Genesis Land Development Corp. — Interim / Quarterly Report 2021

Jul 29, 2021

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GENESIS LAND DEVELOPMENT CORP.

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CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the three and six months ended June 30, 2021 and 2020 (Unaudited)

SECOND QUARTER

GENESIS LAND DEVELOPMENT CORP. CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS

(Unaudited)

(In thousands of Canadian dollars)

	Notes	June 30, 2021 December 31, 2020
Assets
Real estate held for development and sale Amounts receivable Vendor-take-back mortgage receivable Investments in land development entities Other operating assets Right-of-use assets Deferred tax assets Income tax recoverable Cash and cash equivalents	3 9a	207,287 193,309 11,156 11,006 2,719 2,719 5,608 5,608 14,633 14,750 739 712 7,038 8,088 423 559 25,746 29,743
Total assets		275,349 266,494
Liabilities
Loans and credit facilities Dividend payable Customer deposits Accounts payable and accrued liabilities Lease liabilities Provision for future development costs	4 6d 3 5	18,014 21,470 - 6,280 6,632 3,889 25,740 14,092 880 790 21,022 20,213
Total liabilities		72,288 66,734
Commitments and contingencies Subsequent events	8 12
Equity
Share capital Contributed surplus Retained earnings	7c	52,489 52,489 1,025 868 138,329 134,319
Shareholders’ equity		191,843 187,676
Non-controlling interest		11,218 12,084
Total equity		203,061 199,760
Total liabilities and equity		275,349 266,494

See accompanying notes to the condensed consolidated interim financial statements.

2

GENESIS LAND DEVELOPMENT CORP. CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

For the three and six months ended June 30, 2021 and 2020

(In thousands of Canadian dollars except per share amounts)

		Three months ended June 30,	Six months ended June 30,
	Notes	2021 2020	2021 2020
Revenues Sales revenue Other revenue		29,506 30,261 23 464	48,212 53,905 30 472
	10	29,529 30,725	48,242 54,377
Direct cost of sales Write-down of real estate held for development and sale	3	(21,242) (22,003) - -	(34,504) (40,831) - (10,815)
		(21,242) (22,003)	(34,504) (51,646)
Gross margin		8,287 8,722	13,738 2,731
General and administrative Selling and marketing		(2,955) (2,513) (1,484) (1,088)	(5,192) (5,133) (2,495) (2,214)
		(4,439) (3,601)	(7,687) (7,347)
Earnings (loss) from operations		3,848 5,121	6,051 (4,616)
Finance income Finance expense		82 433 (344) (686)	151 791 (697) (1,377)
Earnings (loss) before income taxes		3,586 4,868	5,505 (5,202)
Income tax (expense) recovery		(955) (1,225)	(1,348) 1,393
Net earnings (loss) being comprehensive earnings(loss)		2,631 3,643	4,157 (3,809)
Attributable to non-controlling interest		(57) (1)	147 (70)
Attributable to equity shareholders		2,688 3,644	4,010 (3,739)
Net earnings (loss) per share - basic and diluted		0.07 0.09	0.10 (0.09)

See accompanying notes to the condensed consolidated interim financial statements.

3

GENESIS LAND DEVELOPMENT CORP. CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

For the three and six months ended June 30, 2021 and 2020

(In thousands of Canadian dollars except number of shares)

		Equity attributable to Corporation’s shareholders	Equity attributable to Corporation’s shareholders
	Notes	Common shares- Issued		Non- Controlling Interest Total Equity
		Number of Shares Amount Contributed Surplus Retained Earnings Total Shareholders’ Equity
At December 31, 2019		42,159,927 52,867 603 140,487 193,957		18,938 212,895
Share-based payments Normal course issuer bid Distributions Net loss being comprehensive loss and	7c 6c 11	- - 144 - 144		- 144 - (154) (5,842) (5,842) (111) (3,850)
		(89,040) (113) - (41) (154)
		- - - - -
		- - - (3,739) (3,739)
At June 30, 2020		42,070,887 52,754 747 136,707 190,208		12,985 203,193
At December 31, 2020		41,863,335 52,489 868 134,319 187,676		12,084 199,760
Share-based payments Distributions Net earnings being comprehensive earnings and other	7c 3, 11	- - 157 - 157		- 157 (913) (913) 47 4,057
		- - - - -
		- - - 4,010 4,010
At June 30, 2021		41,863,335 52,489 1,025 138,329 191,843		11,218 203,061

See accompanying notes to the condensed consolidated interim financial statements.

