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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2024

OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from  to


Commission file number 000-56021

ACREAGE HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
British Columbia, Canada98-1463868
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
366 Madison Ave, 14th floor
New YorkNew York10017
(Address of Principal Executive Offices)
(Zip Code)
(646) 600-9181
Registrant’s telephone number, including area code

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

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

Indicate by check mark 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 July 31, 2024, there were 80,928,806 Fixed shares, 40,953,831 Floating Shares, and 117,600 Fixed Multiple Shares, in each case, issued and outstanding.




































TABLE OF CONTENTS
Acreage Holdings, Inc.
Form 10-Q
For the Three and Six Months Ended June 30, 2024
PART IFinancial Information
Item 1.
Item 2.
Item 3.
Item 4.
PART IIOther Information
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.














PART I
Item 1. Financial Statements and Supplementary Data.
ACREAGE HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in thousands)June 30, 2024December 31, 2023
(unaudited)
ASSETS
Cash and cash equivalents$9,999 $13,631 
Restricted cash66 3,984 
Accounts receivable, net9,614 8,459 
Inventory34,015 47,675 
Assets held-for-sale— 6,028 
Other current assets3,691 2,136 
Total current assets57,385 81,913 
Long-term investments33,170 33,170 
Capital assets, net136,373 141,732 
Operating lease right-of-use assets18,250 17,531 
Intangible assets, net35,624 31,044 
Goodwill13,761 13,346 
Other non-current assets1,504 1,558 
Total non-current assets238,682 238,381 
TOTAL ASSETS$296,067 $320,294 
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Accounts payable and accrued liabilities$38,008 $29,936 
Taxes payable7,607 11,395 
Interest payable4,208 5,539 
Operating lease liability, current2,532 2,457 
Debt, current3,351 4,132 
Liabilities related to assets held for sale— 2,253 
Other current liabilities127 2,011 
Total current liabilities55,833 57,723 
Debt, non-current258,409 232,810 
Operating lease liability, non-current18,102 17,293 
Deferred tax liability10,498 10,584 
Liability on unrecognized tax benefits49,157 39,859 
Warrant liability7,020 — 
Other liabilities14 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 liabilities343,200 301,600 
TOTAL LIABILITIES399,033 359,323 
Commitments and contingencies
Common stock, no par value - unlimited authorized, 117,225 and 116,383 issued and outstanding as of June 30, 2024. 115,995 and 115,153 issued and outstanding as of December 31, 2023.
— — 
Additional paid-in capital762,654 759,698 
Treasury stock, 842 common stock held in treasury
(21,054)(21,054)
Accumulated deficit(804,933)(747,550)
Total Acreage Shareholders' deficit
(63,333)(8,906)
Non-controlling interests(39,633)(30,123)
TOTAL DEFICIT
(102,966)(39,029)
TOTAL LIABILITIES AND DEFICIT
$296,067 $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 June 30,Six Months Ended June 30,
(in thousands, except per share amounts)2024202320242023
REVENUE
Retail revenue, net$26,374 $44,913 $58,185 $86,794 
Wholesale revenue, net12,624 13,202 26,114 27,200 
Other revenue, net— — — 84 
Total revenues, net38,998 58,115 84,299 114,078 
Cost of goods sold, retail(14,601)(23,484)(32,543)(43,898)
Cost of goods sold, wholesale(7,475)(13,509)(36,331)(22,473)
Total cost of goods sold(22,076)(36,993)(68,874)(66,371)
Gross profit16,922 21,122 15,425 47,707 
OPERATING EXPENSES
General and administrative8,073 7,073 15,298 17,585 
Compensation expense11,750 13,203 23,868 25,406 
Equity-based compensation expense1,342 694 2,151 1,678 
Marketing559 656 1,118 1,400 
Impairments, net(118)— — — 
Write down of assets held-for-sale, net— 3,557 — 3,557 
Depreciation and amortization933 994 1,789 1,991 
Total operating expenses22,539 26,177 44,224 51,617 
Net operating loss$(5,617)$(5,055)$(28,799)$(3,910)
Income (loss) from investments, net— 322 — (20)
Interest income (loss) from loans receivable— (6)— 10 
Interest expense(8,436)(8,862)(17,295)(16,936)
Other income (loss), net(6,182)1,355 (6,337)(198)
Total other loss(14,618)(7,191)(23,632)(17,144)
Loss before income taxes$(20,235)$(12,246)$(52,431)$(21,054)
Income tax expense(3,894)(5,994)(5,017)(13,343)
Net loss$(24,129)$(18,240)$(57,448)$(34,397)
Less: net loss attributable to non-controlling interests(3,104)(2,084)(8,445)(3,651)
Net loss attributable to Acreage Holdings, Inc.$(21,025)$(16,156)$(49,003)$(30,746)
Net loss per share attributable to Acreage Holdings, Inc. - basic and diluted:$(0.18)$(0.14)$(0.42)$(0.27)
Weighted average shares outstanding - basic and diluted116,278 112,810 116,136 112,679 

