Acreage Holdings, Inc. [ACRHF] Filings

10-Q 1 acrg-20240930.htm 10-Q acrg-20240930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended September 30, 2024


☐			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 Ave, 14th floor	New York	New York	10017
(Address of Principal Executive Offices)			(Zip Code)

(646) 600-9181

Registrant’s telephone number, including area code

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

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

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes x No o

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


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

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

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

The registrant has three classes of issued and outstanding shares: the Fixed Shares, the Floating Shares and the Class F multiple voting shares (the “Fixed Multiple Shares”). The Fixed Shares and Floating Shares each entitle the holders to notice of and to attend at any meeting of the shareholders of the registrant, except a meeting of which only holders of another particular class or series of shares of the registrant have the right to vote. Each Fixed Share is entitled to one vote per Fixed Share, each Floating Share is entitled to one vote per Floating Share and each Fixed Multiple Share is entitled to 4,300 votes per Fixed Multiple Share on all matters upon which the holders of shares are entitled to vote. As of November 14, 2024, there were 80,946,416 Fixed shares, 40,963,782 Floating Shares, and 117,600 Fixed Multiple Shares, in each case, issued and outstanding.

TABLE OF CONTENTS

Acreage Holdings, Inc.

Form 10-Q

For the Three and Nine Months Ended September 30, 2024


PART I	Financial Information

Item 1.	Condensed Consolidated Statements of Financial Position as of September 30, 2024 (unaudited) and December 31, 2023	1
	Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2024 and 2023	3
	Unaudited Condensed Consolidated Statements of Shareholders’ Equity (Deficit) for the three and nine months ended September 30, 2024 and 2023	4
	Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023	6
	Notes to the Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	49
Item 4.	Controls and Procedures	49

PART II	Other Information

Item 1.	Legal Proceedings	50
Item 1A.	Risk Factors	50
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	50
Item 3.	Defaults Upon Senior Securities	51
Item 4.	Mine Safety Disclosures	51
Item 5.	Other Information	51
Item 6.	Exhibits	51

	SIGNATURES	52

PART I

Item 1. Financial Statements and Supplementary Data.


ACREAGE HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION


(in thousands)	September 30, 2024		December 31, 2023
	(unaudited)
ASSETS
Cash and cash equivalents	$	13,780	$	13,631
Restricted cash	65		3,984
Accounts receivable, net	10,226		8,459
Inventory	32,909		47,675


Assets held-for-sale	15,255		6,028
Other current assets	2,446		2,136
Total current assets	74,681		81,913
Long-term investments	33,170		33,170

Capital assets, net	128,761		141,732
Operating lease right-of-use assets	13,516		17,531
Intangible assets, net	27,910		31,044
Goodwill	13,761		13,346

Other non-current assets	1,349		1,558
Total non-current assets	218,467		238,381
TOTAL ASSETS	$	293,148	$	320,294

LIABILITIES AND SHAREHOLDERS’ DEFICIT
Accounts payable and accrued liabilities	$	31,893	$	29,936
Taxes payable	7,566		11,395
Interest payable	5,451		5,539
Operating lease liability, current	1,959		2,457
Debt, current	2,437		4,132

Liabilities related to assets held for sale	15,772		2,253
Other current liabilities	182		2,011
Total current liabilities	65,260		57,723
Debt, non-current	272,225		232,810
Operating lease liability, non-current	14,138		17,293
Deferred tax liability	9,925		10,584
Liability on unrecognized tax benefits	50,571		39,859
Warrant liability	7,133		—
Other liabilities	4		1,054

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

F-1


ACREAGE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION


Total non-current liabilities	353,996		301,600
TOTAL LIABILITIES	419,256		359,323
Commitments and contingencies
Common stock, no par value - unlimited authorized, 121,186 and 120,344 issued and outstanding as of September 30, 2024. 115,995 and 115,153 issued and outstanding as of December 31, 2023.	—		—
Additional paid-in capital	776,489		759,698
Treasury stock, 842 common stock held in treasury	(21,054)		(21,054)
Accumulated deficit	(824,441)		(747,550)
Total Acreage Shareholders' deficit	(69,006)		(8,906)
Non-controlling interests	(57,102)		(30,123)
TOTAL DEFICIT	(126,108)		(39,029)

TOTAL LIABILITIES AND DEFICIT	$	293,148	$	320,294

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

F-2


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)	2024		2023		2024		2023
REVENUE
Retail revenue, net	$	27,435	$	43,857	$	85,620	$	130,651
Wholesale revenue, net	12,188		12,645		38,302		39,845
Other revenue, net	1		—		1		84
Total revenues, net	39,624		56,502		123,923		170,580
Cost of goods sold, retail	(14,995)		(23,247)		(47,538)		(67,145)
Cost of goods sold, wholesale	(10,715)		(11,981)		(47,046)		(34,454)
Total cost of goods sold	(25,710)		(35,228)		(94,584)		(101,599)
Gross profit	13,914		21,274		29,339		68,981

OPERATING EXPENSES
General and administrative	7,516		8,036		22,814		25,621
Compensation expense	11,746		13,524		35,614		38,930
Equity-based compensation expense	(212)		745		1,939		2,423
Marketing	603		542		1,721		1,942
Loss on disposals of construction in process	2,072		—		2,072		—

Write down of assets held-for-sale, net	—		—		—		3,557

Depreciation and amortization	853		928		2,642		2,919
Total operating expenses	22,578		23,775		66,802		75,392

Net operating loss	$	(8,664)	$	(2,501)	$	(37,463)	$	(6,411)

