cbdMD Reports Record First Quarter Fiscal 2020 Net Sales of $10.14 Million

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CHARLOTTE, N.C.–(BUSINESS WIRE)–cbdMD, Inc. (NYSE American: YCBD, YCBD PR A) (the “Company”), a leading cannabidiol (CBD) consumer brands company, reported today its first fiscal 2020 quarter ended December 31, 2019 results, the highlights of which were:

  • The Company reported record net sales of $10,148,236, a year-over-year quarterly increase of approximately 285% (which is based upon the pre-acquisition and post-acquisition net sales of the brand which the Company acquired in late December 2018).
  • The Company reported its net sales for the quarter were approximately 67% through its e-commerce channel and 33% through its retail brick and mortar channel.
  • The Company reported its gross profit margin as a percent of net sales were 63.5% as compared to 64.4% in prior year same period and an improvement from our last quarter ending September 30, 2019, which was 56.7%.
  • The Company reported a quarterly loss from operations of $6,112,598, of which approximately $965,000 was non-cash items. Total operating expenses related to marketing, advertising, sponsorship and affiliate commissions were approximately $5 million for the quarter, of which $1.2 million was an accelerated license fee for the Life Time Fitness Agreement.
  • The Company reported a $16,898,006 decrease in the Company’s non-cash contingent liability and net income before provision for income tax of $10,730,665.
  • The Company reported net income for the first quarter of fiscal 2020 of $12,863,029 or $0.45 cents per diluted share.
  • The Company reported $3,661,210 in cash at December 31, 2019, which gave no effect to the subsequent follow-on firm commitment common stock offering which resulted in approximately $16.9 million of net proceeds on January 14, 2020.

“cbdMD is reporting another record quarter of revenue growth, we are fully financed and expect to achieve cash flow breakeven by the end of this fiscal year. In calendar 2019, our first full year of CBD sales, we generated over $33 million in total net sales, which was well ahead of our initial expectations of $20 million. We believe that we have built two of the leading CBD brands in America, cbdMD and Paw CBD. While our common share price has been negatively impacted by the current investor sentiment in the cannabis sector, we believe we are a bright spot in the overall industry,” said Martin Sumichrast, Chairman and co-CEO of the Company.

“We continue to drive online sales through the use of various digital marketing tactics, athlete and major league partnerships, and high traffic affiliate programs. Currently we have over 222,000 active e-commerce subscribers, an increase of over 10% since last quarter. On the brick and mortar side of our business, we are growing the amount of retail stores who currently carry our brands. Our retail reach is now over 5,300 retail doors, an increase of over 1,000 doors since last quarter and we have also increased our international presence and are now currently selling to wholesale customers in 16 international markets, up from 10 last quarter,” continued Mr. Sumichrast.

“During calendar 2019, we invested heavily in brand development and acquiring brand building assets as well as our physical infrastructure with full scale manufacturing, distribution and warehousing facilities. During calendar 2020, our focus is on deploying and activating these assets while containing our overall advertising and marketing costs. We continue to invest in R&D and testing to ensure the safety and quality of our products. Every batch of finished goods are tested with a full panel by an ISO certified testing laboratory to ensure the quality and purity, as well as to ensure we meet our label claims for potency, ” continued Mr. Sumichrast.

“Our brands have also received leading brand recognition in the CBD industry. In July, 2019, the Brightfield Group, one of the leading predictive analytics and market research firms for the legal CBD industry, named cbdMD a Top 10 domestic brand in two booming categories, Topicals and Skincare/Beauty. In November 2019, in a newly released survey conducted by Brightfield of more than 3,500 CBD users, cbdMD ranked the highest in terms of overall consumer satisfaction as well as the highest in unaided consumer awareness of any of the top 20 CBD brands. In the animal health side of our business, Paw CBD was recently ranked by the Brightfield Group as one of the top five brands in the animal CBD market. Most recently, we announced a plan to start a joint venture with holistic pet foods leader Halo, Purely for Pets® (“Halo®”), a premium, natural pet food brand with a rich 30-year operating history,” added Mr. Sumichrast.

