Repositions product portfolio with effective, industry leading concentrations now supported by clinical claims

Charlotte, North Carolina–(Newsfile Corp. – December 15, 2022) – cbdMD, Inc. (NYSE American: YCBD) (NYSE American: YCBDpA), one of the nation’s leading and most highly trusted and recognized CBD companies, and operator of three 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, 2022.

While we incurred a GAAP loss from operations of $78.1 million, the loss was mostly attributed to a one-time goodwill impairment charge of $60.9 million. Excluding one-time Goodwill Impairment Charges, we continue to make year over year improvements to our GAAP operating loss. The impairment was triggered because of the downward movement in our stock price during the year and revenue trends. While our operating income over the past five quarters has varied as a result of goodwill and intangible impairment, this is the fifth consecutive quarter of non-GAAP Net Adjusted Operating Income gains, improving $0.6 million compared to the quarter ending in June 2022.

“Fiscal 2022 was a reset year for our Company. We began the year by taking aggressive action to reduce our marketing spend and overall SG&A costs, we managed through significant leadership changes, rationalized our product line up, and at the close of the fiscal year launched an industry-leading high potency everyday value product offering. Though our revenues have been disappointing, the aggressive action has resulted in 5 consecutive quarters of non-GAAP adjusted operating income growth all while we made significant headway on clinically backed claims to support our product portfolio.

“We are not satisfied with our overall annual results. However, we knew this was a year of repositioning the company focusing on profitability, sustainability and setting us up for long term growth. Currently, the first quarter revenue is softer than we anticipated as an outcome of these changes. We remain laser focused on improving our bottom line and are continuing to make necessary adjustments to our operation as we acquire, educate and delight consumers with safe, effective products.

“In advance of the launch, we deeply discounted our existing inventory to avoid a write down, leading to our loyal base of customers purchasing more than usual. This further resulted in a slower start as we entered the first quarter of 2023. Our customers are approaching reorder so we will now heavily promote our new high potency, everyday value priced products, also attracting other CBD consumers in the category to the offer. We are excited with our competitive position in the industry and the pipeline of opportunities heading into calendar 2023,” says Kevin MacDermott, cbdMD’s President.

Highlights for Fiscal 2022 and Notable Business Updates

• Supported by the results of our human clinical study, the Company launched its high potency everyday value CBD products in the fourth quarter of fiscal 2022.

• The Company was the first CBD company to commercialize NSF approved products. We were the first CBD company to commercialize NSF for Sport product and are the only company that is actively selling NSF for Sport CBD Products.

• The Company received multiple awards, including the 3^rd annual Product of the Year, new Day Time TV Sleeping Beauty Award, and Healthline Editors pick for best CBD Gummy.

• The Company launched into Wegmans and expanded into additional food drug and mass channels.

• The Company took aggressive steps to reduce its cost structure, including completing the sale of its manufacturing assets to Steady State, LLC, significantly reducing its fixed overhead costs, migrating to a more variable cost structure.

• The Company launched into the Japanese market late in fiscal 2022 and is starting to build its customer and revenue base.

• The Company successfully launched a marketing campaign on its 2018 Farm Act compliant hemp extracted Delta 9 product assortment with the Joe Rogan Experience podcast and the Dan Le Batard Show with Stugotz in July and seeing strong sequential monthly category growth.

• The Company filed a Citizen’s Petition with the assistance of the National Products Association (NPA). FDA responded before the deadline that they needed more time as we expected. We are collaborating with NPA on an aggressive next step.

• The Company’s Novel Food Applications were Validated and are now in the Risk Assessment phase in both the UK and EU. The Company believes that it is the only company in active risk assessment in the EU.

• cbdMD Therapeutics completed our human clinical study and results showed our proprietary broad spectrum reduces pain in healthy adults, in addition to other significant indications on mood, immunity and sleep. After publishing our findings during the second fiscal quarter of 2023, the data will be used to support product development, marketing campaigns, and the submission of structure function claim notifications to FDA.

• The Company completed our Pet clinical trial and results showed that our proprietary broad spectrum reduces pain and improves quality of life in dogs. We anticipate publishing our findings during the second fiscal quarter of 2023 and using clinical results to launch marketing campaigns focused on our products’ proven benefits.

Financial Highlights from our Fiscal Year 2022:

• Net sales totaled $35.4 million in fiscal 2022 or a decrease of 20% compared to $44.5 million in fiscal 2021.

• Our gross profit for the year totaled 63% in fiscal 2022 compared to 67% in fiscal 2021.

• Our loss from operations was $78.1 million in fiscal 2022 as compared to a loss of $19.6 million in fiscal 2021. During 2022 we impaired approximately $60.9 million in goodwill and intangibles under GAAP. Excluding this impairment our loss from operations would have improved to a $17.2 million loss for fiscal 2022.

