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Section 1: 10-Q (10-Q)

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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 March 31, 2020

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, Canada
 
98-1463868
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
366 Madison Avenue, 11th 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 A Subordinate Voting Shares, no par value.

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
x
Smaller reporting company
 
 
Emerging growth company
                
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

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

As of June 25, 2020, there were 99,407,960 Subordinate Voting Shares, as converted, issued and outstanding.


 



























TABLE OF CONTENTS
Acreage Holdings, Inc.
Form 10-Q
For the Three Months Ended March 31, 2020
PART I
Financial Information.
 
 
 
 
Item 1.
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
 
 
 
 
PART II
Other Information.
 
 
 
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
 
 
 
 
 
 
 
 
 
 

Explanatory Note

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

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





ACREAGE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

PART I
Item 1. Financial Statements and Supplementary Data.
(in thousands)
March 31, 2020
 
December 31, 2019
 
(unaudited)
 
(audited)
ASSETS
 
 
 
Cash and cash equivalents
$
13,944

 
$
26,505

Restricted cash
22,095

 
95

Inventory
21,057

 
18,083

Notes receivable, current
2,123

 
2,146

Other current assets
8,903

 
8,506

Total current assets
68,122

 
55,335

Long-term investments
4,725

 
4,499

Notes receivable, non-current
101,713

 
79,479

Capital assets, net
116,693

 
106,047

Operating lease right-of-use assets
55,411

 
51,950

Intangible assets, net
155,490

 
285,972

Goodwill
28,867

 
105,757

Other non-current assets
2,708

 
2,638

Total non-current assets
465,607

 
636,342

TOTAL ASSETS
$
533,729

 
$
691,677

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
Accounts payable and accrued liabilities
$
31,641

 
$
32,459

Taxes payable
7,469

 
4,740

Interest payable
366

 
291

Operating lease liability, current
3,253

 
2,759

Debt, current
22,514

 
15,300

Other current liabilities
2,524

 
1,604

Total current liabilities
67,767

 
57,153

Debt, non-current
47,467

 
28,186

Operating lease liability, non-current
51,016

 
47,522

Deferred tax liability
32,303

 
63,997

Other liabilities
5

 
25

Total non-current liabilities
130,791

 
139,730

TOTAL LIABILITIES
198,558

 
196,883

Commitments and contingencies (Note 13)
 
 
 
Common stock, no par value (Note 11) - unlimited authorized, 97,430 and 90,646 issued and outstanding, respectively

 

Additional paid-in capital
671,738

 
615,678

Treasury stock, 842 SVS held in treasury
(21,054
)
 
(21,054
)
Accumulated deficit
(360,571
)
 
(188,617
)
Total Acreage Shareholders' equity
290,113

 
406,007

Non-controlling interests
45,058

 
88,787

TOTAL EQUITY
335,171

 
494,794

 
 
 
 
TOTAL LIABILITIES AND EQUITY
$
533,729

 
$
691,677


See accompanying notes to Unaudited Condensed Consolidated Financial Statements
3

ACREAGE HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 
 
Three Months Ended March 31,
(in thousands, except per share amounts)
 
2020
 
2019
REVENUE
 
 
 
 
Retail revenue, net
 
$
17,573

 
$
9,909

Wholesale revenue, net
 
6,548

 
2,815

Other revenue, net
 
104

 
173

Total revenues, net
 
24,225

 
12,897

Cost of goods sold, retail
 
(10,889
)
 
(5,881
)
Cost of goods sold, wholesale
 
(3,382
)
 
(1,696
)
Total cost of goods sold
 
(14,271
)
 
(7,577
)
Gross profit
 
9,954

 
5,320

 
 
 
 
 
OPERATING EXPENSES
 
 
 
 
General and administrative
 
13,032

 
10,158

Compensation expense
 
14,477

 
6,489

Equity-based compensation expense
 
34,737

 
18,977

Marketing
 
987

 
801

Loss on impairment
 
187,775

 

Loss on notes receivable
 
8,161

 

Depreciation and amortization
 
2,067

 
908

Total operating expenses
 
261,236

 
37,333

 
 
 
 
 
Net operating loss
 
$
(251,282
)
 
$
(32,013
)
 
 
 
 
 
