10-Q 1 cchwf-20220930.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended September 30, 2022

OR

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

For the transition period from __to __

Commission File Number: 000-56294

 

img243584090_0.jpg 

COLUMBIA CARE INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

British Columbia

98-1488978

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

680 Fifth Ave., 24th Floor

New York, New York

10019

 

(Address of principal executive offices)

(Zip Code)

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

 

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

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

 

 

 

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

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

As of November 8, 2022, there were 400,438,063 shares of common stock, no par value per share, outstanding.

G

 


Table of Contents

 

 

 

Page

FORWARD-LOOKING STATEMENTS

2

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

 

 

Condensed Consolidated Balance Sheets

3

 

Condensed Consolidated Statements of Operations and Comprehensive Loss

4

 

Condensed Consolidated Statements of Changes in Equity

5

 

Condensed Consolidated Statements of Cash Flows

7

 

Notes to Unaudited Condensed Consolidated Financial Statements

8

Item 2.

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

18

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

27

Item 4.

Controls and Procedures

27

PART II.

OTHER INFORMATION

28

Item 1.

Legal Proceedings

28

Item 1A.

Risk Factors

28

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

28

Item 3.

Defaults Upon Senior Securities

28

Item 4.

Mine Safety Disclosures

28

Item 5.

Other Information

28

Item 6.

Exhibits

28

Signatures

31

 

 

 

 

 

i


FORWARD-LOOKING STATEMENTS

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

the satisfaction of the conditions precedent to the closing of the Cresco Transaction (as defined herein);
the receipt of any necessary regulatory approvals in connection with Cresco Transaction (as defined herein);
the impact of the Cresco Transaction (as defined herein) on the Company’s current and future operations, financial condition and prospects;
the value of the Cresco Labs Shares (as defined herein);
the costs of the Cresco Transaction (as defined herein) and potential payment of a termination fee in connection with the Cresco Transaction (as defined herein);
the ability to successfully integrate with the operations of Cresco Labs (as defined herein) and realize the expected benefits of the Cresco Transaction (as defined herein);
the fact that marijuana remains illegal under federal law;
the application of anti-money laundering laws and regulations to the Company;
legal, regulatory, or political change to the cannabis industry;
access to the services of banks for the Company, Cresco Labs or buyers of divestiture assets in relation to the Cresco Transaction (as defined herein);
the ability to complete divestitures in connection with the Cresco Transaction, including the closing of the Combs Transaction (as defined herein);
access to public and private capital;
unfavorable publicity or consumer perception of the cannabis industry;
expansion to the adult-use markets;
the impact of laws, regulations, and guidelines;
the impact of Section 280E of the Internal Revenue Code;
the impact of state laws pertaining to the cannabis industry;
the Company’s reliance on key inputs, suppliers and skilled labor;
the difficulty of forecasting the Company’s sales;
constraints on marketing products;
potential cyber-attacks and security breaches;
net operating loss and other tax attribute limitations;
the impact of changes in tax laws;
the volatility of the market price of the Common Shares;
reliance on management;
litigation;
future results and financial projections; and
the impact of global financial conditions

The list of factors above is illustrative and by no means exhaustive. Additional information regarding these risks and other risks and uncertainties we face is contained in this Quarterly Report on Form 10-Q, our Annual Report on Form 10-K for the year ended December 31, 2021, and our Form 10, dated May 9, 2022. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated, or intended.

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

 

2


 

COLUMBIA CARE INC.

CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS

(Unaudited)

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

 

 

 

 

 

September 30, 2022

 

 

December 31, 2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash

 

$

50,023

 

 

$

82,198

 

Accounts receivable, net of allowances of $1,721 and, $2,542, respectively

 

 

12,647

 

 

 

18,302

 

Inventory

 

 

130,176

 

 

 

94,567

 

Prepaid expenses and other current assets

 

 

15,669

 

 

 

29,252

 

Assets held for sale

 

 

 

 

 

2,120

 

Total current assets

 

 

208,515

 

 

 

226,439

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

370,820

 

 

 

339,692

 

Right of use assets - operating leases, net

 

 

197,311

 

 

 

179,099

 

Right of use assets - finance leases, net

 

 

62,344

 

 

 

66,442

 

Goodwill

 

 

189,917

 

 

 

184,018

 

Intangible assets, net

 

 

325,680

 

 

 

367,787

 

Other non-current assets

 

 

16,991

 

 

 

13,035

 

Total assets

 

 

1,371,578

 

 

 

1,376,512

 

 

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

 

23,661

 

 

 

44,007

 

Accrued expenses and other current liabilities

 

 

