NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended February 2, 2019, February 3, 2018 and January 28, 2017
[Amounts in thousands of Canadian dollars except per share amounts and where otherwise indicated]
1. CORPORATE INFORMATION
The consolidated financial statements of DAVIDsTEA Inc. and its subsidiary (collectively, the “Company”) for the year ended February 2, 2019 were authorized for issue in accordance with a resolution of the Board of Directors on May 2, 2019. 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 Street, Town of Mount-Royal, Quebec, Canada, H4P 1M2.
The Company is engaged in the retail and online sale of tea, tea accessories, and food and beverages in Canada and in the United States. Sales fluctuate from quarter to quarter. Sales are traditionally higher 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 traffic during the summer months.
2. BASIS OF PREPARATION
The consolidated 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 accounting policies were consistently applied to all periods presented, other than with respect to the adoption of new accounting standards as disclosed in note 4.
The Company’s fiscal year ends on the Saturday closest to the end of January, typically resulting in a 52-week year, but occasionally giving rise to an additional week, resulting in a 53-week year. The years ended January 28, 2017, February 2, 2019 cover a 52-week period. The year ended February 3, 2018 covers a 53-week fiscal period.
Basis of consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned U.S. subsidiary, DAVIDsTEA (USA) Inc. The financial statements of the subsidiary are prepared for the same reporting period as the parent company, using consistent accounting policies. All intercompany transactions, balances and unrealized gains or losses have been eliminated.
Basis of measurement
These consolidated financial statements have been prepared on the historical cost basis except for the following material items:
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·
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Derivative financial instruments are measured at fair value; and
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·
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Provisions for onerous contracts are measured at the present value of the expenditures expected to settle the obligations.
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Functional and presentation currency
These consolidated financial statements are presented in Canadian dollars, which is the parent Company’s functional currency.
3. SIGNIFICANT ACCOUNTING POLICIES
Cash
Cash on the consolidated balance sheet comprises cash at banks and on hand.
Inventory valuation
Inventories are measured at the lower of cost and net realizable value. Cost is determined using the weighted average cost method. Costs include the cost of purchase and transportation costs that are directly incurred to bring the inventories to their present location, and duty. Net realizable value is the estimated selling price of inventory in the ordinary course of business, less any estimated selling costs. Cost also includes realized gains and losses on forward contracts designated as cash flow hedges of U.S. inventory purchases.
Property and equipment
Property and equipment are initially recorded at cost and are depreciated over their useful economic life. Cost includes expenditures that are directly attributable to the acquisition of the asset, including any costs directly related to bringing the asset to a working condition for its intended use. The residual values, useful lives and methods of depreciation of property and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate. All repair and maintenance costs are recognized in net loss as incurred.
Depreciation of an asset begins once it becomes available for use. Depreciation is charged to income on the following bases:
Furniture and equipment
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20
% declining balance
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Computer hardware
|
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30
% declining balance
|
Leasehold improvements are depreciated on a straight‑line basis over the lesser of the useful economic life and the initial term of the leases, plus one renewal option period, not to exceed 10 years.
Any gain or loss arising on the disposal or derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in our consolidated statement of net loss when the asset is derecognized.
Intangible assets
Intangible assets consist of computer software, trademarks and patents.
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. The amortization expense on intangible assets with finite lives is recognized in out consolidated statement of loss as the expense category that is consistent with the function of the intangible assets.
Any gain or loss arising on the disposal or derecognition of the intangible asset (calculated as the difference between the net disposal proceeds and the carrying amount of the intangible asset) is included in our consolidated statement of loss when the intangible asset is derecognized.
When computer software is not an integral part of a related item of computer hardware, the software is treated as an intangible. Computer software is amortized on the basis of its estimated useful life using the declining method at the rate of 30%.
Leases
Leases are classified as either operating or finance, based on the substance of the transaction at inception of the lease. Classification is re‑assessed if the terms of the lease are changed.
Leases in which a significant portion of the risks and rewards of ownership are not assumed by the Company are classified as operating leases. The Company carries on its operations in premises under leases of varying terms and renewal options, which are accounted for as operating leases. Payments under an operating lease are recognized in net loss on a straight‑line basis over the term of the lease. When a lease contains a predetermined fixed escalation of the minimum rent, the Company recognizes the related rent expense on a straight‑line basis and, consequently, records the difference between the recognized rental expense and the amounts payable under the lease as deferred rent. Contingent (sales‑based) rentals are recognized as an expense when incurred.
Store opening costs
Store opening costs are expensed as incurred.
Impairment
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i.
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Impairment of financial assets
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The Company applies the “expected credit loss” model. The impairment model applies to trade receivables. It requires a credit loss to be reflected in profit and loss immediately after an asset or receivable is acquired and subsequent changes in expected credit losses at each reporting date reflecting the change in credit risk. The Company applies the simplified approach for trade receivables and calculates expected credit losses based on lifetime expected credit losses.
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ii.
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Impairment of non‑financial assets
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The Company assesses, at each reporting date, whether there is an indication that an item of property and equipment or an intangible asset may be impaired. If any indication exists, the Company estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash‑generating unit’s (“CGU”) fair value less costs of disposal and its value in use. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. 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. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or corporate assets. The discount rate applied to an asset or CGU is the weighted average cost of capital (“WACC”). Management considers factors such as risk-free rate, equity risk premium, size premium, specific business risk premium and cost of debt to derive the WACC.
The Company bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Company’s CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover the lease term.
Based on the management of operations, the Company has defined each of the commercial premises in which it carries out its activities as a CGU, although where appropriate these premises are aggregated at a district or regional level to form a CGU.
An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment may no longer exist or may have decreased and if there has been a change in the assumptions used to determine the asset’s recoverable amount. The reversal is limited to the extent that an asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, had no impairment loss been recognized. Such reversal is recognized in our consolidated statement of loss.
Derivative financial instruments and hedge accounting
The Company enters into foreign exchange forward contracts to hedge its foreign currency risks, resulting from variability in foreign currency exchange rates on inventory purchases, as described in Note 22.
Derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
For the purpose of hedge accounting, hedges are classified as cash flow hedges when hedging the exposure to variability in cash flows that is either attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction.
At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which it wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the effectiveness of changes in the hedging instrument’s fair value in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.
The Company has applied hedge accounting for its foreign exchange forward contracts and has designated them as cash flow hedges. The effective portion of the gain or loss on the hedging instrument is recognized directly in Other Comprehensive Loss (“OCI”), while any ineffective portion is recognized immediately in out consolidated statement of loss. The amounts recognized in OCI are reclassified to inventory when such non-financial asset is recognized on the consolidated balance sheet, and our consolidated statement of loss when inventory is subsequently sold.
Provisions
Provisions are recognized when the Company has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Company expects some or all of a provision to be reimbursed, the reimbursement is recognized as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in our consolidated statement of loss, net of any reimbursement. All provisions are reviewed at each reporting date and adjusted to reflect the current best estimates.
If the effect of the time value of money is material, provisions are discounted using a current pre‑tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.
Deferred lease inducements
The deferred lease inducements are composed of free rent and construction allowances obtained upon signing of lease agreements for certain retail stores. They are amortized on a straight‑line basis over the term of the related leases, plus one renewal option, to a maximum of 10 years.
Share capital
Common shares are classified as equity. Incremental costs directly attributable to the issue of common shares are recognized as a deduction from equity, net of any tax effects.
Common shares are classified as equity if they are non‑redeemable or redeemable only at the Company’s option, and any dividends are discretionary. Dividends thereon are recognized as distributions within equity on approval by the Company’s Board of Directors.
Preferred shares are classified as a financial liability if they are redeemable on a specific date or at the option of the shareholders. Dividends thereon are recognized as interest expense in our consolidated statement of net loss as accrued.
Stock‑based compensation
The Company has a stock option plan for employees and directors from which options to purchase common shares are issued (the “Plan”). Options may not be granted with an exercise price of less than the fair value of the underlying shares at the grant date. The awards have no cash settlement alternatives. The vesting requirements are typically service‑based and the options normally have a contractual life of seven years.
The fair value of stock‑based compensation awards granted to employees is measured at the grant date using the Black Scholes option pricing model. Measurement inputs include the share price of the underlying shares on the measurement date, the exercise price of the option, the expected volatility (based on weighted average historical volatility of comparable companies adjusted for changes expected based on publicly available information), the weighted average expected life of the option (based on historical experience), expected dividends, and the risk‑free interest rate (based on government bonds).
The value of the compensation expense is recognized over the vesting period of the stock options as an expense included in selling and general administration expenses, with a corresponding increase to contributed surplus in equity. The amount recognized as an expense is adjusted to reflect the Company’s best estimate of the number of awards that will ultimately vest. No expense is recognized for awards that do not ultimately vest.
Any consideration paid by plan participants on the exercise of stock options and the previously recognized compensation cost of the options exercised included in contributed surplus are credited to share capital.
Under the Company’s 2015 Omnibus Equity Incentive Plan (the “2015 Omnibus Plan”), selected employees and directors are granted RSUs where each RSU has a value equal to one common share. The compensation expense is recorded at the fair value of the Company’s common shares at the grant date over the vesting period (generally one to three years) with a corresponding credit to contributed surplus for equity-settled RSUs and a corresponding credit to a liability for cash-settled RSUs. RSUs may be settled in shares, cash, or a combination of cash or shares upon vesting at the discretion of the Company. Cash settled RSUs are revalued at each reporting date to reflect their fair value at that date. Fair value is determined using the closing price of the Company’s common shares on the NASDAQ Global Market prior to the date of the grant. The Company has not issued any cash settled awards to date.
Revenue recognition
Revenue is recognized when control of goods has been transferred at the amount of consideration to which the Company expects to be entitled. Revenue from retail sales is recorded upon delivery to the customer. Revenue is recognized on e-commerce sales when merchandise is delivered. Revenues are recorded net of discounts, rebates, estimated returns, sales taxes and amounts deferred related to the issuance of Frequent Steeper points.
Gift cards sold are recorded as deferred revenue and revenue is recognized at the time of redemption or in accordance with the Company’s accounting policy for breakage. Breakage income represents the estimated value of gift cards that is not expected to be redeemed by customers and is determined in proportion to the pattern of rights exercised by the customer. Gift card breakage is included in sales in the consolidated statement of loss.
The Frequent Steeper loyalty and rewards program allows customers to earn points when they purchase products in the Company’s retail stores and on the Company’s website. The Company introduced a new Loyalty program on January 1, 2019 that enhanced some features and removed expiry of points. Under the old program, points were redeemed for free tea or free beverages, depending on the number of points a customer has obtained over a limited collection period, typically a three-month period. Free tea offers were issued at the end of each collection period and redeemable within 60 days thereafter. Free beverage offers were issued at the end of the calendar collection period and redeemable within 60 days thereafter.
Starting January 1, 2019, the Company launched a new Frequent Steeper loyalty and rewards program that allows customers to earn points when they purchase products at the Company’s retail stores and on the Company’s website. Points are converted into offers to receive loose-leaf teas which must be redeemed within 60 days. Free beverage offers are issued once a customer has purchased 10 beverages which must be redeemed within 60 days.
Consideration is allocated between the loyalty program awards and the goods on which the awards were earned, based on their relative stand-alone selling prices.
The fair value of Frequent Steeper points and offers are determined based on the estimated selling price of the loose-leaf tea, net of points and offers we expect will not be redeemed. The fair value of beverage offers is determined based on the estimated selling price of the beverage, net of beverage offers that are not expected to be redeemed. The relative selling price of points and offers issued are recorded as deferred revenue. Offers for loose-leaf tea and beverage offers are recognized as revenue on the earlier of redemption and expiry. On an ongoing basis, the Company monitors historical redemption rates. Frequent Steeper redemptions are included with total sales in our consolidated statement of net loss.
Finance income
Interest income is recognized as interest accrues using the effective interest method.
Income taxes
Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in our consolidated statement of loss except to the extent that they relate to items recognized directly in equity or in other comprehensive loss.
Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered or paid. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
The Company uses the liability method of accounting for deferred income taxes, which requires the establishment of deferred tax assets and liabilities for all temporary differences caused when the tax bases of assets and liabilities differ from their carrying amounts reported in the consolidated financial statements. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the temporary differences when they reverse, based on tax rates that have been enacted or substantively enacted at the end of the reporting period. The Company recognizes deferred income tax assets for unused tax losses and deductible temporary differences only to the extent that, in management’s opinion, it is probable that future taxable income will be available against which they can be utilized. 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.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority and the Company intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.
Earnings per share
Basic earnings per share is calculated using the weighted average number of shares outstanding during the year.
The diluted earnings per share is calculated by adjusting the weighted average number of shares outstanding to include additional shares issued from the assumed conversion of preferred shares and the exercise of stock options and RSUs, if dilutive. For stock options, the number of additional shares is calculated by assuming that the proceeds from such exercises, as well as the amount of unrecognized stock-based compensation which is considered to be assumed proceeds, are used to purchase common shares at the average market price during the reporting period.
Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. A financial asset or liability is recognized initially (at settlement date) at its fair value plus, in the case of a financial asset or liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the instrument. Financial assets and liabilities carried at fair value through profit or loss are initially recognized at fair value and transaction costs are expensed in the consolidated statements of loss.
After initial recognition, financial assets are measured at amortized cost or fair value. Where assets are measured at fair value, gains and losses are either recognized entirely in profit or loss (“FVTPL”) or recognized in other comprehensive income (“FVOCI”).
The Company classifies its financial assets and liabilities according to their characteristics and management's choices and intentions related thereto for the purposes of ongoing measurement.
Classifications that the Company has used for financial assets include:
(a) Amortized Cost – non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. This includes trade receivables, and these are recorded at amortized cost with gains and losses recognized in net income in the period that the asset is no longer recognized or becomes impaired; and
(b) FVTPL – financial assets which are classified as fair value through profit and loss. This includes cash and derivative financial instruments
Classifications that the Company has used for financial liabilities include:
a) Amortized cost – non-derivative financial liabilities measured at amortized cost with gains and losses
recognized in net loss in the period that the liability is no longer recognized. This includes Trade and other payables; and
b) FVTPL – financial liabilities which are classified as fair value through profit and loss. This includes derivative financial instruments
Foreign currency translation
Revenues, expenses and non-monetary assets and liabilities denominated in foreign currencies are recorded at the rate of exchange prevailing at the transaction date. Monetary assets and liabilities denominated in foreign currencies are translated at exchange rates prevailing at the balance sheet date. Unrealized and realized translation gains and losses are reflected in our statement of loss.
The assets and liabilities of the Company’s U.S. wholly owned subsidiary, whose functional currency is the U.S. dollar, are translated into Canadian dollars at the exchange rates in effect at the balance sheet date. Revenues and expenses are translated at average exchange rates for the year. Differences arising from the exchange rate changes are included in OCI in the cumulative translation account.
Foreign exchange gains or losses arising from a monetary item receivable from or payable to a foreign operation, the settlement of which is neither planned nor likely to occur in the foreseeable future and which in substance is considered to form part of the net investment in the foreign operation, are recognized in other OCI in the cumulative translation account and reclassified from equity to our consolidated statement of loss on disposal of the net investment.
4.
CHANGES IN ACCOUNTING PRINCIPLES
As of February 4, 2018, the Company adopted IFRS 9, “Financial Instruments” (“IFRS 9”). IFRS 9 replaces IAS 39 Financial Instruments: Recognition and Measurement for annual periods beginning on or after January 1, 2018, bringing together all three aspects of the accounting for financial instruments: classification and measurement; impairment; and hedge accounting.
With the exception of hedge accounting, which the Company applied prospectively, the Company has applied IFRS 9 retrospectively, with the initial application date of February 4, 2018.
Overall, there was no material impact on the Company’s consolidated financial statements.
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a)
|
The following table presents the carrying amount of financial assets held by the Company at February 3, 2018 and their measurement category under IAS 39 and the new model under IFRS 9.
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February 3, 2018
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February 3, 2018
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IAS 39
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IFRS 9
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|
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Carrying
|
|
|
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Carrying
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|
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Measurement
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|
Value
|
|
Measurement
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|
Value
|
|
|
category
|
|
$
|
|
category
|
|
$
|
Cash
|
|
FVTPL
|
|
63,484
|
|
FVTPL
|
|
63,484
|
Credit card cash clearing receivables
|
|
Amortized cost
|
|
1,291
|
|
Amortized cost
|
|
1,291
|
Other receivables
|
|
Amortized cost
|
|
1,840
|
|
Amortized cost
|
|
1,840
|
Derivative financial instruments
|
|
FVTPL
|
|
229
|
|
FVTPL
|
|
229
|
The classification of all financial liabilities as financial liabilities at amortized cost remains unchanged as well as their measurement resulting from their classification.
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b)
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Impairment. IFRS 9 requires the Company to record expected credit losses on all of its debt securities, loans and trade receivables, either on a 12-month or lifetime basis. The Company applied the simplified approach and records lifetime expected losses on all trade receivables. The Company’s IFRS 9 expected credit loss model did not have a material impact on its consolidated financial statements.
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c)
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Hedge accounting. All existing hedge relationships that are currently designated in effective hedging relationships still qualify for hedge accounting under IFRS 9. As IFRS 9 does not change the general principles of how an entity accounts for effective hedges, the adoption of IFRS 9 did not have a material impact on the Company’s hedge accounting.
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As of February 4, 2018, the Company adopted IFRS 15, “Revenue from Contracts with Customers” (“IFRS 15”). IFRS 15 replaces IAS 11, “Construction Contracts”, and IAS 18, “Revenue”, as well as various interpretations regarding revenue. This standard introduces a single model for recognizing revenue that applies to all contracts with customers, except for contracts that are within the scope of standards on leases, insurance and financial instruments. This standard also requires enhanced disclosures. Adoption of IFRS 15 is mandatory and is effective for annual periods beginning on or after January 1, 2018. The implementation of IFRS 15 impacts the allocation of revenue that is deferred in relation to the Company’s customer loyalty award programs. Prior to adoption, revenue was allocated to the customer loyalty awards using the residual fair value method. Under IFRS 15, consideration is allocated between the loyalty program awards and the goods on which the awards were earned, based on their relative stand-alone selling prices. The change in allocation of revenue that is deferred in relation to the Company’s customer loyalty program did not have a material impact on retained earnings as at February 4, 2018. Overall, there was not a material impact on the Company’s consolidated financial statements.
As of February 4, 2018, the Company adopted International Financial Reporting Interpretations (“IFRIC”) 22, “Foreign Currency Transactions and Advance Consideration” (“IFRIC 22”). In December 2016, the IASB issued IFRIC 22, which addresses how to determine the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income (or part of it) and on the derecognition of a non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration in a foreign currency. IFRIC 22 is effective for annual periods beginning on or after January 1, 2018. There was no material impact on the Company’s consolidated financial statements.
