UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31, 2020~~September 30, 2021



☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 000-56021

ACREAGE HOLDINGS, INC.

(Exact name of registrant as specified in its charter)



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

~~366 Madison~~450 Lexington Avenue, ~~11th Floor~~#3308	New York	New York	~~10017~~10163
(Address of Principal Executive Offices)			(Zip Code)

(646) 600-9181

Registrant’s telephone number, including area code

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

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

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	x	Smaller reporting company	☐☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of ~~June 25, 2020,~~November 3, 2021, there were ~~99,407,960 Subordinate Voting Shares,~~74,637,436 and 32,874,114 Class E subordinate voting shares and Class D subordinate voting shares, as converted, issued and ~~outstanding.~~

outstanding, respectively.

TABLE OF CONTENTS

Acreage Holdings, Inc.

Form 10-Q

For the Three Months and Nine Months Ended ~~March 31, 2020~~

September 30, 2021


PART I		Financial Information

~~PART I~~		~~Financial Information.~~

Item 1.	Condensed Consolidated Statements of Financial Position as of ~~March 31, 2020~~September 30, 2021 (unaudited) and December 31, ~~2019~~2020 (audited).		34
		Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended ~~March 31,~~Sept ember 30, 2021 and 2020 ~~and 2019.~~		45
		Unaudited Condensed Consolidated Statements of Shareholders’ Equity for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020 ~~and 2019.~~		56
		Unaudited Condensed Consolidated Statements of Cash Flows for the ~~three~~nine months ended ~~March 31,~~Sept e mber 30, 2021 and 2020 ~~and 2019.~~		68
		Notes to the Unaudited Condensed Consolidated Financial ~~Statements.~~Statements		89
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations.		3141
Item 3.		Quantitative and Qualitative Disclosures About Market Risk.		3753
Item 4.		Controls and Procedures.		4056


PART II		Other ~~Information.~~Information

Item 1.		Legal Proceedings.		4158
Item 1A.		Risk ~~Factors.~~Factors		4158
Item 2.		Unregistered Sales of Equity Securities and Use of ~~Proceeds.~~Proceeds		4158
Item 3.		Defaults Upon Senior Securities.		4158
Item 4.		Mine Safety ~~Disclosures.~~Disclosures		4158
Item 5.		Other Information.		4159
Item 6.		~~Exhibits.~~Exhibits		4259


		SIGNATURES		4360

~~Explanatory Note~~

Due to the outbreak of coronavirus disease 2019 (“COVID-19”), Acreage Holdings, Inc. (the “Company”, “we”, “our”, “us” or “Acreage”) previously filed a current report on Form 8-K to avail itself of an extension to file its Quarterly Report on Form 10‑Q for the period ended March 31, 2020 (this “Quarterly Report” or “Form 10-Q”), originally due on May 15, 2020, relying on an order issued by the Securities and Exchange Commission (the “SEC”) on March 25, 2020 pursuant to Section 36 of the Securities Exchange Act of 1934, as amended (Release No. 34-88465) (the “Order”), regarding exemptions granted to certain public companies from specified provisions of the Securities Exchange Act of 1934, as amended, and the rules promulgated thereunder. In December 2019, COVID-19 was reported to have surfaced in Wuhan, China, which has and is continuing to spread throughout China and other parts of the world, including the United States. On January 30, 2020, the World Health Organization declared the outbreak of the COVID-19 a “Public Health Emergency of International Concern,” and on March 11, 2020, the World Health Organization characterized the outbreak as a “pandemic”. Our operations are located in many states throughout the United States, including New York, one of the areas of the United States hardest-hit by the COVID-19 pandemic. The Company’s corporate headquarters are located in New York City.

As a result of COVID-19, the Company has been following the recommendations of local health authorities to minimize exposure risk for its employees for the past several weeks, including the temporary closures of its offices and having employees work remotely to the extent possible, which has adversely affected employee efficiency and disrupted the Company’s business operations. In particular, these changes have affected the collaboration of our financial reporting team and the accessibility of the Company’s books and records, resulting in delays in the review, preparation and completion of its financial statements for the first quarter of 2020 due to guidance from authorities for employees to follow work from home procedures. As such, the Company has relied upon the 45-day grace period provided by the Order to delay filing of its Quarterly Report.



ACREAGE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

PART I

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

(in thousands) March 31, 2020 December 31, 2019
(unaudited) (audited)
ASSETS
Cash and cash equivalents $ 13,944
$ 26,505
Restricted cash 22,095
95
Inventory 21,057
18,083
Notes receivable, current 2,123
2,146
Other current assets 8,903
8,506
Total current assets 68,122
55,335
Long-term investments 4,725
4,499
Notes receivable, non-current 101,713
79,479
Capital assets, net 116,693
106,047
Operating lease right-of-use assets 55,411
51,950
Intangible assets, net 155,490
285,972
Goodwill 28,867
105,757
Other non-current assets 2,708
2,638
Total non-current assets 465,607
636,342
TOTAL ASSETS $ 533,729
$ 691,677

LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable and accrued liabilities $ 31,641
$ 32,459
Taxes payable 7,469
4,740
Interest payable 366
291
Operating lease liability, current 3,253
2,759
Debt, current 22,514
15,300
Other current liabilities 2,524
1,604
Total current liabilities 67,767
57,153
Debt, non-current 47,467
28,186
Operating lease liability, non-current 51,016
47,522
Deferred tax liability 32,303
63,997
Other liabilities 5
25
Total non-current liabilities 130,791
139,730
TOTAL LIABILITIES 198,558
196,883
Commitments and contingencies (Note 13)
Common stock, no par value (Note 11) - unlimited authorized, 97,430 and 90,646 issued and outstanding, respectively —
—
Additional paid-in capital 671,738
615,678
Treasury stock, 842 SVS held in treasury (21,054 ) (21,054 )
Accumulated deficit (360,571 ) (188,617 )
Total Acreage Shareholders' equity 290,113
406,007
Non-controlling interests 45,058
88,787
TOTAL EQUITY 335,171
494,794

TOTAL LIABILITIES AND EQUITY $ 533,729
$ 691,677


(in thousands)	September 30, 2021		December 31, 2020
	(unaudited)		(audited)
ASSETS
Cash and cash equivalents	$	27,868	$	32,542
Restricted cash	1,098		22,097

Inventory	33,520		23,715
Notes receivable, current	1,552		2,032
Assets held-for-sale	19,272		62,971
Other current assets	15,470		4,663
Total current assets	98,780		148,020
Long-term investments	38,921		34,126
Notes receivable, non-current	81,434		97,901
Capital assets, net	103,853		89,136
Operating lease right-of-use assets	22,349		17,247
Intangible assets, net	124,534		138,983
Goodwill	37,604		31,922

Other non-current assets	1,493		4,718
Total non-current assets	410,188		414,033
TOTAL ASSETS	$	508,968	$	562,053

LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable and accrued liabilities	$	25,317	$	18,913
Taxes payable	27,378		14,780
Interest payable	1,444		3,504
Operating lease liability, current	1,525		1,492
Debt, current	16,377		27,139
Non-refundable deposits on sale	1,750		750
Liabilities related to assets held-for-sale	2,808		18,154
Other current liabilities	8,844		13,010
Total current liabilities	85,443		97,742
Debt, non-current	126,186		153,318
Operating lease liability, non-current	21,830		16,609
Deferred tax liability	27,024		34,673
Other liabilities	37		2
Total non-current liabilities	175,077		204,602
TOTAL LIABILITIES	260,520		302,344
Commitments and contingencies	0		0
Common stock, no par value - unlimited authorized, 106,403 and 101,250 issued and outstanding, respectively	—		—
Additional paid-in capital	753,840		737,290
Treasury stock, 842 common stock held in treasury	(21,054)		(21,054)
Accumulated deficit	(497,864)		(475,205)
Total Acreage Shareholders' equity	234,922		241,031
Non-controlling interests	13,526		18,678
TOTAL EQUITY	248,448		259,709

TOTAL LIABILITIES AND EQUITY	$	508,968	$	562,053

See accompanying notes to Unaudited Condensed Consolidated Financial Statements



ACREAGE HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except per share amounts)	2021		2020		2021		2020
REVENUE
Retail revenue, net	$	30,794	$	23,914	$	85,038	$	61,362
Wholesale revenue, net	17,077		7,798		42,634		21,513
Other revenue, net	280		30		3,090		164
Total revenues, net	48,151		31,742		130,762		83,039
Cost of goods sold, retail	(16,279)		(14,134)		(43,412)		(37,004)
Cost of goods sold, wholesale	(8,069)		(4,133)		(19,049)		(11,395)
Total cost of goods sold	(24,348)		(18,267)		(62,461)		(48,399)
Gross profit	23,803		13,475		68,301		34,640

OPERATING EXPENSES
General and administrative	8,466		14,819		23,067		40,237
Compensation expense	10,699		8,306		32,236		30,740
Equity-based compensation expense	4,168		10,445		17,191		65,369
Marketing	583		46		992		1,514
Impairments, net	2,339		—		3,157		187,775
Loss on notes receivable	—		—		1,726		8,161
Write down (recovery) of assets held-for-sale	—		2,893		(8,616)		11,003
Legal settlements, net	—		14,150		322		14,150
Depreciation and amortization	4,044		1,396		9,670		4,888
Total operating expenses	30,299		52,055		79,745		363,837

Net operating loss	$	(6,496)	$	(38,580)	$	(11,444)	$	(329,197)

(Loss) income from investments, net	489		(433)		(777)		(195)
Interest income from loans receivable	1,067		1,606		4,125		5,083
Interest expense	(3,620)		(6,147)		(14,072)		(11,106)
Other income (loss), net	81		(656)		7,825		(853)
Total other income (loss)	(1,983)		(5,630)		(2,899)		(7,071)

Loss before income taxes	$	(8,479)	$	(44,210)	$	(14,343)	$	(336,268)

Income tax (expense) benefit	(5,579)		(3,826)		(11,661)		21,633

Net loss	$	(14,058)	$	(48,036)	$	(26,004)	$	(314,635)

Less: net loss attributable to non-controlling interests	(1,761)		(7,488)		(3,347)		(64,941)

Net loss attributable to Acreage Holdings, Inc.	$	(12,297)	$	(40,548)	$	(22,657)	$	(249,694)

Net loss per share attributable to Acreage Holdings, Inc. - basic and diluted:	$	(0.11)	$	(0.39)	$	(0.21)	$	(2.54)

Weighted average shares outstanding - basic and diluted	110,193		103,450		108,385		98,304

Three Months Ended March 31,
(in thousands, except per share amounts) 2020 2019
REVENUE
Retail revenue, net $ 17,573
$ 9,909
Wholesale revenue, net 6,548
2,815
Other revenue, net 104
173
Total revenues, net 24,225
12,897
Cost of goods sold, retail (10,889 ) (5,881 )
Cost of goods sold, wholesale (3,382 ) (1,696 )
Total cost of goods sold (14,271 ) (7,577 )
Gross profit 9,954
5,320

OPERATING EXPENSES
General and administrative 13,032
10,158
Compensation expense 14,477
6,489
Equity-based compensation expense 34,737
18,977
Marketing 987
801
Loss on impairment 187,775
—
Loss on notes receivable 8,161
—
Depreciation and amortization 2,067
908
Total operating expenses 261,236
37,333

Net operating loss $ (251,282 ) $ (32,013 )

Income from investments, net 234
2,727
Interest income from loans receivable 1,647
730
Interest expense (1,226 ) (118 )
Other (loss) income, net (174 ) 92
Total other income 481
3,431

Loss before income taxes $ (250,801 ) $ (28,582 )

Income tax benefit (expense) 28,572
(2,222 )

Net loss $ (222,229 ) $ (30,804 )

Less: net loss attributable to non-controlling interests (50,275 ) (7,427 )

Net loss attributable to Acreage Holdings, Inc. $ (171,954 ) $ (23,377 )

Net loss per share attributable to Acreage Holdings, Inc. - basic and diluted: $ (1.85 ) $ (0.29 )

Weighted average shares outstanding - basic and diluted 92,902
79,440

See accompanying notes to Unaudited Condensed Consolidated Financial Statements



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

Attributable to shareholders of the parent
(in thousands) LLC Membership Units Pubco Shares (as converted) Share Capital Treasury Stock Accumulated Deficit Shareholders’ Equity Non-controlling Interests Total Equity
December 31, 2018 —
79,164
$ 414,757
$ (21,054 ) $ (38,349 ) $ 355,354
$ 130,922
$ 486,276
Issuances for business acquisitions/purchases of intangible assets —
211
3,948
—
—
3,948
4,000
7,948
NCI adjustments for changes in ownership —
643
3,640
—
—
3,640
(3,640 ) —
Other equity transactions —
12
264
—
—
264
—
264
Equity-based compensation expense and related issuances —
190
16,187
—
—
16,187
—
16,187
Net loss —
—
—
—
(23,377 ) (23,377 ) (7,427 ) (30,804 )
March 31, 2019 —
80,220
$ 438,796
$ (21,054 ) $ (61,726 ) $ 356,016
$ 123,855
$ 479,871