Income from investments, net
 
234

 
2,727

Interest income from loans receivable
 
1,647

 
730

Interest expense
 
(1,226
)
 
(118
)
Other (loss) income, net
 
(174
)
 
92

Total other income
 
481

 
3,431

 
 
 
 
 
Loss before income taxes
 
$
(250,801
)
 
$
(28,582
)
 
 
 
 
 
Income tax benefit (expense)
 
28,572

 
(2,222
)
 
 
 
 
 
Net loss
 
$
(222,229
)
 
$
(30,804
)
 
 
 
 
 
Less: net loss attributable to non-controlling interests
 
(50,275
)
 
(7,427
)
 
 
 
 
 
Net loss attributable to Acreage Holdings, Inc.
 
$
(171,954
)
 
$
(23,377
)
 
 
 
 
 
Net loss per share attributable to Acreage Holdings, Inc. - basic and diluted:
 
$
(1.85
)
 
$
(0.29
)
 
 
 
 
 
Weighted average shares outstanding - basic and diluted
 
92,902

 
79,440



See accompanying notes to Unaudited Condensed Consolidated Financial Statements
4

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

 
 
 
 
 
 
Attributable to shareholders of the parent
 
 
 
 
(in thousands)
 
LLC Membership Units
 
Pubco Shares (as converted)
 
Share Capital
 
Treasury Stock
 
Accumulated Deficit
 
Shareholders’ Equity
 
Non-controlling Interests
 
Total Equity
December 31, 2018
 

 
79,164

 
$
414,757

 
$
(21,054
)
 
$
(38,349
)
 
$
355,354

 
$
130,922

 
$
486,276

Issuances for business acquisitions/purchases of intangible assets
 

 
211

 
3,948

 

 

 
3,948

 
4,000

 
7,948

NCI adjustments for changes in ownership
 

 
643

 
3,640

 

 

 
3,640

 
(3,640
)
 

Other equity transactions
 

 
12

 
264

 

 

 
264

 

 
264

Equity-based compensation expense and related issuances
 

 
190

 
16,187

 

 

 
16,187

 

 
16,187

Net loss
 

 

 

 

 
(23,377
)
 
(23,377
)
 
(7,427
)
 
(30,804
)
March 31, 2019
 

 
80,220

 
$
438,796

 
$
(21,054
)
 
$
(61,726
)
 
$
356,016

 
$
123,855

 
$
479,871

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2019
 

 
90,646

 
$
615,678

 
$
(21,054
)
 
$
(188,617
)
 
$
406,007

 
$
88,787

 
$
494,794

Issuances for private placement
 

 
6,085

 
27,887

 

 

 
27,887

 

 
27,887

NCI adjustments for changes in ownership
 

 
113

 
(6,564
)
 

 

 
(6,564
)
 
6,564

 

Capital distributions, net
 

 

 

 

 

 

 
(18
)
 
(18
)
Equity-based compensation expense and related issuances
 

 
586

 
34,737

 

 

 
34,737

 

 
34,737

Net loss
 

 

 

 

 
(171,954
)
 
(171,954
)
 
(50,275
)
 
(222,229
)
March 31, 2020
 

 
97,430

 
$
671,738

 
$
(21,054
)
 
$
(360,571
)
 
$
290,113

 
$
45,058

 
$
335,171


See accompanying notes to Unaudited Condensed Consolidated Financial Statements
5

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

 
 
Three Months Ended March 31,
(in thousands)
 
2020
 
2019
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
Net loss
 
$
(222,229
)
 
$
(30,804
)
Adjustments for:
 
 
 
 
Depreciation and amortization
 
2,067

 
908

Equity-settled expenses, including compensation
 
34,737

 
18,977

Loss on impairment
 
187,775

 

Loss on notes receivable
 
8,161

 

Non-cash interest expense
 
319

 

Non-cash operating lease expense
 
527

 
434

Deferred tax (benefit) expense
 
(31,694
)
 
409

Non-cash income from investments, net
 
(234
)
 
(2,182
)
Change, net of acquisitions in:
 
 
 
 
Inventory
 
(2,374
)
 
(1,694
)
Other assets
 
(835
)
 
(505
)
Interest receivable
 
882

 
(1,153
)
Accounts payable and accrued liabilities
 
(5,226
)
 
