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Sustainable Produce Urban Delivery Inc. Provides Going Public Details and Business Update

·15-min read

/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES LAWS./

VANCOUVER, BC, April 12, 2021 /CNW/ - Sustainable Produce Urban Delivery Inc. ("SPUD") is pleased to provide updates on its going public transaction, business activities and financial results.

As announced in a separate joint press release from Rainy Hollow Ventures Inc. (TSXV: RHV.P) ("Rainy Hollow") and SPUD today, Rainy Hollow has received conditional approval from the TSX Venture Exchange (the "TSXV") in respect of its qualifying transaction (the "Transaction") with SPUD pursuant to Policy 2.4 - Capital Pool Companies of the TSXV. In connection with the Transaction and pursuant to TSXV requirements, Rainy Hollow has filed a filing statement dated April 9, 2021 (the "Filing Statement") on SEDAR (www.sedar.com). Concurrently with the Transaction, Rainy Hollow intends to change its name to "Freshlocal Solutions Inc." and upon completion of the Transaction, the combined entity (the "Resulting Issuer") will carry on the current business of SPUD. The Toronto Stock Exchange (the "TSX") has also conditionally approved the listing of the common shares of the Resulting Issuer following the completion of the Transaction. Final approval of the listing is subject to the Resulting Issuer meeting certain conditions required by the TSX, these conditions include the completion of the Transaction and other standard listing conditions. Upon receipt of the TSX's final approval, the common shares of the Resulting Issuer will begin trading on the TSX under the symbol "LOCL".

SPUD is pleased to report its audited annual financial results for its 2020 and 2019 fiscal years, as well as its unaudited interim financial results for Q1 FY2021. All amounts in this press release are in Canadian dollars. Summarized results are shown below:

Financial Highlights

All amounts in CAD $ millions except Average Customers, Average Order Size, and Same Store Sales

Three months ended

Year ended

January 2,

2021

December 28, 2019

Change

October 3,

2020

September 28, 2019

Change

Consolidated







Revenues

$

31.9

17.8

79%

$

107.6

76.5

41%

Gross Profit1

11.7

6.4

82%

38.5

26.1

47%

Net Loss

(15.9)

(5.1)


(30.7)

(18.6)


Per share

(0.45)

(0.14)


(0.86)

(0.53)


Adjusted Operating Loss1

(2.4)

(3.0)


(10.7)

(13.7)


Cash Flow Used in Operations

(5.0)

(6.7)


(6.8)

(12.5)









eGrocery Business Segment







Revenues

25.0

11.5

118%

78.0

49.6

57%

Active Customers1,2

29,559

17,962

65%

27,122

15,183

79%

Average Order Size1

140

116

21%

115

95

21%

Blush Lane Business Segment







Revenues

9.5

7.5

25%

37.5

31.6

19%

Same Store Sales1

25%

(16%)


19%

4%











1.

Please refer to "Metrics and Reconciliation of Non-IFRS Financial Measures" at the end of this document for further details.

2.

Active customers is based on the number of individual customer accounts that have completed an order on SPUD's eCommerce platform in the past 90 days, measured as of the period end noted.

The financial information above relating to the fiscal years ended October 3, 2020 and September 28, 2019 and the first quarters ended January 2, 2021 and December 28, 2019 should be read in conjunction with (i) the audited consolidated financial statements of SPUD for the years ended October 3, 2020, September 28, 2019 and September 29, 2018; (ii) the management's discussion and analysis of SPUD for the years ended October 3, 2020, September 28, 2019 and September 29, 2018; (iii) the unaudited interim condensed consolidated financial statements of SPUD for the three-month periods ended January 2, 2021 and December 28, 2020; and (iv) the management's discussion and analysis of SPUD for the three-month periods ended January 2, 2021 and December 28, 2020, respectively, copies of the foregoing documents can be found in Exhibits "C", "D" "E" and "F" of the Filing Statement, a copy of which is available on Rainy Hollow's SEDAR profile at www.sedar.com.

Business Highlights

Business Highlights for FY2020

  • Carrefour Strategic Partnership: In July 2020, FoodX, a wholly-owned subsidiary of SPUD, announced its first global sale of its end-to-end SaaS-based eGrocery Management Solution ("eGMS") to a wholly-owned subsidiary of Carrefour S.A. for implementation in the Belgium market. Deployment is expected to be completed within 2021.

  • FoodX Secures Meridian Farm Market as a New Customer: In November 2020, SPUD announced its strategic partnership with Vancouver's Merdian Farm Market to deploy its first mid-market end-to-end eGMS platform. Deployment is expected to be completed in late 2021.

  • Strategic Alliance with Attabotics: In June 2020, FoodX announced a strategic alliance with Attabotics Inc., a leader in the design, manufacture, and implementation of 3D robotic supply chain systems. The alliance is focused on the implementation of Attabotics' technology at FoodX's fulfillment centres and partner fulfillment centres across the globe. The companies also intend to further explore mutual business development and project opportunities based on their combined capabilities.

