Post on 17-Nov-2020
CHARLOTTE’SWEBHOLDINGS,INC.
UNAUDITEDINTERIMCONDENSEDCONSOLIDATEDFINANCIALSTATEMENTS
FORTHETHREEANDSIXMONTHSENDEDJUNE30,2020and2019(ExpressedinUnitedStatesdollars)
UNAUDITEDINTERIMCONDENSEDCONSOLIDATEDFINANCIAL
STATEMENTSForthethreeandsixmonthsendedJune30,2020and2019
CONTENTS
UNAUDITEDINTERIMCONDENSEDCONSOLIDATEDFINANCIALSTATEMENTS:...................................................
STATEMENTSOFFINANCIALPOSITION............................................................................................................. 1
STATEMENTSOF(LOSS)INCOMEANDOTHERCOMPREHENSIVE(LOSS)INCOME.......................................... 3
STATEMENTSOFCHANGESINSHAREHOLDERS’EQUITY.................................................................................. 4
STATEMENTSOFCASHFLOWS......................................................................................................................... 5
NOTESTOUNAUDITEDINTERIMCONDENSEDCONSOLIDATEDFINANCIALSTATEMENTS.............................. 7
CHARLOTTE’SWEBHOLDINGS,INC.UNAUDITEDINTERIMCONDENSEDCONSOLIDATEDSTATEMENTSOFFINANCIALPOSITION(InthousandsofUnitedStatesdollars)
June30,2020 December31,2019
ASSETS
Currentassets:
Cash $ 99,820 $ 68,553
Tradeandotherreceivables,net(note5) 12,488 5,462
Notereceivable(note6) 2,366 1,421
Inventories(note7) 67,130 64,054
Prepaidexpensesandothercurrentassets(note10) 7,742 3,592
Incometaxesreceivable 11,342 3,273
200,888 146,355
Non-currentassets:
Propertyandequipment,net(note8) 50,347 42,949
Intangibleassets,net(note9) 25,703 1,596
Goodwill(note4) 76,688 —
Deferredtaxassets 22 30,417
Otherlong-termassets(note11) 3,949 1,625
$ 357,597 $ 222,942
LIABILITIESANDSHAREHOLDERS’EQUITY
Currentliabilities:
Accountspayable $ 15,542 $ 8,798
Accruedliabilities 14,806 7,323
Deferredrevenue 415 550
Currentcultivationliabilities(note15) 11,497 10,803
Currentnotespayable(note12) 1,329 9
Currentleaseobligations(note13) 2,342 1,945
45,931 29,428
Non-currentliabilities:
Long-termcultivationliabilities(note15) 10,034 14,289
Long-termnotespayable(note12) 312 3
Long-termleaseobligations(note13) 21,448 22,116
Warrantliabilities(note14) 8,766 3,408
Stockappreciationrightsliabilities(note17) 207 —
86,698 69,244
Shareholders’equity:
Sharecapital 275,985 123,927
Contributedsurplus 18,585 27,513
(Accumulateddeficit)Retainedearnings (23,671) 2,258
270,899 153,698
$ 357,597 $ 222,942
1Theaccompanyingnotesareanintegralpartoftheseunauditedinterimcondensedconsolidatedfinancialstatements.
ApprovedbytheBoardofDirectors
/s/“JacquesTortoroli”
Director(signed)
/s/“JohnHeld”
Director(signed)
2Theaccompanyingnotesareanintegralpartoftheseunauditedinterimcondensedconsolidatedfinancialstatements.
CHARLOTTE’SWEBHOLDINGS,INC.
UNAUDITEDINTERIMCONDENSEDCONSOLIDATEDSTATEMENTSOF(LOSS)INCOMEANDOTHERCOMPREHENSIVE(LOSS)INCOME
(InthousandsofUnitedStatesdollars,exceptpershareamounts)
ThreemonthsendedJune30, SixmonthsendedJune30,
2020 2019 2020 2019
Revenue $ 21,680 $ 25,020 $ 43,143 $ 46,720
Costofsales(note19) 10,209 6,526 16,675 12,431
Grossprofitbefore(gain)onfairvalueofbiologicalassets 11,471 18,494 26,468 34,289
Realizedfairvalue(gain)includedininventorysold(note7) (4) (354) (86) (496)
Grossprofit 11,475 18,848 26,554 34,785
Expenses:
Generalandadministrative(note19) 21,108 9,060 37,139 17,519
Salesandmarketing(note19) 6,835 6,527 13,367 11,087
Researchanddevelopment(note19) 1,533 654 2,299 845
Operatingexpenses 29,476 16,241 52,805 29,451
Operating(loss)income (18,001) 2,607 (26,251) 5,334
Financingcosts 364 77 534 134
Interestincome (26) (310) (155) (666)
Other(income)expense,net (3,929) 4 (7,008) 7
(Loss)incomebeforetaxes (14,410) 2,836 (19,622) 5,859
Incometaxexpense(note20) 20 648 6,307 1,334
Net(loss)incomeandcomprehensive(loss)income $ (14,430) $ 2,188 $ (25,929) $ 4,525
Weightedaveragenumberofcommonshares-basic(note18c) 114,206,250 94,986,784 110,821,523 94,105,280
Weightedaveragenumberofcommonshares-diluted(note18c) 114,206,250 106,272,945 110,821,523 106,245,283
(Loss)earningspershare-basic(note18c) $ (0.13) $ 0.02 $ (0.23) $ 0.05
(Loss)earningspershare-diluted(note18c) $ (0.13) $ 0.02 $ (0.23) $ 0.04
3Theaccompanyingnotesareanintegralpartoftheseunauditedinterimcondensedconsolidatedfinancialstatements.
CHARLOTTE’SWEBHOLDINGS,INC.
UNAUDITEDINTERIMCONDENSEDCONSOLIDATEDSTATEMENTSOFCHANGESINSHAREHOLDERS’EQUITY
(InthousandsofUnitedStatesdollars)
SixmonthsendedJune30,2019 SharecapitalContributed
surplusRetainedearnings Total
Balance-December31,2018 $ 78,316 $ 25,357 $ 17,825 $ 121,498
Exerciseofcommonstockoptions 1,663 (1,266) — 397
Exerciseofbrokerstockwarrants 1,295 (834) — 461
Accumulatedeffectofincometaxfromstockoptions — 7,278 — 7,278
Share-basedcompensationexpense(note18d) — 749 — 749
Netincome — — 4,525 4,525
Balance-June30,2019 $ 81,274 $ 31,284 $ 22,350 $ 134,908
SixmonthsendedJune30,2020 SharecapitalContributed
surplusAccumulated
deficit Total
Balance-December31,2019 $ 123,927 $ 27,513 $ 2,258 $ 153,698
Exerciseofcommonstockoptions 2,006 (558) — 1,448
Accumulatedeffectofincometaxfromstockoptions — (16,087) — (16,087)
Share-basedcompensationexpense(note18d) — 2,310 — 2,310
2020ShareOffering(note18a) 47,959 — — 47,959
Shareissuancecosts(note18a) (3,368) — — (3,368)
Abacusacquisition(note4) 105,461 5,407 — 110,868
Netloss — — (25,929) (25,929)
Balance-June30,2020 $ 275,985 $ 18,585 $ (23,671) $ 270,899
4Theaccompanyingnotesareanintegralpartoftheseunauditedinterimcondensedconsolidatedfinancialstatements.
CHARLOTTE’SWEBHOLDINGS,INC.UNAUDITEDINTERIMCONDENSEDCONSOLIDATEDSTATEMENTSOFCASHFLOWS(InthousandsofUnitedStatesdollars)
SixmonthsendedJune30,
2020 2019
Cashflowsfromoperatingactivities:
Net(loss)income $ (25,929) $ 4,525
Itemsnotinvolvingcash:
Depreciationandamortization 3,931 1,406
Changeinfairvalueofbiologicalassets (86) (496)
Changeinfairvalueofwarrantliabilities (6,705) —
Changeinfairvalueofstockappreciationrights (195) —
Expectedcreditlosses (9) 136
Inventoryprovision,net 2,523 953
Share-basedcompensation 2,310 749
Loss/(gain)ondisposalofassets 7 8
Deferredincometaxes 14,330 (182)
Changesinworkingcapital:
Tradeandotherreceivables,net (3,095) (2,693)
Inventories 584 (10,296)
Prepaidexpensesandothercurrentassets (2,739) (5,611)
Accountspayable 2,058 (1,302)
Accruedliabilities 2,288 (1,336)
Incometaxes (8,034) (166)
Cultivationliabilities (3,596) (1,037)
Otheroperatingassetsandliabilities,net 379 98
(21,978) (15,244)
Cashflowsfrominvestingactivities:
Cashacquiredinbusinesscombinations 11,181 —
Fundingofnotesreceivable (936) (1,400)
Purchasesofpropertyandequipmentandintangibleassets (10,187) (4,059)
Proceedsfromsaleofassets 41 53
Proceedsfromloansduefromrelatedparties — 14
Otherinvestingactivities (895) (812)
(796) (6,204)
Cashflowsfromfinancingactivities:
Proceedsfrompublicoffering 57,165 —
Proceedsfromcommonstockoptionexercises 1,448 397
Proceedsfromstockwarrantexercises — 461
Paymentsonnotespayable (5) (5)
Paymentsonleaseobligations (1,199) (1,378)
Shareissuancecosts (3,368) —
54,041 (525)
5Theaccompanyingnotesareanintegralpartoftheseunauditedinterimcondensedconsolidatedfinancialstatements.
