SWISS WATER DECAFFEINATED COFFEE INC.

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(unaudited)

For the Three Months Ended March 31, 2024 and 2023

SWISS WATER DECAFFEINATED COFFEE INC.

Condensed Consolidated Interim Statements of Financial Position as at

(Tabular amounts are in thousands of Canadian dollars) (Unaudited)

March 31, 2024

December 31, 2023

Assets

Note

Current assets

Cash and cash equivalents

4

$

13,599

$

11,091

Accounts receivable

5

22,339

19,110

Inventories

6

25,395

30,338

Prepaid expenses and other receivables

768

884

Income tax receivable

128

167

Derivative assets and hedged firm commitments

7, 20

1,313

2,075

Total current assets

63,542

63,665

Non-current assets

Deposits and other receivables

157

157

Property, plant and equipment

8

133,910

135,736

Deferred tax assets

127

135

Derivative assets

7, 20

110

642

Total non-current assets

134,304

136,670

Total assets

$

197,846

$

200,335

Liabilities and shareholders' equity

Current liabilities

Accounts payable and accrued liabilities

9

$

17,423

$

15,189

Borrowings

10

18,934

17,379

Other liabilities

1,392

1,141

Lease liabilities

11

1,698

1,681

Derivative liabilities and hedged firm commitments

7, 20

747

988

Total current liabilities

40,194

36,378

Non-current liabilities

Other liabilities

43

64

Borrowings

10

76,345

80,804

Borrowings embedded option

10.2

2,244

1,353

Lease liabilities

11

16,283

16,712

Asset retirement obligation

12

3,502

3,839

Deferred tax liabilities

4,676

5,275

Derivative liabilities

7, 20

200

51

Total non-current liabilities

103,293

108,098

Total liabilities

143,487

144,476

Shareholders' equity

Share capital

13

$

45,032

$

44,318

Share-based compensation reserve

175

586

Accumulated other comprehensive (loss) income

(454)

449

Retained earnings

9,606

10,506

Total equity

54,359

55,859

Total liabilities and shareholders' equity

$

197,846

$

200,335

Commitments (Note 21)

Subsequent event (Note 22)

Approved on behalf of the Board:

(signed) "Alan Wallace ", Director

(signed) "Frank Dennis ", Director

- The accompanying notes form an integral part of these condensed consolidated interim financial statements. -

1 | P a g e

SWISS WATER DECAFFEINATED COFFEE INC.

Condensed Consolidated Interim Statements of Loss

(Tabular amounts are in thousands of Canadian dollars, except for per share amounts)

(Unaudited)

3 months ended

3 months ended

Note

March 31, 2024

March 31, 2023

Revenue

14, 18

$

38,730

$

49,045

Cost of sales

(33,615)

(44,151)

Gross profit

5,115

4,894

Operating expenses

Administration expenses

(2,837)

(2,697)

Sales and marketing expenses

(914)

(773)

Total operating expenses

(3,751)

(3,470)

Operating income

1,364

1,424

Non-operating or other

(Loss) gain on risk management activities

(149)

111

Loss on fair value of embedded option

10.2

(891)

(968)

Finance income

460

437

Finance expense

(2,288)

(1,837)

Gain (loss) on foreign exchange

380

(84)

Total non-operating or other

(2,488)

(2,341)

Loss before tax

(1,124)

(917)

Income tax recovery

224

216

Net loss

$

(900)

$

(701)

Earnings per share

Basic and diluted loss per share

17

$

(0.10)

$

(0.08)

- The accompanying notes form an integral part of these condensed consolidated interim financial statements. -

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SWISS WATER DECAFFEINATED COFFEE INC.

