Quarterly Net Sales Increased 33% to $10.6 Million

Direct to Consumer (DTC) Net Sales Increased 77%

Company Expects to Reach Positive Adjusted Operating Income During Calendar 2020

cbdMD, Inc. (NYSE American: YCBD, YCBD PR A) (the “Company”), one of the leading, highly trusted, and most recognized cannabidiol (CBD) brands, reported today record net sales of $10.6 million in its third fiscal 2020 quarter ended June 30, 2020.

“cbdMD reported its single biggest quarterly net sales in its history. Our decisions to concentrate on building brand equity for award winning cbdMD and Paw CBD brands, as well as and focus on our e-commerce strength, has paid off. We have separated ourselves from our competitors and demonstrated that we can grow market share and be fiscally responsible at the same time, with our GAAP and non-GAAP operating results improving by 80% and 96%, respectively, from the comparable periods in fiscal 2019. With $15 million in cash on hand at June 30, 2020, we believe we have more than enough financial strength to grow our operations for the foreseeable future, absent any additional unforeseen impact from COVID-19,” said Martin Sumichrast, the Company’s Chairman and co-Chief Executive Officer.

The highlights from the June 2020 quarter were:

  • The Company reported net sales of $10.6 million for the three months ended June 30, 2020, a year-over-year quarterly increase of approximately 33% and a sequential quarterly increase from the three months ended March 31, 2020 of approximately 13%.
  • The Company reported record quarterly e-commerce, direct to consumer (DTC) net sales of $8.2 million, an increase of 77% year-over-year and a sequential quarterly increase of approximately 21%. The Company’s e-commerce, direct to consumer (DTC) sales accounted for in excess of 77% of total net sales in the June 2020 quarter, an increase from 58% from prior year’s quarter.
  • The Company’s CBD pet brand, Paw CBD, reported an approximate 64% increase in net sales from its March 2020 quarter of approximately $750,000 to approximately $1,229,000 for its June 2020 quarter.
  • The Company reported a gross profit margin of 64.7% as a percent of net sales as compared to 63.4% for the comparable period in fiscal 2019 and adjusted non-GAAP gross profit margin as a percent of net sales was 67.7% as compared to a 65% in the comparable period in fiscal 2019.
  • The Company reported an 80% year-over-year improvement in its GAAP loss from operations of ($1,337,508) as compared to ($6,466,639) in the comparable 2019 period.
  • The Company reported a 96% year-over-year improvement in its non GAAP adjusted loss from operations of ($187,092) as compared to ($5,019,541) in the comparable fiscal 2019 period after adjusting for the following: a non-cash inventory adjustment of $311,000, a non-cash stock option expense of $388,000, a depreciation expense of $233,000 and a non-cash charge of $233k for old inventory.
  • The Company reported a net loss of ($9,052,752), or $(0.18) per share, which was mainly due to a non-cash expense of approximately $7.58 million in the Company’s contingent liability which is associated with earnout shares which may be issued under the terms of the December 2018 acquisition of Cure Based Development.
  • Working capital was $19.7 million and cash on hand was approximately $15 million at June 30, 2020, respectively.
  • CBD Industries, LLC, the Company’s wholly owned manufacturing and distribution subsidiary, was recently added to NSF International’s dietary supplements Good Manufacturing Practice (GMP) registration.

CONFERENCE CALL DETAILS

Wednesday, August 12, 2020, 4:15 p.m. Eastern Time

Domestic:

1-844-407-9500

International:

1-862-298-0850

Replay dial in – Available through September 12, 2020

Domestic:

1-877-481-4010

International:

1-919-882-2331

Replay ID:

36267

Webcast Replay link – available through September 12, 2020:

https://www.webcaster4.com/Webcast/Page/2206/36267

About cbdMD, Inc.

