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High Tide Inc. – ‘40FR12B/A’ on 4/1/21 – ‘EX-99.162’

On:  Thursday, 4/1/21, at 5:13pm ET   ·   Accession #:  1213900-21-19731   ·   File #:  1-40258

Previous ‘40FR12B’:  ‘40FR12B’ on 3/22/21   ·   Next:  ‘40FR12B/A’ on 5/25/21   ·   Latest:  ‘40FR12B/A’ on 5/28/21   ·   5 References:   By:  High Tide Inc. – ‘F-10/A’ on 9/20/21 By:  High Tide Inc. – ‘F-10’ on 9/17/21 By:  High Tide Inc. – Latest ‘40FR12B/A’ on 5/28/21 By:  High Tide Inc. – Next ‘40FR12B/A’ on 5/25/21 To:  High Tide Inc. – Previous ‘40FR12B’ on 3/22/21 

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  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 4/01/21  High Tide Inc.                    40FR12B/A             14:3.5M                                   EdgarAgents LLC/FA

Document/Exhibit                   Description                      Pages   Size 

 1: 40FR12B/A   Amendment No. 1 to Form 40FR12B                     HTML     99K 
 3: EX-99.155   News Release Dated March 19, 2021                   HTML     17K 
 4: EX-99.156   News Release Dated March 22, 2021                   HTML     17K 
 5: EX-99.157   News Release Dated March 24, 2021                   HTML     19K 
 6: EX-99.158   Agreement and Plan of Merger by and Among High      HTML    350K 
                Tide Inc. and Smoke Cartel                                       
 7: EX-99.159   News Release Dated March 25, 2021                   HTML     14K 
 8: EX-99.160   News Release Dated March 26, 2021                   HTML     14K 
 9: EX-99.161   News Release Dated March 30, 2021                   HTML     16K 
10: EX-99.162   Condensed Interim Consolidated Financial            HTML    272K 
                Statements for the Three Months Ended January 31,                
                2021 and 2020                                                    
11: EX-99.163   MD&A for the Three Months Ended January 31, 2021    HTML    127K 
                and 2020                                                         
12: EX-99.164   52-109Fv2 - Certification of Interim Filings - CFO  HTML     11K 
                (E)                                                              
13: EX-99.165   52-109Fv2 - Certification of Interim Filings - CEO  HTML     11K 
                (E)                                                              
14: EX-99.166   News Release Dated March 31, 2021                   HTML     36K 
 2: EX-99.26    Audited Annual Financial Statements Dated February  HTML    442K 
                28, 2020                                                         

Exhibit 99.162

Condensed Interim Consolidated
Financial Statements

For the three months ended January 31, 2021 and 2020

(Stated In thousands of Canadian dollars, except share and per share amounts)

(Unaudited)

High Tide Inc. Condensed Interim Consolidated Financial Statement For the three months ended January 31, 2021 and 2020

Condensed Interim Consolidated Financial Statements for the three months ended January 31, 2021 and 2020.

The accompanying unaudited condensed interim consolidated financial statements of High Tide Inc. (“High Tide” or the “Company”) have been prepared by and are the responsibility of the Company’s management and have been approved by the Audit Committee and Board of Directors of the Corporation.

Approved on behalf of the Board:

High Tide Inc. Condensed Interim Consolidated Statements of Financial Position As at January 31, 2021 and October 31, 2020 (Unaudited – In thousands of Canadian dollars)

High Tide Inc. Condensed Interim Consolidated Statements of Comprehensive Loss For the three months ended January 31, 2021 and 2020 (Unaudited – In thousands of Canadian dollars)

Subsequent Events (Note 22)

High Tide Inc. Condensed Interim Consolidated Statements of Changes in Equity (Unaudited – In thousands of Canadian dollars)

High Tide Inc. Condensed Interim Consolidated Statements of Cash Flows For the three months ended January 31, 2021 and 2020 (Unaudited – In thousands of Canadian dollars)

High Tide Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three months ended January 31, 2021 and 2020 (Unaudited – In thousands of Canadian dollars, except share and per share amounts)

High Tide Inc. (the “Company” or “High Tide”) is a retail-focused cannabis company enhanced by the manufacturing and distribution of consumption accessories. The Company’s shares are listed on the TSX Venture Exchange (“TSXV”) under the symbol “HITI”, the Frankfurt Stock Exchange (“FSE”) under the securities identification code ‘WKN: A2PBPS’ and the ticker symbol “2LY”, and on the OTCQB Market (“OTCQB”) under the symbol “HITIF”. The address of the Company’s corporate and registered office is # 120 – 4954 Richard Road SW, Calgary, Alberta T3E 6L1.

