Positive Near-Term Sales Trend Expected, Significant Operational Adjustments Implemented
Charlotte, North Carolina--(Newsfile Corp. - May 13, 2022) - cbdMD, Inc. (NYSE American: YCBD) (NYSE American: YCBDpA), one of the nation's leading and most highly trusted and recognized CBD companies, and operator of three of the leading CBD brands -- its flagship brand cbdMD, its animal health brand Paw CBD and its beauty and skincare brand cbdMD Botanicals, -- today announced our financial results for March 31, 2022, as we generated $9.6 million in net sales or an increase of 3.3% sequentially.
"Sales trends have firmed-up and we expect an upward trajectory as we continue through calendar 2022. New sales and marketing strategies have been implemented and near-term results are showing promise. Our cost structure has been significantly adjusted which we believe will result in a reduction in future cost and expenses by over 25% or $10 million per year. Going forward, we expect that as our sales growth returns and as our infrastructure becomes more streamlined, our operational results should improve. Our goal is to maintain a cost structure which will yield a positive adjusted EBITDA at quarterly net sales which we achieved in our prior fiscal year. Since our CBD sales commenced in 2018, we have fulfilled over 1.5 million customer orders which have generated over $125 million in net sales. We believe that our premium brands provide a compelling customer experience at a competitive price point. Our expansion into new categories and markets show promise. We have had numerous regulatory and research and development achievements this past quarter which we believe will result in our brands mainstream acceptance as the regulatory climate codifies. Our market share continues to remain strong, and we are optimistic about our future," said Martin Sumichrast, Chairman & co-CEO.
Financial Highlights from our March 31, 2022, Quarter:
- We reported that our net sales for the March 31, 2022, quarter were $9.6 million versus net sales of $9.3 million quarter ending December 31, 2021, or sequential growth of 3.3%. Our net sales for the March 31, 2022, quarter were down 18% compared to the prior year quarter ended March 31, 2021.
- We reported that our March 31, 2022, e-commerce, direct to consumer (DTC) net sales were $6.6 million, versus $7.1 million for our quarter ending December 31, 2021, or a sequential decline of 7.52%. Our e-commerce net sales were down 24.9% compared to the prior year quarter ended March 31, 2021.
- We reported that our March 31, 2022, wholesale sales (including brick and mortar retail customers) was $3.0 million, versus $2.2 million quarter ending December 31, 2021, or sequential increase of 38.2%. Wholesale (including brick and mortar retail customers) net sales were down 11.3% compared to the prior year quarter ended March 31, 2021.
- We reported that our March 31, 2022, gross profit margin was 66.9% versus 63.0% (adjusted for one-time inventory charge) for the quarter ending December 31, 2021. Our gross profit margin was 69.1% in prior year quarter ended March 31, 2021.
- We reported that we are reducing our manufacturing and distribution costs as well as, selling, general and administrative costs (SG&A) which we believe will result in over $10 million of cost reductions or approximately 25% on an annualized basis. These cost reductions were implemented in the March 31, 2022, quarter and are expected to take effect in the Company's current quarter. We anticipate our SG&A to be reduced from $11.45 million in our March 31, 2022, quarter to approximately $9.6 million in our current quarter, in addition to lower manufacturing (as we have outsourced our manufacturing) and distribution costs.
- We reported our loss from operations was approximately $5.0 million in our March 31, 2022, quarter compared to $7.0 million for our quarter ending December 31, 2021, a decrease of approximately 28.6% sequentially. This decrease is primarily related to an increase in sales quarter over quarter as well a sequential decrease in operating expenses from the prior quarter. Our loss from operation was up 20% as compared to the prior year quarter ending March 31, 2021.
- We reported our non-GAAP adjusted operating loss was approximately $3.6 million in our March 31, 2022, quarter, compared to a $4.7 million for our quarter ending December 31, 2021. This decrease was primarily related to increased sales over the December 31, 2021, quarter as well as a sequential decrease in operating expenses of $500,000. Our non-GAAP adjusted operating loss was up 31% compared to the prior year quarter ending March 31, 2021.