Standards issued but not yet effective
IFRS 16, “Leases” (“IFRS 16”) replaces IAS 17, “Leases.” This standard provides a single model for leases abolishing the current distinction between finance and operating leases, with most leases being recognized on the balance sheet. Certain exemptions will apply for short-term leases and leases of low value assets. The new standard will be effective for annual periods beginning on or after January 1, 2019. Early application is permitted, provided the new revenue standard, IFRS 15, has been applied, or is applied at the same date as IFRS 16. The Company expects the adoption of IFRS 16 will have a significant impact as the Company will recognize new assets and liabilities for its operating leases of retail stores. In addition, the nature and timing of expenses related to those leases will change as IFRS 16 replaces the straight-line operating lease expense with a depreciation charge for right-of-use assets and interest expense on lease liabilities. The Company has elected to apply the modified retrospective method by setting right-of-use assets based on the lease liability at the date of initial application, adjusted by the amount of any prepaid or accrued lease payments, and will benefit from the following practical expedients;
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·
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apply IFRS 16 exclusively to contracts that were previously identified as leases applying IAS 17,
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·
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apply a single discount rate to a portfolio of leases with reasonably similar characteristics,
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·
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rely on its assessment of whether leases are onerous applying IAS 37 immediately before the date of initial application as an alternative to performing an impairment review of the right-of-use asset,
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·
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exclude initial direct costs from the measurement of the right-of-use asset at the date of initial application, and
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·
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elect not to apply IFRS 16 to leases for which the underlying asset is of low value.
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As of February 2, 2019, based on the information currently available, the Company estimates that it will recognize a right-of-use asset of approximately $62,800 to $66,000 and a lease liability of approximately $90,000 to $94,600. The right-of-use asset will be net of the provision for onerous leases and deferred rent and lease inducements relating to the leases recognised in the consolidated balance sheet immediately before the date of initial application. The actual impacts of the initial application of IFRS 16 may vary from the estimates provided, as the Company has not finalized all its calculations.
IFRIC 23, “Uncertainty over Income Tax Treatments”, was issued by the IASB in June 2017. The Interpretation provides guidance on the accounting for current and deferred tax liabilities and assets in circumstances in which there is uncertainty over income tax treatments. The Interpretation is effective for annual periods beginning on or after January 1, 2019. Earlier application is permitted.
The Interpretation requires an entity to:
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·
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Contemplate whether uncertain tax treatments should be considered separately, or together as a group, based on which approach provides better predictions of the resolution;
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·
|
Reflect an uncertainty in the amount of income tax payable (recoverable) if it is probable that it will pay (or recover) an amount for the uncertainty; and
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|
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·
|
Measure a tax uncertainty based on the most likely amount or expected value depending on whichever method better predicts the amount payable (recoverable).
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The Company does not expect a material impact from the adoption of IFRIC 23 on its consolidated financial statements.
5. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the consolidated financial statements in conformity with IFRS requires the Company to make judgments, apart from those involving estimation, in applying accounting policies that affect the recognition and measurement of assets, liabilities, revenues, and expenses. Actual results may differ from the judgments made by the Company. Information about judgments that have the most significant effect on recognition and measurement of assets, liabilities, revenues, and expenses are discussed below. Information about significant estimates is discussed in the following section.
Key sources of estimation uncertainty
Recoverability and impairment of non‑financial assets
Leasehold improvements and furniture and equipment are reviewed for impairment if events or changes in circumstances indicate that the carrying amount may not be recoverable. A review for impairment is conducted by comparing the carrying amount of the CGU’s assets with their respective recoverable amounts based on value in use. Value in use is determined based on management’s best estimate of expected future cash flows, which includes estimates of growth rates, from use over the remaining lease term and discounted using a pre‑tax weighted average cost of capital (Note 8).
Critical judgements in applying accounting policies
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i.
|
Impairment of non‑financial assets
|
Management is required to make significant judgments in determining if individual commercial premises in which it carries out its activities are individual CGUs, or if these units should be aggregated at a district or regional level to form a CGU. The significant judgments applied by management in determining if stores should be aggregated in a given geographic area to form a CGU include the determination of expected customer behavior, the allocation basis of e-commerce sales to CGUs, and whether customers could interchangeably shop in any of the stores in a given area and whether management views the cash inflows of the stores in the group as interdependent.
The Company may be subject to audits related to tax risks, and uncertainties exist with respect to the interpretation of tax regulations, changes in tax laws, and the amount and timing of future taxable income. Differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to taxable income and income tax expense already recorded. The Company establishes provisions if required, based on reasonable estimates, for possible consequences of audits by the tax authorities. The amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the entity and the responsible tax authority, which may arise on a wide variety of issues.
To determine the extent to which deferred income tax assets can be recognized, management estimates the amount of probable future taxable profits that will be available against which deductible temporary differences and unused tax losses can be used. Such estimates are made as part of the budget and strategic plan by tax jurisdiction. Management exercises judgment to determine the extent to which realization of future taxable benefits is probable considering factors such as the number of years included in the forecast period and prudent tax planning strategies. See Note 19—Income Taxes for more details.
6. ACCOUNTS AND OTHER RECEIVABLES
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|
February 2,
|
|
|
February 3,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
$
|
|
|
$
|
|
Credit card cash clearing receivables
|
|
|
1,477
|
|
|
|
1,291
|
|
Other receivables
|
|
|
2,204
|
|
|
|
1,840
|
|
|
|
|
3,681
|
|
|
|
3,131
|
|
7. INVENTORIES
|
|
February 2,
|
|
|
February 3,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
$
|
|
|
$
|
|
Finished goods
|
|
|
28,991
|
|
|
|
17,600
|
|
Goods in transit
|
|
|
3,262
|
|
|
|
4,608
|
|
Packaging
|
|
|
2,100
|
|
|
|
2,242
|
|
|
|
|
34,353
|
|
|
|
24,450
|
|
During the year ended February 2, 2019, inventories recognized as cost of sales amounted to $63,195 [February 3, 2018 —$64,611, January 28, 2017 - $62,995]. The cost of inventory includes a write-down of $703 [February 3, 2018 – nil, January 28, 2017 - $869] recorded as a result of net realizable value being lower than cost. Inventory write-downs of nil [February 2, 2018 - $730, January 28, 2017 – nil] recognized in the previous years were reversed.
8. PROPERTY AND EQUIPMENT
|
|
Leasehold
|
|
|
Furniture and
|
|
|
Computer
|
|
|
|
|
|
|
improvements
|
|
|
equipment
|
|
|
hardware
|
|
|
Total
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 28, 2017
|
|
|
75,555
|
|
|
|
11,185
|
|
|
|
3,948
|
|
|
|
90,688
|
|
Acquisitions
|
|
|
6,581
|
|
|
|
1,808
|
|
|
|
1,245
|
|
|
|
9,634
|
|
Disposals
|
|
|
—
|
|
|
|
(187
|
)
|
|
|
—
|
|
|
|
(187
|
)
|
Cumulative translation adjustment
|
|
|
(1,503
|
)
|
|
|
(167
|
)
|
|
|
(49
|
)
|
|
|
(1,719
|
)
|
Balance, February 3, 2018
|
|
|
80,633
|
|
|
|
12,639
|
|
|
|
5,144
|
|
|
|
98,416
|
|
Acquisitions
|
|
|
2,096
|
|
|
|
1,125
|
|
|
|
676
|
|
|
|
3,897
|
|
Disposals
|
|
|
(68
|
)
|
|
|
(32
|
)
|
|
|
-
|
|
|
|
(100
|
)
|
Cumulative translation adjustment
|
|
|
1,481
|
|
|
|
178
|
|
|
|
58
|
|
|
|
1,717
|
|
Balance, February 2, 2019
|
|
|
84,142
|
|
|
|
13,910
|
|
|
|
5,878
|
|
|
|
103,930
|
|
|
|
Leasehold
|
|
|
Furniture and
|
|
|
Computer
|
|
|
|
|
|
|
improvements
|
|
|
equipment
|
|
|
hardware
|
|
|
Total
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Accumulated depreciation and impairment
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 28, 2017
|
|
|
32,342
|
|
|
|
5,048
|
|
|
|
2,138
|
|
|
|
39,528
|
|
Depreciation
|
|
|
6,394
|
|
|
|
1,357
|
|
|
|
680
|
|
|
|
8,431
|
|
Impairment
|
|
|
13,491
|
|
|
|
1,148
|
|
|
|
430
|
|
|
|
15,069
|
|
Disposals
|
|
|
—
|
|
|
|
(105
|
)
|
|
|
—
|
|
|
|
(105
|
)
|
Cumulative translation adjustment
|
|
|
(931
|
)
|
|
|
(102
|
)
|
|
|
(32
|
)
|
|
|
(1,065
|
)
|
Balance, February 3, 2018
|
|
|
51,296
|
|
|
|
7,346
|
|
|
|
3,216
|
|
|
|
61,858
|
|
Depreciation
|
|
|
5,117
|
|
|
|
1,134
|
|
|
|
653
|
|
|
|
6,904
|
|
Impairment
|
|
|
8,164
|
|
|
|
1,411
|
|
|
|
351
|
|
|
|
9,926
|
|
Disposals
|
|
|
—
|
|
|
|
(16
|
)
|
|
|
—
|
|
|
|
(16
|
)
|
Cumulative translation adjustment
|
|
|
1,297
|
|
|
|
126
|
|
|
|
47
|
|
|
|
1,470
|
|
Balance, February 2, 2019
|
|
|
65,874
|
|
|
|
10,001
|
|
|
|
4,267
|
|
|
|
80,142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Carrying Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, February 3, 2018
|
|
|
29,337
|
|
|
|
5,293
|
|
|
|
1,928
|
|
|
|
36,558
|
|
Balance, February 2, 2019
|
|
|
18,268
|
|
|
|
3,909
|
|
|
|
1,611
|
|
|
|
23,788
|
|
For the year ended February 2, 2019, an assessment of impairment indicators was performed which caused the Company to review the recoverable amount of the property and equipment for certain CGUs with an indication of impairment. CGUs reviewed included stores performing below the Company’s expectations. As a result, an impairment loss of $9,926 [February 3, 2018 - $15,069, January 28, 2017 — $7,516] related to store leasehold improvements, furniture and equipment and computer hardware was recorded in the Canada and U.S. segments for $7,686 and $2,240, respectively [February 3, 2018 - $5,114 and $9,955, January 28, 2017 —$1,116 and $6,400, respectively]. These losses were determined by comparing the carrying amount of the CGU’s net assets with their respective recoverable amounts based on value in use. Value in use of nil [February 3, 2018 - $1,097, January 28, 2017 —$472] was determined based on management’s best estimate of expected future cash flows from use over the remaining lease terms, considering historical experience as well as current economic conditions, and was then discounted using a pre‑tax discount rate of 11.9% [February 3, 2018 – 11.9%, January 28, 2017 — 13.4%]. A reversal of impairment occurs when previously impaired CGUs see improved financial results. For the year ended February 2, 2019, no of impairment losses were reversed [February 3, 2018 - $866, January 28, 2017 — nil]. Impairment losses were reversed only to the extent that the carrying amounts of the CGU’s net assets do not exceed the carrying amount that would have been determined, net of depreciation, if no impairment loss had been recognized.
For the year ended February 2, 2019, the depreciation expense was $6,904 [February 3, 2018 - $8,431, January 28, 2017 —$8,069
]; with $5,825 recorded in the Canada segment [February 3, 2018 - $6,387, January 28, 2017 — $5,583], $520 recorded in the U.S. segment [February 3, 2018 - $1,508, January 28, 2017 — $1,930], and $559 recorded in corporate selling, general and administration expenses [February 3, 2018 - $536, January 28, 2017 — $556]. Depreciation expense and net impairment losses are reported in the consolidated statement of loss and comprehensive loss under selling, general and administration expenses (Note 18).
9. INTANGIBLE ASSETS
|
|
Computer
|
|
|
|
|
|
|
|
|
|
software
|
|
|
Other
|
|
|
Total
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Cost
|
|
|
|
|
|
|
|
|
|
Balance, January 28, 2017
|
|
|
6,321
|
|
|
|
279
|
|
|
|
6,600
|
|
Acquisitions
|
|
|
2,962
|
|
|
|
-
|
|
|
|
2,962
|
|
Cumulative translation adjustment
|
|
|
(4
|
)
|
|
|
(10
|
)
|
|
|
(14
|
)
|
Balance, February 3, 2018
|
|
|
9,279
|
|
|
|
269
|
|
|
|
9,548
|
|
Acquisitions
|
|
|
4,356
|
|
|
|
0
|
|
|
|
4,356
|
|
Disposal
|
|
|
(1,724
|
)
|
|
|
(178
|
)
|
|
|
(1,902
|
)
|
Cumulative translation adjustment
|
|
|
4
|
|
|
|
10
|
|
|
|
14
|
|
Balance, February 2, 2019
|
|
|
11,915
|
|
|
|
101
|
|
|
|
12,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 28, 2017
|
|
|
3,565
|
|
|
|
77
|
|
|
|
3,642
|
|
Amortization
|
|
|
1,456
|
|
|
|
18
|
|
|
|
1,474
|
|
Cumulative translation adjustment
|
|
|
(2
|
)
|
|
|
(5
|
)
|
|
|
(7
|
)
|
Balance, February 3, 2018
|
|
|
5,019
|
|
|
|
90
|
|
|
|
5,109
|
|
Amortization
|
|
|
1,281
|
|
|
|
17
|
|
|
|
1,298
|
|
Impairment
|
|
|
34
|
|
|
|
-
|
|
|
|
34
|
|
Disposal
|
|
|
-
|
|
|
|
(111
|
)
|
|
|
(111
|
)
|
Cumulative translation adjustment
|
|
|
2
|
|
|
|
6
|
|
|
|
8
|
|
Balance, February 2, 2019
|
|
|
6,336
|
|
|
|
2
|
|
|
|
6,338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Carrying Value
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, February 3, 2018
|
|
|
4,260
|
|
|
|
179
|
|
|
|
4,439
|
|
Balance, February 2, 2019
|
|
|
5,579
|
|
|
|
98
|
|
|
|
5,678
|
|
Amortization expense is reported in the consolidated statement of loss under selling, general and administration expenses (Note 18).
Included in disposal is a write-off of $1,724 [February 2, 2018 – nil] related to costs incurred with respect to an ERP upgrade which the Company no longer intends to continue.
10. TRADE AND OTHER PAYABLES
|
|
February 2,
|
|
|
February 3,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
$
|
|
|
$
|
|
Trade payable and accrued liabilities
|
|
|
14,990
|
|
|
|
11,221
|
|
Income taxes payable
|
|
|
2,700
|
|
|
|
—
|
|
Government remittances
|
|
|
-
|
|
|
|
186
|
|
Wages, salaries and employee benefits payable
|
|
|
3,261
|
|
|
|
2,985
|
|
|
|
|
20,951
|
|
|
|
14,392
|
|
11. DEFERRED REVENUE
|
|
February 2,
|
|
February 3,
|
|
|
|
2019
|
|
2018
|
|
|
|
$
|
|
$
|
|
Gift cards liability
|
|
4,992
|
|
|
3,982
|
|
Loyalty program liability
|
|
1,249
|
|
|
1,204
|
|
|
|
6,241
|
|
|
5,186
|
|
During the year, the Company recorded gift card breakage income of $242 [February 3, 2018 - $575, January 28, 2017 - $850]. Gift card breakage is included in sales in the consolidated statement of loss.
12. PROVISIONS
|
|
February 2,
|
|
|
February 3,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
$
|
|
|
$
|
|
Opening balance
|
|
|
18,153
|
|
|
|
8,494
|
|
Additions
|
|
|
11,078
|
|
|
|
14,073
|
|
Reversals
|
|
|
(4,796
|
)
|
|
|
(3,752
|
)
|
Utilization
|
|
|
(5,730
|
)
|
|
|
(2,467
|
)
|
Settlements
|
|
|
(691
|
)
|
|
|
(132
|
)
|
Accretion expense
|
|
|
251
|
|
|
|
2,292
|
|
Cumulative translation adjustment
|
|
|
889
|
|
|
|
(355
|
)
|
Ending balance
|
|
|
19,154
|
|
|
|
18,153
|
|
Less: Current portion
|
|
|
(3,714
|
)
|
|
|
(4,693
|
)
|
Long-term portion of provisions
|
|
|
15,440
|
|
|
|
13,460
|
|
Provisions for onerous contracts have been recognized in respect of store leases where the unavoidable costs of meeting the obligations under the lease agreements exceed the economic benefits expected to be received from the contract. The unavoidable costs reflect the present value of the lower of the expected cost of terminating the contract and the expected net cost of operating under the contract. For the year ended February 2, 2019, additions to the onerous provisions were recorded in the amount of $11,078 [February 3, 2018 - $14,073], while the provisions for other stores were fully or partially reversed in the amount of $4,796 [February 3, 2018 - $3,752].
13. COMMITMENTS AND CONTINGENCIES
Operating Lease Commitments
The commercial premises at which the Company carries out its retail operations, its head office and its primary warehouse location are leased from third parties. These rental contracts are classified as operating leases since there is no transfer of risks and rewards inherent to ownership.
These leases have varying terms and renewal rights. In many cases, the amounts payable to the lessor include a fixed rental payment as well as a percentage of sales obtained by the Company in the leased premises. Many leases include escalating rental payments, whereby cash outflows increase over the lease term. Free rental periods are also sometimes included.
The minimum rentals payable under long‑term operating leases are exclusive of certain operating costs for which the Company is responsible. For the year ended February 2, 2019, the Company has recognized in the consolidated statement of loss contingent rent amounting to $1,030 [February 3, 2018 - $1,742, January 28, 2017 — $2,312] and accrued for a contingent rent liability of $477 [February 3, 2018 - $725, January 28, 2017 —$1,001].
Included in the cost of sales and selling, general and administration expenses for the year ended February 2, 2019 is rent expense of $31,520 [February 3, 2018 - $31,565, January 28, 2017 — $29,173].
The following is a schedule of future minimum lease payments under operating leases:
|
|
February 2,
|
|
|
February 3,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
$
|
|
|
$
|
|
Within one year
|
|
|
21,089
|
|
|
|
19,840
|
|
After one year but not more than five years
|
|
|
66,790
|
|
|
|
86,844
|
|
More than five years
|
|
|
28,893
|
|
|
|
28,281
|
|
|
|
|
116,772
|
|
|
|
134,965
|
|
14. REVOLVING FACILITY
On June 11, 2018, the Company amended its existing Credit Agreement (the “Amended Credit Agreement”). The Amended Credit Agreement provides for a two-year revolving facility (“Amended Revolving Facility”) in the principal amount of $15.0 million or the equivalent in U.S. dollars, repayable at any time, two years from June 11, 2018, with no accordion feature. Borrowings under the Amended Revolving Facility may not exceed the lesser of the total commitment for the revolving facility and the borrowing base, calculated as 75% of the face value of all eligible receivables plus 50% of the estimated value of all eligible inventory, less any priority payables.
The Amended Credit Agreement subjects the Company to certain financial covenants. Without the prior written consent of the lender, the Company’s fixed charge coverage ratio may not be less than 1.10:1.00 and the Company’s leverage ratio may not exceed 3.00:1:00. In addition, the Company’s net tangible worth may not be less than $65,000 and the Company’s minimum excess availability must not be less than $15.0 million. The Amended Revolving Facility bears interest based on the Company’s adjusted leverage ratio, at the bank’s prime rate, U.S. bank rate and LIBOR plus a range from 0.5% to 2.5% per annum. A standby fee range of 0.3% to 0.5% will be paid on the daily principal amount of the unused portion of the Amended Revolving Facility.
