Canada House Cannabis Group Announces Restatement of Financial Statements to Rectify Accounting Errors

LOS ANGELES– Canada House Cannabis Group Inc. announced today the filing of a restatement of its unaudited condensed consolidated financial statements for the six months ended January 31, 2023, and 2022. The restatement, referred to as the “Restated Financial Statements,” corrects accounting errors identified subsequent to the issuance of the original unaudited condensed consolidated financial statements on March 23, 2023.

During the restatement process, the Company identified several accounting errors that required adjustments in the statements of financial position, income and comprehensive income, changes in shareholders’ equity, and cash flows for the comparable six-month period ended January 31, 2022. The errors, expressed in thousands of Canadian dollars, are as follows:

1. Investment in associate: The Company used the incorrect method to measure the value of its shares used as an investment in Montréal Cannabis Médical Inc. (MTL) made on August 9, 2022. Instead of using the equity value method, which deducts debt from the enterprise value, the Company used the enterprise value method, resulting in an overstatement of approximately $11,000 in the value of the investment in MTL. Additionally, transaction costs associated with this investment of $905 should not have been expensed. The correction reduces the carrying value of the investment in the associate by $10,095.
2. Mortgage payable: The Company erroneously expensed mortgage renewal costs of $60, which should have been capitalized.
3. Promissory notes: The maturity date on one of the Company’s promissory notes, with a carrying value of $4,167, was amended from December 12, 2024, to December 12, 2023. Consequently, the promissory note should have been classified as a current liability.
4. 2020 convertible debenture: In August 2022, the conversion price of the secured convertible debenture with Archerwill Investments Inc. was amended, causing it to no longer meet the fixed-for-fixed criteria for equity instrument classification. As a result, the Company reassessed the fair value of each component of the debenture. The net impact of this reassessment is an increase in the carrying value of the host debt instrument by $60, and the reclassification of the conversion option and equity from equity to liability. The estimated fair values of the conversion option and equity are $3,463 and $640, respectively, upon correction.

Importantly, the restatement does not impact the Adjusted EBITDA (non-IFRS measure) disclosed in the news release on March 23, 2023.

By rectifying these accounting errors through the restatement of its financial statements, Canada House Cannabis Group aims to provide accurate and reliable financial information to its stakeholders. The Company remains committed to upholding transparency and adhering to the highest standards of financial reporting.