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 |
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(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 |
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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 |
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Smaller reporting company |
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Emerging growth company |
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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 August 5, 2024, there were
Table of Contents
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Page |
2 |
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PART I. |
FINANCIAL INFORMATION |
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Item 1. |
Financial Statements (Unaudited) |
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3 |
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Condensed Consolidated Interim Statements of Operations and Comprehensive Loss |
4 |
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Condensed Consolidated Interim Statements of Changes in Equity |
5 |
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6 |
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Notes to Condensed Consolidated Interim Financial Statements |
7 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
17 |
Item 3. |
26 |
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Item 4. |
26 |
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PART II. |
27 |
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Item 1. |
27 |
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Item 1A. |
27 |
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Item 2. |
27 |
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Item 3. |
27 |
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Item 4. |
27 |
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Item 5. |
27 |
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Item 6. |
28 |
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30 |
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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 “The 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 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, 2023. 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)
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June 30, 2024 |
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December 31, 2023 |
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Assets |
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Current assets: |
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Cash |
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$ |
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$ |
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Accounts receivable, net of allowances of $ |
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Inventory |
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Prepaid expenses and other current assets |
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Assets held for sale |
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Total current assets |
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Property and equipment, net |
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Right of use assets - operating leases, net |
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Right of use assets - finance leases, net |
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Intangible assets, net |
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Deferred taxes |
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Notes Receivable |
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Other non-current assets |
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Total assets |
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$ |
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$ |
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Liabilities and Equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Income tax payable |
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Current portion of lease liability - operating leases |
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Current portion of lease liability - finance leases |
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Current portion of long-term debt, net |
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Liabilities held for sale |
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Total current liabilities |
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$ |
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$ |
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Long-term debt, net |
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Long-term lease liability - operating leases |
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Long-term lease liability - finance leases |
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Derivative liability |
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Other long-term liabilities |
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Total liabilities |
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Stockholders' Equity: |
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Common Stock, |
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Preferred Stock, |
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Proportionate voting shares, |
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Additional paid-in-capital |
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Accumulated deficit |
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( |
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( |
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Equity attributable to The Cannabist Company Holdings Inc. |
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Non-controlling interest |
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( |
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( |
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Total equity |
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Total liabilities and equity |
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$ |
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$ |
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The accompanying notes are an integral part of these Condensed Consolidated Interim Financial Statements.
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)
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Three months ended |
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Six months ended |
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June 30, 2024 |
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June 30, 2023 |
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June 30, 2024 |
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June 30, 2023 |
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Revenues, net of discounts |
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$ |
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$ |
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$ |
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$ |
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Cost of sales related to inventory production |
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( |
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( |
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( |
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Gross Margin |
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$ |
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$ |
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$ |
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Selling, general and administrative expenses |
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( |
) |
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( |
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( |
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( |
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Profit / (loss) from operations |
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( |
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( |
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Other expense: |
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Interest expense on leases |
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( |
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( |
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( |
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( |
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Interest expense |
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( |
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( |
) |
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( |
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( |
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Other income / (expense), net |
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( |
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( |
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( |
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( |
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Total other expense |
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( |
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( |
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( |
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( |
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Loss before provision for income taxes |
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( |
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( |
) |
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( |
) |
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( |
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Income tax expense |
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( |
) |
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( |
) |
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( |
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( |
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Net loss and comprehensive loss |
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( |
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( |
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( |
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( |
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Net profit / (loss) attributable to non-controlling interests |
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( |
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Net loss attributable to shareholders |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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$ |
( |
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Weighted-average number of shares used in earnings per share - basic and diluted |
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Loss attributable to shares (basic and diluted) |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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The accompanying notes are an integral part of these unaudited Condensed Consolidated Interim Financial Statements.
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)
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Common |
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Proportionate |
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Additional |
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Accumulated |
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Total The Cannabist Company Holdings Inc. |
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Non-Controlling |
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Total |
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Balance as of December 31, 2022 |
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$ |
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$ |
( |
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$ |
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$ |
( |
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$ |
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Equity-based compensation (1) |
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— |
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— |
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— |
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Conversion between classes of shares |
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( |
) |
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— |
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— |
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— |
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— |
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— |
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Deconsolidation of subsidiary |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
) |
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( |
) |
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( |
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Balance as of March 31, 2023 |
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$ |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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$ |
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Equity-based compensation (1) |
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— |
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— |
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— |
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Distributions to non-controlling interest holders |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Net loss |
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— |
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— |
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— |
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( |
) |
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( |
) |
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( |
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( |
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Balance as of June 30, 2023 |
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$ |
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$ |
( |
) |
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$ |
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$ |
( |
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$ |
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Common |
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Proportionate |
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Additional |
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Accumulated |
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Total The Cannabist Company Holdings Inc. |
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Non-Controlling |
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Total |
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Balance as of December 31, 2023 |
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$ |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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$ |
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Equity-based compensation (1) |
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— |
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— |
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— |
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— |
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Conversion of convertible notes |
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— |
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— |
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— |
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Conversion between classes of shares |
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( |
) |
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— |
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— |
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— |
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— |
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— |
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Deconsolidation of subsidiary |
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— |
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— |
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— |
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( |
) |
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( |
) |
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— |
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( |
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Net loss |
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— |
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— |
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— |
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( |
) |
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( |
) |
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( |
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Balance as of March 31, 2024 |
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$ |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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$ |
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Equity-based compensation (1) |
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— |
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( |
) |
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— |
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( |
) |
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— |
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( |
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Conversion of convertible notes |
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— |
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— |
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— |
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Legal Settlement |
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— |
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— |
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— |
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Deconsolidation of subsidiary |
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— |
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— |
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— |
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— |
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Distributions |
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— |
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— |
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— |
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( |
) |
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( |
) |
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— |
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( |
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Net loss |
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— |
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— |
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— |
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( |
) |
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( |
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( |
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Balance, June 30, 2024 |
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$ |
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$ |
( |
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$ |
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$ |
( |
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$ |
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(1)
The accompanying notes are an integral part of these unaudited Condensed Consolidated Interim Financial Statements.
