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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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
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
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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7 |
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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. |
31 |
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Item 4. |
31 |
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PART II. |
32 |
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Item 1. |
32 |
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Item 1A. |
32 |
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Item 2. |
32 |
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Item 3. |
32 |
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Item 4. |
32 |
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Item 5. |
32 |
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Item 6. |
32 |
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34 |
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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 “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, 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)
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September 30, 2023 |
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December 31, 2022 |
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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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Deferred taxes |
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Goodwill |
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Intangible assets, net |
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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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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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Deferred taxes |
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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 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)
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Three months ended |
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Nine months ended |
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September 30, 2023 |
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September 30, 2022 |
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September 30, 2023 |
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September 30, 2022 |
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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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( |
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Cost of sales related to business combination fair value adjustments to inventory |
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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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$ |
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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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Loss from operations |
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( |
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( |
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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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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 income (loss) attributable to non-controlling interests |
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( |
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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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$ |
( |
) |
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)
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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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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, June 30, 2023 |
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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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Issuance of shares |
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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, September 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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(1)
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)
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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, 2021 |
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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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Warrants exercised |
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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 March 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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Issuance of shares in connection with acquisitions |
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— |
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— |
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— |
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Cancellation of restricted stock awards |
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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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Conversion of convertible notes |
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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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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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Non-controlling interest buyout |
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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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Warrants exercised |
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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, June 30, 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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— |
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Issuance of shares in connection with acquisitions |
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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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Cancellation of restricted stock awards |
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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, September 30, 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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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 |
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|||||
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September 30, 2023 |
|
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September 30, 2022 |
|
||
Cash flows from operating activities: |
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Net loss |
|
$ |
( |
) |
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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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Debt amortization expense |
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Earnout adjustment |
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|
|
||
Loss on disposal group |
|
|
|
|
|
|
||
Provision for obsolete inventory and other assets |
|
|
|
|
|
|
||
(Gain) / loss on remeasurement of contingent consideration |
|
|
|
|
|
( |
) |
|
Change in fair value of derivative liability |
|
|
|
|
|
( |
) |
|
Loss on deconsolidation of subsidiary |
|
|
|
|
|
|
||
Deferred taxes |
|
|
( |
) |
|
|
( |
) |
Other |
|
|
|
|
|
|
||
Changes in operating assets and liabilities, net of acquisitions |
|
|
|
|
|
|
||
Accounts receivable |
|
|
( |
) |
|
|
|
|
Inventory |
|
|
|
|
|
( |
) |
|
Prepaid expenses and other current assets |
|
|
( |
) |
|
|
|
|
Other assets |
|
|
|
|
|
|
||
Accounts payable |
|
|
|
|
|
( |
) |
|
Payroll liabilities |
|
|
( |
) |
|
|
|
|
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 |
|
|
( |
) |
|
|
( |
) |
Cash paid for acquisitions, net of cash acquired |
|
|
|
|
|
|
||
Proceeds from sale of plant, property and equipment |
|
|
|
|
|
|
||
Proceeds from deconsolidation of Missouri entity |
|
|
|
|
|
|
||
Proceeds for stock issuance |
|
|
|
|
|
|
||
Cash received (paid) on deposits, net |
|
|
|
|
|
( |
) |
|
Net cash provided by (used in) investing activities |
|
|
|
|
|
( |
) |
|
Cash flows from financing activities: |
|
|
|
|
|
|
||
Proceeds from issuance of debt and warrants |
|
|
|
|
|
|
||
Payment of debt issuance costs |
|
|
( |
) |
|
|
( |
) |
Payment of lease liabilities |
|
|
( |
) |
|
|
( |
) |
Repayment of sellers note |
|
|
( |
) |
|
|
( |
) |
Repayment of debt |
|
|
( |
) |
|
|
( |
) |
Issuance of Mortgage |
|
|
|
|
|
|
||
Distributions to non-controlling interest holders |
|
|
( |
) |
|
|
|
|
Exercise of warrants |
|
|
|
|
|
|
||
Taxes paid on equity based compensation |
|
|
( |
) |
|
|
( |
) |
Net cash provided by (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 |
|
$ |
|
|
$ |
|
||
Non-cash equity issuance costs within accrued expenses and accounts payable |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of these unaudited Condensed Consolidated Interim Statements of Cashflows.
7
THE CANNABIST COMPANY HOLDINGS INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE three and NINE months ended SEPTEMBER 30, 2023, and 2022
(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 "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”.
Recent Developments
Mutual Termination of Arrangement Agreement with Cresco Labs:
As previously disclosed, on March 23, 2022, Cannabist Company entered into a definitive arrangement agreement, as amended on February 27, 2023 (the “Arrangement Agreement) with Cresco Labs LLC (“Cresco Labs”), pursuant to which, Cresco Labs agreed, subject to the terms and conditions thereof, to acquire all of the issued and outstanding common shares and proportionate voting shares of Cannabist Company, pursuant to a statutory plan of arrangement under the Business Corporations Act (British Columbia) (the “Arrangement”).
As previously disclosed, Cannabist Company and Cresco Labs were not able to complete the divestitures necessary to secure all necessary regulatory approvals to close the Arrangement by the outside date (June 30, 2023) specified in the Arrangement Agreement.
On July 31, 2023, Cannabist Company and Cresco Labs entered into a termination agreement (the “Termination Agreement”), pursuant to which Cannabist Company and Cresco Labs agreed to terminate the Arrangement Agreement. The Termination Agreement provides for the release by each party of certain claims arising from or relating to the Arrangement, the Arrangement Agreement, the transactions contemplated therein or the circumstances relating thereto. There are no penalties or fees related to the mutual agreement to terminate the Arrangement.
Voluntary Delisting of Common Shares from Canadian Securities Exchange:
The Company voluntarily delisted its Common Shares from the facilities of the Canadian Securities Exchange, effective as of market close on August 2, 2023. Cannabist Company's common shares will continue trading on the Cboe Canada, the new business name of the NEO Exchange. Cboe Canada will remain the Company’s primary securities exchange, as it has been since the Company’s initial public listing.
8
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 nine months ended September 30, 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 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 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 |
|
|
Nine months ended |
|
||||||||||
|
|
|
September 30, 2023 |
|
|
September 30, 2022 |
|
|
September 30, 2023 |
|
|
September 30, 2022 |
|
||||
|
Dispensary |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
Cultivation and wholesale |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
$ |
|
|
$ |
|
|
|
|
|
$ |
|
||||
During the three and nine months ended September 30, 2023, the Company netted discounts of $
Income taxes
The Company calculated its actual effective tax rate for the interim period and applied that rate to the interim period results. In accordance with ASC 740-270, at the end of each interim period the Company is required to determine its best estimate of its annual effective tax rate and apply that rate in providing income taxes on an interim period. However, in certain circumstances when the Company concludes it is unable to reliably estimate the annual effective tax rate for the year, the actual effective tax rate for the interim period may be used. The Company believes that, at this time, the use of the actual effective tax rate is more appropriate than the estimated annual effective tax rate method as the estimated annual effective tax rate method is not reliable due to the high degree of uncertainty in estimating annual pre-tax income due to the stage of growth of the business, and the correlation of Selling, General, and Administrative ("SG&A") expenses to revenue that are permanently disallowed via Section 280E of the Internal Revenue Code.
Modification of debt
The Company accounts for modifications of debt arrangements in accordance with ASC 470-50 Modifications and Extinguishments (“ASC 470-50”). As such, the Company continues to amortize any remaining unamortized debt discount as of the debt modification
9
date over the term of the amended debt. The Company expenses any fees paid to third parties and capitalizes creditor fees associated with the modification as a debt discount and amortizes them over the term of the amended debt. There have been
Business Combinations
We include the results of operations of the businesses that we acquire as of the acquisition date. We allocate the purchase price of the acquisitions to the assets acquired and liabilities assumed based on their estimated fair values. The excess of the purchase price over the fair values of identifiable assets and liabilities is recorded as goodwill. Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred.
Details of the Company’s inventory are shown in the table below:
|
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
|
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:
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
2026 Notes |
|
$ |
|
|
$ |
|
||
Term debt |
|
$ |
|
|
|
|
||
2025 Convertible Notes |
|
$ |
|
|
|
|
||
Mortgage Note |
|
$ |
|
|
|
|
||
2023 Convertible Notes |
|
$ |
|
|
|
|
||
Acquisition related real estate notes |
|
$ |
|
|
|
|
||
Acquisition related promissory notes |
|
$ |
|
|
|
|
||
Acquisition related term debt |
|
$ |
|
|
|
|
||
|
|
$ |
|
|
|
|
||
Unamortized debt discount |
|
$ |
( |
) |
|
|
( |
) |
Unamortized deferred financing costs |
|
$ |
( |
) |
|
|
( |
) |
Unamortized debt premium |
|
$ |
|
|
|
|
||
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 September 30, 2023.
2025 Convertible Notes
On June 29, 2021, the Company completed an offering of
10
accrue interest payable semiannually in arrears and mature on June 29, 2025, unless earlier converted, redeemed or repurchased. The 2025 Convertible Notes shall be convertible, at the option of the holder, from the date of issuance until the date that is 10 days prior to their maturity date into Common Shares of the Company at a conversion price equal to $
The 2025 Convertible Notes require interest-only payments until June 29, 2025, at a rate of
2023 Convertible Notes
On June 19, 2020, the Company completed the first tranche of an offering of senior secured convertible notes (“2023 Convertible Notes”) for an aggregate principal amount of $
Private Placement
On February 3, 2022, Cannabist 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 $
11
2026 Notes using the effective interest method. The Company incurred $
Conversion of Convertible notes
In April 2021, the Company offered an incentive program to the holders of the 2023 Convertible Notes, pursuant to which,
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 $
On August 10, 2023, the Company entered into two term loans and security agreements with a bank as follows:
Debt Transactions
The Company entered into a non-binding agreement with the September 2023 Investors (as defined in Note 10 below) with respect to the repurchase by the Company of up to $
Partial Redemption of 13% Notes due 2024
As described further in Note 10, on October 23, 2023, the Company retired $
Term debt
On March 31, 2020 and April 23, 2020, the Company completed the first and second tranches of a private placement of notes (“Private Notes”) for an aggregate principal amount of $
12
on September 30, 2020. The Private Notes were due in full on March 30, 2024. In connection with the first and second tranche offerings of the Private Notes, the Company issued
On May 14, 2020, the Company completed a private placement of an aggregate of
On July 2, 2020, the Company completed a second private placement of an aggregate of
On October 29, 2020, November 10, 2020 and November 27, 2020, the Company completed private placements of an aggregate of
On November 30, 2020, the Company completed another private placement of an aggregate of
At the option of the holder, each Warrant could be exchanged for one Common Share. The Warrants expired on May 14, 2023.
