Decibel books CA$1.7 million profit on rising cannabis sales

Decibel Cannabis Co. recorded net income of 1.7 million Canadian dollars ($1.3 million) for the 2021 fiscal year and positive adjusted EBITDA of CA$7.4 million on the back of growing cannabis sales.

Unlike larger and better funded competitors Tilray Brands, Hexo Corp. and Canopy Growth Corp., Decibel said Friday it managed to increase its share of the market over the past six months, rising from under 4% last summer to approximately 5% in March 2022, which is also higher than Cronos and Aurora Cannabis.

Annual sales were CA$52.5 million in 2021, and the Calgary, Alberta-based company reported its third consecutive increase in quarterly net sales.

Fourth-quarter revenue ended Dec. 31, 2021, was CA$14 million, up from CA$13.4 million in the quarter ended Aug. 31, 2021.

Competitors suffered significant declines in cannabis sales over the same period of time.

Decibel said the 5% increase in sales over the previous quarter was primarily driven by the launch of its infused pre-roll lines and growth in demand for flower, vape and concentrates.

Decibel also reported selling 2,181 kilograms (4,808 pounds) of cannabis for the 12 months ended Dec. 31, 2021, as compared to 1,160 kilograms in the previous year.

Average wholesale flower price per gram was CA$6.80 and CA$8.58 for the three and 12 months ended Dec 31, 2021, respectively.

That’s down sharply from CA$10.21 and CA$10.17 in the same two time periods last year, respectively.

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However, for the third consecutive year, auditor KPMG cited a material uncertainty that “may cast significant doubt” on Decibel’s ability to continue as a going concern.

KPMG pointed to Decibel’s net income of CA$1.7 million as compared to funds used from operations of CA$17.1 million.

In a regulatory filing, Decibel said the future of the company is dependent on its ability to attain profitable operations and maintain compliance with covenants relating to its lending agreements and obtaining new financing, among other factors.

“There is no certainty that the company will raise these necessary funds from operations or financings,” according to the filing.

“As a result of these factors, there is material uncertainty that may result in significant doubt as to the ability of the company to meet its obligations as they come due and continue as a going concern.”

Decibel generated cash flow from operations of negative CA$17.2 million on the year.

Decibel had CA1.9 million in cash as of the end of last year.

In February 2022, Decibel entered into an amended CA$54 million credit deal with Connect First Credit Union over an initial five-year term.

Shares of Decibel trade as DB on the TSX Venture Exchange.