Q1 2022 cbdMD Inc Earnings Call
Good afternoon, welcome to CBD M D. As December 31, 2021 first quarter earnings call and update.
Speaker 1: Good afternoon, welcome to CBDMD's December 31st, 2021 first quarter earnings call and update. This afternoon, the company issued a press release that provided an overview of its first quarter results, which followed
This afternoon, the company issued a press release that provided an overview of its first quarter results, which followed.
Speaker 1: which followed the filing of its quarterly report on Form 10Q. Today's conference call is being recorded and will be available online, along with our earnings press release covering our financial results and non-GAAP presentation and reconciliation at cbdmd.com in accordance with CBDMD's retention policy.
Which followed the filing of its quarterly report on Form 10-Q .
Today's conference call is being recorded and will be available online along with our earnings press release, covering our financial results and non-GAAP presentation in reconciliation at CBD MD Dot com in accordance with CBD md's retention policies.
Speaker 1: All participants on this call will be in a listen-only mode. The call will be followed by a question and answer session.
All participants on this call will be in a listen only mode. The call will be followed by a question and answer session at.
Speaker 1: At this time, I would like to turn the conference over to Ronan Kennedy, the company's chief financial officer and chief operating officer. Ronan, please go ahead.
At this time I would like to turn the conference over to Ronen Kennedy, The company's Chief Financial Officer, and Chief Operating Officer Ronen. Please go ahead.
Speaker 2: Thank you, Catherine, and thank you all for joining the CBMD December 31st, 2021 first quarter earnings call.
Thank you Catherine and thank you all for joining the <unk> December 31, 2021 first quarter earnings call and update on the call. Today. We also have our chairman and co CEO , Marty <unk> growth as well as Dr. Civil Swift, our vice President of scientific and regulatory affairs. Following the Safe Harbor statement, Marty will provide an overview.
Speaker 2: On the call today, we also have our chairman and co-CEO, Marty Sumichrast, as well as Dr. Sybil Swift, our vice president of scientific and regulatory.
Speaker 2: Following the safe harbor statement, Marty will provide an overview of our business. Dr. Swift will provide an update on our current regulatory conduct for CBD, and I will provide a summary of the quarterly financial results. Following that, we'll open up
Dr. <unk> will provide an update on our regulatory calendar for CBD and I will provide a summary of the quarterly financial results. Following that we'll open up the call for questions, we'd like to remind everyone today that various remarks about future expectations plans and prospects constitute forward looking statements for purposes of Safe Harbor provisions.
Speaker 2: We'd like to remind everyone today that various remarks about future expectations, plans, and prospects constitute forward-looking statements for purposes of safe harbor provisions under the Private Securities Litigation Reform Act of 1990.
Under the private Securities Litigation Reform Act.
1995.
Speaker 2: CBDMD cautions that these four booking statements are subject to risk.
<unk> cautions that these forward looking statements are subject to risks.
Speaker 2: and uncertainties that may cause our actual results to differ materially from those indicated, including lists described in the company's annual report on Form 10-K for the year ended September 30, 2021, and our other filings with the SEC, all of which can be reviewed on the company's website at www.cdnd.com or on the SEC's website at www.SEC.com.
Certainties that may cause our actual results to differ materially from those indicated including those described in the company's annual report on Form 10-K for the year ended September 32021.
Our other filings with the SEC all of which can be reviewed on the company's website at www dot <unk> dot com or on the SEC's website at Www SEC Gov.
Speaker 2: Any forward-looking statements made on this conference call speak only as of today's date, Thursday, February 10, 2022, and CBDMD does not intend to update any of these forward-looking statements to reflect events or circumstances that would occur after today's date, except as may be required by federal security.
Any forward looking statements made on this conference call speak only as of today's date Thursday February 10, 2022, and CBD and does not intend to update any of these forward looking statements to reflect events or circumstances that would occur. After today's date, except as may be required by federal Sig.
Charities laws.
