cbdMD Reports Q3 Net Sales Increase 42% Sequentially to Over $8 Million


Ryan Allway

August 15th, 2019

News


CHARLOTTE, N.C.–(BUSINESS WIRE)–cbdMD, Inc. (NYSE American: YCBD), reported today that in its fiscal quarter ended June 30, 2019, the company generated total net sales of $8,044,000 up 42% sequentially from the March 31, 2019 quarter and over 500% from the June 30th, 2018 quarter, (which was prior to the December, 2018 acquisition of the brand).

“Moreover, we believe we are now on track to reach the five-year earn-out hurdle of $300 million in aggregate net revenue by the end of calendar 2021, full two years ahead of schedule.”

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FINANCIAL HIGHLIGHTS:

  • Total net sales in the quarter ended June 30, 2019 were $8,044,336 up 42% sequentially from the March 31, 2019 quarter and over 500% from the June 30th, 2018 quarter (which was prior to the December, 2018 acquisition of the brand). Total gross sales in the quarter ended June 30, 2019 were $9,784,199 million and allowances for the quarter were $1,739,863.
  • Gross profit was $5.1 million in the third quarter ended June 30, 2019, representing a margin of 63% of net sales, in line with gross margins reported in the March 31, 2019 quarter.
  • Working capital increased to $19.8 million at June 30, 2019, up from working capital of $12.3 million at March 31, 2019. Cash on hand was $11.6 million as of June 30, 2019.
  • Ecommerce sales platform generated approximately 60% of net sales.
  • Secured retail store placement to over 3,000 doors from approximately 600 in December 2018.
  • The loss from operations for the quarter was $8,260,000 of which $2.1 million was a non-cash impairment charge of intangible assets related to the prior licensing and brand management businesses (IM1 and EE1) and $2 million was a non-cash charge related to stock option expenses.
  • The fully diluted net loss for the quarter was $1.19 per share or $27.7 million of which 78% or $21.5 million was attributed to the change in the value of the contingent liability related to acquisition of the cbdMD brand. The change in value was primarily related to the increase in the company’s stock price during the June quarter.

cbdMD, Inc. also announced net sales guidance:

  • Fiscal year ending September 2019, net sales guidance of $24 million to $26 million.
  • Fiscal year ending September 2020, net sales guidance of $80 million to $90 million.

“Our strong third quarter results place us in a great position to exceed established revenue targets for the first year of operations for cbdMD,” stated Martin A. Sumichrast, Chairman and co-CEO of cbdMD. “Moreover, we believe we are now on track to reach the five-year earn-out hurdle of $300 million in aggregate net revenue by the end of calendar 2021, full two years ahead of schedule.”

“We’ve increased the number of locations cbdMD products are available in by 500% since the acquisition of the brand last December, and with the building momentum of retailer acceptance subsequent to the passage of the Farm Bill, we are pursuing every opportunity available to us vigorously as we continue to work to build cbdMD into the top recognized brand in the industry,” continued Sumichrast.

“To secure our leadership position in the CBD industry and create a truly world-class brand in one of the most exciting market opportunities globally, we continue to strategically invest in growing valuable partnerships and sponsorships with world-class athletes that resonate with our customers. In the June quarter we signed several significant sponsorships, including professional golfer and 12-time PGA Tour winner Bubba Watson, Ice Cube’s Big 3 basketball league, Bellator MMA, and Nitro Circus,” stated Scott Coffman, founder of the brand and co-CEO of cbdMD.

“We believe our sponsorship initiatives really set us apart as we seek to grow market share. While many of our peers continue to see challenges in the restrictive advertising environment surrounding CBD, we believe we’ve created a strong competitive advantage that puts our brand in front of tens of millions of potential consumers globally. We’re applying this same approach to our newly launched pet brand “Paw CBD” and anticipate great results from these efforts as we move forward. Overall, I couldn’t be prouder of what our team has accomplished since the merger and look forward to sharing ongoing successes with our shareholders in the months and quarters ahead,” concluded Sumichrast.

CONFERENCE CALL DETAILS

Wednesday, August 14, 2019, 4:15 p.m. Eastern Time

Domestic:

1-844-407-9500

International:

1-862-298-0850

Replay dial in – Available through September 14, 2019

Domestic:

1-877-481-4010

International:

1-919-882-2331

Replay ID:

53043

Webcast Replay link – available through November 14, 2019:
https://www.investornetwork.com/event/presentation/53043

About cbdMD, Inc.

cbdMD, Inc. (NYSE American: YCBD) owns and operates the nationally recognized consumer cannabidiol (CBD) brand cbdMD whose current products include CBD tinctures, CBD gummies, CBD topical, CBD bath bombs, CBD oils, and CBD pet products. The company also operates licensing and corporate brand management businesses as well as the products division.

