Decibel Cannabis : Interim Financial Report

DECIBEL CANNABIS COMPANY INC.

Condensed Consolidated Interim Financial Statements

(Unaudited)

For the three and nine months ended September 30, 2021 and 2020

(In Canadian Dollars)

DECIBEL CANNABIS COMPANY INC.
Condensed Consolidated Interim Statements of Financial Position
As at September 30, 2021 and December 31, 2020
(Unaudited - In thousands of Canadian dollars)
	Notes	September 30, 2021		December 31, 2020
Assets
Current assets
Cash		11,313	3,820
Accounts receivable	3	9,586	3,829
Other current assets	6	3,255	854
Biological assets	4	2,025	1,076
Inventory	5	25,442	10,285
		51,621	19,864
Property, plant and equipment		58,703	59,933
Right-of-use assets		3,493	3,189
Other long-term assets	6	1,900	933
Investments		240	240
Intangible assets		182	315
Goodwill		4,259	4,259
		120,398	88,733
Liabilities
Current liabilities
Accounts payable and accrued liabilities		18,130	12,111
Current portion of lease liabilities		776	491
Current portion of equipment loan		-	68
Current portion of long-term debt	7	11,896	1,634
Convertible debentures		11,354	-
		42,156	14,304
Long-term lease liabilities		3,838	3,904
Long-term debt	7	24,751	26,431
Other long-term liabilities	9	459	-
Convertible debentures		-	10,663
		71,204	55,302
Shareholders' equity
Share capital	8	53,416	43,114
Reserves	9	14,381	10,009
Deficit		(18,603)	(19,692)
		49,194	33,431
		120,398	88,733
Going concern (Note 1)
Commitments and contingencies (Note 17)
Approved on behalf of the board:
		Signed: Director		Signed: Chairman

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

DECIBEL CANNABIS COMPANY INC.
Condensed Consolidated Interim Statements of Income (Loss) and Comprehensive Income (Loss)
For the three and nine months ended September 30, 2021 and 2020
(Unaudited - In thousands of Canadian dollars, except share and per share amounts)
		Three months ended		Nine months ended
			September 30		September 30
		2021	2020	2021	2020
Revenue
Gross revenue		16,992	8,166	48,150	20,047
Excise taxes		(3,623)	(588)	(9,715)	(1,542)
Net revenue	10	13,369	7,578	38,435	18,505
Cost of goods sold		9,268	4,680	24,261	11,341
Gross profit before fair value adjustments		4,101	2,898	14,174	7,164
Unrealized gain on changes in fair value of
biological assets	4	7,184	1,374	15,539	2,485
Change in fair value of biological assets
realized through inventory sold		(6,149)	(1,206)	(9,692)	(2,501)
Gross profit		5,136	3,066	20,021	7,148
Selling, general and administration	12	3,915	2,673	11,378	8,399
Depreciation and amortization		954	624	2,770	1,689
Share-based compensation	9	117	481	1,620	2,261
		4,986	3,778	15,768	12,349
Income (loss) from operations		150	(712)	4,253	(5,201)
Non-operating items
Finance costs	11	1,038	646	3,044	2,365
Foreign exchange (gain) loss		52	9	133	3
Loss (gain) on disposal of property, plant and
equipment and right-of-use assets		-	-	34	(13)
Other income		(14)	(5)	(34)	(32)
		1,076	650	3,177	2,323
Income (loss) before income taxes		(926)	(1,362)	1,076	(7,524)
Income tax expense (recovery)		-
Current		(13)	-	(13)	-
		(13)	-	(13)	-
Net income (loss) and comprehensive income (loss)		(913)	(1,362)	1,089	(7,524)
			-
Income (loss) per share	13		-
Basic		0.00	(0.00)	-	(0.02)
Diluted		0.00	(0.00)	0.00	(0.02)
Weighted average number of shares outstanding	13
Basic		358,219,105	348,352,981	352,095,933	347,392,755
Diluted		369,658,128	348,352,981	363,534,956	347,392,755

