ANNUAL REPORT 2018
Dear fellow shareholders,
As Chairman and CEO of Goodfood Market Corp., I am pleased to present the financial results and
operational achievements for Fiscal Year 2018, ended August 31, 2018.
Fiscal 2018 was another landmark year for Goodfood. Not only did we deliver solid financial
performance and strong growth in active subscribers, we also established a presence in Western
Canada with the launch of our new national platform. We are now serving Canadians from coast to
coast and results continue to exceed our expectations.
The enthusiasm for the Goodfood experience was felt throughout the year, and as a result, we are
now delivering more than one million delicious ready-to-cook meals every month, confirming our
clear leadership position as Canada’s best-selling home meal solutions brand.
Our active subscriber base has almost tripled, increasing from 31,000 at the end of Fiscal 2017 to
89,000 at the end of Fiscal 2018. Gross Merchandise Sales (“GMS”) also increased significantly to
$84 million, an increase of $61 million or 264% over Fiscal 2017. The fact that GMS is growing faster
than our number of subscribers demonstrates that our loyal subscriber base continues to grow and
order more meals per month. The increase in GMS is also a result of our successful introduction of
new meal solutions at higher price points. Our GMS run-rate totalled $107 million at the end of the
fiscal year, up from $36 million.
While delivering exceptional growth, Goodfood also generated positive cash flow from operating
activities during the last two quarters of the year, and for the year as a whole. This reflects our
continued strong growth in revenue, our additional operational efficiency gains and our ability to
generate economies of scale. Being cash flow positive allows us to pursue our aggressive growth
targets, while being less dependant on capital markets.
Operational Excellence
As we managed this growth, we also successfully launched our national platform with the opening
of a state-of-the art production facility in Calgary. With a production capacity of approximately
$100 million in annual revenue, this new facility is increasing our addressable market by over
11 million consumers.
At the same time, we are doubling the production and distribution facility in Montréal, which will
increase national delivery capacity to $500 million. With these two expansions, we also grew our
employee count, creating more than 700 jobs across the country.
We have also made significant investments in automation, while continuing to focus on improving
operational efficiencies, leading to a significant reduction in labour costs as a percentage of revenue
and improvement on margins. Our adjusted gross margin, at 33.6% for the year and 35.0% for the
fourth quarter, reached its highest level since the company’s founding.
Also of note, we were honoured with two prestigious awards in the last year, the first for business
strategy and the second for entrepreneurship. In April, we received the Mercuriades award from the
Federation of Chambers of Commerce of Quebec (FCCQ) in the Successful Business Strategy
category. Later in November, we were named the E&Y Young Entrepreneurs of the Year.
Expanded Product Offering
Our focus on the consumer experience is at the heart of what we do. We are always looking at how
we can tailor our product offering and make ordering as well as preparation simpler for our
consumers. During the year, our chefs created over 750 new recipes and added an additional
10 weekly options for our members to choose from, bringing the total to over 23 recipes per week
and catering to a wider variety of taste preferences. We also introduced the Easy Prep plan which
consists of 15-20 minute recipes that are a rapid, stress-free option for the preparation of wholesome
meals. This plan includes set recipes with our usual high-quality ingredients already partially
prepared.
Further, we have also launched our l’Artisan recipe collection featuring higher end cuts of protein,
responding to subscriber demand for a more upscale meal experience that can be enjoyed once or
twice a week. L’Artisan recipe options include proteins like NY strip, lamb chops or tiger shrimp.
These recipes have flexible price points, contingent on food cost, and are offered at a higher price
point than our classic meal collection.
2019 and Beyond
Fiscal 2018 ended on a high note with strong momentum. For Fiscal 2019, we will remain focused on
three key objectives: maintaining our market leadership and growing our subscriber base across the
country, continuing to improve the consumer experience by adding more recipes and meal options,
and continuing to invest in automation to improve our gross margin.
We also see a compelling opportunity and long runway for growth in the direct-to-consumer home
meal solutions industry, a market whose value we expect will grow to over $9 billion in the future.
Goodfood is uniquely positioned to gain significant market share in key segments of the industry by
leveraging our ability to deliver food across the country and capitalize on consumer tastes and
preferences. As we continue to expand product offering, we intend to roll out solutions for all three
meals of the day, with options that address all levels of engagements, from ready-to-cook to
ready-to-eat during Fiscal 2019.
Finally, we remain committed to environmental sustainability. Our pre-portioned meal kits and our
ability to order the precise amount of food required from suppliers go a long way towards reducing
food wastage both at home and in our supply chain. We recognize the need to do more and our
objective is to reduce packaging as much as possible, while balancing the need to maintain ingredient
freshness.
Thank you
In closing, I want to take this opportunity to express my gratitude to our 1,000 committed and
dedicated employees working tirelessly to promote Goodfood’s mission and values. I am extremely
proud of our team accomplishing so much during this past year. I am confident that we can continue
to achieve much more together in the years ahead. I also want to acknowledge the unwavering
support and vision of Goodfood’s Board of Directors, always available to provide valuable counsel.
Jonathan Ferrari
Chairman and CEO
Neil Cuggy
President and COO
Financial Statements of
GOODFOOD MARKET CORP.
Years ended August 31, 2018 and 2017
GOODFOOD MARKET CORP.
Table of Contents
Independent Auditors’ Report
Financial Statements
Statements of Financial Position
Statements of Loss and Comprehensive Loss
Statements of Changes in Equity
Statements of Cash Flows
Notes to the Financial Statements
Page
1
2
3
4
5 - 28
KPMG LLP
600 de Maisonneuve Blvd. West
Suite 1500, Tour KPMG
Montréal (Québec) H3A 0A3
Canada
Telephone
Fax
Internet
(514) 840-2100
(514) 840-2187
www.kpmg.ca
INDEPENDENT AUDITORS' REPORT
To the Shareholders of Goodfood Market Corp.
We have audited the accompanying financial statements of Goodfood Market Corp., which comprise
the statements of financial position as at August 31, 2018 and 2017, the statements of loss and
comprehensive loss, changes in equity and cash flows for the years then ended, and notes, comprising
a summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with International Financial Reporting Standards, and for such internal control as
management determines is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We
conducted our audits in accordance with Canadian generally accepted auditing standards. Those
standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial statements. The procedures selected depend on our judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, we consider internal control relevant to the entity’s preparation
and fair presentation of the financial statements in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies
used and the reasonableness of accounting estimates made by management, as well as evaluating the
overall presentation of the financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to
provide a basis for our audit opinion.
KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG International Cooperative
("KPMG International"), a Swiss entity.
KPMG Canada provides services to KPMG LLP.
Page 2
Opinion
In our opinion, the financial statements present fairly, in all material respects, the financial position of
Goodfood Market Corp. as at August 31, 2018 and 2017, and its financial performance and its cash
flows for the years then ended in accordance with International Financial Reporting Standards.
November 22, 2018
Montréal, Canada
*CPA auditor, CA, public accountancy permit No. A115894
GOODFOOD MARKET CORP.
Statements of Financial Position
August 31, 2018 and 2017
Assets
Current assets:
Cash and cash equivalents
Sales tax receivable
Inventories
Other current assets
Non-current assets:
Fixed assets
Intangible assets
Other non-current assets
Liabilities and Shareholders’ Equity
Current liabilities:
Line of credit
Accounts payable and accrued liabilities
Deferred revenue
Current portion of long-term debt
Non-current liabilities:
Long-term debt
Other non-current liabilities
Shareholders' equity:
Common shares
Contributed surplus
Deficit
Commitments
Subsequent events
See accompanying notes to financial statements.
On behalf of the Board:
______________________ Director
______________________ Director
Notes
2018
2017
6
7
8
9
10
12
11
12
12
13
14
22
24
$ 24,453,231
1,656,554
1,585,310
204,420
27,899,515
$ 17,548,417
773,462
382,374
152,682
18,856,935
6,005,563
55,170
349,142
2,300,147
70,602
82,558
$ 34,309,390
$ 21,310,242
$
500,000
11,343,138
2,521,999
527,750
14,892,887
$
–
3,529,373
841,037
116,662
4,487,072
1,564,105
1,396,412
17,853,404
395,147
76,444
4,958,663
36,283,498
781,778
(20,609,290)
27,144,084
382,197
(11,174,702)
16,455,986
16,351,579
$ 34,309,390
$ 21,310,242
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GOODFOOD MARKET CORP.
