EX-99.1

EX-99.1 2 d136171dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

LOGO

Skylight Health Group Inc.

(formerly CB2 Insights Inc.)

Condensed Interim Consolidated Financial Statements

June 30, 2021

(Expressed in thousands of Canadian Dollars)

(Unaudited)

SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.)

Condensed Interim Consolidated Statements of Financial Position

(Expressed in thousands of Canadian Dollars)

(Unaudited)


		June 30, 2021		December 31, 2020
		$		$
ASSETS
Current assets
Cash			11,806		20,052
Inventories			30		31
Trade and other receivables	Note 7		5,800		529
Prepaid expenses			1,378		749
Total current assets			19,014		21,361
Non-current
Property, plant and equipment	Note 8		640		88
Right-of-use assets	Note 9		14,638		1,325
Other Intangible assets	Note 10		18,989		6,474
Goodwill	Note 10		9,749		2,224
Total assets			63,030		31,472

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued liabilities	Note 11		5,297		1,124
Loan payable	Note 12		969		446
Purchase consideration payable	Note 6		3,930		526
Lease liabilities	Note 9		1,671		619
Total current liabilities			11,867		2,715
Non-current
Loan payable	Note 12		—		316
Purchase consideration payable	Note 6		1,158		—
Lease liabilities	Note 9		12,455		804
Total liabilities			25,480		3,835

SHAREHOLDERS’ EQUITY
Share capital	Note 13		59,273		43,454
Warrant reserve	Note 13		1,806		2,539
Option reserve	Note 13		5,570		4,349
Share and units to be issued			—		5
Accumulated other comprehensive income			458		450
Accumulated deficit			(29,557)		(23,160)
Total shareholders’ equity			37,550		27,637
Total liabilities and shareholders’ equity			63,030		31,472

The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.

Subsequent events (Note 17)

SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.)

Condensed Interim Consolidated Statements of Loss and Comprehensive Loss

(Expressed in thousands of Canadian Dollars, except per share amounts)

(Unaudited)


		Three months ended				Six months ended
		June 30,				June 30,
		2021		2020		2021		2020
		$		$		$		$

Revenues
Clinic			10,473		3,633		15,584		6,524
Contract research solutions			35		49		91		75
Software			6		19		12		33
			10,514		3,701		15,687		6,632
Cost of sales			3,770		1,088		5,390		2,118
Gross profit			6,744		2,613		10,297		4,514

Operating Expenses
Salaries and wages			4,663		1,115		6,959		2,506
Office and administration			1,722		422		2,291		799
Marketing and business development			645		49		1,548		106
Professional fees			1,379		265		2,008		491
Rent			105		31		131		97
Share-based compensation			361		124		1,410		284
Depreciation and amortization			1,365		627		2,116		1,241
Total operating expenses			10,240		2,633		16,463		5,524

Loss from operations			(3,496)		(20)		(6,166)		(1,010)

Finance expenses
Foreign exchange loss			430		229		699		(435)
Change in fair value of financial liabilities			(26)		769		(63)		1,224
Net gain on debt settlement			—		(295)		—		(295)
Accretion on purchase consideration payable	Note 5, 6 & 12		69		—		133		—
Interest on lease liabilities	Note 9		243		45		360		93
Other income	Note 12		—		—		(870)		—
Net loss			(4,212)		(768)		(6,425)		(1,597)
Other comprehensive loss
Exchange difference on translation of foreign operations, net of tax			56		12		8		(213)
Net loss and comprehensive loss			(4,156)		(756)		(6,417)		(1,810)

Basic and diluted net loss per common share			(0.114)		(0.040)		(0.178)		(0.086)
Weighted average number of common shares outstanding- basic and diluted (in 000s)			36,887		19,185		36,166		18,655

The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.

SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.)

Condensed Interim Consolidated Statements of Cash Flows

(Expressed in thousands of Canadian Dollars)

(Unaudited)


	Six months ended
	June 30,
	2021		2020
	$		$
Operating activities
Net loss		(6,425)		(1,597)

*Adjustments for items not affecting cash:*
Depreciation and amortization		2,116		1,241
Unrealised foreign exchange loss (gain)		558		(445)
Accretion on purchase consideration payable and loan payable		133		—
Interest on lease liabilities		360		93
Share-based compensation		1,410		299
Change in fair value of financial liabilities		(63)		1,224
Write-off of bad debt		—		36
Other income related to loan payable		(867)		—
Other income related to gain on disposal of furniture and equipment		(3)		—
Gain on debt settlement		—		(295)
*Changes in non-cash working capital items:*
Inventories		—		5
Trade and other receivables		(2,526)		71
Prepaid expenses		(411)		(5)
Accounts payable and accrued liabilities		1,439		269
Cash provided by (used in) operating activities		(4,279)		896

Investing activities
Purchase of furniture and equipment		(180)		—
Proceeds from disposal of furniture and equipment		4		—
Development of computer software		(146)		(255)
Purchase consideration paid		(17,644)		—
Cash used in investing activities		(17,966)		(255)

Financing activities
Repayment to related parties		—		(5)
Shares issued and to be issued, net of transaction costs		12,703		(6)
Proceeds from exercise of options		173		—
Proceeds from exercise of warrants		1,309		195
Principal payment of lease liabilities		(605)		(440)
Interest paid on lease liabilities		(360)		(93)
Proceeds from loan		969		917
Cash provided by investing activities		14,189		568

Net (decrease) increase in cash during the period		(8,056)		1,209
Effect of foreign exchange on cash		(190)		(46)
Cash and cash equivalents, beginning of period		20,052		130
Cash and cash equivalents, end of period		11,806		1,293

The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.

SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.)

Condensed Interim Consolidated Statement of Changes in Shareholders’ Equity

(Expressed in thousands of Canadian Dollars)

(Unaudited)


	Number of shares (000s)		Share Capital		Warrant Reserve		Option Reserve		Shares and units to be issued		Accumulated other comprehensive income		Deficit		Total
	#		$		$		$		$		$		$		$
Balance, December 31, 2020		35,070		43,454		2,539		4,349		5		450		(23,160)		27,637
Bought deal (Note 13(b))		1,970		13,793		—		—		—		—		—		13,793
Share issuance costs – cash (Note 13(b))		—		(1,090)		—		—		—		—		—		(1,090)
Shares issued on acquisition		126		794		—		—		—		—		—		794
Share-based compensation (Note 13)		—		—		—		1,351		—		—		—		1,351
Exercise of warrants		965		2,045		(733)		—		(3)		—		—		1,309
Exercise of stock options		79		277		—		(102)		(2)		—		—		173
Options expired		—		—		—		(28)		—		—		28		—
Foreign currency translation		—		—		—		—		—		8		—		8
Net loss for the period		—		—		—		—		—		—		(6,425)		(6,425)
Balance, June 30, 2021		38,210		59,273		1,806		5,570		—		458		(29,557)		37,550

The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.

SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.)

Condensed Interim Consolidated Statement of Changes in Shareholders’ Equity

(Expressed in thousands of Canadian Dollars)

(Unaudited)


	Number of shares (000s)		Share Capital		Warrant Reserve		Option Reserve		Shares and units to be issued		Accumulated other comprehensive income		Deficit		Total
	#		$		$		$		$		$		$		$
Balance, December 31, 2019		16,567		12,225		3,357		1,552		335		441		(16,522)		1,388
Share-based compensation		312		150		—		299		—		—		—		449
Shares issued for services		215		108		—		—		—		—		—		108
Share issuance costs - cash		—		(6)		—		—		—		—		—		(6)
Shares issued and to be issued in settlement of accrued interest		488		230		—		—		(22)		—		—		208
Share issued in settlement of contingent consideration		878		554		—		—		—		—		—		554
Shares issued and to be issued against exercise of warrants		918		1,802		(1,389)		—		(218)		—		—		195
Shares issued in lieu of directors’ fees		135		94		—		—		—		—		—		94
Warrants and options expired		—		—		(1,130)		(12)		—		—		1,142		—
Warrants issued for amendment of promissory note		—		—		215		—		—		—		—		215
Foreign currency translation		—		—		—		—		—		(213)		—		(213)
Net loss for the period		—		—		—		—		—		—		(1,597)		(1,597)
Balance, June 30, 2020		19,513		15,157		1,053		1,839		95		228		(16,977)		1,395

The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.

SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2021 and 2020

(Expressed in thousands of Canadian Dollars)

(Unaudited)

1. Nature of operations and Covid-19 pandemic

Skylight Health Group Inc. (“SHG” or the “Company”), formerly CB2 Insights Inc. (“CB2”), is a healthcare services and technology company, working to positively impact patient health outcomes. The Company operates a US multi-state health network that comprises physical multi-disciplinary medical clinics providing a range of services from primary care, sub-specialty, allied health and diagnostic testing. The Company was incorporated on December 27, 2017 under the Canada Business Corporations Act and completed a reverse takeover (“RTO”) on February 27, 2019 (the “Closing Date”) with MVC Technologies Inc. (“MVC”) which was incorporated in the province of Ontario on November 3, 2014 under the Ontario Business Corporation Act (“OBCA”). Pursuant to the special meeting of the shareholders of the Company held on November 23, 2020, the name of the Company was changed from CB2 Insights Inc. to Skylight Health Group Inc. The head office of the Company is located at 5520 Explorer Drive, Unit 402, Mississauga, Ontario, Canada, L4W 5L1.

On January 5, 2021, the Company’s shares commenced trading on the TSX-V under the symbol “SHG” after getting voluntarily delisted from the Canadian Securities Exchange on January 4, 2021. On June 7, 2021, the Company’s shares commenced trading on the Nasdaq Capital Market (“Nasdaq”) under the symbol “SLHG”. In addition, effective June 7, 2021, the Company’s shares on the TSX-V began trading under the new symbol “SLHG”.

On March 11, 2020, the World Health Organization declared the ongoing COVID-19 outbreak as a global health emergency. This resulted in governments worldwide enacting emergency measures to combat the spread of the virus, including the closure of certain non-essential businesses.