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

Attributable to shareholders of the parent
(in thousands)LLC Membership UnitsPubco Shares (as converted)Share CapitalTreasury StockAccumulated DeficitShareholders’ Equity (Deficit)Non-controlling InterestsTotal Equity (Deficit)
December 31, 20233,861 115,995 $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, 20243,861 116,131 $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, 20243,861 117,225 $762,654 $(21,054)$(804,933)$(63,333)$(39,633)$(102,966)



See accompanying Notes to Unaudited Condensed Consolidated Financial Statements
F-4
ACREAGE HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30,
(in thousands)20242023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss$(57,448)$(34,397)
Adjustments for:
Depreciation and amortization1,789 1,991 
Depreciation and amortization included in COGS5,403 8,935 
Equity-based compensation expense2,151 1,678 
Inventory write-off and provision3,697 6,721 
Change in accounting estimate for the costing of inventory13,828 — 
Loss on extinguishment of debt5,680 — 
Gain on disposal of capital assets(176)— 
Non-cash fair value change related to Warrant liability and Convertible notes94 — 
Bad debt expense206 339 
Non-cash interest expense2,767 2,457 
Non-cash operating lease adjustment162 (112)
Loss on lease termination— (200)
Deferred tax income(86)(18)
Non-cash loss from investments, net— 759 
Write-down of assets held-for-sale— 3,557 
Change, net of acquisitions in:
Accounts receivable(2,009)6,068 
Inventory(1,241)(11,915)
Other assets(820)(469)
Interest receivable648 (360)
Accounts payable and accrued liabilities6,209 (5,670)
Taxes payable(3,788)8,540 
Interest payable2,405 249 
Liability on unrecognized tax benefits9,298 — 
Other liabilities(2,073)(3,130)(1)
Net cash used in operating activities$(13,304)$(14,977)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of capital assets$(2,648)$(3,232)
Collection of notes receivable— 2,000 
Business acquisitions, net of cash acquired— 516 
Purchases of intangible assets(500)— 
Net cash used in investing activities$(3,148)$(716)
CASH FLOWS FROM FINANCING ACTIVITIES:
Other equity transactions$(260)$(130)(1)
Proceeds from financing (refer to Note 14 for related party financing)— 27,121 
Deferred financing costs paid— (500)
Proceeds from issuance of private placement units and warrants10,000 — 
Repayment of debt(838)(868)
Capital distributions - non-controlling interests— (3,968)
Net cash provided by financing activities$8,902 $21,655 
Net increase (decrease) in cash, cash equivalents, restricted cash, and cash held for sale$(7,550)$5,962 
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements
F-5
ACREAGE HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash, cash equivalents, restricted cash, and cash held for sale - Beginning of period17,615 24,067 
Cash, cash equivalents, restricted cash, and cash held for sale - End of period$10,065 $30,029 
RECONCILIATION OF CASH FLOW INFORMATION:
Cash and cash equivalents$9,999 $16,401 
Restricted cash66 13,628 
Total cash, cash equivalents, and restricted cash at end of period$10,065 $30,029 
(1) Presentation of June 30, 2023 figures have been revised, refer to Note 2 for further discussion.