Increase(decrease)incash 31,267 (21,973)
Cash,beginningofyear 68,553 73,404
Cash,endofperiod $ 99,820 $ 51,431
Supplementaldisclosuresofcashflowsfromoperatingactivities:
Cashpaidforinterest $ (48) $ (57)
Cashpaidforinterestonleaseobligations (486) (281)
Cashreceivedfrominterest 155 666
Cashpaidfortaxes (42) (23)
Non-cashpurchasesofpropertyandequipmentandintangibleassets (3,649) —
6Theaccompanyingnotesareanintegralpartoftheseunauditedinterimcondensedconsolidatedfinancialstatements.
1. Companyoverview
Charlotte’s Web Holdings, Inc. together with its subsidiaries, (collectively the “Company”) is a publiccompanyincorporatedpursuanttothelawsoftheProvinceofBritishColumbia.TheCompanyispubliclylistedontheTorontoStockExchange(“TSX”)underthesymbol“CWEB.”
TheCompany’sheadoffice is locatedat1600PearlStreet,Suite300,Boulder,Colorado,80302,UnitedStatesanditsregisteredandrecordsofficeislocatedat2800ParkPlace,666BurrardStreet,Vancouver,BritishColumbiaV6C2Z7,Canada.
2. Basisofpreparation
(a) Statementofcompliance
TheseunauditedinterimcondensedconsolidatedfinancialstatementshavebeenpreparedinaccordancewithInternationalAccountingStandards(“IAS34”),InterimFinancialReportingonabasisconsistentwithInternationalFinancialReportingStandards(“IFRS”)as issuedbytheInternationalAccountingStandardsBoard(“IASB”).
Theseunauditedinterimcondensedconsolidatedfinancialstatementsincludeonlysignificanteventsandtransactionsoccurringsince theCompany’s last fiscalyear-end.Theydonot includeall the informationandnotesrequiredbyIFRSforannualfinancialstatementsandthereforeshouldberead inconjunctionwiththeauditedannualconsolidatedfinancialstatementsandnotesfortheCompany’sfiscalyearendedDecember31,2019.
TheunauditedinterimcondensedconsolidatedfinancialstatementsforthethreeandsixmonthsendedJune30,2020and2019wereapprovedandauthorizedforissuebytheBoardofDirectorsonSeptember12,2020.
(b) Measurementbasis
The unaudited interim condensed consolidated financial statements have been prepared mainly on ahistoricalcostbasis.Othermeasurementbasesusedaredescribedintheapplicablenotes.
(c) Basisofconsolidation
TheCompany’sunauditedinterimcondensedconsolidatedfinancialstatementsconsolidatethoseoftheparent companyCharlotte’sWebHoldings, Inc., itswholly owned subsidiary, Charlotte’sWeb, Inc, andacquired subsidiary, Abacus Health Products, Inc. (“Abacus Health”), a British Columbia corporation,pursuant to the acquisition on June 11, 2020 (note 4). Further, as a result of the acquisition, thesefinancialstatementsconsolidatethewhollyownedsubsidiaryofAbacusHealth,AbacusHealthProducts,Inc.(“AbacusUS”),aDelawarecorporation,andthetwowholly-ownedsubsidiariesofAbacusUS,AbacusWellness,Inc.andCBDPharmaceuticalsLtd.
Inter-company balances and transactions are eliminated in preparing the consolidated financialstatements.TheaccountingpoliciesofthesubsidiariesareconsistentwiththeCompany’spolicies.
(d) Useofestimates
The preparation of unaudited interim condensed consolidated financial statements in conformity withIFRSrequiresmanagementtomakeestimatesandassumptionsthataffectthereportedamountsofassetsandliabilitiesanddisclosuresofcontingentassetsandliabilitiesatthedateoftheconsolidatedfinancialstatements and the reported amount of revenues and expenses during the reporting period. Actualresultscoulddifferfromthoseestimates.
CHARLOTTE’SWEBHOLDINGS,INC.NOTESTOUNAUDITEDINTERIMCONDENSEDCONSOLIDATEDFINANCIALSTATEMENTS
FortheThreeandsixmonthsendedJune30,2020and2019
7Theaccompanyingnotesareanintegralpartoftheseunauditedinterimcondensedconsolidatedfinancialstatements.
(e) Reclassificationsandpriorperiodpresentations
Certain amounts presented in prior periods have been reclassified to conformwith the current periodpresentation.
(f) Functionalandpresentationcurrency
TheunauditedinterimcondensedconsolidatedfinancialstatementsarepresentedinUnitedStatesdollars(unless otherwise noted), which is the functional currency of the parent company. All financialinformationispresentedinUnitedStatesdollarsandhasbeenroundedtothenearestthousand,exceptfor(loss)earningspershareamounts.
3. Summaryofsignificantaccountingpolicies
TheCompany’ssignificantaccountingpoliciesaredescribedinnote3,“Summaryofsignificantaccountingpolicies,” in theCompany’s annual consolidated financial statements for the year endedDecember31,2019.Thefollowingdiscussionisintendedtodescribethosejudgmentsandkeyassumptionsconcerningmajor sourcesofestimationuncertaintyat theendof the current reportingperiod thathave themostsignificantriskofresultinginamaterialadjustmenttothecarryingamountofassetsandliabilitieswithinthenextfinancialyear.
Businesscombinations
The consideration transferred for the acquisition of a business comprises the fair value of assetstransferred;liabilitiesincurredtotheformerowners;equityinterestsissuedbytheCompany;fairvalueofassets and liabilities resulting froma contingent consideration arrangement; and fair value of any pre-existingequity interest intheacquiredbusiness. Identifiableassetsacquiredandliabilitiesassumedinabusinesscombinationaremeasuredinitiallyattheirfairvaluesattheacquisitiondate.Theexcessoftheconsideration transferred, the amount of any non-controlling interest in the acquired entity and theacquisition-datefairvalueofanypreviousequityinterestintheacquiredentityoverthefairvalueofthenetidentifiableassetsacquiredisrecordedasgoodwill.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as afinancialliabilityaresubsequentlyremeasuredtofairvalue,withchangestofairvaluerecognizedinprofitorloss.
Goodwill
IAS36requiresthatassetsbecarriedatnomorethantheirrecoverableamount.Therecoverableamountof goodwill is required to be measured at least on an annual basis, irrespective of whether anyimpairment indicators exist. The Company evaluates goodwill, which is not subjected to amortization,annually,ormorefrequentlyifeventsorchangesincircumstancessuggesttheassetmightbeimpaired.Inevaluating goodwill impairment, the total carrying amount of the reporting unit is compared to itsrecoverableamountsandanylossisallocatedfirsttogoodwillandthentotheotherassets.
IntangibleAssets
Intangible assets consist of software, patents, and the Company’s internet domain name. Acquiredintangibleassetsfrombusinesscombinationsincludetradenamesandcustomerrelationships.Softwareisstated as cost less accumulated amortization. The costs of purchasing the Company’s internet domainnamethroughanopenmarketiscapitalizedasanindefinite-livedintangibleasset.Thecostsofobtaininga patent are capitalized and amortized over its useful life. Acquired trade names and customer
CHARLOTTE’SWEBHOLDINGS,INC.NOTESTOUNAUDITEDINTERIMCONDENSEDCONSOLIDATEDFINANCIALSTATEMENTS
FortheThreeandSixmonthsendedJune30,2020and2019
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relationshipsarestatedatpreliminaryfairvalueestimatesandareamortizedoveraten-yearusefullife,determinedaspartofthevaluationofintangibleassetsinconjunctionwiththeAbacusAcquisition(note4).TheCompanyreviewsintangibleassetswithindefiniteusefullivesforimpairmentatleastannuallyandreviews all intangible assets for impairmentwhenever events or changes in circumstances indicate thecarryingamountoftheassetsmaynotberecoverable.
(a) Adoptionofnewaccountingstandardsandpolicies
TheCompanyhasadoptedthefollowingnewaccountingstandardswhichbecameeffectiveasofJanuary1,2020.
IFRS3,“BusinessCombinations”
InOctober2018, the IASB issuedamendments to IFRS3,BusinessCombinations. TheamendmentsareeffectiveforbusinesscombinationsforwhichtheacquisitiondateisonorafterthebeginningofthefirstannualreportingperiodbeginningonorafterJanuary1,2020andapplyprospectively.Theamendmentsclarify the definition of a business, with the objective of assisting entities in determining whether atransactionshouldbeaccountedforasabusinesscombinationorasanassetacquisition.Atransactionshould be accounted for as a business combination if the acquired assets and liabilities constitute abusiness,andrelatedacquisitioncostsaretobeexpensedasincurred.Atransactionshouldbeaccountedfor as an asset acquisition if an acquired set of activities and assets is a group of assets rather than abusiness,andrelatedacquisitioncostsaretypicallycapitalized.
TheCompany’sassetpurchaseagreementwithStanleyBrothersBioTec, Inc.entered intoFebruary28,2020 and the all-stock acquisition ofAbacusHealth (“Abacus”) on June 11, 2020 are deemedbusinesscombinations.Asaresult,acquisitioncostsrelatedtothesebusinesscombinationsof$3,112and$3,545wereexpensedasincurredduringthethreeandsixmonthsendedJune30,2020.
(b) Futureaccountingstandardsissuedbutnotyeteffective
InJanuary2020,theIASBissuedamendmentstoIAS1,PresentationofFinancialStatementstoclarifytherequirementsforclassifyingliabilitiesascurrentornon-current.TheamendmentsareeffectiveforannualperiodsbeginningonorafterJanuary1,2022.AdoptionthereofisnotexpectedtohaveamaterialimpactonthepresentationoftheCompany’sfinancialstatements.