Condensed Consolidated Interim Statements of Comprehensive Loss and Condensed Consolidated Interim Statements of Changes in Equity

(Tabular amounts are in thousands of Canadian dollars except for amounts of shares) (Unaudited)

Condensed Consolidated Interim Statements of Comprehensive Loss

3 months ended

3 months ended

March 31, 2024

March 31, 2023

Net loss

$

(900)

$

(701)

Other comprehensive (loss) income net of tax

Items that may be subsequently reclassified to income:

Unrealized loss

Derivatives designated as cash flow hedges - currency risk hedges on US$ future revenue

(1,380)

(1)

Items reclassified to income:

Realized loss recognized in income

Derivatives designated as cash flow hedges

- currency risk hedges on US$ future revenue, recognized in revenue

171

313

Other comprehensive (loss) income related to hedging activities

(1,209)

312

Tax recovery (expense) on other comprehensive (loss) income related to hedging activities

326

(84)

Cumulative translation adjustment

(20)

2

Other comprehensive (loss) income net of tax

(903)

230

Net loss and other comprehensive loss

$

(1,803)

$

(471)

Condensed Consolidated Interim Statements of Changes in Equity

Share capital

Share-based

Accumulated other

compensation

comprehensive

Note

Shares

Amount

reserve

income (loss)

Retained earnings

Total equity

Balance at December 31, 2022

9,165,815

$

44,194

$

375

$

(697)

$

11,034

$

54,906

Shares issued for restricted share units

47,140

124

(124)

-

-

-

Settlement of loan with restricted share units

-

-

(27)

-

-

(27)

Share-based compensation

-

-

113

-

-

113

Net loss and other comprehensive income

-

-

-

230

(701)

(471)

Balance at March 31, 2023

9,212,955

$

44,318

$

337

$

(467)

$

10,333

$

54,521

Balance at December 31, 2023

9,212,955

$

44,318

$

586

$

449

$

10,506

$

55,859

Shares issued for restricted share units

13.4

247,597

714

(714)

-

-

-

Share-based compensation

-

-

303

-

-

303

Net loss and other comprehensive loss

-

-

-

(903)

(900)

(1,803)

Balance at March 31, 2024

9,460,552

$

45,032

$

175

$

(454)

$

9,606

$

54,359

- The accompanying notes form an integral part of these condensed consolidated interim financial statements. -

3 | P a g e

SWISS WATER DECAFFEINATED COFFEE INC.

Condensed Consolidated Interim Statements of Cash Flows For the

(Tabular amounts are in thousands of Canadian dollars)

(Unaudited)

3 months ended

3 months ended

Note

March 31, 2024

March 31, 2023

Operating activities

Net loss

$

(900)

$

(701)

Items not affecting cash:

Depreciation and amortization

1,716

3,582

Share-based compensation expense

535

493

Unrealized (loss) gain on risk management activities

(38)

74

Unrealized loss on fair value of embedded option

10.2

891

968

Finance income

(460)

(437)

Finance expense

2,288

1,837

Income tax recovery

(224)

(216)

Other

(476)

51

3,332

5,651

Change in non-cash working capital relating to

operating activities

19

4,710

(6,028)

Net cash generated from (used in) operations

8,042

(377)

Interest received

393

297

Interest paid

19

(1,413)

(1,226)

Net cash generated from (used in) operating activities

7,022

(1,306)

Investing activities

Additions to plant and equipment

19

(351)

(8,300)

Net cash used in investing activities

(351)

(8,300)

Financing activities

Payment of lease liabilities

(413)

(455)

Proceeds from credit facility

-

2,600

Repayments of credit facility

(3,750)

-

Proceeds from construction loans

-

5,842

Transaction costs related to debt financing activities

19

-

(352)

Net cash (used in) generated from financing activities

(4,163)

7,635

Increase (decrease) in cash and cash equivalents

2,508

(1,971)

Cash and cash equivalents, beginning of the period

11,091

3,761

Cash and cash equivalents, end of the period

$

13,599

$

1,790

Supplemental cash flow information (Note 19)

- The accompanying notes form an integral part of these condensed consolidated interim financial statements. -

4 | P a g e

SWISS WATER DECAFFEINATED COFFEE INC.

Notes to the Condensed Consolidated Interim Financial Statements

For the Three Months ended March 31, 2024 and 2023

(Tabular amounts are in thousands of Canadian dollars, except shares and per share amounts) (Unaudited)