The 2024 Notes require interest-only payments through May 14, 2024, at a rate of
Upon initial recognition, the Company recorded $
Total interest and amortization expense on the Company’s debt obligations during the three and nine months ended September 30, 2023 and 2022 are as follows:
|
|
Three months ended |
|
|
Nine months ended |
|
||||||||||
|
|
September 30, 2023 |
|
|
September 30, 2022 |
|
|
September 30, 2023 |
|
|
September 30, 2022 |
|
||||
Interest expense on debt |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Amortization of debt discount |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amortization of debt premium |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Amortization of debt issuance costs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other interest income, net |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total interest expense, net |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The weighted average interest rate on the Company’s indebtedness was
Futurevision Holdings, Inc., Futurevision 2020, LLC and Medicine Man Longmont, LLC
On November 1, 2021, the Company acquired (the “Medicine Man Transaction”) a
13
Medicine Man was formed in 2010 for the purpose of selling medicinal and recreational cannabis products in the state of Colorado. Medicine Man owns and operates vertically integrated cultivation facilities, manufacturing facilities and retail dispensaries in the state of Colorado. The Company executed the Medicine Man Transaction in order to continue to grow revenues; expand its cultivation facilities, manufacturing facilities and dispensaries; and enter, or expand in the Colorado market.
Details of the Company’s property and equipment and related depreciation expense are summarized in the tables below:
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
Land and buildings |
|
$ |
|
|
$ |
|
||
Furniture and fixtures |
|
|
|
|
|
|
||
Equipment |
|
|
|
|
|
|
||
Computers and software |
|
|
|
|
|
|
||
Leasehold improvements |
|
|
|
|
|
|
||
Construction in process |
|
|
|
|
|
|
||
Total property and equipment, gross |
|
|
|
|
|
|
||
Less: Accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Total property and equipment, net |
|
$ |
|
|
$ |
|
||
|
|
Three months ended |
|
|
Nine months ended |
|
||||||||||
|
|
September 30, 2023 |
|
|
September 30, 2022 |
|
|
September 30, 2023 |
|
|
September 30, 2022 |
|
||||
Total depreciation expense for year ended |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Included in: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Costs of sales related to inventory production |
|
$ |
|
|
$ |
|
|
|
|
|
|
|
||||
Selling, general and administrative expenses |
|
$ |
|
|
$ |
|
|
|
|
|
|
|
||||
Non-core Asset Sales
Details of the Company’s prepaid expenses and other current assets are summarized in the table below:
|
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
|
Prepaid expenses |
|
$ |
|
|
|
|
||
|
Short term deposits |
|
|
|
|
|
|
||
|
Other current assets |
|
|
|
|
|
|
||
|
Excise and sales tax receivable |
|
|
|
|
|
|
||
|
Prepaid expenses and other current assets |
|
$ |
|
|
$ |
|
||
Details of the Company’s other non-current assets are summarized in the table below:
|
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
|
Long term deposits |
|
$ |
|
|
$ |
|
||
|
Indemnification receivable |
|
|
|
|
|
|
||
|
Investment in affiliates |
|
|
|
|
|
|
||
|
Restricted cash |
|
|
|
|
|
|
||
|
Notes receivable |
|
|
|
|
|
|
||
|
Other non-current assets |
|
$ |
|
|
$ |
|
||
14
Details of the Company’s accrued expenses and other current liabilities are summarized in the table below:
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
Accrued acquisition and settlement of pre-existing |
|
$ |
|
|
$ |
|
||
Taxes - property and other |
|
|
|
|
|
|
||
Other accrued expenses |
|
|
|
|
|
|
||
Payroll liabilities |
|
|
|
|
|
|
||
Other current liabilities |
|
|
|
|
|
|
||
Construction in progress |
|
|
|
|
|
|
||
Accrued expenses and other current liabilities |
|
$ |
|
|
$ |
|
||
As of September 30, 2023, other accrued expenses include approximately $
The Company had the following activity during the nine months ended September 30, 2023:
September 2023 Offering
On
The Company used the proceeds from the September 2023 Offering to reduce its outstanding indebtedness, as described further in Note 19 below.
The September 2023 Investors had the option to purchase $
15
As of September 30, 2023 and December 31, 2022, outstanding equity-classified warrants to purchase Common Shares consisted of the following:
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||||||||||
Expiration |
|
Number of Shares |
|
|
Exercise Price |
|
|
Number of Shares |
|
|
Exercise Price |
|
||||
May 8, 2021 |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|||
October 1, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
April 26, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
March 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
May 14, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
May 14, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
May 14, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Warrant activity for the nine months ended September 30, 2023 and 2022 are summarized in the table below:
|
|
|
|
|
Weighted average |
|
||
|
|
Number of |
|
|
exercise price |
|
||
|
|
Warrants |
|
|
(Canadian Dollars) |
|
||
Balance as of December 31, 2021 |
|
|
|
|
$ |
|
||
Exercised |
|
|
( |
) |
|
|
|
|
Balance as of September 30, 2022 |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Balance as of December 31, 2022 |
|
|
|
|
|
|
||
Exercised |
|
|
|
|
|
|
||
Expired |
|
|
( |
) |
|
|
|
|
Balance as of September 30, 2023 |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Basic and diluted net loss per share attributable to the Company was calculated as follows:
|
|
Three months ended |
|
|
Nine months ended |
|
||||||||||
|
|
September 30, 2023 |
|
|
September 30, 2022 |
|
|
September 30, 2023 |
|
|
September 30, 2022 |
|
||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Less: Net loss attributable to non-controlling interests |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Net loss attributable to shareholders |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average shares outstanding - basic and diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss per share - basic and diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Certain share-based equity awards were excluded from the computation of dilutive loss per share because inclusion of these awards would have had an anti-dilutive effect.
In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners, and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its board of directors and senior management that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited.
16
The Green Leaf Transaction closed on June 11, 2021. By letters dated April 22, 2022, June 1, 2022 and March 14, 2023, the Company notified the shareholder representative (“SRS”) for the former Green Leaf shareholders that the Company was seeking indemnification of approximately $
Additionally, the Company may be contingently liable with respect to other claims incidental to the ordinary course of its operations. In the opinion of management, and based on management’s consultation with legal counsel, the ultimate outcome of such other matters will not have a materially adverse effect on the Company. Accordingly, no provision has been made in these consolidated financial statements for losses, if any, which might result from the ultimate disposition of these matters should they arise.
Fair Value Measurements
The following table presents the Company’s financial instruments that are measured at fair value on a recurring basis:
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
September 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivative liability |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivative liability |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
( |
) |
During the period included in these financial statements, there were
The following table summarizes the valuation techniques and key inputs used in the fair value measurement of Level 3 financial instruments:
Financial asset/financial |
Valuation techniques |
Significant unobservable |
Relationship of unobservable |
Derivative liability |
Market approach |
Conversion Period |
Increase or decrease in conversion period will result in an increase or decrease in fair value |
The carrying amounts of cash and restricted cash, accounts receivable, and other current assets, accounts payable, accrued expenses, and other current liabilities, current portion of long-term debt and lease liability as of September 30, 2023 and December 31, 2022 approximate their fair values because of the short-term nature of these items and are not included in the table above. The Company’s other long-term payables, long-term debt and lease liabilities approximate fair value due to the market rate of interest used on initial recognition.
17
In addition to the disclosures for assets and liabilities required to be measured at fair value at the balance sheet date, companies are required to disclose the estimated fair values of all financial instruments, even if they are not presented at their fair value on the consolidated balance sheet. The fair values of financial instruments are estimates based upon market conditions and perceived risks as of September 30, 2023 and December 31, 2022. These estimates require management's judgment and may not be indicative of the future fair values of the assets and liabilities.
Goodwill and intangible assets consist of the following:
|
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
|
Goodwill |
|
$ |
|
|
$ |
|
||
|
Less: Accumulated impairment on goodwill |
|
|
( |
) |
|
|
( |
) |
|
Total goodwill, net |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
||
|
Licenses |
|
|
|
|
|
|
||
|
Trademarks |
|
|
|
|
|
|
||
|
Customer Relationships |
|
|
|
|
|
|
||
|
Total intangible assets |
|
|
|
|
|
|
||
|
Less: Accumulated amortization |
|
|
( |
) |
|
|
( |
) |
|
Total intangible assets, net |
|
$ |
|
|
$ |
|
||
The amortization expense for the three and nine months ended September 30, 2023 and 2022 are as follows:
|
|
Three months ended |
|
|
Nine months ended |
|
||||||||||
|
|
September 30, 2023 |
|
|
September 30, 2022 |
|
|
September 30, 2023 |
|
|
September 30, 2022 |
|
||||
Amortization expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling, general and administrative expenses are summarized in the table below:
|
|
Three months ended |
|
|
Nine months ended |
|
||||||||||
|
|
September 30, 2023 |
|
|
September 30, 2022 |
|
|
September 30, 2023 |
|
|
September 30, 2022 |
|
||||
Salaries and benefits |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Professional fees |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating facilities costs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating office and general expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Advertising and promotion |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other fees and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total selling, general and administrative expenses |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
18
Other expense, net is summarized in the table below:
|
|
Three months ended |
|
|
Nine months ended |
|
||||||||||
|
|
September 30, 2023 |
|
|
September 30, 2022 |
|
|
September 30, 2023 |
|
|
September 30, 2022 |
|
||||
Change in fair value of the derivative liability |
|
$ |
|
|
|
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Acquisition and settlement of pre-existing relationships |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Loss on deconsolidation |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earnout adjustment |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Restructuring expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other (income) expense, net |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Loss on disposal of group |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Rental income |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total other (income) expense, net |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
During the nine months ended September 30, 2023 the Company recorded $
18. DIVESTITURE
Columbia Care MO, LLC is licensed to sell medical and adult-use marijuana at its dispensary, as well as produce medical and adult-use marijuana products at its processing facility. The Company supported Columbia Care MO, LLC through management services agreements. In 2022, the Company began considering strategic options for Columbia Care MO, LLC, including the potential for the sale of its associated assets and liabilities (the “Missouri Business”). On March 13, 2023, a definitive agreement was signed to sell the Missouri Business, which is considered non-core, and the Company no longer operated the Missouri Business as of that date. The assets of the Missouri Business are comprised of one dispensary and one processing facility and are being divested for gross proceeds of approximately $
As of September 30, 2023, no assets or liabilities of the disposed-of business remained on our consolidated balance sheets.
|
Three months ended |
|
Nine months ended |
|
||||||||
|
September 30, 2023 |
|
September 30, 2022 |
|
September 30, 2023 |
|
September 30, 2022 |
|
||||
Revenue |
$ |
|
$ |
|
$ |
|
$ |
|
||||
Expenses |
$ |
|
$ |
|
$ |
|
$ |
|
||||
19. SUBSEQUENT EVENTS
Debt Redemption
As described in Note 10 above, on September 18, 2023, the Company raised gross proceeds of approximately $
Divestiture of non-core Asset
On October 6, 2023, the Company entered into a definitive agreement, subject to closing conditions, to dispose of its Utah operations (the “Utah Business”) which are considered non-core and comprised of one dispensary and one cultivation facility. The Utah Business is being divested for gross proceeds of approximately $
Share buy-back Authorization
19
On November 6, 2023, the Company's Board of Directors authorized a normal course issuer bid (the “NCIB”) to repurchase up to
20
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This management’s discussion and analysis (“MD&A”) of the financial condition and results of operations of The Cannabist Company Holdings Inc. (“Cannabist Company”, the “Company”, “us”, “our” or “we”) is supplemental to, and should be read in conjunction with, Cannabist Company's unaudited condensed consolidated interim financial statements and the accompanying notes for the three and nine months ended September 30, 2023 and 2022. Except for historical information, the discussion in this section contains forward-looking statements that involve risks and uncertainties. Future results could differ materially from those discussed below for many reasons, including the risks described in “Disclosure Regarding Forward-Looking Statements,” “Item 1A-Risk Factors” and elsewhere in the Company’s 2022 Form 10-K filed with the SEC on March 29, 2023 and subsequent securities filings.
