cbdMD Demonstrates Strong Year-over-Year Performance, Significantly Reducing Net Loss by $30 Million

Published

Charlotte, North Carolina--(Newsfile Corp. - August 10, 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 third quarter of fiscal 2023 results.

For the third quarter of fiscal 2023 Net Loss improved to $1.7 million on sales of $6.1 million as compared to a $31.6 million Net Loss on sales of $8.6 million in the prior year comparative quarter. Excluding the $30.7 million of goodwill and intangible impairment, loss from operations improved from $2.3 million loss to a $1.8 million loss. Year over year saw significant improvements in SG&A costs and more disciplined organization.

"We have had a dynamic and eventful quarter, marked by significant capital markets activity, a strategic re-platforming of our website, and dedicated efforts in new product innovation. I am tremendously proud of our team's unwavering focus, which allowed us to sustain our revenue base, achieve progress in our adjusted EBITDA, and establish a foundation for future enhancements. We remain highly optimistic about some of the exciting opportunities in our pipeline.

Our unwavering commitment to profitability is resolute, with a keen eye on achieving break-even EBITDA in the near-term. As cbdMD's Interim CEO and CFO, I am enthused by the dedication shown by our team as we strive towards this goal," notes Ronan Kennedy. "We view the upcoming proxy vote for our common and preferred shareholders as pivotal. This vote stands to fortify our capital structure, while unlocking potential liquidity for our preferred shareholders, and opening up more transformational strategic activity that is stymied by our current capital structure."

This quarter's accomplishments reflect not only our diligence but our readiness to seize the opportunities that lie ahead. As we move forward, we remain focused on enhancing shareholder value and steering cbdMD towards a prosperous and rewarding future."

Financial Highlights from our Third Quarter of Fiscal 2023:

  • We reported that our net sales for the June 30, 2023 quarter were $6.1 million, essentially flat vs the quarter ending March 31, 2023. Our net sales for the quarter ended June 30, 2023 were down 28% compared to the prior year quarter ended June 30, 2022. For the nine months ending June 30, 2023 we reported net sales of $18.4 million as compared to $27.5 million in the prior year comparative period.
  • We reported that our quarter ending June 30, 2023 direct to consumer (DTC) net sales were $5.0 million, versus $6.5 million for our quarter ending June 30, 2022, or a year over year decline of 26%. Our e-commerce net sales were up 2.3% sequentially.
  • We reported that our quarter ending June 30, 2023 wholesale net sales were $1.1 million, versus $2.1 million for quarter ending June 30, 2022 or year over year decrease of 46%. Wholesale net sales were down 17% sequentially in part due to some temporary disruptions with the e-commerce platform change.
  • For the quarter ending June 30, 2023, the Company continued delivering on cost rationalizations and recorded SG&A Costs of $5.7 million for the quarter as compared to $8.2 million in the prior year period, a $2.6million improvement. Excluding depreciation, amortization, stock and amortization of certain non-cash marketing expenses cash SG&A costs declined $4.3 million to $4.4 million. Changes made during the third quarter will continue to lower our G&A costs in the coming quarters.
  • We reported loss from operations of approximately $1.8 million for the quarter ending June 30, 2023 compared to a $33.2 million loss from operations for our quarter ending June 30, 2022, an improvement of approximately $31.3 million year over year. For the nine months ending June 30, 2023, we reported loss from operations of approximately $7.2 million as compared to $63.2 million for the prior year comparative period.
  • We reported non-GAAP adjusted EBTIDA of approximately $0.6 million in our June 30, 2023 quarter, compared to $2.7 million for the June 30, 2022 quarter, a $2.1 million year over year improvement. Sequentially we improved $0.2 million. This reduction was primarily related to management's actions taken to right size our cost structure over the last few quarters. For the nine months ended June 30, 2023 we reported non-GAAP EBITDA loss of $4.0 million as compared to $10.9 million in the prior year comparative period.

