CV Sciences, Inc. Reports Second Quarter 2023 Financial Results

SAN DIEGO, Aug. 14, 2023 /PRNewswire/ -- CV Sciences, Inc. (OTCQB:CVSI) (the "Company", "CV Sciences", "our", "us" or "we"), a preeminent consumer wellness company specializing in hemp extracts and other proven science-backed, natural ingredients and products, today announced its financial results for the quarter ended June 30, 2023.

Second Quarter 2023 and Recent Financial and Operating Highlights

  • Generated revenue of $4.0 million for the second quarter 2023 compared to $4.1 million for second quarter 2022;
  • Recognized gross margin of 43.3% for the second quarter 2023 compared to 30.7% for the second quarter 2022 and a sequential improvement from 43.0% for the first quarter 2023;
  • Cash balance of $1.7 million at quarter end compared to $0.6 million at the end of 2022;
  • Generated cash flow from operations of $2.4 million in the first six months of 2023 compared to cash used in operations of $1.5 million in the first six months of 2022; cash flow from operations included employee retention credit (ERC) under the CARES Act for a total of $2.5 million;
  • Extinguished outstanding note payable;
  • Maintained number one position as top-selling hemp extract brand in the natural product retail sales channel, according to SPINS, the leading provider of syndicated data and insights for the natural, organic and specialty products industry;
  • Continued progress in e-commerce channel with 8% increase in subscription revenue during Q2;
  • Launched PlusCBD™ Reserve Collection Extra Gummies to support healthy sleep, faster recovery, deeper relaxation and a brighter mood; and
  • Continued to evaluate strategic opportunities, including consideration of an inbound or outbound merger, sale, acquisition or other options for the Company.

"We continue to increase our distribution network in the natural product retail channel. Our flagship PlusCBD™ brand continues to improve its number one position and gain market share in the natural product channel, and, with our portfolio of high-quality and proven products, we believe the Company is positioned for future growth," stated Joseph Dowling, Chief Executive Officer of CV Sciences. "Our second quarter gross margins exceeded our expectations and we are encouraged by improvements we have made to reduce operating expenses. We have strengthened our balance sheet and continue to operate cost efficiently and plan to continue participating in the consolidation and brand contraction of the CBD market as we execute on our key strategic initiatives, and leverage core competitive advantages to drive long-term growth and shareholder value."

Operating Results - Second Quarter 2023 Compared to Second Quarter 2022

Sales for second quarter 2023 were $4.0 million, a decrease of 4% from $4.1 million for the second quarter 2022. The decline is primarily due to lower number of units sold during the second quarter 2023 by 16%, partially offset by increases in average sales price per unit in the second half of 2022. We generated an operating loss $1.1 million in the second quarter of 2023, compared to an operating loss of $2.3 million in the second quarter 2022, mostly due to improved gross margins and lower operating expenses. The Company had negative adjusted EBITDA for the second quarter of 2023 of $1.2 million, compared to negative adjusted EBITDA of $1.8 million in the second quarter of 2022.

Conference Call and Webcast

The Company will host a conference call and webcast to discuss these results today at 10:00 am EDT/7:00 am PDT. The webcast of the conference call will be available on the Investor Relations section of the Company's website at https://ir.cvsciences.com/news-events or directly at https://viavid.webcasts.com/starthere.jsp?ei=1627000&tp_key=3c5f3865ae. Investors interested in participating in the live call can also dial (877) 407-0784 from the U.S. or international callers can dial (201) 689-8560. A telephone replay will be available approximately three hours after the call concludes, and will be available through Monday, August 21, 2023, by dialing (844) 512-2921 from the U.S. or (412) 317-6671 from international locations, and entering confirmation code 13740404.

About CV Sciences, Inc.

CV Sciences, Inc. (OTCQB:CVSI) is a consumer wellness company specializing in hemp extracts and other proven, science-backed, natural ingredients and products, which are sold through a range of sales channels from B2B to B2C. The Company's PlusCBD™ branded products are sold at select retail locations throughout the U.S. and are the top-selling brands of hemp extracts in the natural products market, according to SPINS, the leading provider of syndicated data and insights for the natural, organic and specialty products industry. CV Sciences follows all guidelines for Good Manufacturing Practices (GMP) and the Company's products are processed, produced, and tested throughout the manufacturing process to confirm strict compliance with Company and regulatory standards and specifications. With a commitment to science, PlusCBD™ product benefits in healthy people are supported by human clinical research data, in addition to three published clinical case studies available on PubMed.gov. PlusCBD™ was the first hemp extract supplement brand to invest in the scientific evidence necessary to receive self-affirmed Generally Recognized as Safe (GRAS) status. CV Sciences, Inc. has primary offices and facilities in San Diego, California. The Company also operates a drug development program focused on developing and commercializing CBD-based novel therapeutics. Additional information is available from OTCMarkets.com or by visiting www.cvsciences.com.

