Acreage Announces Operational Updates, Executive Resignation, Suspension of Guidance and Termination of Proposed Deep Roots Acquisition
NEW YORK, April 03, 2020 (GLOBE NEWSWIRE) — Acreage Holdings, Inc. (“Acreage” or the “Company”) (CSE: ACRG.U) (OTCQX: ACRGF) (FSE: 0VZ) today announced a series of operational updates and strategic business decisions related to the significant impact of the COVID-19 pandemic and other uncontrollable factors that have greatly shifted the cannabis landscape. The moves are intended to enable the Company to maintain its business goals of profitability, conserve cash and to execute its strategic plan.
Acreage’s management executed the following initiatives:
- Temporarily furloughed 122 employees across both the corporate office and field operations teams
- Temporarily closed certain operations, including:
- one dispensary in each of Maryland and North Dakota
- wholesale operations in Iowa
- Form Factory operations in California, Oregon, and Washington
- Converted its dispensary in Queens, New York, to a delivery hub
- Terminated the securities purchase agreement among Greenleaf Compassionate Care Center, Inc., GCCC Management, LLC (“GCCCM”), the equity holders of GCCCM and High Street Capital Partners, LLC relating to the proposed acquisition of a dispensary in Rhode Island
Additionally, the merger agreement entered into with Deep Roots Medical, LLC, as described in the Company’s April 18, 2019 press release, was terminated due to the ongoing moratorium imposed by the Nevada Department of Taxation. The delay prevented the parties from obtaining the consents, approvals and authorizations necessary to consummate the merger prior to the outside date provided in the merger agreement.
Acreage also announced the resignation of Steve Hardardt, the Company’s Executive Vice President, Chief People Officer and Administration, effective immediately.
With the COVID-19 pandemic resulting in a virtual shutdown of significant parts of the United States that is expected to continue for at least the next month and possibly longer, continued construction and regulatory delays in Illinois, California, Massachusetts, Michigan and elsewhere, and in anticipation of a significant economic downturn that will have a yet-to-be-measured impact on the U.S. cannabis industry, the Company re-evaluated its business plan and determined its most prudent path toward profitability.
As a result of today’s decisions, the Company is suspending its previous 2020 financial targets. The company will provide a more detailed update on its first quarter earnings call tentatively scheduled for May 13, 2020.
Although we are facing difficult times, I remain optimistic about the U.S. cannabis industry and Acreage in particular. But as a result of the COVID-19 pandemic, we have made the very difficult decision to furlough several of our employees and close certain facilities while we navigate through the crisis.
Acreage Chair and Chief Executive Officer, Kevin Murphy
Additionally, we withdrew from certain agreements with Deep Roots and Greenleaf as circumstances have materially changed. These bold measures will help to ensure that we emerge from this very challenging situation stronger than ever before.
Headquartered in New York City, Acreage is one of the largest vertically integrated, multi-state operators of cannabis licenses and assets in the U.S., according to publicly available information. Acreage is dedicated to building and scaling operations to create a seamless, consumer-focused branded cannabis experience. Acreage debuted its national retail store brand, The Botanist in 2018 and its award-winning consumer brands, The Botanist and Live Resin Project in 2019.
On June 27, 2019 Acreage implemented an arrangement under section 288 of the Business Corporations Act (British Columbia) (the “Arrangement”) with Canopy Growth Corporation (“Canopy Growth”). Pursuant to the Arrangement, the Acreage articles were amended to provide Canopy Growth with an option to acquire all of the issued and outstanding shares in the capital of Acreage, with a requirement to do so, upon a change in federal laws in the United States to permit the general cultivation, distribution and possession of marijuana (as defined in the relevant legislation) or to remove the regulation of such activities from the federal laws of the United States (the “Triggering Event”), subject to the satisfaction of the conditions set out in the arrangement agreement entered into between Acreage and Canopy Growth on April 18, 2019, as amended on May 15, 2019 (the “Arrangement Agreement”). Acreage will continue to operate as a stand-alone entity and to conduct its business independently, subject to compliance with certain covenants contained in the Arrangement Agreement. Upon the occurrence or waiver of the Triggering Event, Canopy Growth will exercise the option and, subject to the satisfaction or waiver of certain conditions to closing set out in the Arrangement Agreement, acquire (the “Acquisition”) each of the Subordinate Voting Shares (following the automatic conversion of the Class B proportionate voting shares and Class C multiple voting shares of Acreage into Subordinate Voting Shares) in exchange for the payment of 0.5818 of a common share of Canopy Growth per Subordinate Voting Share (subject to adjustment in accordance with the terms of the Arrangement Agreement). If the Acquisition is completed, Canopy Growth will acquire all of the Acreage Shares, Acreage will become a wholly owned subsidiary of Canopy Growth and Canopy Growth will continue the operations of Canopy Growth and Acreage on a combined basis. For more information about the Arrangement and the Acquisition please see the respective information circulars of each of Acreage and Canopy Growth dated May 17, 2019, which are available on Canopy Growth’s and Acreage’s respective profiles on SEDAR at www.sedar.com. For additional information regarding Canopy Growth, please see Canopy Growth’s profile on SEDAR at www.sedar.com.