CHARLOTTE’SWEBHOLDINGS,INC.NOTESTOUNAUDITEDINTERIMCONDENSEDCONSOLIDATEDFINANCIALSTATEMENTS
FortheThreeandSixmonthsendedJune30,2020and2019
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4. AcquisitionofAbacusHealth
On June 11, 2020, the Company acquired all the issued and outstanding subordinate voting shares ofAbacusHealth(“AbacusAcquisition”).
Abacus Health develops, markets and sells over-the-counter (“OTC”) topical products combining activepharmaceutical ingredients with hemp extract. This acquisition provides the Company with growthopportunitiesinbothtopicalandingestibleproductsinthecannabidiol(“CBD”)wellnesscategory.
AbacusHealthprimarilysellsitsproductsunderthreebrandnames:CBDCLINIC,CBDMEDIC,andHarmonyHemp.CBDCLINIC ismarketed to theprofessionalpractitionermarketandsoldexclusively to registeredhealth practitioners such as chiropractors, acupuncturists, massage therapists, physical therapists,naturopathsandosteopaths.CBDMEDICistargetedtotheconsumermarket.CBDMEDICproductsaresolddirectlytoconsumersthroughretailoutlets,healthandfitnesslocations,aswellasthroughane-commerceplatform. Harmony Hemp is targeted to the consumer market. These products are sold through retailoutletsaswellasthroughane-commerceplatform.
TheacquisitionconstitutesabusinesscombinationastheacquiredassetsmeetthedefinitionofabusinessasdefinedinIFRS3BusinessCombinations.Thepurchasepriceaccountingreflectedintheaccompanyingfinancialstatementsispreliminaryandisbaseduponestimatesandassumptionsthataresubjecttochangewithin the measurement period (up to one year from the acquisition date). The measurement periodremainsopenpendingthecompletionofvaluationproceduresrelatedtotheacquiredassetsandassumedliabilities,includinginventories,intangibleassetsandincometaxes.
TransferofownershipoccurredonJune11,2020and,accordingly,theunauditedcondensedconsolidatedstatements of (loss) income and other comprehensive (loss) income include Abacus Health results ofoperationsfortheperiodfromJune11,2020throughJune30,2020.Therevenuesandoperatingprofitofthe acquired business since the date of acquisition were not material to the Company’s results ofoperations. If theacquisitionhadtakenplaceasof January1,2020,revenuefromcontinuingoperationswould have been $47,258 and the loss from continuing operations for the period would have been$(40,330).
(a) Fairvalueofconsideration
Pursuant to the termsof thearrangementagreement, foreachAbacusHealth subordinate voting shareandotherequityinstruments,eachholderreceiveda0.85equivalentreplacementawardoftheCompany’srespectivesecurityatthetimeofclosing.
Considerationconsistedofthefollowing:
Commonshares $ 105,461
Otherequityinstruments 8,666
Totalfairvalueofconsideration $ 114,127
AbacusHealth issuedandoutstandingsubordinatevotingshareswerereplacedwiththe0.85equivalentnumberoftheCompany’scommonsharesandwerevaluedattheCompany’sclosingmarketpriceonthedateoftheacquisitionresultinginpurchaseconsiderationof$105,461.
AbacusHealthotherequityinstruments,includingoutstandingstockoptions,warrants,stockappreciationrights (“SARs”), and Harmony Hemp contingent consideration (note 18d) were replaced with the 0.85equivalentnumberofrespectivesecuritiesoftheCompany.Todeterminetheportionoffairvalueofthe
CHARLOTTE’SWEBHOLDINGS,INC.NOTESTOUNAUDITEDINTERIMCONDENSEDCONSOLIDATEDFINANCIALSTATEMENTS
FortheThreeandSixmonthsendedJune30,2020and2019
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replacementawardthat ispartofpurchaseconsideration,theCompanymeasuredboththefairvalueofthe replacement award as the acquiree, Abacus Health, and the acquirer, the Company, as of theacquisitiondate.TheCompanyattributedtheportionofthefairvaluerelatedtopre-combinationserviceaspurchaseconsiderationandattributed the remaining fairvalue to remuneration forpost-combinationservicesbasedonanyremainingvestingterm.TheCompany’spreliminaryfairvaluesofthereplacementawardswerevaluedusingtheBlack-Scholesoptionpricingmodel,withthefollowingassumptionsusedinthemodel: expected volatility; expected term; risk-free interest rate and value of the underlying share.Resulting purchase consideration for replacement stock options, warrants, SARs, and Harmony Hempcontingentconsiderationis$8,666.
Aportionoftheotherequityinstruments,SARsof$402(note17)andcertainwarrantsacquiredof$2,857(note14),weredeterminedtobeliabilitiesbasedonthenatureoftheinstrumentsandwerepreliminarilyvaluedatacquisitiononJune11,2020.ThesearepresentedasliabilitiesattheirrespectivefairvalueasofJune30,2020intheunauditedinterimcondensedconsolidatedstatementsoffinancialposition.
(b) Estimatedfairvalueofassetsacquired
Thepreliminaryfairvalueallocationtotheidentifiablenetassetsacquiredandliabilitiesassumed,atJune11,2020,issummarizedasfollows:
Assetsacquired
Cash $ 11,181
Tradeandotherreceivables,net 2,264
Inventories 5,318
Prepaidexpensesandothercurrentassets 1,411
Incometaxesreceivable 35
Propertyandequipment 815
Intangibleassets 23,200
Deferredtaxassets 22
Otherlong-termassets 1,432
$ 45,678
Liabilitiesassumed
Accountspayable 4,686
Accruedliabilities 1,547
Currentnotespayable 1,322
Currentleaseobligations 213
Long-termnotepayable 312
Long-termleaseobligations 159
$ 8,239
Netassetsacquired $ 37,439
CHARLOTTE’SWEBHOLDINGS,INC.NOTESTOUNAUDITEDINTERIMCONDENSEDCONSOLIDATEDFINANCIALSTATEMENTS
FortheThreeandSixmonthsendedJune30,2020and2019
11
Theestimatedpreliminaryfairvalueofacquiredinventoriesandintangibleassetsweredeterminedusingaforecasted cash flow approachwith the assistance of a third-party valuation firm. Acquired inventoriesconsistofsubstantiallyallfinishedgoods.
Acquired intangible assets consist of a trade name and customer relationships. Preliminary fair valueestimatesoftheacquiredtradenameandcustomersrelationshipsare$700and$22,500,respectively.TheCompanyhaspreliminarilyassignedaten-yearusefullifetobothclassesofacquiredintangibleassets.
The Company determined that Abacus Health’s carrying costs approximated fair value for all otheracquiredassetsandassumedliabilities.
(c) Goodwill
Goodwillarisesfrombusinesscombinationsandisgenerallydeterminedastheexcessofthefairvalueoftheconsiderationtransferredoverthefairvalueofthenetassetsacquiredandliabilitiesassumedasoftheacquisition date. Goodwill and intangible assets acquired in a purchase business combination anddeterminedtohaveanindefiniteusefullifearenotamortized,buttestedforimpairmentatleastannuallyormorefrequentlyifeventsandcircumstancesexiststhatindicatethatagoodwillimpairmenttestshouldbeperformed.
ThegoodwillacquiredfromtheAbacusAcquisitionisnotdeductiblefortaxpurposes.
Fairvalueofconsideration $ 114,127
Estimatedfairvalueofassetsacquired (37,439)
Goodwill $ 76,688
CHARLOTTE’SWEBHOLDINGS,INC.NOTESTOUNAUDITEDINTERIMCONDENSEDCONSOLIDATEDFINANCIALSTATEMENTS
FortheThreeandSixmonthsendedJune30,2020and2019
12
5. Tradeandotherreceivables
Tradeandotherreceivablesconsistofthefollowing:
June30,2020 December31,2019
Tradereceivables $ 7,599 $ 5,677
Tenantimprovementallowance 4,098 —
Othermiscellaneousreceivables 1,323 326
Expectedcreditlosses(note21) (532) (541)
Tradeandotherreceivables,net $ 12,488 $ 5,462
AcquiredtradereceivablesfromAbacusAcquisition(note4)totalednet$2,264.
Ofthe$4,098tenantimprovementallowancereceivablebalanceatJune30,2020,$1,258wasreclassifiedfrompropertyandequipmentunderconstructionduringthesixmonthsendedJune30,2020.
Other miscellaneous receivables consists primarily of an amount due from a vendor for a settlementrelatedtofaultyequipmentandinsuranceclaimsrelatedtotradereceivables.
TheCompanyprovidesforexpectedcreditlosses(ECLs)basedonitsassessmentofprobabilityofspecificlosses,estimatesoffutureindividualexposuresandprovisionsbasedonhistoricalexperience.
Theagingofreceivablesisasfollows:
June30,2020 December31,2019
Current $ 9,201 $ 3,340
Aged1-30dayspastdue 661 1,028
Aged31-60dayspastdue 1,092 541
Aged>60dayspastdue 2,066 1,094
Expectedcreditlosses (532) (541)
$ 12,488 $ 5,462
Of the $9,201 current receivable balance at June 30, 2020, $4,098 relates to the tenant improvementallowancereceivable.
6.Notereceivable
EffectiveMay2019,theCompanyenteredintoapromissorynotesecuredbyextractionunitswithoneofthe Company’s third-party farming suppliers. During the three months ended June 30, 2020, theremaining$1,400ofthe$2,800notewasfunded.ThenotewasamendedonMarch18,2020andbearsinterest at 2.52% per annum for twelve months from each funding date and increases to 4.00% perannumthereafter.ThenoterequirestheunpaidprincipalandunpaidinterestbalancestobepaidonorbeforetheamendedmaturitydateofOctober31,2021.Theborrowermaypaytheprincipalandaccruedinterest in the formofanoffset to theCompany’spurchasesofextractedhemp.Thenote is carriedatamortizedcost,withanoutstandingbalanceof$2,366ofwhich$46wasaccruedinterestasofJune30,2020.