High Tide does not engage in any U.S. cannabis-related activities as defined by the Canadian Securities Administrators Staff Notice 51-352.

COVID-19

The Company’s business could be significantly adversely affected by the effects of the recent outbreak of novel coronavirus (“COVID-19”). Several significant measures have been implemented in Canada and the rest of the world in response to the increased impact from COVID-19. The Company cannot accurately predict the impact COVID-19 will have on third parties’ ability to meet their obligations with the Company, including due to uncertainties relating to the ultimate geographic spread of the virus, the severity of the disease, the duration of the outbreak, and the length of travel and quarantine restrictions imposed by governments of affected countries. In particular, the continued spread of COVID-19 globally could materially and adversely impact the Company’s business including without limitation, employee health, workplace productivity, and other factors that will depend on future developments beyond the Company’s control. In addition, a significant outbreak of contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries resulting in an economic downturn that could negatively impact the Company’s financial position, financial performance, cash flows, and its ability to raise capital. Since the initial outset of the pandemic, the Company did not experience a significant decline in sales for most of the operating businesses.

These condensed interim consolidated financial statements (“Financial Statements”) have been prepared in accordance with International Accounting Standard (“IAS”) 34 Interim Financial Reporting as issued by the International Accounting Standards Board (“IASB”). They are condensed as they do not include all of the information required for full annual financial statements, and they should be read in conjunction with the audited consolidated financial statements of the Company for the year ended October 31, 2020 which are available on SEDAR at www.sedar.com.

For comparative purposes, the Company has reclassified certain immaterial items on the comparative condensed interim consolidated statement of financial position and the condensed interim consolidated statement of comprehensive income (loss) to conform with current period’s presentation.

These condensed interim consolidated financial statements were approved and authorized for issue by the Board of Directors on March 31, 2021

The estimates and assumptions are reviewed on an ongoing basis. Revisions in accounting estimates are recognized in the year in which the estimate is revised if the revision affects only that year, or in the year of the revision and future years if the revision affects both current and future years. Significant judgements, estimates, and assumptions within these condensed interim consolidated financial statements remain the same as those applied to the consolidated financial statements for the year ended October 31, 2020.

High Tide Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three months ended January 31, 2021 and 2020 (Unaudited – In thousands of Canadian dollars, except share and per share amounts)

In accordance with IFRS 3, Business Combinations, these transactions meet the definition of a business combination and, accordingly, the assets acquired, and the liabilities assumed have been recorded at their respective estimated fair values as of the acquisition date.

On November 18, 2020, the Company closed the acquisition of 100% of the outstanding common shares of Meta Growth Corp (“Meta Growth” or “META”). Pursuant to the terms of the Arrangement, holders of common shares of META (“META Shares“) received 0.824 (the “Exchange Ratio“) High Tide Shares for each META Share held. In total, High Tide acquired 237,941,274 META Shares in exchange for 196,063,610 High Tide Shares, resulting in former META shareholders holding approximately 45.0% of the total number of issued and outstanding High Tide Shares.

In accordance with IFRS 3, Business Combinations (“IFRS 3”), the substance of this transaction constituted a business combination. Management is in the process of gathering the relevant information that existed at the acquisition date to determine the fair value of the net identifiable assets acquired. As such, the initial purchase price was provisionally allocated based on the Company's estimated fair value of the identifiable assets acquired on the acquisition date. The values assigned are, therefore, preliminary and subject to change. Management continues to refine and finalize its purchase price allocation for the fair value of identifiable intangible assets, property plant and equipment, right of use asset, non-controlling interest, income taxes and the allocation of goodwill. The goodwill is primarily related to the opportunities to grow the retail cannabis business, expanded access to capital and greater financial flexibility. For the three months ended January 31, 2021, Meta Growth accounted for $14,506 in revenues and $243 in net income. If the acquisition had been completed on November 1, 2020, the Company estimates it would have recorded an increase of $3,422 in revenues and an increase of $401 in net loss for the three months ended January 31, 2021. The Company also incurred $1,354 in transaction costs, which have been expensed to finance and other costs during the period.

