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cbdMD Reports Fiscal September 30, 2020 Results

·17 min read

Fiscal Year Net Sales Increased 77% To Record $41.9 Million

e-Commerce Direct-to-Consumer Sales Jump 106% to $30.5 Million

cbdMD, Inc. (NYSE American: YCBD, YCBDpA), one of the nation’s leading and most highly trusted and recognized cannabidiol (CBD) brands, today announced its financial results for the fourth quarter and fiscal year ended September 30, 2020.

Commenting on today’s results, Chairman and co-CEO Martin A. Sumichrast said, "We believe cbdMD is now one of the most successful CBD companies in world, with two of the most recognized and valuable CBD brands, cbdMD and Paw CBD. We are committed to continuing to deliver on our financial goals. We have grown quarterly sales over 900% in eight fiscal quarters. We have remained focused on our core competency, which is e-commerce direct-to-consumer sales, which increased to $30.5 million, or 73% of total net sales in fiscal 2020, a 106% increase from the prior year. We have also maintained one of the strongest balance sheets in the CBD industry and we believe we have more than ample enough capital to execute on our 2021 strategy. In fact, we have recently more than doubled our liquidity, which now stands today at approximately $30 million in cash, with virtually no debt. To put this into context, we built two brands in two years with less cash than we have in the bank today. In addition, we dramatically reduced our non-GAAP adjusted loss from operations from over $10 million in the first half of fiscal 2020 to approximately $1.3 million in the second half of fiscal 2020. Earlier this year we set a goal of achieving positive adjusted operating income during calendar year 2020, a non-GAAP financial measure. We are presently confident we will reach this milestone in early fiscal 2021. However, based upon marketing opportunities that may arise during the year, achieving this goal may be extended later into the fiscal year. While we have not committed to any financial guidance, we do expect continued robust sales growth in fiscal 2021."

Financial Highlights:

Fiscal 2020:

  • Net sales increased by 77% year-over-year to a record of $41.9 million in fiscal 2020, from $23.6 million in fiscal 2019.

  • Our gross profit margin increased to 63% in fiscal 2020 from 61% in fiscal 2019. Our non-GAAP adjusted gross margin totaled 67.7% for fiscal 2020, after approximately $2.2 million in non-cash inventory adjustments for the year, as compared to 61% for fiscal 2019.

  • Our loss from operations was $17.6 million in fiscal 2020 as compared to $14.8 million in fiscal 2019, of which approximately $11.7 million, or 67%, was recorded in the first half of fiscal 2020 and approximately $5.8 million was recorded in the second half of the fiscal year.

  • Our non-GAAP adjusted loss from operations in fiscal 2020 was approximately $11.5 million, of which $10.2 million, or 89%, was recorded in the first half of fiscal 2020, and approximately $1.3 million, or 11%, was recorded for the second half of the fiscal year. Our non-GAAP adjusted loss from operations in fiscal 2019 was approximately $11.5 million.

  • Net income attributable to common shareholders for fiscal 2020 was approximately $12.2 million, or $0.28 per share, as compared to a net loss for fiscal 2019 of approximately $50.4 million, or $2.82 per share. The increase in fiscal 2020 was principally attributable to a decrease of approximately $29.8 million in the non-cash contingent liability which is associated with earnout shares which may be issued under the terms of the December 2018 acquisition of Cure Based Development (which owned the cbdMD brand).

  • At September 30, 2020, we had working capital of approximately $16.0 million and cash on hand of approximately $14.8 million as compared to working capital of approximately $12 million and cash on hand of approximately $4.7 million at September 30, 2019. Our working capital position has been further bolstered subsequent to year end following our receipt of approximately $15.8 million in net proceeds from our December 2020 sale of shares of our 8.0% Series A Cumulative Convertible Preferred Stock in a firm commitment underwritten public offering. As a result, as of today we have approximately $30 million in cash on hand.

  • We reported record e-commerce, direct to consumer (DTC) net sales of $30.5 million, or 73% of total net sales in fiscal 2020, an increase of $15.6 million, or 106% increase from fiscal 2019.

  • Our CBD pet brand, Paw CBD, reported approximately $4.5 million in net sales in fiscal 2020, which was the brand’s first full fiscal year.

For the Quarter Ended September 30, 2020:

  • Our net sales for the fourth quarter of fiscal 2020 increased by 23% year-over-year to a record of $11.7 million from $9.5 million in the fourth quarter of fiscal 2019.