CHARLOTTE’SWEBHOLDINGS,INC.NOTESTOUNAUDITEDINTERIMCONDENSEDCONSOLIDATEDFINANCIALSTATEMENTS
FortheThreeandSixmonthsendedJune30,2020and2019
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As of June 30, 2020, the credit risk related to the note receivable has not increased significantly sinceinitialrecognition.TheCompanyassessedthenotereceivableasfullycollectiblewithnorelatedECLs.
7.Inventories
Inventoriesconsistofthefollowing:
June30,2020 December31,2019
Harvestedhempandseeds $ 37,476 $ 37,549
Rawmaterials 17,536 19,785
Finishedgoods 27,604 22,593
Biologicalassets 1,388 —
$ 84,004 79,927
Less:inventoryprovision (16,874) (15,873)
$ 67,130 $ 64,054
Acquired inventories from Abacus Acquisition (note 4), totaled $5,318 and consist of substantially allfinishedgoods.
a. Harvestedhempandseeds
Detailsoftheharvestedhempandseedsconsistsofthefollowing:
June30,2020 December31,2019
Balance,beginningofperiod $ 37,549 $ 10,463
Transferredtohempandseedsuponharvest 218 35,411
Consumedinproduction (291) (8,325)
Balance,endofperiod $ 37,476 $ 37,549
b. Biologicalassets
The Company grows its industrial hemp (i) on leased farms operated entirely by Companypersonnel,and (ii) through third-party farmingoperationswithoversightby theCompany.ThegrowseasonfortheCompany’sharvestedhempisgenerallyfromMaythroughearlyOctoberofeachyear.Allharvestingofplantsiscompletepriortoyear-end.100%oftheCompany’shempiscurrently consumed internally for its finished goods products and is not sold in its raw orprocessed form. The grow season for the Company’s hemp seeds is generally from Januarythrough June and July through December of each year. The Company’s seeds are primarilyutilizedforinternalproductionoftheCompany’shempandresearchanddevelopmentpurposes.
The Company capitalizes the direct and indirect costs associated with the production of itsbiological assets as incurred, less estimated yield losses and fair value adjustments. Anyadjustmentstocapitalizedbiologicalassetcostsareexpensedtocostofsales.
TheCompanymeasuresitsbiologicalassetsattheirfairvaluelesscoststosell.Thisisdeterminedusingamodelwhichestimates theexpectedharvestyield inpounds forplantscurrentlybeingcultivated, and then adjusts that amount for the expected selling price per pound and foradditionalcoststobeincurred,suchaspost-harvestcosts.
CHARLOTTE’SWEBHOLDINGS,INC.NOTESTOUNAUDITEDINTERIMCONDENSEDCONSOLIDATEDFINANCIALSTATEMENTS
FortheThreeandSixmonthsendedJune30,2020and2019
14
Aslittlebiologicaltransformationhastakenplacesincethebeginningofthecultivationprocessthe carrying value approximates the fair value of the biological assets as of June 30, 2020.Measurement of the plant at fair value less costs to sell begins in early September and isrecognizedevenlyuntilthepointofharvest.
Thechangesinthecarryingvalueofbiologicalassetsareasfollows:
Biologicalassets
Carryingamount,December31,2019 $ —
Productioncosts 1,302
Purchases 304
Changesinfairvaluelesscoststosellduetobiologicaltransformation —
Transferredtoinventoriesuponharvest (218)
Carryingamount,June30,2020 $ 1,388
BIologicalassets
Carryingamount,December31,2018 $ —
Productioncosts 4,197
Purchases 32,056
Changesinfairvaluelesscoststosellduetobiologicaltransformation (842)
Transferredtoinventoriesuponharvest (35,411)
Carryingamount,December31,2019 $ —
Theeffectofchangesinfairvalueofbiologicalassetsandinventoryinclude:
ThreemonthsendedJune30,
2020 2019
Realizedfairvalue(gain)includedininventorysold $ (4) $ (354)
Unrealizedfairvaluelossongrowthofbiologicalassets — —
Neteffectofchangesinfairvalueofbiologicalassetsandinventory $ (4) $ (354)
SixmonthsendedJune30,
2020 2019
Realizedfairvalue(gain)includedininventorysold (86) $ (496)
Unrealizedfairvaluelossongrowthofbiologicalassets — —
Neteffectofchangesinfairvalueofbiologicalassetsandinventory $ (86) $ (496)
CHARLOTTE’SWEBHOLDINGS,INC.NOTESTOUNAUDITEDINTERIMCONDENSEDCONSOLIDATEDFINANCIALSTATEMENTS
FortheThreeandSixmonthsendedJune30,2020and2019
15
c. Inventoryprovision
Aninventoryprovisionisestimatedbymanagementandisincludedincostofsales.ForthethreeandsixmonthsendedJune30,2020,inventoryprovisionsof$1,935and$2,523wererecognizedthroughthecostofsalesandwrite-offsofinventorypreviouslyreservedforof$929and$1,522wererecognized.ForthethreeandsixmonthsendedJune30,2019,inventoryprovisionsof$580and$953wereexpensedthroughthecostofsales.ForthethreeandsixmonthsendedJune30,2019,theCompanyhadno inventorywrite-offs.Theamountof inventoryexpensedduringthethreemonthsendedJune30,2020and2019is$5,762and$5,237,respectively.TheamountofinventoryexpensedduringthesixmonthsendedJune30,2020and2019is$10,461and$9,562,respectively.
CHARLOTTE’SWEBHOLDINGS,INC.NOTESTOUNAUDITEDINTERIMCONDENSEDCONSOLIDATEDFINANCIALSTATEMENTS
FortheThreeandSixmonthsendedJune30,2020and2019
16
8. Propertyandequipment
DetailsoftheCompany’spropertyandequipment,includingright-of-use(RoU)assets,andtheircarryingamountsareasfollows:
Landandbuilding
Machineryand
equipment
Furnituresand
fixturesLeasehold
improvementsUnder
constructionRoUassets-buildings
RoUassets-cultivationequipment Total
Cost
AtDecember31,2018 $ — $ 5,958 $ 405 $ 2,624 $ 159 $ — $ — $ 9,146
TransitiontoIFRS16 — — — — — 3,017 131 3,148
Additions-purchasedassets 1,086 6,495 4 636 7,487 — — 15,708
Additions-right-of-useassets — — — — — 21,648 1,286 22,934
Transfersunderconstruction 2,292 1,924 — 1,088 (5,304) — — —
Disposals — (95) (5) (21) — — — (121)
AtDecember31,2019 $ 3,378 $ 14,282 $ 404 $ 4,327 $ 2,342 $ 24,665 $ 1,417 $ 50,815
Additions-purchasedassets 30 995 20 — 11,374 — — 12,419
Additions-right-of-useassets — — — — — 70 — 70
Acquiredinbusinesscombinations — 397 90 180 — 363 — 1,030
Reclassifications — — — (150) (1,258) — — (1,408)
Transferunderconstruction — 108 — (130) 22 — — —
Disposals — (62) — (514) — — — (576)
AtJune30,2020 $ 3,408 $ 15,720 $ 514 $ 3,713 $ 12,480 $ 25,098 $ 1,417 $ 62,350
Landandbuilding
Machineryand
equipmentFurnituresandfixtures
Leaseholdimprovements
Underconstruction
RoUassets-buildings
RoUAssets-cultivationequipment Total
Accumulateddepreciation
AtDecember31,2018 $ — $ (1,920) $ (143) $ (277) $ — $ — $ — $ (2,340)
Depreciation-expensed — (999) (126) (228) — (2,313) — (3,666)
Depreciation-capitalizedtoinventory (19) (1,008) — (653) — — (233) (1,913)
Disposals — 39 4 10 — — — 53
AtDecember31,2019 $ (19) $ (3,888) $ (265) $ (1,148) $ — $ (2,313) $ (233) $ (7,866)
Depreciation-expensed — (1,359) (70) (632) — (1,426) — (3,487)
Depreciation-capitalizedtoinventory (32) (465) — (120) — — (161) (778)
Vendorsettlement $ — $ (400) $ — $ — $ — $ — $ — (400)
Disposals — 14 — 514 — — — 528
AtJune30,2020 $ (51) $ (6,098) $ (335) $ (1,386) $ — $ (3,739) $ (394) $ (12,003)
Landandbuilding
Machineryand
equipmentFurnituresandfixtures
Leaseholdimprovements
Underconstruction
RoUassets-buildings
RoUassets-cultivationequipment Total
Propertyandequipment,net
AtDecember31,2019 3,359 $ 10,394 $ 139 $ 3,179 $ 2,342 $ 22,352 1,184 $ 42,949
AtJune30,2020 3,357 9,622 179 2,327 12,480 21,359 1,023 $ 50,347
CHARLOTTE’SWEBHOLDINGS,INC.NOTESTOUNAUDITEDINTERIMCONDENSEDCONSOLIDATEDFINANCIALSTATEMENTS
FortheThreeandSixmonthsendedJune30,2020and2019
17
Depreciation expensed for the three months ended June 30, 2020 and 2019 was $1,833 and $428,respectively.DepreciationexpensedforthesixmonthsendedJune30,2020and2019was$3,487and$1,308,respectively.Depreciationrelatedtocultivationequipmentandright-of-useassetsthatwascapitalizedforthethree and six months ended June 30, 2020 was $422 and $778, respectively. Depreciation related tocultivationequipmentandright-of-useassetsthatwascapitalizedforthethreeandsixmonthsendedJune30,2019was$675and$726,respectively.
