QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
British Columbia, |
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
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(Address of principal executive offices) |
(Zip Code) |
Large accelerated filer |
☐ |
Accelerated filer |
☐ | |||
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☒ |
Smaller reporting company |
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Emerging growth company |
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Page No. | ||||
PART I. FINANCIAL INFORMATION |
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Item 1. | 1 | |||
2 | ||||
3 | ||||
4 | ||||
5 | ||||
6 | ||||
Item 2. | 26 | |||
Item 3. | 32 | |||
Item 4. | 32 | |||
33 | ||||
Item 1. | 33 | |||
Item 1A. | 35 | |||
Item 2. | 35 | |||
Item 3. | 35 | |||
Item 4. | 35 | |||
Item 5. | 35 | |||
Item 6. | 36 | |||
Signatures | 37 |
June 30, |
December 31, |
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2021 |
2020 |
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(Revised) |
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Assets |
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Cash |
$ | $ | ||||||
Restricted cash |
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Accounts receivable, net of allowance for doubtful accounts of $ |
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Prepaid expenses |
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Inventories |
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Other assets |
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Current Assets |
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Investments |
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Property, plant and equipment |
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Right-of-use |
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Other long-term assets |
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Intangible assets |
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Total Assets |
$ |
$ |
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Liabilities |
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Accounts payable |
$ | $ | ||||||
Accrued and other current liabilities |
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Current portion of long-term debt, net of issuance costs |
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Derivative liabilities |
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Current portion of lease liabilities |
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Current Liabilities |
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Long-term debt, net of issuance costs |
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Deferred income tax |
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Long-term portion of lease liabilities |
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Total Liabilities |
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Commitments and Contingencies |
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Shareholders’ Equity |
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Common shares — |
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Shares to be issued |
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Additional paid-in capital |
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Accumulated deficit |
( |
) | ( |
) | ||||
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|
|
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Total Shareholders’ Equity |
$ |
$ |
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|
|
|
|||||
Total Liabilities and Shareholders’ Equity |
$ |
$ |
||||||
|
|
|
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2021 |
2020 |
2021 |
2020 |
|||||||||||||
Revenues, net of discounts |
$ |
$ |
$ |
$ |
||||||||||||
Costs and expenses applicable to revenues |
( |
) |
( |
) |
( |
) |
( |
) | ||||||||
Gross profit |
||||||||||||||||
Operating expenses |
||||||||||||||||
Selling, general and administrative expenses |
||||||||||||||||
Depreciation and amortization |
||||||||||||||||
Write-downs, recoveries and other charges, net |
( |
) | ||||||||||||||
Impairment loss |
||||||||||||||||
Income (loss) from operations |
( |
) |
( |
) |
( |
) | ||||||||||
Interest income |
||||||||||||||||
Other income |
||||||||||||||||
Interest expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Accretion expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Provision for debt obligation fee |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Gains from change in fair value of financial instruments |
||||||||||||||||
Loss before income taxes |
( |
) |
( |
) |
( |
) |
( |
) | ||||||||
Income tax expense |
||||||||||||||||
Net loss |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) | ||||
Net loss per share - basic and diluted |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) | ||||
Weighted average number of common shares outstanding - basic and diluted |
Three Months Ended June 30, 2021 |
||||||||||||||||||||
Number of Common Shares (‘000) |
Shares to be Issued |
Additional Paid-in-Capital |
Accumulated Deficit |
Total Shareholders’ Equity |