 
CONFERENCE CALL DETAILS
Thursday, February 13, 2020, 4:15 p.m. Eastern Time
Domestic:1-844-602-0380
International:1-862-298-0970
 
Replay dial in – Available through January 18, 2020
Domestic:1-877-481-4010
International:1-919-882-2331
Replay ID:56986
Webcast Replay link – available through March 18, 2020:https://www.investornetwork.com/event/presentation/56986
 

About cbdMD, Inc.

cbdMD, Inc. (NYSE American: YCBD and NYSE American: YCBD PR A) owns and operates the nationally recognized consumer cannabidiol (CBD) brand cdbMD, whose current products include CBD gummies, CBD tinctures, CBD topical, CBD bath bombs, CBD oils and CBD pet products. cbdMD, Inc. is a nationally recognized consumer cannabidiol (CBD) brand whose current products include CBD tinctures, CBD gummies, CBD topicals, CBD bath bombs, and CBD pet products. cbdMD is also the proud partner with the Big 3 Basketball League, Barstool Sports, Bellator MMA, (a subsidiary of Viacom: NASDAQ:VIA), Life Time Fitness and Nitro Circus. To learn more about cbdMD, Inc. and our comprehensive line of over 100 SKU’s of U.S. produced, THC-free CBD products, please visit: www.cbdmd.com or follow cbdMD on Instagram and Facebook or visit one of the over 4,000 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 revenues, our ability to effectively leverage our brand partnerships and sponsorships, our ability to effectively compete in our market, our ability to achieve our net sales guidance, 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 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.

  
cbdMD, INC.CONDENSED CONSOLIDATED BALANCE SHEETSDECEMBER 31, 2019 AND SEPTEMBER 30, 2019 
  
  (Unaudited)    
  December 31,  September 30, 
 2019  2019 
Assets    
     
Current assets:    
Cash and cash equivalents $3,661,310  $4,689,966 
Accounts receivable  670,182   1,425,697 
Accounts receivable other  160,137   160,137 
Accounts receivable – discontinued operations  875,331   1,080,000 
Marketable securities  136,527   198,538 
Investment other securities  600,000   600,000 
Deposits  28,365   6,850 
Merchant reserve  412,979   519,569 
Inventory  5,307,217   4,301,586 
Inventory prepaid  1,141,211   903,458 
Deferred issuance costs  16,828   93,954 
Prepaid software  187,220   206,587 
Prepaid equipment deposits  868,589   868,589 
Prepaid expenses and other current assets  808,275   688,104 
Total current assets  14,874,171   15,743,035 
       
Other assets:      
Property and equipment, net  2,157,980   1,715,557 
Operating lease assets  7,704,109    
Deposits for facilities  755,383   754,533 
Intangible assets, net  21,635,000   21,635,000 
Goodwill  54,669,997   54,669,997 
Total other assets  86,922,469   78,775,087 
       
Total assets $101,796,640  $94,518,122 
   
cbdMD, INC.CONDENSED CONSOLIDATED BALANCE SHEETSDECEMBER 31, 2019 AND SEPTEMBER 30, 2019(continued)
   
  (Unaudited)  
  December 31, September 30,
  2019 2019
Liabilities and shareholders’ equity  
   
Current liabilities:  
Accounts payable $3,625,073  $3,021,271 
Accrued expenses  531,958   681,269 
Operating leases – short term liabilities  1,044,611    
Note payable  279,606    
Customer deposit – related party     7,339 
Total current liabilities  5,481,248   3,709,878 
   
Long term liabilities:    
Long term liabilities     363,960 
Note payable  182,975    
Operating leases – long term liabilities  6,906,193    
Contingent liability  33,701,994   50,600,000 
Deferred tax liability     2,240,300 
Total long term liabilities  40,791,162   53,204,260 
     
Total liabilities  46,272,410   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,  
27,720,356 and 27,720,356 shares issued and outstanding, respectively  27,720   27,720 
Additional paid in capital  102,256,769   97,186,524 
Accumulated deficit  (46,760,759)  (59,610,260)
Total cbdMD, Inc. shareholders’ equity  55,524,230   37,603,984 
     
   
Total liabilities and shareholders’ equity $101,796,640  $94,518,122 
  
cbdMD, INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSFOR THE THREE MONTHS ENDED DECEMBER 31, 2019 AND 2018(Unaudited)
  
  Three months Three months
  Ended Ended
  December 31,2019 December 31,2018
     
Sales $10,412,491  $683,730 
Sales related party      
Total Gross Sales  10,412,491   683,730 
Allowances  (264,255)  (218,042)
Net sales  10,148,236   465,687 
Net sales related party      
Total Net Sales  10,148,236   465,687 
Cost of sales  3,700,537   165,492 
     
Gross Profit  6,447,699   300,196 
     
Operating expenses  12,560,297   1,391,812 
Income (Loss) from operations  (6,112,598)  (1,091,617)
Realized and Unrealized gain (loss) on marketable securities(62,010) 
Decrease of contingent liability  16,898,006   
Interest income  7,267   37,686 
Income (loss) before provision for income taxes  10,730,665   (1,053,931)
     