559

Taxes payable
 
2,729

 
1,538

Interest payable
 
29

 
(248
)
Other liabilities
 
(35
)
 
131

Net cash used in operating activities
 
$
(25,401
)
 
$
(13,630
)
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
Purchases of capital assets
 
$
(7,790
)
 
$
(8,288
)
Investments in notes receivable
 
(11,560
)
 
(8,629
)
Collection of notes receivable
 
23

 
2,835

Proceeds from sale of capital assets
 

 
162

Business acquisitions, net of cash acquired
 

 
(20,770
)
Purchases of intangible assets
 

 
(56,497
)
Deferred acquisition costs and deposits
 

 
(300
)
Distributions from investments
 
8

 

Proceeds from purchase of short-term investments
 

 
74,768

Net cash used in investing activities
 
$
(19,319
)
 
$
(16,719
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
Proceeds from related party debt

5,000



Repayment of related party loan
 
(20,000
)
 

Proceeds from financing
 
21,000

 

Deferred financing costs paid
 
(1,531
)
 

Proceeds from issuance of private placement units, net
 
27,887

 

Collateral received from financing agreement
 
22,000

 

Settlement of taxes withheld
 

 
(2,790
)
Repayment of debt
 
(197
)
 
(7,621
)
Net cash provided by (used in) financing activities
 
$
54,159

 
$
(10,411
)
Net increase (decrease) in cash, cash equivalents and restricted cash
 
$
9,439

 
$
(40,760
)
Cash, cash equivalents and restricted cash - Beginning of period
 
26,600

 
105,038

Cash, cash equivalents and restricted cash - End of period
 
$
36,039

 
$
64,278


See accompanying notes to Unaudited Condensed Consolidated Financial Statements
6

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

 
 
Three Months Ended March 31,
(in thousands)
 
2020
 
2019
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 
 
 
 
Interest paid - non-lease
 
$
2

 
$
354

Income taxes paid
 
525

 
273

OTHER NON-CASH INVESTING AND FINANCING ACTIVITIES:
 
 
 
 
Capital assets not yet paid for
 
$
4,377

 
$
380

Issuance of Class D units for land
 

 
264

Exchange of intangible assets to notes receivable (Note 4)
 
18,800

 

Holdback of Maine HSCP notes receivable (Note 6)

917



Capital assets not yet received



380




See accompanying notes to Unaudited Condensed Consolidated Financial Statements
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”) was originally incorporated under the Business Corporations Act (Ontario) on July 12, 1989 as Applied Inventions Management Inc. On August 29, 2014, the Company changed its name to Applied Inventions Management Corp. The Company continued into British Columbia and changed its name to Acreage Holdings, Inc. on November 9, 2018. The Company’s Subordinate Voting Shares are listed on the Canadian Securities Exchange under the symbol “ACRG.U”, quoted on the OTCQX under the symbol “ACRGF” and traded on the Frankfurt Stock Exchange under the symbol “0VZ”. The Company owns, operates and has contractual relationships with cannabis cultivation facilities, dispensaries and other cannabis-related companies across the United States (“U.S.”).
High Street Capital Partners, LLC, a Delaware limited liability company doing business as Acreage Holdings (“HSCP”), was formed on April 29, 2014. The Company became the indirect parent of HSCP on November 14, 2018 in connection with a reverse takeover (“RTO”) transaction described below.
The Company’s corporate office and principal place of business is located at 366 Madison Avenue, 11th 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 combination agreement (the “Agreement”) whereby the parties 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 Agreement completed the RTO. The RTO transaction is described in detail in Note 1 to the Consolidated Financial Statements of the Company in the Company’s Annual Report on Form 10-K, filed with the SEC on May 29, 2020.
Canopy Growth Corporation transaction

On June 27, 2019, the Company and Canopy Growth Corporation (“Canopy Growth” or “CGC”) completed the transactions contemplated by the arrangement agreement dated April 18, 2019, as amended May 15, 2019, between Canopy Growth and Acreage. Canopy Growth was granted an option to acquire all outstanding shares of the Company, with a requirement to do so upon the occurrence of the occurrence of changes in U.S. federal law to permit the general cultivation, distribution, and possession of marijuana (the “Arrangement”).
On June 24, 2020, Canopy Growth and the Company entered into an agreement to amend the terms of the Arrangement. Please refer to Note 13 for further discussion.
COVID-19

In December 2019, a novel strain of coronavirus (“COVID-19”) emerged in Wuhan, China. Since then, it has spread to several other countries and infections have been reported around the world. On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic.

