SPEAKEASY CANNABIS CLUB LTD.
NOT FOR DISTRIBUTION OR FOR DISSEMINATION IN THE UNITED STATES
COMPANY PROVIDES UPDATE TO SHAREHOLDERS
ROCK CREEK, BC – March 18, 2022 – SpeakEasy Cannabis Club Ltd. (CSE: EASY) (Frankfurt: 39H) (the “Company” or “SpeakEasy”), a holder of a federal licence to cultivate, process and sell cannabis under the Cannabis Act wishes to provide an update to its shareholders.
We would like to take this opportunity to provide an update and communicate to our Shareholders the Company’s path forward. Over the last couple of weeks, we have received emails, phone calls and messages raising concerns over the general health and direction of the Company.
We understand your frustration, this time has been extremely challenging for everyone, but we are working tirelessly through this phase to find solutions.
Your concerns have not gone unheard. We have categorized the most frequently asked questions into 4 segments: Current Operations, Cash Flow Constraints, Why Was SpeakEasy Been Halted, and Corporate Restructure.
Each segment will answer any questions to our best abilities, without releasing material, undisclosed information.
With the issuance of the press releases issued in February, 2022, these do not impede the Company’s ability to perform its daily operations. It is business as usual at the Cannabis Complex facility at Rock Creek.
The SpeakEasy team has been and will continue to work on, processing purchase orders to meet monthly demands and shipping deadlines. We’re excited to have started 2022 with a milestone achievement of increasing our sales by 100% from the previous month (see Press Release, February 11, 2022). Based on our sales projections, with no additional vendors, SpeakEasy anticipates to continue with a healthy revenue stream and strong profit margins through to the summer of 2022.
As we navigate through this difficult time, our team has taken a more aggressive approach to product innovation, accepting new vendors and opening doors to international sales.
It is unfortunate that this halt came at a time where our monthly sales are increasing month over month. We hope that news of uninterrupted sales is a silver lining that brings a small comfort to our investors during this time.
We have started operations in our new 13,300 sq ft growing facility. Previously, our craft cannabis sales were capped due to capacity limitations, however, the additional facility will allow for the production of up to 350 KG of output per month.
Our craft cannabis sales were consistently sold out through 2021 based on capacity, and our current purchase orders have spoken for 100 KG of craft flower for the foreseeable future.
Our team has initiated the processing of the 2021 harvest into concentrates and production will continue to run at capacity.
Lastly, the Company is not now, nor does it have any plans in the near future, to file for bankruptcy.
Cash Flow Constraints
Although our industry is growing, we see many companies struggling with sales and cutting operating costs to free up their capital. The lack of traditional financing opportunities poses great challenges, especially when it comes to a business like ours.
The lack of traditional financing options means that we’re strictly reliant on sales to our vendors. Payment terms in our industry can mean that two slow months of sales turns into half a year without cash coming in. As our outdoor facility has only been licenced since April of 2020, and our extracts sales licence was granted in September of 2021, you can see how these delays would impact our business.
Cash flow constraints come with tough decisions. Our collective decision was to keep our production and output consistent and remain focused on B to B sales for the time being.
As many companies are experiencing similar pain points, new businesses are emerging to address these challenges in our sector such as invoice factoring and cannabis industry specific lenders.
Business development’s key focus has been proactively building relationships with these emerging companies. We understand the cash-flow constraints of today but also recognize them for future phases of business growth.
The Company is committed to exploring new financial tools while building strong relationships with other service providers to ensure we can scale our business into the next phase when the time is right.
As our purchase orders are being processed and new relationships are being secured, we anticipate our cash constraints being eased over the next few quarters.
Why The company Was Halted
On February 28th, SpeakEasy confirmed that it would not be in a position to file its audited financial statements and accompanying management discussion and analysis for the fiscal year ended July 31, 2022 and that the British Columbia Securities Commission confirmed it was not in a position to grant a further extension to the previously issued Management Cease Trade Order. The result was that SpeakEasy was issued a Cease Trade Order on March 2, 2022.
The delay of financials was first announced on November 25th, 2021 and up until February 22nd, the management team was under the impression that SpeakEasy would be in a position to file its required filings.
Key factors that contributed to this result were:
- The lack of financing tools available.
- Industry payment terms.
- Third party scheduling.
- The complexity of our financials.
- Audit companies industry wide are experiencing staffing issues and Covid related challenges.