- We reported that as of March 31, 2022, we had working capital of approximately $18.5 million and cash on hand of approximately $13.3 million. Cash on hand used during our March 31, 2022, quarter was approximately $3.7 million to fund operations (which was an 18% decrease from our December 31, 2021, quarter), $1 million to pay our Series A Preferred Dividend, $950,000 to fund receivables (mainly due to our GNC retail order) and $1 million to reduce our legacy payables.
Achievements from our March 31, 2022, Quarter:
We received the EU's Food Safety Authority Validation of our Hemp Extract Formulation: This validation represents a significant milestone and provides the Company an opportunity to expand its global footprint in an anticipated growing marketplace, that together with the UK, has a total addressable population more than 500 million people. According to a recent report by the Brightfield Group, the EU's CBD market is expected to grow to more than $2.3 billion by 2025, representing a five-year CAGR of over 33%.
We requested the Food and Drug Administration (FDA) to remove the drug exclusion for CBD and review cbdMD's extensive safety submission: In conjunction with the Natural Products Association (NPA), we filed a Citizen's Petition against the Food and Drug Administration (FDA) requesting the FDA to remove the drug exclusion for CBD and to review the Company's extensive dossier of identity, safety and quality data. Removing the drug exclusion for CBD will achieve clarity in the market and create a level playing field for all participants. The outcome of this process is expected to result in the ability of the Company to submit and receive acknowledgement for a New Dietary Ingredient Notification (NDIN). This will finally allow the Company to inform consumers of the benefits of its cannabinoid products and expand its sales in the United States by opening mass retail channels.
We became the first American CBD brand to receive validation by the UK Food Standards Agency: We received validation of our Novel Food application from the United Kingdom's Food Standards Agency for our natural plant-based CBD formulation. We are now approved to sell our proprietary and validated tinctures, gummies, and capsules across the UK.
We became the first CBD company to earn the prestigious NSF International's Certified for Sport® certification: We believe this highly respected designation of NSF Certified for Sport,® opens the door to acceptance by major sports leagues globally. The Company's award-winning, patent-pending proprietary broad spectrum hemp extract blend passed the rigorous testing standards set forth by NSF International for 4 of the Company's flagship products.
We expanded into 840 GNC Locations: We expanded our product offering and nationwide footprint with major retail partner GNC, with distribution in over 840 retail GNC stores nationwide. The product offerings included a variety of ingestibles, functional CBD gummies, sleep aids, soft gels and tinctures.
We signed 7x NASCAR Champion Jimmie Johnson as a brand ambassador: We entered into an endorsement agreement with 7-time NASCAR Cup Series (NCS) Champion and current NTT INDYCAR SERIES driver Jimmie Johnson as a strategic brand ambassador. cbdMD was also approved as a sponsor of INDYCAR.
We will host a conference call at 4:30 p.m., Eastern Time, on Friday, May 13, 2022, to discuss our March 31, 2022, second quarter financial results and business progress.
CONFERENCE CALL DETAILS
| Friday, May 13, 2022, 4:30 p.m. Eastern Time | |
| USA/Canada: | 800-319-4610 |
| International: | 604-638-5340 |
| Teleconference Replay dial in: | |
| USA/Canada: | 855-669-9658 |
| International: | 412-317-0088 |
| Replay Passcode: | 8972 |
| Webcast/Webcast Replay link- available through May 13, 2023: https://www.gowebcasting.com/11834 | |
About cbdMD, Inc.
cbdMD, Inc. is one of the leading and most highly trusted and most recognized cannabidiol (CBD) brands with a comprehensive line of U.S. produced, THC-free1 CBD products as well as our new Full Spectrum products. Our cbdMD brand currently includes over 130 SKUs of high-grade, premium CBD products including CBD tinctures, CBD gummies, CBD topicals, CBD capsules, CBD bath bombs, CBD bath salts, CBD sleep aids and CBD drink mixes. Our Paw CBD brand of pet products includes over 45 SKUs of veterinarian-formulated products including tinctures, chews, topicals products in varying strengths, and our CBD Botanicals brand of beauty and skincare products features 15 SKUs, including facial oil and serum, toners, moisturizers, clear skin, facial masks, exfoliants and body care. To learn more about cbdMD and their comprehensive line of U.S. grown, THC-free1 CBD oil and Full Spectrum products, please visit www.cbdmd.com, follow cbdMD on Instagram and Facebook, or visit one of the thousands of retail outlets that carry cbdMD's products.