cbdMD, Inc. is a nationally recognized consumer cannabidiol (CBD) brand whose current products include CBD tinctures, CBD capsules, CBD gummies, CBD topicals, CBD bath bombs, and CBD pet products. cbdMD is also a proud partner of Bellator MMA and Life Time, Inc., and has one of the largest rosters of professional sports athletes who are part of “Team cbdMD.” To learn more about cbdMD and our comprehensive line of over 100 SKUs of U.S. produced, THC-free1 CBD products, please visit www.cbdMD.com, follow cbdMD on Instagram and Facebook, or visit one of the 6,000 retail outlets that carry cbdMD 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 by the use of 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 and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including, without limitation, statements made with respect to the expansion of the consumer market for CBD products and our ability to increase our market share, our limited operating history, our ability to expand our business and significantly increase our net sales, our ability to effectively leverage our brand partnerships and sponsorships, our ability to effectively compete in our market, and our ability to report profitable operations in the future. You are urged to carefully review and consider any cautionary statements 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, 2019, as amended, as filed with the Securities and Exchange Commission (the "SEC") 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 Non-THC is defined as below the level of detection using validated scientific analytical tools.

Non-GAAP Financial Measures

This press release includes certain financial measures that exclude the impact of certain items and therefore have not been calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). The Company has included adjusted income (loss) from operations and adjusted gross profit because management uses this measure to assess operating performance, in order to highlight trends in the Company’s business that may not otherwise be apparent when relying on financial measures calculated in accordance with GAAP. Neither adjusted income (loss) from operations nor adjusted gross profit has not been prepared in accordance with GAAP. These non-GAAP financial measures should not be considered as alternatives to, or more meaningful than, net income (loss) and gross profit margins as indicators of the Company’s operating performance. Further, these non-GAAP financial measures, as presented by the Company, may not be comparable to similarly titled measures reported by other companies. The Company has attached to this press release a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures.

cbdMD, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

JUNE 30, 2020 AND SEPTEMBER 30, 2019

 

 

(Unaudited)

 

 

 

June 30,

 

September 30,

2020

 

2019

Assets

 

Current assets:

Cash and cash equivalents

$

15,006,319

$

4,689,966

Accounts receivable

 

715,205

 

1,425,697

Accounts receivable other

 

-

 

160,137

Accounts receivable – discontinued operations

 

700,884

 

1,080,000

Marketable securities

 

52,527

 

198,538

Investment other securities

 

-

 

600,000

Deposits

 

-

 

6,850

Merchant reserve

 

-

 

519,569

Inventory

 

6,397,326

 

4,301,586

Inventory prepaid

 

281,885

 

903,458

Deferred issuance costs

 

-

 

93,954

Prepaid software

 

-

 

206,587

Prepaid equipment deposits

 

201,698

 

868,589

Prepaid expenses and other current assets

 

755,906

 

688,104

Total current assets

 

24,111,750

 

15,743,035

 

 

 

Other assets:

 

 

Property and equipment, net

 

3,067,909

 

1,715,557

Operating lease assets

 

7,119,289

 

-

Deposits for facilities

 

706,852

 

754,533

Intangible assets, net

 

21,635,000

 

21,635,000

Goodwill

 

54,669,997

 

54,669,997

Total other assets

 

87,199,047

 

78,775,087

 

 

 

Total assets

$

111,310,797

$

94,518,122

cbdMD, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

JUNE 30, 2020 AND SEPTEMBER 30, 2019

(continued)

 

 

 

 

 

 

 

(Unaudited)

 

 

 

 

June 30,

 

September 30,

 

 

2020

 

2019

Liabilities and shareholders' equity

 

Current liabilities:

Accounts payable

$

1,825,135

 

$

3,021,271

 

Accrued expenses

 

1,396,983

 

 

681,269

 

Operating leases – short term liabilities

 

1,109,585

 

 

-

 

Note payable

 

54,720

 

 

-

 

Customer deposit – related party

 

-

 

 

7,339

 

Total current liabilities

 

4,386,423

 

 

3,709,878

 

 

Long term liabilities:

 

 

Long term liabilities

 

-

 

 

363,960

 

Note payable

 

