cbdMD Reduces Year over Year Net Loss from Operations by $3.0 Million
cbdMD, Inc. (YCBD) reports financial results for Q1 of fiscal 2024, showing improvements in operating loss, gross profit, and non-GAAP adjusted loss. The company launched new brands, ATRx Labs and HempMD, diversifying into new markets. Net sales decreased by 12%, with DTC net sales down by 10%. Despite a decrease in revenue, the company reduced operating expenses, leading to a lower net loss per share. Notable updates include expansion into Sprouts Markets, Amazon USA, and receiving orders for ATRx Labs products from a national retailer.
Positive
Improvements in operating loss, gross profit, and non-GAAP adjusted loss from Q1 of fiscal 2023 to Q1 of fiscal 2024.
Launch of new brands, ATRx Labs and HempMD, to access new markets and channels.
Decrease in net sales by 12%, with DTC net sales down by 10% compared to the prior year.
Reduction in operating expenses leading to a lower net loss per share for Q1 of fiscal 2024.
Expansion into Sprouts Markets, Amazon USA, and receiving orders for ATRx Labs products from a national retailer.
The financial results reported by cbdMD, Inc. indicate a significant improvement in operating loss, decreasing from $4.1 million in the first quarter of fiscal 2023 to $1.1 million in the same quarter of fiscal 2024. This reduction in operating loss is a strong signal of operational efficiency, particularly as it was achieved with a 12% decrease in net sales year over year. The increase in gross profit margin from 59% to 66% suggests improved cost management and potentially higher-quality revenue streams. However, the decrease in working capital and cash on hand could raise concerns about the company's liquidity and ability to sustain operations without additional financing.
Investors should note the strategic expansion into new product lines such as ATRx Labs and HempMD, which diversifies the company's portfolio and could mitigate risks associated with the volatility of the CBD market. The launch into Sprouts Markets and Amazon USA represents a significant opportunity for revenue growth. The recent financing through convertible notes and the proposal to convert preferred stock into common shares could dilute current shareholders but may also clean up the capital structure and improve equity attractiveness.
The CBD industry is rapidly evolving and cbdMD's strategic pivot to include functional mushroom products under the ATRx Labs brand signals an awareness of the broader wellness market trends. By diversifying their product offerings, cbdMD is positioning itself to capture a larger share of the health and wellness market, which continues to grow as consumers increasingly seek natural products for daily use. The positive reception of the ATRx Line, including the Wholefoods Magazine 2024 Natural Choice nominations, indicates potential for brand recognition and consumer trust.
Moreover, the appointment of a new Vice President of Wholesale is a tactical move to strengthen the company's distribution channels. This role is critical in establishing and maintaining relationships with retailers, which can lead to increased shelf presence and sales volume. As cbdMD continues to expand its retail footprint, the role of wholesale operations in driving revenue growth becomes increasingly important.
The proposal to amend the certificate of incorporation to convert Series A Convertible Preferred Stock into common stock is a strategic initiative that requires careful consideration from a legal perspective. Such conversions can simplify the capital structure, making it more attractive to potential investors and can also affect control dynamics within the company. Shareholders should review the terms of the conversion and the potential impact on their voting power and ownership stake.
Additionally, the issuance of senior secured discounted convertible notes as a form of financing is noteworthy. It is essential to understand the terms of these notes, including conversion rates, discounts and security interests, as they will affect the company's debt levels and financial flexibility. Shareholders and potential investors must evaluate the implications of this financing on the company's long-term financial health.
02/13/2024 - 04:10 PM
cbdMD leads with Strategic Improvements and is Building Momentum with ATRx Line
Charlotte, North Carolina--(Newsfile Corp. - February 13, 2024) - cbdMD, Inc. (NYSE American: YCBD) (NYSE American: YCBD-PA) , one of the nation's leading and most highly trusted and recognized CBD companies, and operator of the leading CBD brands - its flagship brand cbdMD , its animal health brand Paw CBD, today announced our financial results for our first quarter of fiscal 2024 ending December 31, 2023.
For the first quarter of Fiscal 2024, we continued to make strong year over year progress on our turnaround. Year over year we improved our operating loss from $4.1 for the first quarter of fiscal 2023 to $1.1 million for the first quarter of fiscal 2024.