Acquired property and equipment from the asset purchase agreement with Stanley Brothers Bio Tec, Inc.(note24),totaled$215andconsistedprimarilyoflabequipment.
AcquiredpropertyandequipmentfromAbacusAcquisition(note4),totaled$815andconsistedprimarilyofRoUassets,machineryandequipment,andleaseholdimprovements.
CHARLOTTE’SWEBHOLDINGS,INC.NOTESTOUNAUDITEDINTERIMCONDENSEDCONSOLIDATEDFINANCIALSTATEMENTS
FortheThreeandSixmonthsendedJune30,2020and2019
18
9. Intangibleassets
Details of the Company’s intangible assets subject to amortization and indefinite-lived and theirrespectivecarryingamountsareasfollows:
Software
Internetdomainname
Underdevelopment Patents Tradenames
Customerrelationships Total
Cost
AtDecember31,2018 $ 633 $ 150 $ — $ — $ — $ — $ 783
Additions 120 — 1,157 — — — $ 1,277
Transfers 1,112 — (1,112) — — — $ —
AtDecember31,2019 $ 1,865 $ 150 $ 45 $ — $ — $ — $ 2,060
Additions 87 — 1,167 98 — — $ 1,352
Acquiredinbusinesscombination — — — — 700 22,500 $23,200
Transfers 172 — (172) — — — $ —
AtJune30,2020 $ 2,124 $ 150 $ 1,040 $ 98 $ 700 $ 22,500 $26,612
Software
Internetdomainname
Underdevelopment Patents
Tradenames
Customerrelationships Total
Accumulatedamortization
AtDecember31,2018 $ (164) $ — $ — $ — $ — $ — $ (164)
Amortization (300) — — — — — (300)
AtDecember31,2019 $ (464) $ — $ — $ — $ — $ — $ (464)
Amortization (317) — — — (4) (124) (445)
AtJune30,2020 $ (781) $ — $ — $ — $ (4) $ (124) $ (909)
Software
Internetdomainname
Underdevelopment Patents
Tradenames
Customerrelationships Total
Intangibleassets,net
AtDecember31,2019 $ 1,401 $ 150 $ 45 $ — $ — $ — $ 1,596
AtJune30,2020 $ 1,343 $ 150 $ 1,040 $ 98 $ 696 $ 22,376 $ 25,703
Acquired intangible assets from Abacus Acquisition (note 4), totaled $23,200 and consist of customerrelationships and tradenames.Customer relationships and tradenamesare amortizedover a ten-yearusefullife.
Amortization expense for the three months ended June 30, 2020 and 2019 was $295 and $52,respectively.AmortizationexpenseforthesixmonthsendedJune30,2020and2019was$445and$98,respectively.
CHARLOTTE’SWEBHOLDINGS,INC.NOTESTOUNAUDITEDINTERIMCONDENSEDCONSOLIDATEDFINANCIALSTATEMENTS
FortheThreeandSixmonthsendedJune30,2020and2019
19
The Company’s intangible assets subject to amortization include software, patents, trade names, andcustomerrelationships.TheCompany’sintangibleassetsalsoincludeaninternetdomainname,whichisan indefinite-lived intangibleasset that isnotsubject toamortization.No impairmentwas recorded forthethreeandsixmonthsendedJune30,2020
.10. Prepaidexpensesandothercurrentassets
DetailsoftheCompany’sprepaidexpensesandothercurrentassetsareasfollows:
June30,2020 December31,2019
Prepaidexpenses:
Marketing $ 768 $ 794
Insurance 2,286 1,940
Other 1,740 482
Deposits:
Inventory 2,409 173
Other 539 203
$ 7,742 $ 3,592
AcquiredprepaidexpensesandothercurrentassetsfromAbacusAcquisition(note4),totaled$1,411andconsistprimarilyofmarketingandinsuranceprepaidexpenses.
11. Otherlong-termassets
DetailsoftheCompany’sandotherlong-termassetsareasfollows:
June30,2020 December31,2019
Prepaidexpenses:
Marketing $ 645 $ —
Deposits:
Equipment 2,256 1,553
Customerescrow 765 —
Leases 37 65
Other 246 7
$ 3,949 $—$ 1,625
Acquiredotherlong-termassetsfromAbacusAcquisition(note4),totaled$1,432andconsistprimarilyofcustomerdepositsinescrowandaprepaymentonalong-termmarketingagreement.
CHARLOTTE’SWEBHOLDINGS,INC.NOTESTOUNAUDITEDINTERIMCONDENSEDCONSOLIDATEDFINANCIALSTATEMENTS
FortheThreeandSixmonthsendedJune30,2020and2019
20
12. Notespayable
DetailsoftheCompany’snotespayableareasfollows:
June30,2020 December31,2019
Equipmentnotespayable $ 7 $ 12
Acquiredpurchasepricepayable 1,634 —
Lesscurrentportion (1,329) (9)
$ 312 $ 3
ThefollowingtabledetailsthechangesintheCompany’snotespayablebalances:
Short-termborrowings Long-termborrowings Total
December31,2019 $ 9 $ 3 $ 12
Repayment (5) — (5)
Conversiontoshort-termborrowings 3 (3) —
Acquiredpurchasepricepayable 1,322 312 1,634
June30,2020 1,329 312 1,641
OnFebruary10,2020,oneofthewholly-ownedsubsidiariesofAbacusUS,AbacusWellness,Inc.,acquiredtheprincipalassetsof twocompaniesowning theHarmonyHempbrand.Pursuant to the termsof theasset purchase agreement, Abacus US, and therefore the Company, is obligated to pay the remainingpurchasepricepayableforHarmonyHempanddelivercontingentequitycompensation(note18d).Theremaining purchase price payable forHarmonyHemp acquiredwith theAbacusAcquisition (note 4) is$1,634,ofwhich$1,322and$312iscurrentandlong-term,respectively.
ForthethreeandsixmonthsendedJune30,2020,totalinterestpaidandexpensedrelatedtonotespayablewas$5and$6,respectively.ForthethreeandsixmonthsendedJune30,2019,totalinterestpaidandexpensedrelatedtothenotespayablewaslessthan$1forbothperiods.
Scheduledmaturitiesofnotespayableareasfollows:
within1year 1to5years Total
June30,2020 $ 1,329 $ 312 $ 1,641
CHARLOTTE’SWEBHOLDINGS,INC.NOTESTOUNAUDITEDINTERIMCONDENSEDCONSOLIDATEDFINANCIALSTATEMENTS
FortheThreeandSixmonthsendedJune30,2020and2019
21
13. Leaseobligations
TheCompanyleasesmanyRoUassetsrelatedtoofficespaceandlandtofacilitateagriculturaloperations.The leasesexpireonvariousdates through2035. Informationabout leases forwhich theCompany isalesseeispresentedbelow.
June30,2020
Maturityanalysis-contractualundiscountedcashflows
Lessthanoneyear $ 3,605
Onetofiveyears 11,833
Morethanfiveyears 18,073
TotalundiscountedleaseliabilitiesatJune30,2020 $ 33,511
LeaseliabilitiesatDecember31,2019 $ 24,061
Additions 70
Leasesacquiredinbusinesscombination 372
Repayments (1,199)
Interest 486
LeaseliabilitiesincludedinthestatementoffinancialpositionatJune30,2020 $ 23,790
Current 2,342
Non-current 21,448
Variableleasepaymentsnotincludedinthemeasurementofleaseliabilities $ 12
Acquired lease liabilities fromAbacusAcquisition (note4), totalednet$372and consistof threeofficebuildingswithintheUnitedStatesandonesatelliteofficebuildinglocatedinIsrael.
LeaseincomefromleasecontractsinwhichtheCompanyactsasalessortotaled$124and$227forthethreeandsixmonthsendingJune30,2020.
14. Warrantliabilities
TheCompany’s2019ShareOfferingWarrantsand2020ShareOfferingWarrants(note18a)andAbacusHealthacquiredDebentureandBoughtDealwarrants(note18e)areclassifiedasafinancialliability.ThefinancialliabilityisremeasuredtofairvalueateachreportingdateusingtheBlack-Scholesoptionpricingmodel,with the following assumptions used in themodel: expected volatility; expected term; risk-freeinterestrateandvalueoftheunderlyingshare,withchangestofairvaluerecognizedinprofitorlossfortheperiod.
CHARLOTTE’SWEBHOLDINGS,INC.NOTESTOUNAUDITEDINTERIMCONDENSEDCONSOLIDATEDFINANCIALSTATEMENTS
FortheThreeandSixmonthsendedJune30,2020and2019
22
BalanceatDecember31,2019
Initialfairvaluemeasurement
Changeinfairvalue
Changeinforeigncurrency
BalanceatJune30,2020
2019ShareOfferingWarrants $3,408 $— $(2,322) $(87) $999
2020ShareOfferingWarrants — 9,206 (2,281) (20) 6,905
Debenturewarrants — 1,404 (975) (4) 425
BoughtDealwarrants — 1,453 (1,009) (7) 437
$3,408 12,063 (6,587) (118) $8,766
AcquiredwarrantliabilitiesfromAbacusAcquisition(note4),totaled$2,857andconsistedofdebenturewarrantsandboughtdealwarrants.