Benefit for income taxes  2,240,300   133,000 
Net Income (Loss) from continuing operations  12,970,965   (920,931)
Net Loss from discontinued operations, net of tax (Note 15)  (41,202)  (1,268,111)
Net Income (Loss)  12,929,763   (2,189,042)
Net Loss attributable to non-controlling interest from discontinued operations (Note 15)     (79,149)
Preferred dividends  66,734    
     
Net Income (Loss) attributable to cbdMD, Inc. common shareholders $12,863,029  $(2,109,893)
     
Net Income (Loss) per share:    
Basic earnings per share $0.46  $(0.21)
Diluted earnings per share  0.45    
Weighted average number of shares Basic:  27,720,356   10,052,960 
Weighted average number of shares Diluted:  28,553,856   10,052,960 
 
cbdMD, INC.CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)FOR THE THREE MONTHS ENDED DECEMBER 31, 2019 AND 2018(Unaudited)
 
  Three months Three months
  Ended Ended
  December 31,2019 December 31,2018
     
Net Income (Loss) $12,929,763  $(2,189,042)
Other Comprehensive Income:    
Continued operations – Net Unrealized Gain (Loss) on Marketable Securities, net of tax      
Comprehensive Income (Loss)  12,929,763   (2,189,042)
     
Comprehensive Income (loss) attributable to non-controlling interest     (79,149)
Preferred dividends  (66,734)   
Comprehensive Income (Loss) attributable to cbdMD, Inc. common shareholders $12,863,029  $(2,109,893)
     
   
cbdMD, INC.CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE THREE MONTHS ENDED DECEMBER 31, 2019 AND 2018(unaudited)
   
  Three Months Ended
December 31,
 Three Months Ended
December 31,
 2019 2018
Cash flows from operating activities:  
Net income (loss) $12,929,763  $(2,189,042)
Adjustments to reconcile net income (loss) to net  
cash used by operating activities:  
Stock based compensation  542,574   143,673 
Restricted stock expense  138,000    
Impairment on discontinued operations asset  38,002    
Depreciation and amortization  113,252   64,414 
Gain on settlement of Note     (20,000)
Increase/(Decrease) in contingent liability  (16,898,006)   
Realized and unrealized loss of marketable securities  62,011   1,578,976 
Non-cash lease expense  382,432    
Non-cash consideration received for services     (407,500)
Changes in operating assets and liabilities:  
Accounts receivable  755,515   (113,629)
Accounts receivable – related party     204,902 
Other accounts receivable     (8,865)
Note receivable     (6,000)
Note receivable – related party     156,147 
Deposits  (22,365)   
Merchant reserve  106,590   (25,090)
Inventory  (1,005,631)  (13,833)
Prepaid inventory  (237,753)   
Prepaid expenses and other current assets  (100,803)  184,300 
Marketable securities     174,327 
Accounts payable and accrued expenses  454,490   (329,680)
Operating lease liability  (318,758)   
Note payable  268,115   (308,627)
Deferred revenue / customer deposits  (7,339)  (114,375)
Cash provided by discontinued operations  166,667    
Deferred tax liability  (2,240,300)  (133,000)
Cash used by operating activities  (4,873,544)  (1,162,902)
   
Cash flows from investing activities:  
Net cash used for merger     (1,177,669)
Purchase of intangible assets     (79,999)
Purchase of property and equipment  (555,674)  (9,925)
Cash used by investing activities  (555,674)  (1,267,593)
   
Cash flows from financing activities:  
Proceeds from issuance of common stock     6,356,997 
Proceeds from issuance of preferred stock  4,421,928    
Preferred dividend distribution  (66,734)   
Deferred issuance costs  45,368   (177,521)
Cash provided by financing activities  4,400,562   6,179,476 
Net increase (decrease) in cash  (1,028,656)  3,748,981 
Cash and cash equivalents, beginning of period  4,689,966   4,282,553 
Cash and cash equivalents, end of period $3,661,310  $8,031,534 
 
cbdMD, INC.CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE THREE MONTHS ENDED DECEMBER 31, 2019 AND 2018(unaudited) (continued)
 
Supplemental Disclosures of Cash Flow Information:
   
  Three Months ended
December 31,
 Three Months Ended
December 31,
  2019 2018
     
Cash Payments for:    
Interest expense $8,221 $203
     
Non-cash financial activities:  
Warrants issued to secondary selling agent $178,513 $86,092
Stock received for prior period services, adjusted for other accounts receivable write down prior to receipt $ $1,352,000
   

SOURCE BUSINESSWIRE

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