Six Months Ended June 30,
(in thousands)20242023
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid - non-lease$2,658 $14,222 
Income taxes paid24 4,280 
OTHER NON-CASH INVESTING AND FINANCING ACTIVITIES:
Capital assets not yet paid for$781 $3,729 
Initial fair value recognition on Warrant Liability6,972 — 
Initial fair value recognition on Convertible Notes11,408 — 


See accompanying Notes to Unaudited Condensed Consolidated Financial Statements
F-6
ACREAGE HOLDINGS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)

1.    NATURE OF OPERATIONS
Acreage Holdings, Inc. (the “Company”, “Pubco” or “Acreage”) is a vertically integrated, multi-state operator in the United States (“U.S.”) cannabis industry. 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 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
F-7
ACREAGE HOLDINGS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
triggered an Exchange Ratio Adjustment Event which modified the Fixed Exchange Ratio from 0.3048 of a Canopy Share for each Fixed Share to 0.03048 of a Canopy Share for each Fixed Share. Refer to Note 15 for further discussion.

Pursuant to the implementation of the Amended Arrangement, on September 23, 2020, a subsidiary of Canopy Growth advanced gross proceeds of $50,000 to Universal Hemp, LLC, an affiliate of the Company. The debenture bears interest at a rate of 6.1% per annum. Refer to Note 10 for further discussion.
On October 24, 2022, the Company entered into an arrangement agreement (the “Floating Share Agreement”) with Canopy Growth and Canopy USA, LLC (“Canopy USA”), Canopy Growth’s newly-created U.S. domiciled holding company, pursuant to which, subject to approval of the holders of the Class D subordinate voting shares of Acreage (the “Floating Shares”) and the terms and conditions of the Floating Share Agreement, Canopy USA will acquire all of the issued and outstanding Floating Shares by way of court-approved 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 June 30, 2024, as well as a net loss and negative cash flow from operating activities for the six months ended June 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-8
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 “2022 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 June 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 Corporation and National Credit Union Share Insurance Fund limits, respectively. The failure of a bank or credit union where
F-9
ACREAGE HOLDINGS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
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 $9,999 and $66 as of June 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 June 30, 2024 and December 31, 2023, the Company’s allowance for doubtful accounts was $626 and $479, respectively, all of which relates to the allowance for credit losses over accounts receivable. As of June 30, 2024 and December 31, 2023, the allowance on loans receivable was $8,911 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 six months ended June 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 49,222 and 46,243 anti-dilutive shares outstanding during the three and six months ended June 30, 2024 and 2023, respectively.
Change in Accounting Estimate
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,
F-10
ACREAGE HOLDINGS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
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 six months ended June 30, 2024.

Change in presentation

Note that certain items presented for the six months ended June 30, 2023, Unaudited Condensed Consolidated Statements of Cash Flows, include changes in presentation to conform to the current year presentation. There was no impact to our Consolidated Financial Statements as a result of this reclassification.

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.
F-11
ACREAGE HOLDINGS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
3.    ACQUISITIONS, DIVESTITURES AND ASSETS HELD FOR SALE
Acquisitions

During the three and six months ended June 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.
Purchase Price AllocationNortheast Patients Group
Assets acquired:
Cash and cash equivalents$361 
Accounts receivable25 
Inventory384 
Other current assets174 
Capital assets7,297 
Finance lease right-of-use asset320 
Operating lease right-of-use asset1,279 
Goodwill22,506 
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 relationship27,691 
Total consideration$27,691 
Divestitures
During the three and six months ended June 30, 2024 and 2023, the Company did not complete any divestitures.
Assets Held for Sale
F-12
ACREAGE HOLDINGS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
During the three months ended June 30, 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 June 30, 2024 the Company did not have any business or assets that met the held-for-sale criteria. 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.

The table below presents the assets and liabilities classified as held for sale on the Unaudited Condensed Consolidated Statements of Financial Position for the years ended December 31, 2023.

