Skylight Health Group Inc.
(formerly CB2 Insights Inc.)
Condensed Interim Consolidated Financial Statements (Restated)
June 30, 2021
(Expressed in thousands of Canadian Dollars)
(Unaudited)
Notice to Reader
The unaudited condensed interim consolidated financial statements have been re-filed to correct identified errors related to the accounting treatment of certain revenue transactions. See note 18 for further details.
SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.) |
Condensed Interim Consolidated Statements of Financial Position
(Expressed in thousands of Canadian Dollars)
(Unaudited)
(Restated – Note 18) | ||||||||||||||
June 30, 2021 | December 31, 2020 | |||||||||||||
$ | $ | |||||||||||||
ASSETS | ||||||||||||||
Current assets | ||||||||||||||
Cash | 11,806 | 20,052 | ||||||||||||
Inventories | 30 | 31 | ||||||||||||
Trade and other receivables | Note 7 | 5,401 | 529 | |||||||||||
Prepaid expenses | 1,378 | 749 | ||||||||||||
Total current assets | 18,615 | 21,361 | ||||||||||||
Non-current | ||||||||||||||
Property, plant and equipment | Note 8 | 640 | 88 | |||||||||||
Right-of-use assets | Note 9 | 14,638 | 1,325 | |||||||||||
Other Intangible assets | Note 10 | 18,989 | 6,474 | |||||||||||
Goodwill | Note 10 | 9,749 | 2,224 | |||||||||||
Total assets | 62,631 | 31,472 | ||||||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||||
Current liabilities | ||||||||||||||
Accounts payable and accrued liabilities | Note 11 | 5,683 | 1,124 | |||||||||||
Loan payable | Note 12 | 969 | 446 | |||||||||||
Purchase consideration payable | Note 6 | 3,930 | 526 | |||||||||||
Lease liabilities | Note 9 | 1,671 | 619 | |||||||||||
Total current liabilities | 12,253 | 2,715 | ||||||||||||
Non-current | ||||||||||||||
Loan payable | Note 12 | — | 316 | |||||||||||
Purchase consideration payable | Note 6 | 1,158 | — | |||||||||||
Lease liabilities | Note 9 | 12,455 | 804 | |||||||||||
Total liabilities | 25,866 | 3,835 | ||||||||||||
SHAREHOLDERS' EQUITY | ||||||||||||||
Share capital | Note 13 | 59,273 | 43,454 | |||||||||||
Warrant reserve | Note 13 | 1,806 | 2,539 | |||||||||||
Option reserve | Note 13 | 5,570 | 4,349 | |||||||||||
Share and units to be issued | — | 5 | ||||||||||||
Accumulated other comprehensive income | 457 | 450 | ||||||||||||
Accumulated deficit | (30,341) | (23,160) | ||||||||||||
Total shareholders' equity | 36,765 | 27,637 | ||||||||||||
Total liabilities and shareholders' equity | 62,631 | 31,472 |
The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.
Going concern (Note 2)
Subsequent events (Note 17)
1
SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.) |
Condensed Interim Consolidated Statements of Loss and Comprehensive Loss
(Expressed in thousands of Canadian Dollars, except per share amounts)
(Unaudited)
Three months ended | Six months ended | |||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||||||
(Restated – Note 18) | (Restated – Note 18) | |||||||||||||||||||
$ | $ | $ | $ | |||||||||||||||||
Revenues | ||||||||||||||||||||
Clinic | 9,861 | 3,633 | 14,789 | 6,524 | ||||||||||||||||
Contract research solutions | 46 | 49 | 102 | 75 | ||||||||||||||||
Software | 6 | 19 | 12 | 33 | ||||||||||||||||
9,913 | 3,701 | 14,903 | 6,632 | |||||||||||||||||
Cost of sales | 3,770 | 1,088 | 5,390 | 2,118 | ||||||||||||||||
Gross profit | 6,143 | 2,613 | 9,513 | 4,514 | ||||||||||||||||
Operating Expenses | ||||||||||||||||||||
Salaries and wages | 4,663 | 1,115 | 6,959 | 2,506 | ||||||||||||||||
Office and administration | 1,722 | 422 | 2,291 | 799 | ||||||||||||||||
Marketing and business development | 645 | 49 | 1,548 | 106 | ||||||||||||||||
Professional fees | 1,379 | 265 | 2,008 | 491 | ||||||||||||||||
Rent | 105 | 31 | 131 | 97 | ||||||||||||||||
Share-based compensation | 361 | 124 | 1,410 | 284 | ||||||||||||||||
Depreciation and amortization | 1,365 | 627 | 2,116 | 1,241 | ||||||||||||||||
Total operating expenses | 10,240 | 2,633 | 16,463 | 5,524 | ||||||||||||||||
Loss from operations | (4,097) | (20) | (6,950) | (1,010) | ||||||||||||||||
Finance expenses | ||||||||||||||||||||
Foreign exchange loss | 430 | 229 | 699 | (435) | ||||||||||||||||
Change in fair value of financial liabilities | (26) | 769 | (63) | 1,224 | ||||||||||||||||
Net gain on debt settlement | — | (295) | — | (295) | ||||||||||||||||
Accretion on purchase consideration payable | Note 5, 6 & 12 | 69 | — | 133 | — | |||||||||||||||
Interest on lease liabilities | Note 9 | 243 | 45 | 360 | 93 | |||||||||||||||
Other income | Note 12 | — | — | (870) | — | |||||||||||||||
Net loss | (4,813) | (768) | (7,209) | (1,597) | ||||||||||||||||
Other comprehensive loss | ||||||||||||||||||||
Exchange difference on translation of foreign | ||||||||||||||||||||
operations, net of tax | 53 | 12 | 7 | (213) | ||||||||||||||||
Net loss and comprehensive loss | (4,760) | (756) | (7,202) | (1,810) | ||||||||||||||||
Basic and diluted net loss per common share | (0.130) | (0.040) | (0.199) | (0.086) | ||||||||||||||||
Weighted average number of common shares | ||||||||||||||||||||
outstanding- basic and diluted (in 000s) | 36,887 | 19,185 | 36,166 | 18,655 |
The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.