Cannabist Company's financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”). Financial information presented in this MD&A is presented in thousands of United States dollars (“$” or “US$”), unless otherwise indicated.
OVERVIEW OF CANNABIST COMPANY
Our principal business activity is the production and sale of cannabis. We strive to be the premier provider of cannabis-related products in each of the markets in which we operate. Our mission is to improve lives by providing cannabis-based health and wellness solutions through community partnerships, research, education and the responsible use of our products as a natural means to improve the quality of life of our patients and customers.
CANNABIST COMPANY OBJECTIVES AND FACTORS AFFECTING OUR PERFORMANCE
As one of the largest fully integrated operators in the cannabis industry, our strategy to grow our business is comprised of the following key components:
Our performance and future success are dependent on several factors. These factors are also subject to inherent risks and challenges, some of which are discussed below.
Branding
We have established a national branding strategy across each of the jurisdictions in which we operate. Maintaining and growing our brand appeal is critical to our continued success. Effective September 2023, the Company changed its name from “Columbia Care Inc.” to “The Cannabist Company Holdings Inc.” reflecting the Company's "Cannabist" national retail brand that was established in 2021.
Regulation
We are subject to the local and federal laws in the jurisdictions in which we operate. We hold all required licenses for the production and distribution of our products in the jurisdictions in which we operate and continuously monitor changes in laws, regulations, treaties and agreements.
Product Innovation and Consumer Trends
Our business is subject to changing consumer trends and preferences, which is dependent, in part, on continued consumer interest in new products. The success of new product offerings, depends upon a number of factors, including our ability to (i) accurately anticipate customer needs; (ii) develop new products that meet these needs; (iii) successfully commercialize new products; (iv) price products competitively; (v) produce and deliver products in sufficient volumes and on a timely basis; and (vi) differentiate product offerings from those of competitors.
Growth Strategies
We have a successful history of growing revenue and we believe we have a strong strategy aimed at continuing our history of expansion in both current and new markets. Our future depends, in part, on our ability to implement our growth strategy including (i) product innovations; (ii) penetration of new markets; (iii) growth of wholesale revenue through third party retailers and distributors; (iv) future development of e-commerce and home delivery distribution capabilities; and (v) expansion of our cultivation and manufacturing capacity. Our ability to implement this growth strategy depends, among other things, on our ability to develop new products that appeal to consumers, maintain and expand brand loyalty, maintain and improve product quality and brand recognition, maintain and improve
21
competitive position in our current markets, and identify and successfully enter and market products in new geographic areas and segments.
SELECTED FINANCIAL INFORMATION
The following tables set forth selected consolidated financial information derived from our unaudited condensed consolidated interim financial statements and the respective accompanying notes prepared in accordance with U.S. GAAP.
During the periods discussed herein, our accounting policies have remained consistent. The selected and summarized consolidated financial information below may not be indicative of our future performance.
Statement of Operations:
|
|
Three months ended |
|
Nine months ended |
||||||||||||
|
|
September 30, 2023 |
|
September 30, 2022 |
|
$ Change |
|
% Change |
|
September 30, 2023 |
|
September 30, 2022 |
|
$ Change |
|
% Change |
Revenues |
|
$129,183 |
|
$132,733 |
|
$(3,550) |
|
(3)% |
|
$382,962 |
|
$385,391 |
|
$(2,429) |
|
(1)% |
Cost of sales related to inventory production |
|
(92,041) |
|
(80,462) |
|
(11,579) |
|
14% |
|
(246,617) |
|
(225,645) |
|
(20,972) |
|
9% |
Cost of sales related to business combination fair value adjustments to inventories |
|
— |
|
(136) |
|
136 |
|
(100)% |
|
— |
|
(136) |
|
136 |
|
(100)% |
Gross profit |
|
$37,142 |
|
$52,135 |
|
$(14,993) |
|
(29)% |
|
$136,345 |
|
$159,610 |
|
$(23,265) |
|
(15)% |
Selling, general and administrative expenses |
|
(56,472) |
|
(70,845) |
|
14,373 |
|
(20)% |
|
(163,895) |
|
(215,093) |
|
51,198 |
|
(24)% |
Loss from operations |
|
(19,330) |
|
(18,710) |
|
(620) |
|
3% |
|
(27,550) |
|
(55,483) |
|
27,933 |
|
(50)% |
Other expense, net |
|
(14,553) |
|
(13,018) |
|
(1,535) |
|
12% |
|
(54,948) |
|
(39,072) |
|
(15,876) |
|
41% |
Income tax expense |
|
(2,297) |
|
(6,575) |
|
4,278 |
|
(65)% |
|
(19,291) |
|
(25,909) |
|
6,618 |
|
(26)% |
Net loss |
|
(36,180) |
|
(38,303) |
|
2,123 |
|
(6)% |
|
(101,789) |
|
(120,464) |
|
18,675 |
|
(16)% |
Net income (loss) attributable to non-controlling interests |
|
545 |
|
(2,872) |
|
3,417 |
|
(119)% |
|
1,139 |
|
(4,569) |
|
5,708 |
|
(125)% |
Net loss attributable to The Cannabist Company Holdings Inc. |
|
$(36,725) |
|
$(35,431) |
|
$(1,294) |
|
4% |
|
$(102,928) |
|
$(115,895) |
|
$12,967 |
|
(11)% |
Loss per share attributable to The Cannabist Company Holdings Inc.—based and diluted |
|
$(0.09) |
|
$(0.09) |
|
$(0.00) |
|
1% |
|
$(0.25) |
|
$(0.30) |
|
$0.04 |
|
(15)% |
Weighted average number of shares outstanding—basic and diluted |
|
409,113,721 |
|
399,227,935 |
|
|
|
|
|
405,472,948 |
|
389,966,408 |
|
|
|
|
Summary of Balance Sheet items:
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
Total Assets |
|
$ |
948,394 |
|
|
$ |
994,726 |
|
Total Liabilities |
|
$ |
797,608 |
|
|
$ |
787,823 |
|
Total Long-Term Liabilities |
|
$ |
600,340 |
|
|
$ |
584,705 |
|
Total Equity |
|
$ |
150,786 |
|
|
$ |
206,903 |
|
22
RESULTS OF OPERATIONS
Comparison of the three and nine months ended September 30, 2023 and 2022
The following table summarizes our results of operations for the three months ended September 30, 2023 and 2022:
|
|
For the three months ended |
|
|||||||||||||
|
|
September 30, 2023 |
|
|
September 30, 2022 |
|
|
$ |
|
|
% |
|
||||
Revenues |
|
$ |
129,183 |
|
|
$ |
132,733 |
|
|
$ |
(3,550 |
) |
|
|
(3 |
)% |
Cost of sales related to inventory production |
|
|
(92,041 |
) |
|
|
(80,462 |
) |
|
|
(11,579 |
) |
|
|
14 |
% |
Cost of sales related to business combination fair value adjustments to inventories |
|
|
— |
|
|
|
(136 |
) |
|
|
136 |
|
|
|
(100 |
)% |
Gross profit |
|
$ |
37,142 |
|
|
$ |
52,135 |
|
|
$ |
(14,993 |
) |
|
|
(29 |
)% |
Selling, general and administrative expenses |
|
|
(56,472 |
) |
|
|
(70,845 |
) |
|
|
14,373 |
|
|
|
(20 |
)% |
Loss from operations |
|
|
(19,330 |
) |
|
|
(18,710 |
) |
|
|
(620 |
) |
|
|
3 |
% |
Other expense, net |
|
|
(14,553 |
) |
|
|
(13,018 |
) |
|
|
(1,535 |
) |
|
|
12 |
% |
Loss before provision for income taxes |
|
|
(33,883 |
) |
|
|
(31,728 |
) |
|
|
(2,155 |
) |
|
|
7 |
% |
Income tax expense |
|
|
(2,297 |
) |
|
|
(6,575 |
) |
|
|
4,278 |
|
|
|
(65 |
)% |
Net loss |
|
|
(36,180 |
) |
|
|
(38,303 |
) |
|
|
2,123 |
|
|
|
(6 |
)% |
Net income (loss) attributable to non-controlling interests |
|
|
545 |
|
|
|
(2,872 |
) |
|
|
3,417 |
|
|
|
(119 |
)% |
Net loss attributable to The Cannabist Company Holdings Inc. |
|
$ |
(36,725 |
) |
|
$ |
(35,431 |
) |
|
$ |
(1,294 |
) |
|
|
4 |
% |
Revenues
The decrease in revenue of $3,550 for the three months ended September 30, 2023, as compared to the prior year period, was driven by the net decline in revenue of $9,804 in our existing retail and wholesale operations and a decline of $4,215 from the sale or closure of certain operations. This was partly offset by the expansion of new retail facilities which contributed to a revenue growth of $10,469 during the three months ended September 30, 2023, as compared to the prior period.
Cost of Sales
The increase in cost of sales of $11,579 for the three months ended September 30, 2023, as compared to the prior year period, was driven by a cost of sales increase of $12,030 in our existing retail and wholesale operations, including from inventory impairment, and by $3,363 from the expansion of new retail facilities. This was partly offset by a decline of $3,813 from the sale or closure of certain operations during the three months ended September 30, 2023, as compared to the prior period.
Gross Profit
The decrease in gross profit of $14,993 for the three months ended September 30, 2023, as compared to the prior year period, was primarily driven by a gross profit decrease of $19,956 in our existing wholesale and retail facilities, including from inventory impairment, and a decrease of $402 from the sale or closure of certain operations. This was offset by an expansion of new retail facilities contributing gross profit growth of $5,365 during the three months ended September 30, 2023, as compared to the prior period.
Operating Expenses
The decrease of $14,373 in operating expenses for the three months ended September 30, 2023, as compared to the prior year period, was primarily attributable to a decrease in salary and benefits expenses of $3,048, depreciation and amortization of $5,165, professional fees of $774, advertisement and promotion expenses of $2,230, and operating office and general expenses of $2,727.
Other Expense, Net
The increase in other expense, net of $1,535 for the three months ended September 30, 2023, as compared to the prior year period, was primarily due to an increase in interest expense on debt of $497, loss on disposal of group of $40, restructuring expense of $568, decrease in acquisition and settlement of pre-existing relationships of $37,362, decrease in rental income of $361, decrease in change in fair value of the derivative liability of $268, and decrease in earnout adjustment income of $127. This was partially offset by a decrease in other expenses of $37,352, and interest on lease of $336.
23
Provisions for Income Taxes
The Company recorded income tax expense of $2,297 for the three months ended September 30, 2023, as compared to an income tax expense of $6,575 for the three months ended September 30, 2022.