December 31, 2019 —
90,646
$ 615,678
$ (21,054 ) $ (188,617 ) $ 406,007
$ 88,787
$ 494,794
Issuances for private placement —
6,085
27,887
—
—
27,887
—
27,887
NCI adjustments for changes in ownership —
113
(6,564 ) —
—
(6,564 ) 6,564
—
Capital distributions, net —
—
—
—
—
—
(18 ) (18 )
Equity-based compensation expense and related issuances —
586
34,737
—
—
34,737
—
34,737
Net loss —
—
—
—
(171,954 ) (171,954 ) (50,275 ) (222,229 )
March 31, 2020 —
97,430
$ 671,738
$ (21,054 ) $ (360,571 ) $ 290,113
$ 45,058
$ 335,171


			Attributable to shareholders of the parent
(in thousands)	LLC Membership Units	Pubco Shares (as converted)	Share Capital		Treasury Stock		Accumulated Deficit		Shareholders’ Equity		Non-controlling Interests		Total Equity
December 31, 2019	—	90,646	$	615,678	$	(21,054)	$	(188,617)	$	406,007	$	88,787	$	494,794
Issuances for private placement	—	6,085	27,887		—		—		27,887		—		27,887
NCI adjustments for changes in ownership	—	113	(6,564)		—		—		(6,564)		6,564		—
Capital distributions, net	—	—	—		—		—		—		(18)		(18)

Equity-based compensation expense and related issuances	—	586	34,737		—		—		34,737		—		34,737
Net loss	—	—	—		—		(171,954)		(171,954)		(50,275)		(222,229)
March 31, 2020	—	97,430	$	671,738	$	(21,054)	$	(360,571)	$	290,113	$	45,058	$	335,171
NCI adjustments for changes in ownership	3,861	272	977		—		—		977		(977)		—
Beneficial conversion feature on convertible note	—	—	523		—		—		523		—		523
Other equity transactions	—	—	—		—		—		—		44		44
Equity-based compensation expense and related issuances	—	864	20,187		—		—		20,187		—		20,187
Net loss	—	—	—		—		(37,192)		(37,192)		(7,178)		(44,370)
June 30, 2020	3,861	98,566	$	693,425	$	(21,054)	$	(397,763)	$	274,608	$	36,947	$	311,555
Issuances on conversion of debenture	—	327	550		—		—		550				550
NCI adjustments for changes in ownership	—	198	1,716		—		—		1,716		(1,716)		—
Other equity transactions	—	212	532		—		—		532		—		532
Equity-based compensation expense and related issuances	—	1,443	10,445		—		—		10,445		—		10,445
Net loss	—	—	—		—		(40,548)		(40,548)		(7,488)		(48,036)
September 30, 2020	3,861	100,746	$	706,668	$	(21,054)	$	(438,311)	$	247,303	$	27,743	$	275,046

See accompanying notes to Unaudited Condensed Consolidated Financial Statements


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


			Attributable to shareholders of the parent
(in thousands)	LLC Membership Units	Pubco Shares (as converted)	Share Capital		Treasury Stock		Accumulated Deficit		Shareholders’ Equity		Non-controlling Interests		Total Equity
December 31, 2020	3,861	101,250	$	737,290	$	(21,054)	$	(475,205)	$	241,031	$	18,678	$	259,709

Purchase of non-controlling interest in subsidiary	—	—	(272)		—		—		(272)		(14)		(286)
NCI adjustments for changes in ownership	—	400	601		—		—		601		(601)		—
Capital distributions, net	—	—	—		—		—		—		(30)		(30)
Other equity transactions	—	97	300		—		—		300		—		300
Equity-based compensation expense and related issuances	—	1,693	6,042		—		—		6,042		—		6,042
Net loss	—	—	—		—		(7,809)		(7,809)		(833)		(8,642)
March 31, 2021	3,861	103,440	$	743,961	$	(21,054)	$	(483,014)	$	239,893	$	17,200	$	257,093
NCI adjustments for changes in ownership	—	666	(1,463)		—		—		(1,463)		1,463		—
Capital distributions, net	—	—	—		—		—		—		(2,547)		(2,547)
Other equity transactions	—	1	117		—		—		117		—		117
Equity-based compensation expense and related issuances	—	1,595	6,981		—		—		6,981		—		6,981
Net loss	—	—	—		—		(2,553)		(2,553)		(753)		(3,306)
June 30, 2021	3,861	105,702	$	749,596	$	(21,054)	$	(485,567)	$	242,975	$	15,363	$	258,338
NCI adjustments for changes in ownership	—	—	76		—		—		76		(76)		—


Equity-based compensation expense and related issuances	—	701	4,168		—		—		4,168		—		4,168
Net loss	—	—	—		—		(12,297)		(12,297)		(1,761)		(14,058)
September 30, 2021	3,861	106,403	$	753,840	$	(21,054)	$	(497,864)	$	234,922	$	13,526	$	248,448

See accompanying notes to Unaudited Condensed Consolidated Financial Statements


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


	Nine Months Ended September 30,
(in thousands)	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(26,004)	$	(314,635)
Adjustments for:
Depreciation and amortization	9,670		4,888
Depreciation and amortization included in COGS	1,714		—
Equity-settled expenses, including compensation	17,607		65,901
Gain on business divestiture	(11,681)		(217)
Loss (gain) on disposal of capital assets	1,690		(75)
Impairments, net	9,947		187,775
Loss on notes receivable	3,726		8,161
Bad debt expense	(1,435)		194
Non-cash other revenue	(2,500)		—
Non-cash interest expense	3,154		3,754
Non-cash operating lease adjustments	(572)		709
Deferred tax benefit	(8,125)		(32,141)
Non-cash loss from investments, net	778		195
Write-down (recovery) of assets held-for-sale	(8,616)		11,003


Change, net of acquisitions in:
Inventory	(11,864)		(1,914)
Other assets	(1,239)		1,110
Interest receivable	(1,031)		(1,286)
Accounts payable and accrued liabilities	1,238		7,384
Taxes payable	12,935		9,742
Interest payable	(2,060)		4,392
Other liabilities	(5,644)		852
Net cash used in operating activities	$	(18,312)	$	(44,208)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of capital assets	$	(27,535)	$	(7,904)
Investments in notes receivable	(3,918)		(14,193)
Collection of notes receivable	13,225		235
Cash paid for long-term investments	—		(34,019)
Proceeds from business divestiture	24,407		997
Proceeds from sale of capital assets	5		1,160
Business acquisitions, net of cash acquired	541		(9,983)

Proceeds from sale of promissory notes	26,000		—
Distributions from investments	1,427		26

Net cash provided by (used in) investing activities	$	34,152	$	(63,681)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from related party debt	$	—	$	5,000
Repayment of related party loan	—		(20,000)
Proceeds from debt financing	6,301		129,000
Deferred financing costs paid	(975)		(3,317)
Proceeds from equity transactions	—		27,887
Collateral received from financing agreement	—		22,000



Repayment of debt	(46,321)		(10,822)


Net cash (used in) provided by financing activities	$	(40,995)	$	149,748
Net (decrease) increase in cash, cash equivalents, restricted cash, and cash held for sale	$	(25,155)	$	41,859
Cash, cash equivalents, restricted cash, and cash held for sale - Beginning of period	54,639		26,600
Cash, cash equivalents, restricted cash, and cash held for sale - End of period	$	29,484	$	68,459

RECONCILIATION OF CASH FLOW INFORMATION:
Cash and cash equivalents	$	27,868	$	46,363
Restricted cash	$	1,098	$	22,096
Cash held for sale	$	518	$	—
Total cash, cash equivalents, restricted cash, and cash held for sale at end of period	$	29,484	$	68,459

Three Months Ended March 31,
(in thousands) 2020 2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (222,229 ) $ (30,804 )
Adjustments for:
Depreciation and amortization 2,067
908
Equity-settled expenses, including compensation 34,737
18,977
Loss on impairment 187,775
—
Loss on notes receivable 8,161
—
Non-cash interest expense 319
—
Non-cash operating lease expense 527
434
Deferred tax (benefit) expense (31,694 ) 409
Non-cash income from investments, net (234 ) (2,182 )
Change, net of acquisitions in:
Inventory (2,374 ) (1,694 )
Other assets (835 ) (505 )
Interest receivable 882
(1,153 )
Accounts payable and accrued liabilities (5,226 ) 559
Taxes payable 2,729
1,538
Interest payable 29
(248 )
Other liabilities (35 ) 131
Net cash used in operating activities $ (25,401 ) $ (13,630 )
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of capital assets $ (7,790 ) $ (8,288 )
Investments in notes receivable (11,560 ) (8,629 )
Collection of notes receivable 23
2,835
Proceeds from sale of capital assets —
162
Business acquisitions, net of cash acquired —
(20,770 )
Purchases of intangible assets —
(56,497 )
Deferred acquisition costs and deposits —
(300 )
Distributions from investments 8
—
Proceeds from purchase of short-term investments —
74,768
Net cash used in investing activities $ (19,319 ) $ (16,719 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from related party debt
5,000

—
Repayment of related party loan (20,000 ) —
Proceeds from financing 21,000
—
Deferred financing costs paid (1,531 ) —
Proceeds from issuance of private placement units, net 27,887
—
Collateral received from financing agreement 22,000
—
Settlement of taxes withheld —
(2,790 )
Repayment of debt (197 ) (7,621 )
Net cash provided by (used in) financing activities $ 54,159
$ (10,411 )
Net increase (decrease) in cash, cash equivalents and restricted cash $ 9,439
$ (40,760 )
Cash, cash equivalents and restricted cash - Beginning of period 26,600
105,038
Cash, cash equivalents and restricted cash - End of period $ 36,039
$ 64,278


	Nine Months Ended September 30,
(in thousands)	2021		2020
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid - non-lease	$	11,444	$	988
Income taxes paid	6,346		867
OTHER NON-CASH INVESTING AND FINANCING ACTIVITIES:
Capital assets not yet paid for	$	4,063	$	5,625

Exchange of intangible assets to notes receivable	—		18,800
Holdback of Maine HSCP notes receivable	—		917
Promissory note conversion (Note 3)	10,880		10,087
Deferred tax liability related to business acquisition	—		3,077
Beneficial conversion feature	—		523
Convertible note conversion	—		550
Insurance proceeds not yet received	6,790		—
Non-cash proceeds from business divestiture	34,475		—
Unpaid debt issuance costs	—		4,968

See accompanying notes to Unaudited Condensed Consolidated Financial Statements



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

Three Months Ended March 31,
(in thousands) 2020 2019
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid - non-lease $ 2
$ 354
Income taxes paid 525
273
OTHER NON-CASH INVESTING AND FINANCING ACTIVITIES:
Capital assets not yet paid for $ 4,377
$ 380
Issuance of Class D units for land —
264
Exchange of intangible assets to notes receivable (Note 4) 18,800
—
Holdback of Maine HSCP notes receivable (Note 6)
917

—
Capital assets not yet received
—

380



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

1. NATURE OF OPERATIONS

Acreage Holdings, Inc. (the “Company”, “Pubco” or “Acreage”) was originally incorporated under the Business Corporations Act (Ontario) on July 12, 1989 as Applied Inventions Management Inc. On August 29, 2014, the Company changed its name to Applied Inventions Management Corp. The Company continued into British Columbia and changed its name to ~~Acreage~~“Acreage Holdings, Inc.” on November 9, 2018. The Company’s ~~Subordinate Voting Shares~~Class E subordinate voting shares (“Fixed Shares”) and Class D subordinate voting shares (“Floating Shares”) are listed on the Canadian Securities Exchange under the ~~symbol “ACRG.U”~~symbols “ACRG.A.U” and “ACRG.B.U”, respectively, quoted on the OTCQX under the ~~symbol “ACRGF”~~symbols “ACRHF” and “ACRDF”, respectively, and traded on the Frankfurt Stock Exchange under the ~~symbol “0VZ”.~~symbols “0VZ1” and “0VZ2”, respectively. The Company indirectly owns, operates and has contractual relationships with cannabis cultivation facilities, dispensaries and other cannabis-related companies ~~across~~in the United States (“U.S.”).

High Street Capital Partners, LLC, a Delaware limited liability company doing business as ~~Acreage Holdings~~“Acreage Holdings” (“HSCP”), was formed on April 29, 2014. The Company became the indirect parent of HSCP on November 14, 2018 in connection with athe reverse takeover (“RTO”) transaction described below.

The Company’s ~~corporate office and~~ principal place of business is located at ~~366 Madison~~450 Lexington Avenue, ~~11th Floor,~~#3308, New York, New York in the U.S. The Company’s registered and records office address is Suite 2800, Park Place, 666 Burrard Street, Vancouver, British Columbia in Canada.