Speaker 2: With that, I'd like to turn the call over to CBMD's Chairman and Co-CEO, Marty Storch.
I'd like to turn the call over to <unk>, Chairman and co CEO Marty Silvercrest.
Speaker 3: Thank you very much Ronan and good afternoon everyone. We appreciate you joining us today. Last quarter we celebrated the three-year anniversary of our company entering the CBD industry with the acquisition of CureBase Development, the owner of our flagship brand CBDMD. It's also the three-year anniversary of the passage of the Farm Bill which decriminalized CBD in the U.S.
Thank you very much Sharon and good afternoon, everyone. We appreciate you joining us today.
Last quarter, we celebrated the <unk> anniversary of our company entering the CBD industry with the acquisition of cure based development the owner of the flagship brand CBD AMD. So also the three year anniversary of the passage of the farm Bill, which decriminalized CBD in the U S.
Three years ago, we were an unknown startup brand competing against thousands of other CBD brands and while not knowing how well our brand would be received we set forth a lofty sales goal under our merger agreement of $113 3 million for our first three year earn out we've now completed.
Speaker 3: Three years ago, we were an unknown startup brand competing against thousands of other CBD brands. And while not knowing how well our brand would be received, we set forth a lofty sales goal under our merger agreement of $113.3 million for our first three-year earn out.
Speaker 3: We've now completed our third year and have exceeded the sales target with total net sales of $118.7 million for our contractual earn out under our merger agreement.
Our third year of that have exceeded the sales target with total net sales of $118 7 million for a contractual earn out under a merger agreement.
Speaker 3: We're proud of this accomplishment, made more impressive considering it was achieved while dealing with the complications of the global COVID pandemic for almost two years.
We're proud of this accomplishment made more impressive considering it was achieved while dealing with the complications of the global Covid pandemic for almost two years.
Speaker 3: As we look out at the next three years, we remain bullish on what we can accomplish, but we must first reposition our company to adjust for market conditions and disruptions that have affected our business during the last several quarters.
As we look out at the next three years, we remain bullish on what we can accomplish but we must first reposition our company to adjust for market conditions and disruptions that have affected our business. During the last several quarters. These disruptions include product delays.
Speaker 3: These disruptions include product delays caused by supply chain issues, set up costs for new channel distribution, combined with an overall softness in the U.S. CBD market.
By supply chain issues setup costs for new channel distribution.
Bind with an overall softness in the U S CBD market.
Speaker 3: While these challenges precipitated, we failed to adjust our cost structure accordingly and in a timely manner, and that led to unacceptably high negative operating results.
All these challenges precipitated we failed to adjust our cost structure accordingly, and in a timely manner and that led to unacceptably high negative operating result.
Speaker 3: As we did in early 2020 when faced with similar circumstances, we are now cutting our overall overhead with a $10 million target in annualized cost savings.
As we did in early 2020 when faced with similar circumstances. We are now cutting our overall overhead with a $10 million target an annualized cost savings, we expect to have a significant amount of this saving instituted by the end of this quarter.
Speaker 3: We expect to have a significant amount of this saving instituted by the end of this quarter.
Speaker 3: We know we can't cut our way to prosperity. We must also grow our sales, both online and through wholesale. We intend to accomplish this by focusing on driving new customer traffic to our websites, changing our marketing priorities to focus on B2B sales partnerships, delivering on product innovation, and expanding our sales channels.
We know we can't cut our way to prosperity, we must also grow our sales both online and through wholesale we.
We intend to accomplish this by focusing on driving new customer traffic to our websites.
<unk>, our marketing priorities to focus on <unk> sales partnerships delivering on product innovation and expanding our sales channels.
Speaker 3: We believe we have the best in class brand recognition and we plan to leverage our brand's power to expand our retail footprint by securing co-branding efforts with non-CBD established brands.
We believe we have the best in class brand recognition and we plan to leverage our brands power to expand our retail footprint by securing co branding efforts with non CBD established brands.
