cbdMD Stabilizes Revenue and Significantly Improves Operating Results
05/15/2023 - 04:10 PM
Company reduces annualized SG and A expenses $24 million year over year
Charlotte, North Carolina--(Newsfile Corp. - May 15, 2023) - cbdMD, Inc. (NYSE American: YCBD) (NYSE American: YCBDpA), one of the nation's leading and most highly trusted and recognized CBD companies, and operator the leading CBD brands - including its flagship brand cbdMD , and its animal health brand Paw CBD, today announced our second quarter of fiscal 2023 results.
For the second quarter of fiscal 2023 GAAP Net Loss improved to $1.4 million on sales of $6.2 million as compared to a $5.0 million Net Loss on sales of $9.6 million in the prior year comparative quarter. Year over year saw significant improvements in SG&A costs.
"While we still have more work left to do, we are excited about the progress we made during the second fiscal quarter. This is one of the best operating results we have had since the Company acquired the cbdMD brand. We are incredibly proud of our team's efforts during the quarter to stabilize our revenue sequentially, while we reduced SG&A expenses by an annualized $24 million year over year. We continue to take steps to improve our business and continue to lay the groundwork during the third quarter that will have an increasing positive impact on the business during the balance of the calendar year," says Ronan Kennedy, cbdMD's Interim CEO and CFO.
Financial Highlights from our Second Quarter of Fiscal 2023:
We reported that our net sales for the March 31, 2023 quarter were $6.2 million versus net sales of $6.1 million quarter ending December 31, 2022, an increase of 2.5% . Our net sales for the quarter ended March 31, 2023 were down 35% compared to the prior year quarter ended March 31, 2022. For the 6 months ending March 31, 2023 we reported net sales of $12.3 million as compared to $18.9 million in the prior year comparative period. We reported that our quarter ending March 31, 2023 direct to consumer (DTC) net sales were $4.9 million , versus $6.5 million for our quarter ending March 31, 2022, or a year over year decline of 26% . Our e-commerce net sales were flat sequentially. We reported that our quarter ending March 31, 2023, wholesale sales (including brick and mortar retail customers) were $1.35 million , versus $1.2 million for quarter ending December 31, 2022 or sequential increase of 15% . Wholesale net sales were down 56% compared to the prior year quarter ended March 31, 2022. For the quarter ending March 31, 2023, the Company continued delivering on cost rationalizations and recorded SG&A Costs of $5.4 million for the quarter as compared to $11.5 million in the prior year period. SG&A has improved $6.0 million compared to the prior year quarter ended March 31, 2022, this represents $24 million in annualized spend reductions. We reported GAAP loss from operations of approximately $1.34 million for the quarter ending March 31, 2023 compared to a $5.3 million loss from operations for our quarter ending March 31, 2022, an improvement of approximately $3.6 million or 72% year over year. For the six months ending March 31, 2023, we reported loss from operations of approximately $5.4 million as compared to $30.2 million for the prior year comparative period. We reported non-GAAP adjusted operating loss of approximately $0.8 million in our March 31, 2023 quarter, compared to $3.6 million for the March 31, 2022 quarter. Sequentially we improved $1.8 million . This reduction was primarily related to management's actions taken to right size our cost structure over the last few quarters. For the six months ended March 31, 2023 we reported non-GAAP adjusted operating loss of $3.5 million as compared to $8.8 million in the prior year comparative period. Highlights for the Second Quarter and Notable Business Updates
cbdMD Therapeutics completed our pet clinical study and results indicated our proprietary broad spectrum improves mobility and gait in dogs. Additionally, owners reported lower observation of pain and improved quality of life. The data is currently being used to support product development and marketing campaigns. After we publish our findings sometime in fiscal 2023, the data will be used to support the submission of structure function claim notifications to FDA. Adara Acquisition Corporation completed its merger with Alliance Entertainment Inc. on February 10th , 2023 and the Company received back its $1 million investment in Adara Sponsor, LLC. The Company launched its third NSF for sport product, our 1500mg broad spectrum gummy. Not only was the first to commercialize NSF for Sport CBD Product it is the only certified gummy product on the market and at the highest concentration on the market. The Company also launched its first products on Amazon; the UK Amazon launch expands cbdMD's reach into the UK market. On April 24, 2023, the Company completed its one-for-forty five reverse stock split of the Company's issued and outstanding shares of common stock. On May 3, 2023, the Company completed an underwritten public offering of 1,350,000 shares of its common stock at a public offering price of $2.10 per share. Gross proceeds from the offering before deducting underwriting discounts and commissions and offering expenses were approximately $2.8 million . After the public offering the Company has over $4 million in cash. We will host a conference call at 4:15 p.m., Eastern Time, on Monday, May 15, 2023, to discuss our March 31, 2023, second quarter financial results and business progress.