The RTO transaction

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

Canopy Growth Corporation transaction

On June 27, 2019, the Company and Canopy Growth Corporation (“Canopy Growth” or “CGC”) ~~completed~~implemented the ~~transactions~~Prior Plan of Arrangement (as defined in Note 13) contemplated by the ~~arrangement agreement dated April 18, 2019, as amended May 15, 2019, between Canopy Growth and Acreage.~~Original Arrangement Agreement (as defined in Note 13). Pursuant to the Prior Plan of Arrangement, Canopy Growth was granted an option to acquire all of the issued and outstanding shares of the Company ~~with~~in exchange for the payment of 0.5818 of a ~~requirement~~common share in the capital of Canopy Growth for each Class A subordinate voting share (each, a “SVS”) held (with the Class B proportionate voting shares (the “PVS”) and Class C multiple voting shares (the “MVS”) being automatically converted to ~~do so upon the occurrence~~SVS immediately prior to consummation of the ~~occurrence of changes~~Acquisition (as defined in ~~U.S.~~Note 13), which original exchange ratio was subject to adjustment in accordance with the Original Arrangement Agreement. Canopy Growth was required to exercise the option upon a change in federal ~~law~~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 ~~“Arrangement”~~“Triggering Event”) and, subject to the satisfaction or waiver of certain closing conditions set out in the Original Arrangement Agreement, Canopy Growth was required to acquire all of the issued and outstanding SVS (following the mandatory conversion of the PVS and MVS into SVS).

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


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

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

COVID-19

In December 2019, a novel strain of coronavirus (“COVID-19”) emerged in Wuhan, China. Since then, it has spread to ~~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~~Management has been closely monitoring the impact of COVID-19, with a focus in the ~~United States, Canada~~health and ~~globally could have an adverse impact on our~~safety of the Company’s employees, business ~~operations~~continuity 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 designedsupporting its communities. The Company has implemented various measures to ~~limit~~reduce the spread of ~~COVID-19 may affect our retail business. Due~~the virus, including implementing social distancing measures at its cultivation facilities, manufacturing facilities, and dispensaries, enhancing cleaning protocols at such facilities and dispensaries and encouraging employees to adhere to preventative measures recommended by local, state, and federal health officials.

Significant uncertainty continues to exist concerning the ~~speed with which~~magnitude of the impact of the COVID-19 ~~situation is developing~~pandemic 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.~~variants.

~~ACREAGE HOLDINGS, INC.~~

~~NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in thousands, except per share data)~~

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation and going concern

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

2021, or any other period.

As reflected in the financial statements, the Company had an accumulated deficit as of ~~March 31, 2020,~~September 30, 2021, as well as a net loss and net cash used in operating activities for the reporting period then ended. These factors raise substantial doubt about the Company’s ability to continue as a going concern for at least one year from the issuance of these financial statements.

However, management believes that substantial doubt about the Company’s ability to meet ~~our~~its obligations for the next twelve months from the date these financial statements were issued has been alleviated due to, but not limited to, (i) ~~capital raised between January and June 2020, (ii)~~ access to future capital commitments, ~~(see Note 13), (iii)~~(ii) continued sales growth from ~~our~~the Company’s consolidated operations, ~~(iv)~~(iii) latitude as to the timing and amount of certain operating expenses as well as capital expenditures, ~~(v)~~(iv) restructuring plans that have already been put in place to improve the Company’s profitability, ~~and (vi)~~(v) the Standby Equity Distribution Agreement ~~described in~~(refer to Note 13 and 17 offor further discussion) and (vi) the ~~Unaudited Condensed Consolidated Financial Statements.~~

anticipated Non-Core Divestitures (refer to Note 3 for further discussion).

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

These interim unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, dated March 25, 2021, as filed with the Securities and Exchange Commission (the “2020 Form 10-K”).


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

Emerging growth company

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

Functional and presentation currency

The unaudited condensed consolidated financial statements and the accompanying notes are expressed in U.S. dollars. Financial metrics are presented in thousands. Other metrics, such as shares outstanding, are presented in thousands unless otherwise noted.

Use of estimates

The preparation of the Company’s ~~Unaudited Condensed Consolidated Financial Statements~~unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts that are reported in the ~~Unaudited Condensed Consolidated Financial Statements~~unaudited condensed consolidated financial statements and accompanying disclosures. Although these estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future, actual results may differ from those estimates. Significant estimates inherent in the preparation of the accompanying ~~Unaudited Condensed Consolidated Financial Statements~~unaudited condensed consolidated financial statements include the fair value of assets acquired and liabilities assumed in business combinations, assumptions relating to equity-based compensation expense, estimated useful lives for property, plant and equipment and intangible assets, the valuation allowance against deferred tax assets and the assessment of potential impairment charges on goodwill, intangible assets and investments in equity and notes receivable.

These interim Unaudited Condensed Consolidated Financial Statements and notes thereto should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 as filed with the Securities and Exchange Commission on May 29, 2020 (the “2019 Form 10-K”).

~~Emerging growth company~~

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

~~Functional and presentation currency~~

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

~~ACREAGE HOLDINGS, INC.~~

~~NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in thousands, except per share data)~~

Basis of consolidation

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

The unaudited and audited consolidated financial statements are referred to as the “Financial Statements” herein. The unaudited condensed consolidated statements of operations are referred to as the “Statements of Operations” herein. The unaudited and audited condensed consolidated statements of financial position are referred to as the “Statements of Financial Position” herein. The unaudited condensed consolidated statements of cash flows are referred to as the “Statements of Cash Flows” herein.

Restricted cash

Restricted cash represents funds contractually held for specific purposes (refer to Note 10) and, as such, not available for general corporate purposes. ~~Cash and restricted cash, as presented on the Statements of Cash Flows, consists of $13,944 and $22,095 as of March 31, 2020, respectively, and $26,505 and $95 as of December 31, 2019.~~

Impairment of long-lived assets

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

Finite-lived intangible assets and other long-lived assets are tested for impairment based on undiscounted cash flows when events or changes in circumstances indicate that the carrying amount may not be recoverable.


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

Accounting for warrants

and convertible notes

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

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

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

Assets held for sale

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

Other assets

The Company’s Other current assets balance on the Statement of Financial Position consists of accounts receivables, billed receivables, and other receivables, net of allowance for doubtful accounts, as well as prepaid expenses and other current assets as of September 30, 2021.

Net loss per share

Net loss per share represents the net loss attributable to shareholders divided by the weighted average number of shares outstanding during the period on an as converted basis. Basic and diluted loss per share are the same as of ~~March 31,~~September 30, 2021 and 2020 ~~and 2019~~ as the issuance of shares upon conversion, exercise or vesting of outstanding units would be anti-dilutive in each period. There were ~~46,962~~42,621 and ~~37,588 anti-dilutive shares~~46,541 potentially dilutive instruments outstanding as of ~~March 31,~~September 30, 2021 and 2020, ~~and 2019,~~ respectively. Refer to Note 16 for further ~~details.~~

~~ACREAGE HOLDINGS, INC.~~

~~NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in thousands, except per share data)~~

~~Accounting Pronouncements Recently Adopted~~

~~As of December 2019, the Company early adopted ASU 2017-04 -~~ ~~Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment~~ (“ASU 2017-04”). The objective of ASU 2017-04 is to simplify how an entity is required to test goodwill for impairment. Under previous GAAP, entities were required to test goodwill for impairment using a two-step approach. Under the amendments in ASU 2017-04, an entity performs its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. The adoption of ASU 2017-04 did not have an effect on the Company’s Financial Statements.discussion.

Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which was subsequently revised by ASU ~~2018-19. The~~2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-11, ASU 2020-02 and ASU 2020-03. ASU 2016-13 introduces a new model for assessing impairment on most financial assets. Entities will be required to use a forward-looking expected loss model, which will replace the current incurred loss model, which will result in earlier recognition of allowance for losses. ~~The~~As an emerging growth company, the Company has elected to use the extended transition period for complying with any new or revised financial accounting


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

standards pursuant to Section 13(a) of the Securities and Exchange Act of 1934. Accordingly, ASU 2016-13 will be effective for the Company’s first interim period of fiscal 2023, and the Company is currently evaluating the impact of the new standard.

3. ACQUISITIONS, DIVESTITURES AND ASSETS HELD FOR SALE

Acquisitions

During the nine months ended September 30, 2021, the Company completed the business combination below. The preliminary purchase price allocation is as follows:


Purchase Price Allocation	CWG (1)
Cash and cash equivalents	$	828
Inventory	1,200
Other current assets	347
Capital assets	3,312
Operating lease ROU asset	1,584
Goodwill	5,682



Other non-current assets	40


Accounts payable and accrued liabilities	(464)
Taxes payable	(68)
Operating lease liability, current	(193)
Other current liabilities	3
Operating lease liability, non-current	(1,391)



Fair value of net assets acquired	$	10,880

Consideration paid:




Settlement of pre-existing relationship	$	10,880

Total consideration	$	10,880

(1) On April 30, 2021, a subsidiary of the Company acquired 100% of CWG Botanicals, Inc. (“CWG”), an adult-use cannabis cultivation and processing operations in the state of California.

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

The preliminary purchase price allocation is based upon preliminary valuations and our estimates and assumptions are subject to change within the purchase price allocation period (generally one year from the acquisition date). The primary areas of the purchase price allocation that are not yet finalized relate to the valuation of the tangible and intangible assets acquired and the residual goodwill.

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



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

~~3. ACQUISITIONS~~

During the ~~three~~nine months ended ~~March 31,~~September 30, 2020, ~~the Company did not complete any business combinations.~~

~~During the three months ended March 31, 2019,~~ the Company completed the following business ~~combinations,~~combination and ~~has~~ allocated ~~each~~the purchase price as follows:

Purchase Price Allocation
Thames Valley
(1)

NCC
(2)
Total
Assets acquired:
Cash and cash equivalents $ 106

$ 696
$ 802
Inventory 39

170
209
Other current assets 1

36
37
Capital assets, net —

539
539
Goodwill 3,596

4,192
7,788
Intangible assets - cannabis licenses 14,850

2,500
17,350
Other non-current assets —

25
25
Liabilities assumed:
Accounts payable and accrued liabilities (121 )
(24 ) (145 )
Other current liabilities —

(621 ) (621 )
Deferred tax liability (3,399 )
(461 ) (3,860 )
Other liabilities —

(175 ) (175 )
Fair value of net assets acquired $ 15,072
$ 6,877
$ 21,949

Consideration paid:
Cash 15,072
—
15,072
Deferred acquisition costs and deposits —
100
100
Subordinate Voting Shares —
3,948
3,948
Settlement of pre-existing relationship —
830
830
Fair value of previously held interest —
1,999
1,999
Total consideration $ 15,072
$ 6,877
$ 21,949

Subordinate Voting Shares issued —
211
211

~~The operating results of the above acquisitions were not material to the periods presented.~~


Purchase Price Allocation	CCF (1)
Cash and cash equivalents	$	17
Inventory	1,969
Other current assets	3,164
Capital assets	4,173
Operating lease ROU asset	4,455
Goodwill	5,247
Intangible assets - cannabis licenses	10,000


Other non-current assets	10


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

(1) On ~~January 29, 2019,~~June 26, 2020, a subsidiary of the Company acquired 100% of ~~Thames Valley Apothecary, LLC~~Compassionate Care Foundation, Inc. (“~~Thames Valley”~~CCF”), a ~~dispensary license holder~~New Jersey vertically integrated medical cannabis nonprofit corporation.

The settlement of pre-existing relationship included in ~~Connecticut.~~

~~(2) On March 4, 2019,~~ the ~~Company acquired the remaining 70% ownership~~transaction price includes a $7,952 line of credit as well as interest ~~in NCC LLC (“NCC”), a dispensary license holder in Illinois. The market price used in valuing SVS issued was $18.70. As a result~~receivable of ~~this acquisition, the~~$2,135 which were both previously ~~held interest in NCC was re-measured, resulting in a gain of $999, which was~~ recorded in ~~Income from investments, net~~Notes receivable, non-current in the Statements of Financial Position. The carrying value of these amounts approximated their fair value.

Divestitures

On April 27, 2021, a subsidiary of the Company sold all equity interests in Acreage Florida, Inc. (“Acreage Florida”), for an aggregate sale price of $60,000. Acreage Florida is licensed to operate medical cannabis dispensaries, a processing facility and a cultivation facility in the state of Florida. The aggregate purchase price consisted of approximately $21,500 in cash, $7,000 of the buyer’s common stock, subject to a rolling lock up restriction period ending one year after the disposition date, with the lock up expiring in monthly 1/6th increments beginning October 27, 2021, and secured promissory notes totaling approximately $31,500. This resulted in a gain on sale of $11,682 recorded in Other income (loss), net on the Statements of Operations ~~during~~for the ~~three~~nine months ended ~~March 31, 2019.~~September 30, 2021. Further, the Company de-recognized deferred tax liabilities related to indefinite-lived intangible lived assets held by Acreage Florida of $6,044 as a result of the disposition in Other income (loss), net on the Statements of Operations for the nine months ended September 30, 2021,

~~Deferred acquisition costs~~On May 8, 2020, the Company sold all equity interests in Acreage North Dakota, LLC, a medical cannabis dispensary holder and ~~deposits~~

~~The Company makes advance payments to certain acquisition targets~~operator for ~~which~~$1,000. This resulted in gain on sale recorded of $217 recorded in Other income (loss), net on the ~~transfer is pending certain regulatory approvals prior to~~Statements of Operations for the ~~acquisition date.~~nine months ended September 30, 2020.