5
THE CANNABIST COMPANY HOLDINGS INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
(Unaudited)
(expressed in thousands of U.S. dollars)
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Six months ended |
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June 30, 2024 |
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June 30, 2023 |
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Cash flows from operating activities: |
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Net loss |
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$ |
( |
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$ |
( |
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Adjustments to reconcile net loss to net cash (used in) operating activities: |
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Depreciation and amortization |
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Equity-based compensation |
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( |
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Debt amortization expense |
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Loss on deconsolidation of subsidiary |
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Loss on disposal group |
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Provision for obsolete inventory and other assets |
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Change in fair value of derivative liability |
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Deferred taxes |
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( |
) |
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( |
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Legal Settlement |
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( |
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Other |
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( |
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Changes in operating assets and liabilities, net of acquisitions |
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Accounts receivable |
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( |
) |
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( |
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Inventory |
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( |
) |
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( |
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Prepaid expenses and other current assets |
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( |
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( |
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Other assets |
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Accounts payable |
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Payroll liabilities |
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( |
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Accrued expenses and other current liabilities |
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( |
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Income taxes payable |
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Other long-term liabilities |
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( |
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Net cash used in operating activities |
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( |
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( |
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Cash flows from investing activities: |
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Purchases of property and equipment |
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( |
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( |
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Proceeds from sale of plant, property and equipment |
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Proceeds from sale of license |
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Net proceeds from sale of Utah business |
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Proceeds from deconsolidation of Missouri entity |
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Cash received on deposits, net |
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Net cash provided by (used in) investing activities |
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( |
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Cash flows from financing activities: |
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Proceeds from issuance of convertible debt |
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Payment of debt issuance costs |
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( |
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Payment of lease liabilities |
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( |
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( |
) |
Repayment of sellers note |
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( |
) |
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( |
) |
Repayment of debt |
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( |
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( |
) |
Repayment of mortgage notes |
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( |
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Distributions |
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( |
) |
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Distributions to non-controlling interest holders |
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( |
) |
|
Taxes paid on equity based compensation |
|
|
( |
) |
|
|
( |
) |
Net cash used in financing activities |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
||
Net increase (decrease) 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 |
|
$ |
|
|
$ |
|
||
Discount on issuance of convertible debt |
|
$ |
( |
) |
|
$ |
|
|
Reduction in debt from debt to equity conversion |
|
$ |
( |
) |
|
$ |
|
|
Equity issued for legal settlement |
|
$ |
|
|
$ |
|
||
Increase in equity from debt to equity conversion |
|
$ |
|
|
$ |
|
||
Assets held for sale |
|
$ |
( |
) |
|
$ |
|
|
Liabilities held for sale |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of these unaudited Condensed Consolidated Interim Financial Statements.
6
THE CANNABIST COMPANY HOLDINGS INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024, and 2023
(Expressed in thousands of U.S. dollars, except for share and per share amounts)
(Unaudited)
The Cannabist Company Holdings Inc. (“the Company”, “the Parent”, or "The Cannabist Company"), formerly known as Columbia Care Inc., 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 Cboe Canada (formerly known as the NEO Exchange), trading under the symbol “CCHW”. Effective September 19, 2023, the Company changed its name from “Columbia Care Inc.” to “The Cannabist Company Holdings Inc.” (the “Name Change”). In connection with the Name Change, on September 21, 2023, the Company’s Common Shares and warrants began trading under the ticker symbols “CBST” and “CBST.WT”, respectively, on Cboe Canada. On September 26, 2023, the Company’s Common Shares began trading on the OTCQX Best Market under the ticker symbol “CBSTF”. The Company’s Common Shares are also listed on the Frankfurt Stock Exchange under the symbol “3LP”.
Basis of preparation
The accompanying unaudited condensed consolidated interim 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 consolidated interim 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 and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the current year ending December 31, 2024. 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, 2023, and 2022 included in the Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”).
The preparation of these unaudited condensed consolidated interim 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.
The unaudited condensed consolidated interim financial statements are presented in United States dollars except as otherwise indicated. All references to C$, CAD$ and CDN$ are to Canadian dollars.