2
SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.) |
Condensed Interim Consolidated Statements of Cash Flows
(Expressed in thousands of Canadian Dollars)
(Unaudited)
Six months ended | ||||||||||||||
June 30, | ||||||||||||||
2021 | 2020 | |||||||||||||
(Restated – Note 18) | ||||||||||||||
$ | $ | |||||||||||||
Operating activities | ||||||||||||||
Net loss | (7,209) | (1,597) | ||||||||||||
Adjustments for items not affecting cash: | ||||||||||||||
Depreciation and amortization | 2,116 | 1,241 | ||||||||||||
Unrealised foreign exchange loss (gain) | 558 | (445) | ||||||||||||
Accretion on purchase consideration payable and loan payable | 133 | — | ||||||||||||
Interest on lease liabilities | 360 | 93 | ||||||||||||
Share-based compensation | 1,410 | 299 | ||||||||||||
Change in fair value of financial liabilities | (63) | 1,224 | ||||||||||||
Write-off of bad debt | — | 36 | ||||||||||||
Other income related to loan payable | (867) | — | ||||||||||||
Other income related to gain on disposal of furniture and equipment | (3) | — | ||||||||||||
Gain on debt settlement | — | (295) | ||||||||||||
Changes in non-cash working capital items: | ||||||||||||||
Inventories | — | 5 | ||||||||||||
Trade and other receivables | (2,130) | 71 | ||||||||||||
Prepaid expenses | (411) | (5) | ||||||||||||
Accounts payable and accrued liabilities | 1,827 | 269 | ||||||||||||
Cash provided by (used in) operating activities | (4,279) | 896 | ||||||||||||
Investing activities | ||||||||||||||
Purchase of furniture and equipment | (180) | — | ||||||||||||
Proceeds from disposal of furniture and equipment | 4 | — | ||||||||||||
Development of computer software | (146) | (255) | ||||||||||||
Purchase consideration paid | (17,644) | — | ||||||||||||
Cash used in investing activities | (17,966) | (255) | ||||||||||||
Financing activities | ||||||||||||||
Repayment to related parties | — | (5) | ||||||||||||
Shares issued and to be issued, net of transaction costs | 12,703 | (6) | ||||||||||||
Proceeds from exercise of options | 173 | — | ||||||||||||
Proceeds from exercise of warrants | 1,309 | 195 | ||||||||||||
Principal payment of lease liabilities | (605) | (440) | ||||||||||||
Interest paid on lease liabilities | (360) | (93) | ||||||||||||
Proceeds from loan | 969 | 917 | ||||||||||||
Cash provided by investing activities | 14,189 | 568 | ||||||||||||
Net (decrease) increase in cash during the period | (8,056) | 1,209 | ||||||||||||
Effect of foreign exchange on cash | (190) | (46) | ||||||||||||
Cash and cash equivalents, beginning of period | 20,052 | 130 | ||||||||||||
Cash and cash equivalents, end of period | 11,806 | 1,293 |
The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.
3
SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.) |
Condensed Interim Consolidated Statement of Changes in Shareholders' Equity
(Expressed in thousands of Canadian Dollars)
(Unaudited)
(Restated – Note 18) | (Restated – Note 18) | (Restated – Note 18) | ||||||||||||||||||||||||
Number of shares (000s) | Share Capital | Warrant Reserve | Option Reserve | Shares and units to be issued | Accumulated other comprehensive income | Deficit | Total | |||||||||||||||||||
# | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||
Balance, December 31, 2020 | 35,070 | 43,454 | 2,539 | 4,349 | 5 | 450 | (23,160) | 27,637 | ||||||||||||||||||
Bought deal (Note 13(b)) | 1,970 | 13,793 | — | — | — | — | — | 13,793 | ||||||||||||||||||
Share issuance costs – cash (Note 13(b)) | — | (1,090) | — | — | — | — | — | (1,090) | ||||||||||||||||||
Shares issued on acquisition | 126 | 794 | — | — | — | — | — | 794 | ||||||||||||||||||
Share-based compensation (Note 13) | — | — | — | 1,351 | — | — | — | 1,351 | ||||||||||||||||||
Exercise of warrants | 965 | 2,045 | (733) | — | (3) | — | — | 1,309 | ||||||||||||||||||
Exercise of stock options | 79 | 277 | — | (102) | (2) | — | — | 173 | ||||||||||||||||||
Options expired | — | — | — | (28) | — | — | 28 | — | ||||||||||||||||||
Foreign currency translation | — | — | — | — | — | 7 | — | 7 | ||||||||||||||||||
Net loss for the period | — | — | — | — | — | — | (7,209) | (7,209) | ||||||||||||||||||
Balance, June 30, 2021 | 38,210 | 59,273 | 1,806 | 5,570 | — | 457 | (30,341) | 36,765 |
The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.
4
SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.) |
Condensed Interim Consolidated Statement of Changes in Shareholders' Equity
(Expressed in thousands of Canadian Dollars)
(Unaudited)
Number of shares (000s) | Share Capital | Warrant Reserve | Option Reserve | Shares and units to be issued | Accumulated other comprehensive income | Deficit | Total | |||||||||||||||||||
# | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||
Balance, December 31, 2019 | 16,568 | 12,225 | 3,357 | 1,552 | 335 | 441 | (16,522) | 1,388 | ||||||||||||||||||
Share-based compensation | 312 | 150 | — | 299 | — | — | — | 449 | ||||||||||||||||||
Shares issued for services | 214 | 108 | — | — | — | — | — | 108 | ||||||||||||||||||
Share issuance costs - cash | — | (6) | — | — | — | — | — | (6) | ||||||||||||||||||
Shares issued and to be issued in settlement of accrued interest | 488 | 230 | — | — | (22) | — | — | 208 | ||||||||||||||||||
Share issued in settlement of contingent consideration | 878 | 554 | — | — | — | — | — | 554 | ||||||||||||||||||
Shares issued and to be issued against exercise of warrants | 918 | 1,802 | (1,389) | — | (218) | — | — | 195 | ||||||||||||||||||
Shares issued in lieu of directors' fees | 135 | 94 | — | — | — | — | — | 94 | ||||||||||||||||||
Warrants and options expired | — | — | (1,130) | (12) | — | — | 1,142 | — | ||||||||||||||||||
Warrants issued for amendment of promissory note | — | — | 215 | — | — | — | — | 215 | ||||||||||||||||||
Foreign currency translation | — | — | — | — | — | (213) | — | (213) | ||||||||||||||||||
Net loss for the period | — | — | — | — | — | — | (1,597) | (1,597) | ||||||||||||||||||
Balance, June 30, 2020 | 19,513 | 15,157 | 1,053 | 1,839 | 95 | 228 | (16,977) | 1,395 |
The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.
5
SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.) Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2021 and 2020 (Expressed in thousands of Canadian Dollars) (Unaudited) |
1.Nature of operations and Covid-19 pandemic
Skylight Health Group Inc. (“SHG” or the “Company”), formerly CB2 Insights Inc. (“CB2”), is a healthcare services and technology company, working to positively impact patient health outcomes. The Company operates a US multi-state health network that comprises physical multi-disciplinary medical clinics providing a range of services from primary care, sub-specialty, allied health and diagnostic testing. The Company was incorporated on December 27, 2017 under the Canada Business Corporations Act and completed a reverse takeover ("RTO") on February 27, 2019 (the "Closing Date") with MVC Technologies Inc. (“MVC”) which was incorporated in the province of Ontario on November 3, 2014 under the Ontario Business Corporation Act (“OBCA”). Pursuant to the special meeting of the shareholders of the Company held on November 23, 2020, the name of the Company was changed from CB2 Insights Inc. to Skylight Health Group Inc. The head office of the Company is located at 5520 Explorer Drive, Unit 402, Mississauga, Ontario, Canada, L4W 5L1.
On January 5, 2021, the Company’s shares commenced trading on the TSX-V under the symbol “SHG” after getting voluntarily delisted from the Canadian Securities Exchange on January 4, 2021. On June 7, 2021, the Company’s shares commenced trading on the Nasdaq Capital Market (“Nasdaq”) under the symbol “SLHG”. In addition, effective June 7, 2021, the Company’s shares on the TSX-V began trading under the new symbol “SLHG”.
On March 11, 2020, the World Health Organization declared the ongoing COVID-19 outbreak as a global health emergency. This resulted in governments worldwide enacting emergency measures to combat the spread of the virus, including the closure of certain non-essential businesses.