"We continued to make strong year over year improvements to our operating income during the first quarter. During the quarter we focused on addressing some larger strategic goals which culminated with the launch of our hempMD brand and functional mushroom brand, ATRx Labs. This diversification allows us to access markets and channels more challenging to CBD while still attracting consumers focused on utilizing natural product to improve their daily lives. While still early, the positive reception, including the Wholefoods Magazine 2024 Natural Choice nominations, and growing commitments around our ATRx Line are promising indicators of our strategic direction," says Ronan Kennedy, cbdMD's Interim CEO & CFO.
The Company recently closed on new financing, supported by several existing shareholders that will help provide additional working capital and to fund expansion of our ATRx Labs line and further bolster our balance sheet.
The Company also continues to focus on marketing and sales efforts, highlighted by the recent appointment of a new Vice President of Wholesale. This move is part of a broader strategy to ensure the organization has the right resources and optimizes vendor relationships to pave the way for revenue growth and improved profitability.
cbdMD remains steadfast in its commitment to delivering exceptional value to its customers and shareholders alike, as it continues to navigate through its strategic initiatives and explore new avenues for growth and profitability.
Financial Highlights from our First Quarter of Fiscal 2024:
Net sales totaled $5.4 million for the December 31, 2024 quarter or a decrease of 12% compared to $6.1 million for the prior year comparative fiscal quarter. We reported direct to consumer (DTC) net sales of $4.4 million or 82.3% of total net sales in the first quarter of fiscal 2024, a decrease from $4.9 million , or 10% from first quarter of fiscal 2023. Our gross profit for the quarter totaled 66% in compared to 59% in the first quarter of fiscal 2023. Our loss from operations was $1.1 million during the first quarter of fiscal 2024 as compared to a loss of $4.1 million in first quarter of fiscal 2023. Our non-GAAP adjusted loss from operations during the first quarter of fiscal 2024 was approximately $0.69 million as compared to our non-GAAP adjusted loss from operations during the first quarter of fiscal 2023 of approximately $2.65 million , despite the decrease in overall revenue. Net loss attributable to common shareholders for first quarter of 2024 was approximately $1.97 million , or $0.67 per share, as compared to a net loss for the first fiscal quarter of 2023 of approximately $4.96 million , or $3.70 per share. The improvement in the first fiscal quarter of 2024 was principally attributable to a $3 million reduction in operating expenses. At December 31, 2023, we had working capital of approximately $1.4 million and cash on hand of approximately $1.5 million as compared to working capital of approximately $3.4 million and cash on hand of approximately $1.8 million at September 30, 2023. Highlights for the First Quarter of 2024 and Notable Business Updates
The Company launched into Sprouts Markets in December of 2023 and looks to further expand during 2024. The Company launched its ATRx Labs and HempMD brands onto Amazon USA during the quarter and is looking to accelerate revenue through this channel during 2024. The Company has received orders for several ATRx Labs functional mushroom products from a national retailer which it anticipates shipping in the coming months. The Company recently announced raising gross proceeds of $1.25 million through a series of senior secured discounted convertible notes. In an effort to clean up the Company's capital structure, the Company has included a new proposal in its proxy statement for its annual meeting to amend its certificate of incorporation to convert each share of its Series A Convertible Preferred Stock and accrued dividends into 6 shares of common stock. We will host a conference call at 4:20 p.m., Eastern Time, on Tuesday, February 13, 2024, to discuss our December 31, 2023, first quarter of fiscal 2024 financial results and business progress.
CONFERENCE CALL DETAILS
Tuesday February 13, 2024, 4:20 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: 0714 Webcast/Webcast Replay link- available through February 13, 2025: https://www.gowebcasting.com/13171
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, including NSF Certified for Sport® products, as well as our new Full Spectrum products. Our cbdMD brand currently includes high-grade, premium CBD products including CBD tinctures, CBD gummies, CBD topicals, CBD capsules, CBD bath bombs, CBD sleep aids and CBD drink mixes and an array of Farm Act compliant Delta 9 products. Our Paw CBD brand of pet products includes veterinarian-formulated products including tinctures, chews, topicals products in varying strengths, and our ATRx brand of natural functional mushroom support. To learn more about cbdMD and our comprehensive line of U.S. grown, THC-free1 CBD oil and Full Spectrum products as well as our other brands, please visit www.cbdmd.com , www.pawcbd.com , or ATRxlabs.com, follow cbdMD on Instagram and Facebook, or visit one of the thousands of retail outlets that carry cbdMD's products.