The credit facility also contains non-financial covenants that, among other things and subject to certain exceptions, restrict the Company’s ability to become guarantor or endorser or otherwise become liable upon any note or other obligation other than in the normal course of business. The Company also cannot make any dividend payments.
As at February 2, 2019, the Company did not have any borrowings under the Amended Revolving Facility.
As at February 2, 2019, the Company is in breach of its fixed charge coverage ratio and certain non-financial covenants. BMO has temporarily agreed to forbear from exercising remedies under the Credit Agreement, however the Company cannot borrow under the facility. The Company is in good-faith discussions with BMO to install an asset based lending facility that will provide a revolving facility at commercial reasonable terms.
15. SHARE CAPITAL
Authorized
An unlimited number of common shares.
Issued and Outstanding
|
|
February 2,
|
|
|
February 3,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
$
|
|
|
$
|
|
Share Capital - Common shares
|
|
|
112,519
|
|
|
|
111,692
|
|
|
|
Common
|
|
|
|
shares
|
|
|
|
#
|
|
Number of shares in issuance
|
|
|
|
Balance, January 28, 2017
|
|
|
25,330,951
|
|
Issuance of common shares upon exercise of options
|
|
|
456,773
|
|
Issuance of common shares upon vesting of restricted stock units
|
|
|
97,648
|
|
Balance, February 3, 2018
|
|
|
25,885,372
|
|
Issuance of common shares upon exercise of options
|
|
|
51,717
|
|
Issuance of common shares upon vesting of restricted stock units
|
|
|
74,728
|
|
Balance, February 2, 2019
|
|
|
26,011,817
|
|
During the year ended February 2, 2019, 51,720 stock options were exercised for common shares, for cash proceeds of $82 and 36,415 common shares for a non-cash settlement of $121 [February 3, 2018 – 456,773 stock options for cash proceeds of $1,782, January 28, 2017
—
1,236,154 stock options for cash proceeds of $2,779]. The carrying value of common shares during the year ended February 2, 2019 includes $82 [February 3, 2018 - $887] which corresponds to a reduction in the contributed surplus associated to options exercised during the period.
In addition, during the year ended February 2, 2019, 74,728 common shares [February 3, 2018 – 97,648, January 28, 2017
—
57,325] were issued in relation to the vesting of restricted stock units (“RSU”), resulting in an increase in share capital of $663, net of tax [February 2, 2018 - $1,142].
Stock‑Based Compensation
The 2015 Omnibus Plan provides for awards of stock options, stock appreciation rights (“SARs”), restricted stock, unrestricted stock, stock units (including restricted stock units, “RSUs”), performance awards, deferred share units, elective deferred share units and other awards convertible into or otherwise based on the Company’s common shares. Eligibility for stock options intended to be incentive stock options (“ISOs”) is limited to the Company’s employees. Dividend equivalents may also be provided in connection with an award under the 2015 Omnibus Plan. The maximum term of stock options and SARs is seven years. The options vest evenly over a period of 36 or 48 months, with some options vesting monthly and some options vesting annually. There are no cash settlement alternatives.
The maximum number of the Company’s common shares that are available for issuance under the 2015 Omnibus Plan is 1,440,000 shares. Common shares issued under the 2015 Omnibus Plan may be shares held in treasury or authorized but unissued shares of the Company not reserved for any other purpose. As at February 2, 2019, 867,882 common shares remain available for issuance under the 2015 Omnibus Plan.
No options were granted for the year ended February 2, 2019. The weighted average fair value of options granted of $2.39 for the year ended February 3, 2018 was estimated using the Black Scholes option pricing model, using the following assumptions; risk-free interest rate of 1.79%, expected volatility of 27.4%, expected option life of 4.0 years, expected dividend yield of nil%, and exercise price of $9.76. Expected volatility was estimated using historical volatility of similar companies whose share prices were publicly available.
A summary of the status of the Company’s stock option plan and changes during the year is presented below.
|
|
For the year ended
|
|
|
|
February 2,
|
|
|
February 3,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
average
|
|
|
|
|
|
average
|
|
|
|
Options
|
|
|
exercise
|
|
|
Options
|
|
|
exercise
|
|
|
|
outstanding
|
|
|
price
|
|
|
outstanding
|
|
|
price
|
|
|
|
#
|
|
|
$
|
|
|
#
|
|
|
$
|
|
Outstanding, beginning of year
|
|
|
447,779
|
|
|
|
7.18
|
|
|
|
933,195
|
|
|
|
5.63
|
|
Issued
|
|
|
-
|
|
|
|
-
|
|
|
|
161,980
|
|
|
|
9.76
|
|
Exercised
|
|
|
(88,135
|
)
|
|
|
2.76
|
|
|
|
(456,773
|
)
|
|
|
3.9
|
|
Forfeitures
|
|
|
(222,104
|
)
|
|
|
8.95
|
|
|
|
(190,623
|
)
|
|
|
9.63
|
|
Outstanding, end of year
|
|
|
137,540
|
|
|
|
7.17
|
|
|
|
447,779
|
|
|
|
7.18
|
|
Exercisable, end of year
|
|
|
80,332
|
|
|
|
4.74
|
|
|
|
304,415
|
|
|
|
5.57
|
|
The weighted average share price at the date of exercise for options exercised during the year ended February 2, 2019 was $4.47 [February 3, 2018 — $8.51].
The following table summarizes information about the stock options outstanding at February 2, 2019 and February 3, 2018:
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
Number
|
|
|
average
|
|
|
Weighted
|
|
|
options
|
|
|
Weighted
|
|
|
|
|
outstanding at
|
|
|
contractual
|
|
|
average
|
|
|
exercisable at
|
|
|
average
|
|
|
|
|
February 2,
|
|
|
remaining
|
|
|
exercise
|
|
|
February 2,
|
|
|
exercise
|
|
|
|
|
2019
|
|
|
life
|
|
|
price
|
|
|
2019
|
|
|
price
|
|
Range of exercise prices
|
|
|
#
|
|
|
(years)
|
|
|
$
|
|
|
#
|
|
|
$
|
|
$0.77
|
|
|
|
31,100
|
|
|
|
1.1
|
|
|
|
0.77
|
|
|
|
31,100
|
|
|
|
0.77
|
|
$3.33 - $4.31
|
|
|
|
35,000
|
|
|
|
2.6
|
|
|
|
4.29
|
|
|
|
35,000
|
|
|
|
4.29
|
|
$8.76 - $10.28
|
|
|
|
53,225
|
|
|
|
5.1
|
|
|
|
10.28
|
|
|
|
-
|
|
|
|
-
|
|
$14.39 - $17.99
|
|
|
|
18,215
|
|
|
|
4.2
|
|
|
|
14.51
|
|
|
|
14,232
|
|
|
|
14.54
|
|
As at February 2, 2019
|
|
|
|
137,540
|
|
|
|
3.4
|
|
|
|
7.17
|
|
|
|
80,332
|
|
|
|
4.74
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
Number
|
|
|
average
|
|
|
Weighted
|
|
|
options
|
|
|
Weighted
|
|
|
|
|
outstanding at
|
|
|
contractual
|
|
|
average
|
|
|
exercisable at
|
|
|
average
|
|
|
|
|
February 3,
|
|
|
remaining
|
|
|
exercise
|
|
|
February 3,
|
|
|
exercise
|
|
|
|
|
2018
|
|
|
life
|
|
|
price
|
|
|
2018
|
|
|
price
|
|
Range of exercise prices
|
|
|
#
|
|
|
(years)
|
|
|
$
|
|
|
#
|
|
|
$
|
|
$0.77
|
|
|
|
50,600
|
|
|
|
2.3
|
|
|
|
0.77
|
|
|
|
50,600
|
|
|
|
0.77
|
|
$3.33 - $4.31
|
|
|
|
172,396
|
|
|
|
3.7
|
|
|
|
3.91
|
|
|
|
161,395
|
|
|
|
3.89
|
|
$8.76 - $10.28
|
|
|
|
161,980
|
|
|
|
6.4
|
|
|
|
9.76
|
|
|
|
55,530
|
|
|
|
8.76
|
|
$14.39 - $17.99
|
|
|
|
62,803
|
|
|
|
4.3
|
|
|
|
14.68
|
|
|
|
36,890
|
|
|
|
14.72
|
|
As at February 3, 2018
|
|
|
|
447,779
|
|
|
|
4.6
|
|
|
|
7.18
|
|
|
|
304,415
|
|
|
|
5.57
|
|
A summary of the status of the Company’s RSU plan and changes during the year ended February 2, 2019 and February 3, 2018 is presented below.
|
|
For the year ended
|
|
|
|
February 2,
|
|
|
February 3,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
average
|
|
|
|
|
|
average
|
|
|
|
RSUs
|
|
|
fair value
|
|
|
RSUs
|
|
|
fair value
|
|
|
|
outstanding
|
|
|
per unit (1)
|
|
|
outstanding
|
|
|
per unit (1)
|
|
|
|
#
|
|
|
$
|
|
|
#
|
|
|
$
|
|
Outstanding, beginning of year
|
|
|
289,416
|
|
|
|
9.7
|
|
|
|
252,233
|
|
|
|
12.42
|
|
Granted
|
|
|
491,450
|
|
|
|
4.47
|
|
|
|
298,897
|
|
|
|
8.59
|
|
Forfeitures
|
|
|
(360,371
|
)
|
|
|
6.31
|
|
|
|
(89,035
|
)
|
|
|
10.03
|
|
Vested
|
|
|
(74,728
|
)
|
|
|
8.85
|
|
|
|
(97,648
|
)
|
|
|
11.85
|
|
Vested, withheld for tax
|
|
|
(74,791
|
)
|
|
|
8.6
|
|
|
|
(75,031
|
)
|
|
|
11.28
|
|
Outstanding, end of year
|
|
|
270,976
|
|
|
|
5.26
|
|
|
|
289,416
|
|
|
|
9.7
|
|
(1) Weighted average fair value per unit as at date of grant.
During the year ended February 2, 2019, the Company recognized a stock-based compensation expense of $211 [February 3, 2018 - $2,021, January 28, 2017 — $2,264].
16. FINANCE COSTS
|
|
February 2,
|
|
|
February 3,
|
|
|
January 28,
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Financing fees on term loan and Revolving Facility [note 14]
|
|
|
2
|
|
|
|
79
|
|
|
|
75
|
|
Accretion on provisions
|
|
|
251
|
|
|
|
2,292
|
|
|
|
-
|
|
Interest and penalty on provision for uncertain tax position
|
|
|
1,300
|
|
|
|
-
|
|
|
|
-
|
|
Other finance costs
|
|
|
61
|
|
|
|
-
|
|
|
|
1
|
|
|
|
|
1,614
|
|
|
|
2,371
|
|
|
|
76
|
|
17. INCOME TAXES
A reconciliation of the statutory income tax rate to the effective tax rate is as follows:
|
|
For the year ended
|
|
|
|
February 2,
|
|
|
February 3,
|
|
|
January 28,
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
|
%
|
|
|
$
|
|
|
%
|
|
|
$
|
|
|
%
|
|
|
$
|
|
Income tax recovery — statutory rate
|
|
|
26.9
|
|
|
|
(7,700
|
)
|
|
|
26.8
|
|
|
|
(7,097
|
)
|
|
|
26.5
|
|
|
|
(1,564
|
)
|
Increase (decrease) in provision for income tax (recovery) resulting from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-deductible items
|
|
|
(1.3
|
)
|
|
|
378
|
|
|
|
(1.6
|
)
|
|
|
437
|
|
|
|
(10.1
|
)
|
|
|
598
|
|
Effect of substantively enacted income tax rate changes
|
|
|
—
|
|
|
|
—
|
|
|
|
(7.9
|
)
|
|
|
2,090
|
|
|
|
—
|
|
|
|
—
|
|
Unrecognized deferred income tax assets
|
|
|
(15.0
|
)
|
|
|
4,306
|
|
|
|
(16.7
|
)
|
|
|
4,415
|
|
|
|
—
|
|
|
|
—
|
|
Write-down of deferred income tax assets
|
|
|
(18.2
|
)
|
|
|
5,194
|
|
|
|
(7.8
|
)
|
|
|
2,054
|
|
|
|
—
|
|
|
|
—
|
|
Provision for uncertain tax position
|
|
|
(9.4
|
)
|
|
|
2,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
0.0
|
|
|
|
4
|
|
|
|
(0.4
|
)
|
|
|
111
|
|
|
|
21.5
|
|
|
|
(1,269
|
)
|
Income tax provision (recovery) — effective tax rate
|
|
|
(17.0
|
)
|
|
|
4,882
|
|
|
|
(7.6
|
)
|
|
|
2,010
|
|
|
|
37.9
|
|
|
|
(2,235
|
)
|
A breakdown of the income tax provision (recovery) on the consolidated statement of loss is as follows:
|
|
For the year ended
|
|
|
|
February 2,
|
|
|
February 3,
|
|
|
January 28,
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Income tax provision (recovery)
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
(187
|
)
|
|
|
(1,575
|
)
|
|
|
2,145
|
|
Deferred
|
|
|
5,069
|
|
|
|
3,585
|
|
|
|
(4,380
|
)
|
|
|
|
4,882
|
|
|
|
2,010
|
|
|
|
(2,235
|
)
|
On December 22, 2017, the Tax Cuts and Jobs Act (“U.S. Tax Reform”) was signed into law, which reduced the U.S. federal corporate income tax rate from 35% to 21%, effective January 1, 2018. As a result of the U.S. Tax Reform, The Company’s net deferred taxes reported on the balance sheet were required to be re-measured using the newly enacted rates. The effect of this re-evaluation resulted in a decrease in the net deferred tax assets in the amount of $4,892 during the year ended February 3, 2018.
The U.S. Tax Reform introduces other important changes in the U.S. corporate income tax laws that may significantly affect the Company in future years, including the creation of a new Base Erosion Anti-Abuse Tax that subjects certain payments from U.S. corporations to foreign related parties to additional taxes, and limitations to certain deductions for net interest expense incurred by U.S. corporations. The U.S. Tax Reform also includes an increase in bonus depreciation from 50% to 100% for qualified property placed in service after September 27, 2017 and before 2023. Future regulations and interpretations to be issued by U.S. authorities may also impact the Company’s estimates and assumptions used in calculating its income tax provisions.
We are currently undergoing transfer pricing audit by the Canada Revenue Agency. While the Company believes that its filing positions are appropriate and supportable, periodically, certain matters may be challenged by tax authorities. We believe that our transfer pricing practices reflect the accurate economic allocation of profit and risk and that proper contemporaneous transfer pricing documentation is in place. Preliminary findings from the transfer pricing audit indicates a difference in the interpretation of the economics of the arrangement. Although the outcome of such matters is not predictable with assurance, we have nonetheless recorded a provision of $4.0 million comprised of $2.7 million and $1.3 milllion for taxes and interest, respectively. While the Company believes its tax provisions are adequate, the final determination of tax audits and any related disputes could be materially different from historical income tax provisions and accruals. The Company intends to vigorously defend its practices and believes it has sufficient arguments to mitigate the unfavorable outcome.
The tax effects of temporary differences and net operating losses that give rise to deferred income tax assets and liabilities are as follows:
|
|
February 2,
|
|
|
February 3,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
$
|
|
|
$
|
|
Deferred income tax assets
|
|
|
|
|
|
|
Operating losses carried forward
|
|
|
4,608
|
|
|
|
1,259
|
|
Tax values of property and equipment in excess of carrying value including impairment
|
|
|
3,505
|
|
|
|
1,553
|
|
Deferred rent
|
|
|
1,762
|
|
|
|
1,662
|
|
Stock options
|
|
|
3,843
|
|
|
|
3,401
|
|
Financing fees and IPO-related costs
|
|
|
588
|
|
|
|
1,197
|
|
Lease inducements
|
|
|
634
|
|
|
|
515
|
|
Provisions for onerous contracts
|
|
|
5,357
|
|
|
|
4,812
|
|
Other
|
|
|
665
|
|
|
|
635
|
|
Total deferred income tax assets
|
|
|
20,962
|
|
|
|
15,034
|
|
Deferred income tax liabilities
|
|
|
|
|
|
|
|
|
Unrealized foreign exchange gain on derivative financial instruments
|
|
|
-
|
|
|
|
62
|
|
Unrealized foreign exchange gain related to intercompany advances
|
|
|
(212
|
)
|
|
|
(113
|
)
|
Deferred income tax liabilities
|
|
|
(212
|
)
|
|
|
(51
|
)
|
Net
|
|
|
20,750
|
|
|
|
14,983
|
|
Unrecognized deferred income tax asset
|
|
|
(20,750
|
)
|
|
|
(9,789
|
)
|
Net deferred income tax assets (liabilities)
|
|
|
-
|
|
|
|
5,194
|
|
As at February 2, 2019, the Company’s Canadian operations have accumulated losses amounting to $11.9 million [February 3, 2018 — nil; January 28, 2017 — nil], which expire during the year 2039. As at February 2, 2019, the Company’s U.S. subsidiary has accumulated losses amounting to US$14.0 million [February 3, 2018 — US$14.2 million; January 28, 2017 — US$14.9 million], which expire during the years 2033 to 2039.
Based upon the projections for future taxable income and prudent tax planning strategies, management believes it is no longer probable the Company will realize the benefits of these operating tax losses carried forward and other deductible temporary differences. Therefore, a full valuation allowance of $20,750 was recorded against the net deferred income tax asset.
