cbdMD Reports Sequential Increase in Net Sales

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

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