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CV Sciences, Inc. Reports Fiscal Year-End 2021 Financial Results

CV Sciences, Inc.
CV Sciences, Inc.

SAN DIEGO, March 31, 2022 (GLOBE NEWSWIRE) -- CV Sciences, Inc. (OTCQB:CVSI) (the “Company”, “CV Sciences”, “our”, “us” or “we”), a preeminent supplier and manufacturer of hemp cannabidiol (CBD) products, today announced its financial results for the year ended December 31, 2021.

Fiscal 2021 and Recent Financial and Operating Highlights

  • Revenue of $20.0 million for fiscal year 2021, compared to $24.4 million for 2020;

  • Gross margin of 43.0% for fiscal year 2021, compared to 45.1% for 2020;

  • Total cash balance of $1.4 million at year end, compared to $4.5 million at the end of 2020;

  • Total retail distribution of more than 8,400 stores as of December 31, 2021, an increase from 7,300 stores as of December 31, 2020;

  • Launched ProCBD™, a full product line of clinical strength products supported by clinical research and available exclusively through health practitioners (Q1 2021);

  • Launched PlusCBD™ Calm and Sleep, two flavorful gummies that support healthy stress response and sleep cycles for people getting back to their normal routines (Q2 2021);

  • Entered into a partnership with Alkemist Labs to support the National Institute for Standards and Technology's Cannabis Quality Assurance program (Q2 2021);

  • Received NutraIngredient-USA 2021 Product of the Year: Immune Support Award for our new and highly innovative CV™ Defense product (Q3 2021);

  • Published study of cannabidiol efficacy in treating nicotine dependence in Journal of Psychopharmacology in collaboration with University of California, San Diego (Q3 2021);

  • Launched re-design of our PlusCBD™ website, providing an improved customer experience (Q3 2021);

  • Launched PlusCBD™ Reserve, a new line of full spectrum hemp extracts (Q3 2021);

  • Launched our "Holiday Survival Kit" combining our top-rated Sleep and Calm gummies (Q3 2021);

  • Continued to implement strategic cost savings initiatives, including the lease termination of our Barnes Canyon facility (Q3 2021);

  • Obtained forgiveness of the PPP loan of $2.9 million (Q3 2021);

  • Announced new distribution agreement with GNC (Q4 2021);

  • Announced launch of PlusCBD™ pain relief topicals (Q1 2022);

  • Announced launch of PlusCBD™ Relief softgels to wellness line of our CBD products (Q1 2022);

  • Applied for employee retention credit under the CARES Act for $2.0 million (Q1 2022);

  • Entered into a securities purchase agreement providing for the sale and issuance of convertible notes (Q1 2022); and

  • Entered into a securities purchase agreement to issue and sell preferred stock and warrants (Q1 2022).

"During a challenging 2021, we focused on building for the future with several key initiatives, including: introduction of new products, and expansion in existing and new B2B sales channels with distribution in over 8,400 U.S. retail locations," stated Joseph Dowling, Chief Executive Officer of CV Sciences. "Our focus on product quality and innovation helped broaden our business in 2021, driving solid distribution gains despite significant headwinds stemming from the pandemic and competitive environment. We recently launched our PlusCBD™ Reserve collection, a full spectrum offering that is intended to provide the benefit of hemp cannabinoids, including CBD and THC, working synergistically, for a balanced cannabinoid supplement. The new Reserve products, along with our Sleep and Calm products launched earlier in 2021, are evidence of our strong innovation pipeline and ability to capitalize on opportunities for future revenue growth. With our portfolio of high-quality, proven products, and favorable regulatory momentum, we believe the Company is positioned for future growth. We also leveraged our science-based approach with the introduction a clinical strength line of CBD products targeting health practitioners and consumers’ strong interest in natural, plant-based alternative medicine and self-care products. Despite near-term challenges and uncertainties, we have positioned our Company to participate in the consolidation and brand contraction of the CBD market by continuing to execute on our key strategic initiatives, and leveraging core competitive advantages to drive long-term growth and shareholder value.”

Operating Results - Full Year 2021 Compared to Full Year 2020
Sales for fiscal 2021 were $20.0 million, a decrease of 18% from $24.4 million in 2020. Current year sales were impacted by increased market competition, which is largely due to the uncertain regulatory environment for CBD. The Company's products were sold in more than 8,400 retail stores nationwide as of December 31, 2021, up from over 7,300 stores as of December 31, 2020.

The Company reduced its operating loss to $18.4 million in 2021, compared to an operating loss of $22.6 million in the prior year.

The Company had negative adjusted EBITDA for fiscal 2021 of $10.0 million, compared to negative adjusted EBITDA of $12.0 million in 2020.

Fourth Quarter 2021 - Sales
During the fourth quarter of 2021, sales declined 4% to $5.0 million compared to $5.2 million in the prior year period. Fourth quarter sales declined 3% on a sequential basis due to the strong competitive environment.

