cbdMD Completes Third Full Year Results; Total Brands Sales of $118.7 Million Exceeds Initial Earn Out Target
02/10/2022 - 04:10 PM
Industry Experienced Weakness in CBD Demand in 2021
Resulting In Company YOY Decline in Net Sales for the December 2021 Quarter
Company Anticipates Regulatory Action Against the FDA With Expected Filing of Citizens Petition
CHARLOTTE, N.C. --(BUSINESS WIRE)--
cbdMD, Inc. (NYSE American: YCBD, 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 we announced our financial results for December 31, 2021 , the first quarter of our fiscal year ended September 30, 2022 and the third full year of operations with our cbdMD brands, after completing the acquisition of Cure Based Development on December 21, 2018 . In the three calendar years (2019-2021), we generated $118.7 million $113.3 million
Despite our three-year growth, our most recent net sales for the first quarter of fiscal 2022 decreased by 26% year-over-year, from $12.3 million $9.3 million United States Food and Drug Administration “FDA”. This product uncertainty has prohibited leading CBD brands such as ours, access to mainstream retailers, wholesalers and sales and marketing platforms. We believe that properly manufactured CBD products such as ours, which adhere to the rigorous standards of the Food Drug & Cosmetic Act, are safe and should be allowed for sale in all these retail channels as well as product marketing on all platforms.
In the coming days, we will be filing, in conjunction with the Natural Products Association , a Citizens Petition which is a process provided by the FDA for individuals and community organizations to make requests to the FDA to amend changes in healthcare policies. Dr. Swift , our Vice President, Scientific & Regulatory Affairs, and formerly from the office within FDA that is responsible for reviewing the safety data, directed the safety studies performed on our proprietary patent pending broad spectrum cannabinoid blend. Our dossier is not a “shot in the dark” and we believe we know the process. The FDA says that they want good science, and this is it. The Agency has defaulted to “being confused” over the entirety of the marketplace for hemp and CBD. We are not asking them to review the safety of all CBD products on the market. We are calling on them to fulfill their mandate and review the safety data compiled for our product based upon our conditions of use. This data was successfully submitted to the UK and EU to support approval of our products as Novel Foods . The process of evaluating the safety of a dietary supplement is not unique to any soil.
We believe it is far past time for the FDA to stop hiding behind the improperly applied exclusion rule that they are using to deny Americans access to a robust marketplace of hemp derived products to help maintain their health in these trying times. We believe that consumers from all walks of life deserve access to consumer healthcare products, especially in these trying times. We have shipped millions of products in the past three years without any reported adverse events. Our science tells us that our products are not only safe, but that they help people. Numerous studies about the benefits of cannabinoids have been coming out over the past several years and we believe that the real harm to the consumer is the lack of clarity in our industry, which falls at the feet of the FDA. While leading brands such as cbdMD go to great expense to adhere to the existing rules applicable to all dietary supplement manufacturers and apply the highest standards of care, other smaller brands flood the market with substandard products and the FDA is directly to blame for this situation. The longer FDA continues its irresponsible absenteeism, the more space that will be occupied by the rogue players. This is evident in the introductions of competitive products such as Delta 8, which is now banned for sale in over 30 states and created a negative downward pressure on the CBD market.
In response to recent weaker sales, we have streamlined operations by rightsizing and up-skilling our team and reducing our marketing spend and other expenditures. Our goal is to reduce over $10 million $20 million December 31, 2021 , we are reviewing all necessary measures to conserve cash.
Our gross profit margin for the quarter decreased to 54.4% in the first quarter of fiscal 2022 from 72.1% in the first quarter of fiscal 2021, partly due to a $878,000 62.2% vs 72.1% in the prior year. This decline is based on lower manufacturing and operating leverage because of the year over year declines in sales as well as changes in our product mix.
Our loss from operations increased to approximately $25.1 million $1.75 million $4.28 5 million$13.84 8 million$4.7 million $523,840 $7.1 million 26% decrease from $9.7 million 2% sequential decline over the September 2021 quarter. Finally, we recorded a $5.95 million
We will host a conference call at 4:15 p.m., Eastern Time , on Thursday, February 10, 2022 , to discuss our December 31, 2021 , first quarter financial results and business progress.
