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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended March 31, 2023


☐	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: 000-56294

COLUMBIA CARE INC.

(Exact Name of Registrant as Specified in its Charter)


British Columbia	98-1488978
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
680 Fifth Ave., 24th Floor New York, New York	10019
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (212) 634-7100

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

Title of each class

Trading
Symbol(s)

Name of each exchange on which registered

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 ☒ No ☐

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 ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.

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 Exchange Act). Yes ☐ No ☒

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No ☐

As of May 11, 2023, there were 406,779,180 shares of common stock, no par value per share (the “Common Shares”), outstanding.

Table of Contents


		Page
FORWARD-LOOKING STATEMENTS		2
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss	4
	Condensed Consolidated Statements of Changes in Equity	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	25
PART II.	OTHER INFORMATION	26
Item 1.	Legal Proceedings	26
Item 1A.	Risk Factors	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3.	Defaults Upon Senior Securities	26
Item 4.	Mine Safety Disclosures	26
Item 5.	Other Information	26
Item 6.	Exhibits	26
Signatures		28

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” regarding Columbia Care Inc. and its subsidiaries (collectively referred to as “Columbia Care,” “we,” “us,” “our,” or the “Company”). We make forward-looking statements related to future expectations, estimates, and projections that are uncertain and often contain words such as, but not limited to, “may”, “would”, “could”, “should”, “will”, “intend”, “plan”, “anticipate”, “believe”, “estimate”, “expect” or other similar words or phrases. These statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties, and assumptions that are difficult to predict. Particular risks and uncertainties that could cause our actual results to be materially different from those expressed in our forward-looking statements include those listed below:

•

the satisfaction of the conditions precedent to the closing of the Cresco Transaction (as defined herein);

•

the receipt of any necessary regulatory approvals in connection with the Cresco Transaction (as defined herein);

•

the impact of the Cresco Transaction (as defined herein) on the Company’s current and future operations, financial condition and prospects;

•

the value of the Cresco Labs Shares (as defined herein);

•

the costs of the Cresco Transaction (as defined herein) and potential payment of a termination fee in connection with the Cresco Transaction (as defined herein);

•

the ability to successfully integrate with the operations of Cresco Labs (as defined herein) and realize the expected benefits of the Cresco Transaction (as defined herein);

•

the fact that marijuana remains illegal under federal law;

•

the application of anti-money laundering laws and regulations to the Company;

•

legal, regulatory, or political change to the cannabis industry;

•

access to the services of banks for the Company, Cresco Labs or buyers of divestiture assets in relation to the Cresco Transaction (as defined herein);

•

the ability to complete divestitures in connection with the Cresco Transaction, including the closing of the Combs Transaction (as defined herein);

•

access to public and private capital;

•

unfavorable publicity or consumer perception of the cannabis industry;

•

expansion to the adult-use markets;

•

the impact of laws, regulations, and guidelines;

•

the impact of Section 280E of the Internal Revenue Code;

•

the impact of state laws pertaining to the cannabis industry;

•

the Company’s reliance on key inputs, suppliers and skilled labor;

•

the difficulty of forecasting the Company’s sales;

•

constraints on marketing products;

•

potential cyber-attacks and security breaches;

•

net operating loss and other tax attribute limitations;

•

the impact of changes in tax laws;

•

the volatility of the market price of the Common Shares;

•

reliance on management;

•

litigation;

•

future results and financial projections; and

•

the impact of global financial conditions

The list of factors above is illustrative and by no means exhaustive. Additional information regarding these risks and other risks and uncertainties we face is contained in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2022. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated, or intended.

We urge readers to consider these risks and uncertainties in evaluating our forward-looking statements. We caution readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

COLUMBIA CARE INC.

CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS

(Unaudited)

(Expressed in thousands of U.S. dollars, except share data)


	March 31, 2023			December 31, 2022
Assets
Current assets:
Cash	$	40,159		$	48,154
Accounts receivable, net of allowances of $2,642 and, $2,504, respectively		12,250			10,087
Inventory		132,624			127,905
Prepaid expenses and other current assets		24,339			21,942
Assets held for sale		29,107			29,089
Total current assets		238,479			237,177

Property and equipment, net		348,581			357,993
Right of use assets - operating leases, net		168,370			174,472
Right of use assets - finance leases, net		42,381			45,423
Goodwill		19,274			19,274
Intangible assets, net		140,461			145,265
Other non-current assets		15,475			15,122
Total assets	$	973,021		$	994,726

Liabilities and Equity
Current liabilities:
Accounts payable	$	29,917		$	23,775
Accrued expenses and other current liabilities		58,130			64,574
Income tax payable		42,628			33,961
Current portion of lease liability - operating leases		7,342			6,762
Current portion of lease liability - finance leases		6,572			6,552
Current portion of long-term debt, net		7,595			47,315
Liabilities held for sale		20,179			20,179
Total current liabilities	$	172,363		$	203,118

Long-term debt, net		323,147			281,705
Deferred taxes		3,774			2,903
Long-term lease liability - operating leases		168,309			174,312
Long-term lease liability - finance leases		48,603			50,586
Derivative liability		265			235
Other long-term liabilities		75,235			74,964
Total liabilities		791,696			787,823

Stockholders' Equity:
Common Stock, no par value, unlimited shares authorized as of March 31, 2023 and December 31, 2022, respectively, 393,409,586 and 391,238,484 shares issued and outstanding as of March 31, 2022 and December 31, 2022, respectively		—			—
Preferred Stock, no par value, unlimited shares authorized as of March 31, 2023 and December 31, 2022, respectively, none issued and outstanding as of March 31, 2023 and December 31, 2022		—			—
Proportionate voting shares, no par value, unlimited shares authorized as of March 31, 2023 and December 31, 2022, respectively; 9,955,661 and 10,009,819 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively		—			—
Additional paid-in-capital		1,123,898			1,117,287
Accumulated deficit		(941,343	)		(904,003	)
Equity attributable to Columbia Care Inc.		182,555			213,284
Non-controlling interest		(1,230	)		(6,381	)
Total equity		181,325			206,903
Total liabilities and equity	$	973,021		$	994,726

The accompanying notes are an integral part of these Condensed Consolidated Interim Balance Sheets.

COLUMBIA CARE INC.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(Expressed in thousands of U.S. dollars, except for number of shares and per share amounts)


	Three months ended
	March 31, 2023			March 31, 2022
Revenues, net of discounts	$	124,535		$	123,087
Cost of sales related to inventory production		(77,454	)		(66,460	)
Gross Margin		47,081			56,627
Selling, general and administrative expenses	$	(55,350	)		(71,292	)
Total operating costs		(55,350	)		(71,292	)
Loss from operations		(8,269	)		(14,665	)
Other expense:
Interest expense on leases		(1,098	)		(1,426	)
Interest expense		(12,573	)		(11,244	)
Other (expense) income, net		(3,943	)		61
Total other expense		(17,614	)		(12,609	)

Loss before provision for income taxes		(25,883	)		(27,274	)
Income tax expense		(10,689	)		(632	)
Net loss and comprehensive loss		(36,572	)		(27,906	)
Net (income) loss attributable to non-controlling interests		768			(1,270	)
Net loss attributable to shareholders	$	(37,340	)	$	(26,636	)

Weighted-average number of shares used in earnings per share - basic and diluted		401,438,546			376,397,260
Loss attributable to shares (basic and diluted)	$	(0.09	)		(0.07	)

The accompanying notes are an integral part of these unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss.