High Tide Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three months ended January 31, 2021 and 2020 (Unaudited – In thousands of Canadian dollars, except share and per share amounts)

High Tide Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three months ended January 31, 2021 and 2020 (Unaudited – In thousands of Canadian dollars, except share and per share amounts)

High Tide Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three months ended January 31, 2021 and 2020 (Unaudited – In thousands of Canadian dollars, except share and per share amounts)

Finance and other costs are comprised of the following:

High Tide Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three months ended January 31, 2021 and 2020 (Unaudited – In thousands of Canadian dollars, except share and per share amounts)

On July 24, 2020, the Company entered into a debt restructuring agreement of $10,808 of the Company’s outstanding debt held by a key industry investor under an 8.5% senior unsecured convertible debenture issued in December 2018. The Company agreed to pay to the key investor certain structured installment payments over a period of over approximately three years, beginning on November 1, 2021, the parties have agreed to amend the original debenture into a secured convertible debenture of the Company in the principal amount equal to the $10,808 (the “Deferred Amount “). The Structured Payments, which start in November 2021, will be credited towards the Deferred Amount. As part of the Debt Restructuring, the parties have also (i) extended the maturity date of the amended debenture to January 1, 2025, (ii) amended the conversion price such that the Deferred Amount is convertible into common shares of High Tide (“HITI Shares“) at a conversion price of $0.425 per HITI Share, and (iii) amended the interest provisions such that the Deferred Amount will not bear any interest until maturity, with the portion of the Deferred Amount outstanding on maturity bearing interest on and from the maturity date at a rate of 8.5% per annum. Upon extinguishment of the debenture $1,445 conversion option was moved to contributed surplus. Management calculated the fair value of the liability component as $5,069 using a discount rate of 22% along with forecasted scheduled payments, with the residual amount of $1,072 net of deferred tax of $247 being allocated to equity. The Company also recognized $3,808 as a gain on extinguishment of debenture.

On December 10, 2020, the Company entered into a debt extension agreement of $1,250 of the Company’s outstanding debt under an 8.5% senior unsecured convertible debenture issued in December 2018. As part of the Debt extension, the parties have also (i) extended the maturity date of the amended debenture to December 31, 2022, (ii) amended the conversion price such that the deferred amount is convertible into common shares of High Tide (“HITI Shares”) at a conversion price of $0.22 per HITI Share. Management calculated the fair value of the liability component as $1,062 using a discount rate of 15%, with the residual amount of $188 net of deferred tax of $42 being allocated to equity. On December 15, 2020, the Company repaid $80 towards the principal amount in cash.

High Tide Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three months ended January 31, 2021 and 2020 (Unaudited – In thousands of Canadian dollars, except share and per share amounts)

On December 10, 2020, the Company entered into a debt restructuring agreement of $1,000 of the Company’s outstanding debt under an 10% senior unsecured convertible debenture issued in June 2019. As part of the Debt Restructuring, the parties have also (i) extended the maturity date of the amended debenture to December 31, 2022, (ii) amended the conversion price such that the Deferred Amount is convertible into common shares of High Tide (“HITI Shares”) at a conversion price of $0.22 per HITI Share. Upon extinguishment of the debenture $63 conversion option was moved to contributed surplus. Management calculated the fair value of the liability component as $850 using a discount rate of 15% along with forecasted scheduled payments, with the residual amount of $150 net of deferred tax of $35 being allocated to equity. The Company also recognized $87 as a loss on extinguishment of debenture.

Management calculated the fair value of the liability component as $1,707 using a discount rate of 22%, the conversion option at relative fair value of $189 net of deferred tax of $43 and the residual of $104 net of deferred tax of $24 being allocated to warrants, recorded in equity. 

Management calculated the fair value of the liability component as $1,806 using a discount rate of 22%, the conversion option at relative fair value of $167 net of deferred tax of $38 and the residual of $142 net of deferred tax of $33 being allocated to warrants, recorded in equity.