Speaker 3: CBDMD.com generates over 70% of our net sales.
CVD <unk> dot com generates over 70% of our net sales.
Speaker 3: Our website enjoys significant customer conversion rates with cbdmd.com residing in the top five for conversion rates based on industry standards.
Our website enjoy significant.
Customer conversion rates with CVD, <unk> dot com residing in the top five for conversion rates based on industry standards.
Speaker 3: Our mission is generating new customer traffic to our site.
Our mission is generating new customer traffic to our sites to lead. This effort, we brought onboard Matt koeppen as our new Chief marketing Officer in November of last year, Matt a proven leader in digital marketing.
Speaker 3: To lead this effort, we brought on board Matt Coatman as our new Chief Marketing Officer in November of last year.
Speaker 3: Matt, a proven leader in digital marketing, has in just three short months revamped the marketing team, cut underperforming legacy marketing spend, and redefined our athletic and sponsorship department to focus on brand sales through corporate sponsorships and partnerships and B2B co-branding initiatives which drive direct sales.
Just three short months revamped the marketing team cut underperforming legacy marketing spend and redefined our athletic and sponsorship department to focus on brand sales to corporate sponsorships and partnerships and <unk> co branding initiatives, which drive direct sales.
Recent successful activation include the expansion of our exclusive CVD advertising partnership with Spotify, and Joe Rogan through its podcast with Joe Rogan experience as well as category exclusive sponsorship with Dan Loeb retire show with Stu got.
Speaker 3: Recent successful activations include the expansion of our exclusive CBD advertising partnership with Spotify and Joe Rogan through his podcast, The Joe Rogan Experience, as well as category-exclusive sponsorship with Dan Lebitar's show with Stu Gott's podcast.
Podcast next month, we expect to announce additional partnerships that can drive new customers to our sites I can report that over the past six weeks, we are seeing improved sales results.
Speaker 3: Next month, we expect to announce additional partnerships that can drive new customers to our sites. I can report that over the past six weeks, we are seeing improved sales results.
Speaker 3: While driving online sales is vital, the growth of our wholesale brick and mortar division is equally important. And to improve sales to our wholesale customers, we streamlined our product offering and adjusted our pricing, making our brand even more competitive. We are also reaching new verticals, such as our exclusive distribution partnership with Troon Golf, the leading golf course management company in the world, which has over 600 golf courses under management.
While driving online sales is vital.
<unk> of our wholesale brick and mortar division is equally important and to improve sales to our wholesale customers, we streamlined our product offering and adjusted our pricing, making our brands even more competitive.
We are also reaching new verticals, such as our exclusive distribution partnership with Troon golf, the leading golf course management company in the World, which has over 600 golf courses under management.
Speaker 3: We are also making inroads to larger retailers and convenience store operators with a redefined sell strategy and mark and product pricing enhancements.
We are also making inroads to larger retailers and convenience store operators with a redefined sell strategy and mark and product pricing enhancements.
Speaker 3: We are expanding into more international markets as registration, regulation, and compliance become clearer. We are currently selling to over 30 international markets, and we are registering our products in several major markets, such as the UK, Central America, and Japan.
We are expanding into more international markets registration regulation and compliance become clear. We are currently selling to over 30 international markets and we are registering our products in several major markets such as the UK Central America and Japan.
Speaker 3: We continue to create new award winning innovative products, such as our newly launched functional gummies and continue as a multi year recipient of product of the year award.
We continue to create new award winning innovative products such as our newly launched functional gummies and continue as a multiyear recipient of product of the year Awards. We continue to obtain official certification strengthens our brand appeal such as our Paw CBD certification from <unk>.
Speaker 3: We continue to obtain official certifications that strengthens our brand appeal, such as our PAW CBD certification from NASC, or the National Animal Supplement Council, a nonprofit group committed to protecting and enhancing the health of companion animals throughout the country.
C or the National Animal supplement Council, a nonprofit group committed to protecting and enhancing the health of companion animals throughout the country.