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, 2018 as filed with the Securities and Exchange Commission (the “SEC”) on December 12, 2018, our Quarterly Report on Form 10-Q for the period ended June 30, 2019 as filed with the SEC on August 14, 2019 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.

cbdMD, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 2019 AND SEPTEMBER 30, 2018

(Unaudited)

June 30,

September 30,

2019

2018

Assets

Current assets:

Cash and cash equivalents

$

11,633,213

$

4,282,553

Accounts receivable

562,800

307,874

Accounts receivable – related party

1,103,628

1,537,863

Accounts receivable other

276,795

1,743,874

Deposits

6,850

Merchant reserve

626,160

Marketable securities

880,132

1,050,961

Investment other securities

1,159,112

1,159,112

Note receivable

486,000

459,000

Note receivable – related party

156,147

Inventory

3,116,458

123,223

Inventory prepaid

643,649

Deferred issuance costs

28,049

Prepaid consulting agreement

200,000

Prepaid rent

60,000

180,000

Prepaid services with stock

198,000

Prepaid equipment – deposit

889,673

Prepaid expenses and other current assets

543,607

561,491

Total current assets

22,186,077

11,790,147

Other assets:

Property and equipment, net

1,016,757

53,480

Goodwill

55,133,697

Intangible assets, net

22,572,097

3,173,985

Total other assets

78,722,551

3,227,465

Total assets

$

100,908,628

$

15,017,612

cbdMD, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 2019 AND SEPTEMBER 30, 2018
(continued)

(Unaudited)

June 30,

September 30,

2019

2018

Liabilities and shareholders’ equity

Current liabilities:

Accounts payable

$

1,886,395

$

473,717

Accounts payable – related party

7,860

Deferred revenue

4,585

161,458

Customer deposit – related party

34,404

Accrued payroll

326,537

Accrued expenses

77,985

6,920

Accrued expenses – related party

320,000

Total current liabilities

2,329,906

969,955

Long term liabilities

Other long term liabilities

7,502

Contingent liability

70,600,000

Deferred tax liability

2,833,000

21,000

Total long term liabilities

73,433,000

28,502

Total liabilities

75,762,906

998,457

cbdMD, Inc. shareholders’ equity (deficit):

Preferred stock, authorized 50,000,000 shares, $0.001 par value, no shares issued and outstanding

Common stock, authorized 150,000,000 shares, $0.001 par value, 27,720,356 and 8,123,928 shares issued and outstanding, respectively

27,720

8,124

Additional paid in capital

96,130,158

21,781,095

Accumulated other comprehensive income (loss)

(2,512,539

)

Accumulated deficit

(70,782,736

)

(6,669,497

)

Total cbdMD, Inc. shareholders’ equity

25,375,142

12,607,183

Non-controlling interest

(229,420

)

1,411,972

Total shareholders’ equity

25,145,722

14,019,155

Total liabilities and shareholders’ equity

$

100,908,628

$

15,017,612

cbdMD, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2019 AND 2018
(Unaudited)

Three months

Three months

Nine months

Nine months

Ended

Ended

Ended

Ended

June 30,

2019

June 30,

2018

June 30,

2019

June 30,

2018

Sales

$

9,784,199

$

1,851,116

$

19,042,098

$

5,440,653

Sales related party

1,350,000

1,550,000

Total Gross Sales

9,784,199

3,201,116

19,042,098

6,990,653

Allowances

(1,739,863

)

(2,686

)

(4,075,381

)

(23,558

)

Net sales

8,044,336

1,848,430

14,966,717

5,417,095

Net sales related party

1,350,000

1,550,000

Total Net Sales

8,044,336

3,198,430

14,966,717

6,967,095

Cost of sales

2,959,198

1,106,706

5,584,868

1,858,651

Gross Profit

5,085,138

2,091,724

9,381,849

5,108,444

Operating expenses excluding impairment losses

11,230,914

1,464,239

18,680,857

4,089,006

Impairment of intangible assets

2,114,334

2,114,334

Operating expenses

13,345,248

1,464,239

20,795,190

4,089,006

Income (Loss) from operations

(8,260,110

)

627,485

(11,413,341

)

1,019,438

Realized and Unrealized gain (loss) on marketable securities

(497,451

)

(1,705,069

)

(Increase) of contingent liability

(21,547,606

)

(52,461,680

)

Gain (loss) on disposal of property and equipment

(34,333

)