4

GENESIS LAND DEVELOPMENT CORP. CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS (Unaudited) For the three and six months ended June 30, 2021 and 2020

(In thousands of Canadian dollars)

		Three months ended June 30,	Six months ended June 30,
	Notes	2021 2020	2021 2020
Operating activities
Receipts from residential lot sales Receipts from development land sales Receipts from residential home sales Other cash (payments) / receipts Paid for land development Paid for lots / land acquisition Paid for residential home construction Paid to suppliers and employees Interest received Income tax payments		2,031 1,519 - 1,425 29,297 22,127 (59) 29 (4,651) (5,051) (1,362) (1,720) (14,882) (8,891) (3,355) (2,496) 82 102 (17) -	7,189 3,699 925 6,443 44,594 36,526 316 187 (9,208) (7,777) (2,089) (1,720) (26,002) (15,609) (8,247) (6,646) 151 129 (162) -
Cash flows from operating activities		7,084 7,044	7,467 15,232
Investing activities
Acquisition of equipment Change in restricted cash		(70) (204) - (259)	(316) (235) 68 (141)
Cash flows used in investing activities		(70) (463)	(248) (376)
Financing activities
Advances from loans and credit facilities Repayments of loans and credit facilities Payment on vendor-take-back mortgage payable Interest and fees paid on loans and credit facilities Distributions to unit holders of limited partnerships Dividends paid Repurchase and cancellation of shares under NCIB	4 3 6d 6c	18,194 3,385 (14,776) (6,972) (9,312) - (272) (358) - - - - - (40)	26,129 11,305 (19,636) (9,546) (9,312) (8,000) (1,314) (720) (803) - (6,280) - - (154)
Cash flows used in financing activities		(6,166) (3,985)	(11,216) (7,115)
Change in cash and cash equivalents Cash and cash equivalents, beginning of period		848 2,596 24,898 21,393	(3,997) 7,741 29,743 16,248
Cash and cash equivalents, end of period		25,746 23,989	25,746 23,989

See accompanying notes to the condensed consolidated interim financial statements.

5

GENESIS LAND DEVELOPMENT CORP. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

For the three and six months ended June 30, 2021 and 2020

(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)

1. DESCRIPTION OF BUSINESS

Genesis Land Development Corp. (the “Corporation” or “Genesis”) was incorporated under the Business Corporation Act (Alberta) on December 2, 1997.

The Corporation is engaged in the acquisition, development and sale of land, residential lots and homes primarily in the greater Calgary area. The Corporation reports its activities as two business segments: land development and home building.

The Corporation is listed for trading on the Toronto Stock Exchange under the symbol “GDC”. Genesis’ head office and registered office are located at 6240, 333 - 96 Ave. NE, Calgary, AB T3K 0S3.

The Corporation has successfully adapted its operations to address the impact of COVID-19. All health and safety recommendations of regulatory authorities are being followed and, when feasible, exceeded. As of July 1, 2021, the majority of COVID-19 restrictions for the province of Alberta have been lifted. The Corporation remains cautious as there is continued uncertainty as to the extent and duration of the economic and regulatory implications of COVID-19.

The consolidated financial statements of Genesis were approved for issuance by the Board of Directors on July 29, 2021.

2. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

The significant accounting policies, basis of measurement and use of judgements and estimates of the Corporation are the same as those applied in the Corporation’s annual audited consolidated financial statements for the year ended December 31, 2020. These policies have been consistently applied to each of the periods presented, unless otherwise indicated.

The unaudited condensed consolidated interim financial statements (“Statements”) of the Corporation are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). These Statements are unaudited and have been prepared in accordance with IAS 34 “Interim Financial Reporting”.

