fixed Share Replacement ~~Security~~”Security”) and a replacement option, restricted stock unit, compensation option or warrant, as applicable, to acquire Floating Shares (a “~~Floating~~“Floating Share Replacement ~~Security~~”Security”) in order to account for the Capital Reorganization.

As a condition to implementation of the ~~Amended~~Existing Arrangement, an affiliate of Canopy Growth advanced the first tranche of ~~$50,000,000~~$50 million of a loan of up to ~~$100,000,000~~$100 million (the “~~Hempco Loan~~”“Hempco Loan”) to Universal Hemp, LLC, an affiliate of the Company that operates solely in the hemp industry in full compliance with all applicable laws (“Universal ~~Hemp~~”Hemp”) pursuant to a secured debenture (the “~~Debenture~~”“Debenture”) bearing interest at a rate of 6.1% per annum and maturing 10 years from the date thereof. 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. A further ~~$50,000,000~~$50 million advance will be made available upon satisfaction of specified

conditions precedent. 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. Refer to Note 5 and Note 10 of the consolidated financial statements for further discussion.

Pursuant to the Amended Plan of Arrangement, Canopy Growth (i) was granted the option to 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 (the “Fixed Exchange Ratio”) of a common share of Canopy Growth (each, a “Canopy Share”) for each Fixed Share held at the time of the acquisition of the Fixed Shares (the “Acquisition” or “Acquisition Time”), subject to adjustment in accordance with the terms of the Amended Plan of Arrangement (the “Canopy Call Option”), which Canopy Growth is required to exercise upon the occurrence, or waiver (at the discretion of Canopy Growth), of a change in federal laws in the United States to permit the general cultivation, distribution and possession of marijuana (as defined in the relevant legislation) or to remove the regulation of such activities from the federal laws of the United States (the “~~Triggering Event~~”“Triggering Event” and the date on which the Triggering Event occurs, the “~~Triggering~~“Triggering Event ~~Date~~”Date”)., The Acquisition of the Fixed Shares upon exercise of the Canopy ~~Growth, will,~~Call Option is subject to the satisfaction or waiver of certain closing conditions set out in the Existing Arrangement ~~Agreement: (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~~Agreement (the “~~Fixed Exchange Ratio”) of a common share of Canopy Growth (each, a “Canopy Growth Share”) for each Fixed Share held 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~~”“Acquisition Closing Conditions”); and (ii) ~~have~~obtained the right (but not the obligation) (the “~~Floating~~“Floating Call ~~Option~~”Option”), exercisable for a period of 30 days following the Triggering Event Date to acquire all of the issued and outstanding Floating ~~Shares. Upon exercise of the Floating Call Option, Canopy Growth may acquire the Floating~~ Shares for consideration of cash or ~~for~~ Canopy Growth Shares or a combination thereof, in Canopy Growth’s sole discretion. If paid in cash, the price per Floating Share ~~shall~~was to be equal to the volume-weighted average trading price of the Floating Shares on the CSE (or other recognized stock exchange on which the Floating Shares are primarily traded as determined by volume) for the 30 trading day period prior to the exercise (or deemed exercise) of the Canopy Call Option, subject to a minimum amount of $6.41 (the “~~Floating~~“Floating Cash ~~Consideration~~”Consideration”). If paid in Canopy Growth Shares, each Floating Share ~~will~~was to be exchanged for a number of Canopy ~~Growth~~ Shares equal to (i) the volume-weighted average trading price of the Floating Shares on the CSE (or other recognized stock exchange on which the Floating Shares are primarily traded as determined by volume) for the 30 trading day period prior to the exercise (or deemed exercise) of the Canopy Call Option, subject to a minimum amount of $6.41, divided by (ii) the volume-weighted average trading price (expressed in US$) of the Canopy ~~Growth~~ Shares on the New York Stock Exchange (the “~~NYSE~~”“NYSE”) (or such other recognized stock exchange on which the Canopy ~~Growth~~ Shares are primarily traded if not then traded on the NYSE) for the 30 trading day period immediately prior to the exercise (or deemed exercise) of the Canopy Call Option (the “~~Floating Ratio~~”“Floating Ratio”). The Floating Ratio is subject to adjustment in accordance with the Amended Plan of Arrangement if Acreage issues greater than the permitted number of Floating Shares prior to the Acquisition Date. No fractional Canopy Shares will be issued pursuant to the Amended Plan of Arrangement. The Floating Call Option cannot be exercised unless the Canopy Call Option is exercised (or deemed to be exercised). 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 (the “~~Acquisition”) 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.~~

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 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 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 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 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 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 be rounded down to the nearest whole number).

In the event that Floating Call Option is exercised, and Canopy Growth acquires the Floating Shares at the Acquisition Time, we will be a wholly-owned subsidiary of Canopy Growth. If Canopy Growth completes the Acquisition of the Fixed Shares but does not acquire the Floating Shares, the Floating Call Option will terminate, and the Floating Shares shall remain outstanding. In such event, the Amending Agreement provides for, among other things: (i) various Canopy Growth rights that extend beyond the Acquisition Date and continue until Canopy Growth the date (the “~~End Date”) Canopy Growth ceases to hold at least 35% of the issued and outstanding Acreage shares. These include, among other things, rights to nominate a majority of Acreage’s Board of Directors (the “Board~~”) following the Acquisition Time, and restrictions on Acreage’s ability to conduct mergers and acquisitions above certain thresholds or incur certain indebtedness without Canopy Growth’s consent

The Amending Agreement also provides that Acreage may issue a maximum of 32,700,000 shares (or convertible securities in proportion to the foregoing), which will include (i) 3,700,000 Floating Shares which are to be issued solely in connection with the exercise of stock options granted to Acreage management (the “~~Option Shares~~”); (ii) 8,700,000 Floating Shares other than the Option Shares; and (iii) 20,300,000 Fixed Shares, without a revision to the Fixed Exchange Ratio. Notwithstanding the foregoing, the Amending Agreement provides that Acreage may not issue any equity securities, without Canopy Growth’s prior consent, other than: (i) upon the exercise or conversion 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 $3.0 million 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 500,000 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 one private placement or public offering of securities during any one-year period for aggregate gross proceeds of up to $20.0 million, subject to specific limitations as set out in the Amending Agreement.

~~For more information, please refer to the Amending Agreement included as an exhibit to this Annual Report on Form 10-K.~~

Pursuant to the ~~Amending~~Existing Agreement, Acreage agreed to submit an Approved Business Plan to Canopy Growth on a quarterly basis that complies with certain specified criteria, including a business plan for the fiscal years ending December 31, 2020 through December 31, 2029 attached as a Schedule to the Proposal Agreement (the “~~Initial Business Plan”). The Initial Business Plan~~which contains annual revenue and earnings targets for each of Acreage’s fiscal years ending on December 31, 2020 to December 31, 2029 ~~as outlined below:~~

Fiscal Year Ending Pro-Forma Net Revenue Target
(in US$ thousands) Consolidated Adj. EBITDA Target
(in US$ thousands)
2020 166,174 (22,499)
2021 253,296 36,720
2022 289,528 53,222
2023 375,274 102,799
2024 558,599 166,744
2025 641,047 190,385
2026 740,194 218,108
2027 848,498 244,402
2028 973,402 273,434
2029 1,120,177 305,840

(the “Initial Business Plan”). A number of factors may cause Acreage to fail to meet the Pro-Forma Net Revenue Targets or the Consolidated Adj. EBITDA Targets set forth in the Initial Business ~~Plan and outlined above.~~Plan. See “~~Risk Factors~~”“Risk Factors”.

In the event that Acreage has not satisfied: (i) 90% of the Pro-Forma Net Revenue Target or the Consolidated Adj. EBITDA Target set forth in the Initial Business Plan, measured on a quarterly basis, an Interim Failure to Perform will occur and ~~the~~certain Austerity Measures shall become applicable. ~~The Austerity Measures include, among other things:~~


			~~(a)~~			~~restrictions on Acreage’s ability to issue shares (or securities convertible into shares) other than:~~


			~~(i)~~			~~upon the exercise or conversion of convertible securities outstanding as such date; and~~


			~~(ii)~~			~~contractual commitments existing as of the;~~


			~~(b)~~			~~prohibitions on entering into any contract in respect of Company Debt, other than in respect of trade payables or similar obligations incurred in the ordinary course;~~


			~~(c)~~			~~granting any options to acquire Fixed Shares or Floating Shares;~~


			~~(d)~~			~~making payments of fees owed to the Board;~~


			~~(e)~~			~~making short-term incentive or bonus payments to any Acreage employee;~~


			~~(f)~~			~~entering into any contract with respect to the disposition of any assets other than inventory in the ordinary course;~~


			~~(g)~~			~~entering into any contract with respect to any business combination, merger or acquisition of assets, other than assets acquired in the ordinary course;~~


			~~(h)~~			~~making any new capital investments or incurring any new capital expenditures; and~~


			~~(i)~~			~~increasing the number of Acreage employees that have a base salary of $150,000 or more or more than five full time employees that would be included in corporate overhead expenditures.~~

~~The Austerity Measures provide significant restrictions on Acreage’s ability to take certain actions otherwise permitted by~~For the ~~Amended Arrangement Agreement; (ii) 80% of~~year ended December 31, 2022, the Company did not exceed the 90% threshold for both the Pro-Forma Net Revenue Target orand the Consolidated Adj. EBITDA Target set forth in the Initial Business ~~Plan, as determined on an annual basis (commencing~~Plan. Therefore, Canopy Growth could, but has not, required the Company to implement austerity measures (as defined in ~~respect~~the Existing Arrangement Agreement) by providing such notice to the Company.

Floating Share Agreement

The Existing Arrangement Agreement contains certain covenants, rights and restrictions in favor of Canopy, which include, among others, the right to nominate a majority of the ~~fiscal year ending December 31, 2021)~~board of directors of Acreage (the “Acreage Board”), ~~a Material Failure~~consent rights on Acreage director and officer appointments, pre-emptive rights, top-up rights, certain audit and inspection rights and restrictions on certain activities, including, but, not limited to, ~~Perform will occur~~dividend payments, M&A activity, acquisitions, divestitures, debt incurrence, securities issuances and ~~(a) certain restrictive covenants applicable to Canopy Growth~~capital raising, in each case without obtaining Canopy’s consent. Acreage is restricted in its pursuit of strategic and other business opportunities under the ~~Amended~~Existing Arrangement Agreement without obtaining Canopy’s consent. These restrictions, coupled with timing uncertainty with which U.S. federal cannabis legislative initiatives will ~~cease~~proceed, impeded both Acreage’s and Canopy’s opportunities in the world’s largest cannabis market. Additionally, the price of the Acreage Shares had the potential to ~~apply~~become a barrier to future Acreage capital-raising initiatives over the term of the Existing Arrangement Agreement particularly in light of the various restrictions contained therein.

In light of the foregoing and other strategic considerations that the Acreage Board considered to be relevant, coupled with Acreage’s improved performance since the Existing Arrangement became effective, the Acreage Board determined to make changes to the terms of the Existing Arrangement Agreement in order to ~~permit~~remove certain restrictions imposed on Acreage by the restrictive covenants contained in the Existing Arrangement Agreement.

As a result of discussions held among representatives of Canopy, the Acreage Board and a special committee of the Acreage Board formed of independent directors to oversee such negotiations (the “Special Committee”), on October 24, 2022, the Company entered into an arrangement agreement (the “Floating Share Agreement”) with Canopy Growth to acquire, or conditionally acquire, a competitor of the Company in the United States should it wish to do so, and (b) an event of default under the Debenture will likely occur resulting in the Hempco Loan becoming immediately due and payable; and (iii) 60% of the Pro-Forma Net Revenue Target or the Consolidated Adj. EBITDA Target 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 Failure to Perform shall occur and 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~~USA, LLC (“Canopy USA”), Canopy Growth’s newly-created U.S. domiciled holding company, pursuant to ~~the Canopy Call Option.~~which, subject to

109

approval of the holders of the Floating Shares and the terms and conditions of the Floating Share Agreement, Canopy USA will acquire all of the issued and outstanding Floating Shares by way of court-approved plan of arrangement (the “Floating Share Arrangement”) for consideration of 0.4500 of a Canopy Share for each Floating Share (the resulting shares, the “Consideration Shares”). The Floating Share Arrangement was approved at a special meeting of the holders of Floating Shares held on March 15, 2023.

Concurrently with entering into the Floating Share Agreement, Canopy Growth irrevocably waived the Floating Call Option obtained under the Existing Arrangement Agreement.

Subject to the provisions of the Floating Share Agreement, Canopy Growth has agreed to exercise the Fixed Call Option no later than five business days following the exchange (in the sole discretion of CBG and Greenstar) of all Canopy Shares held by CBG and Greenstar into a new class of non-voting and non-participating exchangeable shares in the capital of Canopy (the “Exchangeable Canopy Shares”) to be created pursuant to the reorganization of Canopy’s share capital to provide for: (i) the creation of an unlimited number of a new class of Exchangeable Canopy Shares, and (ii) the restatement of the rights of the Canopy Shares to provide for a conversion feature whereby each Canopy Share may at any time, at the option of the holder, be converted into one Exchangeable Canopy Share (the “Canopy Capital Reorganization”). The Canopy Capital Reorganization is subject to the approval by special resolution of Canopy Growth Shareholders at a special meeting of Canopy Shareholders.

Upon completion of: (i) the acquisition of the Floating Shares pursuant to the Floating Share Arrangement; and (ii) the Acquisition of the Fixed Shares following the exercise of the Fixed Call Option pursuant to the Existing Arrangement, Canopy USA will own 100% of the issued and outstanding Acreage Shares. Completion of the Floating Share Agreement is subject to the satisfaction or waiver of certain closing conditions, including receipt of applicable regulatory approvals.

Canopy Growth and Canopy USA have entered into voting support agreements with certain of the Company’s directors and current and former officers, who at the time of the agreement, held approximately 7.3% of the issued and outstanding Floating Shares pursuant to which they have agreed, among other things, to vote their Floating Shares in favor of the Floating Share Agreement.

Acreage expects the Floating Share Arrangement to close upon the receipt of shareholder, court, and regulatory approvals, as well as the exchange by CBG and Greenstar of their Canopy Shares for Exchangeable Canopy Shares, the exercise by Canopy of the Fixed Call Option, and the satisfaction or waiver of all conditions under the Floating Share Agreement and the Existing Arrangement. It is anticipated that the acquisition by Canopy USA of the Fixed Shares pursuant to exercise of the Fixed Call Option will be completed immediately following closing of the Floating Share Agreement.

Company Information

Our website is http://www.acreageholdings.com. Our filings with the Securities and Exchange Commission (“SEC”), including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, are accessible free of charge at http://investors.acreageholdings.com/docs as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers, such as ourselves, that file electronically with the SEC. The Internet address of the SEC’s site is http://www.sec.gov.

We also have adopted a Code of Conduct that applies to all employees, directors and officers. A copy of the Code of Conduct is available without charge to any person desiring a copy of the Code of Conduct. You may request a copy of the Code of Conduct by submitting written request to us at our principal offices at ~~450 Lexington~~366 Madison Ave, ~~#3308,~~14th floor, New York, New York ~~10163.~~10017.

Our Board Mandate and the Charters of the Board’s Audit Committee and Compensation and Corporate Governance Committee (which serves as the Board’s compensation and nominating committee) are available on our website. All materials are accessible on our website at investors.acreageholdings.com. Amendments to, and waivers granted to our directors and executive officers under our code of conduct or charters, if any, will be posted in this area of our website. Copies of these materials are available in print to any shareholder who requests them. Shareholders should direct such requests in writing to Investor Relations Department, Acreage Holdings, Inc., ~~450 Lexington~~366 Madison Ave, ~~#3308,~~14th floor, New York, New York ~~10163,~~10017, or by emailing our Investor Relations team at investors@acreageholdings.com.

The information regarding our website and its content is for your convenience only. The content of our website is not deemed to be incorporated by reference in this report or filed with the SEC.

Information about Our Executive Officers

The following are the Executive Officers of our Company (as of the date of this filing):

Filippo “Peter” Caldini, Chief Executive Officer (age 58)~~(age 56)~~: Peter Caldini joined Acreage Holdings in December 2020 as Chief Executive Officer after serving for 18 months as the Chief Executive Officer and a director of Bespoke Capital Acquisition Corp., a cannabis-focused Special Purpose Acquisition Corporation. Mr. Caldini has over 30 years of experience building and restructuring multinational organizations around the world, with a strong emphasis in consumer healthcare and consumer packaged goods. Mr. Caldini developed extensive commercial management expertise in heavily regulated industries while at Pfizer Inc., Bayer AG and Wyeth, LLC. Mr. Caldini was the Regional President North America for Pfizer Consumer Healthcare from 2017 to 2019, where he drove brand acceleration, marketing strategy, trade execution, global e-commerce and more for the second largest OTC consumer healthcare company in the region with over U.S.$2.1 billion in net sales. Prior to that role he was the Regional President EMEA of Pfizer Consumer Healthcare from 2016 to 2017 and led the Northern European cluster from 2015 to 2016. Mr. Caldini was at Bayer from 2009 to 2014, with roles including the head of sub-region Emerging Markets EMEA, the General Manager of Bayer Consumer Care China and the head of the Nutritionals Strategic Business unit, the global leader in nutritional supplements with brands One-A-Day, Berocca, and Supradyn. From 2002 to 2009 Mr. Caldini was at Wyeth LLC where he was responsible for affiliates across LATAM and AsiaPac and also managed the Centrum brand globally. Mr. Caldini has a Masters of International Economics and Management from Bocconi University in Milan, Italy, an MBA from Northeastern University and a Bachelor of Arts in Political Science from Boston University.

~~Robert J. Daino,~~Steve Goertz, Chief ~~Operating~~Financial Officer (age 52)~~(age 56)~~: ~~Robert Daino is currently~~Mr. Goertz brings more than 30 years of finance, capital markets and strategic planning experience at a variety of industries that are complimentary to the Chief ~~Operating~~Financial Officer role at Acreage. Previously Mr. Goertz served as Chief Financial Officer of SGSCO, a private equity owned global marketing services organization where he led the ~~Company.He joined~~restructuring of the ~~Company~~finance function and participated in ~~2018 and has a proven track record~~the rationalization of ~~success in driving~~ an ~~entrepreneurial spirit into both newly created and established organizations resulting in significant growth. As an investor, advisor and eventually the CEO of Terradiol, Mr. Daino helped lead the~~ organization built through ~~an ownership transition.~~acquisitions. Prior to ~~Terradiol,~~that, Mr. ~~Daino~~Goertz was the ~~President & CEO~~Chief Financial Officer of ~~WCNY Public Media~~goeasy Ltd., a TSX-listed consumer finance company, where he co-led the transformation of the business from a hard goods retailer to a leading non-bank financial services organization. In this role, he was also responsible for the development of systems and the establishment of a risk management discipline and successfully transformed the ~~station into~~capital structure through a ~~national leader,~~series of equity and debt offering. Mr. Goertz also served in various finance and accounting roles at Sobeys, Maple Leaf Foods, and Deloitte. Prior to joining Acreage, Mr. Goertz gained considerable cannabis capital markets experience having spent 14 months working with Bespoke Capital Acquisition Corp, a ~~unique business model, gaining public engagement from all fifty states and 17 countries. In addition, Mr. Daino created~~special purpose acquisition corporation, focused on the ~~first of its kind central casting outsourcing service which has transformed public broadcasting~~cannabis industry in the ~~United States. As the President & CEO of Promergent, Mr. Daino built a highly successful~~U.S. and profitable business. Mr. Daino is a leader in providing process, change and document management software and services. Throughout his 13-year career at General Electric, Mr. Daino held a host of technical and senior management roles across the organization, leading change, growth, and top company performance.globally.

~~Glen S. Leibowitz,~~ Dennis Curran,Chief ~~Financial~~Operating Officer (age 58):~~(age 51): Glen Leibowitz is currently~~ Dennis Curran joined Acreage in March 2022 as the Chief ~~Financial Officer and has served in that role since March 2018. He has~~Operating Officer. Mr. Curran brings over 2035 years of ~~finance~~leadership experience in multiple product categories, sales, trade channels, distributor management, marketing, and ~~accounting experience with expertise~~business maturity in ~~building~~both domestic and ~~scaling~~

~~operations, improving controls, enhancing IPO readiness~~international markets. Before joining Acreage, he was the Chief Customer Officer at GSK Consumer Healthcare and ~~working to manage an organization through accelerated business growth. During his 9 years at Apollo, Mr. Leibowitz held various key roles within~~was responsible for delivering sales, profitability, and innovation for the ~~finance organization including~~United States, the ~~accounting lead in taking the organization public in 2011. Under his tenure, he implemented the public reporting framework, accounting policies and directed the company-wide Sarbanes-Oxley program.~~business’ largest market. Prior to ~~Apollo,~~GSK, Mr. ~~Leibowitz spent almost 10~~Curran had a career spanning 29 years with Procter and Gamble (P&G) in both the US and Europe working with some of the world’s leading consumer brands. His last role at ~~PricewaterhouseCoopers focused on multiple complex foreign registrant financial statements~~P&G was Regional Manager and ~~client IPO documents across sectors including: alternative asset managers, Internet/software, telecommunications, pharmaceutical,~~President for P&G’s North American Prestige business. Mr. Curran was responsible for overseeing sales, marketing, operations, and ~~mining. Mr. Leibowitz serves on the board of directors and is the audit committee chair~~communications for ~~PowerPlay NYC,~~various prestige brands with a not-for-profit organization dedicated to inspiring and educating girls through one-of-a-kind sports and academic enrichment programs. Mr. Leibowitz has announced that he will be resigning as our Chief Financial Officer on April 2, 2021.portfolio worth roughly $550 million.

~~James A. Doherty, III,~~Corey Sheahan, Executive Vice President, General Counsel and Secretary (age 37): ~~(age 41): James Doherty is currently the~~Corey Sheahan rejoined Acreage Holdings, Inc. in April 2022 as Executive Vice President, General Counsel and ~~Secretary of~~Secretary. Prior to rejoining the Company, ~~and has served in that role since November 2017.He has been recognized as~~Mr. Sheahan was Executive Vice President – Legal of Ascend Wellness Holdings, Inc., a ~~Rising Star of Young Attorneys for the Commonwealth of Pennsylvania by Philadelphia Magazine. Mr. Doherty routinely represents a variety of clients~~multi-state operator in the ~~highly regulated gaming~~cannabis industry, from September 2020 to March 2022. Before that, he was Corporate Counsel at Acreage from July 2018 to June 2019 and ~~casino industry. His practice also has an emphasis on professional liability, civil rights, and employment and labor disputes. Mr Doherty also acts as special counsel~~later Deputy General Counsel from June 2019 to a number of public and municipal entities. Mr. Doherty maintains an active appellate practice, having successfully argued cases before the Superior Court, Commonwealth Court and Supreme Court of Pennsylvania.September 2020. Before joining Acreage in July 2018, he was an associate in Foley & Lardner LLP’s Corporate practice group, where he focused on advising public companies on securities laws, corporate governance and public and private financing transactions, and public and private companies on mergers and acquisitions and other commercial transactions. Mr. ~~Doherty served as~~Sheahan graduated from the University of Wisconsin-Madison in 2008 with a ~~law clerk for the Honorable Thomas I. Vanaskie, United States Court~~Bachelor of ~~Appeals for the Third Circuit~~Arts in Economics and ~~as special counsel to the Executive Director~~History. He also holds Juris Doctor degree from Duke University School of the Pennsylvania Gaming Control Board. He was a featured speaker for the Pennsylvania Gaming Law Update Continuing Legal Education and a delegate to the General Litigation Forum. Jim is also a member of the Civil Rights Committee for the Lackawanna County Bar Association.

~~Recent Appointments~~

~~Appointment of New Director~~

~~On January 11, 2021, the Company announced that Katie Bayne was appointed to the Company’s Board of Directors and Audit Committee.~~

~~Appointment of New Chief Financial Officer~~

~~On February 23, 2021, the Company announced that Steve Goertz was appointed to the position of the Company’s Chief Financial Officer, effective April 2, 2021.~~

Law.

Regulatory Framework

In accordance with the Canadian Securities Administrators Staff Notice 51-352 (Revised) - Issuers with U.S. Marijuana-Related Activities (“Staff Notice 51-352”), below is a discussion of the federal and state-level U.S. regulatory regimes in those jurisdictions where the Company is currently involved, through High Street, , in the cannabis industry. High Street is, through its ~~subsidiaries,~~Subsidiaries, engaged in, or has management, consulting services or other agreements in place with license holders to assist in the manufacture, ~~possession,~~processing, sale or distribution of cannabis in the adult-use or medical cannabis marketplace in ~~California,~~ Connecticut, ~~Florida,~~ Illinois, Maine, Massachusetts, ~~Michigan, New Hampshire,~~ New Jersey, New York, Ohio ~~Oregon~~ and Pennsylvania. In accordance with Staff Notice 51-352, the Company will evaluate, monitor and reassess this disclosure, and any related risks, on an ongoing basis and the same will be supplemented and amended to investors in public filings, including in the event of government policy changes or the

introduction of new or amended guidance, laws or regulations regarding cannabis regulation. Any non-compliance, citations or notices of violation which may have an impact on the Company’s license, business activities or operations will be promptly disclosed by the Company.

United States Federal Overview

The United States federal government regulates drugs through the Controlled Substances Act (21 U.S.C. § 811) (the “~~CSA~~”“CSA”) which schedules controlled substances, including cannabis, based on their approved medical use and potential for abuse. Cannabis is classified as a Schedule I controlled substance. The U.S. Department of Justice (the “~~DOJ~~”“DOJ”) defines Schedule I drugs, substances or chemicals as “drugs with no currently accepted medical use and a high potential for abuse.” The United States Food and Drug Administration (the “~~FDA~~”“FDA”) has not approved cannabis as a safe and effective drug for any condition. The FDA has approved a new drug application for Epidiolex, which contains CBD, a component of cannabis, for ~~a narrow segment of medical conditions.~~certain rare epilepsy indications.

State laws that permit and regulate the production, distribution and use of cannabis for adult-use or medical purposes are in direct conflict with the CSA, which makes ~~cannabis~~the production, distribution, sale, and possession of cannabis federally illegal. Although certain states and territories of the U.S. authorize medical or adult-use cannabis production, distribution, and ~~distribution~~sale by licensed or registered entities, under U.S. federal law, the possession, cultivation, and transfer of cannabis and any related drug paraphernalia is illegal and any

such acts are criminal acts under any and all circumstances under the CSA. Although the Company’s activities are believed to be compliant with applicable United States state and local law, strict compliance with state and local laws with respect to cannabis may neither absolve the Company of liability under United States federal law, nor may it provide a defense to any federal proceeding which may be brought against the Company.

As of the date of this Annual Report on Form 10-K, medical use of cannabis is legal, with a doctor's recommendation, in ~~thirty-six (36)~~thirty-eight (38) states, four (4) out of five (5) permanently inhabited U.S. territories, and the District of ~~Columbia, with one (1) state pending enactment until a future date. Thirteen (13)~~Columbia. Ten (10) other states have laws that limit THC content, for the purpose of allowing access to products that are rich in cannabidiol (CBD), a non-psychoactive component of cannabis. The recreational use of cannabis is legal in ~~fourteen (14)~~twenty-one (21) states, the District of Columbia, the Northern Mariana Islands, and ~~Guam, with two (2) states pending enactment until a future date.~~Guam. Another ~~sixteen (16)~~twelve (12) states and the U.S. Virgin Islands have decriminalized its use.

The U.S. administration under President Obama attempted to address the inconsistent treatment of cannabis under state and federal law in the Cole Memorandum which Deputy Attorney General James Cole sent to all U.S. Attorneys in August 2013 that outlined certain priorities for the DOJ relating to the prosecution of cannabis offenses. The Cole Memorandum held that enforcing federal cannabis laws and regulations in jurisdictions that have enacted laws legalizing cannabis in some form and that have also implemented strong and effective regulatory and enforcement systems to control the cultivation, processing, distribution, sale and possession of cannabis, conduct in compliance with those laws and regulations was not a priority for the DOJ. Instead, the Cole Memorandum directed U.S. Attorney’s Offices discretion not to investigate or prosecute state law compliant participants in the medical cannabis industry who did not implicate certain identified federal government priorities, including preventing interstate diversion or distribution of cannabis to minors.

On January 4, 2018, then U.S. Attorney General Jeff Sessions formally issued the Sessions Memorandum, which rescinded the Cole Memorandum effective upon its issuance. The Sessions Memorandum stated, in part, that current law reflects “Congress’ determination that cannabis is a dangerous drug and cannabis activity is a serious crime”, and Mr. Sessions directed all U.S. Attorneys to enforce the laws enacted by Congress and to follow well-established principles that govern all federal prosecutions when deciding whether to pursue prosecutions related to cannabis activities. As a result, federal prosecutors could, and still can, use their prosecutorial discretion to decide to prosecute actors compliant with their state laws. Although there have not been any identified prosecutions of state law compliant cannabis entities, there can be no assurance that the federal government will not enforce federal laws relating to cannabis in the future. Jeff Sessions resigned as U.S. Attorney General on November 7, 2018.

On February 14, 2019, William Barr was confirmed as U.S. Attorney General. However, in a written response to questions from U.S. Senator Cory Booker made as a nominee, Attorney General Barr stated “I do not intend to go after parties who have complied with state law in reliance on the Cole Memo.” The Department of Justice under Mr. Barr did not take a formal position on federal enforcement of laws relating to cannabis. Mr. Barr has stated publicly that his preference would be to have a uniform federal rule against cannabis, but, absent such a uniform rule, his preference would be to permit the existing federal approach of leaving it up to the states to make their own decisions.

On March 10, 2021, Judge Merrick Garland was confirmed as U.S. Attorney General under President Biden. However, in response to questions from U.S. Senator Charles Grassley made as a nominee, Attorney General Garland stated “I do not think it the best use of the Department’s limited resources to pursue prosecutions of those who are complying with the laws in states that have legalized and are effectively regulating marijuana.” In October 2021, in a letter from U.S. Senators Booker and

Elizabeth Warren to Attorney General Garland, the Senators advocated the federal decriminalization of cannabis by removing cannabis from the CSA’s list of controlled substances. To date, Attorney General Garland and the Department of Justice have not publicly responded to the Senators’ letter. Nonetheless, there is no guarantee that state laws legalizing and regulating the sale and use of cannabis will not be repealed or overturned, or that local governmental authorities will not limit the applicability of state laws within their respective jurisdictions. Unless and until the United States Congress amends the CSA with respect to cannabis (and as to the timing or scope of any such potential amendments there can be no assurance), there is a risk that federal authorities may enforce current U.S. federal law.

Although the Cole Memorandum remains rescinded, the sheer size of the cannabis industry, in addition to participation by state and local governments and investors, suggests that a large-scale enforcement operation would more than likely create unwanted political backlash for the DOJ. Regardless, cannabis remains a Schedule I controlled substance at the federal level, and neither the Cole Memorandum nor its rescission has altered that fact. The ~~Department~~federal government of Justice under Mr. Barr did not take a formal position on federal enforcement of laws relating to cannabis. Mr. Barr has stated publicly that his preference would be to have a uniform federal rule against cannabis, but, absent such a uniform rule, his preference would be to permit the existing federal approach of leaving it up to the states to make their own decisions.

~~Furthermore, Acting Attorney General Monty Wilkinson, who began in his position on January 20, 2021, has not provided a clear policy directive for~~ the United States ~~as it pertains~~has always reserved the right to ~~state-legal cannabis-related activities. President Biden has nominated Merrick Garland~~enforce federal law in regard to ~~serve as Attorney General in his administration.~~the sale and disbursement of medical or adult-use cannabis, even if state law sanctioned such sale and disbursement. The Company believes, from a purely legal perspective, that the criminal risk today remains similar to the risk on January 3, 2018. It ~~is not yet known~~remains unclear whether the ~~Department~~risk of ~~Justice under President Biden and Attorney General Garland, will re-adopt the Cole Memorandum or announce a substantive cannabis~~ enforcement ~~policy.~~has been altered. If ~~the~~ Department of Justice policy under ~~Acting Attorney General Wilkinson or~~ Attorney General Garland were to shift and the Department of Justice began to aggressively pursue financiers or owners of cannabis-related businesses, ~~and United States Attorneys followed such Department of Justice policies through pursuing prosecutions,~~ then the Company could face (i) seizure of its cash and other assets used to support or derived from its cannabis operations, (ii) the arrest of its employees, directors, officers, managers and investors, and charges of ancillary criminal violations of the CSA for aiding and abetting and conspiring to violate the CSA by virtue of providing financial support to cannabis companies that service or provide goods to state-licensed or permitted cultivators, processors, distributors, and/or retailers of cannabis, and/or (iii) the barring of its employees, directors, officers, managers and investors who are not United States citizens from entry into the United States for life.

The Company believes it is still unclear what prosecutorial effects will be created by the rescission of the Cole Memorandum. The sheer size of the cannabis industry, in addition to participation by state and local governments and investors, suggests that a large-scale enforcement operation would more than likely create unwanted political backlash for the DOJ. ~~Regardless,~~

cannabis remains a Schedule I controlled substance at the federal level, and neither the Cole Memo nor its rescission has altered that fact. The federal government of the United States has always reserved the right to enforce federal law in regard to the sale and disbursement of medical or adult-use cannabis, even if state law sanctioned such sale and disbursement. The Company believes, from a purely legal perspective, that the criminal risk today remains similar to the risk on January 3, 2018. It remains unclear whether the risk of enforcement has been altered. Additionally, under United States federal law, it may potentially be a violation of federal money laundering statutes for financial institutions to take any proceeds from the sale of cannabisor any other Schedule I controlled substance. Canadian banks are likewise hesitant to deal with cannabis companies, due to the uncertain legal and regulatory framework of the industry. Banks and other financial institutions, particularly those that are federally chartered in the United States, could be prosecuted and possibly convicted of money laundering for providing services to cannabis businesses. While Congress is considering legislation that may address these issues, there can be no assurance that such legislation passes.

Despite these laws, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) issued a memorandum on February 14, 2014 (the “FinCEN Memorandum”) outlining the pathways for financial institutions to bank state-sanctioned cannabis businesses in compliance with federal enforcement priorities. The FinCEN Memorandum echoed the enforcement priorities of the Cole Memorandum and states that in some circumstances, it is permissible for banks to provide services to cannabis-related businesses without risking prosecution for violation of federal money laundering laws. Under these guidelines, financial institutions must submit a Suspicious Activity Report (“SAR”) in connection with all cannabis-related banking activities by any client of such financial institution, in accordance with federal money laundering laws. These cannabis-related SARs are divided into three categories - cannabis limited, cannabis priority, and cannabis terminated - based on the financial institution’s belief that the business in question follows state law, is operating outside of compliance with state law, or where the banking relationship has been terminated, respectively. On the same day that the FinCEN Memorandum was published, the DOJ issued a memorandum (the “2014 Cole Memorandum”) directing prosecutors to apply the enforcement priorities of the Cole Memorandum in determining whether to charge individuals or institutions with crimes related to financial transactions involving the proceeds of cannabis-related conduct. The 2014 Cole Memorandum has been rescinded as of January 4, 2018, along with the Cole Memorandum, removing guidance that enforcement of applicable financial crimes against state-compliant actors was not a DOJ priority.

However, former Attorney General Sessions’ revocation of the Cole Memorandum and the 2014 Cole Memorandum has not affected the status of the FinCEN Memorandum, nor has the Department of the Treasury given any indication that it intends to rescind the FinCEN Memorandum itself. Though it was originally intended for the 2014 Cole Memorandum and the FinCEN Memorandum to work in tandem, the FinCEN Memorandum is a standalone document which explicitly lists the eight enforcement priorities originally cited in the Cole Memorandum. As such, the FinCEN Memorandum remains intact, indicating that the Department of the Treasury and FinCEN intend to continue abiding by its guidance. However, in the United States, it is difficult for cannabis-based businesses to open and maintain a bank account with any bank or other financial institution.

Although the Cole Memorandum has been rescinded, one legislative safeguard for the medical cannabis industry, appended to federal appropriations legislation, remains in place. Currently referred to as the “Rohrabacher-Blumenauer Amendment”, this so-called “rider” provision has been appended to the Consolidated Appropriations Acts ~~for~~every year since fiscal ~~years 2015, 2016, 2017, 2018, and 2019.~~year 2015. Under the terms of the Rohrabacher-Blumenauer rider, the federal government is prohibited from using congressionally appropriated funds to enforce federal cannabis laws against regulated medical cannabis actors operating in compliance with state and local law. On December 20, 2019, then President Donald Trump signed the Consolidated Appropriations Act, 2020 which included

the Rohrabacher-Blumenauer Amendment, which prohibits the funding of federal prosecutions with respect to medical cannabis activities that are legal under state law. On December 27, 2020, the omnibus spending bill passed including the Rohrabacher-Blumenauer Amendment, extending its application until September 30, 2021. ~~There~~Congress did not pass the next spending bill before the September 30, 2021 deadline, and as of the date of this filing, has still not passed an appropriations bill for Fiscal Year 2022. On December 3, 2021, President Biden signed the Further Extending Government Funding Act which included the Rohrabacher-Blumenauer amendment, extending its application through February 18, 2022. On February 8, 2022, the U.S. House of Representatives passed a stopgap appropriations bill that would extend agency funding, and the Rohrabacher-Blumenauer Amendment, until March 11, 2022. As of the date of this filing the bill had yet to be taken up by the U.S. Senate. If Congress acts as it has in prior years, it is likely pass another continuing resolution before funding expires on February 18, 2022 that will extend previous funding levels and riders through mid-March, including the Rohrabacher-Blumenauer Amendment. While there can be no assurances that the Rohrabacher-Blumenauer Amendment will be included in future appropriations bills to prevent the federal government from using congressionally appropriated funds to enforce federal cannabis laws against regulated medical cannabis actors operating in compliance with state and local law.

Despite the legal, regulatory, and political obstacles the cannabisindustry currently faces, the industry has continued to grow. It was anticipated that the federal government would eventually repeal the federal prohibition on cannabis and thereby leave the states to decide for themselves whether to permit regulated cannabis cultivation, production and sale, just as states are free today to decide policies governing the distribution of alcohol or tobacco.

Given current political trends, however, these developments are considered unlikely in the near-term. As an industry best practice, despite the recent rescission of the Cole Memorandum, the Company abides by the following to ensure compliance with the guidance provided by the Cole Memorandum:

•ensure that its operations are compliant with all licensing requirements as established by the applicable state, county, municipality, town, township, borough, and other political/administrative divisions;

•ensure that its cannabis related activities adhere to the scope of the licensing obtained (for example: in the states where cannabis is permitted only for adult-use, the products are only sold to individuals who meet the requisite age requirements);

•implement policies and procedures to ensure that cannabis products are not distributed to minors;

•implement policies and procedures in place to ensure that funds are not distributed to criminal enterprises, gangs or cartels;

•implement an inventory tracking system and necessary procedures to ensure that such compliance system is effective in tracking inventory and preventing diversion of cannabis or cannabis products into those states where cannabis is not permitted by state law, or cross any state lines in general;

•ensure that its state-authorized cannabis business activity is not used as a cover or pretense for trafficking of other illegal drugs, and is not engaged in any other illegal activity, or any activities that are contrary to any applicable anti-money laundering statutes; and

•ensure that its products comply with applicable regulations and contain necessary disclaimers about the contents of the products to prevent adverse public health consequences from cannabis use and prevent impaired driving.

In addition, the Company may (and frequently does) conduct background checks to ensure that the principals and management of its operating subsidiaries are of good character, and have not been involved with other illegal drugs, engaged in illegal activity or activities involving violence, or use of firearms in cultivation, manufacturing or distribution of cannabis. The Company will also conduct ongoing reviews of the activities of its cannabis businesses, the premises on which they operate and the policies and procedures that are related to possession of cannabis or cannabis products outside of the licensed premises, including the cases where such possession is permitted by regulation. See “Risk Factors.”

The Cole Memorandum and the Rohrabacher/Blumenauer Amendment gave medical cannabis operators and investors in states with legal regimes greater certainty regarding federal enforcement as to establish cannabis businesses in those states. Nonetheless, there is no guarantee that state laws legalizing and regulating the sale and use of cannabis will not be repealed or overturned, or that local governmental authorities will not limit the applicability of state laws within their respective jurisdictions. Unless and until the United States Congress amends the CSA with respect to cannabis (and as to the timing or scope of any such potential amendments there can be no assurance), there is a risk that federal authorities may enforce current U.S. federal law.

Despite the expanding market for legal cannabis, traditional sources of financing, including bank lending or private equity capital, are lacking which can be attributable to the fact that cannabis remains a Schedule I substance under the CSA. These traditional sources of financing are expected to remain scarce unless and until the federal government legalizes cannabis cultivation and sales.

Pursuant to Staff Notice 51-352, issuers with U.S. cannabis-related activities are expected to clearly and prominently disclose certain prescribed information in prospectus filings and other required disclosure documents, such as this Annual Report on Form 10-K. In accordance with the Staff Notice 51-352, below is a table of concordance that is intended to assist readers in identifying those parts of this Annual Report on Form 10-K that address the disclosure expectations outlined in Staff Notice 51-352.


Industry Involvement	Specific Disclosure Necessary to Fairly Present all Material Facts, Risks and Uncertainties	Annual Report Cross Reference
All Issuers with U.S. Marijuana-Related Activities	Describe the nature of the Company’s involvement in the U.S. marijuana industry and include the disclosures indicated for at least one of the direct, indirect and ancillary industry involvement types noted in this table.	“~~Description of the~~ Business” “Business - Regulatory Framework” “Business - United States Federal Overview”
	Prominently state that marijuana is illegal under U.S. federal law and that enforcement of relevant laws is a significant risk.	“Business - Regulatory ~~Overview~~Framework” “Business - United States Federal Overview” “Risk Factors - Risks Related to the United States Regulatory System - The Company’s business activities, while compliant with applicable state and local U.S. law, are illegal under U.S. federal law”
	Discuss any statements and other available guidance made by federal authorities or prosecutors regarding the risk of enforcement action in any jurisdiction where the Company conducts U.S. marijuana-related activities.	“Business - Regulatory ~~Overview~~Framework - United States Federal Overview” “Risk Factors - Risks Related to Regulatory Matters - The Company’s Business Activities are Illegal under U.S. Federal Law” “Risk Factors - Risks Related to Regulatory Matters - U.S. State Regulatory Uncertainty”
	Outline related risks including, among others, the risk that third-party service providers could suspend or withdraw services and the risk that regulatory bodies could impose certain restrictions on the Company’s ability to operate in the U.S.	“Risk Factors - Risks Related to Regulatory Matters - The Company’s Business Activities are Illegal under U.S. Federal Law” “Risk Factors - Risks ~~Generally~~ Related to the ~~Company~~Company’s Operations - Service Providers”
	Given the illegality of marijuana under U.S. federal law, discuss the Company’s ability to access both public and private capital and indicate what financing options are / are not available in order to support continuing operations.	“Risk Factors - Risks ~~Generally~~ Related to the ~~Company~~Company’s Operations - Ability to Access Public and Private Capital”
	Quantify the Company’s balance sheet and operating statement exposure to U.S. marijuana-related activities.	At the date of this Annual Report on Form 10-K, 100% of the Company’s operations are in the United States.
	Disclose if legal advice has not been obtained, either in the form of a legal opinion or otherwise, regarding (a) compliance with applicable state regulatory frameworks and (b) potential exposure and implications arising from U.S. federal law.	The Company and its ~~subsidiaries~~Subsidiaries have obtained legal advice regarding (a) compliance with applicable state regulatory frameworks, and (b) potential exposure and implications arising from U.S. federal law.

1615


Industry Involvement	Specific Disclosure Necessary to Fairly Present all Material Facts, Risks and Uncertainties	Annual Report Cross Reference
U.S. Marijuana Issuers with direct involvement in cultivation or distribution	Outline the regulations for U.S. states in which the Company operates and confirm how the Company complies with applicable licensing requirements and the regulatory framework enacted by the applicable U.S. state.	“~~Description of the~~ Business” “~~Regulatory Overview~~Business - State-Level Overview & Compliance Summary” “~~Regulatory Overview - The Regulatory Landscape on a U.S. State Level - California”~~ ~~“Regulatory Overview~~Business - The Regulatory Landscape on a U.S. State Level - Connecticut” “~~Regulatory Overview - The Regulatory Landscape on a U.S. State Level - Florida”~~ ~~“Regulatory Overview~~Business - The Regulatory Landscape on a U.S. State Level - Illinois” “~~Regulatory Overview~~Business - The Regulatory Landscape on a U.S. State Level - Maine” “~~Regulatory Overview~~Business - The Regulatory Landscape on a U.S. State Level - Massachusetts” “~~Regulatory Overview - The Regulatory Landscape on a U.S. State Level - Michigan”~~ ~~“Regulatory Overview - The Regulatory Landscape on a U.S. State Level - New Hampshire”~~ ~~“Regulatory Overview~~Business - The Regulatory Landscape on a U.S. State Level - New Jersey”
		“~~Regulatory Overview~~Business - The Regulatory Landscape on a U.S. State Level - New York” “~~Regulatory Overview~~Business - The Regulatory Landscape on a U.S. State Level - Ohio” “~~Regulatory Overview - The Regulatory Landscape on a U.S. State Level - Oregon”~~ ~~“Regulatory Overview~~Business - The Regulatory Landscape on a U.S. State Level - Pennsylvania”
Discuss the Company’s program for monitoring compliance with U.S. state law on an ongoing basis, outline internal compliance procedures and provide a positive statement indicating that the Company is in compliance with U.S. state law and the related licensing framework. Promptly disclose any non-compliance, citations or notices of violation which may have an impact on the Company’s license, business activities or operations.	“~~Regulatory Overview~~Business - State-Level Overview & Compliance Summary”

1716


Industry Involvement	Specific Disclosure Necessary to Fairly Present all Material Facts, Risks and Uncertainties	Annual Report Cross Reference
U.S. Marijuana Issuers with indirect involvement in cultivation or distribution	Outline the regulations for U.S. states in which the Company’s investee(s) operate.	~~“Regulatory Overview - The Regulatory Landscape on a U.S. State Level - California”~~ ~~“Regulatory Overview~~ “Business - The Regulatory Landscape on a U.S. State Level - Maine” ~~“Regulatory Overview~~“Business - The Regulatory Landscape on a U.S. State Level - Massachusetts” ~~“Regulatory Overview~~“Business - The Regulatory Landscape on a U.S. State Level - New Jersey” ~~“Regulatory Overview~~“Business - The Regulatory Landscape on a U.S. State Level - Ohio”
	Provide reasonable assurance, through either positive or negative statements, that the investee’s business is in compliance with applicable licensing requirements and the regulatory framework enacted by the applicable U.S. state. Promptly disclose any non-compliance, citations or notices of violation, of which the Company is aware, that may have an impact on the investee’s license, business activities or operations.	“~~Regulatory Overview - The Regulatory Landscape on a U.S. State Level - California”~~ ~~“Regulatory Overview~~Business - The Regulatory Landscape on a U.S. State Level - Maine” “~~Regulatory Overview~~Business - The Regulatory Landscape on a U.S. State Level - Massachusetts” “~~Regulatory Overview~~Business - The Regulatory Landscape on a U.S. State Level - New Jersey” “~~Regulatory Overview~~Business - The Regulatory Landscape on a U.S. State Level - Ohio”
U.S. Marijuana Issuers with material ancillary involvement	Provide reasonable assurance, through either positive or negative statements, that the applicable customer’s or investee’s business is in compliance with applicable licensing requirements and the regulatory framework enacted by the applicable U.S. state.	“~~Regulatory Overview~~Business - The Regulatory Landscape on a U.S. State Level - Maine” “~~Regulatory Overview~~Business - The Regulatory Landscape on a U.S. State Level - Massachusetts” “~~Regulatory Overview~~Business - The Regulatory Landscape on a U.S. State Level - New Jersey” “~~Regulatory Overview~~Business - The Regulatory Landscape on a U.S. State Level - Ohio”

In accordance with Staff Notice 51-352, the Company will evaluate, monitor and reassess the foregoing disclosure, and any related risks, on an ongoing basis and any supplements or amendments hereto will be reflected in, and provided to, investors in public filings of the Company, including in the event of government policy changes or the introduction of new or amended guidance, laws or regulations regarding cannabis regulation. Any non-compliance, citations or notices of violation which may have aan material impact on any subsidiary’s licenses, business activities or operations will be promptly disclosed by the Company.

The following chart sets out, for each of the subsidiaries and other entities through which the Company conducts its operations, the U.S. state(s) in which it operates, the nature of its operations (adult-use/medicinal), whether such activities carried on are direct, indirect or ancillary in nature (as such terms are defined in Staff Notice 51-352), the number of sales, cultivation and other licenses held by such entity and whether such entity has any operational cultivation or processing facilities.

1817

State Entity Adult-Use / Medicinal Direct / Indirect / Ancillary Dispensary Licenses Cultivation / Processing / Distribution License Operational Dispensaries Operational Cultivation / Processing Facilities
California
CWG Botanicals, Inc.1, 2,4
Adult-Use / Medicinal Ancillary — 3 — 1
Kanna, Inc. Adult-Use / Medicinal Direct 1 — — —
Gravenstein Foods LLC3
Adult-Use / Medicinal Direct — 1 — —
Connecticut D&B Wellness, LLC Medicinal Direct 1 — 1 —
Prime Wellness of Connecticut, LLC Medicinal Direct 1 — 1 —
Thames Valley Apothecary, LLC Medicinal Direct 1 — 1 —
Florida5

Acreage Florida, Inc. Medicinal Direct 1 1 1 1
Illinois
In Grown Farms LLC1
Adult-Use / Medicinal Direct — 1 — 1
NCC LLC Adult-Use / Medicinal Direct 1 — 1 —
NCC 2 LLC Adult-Use Direct 1 — 1 —
Maine
Wellness Connection of Maine1
Medicinal Ancillary 3 1 3 1
NPG LLC Adult-Use Direct 1 — 1 —
Massachusetts The Botanist, Inc. Medicinal Direct 3 1 2 1
Michigan N/A Medicinal Direct 3 — — —
New Hampshire1
Prime Alternative Treatment Centers of NH, Inc. Medicinal Ancillary 2 1 1 1
New Jersey
Compassionate Care Foundation, Inc.
Medicinal Direct 3 1 2 1
New York NYCANNA, LLC Medicinal Direct 4 1 4 1
Ohio
Greenleaf Apothecaries, LLC1
Medicinal Ancillary 5 — 5 —
Greenleaf Therapeutics, LLC1
Medicinal Ancillary — 1 — —
Greenleaf Gardens, LLC1
Medicinal Ancillary — 1 — 1
Oregon High Street Oregon, LLC Adult-Use Direct 2 1 2 —
22nd & Burn, Inc.
Adult-Use Direct 1 — 1 —
The Firestation 23, Inc. Adult-Use Direct 1 — 1 —
East 11th, Inc.
Adult-Use Direct 1 — 1 —
Gesundheit Foods LLC4
Adult-Use Direct — 2 — —
Pennsylvania Prime Wellness of Pennsylvania, LLC Medicinal Direct — 1 — 1

~~Notes:~~


State	Entity	Adult-Use / Medicinal	Dispensary Licenses	Cultivation / Processing / Distribution Licenses	Operational Dispensaries	Operational Cultivation / Processing Facilities
California	CWG Botanicals, Inc.1	Adult-Use / Medicinal	—	3	—	1
Connecticut	D&B Wellness, LLC	Medicinal	1	—	1	—
	Prime Wellness of Connecticut, LLC	Medicinal	1	—	1	—
	Thames Valley Apothecary, LLC	Medicinal	1	—	1	—
	Acreage Connecticut Cultivation JV LLC 2	Adult-Use	—	1	—	—
	Acreage Connecticut Retail JV LLC 3	Adult-Use	1	—	—	—
Illinois 4	In Grown Farms LLC 2	Adult-Use / Medicinal	—	1	—	1
	NCC LLC	Adult-Use / Medicinal	2	—	2	—
Maine	NPG, LLC 5	Adult-Use	4	1	4	1
Massachusetts 6	The Botanist, Inc.	Adult-Use / Medicinal	2	2	2	2
New Jersey	Acreage CCF New Jersey, LLC	Adult-Use / Medicinal	3	1	3	1
New York	NYCANNA, LLC (d/b/a The Botanist)	Medicinal	4	1	4	1
Ohio	Greenleaf Apothecaries, LLC	Medicinal	5	—	5	—
	Greenleaf Therapeutics, LLC 7	Medicinal	—	1	—	1
	Greenleaf Gardens, LLC 7	Medicinal	—	1	—	— 7
Pennsylvania	Prime Wellness of Pennsylvania, LLC	Medicinal	—	1	—	1
		Total	24	13	23	9

~~(1)~~Acreage provides goods and/or services including but not limited to financing, management, consulting and/or administrative services with these license holders to assist in the operations of their cannabis businesses.