In response to the outbreak, governmental authorities in the United States, Canada and internationally have introduced various recommendations and measures to try to limit the pandemic, including travel restrictions, border closures, non-essential business closures, quarantines, self-isolations, shelters-in-place and social distancing. The COVID-19 outbreak and the response of governmental authorities to try to limit it are having a significant impact on the private sector and individuals, including unprecedented business, employment and economic disruptions. The continued spread of COVID-19 in the United States, Canada and globally could have an adverse impact on our business, operations and financial results, including through disruptions in our cultivation and processing activities, supply chains and sales channels, as well as a deterioration of general economic conditions including a possible national or global recession. Shelter-in-place orders and social distancing practices designed to limit the spread of COVID-19 may affect our retail business. Due to the speed with which the COVID-19 situation is developing and the uncertainty of its magnitude, outcome and duration, it is not possible to estimate its impact on our business, operations or financial results; however, the impact could be material.


8

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

2.    SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation and going concern

The Unaudited Condensed Consolidated Financial Statements of Acreage have been prepared in accordance with United States (“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, 2020.

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

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

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

Use of estimates

The preparation of the Company’s Unaudited Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the amounts that are reported in the Unaudited Condensed Consolidated Financial Statements and accompanying disclosures. Although these estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future, actual results may differ from those estimates. Significant estimates inherent in the preparation of the accompanying Unaudited Condensed Consolidated Financial Statements include the fair value of assets acquired and liabilities assumed in business combinations, assumptions relating to equity-based compensation expense, estimated useful lives for property, plant and equipment and intangible assets, the valuation allowance against deferred tax assets and the assessment of potential impairment charges on goodwill, intangible assets and investments in equity and notes receivable.
These interim Unaudited Condensed Consolidated Financial Statements and notes thereto should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 as filed with the Securities and Exchange Commission on May 29, 2020 (the “2019 Form 10-K”).
Emerging growth company

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

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

9

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

Basis of consolidation

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

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

Impairment of long-lived assets

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

Accounting for warrants

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

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

Net loss per share

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

10

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

Accounting Pronouncements Recently Adopted
As of December 2019, the Company early adopted ASU 2017-04 - Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). The objective of ASU 2017-04 is to simplify how an entity is required to test goodwill for impairment. Under previous GAAP, entities were required to test goodwill for impairment using a two-step approach. Under the amendments in ASU 2017-04, an entity performs its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. The adoption of ASU 2017-04 did not have an effect on the Company’s Financial Statements.
Accounting Pronouncements Not Yet Adopted
In June 2016, the FASB issued ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which was subsequently revised by ASU 2018-19. The ASU introduces a new model for assessing impairment on most financial assets. Entities will be required to use a forward-looking expected loss model, which will replace the current incurred loss model, which will result in earlier recognition of allowance for losses. The ASU will be effective for the Company’s first interim period of fiscal 2023, and the Company is currently evaluating the impact of the new standard.


11

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

3.    ACQUISITIONS
During the three months ended March 31, 2020, the Company did not complete any business combinations.

During the three months ended March 31, 2019, the Company completed the following business combinations, and has allocated each purchase price as follows:
Purchase Price Allocation
 
Thames Valley
(1)
 
NCC
(2)
 
Total
Assets acquired:
 
 
 
 
 
 
Cash and cash equivalents
 
$
106


$
696

 
$
802

Inventory
 
39


170

 
209

Other current assets
 
1


36

 
37

Capital assets, net
 


539

 
539

Goodwill
 
3,596


4,192

 
7,788

Intangible assets - cannabis licenses
 
14,850


2,500

 
17,350

Other non-current assets
 


25

 
25

Liabilities assumed:
 
 
 
 
 
 
Accounts payable and accrued liabilities
 
(121
)

(24
)
 
(145
)
Other current liabilities
 


(621
)
 
(621
)
Deferred tax liability
 
(3,399
)