High Tide Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three months ended January 31, 2021 and 2020 (Unaudited – In thousands of Canadian dollars, except share and per share amounts)

On December 10, 2020, the Company entered into a debt restructuring agreement of $2,000 of the Company’s outstanding debt under an 10% senior unsecured convertible debenture issued in December 2019. As part of the Debt Restructuring, the parties have also (i) extended the maturity date of the amended debenture to December 31, 2022, (ii) amended the conversion price such that the Deferred Amount is convertible into common shares of High Tide (“HITI Shares”) at a conversion price of $0.22 per HITI Share. Upon extinguishment of the debenture $122 conversion option was moved to contributed surplus. Management calculated the fair value of the liability component as $1,886 using a discount rate of 15% along with forecasted scheduled payments, with the residual amount of $114 net of deferred tax of $26 being allocated to equity. The Company also recognized $230 as a loss on extinguishment of debenture. Subsequent to the restructuring, all the debenture holders exercised the conversion option resulting in the issuance of 9,547,257 shares. Upon conversion of the debenture $121 related to the conversion option was moved to contributed surplus.

Management calculated the fair value of the liability component as $1,707 using a discount rate of 22%, the conversion option at relative fair value of $167 net of deferred tax of $38 and the residual of $175 net of deferred tax of $40 being allocated to warrants, recorded in equity. 

Gross proceeds were $5,000 and net proceeds were $4,743, net of cash transaction costs of $257. The gross proceeds were allocated using the Black-Scholes model to value warrants at $364 which was recorded as a derivative liability for $364, the host debt component for $4,309, and the embedded derivatives for $327. The warrants were initially valued at $364 using the Black-Scholes model and the following assumptions were used: stock price of $0.16; expected life of two years; $nil dividends; expected volatility of 70%; exercise price of $0.255; and a risk-free interest rate of 0.52%. At October 31, 2020, the warrants were revalued at $266 using the Black-Scholes model and the following assumptions were used: stock price of $0.145; expected life of 1.4 years; $nil dividends; expected volatility of 70%; exercise price of $0.255; and a risk-free interest rate of 0.52% and recognized a gain of $98 as revaluation of derivative liability. Subsequent changes in fair value of the equity conversion option will be recognized through profit and loss (i.e., FVTPL). The equity conversion option was classified as a derivative liability as it can be settled through the issuance of a variable number of shares, cash, or a combination thereof, based on the trading price at the time of settlement. The fair value of the equity conversion option was determined using the Black-Scholes model and the following assumptions: stock price: $0.16; expected life of 2 year; $nil dividends; expected volatility of 70%; exercise price of $0.255; and risk-free interest rate of 1.98%. Management elected to capitalize $257 transaction costs, which are directly attributable to the issuance of the loan agreement. As of October 31, 2020, the conversion option had a fair value of $498 and the Company recognized a $171 unrealized loss on the derivative liability for the year ended October 31, 2020. The fair value of the equity conversion option was determined using the Black-Scholes model and the following assumptions: stock price: $0.145; expected life of 1.4 year; $nil dividends; expected volatility of 70%; exercise price of $0.255; and risk-free interest rate of 0.52%.

High Tide Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three months ended January 31, 2021 and 2020 (Unaudited – In thousands of Canadian dollars, except share and per share amounts)

On December 8, 2020, the Company entered into a debt restructuring agreement of $5,000 of the Company’s outstanding debt. In conjunction with the restructuring, the Company withdrew an additional $1,000 on the credit facility. As part of the Debt Restructuring, the parties have also (i) extended the maturity date of the amended debenture to December 31, 2021, (ii) amended the conversion price such that the Deferred Amount is convertible into common shares of High Tide (“HITI Shares”) at a conversion price of $0.17 per HITI Share (iii) amended the interest rate from 11.50% per annum to 10% per annum. At December 8, 2020, the warrants were revalued at $389 using the Black-Scholes model and the following assumptions were used: stock price of $0.165; expected life of 1.0 years; $nil dividends; expected volatility of 35%; exercise price of $0.255; and a risk-free interest rate of 0.52% and $199 fair value of the equity conversion option was determined using the Black-Scholes model and the following assumptions: stock price: $0.165; expected life of 1.0 year; $nil dividends; expected volatility of 35%; exercise price of $0.17; and risk-free interest rate of 0.52%. Revaluation of derivative liability resulted in recognizing a gain of $176. Upon extinguishment of the debenture $199 in derivative liability was moved to convertible debenture – equity. Management calculated the fair value of the liability component as $5,577 using a discount rate of 18%. As a result of the debt restructuring, the Company recognized a $199 debt restructuring loss in the statement of net loss and comprehensive loss for the period ended January 31, 2021. Subsequent to the restructuring, the debenture holders exercised the conversion option for $2,000 resulting in the issuance of 11,764,705 shares. As part, of the restructuring 23,529,412 warrants were cancelled.