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

Assets Held for Sale

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

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

Upon classification of the disposal groups as held for sale, the Company tested each disposal group for impairment and recognized charges of $11,003 for the year ended December 31, 2020 ~~and December 31, 2019,~~to write the disposal groups down to its fair value less costs to sell. During the nine months ended September 30, 2021, the Company ~~had no deferred acquisition~~recognized a recovery on the Acreage Florida disposal group of $8,616 within Write down (recovery) of assets held-for-sale on the Statements of Operations as the estimated fair value less costs ~~outstanding.~~to sell increased. Additionally, all assets and liabilities determined within these disposal groups were transferred into Assets held-for-sale and Liabilities related to assets held-for-sale on the Statements of Financial Position, respectively as of September 30, 2021 from each of their previous respective financial statement captions. Refer to the table below for further details.

The preliminary fair values of the major classes of assets and liabilities of the businesses and assets classified as held-for-sale on the Statements of Financial Position are presented below and are subject to change based on developments during the sales process.


	September 30, 2021
	Kanna, Inc.(4)		MMRC(1)		Michigan(4)		Cannabliss(3)		OR - Medford(2)		OR - Powell(2)		Total

Cash	$	—	$	—	$	—	$	518	$	—	$	—	$	518
Inventory	$	—	$	—	$	—	$	166	$	100	$	57	$	323
Notes receivable, current	—		—		—		—		70		—		70
Other current assets	—		30		—		6		—		—		36
Total current assets classified as held-for-sale	—		30		—		690		170		57		947
Capital assets, net	1,156		286		7,469		83		2,252		7		11,253
Operating lease right-of-use assets	944		362		—		1,210		321		164		3,001
Intangible assets, net	970		801		—		—		—		—		1,771
Goodwill	—		—		—		2,191		—		—		2,191
Other non-current assets	—		—		—		21		70		18		109
Total assets classified as held for sale	$	3,070	$	1,479	$	7,469	$	4,195	$	2,813	$	246	$	19,272

Accounts payable and accrued liabilities	$	(98)	$	(3)	$	—	$	(276)	$	(5)	$	(48)	$	(430)
Taxes payable	(15)		—		—		—		—		—		(15)
Operating lease liability, current	(279)		(32)		—		(259)		(146)		(54)		(770)
Other current liabilities	—		—		—		—		—		—		—
Total current liabilities classified as held-for-sale	(392)		(35)		—		(535)		(151)		(102)		(1,215)

Operating lease liability, non-current	(397)		(299)		—		(730)		(167)		—		(1,593)

Total liabilities classified as held-for-sale	$	(789)	$	(334)	$	—	$	(1,265)	$	(318)	$	(102)	$	(2,808)


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

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

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

(3) In September 2021, a subsidiary of the Company entered into a definitive agreement and management services agreements to sell, upon regulatory approval, 4 retail dispensaries in Oregon for total consideration of $6,500, consisting of a $250 cash payment at the time of signing and a 10-month secured promissory note.

(4) Specific market conditions related to these businesses and assets have changed subsequent to their initial classification as held-for-sale. The Company continues to be committed to these sales, has adjusted its expectations and continues to actively market these businesses and assets at a reasonable price given the change in market conditions and the ongoing impact of COVID-19 pandemic.

4. INTANGIBLE ASSETS AND GOODWILL

Intangible assets

The following table details ~~our~~the intangible asset balances by major asset classes:


Intangibles	September 30, 2021		December 31, 2020
Finite-lived intangible assets:
Management contracts	$	14,893	$	19,580



Accumulated amortization on finite-lived intangible assets:
Management contracts	(8,980)		(5,262)



Finite-lived intangible assets, net	5,913		14,318

Indefinite-lived intangible assets
Cannabis licenses	118,621		124,665

Total intangibles, net	$	124,534	$	138,983

Intangibles March 31, 2020 December 31, 2019
Finite-lived intangible assets:
Management contracts $ 19,580
$ 52,438
Customer relationships —
4,600
Developed technology —
3,100
19,580
60,138
Accumulated amortization on finite-lived intangible assets:
Management contracts (3,639 ) (5,750 )
Customer relationships —
(649 )
Developed technology —
(114 )
(3,639 ) (6,513 )
Finite-lived intangible assets, net 15,941
53,625

Indefinite-lived intangible assets
Cannabis licenses 139,549
232,347

Total intangibles, net $ 155,490
$ 285,972


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

The intangible assets balance as of September 30, 2021 excludes intangible assets reclassified to assets held for sale. Refer to Note 3 for further discussion. The average useful life of finite-lived intangible assets ranges from one~~six~~ to five years.~~nine years~~.

Impairment of intangible assets

During the nine months ended September 30, 2021, the Company recognized an impairment charge of $818, related to its finite-lived intangible asset at Prime Alternative Treatment Center Consulting, LLC (“PATCC”), due to changes in expected cash flows pursuant to a revised consulting services agreement, recognized in Impairments, net on the Statements of Operations. This impairment resulted in the recognition of a tax provision benefit and an associated reversal of deferred tax liabilities of $1 and $207 during the three and nine months ended September 30, 2021, respectively.

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

~~The~~•During the nine months ended September 30, 2020, the Company performed a quantitative analysis and concluded certain of the indefinite-lived cannabis licenses had a fair value below the carrying ~~value as of March 31, 2020. During~~value. Accordingly, during the ~~three~~nine months ended ~~March 31,~~September 30, 2020, ~~and 2019,~~ the Company recognized impairment charges of $92,798 ~~and NaN, respectively,~~ with respect to its indefinite-lived intangible assets at Acreage Florida, ~~Inc.,~~ Form Factory Holdings, LLC (“Form Factory”) and Kanna, Inc. The charge is recognized in ~~Loss on impairment~~Impairments, net on the Statements of Operations.

~~The~~•During the nine months ended September 30, 2020, the Company evaluated the recoverability of the related finite-lived intangible assets to be held and used by comparing the carrying amount of the assets to the future net undiscounted cash flows expected to be generated by the assets, or comparable market sales data to determine if the carrying value is recoverable. ~~During~~Accordingly, during the ~~three~~nine months ended ~~March 31,~~September 30, 2020, ~~and 2019,~~ the Company recognized impairment charges of $8,324, ~~and NaN, respectively,~~ with respect to its finite-lived intangible assets at Form Factory and CWG Botanicals, Inc. ~~The~~(“CWG”). This charge iswas recognized in ~~Loss on impairment~~Impairments, net on the Statements of Operations.

•These impairments resulted in the recognition of a tax provision benefit and an associated reversal of deferred tax liabilities of ~~$31,316 for~~$75 and $31,473 during the three and nine months ended ~~March 31, 2020.~~September 30, 2020, respectively.

During the second quarter of fiscal 2020, the Company determined certain indefinite-lived intangible assets met the held-for-sale criteria which includes: management commits to a plan to sell; the asset is available for immediate sale; an active program to locate

~~ACREAGE HOLDINGS, INC.~~

~~NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in thousands, except per share data)~~

a buyer exists; the sale of the asset is probable and expected to be completed within one year; the asset is being actively marketed for sale; and it is unlikely that significant changes to the plan will be made. The Company has identified these assets relating to cannabis licenses within the Company’s national footprint and has evaluated the assets as part of interim impairment testing as noted above. The Company is in the process of evaluating whether this meets the criteria for discontinued operations.

~~WCM Refinancing~~

On March 6, 2020, a subsidiary of the Company closed on a refinancing, transaction and conversion related to Northeast Patients Group, operating as Wellness Connection of Maine (“WCM”), a medical cannabis business in Maine, resulting in ownership of WCM by ~~three~~3 individuals. In connection with the transaction, WCM converted from a non-profit corporation to a for-profit corporation. Refer to Note 6 for further ~~details.~~discussion. Concurrently, a portion of the management contract was converted into a promissory note of $18,800 in Notes receivable, non-current on the Statements of Financial Position in exchange for the previously held management contract. An impairment was determined as the differential between the net carrying value of the previously held management contract and the promissory note received in exchange. This resulted in an impairment loss to finite-lived intangible assets of $9,395 in ~~Loss~~ Impairments, net on ~~impairment~~the Statements of Operations for the nine months ended September 30, 2020.


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

Amortization of intangible assets

During the nine months ended September 30, 2021, the Company terminated and de-recognized a Management Contract for $1,574 with CWG as a result of the competed acquisition. The remaining amortization related to the disposition was recognized in full in Depreciation and amortization on the Statements of Operations. Refer to Note 3 for further discussion of the CWG acquisition.

During the nine months ended September 30, 2021, the Company revised the estimated useful lives related to its management services agreements with Greenleaf Apothecaries, LLC, Greenleaf Therapeutics, LLC and Greenleaf Gardens, LLC (together “Greenleaf), due to changes in the expected duration of these agreements. Refer to Note 17 for further discussion of the Greenleaf acquisition.

Amortization expense recorded during the three and nine months ended ~~March 31,~~September 30, 2021 was $3,117 and $7,588, respectively. Amortization expense recorded during the three and nine months ended September 30, 2020 was $541 and ~~2019 was $1,165 and $661,~~$2,248, respectively.

Expected annual amortization expense for existing intangible assets subject to amortization at ~~March 31, 2020~~September 30, 2021 is as follows for each of the next five fiscal years:

Amortization of Intangibles 2020 2021 2022 2023 2024
Amortization expense $ 1,623
$ 2,164
$ 2,164
$ 2,164
$ 2,164


Amortization of Intangibles	2021		2022		2023		2024		2025
Amortization expense	$	3,281	$	657	$	657	$	657	$	657

Goodwill

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


Goodwill	Total


December 31, 2020	$	31,922
Acquisitions	5,682


September 30, 2021	$	37,604

Goodwill Total
December 31, 2019 $ 105,757
Acquisitions —
Impairment (76,890 )
March 31, 2020 $ 28,867

During the nine months ended September 30, 2021, the Company recognized $5,682 in goodwill based on the preliminary purchase price allocation related to the acquisition of CWG. Refer to Note 3 for further discussion.

Also as a result of the ~~recent~~ global economic impact and uncertainty due to the COVID-19 pandemic, the Company concluded a triggering event had occurred as of March 31, 2020, and accordingly, performed interim impairment testing.

During the ~~three~~nine months ended ~~March 31,~~September 30, 2020, ~~and 2019,~~ the Company recognized impairment charges of $65,304, ~~and NaN, respectively,~~ with respect to its goodwill related to Form Factory. The Company applied the ~~DCF~~discounted cash flow approach to determine the fair value of Form Factory. The charge is recognized in ~~Loss on impairment~~Impairments, net on the Statements of Operations.

Pursuant to the WCM refinancing described above, the Company recognized an impairment loss to goodwill of $11,586 on ~~Loss of impairment~~Impairments, net on the Statements of ~~Operations.~~Operations for the nine months ended September 30, 2020. This was determined as the differential between the net carrying value of the previously held management contract and the promissory note received in exchange.

~~ACREAGE HOLDINGS, INC.~~

~~NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in thousands, except per share data)~~

5. INVESTMENTS

The carrying values of the Company’s investments in the Statements of Financial Position as of ~~March 31, 2020~~September 30, 2021 and December 31, ~~2019~~2020 are as follows:


Investments	September 30, 2021		December 31, 2020


Investments held at FV-NI	38,921		34,126
Equity method investments	—		—
Total long-term investments	$	38,921	$	34,126

Investments March 31, 2020 December 31, 2019
Investments held at FV-NI 4,607
4,376
Equity method investments 118
123
Total long-term investments $ 4,725
$ 4,499


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

~~Income~~(Loss) income from investments, net in the Statements of Operations during the three and nine months ended ~~March 31,~~September 30, 2021 and 2020 ~~and 2019~~ is as follows:

Investment income Three Months Ended March 31,
2020 2019
Short-term investments $ —
$ 500
Investments held at FV-NI 240
1,203
Equity method investments (6 ) 1,024
Income from investments, net $ 234
$ 2,727

~~Short-term investments~~

The Company from time to time invests in U.S. Treasury bills which are classified as held-to-maturity and measured at amortized cost. These range in original maturity from three to six months, and bear interest ranging from 2.2% - 2.4%. During the three months ended March 31, 2019, short-term investments in U.S. Treasury bills in the amount of $74,768 matured.