~~(2)~~1.Separate grow/process licenses.

~~(3)~~2.~~A distribution license~~Acreage Connecticut Cultivation JV, LLC has been ~~issued~~awarded a 35% interest in ~~this U.S. state.~~Adult-Use cultivation license shared with a social equity partner.

~~(4)~~3.Acreage Connecticut Retail JV, LLC has ~~entered into~~been awarded a 49% interest in an ~~agreement to acquire CWG. The acquisition remains subject to regulatory approval.~~Adult-Use retail license shared with a social equity partner.

~~(5)~~4.~~On February 25, 2020, we entered into~~In Grown Farms LLC 2 owns an ~~agreement~~Adult-Use/Medicinal cultivation and processing license and owns an Industrial HEMP processing license.

5.In January 2023, NPG, LLC merged with Northeast Patients Group, a medicinal operator with whom the Company has a management services agreement. The Company allowed the medicinal license to ~~sell all of our operations~~lapse and NPG, LLC has subsequently submitted a name change application for a change to Acreage Maine, LLC.

6.Among the two cultivation/processing/distribution licenses held in ~~Florida for an aggregate purchase price of $60.0 million. The sale~~Massachusetts, one is ~~expected to close during the second quarter of 2021 subject to customary closing conditions including the procurement of all necessary approvals~~a marijuana product manufacturer license used for the ~~transfer to~~production of edibles and the ~~purchaser~~other is a cultivation and product manufacturing license.

7.Greenleaf Therapeutics, LLC and Greenleaf Gardens, LLC operate out of the ~~Florida license for the operation of the medical marijuana businesses.~~same facility in Middlefield, Ohio.

The above-noted licenses have been entered into in the ordinary course of business. The Company is not substantially dependent on any one such license and, as such, does not consider such licenses as material contracts.

State-Level Overview & Compliance Summary

While the Company and High Street are in compliance with the rules, regulations and license requirements governing each state in which the subsidiaries and contractual parties operate, there are significant risks associated with their business and the business of the subsidiaries and contractual parties. Further, the rules and regulations as outlined below are not a full complement of all the rules that the subsidiaries are required to follow in each applicable state.

Although each state has its own laws and regulations regarding the operation of cannabis businesses, certain of the laws and regulations are consistent across jurisdictions. As a general matter, to operate legally under state law, cannabis operators must obtain a license from the state and in certain states must also obtain local approval. In those states where local approval is required, local authorization is a prerequisite to obtaining state licenses, and local governments are permitted to prohibit or otherwise regulate the types and number of cannabis businesses allowed in their locality. The license application and license renewal processes are unique to each state. However, each state’s application process requires a comprehensive criminal history, regulatory history, financial and personal disclosures, coupled with stringent monitoring and continuous reporting requirements designed to ensure only good actors are granted licenses and that licensees continue to operate in compliance with the state regulatory program.

License applicants for each state must submit standard operating procedures describing how the operator will, among other requirements, secure the facility, manage inventory, comply with the state’s seed-to-sale tracking requirements, dispense cannabis, and handle waste, as applicable to the license sought. Once the standard operating procedures are determined compliant and approved by the applicable state regulatory agency, the licensee is required to abide by the processes described and seek regulatory agency approval before any changes to such procedures may be made. Licensees are additionally required to train their employees on compliant operations and are only permitted to transact with other legal and licensed businesses.

As a condition of each state’s licensure, operators must consent to inspections of the commercial cannabis facility as well as the facility’s books and records to monitor and enforce compliance with state law. Many localities have also enacted similar standards for inspections and have already commenced both site-visits and compliance inspections for operators who have received state temporary or annual licensure.

To strengthen the communication and transparency between High Street and its subsidiaries, High Street and its subsidiaries utilize a third-party enterprise compliance platform, which facilitates a regulatory document control workflow for each state and can issue alerts for time sensitive information requests for events such as license renewal or an impending inspection. The software features a robust auditing system that allows for both internal as well as third-party compliance auditing, covering all state, municipal, facility and operational requirements. The third-party software facilitates the implementation and maintenance of compliant operations and can track all required licensing maintenance criteria, which includes countdown features and automatically generated reminders for initiating renewals and required reporting. Though the Company and High Street strive to comply with all aspects of the required state regulations, they believe that the core to ensuring a comprehensive compliance program is to weigh the risk of each regulation and ensure on a regular basis that the operators are properly controlling these risks.

Acreage monitors the applicable rules and regulations of each state in which it has, indirectly through its subsidiaries, licenses, permits, or operations. Acreage maintains a database and tracks each license or permit held by its subsidiaries, showing the renewal date, inspection schedules, and the results of any regulatory inspection reports. Acreage enhances its compliance program through subscription to a web-based service that provides access to cannabis-related state, county, municipal and federal rules and regulations which organizes the laws into distinct categories (such as taxation, zoning, application and licensing, and packaging and labeling) and sorts them by license type (such as cultivation, dispensary and testing). Acreage will also monitor any action taken by its subsidiaries in response to a change of governing regulations or suggestions from regulators.

Acreage’s legal compliance team continually monitors and reviews correspondence and changes to, and updates of, rules or regulatory policies impacting Acreage and the operation of the businesses carried on by its subsidiaries in each U.S. state in which it has operations. Acreage has employed an experienced team of legal and compliance professionals with expertise in regulatory and corporate compliance to oversee its activities. The team led by the Company’s General Counsel, includes a former Assistant U.S. Attorney; a former SEC enforcement attorney and experienced compliance professional; and three experienced corporate attorneys and one paralegal. Acreage has a Director of Operational Compliance who oversees a team that focuses on state-by-state operational compliance issues. Acreage’s legal compliance team has implemented internal policies and procedures at corporate and subsidiary levels designed to mitigate any lapses in its overall infrastructure and facilitate compliance with relevant laws and regulations. Acreage strives to ensure its overall operations are in compliance with U.S. state law and the related licensing framework (see “Regulatory Framework - The Regulatory Landscape on a U.S. State Level). Marijuana remains a Schedule I controlled substance in the U.S. and therefore federally illegal. Acreage has not received any non-compliance citations or notices of violation which may have a material impact on its licenses, business activities or operations.

Acreage is classified as having a “direct,” “indirect” and “ancillary” involvement in the United States cannabis industry and it, each of its subsidiaries and, to the best of its knowledge, each entity through which it has ancillary involvement in the United States cannabis industry, is in compliance with applicable United States state law and related licensing requirements and the regulatory framework enacted by each of the states in which it has operations. The Company is not subject to any citations or notices of violation with applicable licensing requirements and the regulatory frameworks which may have a material impact on its licenses, business activities or operations. The Company uses reasonable commercial efforts to ensure that its business is in compliance with applicable licensing requirements and the regulatory frameworks enacted by each state, through the advice of its Director of Legal Compliance, and its Director of Operational Compliance, who monitor and review its business practices and changes to U.S. federal and state enforcement priorities and rules. The Company’s General Counsel and his legal team work with external legal counsel to ensure that the Company is in on-going compliance with applicable state law. These advisors have provided legal advice to the subsidiaries regarding, among other things, (a) compliance with applicable state regulatory frameworks, and (b) potential exposure and implications arising from U.S. federal law. In addition, the Company has

designated individuals with responsibility for overseeing day-to-day compliance at each facility in which the Company maintains operational control.

The Company will continue to use reasonable commercial efforts to ensure it is in compliance with applicable licensing requirements and the regulatory framework enacted in states where it conducts business by continuous review of its licenses and affirmation certifications from management. The Company has engaged state and local regulatory/compliance counsel engaged in jurisdictions in which it operates.

The Company has a commitment to training its personnel on the relevant issues in order to facilitate its overall compliance effort. The Company’s training program includes, among other items, the following topics:

•importance of compliance with state and local ~~laws~~laws;

•dispensing ~~procedures~~procedures;

•patient ~~privacy~~privacy;

•security and safety policies and ~~procedures~~procedures;

•inventory ~~control~~control;

•quality ~~control~~control;

•cash management and ~~control~~control; and

•transportation ~~procedures~~procedures.

The Company’s training program emphasizes security and inventory control to ensure strict monitoring of cannabis and inventory from delivery to sale or disposal. Only authorized, properly trained employees are allowed to access the Company’s computerized seed- to-sale system. All of the Company’s facilities are monitored 24-hours a day, seven days a week. Visitors to the facilities are only permitted in strict accordance with relevant state laws and appropriately monitored and logged in.

The Company’s compliance team closely monitors and promptly addresses all compliance notifications from the regulators and inspectors in each market, in an effort to resolve any issues identified on a timely basis. The Company keeps records of all compliance notifications received from the state regulators or inspectors and how and when the issue was resolved.

Further, the Company has created comprehensive standard operating procedures that include detailed descriptions and instructions for receiving shipments of inventory, inventory tracking, recordkeeping and record retention practices related to inventory, as well as procedures for performing inventory reconciliation and ensuring the accuracy of inventory tracking and recordkeeping. The Company maintains records of its inventory at all licensed facilities. Adherence to the Company’s standard

operating procedures is mandatory and ensures that the Company’s operations are compliant with the rules set forth by the applicable state and local laws, regulations, ordinances, licenses and other requirements. The Company ensures adherence to standard operating procedures by regularly conducting internal inspections and is committed to ensuring any issues identified are resolved quickly and thoroughly.

In order to comply with industry best practices, despite the rescission of the Cole Memorandum, the Company continues to do the following to ensure compliance with the guidance provided by the Cole Memorandum:

•Ensure the operations are compliant with all licensing requirements that are set forth with regards to cannabis operation by the applicable state, county, municipality, town, township, borough, and other political/administrative divisions. To this end, the Company uses its internal Legal Department including its Legal Compliance team and retains appropriately experienced legal counsel to conduct the necessary due diligence to ensure compliance of such operations with all applicable regulations;

•The activities relating to cannabis business adhere to the scope of the licensing obtained. For example, in ~~Florida~~Ohio only medical cannabis is permitted and therefore the products are only sold to patients who have the appropriate recommendation in the state registry and have a valid state-issued medical identification card;

•The Company only works through licensed operators, which must pass a range of requirements, adhere to strict business practice standards and be subjected to strict regulatory oversight whereby sufficient checks and balances ensure that no revenue is distributed to criminal enterprises, gangs and cartels; and

•The Company conducts reviews of products and product packaging to ensure that the products comply with applicable regulations and contain necessary disclaimers about the contents of the products to prevent adverse public health consequences from cannabis use and prevent impaired driving.

The Company will continue to monitor compliance on an ongoing basis in accordance with its compliance program and standard operating procedures. While the Company’s operations strive to be in compliance with all applicable state laws, regulations and licensing requirements, some of such activities remain illegal under United States federal law. For the reasons

described above and the risks further described in Risk Factors below, there are significant risks associated with the business of the Company. See “Risk Factors”.

The Regulatory Landscape on a U.S. State Level

~~California~~

~~California Legislative History~~

In 1996, California voters passed Proposition 215, the Compassionate Use Act allowing physicians to legally recommend medical cannabis for patients who would benefit from cannabis. The Compassionate Use Act legalized the use, possession and cultivation of medical cannabis for a set of qualifying conditions including AIDS, anorexia, arthritis, cachexia, cancer and chronic pain. The law established a not-for-profit patient/caregiver system but there was no state licensing authority to oversee the businesses that emerged as a result.

In September 2015, the California legislature passed three bills, collectively known as the “Medical Marijuana Regulation and Safety Act”. The Medical Marijuana Regulation and Safety Act established a licensing and regulatory framework for the medical cannabis businesses in California. Multiple agencies oversee different aspects of the program and require businesses obtain a state license and local approval to operate.

~~In November 2016, voters in California passed Proposition 64, the Adult Use of Marijuana Act (“AUMA~~”) creating an adult-use cannabis program for individuals 21 years of age or older. AUMA contained conflicting provisions with the Medical Marijuana Regulation and Safety Act. Consequently, in June 2017, the California State Legislature passed Senate Bill No. 94, known as the Medicinal and Adult-Use Cannabis Regulation and Safety Act (“~~MAUCRSA~~”), which combined the Medical Marijuana Regulation and Safety Act and AUMA to provide a set of regulations to govern medical and adult-use licensing regime for cannabis businesses. The three agencies that regulate cannabis at the state level are: (a) the California Department of Food and Agriculture, via CalCannabis, which issues licenses to cannabis cultivators; (b) the California Department of Public Health, via the Manufactured Cannabis Safety Branch, which issues licenses to cannabis manufacturers; and (c) the California Department of Consumer Affairs, via the Bureau of Cannabis Control, which issues licenses to cannabis distributors, testing laboratories, retailers, and micro-businesses. These agencies also oversee the various aspects of implementing and maintaining California’s cannabis landscape, including the statewide track and trace system.

To legally operate a medical or adult-use cannabis business in California, the operator must have both local approval and a state license. This requires license holders to operate in cities with cannabis licensing and approval programs. Municipalities in California are authorized to determine the number of licenses they will issue to cannabis operators, or can choose to outright ban the cultivation, manufacturing or the retail sale of cannabis. MAUCRSA went into effect on January 1, 2018.

On May 18, 2018, the California Department of Consumer Affairs, the California Department of Public Health and the California Department of Food and Agriculture proposed to re-adopt their emergency cannabis regulations. The three licensing authorities proposed changes to the regulatory provisions to provide greater clarity to licensees and to address issues that have arisen since the emergency regulations went into effect in December 2017. Highlighted among the changes are that applicants may now complete one license application which will allow for both medical and adult-use cannabis activity. These emergency cannabis regulations were officially readopted on June 4, 2018 and came into effect on June 6, 2018. On January 16, 2019, California’s three state cannabis licensing authorities announced that the Office of Administrative Law officially approved state regulations for cannabis businesses. The final cannabis regulations took effect immediately and superseded the previous emergency regulations.

~~California Licenses~~

Although vertical integration across multiple license types is allowed under the state regulations, it is not required. CWG Botanicals, Inc. (“CWG”) holds three licenses in California and has received local approval to operate under such licenses. HSRC NorCal, LLC (“HSRC”), a subsidiary of the Company, has entered into a management or consulting services agreement with CWG but does not own or control CWG at this time. CWG holds cultivation/grow, manufacturing and distribution licenses. The manufacturing license is denoted as a Type 7 which provides CWG the authorization to manufacture cannabis products using volatile solvent as well as non-volatile extraction methods. Each license issued gives CWG the ability to operate as a medical and adult-use provider. Gravenstein Foods LLC (“Gravenstein”), a subsidiary of Form Factory, holds a temporary manufacturing license. The manufacturing license is denoted as a Type 6 which provides Gravenstein the authorization to manufacture cannabis products using only non-volatile extraction methods. On July 15, 2019, Kanna, Inc. (“Kanna”), a subsidiary of the Company, was awarded an Adult-Use and Medicinal - Retailer Provisional License, which allows Kanna to open a dispensary and was awarded an Adult-Use and Medicinal - Retailer Provisional License, which allows Kanna to open a dispensary.

~~California License Types~~

Once an operator obtains local approval, the operator must obtain state licenses before conducting any commercial marijuana activity. There are 12 different license types that cover all commercial activity. License types 1-3 authorize the cultivation of medical and/or adult-use marijuana plants. Type 4 licenses are for nurseries that cultivate and sell clones and “teens” (immature marijuana plants that have established roots but require further vegetation prior to being sent into the flowering period). Type 6 and 7 licenses authorize manufacturers to process marijuana biomass into certain value-added products such as shatter or marijuana distillate oil with the use of volatile or non-volatile solvents, depending on the license type. Type 8 licenses are held by testing facilities who test samples of marijuana products and generate “certificates of analysis,” which include important information regarding the potency of products and whether products have passed or failed certain threshold tests for pesticide and microbiological contamination. Type 9 licenses are issued to “non-storefront” retailers, commonly called delivery services, who bring marijuana products directly to customers and patients at their residences or other chosen delivery location. Type 10 licenses are issued to storefront retailers, or dispensaries, which are open to the public and sell marijuana products onsite. Type 11 licenses are known as “Transport-Only” distribution licenses, and they allow the distributor to transport marijuana and marijuana products between licensees, but not to retailers. Type 12 licenses are issued to distributors who move marijuana and marijuana products to all license types, including retailers.

~~The below table lists the licenses issued to CWG, Gravenstein, and Kanna, Inc.:~~

~~Subsidiary~~

~~License Number~~

~~City~~

~~Expiration Date~~

~~Description~~

~~CWG Botanicals, Inc.~~

~~CCL18-0000104~~

~~Oakland~~

~~4/17/2021~~

~~Grow~~

~~CWG Botanicals, Inc.~~

~~CDPH- 10002775~~

~~Oakland~~

~~4/24/2021~~

~~Manufacturing~~

~~CWG Botanicals, Inc.~~

~~C11-0000434-LIC~~

~~Oakland~~

~~6/19/2021~~

~~Distribution~~

~~Gravenstein Foods LLC~~

~~CDPH-10003051~~

~~Oakland~~

~~5/1/2021~~

~~Manufacturing~~

~~Kanna, Inc.~~

~~C10-0000419-LIC~~

~~Oakland~~

~~7/14/2021~~

~~Retailer~~

In September 2018, the Governor of California approved the Senate Bill 1459 (“SB-1459”). SB-1459 created a new scheme of provisional licenses for cannabis operators. This provisional licensing scheme was essentially intended to replace the temporary licensing scheme. SB-1459 was necessary because the three main state cannabis licensing agencies - the Bureau of Cannabis Control (“BCC”), California Department of Public Health (“CDPH”), and California Department of Food and Agriculture (“CDFA”) - and localities which issue permits to cannabis operators, were all backlogged with numerous applications and couldn’t process all of the applications in time for applicants to get operational in 2018. The steps, per SB-1459 to obtain a provisional license are as follows: (1) an applicant must hold or previously have held a temporary license for the same commercial cannabis activity for which it seeks a provisional, and (2) the applicant must submit a completed annual license application and proof that ~~California Environmental Quality Act~~ ~~(“CEQA”) compliance is underway. Provisional licenses last for 12 months and can be issued through the end of 2019.~~

Currently CWG holds one provisional license for distribution, one provisional license for manufacturing and one provisional license for cultivation. Gravenstein holds one provisional manufacturing license. Kanna holds a provisional license for a dispensary. Gravenstein and Kanna are currently not operational.Those license holders which have a provisional or annual license, must be compliant with METRC 30 days after receiving their licenses. An application for renewal of a cultivation license shall be submitted to the state at least 30 calendar days prior to the expiration date of the current license. A license holder that does not submit a completed license renewal application to the state within 30 calendar days after the expiration of the current license forfeits their eligibility to apply for a license renewal and, instead, would be required to submit a new license application. The license holders must ensure that no cannabis may be sold, delivered, transported or distributed by a producer from or to a location outside of the state.

~~Retail Compliance in California~~

California requires that certain warnings, images, and content information be printed on all marijuana packaging. BCC regulations also include certain requirements about tamper-evident and child-resistant packaging. Distributors and retailers are responsible for confirming that products are properly labeled and packaged before they are sold to a customer.

Consumers aged 21 and up may purchase marijuana in California from a dispensary with an “adult-use” license. Some localities still only allow medicinal dispensaries. Consumers aged 18 and up with a valid physician’s recommendation may purchase marijuana from a medicinal-only dispensary or an adult-use dispensary. Consumers without valid physician’s recommendations may not purchase marijuana from a medicinal-only dispensary. All marijuana businesses are prohibited from hiring employees under the age of 21.

~~California Record-keeping/Reporting~~

~~California has selected METRC as the T&T system used to track commercial cannabis activity. CWG uses a third-party platform, QuantumLeap, which feeds data to METRC to meet all reporting requirements.~~

Licensees are required to maintain records for at least seven years from the date a record is created. These records include: (a) a cultivation plan, (b) all supporting documentation for data or information input into the T&T system, (c) all unique identifiers (“UID”) assigned to product in inventory and all unassigned UIDs, (d) financial records related to the licensed commercial cannabis activity, including bank statements, tax records, sales invoices and receipts, and records of transport and transfer to other licensed facilities, (e) records related to employee training for the T&T system, and (f) permits, licenses, and other local authorizations to conduct the licensee’s commercial cannabis activity.

~~California Inventory/Storage~~

Each licensee is required to assign an account manager to oversee the T&T system. The account manager is fully trained on the system and is accountable to record all commercial cannabis activities accurately and completely. The licensee is expected to correct any data that is entered into the T&T system in error within three business days of discovery of the error.

The licensee is required to report information in the T&T system for each transfer of cannabis or non-manufactured cannabis products to, or cannabis or non-manufactured cannabis products received from, other licensed operators. Licensees must use the T&T system for all inventory tracking activities at a licensed premise, including, but not limited to, reconciling all on-premise and in-transit cannabis or non-manufactured cannabis product inventories at least once every 14 business days. The licensee must store cannabis and cannabis products in a secure place with locked doors.

~~California Security~~

A licensee is required to maintain an alarm system capable of detecting and signaling the presence of a threat requiring urgent attention and to which law enforcement are expected to respond. A licensee must also ensure a professionally qualified alarm company operator or one of its registered alarm agents installs, maintains, monitors, and responds to the alarm system.

The manufacturing and cultivation of cannabis must use a digital video surveillance system which runs 24 hours a day, seven days a week and effectively and clearly records images of the area under surveillance. Each camera must be placed in a location that clearly records activity occurring within 20 feet of all points of entry and exit on the licensed premises. The areas that will be recorded on the video surveillance system should include the following: (a) areas where cannabis goods are weighed, packed, stored, loaded, and unloaded for transportation, prepared, or moved within the premises, (b) limited-access areas, (c) security rooms, and (d) areas storing a surveillance-system storage device with at least one camera recording the access points to the secured surveillance recording area. Surveillance recordings must be kept for a minimum of 90 days.

~~California Transportation~~

Transporting cannabis goods between licensees and a licensed facility may only be performed by persons holding a distributor license. The vehicle or trailer used must not contain any markings or features on the exterior which may indicate or identify the contents or purpose. All cannabis products must be locked in a box, container, or cage that is secured to the inside of the vehicle or trailer. When left unattended, vehicles must be locked and secured. At a minimum, the vehicle must be equipped with an alarm system, motion detectors, pressure switches, duress, panic, and hold-up alarms.

~~California Inspections~~

All licensees are subject to annual and random inspections of their premises. Cultivators may be inspected by the California Department of Fish and Wildlife, the California Regional Water Quality Control Boards, and the California Department of Food and Agriculture. Manufacturers are subject to inspection by the California Department of Public Health, and Retailers, Distributors, Testing Laboratories, and Delivery services are subject to inspection by the Bureau of Cannabis Control. Inspections can result in notices to correct, or notices of violation, fines, or other disciplinary action by the inspecting agency.

~~Marijuana Taxes in California~~

Several types of taxes are imposed in California for adult-use sale. As of January 1, 2020, the California Department of Tax and Fee Administration raised the tax rate on wholesale cannabis from 60% to 80%. Cultivators have the choice of being taxed at $9.65, per dry-weight ounce of cannabis flowers or $1.35 per ounce of wet-weight plants. Further, cultivators are required to pay $2.87 per ounce for fresh frozen biomass. California also imposes an excise tax of 15%. Cities and counties apply their sales tax along with the state’s excise and many cities and counties have also authorized the imposition of special cannabis business taxes which can range from 2% to 10% of gross receipts of the business. The Company has retained legal counsel and/or other advisors in connection with California’s marijuana regulatory program. The Company has developed standard operating procedures for licenses who are operational.

~~U.S. Attorney Statements in California~~

To the knowledge of management of the Company, other than as disclosed in this Annual Report on Form 10-K, there have not been any statements or guidance made by federal authorities or prosecutors regarding the risk of enforcement action in California.

~~Connecticut~~

~~Connecticut Legislative History~~

~~Connecticut’s Medical Marijuana Program (the “CT Program”) was enacted on June 1, 2012 with the signing into law of Act 12-55, the~~ ~~Act Concerning the Palliative Use of Marijuana~~ (the “CT Act”). The CT Program protects patients and caregivers who hold valid medical cannabis registration cards from prosecution for possession of cannabis obtained from licensed dispensaries. Patients are eligible for a medical cannabis registration card if they have a qualifying debilitating medical condition, obtain a medical cannabis recommendation from a CT Program registered physician, and register as a qualified patient through the CT Program. In August 2018, the list of qualifying debilitating medical conditions was raised from 22 to 31 adding among other conditions, muscular dystrophy, chronic neuropathic pain and severe rheumatoid arthritis to the list which already included, among others, cancer, HIV/AIDS, Parkinson’s disease, and Multiple Sclerosis. In 2019, the list of qualifying

conditions was expanded from 31 to 36 adding among other conditions, Tourette syndrome and intractable neuropathic pain that is unresponsive to standard medical treatments. Caregivers may register with the CT Program if they are designated by a qualifying patient, receive certification from a registered physician, and pass a criminal background check. The good standing of patients, caregivers, and physicians under the CT Program is subject to timely reporting and annual renewal requirements.

In April 2014, Connecticut’s Department of Consumer Protection (the “CT DCP”) initially approved six dispensary licenses. In January 2016, the CT DCP approved three additional dispensaries and in December 2018 the CT DCP approved nine additional dispensaries bringing the total to 18. Connecticut began accepting written certifications from physicians to qualify patients on October 1, 2012. As of May 24, 2020, there were approximately 41,203 patients certified to obtain cannabis through the CT Program.

Connecticut Licenses

The CT DCP is responsible for the CT Program and is authorized to issue dispensary and producer/grower licenses. As of January 31, 2021, there were 50,034 patients with an approved medical ID card, Currently, the CT DCP has issued 18 dispensary and four producer/grower licenses. Three of the 18 dispensary licenses have been issued to our subsidiary.

The table below lists the licenses issued to the Company’s indirect subsidiaries operating in Connecticut:

Subsidiary

License number

City

Expiration Date

Description

D&B Wellness, LLC1

MMDF.0000003

~~Bethel~~Danbury

5/13/~~2021~~2023

Medical-Use Dispensary Facility

Prime Wellness of Connecticut, LLC

MMDF.0000004

South Windsor

4/10/~~2021~~2024

Medical-Use Dispensary Facility

Thames Valley Apothecary, LLC1

MMDF.0000005

Uncasville

4/15/~~2021~~2024

Medical-Use Dispensary Facility

Acreage Connecticut Cultivation JV, LLC 2

—

Adult-Use Cultivation Facility

Acreage Connecticut Retail JV, LLC 2

—

Adult-Use Dispensary Facility

1.Subsequent to the year ended December 31, 2022, Thames Valley Apothecary and D&B Wellness converted their Medical-Use Dispensary Facility Licenses, to hybrid Adult-Use and Medical-Use Dispensary Facility Licenses. The new licenses are “adult-use cannabis medical hybrid retailer” licenses and the new license numbers are AMHF.0008251 and AMHF.0008268.

2.These entities have been awarded licenses to operate in the adult use market in Connecticut in partnership with social equity applicants.These licenses are conditional upon certain conditions and fees being fulfilled and paid.

Each medical license qualifies a dispensary to purchase medical cannabis in good faith from licensed medical cannabis producers and to dispense cannabis to qualifying patients or primary caregivers that are registered under the CT Program. Dispensary license holders are required to ensure that no cannabis is sold, delivered, transported, or distributed to a location outside of Connecticut. Under the CT Program, dispensary licenses are renewed annually. Renewal applications must be submitted 45 days prior to license expiration and any renewal submitted more than 30 days after expiration will not be renewed.

Recreational marijuana became legal in Connecticut on July 1, 2021, which makes the use and possession of small amounts of recreational marijuana legal for adults. On January 10, 2023 the adult use cannabis market opened in Connecticut and certain hybrid stores were permitted to sell cannabis to adults 21 and over.

Connecticut Record-keeping/Reporting

Connecticut does not mandate use of any singular unified T&T system by which all dispensary license holders submit data directly to the state. Acreage’s license holders, D&B Wellness, LLC, d/b/a ~~Compassionate Care Center of Connecticut,~~The Botanist, and Prime Wellness of Connecticut, LLC, use a third-party solution, THC BioTrack, to push data to the state in order to meet all reporting requirements. Thames Valley Apothecary, LLC d/b/a The Botanist (“Thames Valley”) uses Leaf Logix Technology as their third-party solution.

The CT Program provides strict guidelines for reporting via the license holder’s third-party T&T system. Every cannabis sale must be documented at the point of sale including recording the date and purchaser’s signature. At least once per day, all sales must be uploaded via the T&T system to the Connecticut Prescription Monitoring Program which accumulates and tracks medical cannabis purchases across all Connecticut dispensaries. The CT Program requires that records are kept for a minimum of three years.

Connecticut Inventory

Upon receipt of a cannabis product, each product must be cataloged and entered in the dispensary’s T&T system. The information required by the CT Program includes the quantity of product received, its lot number, expiration date, and strain. Only registered dispensary pharmacists may accept delivery of cannabis and related products. A delivery receipt for cannabis and cannabis products must be signed by the accepting dispensary pharmacist and be attached to the delivery manifest. Each delivery manifest must be kept on file for three years. Once per week, a count of cannabis product stock is to be conducted by a dispensary pharmacist which includes tracking the producer’s name, type and quantity of cannabis, and a summary of inventory findings. Any discrepancies must be rectified and documented. Any unrectified discrepancy must be disclosed to the dispensary

manager who, if necessary, will notify the CT DCP. Annual controlled substance inventories are required to be conducted on a date specified by the dispensary manager and to be kept on file for three years.

Connecticut Storage/Security

The CT Program requires that dispensaries adhere to strict cannabis storage and security guidelines to maintain control against diversion, theft, and loss of cannabis or cannabis products. Each dispensary is required to (a) establish a security plan including approved safes for storage of all cannabis products, (b) maintain daily supplies of product in locked cabinets, (c) install safes accessible only to the dispensary pharmacist or manager, (d) utilize commercial grade motion detectors and video cameras in all areas that contain cannabis, and (e) install cameras directed at all safes, vaults, dispensing and sale areas, or any other area where cannabis is stored or handled.

Furthermore, the CT Act prescribes that dispensaries must retain and present all video upon request of the CT DCP. Specifically, dispensaries must (a) make the latest 24 hours of video readily available for immediate viewing upon request of a state authorized representative, and (b) retain all videos for at least 30 calendar days. Additionally, dispensaries must install strategically placed duress and panic alarms, both silent and audible, that trigger a law enforcement response. Employees are also required to wear panic alarm buttons for an additional level of safety and security.

Connecticut Training & Education

All dispensary staff pharmacists must go through a training program on cannabis and cannabis products. Such training must include covering the chemical components of cannabis and use of ancillary cannabis delivery devices. Pharmacist training should prepare pharmacists how to best assess the needs of qualified patients during required new-patient private consultations. During such consultations, pharmacists are required to educate new patients on their qualified debilitating medical condition, allergies, medication profile, cannabis use, and cannabis delivery methods. Pharmacists have sole responsibility to recommend products based on the patients’ individual needs.

Like dispensary staff pharmacists, dispensary technicians and employees also must meet training guidelines as set forth by the CT Program. Dispensary technicians must be trained on professional conduct, ethics, patient confidentiality, and developments in the field of medical cannabis use, among other pertinent topics commensurate with the technician’s professional responsibilities. Dispensary employees, among other things, must be trained on the proper use of security measures and controls, procedures for responding to an emergency, and patient confidentiality. A record of all staff training and patient education must be maintained and made available for review at the request of the DPH.

Connecticut Inspections

For the purposes of supervision and enforcement of the CT Program, the Connecticut Commissioner of Consumer Protection is authorized to (i) enter, at reasonable times, any place, including a vehicle, in which marijuana is held, dispensed, sold, produced, delivered, transported, manufactured or otherwise disposed of, (ii) inspect within reasonable limits and in a reasonable manner, such place and all pertinent equipment, finished and unfinished material, containers and labeling, and all things in such place, including records, files, financial data, sales data, shipping data, pricing data, employee data, research, papers, processes, controls and facilities, and (iii) inventory any stock of marijuana therein and obtain samples of any marijuana or marijuana product, any labels or containers for marijuana, paraphernalia, and of any finished and unfinished material.

U.S. Attorney Statements in Connecticut

To the knowledge of management of the Company, there have not been any statements or guidance made by federal authorities or prosecutors regarding the risk of enforcement action in Connecticut.

~~Florida~~

~~Florida Legislative History~~

On June 16, 2014, the Florida state governor signed Senate Bill 1030, also known as the Compassionate Medical Cannabis Act of 2014 (“CMCA”). The CMCA legalized low THC for medical patients suffering from cancer or “a physical medical condition that chronically produces symptoms of seizures”, such as epilepsy, “or severe and persistent muscle spasms”. The CMCA requires physician approval and determination that no other satisfactory alternative treatment options exist for that patient. The CMCA also authorizes medical centers to conduct research on low THC cannabis.

2722

On November 8, 2016, Amendment 2 was added to Florida’s state constitution. Amendment 2 protects qualifying patients, caregivers, physicians, and medical cannabis dispensaries and their staff from criminal prosecution or civil sanctions under Florida law. Amendment 2 also expanded the definition of debilitating diseases to include 12 conditions including HIV/AIDS, Crohn’s disease and post-traumatic stress disorder. Amendment 2 became effective on January 3, 2017. Amendment 2 provides a regulatory framework that requires licensed producers, which are statutorily defined as Medical Marijuana Treatment Centers (each, a “MMTC”), to cultivate, process and dispense medical cannabis in a vertically integrated marketplace.

~~Florida Licenses~~

Licenses are issued by the Florida Department of Health (“FDH”) and is overseen by the Office of Medical Marijuana Use (“OMMU”). Applicants are required to provide comprehensive business plans with demonstrated knowledge and experience on execution, detailed facility plans, forecasted performance and robust financial resources. Technical ability on plant and medical cannabis cultivation, infrastructure, processing, dispensing and safety are also assessed.

License holders are permitted to maintain one license. However, the one license allows the licensee to open one cultivation/processing site and an unlimited number of dispensaries. Each licensee is required to cultivate, process and dispense medical cannabis. The license permits the sale of derivative products produced from extracted cannabis plant oil as medical cannabis to qualified patients. As of December 25, 2020, there were 456,594 patients with an approved medical ID card, 22 approved medical cannabis treatment centers and 301 approved retail dispensing locations . Licensed medical cannabis treatment centers are authorized to cultivate, process and dispense medical cannabis.

On January 4, 2019, High Street completed the acquisition of Acreage Florida, Inc. (“Acreage Florida”). Acreage Florida acquired a cultivation and production facility in Sanderson, Florida, and has secured via lease agreements eight locations to build or remodel dispensaries in Hollywood, Spring Hill, Daytona, Orange Park, St. Petersburg, North Miami Beach and two locations in Miami. Acreage Florida opened its first dispensary in Spring Hill in March 2020.

~~The table below lists the licenses issued to the subsidiaries:~~

~~Subsidiary~~

~~License number~~

~~City~~

~~Expiration Date~~

~~Description~~

~~Acreage Florida, Inc. d/b/ The Botanist~~

~~MMTC-2018-0014~~

~~9/11/2021~~

~~Vertical~~

Under its license, Acreage Florida is permitted to sell cannabis to those patients who are entered into Florida’s electronic medical marijuana use registry by a qualified physician and possess a state-issued medical marijuana identification card. The physician determines patient eligibility as well as the routes of administration (e.g. topical, oral, inhalation) and number of milligrams per day a patient is able to obtain under the program. The physician may order a certification for up to three 70-day supply limits of marijuana, following which the certification expires and a new certification must be issued by a physician. The number of milligrams dispensed, the category of cannabis (either low-THC or medical cannabis) and whether a delivery device such as a vaporizer has been authorized is all recorded in the registry for each patient transaction. On March 18, 2019, Governor Ron DeSantis signed SB 182 into law, repealing the ban on smoking medical cannabis. Patients and their doctors now have greater access to administer medical cannabis and to decide for themselves which mode of administration is best for them. Effective August 27, 2020 the OMMU amended the Florida Administrative code to allow the purchase of edibles. SB 182 also allows patients to receive up to 2.5 ounces of whole flower cannabis every 35 days as recommended by their doctor and requires patients under the age of 18 to have a terminal condition and to get a second opinion from a pediatrician before smoking medical cannabis.

Dispensaries may be located in any location throughout the State of Florida as long as the local government has not issued a prohibition against MMTC dispensaries in their respective municipality. Provided there is not a ban, the Company may locate a dispensary in a site zoned for a pharmacy so long as the location is greater than 500 feet from a public or private elementary, middle, or secondary school.

~~Florida Reporting Requirements~~

Florida regulators require MMTCs to establish, maintain, and control a computer software tracking system that traces cannabis from seed to sale and allows real-time, 24-hour access by the OMMU to such data. The tracking system must allow for integration of other seed-to-sale systems and, at a minimum, include notification of certain events, including when marijuana seeds are planted, when marijuana plants are harvested and destroyed and when cannabis is transported, sold, stolen, diverted, or lost. Each medical marijuana treatment center shall use the seed-to-sale tracking system established by the department or

integrate its own seed-to-sale tracking system with the seed-to-sale tracking system established by the department. Additionally, the OMMU also maintains a patient and physician registry and the licensee must comply with all requirements and regulations relative to the provision of required data or proof of key events to said system in order to retain its license. Florida requires all MMTCs to abide by representations made in their original application to the State of Florida. Any changes or expansions must be requested via an amendment or variance process.

~~Florida Licensing Requirements~~

Licenses issued by the FDH may be renewed biennially so long as the licensee continues to meet the requirements of the Florida Statute 381.986 and pays a renewal fee. License holders can only own one license within the State of Florida. MMTCs can operate an unlimited number of dispensaries. Applicants must demonstrate (and licensed MMTCs must maintain) that: (i) they have been registered to do business in the State of Florida for the previous five years, (ii) they possess a valid certificate of registration issued by the Florida Department of Agriculture & Consumer Services, (iii) they have the technical and technological ability to cultivate and produce cannabis, including, but not limited to, low-THC cannabis, (iv) they have the ability to secure the premises, resources, and personnel necessary to operate as an MMTC, (v) they have the ability to maintain accountability of all raw materials, finished products, and any by-products to prevent diversion or unlawful access to or possession of these substances, (vi) they have an infrastructure reasonably located to dispense cannabis to registered qualified patients statewide or regionally as determined by the OMMU, (vii) they have the financial ability to maintain operations for the duration of the two-year approval cycle, including the provision of certified financial statements to the OMMU, (viii) all owners, officers, board members and managers have passed a Level II background screening, inclusive of fingerprinting, and ensure that a medical director is employed to supervise the activities of the MMTC, and (ix) they have a diversity plan and veterans plan accompanied by a contractual process for establishing business relationships with veterans and minority contractors and/or employees. Upon approval of the application by the OMMU, the applicant must post a performance bond of up to US$5 million, which may be reduced to US$2 million once the licensee has served 1,000 patients.

~~Florida Inventory Storage~~

OMMU regulators require that the MMTC license holder establish, maintain, and control a computer software tracking system that traces cannabis from seed to sale and allows real-time, 24-hour access by the department to data from all MMTCs and cannabis testing laboratories. At a minimum, the T&T system will track when cannabis seeds are planted, harvested and destroyed, and when cannabis is transported, sold, stolen, diverted, or lost. The OMMU has not chosen a unified system. Therefore, the licensee can choose their own T&T system.

~~Florida Security~~

With respect to security requirements for cultivation, processing and dispensing facilities, a MMTC must maintain a fully operational alarm system that secures all entry points and perimeter windows, and is equipped with motion detectors, pressure switches, duress, panic and hold-up alarms. The MMTC must also have a 24-hour video surveillance system with the following features: (a) cameras positioned for the clear identification of persons and activities in controlled areas including growing, processing, storage, disposal and point-of-sale rooms, (b) cameras fixed on entrances and exits to the premises, and (c) ability to record images clearly and accurately together with the time and date. Facilities may not display products or dispense cannabis or cannabis delivery devices in the waiting area and may not dispense cannabis from its premises between the hours of 9:00 p.m. and 7:00 a.m. However, it may perform all other operations and deliver cannabis to qualified patients 24 hours a day.

Cannabis must be stored in a secured, locked room or a vault. A MMTC must have at least two employees, or two employees of a security agency, on the premises at all times where cultivation, processing, or storing of cannabis occurs. A cannabis transportation manifest must be maintained in any vehicle transporting cannabis or a cannabis delivery device. The manifest must be generated from the MMTC’s seed-to-sale tracking system. Further, a copy of the transportation manifest must be provided to the MMTC when receiving a delivery. Each MMTC must retain copies of all cannabis transportation manifests for at least three years. Cannabis and cannabis delivery devices must be locked in a separate compartment or container within the vehicle and employees transporting cannabis or cannabis delivery devices must always have their employee identification on them. Lastly, at least two people must be in a vehicle transporting cannabis, and at least one person must remain in the vehicle while the cannabis is physically delivered.

~~Florida Transportation~~

When transporting cannabis to dispensaries or to patients for delivery, a manifest must be prepared and transportation must be done using an approved vehicle. The cannabis must be stored in a separate, locked area of the vehicle and at all times there must

be two people in a delivery vehicle. During deliveries, one person must remain with the vehicle. The delivery employees must at all times have identification badges. The manifest for all deliveries must be generated by the State approved tracking software. The manifest must include the following information: (i) departure date and time; (ii) name, address and license number of the originating MMTC; (iii) name and address of the receiving entity; (iv) the quantity, form and delivery device of the cannabis; (v) arrival date and time; (vi) the make, model and license plate of the delivery vehicle; and (vii) the name and signatures of the MMTC delivery employees. These manifests must be kept by the MMTC for inspection for at least three years. During the delivery, a copy of the manifest is also provided to the recipient.

~~Florida Inspections~~

The OMMU may conduct announced or unannounced inspections of MMTC’s to determine compliance with applicable laws and regulations. The OMMU is to inspect an MMTC upon receiving a complaint or notice that the MMTC has dispensed cannabis containing mold, bacteria, or other contaminants that may cause an adverse effect to humans or the environment. The OMMU is to conduct at least a biennial inspection of each MMTC to evaluate the MMTC’s records, personnel, equipment, security, sanitation practices, and quality assurance practices.

~~U.S. Attorney Statements in Florida~~

~~To the knowledge of management of the Company, there have not been any statements or guidance made by federal authorities or prosecutors regarding the risk of enforcement action in Florida.~~

Illinois

Illinois Legislative history

The Compassionate Use of Medical Cannabis Pilot Program Act (the “IL Medical Act”) was signed into law in August 2013 and took effect on January 1, 2014. The IL Medical Act provides medical cannabis access to registered patients who suffer from a list of over 50 medical conditions including epilepsy, cancer, HIV/AIDS, Chronic pain, Crohn’s disease and post- traumatic stress disorder. ~~As of December 30, 2020, approximately 150,000 patients have been registered under the IL Medical Act and are qualified to purchase cannabis and cannabis products from registered dispensaries.~~ On August 12, 2019, changes to the Compassionate Use of Medical Cannabis Program became effective.

On June 25, 2019, Illinois Gov. J.B. Pritzker signed into law the Cannabis Regulation & Tax Act (the “IL Adult Use Act” and, together with the IL Medical Act, the “IL Acts”), which permits persons 21 years of age or older to possess, use, and purchase limited amounts of cannabis for personal use. The IL Adult Use Act went into effect on January 1, 2020.

In early January 2023, the Illinois legislature finalized changes to the Illinois Department of Financial and Professional Regulation administrative rules relating to social equity applicants and adult-use retail licenses.

Illinois Licenses

Oversight and implementation under the Acts are divided among three Illinois state departments: the Department of Public Health (the “~~IL DPH~~”“IL DPH”), the Department of Agriculture (the “~~IL DA~~”“IL DA”), and the Department of Financial and Professional Regulation (the “~~IL DFPR~~”“IL DFPR”). The IL DPH oversees the following IL Medical Act mandates: (a) establish and maintain a confidential registry of caregivers and qualifying patients authorized to engage in the medical use of cannabis, (b) distribute educational materials about the health risks associated with the abuse of cannabis and prescription medications, (c) adopt rules to administer the patient and caregiver registration program, and (d) adopt rules establishing food handling requirements for cannabis-infused products that are prepared for human consumption.

It is the responsibility of the IL DA to enforce the provisions of the IL Acts relating to the registration and oversight of cultivation centers and the responsibility of the IL DFPR to enforce the provisions of the IL Acts relating to the registration and oversight of dispensing organizations. The IL DPH, IL DA and IL DFPR may enter into inter-governmental agreements, as necessary, to carry out the provisions of the IL Acts.

Illinois has issued a limited amount of dispensary, producer/grower, and processing licenses. ~~As of December 31, 2020 there were 55 licensed dispensaries and 22 licensed cultivators.~~ NCC LLC (d/b/a Nature’s Care Company) (“NCC”), an indirect Subsidiary of the Company, was awarded both medical and adult-use cannabis dispensary licenses and In Grown Farms, LLC 2 (“IGF”), an indirect Subsidiary of the Company, was awarded both medical and adult-use cultivation/processing licenses as well as a license to process industrial Hemp.

Under the IL Adult Use Act, medical cannabis operators have the ability to apply for “early approval” for adult-use licenses. Medical dispensaries are permitted to apply for one adult-use license at its medical dispensary site and one additional early

approval license at a secondary site. NCC received an adult-use license on February 3, 2020 for its Rolling Meadows dispensary. On August 30, 2020, NCC received a second license from the IL DFPR for a Registered Adult Use Dispensing Organization. NCC has opened a second adult only dispensary in Chicago.

The table below lists the licenses issued to the subsidiaries:

Subsidiary

License number

City

Expiration

Description

NCC LLC

DISP.000024

Rolling Meadows

1/22/~~2021~~2024

Medical Cannabis Dispensary Facility

NCC LCC

AUDO.000050

Rolling Meadows

3/31/~~2021~~2024

Registered Adult Use Dispensing Organization

IGF

1503060729

Freeport

3/9/~~2021~~2024

Medical Cannabis Cultivation/
Processing Facility

IGF

~~1503060729-EA~~1503060729-AU

Freeport

3/31/~~2021~~2024

~~Early Approval~~ Adult Use Cultivation

NCC LLC

AUDO.000064

Chicago

3/31/~~2021~~2024

Registered Adult Use Dispensing Organization

IGF

1204-321

Freeport

12/31/~~2022~~2025

Industrial Hemp Processor

Under the IL Medical Act, dispensary, grower, and processing licenses are valid for one year. After the initial term, licensees are required to submit renewal applications. Pursuant to the IL Act, registration renewal applications must be received 45 days prior to expiration and may be denied if the licensee has a history of non-compliance and penalties.

Under the IL Adult Use Act, an early approval adult-use dispensing license is valid until March 31, 2021. Renewal applications and required fees must be submitted to the IL DFPR 60 days prior to expiration.

Illinois Dispensing Limitations

Dispensing organizations may not dispense more than 2.5 ounces of usable cannabis to qualifying patients, provisional patients, or designated caregivers during a period of 14 days, unless pre-approved by the IL DFPR.

Dispensing limitations for adult-use purchasers are as follows:

•Illinois Residents: 30 grams of flower, 500 mg THC in cannabis infused products, and/or 5 grams of cannabis concentrate.

•Non-Illinois Residents: 15 grams of flower, 250 mg THC in cannabis infused products, and/or 250 milligrams of cannabis concentrate.

Illinois Record-keeping/Reporting

Illinois uses the BioTrack THC T&T system to manage the flow of reported data between each licensee and the state. NCC also uses the T&T system to ensure all reporting requirements are met. Information processed through the T&T system must be maintained in a secure location at the dispensing organization for five years.

Licensees are mandated by the IL Acts to maintain records electronically and make them available for inspection by the IL DFPR upon request. Records that must be maintained and made available, as described in the IL Acts, include: (a) operating procedures, (b) inventory records, policies, and procedures, (c) security records, and (d) staffing plans. All dispensing organization records, including business records such as monetary transactions and bank statements, must be kept for a minimum of three years. Records of destruction and disposal of all cannabis not sold, including notification to the IL DFPR and State Police, must be retained at the dispensary organization for a period of not less than five years.

Illinois Inventory/Storage

The IL Acts have similar requirements regarding inventory tracking and storage. An organization’s agent-in-charge has primary oversight of the dispensing organization’s cannabis inventory control system. Under the IL Acts, a dispensary’s inventory

control system must be real-time, web-based, and accessible by the IL DFPR 24 hours a day, seven days a week. The T&T system used by NCC complies with such requirements.

The inventory control system of a dispensing organization must record all cannabis sales, waste, and acquisitions. Specifically, the inventory system must track and reconcile through the T&T system each day’s cannabis beginning inventory, acquisitions, sales, disposal and ending inventory. Tracked information must include (a) product descriptions including the quantity, strain, variety and batch number of each product received, (b) the name and registry identification number of the permitted cultivation center providing the cannabis, (c) the name and registry identification number of the permitted cultivation center agent delivering the cannabis, (d) the name and registry identification number of the dispensing organization agent receiving the cannabis, and (e) the date of acquisition. Dispensary managers are tasked with conducting and documenting monthly audits of the dispensing organization’s daily inventory according to generally accepted accounting principles.

The inventory control system of a cultivator and processing organization must conduct a weekly inventory of cannabis stock, which includes at a minimum, the date of the inventory, a summary of the inventory findings, the name, signature and title of the individuals who conducted the inventory and the agent-in-charge who oversaw the inventory, and the product name and quantity of cannabis plants or cannabis-infused products at the facility. The record of all cannabis sold must include the date of sale, the name of the dispensary facility to which the cannabis was sold and the batch number, product name and quantity of cannabis sold.

In addition, the T&T permits NCC to set up separate sales reports for (i) sales to qualifying patients and (ii) sales to purchasers, and NCC uses such software to generate separate such reports as is required by the IL Adult Use Act.