  1. THE COMPANY AND ITS OPERATIONS
    Swiss Water Decaffeinated Coffee Inc., ("Swiss Water" or the "Company"), is an entity incorporated under the Canada Business Corporations Act ("CBCA"). The common shares of the Company are listed on the Toronto Stock Exchange under the symbol 'SWP'. The Company's head office is located at 7750 Beedie
    Way, Delta, British Columbia, V4G 0A5, Canada.
    Swiss Water is primarily involved in the decaffeination of green coffee without the use of chemicals by employing the proprietary SWISS WATER® Process. The Company leverages science-based systems and quality controls to produce coffee that is 99.9% caffeine free.
    Swiss Water owns all of the interests of Seaforth Supply Chain Solutions Inc. ("Seaforth"), which is incorporated under CBCA and operates in Delta, British Columbia, Canada; Swiss Water Decaffeinated
    Coffee Company USA, Inc. ("SWUS"), an entity registered in Washington State, USA, and; Swiss Water Decaffeinated Coffee Europe SARL ("SWEU"), an entity registered in Bordeaux, France.
    Seaforth provides a complete range of green coffee handling and storage services, while SWUS and SWEU act as marketing and sales companies and do not have significant assets.
  2. BASIS OF PREPARATION
    The Company's condensed consolidated interim financial statements for the three months ended March 31, 2024 have been prepared in accordance with International Accounting Standards 34 - Interim
    Financial Reporting ("IAS 34") as issued by the International Accounting Standards Board ("IASB").
    Accordingly, certain disclosures included in the annual financial statements prepared in accordance with
    International Financial Reporting Standards ("IFRS") as issued by the IASB have been condensed or omitted. These condensed consolidated interim financial statements should be read in conjunction with the Company's audited consolidated financial statements for the year ended December 31, 2023.
    The accounting policies applied in the preparation of these condensed consolidated interim financial statements are consistent with those applied and disclosed in the Company's audited consolidated financial statements for the year ended December 31, 2023.
    These condensed consolidated interim financial statements are presented in Canadian dollars. Except for per share amounts, all amounts are expressed in thousands of Canadian dollars, unless otherwise stated. References to US$ are to the United States dollars.

These condensed consolidated interim financial statements for the three months ended March 31, 2024, were approved for issuance by the Company's Directors on May 7, 2024. There were no significant non- adjusting events that occurred between the reporting date and the date of authorization, other than as disclosed in the 'Subsequent Event' note.

2.1 New and amended standards

The following amendments to accounting standards became effective for annual periods beginning on or after January 1, 2024. The adoption of these revised standards by the Company did not have a material impact on its condensed consolidated interim financial statements.

  • IAS 7 Statement of Cash Flows and IFRS 7 Financial instruments disclosures contain amendments that require disclosures of the effects of supplier finance arrangements on an entity's liabilities and cash flows, as well as liquidity risk and risk management.

5 | P a g e

SWISS WATER DECAFFEINATED COFFEE INC.

Notes to the Condensed Consolidated Interim Financial Statements

For the Three Months ended March 31, 2024 and 2023

(Tabular amounts are in thousands of Canadian dollars, except shares and per share amounts) (Unaudited)

  • IFRS 16 Leases has amended guidance over accounting for lease liability in a sale and leaseback transaction.
  • IAS 1 Presentation of financial statements was amended to clarify the classification of non- current liabilities with covenants, depending on the rights that exist at the end of the reporting period. Liabilities should be classified as non-current if a company has a substantive right to defer settlement for at least 12 months at the end of the reporting period.

2.2 New and amended standards not yet effective

These standards are effective for periods beginning after January 1, 2025, and the Company does not anticipate a material impact on its financial statements:

    • IFRS 10 Consolidated financial statements and IAS 28 Investments in associates and joint ventures relate to the sale or contribution of assets between an investor and its associate or joint venture, and the amendments clarify accounting for a subsidiary when a parent company loses control of the subsidiary. IAS 28 amended equity method procedures. The amendments' effective date is not yet determined, early adoption is permitted.
    • IAS 21 The effects of changes in foreign exchange rates was amended to specify how to determine whether a currency is exchangeable into another currency and how to determine the spot exchange rate when a currency lacks exchangeability.
  2. CAPITAL MANAGEMENT
    The Company's policy is to maintain a strong capital base to maintain investor, creditor and market confidence and to sustain the future development of the business. The Company manages its capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. The Company considers its capital structure to include shareholders' equity and indebtedness. In order to maintain or adjust the capital structure, the Company may from time-to-time issue common shares, issue preferred shares, issue additional debt, adjust its capital spending, modify its dividend policy, and/or dispose of certain assets to manage current and projected debt levels.
  3. CASH AND CASH EQUIVALENTS
    Cash includes cash held with banks and financial institutions. The Company has invested $7.7 million in thirty (30) day cashable Guaranteed Investment Certificates ("GIC") with a financial services firm, at rates between 4.65% and 5.05% (December 31, 2023: $6.0 million).
  4. ACCOUNTS RECEIVABLE
    Accounts receivable are amounts due from customers for goods sold or services performed in the ordinary course of business. Information about the Company's exposure to foreign currency risk, interest rate risk and credit risk can be found in the 'Financial risk management' note. The Company monitors lifetime expected credit losses using the simplified approach, which is determined based on historic and adjusted relevant forward-looking information. The Company's customers have a negligible default rate and the
    Company's experience in both frequency and amount of losses are not significant. As a result, the expected credit losses provision as at March 31, 2024 was nil (December 31, 2023: $0.1 million).