182,714

 

 

-

 

Paycheck Protection Program loan

 

1,456,100

 

 

-

 

Operating leases - long term liabilities

 

6,305,422

 

 

-

 

Contingent liability

 

15,400,000

 

 

50,600,000

 

Deferred tax liability

 

-

 

 

2,240,300

 

Total long term liabilities

 

23,344,236

 

 

53,204,260

 

 

 

 

Total liabilities

 

27,730,659

 

 

56,914,138

 

 

 

 

cbdMD, Inc. shareholders' equity:

Preferred stock, authorized 50,000,000 shares, $0.001 par value, 500,000 and 0 shares issued and outstanding, respectively

 

500

 

 

-

 

Common stock, authorized 150,000,000 shares, $0.001 par value, 51,345,648 and 27,720,356 shares issued and outstanding, respectively

 

51,346

 

 

27,720

 

Additional paid in capital

 

124,558,046

 

 

97,186,524

 

Accumulated deficit

 

(41,029,754

)

 

(59,610,260

)

Total cbdMD, Inc. shareholders’ equity

 

83,580,138

 

 

37,603,984

 

 

Total liabilities and shareholders' equity

$

111,310,797

 

$

94,518,122

 

cbdMD, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2020 AND 2019

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Three months

 

Three months

 

Nine months

 

Nine months

 

 

Ended

 

Ended

 

Ended

 

Ended

 

 

June 30, 2020

 

June 30, 2019

 

June 30, 2020

 

June 30, 2019

 

 

 

 

 

Total Gross Sales

 

10,809,387

 

 

9,734,459

 

 

30,925,678

 

 

18,170,667

 

Allowances

 

(172,842

)

 

(1,729,310

)

 

(741,861

)

 

(4,063,252

)

Total Net Sales

 

10,636,545

 

 

8,005,149

 

 

30,183,817

 

 

14,107,414

 

Cost of sales

 

3,748,024

 

 

2,929,160

 

 

10,180,637

 

 

5,009,187

 

 

 

 

 

 

Gross Profit

 

6,888,521

 

 

5,075,989

 

 

20,003,180

 

 

9,098,228

 

 

 

 

 

 

Operating expenses

 

8,226,029

 

 

11,542,628

 

 

33,053,962

 

 

18,683,905

 

Income (Loss) from operations

 

(1,337,508

)

 

(6,466,639

)

 

(13,050,782

)

 

(9,585,677

)

Realized and Unrealized gain (loss) on marketable securities

 

(30,849

)

 

(13,162

)

 

(146,011

)

 

(77,802

)

(Increase) Decrease of contingent liability

 

(7,580,000

)

 

(21,547,606

)

 

30,580,000

 

 

(52,461,680

)

Impairment on investment other securities

 

-

 

 

-

 

 

(600,000

)

 

-

 

Impairment accounts receivable other

 

-

 

 

-

 

 

(160,000

)

 

-

 

Interest income (expense)

 

3,436

 

 

6,229

 

 

46,311

 

 

50,189

 

Income (loss) before provision for income taxes

 

(8,944,921

)

 

(28,021,178

)

 

16,669,518

 

 

(62,074,970

)

 

 

 

 

 

Benefit (Provision) for income taxes

 

-

 

 

1,088,000

 

 

2,240,300

 

 

2,296,000

 

Net Income (Loss) from continuing operations

 

(8,944,921

)

 

(26,933,178

)

 

18,909,818

 

 

(59,778,970

)

Net Income (Loss) from discontinued operations, net of tax (Note 16)

 

(7,781

)

 

(2,269,778

)

 

(48,983

)

 

(3,463,123

)

Net Income (Loss)

 

(8,952,702

)

 

(29,202,956

)

 

18,860,835

 

 

(63,242,093

)

Net Gain (Loss) attributable to noncontrolling interest

 

-

 

 

(1,503,707

)

 

-

 

 

(1,641,391

)

Preferred dividends

 

100,050

 

 

-

 

 

266,800

 

