dtea_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 30, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission file number 001-37404

DAVIDsTEA Inc.

(Exact name of registrant as specified in its charter)

Canada

98-1048842

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

5430 Ferrier

Mount-Royal, Québec, Canada, H4P 1M2

(Address of principal executive offices) (zip code)

(888) 873-0006

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class		Name of Each Exchange on Which Registered		Trading Symbol for Each Class
Common shares, no par value per share		NASDAQ Global Market		DTEA

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐

As of December 10, 2021, 26,359,969 common shares of the registrant were outstanding.

The brand, service or product names or marks referred to in this Quarterly Report are trademarks or services marks, registered or otherwise, of DAVIDsTEA Inc. and our wholly-owned subsidiary, DAVIDsTEA (USA) Inc.

DAVIDsTEA Inc.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements	3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31

Item 4.	Controls and Procedures	31

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	32

Item 1A.	Risk Factors	32

Item 2.	Unregistered Sales of Equity Securities	32

Item 3.	Defaults Upon Senior Securities	32

Item 4.	Mine Safety Disclosures	32

Item 5.	Other Information	32

Item 6.	Exhibits	33

DAVIDsTEA Inc. (the “Company”), a corporation incorporated under the Canada Business Corporations Act, qualifies as a foreign private issuer in the United States for purposes of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As a foreign private issuer, the Company has chosen to file annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K with the United States Securities and Exchange Commission (“SEC”) instead of filing the reporting forms available to foreign private issuers, although the Company is not required to do so.

In this Quarterly Report, unless otherwise specified, all monetary amounts are in Canadian dollars, all references to “$,” “C$,” “CAD”, “Canadian dollars” and “dollars” mean Canadian dollars and all references to “U.S. dollars”, “US$” and “USD” mean U.S. dollars.

On December 10, 2021, the Bank of Canada closing average exchange rate was US$1.00 = CAD$1.2714.

Table of Contents

Part I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

DAVIDsTEA Inc.

Incorporated under the laws of Canada

INTERIM CONSOLIDATED BALANCE SHEETS

[Unaudited and in thousands of Canadian dollars]

		As at
		October 30,			January 30,
		2021			2021
		$			$
ASSETS
Current
Cash			13,367			30,197
Accounts and other receivables			4,602			6,212
Inventories			39,802			23,468
Prepaid expenses and deposits			4,835			14,470
Total current assets			62,606			74,347
Property and equipment	[Note 5]		1,169			2,309
Intangible assets			2,638			3,929
Right-of-use assets	[Note 5]		3,345			657
Total assets			69,758			81,242
LIABILITIES AND EQUITY
Current
Trade and other payables			13,958			4,152
Deferred revenue			5,559			7,080
Liabilities subject to compromise	[Note 6]		-			100,550
Current portion of lease liabilities			780			396
Total current liabilities			20,297			112,178
Non-current portion of lease liabilities			2,720			355
Total liabilities			23,017			112,533
Commitments and contingencies
Equity
Share capital	[Note 7]		113,406			113,167
Contributed surplus			2,199			1,747
Deficit			(71,726	)		(148,068	)
Accumulated other comprehensive income			2,862			1,863
Total equity (deficiency)			46,741			(31,291	)
Total liabilities and equity			69,758			81,242

See accompanying notes.

Table of Contents

DAVIDsTEA Inc.

Incorporated under the laws of Canada

INTERIM CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)

[Unaudited and in thousands of Canadian dollars, except share and per share information]

		For the three months ended						For the nine months ended
		October 30,			October 31,			October 30,			October 31,
		2021			2020			2021			2020
		$			$			$			$

Sales	[Note 13]		22,203			26,225			64,195			81,497
Cost of sales			13,587			15,399			36,816			47,409
Gross profit			8,616			10,826			27,379			34,088
Selling, general and administration expenses	[Note 9]		10,242			7,120			28,521			35,883
Restructuring plan activities, net	[Note 10]		195			(10,743	)		(76,964	)		24,017
Results from operating activities			(1,821	)		14,449			75,822			(25,812	)
Finance costs			71			35			104			3,260
Finance income			(28	)		(53	)		(118	)		(361	)
Net income (loss) before income taxes			(1,864	)		14,467			75,836			(28,711	)
Recovery of income taxes	[Note 8, 10]		-			-			(1,000	)		-
Net income (loss)			(1,864	)		14,467			76,836			(28,711	)

Other comprehensive income (loss):
Cumulative translation adjustment			(13	)		209			999			191
Other comprehensive income (loss), net of tax			(13	)		209			999			191
Total comprehensive income (loss)			(1,877	)		14,676			77,835			(28,520	)
Net earnings (loss) per share:
Basic	[Note 11]		(0.07)

SEC Form 10-Q filed by DAVIDsTEA Inc.