COLUMBIA CARE INC.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

(Expressed in thousands of U.S. dollars, except for number of shares)


	Units		Common Shares		Proportionate Voting Shares			Additional Paid-in Capital		Accumulated Deficit			Total Columbia Care Inc. Shareholders' Equity			Non-Controlling Interest			Total Equity
Balance as of December 31, 2021		—		361,423,270		14,729,636		$	1,039,726	$	(468,335	)	$	571,391		$	(20,568	)	$	550,823
Equity-based compensation(1)		—		237,486		—			6,358		—			6,358			—			6,358
Warrants exercised		—		180,000		—			425		—			425			—			425
Net loss		—		—		—			—		(26,636	)		(26,636	)		(1,270	)		(27,906	)
Balance as of March 31, 2022		—		361,840,756		14,729,636		$	1,046,509	$	(494,971	)	$	551,538		$	(21,838	)	$	529,700

	Units		Common Shares		Proportionate Voting Shares			Additional Paid-in Capital		Accumulated Deficit			Total Columbia Care Inc. Shareholders' Equity			Non-Controlling Interest			Total Equity
Balance as of December 31, 2022				391,238,484		10,009,819		$	1,117,287	$	(904,003	)	$	213,284		$	(6,381	)	$	206,903
Equity-based compensation (1)		—		2,116,944		—			6,611		—			6,611			—			6,611
Conversion between classes of shares		—		54,158		(54,158	)		—		—			—			—			—
Deconsolidation of subsidiary		—		—		—			—		—			—			4,383			4,383
Net loss		—		—		—			—		(37,340	)		(37,340	)		768			(36,572	)
Balance as of March 31, 2023		—		393,409,586		9,955,661		$	1,123,898	$	(941,343	)	$	182,555		$	(1,230	)		181,325

(1)

The amounts shown are net of any shares withheld by the Company to satisfy certain tax withholdings in connection with vesting of equity-based awards.

The accompanying notes are an integral part of these unaudited Condensed Consolidated Statements of Changes in Equity.

COLUMBIA CARE INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(expressed in thousands of U.S. dollars)


	Three months ended
	March 31, 2023			March 31, 2022
Cash flows from operating activities:
Net loss	$	(36,572	)	$	(27,906	)
Adjustments to reconcile net loss to net cash (used in) operating activities:
Depreciation and amortization		15,063			21,210
Equity-based compensation		6,515			6,374
Debt amortization expense		2,291			1,936
Loss on deconsolidation of subsidiary		2,473			—
Provision for obsolete inventory and other assets		615			156
Deferred taxes		766			(4,560	)
Change in fair value of derivative liability		30			683
Other		134			217
Changes in operating assets and liabilities, net of acquisitions
Accounts receivable		(2,322	)		1,726
Inventory		(6,315	)		(14,851	)
Prepaid expenses and other current assets		(2,442	)		1,942
Other assets		6,126			(6,111	)
Accounts payable		8,134			(12,072	)
Accrued expenses and other current liabilities		(4,874	)		(8,037	)
Income taxes payable		9,194			5,172
Other long-term liabilities		(2,221	)		6,299
Net cash used in operating activities		(3,405	)		(27,822	)
Cash flows from investing activities:
Purchases of property and equipment		(5,724	)		(29,511	)
Proceeds from sale of plant, property and equipment		—			179
Proceeds from deconsolidation of MO entity		3,040			—
Cash received (paid) on deposits, net		132			(223	)
Net cash used in investing activities		(2,552	)		(29,555	)
Cash flows from financing activities:
Proceeds from issuance of debt and warrants		—			153,250
Payment of debt issuance costs		—			(7,266	)
Repayment of debt		(170	)		(122	)
Payment of lease liabilities		(1,588	)		(1,642	)
Repayment of sellers note		(375	)		(375	)
Exercise of warrants		—			424
Taxes paid on equity based compensation		96			(16	)
Net cash (used in)/provided by financing activities		(2,037	)		144,253