Significant Accounting Judgments, Estimates and Assumptions
The Company’s significant accounting policies are described in Note 2 to the Company’s 2023 Form 10-K, filed with the SEC, on March 13, 2024. 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 |
|
|
Six months ended |
|
||||||||||
|
|
June 30, 2024 |
|
|
June 30, 2023 |
|
|
June 30, 2024 |
|
|
June 30, 2023 |
|
||||
Dispensary |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Cultivation and wholesale |
|
$ |
|
|
|
|
|
$ |
|
|
|
|
||||
Other |
|
$ |
|
|
|
|
|
$ |
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
During the three and six months ended June 30, 2024 the Company netted discounts of $
Details of the Company’s inventory are shown in the table below:
|
|
|
June 30, 2024 |
|
|
December 31, 2023 |
|
||
|
Accessories and supplies |
|
$ |
|
|
$ |
|
||
|
Work-in-process - cannabis in cures and final vault |
|
|
|
|
|
|
||
|
Finished goods - dried cannabis, concentrate and edible products |
|
|
|
|
|
|
||
|
Total inventory |
|
$ |
|
|
$ |
|
||
Current and long-term obligations, net, are shown in the table below:
|
|
June 30, 2024 |
|
|
December 31, 2023 |
|
||
2026 Notes |
|
$ |
|
|
$ |
|
||
2024 Notes |
|
|
|
|
|
|
||
2027 Convertible Notes |
|
|
|
|
|
|
||
2025 Convertible Notes |
|
|
|
|
|
|
||
Mortgage Note |
|
|
|
|
|
|
||
Acquisition related promissory notes |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Unamortized debt discount |
|
|
( |
) |
|
|
( |
) |
Unamortized deferred financing costs |
|
|
( |
) |
|
|
( |
) |
Total debt, net |
|
|
|
|
|
|
||
Less current portion, net* |
|
|
( |
) |
|
|
( |
) |
Long-term portion |
|
$ |
|
|
$ |
|
||
*The current portion of the debt includes scheduled payments on the mortgage notes, acquisition related promissory notes and acquisition related notes payable, net of corresponding portions of the unamortized debt discount and unamortized deferred financing costs.
The Company was in compliance with all financial covenants and was not in default of any provisions under any of its debt arrangements as of June 30, 2024.
8
2026 Notes
On February 3, 2022, the Company closed a private placement (the “February 2022 Private Placement”) of $
The premium and paid interest were paid out of funds raised from the February 2022 Private Placement. The total unamortized debt and debt issuance costs of $
2024 Notes
As further described in Note 4 under the sub-heading “Term debt” of the Financial Statements incorporated by reference in the Company’s Form 10-K for the year ended December 31, 2023, on October 23, 2023, the Company retired $
The 2024 Notes require interest-only payments through May 14, 2024, at a rate of
2027 Convertible Notes
On March 19, 2024, the Company closed a private placement (the “March 2024 Private Placement”) of $
The principal amount of the 2027 Convertible Notes and the conversion price are denominated in U.S. dollars. As the functional currency of the Company is Canadian dollars, the amount of the liability to be settled depends on the applicable foreign exchange rate on the date of settlement. The 2027 Convertible Notes therefore represent an obligation to issue a fixed number of shares for a variable amount of liability. Due to this conversion feature within the 2027 Convertible Notes, the Company is unable to obtain an exception from derivative accounting. Accordingly, this conversion feature was accounted for as an embedded derivative liability and measured at fair value of $
2025 Convertible Notes
On June 29, 2021, the Company completed an offering of
9
price of the 2025 Convertible Notes at a Redemption Price equal to
The 2025 Convertible Notes require interest-only payments until June 29, 2025, at a rate of
January 2024 Debt Exchange
On January 22, 2024, the Company entered into the Exchange Agreement with certain Holders of the Company’s
Pursuant to the terms of the Exchange Agreement, the Holders shall:
In the event the conditions are fulfilled and the Holders fail to Transfer their 2025 Convertible Notes in accordance with the terms of the Exchange Agreement, the Company has the right, but not the obligation, to require the Holders to Transfer some or all of the portion of the $25 million principal amount of 2025 Convertible Notes still held by the Holders. Assuming all of the conditions are fulfilled, and the entire $25 million principal amount of 2025 Convertible Notes are Transferred for Common Shares issued at the minimum prices set out in the Exchange Agreement, a maximum of
Mortgages
In December 2021, the Company entered into a term loan and security agreement with a bank. The agreement provides for $
In June 2022, the Company entered into a term loan and security agreement with a bank. The agreement provides for $
10
is repayable in
On August 10, 2023, the Company entered into two term loans and security agreements with a bank as follows:
Total interest and amortization expense on the Company’s debt obligations during the three and six months ended June 30, 2024 and 2023 are as follows:
|
|
Three months ended |
|
|
Six months ended |
|
||||||||||
|
|
June 30, 2024 |
|
|
June 30, 2023 |
|
|
June 30, 2024 |
|
|
June 30, 2023 |
|
||||
Interest expense on debt |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Amortization of debt discount |
|
|
|
|
|
|
|
|||||||||