Investment (loss) income	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020


Investments held at FV-NI	489		614		(777)		877
Equity method investments	—		(1,047)		—		(1,072)

(Loss) income from investments, net	$	489	$	(433)	$	(777)	$	(195)

Investments held at FV-NI

The Company has investments in equity of several companies that do not result in significant influence or control. These investments are carried at fair value, with gains and losses recognized in the Statements of Operations.

Equity method investments

With a portion of the proceeds for the 6.1% loan received by Universal Hemp, LLC (“Universal Hemp”), Acreage engaged an investment advisor (the “Investment Advisor”) which, under the Investment Advisor’s sole discretion, invested on behalf of Universal Hemp $34,019 on September 28, 2020. As a result, Universal Hemp acquired 34,019 class B units, at $1 par value per unit, which represented 100% financial interest in an Investment Partnership, a Canada-based limited partnership. An affiliate of the Institutional Investor holds Class A units of the Investment Partnership. The ~~Company accounts~~general partner of the Investment Partnership is also an affiliate of the Institutional Investor. The Class B units are held by the Investment Advisor as an agent for ~~investments in which it can exert~~Universal Hemp. Universal Hemp, through its investment with the Investment Advisor was determined to hold significant influence ~~but does not control~~in the Investment Partnership in accordance with ASC 810 due to 1) the economic financial interest, and 2) the entitlement to matters as they pertain to ‘Extraordinary Resolution’ items as defined within the Investment Partnership Agreement. As a result, the Company accounted for the investment in the Investment Partnership under the equity method ~~investments. As of March 31,~~until December 2020. Refer to Note 10 for further discussion (“September 2020 ~~and~~Transactions”).

In December ~~31, 2019,~~2020, as the ~~Company’s equity method investments were not deemed~~Company no longer held significant influence due to the ~~Company’s Financial~~removal of the Extraordinary Resolution entitlements and other revisions in the Investment Partnership Agreement, the Company changed its accounting for the Investment Partnership to recognize the investment at fair value, with gains and losses recognized in the Statements ~~and as such, additional disclosure is omitted.~~of Operations.

6. NOTES RECEIVABLE

Notes receivable as of ~~March 31, 2020~~September 30, 2021 and December 31, ~~2019~~2020 consisted of the following:

March 31, 2020 December 31, 2019
Notes receivable $ 99,105
$ 75,851
Interest receivable 4,731
5,774
Total notes receivable $ 103,836
$ 81,625
Less: Notes receivable, current 2,123
2,146
Notes receivable, non-current $ 101,713
$ 79,479


	September 30, 2021		December 31, 2020
Notes receivable	$	77,755	$	94,171
Interest receivable	5,231		5,762
Total notes receivable	$	82,986	$	99,933
Less: Notes receivable, current	1,552		2,032
Notes receivable, non-current	$	81,434	$	97,901

Interest income on notes receivable during the three and nine months ended ~~March 31,~~September 30, 2021 totaled $1,067 and $4,125, respectively. Interest income on notes receivable during the three and nine months ended September 30, 2020 totaled $1,606 and ~~2019 totaled $1,647~~$5,083, respectively.

The Company has determined that the collectibility of certain notes receivables is doubtful based on information available. As of September 30, 2021, the Company’s allowance for notes receivable and ~~$730,~~accrued interest was $1,831. For the three and nine months ended September 30, 2021, the Company recognized a loss of nil and $1,726, respectively. The charges are recorded in Loss on notes receivable on the Statements of Operations.

On April 27, 2021, the Company received three secured promissory notes in the aggregate amount of approximately $31,500 related to the sale of Acreage Florida. Of the approximately $31,500 in promissory notes, a promissory note for approximately


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

$3,500 was collected during the three and nine months ended September 30, 2021, and in June 2021, the remaining 2 promissory notes totaling $28,000 were sold in a related party transaction to Viridescent Realty Trust, Inc. (“Viridescent”) for cash proceeds of approximately $26,000. This sale resulted in a loss of approximately $2,000 recorded in Other income (loss), net on the Statements of Operations. Refer to Notes 3 and 14 for further discussion.

On March 6, 2020, a subsidiary of the Company closed on a refinancing transaction and conversion related to Northeast Patients Group, operating as WCM, a medical cannabis business in Maine, resulting in ownership of WCM by ~~three~~3 individuals. In connection with the transaction, WCM converted from a non-profit corporation to a for-profit corporation. WCM previously had a series of agreements with Wellness Pain & Management Connection LLC (“WPMC”), which resulted in an outstanding balance of $18,800 due to

~~ACREAGE HOLDINGS, INC.~~

~~NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in thousands, except per share data)~~

WPMC as of closing of this transaction. A restated consulting agreement was put in place, whereby WCM agrees to pay a fixed annual fee of $120, payable monthly, in exchange for a suite of consulting services. In addition, a promissory note payable to WPMC was signed in the amount of $18,800 to convert the existing payment due into a fixed, secured debt obligation.

In order to fund the transaction of WCM, a subsidiary of the Company created a new Maine corporation, named Maine HSCP, Inc. (“Maine HSCP”). At closing, a subsidiary of the Company contributed $5,700 to Maine HSCP, and then sold 900 shares of Maine HSCP, constituting all of the outstanding equity interests of Maine HSCP, to ~~three~~3 qualifying individuals in exchange for promissory notes of $1,900 each. Each note is secured by a pledge of the shares in Maine HSCP, and payment of the note is to be made solely from dividends paid to the shareholder by Maine HSCP, except for amounts to be paid to the shareholder to cover tax obligations. ~~As of March 31, 2020, the Company recorded a holdback reserve of $917 for the State of Maine as a result of finalization of valuation by the State.~~ The ~~Company~~Company’s relevant subsidiary has the option, exercisable at any time, to buy back the shares, at the higher of fair market value or the remaining balance under the promissory notes. The individuals also have the right at any time to put the shares to the ~~Company~~Company’s subsidiary on the same terms. The net equity impact to the Company was ~~NaN,~~nil, and the option described above is only redeemable if permissible pursuant to Maine regulations.

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

During the ~~three~~nine months ended ~~March 31,~~September 30, 2020, the Company wrote off the note receivable and the accrued interest of $8,000 and $161, respectively, as the Company determined that the note was not collectible and recorded a loss on notes receivable of $8,161.

Subsequent to September 30, 2021, the Company completed the acquisition of Greenleaf, an operator of cultivation, processing and retail facilities in Ohio, As of September 30, 2021, notes receivable and interest receivable included $42,043 related to Greenleaf that were assumed as part of the acquisition and will be eliminated upon consolidation for periods after September 30, 2021. Refer to Note 17 for further discussion of the Greenleaf acquisition.

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

Lines of Credit Balance as of
Counterparty Maximum Obligation Interest Rate March 31, 2020 December 31, 2019
Greenleaf ⁽¹⁾
$ 29,286
3.25% - 4.75% $ 27,277
$ 22,569
CWG Botanicals, Inc. ("CWG") ⁽²⁾
12,000
8% 9,466
9,152
Compassionate Care Foundation, Inc. (“CCF”) ⁽³⁾
12,500
18% 7,952
7,152
Prime Alternative Treatment Center, Inc. ("PATC") ⁽⁴⁾
4,650
15% 4,650
4,650
Patient Centric of Martha’s Vineyard, Ltd. (“PCMV”) ⁽⁵⁾
9,000
15% 6,209
5,758
Health Circle, Inc. ⁽⁶⁾
8,000
15% 4,331
3,988
Total $ 75,436
$ 59,885
$ 53,269


Lines of Credit				Balance as of
Counterparty	Maximum Obligation		Interest Rate	September 30, 2021		December 31, 2020
Greenleaf (1)	$	31,200	3.25% - 4.75%	$	29,422	$	29,422
CWG Botanicals Inc. (“CWG”) (2)	12,000		8%	—		9,767
Compassionate Care Foundation, Inc. (“CCF”) (3)	12,500		18%	—		—
Prime Alternative Treatment Center, Inc. ("PATC") (4)	7,150		—%	4,030		4,650
Patient Centric of Martha’s Vineyard, Ltd. (“PCMV”) (5)	9,000		15%	4,854		6,873
Health Circle, Inc. (6)	8,000		15%	4,331		4,331
Total	$	79,850		$	42,637	$	55,043

(1) During the year ended December 31, 2018, a subsidiary of the Company extended lines of credit to Greenleaf, ~~Apothecaries, LLC, Greenleaf Therapeutics, LLC and Greenleaf Gardens, LLC (together “Greenleaf”),~~ which mature in June 2023. Subsequent to September 30, 2021, the Company completed the acquisition of Greeneleaf. Refer to Note 17 for further discussion of the Greenleaf acquisition.

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


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

In April 2021, a subsidiary of the Company closed on its acquisition of CWG and the amounts outstanding under the line of credit was converted into equity in CWG. Refer to Note 3 for further discussion.

(3) In September 2018, a subsidiary of the Company entered into a management agreement to provide certain advisory and consulting services to ~~Compassionate Care Foundation, Inc. (“CCF”)~~CCF for a monthly fee based on product sales. ~~Upon~~

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

On November 15, 2019, as a result of changes to state laws as described above, Acreage entered into a Reorganization Agreement with CCF, pursuant to which Acreage will acquire 100% of the equity interests in CCF’s successor entity, pending state approval. The outstanding amounts receivable under the line of credit will convert to 54% ownership, and the Company will pay $10,000 for the remaining 46%. On In June ~~26,~~ 2020, the transactions contemplated by the Reorganization Agreement closed and the line of credit converted into equity in CCF’s successor ~~entity as described in the prior sentence. Please see~~entity. Refer to Note 173 for ~~additional details.~~further discussion.

(4) ~~Prime Alternative Treatment Center, Inc. (“PATC”)~~PATC is a non-profit license holder in New Hampshire to which the Company’s consolidated subsidiary PATCC provides management or other consulting services. ~~The~~

In March 2021, PATC entered into a revised consulting services and line of credit ~~matures~~agreement with PATCC, whereby previously unrecognized management fees were settled for $2,500, which was recognized in ~~August 2022.~~

~~ACREAGE HOLDINGS, INC.~~

~~NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(in thousands, except per share data)~~

Other revenue, net during the nine months ended September 30, 2021. Pursuant to the revised line of credit agreement, the line of credit is non-interest bearing and will be repaid on a payment schedule with 7 payments in the aggregate amount of $7,150 through June 2023.

(5) In November 2018, a subsidiary of the Company entered into a services agreement with ~~Patient Centric of Martha’s Vineyard, Ltd. (“PCMV”).~~PCMV. The line of credit matures in November 2023. The services agreement was terminated in February 2020.

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

7. CAPITAL ASSETS, net

Net property and equipment consisted of:


	September 30, 2021		December 31, 2020
Land	$	3,811	$	3,811
Building	32,721		34,114
Right-of-use asset, finance leases	5,077		5,077
Construction in progress	27,420		13,697
Furniture, fixtures and equipment	21,741		18,062
Leasehold improvements	26,977		23,681
Capital assets, gross	$	117,747	$	98,442
Less: accumulated depreciation	(13,894)		(9,306)
Capital assets, net	$	103,853	$	89,136

March 31, 2020 December 31, 2019
Land $ 11,611
$ 9,839
Building 37,516
34,522
Right-of-use asset, finance leases 5,980
5,954
Construction in progress 17,125
17,288
Furniture, fixtures and equipment 27,897
21,019
Leasehold improvements 23,240
22,682
Capital assets, gross $ 123,369
$ 111,304
Less: accumulated depreciation (6,676 ) (5,257 )
Capital assets, net $ 116,693
$ 106,047

In August 2021, the Company’s Sewell facility in New Jersey was negatively impacted by a tornado formation from Hurricane Ida. The unusually severe weather conditions caused widespread damage and resulted in a $9,130 loss to capital assets, which has been offset by expected insurance proceeds of $6,790. The net loss of $2,339 was recognized in Impairments, net on the Statements of Operations for the three months ended September 30, 2021. Refer to Note 13 - Commitments and contingencies for further information.

~~Proposed Amendment to Arrangement with Canopy Growth Corporation~~

On June 24, 2020, Acreage and Canopy Growth entered into a proposal agreement which sets out, among other things, the terms and conditions upon which the parties are proposing to amend the current arrangement agreement and amend and restate the existing plan of arrangement. Please refer to Note 13 for additional details.

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

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to assist in the understanding and assessing the trends and significant changes in ~~our~~the Company’s results of operations and financial condition. Historical results may not be indicative of future performance. This discussion includes forward-looking statements that reflect ~~our~~the Company’s plans, estimates and beliefs. Such statements involve risks and uncertainties. ~~Our~~The Company’s 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 Item 1A of ~~our~~the Annual Report on Form 10-K for the year ended December 31, ~~2019 filed with the SEC on May 29,~~ 2020 (the ~~“2019~~“2020 Form 10-K”), and “Cautionary Statement Regarding Forward-Looking Statements” set forth below.