The Statements have been prepared under the historical cost convention except for the financial assets classified as fair value through profit or loss and stock options and deferred share units that have been measured at fair value. The Statements are presented in Canadian dollars, which is the Corporation’s functional currency, and all values are rounded to the nearest thousand, except per share values and where otherwise indicated.

These Statements do not include all of the information required for annual audited consolidated financial statements and should be read in conjunction with the annual audited consolidated financial statements for the year ended December 31, 2020.

6

GENESIS LAND DEVELOPMENT CORP. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

For the three and six months ended June 30, 2021 and 2020

(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)

3. REAL ESTATE HELD FOR DEVELOPMENT AND SALE

	Lots, Multi- family & Commercial Parcels Land Held for Development Home Building Total	Limited Partnerships Intra- segment Elimination Consolidated Total
Gross book value
As at December 31, 2020	48,699 141,812 16,738 207,249	11,995 (4,194) 215,050
Development activities Acquisition Sold	2,085 12,197 21,436 35,718 - - 7,317 7,317 (9,171) - (19,438) (28,609)	183 - 35,901 - - 7,317 (2,748) - (31,357)
As at June 30, 2021	41,613 154,009 26,053 221,675	9,430 (4,194) 226,911
Provision for write-downs
As at December 31, 2020	5,169 14,135 548 19,852	1,889 - 21,741
Sold	- - (228) (228)	(1,889) - (2,117)
As at June 30, 2021	5,169 14,135 320 19,624	- - 19,624
Net book value
As at December 31, 2020 As at June 30, 2021	43,530 127,677 16,190 187,397 36,444 139,874 25,733 202,051	10,106 (4,194) 193,309 9,430 (4,194) 207,287

During the three months ended March 31, 2021, the Corporation closed the sale of a 463.2-acre parcel of development land, located in British Columbia, belonging to a limited partnership for $925. The limited partnership made a distribution of $803 to its unit holders from the proceeds of this sale.

The Corporation entered into a binding agreement to acquire 48 future residential development lots in the City of Calgary for $7,317. The Corporation paid a non-refundable deposit of $1,463, with the balance of $5,854 to be paid on closing, currently scheduled for December 2022. This amount is included in accounts payable and accrued liabilities as at June 30, 2021 (December 31, 2020 - $Nil). During the three and six months ended June 30, 2021, no interest (2020 - $Nil) was capitalized as a component of development activities.

No write-downs were recorded during the three and six months ended June 30, 2021 (2020 - $Nil and $10,815).

7

GENESIS LAND DEVELOPMENT CORP. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

For the three and six months ended June 30, 2021 and 2020

(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)

4. LOANS AND CREDIT FACILITIES

4. LOANS AND CREDIT FACILITIES
	June 30,	December 31,
	2021	2020
Secured by agreements receivable and real estate held for development and sale
(a) Demand land project servicing loan from a major Canadian chartered bank, payable on
collection of agreements receivable, bearing interest at prime +0.75% per annum, secured by real	-	-
estate held for development and sale with a carrying value of $6,563. The loan matures on
February 28, 2022.
Secured by real estate held for development and sale
(b) The VTB bearing interest at 5% per annum was entered into on September 13, 2019 in partial
payment for the purchase of approximately 130 acres of future residential development land in north Calgary. The VTB is secured by these lands which have a carrying value of $31,462. The	9,312	18,624
VTB is to be repaid in two installments of approximately $9,312 each in May 2021 and 2022. The
first installment of $9,312 was paid in May 2021.
Secured by specific dedicated lands and a general corporate charge on all assets of the
Corporation
(c) Corporate revolving line of credit up to $50,000 with a major Canadian financial institution at	8,159	-
an interest rate per annum equal to the higher of prime +1.90% or 4.35%. The loan is due on
February 1, 2024.
Secured by housing projects under development
(d) Demand operating line of credit up to $6,500 from a major Canadian chartered bank, bearing
interest at prime +0.75% per annum, secured by a general security agreement over assets of the	1,181	1,662
home building division.
(e) Demand project specific townhouse construction loans from a major Canadian chartered bank,
payable on collection of sale and closing proceeds, bearing interest at prime +0.90% per annum, secured by the project with a carrying value of $2,743. One loan was closed in June 2021 and the	-	1,185
outstanding loan is due on August 28, 2021.
	18,652	21,471
Deferred fees on loans and credit facilities	(638)	(1)
	18,014	21,470

The weighted average interest rate of loan agreements with financial institutions was 4.20% (December 31, 2020 - 3.26%) based on June 30, 2021 balances.

