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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 September 30, 2023

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: 000-56294

 

 

https://cdn.kscope.io/3c07f8f86a67da1f2d719104c6d89162-img100917292_0.jpg 

THE CANNABIST COMPANY HOLDINGS 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.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-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 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 November 8, 2023, there were 419,187,861 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 Interim Balance Sheets

3

Condensed Consolidated Interim Statements of Operations and Comprehensive Loss

4

 

Condensed Consolidated Interim Statements of Changes in Equity

5

Condensed Consolidated Interim Statements of Cash Flows

7

Notes to Condensed Consolidated Interim Financial Statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

31

Item 4.

Controls and Procedures

31

PART II.

OTHER INFORMATION

32

Item 1.

Legal Proceedings

32

Item 1A.

Risk Factors

32

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

32

Item 3.

Defaults Upon Senior Securities

32

Item 4.

Mine Safety Disclosures

32

Item 5.

Other Information

32

Item 6.

Exhibits

32

Signatures

34

 

 

 

 

 

i


 

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” regarding The Cannabist Company Holdings Inc. and its subsidiaries (collectively referred to as “Cannabist Company,” “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 impact of the termination of the Cresco Transaction (as defined herein) on the Company’s current and future operations, financial condition and prospects;
the costs of the Cresco Transaction (as defined herein);
the impact of the Company's corporate restructuring plan;
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 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.

 

2


 

THE CANNABIST COMPANY HOLDINGS INC.

CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS

(Unaudited)

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

 

 

 

 

September 30, 2023

 

 

December 31, 2022

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash

 

$

60,273

 

 

$

48,154

 

Accounts receivable, net of allowances of $3,293 and $3,142, respectively

 

 

24,990

 

 

 

10,087

 

Inventory

 

 

118,146

 

 

 

127,905

 

Prepaid expenses and other current assets

 

 

27,320

 

 

 

21,942

 

Assets held for sale

 

 

100

 

 

 

29,089

 

Total current assets

 

 

230,829

 

 

 

237,177

 

 

 

 

 

 

 

Property and equipment, net

 

 

326,725

 

 

 

357,993

 

Right of use assets - operating leases, net

 

 

183,570

 

 

 

174,472

 

Right of use assets - finance leases, net

 

 

38,781

 

 

 

45,423

 

Deferred taxes

 

 

3,467

 

 

 

 

Goodwill

 

 

19,274

 

 

 

19,274

 

Intangible assets, net

 

 

127,590

 

 

 

145,265

 

Other non-current assets

 

 

18,158

 

 

 

15,122

 

Total assets

 

$

948,394

 

 

$

994,726

 

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

 

41,492

 

 

$

23,775

 

Accrued expenses and other current liabilities

 

 

55,946

 

 

 

64,574

 

Income tax payable

 

 

44,739

 

 

 

33,961

 

Current portion of lease liability - operating leases

 

 

9,839

 

 

 

6,762

 

Current portion of lease liability - finance leases

 

 

7,154

 

 

 

6,552

 

Current portion of long-term debt, net

 

 

38,098

 

 

 

47,315

 

Liabilities held for sale

 

 

 

 

 

20,179

 

Total current liabilities

 

$

197,268

 

 

$

203,118

 

 

 

 

 

 

 

Long-term debt, net

 

 

294,401

 

 

 

281,705

 

Deferred taxes

 

 

 

 

 

2,903

 

Long-term lease liability - operating leases

 

 

183,083

 

 

 

174,312

 

Long-term lease liability - finance leases

 

 

45,743

 

 

 

50,586

 

Derivative liability

 

 

290

 

 

 

235

 

Other long-term liabilities

 

 

76,823

 

 

 

74,964

 

Total liabilities

 

 

797,608

 

 

 

787,823

 

 

 

 

 

 

 

Stockholders' Equity:

 

 

 

 

 

 

Common Stock, no par value, unlimited shares authorized as of September 30, 2023 and
   December 31, 2022, respectively,
418,915,272 and 391,238,484 shares issued and outstanding
   as of September 30, 2023 and December 31, 2022, respectively

 

 

 

 

 

 

Preferred Stock, no par value, unlimited shares authorized as of September 30, 2023 and
   December 31, 2022, respectively,
none issued and outstanding as of September 30, 2023 and
   December 31, 2022

 

 

 

 

 

 

Proportionate voting shares, no par value, unlimited shares authorized as of September 30, 2023
   and December 31, 2022, respectively;
9,955,661 and 10,009,819 shares issued and outstanding
   as of September 30, 2023 and December 31, 2022, respectively

 

 

 

 

 

 

Additional paid-in-capital

 

 

1,159,007

 

 

 

1,117,287

 

Accumulated deficit

 

 

(1,006,931

)

 

 

(904,003

)

Equity attributable to The Cannabist Company Holdings Inc.