During the quarter ended June 30, 2021, the pandemic did not have a material impact on the Company’s operations. While medical clinics had generally been deemed an essential business, the Company was able to switch to virtual appointments thereby reducing the impact on operations and enabled the Company to achieve savings in clinical operating expenses. As at June 30, 2021, the Company did not observe any impairment of its assets or a significant change in the fair value of assets due to the COVID-19 pandemic. The Company has taken steps to minimize the potential impact of the pandemic including safety measures with respect to personal protective equipment, the reduction in travel and the implementation of a virtual office including regular video conference meetings and participation in virtual Company events, trade shows, customer meetings and other virtual events. In addition, as explained in note 12, the Company obtained a loan under the Paycheck Protection Program (PPP) offered by the US Small Business Administration as part of COVID-19 relief measures which was forgiven on March 30, 2021.
Due to the rapid developments and uncertainty surrounding COVID-19, it is not possible to predict the impact that COVID-19 will have on the Company’s business, financial position and operating results in the future. In addition, it is possible that estimates in the Company’s financial statements will change in the near term as a result of COVID-19 and the effect of any such changes could be material, which could result in, among other things, impairment of long-lived assets including intangibles and goodwill. The Company is closely monitoring the impact of the pandemic on all aspects of its business.
2.Basis of presentation
The Company prepares its unaudited condensed interim consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”), applicable to the preparation of interim condensed consolidated financial statements, including International Accounting Standards (IAS) 34, Interim Financial Reporting. These unaudited condensed interim consolidated financial statements are presented in Canadian dollars and should be read in conjunction with the Company’s annual financial statements for the year ended December 31, 2020, which were prepared in accordance with IFRS.
The Board of Directors approved these unaudited condensed interim consolidated financial statements on March 29, 2022. These unaudited condensed interim consolidated financial statements comply with IFRS.
6
SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.) Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2021 and 2020 (Expressed in thousands of Canadian Dollars) (Unaudited) |
The unaudited condensed interim consolidated financial statements were prepared on a going concern basis under the historical cost convention, except for purchase consideration payable (only for acquisitions performed during the year ended December 31, 2019) which are measured at fair value.
Going concern
These condensed interim consolidated financial statements have been prepared on a going concern basis in accordance with IFRS. The going concern basis of presentation assumes that the Company will continue in operation for the foreseeable future and be able to realize its assets and discharge its liabilities and commitments in the normal course of business. The Company is subject to numerous risk factors that may impact its ability as a going concern, such as, but not limited to, governmental regulations, currency fluctuations, operational risks and extended and unforeseen issues resulting from the current COVID-19 pandemic.
As of the balance sheet date, the Company had an accumulated deficit of $30,341 (restated) and negative cash flow from operations of $4,279 for the six months ended June 30, 2021. The Company has positive working capital as of the balance sheet date of $6,362 (restated). The Company has raised debt and equity financing through 2017 to 2021 in order to pursue acquisitions and platform development resulting in growth in its customer base. The Company expects that the investments it has made over this period will result in increased revenue and operating cash flow, however, the Company anticipates further investment and will require additional debt and/or equity financing in order to continue to develop its business.
Although the Company has been successful in raising funds to date, there can be no assurance that adequate or sufficient funding will be available in the future or available under terms acceptable to the Company, or that the Company will be able to generate sufficient returns from operations. The ability of the Company to continue as a going concern and to realize the carrying value of its assets and discharge its liabilities and commitments when due is dependent on the Company generating revenue and debt and/or equity financing sufficient to fund its cash flow needs. The Company is not currently eligible to raise funds using a registration statement in the United States. These circumstances indicate the existence of a material uncertainty that may raise substantial doubt on the ability of the Company to meet its obligations as they come due, and accordingly the appropriateness of the use of the accounting principles applicable to a going concern.
The condensed interim consolidated financial statements do not reflect adjustments that would be necessary if the going concern assumption were not appropriate. If the going concern basis were not appropriate for these condensed interim consolidated financial statements, then adjustments would be necessary in the carrying value of the assets and liabilities, the reported revenue and expenses and the classifications used in the condensed interim consolidated statements of financial position. Such differences in amounts could be material.
The assessment of material uncertainties related to events and circumstances that may raise substantial doubt on the Company’s ability to continue as a going concern involves significant judgment. In making this assessment, management considers all relevant information, as described above.
3.Summary of significant accounting policies
New accounting standards issued but not yet effective
Certain new accounting standards and interpretations have been published that are not mandatory for the current period and have not been early adopted. These standards are not expected to have a material impact on the Company in the current or future reporting periods except the below amendment:
Amendments to IAS 1 - Presentation of financial statements (“IAS 1”)
In January 2020, the IASB issued Classification of Liabilities as Current or Non-current (Amendments to IAS 1). The amendments aim to promote consistency in applying the requirements by helping companies determine whether debt and other liabilities with an uncertain settlement date should be classified as current (due or potentially due to be settled within
7
SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.) Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2021 and 2020 (Expressed in thousands of Canadian Dollars) (Unaudited) |
one year) or non-current. The amendments include clarifying the classification requirements for debt a Company might settle by converting it into equity. The amendments are effective for annual reporting periods beginning on or after January 1, 2023, with earlier application permitted. The Company is currently evaluating the impact of this amendment.
4.Share consolidation
On May 28, 2021, the Company completed a consolidation (“Share Consolidation”) of its share capital on the basis of five existing common shares for one new common share. As a result of the Share Consolidation, the 190,802,347 common shares issued and outstanding as at that date were consolidated to 38,160,473 common shares outstanding. The Share Consolidation was previously approved by the shareholders at the Annual General Meeting held on February 22, 2021. All information in these consolidated financial statements is presented on a post-Share Consolidation basis, including comparatives.
5.Acquisitions
a)Acquisition of MCM
On October 6, 2020 (the “Closing Date”), the Company acquired 100% of the identified assets of Texas-based primary care services clinic group Maverick County Medical Family Center (“MCM”), P.A.
The aggregate purchase consideration comprised the following:
•$498 (US$375) cash paid on Closing Date.
•$498 (US$375) cash due in six months after the Closing Date. The amount was discounted to its present value and initially recorded at $470 (US$354) on the Closing Date using an effective interest rate of 12%.
•Details of the movements in the purchase consideration payable are as follows:
Three months ended | ||||||||
June 30, 2021 | March 31, 2021 | |||||||
$ | $ | |||||||
Balance, beginning of period | 472 | 465 | ||||||
Addition | — | — | ||||||
Paid in cash | (471) | — | ||||||
Accretion | — | 13 | ||||||
Foreign exchange translation gain | (1) | (6) | ||||||
Balance, end of period | — | 472 |
b)Acquisition of APEX
On January 4, 2021 (the "Closing Date"), the Company acquired 100% of the identified assets of Colorado based primary care services clinic group Apex Family Medicine, LLC (“APEX”). The Company determined that the acquisition was a business combination under IFRS 3 – Business Combinations and was accounted for by applying the acquisition method, whereby the assets acquired and liabilities assumed were recorded at their fair values with any excess of the aggregate consideration over the fair values of the identifiable net assets allocated to goodwill. The goodwill acquired is associated with the APEX’s workforce and is expected to be fully deductible for tax purposes.
The aggregate purchase consideration comprises the following:
•$1,241 (US$974) cash paid on Closing Date.
•$1,116 (US$875) cash payable in two installments over a 6-months period. The amount was discounted to its present value and initially recorded at $1,073 on the Closing Date using an effective interest rate of 11.2%. Subsequently on July 6, 2021, the Company paid the second installment of $545 (US$438).