Statements of Loss and Comprehensive Loss
Years ended August 31, 2018 and 2017
Revenue
Cost of goods sold
Gross profit
Expenses:
Selling, general and administrative
Depreciation and amortization
Loss on disposal of fixed assets
Reverse acquisition of Mira VII
Net finance expenses (income):
Loss on remeasurement to fair value of convertible
notes
Other net finance income
Notes
2018
2017
$ 70,501,757
55,841,951
$ 19,796,240
16,206,503
14,659,806
3,589,737
23,617,947
461,415
113,097
–
24,192,459
7,360,829
54,032
–
1,805,410
9,220,271
–
(98,065)
(98,065)
4,257,944
(22,431)
4,235,513
5
16
15
Net loss, being comprehensive loss for the year
$ (9,434,588)
$
(9,866,047)
Basic and diluted loss per share
17
$
(0.19)
$
(0.32)
See accompanying notes to financial statements.
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GOODFOOD MARKET CORP.
Statements of Changes in Equity
Years ended August 31, 2018 and 2017
Common shares
Notes
Number
Amount
Contributed
surplus
Deficit
Total
Balance as at August 31, 2016
24,837,978 $
59,000
$
– $
(1,308,655) $ (1,249,655)
Net loss
−
−
Conversion of preferred shares 14
9,101,106
1,271,565
Conversion of convertible notes
16
2,645,718
5,291,436
Share issuance
14 10,542,883 21,085,766
–
–
–
–
Share issuance costs
Effect of reverse acquisition of
Mira VII
Share-based payments
Stock options exercised
14
5
18
18
−
(1,725,693)
193,186
562,500
1,125,000
–
−
−
219,612
63,647
37,010
(30,601)
(9,866,047)
(9,866,047)
–
–
–
–
–
−
−
1,271,565
5,291,436
21,085,766
(1,532,507)
1,125,000
219,612
6,409
Balance as at August 31, 2017
47,753,832 $27,144,084
$ 382,197 $ (11,174,702) $16,351,579
Net loss
−
−
Share issuance
14
4,000,000 10,000,000
Share issuance costs
Share-based payments
Stock options exercised
14
18
18
−
(925,942)
−
−
457,745
71,413
65,356
(58,164)
–
−
−
(9,434,588)
(9,434,588)
−
10,000,000
−
−
−
(925,942)
457,745
7,192
Balance as at August 31, 2018
51,825,245 $36,283,498
$ 781,778 $ (20,609,290)
$16,455,986
See accompanying notes to financial statements.
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GOODFOOD MARKET CORP.
Statements of Cash Flows
Years ended August 31, 2018 and 2017
Notes
2018
2017
Cash provided by (used in):
Operating:
Net loss
Adjustments for:
Depreciation and amortization
Share-based payments
Loss on disposal of fixed assets
Loss on remeasurement to fair value of
convertible notes
Other net finance income
Interest paid
Interest received
Consideration transferred for Mira VII in excess
5
of net assets acquired
Other non-current assets
Other non-current liabilities
Other non-cash items
Change in non-cash operating working capital:
Sales tax receivable
Inventories
Other current assets
Accounts payable and accrued liabilities
Deferred revenue
Financing:
Net borrowing under line of credit
Proceeds from issuance of long-term debt
Debt issue costs
Repayment of long-term debt
Proceeds from exercise of stock options
Proceeds from issuance of common shares
Share issuance costs
Proceeds from issuance of convertible notes
Investing:
Acquisition and deposits on fixed assets
Acquisition of intangible assets
8
9
$ (9,434,588)
$
(9,866,047)
461,415
457,745
113,097
–
(98,065)
(159,791)
262,585
–
(165,463)
1,173,201
–
(883,092)
(1,202,936)
(34,337)
8,107,162
1,680,962
54,032
219,612
–
4,257,944
(22,431)
(41,271)
41,788
1,262,644
(56,942)
–
22,534
(692,214)
(303,174)
(131,416)
2,551,633
818,014
277,895
(1,885,294)
500,000
2,500,000
(12,500)
(1,007,228)
7,192
10,000,000
(925,942)
–
–
231,865
–
(24,609)
6,409
21,085,766
(1,532,507)
1,000,000
11,061,522
20,766,924
(4,431,109)
(3,494)
(4,434,603)
(1,811,777)
(41,366)
(1,853,143)
Increase in cash and cash equivalents
6,904,814
17,028,487
Cash and cash equivalents, beginning of year
17,548,417
519,930
Cash and cash equivalents, end of year
$ 24,453,231
$ 17,548,417
See accompanying notes to financial statements.
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GOODFOOD MARKET CORP.
Notes to Financial Statements
Years ended August 31, 2018 and 2017
NOTE 1
REPORTING ENTITY
Goodfood Market Corp. (the "Company") is incorporated under the Canada Business Corporations Act and
is listed on the Toronto Stock Exchange. The Company is domiciled in Montréal, Québec, Canada where
its main production facility and administrative offices are located and has a secondary production facility in
Calgary, Alberta, Canada.
The Company is a home meal solution service company, delivering fresh ingredients that make it easy for
subscribers to prepare delicious meals at home every week. Subscribers select their favorite dishes from a
variety of originally developed recipes online. The Company prepares a personalized box of fresh
ingredients and delivers it to the subscriber's doorstep with easy step-by-step instructions.
On September 1, 2017, the Company completed an amalgamation under the Canada Business
Corporations Act with its wholly owned subsidiary, Goodfood Market Inc. Following the amalgamation, the
Company is comprised of a single legal entity and was renamed Goodfood Market Corp.
NOTE 2
BASIS OF PRESENTATION
2.1 STATEMENT OF COMPLIANCE
The financial statements of the Company have been prepared in accordance with International Financial
Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").
The financial statements of the Company for the years ended August 31, 2018 and 2017 were authorized
for issue by the Board of Directors ("Board") on November 22, 2018.
2.2 BASIS OF MEASUREMENT
The financial statements have been prepared on a historical cost basis.
2.3 FUNCTIONAL AND PRESENTATION CURRENCY
The financial statements are presented in Canadian dollars, which is also the Company’s functional
currency.
NOTE 3
SIGNIFICANT ACCOUNTING POLICIES
3.1 CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash held in financial institutions, outstanding deposits and short-term
deposits with a maturity of three months or less, which are subject to an insignificant risk of changes in
value.
3.2
INVENTORIES
Inventories are valued at the lower of cost and net realizable value. The cost of inventories is determined
using the first-in, first-out method. Net realizable value is the estimated selling price in the ordinary course
of business, less the estimated selling expenses.
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GOODFOOD MARKET CORP.
Notes to Financial Statements
Years ended August 31, 2018 and 2017
3.3 FIXED ASSETS
Items of fixed assets are recognized at cost less accumulated depreciation and accumulated impairment
losses. Cost includes expenditures that are directly attributable to acquiring and bringing the assets to a
working condition for their intended use.
When parts of an item of fixed assets have different useful lives, they are accounted for as separate items
(major components). Gains and losses on disposal of an item of fixed assets are determined by comparing
the proceeds from disposal with the carrying amount and are recognized in net loss.
The cost of replacing a part of an item of fixed assets is recognized in the carrying amount of the item if it
is probable that the future economic benefits embodied within the part will flow to the Company and its cost
can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of the day-
to-day servicing of property and equipment are recognized in net loss as incurred.
Depreciation is calculated over the cost of the asset less its residual value and is recognized in net loss on
a straight-line basis over the estimated useful lives of each part of an item of fixed assets, since this most
closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset.