Income from investments, net	—		248		—		228
Interest income from loans receivable	—		—		—		10
Interest expense	(8,128)		(9,207)		(25,423)		(26,143)
Other income (loss), net	(983)		10,021		(7,320)		9,823
Total other income (loss)	(9,111)		1,062		(32,743)		(16,082)

Loss before income taxes	$	(17,775)	$	(1,439)	$	(70,206)	$	(22,493)

Income tax expense	(4,465)		(6,420)		(9,482)		(19,763)

Net loss	$	(22,240)	$	(7,859)	$	(79,688)	$	(42,256)

Less: net loss attributable to non-controlling interests	(2,732)		(234)		(11,177)		(3,885)

Net loss attributable to Acreage Holdings, Inc.	$	(19,508)	$	(7,625)	$	(68,511)	$	(38,371)

Net loss per share attributable to Acreage Holdings, Inc. - basic and diluted:	$	(0.16)	$	(0.07)	$	(0.58)	$	(0.34)

Weighted average shares outstanding - basic and diluted	119,965		114,171		117,422		113,181

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

F-3


ACREAGE HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY (DEFICIT)


			Attributable to shareholders of the parent
(in thousands)	LLC Membership Units	Pubco Shares (as converted)	Share Capital		Treasury Stock		Accumulated Deficit		Shareholders’ Equity (Deficit)		Non-controlling Interests		Total Equity (Deficit)
December 31, 2022	3,861	112,437	$	760,529	$	(21,054)	$	(678,091)	$	61,384	$	(21,205)	$	40,179
Cumulative effect of change in accounting principle for current expected credit losses, net of tax	—	—	—		—		(367)		(367)		—		(367)
NCI adjustments for changes in ownership	—	—	14		—		—		14		(14)		—
Equity-based compensation expense and related issuances	—	287	984		—		—		984		—		984
Net loss	—	—	—		—		(14,590)		(14,590)		(1,567)		(16,157)
March 31, 2023	3,861	112,724	$	761,527	$	(21,054)	$	(693,048)	$	47,425	$	(22,786)	$	24,639
NCI adjustments for changes in ownership	—	—	(3,389)		—		—		(3,389)		3,389		—
Capital distributions, net	—	—	—		—		—		—		(3,968)		(3,968)
Other equity transactions	—	—	(130)		—		—		(130)		—		(130)
Equity-based compensation expense and related issuances	—	479	694		—		—		694		—		694
Net loss	—	—	—		—		(16,156)		(16,156)		(2,084)		(18,240)
June 30, 2023	3,861	113,203	$	758,702	$	(21,054)	$	(709,204)	$	28,444	$	(25,449)	$	2,995
NCI adjustments for changes in ownership	—	—	(450)		—		—		(450)		450		—
Other equity transactions	—	—	(79)		—				(79)		—		(79)
Equity-based compensation expense and related issuances	—	2,762	745		—		—		745		—		745
Net loss	—	—	—		—		(7,625)		(7,625)		(234)		(7,859)
September 30, 2023	3,861	115,965	$	758,918	$	(21,054)	$	(716,829)	$	21,035	$	(25,233)	$	(4,198)

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

F-4


ACREAGE HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY (DEFICIT)


			Attributable to shareholders of the parent
(in thousands)	LLC Membership Units	Pubco Shares (as converted)	Share Capital		Treasury Stock		Accumulated Deficit		Shareholders’ Equity (Deficit)		Non-controlling Interests		Total Equity (Deficit)
December 31, 2023	3,861	115,995	$	759,698	$	(21,054)	$	(747,550)	$	(8,906)	$	(30,123)	$	(39,029)

NCI adjustments for changes in ownership	—	—	(5,264)		—		—		(5,264)		5,264		—
Other equity transactions	—	—	(16)		—		—		(16)		—		(16)
Equity-based compensation expense and related issuances	—	136	809		—		—		809		—		809
Net loss	—	—	—		—		(27,978)		(27,978)		(5,341)		(33,319)
March 31, 2024	3,861	116,131	$	755,227	$	(21,054)	$	(775,528)	$	(41,355)	$	(30,200)	$	(71,555)
NCI adjustments for changes in ownership	—	—	6,329		—		—		6,329		(6,329)		—
Other equity transactions	—	—	$	(244)	$	—	$	—	$	(244)	$	—	$	(244)
Private placement dividend	—	—	—		—		(8,380)		(8,380)		—		(8,380)
Equity-based compensation expense and related issuances	—	1,094	1,342		—		—		1,342		—		1,342
Net loss	—	—	—		—		(21,025)		(21,025)		(3,104)		(24,129)
June 30, 2024	3,861	117,225	$	762,654	$	(21,054)	$	(804,933)	$	(63,333)	$	(39,633)	$	(102,966)
NCI adjustments for changes in ownership	—	—	14,737		—		—		14,737		(14,737)		—
Other equity transactions	—	—	$	(690)	$	—	$	—	$	(690)	$	—	$	(690)
Equity-based compensation expense and related issuances	—	3,961	(212)		—		—		(212)		—		(212)
Net loss	—	—	—		—		(19,508)		(19,508)		(2,732)		(22,240)
September 30, 2024	3,861	121,186	$	776,489	$	(21,054)	$	(824,441)	$	(69,006)	$	(57,102)	$	(126,108)

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

F-5


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


	Nine Months Ended September 30,
(in thousands)	2024		2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(79,688)	$	(42,256)
Adjustments for:
Depreciation and amortization	2,642		2,919
Depreciation and amortization included in COGS	8,033		6,058
Equity-based compensation expense	1,939		2,423
Inventory write-off and provision	5,581		8,824
Change in accounting estimate for the costing of inventory	13,828		—
Loss on modification of debt	6,322		—
Gain on business divestiture	—		(47)
Loss on disposal of capital assets, net	2,109		34