• Our non-GAAP adjusted loss from operations in fiscal 2022 was approximately $13.1 compared to our non-GAAP adjusted loss from operations in fiscal 2021 of approximately $13.6. million, despite the significant decrease in overall revenue.

• Net loss attributable to common shareholders for fiscal 2022 was approximately $74.0 million, or $1.24 per share, as compared to a net loss for fiscal 2021 of approximately $25.9 million, or $0.41 per share. The decrease in fiscal 2022 was principally attributable to the $60.9 million of goodwill and intangible impairment that occurred in fiscal 2022.

• At September 30, 2022, we had working capital of approximately $10.7 million and cash on hand of approximately $6.7 million as compared to working capital of approximately $29.6 million and cash on hand of approximately $26.4 million at September 30, 2021.

• We reported direct to consumer (DTC) net sales of $26.4 million or 74.7% of total net sales in fiscal 2022, a decrease of $6.4 million, or 19% from fiscal 2021.

Financial Highlights from our Fourth Quarter of Fiscal 2022:

• We reported that our net sales for the September 30, 2022 quarter were $7.8 million versus net sales of $8.6 million quarter ending June 30, 2022, a decrease of 9%. Our net sales for the quarter ended September 30, 2022 were down 19% compared to the prior year quarter ended September 30, 2021.

• We reported that our quarter ending September 30, 2022 direct to consumer (DTC) net sales were $6.3 million, versus $6.5 million for our quarter ending June 30, 2022, or a sequential decline of 4%. Our e-commerce net sales were down 14% compared to the prior year quarter ended September 30, 2021.

• We reported that our quarter ending September 30, 2022, wholesale sales (including brick and mortar retail customers) were $1.6 million, versus $2.1 million for quarter ending June 30, 2022, or sequential decrease of 24%. Some of the declines were associated with the benefits tied to pipeline fills that occurred during the March 2022 quarter. Wholesale net sales were down 37% compared to the prior year quarter ended September 30, 2021. We have added a number of specific food, drug, mass, and convenience channel focused resources during the quarter and anticipate building wholesale inertia as we execute our plan over the next 2 quarters and beyond.

• We reported that our quarter ending September 30, 2022, gross profit margin was 64.0% versus 69% for the quarter ending June 30, 2022. The sequential decline was driven by promotional activity to sell through products prior to our offering reset in September. Our gross profit margin was 58.6% in prior year quarter ended September 30, 2021. The change vs prior year was mainly attributed to actions taken to reduce our high-fixed overhead costs and make our cost of sale more variable and predictable in addition to an inventory impairment in 2021.

• We committed to ongoing cost reductions and an SG&A expense of $8 million on our last call in August. For the quarter ending September 30, 2022, the Company continuing delivering on cost rationalizations and recorded SG&A Costs of $7.9 million for the quarter. SG&A has improved $4.8 million or 38% compared to the prior year quarter ended September 30, 2021. We anticipate further reductions in SG&A during the fiscal two first quarters of 2023 based on ongoing management efforts to right size our costs.

• We reported loss from operations of approximately $14.8 million ($2.8 million excluding goodwill impairment of approximately $11.9 million) for the quarter ending September 30, 2022 compared to a $7.0 million loss from operations for our quarter ending September 30, 2021, a decrease of approximately _112% year over year. This decrease is primarily related to the $11.9 million in goodwill impairment that was offset by a $4.8 million reduction in SG&A expenses.

• We reported non-GAAP adjusted operating loss of approximately $2.1 million in our September 30, 2022 quarter, compared to $4.8 million for the September 30, 2021 quarter. This decrease was primarily related to management’s actions taken on our cost structure over the last few quarters. Additionally, we saw a sequential improvement of approximately $0.6 million over the quarter ending June 30, 2022, despite the decrease in revenue. We have now achieved 5 consecutive quarters of strong non-GAAP Adjusted Operating Income improvement.

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, 2022, included in its Annual Report on Form 10-K filed with the Securities and Exchange Commission on December 15, 2022, 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, 2022.

We will host a conference call at 4:15 p.m., Eastern Time, on Thursday, December 15, 2022, to discuss our September 30, 2022, fourth quarter and full fiscal year financial results and business progress.