During the three and six months ended June 30, 2021, the Corporation received advances of $18,194 and $26,129 (2020 - $3,385 and $11,305) relating to various loan facilities. These are secured by real estate held for development and sale, housing projects under development, specific dedicated lands and a general corporate charge on all assets of the Corporation. These loan facilities bear interest ranging from the prime +0.75% to the higher of prime +1.90% or 4.35% per annum, with due dates ranging from August 28, 2021 to February 1, 2024.

8

GENESIS LAND DEVELOPMENT CORP. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

For the three and six months ended June 30, 2021 and 2020

(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)

4. LOANS AND CREDIT FACILITIES (continued)

Based on the contractual terms, the Corporation’s loans and credit facilities are to be repaid within the following time periods (excluding deferred fees on loans and credit facilities):

July	1,	2021	to June	30,	2022	10,493
July	1,	2022	to June	30,	2023	-
July	1,	2023	to June	30,	2024	8,159
						18,652

As at June 30, 2021 and at December 31, 2020, the Corporation and its subsidiaries were in compliance with all loan covenants.

5. PROVISION FOR FUTURE DEVELOPMENT COSTS

The movement in the provision for future development costs is as follows:

	Land Development	Home Building	Total
As at December 31, 2020	18,737	1,476	20,213
Additions	1,628	5,213	6,841
Changes to estimates	27	(141)	(114)
Development activities	(2,432)	(3,486)	(5,918)
As at June 30, 2021	17,960	3,062	21,022

6. SHARE CAPITAL

a) Authorized

Unlimited number of common shares without par value.

Unlimited number of preferred shares without par value, none issued.

b) Weighted average number of shares

The following table sets forth the weighted average number of common shares outstanding for the three and six months ended June 30, 2021 and 2020:

30, 2021 and 2020:	30, 2021 and 2020:
	Three months ended June 30,	Six months ended June 30,
	2021 2020	2021 2020
Basic Effect of dilutive securities - stock options	41,863,335 42,098,624 - -	41,863,335 42,118,001 - -
Diluted	41,863,335 42,098,624	41,863,335 42,118,001

All 855,000 options outstanding as at June 30, 2021 (2020 - 2,535,000) were excluded in calculating diluted earnings per share for the three and six months ended June 30, 2021 as their weighted average exercise price was higher than the average market price of the Corporation’s shares during the periods.

9

GENESIS LAND DEVELOPMENT CORP. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

For the three and six months ended June 30, 2021 and 2020

(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)

6. SHARE CAPITAL (continued)

c) Normal course issuer bid (“NCIB”)

On October 7, 2020, the Corporation announced the renewal of its NCIB. The renewed NCIB commenced on October 13, 2020 and will terminate on the earlier of: (i) October 12, 2021; and (ii) the date on which the maximum number of common shares are purchased pursuant to the bid. The Corporation may purchase for cancellation up to 2,098,885 common shares under the renewed NCIB.

The following table sets forth the number of common shares repurchased and cancelled during the three and six months ended June 30, 2021 and 2020 under the NCIB.

Three months ended June 30,	Six months ended June 30,
2021 2020	2021 2020
Number of shares repurchased and cancelled - 32,758	- 89,040
Reduction in share capital - 42 Change in retained earnings - (2)	- 113 - 41
Reduction in shareholders’ equity - 40	- 154
Average purchase price per share - 1.21	- 1.74

d) Dividends paid

Cash dividends of $6,280 ($0.15 per share), declared on December 9, 2020, were paid on January 11, 2021. No dividends were declared during the three and six months ended June 30, 2021 and 2020.

7. SHARE-BASED COMPENSATION

a) Stock Option Plan

Share-based payments may be settled in cash or equity at the sole discretion of the Corporation and are accounted for as equity-settled plans. Stock options have a 7-year term and vest 25% on each of the first, second, third and fourth anniversary dates of the grant.