Speaker 3: We announced this week that we are the first and only CBD company during the highly respected designation of NSF certified for sport, which opens the door to partnerships that
We announced this week that we are the first and only CBD company. During the highly respected designation of NSF certified for sport, which opens the door to partnerships that.
Speaker 3: that market to major sports leagues in the USA and internationally.
That market to major sports league in the USA and internationally.
Speaker 3: And finally, and most significantly, we are now actively engaged with the FDA to force clarity with respect to our product.
Finally, and most significantly we are now actively engaged with the FDA to force clarity with respect to our products.
Speaker 3: Receiving clarity from the FDA is the single biggest factor to our ability to market and sell our products unencumbered.
<unk> clarity from the FDA is the single biggest factor to our ability to market and sell our products unencumbered.
Speaker 3: With that, I'll now turn the call over to Dr. Sybil Swift, our Vice President, Science and Regulatory Affairs at CBDMD. Dr. Swift was formerly the Associate Director for Research and Strategy at the FDA's Office of Dietary Supplements Program, and will now provide an important regulatory update. Dr. Swift, please go ahead.
With that I'll now turn the call over to Dr. Civil Swift, Our Vice President Science, and regulatory affairs with CBD MD. Dr. Swift was formally the associate director for research and strategy at the Fda's office of dietary supplements program and will now provide an important regulatory.
Tori update Doctor Swift. Please go ahead.
Speaker 4: Thank you, Marty. And it's a pleasure to be able to talk with everyone on the call today.
Thank you Marty and it's a pleasure to be able to talk with everyone on the call today.
Speaker 4: Prior to starting my work for CBDMD, I spent over five years in the Office of Dietary Supplement Programs, or ODSP, which is the office within FDA that is responsible for reviewing dietary supplement safety submissions.
Prior to starting my work for CBD MD I spent over five years and the office of dietary supplement programs or Ods P, which is the office within FDA that is responsible for reviewing dietary supplement safety submission.
Speaker 4: I have in-depth knowledge regarding the requisite amount of data not only to meet the statutory requirements according to 190.6.
I have in depth knowledge regarding the requisite amount of data not only to meet the statutory requirements. According to 196.
Speaker 4: But to demonstrate that our proprietary patent-pending broad-spectrum cannabinoid blend is safe at the subtherapeutic dietary supplement serving sizes we suggest, and according to our conditions of use.
But to demonstrate that our proprietary patent pending broad spectrum cannabinoid blended state at the sub therapeutic dietary supplement serving sizes, we suggest and according to our conditions of yet.
Speaker 4: Our dossier of quality and safety data is not a shot in the dark. It is the result of over a million dollars invested in the required testing and analysis with a globally recognized analytical testing company. We know the process. The FDA says they want good science, and we believe this is it.
Our dossier of quality and safety data is not a shot in the dark as the result of over $1 million invested in the required testing and analysis.
Globally recognized analytical testing company.
We know the process.
They want good science and we believe this is Ed.
Speaker 4: The data in our dossier was successfully submitted to the UK and EU food safety agencies to support approval of our products as novel foods. And we expect it to be validated there in the coming months.
The data in our dossier was successfully submitted to the UK and EU food safety agencies to support approval of our products as novelty.
We expect to be validated there in the coming months.
Speaker 4: Last week, we met with the FDA to discuss our safety data during a pre-submission meeting for a new dietary ingredient notification.
Last week, we met with the FDA to discuss our safety data during a pre submission meeting for a new dietary ingredient notification.
Speaker 4: The FDA expressed interest in receiving the submission and indicated they wanted to review the science.
The FDA expressed interest in receiving the submission and indicated they wanted to review the science.
Speaker 4: However, they defaulted to the standard position that a notification for CBD would be met with a drug exclusion issue.
However, they defaulted to the standard position that had notification for CBD would be met with a drug exclusion issues.
We made it clear we would not be submitting the notification unless they remove the exclusion criteria.
