Sofgen Pharma S.A 6-K, filed Jun 6, 2023

Sofgen Pharma S.A. (PROCF)

6-K 2023-06-06 For: 2023-06-05

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Added on April 06, 2026

About this 6-K

Sofgen Pharma S.A filed this 6-K on June 6, 2023.

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Exhibit Number		Exhibit Title
99.1		Unaudited Interim Financial Statements for the Three Months Ended March 31, 2023
99.2		Supplementary Financial Information Relating to the Three Months Ended March 31, 2023

PROCAPS GROUP, S.A.

By:	/s/ Ruben Minski
Name:	Ruben Minski
Title:	Chief Executive Officer

		For the three months ended March 31
	Notes	2023			2022
Revenue	5	$	84,162		$	85,630
Cost of sales			(38,100	)		(38,508	)
Gross profit			46,062			47,122

Sales and marketing expenses			(20,670	)		(20,157	)
Administrative expenses			(22,119	)		(24,556	)
Finance income, net	7		1,649			14,582
Other income, net	8		3,958			5,124
Income before tax			8,880			22,115

Income tax expense	9		(2,259	)		(5,669	)
Income for the period		$	6,621		$	16,446

Income for the period attributable to:
Owners of the Company			6,621			16,446
Non-controlling interests			—			—

Earnings per share:
Basic and diluted, income for the year attributable to ordinary equity holders of the Company¹			0.07			0.16

	For the three months ended March 31
	2023		2022
Income for the period	$	6,621	$	16,446

Other comprehensive income
Items that will not be reclassified to profit or loss:
Remeasurement of net defined benefit liability		—		—
Income tax relating to items that will not be reclassified subsequently to profit or loss		—		—
Net of Tax		—		—
Items that will be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations		426		2,234
Other comprehensive income for the period, net of tax		426		2,234
Total comprehensive income for the period	$	7,047	$	18,680

Total comprehensive income for the period attributable to:
Owners of the Company		7,047		18,679
Non-controlling interests		—		1

	Notes	As of March 31, 2023			As of December 31, 2022
Assets
Non-current assets
Property, plant and equipment, net	11		82,450			73,965
Right-of-use assets, net			39,076			39,013
Goodwill			5,790			5,791
Intangible assets, net	10		34,375			32,208
Investments in joint ventures			1,717			1,505
Other financial assets			218			210
Deferred tax assets, net			6,712			6,974
Other assets			2,531			3,078
Total non-current assets		$	172,869		$	162,744
Current assets
Cash			23,033			43,003
Trade and other receivables, net	13		116,363			129,602
Inventories, net	12		99,149			96,833
Amounts owed by related parties, net			2,610			2,474
Current tax assets, net			23,997			21,187
Other current assets, net			3,695			4,344
Total current assets		$	268,847		$	297,443
Total assets		$	441,716		$	460,187

Liabilities and Stockholders’ Equity (Deficit)
Equity (Deficit)
Share capital			1,011			1,011
Share premium			377,677			377,677
Reserves			45,743			45,743
Accumulated deficit			(384,892	)		(391,513	)
Accumulated other comprehensive loss			(33,433	)		(33,859	)
Equity (deficit) attributable to owners of the company		$	6,106		$	(941	)
Non-controlling interest			(937	)		(937	)
Total equity (deficit)		$	5,169		$	(1,878	)
Non-Current liabilities
Borrowings	14		150,011			28,410
Warrant liabilities	16		6,971			10,916
Shares held in escrow	17		32,859			40,064
Deferred tax liabilities			6,616			7,821
Other liabilities			6,626			6,480
Total non-current liabilities		$	203,083		$	93,691
Current liabilities
Borrowings	14		135,112			257,525
Trade and other payables			79,909			90,187
Amounts owed to related parties			3,320			2,914
Current tax liabilities, net			7,411			6,133
Provisions	15		162			138
Other liabilities			7,550			11,477
Total current liabilities		$	233,464		$	368,374
Total liabilities and stockholders’ equity (deficit)		$	441,716		$	460,187

