Acreage Holdings, Inc. (CSE: ACRG.U) (OTCQX: ACRGF) has hit the reset button as the company lays off 122 employees and kills the Deep Roots among other measures. The company blamed the COVID19 virus and other “uncontrollable factors.”
The company also said it was suspending its previous 2020 financial targets and 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,” said Acreage Chair and Chief Executive Officer, Kevin Murphy. “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. 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.”
Acreage recently took measures to raise more capital. On February 7, 2020, the company announced its entry into the Institutional Credit Agreement for a $100 million Institutional Credit Facility was established, with $49 million to be available in March 2020. On the same day, the company also announced its entry into non-binding letters
of intent pursuant to which a subsidiary of Acreage is proposing to enter into the Poppins Credit Agreement to provide cash collateral as security for the Institutional Credit Facility.
Acreage’s management took the following steps according to a company statement:
- 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, the equity holders of GCCCM and High Street Capital Partners, LLC relating to the proposed acquisition of a dispensary in Rhode Island
The merger agreement between Acreage and Deep Roots was announced back in April 2019 and valued at $120 million. The company said it was terminated “due to the ongoing moratorium imposed by the Nevada Department of Taxation.” Acreage said that 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. At the time Deep Roots sold and distributed its Deep Roots, Chillers, Bluebirds, and Helix Twist branded products, and other third-party brands, into nearly 80% of the retail dispensaries in Nevada, making it one of the most connected wholesale operations in the state.
Greenleaf Compassionate Care
The Greenleaf deal stretches back to 2018. According to the company’s MD&A from November 2019, Acreage “entered into a definitive agreement to acquire all ownership interests in GCCC Management, LLC, a management company overseeing the operations of Greenleaf Compassionate Care Center, Inc., a non-profit cultivation and processing facility in Rhode Island, for cash consideration of $10,000. The company is working to resolve regulatory items outstanding prior to closing the transaction.”
Within the 122 employees given pink slips, Acreage also announced the resignation of Steve Hardardt, the Company’s Executive Vice President, Chief People Officer, and Administration, effective immediately.
The company said in its statement, “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.”