Forward-Looking Statements
This press release contains certain forward-looking statements that are based upon current expectations and involve certain risks and uncertainties within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements can be identified using words such as ''should,'' ''may,'' ''intends,'' ''anticipates,'' ''believes,'' ''estimates,'' ''projects,'' ''forecasts,'' ''expects,'' ''plans,'' and ''proposes.'' These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict. You are urged to carefully review and consider any cautionary statements, including but not limited to expectations on cost reductions, and other disclosures, including the statements made under the heading "Risk Factors" in cbdMD, Inc.'s Annual Report on Form 10-K for the fiscal year ended September 30, 2021 as filed with the Securities and Exchange Commission (the "SEC") on December 17, 2021 and our other filings with the SEC. All forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, many of which are generally outside the control of cbdMD, Inc. and are difficult to predict. cbdMD, Inc. does not undertake any duty to update any forward-looking statements except as may be required by law. The information which appears on our websites and our social media platforms, including, but not limited to, Instagram and Facebook, is not part of this press release.
1 THC-free is defined as below the level of detection using validated scientific analytical methods.
Non-GAAP Financial Measures
This press release includes a financial measure that excludes the impact of certain items and therefore has not been calculated in accordance with U.S. generally accepted accounting principles ("GAAP"). cbdMD, Inc. has included adjusted loss from operations because management uses this measure to assess operating performance in order to highlight trends in our business that may not otherwise be apparent when relying on financial measures calculated in accordance with GAAP. The adjusted operating loss has not been prepared in accordance with GAAP. This non-GAAP financial measure should not be considered as an alternative to, or more meaningful than, net loss from operations as an indicator of our operating performance. Further, this non-GAAP financial measure, as presented by cbdMD, Inc., may not be comparable to similarly titled measures reported by other companies. cbdMD, Inc. has attached to this press release a reconciliation of this non-GAAP financial measure to its most directly comparable GAAP financial measure.
| cbdMD, INC. | |||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
| MARCH 31, 2022 AND SEPTEMBER 30, 2021 | |||||||
| (Unaudited) | |||||||
| March 31, | September 30, | ||||||
| 2022 | 2021 | ||||||
| Assets | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 13,336,850 | $ | 26,411,424 | |||
| Accounts receivable | 2,045,602 | 1,113,372 | |||||
| Accounts receivable - discontinued operations | 1,375 | 10,967 | |||||
| Marketable securities | - | 33,351 | |||||
| Investment other securities | 1,000,000 | 1,000,000 | |||||
| Inventory | 4,713,041 | 5,021,867 | |||||
| Inventory prepaid | 519,128 | 551,519 | |||||
| Prepaid sponsorship | 1,474,350 | 1,212,682 | |||||
| Prepaid expenses and other current assets | 1,236,744 | 1,147,178 | |||||
| Total current assets | 24,327,090 | 36,502,360 | |||||
| Other assets: | |||||||
| Property and equipment, net | 2,334,619 | 2,561,574 | |||||
| Operating lease assets | 5,025,669 | 5,614,960 | |||||