Net (decrease)/increase in cash		(7,994	)		86,876
Cash and restricted cash at beginning of the period		49,488			82,533
Cash and restricted cash at end of period	$	41,494		$	169,409
Reconciliation of cash and cash equivalents and restricted cash:
Cash	$	40,159		$	168,424
Restricted cash	$	1,335		$	985
Cash and restricted cash, end of period	$	41,494		$	169,409
Supplemental disclosure of cash flow information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	5,716		$	6,209
Operating cash flows from finance leases	$	1,081		$	1,457
Financing cash flows from finance leases	$	1,588		$	1,642
Cash paid for interest on other obligations	$	12,607		$	5,302
Cash paid for income taxes	$	729		$	70
Lease liabilities arising from the recognition of finance right-of-use assets	$	24		$	1,597
Lease liabilities arising from the recognition of operating right-of-use assets	$	3,264		$	551
Supplemental disclosure of non-cash investing and financing activities:
Non-cash fixed asset additions within accounts payable and accrued expenses	$	478		$	11,010
Non-cash equity issuance costs within accrued expenses and accounts payable	$	—		$	223

COLUMBIA CARE INC.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE three months ended March 31, 2023, and 2022

(Expressed in thousands of U.S. dollars, except for share and per share amounts)

(Unaudited)

OPERATIONS OF THE COMPANY

Columbia Care Inc. (“the Company” or “the Parent”), was incorporated under the laws of the Province of Ontario on August 13, 2018. The Company's principal mission is to improve lives by providing cannabis-based health and wellness solutions and derivative products to qualified patients and consumers. The Company’s head office and principal address is 680 Fifth Ave. 24th Floor, New York, New York 10019. The Company’s registered and records office address is 666 Burrard St #1700, Vancouver, British Columbia V6C 2X8.

On April 26, 2019, the Company completed a reverse takeover (“RTO”) transaction and private placement. Following the RTO, the Company’s Common Shares were listed on the Aequitas NEO exchange, trading under the symbol “CCHW”. As of the time of this report, the Company’s Common Shares are also listed on the Canadian Securities Exchange (the “CSE”) under the symbol “CCHW”, the OTCQX Best Market under the symbol “CCHWF” and on the Frankfurt Stock Exchange under the symbol “3LP”.

On March 23, 2022, the Company jointly announced with Cresco Labs LLC (“Cresco Labs”) that the Company and Cresco Labs have entered into a definitive arrangement agreement (the “Arrangement Agreement”) pursuant to which Cresco Labs will acquire all of the issued and outstanding shares (the “Company Shares”) of the Company (the “Cresco Transaction”). Subject to closing conditions and necessary regulatory approvals, closure of the Cresco Transaction must occur no later than June 30, 2023 per the terms of the Arrangement Agreement, as amended. Under the terms of the Arrangement Agreement, shareholders of the Company (the “Company Shareholders”) will receive 0.5579 of a subordinate voting share of Cresco Labs (each whole share, a “Cresco Labs Share”) for each Company common share (or equivalent) held, subject to adjustment, representing total consideration enterprise value of approximately US$2.0 billion based on the closing price of Cresco Labs Shares on the CSE as of March 22, 2022. After giving effect to the Cresco Transaction, Company Shareholders will hold approximately 35% of the pro forma Cresco Labs Shares (on a fully diluted in-the-money, treasury method basis).

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

The accompanying unaudited condensed interim consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP” or “GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (the “SEC”).

The accompanying unaudited condensed interim consolidated financial statements contain all normal and recurring adjustments necessary to state fairly the consolidated financial condition, results of operations, comprehensive income, statement of shareholders’ equity, and cash flows of the Company for the interim periods presented. Except as otherwise disclosed, all such adjustments consist only of those of a normal recurring nature. Operating results for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the current year ending December 31, 2023. The financial data presented herein should be read in conjunction with the audited consolidated financial statements and accompanying notes as of and for the years ended December 31, 2022, and 2021 included in the Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”).

The preparation of these unaudited condensed interim consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ materially from those estimates.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC and the instructions to Form 10-Q.

Significant Accounting Judgments, Estimates and Assumptions

The Company’s significant accounting policies are described in Note 2 to the Company’s 2022 Form 10-K, filed with the SEC, on March 29, 2023. There have been no material changes to the Company’s significant accounting policies.

Revenue

The Company’s revenues are disaggregated as follows:


	Three months ended
	March 31, 2023		March 31, 2022
Dispensary	$	109,156	$	105,816
Cultivation and wholesale		15,362		17,123