Assets under construction are not depreciated and reflect the cost of fixed assets, which are not yet
available for their intended use. Assets under construction will start to be depreciated when they are
available for their intended use. Leased assets are depreciated over the shorter of the lease term and their
useful lives, unless it is reasonably certain that the Company will obtain ownership by the end of the lease
term. Estimates for depreciation methods, useful lives and residual values are reviewed at each reporting
date and adjusted prospectively, if appropriate.
Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets, as follows:
Asset
Furniture and fixtures
Machinery and equipment
Computer hardware
Leasehold improvements
3.4 LEASES
Period
5 years
3 to 20 years
3 to 5 years
Shorter of lease term and useful life
The determination of whether an arrangement is (or contains) a lease is based on the substance of the
arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the
arrangement is dependent on the use of a specific asset and the arrangement conveys a right to use the
asset, even if that asset is not explicitly specified in an arrangement.
A lease is classified at the inception date as a finance lease or an operating lease. A lease that transfers
substantially all the risks and rewards incidental to ownership to the Company is classified as a finance
lease.
Finance leases are capitalized at the commencement of the lease at the inception date fair value of the
leased property or, if lower, at the present value of the minimum lease payments. Lease payments are
apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate
of interest on the remaining balance of the liability. Finance charges are recognized in finance costs in net
loss.
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GOODFOOD MARKET CORP.
Notes to Financial Statements
Years ended August 31, 2018 and 2017
A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty
that the Company will obtain ownership by the end of the lease term, the asset is depreciated over the
shorter of the estimated useful life of the asset and the lease term.
An operating lease is a lease other than a finance lease. Operating lease payments are recognized in net
loss on a straight-line basis over the lease term. Lease incentives received are recognized as an integral
part of the total lease expense, over the term of the lease.
3.5
INTANGIBLE ASSETS
Intangible assets that have finite useful lives are measured at cost less accumulated amortization and any
accumulated impairment losses. Subsequent expenditure is capitalized only when it increases the future
economic benefits embodied in the specific asset to which it relates. All other expenditure is recognized in
net loss as incurred. Amortization is recognized in net loss on a straight-line basis over the estimated useful
lives of the finite life of intangible assets. The estimated useful life for the current years is as follows:
Asset
Software
The Company’s software assets are internally generated.
3.6
IMPAIRMENT OF NON-FINANCIAL ASSETS
Period
5 years
The Company reviews the carrying amount of its non-financial assets, which include intangible assets with
a finite useful life and fixed assets on each reporting date, in order to determine if specific events or changes
in circumstances indicate that their carrying amounts may not be recoverable.
For impairment testing purposes, assets that cannot be tested individually are aggregated into a cash
generating unit ("CGU"). An impairment loss is recognized if the carrying amount of an asset or a CGU
exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs
to sell and its value in use. In assessing value in use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that reflects current market assessments of the time value
of money and the risks specific to the asset. Impairment losses are recognized in net loss.
3.7 FINANCIAL INSTRUMENTS
Financial assets and liabilities are recognized when the Company becomes party to the contractual
provisions of the financial instrument.
The Company derecognizes a financial asset when the contractual rights to the cash flows from the asset
expire, or it transfers the rights to receive the contractual cash flows of the financial asset in a transaction
in which substantially all the risks and rewards of ownership of the financial asset are transferred.
The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled,
or expire.
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GOODFOOD MARKET CORP.
Notes to Financial Statements
Years ended August 31, 2018 and 2017
3.7.1 FINANCIAL ASSETS
Financial assets are classified in four categories:
Financial assets at fair value through profit or loss
A financial asset is classified at fair value through profit or loss if it is classified as held for trading or is
designated as such on initial recognition. Directly attributable transaction costs are recognized in net loss
as incurred. Financial assets at fair value through profit or loss are measured at fair value and changes
therein, including any interest or dividend income, are recognized in net loss. The Company has not
designated any financial assets at fair value through profit or loss.
Loans and receivables
These assets are initially measured at fair value plus any directly attributable transaction costs. Subsequent
to initial recognition, they are measured at amortized cost using the effective interest method. The Company
currently classifies its cash and cash equivalents, security deposits and amounts receivable as loans and
receivables.
Held-to-maturity investments
These assets are initially measured at fair value plus any directly attributable transaction costs. Subsequent
to initial recognition, they are measured at amortized cost using the effective interest method. The Company
has no financial assets as held-to-maturity.
Available-for-sale financial assets
These assets are initially measured at fair value plus any directly attributable transaction costs. Subsequent
to initial recognition, they are measured at fair value and changes therein, other than impairment losses
and foreign currency differences on debt instruments, are recognized in other comprehensive loss and
accumulated in the fair value reserve. When these assets are derecognized, the gain or loss accumulated
in equity is reclassified to net loss. The Company has no financial assets as available for sale.
Impairment
At each reporting date, the Company assesses whether its financial assets are impaired. Impairment losses
are recognized in net loss when there is objective evidence that the financial assets are impaired. Financial
assets are deemed to be impaired if there is objective evidence of impairment as a result of one or more
events that have occurred after the initial recognition of the asset (an incurred "loss event") and that loss
event has an impact on the estimated future cash flows of the financial asset that can be reliably estimated.
3.7.2 FINANCIAL LIABILITIES
The measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at fair value through profit or loss
A financial liability is classified at fair value through profit or loss if it is classified as held for trading or is
designated as such on initial recognition. Directly attributable transaction costs are recognized in net loss
as incurred. Financial liabilities at fair value through net loss are measured at fair value and changes therein,
including any interest expense, are recognized in net loss. The Company designated its convertible notes
as financial liabilities at fair value through profit or loss.
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GOODFOOD MARKET CORP.
Notes to Financial Statements
Years ended August 31, 2018 and 2017
Other financial liabilities
Other non-derivative financial liabilities are initially measured at fair value less any directly attributable
transaction costs. Subsequent to initial recognition, these liabilities are measured at amortized cost using
the effective interest method. The Company currently classifies the line of credit, accounts payable and
accrued liabilities, and long-term debt as other financial liabilities.
3.7.3 OFFSETTING OF FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are offset and the net amount is reported in the statements of
financial position if there is a currently enforceable legal right to offset the recognized amounts and there is
an intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously.
3.7.4 FAIR VALUE MEASUREMENT
In establishing the fair value, the Company uses a fair value hierarchy based on levels as defined below:
Level 1: defined as observable inputs such as quoted prices in active markets.
Level 2: defined as inputs other than quoted prices in active markets that are either directly or indirectly
observable.
Level 3: defined as inputs that are based on little or no observable market data and, therefore, requiring
entities to develop their own assumptions.
3.8 PROVISIONS
A provision is recognized if, as a result of a past event, the Company has a present legal or constructive
obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be
required to settle the obligation. Provisions are determined by discounting the expected future cash flows
at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific
to the liability. The unwinding of the discount is recognized as finance cost.
Contingent liability
A contingent liability is a possible obligation that arises from past events and of which the existence will be
confirmed only by the occurrence or non-occurrence of one or more uncertain future events not within the
control of the Company, or a present obligation that arises from past events (and therefore exists), but is
not recognized because it is not probable that a transfer or use of assets, provision of services or any other
transfer of economic benefits will be required to settle the obligation, or the amount of the obligation cannot
be estimated reliably.
3.9 SHORT-TERM EMPLOYEE BENEFITS
Short-term employee benefits are measured on an undiscounted basis and are expensed as the related
service is provided. A liability is recognized for the amount expected to be paid if the Company has a present
legal or constructive obligation to pay this amount as a result of past service provided by the employee and
the obligation can be estimated reliably.
9 | P a g e
GOODFOOD MARKET CORP.
Notes to Financial Statements
Years ended August 31, 2018 and 2017
3.10 SHARE-BASED PAYMENTS
Employees and directors of the Company receive remuneration in the form of share-based payments,
whereby employees render services as consideration for equity instruments (equity-settled transactions).