CONFERENCE CALL DETAILS
Title:
cbdMD First Quarter 2022 Earnings Call
Event Date:
Thursday, February 10, 2022 - 4:15 PM Eastern Time
Event Link:
Webcast URL
https://www.webcaster4.com/Webcast/Page/2206/44450
Webcast Replay Expiration:
Friday, February 10, 2023
Participant Numbers:
Toll Free: 888-506-0062
International: 973-528-0011
Entry code (not required): 623328
Replay Number:
Toll Free: 877-481-4010
International: 919-882-2331
Replay Passcode: 44450
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 6,000 retail outlets that carry cbdMD 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 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
DECEMBER 31, 2021 AND SEPTEMBER 30, 2021
(Unaudited)
December 31 ,
September 30 ,
2021
2021
Assets
Current assets:
Cash and cash equivalents
$
19,696,919
$
26,411,424
Accounts receivable
1,108,818
1,113,372
Accounts receivable – discontinued operations
2,625
10,967
Marketable securities
-
33,351
Investment other securities
1,000,000
1,000,000
Inventory
4,867,208
5,021,867
Inventory prepaid
559,708
551,519
Prepaid sponsorship
895,070
1,212,682
Prepaid expenses and other current assets
1,548,181
1,147,178
Total current assets
29,678,529
36,502,360
Other assets:
Property and equipment, net
2,504,220
2,561,574
Operating lease assets
5,296,943
5,614,960
Deposits for facilities
407,708
529,583
Intangible assets, net
18,666,612
23,003,929
Goodwill
42,772,685
56,670,970
Total other assets
69,648,168
88,490,016
Total assets
$
99,326,697
$
124,992,376
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2021 AND SEPTEMBER 30, 2021
(continued)
(Unaudited)
December 31 ,
September 30 ,
2021
2021
Liabilities and shareholders' equity
Current liabilities:
Accounts payable
$
3,673,855
$
2,978,914
Deferred revenue
1,909,139
2,727,612
Accrued expenses
1,117,236
1,151,150
Note payable
60,468
59,470
Total current liabilities
6,760,698
6,917,146
Long term liabilities:
Long term liabilities
93,489
108,985
Operating leases - long term portion
4,571,510
4,859,058
Contingent liability
3,501,000
9,856,000
Deferred tax liability
-
-
Total long term liabilities
8,165,999
14,824,043
Total liabilities
14,926,697
21,741,189
shareholders' equity:
Preferred stock, authorized 50,000,000 shares, $0.00 1
par value, 5,000,000 and 500,000 shares issued and outstanding, respectively
5,000
5,000
Common stock, authorized 150,000,000 shares, $0.00 1
par value, 58,277,970 and 57,783,340 shares issued and outstanding, respectively
58,278
57,783
Additional paid in capital
177,835,993
176,417,269
Accumulated deficit
(93,499,271
)
(73,228,865
)
Total shareholders' equity
84,400,000
103,251,187
Total liabilities and shareholders' equity
$
99,326,697
$
124,992,376
cbdMD, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2021 and 2020
December 31 ,
December 31 ,
2021
2020
Gross Sales
$
9,856,767
$
13,131,946
Allowances
(534,945
)
(803,643
)
Total Net Sales
9,321,822
12,328,303
Cost of sales
4,328,310
3,430,274
Gross Profit
4,993,512
8,898,028
Operating expenses
11,955,284
10,657,973
Impairment of Goodwill and other intangible assets
18,183,285
-
(Loss) from operations
(25,145,057
)
(1,759,945
)
Realized and Unrealized gain (loss) on marketable and other securities, including impairments
(33,350
)
542,710
Decrease (increase) of contingent liability
5,950,000
(8,500,000
)
Other income (expense)
70,737
-
Interest (expense) income
(3,234
)
(10,386
)
Loss (income) before provision for income taxes
(19,160,904
)
(9,727,621
)
Benefit for income taxes
-
332,000
Net (Loss) Income from continuing operations
(19,160,904
)
(9,395,621
)
Net (Loss) Income
(19,160,904
)
(9,395,621
)
Preferred dividends
1,000,502
100,050
Net (Loss) Income attributable to cbdMD, Inc. common shareholders
$
(20,161,406
)
$
(9,495,671
)
Net (Loss) Income per share:
Basic earnings per share
(0.35
)
(0.18
)
Diluted earnings per share
(0.35