Details of stock options are as follows:

		Six months ended June 30,	Six months ended June 30,	Six months ended June 30,	Six months ended June 30,
		2021		2020
		Number of Options Weighted Average Exercise Price		Number of Options Weighted Average Exercise Price
Outstanding - beginning of period Options cancelled pursuant to revised long-term incentive plan		2,535,000 $3.31 (1,680,000) $3.31		2,535,000 $3.31 - -
Outstanding - end of period		855,000 $3.31		2,535,000 $3.31
Exercisable - end of period		427,500 $3.31		633,750 $3.31
Range of Exercise Prices ($)	Outstanding	Exercisable			Weighted Average Remaining Contractual Life in Years
	Number at June 30, 2021 Weighted Average Exercise Price	Number at June 30, 2021	Weighted Average Exercise Price
3.12 - 3.48	855,000 $3.31	427,500	$3.31		4.35

No stock options were issued during the three and six months ended June 30, 2021 (2020 - Nil).

10

GENESIS LAND DEVELOPMENT CORP. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

For the three and six months ended June 30, 2021 and 2020

(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)

7. SHARE-BASED COMPENSATION (continued)

b) Deferred Share Unit Plan (“DSU”)

The Corporation’s cash settled DSU plan provides for DSUs to be issued to directors and designated employees. DSUs are issued with various vesting terms, currently ranging between three to four years. Details of outstanding DSUs are as follows:

	Six months ended June 30,
	2021 2020
	Cash settled Cash settled
Outstanding - beginning of period DSUs granted DSUs cancelled	354,258 70,941 334,033 98,897 (114,548) -
Outstanding - end of period	573,743 169,838
Vested - end of period	100,917 17,734

The outstanding liability related to cash settled DSUs as at June 30, 2021 was $812 (December 31, 2020 - $537) and is recorded in accounts payable and accrued liabilities. DSUs are measured at fair value at each reporting period on a mark-to-market basis.

c) Share-based compensation expense

Share-based compensation was recorded and included as a part of general and administrative expense and is comprised of the following:

following:	following:
	Three months ended June 30,	Six months ended June 30,
	2021 2020	2021 2020
Stock options Deferred share units related to grants which are to be cash settled	13 72 302 19	157 144 275 (2)
Total share-based compensation expense	315 91	432 142

11

GENESIS LAND DEVELOPMENT CORP. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited) For the three and six months ended June 30, 2021 and 2020

(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)

8. COMMITMENTS AND CONTINGENCIES

• a) The Corporation has issued letters of credit and surety bonds pursuant to servicing agreements with municipalities to indemnify them in the event that the Corporation does not perform its contractual obligations. As at June 30, 2021, these amounted to $9,090 (December 31, 2020 - $3,666).

b) The Corporation is committed to pay levies and municipal fees relating to signed municipal agreements on commencement of development of certain real estate assets with the following future payments:

July	1,	2021	to June	30,	2022	7,162
July	1,	2022	to June	30,	2023	3,505
July	1,	2023	to June	30,	2024	1,910
						12,577

• c) The Corporation is a co-defendant in a statement of claim initiated by limited partners of LPLP 2007 and its affiliated RRSP limited partnerships. The statement of claim is brought as a class action but has not yet been certified as such and is seeking damages of at least $16,585. Any potential liability to the Corporation and/or the Partnership is indeterminate, and no provision has been made. The Corporation’s view is that this action is without merit and is actively contesting it. The Corporation and the limited partners have each applied for summary judgement and the Corporation is contesting the certification of this matter as a class proceeding.

• d) The Corporation has contracted to acquire 156 residential lots in the City of Calgary for $20,157 from third-party land developers. The Corporation has paid deposits totaling $2,560 with the remainder being payable as follows:

July	1,	2021	to June	30,	2022	552
July	1,	2022	to June	30,	2023	6,606
July	1,	2023	to June	30,	2024	10,439
						17,597

• e) During the six months ended June 30, 2021, the Corporation entered into a binding agreement to acquire approximately 157 acres of future residential development land in the City of Calgary for $29,150. The Corporation paid a non-refundable deposit of $2,186, with the balance of $26,964 to be paid on closing, currently scheduled for April 2022.