Speaker 4: We made it clear we would not be submitting the notification unless they removed the exclusion criteria.
Speaker 4: The meeting with FDA expressly confirmed our statements from the last earning call that we see no indication the FDA will act on their own.
The meeting with FDA expressly confirmed our statements from the last earning call that we see no indication the FDA will act on their own.
Speaker 4: Therefore, in the coming days, we will be filing in conjunction with the Natural Products Association a citizen's petition, which is a process provided by the FDA for individuals and community organizations.
Therefore in the coming days we.
We will be filing in conjunction with the natural products Association.
Our citizens petition, which is the process provided by the FDA for individuals and community organizations to request the FDA to use the statutory authority to make a change to current health policy.
Speaker 4: to request the FDA to use its statutory authority to make a change to current health policy.
Speaker 4: Our citizen's petition will request that the FDA remove the exclusion for hemp-extracted cannabidiol-containing products.
Our citizens petition will request that the FDA removed the exclusion for hemp extract it can have an IL containing products create.
Speaker 4: create a pathway by which safety data for cannabidiol notifications will be reviewed.
Create a pathway by which safety data for Qdoba dialed notification will be reviewed.
Speaker 4: and review our extensive safety dossier on our core broad spectrum ingredient as part of that process.
And review our extensive safety dossier on our core broad spectrum ingredient as part of that process.
Speaker 4: Other groups have approached FDA with NDI or GRAS submissions. The FDA has repeatedly fallen back on the position that this is a bigger issue without reviewing the submissions with the same lens as those for an ingredient that is not CBD.
Other groups have approached FDA with MDI across the nation.
The FDA has repeatedly following back on the position that this is a bigger issue without reviewing the submissions with the same lens as those for an ingredient that is not CBD.
Speaker 4: We are asking the FDA to review our data for our product based upon our conditions of use.
We are asking the FDA to review our data for our product based upon our conditions of use.
Speaker 4: We are asking the FDA to follow the intent of those who drafted the Dietary Supplement Health and Education Act, or DSHEA.
We are asking the FDA to follow the intent of those who drafted the dietary supplement health and Education Act or just shy.
Speaker 4: which was introduced to counteract unnecessarily stringent federal intervention into the manufacturing, sale, and labeling of dietary supplements.
Which was introduced to counter act unnecessarily stringent federal intervention and the manufacturing sale and labeling of dietary supplements.
Speaker 4: We are a natural product company, and natural products are used safely every day as both foods and drugs.
We are a natural product company and natural products are you safely everyday as both food and drugs.
Speaker 4: We are not suggesting that customers should ingest a drug-level dose of CBD.
We are not suggesting that customers can ingest a drug level dose with CBD.
Speaker 4: In fact, the level of CBD in our dietary supplements is significantly lower than the doses for approved CBD drugs.
In fact, the level of CV D and our dietary supplements is significantly lower than the doses for approved CBD drugs.
Speaker 4: Therefore, we find it difficult to understand why CBD and hemp products are being subjected to a different standard than other dietary supplements, and instead being
Therefore, we find it difficult to understand why CBD and hemp products are being subjected to a different standard than other dietary supplements.
And instead of being subject to a drug standards.
Speaker 4: We understand that FDA moves slowly and doing things in a broad context for the entire marketplace is not without its challenges.
We understand the FDA move slowly and doing things in a broad context for the entire marketplace is not without its challenges.
Speaker 4: is exactly why we are asking them to review our safety data on a one-to-one basis in accordance with their authorities and the regulations for these products.
This is exactly why we are asking them to review our safety data on a one to one basis in accordance with their authority and the regulations for these products.
Speaker 4: We are willing to put all our science out in the public domain, no different than any other
We are willing to put all our science out in the public domain.
No different than any other fluid or supplement product.
Speaker 4: But then we expect the FDA to review it, like they would for any other food or supplement product.
But then we expect the FDA to review it like they would for any other fluid or supplement product.