No Offer or Solicitation
This press release is for informational purposes only and shall not constitute a solicitation of a proxy, consent or authorization with respect to the amendment proposal. This communication may be deemed to be solicitation material in respect of the proposed amendment to cbdMD, Inc.'s Series A preferred stock designation included as a proposal in the Company's preliminary proxy statement for its 2024 annual meeting. In connection with the proposed amendment, the Company had filed with the SEC a preliminary proxy statement and will mail to shareholders a definitive proxy statement in connection with the solicitation of proxies for its annual meeting, and the Company may file other documents with the SEC regarding the proposed amendment. The Company's shareholders are urged to read the definitive proxy statement and other relevant materials when they become available, in their entirety, because they will contain important information about the Company and the proposed amendment.
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 our ability to continue as a going concern, increasing our revenues, cost reductions, potential need for additional working capital, future profitability, development and sales of new products, 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, 2023 as filed with the Securities and Exchange Commission (the "SEC") on December 22, 2023, as amended on January 29, 2024, 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. CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2023 AND SEPTEMBER 30, 2023 (Unaudited) December 31, September 30, 2023 2023 Assets Cash and cash equivalents $ 1,504,844 $ 1,797,860 Accounts receivable 1,102,180 1,216,090 Inventory 3,554,395 4,052,972 Inventory prepaid 188,250 182,675 Prepaid sponsorship 29,473 70,061 Prepaid expenses and other current assets 986,821 750,383 Total current assets 7,365,963 8,070,041 Other assets: Property and equipment, net 790,349 716,579 Operating lease assets 3,060,405 3,350,865 Deposits for facilities 132,203 138,708 Intangible assets, net 3,046,248 3,219,090 Investment in other securities, noncurrent 700,000 700,000 Total other assets 7,729,205 8,125,242 Total assets $ 15,095,168 $ 16,195,283 CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2023 AND SEPTEMBER 30, 2023 (continued) December 31, September 30, 2023 2023 Liabilities and shareholders' equity Current liabilities: Accounts payable $ 1,566,633 $ 1,906,319 Accrued expenses 3,102,468 1,484,441 Operating leases - current portion 1,302,663 1,277,089 Note payable - 2,492 Total current liabilities 5,971,764 4,670,341 Long term liabilities: Long term liabilities - 9 Operating leases - long term portion 2,066,050 2,403,286 Contingent liability 20,611 90,363 Total long term liabilities 2,086,661 2,493,658 Total liabilities 8,058,425 7,163,999 cbdMD, Inc. 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, 2,961,056 and 2,960,573 shares issued and outstanding, respectively 2,961 2,961 Additional paid in capital 183,389,556 183,387,095 Accumulated deficit (176,360,774 ) (174,363,772 ) Total cbdMD, Inc. shareholders' equity 7,036,743 9,031,284 Total liabilities and shareholders' equity $ 15,095,168 $ 16,195,283
cbdMD, INC. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 2023 and 2022 (Unaudited) December 31, December 31, 2023 2022 Gross Sales $ 5,375,630 $ 6,240,526 Allowances (225 ) (155,308 ) Total Net Sales 5,375,405 6,085,218 Cost of sales 1,817,907 2,517,452 Gross Profit 3,557,498 3,567,766 Operating expenses 4,623,333 7,613,947 Loss from operations (1,065,835 ) (4,046,181 ) Decrease of contingent liability 69,752 61,000 Interest expense (income) (418 ) 29,119 Loss before provision for income taxes (996,501 ) (3,956,062 ) Benefit for income taxes - - Net Loss (996,501 ) (3,956,062 ) Preferred dividends 1,000,501 1,000,502 Net Loss available to cbdMD, Inc. common shareholders $ (1,997,002 ) $ (4,956,564 ) Net Loss per share: Basic and diluted earnings per share (0.67 ) (3.70 ) Weighted average number of shares Basic and Diluted: 2,960,945 1,341,277
cbdMD, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS FOR THE THREE MONTHS ENDED DECEMBER 31 2023 and 2022 (Unaudited) December 31, December 31, 2023 2022 Net Loss Income $ (996,501 ) $ (3,956,062 ) Comprehensive Loss (996,501 ) (3,956,062 ) Preferred dividends (1,000,501 ) (1,000,502 ) Comprehensive Loss attributable to cbdMD, inc. common shareholders $ (1,997,002 ) $ (4,956,564 )
