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Decibel Announces Year End 2019 Results, Amendment to Credit Facility and Extension of Interim Financial Filings

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CALGARY, May 25, 2020 /CNW/ - Decibel Cannabis Company Inc. (the "Company" or "Decibel") (TSXV:DB) (OTCQB:DBCCF) announces its year-end and fourth quarter financial results for 2019 and provides an update to the anticipated filing date of its Q1 2020 results. The Company is also pleased to announce that it has entered into an agreement with its lender ATB Financial ("ATB") to amend its credit agreement.

As a result of the previously announced Arrangement (as defined herein) completed on December 20, 2019 (the "Closing Date"), the historical financial results of Decibel for the period ending December 31, 2019 relate solely to We Grow BC Ltd. ("We Grow") up to and including the Closing Date. Following the Closing Date the financial information of Decibel relates to that of the consolidated company. As a result, the 2019 financial results reflect eleven days of net revenue and operational activity from operating assets acquired from Westleaf Inc. ("Westleaf") in the Arrangement.

2019 Financial Highlights and Subsequent Events

  • Net revenue for the fourth quarter and year-end of $1.5 and $6.2 million, respectively, primarily relating to sales from the Company's Creston facility.

  • Adjusted EBITDA loss for the fourth quarter and year-end of $1.6 and $1.8 million, respectively.

  • Net loss for the fourth quarter and year-end of $6.0 and $6.5 million, respectively.

  • Sold 177 kilograms of cannabis in the fourth quarter and 731 kilograms of cannabis during the fiscal year achieving gross price per gram of $11.44 for the period. Sales volumes in the fourth quarter of 2019 were impacted by a Health Canada quality assurance hold on 190 kilograms that was subsequently lifted on January 14, 2020 and sold in Q1 2020.

  • On December 20, 2019, We Grow completed a plan of arrangement (the "Arrangement") which constituted a reverse takeover of Westleaf to combine We Grow's cultivation facility and premium brand, Qwest, with Westleaf's high quality cultivation, extraction, and retail assets to create one of Canada's preeminent ultra-premium cannabis companies.

  • Executed several cost-reduction measures and realized synergies resulting from the Arrangement, resulting in an estimated cost savings exceeding $5 million through the 2020 fiscal year compared to 2019. These initiatives have included a ~35% reduction in corporate staff, a 68% reduction of its lease portfolio and broad elimination all non-essential spending.

  • Secures credit facility amendments to provide additional financial flexibility.

Fiscal year 2019 represents the Company's first full year of sales from its Creston facility. During the period, revenue performance was positively affected by the launch of new cannabis strains and an expanded distribution footprint that includes British Columbia, Alberta, Ontario, Saskatchewan and Prince Edward Island. In the fiscal year 2019, the Company achieved construction milestones including the completion of construction and the receipt of a standard processing licence for its extraction and manufacturing facility. Management anticipates that its operational assets and facilities under development will allow the Company to increase sales volumes, expand into cannabis derivative products, and ultimately execute on its premium strategy. To date, Decibel's premium strategy has resulted in achieving one of the highest gross prices per gram in the Canadian recreational market of $11.44 for the year ended December 31, 2019.

Decibel's year-end Financial Statements and related Management Discussion & Analysis for the reporting period are available under the Company's profile at www.sedar.com.

Credit Facility Amendment

Decibel is pleased to announce that on May 22, 2020, the Company entered into an agreement to amend its credit agreement with ATB. The Company believes the amended agreement is better aligned with the Company's balance sheet and cash flow expectations and provides financial flexibility over the near term. Among other things, the amendments include an amendment to Decibel's tested financial covenants and to certain licensing milestones. Additionally, the amendment provides for a $2.2 million reduction of the borrowing base availability under the facility. For more information please refer to Decibel's management's discussion and analysis for the year ended December 31, 2019, including to "Liquidity and Capital Resources".

Stuart Boucher, Decibel's interim CFO, stated: "Decibel appreciates ATB's commitment to and understanding of the Company's business strategy and believes that the amendments will allow the Company to meet its near-term objectives."

Q1 2020 Interim Filing Extension

The Company also announces today that it is extending the filing deadline of its Q1 2020 interim financial statements and related management discussion and analysis for the fiscal quarter ended March 31, 2020 (collectively, the "Interim Filings"). Decibel anticipates that it will be able to complete the Interim Filings no later than July 10, 2020.

Recent proclamations and guidance from Canadian health authorities, the City of Calgary and the Province of Alberta and challenges resulting from the COVID-19 pandemic, have required the Company to coordinate the preparation of the Interim Filings remotely. As a result, the preparation of the Interim Filings has been delayed.

According to Blanket Order 51-517 issued by the Alberta Securities Commission on March 23, 2020 (the "Blanket Order"), during the period from March 23, 2020 to June 1, 2020, a person or company required to make certain filings has an additional 45 days from the otherwise applicable deadline to make such filings. The Company is relying on the Blanket Order for temporary relief from the requirements set out in Part 4 and Part 5 of National Instrument 51-102 – Continuous Disclosure Obligations ("NI 51-102"), to file the Interim Filings by the applicable deadlines set forth in NI 51-102.