ThefollowingassumptionswereusedtodeterminethefairvalueoftheCompany’swarrants:
June30,2020 December31,2019
Valuationassumptions:
Expectedvolatility 84.18% 84.23%
Expectedterm(years) 0.58-1.96 1.00
Risk-freeinterest 0.16% 1.59%
Valueofunderlyingshare 3.83 7.64
15. Cultivationliabilities
Cultivation liabilitiesconsistofamountsowedto third-party farmingoperators.Thetotalamount tobepaidisbasedonthepotencyandyieldofthecrops.Theamountsarepaidovermultipleyearsasstatedinthecontractswiththethird-partyfarmingoperators.Thecultivationliabilitiesareinitiallymeasuredatthepresent value of future payments, discounted using the Company’s incremental borrowing rate. Totalimputed interest recognizedoncultivation liabilities for thethreeandsixmonthsending June30,2020was$35,respectively.
Futurepaymentsdueundercontractobligationsareasfollows:
Short-term Long-term Total
December31,2019 $ 10,803 $ 14,289 $ 25,092
Settlementpayments (3,596) — (3,596)
Interest 35 — 35
Conversiontoshort-termborrowings 4,255 (4,255) —
June30,2020 $ 11,497 $ 10,034 $ 21,531
CHARLOTTE’SWEBHOLDINGS,INC.NOTESTOUNAUDITEDINTERIMCONDENSEDCONSOLIDATEDFINANCIALSTATEMENTS
FortheThreeandSixmonthsendedJune30,2020and2019
23
Scheduledmaturitiesofamountsowedareasfollows:
Within1year 1to5years Total
Cultivationliabilities $ 11,580 $ 10,067 $ 21,647
Imputedinterest (83) (33) (116)
June30,2020 $ 11,497 $—$ 10,034 $ 21,531
16.Lineofcredit
TheCompanyenteredintoanassetbackedlineofcreditwithJ.P.MorganinthesixmonthsendedJune30,2020for$10,000withanaccordionfeaturetoextendthelineto$20,000witha3-yearmaturity.ThelineofcreditagreementrequirescompliancebytheCompanywithcertaindebtcovenants.AsofJune30,2020,theCompanywasincompliancewithalldebtcovenantsandhasnotyetdrawnonthelineofcredit.
17. Stockappreciationrightsliabilities
Pursuant to the Abacus Acquisition, the Company has outstanding stock appreciation rights issued toemployeesandconsultants.Allawardsexpiretenyearsaftergrantandprimarilyvestonaquarterlybasisoverthreeyears.Holdersoftheawardsmayexercisevestedamountsandreceivecashrepresentingthefairvalue,lessbaseprice.ThefollowingassumptionswereusedtodeterminethefairvalueoftheSARsondateofacquisitionandatreportingdate:
June30,2020 June11,2020
Valuationassumptions:
Expectedvolatility 87.50% 87.27%
Expectedterm(years) 4.48-5.35 4.50-6.07
Risk-freeinterestrate 0.16% 0.66%
Valueofunderlyingshare $ 3.83 $ 5.75
June30,2020
Balance,beginningofperiod $ —
Initialfairvaluemeasurement 402
Changeinfairvalue (195)
Balance,endofperiod $ 207
18. Shareholders’equity
(a) Issuedandoutstanding
On June 18, 2020, the Company closed its underwritten public share offering (“2020 ShareOffering”)of10,000,000units ("OfferedUnits")withanover-allotmentoptionexercised in fullforanadditional1,500,000unitsoftheCompanyatapriceofC$6.75(US$4.97)perOfferedUnit,fortotalaggregategrossproceedsofC$77,625(US$57,165).EachOfferedUnitconsistedofonecommon share of the Company and one-half of one common share purchase warrant of theCompany(eachwholecommonsharepurchasewarrant,a"2020ShareOfferingWarrant").Each
CHARLOTTE’SWEBHOLDINGS,INC.NOTESTOUNAUDITEDINTERIMCONDENSEDCONSOLIDATEDFINANCIALSTATEMENTS
FortheThreeandSixmonthsendedJune30,2020and2019
24
2020ShareOfferingWarrantentitlestheholdertopurchaseonecommonshareoftheCompanyatapriceofC$8.50throughexpirationtwoyearsaftertheclosingofthe2020ShareOffering.Atinitialmeasurement,the5,750,0002020ShareOfferingWarrants(note18e)issuedresultedina$9,206financialliabilityreportedintheunauditedinterimcondensedconsolidatedstatementsoffinancial position (note 14). For the sixmonths ended June 30, 2020, share issuance costs of$3,368wererecognizedintheunauditedinterimcondensedconsolidatedstatementsofchangesinshareholders’equity.
ChangesforthesixmonthsendedJune30,2020areasfollows:
Proportionalvotingshares
Commonshares
outstandingTreasuryshares
Numberofcommonshares
issued
December31,2019 95,342 69,253,544 (1,835,370) 67,418,174
Exerciseofstockoptions — 3,374,499 — 3,374,499Exerciseofbrokerstockwarrants — — — —Conversiontocommonvotingshares
(2,887) 1,154,766 — 1,154,766
Restrictedshareawardvesting — 20,175 — 20,1752020ShareOffering — 11,500,000 — 11,500,000AbacusHealthacquiredshares 1,975 17,551,705 — 17,551,705
June30,2020 94,430 102,854,689 — (1,835,370) — 101,019,319
Acquired Abacus Health shares and other securities presented in these unaudited interimcondensed consolidated financial statements are stated on a post-acquisition converted basis(note4).
During the six months ended June 30, 2020, certain existing shareholders cancelled andconvertedtheirproportionalvotingsharestocommonshares.
(b) Dividends
ThecommonproportionatevotingshareshareholdersareentitledtoreceivedividendsoutoftheassetsavailableforthepaymentofdividendsatsuchtimesandinsuchamountandformastheBoardofDirectorsmay from time to timedetermine, subject to anypreferential rights of theholders of any outstanding preferred shares, on the following basis, and otherwise withoutpreferenceordistinctionamongorbetweentheshares.Eachproportionatevotingsharewillbeentitledto400timestheamountpaidordistributedpercommonshare.
(c) (Loss)earningspershare
Basicanddiluted(loss)earningspersharehavebeencalculatedusingnet(loss)income.
The reconciliation of weighted average number of shares for the purpose of diluted (loss)earningspersharetotheweightedaveragenumberofordinarysharesusedinthecalculationofbasic (loss)earningsper share isdetailedbelow.Basic shares include theproportionatevotingsharesonanas-convertedbasis.
CHARLOTTE’SWEBHOLDINGS,INC.NOTESTOUNAUDITEDINTERIMCONDENSEDCONSOLIDATEDFINANCIALSTATEMENTS
FortheThreeandSixmonthsendedJune30,2020and2019
25
ThreemonthsendedJune30,
2020 2019
Weightedaveragenumberofcommonshares-basic 114,206,250 94,986,784
Dilutiveeffectofstockoptionsandawards — 11,286,161
Weightedaveragenumberofcommonshares-diluted 114,206,250 106,272,945
(Loss)earningspershare-basic $ (0.13) $ 0.02
(Loss)earningspershare-diluted $ (0.13) $ 0.02
Weightedaveragecommonshareequivalentsexcludedduetoanti-dilutiveeffectondilutedearningspershare 4,151,755 —
SixmonthsendedJune30,
2020 2019
Weightedaveragenumberofcommonshares-basic 110,821,523 94,105,280
Dilutiveeffectofstockoptionsandawards — 12,140,003
Weightedaveragenumberofcommonshares-diluted 110,821,523 106,245,283
(Loss)earningspershare-basic $ (0.23) $ 0.05
(Loss)earningspershare-diluted $ (0.23) $ 0.04
Weightedaveragecommonshareequivalentsexcludedduetoanti-dilutiveeffectondilutedearningspershare 4,263,982 —
(d) Stockincentiveplans
Share-basedcompensationexpenserecognizedforthethreemonthsendedJune30,2020,and2019,was$2,044and$440,respectively.Share-basedcompensationexpenserecognizedforthesixmonthsendedJune30,2020,and2019,was$2,310and$749,respectively.
i. Stockoptions
1. Foundersstockoptions
At June 30, 2020, all common shares under option were exercised. AtDecember 31, 2019, the number of common shares under option andexercisablewas799,948.
2. 2015and2018Planstockoptions
TheCompanyrecognizescompensationexpenseforshareoptiongrantsbasedon the fair value at the date of grant using the Black-Scholes option pricingmodel. The following assumptions were used to determine the fair value ofshareoptiongrants.
CHARLOTTE’SWEBHOLDINGS,INC.NOTESTOUNAUDITEDINTERIMCONDENSEDCONSOLIDATEDFINANCIALSTATEMENTS
FortheThreeandSixmonthsendedJune30,2020and2019
26
SixmonthsendedJune30,
2020 2019
Valuationassumptions:
Expectedvolatility 84.13%-87.27% 90.0%-92.0%
Expectedterm(years) 0.25-6.25 1.5-5.0
Risk-freeinterestrate 0.47%-1.40% 1.9%-2.5%
Valueofunderlyingshare $4.09-$7.13 $11.92-$21.10
Numberofsharesunder
option
Weightedaverage
exerciseprice(USD)
BalanceatDecember31,2019 4,902,194 $ 1.95
Granted 1,326,046 $ 5.02
AbacusHealthacquiredstockoptions 1,317,932 $ 4.80
Exercised (2,574,551) $ 0.56
Forfeited(andexpired) (252,658) $ 6.83
BalanceatJune30,2020 4,718,963 $ 4.06
ExercisableatJune30,2020 2,362,718 $ 2.25
ForthebalanceatJune30,2020,weightedaverageremainingcontractuallifeis8.35.Theweightedaveragegrant-datefairvalueofoptionsgrantedduringthesixmonthsendedJune30,2020was$3.85.