| Deposits for facilities | 138,708 | 529,583 | |||||
| Intangible assets, net | 18,389,258 | 23,003,929 | |||||
| Goodwill | 42,772,685 | 56,670,970 | |||||
| Total other assets | 68,660,939 | 88,490,016 | |||||
| Total assets | $ | 92,988,029 | $ | 124,992,376 | |||
| CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
| DECEMBER 31, 2021 AND SEPTEMBER 30, 2021 | |||||||
| (continued) | |||||||
| (Unaudited) | |||||||
| March 31, | September 30, | ||||||
| 2022 | 2021 | ||||||
| Liabilities and shareholders' equity | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 2,746,837 | $ | 2,978,914 | |||
| Deferred revenue | 1,840,797 | 2,727,612 | |||||
| Accrued expenses | 1,136,018 | 1,151,150 | |||||
| Note payable | 61,483 | 59,470 | |||||
| Total current liabilities | 5,785,135 | 6,917,146 | |||||
| Long term liabilities: | |||||||
| Long term liabilities | 77,732 | 108,985 | |||||
| Operating leases - long term portion | 4,278,733 | 4,859,058 | |||||
| Contingent liability | 2,823,000 | 9,856,000 | |||||
| Total long term liabilities | 7,179,465 | 14,824,043 | |||||
| Total liabilities | 12,964,600 | 21,741,189 | |||||
| shareholders' equity: | |||||||
| Preferred stock, authorized 50,000,000 shares, $0.001 | |||||||
| par value, 5,000,000 and 500,000 shares issued and outstanding, respectively | 5,000 | 5,000 | |||||
| Common stock, authorized 150,000,000 shares, $0.001 | |||||||
| par value, 58,352,213 and 57,783,340 shares issued and outstanding, respectively | 59,352 | 57,783 | |||||
| Additional paid in capital | 179,116,064 | 176,417,269 | |||||
| Accumulated deficit | (99,156,987 | ) | (73,228,865 | ) | |||
| Total shareholders' equity | 80,023,429 | 103,251,187 | |||||
| Total liabilities and shareholders' equity | $ | 92,988,029 | $ | 124,992,376 | |||
| cbdMD, INC. | |||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||
| FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 2022 AND 2021 | |||||||||||||
| Three Months | Three Months | Six Months | Six Months | ||||||||||
| Ended | Ended | Ended | Ended | ||||||||||
| March 31, | March 31, | March 31, | March 31, | ||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||
| Gross Sales | $ | 9,948,858 | $ | 12,457,386 | $ | 19,805,625 | $ | 25,520,568 | |||||
| Allowances | (319,972 | ) | (658,775 | ) | (854,917 | ) | (1,393,654 | ) | |||||
| Total Net Sales | 9,628,886 | 11,798,611 | 18,950,708 | 24,126,914 | |||||||||
| Cost of sales | 3,186,564 | 3,643,127 | 7,514,874 | 7,073,402 | |||||||||
| Gross Profit | 6,442,322 | 8,155,484 | 11,435,834 | 17,053,512 | |||||||||
| Operating expenses | 11,452,700 | 12,323,207 | 23,407,984 | 22,981,180 | |||||||||
| Impairment of Goodwill and other intangible assets | - | - | 18,183,285 | - | |||||||||
| Loss from operations | (5,010,378 | ) | (4,167,723 | ) | (30,155,435 | ) | (5,927,668 | ) | |||||
| Realized and Unrealized gain (loss) on marketable and other securities, including impairments | - | 2,852 | (33,352 | ) | 545,562 | ||||||||
| Decrease (increase) of contingent liability | 353,000 | (8,871,000 | ) | 6,303,000 | (17,371,000 | ) | |||||||
| Other income (expense) | 2,249 | - | 72,987 | - | |||||||||
| Interest (expense) income | (2,086 | ) | (10,603 | ) | (5,320 | ) | (20,990 | ) | |||||
| Loss before provision for income taxes | (4,657,215 | ) | (13,046,474 | ) | (23,818,120 | ) | (22,774,096 | ) | |||||
| Benefit for income taxes | - | 536,000 | - | 868,000 | |||||||||
