UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
|
|
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
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.
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).
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.
Large accelerated filer |
|
☐ |
|
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 Exchange Act). Yes
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
G
Table of Contents
|
|
Page |
2 |
||
PART I. |
FINANCIAL INFORMATION |
|
Item 1. |
Financial Statements (Unaudited) |
|
|
3 |
|
|
Condensed Consolidated Statements of Operations and Comprehensive Loss |
4 |
|
5 |
|
|
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. |
25 |
|
Item 4. |
25 |
|
PART II. |
26 |
|
Item 1. |
26 |
|
Item 1A. |
26 |
|
Item 2. |
26 |
|
Item 3. |
26 |
|
Item 4. |
26 |
|
Item 5. |
26 |
|
Item 6. |
26 |
|
28 |
||
i
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 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.
2
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 |
|
$ |
|
|
$ |
|
||
Accounts receivable, net of allowances of $ |
|
|
|
|
|
|
||
Inventory |
|
|
|
|
|
|
||
Prepaid expenses and other current assets |
|
|
|
|
|
|
||
Assets held for sale |
|
|
|
|
|
|
||
Total current assets |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Property and equipment, net |
|
|
|
|
|
|
||
Right of use assets - operating leases, net |
|
|
|
|
|
|
||
Right of use assets - finance leases, net |
|
|
|
|
|
|
||
Goodwill |
|
|
|
|
|
|
||
Intangible assets, net |
|
|
|
|
|
|
||
Other non-current assets |
|
|
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Liabilities and Equity |
|
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
|
|
$ |
|
||
Accrued expenses and other current liabilities |
|
|
|
|
|
|
||
Income tax payable |
|
|
|
|
|
|
||
Current portion of lease liability - operating leases |
|
|
|
|
|
|
||
Current portion of lease liability - finance leases |
|
|
|
|
|
|
||
Current portion of long-term debt, net |
|
|
|
|
|
|
||
Liabilities held for sale |
|
|
|
|
|
|
||
Total current liabilities |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Long-term debt, net |
|
|
|
|
|
|
||
Deferred taxes |
|
|
|
|
|
|
||
Long-term lease liability - operating leases |
|
|
|
|
|
|
||
Long-term lease liability - finance leases |
|
|
|
|
|
|
||
Derivative liability |
|
|
|
|
|
|
||
Other long-term liabilities |
|
|
|
|
|
|
||
Total liabilities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Stockholders' Equity: |
|
|
|
|
|
|
||
Common Stock, |
|
|
|
|
|
|
||
Preferred Stock, |
|
|
|
|
|
|
||
Proportionate voting shares, |
|
|
|
|
|
|
||
Additional paid-in-capital |
|
|
|
|
|
|
||
Accumulated deficit |
|
|
( |
) |
|
|
( |
) |
Equity attributable to Columbia Care Inc. |
|
|
|
|
|
|
||
Non-controlling interest |
|
|
( |
) |
|
|
( |
) |
Total equity |
|
|
|
|
|
|
||
Total liabilities and equity |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of these Condensed Consolidated Interim Balance Sheets.
3
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 |
|
$ |
|
|
$ |
|
||
Cost of sales related to inventory production |
|
|
( |
) |
|
|
( |
) |
Gross Margin |
|
|
|
|
|
|
||
Selling, general and administrative expenses |
|
$ |
( |
) |
|
|
( |
) |
Total operating costs |
|
|
( |
) |
|
|
( |
) |
Loss from operations |
|
|
( |
) |
|
|
( |
) |
Other expense: |
|
|
|
|
|
|
||
Interest expense on leases |
|
|
( |
) |
|
|
( |
) |
Interest expense |
|
|
( |
) |
|
|
( |
) |
Other (expense) income, net |
|
|
( |
) |
|
|
|
|
Total other expense |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
||
Loss before provision for income taxes |
|
|
( |
) |
|
|
( |
) |
Income tax expense |
|
|
( |
) |
|
|
( |
) |
Net loss and comprehensive loss |
|
|
( |
) |
|
|
( |
) |
Net (income) loss attributable to non-controlling interests |
|
|
|
|
|
( |
) |
|
Net loss attributable to shareholders |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
||
Weighted-average number of shares used in earnings per |
|
|
|
|
|
|
||
Loss attributable to shares (basic and diluted) |
|
$ |
( |
) |
|
|
( |
) |
The accompanying notes are an integral part of these unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss.
