Delta 9 Cannabis : Interim Financial Report

DELTA 9 CANNABIS INC.

CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(UNAUDITED)

JUNE 30, 2022

(EXPRESSED IN CANADIAN DOLLARS)

DELTA 9 CANNABIS INC.

INDEX TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

	JUNE 30, 2022
CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION ........................................	STATEMENT 1
CONSOLIDATED INTERIM STATEMENTS OF NET LOSS AND COMPREHENSIVE LOSS ......	STATEMENT 2
CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY ........	STATEMENT 3
CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS ........................................................	STATEMENT 4
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS ........................................................	PAGE 1

DELTA 9 CANNABIS INC.							STATEMENT 1
CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION
(UNAUDITED)
(CANADIAN DOLLARS)								AS AT
				June 30,		December 31,
				2 0 2 2				2 0 2 1
	A S S E T S
CURRENT
Cash (Note 6)		$		13,492,732		$		943,247
Trade and other receivables (Note 7)			4,598,146				4,569,330
Inventories (Note 8)			21,584,334				20,383,157
Biological assets (Note 9)			1,727,484				2,205,105
Current portion of notes receivable (Note 11)			529,210				973,294
Prepayments and other current assets (Note 10)			2,711,295				1,546,005
Due from directors, officers and related parties (Note 18)			108,291				100,269
				44,751,492				30,720,407
NOTES RECEIVABLE (Note 11)			236,353				268,805
PROPERTY, PLANT AND EQUIPMENT (Note 12)			27,379,899				28,208,075
RIGHT-OF-USE ASSETS (Note 19)			17,439,064				11,989,708
INVESTMENTS (Note 14)			533,333				533,333
INTANGIBLES				150,000				150,000
GOODWILL (Note 5, 13)				16,311,603				2,910,976
		$		106,801,744		$		74,781,304
	L I A B I L I T I E S
CURRENT
Accounts payable and accrued liabilities (Note 15)	$		10,847,199		$		10,990,711
Customer deposits	(Note 16)			90,098				294,167
Due to shareholder	(Note 18)			48,951				48,951
Current portion of loan from related parties (Note 18)			-				180,870
Current portion of deferred revenue (Note 17)			267,162				267,162
Current portion of lease liabilities (Note 19)			7,094,863				6,641,816
Current portion of borrowings (Note 20)			1,807,990				10,720,706
Current portion of convertible debentures (Note 21)			11,673,090				11,154,547
				31,829,353				40,298,930
LOAN FROM RELATED PARTIES (Note 18)			2,708,344				2,481,817
DEFERRED REVENUE (Note 17)			1,060,304				1,193,885
LEASE LIABILITIES (Note 19)			10,680,551				5,527,530
BORROWINGS (Note 20)			30,425,754				-
CONVERTIBLE DEBENTURES - HOST LIABILITY (Note 21)			6,819,936				-
CONVERTIBLE DEBENTURES - EMBEDDED DERIVATIVE LIABILITY (Note 21)	2,256,000				-
				85,780,242				49,502,162
	S H A R E H O L D E R S' E Q U I T Y
SHARE CAPITAL (Note 22)			68,749,653				64,080,903
WARRANTS				1,601,251				1,456,415
CONTRIBUTED SURPLUS			5,657,638				5,774,941
ACCUMULATED DEFICIT	(	36,353,010)	(	27,369,106)
ACCUMULATED OTHER COMPREHENSIVE LOSS	(	19,274,154)	(	19,274,154)
NON-CONTROLLING INTEREST			640,124				610,143
TOTAL SHAREHOLDERS' EQUITY			21,021,502				25,279,142
		$		106,801,744		$		74,781,304
COMMITMENTS (Note 29)
Approved on behalf of the Board:
"Nitin Kaushal"		"John William Arbuthnot IV"
Signed: Director		Signed: Director

See accompanying notes to consolidated interim financial statements

DELTA 9 CANNABIS INC.