High Tide Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three months ended January 31, 2021 and 2020 (Unaudited – In thousands of Canadian dollars, except share and per share amounts)

On May 23, 2019, the Company acquired all of the issued and outstanding shares of Dreamweavers for aggregate consideration of $3,094 which included 3,100,000 common shares with a fair value of $1,147, 1,550,000 purchase warrants exercisable at $0.75 per common share of High Tide and notes payables of $300 repayable over five years with zero interest rate due at each anniversary date. Notes payable was valued at $102 by discounting it over five years at market interest rate of 22%. During the three-month ended January 31, 2021, the Company incurred accretion of $10.

On June 26, 2019, the Company purchased a building in Niagara, Ontario, for the purpose of opening a Canna Cabana retail location. The consideration for the building consisted of $754 in cash, out of which $54 was legal fees, a $1,600 vendor take back loan, and $300 paid in shares. The loan has a twelve-month term and bears an interest rate of 5.5% per annum payable monthly with a maturity date of June 30^th, 2020. On July 16, 2020, the Company refinanced the loan through Windsor Private Capital (“Windsor”), a Toronto-based merchant bank. The new loan has a seventeen - month term and bears an interest rate of 10% per annum payable monthly with a maturity date of December 30th, 2021. The Company also incurred $43 in transaction costs, which will be expensed over the term of the loan using the effective interest rate.

On September 4, 2019, the Company entered into a $2,000 loan agreement with a private lender. The loan had a twelve-month term and carried an interest rate of 12% per annum payable monthly. In connection with the advance of the loan, the Company issued 1,600,000 warrants to the lender. Each warrant is redeemable for one common share in the capital of the Company at a price of $0.85 per Common Share for a period of two years from the date of the loan agreement. Management calculated the fair value of the liability component as $1,895 using a discount rate of 22%, with the residual amount of $105 being allocated to warrants, recorded in equity. The loan was personally guaranteed by the CEO. On September 14, 2020, the Company entered into loan amending agreement, the maturity of the Loan was extended until September 30, 2021. The Company also entered into a warrant exchange agreement wherein the 1,600,000 warrants the Lender originally received as consideration for the Loan under the Loan Agreement, having an exercise price of $0.85 per common share and exercisable for a period of 2 years from the effective date of the Loan, were terminated and 1,600,000 new warrants having an exercise price of $0.30 per Common Share and expiring on September 30, 2021 were issued. Management calculated the fair value of the liability component as $1,928 using a discount rate of 22%, with the residual amount of $72 net of deferred tax of $17 being allocated to warrants, recorded in equity. During the three-month ended January 31, 2021, the Company incurred accretion of $17.

The Company obtained a government loan under the Canada Emergency Response Benefit, part of Canada’s COVID-19 economic response plan. The loan bears no interest and has a maturity date of December 31, 2025. The note payable has been recorded at its fair value of $69 by discounting it over six months at a market interest rate of 22%. During the three-months ended January 31, 2021, the Company incurred accretion of $6.

On November 18, 2020, the Company acquired all of the issued and outstanding shares of Meta which included notes payable to Opaskwayak Cree Nation (“OCN”). Notes payable were valued at $12,783 at the date of acquisition by discounting it over two years at market interest rate of 15%. On January 6, 2021, the Company entered into another Amended Loan Agreement with OCN to remove the annual administration fee and extend the maturity date of the loan until December 31, 2024. As a result of the debt restructuring, the Company recognized a $1,145 debt restructuring gain in the statement of net loss and comprehensive loss for the period ended January 31, 2021. The carrying value of the loan balance as at January 31, 2021 amounts to $11,402. During the three-months ended January 31, 2021, the Company incurred accretion of $267 and also made $503 in payment towards the outstanding balance.

High Tide Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three months ended January 31, 2021 and 2020 (Unaudited – In thousands of Canadian dollars, except share and per share amounts)

Common shares:

High Tide Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three months ended January 31, 2021 and 2020 (Unaudited – In thousands of Canadian dollars, except share and per share amounts)

The Company’s stock option plan limits the number of common shares reserved under the plan from exceeding a “rolling maximum” of ten (10%) percent of the Company’s issued and outstanding common shares from time to time. The stock options vest at the discretion of the Board of Directors, upon grant to directors, officers, employees and consultants of the Company and its subsidiaries. All options that are outstanding will expire upon maturity, or earlier, if the optionee ceases to be a director, officer, employee or consultant or there is a merger, amalgamation or change in control of the Company. The maximum exercise period of an option shall not exceed 10 years from the grant date. Changes in the number of stock options, with their weighted average exercise prices, are summarized below:

For the period ended January 31, 2021, the Company recorded share-based compensation of $553 (2020 - $27) related to stock options.