During the quarter ended June 30, 2021, the pandemic did not have a material impact on the Company’s operations. While medical clinics had generally been deemed an essential business, the Company was able to switch to virtual appointments thereby reducing the impact on operations and enabled the Company to achieve savings in clinical operating expenses. As at June 30, 2021, the Company did not observe any impairment of its assets or a significant change in the fair value of assets due to the COVID-19 pandemic. The Company has taken steps to minimize the potential impact of the pandemic including safety measures with respect to personal protective equipment, the reduction in travel and the implementation of a virtual office including regular video conference meetings and participation in virtual Company events, trade shows, customer meetings and other virtual events. In addition, as explained in note 12, the Company obtained a loan under the Paycheck Protection Program (PPP) offered by the US Small Business Administration as part of COVID-19 relief measures which was forgiven on March 30, 2021.

Due to the rapid developments and uncertainty surrounding COVID-19, it is not possible to predict the impact that COVID-19 will have on the Company’s business, financial position and operating results in the future. In addition, it is possible that estimates in the Company’s financial statements will change in the near term as a result of COVID-19 and the effect of any such changes could be material, which could result in, among other things, impairment of long-lived assets including intangibles and goodwill. The Company is closely monitoring the impact of the pandemic on all aspects of its business.

2. Basis of presentation

The Company prepares its unaudited condensed interim consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”), applicable to the preparation of interim condensed consolidated financial statements, including International Accounting Standards (IAS) 34, Interim Financial Reporting. These unaudited condensed interim consolidated financial statements are presented in Canadian dollars and should be read in conjunction with the Company’s annual financial statements for the year ended December 31, 2020, which were prepared in accordance with IFRS.

The Board of Directors approved these unaudited condensed interim consolidated financial statements on August 12, 2021. These unaudited condensed interim consolidated financial statements comply with IFRS.

SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2021 and 2020

(Expressed in thousands of Canadian Dollars)

(Unaudited)

The unaudited condensed interim consolidated financial statements were prepared on a going concern basis under the historical cost convention, except for purchase consideration payable (only for acquisitions performed during the year ended December 31, 2019) which are measured at fair value.

3. Summary of significant accounting policies

New accounting standards issued but not yet effective

Certain new accounting standards and interpretations have been published that are not mandatory for the current period and have not been early adopted. These standards are not expected to have a material impact on the Company in the current or future reporting periods except the below amendment:

Amendments to IAS 1 - Presentation of financial statements (“IAS 1”)

In January 2020, the IASB issued Classification of Liabilities as Current or Non-current (Amendments to IAS 1). The amendments aim to promote consistency in applying the requirements by helping companies determine whether debt and other liabilities with an uncertain settlement date should be classified as current (due or potentially due to be settled within one year) or non-current. The amendments include clarifying the classification requirements for debt a Company might settle by converting it into equity. The amendments are effective for annual reporting periods beginning on or after January 1, 2023, with earlier application permitted. The Company is currently evaluating the impact of this amendment.

4.	Share consolidation

On May 28, 2021, the Company completed a consolidation (“Share Consolidation”) of its share capital on the basis of five existing common shares for one new common share. As a result of the Share Consolidation, the 190,802,347 common shares issued and outstanding as at that date were consolidated to 38,160,473 common shares outstanding. The Share Consolidation was previously approved by the shareholders at the Annual General Meeting held on February 22, 2021. All information in these consolidated financial statements is presented on a post-Share Consolidation basis, including comparatives.

5.	Acquisitions

a)	Acquisition of MCM

On October 6, 2020 (the “Closing Date”), the Company acquired 100% of the identified assets of Texas-based primary care services clinic group Maverick County Medical Family Center (“MCM”), P.A.

The aggregate purchase consideration comprised the following:

●

$498 (US$375) cash paid on Closing Date.

●

$498 (US$375) cash due in six months after the Closing Date. The amount was discounted to its present value and initially recorded at $470 (US$354) on the Closing Date using an effective interest rate of 12%.

●

Details of the movements in the purchase consideration payable are as follows:

SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2021 and 2020

(Expressed in thousands of Canadian Dollars)

(Unaudited)


	Three months ended
	June 30, 2021		March 31, 2021
	$		$
Balance, beginning of period		472		465
Addition		—		—
Paid in cash		(471)		—
Accretion		—		13
Foreign exchange translation gain		(1)		(6)
Balance, end of period		—		472

b)	Acquisition of APEX

On January 4, 2021 (the “Closing Date”), the Company acquired 100% of the identified assets of Colorado based primary care services clinic group Apex Family Medicine, LLC (“APEX”). The Company determined that the acquisition was a business combination under IFRS 3 – Business Combinations and was accounted for by applying the acquisition method, whereby the assets acquired and liabilities assumed were recorded at their fair values with any excess of the aggregate consideration over the fair values of the identifiable net assets allocated to goodwill. The goodwill acquired is associated with the APEX’s workforce and is expected to be fully deductible for tax purposes.

The aggregate purchase consideration comprises the following:

●

$1,241 (US$974) cash paid on Closing Date.

●

$1,116 (US$875) cash payable in two instalments over a 6-months period. The amount was discounted to its present value and initially recorded at $1,073 on the Closing Date using an effective interest rate of 11.2%. Subsequently on July 6, 2021, the Company paid the second instalment of $545 (US$438).