December 31, 2023
Akron and Wickliffe, Ohio
Inventory$302 
Other current assets147 
Total current assets classified as held-for-sale449 
Capital assets, net1,064 
Intangible assets, net4,080 
Goodwill415 
Other non-current assets20 
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)

4.    INTANGIBLE ASSETS AND GOODWILL
Intangible assets
The following table details the intangible asset balances by major asset classes:
IntangiblesJune 30, 2024December 31, 2023
Indefinite-lived intangible assets
Cannabis licenses35,624 31,044 
Total intangibles, net$35,624 $31,044 
The intangible assets balance as of 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 six months ended June 30, 2024 and June 30, 2023, respectively.
Goodwill
The following table details the changes in the carrying amount of goodwill:
F-13
ACREAGE HOLDINGS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
GoodwillTotal
December 31, 2023$13,346 
Transferred from held-for-sale415 
June 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 June 30, 2024 and December 31, 2023 are as follows:
InvestmentsJune 30, 2024December 31, 2023
Investments held at FV-NI$33,170 $33,170 
Total long-term investments$33,170 $33,170 
Income (loss) from investments, net in the Unaudited Condensed Consolidated Statements of Operations during the three and six months ended June 30, 2024 and 2023 is as follows:
Investment income (loss)Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
Investments held at FV-NI— 322 — (20)
Income (loss) from investments, net$— $322 $— $(20)
Investments held at FV-NI
The Company has investments in equity of other companies that do not result in significant influence or control. These investments are carried at fair value, with gains and losses recognized in the Unaudited Condensed Consolidated Statements of Operations.
As further described under the “6.10% Secured debenture due September 2030” in Note 10, on September 23, 2020, a subsidiary of the Company, Universal Hemp, LLC ("Universal Hemp"), was advanced gross proceeds of $50,000 (less transaction costs) pursuant to the terms of a secured debenture. The Company subsequently engaged an investment advisor, which under the investment advisor's sole discretion, on September 28, 2020 invested $34,019 of these proceeds on behalf of Universal Hemp. As a result, Universal Hemp acquired 34,019 class B units, at $1 par value per unit, which represented 100% financial interest in an Investment Partnership, a Canada-based limited partnership. An affiliate of the institutional investor 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.
F-14
ACREAGE HOLDINGS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
6.     NOTES RECEIVABLE, NET

Notes receivable as of June 30, 2024 and December 31, 2023 consisted of the following:
June 30, 2024December 31, 2023
Promissory notes receivable$862 $862 
Line of credit receivable4,3314,331
Interest receivable3,718 3,286 
Allowance for notes and interest receivable(8,911)(8,479)
Total notes receivable$— $— 
Less: Notes receivable, current— — 
Notes receivable, non-current$— $— 
Interest income (loss) from loans receivable during the three and six months ended June 30, 2024 was nil, respectively, and $(6) and $10 for the three and six months ended June 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 June 30, 2024 and December 31, 2023, the Company’s allowance for notes receivable of $8,911 and $8,479, respectively, including $5,193 of principal outstanding and $3,718 and $3,286 of accrued interest, respectively, and represents the full value of such loan balances.
Activity during the six months ended June 30, 2023

