cbdMD Reduces Year over Year Net Loss from Operations by $55.8 Million
Company Launches HempMD Products and Nutraceutical Brand ATRx with a new Functional Mushroom Product to Expand Growth Opportunities and Markets
Charlotte, North Carolina–(Newsfile Corp. – December 22, 2023) – cbdMD, Inc. (NYSE American: YCBD) (NYSE American: YCBD-PA), one of the nation’s leading and most highly trusted and recognized CBD companies, and operator of the leading CBD brands – its flagship brand cbdMD, its animal health brand Paw CBD, today announced our quarterly and full fiscal financial results for September 30, 2023.
For Fiscal 2023, we continued to make strong progress on our turnaround, incurring a loss from operations of $22.4 million. This included one-time intangible impairment charges of $13.2 million as required under GAAP due to the decrease of the trading price of our common stock during the quarter (which we believe was in part due to the market reaction to our failed shareholder proposal to convert our outstanding preferred stock and suspension of our monthly cash dividend payment on our preferred stock). Excluding one-time Intangible Impairment Charges, we continue to make significant year-over-year improvements to our operating loss. While our quarterly operating income over the past two years has varied as a result of goodwill and intangible impairment, we have continued to reduce non-GAAP Net Adjusted Operating losses.
“We made significant strides this year on our path to positive cash flow, especially during the second half of the year. We have exhibited operational excellence while we turned over our marketing department, re-platformed our e-commerce system and rationalized expenses across the board. We knew it was going to be a challenging year while we reset the business and are proud of the way our team executed on the challenge,” says Ronan Kennedy, cbdMD’s Interim CEO & CFO.
“Despite barriers at retail due to our category, we continued to invest in developing new strategic relationships for the cbdMD brand and are excited to announce that cbdMD launched into 160 Sprouts Markets stores across the nation this month. We remain focused on new revenues in early calendar 2024 and are cautiously optimistic about building inertia during 2024,” continued Mr. Kennedy.
“While we continue to have a robust pipeline of new and improved CBD products, we have focused on launching 2 new brands, hempMD and ATRx, to provide expanded opportunities for growth despite the impediments to CBD channel growth caused by the current regulatory landscape. hempMD is a collection of curated hemp products primarily designed for sale on Amazon. The ATRx brand is designed to provide functional, non-cannabinoid health and wellness solutions to our customers, with an initial focus on the emerging functional mushroom market. We are excited to announce the launch of the Ultimate Mushroom Daily Gummy, our first ATRx product. The Ultimate Mushroom Daily Gummy’s proprietary blend has ingredients which were carefully selected to enhance focus and memory, support gut health, reduce inflammation and boost immunity which pairs well with our core cbdMD products as part of an every-day routine. We are already in discussions about expanding the ATRx line in multiple brick and mortar retailers. Both of these new brands provide opportunities for us to expand beyond current distribution and marketing channels furthering, efforts to reach new customers.
2024 will be a pivotal year for the Company. Re-growing sales and addressing our equity capital structure remain our highest priorities. We believe work completed on the business and brands since June has improved the outlook for the Company, creating exciting new growth opportunities going into calendar 2024,” concluded Mr. Kennedy.
Highlights for Fiscal 2023 and Notable Business Updates
- The Company launched into Sprouts Markets in December of 2023 and looks to further expand during 2024.
- The Company re-platformed to Shopify in June of 2023 and launched a site refresh in November 2023 as it works to employ the best-in-class customer experience and optimize its cost structure.
- The Company launched into Amazon UK early third fiscal quarter with 6 offerings and looks to further expand its Amazon UK offerings in 2024.
- The Company launched hempMD and ATRx brands, expanding our product channels into Amazon US and other more traditional consumer products channels that have historically precluded the sale of CBD products. The Company also intends to launch these new brands into the Amazon UK network in 2024.
- cbdMD continues to lead the way in commercializing NSF Certified for Sport® THC Free products, and during 2023 expanded its NSF Certified for Sport® offering to include the widest range of dose formats and the highest CBD strength NSF Certified for Sport®products on the market.
- cbdMD expanded its successful line of Delta-9 products by adding additional gummies.
- The Company received multiple awards – Paw CBD was recognized with “Dog Hip & Joint Product Of The Year” award from Pet Innovations, cbdMD Freeze roll-on has been named a bronze winner in two distinguished categories at the esteemed Best in Biz Awards. The company’s CBD Freeze Roll-On was recognized in the Consumer Product of the Year category, and its popular CBD PM Softgel Capsules – NSF Certified for Sport® were honored in the Best New Product of the Year – Consumer category.
- cbdMD announced the publication of the Company’s safety data in Regulatory Toxicology and Pharmacology, supporting a safe upper dose of its proprietary Broad Spectrum CBD blend at 1mg/lb of bodyweight daily.