Non-cash fair value change related to Warrant liability and Convertible notes	452		—
Bad debt expense	342		320
Non-cash interest expense	6,486		3,743
Non-cash operating lease adjustment	693		(18)
Loss on lease termination	—		(200)
Deferred tax income	(121)		16
Non-cash loss from investments, net	—		870

Write-down of assets held-for-sale	—		3,557


Change, net of acquisitions in:
Accounts receivable	(3,482)		(3,427)
Inventory	(2,987)		(12,572)
Other assets	227		(597)
Interest receivable	1,373		(756)
Accounts payable and accrued liabilities	5,719		(2,628)
Taxes payable	(3,324)		15,026
Interest payable	3,648		3,101
Liability on unrecognized tax benefits	14,691		—
Other liabilities	(2,030)		(3,119)
Net cash used in operating activities	$	(17,547)	$	(18,729)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of capital assets	$	(2,390)	$	(5,345)

Collection of notes receivable	—		2,150




Business acquisitions, net of cash acquired	—		516
Purchases of intangible assets	(500)		(27)







Proceeds from business divestiture	—		500
Net cash used in investing activities	$	(2,890)	$	(2,206)
CASH FLOWS FROM FINANCING ACTIVITIES:
Other equity transactions	$	(950)	$	(79)

Proceeds from financing (refer to Note 14 for related party financing)	8,455		27,121
Deferred financing costs paid	—		(500)
Proceeds from issuance of private placement units and warrants	10,000		—






Repayment of debt	(838)		(913)

Capital distributions - non-controlling interests	—		(3,968)

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

F-6


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


Net cash provided by financing activities	$	16,667	$	21,661
Net increase (decrease) in cash, cash equivalents, and restricted cash	$	(3,770)	$	726
Cash, cash equivalents, and restricted cash - Beginning of period	17,615		24,067
Cash, cash equivalents, and restricted cash - End of period	$	13,845	$	24,793

RECONCILIATION OF CASH FLOW INFORMATION:
Cash and cash equivalents	$	13,780	$	15,142

Restricted cash	65		9,651

Total cash, cash equivalents, and restricted cash at end of period	$	13,845	$	24,793


	Nine Months Ended September 30,
(in thousands)	2024		2023
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid - non-lease	$	3,478	$	19,266
Income taxes paid	—		5,933
OTHER NON-CASH INVESTING AND FINANCING ACTIVITIES:
Capital assets not yet paid for	$	781	$	5,040













Cumulative effect of change in accounting principle for current expected credit losses, net of tax	—		121
NCI adjustments for changes in ownership	—		(14)
Initial fair value recognition on Warrant Liability	6,972		—
Initial fair value recognition on Convertible Notes	11,408		—

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

F-7


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

1. NATURE OF OPERATIONS

Acreage Holdings, Inc. (the “Company”, “Pubco” or “Acreage”) is a vertically integrated, multi-state operator in the United States (“U.S.”) cannabis industry. The Company’s operations include (i) cultivating and processing cannabis plants, (ii) manufacturing branded consumer products, (iii) distributing cannabis flower and manufactured products, and (iv) retailing cannabis products to patients and consumers. The Company’s products appeal to medical and adult recreational use customers through brand strategies intended to build trust and loyalty.

The Company’s Class E subordinate voting shares (“Fixed Shares”) and Class D subordinate voting shares (“Floating Shares”) are listed on the Canadian Securities Exchange under the symbols “ACRG.A.U” and “ACRG.B.U”, respectively, quoted on the OTCQX under the symbols “ACRHF” and “ACRDF”, respectively, and traded on the Frankfurt Stock Exchange under the symbols “0VZ1” and “0VZ2”, respectively.

High Street Capital Partners, LLC (“HSCP”) was formed on April 29, 2014. The Company became the indirect parent of HSCP on November 14, 2018 in connection with the reverse takeover (“RTO”) transaction described below.

The Company’s principal place of business is located at 366 Madison Ave, 14th floor, New York, New York in the U.S. The Company’s registered and records office address is Suite 2800, Park Place, 666 Burrard Street, Vancouver, British Columbia in Canada.

The RTO transaction

On September 21, 2018, the Company, HSCP, HSCP Merger Corp. (a wholly-owned subsidiary of the Company), Acreage Finco B.C. Ltd. (a special purpose corporation) (“Finco”), Acreage Holdings America, Inc. (“USCo”) and Acreage Holdings WC, Inc. (“USCo2”) entered into a business combination agreement (the “Business Combination Agreement”) whereby the parties thereto agreed to combine their respective businesses, which would result in the RTO of Pubco by the security holders of HSCP, which was deemed to be the accounting acquiror. On November 14, 2018, the parties to the Business Combination Agreement completed the RTO.

Canopy Growth Corporation transaction

On June 27, 2019, the Company and Canopy Growth Corporation (“Canopy Growth” or “CGC”) implemented the Prior Plan of Arrangement (as defined in Note 15) contemplated by the Original Arrangement Agreement (as defined in Note 15). 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. Canopy Growth was required to exercise the option upon a change in federal laws in the United States to permit the general cultivation, distribution and possession of marijuana (as defined in the relevant legislation) or to remove the regulation of such activities from the federal laws of the United States (the “Triggering Event”) and, subject to the satisfaction or waiver of certain closing conditions set out in the Original Arrangement Agreement, Canopy Growth was required to acquire all of the issued and outstanding subordinated voting shares (“SVS”) (following the mandatory conversion of the Class B proportionate voting shares (the “PVS”) and Class C multiple voting shares (the “MVS”) into SVS).

