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Decibel Cannabis Company Inc.  (TSXV: DB) (OTCQB: DBCCF) announced its unaudited interim financial results for the first quarter ending March 31, 2024. Decibel reported that its revenue fell to C$32.6 million in the first quarter from last year’s C$40.5 million for the same period.

Decibel attributed the decline to increased competition in the infused pre-roll segment, vape consumers switching towards large format 510 cartridges and disposables, and the halting of exports to Israel as the company transitioned to a new distribution partner. After the quarter ended, Decibel launched large format 510 cartridges and disposables hoping to capture sales in that format.

Decibel also reported that its net losses grew to C$3.3 million versus last year’s net loss of half a million. However, Decibel noted that the C$3.3 million impairment negatively impacted the adjusted net income on the Prairie Record’s assets held for sale during the first quarter of 2024. The company said it agreed to sell its Prairie Records retail property to Fire & Flower in February and expected to get C$3.3 million from the sale. The deal closed after the quarter ended on April 10, 2024.

“Despite the drop in revenue, we remain one of Canada’s top brands by market share.  With a focused effort on our strategy, we expect an improved Q2 and more importantly a continued path to sustainable growth and profitability.  I am currently undergoing a comprehensive business review and I look forward to sharing the initiatives undertaken before July 15th.” said Benjamin Sze, Decibel’s Chief Executive Officer.

Israel problems

Decibel said in its MD&A that in January 2024, the Israeli government issued a notification naming Canadian cannabis companies, including Decibel, indicating the launch of an “anti-dumping” investigation in respect of Canadian cannabis exports to Israel. The company was named in the investigation and told investors it was participating in the investigation, which is voluntary. The MD&A stated, “A finding of “dumping” under international trade law could result in the imposition of a dumping duty on Israeli importers of Canadian cannabis exports by companies whose pricing practices are determined to violate anti-dumping laws.”

During the quarter, the company said it signed a supply agreement with a new Israel counterparty, contemplating an annual commitment by the Israeli company to purchase 1,000 kg of craft cannabis. Also during the quarter, an Israeli customer defaulted on its payments required under a cannabis supply agreement with the company, leading it to provision C$1.6 million of such receivable.

Decibel said it took formal legal action to collect the receivable, and the Israeli company subsequently filed an insolvency motion. Decibel joined these proceedings and formally filed its claim with the trustee. The company said it believes there is 300kg of inventory related to this provisioned receivable that is currently accessible, and that a portion of the receivable may be recoverable through a resale agreement of this inventory with the trustee and another Israeli company.

The company is also reporting its earnings as a going concern, however, it said it has confidence it will be able to comply with the financial covenants applicable to the credit facility with Connect First Credit Union Ltd. for at least the next twelve months.

The post Decibel Cannabis reports falling revenue due to increased competition appeared first on Green Market Report.

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Debra Borchardt, KahliBuds, 420GrowLife