All of the Company's management, directors and other insiders will remain subject to its share trading and black-out policy which reflects the principles set out in section 9 of National Policy 11-207: Failure-to-File Cease Trade Orders and Revocations in Multiple Jurisdictions.

There have been no material developments in the business of the Company, other than those disclosed in this press release and in the Company's year-end report and related management discussion and analysis.

About Decibel

Decibel is uncompromising in the process and craftsmanship needed to deliver the highest quality cannabis products and retail experiences. Decibel has three production houses operating or under development along with its wholly owned retail business, Prairie Records. The Qwest Estate in Creston, BC is a licensed and operating 26,000 square foot cultivation space which produces the widely championed, rare cultivar-focused brands Qwest and Qwest Reserve, which are sold in six provinces across Canada. Thunderchild Cultivation, an 80,000 square foot indoor cultivation facility in Battleford, SK is scheduled to be completed and licensed in 2020. The Plant, Decibel's extraction facility, in Calgary, AB has 15,000 square feet of Health Canada licensed extraction and product development space. This production house will fuel the growth of our brands Qwest, Qwest Reserve, and Blendcraft, into new and innovative product formats like concentrates, vapes, edibles and beyond.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Non-GAAP Measures

This news release contains the financial performance metric of Adjusted EBITDA, a measure that is not recognized or defined under IFRS ("Non-GAAP Measures"). As a result, this data may not be comparable to data presented by other cannabis companies. For an explanation and reconciliation of Adjusted EBITDA to related comparable financial information presented in the Financial Statements prepared in accordance with IFRS, refer to the MD&A for the year ended December 31, 2019. The Company believes that Adjusted EBITDA is a useful indicator of operating performance and is specifically used by management to assess the financial and operational performance of the Company.

The Company calculates Adjusted EBITDA as net loss and comprehensive loss excluding unrealized gain on changes in fair value of biological assets, change in fair value of biological assets realized through inventory sold, depreciation and amortization expense, share-based compensation, other income, finance costs, foreign exchange loss, non-cash production costs and severance payments. Non-cash production costs relate to amortization expense allocations included in production costs. Non-GAAP Measures should be considered together with other financial information prepared in accordance with IFRS to enable investors to evaluate the Decibel's operating results, underlying performance and prospects in a manner similar to Decibel's management.

Accordingly, these Non-GAAP Measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.

Cautionary Statements

This news release contains "forward-looking information" and "forward-looking statements" (collectively, "forward-looking statements") within the meaning of the applicable Canadian securities legislation. All statements, other than statements of historical fact, are forward-looking statements and are based on expectations, estimates and projections as at the date of this news release. Any statement that involves discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, future events or performance (often but not always using phrases such as "expects", or "does not expect", "is expected", "anticipates" or "does not anticipate", "plans", "budget", "scheduled", "forecasts", "estimates", "believes" or "intends" or variations of such words and phrases or stating that certain actions, events or results "may" or "could", "would", "might" or "will" be taken to occur or be achieved) are not statements of historical fact and may be forward-looking statements.

In this news release, forward-looking statements relate to, among other things the Company's expectations regarding its operational assets and facilities under development, the Company's timing of the filing of the Interim Filings, the timing, construction and licensing of the Thunderchild Cultivation facility, the Company's ability to grow Qwest, Qwest Reserve and Blendcraft brands into new and innovative product formats, the Company's expectations with respect to the amended credit agreement's ability to provide financial flexibility and allow the Company to meet its near term objectives and the Company's ability to execute on the foregoing. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties, and other factors which may cause the actual results and future events to differ materially from those expressed or implied by such forward-looking statements. Such factors include, but are not limited to: risks relating to the Company's ability to file the Interim Filings, additional timing, delays, regulatory changes and impacts, capital requirements, construction impacts, displacement requirements and unforeseen requirements resulting from the COVID-19 pandemic, the ability to obtain or maintain licences to retail cannabis products; review of the Company's production facilities by Health Canada and receipt or maintenance of licences (including any amendments thereto) from Health Canada in respect thereof; future legislative and regulatory developments involving cannabis; inability to access sufficient capital from internal and external sources, and/or inability to access sufficient capital on favourable terms; the labour market generally and the ability to access, hire and retain employees; general business, economic, competitive, political and social uncertainties; the satisfaction of conditions precedent under the Company's credit facilities; timing and completion of construction and expansion of the Company's production facilities and retail locations; and the delay or failure to receive board, regulatory or other approvals, including any approvals of the TSXV, as applicable. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on the forward-looking statements and information contained in this news release. Except as required by law, the Company assumes no obligation to update the forward-looking statements of beliefs, opinions, projections, or other factors, should they change, except as required by law.

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/decibel-announces-year-end-2019-results-amendment-to-credit-facility-and-extension-of-interim-financial-filings-301064676.html

SOURCE Decibel Cannabis Company Inc.

Cision View original content to download multimedia: http://www.newswire.ca/en/releases/archive/May2020/25/c4977.html

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