The changes in the net deferred income tax asset were as follows for the fiscal years:
|
|
February 2,
|
|
|
February 3,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
$
|
|
|
$
|
|
Balance net, beginning of year
|
|
|
5,194
|
|
|
|
14,375
|
|
Deferred rent
|
|
|
101
|
|
|
|
(222
|
)
|
Canadian and U.S. operating losses carried forward
|
|
|
3,349
|
|
|
|
(1,180
|
)
|
Property and equipment, including store impairment
|
|
|
1,952
|
|
|
|
3,387
|
|
Stock options
|
|
|
442
|
|
|
|
(2,245
|
)
|
Financing fees and IPO-related costs
|
|
|
(609
|
)
|
|
|
(604
|
)
|
Foreign exchange gain on derivative financial instrument
|
|
|
(62
|
)
|
|
|
183
|
|
Unrealized foreign exchange gain on intercompany advances
|
|
|
(99
|
)
|
|
|
196
|
|
Lease inducement
|
|
|
120
|
|
|
|
(149
|
)
|
Unrecognized deferred income tax asset
|
|
|
(10,961
|
)
|
|
|
(9,789
|
)
|
Provisions for onerous contracts
|
|
|
544
|
|
|
|
1,447
|
|
Other
|
|
|
29
|
|
|
|
(205
|
)
|
Deferred income tax assets net, end of year
|
|
|
-
|
|
|
|
5,194
|
|
18. SELLING, GENERAL AND ADMINISTRATION EXPENSES
Included in selling, general and administration expenses are the following expenses:
|
|
For the year ended
|
|
|
|
February 2,
|
|
|
February 3,
|
|
|
January 28,
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Wages, salaries and employee benefits
|
|
|
68,324
|
|
|
|
65,888
|
|
|
|
61,143
|
|
Depreciation of property and equipment
|
|
|
6,904
|
|
|
|
8,431
|
|
|
|
8,069
|
|
Amortization of intangible assets
|
|
|
1,298
|
|
|
|
1,474
|
|
|
|
758
|
|
Loss on disposal of property and equipment
|
|
|
151
|
|
|
|
82
|
|
|
|
356
|
|
Impairment of property and equipment
|
|
|
9,960
|
|
|
|
15,069
|
|
|
|
7,516
|
|
Net Provision for onerous contracts (a)
|
|
|
552
|
|
|
|
7,854
|
|
|
|
8,140
|
|
Stock-based compensation
|
|
|
211
|
|
|
|
2,021
|
|
|
|
2,264
|
|
Executive and employee separation costs related to salary
|
|
|
1,280
|
|
|
|
2,033
|
|
|
|
835
|
|
Strategic review and proxy contest costs
|
|
|
3,593
|
|
|
|
-
|
|
|
|
-
|
|
ERP project termination
|
|
|
2,496
|
|
|
|
-
|
|
|
|
-
|
|
Other selling, general and administration
|
|
|
30,953
|
|
|
|
29,078
|
|
|
|
25,675
|
|
|
|
|
125,722
|
|
|
|
131,930
|
|
|
|
114,756
|
|
(a)
|
Net provision for onerous contract includes additions, reversals and utilization.
|
19. EARNINGS PER SHARE
The following reflects the loss and share data used in the basic and diluted EPS computations:
|
|
February 2,
|
|
|
February 3,
|
|
|
January 28,
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Net loss for basic EPS
|
|
|
(33,539
|
)
|
|
|
(28,501
|
)
|
|
|
(3,688
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding — basic and diluted
|
|
|
25,967,836
|
|
|
|
25,716,186
|
|
|
|
24,699,290
|
|
For the years ended February 2, 2019, February 3, 2018, and January 28, 2017, as a result of the net loss during the year, the stock options and RSUs disclosed in Note 15 are anti‑dilutive.
20. 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 year ended February 2, 2019, the Company purchased merchandise from a company controlled by one of its executive employees amounting to $241 [February 3, 2018 — $87; January 28, 2017 — nil]. Subsequent to year end, the Company extended its relationship by entering into an agreement for the purchase and sale of administrative and infrastructure services.
In February 2019, the Company entered into an arrangement with a related party of the controlling shareholder for the development of reporting and consulting services.
During the year ended February 2, 2019, the Company reimbursed Rainy Day Investments Ltd. (“Rainy Day Investments”), a controlling shareholder $957 for third-party costs incurred by it in connection with the proxy contest which culminated at the Company’s annual meeting held on June 14, 2018. This reimbursement was approved by the independent members of the Board of Directors of the Company. This amount is included in selling, general and administration expenses.
Transactions with Key Management Personnel
Key management of the Company includes members of the Board as well as members of the Executive Committee. The compensation earned by key management in aggregate was as follows:
|
|
February 2,
|
|
|
February 3,
|
|
|
January 28,
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Wages, salaries ,bonus and director fees
|
|
|
2,706
|
|
|
|
4,071
|
|
|
|
3,434
|
|
Termination benefits
|
|
|
1,025
|
|
|
|
1,485
|
|
|
|
719
|
|
Stock-based compensation
|
|
|
101
|
|
|
|
1,809
|
|
|
|
1,377
|
|
Total compensation earned by key management personnel
|
|
|
3,832
|
|
|
|
7,365
|
|
|
|
5,530
|
|
21. 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. The Company has reviewed its operations and determined that each of its retail stores represents an operating segment. However, because its retail stores have similar economic characteristics, sell similar products, have similar types of customers, and use similar distribution channels, the Company has determined that these operating segments can be aggregated at a geographic level. As a result, the Company has concluded that it has two reportable segments, Canada and the U.S., that derive their revenues from the retail and online sale of tea, tea accessories, and food and beverages. The Company’s Chief Executive Officer (the chief operating decision maker or “CODM”) makes decisions about resources to be allocated to the segments and assesses performance, and for which discrete financial information is available.
The Company derives revenue from the following products:
|
|
February 2,
|
|
|
February 3,
|
|
|
January 28,
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Tea
|
|
|
152,761
|
|
|
|
156,125
|
|
|
|
143,280
|
|
Tea accessories
|
|
|
44,436
|
|
|
|
49,470
|
|
|
|
53,807
|
|
Food and beverages
|
|
|
15,556
|
|
|
|
18,420
|
|
|
|
18,897
|
|
|
|
|
212,753
|
|
|
|
224,015
|
|
|
|
215,984
|
|
Property and equipment and intangible assets by country are as follows:
|
|
February 2,
|
|
|
February 3,
|
|
|
January 28,
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Canada
|
|
|
27,996
|
|
|
|
37,234
|
|
|
|
41,432
|
|
US
|
|
|
1,470
|
|
|
|
3,763
|
|
|
|
12,686
|
|
Total
|
|
|
29,466
|
|
|
|
40,997
|
|
|
|
54,118
|
|
Results from operating activities before corporate expenses per country are as follows:
|
|
For the year ended
|
|
|
|
February 2, 2019
|
|
|
|
Canada
|
|
|
US
|
|
|
Consolidated
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Sales
|
|
|
169,430
|
|
|
|
43,323
|
|
|
|
212,753
|
|
Cost of sales
|
|
|
89,604
|
|
|
|
25,170
|
|
|
|
114,774
|
|
Gross profit
|
|
|
79,826
|
|
|
|
18,153
|
|
|
|
97,979
|
|
Selling, general and administration expenses (allocated)
|
|
|
57,902
|
|
|
|
18,175
|
|
|
|
76,077
|
|
Impairment of property and equipment
|
|
|
7,719
|
|
|
|
2,240
|
|
|
|
9,960
|
|
Onerous contracts provision (recovery)
|
|
|
2,034
|
|
|
|
(1,482
|
)
|
|
|
552
|
|
Results from operating activities before corporate expenses
|
|
|
12,171
|
|
|
|
(780
|
)
|
|
|
11,391
|
|
Selling, general and administration expenses (non-allocated)
|
|
|
|
|
|
|
|
|
|
|
39,134
|
|
Results from operating activities
|
|
|
|
|
|
|
|
|
|
|
(27,743
|
)
|
Finance costs
|
|
|
|
|
|
|
|
|
|
|
1,614
|
|
Finance income
|
|
|
|
|
|
|
|
|
|
|
(700
|
)
|
Loss before income taxes
|
|
|
|
|
|
|
|
|
|
|
(28,657
|
)
|
|
|
For the year ended
|
|
|
|
February 3, 2018
|
|
|
|
Canada
|
|
|
US
|
|
|
Consolidated
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Sales
|
|
|
185,287
|
|
|
|
38,728
|
|
|
|
224,015
|
|
Cost of sales
|
|
|
93,383
|
|
|
|
23,389
|
|
|
|
116,772
|
|
Gross profit
|
|
|
91,904
|
|
|
|
15,339
|
|
|
|
107,243
|
|
Selling, general and administration expenses (allocated)
|
|
|
54,884
|
|
|
|
18,302
|
|
|
|
73,186
|
|
Impairment of property and equipment
|
|
|
5,114
|
|
|
|
9,955
|
|
|
|
15,069
|
|
Provision for onerous contracts
|
|
|
1,752
|
|
|
|
6,102
|
|
|
|
7,854
|
|
Results from operating activities before corporate expenses
|
|
|
30,154
|
|
|
|
(19,020
|
)
|
|
|
11,134
|
|
Selling, general and administration expenses (non-allocated)
|
|
|
|
|
|
|
|
|
|
|
35,821
|
|
Results from operating activities
|
|
|
|
|
|
|
|
|
|
|
(24,687
|
)
|
Finance costs
|
|
|
|
|
|
|
|
|
|
|
2,371
|
|
Finance income
|
|
|
|
|
|
|
|
|
|
|
(567
|
)
|
Loss before income taxes
|
|
|
|
|
|
|
|
|
|
|
(26,491
|
)
|
|
|
For the year ended
|
|
|
|
January 28, 2017
|
|
|
|
Canada
|
|
|
US
|
|
|
Consolidated
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Sales
|
|
|
180,380
|
|
|
|
35,604
|
|
|
|
215,984
|
|
Cost of sales
|
|
|
86,473
|
|
|
|
21,061
|
|
|
|
107,534
|
|
Gross profit
|
|
|
93,907
|
|
|
|
14,543
|
|
|
|
108,450
|
|
Selling, general and administration expenses (allocated)
|
|
|
49,466
|
|
|
|
16,584
|
|
|
|
66,050
|
|
Impairment of property and equipment
|
|
|
1,116
|
|
|
|
6,400
|
|
|
|
7,516
|
|
Provision for onerous contracts
|
|
|
427
|
|
|
|
7,713
|
|
|
|
8,140
|
|
Results from operating activities before corporate expenses
|
|
|
42,898
|
|
|
|
(16,154
|
)
|
|
|
26,744
|
|
Selling, general and administration expenses (non-allocated)
|
|
|
|
|
|
|
|
|
|
|
33,050
|
|
Results from operating activities
|
|
|
|
|
|
|
|
|
|
|
(6,306
|
)
|
Finance costs
|
|
|
|
|
|
|
|
|
|
|
76
|
|
Finance income
|
|
|
|
|
|
|
|
|
|
|
(479
|
)
|
Loss before income taxes
|
|
|
|
|
|
|
|
|
|
|
(5,903
|
)
|
22. FINANCIAL RISK MANAGEMENT
The Company’s activities expose it to a variety of financial risks, including risks related to foreign exchange, interest rate, credit, and liquidity.
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 loss in the amount of $123.
The Company’s foreign exchange exposure is as follows:
|
|
February 2,
|
|
|
February 3,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
US$
|
|
|
US$
|
|
Cash
|
|
|
267
|
|
|
|
5,686
|
|
Accounts receivable
|
|
|
1,142
|
|
|
|
882
|
|
Accounts payable
|
|
|
3,869
|
|
|
|
2,555
|
|
The Company’s U.S. subsidiary’s transactions are denominated in U.S. dollars.
In order to protect itself from the risk of losses should the value of the Canadian dollar decline in relation to the U.S. dollar, the Company entered into forward contracts to fix the exchange rate of 80% to 90% of its expected U.S. dollar inventory purchasing requirements, through September 2018. A forward foreign exchange contract is a contractual agreement to buy a specific currency at a specific price and date in the future. The Company designated the forward contracts as cash flow hedging instruments under IFRS 9. This has resulted in mark-to-market foreign exchange adjustments, for qualifying hedged instruments, being recorded as a component of other comprehensive loss for the years ended Februay 2, 2019 and February 3, 2018. As at February 2, 2019 and February 3, 2018, the designated portion of these hedges was considered effective.
The Company had no foreign exchange contracts outstanding as at February 2, 2019.
The nominal and contract values of foreign exchange contracts outstanding as at February 3, 2018 are as follows:
|
|
Range of
|
|
Nominal
|
|
|
Nominal
|
|
|
|
|
Unrealized
|
|
|
|
Contractual
|
|
value
|
|
|
value
|
|
|
|
|
gain/(loss)
|
|
Purchase contracts
|
|
exchange rate
|
|
US$
|
|
|
C$
|
|
|
Term
|
|
C$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. dollar
|
|
1.2221 - 1.3050
|
|
|
24,100
|
|
|
|
30,033
|
|
|
February 2018 to September 2018
|
|
|
(229
|
)
|
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 of cash. The Company is exposed to cash flow risk on its Revolving Facility which bears interest at variable interest rates (see Note 14). As at February 2, 2019 and February 3, 2018, the Company did not have any borrowings on the Revolving Facility.
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.
As at February 2, 2019, the Company had $42.1 million in cash. In addition, the Company has a Revolving Facility of $15,000, the full amount of which remained un-drawn as at February 2, 2019. Access to this Facility is further described in Note 14.
The Company expects to finance its working capital needs, store renovations, and investments in infrastructure through cash flows from operations and cash on hand. The Company expects that its trade and other payables will be discharged within 90 days.
The following table summarizes the obligations as of February 2, 2019 and February 3, 2018, and the effect such obligations are expected to have on liquidity and cash flows in future periods.
|
|
February 2, 2019
|
|
|
|
Payments due by period
|
|
|
|
|
|
|
less than
|
|
|
Between
|
|
|
More than
|
|
|
|
Total
|
|
|
1 year
|
|
|
1 and 5 years
|
|
|
5 years
|
|
Trade and other payables
|
|
|
18,251
|
|
|
|
18,251
|
|
|
|
-
|
|
|
|
-
|
|
Operating lease obligations
|
|
|
116,772
|
|
|
|
21,089
|
|
|
|
66,790
|
|
|
|
28,893
|
|
Purchase obligations
|
|
|
9,146
|
|
|
|
9,146
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
144,169
|
|
|
|
48,486
|
|
|
|
66,790
|
|
|
|
28,893
|
|
|
|
February 3, 2018
|
|
|
|
Payments due by period
|
|
|
|
|
|
|
less than
|
|
|
Between
|
|
|
More than
|
|
|
|
Total
|
|
|
1 year
|
|
|
1 and 5 years
|
|
|
5 years
|
|
Trade and other payables
|
|
|
14,392
|
|
|
|
14,392
|
|
|
|
—
|
|
|
|
—
|
|
Operating lease obligations
|
|
|
134,965
|
|
|
|
19,840
|
|
|
|
86,844
|
|
|
|
28,281
|
|
Purchase obligations
|
|
|
8,820
|
|
|
|
8,820
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
158,177
|
|
|
|
43,052
|
|
|
|
86,844
|
|
|
|
28,281
|
|
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 accounts receivable and derivative financial instruments. Accounts receivable primarily consists of receivables from retail customers who pay by credit card, 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.
Fair Values
Financial assets and financial liabilities are measured on an ongoing basis at fair value or amortized cost. The disclosures in the “Financial instruments” section of Note 3 describe how the categories of financial instruments are measured and how income and expenses, including fair value gains and losses, are recognized. The fair values of derivative financial instruments have been determined by reference to forward exchange rates at the end of the reporting period and classified in Level 2 of the fair value hierarchy. There were no outstanding derivative financial instruments at February 2, 2019.
The classification of financial instruments at February 3, 2018, as well as their carrying values and fair values, are shown in the tables below:
|
|
Carrying
|
|
|
Fair
|
|
|
|
value
|
|
|
value
|
|
|
|
$
|
|
|
$
|
|
Financial assets
|
|
|
|
|
|
|
Derivative financial instruments — foreign forward exchange contracts
|
|
|
239
|
|
|
|
239
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
Derivative financial instruments — foreign forward exchange contracts
|
|
|
468
|
|
|
|
468
|
|
The Company has determined the estimated fair values of its financial instruments based on appropriate valuation methodologies; however, considerable judgment is required to develop these estimates. Accordingly, the estimated fair values are not necessarily indicative of the amounts the Company could realize or would pay in a current market exchange. The estimated fair value amounts can be materially affected by the use of different assumptions or methodologies. The methods and assumptions used to estimate the fair value of financial instruments are described below:
|
·
|
The estimated fair value of forward contracts is determined using forward exchange rates at the end of the reporting period [Level 2].
|
The Company categorizes its financial assets and liabilities measured at fair value into one of three different levels depending on the observability of the inputs used in the measurement.
Level 1: This level includes assets and liabilities measured at fair value based on unadjusted quoted prices for identical assets and liabilities in active markets that are accessible at the measurement date.
Level 2: This level includes valuations determined using directly (i.e. as prices) or indirectly (i.e. derived from prices) observable inputs other than quoted prices included within Level 1. Derivative instruments in this category are valued using models or other standard valuation techniques derived from observable market inputs.
Level 3: This level includes valuations based on inputs which are less observable, unavailable or where the observable data does not support a significant portion of the instruments’ fair value.
23. MANAGEMENT OF CAPITAL
The Company’s capital is composed of shareholders’ equity as follows:
|
|
February 2,
|
|
|
February 3,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
$
|
|
|
$
|
|
Cash
|
|
|
42,074
|
|
|
|
63,484
|
|
Shareholder s equity [excluding accumulated other comprehensive income]
|
|
|
65,959
|
|
|
|
99,613
|
|
Total capital under management
|
|
|
108,033
|
|
|
|
163,097
|
|
The Company’s objectives in managing capital are to ensure sufficient liquidity to pursue its organic growth, to establish a strong capital base so as to maintain investor, creditor and market confidence and to provide an adequate return to shareholders.
The Company’s primary uses of capital are to finance increases in non‑cash working capital and capital expenditures for its store renovation program as well as information technology and infrastructure.
The Board does not establish quantitative return on capital criteria for management, but rather promotes year-over-year sustainable profitable growth. The Company is not subject to any externally imposed capital requirements.
As of February 2, 2019, the Company was in default under certain covenants contained in our Credit Agreement, including our failure to maintain a fixed charge coverage ratio of 1.10:1.00 and certain reporting requirements. BMO has temporarily agreed to forbear from exercising remedies under the Credit Agreement, however the Company cannot borrow under the Credit Agreement. During the year ended February 3, 2018 the Company also considered its access to the Revolving Facility as a source for funding its cash requirements, although it had not drawn on the Revolving facility at February 3, 2018.
24. GUARANTEES
Some agreements to which the Company is party, specifically those related to debt agreements and the leasing of its premises, include indemnification provisions that may require the Company to make payments to a third party for breach of fundamental representation and warranty terms in the agreements, with respect to matters such as corporate status, title of assets, environmental issues, consents to transfer, employment matters, litigation, taxes payable and other potential material obligations. The maximum potential amount of future payments that the Company could be required to make under these indemnification provisions is not reasonably quantifiable as certain indemnifications are not subject to a monetary limitation. As at February 3, 2018, management does not believe that these indemnification provisions would require any material cash payment by the Company, and insurance coverage, estimated by management to be reasonable and sufficient, exists in order to minimize the previously mentioned risks.
The Company indemnifies its directors and officers against claims reasonably incurred and resulting from the performance of their services to the Company, and maintains liability insurance for its directors and officers as well as those of its subsidiary.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of management, including our principal executive and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), as of the end of the period covered by this report, or the Evaluation Date. Based upon the evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of the Evaluation Date. Disclosure controls and procedures are controls and procedures designed to ensure that information required to be disclosed by us in our reports filed under the Exchange Act, such as this report, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to our management, including our principal executive and principal financial officers as appropriate, to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) promulgated under the Exchange Act as a process, designed by, or under the supervision of the Company’s principal executive and principal financial officers and effected by the Company’s board of directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions and disposition of assets; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; providing reasonable assurance that receipts and expenditures are made only in accordance with management and board authorizations; and providing reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements, and even when determined to be effective, can only provide reasonable assurance with respect to financial statement preparation and presentation.
Management, with the participation of the Company’s principal executive and financial officers, assessed our internal control over financial reporting as of February 2, 2019, the end of our fiscal year. Management based its assessment on the 2013 framework established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management’s assessment included evaluation of elements such as the design and operating effectiveness of key financial reporting controls, process documentation, accounting policies, and our overall control environment. Based on this assessment, management has concluded that our internal control over financial reporting was effective as of the end February 2, 2019.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the year ended February 2, 2019 that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
Not applicable.