●

Details of the movements in the purchase consideration payable are as follows:


	Three months ended
	June 30, 2021		March 31, 2021
	$		$
Balance, beginning of period		1,086		—
Addition		—		2,314
Paid in cash		(548)		(1,241)
Accretion		13		28
Foreign exchange translation gain		(9)		(15)
Balance, end of period		542		1,086

SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2021 and 2020

(Expressed in thousands of Canadian Dollars)

(Unaudited)


The allocated purchase price calculation is as follows:
	$
Consideration - cash		2,314
Lease liabilities		118
Assumed liabilities		37
Total consideration		2,469

Identifiable assets acquired
Customer relationships		1,403
Non-compete		22
Cash		37
Accounts receivable		125
Right of use asset		118
Total identifiable assets acquired		1,705
Total goodwill		764
		2,469

Operating results have been included in these unaudited condensed interim consolidated financial statements from the Closing Date. APEX’s revenue and net income for the period from the date of acquisition to June 30, 2021 included in the unaudited condensed interim consolidated statements of loss and comprehensive loss are $672 and $161 respectively.

c)	Acquisition of RCMA

On February 3, 2021 (the “Closing Date”), the Company acquired 100% of the identified assets of River City Medical Associates (“RCMA”), Inc., a Florida corporation. The Company determined that the acquisition was a business combination under IFRS 3 – Business Combinations and was accounted for by applying the acquisition method, whereby the assets acquired and liabilities assumed were recorded at their fair values with any excess of the aggregate consideration over the fair values of the identifiable net assets allocated to goodwill. The goodwill acquired is associated with the RCMA’s workforce and is expected to be fully deductible for tax purposes.

The aggregate purchase consideration comprises the following:

●

$288 (US$225) cash paid on Closing Date.

●

$139 (US$109) cash payable within 120 days after the Closing Date being the amount withheld from the purchase consideration for liabilities prior to closing date. The amount was discounted to its present value and initially recorded at $137 (US$107) on the Closing Date using an effective interest rate of 10.9%. On April 27, 2021, the Company released $135 from the escrow account (US$109).

●

$2,812 (US$2,200) funds held in an escrow account to be released once the conditions stipulated in the Transition Services Agreement have been complied with within two months after the Closing Date. Subsequently, on April 22, 2021, the Company released $2,750 from the escrow account (US$2,200)

●

74,833 common shares in the Company valued at 10-day VWAP of $6.3925 per share amounting to $478 (US$373) to be issued on Closing Date. The amount was recognized at the fair value of the consideration amounting to $492 (US$385) on the Closing Date.

●

Variable number of common shares in the Company amounting to $1,908 (US$1,493) to be issued in five equal instalments within 15 months after the Closing Date. The number of shares will be determined based on the share price on each instalment date. The amount was discounted to its present value and initially recorded at $1,892 (US$1,480) on the Closing Date using an effective interest rate of 15%.

●

Details of the movements in the purchase consideration payable are as follows:

SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2021 and 2020

(Expressed in thousands of Canadian Dollars)

(Unaudited)


	Three months ended
	June 30, 2021		March 31, 2021
	$		$
Balance, beginning of period		4,765		—
Addition		—		5,621
Paid in cash		(2,885)		(288)
Paid in shares		(377)		(485)
Accretion		9		3
Foreign exchange translation gain		(47)		(86)
Balance, end of period		1,465		4,765


The allocated purchase price calculation is as follows:
	$
Consideration – cash		3,237
Consideration – shares		2,384
Lease liabilities		3,800
Assumed liabilities		217
Total consideration		9,638

Identifiable assets acquired
Customer relationships		3,618
Brand and trademarks		706
Non-compete clause		56
Cash		217
Furniture and equipment		32
Right of use asset		3,800
Total identifiable assets acquired		8,429
Total goodwill		1,209
		9,638

Operating results have been included in these unaudited condensed interim consolidated financial statements from the Closing Date. RCMA’s revenue and net income for the period from the date of acquisition to June 30, 2021 included in the unaudited condensed interim consolidated statements of loss and comprehensive loss are $3,438 and $1,780, respectively. If the acquisition had occurred on January 1, 2021, management estimates that consolidated revenue would have increased by $429 and net loss would have decreased by $231 for the six months ended June 30, 2021.

d)	Acquisition of Rocky Mountain

On April 5, 2021 (the “Closing Date”), the Company acquired 100% of the membership interest of Colorado based Primary Care Clinic Group, Rocky Mountain. The Company determined that the acquisition was a business combination under IFRS 3 – Business Combinations and was accounted for by applying the acquisition method, whereby the assets acquired and liabilities assumed were recorded at their fair values with any excess of the aggregate consideration over the fair values of the identifiable net assets allocated to goodwill.

The goodwill acquired is associated with Rocky Mountain’s workforce and is expected to be fully deductible for tax purposes.

SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2021 and 2020

(Expressed in thousands of Canadian Dollars)

(Unaudited)

The aggregate purchase consideration comprises the following:

•

$10,635 (US$8,491) cash paid on Closing Date.

•

$2,067 (US$1,650) cash payable in three equal instalments over two years from the Closing Date. The amount was discounted to its present value and initially recorded at $1,829 (US$1,460) on the Closing Date using an effective interest rate of 11.4%.