STATEMENT 2

CONSOLIDATED INTERIM STATEMENTS OF NET LOSS AND COMPREHENSIVE LOSS

(UNAUDITED)
(CANADIAN DOLLARS)				FOR THE THREE AND SIX MONTH PERIOD ENDED
			Three month ended			Six month ended
			June 30					June 30
			2022				2021				2022				2021
REVENUE (Note 24)	$		17,495,078		$		16,750,695		$		29,974,655		$		29,978,236
COST OF SALES			12,850,777				11,817,720				22,365,873				21,357,339
GROSS PROFIT BEFORE UNREALIZED GAIN
FROM CHANGES IN BIOLOGICAL ASSETS			4,644,301				4,932,975				7,608,782				8,620,897
Unrealized gain from changes in fair value of
biological assets			5,573,955				4,647,158				6,999,866				9,084,926
Fair value of biological assets in inventory sold	(	6,116,143)	(	4,690,019)	(	6,667,761)	(	9,864,013)
GROSS PROFIT			4,102,113				4,890,114				7,940,887				7,841,810
EXPENDITURES
General and administrative (Note 25)			4,043,257				2,742,066				7,853,574				6,259,543
Sales and marketing (Note 25)			3,381,223				2,537,879				6,094,853				4,714,857
Share based compensation (Note 22)			107,121				413,716				354,065				915,086
			7,531,601				5,693,661				14,302,492				11,889,486
INCOME (LOSS) FROM OPERATIONS	(	3,429,488)	(	803,547) (	6,361,605)	(	4,047,676)
OTHER INCOME
Finance income (expense) - net (Note 26)	(	1,882,939)	(	929,633)	(	3,150,521)	(	1,770,783)
Other income (Note 27)			95,183				193,266				173,035				278,565
Other financing costs	(	70,441)			-		(	70,441)			-
Gain (loss) on fair value change in derivative
liability(Note 21)			455,609				-				455,609				-
	(	1,402,588)		(	736,367)	(	2,592,318)	(	1,492,218)
NET INCOME (LOSS) BEFORE INCOME TAXES	(	4,832,076)		(	1,539,914) (	8,953,923)	(	5,539,894)
Current income tax recovery			-			(	401,015)			-		(	401,015)
NET INCOME (LOSS)		(	4,832,076)	(	1,138,899)	(	8,953,923)	(	5,138,879)
Net income (loss) and comprehensive income (loss)
attributable to:
Delta 9 Cannabis Inc.	(	4,812,788)	(	1,385,265)	(	8,983,904)	(	5,674,891)
Non-controlling interest (Note 23)		(	19,288)			246,366				29,981				536,012
		(	4,832,076)	(	1,138,899)	(	8,953,923)	(	5,138,879)
Other comprehensive income (loss)
Gain on disposal of Decibel Cannabis Company
Inc. investment			-				-				-				493,846
Total comprehensive income (loss)	(	4,832,076)	(	1,138,899)	(	8,953,923)	(	4,645,033)
Delta 9 Cannabis Inc	(	4,812,788)	(	1,385,265)	(	8,983,904)	(	5,181,045)
Non-controlling interest (Note 23)		(	19,288)			246,366				29,981				536,012
		(	4,832,076)	(	1,138,899)	(	8,953,923)	(	4,645,033)
Earnings (loss) per share - basic (Note 28)	$(	0.04)$(	0.01)$(	0.08)$(	0.06)
Earnings (loss) per share - diluted (Note 28)	$(	0.04)$(	0.01)$(	0.08)$(	0.06)

DELTA 9 CANNABIS INC.																								STATEMENT 3
CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)
(CANADIAN DOLLARS)																	FOR THE SIX MONTH PERIOD ENDED JUNE 30
																			Accumulated
																				Other		Non-
		Number of										Contributed		Accumulated	Comprehensive		Controlling
		shares		Share Capital			Warrants			Surplus			Deficit			Loss		Interest		Total Equity
BALANCE, December 31, 2020	101,940,350	$	62,274,195		$	1,456,415	$		5,158,458	$(	17,112,604)	$(	19,768,000)	$	926,896		$	32,935,360
Net income (loss)	-		-				-				-		(	5,674,891)			-			536,012		(	5,138,879)
Reallocation of Head Office costs	-		-				-				-				920,985				-		(	920,985)		-
Gain on disposal of Decibel
Cannabis Company Inc. investment	-		-				-				-				-				493,846			-			493,846
Investment by minority shareholder	-		-				-				-				-				-			343,000			343,000
Equity component of promissory note	-		-				-				-				-				-			36,496			36,496
Shares issued in business
acquisition transactions	144,231		75,000				-				-				-				-			-			75,000
Share based compensation	-		-				-				915,086				-				-			-			915,086
Transfer on exercise of restricted
stock units		578,000		346,800				-			(	346,800)			-				-			-			-
BALANCE, June 30, 2021		102,662,581	$	62,695,995		$		1,456,415	$		5,726,744	$(	21,866,510)	$(	19,274,154)	$	921,419		$	29,659,909
BALANCE, December 31, 2021	105,657,268	$	64,080,903		$	1,456,415		$		5,774,941		$(	27,369,106)	$(	19,274,154)	$	610,143		$	25,279,142
Net income (loss)	-		-				-				-		(	8,983,904)			-			29,981		(	8,953,923)
Shares issued in equity raise	8,800,027		1,399,943				144,836				-				-				-			-			1,544,779
Shares issued to Sundial Cannabis
Inc.(Note 22)	661,049		172,146				-				-				-				-			-			172,146
Shares issued related to financing
(Note 22)	2,038,217		640,000				-				-				-				-			-			640,000
Shares issued in business
acquisition transactions (Note 5)	6,966,986		1,985,293				-				-				-				-			-			1,985,293
Share based compensation (Note 22)	-		-				-				354,065				-				-			-			354,065
Transfer on exercise of restricted
stock units (Note 22)		949,600		471,368				-			(	471,368)			-				-			-			-
BALANCE, June 30,2022		125,073,147	$	68,749,653		$		1,601,251	$		5,657,638	$(	36,353,010)	$(	19,274,154)	$	640,124		$	21,021,502

See accompanying notes to consolidated interim financial statements