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

DECIBEL CANNABIS COMPANY INC.
Condensed Consolidated Interim Statements of Changes in Equity
For the nine months ended September 30, 2021 and 2020
(Unaudited - In thousands of Canadian dollars, except share and per share amounts)
				Reserves
	Number	Share		Convertible Share-based
	of shares	capital	Warrants	debentures	payments
	(Note 8)	(Note 8)	(Note 9)		(Note 9)	Deficit	Total
Balance, January 1, 2021	348,489,373	43,114	672	1,938	7,399	(19,692)	33,431
Exercise of restricted share units	1,833,161	342	-	-	(342)	-	-
Proceeds from exercise of stock options	1,639,811	352	-	-	(81)	-	271
Share based compensation	-	-	-	-	1,028	-	1,028
Shares issued through bought deal financing	51,750,000	10,846	4,251	-	-	-	15,097
Share issuance costs, net of tax	-	(1,238)	(484)	-	-	-	(1,722)
Comprehensive income	-	-	-	-	-	1,089	1,089
Balance, September 30, 2021	403,712,345	53,416	4,439	1,938	8,004	(18,603)	49,194
				Reserves
					Share-
	Number	Share		Convertible	based
	of shares	capital	Warrants	debentures	payments	Deficit	Total
	(Note 8)	(Note 8)	(Note 9)		(Note 9)
Balance, January 1, 2020	343,573,171	42,196	554	1,938	5,679	(10,482)	39,885
Exercise of restricted share units	4,836,202	895	-	-	(895)	-	-
Exercise of performance warrants	80,000	15	(15)	-	-	-	-
Share based compensation	-	-	133	-	2,615	-	2,748
Share issuance costs, net of tax	-	8	-	-	-	-	8
Comprehensive loss	-	-	-	-	-	(9,210)	(9,210)
Balance, December 31, 2020	348,489,373	43,114	672	1,938	7,399	(19,692)	33,431

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

DECIBEL CANNABIS COMPANY INC.
Condensed Consolidated Interim Statements of Cash Flows
For the nine months ended September 30, 2021 and 2020
(Unaudited - In thousands of Canadian dollars)
			Nine months ended
			September 30
	Notes	2021	2020
Cash provided by (used in)
Operating activities
Net income (loss)		1,089	(7,524)
Depreciation and amortization		2,770	1,689
Non-cash finance costs	11	779	753
Unrealized gain on changes in fair value of biological
assets		(15,539)	(2,485)
Change in fair value of biological assets realized through
inventory sold		9,692	2,501
Share-based compensation	9	1,620	2,261
Loss (gain) on disposal of property, plant and equipment
and right-of-use assets		34	(13)
Inventory provision for destruction events	5	833	-
Other non-cash items		(8)	-
Changes in non-cash working capital	15	(13,297)	(3,044)
Cash used in operating activities		(12,027)	(5,862)
Investing activities
Purchase of property, plant and equipment		(1,771)	(3,825)
Purchase of investments		-	(124)
Purchase of intangible assets		(22)	(17)
Changes in non-cash working capital	15	(222)	(1,589)
Cash used in investing activities		(2,015)	(5,555)
Financing activities
Proceeds from issuance of common shares	8	271	-
Proceeds from bought deal financing	8	15,008	-
Proceeds from long-term debt	7, 15	9,990	3,000
Repayment of long-term debt	15	(1,376)	(1,451)
Financing fees	15	(119)	(271)
Payment (reimbursement) of share issuance costs	8	(1,722)	-
Repayment of equipment loan	15	(68)	(194)
Repayment of lease liabilities	15	(449)	(247)
Cash provided by financing activities		21,535	837
Increase (decrease) in cash		7,493	(10,580)
Cash, beginning of period		3,820	11,654
Cash, end of period		11,313	1,074

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