SpeakEasy has been a public company for nearly 4 years. These 4 years have been filled with many delays, hurdles, but most importantly growth. As our sales continue to increase and the potential for high-growth becomes a reality, we look to attract new executives that can assist on the corporate side of the business while leveraging their public market knowledge.
We are currently working closely with the auditors to finalize an audit completion process. Our top priority is to file the audited financial statements and accompanying management discussion and analysis for the fiscal year-ended July 31, 2021 and for the interim period ended October 31, 2021 and get SpeakEasy trading again. At this time, we do not have a clear timeline, as we are reliant on both the auditors and the other regulatory bodies.
Once the 2021 Year End financials are released, Q1, 2022 and Q2 2022 financials will be filed, and an announcement on the 2021 harvest output will follow shortly thereafter.
As we evolved throughout the years our founding principles and core values have been fortified. We have made SpeakEasy vertically integrated from a production standpoint. With sales continuing to increase, SpeakEasy is positioned with a competitive advantage due to its low cost of cultivation, and an on site extraction facility that allows the company to significantly reduce its logistics costs.
Many team members of SpeakEasy are also shareholders. Like you, their family members and friends are also invested in SpeakEasy. We started as a family owned business, and we are committed to pushing SpeakEasy into this next phase for the shareholders, individuals and families that have supported us from the start.
We will not leave our investors in the dark. You can expect a weekly newsletter from our team that will detail business updates as well as answer any general questions that we have received from our investors during the week.
We thank you for your patience and continued support during this time.
About SpeakEasy Cannabis Club Ltd.
SpeakEasy Cannabis Club Ltd. holds a cultivation, processing and sales licence issued by Health Canada under the Cannabis Act. SpeakEasy owns 290 acres of land in Rock Creek, British Columbia, and leverages five generations of farming experience in B.C. as well as its favourable location to grow and process high-quality cannabis products at low cost. SpeakEasy cultivates small batch, high quality craft cannabis at scale in a portion of its 63,200 square foot indoor cannabis complex and has completed its harvest of its 60-acre outdoor field.
On behalf of the Board of the Directors
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This corporate update contains statements that constitute “forward-looking statements.” Such forward looking statements involve known and unknown risks, uncertainties and other factors that may cause SpeakEasy’s actual results, performance or achievements, or developments in the industry to differ materially from the anticipated results, performance or achievements expressed or implied by such forward-looking statements. Forward looking statements are statements that are not historical facts and are generally, but not always, identified by the words “expects,” “plans,” “anticipates,” “believes,” “intends,” “estimates,” “projects,” “potential” and similar expressions, or that events or conditions “will,” “would,” “may,” “could” or “should” occur.
Forward-looking statements in this document include statements concerning its expectation to file the Required Filings and the anticipated timing thereof, the Company’s ability to continue to satisfy the requirements of NP 12-203 and all other statements that are not statements of historical fact.
Although SpeakEasy believes the forward-looking information contained in this update is reasonable based on information available on the date hereof, by their nature forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or other future events, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. By their nature, these statements involve a variety of assumptions, known and unknown risks and uncertainties and other factors, which may cause actual results, levels of activity and achievements to differ materially from those expressed or implied by such statements.
Examples of such assumptions, risks and uncertainties include, without limitation, assumptions, risks and uncertainties associated with the global COVID-19 pandemic, including the risk that the Company be deemed a non-essential business and asked to temporarily cease operations; general economic conditions; adverse industry events; future legislative and regulatory developments involving cannabis; the Company’s ability to access sufficient capital from internal and external sources, and/or inability to access sufficient capital on favorable terms; the cannabis industry in Canada and generally; the demand for cannabis and cannabis related products, the ability of SpeakEasy to implement its business strategies; competition; the ability of SpeakEasy to obtain and retain all applicable licences under the Cannabis Act and other assumptions, risks and uncertainties.
THE FORWARD-LOOKING INFORMATION CONTAINED IN THIS UPDATE REPRESENTS THE EXPECTATIONS OF THE COMPANY AS OF THE DATE OF THIS UPDATE AND, ACCORDINGLY, IS SUBJECT TO CHANGE AFTER SUCH DATE. READERS SHOULD NOT PLACE UNDUE IMPORTANCE ON FORWARD-LOOKING INFORMATION AND SHOULD NOT RELY UPON THIS INFORMATION AS OF ANY OTHER DATE. WHILE THE COMPANY MAY ELECT TO, IT DOES NOT UNDERTAKE TO UPDATE THIS INFORMATION AT ANY PARTICULAR TIME EXCEPT AS REQUIRED IN ACCORDANCE WITH APPLICABLE LAWS.