(461
)
 
(3,860
)
Other liabilities
 


(175
)
 
(175
)
Fair value of net assets acquired
 
$
15,072

 
$
6,877

 
$
21,949

 
 
 
 
 
 
 
Consideration paid:
 
 
 
 
 
 
Cash
 
15,072

 

 
15,072

Deferred acquisition costs and deposits
 

 
100

 
100

Subordinate Voting Shares
 

 
3,948

 
3,948

Settlement of pre-existing relationship
 

 
830

 
830

Fair value of previously held interest
 

 
1,999

 
1,999

Total consideration
 
$
15,072

 
$
6,877

 
$
21,949

 
 
 
 
 
 
 
Subordinate Voting Shares issued
 

 
211

 
211


The operating results of the above acquisitions were not material to the periods presented.
(1) On January 29, 2019, the Company acquired 100% of Thames Valley Apothecary, LLC (“Thames Valley”), a dispensary license holder in Connecticut.
(2) On March 4, 2019, the Company acquired the remaining 70% ownership interest in NCC LLC (“NCC”), a dispensary license holder in Illinois. The market price used in valuing SVS issued was $18.70. As a result of this acquisition, the previously held interest in NCC was re-measured, resulting in a gain of $999, which was recorded in Income from investments, net in the Statements of Operations during the three months ended March 31, 2019.
Deferred acquisition costs and deposits

The Company makes advance payments to certain acquisition targets for which the transfer is pending certain regulatory approvals prior to the acquisition date.

12

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

As of March 31, 2020 and December 31, 2019, the Company had no deferred acquisition costs outstanding.


4.    INTANGIBLE ASSETS AND GOODWILL
Intangible assets
The following table details our intangible asset balances by major asset classes:
Intangibles
 
March 31, 2020
 
December 31, 2019
Finite-lived intangible assets:
 
 
 
 
Management contracts
 
$
19,580

 
$
52,438

Customer relationships
 

 
4,600

Developed technology
 

 
3,100

 
 
19,580

 
60,138

Accumulated amortization on finite-lived intangible assets:
 
 
 
 
Management contracts
 
(3,639
)
 
(5,750
)
Customer relationships
 

 
(649
)
Developed technology
 

 
(114
)
 
 
(3,639
)
 
(6,513
)
Finite-lived intangible assets, net
 
15,941

 
53,625

 
 
 
 
 
Indefinite-lived intangible assets
 
 
 
 
Cannabis licenses
 
139,549

 
232,347

 
 
 
 
 
Total intangibles, net
 
$
155,490

 
$
285,972


The average useful life of finite-lived intangible assets ranges from six to nine years.

Impairment of intangible assets

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

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

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

These impairments resulted in the recognition of a tax provision benefit and an associated reversal of deferred tax liabilities of $31,316 for the three months ended March 31, 2020.

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

13

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

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

WCM Refinancing

On March 6, 2020, the Company closed on a refinancing, transaction and conversion related to Northeast Patients Group, operating as Wellness Connection of Maine (“WCM”), a medical cannabis business in Maine, resulting in ownership of WCM by three individuals. In connection with the transaction, WCM converted from a non-profit corporation to a for-profit corporation. Refer to Note 6 for further details. Concurrently, a portion of the management contract was converted into a promissory note of $18,800 in Notes receivable, non-current on the Statements of Financial Position in exchange for the previously held management contract. An impairment was determined as the differential between the net carrying value of the previously held management contract and the promissory note received in exchange. This resulted in an impairment loss to finite-lived intangible assets of $9,395 in Loss on impairment on the Statements of Operations.
Amortization expense recorded during the three months ended March 31, 2020 and 2019 was $1,165 and $661, respectively.
Expected annual amortization expense for existing intangible assets subject to amortization at March 31, 2020 is as follows for each of the next five fiscal years:
Amortization of Intangibles
 
2020
 
2021
 
2022
 
2023
 
2024
Amortization expense
 
$
1,623

 
$
2,164

 
$
2,164

 
$
2,164

 
$
2,164


Goodwill
The following table details the changes in the carrying amount of goodwill:
Goodwill
 
Total
December 31, 2019
 
$
105,757

Acquisitions
 

Impairment
 
(76,890
)
March 31, 2020
 
$
28,867


Also as a result of the recent global economic impact and uncertainty due to the COVID-19 pandemic, the Company concluded a triggering event had occurred as of March 31, 2020, and accordingly, performed interim impairment testing.
During the three months ended March 31, 2020 and 2019, the Company recognized impairment charges of $65,304 and nil, respectively, with respect to its goodwill related to Form Factory. The Company applied the DCF approach to determine the fair value of Form Factory. The charge is recognized in Loss on impairment on the Statements of Operations.

