Rubicon Organics Inc.
Condensed Consolidated Interim Financial Statements (Unaudited)
For the three months ended March 31, 2024 and 2023
Expressed in Canadian dollars
RUBICON ORGANICS INC.
NOTICE TO READER
The accompanying unaudited condensed consolidated interim financial statements of the Company have been prepared by and are the responsibility of the Company's management. The Company's independent auditor has not performed a review of these financial statements in accordance with the standards established by the Canadian Institute of Professional Chartered Accountants for a review of interim financial statements by an entity's auditor.
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RUBICON ORGANICS INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION (UNAUDITED) Expressed in Canadian Dollars
March 31, | December 31, | ||
Notes | 2024 | 2023 | |
ASSETS | |||
Current | 8,121,134 | ||
Cash and cash equivalents | 18 | 9,784,190 | |
Accounts receivable | 5 | 3,902,424 | 3,336,328 |
Prepaid expenses, deposits, & other | 6 | 1,979,706 | 2,253,669 |
Inventories | 7 | 9,800,825 | 9,644,445 |
Cannabis plants | 8 | 1,805,902 | 1,634,566 |
Derivatives | 14 | 667,159 | 386,642 |
26,277,150 | 27,039,840 | ||
Non-Current | 24,705,370 | ||
Property, plant and equipment | 9 | 25,314,148 | |
Right-of-use assets | 11 | 137,423 | 155,305 |
Intangible assets | 10 | 2,381,749 | 2,381,749 |
Total assets | |||
53,501,692 | 54,891,042 | ||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||
Current | |||
Accounts payable and accrued liabilities | 12 | 6,002,001 | 6,208,924 |
Interest payable | - | 385,800 | |
Current portion of lease liabilities | 11 | 56,148 | 53,465 |
Current portion of loans and borrowings | 13 | 10,664,636 | 10,259,562 |
16,722,785 | 16,907,751 | ||
Non-Current | 74,085 | ||
Lease liabilities | 88,973 | ||
Total liabilities | |||
16,796,870 | 16,996,724 | ||
Shareholders' equity | 107,793,260 | ||
Share capital | 15 | 107,793,260 | |
Reserves | 16 | 22,327,012 | 21,624,166 |
Deficit | (93,415,450) | (91,523,108) | |
Total shareholders' equity | 36,704,822 | 37,894,318 | |
Total liabilities and shareholders' equity | 53,501,692 | 54,891,042 |
Approved on behalf of the Board: | (Signed) "David Donnan" | (Signed) "Margaret Brodie" | |
Director | Director and CEO |
The accompanying Notes form an integral part of these condensed consolidated interim financial statements.
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RUBICON ORGANICS INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF LOSS AND COMPREHENSIVE LOSS (UNAUDITED)
Expressed in Canadian Dollars, except for share information
Revenue
Product sales
Excise taxes
Net revenue
Cost of sales
Production costs
Inventory expensed to cost of sales
Inventory written off or provided for
Gross profit before fair value adjustments
Fair value adjustments to cannabis plants, inventory sold, and other charges
For the three months ended | ||
Notes | March 31, 2024 | March 31, 2023 |
11,364,324 | 11,633,694 | |
(2,473,907) | (2,833,754) | |
8,890,417 | 8,799,940 | |
9 | 2,692,692 | 2,678,604 |
9 | 3,737,334 | 2,934,894 |
266,039 | 157,424 | |
2,194,352 | 3,029,018 | |
8 | 164,252 | 139,463 |
Gross profit | 2,358,604 | 3,168,481 | |
Operating expenses | 1,898,468 | ||
Consulting, salaries and wages | 2,058,978 | ||
General and administrative | 982,161 | 847,739 | |
Share-based compensation | 16 | 702,846 | (132,158) |
Sales and marketing | 453,493 | 610,369 | |
Depreciation and amortization | 9 | 60,122 | 88,050 |
Loss from operations | 4,097,090 | 3,472,978 | |
(1,738,486) | (304,497) | ||
Interest on loans | 13 | 279,084 | 269,580 |
Foreign exchange (gain) | 155,289 | (18,921) | |
Fair value (gain) loss on derivatives | 14 | (280,517) | 19,891 |
Net loss for the period | (1,892,342) | (575,047) | |
Loss per share, basic | (0.03) | (0.01) | |
Loss per share, diluted | (0.03) | (0.01) | |
Weighted average number of shares outstanding, basic | 56,662,430 | 56,424,994 | |
Weighted average number of shares outstanding, diluted | 57,709,649 | 56,858,327 |
The accompanying Notes form an integral part of these condensed consolidated interim financial statements.