At September 30, 2023 the company has a Deferred Tax Asset of approximately $16,661 related to its acquisition of VentureForth LLC, which occurred during 2022. The consideration paid to acquire 100% of the VentureForth Holdings LLC partnership interests was expensed for book purposes. For tax purposes, such consideration is capitalized as the transaction is treated as a deemed asset purchase for tax purposes. Such treatment results in a Deferred Tax Asset. However, because of the limitations of Section 280E of the Internal Revenue Code, the company does not expect to recognize the full tax benefit for this specific deferred tax asset.
The following table summarizes our results of operations for the nine months ended September 30, 2023 and 2022:
|
|
For the Nine months ended |
|
|||||||||||||
|
|
September 30, 2023 |
|
|
September 30, 2022 |
|
|
$ |
|
|
% |
|
||||
Revenues |
|
$ |
382,962 |
|
|
$ |
385,391 |
|
|
$ |
(2,429 |
) |
|
|
(1 |
)% |
Cost of sales related to inventory production |
|
|
(246,617 |
) |
|
|
(225,645 |
) |
|
|
(20,972 |
) |
|
|
9 |
% |
Cost of sales related to business combination fair value adjustments to inventories |
|
|
— |
|
|
|
(136 |
) |
|
|
136 |
|
|
|
(100 |
)% |
Gross profit |
|
$ |
136,345 |
|
|
$ |
159,610 |
|
|
$ |
(23,265 |
) |
|
|
(15 |
)% |
Selling, general and administrative expenses |
|
|
(163,895 |
) |
|
|
(215,093 |
) |
|
|
51,198 |
|
|
|
(24 |
)% |
Loss from operations |
|
|
(27,550 |
) |
|
|
(55,483 |
) |
|
|
27,933 |
|
|
|
(50 |
)% |
Other expense, net |
|
|
(54,948 |
) |
|
|
(39,072 |
) |
|
|
(15,876 |
) |
|
|
41 |
% |
Loss before provision for income taxes |
|
|
(82,498 |
) |
|
|
(94,555 |
) |
|
|
12,057 |
|
|
|
(13 |
)% |
Income tax expense |
|
|
(19,291 |
) |
|
|
(25,909 |
) |
|
|
6,618 |
|
|
|
(26 |
)% |
Net loss |
|
|
(101,789 |
) |
|
|
(120,464 |
) |
|
|
18,675 |
|
|
|
(16 |
)% |
Net income (loss) attributable to non-controlling interests |
|
|
1,139 |
|
|
|
(4,569 |
) |
|
|
5,708 |
|
|
|
(125 |
)% |
Net loss attributable to The Cannabist Company Holdings Inc. |
|
$ |
(102,928 |
) |
|
$ |
(115,895 |
) |
|
$ |
12,967 |
|
|
|
(11 |
)% |
Revenues
The decrease in revenue of $2,429 for the nine months ended September 30, 2023, as compared to the prior year period, was driven by the net decline in revenue of $18,339 in our existing retail and wholesale operations and a decline of $10,369 from the sale or closure of certain operations. This was partly offset by the expansion of new retail facilities which contributed to a revenue growth of $26,279 during the nine months ended September 30, 2023, as compared to the prior period.
Cost of Sales
The increase in cost of sales of $20,972 for the nine months ended September 30, 2023, as compared to the prior year period, was driven by a cost of sales increase of $21,312 in our existing retail and wholesale operations, including from inventory impairment, and by $8,361 from the expansion of new retail facilities. This was partly offset by a decline of $8,323 from the sale or closure of certain operations during the nine months ended September 30, 2023, as compared to the prior period.
Gross Profit
The decrease in gross profit of $23,265 for the nine months ended September 30, 2023, as compared to the prior year period, was primarily driven by a gross profit decrease of $35,352 in our existing wholesale and retail facilities, including from inventory impairment, and a decrease of $2,046 from the sale or closure of certain operations. This was offset by an expansion of new retail facilities contributing gross profit growth of $14,133 during the nine months ended September 30, 2023, as compared to the prior period.
Operating Expenses
The decrease of $51,198 in operating expenses for the nine months ended September 30, 2023, as compared to the prior year period, was primarily attributable to a decrease in salary and benefits expenses of $14,111, depreciation and amortization of $18,041, professional fees of $6,311, advertisement and promotion expenses of $7,422, operating office and general expenses of $2,175, and other fees and expenses of $3,269. This was partially offset by an increase in operating facilities costs of $131.
24
Other Expense, Net
The increase in other expense, net of $15,876 for the nine months ended September 30, 2023, as compared to the prior year period, was primarily due to an increase in interest expense on debt of $3,068, loss on disposal of group of $9,089, loss on deconsolidation of $2,473, restructuring expense of $3,812, decrease in acquisition and settlement of pre-existing relationships of $37,362, decrease in rental income of $269, and decrease in change in fair value of the derivative liability of $5,995. This was partially offset by a decrease in other expenses of $44,868, earnout adjustment of $349, and interest on lease of $975.
Provisions for Income Taxes
The Company recorded income tax expense of $19,291 for the nine months ended September 30, 2023, as compared to an income tax expense of $25,909 for the nine months ended September 30, 2022.
At September 30, 2023 the company has a Deferred Tax Asset of approximately $16,661 related to its acquisition of VentureForth LLC, which occurred during 2022. The consideration paid to acquire 100% of the VentureForth Holdings LLC partnership interests was expensed for book purposes. For tax purposes, such consideration is capitalized as the transaction is treated as a deemed asset purchase for tax purposes. Such treatment results in a Deferred Tax Asset. However, because of the limitations of Section 280E of the Internal Revenue Code, the company does not expect to recognize the full tax benefit for this specific deferred tax asset.
Non-GAAP Measures
We use certain non-GAAP measures, referenced in this MD&A. These measures are not recognized measures under GAAP and do not have a standardized meaning prescribed by GAAP and therefore may not be comparable to similar measures presented by other companies. Accordingly, these measures should not be considered in isolation from nor as a substitute for our financial information reported under GAAP. We use non-GAAP measures including EBITDA, Adjusted EBITDA and Adjusted EBITDA margin which may be calculated differently by other companies. These non-GAAP measures and metrics are used to provide investors with supplemental measures of our operating performance and liquidity and thus highlight trends in our business that may not otherwise be apparent when relying solely on GAAP measures. These supplemental non-GAAP financial measures should not be considered superior to, as a substitute for, or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented. We also recognize that securities analysts, investors and other interested parties frequently use non-GAAP measures in the evaluation of companies within our industry. Finally, we use non-GAAP measures and metrics in order to facilitate evaluation of operating performance comparisons from period to period, to prepare annual operating budgets and forecasts and to determine components of executive compensation.
25
The following table provides a reconciliation of net loss for the period to EBITDA and Adjusted EBITDA for the three and nine months ended September 30, 2023, and 2022:
|
|
Three months ended |
|
|
Nine months ended |
|
||||||||||
|
|
September 30, 2023 |
|
|
September 30, 2022 |
|
|
September 30, 2023 |
|
|
September 30, 2022 |
|
||||
Net loss |
|
$ |
(36,180 |
) |
|
$ |
(38,303 |
) |
|
$ |
(101,789 |
) |
|
$ |
(120,464 |
) |
Income tax |
|
|
2,297 |
|
|
|
6,575 |
|
|
|
19,291 |
|
|
|
25,909 |
|
Depreciation and amortization |
|
|
17,929 |
|
|
|
21,808 |
|
|
|
47,607 |
|
|
|
63,077 |
|
Interest expense, net and debt amortization |
|
|
14,500 |
|
|
|
14,339 |
|
|
|
41,956 |
|
|
|
38,507 |
|
EBITDA (Non-GAAP measure) |
|
$ |
(1,454 |
) |
|
$ |
4,419 |
|
|
$ |
7,065 |
|
|
$ |
7,029 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Share-based compensation |
|
|
8,321 |
|
|
|
6,597 |
|
|
|
18,304 |
|
|
|
20,649 |
|
Fair-value mark-up for acquired inventory |
|
|
— |
|
|
|
136 |
|
|
|
— |
|
|
|
136 |
|
Transaction and other non-core costs, including costs associated with the Cresco transaction, litigation expenses and other costs related to restructuring |
|
|
1,720 |
|
|
|
10,084 |
|
|
|
4,502 |
|
|
|
28,097 |
|
Fair-value changes on derivative liabilities |
|
|
25 |
|
|
|
(243 |
) |
|
|
55 |
|
|
|
(5,940 |
) |
Restructuring expense |
|
|
11,147 |
|
|
|
— |
|
|
|
14,391 |
|
|
|
— |
|
Loss on deconsolidation |
|
|
694 |
|
|
|
— |
|
|
|
3,167 |
|
|
|
— |
|
Impairment on disposal group |
|
|
40 |
|
|
|
— |
|
|
|
9,689 |
|
|
|
— |
|
Adjusted EBITDA (Non-GAAP measure) |
|
$ |
20,493 |
|
|
$ |
20,993 |
|
|
$ |
57,173 |
|
|
$ |
49,971 |
|
Revenue |
|
$ |
129,183 |
|
|
$ |
132,733 |
|
|
$ |
382,962 |
|
|
$ |
385,391 |
|
Adjusted EBITDA (Non-GAAP measure) |
|
|
20,493 |
|
|
|
20,993 |
|
|
|
57,173 |
|
|
|
49,971 |
|
Adjusted EBITDA margin (Non-GAAP measure) |
|
|
15.9 |
% |
|
|
15.8 |
% |
|
|
14.9 |
% |
|
|
13.0 |
% |
Revenue |
|
$ |
129,183 |
|
|
$ |
132,733 |
|
|
$ |
382,962 |
|
|
$ |
385,391 |
|
Gross profit |
|
|
37,142 |
|
|
|
52,135 |
|
|
|
136,345 |
|
|
|
159,610 |
|
Gross margin |
|
|
28.8 |
% |
|
|
39.3 |
% |
|
|
35.6 |
% |
|
|
41.4 |
% |
Adjusted EBITDA
The decrease in Adjusted EBITDA for the three months ended September 30, 2023, as compared to the prior year period, was primarily driven by declines in gross profit in the ongoing wholesale and retail operations and through restructuring and disposal activity, partially offset by improved leverage of revenues across selling, general, and administrative expenses such as facility costs, salary costs, and benefit costs.
The increase in Adjusted EBITDA for the nine months ended September 30, 2023, as compared to the prior year period, was primarily driven by improved leverage of revenues across selling, general, and administrative expenses, such as facility costs, salary costs, and benefit costs, primarily achieved through restructuring activities. This was partially offset by gross profit declines in the ongoing wholesale and retail operations.
Our future financial results are subject to significant potential fluctuations caused by, among other things, growth of sales volume in new and existing markets and our ability to control operating expenses. In addition, our financial results may be impacted significantly by changes to the regulatory environment in which we operate, on a local, state and federal level.