This MD&A should be read in conjunction with the Company’s unaudited condensed consolidated financial statements for the three month period ended September 30, 2021 and related notes appearing elsewhere in this Quarterly Report on Form 10-Q (this “Quarterly Report” or “Form 10-Q”) and the ~~2019~~2020 Form 10-K. Financial information presented in this MD&A is presented in thousands of ~~United States (“~~U.S.”) dollars, unless otherwise indicated.

Cautionary Statement Regarding Forward Looking-Statements

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

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

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

the ability of Acreage and Canopy Growth to receive, in a timely manner and on satisfactory terms, the necessary regulatory, court and shareholders approvals relating to the proposed new arrangement (the “New Arrangement”);

~~the ability of the parties to satisfy, in a timely manner, the other conditions to the completion of the New Arrangement;~~

~~other expectations and assumptions concerning the transactions contemplated in the New Arrangement;~~

•the anticipated benefits of the ~~New~~Amended Arrangement;

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

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

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

•the likelihood of the Triggering Event being satisfied or waived by the outside date; ~~in the event the New Arrangement is not adopted, the likelihood of completing the current plan of arrangement on the current terms;~~

~~in the event that the New Agreement is adopted,~~ •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 the novel coronavirus;

•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;

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

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

•risks relating to the management of growth;

•increasing competition in the industry;

•risks inherent in an agricultural business;

•risks relating to energy costs;

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

•reliance on key inputs, suppliers and skilled labor;

•cybersecurity risks;

•ability and constraints on marketing products;

•fraudulent activity by employees, contractors and consultants;

•tax and insurance related risks;

•risks related to the economy generally;

•risk of litigation;

•conflicts of interest;

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

•risks related to future acquisitions or dispositions;

•sales by existing shareholders; and

•limited research and data relating to cannabis.

A description of additional assumptions used to develop such forward-looking statements and a description of additional risk factors that may cause actual results to differ materially from forward-looking statements can be found in Part I, Item 1A of the Company’s Annual Report on Form 10-K, under the heading “Risk Factors”, dated March 25, 2021, as filed with the ~~SEC on May 29, 2020.~~Securities and Exchange Commission. Although Acreage has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. Readers are cautioned that the foregoing list of factors is not exhaustive. Readers are further cautioned not to place undue reliance on forward-looking statements as there can be no assurance that the plans, intentions or

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

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

•

~~Overview—This section provides a general description of the Company’s businesses, as well as developments that occurred during the three months ended March 31,~~

•Overview—This section provides a general description of the Company’s businesses, its strategic objectives, as well as developments that occurred during the three and nine months ended September 30, 2021 and 2020 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 three and nine months ended September 30, 2021 and ~~2019 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 three months ended March 31, 2020 and 2019. 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 three months ended March 31, 2020 and 2019, as well as a discussion on the Company’s outstanding debt and commitments that existed as of March 31, 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 nine months ended September 30, 2021 and 2020, as well as a discussion on the Company’s outstanding debt and commitments that existed as of September 30, 2021. Included in the discussion of outstanding debt is a discussion of the amount of financial capacity available to fund the Company’s future commitments and obligations, as well as a discussion of other financing arrangements.

Overview

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

~~Highlights from the three months ended March 31, 2020~~

~~We began adult-use sales at our dispensary in Illinois; the significantly increased sales have exceeded internal expectations. Received zoning approval to open dispensary in Chicago.~~


•	~~We opened~~ ~~The Botanist~~ ~~dispensary in Spring Hill, Florida during March. This medical cannabis dispensary is the Company’s first in the state.~~

The Company closed a refinancing, transaction and conversion related to Northeast Patients Group, operating as Wellness Connection of Maine (“WCM”), a medical cannabis business in Maine, resulting in ownership of WCM by three Maine residents, as required by Maine law. In connection with the transaction, WCM converted from a non-profit corporation to a for-profit corporation.

~~We raised $48,887, net of issuance costs, as part of a series of financing transactions that were announced on February 7, 2020.~~

~~Operational and Regulation Overview~~

We believe our operations are in material compliance with all applicable state and local laws, regulations and licensing requirements in the states which we operate. However, cannabis is illegal under U.S. federal law. Substantially all our revenue is derived from U.S. cannabis operations. For information about risks related to U.S. cannabis operations, please refer to Item 1A of the 2019 Form 10-K.

~~Results of Operations~~

The following table presents selected financial data derived from the unaudited condensed consolidated financial statements of the Company for the three months ended March 31, 2020 and 2019. The selected financial information set out below may not be indicative of the Company’s future performance.

Summary Results of Operations Better/(Worse)
in thousands, except per share amounts Three Months Ended March 31, 2020 vs. 2019
2020 2019 $ %
Revenues, net $ 24,225
$ 12,897
$ 11,328
88 %
Operating loss (251,282 ) (32,013 ) (219,269 ) (685 )%
Net loss attributable to Acreage (171,954 ) (23,377 ) (148,577 ) (636 )%
Basic and diluted loss per share attributable to Acreage $ (1.85 ) $ (0.29 ) $ (1.56 ) (538 )%

~~Revenues, net, cost of goods sold and gross profit~~

The Company derives its revenues from sales of cannabis and cannabis-infused products through retail dispensary, wholesale, manufacturing and cultivation businesses, as well as from management or consulting fees from entities for whom we provide management or consulting services. As of ~~March 31, 2020,~~September 30, 2021, Acreage owned and operated a total of 22 dispensaries - five dispensaries in Oregon (three in Portland, one in Eugene and one in Springfield), four in New York (Buffalo, Farmingdale, Middletown and Queens), three in New Jersey (Atlantic City, Egg Harbor and Williamstown), three in Connecticut (Bethel, South Windsor and Uncasville), ~~one~~two in ~~Baltimore, Maryland, one~~Massachusetts (Worcester and Shrewsbury), two in ~~Worcester, Massachusetts, one~~Illinois (Chicago and Rolling Meadows), and three in ~~Rolling Meadows, Illinois~~Maine (Gardiner, Portland and ~~one~~South Portland). As of September 30, 2021, Acreage owned and operated a total of 6 cultivation and processing facilities in ~~Fargo, North Dakota. Acreage has cultivation facilities in~~Oakland, California, Sinking Spring, Pennsylvania, Sterling, Massachusetts, Syracuse, New York, Freeport, Illinois, and ~~Freeport, Illinois.~~Egg Harbor, New Jersey. Acreage also ~~collects~~collected management and consulting services revenues, substantially all in ~~Maine.~~Maine and New Hampshire.

Strategic Priorities

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

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

Strengthening the Balance Sheet: Strengthening the balance sheet is key to both providing the Company with the necessary capital to achieve its operational plans and building shareholder confidence. The Company has worked to ensure that sufficient

capital has been available when needed. Going forward, the Company will monitor the capital markets and utilize opportunities to access both debt or equity when it is necessary and advantageous to do so.

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

Highlights from the three months ended September 30, 2021:

•The Company achieved total consolidated revenue growth of 52% as compared with the three months ended September 30, 2020. On a sequential basis, the Company achieved total consolidated revenue growth of 9% compared with the three months ended June 30, 2021.

•Adjusted EBITDA for the three months ended September 30, 2021 was $6.5 million compared to an adjusted EBITDA loss of $6.9 million in the same period in 2020. This marks the third consecutive quarter of positive adjusted EBITDA for the company and validates management's refocused strategic plan.

•Hurricane Ida caused extensive damage to the Company’s cultivation facility located in Sewell, New Jersey, which was nearing the completion of its construction. As a result, the Company wrote off the value of the capital assets at the Sewell, New Jersey locations and incurred a one-time charge, net of expected insurance proceeds of $2.3 million.

•The Company entered into a definitive agreement and management services agreements to sell, upon regulatory approval, four retail dispensaries in Oregon for total consideration of $6.5 million,

•Subsequent to September 30, 2021, the Company completed the acquisition of Greenleaf Apothecaries, LLC, Greenleaf Therapeutics, LLC and Greenleaf Gardens, LLC (together “Greenleaf), an operator of cultivation, processing and retail facilities in Ohio,

Additional highlights from the nine months ended September 30, 2021:

•The Company achieved total consolidated revenue growth of 57% as compared with the nine months ended September 30, 2020.

•Adjusted EBITDA for the nine months ended September 30, 2021 was $16.2 million compared to an adjusted EBITDA loss of $26.0 million in the same period in 2020.

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

•The Company completed the acquisition of 100% of CWG Botanicals, Inc. (“CWG”), an adult-use cannabis cultivation and processing operations in the state of California.

•The Company completed the sale of its operations in Florida for aggregate proceeds of $60.0 million, which is consistent with its overall strategy to focus on its core states.

•The Company agreed to sell its dispensary in Powell, Oregon and its cultivation and processing facility in Medford, Oregon.

•The Company utilized the proceeds from the sale of Acreage Florida and its restricted cash to strengthen its balance sheet. During the nine months ended September 30, 2021, the Company reduced its external debt by $46.3 million.

•The Company reached an agreement with Medterra CBD, LLC, one of the largest CBD companies in the industry, that.will allow Acreage Holdings to tap into Medterra’s innovation pipeline, high-quality CBD, and significant e-commerce platform for nationwide distribution of a suite of branded CBD products.

Operational and Regulation Overview

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

Results of Operations for Three Months Ended September 30, 2021 and 2020

The following table presents selected financial data derived from the unaudited condensed consolidated financial statements of the Company for the three and nine months ended September 30, 2021 and 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	Three Months Ended September 30,				2021 vs. 2020				Nine Months Ended September 30,				2021 vs. 2020
	2021		2020		$		%		2021		2020		$		%
Revenues, net	$	48,151	$	31,742	$	16,409	52	%	$	130,762	$	83,039	$	47,723	57	%
Operating loss	(6,496)		(38,580)		32,084		83	%	(11,444)		(329,197)		317,753		97	%
Net loss attributable to Acreage	(12,297)		(40,548)		28,251		70	%	(22,657)		(249,694)		227,037		91	%
Basic and diluted loss per share attributable to Acreage	$	(0.11)	$	(0.39)	$	0.28	72	%	$	(0.21)	$	(2.54)	$	2.33	92	%

Revenues, Cost of goods sold and Gross margin

The Company derives its revenues from sales of cannabis and cannabis-infused products through retail dispensary, wholesale and manufacturing and cultivation businesses, as well as from management or consulting fees from entities for whom the Company provides management or consulting services.

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.


							Better/(Worse)										Better/(Worse)
in thousands	Three Months Ended September 30,						2021 vs. 2020				Nine Months Ended September 30,						2021 vs. 2020
	2021			2020			$		%		2021			2020			$		%
Retail revenue, net	$	30,794		$	23,914		$	6,880	29	%	$	85,038		$	61,362		$	23,676	39	%
Wholesale revenue, net	17,077			7,798			9,279		119	%	42,634			21,513			21,121		98	%
Other revenue, net	280			30			250		833	%	3,090			164			2,926		n/m
Total revenues, net	$	48,151		$	31,742		$	16,409	52	%	$	130,762		$	83,039		$	47,723	57	%
Cost of goods sold, retail	(16,279)			(14,134)			(2,145)		(15)	%	(43,412)			(37,004)			(6,408)		(17)	%
Cost of goods sold, wholesale	(8,069)			(4,133)			(3,936)		(95)	%	(19,049)			(11,395)			(7,654)		(67)	%
Total cost of goods sold	$	(24,348)		$	(18,267)		$	(6,081)	(33)	%	$	(62,461)		$	(48,399)		$	(14,062)	(29)	%
Gross profit	$	23,803		$	13,475		$	10,328	77	%	$	68,301		$	34,640		$	33,661	97	%
Gross margin	49		%	43		%			6	%	52		%	42		%			10	%

Gross profit Better/(Worse)
in thousands Three Months Ended March 31, 2020 vs. 2019
2020 2019 $ %
Retail revenue, net $ 17,573
$ 9,909
$ 7,664
77 %
Wholesale revenue, net 6,548
2,815
3,733
133 %
Other revenue, net 104
173
(69 ) (40 )%
Total revenues, net $ 24,225
$ 12,897
$ 11,328
88 %
Cost of goods sold, retail (10,889 ) (5,881 ) (5,008 ) (85 )%
Cost of goods sold, wholesale (3,382 ) (1,696 ) (1,686 ) (99 )%
Total cost of goods sold $ (14,271 ) $ (7,577 ) $ (6,694 ) (88 )%
Gross profit $ 9,954
$ 5,320
$ 4,634
87 %
Gross margin 41 % 41 % — %

~~The increase in total~~Total revenues ~~during~~increased by $16,409 or 52% for the three months ended September 30, 2021, as compared to the corresponding period of fiscal 2020. On a comparative basis, total revenue increased by $5,961 due to the acquisitions of (i) certain Maine operations and (ii) CWG in April 2021 and was offset by decreases of $542 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 ~~31,~~ 2020 ~~was primarily driven~~and iii) Acreage Florida in April 2021. Additionally, revenue for the three months ended September 30, 2021 for the Company’s operations in Oregon, which are considered non-core and are being held for sale, decreased by $1,035 as compared to the corresponding period in fiscal 2020. Excluding these acquisitions ~~which contributed 19%. Acquisitions drove 27%~~ and 5%divestitures/closures and the impact of revenue declines in the Company’s Oregon operations, total revenue increased by $12,025 or 42% for the three months ended September 30, 2021, as compared to the corresponding period of fiscal 2020.