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



14

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

5.    INVESTMENTS
The carrying values of the Company’s investments in the Statements of Financial Position as of March 31, 2020 and December 31, 2019 are as follows:
Investments
 
March 31, 2020
 
December 31, 2019
Investments held at FV-NI
 
4,607

 
4,376

Equity method investments
 
118

 
123

Total long-term investments
 
$
4,725

 
$
4,499


Income from investments, net in the Statements of Operations during the three months ended March 31, 2020 and 2019 is as follows:
Investment income
 
Three Months Ended March 31,
 
 
2020
 
2019
Short-term investments
 
$

 
$
500

Investments held at FV-NI
 
240

 
1,203

Equity method investments
 
(6
)
 
1,024

Income from investments, net
 
$
234

 
$
2,727


Short-term investments

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

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

The Company accounts for investments in which it can exert significant influence but does not control as equity method investments. As of March 31, 2020 and December 31, 2019, the Company’s equity method investments were not deemed significant to the Company’s Financial Statements and as such, additional disclosure is omitted.

6.     NOTES RECEIVABLE

Notes receivable as of March 31, 2020 and December 31, 2019 consisted of the following:
 
 
March 31, 2020
 
December 31, 2019
Notes receivable
 
$
99,105

 
$
75,851

Interest receivable
 
4,731

 
5,774

Total notes receivable
 
$
103,836

 
$
81,625

Less: Notes receivable, current
 
2,123

 
2,146

Notes receivable, non-current
 
$
101,713

 
$
79,479


Interest income on notes receivable during the three months ended March 31, 2020 and 2019 totaled $1,647 and $730, respectively.
On March 6, 2020, the Company closed on a refinancing, transaction and conversion related to Northeast Patients Group, operating as WCM, a medical cannabis business in Maine, resulting in ownership of WCM by three individuals. In connection with the transaction, WCM converted from a non-profit corporation to a for-profit corporation. WCM previously had a series of agreements with Wellness Pain & Management Connection LLC (“WPMC”), which resulted in an outstanding balance of $18,800 due to

15

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

WPMC as of closing of this transaction. A restated consulting agreement was put in place, whereby WCM agrees to pay a fixed annual fee of $120, payable monthly, in exchange for a suite of consulting services. In addition, a promissory note payable to WPMC was signed in the amount of $18,800 to convert the existing payment due into a fixed, secured debt obligation.
In order to fund the transaction of WCM, the Company created a new Maine corporation, named Maine HSCP, Inc. (“Maine HSCP”). At closing, the Company contributed $5,700 to Maine HSCP, and then sold 900 shares of Maine HSCP, constituting all of the outstanding equity interests of Maine HSCP, to three qualifying individuals in exchange for promissory notes of $1,900 each. Each note is secured by a pledge of the shares in Maine HSCP, and payment of the note is to be made solely from dividends paid to the shareholder by Maine HSCP, except for amounts to be paid to the shareholder to cover tax obligations. As of March 31, 2020, the Company recorded a holdback reserve of $917 for the State of Maine as a result of finalization of valuation by the State. The Company has the option, exercisable at any time, to buy back the shares, at the higher of fair market value or the remaining balance under the promissory notes. The individuals also have the right at any time to put the shares to the Company on the same terms. The net equity impact to the Company was nil, and the option described above is only redeemable if permissible pursuant to Maine regulations.
On July 1, 2019, the Company entered into $8,000 convertible note receivable with a west coast social equity program. Upon certain conditions related to a subsequent capital raise, the Company will obtain the right to convert its financing receivable to an ownership interest. The line of credit matures in June 2022 and bears interest at a rate of 8% per annum.
During the three months ended March 31, 2020, the Company wrote off the note receivable and the accrued interest of $8,000 and $161, respectively, as the Company determined that the note was not collectible and recorded a loss on notes receivable of $8,161.
The Company provides revolving lines of credit to several entities under management services agreements which are included in notes receivable. The relevant terms and balances are detailed below.
Lines of Credit
 