TheweightedaveragesharepriceatthedateofexerciseofoptionsexercisedduringthethreemonthperiodendedJune30,2020was$6.04.
ii. Restrictedshareawards
Detailsof thenumberof restrictedshareawardsoutstandingunder the2018Planisasfollows:
Numberofrestricted
shares
Weightedaveragegrant-datefair
value(USD)
BalanceatDecember31,2019 114,266 $ 20.52
Granted 297,439 $ 4.70
Forfeited (12,384) $ 14.75
Vested (20,175) $ 18.99
BalanceatJune30,2020 379,146 $ 8.41
CHARLOTTE’SWEBHOLDINGS,INC.NOTESTOUNAUDITEDINTERIMCONDENSEDCONSOLIDATEDFINANCIALSTATEMENTS
FortheThreeandSixmonthsendedJune30,2020and2019
27
iii. HarmonyHempcontingentcompensation
PursuanttothetermsoftheHarmonyHempassetpurchaseagreement(note12), Abacus US, and therefore the Company, is required to deliver commonshares in three installmentson the12th,18th and24thmonthanniversariesofthe closing date to key individuals. All vesting of the common shares isdependent and contingent on the continuation of the key individual’sconsulting, employment or other services relationship with the Company ontheapplicablevestingdate.Share-basedcompensationexpenseattributabletoHarmonyHempcontingentconsideration for thethreeandsixmonthsendedJune30,2020was$115.
(e) Warrants
ThefollowingsummarizesthenumberofwarrantsoutstandingasofJune30,2020:
BalanceatDecember31,2019
BalanceatJune30,2020
Numberofwarrants
outstanding Granted
AbacusHealthacquiredwarrants
Numberofwarrants
outstanding
Weightedaverage
exerciseprice
Broker 1,110 — — 1,110 $ 5.39
2019ShareOfferingWarrants 2,500,000 — — 2,500,000 $ 12.67
2020ShareOfferingWarrants — 5,750,000 — 5,750,000 $ 6.26
AbacusHealthacquiredwarrants — — 1,892,872 1,892,872 $ 11.38
2,501,110 5,750,000 1,892,872 10,143,982 $ 8.80
For the balance of outstanding warrants at June 30, 2020, the weighted average remainingcontractuallifeis1.84years.
CHARLOTTE’SWEBHOLDINGS,INC.NOTESTOUNAUDITEDINTERIMCONDENSEDCONSOLIDATEDFINANCIALSTATEMENTS
FortheThreeandSixmonthsendedJune30,2020and2019
28
19. Expensesbynature
Thecostsofsalesandoperatingexpensesbynatureareasfollows:
ThreemonthsendedJune30,
SixmonthsendedJune30,
2020 2019 2020 2019
Costofsales $ 10,209 $ 6,526 $ 16,675 $ 12,431
Inventoryexpensedtocostofsales 5,762 5,237 10,461 9,562
Inventoryprovision,net 2,528 — 2,523 —
Otherproductioncosts 1,736 1,379 3,211 2,476
Depreciationandamortization 183 (90) 480 393
Generalandadministrative $ 21,108 $ 9,060 $ 37,139 $ 17,519
Personnel 9,023 2,943 16,810 7,109
Legalandprofessionalservices 6,972 3,143 10,921 4,403
Otheroperatingexpenses 3,237 2,475 6,164 5,109
Depreciationandamortization 1,876 499 3,244 898
Salesandmarketing $ 6,835 $ 6,527 $ 13,367 $ 11,087
Advertising,promotionsandsellingcosts 3,399 3,562 6,874 6,253
Personnel 2,965 2,335 5,463 3,865
Facilitiesandotherexpenses 425 595 945 899
Depreciationandamortization 46 35 85 70
.
Researchanddevelopment $ 1,533 $ 654 $ 2,299 $ 845
Personnel 1,286 343 1,813 534
Otheroperatingexpenses 222 266 361 266
Depreciationandamortization 25 45 125 45
Asa resultofbusinesscombinations,asdefinedby IFRS3BusinessCombinations (note3),one-timeacquisitioncostsof$3,112and$3,545wereexpensedas incurredduringthethreeandsixmonthsendedJune30,2020ingeneralandadministrative.
Accruedlitigationsettlementexpenseof$2,050,aone-timecost,wasrecordedduringthethreeandsixmonthsendedJune30,2020ingeneralandadministrative.
CHARLOTTE’SWEBHOLDINGS,INC.NOTESTOUNAUDITEDINTERIMCONDENSEDCONSOLIDATEDFINANCIALSTATEMENTS
FortheThreeandSixmonthsendedJune30,2020and2019
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20. Incometaxes
(a) Componentsofincometaxes
Themajorcomponentsofincometaxexpenseattributabletoincomefromcontinuingoperationsconsistsof:
ThreemonthsendedJune30,
SixmonthsendedJune30,
2020 2019 2020 2019
U.S.federal $ — $ 379 $ 5,463 $ 1,019
Stateandlocal 20 269 844 315
$ 20 $ 648 $ 6,307 $ 1,334
During the first quarter of 2020, the Company expensed previously recognized deferred taxassets(see(d)below).Ofwhich$16,087wasoffsetincontributedsurplusrelatedtotheincometaxbenefit previously recognized for stockoptions. Further, $8,069was reclassified to incometaxesreceivableinconjunctionwiththeCARESAct(see(e)below)andtheremaining$6,262wasrecordedasincometaxexpense.
(b) Taxratereconciliation
Income tax expense attributable to (loss) income from continuing operations for the three and sixmonths ended June30, 2020, and2019, differed from the amounts computedby applying theU.S.federalincometaxratesof21%,asaresultofthefollowing:
2020 2019
Computed"expected"taxexpense 21.0% 21.0%
Stateincometaxes,netoffederaltaxbenefit 3.7% 1.5%
Permanentitems 2.4% 0.3%
Changeintaxrate (0.4%) 0.2%
Inabilitytorecognizecurrentyeardeferredtaxassets (26.2%) 0.0%
Other,net 1.4% (0.2%)
Effectivetaxratebeforediscreteitem 1.9% 22.8%
Derecognizedeferredtaxassets (34.1%) 0.0%
Effectivetaxrateafterdiscreteitem (32.1%) 22.8%
(c) Uncertaintaxposition
DuetotheadoptionofIFRIC23,uncertaintiesexistwithrespecttotheinterpretationofcomplextaxregulations,changes in tax laws,andtheamountandtimingof futuretaxable income.TheCompanyrecognizesthetaxbenefitfromanuncertaintaxpositiononlyifitisprobablethatthetaxpositionwillbesustainedbasedonitstechnicalmerits.TheCompanymeasuresandrecordsthetaxbenefits fromsuchapositionbasedonthe largestbenefit thathasagreaterthan50%likelihoodofbeingrealizeduponultimatesettlement.TheCompany’sestimatedliabilitiesrelatedto thesematters are adjusted in the period in which the uncertain tax position is effectivelysettled, the statute of limitations for examination expires or when additional informationbecomes available. The Company’s liability for unrecognized tax benefits requires the use of
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assumptions and significant judgement to estimate the exposures associatedwith our variousfiling positions. Although the Company believes that the judgments and estimates made arereasonable, actual results could differ and resulting adjustments could materially affect oureffectiveincometaxrateandincometaxprovision.
DuringthethreeandsixmonthsendedJune30,2020,theCompanydidnotrecordaprovisionforuncertaintaxpositions.
(d) Deferredtaxassets
IAS12–IncomeTaxesrequiresanentitytorecognizedeferredtaxassetswhenitisprobablethattaxableprofitswillbeavailabletooffsetthesetemporarydifferenceswhentheyarededucted.Management assesses the available positive and negative evidence to estimate whethersufficient future taxable income will be generated to permit use of the existing deferred taxassets.Twosignificantpiecesofobjectivenegativeevidenceevaluatedwerethecumulativelossincurredoverthethree-yearperiod,whichtriggeredduringthequarterendedMarch31,2020,andtheforecastedannual2020loss.Suchobjectiveevidencelimitstheabilitytoconsiderothersubjectiveevidence,suchasourprojectionsforfuturegrowth.Asaresult,theCompanydoesnothave the ability to recognize the deferred tax assets. These assets consist primarily of a netoperating loss carryforward in the amount of $18,000. This net operating loss carryforwardremainsavailableforfutureusetooffsetfuturetaxliabilities.
(e) TheCARESAct
OnMarch 27, 2020 the Coronavirus Aid, Relief, and Economic Security Act (“CARESAct”)wasenactedinresponsetotheCOVID-19pandemic.TheCARESAct,amongotherthings,allowsfortheCompanytocarrybackthenetoperatinglossgeneratedin2019.Theimpactofthecarrybackwillresultinarefundof$8,069whichisincludedinincometaxesreceivableasofJune30,2020.The Company will continue to monitor future developments and interpretations for furtherimpacts.
The Company previously recognized $3,273 of income taxes receivable related to 2019 taxoverpayments,resultinginatotalincometaxesreceivableasofJune30,2020of$11,342.
21. Financialriskmanagement
TheCompanyhasexposuretothefollowingrisksfromitsuseoffinancialinstruments.Themaintypesofrisksaremarketrisk,creditriskandliquidityrisk.TheCompany’sseniormanagementoverseesthemanagementoftheserisks.TheCompany’sfinancialinstrumentsandpoliciesformanagingtheserisksaredetailedbelow.
