Adastra reports record sales in 2023, but remains in the red

Canadian cannabis processor and producer Adastra Holdings Ltd. (CSE: XTRX) reported its financial results for the fourth quarter and fiscal year ending Dec. 31, 2023, showing its highest sales haul yet, which was coupled with a rise in net loss.

For the fiscal year, the company posted gross revenue of C$37.7 million, marking a 108% increase over the previous year. After excise taxes, net revenue came out to C$22.2 million, up 67% from C$13.3 million in the same period the year before.

The jump in sales was primarily attributed to higher demand for Adastra’s in-house brand, which was met with increased production at the company’s facility in Langley, British Columbia.

Still, Adastra posted a net loss of C$3.54 million in 2023, a 17% rise from the previous year. The company cited increased spending on marketing initiatives to boost brand awareness as the main reason for the higher loss.

According to filings, auditors noted material uncertainty “that may cast significant doubt” on the company’s ability to continue as a going concern. As of Dec. 31, 2023, Adastra had a working capital deficiency of around C$6 million and a deficit of C$21.7 million.

However, Adastra generated record cash from operating activities of C$1.9 million for the year.

Looking ahead, Adastra said it expects to maintain its growth momentum and has already achieved new milestones, including a record single purchase order of C$1 million in March.

“Moreover, we’re committed to a renewed focus on cost-saving measures aimed at ensuring profitability,” interim CEO Lachlan McLeod said.

The firm during the year also received permission from the Canadian government to sell limited amounts of cocaine and psilocybin to pharmacies, hospitals, and researchers. The license allows the company to sell up to 1,000 grams of psilocybin and “interact” with 250 grams of cocaine, as well as import coca leaves for manufacturing and synthesizing cocaine.

While it didn’t exactly mean the legalization of such substances for recreational use in Canada, McLeod said at the time it was announced that the company would “evaluate how the commercialization of this substance fits in with our business model.”