| Net Loss | (4,657,215 | ) | (12,510,474 | ) | (23,818,120 | ) | (21,906,096 | ) | |||||
| Net Loss | (4,657,215 | ) | (12,510,474 | ) | (23,818,120 | ) | (21,906,096 | ) | |||||
| Preferred dividends | 1,000,500 | 560,280 | 2,001,002 | 660,330 | |||||||||
| Net Loss attributable to cbdMD, Inc. common shareholders | $ | (5,657,715 | ) | $ | (13,070,754 | ) | $ | (25,819,122 | ) | $ | (22,566,426 | ) | |
| Net Loss per share: | |||||||||||||
| Basic earnings per share | (0.10 | ) | (0.24 | ) | (0.44 | ) | (0.43 | ) | |||||
| Diluted earnings per share | (0.10 | ) | (0.24 | ) | (0.44 | ) | (0.43 | ) | |||||
| Weighted average number of shares Basic: | 58,966,979 | 53,471,607 | 59,073,963 | 52,793,872 | |||||||||
| Weighted average number of shares Diluted: | 58,966,979 | 53,471,607 | 59,073,963 | 52,793,872 | |||||||||
| cbdMD, INC. | |||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS | |||||||||||||
| FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 2022 AND 2021 | |||||||||||||
| Three Months | Three Months | Six Months | Six Months | ||||||||||
| Ended | Ended | Ended | Ended | ||||||||||
| March 31, | March 31, | March 31, | March 31, | ||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||
| Net (Loss) Income | $ | (4,657,215 | ) | $ | (12,510,474 | ) | $ | (23,818,120 | ) | $ | (21,906,096 | ) | |
| Comprehensive (Loss) Income | (4,657,215 | ) | (12,510,474 | ) | $ | (23,818,120 | ) | $ | (21,906,096 | ) | |||
| Preferred dividends | (1,000,500 | ) | (560,280 | ) | $ | (2,001,002 | ) | $ | (660,330 | ) | |||
| Comprehensive (Loss) Income attributable to cbdMD, inc. common shareholders | $ | (5,657,715 | ) | $ | (13,070,754 | ) | $ | (25,819,122 | ) | $ | (22,566,426 | ) | |
| cbdMD, INC. | |||||||
| CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS | |||||||
| FOR THE SIX MONTHS ENDED MARCH 31, 2022 and 2021 | |||||||
| Six Months | Six Months | ||||||
| Ended | Ended | ||||||
| March 31, | March 31, | ||||||
| 2022 | 2021 | ||||||
| Cash flows from operating activities: | |||||||
| Net Loss | $ | (23,818,120 | ) | $ | (21,906,096 | ) | |
| Adjustments to reconcile net (income) loss to net | |||||||
| cash used by operating activities: | |||||||
| Stock based compensation | 797,096 | 451,527 | |||||
| Restricted stock expense | 837,267 | 547,140 | |||||
| Marketing stock amortization | 339,520 | - | |||||
| Issuance of stock / warrants for service | - | 155,695 | |||||
| Inventory and materials impairment | 878,142 | - | |||||
| Intangibles amortization | 329,671 | - | |||||
| Depreciation | 600,750 | 473,324 | |||||
| Impairment of Goodwill and other intangible assets | 18,183,285 | - | |||||
| Increase/(Decrease) in contingent liability | (6,303,000 | ) | 17,371,000 | ||||
| Realized and unrealized loss of Marketable and other securities | 33,350 | (5,562 | ) | ||||
| Termination benefit | - | 352,279 | |||||
| Amortization of operating lease asset | 589,291 | 611,298 | |||||
| Changes in operating assets and liabilities: | |||||||
| Accounts receivable | (932,230 | ) | (936,983 | ) | |||
| Deposits | 390,875 | 1,125 | |||||
| Inventory | (569,316 | ) | 271,815 | ||||
| Prepaid inventory | 32,391 | (190,451 | ) | ||||
| Prepaid expenses and other current assets | (354,752 | ) | 44,408 | ||||
| Accounts payable and accrued expenses | (1,129,614 | ) | (1,366,373 | ) | |||
| Operating lease liability | (595,457 | ) | (540,664 | ) | |||
| Deferred revenue / customer deposits | 10,723 | (41,418 | ) | ||||