  • Our gross profit margin for the quarter decreased to 54% in the fourth quarter of fiscal 2020 from 57% in the fourth quarter of fiscal 2019, which was principally attributable to an approximate $1.66 million in non-cash inventory adjustment during the quarter. Our non-GAAP adjusted gross margin totaled 68% for the fourth quarter of fiscal 2020 as compared to approximately 57% in the fourth quarter of fiscal 2019.

  • Our loss from operations was approximately $4.5 million compared to $5.2 million from the prior year’s quarter.

  • Our non-GAAP adjusted operating loss was approximately $1.06 million, compared to a $4.1 million non-GAAP adjusted operating loss from the prior year’s quarter.

  • We reported record fourth quarter fiscal 2020 e-commerce, direct to consumer (DTC) net sales of $8.6 million, an increase of $3.2 million, or 58%, from the fourth quarter of fiscal 2019.

  • Our pet brand, Paw CBD, which was launched in the fourth quarter of fiscal 2019 reported approximately $1.67 million in net sales in the fourth quarter of fiscal 2020.

cbdMD, Inc. will host a conference call at 4:15 p.m., Eastern Time, on Tuesday, December 22, 2020, to discuss the company’s September 30, 2020 fourth quarter and fiscal year-end financial results and business progress.

CONFERENCE CALL DETAILS

Tuesday, December 22, 2020, 4:15 p.m. Eastern Time

Domestic:

1-888-506-0062

International:

1-973-528-0011

Replay dial in – Available through January 20, 2020

Domestic:

1-877-481-4010

International:

1-919-882-2331

Replay Passcode:

39191

Webcast/Webcast Replay link- available through December 23, 2020: https://www.webcaster4.com/Webcast/Page/2206/39191

About cbdMD, Inc.

cbdMD, Inc. is one of the leading, most highly trusted, and most recognized cannabidiol (CBD) brands, 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, Non-THC1 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.

1 Non-THC is defined as below the level of detection using validated scientific analytical tools.

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. 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, 2020 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.

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"). cbdMD, Inc. has included adjusted income (loss) from operations and adjusted gross profit because management uses these measures 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 income (loss) from operations and the adjusted gross profit margin have 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) from operations and gross profit as indicators of our operating performance. Further, these non-GAAP financial measures, 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 these non-GAAP financial measures to their most directly comparable GAAP financial measures.

CBDMD, INC.

CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2020 AND 2019

2020

2019

Assets

Current assets:

Cash and cash equivalents

$

14,824,644

$

4,689,966

Accounts receivable

911,482

1,425,697

Accounts receivable other

-

160,137

Accounts receivable – discontinued operations

447,134

1,080,000

Marketable securities

26,472

198,538

Investment other securities

250,000

600,000

Deposits

40,198

6,850

Merchant reserve

-

519,569

Inventory

4,603,360

4,301,586

Inventory prepaid

288,178

903,458

Deferred issuance costs

-

93,954

Prepaid software

174,308

206,587

Prepaid equipment deposits

40,197

868,589

Prepaid sponsorship expense

1,203,300

-

Prepaid expenses and other current assets

902,979

688,104

Total current assets

23,712,252

15,743,035

Other assets:

Property and equipment, net

3,183,487

1,715,557

Operating lease right-of-use assets

6,851,357

-

Deposits for facilities

790,708

754,533

Intangible assets, net

21,635,000

21,635,000

Goodwill

54,669,997

54,669,997

Total other assets

87,130,549

78,775,087

Total assets

$

110,842,801

$

94,518,122

CBDMD, INC.

CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2020 AND 2019

(continued)

2020

2019

Liabilities and shareholders' equity

Current liabilities:

Accounts payable

$

2,850,421

$

3,021,271

Deferred revenue

45,141

-

Accrued expenses

2,724,779

681,269

Operating leases – short term liabilities

1,159,098

-

Paycheck Protection Program Loan

854,000

-

Note payable

55,639

-

Customer deposit – related party

-

7,339

Total current liabilities

7,689,078

3,709,878

Long term liabilities

Long term liabilities

264,367

363,960

Paycheck Protection Program loan

602,100

-

Operating leases – long term liabilities

6,010,208

-

Contingent liability

16,200,000

50,600,000

Deferred tax liability

895,000

2,240,300

Total long-term liabilities

23,971,675

53,204,260

Total liabilities

31,660,753

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,

52,130,870 and 27,720,356 shares issued and outstanding, respectively

52,131

27,720

Additional paid in capital

126,517,784

97,186,524

Accumulated deficit

(47,388,367

)