12

GENESIS LAND DEVELOPMENT CORP. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

For the three and six months ended June 30, 2021 and 2020

(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)

9. FINANCIAL INSTRUMENTS

The fair values of cash and cash equivalents, restricted cash, accounts payable and accrued liabilities approximate their carrying values as they are typically expected to be settled within twelve months. The fair value of deposits approximates their carrying value as the terms of deposits are comparable to the market terms for similar instruments.

The fair values of the Corporation’s loans and credit facilities, amounts receivable and vendor-take-back mortgage receivable were estimated based on current market rates for loans of the same risk and maturities.

The fair value of investments in land development entities are based on the market approach method. This method uses prices and other relevant information that have been generated by market transactions involving identical or comparable assets.

Fair value measurements recognized in the consolidated balance sheets are categorized using a fair value hierarchy that reflects the significance of inputs used in determining the fair values. The three fair value hierarchy levels are as follows:

• Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities;

• Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

• Level 3: Inputs for the asset or liability that is not based on observable market data (unobservable inputs).

The Corporation’s current financial assets are measured at amortized cost or fair value through profit and loss (“FVTPL”). The estimated fair value of financial assets and liabilities measured at FVTPL as at June 30, 2021 and December 31, 2020 are presented in the following table:

			Carrying Value	Carrying Value	Fair Value	Fair Value
	Fair Value Hierarchy	Measurement Basis	As at June 30, 2021	As at Dec. 31, 2020	As at June 30, 2021	As at Dec. 31, 2020
Financial Assets
Cash	Level 1	FVTPL	25,746	29,743	25,746	29,743
Investments in land development entities	Level 3	FVTPL	5,608	5,608	5,608	5,608
Restricted cash(1)	Level 1	FVTPL	6,114	7,351	6,114	7,351

(1) Included in other operating assets.

During the three and six months ended June 30, 2021 and 2020, no transfers were made between the levels in the fair value hierarchy.

13

GENESIS LAND DEVELOPMENT CORP. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited) For the three and six months ended June 30, 2021 and 2020

(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)

9. FINANCIAL INSTRUMENTS (continued)

a) Risks associated with financial instruments

(i) Credit risk

The Corporation recognizes bad debt expense (or recovery) relating to amounts receivable on sold lots, net of the value of the related sold lots which are taken back into the Corporation’s lot inventory on the termination of the relevant agreement. Termination could occur when the buyer fails to perform or observe terms of covenants of the relevant agreement. Agreements receivable for lot sales have various terms of repayment with purchasers generally having between 6 and 24 months to pay the balance owing for the purchased lots.

Recovery of bad debt expense is included in the Corporation’s general and administrative expenses. In order to mitigate credit risk, the Corporation does not transfer title to sold residential lots until full payment is received. Individual balances due from customers as at June 30, 2021, which comprise greater than 10% of total amounts receivable, totaled $10,814 from three customers (December 31, 2020 - $10,235 from two customers).

Aging of amounts receivable was as follows:

Aging of amounts receivable was as follows:
	June	30, 2021	December 31, 2020
Not past due		11,156	11,006
		11,156	11,006

(ii) Liquidity risk

The contractual maturities of financial liabilities and other commitments as at June 30, 2021 were as follows:

The contractual maturities of financial liabilities and other commitments as at	June 30, 2021	were as follows:
	<1 Year	>1 Year	Total
Financial liabilities
Accounts payable and accrued liabilities	19,412	6,328	25,740
Loans and credit facilities excl. deferred fees on loans and credit facilities (note 4)	10,493	8,159	18,652
	29,905	14,487	44,392
Commitments
Lease obligations (including variable operating costs)	254	1,954	2,208
Land and lot purchase contracts (note 8d and note 8e)	27,516	17,045	44,561
Levies and municipal fees (note 8b)	7,162	5,415	12,577
	34,932	24,414	59,346
	64,837	38,901	103,738

At June 30, 2021, the Corporation had obligations due within the next 12 months of $64,837 (December 31, 2020 - $39,777). Based on the Corporation’s operating history, its relationship with its lenders and committed sales contracts, management believes that the Corporation has the ability to continue to renew or repay its financial obligations as they come due. During the six months ended June 30, 2021, the Corporation renewed one loan (note 4a) and established a corporate revolving line of credit of $50,000 (note 4c).