On June 24, 2020, Canopy Growth and the Company entered into an agreement to, among other things, amend the terms of the Original Arrangement Agreement and the terms of the Prior Plan of Arrangement (the “Amended Arrangement”). On September 16, 2020, the Company’s shareholders voted in favor of a special resolution authorizing and approving the terms of, among other things, the Amended Arrangement. Subsequently, on September 18, 2020, the Company obtained a final order from the Supreme Court of British Columbia approving the Amended Arrangement, and on September 23, 2020 the Company and Canopy Growth entered into the Amending Agreement (as defined in Note 15) and implemented the Amended Arrangement. Pursuant to the Amended Arrangement, the Company’s articles were amended to create the Fixed Shares, the Floating Shares and the Class F multiple voting shares (the “Fixed Multiple Shares”), and each outstanding SVS was exchanged for 0.7 of a Fixed Share and 0.3 of a Floating Share, each outstanding PVS was exchanged for 28 Fixed Shares and 12 Floating Shares; and each outstanding MVS was exchanged for 0.7 of a Fixed Multiple Share and 0.3 of a Floating Share. Pursuant to the Amended Arrangement, Canopy Growth was granted the option to acquire all of the issued and outstanding Fixed Shares on the basis of 0.03048 (after giving effect to the Canopy Consolidation) (the “Fixed Share Exchange Ratio”) of a common share of Canopy Growth (each, a “Canopy Share”) for each Fixed Share held at the time of the acquisition of the Fixed Shares (the “Acquisition” or “Acquisition Time”), subject to adjustment in accordance with the terms of the Amended Arrangement (the “Canopy Call Option”), which Canopy Growth is required to exercise upon the occurrence, or waiver (at the discretion of Canopy Growth), of a Triggering Event (the date on which the Triggering Event occurs, the “Triggering Event Date”). On December 15, 2023, Canopy Growth initiated a reverse 1-for-10 share consolidation (the “Canopy Consolidation”), which triggered an Exchange Ratio Adjustment Event which modified the Fixed Share Exchange Ratio from 0.3048 of a Canopy

F-8


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

Share for each Fixed Share to 0.03048 of a Canopy Share for each Fixed Share. Refer to Note 15 for further discussion, including a discussion of the anticipated adjustment to the Fixed Share Exchange Ratio as a result of the offering of convertible notes completed in June 2024.

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

On October 24, 2022, the Company entered into an arrangement agreement (the “Floating Share Agreement”) with Canopy Growth and Canopy USA, LLC (“Canopy USA”), Canopy Growth’s newly-created U.S. domiciled holding company, pursuant to which, subject to approval of the holders of the Class D subordinate voting shares of Acreage (the “Floating Shares”) and the terms and conditions of the Floating Share Agreement, Canopy USA will acquire all of the issued and outstanding Floating Shares by way of court-approved Floating Share Arrangement for consideration of 0.04500 (after giving effect to the Canopy Consolidation) of a Canopy Share in exchange for each Floating Share. On March 15, 2023, the Company received the required approval of the holders of Floating Shares in connection with the Floating Share Arrangement at its special meeting of holders of Floating Shares (the “Special Meeting”). On March 21, 2023, the Company obtained a final order form from the Supreme Court of British Columbia approving the Floating Share Arrangement. Upon the satisfaction or waiver of all other conditions set out in the Floating Share Arrangement Agreement, which the parties continue to work towards, the parties will complete the Floating Share Arrangement. On December 15, 2023, Canopy Growth initiated the Canopy Consolidation, which triggered an Exchange Ratio Adjustment Event, which affected the Floating Share Agreement and the consideration agreed upon between Canopy USA and the Company. Refer to Note 15 for further discussion.

On June 3, 2024, the Canopy Call Option was exercised in accordance with the terms of the Amended Arrangement. Upon closing of the Amended Arrangement and Floating Share Agreement (the “Acquisitions” or the “Transactions”), Canopy USA will own 100% of the Fixed Shares and Floating Shares and in connection therewith, Acreage would become a wholly owned subsidiary of Canopy USA. Closing of the Acquisitions remain subject to all of the closing conditions set forth in the Amended Arrangement and the Floating Share Agreement. There can be no certainty, nor can the Company provide any assurance, that all conditions precedent will be satisfied or waived, which may result in the Acquisitions not being completed. Refer to Note 15 for further discussion.

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation and going concern

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments consisting only of normal recurring adjustments necessary for a fair presentation have been reflected in these unaudited condensed consolidated financial statements. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2024, or any other period. Further, the accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis which implies the Company will continue to meet its obligations for the next twelve months as of the date these financial statements are issued.

As reflected in the unaudited condensed consolidated financial statements, the Company had an accumulated deficit as of September 30, 2024, as well as a net loss and negative cash flow from operating activities for the nine months ended September 30, 2024. 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. Continuation as a going concern is dependent upon continued operations of the Company, which is dependent upon the Company’s ability to meet its financial requirements and the success of its future operations. The consolidated financial statements do not include any adjustments to the amount and classification of assets and liabilities that may be necessary should the Company not continue as a going concern.