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

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

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

The Company did not have any activity during the three and six months ended June 30, 2024.
F-15
ACREAGE HOLDINGS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
7.    CAPITAL ASSETS, NET
Net property, plant and equipment consisted of:
June 30, 2024December 31, 2023
Land$9,708 $9,708 
Building58,524 58,524 
Right-of-use asset, finance leases6,183 6,183 
Furniture, fixtures and equipment41,372 39,943 
Leasehold improvements60,256 58,828 
Construction in progress2,216 4,069 
Software2,513 2,513 
Capital assets, gross$180,772 $179,768 
Less: accumulated depreciation and amortization(44,399)(38,036)
Capital assets, net$136,373 $141,732 
Depreciation of capital assets for the three and six months ended June 30, 2024 includes $933 and $1,789 of depreciation and amortization expense, which includes $2,663 and $5,407 that was capitalized to inventory, respectively. Depreciation of capital assets for the three and six months ended June 30, 2023 includes $994 and $1,991 of depreciation and amortization expense, which includes $2,090 and $4,377 that was capitalized to inventory, respectively.
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 InformationClassificationJune 30, 2024December 31, 2023
Right-of-use assets
OperatingOperating lease right-of-use assets$18,250 $17,531 
FinanceCapital assets, net6,183 6,183 
Total right-of-use assets$24,433 $23,714 
Lease liabilities
Current
OperatingOperating lease liability, current$2,532 $2,457 
FinancingDebt, current127 116 
Non-current
OperatingOperating lease liability, non-current18,102 17,293 
FinancingDebt, non-current5,776 5,827 
Total lease liabilities$26,537 $25,693 
F-16
ACREAGE HOLDINGS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
Three Months Ended June 30,Six Months Ended June 30,
Statement of Operations InformationClassification2024202320242023
Short-term lease expenseGeneral and administrative$111 $58 $226 $209 
Operating lease expenseGeneral and administrative1,173 1,277 2,344 2,615 
Finance lease expense:
Amortization of right of use assetDepreciation and amortization87 92 155 185 
Interest expense on lease liabilitiesInterest expense209 211 419 420 
Net operating and finance lease cost$1,469 $1,580 $2,918 $3,220 
Six Months Ended June 30,
Statement of Cash Flows InformationClassification20242023
Cash paid for operating leasesNet cash used in operating activities$2,182 $2,727 
Cash paid for finance leases - interestNet cash used in operating activities$460 $522 
The following represents the Company’s future minimum payments required under existing leases with initial terms of one year or more as of June 30, 2024:
Maturity of lease liabilitiesOperating LeasesFinance Leases
2024$2,151 $464 
20254,313 946 
20264,526 969 
20274,114 992 
20283,015 867 
Thereafter13,398 10,839 
Total lease payments$31,517 $15,077 
Less: interest10,883 9,174 
Present value of lease liabilities$20,634 $5,903 
Weighted average remaining lease term (years)810
Weighted average discount rate10%12%
As of June 30, 2024, there have been no leases entered into that have not yet commenced.
F-17
ACREAGE HOLDINGS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
9.    INVENTORY
The Company’s inventory balance consists of the following:
June 30, 2024December 31, 2023
Retail inventory$3,946 $2,918 
Wholesale inventory22,407 36,139 
Cultivation inventory5,438 5,826 
Supplies & other2,224 2,792 
Total$34,015 $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 six months ended June 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 $1,773 and $3,697of wholesale inventory adjustments within Cost of goods sold, wholesale on the Statements of Operations during the three and six months ended June 30, 2024, respectively, and $4,484 and $6,721 during the three and six months ended June 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 six months ended June 30, 2024.
10.    DEBT
The Company’s debt balances consist of the following:
Debt balancesJune 30, 2024December 31, 2023
Financing liability (failed sale-leaseback)$15,253 $15,253 
Finance lease liabilities5,903 5,943 
7.50% Loan due April 2026
33,935 32,438 
6.10% Secured debenture due September 2030
47,180 46,955 
Note due December 20241,582 2,375 
Prime rate credit facilities due January 2026, as amended— 132,337 
Amended and restated credit agreement144,819 — 
Convertible notes11,447 — 
Note backed by ERTC
1,641 1,641 
Total debt$261,760 $236,942 
Less: current portion of debt3,351 4,132 
Total long-term debt$258,409 $232,810 
F-18
ACREAGE HOLDINGS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
Scheduled maturities of debt, excluding amortization of discount and issuance costs, are as follows:
2024$3,224 
2025— 
2026179,677 
202711 
202839 
Thereafter71,105 
Total payments (excluding amortization of discount and issuance costs)(1)
$254,056 
(1) Excludes future liabilities related to Convertible notes as this instrument is not expected to be settled in cash.
During the three and six months ended June 30, 2024, the Company incurred interest expense of $8,436 and $17,295, respectively, $8,862 and $16,936 during the three and six months ended June 30, 2023, respectively, on the Unaudited Condensed Consolidated Statements of Operations. Interest expense for the three and six months ended June 30, 2024 included debt discount amortization of $415 and $956, respectively, and amortization of debt issuance costs of $488 and $1,144, respectively. Interest expense for the three and six months ended June 30, 2023 included debt discount amortization of $525 and $1,015, respectively, and amortization of debt issuance costs of $698 and $1,388, respectively. As of June 30, 2024 and December 31, 2023, the Company had unamortized discount $923 and $4,484, respectively, and debt issuance costs of $2,820 and $7,410, respectively, which is netted against the gross carrying value of long-term debt in Debt, non-current on Unaudited Condensed Consolidated Statements of Financial Position. Additionally, as of June 30, 2024 and December 31, 2023, the Company had accrued interest of $4,208 and $5,539, respectively, within Interest payable on the Unaudited Condensed Consolidated Statements of Financial Position.
Financing liability (failed sales leaseback)
In connection with the Company’s failed sale-leaseback transaction in November 2020, a financing liability was recognized equal to the cash proceeds received. The Company will recognize the cash payments made on the lease as interest expense, and the principal will be de-recognized upon expiration of the lease.