 

-

 

 

 

 

 

 

Net Income (Loss) attributable to cbdMD, Inc. common shareholders

$

(9,052,752

)

$

(27,699,249

)

$

18,594,035

 

$

(61,600,702

)

 

 

 

 

 

Net Income (Loss) per share:

 

 

 

 

Basic earnings per share

$

(0.18

)

$

(1.19

)

$

0.45

 

$

(4.22

)

Diluted earnings per share

$

-

 

$

-

 

$

0.44

 

$

-

 

 

 

 

 

 

Weighted average number of shares Basic:

 

51,335,648

 

 

23,193,793

 

 

41,411,261

 

 

14,585,619

 

Weighted average number of shares Diluted:

 

-

 

 

-

 

 

42,534,519

 

 

-

 

cbdMD, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2020 AND 2019

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Three months

 

Three months

 

Nine months

 

Nine months

 

 

Ended

 

Ended

 

Ended

 

Ended

 

 

June 30, 2020

 

June 30, 2019

 

June 30, 2020

 

June 30, 2019

 

 

 

 

 

Net Income (Loss)

$

(8,952,702

)

$

(29,202,956

)

$

18,860,835

 

$

(63,242,093

)

Comprehensive Income (Loss)

 

(8,952,702

)

 

(29,202,956

)

 

18,860,835

 

 

(63,242,093

)

 

 

 

 

 

Comprehensive Income (loss) attributable to non-controlling interest

 

-

 

 

(1,503,707

)

 

-

 

 

(1,641,391

)

Preferred dividends

 

(100,050

)

 

-

 

 

(266,800

)

 

-

 

Comprehensive Income (Loss) attributable to cbdMD, Inc. common shareholders

$

(9,052,752

)

$

(27,699,249

)

$

18,594,035

 

$

(61,600,702

)

cbdMD, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED JUNE 30, 2020 AND 2019

(unaudited)

 

 

 

 

 

 

 

Nine Months Ended June 30,

 

Nine Months Ended June 30,

 

 

2020

 

2019

Cash flows from operating activities:

Net Income (loss)

$

18,860,835

 

$

(63,242,093

)

Adjustments to reconcile net (income) loss to net cash used by operating activities:

Stock based compensation

 

1,391,271

 

 

2,022,812

 

Restricted stock expense

 

138,001

 

 

92,000

 

Issuance of stock / warrants for service

 

84,450

 

 

289,750

 

Intangible impairment

 

-

 

 

2,114,334

 

Inventory and materials impairment

 

233,372

 

 

-

 

Impairment on discontinued operations asset

 

45,783

 

 

-

 

Depreciation and amortization

 

499,394

 

 

272,121

 

Gain on settlement of Note

 

-

 

 

(20,000

)

Other than temporary impairment other securities and other accounts receivable

 

760,000

 

 

-

 

Increase/(Decrease) in contingent liability

 

(30,580,000

)

 

52,461,680

 

Realized and unrealized loss of marketable securities

 

146,011

 

 

1,705,069

 

Merchant reserve settlement

 

132,657

 

 

-

 

Non-cash consideration received for services

 

-

 

 

(470,000

)

Non-cash lease expense

 

878,986

 

 

-

 

Changes in operating assets and liabilities:

Accounts receivable

 

710,629

 

 

399,074

 

Accounts receivable – related party

 

-

 

 

204,902

 

Other accounts receivable

 

-

 

 

(298,754

)

Note receivable

 

-

 

 

(27,000

)

Note receivable – related party

 

-

 

 

156,147

 

Deposits

 

(147,166

)

 

-

 

Merchant reserve

 

386,912

 

 

(199,907

)

Inventory

 

(2,329,112

)

 

(2,581,958

)

Prepaid inventory

 

621,573

 

 

-

 

Prepaid expenses and other current assets

 

1,007,374

 

 

(717,894

)

Marketable securities

 

-

 

 

701,593

 

Accounts payable and accrued expenses

 

(480,424

)