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RUBICON ORGANICS INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)
Expressed in Canadian Dollars, except for share information
Share- | Total | |||||||
Number of | Based | Warrant | Shareholders' | |||||
Notes | Shares | Share Capital | Reserves | Reserve | Reserves | Deficit | Equity | |
Balance, January 1, 2023 | 56,124,994 | 107,610,759 | 12,692,956 | 7,728,952 | 20,421,908 | (89,699,572) | 38,333,095 | |
Share-based compensation | 16 | - | - | (132,158) | - | (132,158) | - | (132,158) |
Net loss for the period | - | - | - | - | - | (575,047) | (575,047) | |
Balance, March 31, 2023 | 56,124,994 | 107,610,759 | 12,560,798 | 7,728,952 | 20,289,750 | (90,274,619) | 37,625,890 | |
Balance, January 1, 2024 | 56,191,661 | 107,793,260 | 13,895,214 | 7,728,952 | 21,624,166 | (91,523,108) | 37,894,318 | |
Share-based compensation | 16 | - | - | 702,846 | - | 702,846 | - | 702,846 |
Net loss for the period | - | - | - | - | - | (1,892,342) | (1,892,342) | |
Balance, March 31, 2024 | 56,191,661 | 107,793,260 | 14,598,060 | 7,728,952 | 22,327,012 | (93,415,450) | 36,704,822 | |
The accompanying Notes form an integral part of these condensed consolidated interim financial statements.
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RUBICON ORGANICS INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS (UNAUDITED) Expressed in Canadian Dollars
For the three months ended | |||
Notes | March 31, 2024 | March 31, 2023 | |
OPERATING ACTIVITIES | |||
Net loss from continuing operations | (1,892,342) | (575,047) | |
Adjustments to reconcile net loss to cash used in operating | |||
activities | |||
Fair value adjustments to cannabis plants, inventory | 8 | (164,252) | (139,464) |
sold, and other charges | |||
Depreciation and amortization | 9 | 776,680 | 744,783 |
Share-based compensation | 15 | 702,846 | (132,158) |
Interest on loans | 12 | 279,084 | 269,580 |
Foreign exchange loss | 142,689 | (4,069) | |
Fair value gain on derivatives | 13 | (280,517) | 19,891 |
Changes in non-cash working capital items | 17 | (423,346) | 9,007 |
Cash from / (used) in operating activities | (859,158) | 192,523 | |
INVESTING ACTIVITIES | (384,004) | ||
Purchase of property, plant and equipment | 9 | (486,332) | |
Cash (used) in investing activities | (384,004) | (486,332) | |
FINANCING ACTIVITIES | (385,800) | ||
Interest paid | 17 | (352,765) | |
Repayment of lease liabilities | (17,395) | (43,013) | |
Cash (used) by financing activities | (403,195) | (395,778) | |
Effect of exchange rate changes on cash | (16,699) | (4,054) | |
Net decrease in cash during the period | (1,663,056) | (693,640) | |
Cash and cash equivalents, beginning of period | 9,784,190 | 8,294,117 | |
Cash and cash equivalents, end of period | 8,121,134 | 7,600,477 |
The accompanying Notes form an integral part of these condensed consolidated interim financial statements.
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RUBICON ORGANICS INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
Expressed in Canadian dollars
-
NATURE OF OPERATIONS
Rubicon Organics Inc. (the "Company", "Rubicon", or "ROI") is a British Columbia registered company incorporated on May 15, 2015.
The Company's principal business is the production and sale of cannabis in Canada. The Company produces and processes organic cannabis at its wholly owned, federally licensed 125,000 square foot facility in Delta, British Columbia (the "Delta Facility") which it sells under its wholly owned and other licensed brands.
The Company's common shares trade on the TSX Venture Exchange (the "TSXV") under the trading symbol "ROMJ" and on the OTCQX Best Market under the symbol "ROMJF".
The address of the Company's registered office and records is 1200 Waterfront Centre, 200 Burrard Street, PO Box 48600 Vancouver, British Columbia V7X 1T2. The Company's head office is unit 505, 744 West Hastings Street, Vancouver, British Columbia V6C 1A5. - BASIS OF PREPARATION
These condensed consolidated interim financial statements, including comparatives, have been prepared in accordance with International Accounting Standards ("IAS") 34, Interim Financial Reporting. Certain information and note disclosures normally included in the audited annual consolidated financial statements prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and interpretations of the International Financial Reporting Standards Interpretation Committee ("IFRIC") have been omitted or condensed. As a result, these condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the year ended December 31, 2023 ("Annual Financial Statements").
These condensed consolidated interim financial statements have been prepared on a going concern basis which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future.
