Annual and transition report of foreign private issuers pursuant to Section 13 or 15(d)

DISCONTINUED OPERATIONS AND DECONSOLIDATION OF TRICHOME

v3.24.1
DISCONTINUED OPERATIONS AND DECONSOLIDATION OF TRICHOME
12 Months Ended
Dec. 31, 2023
Discontinued Operations And Deconsolidation [Abstract]  
DISCONTINUED OPERATIONS AND DECONSOLIDATION OF TRICHOME [Text Block]
NOTE 25:-
DISCONTINUED OPERATIONS AND DECONSOLIDATION OF TRICHOME
 
During 2022, following management strategic review of the operations of the Group, the Company decided to discontinue its operation in Canada and sell its subsidiaries in the segment, Trichome Group.
 
A discontinued operation is a component of the Group that represents a separate major line of business or geographical area of operations and that either has been disposed of or is classified as held for sale. The Trichome Group comprised the geographical operating segment for Canada.
 
Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the statement of profit and loss and other comprehensive income.
 
The Company identified its decision as indication for an impairment of Trichome group's cash generating unit (the "CGU"). The Company performed an analysis for the recoverability of the CGU and recognized an impairment of $115,112, which was recorded under Net loss from discontinued operations, net of tax.
 
On November 7, 2022, Trichome Group filed and obtained an initial order under CCAA (see Note 1), which is a Canadian federal law that permits a Canadian business to restructure its affairs while carrying on its business in the ordinary course with minimal disruption to its customers, suppliers and employees.
 
Per the CCAA proceeding, the Court has appointed a monitor, which oversees management activities. The administration of the CCAA process, principally relating to the powers provided to the court and the court appointed monitor, as well as the secured debtholder interests, removed certain elements of control of the business from the Company. As a result, the Company has determined that it no longer has a controlling financial interest over Trichome group as defined in IFRS 10, "Consolidations", and therefore has deconsolidated Trichome as of the date of the CCAA filing.
 
Following the deconsolidation, the carrying value of assets and liabilities of Trichome group were removed from the Company’s consolidated statements of financial position. The net amount deconsolidated from the Company’s balance sheet was $1,171, including $406 of cash, $7,228 of inventory and biological assets, $14,645 of property, plant and equipment, ($3,774) of bank loans and revolving credit line and ($17,334) of other assets and liabilities, net.
 
As a result, the Company recorded a loss from derecognition of net assets totaling $17,959 in non-operating income (loss) and the investment in Trichome group decreased to $nil.
 
In the context of the CCAA filing, there are no remaining liabilities to the Company or any of its consolidated subsidiaries related to the Canadian entities. The Trichome group was party to transactions with the Company and its consolidated subsidiaries entered into in the normal course of business; these transactions include recharge of various corporate expenses for services benefiting Trichome group and sell of inventory. Up to the date of the CCAA filing, these transactions were eliminated on consolidation and had no impact on the Company’s consolidated statement of profit or loss. After deconsolidating Trichome group, these transactions are treated as third-party transactions in the Company's financial statements. The amount of these related-party transactions during the period of November 7, 2022 to December 31, 2022 were $921.
 
The assets and liabilities of Trichome Group included in the consolidated statement of financial position as of December 31, 2021, and immediately prior to the deconsolidation on November 6, 2022, are as follows:
 
   
November 6,
2022
   
December 31,
2021
 
ASSETS
           
             
CURRENT ASSETS:
           
Cash and cash equivalents
 
$
406
   
$
3,171
 
Trade receivables
   
1,047
     
8,486
 
Other accounts receivable
   
2,194
     
11,198
 
Loans receivable
   
1,010
     
2,708
 
Biological assets
   
444
     
1,435
 
Inventories
   
6,784
     
9,715
 
                 
     
11,885
     
36,713
 
NON-CURRENT ASSETS:
               
Property, plant and equipment, net
   
14,645
     
21,236
 
Derivative assets
   
-
     
14
 
Right-of-use assets, net
   
10,999
     
14,570
 
Intangible assets, net
   
17,157
     
22,846
 
Goodwill
   
-
     
107,854
 
                 
     
42,801
     
166,520
 
                 
Total assets
 
$
54,686
   
$
203,233
 
                 
LIABILITIES
               
                 
CURRENT LIABILITIES:
               
Trade payables
 
$
7,266
   
$
4,667
 
Bank loans and credit facilities
   
3,774
     
8,684
 
Other accounts payable and accrued expenses
   
25,217
     
14,019
 
Current maturities of operating lease liabilities
   
869
     
841
 
                 
     
37,126
     
28,211
 
NON-CURRENT LIABILITIES:
               
Operating lease liabilities
   
13,517
     
14,883
 
Deferred tax liability, net
   
2,872
     
4,065
 
                 
     
16,389
     
18,948
 
                 
Total liabilities
 
$
53,515
   
$
47,159
 
 
The results of discontinued operations of Trichome are summarized as follows:
 
   
Period ended
November 6,
2022
   
Year ended
December 31,
2021
 
             
Revenues
 
$
28,171
   
$
20,247
 
Cost of revenues
   
24,227
     
16,960
 
                 
Gross profit before fair value adjustments
   
3,944
     
3,287
 
                 
Fair value adjustments:
               
Unrealized change in fair value of biological assets
   
399
     
902
 
Realized fair value adjustments on inventory sold in the period
   
(2,528
)
   
(226
)
                 
Total fair value adjustments
   
(2,129
)
   
676
 
                 
Gross profit
   
1,815
     
3,963
 
                 
General and administrative expenses
   
38,464
     
14,998
 
Impairment of goodwill, intangible assets, right-of-use assets and fixed assets
   
115,112
     
-
 
Selling and marketing expenses
   
4,912
     
2,270
 
Restructuring expenses
   
4,506
     
-
 
Share-based compensation
   
1,130
     
2,049
 
                 
Total operating expenses
   
164,124
     
19,317
 
                 
Operating loss
   
(162,309
)
   
(15,354
)
                 
Finance expenses, net
   
(5,264
)
   
(2,495
)
                 
Loss before income taxes
   
(167,573
)
   
(17,849
)
Income tax expense (benefit)
   
(1,194
)
   
5
 
                 
Net loss from discontinued operations, net of tax
 
$
(166,379
)
 
$
(17,854
)

 

Below are data of the net cash flows provided by (used in) the discontinued operations:
 
   
Period ended
November 6,
2022
   
Year ended
December 31,
2021
 
             
Operating activities
 
$
(300
)
 
$
(10,621
)
                 
Investing activities
 
$
(615
)
 
$
(1,434
)
                 
Financing activities
 
$
(1,850
)
 
$
14,864
 
 
  *)
From business combination dated, March 18, 2021.