	Attributable to equity holders of the Group
	Issued Capital		Share premium		Reserves¹		Accumulated deficit			Other Comprehensive Income			Total			Non-controlling interest			Total equity (deficit)
Balance as of January 1, 2022	$	1,011	$	377,677	$	42,749	$	(431,059	)	$	(27,778	)	$	(37,400	)	$	(940	)	$	(38,340	)
Income for the period		—		—		—		16,446			—			16,446			—			16,446
Transfer reserves		—		—		2,994		(2,994	)		—			—			—			—
Other comprehensive income		—		—		—		—			2,233			2,233			1			2,234
Non-controlling interest		—		—		—		—			1			1			—			1
Others		—		—		—		—			—			—			—			—
Balance as of March 31, 2022	$	1,011	$	377,677	$	45,743	$	(417,607	)	$	(25,544	)	$	(18,720	)	$	(939	)	$	(19,659	)

Balance as of January 1, 2023		1,011		377,677		45,743		(391,513	)		(33,859	)		(941	)		(937	)		(1,878	)
Income for the period		—		—		—		6,621			—			6,621			—			6,621
Transfer reserves		—		—		—		—			—			—			—			—
Other comprehensive income		—		—		—		—			426			426			—			426
Balance as of March 31, 2023		1,011		377,677		45,743		(384,892	)		(33,433	)		6,106			(937	)		5,169

		For the three months ended March 31
	Notes	2023			2022
Operating activities
Income for the period		$	6,621		$	16,446
Adjustments to reconcile net income with cash flow from operating activities before changes in working capital:
Depreciation of property, plant and equipment	11		1,275			1,452
Depreciation of right-of-use assets			1,502			1,230
Amortization of intangibles	10		929			818
Income tax expense	9		2,259			5,669
Finance income	7		(1,649	)		(14,582	)
Unrealized currency exchange rate differences			2,590			—
Share of result of joint ventures			(199	)		100
Net loss on sale and disposal of property, plant and equipment	11		48			33
Inventory provision	12		996			591
Provision for bad debt	13		1,157			314
Provisions	15		29			—
Cash flow from operating activities before changes in working capital			15,558			12,071

(Increase)/decrease in operating assets and liabilities:
Trade and other receivables, net			11,751			5,573
Amounts owed by related parties			255			(521	)
Inventories, net			(813	)		(19,830	)
Current tax assets, net			(2,809	)		(6,757	)
Other current assets, net			649			2,092
Trade and other payables			(15,330	)		16,814
Amounts owed to related parties			322			333
Current tax liabilities, net			166			1,442
Other liabilities			(4,158	)		(2,843	)
Provisions	15		(6	)		(7	)
Other financial assets			(8	)		(12	)
Other assets			525			(541	)
Cash generated from operations			6,102			7,814

Interest paid			(905	)		(434	)
Income tax paid			(2,089	)		(1,046	)
Cash flow provided by operating activities		$	3,108		$	6,334

Investing activities
Acquisition of property, plant and equipment	11		(3,282	)		(2,197	)
Acquisition of intangibles	10		(1,582	)		(1,827	)
Advances to related parties			(163	)		(136	)

Cash flow used in investing activities		$	(5,027	)	$	(4,160	)

Financing activities
Proceeds from borrowings	14		16,360			30,334
Payments on borrowings	14		(26,403	)		(33,624	)
Payments to related parties			—			(2,359	)
Interest paid on borrowings	14		(6,887	)		(3,924	)
Payment of lease liabilities	14		(1,660	)		(587	)

Cash flow used in financing activities		$	(18,590	)	$	(10,160	)

Net decrease in cash			(20,509	)		(7,986	)
Cash at beginning of the period			43,003			72,112
Effect of exchange rate fluctuations			539			1,518
Cash at end of the period		$	23,033		$	65,644

Non-cash financing and investing activities¹		$	8,825		$	13,463

	Place of business/	Ownership interests held by:
	country of	The Group						Non-controlling interests						Principal
Name of entity	incorporation	2023			2022			2023			2022			activities
Procaps S.A.	Colombia		100	%		100	%		—	%		—	%	Manufacturing and distribution of prescription and over-the-counter
C.I. Procaps S.A.	Colombia		100	%		100	%		—	%		—	%	pharmaceutical products.
Procaps S.A. de C.V	El Salvador		100	%		100	%		—	%		—	%
Softcaps - Colbras	Brazil		100	%		100	%		—	%		—	%
Diabetrics Healthcare S.A.S.	Colombia		100	%		100	%		—	%		—	%	Diabetes solutions and chronic disease management tool.