(a) FairValue
AsatJune30,2020,theCompany’sfinancialassetsincludecashandtradereceivables.Financialliabilities include trade payables, purchase price payable and derivative financial liability. Thecarryingamountsofcurrentassetsandliabilitiesapproximatetheirfairvalueduetotheirshortperiodtomaturity.Thederivativefinancialliabilityismeasuredatfairvaluethroughprofitorloss("FVTPL").
The fair valuemeasurement of the Company’s financial and non-financial assets and liabilitiesutilizesmarket observable inputs and data as far as possible. Inputs used in determining fairvaluemeasurements are categorized intodifferent levels basedonhowobservable the inputsusedinthevaluationtechniqueutilizedare(the'fairvaluehierarchy'):
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-Level1:Quotedpricesinactivemarketsforidenticalitems(unadjusted);-Level2:ObservabledirectorindirectinputsotherthanLevel1inputs;and-Level3:Unobservableinputs(i.e.notderivedfrommarketdata).
Theclassificationofanitemintotheabovelevelsisbasedonthelowestleveloftheinputsusedthat has a significant effect on the fair value measurement of the item. Transfers of itemsbetweenlevelsarerecognizedintheperiodtheyoccur.
The Company's cash is subject to a level 1 valuation. The derivative financial liability for thePurchaseWarrantsandDebentureWarrantsissubjecttoalevel1valuation.
Thebasisofthevaluationofthederivativefinancialliabilityisfairvalue.Thederivativefinancialliability is revalued each period using the Black-Scholes valuation model and quoted marketrates.Thisvaluationtechniquemaximizestheuseofobservablemarketdatawhereitisavailableandreliesaslittleaspossibleonentityspecificestimates.
(b) MarketRisk
Marketriskistheriskthatchangesinmarketprices,suchasforeignexchangeratesandinterestrates,willaffecttheCompany’sincomeorthevalueofitholdingfinancialinstruments.
The Company conducts sales transactions with foreign entities. The transactions aredenominated in USD, the functional currency, and therefore the Company does not haveexposuretoforeignexchangeraterisk.
Interestrateriskistheriskthatthefairvalueorfuturecashflowsofafinancialinstrumentwillfluctuate because of change in market interest rates. The Company’s trade receivables andaccountspayablearenon-interestbearing.Financialassetsandfinancial liabilitieswithvariableinterestratesexposetheCompanytocashflowinterestraterisk.TheCompanydoesnothaveany debt instruments outstanding with variable interest rates at June 30, 2020. Changes inmarketinterestratescausethefairvalueoflong-termdebtwithfixedinterestratestofluctuatebutdoesnotimpactnetincomeastheCompanyrecordsdebtatamortizedcostandthecarryingvaluedoesnotchangeasinterestrateschange.
(c) Creditrisk
Creditriskreferstotheriskthatacounterpartywilldefaultonitscontractualobligation,resultinginfinancial losstotheCompany.Suchrisksariseprimarily fromcertainfinancialassetsheldbythe Company consisting of trade receivables, note receivable, and deposits. The Company’smaximum exposure to credit risk is limited to the carrying amount of the financial assets assummarizedbelow:
June30,2020 December31,2019
Tradeandotherreceivables,net $ 12,488 $ 5,462
Otherlong-termassets 3,949 1,625
Deposits-current 2,948 376
Notereceivable 2,366 1,421
$ 21,751 $ 8,884
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The Company applies the simplified approach to providing for expected credit losses asprescribedbyIFRS9,whichpermitstheuseofthelifetimeexpectedlossprovisionforalltradereceivables.ThelossallowanceprovisionisbasedontheCompany’shistoricalcollectionandlossexperience and incorporates forward-looking factors,where appropriate. The provisionmatrixbelowshowstheexceptedcreditlossrateateachagingcategoryoftradeandotherreceivables.
CurrentAged1-30days
pastdueAged31-60days
pastdueAged>60days
pastdue Total
Expectedlossrate 0.97% 7.41% 6.41% 15.68% 4.09%
Grosscarryingamount $9,201 $ 661 $ 1,092 $ 2,066 13,020
Lossallowanceprovision,endoftheperiod $ 89 $ 49 $ 70 $ 324 532
i. Tradeandotherreceivables
Individual receivableswhichareknowntobeuncollectiblearewrittenoffby reducingthe carryingamountdirectly.Other receivablesareassessed collectively todeterminewhetherthereisobjectiveevidencethatanimpairmenthasbeenincurred,butnotyetbeen identified. The Company maintains an allowance for doubtful accounts thatrepresentsitsestimateoftheuncollectibleamountsbasedonspecificlossesestimatedonindividualexposuresandprovisionsbasedonhistoricalexperience.
The Company considers that there is evidence of impairment if any of the followingindicatorsarepresent:
• significantfinancialdifficultiesofthedebtor;• probability that thedebtorwill enterbankruptcyor financial reorganization;
and/or• defaultordelinquencyinpayments
Seenote5forinformationabouttheagingoftradeandotherreceivables.
(d) Liquidityrisk
LiquidityriskistheriskthattheCompanywillnotbeabletomeetitsobligationsastheybecomedue.TheCompanymanagesliquidityriskbyevaluatingworkingcapitalandforecastinglong-termfinancial liabilitiesaswell as forecast cash inflowsandoutflows frombusinessoperations. TheCompany’scashbalancesatJune30,2020andDecember31,2019were$99,820and$68,553,respectively. Networking capital at June 30, 2020 andDecember 31, 2019was $154,957 and$116,927,respectively.
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22. Fairvaluemeasurement
SetoutbelowisacomparisonbyclassofthecarryingamountsandfairvalueoftheCompany’sfinancialinstruments.
June30,2020 December31,2019
CarryingAmount FairValue
CarryingAmount FairValue
Financialassets
Cash $ 99,820 $ 99,820 $ 68,553 $ 68,553
Tradeandotherreceivables,net 12,488 12,488 5,462 5,462
Notereceivable 2,366 2,366 1,421 1,421
$ 114,674 $ 114,674 $ 75,436 $ 75,436
Financialliabilities
Accountspayableandaccruedliabilities $ 30,348 $ 30,348 $ 16,121 $ 16,121
Cultivationliabilities 21,531 21,531 25,092 25,092
Notespayable 1,641 1,641 12 12
Leaseobligations 23,790 23,790 24,061 24,061
Warrantliabilities 8,766 8,766 3,408 3,408
$ 86,076 $ 86,076 $ 68,694 $ 68,694
23. Capitalmanagement
Forcapitalmanagementpurposes,theCompanydefinescapitalasitsshareholders’equitythatincludessharecapital,contributedsurplusandretainedearnings.TheamountsincludedintheCompany’scapitalfortherelevantperiodareasfollows:
June30,2020 $270,899December31,2019$153,698
TheCompany’sprincipalobjectivesinmanagingcapitalare:
• toensurethatitwillcontinuetooperateasagoingconcern;• to be flexible to take advantage of contract and growth opportunities that are expected to
providesatisfactoryreturnstoitsshareholders;• to maintain a strong capital base to maintain customers, investors, creditors and market
confidence;and• toprovideanadequaterateofreturntoitsshareholders.
TheCompanymanagesandadjustsitscapitalstructureconsideringchangesineconomicconditions.Tomaintainoradjustitscapitalstructure,theCompanymayissuedebtornewshares.FinancingdecisionsaregenerallymadeonaspecifictransactionbasisanddependonsuchthingsastheCompany’sneeds,capitalmarketsandeconomicconditionsatthetimeofthetransaction.Managementreviewsitscapitalmanagementapproachonanongoingbasisandbelievesthatthisapproachisreasonable,giventhesizeofthecompany.
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To support capital management, the Company has a an asset backed line of credit with J.P. Morgan$10,000withanaccordion feature toextend the line to$20,000witha3-yearmaturity (note16). TheCompanyhasnotyetdrawnonthelineofcredit.
24. Relatedpartytransactions
TheCompanyenteredintoanagreementfortheleaseofpropertyheldbyanentityownedbycertainfoundersoftheCompany.TheleasetermiseffectiveJanuary1,2019throughDecember31,2020.Perthetermsoftheleaseagreement,theCompanyprepaidbaserentinfulluponexecutionintheamountof $144. The lease asset is presented as a right of use asset with property and equipment on thestatementoffinancialposition.
OnFebruary28,2020,theCompanyenteredintoanassetpurchaseagreementwithStanleyBrothersBioTec, Inc., an entity formerly owned by certain founders of the Company. The Company purchasedsubstantially all the assets related to Stanley Brothers Bio Tec Inc. for total consideration of $250.Acquiredpropertyandequipmenttotaled$215andconsistedprimarilyoflabequipment.Theremaining$35oflabandothermiscellaneoussuppliesacquiredwereexpensedthroughresearchanddevelopment.
AidanceScientific,Inc.(“Aidance”)isthemanufacturerofnearlyallAbacusHealthproducts.TheformerChief Executive Officer of Abacus Health, and current President of the Company, also serves onAidance’s Board ofDirectors. As of June 30, 2020, the Company has a liability of $335 due to and areceivableof$129due fromAidancepresented inaccountspayableand tradeandother receivables,net,respectively,intheunauditedinterimcondensedconsolidatedstatementsoffinancialposition.
25. RemunerationofkeymanagementoftheCompany
Theremunerationawardedtoseniorkeymanagementincludesthefollowing:
ThreemonthsendedJune30,
SixmonthsendedJune30,
2020 2019 2020 2019
Wagesandbonus $ 665 771 $ 2,024 948
Benefits $ 112 69 $ 174 76
Share-basedcompensation $ 809 181 $ 1,005 423
$ 1,586 $ 1,021 $ 3,203 $ 1,447
TheCompanyaddedadditionalkeymanagementpositionsstartinginthesecondquarterof2019.
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