CONFERENCE CALL DETAILS
Monday May 15, 4:15 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: 9893 Webcast/Webcast Replay link- available through May 15, 2024: https://www.gowebcasting.com/12471
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 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 CBD Botanicals brand of beauty and skincare products including facial oil and serum, toners, moisturizers, clear skin, facial masks, exfoliants and body care. To learn more about cbdMD and our 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 our ability to continue as a going concern, increasing our revenues, cost reductions, potential need for additional working capital, future profitability, results from clinical studies 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, 2022 as filed with the Securities and Exchange Commission (the "SEC") on December 15, 2022 and as amended on December 20, 2022 and May 3, 2023 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, 2023 AND SEPTEMBER 30, 2022 (Unaudited) March 31, September 30, 2023 2022 Assets Cash and cash equivalents $ 1,718,552 $ 6,720,234 Accounts receivable 1,161,553 1,447,831 Accounts receivable – discontinued operations - 1,375 Marketable securities, at cost - - Investment other securities - 1,000,000 Inventory 4,531,890 4,767,373 Prepaid sponsorship 92,755 1,372,845 Prepaid expenses and other current assets 2,641,452 701,945 Total current assets 10,146,202 16,011,603 Other assets: Property and equipment, net 798,177 823,310 Operating lease assets 3,921,195 4,477,841 Deposits for facilities 138,708 244,606 Intangible assets 17,279,840 17,834,549 Investment in other securities, noncurrent 1,400,000 1,400,000 Total other assets 23,537,920 24,780,306 Total assets $ 33,684,122 $ 40,791,909 CONDENSED CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2022 AND SEPTEMBER 30, 2022 (continued) (Unaudited) March 31, September 30, 2023 2022 Liabilities and shareholders' equity Current liabilities: Accounts payable $ 1,337,611 $ 2,036,558 Deferred revenue 2,107,179 2,060,762 Accrued expenses 1,227,249 1,178,683 Note payable 7,375 9,609 Total current liabilities 4,679,414 5,285,612 Long term liabilities: Long term liabilities - 125,491 Operating leases - long term portion 3,051,484 3,680,375 Contingent liability 167,000 276,000 Total long term liabilities 3,218,484 4,081,866 Total liabilities 7,897,898 9,367,478 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, 1,456,693 and 1,348,125 shares issued and outstanding, respectively 1,457 1,348 Additional paid in capital 180,497,196 178,841,646 Accumulated deficit (154,717,429 ) (147,423,563 Total shareholders' equity 25,786,224 31,424,431 Total liabilities and shareholders' equity $ 33,684,122 $ 40,791,909
cbdMD, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 2023 and 2022 (Unaudited) (Unaudited) Three months Three months Six Months Six Months Ended Ended Ended Ended March 31, March 31, March 31, March 31, 2023 2022 2023 2022 Gross Sales $ 6,584,666 $ 9,948,858 $ 12,825,191 $ 19,805,625 Allowances (344,646 ) (319,972 ) (499,954 ) (854,917 ) Total Net Sales 6,240,020 9,628,886 12,325,237 18,950,708 Cost of sales 2,224,512 3,186,564 4,741,964 7,514,874 Gross Profit 4,015,508 6,442,322 7,583,273 11,435,834 Operating expenses 5,416,151 11,452,700 13,030,097 23,407,984 Impairment of Goodwill and other intangible assets - - - 18,183,285 Loss from operations (1,400,643 ) (5,010,378 ) (5,446,824 ) (30,155,435 ) Realized and Unrealized loss on marketable and other securities - - - (33,352 ) Decrease of contingent liability 48,000 353,000 107,000 6,303,000 Other income 17,787 2,249 49,543 72,987 Interest income (expense) (1,946 ) (2,086 ) (4,583 ) (5,320 ) Loss before provision for income taxes (1,336,802 ) (4,657,215 ) (5,294,864 ) (23,818,120 ) Benefit for income taxes - - - - Net Loss (1,336,802 ) (4,657,215 ) (5,294,864 ) (23,818,120 ) Preferred dividends 1,000,500 1,000,502 2,001,002 2,001,002 Net Loss available to cbdMD, Inc. common shareholders $ (2,337,302 ) $ (5,657,717 ) $ (7,295,866 ) $ (25,819,122 ) Net Loss per share: Basic earnings per share (1.74 ) (4.32 ) (5.43 ) (19.67 ) Diluted earnings per share (1.74 ) (4.32 ) (5.43 ) (19.67 ) Weighted average number of shares Basic: 1,345,589 1,310,378 1,343,394 1,312,755 Weighted average number of shares Diluted: 1,345,589 1,310,378 1,343,394 1,312,755