•

$1,076 (US$859) cash payable on account of working capital true-up and settlement of a liability.

•

Details of the movements in the purchase consideration payable are as follows:


	Three months ended
		June 30, 2021
	$
Balance, beginning of period		—
Addition		13,540
Paid in cash		(10,635)
Accretion		47
Foreign exchange translation gain		(30)
Balance, end of period		2,922


The allocated purchase price calculation is as follows:
	$
Consideration – cash		13,540
Lease liabilities		5,453
Assumed liabilities		2,508
Total consideration		21,501

Identifiable assets acquired
Customer relationships		2,893
Brand and trademarks		3,238
Cash		753
Accounts receivable		2,675
Prepaid expenses		235
Furniture and equipment		295
Right of use asset		6,322
Total identifiable assets acquired		16,411
Total goodwill		5,090
		21,501

Operating results have been included in these unaudited condensed interim consolidated financial statements from the Closing Date. Rocky Mountain’s revenue and net loss for the period from the date of acquisition to June 30, 2021 included in the unaudited condensed interim consolidated statements of loss and comprehensive loss is $4,087 and $667, respectively. If the acquisition had occurred on January 1, 2021, management estimates that consolidated revenue would have increased by $4,768 and net loss would have increased by $1,135 for the six months ended June 30, 2021.

SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2021 and 2020

(Expressed in thousands of Canadian Dollars)

(Unaudited)

e)	Acquisition of Doctors Center

On June 23, 2021 (the “Closing Date”), the Company acquired 100% of the identified assets of Florida based primary care group Doctors Center Inc. for a total cash transaction value of $2,752 (US$2,240). The Company determined that the acquisition was a business combination under IFRS 3 – Business Combinations and was accounted for by applying the acquisition method, whereby the assets acquired and liabilities assumed were recorded at their fair values with any excess of the aggregate consideration over the fair values of the identifiable net assets allocated to goodwill. The goodwill acquired is associated with Doctors Center workforce and is expected to be fully deductible for tax purposes. There was a holdback payment to a medical doctor in the amount of $694 (US$560), payable in two instalments of $347 (US$280) at the 6 and 12 month anniversaries of the Closing Date, provided the medical doctor continues to be an employee of the Company. Given the significant amount of the holdback and employment timing, it was determined to be a nominal probability that the medical doctor would compete in the one year period post-acquisition. Therefore, no value was assigned to the non-compete agreement and the payments will be expensed in the period paid.

The aggregate purchase consideration comprises the following:

•

$2,654 (US$2,160) cash paid on the Closing Date.

•

$98 (US$80) cash payable within the next 12 months. Subsequently, on July 15, 2021, the Company paid $57 (US$45) of this amount.

•

Details of the movements in the purchase consideration payable are as follows:


	Three months ended
	June 30, 2021
	$
Balance, beginning of period		—
Addition		2,752
Paid in cash		(2,654)
Foreign exchange translation loss		1
Balance, end of period		99

The allocated purchase price calculation is as follows:


	$
Consideration – cash		2,752
Lease liabilities		2,869
Assumed liabilities		71
Total consideration		5,692

Identifiable assets acquired
Customer relationships		1,499
Brand and trademarks		463
Cash		71
Furniture and equipment		164
Right of use asset		2,869
Total identifiable assets acquired		5,066
Total goodwill		626
		5,692

SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2021 and 2020

(Expressed in thousands of Canadian Dollars)

(Unaudited)

Operating results have been included in these unaudited condensed interim consolidated financial statements from the Closing Date. Doctors Center’s revenue and net income for the period from the date of acquisition to June 30, 2021 included in the unaudited condensed interim consolidated statements of loss and comprehensive loss are $69 and $38, respectively. If the acquisition had occurred on January 1, 2021, management estimates that consolidated revenue would have increased by $1,562 and net loss would have decreased by $507 for the six months ended June 30, 2021.

6.	Purchase consideration payable


		June 30, 2021		December 31, 2020
		$		$
Healthcare Resource Management LLC (“HRM”)			60		61
MCM	Note 5		—		465
APEX	Note 5		542		—
RCMA	Note 5		1,465		—
Rocky Mountain	Note 5		2,922		—
Doctors Center	Note 5		99		—
		5,088		526


Allocated as:		$		$
Current		3,930		526
Non-current		1,158		—
	5,088		526

7.	Trade and other receivables


	June 30, 2021		December 31, 2020
	$		$
Trade receivables		5,304		287
Harmonized sales tax recoverable		399		192
Security deposits		97		50
		5,800		529

The lifetime expected credit loss allowance for impairment is estimated based on the Company’s historical loss experience, adjusted for factors that are specific to the debtors and an assessment of both the current as well as forecast direction of conditions. As at June 30, 2021, an expected credit loss of $nil has been recognized.

SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2021 and 2020

(Expressed in thousands of Canadian Dollars)

(Unaudited)

8.	Property, plant and equipment


	Furniture		Vehicles		Computer Hardware		Leaseholds		Equipment		Total
		$		$		$		$		$		$
*Cost*
As at December 31, 2020		129		22		116		65		58		390
Additions		25		—		40		34		81		180
Acquisition		81		—		14		333		63		491
Disposal		—		(22)		—		—		—		(22)
Net exchange differences		(3)		—		(4)		(3)		—		(10)
As at June 30, 2021		232		—		166		429		202		1,029

*Depreciation*
As at December 31, 2020		93		21		84		57		47		302
Depreciation		31		—		24		45		15		115
Disposal		—		(21)		—		—		—		(21)
Net exchange differences		(2)		—		(2)		(3)		—		(7)
As at June 30, 2021		122		—		106		99		62		389

Net book value
As at December 31, 2020		36		1		32		8		11		88
As at June 30, 2021		110		—		60		330		140		640

9.	Right-of-use assets and lease liabilities

Right of use assets


Premises leases	June 30, 2021
	$
Beginning balance		1,325
Additions		1,257
Acquisitions		13,109
Depreciation		(834)
Lease incentives		(23)
Net exchange differences		(196)
Ending balance		14,638

Lease liabilities


			June 30, 2021
			$
Beginning balance			1,422
Additions			1,257
Acquisitions			12,240
Interest expense			360
Lease payments			(965)
Net exchange differences			(188)
Ending balance			14,126

SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2021 and 2020

(Expressed in thousands of Canadian Dollars)

(Unaudited)


Allocated as:			$
Current			1,671
Non-current			12,455
			14,126

When measuring lease liabilities, the Company discounted lease payments using its incremental borrowing rate. The weighted-average interest rate applied ranges from 6.4% to 12%.

10.

Goodwill and other intangible assets


	Goodwill		Customer relationships		Brand and trademarks		Non-compete clause		Computer software		Total other intangibles
		$		$		$		$		$		$
*Cost*
Balance, December 31, 2020		2,224		4,076		2,546		47		3,616		10,285
Additions		—		—		—		—		146		146
Acquisition		7,689		9,413		4,407		78		—		13,898
Net exchange differences		(164)		(275)		(118)		(4)		(1)		(398)
Balance, June 30, 2021		9,749		13,214		6,835		121		3,761		23,931

*Amortization*
Balance, December 31, 2020		—		1,324		—		—		2,487		3,811
Amortization		—		857		—		14		296		1,167
Net exchange differences		—		(36)		—		—		—		(36)
Balance, June 30, 2021		—		2,145		—		14		2,783		4,942

Net book value
As at December 31, 2020		2,224		2,752		2,546		47		1,129		6,474
As at June 30, 2021		9,749		11,069		6,835		107		978		18,989

11.

Accounts payable and accrued liabilities


	June 30, 2021		December 31, 2020
	$		$
Accounts payable		3,345		486
Accrued liabilities		1,952		638
	5,297		1,124

12.

Loan payable

On April 27, 2020, the Company obtained a loan of $917 (US$653) from Citizens Bank N.A under the Paycheck Protection Program (PPP) offered by US Small Business Administration as part of COVID-19 relief measures. The loan carries an interest rate of 1% and the repayments would start from February 27, 2021 in equal monthly instalments over eighteen months. The PPP program allows for the loan to be forgiven if the disbursed amount is spent in accordance with specific guidelines. On December 1, 2020, the Company applied for loan forgiveness, and if approved, the loan amount would be reclassified as a government grant in the statements of loss and comprehensive loss.

The loan was measured at fair value on receipt date using effective interest rate method and the difference between the fair value and receipt amount was recorded as deferred income under accrued liabilities. This difference represents the benefit received by the Company due to reduced interest rate on the loan and over the term of the loan, this benefit will be recognized as other income in the statement of loss and comprehensive loss.

SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2021 and 2020

(Expressed in thousands of Canadian Dollars)

(Unaudited)

During the three and six months ended June 30, 2021, the Company recognised an amount of $14 as other income and $20 as accretion expense on the loan. On March 30, 2021, the Company recognized $853 as other income representing the write-off of the PPP loan after receiving approval of the forgiveness application.

On June 4, 2021, the Company obtained a loan of $969 (US$782) from Aon Reed Stenhouse Inc. for the Directors and Officers insurance. The amortized cost approximates fair value. The loan carries an interest rate of 3.43% and repayments will start from July 4, 2021 in equal monthly payments for ten months.

13.

Share capital

a)	Authorized share capital

Unlimited number of voting common shares without par value.

b)	Common shares issued


	Numbers of common shares (000s)		Share Capital
		#		$
Balance, December 31, 2020		35,070		43,454
Bought deal		1,970		13,793
Share issuance costs – cash		—		(1,090)
Shares issued in settlement of purchase consideration payable (i)		126		794
Shares issued against exercise of warrants (ii)		965		2,045
Exercise of stock options (iii)		79		277
Balance, June 30, 2021		38,210		59,273

(i)

On May 26, 2021, the Company closed a bought deal offering with a syndicate of underwriters (collectively the “Underwriters”). Pursuant to this, the Underwriters were issued, on a bought deal basis, with full exercise of the Underwriters’ 15% over-allotment option, 1,970,360 common shares of the Company at a price of $7.00 per common share for gross proceeds of $13,793, less share issuance costs of $1,090.