| Collection on discontinued operations accounts receivable | 9,592 | 424,917 | |||||
| Deferred tax liability | - | (868,000 | ) | ||||
| Cash used by operating activities | (10,670,536 | ) | (5,151,019 | ) | |||
| Cash flows from investing activities: | |||||||
| Proceeds from sale of other investment securities | - | (750,000 | ) | ||||
| Purchase of property and equipment | (373,795 | ) | (226,542 | ) | |||
| Cash provided (used) by investing activities | (373,795 | ) | (976,542 | ) | |||
| Cash flows from financing activities: | |||||||
| Proceeds from issuance of preferred stock | - | 15,798,115 | |||||
| Note payable | (29,240 | ) | (123,268 | ) | |||
| Preferred dividend distribution | (2,001,002 | ) | (660,330 | ) | |||
| Cash provided by financing activities | (2,030,242 | ) | 15,014,517 | ||||
| Net increase (decrease) in cash | (13,074,573 | ) | 8,886,955 | ||||
| Cash and cash equivalents, beginning of period | 26,411,424 | 14,824,644 | |||||
| Cash and cash equivalents, end of period | $ | 13,336,851 | $ | 23,711,600 | |||
| Supplemental Disclosures of Cash Flow Information: | |||||||
| 2022 | 2021 | ||||||
| Cash Payments for: | |||||||
| Interest expense | $ | - | $ | - | |||
| Non-cash financial activities: | |||||||
| Issuance of Contingent earnout shares: | $ | 730,000 | $ | 11,271,000 | |||
| Warrants issued to representative | $ | - | $ | 254,950 | |||
| cbdMD, Inc. | |||||||||||||
| SUPPLEMENTAL FINANCIAL INFORMATION | |||||||||||||
| RECONCILIATION OF NON-GAAP ADJUSTED INCOME (LOSS) FROM OPERATIONS | |||||||||||||
| Three Months | Three Months | Six Months | Six Months | ||||||||||
| Ended | Ended | Ended | Ended | ||||||||||
| March 31, | March 31, | March 31, | March 31, | ||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||
| GAAP (loss) from operations | $ | (5,010,378 | ) | $ | (4,167,723 | ) | $ | (30,155,435 | ) | $ | (5,927,668 | ) | |
| Adjustments: | |||||||||||||
| Depreciation | 600,750 | 240,517 | 600,750 | 473,323 | |||||||||
| Employee and director stock compensation (1) | 754,207 | 825,833 | 1,634,363 | 1,090,007 | |||||||||
| Other non-cash stock compensation for services (2) | - | 33,358 | - | 69,071 | |||||||||
| Inventory adjustment (3) | - | - | 878,142 | - | |||||||||
| Write down of legacy accounts receivable (4) | - | - | - | - | |||||||||
| Impairment of goodwill and other intangible assets (5) | - | - | 18,029,000 | - | |||||||||
| Accrual for severance | 22,500 | 299,610 | 22,500 | 703,022 | |||||||||
| Accrual / expenses for discretionary bonus | - | - | 150,000 | 300,000 | |||||||||
| Non-GAAP adjusted (loss) from operations | $ | (3,632,921 | ) | $ | (2,768,404 | ) | $ | (8,840,680 | ) | $ | (3,292,245 | ) | |
(1) Represents non-cash expense related to options, warrants, restricted stock expenses that have been amortized during the period.
(2) Represents non-cash expense related to options, warrants, restricted stock expenses that have been amortized during the period.
(3) Represents an operating expense related to inventory loss related to regulatory changes impacting labels and packaging and obsolete/expired inventory.
(4) Write down of legacy accounts receivable.
(5) Represents non-cash goodwill impairment of $13,898,285 and impairment of the cbdMD trademark of $4,285,000.
Contacts:
Investors:
cbdMD, Inc.
John Weston
Director of Investor Relations
john.weston@cbdmd.com
(704) 249-9515
To view the source version of this press release, please visit https://www.newsfilecorp.com/release/123988
