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

DISCONTINUED OPERATIONS AND DECONSOLIDATION OF TRICHOME

v3.23.1
DISCONTINUED OPERATIONS AND DECONSOLIDATION OF TRICHOME
 12 Months Ended
Dec. 31, 2022
Discontinued Operations And Deconsolidation [Abstract]  
DISCONTINUED OPERATIONS AND DECONSOLIDATION OF TRICHOME [Text Block]
NOTE 24:-
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
  
 
   
November 6,
2022
    
December 31,
2021
  
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,
    
Year ended December 31
  
   
2022
    
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.