PART III.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following is a list of the names and ages of our directors and officers as of April 17, 2019, and a brief summary of the business experience of each of them. Unless otherwise stated, the business address for our directors and officers is c/o DAVIDsTEA Inc., 5430 Ferrier Street, Mount‑Royal, Québec, Canada H4P 1M2.
Name
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Age
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Position
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Herschel Segal
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88
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Interim Chief Executive Officer, Chairman of the Board and Director
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Frank Zitella, CPA, CMA, CA
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54
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Chief Financial Officer, Chief Operating Officer and Corporate Secretary
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Sarah Segal
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34
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Chief Brand Officer
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Pat De Marco, CPA, CA
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58
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Lead Director
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Susan L. Burkman
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65
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Director
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Anne Darche
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63
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Director
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Emilia Di Raddo, CPA, CA
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61
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Director
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Max Ludwig Fischer, Ph.D
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68
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Director
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Peter Robinson
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66
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Director
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Herschel Segal, Interim Chief Executive Officer and Chairman of the Board
. Mr. Segal, 88, was appointed Chairman of the Board of Directors and Interim Chief Executive Officer of the Company on June 14, 2018. Since January 1969, Herschel Segal has been President and Chief Executive Officer of Rainy Day Investments Ltd., an investment company. In 1959, Mr. Segal founded Le Château Inc., a clothing retailer listed on the TSX Venture Exchange, and served as its Chief Executive Officer until September 2006. Mr. Segal served as Executive Chairman of Le Château Inc. until February 2007 and remains a director. Mr. Segal holds a Bachelor of Arts degree from McGill University, Montreal, Québec. Mr. Segal is a founder of DAVIDsTEA and a resident of Québec, Canada.
Frank Zitella, CPA, CMA, CA, Chief Financial Officer, Chief Operating Officer and Secretary
. Mr. Zitella, 54, joined the Company on December 10, 2018 as Chief Financial Officer and Corporate Secretary and on April 26, 2019 assumed responsiblitieas as the Company’s Chief Operating Officer. Mr. Zitella has close to 30 years of finance, strategic planning and corporate tax planning experience and served for over eleven years as the Vice President and Chief Financial Officer of DST Health Solutions, LLC, a subsidiary of SS&C Technologies Holdings, Inc. (Nasdaq: SSNC), and for over eight years as the Chief Financial Officer of International Financial Data Services, a joint venture between State Street Bank and SS&C Technologies Holdings, Inc. Mr. Zitella received his Bachelor of Commerce degree from Concordia University, Montreal, Québec and his Graduate Diploma in Public Accountancy from McGill University, Montreal, Québec. Mr. Zitella is a resident of Québec, Canada.
Sarah Segal, Chief Brand Officer.
Ms. Segal, 34, served as the President and Head of Product Development and Tea Department for DAVIDsTEA from December 2010 to September 2012. Since May 2013, Ms. Segal has served as the CEO of the retail company SQUISH Candies, based in Montreal, Québec. In 2017, Ms. Segal was appointed VP, Product Development & Innovation at DAVIDsTEA. Most recently, Ms. Segal was appointed Chief Brand Officer. Ms. Segal received a Bachelor of Arts degree in Environmental Health from McGill University, Montreal, Québec, and an M.Sc. degree in Water Science, Policy and Management from Oxford University, Oxford, England. Ms. Segal is a resident of Québec, Canada.
Pat De Marco, CPA, CA, Lead Director
(June 14, 2018 to present)
. Mr. De Marco, 58, has served as President and Chief Operating Officer of Viau Food Products Inc. of Laval, Québec, a large Canadian processor of beef and pork products, since 2008. Prior thereto, Mr. De Marco held senior executive positions at Moores Retail Group Inc., Canada’s leading menswear retailer, from 1995 as Chief Financial Officer and from 2002 as President. Prior to that, Mr. De Marco was a partner at Ernst & Young LLP, where for 13 years he audited and consulted for companies in the manufacturing, real estate and consumer goods sectors. Mr. De Marco is a CPA, and holds a Bachelor of Commerce degree from Concordia University, Montreal, Québec. Mr. De Marco is a resident of Québec, Canada.
Susan L. Burkman, Director (August 23, 2018 to present)
. Ms. Burkman, 65, is an experienced financial consulting executive. Throughout her 35 years in the investment banking industry, she has successfully led equity, M&A, and valuation and fairness opinion transactions in excess of $6 billion for Canadian companies across numerous industries. Since 2007, she has been majority shareholder and President of Burkman Capital Corporation, an investment banking boutique located in Bromont, Québec. From 1997 to 2007, Ms. Burkman was a partner at Griffiths McBurney and Partners and a Director at GMP Securities where she led the Investment Banking Group in Montreal. Prior thereto, Ms. Burkman was President of Mathurin-Burkman Inc., an investment banking boutique, a Vice-President and member of the Board of Directors of McNeil Mantha Inc., then a publicly-traded Canadian securities brokerage firm, and held positions with Wood Gundy Securities in Toronto and with the Corporate Banking division of Bank of Montreal. Ms. Burkman started her professional career as an auditor with KPMG at its Pittsburgh, Pennsylvania and Toronto, Ontario offices. Since 2012, Ms. Burkman has been a member of the Board of Directors of Olameter Inc., a provider of outsourced utility solutions in North America based in Montreal. Ms. Burkman holds both a Bachelor of Arts degree and Masters of Business Administration degree from the University of Pittsburgh and became a Certified Public Accountant in Pennsylvania. Ms. Burkman is a resident of Québec, Canada.
Anne Darche, Director (August 23, 2018 to present)
. Ms. Darche, 63, is a marketing and consumer-trends specialist with a 20-year career in Montreal advertising agencies, primarily as a co-owner, VP for strategic planning and president. The agency she helped build and administer, Allard Johnson, became one of Canada’s leading advertising firms. A respected speaker, she has been heard regularly on Radio-Canada sharing her views on trends, breakthroughs and market disruptions. Ms. Darche serves as a director of Germain Hôtels, a company based in Québec City that owns and operates hotels across Canada, KDC, a leading North American contract manufacturer of health and beauty-care products, and 48North Cannabis Corp., a company listed on the TSX Venture Exchange whose wholly-owned subsidiary is a licensed producer of cannabis in Canada. She is also chair of MU, a not-for-profit organization devoted to beautifying the city of Montreal by creating murals that are anchored in local communities. Ms. Darche holds a Bachelor of Arts degree in graphic design from Université Laval, Québec City, Québec and a Masters of Business Administration degree from Université de Sherbrooke, Sherbrooke, Québec and is a Chartered Director. Ms. Darche is a resident of Québec, Canada.
Emilia Di Raddo, CPA, CA, Director (2014 to present)
. Ms. Di Raddo, 61, has been a director of the Company since 2012, except between January 2013 and March 2014. She has been the President of Le Château Inc., a company listed on the TSX Venture Exchange, since 2000, has served on its Board of Directors since 2001 and was Chief Financial Officer from 1996 to 2000. Prior thereto, Ms. Di Raddo was a partner at Ernst & Young LLP where she practiced for more than 15 years for companies operating in the retail and consumer products industry. Ms. Di Raddo received a Bachelor of Commerce degree and a Diploma in Accountancy from Concordia University, Montreal, Québec, and is also a chartered accountant and a CPA. Ms. Di Raddo is a resident of Québec, Canada.
Max Ludwig Fischer, Ph.D, Director (June 14, 2018 to present)
. Mr. Fischer, 68, was Professor of German and International Studies at Willamette University, Salem, Oregon, where he also held administrative positions, including Chair of the Department of German and Russian Studies. Since 2008, Mr. Fischer has been a consultant to the President and CEO of Rancho La Puerta in Tecate, Mexico, a consistent winner of Travel & Leisure’s “Best Spa Destination”, as well as a Bi-Annual Lecturer on Nutrition and Natural Healing Modalities at Rancho La Puerta. In 2018, Mr. Fischer was an invited lecturer on “The Concept of Holistic Living” at the Omega Institute, Rhinebeck, New York. Mr. Fischer holds a Ph.D. in Philosophy and a Masters of Arts degree from the University of Colorado, Boulder, Colorado, and a Bachelor of Arts degree in English and sociology from the University of Regensburg, Regensburg, Germany. Mr. Fischer is the author of numerous publications on 20
th
century literature, exile literature and intercultural communications. In addition to his expertise in literature, Mr. Fischer has a deep interest in psychology, holistic living and natural nutrition. Mr. Fischer is a resident of Ontario, Canada.
Peter Robinson, Director (June 14, 2018 to present)
. Mr. Robinson, 66, possesses diverse leadership experience spanning more than four decades in business, government and the non-profit sectors. He was Chief Executive Officer of the David Suzuki Foundation from 2008 to 2017 and, from 2000 to 2008, was Chief Executive Officer of Mountain Equipment Co-op, a Canadian consumers’ cooperative that sells outdoor recreation gear and clothing exclusively to its members. From 1983 to 2000, Mr. Robinson held a number of positions with BC Housing, a government agency, including Chief Executive Officer from 1999 to 2000. Mr. Robinson holds a Bachelor of Arts degree in geography from Simon Fraser University, Burnaby, British Columbia, and a Master of Arts degree in Conflict Analysis and Management and a Doctor of Social Sciences degree, both from Royal Roads University, Victoria, British Columbia. He has been extensively involved in community and humanitarian work, including serving as a director from 2012 to 2017 of Imagine Canada, a national charitable organization, governor of the Canadian Red Cross Society from 2010 to 2012, and Chair of the Board of Governors and Chancellor of Royal Roads University from 2007 to 2010. Mr. Robinson is a resident of British Columbia, Canada.
Family Relationships
Sarah Segal, the Chief Brand Officer of DAVIDsTEA, is the daughter of Herschel Segal, Chairman of the Board of Directors and Interim Chief Executive Officer of the Company and the owner of Rainy Day Investments Ltd., which controls approximately 46% of the outstanding shares of DAVIDsTEA.
Audit Committee
Function of Audit Committee
The Audit Committee of the Board of Directors (the “Audit Committee”) operates under a written charter adopted by the Board of Directors. The Charter contains a detailed description of the scope of the Audit Committee’s responsibilities and how they will be carried out. The Audit Committee Charter is available on our Investor Relations website at http://ir.davidstea.com under “Corporate Governance” and on SEDAR at www.sedar.com. The Audit Committee’s primary responsibilities and duties include:
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appointing, compensating, retaining and overseeing the work of any registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services and reviewing and appraising the audit efforts of our independent accountants;
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establishing procedures for (i) the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters and (ii) confidential and anonymous submissions by our employees of concerns regarding questionable accounting or auditing matters;
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engaging independent counsel and other advisers, as necessary;
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determining funding of various services provided by accountants or advisers retained by the committee;
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reviewing our financial reporting processes and internal controls;
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establishing, maintaining and overseeing the Company’s related party transaction policy, including overseeing the process for approval of all related-party transactions involving executive officers and directors; and
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providing an open avenue of communication among the independent accountants, financial and senior management and the Board.
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Independence of Audit Committee Members
The members of the Audit Committee are Pat De Marco (chair), Susan L. Burkman and Peter Robinson. The Board has determined that each of them meets the independence requirements under the rules of the NASDAQ Global Market and under Rule 10A-3 under the Exchange Act.
Audit Committee Financial Experts
The Board has determined that Pat De Marco and Susan L. Burkman are “Audit Committee financial experts”. All members of the Audit Committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the NASDAQ Global Market.
Audited Financial Statements Included in Annual Report
Management has the primary responsibility for establishing and maintaining adequate internal financial controls, for preparing the financial statements and for the public reporting process. Ernst & Young LLP (“EY”), the Company’s independent registered public accounting firm, is responsible for expressing an opinion on the conformity of the Company’s audited consolidated financial statements with International Financial Reporting Standards.
The Audit Committee has reviewed and discussed with management and EY the Company’s audited consolidated financial statements for the year ended February 2, 2019 and Management’s Discussion and Analysis of Financial Condition and Results of Operation.
The Audit Committee has also discussed with EY the matters required to be discussed by the Public Company Accounting Oversight Board (“PCAOB”) AU Section 380, “Communication with Audit Committees.” The Audit Committee received the written disclosures and the letter from EY that are required by PCAOB Rule 3526, “Communication with Audit Committees Concerning Independence,” and has discussed with EY its independence. The Audit Committee considered whether EY’s provision of non-audit services to the Company is compatible with maintaining EY’s independence. This discussion and disclosure informed the Audit Committee’s review of EY’s independence and assisted the Audit Committee in evaluating that independence. On the basis of the foregoing, the Audit Committee concluded that EY is independent from the Company, its affiliates and management.
Based upon its review of the Company’s audited consolidated financial statements and the discussions noted above, the Audit Committee recommended to the Board of Directors that the Company’s audited consolidated financial statements for the year ended February 2, 2019 be included in the Company’s Annual Report on Form 10-K for such fiscal year for filing with the SEC. This report has been furnished by the members of the Audit Committee.
Pat De Marco, Chair
Susan L. Burkman
Peter Robinson
Corporate Governance
Statement of Corporate Governance Practices
As a reporting issuer in the Canadian Province of Québec with securities listed on the NASDAQ, DAVIDsTEA complies with all applicable rules adopted by the AMF and the SEC. As a Canadian issuer, DAVIDsTEA is exempt from complying with many of the NASDAQ Corporate Governance Standards, provided that DAVIDsTEA complies with Canadian governance requirements.
Policy Statement 58-201 to Corporate Governance Guidelines
of the AMF provides guidance on governance practices for reporting issuers in the Province of Québec. Québec
Regulation 58-101 respecting Disclosure of Corporate Governance Practices
requires such issuers to make prescribed disclosure regarding their governance practices. The Board is of the view that DAVIDsTEA’s corporate governance practices satisfy the foregoing requirements of the Province of Québec, as reflected in the disclosure made below. The Board of Directors has approved the disclosure of DAVIDsTEA’s corporate governance practices described below, on the recommendation of the Corporate Governance and Nominating Committee (“CGNC”).
Board of Directors
Independence
The Board of Directors consists of seven directors, six of whom are non‑employee directors. Herschel Segal, Pat De Marco, Emilia Di Raddo, Max Ludwig Fischer and Peter Robinson were elected as directors at the annual meeting of shareholders held on June 14, 2018. Susan L. Burkman and Anne Darche were appointed as directors on August 23, 2018 to fill vacancies created by the resignations of two directors. Directors are elected or appointed to hold office until the next annual meeting of shareholders or until their earlier resignation or removal from office in accordance with the Company’s by-laws.
Five of the seven directors comprising the Board of Directors are considered “independent” pursuant to Section 1.4 of Québec
Regulation 52-110 respecting Audit Committees
. Under that provision, Susan L. Burkman, Anne Darche, Pat De Marco, Max Ludwig Fischer and Peter Robinson are considered independent, whereas Herschel Segal is not considered to be independent in that he is an executive officer of the Company and Emilia Di Raddo is not considered to be independent in light of her long-standing business relationship with Herschel Segal. The independence of directors is determined by the Board based on the results of independence questionnaires completed by each director annually, as well as other factual circumstances reviewed on an ongoing basis.
To enhance the independent judgment of the Board of Directors, the independent members of the Board of Directors may meet in the absence of members of management and the non‑independent directors. An
in camera
session is scheduled as part of every meeting of the Board of Directors and its committees to allow independent directors to meet without non-independent directors and members of management, as necessary. All non‑independent directors are responsible to the Board of Directors as a whole and have a duty of care to the Company.
As Herschel Segal, Chairman of the Board, is not an independent director, the Board of Directors appointed Pat De Marco, an independent director, as “Lead Director” on September 23, 2018 upon the recommendation of the CGNC.
The Board of Directors has adopted a Charter of the Board of Directors delineating its principal roles and responsibilities. The Charter of the Board of Directors is available on our Investor Relations website at http://ir.davidstea.com under “Corporate Governance” and on SEDAR at www.sedar.com.
Chair of the Board
Herschel Segal, Interim Chief Executive Officer and Chairman of the Board, chairs meetings of the Board of Directors. Mr. Segal is not an independent director. As a result, on September 23, 2018, upon the recommendation of the CGNC, the Board of Directors appointed Pat De Marco, an independent director, as “Lead Director”. As Lead Director, Mr. De Marco provides leadership in ensuring Board effectiveness and is responsible for facilitating and encouraging open and effective communication between management of the Company and the Board of Directors, consulting with the Chairman of the Board in setting the agenda for Board meetings, ensuring Board committees function appropriately, chairing meetings of the independent members of the Board of Directors and chairing Board of Directors’ meetings if the Chairman of the Board is absent.
Conflicts of Interest
In accordance with applicable law and DAVIDsTEA’s policy, each director is required to disclose to the Board any potential conflict of interest he or she may have in a matter before the Board or a committee thereof at the beginning of the Board or committee meeting. A director who is in a potential conflict of interest must not attend any part of the meeting during which the matter is discussed or participate in a vote on such matter.
Formal Position Descriptions
The Board has adopted formal position descriptions for the Chairman of the Board and the Board Committee Chairs, as well as for the President and CEO.
Chairman of the Board
The Board of Directors has adopted a written position description for the Chairman of the Board of Directors and each of the Committee chairs, which sets out each of the chairs’ key responsibilities, including duties relating to setting meeting agendas, chairing meetings and working with the respective committee and management to ensure, to the greatest extent possible, the effective functioning of the committee and the Board of Directors.
The primary responsibility of the Chairman is to provide leadership to the Board to enhance Board effectiveness. The Chair of the Board must oversee that the relationship between the Board, management, shareholders and other stakeholders is effective, efficient and further to the best interests of the Company.
Committee Chairs
The position descriptions of each Committee Chair provide that each Chair’s key role is to manage his or her respective Committee and ensure that the Committee carries out its mandate effectively. Like the Chairman of the Board, each Committee Chair is expected to provide leadership to enhance the Committee’s effectiveness and must oversee the Committee’s discharge of its duties and responsibilities. Committee Chairs must report regularly to the Board on the business of their respective committees.
Interim Chief Executive Officer
The primary responsibility of the Interim CEO is to lead the Company by providing strategic direction that includes the development and implementation of plans, policies, strategies and budgets for the growth and profitable operation of the Company. The Board of Directors has developed a written position description for the CEO which sets out the Chief Executive Officer’s key responsibilities, including duties relating to strategic planning, operational direction, Board of Directors interaction, building an effective management team and communication with shareholders.
The HRCC develops yearly goals and objectives that the CEO is responsible for meeting. The corporate objectives that the CEO is responsible for meeting, with the rest of management placed under his supervision, are determined by the strategic plans and the budgets as they are approved each year by the Board.
Election of Directors
The articles of the Company provide that the Board shall consist of not less than three and not more than fifteen directors. Each director is elected for a one-year term ending at the next annual meeting of shareholders or when his or her successor is elected, unless he or she resigns or his or her office otherwise becomes vacant.
Committees of the Board
The Board has established the Audit Committee, the Human Resources and Compensation Committee (“HRCC”) and the CGNC and has delegated to each of these committees certain responsibilities that are set forth in their respective mandates.