Storage of cannabis and cannabis product inventory is also regulated by the IL Acts. Inventory must be stored on the dispensary’s licensed premises in a restricted access area. Appropriate storage temperatures, containers, and lighting are required to ensure the quality and purity of cannabis inventory is not adversely affected.

Illinois Security

Under the IL Acts, dispensaries must implement security measures to deter and prevent entry into and theft from restricted access areas containing either cannabis or currency. Mandated security measures include security systems, panic alarms, and locked doors or barriers between the facility’s entrance and limited access areas. Admission to the limited access areas must be restricted to only purchasers, registered qualifying patients, designated caregivers, principal officers, and agents conducting business with the dispensing organization. Visitors and persons conducting business with the licensee in limited access areas must always wear identification badges and be escorted by a licensee’s agent authorized to enter the restricted access area, and such persons must be pre-approved by the IL DFPR. A visitor’s log must be kept on-site and be maintained for five years.

The IL Acts provide that 24-hour video surveillance of both a licensee’s interior and exterior are required to be taken and kept for at least 90 days. Unless prohibited by law, video of all interior dispensary areas, including all points of entry and exit, safes, sales areas, and storage areas must be kept. Unobstructed video of the exterior perimeter, including the storefront, grow facility and the parking lot, must also be kept. Video surveillance cameras are required to be angled to allow for facial recognition and the capture of clear and certain identification of any person entering or exiting the dispensary area. Additionally, all video must be taken in lighting sufficient for clear viewing during all times of night or day. The IL Acts also require all security equipment to be inspected and tested within regular 30-day intervals.

Illinois Transportation

~~Prior~~Under the IL Acts, cultivation facilities cannot transport cannabis to ~~transporting any~~a craft grower, dispensary, infuser, or laboratory without obtaining a Transporter License from the IL DA. Cultivation facilities may also enter into contracts with licensed transporters.

In general, Illinois transporters cannot transport cannabis or cannabis-infused ~~product,~~to any person or entity other than a cultivation ~~facility must:~~center, a craft grower, an infuser, a dispensing organization, or a testing facility. Transporting operations are closely regulated by the IL DA and include numerous restrictions relating to safety and security. The cannabis product must packed in a cannabis container and transported in an enclosed, locked storage compartment that is secured or affixed to the transportation vehicle. Transporting agents may not open the cannabis container once packed and sealed for delivery, and no person who is not a transporter agent is permitted to be in a transporter vehicle while transporting cannabis goods. Transporter agents must carry their IL DA-issued ID cards on their person and keep the cards visible at all times during the transportation of cannabis or while on the property of a cannabis business establishment.

•~~Complete~~Transporter vehicles are subject to gross weight limits and cannot bear any markings indicating that the vehicle contains cannabis. The vehicles must be equipped with a ~~shipping manifest using~~GPS-based tracking device that allows the transporter to track the vehicle’s whereabouts at all times. Transporter vehicles must have their license plate number and VIN on file with IL DA and are subject to random inspections by IL DA, IL DPH and the Illinois State Police at any time.

Transporter agents must notify local law enforcement, the Illinois State Police, and IL DA within 24 hours after discovery of loss or theft from a ~~form prescribed by the IL DA; and~~

•~~Securely transmit a copy~~transporter vehicle. A record of the ~~manifest to~~theft, loss, or other unaccountability must be created and maintained for at least a 5-year period.

Transporters must maintain a daily inventory of product transported, including the ~~dispensary facility that will receive~~name of the ~~products~~sending and toreceiving business establishments, the ~~IL DA before~~name of the ~~close~~agent who received the container, and the time and location of ~~business the day prior to transport. The manifest~~delivery. Other recordkeeping obligations include bank statements, accounting and tax records, employee records, and purchasing documentation (invoices, bills of lading, etc.). These records must be kept for a minimum of 5 years and must be made available to IL DA (or the Illinois ~~State Police upon request.~~

~~The cultivation facility shall maintain all shipping manifests and make them available at the request~~Department of ~~the IL DA.~~

~~Cannabis products that are being transported shall:~~

•Only be transported in a locked, safe and secure storage compartment that is part of the motor vehicle transporting the cannabis, or in a locked storage container that has a separate key or combination pad; and

•~~Not be visible from outside the motor vehicle.~~

Any motor vehicle transporting cannabis is required travel directly from the cultivation facility to the dispensary facility, or a testing laboratory, and must not make any stops in between except to other dispensary facilities or laboratories, for refueling or in case of an emergency. A cultivation center shall ensure that all delivery times and routes are randomized. A cultivation center shall staff all transport motor vehicles with a minimum of two employees. At least one delivery team member shall remain with the motor vehicle at all times that the motor vehicle contains cannabis. Each delivery team member shall have access to a secure form of communication with personnel at the cultivation center and the ability to contact law enforcement through the 911 emergency system at all times that the motor vehicle contains cannabis. Each delivery team member shall possess his or her department issued identification card at all times when transporting or delivering cannabis and shall produce it for the IL DA or IL DA’s authorized representative or law enforcement officialRevenue) upon request.

Illinois Inspections

Dispensing organizations are subject to random and unannounced dispensary inspections and cannabis testing by the IL DFPR and Illinois State Police. The IL DFPR and its authorized representatives may enter any place, including a vehicle, in which cannabis is held, stored, dispensed, sold, produced, delivered, transported, manufactured or disposed of and inspect in a reasonable manner, the place and all pertinent equipment, containers and labeling, and all materials, data and processes, and inventory any stock of cannabis and obtain samples of any cannabis or cannabis product, any labels or containers for cannabis, or paraphernalia.

The IL DFPR may conduct an investigation of an applicant, application, dispensing organization, principal officer, dispensary agent, third party vendor or any other party associated with a dispensing organization for an alleged violation of the IL Acts or

to determine qualifications to be granted a registration by the IL DFPR. The IL DFPR may require an applicant or dispensing organization to produce documents, records or any other material pertinent to the investigation of an application or alleged violations of the IL Act.

Cannabis cultivation centers are also subject to random inspections by the IL DA.

Guarantee of Cannabis and Cannabis-Infused Product Variety

The IL Adult Use Act requires that dispensing organizations maintain an assortment of products from various suppliers such that inventory from any one supplier ~~representing~~does not represent greater than 40% of the dispensing organization’s total ~~Inventory.~~inventory available for sale. NCC monitors inventory offered for sale on a weekly basis and ensure that no single cultivator’s products comprise more than 40% of the inventory offered for sale at NCC. NCC produces a periodic inventory report from BioTrackTHC to determine the inventory percentages of purchases by cultivator.

The IL Adult Use Act further requires that a dispensing organization have a policy to prioritize serving patients and other medical program participants over purchasers.

U.S. Attorney Statements in Illinois

Maine

Maine Legislative history

Maine has allowed qualified patients with specific conditions to grow for their own usage and possess limited amounts of medical cannabis since November 1999, but the law lacked any distribution mechanism. On November 3, 2009, Maine voters approved Question 5, which established dispensaries and caregivers are able to grow and dispense up to 2.5 oz. of medical grade cannabis every two weeks to persons with one of 17 debilitating and chronic medical conditions including HIV/AIDS, Crohn’s disease, cancer and post-traumatic stress disorder. The registered dispensaries and caregivers were regulated by the Maine Department of Health and Human Services (“~~MDHHS~~”MDHHS”), but oversight was recently shifted to the Maine Department of Administrative and Financial Services (“~~MDAFS~~”MDAFS”).

In November 2016, Maine approved cannabis legalization at the ballot. On January 27, 2017, the legislature approved a moratorium on implementing parts of the law regarding retail sales and taxation until at least February 2018, giving time to resolve issues and promulgate rules. The portion of the law that allows persons over 21 years to grow six mature plants and possess, transport and gift up to 2.5 ounces became effective on January 30, 2017 (although this was limited to three mature plants in the 2018 legislation). A 17-member special legislative committee was formed to address the complex issues surrounding full implementation of the law. In April 2018, the Governor of Maine vetoed the bill to legalize cannabis for adult-use. However, in May 2018, Maine lawmakers overrode the Governor’s veto clearing the way for adult-use. In February 2019, MDAFS created the Office of Marijuana Policy (“~~OMP~~”OMP”) to oversee all aspects of adult-use marijuana. The adult-use regulations were adopted in June 2019. Furthermore, a mandatory “opt-in” mechanism allows municipalities to control whether they want retail cannabis establishments in their communities. The State of Maine first made adult-use applications available on December 5, 2019 and the first conditional licenses were issued on March 13, 2020. The OMP intended to launch adult-use in spring 2020, before the COVID-19 pandemic necessitated the postponement of these plans. The first active licenses were issued to adult-use establishments on Tuesday, September 8, 2020. Actively licensed adult-use marijuana stores were able to begin retail sales to the public on or after October 9, 2020.

Maine Registration Certificates

The Maine Medical Use of Marijuana Program Rules and the enabling statute, the Maine Medical Use of Marijuana Act, govern the Maine Medical Use of Marijuana Program (“~~MMUMP~~”MMUMP”). The MDHHS was originally responsible for administering the MMUMP to ensure qualifying patients’ access to safe cannabis for medical use and was responsible for issuing dispensary registration certificates as well as caregiver certificates. The MMUMP through the MDHHS issued eight dispensary registration certificates. However, the MMUMP was transferred to the MDAFS in May 2018, as part of LD 1719, which implemented the adult-use program.

Northeast Patient Group d/b/a Wellness Connection of Maine (“~~WCM~~”WCM”), a contractual party and debtor of the Company, ~~holds~~held four of the eight vertically integrated dispensary certificates of registration. ~~The South Portland location was~~Three out of these four locations in Maine have been converted to adult-use and isare owned directly by a subsidiary of Acreage.

The table below lists the certificates issued to ~~WCM and~~ our ~~subsidiary:~~

~~MSA Party~~

~~Certificate of Registration~~

~~City~~

~~Expiration Date~~

~~Description~~

~~WCM~~

~~DSP107~~

~~Portland~~

~~4/11/2021~~

~~Dispensary~~

~~WCM~~

~~DSP103~~

~~Gardiner~~

~~12/22/2021~~

~~Dispensary~~

~~WCM~~

~~DSP108~~

~~Brewer~~

~~6/15/2021~~

~~Dispensary~~

~~WCM~~

~~DSP102~~

~~Auburn~~

~~Not applicable~~

~~Cultivation~~

subsidiary, NPG LLC:

Subsidiary

License number

City

Expiration

Description

NPG LLC

AMS338

South Portland

11/22/~~2021~~2023

Adult Use Dispensary

NPG LLC

AMS335

Gardiner

4/30/2024

Adult Use Dispensary

NPG LLC

MJ-002780-2020

Portland

6/23/2023

Adult Use Dispensary

NPG LLC

ACD334, AMF330

Auburn

10/20/2023

Cultivation and Manufacturing Facility

NPG LLC

AMS1130

Brewer

4/14/2024

Adult Use Dispensary

The Maine vertically integrated dispensary certificate of registration is valid for one year from the date of issuance. Each certificate of registration for dispensaries allows cultivation, processing and dispensing. WCM cultivates and processes at one centralized location for its three operational dispensaries. The cultivation facility and retail site of a dispensary must comply with all requirements and prohibitions of the Maine statutes and regulations. Failure to comply may result in enforcement action including, but not limited to, termination of the registration certificate. The dispensary must receive both state licensing and municipal approval. The South Portland dispensary location is an adult-use dispensary and operates separately from our managed dispensaries in Maine.

The dispensary must submit an application for the renewal of a current registration certificate with all required documentation and the required fees 60 days prior to the expiration date. Failure to submit a timely, complete renewal packet may be grounds for denial of the renewal and may result in expiration of the registration certificate to operate the dispensary. Once the application is received and validated, an inspection is scheduled which is conditional for the renewal. The certificate of registration holders must ensure that no cannabis may be sold, delivered, transported or distributed by a producer from or to a location outside of Maine.

Maine Record-keeping/Reporting

Maine does not yet have a unified, mandatory T&T system, although one will be implemented through the development of the adult-use program. However, WCM tracks seed-to-sale via an integrated platform. Required information is forwarded to the MMUMP through email. The operating documents of a registered dispensary must include procedures to ensure accurate record keeping. Registered dispensaries must maintain at least the following: business records, including records of assets and liabilities, tax returns, contracts, monetary transactions, checks, invoices and vouchers which the dispensary keeps as its books of accounts. Business records also include the sales record that indicates the name of the qualifying patient or primary caregiver to whom cannabis has been distributed, sold or donated, including the quantity and form. The registered dispensary must also keep on file and available for MDHHS (now MDAFS) inspection upon request, a copy of each current patient’s registry identification, a copy of the medical provider written certification and the MMUMP approved dispensary designation form. All business records must be available upon request by the MDHHS (now MDAFS) and maintained and retained for six years.

Maine Inventory/Storage

All cultivation facilities for medical use are restricted to cultivating in an enclosed, locked facility or area. Cannabis at a registered dispensary must be kept under double lock and inventoried daily by two cardholders. Each patient’s transactions are recorded and controlled in the POS system to prevent any patient to access more than the allowed limit. WCM monitors inventory daily and reports inventory supply monthly.

Maine Security

Cultivation of cannabis for medical use requires implementation of appropriate security measures to discourage theft of cannabis, ensure safety and prevent unauthorized entrance to a cultivation site in accordance with the MMUMP statute and rules. Requirements include but are not limited to an enclosed, locked facility and enclosed outdoor areas must have durable locks to discourage theft and unauthorized entrance.

Registered dispensaries must implement appropriate security measures to deter and prevent unauthorized entrance into areas containing cannabis and the theft of cannabis at the registered dispensary and the grow location for the cultivation of cannabis. Security measures to protect the premises, the public, qualifying patients, primary caregivers and principal officers, board members and employees of the registered dispensary must include, but are not limited to (a) on-site parking, (b) exterior lighting sufficient to deter nuisance activity and facilitate surveillance, (c) devices or a series of devices, including, but not limited to, a signal system interconnected with a radio frequency method such as cellular, private radio signals, or other mechanical or electronic device to detect an unauthorized intrusion, and (d) interior electronic monitoring, video cameras, and panic buttons. Electronic monitoring and video camera recordings must be maintained by the medical dispensary and cultivation facility a minimum of 14 days. Electronic monitoring and video camera recordings must be maintained by the adult-use dispensary and facility a minimum of 45 days.

Maine Inspections

Registered dispensaries, including all retail and cultivation locations, are subject to inspection at least annually by the MDAFS in accordance with this rule and the statute. Submission of an application for a dispensary registration certificate constitutes permission for entry and inspection of dispensary locations. Failure to cooperate with required inspections may be grounds to revoke the dispensary's registration certificate. During an inspection, the MDAFS may identify violations of this rule, the statute and the dispensary's policies and procedures. The dispensary shall receive written notice of the nature of the violations. The dispensary shall notify the MDAFS in writing with a postmark date within ten business days of the date of the notice of violations and identify the corrective actions taken and the date of the correction.

During an inspection, the MDAFS shall (1) collect soil and plant samples, and samples of products containing marijuana prepared at the dispensary, (2) place the dispensary's registration number on each sample container, (3) label the sample containers with the description and quantity of its content, (4) seal sample containers, and (5) have dispensary and MDAFS staff initial each sample container.

U.S. Attorney Statements in Maine

Massachusetts

Massachusetts Legislative history

The Massachusetts Medical Use of Marijuana Program (the “MA Program”) was formed pursuant to the Act for the Humanitarian Medical Use of Marijuana (the “MA ACT”). The MA Program allows registered persons to purchase medical cannabis and applies to any patient, personal caregiver, Medical Marijuana Treatment Center (“MTC”). To qualify for the program, patients must have a debilitating condition as defined by the MA Program. Currently there are over nine conditions that allow a patient to acquire cannabis in Massachusetts, including AIDS/HIV, ALS, cancer and Crohn’s disease. ~~As of May 31, 2019, approximately 59,000 patients have been registered to purchase medical cannabis products in Massachusetts.~~ The MA Program is administrated by the Cannabis Control Commission (“CCC”).

In November 2016, Massachusetts voted affirmatively on a ballot petition to legalize and regulate cannabis for adult-use. The Massachusetts legislature amended the law on December 28, 2016, delaying the date adult-use cannabis sales would begin by six months. The delay allowed the legislature to clarify how municipal land-use regulations would treat the cultivation of cannabis and authorized a study of related issues. After further debate, the state House of Representatives and state Senate approved H.3818 which became Chapter 55 of the Acts of 2017, An Act to Ensure Safe Access to Marijuana, and established the CCC. The CCC consists of five commissioners and regulates the Massachusetts Recreational Marijuana Program as well as the MA Program. Adult-use of cannabis in Massachusetts started in July 2018.

Massachusetts Licenses

Under the MA Program, MTCs are heavily regulated. Vertically integrated MTCs grow, process, and dispense their own cannabis. As such, each MTC is required to have a retail facility as well as cultivation and processing operations, although retail operations may be separate from grow and cultivation operations. A MTC’s cultivation location may be in a different municipality or county than its retail facility. ~~MTC’s are required to be Massachusetts non-profit corporations.~~

The MA Program mandates a comprehensive application process for MTCs. Each MTC applicant must submit a Certificate of Good Standing, comprehensive financial statements, a character competency assessment, and employment and education histories of the senior partners and individuals responsible for the day-to-day security and operation of the MTC. Municipalities may individually determine what local permits or licenses are required if an MTC wishes to establish an operation within its boundaries.

The table below lists the licenses issued to the subsidiaries and entities operating in Massachusetts with which the Company has a consulting services agreement:

Subsidiary

License Number

City

Expiration Date

Description

The Botanist, Inc.

RMD-905

Sterling

5/~~17/2021~~12/2023

MTC Cultivation/Processing

The Botanist, Inc.

RMD-905

Worcester

~~5/17/2021~~7/22/2023

MTC Dispensary

The Botanist, Inc.

~~Provisional~~MP281672

Leominster

~~Not applicable~~7/15/2023

RMD ~~Dispensary~~- Marijuana Product Manufacturer - Kitchen

The Botanist, Inc.

RMD-1225

Shrewsbury

~~6/06/2021~~5/12/2023

RMD Dispensary

Effective as of February 13, 2020, South Shore Biopharma, LLC and MA RMD SVCS, LLC, subsidiaries of the Company, entered into termination and separation agreements with PCMV and Health Circle, respectively. SSBP previously entered into a termination and separation agreement with Mass Medi Spa, Inc. Following termination, PCMV and Health Circle still have notes outstanding to the Company for all amounts previously advanced by the Company.~~As of the date hereof, notes payable of approximately $6 million and $4.3 million remain outstanding for PCMV and Health Circle, respectively.~~ Our Shrewsbury and Worcester locations presently operate as adult-use dispensaries.

Each Massachusetts dispensary, grower and processor license is valid for one year and must be renewed no later than 60 calendar days prior to expiration. As in other states where cannabis is legal, the CCC can deny or revoke licenses and renewals for multiple reasons, including (a) submission of materially inaccurate, incomplete, or fraudulent information, (b) failure to comply with any applicable law or regulation, including laws relating to taxes, child support, workers compensation and insurance coverage, (c) failure to submit or implement a plan of correction (d) attempting to assign registration to another

entity, (e) insufficient financial resources, (f) committing, permitting, aiding, or abetting of any illegal practices in the operation of the MTC, (g) failure to cooperate or give information to relevant law enforcement related to any matter arising out of conduct at an MTC, and (h) lack of responsible MTC operations, as evidenced by negligence, disorderly or unsanitary facilities or permitting a person to use a registration card belonging to another person. Additionally, license holders must ensure that no cannabis is sold, delivered, or distributed by a producer from or to a location outside of this state.

No person or entity may “control,” as that is described in 935 CMR 501.000 et seq., more than three MTC licenses.

Massachusetts Dispensary Requirements (Medical)

A MTC is to follow its written and approved operation procedures in the operation of its dispensary locations. Operating procedures shall include (i) security measures in compliance with the MA Program; (ii) employee security policies including personal safety and crime prevention techniques; (iii) hours of operation and after-hours contact information; (iv) a price list for marijuana; (v) storage protocols in compliance with state law; (vi) a description of the various strains of marijuana that will be cultivated and dispensed, and the forms that will be dispensed; (vii) procedures to ensure accurate recordkeeping including inventory protocols; (viii) plans for quality control; (ix) a staffing plan and staffing records; (x) diversion identification and reporting protocols; and (xi) policies and procedures for the handling of cash on MTC premises including storage, collection frequency and transport to financial institutions. The siting of dispensary locations is expressly subject to local/municipal approvals pursuant to state law, and municipalities control the permitting application process that a MTC must comply with. More specifically, a MTC is to comply with all local requirements regarding siting, provided however that if no local requirements exist, a MTC shall not be sited within a radius of 500 feet of a school, daycare center, or any facility in which children commonly congregate. The 500-foot distance under this section is measured in a straight line from the nearest point of the facility in question to the nearest point of the proposed MTC. The MA Program requires that MTCs limit their inventory of seeds, plants, and useable marijuana to reflect the projected needs of registered qualifying patients. A MTC may only dispense to a registered qualifying patient who has a current valid certification.

Massachusetts Record-keeping/Reporting (Medical)

Massachusetts uses METRC as the T&T system. Individual licensees, whether directly or through a third-party application programming interface (an “API”), are required to push data to the state to meet all reporting requirements. ~~Each of Health Circle, Inc., Mass Medi-Spa, Inc., Patient Centric Martha’s Vineyard, Ltd. and~~ The Botanist ~~Inc. use or will use~~uses METRC to capture and send all required data points for cultivation, manufacturing, and retail as required by applicable law.

The MA Program requires that MTC records be readily available for inspection by the Department of Health upon request. Among the records that are required to be maintained and made available are: (a) operating procedures, (b) inventory records, and (c) seed-to-sale tracking records for all cannabis and cannabis infused products.

Massachusetts Inventory/Storage (Medical)

Through the T&T system, MTCs are required to record all actions related to each individual cannabis plant. This robust inventorying requirement includes tracking how each plant is handled and processed from seed and cultivation, through growth, harvest and preparation of cannabis infused products, if any, to final sale of finished products. This system must chronicle every step, ingredient, activity, transaction, and dispensary agent, registered qualifying patient, or personal caregiver who handles, obtains, or possesses the product. To meet this tracking requirement, the inventory tracking process is mandated to utilize unique plant and batch identification numbers. Besides capturing all processes associated with each cannabis plant, MTCs must also establish and abide by inventory controls and procedures for conducting inventory reviews and comprehensive inventories of cultivating, finished, and stored cannabis products. To ensure inventories are accurate, MTCs are not only required to conduct monthly inventories but also to compare monthly inventories to the T&T system records.

The MA Program requires all cannabis and cannabis infused products be securely stored. MTCs must ensure that all safes, vaults, and other equipment or areas used for the production, cultivation, harvesting, processing, or storage of cannabis and cannabis infused products are securely locked and protected against unauthorized entry. The MA Program also specifies that limited access areas, accessible only to authorized personnel, must be established in each dispensary. Furthermore, only the minimum number of employees essential to business operations may be given access to the limited access areas.

Massachusetts Security (Medical)

Adequate security systems that prevent and detect diversion, theft, or loss of cannabis are required of each MTC under the MA Program. Such security systems must utilize commercial grade equipment and are required to include (a) a perimeter alarm on

all entry and exit points and perimeter windows, (b) a failure notification system that provides an audible, text, or visual notification of any failure in the surveillance system, and (c) a duress alarm, panic alarm, or holdup alarm connected to local public safety or law enforcement authorities.

To ensure MTCs meet the rigorous security standards laid out by the MA Program, use of surveillance cameras is mandated. MTCs must install video cameras in the following areas: (a) all areas that may contain cannabis, (b) all points of entry and exit, and (c) in any parking lot. Video cameras must be appropriate for the lighting conditions of the area under surveillance. Interior video cameras must be directed at all safes, vaults, sales areas, and areas where cannabis is cultivated, harvested, processed, prepared, stored, handled, or dispensed. Video surveillance is required to be operational 24 hours a day, seven days a week and all recordings must be retained for at least 90 calendar days.

Massachusetts Transportation (Medical)

The MA Program regulates the means and methods by which cannabis is transported. A MTC transporting cannabis must ensure the product is in a secure, locked storage compartment. If a cannabis establishment, pursuant to a cannabis transporter license is transporting cannabis products for more than one cannabis establishment at a time, the cannabis products for each cannabis establishment must be kept in separate locked storage compartments during transportation and separate manifests are required for each cannabis establishment. Vehicles transporting cannabis must be equipped with an approved alarm system and functioning heating and air conditioning systems appropriate for maintaining correct temperatures for storage of cannabis products. Additionally, cannabis products may not be visible from outside the vehicle and MTCs must ensure that all transportation times and routes are randomized. Cannabis and cannabis infused products may not be transported outside Massachusetts.

Massachusetts CCC Inspections (Medical)

The CCC or its agents may inspect a MTC and affiliated vehicles at any time without prior notice. A MTC shall immediately upon request make available to the CCC information that may be relevant to a CCC inspection, and the CCC may direct a MTC to test marijuana for contaminants. Any violations found will be noted in a deficiency statement that will be provided to the MTC, and the MTC shall thereafter submit a Plan of Correction to the CCC outlining with particularity each deficiency and the timetable and steps to remediate the same. The CCC shall have the authority to suspend or revoke a certificate of registration in accordance with 935 CMR 501.510 of the Regulation of adult-use cannabis in Massachusetts.

Regulation of the Adult Use Cannabis Market in Massachusetts

Adult-use (recreational) marijuana has been legal in Massachusetts since December 15, 2016, following a ballot initiative in November of that year. The CCC, a regulatory body created in 2018, licenses adult-use cultivation, processing and dispensary facilities (collectively, “Marijuana Establishments”) pursuant to 935 CMR 500.000 et seq. The first adult-use marijuana facilities in Massachusetts began operating in November 2018.

Massachusetts Licensing Requirements (Adult-Use)

Many of the same application requirements exist for a Marijuana Establishment license as a MTC application, and each owner, officer or member must undergo background checks and fingerprinting with the CCC. Applicants must submit the location and identification of each site, and must establish a property interest in the same, and the applicant and the local municipality must have entered into a host agreement authorizing the location of the adult-use Marijuana Establishment within the municipality, and said agreement must be included in the application. Applicants must include disclosure of any regulatory actions against it by the Commonwealth of Massachusetts, as well as the civil and criminal history of the applicant and its owners, officers, principals or members. The application must include the MTC applicant’s plans for separating medical and adult-use operations, proposed timeline for achieving operations, liability insurance, business plan, and a detailed summary describing and/or updating or modifying the MTC’s existing medical marijuana operating policies and procedures for adult-use including security, prevention of diversion, storage, transportation, inventory procedures, quality control, dispensing procedures, personnel policies, record keeping, maintenance of financial records and employee training protocols.

No person or entity may ~~own more than 10% or~~ “control” (as described in 935 CMR 500.000 et seq.) more than three licenses in each Marijuana Establishment class (i.e., marijuana retailer, marijuana cultivator, marijuana product manufacturer). Additionally, there is a 100,000 square foot cultivation canopy for adult-use ~~licenses; however, there is no canopy restriction for MTC license holders relative to their cultivation facility.~~and medical licenses.

Massachusetts Dispensary Requirements (Adult-Use)

Marijuana retailers are subject to certain operational requirements in addition to those imposed on marijuana establishments generally. Dispensaries must immediately inspect patrons’ identification to ensure that everyone who enters is at least twenty-one years of age. Dispensaries may not dispense more than one ounce of marijuana or five grams of marijuana concentrate per transaction. Point-of-sale systems must be approved by the CCC, and retailers must record sales data. Records must be retained and available for auditing by the CCC and Department of Revenue. Dispensaries must also make patient education materials available to patrons. Such materials must include:

•A warning that marijuana has not been analyzed or approved by the FDA, that there is limited information on side effects, that there may be health risks associated with using marijuana, and that it should be kept away from children;

•A warning that when under the influence of marijuana, driving is prohibited by M.G.L. c. 90, § 24, and machinery should not be operated;

•Information to assist in the selection of marijuana, describing the potential differing effects of various strains of marijuana, as well as various forms and routes of administration;

•Materials offered to consumers to enable them to track the strains used and their associated effects;

•Information describing proper dosage and titration for different routes of administration, with an emphasis on using the smallest amount possible to achieve the desired effect;

•A discussion of tolerance, dependence, and withdrawal;

•Facts regarding substance abuse signs and symptoms, as well as referral information for substance abuse treatment programs;

•A statement that consumers may not sell marijuana to any other individual;

•Information regarding penalties for possession or distribution of marijuana in violation of Massachusetts law; and

•Any other information required by the CCC.

Massachusetts Security and Storage Requirements (Adult-Use)

Each marijuana establishment must implement sufficient safety measures to deter and prevent unauthorized entrance into areas containing marijuana and theft of marijuana at the establishment. Security measures taken by the establishments to protect the premises, employees, consumers and general public shall include, but not be limited to, the following:

•Positively identifying individuals seeking access to the premises of the Marijuana Establishment or to whom or marijuana products are being transported pursuant to 935 CMR 500.105(14) to limit access solely to individuals 21 years of age or older;

•Adopting procedures to prevent loitering and ensure that only individuals engaging in activity expressly or by necessary implication permitted by these regulations and its enabling statute are allowed to remain on the premises;

•Disposing of marijuana in accordance with 935 CMR 500.105(12) in excess of the quantity required for normal, efficient operation as established within 935 CMR 500.105;

•Securing all entrances to the Marijuana Establishment to prevent unauthorized access;

•Establishing limited access areas pursuant to 935 CMR 500.110(4), which shall be accessible only to specifically authorized personnel limited to include only the minimum number of employees essential for efficient operation;

•Storing all finished marijuana products in a secure, locked safe or vault in such a manner as to prevent diversion, theft and loss;

•Keeping all safes, vaults, and any other equipment or areas used for the production, cultivation, harvesting, processing or storage of marijuana products securely locked and protected from entry, except for the actual time required to remove or replace marijuana;

•Keeping all locks and security equipment in good working order;

•Prohibiting keys, if any, from being left in the locks or stored or placed in a location accessible to persons other than specifically authorized personnel;

•Prohibiting accessibility of security measures, such as combination numbers, passwords or electronic or biometric security systems, to persons other than specifically authorized personnel;

•Ensuring that the outside perimeter of the marijuana establishment is sufficiently lit to facilitate surveillance, where applicable;

•Ensuring that all marijuana products are kept out of plain sight and are not visible from a public place without the use of binoculars, optical aids or aircraft;

•Developing emergency policies and procedures for securing all product following any instance of diversion, theft or loss of marijuana, and conduct an assessment to determine whether additional safeguards are necessary;

•Developing sufficient additional safeguards as required by the CCC for marijuana establishments that present special security concerns; ~~and~~

•Sharing the marijuana establishment's security plan and procedures with law enforcement authorities and fire services and periodically updating law enforcement authorities and fire services if the plans or procedures are modified in a material ~~way.~~way; and

•Marijuana must be stored in special limited access areas, and alarm systems must meet certain technical requirements, including the ability to record footage to be retained for at least 90 days.

Massachusetts Transportation Requirements (Adult-Use)

Marijuana products may only be transported between licensed marijuana establishments by registered marijuana establishment agents. A licensed marijuana transporter may contract with a licensed marijuana establishment to transport that licensee's marijuana products to other licensed establishments. The originating and receiving licensed establishments shall ensure that all transported marijuana products are linked to the seed-to-sale tracking program. For the purposes of tracking, seeds and clones will be properly tracked and labeled in a form and manner determined by the CCC. Any marijuana product that is undeliverable or is refused by the destination marijuana establishment shall be transported back to the originating establishment. All vehicles transporting marijuana products shall be staffed with a minimum of two marijuana establishment agents. At least one agent shall remain with the vehicle at all times that the vehicle contains marijuana or marijuana products. Prior to the products leaving a marijuana establishment for the purpose of transporting marijuana products, the originating marijuana establishment must weigh, inventory, and account for, on video, all marijuana products to be transported. Within eight hours after arrival at the destination marijuana establishment, the destination establishment must re-weigh, re-inventory, and account for, on video, all marijuana products transported. When videotaping the weighing, inventorying, and accounting of marijuana products before transportation or after receipt, the video must show each product being weighed, the weight, and the manifest. Marijuana products must be packaged in sealed, labeled, and tamper or child-resistant packaging prior to and during transportation. In the case of an emergency stop during the transportation of marijuana products, a log must be maintained describing the reason for

the stop, the duration, the location, and any activities of personnel exiting the vehicle. A marijuana establishment or a marijuana transporter transporting marijuana products is required to ensure that all transportation times and routes are randomized. An establishment or transporter transporting marijuana products shall ensure that all transport routes remain within Massachusetts. All vehicles and transportation equipment used in the transportation of cannabis products or edibles requiring temperature control for safety must be designed, maintained, and equipped as necessary to provide adequate temperature control to prevent the cannabis products or edibles from becoming unsafe during transportation, consistent with applicable requirements pursuant to 21 CFR 1.908(c).

Vehicles used for transport must be owned or leased by the marijuana establishment or transporter, and they must be properly registered, inspected, and insured in Massachusetts. Marijuana may not be visible from outside the vehicle, and it must be transported in a secure, locked storage compartment. Each vehicle must have a global positioning system, and any agent transporting marijuana must have access to a secure form of communication with the originating location.

Massachusetts CCC Inspections

The CCC or its agents may inspect a marijuana establishment and affiliated vehicles at any time without prior notice in order to determine compliance with all applicable laws and regulations. All areas of a marijuana establishment, all marijuana establishment agents and activities, and all records are subject to such inspection. Marijuana establishments must immediately upon request make available to the Commission all information that may be relevant to a CCC inspection, or an investigation of any incident or complaint. A marijuana establishment must make all reasonable efforts to facilitate the CCC's inspection, or investigation of any incident or complaint, including the taking of samples, photographs, video or other recordings by the CCC or its agents, and to facilitate the CCC's interviews of marijuana establishment agents. During an inspection, the CCC may direct a Marijuana Establishment to test marijuana for contaminants as specified by the CCC, including but not limited to mold, mildew, heavy metals, plant-growth regulators, and the presence of pesticides not approved for use on marijuana by the Massachusetts Department of Agricultural Resources.

Moreover, the CCC is authorized to conduct a secret shopper program to ensure compliance with all applicable laws and regulations.

U.S. Attorney Statements in Massachusetts

On July 10, 2018, the U.S. Attorney for the District of Massachusetts, Andrew Lelling, issued a statement regarding the legalization of adult-use marijuana in Massachusetts. Mr. Lelling stated that since he has a constitutional obligation to enforce the laws passed by Congress, he would not immunize the residents of Massachusetts from federal law enforcement. He did state, however, that his office’s resources would be primarily focused on combating the opioid epidemic. He stated that considering those factors and the experiences of other states that have legalized adult-use marijuana, his office’s enforcement efforts would focus on the areas of (i) overproduction, (ii) targeted sales to minors and (iii) organized crime and interstate transportation of drug proceeds.

In December 2021, when asked if she would prosecute marijuana offenses, given that it is legalized in Massachusetts but not at the federal level, the current U.S. Attorney for the District of Massachusetts, Rachel Rollins publicly commented the following: “My intent is to look at significant distributors, massive drug kingpins, with respect to marijuana," she said. "We want to make sure we are focusing on the people who are trafficking [rather than individual users]."

~~Michigan~~

~~Michigan Legislative History~~

In 2008, the Michigan Compassionate Care Initiative established a medical cannabis program for serious and terminally ill patients. This program, which was approved by the House but not acted upon, defaulted to a public initiative on the November ballot. Proposal 1 was approved by 63% of voters on November 8, 2008. Proposal 1 was then written into law and approved by Michigan’s lawmakers in December 2008. The resulting Act became the Michigan Medical Marihuana Act (“~~MMMA”).~~

In 2016, the Michigan legislature passed two new acts and also amended the original MMMA. The first act, amended effective January 1, 2019, established a licensing and regulation framework for medical marihuana growers, processors, secure transporters, provisioning centers, and safety compliance facilities. The second act established a “seed-to-sale” system to track marihuana that is grown, processed, transferred, stored, or disposed of under the Medical Marihuana Facilities Licensing Act.

~~The passage of the Michigan Regulation and Taxation of Marihuana Act (“MRTMA”) by voter initiative on November 6, 2018, made Michigan the tenth state to legalize the recreational use of marijuana.~~ ~~On December 1~~st~~, 2019, adult-use cannabis sales commenced. On June 22, 2020, the Marijuana Regulatory Agency promulgated administrative rules governing medical and adult-use cannabis licensing.~~

The Marijuana Regulatory Agency is responsible for the oversight of medical and adult-use cannabis in Michigan and consists of the Licensing Division, the Enforcement Division and the Michigan Medical Marihuana Program Division. The MMMA provides access to state residents to cannabis and cannabis related products under one of 11 debilitating conditions, including epilepsy, cancer, HIV/AIDS, cancer and post-traumatic stress disorder. In July 2018, the Licensing Division approved 11 additional conditions to the list of aliments to qualify for medical cannabis. The additional 11 include chronic pain, colitis and spinal cord injury.

~~Michigan Licenses~~

HSCP’s subsidiaries have secured real estate assets in strategic locations, including in Detroit, Bay City, and Battle Creek. Kevin Michigan, LLC (“Kevin Michigan”), which is not affiliated with any HSCP entity, has secured municipal approval for medical marijuana dispensaries in Detroit, Bay City, and Battle Creek, and has a state operating license for its Detroit medical marijuana dispensary. HSCP’s subsidiaries lease real estate to Kevin Michigan, provide consulting services to Kevin Michigan with respect to its Detroit facility, and sublicense certain intellectual property to Kevin Michigan. We currently have no operations in Michigan.

~~U.S. Attorney Statements in Michigan~~

On November 8, 2018, United States Attorneys Matthew Schneider and Andrew Birge for the Eastern and Western Districts of Michigan, respectively, issued a joint statement regarding the legalization of adult-use marijuana in Michigan. They stated that since they had taken oaths to protect and defend the Constitution and the laws of the United States, they would not immunize the residents of Michigan from federal law enforcement. They stated that they would continue to the investigation and

prosecution of marijuana crimes as they do with any other crime. They stated they would consider the federal law enforcement priorities set by the DOJ, the seriousness of the crime, the deterrent effect of prosecution, and the cumulative impact of the crime on a community, while also considering their ability to prosecute with limited resources. They stated that combating illegal drugs was just one of many priorities, and that even within the area of drugs, they were focused on combating the opioid epidemic. They stated that they have not focused on prosecution of low-level offenders, which they stated would not change (unless aggravating factors were present). They did state that certain crimes involving marijuana could pose serious risks and harm to a community, including interstate trafficking, involvement of other illegal drugs or activity, persons with criminal records, presence of firearms or violence, criminal enterprises, gangs and cartels, bypassing local laws and regulations, potential for environmental contamination, risks to minors, and cultivation on federal property.

~~New Hampshire~~

~~New Hampshire Legislative history~~

New Hampshire’s Therapeutic Cannabis Program (the “NH Program”) was enacted on July 23, 2013, when the New Hampshire governor signed House Bill 573 into law allowing New Hampshire residents with qualifying medical conditions to use cannabis for medical purposes. Among the 18 qualifying medical conditions included in HB 573 are cancer, HIV/AIDS, ALS and Crohn’s disease. On June 28, 2017, the New Hampshire governor signed HB 160 which added post-traumatic stress disorder and other medical conditions to the law. On January 8, 2020 the New Hampshire House voted to add insomnia and opioid use disorder to the list of qualifying conditions, though the opioid use disorder carries significant restrictions. The New Hampshire legislature placed the responsibility for administering the NH Program within the New Hampshire Department of Health and Human Services (the “~~DHHS~~”). The first New Hampshire dispensary began serving patients on April 30, 2016. On July 18, 2017, the governor of New Hampshire signed into law HB 640, a cannabis decriminalization bill. Under HB 640, effective September 16, 2017, penalties for non-registered and non-medical possession of three-quarters of an ounce or less of cannabis were reduced from a criminal misdemeanor to a civil violation punishable only by a fine. As of June 2019, approximately 8,302 patients have been registered to purchase medical cannabis products in New Hampshire.

~~New Hampshire Licenses~~

~~The DHHS oversees the issuance of licenses and the rules and regulations for cannabis businesses, known as Alternative Treatment Centers (each, an “ATC~~”). ATCs are not-for-profit entities registered under the New Hampshire Revised Statutes Annotated Section 126-X:7. ATCs are business entities that acquire, possess, cultivate, manufacture, deliver, transfer, transport, sell, supply, and dispense cannabis and related materials to qualified patients and other ATCs. ATCs are issued a notice of registration approval only after the DHHS has inspected and determined that the ATC is in full compliance with all regulatory and statute requirements. DHHS has issued licenses to four qualifying ATCs and in March 2018 lawmakers passed legislation calling for two additional dispensaries.

~~The table below lists the license issued to Prime Alternative Treatment Centers of NH, Inc. (“PATC~~”), an entity that has a management services agreement with Prime Alternative Treatment Center Consulting, LLC, a subsidiary of the Company; Prime Alternative Treatment Center Consulting, LLC does not own or control PATC:

~~MSA Party~~

~~License Number~~

~~City~~

~~Expiration Date~~

~~Description~~

~~Prime Alternative Treatment Centers of NH, Inc.~~

~~ATC-001~~

~~Merrimack~~

~~6/30/2021~~

~~Grow / Manufacturing and Dispensary~~

ATC grower, processing, and dispensary licenses are valid for one year and expire on June 30th of the following year. License holders are required to submit a renewal application at least 120 days prior to the expiration of the current registration and include updates to the ATC’s original application as appropriate. Additionally, ATCs must ensure that no cannabis is transported outside of the state. The cultivation and processing facility is located in Peterborough, NH and the dispensary is located in Merrimack, NH.

~~New Hampshire Record-keeping/Reporting~~

New Hampshire selected BioTrackTHC as the T&T system for commercial cannabis activity. PATC currently uses a BioTrackTHC that pushes the data to New Hampshire’s T&T system to meet all reporting requirements.

Each ATC is required to maintain records in accordance with the records retention schedule established by the DHHS. As part of the records retention schedule, ATCs must keep a record of each transaction including the amount of cannabis dispensed, the amount paid, and the registry identification number of the qualifying patient, designated caregiver, or ATC and the qualifying patient’s provider. ATC’s are required to submit annual reports to the state that include (a) a description of efforts to educate qualifying patients and designated caregivers, (b) the annual financial report of the ATC including expenditures, liabilities, monetary reserves, and revenues received for sales of cannabis by strain and by type, (c) the total number of qualifying patients and designated caregivers served, and (d) reports on security issues including an aggregate account of all reportable incidents. Additionally, ATCs must maintain current and accurate records for each qualifying patient and designated caregiver registered with the ATC. The NH Program mandates all records be kept for a minimum of four years.

~~New Hampshire Inventory/Storage~~

Comprehensive inventory procedures and controls are required to be established and followed under the NH Program. Regular inventory counts and reviews designed to enable timely detection of any diversion, theft, or loss are specifically required by the NH Program. As part of the comprehensive inventory plan, ATCs must reconcile daily all on-premises and in-transit cannabis and be able to present such inventory records for review upon request of the state. In addition to daily inventories, monthly inventories are also mandated and must record all cannabis available for dispensing, mature cannabis plants, and seedlings at each authorized location.

Comprehensive storage guidelines are detailed under the NH Program. All cannabis and cannabis infused products, whether in the process of cultivation, processing, transport, testing, or available for sale, must be securely stored to prevent diversion, theft or loss. Additionally, cannabis must only be accessible by ATC agents who are specifically authorized to handle cannabis and to whom access is essential for efficient ATC operation. At the end of each business day, any cannabis or cannabis infused products must be returned to a secure storage location. Similarly, after cultivation and/or processing, all cannabis must be securely stored.

~~New Hampshire Security~~

Protecting dispensary facility patients, employees, and safeguarding cannabis against theft are all goals of the NH Program. ATCs are required to have security systems designed to prevent and detect diversion, theft, or loss of cannabis as well as unauthorized intrusion. Such security systems must include: (a) a perimeter alarm at all entry points and perimeter windows, and (b) a duress, panic, and holdup alarm connected to local public safety or law enforcement authorities or to an alarm monitoring company. Additionally, two agents must be present at the premises during all hours of operations.

Like dispensary facilities, security of cultivation facilities is also highly regulated under the NH Program. All phases of cannabis cultivation are required to take place in specially designated, secure, limited access areas that are monitored by surveillance camera systems. Surveillance cameras must cover all points of facility entry and exit, the parking lot, the entrance to the video surveillance room, and any areas that may contain cannabis. Surveillance video must be active 24 hours a day, seven days a weekand all recordings must be retained for at least 90 calendar days. The NH Program mandates that all security equipment be maintained in good working order and shall be inspected and tested at regular intervals of at no more than 30 calendar days.

~~New Hampshire Transportation~~

ATCs must create transport manifests for each transportation event, which must include pertinent information including departure date and time, identifying information and license number of the originating ATC, identifying information of the destination entity, product type and quantity, estimated time of arrival and name of employee transporting the product. The originating ATC must transmit a copy of the manifest to the destination entity prior to transport. The manifest must be signed and dated upon departure and arrival.

All cannabis must be tracked as inventory and must be transported in containers so as to not be visible or recognizable from outside the vehicle. The vehicle must not be marked as transporting cannabis nor bear the name of the ATC. Vehicles must not remain unattended at any time.

~~New Hampshire Inspections~~

Alternative treatment centers shall be subject to inspection by the DHHS at any time. During an inspection, the department may review the alternative treatment center's records, including its confidential dispensing and data collection records, which shall track transactions and product effectiveness according to qualifying patients' registry identification numbers to protect their confidentiality.

~~U.S. Attorney Statements in New Hampshire~~

New Jersey

New Jersey Legislative history

On January 18, 2010, the governor of New Jersey signed into law S.119, the Compassionate Use Medical Marijuana Act (the “~~NJ Act~~”“NJ Act”), permitting the use of medical cannabis for persons with debilitating conditions including cancer, HIV/AIDS, ALS, Crohn’s disease and any terminal illness. The ~~law permits the~~ New Jersey ~~Department~~Cannabis Regulatory Commission is responsible for the administration and implementation of ~~Health (“NJDH”) to create rules to add other illnesses~~activities related to the ~~permitted conditions.~~NJ Act. The NJ ~~Law~~Act does not permit patients to grow their own cannabis but rather mandates that cannabis must be acquired through ATCs licensed by the State.

Caregivers for patients are permitted to collect cannabis on behalf of the patient. Under the NJ Act, six ATCs received licenses from the State. The ATCs are non-profit entities and have the exclusive right to produce and sell medical cannabis in New Jersey.

On March 27, 2018 through executive order No. 6 (2018), Governor Phil Murphy expanded the medical cannabis program, announcing the 20-plus recommendations presented by the NJDH on March 23, 2018. The NJDH’s recommendations and next steps included certain measures that took effect immediately (e.g. the addition of debilitating conditions and the reduction of registration fees) and other recommendations (e.g. the home delivery model) that ~~require~~required further regulatory or statutory enactment.

In February 2019, the NJDH amended the list of debilitating conditions to include opioid use disorder, which had been accepted as petition by the review panel. The NJDH also implemented measures to streamline the enrollment process for patients, allow physicians to opt out of being listed publicly, and ~~have started~~opened the permitting process for ~~six new~~up to 24 ATCs.

In the 2020 general election, New Jersey residents voted two-to-one in favor of recreational cannabis legalization.~~The~~ In February 2021, the state ~~has to pass legalization~~passed and ~~decriminalization bills, which will then get signed into law by~~ Governor Phil ~~Murphy. Once~~Murphy signed the Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization (CREAMM) Act which regulates the recreational sale and possession of cannabis. In that ~~happens,~~same month, Governor Murphy completed his appointments for the ~~state’s~~five-person Cannabis Regulatory Commission (CRC) ~~will be fully appointed, and that five-person body must issue regulations within six (6) months of the effective date of the law for every part of the industry — from growing to distribution.~~.

New Jersey Licenses

The ~~NJDH~~CRC is responsible for administering the NJ Act to ensure qualifying patients’ access to safe cannabis for medical use in New Jersey. The ~~NJDH~~CRC is responsible for issuing permits to entities who will operate an ATC. New Jersey ~~is a vertical state where the dispensary needs~~permits ATCs to be ~~in the same location as the growing and processing facilities.~~vertically integrated. One of the recommendations in executive order No. 6 is to allow existing license holders to have up to two additional dispensaries not attached to the growing facility. The NJDH has issued twelve permits. ~~The~~In 2018, the NJDH previously accepted applications for an additional six vertical permits. The ~~NJDH~~CRC is seeking new applicants to operate up to 24 additional Alternative Treatment Centers (ATCs): Up to 8 in the northern region of the state, up to 8 in the central region, up to 7 in the southern region, and up to 1 “at-large” to be determined during the award process.not accepting applications for ATCs at this time.

ATC permits expire ~~annually on December 31.~~annually. A permit renewal application must be submitted at least 60 days prior to the expiration date. An ATC that seeks to renew its permit shall submit to the permitting authority an application for renewal with all required documentation and the required fees. An ATC shall update and ensure the correctness of all information submitted in previous applications for a permit or otherwise on file with the ~~NJDH.~~CRC. Prior to the issuance of any permit, every principal officer, owner, director and board member of an ATC must certify stating that he or she submits to the jurisdiction of the courts

of the State of New Jersey and agrees to comply with all the requirements of the laws of New Jersey pertaining to New Jersey’s Medicinal Marijuana Program. Failure to provide correct and current up-to-date information is grounds for denial of the application for renewal of the permit.

AsOn August 19, 2021, the CRC adopted its initial rules for adult use of ~~January 2021, approximately 101,496~~cannabis in New Jersey, effective for one year ending on August 19, 2022. ~~patients were registered~~The rules focused on the application process and ~~have medical licenses allowing them to purchase~~the requirements for owning and operating a cannabis ~~products from an ATC.~~business. Additional rules will be fleshed out through the normal regulatory rule making process during 2022.

~~Compassionate Care Foundation, Inc.~~Acreage CCF New Jersey, LLC (“~~CCF~~”CCF”) is a vertically integrated medical and recreational cannabis operator in New Jersey with licenses to conduct growing, processing, wholesale, and dispensary operations.in Egg Harbor, New Jersey. On October 4, 2013, the New Jersey Department of Health issued CCF a license to operate its facilities. The license has been renewed without issue. On June 26, 2020 we closed on the purchase of CCF and it is currently a wholly-owned subsidiary.

The table below lists the permit issued to CCF:

~~MSA Party~~Subsidiary

Permit Number

City

Expiration Date

Description

CCF

10042013

Egg Harbor

12/31/~~2021~~2023

Recreational Cultivate and Dispense

CCF

10042013

Atlantic City

12/31/~~2021~~2023

Dispense

CCF

10042013

Williamstown

12/31/2023

Recreational Dispense

New Jersey Record-keeping/Reporting

New Jersey does not have a unified T&T system. All information is forwarded to the MMMP through email. The ATC collects and submits to the NJDH for each calendar year statistical data on (a) the number of registered qualified patients and registered primary caregivers, (b) the debilitating medical conditions of the qualified patients, (c) patient demographic data, (d) summary

of the patient surveys and evaluation of services and (e) other information as the NJDH may require. The ATC must retain records for at least two years.