 

 

152,076

 

 

 

213,284

 

Non-controlling interest

 

 

(1,290

)

 

 

(6,381

)

Total equity

 

 

150,786

 

 

 

206,903

 

Total liabilities and equity

 

$

948,394

 

 

$

994,726

 

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

 

3


 

THE CANNABIST COMPANY HOLDINGS 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

 

 

Nine months ended

 

 

 

September 30, 2023

 

 

September 30, 2022

 

 

September 30, 2023

 

 

September 30, 2022

 

Revenues, net of discounts

 

$

129,183

 

 

$

132,733

 

 

$

382,962

 

 

$

385,391

 

Cost of sales related to inventory production

 

 

(92,041

)

 

 

(80,462

)

 

 

(246,617

)

 

 

(225,645

)

Cost of sales related to business combination fair value adjustments to inventory

 

 

-

 

 

 

(136

)

 

 

 

 

 

(136

)

Gross Margin

 

$

37,142

 

 

$

52,135

 

 

$

136,345

 

 

$

159,610

 

Selling, general and administrative expenses

 

 

(56,472

)

 

 

(70,845

)

 

 

(163,895

)

 

 

(215,093

)

Loss from operations

 

 

(19,330

)

 

 

(18,710

)

 

 

(27,550

)

 

 

(55,483

)

Other expense:

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense on leases

 

 

(1,029

)

 

 

(1,365

)

 

 

(3,186

)

 

 

(4,161

)

Interest expense

 

 

(13,471

)

 

 

(12,974

)

 

 

(38,770

)

 

 

(35,702

)

Other (income) expense, net

 

 

(53

)

 

 

1,321

 

 

 

(12,992

)

 

 

791

 

Total other expense

 

 

(14,553

)

 

 

(13,018

)

 

 

(54,948

)

 

 

(39,072

)

 

 

 

 

 

 

 

 

 

 

 

 

Loss before provision for income taxes

 

 

(33,883

)

 

 

(31,728

)

 

 

(82,498

)

 

 

(94,555

)

Income tax expense

 

 

(2,297

)

 

 

(6,575

)

 

 

(19,291

)

 

 

(25,909

)

Net loss and comprehensive loss

 

 

(36,180

)

 

 

(38,303

)

 

 

(101,789

)

 

 

(120,464

)

Net income (loss) attributable to non-controlling interests

 

 

545

 

 

 

(2,872

)

 

 

1,139

 

 

 

(4,569

)

Net loss attributable to shareholders

 

$

(36,725

)

 

$

(35,431

)

 

$

(102,928

)

 

$

(115,895

)

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average number of shares used in earnings per share - basic and diluted

 

 

409,113,721

 

 

 

399,227,935

 

 

 

405,472,948

 

 

 

389,966,408

 

Loss attributable to shares (basic and diluted)

 

$

(0.09

)

 

$

(0.09

)

 

$

(0.25

)

 

$

(0.30

)

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

4


 

THE CANNABIST COMPANY HOLDINGS INC.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

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

 

Common
Shares

 

 

Proportionate
Voting Shares

 

 

Additional
Paid-in Capital

 

 

Accumulated
Deficit

 

 

Total The Cannabist Company Holdings 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

 

Equity-based compensation (1)

 

3,413,933

 

 

 

 

 

 

2,939

 

 

 

 

 

 

2,939

 

 

 

 

 

 

2,939

 

Distributions to non-controlling interest holders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(431

)

 

 

(431

)

Net loss

 

 

 

 

 

 

 

 

 

 

(28,863

)

 

 

(28,863

)

 

 

(174

)

 

 