Conference Call and Webcast
The Company will host a conference call and webcast to discuss these results today at 4:30 pm EDT/1:30 pm 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://services.choruscall.com/mediaframe/webcast.html?webcastid=SpDVVgjG. Investors interested in participating in the live call can also dial (855) 327-6837 from the U.S. or international callers can dial (631) 891-4304. A telephone replay will be available approximately two hours after the call concludes, and will be available through Thursday, April 7, 2022, by dialing (844) 512-2921 from the U.S. or (412) 317-6671 from international locations, and entering confirmation code 10018666.

About CV Sciences, Inc.
CV Sciences, Inc. (OTCQB:CVSI) operates two distinct business segments: a consumer product division focused on manufacturing, marketing and selling plant-based dietary supplements and CBD products to a range of market sectors; and a drug development division focused on developing and commercializing CBD-based novel therapeutics. The Company’s PlusCBD™ products are sold at more than 8,400 retail locations throughout the U.S. and it is one of the top-selling brands of hemp-derived CBD 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 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 CBD 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. 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.

Contact Information

Investor Contact:
ICR
Reed Anderson
646-277-1260
reed.anderson@icrinc.com

Media Contact:
ICR
Cory Ziskind
646-277-1232
cory.ziskind@icrinc.com

CV SCIENCES, INC.
STATEMENTS OF OPERATIONS
(in thousands, except per share data)

Years ended
December 31,

2021

2020

Product sales, net

$

20,048

$

24,429

Cost of goods sold

11,432

13,420

Gross Profit

8,616

11,009

Operating expenses:

Research and development

1,185

2,943

Selling, general and administrative

25,877

30,658

27,062

33,601

Operating Loss

(18,446

)

(22,592

)

Gain on debt extinguishment

(2,945

)

Interest expense, net

140

9

Loss before income taxes

(15,641

)

(22,601

)

Income tax benefit

(87

)

(317

)

Net Loss

$

(15,554

)

$

(22,284

)

Weighted average common shares outstanding, basic and diluted

107,817

99,913

Net loss per common share, basic and diluted

$

(0.14

)

$

(0.22

)

CV SCIENCES, INC.
BALANCE SHEETS
(in thousands, except per share data)

December 31,
2021

December 31,
2020

Assets

Current assets:

Cash and cash equivalents

$

1,375

$

4,024

Restricted cash

501

Accounts receivable, net

2,041

1,126

Inventory

8,624

8,840

Prepaid expenses and other

2,146

2,372

Total current assets

14,186

16,863

Property & equipment, net

1,717

2,877

Operating lease assets

3,057

Intangibles, net

1,485

3,730

Goodwill

2,788

Other assets

678

1,310

Total assets

$

18,066

$

30,625

Liabilities and stockholders' equity

Current liabilities:

Accounts payable

$

2,624

$

1,677

Accrued expenses

10,915

9,805

Current portion of operating lease liability

680

Convertible notes

612

Current portion of long-term debt

310

2,174

Total current liabilities

14,461

14,336

Debt

1,453

Operating lease liability

3,467

Deferred tax liability

62

157

Total liabilities

14,523

19,413

Commitments and contingencies

Stockholders' equity

Preferred stock, par value $0.0001; 10,000 shares authorized; no shares issued and outstanding

Common stock, par value $0.0001; 190,000 shares authorized, 112,482 and 100,664 shares issued and outstanding as of December 31, 2021 and 2020, respectively

11

10

Additional paid-in capital

83,007

75,123

Accumulated deficit

(79,475

)

(63,921

)

Total stockholders' equity

3,543

11,212

Total liabilities and stockholders' equity

$

18,066

$

30,625

CV SCIENCES, INC.
STATEMENTS OF CASH FLOWS
(in thousands)

Years ended December 31,

2021

2020

OPERATING ACTIVITIES

Net loss

$

(15,554

)

$

(22,284

)

Adjustments to reconcile net loss to net cash flows used in operating activities:

Depreciation and amortization

1,153

872

Stock-based compensation

3,210

3,881

Deferred taxes

(94

)

(264

)

Common stock issued for commitment fee

100

Derecognition of tax receivable for founder RSU settlement

6,229

Amortization of debt discount

72

Gain on debt extinguishment

(2,945

)

Impairment of goodwill and intangible assets

5,033

Gain on lease termination

(972

)

(352

)

Non-cash lease expense

350

598

Bad debt expense

74

133

Loss on sale of property and equipment

25

191

Other

247

134

Change in operating assets and liabilities:

Accounts receivable

(989

)

918

Inventory

216

1,703

Prepaid expenses and other

1,045

2,959

Accounts payable and accrued expenses

1,644

(2,118

)

Net cash used in operating activities

(7,485

)

(7,300

)