New Jersey Inventory/Storage

The ATC will establish inventory controls and procedures for the conduct of inventory reviews and comprehensive inventories of cultivating, stored, usable and unusable cannabis. The ATC will conduct a monthly inventory of cultivating, stored, usable and unusable cannabis. Through a unified T&T system is not currently in place, an ATC is required to have a T&T system for tracking inventory and dispensing cannabis products to patients. CCF uses BioTrackTHC as its T&T system. An ATC is authorized to possess two ounces of usable cannabis per registered qualifying patient plus an additional supply, not to exceed the amount needed to enable the alternative treatment center to meet the demand of newly registered qualifying patients.

Per regulatory requirements an ATC, at a minimum, must (a) establish inventory controls and procedures for the conduct of inventory reviews and comprehensive inventories of cultivating, stored, usable and unusable cannabis, (b) conduct a monthly inventory of cultivating, stored, usable and unusable cannabis, (c) perform a comprehensive inventory inspection at least once every year from the date of the previous comprehensive inventory, and (d) promptly transcribe inventories taken by use of an oral recording device. If cannabis is disposed of, the ATC must maintain a written record of the date, the quantity disposed of, the manner of disposal and the persons present during the disposal, with their signatures. ATCs must keep disposal records for at least two years. Results of the inventory inspection should document the date of the inventory review, a summary of the inventory findings and the name, signature and title of the individuals who conducted the inventory inspection.

An ATC shall limit access to medicinal cannabis storage areas to the absolute minimum number of specifically authorized employees. In the event non-employee maintenance personnel, business guests or visitors to be present in or pass through medical cannabis storage areas, the ATC must have a dedicated person who is specifically authorized by policy or job description to supervise the activity. The ATC must ensure that the storage of usable cannabis prepared for dispensing to patients is in a locked area with adequate security.

New Jersey Security

An ATC is required to implement effective controls and procedures to guard against theft and diversion of cannabis including systems to protect against electronic records tampering. At a minimum, ~~every ATC must (a) install, maintain in good working order and operate a safety and~~there are 13 minimum security ~~alarm system that provides suitable protection 24 hours a day, seven days a week against theft and diversion, (b) immediately notify~~requirements pursuant to the ~~state or local police agencies of an unauthorized breach of security. An ATC~~

~~must conduct maintenance inspections and tests of the security alarm system at intervals not to exceed 30 days from the previous inspection.~~NJ Admin. Code 17:30A-9.7.

A video surveillance system must be installed and operated to clearly monitor all critical control activities of the ATC and must operate in good working order at all times. The ATC must provide two monitors for remote viewing via telephone lines to the NJDH offices. This security system must be approved by State of New Jersey’s Medicinal Marijuana Program prior to permit issuance. The original tapes or digital pictures produced by the system must be stored in a safe place for a minimum of 30 days.

New Jersey Transportation

An ATC that is authorized by permit to cultivate medicinal marijuana at one location and to dispense it at a second location shall transport only usable marijuana from the cultivation site to the dispensing site according to a delivery plan submitted to the Department. Each vehicle must be staffed with at least two registered ATC employees. At least one delivery team member shall remain with the vehicle at all times that the vehicle contains medicinal marijuana. Each delivery team member shall have access to a secure form of communication with the ATC, such as a cellular telephone, at all times that the vehicle contains medicinal marijuana. Each delivery team member must possess their ATC employee identification card at all times and shall produce it to NJDH staff or law enforcement officials upon demand.

Each transport vehicle needs to be equipped with a secure lockbox or locking cargo area, which shall be used for the sanitary and secure transport of medicinal marijuana. Each ATC must maintain current commercial automobile liability insurance on each vehicle used for transport of medicinal marijuana in the amount of one million dollars per incident. Each ATC must ensure that vehicles used to transport medicinal marijuana bear no markings that would either identify or indicate that the vehicle is used to transport medicinal marijuana, and each trip must be completed in a timely and efficient manner, without intervening stops or delays. Each ATC shall maintain a record of each transport of medicinal marijuana in a transport logbook, which must include dates and times of trips, names of employees on the delivery team, relevant facts about the products transported and the signatures of the delivery team.

ATCs must report any vehicle accidents, diversions, losses, or other reportable events that occur during transport to the permitting authority in accordance with New Jersey law.

Home delivery is not permitted under New Jersey law. An ATC may not deliver marijuana to the home or residence of a registered qualifying patient or primary caregiver.

~~New Jersey Inspections~~

An ATC is subject to onsite assessment by the NJDH at any time. The NJDH may enter an ATC without notice to carry out an onsite assessment in accordance New Jersey laws and regulations. All ATCs are required to provide the NJDH or the NJDH’s designee immediate access to any material and information so requested. Submission of an application for an ATC permit constitutes permission for entry and onsite assessment of an ATC, and failure to cooperate with an onsite assessment and or to provide the NJDH access to the premises or information may be grounds to revoke the permit of the ATC and to refer the matter to state law enforcement agencies.

An onsite assessment may include (1) the review of all ATC documents and records and conferences with qualifying patients and primary caregivers and other persons with information, and the making and retaining of copies and/or extracts, (2) the use of any computer system at the ATC to examine electronic data, (3) the reproduction and retention of any document and/or electronic data in the form of a printout or other output, (4) the examination and collection of samples of any marijuana found at the ATC, and (5) the seizure and detention of any marijuana or thing believed to contain marijuana found at the ATC.

U.S. Attorney Statements in New Jersey

New York

New York Legislative history

In July 2014, the New York Legislature and Governor enacted the Compassionate Care Act (the “CCA”) to provide a comprehensive, safe and effective medical cannabis program. The CCA bill which is part of the Title V-A in Article 33, Title 10, Chapter 13 of the Public Health Law is scheduled to sunset in seven (7) years, in 2021. The CCA provides access to the program to those who suffer from one of 31 qualifying serious conditions including, debilitating or life-threatening conditions including cancer, HIV/AIDS, ALS and chronic pain. Patients must also have one of the following associated or complicating conditions: cachexia or wasting syndrome, severe or chronic pain, severe nausea, seizures, or severe or persistent muscle spasms.

Pursuant to the CCA, only a limited number of product offerings are allowed including metered liquid or oil preparations, solid and semi-solid preparations (e.g. capsules, chewable and effervescent tablets), metered ground plant preparations, and topical forms and transdermal patches. Medical cannabis may not be incorporated into the food products unless approved by the Commissioner of Health and smoking of cannabis flower is prohibited.

On March 31, 2021, New York approved the Marijuana Regulation and Taxation Act (the “MRTA”) into law, legalizing adult-use cannabis in the state and establishing a regulatory framework.Six months following the appointment of the Cannabis Control Board (the “CCB”), the CCA was scheduled to be repealed and replaced by MRTA’s medical provisions. Governor Kathy Hochul appointed the final members of the CCB in September 2021. Regulatory oversight of medical cannabis was transferred to Office of Cannabis Management (the”OCM”), with oversight from the CCB.

New York Licenses

The New York Department of Health (“NYDOH”) has issued licenses to ten registered organizations which hold vertically integrated licenses. Each registered organization has one cultivation/processing license and four dispensary licenses.

~~As of September 1, 2020, there were124,718 certified patients allowed to purchase cannabis products from a dispensary.~~

The table below lists the licenses approved to be issued to NYCANNA, LLC (“NYCANNA”), an indirect subsidiary of the Company:

Subsidiary

License number

City

Expiration Date

Description

NYCANNA, LLC

MM0601M

Dewitt

7/31/~~2021~~2023

~~Acquiring possession, sale, transporting, distributing~~Cultivation and ~~dispensing medical marijuana~~Manufacturing

NYCANNA, LLC

MM0602D

Jamaica

7/31/~~2021~~2023

Acquiring possession, sale, transporting, distributing and dispensing medical marijuana

NYCANNA, LLC

MM0603D

Farmingdale

7/31/~~2021~~2023

Acquiring possession, sale, transporting, distributing and dispensing medical marijuana

NYCANNA, LLC

MM0604D

Buffalo

7/31/~~2021~~2023

Acquiring possession, sale, transporting, distributing and dispensing medical marijuana

NYCANNA, LLC

MM0605D

Wallkill

7/31/~~2021~~2023

Acquiring possession, sale, transporting, distributing and dispensing medical marijuana

The New York dispensary, growing and processing licenses are valid for two years from the date of issuance and the license holders are required to submit a renewal application not be more than six months nor less than four months prior to expiration. License holders must ensure that no cannabis is sold, delivered, transported or distributed by a producer from or to a location outside of New York.

New York Record-keeping/Reporting

The NYDOH uses the BioTrack THC T&T system used to track commercial cannabis activity. NYCANNA also uses BioTrack THC to push the data to the NYDOH to meet all reporting requirements. Each month, each registered organization is required to file reports with the NYDOH which provides information showing all products dispensed during the month. All other data shall be pulled from the T&T system. The data must include (a) documentation, including lot numbers where applicable, of all materials used in the manufacturing of the approved medical cannabis product to allow tracking of the materials including but not limited to soil, soil amendment, nutrients, hydroponic materials, fertilizers, growth promoters, pesticides, fungicides, and

herbicides, (b) cultivation, manufacturing, packaging and labeling production records, and (c) laboratory testing results. The records are required to be maintained for a period of five years.

New York Inventory/Storage

A record of all approved medical cannabis products that have been dispensed must be filed with the NYDOH electronically through BioTrack THC no later than 24 hours after the cannabis was dispensed to the certified patient or designated caregiver. The information filed must include (a) a serial number for each approved medical cannabis product dispensed to the certified patient or designated caregiver, (b) an identification number for the registered organization’s dispensing facility, (c) the patient’s name, date of birth and gender, (d) the patient’s address, including street, city, state and zip code, and (e) the patient’s registry identification card number.

All cannabis that is not part of a finished product must be stored in a secure area or location within the registered organization accessible only to a minimum number of employees essential for efficient operation and in such a manner as approved by the NYDOH in advance, to prevent diversion, theft or loss and against physical, chemical and microbial contamination and deterioration. Cannabis must be returned to its secure location immediately after completion of manufacture, distribution, transfer or analysis.

New York Security

All facilities operated by a registered organization, including any manufacturing facility and dispensing facility, must have a security system to prevent and detect diversion, theft or loss of cannabis and/or medical cannabis products, utilizing commercial grade equipment which include (a) a perimeter alarm, (b) a duress alarm, (c) a panic alarm, and (d) a holdup alarm.

The manufacturing and dispensing facilities must direct cameras at all approved safes, approved vaults, dispensing areas, cannabis sales areas and any other area where cannabis is manufactured, stored, handled, dispensed or disposed of. The manufacturing and dispensing facilities must angle the cameras to allow for the capture of clear and certain identification of any person entering or exiting the facilities. The surveillance cameras must record 24 hours, seven days a week. Recordings from all video cameras must be readily available for immediate viewing by a state authorized representative upon request and must be retained for at least 90 days. A registered organization must test the security and surveillance equipment no less than semi-annually at each manufacturing and dispensing facility that is operated under the registered organization’s registration. Records of security tests must be maintained for five years.

New York Transportation

Cannabis products, outside of the context of medical marijuana, must be transported in a locked storage compartment that is part of the vehicle transporting the cannabis and in a storage compartment that is not visible from outside the vehicle. An employee of a registered organization, when transporting approved medical cannabis products must (a) travel directly to his or her destination(s) and may not make any unnecessary stops in between, (b) ensure that all approved medical cannabis product delivery times are randomized, (c) appoint each vehicle with a minimum of two employees where at least one transport team member remains with the vehicle at all times, (d) possess a copy of the shipping manifest at all times when transporting or delivering approved medical cannabis products, and (e) keep the manifest in a safe compartment for a minimum of five years.

New York Inspections

~~Medical marijuana facilities in New York must make its books,~~All licensed or permitted premises and all records ~~and manufacturing and dispensing facilities available~~are subject to inspection by the ~~department or its~~OCM, by the duly authorized representatives ~~for monitoring, on-site inspection, and audit purposes, including but not limited~~of the CCB, by any peace officer acting pursuant to ~~periodic inspections and/~~his or ~~evaluations of facilities, methods, procedures, materials, staff and equipment to assess~~her special duties, or by a police officer. The subject may include

ensuring compliance with ~~requirements of New York law.~~applicable licenses, permits, regulations, and other applicable state and local building codes, fire, health, and safety regulations.

U.S. Attorney Statements in New York

Ohio

Ohio Legislative History

Effective September 8, 2016, House Bill 523 legalized the use of medical cannabis for 21 debilitating conditions as prescribed by a licensed physician. On implementation, the Ohio Medical Marijuana Control Program (“~~OMMCP~~”OMMCP”) will allow people with certain medical conditions including Alzheimer’s disease, HIV/AIDS, ALS, cancer, and traumatic brain injury to legally purchase medical cannabis. On July 8, 2020 Ohio Medical Board added Cachexia to the list of qualifying conditions. Though Ohio was required to implement a fully operational OMMCP by September 8, 2018 with a controlled system for cultivation, laboratory-testing, physician/patient registration and dispensing, the timeline was delayed until November 2018. Regulatory oversight is shared between three offices; (a) the Ohio Department of Commerce with respect to overseeing cultivators, processors and testing laboratories; (b) the Ohio Board of Pharmacy with respect to overseeing retail dispensaries and the registration of patients and caregivers, and (c) the State Medical Board of Ohio with respect to certifying physicians to recommend medical cannabis. The OMMCP will permit limited product types including oils, tinctures, plant materials and edibles. Adult-use and the smoking of cannabis flower are prohibited. ~~As of December 31, 2020, there were approximately 160,000 registered patients allowed to purchase cannabis products from a dispensary.~~

Ohio Licenses

Prior to September 8, 2018, the Ohio Board of Pharmacy was permitted to issue up to 60 dispensary provisional licenses. After September 8, 2018, additional provisional licenses are permitted to be issued if the population, the number of patients seeking to use medical cannabis products and the availability of all forms of cannabis products support additional licenses. To be considered for approval of a provisional dispensary or a processing license, the applicant must complete all mandated requirements. To obtain a certificate of operation for a medical cannabis dispensary or processing facility, the prospective licensee must be capable of operating in accordance with Chapter 3796 of the Revised Code, the Medical Marijuana Control Program. Dispensary Certificates of operation carry two-year terms, while certificates of operation for cultivators and processors must be renewed annually.

A certificate of operation will expire on the date identified on the certificate. A licensee will receive written or electronic notice 90 days before the expiration of its certificate of operation. The licensee must submit the renewal information at least 45 days prior to the date the existing certificate expires. The information required for the license renewal includes, but is not limited to, the following: (a) a roster that includes the dispensary’s employees’ names, (b) the history of compliance with regulations, and (c) the number and severity of any violations. If a licensee’s renewal application is not filed prior to the expiration date of the certificate of operation, the certificate of operation will be suspended for a maximum of 30 days. After 30 days, if the dispensary has not successfully renewed the certificate of operation, including the payment of all applicable fees, the certificate of operations will be deemed expired. The original implementation deadline of September 8, 2018 was missed by Ohio, as noted above. Starting in January 2019, Ohio patients were able to purchase medical cannabis.

Greenleaf Apothecaries, LLC (“~~GLA~~”GLA”) has been issued five dispensary licenses and Greenleaf Therapeutics, LLC (“~~GLT~~”GLT”) has been issued one provisional processing license. Greenleaf Gardens, LLC (“~~GLG~~”GLG”) has been issued one provisional grow license. The ~~Company has entered into a master service agreement with GLA, GLT and GLG. The~~ table below lists the locations of the licenses.

The table below lists the licenses issued to GLA, GLT and GLG:

~~MSA Party~~Subsidiary

License Number

City

Expiration Date

Description

GLA

~~MMD.0700044~~MMD.0700080

Akron

7/~~31/2021~~1/2023

Dispensary Facility

GLA

MMD.0700042

Cleveland

7/~~31/2021~~1/2023

Dispensary Facility

GLA

MMD.0700004

Canton

7/~~31/2021~~1/2023

Dispensary Facility

GLA

~~MMD.0700005~~MMD.0700083

Wickliffe

7/~~31/2021~~1/2023

Dispensary Facility

GLA

MMD.0700043

Columbus

7/~~31/2021~~1/2023

Dispensary Facility

GLT

MMCPP00064

Middlefield

~~7/31/2021~~3/8/2024

Processing

GLG

MMCPC00143

Middlefield

~~11/~~12/~~2021~~3/2024

Cultivation

GLA currently has five operational dispensaries, one in each of the cities set out in the table above. In October 2019, GLA entered into a settlement agreement with the Ohio Board of Pharmacy that provides, among other provisions, that the process of closing the acquisition of GLA will be completed 18 months following the date the final dispensary became operational, which occurred on November 8, 2019.~~GLT and GLG also became operational in 2020.~~

~~The Company is currently in discussions for finalizing the purchases of GLA, GLT and GLG.~~

Ohio Record-keeping/Reporting

A holder of a processing license must maintain the following records: (a) samples sent for testing, (b) disposal of products, (c) tracking of inventory, (d) form and types of medical cannabis maintained at the processing facility on a daily basis, (e) production records, including extraction, refining, manufacturing, packaging and labeling, (f) financial records, and (g) purchase invoices, bills of lading, manifests, sales records, copies of bills of sale, and any supporting documents, including the items and/or services purchased, from whom the items were purchased, and the date of purchase.

A holder of a dispensary license must maintain the following records: (a) confidential storage and retrieval of patient information or other medical cannabis records, (b) records of all medical cannabis received, dispensed, sold, destroyed, or used, (c) dispensary operating procedures, (d) a third-party vendor list, (e) monetary transactions, and (f) journals and ledgers. All records relating to the purchase or return, dispensing, distribution, destruction, and sale of medical cannabis must be maintained under appropriate supervision and control to restrict unauthorized access on the licensed premises for a five-year period.

Ohio Inventory/Storage

Ohio has selected METRC as the T&T system. Individual licensees, whether directly or through third-party APIs, are required to push data to the state to meet all reporting requirements. A holder of a processing license must track and submit through the inventory tracking system any information the Ohio Department of Commerce determines necessary for maintaining and tracking medical cannabis extracts and products.

A holder of a processing or cultivation license must conduct weekly inventory of medical cannabis which includes (a) the date of the inventory, (b) net weight of plant material and the net weight and volume of medical cannabis extract, (c) net weight and unit count of medical cannabis products prepared or packaged for sale to a dispensary, and (d) a summary of the inventory findings. On an annual basis and as a condition for renewal of a processing license, a holder of a processing license shall conduct a physical, manual inventory of plant material, medical cannabis extract, and medical cannabis products on hand at the processor and compare the findings to an annual inventory report generated using the inventory tracking system. A holder of a processing license must store plant material, medical cannabis extract, and medical cannabis product inventory on the premises in a designated, enclosed, locked area and accessible only by authorized individuals.

A holder of a dispensary license must use the METRC T&T system to push data to the Ohio Board of Pharmacy on a real-time basis. The following data must be transmitted: (a) each transaction and each day’s beginning inventory, acquisitions, sales, disposal and ending inventory, (b) acquisitions of medical cannabis from a licensed processor or cultivator holding a plant-only processor designation, (c) name and license number of the licensed dispensary employee receiving the medical cannabis and, (d) other information deemed appropriate by the Ohio State Board of Pharmacy. A dispensary’s designated representative shall conduct the inventory at least once a week. Records of each day’s beginning inventory, acquisitions, sales, disposal and ending inventory shall be kept for a period of three years.

The dispensary licensee must restrict access areas and keep stock of medical cannabis in secured area enclosed by a physical barrier with suitable locks and an alarm system capable of detecting entry at a time when licensed dispensary employees are not present. Medical cannabis must be stored at appropriate temperatures and under appropriate conditions to help ensure that its identity, strength, quality and purity are not adversely affected.

Ohio Security

All licensees must have a security system that remains operational at all times and that uses commercial grade equipment to prevent and detect diversion, theft or loss of medical cannabis, including (a) a perimeter alarm, (b) motion detectors, and (c) duress and panic alarms. A dispensary must also employ a holdup alarm, which means a silent alarm signal generated by the manual activation of a device intended to signal a robbery in progress.

Video cameras at a dispensary must be positioned at each point of egress and each point of sale. The cameras must capture the sale, the individuals and the computer monitors used for the sale. Video surveillance recording must operate 24 hours a day, seven days a week. Recording from all video cameras during hours of operation must be made available for immediate viewing by the Ohio State Board of Pharmacy upon request and must be retained for at least six months.

Video cameras at a processing or cultivation facility must be directed at all approved safes, approved vaults, cannabis sales areas, and any other area where plant material, medical cannabis extract, or medical cannabis products are being processed, stored or handled. Video surveillance must take place 24 hours a day, seven days a week. Recordings from all video cameras during hours of operation must be readily available for immediate viewing by the Ohio regulatory bodies upon request and must be retained for at least six months.

Ohio Transportation

Medical marijuana entities must maintain a transportation log containing the names and addresses of the medical marijuana entities sending and receiving the shipment, names and registration numbers of the registered employees transporting the medical marijuana or the products containing medical marijuana, the license plate number and vehicle type that will transport the shipment, the time of departure and estimated time of arrival, the specific delivery route, which includes street names and distances; and the total weight of the shipment and a description of each individual package that is part of the shipment, and the total number of individual packages. Copies of the log described above must be transmitted to the recipient and to the Ohio Department of Commerce before the close of business the day prior to the trip.

Vehicles transporting medical marijuana or marijuana products must be insured as required by law, store the products in locked compartments, ensure that the products are not visible from outside the vehicle, be staffed with two employees registered with the department (with one remaining with the vehicle at all times) and have access to the 911 emergency system. Vehicles must not be marked with any marks or logos.

Trips must be direct, other than to refuel the vehicle. Drivers must have their employee identification cards at all times and must ensure that delivery times and routes are randomized. A copy of the transportation log must be carried during the trip.

Ohio Inspections

The submission of an application that results in the issuance of a provisional license or certificate of operation for a cultivator or processor irrevocably gives the Ohio Department of Commerce consent to conduct all inspections necessary to ensure compliance with the cultivator's application, state and local law and regulators. An inspector conducting an inspection pursuant to this rule shall be accompanied by a “type 1” key employee during the inspection. The inspector may review and make copies of records, enter any area of a facility, inspect vehicles, equipment, premises, and question employees, among other actions.

Dispensaries in Ohio are subject to random and unannounced dispensary inspections and medical marijuana testing by the Ohio Board of Pharmacy. The Ohio Board of Pharmacy and its representatives may enter facilities and vehicles where medical marijuana is held and conduct inspections in a reasonable manner each place and all pertinent equipment, containers and materials and data. The Ohio Board of Pharmacy may also obtain any medical marijuana or related products from such facility.

U.S. Attorney Statements in Ohio

~~Oregon~~

~~Oregon Legislative History~~

Oregon has both a medical and adult-use cannabis program. The Oregon Medical Marijuana Act (“OMM”) was established by Oregon Ballot Measure 67 in 1998 to allow for the cultivation, possession and use of cannabis by patients upon doctor recommendation. The OMM removed criminal penalties for medical cannabis for patients with debilitating medical conditions whose doctor verified the condition and determined medical cannabis may alleviate the condition. Qualifying conditions include cancer, chronic pain, glaucoma and HIV/AIDS. The Oregon Medical Marijuana Program (“OMMP”) administers the program within the Oregon Department of Human Services. Patients obtain permits through the Oregon Department of Human Services.

In 2014, Measure 91 was approved which legalized non-medical cultivation and uses of cannabis effective July 1, 2015. Oregon Governor Kate Brown signed an emergency bill declaring cannabis sales legal to adult-use users from commercial dispensaries effective October 1, 2015. Effective January 1, 2017, cannabis was permitted to be sold for adult-use only by businesses that obtained a recreational retailer license from the Oregon Liquor Control Commission (“OLCC”). Medical cannabis dispensaries

5140

that did not obtain a retailer license were no longer permitted to sell cannabis for adult-use after 2016. Holders of retailer licenses are permitted to sell cannabis for medical use to an OMMP patient 18 years of age or older whereas the minimum age to purchase cannabis for adult-use is 21.

~~Oregon Licenses~~

Oregon does not limit the number of retailer, grower or processing licenses The OLCC regulates all retailer, producer, processor and lab license holders who have been approved to hold adult-use licenses and all producers and retailers if they sell both medical and adult-use cannabis. The Oregon Health Administration regulates all growers and dispensaries who hold only medical licenses. To operate legally under state law, cannabis operators must obtain a state license and local approval. Applicants for each license class are subject to the respective requirements and criteria of the OLCC which include but are not limited to criminal background checks, zoning requirements, readiness inspection, and state registration.

~~The table below lists the licenses issued to Acreage’s indirect subsidiaries operating in Oregon:~~

~~Subsidiary~~

~~License Number~~

~~City~~

~~Expiration Date~~

~~Description~~

~~East 11th Incorporated~~

~~1004151A29E~~

~~Eugene~~

~~See below~~

~~Dispensary Facility~~

~~22nd and Burn Inc.~~

~~100400192AC~~

~~Portland~~

~~See below~~

~~Dispensary Facility~~

~~The Firestation 23 Inc.~~

~~1003660E75D~~

~~Portland~~

~~See below~~

~~Dispensary Facility~~

~~HSCP Oregon, LLC~~

~~1004152E8C9~~

~~Springfield~~

~~See below~~

~~Dispensary Facility~~

~~HSCP Oregon, LLC~~

~~020-1003642197C~~

~~Medford~~

~~See below~~

~~Producer License~~

~~HSCP Oregon, LLC~~

~~10026747951~~

~~Portland~~

~~See below~~

~~Dispensary Facility~~

~~Gesundheit Foods LLC~~

~~1013975ABC8~~

~~Milwaukie~~

~~7/18/2021~~

~~Processor~~

~~Gesundheit Foods LLC~~

~~1013984A526~~

~~Milwaukie~~

~~7/18/2021~~

~~Wholesaler~~

~~On January 14, 2020, each of East 11th Incorporated, 22nd and Burn Inc., The Firestation 23 Inc. and~~HSCP Oregon, LLC Dispensary in Springfield received a letter from the OLCC permitting these entities to continue to operate while the OLCC reviews their renewal applications. On July 28, 2020 HSCP Oregon, LLC received a letter from the OLLC permitting the producer to continue to operate while the OLCC reviews their renewal applications. On March 10, 2020, HSCP Oregon, LLC received a letter from the OLLC permitting the dispensary in Portland to continue to operate while the OLCC reviews their renewal applications.

The retailer, producer and processer licenses are valid for one year and the licensees are required to submit a renewal application at least 20 days before the date of expiration. The license holders must ensure that no cannabis is sold, delivered, transported or distributed by a producer from or to a location outside of Oregon. On June 3, 2020, Gesundheit Foods LLC requested to temporarily close its wholesaler and processor operations under regulation 845-025-1160 (c). On July 14, 2020 HSCP Oregon, LLC requested to temporarily close its Medford location producer operations under regulation 845-025-1160 (c).

~~Oregon Record-keeping/Reporting~~

Oregon uses the METRC T&T system and allows other third-party system integration via an API to track cannabis. The subsidiaries in Oregon use a third-party T&T system to push the data to the state through an API to meet all reporting requirements. All cannabis products dispensed are documented at point of sale via the T&T system. License holders must maintain the documentation from the T&T system in a secure locked location at each dispensing or growing location for three years as required by the OLCC.

The OLCC requires all cannabis licensees to have and maintain records that clearly reflect all financial transactions and the financial condition of the business. The following records may be kept in either paper or electronic form and must be maintained for a three year period and be made available for inspection if requested by the OLCC: (a) purchase invoices and supporting documents for items and services purchased for use in the production, processing, research, testing and sale of cannabis items that include from whom the items were purchased and the date of purchase, (b) bank statements for any accounts, (c) accounting and tax records, (d) documentation of all financial transactions, including contracts and agreements for services performed or received, and (e) all employee records, including training.

~~Oregon Inventory/Storage~~

OLCC licensees must report the following to Oregon’s Cannabis Tracking System (“CTS”) (a) a reconciliation of all on-premise and in-transit cannabis item inventories each day, (b) all information for seeds, usable cannabis, CBD concentrates and extracts by weight, (c) the wet weight of all harvested cannabis plants immediately after harvest, (d) all required information for CBD products by unit count, and (e) for retailer license holders, the price before tax and amount of each item sold to consumers and the date of each transaction. The data must be transmitted for each individual transaction before the retailer opens the next business day.

All cannabis items on a licensed retailer’s premises must be held in a safe or vault. All usable cannabis, cut and drying mature cannabis plants, CBD concentrates, extracts or products on the licensed premises of a licensee other than a retailer are to be kept in a locked, enclosed area within the licensed premises that is secured with at a minimum, a steel door with a steel frame or equivalent, and a commercial grade, non-residential door lock.

All licensees must keep all video recordings and archived required records not stored electronically in a locked storage area. Current records may be kept in a locked cupboard or desk outside the locked storage area during hours when the licensed business is open.

~~Oregon Security~~

A licensed premise must have a fully operational security alarm system, activated at all times when the licensed premises is closed for business. Among other features the security alarm system for the licensed premises must (a) be able to detect unauthorized entry onto the licensed premises and unauthorized activity within any limited access area where mature cannabis plants, usable cannabis, CBD concentrates, extracts or products are present, (b) be programmed to notify the licensee, a licensee representative or other authorized personnel in the event of an unauthorized entry, and (c) either have at least two operational “panic buttons” located inside the licensed premises that are linked with the alarm system that immediately notifies a security company or law enforcement, or have operational panic buttons physically carried by all employees present on the licensed premises that are linked with the alarm system that immediately notifies a security company or law enforcement.

A licensed premise must have a fully operational video surveillance recording system. Among other requirements, a licensed premise must have cameras that continuously record, 24 hours a day, seven days a week: (a) in all areas where mature cannabis plants, usable cannabis, CBD concentrates, extracts or products may be present on the licensed premises; and (b) all points of ingress and egress to and from areas where mature cannabis plants, usable cannabis, CBD concentrates, extracts or products are present. A licensee must keep all surveillance recordings for a minimum of 90 calendar days and have the surveillance room or surveillance area with limited access.

~~Oregon Transportation~~

Licensed producers which transport cannabis to licensed retailers must comply with the following: (a) a licensee must keep cannabis items in transit shielded from public view, (b) the cannabis items must be of secured (locked-up) during transport, (c) the transport must be equipped with an alarm system, (d) the transport must be temperature controlled if perishable cannabis items are being transported, (e) the transport must provide arrival date and estimated time of arrival information, (f) all cannabis items must be packaged in shipping containers and labeled with a unique identifier, and (g) the transport must provide a copy of the printed manifest and any printed receipts for cannabis items delivered to law enforcement officers or other representatives of a government agency if requested to do so while in transit.

~~Oregon Inspections~~

All marijuana licensees may be subject to safety inspections of licensed premises by state or local government officials to determine compliance with state or local health and safety laws. The OLCC also may conduct an inspection at any time to ensure that a registrant, licensee or permittee is in compliance with Oregon state laws. A licensee, licensee representative, or permittee must cooperate with the OLCC during an inspection. If licensee, licensee representative or permittee fails to permit the OLCC to conduct an inspection the OLCC may seek an investigative subpoena to inspect the premises and gather books, payrolls, accounts, papers, documents or records.

~~U.S. Attorney Statements in Oregon~~

Pennsylvania

Pennsylvania Legislative History

The Pennsylvania Medical Marijuana Program (the “PA Program”) was established by the Pennsylvania Medical Marijuana Act (the “PA Act”) on April 17, 2016. The PA Program provides access to medical cannabis for qualified state residents who suffer from 23 specific medical conditions including epilepsy, chronic pain, HIV, AIDS, cancer, and post-traumatic stress disorder. To qualify under the PA Program, medical cannabis patients must both register with the Pennsylvania Department of Health (the “~~PADOH~~”“PADOH”) and obtain either an identification card or authorization letter from the PADOH. As of November 11, 2020, more than 425,000 patients in Pennsylvania have registered to participate in the medical marijuana program, and more than 280,000 have active identification cards and are able to purchase medical marijuana at a dispensary. On February 15, 2018, dispensaries licensed under the PA Program began selling medical cannabis to qualified patients. Pennsylvania currently allows sale of medical cannabis to qualified patients in the following forms: pill, oil, topical forms including gels, creams, or ointments, tincture, and liquids. On August 1, 2018, the Pennsylvania Health Secretary approved the sale of dry leaf cannabis.

Pennsylvania Permits

The PA Act allows the PADOH to issue up to 25 grower/processor permits and 50 dispensary permits (each dispensary permit allows the holder to open up to three separate dispensary sites). On June 29, 2017, the PADOH issued 12 cultivation/processing permits and 27 dispensary permits. Permits are granted to applicants who demonstrate, among other things: (a) the ability to implement and maintain effective security measures and controls to prevent diversion, (b) a clear criminal background free of illegal conduct, (c) compliance with municipality zoning requirements, (d) well-defined standard operating procedures, and (e) a verified diversity plan. Prior to awarding permits, the PA Program requires the PADOH to verify all applicant information including through interviews of principals, operators, financial backers, and employees engaged and to be engaged in the permit applicant’s cannabis operations.

~~On July 31, 2018, the PADOH announced it issued an additional 13 grower/processor permits and 23 dispensary permits.~~

The table below lists the permit issued to Prime Wellness of Pennsylvania LLC (“PWPA”), an indirect Subsidiary of the Company.

Subsidiary

Permit

City

Expiration Date

Description

Prime Wellness of Pennsylvania LLC

GP- 1005-17

Sinking Spring

6/20/~~2021~~2023

Grow/Processing Facility

Dispensary, grower, and processing permits are valid for one year from the date of issuance and permit holders are required to submit renewal applications in accordance with the PA Act. The PADOH must renew a permit unless it determines the applicant is unlikely to maintain effective control against diversion of medical cannabis and the applicant is unlikely to comply with all laws as prescribed under the PA Act. Additionally, permit holders must ensure that no cannabis is sold, delivered, transported, or distributed outside of Pennsylvania.

Pennsylvania Record keeping/Reporting

The PA Act requires each licensed medical cannabis grower/processor or dispensary to report information to the PADOH every three months including, but not limited to, (a) the amount of medical cannabis sold by the grower/processor, (b) the total value and amounts of medical cannabis sold by the grower/processor, (c) the amount of medical cannabis purchased by each dispensary, (d) the cost and amounts of medical cannabis sold to each dispensary, and (e) the total amount and dollar value of medical cannabis sold by each dispensary.

To monitor reporting requirements under the PA Act, the PADOH selected MJ Freeway as the T&T system to implement a seed-to-sale electronic tracking. PWPA also uses MJ Freeway to push data and ensure compliance with all reporting requirements.

Pennsylvania Inventory/Storage

The PA Act requires each medical cannabis grower/processor maintains inventory and storage data in an electronic format through MJ Freeway. The following information is tracked to ensure a compliant cannabis business operation: (a) the number, weight, and type of seeds used, (b) the number of immature medical cannabis plants, (c) the number of mature medical cannabis

plants, (d) the number of medical cannabis products ready for sale, and (d) the number of damaged, defective, expired, or contaminated seeds, immature medical cannabis plants, medical cannabis plants and medical cannabis products awaiting disposal.

Robust physical inventory controls and procedures are required of each medical cannabis grower/processor under the PA Act. The following procedures are mandated to ensure physical inventory counts match electronic records: (a) monthly inventory counts of both medical cannabis plants in the process of growing and medical cannabis products that are stored for future sale,

(b) comprehensive inventory counts of seeds, immature medical cannabis plants and medical cannabis plants, and (c) written or electronic records created and maintained for each inventory count conducted.

Additionally, each medical cannabis grower/processor must separately store in locked, limited access areas all seeds, immature medical cannabis plants, medical cannabis plants and medical cannabis that is expired, damaged, deteriorated, mislabeled or contaminated.

Pennsylvania Security

The PA Act mandates each medical cannabis grower/processor must use security and surveillance systems including stringent video backup requirements to safeguard their medical cannabis and related products. Security requirements include: (a) alarm systems that cover all facility entrances, exits, areas that contain medical cannabis, safes, and the perimeter of the facility, and (b) professionally-monitored security and surveillance systems that operate 24 hours a day, 7 days a week and record all activity in images capable of clearly revealing facial detail. All images captured by each surveillance camera must be stored for a minimum of two (2) years in a format that may be easily accessed for investigative purposes. Furthermore, all recordings must be kept in a locked cabinet, closet or other secure place to protect them from tampering or theft.

The PA Act also specifies requirements for the alarm system. The alarm system must include: (a) a silent security alarm signal, (b) an audible security alarm signal generated by the manual activation of a device intended to signal a life-threatening or emergency situation requiring law enforcement response, and (c) an electrical, electronic, mechanical, or other device capable of being programmed to send a pre-recorded voice message requesting dispatch, when activated, over a telephone line, radio, or other communication system to a law enforcement, public safety, or emergency services agency.

Pennsylvania Transportation

A medical cannabis grower/processor must transport and deliver medical cannabis to a medical cannabis organization or an approved laboratory within Pennsylvania in accordance with the following: (a) deliveries must be made between 7:00 a.m. and 9:00 p.m., (b) a global positioning system must be used to ensure safe and efficient delivery, (c) medical cannabis may not be visible from outside of the transport vehicle, (d) vehicles must be equipped with a secure cargo area, (e) each transport vehicle must be staffed with at least two individuals and at least one delivery team member must remain with the medical cannabis at all times, and (f) a printed or electronic transport manifest must accompany every delivery.

Pennsylvania Inspections

The PADOH may conduct announced or unannounced inspections or investigations to determine the medical marijuana organization’s compliance with its license and Pennsylvania laws and regulations. During an inspection or investigation, the PADOH may review the site, facility, vehicles, books, records, papers, documents, data, and other physical or electronic information. The PADOH may also question employees, officers, investors or similar persons and any other person or entity providing services to the medical marijuana organization.

The PADOH may also conduct an inspection of a grower/processor facility’s equipment, instruments, tools and machinery that are used to grow, process and package medical marijuana, including containers and labels. The PADOH and its authorized agents will have free access to review and, if necessary, make copies of books, records, papers, documents, data, or other physical or electronic information that relates to the business of the medical marijuana organization, including financial data, sales data, shipping data, pricing data and employee data.

The PADOH and its authorized agents have the right to access any area within a site or facility and are permitted to collect test samples for testing at an approved laboratory.

Failure of a medical marijuana organization to provide the PADOH and its authorized agents immediate access to any part of a medical marijuana organization’s site or facility, requested material, physical or electronic information, or individual as part of an inspection or investigation may result in the imposition of a civil monetary penalty, suspension or revocation of its permit, or an immediate cessation of operations pursuant to a cease and desist order issued by the PADOH.

U.S. Attorney Statements in Pennsylvania

Item 1A. Risk Factors.

The following discussion of risk factors contains forward-looking statements. These risk factors may be important to understanding other statements in this Form 10-K. The following information should be read in conjunction with Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K.

Below is a summary of the principal factors that make an investment in Acreage speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below, after this summary, and should be carefully considered, together with other information in this Annual Report on Form 10-K and our other filings with the SEC before making an investment decision regarding Acreage.

Such risks and other factors may include, but are not limited to:

•the US Federal Illegality of the Company’s Business Activities;

•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~~Floating Share Arrangement with Canopy Growth;

•the occurrence or waiver of the Triggering Event, 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;

•~~the likelihood of the Triggering Event occurring or being 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 to financing Acreage’s 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 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;

•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;

•the risk that the Floating Share Arrangement may not be completed;

•risks related to the completion of the Floating Share Arrangement, including market overhang risk related to the Canopy Shares, risks related to the Nasdaq listing of the Canopy Shares and shareholder consolidation, risks that Canopy is unable to finance Canopy USA;

•Canopy is subject to certain restrictions of the TSX and the Nasdaq, which may constrain is ability to expand its business in the United States;

•if Canopy USA acquires Wana, Jetty or the Fixed Shares of Acreage without structural amendments to Canopy’s interest in Canopy USA, the listing of the Canopy Shares on the Nasdaq Stock Market may be jeopardized;

•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;

•the dual structure of the Fixed Shares and Floating Shares;

•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 with 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.

Risks Specifically Related to Regulatory Matters

The Company’s Business Activities are Illegal under U.S. Federal Law.

Cannabis (with the exception of hemp containing no more than 0.3% THC by dry weight) is illegal under U.S. federal law. In those states in which the use of cannabis has been legalized, its use remains a violation of federal law pursuant to the Controlled Substances Act of ~~190~~1990 (the “CSA”). The CSA classifies marijuana (cannabis) as a Schedule I controlled substance, and as such, medical and adult-use cannabis consumption is illegal under U.S. federal law. Unless and until Congress amends the CSA with respect to cannabis (and the President approves such amendment), there is a risk that federal authorities may enforce current federal law. If that occurs, the Subsidiaries or other entities in which the Company may have an interest from time to time may be deemed to be producing, cultivating or dispensing cannabis and drug paraphernalia in violation of federal law, or the Company may be deemed to be facilitating the selling or distribution of cannabis and drug paraphernalia in violation of federal law with respect to the Company’s investment in the Subsidiaries. Since federal law criminalizing the use of cannabis preempts state laws that legalize its use, strict enforcement of federal law regarding cannabis is a significant risk which would greatly harm the Company’s business, prospects, results of operation, and financial condition. As all of our operations are cannabis-related and conducted in the United States, our balance sheet and operating statement exposure to U.S. marijuana related activities is 100% in each case.

The activities of the Subsidiaries are, and will continue to be, subject to evolving regulation by governmental authorities. The Subsidiaries are directly or indirectly engaged in the medical and adult-use cannabis industry in the U.S. where such activities are permitted under state law. The legality of the production, cultivation, extraction, distribution, retail sales, transportation and use of cannabis differs between states in the U.S. Due to the current regulatory environment in the U.S., new risks may emerge, and management may not be able to predict all such risks.

There are 36 states in the U.S., in addition to Washington D.C., Puerto Rico, Guam, the Northern Mariana Islands, and the U.S. Virgin Islands, that have laws and/or regulations that recognize, in one form or another, legitimate medical uses for cannabis and consumer use of cannabis in connection with medical treatment. Alaska, Arizona, California, Colorado, Connecticut, Illinois, Maine, Maryland, Massachusetts, Michigan, Missouri, Montana, Nevada, New Jersey, New York, New Mexico, Oregon, ~~South Dakota,~~Rhode Island, Virginia, Vermont, Washington, Washington, D.C., the Northern Mariana Islands, and Guam have legalized cannabis for ~~adult-use.~~adult-use in some form.

The funding by the Company of the activities of the Subsidiaries involved in the medical and adult-use cannabis industry through equity investments, loans or other forms of investment, may be illegal under the applicable federal laws of the U.S. and other applicable laws. There can be no assurances that the federal government of the U.S. or other jurisdictions will not seek to enforce the applicable laws against the Company. The consequences of such enforcement would be materially adverse to the Company and the Company’s business, including its reputation, profitability, the market price of its publicly traded shares, and could result in the forfeiture or seizure of all or substantially all of the Company’s assets.

regulating the sale and use of cannabis will not be repealed or overturned, or that local governmental authorities will not limit

the applicability of state laws within their respective jurisdictions. Unless and until the United States Congress amends the CSA with respect to cannabis (and as to the timing or scope of any such potential amendments there can be no assurance), there is a risk that federal authorities may enforce current U.S. federal law.

The Department of Justice under Mr. Barr did not take a formal position on federal enforcement of laws relating to cannabis. Mr. Barr has stated publicly that his preference would be to have a uniform federal rule against cannabis, but, absent such a uniform rule, his preference would be to permit the existing federal approach of leaving it up to the states to make their own decisions.

~~Furthermore, Acting~~On March 10, 2021, Judge Merrick Garland was confirmed as U.S. Attorney General ~~Monty Wilkinson, who began~~under President Biden. However, in ~~his position on January 20, 2021, has not provided~~response to questions from U.S. Senator Charles Grassley made as a ~~clear policy directive for the United States as it pertains to state-legal cannabis-related activities. President Biden has nominated Merrick Garland to serve as~~nominee, Attorney General Garland stated “I do not think it the best use of the Department’s limited resources to pursue prosecutions of those who are complying with the laws in ~~his administration. It is not yet known whether~~states that have legalized and are effectively regulating marijuana.” In October 2021, in a letter from U.S. Senators Booker and Elizabeth Warren to Attorney General Garland, the Senators advocated the federal decriminalization of cannabis by removing cannabis from the CSA’s list of controlled substances. To date, Attorney General Garland and the Department of Justice ~~under President Biden~~have not publicly responded to the Senators’ letter. Nonetheless, there is no guarantee that state laws legalizing and ~~Attorney General Garland, will re-adopt~~regulating the Cole Memorandum or announce a substantive cannabis enforcement policy. If the Department of Justice policy under Acting Attorney General Wilkinson or Attorney General Garland, were to aggressively pursue financiers or owners of cannabis-related businesses,sale and United States Attorneys followed such Department of Justice policies through pursuing prosecutions, then the Company could face (i) seizure of its cash and other assets used to support or derived from its cannabis operations, (ii) the arrest of its employees, directors, officers, managers and investors, and charges of ancillary criminal violations of the CSA for aiding and abetting and conspiring to violate the CSA by virtue of providing financial support to cannabis companies that service or provide goods to state-licensed or permitted cultivators, processors, distributors, and/or retailersuse of cannabis ~~and/~~will not be repealed or ~~(iii)~~overturned, or that local governmental authorities will not limit the ~~barring~~applicability of ~~its employees, directors, officers, managers~~state laws within their respective jurisdictions. Unless and ~~investors who are not United States citizens from entry into~~until the United States ~~for life.~~Congress amends the CSA with respect to cannabis (and as to the timing or scope of any such potential amendments there can be no assurance), there is a risk that federal authorities may enforce current U.S. federal law.

One legislative safeguard for the medical cannabis industry, appended to federal appropriations legislation, remains in place. Currently referred to as the “Rohrabacher-Blumenauer Amendment”, this so-called “rider” provision has been appended to the Consolidated Appropriations Acts for fiscal years 2015, 2016, 2017, 2018, and 2019. Under the terms of the Rohrabacher-Blumenauer rider, the federal government is prohibited from using congressionally appropriated funds to enforce federal cannabis laws against regulated medical cannabis actors operating in compliance with state and local law. On December 20, 2019, then President Donald Trump signed the Consolidated Appropriations Act, 2020 which included the Rohrabacher-Blumenauer Amendment, which prohibits the funding of federal prosecutions with respect to medical cannabis activities that are legal under state law. On December 27, 2020, the omnibus spending bill passed including the Rohrabacher-Blumenauer Amendment, extending its application until September 30, 2021. There can be no assurances that the Rohrabacher-Blumenauer Amendment will be included in future appropriations bills to prevent the federal government from using congressionally appropriated funds to enforce federal cannabis laws against regulated medical cannabis actors operating in compliance with state and local law.

There is no guarantee that state laws legalizing and regulating the sale and use of cannabis will not be repealed, amended or overturned, or that local governmental authorities will not limit the applicability of state laws within their respective jurisdictions. Unless and until the United States Congress amends or repeals the CSA with respect to medical and/or adult-use cannabis (and as to the timing or scope of any such potential amendment or repeal there can be no assurance), there is a significant risk that federal authorities may enforce current federal law. If the federal government begins to enforce federal laws relating to cannabis in states where the sale and use of cannabis is currently legal, or if existing applicable state laws are repealed or curtailed, the Company’s business, results of operations, financial condition and prospects would be materially adversely affected.

Marijuana (cannabis) remains a Schedule I controlled substance under the CSA, and neither the Cole Memorandum nor its rescission nor the continued passage of the Rohrabacher/Blumenauer Amendment has altered that fact. The federal government of the United States has always reserved the right to enforce federal law in regard to the sale and disbursement of medical or adult-use marijuana, even if state law sanctions such sale and disbursement. If the United States federal government begins to enforce United States federal laws relating to cannabis in states where the sale and use of cannabis is currently legal, or if existing applicable state laws are repealed or curtailed, the Company’s business, results of operations, financial condition and prospects would be materially adversely affected.

The uncertainty of U.S. federal enforcement practices going forward and the inconsistency between U.S. federal and state laws and regulations presents major risks for the business and operations of the Company, High Street and the Subsidiaries.

5845

Nature of the Business Model

Since the cultivation, processing, production, distribution, and sale of cannabis for any purpose, medical, adult-use or otherwise, remain illegal under U.S. federal law, it is possible that any of the Company, High Street or the Subsidiaries may be forced to cease activities. The United States federal government, through, among others, the DOJ, its sub agency the Drug Enforcement Administration (“~~DEA~~”DEA”), and the U.S. Internal Revenue Service (the “~~IRS~~”“IRS”), has the right to actively investigate, audit and shut down cannabis growing facilities, processors and retailers. The U.S. federal government may also attempt to seize the property of the Company, High Street or any Subsidiary. Any action taken by the DOJ, the DEA and/or the IRS to interfere with, seize, or shut down the operations of the Company, High Street or any Subsidiary will have an adverse effect on their businesses, operating results and financial condition.

U.S. State Regulatory Uncertainty

There is no assurance that state laws legalizing and regulating the sale and use of cannabis will not be repealed, amended or overturned, or that local governmental authorities will not limit the applicability of state laws within their respective jurisdictions. If the U.S. federal government begins to enforce U.S. federal laws relating to cannabis in states where the sale and use of cannabis is currently legal, or if existing state laws are repealed or curtailed, the Company’s business or operations in those states or under those laws would be materially and adversely affected. Federal actions against any individual or entity engaged in the cannabis industry or a substantial repeal of cannabis related legislation could adversely affect the Company, its business and its assets or investments.

Certain U.S. states where medical and/or adult-use cannabis is legal have or are considering special taxes or fees on the cannabis industry. It is uncertain at this time whether other states are in the process of reviewing such additional taxes and fees. The implementation of special taxes or fees could have a material adverse effect upon the businesses, results of operations and financial condition of the Company, High Street and the Subsidiaries.

The Company, High Street and the Subsidiaries are Subject to Applicable Anti-Money Laundering Laws and Regulations

The Company, High Street and the Subsidiaries are subject to a variety of laws and regulations domestically in the U.S. that involve money laundering, financial record-keeping and proceeds of crime, including the U.S. Currency and Foreign Transactions Reporting Act of 1970 (commonly known as the “~~Bank~~“Bank Secrecy Act”Act”), as amended by Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “~~USA~~“USA Patriot ~~Act~~”Act”), and the rules and regulations thereunder, and any related or similar rules, regulations or guidelines, issued, administered or enforced by governmental authorities in the ~~U.S..~~U.S. The Company, High Street and the Subsidiaries are also subject to similar laws and regulations in Canada, including the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada), as amended. Further, under U.S. federal law, banks or other financial institutions that provide a cannabis business with a checking account, debit or credit card, small business loan, or any other service could be found guilty of money laundering, aiding and abetting, or conspiracy.