The cost of equity-settled transactions is determined by the fair value at the date when the grant is made
using an appropriate valuation model, further details of which are given in Note 18. That cost is recognized
as a compensation expense, together with a corresponding increase in equity (contributed surplus), over
the period in which the service and the performance conditions are fulfilled (the vesting period). The
cumulative expense recognized for equity-settled transactions at each reporting date until the vesting date
reflects the extent to which the vesting period has expired. The expense or credit in the statements of loss
and comprehensive loss for a period represents the movement in cumulative expense recognized at the
beginning and end of that period.
3.11 REVENUE
Revenue from the sale of goods is measured at the fair value of consideration received, net of refunds,
sales incentives and credits. Revenue is recognized when persuasive evidence exists that the significant
risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is
probable, and there is no continuing management involvement with the goods. For the sale of meal kits,
transfer of risks and rewards occurs upon the delivery of goods. Deferred revenue is recognized for
consideration received in advance of the related revenue. Sales and referral credits are also included in
deferred revenue and are measured based on the fair value of the sales and referral credits granted, taking
into consideration the estimated redemption percentage. Sales and referral credits are recognized as
revenue upon redemption and when the Company fulfills its obligation.
3.12 TAXES
Income tax expense comprises current and deferred income taxes. It is recognized in net loss except to the
extent that it relates to a business combination, or items recognized directly in equity or in other
comprehensive loss.
Current income tax
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the years
and any adjustment to the tax payable or receivable in respect of previous years. The amount of current
tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects
uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted
at the reporting date. Current tax assets and liabilities are offset only if certain criteria are met.
Deferred income tax
Deferred income tax is recognized in respect of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
10 | P a g e
GOODFOOD MARKET CORP.
Notes to Financial Statements
Years ended August 31, 2018 and 2017
Deferred income tax assets are recognized for unused tax losses, unused tax credits and deductible
temporary differences to the extent that it is probable that future taxable profits will be available against
which they can be used. Deferred income tax assets are reviewed at each reporting date and are reduced
to the extent that it is no longer probable that the related tax benefit will be realized; such reductions are
reversed when the probability of future taxable profits improves. Unrecognized deferred income tax assets
are reassessed at each reporting date and recognized to the extent that it has become probable that future
taxable profits will be available against which they can be used.
Deferred income tax is measured at the tax rates that are expected to be applied to temporary differences
when they reverse, using tax rates enacted or substantively enacted at the reporting date.
The measurement of deferred income tax reflects the tax consequences that would follow from the manner
in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets
and liabilities. Deferred income tax assets and liabilities are offset only if certain criteria are met.
Sales tax
Expenses and assets are recognized net of the amount of sales tax, except:
When the sales tax incurred on a purchase of assets or services is not recoverable from the taxation
authority, in which case, the sales tax is recognized as part of the cost of acquisition of the asset or as
part of the expense item, as applicable; and
When receivables and payables are stated with the amount of sales tax included.
The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of
receivables or payables in the statements of financial position.
3.13 FOREIGN CURRENCY
Transactions in foreign currencies are comprised of purchases from foreign suppliers. These transactions
are translated using the functional currency of the Company at exchange rates at the dates of the
transactions. The related payables denominated in foreign currencies at the reporting date are translated
to the functional currency at the exchange rates at that date. The resulting foreign currency gains or losses
are recognized on a net basis within net finance expenses in net loss.
3.14 EARNINGS PER SHARE
Basic earnings per share are computed by dividing net loss by the weighted average number of common
shares outstanding during the year. Diluted earnings per share are computed using the weighted average
number of common shares outstanding during the year adjusted to include the dilutive impact of stock
options and convertible notes.
The dilutive effect of outstanding options is excluded as additional share dilution in the computation of
diluted earnings per share as such inclusion would have been antidilutive due to the net loss reported by
the Company (further details are given in Note 17).
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GOODFOOD MARKET CORP.
Notes to Financial Statements
Years ended August 31, 2018 and 2017
3.15 FINANCE INCOME AND FINANCE COSTS
Finance income comprises interest income and foreign exchange gains. Finance costs comprise interest
expense on long-term debt and changes in fair value of convertible notes. The Company recognizes finance
income and finance costs as operating activities in the Company’s statements of cash flows.
3.16 SEGMENT REPORTING
The Company determined that it operated a single operating segment for the years ended August 31, 2018
and 2017.
3.17 NEW AND AMENDED STANDARDS NOT YET ADOPTED BY THE COMPANY
IFRS 2, Classification and Measurement of Share-based Payment Transactions (Amendments to IFRS 2)
In June 2016, the IASB issued amendments to IFRS 2, Share-based Payment, clarifying how to account
for certain types of share-based payment transactions. The amendments apply for annual periods
beginning on or after January 1, 2018. As a practical simplification, the amendments can be applied
prospectively. Retrospective or early application is permitted if information is available without the use of
hindsight. The amendments provide requirements on the accounting for the effects of vesting and non-
vesting conditions on the measurement of cash-settled share-based payments, share-based payment
transactions with a net settlement feature for withholding tax obligations, and a modification to the terms
and conditions of a share-based payment that changes the classification of the transaction from cash-
settled to equity-settled.
The Company intends to apply the amendments to IFRS 2 in its financial statements prospectively, effective
September 1, 2018.
IFRS 15, Revenue from Contracts with Customers
In May 2014, the IASB issued IFRS 15, Revenue from Contracts with Customers. The new standard is
effective for annual periods beginning on or after January 1, 2018. Earlier application is permitted. IFRS 15
will replace IAS 11, Construction Contracts, IAS 18, Revenue, IFRIC 13, Customer Loyalty Programmes,
IFRIC 15, Agreements for the Construction of Real Estate, IFRIC 18, Transfer of Assets from Customers,
and SIC 31, Revenue - Barter Transactions Involving Advertising Services. In April 2016, the IASB issued
Clarifications to IFRS 15, Revenue from Contracts with Customers, which are effective at the same time as
IFRS 15. The standard contains a single model that applies to contracts with customers and two
approaches to recognizing revenue: at a point in time or over time. The model features a contract-based
five-step analysis of transactions to determine whether, how much and when revenue is recognized. New
estimates and judgmental thresholds have been introduced, which may affect the amount and/or timing of
revenue recognized. The new standard applies to contracts with customers. It does not apply to insurance
contracts, financial instruments or lease contracts, which fall in the scope of other IFRS. The clarifications
to IFRS 15 provide additional guidance with respect to the five-step analysis, transition, and the application
of the standard to licenses of intellectual property.
The Company will adopt IFRS 15 on September 1, 2018 and estimates that doing so will have no impact
on the financial statements. Disclosures will be enhanced as required by IFRS 15.
12 | P a g e
GOODFOOD MARKET CORP.
Notes to Financial Statements
Years ended August 31, 2018 and 2017
IFRS 9, Financial Instruments
In July 2014, the IASB issued the complete IFRS 9, Financial Instruments (IFRS 9 (2014)). The mandatory
effective date of IFRS 9 is for annual periods beginning on or after January 1, 2018 and must be applied
retrospectively with some exemptions. The restatement of prior periods is not required and is only permitted
if information is available without the use of hindsight. IFRS 9 (2014) introduces new requirements for the
classification and measurement of financial assets. Under IFRS 9 (2014), financial assets are classified
and measured based on the business model in which they are held and the characteristics of their
contractual cash flows. The standard introduces additional changes relating to financial liabilities. It also
amends the impairment model by introducing a new "expected credit loss" model for calculating impairment.
IFRS 9 (2014) also includes a new general hedge accounting standard, which aligns hedge accounting
more closely with risk management. The Company will adopt IFRS 9 (2014) in its financial statements for
the annual period beginning on September 1, 2018.
While the adoption of IFRS 9 (2014) will change the classification of certain of the Company’s financial
instruments, the changes in classification do not result in any changes in measurement. As well, the new
impairment guidelines do not result in a change in the carrying value of the Company’s financial assets at
amortized cost.