Highlights for the Third Quarter and Notable Business Updates

  • 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.
  • We completed the change of our e-commerce platform to Shopify in June of 2023. The change in platform makes us more nimble, lowers our operating costs compared to Magento and allows us to plug into best-in-class tools for growing direct to consumer ecommerce businesses.
  • On August 1, 2023, the Company filed a preliminary proxy statement on Schedule 14A and called for a special meeting on September 22, 2023. The Company's board has proposed an amendment to the Series A Preferred Stock designation to provide for the automatic conversion of each Series A Preferred share for 3 shares of the Company's common stock. The Company believes the exchange will, among other benefits to the Company and its shareholders, significantly improve cash flow and enhance the prospects of strategic opportunities for the Company. The proposal requires approval from both of the Company's common shareholders as well as the Series A Preferred shareholders.
  • The Company recently expanded its hemp-derived Delta-91 line to include strain-like experience, including Elevate, Relax, Uplift to complement its existing Delta 9 product offering.
  • We are leading lobbying efforts in Washington to have ingestible and topical CBD products regulated under current regulation, including a submission of written statement to House oversight hearing and responses to Congressional Request of Information on FDA position regarding regulation of hemp derived cannabinoids.

We will host a conference call at 4:30 p.m., Eastern Time, on Thursday, August 10, 2023, to discuss our June 30, 2023, third quarter financial results and business progress.

CONFERENCE CALL DETAILS

Thursday August 10, 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: 0366
Webcast/Webcast Replay link- available through August 10, 2024: https://www.gowebcasting.com/12672

 

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 products1. 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-free2 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 Total hemp-derived Delta 9 THC concentration does not exceed 0.3% by weight. Consuming this product could result in the consumer failing a drug test for marijuana. 2 THC-free is defined as below the level of detection using validated scientific analytical methods.

Additional Information and Where to Find It

This communication may be deemed to be solicitation material in respect of the proposed amendment to cbdMD, Inc.'s Series A preferred stock designation. In connection with the proposed amendment, the Company will file with the SEC and will mail to shareholders a definitive proxy statement in connection with the solicitation of proxies for its special 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 CAREFULLY AND IN THEIR ENTIRETY, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE COMPANY AND THE PROPOSED AMENDMENT. Shareholders will be able to obtain free copies of the proxy statement and other relevant materials (when they become available) and other documents filed by the Company with the SEC at the SEC's web site at www.sec.gov. Copies of the proxy statement and the filings that will be incorporated by reference therein may also be obtained, without charge, from the Company's website, www.cbdmd.com, under the heading "Investor Relations" or by contacting the Company's Investor Relations at (704) 445-3064 or ir@cbdmd.com.

Participants in Solicitation

The Company and its directors and executive officers may be deemed to be participants in the solicitation of proxies in respect of the proposed amendment. Information regarding the Company's directors and executive officers is available in its proxy statement filed with the SEC on January 4, 2023. Additional information regarding these persons and their interests in the proposed amendment is included in the proxy statement relating to the proposed amendment that has been filed with the SEC. These documents can be obtained free of charge from the sources indicated above.

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
JUNE 30, 2023 AND SEPTEMBER 30, 2022
     
  (Unaudited)  
  June 30, September 30,
    2023   2022  
Assets    
     
     
Cash and cash equivalents $ 2,846,739 $ 6,720,234
Accounts receivable 111,740 1,447,831
Accounts receivable – discontinued operations - 1,375
Marketable securities, at cost - -
Investment other securities - 1,000,000
Inventory 4,276,957 4,767,373
Prepaid sponsorship 61,227 1,372,845
Prepaid expenses and other current assets   1,794,221 701,945  
Total current assets 9,090,884 16,011,603
     
Other assets:    
Property and equipment, net 699,953 823,310
Operating lease assets 3,637,761 4,477,841
Deposits for facilities 138,708 244,606
Intangible assets 17,002,485 17,834,549
Investment in other securities, noncurrent   1,400,000   1,400,000  
Total other assets 22,878,907 24,780,306
     
Total assets $ 31,969,791 $ 40,791,909
     
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2022 AND SEPTEMBER 30, 2022
(continued)
     
  (Unaudited)  
  June 30, September 30,
  2023 2022  
Liabilities and shareholders' equity    
     