	Reportable segments
For the three months ended March 31 2023	NextGel			Procaps Colombia			CAN			CASAND			Diabetrics			Total

Segment revenue		44,754			29,767			15,147			19,709			6,815			116,192
Inter-segment revenue		(19,794	)		(210	)		(5,581	)		(3,687	)		(2,758	)		(32,030	)
Revenue from contracts with customers		24,960			29,557			9,566			16,022			4,057			84,162

Timing of revenue recognition
Goods transferred at a point in time		24,179			29,557			9,566			16,022			4,057			83,381
Services transferred over time		781			—			—			—			—			781
Total revenue from contracts with customers		24,960			29,557			9,566			16,022			4,057			84,162

	Reportable segments
For the three months ended March 31 2022	NextGel			Procaps Colombia		CAN			CASAND			Diabetrics			Total

Segment revenue		58,155			31,549		15,400			16,525			7,594			129,223
Inter-segment revenue		(32,818	)		309		(4,130	)		(3,963	)		(2,991	)		(43,593	)
Revenue from contracts with customers		25,337			31,858		11,270			12,562			4,603			85,630

Timing of revenue recognition
Goods transferred at a point in time		24,486			31,858		11,270			12,111			4,603			84,328
Services transferred over time		851			—		—			451			—			1,302
Total revenue from contracts with customers		25,337			31,858		11,270			12,562			4,603			85,630

	Diabetrics									Corporate								Total
For the three months ended March 31, 2023	Total			Inter- segment eliminations			External			Total			Inter- segment eliminations		External			Total			Inter- segment eliminations			External
Revenue		6,815			(2,758	)		4,057			—			—		—			116,192			(32,030	)		84,162
Contribution margin ¹		(213	)		(287	)		(500	)		(14,775	)		13,833		(942	)		7,831			17,561			25,392
Administrative expenses		—			—			—			22,119			—		22,119			22,119			—			22,119
Finance expenses		—			—			—			(1,649	)		—		(1,649	)		(1,649	)		—			(1,649	)
Other expenses		—			—			—			(3,958	)		—		(3,958	)		(3,958	)		—			(3,958	)
Income (loss) before tax																			(8,681	)		17,561			8,880

Cost	Total
Balance as of January 1, 2022	$	53,926
Additions		294
Additions from internal developments		1,533
Foreign currency exchange		2,590
Balance as of March 31, 2022	$	58,343

Balance as of January 1, 2023	$	57,831
Additions		353
Additions from internal developments		1,874
Foreign currency exchange		1,488
Transfers		28
Balance as of March 31, 2023	$	61,574

Accumulated amortization	Total
Balance as of January 1, 2022	$	23,755
Amortization expense		818
Foreign currency exchange		1,063
Balance as of March 31, 2022	$	25,636

Balance as of January 1, 2023	$	25,623
Amortization expense		929
Foreign currency exchange		647
Balance as of March 31, 2023	$	27,199

As of March 31, 2022
Net book value	$	32,707
As of March 31, 2023
Net book value	$	34,375

Accumulated depreciation	Total
Balance as of January 1, 2022	$	44,016
Disposals		(8	)
Depreciation expense		1,452
Effect of exchange differences in foreign currency		2,594
Balance as of March 31, 2022	$	48,054

Balance as of January 1, 2023	$	47,933
Disposals		(217	)
Depreciation expense		1,275
Effect of exchange differences in foreign currency		1,229
Transfers		(38	)
Balance as of March 31, 2023	$	50,182

As of March 31, 2022
Net book value	$	77,296
As of March 31, 2023
Net book value	$	82,450

	As of March 31, 2023			As of December 31, 2022
Raw materials and supplies	$	42,848		$	42,701
Products in process		8,473			7,412
Finished products and merchandise		43,022			41,492
Inventory in transit		11,211			11,531
Subtotal	$	105,554		$	103,136
Less: Provision		(6,405	)		(6,303	)
Total	$	99,149		$	96,833