IFRS 16, Leases
In January 2016, the IASB issued IFRS 16, Leases. The new standard is effective for annual periods
beginning on or after January 1, 2019. Earlier application is permitted for entities that apply IFRS 15,
Revenue from Contracts with Customers, at or before the date of initial adoption of IFRS 16. IFRS 16 will
replace IAS 17, Leases. This standard introduces a single lessee accounting model and requires a lessee
to recognize assets and liabilities for all leases with a term of more than 12 months, unless the underlying
asset is of low value. A lessee is required to recognize a right-of-use asset representing its right to use the
underlying asset and a lease liability representing its obligation to make lease payments. This standard
substantially carries forward the lessor accounting requirements of IAS 17, while requiring enhanced
disclosures to be provided by lessors. Other areas of the lease accounting model have been impacted,
including the definition of a lease. Transitional provisions have been provided. The Company intends to
adopt IFRS 16 in its financial statements for the annual period beginning on September 1, 2019.
Given that the Company has significant contractual obligations accounted for as operating leases under
IAS 17, its preliminary conclusion is that there will be a material increase to both assets and liabilities upon
adoption of IFRS 16, and material changes to the presentation of expense associated with the lease
arrangements between selling, general and administrative expense, and amortization, and other net finance
income.
The Company is in the process of analyzing the full impact of the adoption of IFRS 16. The Company
intends to adopt IFRS 16 using the “modified retrospective approach”.
13 | P a g e
GOODFOOD MARKET CORP.
Notes to Financial Statements
Years ended August 31, 2018 and 2017
NOTE 4
SIGNIGIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the Company’s financial statements in conformity with IFRS requires management to
make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses and the accompanying disclosures. Uncertainty about these assumptions and
estimates could result in outcomes that require a material adjustment to the carrying amount of assets or
liabilities affected in future periods. These assumptions and estimates are regularly reviewed. Revisions to
accounting estimates are recognized in the year in which the estimates are revised and in any future years
affected.
The Company’s main judgements, estimates, and assumptions are presented below:
4.1
MEASUREMENT OF REVENUES
Revenues are presented net of refunds, sales incentives and credits, including referral credits. Credit
amounts are estimated based on the Company’s history and experience of the redemption percentage of
those credits. The corresponding estimated liability for credits is included in deferred revenues.
4.2 FIXED ASSETS
Judgement is necessary in the determining the date at which fixed assets are available for their intended
use. Also, at each reporting date, management determines whether fixed assets and intangible assets
present indicators of impairment. For the purposes of its analysis, management uses its judgement
considering factors such as the economic environment and the market in which the Company operates,
budget forecasts and physical obsolescence.
4.3 DEFERRED INCOME TAX
Deferred tax assets are recognized for unused tax losses to the extent that it is probable that taxable profit
will be available against which the losses can be utilized. Significant management judgement is required to
determine the amount of deferred tax assets that can be recognized, based upon the likely timing and the
level of future taxable profits, together with future tax planning strategies. The Company has determined
that it cannot recognize deferred tax assets on the tax losses carried forward (further details are given in
Note 19).
NOTE 5
REVERSE ACQUISITION OF MIRA VII BY GOODFOOD MARKET INC.
On April 25, 2017, Mira VII, together with its wholly-owned subsidiary, Mira VII Subco Inc. ("Subco"), entered
into an amalgamation agreement with Goodfood Market Inc. pursuant to which Subco would amalgamate
with Goodfood Market Inc. (the "Amalgamation") to complete an arm’s length qualifying transaction in
accordance with the policies of the TSX Venture Exchange (the "Qualifying Transaction"). The
Amalgamation was structured as a three-cornered amalgamation and, as a result, the amalgamated
corporation was to become a wholly-owned subsidiary of Mira VII at the time of the completion of the
Amalgamation.
Immediately prior to the completion of the Qualifying Transaction, Mira VII consolidated its common shares
on the basis of one post-consolidation Mira VII common share for every 22.2222 Mira VII common shares
existing before such consolidation. Similarly, immediately prior to the Amalgamation, Goodfood Market Inc.
split its common shares on the basis of 24.8379775 shares for each share existing prior to such split (the
"Share Split").
14 | P a g e
GOODFOOD MARKET CORP.
Notes to Financial Statements
Years ended August 31, 2018 and 2017
On June 1, 2017, the Amalgamation was completed and Mira VII changed its name to Goodfood Market
Corp. On June 7, 2017, the common shares of Goodfood Market Corp. began trading upon the Toronto
Stock Exchange under the symbol "FOOD" and the common shares of the former Mira VII were delisted
from the TSX Venture Exchange.
Mira VII acquired legal control of Goodfood Market Inc. by way of an amalgamation between Goodfood
Market Inc. and Subco, a wholly-owned subsidiary of Mira VII. However, as the shareholders of Goodfood
Market Inc. gained voting control of Mira VII pursuant to the issuance of Mira VII common shares to the
shareholders of Goodfood Market Inc., representing a significant majority interest, Goodfood Market Inc.
was determined to be the accounting acquirer and, consequently, the transaction was accounted for as a
reverse acquisition of Mira VII by Goodfood Market Inc. As Mira VII did not meet the definition of a business,
the transaction was accounted for as a reverse acquisition of net assets, pursuant to IFRS 2, Share-based
payment.
The acquisition-date fair value of the consideration transferred by the accounting acquirer, Goodfood
Market Inc., for its interest in the accounting acquiree, Mira VII, of $1,125,000 for 562,500 common shares,
was determined based on the fair value of the equity interest Goodfood Market Inc. would have had to give
to the owners of Mira VII, before the reverse acquisition, to provide the same percentage equity interest in
the combined entity that resulted from the reverse acquisition, and was recorded as an increase in common
shares in the statements of financial position.
As the fair value of Mira VII’s identifiable net deficiency in assets at the reverse acquisition date was
$137,644, the excess of consideration transferred over the net assets acquired of $1,262,644 was reflected
as a reverse acquisition of Mira VII expense in the statements of loss and comprehensive loss.
The following table provides a breakdown of expenses incurred in connection with the reverse acquisition
of Mira VII by Goodfood Market Inc. for the year ended August 31, 2017:
Consideration transferred for Mira VII in excess of net assets acquired
Professional fees
Exchange and listing fees
$ 1,262,644
368,792
173,974
$ 1,805,410
NOTE 6
INVENTORIES
The cost of inventories recognized as an expense within cost of goods sold during the year ended
August 31, 2018 was $45,273,985 (2017 - $13,245,554).
Packaging supplies
Food
Work in process
2018
2017
$ 570,362
888,948
126,000
$ 205,349
177,025
−
$ 1,585,310
$ 382,374
15 | P a g e
2018
2017
$
71,270
120,785
12,365
$ 101,188
−
51,494
$ 204,420
$ 152,682
GOODFOOD MARKET CORP.
Notes to Financial Statements
Years ended August 31, 2018 and 2017
NOTE 7
OTHER CURRENT ASSETS
Prepaid expenses
Amounts receivable
Other
NOTE 8
FIXED ASSETS
Furniture and Machinery and Computer
fixtures
Cost:
Balance as at
equipment hardware improvements
Leasehold Assets under
construction
Total
August 31, 2016
$
Additions
9,506
46,887
$ 69,684 $
152,480
5,492
102,397
$
−
7,080
$
− $
84,682
2,259,529
1,950,685
Balance as at
August 31, 2017
Additions
Transfer
Disposals
Balance as at
56,393
144,240
22,344
−
222,164 107,889
126,185
666,895
−
1,014,000
−
(128,390)
7,080
121,004
4,117,019
−
1,950,685
3,202,678
(5,153,363)
−
2,344,211
4,261,002
−
(128,390)
August 31, 2018
$ 222,977
$1,774,669 $ 234,074
$ 4,245,103
$
− $6,476,823
Accumulated depreciation:
Balance as at
August 31, 2016
$
Depreciation
2,056
3,600
$
3,443 $
619 $
22,636
11,592
−
118
$
− $
−
6,118
37,946
Balance as at
August 31, 2017
Depreciation
Disposals
Balance as at
5,656
27,084
−
26,079
127,984
(15,293)
12,211
55,734
−
118
231,687
−
−
−
−
44,064
442,489
(15,293)
August 31, 2018
$ 32,740
$ 138,770 $ 67,945
$ 231,805
$
− $ 471,260
Net carrying amounts:
Balance as at
August 31, 2017
$ 50,737
$ 196,085 $ 95,678
$
6,962
$1,950,685 $2,300,147
Balance as at
August 31, 2018
190,237
1,635,899
166,129
4,013,298
−
6,005,563
As at August 31, 2018, $99,774 (2017 - $21,975) of machinery and equipment additions relates to finance
leases, $146,767 (2017 - nil) of leasehold improvement transfers relates to capitalized rent expense and
$110,806 (2017 - $426,333) of fixed asset additions is included in accounts payable and accrued liabilities.