90,217

 

 

 

126,954

 

Income tax payable

 

 

5,901

 

 

 

26,537

 

Contingent consideration

 

 

 

 

 

29,345

 

Current portion of lease liability - operating leases

 

 

10,291

 

 

 

9,056

 

Current portion of lease liability - finance leases

 

 

5,790

 

 

 

5,092

 

Current portion of long-term debt, net

 

 

42,155

 

 

 

1,884

 

Liabilities held for sale

 

 

 

 

 

1,122

 

Total current liabilities

 

 

178,015

 

 

 

243,997

 

 

 

 

 

 

 

 

Long-term debt, net

 

 

285,113

 

 

 

159,017

 

Deferred taxes

 

 

67,397

 

 

 

79,477

 

Long-term lease liability - operating leases

 

 

195,069

 

 

 

176,004

 

Long-term lease liability - finance leases

 

 

67,117

 

 

 

70,268

 

Contingent consideration

 

 

 

 

 

11,596

 

Derivative liability

 

 

855

 

 

 

6,795

 

Other long-term liabilities

 

 

77,135

 

 

 

78,535

 

Total liabilities

 

 

870,701

 

 

 

825,689

 

 

 

 

 

 

 

 

Stockholders' Equity:

 

 

 

 

 

 

Common Stock, no par value, unlimited shares authorized as of September 30, 2022 and December 31, 2021, respectively, 387,673,510 and 361,423,270 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

 

 

 

 

 

 

Preferred Stock, no par value, unlimited shares authorized as of September 30, 2022 and December 31, 2021, respectively, none issued and outstanding as of September 30, 2022 and December 31, 2021

 

 

 

 

 

 

Proportionate voting shares, no par value, unlimited shares authorized as of September 30, 2022 and December 31, 2021, respectively; 12,013,889 and 14,729,636 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

 

 

 

 

 

 

Additional paid-in-capital

 

 

1,110,244

 

 

 

1,039,726

 

Accumulated deficit

 

 

(603,893

)

 

 

(468,335

)

Equity attributable to Columbia Care Inc.

 

 

506,351

 

 

 

571,391

 

Non-controlling interest

 

 

(5,474

)

 

 

(20,568

)

Total equity

 

 

500,877

 

 

 

550,823

 

Total liabilities and equity

 

$

1,371,578

 

 

$

1,376,512

 

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

3


 

COLUMBIA CARE INC.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

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

 

 

 

Three months ended

 

 

Nine months ended

 

 

September 30, 2022

 

 

September 30, 2021

 

 

September 30, 2022

 

 

September 30, 2021

 

 

Revenues, net of discounts

 

 

132,733

 

 

$

132,322

 

 

$

385,391

 

 

$

320,804

 

 

Cost of sales related to inventory production

 

 

(80,462

)

 

 

(69,525

)

 

 

(225,645

)

 

 

(181,120

)

 

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

 

 

(136

)

 

 

(1,430

)

 

 

(136

)

 

 

(2,922

)

 

Gross Margin

 

 

52,135

 

 

 

61,367

 

 

 

159,610

 

 

 

136,762

 

 

Selling, general and administrative expenses

 

 

(70,845

)

 

 

(61,745

)

 

 

(215,093

)

 

 

(162,282

)

 

Loss from operations

 

 

(18,710

)

 

 

(378

)

 

 

(55,483

)

 

 

(25,520

)

 

Other expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest (expense) income on leases, net

 

 

(1,365

)

 

 

(1,067

)

 

 

(4,161

)

 

 

(3,831

)

 

Interest (expense) income, net

 

 

(12,974

)

 

 

(6,990

)

 

 

(35,702

)

 

 

(14,855

)

 

Other income (expense), net

 

 

1,321

 

 

 

(48,934

)

 

 

791

 

 

 

(48,615

)

 

Total other expense

 

 

(13,018

)

 

 

(56,991

)

 

 

(39,072

)

 

 

(67,301

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss before provision for income taxes

 

 

(31,728

)

 

 

(57,369

)

 

 

(94,555

)

 

 

(92,821

)

 

Income tax benefit (expense)

 

 

(6,575

)

 

 

12,999

 

 

 

(25,909

)

 

 

631

 

 

Net loss and comprehensive loss

 

 

(38,303

)

 

 

(44,370

)

 

 

(120,464

)

 

 

(92,190

)

 

Net loss attributable to non-controlling interests

 

 

(2,872

)

 

 

(1,474

)

 

 

(4,569

)

 

 

(2,368

)

 

Net loss attributable to shareholders

 

 

(35,431

)

 

$

(42,896

)

 

$

(115,895

)

 

$

(89,822

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

399,227,935

 

 

325,416,684

 

 

 

389,966,408

 

 

311,446,922

 

 

Loss attributable to shares (basic and diluted)

 

$

(0.09

)

 

 

(0.13

)

 

 

(0.30

)

 

 

(0.29

)

 

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

4


 

COLUMBIA CARE INC.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

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

 

 

 

 

 

 

 

 

Proportionate

 

 

Additional

 

 

Accumulated

 

 

Total Columbia Care Inc.