 

1,073,211

 

Accounts payable and accrued expenses – related party

 

-

 

 

(313,591

)

Operating lease liability

 

(766,289

)

 

-

 

Note payable

 

42,968

 

 

-

 

Deferred revenue / customer deposits

 

(7,339

)

 

(380,804

)

Collection on discontinued operations accounts receivable

 

333,333

 

 

-

 

Deferred tax liability

 

(2,240,300

)

 

(2,296,000

)

Cash used by operating activities

 

(10,277,081

)

 

(9,055,308

)

 

Cash flows from investing activities:

Net cash used for merger

 

-

 

 

(1,167,295

)

Purchase of intangible assets

 

-

 

 

(79,999

)

Purchase of property and equipment

 

(1,851,746

)

 

(359,421

)

Cash used by investing activities

 

(1,851,746

)

 

(1,606,715

)

 

Cash flows from financing activities:

Proceeds from issuance of common stock

 

16,771,756

 

 

19,009,897

 

Proceeds from issuance of preferred stock

 

4,421,928

 

 

-

 

PPP loan

 

1,456,100

 

 

-

 

Note Payable – related party

 

-

 

 

(764,300

)

Preferred dividend distribution

 

(266,800

)

 

-

 

Deferred issuance costs

 

62,197

 

 

(232,914

)

Cash provided by financing activities

 

22,445,180

 

 

18,012,683

 

Net increase (decrease) in cash

 

10,316,353

 

 

7,350,660

 

Cash and cash equivalents, beginning of period

 

4,689,966

 

 

4,282,553

 

Cash and cash equivalents, end of period

$

15,006,319

 

$

11,633,213

 

cbdMD, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED JUNE 30, 2020 AND 2019

(unaudited) (continued)

 

Supplemental Disclosures of Cash Flow Information:

 

 

Nine Months ended June 30,

 

Nine Months Ended June 30,

 

2020

 

2019

 

 

 

Cash Payments for:

 

 

Interest expense

$

26,126

$

36,418

 

 

 

Non-cash financial activities:

Warrants issued to secondary selling agent

$

524,113

$

309,592

Stock received for prior period services, adjusted for other accounts receivable write down prior to receipt

$

-

$

1,352,000

Adoption of ASU 2016-01

$

-

$

2,512,539

cbdMD, Inc.

SUPPLEMENTAL FINANCIAL INFORMATION

RECONCILIATION OF ADJUSTED INCOME (LOSS) FROM OPERATIONS

(Unaudited)

 

 

Three months

Three months

 

Ended

Ended

 

June 30, 2020

June 30, 2019

 

 

 

GAAP Income (Loss) from operations

(1,337,508

)

(6,466,639

)

 

 

 

Adjustments:

 

 

Inventory adjustment (1)

316,922

 

-

 

Non-cash stock related expense (2)

388,185

 

1,389,224

 

Depreciation expense

211,937

 

57,874

 

One-time abnormal inventory adjustment (3)

233,372

 

-

 

Adjusted Income (loss) from operations

(187,092

)

(5,019,541

)

 

Three months

 

Three months

 

 

Ended

 

Ended

 

 

June 30, 2020

 

June 30, 2019

 

 

 

 

 

 

GAAP net sales

10,636,545

 

8,005,149

 

GAAP cost of sales

3,748,024

 

2,929,160

 

 

 

 

 

 

Adjustments:

 

 

 

 

Inventory adjustment (1)

316,922

 

130,795

 

Adjusted cost of sales

3,431,102

 

2,798,365

 

Adjusted Gross Profit

7,205,443

67.7

%

5,206,784

65.0

%

(1)

Amount represents an adjustment after performing a physical inventory account.

(2)

Represents non-cash expense related to options, warrants, restricted stock expenses that have been amortized during the period.

(3)

Amount represents an operating expense related to inventory loss related to regulatory changes impacting labels and packaging.

 

John Weston Director of Investor Relations john.weston@cbdmd.com 704-249-9515

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