8
SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.) Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2021 and 2020 (Expressed in thousands of Canadian Dollars) (Unaudited) |
•Details of the movements in the purchase consideration payable are as follows:
Three months ended | ||||||||
June 30, 2021 | March 31, 2021 | |||||||
$ | $ | |||||||
Balance, beginning of period | 1,086 | — | ||||||
Addition | — | 2,314 | ||||||
Paid in cash | (548) | (1,241) | ||||||
Accretion | 13 | 28 | ||||||
Foreign exchange translation gain | (9) | (15) | ||||||
Balance, end of period | 542 | 1,086 |
The allocated purchase price calculation is as follows:
$ | |||||||||||
Consideration - cash | 2,314 | ||||||||||
Lease liabilities | 118 | ||||||||||
Assumed liabilities | 37 | ||||||||||
Total consideration | 2,469 | ||||||||||
Identifiable assets acquired | |||||||||||
Customer relationships | 1,403 | ||||||||||
Non-compete | 22 | ||||||||||
Cash | 37 | ||||||||||
Accounts receivable | 125 | ||||||||||
Right of use asset | 118 | ||||||||||
Total identifiable assets acquired | 1,705 | ||||||||||
Total goodwill | 764 | ||||||||||
2,469 |
Operating results have been included in these unaudited condensed interim consolidated financial statements from the Closing Date. APEX’s revenue and net income for the period from the date of acquisition to June 30, 2021 included in the unaudited condensed interim consolidated statements of loss and comprehensive loss are $684 (restated) and $173 (restated) respectively.
c)Acquisition of RCMA
On February 3, 2021 (the "Closing Date"), the Company acquired 100% of the identified assets of River City Medical Associates (“RCMA”), Inc., a Florida corporation. The Company determined that the acquisition was a business combination under IFRS 3 – Business Combinations and was accounted for by applying the acquisition method, whereby the assets acquired and liabilities assumed were recorded at their fair values with any excess of the aggregate consideration over the fair values of the identifiable net assets allocated to goodwill. The goodwill acquired is associated with the RCMA’s workforce and is expected to be fully deductible for tax purposes.
The aggregate purchase consideration comprises the following:
•$288 (US$225) cash paid on Closing Date.
•$139 (US$109) cash payable within 120 days after the Closing Date being the amount withheld from the purchase consideration for liabilities prior to closing date. The amount was discounted to its present value and initially
9
SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.) Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2021 and 2020 (Expressed in thousands of Canadian Dollars) (Unaudited) |
recorded at $137 (US$107) on the Closing Date using an effective interest rate of 10.9%. On April 27, 2021, the Company released $135 from the escrow account (US$109).
•$2,812 (US$2,200) funds held in an escrow account to be released once the conditions stipulated in the Transition Services Agreement have been complied with within two months after the Closing Date. Subsequently, on April 22, 2021, the Company released $2,750 from the escrow account (US$2,200)
•74,833 common shares in the Company valued at 10-day VWAP of $6.3925 per share amounting to $478 (US$373) to be issued on Closing Date. The amount was recognized at the fair value of the consideration amounting to $492 (US$385) on the Closing Date.
•Variable number of common shares in the Company amounting to $1,908 (US$1,493) to be issued in five equal installments within 15 months after the Closing Date. The number of shares will be determined based on the share price on each installment date. The amount was discounted to its present value and initially recorded at $1,892 (US$1,480) on the Closing Date using an effective interest rate of 15%.
•Details of the movements in the purchase consideration payable are as follows:
Three months ended | ||||||||
June 30, 2021 | March 31, 2021 | |||||||
$ | $ | |||||||
Balance, beginning of period | 4,765 | — | ||||||
Addition | — | 5,621 | ||||||
Paid in cash | (2,885) | (288) | ||||||
Paid in shares | (377) | (485) | ||||||
Accretion | 9 | 3 | ||||||
Foreign exchange translation gain | (47) | (86) | ||||||
Balance, end of period | 1,465 | 4,765 |
The allocated purchase price calculation is as follows:
$ | |||||||||||
Consideration – cash | 3,237 | ||||||||||
Consideration – shares | 2,384 | ||||||||||
Lease liabilities | 3,800 | ||||||||||
Assumed liabilities | 217 | ||||||||||
Total consideration | 9,638 | ||||||||||
Identifiable assets acquired | |||||||||||
Customer relationships | 3,618 | ||||||||||
Brand and trademarks | 706 | ||||||||||
Non-compete clause | 56 | ||||||||||
Cash | 217 | ||||||||||
Furniture and equipment | 32 | ||||||||||
Right of use asset | 3,800 | ||||||||||
Total identifiable assets acquired | 8,429 | ||||||||||
Total goodwill | 1,209 | ||||||||||
9,638 |
Operating results have been included in these unaudited condensed interim consolidated financial statements from the Closing Date. RCMA’s revenue and net income for the period from the date of acquisition to June 30, 2021 included in the unaudited condensed interim consolidated statements of loss and comprehensive loss are $2,916 (restated) and $1,258 (restated), respectively.
10
SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.) Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2021 and 2020 (Expressed in thousands of Canadian Dollars) (Unaudited) |
d)Acquisition of Rocky Mountain
On April 5, 2021 (the "Closing Date"), the Company acquired 100% of the membership interest of Colorado based Primary Care Clinic Group, Rocky Mountain. The Company determined that the acquisition was a business combination under IFRS 3 – Business Combinations and was accounted for by applying the acquisition method, whereby the assets acquired and liabilities assumed were recorded at their fair values with any excess of the aggregate consideration over the fair values of the identifiable net assets allocated to goodwill.
The goodwill acquired is associated with Rocky Mountain’s workforce and is expected to be fully deductible for tax purposes.
The aggregate purchase consideration comprises the following:
•$10,635 (US$8,491) cash paid on Closing Date.
•$2,067 (US$1,650) cash payable in three equal installments over two years from the Closing Date. The amount was discounted to its present value and initially recorded at $1,829 (US$1,460) on the Closing Date using an effective interest rate of 11.4%.
•$1,076 (US$859) cash payable on account of working capital true-up and settlement of a liability.
•Details of the movements in the purchase consideration payable are as follows:
Three months ended | |||||
June 30, 2021 | |||||
$ | |||||
Balance, beginning of period | — | ||||
Addition | 13,540 | ||||
Paid in cash | (10,635) | ||||
Accretion | 47 | ||||
Foreign exchange translation gain | (30) | ||||
Balance, end of period | 2,922 |
11
SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.) Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2021 and 2020 (Expressed in thousands of Canadian Dollars) (Unaudited) |
The allocated purchase price calculation is as follows:
$ | ||||||||
Consideration – cash | 13,540 | |||||||
Lease liabilities | 5,453 | |||||||
Assumed liabilities | 2,508 | |||||||
Total consideration | 21,501 | |||||||
Identifiable assets acquired | ||||||||
Customer relationships | 2,893 | |||||||
Brand and trademarks | 3,238 | |||||||
Cash | 753 | |||||||
Accounts receivable | 2,675 | |||||||
Prepaid expenses | 235 | |||||||
Furniture and equipment | 295 | |||||||
Right of use asset | 6,322 | |||||||
Total identifiable assets acquired | 16,411 | |||||||
Total goodwill | 5,090 | |||||||
21,501 |
Operating results have been included in these unaudited condensed interim consolidated financial statements from the Closing Date. Rocky Mountain’s revenue and net loss for the period from the date of acquisition to June 30, 2021 included in the unaudited condensed interim consolidated statements of loss and comprehensive loss is $3,849 (restated) and $905 (restated), respectively.
e)Acquisition of Doctors Center
On June 23, 2021 (the "Closing Date"), the Company acquired 100% of the identified assets of Florida based primary care group Doctors Center Inc. for a total cash transaction value of $2,752 (US$2,240). The Company determined that the acquisition was a business combination under IFRS 3 – Business Combinations and was accounted for by applying the acquisition method, whereby the assets acquired and liabilities assumed were recorded at their fair values with any excess of the aggregate consideration over the fair values of the identifiable net assets allocated to goodwill. The goodwill acquired is associated with Doctors Center workforce and is expected to be fully deductible for tax purposes. There was a holdback payment to a medical doctor in the amount of $694 (US$560), payable in two installments of $347 (US$280) at the 6 and 12 month anniversaries of the Closing Date, provided the medical doctor continues to be an employee of the Company. Given the significant amount of the holdback and employment timing, it was determined to be a nominal probability that the medical doctor would compete in the one year period post-acquisition. Therefore, no value was assigned to the non-compete agreement and the payments will be expensed in the period paid.
The aggregate purchase consideration comprises the following:
•$2,654 (US$2,160) cash paid on the Closing Date.
•$98 (US$80) cash payable within the next 12 months. Subsequently, on July 15, 2021, the Company paid $57 (US$45) of this amount.
•Details of the movements in the purchase consideration payable are as follows:
12
SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.) Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2021 and 2020 (Expressed in thousands of Canadian Dollars) (Unaudited) |
Three months ended | |||||
June 30, 2021 | |||||
$ | |||||
Balance, beginning of period | — | ||||
Addition | 2,752 | ||||
Paid in cash | (2,654) | ||||
Foreign exchange translation loss | 1 | ||||
Balance, end of period | 99 |
The allocated purchase price calculation is as follows:
$ | |||||||||||
Consideration – cash | 2,752 | ||||||||||
Lease liabilities | 2,869 | ||||||||||
Assumed liabilities | 71 | ||||||||||
Total consideration | 5,692 | ||||||||||
Identifiable assets acquired | |||||||||||
Customer relationships | 1,499 | ||||||||||
Brand and trademarks | 463 | ||||||||||
Cash | 71 | ||||||||||
Furniture and equipment | 164 | ||||||||||
Right of use asset | 2,869 | ||||||||||
Total identifiable assets acquired | 5,066 | ||||||||||
Total goodwill | 626 | ||||||||||
5,692 |
Operating results have been included in these unaudited condensed interim consolidated financial statements from the Closing Date. Doctors Center’s revenue and net income for the period from the date of acquisition to June 30, 2021 included in the unaudited condensed interim consolidated statements of loss and comprehensive loss are $68 (restated) and $37 (restated), respectively.
If all current year acquisitions had occurred on January 1, 2021, management estimates that consolidated revenue would have increased by $6,679 and net loss would have increased by $1,426 for the six months ended June 30, 2021.
6.Purchase consideration payable
June 30, 2021 | December 31, 2020 | |||||||||||||
$ | $ | |||||||||||||
Healthcare Resource Management LLC (“HRM”) | 60 | 61 | ||||||||||||
MCM | Note 5 | — | 465 | |||||||||||
APEX | Note 5 | 542 | — | |||||||||||
RCMA | Note 5 | 1,465 | — | |||||||||||
Rocky Mountain | Note 5 | 2,922 | — | |||||||||||
Doctors Center | Note 5 | 99 | — | |||||||||||
5,088 | 526 |
13
SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.) Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2021 and 2020 (Expressed in thousands of Canadian Dollars) (Unaudited) |
Allocated as: | $ | $ | |||||||||
Current | 3,930 | 526 | |||||||||
Non-current | 1,158 | — | |||||||||
5,088 | 526 |
7.Trade and other receivables
(Restated – Note 18) | ||||||||||||||
June 30, 2021 | December 31, 2020 | |||||||||||||
$ | $ | |||||||||||||
Trade receivables | 4,905 | 287 | ||||||||||||
Harmonized sales tax recoverable | 399 | 192 | ||||||||||||
Security deposits | 97 | 50 | ||||||||||||
5,401 | 529 |
The lifetime expected credit loss allowance for impairment is estimated based on the Company’s historical loss experience, adjusted for factors that are specific to the debtors and an assessment of both the current as well as forecast direction of conditions. As at June 30, 2021, an expected credit loss of $nil has been recognized.
8.Property, plant and equipment
Furniture | Vehicles | Computer Hardware | Leaseholds | Equipment | Total | |||||||||||||||
$ | $ | $ | $ | $ | $ | |||||||||||||||
Cost | ||||||||||||||||||||
As at December 31, 2020 | 129 | 22 | 116 | 65 | 58 | 390 | ||||||||||||||
Additions | 25 | — | 40 | 34 | 81 | 180 | ||||||||||||||
Acquisition | 81 | — | 14 | 333 | 63 | 491 | ||||||||||||||
Disposal | — | (22) | — | — | — | (22) | ||||||||||||||
Net exchange differences | (3) | — | (4) | (3) | — | (10) | ||||||||||||||
As at June 30, 2021 | 232 | — | 166 | 429 | 202 | 1,029 | ||||||||||||||
Depreciation | ||||||||||||||||||||
As at December 31, 2020 | 93 | 21 | 84 | 57 | 47 | 302 | ||||||||||||||
Depreciation | 31 | — | 24 | 45 | 15 | 115 | ||||||||||||||
Disposal | — | (21) | — | — | — | (21) | ||||||||||||||
Net exchange differences | (2) | — | (2) | (3) | — | (7) | ||||||||||||||
As at June 30, 2021 | 122 | — | 106 | 99 | 62 | 389 | ||||||||||||||
Net book value | ||||||||||||||||||||
As at December 31, 2020 | 36 | 1 | 32 | 8 | 11 | 88 | ||||||||||||||
As at June 30, 2021 | 110 | — | 60 | 330 | 140 | 640 |
14
SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.) Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2021 and 2020 (Expressed in thousands of Canadian Dollars) (Unaudited) |
9.Right-of-use assets and lease liabilities
Right of use assets
Premises leases | June 30, 2021 | ||||||||||
$ | |||||||||||
Beginning balance | 1,325 | ||||||||||
Additions | 1,257 | ||||||||||
Acquisitions | 13,109 | ||||||||||
Depreciation | (834) | ||||||||||
Lease incentives | (23) | ||||||||||
Net exchange differences | (196) | ||||||||||
Ending balance | 14,638 |
Lease liabilities
June 30, 2021 | |||||||||||
$ | |||||||||||
Beginning balance | 1,422 | ||||||||||
Additions | 1,257 | ||||||||||
Acquisitions | 12,240 | ||||||||||
Interest expense | 360 | ||||||||||
Lease payments | (965) | ||||||||||
Net exchange differences | (188) | ||||||||||
Ending balance | 14,126 |
Allocated as: | $ | ||||||||||
Current | 1,671 | ||||||||||
Non-current | 12,455 | ||||||||||
14,126 |
When measuring lease liabilities, the Company discounted lease payments using its incremental borrowing rate. The weighted-average interest rate applied ranges from 6.4% to 12%.
15
SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.) Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2021 and 2020 (Expressed in thousands of Canadian Dollars) (Unaudited) |
10.Goodwill and other intangible assets
Goodwill | Customer relationships | Brand and trademarks | Non-compete clause | Computer software | Total other intangibles | |||||||||||||||
$ | $ | $ | $ | $ | $ | |||||||||||||||
Cost | ||||||||||||||||||||
Balance, December 31, 2020 | 2,224 | 4,076 | 2,546 | 47 | 3,616 | 10,285 | ||||||||||||||
Additions | — | — | — | — | 146 | 146 | ||||||||||||||
Acquisition | 7,689 | 9,413 | 4,407 | 78 | — | 13,898 | ||||||||||||||
Net exchange differences | (164) | (275) | (118) | (4) | (1) | (398) | ||||||||||||||
Balance, June 30, 2021 | 9,749 | 13,214 | 6,835 | 121 | 3,761 | 23,931 | ||||||||||||||
Amortization | ||||||||||||||||||||
Balance, December 31, 2020 | — | 1,324 | — | — | 2,487 | 3,811 | ||||||||||||||
Amortization | — | 857 | — | 14 | 296 | 1,167 | ||||||||||||||
Net exchange differences | — | (36) | — | — | — | (36) | ||||||||||||||
Balance, June 30, 2021 | — | 2,145 | — | 14 | 2,783 | 4,942 | ||||||||||||||
Net book value | ||||||||||||||||||||
As at December 31, 2020 | 2,224 | 2,752 | 2,546 | 47 | 1,129 | 6,474 | ||||||||||||||
As at June 30, 2021 | 9,749 | 11,069 | 6,835 | 107 | 978 | 18,989 |
11.Accounts payable and accrued liabilities
(Restated – Note 18) | ||||||||||||||
June 30, 2021 | December 31, 2020 | |||||||||||||
$ | $ | |||||||||||||
Accounts payable | 3,345 | 486 | ||||||||||||
Accrued liabilities | 2,338 | 638 | ||||||||||||
5,683 | 1,124 |
12.Loan payable
On April 27, 2020, the Company obtained a loan of $917 (US$653) from Citizens Bank N.A under the Paycheck Protection Program (PPP) offered by US Small Business Administration as part of COVID-19 relief measures. The loan carries an interest rate of 1% and the repayments would start from February 27, 2021 in equal monthly installments over eighteen months. The PPP program allows for the loan to be forgiven if the disbursed amount is spent in accordance with specific guidelines. On December 1, 2020, the Company applied for loan forgiveness, and if approved, the loan amount would be reclassified as a government grant in the statements of loss and comprehensive loss.
The loan was measured at fair value on receipt date using effective interest rate method and the difference between the fair value and receipt amount was recorded as deferred income under accrued liabilities. This difference represents the benefit received by the Company due to reduced interest rate on the loan and over the term of the loan, this benefit will be recognized as other income in the statement of loss and comprehensive loss.
During the three and six months ended June 30, 2021, the Company recognized an amount of $14 as other income and $20 as accretion expense on the loan. On March 30, 2021, the Company recognized $853 as other income representing the write-off of the PPP loan after receiving approval of the forgiveness application.
16
SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.) Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2021 and 2020 (Expressed in thousands of Canadian Dollars) (Unaudited) |
On June 4, 2021, the Company obtained a loan of $969 (US$782) from Aon Reed Stenhouse Inc. for the Directors and Officers insurance. The amortized cost approximates fair value. The loan carries an interest rate of 3.43% and repayments will start from July 4, 2021 in equal monthly payments for ten months.
13.Share capital
a)Authorized share capital
Unlimited number of voting common shares without par value.
b)Common shares issued
Numbers of common shares (000s) | Share Capital | |||||||
# | $ | |||||||
Balance, December 31, 2020 | 35,070 | 43,454 | ||||||
Bought deal | 1,970 | 13,793 | ||||||
Share issuance costs – cash | — | (1,090) | ||||||
Shares issued in settlement of purchase consideration payable (i) | 126 | 794 | ||||||
Shares issued against exercise of warrants (ii) | 965 | 2,045 | ||||||
Exercise of stock options (iii) | 79 | 277 | ||||||
Balance, June 30, 2021 | 38,210 | 59,273 |
(i)On May 26, 2021, the Company closed a bought deal offering with a syndicate of underwriters (collectively the “Underwriters”). Pursuant to this, the Underwriters were issued, on a bought deal basis, with full exercise of the Underwriters’ 15% over-allotment option, 1,970,360 common shares of the Company at a price of $7.00 per common share for gross proceeds of $13,793, less share issuance costs of $1,090.
(ii)During the six months ended June 30, 2021, the Company issued 74,833 shares valued at $6.00 per share and 50,715 shares valued at $6.80 in settlement of consideration payable for the acquisition of RCMA.
(iii)During the six months ended June 30, 2021, shareholders exercised 964,525 warrants at an exercise price with a range of $1.00 to $5.00 per share.
The fair value of the warrants exercised amounting to $733 was reclassified from the Warrant reserve to Share Capital.
(iv)During the six months ended June 30, 2021, shareholders exercised 79,512 options at an exercise price with a range of $0.406 to $5.70 per share.
The fair value of the options exercised amounting to $102 was reclassified from the Option reserve to Share Capital.
Warrants
During February 2021, the Company granted 700 warrants to a shareholder. These warrants are exercisable over a period of one year from the date of grant with an exercise price of $4.00, vesting immediately.
17
SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.) Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2021 and 2020 (Expressed in thousands of Canadian Dollars) (Unaudited) |
A summary of the warrant activity for the periods ended June 30, 2021 and 2020 is as follows:
Numbers of warrants (000s) | Weighted Average Exercise Price | |||||||
# | $ | |||||||
Balance, December 31, 2019 | 3,106 | 2.80 | ||||||
Exercised | (918) | 3.20 | ||||||
Expired | (1,187) | 2.00 | ||||||
Granted | 600 | 0.70 | ||||||
Balance, June 30, 2020 | 1,601 | 1.70 |
Balance, December 31, 2020 | 4,835 | 1.25 | ||||||
Granted | 1 | 4.00 | ||||||
Exercised | (965) | 1.36 | ||||||
Balance, June 30, 2021 | 3,871 | 1.23 |
At June 30, 2021, a summary of warrants outstanding and exercisable is as follows:
Range of exercise prices | Number outstanding (000s) | Weighted Average Exercise Price | Weighted Average Remaining Life | ||||||||
# | $ | Years | |||||||||
$0.70-$1.00 | 3,516 | 0.95 | 1.37 | ||||||||
$2.35-$2.50 | 90 | 2.35 | 1.37 | ||||||||
$4.00-$5.00 | 265 | 4.51 | 1.07 | ||||||||
3,871 | 1.23 | 1.35 |
Options
During February and March 2021, the Company granted 289,360 options to employees, directors and consultants. These options are exercisable over a period of 2 to 5 years from the date of grant with an exercise price ranging from $6.50 to $9.00. 152,360 options vested immediately and the rest will vest over 1 to 3 years.
