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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
,” in the Financial Statements for additional information related to these transactions.
33
Operational and Regulation Overview
We believe our operations are in material compliance with all applicable state and local laws, regulations, and licensing requirements in the states in which we operate. However, cannabis is illegal under United States federal law. Substantially all of our revenue is derived from United States cannabis operations. For information about risks related to United States cannabis operations, refer to Item 1A., “
Risk Factors
,” of the Annual Report.
Key Financial Highlights
Revenue increased by $29,086, or 34%, during Q1 2023, as compared to Q1 2022, primarily driven by incremental revenue from new site openings and growth from our existing business.
Operating profit of $255 during Q1 2023, as compared to an operating loss of $14,780 in Q1 2022, primarily driven by improved gross profit margin and the absence of a litigation settlement charge.
Net decrease in cash and cash equivalents of $850 during the three months ended March 31, 2023, primarily driven by net cash used in investing activities, including payments related to prior year acquisitions, offset by timing of payments related to working capital and operating activities.
34
RESULTS
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
$255 during Q1 2023, as compared to an operating loss of $14,780 in Q1 2022, primarily driven by improved gross profit margin and the absence of a litigation settlement charge.
Net decrease in cash and cash equivalents of $850 during the three months ended March 31, 2023, primarily driven by net cash used in investing activities, including payments related to prior year acquisitions, offset by timing of payments related to working capital and operating activities.
34
RESULTS OF OPERATIONS
Three Months Ended March 31, 2023 Compared with the Three Months Ended March 31, 2022
Three Months EndedMarch 31,
($ in thousands)
2023
2022
Increase / (Decrease)
Revenue, net
114,176
85,090
29,086
34%
Cost of goods sold
(78,472)
(61,643)
16,829
27%
Gross profit
35,704
23,447
12,257
52%
Gross profit %
31.3
27.6
Operating expenses
General and administrative expenses
35,449
33,227
2,222
7%
Settlement expense
5,000
(5,000)
NM
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
,176
85,090
29,086
34%
Cost of goods sold
(78,472)
(61,643)
16,829
27%
Gross profit
35,704
23,447
12,257
52%
Gross profit %
31.3
27.6
Operating expenses
General and administrative expenses
35,449
33,227
2,222
7%
Settlement expense
5,000
(5,000)
NM*
Total operating expenses
35,449
38,227
(2,778)
(7)%
Operating profit (loss)
255
(14,780)
15,035
102%
Other (expense) income
Interest expense
(8,975)
(6,031)
2,944
49%
Other, net
265
103
162
157%
Total other expense
(8,710)
(5,928)
2,782
47%
Loss before income taxes
(8,455)
(20,708)
(12,253)
(59)%
Income tax expense
(10,017)
(7,107)
2,910
41%
Net loss
(18,472)
(27,815)
(9
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
,031)
2,944
49%
Other, net
265
103
162
157%
Total other expense
(8,710)
(5,928)
2,782
47%
Loss before income taxes
(8,455)
(20,708)
(12,253)
(59)%
Income tax expense
(10,017)
(7,107)
2,910
41%
Net loss
(18,472)
(27,815)
(9,343)
(34)%
Not meaningful
Revenue
Revenue increased by $29,086, or 34%, during the three months ended March 31, 2023, as compared to the three months ended March 31, 2022. Our revenue growth was primarily driven by $8,506 of incremental related to new dispensaries that opened during 2022 and 2023 and an increase of $7,798 across our legacy locations, which includes a benefit from the commencement of adult-use sales at our New Jersey dispensaries that began in 2022. Additionally, we recognized $3,408 of incremental revenue from acquisitions, which includes $257 related to the Marichron acquisition that occurred in late 2022. The current period also benefited from a $
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
primarily driven by $8,506 of incremental related to new dispensaries that opened during 2022 and 2023 and an increase of $7,798 across our legacy locations, which includes a benefit from the commencement of adult-use sales at our New Jersey dispensaries that began in 2022. Additionally, we recognized $3,408 of incremental revenue from acquisitions, which includes $257 related to the Marichron acquisition that occurred in late 2022. The current period also benefited from a $9,374 increase in net revenue related to our wholesale operations, primarily driven by an increase in wholesale volume sold, particularly in New Jersey, but partially offset by pricing pressure across the markets in which we operate. As of March 31, 2023, we had 554 SKUs for our cultivation products, compared to 285 SKUs as of March 31, 2022.
Cost of Goods Sold and Gross Profit
Cost of goods sold increased by $16,829, or 27%, during the three months ended March 31, 2023, as compared to the three months ended March 31, 2022. Cost of goods sold represents direct and indirect expenses attributable to the production of wholesale products as well as direct expenses incurred in purchasing products from
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
SKUs for our cultivation products, compared to 285 SKUs as of March 31, 2022.
Cost of Goods Sold and Gross Profit
Cost of goods sold increased by $16,829, or 27%, during the three months ended March 31, 2023, as compared to the three months ended March 31, 2022. Cost of goods sold represents direct and indirect expenses attributable to the production of wholesale products as well as direct expenses incurred in purchasing products from other wholesalers. Gross profit for the three months ended March 31, 2023 was $35,704, representing a gross margin of 31.3%, compared to gross profit of $23,447 and gross margin of 27.6% for the three months ended March 31, 2022. The increase in gross margin was primarily driven by improved utilization and production at our Massachusetts and New Jersey cultivation facilities due to increased production, partially offset by pricing pressure and lower margins from our outlet stores. Additionally, the current period included $3,942 of write-downs of certain inventory items primarily within our Michigan and Massachusetts businesses, compared with total write-downs of $2,204 in the prior period.
35
General and Administrative Expenses
General and administrative expenses
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
March 31, 2022. The increase in gross margin was primarily driven by improved utilization and production at our Massachusetts and New Jersey cultivation facilities due to increased production, partially offset by pricing pressure and lower margins from our outlet stores. Additionally, the current period included $3,942 of write-downs of certain inventory items primarily within our Michigan and Massachusetts businesses, compared with total write-downs of $2,204 in the prior period.
35
General and Administrative Expenses
General and administrative expenses increased by $2,222, or 7%, during the three months ended March 31, 2023, as compared to the three months ended March 31, 2022. The increase was primarily driven by:
a $4,660 increase in depreciation and amortization expense due to $3,854 of incremental amortization of licenses driven by prior year acquisitions and $806 of incremental depreciation expense due to a larger average balance of fixed assets in service; and
a $1,988 increase in compensation expense, including $451 higher equity-based compensation expense.
These increases were partially offset by:
$2,492 lower fees related to professional services and external support, driven by lower legal expenses; and
$1,475 lower overhead due to improved utilization at our
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
ization expense due to $3,854 of incremental amortization of licenses driven by prior year acquisitions and $806 of incremental depreciation expense due to a larger average balance of fixed assets in service; and
a $1,988 increase in compensation expense, including $451 higher equity-based compensation expense.
These increases were partially offset by:
$2,492 lower fees related to professional services and external support, driven by lower legal expenses; and
$1,475 lower overhead due to improved utilization at our cultivation facilities.
Settlement Expense
During 2022, we recognized an expense of $5,000 related to the settlement of a stockholder dispute.
Interest Expense
Interest expense increased by $2,944, or 49%, during the three months ended March 31, 2023, as compared to the three months ended March 31, 2022. The increase was primarily driven by higher cash interest expense associated with additional borrowings under our credit facility. During the three months ended March 31, 2023, the Company had a weighted-average outstanding debt balance of $335,104 with a weighted-average interest rate of 9.9%, excluding finance leases, compared to a weighted-average debt balance of $241,649 during the three months ended March
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
2023, as compared to the three months ended March 31, 2022. The increase was primarily driven by higher cash interest expense associated with additional borrowings under our credit facility. During the three months ended March 31, 2023, the Company had a weighted-average outstanding debt balance of $335,104 with a weighted-average interest rate of 9.9%, excluding finance leases, compared to a weighted-average debt balance of $241,649 during the three months ended March 31, 2022 with a weighted-average interest rate of 9.6%.
Income Tax Expense
Ascend Wellness Holdings, Inc.’s quarterly tax provision is calculated under the discrete method which treats the interim period as if it were the annual period and determines the income tax expense or benefit on that basis. The discrete method is applied when application of the estimated annual effective tax rate is impractical because it is not possible to reliably estimate the annual effective tax rate. Ascend Wellness Holdings, Inc. believes, at this time, the use of this discrete method is more appropriate than the annual effective tax rate method due to the high degree of uncertainty in estimating annual pre-tax income due to the early growth stage of the business. Since the Company operates in the cannabis industry, it is subject to the limitations of Internal Revenue Code (“
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
basis. The discrete method is applied when application of the estimated annual effective tax rate is impractical because it is not possible to reliably estimate the annual effective tax rate. Ascend Wellness Holdings, Inc. believes, at this time, the use of this discrete method is more appropriate than the annual effective tax rate method due to the high degree of uncertainty in estimating annual pre-tax income due to the early growth stage of the business. Since the Company operates in the cannabis industry, it is subject to the limitations of Internal Revenue Code (“IRC”) Section 280E, which prohibits businesses engaged in the trafficking of Schedule I or Schedule II controlled substances from deducting ordinary and necessary business expenses from gross profit. Cannabis businesses operating in states that align their tax codes with IRC Section 280E are also unable to deduct ordinary and necessary business expenses for state tax purposes. Ordinary and necessary business expenses deemed non-deductible under IRC Section 280E are treated as permanent book-to-tax differences. Therefore, the effective tax rate can be highly variable and may not necessarily correlate with pre-tax income or loss.
The statutory federal tax rate was 21% during both periods. During the three months ended March 31, 2023 the Company had operations in six U.S. geographic markets: Illinois, Michigan, Ohio, Massachusetts
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
and necessary business expenses for state tax purposes. Ordinary and necessary business expenses deemed non-deductible under IRC Section 280E are treated as permanent book-to-tax differences. Therefore, the effective tax rate can be highly variable and may not necessarily correlate with pre-tax income or loss.
The statutory federal tax rate was 21% during both periods. During the three months ended March 31, 2023 the Company had operations in six U.S. geographic markets: Illinois, Michigan, Ohio, Massachusetts, New Jersey, and Pennsylvania, which have state tax rates ranging from 6% to 11.5%. Certain states, including Michigan, do not align with IRC Section 280E for state tax purposes and permit the deduction of ordinary and necessary business expenses from gross profit in the calculation of state taxable income. There have been no material changes to income tax matters in connection with the normal course of our operations during the current year.
Income tax expense was $10,017, or 28.1%, of gross profit, during the three months ended March 31, 2023, as compared to $7,107, or 30.3%, of gross profit, during the three months ended March 31, 2022. The effective tax rate on gross
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
the calculation of state taxable income. There have been no material changes to income tax matters in connection with the normal course of our operations during the current year.
Income tax expense was $10,017, or 28.1%, of gross profit, during the three months ended March 31, 2023, as compared to $7,107, or 30.3%, of gross profit, during the three months ended March 31, 2022. The effective tax rate on gross profit for the three months ended March 31, 2023 benefited from an incremental impact attributable to the tax accounting treatment of certain acquired intangible assets, partially offset by relatively higher penalties and interest due on federal tax payments in the current year as compared to the prior year.
36
NON-GAAP FINANCIAL MEASURES
We define “Adjusted Gross Profit” as gross profit excluding non-cash inventory costs, which include depreciation and amortization included in cost of goods sold, equity-based compensation included in cost of goods sold, start-up costs included in cost of goods sold, and other non-cash inventory adjustments. We define “Adjusted Gross Margin” as Adjusted Gross Profit as a percentage of net revenue. Our “Adjusted EBITDA” is a non-GAAP
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
NON-GAAP FINANCIAL MEASURES
We define “Adjusted Gross Profit” as gross profit excluding non-cash inventory costs, which include depreciation and amortization included in cost of goods sold, equity-based compensation included in cost of goods sold, start-up costs included in cost of goods sold, and other non-cash inventory adjustments. We define “Adjusted Gross Margin” as Adjusted Gross Profit as a percentage of net revenue. Our “Adjusted EBITDA” is a non-GAAP measure used by management that is not defined by U.S. GAAP and may not be comparable to similar measures presented by other companies. We define “Adjusted EBITDA Margin” as Adjusted EBITDA as a percentage of net revenue. Management calculates Adjusted EBITDA as the reported net loss, adjusted to exclude: income tax expense; other (income) expense; interest expense; depreciation and amortization; depreciation and amortization included in cost of goods sold; non-cash inventory adjustments; equity-based compensation; equity-based compensation included in cost of goods sold; start-up costs; start-up costs included in cost of goods sold; transaction-related and other non-recurring expenses; litigation settlement; and gain or loss on sale of assets. Accordingly, management believes that Adjust
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
as the reported net loss, adjusted to exclude: income tax expense; other (income) expense; interest expense; depreciation and amortization; depreciation and amortization included in cost of goods sold; non-cash inventory adjustments; equity-based compensation; equity-based compensation included in cost of goods sold; start-up costs; start-up costs included in cost of goods sold; transaction-related and other non-recurring expenses; litigation settlement; and gain or loss on sale of assets. Accordingly, management believes that Adjusted EBITDA provides meaningful and useful financial information, as this measure demonstrates the operating performance of the business. Non-GAAP financial measures may be considered in addition to the results prepared in accordance with U.S. GAAP, but they should not be considered a substitute for, or superior to, U.S. GAAP results.
The following table presents Adjusted Gross Profit for the three months ended March 31, 2023 and 2022:
Three Months EndedMarch 31,
($ in thousands)
2023
2022
Gross Profit
35,704
23,447
Depreciation and amortization included in cost of goods sold
6,327
2,943
Equity-based compensation included in cost of goods sold
50
3,
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
superior to, U.S. GAAP results.
The following table presents Adjusted Gross Profit for the three months ended March 31, 2023 and 2022:
Three Months EndedMarch 31,
($ in thousands)
2023
2022
Gross Profit
35,704
23,447
Depreciation and amortization included in cost of goods sold
6,327
2,943
Equity-based compensation included in cost of goods sold
50
3,995
Start-up costs included in cost of goods sold(1)
1,570
3,923
Non-cash inventory adjustments(2)
3,942
2,204
Adjusted Gross Profit
47,593
36,512
Adjusted Gross Margin
41.7
42.9
(1)
Incremental expenses associated with the expansion of activities at our cultivation facilities that are not yet operating at scale, including excess overhead expenses resulting from delays in regulatory approvals at certain cultivation facilities.
(2)
Consists of write-offs of expired products, obsolete packaging, and net realizable value adjustments related to certain inventory items in Michigan and Massachusetts.
37
The following table presents Adjusted EBITDA for the three months ended March 31, 2023 and
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
7
42.9
(1)
Incremental expenses associated with the expansion of activities at our cultivation facilities that are not yet operating at scale, including excess overhead expenses resulting from delays in regulatory approvals at certain cultivation facilities.
(2)
Consists of write-offs of expired products, obsolete packaging, and net realizable value adjustments related to certain inventory items in Michigan and Massachusetts.
37
The following table presents Adjusted EBITDA for the three months ended March 31, 2023 and 2022:
Three Months EndedMarch 31,
($ in thousands)
2023
2022
Net loss
(18,472)
(27,815)
Income tax expense
10,017
7,107
Other (income) expense
(265)
(103)
Interest expense
8,975
6,031
Depreciation and amortization
13,719
5,675
Non-cash inventory adjustments(1)
3,942
2,204
Equity-based compensation
3,005
6,499
Start-up costs(2)
2,527
4,760
Transaction-related and other non-recurring expenses(4)
302
6,194
(Gain) loss on sale of assets
(442)
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
103)
Interest expense
8,975
6,031
Depreciation and amortization
13,719
5,675
Non-cash inventory adjustments(1)
3,942
2,204
Equity-based compensation
3,005
6,499
Start-up costs(2)
2,527
4,760
Transaction-related and other non-recurring expenses(4)
302
6,194
(Gain) loss on sale of assets
(442)
818
Litigation settlement
5,000
Adjusted EBITDA
23,308
16,370
Adjusted EBITDA Margin
20.4
19.2
(1)
Consists of write-offs of expired products, obsolete packaging, and net realizable value adjustments related to certain inventory items in Michigan and Massachusetts.
(2)
One-time costs associated with acquiring real estate, obtaining licenses and permits, and other costs incurred before commencement of operations at certain locations, as well as incremental expenses associated with the expansion of activities at our cultivation facilities that are not yet operating at scale, including excess overhead expenses resulting from delays in regulatory approvals at certain cultivation facilities. The 2023 amount also includes a $491 fair value adjustment related to the OPA acquisition earn-out
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
value adjustments related to certain inventory items in Michigan and Massachusetts.
(2)
One-time costs associated with acquiring real estate, obtaining licenses and permits, and other costs incurred before commencement of operations at certain locations, as well as incremental expenses associated with the expansion of activities at our cultivation facilities that are not yet operating at scale, including excess overhead expenses resulting from delays in regulatory approvals at certain cultivation facilities. The 2023 amount also includes a $491 fair value adjustment related to the OPA acquisition earn-out.
(3)
Legal and professional fees associated with litigation matters, potential acquisitions, and other regulatory matters and other non-recurring expenses.
38
LIQUIDITY AND CAPITAL RESOURCES
We are an emerging growth company and our primary sources of liquidity are operating cash flows, borrowings through the issuance of debt, and funds raised through the issuance of equity securities. We are generating cash from sales and deploying our capital reserves to acquire and develop assets capable of producing additional revenue and earnings over both the immediate and long term. Capital reserves are being utilized for acquisitions in the medical and adult use cannabis markets, for capital expenditures and improvements in existing facilities, product development and marketing, as well as customer, supplier, and investor and industry relations.
Financing History and Future Capital Requirements
Histor
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
ings through the issuance of debt, and funds raised through the issuance of equity securities. We are generating cash from sales and deploying our capital reserves to acquire and develop assets capable of producing additional revenue and earnings over both the immediate and long term. Capital reserves are being utilized for acquisitions in the medical and adult use cannabis markets, for capital expenditures and improvements in existing facilities, product development and marketing, as well as customer, supplier, and investor and industry relations.
Financing History and Future Capital Requirements
Historically, we have used private financing as a source of liquidity for short-term working capital needs and general corporate purposes. In May 2021, we completed an IPO of shares of our Class A common stock through which we raised aggregate net proceeds of approximately $86,065, after deducting underwriting discounts and commissions and certain direct offering expenses paid by us, and in August 2021 we entered into a credit facility under which we initially borrowed a $210,000 term loan. During the second quarter of 2022, we borrowed an additional $65,000 of term loans from certain lenders under the expansion feature of the credit facility, as further described below.
Our future ability to fund operations, to make planned capital expenditures, to acquire other entities or investments, to make
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
deducting underwriting discounts and commissions and certain direct offering expenses paid by us, and in August 2021 we entered into a credit facility under which we initially borrowed a $210,000 term loan. During the second quarter of 2022, we borrowed an additional $65,000 of term loans from certain lenders under the expansion feature of the credit facility, as further described below.
Our future ability to fund operations, to make planned capital expenditures, to acquire other entities or investments, to make scheduled debt payments, and to repay or refinance indebtedness depends on our future operating performance, cash flows, and ability to obtain equity or debt financing, which are subject to prevailing economic conditions, as well as financial, business, and other factors, some of which are beyond our control.
As of March 31, 2023 and December 31, 2022, we had total current liabilities of $109,812 and $110,949, respectively, and total current assets of $204,208 and $198,743, respectively, which includes cash and cash equivalents of $73,296 and $74,146, respectively, to meet our current obligations. As of March 31, 2023, we had working capital of $94,396,
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
control.
As of March 31, 2023 and December 31, 2022, we had total current liabilities of $109,812 and $110,949, respectively, and total current assets of $204,208 and $198,743, respectively, which includes cash and cash equivalents of $73,296 and $74,146, respectively, to meet our current obligations. As of March 31, 2023, we had working capital of $94,396, compared to $87,794 as of December 31, 2022.
Approximately 94% and 90% of our cash and cash equivalents balance as of March 31, 2023 and December 31, 2022, respectively, is on deposit with banks, credit unions, or other financial institutions. We have not experienced any material impacts related to banking restrictions applicable to cannabis businesses. Our cash and cash equivalents balance is not restricted for use by variable interest entities.
As reflected in the Financial Statements, we had an accumulated deficit as of March 31, 2023 and December 31, 2022, as well as a net loss for the three months ended March 31, 2023 and 2022, which are indicators that raise
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
banks, credit unions, or other financial institutions. We have not experienced any material impacts related to banking restrictions applicable to cannabis businesses. Our cash and cash equivalents balance is not restricted for use by variable interest entities.
As reflected in the Financial Statements, we had an accumulated deficit as of March 31, 2023 and December 31, 2022, as well as a net loss for the three months ended March 31, 2023 and 2022, which are indicators that raise substantial doubt of our ability to continue as a going concern. Management believes that substantial doubt of our ability to continue as a going concern for at least one year from the issuance of our Financial Statements has been alleviated due to: (i) cash on hand and (ii) continued growth of sales from our consolidated operations. Management plans to continue to access capital markets for additional funding through debt and/or equity financings to supplement future cash needs, as may be required. However, management cannot provide any assurances that the Company will be successful in accomplishing its business plans. If we are unable to raise additional capital on favorable terms, if at all, whenever necessary, we may be forced to decelerate or curtail certain of our operations until such time as additional capital becomes available.
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
growth of sales from our consolidated operations. Management plans to continue to access capital markets for additional funding through debt and/or equity financings to supplement future cash needs, as may be required. However, management cannot provide any assurances that the Company will be successful in accomplishing its business plans. If we are unable to raise additional capital on favorable terms, if at all, whenever necessary, we may be forced to decelerate or curtail certain of our operations until such time as additional capital becomes available.