The Company announced partnerships with Lucille Vega, M.D.
Financial Highlights from our Fiscal Year 2023:
- Net sales totaled $24.1 million in fiscal 2023 or a decrease of 31.7% compared to $35.4 million in fiscal 2021.
- Our gross profit for the year totaled 62% in fiscal 2023 compared to 63% in fiscal 2022.
- Our loss from operations was $22.4 million in fiscal 2023 as compared to a loss of $78.3 million in fiscal 2022. During 2023 we impaired approximately $13.2 million in intangibles as compared to $60.9 million of goodwill and intangibles in the prior year. Excluding this impairment our non-GAAP loss from operations improved by $8.0 million for fiscal 2023.
- Our non-GAAP adjusted loss from operations in fiscal 2023 was approximately $5.5 compared to our non-GAAP adjusted loss from operations in fiscal 2022 of approximately $13.1 million, despite the significant decrease in overall revenue.
- Net loss attributable to common shareholders for fiscal 2023 was approximately $26.9 million, or $13.30 per share, as compared to a net loss for fiscal 2022 of approximately $74.0 million, or $55.80 per share. The improvement in fiscal 2023 was principally attributable to the $47 million reduction in net loss.
- At September 30, 2023, we had working capital of approximately $3.4 million and cash on hand of approximately $1.8 million as compared to working capital of approximately $10.7 million and cash on hand of approximately $6.7 million at September 30, 2022.
- We reported direct to consumer (DTC) net sales of $19.4 million or 80.5% of total net sales in fiscal 2023, a decrease of $6.9 million, or 26.5% from fiscal 2021.
Pursuant to the disclosure requirements of the NYSE American Company Guide Section 610(b), cbdMD is reporting that its audited consolidated financial statements for the fiscal year ended September 30, 2023, included in its Annual Report on Form 10-K filed with the Securities and Exchange Commission on December 22, 2023, contains an audit opinion from its independent registered public accounting firm that includes an explanatory paragraph related to cbdMD’s ability to continue as a going concern. This announcement does not represent any change or amendment to cbdMD’s financial statements or to its Annual Report on Form 10-K for the fiscal year ended September 30, 2023.
We will host a conference call at 4:20 p.m., Eastern Time, on Friday, December 22, 2023, to discuss our September 30, 2023, fourth quarter and full fiscal year financial results and business progress.
CONFERENCE CALL DETAILS
| Friday December 22, 2023, 4:20 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: | 0614 |
| Webcast/Webcast Replay link- available through December 22, 2024: https://www.gowebcasting.com/13114 | |
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 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 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.
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 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. | ||||||
| CONSOLIDATED BALANCE SHEETS | ||||||
| SEPTEMBER 30, 2023 AND SEPTEMBER 30, 2022 | ||||||
| September 30, | September 30, | |||||
| 2023 | 2022 | |||||
| Assets | ||||||
| Cash and cash equivalents | $ | 1,797,860 | $ | 6,720,234 | ||
| Accounts receivable | 1,216,090 | 1,447,831 | ||||
| Accounts receivable – discontinued operations | – | 1,375 | ||||
| Investment other securities | – | 1,000,000 | ||||
| Inventory | 4,052,972 | 4,255,914 | ||||
| Inventory prepaid | 182,675 | 511,459 | ||||
| Prepaid sponsorship | 70,061 | 1,372,845 | ||||
| Prepaid expenses and other current assets | 750,383 | 701,945 | ||||
| Total current assets | 8,070,041 | 16,011,603 | ||||
| Other assets: | ||||||
| Property and equipment, net | 716,579 | 823,310 | ||||
| Operating lease assets | 3,350,865 | 4,477,841 | ||||
| Deposits for facilities | 138,708 | 244,606 | ||||
| Intangible assets, net | 3,219,090 | 17,834,549 | ||||
| Investment in other securities, noncurrent | 700,000 | 1,400,000 | ||||
| Total other assets | 8,125,242 | 24,780,306 | ||||
| Total assets | $ | 16,195,283 | $ | 40,791,909 | ||
| CONSOLIDATED BALANCE SHEETS | ||||||
| SEPTEMBER 30, 2023 AND SEPTEMBER 30, 2022 | ||||||
| (continued) | ||||||
| September 30, | September 30, | |||||