6 | P a g e

SWISS WATER DECAFFEINATED COFFEE INC.

Notes to the Condensed Consolidated Interim Financial Statements

For the Three Months ended March 31, 2024 and 2023

(Tabular amounts are in thousands of Canadian dollars, except shares and per share amounts) (Unaudited)

6. INVENTORIES

During the three months ended March 31, 2024, the cost of inventories recognized in cost of sales was $32.6 million (2023: $39.6 million). The hedge accounting component represents the derivative adjustment related to designated hedges for inventory on hand as at each reporting period. As at March 31, 2024, the inventory provision was $0.2 million (December 31, 2023: $0.8 million). During the three months ended March 31, 2024, cost of sales includes a $0.5 million recovery related to the inventory provision (2023: $0.1 million expense).

March 31, 2024 December 31, 2023

Raw materials

$

13,269

$

18,500

Finished goods

10,803

10,347

Carbon

511

472

Packaging

361

243

Hedge accounting component

451

776

$

25,395

$

30,338

7. DERIVATIVE FINANCIAL INSTRUMENTS

The Company's derivative financial instruments were carried at fair value through profit or loss as follows:

March 31, 2024

December 31, 2023

Net coffee futures contracts

$

1,165

$

1,273

Net US dollar forward contracts, current

(27)

(200)

Net US dollar forward contracts, long-term

(1)

-

Borrowings embedded option

Note 10.2

(2,244)

(1,353)

$

(1,107)

$

(280)

The Company's derivative financial instruments were carried at fair value through other comprehensive income as follows:

March 31, 2024

December 31, 2023

Net US dollar forward contracts, current

$

(520)

$

8

Net US dollar forward contracts, long-term

(89)

591

$

(609)

$

599

8. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment comprise owned and leased right-of-use assets.

March 31, 2024 December 31, 2023

Property, plant and equipment

$

118,747

$

120,116

Right-of-use assets

15,163

15,620

$

133,910

$

135,736

7 | P a g e

SWISS WATER DECAFFEINATED COFFEE INC.

Notes to the Condensed Consolidated Interim Financial Statements

For the Three Months ended March 31, 2024 and 2023

(Tabular amounts are in thousands of Canadian dollars, except shares and per share amounts) (Unaudited)

8.1 Property, plant and equipment

Machinery and

Leasehold

Computer

Furniture and

Construction

equipment

Building

improvements

equipment

fixtures

in progress

Total

Cost

January 1, 2024

$

108,311

$

18,159

$

7,235

$

677

$

171

$

80

$

134,633

Additions

96

-

-

-

-

258

354

ARO remeasurement

-

-

(366)

-

-

-

(366)

Transfers

231

-

-

5

1

(237)

-

March 31, 2024

$

108,638

$

18,159

$

6,869

$

682

$

172

$

101

$

134,621

Accumulated depreciation

January 1, 2024

$

(10,735)

(2,699)

(575)

(392)

(116)

-

(14,517)

Depreciation

(886)

(318)

(117)

(29)

(7)

-

(1,357)

March 31, 2024

$

(11,621)

$

(3,017)

$

(692)

$

(421)

$

(123)

$

-

$

(15,874)