INVESTING ACTIVITIES

Purchase of property and equipment

(35

)

(1,057

)

Net cash flows used in investing activities

(35

)

(1,057

)

FINANCING ACTIVITIES

Proceeds from debt

2,906

Repayment of unsecured debt

(808

)

Proceeds from issuance of convertible notes

1,000

Debt issuance costs

(229

)

Proceeds from issuance of common stock

4,407

193

Proceeds from exercise of stock options

175

Net cash flows provided by financing activities

4,370

3,274

Net decrease in cash, cash equivalents and restricted cash

(3,150

)

(5,083

)

Cash, cash equivalents and restricted cash, beginning of year

4,525

9,608

Cash, cash equivalents and restricted cash, end of year

$

1,375

$

4,525


Supplemental cash flow disclosures:

Income taxes paid

$

13

$

20

Supplemental disclosure of non-cash transactions:

Purchase of insurance through issuance of note payable

$

397

$

721

Derecognition of operating ROU lease asset related to operating lease termination

(2,773

)

(4,704

)

Conversion of convertible debt

(230

)

Forgiveness of PPP loan

(2,945

)

Purchase of property and equipment in accounts payable and accrued expenses

15

Sale of property and equipment in exchange for note receivable (recorded in prepaid expenses and other) and inventory

675

Cashless exercise of options

108

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 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 loss plus depreciation expense, amortization expense, interest expense, and income tax expense, minus income tax benefit), 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 loss to non-GAAP net loss for the years ended December 31, 2021 and 2020 is detailed below (in thousands, except per share data):

Years ended
December 31,

2021

2020

Net loss - GAAP

$

(15,554

)

$

(22,284

)

Stock-based compensation (1)

3,210

3,881

Gain on extinguishment of debt (2)

(2,945

)

Gain on lease termination (3)

(906

)

(352

)

Derecognition of tax receivable for founder RSU settlement (4)

6,229

Goodwill and intangible asset impairment (5)

5,033

Net loss - non-GAAP

$

(11,162

)

$

(12,526

)

Diluted EPS - GAAP

$

(0.14

)

$

(0.22

)

Stock-based compensation (1)

0.03

0.04

Gain on extinguishment of debt (2)

(0.03

)

Gain on lease termination (3)

(0.01

)

(0.01

)

Derecognition of tax receivable for founder RSU settlement (4)

0.06

Goodwill and intangible asset impairment (5)

0.05

Diluted EPS - non-GAAP

$

(0.10

)

$

(0.13

)

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

107,817

99,913

_____________

(1) Represents stock-based compensation expense related to stock options awarded to employees, consultants and non-executive directors based on the grant date fair value using the Black-Scholes valuation model.
(2) Represents gain on extinguishment of debt related to PPP loan.
(3) Represents gain associated with lease termination agreement for our main facility during the third quarter 2021 and lease termination of one of our San Diego facilities during the third quarter 2020.
(4) Represents the derecognition of the tax receivable related to founder RSU settlement.
(5) Represents goodwill and intangible asset impairment charge.

A reconciliation from our net loss to Adjusted EBITDA, a non-GAAP measure, for the years ended December 31, 2021 and 2020 is detailed below (in thousands):

Year ended December 31, 2021

Year ended December 31, 2020

Consumer
Products

Specialty
Pharma

Total

Consumer
Products

Specialty
Pharma

Total

Net loss

$

(9,861

)

$

(5,693

)

$

(15,554

)

$

(19,908

)

$

(2,376

)

$

(22,284

)

Depreciation

1,153

1,153

836

836

Amortization

36

36

Interest expense

140

140

9

9

Income tax expense (benefit)

7

(94

)

(87

)

(317

)

(317

)

EBITDA

(8,561

)

(5,787

)

(14,348

)

(19,380

)

(2,340

)

(21,720

)

Stock-based compensation (1)

3,209

1

3,210

3,744

137

3,881

Gain on extinguishment of debt (2)

(2,945

)

(2,945

)

Gain on lease termination (3)

(906

)

(906

)

(352

)

(352

)

Derecognition of tax receivable for founder RSU settlement (4)

6,229

6,229

Goodwill and intangible asset impairment (5)

5,033

5,033

Adjusted EBITDA

$

(9,203

)

$

(753

)

$

(9,956

)

$

(9,759

)

$

(2,203

)

$

(11,962

)

______________

(1) Represents stock-based compensation expense related to stock options awarded to employees, consultants and non-executive directors based on the grant date fair value using the Black-Scholes valuation model.
(2) Represents gain on extinguishment of debt related to the PPP loan.
(3) Represents gain associated with lease termination agreement for our main facility during the third quarter 2021 and lease termination of one of our San Diego facilities during the third quarter 2020.
(4) Represents the derecognition of the tax receivable related to founder RSU settlement.
(5) Represents goodwill and intangible asset impairment charge.