Despite these laws, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“~~FinCEN~~”FinCEN”) issued a memorandum on February 14, 2014 (the “~~FinCEN Memorandum~~”“FinCEN Memorandum”) outlining the pathways for financial institutions to bank state-sanctioned cannabis businesses in compliance with federal enforcement priorities. The FinCEN Memorandum echoed the enforcement priorities of the Cole Memorandum. Under these guidelines, financial institutions must submit a Suspicious Activity Report (“~~SAR~~”SAR”) in connection with all cannabis-related banking activities by any client of such financial institution, in accordance with federal money laundering laws. These cannabis-related SARs are divided into three categories - cannabis limited, cannabis priority, and cannabis terminated - based on the financial institution’s belief that the business in question follows state law, is operating outside of compliance with state law, or where the banking relationship has been terminated, respectively.

The FinCEN Memorandum states that in some circumstances, it is permissible for banks to provide services to cannabis-related businesses without risking prosecution for violation of federal money laundering laws. It refers to supplementary guidance included in the Cole Memorandum.

The rescission of the Cole Memorandum has not yet affected the status of the FinCEN Memorandum, nor has the Department of the Treasury given any indication that it intends to rescind the FinCEN Memorandum itself.

Although the FinCEN Memorandum remains intact, it is unclear whether the current administration will continue to follow the guidelines of the FinCEN Memorandum. The DOJ continues to have the right and power to prosecute crimes committed by banks and financial institutions, such as money laundering and violations of the Bank Secrecy Act, that occur in any state including states that have in some form legalized the sale of cannabis. Further, the conduct of the DOJ’s enforcement priorities

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could change for any number of reasons. A change in the DOJ’s priorities could result in the DOJ’s prosecuting banks and financial institutions for crimes that were not previously prosecuted.

If any of the operations of High Street or any of the Subsidiaries, or any proceeds thereof, any dividend distributions or any profits or revenues derived from these operations were found to be in violation of money laundering legislation or otherwise, such transactions may be viewed as proceeds from a crime under one or more of the statutes noted above. This may restrict the ability of the Company, High Street or any of the Subsidiaries to declare or pay dividends or effect other distributions.

Restricted Access to Banking

In February 2014, FinCEN issued the FinCEN Memorandum (which is not law) which provides guidance with respect to financial institutions providing banking services to cannabis business, including burdensome due diligence expectations and reporting requirements. This guidance does not provide any safe harbors or legal defenses from examination or regulatory or criminal enforcement actions by the DOJ, FinCEN or other federal regulators. Thus, most banks and other financial institutions in the United States do not appear to be comfortable providing banking services to cannabis-related businesses, or relying on this guidance, which can be amended or revoked at any time by the executive branch. In addition to the foregoing, banks may refuse to process debit card payments and credit card companies generally refuse to process credit card payments for cannabis-related businesses. As a result, the Company may have limited or no access to banking or other financial services in the United States. In addition, federal money laundering statutes and Bank Secrecy Act regulations discourage financial institutions from working with any organization that sells a controlled substance, regardless of whether the state it resides in permits cannabis sales. While the United States House of Representatives has passed the SAFE Banking Act, which would permit commercial banks to offer services to cannabis companies that are in compliance with state law, it remains under consideration by the Senate, and if Congress fails to pass the SAFE Banking Act, the Company’s inability, or limitations on the Company’s ability, to open or maintain bank accounts, obtain other banking services and/or accept credit card and debit card payments may make it difficult for the Company to operate and conduct its business as planned or to operate efficiently.

Lack of Access to U.S. Bankruptcy Protections; Other Bankruptcy Risks

Because cannabis remains illegal under U.S. federal law, many courts have denied cannabis businesses bankruptcy protections, thus making it very difficult for lenders to recoup their investments in the cannabis industry in the event of a bankruptcy. If the Company, High Street or any of the Subsidiaries were to experience a bankruptcy, there is no guarantee that U.S. federal bankruptcy protections would be available, which would have a material adverse effect.

Additionally, there is no guarantee that the Company will be able to effectively enforce its interests in High Street and its underlying Subsidiaries. A bankruptcy or other similar event related to an investment of the Company that precludes a party from performing its obligations under an agreement may have a material adverse effect on the Company. In addition, bankruptcy or other similar proceedings are often a complex and lengthy process, the outcome of which may be uncertain and could result in a material adverse effect on the Company.

Heightened Scrutiny by Canadian Authorities

Because cannabis is illegal under U.S. federal law, the business, operations and investments of the Company, High Street and the Subsidiaries in the U.S., and any future businesses, operations and investments, may become the subject of heightened scrutiny by securities regulators, stock exchanges and other authorities in Canada. As a result, the Company may be subject to significant direct and indirect interaction with Canadian public officials. There can be no assurance that this heightened scrutiny will not in turn lead to the imposition of certain restrictions on the Company’s ability to invest or hold interests in other entities in the U.S. or any other jurisdiction, or have consequences for its stock exchange listing or Canadian reporting obligations, in addition to those described herein. See “The Company’s Business Activities are Illegal under U.S. Federal Law”.

On February 8, 2018, the Canadian Securities Administrators published Staff Notice 51-352 - Issuers with U.S. Marijuana-Related Activities (“Staff Notice ~~51-352~~”51-352”) describing the Canadian Securities Administrators’ disclosure expectations for specific risks facing issuers with cannabis-related activities in the U.S. Staff Notice 51-352 confirms that a disclosure-based approach remains appropriate for issuers with U.S. cannabis-related activities. Staff Notice 51-352 includes additional disclosure expectations that apply to all issuers with U.S. cannabis-related activities, including those with direct and indirect involvement in the cultivation and distribution of cannabis, as well as issuers that provide goods and services to third parties involved in the U.S. cannabis industry.

CDS Clearing and Depository Services Inc. (“~~CDS~~”CDS”) is Canada’s central securities depository, clearing and settling trades in the Canadian equity, fixed income and money markets. On February 8, 2018, following discussions with the Canadian Securities Administrators and recognized Canadian securities exchanges, the TMX Group, which is the owner and operator of CDS,

announced the signing of a Memorandum of Understanding (“~~MOU~~”MOU”) with Aequitas NEO Exchange Inc., the CSE and the

Toronto Stock Exchange confirming that it relies on such exchanges to review the conduct of listed issuers. The MOU notes that securities regulation requires that the rules of each of the exchanges must not be contrary to the public interest and that the rules of each of the exchanges have been approved by the securities regulators. Pursuant to the MOU, CDS will not ban accepting deposits of or transactions for clearing and settlement of securities of issuers with cannabis-related activities in the U.S.

Even though the MOU indicated that there are no plans of banning the settlement of securities of issuers with U.S. cannabis related activities through CDS, there can be no guarantee that the settlement of securities will continue in the future. If such a ban were to be implemented, it would have a material adverse effect on the ability of holders of Fixed Shares and Floating Shares to make and settle trades. In particular, the Fixed Shares and Floating Shares would become highly illiquid until an alternative (if available) was implemented, and investors would have no ability to effect a trade of the Fixed Shares and Floating Shares through the facilities of a stock exchange.

Constraints on Marketing Products

The development of the Company’s business and operating results may be hindered by applicable restrictions on sales and marketing activities imposed by government regulatory bodies for products containing cannabis or ingredients derived from cannabis, including but not limited, to the FDA, the United States Department of Agriculture (“USDA”) and state regulatory agencies that may institute new regulatory requirements. The regulatory environment in the United States limits the Company’s ability to compete for market share in a manner similar to other industries. If the Company is unable to effectively market its products and compete for market share, or if the costs of compliance with government legislation and regulation cannot be absorbed through increased selling prices for its products, the Company’s sales and operating results could be adversely affected.

Reliance on Management or Consulting Services Agreements with Subsidiaries and Affiliates

The Company’s Subsidiaries and other affiliates provide assistance and advice regarding the medicinal cannabis business in certain cases through management services agreements entered into with state-licensed entities. Under such agreements, the Subsidiaries and affiliates perform certain management and operational services. In exchange for providing these services, the subsidiaries and affiliates receive management fees which are a key source of revenue for the Company. Payment of such fees is dependent on the continuing validity and enforceability of the relevant management services agreements. If such agreements are found to be invalid or unenforceable by regulators, whether on the basis that they relate to activities that are illegal under U.S. federal law or otherwise, or are terminated by the counter-party, this could have a material adverse effect on the Company’s business, prospects, financial condition, and operating results.

European Anti-Money Laundering Laws and Regulation

European laws, regulations and their enforcement, particularly those pertaining to anti-money laundering, relating to making and/or holding investments in cannabis-related practices or activities are in flux and vary dramatically from jurisdiction to jurisdiction across Europe (including without limitation, the United Kingdom). The enforcement of these laws and regulations and their effect on shareholders are uncertain and involve considerable risk. In the event that any of the Company’s operations, or any proceeds thereof, any dividends or distributions therefrom, or any profits or revenues accruing from such operations are found to be in violation of such laws or regulation, such transactions (including holding of shares in the Company) could expose any shareholder(s) in that jurisdiction to potential prosecution and/or criminal and civil sanction.

Tax Risks Related to Controlled Substances

Limits on U.S. deductibility of certain expenses may have a material adverse effect on our financial condition, results of operations and cash flows. Section 280E (“Section ~~280E~~”280E”) of the Internal Revenue Code (the “~~Code~~”“Code”) prohibits businesses from deducting certain expenses associated with the trafficking of controlled substances (within the meaning of Schedule I and II of the CSA). IRS has applied Section 280E in tax audits against various cannabis businesses in the U.S. that are permitted under applicable state laws. Although the IRS issued a clarification allowing the deduction of certain expenses, the scope of such items is interpreted very narrowly, and the bulk of operating costs and general administrative costs are not permitted to be deducted. While there are currently several pending cases before various administrative and federal courts challenging these restrictions, there is no guarantee that these courts will issue an interpretation of Section 280E that is favorable to cannabis businesses.

If our tax filing positions were to be challenged by federal, state and local or foreign tax jurisdictions, we may not be wholly successful in defending our tax filing positions. We record reserves for unrecognized tax benefits based on our assessment of the probability of successfully sustaining tax filing positions. Management exercises significant judgment when assessing the

probability of successfully sustaining tax filing positions, and in determining whether a contingent tax liability should be recorded and, if so, estimating the amount. If our tax filing positions are successfully challenged, payments could be required that are in excess of reserved amounts or we may be required to reduce the carrying amount of our net deferred tax asset, either of which result could be significant to our financial condition or results of operations.

Proposed legislation in the U.S. Congress, including changes in U.S. tax law and the recently enacted Inflation Reduction Act of 2022, may adversely impact us and the value of our shares.

Changes to U.S. tax laws (which changes may have retroactive application) could adversely affect us. In recent years, many changes to U.S. federal income tax laws have been proposed and made, and additional changes to U.S. federal income tax laws are likely to continue to occur in the future.

The U.S. Congress is currently considering numerous items of legislation which may be enacted prospectively or with retroactive effect, which legislation could adversely impact our financial performance and the value of our shares. Additionally, states in which we operate or own assets may impose new or increased taxes. If enacted, most of the proposals would be effective for the current or later years. The proposed legislation remains subject to change, and its impact on us or our investors is uncertain.

In addition, the Inflation Reduction Act of 2022 was recently signed into law and includes provisions that will impact the U.S. federal income taxation of corporations. Among other items, this legislation includes provisions that will impose a minimum tax on the book income of certain large corporations and an excise tax on certain corporate stock repurchases that would be imposed on the corporation repurchasing such stock. It is unclear how this legislation will be implemented by the U.S. Department of Treasury and we cannot predict how this legislation or any future changes in tax laws might affect us or investors in our shares.

Due to the high degree of uncertainty regarding the implementation and impact of the CARES Act and other legislation related to COVID-19, and their application to businesses substantially similar to ours, there can be no assurance that we will be able to comply with the applicable terms and conditions of the CARES Act and retain such assistance.

On March 27, 2020, the CARES Act was signed into law, aimed at providing emergency assistance and health care for individuals, families, and businesses affected by the COVID-19 pandemic and generally supporting the U.S. economy. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, and modifications to the net interest deduction limitations. In February 2023, we filed for an Employee Retention Tax Credit (“ERTC”) distribution in the amount of approximately $14.8 million. ERTC distributions are refundable tax credits for 50% of qualified wages paid to employees during the pandemic. A company is eligible for the ERTC if it has not received a Paycheck Protection Program loan under the Cares Act and (1) its operations have been fully or partially suspended because of COVID-19 or (2) its gross receipts in a calendar quarter in 2020 declined by more than 50% from the same period in 2019. No formal determination regarding our claim for the ERTC has been received. Due to the high degree of uncertainty regarding the implementation of the CARES Act and other stimulus legislation, and due to the nature of our business, there can be no assurance that we will receive any ERTC distributions or that we will be permitted to retain any ERTC distributions we ultimately receive which could have an impact on us and our financial operations.

Emerging Growth Company Status

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to use this exemption from new or revised accounting standards and, therefore, we will not be subject to the same new or revised accounting standards as other public companies.

For as long as we continue to be an emerging growth company, we intend to take advantage of certain other exemptions from various reporting requirements that are applicable to other public companies including, but not limited to, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our Fixed Shares and Floating Shares less attractive because we will rely on these exemptions. If some investors find our Fixed Shares and Floating Shares less attractive as a result, then there may be a less active trading market for our Fixed Shares and Floating Shares and our stock price may be more volatile.

We will remain an emerging growth company until the earliest of (i) the last day of the year in which we have total annual gross revenue of $1.07 billion or more; (ii) the last day of the year following the fifth anniversary of the first sale of the common equity securities pursuant to an effective registration under the Securities Act of 1933, as amended (the “Securities Act”),

expected to be December 31, 2024; (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.

Limited Trademark Protection

The Subsidiaries will not be able to register any U.S. federal trademarks in classes covering their cannabis-related products or services under the current state of federal law. Because producing, manufacturing, processing, possessing, distributing, and selling cannabis is illegal under the CSA, the United States Patent and Trademark Office (USPTO) will not permit the registration of any trademark that does not comply with the CSA. As a result, the Subsidiaries will unlikely be able to protect their cannabis product trademarks beyond the geographic areas in which they conduct business pursuant to the relevant state’s law. The use of such trademarks outside the states in which the Subsidiaries operate by one or more other persons could have a material adverse effect on the value of such trademarks.

Civil Asset Forfeiture

Because the cannabis industry remains illegal under U.S. federal law, any real or personal property owned by participants in the cannabis industry, such as the Company, High Street and the Subsidiaries, which is used in the course of conducting such business, or any property or monies deemed to be proceeds of an illegal cannabis business, could be subject to seizure by law enforcement and subsequent civil asset forfeiture, even in the absence of a criminal charge or conviction.

FDA Regulation

Cannabis containing more than 0.3% THC (tetrahydrocannabinol) remains a Schedule I controlled substance under U.S. federal law. If the federal government reclassifies cannabis to a Schedule II controlled substance, it is possible that the FDA would regulate it under the Federal Food, Drug, and Cosmetic Act of 1938 or under the Public Health Service ~~Act~~.Act. Additionally, the FDA may issue rules, regulations or guidance including good manufacturing practices, related to the growth, cultivation, harvesting and processing of medical cannabis, as well as any medical claims made with respect to cannabis. If regulated by the FDA as a drug, clinical trials would be needed to demonstrate efficacy and safety. It is also possible that the FDA would require that facilities where medical-use cannabis is grown register with the FDA and comply with certain federally prescribed regulations.

In addition, while the FDA has not yet pursued enforcement actions against the cannabis industry, it has sent numerous warning letters to sellers of CBD products concerning its use in food and beverages as well as the making of health claims. The FDA could turn its attention to the cannabis industry especially relating to claims of concern. In the event that some or all of these regulations or enforcement actions are imposed, what the

impact this would have on the cannabis industry is unknown, including what costs, requirements and possible prohibitions may be enforced. If the Subsidiaries are unable to comply with the regulations or registration as prescribed by the FDA, it may have an adverse effect on the business, operating results and financial condition of the Company and/or High Street.

On January 26, 2023 the FDA announced that it would not be promulgating regulations for the use of CBD in foods, beverages or supplements until a new regulatory framework, implemented in tandem with Congress, is established. In its release FDA noted that based upon available evidence, it is not apparent how CBD products could meet safety standards for dietary supplements or food additives, and that therefore it did not intend to pursue rulemaking allowing the use of CBD in dietary supplements or conventional foods. It also noted that FDA would continue to take action against CBD and other cannabis-derived products to protect the public, in coordination with state regulatory partners, and would remain diligent in monitoring the marketplace, identifying products that pose risks and taking appropriate enforcement actions within its authority.

Laws and Regulations Affecting the Industry in which the Company Operates are Constantly Changing

The constant evolution of laws and regulations affecting the cannabis industry could detrimentally affect the Company. The current and proposed operations of the Subsidiaries are subject to a variety of local, state and federal medical cannabis laws and regulations relating to the manufacture, management, transportation, storage and disposal of cannabis, as well as laws and regulations relating to consumable products health and safety, the conduct of operations and the protection of the environment. These laws and regulations are broad in scope and subject to evolving interpretations, which could require the Company, High Street or the Subsidiaries to incur substantial costs associated with compliance or alter certain aspects of their business plans. In addition, violations of these laws, or allegations of such violations, could disrupt certain aspects of the business plans of the Company, High Street or the Subsidiaries and result in a material adverse effect on certain aspects of their planned operations. These laws and regulations are rapidly evolving and subject to change with minimal notice. Regulatory changes may adversely affect the Company's profitability or cause it to cease operations entirely. The cannabis industry may come under scrutiny or further scrutiny by the FDA, USDA, DEA, IRS, SEC, the DOJ, the Financial Industry Regulatory Advisory or other federal or applicable state or nongovernmental regulatory authorities or self-regulatory organizations that supervise or regulate the production, distribution, sale or use of cannabis for medical or adult-use purposes in the United States. It is impossible to determine the extent of the impact of any new laws, regulations or initiatives that may be proposed, or whether any proposals will become law. The regulatory uncertainty surrounding the industry may adversely affect the business and operations of the Company, including without limitation, the costs to remain compliant with applicable laws and the impairment of its business or the ability to raise additional capital. In addition, the Company will not be able to predict the nature of any future laws, regulations, interpretations or applications, and it is possible that regulations may be enacted in the future that will be directly applicable to its business. For example, see the “Risk Factors - Heightened Scrutiny by Canadian Authorities” related to CDS above.

Limitation on Ownership of Licenses

In certain states, the cannabis laws and regulations limit, not only the number of cannabis licenses issued, but also the number of cannabis licenses that one person may own. For example, in Massachusetts, no person may have an ownership interest, or control over, more than three license holders in any category - cultivation, processing or dispensing. In Maryland, the Department of Health has taken the position that the law prevents having a material ownership interest in more than one license holder in any one of these three categories. In New Jersey, there are restrictions on overlapping ownership of license holders. In Florida, there are also limitations on owning more than one of the vertically-integrated medical cannabis licenses offered in that state. The Company believes that, where such restrictions apply, it may still capture significant share of revenue in the market through wholesale sales, exclusive marketing relations, provision of management or consulting services, franchising and similar arrangement with other operators. Nevertheless, such limitations on the acquisition of ownership of additional licenses within certain states may limit the Company’s ability to grow organically or to increase its market share in such states.

Risks Related to the Company’s Operations

~~Our Results of Operations May Continue to be Negatively Impacted by the COVID-19 Outbreak~~

In December 2019, a novel strain of coronavirus (“COVID-19”) emerged in Wuhan, China. Since then, it has spread to several 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. The continued spread of COVID-19 in the United States, Canada and globally could continue to have an adverse impact on our business, operations and financial results, including through disruptions in our cultivation and processing activities, supply chains and sales channels, as well as a deterioration of general economic conditions including a possible national or global recession. Shelter-in-place orders and social distancing practices designed to limit the spread of COVID-19 may affect our retail business. Due to the speed with which the COVID-19 situation is developing and the uncertainty of its magnitude, outcome and duration, it is not possible to estimate its impact on our business, operations or financial results; however, the impact could be material. We own a

cultivational, processing and wholesale license and lease a property in Medford, Oregon and in part as a response to the COVID-19 pandemic, we temporarily halted cultivation/processing operations in Oregon.

Unfavorable Publicity or Consumer Perception

The legal cannabis industry in the U.S. is at an early stage of its development. Cannabis has been, and is expected to continue to be, a controlled substance for the foreseeable future. Consumer perceptions regarding legality, morality, consumption, safety, efficacy and quality of cannabis are mixed and evolving. Consumer perception can be significantly influenced by scientific research or findings, regulatory investigations, litigation, media attention and other publicity regarding the consumption of cannabis products. There can be no assurance that future scientific research, findings, regulatory proceedings, litigation, media attention or other research findings or publicity will be favorable to the cannabis market or any particular product, or consistent with earlier publicity. Future research reports, findings, regulatory proceedings, litigation, media attention or other publicity that are perceived as less favorable than, or that question, earlier research reports, findings or publicity could have a material adverse effect on the demand for cannabis and on the business, results of operations, financial condition and cash flows of the Subsidiaries and accordingly High Street and the Company. Further, adverse publicity, reports or other media attention regarding cannabis in general, or associating the consumption of cannabis with illness or other negative effects or events, could have such a material adverse effect.

Public opinion and support for medical and adult-use cannabis use has traditionally been inconsistent and varies from jurisdiction to jurisdiction. While public opinion and support appears to be rising for legalizing medical and adult-use cannabis, it remains a controversial issue subject to differing opinions surrounding the level of legalization (for example, medical cannabis as opposed to legalization in general).

The ability to gain and increase market acceptance of the Subsidiaries’ products may require the Company, High Street and/or the Subsidiaries to establish and maintain its brand name and reputation. In order to do so, substantial expenditures on product

development, strategic relationships and marketing initiatives may be required. There can be no assurance that these initiatives will be successful and their failure may have an adverse effect on the Company, High Street and/or the Subsidiaries.

Further, a shift in public opinion may also result in a significant influence over the regulation of the cannabis industry in Canada, the U.S. or elsewhere. A negative shift in the perception of the public with respect to medical cannabis in the U.S. or any other applicable jurisdiction could affect future legislation or regulation. Among other things, such a shift could cause state jurisdictions to abandon initiatives or proposals to legalize medical cannabis, thereby limiting the number of new state jurisdictions into which the Company could expand. Any inability to fully implement the Company’s expansion strategy may have a material adverse effect on its business, financial condition and results of operations.

Limited Operating History

The Company presently generates losses, and will only start generating profits in future periods if at all, and accordingly, the Company is therefore expected to remain subject to many of the risks common to early-stage enterprises for the foreseeable future, including challenges related to laws, regulations, licensing, integrating and retaining qualified employees; making effective use of limited resources; achieving market acceptance of existing and future solutions; competing against companies with greater financial and technical resources; acquiring and retaining customers; and developing new solutions. There can be no assurance that the Subsidiaries will be successful in addressing these risks, and the failure to do so in any one area could have a material adverse effect on the Company’s business, prospects, financial condition and results of operations.

Competition with the Company

There is potential that the Company will face intense competition from other companies, some of which can be expected to have longer operating histories and more financial resources and experience than the Company. Increased competition by larger and better financed competitors could materially and adversely affect the business, financial condition, results of operations or prospects of the Company.

Because of the early stage of the industry in which the Company operates, the Company expects to face additional competition from new entrants. To become and remain competitive, the Company will require research and development, marketing, sales and support. In addition, the Company will have to establish and leverage best practices, standardize operating procedures and generate operational efficiencies through services shared among the Subsidiaries and other organizational methodologies. Pressure from the Company’s competitors may have a material adverse effect on the Company’s business, financial condition, results of operations or prospects.

Competition with the Subsidiaries

There is potential that the Subsidiaries will face intense competition from other companies, some of which can be expected to have longer operating histories and more financial resources and experience than the Subsidiaries. Currently, the cannabis industry is generally comprised of individuals and small to medium-sized entities; however, the risk remains that large conglomerates and companies who also recognize the potential for financial success through investment in this industry could strategically purchase or assume control of larger dispensaries, processing plants and cultivation facilities. In doing so, these larger competitors could establish price setting and cost controls which would effectively “price out” many of the individuals and small to medium-sized entities who currently make up the bulk of the participants in the varied businesses operating within and in support of the medical and adult-use cannabis industry. Competition between companies in the cannabis industry also relies heavily on the ability to attract community support.

Because of the early stage of the industry in which the Subsidiaries operate, the Company expects the Subsidiaries to face additional competition from new entrants. To become and remain competitive, the Subsidiaries will require research and development, marketing, sales and support. The Company may not have sufficient resources to maintain research and development, marketing, sales and support efforts on a competitive basis which could materially and adversely affect the business, financial condition and results of operations of the Subsidiaries and, in turn, the Company.

In addition, medical cannabis products compete against other healthcare drugs and a high volume of cannabis continues to be sold illegally on the illicit market.

Dependence on Performance of Subsidiaries

The Company is dependent on the operations, assets and financial health of the Subsidiaries. Accordingly, if the financial performance of any Subsidiary declines this will adversely affect the Company’s investment in such Subsidiary, the ability to

realize a return on such investment and the financial results of the Company. The Company will conduct due diligence on each new entity prior to making any investment. Nonetheless, there is a risk that there may be some liabilities or other matters that are not identified through the due diligence or ongoing monitoring that may have an adverse effect on the business, and this could have a material adverse impact on the business, financial condition, results of operations or prospects of the Company.

Competition from Synthetic Production and Technological Advances

The pharmaceutical industry may attempt to dominate the cannabis industry, and in particular, legal cannabis, through the development and distribution of synthetic products which emulate the effects and treatment of organic cannabis. If they are successful, the widespread popularity of such synthetic products could change the demand, volume and profitability of the cannabis industry. This could materially adversely affect the ability of the Company to secure long-term profitability and success through the sustainable and profitable operation of its business. There may be unknown additional regulatory fees and taxes that may be assessed in the future.

Ability to Identify Investments

A key element of the Company’s growth strategy will in part involve identifying and making acquisitions of interests in, or the businesses of, entities involved in the legal cannabis industry. The Company’s ability to identify such potential acquisition opportunities and make debt and/or equity investments is not guaranteed. Achieving the benefits of future acquisitions will depend in part on successfully identifying and capturing such opportunities in a timely and efficient manner and in structuring such arrangements to ensure a stable and growing stream of revenues.

Risks Associated with Failure to Manage Growth Effectively

The growth of High Street and the Company has placed and may continue to place significant demands on management and their operational and financial infrastructures. As the operations of the Company, High Street and the Subsidiaries grow in size, scope and complexity and as new opportunities are identified and pursued, the Company and High Street may need to increase in scale its infrastructure (financial, management, informational, personnel and otherwise). In addition, the Company will need to effectively execute on business opportunities and continue to build on and deploy its corporate development and marketing assets as well as access sufficient new capital, as may be required. The ability of the Company and High Street to successfully complete the proposed acquisitions and to capitalize on other growth opportunities may redirect the limited resources of the Company and/or High Street and require expansion of its infrastructure. This will require the commitment of financial, operational and technical resources in advance of an increase in the volume of business, with no assurance that the volume of business will increase.

There can be no assurance that the Company or High Street will be able to respond adequately or quickly enough to the changing demands that its proposed acquisition plans will impose on management, team members and existing infrastructure, and changes to the operating structure of the Company and High Street may result in increased costs or inefficiencies that cannot be anticipated. Changes as the Company and High Street grow may have a negative impact on their operations, and cost increases resulting from the inability to effectively manage its growth could adversely impact its profitability. In addition, continued growth could also strain the ability to maintain reliable service levels for its clients, develop and approve its operational, financial and management controls, enhance its reporting systems and procedures and recruit, train and retain highly-skilled personnel. Failure to effectively manage growth could result in difficulty or delays in servicing clients, declines in quality or client satisfaction, increases in costs, difficulties in introducing new products or applications or other operational difficulties, and any of these difficulties could adversely impact the business performance and results of operations of the Company and High Street.

Future Material Acquisitions or Dispositions of Strategic Transactions

Material acquisitions, dispositions and other strategic transactions involve a number of risks, including: (i) potential disruption of the Company’s ongoing business, (ii) distraction of management, (iii) the Company may become more financially leveraged, (iv) the anticipated benefits and cost savings of those transactions may not be realized fully or at all or may take longer to realize than expected, (v) increasing the scope and complexity of the Company’s operations, and (vi) loss or reduction of control over certain of the Company’s assets. Additionally, the Company or High Street may issue additional equity interests in connection with such transactions, which would dilute a shareholder’s holdings in the Company.

Proposed Transactions

The Company’s ~~pending~~proposed transactions are subject to certain conditions, many of which are outside of the control of the Company and there can be no assurance that they will be completed, on a timely basis or at all. As a consequence, there is a risk that one or more of the proposed transactions will not close in a timely fashion or at all. If one or more of the proposed transactions is not completed for any reason, the ongoing business of the Company may be adversely affected and, without realizing any of the benefits of having completed such transactions, the Company will be subject to a number of risks, including, without limitation, (i) the Company may experience negative reactions from the financial markets, including negative impacts on the Company’s stock price, (ii) in the case of a proposed acquisition, the Company may need to find an alternative use of any capital earmarked for such proposed acquisitions, (iii) in the case of a proposed disposition, the Company will not receive the anticipated proceeds of such disposition and accordingly may not be able to execute on other business opportunities for which such proceeds have been earmarked, and (iv) matters relating to the proposed transactions will require substantial commitments of time and resources by management of the Company which would otherwise have been devoted to day-to-day operations and other opportunities that may have been beneficial to the Company.

If one or more of the proposed transactions are not completed, the risks described above may materialize and they may adversely affect the business, results of operations, financial condition and prospects and stock price of the Company.

Acreage may not be ~~restricted~~able to cease operations from ~~making~~ Non-Core ~~Divestitures~~states within the prescribed time limit

The Debenture, along with certain waivers, requires that we ~~divest from our assets~~cease operations outside of Connecticut, Maine, Massachusetts, ~~New Hampshire,~~ New York, New Jersey, Pennsylvania, Illinois and Ohio (the “~~Identified States~~”“Identified States”) ~~within 18 months of the date the Debenture is executed.~~by March 31, 2024.

~~Canopy Growth has provided its consents to the Company with respect to the proposed divestiture by us of all assets outside of the Identified States (the~~ ~~“Non-Core Divestitures~~”). The Debenture ~~will provide~~provides that, among other things, if the ~~Non-Core Divestitures are~~Company does not ~~completed within 18 months from~~cease operations outside of the ~~Amendment Date,~~Identified States by the deadline, whether as a result of regulatory delays or otherwise, such failure shall constitute an event of default thereunder. Upon the occurrence of an event of default under the Debenture, the Loan will become immediately due and payable.

The Company may not have adequate resources to repay the Debenture. There is no assurance that the Company will be able to raise the necessary amount of capital to repay the Debenture or otherwise refinance these obligations. Accordingly, failure to ~~complete~~cease operations outside of the ~~Non-Core Divestitures~~Identified States within the prescribed time would have a material adverse effect on the Company’s business, financial condition, results of operations and prospects and could threaten its ability to satisfy its obligations or continue as a going concern.

In addition, if the Loan is required to be repaid prior to the maturity date, it would have an immediate and lasting material adverse effect on Acreage and its ability to complete the Acquisition. ~~If the Amended Arrangement is not completed, Acreage will be subject to the restrictive covenants and consent requirements under the Existing Arrangement~~.

Ability to Access Public and Private Capital

The Company may require equity and/or debt financing to undertake capital expenditures or to undertake acquisitions or other transactions. If the Company is required to access capital markets to carry out its development objectives, the state of capital markets and other financial systems could affect the Company’s access to, and cost of, capital. There can be no assurance that additional financing will be available to the Company when needed or on terms that are commercially viable. The Company’s inability to raise financing to fund capital expenditures or acquisitions could limit its growth and may have a material adverse effect upon future profitability.

The Company may have access to equity financing from the public capital markets in Canada and the U.S. by virtue of its status as a reporting issuer in each of the provinces of Canada (other than Newfoundland and Labrador, Prince Edward Island and Quebec), and under the Exchange Act. The Company also may have access to equity and debt financing from the prospectus exempt (private placement) markets in Canada and the U.S. The Company also has relationships with sources of private capital (such as funds and high net worth individuals) that could be investigated at a higher cost of capital. While the Company is not able to obtain bank financing in the U.S. or financing from other U.S. federally regulated entities, it currently has access to equity financing through the public and private markets in Canada and the U.S., and to debt financing in the U.S. through certain specialty lenders. Furthermore, the ~~Amending~~Existing Arrangement Agreement provides that the Company may not issue any equity securities, without Canopy Growth’s prior consent, other than: (i) upon the exercise or conversion 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 $3,000,000 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 500,000 Fixed Shares in connection with debt financing transactions that are otherwise in compliance with the terms of the Existing Arrangement ~~Agreement, as amended by the Amending~~ Agreement; or (vi) pursuant to one private placement or public offering of securities during any one-year period for aggregate gross proceeds of up to $20,000,000, subject to specific limitations as set out in the ~~Amending~~Existing Arrangement Agreement.

However, additional equity financing may be dilutive to shareholders of the Company and could involve the sale of securities with rights and preferences superior to those of the Fixed Shares or the Floating Shares. Debt financing may involve restrictions on the Company’s financing and operating activities. Debt financing may be convertible into other securities of the Company or involve the issuance of equity fees, either of which may result in immediate or resulting dilution. In either case, additional financing may not be available to the Company on acceptable terms or at all. If the Company is unable to raise additional funds as needed, the scope of its operations or growth may be reduced and, as a result, the Company may be unable to fulfill its long-term goals. In this case, investors may lose all or part of their investment. Any default under such debt instruments could have a material adverse effect on the Company, its business or the results of operations.

Investments May be Pre-Revenue

The Company may make investments in companies with no significant sources of operating cash flow and no revenue from operations. The Company’s investment in such companies are subject to risks and uncertainties that new companies with no operating history may face. In particular, there is a risk that the Company’s investment in these pre-revenue companies will not be able to meet anticipated revenue targets or generate no revenue at all. The risk is that underperforming pre-revenue companies may lead to these businesses failing which could have a materially adverse impact on the business, financial condition and operating results of the Company.

Enforceability of Judgments Against Subsidiaries

High Street and the Subsidiaries are organized under the laws of various U.S. states. All of the assets of these entities are located outside of Canada and certain of the experts retained by the Company or its affiliates are residents of countries other than Canada. As a result, it may be difficult or impossible for shareholders of the Company to effect service within Canada upon such persons, or to realize against them in Canada upon judgments of courts of Canada predicated upon the civil liability provisions of applicable Canadian provincial securities laws or otherwise. There is some doubt as to the enforceability in the U.S. by a court in original actions, or in actions to enforce judgments of Canadian courts, of civil liabilities predicated upon such applicable Canadian provincial securities laws or otherwise. A court in the U.S. may refuse to hear a claim based on a violation of Canadian provincial securities laws or otherwise on the grounds that such jurisdiction is not the most appropriate forum to bring such a claim. Even if a court in the U.S. agrees to hear a claim, it may determine that the local law in the U.S., and not Canadian law, is applicable to the claim. If Canadian law is found to be applicable, the content of applicable Canadian

law must be proven as a fact, which can be a time-consuming and costly process. Certain matters of procedure will also be governed by U.S. law in such circumstances.

Research and Market Development

Although the Company through High Street and the Subsidiaries, will be committed to researching and developing new markets and products and improving existing products, there can be no assurances that such research and market development activities will prove profitable or that the resulting markets and/or products, if any, will be commercially viable or successfully produced and marketed.

Due to the early stage of the legal cannabis industry, forecasts regarding the size of the industry and the sales of products by the Subsidiaries is inherently subject to significant unreliability. A failure in the demand for products to materialize as a result of competition, technological change or other factors could have a material adverse effect on the business, results of operations and financial condition of High Street and the Subsidiaries, and consequently, the Company.

Our Sales are Difficult to Forecast.

As a result of recent and ongoing regulatory and policy changes in the medical and adult use cannabis industries and unreliable levels of market supply, the market data available is limited and unreliable. We must rely largely on our own market research to forecast sales, as detailed forecasts are not generally obtainable from other sources in the states in which our business operates. During the fiscal year ended December 31, 2022, we analyzed our inventory balances, and recorded wholesale inventory adjustments as a result of (i) having excess inventory and (ii) reducing the carrying value to ensure inventory balances are properly recorded at the lower of cost and net realizable value. We recognized $11.1 million of wholesale inventory adjustments within Cost of goods sold, wholesaleon the Statements of Operations for the fiscal year. Additionally, any market research and our projections of estimated total retail sales, demographics, demand and similar consumer research, are based on assumptions from limited and unreliable market data. A failure in the demand for our products to materialize as a result of competition, technological change or other factors could have a material adverse effect on our business, results of operations and financial condition.

Results of Future Clinical Research

Research in Canada, the U.S. and internationally regarding the medical benefits, viability, safety, efficacy, dosing and social acceptance of cannabis or isolated cannabinoids (such as CBD and THC), and associated terpenoids remains in early stages. There have been relatively few clinical trials on the benefits of cannabis or isolated cannabinoids (such as CBD and THC). Although the Company believes that the articles, reports and studies support its beliefs regarding the medical benefits, viability, safety, risks, efficacy, dosing and social acceptance of cannabis, future basic research and clinical trials may prove such statements to be incorrect, or could raise concerns regarding, and perceptions relating to, cannabis. Future research studies and clinical trials may reach negative conclusions regarding the medical benefits, viability, safety, efficacy, dosing, social acceptance or other facts and perceptions related to cannabis, which could have a material adverse effect on the demand for the Company’s products with the potential to lead to a material adverse effect on the Company’s business, financial condition, results of operations or prospects.

Environmental Risk and Regulation

The operations of the Company, High Street and the Subsidiaries are subject to environmental regulation in the various jurisdictions in which they operate. These regulations mandate, among other things, the maintenance of air and water quality standards and land reclamation. They also set forth limitations on the generation, transportation, storage and disposal of solid and hazardous waste. Environmental legislation is evolving in a manner ~~which~~that will require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors (or the equivalent thereof) and employees. There is no assurance that future changes in environmental regulation, if any, will not adversely affect the operations of the Company, High Street or the Subsidiaries.

Governmental Approvals and Permits and Laws

Government approvals and permits are currently, and may in the future be, required in connection with the operations of the Company, High Street or the Subsidiaries. To the extent such approvals are required and not obtained, the Company, High Street or any of the Subsidiaries may be curtailed or prohibited from their production of medical and adult-use cannabis or from proceeding with the development of their operations as currently proposed.

Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. The Subsidiaries may be required to compensate those suffering loss or damage by reason of their operations and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations.

The Subsidiaries may not be able to obtain or maintain the necessary licenses, permits, certificates, authorizations or accreditations to operate their respective businesses, or may only be able to do so at great cost. In addition, the Subsidiaries may not be able to comply fully with the wide variety of laws and regulations applicable to the cannabis industry. Failure to comply with or to obtain the necessary licenses, permits, certificates, authorizations or accreditations could result in restrictions on a Subsidiary’s ability to operate in the cannabis industry, which could have a material adverse effect on the business, results of operations and financial condition of the Company, High Street and/or the Subsidiaries.

Amendments to current laws, regulations and permits governing the production of medical and adult-use cannabis, or more stringent implementation thereof, could have a material adverse impact on the Company, High Street or any of the Subsidiaries and cause increases in expenses, capital expenditures or production costs or reduction in levels of production or require abandonment or delays in development.

Enforceability of Contracts

Since cannabis remains illegal at the federal level, courts in multiple U.S. states have on several occasions found cannabis-related contracts unenforceable due to illegality under federal law, even in the absence of any violation of state law. Therefore, there is uncertainty that the Company, High Street or any of the Subsidiaries will be able to legally enforce their respective material agreements.

Liability and Enforcement Complaints

The participation of the Company, High Street or the Subsidiaries in the cannabis industry may lead to litigation, formal or informal complaints, enforcement actions, and inquiries by various federal, state, or local governmental authorities against the Company, High Street or any of the Subsidiaries. Litigation, complaints, and enforcement actions could consume considerable amounts of financial and other corporate resources, which could have an adverse effect on the future cash flows, earnings, results of operations and financial condition of the Company, High Street or any of the Subsidiaries.

Service Providers

As a result of any adverse change to the approach in enforcement of the U.S. cannabis laws, adverse regulatory or political changes, additional scrutiny by regulatory authorities, adverse changes in the public perception in respect to the consumption of cannabis or otherwise, third-party service providers to the Company, High Street or any of the Subsidiaries could suspend or withdraw their services, which may have a material adverse effect on the business, revenues, operating results, financial condition or prospects of the Company, High Street or any of the Subsidiaries.

Reliance on Management or Consulting Services Agreements with Subsidiaries and Affiliates

The Subsidiaries and other affiliates provide assistance and advice in the medicinal cannabis business in certain cases through management or consulting services agreements entered into with state-licensed entities. Under such agreements, the Subsidiaries and affiliates perform certain operational or administrative services. In exchange for providing these services, the Subsidiaries and affiliates receive management fees which are a source of revenue. Payment of such fees is dependent on the continuing validity and enforceability of the relevant agreements. If such agreements are found to be invalid or unenforceable, or are terminated by the counter-party, this could have a material adverse effect on the business, prospects, revenues, financial condition, and operating ~~results.~~results of the Company, High Street or any of the Subsidiaries.

Product Liability

Certain of the Subsidiaries manufacture, process and/or distribute products designed to be ingested by humans, and therefore face an inherent risk of exposure to product liability claims, regulatory action and litigation if products are alleged to have caused significant loss or injury. In addition, the manufacture and sale of cannabis products involve the risk of injury to consumers due to tampering by unauthorized third parties or product contamination. Previously unknown adverse reactions resulting from human consumption of cannabis products alone or in combination with other medications or substances could occur. The Company, High Street and/or the Subsidiaries may be subject to various product liability claims, including, among others, that the products produced by them caused injury or illness, include inadequate instructions for use or include inadequate warnings concerning possible side effects or interactions with other substances. A product liability claim or regulatory action could result in increased costs, could adversely affect the reputation of the Company, High Street or any of the Subsidiaries, and could have a material adverse effect on the business, results of operations and financial condition of the Company, High Street or any of the Subsidiaries. There can be no assurances that product liability insurance will be obtained or maintained on acceptable terms or with adequate coverage against potential liabilities.

Product Recalls

Cultivators, manufacturers and distributors of products are sometimes subject to the recall or return of their products for a variety of reasons, including product defects, such as contamination, unintended harmful side effects or interactions with other substances, packaging safety and inadequate or inaccurate labeling disclosure. If any of the products produced by the Subsidiaries are recalled due to an alleged product defect or for any other reason, the Subsidiaries could be required to incur the

unexpected expense of the recall and any legal proceedings that might arise in connection with the recall and may lose a significant amount of sales and may not be able to replace those sales at an acceptable margin or at all. Additionally, if one of the products produced by a Subsidiary were subject to recall, the image of that product and the Subsidiary and potentially the Company could be harmed. A recall for any of the foregoing reasons could lead to decreased demand for products produced by the Subsidiaries and could have a material adverse effect on their results of operations and financial condition as well as those of the Company.

Risks Inherent in an Agricultural Business

Medical and adult-use cannabis is an agricultural product. There are risks inherent in the cultivation business, such as insects, plant diseases and similar agricultural risks. Although ~~the products are usually grown indoors or~~we currently grow all of our cannabis in ~~green houses~~indoor and greenhouse facilities under climate-controlled conditions, with conditions monitored, there can be no assurance that natural elements will not have a

material adverse effect on the production of the Subsidiaries’ products and, consequentially, on the business, financial condition and operating results of the Company.

Reliance on Key Inputs

The cultivation, extraction and processing of cannabis and derivative products is dependent on a number of key inputs and their related costs including raw materials, electricity, water and other local utilities. Any significant interruption or negative change in the availability or economics of the supply chain for key inputs could materially impact the business, financial condition and operating results of the Subsidiaries, and consequently, the Company. Some of these inputs may only be available from a single supplier or a limited group of suppliers. If a sole source supplier was to go out of business, the relevant Subsidiary might be unable to find a replacement for such source in a timely manner or at all. Any inability to secure required supplies and services or to do so on appropriate terms could have a materially adverse impact on the business, financial condition and operating results of a Subsidiary, and consequently, the Company.

In addition, ~~medical~~ cannabis growing operations consume considerable energy, making the Subsidiaries vulnerable to rising energy costs. Rising or volatile energy costs may adversely impact the business of the Subsidiaries and their ability to operate profitably which may, in turn, adversely impact the Company.

Key Personnel

The success of the Company will depend on the abilities, experience, efforts and industry knowledge of senior management and other key employees of the Company and High Street. If one or more of the executive officers or key personnel of the Company, High Street or the Subsidiaries were unable or unwilling to continue in their present positions, the Company, High Street or the relevant Subsidiary, as applicable, might not be able to replace them easily or at all. The long-term loss of the services of any key personnel for any reason could have a material adverse effect on business, financial condition, results of operations or prospects of the Company. In addition, if any of the executive officers or key employees of the Company, High Street or the Subsidiaries joins a competitor or forms a competing company, the Company, High Street or the relevant Subsidiary may lose know-how, key professionals and staff members. Further, the hiring of any officer and the nomination of any director to the board of directors of the Company is subject to such proposed officer or director satisfying the criteria agreed to with Canopy Growth in the ~~Amendment~~Existing Arrangement Agreement or otherwise obtaining prior written consent from Canopy Growth.

Talent Pool

As the Company, High Street and the Subsidiaries grow, they will need to hire additional human resources to continue to develop their businesses. However, experienced talent in the areas of medical cannabis research and development, growing cannabis and extraction is difficult to source, and there can be no assurance that the appropriate individuals will be available or affordable. Additionally, we have incurred and expect to continue to incur increased labor costs and experience staffing challenges. Without adequate personnel and expertise, the growth of the business of the Company, High Street or the Subsidiaries may suffer. There can be no assurance that any of the Company, High Street or the Subsidiaries will be able to effectively manage growth, and any failure to do so could have a material adverse effect on the business, financial condition, results of operations or prospects of the Company, High Street or the Subsidiaries.

Fraudulent or Illegal Activity by Employees, Contractors and Consultants

The Company, High Street and the Subsidiaries are exposed to the risk that any of their employees, independent contractors, consultants or business counterparties may engage in fraudulent or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent conduct or disclosure of unauthorized activities to the Company, High Street or

any Subsidiary that violates, (i) government regulations, (ii) manufacturing standards, (iii) federal and state healthcare fraud and abuse laws and regulations, or (iv) laws that require the true, complete and accurate reporting of financial information or data. It may not always be possible for the Company, High Street or the Subsidiaries to identify and deter misconduct by its employees and other third parties, and the precautions taken by the Company to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting the Company, High Street or the Subsidiaries from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against the Company, High Street or any of the Subsidiaries, and it is not successful in defending itself or asserting its rights, those actions could have a significant impact on the business of the Company, High Street or the Subsidiaries, including the imposition of civil, criminal and administrative penalties, damages, monetary fines, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of the operations of the Company, High Street or the Subsidiaries, any of which could have a material adverse effect on the business, financial condition, results of operations or prospects of the Company, High Street or any of the Subsidiaries.

Intellectual Property

The success of the Company will depend, in part, on the ability of the Subsidiaries to maintain and enhance trade secret protection over their existing and potential proprietary techniques and processes. The Subsidiaries may be vulnerable to competitors who develop competing technology, whether independently or as a result of acquiring access to the proprietary products and trade secrets of the Subsidiaries, notwithstanding the Subsidiaries’ use and enforcement of non-disclosure and non-compete agreements. In addition, effective future patent, copyright and trade secret protection may be unavailable or limited in certain foreign countries and may be unenforceable under the laws of certain jurisdictions. Failure of the Subsidiaries to adequately maintain and enhance protection over their proprietary techniques and processes could have a materially adverse impact on the business, financial condition and operating results of the Company.

The Company May be Exposed to Infringement or Misappropriation Claims by Third Parties

The Company’s success may likely depend on the ability of the Subsidiaries to use and develop new extraction technologies, recipes, know-how and new strains of cannabis without infringing the intellectual property rights of third parties. The Company cannot ensure that third parties will not assert intellectual property claims against it. The Company is subject to additional risks if entities licensing intellectual property to the Company do not have adequate rights in any such licensed materials. If third parties assert copyright or patent infringement or violation of other intellectual property rights against the Company, it will be required to defend itself in litigation or administrative proceedings, which can be both costly and time consuming and may significantly divert the efforts and resources of management personnel. An adverse determination in any such litigation or proceedings to which the Company may become a party could subject it to significant liability to third parties, require it to seek licenses from third parties, to pay ongoing royalties or subject the Company to injunctions prohibiting the development and operation of its products and services.

Insurance Coverage

There is a risk that a greater number of state regulatory agencies will begin requiring entities engaged in certain aspects of the business or industry of legal cannabis to post a bond or significant fees when applying for example for a dispensary license or renewal as a guarantee of payment of sales and franchise tax. The Company is not able to quantify at this time the potential scope for such bonds or fees in the states in which it currently or may in the future have operations. Any bonds or fees of material amounts could have a negative impact on the ultimate success of the business of the Subsidiaries and High Street, and consequently, the Company.

The Company’s business is subject to numerous risks and hazards generally, including adverse environmental conditions, accidents, labor disputes and changes in the regulatory environment. Such occurrences could result in damage to assets, personal injury or death, environmental damage, delays in operations, monetary losses and possible legal liability.

Although High Street maintains insurance to protect against certain risks in such amounts as it considers to be reasonable, its insurance does not cover all the potential risks associated with its operations. The Company may also be unable to maintain insurance to cover these risks at economically feasible premiums. Insurance coverage may not continue to be available or may not be adequate to cover any resulting liability. Moreover, insurance against risks such as environmental pollution or other hazards encountered in the operations of High Street and the Subsidiaries is not generally available on acceptable terms. The Company might also become subject to liability for pollution or other hazards which may not be insured against or which the Company may elect not to insure against because of premium costs or other reasons. Losses from these events may cause the Company to incur significant costs that could have a material adverse effect upon its business, results of operations, financial condition or prospects.

Litigation

Any of the Company, High Street or the Subsidiaries may become party to litigation from time to time in the ordinary course of business which could adversely affect their businesses. Should any litigation in which any of the Company, High Street or the Subsidiaries becomes involved result in a decision or verdict against them, such decision or verdict could materially adversely affect the ability of the Company, High Street or any Subsidiary to continue operating and could materially adversely impact the market price for Fixed Shares and Floating Shares as well as result in the expenditure of significant resources. Even if any of the Company, High Street or the Subsidiaries are involved in litigation and wins, litigation can redirect significant resources from business operations to prosecuting or defending such litigation, which can adversely affect the business, operations or financial condition of the Company, High Street and/or the Subsidiaries, as applicable.

Internal Controls

Effective internal controls are necessary for the Company to provide reliable financial reports and to help prevent fraud. Although the Company will implement a number of safeguards in efforts to ensure the reliability of its financial reports, including those imposed on the Company under U.S. and Canadian laws, including the Sarbanes-Oxley Act of 2002, the Company cannot be certain that such measures will ensure that the Company will maintain adequate control over financial reporting. Failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm the Company’s ability to meet its reporting obligations. If the Company or its auditors discover a material weakness, as we reported in Item 9A. of this Form 10-K, the disclosure of that fact, even if quickly remedied, could reduce the market’s confidence in the Company’s consolidated financial statements and adversely affect the trading price of the Fixed Shares and Floating Shares.