Speaker 4: rather than default to a policy statement about being confused.
Rather than default to a policy statement about being confused.
Speaker 4: We believe it is far past time for the FDA to stop hiding behind the improperly applied exclusion rule that they are using to deny Americans access to a robust marketplace of hemp-derived products to help maintain their health.
We believe it is far past time for the FDA to stop hiding behind them properly applied exclusion rule, but they are using to deny Americans access to a robust marketplace of hemp derived products to help maintain their health.
Speaker 4: Consumers from all walks of life deserve access to consumer health care products, especially in these trying times.
Consumers from all walks of life deserve access to consumer healthcare products, especially in these trying times.
Speaker 4: By removing the arbitrary and capricious exclusion and recognizing that our product is safe, it will open our ability to conduct further studies on the efficacy of cannabinoids as dietary supplements to support and maintain a healthy life.
By removing the arbitrary and capricious exclusion and recognizing that our product to say.
It will open our ability to conduct further studies on the efficacy of cannabinoids dietary supplements to support and maintain a healthy life.
Speaker 4: While leading brands, such as ours, go to great expense to adhere to the existing rules applicable to all dietary supplement manufacturers and apply the highest standards of care, other smaller brands flood the market with substandard products and the FDA is to
While leading brands such as ours go to great expense to adhere to the existing rules applicable to all dietary supplement manufacturers and.
And apply the highest standards of care.
Other smaller brands flood the market with sub standard products.
And the FDA is directly to blame for that.
Speaker 4: Uncertainty due to substandard products has prohibited leading CBD brands, such as ours, access to mainstream retailers, wholesalers, and sales and marketing platforms.
Uncertainty due to sub standard products has prohibited leading CBD brands such as ours.
Access to mainstream retailers wholesalers and sales and marketing platforms.
Speaker 4: We believe that properly manufactured CBD products, such as ours, which adhere to the rigorous standards of the Food, Drug, and Cosmetic Act, are safe and should be allowed for sale in all these retail channels, as well as product marketing on all platforms.
We believe that properly manufactured CBD products, such as ours, which adhere to the rigorous standards of the food drug and cosmetic act are safe.
And should be allowed for sale and all of these retail channels as well as products marketing on all platforms.
Speaker 4: At CBDMD, we pride ourselves as being leaders in this industry. We have been sitting on the sidelines long enough waiting for FDA to act.
At <unk> we.
Pride ourselves as being leaders in this industry.
<unk> been sitting on the sideline long enough waiting for FDA to act.
Speaker 4: but they continue to make disingenuous statements about not being able to decide without more data.
But they continue to make disingenuous statements about not being able to decide without more data.
After we are bringing them the data.
Speaker 4: We demand a level playing field rather than deference to a status quo created by an arbitrarily applied drug exclusion.
We demand a level playing field rather than deferring to a status quo.
Created by an arbitrarily applied drug exclusion.
To conclude it is our belief and with the backing and support of the NPA.
Speaker 4: and with the backing and support of the NPA, the filing of this citizen's petition could begin the process to eventual regulatory framework the CBD industry needs and deserves.
The filing of this citizens petition could began the process to eventual regulatory framework, the CBD industry need and deserve.
Speaker 4: This tactic is not original in concept, it has been done in the past.
This tactic is not original in concept that has been done in the past.
Speaker 4: However, we feel that it's time the CBD industry be looked at and dealt with on a level playing field. We remain committed to providing the highest quality products to our consumers.
However, we feel that it's time the CBD industry, if you looked at and dealt with on a level playing field.
We remain committed to providing the highest quality products to our consumers invest in our science deregulation to ensure our products are safe and useful for everyday health and wellness and finally to be able to market our products across all platforms.
Speaker 4: invest in the science and regulation to ensure our products are safe and useful for everyday health and wellness, and finally, to be able to market our products across all platforms to drive and build shareholder value.
Drive and build shareholder value.