6.10% Secured debenture due September 2030
On September 23, 2020, pursuant to the implementation of the Amended Arrangement (Refer to Note 15 for further discussion), a subsidiary of Canopy Growth advanced gross proceeds of $50,000 (less transaction costs of approximately $4,025) to Universal Hemp, an affiliate of the Company, pursuant to the terms of a secured debenture (“6.1% Loan”). In accordance with the terms of the debenture, the funds cannot be used, directly or indirectly, in connection with or for any cannabis or cannabis-related operations in the United States, unless and until such operations comply with all applicable laws of the United States. An additional $50,000 may be advanced pursuant to the debenture subject to the satisfaction of certain conditions by Universal Hemp. The debenture bears interest at a rate of 6.1% per annum, matures 10 years from the date hereof or such earlier date in accordance with the terms of the debenture and all interest payments made pursuant to the debenture are payable in cash by Universal Hemp. Subsequent to the quarter end September 30, 2023, Universal Hemp received a reservations of rights letter for failure to make the annual cash interest payment within 10 business days of September 23, 2023 (October 10, 2023). The parties agreed on November 14, 2023 to waive the default until March 29, 2024 and that the cash interest payment would be satisfied through a partial cash payment of $1,400 by year end 2023, an obligation of Universal Hemp to deliver proceeds from the sale of certain real property held by Universal Hemp and an agreement between the parties to offset potential future expenses that may be payable by Canopy Growth. The debenture is secured by substantially all of the assets of Universal Hemp and its subsidiaries and, further, is not convertible and is not guaranteed by Acreage.

With a portion of the proceeds for the 6.1% Loan received by Universal Hemp, Acreage engaged an Investment Advisor which, under the Investment Advisor’s sole discretion, invested on behalf of Universal Hemp $34,019 on September 28, 2020. As a result, Universal Hemp acquired 34,019 class B units, at $1.00 par value per unit, which represented 100% financial interest in the Investment Partnership, a Canada-based limited partnership. An affiliate of the Institutional Investor holds class A units of the Investment Partnership. The general partner of the Investment Partnership is also an affiliate of the Institutional Investor. 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. Upon execution of the limited partnership agreement, $1,019 was distributed to the class A unit holders of the Investment Partnership.
F-19
ACREAGE HOLDINGS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
7.50% Loan due April 2026
On September 28, 2020, the Company received gross proceeds of $33,000 (less transaction costs of approximately $959) from an affiliate of the Institutional Investor (the “Lender”) and used a portion of the proceeds of this loan to retire its short-term $11,000 convertible note (as described above) and its short-term note aggregating approximately $18,000 in October 2020, with the remainder being used for working capital purposes. The loan is unsecured, matures in 3 years and bears interest at a 7.5% annual interest rate. The Lender is controlled by the Institutional Investor. The Investment Partnership is the investor in the Lender. On December 16, 2021, the Company paid an amendment fee of $413 to extend the maturity date from September 28, 2023 to April 2, 2026. The amendment was treated as a debt extinguishment.

Note due December 2024

In November 2020, the Company issued a promissory note with a third party, which is non-interest bearing and payable based on a payment schedule with ten payments in the aggregate amount of $7,750 through December 31, 2024, as a result of a settlement described under the “CanWell Dispute” in Note 15.
Prime rate credit facilities due January 2026, as amended
On December 16, 2021, the Company entered into a $150,000 senior secured credit facility with a syndicate of lenders consisting of a $75,000 initial draw, a $25,000 delayed draw that must be advanced within 12 months and a $50,000 committed accordion facility that is available after December 1, 2022, provided certain financial covenants are met, and with a maturity of January 1, 2026. Upon closing, gross proceeds of $75,000 were drawn (before origination discounts and issuance costs of approximately $4,000 and $1,500, respectively, which were capitalized). In April 2022, the Company drew down on the $25,000 delayed draw. Refer to Note 16 for further discussion of the syndicated related party lender.