16 | P a g e
GOODFOOD MARKET CORP.
Notes to Financial Statements
Years ended August 31, 2018 and 2017
NOTE 9
INTANGIBLE ASSETS
Cost:
Balance as at August 31, 2016
Additions
Balance as at August 31, 2017
Additions
Balance as at August 31, 2018
Accumulated amortization:
Balance as at August 31, 2016
Amortization
Balance as at August 31, 2017
Amortization
Balance as at August 31, 2018
Net carrying amounts:
Balance as at August 31, 2017
Balance as at August 31, 2018
Software
$
49,770
41,366
91,136
3,494
$
94,630
$
4,448
16,086
20,534
18,926
$
39,460
$
70,602
55,170
NOTE 10 OTHER NON-CURRENT ASSETS
Security deposits
Deposits on fixed assets
Other
NOTE 11 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable
Accrued liabilities
2018
2017
$ 229,095
101,121
18,926
$
77,058
−
5,500
$ 349,142
$
82,558
2018
2017
$ 9,366,092
1,977,046
$ 2,460,951
1,068,422
$ 11,343,138
$ 3,529,373
17 | P a g e
GOODFOOD MARKET CORP.
Notes to Financial Statements
Years ended August 31, 2018 and 2017
NOTE 12 DEBT
Interest-bearing financing:
Secured term loan, variable interest at bank prime plus 3.25%,
maturing in August 2022 (further details are given in Note 12.1)
Unsecured term loan, variable rate 6.80% (2017 – 6.05%),
maturing in September 2019
Finance leases:
2018
2017
$ 2,000,000
$
−
1,676
24,400
Finance leases at implicit rates ranging, 6.28% to 6.79%
(2017 – 6.28%), maturing from January 2020 to March 2023
100,349
17,704
Matured borrowings:
Secured term loan, variable rate (2017 – 10.03%)
Unsecured term loan, fixed rate (2017 – 8.78%)
Unsecured term loan, fixed rate of (2017 – 5.80%)
Unsecured demand loan, variable rate (2017 – 6.20%)
Unamortized financing costs
Current portion of long-term debt
12.1 CREDIT FACILITY
−
−
−
−
2,102,025
10,170
2,091,855
527,750
230,000
214,480
13,975
11,250
511,809
−
511,809
116,662
$ 1,564,105
$ 395,147
In September 2017, the Company obtained a commitment from a Canadian chartered bank for a secured
credit facility which includes a five-year variable-rate term loan of $2,500,000, a $500,000 revolving line of
credit and $500,000 in credit card availability. The credit facility is secured by inventory and a first-ranking
movable hypothec on the Company’s assets.
On October 12, 2017, the term loan of $2,500,000 was disbursed, bearing variable interest at bank prime
plus 3.25% (6.95% as at August 31, 2018). The term loan is repayable in equal quarterly instalments of
$125,000 beginning on November 30, 2017 and ending August 31, 2022. The proceeds of the term loan
were used to refinance the Company’s long-term debt, finance capital expenditures, and for general
corporate purposes.
As at August 31, 2018, the operating line of credit of $500,000 was fully drawn, bearing variable interest at
bank prime plus 3.25% (6.95% as at August 31, 2018). The line of credit is used to finance day-to-day
operations and is repayable on demand. Amounts owing with respect to credit cards are included in
accounts payable and accrued liabilities.
The credit facility includes financial covenants with which the Company was in compliance as at August 31,
2018.
12.2 FINANCE LEASES
The company is party to finance leases for the leasing of automotive equipment.
18 | P a g e
GOODFOOD MARKET CORP.
Notes to Financial Statements
Years ended August 31, 2018 and 2017
12.3 PRINCIPAL PAYMENTS
Principal payments due on the long-term debt in each of the following years and the minimum payments
required under the finance leases are as follows:
2019
2020
2021
2022
2023
Credit facility
Principal
Finance leases
Principal
Interest
Total principal
payments
$ 501,676
500,000
500,000
500,000
−
$ 26,074
21,818
18,756
18,756
14,945
$ 4,336
3,934
3,647
3,647
1,781
$ 527,750
521,818
518,756
518,756
14,945
$ 2,001,676
$ 100,349
$ 17,345
$ 2,102,025
As at August 31, 2018, there was no amount of accrued interest included in accrued liabilities with respect
to the Company’s long-term debt (2017 - $2,273).
NOTE 13 OTHER NON-CURRENT LIABILITIES
Lease inducement on leasehold improvements
Other lease incentives
NOTE 14 SHARE CAPITAL
14.1 COMMON SHARES
2018
2017
$
912,088
484,324
$
−
76,444
$ 1,396,412
$
76,444
The Company is authorized to issue an unlimited number of no par value common shares.
In connection with the public offering completed on May 7, 2018, the Company issued 4,000,000 common
shares at a price of $2.50 per share for gross proceeds of $10,000,000, less share issuance costs of
$925,942.
During the second quarter of fiscal 2018, 71,413 common shares of the Company were issued following
the exercise of stock options (refer to Note 18).
In connection and following the Amalgamation (refer to Note 5), the following common share transactions
were undertaken by the Company:
On June 1, 2017, in connection with the Amalgamation, all outstanding common shares of Goodfood
Market Inc. were exchanged on a one-for-one basis for common shares of the Company;
During the fourth quarter of fiscal 2017, 63,647 common shares of the Company were issued following
the exercise of stock options (refer to Note 18).
19 | P a g e
GOODFOOD MARKET CORP.
Notes to Financial Statements
Years ended August 31, 2018 and 2017
In connection and prior to the Amalgamation, the following transactions were undertaken by Goodfood
Market Inc.:
On May 31, 2017, the common shares of Goodfood Market Inc. were split on a 1:24.8379775 basis
(the "Share Split"). The Share Split is reflected retrospectively to current years in these financial
statements;
On May 31, 2017, following a resolution of the majority holders of preferred shares, all outstanding
preferred shares were converted into 9,101,106 common shares of Goodfood Market Inc.;
On June 1, 2017, in connection with the Amalgamation, all outstanding convertible notes were
converted in accordance with their contractual provisions into 2,645,718 common shares of Goodfood
Market Inc. (from which 1,319,717 common shares were issued to a company controlled by a Board
member); and
On June 1, 2017,
in connection with
issued
10,542,883 common shares in a private placement for gross proceeds of $21,085,766, incurring share
issue costs of $1,725,693. Included in share issue costs is $193,186 related to the fair value of 405,002
two-year compensation options granted to the agents to purchase common shares of the Company at
a price of $2.00 per common share.
the Amalgamation, Goodfood Market
Inc.
The assumptions used to estimate the fair value of the agent compensation options using the Black-Scholes
option pricing model are as follows:
Volatility
Risk-free interest rate
Expected life of options
Common share value at grant date
Exercise price
14.2 CLASS A PREFERRED SHARES
The Company is not authorized to issue preferred shares.
60%
0.73%
1 year
$2.00
$2.00
Goodfood Market Inc. was authorized to issue an unlimited number of no par value voting Class A preferred
shares, in Series, participating in priority to common shares. Class A preferred shares were classified as a
financial liability measured at amortized cost as Class A preferred shares provided the holders with a
contingent settlement in cash to the value of their subscription amount, based upon the occurrence of a
liquidity event. Class A preferred shares were convertible on a one-for-one basis, subject to antidilution
provisions, into common shares at any time at the option of the holder, upon majority approval of the
Class A preferred shareholders or the closing of an initial public offering generating gross proceeds of at
least $20,000,000 or such lower amount upon majority approval of Class A preferred shareholders.