Liquidity and Capital Resources
Our primary need for liquidity is to fund working capital requirements of our business, capital expenditures and for general corporate purposes. Historically, we have relied on external financing as our primary source of liquidity. Our ability to fund our operations and to make capital expenditures depends on our ability to successfully secure financing through issuance of debt or equity, as well as our ability to improve our future operating performance and cash flows, which are subject to prevailing economic conditions and financial, business and other factors, some of which are beyond our control.
We are currently meeting our obligations and are earning revenues from our operations. However, we have sustained losses since inception and may require additional capital in the future. We estimate that based on our current business operations and working capital, we will continue to meet our obligations in the short term. As we continue to seek growth through expansion or acquisition, our cash flow requirements and obligations could materially change. As of September 30, 2023, we did not have any significant external capital requirements.
26
Recent Financing Transactions
Private Placement
On February 3, 2022, Cannabist Company closed a private placement of $185,000 aggregate principal amount of 9.50% senior-secured first-lien notes due 2026 (the “2026 Notes”) and received aggregate gross proceeds of $153,250. The 2026 Notes are senior secured obligations of the Company and were issued at 100.0% of face value. The 2026 Notes accrue interest in arrears which is payable semi-annually and mature on February 3, 2026, unless earlier redeemed or repurchased. The Company may redeem the 2026 Notes at par, in whole or in part, on or after February 3, 2024, as more particularly described in the fourth supplemental trust indenture governing the 2026 Notes. In connection with the offering of the 2026 Notes, the Company exchanged $31,750 of the Company’s existing 13.0% Term Debt, pursuant to private agreements in accordance with the trust indenture, for an equivalent amount of 2026 Notes plus accrued but unpaid interest and any negotiated premium thereon.
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 $2,153, related to the modified portion of the 13.0% Term Debt, will be amortized over the term of the 2026 Notes using the effective interest method. The Company incurred $7,189 in creditor fees in connection with the modified 13.0% Term Debt and 2026 Notes and $301 in third-party legal fees related to 2026 Notes which were capitalized and will be amortized over the term of the 2026 Notes using the effective interest rate method.
September 2023 Offering
On September 18, 2023, the Company entered into subscription agreements with institutional investors (the “September 2023 Investors”) for the purchase and sale of 22,244,210 units of the Company (the “September 2023 Units”) at a price of C$1.52 per September 2023 Unit (the “Issue Price”) pursuant to a private placement (the “September 2023 Offering”), for aggregate gross proceeds of approximately C$33.8 million or approximately $25 million (the “Initial Tranche”). Each September 2023 Unit consists of one Common Share (or Common Share equivalent) and one half of one warrant that entitles the holder to acquire one Common Share at a price of C$1.96 per Common Share, a 29% premium to issue, for a period of three years following the closing of the Initial Tranche (each full warrant, a “September 2023 Warrant”). The Initial Tranche consisted of an aggregate of 21,887,240 Common Shares, 11,122,105 September 2023 Warrants and 356,970 pre-funded warrants that provide the holder the right to purchase one Common Share at an exercise price of C$0.0001 per Common Share (the “September 2023 Pre-Funded Warrants”). The September 2023 Offering closed on September 21, 2023.
The Company used the proceeds from the September 2023 Offering to reduce its outstanding indebtedness.
The September 2023 Investors had the option to purchase $25 million in additional September 2023 Units at a price equal to the Issue Price, upon written notice to the Company at any time up to November 2, 2023, which was not exercised. In connection with the September 2023 Offering, the Company and the September 2023 Investors entered into a customary registration rights agreement, pursuant to which the Company filed a registration statement on Form S-1 on October 17, 2023 to register the resale of the Common Shares underlying the September 2023 Units. The September 2023 Units are subject to limited lock-up requirements.
Cash Flows
The following table summarizes the sources and uses of cash for each of the periods presented:
|
|
Nine months ended |
|
|||||
|
|
September 30, 2023 |
|
|
September 30, 2022 |
|
||
Net cash used in operating activities |
|
$ |
(1,909 |
) |
|
$ |
(116,553 |
) |
Net cash provided by (used in) investing activities |
|
|
21,938 |
|
|
|
(71,958 |
) |
Net cash provided by (used in) financing activities |
|
|
(5,927 |
) |
|
|
157,336 |
|
Net increase (decrease) in cash |
|
$ |
14,102 |
|
|
$ |
(31,175 |
) |
Operating Activities
During the nine months ended September 30, 2023, operating activities used $1,909 of cash, primarily resulting from a net loss of $101,789 and a change in deferred taxes of $6,475; this was partially offset by depreciation and amortization of $47,607, equity-based compensation expense of $18,304, loss on disposal group of $10,750, loss on deconsolidation of subsidiary of $2,473, debt amortization expense of $7,366, provision for obsolete inventory and other assets of $8,126, and net changes in operating assets and liabilities of $11,028. The net change in operating assets and liabilities was primarily due to a decrease in other assets of $12,270, an increase in accounts payable of $20,092, and an increase in income tax payable of $11,306; this was offset by an increase in accounts receivable of
27
$15,718, an increase in prepaid expenses and other current assets of $4,933, a decrease in other long-term liabilities of $5,291, and other current liabilities of $7,264.
During the nine months ended September 30, 2022, operating activities used $116,553 of cash, primarily resulting from a net loss of $120,464, net changes in operating assets and liabilities of $44,113, and a gain on remeasurement of contingent consideration of $37,362; this was partially offset by depreciation and amortization of $63,077, equity-based compensation expense of $20,649, and debt amortization expense of $6,278.
Investing Activities
During the nine months ended September 30, 2023, investing activities provided $21,938 of cash mainly due to proceeds from sale of plant, property and equipment of $3,189, proceeds for stock issuance of $23,872, proceeds from deconsolidation of Missouri entity of $3,040, and net cash received on deposits of $97. This was partially offset by cash used in purchases of property and equipment of $8,260.
During the nine months ended September 30, 2022, investing activities used $71,958 of cash pursuant to purchases of property and equipment of $69,362 and cash paid on deposits of $2,973. This was partially offset by proceeds from the sale of property and equipment of $358.
Financing Activities
During the nine months ended September 30, 2023, financing activities used $5,927 of cash, mainly due to the payment of lease liabilities of $6,153, distributions to non-controlling interest holders of $431, taxes paid on equity-based compensation of $456, repayment of a seller's note of $1,125, repayment of debt of $5,592. This was partially offset by cash provided by issuance of mortgage of $8,050.
During the nine months ended September 30, 2022, financing activities provided $157,336 of cash, mainly due to $153,250 in net proceeds received from the issuance of debt and the issuance of a mortgage of $16,500; this was partially offset by a debt issuance cost of $7,699 and lease liability payments of $2,965.
Contractual Obligations and Commitments
The following table summarizes contractual obligations as of September 30, 2023 and the effects that such obligations are expected to have on our liquidity and cash flows in future periods:
|
|
Payments Due by Period |
|||||||||||||||||||||||||||
|
|
Total |
|
|
Less than 1 year |
|
|
Year 1 |
|
|
Year 2 |
|
|
Year 3 |
|
|
Year 4 |
|
|
Year 5 and beyond |
|
|
|||||||
Lease commitments |
|
$ |
394,406 |
|
|
$ |
6,344 |
|
|
$ |
36,286 |
|
|
$ |
32,134 |
|
|
$ |
29,711 |
|
|
$ |
29,258 |
|
|
$ |
260,673 |
|
|
Sale-Leaseback commitments |
|
$ |
200,425 |
|
|
$ |
2,467 |
|
|
$ |
10,082 |
|
|
$ |
10,407 |
|
|
$ |
10,743 |
|
|
$ |
11,090 |
|
|
$ |
155,636 |
|
|
2026 Notes |
|
$ |
185,000 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
185,000 |
|
|
$ |
— |
|
|
$ |
— |
|
|
Term debt (principal) |
|
$ |
38,215 |
|
|
$ |
— |
|
|
$ |
38,215 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
Interest on term debt |
|
$ |
50,567 |
|
|
$ |
2,484 |
|
|
$ |
20,059 |
|
|
$ |
17,575 |
|
|
$ |
10,449 |
|
|
$ |
— |
|
|
$ |
— |
|
|
Convertible debt (principal) |
|
$ |
80,100 |
|
|
$ |
5,600 |
|
|
$ |
— |
|
|
$ |
74,500 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
Interest on convertible debt |
|
$ |
7,734 |
|
|
$ |
1,041 |
|
|
$ |
4,470 |
|
|
$ |
2,223 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
Mortgage notes (principal) |
|
$ |
43,640 |
|
|
$ |
219 |
|
|
$ |
593 |
|
|
$ |
670 |
|
|
$ |
746 |
|
|
$ |
33,698 |
|
|
$ |
7,714 |
|
|
Mortgage notes (interest) |
|
$ |
17,660 |
|
|
$ |
2,095 |
|
|
$ |
4,671 |
|
|
$ |
4,595 |
|
|
$ |
4,518 |
|
|
$ |
1,150 |
|
|
$ |
631 |
|
|
Closing promissory note (principal) |
|
$ |
1,875 |
|
|
$ |
375 |
|
|
$ |
1,500 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
Closing promissory note (interest) |
|
$ |
112 |
|
|
$ |
37 |
|
|
$ |
75 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
Total contractual obligations |
|
$ |
1,019,734 |
|
|
$ |
20,662 |
|
|
$ |
115,951 |
|
|
$ |
142,103 |
|
|
$ |
241,167 |
|
|
$ |
75,195 |
|
|
$ |
424,654 |
|
|
28
The above table excludes purchase orders for inventory in the normal course of business.
Effects of Inflation
Rising inflation rates have had a substantial impact on our financial performance to date and may have an impact on our financial performance in the future as our ability to pass on an increase in costs is not entirely within our control.
Critical Accounting Estimates
We make judgements, estimates and assumptions about the future that affect assets and liabilities, and revenues and expenses. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the review affects both current and future periods.
Judgements estimates and assumptions with the most significant effect on the amounts recognized in the consolidated financial statements are described below.
FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT
Our financial instruments consist of cash and cash equivalents, accounts receivable, notes receivable, deposits and other current assets, accounts payable, accrued expenses, current taxes payable and other current liabilities like interest payable and payroll liabilities, derivative liability, debt and lease liabilities. The fair values of cash and restricted cash, accounts and notes receivable, deposits, accounts payable and accrued expenses and other current liabilities like interest payable and payroll liabilities, short-term debt and lease liabilities approximate their carrying values due to the relatively short-term to maturity or because of the market rate of interest used on initial recognition. Cannabist Company classifies its derivative liability as fair value through profit and loss (FVTPL).
Financial instruments recorded at fair value are classified using a fair value hierarchy that reflects the significance of the inputs to fair value measurements. The three levels of fair value contained within the hierarchy are:
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities;
Level 2 – Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly; and
Level 3 – Inputs for the asset or liability that are not based on observable market data.
Our assets measured at fair value on a nonrecurring basis include investments, assets and liabilities held for sale, long-lived assets and indefinite-lived intangible assets. We review the carrying amounts of such assets whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable or at least annually, for indefinite-lived intangible assets. Any resulting asset impairment would require that the asset be recorded at its fair value. The resulting fair value measurements of the assets are considered Level 3 measurements.