(ii)	During the six months ended June 30, 2021, the Company issued 74,833 shares valued at $6.00 per share and 50,715 shares valued at $6.80 in settlement of consideration payable for the acquisition of RCMA.

(iii)

During the six months ended June 30, 2021, shareholders exercised 964,525 warrants at an exercise price with a range of $1.00 to $5.00 per share.

The fair value of the warrants exercised amounting to $733 was reclassified from the Warrant reserve to Share Capital.

(iv)	During the six months ended June 30, 2021, shareholders exercised 79,512 options at an exercise price with a range of $0.406 to $5.70 per share.

The fair value of the options exercised amounting to $102 was reclassified from the Option reserve to Share Capital.

Warrants

During February 2021, the Company granted 700 warrants to a shareholder. These warrants are exercisable over a period of one year from the date of grant with an exercise price of $4.00, vesting immediately.

SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2021 and 2020

(Expressed in thousands of Canadian Dollars)

(Unaudited)

A summary of the warrant activity for the periods ended June 30, 2021 and 2020 is as follows:


	Numbers of warrants (000s)		Weighted Average Exercise Price
		#		$
Balance, December 31, 2019		3,106		2.80
Exercised		(918)		3.20
Expired		(1,187)		2.00
Granted		600		0.70
Balance, June 30, 2020		1,601		1.70

Balance, December 31, 2020		4,835		1.25
Granted		1		4.00
Exercised		(965)		1.36
Balance, June 30, 2021		3,871		1.23

At June 30, 2021, a summary of warrants outstanding and exercisable is as follows:


Range of exercise prices	Number outstanding (000s)		Weighted Average Exercise Price		Weighted Average Remaining Life
	#		$		Years
$0.70-$1.00		3,516		0.95		1.37
$2.35-$2.50		90		2.35		1.37
$4.00-$5.00		265		4.51		1.07
	3,871		1.23		1.35

Options

During February and March 2021, the Company granted 289,360 options to employees, directors and consultants. These options are exercisable over a period of 2 to 5 years from the date of grant with an exercise price ranging from $6.50 to $9.00. 152,360 options vested immediately and the rest will vest over 1 to 3 years.

A summary of the option activity for the periods ended June 30, 2021 and 2020 is as follows:


	Numbers of options (000s)		Weighted Average Exercise Price
		#		$
Balance, December 31, 2019		1,344		1.90
Expired		(23)		1.00
Granted		412		0.40
Balance, June 30, 2020		1,733		1.55

Balance, December 31, 2020		2,594		2.17
Granted		289		7.64
Exercised		(79)		1.27
Forfeiture		(48)		1.79
Expired		(3)		2.29
Balance, June 30, 2021		2,753		2.78

SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2021 and 2020

(Expressed in thousands of Canadian Dollars)

(Unaudited)

At June 30, 2021, a summary of stock options outstanding and exercisable is as follows:


Range of exercise prices	Number outstanding (000s)		Weighted Average Exercise Price (outstanding)		Weighted Average Remaining Life		Number exercisable (000s)		Weighted Average Exercise Price (exercisable)
		#		$		Years		#		$
$0.406-$2.20		1,122		0.65		3.60		585		0.59
$2.21 - $4.70		1,210		3.30		2.78		1,178		3.28
$4.71 - $6.50		200		5.87		3.05		156		5.70

$6.51 - $9.00		221		7.92		2.92		159		7.70
	2,753		2.78		3.14		2,078		3.05

During the three and six months ended June 30, 2021, $361 and $1,410, respectively (three and six months ended June 30, 2020 - $124 and $284, respectively) has been recognized as share-based compensation expense. The fair value of the granted options was calculated using the Black-Scholes model using an expected life ranging from 1 to 4 years, risk-free interest rate ranging from 0.12% to 0.68%, share price ranging from $6.30 to $8.90, volatility ranging from 111.7% to 130.7% and a dividend yield of 0%. During the six months ended June 30, 2021 directors options accrual amounted to $59.

14.

Fair value measurement and liquidity

The Company classifies and subsequently measures cash, trade receivables, accounts payable and accrued liabilities, loan payable and purchase consideration payable at amortized cost and the fair value of these financial instruments approximates carrying value due to their short-term nature and/or carrying market rates of interest.

There are no financial instruments which were measured at fair value in the condensed interim consolidated statements of financial position as at June 30, 2021.

The Company manages liquidity risk by monitoring actual and projected cash flows. A cash flow forecast is performed regularly to ensure that the Company has sufficient cash to meet operational needs while maintaining sufficient liquidity. The Company may require additional capital to fund activities and any acquisitions. Potential sources of capital could include equity and/or debt financings, marketing agreements, and/or new strategic partnership agreements to fund some or all operational needs. There can be no assurance that the Company will be able to obtain the capital sufficient to meet any or all of the Company needs. The availability of equity or debt financing will be affected by, among other things, the state of the capital markets generally, strategic alliance agreements and other relevant commercial considerations. In addition, if the Company raises additional funds by issuing equity securities, existing security holders will likely experience dilution, and any incurring of indebtedness would result in increased debt service obligations and could require the Company to agree to operating and financial covenants that would restrict operations. Any failure on the Company’s part to raise additional funds on terms favourable to the Company or at all may require the Company to significantly change or curtail current or planned operations in order to conserve cash until such time, if ever, that sufficient proceeds from operations are generated, and could result in the Company not being in a position to take advantage of business opportunities and the delay of transitioning current fee-for-service practices to value-based care.