Speaker 4: Thank you. And now I'll turn it back over to Ronan Kennedy, our Chief Financial and Chief Operating Officer. Ronan.
Thank you.
Now I will turn it back over to Brendan Kennedy, our chief financial and Chief operating Officer Ronen.
Speaker 2: Thank you, Sybil, and welcome, everyone. Total GAAP net sales for the first quarter of fiscal 2022 were $9.3 million, a 24% decrease from prior year's first quarter total. Our quarterly e-commerce direct-to-consumer business generated sales of $7.1 million in the first quarter of fiscal 2022, a 26% year-over-year quarterly total.
Thank you civil and welcome everyone total GAAP net sales for the first quarter of fiscal 2022 were $9 3 million a 24% decrease from prior year's first quarter total.
Our quarterly e-commerce direct to consumer business generated sales of $7 1 million in the first quarter of fiscal 2022 or 26% year over year quarterly decrease.
Speaker 2: ecommerce represented 76% of our total net sales for the first
E Commerce represented 76% of our total net sales for the first quarter.
Speaker 2: Our wholesale business generated $2.2 million of net sales for the first quarter, down 16% as compared to $2.6 million for the comparative first quarter in fiscal 2020.
Our wholesale business generated $2 2 million of net sales for the first quarter down 16% as compared to 20.
$2 6 million for the comparative first quarter and fiscal 2021.
Speaker 2: Our GAAP gross profit margin decreased to 54.4 percent in the first quarter from 72.1 percent in the first quarter of fiscal 2021. This is partly due to an $878,000 non-cash inventory charge as we rationalized several slower moving and expiring products.
Our GAAP gross profit margin decreased to 54, 4% in the first quarter.
From 72, 1% in the first quarter of fiscal 2021.
Partly due to an 878000 noncash inventory charge as we rationalize several slower moving and expiring product lines.
Speaker 2: Excluding this charge, our non-gap adjusted gross profit totaled 62.2% as compared to 72% in the prior year. This decline is based on lower manufacturing and operating leverage from year-over-year revenue declines as well as
Excluding this charge our non-GAAP adjusted gross profit totaled 62, 2% as compared to 72% and.
In the prior year.
This decline is based on lower manufacturing and operating leverage from year over year revenue declines as well as changes in our product mix.
Our operating expenses for the first quarter of fiscal 2022 totaled $11 9 million up from $10 6 million in the prior year year over year noncash operating expenses increased by $978000 comprised of $870000 increase in non cash.
Speaker 2: Our operating expenses for the first quarter of fiscal 2022 total $11.9 million, up from $10.6 million in the prior year. Year over year, non-cash operating expenses increased by $978,000, comprised of $870,000 increase in non-cash stock compensation, as well as $108,000 increase in depreciation and amortization.
Stock compensation as well as $108000 increase in depreciation and amortization expense.
Speaker 2: Our marketing, sponsorship, and commission expenses increased $841,000 a year.
Marketing sponsorship and commission expenses increased 841000 year over year, leading to a total operating expense increase of $1 3 million or 12% from the prior fiscal quarter, excluding the increases in noncash charges in marketing in sponsorship and commission expenses, we were able to reduce our remain.
Speaker 2: leading to a total operating expense increase of $1.3 million, or 12% from the prior fiscal quarter. Excluding the increases in non-cash charges and marketing sponsorship and commission expenses, we were able to reduce our remaining operating expenses by over $520,000 a year.
Operating expenses by over 520000 year over year.
Overall, our GAAP loss from operations totaled $25 1 million for the first quarter of fiscal 2022 as compared to $1 7 million loss from the prior year period the.
Speaker 2: Overall, our gap loss from operations totaled $25.1 million for the first quarter of fiscal 2022 as compared to $1.7 million loss from the prior year period. The decline is primarily due to a non-cash impairment of goodwill and intangibles of $18.2 million at the quarter end as well as a $3.9 million drop in gross profit.