Financial Risk Management
We are exposed in varying degrees to a variety of financial instrument related risks. Our risk exposures and the impact on our financial instruments is summarized below:
Credit Risk
Credit risk is the risk of a potential loss to us if a customer or third party to a financial instrument fails to meet its contractual obligations. The maximum credit exposure at September 30, 2023 and December 31, 2022, is the carrying amount of cash and cash equivalents, subscription receivable, accounts receivable and notes receivable. We do not have significant credit risk with respect to our customers. All cash deposits are with regulated U.S. financial institutions.
We provide credit to our customers in the normal course of business and have established credit evaluation and monitoring processes to mitigate credit risk but have limited risk as the majority of our sales are transacted with cash. Through our Cannabist Company National Credit program, we provide credit to customers in certain markets in which we operate.
Liquidity Risk
Liquidity risk is the risk that we will not be able to meet our financial obligations associated with financial liabilities. We manage liquidity risk through the management of our capital structure. Our approach to managing liquidity is to estimate cash requirements from operations, capital expenditures and investments and ensure that we have sufficient liquidity to fund our ongoing operations and to settle obligations and liabilities when due.
To date, we have incurred significant cumulative net losses and we have not generated positive cash flows from our operations. We have therefore depended on financing from sale of our equity and from debt financing to fund our operations. Overall, we do not expect the
29
net cash contribution from our operations and investments to be positive in the near term, and we therefore expect to rely on financing from equity or debt.
Market Risk
In addition to business opportunities and challenges applicable to any business operating in a fast-growing environment, our business operates in a highly regulated and multi-jurisdictional industry, which is subject to potentially significant changes outside of our control as individual states as well as the U.S. federal government may impose restrictions on our ability to grow our business profitably or enact new laws and regulations that open up new markets.
Interest Rate Risk
Interest rate risk is the risk that the fair value or future cash flows of our financial instrument will fluctuate because of changes in market interest rates. Our cash deposits bear interest at market rates.
Currency Risk
Our operating results and financial position are reported in thousands of U.S. dollars. We may enter into financial transactions denominated in other currencies, which would result in your operations and financial position becoming subject to currency transaction and translation risks.
As of September 30, 2023, and December 31, 2022, we had no hedging agreements in place with respect to foreign exchange rates. We have not entered into any agreements or purchased any instruments to hedge possible currency risks at this time.
Price Risk
Price risk is the risk of variability in fair value due to movements in equity or market prices. We are subject to the risk of price variability pursuant to our products due to competitive or regulatory pressures.
30
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
There have been no significant material changes to the market risks as disclosed in the Company’s 2022 Form 10-K. See also Financial Risk Management in Part I, Item 2 of this Form 10-Q.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report were effective to provide reasonable assurance that the information required to be disclosed by the Company in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that it is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control
There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) under the Securities Exchange Act of 1934, as amended) during the quarter ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
31
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
A discussion of our litigation matters occurring in the period covered by this report is found in Reference to Part I, Item 1, Note 13, Commitments and Contingencies in the Notes to Unaudited Interim Consolidated Financial Statements of this Form 10-Q.
Item 1A. Risk Factors
As of the date of this filing, except as noted below, there have been no material changes in our risk factors from those disclosed in Part I, Item 1A, of the Company’s 2022 Form 10-K, which is incorporated by reference herein.
Item 2. Unregistered Sales of Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
Securities Trading Plans of Directors and Executive Officers
During the three and nine months ended September 30, 2023, none of our directors or executive officers
Item 6. Exhibit Index
Exhibit Number |
|
Description |
2.1 |
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2.2 |
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3.1 |
|
|
3.2 |
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4.1 |
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4.2 |
|
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4.3 |
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4.4 |
|
|
4.5 |
|
32
4.6 |
|
|
4.7 |
|
|
4.8 |
|
|
4.9 |
|
|
4.10 |
|
|
4.11 |
|
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4.12 |
|
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4.13 |
|
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4.14 |
|
|
10.1 |
|
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10.2* |
|
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31.1* |
|
|
31.2* |
|
|
32.1‡ |
|
|
32.2‡ |
|
|
101.INS* |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
101.SCH* |
|
Inline XBRL Taxonomy Extension Schema Document |
101.CAL* |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF* |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB* |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE* |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104* |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed herewith.
‡ Document has been furnished, is not deemed filed and is not to be incorporated by reference into any of the Company’s filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, irrespective of any general incorporation language contained in any such filing.
33
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
THE CANNABIST COMPANY HOLDINGS INC. |
|
|
|
|
|
Date: November 14, 2023 |
|
By: |
/s/ Nicholas Vita |
|
|
|
Nicholas Vita |
|
|
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Chief Executive Officer and Director |
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|
|
|
Date: November 14, 2023 |
|
By: |
/s/ Derek Watson |
|
|
|
Derek Watson |
|
|
|
Chief Financial Officer |
34
Exhibit 10.2
TRANSITION AND RELEASE OF CLAIMS AGREEMENT
This Transition and Release of Claims Agreement (“Agreement”) is entered into as of August 31, 2023, hereinafter “Effective Date,” by and between Rosemary Mazanet, Rosemary Mazanet’s marital community (if any), heirs, and assigns (hereinafter “Mazanet” or “Executive”), and Columbia Care LLC, a Delaware Corporation, its affiliates (including, without limitation, any parent, subsidiary companies, or related companies such as Columbia Care Inc.), its successors and assigns (hereinafter the “Company”). Mazanet and the Company are sometimes collectively referred to as the “Parties.”
NOW, THEREFORE, in consideration of the premises and the mutual covenants set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto covenant and agree as follows:
{00145592;2 }
- 2 -
Mazanet specifically acknowledges and agrees that this consideration exceeds the amount Mazanet would otherwise be entitled to receive upon termination of Mazanet’s employment, and that it is in exchange for entering into this Agreement. Mazanet will not at any time seek additional consideration in any form from the Company except as expressly set forth in this Agreement. Mazanet specifically acknowledges and agrees that the Company has made no representations to Mazanet regarding the tax consequences of any amounts received by Mazanet or for Mazanet’s benefits pursuant to this Agreement. Mazanet agrees to pay all taxes and/or tax assessments due to be paid by Mazanet, and to indemnify the Company for any claims, costs and/or penalties caused by Mazanet’s failure to pay such taxes and/or tax assessments. In the event of Mazanet’s death, any payments or benefits payable under this Paragraph 2 will be made to the estate or legal representative of Mazanet.
- 3 -
- 4 -
- 5 -
To Executive: Rosemary Mazanet
2442 Beacon Street Chestnut Hill, MA 02467
Email: rosemary.mazanet@columbia.care
To Company: Bryan Olson
Chief People and Administrative Officer Columbia Care LLC
321 Billerica Road, Suite 204
Chelmsford, MA 01824 Email: bryan.olson@columbia.care
- 6 -
ACCEPTED AND AGREED TO: |
|
|
COMPANY |
|
|
/s/ Nicholas Vita |
|
/s/ Rosemary Mazanet |
By: Nicholas Vita |
|
Rosemary Mazanet |
Its: Chief Executive Officer |
|
|
|
|
|
|
|
|
Dated: August 31, 2023 |
|
Dated: August 31, 2023 |
- 7 -
EXHIBIT A
Equity Vehicle: |
Unvested Shares (as of Effective Date): |
Time-Vested RSUs |
1,279,695 |
2021 PSUs |
37,709 |
SPAC PSUs |
174,139 |
Total |
1,491,543 |
EXHIBIT B
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT is made effective on the 31st day of August, 2023.
BETWEEN:
Columbia Care Inc., a company continued under the laws of British Columbia and having its registered office at 666 Burrard St #1700, Vancouver, BC V6C 2X8;
(the “Company”)
AND:
Rosemary Mazanet, a resident of the State of Massachusetts
(the “Indemnified Party”)
WHEREAS:
NOW THEREFORE, IN CONSIDERATION OF the premises and mutual covenants herein contained, and in consideration of the Indemnified Party’s service or continued service as a director and/or an officer of the Company or any Affiliate (as defined below), the receipt and sufficiency of which consideration is hereby acknowledged, the Company and the Indemnified Party do hereby covenant and agree as follows.
ARTICLE 1: DEFINITIONS
1.1 In this Agreement:
{00145592;2 }
- 2 -
ARTICLE 2: AGREEMENT TO SERVE
2.1 The Indemnified Party agrees to become and serve as or continue to be and serve as, as the case may be, a director and/or an officer of the Company and, if requested by the Company and provided it is agreeable to the Indemnified Party, the Indemnified Party also agrees to become and serve as or continue to be and serve as, as the case may be, a director and/or an officer of any Affiliate designated by the Company.
ARTICLE 3: INDEMNIFICATION
3.1 Except as otherwise provided herein, the Company agrees to indemnify and save harmless the Indemnitees to the fullest extent authorized and permitted by the Business Corporations Act against all judgments, penalties and fines awarded or imposed in, and all amounts paid in settlement (collectively, “settlement amounts”) of, any proceeding in which any of the Indemnitees:
by reason of the Indemnified Party being or having been a director or an officer of the Company or an Affiliate, and all Expenses actually and reasonably incurred by the Indemnitees in respect of a proceeding identified in this Section 3.1, provided that:
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3.2 For greater certainty, a settlement amount subject to indemnification pursuant to Section 3.1 shall include any Taxes which the Indemnitees may be subject to or suffer or incur as a result of, in respect of, arising out of or referable to any indemnification of the Indemnitees by the Company pursuant to this Agreement.
3.3 To the extent permitted by the Business Corporations Act, at the request of the Indemnitees, the Company will pay all Expenses actually and reasonably incurred by the Indemnitees in respect of a proceeding identified in Section 3.1 as they are incurred from time to time in advance of the final disposition of that proceeding, on receipt of the following:
For greater certainty, subject as hereinafter provided in Article 4, it shall not be necessary for the Indemnitees to pay such Expenses and then seek reimbursement; the Indemnitees shall provide satisfactory evidence to the Company for direct payment by the Company. The Company shall make payment to the Indemnitees (or as the Indemnitees may direct) within ten (10) days after the Company has received the foregoing information from the Indemnitees. If any portion of the Expenses is subject to dispute in accordance with Article 4, the Company shall promptly pay to the Indemnitees the undisputed portion of any disputed Expenses.
3.4 The written certification of any of the Indemnitees, together with a copy of a receipt, or a statement indicating the amount paid or to be paid by the Indemnitees, will constitute satisfactory evidence of any Expenses for the purposes of Section 3.3.
3.5 Notwithstanding any other provision herein to the contrary, the Company will not be obligated under this Agreement to indemnify the Indemnitees:
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3.6 It is the intent of the parties hereto that (i) in the event of any change, after the date of this Agreement, in any applicable law which expands the right of the Company or an Affiliate to indemnify or make Expense advances to a director or officer to a greater degree than would be afforded currently under the Company’s Articles and this Agreement at the date hereof, the Indemnified Party shall receive the greater benefits afforded by such change, and (ii) this Agreement be interpreted and enforced so as to provide obligatory indemnification and expense advances under such circumstances as set forth in this Agreement, if any, in which the providing of indemnification or Expense advances would otherwise be discretionary. It is acknowledged that the Company or an Affiliate may enter into indemnity agreements with other directors and officers of the Company or an Affiliate. In the event that the terms or conditions of any other indemnity agreement include or are amended after the date hereof to include broader protections than those which are provided under this Agreement, the Indemnified Party, to the extent he/she is still a director or officer of the Company or any Affiliates, shall be notified promptly of such development and he/she shall have at his/her option, the opportunity to have this Agreement amended so as to ensure that this Agreement, as amended, includes such broader protections.
