StateHouse Reports First Quarter 2023 Financial Results - Seite 3

While Q1 revenues declined slightly sequentially due to seasonal factors and reduced foot traffic in retail, the Company has continued to generate strong gross profit before biological asset adjustments and gross margin of $10.9 million or 44.3% of total revenue. Additionally, during Q1, the Company reduced operating expenses from the prior quarter by approximately $12.0 annualized. These reductions have been achieved through a comprehensive evaluation of Company operations, including process improvements, outsourcing of distribution, upgraded and consolidated technology, and the elimination of redundant operations and service providers. Management reduced headcount an additional 16% from January 1, 2023 to May 30, 2023. Management is also exploring the potential sale of various non-core assets, which is expected to generate approximately $1-3 million of non-dilutive capital⁽³⁾ to strengthen its balance sheet and fund its growth objectives⁽²⁾.

The Company has continued to execute on improvements at its cultivation operations, with significant enhancements being made at its Salinas facility. The Company expects flower yields and efficiency to improve during 2023 through infrastructure investments that will increase CO2 and light distribution, which will foster cannabis yields and potency while it continues to reduce costs and drive efficiency.

In its retail operations, the Company has focused on increasing profitability despite competitive pressures related to sales discounting.  Gross margins have held steady as the Company moves further towards its goal of in-house branded products representing approximately 40% of total retail sales.

The Company has completed a number of integration milestones to establish itself as a leading California cannabis company. StateHouse is now well positioned as a focused, integrated CPG business with proprietary production, processing, brands, and retail stores. This strong platform will provide the foundation for growth, as well as improvements in profitability. Based on improvements in the business and what has been achieved to date, the Company expects to generate positive Adjusted EBITDA⁽¹⁾⁽³⁾  and to begin generating positive cash flow before the end of 2023⁽³⁾.