(59,610,260

)

Total cbdMD, Inc. shareholders' equity

79,182,048

37,603,984

Total liabilities and shareholders' equity

$

110,842,801

$

94,518,122

CBDMD, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED SEPTEMBER 30, 2020 AND 2019

2020

2019

Sales

$

43,172,778

$

28,023,848

Sales related party

-

55,596

Total Gross Sales

43,172,778

28,079,444

Allowances

(1,289,044

)

(4,427,893

)

Net sales

41,883,734

23,595,955

Net sales related party

-

55,596

Total Net Sales

41,883,734

23,651,551

Costs of sales

15,514,727

9,136,677

Gross profit

26,369,006

14,514,873

Operating expenses excluding impairment losses

43,950,862

28,875,186

Impairment of intangible assets

-

436,578

Operating expenses

43,950,862

29,311,764

Income (loss) from operations

(17,581,856

)

(14,796,891

)

Realized and unrealized gain (loss) on marketable securities

(172,066

)

(102,716

)

Impairment on investment other securities

(760,000

)

(502,560

)

(Increase) decrease of contingent liability

29,780,000

(32,461,680

)

Interest income

39,877

75,071

Income (loss) before provision for income taxes

11,305,955

(47,788,776

)

Benefit from (provision for) income taxes

1,345,300

2,359,000

Net Income (loss) from continuing operations

12,651,255

(45,429,776

)

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

(48,983

)

(5,927,773

)

Net Income (loss)

$

12,602,272

$

(51,357,549

)

Net Income (loss) attributable to non-controlling interest from discontinued operations (Note 16)

-

(929,323

)

Preferred dividends

366,850

-

Net Income (loss) attributable to common shareholders

$

12,235,422

$

(50,428,226

)

Net Income (Loss) per share

Basic earnings (loss) per share

$

0.28

$

(2.82

)

Diluted earnings (loss) per share

$

0.28

$

-

Weighted average number of shares basic

44,140,360

17,887,247

Weighted average number of shares diluted

45,171,674

-

CBDMD, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE YEARS ENDED SEPTEMBER 30, 2020 AND 2019

2020

2019

Net Income (Loss)

$

12,602,272

$

(51,357,549)

Comprehensive Income (Loss)

12,602,272

(51,357,549

)

Comprehensive Income (loss) attributable to non-controlling interest

-

(929,323

)

Preferred dividends

(366,850

)

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

$

12,235,422

$

(50,428,226

)

CBDMD, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED SEPTEMBER 30, 2020 AND 2019

2020

2019

Cash flows from operating activities:

Net income (loss)

$

12,602,272

$

(51,357,549

)

Adjustments to reconcile net loss to net

cash used by operating activities:

Stock based compensation

1,900,194

2,458,530

Restricted stock expense

138,000

230,000

Depreciation and amortization

720,755

289,574

Issuance of stock / warrants for services

338,400

289,750

Realized and unrealized (gain)/loss on marketable securities

172,066

2,439,996

Impairment on investment other securities

760,000

502,560

Inventory impairment

233,372

-

Impairment on discontinued operations asset

45,783

3,398,438

Payment in-kind interest

-

(30,000

)

Loss on sale of property and equipment -discontinued operations

-

39,013

Severance agreement

489,381

-

Increase/(decrease) in contingent liability

(29,780,000

)

32,461,680

Intangible impairment

-

436,578

Non-cash consideration received for services provided

132,657

(470,000

)

Non-cash lease expense

1,180,213

-

Changes in operating assets and liabilities:

Accounts receivable

514,352

60,155

Accounts receivable - related party

-

(462,137

)

Other accounts receivable

-

2,737

Inventory

(535,146

)

(3,123,437

)

Note receivable – related party

-

156,147

Deposits

(938,112

)

(761,383

)

Merchant reserve

386,912

(93,316

)

Prepaid inventory

615,280

(903,458

)

Proceeds from sale of securities

-

410,094

Prepaid rent

-

180,000

Prepaid expenses and other current assets

645,796

(963,044

)

Accounts payable and accrued expenses

1,479,189

2,280,726

Accounts payable and accrued expenses – related party

-

(7,502

)