Current liabilities:    
Accounts payable $ 1,411,811 $ 2,036,558
Deferred revenue 1,716,541 2,060,762
Accrued expenses 1,251,987 1,178,683
Note payable   4,135   9,609  
Total current liabilities 4,384,474 5,285,612
     
Long term liabilities:    
Long term liabilities 819 125,491
Operating leases - long term portion 2,730,545 3,680,375
Contingent liability   122,230   276,000  
Total long term liabilities 2,853,594 4,081,866
     
Total liabilities   7,238,068   9,367,478  
     
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, 2,855,230 and 1,348,125 shares issued and outstanding, respectively 2,855 1,348
Additional paid in capital 183,212,202 178,841,646
Accumulated deficit   (157,488,334 )   (147,423,563 )
Total shareholders' equity 25,731,723 31,424,431
     
     
Total liabilities and shareholders' equity $ 32,969,791 $ 40,791,909  

 

cbdMD, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2023 and 2022
(Unaudited) (Unaudited)
Three months Three months Nine Months Nine Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2023 2022 2023 2022
Gross Sales $ 6,462,965 $ 8,868,093 $ 19,288,155 $ 28,673,718  
Allowances (343,585 ) (275,200 ) (843,538 ) (1,130,117 )
Total Net Sales 6,119,380 8,592,893 18,444,617 27,543,601
Cost of sales   2,273,839 2,660,185 7,015,803 10,176,085  
       
Gross Profit 3,845,541 5,932,708 11,428,814 17,367,516
       
Operating expenses 5,669,194 8,282,931 18,699,293 31,690,915
Impairment of Goodwill and other intangible assets   -   30,776,436   - 48,959,721  
Loss from operations (1,823,653 ) (33,126,659 ) (7,270,479 ) (63,283,120 )
Realized and Unrealized loss on marketable and other securities - - - (33,352 )
Decrease of contingent liability 44,771 1,943,000 153,771 8,246,000
Gain on sale of assets - 88,769 - 88,769
Restructuring expense - (602,092 ) - (602,092 )
Other income 9,725 62,390 59,269 137,377
Interest income (expense)   (1,246 ) (1,551 ) (5,831 ) (6,871 )
Loss before provision for income taxes (1,770,403 ) (31,636,143 ) (7,063,270 ) (55,453,289 )
       
Benefit for income taxes - - - -  
Net Loss (1,770,403 ) (31,636,143 ) (7,063,270 ) (55,453,289 )
       
Preferred dividends 1,000,501 1,000,501 3,001,503 3,001,503  
       
Net Loss available to cbdMD, Inc. common shareholders $ (2,770,904 ) $ (32,636,644 ) $ (10,064,773 ) $ (58,454,792 )
       
Net Loss per share:        
Basic earnings per share (1.16 ) (24.81 ) (4.26 ) (44.41 )
Diluted earnings per share (1.16 ) (24.81 ) (4.26 ) (44.41 )
Weighted average number of shares Basic:   2,379,633 1,318,151 2,360,908 1,316,205  
Weighted average number of shares Diluted: 2,379,633 1,318,151 2,360,908 1,316,205  
                         

 

cbdMD, INC.    
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS    
FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2023 and 2022    
         
  (Unaudited)   (Unaudited)  
  Three months Three months Nine Months Nine Months
  Ended Ended Ended Ended
  June 30, June 30, June 30, June 30,
  2023 2022 2023 2022  
         
Net Loss $ (1,770,403 ) $ (31,634,143 ) $ (7,063,270 ) $ (55,453,289 )
Comprehensive Loss (1,770,403 ) (31,634,143 ) (7,063,270 ) (55,453,289 )
         
Preferred dividends   (1,000,501 ) (1,000,501 ) (3,001,503 ) (3,004,503 )
Comprehensive Loss attributable to cbdMD, inc. common shareholders $ (2,770,904 ) $ (32,634,644 ) $ (10,064,773 ) $ (58,454,792 )
                         

 

cbdMD, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 2023 and 2022
  (Unaudited)  
  Nine Months Nine Months
  Ended Ended
  June 30, June 30,
  2023 2022  
     
Cash flows from operating activities:    
Net Loss $ (7,063,270 ) $ (55,453,289 )
Adjustments to reconcile net loss to net    
cash used by operating activities:    
Stock based compensation 130,879 424,455
Restricted stock expense 105,101 504,650
Write off of prepaid assets due to termination of contractual obligation 884,892 -
Issuance of stock for services - -
Marketing stock amortization - 717,174
Inventory and materials impairment - 878,142
Intangibles Amortization 832,063 607,025
Depreciation 300,726 770,335
Impairment of goodwill and other intangible assets - 48,959,721
Decrease in contingent liability (153,771 ) (8,246,000 )
Realized and unrealized loss of Marketable and other securities - 33,350
Amortization of operating lease asset 840,079 863,768
Changes in operating assets and liabilities:    
Accounts receivable 336,091 (116,861 )
Deposits 105,898 284,977
Inventory 424,079 (174,479 )
Prepaid inventory 66,337 2,939
Prepaid expenses and other current assets 996,462 (1,088,579 )
Accounts payable and accrued expenses (1,172,306 ) (1,149,456 )
Operating lease liability (876,526 ) (872,656 )
Deferred revenue / customer deposits 203,341 3,723
Collection on discontinued operations accounts receivable   1,375 9,592  
Cash used by operating activities (4,038,550 ) (13,041,469 )
     
Cash flows from investing activities:    
Other securities 1,000,000 -
Proceeds from sale of assets   (322,017 )
Purchase of property and equipment (177,369 ) (462,221 )
Cash flows from investing activities 822,631 (784,238 )
     
Cash flows from financing activities:    
Proceeds from issuance of common stock 2,474,072 -
Note payable (130,145 ) (31,044 )
Preferred dividend distribution   (3,001,503 )   (3,001,003 )
Cash flows from financing activities   (657,576 )   (3,032,047 )
Net increase (decrease) in cash (3,873,495 ) (16,857,754 )
Cash and cash equivalents, beginning of period   6,720,234   26,411,424  
Cash and cash equivalents, end of period $ 2,846,739 $ 9,553,670  
     
     
     
Supplemental Disclosures of Cash Flow Information:    
  2023 2022  
     
Cash Payments for:    
Interest expense $ 1,247 $ 6,817  
     
Non-cash financial activities:    
Issuance of shares in exchnage for a360 credit $ 1,531,999 $ -
Issuance of Contingent earnout shares: $ - $ 908,000  
       

 

cbdMD, Inc.    
SUPPLEMENTAL FINANCIAL INFORMATION    
RECONCILIATION OF NON-GAAP ADJUSTED LOSS FROM OPERATIONS    
(unaudited)        
  Three Months Three Months Nine Months Six Months
  Ended Ended Ended Ended
  March 31, March 31, March 31, March 31,
  2023 2022 2023 2022  
         
GAAP (loss) from operations $ (1,823,653 ) $ (33,126,659 ) $ (7,270,479 ) $ (62,283,120 )
Adjustments:        
Depreciation & Amortization 375,579 435,910 1,132,789 1,377,361
Employee and director stock compensation (1) 61,017 (938,285 ) 315,982 851,517
Other non-cash stock compensation for services (2) - - 884,892 -
Inventory adjustment (3) - - - 878,142
Impairment of goodwill and other intangible assets (4) - 30,776,436 - 48,805,436
Accrual for severance - 107,261 129,761 129,761
a360 trade credit 778,703 - 887,039 -
Accrual / expenses for discretionary bonus - - - 150,000
Non-GAAP adjusted (loss) from operations $ (608,354 ) $ (2,745,337 ) $ (3,920,016 ) $ (10,090,903 )
           

 

(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 goodwill impairment of $30,776,436 during the June 2022 quarter in addition to 13,898,285 of non-cash goodwill and impairment of the cbdMD trademark of $4,285,000 during the balance of the nine months ended June 2022.

Contacts:

Investors: cbdMD, Inc. Ronan Kennedy Interim Chief Executive Officer and Chief Financial Officer IR@cbdmd.com (704) 445-3064

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/176820

SOURCE cbdMD

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