(29,037

)

Balance, June 30, 2023

 

396,823,519

 

 

 

9,955,661

 

 

$

1,126,837

 

 

$

(970,206

)

 

$

156,631

 

 

$

(1,835

)

 

 

154,796

 

Equity-based compensation (1)

 

204,513

 

 

 

 

 

 

8,298

 

 

 

 

 

 

8,298

 

 

 

 

 

 

8,298

 

Issuance of shares

 

21,887,240

 

 

 

 

 

 

23,872

 

 

 

 

 

 

23,872

 

 

 

 

 

 

23,872

 

Net loss

 

 

 

 

 

 

 

 

 

 

(36,725

)

 

 

(36,725

)

 

 

545

 

 

 

(36,180

)

Balance, September 30, 2023

 

418,915,272

 

 

 

9,955,661

 

 

$

1,159,007

 

 

$

(1,006,931

)

 

$

152,076

 

 

$

(1,290

)

 

$

150,786

 

 

(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 Interim Statements of Changes in Equity.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5


 

 

 

THE CANNABIST COMPANY HOLDINGS INC.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY (CONTINUED)

(Unaudited)

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

 

 

Common
Shares

 

 

Proportionate
Voting Shares

 

 

Additional
Paid-in Capital

 

 

Accumulated
Deficit

 

 

Total The Cannabist Company Holdings 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

 

Equity-based compensation (1)

 

21,034,418

 

 

 

 

 

 

49,346

 

 

 

 

 

 

49,346

 

 

 

 

 

 

49,346

 

Issuance of shares in connection with acquisitions

 

1,099,549

 

 

 

 

 

 

3,178

 

 

 

 

 

 

3,178

 

 

 

 

 

 

3,178

 

Cancellation of restricted stock awards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of convertible notes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion between classes of shares

 

2,431,508

 

 

 

(2,431,508

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-controlling interest buyout

 

 

 

 

 

 

 

 

 

 

(19,663

)

 

 

(19,663

)

 

 

19,663

 

 

 

 

Warrants exercised

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

(53,828

)

 

 

(53,828

)

 

 

(427

)

 

 

(54,255

)

Balance, June 30, 2022

 

386,406,231

 

 

 

12,298,128

 

 

$

1,099,033

 

 

$

(568,462

)

 

$

530,571

 

 

$

(2,602

)

 

$

527,969

 

Equity-based compensation (1)

 

 

 

 

 

 

 

6,780

 

 

 

 

 

 

6,780

 

 

 

 

 

 

6,780

 

Issuance of shares in connection with acquisitions

 

983,040

 

 

 

 

 

 

4,431

 

 

 

 

 

 

4,431

 

 

 

 

 

 

4,431

 

Conversion between classes of shares

 

284,239

 

 

 

(284,239

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cancellation of restricted stock awards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

(35,431

)

 

 

(35,431

)

 

 

(2,872

)

 

 

(38,303

)

Balance, September 30, 2022

 

387,673,510

 

 

 

12,013,889

 

 

$

1,110,244

 

 

$

(603,893

)

 

$

506,351

 

 

$

(5,474

)

 

$

500,877

 

 

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 Interim Statements of Changes in Equity.

6


 

THE CANNABIST COMPANY HOLDINGS INC.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

(Unaudited)

(expressed in thousands of U.S. dollars)

 

 

 

 

Nine months ended

 

 

 

September 30, 2023

 

 

September 30, 2022

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(101,789

)

 

$

(120,464

)

Adjustments to reconcile net loss to net cash (used in) operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

47,607

 

 

 

63,077

 

Equity-based compensation

 

 

18,304

 

 

 

20,649

 

Debt amortization expense

 

 

7,366

 

 

 

6,278

 

Earnout adjustment

 

 

 

 

 

349

 

Loss on disposal group

 

 

10,750

 

 

 

 

Provision for obsolete inventory and other assets

 

 

8,126

 

 

 

5,040

 

(Gain) / loss on remeasurement of contingent consideration

 

 

 

 

 

(37,362

)

Change in fair value of derivative liability

 

 

55

 

 

 

(5,940

)

Loss on deconsolidation of subsidiary

 

 

2,473

 

 

 

 

Deferred taxes

 

 

(