  • Key Leadership Team Additions: SPUD announced important additions to its corporate leadership team, including Jeffrey King as Chief Technology Officer and PJ Stafford as Vice President, Business Development of FoodX. SPUD also appointed grocery industry veterans Walter Robb and Daryl Porter as members of its corporate advisory committee.

Business Highlights for Q1 FY2021, and the Period Subsequent to the Quarter End

  • Financings (private placements): In October 2020 and December 2020, SPUD completed a $15.5 million private placement of convertible debentures and a $24.2 million private placement of subscription receipts, respectively.

  • Successful efforts to strengthen SPUD's access to capital to fund its growth: As part of SPUD's efforts to strengthen its financial liquidity, on March 12, 2021, SPUD entered into an agreement with Silicon Valley Bank for a secured revolving loan facility of up to $15.0 million, which will become effective at the closing of the Transaction.

  • Carrefour Equity Participation Right: In April 2021, Carrefour S.A. entered into an Amended Equity Participation Right Agreement (the "Agreement Equity Participation") pursuant to which Carrefour S.A. was granted the right to purchase up to 9.9% of the Resulting Issuer common shares on an undiluted basis, calculated on a post-issuance basis, issued and outstanding at the time of exercise of such right (the "EPR"), upon payment of a price per share equal to a 15% discount from the market price at the time the EPR will be exercised. The EPR is subject to the completion of the Transaction and the execution of a new SaaS agreement with Carrefour S.A. or one of its affiliates in the European territory contemplated in the Equity Participation Agreement. In the event that Carrefour S.A. exercises the EPR and purchases 9.9 % of the then issued and outstanding of the Resulting Issuer shares, and as long as thereafter Carrefour S.A. holds together with its wholly-owned affiliates not less than 7.5% (5.0% in certain circumstances described in the Equity Participation Agreement) of the issued and outstanding Resulting Issuer shares, Carrefour S.A. will be entitled to nominate one individual for appointment or election as a director of the Resulting Issuer. Additional details relating to the Equity Participation Agreement are outlined in the Filing Statement.

"As we approach completion of our important first eGMS deployment in Europe with Carrefour, we are excited to announce the extension of our relationship through the Carrefour Equity Participation Agreement," stated Peter van Stolk, CEO of SPUD. "The important business development steps we have taken, along with our recent full-year and quarterly results, clearly demonstrate the progress we're making throughout our business and provide a strong platform on which we can continue to build out our FoodX eGMS business."

About SPUD

SPUD is a Vancouver-based company that is building a leadership position in the provision of end-to-end grocery e-commerce solutions. SPUD operates two primary businesses, FoodX and eGrocery, both of which support its corporate mission to leverage innovation and technology to create a sustainable and profitable food system for all. FoodX Technologies ("FoodX") is SPUD's scalable end-to-end SaaS-based eGrocery Management Solution (eGMS) which is designed to meet the needs of large and small grocery retailers while providing profitable unit economics. The FoodX eGMS is the culmination of 20 years of experience in online grocery and the company's proven track record of delivering efficiently, sustainably and profitably. SPUD's consumer eGrocery business has expanded into one of Canada's largest online grocery companies, with a focus on delivering fresh, local, organic produce and groceries, along with exceptional customer experiences. SPUD serves the main urban markets in British Columbia and Alberta through its brick and mortar store locations operating under the Be Fresh and Blush Lane banners, as well as through SPUD.ca which is SPUD's award-winning online eGrocery platform. For more information, please visit http://spud.ca.

Notice on Forward Looking Information

Certain statements and information herein, including all statements that are not historical facts, contain forward-looking statements and forward-looking information within the meaning of applicable securities laws. Such forward-looking statements or information include but are not limited to statements or information with respect to: the terms and conditions of the Transaction, including receipt of final TSXV and TSX approval; the closing of the Transaction; and the listing of the Resulting Issuer on the TSX. Often, but not always, forward-looking statements or information can be identified by the use of words such as "estimate", "project", "belief", "anticipate", "intend", "expect", "plan", "predict", "may" or "should" and the negative of these words or such variations thereon or comparable terminology are intended to identify forward-looking statements and information.

With respect to forward-looking statements and information contained herein, Rainy Hollow and SPUD have made numerous assumptions including among other things, assumptions about general business and economic conditions of SPUD and the market in which it operates. The foregoing list of assumptions is not exhaustive.

Although management of Rainy Hollow and SPUD believe that the assumptions made and the expectations represented by such statements or information are reasonable, there can be no assurance that forward-looking statements or information herein will prove to be accurate. Forward-looking statements and information by their nature are based on assumptions and involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements or information. These factors include, but are not limited to: risks relating to the receipt of all requisite final approvals for the Transaction, including TSXV and TSX; final approval of the Resulting Issuer's listing application by the TSX; risks associated with the business of SPUD; business and economic conditions in the eGrocery industry generally; the supply and demand for labour and other project inputs; changes in commodity prices; changes in interest and currency exchange rates; risks relating to unanticipated operational difficulties (including failure of technology or processes to operate in accordance with specifications or expectations, cost escalation, unavailability of materials and equipment, government action or delays in the receipt of government approvals, industrial disturbances or other job action, and unanticipated events related to health, safety and environmental matters); changes in general economic conditions or conditions in the financial markets; changes in laws; risks related to the direct and indirect impact of COVID-19 including, but not limited to, its impact on general economic conditions; the ability to obtain financing as required; and other risk factors as detailed from time to time. Rainy Hollow and SPUD do not undertake to update any forward-looking information, except in accordance with applicable securities laws.