(iii) Market risk

The Corporation is exposed to interest rate risk to the extent that certain agreements receivable and certain loans and credit facilities are at a floating rate of interest. A 1% change in interest rates would result in a change in interest incurred of approximately $93 annually on floating rate loans.

14

GENESIS LAND DEVELOPMENT CORP. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

For the three and six months ended June 30, 2021 and 2020

(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)

9. FINANCIAL INSTRUMENTS (continued)

b) Capital management

The Corporation’s policy is to maintain a sufficient capital base in order to retain investor, creditor and market confidence and to sustain future development of the business. The Corporation is in compliance with any externally imposed capital requirements.

The Corporation manages its capital structure and makes adjustments to it in light of changes in regional economic conditions and the risk characteristics of the underlying real estate industry within that region.

The Corporation considered its capital structure at the following dates to specifically include:

	June 30, 2021	December 31, 2020
Loans and credit facilities (note 4)	18,014	21,470
Shareholders’ equity	191,843	187,676
	209,857	209,146

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GENESIS LAND DEVELOPMENT CORP. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

For the three and six months ended June 30, 2021 and 2020

(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)

10. SEGMENTED INFORMATION

The income producing business units of the Corporation reported the following activities for the three and six months ended June 30, 2021 and 2020:

Three months ended June 30, 2021	Land Development Segment Home Building Segment Intersegment Elimination Total Genesis LP Intrasegment Elimination Total
Revenues Direct cost of sales	10,406 8 - 10,414 28,427 (9,312) 29,529 (6,079) - - (6,079) (24,475) 9,312 (21,242)
Gross margin G&A, selling & marketing and net finance expense or income	4,327 8 - 4,335 3,952 - 8,287 (1,907) (65) - (1,972) (2,729) - (4,701)
Earnings (loss) before income taxes and non-controllinginterest	2,420 (57) - 2,363 1,223 - 3,586
Three months ended June 30, 2020	Land Development Segment Home Building Segment Intersegment Elimination Total Genesis LP Intrasegment Elimination Total
Revenues	14,700 39 - 14,739 23,901 (8,090) 30,550
Revenues - development lands	175 - - 175 - - 175
Direct cost of sales	(9,357) - - (9,357) (20,736) 8,090 (22,003)
Gross margin G&A, selling & marketing and net finance expense or income	5,518 39 - 5,557 3,165 - 8,722 (1,546) (40) - (1,586) (2,268) - (3,854)
Earnings (loss) before income taxes and non-controllinginterest	3,972 (1) - 3,971 897 - 4,868

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GENESIS LAND DEVELOPMENT CORP. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

For the three and six months ended June 30, 2021 and 2020

(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)

10. SEGMENTED INFORMATION (continued)

Six months ended June 30, 2021	Land Development Segment Home Building Segment Intersegment Elimination Total Genesis LP Intrasegment Elimination Total
Revenues	18,984 195 (184) 18,995 42,297 (13,975) 47,317 - 925 - 925 - - 925 (11,167) (845) - (12,012) (36,467) 13,975 (34,504)
Revenues - development lands
Direct cost of sales
Gross margin G&A, selling & marketing and net finance expense or income	7,817 275 (184) 7,908 5,830 - 13,738 (3,555) (128) 184 (3,499) (4,734) - (8,233)
Earnings before income taxes and non-controllinginterest	4,262 147 - 4,409 1,096 - 5,505
Segmented assets as at June 30,2021	232,376 13,982 (6,647) 239,711 34,084 1,554 275,349
Segmented liabilities as at June 30,2021(1), (2)	54,168 2,790 (2,453) 54,505 16,229 1,554 72,288
Segmented net assets as at June 30,2021(1), (2)	178,208 11,192 (4,194) 185,206 17,855 - 203,061