A summary of the option activity for the periods ended June 30, 2021 and 2020 is as follows:
Numbers of options (000s) | Weighted Average Exercise Price | |||||||
# | $ | |||||||
Balance, December 31, 2019 | 1,344 | 1.90 | ||||||
Expired | (23) | 1.00 | ||||||
Granted | 412 | 0.40 | ||||||
Balance, June 30, 2020 | 1,733 | 1.55 |
18
SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.) Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2021 and 2020 (Expressed in thousands of Canadian Dollars) (Unaudited) |
Balance, December 31, 2020 | 2,594 | 2.17 | ||||||
Granted | 289 | 7.64 | ||||||
Exercised | (79) | 1.27 | ||||||
Forfeiture | (48) | 1.79 | ||||||
Expired | (3) | 2.29 | ||||||
Balance, June 30, 2021 | 2,753 | 2.78 |
At June 30, 2021, a summary of stock options outstanding and exercisable is as follows:
Range of exercise prices | Number outstanding (000s) | Weighted Average Exercise Price (outstanding) | Weighted Average Remaining Life | Number exercisable (000s) | Weighted Average Exercise Price (exercisable) | ||||||||||||
# | $ | Years | # | $ | |||||||||||||
$0.406-$2.20 | 1,122 | 0.65 | 3.60 | 585 | 0.59 | ||||||||||||
$2.21 - $4.70 | 1,210 | 3.30 | 2.78 | 1,178 | 3.28 | ||||||||||||
$4.71 - $6.50 | 200 | 5.87 | 3.05 | 156 | 5.70 | ||||||||||||
$6.51 - $9.00 | 221 | 7.92 | 2.92 | 159 | 7.70 | ||||||||||||
2,753 | 2.78 | 3.14 | 2,078 | 3.05 |
During the three and six months ended June 30, 2021, $361 and $1,410, respectively (three and six months ended June 30, 2020 - $124 and $284, respectively) has been recognized as share-based compensation expense. The fair value of the granted options was calculated using the Black-Scholes model using an expected life ranging from 1 to 4 years, risk-free interest rate ranging from 0.12% to 0.68%, share price ranging from $6.30 to $8.90, volatility ranging from 111.7% to 130.7% and a dividend yield of 0%. During the six months ended June 30, 2021 directors options accrual amounted to $59.
14.Fair value measurement and liquidity
The Company classifies and subsequently measures cash, trade receivables, accounts payable and accrued liabilities, loan payable and purchase consideration payable at amortized cost and the fair value of these financial instruments approximates carrying value due to their short-term nature and/or carrying market rates of interest.
There are no financial instruments which were measured at fair value in the condensed interim consolidated statements of financial position as at June 30, 2021.
The Company manages liquidity risk by monitoring actual and projected cash flows. A cash flow forecast is performed regularly to ensure that the Company has sufficient cash to meet operational needs while maintaining sufficient liquidity. The Company may require additional capital to fund activities and any acquisitions. Potential sources of capital could include equity and/or debt financings, marketing agreements, and/or new strategic partnership agreements to fund some or all operational needs. There can be no assurance that the Company will be able to obtain the capital sufficient to meet any or all of the Company needs. The availability of equity or debt financing will be affected by, among other things, the state of
the capital markets generally, strategic alliance agreements and other relevant commercial considerations. In addition, if the Company raises additional funds by issuing equity securities, existing security holders will likely experience dilution, and any incurring of indebtedness would result in increased debt service obligations and could require the Company to agree to operating and financial covenants that would restrict operations. Any failure on the Company’s part to raise additional funds on terms favourable to the Company or at all may require the Company to significantly change or curtail current or planned operations in order to conserve cash until such time, if ever, that sufficient proceeds from operations
19
SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.) Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2021 and 2020 (Expressed in thousands of Canadian Dollars) (Unaudited) |
are generated, and could result in the Company not being in a position to take advantage of business opportunities and the delay of transitioning current fee-for-service practices to value-based care.
15.Related party disclosures
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly. Key management personnel include the Company’s Chief Executive Officer ("CEO"), President, Chief Financial Officer ("CFO"), Chief Medical Officer, Chief Operating Officer, Chief Corporate Officer and members of the Company’s Board of Directors.
The amounts disclosed in the table below are the amounts recognized as an expense during the reporting period related to key management personnel.
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||
$ | $ | $ | $ | ||||||||||||||
Salary and short-term employee benefits | 522 | 121 | 745 | 224 | |||||||||||||
Share based compensation | 180 | 44 | 302 | 100 | |||||||||||||
Directors’ fees | 54 | 94 | 131 | 94 | |||||||||||||
Professional services | — | 14 | — | 30 | |||||||||||||
756 | 273 | 1,178 | 448 |
16.Segmented information
The Company has two reportable segments related to its medical services and software and corporate businesses which also align with the two countries in which it operates, namely, United States and Canada. Corporate costs are included in the Canadian segment. The disclosure with regards to the Company’s aforementioned segments and locations are listed below:
(Restated – Note 18) | (Restated – Note 18) | ||||||||||
Three months ended June 30, 2021 | USA (Medical Services) | Canada (Software and Corporate) | Total | ||||||||
$ | $ | $ | |||||||||
Revenue | 9,872 | 41 | 9,913 | ||||||||
Cost of Sales | 3,770 | — | 3,770 | ||||||||
Gross profit | 6,102 | 41 | 6,143 | ||||||||
Total operating expenses | 7,763 | 2,477 | 10,240 | ||||||||
Loss from operations | (1,661) | (2,436) | (4,097) | ||||||||
Foreign exchange loss | — | 430 | 430 | ||||||||
Change in fair value of financial liabilities | (26) | — | (26) | ||||||||
Accretion on purchase consideration payable and loan payable | 69 | — | 69 | ||||||||
Interest on lease liabilities | 243 | — | 243 | ||||||||
Net loss | (1,947) | (2,866) | (4,813) |
20
SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.) Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2021 and 2020 (Expressed in thousands of Canadian Dollars) (Unaudited) |
(Restated – Note 18) | (Restated – Note 18) | ||||||||||
Six months ended June 30, 2021 | USA (Medical Services) | Canada (Software and Corporate) | Total | ||||||||
$ | $ | $ | |||||||||
Revenue | 14,800 | 103 | 14,903 | ||||||||
Cost of Sales | 5,390 | — | 5,390 | ||||||||
Gross profit | 9,410 | 103 | 9,513 | ||||||||
Total operating expenses | 11,205 | 5,258 | 16,463 | ||||||||
Loss from operations | (1,795) | (5,155) | (6,950) | ||||||||
Foreign exchange loss | — | 699 | 699 | ||||||||
Change in fair value of financial liabilities | (63) | — | (63) | ||||||||
Accretion on purchase consideration payable and loan payable | 133 | — | 133 | ||||||||
Interest on lease liabilities | 360 | — | 360 | ||||||||
Other income | (870) | — | (870) | ||||||||
Net loss | (1,355) | (5,854) | (7,209) |
(Restated – Note 18) | (Restated – Note 18) | ||||||||||
As at June 30, 2021 | USA (Medical Services) | Canada (Software and Corporate) | Total | ||||||||
$ | $ | $ | |||||||||
Non-current assets | 41,817 | 2,199 | 44,016 | ||||||||
Total assets | 55,816 | 6,815 | 62,631 | ||||||||
Total liabilities | 25,091 | 775 | 25,866 |
Three months ended June 30, 2020 | USA (Medical Services) | Canada (Software and Corporate) | Total | ||||||||
$ | $ | $ | |||||||||
Revenue | 3,633 | 68 | 3,701 | ||||||||
Cost of Sales | 1,088 | — | 1,088 | ||||||||
Gross profit | 2,545 | 68 | 2,613 | ||||||||
Total operating expenses | 1,692 | 941 | 2,633 | ||||||||
Income (loss) from operations | 853 | (873) | (20) | ||||||||
Foreign exchange loss | — | 229 | 229 | ||||||||
Gain on debt settlement | — | (295) | (295) | ||||||||
Change in fair value of financial liabilities | — | 769 | 769 | ||||||||
Interest on lease liabilities | 44 | 1 | 45 | ||||||||
Net income (loss) | 809 | (1,577) | (768) |
21
SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.) Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2021 and 2020 (Expressed in thousands of Canadian Dollars) (Unaudited) |
Six months ended June 30, 2020 | USA (Medical Services) | Canada (Software and Corporate) | Total | ||||||||
$ | $ | $ | |||||||||
Revenue | 6,524 | 108 | 6,632 | ||||||||
Cost of Sales | 2,118 | — | 2,118 | ||||||||
Gross profit | 4,406 | 108 | 4,514 | ||||||||
Total operating expenses | 3,586 | 1,938 | 5,524 | ||||||||
Income (loss) from operations | 820 | (1,830) | (1,010) | ||||||||
Foreign exchange loss | — | (435) | (435) | ||||||||
Gain on debt settlement | — | (295) | (295) | ||||||||
Change in fair value of financial liabilities | (28) | 1,252 | 1,224 | ||||||||
Interest on lease liabilities | 90 | 3 | 93 | ||||||||
Net income (loss) | 758 | (2,355) | (1,597) |
As at December 31, 2020 | USA (Medical Services) | Canada (Software and Corporate) | Total | ||||||||
$ | $ | $ | |||||||||
Non-current assets | 9,361 | 750 | 10,111 | ||||||||
Total assets | 11,469 | 20,003 | 31,472 | ||||||||
Total liabilities | 3,274 | 561 | 3,835 |
17.Subsequent events
On July 13, 2021, the Company acquired 100% of the interest of ACO Partners LLC, a new Accountable Care Organization (“ACO”) that will begin participating in the Medicare Shared Savings Program offered by the Centers for Medicare and Medicaid Services (“CMS”) effective January 1, 2022 for a total cash consideration of $313 (US$250). Subsequently, the Company determined it would not receive approval on the ACO application to the CMS by January 31, 2022. The cash paid on Closing Date of $78 (US$63) has been written off as of December 31, 2021 and no further amounts are payable.