Management believes that substantial doubt about the Company’s ability to meet its obligations for the next twelve months from the date these financial statements are issued can be mitigated by, but not limited to, (i) expected long-term sales growth from the Company’s consolidated operations, (ii) latitude as to the timing and amount of certain operating expenses as well as capital expenditures, (iii) expense reduction plans that have already been put in place to improve the Company’s results, (iv) access to the U.S. and Canadian public equity markets. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. Management also cannot provide any assurance as to unforeseen circumstances that could occur at any time within the next twelve months or thereafter which could increase the Company’s need to raise additional capital on an immediate basis.

F-9


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

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, 2023, dated April 30, 2024, as filed with the Securities and Exchange Commission (the “2023 Form 10-K”).

Use of estimates

Preparation of financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities as of the dates presented and the reported amounts of revenues and expenses during the periods presented. Actual results could differ from those estimates. Significant estimates inherent in the preparation of the accompanying unaudited condensed consolidated financial statements include the fair value of assets acquired and liabilities assumed in business combinations, assumptions relating to equity-based compensation expense, estimated useful lives for property, plant and equipment and intangible assets, the valuation allowance against deferred tax assets and the assessment of potential impairment charges on goodwill, intangible assets and investments in equity and notes receivable.

Emerging growth company

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

Functional and presentation currency

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

Basis of consolidation

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

VIEs

In determining whether the Company is the primary beneficiary of a VIE, the Company assesses whether it has the power to direct matters that most significantly impact the activities of the VIE and have the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. There were no material consolidated VIEs as of September 30, 2024 or December 31, 2023.

Non-controlling interests (“NCI”)

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

Cash and cash equivalents

The Company defines cash equivalents as highly liquid investments held for the purpose of meeting short-term cash commitments that are readily convertible into known amounts of cash, with original maturities of three months or less. The Company maintains cash with various U.S. banks and credit unions with balances in excess of the Federal Deposit Insurance

F-10


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

Corporation and National Credit Union Share Insurance Fund limits, respectively. The failure of a bank or credit union where the Company has significant deposits could result in a loss of a portion of such cash balances in excess of the insured limit, which could materially and adversely affect the Company’s business, financial condition, results of operations and the market price of the Company’s Fixed Shares and Floating Shares.

Restricted cash

Restricted cash represents funds contractually held for specific purposes and, as such, not available for general corporate purposes. Cash and cash equivalents and restricted cash, as presented on the Unaudited Condensed Consolidated Statements of Cash Flows, consists of $13,780 and $65 as of September 30, 2024, respectively, and $13,631 and $3,984 as of December 31, 2023, respectively.

Accounts receivable and notes receivable valuations

The Company reports accounts receivable at their net realizable value, which is management’s best estimate of the cash that will ultimately be received from customers. The Company's notes receivable represent notes due from various third parties. The Company maintains an allowance for expected credit losses to reflect the expected uncollectability of accounts receivable and notes receivable based on historical collection data and specific risks identified among uncollected accounts, as well as management’s expectation of future economic conditions. The Company also considers relevant qualitative and quantitative factors to assess whether historical loss experience should be adjusted to better reflect the risk characteristics of the companies receivables and the expected future losses. If current or expected future economic trends, events, or changes in circumstances indicate that specific receivable balances may be impaired, further consideration is given to the collectability of those balances and the allowance is adjusted accordingly. Trade accounts receivable and notes receivable are written off after exhaustive collection efforts occur and the receivable is deemed uncollectible. As of September 30, 2024 and December 31, 2023, the Company’s allowance for doubtful accounts was $755 and $479, respectively, all of which relates to the allowance for credit losses over accounts receivable. As of September 30, 2024 and December 31, 2023, the allowance on loans receivable was $9,204 and $8,479, respectively, of which the allowance for credit losses over notes receivable was nil as the receivables were fully reserved for. Refer to Note 6 for further discussion.

Fair value of financial instruments

The Company accounts for assets and liabilities measured at fair value on a recurring basis in accordance with Accounting Standards Codification (“ASC”) 820 - Fair Value Measurements. ASC 820 utilizes a fair value hierarchy that reflects the significance of the inputs used to make the measurements. The hierarchy is summarized as follows:

•Level 1 - quoted prices in active markets for identical assets or liabilities

•Level 2 - inputs that are observable for the asset or liability, either directly (quoted prices) for similar assets or liabilities in active markets or indirectly (derived from prices) for identical assets or liabilities in markets with insufficient volume or infrequent transactions

•Level 3 - inputs for assets or liabilities that are not based upon observable market data

The Company records Accounts receivable, net, and Accounts payable and accrued liabilities at cost. The carrying values of these instruments approximate their fair value due to their short-term maturities. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments.

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 for the three and nine months ended September 30, 2024 and 2023, as the issuance of shares upon conversion, exercise or vesting of outstanding units would be anti-dilutive in each period. There were 38,686 and 51,006 anti-dilutive shares outstanding during the three and nine months ended September 30, 2024 and 2023, respectively.

Change in Accounting Estimate

F-11


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

financial reporting transparency. The Company accounted for this change as a change in accounting estimate and, accordingly, applied it on a prospective basis. This change resulted in a $13,828 charge to Cost of goods sold, wholesale on the Company’s Unaudited Condensed Consolidated Statements of Operations for the nine months ended September 30, 2024.

Accounting Pronouncements Recently Adopted

In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-08 - Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The new standard improves the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency. The new standard requires an entity to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606 - Revenue from Contracts with Customers. The ASU took effect for the Company’s first interim period of fiscal 2024. The standard has been applied prospectively to business combinations occurring on or after the effective date of the amendments. The adoption of ASU 2021-08 did not have a material effect on the Company’s unaudited condensed consolidated financial statements.

Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures (Topic 280). This ASU updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of a segment's profit or loss. This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources. The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is also permitted. This ASU will result in additional required disclosures when adopted, where applicable.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (Topic 740). The ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2025. Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance. Once adopted, this ASU will result in additional disclosures.

3. ACQUISITIONS, DIVESTITURES AND ASSETS HELD FOR SALE

Acquisitions

During the three and nine months ended September 30, 2024, the Company did not complete any acquisitions.

On January 2, 2023, a subsidiary of the Company acquired cultivation, processing and retail operations in Maine from a third party who provided cultivation, manufacturing, processing, distribution and handling, recordkeeping, compliance, and other services to the Company’s operations in Maine. Under the terms of the agreement, the consideration paid consisted of the settlement of a pre-existing relationship, which included a line-of credit, other advances and the related interest receivable, all totaling $27,691, which were previously recorded in Notes receivable, net on the Statements of Financial Position.

The purchase price allocation is based upon final valuations, estimates and assumptions which are subject to change within the measurement period, generally one year from the acquisition date. The primary areas of the purchase price allocation that are not yet finalized relate to the valuation of the capital assets, tangible assets acquired and the residual goodwill resulting from the transaction.

F-12


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


Purchase Price Allocation	Northeast Patients Group
Assets acquired:
Cash and cash equivalents	$	361
Accounts receivable	25
Inventory	384
Other current assets	174
Capital assets	7,297
Finance lease right-of-use asset	320
Operating lease right-of-use asset	1,279
Goodwill	22,506

Liabilities assumed:
Accounts payable and accrued liabilities	(513)
Taxes payable	(1,112)
Finance lease liability, current	(87)
Finance lease liability, non-current	(459)
Operating lease liability, current	(73)

Operating lease liability, non-current	(1,385)
Notes payable	(11)
Deferred tax liability	(1,015)
Fair value of net assets acquired	$	27,691

Consideration paid:
Settlement of pre-existing relationship	27,691
Total consideration	$	27,691

Divestitures

During the three and nine months ended September 30, 2024, the Company did not complete any divestitures. During the three and nine months ended September 30, 2023, management committed to a plan to sell CWG Botanicals, Inc. (“CWG”) as of June 30, 2023. As of then, all assets and liabilities were classified as held for sale on the balance sheet and written down to the fair value of the expected sale price. On September 12, 2023, the Company sold 100% of its ownership interest in CWG for an aggregate sales price of $500 and recognizing a gain of $47 on the Unaudited Condensed Consolidated Statements of Operations in Other income, net.

Assets Held for Sale

In the second quarter of 2024, the Company determined that the assets and liabilities categorized as held-for-sale related to the Company’s Ohio operations no longer meet the held-for-sale criteria as the Company intends to retain and continue its Ohio operations. As of December 31, 2023, the Company determined certain businesses and assets in Ohio met the held-for-sale criteria. As such, the related assets and liabilities within these disposal groups were transferred into Assets held-for-sale and Liabilities related to assets held-for-sale on the Unaudited Condensed Consolidated Statements of Financial Position.

As of September 30, 2024, the Company determined certain businesses and assets in Connecticut and Maine met the held-for-sale criteria. As such, the related assets and liabilities within these disposal groups were transferred into Assets held-for-sale and Liabilities related to assets held-for-sale on the Unaudited Condensed Consolidated Statements of Financial Position.

The tables below presents the assets and liabilities classified as held for sale on the Unaudited Condensed Consolidated Statements of Financial Position for the periods ended September 30, 2024 and December 31, 2023, respectively.

F-13


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


	September 30, 2024
	Prime Wellness, D&B and Thames Valley, Connecticut		NPG Retail, Maine		Total
Cash and cash equivalents	$	174	$	75	$	249
Inventory	611		352		963
Other current assets	93		93		186
Total current assets classified as held-for-sale	878		520		1,398
Capital assets, net	2,500		564		3,064
Operating lease right-of-use assets	2,056		856		2,912
Intangible assets, net	7,713		—		7,713


Other non-current assets	133		35		168
Total assets classified as held-for-sale	$	13,280	$	1,975	$	15,255

Accounts payable and accrued liabilities	$	(6,522)	$	(576)	$	(7,098)
Taxes payable	(424)		(81)		(505)
Operating lease liability, current	(442)		(223)		(665)

Total current liabilities classified as held-for-sale	(7,388)		(880)		(8,268)
Debt, non-current	(799)		—		(799)
Operating lease liability, non-current	(1,402)		(786)		(2,188)
Deferred tax liabilities	(538)		—		(538)
Liability on uncertain tax position	(3,979)		—		(3,979)
Total liabilities classified as held-for-sale	$	(14,106)	$	(1,666)	$	(15,772)


	December 31, 2023
	Akron and Wickliffe, Ohio

Inventory	302
Other current assets	147
Total current assets classified as held-for-sale	449
Capital assets, net	1,064


Intangible assets, net	4,080
Goodwill	415
Other non-current assets	20
Total assets classified as held-for-sale	$	6,028

Accounts payable and accrued liabilities	$	(1,730)

Operating lease liability, current	(99)

Total current liabilities classified as held-for-sale	(1,829)

Operating lease liability, non-current	(424)


Total liabilities classified as held-for-sale	$	(2,253)

F-14


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

4. INTANGIBLE ASSETS AND GOODWILL

Intangible assets

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


Intangibles	September 30, 2024		December 31, 2023












Indefinite-lived intangible assets
Cannabis licenses	27,910		31,044

Total intangibles, net	$	27,910	$	31,044

The intangible assets balance as of September 30, 2024 and December 31, 2023 excludes intangible assets reclassified to assets held-for-sale (refer to Note 3 for further discussion).