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

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

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

The facility has a maturity date of January 1, 2026 and the Company had the option to extend the maturity date to January 1, 2027 prior to January 1, 2024, for a fee equal to 1.0% of the total loan amount. If the Company chooses to extend the maturity date, it will also be required to make monthly installment payments, each of which shall be an amount equal to five percent per year of the outstanding amount of the loan. The Company did not exercise the option to extend the maturity date.

On April 20, 2024 and May 10, 2024, the Company received a notice of default letter on each date from the agents of the Prime rate credit facilities due January 2026, as amended, of the occurrence of certain events of default (the “Default Letters”). The Default Letter dated April 20, 2024 contains allegations that there have been three events of default with respect to the credit agreement and the agents and lenders reserved all rights, and that they were in the process of reviewing the appropriate course of action to be taken with respect to the identified events of default. On May 10, 2024, the Company received another default letter from the agents alleging an event of default for failure by the borrower to make a monthly interest payment due May 1, 2024. The Default Letters did not identify that there had been any exercise of rights or remedies available to the agents or lenders under Section 9.1 of the credit agreement. As of June 30, 2024, the Company remedied the notices of default by entering into the amended and restated credit agreement, see below.

On June 3, 2024, the Company entered into an amended and restated credit agreement (the “Amended and Restated Credit Agreement”) with a new syndicate of lenders, including a wholly owned subsidiary of Canopy Growth Corporation. The Amended and Restated Credit Agreement will continue to bear interest at a variable rate of Prime plus 5.75% per annum, payable monthly in arrears, with a Prime floor of 5.50% and a maturity date of January 1, 2026. The amendment was treated as
F-20
ACREAGE HOLDINGS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
a debt extinguishment and the Company recognized a loss of $5,680 to Other income (loss), net on the Unaudited Condensed Consolidated Statements of Operations during the three and six months ended June 30, 2024.

Amended and Restated Credit Agreement

On June 3, 2024, the Company, HSCP, as borrower, 11065220 Canada Inc., a wholly-owned subsidiary of Canopy Growth, VRT Agent and the loan parties thereto from time to time, entered into an amended and restated credit agreement. 11065220 Canada Inc. purchased all of the rights and interests of AFC Gamma, Inc. (“AFCG”), AFC Institutional Fund LLC (“AFCI” and together with AFCG, the “AFC Lenders”) under the Prime rate credit facilities due January 2026, as amended, for an aggregate amount equal to approximately $99,800. Further, this amendment allowed the Company to capitalize accrued obligations that existed before the amendment on June 3, 2024, including accrued interest, which brought the principal outstanding under this Facility to $143,287. The loan will continue to bear interest at a variable rate of U.S. prime (“Prime”) plus 5.75% per annum, payable monthly in arrears, with a Prime floor of 5.50%, and a maturity date of January 1, 2026. Under the terms of the amended and restated credit agreement, the maturity date may be extended from January 2026 to December 31, 2030, assuming the transaction with Canopy is consummated, among other things. Interest under the Amended and Restated Credit Agreement will be payable in cash or in kind, at the Company’s election, through November 30, 2024. The loan is secured by pledged equity interests and substantially all of the assets of the Company. Further, the loan is subject to various financial covenants, including (i) a fixed charge coverage ratio and two leverage ratios in respect of all periods beginning on or after December 31, 2024 and (ii) a minimum cash requirement of $3.0 million as of quarter end for all periods beginning on or after December 31, 2024.