On September 16, 2021, the Company acquired 70% of the membership interest of Pennsylvania based Primary Care Clinic Group, Aspire Health Concepts, Inc. (“Aspire”) for a total cash consideration of $1,996 (US$1,575).
On October 29, 2021, the Company announced the execution of a Definitive Agreement with New Frontier Data to divest 100% of assets related to its legacy businesses Canna Care Docs and Relaxed Clarity (“Legacy Business”). Terms of the transaction will be total cash consideration of $11,124 (US$8,628). Payment terms will include cash on closing of $5,157 (US$4,000), with the remainder of the balance paid over three installments at 12 months, 18 months and 24 months from the date of closing. The closing occurred on December 15, 2021 and a gain on disposal of $5,641 was recognized.
On December 6, 2021, the Company announced the closing of the registered offering of 275,000 9.25% Series A Cumulative Redeemable Perpetual Preferred Shares (“Series A Preferred Shares”) at a price to the public of US$21 per share for gross proceeds of US$5,775. The Series A Preferred Shares trade on the Nasdaq Capital Market under the symbol “SLHGP”.
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SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.) Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2021 and 2020 (Expressed in thousands of Canadian Dollars) (Unaudited) |
18.Restatement of condensed interim consolidated financial statements
Revenue
Subsequent to the original issuance of its condensed interim consolidated financial statements, the Company identified errors related to the accounting treatment of certain revenue transactions. The Company overstated revenue and accounts receivable due to not properly recording price concessions as a reduction of revenue. The Company concluded that the impact was material to the Company’s condensed interim consolidated financial statements prepared according to IFRS and have restated the impact of these errors. The impact of these errors to the condensed interim consolidated financial statements was:
Line items in the restated condensed interim consolidated statement of financial position
As at June 30, 2021 | Adjustment | As at June 30, 2021 - Restated | |||||||||
$ | $ | $ | |||||||||
Trade and other receivables | 5,800 | (399) | 5,401 | ||||||||
Current assets | 19,014 | (399) | 18,615 | ||||||||
Total assets | 63,030 | (399) | 62,631 | ||||||||
Accounts payable and accrued liabilities | 5,297 | 386 | 5,683 | ||||||||
Total current liabilities | 11,867 | 386 | 12,253 | ||||||||
Total liabilities | 25,480 | 386 | 25,866 | ||||||||
Accumulated other comprehensive income | 458 | (1) | 457 | ||||||||
Accumulated deficit | (29,557) | (784) | (30,341) | ||||||||
Total shareholders' equity | 37,550 | (785) | 36,765 | ||||||||
Total liabilities and shareholders' equity | 63,030 | (399) | 62,631 |
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SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.) Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2021 and 2020 (Expressed in thousands of Canadian Dollars) (Unaudited) |
Line items in the restated condensed interim consolidated statement of loss and comprehensive loss
Three months ended June 30, 2021 | Adjustment | Three months ended June 30, 2021 – Restated | |||||||||
$ | $ | $ | |||||||||
Clinic | 10,473 | (612) | 9,861 | ||||||||
Contract research solutions | 35 | 11 | 46 | ||||||||
Total revenue | 10,514 | (601) | 9,913 | ||||||||
Gross profit | 6,744 | (601) | 6,143 | ||||||||
Loss from operations | (3,496) | (601) | (4,097) | ||||||||
Net loss | (4,212) | (601) | (4,813) | ||||||||
Exchange difference on translation of foreign operations, net of tax | 56 | (3) | 53 | ||||||||
Net loss and comprehensive loss | (4,156) | (604) | (4,760) | ||||||||
Basic and diluted net loss per common share | (0.114) | (0.016) | (0.130) |
Six months ended June 30, 2021 | Adjustment | Six months ended June 30, 2021 – Restated | |||||||||
$ | $ | $ | |||||||||
Clinic | 15,584 | (795) | 14,789 | ||||||||
Contract research solutions | 91 | 11 | 102 | ||||||||
Total revenue | 15,687 | (784) | 14,903 | ||||||||
Gross profit | 10,297 | (784) | 9,513 | ||||||||
Loss from operations | (6,166) | (784) | (6,950) | ||||||||
Net loss | (6,425) | (784) | (7,209) | ||||||||
Exchange difference on translation of foreign operations, net of tax | 8 | (1) | 7 | ||||||||
Net loss and comprehensive loss | (6,417) | (785) | (7,202) | ||||||||
Basic and diluted net loss per common share | (0.178) | (0.021) | (0.199) |
Line items in the restated condensed interim consolidated statement of cash flows
Six months ended June 30, 2021 | Adjustment | Six months ended June 30, 2021 – Restated | |||||||||
$ | $ | $ | |||||||||
Net loss | (6,425) | (784) | (7,209) | ||||||||
Trade and other receivables | (2,526) | 396 | (2,130) | ||||||||
Accounts payable and accrued liabilities | 1,439 | 388 | 1,827 |
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SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.) Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2021 and 2020 (Expressed in thousands of Canadian Dollars) (Unaudited) |
Line items in the restated condensed interim consolidated statement of changes in shareholders’ equity
Accumulated other comprehensive income | Accumulated deficit | Total shareholders’ equity | |||||||||
$ | $ | $ | |||||||||
As at June 30, 2021 | 458 | (29,557) | 37,550 | ||||||||
Adjustment | (1) | (784) | (785) | ||||||||
As at June 30, 2021 - Restated | 457 | (30,341) | 36,765 |
The restatement also resulted in adjustments being made to notes 2, 5, 7, 11 and 16.
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