cbdMD, INC. CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE THREE ENDED DECEMBER 31, 2023 and 2022 (Unaudited) December 31, December 31, 2023 2022 Cash flows from operating activities: Net Loss $ (996,501 ) $ (3,956,062 ) Adjustments to reconcile net (income) loss to net cash used by operating activities: Stock based compensation 1,772 79,446 Restricted stock expense 689 43,449 Write off of prepaid assets due to termination of contractual obligation - 884,892 Marketing stock amortization - - Inventory and materials impairment - - Intangibles amortization 172,842 277,354 Depreciation 110,864 100,112 Impairment of Goodwill and other intangible assets - - Gain on sale of fixed assets - - Decrease in contingent liability (69,752 ) (61,000 ) Realized and unrealized loss of Marketable and other securities - - Termination benefit - - Extinguishment of Paycheck Protection Program Loan - - Amortization of operating lease asset 290,459 276,636 Changes in operating assets and liabilities: Accounts receivable 67,169 549,111 Deposits 6,505 105,898 Inventory 498,577 (434,695 ) Prepaid inventory (5,575 ) 340,799 Prepaid expenses and other current assets (195,850 ) (226,670 ) Accounts payable and accrued expenses 142,292 39,204 Operating lease liability (311,661 ) (287,547 ) Deferred revenue / customer deposits 182,290 203,341 Collection on discontinued operations accounts receivable - 1,375 Cash used by operating activities (105,880 ) (2,064,357 ) Cash flows from investing activities: Proceeds from sale of other investment securities - - Purchase of property and equipment (184,635 ) (177,370 ) Cash used by investing activities (184,635 ) (177,370 ) Cash flows from financing activities: Proceeds from issuance of common stock - - Note payable (2,501 ) (125,341 ) Preferred dividend distribution - (1,000,502 ) Cash used by financing activities (2,501 ) (1,125,843 ) Net decrease in cash (293,016 ) (3,367,570 ) Cash and cash equivalents, beginning of period 1,797,860 26,411,424 Cash and cash equivalents, end of period $ 1,504,844 $ 23,043,854 Supplemental Disclosures of Cash Flow Information: 2023 2022 Cash Payments for: Interest expense $ 11,614 $ 2,638 Non-cash financial activities: Preferred dividends accrued but not paid $ 1,000,501 $ -
cbdMD, Inc. SUPPLEMENTAL FINANCIAL INFORMATION RECONCILIATION OF NON-GAAP ADJUSTED LOSS FROM OPERATIONS (unaudited) Three Months Three Months Ended Ended December 31, December 31, 2023 2022 GAAP loss from operations $ (1,065,835 ) $ (4,046,181 ) Adjustments: Depreciation & Amortization 283,706 377,466 Employee and director stock compensation (1) 16,542 137,144 Other non-cash stock compensation for services (2) - 884,893 Mergers and Acquistions and financing transaction expenses (3) 67,599 - Non-GAAP adjusted loss from operations $ (697,988 ) $ (2,646,678 )
(1) Represents non-cash expense related to options, warrants, restricted stock expenses that have been amortized during the period.
Contacts:
Investors:IR@cbdmd.com
To view the source version of this press release, please visit https://www.newsfilecorp.com/release/197805
What are the financial highlights from cbdMD's first quarter of fiscal 2024?
cbdMD reported net sales of $5.4 million, a decrease of 12% compared to the prior year. DTC net sales were $4.4 million, down by 10% from the first quarter of fiscal 2023. The gross profit was 66% compared to 59% in the first quarter of fiscal 2023.
What was the net loss attributable to common shareholders for the first quarter of 2024?
The net loss attributable to common shareholders for the first quarter of 2024 was approximately $1.97 million, or $0.67 per share, compared to a net loss of approximately $4.96 million, or $3.70 per share, in the first fiscal quarter of 2023.
What strategic goals did cbdMD focus on during the first quarter of fiscal 2024?
During the first quarter of fiscal 2024, cbdMD focused on addressing strategic goals that led to the launch of new brands, ATRx Labs, and HempMD, to access markets and channels challenging to CBD products.
What notable updates were announced by cbdMD for the first quarter of 2024?
cbdMD announced expansion into Sprouts Markets, launching ATRx Labs and HempMD brands on Amazon USA, and receiving orders for ATRx Labs products from a national retailer.
What was the impact of the new financing on cbdMD's operations?
The new financing closed by cbdMD will provide additional working capital to fund the expansion of the ATRx Labs line and bolster the company's balance sheet.