(69,311

)

Interest income (expense)

14,211

(232

)

76,330

(737

)

Income (loss) before provision for income taxes

(30,290,956

)

627,253

(65,538,093

)

949,390

Benefit (Provision) for income taxes

1,088,000

(62,000

)

2,296,000

(6,000

)

Net Income (Loss)

(29,202,956

)

565,253

(63,242,093

)

943,390

Net Gain (Loss) attributable to noncontrolling interest

(1,503,707

)

359,179

(1,641,391

)

465,848

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

$

(27,699,249

)

$

206,074

$

(61,600,702

)

$

477,542

Net Income (Loss) per share:

Basic

$

(1.19

)

$

0.03

$

(4.22

)

$

0.06

Diluted

$

$

0.03

$

$

0.06

Weighted average number of shares Basic:

23,193,793

8,075,341

14,585,619

7,614,621

Weighted average number of shares Diluted:

8,092,931

7,637,012

cbdMD, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 2019 AND 2018
(unaudited)

Nine Months Ended June 30,

Nine Months Ended June 30,

2019

2018

Cash flows from operating activities:

Net loss

$

(63,242,093

)

$

943,390

Adjustments to reconcile net loss to net cash used by operating activities:

Stock based compensation

2,022,812

386,719

Restricted stock expense

92,000

39,100

Issuance of stock / warrants for service

289,750

478,002

Intangible impairment

2,114,334

Inventory impairment

102,124

Depreciation and amortization

272,121

169,788

Gain on settlement of Note

(20,000

)

Increase/(Decrease) in contingent liability

52,461,680

Realized and unrealized loss of marketable securities

1,705,069

Loss on sale of property and equipment

69,311

Non-cash consideration received for services

(470,000

)

(3,404,502

)

Changes in operating assets and liabilities:

Accounts receivable

399,074

(45,502

)

Accounts receivable – related party

204,902

(637,675

)

Other accounts receivable

(298,754

)

(1,204,003

)

Other accounts receivable – related party

236,364

Note receivable

(27,000

)

(450,000

)

Note receivable – related party

156,147

114,802

Merchant reserve

(199,907

)

Inventory

(2,581,958

)

10,340

Prepaid expenses and other current assets

(717,894

)

(980,952

)

Marketable securities

701,593

Accounts payable and accrued expenses

1,073,211

(324,785

)

Accounts payable and accrued expenses – related party

(313,591

)

(470,905

)

Deferred revenue / customer deposits

(380,804

)

121,916

Deferred tax liability

(2,296,000

)

6,000

Cash used by operating activities

(9,055,308

)

(4,840,368

)

Cash flows from investing activities:

Net cash used for merger

(1,167,295

)

Purchase of investment other securities

(300,000

)

Purchase of intangible assets

(79,999

)

(360,000

)

Purchase of property and equipment

(359,421

)

(2,465

)

Cash used by investing activities

(1,606,715

)

(662,465

)

Cash flows from financing activities:

Proceeds from issuance of common stock

19,009,897

10,927,535

Note Payable – related party

(764,300

)

Deferred issuance costs

(232,914

)

(285,086

)

Cash provided by financing activities

18,012,683

10,642,449

Net increase (decrease) in cash

7,350,660

5,139,616

Cash and cash equivalents, beginning of period

4,282,553

284,246

Cash and cash equivalents, end of period

$

11,633,213

$

5,423,862

cbdMD, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 2019 AND 2018
(unaudited) (continued)

Supplemental Disclosures of Cash Flow Information:

Nine Months ended June 30,

Nine Months Ended June 30,

2019

2018

Cash Payments for:

Interest expense

$

36,418

$

505

Non-cash financial activities:

Warrants issued to secondary selling agent

$

309,592

$

171,600

Equity investment exchange to be issued in the future

$

$

160,000

Stock received for prior period services, adjusted for other accounts receivable write down prior to receipt

$

1,352,000

$

Adoption of ASU 2016-01

$

2,512,539

$

 

Contacts

Investors:
John Weston
Director of Investor Relations
[email protected]
704-249-9515

RedChip Companies
Craig Brelsford
[email protected]
407-644-4256

This article was published by CFN Enterprises Inc. (OTCQB: CNFN), owner and operator of CFN Media, the industry’s leading agency and digital financial media network dedicated to the burgeoning CBD and legal cannabis industries. Call +1 (833) 420-CNFN for more information.

Ryan Allway

About Ryan Allway

Mr. Allway has over a decade of experience in the financial markets as both a private investor and financial journalist. He has been actively involved in the cannabis industry since its inception, covering public and private companies.


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