||||||||||||||||
Balance – March 31, 2021 |
$ |
$ |
$ |
( |
) |
$ |
||||||||||||||
Share-based compensation |
— |
— |
— |
|||||||||||||||||
Net loss |
— |
— |
— |
( |
) |
( |
) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance – June 30, 2021 |
$ |
$ |
$ |
( |
) |
$ |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Six Months Ended June 30, 2021 |
||||||||||||||||||||
Number of Common Shares (‘000) |
Shares to be Issued |
Additional Paid-in-Capital |
Accumulated Deficit |
Total Shareholders’ Equity |
||||||||||||||||
Balance – January 1, 2021– Revised |
$ |
$ |
$ |
( |
) | $ |
||||||||||||||
Share-based compensation |
— |
— |
— |
|||||||||||||||||
Net loss |
— |
— |
— |
( |
) | ( |
) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance – June 30, 202 1 |
$ |
$ |
$ |
( |
) | $ |
||||||||||||||
|
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|
|
|
|
|
|
|
|
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| |||||||||||||||||
Three Months Ended June 30, 2020 |
||||||||||||||||||||
Number of Common Shares (‘000) |
Shares to be Issued |
Additional Paid-in-Capital |
Accumulated Deficit |
Total Shareholders’ Equity |
||||||||||||||||
Balance – March 31, 2020 |
$ |
$ |
$ |
( |
) | $ |
||||||||||||||
Share-based compensation |
— | — | — | |||||||||||||||||
Net loss |
— | — | — | ( |
) | ( |
) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance – June 30, 202 0 |
$ |
$ |
$ |
( |
) | $ |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Six Months Ended June 30, 2020 |
||||||||||||||||||||
Number of Common Shares (‘000) |
Shares to be Issued |
Additional Paid-in-Capital |
Accumulated Deficit |
Total Shareholders’ Equity |
||||||||||||||||
Balance – January 1, 2020 |
$ |
$ |
$ |
( |
) |
$ |
||||||||||||||
Share issuance – Settlement of outstanding obligations |
— | — | ||||||||||||||||||
Share-based compensation |
— | — | — | |||||||||||||||||
Other - Warrant issuance |
— | — | ( |
) | — | ( |
) | |||||||||||||
Net loss |
— | — | — | ( |
) | ( |
) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance – June 30, 2020 |
$ |
$ |
$ |
( |
) |
$ |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
||||||||
2021 |
2020 |
|||||||
CASH FLOW FROM OPERATING ACTIVITIES |
||||||||
Net loss |
$ |
( |
) | $ |
( |
) | ||
Adjustments to reconcile net loss to cashflow from (used in) operations: |
||||||||
Interest income |
( |
) | ( |
) | ||||
Interest expense |
||||||||
Accretion expense |
||||||||
Debt obligation fees |
||||||||
Impairment loss |
||||||||
Depreciation and amortization |
||||||||
Write-downs and other charges |
||||||||
Share-based compensation |
||||||||
Gain from change in fair value of financial instruments |
( |
) | ( |
) | ||||
Income from equity-accounted investments |
— | ( |
) | |||||
Deferred income taxes |
( |
) | ||||||
Change in non-cash working capital items (Note 12) |
||||||||
|
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|
|||||
NET CASH FLOW PROVIDED BY (USED IN) OPERATING ACTIVITIES |
$ |
$ |
( |
) | ||||
|
|
|
|
|||||
CASH FLOW FROM INVESTING ACTIVITIES |
||||||||
Purchase of property, plant and equipment |
( |
) | ( |
) | ||||
Acquisition of other intangible assets |
( |
) | ( |
) | ||||
Proceeds from redemption and sale of investment |
— | |||||||
Issuance of related party promissory note |
( |
) | ( |
) | ||||
|
|
|
|
|||||
NET CASH USED IN INVESTING ACTIVITIES |
$ |
( |
) |
$ |
( |
) | ||
|
|
|
|
|||||
CASH FLOW FROM FINANCING ACTIVITIES |
||||||||
Proceeds from issuance of debt |
— | |||||||
Debt issuance costs |
( |
) | — | |||||
Repayment of debt |
( |
) | ( |
) | ||||
|
|
|
|
|||||
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES |
$ |
$ |
( |
) | ||||
|
|
|
|
|||||
CASH AND RESTRICTED CASH: |
||||||||
NET INCREASE (DECREASE) IN CASH AND RESTRICTED CASH DURING THE PERIOD |
( |
) | ||||||
|
|
|
|
|||||
CASH AND RESTRICTED CASH, BEGINNING OF PERIOD |
||||||||
|
|
|
|
|||||
CASH AND RESTRICTED CASH, END OF PERIOD |
$ |
$ |
||||||
|
|
|
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(a) |
Description of Business |
(b) |
Basis of Presentation |
(c) |
Going Concern |
• | renegotiation of existing financing arrangements and other material contracts, including any amendments, waivers, extensions or similar agreements with the Lenders to and/or stakeholders of the Company and/or its subsidiaries that the Special Committee determines are in the best interest of the Company and/or its subsidiaries; |
• | managing available sources of capital, including equity investments or debt financing or refinancing and the terms thereof; |
• | implementing the operational and financial restructuring of the Company and its subsidiaries and their respective businesses, assets and licensure and other rights; and |
• | implementing other potential strategic transactions. |
(d) |
Basis of Consolidation |
( e ) |
Use of Estimates |
( f ) |
Change in Estimates |
( g ) |
Coronavirus Pandemic |
Operating Leases |
||||
2022 |
$ | |||
2023 |
||||
2024 |
||||
2025 |
||||
2026 |
||||
Thereafter |
||||
|
|
|||
Total lease payments |
$ | |||
Less: interest expense |
( |
) | ||
|
|
|||
Present value of lease liabilities |
$ | |||
Weighted-average remaining lease term (years) |