Retail revenue increased by $6,880 or 29% for the three months ended September 30, 2021, as compared to the corresponding period of fiscal 2020. Excluding the impact of acquisitions and divestitures/closures, retail ~~and wholesale~~ revenue ~~increases, respectively.~~increased by $3,746 for the three months ended September 30, 2021, as compared to the corresponding period of fiscal 2020. The remaining increase in ~~wholesale~~

retail revenue was primarily driven by ~~our~~increased demand and production across various states, and new store openings and was partially offset by retail revenue declines of $911 in non core states (Oregon).

Wholesale revenue increased by 119% for the three months ended September 30, 2021, as compared to the corresponding periods of fiscal 2020. The increased wholesale revenue was primarily due to increased capacity, coupled with maturing operations at the Company’s Pennsylvania, Massachusetts, and ~~Massachusetts~~Illinois cultivation facilities. This resulted in higher yields and product mix in each of the respective markets. Additionally, wholesale revenue for the three months ended September 30, 2021 included $2,189 from CWG which was acquired in April 2021.

~~The increase~~On a year-to-date basis, total revenues for the nine months ended September 30, 2021, increased by $47,723 or 57% as compared to the corresponding period of fiscal 2020. On a comparative basis, total revenues increased by $18,651 due to the acquisitions of (i) CCF in June 2020, (ii) certain Maine operations and (iii) CWG in May 2021 and was offset by decreases of $1,629 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 nine months ended September 30, 2021 for the Company’s operations in Oregon, which are considered non-core and are being held for sale, decreased by $2,575 as compared to the corresponding period in 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 $33,275 or 46% for the nine months ended September 30, 2021, as compared to the corresponding period of fiscal 2020. Finally, total revenue for the nine months ended September 30, 2021 included $2,500 of management fees in New Hampshire, a portion of which related to prior fiscal periods.

While total revenues increased 52%, total costs of goods sold only increased 33% for the three months ended September 30, 2021, as compared with the corresponding period of fiscal 2020.

Retail cost of goods sold ~~during~~increased 15% for the three months ended ~~March 31, 2020 was primarily driven by acquisitions, which contributed 20%. Acquisitions contributed 22% and 13%~~September 30, 2021, as compared to the corresponding period of fiscal 2020, and below the 29% increase in retail ~~and wholesale costs~~revenue. The lower rate of growth for retail cost of goods sold ~~respectively. The remaining~~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 for this internally produced product does not contain the wholesale margin that would be paid if the Company had to source that same product from external vendors.

Wholesale cost of goods sold increased 95% for the three months ended September 30, 2021, as compared to the corresponding period of fiscal 2020, and below the 119% 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 ~~primarily~~lower as a result of production efficiencies being achieved. In addition, wholesale cost of goods sold for the comparative period were driven by ~~our Pennsylvania~~the initial set up costs and ~~Massachusetts~~consequential expansion impact of various cultivation ~~facilities.~~facilities that was not as significant in the current period.

On a year-to-date basis, while total revenues increased 57%, total costs of goods sold only increased 29% for the nine months ended September 30, 2021, as compared with the corresponding period of fiscal 2020. The reasons for the increases in costs of goods sold and for the lower rate of growth of costs of goods sold compared to the revenue growth, for the nine months ended September 30, 2021, are consistent with the reasons for the three months ended September 30, 2021.

Gross margin for the three months ended September 30, 2021 was 49.4%, compared to 42.5% for the three months ended September 30, 2020. Gross margin for the nine months ended September 30, 2021 was 52.2%, compared to 41.7% for the nine months ended September 30, 2020. The increase in gross ~~profit~~margin was driven by the factors discussed above. ~~Acquisitions contributed 19% to the increase. Gross margin for the three months ended March 31, 2020 was 41.1%, compared to 41.2% for the three months ended March 31, 2019.~~

Revenue by geography

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


Revenue by region					Better/(Worse)				Revenue by region					Better/(Worse)								Better/(Worse)
in thousands	Three Months Ended March 31,				2020 vs. 2019				in thousands	Three Months Ended September 30,				2021 vs. 2020				Nine Months Ended September 30,				2021 vs. 2020
	2020		2019		$		%			2021		2020		$		%		2021		2020		$		%
New England	$	11,323	$	7,084	$	4,239	60	%	New England	$	19,892	$	12,598	$	7,294	58	%	$	56,070	$	36,520	$	19,550	54	%
Mid-Atlantic	7,086		3,093		3,993		129	%	Mid-Atlantic	14,695		11,217		3,478		31	%	43,474		25,622		17,852		70	%
Midwest	2,943		596		2,347		394	%	Midwest	10,012		4,810		5,202		108	%	22,333		12,050		10,283		85	%
West	2,803		2,124		679		32	%	West	3,552		2,700		852		32	%	8,264		8,082		182		2	%
South									South	—		417		(417)		n/m		621		776		(155)		(20)

Total revenues, net	$	24,225	$	12,897	$	11,328	88	%	Total revenues, net	$	48,151	$	31,742	$	16,409	52	%	$	130,762	$	83,039	$	47,723	57	%

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

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

Evaluation of Disclosure Controls and Procedures

Based on an evaluation under the supervision and with the participation of the Company’s management, and due to the material weakness in internal controls over financial reporting described below, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were not effective ~~as of March 31, 2020~~for the period ending September 30, 2021 to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Inherent Limitations Over Internal Controls

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


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

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


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

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


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

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

Management, including the Company’s Chief Executive Officer and Chief Financial Officer, does not expect that the Company’s internal controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls in future periods are subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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

•CWG Botanicals, Inc. (“CWG”) (acquired April 30, 2021)

The operations of CWG represents approximately 3% of the Company’s total assets as of September 30, 2021 and 1% of the Company’s gross revenue for the nine months ended September 30, 2021.

Material Weaknesses in Internal Control Over Financial Reporting

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

As of November 10, 2021, the review, testing and evaluation of key internal controls over financial reporting completed by the Company resulted in the Company’s principal executive officer and principal financial officer concluding that as of September 30, 2021, a material weakness existed in the Company’s internal controls over financial reporting. Specifically, as a result of turnover and the availability of resources with the appropriate level of technical capabilities (including the impacts on staffing

and recruiting and the general global labor shortage brought about by the global COVID-19 pandemic), the Company did not have effective staffing levels and adequate segregation of duties within several finance and accounting processes. Further, and as a result of this material weakness, the Company’s financial disclosures for the quarterly period ending June 30, 2021 incorrectly disclosed certain debt that was due 11 months after the balance sheet date as long-term rather than as current liabilities.

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

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

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

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

d.Developing further training on segregation of duties; and

e.Designing and implementing additional compensating controls where necessary.

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

Changes in Internal Control Over Financial Reporting

~~There~~Other than the changes discussed above in connection with our implementation of the remediation plan, there were no changes in ~~the Company’s~~our internal control over financial reporting ~~during the first quarter of 2020, which were identified~~(as such term is defined in ~~connection with management’s evaluation required by paragraph (d) of~~ Rules ~~13a-15~~13a–15(f) and ~~15d-15~~15d–15(f) under the Exchange ~~Act,~~Act) that ~~have~~occurred during our most recent quarter, that has materially affected, or ~~are~~is reasonably likely to materially affect, ~~the Company’s~~our internal control over financial reporting.

PART II

Item 1. Legal ~~Proceedings.~~Proceedings

For information on legal proceedings, ~~see~~refer to Note 13 to the condensed consolidated financial statements included this report.

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

There ~~have~~has been noone material ~~changes~~change to the risk factors described in the section titled “Risk Factors” in the ~~2019~~Company’s Annual Report on Form ~~10-K.~~10-K for the year ended December 31, 2020, as follows:

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.

We are currently in the process of remediating the material weakness through the following actions, which are expected to be completed by the second quarter of 2022:

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

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

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

d.Developing further training on segregation of duties; and

e.Designing and implementing additional compensating controls where necessary.

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.

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

None.

Item 3. Defaults Upon Senior ~~Securities.~~Securities

None.

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

Not applicable.

Item 5. Other ~~Information.~~Information

Not applicable.

Item 6. Exhibits.

Incorporated by Reference

Exhibit No.

Description of Document

Schedule Form

File Number

Exhibit

Filing Date

Filed or Furnished Herewith

Exhibit No.

Description of Document

Schedule Form

File Number

Exhibit

Filing Date

Filed or Furnished Herewith

10.1

Standby Equity Distribution Agreement, between Acreage Holdings, Inc. and SAFMB Concord LP, dated May 29, 2020.

Amendment No. 4 to Credit Agreement by and among Acreage Finance Delaware, LLC, Acreage IP Holdings, LLC and IP Investment Company, LLC, originally dated as of March 6 2020

8-K

000-56021

10.1

4/1/21

10.2

Loan Agreement between High Street Capital Partners, LLC and ALBF Investments, LLC, dated June 15, 2020.

Amendment to Stock Purchase Agreement by and among High Street Capital Partners, LLC, RWB Florida LLC and Red White & Bloom Brands Inc., dated as of April 27, 2021

10-Q

000-56021

10.4

5/10/21

10.3

Term Loan Note between High Street Capital Partners, LLC and ALBF investments, LLC, dated June 15, 2020.

Loan Sale and Assignment Agreement by and between High Street Capital Partners, LLC and Viridescent Realty Trust, Inc., dated as of June 11, 2021.

8-K

000-56021

10.1

6/16/21

10.4

Securities Purchase Agreement, between Acreage Holdings, Inc. and YA II PN, Ltd., dated May 29, 2020.

10.5

Secured Convertible Debenture of Acreage Holdings, Inc., dated May 29, 2020.

10.6

Registration Rights Agreement, between Acreage Holdings, Inc. and YA II PN, Ltd., dated May 29, 2020.

31.1

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

31.1

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

31.2

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

31.2

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

32.1

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

32.1

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

101

Attached as Exhibit 101 to this report are the following documents formatted in iXBRL (Extensible Business Reporting Language): (i) Unaudited Condensed Consolidated Statements of Financial Position as of March 31, 2020 and December 31, 2019, (ii) Unaudited Condensed Consolidated Statements of Operations for the quarters ended March 31, 2020 and March 31, 2019, (iii) Unaudited Condensed Consolidated Statements of Cash Flows for the quarters ended March 31, 2020 and March 31, 2019, and (iv) Notes to Unaudited Condensed Consolidated Financial Statements for the quarter ended March 31, 2020.

101

Attached as Exhibit 101 to this report are the following documents formatted in iXBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Statements of Financial Position as of September 30, 2021 (unaudited) and December 31, 2020 (audited), (ii) Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and September 30, 2020, (iii) Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended September 30, 2021 and September 30, 2020, (iv) Unaudited Condensed Consolidated Statements of Shareholders’ Equity for the three and nine months ended September 30, 2021 and September 30, 2020 and (v) Notes to Unaudited Condensed Consolidated Financial Statements.