 
 
 
 
Balance as of
Counterparty
 
Maximum Obligation
 
Interest Rate
 
March 31, 2020
 
December 31, 2019
Greenleaf (1)
 
$
29,286

 
3.25% - 4.75%
 
$
27,277

 
$
22,569

CWG Botanicals, Inc. ("CWG") (2)
 
12,000

 
8%
 
9,466

 
9,152

Compassionate Care Foundation, Inc. (“CCF”) (3)
 
12,500

 
18%
 
7,952

 
7,152

Prime Alternative Treatment Center, Inc. ("PATC") (4)
 
4,650

 
15%
 
4,650

 
4,650

Patient Centric of Martha’s Vineyard, Ltd. (“PCMV”) (5)
 
9,000

 
15%
 
6,209

 
5,758

Health Circle, Inc. (6)
 
8,000

 
15%
 
4,331

 
3,988

Total
 
$
75,436

 
 
 
$
59,885

 
$
53,269


(1) During the year ended December 31, 2018, the Company extended lines of credit to Greenleaf Apothecaries, LLC, Greenleaf Therapeutics, LLC and Greenleaf Gardens, LLC (together “Greenleaf”), which mature in June 2023.
(2) The revolving line of credit due from CWG matures in December 2021.
(3) In September 2018, the Company entered into a management agreement to provide certain advisory and consulting services to Compassionate Care Foundation, Inc. (“CCF”) for a monthly fee based on product sales. Upon certain changes in New Jersey state laws to allow for-profit entities to hold cannabis licenses and certain regulatory approvals, the management agreement will terminate and any outstanding obligations on the line of credit will convert to a direct ownership interest in CCF, which will convert to a for-profit entity.
On November 15, 2019, as a result of changes to state laws as described above, Acreage entered into a Reorganization Agreement with CCF, pursuant to which Acreage will acquire 100% of the equity interests in CCF’s successor entity, pending state approval. The outstanding amounts receivable under the line of credit will convert to 54% ownership, and the Company will pay $10,000 for the remaining 46%. On June 26, 2020, the transactions contemplated by the Reorganization Agreement closed and the line of credit converted into equity in CCF’s successor entity as described in the prior sentence. Please see Note 17 for additional details.
(4) Prime Alternative Treatment Center, Inc. (“PATC”) is a non-profit license holder in New Hampshire to which the Company’s consolidated subsidiary PATCC provides management or other consulting services. The line of credit matures in August 2022.

16

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

(5) In November 2018, the Company entered into a services agreement with Patient Centric of Martha’s Vineyard, Ltd. (“PCMV”). The line of credit matures in November 2023. The services agreement was terminated in February 2020.
(6) Health Circle, Inc. is a non-profit license holder in Massachusetts that formerly had a services agreement with the Company’s consolidated subsidiary MA RMDS. The line of credit matures in November 2032. The services agreement was terminated in February 2020.

7.    CAPITAL ASSETS, net
Net property and equipment consisted of:
 
 
March 31, 2020
 
December 31, 2019
Land
 
$
11,611

 
$
9,839

Building
 
37,516

 
34,522

Right-of-use asset, finance leases
 
5,980

 
5,954

Construction in progress
 
17,125

 
17,288

Furniture, fixtures and equipment
 
27,897

 
21,019

Leasehold improvements
 
23,240

 
22,682

Capital assets, gross
 
$
123,369

 
$
111,304

Less: accumulated depreciation
 
(6,676
)
 
(5,257
)
Capital assets, net
 
$
116,693

 
$
106,047


Depreciation of capital assets for the three months ended March 31, 2020 and 2019 include $902 and $247 of depreciation expense, and $600 and $410, that was capitalized to inventory, respectively.

