Debra Borchardt
Entourage Health Corp. (TSX-V: ENTG) (OTCQX: ETRGF) announced its financial results for the second quarter ending June 30, 2023. Entourage reported total revenue increased 1% to $13.37 million over last year’s revenue of $13.18 million. However, revenue fell sequentially from the first quarter’s $15 million. The company also reported a loss of $9.5 million.
“Through the transition to a streamlined model and our strategic collaboration with our trusted supply partner, we’ve achieved strong results that are driving us toward a leaner and more operationally efficient framework. We’re optimizing the value of every revenue dollar, magnifying our profit margins, and bolstering our cash performance. These strides enhance our financial resilience and position us to capitalize on the surging demand for our products, charting a promising path for our business growth,” said George Scorsis, CEO and Executive Chair.
Going Concern
Despite the company’s best efforts, Entourage is reporting its financials as a going concern. In the company’s filings, it stated that as of June 30, 2023, it had a working capital of $(120,287,938) (December 31, 2022 – $(101,793,647) and an accumulated deficit of $(338,455,409) (December 31, 2022– $(319,368,021).
Entourage said it thinks it has enough cash on hand to service its liabilities and fund operating costs for the immediate future with the additional sources of funding actually received in February 2023, as well as additional funding expected during 2023. However, there is uncertainty as to how long these funds will last. The company reported that it has total current liabilities of $151 million (December 31, 2022: $141,878,963) with cash on hand of $9.4 million.
In April 2023, the company reached an agreement to sell its Strathroy facility which netted $8.5 million that was used to repay the Bank of Montreal debt. With regard to the credit facility, Entourage said it was in breach to comply with its financial covenant to maintain a certain minimum quarterly EBITDA target as of June 30, 2023, but the company was seeking a waiver.
Positives
On a positive note, the company has been cutting costs with selling, general, and administrative (SG&A) expenses declining 13% to $6.85 million. It was primarily driven by layoffs, predominantly linked to the exit of cultivation activities in March 2023.
In June, the company fulfilled its first international order—an impressive 100kg of bulk medicinal cannabis dispatched to Australia through a partnership with Lyphe Australia Pty Ltd., a fully-owned subsidiary of Lyphe Group Ltd. In the company’s statement, it said that four of the company’s premium strains will now be available to medicinal cannabis patients through Lyphe, cementing our global market presence and accelerating our strategic growth agenda.
“In Q2, we maintained a strong commitment to enhancing operational efficiency throughout our business,” highlighted Vaani Maharaj, CFO of Entourage. “Our efforts translated into tangible results: they have effectively trimmed our expense base, balancing cost reduction while maintaining product quality. This marks a transition from the previous quarter, significantly strengthening our company as we continue to stay resolute amid the ebbs and flows of the industry, underscoring our commitment to generating substantial shareholder value.”
Finally, the board opted to take its compensation in stock versus cash.