3.7 Notwithstanding any other provision of this Agreement, to the extent that the Indemnified Party is, by reason of the fact that the Indemnified Party is or was a director or an officer of the Company or any Affiliate, a witness or participant other than as a named party in a proceeding, the Company shall pay to the Indemnified Party all out-of-pocket Expenses actually and reasonably incurred by the Indemnified Party or on the Indemnified Party’s behalf in connection therewith.
3.8 The Company shall have the burden of establishing that any Expense it wishes to challenge is not reasonable.
3.9 Notwithstanding anything to the contrary contained herein, the Company hereby acknowledges that the Indemnitee may have certain rights to indemnification, advancement of expenses and/or insurance provided by or on behalf of an Affiliated Entity. The Company hereby agrees that, with respect to the Indemnitee, the Company, on behalf of itself and its subsidiaries, their respective successors and assigns and persons claiming through any of them, (i) is, relative to each Affiliated Entity, the indemnitor of first resort (i.e., its obligations to the Indemnitee under this Agreement are primary and any duplicative, overlapping or corresponding obligations of an Affiliated Entity are secondary), (ii) shall be required to make all advances and other payments under this Agreement, and shall be fully liable therefor, without regard to any rights the Indemnitee may have against his or her Affiliated Entity, and (iii) irrevocably waives, relinquishes and releases any such Affiliated Entity from any and all claims against such Affiliated Entity for contribution, subrogation or any other recovery of any kind in respect of any claim by the Indemnitee under this Agreement, the Company’s certificate of incorporation or its bylaws. The Company further agrees, on behalf of itself and its subsidiaries, their respective successors and assigns and persons claiming through any of them, that (i) no advancement or payment by an Affiliated Entity on behalf of the Indemnitee with respect to any claim for which the Indemnitee has sought indemnification from the Company shall affect the foregoing, (ii) any such Affiliated Entity shall have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of the Indemnitee against the Company and (iii) Indemnitee will not be obligated to seek indemnification from or expense advancement
- 5 -
or reimbursement by any Affiliated Entity with respect to any claim. The Company agrees that each Affiliated Entity is an express third party beneficiary of the terms of this Section 3.9. For purposes of this Agreement, “Affiliated Entity” means, with respect to the Indemnitee, any investment fund, institutional investor, management company, managed account or other financial intermediary which employs or engages, or is affiliated with, the Indemnitee, to whom Indemnitee provides services, or in whom Indemnitee has a direct or indirect equity or similar interest.
ARTICLE 4: DENIAL OF INDEMNIFICATION
4.1 If indemnification under this Agreement is not paid in full by the Company within thirty (30) days after a written claim therefor has been received by it and the applicable approval of the Court has been obtained where required, whichever is later, the Indemnitees may any time thereafter bring suit against the Company to recover the unpaid amount of the claim and, if wholly successful on the merits or otherwise or substantially successful on the merits, the Indemnitees will also be entitled to be paid all Expenses incurred in connection with the prosecution of such claim including, for greater certainty, legal fees (including reasonable disbursements) as between solicitor and own client on a full indemnity basis. It will be a defence to any such action that the Indemnified Party has not met the standards of conduct which make it permissible under this Agreement, the Business Corporations Act or applicable law for the Company to indemnify the Indemnitees for the amount claimed, but the burden of proving such defence will be on the Company.
ARTICLE 5: CONDUCT OF DEFENCE
5.1 Promptly after receiving notice from any of the Indemnitees of any proceeding identified in Section 3.1, the Company may, and upon the written request of the Indemnitees will, promptly assume conduct of the defence thereof and, at the Company's expense, retain counsel on behalf of the Indemnitees who is satisfactory to the Indemnitees, acting reasonably, to represent the Indemnitees in respect of the proceeding. If the Company assumes conduct of the defence on behalf of the Indemnitees, the Indemnified Party hereby consents to the conduct thereof and to any action taken by the Company, in good faith, in connection therewith and the Indemnified Party will fully cooperate in such defence including, without limitation, providing documents, attending examinations for discovery, making affidavits, meeting with counsel, testifying and divulging to the Company all information reasonably required to defend or prosecute the proceeding.
5.2 In connection with any proceeding in respect of which the Indemnitees may be entitled to be indemnified hereunder, the Indemnitees will have the right to employ separate counsel of their choosing and to participate in the defence thereof but the legal fees and disbursements of such counsel will be at the sole expense of the Indemnitees unless:
in which event the reasonable legal fees and disbursements of such counsel will be paid by the Company, subject to the terms hereof. In any such proceeding, the Company will fully cooperate in the defence of the Indemnitees including, without limitation, providing documents and causing its representatives to attend
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examinations for discovery, make affidavits, meet with counsel and testify and divulge all information in the Company’s possession reasonably required to defend or prosecute the proceeding.
ARTICLE 6: SETTLEMENT
6.1 The Company may, with the prior written consent of the Indemnitees (which consent shall not be unreasonably withheld, conditioned or delayed), enter into a settlement or other agreement to settle or compromise a proceeding. In seeking such consent, the Company will provide the Indemnitees with a reasonable period of time, in light of the circumstances, to consider the terms of a proposed settlement.
6.2 If the Indemnitees refuse after being requested by the Company to give consent to the terms of a proposed settlement which is otherwise acceptable to the Company, acting reasonably, the Company cannot settle but may require the Indemnitees to negotiate or defend the proceeding independently of the Company at the Indemnitees’ expense. In such event any amount recovered by the claimant in excess of the amount for which settlement could have been made by the Company shall not be recoverable under this Agreement or otherwise, it being further agreed by the parties that in such event the Company shall only be responsible for Expenses up to the time at which such settlement could have been made.
6.3 The Company shall not be liable for any settlement of any proceeding effected without its prior written consent (which consent shall not be unreasonably withheld, conditioned or delayed).
6.4 The Indemnitees shall have the right to negotiate a settlement in respect of any proceeding, provided, however, that in such circumstances, unless the Company approves such settlement, the Indemnitees shall pay any compensation, Expenses or other payment to be made under the settlement and the Expenses of negotiating and implementing the settlement, and shall not seek indemnity from the Company in respect of such compensation, Expenses or other payment.
ARTICLE 7: COURT APPROVAL
7.1 In the event of any claim for indemnification or payment of Expenses with respect to a proceeding brought against an Indemnitee by or on behalf of the Company or an Affiliate, provided that the Indemnified Party has fulfilled the conditions set forth in paragraphs 3.1(c) and 3.1(d) of Section 3.1, the Company will with best efforts apply to the Court for an order approving the indemnification of, or payment of Expenses to, the Indemnitees.
ARTICLE 8: NO PRESUMPTIONS AS TO ABSENCE OF GOOD FAITH
8.1 Termination of any proceeding by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, or similar or other result, will not, of itself, create any presumption for the purposes of this Agreement that the Indemnified Party did not act honestly and in good faith with a view to the best interests of the Company or an Affiliate, as the case may be, or, in the case of a proceeding other than a civil proceeding, that he/she did not have reasonable grounds for believing that his/her conduct was lawful (unless the judgment or order of a court or another tribunal of competent jurisdiction specifically finds otherwise). Neither the failure of the Company (including the Board, its independent legal counsel or its shareholders) to have made a determination that indemnification of the Indemnitees is proper in the circumstances because the Indemnified Party has met the applicable standard of conduct, nor an actual determination by the Company (including the Board, its independent legal counsel or its shareholders) that the Indemnified Party has not met such applicable standard of conduct, will be a defence to any action brought by the Indemnitees against the Company to recover the amount of any indemnification claim, nor create a presumption that the Indemnified Party has not met the applicable standard of conduct.
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8.2 For purposes of any determination under this Agreement, the Indemnified Party will be deemed, subject to compelling evidence to the contrary, to have acted in good faith and in the best interests of the Company or any Affiliate. The Company will have the burden of establishing the absence of good faith.
8.3 The knowledge and/or actions, or failure to act, of any other director, officer, agent or employee of the Company or any Affiliate will not be imputed to the Indemnified Party for purposes of determining the right to indemnification under this Agreement.
ARTICLE 9: RESIGNATION
9.1 Nothing in this Agreement will prevent or restrict the Indemnified Party from, at any time, changing his/her title or position within the Company or any Affiliate or from resigning as a director or an officer of the Company or any Affiliate. The Company and any Affiliate will have no obligation under this Agreement to continue the Indemnified Party as a director or an officer.
ARTICLE 10: DEATH
10.1 For greater certainty, if the Indemnified Party is deceased and is or becomes entitled to indemnification under any of the provisions of this Agreement, the Company agrees to indemnify and hold harmless the Indemnified Party's estate and the Indemnitees to the same extent as it would indemnify the Indemnified Party, if alive, hereunder.
ARTICLE 11: OTHER RIGHTS AND REMEDIES
11.1 The indemnification provided for in this Agreement will not derogate from, exclude or reduce any other rights or remedies, in law or in equity, to which the Indemnitees may be entitled by operation of law or under any statute, rule, regulation or ordinance or by virtue of any available insurance coverage, including, but not limited to, the following:
both as to matters arising out of the capacity of the Indemnified Party as a director or an officer of the Company or an Affiliate or as to matters arising out of another capacity with the Company or an Affiliate, while being a director or an officer of the Company or an Affiliate, or as to matters arising by reason of his/her being or having been at the request of the Company, a director, officer or employee of any other legal entity of which the Company is or was an equity owner or creditor.
ARTICLE 12: NOTICE OF PROCEEDING
12.1 The Indemnitees agree to give written notice to the Company as soon as reasonably practicable after being served with any statement of claim, writ, notice of motion, indictment or other document commencing or continuing any proceedings against the Indemnitees as a party. Any failure of the Indemnitees to give notice as herein provided shall not derogate from, exclude or reduce any of the rights or remedies, to which the Indemnitees are entitled to pursuant to any of the provisions of this Agreement, provided the Company has not suffered any actual damage from the failure of the Indemnitees to give notice as herein provided.
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12.2 If the Company receives notice from any other source of any matter of which the Indemnitees would otherwise be obligated hereunder to give notice to the Company, then the Indemnitees will be relieved of the obligation hereunder to give notice to the Company, provided that the Company has not suffered any actual damage from the failure of the Indemnitees to give notice as herein provided. The Company will give notice of such matter to the Indemnitees as soon as reasonably practicable.
ARTICLE 13: CO-OPERATION AND INVESTIGATION
13.1 The Company shall forthwith conduct such investigation of each proceeding of which it receives written notice pursuant to Article 12 as it deems is reasonably necessary or appropriate in the circumstances and shall pay all costs of such investigation. The Indemnified Party will cooperate fully with the investigation provided that the Indemnified Party shall not be required to provide assistance that would materially prejudice his/her defence or infringe any constitutional or other right he/she may be entitled to assert under law.