There was no amortization expense recorded for the three and nine months ended September 30, 2024 and 2023, respectively.

Goodwill

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


Goodwill	Total
December 31, 2023	$	13,346
Transferred from held-for-sale	415


September 30, 2024	$	13,761

5. INVESTMENTS

The carrying values of the Company’s investments in the Unaudited Condensed Consolidated Statements of Financial Position as of September 30, 2024 and December 31, 2023 are as follows:


Investments	September 30, 2024		December 31, 2023


Investments held at FV-NI	$	33,170	$	33,170

Total long-term investments	$	33,170	$	33,170

Income from investments, net in the Unaudited Condensed Consolidated Statements of Operations during the three and nine months ended September 30, 2024 and 2023 is as follows:


Investment income	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023


Investments held at FV-NI	—		248		—		228


Income from investments, net	$	—	$	248	$	—	$	228

F-15


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

Investments held at FV-NI

The Company has an equity investment in the Red White and Bloom company that does not result in significant influence or control. These investments are carried at fair value, with gains and losses recognized in the Unaudited Condensed Consolidated Statements of Operations.

As further described under the “6.10% Secured debenture due September 2030” in Note 10, on September 23, 2020, a subsidiary of the Company, Universal Hemp, LLC ("Universal Hemp"), was advanced gross proceeds of $50,000 (less transaction costs) pursuant to the terms of a secured debenture. The Company subsequently engaged an investment advisor, which under the investment advisor's sole discretion, on September 28, 2020 invested $34,019 of these proceeds on behalf of Universal Hemp. As a result, Universal Hemp acquired 34,019 class B units, at $1 par value per unit, which represented 100% financial interest in an Investment Partnership, a Canada-based limited partnership. An affiliate of the institutional investor held Class A units of the Investment Partnership. The general partner of the Investment Partnership was also an affiliate of the Institutional Investor. During the fourth quarter of 2023, Kevin Murphy acquired all Class A units and became the general partner of the Investment Partnership. The Class B units are held by the Investment Advisor as an agent for Universal Hemp.

Universal Hemp, through its investment with the Investment Advisor, was originally determined to hold significant influence in the Investment Partnership in accordance with ASC 810 - Consolidations due to (1) the economic financial interest, and (2) the entitlement to matters as they pertain to ‘Extraordinary Resolution’ items as defined within the Investment Partnership Agreement. As a result, the Company accounted for the investment in the Investment Partnership under the equity method until December 2020. Refer to Note 10 for further discussion. In December 2020, the Company no longer held significant influence due to the removal of the Extraordinary Resolution entitlements and other revisions in the Investment Partnership Agreement. As a result, the Company changed its accounting for the Investment Partnership to recognize the investment at fair value, with gains and losses recognized in the Unaudited Condensed Consolidated Statements of Operations.

6. NOTES RECEIVABLE, NET

Notes receivable as of September 30, 2024 and December 31, 2023 consisted of the following:


	September 30, 2024		December 31, 2023
Promissory notes receivable	$	862	$	862
Line of credit receivable	4,331		4,331
Interest receivable	4,011		3,286
Allowance for notes and interest receivable	(9,204)		(8,479)
Total notes receivable	$	—	$	—
Less: Notes receivable, current	—		—
Notes receivable, non-current	$	—	$	—

Interest income from loans receivable during the three and nine months ended September 30, 2024 was nil, respectively, and nil and $10 for the three and nine months ended September 30, 2023, respectively.

At each reporting date, the Company applies its judgment to evaluate the collectability of the note receivable and makes a provision based on the assessed amount of expected credit loss. This judgment is based on parameters such as interest rates, market conditions and creditworthiness of the creditor.

The Company determined that the collectability of certain notes receivables is doubtful based on information available. As of September 30, 2024 and December 31, 2023, the Company’s allowance for notes receivable was $9,204 and $8,479, respectively, including $5,193 of principal outstanding and $4,011 and $3,286 of accrued interest, respectively, and represents the full value of such loan balances.

Activity during the nine months ended September 30, 2023

F-16


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

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

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

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

The Company did not have any activity during the three and nine months ended September 30, 2024.

7. CAPITAL ASSETS, NET

Net property, plant and equipment consisted of:


	September 30, 2024		December 31, 2023
Land	$	9,390	$	9,708
Building	57,987		58,524
Right-of-use asset, finance leases	5,077		6,183
Furniture, fixtures and equipment	40,632		39,943
Leasehold improvements	58,175		58,828
Construction in progress	1,342		4,069
Software	2,513		2,513
Capital assets, gross	$	175,116	$	179,768
Less: accumulated depreciation and amortization	(46,355)		(38,036)
Capital assets, net	$	128,761	$	141,732

Depreciation of capital assets for the three and nine months ended September 30, 2024 is comprised of $853 and $2,642 of depreciation and amortization expense, respectively, and $2,626 and $8,033 that was capitalized to inventory, respectively. Depreciation of capital assets for the three and nine months ended September 30, 2023 is comprised of $928 and $2,919 of depreciation and amortization expense, respectively, and $2,116 and $6,493 that was capitalized to inventory, respectively.

In September 2024, management made the decision to abandon construction activities for the Prime Wellness of Pennsylvania expansion project. As a result, the associated Construction in Progress (CIP) assets were disposed of. In accordance with ASC 360, we recognized a loss of $2,072 on the disposal of these assets as of September 30, 2024.