Forward Looking Statements

This press release may contain certain forward-looking statements and information, as defined within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, and is subject to the Safe Harbor created by those sections. This material contains statements about expected future events and/or financial results that are forward-looking in nature and subject to risks and uncertainties. Such forward-looking statements by definition involve risk and uncertainties. CV Sciences does not undertake any obligation to publicly update any forward-looking statements, except as required by applicable law. As a result, investors should not place undue reliance on such forward-looking statements.

Contact Information
ir@cvsciences.com 

CV SCIENCES, INC.

STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except per share data)



Three months ended

June 30,


Six months ended

June 30,


2023


2022


2023


2022

Product sales, net

$       3,966


$       4,138


$       8,114


$       8,585

Cost of goods sold

2,248


2,868


4,614


6,159

Gross profit

1,718


1,270


3,500


2,426









Operating expenses:








Research and development

36


102


71


223

Selling, general and administrative

2,758


3,483


4,914


6,033

Benefit from reversal of accrued payroll tax



(6,171)


Total operating expenses

2,794


3,585


(1,186)


6,256









Operating income (loss)

(1,076)


(2,315)


4,686


(3,830)









Other expense, net

209


336


265


1,038

Income (loss) before income taxes

(1,285)


(2,651)


4,421


(4,868)

Income tax expense

3


2


3


2

Net income (loss)

(1,288)


(2,653)


4,418


(4,870)

Deemed dividend for beneficial conversion of Series A convertible preferred stock


920



920

Net income (loss) attributable to common stockholders

$     (1,288)


$     (3,573)


$       4,418


$     (5,790)









Weighted average common shares outstanding, basic and diluted

152,599


135,414


152,353


127,104

Net income (loss) per share attributable to common stockholders, basic and diluted

$       (0.01)


$       (0.03)


$         0.03


$       (0.05)

 

CV SCIENCES, INC.

BALANCE SHEETS (UNAUDITED)

(in thousands, except per share data)



June 30, 2023


December 31, 2022

Assets




Current assets:




Cash

$             1,690


$                   611

Accounts receivable, net

611


766

Inventory

5,836


6,563

Prepaid expenses and other

411


3,190

Total current assets

8,548


11,130





Property and equipment, net

457


575

Right of use assets

222


275

Intangibles, net

251


251

Other assets

401


505

Total assets

$             9,879


$             12,736





Liabilities and stockholders' equity (deficit)




Current liabilities:




Accounts payable

$             2,161


$                2,284

Accrued expenses

3,537


9,690

Operating lease liability - current

123


117

Debt, net

28


1,223

Total current liabilities

5,849


13,314





Operating lease liability - net of current portion

125


188

Deferred tax liability

11


11

Total liabilities

5,985


13,513





Commitments and contingencies








Stockholders' equity (deficit)




Preferred stock, par value $0.0001; 10,000 shares authorized; 1 share issued as of June
30, 2023 and December 31, 2022; no shares outstanding as of June 30, 2023 and
December 31, 2022


Common stock, par value $0.0001; 790,000 shares authorized as of June 30, 2023 and
December 31, 2022; 154,604 and 152,104 shares issued and outstanding as of June 30,
2023 and December 31, 2022, respectively

15


15

Additional paid-in capital

87,150


86,897

Accumulated deficit

(83,271)


(87,689)

Total stockholders' equity (deficit)

3,894


(777)





Total liabilities and stockholders' equity (deficit)

$             9,879


$             12,736

 

 

 

CV SCIENCES, INC.

STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)



Six months ended June 30,


2023


2022

OPERATING ACTIVITIES




Net income (loss)

$              4,418


$            (4,870)

Adjustments to reconcile net income (loss) to net cash flows provided by (used in) operating activities:




Depreciation and amortization

118


860

Stock-based compensation

153


662

Employee retention credit benefit


(1,993)

Note discount and interest expense

112


1,034

Benefit from reversal of accrued payroll tax

(6,171)


Non-cash lease expense

53


19

Loss on sale of property and equipment


159

Other

312


205

Change in operating assets and liabilities:




Accounts receivable, net

148


1,019

Inventory

727


1,267

Prepaid expenses and other

2,778


885

Accounts payable and accrued expenses

(262)


(795)

Net cash flows provided by (used in) operating activities

2,386


(1,548)





FINANCING ACTIVITIES




Proceeds from issuance of preferred stock and common stock warrants, net of issuance costs


554

Proceeds from issuance of convertible notes, net of issuance costs


954

Repayment of note payable

(1,117)


Repayment of unsecured debt

(190)


(221)

Net cash flows provided by (used in)  financing activities

(1,307)


1,287





Net increase in cash

1,079


(261)

Cash, beginning of period

611


1,375

Cash, end of period

$             1,690


$             1,114





Supplemental cash flow disclosures:




Interest paid

$                    4


$                    4

Supplemental disclosure of non-cash transactions:




Convertible note principal conversion into shares of common stock

$                  —


$            (1,030)

Services paid with common stock

$                  —


$                384

Issuance cost in accounts payable and accrued expenses

$                  —


$                345

 

CV SCIENCES, INC.