ERTC Factoring Agreement
On April 11, 2023, the Company received $12,113 pursuant to a financing agreement with a third-party lender (the “Financing Agreement”), which was included in “Debt, current” as of June 30, 2023. The Company assigned to the lender its interests in Employee Retention Tax Credits (“ERTC”) that it submitted for a claim of approximately $14,251. If the Company does not receive the ERTC, in whole or in part, the Company is required to repay the related portion of the funds received plus 10% interest accrued from the date of the Financing Agreement through the repayment date. The Financing Agreement does not have a stated maturity date and the discount is being accreted to interest expense over an expected term. The Company’s obligations under the Financing Agreement will be satisfied upon receipt of the ERTC or other full repayment. Finally, the Company determined the ERTC did not meet the criteria to record as a receivable as of June 30, 2023 due to the uncertain nature of such claims.
During the year ended December 31, 2023, the Company received $10,472 of the ERTC claims which was remitted to the lender per the terms of the Financing Agreement, extinguishing an equal portion of the debt included in “Debt, current.”
Private Placement
On June 4, 2024, the Company entered into a Subscription agreement with ATB Securities (the “Agent”) and certain investors (“Holder” or “Investor”). Under the agreement, the Company issued 12,000 units (the “Units”) by way of a brokered private placement (the “Private placement”) at a price of $833.33 per Unit, for gross proceeds of $10,000. Each Unit consists of $1,000 principal amount of non-recourse unsecured convertible notes (the Convertible notes”) and Fixed Share purchase warrants (the “Warrants” or “Warrant liability”). Refer to Note 11 for further discussion regarding the Company’s Warrant liability.

The initial fair values of the Convertible notes and Warrant liability of $18,380, in the aggregate, exceeded the gross proceeds received of $10,000 by $8,380. As a result, the excess fair value over the proceeds is accounted for as a deemed dividend and recorded in Accumulated deficit, refer to Private placement dividend on the Unaudited Condensed Consolidated Statements of Shareholders Equity (Deficit).

F-21
ACREAGE HOLDINGS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
Convertible notes

The convertible notes consists of $1,000 principal amount, per unit, of non-recourse unsecured convertible notes reflecting a 16.67% original issue discount, and are convertible into that number of Class E subordinated voting shares of the Company at a set conversion price. The conversion price per fixed share is determined by multiplying i) the exchange ratio (as defined by the Fixed Share Arrangement Agreement) by ii) the fair market value of the common shares of Canopy on the business day prior to the closing of the Transactions. If the Transactions occur on or before the maturity date, which is 15 months from the issue date of June 4, 2024, the convertible note will automatically convert into Fixed Shares at the conversion price. If the Transactions do not occur before the maturity date, holders of the Units entered into a Put Agreement with Canopy USA, pursuant to which such investor will have the right to require Canopy USA to purchase the subscribed for Convertible Notes and the Warrants subscribed for. The Company elected the fair value option to account for the liability related to the convertible notes. Refer to Note 12 for further discussion.

11.    WARRANT LIABILITY
On June 4, 2024, the Company issued units by way of a private placement, with each unit consisting of convertible notes and fixed share purchase warrants. Refer to Note 10 for further discussion on the private placement and convertible notes.
The fixed share purchase warrants are each exercisable to acquire one Fixed Share at a set exercise price at any time on or before the expiration date of June 5, 2029. The exercise price is determined by multiplying i) the exchange ratio (as defined by the Fixed Share Arrangement Agreement) by ii) the fair market value of the Canopy shares on the business day prior to the close of the Transactions. In the event the Transactions do not occur prior to the expiration date of June 5, 2029, the Warrants will become void and the subscription rights will expire and terminate. Refer to Note 12 for further discussion. Further, liability accounting has been applied to the Warrants as the units issued are linked to Canopy’s publicly traded share price. Finally, the number of Fixed Shares issuable upon conversion of the Warrants remains unknown at this time; however, the completion of the Private Placement is expected to result in significant dilution of the Fixed Shares.
12.    FAIR VALUE
The following table summarize the Company’s financial assets and liabilities recorded at fair value:

June 30, 2024
Level 1Level 2Level 3NAVTotal
Assets
Cash and cash equivalents$9,999 $— $— $— $9,999 
Restricted cash66 — — — 66 
Long-term investments— — — 33,170 33,170 
Liabilities
Convertible notes$— $— $11,447 $— $11,447 
Warrant liability— — 7,020 — 7,020 
December 31, 2023
Level 1Level 2Level 3NAVTotal
Assets
Cash and cash equivalents$13,631 $— $— $— $13,631 
Restricted cash3,984 — — — 3,984 
Long-term investments