	For the three months ended March 31
	2023		2022
South America	$	59,743	$	59,200
Central America		15,747		16,281
North America		7,426		8,232
Europe		1,246		1,917
Total	$	84,162	$	85,630

	For the three months ended March 31
	2023			2022
Banking expenses	$	(223	)	$	(316	)
Bank fees		(206	)		(107	)
Other financial expenses¹		(296	)		(149	)
Net fair value gain of warrant liabilities²		3,945			1,728
Net fair value gain of shares held in escrow²		7,205			18,510
Interest expense		(8,776	)		(5,084	)
Total	$	1,649		$	14,582

	For the three months ended March 31
	2023			2022
Currency exchange rate differences¹	$	3,930		$	5,170
Economic emergency contribution expenses		(316	)		(273	)
Fines, surcharges, penalties and taxes assumed		(80	)		(82	)
Donations		(155	)		(80	)
Other		579			389
Total	$	3,958		$	5,124

	As of March 31, 2023		As of December 31, 2022
Borrowings at amortized cost^(a)
Syndicated term loan ⁽¹⁾	$	38,204	$	38,626
Other term loan ⁽²⁾		96,487		95,720
Lease liabilities ⁽³⁾		33,980		34,192
Factoring obligations ⁽⁴⁾		1,144		2,317
Bank overdrafts ⁽⁵⁾		308		80
Notes ⁽⁶⁾		115,000		115,000
Total Interest bearing liabilities	$	285,123	$	285,935

Current		135,112		257,525
Non-Current	$	150,011	$	28,410

	As of March 31, 2023			As of December 31, 2022
Trade receivables, net of discounts ¹	$	116,989		$	126,456
Other receivables		12,591			15,211
Impairment of trade and other receivables ²		(13,217	)		(12,065	)
Trade receivables, net of discounts and impairment	$	116,363		$	129,602

	Currency	Range of Interest	Maturity Year		As of March 31, 2023			As of December 31, 2022
Syndicated term loan	COP	IBR + 5.30%		2023-2025	$	38,664		$	39,156
Amortized cost	COP	N/A		2023		(460	)		(530	)
Total Syndicated term loan					$	38,204		$	38,626

	●	Indebtedness Indicator (Indebtedness/EBITDA) as of June 30 and December 31 of each year, during the loan term, must be less than or equal to 3.5 times. If the indicator is greater than 3.0 and less than 3.5, it proceeds to the extent that this value is originated by causes other than additional debt and the justification of the increase must be presented to the agent.

	●	Short-term leverage ratio < 1.0 on the last day of each semester.

	●	The Syndicated Loan Agreement establishes that each of the jointly obligated parties, unless they have the express, prior and written authorization of the Agent, will refrain from incurring any type of financial debt when the proforma indebtedness indicator, once acquired the additional financial debt, is greater than 3.0 times and maintaining any type of financial debt when the pro forma indebtedness indicator, once the national debt is acquired, is greater than 3.5 times.

	●	The Company’s consolidated Indebtedness Indicator (Indebtedness / EBITDA) should not be greater than 3.5x.

	●	An EBITDA interest coverage ratio (calculated as the consolidated EBITDA for the last twelve months of Procaps, S.A. and the other obligors thereunder divided by the consolidated interest expenses of Procaps, S.A. and the other obligors thereunder) in excess of, or equal to, 3.00:1.00, calculated at certain dates of determination.

	●	The consolidated total debt of Procaps, S.A., the Group and the other obligors thereunder to consolidated EBITDA for the last twelve months of 4:00:1.00 or less (original covenant: 3.50:1.00 or less).

	●	An EBITDA interest coverage ratio in excess of, or equal to, 2.20:1.00 (original covenant: in excess of, or equal to, 3.00:1.00).

	2023			2022
Contingencies
Balance as of January 1	$	138		$	501
Effect of changes in foreign exchange rates		2			84
Provisions made		29			—
Provisions used		(6	)		(7	)
Balance as of March 31	$	162		$	578

	As of March 31, 2023		As of December 31, 2022
Public warrants	$	5,800	$	9,200
Private warrants¹		1,171		1,716
	$	6,971	$	10,916

	As of March 31, 2023			As of December 31, 2022
As of January 1	$	9,200		$	16,000
Acquired public warrants		—			—
Fair value remeasurement		(3,400	)		(6,800	)
Balance as of March 31/December 31	$	5,800		$	9,200

	●	Level 1: inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

	●	Level 2: inputs are observable either directly (e.g. as prices) or indirectly (e.g. derived from prices).

	As of March 31, 2023				As of December 31, 2022
	FVTPL¹		Amortized cost²		FVTPL¹		Amortized cost²
Financial assets not measured at fair value
Trade and other receivables, net	$	—	$	116,363	$	—	$	129,602
Amounts owed by related parties		—		2,610		—		2,474
Cash		—		23,033		—		43,003
Other financial assets		—		218		—		210
Total financial assets not measured at fair value	$	—	$	142,224	$	—	$	175,289

Financial liabilities measured at fair value
Warrant liabilities	$	6,971	$	—	$	10,916	$	—
Shares held in escrow		32,859		—		40,064		—
Total financial liabilities measured at fair value		39,830		—		50,980		—
Financial liabilities not measured at fair value
Borrowings		—		285,122		—		285,934
Trade and other payables, net		—		79,909		—		90,187
Amounts owed to related parties		—		3,320		—		2,914
Total financial liabilities not measured at fair value	$	—	$	368,351	$	—	$	379,035

Type	Fair value		Valuation Technique	Significant unobservable input	Relationship between significant unobservable input to fair value	Sensitivity of significant unobservable input to fair value
							+5%		-5%
Private warrants	$	150	The fair value of the Private Warrants is estimated using the Black-Scholes option pricing formula for European calls, since the underlying stock is not expected to pay dividends over the term of the Warrants.	Volatility of 38.3% (2022: 36.6%)	The higher (lower) the volatility, the higher (lower) the fair value.	$	220	$	95
Private warrants in escrow		1,021	The fair value of the Private Warrants in escrow is estimated using Monte Carlo simulation in a risk-neutral framework assuming a Geometric Brownian Motion for the future stock price.	Volatility of 41.0% (2022: 37.5%)	The higher (lower) the volatility, the higher (lower) the fair value.		1,495		661
Shares held in escrow		32,859	The fair value of the shares to be delivered is estimated using Monte Carlo simulation in a risk-neutral framework assuming a Geometric Brownian Motion for the future stock price.	Volatility of 40.5% (2022: 36.5%)	The higher (lower) the volatility, the higher (lower) the fair value.		33,191		32,447

March 31, 2023	Current (not past due)			1-30 days past due			31-60 days past due			61-90 days past due			91-120 days past due			More than 120 days past due			Total
Weighted-average loss rate		0.38	%		3.47	%		2.90	%		5.12	%		8.08	%		89.50	%		15.95	%
Gross carrying amount		101,950			10,737			10,008			6,079			2,363			26,335			157,472
Impairment loss allowance		(391	)		(373	)		(290	)		(311	)		(191	)		(23,569	)		(25,125	)
	$	101,559		$	10,364		$	9,718		$	5,768		$	2,172		$	2,766		$	132,347

December 31, 2022	Current (not past due)			1-30 days past due			31-60 days past due			61-90 days past due			91-120 days past due			More than 120 days past due			Total
Weighted-average loss rate		0.39	%		3.42	%		4.50	%		14.25	%		19.89	%		83.88	%		14.07	%
Gross carrying amount		124,219			11,816			3,864			1,958			890			26,605			169,352
Impairment loss allowance		(483	)		(404	)		(174	)		(279	)		(177	)		(22,317	)		(23,834	)
	$	123,736		$	11,412		$	3,690		$	1,679		$	713		$	4,288		$	145,518

	For the three months ended March 31
	2023		20221
Short-term employee benefits		752		535
Consulting fees		575		613
	$	1,327	$	1,148

	●	Short-term leverage ratio less than 1.6 (original covenant: less than 1.0).