Prior to the Amalgamation, the following preferred share transactions were undertaken by Goodfood Market
Inc.:
In September 2016, convertible notes with a conversion date fair value of $471,550 were converted
into 46,419 Class A preferred shares Series 2 (from which 34,306 shares were issued to a company
controlled by a Board member);
20 | P a g e
GOODFOOD MARKET CORP.
Notes to Financial Statements
Years ended August 31, 2018 and 2017
On May 31, 2017, following a resolution of the majority holders of preferred shares, all outstanding
Class A preferred shares consisting of 320,000 Class A Series 1 preferred shares and 46,419 Class A
Series 2 preferred shares were converted (of which 270,306 shares were held by a company controlled
by a Board member) into 9,101,106 common shares of Goodfood Market Inc. (of which
6,713,854 common shares were issued to a company controlled by a Board member); and
On May 31, 2017, following the conversion of all outstanding Class A preferred shares into common
shares, Goodfood Market Inc. amended its articles of incorporation as such that its authorized capital
consisted solely of an unlimited number of common shares.
Balance as at August 31, 2016
Number of
shares
Amount
320,000
$
800,015
Issuance upon conversion of convertible notes
Conversion into common shares of Goodfood Market Inc.
46,419
(366,419)
471,550
(1,271,565)
Balance as at August 31, 2017
−
$
−
NOTE 15 OTHER NET FINANCE INCOME
Interest expense on long-term debt
Interest income
Foreign exchange loss (gain)
$
2018
162,223
(279,986)
19,698
$
2017
42,259
(63,054)
(1,636)
$
(98,065)
$
(22,431)
NOTE 16
FINANCIAL INSTRUMENTS
The Company has determined that the fair values of cash and cash equivalents, security deposits and
amounts receivable included in other current assets, line of credit, and accounts payable and accrued
liabilities approximate their respective carrying amounts at the statement of financial position date, due to
the short-term maturity of those instruments. The Company determined that the fair value of its long-term
debt approximates its carrying amount as it bears interest at market interest rates for financial instruments
with similar terms and risks.
16.1 CONVERTIBLE NOTES
Balance as at August 31, 2016
Issuance of convertible notes
Conversion into Class A preferred shares, Series 2
Loss on remeasurement to fair value
Conversion into common shares
Interest entitlement reclassified to accounts payable and accrued liabilities
Balance as at August 31, 2017
$
506,368
1,000,000
(471,550)
4,257,944
(5,291,436)
(1,326)
$
−
21 | P a g e
GOODFOOD MARKET CORP.
Notes to Financial Statements
Years ended August 31, 2018 and 2017
On June 1, 2017, in connection with the Amalgamation described in Note 5, all outstanding one and
three-year convertible notes with an aggregate conversion date fair value of $5,291,436 were converted
into 2,645,718 common shares (of which $2,639,434 and 1,319,717 common shares were converted by a
company controlled by a Board member).
The fair value of convertible notes as at June 1, 2017, immediately prior to conversion into common shares,
was estimated using Level 3 inputs and was equal to the fair value of the common shares issued upon
conversion plus a residual interest entitlement. The fair value per common share issued upon conversion
was determined with reference to the private placement share price of $2.00 (refer to Note 14). The number
of shares issued upon conversion was determined with reference to the terms of the convertible notes.
NOTE 17
LOSS PER SHARE
Net loss
Basic weighted average number of common shares
Loss per share - basic and diluted
2018
2017
$ (9,434,588)
49,068,678
(0.19)
$
(9,866,047)
30,625,537
(0.32)
Basic weighted average number of common shares has been adjusted retrospectively to reflect the Share
Split. The conversion of convertible notes into common shares, exercise of stock options and share
issuance is weighted from the transaction date.
Class A preferred shares, stock options and convertible notes prior to their conversion into common shares
were excluded from the diluted weighted average number of common shares calculation because such
inclusion would have been antidilutive due to the net loss reported by the Company.
NOTE 18 STOCK OPTION PLAN
On June 1, 2017, in connection with the Amalgamation, the stock option plans of Goodfood Market Inc. and
Mira VII were dissolved and replaced by a plan established by the Company.
The stock option plan was established by the Company to attract and retain employees, consultants,
directors and officers. The plan provides for the granting of options to purchase common shares where at
any given time the number of stock options reserved for issuance is equal to 5% of the Company’s issued
and outstanding common shares. Under the plan, options generally vest over a period of four years and
expire eight years from the grant date. As at August 31, 2018, 1,165,791 stock options were available for
issuance (2017 – 1,636,111).
Upon dissolution of the Mira VII stock option plan, all outstanding Mira VII stock options were cancelled,
and upon dissolution of the Goodfood Market Inc. stock option plan, all outstanding Goodfood Market Inc.
stock options were cancelled and exchanged for stock options of the Company with comparable terms
except for a reduced vesting period. To reflect the reduced vesting period, the Company accelerated the
recognition of compensation cost with respect to these options for the year ended August 31, 2017.
Following the Amalgamation, all stock options were granted at an exercise price equal to the common
shares fair value at the date of grant.
22 | P a g e
GOODFOOD MARKET CORP.
Notes to Financial Statements
Years ended August 31, 2018 and 2017
Total share-based payments recognized under the stock option plan amounted to $457,745 for the year
ended August 31, 2018 (2017 - $219,612).
The weighted average fair value of stock options granted during the year ended August 31, 2018 was $1.42
(2017 - $0.83) and was estimated at the date on which the options were granted using the Black-Scholes
option pricing model with the following weighted-average assumptions:
Volatility
Risk-free interest rate
Expected life of options
Common share value at grant date
Exercise price
2018
2017
65%
2.07%
5.1 years
$2.55
$2.55
68%
1.25%
5.1 years
$1.26
$1.05
Information concerning the movement in stock options is as follows:
2018
Weighted
average
exercise price
Number of
options
2017
Weighted
average
exercise price
Number of
options
Outstanding, beginning of year
Granted
Exercised
Forfeited
751,581
787,666
(71,413)
(42,363)
Outstanding, end of year
1,425,471
$
1.07
2.55
0.10
0.30
1.96
54,644
760,584
(63,647)
−
751,581
$
0.10
1.05
0.10
−
1.07
Exercisable, end of year
322,483
$
1.02
214,914
$
0.60
For the year ended August 31, 2018, the weighted average share price of the Company’s common shares
upon the exercise date of stock options was $2.94 (2017 – $1.49).
23 | P a g e
GOODFOOD MARKET CORP.
Notes to Financial Statements
Years ended August 31, 2018 and 2017
Summary of options outstanding as at August 31, 2018 and 2017 is as follows:
Balance as at August 31, 2018:
Balance as at August 31, 2017:
Number of
options
outstanding
Weighted
average
contractual
life outstanding
Exercise
price
Exercisable
options
$ 0.10
$ 1.56
$ 2.00
$ 2.01
$ 2.53
$ 2.56
$ 2.62
$ 2.71
$ 2.90
$ 1.96
$ 0.10
$ 1.56
$ 2.00
$ 1.07
178,834
347,820
114,708
100,374
21,087
334,618
9,065
300,000
18,965
1,425,471
289,053
347,820
114,708
751,581
6.75
6.98
6.75
7.25
7.87
7.96
7.62
7.45
7.37
7.30
7.75
7.98
7.75
7.86
146,236
86,955
89,292
–
–
–
–
–
–
322,483
158,664
–
56,250
214,914
NOTE 19
INCOME TAXES
The following table reconciles income taxes computed at the Company’s statutory rate of 26.7%
(2017 – 26.8%) and the total tax expense for the years ended August 31:
2018
2017
Loss before income taxes
$ (9,434,589)
$
(9,866,047)
Income tax benefit at the combined Canadian statutory rate
(2,519,036)
(2,644,101)
Decrease resulting from:
Change in unrecognized deferred income tax assets
Permanent differences
Change in tax status and effect of reverse acquisition
Difference between reversal rate and current rate
2,386,856
132,180
–
–
1,198,211
1,504,388
(76,086)
17,588
Total income tax expense
$
–
$
–
24 | P a g e
GOODFOOD MARKET CORP.