We are exposed to potential risks from legislation requiring companies to evaluate internal controls under Section 404(a) of the Sarbanes-Oxley Act of 2002. As an emerging growth company, we will be exempt from auditor attestation requirements concerning any such report so long as we are an emerging growth company. Management conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, ~~2020~~,2022, based on the framework established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Refer to Item 9A. Controls and Procedures for further discussion.

If we fail to maintain an effective system of internal control over financial reporting in the future, we may not be able to accurately report our financial condition, results of operations or cash flows, which may adversely affect investor confidence in us and, as a result, the value of our common stock.

Section 404 of the Sarbanes-Oxley Act requires us to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting. This assessment needs to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control that results in more than a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis.

We identified a material weakness in our internal control over financial reporting as of September 30, 2021, which, as a result of turnover and the availability of capable resources (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. Finally, for the year ended December 31, 2022, the Company did not have adequate processes or sufficient resources to adequately assess the impairment of goodwill and intangible assets and cutoff over inventory.

We are currently in the process of remediating the material weakness through the following actions, which are expected to be completed by the second half of 2023, refer to Item 9A. Controls and Procedures for further discussion:

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.

The material weakness will not be considered remediated until the revised controls operate for a sufficient period of time and we have concluded, through testing, that these controls are designed and operating effectively.

Failure to remediate the material weakness described above at all or within our expected timeframe, or any newly identified material weaknesses could limit our ability to prevent or detect a misstatement of our financial results, lead to a loss of investor confidence and have a negative impact on the trading price of our common stock.

Operational Risks

The Company, High Street and the Subsidiaries may be affected by a number of operational risks and may not be adequately insured for certain risks, including: labor disputes; catastrophic accidents; fires; blockades or other acts of social activism; changes in the regulatory environment; impact of non-compliance with laws and regulations; natural phenomena, such as inclement weather conditions, floods, earthquakes and ground movements. There is no assurance that the foregoing risks and

hazards will not result in damage to, or destruction of, the Subsidiaries’ properties, dispensary facilities, grow facilities and extraction facilities, personal injury or death, environmental damage, or have an adverse impact on the Subsidiaries’ operations, costs, monetary losses, potential legal liability and adverse governmental action, any of which could have an adverse impact on the future cash flows, earnings and financial condition of the Company, High Street or the Subsidiaries. Also, the Subsidiaries may be subject to or affected by liability or sustain loss for certain risks and hazards against which they may elect not to insure because of the cost. This lack of insurance coverage could have an adverse impact on future cash flows, earnings, results of operations and financial condition of the Company, High Street or the Subsidiaries.

Conflicts of Interest

Certain of the Company’s directors and officers are, and may continue to be, involved in other business ventures through their direct and indirect participation in corporations, partnerships, joint ventures, etc. that may become potential competitors of the products and services the Company intends to provide. Situations may arise in connection with potential acquisitions or investment opportunities where the other interests of these directors and officers conflict with or diverge from the Company’s interests. In accordance with applicable corporate law, directors who have a material interest in or who are a party to a material contract or a proposed material contract with the Company are required, subject to certain exceptions, to disclose that interest and generally abstain from voting on any resolution to approve the contract. In addition, the directors and officers are required to act honestly and in good faith with a view to the best interests of the Company. However, in conflict of interest situations, the Company’s directors and officers may owe the same duty to another company and will need to balance their competing interests with their duties to the Company. Circumstances (including with respect to future corporate opportunities) may arise that may be resolved in a manner that is unfavorable to the Company.

Effect of General Economic and Political Conditions

The business of each of the Company, High Street and the Subsidiaries, is subject to the impact of changes in national or North American economic conditions including, but not limited to, recessionary or inflationary trends, equity market conditions, consumer credit availability, interest rates, consumers’ disposable income and spending levels, job security and unemployment, and overall consumer confidence. These economic conditions may be further affected by political events throughout the world that cause disruptions in the financial markets, either directly or indirectly. Adverse economic and political developments could have a material adverse effect on the business, financial condition, results of operations or prospects of the Company, High Street and the Subsidiaries.

Information Technology Systems and Cyber Security Risk

The Subsidiaries’ use of technology is critical in their respective continued operations. The Subsidiaries are susceptible to operational, financial and information security risks resulting from cyber-attacks and/or technological malfunctions. Successful cyber-attacks and/or technological malfunctions affecting the Subsidiaries or their service providers can result in, among other things, financial losses, the inability to process transactions, the unauthorized release of customer information or confidential information and reputational risk.

The Subsidiaries have not experienced any material losses to date relating to cybersecurity attacks or other information breaches. However, there can be no assurance that the Subsidiaries will not incur such losses in the future. As cybersecurity threats continue to evolve, the Subsidiaries may be required to use additional resources to continue to modify or enhance protective measures or to investigate security vulnerabilities.

Security Risks

The business premises of the Company’s operating locations may be targets for theft. While the Subsidiaries have implemented security measures at each location and continue to monitor and improve their security measures, their cultivation, processing and dispensary facilities could be subject to break-ins, robberies and other breaches in security. If there was a breach in security and a Subsidiary fell victim to a robbery or theft, the loss of cannabis plants, cannabis oils, cannabis flowers and cultivation and processing equipment could have a material adverse impact on the business, financial condition and results of ~~operation~~operations of such Subsidiary and, consequentially, the Company and High Street.

As the Subsidiaries’ businesses involve the movement and transfer of cash which is collected from dispensaries or patients/customers and deposited into its bank, there is a risk of theft or robbery during the transport of cash. The Subsidiaries have engaged security firms to provide security in the transport and movement of large amounts of cash. While the Subsidiaries have taken robust steps to prevent theft or robbery of cash during transport, there can be no assurance that there will not be a security breach during the transport and the movement of cash involving the theft of product or cash.

~~Past Performance Not Indicative of Future Results~~

The investment and operational performance of High Street prior to the completion of the RTO is not indicative of the future operating results of the Company. There can be no assurance that the historical operating results achieved by High Street or its affiliates will be achieved by the Company, and the Company’s performance may be materially different.

Going Concern Risk

The Company will continually monitor its capital requirements based on its capital and operational needs and the economic environment and may raise new capital as necessary. The Company’s ability to continue as a going concern will depend on its ability to realize profits from High Street and or the ability to raise additional equity or debt in the private or public markets. While the Company and High Street have been successful in raising equity and debt to date, there can be no assurances that the Company will be successful in completing an equity or debt financing or in achieving profitability in the future.

As reflected in the Company’s audited consolidated financial statements for the year ended December 31, ~~2020~~2022 (the “~~Consolidated~~“Consolidated Financial ~~Statements~~”Statements”), the Company had an accumulated deficit ~~and a negative net working capital (current liabilities greater than current assets)~~ as of December 31, ~~2020,~~2022, 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.

However, management believes that substantial doubt ~~of our~~about the Company’s ability to meet ~~our~~its obligations for the next twelve months from the date ~~of the~~these financial statements ~~included herein~~ were ~~first made available~~issued has been alleviated due to, but not limited to, (i) ~~access to future capital commitments (see Note 17 of the Consolidated Financial Statements), (ii)~~ continued sales growth from ~~our~~the Company’s consolidated operations, ~~(iii)~~(ii) latitude as to the timing and amount of certain operating expenses as well as capital expenditures, ~~(iv) restructuring~~(iii) expense reduction plans that have already been put in place to improve the Company’s ~~profitability.~~results, (iv) the AFC-VRT credit facilities (refer to Notes 10 and 17 for further discussion), and (v) access to the U.S. and Canadian public equity markets.

If the Company is unable to raise additional capital whenever necessary, it may be forced to decelerate or curtail its footprint ~~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 wethe Company will be successful in accomplishing any of ~~our~~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 ~~our~~the Company’s need to raise additional capital on an immediate basis. ~~There are limits on the number of shares we can issue provided for in the Arrangement Agreement. See “Amended Arrangement with Canopy Growth Corporation~~”.

Indemnification

The Company’s Articles provide that the Company will, to the fullest extent permitted by law, indemnify directors and officers for certain liabilities incurred by them by virtue of having been a director or officer of the Company.

The Company may also have contractual indemnification obligations under any future employment agreements with its officers or agreements entered into with its directors. The foregoing indemnification obligations could result in it incurring substantial expenditures to cover the cost of settlement or damage awards against directors and officers, which the Company may be unable to recoup. These provisions and the resulting costs may also discourage it from bringing a lawsuit against directors and officers for breaches of their fiduciary duties, and may similarly discourage the filing of derivative litigation by its shareholders against its directors and officers even though such actions, if successful, might otherwise benefit it and its shareholder.

Difficulty in Enforcing Judgments and Effecting Service of Process on Directors and Officers

Certain directors and officers of the Company reside outside of Canada and some or all of the assets of such persons are located outside of Canada. Therefore, it may not be possible for shareholders to collect or to enforce judgments obtained in Canadian courts predicated upon the civil liability provisions of applicable Canadian securities laws against such persons. Moreover, it may not be possible for shareholders to effect service of process within Canada upon such persons.

Risks Related to Ownership

Voting Control

As a result of the Class F Multiple Voting Shares (the “~~Fixed~~“Fixed Multiple Shares”) held by Mr. Murphy, he exercises a significant majority of the voting power in respect of our shares. The Fixed Shares and the Floating Shares are each entitled to one vote per share and the Fixed Multiple Shares are entitled to 4,300 votes per share. As a result, Mr. Murphy has the ability to control the outcome of all matters submitted to the Company’s shareholders for approval, including the election and removal of directors and any arrangement or sale of all or substantially all of the assets of the Company. This concentrated control could delay, defer, or prevent a change of control of the Company, an arrangement or amalgamation involving the Company or sale of all or substantially all of the assets of the Company that its other shareholders support. Conversely, this concentrated control could allow Mr. Murphy, as the holder of the Fixed Multiple Shares, to cause the Company to consummate such a transaction that the Company’s other shareholders do not support. In addition, the holder of the Fixed Multiple Shares may cause the Company to

make long-term strategic investment decisions and take risks that may not be successful and may seriously harm the Company’s business.

As a member of the Board, Mr. Murphy owes fiduciary duties to the Company, including those of care and loyalty, and must act in good faith and with a view to the best interests of the Company. As a shareholder, even a controlling shareholder, Mr. Murphy will be entitled to vote his shares, and shares over which he has voting control, in his own interests, which may not always be in the interests of the Company’s shareholders generally. Because Mr. Murphy holds most of his economic interest in the Company’s business through High Street, rather than through the Company, he may have conflicting interests with holders of our shares. For example, Mr. Murphy may have different tax positions from the Company, which could influence his decisions regarding whether and when the Company should dispose of assets or incur new or refinance existing indebtedness, especially in light of the existence of the Tax Receivable Agreement, and whether and when the Company should undergo certain changes of control within the meaning of the Tax Receivable Agreement or terminate the Tax Receivable Agreement. In addition, the structuring of future transactions may take into consideration these tax or other considerations even where no

similar benefit would accrue to the Company. In addition, the significant ownership of Mr. Murphy in the Company and his resulting ability to effectively control the Company may discourage someone from making a significant equity investment in the Company, or could discourage transactions involving a change in control, including transactions in which holders of our shares might otherwise receive a premium for their shares over the then-current market price.

Unpredictability Caused by Voting Control

Although other companies have dual class or multiple voting share structures, given the unique capital structure of the Company and the concentration of voting control held by the Mr. Murphy, as the sole holder of the Fixed Multiple Shares, this structure and control could result in a lower trading price for, or greater fluctuations in the trading price of, the Fixed Shares and the Floating Shares, or may result in adverse publicity to the Company or other adverse consequences.

Price Volatility of Publicly Traded Securities

In recent years, the securities markets in the U.S. and Canada have experienced a high level of price and volume volatility, and the market prices of securities of many companies have experienced wide fluctuations in price which have not necessarily been related to the operating performance, underlying asset values or prospects of such companies. There can be no assurance that fluctuations in price of the Fixed Shares and the Floating Shares will not occur. The market price of the Fixed Shares and the Floating Shares could be subject to significant fluctuations in response to variations in quarterly and annual operating results, the results of any public announcements the Company makes, general economic conditions, and other factors. Increased levels of volatility and resulting market turmoil may adversely impact the price of the Fixed Shares and the Floating Shares.

~~Price Volatility Caused by COVID-19~~

The COVID-19 outbreak, and the response of governmental authorities to try to limit it, are having a significant impact on the securities markets in the U.S. and Canada. Since the COVID-19 outbreak commenced, the securities markets in the U.S. and Canada have experienced a high level of price and volume volatility and wide fluctuations in the market prices of securities of many companies, which have not necessarily been related to the operating performance, underlying asset values or prospects of such companies. The speed with which the COVID-19 situation has developed and continues to develop and the uncertainty of its magnitude, outcome and duration may adversely impact the price of the Fixed Shares or the Floating Shares. See “O~~ur Results of Operations May be Negatively Impacted by the COVID-19 Outbreak” and “Price Volatility of Publicly Traded Securities~~”.

Dividends

Holders of our shares will not have a right to dividends on such shares unless declared by the Board. It is not anticipated that the Company will pay any dividends in the foreseeable future. Dividends paid by the Company would be subject to tax and, potentially, withholdings. The declaration of dividends is at the discretion of the Board, even if the Company has sufficient funds, net of its liabilities, to pay such dividends, and the declaration of any dividend will depend on the Company’s financial results, cash requirements, future prospects and other factors deemed relevant by the Board. Furthermore, the Company cannot declare, set aside or pay any dividend in respect of our shares without the prior written consent of Canopy Growth. See “~~Amended Arrangement with~~ Canopy Growth Corporation Arrangement”.

Dilution

The Company and High Street may issue additional securities in the future, which may dilute a shareholder’s holdings in the Company and the Company’s revenue per share. The Board has discretion to determine the price and the terms of further issuances. Moreover, additional Fixed Shares and Floating Shares will be issued by the Company on the exercise of options under the Company’s Omnibus Incentive Plan, upon the exercise of the outstanding warrants and upon the redemption of outstanding Units. Moreover, additional Fixed Shares and Floating Shares will be issued by the Company on the exercise, conversion or redemption of certain outstanding securities of the Company, Acreage Holdings America, Inc. (“~~USCo~~”USCo”), Acreage Holdings WC, Inc. (“~~USCo2~~”USCo2”) and High Street in accordance with their terms. The Company may also issue Fixed Shares and Floating Shares to finance future acquisitions. The Company cannot predict the size of future issuances of Fixed Shares and Floating Shares or the effect that future issuances and sales of Fixed Shares and Floating Shares will have on the market price of the Fixed Shares and the Floating Shares. Issuances of a substantial number of additional Fixed Shares and Floating Shares, or the perception that such issuances could occur, may adversely affect prevailing market prices for the Fixed Shares and the Floating Shares.

Costs of Maintaining a Public Listing

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As a public company, there are costs associated with legal, accounting and other expenses related to regulatory compliance. Securities legislation and the rules and policies of the CSE require listed companies to, among other things, adopt corporate governance and related practices, and to continuously prepare and disclose material information, all of which add to a company’s legal and financial compliance costs. The Company may also elect to devote greater resources than it otherwise would have on communication and other activities typically considered important by publicly traded companies.

Cash Flow From Operations

During the year ended December 31, ~~2020,~~2022, the Company sustained net losses from operations and had negative cash flow from operating activities. As of December 31, ~~2020,~~2022, the Company’s accumulated deficit was approximately ~~$475.2~~$678.1 million. Additionally, as of December 31, ~~2020,~~2022, the Company’s cash and cash equivalents ~~and restricted cash~~ was approximately ~~$54.6~~$24.1 million. See “Sufficiency of Capital”.

Sufficiency of Capital

Should the Company’s costs and expenses prove to be greater than currently anticipated, or should the Company change its current business plan in a manner that will increase or accelerate its anticipated costs and expenses, the depletion of its working capital would be accelerated. To the extent it becomes necessary to raise additional cash in the future as its current cash and working capital resources are depleted, the Company will seek to raise it through the public or private sale of assets, debt or equity securities, the procurement of advances on contracts or licenses, funding from joint-venture or strategic partners, debt financing or short-term loans, or a combination of the foregoing. The Company may also seek to satisfy indebtedness without any cash outlay through the private issuance of debt or equity securities. The Company cannot guarantee that it will be able to secure the additional cash or working capital it may require to continue our operations. Failure by the Company to obtain additional cash or working capital on a timely basis and in sufficient amounts to fund its operations or to make other satisfactory arrangements may cause the Company to delay or indefinitely postpone certain of its activities, including potential acquisitions, or to reduce or delay capital expenditures, sell material assets, seek additional capital (if available) or seek compromise arrangements with its creditors. The foregoing could materially and adversely impact the business, operations, financial condition and results of operations of the Company.

United States Tax Classification of the Company

Although the Company is and will continue to be a British Columbia company, the Company is also treated as a United States corporation for United States federal income tax purposes under section 7874 of the Code and is subject to United States federal income tax on its worldwide income. However, for Canadian tax purposes, the Company is, regardless of any application of section 7874 of the Code, to be treated as being resident of Canada under the Income Tax Act (Canada) (the “Tax Act”). As a result, the Company will be subject to taxation both in Canada and the United States which could have a material adverse effect on its financial condition and results of operations.

Any dividends received by shareholders who are residents of Canada for purposes of the Tax Act will generally be subject to U.S. withholding tax at a 30% rate or such lower rate as provided in an applicable treaty. In addition, a Canadian foreign tax credit or deduction may not be available under the Tax Act in respect of such taxes.

Dividends received by U.S. resident shareholders will not be subject to U.S. withholding tax but will be subject to Canadian withholding tax under the Tax Act at a 25% rate or such lower rate as provided in an applicable treaty. Dividends paid by the Company will be characterized as U.S. source income for purposes of the foreign tax credit rules under the Code. Accordingly, U.S. shareholders generally will not be able to claim a credit for any Canadian tax withheld unless, depending on the circumstances, they have an excess foreign tax credit limitation due to other foreign source income that is subject to a low or zero rate of foreign tax.

Dividends received by shareholders that are neither Canadian nor U.S. residents will generally be subject to U.S. withholding tax and will also be subject to Canadian withholding tax. These dividends may not qualify for a reduced rate of U.S. withholding tax under any income tax treaty otherwise applicable to a shareholder of the Company, subject to examination of the relevant treaty.

The Company is treated as a U.S. domestic corporation for U.S. federal income tax purposes under section 7874 of the Code. As a U.S. domestic corporation for U.S. federal income tax purposes, the taxation of the Company’s non-U.S. holders of Fixed Shares or the Floating Shares upon a disposition of Fixed Shares or the Floating Shares generally depends on whether the Company is classified as a United States real property holding corporation (a “USRPHC”) under the Code. The Company believes that it is not currently, and has never been, a USRPHC. However, the Company has not sought and does not intend to

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seek formal confirmation of its status as a non-USRPHC from the IRS. If the Company ultimately is determined by the IRS to constitute a USRPHC, its non-U.S. holders of the Fixed Shares and the Floating Shares may be subject to U.S. federal income tax on any gain associated with the disposition of the Fixed Shares and the Floating Shares.

EACH SHAREHOLDER SHOULD SEEK TAX ADVICE, BASED ON SUCH SHAREHOLDER’S PARTICULAR FACTS AND CIRCUMSTANCES, FROM AN INDEPENDENT TAX ADVISOR, INCLUDING, WITHOUT LIMITATION, IN CONNECTION WITH THE COMPANY’S CLASSIFICATION AS A U.S. DOMESTIC CORPORATION FOR UNITED STATES FEDERAL INCOME TAX PURPOSES UNDER SECTION 7874(b) OF THE CODE, THE APPLICATION OF THE CODE, THE APPLICATION OF A U.S. TAX TREATY, THE APPLICATION OF U.S. FEDERAL ESTATE AND GIFT TAXES, THE APPLICATION OF U.S. FEDERAL TAX WITHHOLDING REQUIREMENTS, THE APPLICATION OF U.S. ESTIMATED TAX PAYMENT REQUIREMENTS AND THE APPLICATION OF U.S. TAX RETURN FILING REQUIREMENTS.

Risks Related to the Company’s Organizational Structure

Corporate Structure Risks

The Company is a holding company and has no material assets other than its indirect ownership of Units of High Street. As such, the Company has no independent means of generating revenue or cash flow. The Company has determined that High Street will be a variable interest entity (a “~~VIE~~”“VIE”) and that it will be the primary beneficiary of High Street. Accordingly, pursuant to the VIE accounting model, the Company will consolidate High Street in its consolidated financial statements. In the event of a change in accounting guidance or amendments to the Amended and Restated LLC Agreement which governs High Street (the “A“A&R LLC ~~Agreement~~”Agreement”) resulting in the Company no longer having a controlling interest in High Street, the Company may not be able to consolidate High Street’s results of operations with its own, which would have a material adverse effect on the Company’s results of operations. Moreover, the Company’s ability to pay its taxes and operating expenses or declare and pay dividends in the future, if any, will be dependent upon the financial results and cash flows of High Street and the Subsidiaries and distributions it receives indirectly from High Street. There can be no assurance that any of High Street or the Subsidiaries will generate sufficient cash flow to distribute funds to the Company or that applicable state law and contractual restrictions will permit such distributions.

High Street will continue to be treated as a partnership for U.S. federal income tax purposes and, as such, will not be subject to any entity-level U.S. federal income tax. Instead, taxable income will be allocated to the holders of Units. Accordingly, holders of Units will incur income taxes on their allocable share of any net taxable income of High Street. Under the terms of the A&R LLC Agreement, High Street will be obligated to make tax distributions to holders of Units. USCo intends, as its manager, to cause High Street to make cash distributions to the owners of Units in an amount sufficient to (i) fund their tax obligations in respect of taxable income allocated to them, and (ii) cover the operating expenses of USCo, USCo2 and the Company, including payments under the Tax Receivable Agreement. However, High Street’s ability to make such distributions may be subject to various limitations and restrictions, such as restrictions on distributions that would either violate any contract or agreement to which High Street is then a party, including debt agreements, or any applicable law, or that would have the effect of rendering High Street insolvent. If the Company does not have sufficient funds to pay tax or other liabilities or to fund its operations, it may have to borrow funds, which could materially adversely affect its liquidity and financial condition and subject it to various restrictions imposed by any such lenders. In addition, if High Street does not have sufficient funds to make distributions, the Company’s ability to declare and pay cash dividends will also be restricted or impaired.

High Street Tax Receivable Agreement

USCo is a party to the tax receivable agreement originally dated November 14, 2018 (the “~~Tax~~“Tax Receivable ~~Agreemen~~t”Agreement”) between USCo, High Street and certain executive employees of the Company, whose rights were assigned to Canopy USA (the ““Tax Receivable Recipients”) pursuant to the Third Amendment to the Tax Receivable ~~Recipients”).~~Agreement dated October 24, 2022. Under the Tax Receivable Agreement, USCo is required to make cash payments to the Tax Receivable Recipients equal to 65% of the tax benefits, if any, that USCo actually realizes, or in certain circumstances is deemed to realize, as a result of (i) the increases in its share of the tax basis of assets of High Street resulting from any redemptions or exchanges of Units from the High Street Members, and (ii) certain other tax benefits related to USCo making payments under the Tax Receivable Agreement. Although the actual timing and amount of any payments that USCo makes to the Tax Receivable Recipients under the Tax Receivable Agreement will vary, it expects those payments will be significant. Any payments made by USCo to the Tax Receivable Recipients under the Tax Receivable Agreement may generally reduce the amount of overall cash flow that might have otherwise been available to it. Furthermore, USCo’s future obligation to make payments under the Tax Receivable Agreement could make the Company a less attractive target for an acquisition. Payments under the Tax Receivable Agreement are not conditioned on any Tax Receivable Recipient’s continued ownership of Units or our shares after the completion of the RTO.

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The actual amount and timing of any payments under the Tax Receivable Agreement will vary depending upon a number of factors, including the timing of redemptions or exchanges by the holders of Units, the amount of gain recognized by such holders of Units, the realized tax benefit by USCo, the amount and timing of the taxable income USCo generates in the future, and the applicable federal and state tax rates.

The Company’s organizational structure, including the Tax Receivable Agreement, confers certain benefits upon the Tax Receivable Recipients that will not benefit the holders of our shares to the same extent as it will benefit the Tax Receivable Recipients. High Street is a party to the Tax Receivable Agreement, which provides for the payment by USCo to the Tax Receivable Recipients of 65% of the amount of tax benefits, if any, that High Street actually realizes, or in some circumstances is deemed to realize, as a result of (i) the increases in the tax basis of assets of High Street resulting from any redemptions or exchanges of Units from the High Street Members, and (ii) certain other tax benefits related to USCo making payments under the Tax Receivable Agreement. An additional 20% of such tax benefits will be paid to certain executives of High Street upon the Tax Receivable Bonus Plan. Although USCo will retain 15% of the amount of such tax benefits, this and other aspects of the Company’s organizational structure may adversely impact the Company’s financial results.

The Tax Receivable Agreement provides that upon certain mergers, asset sales, other forms of business combinations or other changes of control or if, at any time, USCo elects an early termination of the Tax Receivable Agreement, then its obligations, or its successor’s obligations, under the Tax Receivable Agreement to make payments thereunder would be based on certain assumptions, including an assumption that USCo would have sufficient taxable income to fully utilize all potential future tax benefits that are subject to the Tax Receivable Agreement.

As a result of the foregoing, (i) USCo could be required to make payments under the Tax Receivable Agreement that are greater than the specified percentage of the actual benefits it ultimately realizes in respect of the tax benefits that are subject to the Tax Receivable Agreement, and (ii) if it elects to terminate the Tax Receivable Agreement early, it would be required to make an immediate cash payment equal to the present value of the anticipated future tax benefits that are the subject of the Tax Receivable Agreement, which payment may be made significantly in advance of the actual realization, if any, of such future tax benefits. In these situations, USCo’s obligations under the Tax Receivable Agreement could have the effect of delaying, deferring or preventing certain mergers, asset sales, other forms of business combinations or other changes of control of the Company. There can be no assurance that USCo will be able to fund or finance its obligations under the Tax Receivable Agreement.

Concurrently with the execution of the Floating Share Agreement, Canopy, Canopy USA, High Street, USCo and certain individuals party to the Tax Receivable Agreement, amended the Tax Receivable Agreement. Pursuant to the Floating Share Agreement, Canopy, on behalf of Canopy USA agreed to: (i) issue Canopy Shares with a value of approximately $30.5 million due to the participants of a tax receivable agreement “the Tax Receivable Agreement Members” in exchange for each such individual executing an assignment of rights agreement assigning such individual’s rights under the Tax Receivable Agreement to Canopy USA, such that following assignment, Canopy USA is the sole member and beneficiary under the TRA; and (ii) fund a payment with a value of approximately $19.5 million to be made by the Company in Canopy Shares to certain eligible participants pursuant to the Bonus Plans, as amended on October 24, 2022, both in order to reduce a potential liability of approximately $121 million under the Tax Receivable Agreement and the Bonus Plans. In connection with the foregoing, Canopy issued 5,648,927 Canopy Shares with a value of approximately $15.25 million to the Tax Receivable Agreement Members, with a second payment of approximately $15.25 million in Canopy Shares to occur on the earlier of: (a) the second Business Day following the date on which the Floating Share Arrangement has been approved; or (b) April 24, 2023. In addition, the Tax Receivable Agreement Bonuses with an aggregate value of approximately $19.5 million in Canopy Shares will be issued by Canopy to certain eligible participants under the Bonus Plans on the closing of the Floating Share Arrangement or, if the Floating Share Arrangement does not close or is terminated but the Existing Arrangement closes, then on the closing of the Acquisition. The Tax Receivable Agreement Bonuses will be paid to recipients to be determined by Kevin Murphy, the administrator of the Bonus Plans, and may include one or more of Kevin Murphy, John Boehner, Brian Mulroney, and Peter Caldini, each of whom are directors of Acreage and other current and former officers or consultants of Acreage as may be determined by Kevin Murphy. Canopy has also agreed to register the resale of such Canopy Shares under the Securities Act of 1933, as amended.

Payments Made Under the Tax Receivable Agreement

Payments under the Tax Receivable Agreement will be based on the tax reporting positions that USCo determines, and the IRS or another tax authority may challenge all or part of the tax basis increases, as well as other related tax positions USCo takes, and a court could sustain such challenge. If the outcome of any such challenge would reasonably be expected to materially affect a recipient’s payments under the Tax Receivable Agreement, then USCo will not be permitted to settle or fail to contest such challenge without the consent (not to be unreasonably withheld or delayed) of each Tax Receivable Recipient that directly or indirectly owns at least 10% of the outstanding Units of High Street. USCo will not be reimbursed for any cash payments previously made under the Tax Receivable Agreement in the event that any tax benefits initially claimed by USCo and for which payment has been made are subsequently challenged by a taxing authority and are ultimately disallowed. Instead, any excess cash payments made by USCo to a Tax Receivable Recipient will be netted against any future cash payments that USCo might otherwise be required to make under the terms of the Tax Receivable Agreement. However, USCo might not determine that USCo has effectively made an excess cash payment to a Tax Receivable Recipient for a number of years following the initial time of such payment and, if any of USCo tax reporting positions are challenged by a taxing authority, USCo will not be permitted to reduce any future cash payments under the Tax Receivable Agreement until any such challenge is finally settled or determined. As a result, payments could be made under the Tax Receivable Agreement in excess of the tax savings that USCo realizes in respect of the tax attributes with respect to a Tax Receivable Recipient that are the subject of the Tax Receivable Agreement.

Fluctuations in the Company’s tax obligations and effective tax rate and realization of the Company’s deferred tax assets may result in volatility of the Company’s operating results.

The Company will be subject to taxes by the Canadian federal, state, local and foreign tax authorities, and the Company’s tax liabilities will be affected by the allocation of expenses to differing jurisdictions. The Company records tax expenses based on estimates of future earnings, which may include reserves for uncertain tax positions in multiple tax jurisdictions, and valuation allowances related to certain net deferred tax assets. At any one time, many tax years may be subject to audit by various taxing jurisdictions. The results of these audits and negotiations with taxing authorities may affect the ultimate settlement of these matters. The Company expects that throughout the year there could be ongoing variability in the quarterly tax rates as events

occur and exposures are evaluated. The Company’s future effective tax rates could be subject to volatility or adversely affected by a number of factors, including:

~~changes in the valuation of deferred tax assets and liabilities;~~


			•			changes in the valuation of deferred tax assets and liabilities;

~~expected timing and amount of the release of any tax valuation allowances;~~


			•			expected timing and amount of the release of any tax valuation allowances;

~~tax effects of share-based compensation;~~


			•			tax effects of share-based compensation;

~~changes in tax laws, regulations or interpretations thereof; or~~


			•			changes in tax laws, regulations or interpretations thereof; or

future earnings being lower than anticipated in countries where the Company has lower statutory tax rates and higher than anticipated earnings in countries where the Company has higher statutory tax rates.


			•			future earnings being lower than anticipated in countries where the Company has lower statutory tax rates and higher than anticipated earnings in countries where the Company has higher statutory tax rates.

In addition, the Company’s effective tax rate in a given financial statement period may be materially impacted by a variety of factors including but not limited to changes in the mix and level of earnings, varying tax rates in the different jurisdictions in which the Company, High Street and the Subsidiaries operate, fluctuations in valuation allowances, deductibility of certain items, or by changes to existing accounting rules or regulations. Further, tax legislation may be enacted in the future which could negatively impact the Company’s current or future tax structure and effective tax rates. The Company, High Street or any Subsidiary may be subject to audits of income, sales, and other transaction taxes by federal, state, local, and foreign taxing authorities. Outcomes from these audits could have an adverse effect on the Company’s operating results and financial condition of the Company, High Street or the Subsidiaries.

Under Sections 3(a)(1)(A) and (C) of the United States Investment Company Act 1940 (the “~~1940 Act~~”“1940 Act”), a company generally will be deemed to be an “investment company” for purposes of the 1940 Act if (i) it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities or (ii) it engages, or proposes to engage, in the business of investing, reinvesting, owning, holding or trading in securities and it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. The Company does not believe it is an “investment company,” as such term is defined in either of those sections of the 1940 Act.

The Company indirectly controls and operates High Street. On that basis, the Company believes that its interest in High Street is not an “investment security” as that term is used in the 1940 Act. However, if the Company were to cease participation in the management of High Street, its interest in High Street could be deemed an “investment security” for purposes of the 1940 Act.

The Company and High Street intend to conduct their operations so that the Company will not be deemed an investment company. However, if the Company were to be deemed an investment company, restrictions imposed by the 1940 Act, including limitations on the Company’s capital structure and the Company’s ability to transact with affiliates, could make it impractical for the Company to continue its business as contemplated and could have a material adverse effect on the Company’s business.

Risks Related to the Acquisition

The Existing Arrangement Agreement ~~and the Amending Agreement each contain~~contains restrictive covenants which may adversely limit management’s discretion in operating our business.

The Existing Arrangement Agreement ~~and the Amending Agreement each contain~~contains restrictive covenants that may potentially impair the discretion of ~~our~~Acreage’s management with respect to certain business matters. These covenants place restrictions on, among other things, the ability of usthe Company to make any material change to the nature of ~~our~~its business, ~~to pay distributions or~~ make certain ~~other~~ payments, toincur additional indebtedness, issue Acreage Shares, create liens or encumbrances ~~to issue securities, or to take on indebtedness~~ not permitted by the Existing Arrangement Agreement and to sell or otherwise dispose of certain assets. The restrictive covenants set out in the Existing Arrangement Agreement may significantly impair management’s ability to operate Acreage’s business. A failure to comply with these terms, if not cured or waived, could result in a breach of the Existing Arrangement Agreement.

~~If we do not~~Under the Existing Arrangement Agreement, Acreage will be required to comply with the ~~initial business plan set forth in the Proposal Agreement, there may be significant restrictions on the operation of our business and Canopy Growth may not be required to complete the Acquisition.~~Initial Business Plan.

~~Pursuant to~~Under the Existing Arrangement Agreement, we are required to comply with the initial business plan set forth in the Proposal Agreement (the “~~Initial~~“Initial Business ~~Plan~~”Plan”). The Initial Business Plan sets forth certain Pro-Forma Net Revenue Targets (as defined in the Arrangement Agreement) and Consolidated Adj. EBITDA Targets (as defined in the Existing Arrangement Agreement) for each applicable fiscal year of the Initial Business Plan. For the year ended December 31, 2022, the Company did not exceed the 90% threshold for both the Pro-Forma Net Revenue Target and the Consolidated Adj. EBITDA Target set forth in the Initial Business Plan. Therefore, Canopy Growth could, but has not, required the Company to implement austerity measures (as defined in the Existing Arrangement Agreement) by providing such notice to the Company.

If, at the end of a fiscal quarter (commencing with the fiscal quarter dated December 31, 2020), our Pro-Forma Revenue (as defined in the Existing Arrangement Agreement) is less than 90% of the Pro-Forma Net Revenue Target set forth in the Initial Business Plan or if ~~the~~our Consolidated EBITDA (as defined in the Existing Arrangement Agreement) is less than 90% of the Consolidated Adj.

EBITDA Target set forth in the Initial Business Plan, an Interim Failure to Perform (as defined in the Existing Arrangement Agreement) will be deemed to have occurred and the Austerity Measures (as defined in the Existing Arrangement Agreement) will become applicable. The Austerity Measures place significant restrictions on our ability to take certain actions in the operation of our business. Among other things, the Austerity Measures prevent us from issuing any Fixed Shares, Fixed Multiple Shares or Floating Shares, granting any New Options (as defined in the Existing Arrangement Agreement) or Floating Options (as defined in the Existing Arrangement Agreement), entering into any contract in respect of Company Debt (as defined in the Existing Arrangement Agreement) (other than in the ordinary course of business), or paying any fees owing to members of our Board. The Austerity Measures also prevent us and our subsidiaries from entering into any business combination, merger or acquisition of assets (other than in the ordinary course of business), from making any new capital investments or incurring any new capital expenditures, and from entering into any contract to dispose of any assets (other than in the ordinary course of business). The Austerity Measures will apply until the non-compliance causing the Interim Failure to Perform is cured by us and our subsidiaries, as applicable. However, if an Interim Failure to Perform occurs and the Austerity Measures are implemented, ~~the~~our ability ~~of us~~ to conduct our business in the ordinary course will be significantly restricted. Accordingly, the occurrence of an Interim Failure to Perform will increase the possibility that a Material Failure to Perform (as defined in the Existing Arrangement Agreement) and/or a Failure to Perform (as defined in the Existing Arrangement Agreement) will occur.

A Material Failure to Perform will be deemed to occur if our Pro-Forma Revenue is less than 80% of the Pro-Forma Net Revenue Target or ~~the~~our Consolidated EBITDA is less than 80% of the Consolidated Adj. EBITDA Target, as determined on an annual basis (commencing in respect of the fiscal year ending December 31, 2021). The occurrence of a Material Failure to Perform is considered a breach of a material term of the Existing Arrangement Agreement incapable of being cured. Consequently, certain restrictive covenants under the Existing Arrangement Agreement which relate to exclusivity and non-competition of Canopy Growth in favor of us, including the restriction preventing Canopy Growth from acquiring a competitor of ours in the United States, will terminate. In addition, the occurrence of a Material Failure to Perform is likely to constitute an event of default under the Debenture, causing the Hempco Loan to become immediately due and payable. If the Hempco Loan is required to be repaid prior to the maturity date, it would have an immediate and lasting material adverse effect on us and our ability to complete the Acquisition.

In addition, if our Pro-Forma Revenue is less than 60% of the Pro-Forma Net Revenue Target or the Consolidated EBITDA is less than 60% of the Consolidated Adj. EBITDA Target for the trailing 12 month period ending on the date that is 30 days prior to the proposed Acquisition Time, a Failure to Perform shall occur and a material adverse impact will be deemed to have occurred for purposes of Section 6.2(2)(h) of the Existing Arrangement Agreement. In the event of a Failure to Perform, Canopy Growth will not be required to complete the Acquisition.

~~The Company could fail to receive the necessary regulatory approval~~

~~The Arrangement is not required to be completed unless the Arrangement receives approval under the~~ ~~United States Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and approvals of each of the TSX, NYSE and CSE, including the approval of the listing of the Canopy Growth Shares to be issued pursuant to the Acquisition on the TSX and NYSE.~~

If Canopy Growth fails to complete the Acquisition or the Acquisition is completed on different terms, there could be a material adverse effect on our business.

There can be no assurance that the Acquisition will be completed, or if completed, that it will be completed on the same or similar terms to those set out in the Existing Arrangement Agreement and the Floating Share Agreement. The completion of the Acquisition is subject to the satisfaction of a number of conditions which include, among others, (i) obtaining necessary approvals, including the Acquisition Regulatory Approvals (as defined in the Existing Arrangement Agreement), (ii) performance by us, and Canopy Growth, of our, and its, respective obligations and covenants in the Existing Arrangement Agreement, and (iii) cannabis production, distribution and sale becoming legal under United States federal law, or being removed from regulation under such law. If these conditions are not fulfilled or waived or the Acquisition is not completed for any other reason, our shareholders will not receive Canopy ~~Growth~~ Shares as consideration for their shares of ~~Acreage, or, if applicable, the Floating Cash Consideration.~~Acreage. Certain of these conditions, including the ~~occurrence~~approval of the ~~Triggering Event Date,~~Canopy Capital Reorganization and the exchange of all Canopy Shares held by CBG and Greenstar into Exchangeable Canopy Shares, are outside of our control. There can be no certainty, nor can we provide any assurance, that all conditions precedent will be satisfied or waived, or, if satisfied or waived, when they will be satisfied or waived and, accordingly, the Acquisition may not be completed.

In addition, if the Acquisition is not completed, our ongoing business may be adversely affected as a result of the costs (including opportunity costs) incurred in respect of pursuing the Acquisition, and we could experience negative reactions from the financial markets, which could cause a decrease in the market price of the Fixed Shares, particularly if the market price reflects market assumptions that the Acquisition will be completed or completed on certain terms. We may also experience negative reactions from our customers and employees and there could be negative impact on our ability to attract future acquisition opportunities. Failure to complete the Acquisition or a change in the terms of the Acquisition could each have a material adverse effect on Acreage’s business, financial condition and results of operations.

If we issue more Fixed Shares or Floating Shares than permitted under the Arrangement Agreement or if we, or one of our subsidiaries, make a $20.0 million payout in certain situations, the holders of our Fixed Shares or Floating Shares may receive fewer Canopy Growth Shares upon completion of the Acquisition.

There is a fixed maximum number of Canopy Growth Shares that may be issued in connection with the Acquisition. In the event that we issue more Fixed Shares than the permitted threshold under the Arrangement Agreement or if we or any of our subsidiaries are required to make a payout over $20.0 million in order to either (i) settle, (ii) satisfy a judgment, or (iii) acquire the disputed minority non-controlling interest, in connection with the claim filed by EPMMNY LLC against certain of our subsidiaries, the Fixed Exchange Ratio will be automatically reduced. In addition, in the event that we issue more Floating Shares than the permitted threshold under the Arrangement Agreement, the Floating Ratio will be automatically reduced. Any such reduction of the Fixed Exchange Ratio or Floating Ratio will result in the holders of Fixed Shares or Floating Shares, as applicable, receiving fewer Canopy Growth Shares upon completion of the Acquisition.

~~Risks Related to the Acquisition by Canopy Growth of the Fixed Shares only and not the Floating Shares~~

There is the possibility that Canopy Growth will only acquire the Fixed Shares and not the Floating Shares as part of the Acquisition. If Canopy were to do so then some risks include, but are not limited to: risks associated with holding securities of a company with a majority controlling shareholder; risk that there may not be an active trading market for the Floating Shares; risk that the Floating Shares will not trade at an intrinsic value; risks that the Company will be restricted from pursuing strategic and organic growth opportunities without Canopy Growth’s consent; risk of loss of revenue under the Management Services Agreements; and risks that Canopy Growth may compete with the Company or divert opportunities to its other investees that participate in the U.S. cannabis industry.

Additional risks and uncertainties, including those currently unknown or considered immaterial by the Company and Canopy Growth, may also adversely affect the business of the Company or Canopy Growth following the Acquisition of the Fixed Shares only and not the Floating Shares.

~~The Exchange Ratio may be decreased in certain instances~~

There is a fixed maximum number of Canopy Growth Shares to be issued in connection with the Acquisition. In addition, in the event that the Company issues more shares than the permitted threshold under the Arrangement Agreement or if the Company or any of its Subsidiaries is required to make a payout over $20.0 million in order to either (i) settle, (ii) satisfy a judgment, or (iii) acquire the disputed minority non-controlling interest, in connection with the claim filed by EPMMNY LLC against certain Subsidiaries, the Fixed Exchange Ratio will be automatically reduced. Any such reduction of the Fixed Exchange Ratio will result in the shareholders of the Company receiving fewer Canopy Growth Shares upon completion of the Acquisition.

The Company will incur substantial transaction-related costs in connection with the Acquisition

The Company expects to incur a number of non-recurring transaction-related costs associated with completing the Acquisition which will be incurred whether or not the Acquisition is completed. Such costs may offset any expected cost savings and other synergies from the Acquisition.

The Canopy ~~Growth~~ Shares to be received by shareholders as a result of the Acquisition will have different rights from the Fixed Shares and the Floating Shares

Following completion of the Acquisition, shareholders will no longer be shareholders of the Company, a corporation governed by the ~~British Columbia~~ Business Corporations Act (British Columbia) (the “BCBA”), but will instead be shareholders of Canopy Growth, a corporation governed by the Canada Business Corporations Act ~~(Canada) (“CBCA~~”(the “CBCA”). There may be important differences between the current rights of shareholders and the rights to which such shareholders will be entitled as shareholders of Canopy Growth under the CBCA and Canopy Growth’s constating documents.

~~The Company and Canopy Growth may not integrate successfully~~Securing additional financing

The continued development of Acreage’s business may require additional financing. In the event that the Floating Share Arrangement is not completed and the Fixed Call Option has not been exercised under the Existing Arrangement prior to the termination of the Floating Share Agreement, Canopy will retain the Fixed Call Option to acquire the Fixed Shares under the Existing Arrangement. There can be no assurance that additional capital or other types of financing will be available or that, if available, the terms of such financing will be favourable to Acreage. In addition, the Existing Arrangement Agreement contains restrictive covenants and consent requirements relating to capital raising activities, incurring indebtedness and other financial and operational matters, which may make it more difficult for Acreage to obtain additional capital and to pursue business opportunities, including potential acquisitions.

Acreage may require additional financing to fund its operations until positive cash flow is achieved. If the Floating Share Arrangement is not completed and the Fixed Call Option is not exercised under the Existing Arrangement as currently proposed, risks may materialize and may materially and adversely affect Acreage’s business, financial results and the price of the Floating Shares and the Fixed Shares. This could result in the delay or indefinite postponement of Acreage’s current business objectives or Acreage ceasing to carry on business. If Acreage is able to raise additional equity financing through the

issuance of Floating Shares and Fixed Shares, such issuances may substantially dilute the interests of Floating Shareholders. If Acreage is able to raise additional debt financing, payment of the associated interest costs is likely to impose a substantial financial burden on Acreage.

Risks Relating to the Floating Share Arrangement

The Floating Share Arrangement may not be completed

There can be no assurance that the Floating Share Arrangement will be completed. The completion of the Floating Share Arrangement is subject to the satisfaction or waiver of a number of conditions which include, among other things: (i) obtaining necessary approvals, including the court approvals, exchange approvals and other regulatory approvals (as defined in the Floating Share Agreement); (ii) performance by Acreage, Canopy and Canopy USA of their respective obligations and covenants in the Floating Share Agreement; and (iii) satisfaction or, if permitted, waiver of the Acquisition Closing Conditions (as defined in the Floating Share Agreement), excluding conditions that by their terms cannot be satisfied until the Acquisition Effective Time (as defined in the Floating Share Agreement), and the conditions precedent set out in the Floating Share Agreement, including, among others, completion of the Canopy Capital Reorganization (as defined in the Floating Share Agreement) on or prior to May 31, 2023 (or such date as may be agree to in writing by Acreage Canopy USA and Canopy).

If these conditions are not fulfilled or waived, or the Floating Share Arrangement is not completed for any other reason, Floating Shareholders will not receive the Canopy Shares. Certain of these conditions are outside of the control of Acreage. There can be no certainty, nor can Acreage provide any assurance, that all conditions precedent to the completion of the Floating Share Arrangement will be satisfied or waived, or, if satisfied or waived, when they will be satisfied or waived and, accordingly, the Floating Share Arrangement may not be completed. In addition, in the event that the Floating Share Arrangement is not completed, Canopy will still retain the right to acquire all of the Fixed Shares pursuant to Fixed Call Option under the Existing Arrangement. If the Fixed Call Option is exercised, it is anticipated Canopy USA will beneficially own approximately 70% of the voting rights attached to all the outstanding Acreage Shares at the Acquisition Time (as defined in the Floating Share Agreement). If the Floating Share Arrangement is not completed and the Acquisition is completed within the anticipated timeframe, thereafter holders of Floating Shares will have little or no influence on the conduct of Acreage’s business and affairs, and there may not be an active trading market for the Floating Shares, among other things.

Further, if the Floating Share Arrangement is not completed, the ongoing business of Acreage may be adversely affected as a result of the costs (including opportunity costs) incurred in respect of pursuing the Floating Share Arrangement, and Acreage could experience negative reactions from the financial markets, which could cause a decrease in the market price of the Floating Shares and/or the Fixed Shares. Acreage may also experience negative reactions from its customers and employees, and there could be a negative impact on Acreage’s ability to attract future acquisition opportunities. Failure to complete the Floating Share Agreement or a change in the terms of the Floating Share Agreement could each have a material adverse effect on Acreage’s business, financial condition and results of operations and its ability to comply with the covenants and conditions set forth in the Existing Arrangement Agreement.

Market overhang risk

Upon completion of the Floating Share Arrangement and assuming completion of the Acquisition, a significant number of additional Canopy Shares will be issued and available for trading in the public market. Such increase in the number of Canopy Shares available for trading in the public market may lead to sales of such Canopy Shares, or the perception that such sales may occur (commonly referred to as “market overhang”), either of which may adversely affect the market for, and the market price of, the Canopy Shares.

Nasdaq listing and share consolidation

The Canopy Shares are listed for trading on the TSX and the Nasdaq. In order to maintain the listing of the Canopy Shares on the Nasdaq, Canopy must comply with the Nasdaq’s continued listing requirements and standards, which stipulate that the Canopy Shares must maintain a minimum bid price of at least $1.00 per share (the “Minimum Share Price Listing Standard”). There can be no assurance that there will be sufficient liquidity of the Canopy Shares, nor that Canopy will be able to meet the Minimum Share Price Listing Standard on an ongoing basis. In order for Canopy to regain compliance with the Minimum Share Price Listing Standard in the event that the trading price of the Canopy Shares drops below $1.00, Canopy may be required to consolidate (or reverse split) the issued and outstanding Canopy Shares into a lesser number of issued and outstanding Canopy Shares. This would have a dilutive effect on the Floating Shareholders that receive Canopy Shares pursuant to the Floating Share Arrangement. If Canopy is unable to regain compliance with the Minimum Share Price Listing Standard, the Canopy Shares may be subject to delisting from the Nasdaq.

Canopy cannot finance Canopy USA

In October 2017, the TSX issued a staff notice (the “TSX Staff Notice”), warning that listed issuers with ongoing business activities that are in violation of United States federal law regarding marijuana are not compliant with applicable listing

requirements (the “TSX Listing Requirements”). Furthermore, the TSX Staff Notice made clear that the concept of “ongoing business activities” would be interpreted broadly to include: (i) activities related to the cultivation, distribution or possession of cannabis in the United States (a “U.S. Cannabis Business”); (ii) commercial interests or arrangements with a U.S. Cannabis Business that are similar in substance to ownership or investment; (iii) providing services or products that are specifically designed for, or targeted as, a U.S. Cannabis Business; or (iv) commercial interests or arrangements with entities providing such services or products to a U.S. Cannabis Business.

As a result of the foregoing, Canopy cannot finance the business or operations of Canopy USA for so long as Canopy is listed on the TSX or the TSX Listing Requirements remain subject to the TSX Staff Notice. There can be no assurance that Canopy USA will be able to generate sufficient funds required for its operations without external funding, which may dilute Canopy’s as-converted interest in Canopy USA. Further, there can be no assurance that Canopy USA will be able to obtain and maintain financing on acceptable terms, or at all. In the event that Canopy USA is unable to obtain or maintain sufficient financing, the value of the Canopy Shares may decline as the business, growth and prospects of Canopy USA may be materially adversely impacted thereby impacting the consolidated financial statements of Canopy and its own future business, growth and prospects.

The Canopy Shares to be received by Floating Shareholders as a result of the Floating Share Arrangement will have different rights from the Floating Shares

Upon completion of the Floating Share Arrangement, Floating Shareholders will no longer be shareholders of Acreage, a company governed by the BCBCA, but will instead be shareholders of Canopy, a corporation governed by the CBCA. There may be important differences between the current rights of Floating Shareholders and the rights to which such shareholders will be entitled as shareholders of Canopy under the CBCA and Canopy’s constating documents. Shareholder rights under the CBCA are in many instances comparable to those under the BCBCA; however, there are several differences.

