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

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.

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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 SHEETS DECEMBER 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 SHEETS DECEMBER 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 OPERATIONS FOR 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 FLOWS FOR 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 FLOWS FOR 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