Credit Facility
In August 2021, we entered into a credit facility (the “2021 Credit Facility”) which provided for an initial term loan of $210,000. We had the ability to request an increase in the 2021 Credit Facility up to $275,000 if the existing lenders (or other lenders) agreed to provide such additional term loans. During the second quarter of 2022, we borrowed an additional $65,000 of incremental term loans through this expansion feature (the “2022 Loans”) for total borrowings of $275,000 outstanding as of March 31, 2023. The 2021 Credit Facility matures on August 27, 2025 and does not require scheduled principal amortization payments. Borrowings under the
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
000 if the existing lenders (or other lenders) agreed to provide such additional term loans. During the second quarter of 2022, we borrowed an additional $65,000 of incremental term loans through this expansion feature (the “2022 Loans”) for total borrowings of $275,000 outstanding as of March 31, 2023. The 2021 Credit Facility matures on August 27, 2025 and does not require scheduled principal amortization payments. Borrowings under the 2021 Credit Facility bear interest at a rate of 9.5% per annum, payable quarterly. The initial proceeds from the 2021 Credit Facility were used, in part, to prepay certain then-outstanding debt obligations and, together with the 2022 Loans, fund working
39
capital and general corporate matters, including, but not limited to, growth investments, acquisitions, capital expenditures, and other strategic initiatives.
Mandatory prepayments are required following certain events, including the proceeds of indebtedness that is not permitted under the agreement, asset sales, and casualty events, subject to customary reinvestment rights. We may prepay the 2021 Credit Facility at any time, subject to a customary make-whole payment or prepayment penalty, as applicable. Once
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
fund working
39
capital and general corporate matters, including, but not limited to, growth investments, acquisitions, capital expenditures, and other strategic initiatives.
Mandatory prepayments are required following certain events, including the proceeds of indebtedness that is not permitted under the agreement, asset sales, and casualty events, subject to customary reinvestment rights. We may prepay the 2021 Credit Facility at any time, subject to a customary make-whole payment or prepayment penalty, as applicable. Once repaid, amounts borrowed under the 2021 Credit Facility may not be re-borrowed. We may request an extension of the maturity date for 364 days, which the lenders’ may grant in their discretion.
We are required to comply with two financial covenants under the 2021 Credit Agreement. Liquidity (defined as unrestricted cash and cash equivalents pledged under the 2021 Credit Facility plus any future revolving credit availability) may not be below $20,000 as of the last day of any fiscal quarter, and we may not permit the ratio of Consolidated EBITDA (as defined in the 2021 Credit Agreement) to consolidated cash interest expense for any period of four consecutive fiscal quarters to be less than 2.50:1.00.
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
the 2021 Credit Agreement. Liquidity (defined as unrestricted cash and cash equivalents pledged under the 2021 Credit Facility plus any future revolving credit availability) may not be below $20,000 as of the last day of any fiscal quarter, and we may not permit the ratio of Consolidated EBITDA (as defined in the 2021 Credit Agreement) to consolidated cash interest expense for any period of four consecutive fiscal quarters to be less than 2.50:1.00. Ascend Wellness Holdings, Inc. has a customary equity cure right for each of these financial covenants. Ascend Wellness Holdings, Inc. is in compliance with these covenants as of March 31, 2023. Refer to Note 11, “Debt,” in the Financial Statements for additional information.
Financing Agreement
In December 2022, we received $19,364 pursuant to a financing agreement with a third-party lender (the “Financing Agreement”), which is included in “Long-term debt, net” in the Financial Statements at March 31, 2023. Ascend Wellness Holdings, Inc. assigned to the lender its interests in an employee retention tax credit claim (the “ERTC Claim”) that it submitted in November 2022 for approximately $22,800. If the Company does not receive the
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
ancing Agreement
In December 2022, we received $19,364 pursuant to a financing agreement with a third-party lender (the “Financing Agreement”), which is included in “Long-term debt, net” in the Financial Statements at March 31, 2023. Ascend Wellness Holdings, Inc. assigned to the lender its interests in an employee retention tax credit claim (the “ERTC Claim”) that it submitted in November 2022 for approximately $22,800. If the Company does not receive the ERTC Claim, in whole or in part, the Company is required to repay the related portion of the funds received plus interest of 10% accrued from the date of the Financing Agreement through the repayment date. The Financing Agreement does not have a stated maturity date and the discount is being accreted to interest expense over an expected term. Ascend Wellness Holdings, Inc.’s obligations under the Financing Agreement will be satisfied upon receipt of the ERTC Claim or other full repayment. Ascend Wellness Holdings, Inc. determined the ERTC Claim did not meet the criteria to record as a receivable as of March 31, 2023 because of the uncertain nature of the ERTC Claim. Refer to Note 11, “Debt,” in the Financial Statements for additional information.
Cash Flows
Three Months Ended March
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
being accreted to interest expense over an expected term. Ascend Wellness Holdings, Inc.’s obligations under the Financing Agreement will be satisfied upon receipt of the ERTC Claim or other full repayment. Ascend Wellness Holdings, Inc. determined the ERTC Claim did not meet the criteria to record as a receivable as of March 31, 2023 because of the uncertain nature of the ERTC Claim. Refer to Note 11, “Debt,” in the Financial Statements for additional information.
Cash Flows
Three Months Ended March 31,
(in thousands)
2023
2022
Net cash provided by (used in) operating activities
5,778
(10,245)
Net cash used in investing activities
(5,679)
(622)
Net cash used in financing activities
(949)
(817)
Operating Activities
Net cash provided by operating activities was $5,778 during the three months ended March 31, 2023, as compared to net cash used in operating activities of $10,245 during the three months ended March 31, 2022, primarily driven by the timing of payments to suppliers and vendors and other working capital payments, as well as the timing and amount of income tax payments.
Investing Activities
Net cash used in investing activities increased by $5
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
(817)
Operating Activities
Net cash provided by operating activities was $5,778 during the three months ended March 31, 2023, as compared to net cash used in operating activities of $10,245 during the three months ended March 31, 2022, primarily driven by the timing of payments to suppliers and vendors and other working capital payments, as well as the timing and amount of income tax payments.
Investing Activities
Net cash used in investing activities increased by $5,057 during the three months ended March 31, 2023, as compared to the three months ended March 31, 2022. The increase was primarily due to the absence of proceeds from the sale of assets that occurred in the prior year, partially offset by lower payments associated with acquisitions and a benefit from reimbursements under tenant improvement allowances related to leasehold improvement expenditures.
40
Financing Activities
Net cash used in financing activities increased by $132 during the three months ended March 31, 2023, as compared to the three months ended March 31, 2022. The slight increase was primarily due to higher payments for taxes withheld under equity-based compensation plans and repayments associated with finance leases.
Contractual Obligations and Other Commitments and
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
payments associated with acquisitions and a benefit from reimbursements under tenant improvement allowances related to leasehold improvement expenditures.
40
Financing Activities
Net cash used in financing activities increased by $132 during the three months ended March 31, 2023, as compared to the three months ended March 31, 2022. The slight increase was primarily due to higher payments for taxes withheld under equity-based compensation plans and repayments associated with finance leases.
Contractual Obligations and Other Commitments and Contingencies
Material contractual obligations arising in the normal course of business primarily consist of long-term fixed rate debt and related interest payments, leases, finance arrangements, and amounts due for acquisitions. We believe that cash flows from operations will be sufficient to satisfy our capital expenditures, debt services, working capital needs, and other contractual obligations for the next twelve months.
The following table summarizes the Company’s material future contractual obligations as of March 31, 2023:
(in thousands)
Commitments Due by Period
Contractual Obligations
Total
Remainder of 2023
2024 - 2025
2026 - 2027
Thereafter
Term notes(1)
275,000
275,000
Fixed interest related to term notes(2)
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
, working capital needs, and other contractual obligations for the next twelve months.
The following table summarizes the Company’s material future contractual obligations as of March 31, 2023:
(in thousands)
Commitments Due by Period
Contractual Obligations
Total
Remainder of 2023
2024 - 2025
2026 - 2027
Thereafter
Term notes(1)
275,000
275,000
Fixed interest related to term notes(2)
62,915
19,683
43,232
Sellers’ Notes(3)
21,457
2,357
19,100
Finance arrangements(4)
21,431
1,738
4,941
5,275
9,477
Operating leases(5)
664,869
27,180
75,297
78,744
483,648
Finance leases(5)
1,493
321
856
316
Other commitments(6)
15,471
15,471
Total
1,062,636
51,279
433,897
84,335
493,125
(1)
Principal payments due under our term notes payable. Refer to Note 11, “Debt,” in
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
Operating leases(5)
664,869
27,180
75,297
78,744
483,648
Finance leases(5)
1,493
321
856
316
Other commitments(6)
15,471
15,471
Total
1,062,636
51,279
433,897
84,335
493,125
(1)
Principal payments due under our term notes payable. Refer to Note 11, “Debt,” in the Financial Statements for additional information.
(2)
Represents fixed interest rate payments on borrowings under the 2021 Credit Facility based on the principal outstanding at March 31, 2023. Interest payments could fluctuate based on prepayments or additional amounts borrowed.
(3)
Consists of amounts owed for acquisitions or other purchases. Certain cash payments include an interest accretion component, and the timing of certain payments may vary based on regulatory approval. Refer to Note 11, “Debt,” in the Financial Statements for additional information. This amount excludes the potential earn-out payment related to the OPA acquisition that has an estimated fair value of $5,567 at March 31, 2023 and is dependent upon the commencement of adult-use cannabis sales in Ohio
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
)
Consists of amounts owed for acquisitions or other purchases. Certain cash payments include an interest accretion component, and the timing of certain payments may vary based on regulatory approval. Refer to Note 11, “Debt,” in the Financial Statements for additional information. This amount excludes the potential earn-out payment related to the OPA acquisition that has an estimated fair value of $5,567 at March 31, 2023 and is dependent upon the commencement of adult-use cannabis sales in Ohio. Refer to Note 4, “Acquisitions,” in the Financial Statements for additional information.
(4)
Reflects our contractual obligations to make future payments under non-cancelable operating leases that did not meet the criteria to qualify for sale-leaseback treatment. Refer to Note 10, “Leases,” in the Financial Statements for additional information.
(5)
Reflects our contractual obligations to make future payments under non-cancelable leases. Refer to Note 10, “Leases,” in the Financial Statements for additional information.
(6)
Related to the Story of PA acquisition. Refer to Note 4, “Acquisitions,” in the Financial Statements for additional information. We expect to fund up to an additional total of $10,000 under the research collaboration agreement over the
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
10, “Leases,” in the Financial Statements for additional information.
(5)
Reflects our contractual obligations to make future payments under non-cancelable leases. Refer to Note 10, “Leases,” in the Financial Statements for additional information.
