Debra BorchardtStateHouse Holdings Inc. (CSE: STHZ) (OTCQX: STHZF) announced revenues rose 42% over last year to $24.7 million for the first quarter ending March 31, 2023. Retail revenues rose 58% over last year’s first quarter to $14.4 million. However, revenues for StateHouse dipped from the fourth quarter sales of $25.5 million which the company blamed on seasonal factors and reduced foot traffic in the stores.
The net loss for the quarter was essentially flat at $10 million. The net loss per share improved to ($0.05) versus last year’s net loss per share of ($0.10).
“We’re off to a fantastic start in 2023,” said Ed Schmults, Chief Executive Officer of StateHouse. “Our focus remains on driving unparalleled customer satisfaction and loyalty through innovative product offerings and one of the most valuable customer loyalty programs in the industry.”
Going Concern Remains
Despite Schmults’s rosy vision, as of March 31, 2023, the company had cash of $2.6 million and a working capital deficit of $107 million. Statehouse wrote in its filing that it has experienced recurring operating losses of $10,603,411 and $10,412,298 for the quarters ending March 31, 2023, and 2022, respectively. It had an accumulated operating deficit of $369 million at the end of the first quarter. In addition, the company had negative cash flows from operating activities at the end of the quarter $1,358,924. Statehouse said it got its fifth extension on its Senior Secured Debt, however, it will need to refinance or obtain additional funding in order to pay down the Senior Secured Debt at the extended maturity date of June 5, 2023.
Statehouse said it has reduced headcount by an additional 16% from January 1, 2023, to May 30, 2023. The company also said it is also exploring the potential sale of various non-core assets, which is expected to generate approximately $1-3 million of non-dilutive capital to strengthen its balance sheet and fund its growth objectives. The company said it can sustain its current operations, but its cash needs are significant and not achievable with the current cash flow. On a positive note, Statehouse got $6.4 million of ERC funds after the quarter ended.
During the quarter, Statehouse cut its operating expenses from the prior quarter by approximately $12 million annualized. The company said it made the reductions through process improvements, outsourcing of distribution, upgraded and consolidated technology, and the elimination of redundant operations and service providers.
Schmults added, “With our fully integrated supply chain and industry leading scale we anticipate realizing additional cost synergies throughout this year through the addition of new automation capabilities and further refinement and optimization of our operations. In April we celebrated our momentous one-year anniversary as a unified powerhouse, propelling ourselves to the forefront of the California cannabis landscape. It has been an exciting year and we believe our unwavering pursuit of excellence throughout this integration has strongly positioned us on the right pathway to success.”
Looking ahead, StateHouse said it expects to achieve positive EBTIDA in 2023 and maintains focus to become cash flow positive before the end of 2023.