| 2023 | 2022 | |||||
| Liabilities and shareholders’ equity | ||||||
| Current liabilities: | ||||||
| Accounts payable | $ | 1,906,319 | $ | 2,036,558 | ||
| Deferred revenue | 1,484,441 | 2,060,762 | ||||
| Accrued expenses | 1,277,089 | 1,178,683 | ||||
| Note payable | 2,492 | 9,609 | ||||
| Total current liabilities | 4,670,341 | 5,285,612 | ||||
| Long term liabilities: | ||||||
| Long term liabilities | 9 | 125,491 | ||||
| Operating leases – long term portion | 2,403,286 | 3,680,375 | ||||
| Contingent liability | 90,363 | 276,000 | ||||
| Total long term liabilities | 2,493,658 | 4,081,866 | ||||
| Total liabilities | 7,163,999 | 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, 2,960,573 and 1,348,125 shares issued and outstanding, respectively | 2,961 | 1,348 | ||||
| Additional paid in capital | 183,387,095 | 178,841,646 | ||||
| Accumulated deficit | (174,363,772 | ) | (147,423,563 | ) | ||
| Total shareholders’ equity | 9,031,284 | 31,424,431 | ||||
| Total liabilities and shareholders’ equity | $ | 16,195,283 | $ | 40,791,909 | ||
| cbdMD, INC. | ||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||
| FOR THE YEARS ENDED SEPTEMBER 30, 2023 and 2022 | ||||||
| September 30, | September 30, | |||||
| 2023 | 2022 | |||||
| Gross Sales | $ | 25,053,857 | $ | 37,122,215 | ||
| Allowances | (898,495 | ) | (1,718,991 | ) | ||
| Total Net Sales | 24,155,362 | 35,403,224 | ||||
| Cost of sales | 9,177,703 | 13,066,639 | ||||
| Gross Profit | 14,977,659 | 22,336,585 | ||||
| Operating expenses | 24,246,208 | 39,647,130 | ||||
| Impairment of Goodwill and other intangible assets | 13,219,000 | 60,955,970 | ||||
| Loss from operations | (22,487,549 | ) | (78,266,515 | ) | ||
| Realized and Unrealized loss on marketable and other securities, including impairments | (700,000 | ) | (33,350 | ) | ||
| Decrease of contingent liability | 185,638 | 8,473,999 | ||||
| Gain on sale of assets | – | 88,769 | ||||
| Restructuring expense | – | (602,092 | ) | |||
| Other income | – | 239,250 | ||||
| Interest income | 63,702 | 16,246 | ||||
| Loss before provision for income taxes | (22,938,209 | ) | (70,083,693 | ) | ||
| Benefit for income taxes | – | – | ||||
| Net Loss | (22,938,209 | ) | (70,083,693 | ) | ||
| Preferred dividends | 4,002,000 | 4,002,005 | ||||
| Net Loss available to cbdMD, Inc. common shareholders | $ | (26,940,209 | ) | $ | (74,085,698 | ) |
| Net Loss per share: | ||||||
| Basic earnings per share | (13.32 | ) | (55.80 | ) | ||
| Diluted earnings per share | (13.32 | ) | (55.80 | ) | ||
| Weighted average number of shares Basic: | 2,022,320 | 1,327,784 | ||||
| Weighted average number of shares Diluted: | 2,022,320 | 1,327,784 | ||||
| cbdMD, INC. | ||||||
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS | ||||||
| FOR THE YEARS ENDED SEPTEMBER 30, 2023 and 2022 | ||||||
| September 30, | September 30, | |||||
| 2023 | 2022 | |||||
| Net Loss Income | $ | (22,938,209 | ) | $ | (70,083,693 | ) |
| Comprehensive Loss | (22,938,209 | ) | (70,083,693 | ) | ||
| Preferred dividends | (4,002,000 | ) | (4,002,005 | ) | ||
| Comprehensive Loss attributable to cbdMD, inc. common shareholders | $ | (26,940,209 | ) | $ | (74,085,698 | ) |
| cbdMD, INC. | ||||||
| CONSOLIDATED STATEMENT OF CASH FLOWS | ||||||
| FOR THE YEARS ENDED SEPTEMBER 30, 2023 and 2022 | ||||||
| September 30, | September 30, | |||||
| 2023 | 2022 | |||||
| Cash flows from operating activities: | ||||||
| Net Loss | $ | (22,938,209 | ) | $ | (70,083,693 | ) |
| Adjustments to reconcile net (income) loss to net | ||||||
| cash used by operating activities: | ||||||
| Stock based compensation | 233,666 | 555,215 | ||||
| Restricted stock expense | 109,202 | 373,610 | ||||
| Write off of prepaid assets due to termination of contractual obligation | 884,892 | |||||
| Marketing stock amortization | – | 907,774 | ||||
| Inventory and materials impairment | 175,499 | 878,142 | ||||
| Intangibles amortization | 1,396,459 | 884,380 | ||||
| Depreciation | 404,280 | 948,962 | ||||
| Impairment of Goodwill and other intangible assets | 13,219,000 | 60,955,970 | ||||
| Gain on sale of fixed assets | – | (322,017 | ) | |||
| Increase/(Decrease) in contingent liability | (185,638 | ) | (8,473,999 | ) | ||