Cautionary Statement

Completion of the Transaction is subject to a number of conditions, including but not limited to, TSXV or TSX acceptance. There can be no assurance that the Transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the management information circular of SPUD or the Filing Statement of Rainy Hollow prepared in connection with the Transaction, any information released or received with respect to the Transaction may not be accurate or complete and should not be relied upon. Trading in the securities of Rainy Hollow should be considered highly speculative.

Neither the TSXV nor the TSX has in any way passed upon the merits of the proposed Transaction and has neither approved nor disapproved the contents of this news release. Neither TSXV nor its Regulation Services Provider (as that term is defined in policies of the TSXV) accepts responsibility for the adequacy or accuracy of this release.

This news release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold within the United States or to U.S. persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.

Metrics and Reconciliation of Non-IFRS Financial Measures

SPUD uses metrics and non-IFRS financial measures for which a complete definition is presented below and for which a reconciliation to financial information in accordance with IFRS is presented later in this section. These measures should be considered as a complement to financial performance measures in accordance with IFRS and to provide further understanding of SPUD's operating results from management's perspective. They do not substitute, are not superior to them and do not have any standardized meaning prescribed under IFRS and therefore may not be comparable to similar measures as presented by other issuers.

Non-IFRS Metrics

Definition

eGrocery Average Order Size

The eGrocery Average Order Size ("AOS") is defined as total sales net of returns and credits, divided by the number of orders made for the period. SPUD believes that AOS is a useful metric for readers because it is indicative of eGrocery adoption, consumers expanding their share of purchases made online and the strength of SPUD's online consumer business.

Active Customers

Based on the number of individual customer accounts that have completed an order on SPUD's eCommerce platform in the past 90 days, measured as of the period end noted.

Same-store sales

Retail segment sales from the same location for stores in operation in that location in both periods.

Non-IFRS Financial Measures

Definition

Adjusted operating loss

Adjusted operating loss represents net income or loss before net finance expenses (income), depreciation and amortization expense and stock-based compensation expense. SPUD believes that this is a more representative measure to monitor its operational results.

Gross Profit

Gross Profit represents revenue net of returns and credits less cost of sales.

The financial information has been prepared in accordance with IFRS. However, financial measures used, namely adjusted operating loss and gross profit for which a reconciliation is presented in the following table, do not have any standardized meaning under IFRS and could be calculated differently by other companies. Those measures may not be comparable to similar measures described by other companies, as IFRS does not have standard definitions for these measures. These measures should be considered as a complement to IFRS measures and for further understanding of SPUD's operating results. Readers should use these non-IFRS measures in conjunction with the IFRS financial statements for each applicable period.

SPUD believes adjusted operating loss is a useful measure of financial performance to assess its ability to finance its ongoing operations, service its debt obligations and capitalize on expansion opportunities. Gross profit is used to assess the ability of SPUD to increase sales and control its cost of sales via strategic purchasing.

This section presents a reconciliation of financial information in the unaudited interim condensed consolidated financial statements of SPUD for the three-month periods ended January 2, 2021 and December 28, 2020 to the non-IFRS measures above.

The following tables summarize non-IFRS measures used above for the three-month periods ended January 2, 2021 and December 28, 2019.

Adjusted Operating Loss

Quarter ended (In thousands of Canadian dollars)

January 2,
2021

December 28,
2019

Net loss and comprehensive loss

$(15,924)

(5,148)

Net finance expense

12,095

1,015

Depreciation and amortization expense

1,121

1,069

Stock based compensation expense

322

77

Adjusted operating loss

(2,386)

(2,987)

Gross Profit

Quarter ended (In thousands of Canadian dollars)

January 2,
2021

December 28,
2019

Revenue

$31,872

$17,842

Cost of sales

(20,187)

(11,417)

Gross Profit

11,685

6,425

This section presents a reconciliation of financial information in the audited consolidated financial statements of SPUD for the years ended October 3, 2020 and September 28, 2019 to the non-IFRS measures used above.

The following tables summarize non-IFRS measures used above for the years ended October 3, 2020 and September 28, 2019.

Adjusted Operating Loss

Year ended (In thousands of Canadian dollars)

October 3,
2020

September 28,
2019

Net Loss and comprehensive loss

$(30,722)

$(18,561)

Net finance expense

14,020

910

Depreciation and amortization expense

4,561

2,488

Stock based compensation expense

1,457

1,449

Adjusted operating loss

$(10,684)

(13,714)

Gross Profit

Year ended (In thousands of Canadian dollars)

October 3,
2020

September 28,
2019

Revenue

$107,561

$76,528

Cost of sales

(69,043)

(50,380)

Gross Profit

$38,518

26,148

SOURCE Sustainable Produce Urban Delivery Inc. (SPUD)

Cision
Cision

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