||||
Weighted-average discount rate |
% | |||
|
|
Balance Sheet Information |
Classification |
June 30, 2021 |
December 31, 2020 |
|||||||
Right-of-use |
Operating leases | $ | $ | |||||||
|
|
|
|
|||||||
Lease Liabilities |
||||||||||
Current portion of lease liabilities |
Operating leases | $ | $ | |||||||
Long-term lease liabilities |
Operating leases | |||||||||
|
|
|
|
|||||||
Total |
$ |
$ |
||||||||
|
|
|
|
June 30, 2021 |
December 31, 2020 |
|||||||
(Revised) |
||||||||
Supplies |
$ | $ | ||||||
Raw materials |
||||||||
Work in process |
||||||||
Finished goods |
||||||||
|
|
|
|
|||||
Total |
$ |
$ |
||||||
|
|
|
|
Secured Notes (1) |
May 2019 Debentures |
March 2019 Debentures |
Other |
Total |
||||||||||||||||
As of January 1, 2021 |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Fair value of financial liabilities issued |
— | — | ||||||||||||||||||
Accretion of balance |
||||||||||||||||||||
Repayment |
— | — | — | ( |
) | ( |
) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
As of June 30, 2021 |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
(1) | This amount includes the Company’s obligation to pay an exit fee of $ |
(a) |
Secured Notes |
(b) |
March 2019 Debentures |
(c) |
May 2019 Debentures |
(d) |
Stavola Trust Note |
(a) |
Share Capital |
• | |
(b) |
Warrants |
June 30, 2021 |
||||||||
Units |
Weighted Average Exercise Price (C$) |
|||||||
Warrants outstanding as of December 31, 2020 |
$ | |||||||
Granted |
||||||||
Exercised |
||||||||
Expired |
( |
) | ||||||
Warrants outstanding as of June 30, 2021 |
$ |
|||||||
June 30, 2021 |
December 31, 2020 |
|||||||
Risk-free interest rate |
% | % | ||||||
Expected dividend yield |
% | % | ||||||
Expected volatility |
% | % |
June 30, 2021 |
December 31, 2020 |
|||||||||||||||
Year of expiration |
Number Outstanding |
Weighted Average Exercise Price (C$) |
Number Outstanding |
Weighted Average Exercise Price (C$) |
||||||||||||
2021 |
$ | $ | ||||||||||||||
2022 |
||||||||||||||||
2023 |
||||||||||||||||
Warrants outstanding |
$ |
$ |
||||||||||||||
(c) |
Potentially Dilutive Securities |
June 30, 2021 |
December 31, 2020 |
|||||||
Common share options |
||||||||
Warrants |
||||||||
Secured notes |
||||||||
Debentures |
||||||||
MPX dilutive instruments (1) |
||||||||
Total |
||||||||
(1) | Prior to the MPX Acquisition, MPX had instruments outstanding that were potentially dilutive and as a result of the MPX Acquisition, the Company assumed certain of these instruments. |
(d) |
Stock Options |
June 30, 2021 |
December 31, 2020 |
|||||||||||||||||||||||
Units |
Weighted Average Exercise Price (C$) |
Weighted Average Contractual Life |
Units |
Weighted Average Exercise Price (C$) |
Weighted Average Contractual Life |
|||||||||||||||||||
Options outstanding, beginning |
$ | — | $ | — | ||||||||||||||||||||
Granted |
— | — | ||||||||||||||||||||||
Exercised |
— | — | ||||||||||||||||||||||
Forfeited/Expired |
( |
) | — | ( |
) | — | ||||||||||||||||||
Options outstanding, ending |
$ |
$ |
||||||||||||||||||||||
Three Months Ended |
Six Months Ended |
|||||||||||||||
June 30, 2021 |
June 30, 2020 |
June 30, 2021 |
June 30, 2020 |
|||||||||||||
Loss before income taxes |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
Income tax expense |
||||||||||||||||
Effective tax rate |
( |
)% | ( |
)% | ( |
)% | ( |
)% | ||||||||
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2021 |
2020 |
2021 |
2020 |
|||||||||||||
Revenues |
||||||||||||||||
Eastern Region |
$ | $ | $ | $ | ||||||||||||
Western Region |
||||||||||||||||
Other (1) |
||||||||||||||||
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|
|
|
|
|
|
|
|||||||||
Total |
$ |
$ |
$ |
$ |
||||||||||||
|
|
|
|
|
|
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|
|||||||||
Gross profit |
||||||||||||||||
Eastern Region |
$ | $ | $ | $ | ||||||||||||
Western Region |
||||||||||||||||
Other |
( |
) | ( |
) | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ |
$ |
$ |
$ |
||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Depreciation and amortization |
||||||||||||||||
Eastern Region |
$ | $ | $ | $ | ||||||||||||
Western Region |
||||||||||||||||
Other |
||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ |
$ |
$ |
$ |
||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Asset impairments and write-downs |
||||||||||||||||
Eastern Region |
$ | — | $ | $ | $ | |||||||||||
Western Region |
— | — | ||||||||||||||
Other |
— | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ |
$ |
$ |
$ |
||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net los s |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eastern Region |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
Western Region |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Other |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Purchase of property, plant and equipment |
||||||||||||||||
Eastern Region |
$ | $ | $ | $ | ||||||||||||
Western Region |
||||||||||||||||
Other |
||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ |
$ |
$ |
$ |
||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Purchase of intangibles |
||||||||||||||||
Eastern Region |
$ | $ | $ |