Human Resources and Compensation Committee
The HRCC’s primary purpose, with respect to compensation, is to assist the Board of Directors in fulfilling its oversight responsibilities and to make recommendations to the Board of Directors with respect to the compensation of the directors and executive officers. Independent consultants may also be periodically retained to assist the HRCC in fulfilling its responsibilities when needed. As required in its mandate, the HRCC is composed of a majority of independent directors, including the Chairman of the committee who must qualify as an independent director. The three current members of the HRCC are Max Ludwig Fischer (chair), Anne Darche and Emilia Di Raddo. The HRCC Charter is available on our Investor Relations website at http://ir.davidstea.com under “Corporate Governance” and on SEDAR at www.sedar.com.
Corporate Governance and Nominating Committee
The three current members of the CGNC are Peter Robinson (chair), Pat De Marco and Max Ludwig Fischer. The Charter of the CGNC is available on our Investor Relations website at http://ir.davidstea.com under “Corporate Governance” and on SEDAR at www.sedar.com.
Board and Committee Meetings
In Camera Sessions
To maintain independence from management, the independent Board members meet at least annually and may meet at each Board meeting without the presence of management. Such meetings are chaired by the Lead Director. Similarly, each of the Board committees meets without management present under the chairmanship of the committee Chair at least annually and may meet at each committee meeting without the presence of management.
Ethical Business Conduct
The Company’s Code of Ethics for Senior Managers and Financial Officers (the “Code of Ethics”) is applicable to all DAVIDsTEA’s directors, senior managers and financial officers and has been developed to promote the honest and ethical conduct of our directors, senior managers and financial officers, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; to promote full, fair, accurate, timely and understandable disclosure in periodic reports required to be filed by the Company; and to promote compliance with all applicable rules and regulations that apply to the Company and its officers. The Code of Ethics is available on our Investor Relations website at http://ir.davidstea.com under “Corporate Governance” and on SEDAR at www.sedar.com. The Code of Ethics addresses several matters, including conflicts of interest, integrity of corporate records, confidentiality of corporate information, protection and use of corporate assets and opportunities, insider trading, compliance with laws and reporting of unethical or illegal behaviour. No waiver has ever been granted to a director or executive officer in connection with the Code of Ethics.
In addition to monitoring compliance with the Code of Ethics, the Board has adopted whistleblowing procedures for reporting unethical or questionable acts by the Company or employees thereof. Complaints can be made via telephone at a confidential line called the integrity line. Any Human Resources-related question is redirected to our Head of Human Resources while any issue of misconduct or fraud is redirected to the Chair of the Audit Committee who is responsible to oversee the whistleblowing procedures.
Board, Committees and Directors Performance Assessment
On an annual basis, the Chairman of the Board is responsible for the process of assessing the performance and effectiveness of the Board as a whole, the Board Committees, Committee Chairs and individual directors. Questionnaires are distributed to each director for the purpose of (i) evaluating the Board’s responsibilities and functions, its operations, how it compares with boards of other companies on which the directors serve and the performance of the Board’s Committees and (ii) inviting directors to make suggestions for improving the performance of the Chairman of the Board, Committee Chairs and individual directors. The questionnaire completed by the Chairman of the Board is submitted to the Chair of the HRCC. The results of the questionnaires are compiled by the Corporate Secretary on a confidential basis to encourage full and frank commentary. In addition, the Chairman of the Board discusses with each Board member individually in order to discuss the questionnaires and also meets the Chair of the HRCC who is responsible for his assessment. The results of the questionnaires as well as any issues raised during individual discussions are presented and discussed at a following meeting of the Board. At all times, Board members are free to discuss among themselves the performance of a fellow director, or submit such a matter to the Chairman of the Board. Based on the outcome of the discussion, the Chairman of the Board then presents to the Board the assessment’s findings and its recommendations to enhance the performance and effectiveness of the Board and its Committees.
Director Selection
Skills and Experience of Directors
The process by which the Board establishes new candidates for Board nominations lies within the discretion of the Board of Directors with a view of the best interests of the Company and in accordance with the corporate governance guidelines. Pursuant to the governing statutes, and our articles and by‑laws, new candidates for Board nominations can be proposed by the shareholders and will be voted on by the shareholders at each annual meeting of shareholders.
Nomination of Directors
Before making a recommendation on a new director candidate, the Chairman of the Board and members of the CGNC meet with the candidate to discuss the candidate’s interest and ability to devote the time and commitment required to serve on the Board. In certain circumstances, the Board may also retain an independent recruiting firm to identify director candidates and fix such firm’s fees and other retention terms.
The Board does not impose nor does it believe that it should establish term limits or retirement age limits for its directors, as such limits may cause the loss of experience and expertise important to the optimal performance of the Board.
Diversity and Gender Diversity
The Company does not have a formal policy on diversity on the Board of Directors or in senior management positions. The Company is, however, mindful of the benefit of diversity of the Board of Directors and senior management, including the representation of women on the Board and in senior management positions, and the need to maximize their effectiveness and respective decision‑making abilities. Accordingly, in searches for new candidates, while the Company seeks to recruit or appoint the most qualified individuals for particular positions, it considers the merit of potential candidates based on a balance of skills, background, experience and knowledge, including taking into consideration diversity such as gender, age and geographic areas.
Director Orientation and Continuing Education
Orientation
The HRCC is responsible for developing, monitoring and reviewing the Company’s orientation and continuing education programs for directors. New directors are provided with an information package on the Company’s business, its strategic and operational business plans, its operating performance, its governance system and its financial position. Also, new directors meet individually with the Chief Executive Officer and other senior executives to discuss these matters. The Board ensures that prospective candidates fully understand the role of the Board and its Committees and the contribution that individual directors are expected to make, including, in particular, the personal commitment that the Company expects of its directors.
Continuing Education
All Board members have visited DAVIDsTEA’s stores. Management makes presentations to the Board on a range of topics that are relevant to the Company’s operations. Senior management makes regular presentations to the Board and its committees to educate them and keep them informed of developments within the Company’s main areas of business and operations, as well as on key legal, regulatory and industry developments. Directors are also provided with Board and Board committee materials in advance of regularly-scheduled meetings. Directors receive periodic updates between Board meetings on matters that affect the Company’s business. Finally, Board members have full access to the Company’s senior management and employees.
ITEM 11. EXECUTIVE COMPENSATION
This section discusses the material components of the executive compensation program for our executive officers who are named in the “2018 Summary Compensation Table” below. In Fiscal 2018, our “Named Executive Officers” and their positions were as follows:
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Herschel Segal, Interim Chief Executive Officer and Chairman of the Board since June 14, 2018
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Joel Silver, former President and Chief Executive Officer
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Frank Zitella, Chief Financial Officer since December 10, 2018 and Chief Operating Officer since April 26, 2019
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Joe Bongiorno, Interim Chief Financial Officer from September 24, 2018 to December 9, 2018
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Howard Tafler, former Chief Financial Officer
|
|
|
|
|
·
|
Sarah Segal, Chief Brand Officer since August 21, 2018
|
This discussion may contain forward-looking statements that are based on our current plans, considerations, expectations and determinations regarding future compensation programs. Actual compensation programs that we adopt may differ materially from the currently planned programs summarized in this discussion. See Part I on Form 10-K “Cautionary Note Regarding Forward-Looking Statements”.
Executive and Director Compensation
Processes and Procedures for Compensation Decisions
Our HRCC is responsible for the executive compensation programs for our executive officers and reports to our Board on its discussions, decisions and other actions. Our HRCC reviews and approves corporate goals and objectives relating to the compensation of our Chief Executive Officer, evaluates the performance of our Chief Executive Officer in light of those goals and objectives and determines and approves the compensation of our Chief Executive Officer based on such evaluation. Our HRCC has the sole authority to determine our Chief Executive Officer’s compensation. In addition, our HRCC, in consultation with our Chief Executive Officer, reviews and approves all compensation for the other officers and directors. Our Chief Executive Officer also makes compensation recommendations for our other executive officers and initially proposes the corporate and departmental performance objectives under our Executive Incentive Compensation Plan to the HRCC.
The HRCC is authorized to retain the services of one or more executive compensation and benefits consultants or other outside experts or advisors as it sees fit, in connection with the establishment of our compensation programs and related policies.
The Insider Trading Policy
The Company has adopted an insider trading policy that applies to the equity transactions of all of the employees, including most notably of directors and officers, including Named Executive Officers. Under the policy, transactions by covered individuals in the Company’s securities are authorized only during insider trading windows (which open the second full day after financial results are released each quarter to permit market adjustments), and all transactions must be pre-approved and cleared by the Corporate Secretary so as to avoid any appearance of trading based on non-public information.
Hedging Prohibition
Hedging transactions can be accomplished through a variety of mechanisms including prepaid forward contracts, equity swaps and collars and other similar devices. Because hedging transactions permit the holder of the securities to continue to own the securities without the full risks and rewards of ownership, such transactions can cause the interests of such holder not to be aligned with our other shareholders and therefore the employees, officers and directors are prohibited from hedging any equity-based compensation or Company shares.
Automatic Securities Disposition Plan (10b5-1 Plan)
Automatic Securities Disposition Plans are permitted under the Insider Trading Policy and must be approved by the Corporate Secretary and meet the requirements of the
Securities Act
(Québec) and similar rules and regulations in other applicable Canadian securities laws as well as Rule 10b5-1(c)(1)(i)(B) under the Exchange Act. In general, such plans must be entered into at a time when the person entering into the plan is not aware of any material non-public information with respect to the Company.
Short-Term Incentive Plan
The annual incentive program is a cash bonus intended to compensate officers for achieving short‑term corporate goals. It is also intended to reward the Named Executive Officers for both the overall performance of the Company and individual performance during the year. The Company believes that establishing cash bonus opportunities is an important factor in both attracting and retaining the services of qualified and highly-skilled executives. The HRCC determined that the most meaningful measure of successful growth was Comparable Sales and selected other financial objectives in line with the Company’s short-term corporate goals, which, together with Comparable Sales, would form the basis for the annual incentive program. The HRCC reviews annually the weight attributed to each financial objective. Therefore, for fiscal 2018, the annual incentive formula attributed 75% to corporate Comparable Sales growth and 25% to other financial objectives. Notwithstanding the above formula, the HRCC may, in its sole discretion, adjust the calculated payment, as much as to cancel payment altogether, should it determine that the calculated payment requires adjustment.
For the fiscal year ended February 2, 2019 the Company did not meet the annual incentive program targets.
Mid- and Long-Term Incentive Plans
In 2015, the Board and the shareholders of the Company adopted the 2015 Omnibus Equity Incentive Plan (the “2015 Omnibus Plan”) in connection with our IPO. All equity and equity‑based awards, including awards to the Named Executive Officers, are made under the 2015 Omnibus Plan. Accordingly, the RSU and option awards made in Fiscal 2018 to executive officers were all made under the 2015 Omnibus Plan. As our common shares are currently traded solely on the NASDAQ Global Market, the grant value and number of units awarded are determined based on the U.S. dollar share price and are not subject to currency conversion.
The target award values for the Named Executive Officers are indicated in the table below. Actual Fiscal 2018 awards can be found in the summary compensation table set out below. Under the 2015 Omnibus Plan, when calculating the number of stock options and/or restricted share units/performance share units granted based on the target award values, the Company does not convert for U.S.-Canadian currency rates.
|
|
Target
|
|
|
Maximum
|
|
Name
|
|
Value
|
|
|
Value
|
|
|
|
(% of salary)
|
|
|
|
|
|
|
|
|
Joel Silver
(1)
|
|
|
100
|
%
|
|
|
150
|
%
|
Howard Tafler
(2)
|
|
|
35
|
%
|
|
|
50
|
%
|
Notes:
|
(1)
|
Joel Silver was President and Chief Executive Officer until June 14, 2018.
|
|
(2)
|
Howard Tafler was Chief Financial Officer until September 24, 2018.
|
Summary Compensation Table
The following table illustrates the compensation paid to the Named Executive Officers for the last two completed fiscal years, as applicable. All compensation is disclosed in U.S. dollars. For employees who receive all or a portion of their compensation in Canadian dollars, unless otherwise indicated, an exchange of 1.3095 for 2018, and 1.2393 for 2017 has been used to convert to U.S. dollars, which represents the exchange rate of the U.S. Federal Reserve Bank of New York at noon on the last day of each fiscal year, and which, in the Company’s opinion, is an appropriate reflection of exchange rates variation during the year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-equity incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
plan compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual
|
|
|
Long-term
|
|
|
All
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
incentive
|
|
|
incentive
|
|
|
other
|
|
|
Total
|
|
|
|
|
|
Salary
|
|
|
Bonus
(7)
|
|
|
Awards
(8)
|
|
|
Awards
(9)
|
|
|
plan
(10)
|
|
|
plan
|
|
|
compensation
(11)
|
|
|
Compensation
|
|
Name and principal position
|
|
Year
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
Herschel Segal (1)
|
|
2018
|
|
|
190,913
|
|
|
|
-
|
|
|
|
62,250
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
253,163
|
|
Interim Chief Executive Officer and
|
|
2017
|
|
|
-
|
|
|
|
-
|
|
|
|
46,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
46,500
|
|
Chairman of the Board
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joel Silver (2)
|
|
2018
|
|
|
110,788
|
|
|
|
-
|
|
|
|
300,002
|
|
|
|
-
|
|
|
|
101,718
|
|
|
-
|
|
|
|
724,958
|
|
|
|
1,237,466
|
|
Officer
|
|
2017
|
|
|
285,521
|
|
|
|
-
|
|
|
|
199,969
|
|
|
|
200,126
|
|
|
|
107,480
|
|
|
|
-
|
|
|
|
8,069
|
|
|
|
801,165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frank Zitella (3)
|
|
2018
|
|
|
38,183
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
38,183
|
|
Chief Financial Officer
|
|
2017
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joe Bongiorno (4)
|
|
2018
|
|
|
126,129
|
|
|
|
-
|
|
|
|
21,569
|
|
|
|
-
|
|
|
|
2,138
|
|
|
|
-
|
|
|
|
731
|
|
|
|
150,567
|
|
Interim Chief Financial Officer
|
|
2017
|
|
|
109,581
|
|
|
|
-
|
|
|
|
7,991
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
813
|
|
|
|
118,385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Howard Tafler (5)
|
|
2018
|
|
|
128,425
|
|
|
|
-
|
|
|
|
92,742
|
|
|
|
-
|
|
|
|
11,283
|
|
|
|
-
|
|
|
|
731
|
|
|
|
233,181
|
|
Former Chief Financial Officer
|
|
2017
|
|
|
194,515
|
|
|
|
14,903
|
|
|
|
55,544
|
|
|
|
-
|
|
|
|
18,953
|
|
|
|
-
|
|
|
|
813
|
|
|
|
284,728
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sarah Segal (6)
|
|
2018
|
|
|
175,640
|
|
|
|
-
|
|
|
|
57,517
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
233,157
|
|
Chief Brand Officer
|
|
2017
|
|
|
87,084
|
|
|
|
-
|
|
|
|
46,500
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
133,584
|
|
Notes:
|
(1)
|
Herschel Segal was appointed Interim Chief Executive Officer and Chairman of the Board on June 14, 2018.
|
|
|
|
|
(2)
|
Joel Silver was appointed President and Chief Executive Officer on March 20, 2017 and held such positions until June 14, 2018.
|
|
|
|
|
(3)
|
Frank Zitella was appointed Chief Financial Officer and Corporate Secretary on December 10, 2018 and Chief Operating Officer on April 26, 2019.
|
|
|
|
|
(4)
|
Joe Bongiorno served as Interim Chief Financial Officer from September 24, 2018 to December 9, 2018. Mr. Bongiorno is Director of Finance of the Company.
|
|
|
|
|
(5)
|
Howard Tafler was appointed Interim Chief Financial Officer effective August 14, 2017 and Chief Financial Officer effective December 7, 2017, a position he held until September 24, 2018.
|
|
|
|
|
(6)
|
Sarah Segal was appointed Chief Brand Officer on August 21, 2018 and prior thereto was the Company’s VP Product Development and Innovation.
|
|
|
|
|
(7)
|
Amounts shown represent retention bonuses
|
|
|
|
|
(8)
|
Amounts shown reflect the aggregate grant date fair market value of time-vesting RSUs granted to Named Executive Officers on April 19, 2018 and April 18, 2017 (except for grant made to Mr. Silver in fiscal 2017 whose grant was made on March 20, 2017 upon his start date), under the 2015 Omnibus Plan, excluding the value of estimated forfeitures on the shares. Assumptions used in the calculation of these amounts are disclosed in note 15 to the Company’s Consolidated Financial Statements for the year ended February 2, 2019.
|
|
|
|
|
(9)
|
Amounts shown reflect the aggregate grant date fair value of time-vesting stock options, using a Black-Scholes option pricing model, and exclude the value of estimated forfeitures. Assumptions used in the calculation of these amounts are included below for grants received by the Named Executive Officers over the last two fiscal years
|
|
|
|
|
(10)
|
Represents the awards earned during the year under the Short-Term Annual Incentive Program.
|
|
|
|
|
(11)
|
The amounts shown represent amounts paid to Mr. Silver pursuant to his separation agreement, the monthly car allowance for Mr. Silver, and the professional association fees for Mr. Tafler and Mr. Bongiorno.
|
Incentive Plan Awards
Outstanding share-based awards and option-based awards
The following table sets out information regarding outstanding awards in U.S. dollars held by the Named Executive Officers as of February 2, 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share Awards
|
|
|
|
|
|
|
Option Awards
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Market value
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
shares
|
|
|
of shares
|
|
|
|
|
|
|
securities
|
|
|
securities
|
|
|
|
|
|
|
|
|
|
|
|
or units of
|
|
|
or units of
|
|
|
|
|
|
|
underlying
|
|
|
underlying
|
|
|
|
|
|
|
|
|
|
|
|
stock
|
|
|
stock
|
|
|
|
|
|
|
unexercised
|
|
|
unexercised
|
|
|
Option
|
|
|
|
|
|
|
|
|
that
|
|
|
that
|
|
|
|
|
|
|
options -
|
|
|
options -
|
|
|
exercise
|
|
|
Option
|
|
|
|
|
|
have not
|
|
|
have not
|
|
|
|
Grant
|
|
|
exercisable
(7)
|
|
|
unexercisable
|
|
|
price
(8)
|
|
|
expiration
|
|
|
Grant
|
|
|
vested
(10)
|
|
|
vested
(11)
|
|
Name
|
|
Date
|
|
|
(#)
|
|
|
(#)
|
|
|
($)
|
|
|
date
(9)
|
|
|
Date
|
|
|
(#)
|
|
|
($)
|
|
Herschel Segal (1)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
2018-06-14
|
|
|
|
15,000
|
|
|
|
24,000
|
|
Interim Chief Executive Officer and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chairman of the Board
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joel Silver (2)
|
|
|
2017-03-20
|
|
|
|
-
|
|
|
|
53,225
|
|
|
|
7.70
|
|
|
|
2024-03-20
|
|
|
2018-04-19
|
|
|
|
21,803
|
|
|
|
34,885
|
|
Former President and Chief
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frank Zitella (3)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joe Bongiorno (4)
|
|
|
2013-02-22
|
|
|
|
4,500
|
|
|
|
-
|
|
|
|
0.59
|
|
|
|
2020-02-22
|
|
|
2018-04-19
|
|
|
|
6,270
|
|
|
|
10,032
|
|
Interim Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017-04-18
|
|
|
|
915
|
|
|
|
1,464
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016-04-15
|
|
|
|
360
|
|
|
|
576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,545
|
|
|
|
12,072
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Howard Tafler (5)
|
|
|
2016-04-15
|
|
|
|
2,374
|
|
|
|
-
|
|
|
|
11.19
|
|
|
|
2019-09-21
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Former Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sarah Segal (6)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
2018-04-19
|
|
|
|
16,720
|
|
|
|
26,752
|
|
Chief Brand Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes:
|
(1)
|
Herschel Segal was appointed Interim Chief Executive Officer and Chairman of the Board on June 14, 2018.