4
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 |
|
|
Proportionate |
|
|
Additional |
|
|
Accumulated |
|
|
Total Columbia Care Inc. |
|
|
Non-Controlling |
|
|
Total |
|
||||||||
Balance as of December 31, 2021 |
|
|
— |
|
|
|
|
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
Equity-based compensation(1) |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Warrants exercised |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance as of March 31, 2022 |
|
|
— |
|
|
|
|
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
Units |
|
|
Common |
|
|
Proportionate |
|
|
Additional |
|
|
Accumulated |
|
|
Total Columbia Care Inc. |
|
|
Non-Controlling |
|
|
Total |
|
||||||||
Balance as of December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||||
Equity-based compensation (1) |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Conversion between classes of shares |
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Deconsolidation of subsidiary |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Balance as of March 31, 2023 |
|
|
— |
|
|
|
|
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
|
|
|||||
The accompanying notes are an integral part of these unaudited Condensed Consolidated Statements of Changes in Equity.
5
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 |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash (used in) operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Equity-based compensation |
|
|
|
|
|
|
||
Debt amortization expense |
|
|
|
|
|
|
||
Loss on deconsolidation of subsidiary |
|
|
|
|
|
|
||
Provision for obsolete inventory and other assets |
|
|
|
|
|
|
||
Deferred taxes |
|
|
|
|
|
( |
) |
|
Change in fair value of derivative liability |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Changes in operating assets and liabilities, net of acquisitions |
|
|
|
|
|
|
||
Accounts receivable |
|
|
( |
) |
|
|
|
|
Inventory |
|
|
( |
) |
|
|
( |
) |
Prepaid expenses and other current assets |
|
|
( |
) |
|
|
|
|
Other assets |
|
|
|
|
|
( |
) |
|
Accounts payable |
|
|
|
|
|
( |
) |
|
Accrued expenses and other current liabilities |
|
|
( |
) |
|
|
( |
) |
Income taxes payable |
|
|
|
|
|
|
||
Other long-term liabilities |
|
|
( |
) |
|
|
|
|
Net cash used in operating activities |
|
|
( |
) |
|
|
( |
) |
Cash flows from investing activities: |
|
|
|
|
|
|
||
Purchases of property and equipment |
|
|
( |
) |
|
|
( |
) |
Proceeds from sale of plant, property and equipment |
|
|
|
|
|
|
||
Proceeds from deconsolidation of MO entity |
|
|
|
|
|
|
||
Cash received (paid) on deposits, net |
|
|
|
|
|
( |
) |
|
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
||
Proceeds from issuance of debt and warrants |
|
|
|
|
|
|
||
Payment of debt issuance costs |
|
|
|
|
|
( |
) |
|
Repayment of debt |
|
|
( |
) |
|
|
( |
) |
Payment of lease liabilities |
|
|
( |
) |
|
|
( |
) |
Repayment of sellers note |
|
|
( |
) |
|
|
( |
) |
Exercise of warrants |
|
|
|
|
|
|
||
Taxes paid on equity based compensation |
|
|
|
|
|
( |
) |
|
Net cash (used in)/provided by financing activities |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
||
Net (decrease)/increase in cash |
|
|
( |
) |
|
|
|
|
Cash and restricted cash at beginning of the period |
|
|
|
|
|
|
||
Cash and restricted cash at end of period |
|
$ |
|
|
$ |
|
||
Reconciliation of cash and cash equivalents and restricted cash: |
|
|
|
|
|
|
||
Cash |
|
$ |
|
|
$ |
|
||
Restricted cash |
|
$ |
|
|
$ |
|
||
Cash and restricted cash, end of period |
|
$ |
|
|
$ |
|
||
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
||
Operating cash flows from operating leases |
|
$ |
|
|
$ |
|
||
Operating cash flows from finance leases |
|
$ |
|
|
$ |
|
||
Financing cash flows from finance leases |
|
$ |
|
|
$ |
|
||
Cash paid for interest on other obligations |
|
$ |
|
|
$ |
|
||
Cash paid for income taxes |
|
$ |
|
|
$ |
|
||
Lease liabilities arising from the recognition of finance right-of-use assets |
|
$ |
|
|
$ |
|
||
Lease liabilities arising from the recognition of operating right-of-use assets |
|
$ |
|
|
$ |
|
||
Supplemental disclosure of non-cash investing and financing activities: |
|
|
|
|
|
|
||
Non-cash fixed asset additions within accounts payable and accrued expenses |
|
$ |
|
|
$ |
|
||
Non-cash equity issuance costs within accrued expenses and accounts payable |
|
$ |
|
|
$ |
|
||
6
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)
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
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.
7
Revenue
The Company’s revenues are disaggregated as follows:
|
|
|
Three months ended |
|
|||||
|
|
|
March 31, 2023 |
|
|
March 31, 2022 |
|
||
|
Dispensary |
|
$ |
|
|
||||