Cover
Cover - shares | 9 Months Ended | |
Oct. 30, 2021 | Dec. 10, 2021 | |
Cover [Abstract] | ||
Entity Registrant Name | DAVIDsTEA Inc. | |
Entity Central Index Key | 0001627606 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Current Fiscal Year End Date | --02-02 | |
Entity Small Business | false | |
Entity Shell Company | false | |
Entity Emerging Growth Company | false | |
Entity Current Reporting Status | Yes | |
Document Period End Date | Oct. 30, 2021 | |
Entity Filer Category | Non-accelerated Filer | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2022 | |
Entity Common Stock Shares Outstanding | 26,359,969 | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Entity File Number | 001-37404 | |
Entity Incorporation State Country Code | Z4 | |
Entity Tax Identification Number | 98-1048842 | |
Entity Address Address Line 1 | 5430 Ferrier | |
Entity Address Address Line 2 | Mount-Royal | |
Entity Address City Or Town | Québec | |
Entity Address Country | CA | |
Entity Address Postal Zip Code | H4P 1M2 | |
City Area Code | 888 | |
Local Phone Number | 873-0006 | |
Security 12b Title | Common shares, no par value per share | |
Trading Symbol | DTEA | |
Security Exchange Name | NASDAQ | |
Entity Interactive Data Current | Yes |
INTERIM CONSOLIDATED BALANCE SH
INTERIM CONSOLIDATED BALANCE SHEETS - CAD ($) | Oct. 30, 2021 | Jan. 30, 2021 |
Current Assets | ||
Cash | $ 13,367,000 | $ 30,197,000 |
Accounts and other receivables | 4,602,000 | 6,212,000 |
Inventories | 39,802,000 | 23,468,000 |
Prepaid expenses and deposits | 4,835,000 | 14,470,000 |
Total current assets | 62,606,000 | 74,347,000 |
Property and equipment | 1,169,000 | 2,309,000 |
Intangible assets | 2,638,000 | 3,929,000 |
Right-of-use assets | 3,345,000 | 657,000 |
Total assets | 69,758,000 | 81,242,000 |
Current Liabilities | ||
Trade and other payables | 13,958,000 | 4,152,000 |
Deferred revenue | 5,559,000 | 7,080,000 |
Liabilities subject to compromise | 0 | 100,550,000 |
Current portion of lease liabilities | 780,000 | 396,000 |
Total current liabilities | 20,297,000 | 112,178,000 |
Non-current portion of lease liabilities | 2,720,000 | 355,000 |
Total liabilities | 23,017,000 | 112,533,000 |
Equity | ||
Share capital | 113,406,000 | 113,167,000 |
Contributed surplus | 2,199,000 | 1,747,000 |
Deficit | (71,726,000) | (148,068,000) |
Accumulated other comprehensive income | 2,862,000 | 1,863,000 |
Total equity (deficiency) | 46,741,000 | (31,291,000) |
Total liabilities and equity | $ 69,758,000 | $ 81,242,000 |
INTERIM CONSOLIDATED STATEMENTS
INTERIM CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) (Unaudited) - CAD ($) shares in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 30, 2021 | Oct. 31, 2020 | Oct. 30, 2021 | Oct. 31, 2020 | |
INTERIM CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) (Unaudited) | ||||
Sales | $ 22,203,000 | $ 26,225,000 | $ 64,195,000 | $ 81,497,000 |
Cost of sales | 13,587,000 | 15,399,000 | 36,816,000 | 47,409,000 |
Gross profit | 8,616,000 | 10,826,000 | 27,379,000 | 34,088,000 |
Selling, general and administration expenses | 10,242,000 | 7,120,000 | 28,521,000 | 35,883,000 |
Restructuring plan activities, net | 195,000 | (10,743,000) | (76,964,000) | 24,017,000 |
Results from operating activities | (1,821,000) | 14,449,000 | 75,822,000 | (25,812,000) |
Finance costs | 71,000 | 35,000 | 104,000 | 3,260,000 |
Finance income | (28,000) | (53,000) | (118,000) | (361,000) |
Net income (loss) before income taxes | (1,864,000) | 14,467,000 | 75,836,000 | (28,711,000) |
Recovery of income taxes | 0 | 0 | (1,000,000) | 0 |
Net income (loss) | (1,864,000) | 14,467,000 | 76,836,000 | (28,711,000) |
Other comprehensive income (loss): | ||||
Cumulative translation adjustment | (13,000) | 209,000 | 999,000 | 191,000 |
Other comprehensive income (loss), net of tax | (13,000) | 209,000 | 999,000 | 191,000 |
Total comprehensive income (loss) | $ (1,877,000) | $ 14,676,000 | $ 77,835,000 | $ (28,520,000) |
Net earnings (loss) per share: | ||||
Basic | (0.07) | 0.55 | 2.92 | (1.10) |
Fully diluted | (0.07) | 0.54 | 2.79 | (1.10) |
Weighted average number of shares outstanding: | ||||
Weighted average number of shares outstanding Basic | 26,359,969 | 26,214,573 | 26,300,289 | 26,143,963 |
Weighted average number of shares outstanding Fully diluted | 26,359,969 | 26,767,470 | 27,584,128 | 26,143,963 |
INTERIM CONSOLIDATED STATEMEN_2
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - CAD ($) | 3 Months Ended | 9 Months Ended | ||
Oct. 30, 2021 | Oct. 31, 2020 | Oct. 30, 2021 | Oct. 31, 2020 | |
OPERATING ACTIVITIES | ||||
Net income (loss) | $ (1,864,000) | $ 14,467,000 | $ 76,836,000 | $ (28,711,000) |
Items not affecting cash: | ||||
Depreciation of property and equipment | 398,000 | 237,000 | 1,193,000 | 1,781,000 |
Amortization of intangible assets | 403,000 | 420,000 | 1,290,000 | 1,503,000 |
Amortization of right-of-use assets | 242,000 | 189,000 | 536,000 | 2,882,000 |
Gain on modification of lease liabilities | 0 | (20,385,000) | 0 | (75,121,000) |
Gain (loss) on liabilities subject to compromise | 0 | 2,633,000 | (79,861,000) | 71,653,000 |
Interest on lease liabilities | 50,000 | 29,000 | 83,000 | 3,216,000 |
Loss on disposal of property and equipment and right-of-use assets | 0 | 18,000 | 0 | 1,560,000 |
Impairment of property and equipment and right-of-use assets | 0 | 0 | 0 | 39,960,000 |
Stock-based compensation expense | 392,000 | 198,000 | 937,000 | 778,000 |
Sub-total | (379,000) | (2,194,000) | 1,014,000 | 19,501,000 |
Net change in other non-cash working capital balances related to operations | 1,932,000 | (9,822,000) | (17,233,000) | (39,397,000) |
Cash flows provided by (used in) operating activities | 1,553,000 | (12,016,000) | (16,219,000) | (19,896,000) |
FINANCING ACTIVITIES | ||||
Proceed from issuance of common shares pursuant to exercise of stock options | 0 | 0 | 0 | 3,000 |
Payment of lease liabilities | (237,000) | (250,000) | (559,000) | (5,824,000) |
Cash flows used in financing activities | (237,000) | (250,000) | (559,000) | (5,821,000) |
INVESTING ACTIVITIES | ||||
Additions to property and equipment | 0 | (91,000) | (52,000) | (402,000) |
Additions to intangible assets | 0 | (3,000) | 0 | (320,000) |
Repayment of loan from a Company controlled by an executive employee | 0 | 0 | 0 | 2,026,000 |
Cash flows provided by (used in) investing activities | 0 | (94,000) | (52,000) | 1,304,000 |
Increase (decrease) in cash during the period | 1,316,000 | (12,360,000) | (16,830,000) | (24,413,000) |
Cash, beginning of the period | 12,051,000 | 34,285,000 | 30,197,000 | 46,338,000 |
Cash, end of the period | 13,367,000 | 21,925,000 | 13,367,000 | 21,925,000 |
Cash received for: | ||||
Interest | 7,000 | 50,000 | 101,000 | 329,000 |
Income taxes (classified as operating activity) | $ 0 | $ 0 | $ 0 | $ 870,000 |
INTERIM CONSOLIDATED STATEMEN_3
INTERIM CONSOLIDATED STATEMENTS OF EQUITY (Deficiency) (Unaudited) - CAD ($) | Total | Share capitals [member] | Contributed Surplus [Member] | Deficit [member] | Accumulated other comprehensive income loss [member] |
Balance, amount at Feb. 01, 2020 | $ 23,349,000 | $ 112,843,000 | $ 1,577,000 | $ (92,278,000) | $ 1,207,000 |
Statement [Line Items] | |||||
Net income | (28,711,000) | 0 | 0 | (28,711,000) | |
Other comprehensive loss | 191,000 | 0 | 0 | 0 | 191,000 |
Total comprehensive loss | (28,520,000) | 0 | 0 | (28,711,000) | 191,000 |
Issuance of common shares | 3,000 | 4,000 | (1,000) | 0 | 0 |
Common shares issued on vesting of restricted stock units | (148,000) | 292,000 | (593,000) | 153,000 | 0 |
Stock-based compensation expense | 778,000 | 0 | 778,000 | 0 | 0 |
Balance, amount at Oct. 31, 2020 | (4,538,000) | 113,119,000 | 1,761,000 | (120,836,000) | 1,398,000 |
Balance, amount at Jan. 30, 2021 | (31,291,000) | 113,167,000 | 1,747,000 | (148,068,000) | 1,863,000 |
Statement [Line Items] | |||||
Net income | 76,836,000 | 0 | 0 | 76,836,000 | 0 |
Other comprehensive loss | 999,000 | 0 | 0 | 0 | 999,000 |
Total comprehensive loss | 77,835,000 | 0 | 0 | 76,836,000 | 999,000 |
Issuance of common shares | 0 | 0 | 0 | 0 | 0 |
Common shares issued on vesting of restricted stock units | (740,000) | 239,000 | (485,000) | (494,000) | 0 |
Stock-based compensation expense | 937,000 | 0 | 937,000 | 0 | 0 |
Balance, amount at Oct. 30, 2021 | $ 46,741,000 | $ 113,406,000 | $ 2,199,000 | $ (71,726,000) | $ 2,862,000 |
CORPORATE INFORMATION
CORPORATE INFORMATION | 9 Months Ended |
Oct. 30, 2021 | |