On November 18, 2020, the Company acquired all the issued and outstanding shares of Meta which resulted in acquiring 943,579 RSUs outstanding on the date of closing based on the exchange ratio of 0.824 agreed upon in the arrangement agreement. The Company’s RSU plan is applicable to directors, officers, and employees of the Company. The RSUs are equity-settled and each RSU can be settled for one common share for no consideration. The number of RSUs outstanding at January 31, 2021 amounts to 943,579. These RSUs were recorded in contributed surplus using the Black-Scholes model and the following assumptions were used: stock price of $0.18; expected life of 0.35 years; $nil dividends; expected volatility of 70%; exercise price of $0.18; and a risk-free interest rate of 0.52%.

High Tide Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three months ended January 31, 2021 and 2020 (Unaudited – In thousands of Canadian dollars, except share and per share amounts)

As at January 31, 2021 132,803,744 warrants were exercisable.

High Tide Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three months ended January 31, 2021 and 2020 (Unaudited – In thousands of Canadian dollars, except share and per share amounts)

High Tide Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three months ended January 31, 2021 and 2020 (Unaudited – In thousands of Canadian dollars, except share and per share amounts)

The Company’s activities expose it to a variety of financial risks. The Company is exposed to credit, liquidity, and market risk due to holding certain financial instruments. The Company’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company’s financial performance.

Risk management is carried out by senior management in conjunction with the Board of Directors.

Fair value

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, marketable securities, loans receivable, accounts payable and accrued liabilities, notes payable, convertible debentures, derivative liabilities and shareholders’ loans.

IFRS 13 establishes a three-level hierarchy that prioritizes the inputs relative to the valuation techniques used to measure fair value. Fair values of assets and liabilities included in Level 1 of the hierarchy are determined by reference to quoted prices in active markets for identical assets and liabilities. Fair value of assets and liabilities in Level 2 are determined using inputs other than quoted prices for which all significant outputs are observable, either directly or indirectly. Fair value of assets and liabilities in Level 3 are determined based on inputs that are unobservable and significant to the overall fair value measurement. Accordingly, the Company has categorized its financial instruments carried at fair value into one of three different levels depending on the observability of the inputs employed in the measurement. The Company’s cash and cash equivalents are subject to Level 1 valuation.

The marketable securities and derivative liability have been recorded at fair value based on level 2 inputs. The carrying values of accounts receivable, accounts payable and accrued liabilities and shareholder loans approximate their fair values due to the short-term maturities of these financial instruments. The carrying value of the notes payable and convertibile debentures approximate their fair value as they are discounted using a market rate of interest.

Loans receivable are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. The fair values of loans receivable are not materially different to their carrying amounts, since the interest rate on those loans is either close to current market rates or the loans are of a short-term nature.

Marketable securities

In connection with the Company’s acquisition of META on November 18, 2020, the Company acquired 1,350,000 shares of THC Global Group Limited (“THC”). The fair value of the THC shares amounting to $606 has been recognized as a marketable security, based on the trading price of THC’s shares. In addition, to this the Company has also recorded $245 in GICs as a marketable security.

Credit risk

Credit risk arises when a party to a financial instrument will cause a financial loss for the counter party by failing to fulfill its obligation. Financial instruments that subject the Company to credit risk consist primarily of cash, accounts receivable, marketable securities and loans receivable. The credit risk relating to cash and cash equivalents and restricted marketable securities balances is limited because the counterparties are large commercial banks. The amounts reported for accounts receivable in the statement of consolidated financial position is net of expected credit loss and the net carrying value represents the Company’s maximum exposure to credit risk. Accounts receivable credit exposure is minimized by entering into transactions with creditworthy counterparties and monitoring the age and balances outstanding on an ongoing basis. Sales to retail customers are required to be settled in cash or using major credit cards, mitigating credit risk.

High Tide Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three months ended January 31, 2021 and 2020 (Unaudited – In thousands of Canadian dollars, except share and per share amounts)

The following table sets forth details of the aging profile of accounts receivable and the allowance for expected credit loss: