YCBD - cbdMD Reports Second Quarter Results
cbdMD's new line of functional mushroom products, ATRx, launches into national retailer
Charlotte, North Carolina--(Newsfile Corp. - May 15, 2024) - 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 the leading CBD brands cbdMD and Paw CBD, along with its new functional mushroom brand ATRx Labs today announced its financial results for the March 31, 2024 second quarter of fiscal 2024 year end.
While year-over-year operational losses showed a slight increase from $1.4 million in the second quarter of fiscal 2023 ending March 31, 2023 to $1.5 million in second fiscal quarter 2024, management believes recently implemented expense reductions are poised to generate significant savings in the second half of the fiscal year.
"Transformation is not always linear, and while our second fiscal quarter 2024 results fell short of our ambitions, we believe the operational changes we've enacted are set to propel us forward," remarked Ronan Kennedy, cbdMD's CEO & CFO. "We're particularly excited about our ATRx Platinum line national rollout at GNC, which not only broadens our market presence but also validates our expansion into functional mushrooms."
In response to financial challenges, cbdMD has executed aggressive cost-cutting measures, projecting approximately $2.4 million in annualized savings that should be realized by August. These measures include reducing non-essential staff numbers, eliminating non-critical expenses, renegotiating vendor contracts, and consolidating its executive offices with its warehouse facility by entering into agreements to terminate its executive headquarters lease. These efforts are expected to reduce related expenses by approximately $0.6 million per quarter, positioning the company to potentially achieve positive cash flow in the upcoming quarters.
Kennedy added, "Our shareholders have spoken: profitability is imperative. Their input has further fueled our commitment to making tough yet crucial decisions, setting us up for success by the fiscal year's end. With revenues currently on pace for third fiscal quarter 2024 to surpass those of the March 2024 quarter, we are optimistic about making significant strides in this current fiscal period."
Financial Highlights from our Second Quarter of Fiscal 2024:
- Net sales totaled $4.4 million for the March 31, 2024 quarter or a decrease of 30% compared to $6.2 million for the prior year comparative fiscal quarter. For the six months ended March 2024, Net sales totaled $9.8 million as compared to $12.3 million for the prior year period.
- We reported direct to consumer (DTC) net sales of $3.6 million or 82.8% of total net sales in the second quarter of fiscal 2024, a decrease from $4.9 million, or 26% from first quarter of fiscal 2023.
- We reported wholesale net sales of $0.75 million in the second quarter of fiscal 2024, a decrease from $1.3 million, or 44% from second quarter of fiscal 2023.
- During the quarter we incurred a $0.44 million credit issued to a wholesale customer related to related to the $1 million order shipped during the March 2022 quarter.
- Our gross profit for the quarter totaled 59% in compared to 64% in the second quarter of fiscal 2023, mostly due to the issued credit.
- Our loss from operations was $1.5 million during the second quarter of fiscal 2024 as compared to a loss of $1.4 million in second quarter of fiscal 2023.
- Net loss attributable to common shareholders for second quarter of 2024 was approximately $4.0 million, or $1.35 per share, as compared to a net loss for the second fiscal quarter of 2023 of approximately $2.3 million, or $1.74 per share. The decrease in the second fiscal quarter of 2024 was principally attributable to a $1.4 million non-cash contingency liability increase related to the potential convertible liability of the Notes issued during the quarter along with a corresponding increase in the Company's stock price from issuance to March 31, 2024.
- At March 31, 2024, we had working capital of approximately $3.2 million (excluding the accrued preferred dividend) and cash on hand of approximately $2.1 million as compared to working capital of approximately $4.1 million (excluding the accrued preferred dividend) and cash on hand of approximately $1.8 million at September 30, 2023.
- Our non-GAAP adjusted loss from operations during the second quarter of fiscal 2024 was approximately $0.68 million as compared to our non-GAAP adjusted loss from operations during the second quarter of fiscal 2023 of approximately $0.80 million, despite the decrease in overall revenue.
Highlights for the Second Quarter of 2024 and Notable Business Updates
- During the quarter, the Company closed on $1.25 million in net financing through a series of Convertible Notes ("Notes") with a total principal balance of approximately $1.54 million. The Company intends to use the proceeds from the issuance of the Notes for working capital and general corporate purposes. As of the filing date, there is approximately $1 million in principal balance remaining on the Notes.
- The Company has consolidated its executive offices and warehouse and entered into agreements with its current landlord on its historical executive offices. Should the Company fulfill the obligations in these agreements, including making payments through July, the lease would terminate at the end of July 2024.
- The Company has implemented what it believes are over $200,000 in monthly operating costs savings that will be in place by August.
- Since January the Company made several non-executive personnel changes, including the hiring of a new VP of Wholesale and Director of Digital Marketing to combat ongoing revenue attrition and focus on profitability. We anticipate revenues to increase over the $4.8 million adjusted net revenue (excluding the $0.44 million credit) during the third quarter of fiscal 2024.
- As a follow-up to the Company's launch of its functional mushroom brand, ATRx Labs, during the first fiscal quarter, the Company launched the ATRx Platinum line throughout GNC's approximate 1,500 corporate locations during the second ficcal quarter of 2024. GNC national presence gives the brand the support and added credibility of a national retailer and further substantiates the growing demand for functional, natural products.
We will host a conference call at 4:20 p.m., Eastern Time, on Wednesday, May 15, 2024, to discuss our March 31, 2024, second quarter of fiscal 2024 financial results and business progress.
CONFERENCE CALL DETAILS
| Wednesday, May 15, 2024, 4:20 p.m. Eastern Time |
| USA/Canada: |
| 844-763-8274 |
| International: |
| 647-484-8814 |
| Teleconference Replay dial in: |
| USA/Canada: |
| 855-669-9658 |
| International: |
| 412-317-0088 |
| Replay Passcode: |
| 0905 |
| Webcast/Webcast Replay link- available through May 15, 2025: https://www.gowebcasting.com/13342 |
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 sleep aids, and an array of Farm Act compliant Delta 9 products. Our Paw CBD brand of pet products includes veterinarian-formulated products including tinctures and chews 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.
1 THC-free is defined as below the level of detection using validated scientific analytical methods.
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, Form 10-Q for the quarterly period ended December 31, 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.
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 |
| MARCH 31, 2024 AND SEPTEMBER 30, 2023 |
| (unaudited) |
| March 31, |
| September 30, |
| 2024 |
| 2023 |
| Assets |
| Cash and cash equivalents |
| $ |
| 2,105,396 |
| $ |
| 1,797,860 |
| Accounts receivable, net of allowance for credit losses of $179,419 and $42,180, respectively |
| 868,217 |
| 1,216,090 |
| Inventory |
| 3,174,005 |
| 4,052,972 |
| Inventory prepaid |
| 277,794 |
| 182,675 |
| Prepaid sponsorship |
| 52,078 |
| 70,061 |
| Prepaid expenses and other current assets |
| 932,770 |
| 750,383 |
| Total current assets |
| 7,410,260 |
| 8,070,041 |
| Other assets: |
| Property and equipment, net |
| 667,979 |
| 716,579 |
| Operating lease assets |
| 2,766,290 |
| 3,350,865 |
| Deposits for facilities |
| 132,203 |
| 138,708 |
| Intangible assets, net |
| 2,873,406 |
| 3,219,090 |
| Investment in other securities, noncurrent |
| 700,000 |
| 700,000 |
| Total other assets |
| 7,139,878 |
| 8,125,242 |
| Total assets |
| $ |
| 14,550,138 |
| $ |
| 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 |
| $ |
| 1,291,306 |
| $ |
| 1,906,319 |
| Accrued expenses |
| 1,282,028 |
| 629,648 |
| Accrued dividends |
| 2,668,000 |
| 667,000 |
| Deferred revenue |
| 468,472 |
| 187,793 |
| Operating leases - current portion |
| 1,226,764 |
| 1,277,089 |
| Note payable |
| - |
| 2,492 |
| Total current liabilities |
| 6,936,570 |
| 4,670,341 |
| Long term liabilities: |
| Convertible notes |
| 2,702,000 |
| - |
| Other long term liabilities |
| - |
| 9 |
| Operating leases - long term portion |
| 1,824,721 |
| 2,403,286 |
| Contingent liability |
| - |
| 90,363 |
| Total long term liabilities |
| 4,526,721 |
| 2,493,658 |
| Total liabilities |
| 11,463,291 |
| 7,163,999 |
| cbdMD, Inc. 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, 3,045,204 and 2,960,573 shares issued and outstanding, respectively |
| 3,045 |
| 2,961 |
| Additional paid in capital |
| 183,456,639 |
| 183,387,095 |
| Comprehensive other expense |
| (6,000) |
| - |
| Accumulated deficit |
| (180,371,837) |
| (174,363,772) |
| Total cbdMD, Inc. shareholders' equity |
| 3,086,847 |
| 9,031,284 |
| Total liabilities and shareholders' equity |
| 14,550,138 |
| $ |
| 16,195,283 |
| cbdMD, INC. |
| CONSOLIDATED STATEMENTS OF OPERATIONS |
| FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 2024 and 2023 |
| (Unaudited) |
| Three months |
| Three months |
| Six Months |
| Six Months |
| Ended |
| Ended |
| Ended |
| Ended |
| March 31 |
| March 31 |
| March 31 |
| March 31 |
| 2024 |
| 2023 |
| 2024 |
| 2023 |
| Gross Sales |
| $ |
| 4,816,444 |
| $ |
| 6,584,666 |
| $ |
| 10,192,075 |
| $ |
| 12,825,191 |
| Allowances |
| (439,926) |
| (344,646) |
| (440,152) |
| (499,954) |
| Total Net Sales |
| 4,376,518 |
| 6,240,020 |
| 9,751,923 |
| 12,325,237 |
| Cost of sales |
| 1,795,790 |
| 2,224,512 |
| 3,613,698 |
| 4,741,964 |
| Gross Profit |
| 2,580,728 |
| 4,015,508 |
| 6,138,225 |
| 7,583,273 |
| Operating expenses |
| 4,131,719 |
| 5,416,151 |
| 8,755,053 |
| 13,030,097 |
| Loss from operations |
| (1,550,991) |
| (1,400,643) |
| (2,616,828) |
| (5,446,824) |
| (Increase) decrease of contingent liability |
| 4,828 |
| 48,000 |
| 74,580 |
| 109,000 |
| (increase) decrease in fair value of convertible debt |
| (1,446,000) |
| - |
| (1,446,000) |
| - |
| Other income |
| - |
| 17,787 |
| - |
| 49,543 |
| Interest expense |
| (18,399) |
| (1,946) |
| (18,817) |
| (4,583) |
| Loss before provision for income taxes |
| (3,010,562) |
| (1,336,802) |
| (4,007,065) |
| (5,292,864) |
| Benefit for income taxes |
| - |
| - |
| - |
| - |
| Net Loss |
| (3,010,562) |
| (1,336,802) |
| (4,007,065) |
| (5,292,864) |
| Preferred dividends |
| 1,000,500 |
| 1,000,500 |
| 2,001,000 |
| 2,001,002 |
| Net Loss available to cbdMD, Inc. common shareholders |
| $ |
| (4,011,062) |
| $ |
| (2,337,302) |
| $ |
| (6,008,065) |
| $ |
| (7,293,866) |
| Net Loss per share: |
| Basic and diluted earnings per share |
| $ |
| (1.35) |
| $ |
| (1.74) |
| $ |
| (2.03) |
| $ |
| (5.43) |
| Weighted average number of shares Basic and Diluted: |
| 2,961,057 |
| 1,345,589 |
| 2,961,000 |
| 1,343,394 |
| cbdMD, INC. |
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS |
| FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 2024 and 2023 |
| (Unaudited) |
| Three months |
| Three months |
| Six Months |
| Six Months |
| Ended |
| Ended |
| Ended |
| Ended |
| March 31 |
| March 31 |
| March 31 |
| March 31 |
| 2024 |
| 2023 |
| 2024 |
| 2023 |
| Net Loss Income |
| $ |
| (3,010,562) |
| $ (1,336,802) |
| $ |
| (4,007,065) |
| $ (5,292,864) |
| Comprehensive Loss |
| (3,010,562) |
| (1,336,802) |
| (4,007,065) |
| (5,292,864) |
| Other comprehensive loss |
| (6,000) |
| - |
| (6,000) |
| - |
| Preferred dividends |
| (1,000,500) |
| (1,000,500) |
| (2,001,000) |
| (2,001,002) |
| Comprehensive Loss attributable to cbdMD, inc. common shareholders |
| $ |
| (4,017,062) |
| $ |
| (2,337,302) |
| $ |
| (6,014,065) |
| $ |
| (7,293,866) |
| cbdMD, INC. |
| CONSOLIDATED STATEMENT OF CASH FLOWS |
| FOR THE THREE AND SIX ENDED MARCH 31, 2024 AND 2023 |
| (Unaudited) |
| Six Months |
| Six Months |
| March 31 |
| March 31 |
| 2024 |
| 2023 |
| Cash flows from operating activities: |
| Net Loss |
| $ |
| (4,007,065) |
| $ |
| (5,292,864) |
| Adjustments to reconcile net loss to net |
| cash used by operating activities: |
| Stock based compensation |
| 2,852 |
| 96,216 |
| Restricted stock expense |
| 992 |
| 100,249 |
| Write off of prepaid assets due to termination of contractual obligation |
| - |
| 884,892 |
| Issuance of stock for services |
| - |
| 1,459,193 |
| Intangibles amortization |
| 345,684 |
| 554,709 |
| Depreciation |
| 228,615 |
| 100,112 |
| Increase (decrease) in contingent liability |
| (74,580) |
| (109,000) |
| Increase (decrease) in fair value of convertible debt |
| 1,446,000 |
| - |
| Amortization of operating lease asset |
| 584,574 |
| 556,646 |
| Changes in operating assets and liabilities: |
| Accounts receivable |
| 301,132 |
| 286,278 |
| Deposits |
| 6,505 |
| 105,898 |
| Inventory |
| 878,967 |
| 135,176 |
| Prepaid inventory |
| (95,119) |
| 100,307 |
| Prepaid expenses and other current assets |
| (164,404) |
| (1,544,308) |
| Accounts payable and accrued expenses |
| 449,287 |
| (855,872) |
| Operating lease liability |
| (628,891) |
| (580,325) |
| Deferred revenue / customer deposits |
| (84,497) |
| 203,341 |
| Collection on discontinued operations accounts receivable |
| - |
| 1,375 |
| Cash used by operating activities |
| (809,948) |
| (3,797,977) |
| Cash flows from investing activities: |
| Proceeds from sale of other investment securities |
| - |
| - |
| Purchase of property and equipment |
| (180,015) |
| (74,980) |
| Other securities |
| - |
| 1,000,000 |
| Cash used by investing activities |
| (180,015) |
| 925,020 |
| Cash flows from financing activities: |
| Proceeds from issuance of common stock |
| 50,000 |
| - |
| Note payable |
| 1,247,499 |
| (127,725) |
| Preferred dividend distribution |
| - |
| (2,001,000) |
| Cash used by financing activities |
| 1,297,499 |
| (2,128,725) |
| Net decrease in cash |
| 307,536 |
| (5,001,682) |
| Cash and cash equivalents, beginning of period |
| 1,797,860 |
| 6,720,234 |
| Cash and cash equivalents, end of period |
| $ |
| 2,105,396 |
| $ |
| 1,718,552 |
| Supplemental Disclosures of Cash Flow Information: |
| 2023 |
| 2022 |
| Cash Payments for: |
| Interest expense |
| $ |
| 88,961 |
| $ |
| 2,638 |
| Non-cash financial activities: |
| Preferred dividends accrued but not paid |
| $ |
| 2,001,000 |
| $ |
| - |
| 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 |
| 2024 |
| 2023 |
| 2024 |
| 2023 |
| GAAP loss from operations |
| $ |
| (1,550,991) |
| $ |
| (1,400,643) |
| $ |
| (2,616,828) |
| $ |
| (5,446,824) |
| Adjustments: |
| Depreciation & Amortization |
| 290,592 |
| 379,744 |
| 574,299 |
| 757,210 |
| Employee and director stock compensation (1) |
| 11,944 |
| 117,821 |
| 28,486 |
| 254,965 |
| Other non-cash stock compensation for services (2) |
| - |
| - |
| - |
| 884,892 |
| Expenses related to Convertible Note financing (3) |
| 58,239 |
| - |
| 58,239 |
| - |
| Accrual for severance |
| - |
| - |
| - |
| 129,761 |
| Non-cash expense incurred as a credit (4) |
| 439,926 |
| - |
| 439,926 |
| - |
| Mergers and Acquisitions and financing transaction expenses (5) |
| - |
| - |
| 67,599 |
| - |
| Non-cash accelerated amortization of expense related to terminated IT contracts |
| 72,101 |
| - |
| 72,101 |
| - |
| a-369 non-cash trade credit |
| - |
| 107,608 |
| - |
| 107,608 |
| Non-GAAP adjusted loss from operations |
| $ |
| (678,189) |
| $ |
| (795,470) |
| $ |
| (1,376,178) |
| $ |
| (3,312,387) |
(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 expenses incurred related to the issuance of the Notes.
(4) Represents non-cash expense incurred as a credit provided to GNC to replace expired product.
(5) Represents expenses incurred in relation to M&A and financing activities during the six months ended March 31, 2024.
Contacts:
Investors:
cbdMD, Inc.
Ronan Kennedy
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/209289