1. CORPORATE INFORMATION | 1. CORPORATE INFORMATION The unaudited condensed interim consolidated financial statements of DAVIDsTEA Inc. and its subsidiary, DAVIDsTEA (USA) Inc., (collectively, the “Company”) for the three and nine-month periods ended October 30, 2021 were authorized for issue in accordance with a resolution of the Board of Directors on December 13, 2021. The Company is incorporated and domiciled in Canada and its shares are publicly traded on the Nasdaq Global Market under the symbol “DTEA”. The registered office is located at 5430 Ferrier St., Town of Mount-Royal, Québec, Canada, H4P 1M2. The Company offers a specialty branded selection of high-quality proprietary loose-leaf teas, pre-packaged teas, tea sachets, tea-related accessories and gifts through its e-commerce platform at www.davidstea.com and the Amazon Marketplace, its wholesale customers which include over 3,300 grocery stores and pharmacies, and 18 company-owned stores across Canada. The Company offers primarily proprietary tea blends that are exclusive to the Company, as well as traditional single-origin teas and herbs. Our passion for and knowledge of tea permeates our culture and is rooted in an excitement to explore the taste, health and lifestyle elements of tea. With a focus on innovative flavours, wellness-driven ingredients and organic tea, the Company launches seasonally driven “collections” with a mission of making tea fun and accessible to all. Sales fluctuate from quarter to quarter. Sales are traditionally highest in the fourth fiscal quarter due to the year-end holiday season and tend to be lowest in the second and third fiscal quarters because of lower customer engagement during the summer months. In March 2020, the outbreak of a novel strain of coronavirus (“COVID-19”) was declared a global pandemic by the World Health Organization and on March 17, 2020, in response to the COVID-19 pandemic, the Company announced the temporary closure of all of its retail stores in Canada and the United States. On August 21, 2020, the Company re-opened 18 stores across Canada. The Company qualifies for the Canada Emergency Wage Subsidy and Canada Emergency Rent Subsidy under the COVID-19 Economic Response Plan of the Government of Canada. The Company recognized payroll subsidies for the three and nine-month periods ended October 30, 2021 of $0.6 million and $3.4 million, respectively (October 31, 2020 - $1.4 million and $3.4 million, respectively). The Company recognized rent subsidies for the three and nine-month periods ended October 30, 2021 of $0.2 million and $1 million, respectively (October 31, 2020 – $nil and $nil, respectively). The wage and rent subsidy program benefits were recognized in Selling, general and administration expenses. CCAA Proceedings On July 8, 2020, the Company announced that it was implementing a restructuring plan (the “Restructuring Plan”) under the Companies’ Creditors Arrangement Act (Canada) (the “CCAA”) in order to accelerate its transition to predominantly an online retailer and wholesaler of high-quality tea and accessories and that during the restructuring process, the Company would continue to operate its online business through its e-commerce platform and the Amazon Marketplace as well as its wholesale distribution channel. Following a careful review of available options to stem the losses from its brick-and-mortar footprint, the Company’s management and Board of Directors determined that the formal Restructuring Plan was the best option in the context of an increasingly challenging retail environment, further exacerbated by the COVID-19 pandemic. On July 8, 2020, the Company obtained an Initial Order pursuant to the CCAA from the Québec Superior Court in order to implement the Restructuring Plan (the “Initial Order”). On July 9, 2020, the United States Bankruptcy Court for the District of Delaware entered an order in favor of the Company under Chapter 15 of the United States Bankruptcy Code. The order of the United States Bankruptcy Court provisionally recognized the proceedings under the CCAA and enforced the Initial Order, in effect providing protection to the Company from creditor action against its assets in the United States. As part of its Restructuring Plan and further to obtaining the Initial Order, the Company, on July 10, 2020, sent notices to terminate leases for 82 of its stores in Canada and all 42 of its stores in the United States. These lease terminations were effective on August 9, 2020. On July 16, 2020, the Company obtained an Amended and Restated Initial Order from the Québec Superior Court, extending to September 17, 2020 the application of the Initial Order. The Amended and Restated Initial Order also dealt with certain administrative matters, particularly with regards to the lease terminations. On July 30, 2020, the Company sent notices to terminate leases for an additional 82 of its stores in Canada. These lease terminations were effective on August 29, 2020. On September 17, 2020, the Québec Superior Court extended the stay of all proceedings against the Company to December 15, 2020 and issued a claims process order (the “Claims Process Order”) establishing the claims procedures for the Company’s creditors under the CCAA. The Claims Process Order, among other things, set November 6, 2020 (the “Claims Bar Date”) as the time by which creditors had to submit their claims to PricewaterhouseCoopers (“PwC”), the Court-appointed Monitor. On December 15, 2020, the Québec Superior Court extended the stay of all proceedings against the Company to March 19, 2021. The Court also approved a retention plan for certain key employees (“KERP”) and created a priority charge over the debtors’ assets for the KERP in addition to extending the Claims Bar Date for certain Canadian employees until December 31, 2020. On March 19, 2021, the Québec Superior Court extended the stay of all proceedings against the Company to June 4, 2021, and addressed certain administrative matters. On May 7, 2021, the Company obtained an order from the Québec Superior Court authorizing the Company to file its plan of arrangement (the “Plan of Arrangement” or the “Plan”) under the CCAA and to call a creditors’ meeting to be held on June 11, 2021. The Court order also extended to July 16, 2021 the stay of all proceedings against the Company under the CCAA. At the creditors’ meeting held on June 11, 2021, the Plan of Arrangement was approved by the requisite majorities of creditors of DAVIDsTEA Inc. and its subsidiary, DAVIDsTEA (USA) Inc., respectively, in accordance with the CCAA, that is, a simple majority of creditors of DAVIDsTEA Inc. and of DAVIDsTEA (USA) Inc., voting separately, whose claims were affected by the Plan of Arrangement, representing in each case at least two-thirds in dollar value of all such claims duly filed in accordance with the CCAA proceedings. The Plan of Arrangement approved by the Company’s creditors on June 11, 2021 required that DAVIDsTEA Inc. distribute an aggregate amount of approximately $17.6 million to its creditors and those of DAVIDsTEA (USA) Inc. in full and final settlement of all claims affected by the Plan of Arrangement. On June 16, 2021, the Company was granted a sanction order (the “Sanction Order”) for the Plan of Arrangement from the Québec Superior Court and obtained recognition of the Sanction Order from the United States Bankruptcy Court for the District of Delaware under Chapter 15 of the United States Bankruptcy Code. On June 18, 2021, the Monitor issued a Certificate of Implementation in accordance with paragraph 16 of the Sanction Order, in which it certified that all the conditions precedent to the implementation of the Plan, as set forth in section 7.2 of the Plan, had been fulfilled or waived by the debtors; Upon issuance of the Certificate of Implementation, the Monitor began distributing funds to the creditors who had duly proven their claims as part of the claims process. On September 9, 2021, the Monitor filed a Certificate of Termination with the Québec Superior Court in accordance with paragraph 24 of the Sanction Order and declared the CCAA proceedings were terminated without further act or formality. |
BASIS OF PREPARATION and GOING
BASIS OF PREPARATION and GOING CONCERN UNCERTAINTY | 9 Months Ended |
Oct. 30, 2021 | |