|
|
|
|
|
(2)
|
Joel Silver was appointed President and Chief Executive Officer on March 20, 2017 and held such positions until June 14, 2018.
|
|
|
|
|
(3)
|
Frank Zitella was appointed Chief Financial Officer and Corporate Secretary on December 10, 2018 and Chief Operating Officer on April 26, 2019.
|
|
|
|
|
(4)
|
Joe Bongiorno served as Interim Chief Financial Officer from September 24, 2018 to December 10, 2018. Mr. Bongiorno is Director of Finance of the Company.
|
|
|
|
|
(5)
|
Howard Tafler was appointed Interim Chief Financial Officer effective August 14, 2017 and Chief Financial Officer effective December 7, 2017, a position he held until September 24, 2018.
|
|
|
|
|
(6)
|
Sarah Segal was appointed Chief Brand Officer on August 21, 2018 and prior thereto was the Company’s VP Product Development and Innovation.
|
|
|
|
|
(7)
|
Unless earlier terminated, forfeited, relinquished or expired, the options will vest as to ¼
th
of the Shares on each of the first four anniversaries of the grant date and the option becoming vested as to 100% of the Shares on the final vesting date. Shares subject to the option will not vest on any vesting date unless the NEO has remained in continuous service from the date of grant through such vesting date, unless otherwise provided in the LTIP plan further discussed in Item 11 – Executive Compensation.
|
|
|
|
|
(8)
|
For option awards granted after the IPO, the exercise price is equal to the closing price of our common stock on the NASDAQ Global Market on the day the award was granted. For option awards granted prior to the IPO, the exercise price was determined by our Board based on an independent third party valuation and was denominated in Canadian dollars. As our shares are currently traded only on the NASDAQ in USD, the exercise prices of the pre-IPO awards have been converted to U.S. dollars based on the U.S. dollar/Canadian dollar exchange rate in effect as of February 3, 2019, the last business day of Fiscal 2018 of C$1 = US$1.3095. The actual exchange rate in effect at the time of exercise for options granted with a Canadian dollar exercise price will be used to convert the option exercise price to U.S. dollars.
|
|
|
|
|
(9)
|
All stock options have a seven‑year term.
|
|
|
|
|
(10)
|
Unless earlier terminated, forfeited, relinquished or expired, the RSUs will vest as to one quarter of the shares on each of the first two anniversaries of the grant date and remaining half of the RSUs will vest on the third anniversary of the grand date. Shares subject to the RSUs will not vest on any vesting date unless the NEO has remained in continuous service from the date of grant through such vesting date, unless otherwise provided in the LTIP plan further discussed in Item 11 – Executive Compensation.
|
|
|
|
|
(11)
|
The market value is calculated by multiplying the closing price of the Shares on the NASDAQ Global Market on February 2, 2019, being the last business day of the fiscal year, which closing price was US$1.60 per Share, by the number of RSUs that had not vested as of such date.
|
Equity Compensation Plan Information
The table below illustrates the status of the shares reserved for issuance under the Company’s equity-based incentive plans.
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
Number of
|
|
|
Weighted
|
|
|
securities available
|
|
|
|
|
|
securities to be
|
|
|
average
|
|
|
for future issuance
|
|
|
|
|
|
issued upon
|
|
|
exercise price
|
|
|
under equity
|
|
|
|
|
|
exercise of
|
|
|
of
|
|
|
compensation plans
|
|
|
|
|
|
outstanding
|
|
|
outstanding
|
|
|
(excluding
|
|
|
|
|
|
options, warrants
|
|
|
options, warrants
|
|
|
securities reflected
|
|
|
|
|
|
and rights
(2)
|
|
|
and rights
(3)(4)
|
|
|
in column (a))
|
|
|
|
|
|
(#)
|
|
|
($USD)
|
|
|
(#)
|
|
Plan Category
|
|
Plan Name
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
Equity compensation plans approved by security holders
|
|
Amended and Restated Equity Incentive Plan
(1)
|
|
|
66,100
|
|
|
|
2.01
|
|
|
|
—
|
|
|
|
2015 Omnibus Equity Incentive Plan
|
|
|
572,118
|
|
|
|
8.68
|
|
|
|
867,882
|
|
Total
|
|
|
|
|
638,218
|
|
|
|
|
|
|
|
867,882
|
|
|
(1)
|
Since the adoption of the 2015 Omnibus Plan in connection with the IPO, no awards have been or will be made under the Equity Plan. Outstanding options previously granted under the Equity Plan remain subject to the terms of the Equity Plan.
|
|
|
|
|
(2)
|
Reflects outstanding stock options and RSUs.
|
|
|
|
|
(3)
|
Restricted stock units have no exercise price and, therefore, the weighted average price does not take these awards into account.
|
|
|
|
|
(4)
|
The weighted average exercise price of outstanding options have been converted from CAD to USD at an exchange rate of 1.3095.
|
Termination and Change in Control Benefits
The Named Executive Officers would be entitled to the following payments and benefits in the event of termination of the executive’s employment pursuant to the employment agreement between the executive and the Company.
Frank Zitella
Voluntary Resignation
Unvested options granted under the Equity Incentive Plan will be forfeited upon a termination of employment due to a voluntary resignation and vested options will remain exercisable for a period of 30 days following such termination. Under the 2015 Omnibus Plan, vested options will remain exercisable until the earlier of the one-year anniversary of the termination of employment or the award’s normal expiration date. Unvested awards under the 2015 Omnibus Plan will be forfeited at the time of such termination.
Termination for Cause
Vested and unvested awards under both the Equity Incentive Plan and the 2015 Omnibus Plan will be forfeited immediately at time of termination.
Termination Due to Death
Unvested options granted under the Equity Incentive Plan will be forfeited upon death while vested options will remain exercisable by the estate for a period of 180 days following death. Under the 2015 Omnibus Plan, upon death, all time-based awards will immediately vest and performance awards will vest at the target level of performance. Options will remain exercisable until the earlier of the one-year anniversary of the executive’s death or the award’s normal expiration date.
Termination Due to Disability
Unvested options granted under the Equity Incentive Plan will be forfeited upon termination of employment while vested options will remain exercisable for a period of 180 days following termination. Under the 2015 Omnibus Plan, upon a termination of employment due to disability, all time-based awards will immediately vest and performance awards will remain eligible to vest to the extent the applicable performance goals are achieved. Options will remain exercisable until the earlier of the one-year anniversary of the participant’s termination of employment due to disability or the award’s normal expiration date.
Retirement
Unvested options granted under the Equity Incentive Plan be will be forfeited upon retirement while vested options will remain exercisable for a period of 90 days. Awards other than stock options made under the 2015 Omnibus Plan will vest based on a
pro rata
of elapsed days between the start of the performance period and the complete three-year period. If a performance condition is attached to the vesting, the outstanding awards will be treated as per the achievement of the performance criterion at the time of retirement. Vested options will remain exercisable for a period of five years following retirement or until the original option expiry date. For purposes of the plan, retirement is defined as 65 years of age and 55 years of age with ten years of service or more.
Involuntary Termination
Unvested options granted under the Equity Incentive Plan will be forfeited upon an involuntary termination of employment by the Company while vested options will remain exercisable for a period of 30 days. Under the 2015 Omnibus Plan, upon an involuntary termination of employment by the Company, options will be forfeited to the extent then unvested and vested options will remain exercisable until the earlier of the one-year anniversary of the participant’s termination of service or the award’s normal expiration date. RSUs and performance awards will be deemed vested pro rata based on the number of days in a specified period (i.e. the period from the date of grant to the third anniversary of the grant date) that have elapsed from the date of grant to the six-month anniversary of the date of the termination of employment, with the vesting of performance awards to be subject to performance assessed as of the date of such termination of employment.
Change in Control
Under the Equity Incentive Plan, upon the occurrence of a trigger event (as defined in the Equity Plan, generally a liquidation or change of control), participants holding vested options or options that would vest upon the completion of the trigger event will have the right to exercise such options on a basis that allows the participants to tender the common shares delivered upon such exercise in the transaction and any options not so exercised will expire and be cancelled upon the completion of the trigger event. In the event of a trigger event in which the purchase price in the transaction will be paid in cash, in lieu of a participant exercising his or her vested options prior to the trigger event, the participant may require us to purchase his or her options for a purchase price per common share equal to the purchase price per common share in the transaction times the number of common shares subject to the option, minus the aggregate exercise price for such common shares, subject to the completion of the trigger event.
Under the 2015 Omnibus Plan, upon a termination by the Company other than for Cause within twelve months following a change in control, to the extent granted prior to the time of the change in control and then outstanding, all time-based awards will vest and performance awards will vest at the target level of performance. Options will remain exercisable until the earlier of the one-year anniversary of the participant’s termination of employment or service due to disability or the award’s normal expiration date.
Director Compensation
Compensation of Directors
The Company’s compensation policy for directors is designed to enable the Company to attract and retain highly qualified non-employee directors. Under the policy, all non-employee directors received the cash and equity compensation set forth below.
Board Chair
|
|
Annual retainer
|
C$100,000
|
Annual target equity grant
|
15,000 RSUs or DSUs, at the option of the Director
|
Interim CEO
|
|
Annual retainer
|
C$50,000
|
|
|
Board member
|
|
Annual retainer
|
C$50,000
|
Annual target equity grant
|
7,500 RSUs or DSUs, at the option of the Director
|
Board meeting fees
|
C$1,000 for attendance in person and $500 for teleconference
|
Executive Chairman
|
|
Annual retainer
|
C$25,000
|
|
|
Lead Director
|
|
Annual retainer
|
C$25,000
|
|
|
Audit Committee Chair
|
|
Additional annual retainer
|
C$15,000 minimum
|
Audit Committee meeting fees
|
C$1,000 for attendance in person and $500 for teleconference
|
|
|
Human Resources and Compensation Committee Chair
|
|
Additional annual retainer
|
C$10,000 minimum
|
Human Resources and Compensation Committee meeting fees
|
C$1,000 for attendance in person and $500 for teleconference
|
|
|
Corporate Governance and Nominating Committee Chair
|
|
Additional annual retainer
|
C$10,000 minimum
|
Corporate Governance and Nominating Committee meeting fees
|
C$1,000 for attendance in person and $500 for teleconference
|
|
|
Special Committee Chair
(1)
|
|
Monthly retainer
|
C$7,800
|
Special Committee member
|
|
Monthly retainer
|
C$3,900 (US$3,000 for US Directors)
|
Notes:
(1) On February 26, 2018, the Board formed a Special Committee of independent directors for the purpose of reviewing strategic alternatives on behalf of the Company.
Under our non‑employee director compensation policy, annual retainers and meeting fees are paid in quarterly cash payments. Equity grants generally will be made in the form of RSUs or DSUs granted under the 2015 Omnibus Plan and will generally vest in full on the first anniversary of the grant date. Equity awards under the non‑employee director compensation policy will be made at a date following the Company’s annual meeting of shareholders.
The following table sets out information concerning the compensation earned by our non‑employee directors during the fiscal year ending February 2, 2019. Joel Silver received no additional compensation for services as director and, consequently, is not included in this table. The compensation received by Mr. Silver as former President and Chief Executive Officer can be found in the Summary Compensation Table above.
Director Compensation Table
The following table sets out information concerning all amounts of compensation provided to the directors of the Company who are not members of the management of the Company for the fiscal year ended February 2, 2019. All compensation is disclosed in U.S. dollars. For Directors who receive a portion of their compensation in Canadian dollars, unless otherwise indicated, an exchange of 1.3095 for 2018, and 1.2393 for 2017 has been used to convert to U.S. dollars, which represents the exchange rate of the U.S. Federal Reserve Bank of New York at noon on the last day of each fiscal year, and which, in the Company’s opinion, is an appropriate reflection of exchange rates variation during the year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
pension
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
value and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-equity
|
|
|
non-qualified
|
|
|
|
|
|
|
|
|
|
Fees earned
|
|
|
|
|
|
|
|
|
incentive
|
|
|
deferred
|
|
|
All
|
|
|
|
|
|
|
or paid
|
|
|
Stock
|
|
|
Option
|
|
|
compensation
|
|
|
compensation
|
|
|
other
|
|
|
|
|
|
|
in cash
|
|
|
awards
|
|
|
awards
|
|
|
plan
|
|
|
earnings
|
|
|
compensation
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
Anne Darche
(1)
|
|
|
21,000
|
|
|
|
24,750
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
45,750
|
|
Emilia Di Raddo
(2)
|
|
|
38,950
|
|
|
|
31,125
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
70,075
|
|
Max Ludwig Fischer
(3)
|
|
|
35,896
|
|
|
|
31,125
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
67,021
|
|
Pat De Marco
(4)
|
|
|
44,596
|
|
|
|
31,125
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
75,721
|
|
Peter Robinson
(5)
|
|
|
34,675
|
|
|
|
31,125
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
65,800
|
|
Susan L. Burkman
(6)
|
|
|
21,000
|
|
|
|
24,750
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
45,750
|
|
Gary O'Connor
(7)
|
|
|
11,455
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11,455
|
|
Lorenzo Salvaggio
(8)
|
|
|
3,147
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,147
|
|
Maurice Tousson
(9)
|
|
|
19,091
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
19,091
|
|
Kathleen C. Tierney
(10)
|
|
|
11,455
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11,455
|
|
Michael J. Mardy
(11)
|
|
|
12,409
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12,409
|
|
Roland Walton
(12)
|
|
|
5,820
|
|
|
|
31,125
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
36,945
|
|
Tyler Gage
(13)
|
|
|
9,546
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
9,546
|
|
M. William Cleman
(14)
|
|
|
9,281
|
|
|
|
31,125
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
40,406
|
|
Notes:
|
(1)
|
Appointed as a director on August 23, 2018.
|
|
|
|
|
(2)
|
Elected as a director in 2014 to present.
|
|
|
|
|
(3)
|
Elected as a director on June 14, 2018.
|
|
|
|
|
(4)
|
Elected as a director on June 14, 2018.
|
|
|
|
|
(5)
|
Elected as a director on June 14, 2018.
|
|
|
|
|
(6)
|
Appointed as a director on August 23, 2018.
|
|
|
|
|
(7)
|
Resigned on June 14, 2018.
|
|
|
|
|
(8)
|
Resigned as a director on March 5, 2018
|
|
|
|
|
(9)
|
Resigned on June 14, 2018.
|
|
|
|
|
(10)
|
Resigned on June 14, 2018.
|
|
|
|
|
(11)
|
Resigned on June 14, 2018.
|
|
|
|
|
(12)
|
Roland Walton was elected as a director on June 14, 2018 and resigned on July 9, 2018.
|
|
|
|
|
(13)
|
Resigned June 14, 2018
|
|
|
|
|
(14)
|
Elected as a director on June 14, 2018 and resigned on July 26, 2018.
|
|
|
|
|
(15)
|
Director fees were paid in cash in Canadian dollars except for Ms. Tierney and Messrs.Gage and Mardy, who are all U.S. residents. Their respective compensation was converted to U.S. dollars at the time of payment.
|
The directors are reimbursed by the Company for the reasonable costs and expenses incurred in connection with attending meetings of the Board of Directors and its committees including, to the extent applicable, the cost of travel on commercial or leased aircraft.
Value vested or earned during the year for directors
The following table sets out information regarding option-based awards and share-based awards that vested in the fiscal year ended February 2, 2019 for our directors and former directors. All share based awards that vested in Fiscal 2018 are disclosed in U.S. dollars.
|
|
|
|
|
|
|
Non-equity
incentive
|
|
|
|
Option-based
awards -
|
|
Share-based
awards -
|
|
|
plan
compensation -
|
|
|
|
Value vested
during
|
|
Value vested
during
|
|
|
Value earned
during
|
|
|
|
the year(1)(2)
|
|
the year
|
|
|
the year
|
|
Name
|
|
(US $)
|
|
($)
|
|
|
($)
|
|
Tyler Gage
|
|
-
|
|
|
28,875
|
|
|
-
|
|
Gary O'Connor
|
|
-
|
|
|
28,875
|
|
|
-
|
|
Michael J. Mardy
|
|
-
|
|
|
42,896
|
|
|
-
|
|
Lorenzo Salvaggio
|
|
-
|
|
|
26,250
|
|
|
-
|
|
Sarah Segal
|
|
-
|
|
|
42,896
|
|
|
-
|
|
Kathleen C. Tierney
|
|
-
|
|
|
42,896
|
|
|
-
|
|
Maurice Tousson
|
|
-
|
|
|
71,771
|
|
|
-
|
|
Notes:
|
(1)
|
Herschel Segal, Susan L. Burkman, Anne Darche, Pat De Marco, Max Ludwig Fischer and Peter Robinson, all current directors of the Company, do not hold any stock options.
|
|
|
|
|
(2)
|
M. William Cleman, Tyler Gage, Michael J. Mardy, David W. McCreight, Gary O’Connor, Lorenzo Salvaggio, Kathleen C. Tierney, Maurice Tousson and Roland Walton, all former directors of the Company, did not hold any stock options.
|
|
|
|
|
(3)
|
The value is calculated as if the stock options were exercised on the vesting date of each relevant grant. The value represents the difference between the option’s exercise price and the closing share price on the NASDAQ on the vesting date, multiplied by the number of shares underlying the options that vested. As the Shares are traded only on the NASDAQ in US dollars, the exercise prices of the pre-IPO awards have been converted to USD based on the noon buying rate of the U.S. Federal Reserve Bank of New York on February 2, 2019, the last business day of this fiscal year, being $1.3095. For vesting dates prior to the IPO, the quarterly share valuation, as determined by our Board based in part on an independent third party valuation, was used. The actual value earned, if any, will be different and will be based on the closing price of the Shares on the actual date of exercise.
|
Indebtedness of Directors and Officers
As of March 29, 2019, no executive officer, director, proposed nominee for election as a director or employee, former or present, of the Company was indebted to the Company including in respect of indebtedness to others where the indebtedness is the subject of a guarantee, support agreement, letter of credit or other similar arrangement provided by the Company.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table shows, as of March 29, 2019, the number of common shares beneficially owned by each director, director nominee and executive officer named in the Summary Compensation Table in Item 11 and all directors, director nominees and executive officers as a group.