Anticipated benefits of integration with Canopy USA may not materialize

It is anticipated that Canopy USA will exercise its option to acquire 100% of the shares of Jetty (the “Jetty Option”) and 100% of the shares of Wana (the “Wana Option”). If such options are exercised, upon completion of the Floating Share Arrangement, it is anticipated that Canopy USA’s business will involve the integration of companies that previously operated independently. ~~As a result, the Acquisition will~~Such integration may present challenges tofor Canopy ~~Growth’s management,~~USA, including the integration of the operations, systems and personnel, ~~of the two companies,~~ and special risks, including possible unanticipated liabilities, unanticipated costs, diversion of ~~management’s~~time and attention and the loss of key employees. The difficulties ~~management encounters~~Canopy USA may encounter in the transition and integration process could have an adverse effect on the revenues, level of expenses and operating results of Canopy ~~Growth following completion of the Acquisition.~~and Canopy USA. If actual results are less ~~favorable~~favourable than anticipated, the ~~Company and Canopy Growth currently estimate, the combined company’s~~ business, results of operations, financial condition and liquidity of Canopy and Canopy USA could be materially adversely impacted.

The ability to realize the benefits of the ~~Acquisition will~~Floating Share Arrangement may depend in part on successfully consolidating functions and integrating operations, procedures and personnel in a timely and efficient manner, as well as on ~~the combined company’s~~Canopy USA’s ability to realize the anticipated growth opportunities and synergies, efficiencies and cost savings from integrating the ~~Company’s~~businesses of Acreage with Wana and ~~Canopy Growth’s businesses following completion of~~Jetty, in the ~~Acquisition.~~event the Wana Option and the Jetty Option are exercised.

~~Most operational~~Operational, strategic and ~~strategic decisions and certain~~ staffing decisions ~~with respect to the combined company~~ have not yet been made. These decisions, ~~and~~coupled with the integration of Acreage, Wana and Jetty, in the ~~two companies will~~event the options to acquire ownership of these entities is exercised, into Canopy USA’s operations, may present challenges, ~~to management,~~ including the integration of systems and personnel, ~~of the two companies~~ and special risks, including possible unanticipated liabilities, unanticipated costs, and the loss of key employees. The performance of ~~the combined company’s operations~~Canopy USA after completion of the ~~Acquisition~~Floating Share Arrangement could be adversely affected if ~~the combined company~~Canopy USA cannot attract and retain key employees to assist in ~~the integration and operation of the combined company.~~its operations. As a result of these factors, it is possible that the expected cost reductions and synergies ~~expected from the combination of the Company and Canopy Growth will~~may not be realized.

~~This~~It is expected that integration will require the dedication of substantial ~~management~~ effort, time and resources, which may divert ~~management’s~~the focus of Canopy USA and resources from other strategic opportunities following completion of the ~~Acquisition and~~Floating Share Arrangement, as well as from operational ~~matters during this process.~~matters. The amount and timing of the synergies ~~the parties hope~~hoped to ~~realize~~be realized may not occur as planned. In addition, the integration process may result in the disruption of ongoing business that may adversely affect the ability of ~~the combined company~~Canopy USA and Canopy to achieve the anticipated benefits of the ~~Acquisition.~~Floating Share Arrangement.

The anticipated benefits of the strategy involving Canopy USA may not be realized

Achieving the benefits anticipated through Canopy USA depends in part on the ability of Canopy USA to effectively capitalize on its scale, to realize the anticipated capital and operating synergies, to profitably sequence the growth prospects and to maximize the potential of its growth opportunities. The ability to realize these benefits from the proposed acquisitions of Acreage, Wana and Jetty by Canopy USA may depend, in part, on successfully consolidating certain functions and integrating operations, procedures and personnel in a timely and efficient manner, and on Canopy USA’s ability to realize the anticipated

growth opportunities and synergies. The integration of Acreage with Wana and Jetty, in the event the Wana Option and Jetty Option are exercised, by Canopy USA will require the dedication of substantial effort, time and resources on the part of Canopy USA which may divert time, focus and resources from other strategic opportunities available to Canopy USA and from operational matters during this process. In addition, the integration process could result in disruption of existing relationships with suppliers, employees, customers and other constituencies of each company. There can be no assurance that Canopy USA will be able to integrate the operations of each of the businesses successfully or achieve any of the synergies or other benefits that are anticipated.

Operational and strategic decisions with respect to the integration of Acreage with Wana and Jetty, in the event the Wana Option and Jetty Option are exercised, have not yet been made and may present challenges. It is possible that the integration process could result in the inability to attract and retain key employees, the disruption of the respective ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect the ability to maintain relationships with clients, suppliers, employees or to achieve the anticipated benefits. The performance of Canopy USA could be adversely affected if Canopy USA cannot attract and retain key employees. Any inability of Canopy USA to successfully integrate the operations could have a material adverse effect on the business, financial condition and results of operations of Canopy and Canopy USA.

Canopy ~~Growth~~may not be able to renegotiate its debt to Greenstar

Greenstar holds $100 million aggregate principal amount of outstanding unsecured subordinated senior promissory notes issued by Canopy which mature on July 15, 2023. Greenstar, in its early warning report filed under Canopy’s profile on SEDAR dated October 26, 2022, and Canopy have each announced their intention to negotiate an exchange of such notes for Exchangeable Canopy Shares if the Canopy Capital Reorganization is authorized by Canopy’s shareholders at the special meeting of Canopy shareholders to be called for such purposes (the “Canopy Meeting”). There can be no assurance that the Canopy Capital Reorganization will be approved at the Canopy Meeting, or if it is, that negotiations for such exchange will be successful. If Canopy is not able to successfully negotiate the exchange of such notes for Exchangeable Canopy Shares, the maturity of such notes on July 15, 2023 will require repayment of the notes in cash, which may result in financial difficulty for Canopy. This may result in a decline in the market value of the Canopy Shares, and a resulting negative impact on the value that Floating Shareholders will realize upon completion of the Floating Share Arrangement.

Upon the closing of the Floating Share Arrangement, Shareholders will own shares of Canopy whose management team will not have the ability to direct or manage the operations of Canopy USA

Current Shareholders will not receive shares of Canopy USA as part of the Floating Share Arrangement but only shares of Canopy yet upon the closing of the Floating Share Arrangement, Canopy USA will hold all of the Acreage Shares. Canopy does not have the ability to direct or manage the operations of Canopy USA. The interests of Canopy USA may not coincide with the interests of Canopy and its shareholders and, consequentially, management of Canopy USA may not necessarily act in accordance with the best interests of the shareholders of Canopy. To the extent that conflicts of interests may arise, Canopy USA may act in a manner adverse to Canopy and its shareholders.

Canopy may issue additional equity securities

Canopy ~~Growth~~ may issue equity securities to finance its activities, including in order to finance acquisitions. IfIn addition, if Canopy ~~Growth issues~~is successful in negotiating the exchange of certain outstanding promissory notes owed to Greenstar for Exchangeable Canopy Shares (see “Canopy may be unable to renegotiate its debt to Greenstar” above), additional Exchangeable Canopy Shares will be issued, which will be convertible into Canopy Shares. Following any issuance of additional equity securities by Canopy, whether prior to or following the ~~Acquisition,~~completion of the Floating Share Arrangement, the ownership interest of ~~existing shareholders of the Company~~Floating Shareholders in Canopy ~~Growth assuming~~upon such completion of the ~~Acquisition~~Floating Share Arrangement may be diluted, and some or all of ~~Canopy Growth’s~~Canopy’s financial measures on a per share basis ~~could~~may be reduced. Moreover, if ~~the intention to issue additional equity securities becomes publicly known, Canopy Growth’s share price may be materially adversely affected.~~

~~Following the completion of the Acquisition, the combined company may issue additional equity securities~~

Following the completion of the Acquisition, the combined company may issue equity securities to finance its activities, including in order to finance acquisitions. If the combined company were to issue additional equity securities, the ownership interest of existing shareholders may be diluted and some or all of the combined company’s financial measures on a per share basis could be reduced. Moreover, as the combined company’sCanopy’s intention to issue additional equity securities becomes publicly known, the ~~combined company’s share~~ price of the Canopy Shares may be materially adversely affected.

The Acquisition will affect the rights of ~~the Company’s shareholders~~Floating Shareholders

Following the completion of the ~~Acquisition, shareholders~~Floating Share Arrangement, Floating Shareholders will no longer have ~~a direct~~an interest in ~~the Company,~~Acreage, its assets, revenues or profits. In the event that the actual value of ~~Company’s~~Acreage’s assets or business as at the ~~effective date of~~Effective Date (as defined in the ~~Acquisition~~Floating Share Agreement), exceeds the ~~implied~~ value of Acreage implied by the ~~Company under~~exchange ratio of 0.4500 of a Canopy Share to be issued for each Floating Share exchanged pursuant to the Floating Share Arrangement ~~shareholders~~(the “Exchange Ratio”), holders of Floating Shares will not be entitled to additional ~~consideration~~consideration.

Adverse U.S. federal income tax consequences

For U.S. federal income tax purposes, the Floating Share Arrangement is expected not to qualify as a reorganization under Section 368(a) of the Code and is expected to be a fully taxable transaction. U.S. Holders may be required to pay substantial U.S. federal income taxes in connection with the Floating Share Arrangement. Assuming the Floating Share Arrangement does not qualify as a reorganization under Section 368(a) of the Code, a U.S. Holder that receives Canopy Shares in exchange for Floating Shares would generally recognize a capital gain or loss equal to the difference between the fair market value of the Canopy Shares received and the U.S. Holder’s adjusted tax basis in the Floating Shares exchanged therefor. For additional information, see the section entitled “Certain United States Federal Income Tax Considerations”. Special rules apply to Non-U.S. Holders based on their ~~shares.~~particular circumstances. There is a risk that such Non-U.S. Holders could be subjected to U.S. federal income tax under certain circumstances.

Canopy ~~Growth~~is subject to certain restrictions of the TSX and the Nasdaq, which may constrain its ability to expand its business in the United States

The Canopy Shares are currently listed on the TSX and the Nasdaq. So long as Canopy continues to be listed on the TSX and the Nasdaq, Canopy must comply with their requirements and guidelines when conducting business, particularly when pursuing opportunities in the United States.

In October 2017, the TSX issued the TSX Staff Notice, which notes that listed issuers with ongoing business activities that are in violation of United States federal law regarding marijuana are not compliant with the TSX Listing Requirements. Should the TSX determine that Canopy is in violation of the TSX Listing Requirements, the TSX may initiate a delisting review. Although Canopy believes that it complies with all applicable laws and regulations, including the TSX Listing Requirements, there is a risk that Canopy’s interpretation may differ from that of the TSX. Canopy’s failure to comply with the TSX Listing Requirements could result in a delisting of the Canopy Shares from the TSX, or the denial of Canopy’s application (the “Listing Application”) to list the Canopy Shares issuable to the Floating Shareholders on the TSX. The denial of Canopy’s Listing Application could, among other things: (i) result in the failure to satisfy the condition precedent to completion of the Floating Share Arrangement that all required court approvals and other regulatory approvals be obtained, such that the Floating Share Agreement will be terminated, and the Floating Share Arrangement will not be completed; (ii) have a material adverse effect on the trading price of the Canopy Shares; or (iii) have a material adverse effect on Canopy’s business, financial condition and results of operations.

While the Nasdaq has not issued official rules specific to the cannabis or hemp industry, stock exchanges in the United States, including the Nasdaq, have historically refused to list certain cannabis related businesses, including cannabis retailers, that operate primarily in the United States. Failure to comply with any requirements imposed by the Nasdaq could result in the delisting of the Canopy Shares from the Nasdaq, or the denial of any application to have additional securities listed on the Nasdaq, which could have a material adverse effect on the trading price of the Canopy Shares. See “Regulatory Matters — Stock Exchange Matters”.

If Canopy USA acquires Wana, Jetty or the Fixed Shares of Acreage without structural amendments to Canopy’s interest in Canopy USA, the listing of the Canopy Shares on the Nasdaq Stock Market may be ~~acquired before~~jeopardized

Canopy’s listings on the TSX and Nasdaq prohibit Canopy from investing in, or acquiring, state regulated, but federally illegal, businesses in the United States cannabis market until a change in United States federal law occurs or Canopy delists the Canopy Shares from the TSX and Nasdaq and lists on an alternative exchange that does not prohibit investments in United States cannabis businesses. While Canopy believes that it currently complies with all applicable laws and regulations, as well as the applicable cannabis related policies of the TSX and Nasdaq, Canopy’s interpretation may differ from those of the stock exchanges now or in the future, and therefore, the TSX or Nasdaq could allege that Canopy violates the exchange’s cannabis-related policies.

Canopy has advised that it expects to consolidate the financial statements of Canopy USA in accordance with U.S. GAAP, including the financial statements of Acreage, Wana and Jetty once those acquisitions have been completed by Canopy USA. On December 7, 2022, Canopy received a letter from Nasdaq Regulation requesting certain information and stating, among other things, its position that companies that consolidate “the assets and revenues generated from activities in violation under federal law cannot continue to list on Nasdaq.” Canopy has advised that it expects to continue dialogue with Nasdaq Regulation regarding its position. Representatives of Nasdaq have expressed to representatives of Canopy that the exchange was comfortable with the formation of Canopy USA, the Reorganization and Canopy holding Canopy USA Non-Voting Shares. Representatives of Nasdaq have also indicated to representatives of Canopy that Nasdaq Rule 5205(c) requires Nasdaq to determine compliance with the listing standards based on a company’s financial statements. Canopy has advised that it disagrees with Nasdaq’s application of Nasdaq Rule 5205(c) since Nasdaq Rule 5205(c) merely refers to a company’s initial listing and continued listing qualifications expressly enumerated in the Nasdaq Rules and does not address the matter of the legality of the revenues reported within a company’s financial statements. Accordingly, Canopy has advised that it intends to continue its dialogue with Nasdaq Regulation as it believes that the “qualifications” referenced in Nasdaq Rule 5205(c) cannot

refer to a standard that does not exist within the Nasdaq Rules nor, intuitively, can accounting treatment form the basis for a conclusion with respect to compliance with laws.

Canopy has advised that it is hopeful that another exchange will seek to determine Canopy’s compliance with its listing requirements on the basis of applicable laws. In the event that neither Nasdaq nor another exchange is comfortable with financial consolidation of Canopy USA and Nasdaq initiates a delisting process, Canopy has advised that it intends to vigorously appeal such a decision.

There is significant judgment in applying the guidance with respect to consolidation of a variable interest entity under U.S. GAAP, particularly given the highly-structured, nuanced and novel nature of Canopy’s interest in Canopy USA. No precedent has been identified by Canopy with respect to the accounting treatment under U.S. GAAP. Canopy USA was structured to ensure that Canopy does not currently have the ability to direct or manage the operations of Canopy USA. The Protection Agreement provides for stringent negative covenants in favor of Canopy that limit a wide variety of corporate and operational decisions of Canopy USA without the consent of Canopy. Canopy considers that in the aggregate, given the disproportionality of economics to stated power over the operations and strategy of Canopy USA, the limited exposure to the economics of Canopy USA for shareholders other than Canopy, the negative covenants contained in the Protection Agreement and the fact that the third-party investors in Canopy USA had pre-existing business relationships with Canopy, based on the current structure of Canopy’s ownership in Canopy USA, consolidation of Canopy USA by Canopy was deemed to most appropriately result in compliance with the requirements of U.S. GAAP despite Canopy’s inability to direct or manage the operations of Canopy USA. In addition, Canopy advised that it believes that consolidating the financial statements of Canopy USA under U.S. GAAP provides investors of Canopy with a more fulsome, accurate and detailed understanding of the financial position and profit and loss for Canopy overall despite Canopy’s inability to direct or manage the operations of Canopy USA. However, in the event that financial consolidation of Canopy USA is not acceptable to either Nasdaq or another exchange and Canopy is unsuccessful in an appeal with respect to a delisting on Nasdaq, Canopy has advised that it intends to amend the structure of its interest in Canopy USA and the terms of the Protection Agreement and Canopy USA’s Limited Liability Company Agreement such that Canopy would not be required to consolidate the financial results of Canopy USA into Canopy’s financial statements. Such changes may include: (1) reducing Canopy’s economic interest in Canopy USA on an as- converted basis to no greater than 90%, (2) reducing the number of managers on Canopy USA’s board of managers from four to three, including, reducing Canopy’s nomination right to a single manager, (3) modifying the terms of the protection agreement entered into among Canopy, 11065220 Canada Inc. and Canopy USA dated October 24, 2022 (the “Protection Agreement”) and Canopy USA’s Limited Liability Company Agreement in order to eliminate certain negative covenants, and (4) modifying the terms of the agreements with third-party investors in Canopy USA to, among other things, eliminate their right to guaranteed returns. Accordingly, Canopy has advised that it does not believe there is any circumstance in which the amendment proposal will result in a delisting from Nasdaq unless there is a concurrent listing on another exchange. Nonetheless, there can be no assurance that Canopy will be able to successfully amend the structure of Canopy’s interest in Canopy USA, as well as the terms of the Protection Agreement and Canopy USA’s Limited Liability Company Agreement such that Canopy would not be required to consolidate the financial results of Canopy USA into Canopy’s financial statements. In addition, there can be no assurance that the SEC will agree with Canopy’s proposed accounting treatment of Canopy USA. Accordingly, there can be no assurance that Canopy will remain listed on Nasdaq or any other exchange on which the Canopy Shares are currently listed on, which could have a material adverse effect on the trading price of the Canopy Shares, as well as Canopy’s business, financial condition and results of operations. In the event of a delisting from a stock exchange, there is no assurance that Canopy will be able to satisfy the conditions required to list on an alternative stock exchange.

A delisting could adversely impact the liquidity of the Canopy Shares

The Canopy Shares are currently listed on the TSX and the Nasdaq. During the 12-month period ended December 31, 2022, approximately 78% of the trading volume of the Canopy Shares took place on the Nasdaq. If the Canopy Shares are delisted from the Nasdaq, there may be a reduction in the liquidity of the Canopy Shares. The pool of potential purchasers of Canopy Shares could also become more limited as a result. Accordingly, a purchase or sale of Canopy Shares may take longer to complete unless Canopy was able to list the Canopy Shares on an alternative exchange. Any inability to purchase and sell Canopy Shares on a timely basis in sufficient quantities could have a material adverse effect on the market price of the Canopy Shares or the ability of Canopy to complete future equity financings on terms favourable to it.

Canopy’s ability to meet its debt obligations may have an adverse impact on its capital position, business and operations

Canopy’s publicly available interim financial statements as of and for nine months ended December 31, 2022 reflect a net loss and negative cash flow from operating activities for the nine months ended December 31, 2022. Canopy has approximately C$337.38 million in debt maturing in 2023, including certain notes owed to Greenstar (see “Canopy may be unable to renegotiate its debt to Greenstar”) above. Canopy and Greenstar have each indicated their intention to negotiate an exchange of such debt for Exchangeable Canopy Shares if the Canopy Capital Reorganization is approved at the Canopy Meeting. If such negotiations are not successful, and Canopy is unable or does not have the resources to repay or refinance such debt coming due

in 2023, that may have an adverse impact on Canopy’s capital position, business and operations and, consequentially, the liquidity and price of the Canopy Shares.

Risk of a change of control of Canopy USA but not Canopy

There can be no assurance that Canopy will maintain its ownership interest in Canopy USA. If Canopy divests its ownership interest in Canopy USA, whether as a result of a forced divestiture or by voluntary sale, Floating Shareholders will no longer have an interest in Canopy USA or its U.S. cannabis investments previously held by Canopy.

The Reorganization may not be acceptable to certain of Canopy’s financial lenders or other capital providers

Although the sale of cannabis is permissible at the state level in a number of states in United States, cannabis continues to be categorized as a controlled substance under the Controlled Substances Act, and the cultivation, distribution, sale and possession of cannabis remains federally illegal in the United States. As such, the Controlled Substances Act may still be enforced against individuals and companies operating in states in which the sale of cannabis is permissible. This poses a risk that certain of Canopy’s lenders or other capital providers may choose not to engage in business with Canopy if it is believed that Canopy is in contravention of the Controlled Substances Act. If one or more of such providers terminates its relationship with Canopy as a result of its strategy to accelerate its entry into the United States cannabis industry through the creation of Canopy USA (the “Reorganization”), it could have a material adverse effect on Canopy, including its reputation and ability to conduct business, its financial position, operating results, profitability or liquidity or the market price of its listed securities.

Prior to the Effective Time, Acreage is restricted from taking certain actions pursuant to the Floating Share Arrangement

The Floating Share Agreement restricts Acreage from taking specified actions until the earlier of the (12:00 a.m. (Vancouver time) on the Effective Date (the “Effective Time”) and the time that the Floating Share Agreement is terminated in accordance with its terms, including issuing additional Floating Shares subject to certain exceptions, without the consent of Canopy which may adversely affect the ability of Acreage to execute certain business strategies. These restrictions may prevent Acreage from pursuing certain business opportunities that may arise prior to the Effective Time.

Ability to integrate successfully

The Floating Share Arrangement will involve the integration of companies that previously operated independently. The ability to realize the benefits of such transactions will depend in part on successfully consolidating functions and integrating operations, procedures and personnel in a timely and efficient manner, as well as the ability to realize the anticipated growth opportunities and synergies, efficiencies and cost savings from integrating Acreage’s businesses. Operational and strategic decisions and staffing decisions have not yet been made. The loss of the services of Acreage personnel and key employees following the Effective Date, whether as a direct result of the completion of the transaction, inability to retain such personnel due to a change of job requirements thereafter, or otherwise the inability to successfully integrate, or an inability to attract other suitably qualified persons when needed, could have a material adverse effect on the ability of Canopy and Canopy USA to execute on the business plan and strategy, and Canopy and Canopy USA may be unable to find adequate replacements on a timely basis, or at all.

Risks if the Floating Share Arrangement is not completed and Canopy acquires the Fixed Shares

Pursuant to the Floating Share Agreement, Canopy has irrevocably waived the Floating Call Option to acquire the Floating Shares pursuant to the Existing Arrangement. If the Floating Share Arrangement is not completed, the Fixed Call Option may have already been exercised pursuant to the Floating Share Agreement. If the Fixed Call Option has not yet been exercised, Canopy will still retain the right to acquire all of the Fixed Shares pursuant to the Fixed Call Option under the Existing Arrangement. If the Fixed Call Option is exercised in either such scenario and Canopy USA acquires the Fixed Shares, it is anticipated that Canopy USA will beneficially own approximately 70% of the voting rights attached to all the outstanding Acreage Shares at the Acquisition Time.

Risks relating to holding Floating Shares in a company with a majority controlling shareholder

In the event that the Floating Share Arrangement is not completedbutthe Acquisition is completed, following the Acquisition Time until the End Date, the Existing Arrangement Agreement provides that Canopy will have certain rights including, without limitation, the right to nominate a majority of the Acreage Board, pre-emptive rights, top-up rights, approval rights and certain audit and inspection rights. In addition, there will be a number of restrictions imposed on Acreage, including, without limitation, restrictions regarding the payment of dividends, Acreage’s merger and acquisition activities, acquisitions, divestitures, amendments to constating documents, the issuance of certain securities and entering into any agreements that limit

Acreage’s ability to compete, in each case without the consent of Canopy. Floating Shareholders will have little or no influence on the conduct of Acreage’s business and affairs.

By virtue of becoming the controlling shareholder of Acreage, together with the rights and restrictions in the Existing Arrangement Agreement, Canopy will have the power to exercise decisive influence over Acreage. There are no guarantees that Canopy’s interests will align with the interests of Acreage or the interests of its Floating Shareholders. As a result, Acreage could be prevented from entering into transactions that could be beneficial to Acreage or its Floating Shareholders, and third parties will likely be discouraged from making a take-over bid for all of the Floating Shares as a result of the existence of a controlling shareholder. Any such transaction would likely involve payment of an amount of consideration per Floating Share less than would have been received by the holders pursuant to the Floating Share Arrangement. If a third-party were to offer to acquire all of the Fixed Shares from Canopy, holders of Floating Shares would have no “coattail rights” which would oblige such a third-party to offer to acquire the Floating Shares on the same terms. In addition, any sale of a substantial number of Floating Shares by a controlling shareholder could cause the market price of the Floating Shares to decline.

There may not be an active trading market for the Floating Shares

In the event that the Fixed Shares are acquired upon exercise of ~~any business consolidation, amalgamation, arrangement, merger, redemption, compulsory acquisition~~the Fixed Call Option pursuant to the Existing Arrangement and the Floating Share Arrangement is not completed, notwithstanding that it is proposed that the Floating Shares will remain listed for trading on the CSE, such listing may not provide significant liquidity, and the Floating Shares may not trade at prices advantageous to Floating Shareholders. An active or ~~similar transaction~~liquid trading market in the Floating Shares may not continue following the Acquisition Time. It is possible that low demand for the Floating Shares may make it difficult, or impossible, for a Floating Shareholder to sell their Floating Shares. Therefore, the sale of Floating Shares may take more time or ~~involving Canopy Growth, or~~require Floating Shareholders to accept a sale ~~or conveyance of all or substantially all~~at a lower price. In addition, the market price of the ~~assets~~Floating Shares may be subject to fluctuation, whether or not due to fluctuations in Acreage’s operating results and financial condition, which could, in turn, result in substantial losses being incurred by Floating Shareholders.

Limited ability to pursue strategic and organic growth opportunities without Canopy’s consent

The Existing Arrangement Agreement includes certain covenants in favour of Canopy ~~Growth~~that will apply following the Acquisition Time until the End Date. Such covenants include, among other things, the right to nominate a majority of the Acreage Board, pre-emptive rights, top-up rights, approval rights and certain audit and inspection rights. In addition, during such time there will be a number of restrictions imposed on Acreage, including, without limitation, restrictions regarding the payment of dividends, Acreage’s merger and acquisition activities, acquisitions, divestitures, amendments to Acreage’s constating documents, the issuance of certain securities and entering into any agreements that limit Acreage’s ability to compete, in each case without the consent of Canopy.

As a result, following the Acquisition Time, Acreage will be subject to a number of constraints. Acreage is not permitted to pursue various strategic and other ~~body corporate, trust, partnership~~business opportunities without obtaining Canopy’s consent. In the event Canopy does not provide its consent, Acreage may fail to execute on its business objectives and may not be able to pursue strategic and organic growth opportunities, which may have a material adverse effect on Acreage’s business, financial condition, results of operations and prospects.

Canopy USA may compete or divert opportunities to its other ~~entity, but excluding, for greater certainty,~~investees that participate in the U.S. cannabis industry

Canopy USA may compete with the business of Acreage. There is a risk that there will be situations when the interests of Canopy USA conflict with the interests of Acreage or Canopy Shareholders. Any increased competitive pressure against Acreage from Canopy, its Subsidiaries, Canopy USA or any ~~transactions involving~~investee companies after the Acquisition Time may have a material adverse effect on Acreage’s business, financial condition, results of operations and prospects.

Additional risks and uncertainties, including those currently unknown or considered immaterial by Acreage, Canopy ~~Growth~~ and ~~one~~Canopy USA, may also adversely affect the business of Acreage or ~~more of its subsidiaries (a “Canopy Growth Change of Control”) before the~~Canopy following completion of the Acquisition, shareholders of the Company will not be entitled to vote or exercise any dissent rights in connection with such proposed acquisition, however, all such shareholders of the Company will be bound by the terms of any such acquisition if approved. Accordingly, in the event of the exercise or deemed exercise of the Canopy Call Option or the Floating Call Option following a successful Canopy Growth Change of Control, it is anticipated that shareholders of the Company would receive securities of the entity resulting from such Canopy Growth Change of Control. The projected synergies and anticipated benefits of being acquired by Canopy Growth may not be realized if the Company is acquired in turn by a third-party purchaser or successor entity, as applicable, following a successful Canopy Growth Change of Control. The Company and such third-party purchaser or successor entity may not successfully integrate. If actual results are less favorable than the Company and Canopy Growth currently estimate, the business, results of operations, financial condition and liquidity of any such third-party purchaser or successor entity, as applicable, could be materially adversely impacted.Acquisition.

Risks Related to the Fixed Shares and Floating Shares

We cannot guarantee returns on our Fixed Shares or Floating Shares.

There is no guarantee that either the Fixed Shares or the Floating Shares will earn any positive return in the short term or long term. A holding of Fixed Shares or Floating Shares is speculative and involves a high degree of risk and should be undertaken only by holders whose financial resources are sufficient to enable them to assume such risks and who have no need for

immediate liquidity in their investment. A holding of Fixed Shares or Floating Shares is appropriate only for holders who have the capacity to absorb a loss of some or all of their investment.

Our Fixed Shares and Floating Shares may have a volatile market price.

The market price of the Fixed Shares and Floating Shares may be volatile and subject to wide fluctuations in response to numerous factors, many of which are beyond our control. This volatility may affect the ability of holders of Fixed Shares or Floating Shares to sell their securities at an advantageous price. Market price fluctuations in the Fixed Shares or Floating Shares may be due to our operating results failing to meet expectations of securities analysts or investors in any period, downward revision in securities analysts’ estimates, adverse changes in general market conditions or economic trends, acquisitions, dispositions or other material public announcements by us or our competitors, along with a variety of additional factors. These broad market fluctuations may adversely affect the market price of the Fixed Shares or Floating Shares.

Financial markets historically at times have experienced significant price and volume fluctuations that have particularly affected the market prices of equity securities of companies and that have often been unrelated to the operating performance, underlying asset values or prospects of such companies. Accordingly, the market price of the Fixed Shares or Floating Shares may decline even if our operating results, underlying asset values or prospects have not changed. Additionally, these factors, as well as other related factors, may cause decreases in asset values that are deemed to be other than temporary, which may result in impairment losses. There can be no assurance that continuing fluctuations in price and volume will not occur. If such increased levels of volatility and market turmoil continue, our operations could be adversely impacted, and the trading price of the Fixed Shares or Floating Shares may be materially adversely affected.

Lowered market price of the Floating Shares

The current price of the Floating Shares may reflect a market assumption that the transactions contemplated pursuant to the Floating Share Agreement will occur. A failure to complete the transactions contemplated pursuant to the Floating Share Agreement may result in a material decline in the price of the Floating Shares. Financial markets may experience significant price and volume fluctuations that affect the market prices of equity securities of companies that are unrelated to the operating performance, underlying asset values or prospects of such companies. Accordingly, the market price of the Floating Shares may decline even if Shareholder Approval is obtained. There can be no assurance that continuing fluctuations in price and volume will not occur before the Floating Share Arrangement is completed.

Our security holders resident in the United States may have difficulty settling trades because we operate in the cannabis sector.

Given the heightened risk profile associated with cannabis in the United States, capital markets participants may be unwilling to assist with the settlement of trades for U.S. resident security holders of companies with operations in the United States cannabis industry which may prohibit or significantly impair the ability of security holders in the United States to trade the Fixed Shares or Floating Shares. In the event residents of the United States are unable to settle trades of the Fixed Shares or Floating Shares, this may affect the pricing of the Fixed Shares or Floating Shares in the secondary market, the transparency and availability of trading prices and the liquidity of these securities.

There can be no assurance as to the liquidity of the trading market for our Fixed Shares or Floating Shares.

Our shareholders may be unable to sell significant quantities of Fixed Shares or Floating Shares into the public trading markets without a significant reduction in the price of their Fixed Shares or Floating Shares, or at all. There can be no assurance that there will be sufficient liquidity of the Fixed Shares or Floating Shares on the trading market, or that we will continue to meet the listing requirements of one or more of the CSE, OTCQX or FRA or achieve listing on any other public listing exchange.

Our Fixed Shares may trade at a price that is not indicative of our performance or at a discount to the Fixed Exchange Ratio.

There is no guarantee that the Fixed Shares will trade at a price that reflects our performance or at a price relative to the trading price of the Canopy ~~Growth~~ Shares based upon the the exchange ratio of 0.3048 of a Canopy Share for each Fixed Share exchanged pursuant to the Existing Arrangement, subject to adjustment in accordance with the Existing Arrangement and the Existing Arrangement Agreement (the “Fixed Exchange ~~Ratio.~~Ratio”). Given the uncertainties regarding the completion of the Acquisition, it is possible the Fixed Shares will trade at a significant discount to the Fixed Exchange Ratio.

~~Our~~ Floating Shares may not trade at ~~a price~~prices that isreflect the Exchange Ratio and will not ~~indicative of our performance or the minimum price required to be paid by Canopy Growth pursuant to the Floating Call Option.~~trade at an intrinsic value.

~~The intrinsic value of~~Until the ~~Floating Shares is indeterminate. There~~Effective Date, there is no guarantee that the Floating Shares will trade at a price that reflects ~~our~~the performance ~~nor at the minimum price required to be paid by Canopy Growth pursuant to the Floating Call Option. Moreover, the Floating Shares will not trade~~of Acreage or at a price ~~that is necessarily proportionate~~relative to the trading price of the ~~Fixed Shares.~~Canopy Shares based upon the Exchange Ratio. Given the uncertainties

regarding the completion of the Floating Share Arrangement, it is possible the Floating Shares will trade at a significant discount to the Exchange Ratio. Moreover, the intrinsic value of the Floating Shares is indeterminate.

Our credit agreements contain restrictive covenants which may adversely limit management’s discretion in operating our business.

Our credit agreements and the Debenture contain restrictive covenants that limit the discretion of management with respect to certain limited matters. A failure to comply with these terms could result in an event of default which, if not cured or waived, could result in accelerated repayment and may have a material and adverse consequence on our business, operations or financial condition, on a consolidated basis.

If certain U.S. states do not legalize recreational cannabis use within a proximate timeframe, we may not be able to comply with the Initial Business Plan which may result in significant restrictions on the operation of our business and Canopy Growth may not be required to complete the Acquisition.

The Initial Business Plan has been prepared based on the assumption that certain regulatory initiatives legalizing recreational cannabis will be approved in Connecticut, Massachusetts, New York, Pennsylvania, Illinois, New Jersey, ~~New Hampshire,~~ Maine and Ohio within a proximate timeframe. If some or all of the anticipated regulatory initiatives do not occur in the foregoing states within the contemplated timeline, or at all, it will have a significant adverse impact on our ability to meet the Pro-Forma Net Revenue Targets and Consolidated Adj. EBITDA Targets prescribed in the Initial Business Plan, which will likely result in an Interim Failure to Perform that could lead to a Material Failure to Perform and ultimately, a Failure to Perform.

Risks Related to our Articles

Our Articles contain a forum selection provision under Article 30, which, among other things, identifies the Supreme Court of British Columbia and the Court of Appeal of British Columbia as the exclusive forum for certain litigation. Given that, under United States law, investors cannot waive compliance by us with U.S. federal securities laws, it is uncertain whether the forum selection provision applies to actions arising under U.S. federal securities laws, and if it does, whether a British Columbia Court would enforce such provision. It is also uncertain whether a breach of U.S. securities law in and of itself would give rise to a direct cause of action in British Columbia, although indirect causes of action may arise thereunder as a result of, without limitation, breach, misrepresentation or the like. In the event it was determined that the forum selection provision applies to actions arising under U.S. federal securities laws or, if it did, a British Columbia court refused to enforce such provision or a breach of U.S. securities law did not give rise to a cause of action in British Columbia, there is a risk that we would be required to litigate any such breach in a jurisdiction which is less favorable to us, which could result in additional costs and financial losses that could have a material adverse effect on our business.

Risks Related to the United States Regulatory System

Our employees, directors, officers, managers and/or investors could face detention, denial of entry or lifetime bans from the United States for their business associations with us.

Because cannabis remains illegal under United States federal law, those investing in Canadian companies with operations in the United States cannabis industry could face detention, denial of entry or lifetime bans from the United States for their business associations with United States cannabis businesses. Entry happens at the sole discretion of U.S. Customers and Border Protection (“~~CBP~~”CBP”) officers on duty, and these officers have wide latitude to ask questions to determine the admissibility of a non-United States citizen or foreign national. The government of Canada ~~has started warning~~warns travelers on its website that previous use of cannabis, or any substance prohibited by United States federal laws, could mean denial of entry to the United States. Business or financial involvement in the cannabis industry in the United States could also be reason enough for United States border guards to deny entry. On September 21, 2018, CBP released a statement outlining its current position with respect to enforcement of the laws of the United States. It stated that Canada’s legalization of cannabis will not change CBP enforcement of United States laws regarding controlled substances and because cannabis continues to be a controlled substance under United States law, working in or facilitating the proliferation of the legal cannabis industry in U.S. states where it is deemed legal may affect admissibility to the United States. On October 9, 2018, CBP released an additional statement regarding the admissibility of Canadian citizens working in the legal cannabis industry. CBP stated that a Canadian citizen working in or facilitating the proliferation of the legal cannabis industry in Canada coming into the United States for reasons unrelated to the cannabis industry will generally be admissible to the United States; however, if such person is found to be coming into the United States for reasons related to the cannabis industry, such person may be deemed inadmissible. As a result, CBP has affirmed that, employees, directors, officers, managers and investors of companies involved in business activities related to cannabis in the United States who are not United States citizens face the risk of being barred from entry into the United States for life.

Uncertainty regarding the regulations under the U.S. 2018 Farm Bill, and undeveloped shared state-federal regulations over hemp cultivation and production, may impact our hemp business.

The Agriculture Improvement Act of 2018, otherwise known as the Farm Bill was signed into law on December 20, 2018. Under Section 10113 of the Farm Bill, state departments of agriculture must consult with the state’s governor and chief law enforcement officer to devise a plan that must be submitted to the Secretary of the USDA. A state’s plan to license and regulate hemp can only commence once the Secretary of USDA approves that state’s plan. In states opting not to devise a hemp regulatory program, the USDA will need to construct a regulatory program under which hemp cultivators in those states must apply for licenses and comply with a federally-run program. Even if a state creates a plan in conjunction with its governor and chief law enforcement officer, the Secretary of the USDA must approve such plan. There can be no guarantee that any state plan will be approved. Review times may be extensive. Although interim rules for hemp production under the Farm Bill are now in place federally, the timing of finalized federal rules and regulations, in addition to state specific rules and regulations, cannot be assured. There may be amendments and the ultimate plans, if approved by the states and the USDA, may materially limit our hemp business depending upon the scope of the regulations.

Laws and regulations affecting our industry governing operations under the Farm Bill are in development.

As a result of the Farm Bill’s passage, there will be a constant evolution of laws and regulations affecting the hemp industry that could detrimentally affect our operations. Local, state and federal hemp laws and regulations may be broad in scope and subject to changing interpretations. These changes may require us to incur substantial costs associated with legal and compliance fees and ultimately require us to alter our business plan. Furthermore, violations of these laws, or alleged violations, could disrupt our business and result in a material adverse effect on our operations. In addition, we cannot predict the nature of any future laws, regulations, interpretations or applications, and it is possible that regulations may be enacted in the future that will be directly applicable to our business.

The possible FDA Regulation of hemp and industrial hemp-derived CBD, and the possible registration of facilities where hemp is grown and hemp-derived products are produced, if implemented, could negatively affect our hemp business.

As a result of the passage of the Farm Bill, at some indeterminate future time, the U.S. Food and Drug Administration (“~~FDA~~”FDA”) may choose to change its position concerning products containing hemp, or cannabidiol (“~~CBD~~”CBD”) and other cannabinoids derived from hemp, and may choose to enact regulations that are applicable to such products, including, but not limited to: the processing of hemp into hemp products and applicability of good manufacturing practices to such processing; regulations covering the physical facilities where hemp is grown and/or processed; and possible testing to determine efficacy and safety of products containing hemp-derived CBD. In this hypothetical event, the proposed products, which we plan to introduce will likely contain CBD and may be subject to regulation. In the hypothetical event that some or all of these regulations are imposed, we do not know what the impact would be on the hemp industry in general, and what costs, requirements and possible prohibitions may be enforced. If we are unable to comply with the conditions and possible costs of possible regulations and/or registration, as may be prescribed by the FDA, we may be unable to continue to operate segments of our hemp business.

Our current officers and directors do not have experience in the hemp business.

Although management has business experience in cannabis, they have limited experience in the hemp-based product business or retail business. Therefore, without industry-specific experience, their business experience may not be enough to effectively start-up and maintain a hemp-based product company. As a result, the implementation of our hemp business plan may be delayed, or eventually, unsuccessful.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

Our corporate headquarters are located at ~~450 Lexington~~366 Madison Ave, ~~#3308,~~14th floor, New York, New York, ~~10163.~~10017. The following table sets forth our owned and leased locations by geographic location as of December 31, ~~2020 .~~2022. The Company has entered into sale-and-leaseback transactions with GreenAcreage Real Estate Corp. and will continue to enter into such transactions with real estate investment trusts when deemed beneficial to the Company’s strategy. As a result, the Company’s real estate profile may continue to shift to leased properties.

The tables and footnotes below summarize the Company’s real estate profile as of December 31, ~~2020:~~2022:

Retail Facilities:

Regions Operational In Development Owned Leased
New England
Connecticut 3 — — 3
Maine(1)
3 — — 3
Maine 1 — 1 —
Massachusetts 2 1 — 3
New Hampshire(1)
1 1 — 2
Mid-Atlantic
New Jersey 2 1 — 3
New York 4 — — 4
Midwest
Illinois 2 — — 2
Michigan — 3 3 —
Ohio(1)
5 — — 5
West
California — 1 — 1
Oregon 5 — — 5
South
Florida 1 7 — 8
Total 29 14 4 39


Regions	Operational	In Development	Owned	Leased
Connecticut	3	—	—	3
Maine	4	—	—	4
Massachusetts	2	—	—	2
New Jersey	3	—	—	3
New York	4	—	—	4
Illinois	2	—	1	1
Ohio	5	—	—	5
Total	23	—	1	22

~~(1)~~Acreage provides services including but not limited to financing, management, consulting and/or administrative services with these license holders to assist in the operations of their cannabis businesses.

Cultivation/Processing Facilities

Regions Operational In Development Owned Leased
New England
Maine(1)
1 — — 1
Massachusetts 1 — — 1
New Hampshire(1)
1 — — 1
Mid-Atlantic
New Jersey 1 1 1 1
New York 1 — — 1
Pennsylvania 1 — — 1
Midwest
Illinois 1 — 1 —
Iowa(2)
— — 1 —
Ohio(1)
1 — 1 —
West
California(1)
1 — — 1
Oregon(3)
— — — 1
South
Florida 1 — 1 —
Total 10 1 5 8

~~(2)Acreage owns a property in Iowa but surrendered its license in June 2020.~~

~~(3)~~Acreage owns a cultivational, processing and wholesale license and leases a property in Medford, Oregon. We temporarily halted cultivation/processing operations in Oregon, in part as a response to the COVID-19 pandemic.


Regions	Operational	In Development	Owned	Leased
Maine	1	—	—	1
Massachusetts	2	—	—	2
New Jersey	1	—	—	1
New York	1	—	—	1
Pennsylvania	1	—	—	1
Illinois	1	—	1	—
Ohio	1	—	1	—
California	1	—	—	1
Total	9	—	2	7

Item 3. Legal Proceedings.

EPMMNY

On November 2, 2018, EPMMNY LLC (“~~EPMMNY~~”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 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 in April 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 May 2021. The plaintiff also filed a motion seeking a preliminary injunction of any transfer of our assets. This motion was fully briefed and we are awaiting the courts decision.

~~CanWell Dispute~~

~~The CanWell dispute is comprised of five 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.~~

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 ~~Loss on legal settlements~~ on the Consolidated 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 payment of $500 was made in November 2020.

~~Lease Dispute~~

On or around December 2019, it is alleged that a wholly-owned subsidiary of HSCP entered into three 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 six payments to the commercial landlord totaling $6,336, which the Company has accrued for in ~~Loss on legal settlements~~ on the Consolidated Statements of Operations for year ended December 31, 2020. The first and second payments of $1,000 was made in November 2020 and December 2020, respectively, and the final payment will be due on December 31, 2021.

~~Compass Neuroceuticals~~

~~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 approximately $9.0 million. Compass filed counterclaims for breach, also in the $9.0 million range. A final arbitration hearing is currently scheduled for August 2021. The matter is in its early stages, therefore, it is too early to ascertain the materiality of any potential settlement or judgment, but the Company plans to defend itself vigorously in this matter.grounds.

Item 4. Mine Safety Disclosures.

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

The ~~Company’s~~Company has three classes of issued and outstanding shares: Class E subordinate voting shares (“Fixed ~~Shares~~”Shares”) ~~and~~, the Class D subordinate voting shares (“(“Floating Shares”) and the Class F multiple voting shares. The Company’s Fixed Shares and 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.

Holders

As of ~~March 4, 2021,~~April 14, 2023, there were ~~795~~828 holders of record of the Fixed Shares and ~~756~~818 holders of record of the Floating Shares, including CDS & Co. and Cede & Co., which are the nominees for holding shares on behalf of brokerage firms in Canada and the U.S., respectively, each as a single holder of record.

Item 6. ~~Selected Financial Data.~~

The information set forth below for the years ended December 31, 2020, 2019, 2018, and 2017 is not necessarily indicative of results of future operations, and should be read in conjunction with Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes thereto included in Part II, Item 8 of this Form 10-K to fully understand factors that may affect the comparability of the information presented below.

As an emerging growth company, we are not required to present selected financial data for any period prior to the earliest audited financial statements presented in connection with our first registration statement that became effective under the Exchange Act. Consequently, we do not present financial data for the years ended December 31, 2016 in the table below.

Selected Financial Data Year Ended December 31,
(in thousands, except per share amounts) 2020 2019 2018 2017
Revenues, net $ 114,545 $ 74,109 $ 21,124 $ 7,743
Net operating loss (364,811) (191,444) (41,133) (7,047)
Net loss (360,118) (195,162) (32,261) (10,102)
Net loss attributable to Acreage (286,588) (150,268) (27,483) (9,109)
Net loss per share attributable to Acreage, basic and diluted (2.87) (1.74) (0.41) (0.20)
Weighted average shares outstanding, basic and diluted 99,980 86,185 66,699 45,076

December 31,
2020 2019 2018
Cash and cash equivalents $ 32,542 $ 26,505 $ 104,943
Total assets 562,053 691,677 554,582
Total non-current liabilities 204,602 139,730 35,447
Reserved.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”&A”) is intended to assist in the understanding and assessing the trends and significant changes in our results of operations and financial condition. Historical results may not be indicative of future performance. This discussion includes forward-looking statements that reflect our plans, estimates and beliefs. Such statements involve risks and uncertainties. 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 and “Cautionary Statement Regarding Forward-Looking Statements” of this Annual Report on Form 10-K.

This MD&A should be read in conjunction with the Company’s consolidated financial statements and related notes. Financial information presented in this MD&A is presented in thousands of ~~United States (“~~U.S.”) dollars, unless otherwise indicated.

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

•Results of Operations—This section provides an analysis of the Company’s results of operations for the years ended December 31, 2022, 2021 and 2020. 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—This section provides an analysis of the Company’s cash flows for the years ended December 31, 2022, 2021 and 2020, as well as a discussion on the Company’s outstanding debt and commitments that existed as of December 31, 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.

•Critical Accounting Policies and Estimates—This section provides a summary of the estimates and assumptions management believes could have a significant impact on our financial statements. For a summary of our significant accounting policies, refer to Note 2 of the Consolidated Financial Statements for further discussion.

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 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. ~~Our~~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. ~~We appeal~~The Company appeals to medical and adult-use customers through brand strategies intended to build trust and loyalty.

As of December 31, 2022, Acreage owned and operated a total of twenty-three dispensaries - four in New York, three in New Jersey, three in Connecticut, two in Massachusetts, two in Illinois, five in Ohio, and four in Maine. As of December 31, 2022, Acreage owned and operated a total of nine cultivation and processing facilities, one each in California, Illinois, Maine, New Jersey, New York, Ohio and Pennsylvania, respectively, and two in Massachusetts.

Strategic Priorities

The Company believes its focused strategy is the key to continued improvements in its financial results and shareholder value. For the past few years, the Company was focused on three key strategic objectives - accelerating growth in its core markets, driving profitability, and strengthening the balance sheet. For 2023 and onwards, the Company has modified its strategic objectives in response to Company and industry developments - focus on cash, accelerate growth in core markets with core brands and prepare for Canopy USA.

Focus on Cash: A combination of economic conditions, lack of regulatory change and industry competition impacting pricing has negatively impacted the Company’s ability to generate cash flow to support operational requirements and capital activities. Additionally, these factors have likely limited the additional capital that might be available to the Company. While these factors continue, the Company will focus on maximizing the cash flow generated by operating activities and limit capital expenditures to only those projects that can be funded from existing resources and are expected to generate near-term returns.

Accelerating Growth in Core Markets with Core Brands: 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. Additionally, the Company has developed a portfolio of core brands that resonate with its customers. The Company will focus on ensuring that these core brands feature prominently in the markets where they are available.

Prepare for Canopy USA: During the fourth quarter of 2022, the Company entered into a new strategic arrangement with Canopy Growth that, would allow Canopy Growth to acquire 100% of Acreage by (i) waiving its existing Floating Share option and entering into a new Floating Share acquisition agreement; and (ii) committing to exercise its Fixed Share option, all subject to required approvals and terms of the related agreements. (see Part I, Item 1. Business - “Canopy Growth Corporation Arrangement”). Throughout 2023, the Company will take all steps necessary to prepare for the eventual closing of this transactions.

Highlights from the year ended December 31, ~~2020~~

During 2020, as part of an overall strategic plan to focus on key, profitable operations we decided to continue to develop operations in the following nine core states of Connecticut, Maine, Massachusetts, New Hampshire, New York, New Jersey, Pennsylvania, Illinois and Ohio2022~~. We expect this shift in focus to lead to margin improvements and accelerate our pathway to achieve positive returns~~.

•~~We began adult-use sales at~~On October 24, 2022, the Company entered into a new strategic arrangement with Canopy Growth that would allow Canopy Growth to acquire 100% of Acreage by (i) waiving its existing Floating Share option and entering into a new Floating Share acquisition agreement; and (ii) committing to exercise its Fixed Share option, all subject to the required shareholder and regulatory approvals and other closing conditions as described in the related agreements.

•On October 24, 2022, the Company amended its existing credit facility to provide immediate access to $25 million and increased flexibility through revised covenants. Subsequent to year end, the facility was further amended to allow for an additional draw of $15 million to be used for capital expenditures and to limit the total draws under the facility to $140 million.

•During the fourth quarter of 2022, the Company’s social equity joint ventures with our ~~dispensary~~social equity partner in ~~Illinois; the significantly increased sales have exceeded internal expectations. We also received zoning approval to open~~Connecticut was approved for both a ~~dispensary in Chicago.~~Disproportionately Impacted Area Cultivation License and an Adult-use Cannabis Retailer license.