Statement of Cash Flows Information	Classification	Nine Months Ended September 30,
		2021		2020
Cash paid for operating leases	Net cash used in operating activities	$	3,747	$	5,803
Cash paid for finance leases - interest	Net cash used in operating activities	$	508	$	587


Maturity of lease liabilities	Operating Leases		Finance Leases
2021 (1)	$	890	$	173
2022	3,505		701
2023	3,547		722
2024	3,697		743
2025	3,847		766
Thereafter	23,577		13,276
Total lease payments	$	39,063	$	16,381
Less: imputed interest	15,708		11,153
Present value of lease liabilities	$	23,355	$	5,228

Weighted average remaining lease term (years)	9		13
Weighted average discount rate	10%		12%



Maturity of lease liabilities	Operating Leases		Finance Leases
2020	$	6,414	$	652
2021	8,629		873
2022	8,484		893
2023	8,310		914
2024	8,030		936
Thereafter	53,986		18,740
Total lease payments	$	93,853	$	23,008
Less: imputed interest	39,584		17,002
Present value of lease liabilities	$	54,269	$	6,006

Weighted average remaining lease term (years)	12		24
Weighted average discount rate	10%		14%


	March 31, 2020		December 31, 2019			September 30, 2021		December 31, 2020
Retail inventory	$	2,103	$	1,784	Retail inventory	$	2,779	$	1,803
Wholesale inventory	13,816		11,993		Wholesale inventory	22,391		18,055
Cultivation inventory	3,235		3,021		Cultivation inventory	5,085		2,317
Supplies & other	1,903		1,285		Supplies & other	3,265		1,540
Total	$	21,057	$	18,083	Total	$	33,520	$	23,715



Debt balances	March 31, 2020		December 31, 2019
NCCRE loan	$	487	$	492
Seller’s notes	2,744		2,810
Related party debt	—		15,000
Financing liability	19,052		19,052
Finance lease liabilities	6,006		6,132
SAF loan	19,438		—
SAF loan collateral (related party)	22,254		—
Total debt	$	69,981	$	43,486
Less: current portion of debt	22,514		15,300

Total long-term debt	$	47,467	$	28,186



Purchase Price Allocation	Thames Valley (1)			NCC (2)			Total
Assets acquired:
Cash and cash equivalents	$	106		$	696		$	802
Inventory	39			170			209
Other current assets	1			36			37
Capital assets, net	—			539			539
Goodwill	3,596			4,192			7,788
Intangible assets - cannabis licenses	14,850			2,500			17,350
Other non-current assets	—			25			25
Liabilities assumed:
Accounts payable and accrued liabilities	(121		)	(24		)	(145		)
Other current liabilities	—			(621		)	(621		)
Deferred tax liability	(3,399		)	(461		)	(3,860		)
Other liabilities	—			(175		)	(175		)
Fair value of net assets acquired	$	15,072		$	6,877		$	21,949

Consideration paid:
Cash	15,072			—			15,072
Deferred acquisition costs and deposits	—			100			100
Subordinate Voting Shares	—			3,948			3,948
Settlement of pre-existing relationship	—			830			830
Fair value of previously held interest	—			1,999			1,999
Total consideration	$	15,072		$	6,877		$	21,949

Subordinate Voting Shares issued	—			211			211



Investment income	Three Months Ended March 31,
	2020			2019
Short-term investments	$	—		$	500
Investments held at FV-NI	240			1,203
Equity method investments	(6		)	1,024
Income from investments, net	$	234		$	2,727


Balance Sheet Information	Classification	September 30, 2021		December 31, 2020
Right-of-use assets
Operating	Operating lease right-of-use assets	$	22,349	$	17,247
Finance	Capital assets, net	4,585		4,776
Total right-of-use assets		$	26,934	$	22,023

Lease liabilities
Current
Operating	Operating lease liability, current	$	1,525	$	1,492

Non-current
Operating	Operating lease liability, non-current	21,830		16,609
Financing	Debt, non-current	5,228		5,174
Total lease liabilities		$	28,583	$	23,275


Statement of Operations Information	Classification	Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020
Short-term lease expense	General and administrative	$	(40)	$	437	$	17	$	1,108
Operating lease expense	General and administrative	1,038		2,062		3,175		6,512
Finance lease expense:
Amortization of right of use asset	Depreciation and amortization	63		87		190		81
Interest expense on lease liabilities	Interest expense	190		190		561		621
Sublease income	Other income (loss), net	—		—		(3)		(28)
Net lease cost		$	1,291	$	2,339	$	3,923	$	7,186



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


Shareholders’ Equity	Fixed Shares	Floating Shares	Fixed Shares Held in Treasury	Floating Shares Held in Treasury	Fixed Multiple Shares	Total Shares Outstanding
December 31, 2020	71,346	30,628	(589)	(253)	118	101,250
Issuances	2,370	1,717	—	—	—	4,087
NCI conversions	746	320	—	—	—	1,066
September 30, 2021	74,462	32,665	(589)	(253)	118	106,403



Warrants	Three Months Ended March 31,
	2020	2019
Beginning balance	2,040	2,259
Granted	6,085	—
Expired	—	—
Ending balance	8,125	2,259


Warrants	Nine Months Ended September 30, 2021
	Fixed Shares	Floating Shares
Beginning balance	7,131	3,087
Granted	—	—
Expired	—	—

Ending balance	7,131	3,087


Warrants	September 23,2020 to September 30, 2020		January 1, 2020 to September 22, 2020
	Fixed Shares	Floating Shares	SVS
Beginning balance	5,684	2,436	2,040
Granted	—	—	6,085
Expired	—	—	(4)
Modification pursuant to Amended Arrangement	—	—	(8,121)

Ending balance	5,684	2,436	—


HSCP net asset reconciliation	September 30, 2021			December 31, 2020
Current assets	$	95,688		$	144,938
Non-current assets	406,428			410,269
Current liabilities	(42,704)			(80,649)
Non-current liabilities	(160,867)			(171,485)
Other NCI balances	(713)			(742)
Accumulated equity-settled expenses	(223,805)			(206,315)
Net assets	$	74,027		$	96,016
HSCP/USCo2 ownership % of HSCP	17.31		%	18.68		%
Net assets allocated to USCo2/HSCP	$	12,813		$	17,936
Net assets attributable to other NCIs	713			742
Total NCI	$	13,526		$	18,678


	Three Months Ended September 30,				Nine Months Ended September 30,
HSCP Summarized Statement of Operations	2021		2020		2021		2020
Net loss allocable to HSCP/USCo2	(10,052)		(45,059)		(18,882)		(322,129)
HSCP/USCo2 weighted average ownership % of HSCP	17.57	%	16.62	%	17.80	%	20.00	%
Net loss allocated to HSCP/USCo2	(1,766)		(7,488)		(3,361)		(64,426)
Net loss allocated to other NCIs	5		—		14		(515)
Net loss attributable to NCIs	(1,761)		(7,488)		(3,347)		(64,941)



	Three Months Ended March 31,
Convertible Units	2020		2019
Beginning balance	25,035		27,340
Issuance of NCI units	—		198
Vested LLC C-1s canceled	(1,310	)	(123	)
LLC C-1s vested	1,000		625
NCI units settled in cash	—		(643	)
NCI units converted to Pubco	(113	)	—
Ending balance	24,612		27,397



	Three Months Ended March 31, 2020
Restricted Share Units (Fair value information expressed in whole dollars)	RSUs		Weighted Average Grant Date Fair Value
Unvested, beginning of period	7,843		$	15.10
Granted ⁽¹⁾	4,155		3.68
Forfeited	(1,593	)	14.48
Vested	(1,247	)	8.00
Unvested, end of period	9,158		$	10.99


	Nine Months Ended September 30, 2021
	Fixed Shares			Floating Shares
Restricted Share Units (Fair value information expressed in whole dollars)	RSUs	Weighted Average Grant Date Fair Value		RSUs	Weighted Average Grant Date Fair Value
Unvested, beginning of the period (1)	5,119	$	9.24	2,688	$	7.83
Granted	993	$	3.02	385	$	2.57
Forfeited	(399)	$	3.70	(152)	$	3.71
Vested	(2,178)	$	10.13	(1,410)	$	7.45
Unvested, end of period	3,535	$	7.57	1,511	$	7.26
Vested and unreleased	86	$	14.95	246	$	3.97
Outstanding, end of period	3,621	$	7.74	1,757	$	6.80



	Three Months Ended March 31, 2020
Stock Options (Exercise price expressed in whole dollars)	Options		Weighted Average Exercise Price
Options outstanding, beginning of period	5,607		$	21.56
Granted	191		5.75
Forfeited	(731	)	16.39
Exercised	—		—
Options outstanding, end of period	5,067		$	21.71

Options exercisable, end of period	1,718		$	24.80



	Three Months Ended March 31, 2020
Profits Interests (Fair value information expressed in whole dollars)	Number of Units		Weighted Average Grant Date Fair Value
Unvested, beginning of period	1,000		$	0.43
Class C-1 units granted	—		—
Class C-1 units canceled	—		—
Class C-1 vested	(1,000	)	0.43
Unvested, end of period	—		$	—


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net loss attributable to common shareholders of the Company	$	(12,297)	$	(40,548)	$	(22,657)	$	(249,694)
Weighted average shares outstanding - basic	110,193		103,450		108,385		98,304
Effect of dilutive securities	—		—		—		—





Weighted average shares - diluted	110,193		103,450		108,385		98,304
Net loss per share attributable to common shareholders of the Company - basic	$	(0.11)	$	(0.39)	$	(0.21)	$	(2.54)
Net loss per share attributable to common shareholders of the Company - diluted	$	(0.11)	$	(0.39)	$	(0.21)	$	(2.54)



	Three months ended
	March 31, 2020			March 31, 2019
Net loss attributable to common shareholders of the Company	$	(171,954	)	$	(23,377	)
Weighted average shares outstanding - basic	92,902			79,440
Effect of dilutive securities	—			—
Weighted average shares - diluted	92,902			79,440
Net loss per share attributable to common shareholders of the Company - basic	$	(1.85	)	$	(0.29	)
Net loss per share attributable to common shareholders of the Company - diluted	$	(1.85	)	$	(0.29	)


Other (loss) income					Better/(Worse)								Better/(Worse)
in thousands	Three Months Ended September 30,				2021 vs. 2020				Nine Months Ended September 30,				2021 vs. 2020
	2021		2020		$		%		2021		2020		$		%
(Loss) income from investments, net	$	489	$	(433)	$	922	n/m		$	(777)	$	(195)	$	(582)	(298)	%
Interest income from loans receivable	1,067		1,606		(539)		(34)	%	4,125		5,083		(958)		(19)	%
Interest expense	(3,620)		(6,147)		2,527		41	%	(14,072)		(11,106)		(2,966)		(27)
Other income (loss), net	81		(656)		737		n/m		7,825		(853)		8,678		n/m
Total other income (loss)	$	(1,983)	$	(5,630)	$	3,647	65	%	$	(2,899)	$	(7,071)	$	4,172	59

n/m - Not Meaningful



Other income							Better/(Worse)
in thousands	Three Months Ended March 31,						2020 vs. 2019
	2020			2019			$			%
Income from investments, net	$	234		$	2,727		$	(2,493	)	(91	)%
Interest income from loans receivable	1,647			730			917			126	%
Interest expense	(1,226		)	(118		)	(1,108		)	(939	)%
Other (loss) income, net	(174		)	92			(266		)	n/m
Total other income	$	481		$	3,431		$	(2,950	)	(86	)%

n/m - Not Meaningful


Adjusted EBITDA					Better/(Worse)								Better/(Worse)
in thousands	Three Months Ended September 30,				2021 vs. 2020				Nine Months Ended September 30,				2021 vs. 2020
	2021		2020		$		%		2021		2020		$		%
Net loss (U.S. GAAP)	$	(14,058)	$	(48,036)					$	(26,004)	$	(314,635)
Income tax expense (benefit)	5,579		3,826						11,661		(21,633)
Interest (income) expense, net	2,553		4,541						9,947		6,023
Depreciation and amortization	4,590		1,396						11,384		4,888
EBITDA (non-GAAP)	$	(1,336)	$	(38,273)	$	36,937	97	%	$	6,988	$	(325,357)	$	332,345	n/m
Adjusting items:
(Income) loss from investments, net	(489)		433						777		195
Impairments, net	—		—						818		187,775
Loss on Sewell facility	2,339		—						2,339		—
Loss on notes receivable	—		—						1,726		8,161
Write down (recovery) of assets held-for-sale	—		2,893						(8,616)		11,003
Equity-based compensation expense	4,168		10,445						17,191		65,370
Legal settlements, net	—		14,150						322		14,150
Gain on business divestiture	(109)		—						(11,791)		—
Transaction costs	—		3,114						—		3,114
Other non-recurring expenses	1,924		355						6,425		9,605
Adjusted EBITDA (non-GAAP)	$	6,497	$	(6,883)	$	13,380	n/m		$	16,179	$	(25,984)	$	42,163	n/m

n/m - Not Meaningful


Cash flows							Better/(Worse)					Cash flows					Better/(Worse)
in thousands	Three Months Ended March 31,						2020 vs. 2019					in thousands	Nine Months Ended September 30,				2021 vs. 2020
	2020			2019			$			%			2021		2020		$		%
Net cash used in operating activities	$	(25,401	)	$	(13,630	)	$	(11,771	)	(86	)%	Net cash used in operating activities	$	(18,312)	$	(44,208)	$	25,896	59	%
Net cash used in investing activities	(19,319		)	(16,719		)	(2,600		)	(16	)%
Net cash provided by (used in) financing activities	54,159			(10,411		)	64,570			n/m
Net increase (decrease) in cash, cash equivalents and restricted cash	$	9,439		$	(40,760	)	$	50,199		n/m
Net cash provided by (used in) investing activities												Net cash provided by (used in) investing activities	34,152		(63,681)		97,833		n/m
Net cash (used in) provided by financing activities												Net cash (used in) provided by financing activities	(40,995)		149,748		(190,743)		n/m
Net (decrease) increase in cash, cash equivalents, restricted cash, and cash held for sale												Net (decrease) increase in cash, cash equivalents, restricted cash, and cash held for sale	$	(25,155)	$	41,859	$	(67,014)	n/m
n/m - Not Meaningful												n/m - Not Meaningful


	Acreage Holdings, Inc.
	(Registrant)

	~~Acreage Holdings, Inc.~~By:	/s/ Steve Goertz
	~~(Registrant)~~	Steve Goertz

~~By:~~	~~/s/ Glen Leibowitz~~
	~~Glen Leibowitz~~
	Chief Financial Officer