cbdMD, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 2023 and 2022 (Unaudited) (Unaudited) Three months Three months Six Months Six Months Ended Ended Ended Ended March 31, March 31, March 31, March 31, 2023 2022 2023 2022 Net Loss $ (1,336,802 ) $ (4,657,215 ) $ (5,294,864 ) $ (23,818,120 ) Comprehensive Loss (1,336,802 ) (4,657,215 ) (5,294,864 ) (23,818,120 ) Preferred dividends (1,000,500 ) (1,000,502 ) (2,001,002 ) (2,001,002 ) Comprehensive Loss attributable to cbdMD, inc. common shareholders $ (2,337,302 ) $ (5,657,717 ) $ (7,295,866 ) $ (25,819,122 )
cbdMD, INC. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED MARCH 31, 2023 and 2022 (Unaudited) Six Months Six Months Ended Ended March 31, March 31, 2023 2022 Cash flows from operating activities: Net Loss $ (5,292,864 ) $ (23,818,120 ) Adjustments to reconcile net loss to net cash used by operating activities: Stock based compensation 96,216 797,096 Restricted stock expense 100,249 837,267 Write off of prepaid assets due to termination of contractual obligation 884,892 - Issuance of stock for services 1,459,193 - Marketing stock amortization - 339,520 Inventory and materials impairment - 878,142 Intangibles Amortization 554,709 329,671 Depreciation 100,112 600,750 Impairment of goodwill and other intangible assets - 18,183,285 Decrease in contingent liability (109,000 ) (6,303,000 ) Realized and unrealized loss of Marketable and other securities - 33,352 Amortization of operating lease asset 556,646 589,291 Changes in operating assets and liabilities: Accounts receivable 286,278 (932,230 ) Deposits 105,898 390,875 Inventory 135,176 (569,316 ) Prepaid inventory 100,307 32,391 Prepaid expenses and other current assets (1,544,308 ) 354,752 Accounts payable and accrued expenses (855,872 ) (1,129,614 ) Operating lease liability (580,325 ) (595,457 ) Deferred revenue / customer deposits 203,341 10,723 Collection on discontinued operations accounts receivable 1,375 9,592 Deferred tax liability - - Cash used by operating activities (3,797,977 ) (10,670,537 ) Cash flows from investing activities: Other securities 1,000,000 (373,795 ) Purchase of property and equipment (74,980 ) - Cash flows from investing activities 925,020 (373,795 ) Cash flows from financing activities: Proceeds from issuance of preferred stock - - Note payable (127,725 ) (29,240 ) Preferred dividend distribution (2,001,000 ) (2,001,002 ) Cash flows from financing activities (2,128,725 ) (2,030,242 ) Net increase (decrease) in cash (5,001,682 ) (13,074,574 ) Cash and cash equivalents, beginning of period 6,720,234 26,411,424 Cash and cash equivalents, end of period $ 1,718,552 $ 13,336,850 Supplemental Disclosures of Cash Flow Information: 2022 2021 Cash Payments for: Interest expense $ 2,638 $ 4,173 Non-cash financial activities: Issuance of Contingent earnout shares: $ - $ 730,000
cbdMD, Inc. SUPPLEMENTAL FINANCIAL INFORMATION RECONCILIATION OF NON-GAAP ADJUSTED LOSS FROM OPERATIONS (unaudited) Three Months Three Months Six Months Six Months Ended Ended Ended Ended March 31, March 31, March 31, March 31, 2023 2022 2023 2022 GAAP (loss) from operations $ (1,400,643 ) $ (5,010,378 ) $ (5,446,824 ) $ (30,155,435 ) Adjustments: Depreciation & Amortization 379,744 600,750 757,210 600,750 Employee and director stock compensation (1) 117,821 754,207 254,965 1,634,363 Other non-cash stock compensation for services (2) - - 884,892 - Inventory adjustment (3) - - - 878,142 Impairment of goodwill and other intangible assets (4) - - - 18,029,000 Accrual for severance - 22,500 129,761 22,500 a360 trade credit 107,608 - 107,608 - Accrual / expenses for discretionary bonus - - - 150,000 Non-GAAP adjusted (loss) from operations $ (795,470 ) $ (3,632,921 ) $ (3,312,387 ) $ (8,840,680 )
(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) Represents non-cash impairment of the cbdMD trademark of $4,285,000 and $13,898,285 of goodwill impairment during the first fiscal quarter of 2022.
Contacts:
Investors: cbdMD, Inc. Ronan Kennedy Interim Chief Executive Officer and Chief Financial OfficerIR@cbdmd.com (704) 445-3064
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