•The Company ~~closed a refinancing transaction and conversion related to Northeast Patients Group, operating~~achieved total consolidated revenue growth of 26% as ~~WCM, a medical cannabis business in Maine, resulting in ownership of WCM by three Maine residents, as required by Maine law. In connection~~compared with ~~the transaction, WCM converted from a non-profit corporation to a for-profit corporation.~~

•~~We received Cannabis Control Commission provisional approval for adult-use sales at~~ ~~The Botanist~~ ~~locations in Worcester and Shrewsbury, Massachusetts.~~

•~~We closed our acquisition of Compassionate Care Foundation, Inc. (“CCF”), a medical cannabis cultivator and dispenser in New Jersey.~~

•~~We opened a second adult-use dispensary in Illinois, ahead of schedule.~~

•On September 23, 2020, we entered into the Amended Arrangement with Canopy Growth. Pursuant to the Amended Arrangement, the Company’s articles were amended to create the Class E subordinate voting shares (the “~~Fixed Shares”), Class D subordinate voting shares (the “Floating Shares”) and the Class F multiple voting shares (the “Fixed Multiple Shares”), and the Company completed a capital reorganization (the “Capital Reorganization”) pursuant to which each outstanding Class A subordinate voting share (the “SVS”) was exchanged for 0.7 of a Fixed Share and 0.3 of a Floating Share, each outstanding Class B proportionate voting share (the “PVS”) was exchanged for 28 Fixed Shares and 12 Floating Shares, and each outstanding Class C multiple voting share ( the “MVS”) was exchanged for 0.7 of a Fixed Multiple Share and 0.3 of a Floating Share. Refer to Note 13 of the consolidated financial statements for further discussion.~~

•Pursuant to the Arrangement Agreement, upon the occurrence of a Triggering Event, Canopy Growth, will, subject to the satisfaction or waiver of certain closing conditions set out in the Arrangement Agreement: (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 Canopy Growth Share for each Fixed Share held at the time of the acquisition of the Fixed Shares, subject to adjustment in accordance with the terms of the Amended Arrangement; and (ii) have the right (but not the obligation), exercisable for a period of 30 days following the Triggering Event Date to acquire all of the issued and outstanding Floating Shares. Upon exercise of the Floating Call Option, Canopy Growth may acquire the Floating Shares for cash or for Canopy Growth Shares or a combination thereof, in Canopy Growth’s sole discretion.

•~~We entered into various financing transactions and repayments during~~ the year ended December 31, ~~2020, which are described in further details in the~~ ~~Liquidity and Capital Resources~~ ~~section.~~

2021.

•~~COVID-19 has had minimal impact on our overall performance but at some locations there has been some impact~~Adjusted EBITDA for the year ended December 31, 2022 was $34.8 million, compared to ~~our day-to-day operations.~~adjusted EBITDA of $24.6 million during the same period in 2021. This marks eight consecutive quarters 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.

•Launched Botanist Vape Cartridges and Disposables in Illinois as well as Superflux Cured Concentrates to build on reputation of national brand. Further, Superflux Won Best Vape Pen and Cartridge category in High Times Cannabis Cup Illinois with their Live Resin Margalope Cartridge.

•On ~~February~~July 5, 2022, the Company completed the sale of its four remaining Oregon dispensaries for total proceeds of $6.2 million with $5.85 million being satisfied by a 36 month promissory note bearing interest at a rate of 12% per annum.

•On May 3, 2022, the Company completed the sale of its cultivation facility in Medford, Oregon for total proceeds of $2.0 million.

•On May 1, 2022, the Company acquired and converted to adult use the final dispensary owned by our partner in Maine.

•On April 25, ~~2021 we entered into an agreement to sell our~~2022, the Company commenced adult-use operations in ~~Florida, which is consistent with~~New Jersey, offering a range of products from our ~~overall strategy to focus on our core nine states.~~flagship brand The Botanist for adult-use sales.

Operational and Regulation Overview (all amounts in thousands, except per share amounts)

~~We believe Acreage’s~~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 ~~we operate.~~it operates. However, cannabis is illegal under U.S. federal law. Substantially all ~~our~~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 this Form 10-K.

~~COVID-19~~

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

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

Results of Operations

The following table presents selected financial data derived from the consolidated financial statements of the Company for the years ended December 31, ~~2020, 2019~~2022, 2021 and ~~2018.~~2020. The selected financial information set out below may not be indicative of the Company’s future performance.

Summary Results of Operations Better/(Worse) Better/(Worse)
in thousands, except per share amounts Year Ended December 31, 2020 vs. 2019 2019 vs. 2018
2020 2019 2018 $ % $ %
Revenues, net $ 114,545 $ 74,109 $ 21,124 $ 40,436 55 % $ 52,985 251 %
Operating loss (364,811) (191,444) (41,133) (173,367) (91) (150,311) (365)
Net loss attributable to Acreage (286,588) (150,268) (27,483) (136,320) (91) (122,785) (447)
Basic and diluted loss per share attributable to Acreage $ (2.87) $ (1.74) $ (0.41) $ (1.13) (65) % $ (1.33) (324) %
Summary Results of Operations


							Better/(Worse)					Better/(Worse)
in thousands, except per share amounts	Year Ended December 31,			2022 vs. 2021					2021 vs. 2020
		2022			2021		2020			$		%		$		%
Revenues, net		$	237,138		$	188,859	$	114,545		$	48,279	26	%	$	74,314	65	%
Net operating loss		(143,093)			(47,071)		(364,811)			(96,022)		(204)		317,740		87
Net loss attributable to Acreage		(139,876)			(63,010)		(286,588)			(76,866)		(122)		223,578		78
Basic and diluted loss per share attributable to Acreage		$	(1.28)		$	(0.60)	$	(2.92)		$	(0.68)	(113)	%	$	2.32	79	%

Revenues, ~~net, cost~~Cost of goods sold and ~~gross~~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 ~~we provide~~the Company provides management or consulting services. As of December 31, 2020, 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), two in New Jersey (Atlantic City and Egg Harbor), 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). Acreage has cultivation facilities in Sinking Spring, Pennsylvania, Sterling, Massachusetts, Syracuse, New York, Freeport, Illinois Sanderson, Florida and Egg Harbor, New Jersey. Acreage also collects management services revenues, substantially all in Maine.

Gross profit is revenue less cost of goods sold. Cost of goods sold ~~include~~includes costs directly attributable to inventory sold such as direct material, labor, and ~~overhead.~~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.

9183


Gross profit											Better/(Worse)				Better/(Worse)
																											Better/(Worse)					Better/(Worse)
in thousands	in thousands	Year Ended December 31,									2020 vs. 2019				2019 vs. 2018				in thousands	Year Ended December 31,				2022 vs. 2021						2021 vs. 2020
		2020			2019			2018			$		%		$		%				2022			2021			2020			$		%		$		%
Retail revenue, net	Retail revenue, net	$	86,380		$	54,401		$	17,475		$	31,979	59	%	$	36,926	211	%	Retail revenue, net		$	181,479		$	127,306		$	86,380		$	54,173	43	%	$	40,926	47	%
Wholesale revenue, net	Wholesale revenue, net	27,971			18,539			2,969			9,432		51		15,570		524		Wholesale revenue, net		54,499			58,183			27,971			(3,684)		(6)		30,212		108
Other revenue, net	Other revenue, net	194			1,169			680			(975)		(83)		489		72		Other revenue, net		1,160			3,370			194			(2,210)		(66)		3,176		n/m
Total revenues, net	Total revenues, net	$	114,545		$	74,109		$	21,124		$	40,436	55	%	$	52,985	251	%	Total revenues, net		$	237,138		$	188,859		$	114,545		$	48,279	26	%	$	74,314	65	%
Cost of goods sold, retail	Cost of goods sold, retail	(51,018)			(33,844)			(10,038)			(17,174)		(51)		(23,806)		(237)		Cost of goods sold, retail		(94,783)			(65,776)			(51,018)			(29,007)		(44)		(14,758)		(29)
Cost of goods sold, wholesale	Cost of goods sold, wholesale	(14,369)			(9,821)			(1,666)			(4,548)		(46)		(8,155)		(489)		Cost of goods sold, wholesale		(40,610)			(27,201)			(14,369)			(13,409)		(49)		(12,832)		(89)
Total cost of goods sold	Total cost of goods sold	$	(65,387)		$	(43,665)		$	(11,704)		$	(21,722)	(50)	%	$	(31,961)	(273)	%	Total cost of goods sold		$	(135,393)		$	(92,977)		$	(65,387)		$	(42,416)	(46)	%	$	(27,590)	(42)	%
Gross profit	Gross profit	$	49,158		$	30,444		$	9,420		$	18,714	61	%	$	21,024	223	%	Gross profit		$	101,745		$	95,882		$	49,158		$	5,863	6	%	$	46,724	95	%
Gross margin	Gross margin	43		%	41		%	45		%			2	%			(4)	%	Gross margin		43		%	51		%	43		%			(8)	%			8	%
n/m - Not Meaningful	n/m - Not Meaningful																		n/m - Not Meaningful

Year ended December 31, ~~2020~~2022 vs. ~~2019~~2021

~~Retail revenue saw a net increase of 59%~~Total revenues for the year ended December 31, ~~2020, as~~2022 grew by $48,279, or 26%, compared with 2021. On a comparative basis, total revenue increased by $49,606 due to the ~~corresponding~~acquisitions of (i) Greenleaf Ohio in October 2021, (ii) certain Maine operations and (iii) CWG in May 2021 and was offset by decreases of $4,790 due to the decreased performance and ultimate divestiture of the Company’s operations in Oregon in July 2022 and the divestiture of Acreage Florida in April 2021. Additionally, total revenue for the prior ~~period. The increase~~comparative year ended December 31, 2021 included (i) $2,530 of previously unrecognized management fees, some of which related to prior periods and (ii) a bulk wholesale sale transaction of $1,500 that did not recur. Excluding these acquisitions and divestitures/closures, the impact of total revenue declines in ~~retail revenue, net of $31,979~~the Company’s Oregon operations and the non-recurring transactions for the year ended December 31, ~~2020,~~2021, total revenue increased by $7,493, or 4%, for the year ended December 31, 2022, as compared to fiscal 2021.

Retail revenue for the year ended December 31, 2022 grew by $54,173, or 43%, compared with 2021. Excluding the impact of acquisitions and divestitures/closures, as well as declines in the Company’s Oregon operations prior to their ultimate sale, retail revenue increased by $13,397, or 11%, for the year ended December 31, 2022 compared to the year ended 2021. This organic growth was primarily driven by increased demand and production across various states.

Wholesale revenue for the year ended December 31, 2022 decreased by $3,684, or 6%, compared to fiscal 2021. The modest decline in wholesale revenue was primarily due to price compression and decreased wholesale demand in select markets. Additionally, wholesale revenue for the year ended December 31, 2022 increased by $4,040 due to acquisitions that have occurred over the prior 24 months which were somewhat offset by a bulk wholesale sale transaction of $1,500 in the second quarter of 2021 that did not recur.

Retail cost of goods sold increased $29,007, or 44%, for the year ended December 31, 2022 compared to 2021, which was generally consistent with the 43% increase in retail revenue. Price compression in select markets was offset by cost efficiencies.

Wholesale cost of goods sold increased $13,409, or 49%, for the year ended December 31, 2022 compared to 2021, which outpaced the 6% decrease in wholesale revenue. Wholesale cost of goods sold increased due to $11,145 of non-cash inventory adjustments made in the year ended December 31, 2022 as a result of (i) excess inventory in select markets, (ii) reducing the carrying value of wholesale inventory to reflect the lower of cost and net realizable value and (iii) increased costs due to inflation. Excluding these non-cash inventory adjustments, wholesale costs of goods sold increased $2,264 or 8%. Cost increases and product mix shifts drove the increase in wholesale cost of goods sold.

Gross profit increased $5,863, or 6%, for the year ended December 31, 2022 to $101,745 from $95,882 in 2021, and Gross margin decreased from 51% of revenue for the year ended December 31, 2021 to 43% of revenue in 2022, or (8)%, due to the factors discussed above. Efficiencies gained from further economies of scale were unable to offset overall selling price declines, cost increases due to inflation, and the aforementioned wholesale non-cash inventory adjustments. Excluding the non-cash inventory adjustments, margin decreased to 47%.

Year ended December 31, 2021 vs. 2020

Total revenues for the year ended December 31, 2021 grew by $74,314, or 65%, compared with 2020. On a comparative basis, total revenue increased by $37,320 due to the acquisitions of (i) CCF in June 2020, (ii) certain Maine operations (iii) CWG in May 2021 and (iv) Greenleaf Ohio in October 2021 and was offset by decreases of $2,071 due to the divestitures/closures of (i) Maryland Medicinal Research & Caring, LLC and Acreage North Dakota, LLC in May 2020, (ii) Form Factory in March 2020

and (iii) Acreage Florida in April 2021. Additionally, total revenues for the year ended December 31, 2021 for the Company’s operations in Oregon, which are considered non-core and are being held for sale, decreased by $3,721 as compared to fiscal 2020. Excluding these acquisitions and divestitures/closures and the impact of total revenue declines in the Company’s Oregon operations, total revenue increased by $42,786, or 42%, for the year ended December 31, 2021, as compared to fiscal 2020.

Retail revenue for the year ended December 31, 2021 grew by $40,926, or 47%, compared with 2020. Excluding the impact of acquisitions and divestitures/closures, retail revenue increased by $11,497 for the year ended December 31, 2021 compared to fiscal 2020. This organic growth was primarily driven by increased demand and production across various states, ~~(primarily Connecticut, New York, Florida~~ and ~~Massachusetts), along with impact of CCF which~~new store openings and was ~~acquired in June 2020, and further driven by the impact of NCC LLC (“NCC~~”), a dispensary license holder in Illinois acquired in March 2019, becoming fully operational during the year, coupled with an expansion in sales as adult-use sales became legalized in the state of Illinois in January 2020. These increases were partially offset by ~~the net impact~~retail revenue declines of ~~decreased business~~$3,337 in ~~Maryland Medicinal Research & Caring, LLC (“MMRC”) ($557) as well as the divestiture of Acreage North Dakota, LLC ($491), which occurred in May 2020.~~non-core states (Oregon).

Wholesale revenue ~~net increased 51%~~ for the year ended December 31, ~~2020, as~~2021 grew by $30,212, or 108%, compared to ~~the corresponding prior period.~~fiscal 2020. The ~~increases in~~increased wholesale revenue ~~net for the year ended December 31, 2020 were~~was primarily due to increased capacity, coupled with ~~growing~~maturing operations ~~in our~~at the Company’s Pennsylvania, Massachusetts, ~~Illinois~~ and ~~New Jersey~~Illinois cultivation facilities. This resulted in higher yields and product mix in each of the respective markets.

~~Cost of goods sold increased 50%~~ Additionally, wholesale revenue for the year ended December 31, ~~2020, as~~2021 increased by $6,196 due to acquisitions that have occurred over the prior 24 months.

Finally, total revenue for the year ended December 31, 2021 included $3,370 of management fees, a portion of which related to prior fiscal periods. Refer to Note 3 in the Consolidated Financial Statements for further discussion on acquisitions, divestitures, assets held-for-sale.

Retail cost of goods sold $14,758, or 29%, for 2021 compared to 2020, which was outpaced by the ~~prior period.~~47% increase in retail revenue. The lower rate of growth for retail cost of goods sold was due to the increased vertical integration of the Company’s operations. A greater portion of the product sold at the Company’s retail dispensaries is sourced internally from the Company’s cultivation and processing operations. Cost of goods sold ~~retail increased in line with~~for this internally produced product does not contain the ~~retail revenue increases. Cost~~wholesale margin that would be paid if the Company had to source that same product from external vendors.

Wholesale cost of goods sold increased $12,832, or 89%, for 2021 compared to 2020, which was outpaced by the 108% 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 ~~increases to wholesale revenue.~~production efficiencies being achieved. In addition, wholesale cost of goods sold for the ~~increase was further~~comparative period were driven by the initial set up costs and consequential expansion impact of various cultivation ~~facilities. The suspension~~facilities that was not as significant in the current period.

Gross profit increased from $49,158 in 2020 to $95,882 in 2021, or 95%, and Gross margin increased from 43% of ~~operations at Form Factory Holdings, LLC (“Form Factory~~”)revenue in 2020 to 51% of revenue in 2021, or 8%, ~~a manufacturer and distributor of cannabis-based edibles and beverages, since March 2020 further increased costs of goods sold ($824), wholesale as a result of consequential inventory write-offs.~~

~~The increase in gross profit was driven by~~due to the factors discussed above. ~~Gross margin for the year ended December 31, 2020 was 42.9%, compared to 41.1% for the year ended December 31, 2019.~~

Excluding Form Factory, the average estimated wholesale price per gram sold during the years ended December 31, 2020 and 2019 was $6.65 and $6.78, respectively. Excluding Form Factory, the average estimated wholesale cost per gram sold during the years ended December 31, 2019 and 2018 was $3.16 and $3.30, respectively.

~~Year ended December 31, 2019 vs. 2018~~

The increase in total revenues during the year ended December 31, 2019 was primarily driven by acquisitions, which contributed 183%. Acquisitions drove 198% and 118% of retail and wholesale revenue increases, respectively. The remaining increase in wholesale revenue was primarily driven by our Pennsylvania cultivation facility.

The increase in total cost of goods sold during the year ended December 31, 2019 was primarily driven by acquisitions, which contributed 206%. Acquisitions contributed 217% and 135% to the retail and wholesale costs of goods sold, respectively. The remaining increase in wholesale cost of goods sold was primarily driven by our Pennsylvania cultivation facility.

The increase in gross profit was driven by the factors discussed above. Acquisitions contributed 155% to the increase. Gross margin for the year ended December 31, 2019 was 41.1%, compared to 44.6% for the year ended December 31, 2018.

Excluding Form Factory, the average estimated wholesale price per gram sold during the years ended December 31, 2019 and 2018 was $6.78 and $7.17, respectively. Excluding Form Factory, the average estimated wholesale cost per gram sold during the years ended December 31, 2019 and 2018 was $3.30 and $4.03, respectively.

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	Revenue by region							Better/(Worse)				Better/(Worse)				Revenue by region						Better/(Worse)				Better/(Worse)
in thousands	in thousands	Year Ended December 31,						2020 vs. 2019				2019 vs. 2018				in thousands	Year Ended December 31,			2022 vs. 2021				2021 vs. 2020
		2020		2019		2018		$		%		$		%				2022		2021		2020		$		%		$		%
New England	New England	$	48,325	$	36,875	$	9,139	$	11,450	31	%	$	27,736	303		New England		$	63,969	$	73,925	$	48,325	$	(9,956)	(13)	%	$	25,600	53	%
Mid-Atlantic	Mid-Atlantic	37,300		19,797		3,122		17,503		88		16,675		534		Mid-Atlantic		77,217		58,869		37,300		18,348		31		21,569		58
Midwest	Midwest	17,347		6,839		20		10,508		154		6,819		n/m		Midwest		91,437		43,764		17,347		47,673		109		26,417		152
West	West	10,206		10,598		8,843		(392)		(4)		1,755		20		West		4,515		11,680		10,206		(7,165)		(61)		1,474		14
South	South	1,367		—		—		1,367		n/m		—		n/m		South		—		621		1,367		(621)		(100)		(746)		(55)
Total revenues, net	Total revenues, net	$	114,545	$	74,109	$	21,124	$	40,436	55	%	$	52,985	251	%	Total revenues, net		$	237,138	$	188,859	$	114,545	$	48,279	26	%	$	74,314	65	%

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


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

~~450 Lexington~~366 Madison Ave, ~~#3308~~14th floor	New York	New York	~~10163~~10017
(Address of Principal Executive Offices)			(Zip Code)


Large accelerated filer	o	Accelerated filer	o☒
Non-accelerated filer	xo	Smaller reporting company	☒
		Emerging growth company	☒


PART I

Item 1.	Business.	1
Item 1A.	Risk Factors.	5643
Item 1B.	Unresolved Staff Comments.	8579
Item 2.	Properties.	8580
Item 3.	Legal Proceedings.	8780
Item 4.	Mine Safety Disclosures.	8881

PART II

Item 5.	Market for ~~Registrant~~’sRegistrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.	8981
Item 6.	~~Selected Financial Data.~~Reserved.	8981
Item 7.	Management’s Discussion and Analysis of Financial Condition and R ~~esults~~Results of ~~Operations~~.Operations.	8981
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk.	~~106~~95
Item 8.	Financial Statements and Supplementary Data.	F-1
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.	~~109~~98
Item 9A.	Controls and Procedures.	~~109~~98
Item 9B.	Other Information.	~~110~~99
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	99

PART III

Item 10.	Directors, Executive Officers and Corporate Governance.	~~110~~99
Item 11.	Executive Compensation.	~~110~~100
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	~~111~~100
Item 13.	Certain Relationships and Related Transactions, and Director Independence.	~~111~~100
Item 14.	Principal Accounting Fees and Services.	~~111~~100

PART IV

Item 15.	Exhibits, Financial Statement Schedules.	~~111~~100
Item 16.	Form 10-K Summary.	~~115~~104

	SIGNATURES	~~115~~104


Operating expenses	Operating expenses							Better/(Worse)				Better/(Worse)				Operating expenses						Better/(Worse)				Better/(Worse)
in thousands	in thousands	Year Ended December 31,						2020 vs. 2019				2019 vs. 2018				in thousands	Year Ended December 31,			2022 vs. 2021				2021 vs. 2020
		2020		2019		2018		$		%		$		%				2022		2021		2020		$		%		$		%
General and administrative	General and administrative	$	50,469	$	56,224	$	18,647	$	5,755	10	%	$	(37,577)	(202)	%	General and administrative		$	38,248	$	32,026	$	50,469	$	(6,222)	(19)	%	$	18,443	37	%
Compensation expense	Compensation expense	41,704		42,061		15,356		357		1		(26,705)		(174)		Compensation expense		55,905		45,769		41,704		(10,136)		(22)		(4,065)		(10)
Equity-based compensation expense	Equity-based compensation expense	92,064		97,538		11,230		5,474		6		(86,308)		(769)		Equity-based compensation expense		10,138		19,946		92,064		9,808		49		72,118		78
Marketing	Marketing	1,820		5,009		1,571		3,189		64		(3,438)		(219)		Marketing		3,204		1,643		1,820		(1,561)		(95)		177		10
Loss on impairments		188,023		13,463		—		(174,560)		n/m		(13,463)		n/m
Impairments, net																Impairments, net		121,706		32,828		188,023		(88,878)		(271)		155,195		83
Loss on notes receivable	Loss on notes receivable	8,161		—		—		(8,161)		n/m		—		n/m		Loss on notes receivable		7,219		7,869		8,161		650		8		292		4
Write down of assets held-for-sale		11,003		—		—		(11,003)		n/m		—		n/m
Loss on legal settlements		14,555		—		—		(14,555)		n/m		—		n/m
Write down (recovery) of assets held-for-sale																Write down (recovery) of assets held-for-sale		874		(8,616)		11,003		(9,490)		n/m		19,619		n/m
Legal settlements (recoveries)																Legal settlements (recoveries)		(335)		372		14,555		707		n/m		14,183		97
Depreciation and amortization	Depreciation and amortization	6,170		7,593		3,749		1,423		19		(3,844)		(103)		Depreciation and amortization		7,879		11,116		6,170		3,237		29		(4,946)		(80)
Total operating expenses	Total operating expenses	$	413,969	$	221,888	$	50,553	$	(192,081)	(87)	%	$	(171,335)	(339)	%	Total operating expenses		$	244,838	$	142,953	$	413,969	$	(101,885)	(71)	%	$	271,016	65	%

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


Other income (loss)						Better/(Worse)				Better/(Worse)
in thousands	Year Ended December 31,			2022 vs. 2021				2021 vs. 2020
		2022		2021		2020		$		%		$		%
Income (loss) from investments, net		$	241	$	(3,549)	$	98	$	3,790	n/m		$	(3,647)	n/m
Interest income from loans receivable		1,619		4,824		6,695		(3,205)		(66)	%	(1,871)		(28)
Interest expense		(24,036)		(19,964)		(15,853)		(4,072)		(20)		(4,111)		(26)
Other income (loss), net		6,596		10,408		(3,487)		(3,812)		(37)		13,895		n/m
Total other loss		$	(15,580)	$	(8,281)	$	(12,547)	$	(7,299)	(88)	%	$	4,266	34	%

n/m - Not Meaningful


☒			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Fiscal Year Ending	Pro-Forma Net Revenue Target (in US$ thousands)	Consolidated Adj. EBITDA Target (in US$ thousands)
2020	166,174	(22,499)
2021	253,296	36,720
2022	289,528	53,222
2023	375,274	102,799
2024	558,599	166,744
2025	641,047	190,385
2026	740,194	218,108
2027	848,498	244,402
2028	973,402	273,434
2029	1,120,177	305,840


Selected Financial Data	Year Ended December 31,
(in thousands, except per share amounts)	2020		2019		2018		2017
Revenues, net	$	114,545	$	74,109	$	21,124	$	7,743
Net operating loss	(364,811)		(191,444)		(41,133)		(7,047)
Net loss	(360,118)		(195,162)		(32,261)		(10,102)
Net loss attributable to Acreage	(286,588)		(150,268)		(27,483)		(9,109)
Net loss per share attributable to Acreage, basic and diluted	(2.87)		(1.74)		(0.41)		(0.20)
Weighted average shares outstanding, basic and diluted	99,980		86,185		66,699		45,076


	December 31,
	2020		2019		2018
Cash and cash equivalents	$	32,542	$	26,505	$	104,943
Total assets	562,053		691,677		554,582
Total non-current liabilities	204,602		139,730		35,447


Summary Results of Operations							Better/(Worse)				Better/(Worse)
in thousands, except per share amounts	Year Ended December 31,						2020 vs. 2019				2019 vs. 2018
	2020		2019		2018		$		%		$		%
Revenues, net	$	114,545	$	74,109	$	21,124	$	40,436	55	%	$	52,985	251	%
Operating loss	(364,811)		(191,444)		(41,133)		(173,367)		(91)		(150,311)		(365)
Net loss attributable to Acreage	(286,588)		(150,268)		(27,483)		(136,320)		(91)		(122,785)		(447)
Basic and diluted loss per share attributable to Acreage	$	(2.87)	$	(1.74)	$	(0.41)	$	(1.13)	(65)	%	$	(1.33)	(324)	%


Adjusted EBITDA						Better/(Worse)				Better/(Worse)
in thousands	Year Ended December 31,			2022 vs. 2021				2021 vs. 2020
		2022		2021		2020		$		%		$		%
Net loss (U.S. GAAP)		$	(168,695)	$	(73,157)	$	(360,118)
Income tax expense		10,022		17,805		(17,240)
Interest expense, net		22,417		15,140		9,158
Depreciation and amortization(1)		14,818		14,276		6,170
EBITDA (non-GAAP)		$	(121,438)	$	(25,936)	$	(362,030)	$	(95,502)	368	%	$	336,094	93	%
Adjusting items:
Loss (income) from investments, net		(241)		3,549		(98)
Impairments, net		121,330		30,698		188,023
Non-cash inventory adjustments		11,145		—		—
Loss on extraordinary events(2)		376		2,130		—
Loss on notes receivable		7,219		7,869		8,161
Write down (recovery) of assets held-for-sale		874		(8,616)		11,003
Legal settlements, net		(335)		372		14,555
Gain on business divestiture		(4,006)		(11,802)		—
Equity-based compensation expense		10,138		19,946		92,064
Transaction costs		—		—		3,114
Other non-recurring expenses(3)		9,786		6,428		15,701
Adjusted EBITDA (non-GAAP)		$	34,848	$	24,638	$	(29,507)	$	10,210	41	%	$	54,145	n/m

n/m - Not Meaningful


Cash flows	Cash flows							Better/(Worse)				Better/(Worse)				Cash flows							Better/(Worse)				Better/(Worse)
in thousands	in thousands	Year Ended December 31,						2020 vs. 2019				2019 vs. 2018				in thousands	Year Ended December 31,						2022 vs. 2021				2021 vs. 2020
		2020		2019		2018		$		%		$		%			2022		2021		2020		$		%		$		%
Net cash used in operating activities	Net cash used in operating activities	$	(67,678)	$	(70,879)	$	(35,536)	$	3,201	5	%	$	(35,343)	(99)	%	Net cash used in operating activities	$	(50,095)	$	(40,530)	$	(67,678)	$	(9,565)	(24)	%	$	27,148	40	%
Net cash used in investing activities		(69,302)		(14,609)		(235,692)		(54,693)		(374)		221,083		94
Net cash provided by financing activities		165,019		7,050		359,766		157,969		n/m		(352,716)		(98)
Net increase (decrease) in cash, cash equivalents and restricted cash		$	28,039	$	(78,438)	$	88,538	$	106,477	n/m		$	(166,976)	n/m
Net cash provided by (used in) investing activities																Net cash provided by (used in) investing activities	(9,609)		43,369		(69,302)		(52,978)		n/m		112,671		n/m
Net cash provided by (used in) financing activities																Net cash provided by (used in) financing activities	39,270		(12,977)		165,019		52,247		n/m		(177,996)		n/m
Net increase (decrease) in cash, cash equivalents, restricted cash, and cash held for sale																Net increase (decrease) in cash, cash equivalents, restricted cash, and cash held for sale	$	(20,434)	$	(10,138)	$	28,039	$	(10,296)	(102)	%	$	(38,177)	n/m

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


Debt balances	December 31, 2020		December 31, 2019
NCCRE loan	$	470	$	492
Seller’s notes	2,581		2,810
Related party debt	—		15,000
Financing liability (related party)	15,253		19,052
Finance lease liabilities	5,174		6,132
3.55% Credit facility due 2022	20,043		—
3.55% Credit facility collateral (related party)	22,169		—
Convertible debenture	—		—
Bridge loan	—		—
7.5% Loan due 2023 (related party)	32,124		—
6.1% Secured debenture due 2030 (related party)	46,085		—
Hempco Foros promissory note	2,000		—
Senior secured term loan facility	22,870		—
Construction financing loan	4,438		—
Canwell settlement promissory note	7,250		—
Total debt	$	180,457	$	43,486
Less: current portion of debt	27,139		15,300
Total long-term debt	$	153,318	$	28,186


Debt balances	December 31, 2022		December 31, 2021
Financing liability (failed sale-leaseback)	$	15,253	$	15,253
Finance lease liabilities	5,306		5,245
7.50% Loan due April 2026	31,288		30,763
6.10% Secured debenture due September 2030	46,502		46,050
Note due December 2024	3,167		4,750
Prime rate credit facilities due January 2026, as amended	113,564		68,673
Total debt	$	215,080	$	170,734
Less: current portion of debt	1,584		1,583
Total long-term debt	$	213,496	$	169,151


Contractual obligations
in thousands	Total		Less than 1 year		1-3 years		3-5 years		5+ years
Off-balance sheet arrangements
Purchase obligations	$	—	—		—		—		—

On-balance sheet arrangements
Operating lease obligations	30,935		4,733		6,208		5,881		14,113
Finance lease obligations	16,887		680		1,423		1,509		13,275
Debt obligations	160,030		27,139		62,353		24,453		46,085

Total	$	207,852	$	32,552	$	69,984	$	31,843	$	73,473


Report of Independent Registered Public Accounting Firm (PCAOB ID No. 688)			F-2

Consolidated Statements of Financial Position as of December 31, 20 20 2022 and 20 192021			F-3

Consolidated Statements of Operations for the years ended December 31, 20 20 ~~, 201~~9 2022, 2021 and 2 ~~018~~2020			F-4

Consolidated Statements of Shareholders’ Equity for the years ended December 31, 20 20 ~~, 201~~9 2022, 2021 and 20 182020			F-5

Consolidated Statements of Cash Flows for the years ended December 31, 20 20 ~~, 201~~9 2022, 2021 and 20 182020			F-6

Notes to Consolidated Financial Statements			F-8


ACREAGE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION


(in thousands)	(in thousands)	December 31, 2020		December 31, 2019		(in thousands)	December 31, 2022		December 31, 2021

ASSETS	ASSETS					ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	32,542	$	26,505	Cash and cash equivalents	$	24,067	$	43,180
Restricted cash	Restricted cash	22,097		95		Restricted cash	—		1,098
Accounts receivable, net						Accounts receivable, net	10,512		8,202
Inventory	Inventory	23,715		18,083		Inventory	49,446		41,804
Notes receivable, current	Notes receivable, current	2,032		2,146		Notes receivable, current	29,191		7,104

Assets held-for-sale	Assets held-for-sale	62,971		0		Assets held-for-sale	—		8,952
Other current assets	Other current assets	4,663		8,506		Other current assets	4,977		2,639
Total current assets	Total current assets	148,020		55,335		Total current assets	118,193		112,979
Long-term investments	Long-term investments	34,126		4,499		Long-term investments	34,046		35,226
Notes receivable, non-current	Notes receivable, non-current	97,901		79,479		Notes receivable, non-current	—		27,563
Capital assets, net	Capital assets, net	89,136		106,047		Capital assets, net	133,405		126,797
Operating lease right-of-use assets	Operating lease right-of-use assets	17,247		51,950		Operating lease right-of-use assets	22,443		24,598
Intangible assets, net	Intangible assets, net	138,983		285,972		Intangible assets, net	35,124		119,695
Goodwill	Goodwill	31,922		105,757		Goodwill	13,761		43,310

Other non-current assets	Other non-current assets	4,718		2,638		Other non-current assets	3,601		1,383
Total non-current assets	Total non-current assets	414,033		636,342		Total non-current assets	242,380		378,572
TOTAL ASSETS	TOTAL ASSETS	$	562,053	$	691,677	TOTAL ASSETS	$	360,573	$	491,551

LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY					LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	$	18,913	$	32,459	Accounts payable and accrued liabilities	$	29,566	$	23,861
Taxes payable	Taxes payable	14,780		4,740		Taxes payable	24,226		24,572
Interest payable	Interest payable	3,504		291		Interest payable	2,575		1,432
Operating lease liability, current	Operating lease liability, current	1,492		2,759		Operating lease liability, current	2,443		2,145
Debt, current	Debt, current	27,139		15,300		Debt, current	1,584		1,583
Non-refundable deposits on sale	Non-refundable deposits on sale	750		0		Non-refundable deposits on sale	—		1,000
Liabilities related to assets held for sale	Liabilities related to assets held for sale	18,154		0		Liabilities related to assets held for sale	—		1,867
Other current liabilities	Other current liabilities	13,010		1,604		Other current liabilities	11,939		10,333
Total current liabilities	Total current liabilities	97,742		57,153		Total current liabilities	72,333		66,793
Debt, non-current	Debt, non-current	153,318		28,186		Debt, non-current	213,496		169,151
Operating lease liability, non-current	Operating lease liability, non-current	16,609		47,522		Operating lease liability, non-current	21,692		24,255
Deferred tax liability	Deferred tax liability	34,673		63,997		Deferred tax liability	9,623		27,082
Other liabilities	Other liabilities	2		25		Other liabilities	3,250		—
Total non-current liabilities	Total non-current liabilities	204,602		139,730		Total non-current liabilities	248,061		220,488
TOTAL LIABILITIES	TOTAL LIABILITIES	302,344		196,883		TOTAL LIABILITIES	320,394		287,281
Commitments and contingencies	Commitments and contingencies	0		0		Commitments and contingencies
Common stock, no par value - unlimited authorized, 101,250 and 90,646 issued and outstanding, respectively		0		0
Common stock, no par value - unlimited authorized, 112,437 and 106,903 issued and outstanding, respectively						Common stock, no par value - unlimited authorized, 112,437 and 106,903 issued and outstanding, respectively	—		—
Additional paid-in capital	Additional paid-in capital	737,290		615,678		Additional paid-in capital	760,529		756,536
Treasury stock, 842 common stock held in treasury	Treasury stock, 842 common stock held in treasury	(21,054)		(21,054)		Treasury stock, 842 common stock held in treasury	(21,054)		(21,054)
Accumulated deficit	Accumulated deficit	(475,205)		(188,617)		Accumulated deficit	(678,091)		(538,215)
Total Acreage Shareholders' equity	Total Acreage Shareholders' equity	241,031		406,007		Total Acreage Shareholders' equity	61,384		197,267
Non-controlling interests	Non-controlling interests	18,678		88,787		Non-controlling interests	(21,205)		7,003
TOTAL EQUITY	TOTAL EQUITY	259,709		494,794		TOTAL EQUITY	40,179		204,270

TOTAL LIABILITIES AND EQUITY	TOTAL LIABILITIES AND EQUITY	$	562,053	$	691,677	TOTAL LIABILITIES AND EQUITY	$	360,573	$	491,551


						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, 2017		$	49,375	$	0	$	29,454	$	0	$	(10,861)	$	18,593	$	10,030	$	28,623
Issuance of Class D units		17,018		—		105,514		—		—		105,514		—		105,514
Issuance of Class E units, net		19,352		—		116,124		—		—		116,124		—		116,124
Interest expense settled with PIK units		330		66		1,912		—		—		1,912		—		1,912
Conversion of notes to equity		6,473		—		30,759		—		—		30,759		—		30,759
Issuance of warrants		—		—		3,285		—		—		3,285		—		3,285
Issuance of Pubco shares in redemption of membership units		(66,820)		65,978		280		(21,054)		—		(20,774)		—		(20,774)
RTO-related issuances, net		—		12,626		298,004		—		—		298,004		—		298,004
Formation of NCI at RTO and adjustments for changes in ownership		(27,340)		—		(133,943)		—		—		(133,943)		133,943		0
Establishment of deferred tax liability due to RTO		—		—		(30,175)		—		—		(30,175)		—		(30,175)
Capital contributions, net		—		—		—		—		—		—		2,767		2,767
Increase in non-controlling interests from business acquisitions		—		—		—		—		—		—		7,241		7,241
Purchase of non-controlling interests		—		—		(21,798)		—		—		(21,798)		(12,305)		(34,103)
Other equity transactions		—		398		4,426		—		(5)		4,421		(5,976)		(1,555)
Equity-based compensation expense and related issuances		1,612		96		10,915		—		—		10,915		—		10,915
Net loss		—		—		—		—		(27,483)		(27,483)		(4,778)		(32,261)
December 31, 2018		$	0	$	79,164	$	414,757	$	(21,054)	$	(38,349)	$	355,354	$	130,922	$	486,276
Issuances for business acquisitions/purchases of intangible assets		—		5,364		104,748		—		—		104,748		4,356		109,104
NCI adjustments for changes in ownership		—		2,784		(2,766)		—		—		(2,766)		2,766		0
Capital distributions, net		—		—		—		—		—		—		(4,363)		(4,363)
Other equity transactions		—		589		11,707		—		—		11,707		—		11,707
Equity-based compensation expense and related issuances		—		2,745		87,232		—		—		87,232		—		87,232
Net loss		—		—		—		—		(150,268)		(150,268)		(44,894)		(195,162)

December 31, 2019	December 31, 2019	$	0	$	90,646	$	615,678	$	(21,054)	$	(188,617)	$	406,007	$	88,787	$	494,794	December 31, 2019	—	90,646	$	615,678	$	(21,054)	$	(188,617)	$	406,007	$	88,787	$	494,794
Issuances for private placement	Issuances for private placement	—		6,085		27,887		—		—		27,887		—		27,887		Issuances for private placement	—	6,085	27,887		—		—		27,887		—		27,887
Beneficial conversion feature on convertible note (See Note 10)		—		—		523		—		—		523		—		523
Beneficial conversion feature on convertible note																		Beneficial conversion feature on convertible note	—	—	523		—		—		523		—		523
Issuances on conversion of debenture	Issuances on conversion of debenture	—		327		550		—		—		550		—		550		Issuances on conversion of debenture	—	327	550		—		—		550		—		550

Issuance of warrants	Issuance of warrants	—		—		3,229		—		—		3,229		—		3,229		Issuance of warrants	—	—	3,229		—		—		3,229		—		3,229
NCI adjustments for changes in ownership	NCI adjustments for changes in ownership	3,861		583		(3,395)		—		—		(3,395)		3,395		0		NCI adjustments for changes in ownership	3,861	583	(3,395)		—		—		(3,395)		3,395		—
Capital contributions, net	Capital contributions, net	—		—		—		—		—		—		26		26		Capital contributions, net	—	—	—		—		—		—		26		26
Other equity transactions	Other equity transactions	—		276		754		—		0		754		0		754		Other equity transactions	—	276	754		—		—		754		—		754
Equity-based compensation expense and related issuances	Equity-based compensation expense and related issuances	0		3,333		92,064		—		—		92,064		—		92,064		Equity-based compensation expense and related issuances	—	3,333	92,064		—		—		92,064		—		92,064
Net loss	Net loss	—		—		—		—		(286,588)		(286,588)		(73,530)		(360,118)		Net loss	—	—	—		—		(286,588)		(286,588)		(73,530)		(360,118)
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)
NCI adjustments for changes in ownership																		NCI adjustments for changes in ownership	—	1,066	(1,063)		—		—		(1,063)		1,063		—
Capital distributions, net																		Capital distributions, net	—	—	—		—		—		—		(2,577)		(2,577)
Other equity transactions																		Other equity transactions	—	98	635		—		—		635		—		635
Equity-based compensation expense and related issuances																		Equity-based compensation expense and related issuances	—	4,489	19,946		—		—		19,946		—		19,946
Net loss																		Net loss	—	—	—		—		(63,010)		(63,010)		(10,147)		(73,157)
December 31, 2021																		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																		NCI adjustments for changes in ownership	—	—	(6,145)		—		—		(6,145)		6,145		—
Capital distributions, net																		Capital distributions, net	—	—	—		—		—		—		(5,534)		(5,534)
Other equity transactions																		Other equity transactions	—	378	—		—		—		—		—		—
Equity-based compensation expense and related issuances																		Equity-based compensation expense and related issuances	—	5,156	10,138		—		—		10,138		—		10,138
Net loss																		Net loss	—	—	—		—		(139,876)		(139,876)		(28,819)		(168,695)
December 31, 2022																		December 31, 2022	3,861	112,437	$	760,529	$	(21,054)	$	(678,091)	$	61,384	$	(21,205)	$	40,179


Purchase of non-controlling interest	0		0		(19,643)
Repayment of debt	(25,821)		(12,333)		(17,838)

Capital contributions (distributions) - non-controlling interests, net	0		(4,363)		2,767
Net cash provided by financing activities	$	165,019	$	7,050	$	359,766
Net increase (decrease) in cash, cash equivalents and restricted cash	$	28,039	$	(78,438)	$	88,538
Cash, cash equivalents and restricted cash - Beginning of period	26,600		105,038		16,500
Cash, cash equivalents and restricted cash - End of period	$	54,639	$	26,600	$	105,038


Proceeds from related party debt	$	—	$	—	$	7,100
Repayment of related party loan	—		—		(22,100)
Proceeds from financing (refer to Note 14 for related party financing)	$	50,000	$	81,407	160,587
Deferred financing costs paid	(3,315)		(3,371)		(7,864)
Proceeds from issuance of private placement units and warrants, net	—		26		31,117
Collateral received from financing agreement	—		—		22,000





Repayment of debt	(1,881)		(91,039)		(25,821)

Capital distributions - non-controlling interests	(5,534)		—		—
Net cash provided by (used in) financing activities	$	39,270	$	(12,977)	$	165,019
Net increase (decrease) in cash, cash equivalents, restricted cash, and cash held for sale	$	(20,434)	$	(10,138)	$	28,039
Cash, cash equivalents, restricted cash, and cash held for sale - Beginning of period	44,501		54,639		26,600
Cash, cash equivalents, restricted cash, and cash held for sale - End of period	$	24,067	$	44,501	$	54,639

RECONCILIATION OF CASH FLOW INFORMATION:
Cash and cash equivalents	$	24,067	$	43,180	$	32,542
Restricted cash	—		1,098		$	22,097
Cash held for sale	$	—	$	223	$	—
Total cash, cash equivalents, restricted cash, and cash held for sale at end of period	$	24,067	$	44,501	$	54,639


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


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


~~Purchase Price Allocation~~	~~CCF (1)~~
~~Assets acquired:~~
~~Cash and cash equivalents~~	$	17
~~Inventory~~	~~1,969~~
~~Other current assets~~	~~3,164~~
~~Capital assets, net~~	~~4,173~~
~~Operating lease ROU asset~~	~~4,455~~
~~Goodwill~~	~~5,247~~
~~Intangible assets - cannabis licenses~~	~~10,000~~


~~Other non-current assets~~	10
~~Liabilities assumed:~~
~~Accounts payable and accrued liabilities~~	~~(228)~~
~~Taxes payable~~	~~(17)~~
~~Other current liabilities~~	~~(4,248)~~

~~Operating lease liability~~	~~(4,455)~~


~~Fair value of net assets acquired~~	$	~~20,087~~

~~Consideration paid:~~
~~Cash~~	$	~~10,000~~


~~Settlement of pre-existing relationship~~	~~10,087~~

~~Total consideration~~	$	~~20,087~~


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

Capital assets, net	22,923		3,312		26,235
Operating lease right-of-use asset	2,819		1,584		4,403
Goodwill	1,619		1,482		3,101
Intangible assets, net - cannabis licenses	17,000		3,200		20,200
Intangible assets, net - customer relationships	—		1,000		1,000
Other non-current assets	189		40		229
Liabilities assumed:
Accounts payable and accrued liabilities	(1,829)		(464)		(2,293)

Taxes payable	(33)		(68)		(101)
Operating lease liability, current	(315)		(193)		(508)
Other current liabilities	(294)		3		(291)
Operating lease liability, non-current	(2,504)		(1,391)		(3,895)
Fair value of net assets acquired	$	44,996	$	10,880	$	55,876

Consideration paid:
Settlement of pre-existing relationship	44,996		10,880		$	55,876
Total consideration	$	44,996	$	10,880	$	55,876


Purchase Price Allocation	Thames Valley (1)		NCC (2)		Form Factory (3)		Total
Assets acquired:
Cash and cash equivalents	$	106	$	696	$	4,276	$	5,078
Inventory	39		170		520		729
Other current assets	1		36		1,136		1,173
Capital assets, net	0		539		3,988		4,527
Operating lease ROU asset	0		0		10,477		10,477
Goodwill	3,596		4,192		65,303		73,091
Intangible assets - cannabis licenses	14,850		2,500		40,372		57,722
Intangible assets - customer relationships	0		0		4,600		4,600
Intangible assets - developed technology	0		0		3,100		3,100
Other non-current assets	0		25		403		428
Liabilities assumed:
Accounts payable and accrued liabilities	(121)		(24)		(1,572)		(1,717)
Other current liabilities	0		(621)		(74)		(695)
Debt	0		0		(494)		(494)
Operating lease liability	0		0		(10,477)		(10,477)
Deferred tax liability	(3,399)		(461)		(14,519)		(18,379)
Other liabilities	0		(175)		(23)		(198)
Fair value of net assets acquired	$	15,072	$	6,877	$	107,016	$	128,965

Consideration paid:
Cash	$	15,072	$	0	$	3,711	$	18,783
Deferred acquisition costs and deposits	0		100		0		100
Subordinate Voting Shares	0		3,948		95,266		99,214
Settlement of pre-existing relationship	0		830		8,039		8,869
Fair value of previously held interest	0		1,999		0		1,999
Total consideration	$	15,072	$	6,877	$	107,016	$	128,965

Subordinate Voting Shares issued	0		211		4,770		4,981


	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)


	December 31, 2020
	Acreage Florida, Inc.		Kanna, Inc.		MMRC(1)		Michigan		OR - Cannabliss		OR - Medford		OR - Powell		Total
Inventory	$	587	$	0	$	0	$	0	$	379	$	100	$	127	$	1,193
Notes receivable, current	0		0		0		0		0		31		0		31
Other current assets	161		0		20		0		1		0		0		182
Total current assets classified as held-for-sale	748		0		20		0		380		131		127		1,406
Capital assets, net	7,137		1,156		286		7,469		83		2,252		7		18,390
Operating lease right-of-use assets	10,305		944		362		0		925		321		164		13,021
Intangible assets, net	26,190		970		802		0		0		0		0		27,962
Goodwill	0		0		0		0		2,192		0		0		2,192
Total assets classified as held for sale	$	44,380	$	3,070	$	1,470	$	7,469	$	3,580	$	2,704	$	298	$	62,971

Accounts payable and accrued liabilities	$	(247)	$	(132)	$	(3)	$	0	$	(260)	$	0	$	0	$	(642)
Taxes payable	0		1		0		0		(179)		0		0		(178)
Operating lease liability, current	(501)		(250)		(29)		0		(184)		(133)		(122)		(1,219)
Other current liabilities	(89)		0		0		0		0		0		0		(89)
Total current liabilities classified as held-for-sale	(837)		(381)		(32)		0		(623)		(133)		(122)		(2,128)

Operating lease liability, non-current	(14,107)		(610)		(325)		0		(688)		(278)		(22)		(16,030)
Deferred tax liabilities	0		0		0		0		4		0		0		4
Total liabilities classified as held-for-sale	$	(14,944)	$	(991)	$	(357)	$	0	$	(1,307)	$	(411)	$	(144)	$	(18,154)


Intangibles	Intangibles	December 31, 2020		December 31, 2019		Intangibles	December 31, 2022		December 31, 2021
Finite-lived intangible assets:	Finite-lived intangible assets:					Finite-lived intangible assets:
Management contracts	Management contracts	$	19,580	$	52,438	Management contracts	$	—	$	1,511
Customer relationships	Customer relationships	0		4,600		Customer relationships	1,000		1,000
Developed technology		0		3,100
		19,580		60,138
Total finite-lived intangible assets						Total finite-lived intangible assets	1,000		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	(5,262)		(5,750)		Management contracts	—		(493)
Customer relationships	Customer relationships	0		(649)		Customer relationships	(1,000)		—
Developed technology		0		(114)
		(5,262)		(6,513)
Total accumulated amortization on finite-lived intangible assets						Total accumulated amortization on finite-lived intangible assets	(1,000)		(493)
Finite-lived intangible assets, net	Finite-lived intangible assets, net	14,318		53,625		Finite-lived intangible assets, net	—		2,018

Indefinite-lived intangible assets	Indefinite-lived intangible assets					Indefinite-lived intangible assets
Cannabis licenses	Cannabis licenses	124,665		232,347		Cannabis licenses	35,124		117,677

Total intangibles, net	Total intangibles, net	$	138,983	$	285,972	Total intangibles, net	$	35,124	$	119,695


Amortization of Intangibles	2021		2022		2023		2024		2025
Amortization expense	$	2,164	$	2,164	$	2,164	$	2,164	$	2,164


Goodwill	Total
December 31, ~~2018~~2020	$	~~32,116~~31,922
Acquisitions	~~73,091~~19,800
Impairment	(12,631)
Other adjustments(1)	4,219
December 31, 2021	$	43,310
Adjustment to purchase price allocation	~~550~~
~~December 31, 2019~~	$	~~105,757~~
~~Acquisitions~~	~~5,247~~ (16,700)
Impairment	~~(76,890)~~(16,590)
~~Transferred to held-for-sale~~Other Adjustments(1)	~~(2,192)~~3,741
December 31, ~~2020~~2022	$	~~31,922~~13,761


Investments	Investments	December 31, 2020		December 31, 2019		Investments	December 31, 2022		December 31, 2021

Investments held at FV-NI	Investments held at FV-NI	34,126		4,376		Investments held at FV-NI	$	34,046	$	35,226
Equity method investments		0		123

Total long-term investments	Total long-term investments	$	34,126	$	4,499	Total long-term investments	$	34,046	$	35,226


Investment income	Year Ended December 31,
	2020		2019		2018
Short-term investments	$	0	$	738	$	406

Investments held at FV-NI	1,158		(2,218)		6,570
Equity method investments	(1,060)		1,000		13,301
Gain from investments held for sale	0		0		1,500
Income from investments, net	$	98	$	(480)	$	21,777


Investment income (loss)	Year Ended December 31,
		2022		2021		2020
Short-term investments		$	4	$	—	$	—

Investments held at FV-NI		237		(3,549)		1,158
Equity method investments		—		—		(1,060)

Income (loss) from investments, net		$	241	$	(3,549)	$	98