)
(0.18
)
Weighted average number of shares Basic:
57,825,367
52,130,870
Weighted average number of shares Diluted:
57,825,367
52,130,870
cbdMD, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE THREE MONTHS ENDED DECEMBER 31, 2021 and 2020
December 31 ,
December 31 ,
2021
2020
Net (Loss) Income
$
(19,160,904
)
$
(9,395,621
)
Comprehensive (Loss) Income
(19,160,904
)
(9,395,621
)
Preferred dividends
(1,000,502
)
(100,050
)
Comprehensive (Loss) Income attributable to cbdMD, inc. common shareholders
$
(20,161,406
)
$
(9,495,671
)
cbdMD, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2021 and 2020
December 31 ,
December 31 ,
2021
2020
Cash flows from operating activities:
Net (Loss) Income
$
(19,160,904
)
$
(9,395,621
)
Adjustments to reconcile net (income) loss to net
cash used by operating activities:
Stock based compensation
505,466
248,894
Restricted stock expense
508,754
15,279
Marketing stock amortization
220,000
-
Issuance of stock / warrants for service
-
35,712
Inventory and materials impairment
878,142
-
Depreciation and amortization
340,701
232,658
Impairment of Goodwill and other intangible assets
18,183,285
-
Increase/(Decrease) in contingent liability
(5,950,000
)
8,500,000
Realized and unrealized loss of Marketable and other securities
33,350
(542,709
)
Termination benefit
-
305,326
Amortization of operating lease asset
318,017
304,080
Changes in operating assets and liabilities:
Accounts receivable
4,554
(110,072
)
Deposits
121,875
24,000
Inventory
(723,483
)
219,859
Prepaid inventory
(8,189
)
(48,184
)
Prepaid expenses and other current assets
(303,391
)
(310,268
)
Accounts payable and accrued expenses
(127,254
)
(1,500,755
)
Operating lease liability
(321,462
)
(237,952
)
Deferred revenue / customer deposits
3,723
(22,701
)
Collection on discontinued operations accounts receivable
8,342
422,417
Deferred tax liability
-
(332,000
)
Cash used by operating activities
(5,468,475
)
(2,192,038
)
Cash flows from investing activities:
Proceeds from sale of other investment securities
-
540,000
Purchase of property and equipment
(231,030
)
(93,294
)
Cash provided (used) by investing activities
(231,030
)
446,706
Cash flows from financing activities:
Proceeds from issuance of preferred stock
-
15,798,115
Note payable
(14,498
)
(13,564
)
Preferred dividend distribution
(1,000,502
)
(100,050
)
Deferred issuance costs
-
-
Cash provided by financing activities
(1,015,000
)
15,684,500
Net increase (decrease) in cash
(6,714,505
)
13,939,168
Cash and cash equivalents, beginning of period
26,411,424
14,824,644
Cash and cash equivalents, end of period
$
19,696,919
$
28,763,812
Supplemental Disclosures of Cash Flow Information:
2021
2021
Cash Payments for:
Interest expense
$
3,234
$
3,672
Non-cash financial activities:
Issuance of Contingent earnout shares:
$
405,000
$
-
Warrants issued to representative
$
-
$
254,950
cbdMD, Inc.
SUPPLEMENTAL FINANCIAL INFORMATION
RECONCILIATION OF NON-GAAP ADJUSTED INCOME (LOSS) FROM OPERATIONS
Three Months
Three Months
Ended
Ended
December 31 ,
December 31 ,
2021
2020
GAAP (loss) from operations
$
(25,145,057
)
$
(1,759,945
)
Adjustments:
Depreciation
340,701
232,806
Employee and director stock compensation (1)
1,014,220
264,174
Other non-cash stock compensation for services (2)
-
35,713
Inventory adjustment (3)
878,142
-
Write down of legacy accounts receivable (4)
-
-
Impairment of Goodwill and other intangible assets (5)
18,183,285
-
Accrual for severance
-
403,412
Accrual / expenses for discretionary bonus
150,000
300,000
Non-GAAP adjusted (loss) from operations
$
(4,728,709
)
$
(523,840
)
(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 $4,285,000
View source version on businesswire.com : https://www.businesswire.com/news/home/20220210005813/en/
PR:
Robert Pettway
rpettway@cbdmd.com
Investors:
John Weston
john.weston@cbdmd.com
Source: cbdMD, Inc.