| Realized and unrealized loss of Marketable and other securities | 700,000 | 33,350 | ||||
| Termination benefit | – | – | ||||
| Extinguishment of Paycheck Protection Program Loan | – | – | ||||
| Amortization of operating lease asset | 1,126,976 | 1,137,119 | ||||
| Changes in operating assets and liabilities: | ||||||
| Accounts receivable | 278,482 | 65,541 | ||||
| Deposits | 105,898 | 284,977 | ||||
| Inventory | 27,443 | (112,189 | ) | |||
| Prepaid inventory | 328,784 | 40,060 | ||||
| Prepaid expenses and other current assets | 2,095,323 | (289,586 | ) | |||
| Accounts payable and accrued expenses | (1,290,141 | ) | (1,812,547 | ) | ||
| Operating lease liability | (1,178,683 | ) | (1,151,150 | ) | ||
| Deferred revenue / customer deposits | 203,341 | 203,341 | ||||
| Collection on discontinued operations accounts receivable | 1,375 | 9,592 | ||||
| Cash used by operating activities | (4,302,051 | ) | (14,967,150 | ) | ||
| Cash flows from investing activities: | ||||||
| Proceeds from sale of other investment securities | 1,000,000 | – | ||||
| Purchase of property and equipment | (297,549 | ) | (688,680 | ) | ||
| Cash provided (used) by investing activities | 702,451 | (688,680 | ) | |||
| Cash flows from financing activities: | ||||||
| Proceeds from issuance of common stock | 2,478,325 | – | ||||
| Note payable | (132,599 | ) | (33,355 | ) | ||
| Preferred dividend distribution | (3,668,500 | ) | (4,002,005 | ) | ||
| Cash provided by financing activities | (1,322,774 | ) | (4,035,360 | ) | ||
| Net decrease in cash | (4,922,374 | ) | (19,691,190 | ) | ||
| Cash and cash equivalents, beginning of period | 6,720,234 | 26,411,424 | ||||
| Cash and cash equivalents, end of period | $ | 1,797,860 | $ | 6,720,234 | ||
| Supplemental Disclosures of Cash Flow Information: | ||||||
| 2023 | 2022 | |||||
| Cash Payments for: | ||||||
| Interest expense | $ | 6,399 | $ | 2,364 | ||
| Non-cash financial activities: | ||||||
| Issuance of Contingent earnout shares: | $ | – | $ | 1,086,000 | ||
| Preferred dividends accrued but not paid | $ | 667,000 | $ | – | ||
| cbdMD, Inc. | ||||||||||||
| SUPPLEMENTAL FINANCIAL INFORMATION | ||||||||||||
| RECONCILIATION OF NON-GAAP ADJUSTED LOSS FROM OPERATIONS | ||||||||||||
| (unaudited) | ||||||||||||
| Three Months | Three Months | Twelve Months | Twelve Months | |||||||||
| Ended | Ended | Ended | Ended | |||||||||
| September 30, | September 30, | September 30, | September 30, | |||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||
| GAAP (loss) from operations | $ | (15,217,070 | ) | $ | (14,894,624 | ) | $ | (22,487,549 | ) | $ | (78,266,515 | ) |
| Adjustments: | ||||||||||||
| Depreciation & Amortization | 667,950 | 455,965 | 1,800,739 | 1,833,326 | ||||||||
| Employee and director stock compensation (1) | 33,263 | 272,613 | 349,245 | 1,124,130 | ||||||||
| Inventory adjustment (2) | 70,000 | – | 70,000 | 878,142 | ||||||||
| Impairment of goodwill and other intangible assets (3) | 13,219,000 | 11,996,249 | 13,219,000 | 60,955,970 | ||||||||
| Incremental bad debt | 45,000 | – | 45,000 | – | ||||||||
| Accrual for severance (4) | – | – | – | 129,761 | ||||||||
| a360 non-cash trade credit | 609,732 | 1,476,967 | ||||||||||
| Accrual / expenses for discretionary bonus | – | – | – | 150,000 | ||||||||
| Non-GAAP adjusted (loss) from operations | $ | (572,125 | ) | $ | (2,169,797 | ) | $ | (5,526,598 | ) | $ | (13,195,186 | ) |
(1) Represents non-cash expense related to options, warrants, restricted stock expenses that have been amortized during the period.
(2) Represents an operating expense related to inventory loss related to regulatory changes impacting labels and packaging and obsolete/expired inventory.
(3) Represents non-cash impairment of the cbdMD, DCO and Technology Relief from Royalty trademarks of $13.22 million during the fourth quarter of fiscal 2023, non-cash impairment of the cbdMD trademark of $4.28 million during the first quarter of fiscal year 2022 and $56.67 million of goodwill impairment during the fiscal year ended 2022.
(4) Represents one-time severance costs incurred as the Company rationalized a number of positions.
Contacts:
Investors:
cbdMD, Inc.
Ronan Kennedy
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/192159