CONFERENCE CALL DETAILS

Thursday December 15, 2022, 4:15 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:	9709
Webcast/Webcast Replay link- available through December 15, 2023: https://www.gowebcasting.com/12411

 

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 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 CBD Botanicals brand of beauty and skincare products including facial oil and serum, toners, moisturizers, clear skin, facial masks, exfoliants and body care. To learn more about cbdMD and our comprehensive line of U.S. grown, THC-free¹ CBD oil and Full Spectrum products, please visit www.cbdmd.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, results from clinical studies 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, 2022 as filed with the Securities and Exchange Commission (the “SEC”) on December 15, 2022 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, 2022 AND SEPTEMBER 30, 2021
			September 30,			September 30,
			2022			2021
	Assets
	Cash and cash equivalents	$	6,720,234		$	26,411,424
	Accounts receivable		1,447,831			1,113,372
	Accounts receivable – discontinued operations		1,375			10,967
	Marketable securities		–			33,351
	Investment other securities		1,000,000			1,000,000
	Inventory		4,255,914			5,021,867
	Inventory prepaid		511,459			551,519
	Prepaid sponsorship		1,372,845			1,212,682
	Prepaid expenses and other current assets		701,945			1,147,178
	Total current assets		16,011,603			36,502,360
	Other assets:
	Property and equipment, net		823,310			2,561,574
	Operating lease assets		4,477,841			5,614,960
	Deposits for facilities		244,606			529,583
	Intangible assets, net		17,834,549			23,003,929
	Goodwill		–			56,670,970
	Investment in other securities, noncurrent		1,400,000			–
	Total other assets		24,780,306			88,381,016
	Total assets	$	40,791,909		$	124,883,376
	CONSOLIDATED BALANCE SHEETS
	SEPTEMBER 30, 2021 AND SEPTEMBER 30, 2021
	(continued)
			September 30,			September 30,
			2022			2021
	Liabilities and shareholders’ equity
	Current liabilities:
	Accounts payable	$	2,036,558		$	2,978,914
	Deferred revenue		2,060,762			2,727,612
	Accrued expenses		1,178,683			1,151,150
	Note payable		9,609			59,470
	Total current liabilities		5,285,612			6,917,146
	Long term liabilities:
	Long term liabilities		125,491			108,985
	Operating leases – long term portion		3,680,375			4,859,058
	Contingent liability		276,000			9,856,000
	Total long term liabilities		4,081,866			14,824,043
	Total liabilities		9,367,478			21,741,189
	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, 60,665,595 and 57,783,340 shares issued and outstanding, respectively		60,666			57,783
	Additional paid in capital		178,782,328			176,417,269
	Accumulated deficit		(147,423,563)			(73,337,865)
	Total shareholders’ equity		31,424,431			103,142,187
	Total liabilities and shareholders’ equity	$	40,791,909		$	124,883,376

 

	cbdMD, INC.
	CONSOLIDATED STATEMENTS OF OPERATIONS
	FOR THE YEARS ENDED SEPTEMBER 30, 2022 and 2021
			September 30,			September 30,
			2022			2021
	Gross Sales	$	37,122,215		$	47,332,085
	Allowances		(1,718,991)			(2,851,322)
	Total Net Sales		35,403,224			44,480,763
	Cost of sales		13,066,639			14,495,063
	Gross Profit		22,336,585			29,985,700
	Operating expenses		39,647,130			46,601,690
	Impairment of Goodwill and other intangible assets		60,955,970			–
	Loss from operations		(78,266,515)			(16,615,990)
	Realized and Unrealized  (loss) gain on marketable and other securities, including impairments		(33,350)			546,878
	Gain on extinguishment of debt		–			1,466,113
	Decrease (increase) of contingent liability		8,473,999			(6,687,439)
	Gain (loss) on sale of assets		88,769			–
	Restructuring expense		(602,092)			–
	Other income		239,250			29,479
	Interest (expense) income		16,246			(28,930)
	Loss before provision for income taxes		(70,083,693)			(21,289,889)
	Benefit for income taxes		–			895,000
	Net Loss		(70,083,693)			(20,394,889)
	Preferred dividends		4,002,005			2,554,609
	Net Loss available to cbdMD, Inc. common shareholders	$	(74,085,698)		$	(22,949,498)
	Net Loss per share:
	Basic earnings per share		(1.24)			(0.47)
	Diluted earnings per share		(1.24)			(0.47)
	Weighted average number of shares Basic:		59,750,301			54,938,128
	Weighted average number of shares Diluted:		59,750,301			54,938,128

 

	cbdMD, INC.
	CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
	FOR THE YEARS ENDED SEPTEMBER 30, 2022 and 2021
			September 30,			September 30,
			2022			2021
	Net (Loss) Income	$	(70,083,693)		$	(23,394,889)
	Comprehensive (Loss) Income		(70,083,693)			(23,394,889)
	Preferred dividends		(4,002,005)			(2,554,609)
	Comprehensive (Loss) Income attributable to cbdMD, inc. common shareholders	$	(74,085,698)		$	(25,949,498)