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 and the production and sale of cannabis products. Leases with an initial term of 12 months or less are not recorded on the Statements of Financial Position and are expensed in the 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.
Balance Sheet Information
 
Classification
 
March 31, 2020
 
December 31, 2019
Right-of-use assets
 
 
 
 
 
 
Operating
 
Operating lease right-of-use assets
 
$
55,411

 
$
51,950

Finance
 
Capital assets, net
 
5,764

 
5,832

Total right-of-use assets
 
 
 
$
61,175

 
$
57,782

 
 
 
 
 
 
 
Lease liabilities
 
 
 
 
 
 
Current
 
 
 
 
 
 
Operating
 
Operating lease liability, current
 
$
3,253

 
$
2,759

Financing
 
Debt, current
 
74

 
49

Non-current
 
 
 
 
 

Operating
 
Operating lease liability, non-current
 
51,016

 
47,522

Financing
 
Debt, non-current
 
5,932

 
6,083

Total lease liabilities
 
 
 
$
60,275

 
$
56,413

 
 
 
 
 
 
 
Statement of Operations Information
 
Classification
 
Three Months Ended
March 31, 2020
 
Three Months Ended March 31, 2019
Short-term lease expense
 
General and administrative
 
$
317

 
$
298

Operating lease expense
 
General and administrative
 
2,020

 
956

Finance lease expense:
 
 
 
 
 

Amortization of right of use asset
 
Depreciation and amortization
 
95

 
2

Interest expense on lease liabilities
 
Interest expense
 
215

 
12

Sublease income
 
Other (loss) income, net
 
(16
)
 
(43
)
Net lease cost
 
 
 
$
2,314

 
$
927

 
 
 
 
 
 
 
Statement of Cash Flows Information
 
Classification
 
Three Months Ended
March 31, 2020
 
Three Months Ended March 31, 2019
Cash paid for operating leases
 
Net cash used in operating activities
 
1,493

 
522

Cash paid for finance leases - interest
 
Net cash used in operating activities
 
196

 
12



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 March 31, 2020:
Maturity of lease liabilities
 
Operating Leases
 
Finance Leases
2020
 
$
6,414

 
$
652

2021
 
8,629

 
873

2022
 
8,484

 
893

2023
 
8,310

 
914

2024
 
8,030

 
936

Thereafter
 
53,986

 
18,740

Total lease payments
 
$
93,853


$
23,008

Less: imputed interest
 
39,584

 
17,002

Present value of lease liabilities
 
$
54,269

 
$
6,006

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

As of March 31, 2020, there have been no leases entered into that have not yet commenced.


9.    INVENTORY
 
 
March 31, 2020
 
December 31, 2019
Retail inventory
 
$
2,103

 
$
1,784

Wholesale inventory
 
13,816

 
11,993

Cultivation inventory
 
3,235

 
3,021

Supplies & other
 
1,903

 
1,285

Total
 
$
21,057

 
$
18,083



10.    DEBT
The Company’s debt balances consist of the following:
Debt balances
March 31, 2020
 
December 31, 2019
NCCRE loan
$
487

 
$
492

Seller’s notes
2,744

 
2,810

Related party debt

 
15,000

Financing liability
19,052

 
19,052

Finance lease liabilities
6,006

 
6,132

SAF loan
19,438

 

SAF loan collateral (related party)
22,254

 

Total debt
$
69,981

 
$
43,486

Less: current portion of debt
22,514

 
15,300

 
 
 
 
Total long-term debt
$
47,467

 
$
28,186


19

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

The interest expense related to the Company’s debt during the three months ended March 31, 2020 and 2019 consists of the following:
Interest Expense
 
Three Months Ended March 31,
 
 
2020
 
2019
NCCRE loan
 
5

 
5

Seller’s notes
 
72

 
101

Interest expense on financing liability
 
591

 

Interest expense on finance lease liability
 
215

 
12

Interest expense on SAF loan
 
89

 

Interest expense on SAF loan collateral (related party)
 
254

 

Total interest expense
 
$
1,226

 
$
118


NCC Real Estate, LLC (“NCCRE”) loan

NCCRE, which is owned by the Company’s consolidated subsidiary HSC Solutions, LLC, entered into a $550 secured loan with a financial institution for the purchase of a building in Rolling Meadows, Illinois in December 2016. The building is leased to NCC. The promissory note payable carries a fixed interest rate of 3.7% and is due in December 2021.
Seller’s notes

The Company issued Sell