These financial statements were authorized for issuance by the Board of Directors of the Company on May 15, 2024.
3. MATERIAL ACCOUNTING POLICIES
The accounting policies used in the preparation of these condensed consolidated interim financial statements are consistent with those followed in the preparation in the Company's Annual Financial Statements, except for the adoption of the following accounting policy amendment:
In October 2020, the IASB published amendments to IAS 1 - Presentation of Financial Statements - Classification of debt with covenants as current or non-current. Under existing IAS 1 requirements, companies classify a liability as current when they do not have an unconditional right to defer settlement of the liability for at least twelve months after the end of the reporting period. As part of its amendments, the IASB has removed the requirement for a right to be unconditional and instead, now requires that a right to defer settlement must have substance and exist at the end of the reporting period. A company classifies a liability as non-current if it has a right to defer settlement for at least 12- months after the reporting period. This new requirement may change how companies classify their debt. The amendments clarify how a company classifies a liability that includes a counterparty conversion option, which could be recognized as either equity or a liability separately from the liability component under IAS 32 - Financial Instruments: Presentation. Generally, if a liability has any conversion options that involve a transfer of the company's own equity instruments, these would affect its classification as current or non-current. The IASB has now clarified that when classifying liabilities as current or non-current, a company can ignore only those conversion options that are recognized as equity. Therefore, companies may need to reassess the classification of liabilities that can be settled by the transfer of the company's own equity instruments.
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RUBICON ORGANICS INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) Expressed in Canadian dollars
The amendment was adopted on January 1, 2024, and the implementation of this amendment did not have a material impact on the condensed consolidated interim financial statements.
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CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
The critical estimates and judgements made in the preparation of these condensed consolidated interim financial statements are the same as those used in preparing the Company's Annual Financial Statements. - ACCOUNTS RECEIVABLE
March 31, 2024 | December 31, 2023 | |
$ | $ | |
Trade receivables | 3,670,099 | 3,318,681 |
Sales taxes recoverable | 232,325 | 17,647 |
Total accounts receivable | 3,902,424 | 3,336,328 |
Trade receivables arise from sales of cannabis to distributors and retailers in Canada. As at March 31, 2024, 98% of trade receivables were with provincial government cannabis distributors (December 31, 2023: 99%). Trade receivables are net of a $493,652 provision for returns (December 31, 2023: $655,116).
For the three months ended March 31, 2024, the Company had four customers (March 31, 2023: four customers) that
individually represented more than 10% and together constituted 98% (March 31, 2023: 99%), of the Company's net revenue. Direct sales to provincial government cannabis distributors accounted for 99% of revenue (March 31, 2023: 99%).
6. PREPAID EXPENSES, DEPOSITS, & OTHER | |||
March 31, 2024 | December 31, 2023 | ||
$ | $ | ||
Prepaid expenses | 333,120 | 801,352 | |
Deposits | 1,413,686 | 1,123,149 | |
Deferred excise tax expense | 232,900 | 329,168 | |
Total prepaid expenses and deposits | 1,979,706 | 2,253,669 |
As at March 31, 2024, $56,941 of the deposits balance was related to property, plant and equipment (December 31, 2023: $97,953).
7. INVENTORIES
Inventory as at March 31, 2024 and December 31, 2023 consisted of consumable inventory used in the propagation and transformation of the Company's cannabis plants, work-in-process ("WIP") inventory and finished goods.
March 31, 2024 | December 31, 2023 | |
$ | $ | |
Consumable inventory | 2,095,824 | 1,973,774 |
WIP inventory | 6,684,565 | 6,569,448 |
Finished goods | 1,020,436 | 1,101,223 |
Total inventories | 9,800,825 | 9,644,445 |
At March 31, 2024, WIP inventory and finished goods include $5,116,064 of non-cash fair value of cannabis plants transferred upon harvest (December 31, 2023: $5,123,148).
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RUBICON ORGANICS INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) Expressed in Canadian dollars
At March 31, 2024, $994,421 of consumable inventory is expected to be utilized more than twelve months after the reporting period (December 31, 2023: $977,493).
8. CANNABIS PLANTS
The changes in the carrying value of cannabis plants was as follows:
$ | |
Balance, December 31, 2023 | 1,634,566 |
Change in fair value of cannabis plants | 2,594,738 |
Transferred to WIP inventory upon harvest | (2,423,402) |
Balance, March 31, 2024 | 1,805,902 |
The fair value of cannabis plants was determined using a valuation model that estimates the expected average yield per plant and applies this to the estimated fair value less costs to sell per gram of dried cannabis flower. These fair value measurements have been categorized as Level 3 of the fair value hierarchy because there is currently no actively traded commodity market in Canada for cannabis plants.