 

	cbdMD, INC.
	CONSOLIDATED STATEMENT OF CASH FLOWS
	FOR THE YEARS ENDED SEPTEMBER 30, 2022 and 2021
			September 30,			September 30,
			2022			2021
	Cash flows from operating activities:
	Net Loss	$	(70,083,693)		$	(23,394,889)
	Adjustments to reconcile net (income) loss to net
	cash used by operating activities:
	Stock based compensation		555,215			1,298,106
	Restricted stock expense		373,610			1,626,613
	Marketing stock amortization		907,774			871,390
	Issuance of stock / warrants for service		–			97,720
	Inventory and materials impairment		878,142			670,580
	Intangibles amortization		884,380			–
	Depreciation		948,962			1,017,408
	Impairment of Goodwill and other intangible assets		60,955,970			–
	Gain on sale of fixed assets		(322,017)			–
	Increase/(Decrease) in contingent liability		(8,473,999)			6,687,439
	Realized and unrealized loss of Marketable and other securities		33,350			(546,878)
	Termination benefit		–			196,896
	Extinguishment of Paycheck Protection Program Loan		–			(1,466,113)
	Amortization of operating lease asset		1,137,119			1,236,397
	Changes in operating assets and liabilities:
	Accounts receivable		65,541			(183,735)
	Deposits		284,977			261,125
	Inventory		(112,189)			(1,009,192)
	Prepaid inventory		40,060			(263,341)
	Prepaid expenses and other current assets		(289,586)			525,670
	Accounts payable and accrued expenses		(1,812,547)			(104,422)
	Operating lease liability		(1,151,150)			(1,159,097)
	Deferred revenue / customer deposits		203,341			3,723
	Collection on discontinued operations accounts receivable		9,592			436,167
	Deferred tax liability		–			(895,000)
	Cash used by operating activities		(14,967,150)			(14,093,433)
	Cash flows from investing activities:
	Proceeds from sale of other investment securities		–			540,000
	Purchase of other investment securities		–			(750,000)
	Purchase of DirectCBDOnline.com		–			(2,000,000)
	Purchase of property and equipment		(688,680)			(342,013)
	Cash provided (used) by investing activities		(688,680)			(2,552,013)
	Cash flows from financing activities:
	Proceeds from issuance of preferred stock		–			30,938,386
	Note payable		(33,355)			(151,551)
	Preferred dividend distribution		(4,002,005)			(2,554,609)
	Cash provided by financing activities		(4,035,360)			28,232,226
	Net increase (decrease) in cash		(19,691,190)			11,586,779
	Cash and cash equivalents, beginning of period		26,411,424			14,824,644
	Cash and cash equivalents, end of period	$	6,720,234		$	26,411,424
	Supplemental Disclosures of Cash Flow Information:
			2022			2021
	Cash Payments for:
	Interest expense	$	2,364		$	33,693
	Non-cash financial activities:
	Issuance of Contingent earnout shares:	$	1,086,000		$	4,620,000
	Warrants issued to representative	$	–		$	524,113

 

	cbdMD, Inc.
	SUPPLEMENTAL FINANCIAL INFORMATION
	RECONCILIATION OF NON-GAAP ADJUSTED INCOME (LOSS) FROM OPERATIONS
	(unaudited)
			Three Months			Three Months			Nine Months			Nine Months
			Ended			Ended			Ended			Ended
			September 30,			September 30,			September 30,			September 30,
			2022			2021			2022			2021
	GAAP (loss) from operations	$	(14,894,624)		$	(7,012,702)		$	(78,266,515)		$	(19,615,990)
	Adjustments:
	Depreciation & Amortization		455,965			297,552			1,833,326			1,017,408
	Employee and director stock compensation (1)		272,613			1,100,362			1,124,130			3,149,688
	Other non-cash stock compensation for services (2)		–			–			–			97,721
	Inventory adjustment (3)		–			671,669			878,142			671,669
	Impairment of goodwill and other intangible assets (5)		11,996,249			–			60,955,970			–
	Accrual for severance		–			–			129,761			703,022
	Accrual / expenses for discretionary bonus		–			150,000			150,000			300,000
	Non-GAAP adjusted (loss) from operations	$	(2,169,797)		$	(4,793,119)		$	(13,195,186)		$	(13,676,482)

 
(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) Represents an operating expense related to inventory loss related to regulatory changes impacting labels and packaging and obsolete/expired inventory.
(4) Representsnon-cash impairment of the cbdMD trademark of $4,285,000 during the first quarter of fiscal 2022 and $56,670,970 of goodwill impairment during the fiscal year ended 2022.
(5) Represents one-time severance costs incurred as the Company rationalized a number of positions.

Contacts:

Investors:
cbdMD, Inc.
Ronan Kennedy
Chief Financial Officer
[email protected]
(704) 445-3064

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