2. BASIS OF PREPARATION AND GOING CONCERN UNCERTAINTY | 2. BASIS OF PREPARATION AND GOING CONCERN UNCERTAINTY These unaudited condensed interim consolidated financial statements have been prepared in accordance with IAS 34, “Interim Financial Reporting” as issued by the International Accounting Standards Board (“IASB”). Accordingly, these financial statements do not include all of the financial statement disclosures required for annual financial statements and should be read in conjunction with the Company’s audited consolidated financial statements for the year ended January 30, 2021, which have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the IASB. In management’s opinion, the unaudited condensed interim consolidated financial statements reflect all the adjustments that are necessary for a fair presentation of the results for the interim period presented. These unaudited condensed interim consolidated financial statements have been prepared using the accounting policies and methods of computation as outlined in Note 3 of the consolidated financial statements for the year ended January 30, 2021. Going Concern Uncertainty In December 2019, a novel strain of coronavirus, responsible for COVID-19, was first reported and was subsequently declared a pandemic by the World Health Organization in March 2020. The measures adopted by the federal, provincial and state governments in order to mitigate the spread of the outbreak required the Company to temporarily close all of its retail locations across North America effective March 17, 2020. On July 8, 2020, the Company announced that it was implementing the Restructuring Plan under applicable laws in both Canada and the United States in order to accelerate its transition to predominantly an online retailer and wholesaler of high-quality tea and accessories. As part of the Restructuring Plan, in July 2020, the Company sent notices to terminate leases for 164 of its stores in Canada and all 42 of its stores in the United States.On August 21, 2020, the Company re-opened 18 of its stores throughout Canada. Although the Company continues to offer its products directly to consumers through its online store and in supermarkets and drugstores across Canada, it is unlikely that customers will purchase its products at previous volumes through these alternative channels. Furthermore, the duration and impact of the COVID-19 pandemic is unknown and may influence consumer shopping behavior and consumer demand including online shopping. The Plan of Arrangement required approximately $17.6 million to be paid to the Company’s creditors in order to legally emerge from the formal restructuring process. This is expected to place increased risk on the Company’s available liquidity, especially considering the Company does not currently have access to any debt or financing arrangements. For the three and nine-month period ended October 30, 2021, the Company reported a net loss of $1.9 million and net income of $76.8 million, respectively which includes a gain on settlement of $77.7 million for the nine-month period ended October 30, 2021. The Company’s current liabilities total $20.3 million as at October 30, 2021. As at October 30, 2021, the Company held cash and accounts and other receivables of $18.0 million. The Company does not currently have any third-party financing available with which to meet any future financial obligations. The Company’s ability to continue as a going concern is dependent on its ability to stabilize its business from unfavorable trend lines, and by focusing on how to grow its product portfolio including sales and customer service execution. The Company transitioned to a digital-first organization with a leaner, more sustainable physical presence that complements a growing world-class online and grocery business, supported by a right-sized support organization. Management believes that there is material uncertainty surrounding the Company’s ability to execute the strategy necessary to return to sustained profitability in the current environment, including the unpredictability surrounding the recovery from the COVID-19 pandemic, and changes in consumer behavior. As a result, these events and conditions indicate that a material uncertainty exists that raises substantial doubt about the Company’s ability to continue as a going concern and, therefore, realize its assets and discharge its liabilities in the normal course of business. These interim condensed consolidated financial statements have been prepared on a going concern basis, which assumes the Company will continue its operations for the foreseeable future and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business. These interim condensed consolidated financial statements as at and for the three and nine-months ended October 30, 2021 do not include any adjustments to the carrying amounts and classification of assets, liabilities and reported expenses that may otherwise be required if the going concern basis was not appropriate. Such adjustments could be material. |
CHANGES IN ACCOUNTING PRINCIPLE
CHANGES IN ACCOUNTING PRINCIPLES | 9 Months Ended |
Oct. 30, 2021 | |
3. CHANGES IN ACCOUNTING PRINCIPLES | 3. CHANGES IN ACCOUNTING PRINCIPLES Change in the pattern of consumption of intangible assets Intangible assets are initially recorded at cost. Intangible assets with finite lives are amortized over their useful economic life. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life are considered to modify the amortization period or method, as appropriate, and are treated as changes in accounting estimates. In the first quarter of 2021 the Company reviewed the pattern of consumption of its intangible assets. The Company previously used the declining method at the rate of 30% per annum. The Company changed the method of depreciation for intangible assets to a straight-line basis over the assets’ useful economic life to better reflect the underlying pattern of consumption. Recently Issued Accounting Pronouncements Costs necessary to sell inventories (IAS 2) agenda decision At its June 2021 meeting, the IFRS Interpretations Committee finalised an agenda decision about the costs an entity includes as the “estimated costs necessary to make the sale” when determining the net realizable value of inventories. The IFRS Interpretations Committee concluded that when determining the net realizable value of inventories, an entity estimates the costs necessary to make the sale in the ordinary course of business, which requires the exercise of judgment. The company does not expect any impact on it results. COVID-19 related rent concessions On May 28, 2020, the IASB issued an amendment to IFRS 16, “Leases” to make it easier for lessees to account for COVID-19-related rent concessions such as rent holidays and temporary rent reductions. In April 2021, the IASB extended the relief to cover rent concessions that reduce lease payments due on or before June 30, 2022. The amendment exempts lessees from having to consider individual lease contracts to determine whether rent concessions occurring as a direct consequence of the COVID-19 pandemic are lease modifications and allows lessees to account for such rent concessions as if they were not lease modifications. It applies to COVID-19-related rent concessions that reduce lease payments due on or before June 30, 2021. The amendment was effective as of June 1, 2020 but could be applied immediately in any financial statements; interim or annual, not yet authorized for issue. The Company applied the practical expedient to all rent concessions meeting the criteria as set out in the amendment, as of February 2, 2020. With respect to rent concessions not meeting the definition of a lease modification, the Company elected to account for such concessions by continuing to account for the lease liability and right-of-use asset using the rights and obligations of the existing lease and recognizing a separate lease payable in the period in which the allocated lease cash payment is due. As a result of the Initial Order obtained from the Québec Superior Court on July 8, 2020, any rent concessions provided by landlords were accordingly nullified. |
SIGNIFICANT ACCOUNTING JUDGEMEN
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS | 9 Months Ended |
Oct. 30, 2021 | |
4. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS | 4. SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS The preparation of condensed interim consolidated financial statements requires management to make estimates and assumptions using judgment that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense during the reporting period. Estimates and other judgments are continually evaluated and are based on management’s experience and other factors, including expectations about future events that are believed to be reasonable under the circumstances. Actual results may differ from those estimates. In preparing these unaudited condensed interim consolidated financial statements, critical judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those referred to in Note 5 of the consolidated financial statements for the year ended January 30, 2021. |
PROPERTY AND EQUIPMENT AND RIGH