The significant assumptions applied in determining the fair value are as follows:
- expected average yield of approximately 50.1 grams per plant (December 31, 2023: 51.8 grams per plant); and
- comparable selling price of wholesale dried cannabis flower ranging from $0.98 to $1.51 per gram (December 31, 2023: $0.87 to $1.59 per gram).
The comparable selling price used in the valuation is based on recently quoted prices of wholesale dried cannabis flower from licensed Canadian wholesalers and varies based on THC content. Expected average yields for cannabis plants are subject to a variety of factors, such as strains being grown, length of growing cycle, and space allocated for growing. Estimates of future yields are based on the historical weighted average of actual yields.
The Company periodically reassesses the significant assumptions applied in determining the fair value of cannabis plants based on historical information as well as the Company's planned production schedules. When there is a material change in any of the significant assumptions, the fair value of cannabis plants is adjusted.
For the period ended March 31, 2024, the Company determined the weighted average fair value less costs to sell was approximately $1.40 per dried gram (December 31, 2023: $1.45 per dried gram).
The Company has quantified the sensitivity of the significant unobservable inputs used to calculate the fair value recorded. A decrease in the comparable selling price per gram of 10% would result in a decrease in the value of cannabis plants of $242,289. A decrease in the expected average yield per plant of 10% would result in a decrease in the value of cannabis plants of $180,540.
The number of weeks in the growth cycle is twelve to fourteen weeks from propagation to harvest. As at March 31, 2024, the cannabis plants were estimated to be, on average, 41% complete (December 31, 2023: 41% complete).
The fair value adjustment to cannabis plants, inventory sold, and other charges for the three months ended March 31,
2024 and 2023 is comprised of the following:
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RUBICON ORGANICS INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
Expressed in Canadian dollars
For the three months ended | ||
March 31, 2024 | March 31, 2023 | |
$ | $ | |
Unrealized gain on changes in fair value of cannabis plants | 2,594,738 | 3,083,913 |
Realized fair value of inventory sold | (2,096,229) | (2,869,485) |
Adjustment to net realizable value of inventory on hand at period end | (334,257) | (74,965) |
164,252 | 139,463 | |
9. PROPERTY, PLANT AND EQUIPMENT
Buildings and | |||||
leasehold | Equipment | Construction in | |||
Cost | improvements | and vehicles | Land | progress | Total |
$ | $ | $ | $ | $ | |
At December 31, 2023 | 18,557,095 | 15,213,816 | 2,040,722 | 533,862 | 36,345,495 |
Additions | - | 27,161 | - | 140,200 | 167,361 |
At March 31, 2024 | 18,557,095 | 15,240,977 | 2,040,722 | 674,062 | 36,512,856 |
Accumulated depreciation | |||||
At December 31, 2023 | 3,327,300 | 7,704,047 | - | - | 11,031,347 |
Depreciation | 243,158 | 532,981 | - | - | 776,139 |
At March 31, 2024 | 3,570,458 | 8,237,028 | - | - | 11,807,486 |
Net book value | |||||
At March 31, 2024 | 14,986,637 | 7,003,949 | 2,040,722 | 674,062 | 24,705,370 |
Buildings and | Equipment | Construction in | |||
Cost | leasehold | Land | Total | ||
and vehicles | progress | ||||
improvements | |||||
$ | $ | $ | $ | $ | |
At December 31, 2022 | 17,408,688 | 13,772,313 | 2,040,722 | 723,993 | 33,945,716 |
Additions | 10,451 | 503,037 | - | 1,886,291 | 2,399,779 |
Commissioned during the | 1,137,956 | 938,466 | (2,076,422) | - | |
period | |||||
At December 31, 2023 | 18,557,095 | 15,213,816 | 2,040,722 | 533,862 | 36,345,495 |
Accumulated depreciation | |||||
At December 31, 2022 | 2,392,598 | 5,597,354 | - | - | 7,989,952 |
Depreciation | 934,702 | 2,106,693 | - | - | 3,041,395 |
At December 31, 2023 | 3,327,300 | 7,704,047 | - | - | 11,031,347 |
Net book value | |||||
At December 31, 2023 | 15,229,795 | 7,509,769 | 2,040,722 | 533,862 | 25,314,148 |
For the three months ended March 31, 2024, depreciation of $529,542 was included in production costs (March 31, 2023: $478,891 and $112,030 was capitalized to inventory (March 31, 2023: $189,088).
During the three months ended March 31, 2024, the total amount of depreciation recognized in cost of sales was $186,574 (March 31, 2023: $175,289).
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Rubicon Organics Inc. published this content on 16 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 16 May 2024 02:07:08 UTC.