F-17


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

8. LEASES

The Company leases land, buildings, equipment and other capital assets which it plans to use for corporate purposes in addition to the production and sale of cannabis products. Leases with an initial term of 12 months or less are not recorded on the Unaudited Condensed Consolidated Statements of Financial Position and are expensed in the Unaudited Condensed Consolidated Statements of Operations on the straight-line basis over the lease term. The Company does not have any material variable lease payments and accounts for non-lease components separately from leases.


Statement of Financial Position Information	Classification	September 30, 2024		December 31, 2023
Right-of-use assets
Operating	Operating lease right-of-use assets	$	13,516	$	17,531
Finance	Capital assets, net	5,077		6,183
Total right-of-use assets		$	18,593	$	23,714

Lease liabilities
Current
Operating	Operating lease liability, current	$	1,959	$	2,457
Financing	Debt, current	4		116
Non-current
Operating	Operating lease liability, non-current	14,138		17,293
Financing	Debt, non-current	5,375		5,827
Total lease liabilities		$	21,476	$	25,693


		Three Months Ended September 30,				Nine Months Ended September 30,
Statement of Operations Information	Classification	2024		2023		2024		2023
Short-term lease expense	General and administrative	$	252	$	102	$	478	$	311

Operating lease expense	General and administrative	1,313		1,238		3,657		3,853
Finance lease expense:
Amortization of right of use asset	Depreciation and amortization	35		93		190		278
Interest expense on lease liabilities	Interest expense	162		213		518		633

Net operating and finance lease cost		$	1,510	$	1,544	$	4,365	$	4,764


		Nine Months Ended September 30,
Statement of Cash Flows Information	Classification	2024		2023
Cash paid for operating leases	Net cash used in operating activities	$	3,369	$	3,871
Cash paid for finance leases - interest	Net cash used in operating activities	$	555	$	718

F-18


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

The following represents the Company’s future minimum payments required under existing leases with initial terms of one year or more as of September 30, 2024:


Maturity of lease liabilities	Operating Leases		Finance Leases
2024	$	905	$	189
2025	3,153		766
2026	3,017		789
2027	3,056		812
2028	2,553		837
Thereafter	12,787		10,839
Total lease payments	$	25,471	$	14,232
Less: interest	9,374		8,853
Present value of lease liabilities	$	16,097	$	5,379

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

As of September 30, 2024, there have been no leases entered into that have not yet commenced.

9. INVENTORY

The Company’s inventory balance consists of the following:


	September 30, 2024		December 31, 2023
Retail inventory	$	2,436	$	2,918
Wholesale inventory	22,839		36,139
Cultivation inventory	5,232		5,826
Supplies & other	2,402		2,792
Total	$	32,909	$	47,675

Inventory is valued at the lower of cost and net realizable value (“NRV”), defined as estimated selling price in the ordinary course of business, less estimated costs of disposal. During the nine months ended September 30, 2024, the Company analyzed its inventory balances, and recorded wholesale inventory adjustments as a result of (i) having excess or obsolete inventory and (ii) reducing the carrying value to ensure inventory balances are properly recorded at the lower of cost and NRV. The Company recognized $1,884 and $5,581 of wholesale inventory adjustments within Cost of goods sold, wholesale on the Statements of Operations during the three and nine months ended September 30, 2024, respectively, and $2,103 and $8,824 during the three and nine months ended September 30, 2023, respectively.

During the first quarter of 2024, the Company implemented a change in accounting estimate for the costing of inventory cultivated, extracted or processed, and manufactured or infused by the Company from historical average cost to three-month rolling average cost to better align with evolving market dynamics, improve the accuracy of inventory valuation, and enhance financial reporting transparency. The Company accounted for this change as a change in accounting estimate and, accordingly, applied it on a prospective basis. This change resulted in a $13,828 charge to Cost of goods sold, wholesale on the Company’s Unaudited Condensed Consolidated Statements of Operations for the nine months ended September 30, 2024.

F-19


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

10. DEBT

The Company’s debt balances consist of the following:


Debt balances	September 30, 2024		December 31, 2023
Financing liability (failed sale-leaseback)	$	14,454	$	15,253
Finance lease liabilities	5,379		5,943
7.50% Loan due April 2026	34,691		32,438
6.10% Secured debenture due September 2030	47,293		46,955
Note due December 2024	792		2,375
13.50% credit facilities due September 2027, as amended	158,719		132,337

Convertible notes	11,693		—
Note backed by ERTC	1,641		1,641
Total debt	$	274,662	$	236,942
Less: current portion of debt	2,437		4,132
Total long-term debt	$	272,225	$	232,810

Scheduled maturities of debt, excluding amortization of discount and issuance costs, are as follows:


2024	$	2,437
2025	—
2026	—
2027

Acreage Holdings, Inc. [ACRHF] Filings
Acreage Holdings, Inc. [ACRDF] Filings
10-Q	[2024-11-14]
10-Q	[2024-08-14]
10-Q	[2024-05-30]
10-K	[2024-04-30]
10-Q	[2023-11-14]
10-Q	[2023-08-09]
10-Q	[2023-05-23]
10-K	[2023-05-01]
10-Q	[2022-11-09]
10-Q	[2022-08-09]
10-Q	[2022-05-10]
10-K	[2022-03-11]
10-Q	[2021-11-12]
10-Q	[2021-08-10]
10-Q	[2021-05-10]
10-K	[2021-03-26]
S-1	[2021-02-08]
10-Q	[2020-12-18]
10-Q	[2020-08-14]
10-Q	[2020-06-29]
10-K	[2020-05-29]

Acreage Holdings, Inc. [ACRHF] Filings

Acreage Holdings, Inc. [ACRDF] Filings