15.

Related party disclosures

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly. Key management personnel include the Company’s Chief Executive Officer (“CEO”), President, Chief Financial Officer (“CFO”), Chief Medical Officer, Chief Operating Officer, Chief Corporate Officer and members of the Company’s Board of Directors.

The amounts disclosed in the table below are the amounts recognized as an expense during the reporting period related to key management personnel.

SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2021 and 2020

(Expressed in thousands of Canadian Dollars)

(Unaudited)


	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
		$		$		$		$
Salary and short-term employee benefits		522		121		745		224
Share based compensation		180		44		302		100
Directors’ fees		54		94		131		94
Professional services		—		14		—		30
	756		273		1,178		448

16.

Segmented information

The Company has two reportable segments related to its medical services and software and corporate businesses which also align with the two countries in which it operates, namely, United States and Canada. Corporate costs are included in the Canadian segment. The disclosure with regards to the Company’s aforementioned segments and locations are listed below:


Three months ended June 30, 2021	USA (Medical Services)		Canada (Software and Corporate)		Total
		$		$		$
Revenue		10,473		41		10,514
Cost of Sales		3,770		—		3,770
Gross profit		6,703		41		6,744
Total operating expenses		7,763		2,477		10,240
Loss from operations		(1,060)		(2,436)		(3,496)

Foreign exchange loss		—		430		430
Change in fair value of financial liabilities		(26)		—		(26)
Accretion on purchase consideration payable and loan payable		69		—		69
Interest on lease liabilities		243		—		243
Net loss		(1,346)		(2,866)		(4,212)


Six months ended June 30, 2021	USA (Medical Services)		Canada (Software and Corporate)		Total
		$		$		$
Revenue		15,584		103		15,687
Cost of Sales		5,390		—		5,390
Gross profit		10,194		103		10,297
Total operating expenses		11,205		5,258		16,463
Loss from operations		(1,011)		(5,155)		(6,166)

Foreign exchange loss		—		699		699
Change in fair value of financial liabilities		(63)		—		(63)
Accretion on purchase consideration payable and loan payable		133		—		133
Interest on lease liabilities		360		—		360
Other income		(870)		—		(870)
Net loss		(571)		(5,854)		(6,425)

SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2021 and 2020

(Expressed in thousands of Canadian Dollars)

(Unaudited)


As at June 30, 2021	USA (Medical Services)			Canada (Software and Corporate)			Total
		$			$			$
Non-current assets		41,817			2,199			44,016
Total assets		56,215			6,815			63,030
Total liabilities		24,705			775			25,480

Three months ended June 30, 2020	USA (Medical Services)			Canada (Software and Corporate)			Total
		$			$			$
Revenue		3,633			68			3,701
Cost of Sales		1,088			—			1,088
Gross profit		2,545			68			2,613
Total operating expenses		1,692			941			2,633
Income (loss) from operations		853			(873	)		(20	)

Foreign exchange loss		—			229			229
Gain on debt settlement		—			(295	)		(295	)
Change in fair value of financial liabilities		—			769			769
Interest on lease liabilities		44			1			45
Net income (loss)		809			(1,577	)		(768	)

Six months ended June 30, 2020	USA (Medical Services)			Canada (Software and Corporate)			Total
		$			$			$
Revenue		6,524			108			6,632
Cost of Sales		2,118			—			2,118
Gross profit		4,406			108			4,514
Total operating expenses		3,586			1,938			5,524
Income (loss) from operations		820			(1,830	)		(1,010	)

Foreign exchange loss		—			(435	)		(435	)
Gain on debt settlement		—			(295	)		(295	)
Change in fair value of financial liabilities		(28	)		1,252			1,224
Interest on lease liabilities		90			3			93
Net income (loss)		758			(2,355	)		(1,597	)

As at December 31, 2020	USA (Medical Services)			Canada (Software and Corporate)			Total
		$			$			$
Non-current assets		9,361			750			10,111
Total assets		11,469			20,003			31,472
Total liabilities		3,274			561			3,835

SKYLIGHT HEALTH GROUP INC. (formerly CB2 Insights Inc.)

Notes to the Condensed Interim Consolidated Financial Statements

For the three and six months ended June 30, 2021 and 2020

(Expressed in thousands of Canadian Dollars)

(Unaudited)

17.

Subsequent events

On July 13, 2021 (the “Closing Date”), the Company acquired 100% of the identified assets of ACO Partners LLC, a new Accountable Care Organization (“ACO”) that will begin participating in the Medicare Shared Savings Program offered by the Centers for Medicare and Medicaid Services (“CMS”) effective January 1, 2022. The total cash consideration of $313 (US$250) is to be paid as follows:

•

$78 (US$63) cash on Closing Date

•

$78 (US$63) cash payable contingent on receiving approval on Phase 1 of the pending ACO application to the CMS by January 31, 2022

•

$157 (US$124) cash payable contingent on receiving final approval of the pending ACO application to the CMS by January 31, 2022