March 31, 2024

$

97,017

$

15,142

$

6,177

$

261

$

49

$

101

$

118,747

Machinery and

Leasehold

Computer

Furniture and

Construction

equipment

Building

improvements

equipment

fixtures

in progress

Total

Cost

January 1, 2023

$

83,069

$

13,880

$

11,915

$

1,224

$

280

$

41,779

$

152,147

Additions

5

-

916

-

10

15,268

16,199

Disposals

(27,065)

-

(5,846)

(683)

(119)

-

(33,713)

Transfers

52,302

4,279

250

136

-

(56,967)

-

December 31, 2023

$

108,311

$

18,159

$

7,235

$

677

$

171

$

80

$

134,633

Accumulated depreciation

January 1, 2023

$

(32,787)

$

(1,889)

$

(5,583)

$

(983)

$

(211)

$

-

$

(41,453)

Depreciation

(5,013)

(810)

(838)

(92)

(24)

-

(6,777)

Disposals

27,065

-

5,846

683

119

-

33,713

December 31, 2023

$

(10,735)

$

(2,699)

$

(575)

$

(392)

$

(116)

$

-

$

(14,517)

December 31, 2023

$

97,576

$

15,460

$

6,660

$

285

$

55

$

80

$

120,116

For the three months ended March 31, 2024, the total depreciation expense was $1.4 million (2023: $3.0

million), of which, $1.3 million was depreciation charged to cost of sales (2023: $2.9 million), while $0.1

million of depreciation charges were included in administrative expenses (2023: $0.1 million). From the

expensed depreciation, a total of $0.1 million was allocated from cost of sales to inventory (2023: $0.04 million).

Plant and equipment in Delta BC

The Burnaby lease expired in June 2023. During 2023, the Company salvaged $1.3 million in assets from the production facility in Burnaby. These assets were repurposed at the Delta location and put to use effective January 1, 2024, where they are depreciated over their remaining useful lives.

Effective September 1, 2023, Swiss Water completed the construction of its second production line and commenced producing commercial-grade chemical free decaffeinated coffee. As such, the Company transferred a total of $57.0 million of costs from construction in progress to machinery and equipment and started depreciating over its useful life ranging between 10 and 35 years.

Plant and equipment at legacy location in Burnaby BC

Effective January 1, 2023, the Company reduced the estimated useful life of the non-salvaged assets located at its production facility in Burnaby, by 12 years. The useful life of these assets was re-aligned

8 | P a g e

SWISS WATER DECAFFEINATED COFFEE INC.

Notes to the Condensed Consolidated Interim Financial Statements

For the Three Months ended March 31, 2024 and 2023

(Tabular amounts are in thousands of Canadian dollars, except shares and per share amounts) (Unaudited)

against the final production date at the site, which was in April 2023. At the time of the change in estimate, these assets had a carrying value of approximately $3.0 million. The financial impact of the change in estimate was an incremental depreciation expense of $2.1 million for the three months ended March 31, 2023. There was no such change in estimate during the three months ended March 31, 2024, as the Company exited the Burnaby location in June 2023.

8.2 Right-of-use assets

For the three months ended March 31, 2024, total depreciation expense was $0.5 million (2023: $0.5

million), of which $0.4 million was charged to cost of sales (2023: $0.4 million) and $0.1 million was

included in administrative expense (2023: 0.1 million).

9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities comprise the following:

March 31, 2024 December 31, 2023

Accounts payable

$

13,567

$

11,458

Accrued liabilities

3,856

3,731

$

17,423

$

15,189

10. BORROWINGS

As at and during the three months ended March 31, 2024, the Company was in compliance with all banks' and creditor's covenants. The Company's borrowings are as follows:

March 31, 2024 December 31, 2023

Construction loans with BDC and FCC

Note 10.1

$

56,832

$

56,824

Debenture with warrants with MRC

Note 10.2

14,951

14,631

Credit facility

Note 10.3

23,496

26,728

Borrowings, total

$

95,279

$

98,183

Less current portion

Construction loans with BDC and FCC

Note 10.1

(3,983)

(2,748)

Debenture with warrants with MRC

Note 10.2

(14,951)

(14,631)

Borrowings, current

$

(18,934)

$

(17,379)

Borrowings, non-current

$

76,345

$

80,804

9 | P a g e

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Swiss Water Decaffeinated Coffee Inc. published this content on 08 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 08 May 2024 21:43:40 UTC.