(6)
Related to the Story of PA acquisition. Refer to Note 4, “Acquisitions,” in the Financial Statements for additional information. We expect to fund up to an additional total of $10,000 under the research collaboration agreement over the ten years following the agreement date. Since the timing of the payments may vary, this amount has been excluded from the table above.
As of the date of this filing, we do not have any off-balance sheet arrangements, as defined by applicable regulations of the United States Securities and Exchange Commission, that have, or are reasonably likely to have, a current or future effect on the results of our operations or financial condition, including, and without limitation, such considerations as liquidity and capital resources.
41
Capital Expenditures
We anticipate capital expenditures, net of tenant improvement allowances, of approximately $25,000 during the remainder of 2023, including expenditures related to the Maryland transaction. Changes to this estimate could result from the timing of various project start dates, which are subject
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
Exchange Commission, that have, or are reasonably likely to have, a current or future effect on the results of our operations or financial condition, including, and without limitation, such considerations as liquidity and capital resources.
41
Capital Expenditures
We anticipate capital expenditures, net of tenant improvement allowances, of approximately $25,000 during the remainder of 2023, including expenditures related to the Maryland transaction. Changes to this estimate could result from the timing of various project start dates, which are subject to local and regulatory approvals. Spending at our cultivation and processing facilities includes: construction; purchase of capital equipment such as extraction equipment, heating, ventilation, and air conditioning equipment, and other manufacturing equipment; general maintenance; and information technology capital expenditures. Dispensary-related capital expenditures includes construction costs for the initial build-out of each location, general maintenance costs, and upgrades to existing locations.
During the remainder of 2023, we expect to complete the second phase of expansion at our New Jersey cultivation facility, the initial build out of our Pennsylvania cultivation facility, and complete certain expansion projects at our Illinois and Massachusetts cultivation facilities. We also anticipate building out the three dispensaries in Ohio related to the OPA transaction, up to four additional dispensaries in Pennsylvania, and two additional dispensaries in each of
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
construction costs for the initial build-out of each location, general maintenance costs, and upgrades to existing locations.
During the remainder of 2023, we expect to complete the second phase of expansion at our New Jersey cultivation facility, the initial build out of our Pennsylvania cultivation facility, and complete certain expansion projects at our Illinois and Massachusetts cultivation facilities. We also anticipate building out the three dispensaries in Ohio related to the OPA transaction, up to four additional dispensaries in Pennsylvania, and two additional dispensaries in each of Illinois and Michigan. Additionally, we anticipate certain general maintenance activities across our cultivation facilities and dispensary locations. Management expects to fund capital expenditures by utilizing cash flows from operations and reimbursements under tenant improvement allowances from sale leaseback transactions.
As of March 31, 2023, our construction in progress (“CIP”) balance was $11,050 and relates to capital spending on projects that were not yet complete. This balance includes amounts related to: the expansion of our New Jersey cultivation facility; certain projects at our Illinois cultivation facility; the build out of the Tinley Park dispensary that opened in April 2023; the build out of dispensaries in Ohio; and other projects across our dispensaries and cultivation facilities.
Other Matters
Equity Incentive Plans
As of March
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
our construction in progress (“CIP”) balance was $11,050 and relates to capital spending on projects that were not yet complete. This balance includes amounts related to: the expansion of our New Jersey cultivation facility; certain projects at our Illinois cultivation facility; the build out of the Tinley Park dispensary that opened in April 2023; the build out of dispensaries in Ohio; and other projects across our dispensaries and cultivation facilities.
Other Matters
Equity Incentive Plans
As of March 31, 2023, a total of 9,994 restricted common shares had been issued under the equity incentive plan approved in 2020 (the “2020 Plan”), of which 125 were unvested as of March 31, 2023. Total unrecognized compensation cost related to the restricted common shares was $17 as of March 31, 2023, which is expected to be recognized over a weighted-average remaining period of 0.5 years.
In July 2021, the Company adopted a new stock incentive plan (the “2021 Plan”), pursuant to which 17,000 shares of Class A common stock are reserved for issuance thereunder, subject to certain adjustments and other terms. Following the adoption of the 2021 Plan,
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
unrecognized compensation cost related to the restricted common shares was $17 as of March 31, 2023, which is expected to be recognized over a weighted-average remaining period of 0.5 years.
In July 2021, the Company adopted a new stock incentive plan (the “2021 Plan”), pursuant to which 17,000 shares of Class A common stock are reserved for issuance thereunder, subject to certain adjustments and other terms. Following the adoption of the 2021 Plan, no additional awards are expected to be issued under the 2020 Plan. The 2021 Plan authorized the issuance of options, stock appreciation rights, restricted stock awards, restricted stock units (“RSUs”), and other stock-based awards (collectively the “2021 Plan Awards”). As of March 31, 2023, there were 4,242 shares of Class A common stock available for grant for future equity-based compensation awards under the 2021 Plan.
During the three months ended March 31, 2023, the Company granted a total of 2,486 RSUs under the 2021 Plan. As of March 31, 2023, a total of 14,438 RSUs have been granted under the 2021 Plan, of
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
As of March 31, 2023, there were 4,242 shares of Class A common stock available for grant for future equity-based compensation awards under the 2021 Plan.
During the three months ended March 31, 2023, the Company granted a total of 2,486 RSUs under the 2021 Plan. As of March 31, 2023, a total of 14,438 RSUs have been granted under the 2021 Plan, of which 7,178 are unvested as of March 31, 2023. Total unrecognized compensation cost related to the RSUs was $35,939 as of March 31, 2023, which is expected to be recognized over a weighted-average remaining period of 2.1 years.
Additionally, 1,933 stock option awards are outstanding as of March 31, 2023, of which 261 of which are exercisable. No options were granted or exercised during the three months ended March 31, 2023. The outstanding options have a remaining weighted-average contractual life of 4.2 years as of March 31, 2023, and total unrecognized stock-based compensation expense related to unvested options was $2,441
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
2.1 years.
Additionally, 1,933 stock option awards are outstanding as of March 31, 2023, of which 261 of which are exercisable. No options were granted or exercised during the three months ended March 31, 2023. The outstanding options have a remaining weighted-average contractual life of 4.2 years as of March 31, 2023, and total unrecognized stock-based compensation expense related to unvested options was $2,441, which is expected to be recognized over a weighted-average remaining period of 3.1 years.
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Total equity-based compensation expense was $4,555 and $5,715 during the three months ended March 31, 2023 and 2022, respectively, of which $1,600 and $3,211, respectively, was capitalized to inventory. As of March 31, 2023 and December 31, 2022, $2,086 and $536, respectively, remains capitalized in inventory. During the three months ended March 31, 2023, we recognized $2,955 within “General and administrative expenses” on the unaudited Condensed Consolidated Statements of Operations in the Financial Statements and we recognized $50 within
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
of which $1,600 and $3,211, respectively, was capitalized to inventory. As of March 31, 2023 and December 31, 2022, $2,086 and $536, respectively, remains capitalized in inventory. During the three months ended March 31, 2023, we recognized $2,955 within “General and administrative expenses” on the unaudited Condensed Consolidated Statements of Operations in the Financial Statements and we recognized $50 within “Cost of goods sold.” During the three months ended March 31, 2022, we recognized $2,504 within “General and administrative expenses” and we recognized $3,995 within “Cost of goods sold.” Refer to Note 13, “Equity-Based Compensation Expense,” in the Financial Statements for additional information.
In July 2021, the Company adopted an employee stock purchase plan (the “2021 ESPP”), pursuant to which 4,000 shares of Class A common stock are reserved for issuance thereunder, subject to certain adjustments and other terms. As of March 31, 2023, no shares have been issued under the 2021 ESPP.
On March 9, 2023, the Company’s board of directors unanimously
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
Compensation Expense,” in the Financial Statements for additional information.
In July 2021, the Company adopted an employee stock purchase plan (the “2021 ESPP”), pursuant to which 4,000 shares of Class A common stock are reserved for issuance thereunder, subject to certain adjustments and other terms. As of March 31, 2023, no shares have been issued under the 2021 ESPP.
On March 9, 2023, the Company’s board of directors unanimously approved, subject to stockholder approval, an amendment to the 2021 Plan (the “Amendment”) to increase the maximum number of shares of Class A common stock available for issuance under the 2021 Plan to an amount not to exceed 10% of the total number of issued and outstanding shares of Class A common stock, on a non-diluted basis, as constituted on the grant date of an award pursuant to the 2021 Plan. On May 5, 2023, the stockholders of the Company voted to approve the Amendment.
Lease-Related Transactions
In February 2023, we amended the lease related to our Franklin, New Jersey cultivation facility to increase the tenant improvement allowance, which resulted in increased rent amounts. We accounted for the
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
of issued and outstanding shares of Class A common stock, on a non-diluted basis, as constituted on the grant date of an award pursuant to the 2021 Plan. On May 5, 2023, the stockholders of the Company voted to approve the Amendment.
Lease-Related Transactions
In February 2023, we amended the lease related to our Franklin, New Jersey cultivation facility to increase the tenant improvement allowance, which resulted in increased rent amounts. We accounted for the amendment as a lease modification and remeasured the ROU asset and lease liability as of the amendment date. The modification resulted in a total additional tenant improvement allowance of $15,000, a reduction of $2,254 to the ROU asset, and an increase of $12,746 to the lease liability.
Refer to Note 10, “Leases,” in the Financial Statements for additional information regarding the Company’s leases.
COVID-19 Pandemic
We continue to evaluate and implement actions to strengthen our financial position and support the continuity of our business and operations in the face of the COVID-19 pandemic (the “Pandemic”) and other events. Although our operations have not been materially affected to date, the ultimate severity of the Pandemic and its impact on
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
12,746 to the lease liability.
Refer to Note 10, “Leases,” in the Financial Statements for additional information regarding the Company’s leases.
COVID-19 Pandemic
We continue to evaluate and implement actions to strengthen our financial position and support the continuity of our business and operations in the face of the COVID-19 pandemic (the “Pandemic”) and other events. Although our operations have not been materially affected to date, the ultimate severity of the Pandemic and its impact on the economic environment remains uncertain. We continue to generate operating cash flows to meet our short-term liquidity needs. While the Pandemic has not had a material impact on our results of operations to date, given the uncertainties associated with the Pandemic, we are unable to estimate the future impact of the Pandemic on our business, financial condition, results of operations, and/or cash flows in future periods. We believe we have sufficient liquidity available from cash and cash equivalents on hand of $73,296 as of March 31, 2023 to enable us to meet our working capital and other operating requirements, fund growth initiatives and capital expenditures, settle our liabilities, and pay scheduled interest payments on debt.
Legal Matters
MedMen NY Litigation
On February 25, 2021
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
of the Pandemic on our business, financial condition, results of operations, and/or cash flows in future periods. We believe we have sufficient liquidity available from cash and cash equivalents on hand of $73,296 as of March 31, 2023 to enable us to meet our working capital and other operating requirements, fund growth initiatives and capital expenditures, settle our liabilities, and pay scheduled interest payments on debt.