Notes to Financial Statements
Years ended August 31, 2018 and 2017
Movement in temporary differences during the year ended August 31, 2018 is detailed as follows:
Deferred income tax assets:
Other non-current liabilities
Deferred income tax liabilities:
Fixed assets
Balance as at
August 31, 2017
Recognized in
Balance as at
profit or loss August 31, 2018
$
$
–
–
–
$
112,237
$
112,237
(112,237)
(112,237)
$
–
$
–
As at August 31, 2018 and 2017, the Company had unrecognized deferred income tax assets as follows:
Deferred income tax assets:
Net operating loss carry forwards
Fixed assets
Share issuance costs
Intangible assets
Other non-current liabilities
Other
2018
2017
$ 3,398,449
–
505,854
245,568
257,813
20,272
$ 1,232,747
9,886
334,229
198,906
22,691
–
Unrecognized deferred income tax assets
$ 4,427,956
$ 1,798,459
The Company has operating tax losses carried forward of $12,824,337 (2017 – $4,651,876) and
unrecognized deductible temporary differences of $3,884,929 (2017 – $2,134,763) that are available to
reduce taxable income. Deferred income tax assets have not been recognized in respect of these items
because it is not probable that future taxable profit will be available against which the Company can utilize
the benefits therefrom. As at August 31, 2018, the amounts and expiry dates of the tax losses carried
forward were as follows:
2035
2036
2037
2038
$
49,298
712,284
3,547,031
8,515,724
$ 12,824,337
NOTE 20 ADDITIONAL INFORMATION ON STATEMENT OF LOSS AND COMPREHENSIVE LOSS
Short-term employee benefit expense
Operating lease expense
2018
2017
$ 18,753,232
815,992
$ 5,584,729
161,032
25 | P a g e
GOODFOOD MARKET CORP.
Notes to Financial Statements
Years ended August 31, 2018 and 2017
NOTE 21
FINANCIAL RISKS
Credit risk:
Credit risk is the risk of an unexpected loss if a counterparty to a financial instrument fails to meet its
contractual obligation. The Company regularly monitors credit risk exposure and takes steps to mitigate the
likelihood of this exposure resulting in losses. The Company's exposure to credit risk is primarily attributable
to its cash and cash equivalents, and amounts receivable included in other current assets. The Company's
maximum credit exposure corresponds to the carrying amount of these financial assets. Management
believes the credit risk is limited because the Company deals with major North American financial
institutions.
Liquidity risk:
Liquidity risk is the risk that the Company will be unable to fulfill its obligations on a timely basis or at a
reasonable cost. The Company manages its liquidity risk by monitoring its operating requirements. The
Company prepares budget and cash forecasts to ensure it has sufficient funds to fulfill its obligations.
Capital management
The Company's objective in managing its capital is to ensure a sufficient liquidity position to finance its
operations to maximize the preservation of capital and to deliver competitive returns on invested capital. To
fund its activities, the Company has relied on public and private placements, convertible notes and long-
term debt, which are included in the Company's definition of capital. The Company manages its excess
cash to ensure that it has sufficient reserves to fund its operations and capital expenditures.
The following are amounts due on contractual maturities of financial liabilities, including estimated interest
payments as at August 31:
Total carrying Contractual
amount cash flows
Less than
1 year
1 to 5 More than
5 years
years
2018
Line of credit
Accounts payable and
accrued liabilities
Long-term debt (1) (2)
$
500,000 $
500,000 $ 500,000 $
– $
11,343,138 11,343,138 11,343,138
658,079
2,414,767
2,091,855
–
1,756,688
–
–
–
2017
Total carrying Contractual
amount cash flows
Less than
1 year
1 to 5 More than
5 years
years
Accounts payable and
accrued liabilities
Long-term debt (2)
$ 3,529,373 $ 3,529,373 $ 3,529,373 $
624,270
158,637
511,809
– $
457,877
–
7,756
(1) In November 2018, the Company signed a new debt agreement with proceeds partially used to refinance the current
long-term debt (see further details in Note 24).
(2) As at August 31, 2018, an interest rate of 6.95% (2017 – 9.67%) was used to determine the estimated interest
payments on the Company’s variable-rate long-term debt.
26 | P a g e
GOODFOOD MARKET CORP.
Notes to Financial Statements
Years ended August 31, 2018 and 2017
Interest rate risk:
The Company’s long-term debt and line of credit bear interest at variable rates which are determined by a
base rate set by the lender plus a margin. As a result, the Company is exposed to interest rate risk due to
fluctuations in lenders’ base rates.
Sensitivity analysis for interest rate risk
An increase or decrease of 100 basis points in the interest rate would not have a significant impact on the
Company’s net loss.
NOTE 22 COMMITMENTS
As at August 31, 2018, the Company is committed to minimum annual lease payments under operating
leases as follows:
Less than one year
Between one and five years
More than five years
NOTE 23 RELATED PARTIES
$ 1,253,505
4,432,639
1,260,141
$ 6,946,285
The chief executive officer ("CEO") and the president also acting as chief operating officer ("COO") are
controlling shareholders of the Company and are members of the Board of the Company. The CEO is also
Chairman of the Board.
23.1 RELATED PARTIES
The Company’s related party transactions are as follows:
On May 7, 2018, in connection with the public offering described in Note 14, 60,000 common shares
were purchased by Board members at a price of $2.50 per share;
On June 1, 2017, convertible notes held by a company controlled by a Board member with a carrying
value of $2,639,434 were converted into 1,319,717 common shares;
On May 31, 2017, 34,306 Class A Series 1 preferred shares and 236,000 Class A Series 2 preferred
shares held by a company controlled by a Board member with a carrying value of $706,953 were
converted into 6,713,854 common shares;
On September 14, 2016, the Company issued a convertible note with a face value of $500,000 to a
company controlled by a Board member; and
On September 6, 2016, convertible notes held by a company controlled by a Board member with a
carrying value of $471,550 were converted into 34,306 Class A Series 2 preferred shares.
These transactions are recorded at the amount of consideration paid as established and agreed to by the
related parties. Convertible notes were subsequently measured at fair value through net loss.
27 | P a g e
GOODFOOD MARKET CORP.
Notes to Financial Statements
Years ended August 31, 2018 and 2017
23.2 KEY MANAGEMENT PERSONNEL
Key management personnel includes the members of the Board as well as the CEO, COO and Chief
Financial Officer.
The following table presents the compensation of the key management personnel recognized in net loss:
Short-term employee benefits (includes directors’ fees)
Share-based payments
$
867,191
356,240
$
276,533
80,503
2018
2017
On September 1, 2018, 1,075,000 stock options at an exercise price of $2.55 were issued to key
management personnel.
NOTE 24 SUBSEQUENT EVENTS
24.1 EXPANSION OF EASTERN CANADIAN FACILITY
On September 24, 2018, the Company signed an amendment to the lease of the Eastern Canada facility,
to renew and extend the term of the initial premises and lease an additional 72,000 square-foot area,
expanding to a total 155,000 square-feet, which will double the production capacity of the facility. The initial
lease term ends in October 2023 with renewal options for some further fifteen years. The additional leases
are classified as operating leases with an additional estimated commitment of $3,433,000.
24.2 DEBT FINANCING
In November 2018, the Company obtained a commitment from a Canadian financial institution for a secured
three-year term loan of $10 million, a $2.5 million revolving credit facility and $1.0 million in other short-term
financing. The term loan and the revolving credit facility are bearing variable interest at bankers’ acceptance
rate plus 2.50%. The term loan will be repayable in quarterly instalments of $125,000 beginning on
December 4, 2020 with a bullet repayment of the balance at the end of the three-year term.. The proceeds
from the financing will be used to fund expansion capital expenditures, invest in automation, refinance the
Company’s long-term debt and for general corporate purposes.
28 | P a g e