The following table and accompanying footnotes set forth information relating to the beneficial ownership of our common shares as of March 29, 2019 by;
|
·
|
each person, or group of affiliated persons, known by us to beneficially own more than 5% of our outstanding common shares,
|
|
|
|
|
·
|
each of our directors and director nominees,
|
|
|
|
|
·
|
each of our Named Executive Officers, and
|
|
|
|
|
·
|
all directors and executive officers as a group.
|
Our major shareholders do not have voting rights that are different from our shareholders in general.
Each shareholder’s percentage ownership is based on 26,011,817 common shares outstanding as of March 29, 2019.
Beneficial ownership is determined in accordance with SEC rules. In general, under these rules a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise has or shares voting power or investment power with respect to such security. A person is also deemed to be a beneficial owner of a security if that person has the right to acquire beneficial ownership of such security within 60 days. Except as otherwise indicated, and subject to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all common shares held by that person. Our common shares that a person has the right to acquire within 60 days of April 17, 2019 are deemed outstanding for purposes of computing the percentage ownership of such person holding, but are not deemed outstanding for purposes of computing the percentage ownership of any other person, except with respect to the percentage ownership of all directors, director nominees and executive officers as a group. As of April 17, 2019, 33,974 shares were owned by 3 United States holders of record.
Unless otherwise indicated below, the address for each beneficial owner listed is c/o DAVIDsTEA Inc., 5430 Ferrier, Mount‑Royal, Québec, Canada, H4P 1M2.
Transfer Agent and Registrar
The Company’s transfer agent and registrar is AST Trust Company, Montréal.
|
|
Shares Beneficially Owned
|
|
|
|
as at April 17, 2019
|
|
|
|
Number of
|
|
|
Percentage
|
|
|
|
shares
|
|
|
of shares
|
|
Name of beneficial owner
|
|
(#)
|
|
|
(%)
|
|
|
|
|
|
|
|
|
Beneficial Owners of more than 5% of our common shares and/or selling shareholders:
|
|
|
|
|
|
|
Rainy Day Investments Ltd.
(1)
|
|
|
12,012,538
|
|
|
|
46.18
|
%
|
|
|
|
|
|
|
|
|
|
Named Executive Officers and Directors:
|
|
|
|
|
|
|
|
|
Herschel Segal
(2)
|
|
|
20,118
|
|
|
*
|
|
Frank Zitella
|
|
-
|
|
|
-
|
|
Joe Bongiorno
(3)
|
|
|
6,732
|
|
|
*
|
|
Sarah Segal
(4)
|
|
|
18,870
|
|
|
*
|
|
Pat De Marco
(5)
|
|
|
7,500
|
|
|
*
|
|
Emilia Di Raddo
(6)
|
|
|
21,243
|
|
|
*
|
|
Max Ludwig Fischer
(7)
|
|
|
7,500
|
|
|
*
|
|
Peter Robinson
(8)
|
|
|
7,500
|
|
|
*
|
|
Susan L. Burkman
(9)
|
|
|
1,000
|
|
|
*
|
|
Anne Darche
|
|
-
|
|
|
-
|
|
All executive officers and directors as a group
(10)
|
|
|
90,463
|
|
|
*
|
|
Notes:
|
*
|
represents less than 1%.
|
|
|
|
|
(1)
|
Rainy Day Investments Ltd. (“Rainy Day”) is a company controlled by Herschel Segal, Chairman of the Board and Interim Chief Executive Officer of the Company, who holds voting and investment control over the shares held by Rainy Day. The principal business address for Rainy Day is 5695 Ferrier, Mount Royal, Québec, Canada, H4P 1N1.
|
|
|
|
|
(2)
|
Herschel Segal holds 18,595 DSUs and 1,523 common shares.
|
|
|
|
|
(3)
|
Joe Bongiorno holds 2,232 RSUs and options to purchase 4,500 common shares.
|
|
|
|
|
(4)
|
Sarah Segal holds 11,680 DSUs and 7,190 RSUs.
|
|
|
|
|
(5)
|
Pat De Marco holds 7,500 DSUs.
|
|
|
|
|
(6)
|
Emilia Di Raddo holds 7,500 RSUs and 13,743 common shares.
|
|
|
|
|
(7)
|
Max Ludwig Fischer also holds 7,500 RSUs.
|
|
|
|
|
(8)
|
Peter Robinson holds 7,500 DSUs.
|
|
|
|
|
(9)
|
Susan L. Bukman holds 1,000 common shares.
|
|
|
|
|
(10)
|
Includes RSUs and DSUs vesting, and options to purchase common shares exercisable, within 60 days of April 17, 2019.
|
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Our Audit Committee reviews and approves related-party transactions or recommends related-party transactions for review by independent members of our Board of Directors. Each of the transactions described below have been reviewed by our Audit Committee.
Arrangements with Our Investors
We have entered into an amended and restated investors’ rights agreement with certain of our shareholders.
Investors’ Rights Agreement
In February 2014, in connection with the issuance of our Series A-1 preferred shares, we entered into an amended and restated investors’ rights agreement, which was amended in December 2014 in connection with our issuance of our Series A-2 preferred shares. The agreement contains provisions related to registration rights, information and observation rights, rights to future share issuances and approval rights by certain investors and/or their board designees. The information and observation rights, rights to future share issuance and approval rights terminated as a result of our IPO.
Subject to certain conditions, holders of 20% or more of the Investor Registrable Shares or 20% or more of the Rainy Day Registrable Securities (as those terms are defined in the agreement) have the right to demand that we register under the Securities Act or under Canadian securities laws all or a portion of such shareholder or shareholders’ Registrable Securities at our expense. Such rights became effective as of April 3, 2015. Upon the exercise of this right, we must give notice to all other parties who then hold registrable securities, as defined in the agreement, to permit them to participate in the offering.
In addition, if we propose to register our common shares under the Securities Act or under any Canadian securities laws, we must give prompt notice to each holder of registrable securities of our intent to do so and each such holder has piggyback registration rights and is entitled to include any part of its registrable securities in such registration, subject to certain conditions.
Finally, at times when we are eligible to use a shelf registration statement on Form S-3 or Form F-3, holders of registrable securities may demand that we file a Form S-3, F-3 or S-10 registration statement with respect to any or a portion of such holder’s registrable securities having an anticipated aggregate offering price, net of all underwriting discounts, selling commissions, share transfer taxes and certain other expenses, of at least $1 million. Upon receiving notice of such a demand, we must notify all other holders to permit them to exercise piggyback registration rights with respect to such demand.
Director Independence
Five of our seven directors that make up our board of directors are considered independent under Canadian securities laws and the NASDAQ rules. Under these rules, Susan L. Burkman, Anne Darche, Pat De Marco, Max Ludwig Fischer and Peter Robinson are considered independent, whereas Herschel Segal is not considered to be independent in that he is an executive officer of the Company and Emilia Di Raddo is not considered to be independent in light of her long-standing business relationship with Herschel Segal. The independence of directors is determined by the Board based on the results of independence questionnaires completed by each director annually, as well as other factual circumstances reviewed on an ongoing basis.
To enhance the independent judgment of the Board of Directors, the independent members of the Board of Directors frequently meet in the absence of members of management and the non-independent directors. An
in camera
session is scheduled as part of every meeting of the Board of Directors and its committees to allow independent directors to meet without non-independent directors and members of management, as necessary. All non-independent directors are responsible to the Board of Directors as a whole and have a duty of care to the Company.
Five of our seven directors that make up the Board of Directors are considered “independent” pursuant to Section 1.4 of Québec
Regulation 52-110 respecting Audit Committees
. Under these rules, Pat De Marco, Susan L. Burkman, Anne Darche, Max Ludwig Fischer and Peter Robinson are considered independent, whereas Emilia Di Raddo and Herschel Segal are not considered to be independent as a result of their respective relationships with the Company or their relationships with shareholders. The independence of directors is determined by the Board based on the results of independence questionnaires completed by each director annually, as well as other factual circumstances reviewed on an ongoing basis.
Family Relationships
Sarah Segal, the Chief Branding Officer of DAVIDsTEA, is the daughter of Herschel Segal, who is the owner of Rainy Day Investments Ltd. (“Rainy Day”). Rainy Day owns approximately 46% of the outstanding shares of the company. Mr. Segal is our Interim Chief Executive Officer and the Chairman of our Board of Directors.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets out the aggregate fees billed to the Company for the fiscal years ended February 2, 2019 and February 3, 2018 by EY:
|
|
For the year ended
|
|
|
|
February 2,
|
|
|
February 3,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
Audit fees (1)
|
|
|
518,500
|
|
|
|
478,000
|
|
Audit-related fees (2)
|
|
|
-
|
|
|
|
15,000
|
|
Tax fees (3)
|
|
|
111,181
|
|
|
|
73,845
|
|
All other fees (4)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
629,681
|
|
|
|
566,845
|
|
Notes:
|
(1)
|
Audit fees consist of fees billed for professional services rendered for the audit of our consolidated annual financial statements and review of the interim consolidated financial statements included in our quarterly reports, consultation concerning financial reporting and accounting standards, translation services, and services provided in connection with statutory and regulatory filings or engagements, including consent procedures in connection with public filings.
|
|
|
|
|
(2)
|
Audit-related fees consist of fees billed for related services that are reasonably related to the performance of the audit or review of our consolidated financial statements and that are not reported under "Audit Fees", including fees billed in relation to our initial public offering.
|
|
|
|
|
(3)
|
Tax fees consist of fees billed for professional services rendered for tax compliance, tax advice and tax planning (domestic and international). These services include assistance regarding federal, state and international tax compliance, and transfer pricing studies and advisory services.
|
|
|
|
|
(4)
|
All other fees consist of fees for all other professional services and products rendered by EY.
|
All fees paid and payable by the Company to EY in Fiscal 2018 and Fiscal 2017 were pre-approved by the Company’s Audit Committee pursuant to the procedures and policies set forth in the Audit Committee mandate. The Audit Committee's policy is to pre-approve all audit and permissible non-audit services provided by our independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services. The independent registered public accounting firm and management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent registered public accounting firm in accordance with this pre-approval. The Chair of the Audit Committee is also authorized, pursuant to delegated authority, to pre-approve additional services on a case-by-case basis, and such approvals are communicated to the full Audit Committee at its next meeting.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following documents are filed as part of this Form 10-K:
(a)(1) Financial Statements
The audited consolidated financial statements of the Company filed as part of this Annual Report on Form 10-K are included in Part II, Item 8, and include:
|
Report of Independent Registered Public Accounting Firm
|
As of February 2, 2019 and February 3, 2018:
|
Consolidated Balance Sheets
|
For the years ended February 2, 2019, February 3, 2018, and January 28, 2017:
|
Consolidated Statements of Loss and Comprehensive Loss
|
Consolidated Statements of Cash Flows
|
Consolidated Statements of Equity
|
Notes to Consolidated Financial Statements
|
(a)(2) Financial Statement Schedule
All other schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto.
(a)(3) Exhibits
|
|
|
|
Incorporated by Reference
(File No. 333-203219, unless otherwise indicated)
|
Exhibit Number
|
|
Description of Document
|
|
Form
|
|
Filing Date
|
|
Exhibit Number
|
3.1
|
|
Form of Amended and Restated Articles of Incorporation of DAVIDsTEA Inc.
|
|
F-1/A
|
|
5/18/2015
|
|
3.1
|
3.2
|
|
Amended and Restated Bylaws of DAVIDsTEA Inc.
|
|
F-1
|
|
4/2/2015
|
|
3.2
|
4.1
|
|
Description of Share Capital
|
|
|
|
5/2/2019
|
|
Filed herewith
|
10.1
|
|
Credit Facility Letter from HSBC Bank Canada to DAVIDsTEA Inc. and DAVIDsTEA (USA) Inc., dated August 19, 2013, as amended
|
|
F-1
|
|
4/2/2015
|
|
10.1
|
10.2
|
|
Amended and Restated Equity Incentive Plan, as amended
|
|
F-1
|
|
4/2/2015
|
|
10.3
|
10.3
|
|
2015 Omnibus Incentive Plan
|
|
F-1
|
|
4/2/2015
|
|
10.14
|
10.4
|
|
Form of Nonstatutory Stock Option Award Agreement under 2015 Omnibus Incentive Plan
|
|
F-1
|
|
4/2/2015
|
|
10.15
|
10.5
|
|
Form of Restricted Stock Unit Award Agreement Under 2015 Omnibus Incentive Plan
|
|
F-1
|
|
4/2/2015
|
|
10.16
|
10.6
|
|
Form of Indemnification Agreement for Directors and Officers
|
|
F-1
|
|
4/2/2015
|
|
10.17
|
10.7
|
|
Agreement of Lease between DAVIDsTEA Inc. and S. Rossy Investments Inc., dated July 22, 2013
|
|
F-1
|
|
4/2/2015
|
|
10.41
|
10.8
|
|
Lease Agreement between DAVIDsTEA Inc. and Olymbec Development Inc. (f/k/a Olymbec Development (2004) Inc.), dated April 28, 2010
|
|
F-1
|
|
4/2/2015
|
|
10.42
|
10.9
|
|
First Addendum to Lease Agreement between DAVIDsTEA Inc. and Olymbec Development Inc. (f/k/a Olymbec Development (2004) Inc.), dated January 19, 2011
|
|
F-1
|
|
4/2/2015
|
|
10.43
|
10.10
|
|
Second Addendum to Lease Agreement between DAVIDsTEA Inc. and Olymbec Development Inc. (f/k/a Olymbec Development (2004) Inc.), dated September 2, 2011
|
|
F-1
|
|
4/2/2015
|
|
10.44
|
10.11
|
|
Third Amendment to Lease Agreement between DAVIDsTEA Inc. and Olymbec Development Inc. (f/k/a Olymbec Development (2004) Inc.), dated February 20, 2014
|
|
F-1
|
|
4/2/2015
|
|
10.45
|
10.12
|
|
Month to Month Tenancy Agreement by and between Le Chateau Inc. and DAVIDsTEA Inc., dated February 14, 2011
|
|
F-1
|
|
4/2/2015
|
|
10.46
|
10.13
|
|
License Agreement by and between Le Chateau Inc. and DAVIDsTEA Inc., dated June 18, 2008
|
|
F-1
|
|
4/2/2015
|
|
10.47
|
10.14
|
|
License Agreement Extension by and between Le Chateau Inc. and DAVIDsTEA Inc., dated June 3, 2013
|
|
F-1
|
|
4/2/2015
|
|
10.48
|
10.15
|
|
Agreement of Sublease by and between Le Chateau Inc. and DAVIDsTEA Inc., dated April 26, 2012
|
|
F-1
|
|
4/2/2015
|
|
10.49
|
10.16
|
|
Storage Agreement by and between Le Chateau Inc. and DAVIDsTEA Inc., dated May 28, 2012
|
|
F-1
|
|
4/2/2015
|
|
10.50
|
10.17
|
|
Storage Agreement Extension by and between Le Chateau Inc. and DAVIDsTEA Inc., dated February 14, 2014
|
|
F-1
|
|
4/2/2015
|
|
10.51
|
10.18
|
|
Short-Term Incentive Plan
|
|
F-1
|
|
4/2/2015
|
|
10.52
|
10.19
|
|
Credit Agreement by and between DAVIDsTEA Inc., Bank of Montreal and BMO Capital Markets, dated April 24, 2015
|
|
F-1/A
|
|
5/18/2015
|
|
10.56
|
10.20
|
|
First Memorandum of Agreement between DAVIDsTEA (USA) Inc. and Christine Bullen, dated January 31, 2017
|
|
10-K
|
|
4/13/2017
|
|
10.40
|
10.21
|
|
Employment Agreement by and between DAVIDsTEA Inc. and Joel Silver, dated March 13, 2017
|
|
8-K
|
|
3/13/2017
|
|
10.1
|
10.22
|
|
Memorandum of Agreement between DAVIDsTEA Inc. and Christine Bullen, dated May 29, 2017
|
|
8-K
|
|
6/2/2017
|
|
10.1
|
10.23
|
|
Executive Employment Agreement between DAVIDsTEA Inc. and Howard Tafler, dated September 7, 2017
|
|
10-Q
|
|
9/7/2017
|
|
10.1
|
23.1
|
|
Consent of Independent Registered Public Accounting Firm
|
|
|
|
5/2/2019
|
|
Filed herewith
|
31.1
|
|
Certification of Interim Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, relating to DAVIDsTEA Inc.
|
|
|
|
5/2/2019
|
|
Filed herewith
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, relating to DAVIDsTEA Inc.
|
|
|
|
5/2/2019
|
|
Filed herewith
|
32.1
|
|
Certification of Interim Chief Executive Officer pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, relating to DAVIDsTEA Inc.
|
|
|
|
5/2/2019
|
|
Filed herewith
|
32.2
|
|
Certification of Chief Financial Officer pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, relating to DAVIDsTEA Inc.
|
|
|
|
5/2/2019
|
|
Filed herewith
|
101.INS
|
|
101.INS XBRL Instance
|
|
|
|
4/19/2018
|
|
Filed herewith
|
101.SCH
|
|
101.SCH XBRL Taxonomy Extension Schema
|
|
|
|
4/19/2018
|
|
Filed herewith
|
101.CAL
|
|
101.CAL XBRL Taxonomy Extension Calculation
|
|
|
|
4/19/2018
|
|
Filed herewith
|
101.LAB
|
|
101.LAB XBRL Taxonomy Extension Labels
|
|
|
|
4/19/2018
|
|
Filed herewith
|
101.PRE
|
|
101.PRE XBRL Taxonomy Extension Presentation
|
|
|
|
4/19/2018
|
|
Filed herewith
|
101.DEF
|
|
101.DEF XBRL Taxonomy Extension Definition
|
|
|
|
4/19/2018
|
|
Filed herewith
|
ITEM 16. FORM 10-K SUMMARY
None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
DAVIDsTEA INC.
|
|
|
|
|
|
Date: May 2, 2019
|
By:
|
/s/ Herschel Segal
|
|
|
Name:
|
Herschel Segal
|
|
|
Title:
|
Interim Chief Executive Officer and Chairman of the Board
|
|
Pursuant to the requirements of the Securities Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
/s/ Herschel Segal
|
|
Interim Chief Executive Officer and Chairman of the Board
|
Name: Herschel Segal
|
|
(principal executive officer)
|
|
|
|
/s/ Frank Zitella
|
|
Chief Financial Officer and Chief Operating Officer
|
Name: Frank Zitella
|
|
(principal financial officer and principal accounting officer)
|
|
|
|
/s/ Pat De Marco
|
|
Director
|
Name: Pat De Marco
|
|
|
|
|
|
/s/ Emilia Di Raddo
|
|
Director
|
Name: Emilia Di Raddo
|
|
|
|
|
|
/s/ Max Ludwig Fisher
|
|
Director
|
Name: Max Ludwig Fischer
|
|
|
|
|
|
/s/ Anne Darche
|
|
Director
|
Name: Anne Darche
|
|
|
|
|
|
/s/ Susan L. Burkman
|
|
Director
|
Name: Susan L. Burkman
|
|
|
|
|
|
/s/ Peter Robinson
|
|
Director
|
Name: Peter Robinson
|
|
|
Date: May 2, 2019
|
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