Legal Matters
MedMen NY Litigation
On February 25, 2021, the Company entered into a definitive investment agreement (the “Investment Agreement”) with subsidiaries of MedMen Enterprises Inc. (“MedMen”), under which we would have, subject to regulatory approval, completed an investment (the “Investment”) of approximately $73,000 in MedMen NY, Inc. (“MMNY”), a licensed medical cannabis operator in the state of New York. Following the completion of the transactions contemplated by the Investment Agreement, we were expected to hold all the outstanding equity of MMNY. Specifically, the Investment Agreement provided that at closing, the Company was going to pay to MedMen’s senior lenders $35,000, less certain transaction costs and a prepaid deposit of $4,000, and AWH New York, LLC was going to issue a senior
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
Men NY, Inc. (“MMNY”), a licensed medical cannabis operator in the state of New York. Following the completion of the transactions contemplated by the Investment Agreement, we were expected to hold all the outstanding equity of MMNY. Specifically, the Investment Agreement provided that at closing, the Company was going to pay to MedMen’s senior lenders $35,000, less certain transaction costs and a prepaid deposit of $4,000, and AWH New York, LLC was going to issue a senior secured promissory note in favor of MMNY’s senior secured lender in the
43
principal amount of $28,000, guaranteed by AWH, which cash investment and note would be used to reduce the amounts owed to MMNY’s senior secured lender.
Following its investment, AWH would hold a controlling interest in MMNY equal to approximately 86.7% of the equity in MMNY, and be provided with an option to acquire MedMen’s remaining interest in MMNY in the future for a nominal additional payment, which option the Company intended to exercise. The Investment Agreement also required AWH to make an additional investment of $10,000 in MMNY, which investment would also be used to repay MMNY’s senior secured lender, if adult-use cannabis sales
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
, AWH would hold a controlling interest in MMNY equal to approximately 86.7% of the equity in MMNY, and be provided with an option to acquire MedMen’s remaining interest in MMNY in the future for a nominal additional payment, which option the Company intended to exercise. The Investment Agreement also required AWH to make an additional investment of $10,000 in MMNY, which investment would also be used to repay MMNY’s senior secured lender, if adult-use cannabis sales commenced in MMNY’s dispensaries.
Ascend Wellness Holdings, Inc. contends that, in December 2021, the parties to the Investment Agreement received the required approvals from the State of New York to close the transactions contemplated by the Investment Agreement, but MedMen has disputed the adequacy of the approvals provided by the State of New York. Ascend Wellness Holdings, Inc. delivered notice to MedMen in December 2021 that it wished to close the transactions as required by the Investment Agreement. Nevertheless, MedMen, on January 2, 2022, gave notice to the Company that MedMen purported to terminate the Investment Agreement.
Following receipt of such notice, on January 13, 2022, the Company filed a complaint against MedMen and others in the Commercial Division of the Supreme Court of the State of New
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
by the State of New York. Ascend Wellness Holdings, Inc. delivered notice to MedMen in December 2021 that it wished to close the transactions as required by the Investment Agreement. Nevertheless, MedMen, on January 2, 2022, gave notice to the Company that MedMen purported to terminate the Investment Agreement.
Following receipt of such notice, on January 13, 2022, the Company filed a complaint against MedMen and others in the Commercial Division of the Supreme Court of the State of New York (the “Court”), requesting specific performance that the transactions contemplated by the Investment Agreement must move forward, and such other relief as the Court may deem appropriate. Ascend Wellness Holdings, Inc. simultaneously moved for a temporary restraining order and preliminary injunction (the “Motion”) requiring MedMen to operate its New York business in the ordinary course of business and to refrain from any activities or transactions that might impair, encumber, or dissipate MedMen’s New York assets. The parties resolved the Motion via a “Stipulation and Order” entered by the Court on January 21, 2022 that requires that MMNY operate only in compliance with the law and in a manner consistent with its ordinary course of business that preserves all assets of MMNY. It further requires MMNY to not take certain actions
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
York business in the ordinary course of business and to refrain from any activities or transactions that might impair, encumber, or dissipate MedMen’s New York assets. The parties resolved the Motion via a “Stipulation and Order” entered by the Court on January 21, 2022 that requires that MMNY operate only in compliance with the law and in a manner consistent with its ordinary course of business that preserves all assets of MMNY. It further requires MMNY to not take certain actions, including any actions that would have a material adverse effect on MedMen’s NY business. On March 27, 2023, the parties entered a further stipulation that would modify the January 21, 2022 Stipulation and Order, but that modification has not been approved by the Court. Accordingly, the Stipulation and Order remains in place until trial. The Stipulation and Order also set an initial schedule for the litigation.
On January 24, 2022, MedMen filed counterclaims against the Company, alleging that Ascend had breached the Investment Agreement, and seeking declaratory relief that MedMen had properly terminated the Investment Agreement. On February 14, 2022, the Company moved to dismiss MedMen’s counterclaims and filed an
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
been approved by the Court. Accordingly, the Stipulation and Order remains in place until trial. The Stipulation and Order also set an initial schedule for the litigation.
On January 24, 2022, MedMen filed counterclaims against the Company, alleging that Ascend had breached the Investment Agreement, and seeking declaratory relief that MedMen had properly terminated the Investment Agreement. On February 14, 2022, the Company moved to dismiss MedMen’s counterclaims and filed an amended complaint (the “First Amended Complaint”) that included additional claims against MedMen for breach of contract. The First Amended Complaint contained several causes of action, including for breach of contract and breach of the covenant of good faith and fair dealing. The First Amended Complaint sought damages in addition to continuing to seek injunctive and declaratory relief. On March 7, 2022, MedMen filed amended counterclaims, an answer, and affirmative defenses to the First Amended Counterclaim. On March 28, 2022, the Company moved to dismiss MedMen’s amended counterclaims. On April 20, 2022, the parties entered into a stipulation extending the time for MedMen to oppose the Company’s motion to dismiss until May 5
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ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
damages in addition to continuing to seek injunctive and declaratory relief. On March 7, 2022, MedMen filed amended counterclaims, an answer, and affirmative defenses to the First Amended Counterclaim. On March 28, 2022, the Company moved to dismiss MedMen’s amended counterclaims. On April 20, 2022, the parties entered into a stipulation extending the time for MedMen to oppose the Company’s motion to dismiss until May 5, 2022. In addition, the parties agreed to stay all discovery, including both party and non-party discovery. On May 5, 2022, the parties filed another stipulation order with the Court adjourning until further notice from the Court MedMen’s time to oppose the Company’s motion to dismiss MedMen’s amended counterclaims. The parties again stipulated that all discovery remains stayed pending further order from the Court.
On May 10, 2022, the Company and MedMen signed a term sheet (the “Term Sheet”), pursuant to which the parties agreed to use best efforts to enter into a settlement agreement and enter into new or amended transactional documents. Specifically, if consummated, the agreements contemplated by the Term Sheet would entail, among
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
to oppose the Company’s motion to dismiss MedMen’s amended counterclaims. The parties again stipulated that all discovery remains stayed pending further order from the Court.
On May 10, 2022, the Company and MedMen signed a term sheet (the “Term Sheet”), pursuant to which the parties agreed to use best efforts to enter into a settlement agreement and enter into new or amended transactional documents. Specifically, if consummated, the agreements contemplated by the Term Sheet would entail, among other things, the Company paying MedMen $15,000 in additional transaction consideration, and MedMen withdrawing its counterclaims against the Company. Per the amended transaction terms contemplated in the Term Sheet, upon closing, the Company would receive a 99.99% controlling interest in MMNY and the Company would pay MedMen $74,000, which reflected the original transaction consideration plus an additional $11,000 per the parties’ term sheet, less a $4,000 deposit that the Company already paid.
44
The amended transaction terms contemplated in the Term Sheet also would have required MedMen to provide a representation and warranty that the status of the MMNY assets has not materially changed since December 31, 2021 and an acknowledgement that the representations and warranties from the Investment
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ticker:AAWH
name:Ascend Wellness Holdings, Inc.
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filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
NY and the Company would pay MedMen $74,000, which reflected the original transaction consideration plus an additional $11,000 per the parties’ term sheet, less a $4,000 deposit that the Company already paid.
44
The amended transaction terms contemplated in the Term Sheet also would have required MedMen to provide a representation and warranty that the status of the MMNY assets has not materially changed since December 31, 2021 and an acknowledgement that the representations and warranties from the Investment Agreement will survive for three months after the closing of the contemplated transactions. After the Company determined that MedMen cannot make or provide the representations and warranties MedMen would have been required to make as part of the contemplated transactions, the Company determined that it no longer intends to consummate the contemplated transactions.
On September 30, 2022, the Company sought leave from the Court to file a second amended complaint (the “Second Amended Complaint”). The Second Amended Complaint contains breach of contract claims against MedMen, as well as a claim for the breach of the implied covenant of good faith and fair dealing, and a claim for anticipatory breach of contract. In connection with those claims, the Company is no longer seeking injunctive or declaratory relief; however, the Company
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
contemplated transactions.
On September 30, 2022, the Company sought leave from the Court to file a second amended complaint (the “Second Amended Complaint”). The Second Amended Complaint contains breach of contract claims against MedMen, as well as a claim for the breach of the implied covenant of good faith and fair dealing, and a claim for anticipatory breach of contract. In connection with those claims, the Company is no longer seeking injunctive or declaratory relief; however, the Company continues to seek damages from MedMen, including, but not limited to, the return of the $4,000 deposit, approximately $2,400 of advances pursuant to a working capital loan agreement (as described in Note 6, “Notes Receivable”) and other capital expenditure advances paid to MMNY by the Company.
On November 21, 2022, the parties entered into a stipulation whereby MedMen agreed to the filing of the Second Amended Complaint, which is now the operative pleading in the litigation. In addition, in the stipulation, the Company agreed that it would not contest MedMen’s filing of second amended counterclaims against the Company while reserving all rights with respect to any such counterclaims, including the right to move to dismiss any amended counter
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ticker:AAWH
name:Ascend Wellness Holdings, Inc.
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filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
advances paid to MMNY by the Company.
On November 21, 2022, the parties entered into a stipulation whereby MedMen agreed to the filing of the Second Amended Complaint, which is now the operative pleading in the litigation. In addition, in the stipulation, the Company agreed that it would not contest MedMen’s filing of second amended counterclaims against the Company while reserving all rights with respect to any such counterclaims, including the right to move to dismiss any amended counterclaims. Because the parties agreed to the filing of each side’s amended pleadings, on November 28, 2022, the Court determined that Ascend’s March 2022 motion to dismiss was moot.