ARTICLE 14: EFFECTIVE DATE
14.1 The right to be indemnified or to the reimbursement or advancement of Expenses pursuant to this Agreement is intended to be retroactive and shall be available with respect to events occurring prior to the execution hereof. For greater certainty, this Agreement shall be effective as and from the first day that the Indemnified Party became or becomes a director or an officer of the Company or an Affiliate or began serving in a capacity similar thereto for the Company or an Affiliate.
ARTICLE 15: INSOLVENCY
15.1 It is the intention of the parties hereto that this Agreement and the obligations of the Company will not be affected, discharged, impaired, mitigated or released by reason of any bankruptcy, insolvency, receivership or other similar proceeding of creditors of the Company and that in such event any amount owing to the Indemnitees hereunder will be treated in the same manner as the other fees or expenses of the directors and officers of the Company.
ARTICLE 16: SURVIVAL
16.1 Notwithstanding any merger, amalgamation, business combination, reorganization, sale of assets, insolvency proceeding or other corporate change, the obligations of the Company under this Agreement, other than Article 17, shall continue until the later of:
16.2 The obligations of the Company under Article 17 of this Agreement shall continue for six (6) years after the Indemnified Party ceases to be a director or an officer of the Company or any Affiliate.
ARTICLE 17: INSURANCE
17.1 The Company shall use its reasonable best efforts to obtain and maintain a policy of insurance that has been approved by the Board with respect to liability relating to its directors or officers, which policy shall pursuant to its terms extend to the Indemnified Party in his/her capacity as a director or an officer of the Company. The Company will use its reasonable best efforts to include the Indemnified Party as an insured under such policy to the maximum extent reasonably possible and will provide the Indemnified Party with
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a copy of such policy upon the Indemnified Party being so included as an insured. In the event the Indemnified Party is not named under such policy, the Company shall immediately provide written notice of such fact to the Indemnified Party. Further, the Company shall advise the Indemnified Party promptly after it becomes aware of any material change in, cancellation, termination or lapse in coverage of the aforementioned insurance policy. In the event an insurable event occurs, the Indemnitees will be indemnified promptly as provided in this Agreement regardless of whether the Company has received the insurance proceeds. The Indemnitees are entitled to full indemnification as provided in this Agreement notwithstanding any deductible amounts or policy limits contained in any such insurance policy.
17.2 In the event the Company is sold or enters into any business combination as a result of which the directors’ and officers’ liability insurance policy is terminated and not replaced with a substantially similar policy equally applicable to the Indemnified Party, the Company shall use its reasonable best efforts to cause run off “tail” insurance to be purchased for the benefit of the Indemnified Party with substantially the same coverage for the balance of the six (6) year term set out in Section 16.2.
ARTICLE 18: TAX ADJUSTMENT
18.1 Should any payment made pursuant to this Agreement, including the payment of insurance premiums or any payment made by an insurer under an insurance policy, be deemed to constitute a taxable benefit or otherwise be or become subject to any Taxes or levy, then the Company shall pay any amount necessary to ensure that the amount received by or on behalf of the Indemnitees, after the payment of or withholding for Taxes, fully reimburses the Indemnitees for the actual cost, expense or liability incurred by or on behalf of the Indemnitees.
ARTICLE 19: SUBROGATION
19.1 To the extent permitted by law, the Company shall be subrogated to all rights which the Indemnitees may have under all policies of insurance or other contracts pursuant to which the Indemnitees may be entitled to reimbursement of, or indemnification in respect of any Expenses borne by the Company pursuant to this Agreement. Nothing in this Agreement shall be deemed to diminish or otherwise restrict the right of the Company or the Indemnitees to proceed or collect against any insurers or be deemed to give such insurers any rights against the Company under or with respect to this Agreement, including without limitation any right to be subrogated to the Indemnitees’ rights hereunder, unless otherwise expressly agreed to by the Company in writing, and the obligation of such insurers to the Company and the Indemnified Party shall not be deemed to be reduced or impaired in any respect by virtue of the provisions of this Agreement.
ARTICLE 20: NOTICE
20.1 Any notice or other communication required or permitted to be given hereunder will be in writing and will be either hand delivered, or will be sent by registered mail, all charges prepaid, to the address set out on the first page hereof.
20.2 In the case of registered mail, any notice or other communication will be deemed to be received on the fourth (4th) Business Day following the day of mailing, provided there is no Postal Interruption at the time of mailing or at any time during the five (5) days either preceding or following the day of mailing, in which case any such notice or communication will be deemed to be received only upon actual receipt thereof.
20.3 Any party hereto may, from time to time, modify or change its address by providing written notice to the other party, and thereafter the address as modified or changed will be deemed to be the address of the person specified above.
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ARTICLE 21: SEVERABILITY
21.1 If any portion of a provision of this Agreement is held to be invalid, illegal or unenforceable, in whole or in part, for any reason whatsoever:
ARTICLE 22: SUBMISSION TO JURISDICTION
22.1 Each party to this Agreement submits to the non-exclusive jurisdiction of any British Columbia courts sitting in Vancouver in any action, application, reference or other proceeding arising out of or relating to this Agreement and consents to all claims in respect of any such action, application, reference or other proceeding being heard and determined in such British Columbia courts.
ARTICLE 23: MODIFICATIONS AND WAIVERS
23.1 No supplement, modification or amendment of this Agreement will be binding unless executed in writing by both of the parties hereto.
23.2 This Agreement and the obligations of the Company hereunder will not be affected, discharged, impaired, mitigated or released by reason of any waiver, extension of time or indulgence by the Indemnitees of any breach or default in performance by the Company of any terms, covenants or conditions of this Agreement, nor will any waiver, indulgence or extension of time constitute a waiver of:
nor will the failure by the Indemnitees to assert any of their rights or remedies hereunder in a timely fashion be construed as a waiver or acquiescence or affect the Indemnitees’ right to assert any such right or remedy thereafter.
ARTICLE 24: ENTIRE AGREEMENT
24.1 This Agreement will supersede and replace any and all prior or contemporaneous agreements between the parties (except any written agreement of employment or consulting between the Company or an Affiliate and the Indemnified Party, which agreement of employment or consulting, if in existence, will remain in full effect except to the extent augmented or amended herein) and discussions between the parties hereto respecting the matters set forth herein, and will constitute the entire agreement between the parties hereto with respect to the matters set forth herein.
ARTICLE 25: SUCCESSORS AND ASSIGNS
25.1 This Agreement will be binding upon and enure to the benefit of the Company, its successors and assigns, and also the Indemnitees.
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ARTICLE 26: FURTHER ASSURANCES
26.1 Each of the parties hereto will at all times and from time to time hereafter and upon every reasonable written request so to do, make, do, execute and deliver, or cause to be made, done, executed and delivered, all such further acts, documents, assurances and things as may be reasonably required for more effectually implementing and carrying out the provisions and the intent of this Agreement.
26.2 The Company hereby covenants to the Indemnified Party that it shall not take any action, including through an amendment of its Articles or otherwise, that would diminish the rights of the Indemnified Party under this Agreement. No amendment of this Agreement, the Articles of the Company or any Affiliate, or other constating documents of the Company or any Affiliate shall limit or eliminate the right of Indemnified Party to the benefits, including indemnification and advancement of Expenses set forth in this Agreement.
ARTICLE 27: INTERPRETATION
27.1 Headings will not be used in any way in construing or interpreting any provision hereof.
27.2 Whenever the singular or masculine or neuter is used in this Agreement, the same will be construed as meaning plural or feminine or body politic or corporate or vice versa, as the context so requires.
27.3 Words such as herein, therefrom and hereinafter reference and refer to the whole Agreement and are not restricted to the clause in which they appear.
ARTICLE 28: COUNTERPARTS
28.1 This Agreement may be executed in any number of counterparts (including counterparts by facsimile) and all such counterparts taken together shall be deemed to constitute one and the same instrument.
Remainder of page left intentionally blank. Signature page follows.
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IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the date first written above.
COLUMBIA CARE INC. |
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Per. |
/s/ Nicholas Vita |
Name: |
Nicholas Vita |
Title: |
Chief Executive Officer |
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/s/ Rosemary Mazanet |
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Rosemary Mazanet |
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CONSENT TO ACT AS DIRECTOR
To: Columbia Care Inc. (the “Company”)
I consent to act as a director of the Company and agree to my re-election or re-appointment from time to time without further notice.
I certify that I am not disqualified from acting as a director under the provisions of subsection 124(2) of the Business Corporations Act (British Columbia), the text of which is set out below.
I acknowledge that the Company may be required to file certain documentation with various regulatory' authorities, including securities regulatory authorities, in order to meet its obligations under applicable law. In doing so, the Company may be required to disclose certain personal information about me. I consent to the disclosure of such personal information and acknowledge that such information may be made available to the public under securities and other regulatory legislation.
Dated as of August 31, 2023.
/s/ Rosemary Mazanet |
Name: Rosemary Mazanet |
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Delivery Address: |
2442 Beacon Street |
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Chestnut Hill, MA 02467 |
DELIVERY ADDRESS means an address where documents can be delivered during regular business hours but does not include a past office box.
PERSONS DISQUALIFIED AS DIRECTORS
Section 124(2) of the Business Corporations Act (British Columbia)
An individual is not qualified to become or act as a director of a company if that individual is
(a) under the age of 18 years;
(b) found by a court, in Canada or elsewhere, to be incapable of managing the individual's own affairs;
(c) an undischarged bankrupt; or
(d) convicted in or out of the British Columbia of an offense in Connection with Promotion, Formation or management of a corporation or unincorporated business, or of an offence involving fraud, unless:
(i) the court orders otherwise;
(ii) 5 years have elapsed since the last to occur of
(A) the expiration of the period set for suspension of the passing of sentence without a sentence having been passed,
(B) the imposition of a fine;
(C) the conclusion of the term of any Imprisonment, and
(D) the conclusion of the term of any probation imposed, or
(iii) a pardon was granted or issued, or a record suspension was ordered, under the Criminal Records Act (Canada) and the pardon or record under suspension, as the case may be, has not yet been revoked or ceased to have effect.
Section 426(3) of the Business Corporations Act (British Columbia) provides that "an individual who acts as a director of a company and who, under section 124(2), is not qualified to act as a director of a company commits an offence*.
111402959
Exhibit 31.1
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Nicholas Vita, certify that:
Date: November 14, 2023 |
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By: |
/s/ Nicholas Vita |
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Name: Nicholas Vita |
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|
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Chief Executive Officer |
Exhibit 31.2
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Derek Watson, certify that:
Date: November 14, 2023 |
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By: |
/s/ Derek Watson |
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Derek Watson |
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|
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Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of The Cannabist Company Holdings Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
Date: November 14, 2023 |
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By: |
/s/ Nicholas Vita |
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Nicholas Vita |
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|
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Chief Executive Officer |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of The Cannabist Company Holdings Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
Date: November 14, 2023 |
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By: |
/s/ Derek Watson |
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Derek Watson |
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Chief Financial Officer |