NON-GAAP FINANCIAL MEASURES (UNAUDITED)

We prepare our financial statements in accordance with generally accepted accounting principles for the United States (GAAP). The non-GAAP financial measures, such as net income (loss) per share and Adjusted EBITDA included in this press release are different from those otherwise presented under GAAP. We use non-GAAP measures internally to evaluate our performance and make financial and operational decisions that are presented in a manner that adjusts from their equivalent GAAP measures or that supplement the information provided by our GAAP measures. The non-GAAP financial measures exclude non-cash compensation expense for stock options. When evaluating the performance of our business and developing short and long-term plans, we do not consider share-based compensation charges. Although share-based compensation is necessary to attract and retain quality employees, our consideration of share-based compensation places its primary emphasis on overall shareholder dilution rather than the accounting charges associated with such grants. Because of the varying availability of valuation methodologies and subjective assumptions, we believe that the exclusion of share-based compensation allows for more accurate comparison of our financial results to previous periods. In addition, we believe it useful to investors to understand the specific impact of the application of the fair value method of accounting for share-based compensation on our operating results.

Adjusted EBITDA is defined by us as EBITDA (net income (loss) plus depreciation, interest and income tax expense), further adjusted to exclude certain non-cash expenses and other adjustments as set forth below. We use Adjusted EBITDA because we believe it more clearly highlights trends in our business that may not otherwise be apparent when relying solely on GAAP financial measures, since Adjusted EBITDA eliminates from our results specific financial items that have less bearing on our core operating performance.

We use Adjusted EBITDA in communicating certain aspects of our results and performance, including in this press release, and believe that Adjusted EBITDA, when viewed in conjunction with our GAAP results and the accompanying reconciliation, can provide investors with greater transparency and a greater understanding of factors affecting our financial condition and results of operations than GAAP measures alone. In addition, we believe the presentation of Adjusted EBITDA is useful to investors in making period-to-period comparison of results because the adjustments to GAAP are not reflective of our core business performance.

A reconciliation from our GAAP net income (loss) to non-GAAP net loss for the three and six months ended June 30, 2023 and 2022 is detailed below (in thousands, except per share data):


Three months  ended

June 30,


Six months  ended

June 30,


2023


2022


2023


2022

Net income (loss) attributable to common stockholders - GAAP

$     (1,288)


$     (3,573)


$       4,418


$     (5,790)

Stock-based compensation (1)

35


146


153


662

Benefit from reversal of accrued payroll tax (2)



(6,171)


Employee retention credit benefit (3)




(1,993)

Note discount and interest expense (4)

12


334


112


1,034

Deemed dividend (5)


920



920

Net loss - non-GAAP

$     (1,241)


$     (2,173)


$     (1,488)


$     (5,167)









Diluted EPS - GAAP

$       (0.01)


$       (0.03)


$         0.03


$       (0.05)

Stock-based compensation (1)




0.01

Benefit from reversal of accrued payroll tax (2)



(0.04)


Employee retention credit benefit (3)




(0.02)

Note discount and interest expense (4)




0.01

Deemed dividend (5)


0.01



0.01

Diluted EPS - non-GAAP

$       (0.01)


$       (0.02)


$       (0.01)


$       (0.04)









Shares used to calculate diluted EPS - GAAP and non-GAAP

152,599


135,414


152,353


127,104

_____________

(1)

Represents stock-based compensation expense related to stock options awarded to employees and non-executive directors based on the grant date fair value using the Black-Scholes valuation model.

(2)

Represents benefit from reversal of accrued payroll tax associated with RSU release to founder in 2019.

(3)

Represents expense reduction related to benefit for employee retention credit.

(4)

Represents amortization of OID/debt issuance costs and interest expense for convertible notes payable and notes payable.

(5)

Represents deemed dividend associated with beneficial conversion charge of conversion of Series A preferred stock.

 

A reconciliation from our net income (loss) to Adjusted EBITDA, a non-GAAP measure, for the three and six months ended June 30, 2023 and 2022 is detailed below (in thousands):


Three months  ended June 30,


Six months  ended June 30,


2023


2022


2023


2022

Net income (loss)

$           (1,288)


$           (2,653)


$             4,418


$           (4,870)

Depreciation expense

58


343


118


860

Interest expense

9


336


65


1,038

Income tax expense

3


2


3


2

EBITDA

(1,218)


(1,972)


4,604


(2,970)

Stock-based compensation (1)

35


146


153


662

Benefit from reversal of accrued payroll tax (2)



(6,171)


Employee retention credit benefit (3)




(1,993)

Adjusted EBITDA

$           (1,183)


$           (1,826)


$           (1,414)


$           (4,301)

______________

(1)

Represents stock-based compensation expense related to stock options awarded to employees and non-executive directors based on the grant date fair value using the Black-Scholes valuation model.

(2)

Represents benefit from reversal of accrued payroll tax associated with RSU release to founder in 2019.

(3)

Represents expense reduction related to benefit for employee retention credit.

 

Media Contact:
Tori Rusko
cv@mattio.com

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SOURCE CV Sciences, Inc.