On December 21, 2022, MedMen filed amended counterclaims, an answer, and affirmative defenses to the Company’s Second Amended Complaint. In addition to the allegations in MedMen’s earlier pleadings, MedMen now also alleges that the Company breached the Term Sheet. On January 20, 2023, the Company moved to dismiss MedMen’s amended counterclaims. The briefing on the Company’s motion to dismiss was completed as of March 3, 2023. The parties are awaiting a decision from the Court on the motion to dismiss
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ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
counterclaims, an answer, and affirmative defenses to the Company’s Second Amended Complaint. In addition to the allegations in MedMen’s earlier pleadings, MedMen now also alleges that the Company breached the Term Sheet. On January 20, 2023, the Company moved to dismiss MedMen’s amended counterclaims. The briefing on the Company’s motion to dismiss was completed as of March 3, 2023. The parties are awaiting a decision from the Court on the motion to dismiss.
Following the Company’s decision to no longer consummate the contemplated transactions, during the third quarter of 2022, the Company expensed a total of $1,704 of capitalized costs, primarily consisting of capital expenditures or deposits that were incurred for certain locations. Additionally, during the fourth quarter of 2022, the Company established an estimated reserve of $3,700 related to the remaining amounts that it is actively pursuing collecting. Ascend Wellness Holdings, Inc. determined that the estimated reserve remained adequate as of March 31, 2023 and is included within “Other current assets” on the unaudited Condensed Consolidated Balance Sheets in the Financial Statements at March 31, 2023 and December 31, 2022.
45
CRITICAL ACCOUNTING POLICIES AND
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name:Ascend Wellness Holdings, Inc.
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filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
the fourth quarter of 2022, the Company established an estimated reserve of $3,700 related to the remaining amounts that it is actively pursuing collecting. Ascend Wellness Holdings, Inc. determined that the estimated reserve remained adequate as of March 31, 2023 and is included within “Other current assets” on the unaudited Condensed Consolidated Balance Sheets in the Financial Statements at March 31, 2023 and December 31, 2022.
45
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our accompanying Financial Statements are prepared in accordance with GAAP, which requires us to make certain estimates in the application of our accounting policies based on the best assumptions, judgments, and opinions of our management. Ascend Wellness Holdings, Inc.’s significant accounting policies are described in Note 2, “Basis of Presentation and Significant Accounting Policies,” in the Financial Statements. For a description of our critical accounting policies, see Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report. There have been no significant changes to our critical accounting policies and estimates, except as disclosed in Note 2, “Basis of Presentation and Significant Accounting Policies,” to the Financial Statements.
Recently Adopted Accounting Standards and Recently Issued Accounting Pronouncements
For
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ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
, “Basis of Presentation and Significant Accounting Policies,” in the Financial Statements. For a description of our critical accounting policies, see Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report. There have been no significant changes to our critical accounting policies and estimates, except as disclosed in Note 2, “Basis of Presentation and Significant Accounting Policies,” to the Financial Statements.
Recently Adopted Accounting Standards and Recently Issued Accounting Pronouncements
For information about our recently adopted accounting standards and recently issued accounting standards not yet adopted, see Note 2, “Basis of Presentation and Significant Accounting Policies,” to the Financial Statements.
Ascend Wellness Holdings, Inc. is an emerging growth company under federal securities laws and as such we are able to elect to follow scaled disclosure requirements for this filing, including an extended transition period for complying with new or revised accounting standards applicable to public companies.
REGULATORY ENVIRONMENT: ISSUERS WITH UNITED STATES CANNABIS-RELATED ASSETS
In accordance with the Canadian Securities Administration Staff Notice 51-352, information regarding the current federal and state-level United States regulatory regimes in those jurisdictions where we are currently directly and indirectly involved in the cannabis industry, through our subsidiaries and investments, is incorporated by reference from
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ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
follow scaled disclosure requirements for this filing, including an extended transition period for complying with new or revised accounting standards applicable to public companies.
REGULATORY ENVIRONMENT: ISSUERS WITH UNITED STATES CANNABIS-RELATED ASSETS
In accordance with the Canadian Securities Administration Staff Notice 51-352, information regarding the current federal and state-level United States regulatory regimes in those jurisdictions where we are currently directly and indirectly involved in the cannabis industry, through our subsidiaries and investments, is incorporated by reference from subsections “Overview of Government Regulation,” “Compliance with Applicable State Laws in the United States,” and “State Regulation of Cannabis,” under Item 1., “Business,” of the Company’s Annual Report, as filed with the Securities and Exchange Commission and with the relevant Canadian securities regulatory authorities under its profile on SEDAR.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are exposed in varying degrees to various market risks, including changes in interest rates, prices of raw materials, and other financial instrument related risks. There have been no material changes in our market risks from those disclosed in Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in our Annual Report on Form 10
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name:Ascend Wellness Holdings, Inc.
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filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
securities regulatory authorities under its profile on SEDAR.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are exposed in varying degrees to various market risks, including changes in interest rates, prices of raw materials, and other financial instrument related risks. There have been no material changes in our market risks from those disclosed in Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in our Annual Report on Form 10-K for the year ended December 31, 2022.
Liquidity Risk
Liquidity risk is the risk that we will not be able to meet our financial obligations associated with financial liabilities. We manage liquidity risk through the effective management of our capital structure. Our approach to managing liquidity is to ensure that we will have sufficient liquidity at all times to settle obligations and liabilities when due.
As reflected in the Financial Statements, the Company had an accumulated deficit as of March 31, 2023 and December 31, 2022, as well as a net loss for the three months ended March 31, 2023 and 2022, which are indicators that raise substantial doubt of our ability to continue as a going concern. Management believes that substantial doubt of
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ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
to managing liquidity is to ensure that we will have sufficient liquidity at all times to settle obligations and liabilities when due.
As reflected in the Financial Statements, the Company had an accumulated deficit as of March 31, 2023 and December 31, 2022, as well as a net loss for the three months ended March 31, 2023 and 2022, which are indicators that raise substantial doubt of our ability to continue as a going concern. Management believes that substantial doubt of our ability to continue as a going concern for at least one year from the issuance of our Financial Statements has been alleviated due to: (i) cash on hand and (ii) continued growth of sales from our consolidated operations. Management plans to continue to access capital markets for additional funding through debt and/or equity financings to supplement future cash needs, as may be required. However, management cannot provide any assurances that we will be successful in accomplishing our business plans. If we are unable to raise additional capital on favorable terms, if at all, whenever necessary, we may be forced to decelerate or curtail certain of our operations until such time as additional capital becomes available.
46
ITEM 4. CONTROLS AND PROCEDURES.
a.
Disclosure Controls and Procedures
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name:Ascend Wellness Holdings, Inc.
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filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
funding through debt and/or equity financings to supplement future cash needs, as may be required. However, management cannot provide any assurances that we will be successful in accomplishing our business plans. If we are unable to raise additional capital on favorable terms, if at all, whenever necessary, we may be forced to decelerate or curtail certain of our operations until such time as additional capital becomes available.
46
ITEM 4. CONTROLS AND PROCEDURES.
a.
Disclosure Controls and Procedures.
As of the end of the period covered by this report, our Principal Executive Officers and Principal Financial Officer evaluated our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon that evaluation, our Principal Executive Officers and Principal Financial Officer concluded that as of the end of the period covered by this report, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act is (1) recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the United States Securities and Exchange Commission and (2)
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filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
1934, as amended (the “Exchange Act”). Based upon that evaluation, our Principal Executive Officers and Principal Financial Officer concluded that as of the end of the period covered by this report, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act is (1) recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the United States Securities and Exchange Commission and (2) accumulated and communicated to our management, including our Principal Executive Officers and Principal Financial Officer, to allow timely decisions regarding required disclosure.
b.
Changes in Internal Control Over Financial Reporting.
There have been no changes in our internal control over financial reporting identified in connection with the evaluation described above that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
A discussion of our litigation matters occurring in the period covered by this report is found in
Note 15
, “Commitments and Contingencies,” to the Financial Statements in this Form 10-Q.
ITEM 1A. RISK FACTORS.
As of the date of this filing, there have been no material
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name:Ascend Wellness Holdings, Inc.
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
A discussion of our litigation matters occurring in the period covered by this report is found in
Note 15
, “Commitments and Contingencies,” to the Financial Statements in this Form 10-Q.
ITEM 1A. RISK FACTORS.
As of the date of this filing, there have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022, in response to Item 1A., “Risk Factors,” of Part I of the Annual Report.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
There have been no sales of unregistered securities during the quarter ended March 31, 2023, and from the period from April 1, 2023 to the filing date of this report, which have not been previously disclosed in a prior Current Report on Form 8-K.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. MINE SAFETY DIS
cik:1756390
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name:Ascend Wellness Holdings, Inc.
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
There have been no sales of unregistered securities during the quarter ended March 31, 2023, and from the period from April 1, 2023 to the filing date of this report, which have not been previously disclosed in a prior Current Report on Form 8-K.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.
47
ITEM 6. EXHIBITS.
(a) EXHIBIT INDEX
Incorporated by Reference
Exhibit No.
Exhibit Description
Form
File No.
Exhibit
Filing Date
3.1
Certificate of Incorporation
S-1
333-254800
3.4
April 23, 2021
3.2
Bylaws
S-1
333-254800
3.5
April 23, 2021
4.1
Specimen Stock Certificate evidencing the shares of common stock
S-1
333-254800
4.1
April 15, 202
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
Exhibit
Filing Date
3.1
Certificate of Incorporation
S-1
333-254800
3.4
April 23, 2021
3.2
Bylaws
S-1
333-254800
3.5
April 23, 2021
4.1
Specimen Stock Certificate evidencing the shares of common stock
S-1
333-254800
4.1
April 15, 2021
4.2
Form of Registration Rights Agreement
S-1
333-254800
4.2
April 23, 2021
4.3
Form of Warrant Agreement between Ascend Wellness Holdings, Inc. and each of the several lenders, dated June 30, 2022
10-Q
333-254800
4.5
August 15, 2022
10.1†
Amendment to the Ascend Wellness Holdings, Inc. 2021 Stock Incentive Plan
8-K
333-254800
10.1
May 9, 2023
10.2†
Employment Agreement between Ascend Wellness Holdings, Inc. and John Hartmann, dated May 9
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
, dated June 30, 2022
10-Q
333-254800
4.5
August 15, 2022
10.1†
Amendment to the Ascend Wellness Holdings, Inc. 2021 Stock Incentive Plan
8-K
333-254800
10.1
May 9, 2023
10.2†
Employment Agreement between Ascend Wellness Holdings, Inc. and John Hartmann, dated May 9, 2023
8-K
333-254800
10.2
May 9, 2023
10.3†
Amendment No. 1 to the Amended and Restated Employment Agreement between Ascend Wellness Holdings, Inc. and Francis Perullo, dated May 9, 2023
8-K
333-254800
10.3
May 9, 2023
31.1*
Certification of Periodic Report by Interim Co-Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
Certification of Periodic Report by Interim Co-Principal Executive Officer and Principal Financial Officer under Section 302 of the Sarbanes-Ox
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
ullo, dated May 9, 2023
8-K
333-254800
10.3
May 9, 2023
31.1*
Certification of Periodic Report by Interim Co-Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
Certification of Periodic Report by Interim Co-Principal Executive Officer and Principal Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
32‡
Certification of Interim Co-Chief Executive Officers and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH*
Inline XBRL Taxonomy Extension Schema Document
101.CAL*
Inline XBRL Taxonomy Calculation Linkbase Document
101.DEF*
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*
Inline XBRL Taxonomy Label Linkbase Document
101.PRE*
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ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
of 2002.