Six months ended June 30, 2020	Land Development Segment Home Building Segment Intersegment Elimination Total Genesis LP Intrasegment Elimination **Total **
Revenues	20,450 41 - 20,491 37,989 (13,265) 45,215
Revenues - development lands	9,162 - - 9,162 - - 9,162
Direct cost of sales Write-down of real estate held for development and sale	(21,159) - - (21,159) (32,937) 13,265 (40,831) (10,000) - - (10,000) (815) - (10,815)
Gross margin G&A, selling & marketing and net finance expense or income	(1,547) 41 - (1,506) 4,237 - 2,731 (3,365) (111) - (3,476) (4,457) - (7,933)
(Loss) earnings before income taxes and non-controllinginterest	(4,912) (70) - (4,982) (220) - (5,202)
Segmented assets as at December 31,2020	232,166 14,701 (6,320) 240,547 23,825 2,122 266,494
Segmented liabilities as at December 31,2020(1), (2)	57,181 2,744 (2,226) 57,699 6,913 2,122 66,734
Segmented net assets as at December 31,2020(1), (2)	174,985 11,957 (4,094) 182,848 16,912 - 199,760

(1) Segmented liabilities under the Genesis land development segment include $3,228 due to the home building segment (December 31, 2020 - $4,118 due from the land development segment to the home building segment).

(2) Segmented liabilities under the LP segment is comprised of accounts payable and accrued liabilities and includes $2,453 (December 31, 2020 - $2,226) due to Genesis.

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GENESIS LAND DEVELOPMENT CORP. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited)

For the three and six months ended June 30, 2021 and 2020

(All tabular amounts and amounts in footnotes to tables are in thousands of Canadian dollars except number of shares)

11. CONSOLIDATED ENTITIES

The Statements include the accounts of the Corporation and its wholly-owned subsidiaries, as well as the consolidated revenues, expenses, assets, liabilities and cash flows of limited partnership entities that the Corporation controls. The Corporation has less than 50% equity ownership in these limited partnership entities; however, the Corporation has control over these entities’ activities, projects, financial and operating policies due to contractual arrangements. As such, the relationship between the Corporation and the limited partnership entities indicates that they are controlled by the Corporation. Accordingly, the accounts of the limited partnerships have been consolidated in the Corporation’s financial statements. Subsidiaries of the Corporation are general partners in three limited partnership group structures.

The Corporation is a co-defendant in a statement of claim initiated by three limited partners of LPLP 2007 and its affiliated RRSP limited partnerships. The statement of claim is brought as a class action but has not yet been certified as such and is seeking damages of at least $16,585. Any potential liability to the Corporation and/or the partnerships is indeterminate, and no provision has been made.

LPLP 2007 is a limited partnership controlled by the Corporation. In 2019 the Corporation completed a transaction with LPLP 2007, whereby the Corporation acquired the third-party, secured vendor-take-back mortgage receivable held by LPLP 2007. Consideration paid to LPLP 2007 included a cash payment of $10,360 to LPLP 2007 by the Corporation, with the net proceeds were placed in the trust account of counsel to LPLP2007 to be available for pro rata distribution its limited partners. Early in 2020 limited partners were given the option to receive their pro rata distribution of the amount held in trust, provided the limited partner signed a letter of transmittal in which the limited partner released LPLP 2007, Genesis and related entities from any liabilities in respect of the statement of claim described above. The offer to the limited partners expired on September 18, 2020. As at June 30, 2021, unitholders holding 25,619,829 (58.4%) limited partnership units submitted such transmittal letters, and $6,092 of the available trust funds have been distributed. All remaining funds which are held in trust will be used by LPLP 2007 to fund its operations, including its share of any costs incurred in respect of the proposed class action.

12. SUBSEQUENT EVENTS

Subsequent to June 30, 2021, the following occurred:

a) The sale of a 4.27-acre parcel of land in Calgary was closed for cash consideration of $2,550.

b) As of July 1, 2021, the majority of COVID-19 restrictions for the province of Alberta have been lifted. It is still too early to estimate the impact of this development on the financial results and condition of the Corporation in future periods.

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