PROPERTY AND EQUIPMENT AND RIGHT-OF-USE ASSETS | 9 Months Ended |
Oct. 30, 2021 | |
5. PROPERTY AND EQUIPMENT AND RIGHT-OF-USE ASSETS | 5. PROPERTY AND EQUIPMENT AND RIGHT-OF-USE ASSETS As a result of the impairment assessment and the Company’s decision to implement its Restructuring Plan and to accelerate its transition to predominately an online retailer, the Company recorded an impairment loss of $nil and $13.2 million for the three and nine-month periods ended October 31, 2020, respectively, related to property and equipment, and $nil and $26.8 respectively, related to right of use assets. Included in the amount above of $40 million, $37.4 million relates to the 206 stores permanently closed as a result of the Restructuring Plan, and is recorded in Restructuring Plan activities, net (Note 10) in the interim consolidated statement of income (loss) and comprehensive income (loss). The remaining $2.6 million of impairment loss was determined by comparing the carrying amount of the cash-generating units’ net assets with their respective recoverable amounts based on value in use, and is recorded in Selling, general and administration expenses (Note 9) in the interim consolidated statement of income (loss) and comprehensive income (loss). For these stores, a value in use of $791 was determined based on management’s best estimate of expected future cash flows from use over the remaining lease terms, considering historical experience and economic conditions, including the expected reopening date and the timeframe to foot traffic recovery in those locations, and was then discounted using a pre-tax discount rate of 13.0%. Depreciation of property and equipment for the three and nine-month periods ended October 30, 2021 was $398 and $1,193, respectively (October 31, 2020 - $237 and $1,781, respectively), and is recorded in Selling, general and administration expenses (Note 9) in the interim consolidated statement of income (loss) and comprehensive income (loss). Amortization of right-of-use assets for the three and nine-month periods ended October 30, 2021 was $242 and $536 respectively (October 31, 2020 - $189 and $2,882, respectively), and is recorded in Selling, general and administration expenses (Note 9) in the interim consolidated statement of income (loss) and comprehensive income (loss). |
LIABILITIES SUBJECT TO COMPROMI
LIABILITIES SUBJECT TO COMPROMISE | 9 Months Ended |
Oct. 30, 2021 | |
6. LIABILITIES SUBJECT TO COMPROMISE | 6. LIABILITIES SUBJECT TO COMPROMISE As a result of the Initial Order obtained on July 8, 2020 and subsequent amendments (Note 1), the payment of liabilities owing as of July 8, 2020 was stayed, and the outstanding liabilities, as well as any additional outstanding claims by creditors were subject to compromise pursuant to the Company’s Plan of Arrangement. Obligations for goods and services provided to the Company after the filing date of July 8, 2020 are discharged based on negotiated terms and are excluded from liabilities subject to compromise. The Plan of Arrangement was approved by the Company’s creditors on June 11, 2021 and required that the Company distribute an aggregate amount of approximately $17.6 million to its creditors in full and final settlement of all claims affected by the Plan of Arrangement. On June 18, 2021, the Monitor issued a Certificate of Implementation in which it certified that all the conditions precedent to the implementation of the Plan, including, among other things, remittance of funds to the Monitor for distribution to creditors, had been fulfilled or waived by the debtors. As a result of the final settlement, the Company recorded in the three-month ended July 31, 2021 a gain on the settlement of liabilities subject to compromise of $77.7 million which was reduced by $1.2 million of professional fees in connection with the CCAA proceedings. This net gain is presented in the second quarter and nine months ended October 30, 2021 interim consolidated statements of income (loss) and comprehensive income (loss) in Restructuring Plan activities, net and Recovery of income taxes as a net gain of $76.7 million and $1.0 million, respectively. On September 9, 2021, the Monitor filed a Certificate of Termination with the Québec Superior Court in accordance with paragraph 24 of the Sanction Order and declared the CCAA proceedings were terminated without further act or formality. As a result there are no liabilities subject to compromise as of July 31, 2021 and October 30, 2021. Disclaimed and modified leases Trade and other payables Severance Costs Liabilities subject to compromise $ $ $ $ Balance as at January 30, 2021 75,310 20,699 4,541 100,550 Reversals (1,771 ) (377 ) - (2,148 ) Balance as at May 1, 2021 73,539 20,322 4,541 98,402 Adjustments (1,309 ) (2,558 ) - (3,867 ) Additions - 742 - 742 Reversals (72,230 ) (18,506 ) (4,541 ) (95,277 ) Balance as at July 31, 2021 & October 30, 2021 - - - - |
SHARE CAPITAL
SHARE CAPITAL | 3 Months Ended |
Oct. 30, 2021 | |
7. SHARE CAPITAL | 7. SHARE CAPITAL Authorized An unlimited number of common shares. Issued and outstanding October 30, January 30, 2021 2021 $ $ Share Capital - 26,359,969 Common shares (January 30, 2021 - 26,234,582) 113,406 113,167 During the three and nine-month periods ended October 30, 2021, nil and 125,387 common shares, respectively, (October 31, 2020 – 8,431 and 126,398 common shares, respectively) were issued in relation to the vesting of restricted stock units (“RSU”), resulting in an increase in share capital of $nil and $239, net of tax (October 31, 2020 — $20 and $292, net of tax respectively) and a reduction in contributed surplus of $nil and $485, respectively (October 31, 2020 — $39 and $593, respectively). Stock-based compensation As at October 30, 2021, 777,709 (October 31, 2020, 1,088,729) common shares remain available for issuance under the 2015 Omnibus Plan. No stock options were granted during the three and nine-month periods ended October 30, 2021 and October 31, 2020. A summary of the status of the Company’s stock option plan and changes during the nine-month periods are presented below. For the nine months ended October 30, October 31, 2021 2020 Weighted Weighted average average Options exercise Options exercise outstanding price outstanding price # $ # $ Outstanding, beginning of year 17,490 6.32 76,350 8.96 Exercised - - (4,000 ) 0.77 Forfeitures (8,000 ) 4.31 - - Outstanding, end of period 9,490 8.01 72,350 9.41 Exercisable, end of period 9,490 8.01 72,350 9.41 A summary of the status of the Company’s RSU plan and changes during the nine-month periods are presented below. For the nine months ended October 30, October 31, 2021 2020 Weighted Weighted average average RSUs fair value RSUs fair value outstanding per unit (1) outstanding per unit (1) # $ # $ Outstanding, beginning of year 1,306,101 1.70 749,522 2.17 Granted 727,217 4.55 1,177,222 1.44 Forfeitures (174,041 ) (2.56) (313,229 ) (1.67) Vested (125,387 ) (1.91) (126,398 ) (2.28) Vested, withheld for tax (130,562 ) (1.91) (128,760 ) (2.31) Outstanding, end of period 1,603,328 2.86 1,358,357 1.63 _____________ (1) Weighted average fair value per unit as at date of grant. During the three and nine-month periods ended October 30, 2021, the Company recognized a stock-based compensation expense of $392 and $937, respectively (October 31, 2020 — $198 and $778). |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Oct. 30, 2021 | |
8. INCOME TAXES | 8. INCOME TAXES Income tax expense is recognized based on management’s best estimate of the weighted average annual income tax rate expected for the full fiscal year. A reconciliation of the statutory income tax rate to the effective tax rate is as follows: For the three months ended For the nine months ended October 30, October 31, October 30, October 31, 2021 2020 2021 2020 % $ % $ % $ % $ Income tax provision (recovery) statutory rate 26.4 (492 ) 26.8 3,878 26.4 20,020 26.8 (7,694 ) Increase (decrease) in income tax provision (recovery) resulting from: Non-deductible items (5.7 ) 105 0.4 54 0.3 255 (0.6 ) 180 Unrecognized deferred income tax assets (20.7 ) 387 (27.2 ) (3,932 ) (26.7 ) (20,275 ) (26.2 ) 7,514 Recovery of income taxes - - - - (1.3 ) (1,000 ) - - Income tax provision (recovery) effective tax rate - - - - (1.3 ) (1,000 ) - - |
SELLING, GENERAL AND ADMINISTRA
SELLING, GENERAL AND ADMINISTRATION EXPENSES | 9 Months Ended |
Oct. 30, 2021 | |
9. SELLING, GENERAL AND ADMINISTRATION EXPENSES | 9. SELLING, GENERAL AND ADMINISTRATION EXPENSES For the three months ended For the nine months ended October 30, October 31, October 30, October 31, 2021 2020 2021 2020 $ $ $ $ Wages, salaries and employee benefits 3,804 3,496 10,917 15,879 Depreciation of property and equipment 398 237 1,193 1,781 Amortization of intangible assets 403 420 1,290 1,503 Amortization right-of-use asset 242 189 536 2,882 Marketing expenses 1,564 1,209 3,928 2,848 Stock-based compensation 392 198 937 778 Government emergency wage and rent subsidy (758 ) (1,446 ) (4,354 ) (3,445 ) Software implementation costs 641 - 3,095 - IT expenses 1,612 736 4,192 2,191 Credit card fees 447 547 1,426 1,736 Professional fees 236 611 1,131 1,682 Other selling, general and administration 1,261 923 4,230 5,487 Impairment of property and equipment and right-of-use assets - - - 2,561 10,242 7,120 28,521 35,883 |
RESTRUCTURING PLAN ACTIVITIES
RESTRUCTURING PLAN ACTIVITIES | 9 Months Ended |
Oct. 30, 2021 | |
10. RESTRUCTURING PLAN ACTIVITIES | 10. RESTRUCTURING PLAN ACTIVITIES For the three months ended For the nine months ended October 30, October 31, October 30, October 31, 2021 2020 2021 2020 $ $ $ $ Liabilities subject to compromise - (20,385 ) (78,861 ) (75,121 ) Professional fees 195 856 1,897 1,829 Income tax recovery - - (1,000 ) - Lease terminations - 6,710 - 49,588 Loss on disposal of property and equipment and right-of-use assets - 18 - 1,560 Severance costs - (337 ) - 4,832 Interest and penalties related to unpaid occupancy charges - 146 - 1,147 Store closure related costs - 2,249 - 2,783 Impairment of property and equipment and right-of-use assets - - - 37,399 195 (10,743 ) (77,964 ) 24,017 Presented in: Restructuring plan activities, net 195 (10,743 ) (76,964 ) 24,017 Recovery of income taxes - - (1,000 ) - 195 (10,743 ) (77,964 ) 24,017 |
EARNINGS (LOSS) PER SHARE
EARNINGS (LOSS) PER SHARE | 9 Months Ended |
Oct. 30, 2021 | |
11. EARNINGS (LOSS) PER SHARE | 11. EARNINGS (LOSS) PER SHARE Basic earnings (loss) per share (“EPS”) amounts are calculated by dividing the net income (loss) for the period attributable to ordinary equity holders by the weighted average number of ordinary shares outstanding during the period. Diluted EPS amounts are calculated by dividing the net income (loss) attributable to ordinary equity holders by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares, unless these would be anti‑dilutive. The following reflects the net earnings (loss) and share data used in the basic and diluted EPS computations: For the three months ended For the nine months ended October 30, October 31, October 30, October 31, 2021 2020 2021 2020 $ $ $ $ Net earnings (loss) for basic EPS (1,864 ) 14,467 76,836 (28,711 ) Weighted average number of shares outstanding: Basic 26,359,969 26,214,573 26,300,289 26,143,963 Fully diluted 26,359,969 26,767,470 27,584,128 26,143,963 Net earnings (loss) per share: Basic (0.07) 0.55 2.92 (1.10) Fully diluted (0.07) 0.54 2.79 (1.10) |
RELATED PARTY DISCLOSURES
RELATED PARTY DISCLOSURES | 9 Months Ended |
Oct. 30, 2021 | |
RELATED PARTY DISCLOSURES | |
12. RELATED PARTY DISCLOSURES | 12. RELATED PARTY DISCLOSURES Transactions with related parties are measured at the exchange amount, being the consideration established and agreed to by the related parties. During the three and nine-month periods ended October 30, 2021, the Company purchased merchandise for resale amounting to $77 and $306, respectively (October 31, 2020 - $50 and $76, respectively) and provided infrastructure and administrative services of $11 and $23, respectively (October 31, 2020 - $5 and $80, respectively) to a company controlled by one of its executive employees. As of October 30, 2021, an amount of $41 was outstanding and presented in Trade and other payables. The Company did not have any spending for the three and nine-month periods (October 31, 2020 — $nil and $53, respectively) for consulting services from a related party of the principal shareholder. Loan to a Company controlled by one of the Company’s executive employees During the second quarter of 2019, the Company entered into a secured loan agreement with Oink Oink Candy Inc., doing business as “Squish,” as borrower, and Rainy Day Investments Ltd. (“RDI”), as guarantor pursuant to which the Company agreed to lend to Squish an amount of up to $4.0 million, amended on September 13, 2019 to reflect a maximum amount available under the facility of $2.0 million. RDI guaranteed all of Squish’s obligations to the Company and, as security in full for the guarantee, gave a movable hypothec (or lien) in favor of the Company on its shares of the Company. Squish is a company controlled by Sarah Segal, the Chief Executive Officer and Chief Brand Officer of the Company and a member of the Board of Directors. RDI, the principal shareholder of the Company, is controlled by Herschel Segal, Strategic Advisor of the Company and recently retired Chairman of the Board of Directors. The Company and Squish previously entered into a Collaboration and Shared Services Agreement pursuant to which they collaborate on and share various services and infrastructure. During the first quarter of 2020, the loan of $2.0 million and accrued interest of $45, including $19 which was earned in the first quarter of 2020, was fully repaid. |
SEGMENT INFORMATION
SEGMENT INFORMATION | 9 Months Ended |
Oct. 30, 2021 | |
SEGMENT INFORMATION | |
13. SEGMENT INFORMATION | 13. SEGMENT INFORMATION An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses. During the year ended January 30, 2021, the Company reviewed its operations and determined that its operating segments are geographic components. The Company has concluded that it has two operating segments, Canada and the United States, that derive their revenues from the online, retail and wholesale sale of tea, tea accessories and food and beverages. The Company’s Chief Executive and Brand Officer and President, Chief Financial and Operations Officer (the chief operating decision makers or “CODM”) make decisions about resources to be allocated and assesses performance of these segments. In the prior year the operating segments were the retail premises, and the reportable segments were Canada and the United States (the “U.S.”). As a result, there is no impact on prior period information as reportable segments were previously Canada and the U.S. The Company derives revenue from the following products: For the three months ended For the nine months ended October 30, October 31, October 30, October 31, 2021 2020 2021 2020 $ $ $ $ Tea 19,054 22,989 55,192 69,004 Tea accessories 2,723 3,183 8,129 10,868 Food and beverages 426 53 874 1,625 22,203 26,225 64,195 81,497 Property and equipment, right-of-use assets and intangible assets by country are as follows: October 30, January 30, 2021 2021 $ $ Canada 7,152 6,895 US - - 7,152 6,895 Results from operating activities before corporate expenses per country are as follows: For the three months ended For the nine months ended October 30, 2021 October 30, 2021 Canada US Consolidated Canada US Consolidated $ $ $ $ $ $ Sales 17,949 4,254 22,203 51,124 13,071 64,195 Cost of sales 10,891 2,696 13,587 29,480 7,336 36,816 Gross profit 7,058 1,558 8,616 21,644 5,735 27,379 Selling, general and administration expenses (allocated) 3,096 422 3,518 7,818 1,465 9,283 Results from operating activities before corporate expenses 3,962 1,136 5,098 13,826 4,270 18,096 Selling, general and administration expenses (non-allocated) 6,724 19,238 Restructuring plan activities, net 195 (76,964 ) Results from operating activities (1,821 ) 75,822 Finance costs 71 104 Finance income (28 ) (118 ) Net income (loss) before income taxes (1,864 ) 75,836 For the three months ended For the nine months ended October 31, 2020 October 31, 2020 Canada US Consolidated Canada US Consolidated $ $ $ $ $ $ Sales 20,465 5,760 26,225 61,497 20,000 81,497 Cost of sales 11,994 3,152 15,399 36,851 10,558 47,409 Gross profit 8,471 2,608 10,826 24,646 9,442 34,088 Selling, general and administration expenses (allocated) 2,699 272 3,252 14,357 3,661 18,018 Impairment of property and equipment and right-of-use assets 0 2,561 2,561 Results from operating activities before corporate expenses 5,772 2,336 7,574 7,728 5,781 13,509 Selling, general and administration expenses (non-allocated) 3,868 15,304 Restructuring plan activities, net (10,743 ) 24,017 Results from operating activities 14,449 (25,812 ) Finance costs 35 3,260 Finance income (53 ) (361 ) Net income (loss) before income taxes 14,467 (28,711 ) |
FINANCIAL RISK MANAGEMENT
FINANCIAL RISK MANAGEMENT | 9 Months Ended |
Oct. 30, 2021 | |
FINANCIAL RISK MANAGEMENT | |
14. FINANCIAL RISK MANAGEMENT | 14. FINANCIAL RISK MANAGEMENT The Company’s activities expose it to a variety of financial risks, including risks related to foreign exchange, interest rate, liquidity and credit. Currency Risk — Foreign Exchange Risk Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Given that some of its purchases are denominated in U.S. dollars, the Company is exposed to foreign exchange risk. The Company’s foreign exchange risk is largely limited to currency fluctuations between the Canadian and U.S. dollars. The Company is exposed to currency risk through its cash, accounts receivable and accounts payable denominated in U.S. dollars. Assuming that all other variables remain constant, a revaluation of these monetary assets and liabilities due to a 5% rise or fall in the Canadian dollar against the U.S. dollar would have resulted in an increase or decrease to net income (loss) in the amount of $218 (October 31, 2020 - $587). The Company’s foreign exchange exposure is as follows: October 30, January 30, 2021 2021 US$ US$ Cash 536 630 Accounts and other receivables 368 465 Prepaid expenses and deposits 226 5,394 Trade and other payables 5,486 750 The Company’s U.S. subsidiary’s transactions are denominated in U.S. dollars. Market Risk — Interest Rate Risk Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Financial instruments that potentially subject the Company to cash flow interest rate risk include financial assets and liabilities with variable interest rates and consist primarily of cash on hand. Liquidity Risk Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. The Company’s approach to managing liquidity risk is to ensure, to the extent possible, that it will always have sufficient liquidity to meet liabilities when due. The Company’s liquidity follows a seasonal pattern based on the timing of inventory purchases and capital expenditures. The Company is exposed to this risk mainly in respect of its trade and other payables, lease and purchase obligations. As at October 30, 2021, the Company had $13.4 million in cash. The Company expects to finance its working capital needs and investments in infrastructure through cash flows from operations and cash on hand. At October 30, 2021, trade and other payables amounted to $14.0 million (January 30, 2021 - $4.2 million) and purchase obligations amounted to $5.9 million, net of $0.3 million of advances (January 30, 2021 - $14.1 million, net of $6.8 million of advances). All trade and other payables are expected to be paid according to negotiated vendor terms. Refer to Note 2 for details with respect to the going concern uncertainty. Credit Risk The Company is exposed to credit risk resulting from the possibility that counterparties may default on their financial obligations to the Company. The Company’s maximum exposure to credit risk at the reporting date is equal to the carrying value of receivables. Accounts receivable primarily consist of receivables from retail customers who pay by credit card, receivables from our wholesale channel sales, recoveries of credits from suppliers for returned or damaged products, and receivables from other companies for sales of products, gift cards and other services. Credit card payments have minimal credit risk and the limited number of corporate receivables is closely monitored. As a result, expected credit loss on these financial assets is not significant. |
LIABILITIES SUBJECT TO COMPRO_2
LIABILITIES SUBJECT TO COMPROMISE (Tables) | 9 Months Ended |
Oct. 30, 2021 | |
Schedule of liability subject to compromise | Disclaimed and modified leases Trade and other payables Severance Costs Liabilities subject to compromise $ $ $ $ Balance as at January 30, 2021 75,310 20,699 4,541 100,550 Reversals (1,771 ) (377 ) - (2,148 ) Balance as at May 1, 2021 73,539 20,322 4,541 98,402 Adjustments (1,309 ) (2,558 ) - (3,867 ) Additions - 742 - 742 Reversals (72,230 ) (18,506 ) (4,541 ) (95,277 ) Balance as at July 31, 2021 & October 30, 2021 - - - - |
SHARE CAPITAL (Tables)
SHARE CAPITAL (Tables) | 9 Months Ended |
Oct. 30, 2021 | |
SHARE CAPITAL (Tables) | |
Summary of authorized, issued, and outstanding shares | October 30, January 30, 2021 2021 $ $ Share Capital - 26,359,969 Common shares (January 30, 2021 - 26,234,582) 113,406 113,167 |
Summary of stock option plan and periodic changes | For the nine months ended October 30, October 31, 2021 2020 Weighted Weighted average average Options exercise Options exercise outstanding price outstanding price # $ # $ Outstanding, beginning of year 17,490 6.32 76,350 8.96 Exercised - - (4,000 ) 0.77 Forfeitures (8,000 ) 4.31 - - Outstanding, end of period 9,490 8.01 72,350 9.41 Exercisable, end of period 9,490 8.01 72,350 9.41 |
Summary of the status of the RSU plan and periodic changes | For the nine months ended October 30, October 31, 2021 2020 Weighted Weighted average average RSUs fair value RSUs fair value outstanding per unit (1) outstanding per unit (1) # $ # $ Outstanding, beginning of year 1,306,101 1.70 749,522 2.17 Granted 727,217 4.55 1,177,222 1.44 Forfeitures (174,041 ) (2.56) (313,229 ) (1.67) Vested (125,387 ) (1.91) (126,398 ) (2.28) Vested, withheld for tax (130,562 ) (1.91) (128,760 ) (2.31) Outstanding, end of period 1,603,328 2.86 1,358,357 1.63 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 9 Months Ended |
Oct. 30, 2021 | |
INCOME TAXES (Tables) | |
Schedule of the reconciliation of the statutory income tax rate to the effective tax rate | For the three months ended For the nine months ended October 30, October 31, October 30, October 31, 2021 2020 2021 2020 % $ % $ % $ % $ Income tax provision (recovery) statutory rate 26.4 (492 ) 26.8 3,878 26.4 20,020 26.8 (7,694 ) Increase (decrease) in income tax provision (recovery) resulting from: Non-deductible items (5.7 ) 105 0.4 54 0.3 255 (0.6 ) 180 Unrecognized deferred income tax assets (20.7 ) 387 (27.2 ) (3,932 ) (26.7 ) (20,275 ) (26.2 ) 7,514 Recovery of income taxes - - - - (1.3 ) (1,000 ) - - Income tax provision (recovery) effective tax rate - - - - (1.3 ) (1,000 ) - - |
SELLING GENERAL AND ADMINISTRAT
SELLING GENERAL AND ADMINISTRATION EXPENSES (Tables) | 9 Months Ended |
Oct. 30, 2021 | |
SELLING GENERAL AND ADMINISTRATION EXPENSES (Tables) | |
Schedule of selling, general and administrative expenses | For the three months ended For the nine months ended October 30, October 31, October 30, October 31, 2021 2020 2021 2020 $ $ $ $ Wages, salaries and employee benefits 3,804 3,496 10,917 15,879 Depreciation of property and equipment 398 237 1,193 1,781 Amortization of intangible assets 403 420 1,290 1,503 Amortization right-of-use asset 242 189 536 2,882 Marketing expenses 1,564 1,209 3,928 2,848 Stock-based compensation 392 198 937 778 Government emergency wage and rent subsidy (758 ) (1,446 ) (4,354 ) (3,445 ) Software implementation costs 641 - 3,095 - IT expenses 1,612 736 4,192 2,191 Credit card fees 447 547 1,426 1,736 Professional fees 236 611 1,131 1,682 Other selling, general and administration 1,261 923 4,230 5,487 Impairment of property and equipment and right-of-use assets - - - 2,561 10,242 7,120 28,521 35,883 |
RESTRUCTURING PLAN ACTIVITIES (
RESTRUCTURING PLAN ACTIVITIES (Tables) | 9 Months Ended |
Oct. 30, 2021 | |
Summary of restructuring activities | For the three months ended For the nine months ended October 30, October 31, October 30, October 31, 2021 2020 2021 2020 $ $ $ $ Liabilities subject to compromise - (20,385 ) (78,861 ) (75,121 ) Professional fees 195 856 1,897 1,829 Income tax recovery - - (1,000 ) - Lease terminations - 6,710 - 49,588 Loss on disposal of property and equipment and right-of-use assets - 18 - 1,560 Severance costs - (337 ) - 4,832 Interest and penalties related to unpaid occupancy charges - 146 - 1,147 Store closure related costs - 2,249 - 2,783 Impairment of property and equipment and right-of-use assets - - - 37,399 195 (10,743 ) (77,964 ) 24,017 Presented in: Restructuring plan activities, net 195 (10,743 ) (76,964 ) 24,017 Recovery of income taxes - - (1,000 ) - 195 (10,743 ) (77,964 ) 24,017 |
EARNINGS (LOSS) PER SHARE (Tabl
EARNINGS (LOSS) PER SHARE (Tables) | 9 Months Ended |
Oct. 30, 2021 | |
Schedule of reconciliation of basic and diluted EPS | For the three months ended For the nine months ended October 30, October 31, October 30, October 31, 2021 2020 2021 2020 $ $ $ $ Net earnings (loss) for basic EPS (1,864 ) 14,467 76,836 (28,711 ) Weighted average number of shares outstanding: Basic 26,359,969 26,214,573 26,300,289 26,143,963 Fully diluted 26,359,969 26,767,470 27,584,128 26,143,963 Net earnings (loss) per share: Basic (0.07) 0.55 2.92 (1.10) Fully diluted (0.07) 0.54 2.79 (1.10) |
SEGMENT INFORMATION (Tables)
SEGMENT INFORMATION (Tables) | 9 Months Ended |
Oct. 30, 2021 | |
SEGMENT INFORMATION | |
Schedule of revenue by product | For the three months ended For the nine months ended October 30, October 31, October 30, October 31, 2021 2020 2021 2020 $ $ $ $ Tea 19,054 22,989 55,192 69,004 Tea accessories 2,723 3,183 8,129 10,868 Food and beverages 426 53 874 1,625 22,203 26,225 64,195 81,497 |
Schedule of property and equipment and intangible assets by country | October 30, January 30, 2021 2021 $ $ Canada 7,152 6,895 US - - 7,152 6,895 |
Schedule of gross profit per country | For the three months ended For the nine months ended October 30, 2021 October 30, 2021 Canada US Consolidated Canada US Consolidated $ $ $ $ $ $ Sales 17,949 4,254 22,203 51,124 13,071 64,195 Cost of sales 10,891 2,696 13,587 29,480 7,336 36,816 Gross profit 7,058 1,558 8,616 21,644 5,735 27,379 Selling, general and administration expenses (allocated) 3,096 422 3,518 7,818 1,465 9,283 Results from operating activities before corporate expenses 3,962 1,136 5,098 13,826 4,270 18,096 Selling, general and administration expenses (non-allocated) 6,724 19,238 Restructuring plan activities, net 195 (76,964 ) Results from operating activities (1,821 ) 75,822 Finance costs 71 104 Finance income (28 ) (118 ) Net income (loss) before income taxes (1,864 ) 75,836 For the three months ended For the nine months ended October 31, 2020 October 31, 2020 Canada US Consolidated Canada US Consolidated $ $ $ $ $ $ Sales 20,465 5,760 26,225 61,497 20,000 81,497 Cost of sales 11,994 3,152 15,399 36,851 10,558 47,409 Gross profit 8,471 2,608 10,826 24,646 9,442 34,088 Selling, general and administration expenses (allocated) 2,699 272 3,252 14,357 3,661 18,018 Impairment of property and equipment and right-of-use assets 0 2,561 2,561 Results from operating activities before corporate expenses 5,772 2,336 7,574 7,728 5,781 13,509 Selling, general and administration expenses (non-allocated) 3,868 15,304 Restructuring plan activities, net (10,743 ) 24,017 Results from operating activities 14,449 (25,812 ) Finance costs 35 3,260 Finance income (53 ) (361 ) Net income (loss) before income taxes 14,467 (28,711 ) |
FINANCIAL RISK MANAGEMENT (Tabl
FINANCIAL RISK MANAGEMENT (Tables) | 9 Months Ended |
Oct. 30, 2021 | |
FINANCIAL RISK MANAGEMENT | |
Summary of foreign exchange exposure | October 30, January 30, 2021 2021 US$ US$ Cash 536 630 Accounts and other receivables 368 465 Prepaid expenses and deposits 226 5,394 Trade and other payables 5,486 750 |
CORPORATE INFORMATION (Details
CORPORATE INFORMATION (Details Narrative) - CAD ($) $ in Millions | Jun. 11, 2021 | Oct. 30, 2021 | Oct. 31, 2020 | Oct. 30, 2021 | Oct. 31, 2020 |
Recognized payroll subsidies | $ 0.6 | $ 1.4 | $ 3.4 | $ 3.4 | |
Settlement amount to creditors | $ 17.6 | ||||
Recognized rent subsidies | $ 0.2 | $ 1 |
BASIS OF PREPARATION and GOIN_2
BASIS OF PREPARATION and GOING CONCERN UNCERTAINTY (Details Narrative) - CAD ($) $ in Millions | Jun. 11, 2021 | Oct. 30, 2021 | Jul. 31, 2021 | Oct. 30, 2021 |
Statement [Line Items] | ||||
Total current liabilities | $ 20.3 | $ 20.3 | ||
Net Income (loss) | (1.9) | (76.8) | ||
Gain on settlement | $ 77.7 | 77.7 | ||
Settlement amount to creditors | $ 17.6 | |||
Going Concern Uncertainty [Member] | ||||
Statement [Line Items] | ||||
Settlement amount to creditors | $ 17.6 | |||
Cash and accounts and other receivables | $ 18 |
PROPERTY AND EQUIPMENT AND RI_2
PROPERTY AND EQUIPMENT AND RIGHTOFUSE ASSETS (Details Narrative) - CAD ($) | 3 Months Ended | 9 Months Ended | ||
Oct. 30, 2021 | Oct. 31, 2020 | Oct. 30, 2021 | Oct. 31, 2020 | |
Impairment loss of property and equipment | $ 0 | $ 13,200,000 | ||
Impairment loss of right-of-use assets | 0 | 26,800,000 | ||
Value in use | $ 791,000 | $ 791,000 | ||
Pre-tax discount rate | 13.00% | 13.00% | ||
Depreciation | $ 398,000 | 237,000 | $ 1,193,000 | 1,781,000 |
Amortization of right-of-use assets | $ 242,000 | 189,000 | 536,000 | 2,882,000 |
Impairment of property, equipment and right-of-use assets | $ 2,600,000 | $ 2,600,000 | ||
Impairment of property, equipment and right-of-use assets related to 206 stores permanently closed | 37,400,000 | |||
Impairment of property and equipment | $ 40,000,000 |
LIABILITIES SUBJECT TO COMPRO_3
LIABILITIES SUBJECT TO COMPROMISE (Details) - CAD ($) $ in Thousands | 1 Months Ended | 9 Months Ended |
Jan. 30, 2021 | Oct. 30, 2021 | |
Liabilities Subject To Compromise [Member] | ||
Statement [Line Items] | ||
Balance, January 30, 2021 | $ 100,550 | |
Reversals | (2,148) | $ (95,277) |
Adjustments | (3,867) | |
Balance, May 1, 2021 | 98,402 | |
Balance as at July 31, 2021 & October 30, 2021 | 0 | |
Additions | 742 | |
Severance Costs [member] | ||
Statement [Line Items] | ||
Balance, January 30, 2021 | 4,541 | |
Reversals | 0 | (4,541) |
Adjustments | 0 | |
Balance, May 1, 2021 | 4,541 | |
Balance as at July 31, 2021 & October 30, 2021 | 0 | |
Additions | 0 | |
Trade and Other Payables [member] | ||
Statement [Line Items] | ||
Balance, January 30, 2021 | 20,699 | |
Reversals | (377) | (18,506) |
Adjustments | (2,558) | |
Balance, May 1, 2021 | 20,322 | |
Balance as at July 31, 2021 & October 30, 2021 | 0 | |
Additions | 742 | |
Disclaimed And Modified Leases [Member] | ||
Statement [Line Items] | ||
Balance, January 30, 2021 | 75,310 | |
Reversals | (1,771) | (72,230) |
Adjustments | (1,309) | |
Balance, May 1, 2021 | $ 73,539 | |
Balance as at July 31, 2021 & October 30, 2021 | 0 | |
Additions | $ 0 |
LIABILITIES SUBJECT TO COMPRO_4
LIABILITIES SUBJECT TO COMPROMISE (Details Narrative) - CAD ($) | Jun. 11, 2021 | Jul. 31, 2021 | Oct. 30, 2021 |
Gain on settlement | $ 77,700,000 | $ 77,700,000 | |
Reduced professional fees | 1,200,000 | ||
Gain recovery of income taxes | 1,000,000 | 1,000,000 | |
Restructuring Plan activities, net | $ 76,700,000 | $ 76,700,000 | |
Settlement amount to creditors | $ 17,600,000 |
SHARE CAPITAL (Details)
SHARE CAPITAL (Details) - CAD ($) $ in Thousands | Oct. 30, 2021 | Jan. 30, 2021 |
Share Capital - 26,359,969 Common shares (January 30, 2021 - 26,234,582) | $ 113,406 | $ 113,167 |
SHARE CAPITAL (Details 1)
SHARE CAPITAL (Details 1) - shares | 9 Months Ended | |
Oct. 30, 2021 | Oct. 31, 2020 | |
SHARE CAPITAL (Tables) | ||
Outstanding, beginning of year | 17,490 | 76,350 |
Outstanding, exercised | (4,000) | |
Outstanding, Forfeitures | (8,000) | |
Outstanding, end of period | 9,490 | 72,350 |
Exercisable, end of period | 9,490 | 72,350 |
Weighted average exercise price, beginning | 6.32 | 8.96 |
Weighted average exercise price, exercised | 0.77 | |
Weighted average exercise price, Forfeitures | 4.31 | |
Weighted average exercise price, ending | 8.01 | 9.41 |
Weighted average exercise price, exercisable | 8.01 | 9.41 |
SHARE CAPITAL (Details 2)
SHARE CAPITAL (Details 2) - shares | 9 Months Ended | |
Oct. 30, 2021 | Oct. 31, 2020 | |
SHARE CAPITAL (Tables) | ||
Outstanding, beginning of year | 1,306,101 | 749,522 |
Granted | 727,217 | 1,177,222 |
Forfeitures | (174,041) | (313,229) |
Vested | (125,387) | (126,398) |
Vested, withheld for tax | (130,562) | (128,760) |
Outstanding, end of period | 1,603,328 | 1,358,357 |
Outstanding, beginning of year | 2.17 | 1.70 |
Granted | 4.55 | 1.44 |
Forfeitures | (2.56) | (1.67) |
Vested | (1.91) | (2.28) |
Vested, withheld for tax | (1.91) | (2.31) |
Outstanding, end of period | 2.86 | 1.63 |
SHARE CAPITAL (Details Narrativ
SHARE CAPITAL (Details Narrative) - CAD ($) | 3 Months Ended | 9 Months Ended | ||
Oct. 30, 2021 | Oct. 31, 2020 | Oct. 30, 2021 | Oct. 31, 2020 | |
Statement [Line Items] | ||||
Stock-based compensation expense | $ 392,000 | $ 198,000 | $ 937,000 | $ 778,000 |
Common shares issued on vesting of restricted stock units, value | (740,000) | (148,000) | ||
Options [Member] | ||||
Statement [Line Items] | ||||
Reduction in the contributed surplus | 0 | 39,000 | $ 485,000 | $ 593,000 |
2015 Omnibus Plan [Member] | ||||
Statement [Line Items] | ||||
Maximum number of shares available for issuance | 777,709 | 1,088,729 | ||
Restricted Stock Units (RUS) [Member] | ||||
Statement [Line Items] | ||||
Common shares issued on vesting of restricted stock units, value | $ 0 | $ 20,000 | $ 239,000 | $ 292,000 |
Common shares issued on vesting of restricted stock units, shares | 0 | 8,431 | 125,387 | 126,398 |
INCOME TAXES (Details)
INCOME TAXES (Details) - CAD ($) | 3 Months Ended | 9 Months Ended | ||
Oct. 30, 2021 | Oct. 31, 2020 | Oct. 30, 2021 | Oct. 31, 2020 | |
INCOME TAXES (Tables) | ||||
Income tax recovery - statutory rate (as a percent) | 26.40% | 26.80% | 26.40% | 26.80% |
Non-deductible items (as a percent) | (5.70%) | 0.40% | 0.30% | (0.60%) |
Unrecognized (recognized) deferred income tax assets (as a percent) | (20.70%) | (27.20%) | (26.70%) | (26.20%) |
Income tax provision (recovery) - effective tax rate (as a percent) | 0.00% | 0.00% | (1.30%) | 0.00% |
Income tax provision (recovery) - effective tax rate (as a percent) | 0.00% | 0.00% | (1.30%) | 0.00% |
Income tax provision - statutory rate | $ (492,000) | $ 3,878,000 | $ 20,020,000 | $ (7,694,000) |
Non-deductible items | 105,000 | 54,000 | 255,000 | 180,000 |
Unrecognized (recognized) deferred income tax asset | $ 387,000 | $ (3,932,000) | (20,275,000) | 7,514,000 |
Income tax provision (recovery) - effective tax rate | (1,000,000) | |||
Income tax recovery - effective tax rate | $ (1,000,000) | $ 0 |
SELLING GENERAL AND ADMINISTR_2
SELLING GENERAL AND ADMINISTRATION EXPENSES (Details) - CAD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 30, 2021 | Oct. 31, 2020 | Oct. 30, 2021 | Oct. 31, 2020 | |
SELLING GENERAL AND ADMINISTRATION EXPENSES (Tables) | ||||
Wages, salaries and employee benefits | $ 3,804 | $ 3,496 | $ 10,917 | $ 15,879 |
Depreciation of property and equipment | 398 | 237 | 1,193 | 1,781 |
Amortization of intangible assets | 403 | 420 | 1,290 | 1,503 |
Amortization right-of-use asset | 242 | 189 | 536 | 2,882 |
Marketing expenses | 1,564 | 1,209 | 3,928 | 2,848 |
Stock-based compensation | 392 | 198 | 937 | 778 |
Government emergency wage subsidy | (758) | (1,446) | (4,354) | (3,445) |
Software implementation costs | 641 | 0 | 3,095 | 0 |
IT expenses | 1,612 | 736 | 4,192 | 2,191 |
Credit card fees | 447 | 547 | 1,426 | 1,736 |
Professional fees | 236 | 611 | 1,131 | 1,682 |
Other selling, general and administration | 1,261 | 923 | 4,230 | 5,487 |
Impairment of property and equipment and right-of-use asset | 0 | 0 | 0 | 2,561 |
Selling, General and Administration Expenses | $ 10,242 | $ 7,120 | $ 28,521 | $ 35,883 |
RESTRUCTURING PLAN ACTIVITIES_2
RESTRUCTURING PLAN ACTIVITIES (Details) - CAD ($) | 3 Months Ended | 9 Months Ended | ||
Oct. 30, 2021 | Oct. 31, 2020 | Oct. 30, 2021 | Oct. 31, 2020 | |
Liabilities subject to compromise | $ 0 | $ (20,385,000) | $ (78,861,000) | $ (75,121,000) |
Professional fee | 195,000 | 856,000 | 1,897,000 | 1,829,000 |
Income tax recovery | 0 | 0 | (1,000,000) | 0 |
Lease Terminations | 0 | 6,710,000 | 0 | 49,588,000 |
Loss on disposal of property and equipment and right-of-use assets | 0 | 18,000 | 0 | 1,560,000 |
Severance costs | 0 | (337,000) | 0 | 4,832,000 |
Interest and penalties related to unpaid occupancy charges | 0 | 146,000 | 0 | 1,147,000 |
Store closure related costs | 0 | 2,249,000 | 0 | 2,783,000 |
Impairment of property and equipment, right-of-use assets | 0 | 0 | 0 | 37,399,000 |
Restructuring plan activities, net | 195,000 | (10,743,000) | (76,964,000) | 24,017,000 |
Recovery of income taxes | 0 | 0 | (1,000,000) | 0 |
Total net | $ 195,000 | $ (10,743,000) | $ (77,964,000) | $ 24,017,000 |
EARNINGS (LOSS) PER SHARE (Deta
EARNINGS (LOSS) PER SHARE (Details) - CAD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 30, 2021 | Oct. 31, 2020 | Oct. 30, 2021 | Oct. 31, 2020 | |
Net earnings (loss) for basic EPS | $ (1,864) | $ 14,467 | $ 76,836 | $ (28,711) |
Basic | 26,359,969 | 26,214,573 | 26,300,289 | 26,143,963 |
Fully diluted | 26,359,969 | 26,767,470 | 27,584,128 | 26,143,963 |
Net earnings (loss) per share: Basic | (0.07) | 0.55 | 2.92 | (1.10) |
Net earnings (loss) per share: Diluted | (0.07) | 0.54 | 2.79 | (1.10) |
RELATED PARTY DISCLOSURES (Deta
RELATED PARTY DISCLOSURES (Details Narrative) - CAD ($) | 3 Months Ended | 9 Months Ended | |||
Oct. 30, 2021 | Oct. 31, 2020 | Oct. 30, 2021 | Oct. 31, 2020 | May 01, 2020 | |
Statement [Line Items] | |||||
Merchandise purchased from related party | $ 77,000 | $ 50,000 | $ 306,000 | $ 76,000 | |
Infrastructure and administrative services | 11,000 | 5,000 | 23,000 | 80,000 | |
Trade and other payables | 41,000 | 41,000 | |||
Consulting services | $ 0 | $ 0 | $ 0 | 53,000 | |
Revolving loan interest rate Description | the Company agreed to lend to Squish an amount of up to $4.0 million, amended on September 13, 2019 to reflect a maximum amount available under the facility of $2.0 million. | ||||
Squish [Member] | |||||
Statement [Line Items] | |||||
Earned in first quarter | 19,000 | ||||
Accrued interest | $ 45,000 | ||||
Loan amount repaid | $ 2,000,000 |
SEGMENT INFORMATION (Details)
SEGMENT INFORMATION (Details) - CAD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 30, 2021 | Oct. 31, 2020 | Oct. 30, 2021 | Oct. 31, 2020 | |
Statement [Line Items] | ||||
Sales | $ 22,203 | $ 26,225 | $ 64,195 | $ 81,497 |
Tea [Member] | ||||
Statement [Line Items] | ||||
Sales | 19,054 | 22,989 | 55,192 | 69,004 |
Tea Accessories [Member] | ||||
Statement [Line Items] | ||||
Sales | 2,723 | 3,183 | 8,129 | 10,868 |
Food And Beverages [Member] | ||||
Statement [Line Items] | ||||
Sales | $ 426 | $ 53 | $ 874 | $ 1,625 |
SEGMENT INFORMATION (Details 1)
SEGMENT INFORMATION (Details 1) - CAD ($) | Oct. 30, 2021 | Jan. 30, 2021 |
Statement [Line Items] | ||
Property and equipment and intangible assets | $ 7,152,000 | $ 6,895,000 |
United States Segment [Member] | ||
Statement [Line Items] | ||
Property and equipment and intangible assets | 0 | 0 |
Canada Segment [Member] | ||
Statement [Line Items] | ||
Property and equipment and intangible assets | $ 7,152,000 | $ 6,895,000 |
SEGMENT INFORMATION (Details 2)
SEGMENT INFORMATION (Details 2) - CAD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 30, 2021 | Oct. 31, 2020 | Oct. 30, 2021 | Oct. 31, 2020 | |
Statement [Line Items] | ||||
Sales | $ 22,203 | $ 26,225 | $ 64,195 | $ 81,497 |
Cost of sales | 13,587 | 15,399 | 36,816 | 47,409 |
Gross profit | 8,616 | 10,826 | 27,379 | 34,088 |
Results from operating activities | (1,821) | 14,449 | 75,822 | (25,812) |
Net Income (loss) before income taxes | (1,864) | 14,467 | 75,836 | (28,711) |
Operating Segments [Member] | Canada Segment [Member] | ||||
Statement [Line Items] | ||||
Sales | 17,949 | 20,465 | 51,124 | 61,497 |
Cost of sales | 10,891 | 11,994 | 29,480 | 36,851 |
Gross profit | 7,058 | 8,471 | 21,644 | 24,646 |
Selling, general and administration expenses (allocated) | 3,096 | 2,699 | 7,818 | 14,357 |
Impairment of property, equipment and right-of-use assets | 0 | 2,561 | ||
Results from operating activities before corporate expenses | 3,962 | 5,772 | 13,826 | 7,728 |
Operating Segments [Member] | United States Segment [Member] | ||||
Statement [Line Items] | ||||
Sales | 4,254 | 5,760 | 13,071 | 20,000 |
Cost of sales | 2,696 | 3,152 | 7,336 | 10,558 |
Gross profit | 1,558 | 2,608 | 5,735 | 9,442 |
Selling, general and administration expenses (allocated) | 422 | 272 | 1,465 | 3,661 |
Results from operating activities before corporate expenses | 1,136 | 2,336 | 4,270 | 5,781 |
Operating Segments [Member] | Consolidated Segments [Member] | ||||
Statement [Line Items] | ||||
Sales | 22,203 | 26,225 | 64,195 | 81,497 |
Cost of sales | 13,587 | 15,399 | 36,816 | 47,409 |
Gross profit | 8,616 | 10,826 | 27,379 | 34,088 |
Selling, general and administration expenses (allocated) | 3,518 | 3,252 | 9,283 | 18,018 |
Impairment of property, equipment and right-of-use assets | 2,561 | |||
Results from operating activities before corporate expenses | 5,098 | 7,574 | 18,096 | 13,509 |
Selling, general and administration expenses (non-allocated) | 6,724 | 3,868 | 19,238 | 15,304 |
Restructuring plan activities, net | 195 | (10,743) | (76,964) | 24,017 |
Results from operating activities | (1,821) | 14,449 | 75,822 | (25,812) |
Finance costs | 71 | 35 | 104 | 3,260 |
Finance income | (28) | (53) | (118) | (361) |
Net Income (loss) before income taxes | $ (1,864) | $ 14,467 | $ 75,836 | $ (28,711) |
FINANCIAL RISK MANAGEMENT (Deta
FINANCIAL RISK MANAGEMENT (Details) - Estimate For Allowed Claims [Member] - CAD ($) $ in Thousands | Oct. 30, 2021 | Jan. 30, 2021 |
Statement [Line Items] | ||
Foreign exchange exposure, cash | $ 536 | $ 630 |
Foreign exchange exposure, accounts and other receivable | 368 | 465 |
Foreign exchange exposure, prepaid expense and deposits | 226 | 5,394 |
Foreign exchange exposure, Trade and other payable | $ 5,486 | $ 750 |
FINANCIAL RISK MANAGEMENT (De_2
FINANCIAL RISK MANAGEMENT (Details Narrative) - CAD ($) $ in Thousands | 9 Months Ended | ||
Oct. 30, 2021 | Oct. 31, 2020 | Jan. 30, 2021 | |
Statement [Line Items] | |||
Trade and other payable | $ 14,000 | $ 4,200 | |
Purchase obligations | 5,900 | $ 14,100 | |
Purchase obligations, Advances | 300 | ||
Cash in hand | $ 13,400 | ||
Estimate For Allowed Claims [Member] | |||
Statement [Line Items] | |||
Change in assets and liabilities due currency translation, percentage | 5.00% | ||
Increase (decrease) in net loss due to change in exchange rate | $ 218 | $ 587 |