101.INS*
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH*
Inline XBRL Taxonomy Extension Schema Document
101.CAL*
Inline XBRL Taxonomy Calculation Linkbase Document
101.DEF*
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*
Inline XBRL Taxonomy Label Linkbase Document
101.PRE*
Inline XBRL Presentation Linkbase Document
104*
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
Filed herewith.
† Indicates management contract or compensatory plan, contract or arrangement.
‡ Document has been furnished, is not deemed filed and is not to be incorporated by reference into any of the Company’s filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, irrespective of any general incorporation language contained in any such filing.
48
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
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YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
, is not deemed filed and is not to be incorporated by reference into any of the Company’s filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, irrespective of any general incorporation language contained in any such filing.
48
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Ascend Wellness Holdings, Inc.
May 10, 2023
/s/ Daniel Neville
Daniel NevilleInterim Co-Chief Executive Officer(Interim Co-Principal Executive Officer) andChief Financial Officer (Principal Financial Officer)
May 10, 2023
/s/ Roman Nemchenko
Roman NemchenkoExecutive Vice President, Chief Accounting Officer(Principal Accounting Officer)
49
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
/s/ Roman Nemchenko
Roman NemchenkoExecutive Vice President, Chief Accounting Officer(Principal Accounting Officer)
49
cik:1756390
ticker:AAWH
name:Ascend Wellness Holdings, Inc.
exchange:OTC
filing_type:10-Q
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 15, 2023
ALTISOURCE ASSET MANAGEMENT CORPORATION
(Exact name of Registrant as specified in its charter)
U.S. Virgin Islands
001-36063
66-0783125
(State or other jurisdiction of incorporation or organization)
(Commission File Number)
(I.R.S. Employer Identification No.)
5100 Tamarind Reef
Christiansted, U.S. Virgin Islands 00820
(Address of principal executive offices including zip code)
(704) 275-9113
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:8-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
)
(704) 275-9113
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common stock, par value $0.01 per share
AAMC
NYSE American
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:8-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common stock, par value $0.01 per share
AAMC
NYSE American
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter):
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Item 2.02 Results of Operations and Financial Condition
On May 15, 2023, Altisource Asset Management Corporation (“AAMC”) issued a press release announcing its financial results for the quarter ended March 31, 2023. A copy of the press release is attached hereto as Exhibit
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:8-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Item 2.02 Results of Operations and Financial Condition
On May 15, 2023, Altisource Asset Management Corporation (“AAMC”) issued a press release announcing its financial results for the quarter ended March 31, 2023. A copy of the press release is attached hereto as Exhibit 99.1.
The information in this Item 2.02, including the information in Exhibit 99.1, is furnished solely pursuant to Item 2.02 of this Form 8-K. Consequently, it is not deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section. It may only be incorporated by reference in another filing under the Securities Exchange Act of 1934 or Securities Act of 1933 if such subsequent filing specifically references this Item 2.02 of this Form 8-K.
Item 7.01 Regulation FD Disclosure
On May 15, 2023, at 8:30 a.m. (EDT),
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:8-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section. It may only be incorporated by reference in another filing under the Securities Exchange Act of 1934 or Securities Act of 1933 if such subsequent filing specifically references this Item 2.02 of this Form 8-K.
Item 7.01 Regulation FD Disclosure
On May 15, 2023, at 8:30 a.m. (EDT), the Company will hold a conference call to discuss the results of the first quarter ended March 31, 2023 and the firm's
business plan and outlook
. A copy of the presentation for the conference call is attached as Exhibit 99.2 to this Report on Form 8-K.
Exhibit 99.2 is being furnished pursuant to Item 7.01 of Form 8-K and the information included therein shall not be deemed “filed” for purposes of Section 18 of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of the Company under the U.S. Securities Act of 193
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:8-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
8-K.
Exhibit 99.2 is being furnished pursuant to Item 7.01 of Form 8-K and the information included therein shall not be deemed “filed” for purposes of Section 18 of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of the Company under the U.S. Securities Act of 1933, as amended, or the Exchange Act.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits.
Exhibit No.
Description
99.1
Press Release of Altisource Asset Management Corporation, dated May 15, 2023.
99.2
Investor Presentation of Altisource Asset Management Corporation, May 15, 2023.
104
Cover Page Interactive Data File (embedded within the Inline XBRL document).
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Altisource
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:8-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
3.
99.2
Investor Presentation of Altisource Asset Management Corporation, May 15, 2023.
104
Cover Page Interactive Data File (embedded within the Inline XBRL document).
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Altisource Asset Management Corporation
May 15, 2023
By:
/s/
Stephen Ramiro Krallman
Stephen Ramiro Krallman
Chief Financial Officer
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:8-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 001-36063
Altisource Asset Management Corporation
(Exact name of registrant as specified in its charter)
U.S. Virgin Islands
66-0783125
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
5100 Tamarind Reef
Christiansted, U.S. Virgin Islands 00820
(Address of principal executive office)
(704) 275-9113
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol(s)
Name of Exchange on which Registered
Common stock, par value $0.01 per share
AAMC
NYSE American
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
No.)
5100 Tamarind Reef
Christiansted, U.S. Virgin Islands 00820
(Address of principal executive office)
(704) 275-9113
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol(s)
Name of Exchange on which Registered
Common stock, par value $0.01 per share
AAMC
NYSE American
Securities registered pursuant to Section 12(g) of the Act:
None.
Indicate by check if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
No
Indicate by check if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
required to submit such files). Yes
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
Accelerated Filer
Non-Accelerated Filer
Smaller Reporting Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
No
The aggregate market value of common stock held by non-affiliates of the registrant was $10.5 million, based on the closing share price as reported on the New York Stock Exchange on June 30, 2022 and the assumption that all Directors and executive officers of the registrant and their families and beneficial holders of 10% of the registrant's common stock are affiliates. This determination of affiliate status is not necessarily a conclusive determination for any other purpose.
As of March 17, 2023, 1,760,827 shares of our common stock were outstanding (excluding 1,671,467 shares held as treasury stock).
Portions of the Registr
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
Exchange on June 30, 2022 and the assumption that all Directors and executive officers of the registrant and their families and beneficial holders of 10% of the registrant's common stock are affiliates. This determination of affiliate status is not necessarily a conclusive determination for any other purpose.
As of March 17, 2023, 1,760,827 shares of our common stock were outstanding (excluding 1,671,467 shares held as treasury stock).
Portions of the Registrant's definitive proxy statement relating to its 2023 annual meeting of shareholders (the “2023 Proxy Statement”) are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. The Registrant intends to file the 2023 Proxy Statement with the U.S. Securities and Exchange Commission not later than 120 days after the end of the fiscal year to which this report relates.
Altisource Asset Management Corporation
December 31, 2022
Table of Contents
Part I
Item 1. Business.
Item 1A. Risk Factors.
Item 1B. Unresolved Staff Comments.
16
Item 2. Properties.
16
Item 3. Legal Proceedings.
16
Item 4. Mine Safety Disclosures.
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
U.S. Securities and Exchange Commission not later than 120 days after the end of the fiscal year to which this report relates.
Altisource Asset Management Corporation
December 31, 2022
Table of Contents
Part I
Item 1. Business.
Item 1A. Risk Factors.
Item 1B. Unresolved Staff Comments.
16
Item 2. Properties.
16
Item 3. Legal Proceedings.
16
Item 4. Mine Safety Disclosures.
16
Part II
17
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
17
Item 6. Reserved.
17
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
18
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
24
Item 8. Consolidated Financial Statements and Supplementary Data.
24
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
24
Item 9A. Controls and Procedures.
25
Item 9B. Other Information.
26
Part III
27
Item 10. Directors, Executive Officers and Corporate Governance.
27
Item
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
of Operations.
18
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
24
Item 8. Consolidated Financial Statements and Supplementary Data.
24
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
24
Item 9A. Controls and Procedures.
25
Item 9B. Other Information.
26
Part III
27
Item 10. Directors, Executive Officers and Corporate Governance.
27
Item 11. Executive Compensation.
27
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
27
Item 13. Certain Relationships and Related Transactions, and Director Independence.
27
Item 14. Principal Accountant Fees and Services.
27
Part IV
28
Item 15. Exhibits.
28
Signatures
30
(table of contents)
References in this report to “we,” “our,” “us,” “AAMC,” or the “Company” refer to Altisource Asset Management Corporation and its consolidated subsidiaries, unless otherwise indicated. References in this report to “Front Yard” refer to Front Yard Residential Corporation and its consolidated subsidiaries, unless otherwise indicated.
Special note on forward-looking statements
Our disclosure and analysis
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
Part IV
28
Item 15. Exhibits.
28
Signatures
30
(table of contents)
References in this report to “we,” “our,” “us,” “AAMC,” or the “Company” refer to Altisource Asset Management Corporation and its consolidated subsidiaries, unless otherwise indicated. References in this report to “Front Yard” refer to Front Yard Residential Corporation and its consolidated subsidiaries, unless otherwise indicated.
Special note on forward-looking statements
Our disclosure and analysis in this Annual Report on Form 10-K contain, and our officers, directors and authorized spokepersons may make, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “targets,” “predicts,” or “potential,” or the negative of these words and phrases or similar words or phrases that are predictions
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “targets,” “predicts,” or “potential,” or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and that do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions.
The forward-looking statements contained in this report reflect our current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause our actual business, operations, results or financial condition to differ significantly from those expressed in any forward-looking statement. Factors that may materially affect such forward-looking statements include, but are not limited to:
Our ability to develop and implement new businesses or, to the extent such businesses are developed, our ability to make them successful or sustain the performance of any such businesses;
Developments in the litigation regarding our redemption obligations under the Certificate of Designations of
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
risks, uncertainties, assumptions and changes in circumstances that may cause our actual business, operations, results or financial condition to differ significantly from those expressed in any forward-looking statement. Factors that may materially affect such forward-looking statements include, but are not limited to:
Our ability to develop and implement new businesses or, to the extent such businesses are developed, our ability to make them successful or sustain the performance of any such businesses;
Developments in the litigation regarding our redemption obligations under the Certificate of Designations of our Series A Convertible Preferred Stock (the “Series A Shares”), including our ability to obtain declaratory relief confirming that we were not obligated to redeem any of the Series A Shares on the March 15, 2020 redemption date if we do not have funds legally available to redeem all, but not less than all, of the Series A Shares requested to be redeemed on that redemption date;
Altisource Asset Management Corp has no direct exposure to the recently failed banks due to the recent financial conditions of the banking system. If other banks or financial institutions enter receivership or become insolvent in the future, our ability, and the ability of our customers, clients and vendors, to access capital, may be threatened and could have a material adverse effect on our business and financial condition;
Current inflationary
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
redeem all, but not less than all, of the Series A Shares requested to be redeemed on that redemption date;
Altisource Asset Management Corp has no direct exposure to the recently failed banks due to the recent financial conditions of the banking system. If other banks or financial institutions enter receivership or become insolvent in the future, our ability, and the ability of our customers, clients and vendors, to access capital, may be threatened and could have a material adverse effect on our business and financial condition;
Current inflationary economic and market conditions, including the current rising interest rate environment and development in the credit market;
Access to existing and new debt capital to continue to fund our origination and acquisition platforms;
The ability of the Company to execute on its Action Plan (“The Plan”) submitted to the NYSE American, LLC (“NYSE”) to allow the company to maintain its listing status on the NYSE; and
The failure of our information technology systems, a breach thereto, and our ability to integrate and improve those systems at a pace fast enough to keep up with competitors and security threats.
While forward-looking statements reflect our good faith beliefs, assumptions and expectations, they are not guarantees of future performance. Such forward-looking statements speak only as of their respective dates, and we assume no obligation to update
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
SE American, LLC (“NYSE”) to allow the company to maintain its listing status on the NYSE; and
The failure of our information technology systems, a breach thereto, and our ability to integrate and improve those systems at a pace fast enough to keep up with competitors and security threats.
While forward-looking statements reflect our good faith beliefs, assumptions and expectations, they are not guarantees of future performance. Such forward-looking statements speak only as of their respective dates, and we assume no obligation to update them to reflect changes in underlying assumptions, new information or otherwise. For a further discussion of these and other factors that could cause our future results to differ materially from any forward-looking statements contained herein, please refer to the section “
Item 1A. Risk Factors
.”
ii
(table of contents)
Part I
Item 1. Business
Our Business
Altisource Asset Management Corporation (“we,” “our,” “us,” “AAMC,” or the “Company”) was incorporated in the U. S. Virgin Islands (“USVI”) on March 15, 2012 (our “inception”), and commenced operations as an asset manager on December 21, 2012. As disclosed in our public filings, the Company's prior business operations ceased
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
(table of contents)
Part I
Item 1. Business
Our Business
Altisource Asset Management Corporation (“we,” “our,” “us,” “AAMC,” or the “Company”) was incorporated in the U. S. Virgin Islands (“USVI”) on March 15, 2012 (our “inception”), and commenced operations as an asset manager on December 21, 2012. As disclosed in our public filings, the Company's prior business operations ceased in the first week of 2021. Altisource Asset Management Corp previously operated as the external manager for Front Yard Residential Corporation (“Front Yard”), a public real estate investment trust (“REIT”) focused on acquiring and managing quality, affordable single-family rental (“SFR”) properties throughout the United States.
During 2021, AAMC engaged in a comprehensive assessment to either internally develop a new business operation or acquire a separate operating company. A range of industries were analyzed, including, but not limited to, real estate lending, cryptocurrency, block-chain technology and insurance operations. Outside professional firms, including among others, Cowen and Company, LLC, an investment bank, and Norton Rose Fulbright LLP, a global law practice, were engaged to provide due diligence, legal and valuation
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
States.
During 2021, AAMC engaged in a comprehensive assessment to either internally develop a new business operation or acquire a separate operating company. A range of industries were analyzed, including, but not limited to, real estate lending, cryptocurrency, block-chain technology and insurance operations. Outside professional firms, including among others, Cowen and Company, LLC, an investment bank, and Norton Rose Fulbright LLP, a global law practice, were engaged to provide due diligence, legal and valuation expertise to assist in our search.
As of March 2022, the Company created the Alternative Lending Group (“ALG”), to generate alternative private credit loans through Direct to Borrower Lending, Wholesale Originations, and Correspondent Loan Acquisitions. The initial operations of ALG entail the following:
Build out a niche origination platform as well as a loan acquisition team;
Fund the originated or acquired alternative loans from a combination of Company equity and existing or future lines of credit;
Sell the originated and acquired alternative loans through forward commitment and repurchase contracts;
Leverage senior management’s expertise in this space; and
Utilize AAMC’s existing operations in India to drive controls and cost efficiencies.
ALG's primary sources of income is derived from mortgage banking activities
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
ALG entail the following:
Build out a niche origination platform as well as a loan acquisition team;
Fund the originated or acquired alternative loans from a combination of Company equity and existing or future lines of credit;
Sell the originated and acquired alternative loans through forward commitment and repurchase contracts;
Leverage senior management’s expertise in this space; and
Utilize AAMC’s existing operations in India to drive controls and cost efficiencies.
ALG's primary sources of income is derived from mortgage banking activities generated through the origination and acquisition of loans, and their subsequent sale or securitization as well as net interest income from loans while held on the balance sheet for investment.
In addition, the Company has determined to focus operations solely on ALG for the foreseeable future. Based on current market conditions in the cryptocurrency industry, the Company does not believe the timing is right to deploy resources to the cryptocurrency ATM business until the cryptocurrency market has reached some type of stabilization.
Environmental, Social and Governance
As AAMC is initiating new operations, its management team will assess its strategic and operational approach to environmental, social, and governance (“ESG”) matters in 2023 and execute on specific ESG initiatives, accordingly. AAMC’s corporate goal of investing in underserved
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
Based on current market conditions in the cryptocurrency industry, the Company does not believe the timing is right to deploy resources to the cryptocurrency ATM business until the cryptocurrency market has reached some type of stabilization.
Environmental, Social and Governance
As AAMC is initiating new operations, its management team will assess its strategic and operational approach to environmental, social, and governance (“ESG”) matters in 2023 and execute on specific ESG initiatives, accordingly. AAMC’s corporate goal of investing in underserved markets is integrated with, and linked to, our approach to ESG matters at AAMC.
Human Capital Resources
As of December 31, 2022, AAMC employed 55 full-time employees, with plans to increase our headcount through the creation of alternative loan origination, loan operations, and acquisition teams. At this time, our employees are primarily based in the United States Virgin Islands, Florida and India. The retention of our employees and the ability to attract new employees are core to the sustainability and long-term success of AAMC, and we will invest in programs that attract, retain, develop, and care for our people. Cultural priorities and values are closely intertwined with our overarching business strategy, and we believe these priorities support AAMC’s ability
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
loan origination, loan operations, and acquisition teams. At this time, our employees are primarily based in the United States Virgin Islands, Florida and India. The retention of our employees and the ability to attract new employees are core to the sustainability and long-term success of AAMC, and we will invest in programs that attract, retain, develop, and care for our people. Cultural priorities and values are closely intertwined with our overarching business strategy, and we believe these priorities support AAMC’s ability to fulfill our mission and contribute to our ongoing focus on having a strong, healthy culture and a capable and satisfied workforce.
Diversity, Equity, Inclusion, and Belonging
(table of contents)
Altisource Asset Management Corp believes in developing an atmosphere that fosters diversity, equity, inclusion, and belonging (“DEIB”).
This mandate starts from the top with the independent members of our Board of Directors all being persons of color. Our DEIB work is focused on 1) developing and executing programs and processes that increase the representation of female and racially diverse employees at all levels within the organization; and 2) investing in programs, training, and mentorship that contribute to an inclusive and equitable work environment for all our employees. Through our origination activities, we believe that we will
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
, and belonging (“DEIB”).
This mandate starts from the top with the independent members of our Board of Directors all being persons of color. Our DEIB work is focused on 1) developing and executing programs and processes that increase the representation of female and racially diverse employees at all levels within the organization; and 2) investing in programs, training, and mentorship that contribute to an inclusive and equitable work environment for all our employees. Through our origination activities, we believe that we will have the opportunity to provide liquidity and capital through our assessment of underserved markets.
Competition
We are subject to intense competition in acquiring, originating, and selling loans, the potential for initiating securitization transactions, and in other aspects of our business. Dependent upon the loan product niche as we expand, our potential competitors may include in varying degrees, commercial banks, mortgage REITs, regional and community banks, other specialty finance companies, financial institutions, as well as investment funds and other investors in real estate-related assets. In addition, other companies may be formed that will compete with us. Some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more favorable relationships than we can.
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
loan product niche as we expand, our potential competitors may include in varying degrees, commercial banks, mortgage REITs, regional and community banks, other specialty finance companies, financial institutions, as well as investment funds and other investors in real estate-related assets. In addition, other companies may be formed that will compete with us. Some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more favorable relationships than we can. Some of our competitors have greater resources than us, and we may not be able to compete successfully with them.
Federal and State Regulatory and Legislative Developments
Our new business will be affected by conditions in the housing, business-purpose, multifamily, and real estate markets and the broader financial markets, as well as by the financial condition and resources of other participants in these markets. These markets and many of the participants in these markets are subject to, or regulated under, various federal and state laws and regulations. In some cases, the government or government-sponsored entities, such as Fannie Mae and Freddie Mac, directly participate in these markets. In particular, because issues relating to residential real estate and housing finance can be areas of political focus, federal, state and local governments may be more
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
financial markets, as well as by the financial condition and resources of other participants in these markets. These markets and many of the participants in these markets are subject to, or regulated under, various federal and state laws and regulations. In some cases, the government or government-sponsored entities, such as Fannie Mae and Freddie Mac, directly participate in these markets. In particular, because issues relating to residential real estate and housing finance can be areas of political focus, federal, state and local governments may be more likely to take actions that affect residential real estate, the markets for financing residential real estate, and the participants in residential real estate-related industries than they would with respect to other industries. As a result of the government’s statutory and regulatory oversight of the markets we participate in and the government’s direct and indirect participation in these markets, federal and state governmental actions, policies, and directives can have an adverse effect on these markets and on our business and the value of, and the returns on, mortgages, mortgage-related securities, and other assets we own or may acquire in the future, which effects may be material. For additional discussion regarding federal and state legislative and regulatory developments, see the risk factor below under the heading “
Federal and state legislative and regulatory developments and the actions of governmental authorities
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
YOU are a financial analyst. You are reading a report of a company.
The report is about the company's financial status.
’s direct and indirect participation in these markets, federal and state governmental actions, policies, and directives can have an adverse effect on these markets and on our business and the value of, and the returns on, mortgages, mortgage-related securities, and other assets we own or may acquire in the future, which effects may be material. For additional discussion regarding federal and state legislative and regulatory developments, see the risk factor below under the heading “
Federal and state legislative and regulatory developments and the actions of governmental authorities and entities may adversely affect our business and the value of, and the returns on, mortgages, mortgage-related securities, and other assets we own or may acquire in the future"
in
Part I, Item 1A
of this Annual Report on Form 10-K.
Information Available on Our Website
Our website can be found at www.altisourceamc.com. We make available, free of charge through the investor information section of our website, access to our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the U.S. Securities Exchange Act of 1934, as well as proxy statements
cik:1555074
ticker:AAMC
name:Altisource Asset Management Corp
exchange:NYSE
filing_type:10-K
|
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