Segment Information

6 Months Ended

Jun. 30, 2020

Segment reporting is prepared on the same basis that the Company’s chief operating decision makers (the “CODMs”) manage the business, make operating decisions and assess the Company’s performance. The Company determined that it has the following two reportable segments: United States and Rest of World. The United States operating segment consists of the manufacture and distribution of hemp-derived CBD infused products. The Rest of World operating segment is involved in the cultivation, manufacture, and marketing of cannabis and cannabis-derived products for the medical and adult-use markets. These two segments represent the geographic regions in which the Company operates and the different product offerings within each geographic region. The results of each segment are regularly reviewed by the CODMs to assess the performance of the segment and make decisions regarding the allocation of resources. The CODMs review operating income (loss) as the measure of segment profit or loss to evaluate performance of and allocate resources for its reportable segments. Operating income (loss) is defined as net revenue less cost of sales and operating expenses.

Reporting by operating segments follows the same accounting policies as those used to prepare the consolidated financial statements. The operating segments are presented in accordance with the same criteria used for internal reporting prepared for the CODMs. Intersegment transactions are recorded at the stated values as agreed to by the segments.

Segment data was as follows for the three months ended June 30, 2020:


	Three months ended June 30, 2020
	United States		Rest of World		Corporate		Total
Consolidated statements of net income (loss) and comprehensive income (loss)
Net revenue
Cannabis flower	$	—	$	5,674	$	—	$	5,674
Cannabis extracts	2,174		1,917		—		4,091
Other	—		118		—		118
Net revenue	$	2,174	$	7,709	$	—	$	9,883

Share of loss from investments in equity accounted investees	$	—	$	794	$	—	$	794

Interest income	8		3,811		(2)		3,817
Interest expense	—		(83)		—		(83)
Interest income, net	$	8	$	3,728	$	(2)	$	3,734

Impairment loss on goodwill and intangible assets	40,000		$	—	$	—	$	40,000

Depreciation and amortization	36		654		(6)		684
Income tax expense	—		—		—		—
Net income (loss)	(47,762)		(52,899)		(7,042)		(107,703)

Segment data was as follows for the six months ended June 30, 2020:


	Six months ended June 30, 2020
	United States		Rest of World		Corporate		Total
Consolidated statements of net income (loss) and comprehensive income (loss)
Net revenue
Cannabis flower	$	—	$	8,415	$	—	$	8,415
Cannabis extracts	4,350		5,317		—		9,667
Other	—		233		—		233
Net revenue	$	4,350	$	13,965	$	—	$	18,315

Share of loss from investments in equity accounted investees	$	—	$	1,966	$	—	$	1,966

Interest income	13		11,562		—		11,575
Interest expense	—		(90)		—		(90)
Interest income, net	$	13	$	11,472	$	—	$	11,485

Impairment loss on goodwill and intangible assets	40,000		$	—	$	—	$	40,000

Depreciation and amortization	69		1,302		—		1,371
Income tax expense	—		—		—		—
Net income (loss)	(57,567)		39,257		(13,712)		(32,022)

Consolidated balance sheets
Total assets	$	250,470	$	348,569	$	1,311,248	$	1,910,287
Investments in equity accounted investees	—		933		—		933
Goodwill	178,414		1,322		—		179,736
Purchase of property, plant and equipment, net	219		13,125		—		13,344

Sources of net revenue for the three and six months ended June 30, 2020 and 2019 were as follows:


	Three months ended June 30,						Six months ended June 30,
	2020		2019		2020		2019
Cannabis flower	5,674		6,096		$	8,415	$	7,921
Cannabis extracts	4,091		1,535		9,667		2,638
Other	118		22		233		98
Net revenue	$	9,883	$	7,653	$	18,315	$	10,657

Net revenue attributed to a geographic region based on the location of the customer were as follows:


	Three months ended June 30,						Six months ended June 30,
	2020		2019		2020		2019
Canada	7,416		7,340		$	13,507	$	10,323
United States	2,174		—		4,350		—
Other countries	293		313		458		334
Total	$	9,883	$	7,653	$	18,315	$	10,657

Property, plant and equipment assets were physically located in the following geographic regions:


	As of June 30, 2020		As of December 31, 2019
Canada	$	140,357	$	141,021
United States	2,253		2,103
Other countries	21,680		18,685
Total	$	164,290	$	161,809

The Company sells products through a limited number of major customers. Major customers are defined as customers that each individually accounted for greater than 10% of the Company’s revenues and greater than 10% of accounts receivable.

United States

During the three and six months ended June 30, 2020, the U.S. segment had no major customers.

As of June 30, 2020, $46 (December 31, 2019 – $12) in expected credit losses has been recognized on receivables from contracts with customers.

Rest of World

During the three months ended, June 30, 2020, the Rest of World segment earned a total net revenue before excise taxes of $7,040 from four major customers, BC Liquor Distribution Branch, Alberta Gaming, Liquor and Cannabis Commission, Ontario Cannabis Retail Corporation, and Société Québécoise du Cannabis accounting for 26%, 19%, 16% and 12% of the Company’s total revenues, respectively (three months ended June 30, 2019 – $4,118 from one major customer accounting for 54% of the Company’s total revenues).

During the six months ended, June 30, 2020, the Rest of World segment earned a total net revenue before excise taxes of $11,819 from the same four major customers as mentioned above, representing 19%, 22%, 13%, and 13% of the Company’s total revenues, respectively (six months ended June 30, 2019 – $5,800 from two major customers, together accounting for 54% of the Company’s total revenues).

As of June 30, 2020, $34 (December 31, 2019 – $124) in expected credit losses has been recognized on receivables from contracts with customers.