Operating lease liability

(1,045,285

)

-

Deferred Revenue/customer deposits

37,802

(416,619

)

Collection on discontinued operations accounts receivable

587,083

-

Deferred tax liability

(1,345,300

)

(2,425,000

)

Cash used by operating activities

(10,664,336

)

(15,377,467

)

Cash flows from investing activities:

Net cash used for merger

-

(916,555

)

Purchase of other investment securities

(250,000

)

-

Purchase of intangible assets

-

(50,000

)

Purchase of property and equipment

(1,320,095

)

(1,198,618

)

Cash used by investing activities

(1,570,095

)

(2,133,850

)

CBDMD, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED SEPTEMBER 30, 2020 AND 2019

(continued)

Cash flows from financing activities:

Proceeds from issuance of common stock

16,766,106

19,009,897

Proceeds from issuance of preferred stock

4,421,928

-

Proceeds from Paycheck Protection Program loan

1,456,100

-

Preferred dividend distribution

(366,850

)

-

Proceeds from Note payable

29,629

-

Payments on Note payable – related party

-

(764,300

)

Deferred issuance costs

62,197

(326,868

)

Cash provided by financing activities

22,369,110

17,918,729

Net increase in cash

10,134,678

407,413

Cash and cash equivalents, beginning of year

4,689,966

4,282,553

Cash and cash equivalents, end of year

$

14,824,644

$

4,689,966

cbdMD, Inc.

SUPPLEMENTAL FINANCIAL INFORMATION

RECONCILIATION OF NON-GAAP ADJUSTED INCOME (LOSS) FROM OPERATIONS

(Unaudited)

Fiscal Year Ended September 30

Three Months Ended September 30

2020

2019

2020

2019

GAAP (loss) from operations

$

(17,581,856

)

$

(14,796,891

)

$

(4,531,073

)

$

(5,286,154

)

Adjustments:

Depreciation

720,754

289,574

221,360

17,453

Employee and director stock compensation (1)

1,985,803

2,688,529

537,943

1,136,158

Other non-cash stock compensation for services (2)

338,400

289,750

253,950

-

Non-cash inventory adjustment (3)

2,207,000

-

1,663,000

-

Write down of legacy accounts receivables (4)

102,000

-

102,000

-

Accrual for severance

489,381

-

489,381

-

Accrual / expenses for discretionary bonus

200,000

-

200,000

-

Non-GAAP adjusted (loss) from operations

$

(11,583,516

)

$

(11,529,036

)

$

(1,063,439

)

$

(4,132,543

)

(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)

Amount represents an operating expense related to inventory loss related to issues tied to physical inventory issues, regulatory changes impacting labels and packaging, write-off of raw materials and a net realized valuation adjustment on non-core finished goods.

(4)

Write down of legacy accounts receivable.

cbdMD, Inc.

SUPPLEMENTAL FINANCIAL INFORMATION

RECONCILIATION OF NON-GAAP ADJUSTED GROSS PROFIT MARGIN

(Unaudited)

Fiscal Year Ended September 30

Three Months Ended September 30

2020

2019

2020

2019

Total net sales

$

41,883,734

$

23,651,551

$

11,699,917

$

9,544,137

Cost of sales

15,514,728

9,136,677

5,334,090

4,127,491

Gross profit

$

26,369,006

$

14,514,873

$

6,366,359

$

5,416,646

Gross profit margin

63.0

%

61.4

%

54.4

%

56.8

%

Adjustments:

Non-cash inventory adjustment (1)

1,974,000

-

1,663,000

-

Non-GAAP adjusted gross profit

$

28,343,539

$

14,514,873

$

8,029,359

$

5,416,646

Non-GAAP adjusted gross profit margin

67.7

%

61.4

%

68.6

%

56.8

%

(1)

Amount represents an operating expense related to inventory loss related to issues tied to physical inventory issues, write-off of scrap material and a net realized valuation adjustment on non-core finished goods.

View source version on businesswire.com: https://www.businesswire.com/news/home/20201222005655/en/

Contacts

PR:

cbdMD, Inc.
Lauren Greene
Communications Specialist
Lauren.Greene@cbdMD.com
(843) 743-9999

Investors:

cbdMD, Inc.
John Weston
Director of Investor Relations
John.Weston@cbdMD.com
(704) 249-9515