 

 

Non-Controlling

 

 

Total

 

 

 

Shares

 

 

Voting Shares

 

 

Paid-in Capital

 

 

Deficit

 

 

Shareholders' Equity

 

 

Interest

 

 

Equity

 

Balance, December 31, 2021

 

 

361,423,270

 

 

 

14,729,636

 

 

$

1,039,726

 

 

$

(468,335

)

 

$

571,391

 

 

$

(20,568

)

 

$

550,823

 

Equity-based compensation (1)

 

 

237,486

 

 

 

 

 

 

6,358

 

 

 

 

 

 

6,358

 

 

 

 

 

 

6,358

 

Warrants exercised

 

 

180,000

 

 

 

 

 

 

425

 

 

 

 

 

 

425

 

 

 

 

 

 

425

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(26,636

)

 

 

(26,636

)

 

 

(1,270

)

 

 

(27,906

)

Balance, March 31, 2022

 

 

361,840,756

 

 

 

14,729,636

 

 

$

1,046,509

 

 

$

(494,971

)

 

$

551,538

 

 

$

(21,838

)

 

$

529,700

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity-based compensation (1)

 

 

21,034,418

 

 

 

 

 

 

49,346

 

 

 

 

 

 

49,346

 

 

 

 

 

 

49,346

 

Issuance of shares in connection with acquisitions

 

 

1,099,549

 

 

 

 

 

 

3,178

 

 

 

 

 

 

3,178

 

 

 

 

 

 

3,178

 

Cancellation of restricted stock awards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of convertible notes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion between classes of shares

 

 

2,431,508

 

 

 

(2,431,508

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-controlling interest buyout

 

 

 

 

 

 

 

 

 

 

 

(19,663

)

 

 

(19,663

)

 

 

19,663

 

 

 

 

Warrants exercised

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(53,828

)

 

 

(53,828

)

 

 

(427

)

 

 

(54,255

)

Balance, June 30, 2022

 

 

386,406,231

 

 

 

12,298,128

 

 

 

1,099,033

 

 

 

(568,462

)

 

 

530,571

 

 

 

(2,602

)

 

 

527,969

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity-based compensation (1)

 

 

 

 

 

 

 

 

6,780

 

 

 

 

 

 

6,780

 

 

 

 

 

 

6,780

 

Issuance of shares in connection with acquisitions

 

 

983,040

 

 

 

 

 

 

4,431

 

 

 

 

 

 

4,431

 

 

 

 

 

 

4,431

 

Conversion between classes of shares

 

 

284,239

 

 

 

(284,239

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cancellation of restricted stock awards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(35,431

)

 

 

(35,431

)

 

 

(2,872

)

 

 

(38,303

)

Balance, September 30, 2022

 

 

387,673,510

 

 

 

12,013,889

 

 

$

1,110,244

 

 

$

(603,893

)

 

$

506,351

 

 

$

(5,474

)

 

$

500,877

 

(1)
The amounts shown are net of any shares withheld by the Company to satisfy certain tax withholdings in connection with vesting of equity-based awards.

 

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

 

 

5


COLUMBIA CARE INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (CONTINUED)

(Unaudited)

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

 

 

 

 

 

 

 

 

 

Proportionate

 

 

Additional

 

 

Accumulated

 

 

Total Columbia Care Inc.

 

 

Non-Controlling

 

 

Total

 

 

 

Shares

 

 

Voting Shares

 

 

Paid-in Capital

 

 

Deficit

 

 

Shareholders' Equity

 

 

Interest

 

 

Equity

 

Balance, December 31, 2020

 

 

250,003,917

 

 

 

26,507,914

 

 

$

632,062

 

 

$

(325,238

)

 

$

306,824

 

 

$

(19,875

)

 

$

286,949

 

Equity-based compensation (1)

 

 

190,925

 

 

 

 

 

7,792

 

 

 

 

 

7,792

 

 

 

 

 

 

7,792

 

Issuance of shares, net

 

 

21,792,500

 

 

 

 

 

133,151

 

 

 

 

 

133,151

 

 

 

 

 

 

133,151