The decline is primarily due to a non cash impairment of goodwill and intangibles of $18 2 million at quarter end as well as a $3 9 million drop in gross profit.
Speaker 2: Our non-GAAP adjustments to operating expenses for the first quarter of fiscal 2022 include a $18.2 million add back related to the impairment of goodwill and our trade name, $1 million in non-cash stocks,
And non-GAAP adjustments to operating expenses for the first quarter of fiscal 2022 included $18 2 million add back related to the impairment of goodwill and our trade name 1 million in noncash stock expense depreciation expense of 340870 $8000 of noncash.
Speaker 2: depreciation expense of $340,000 and an $878,000 of non-cash inventory charge resulting in a non-GAAP-adjusted operating loss of $4.7 million for the first quarter of fiscal 2022 as compared to half a million non-GAAP-adjusted operating loss in the first quarter of fiscal 2022.
Inventory charge, resulting in a non-GAAP adjusted operating loss of $4 7 million for the first quarter of fiscal 2022 as compared to $5 million non-GAAP .
<unk> operating loss in the first quarter of fiscal 2021 the.
Speaker 2: The increase in non-GAAP-adjusted operating loss over the prior year period is primarily attributed to the drop in revenue and corresponding gross profit as well as an increase in operating
The increase in non-GAAP adjusted operating loss over the prior year period is primarily attributed to the drop in revenue and corresponding gross profit as well as an increase in operating expenses.
Speaker 2: Sequentially, we reduced our non gap operating loss by 200,000 from September 2021 quarter to the December 2021 quarter, despite the decline in.
Sequentially, we reduced our non-GAAP operating loss by 200000 from September 2021 quarter to the December 2021 quarter. Despite the decline in revenue.
Speaker 2: Other operating income expenses on our consolidated income statement for the first quarter of fiscal 2022, including non-cash contingent liability gain of $5.7 million related to our December 2018 acquisition of cure-based development. During the December , we issued 466,713 earn-out shares corresponding to the third earn-out period under the terms of the act.
Other operating.
Income and expenses on our consolidated income statement for the first quarter of fiscal 2022, including non cash contingent liability gain of $5 7 million related to our December 2018 acquisition of cure based development during.
During the December December we issued 466700 <unk> earn out shares.
Corresponding to the third earn out period under the terms of the acquisition.
Speaker 2: At the time of issuance, we booked a $366,000 valuation decrease and reclassified $405,000 from the contingent liability to additional paid-in capital on the consolidated value.
At the time of issuance, we booked a 366000 valuation decrease and reclassified 405000 405000 from the contingent liability to additional paid in capital on the consolidated balance sheet.
Speaker 2: The remaining turnout shares were revalued at the end of the quarter, resulting in a total non-cash contingent liability gain of $5.3 million for the quarter.
The remaining earn out shares will be valued at the end of the quarter.
<unk> and a total non cash contingent liability gain of $5 3 million for the quarter. The change in valuation of the contingent liability are primarily the result of a decrease in market price of our common stock during the period from $2 eight to $1 <unk> per share.
Speaker 2: The change in valuation on the contingent liability are primarily a result of the decrease in market price of our common stock during the period from $2.08 to $1.08 per share.
Speaker 2: During the first fiscal quarter of 2022, we utilized approximately $6.7 million of cash. The main component included cash used from operations, our adjusted non-gap operating loss of $4.7 million, $1 million of paid dividends, and $230,000 in property equipment acquisitions with the balance coming from changes in our working capital.
During the first fiscal quarter of 2022, we utilized approximately $6 7 million of cash the main component included cash.
<unk> from operations.
Our adjusted non.
non-GAAP operating loss of $4 7 million $1 million of paid dividends and 230000 in property and equipment acquisitions with the balance coming from changes in working capital.
Speaker 2: We had cash and cash equivalents of approximately $19.6 million and working capital of approximately $22.9 million on December 31, 2021, compared to cash and cash equivalents of approximately $26.4 million and working capital of $29.6 million as of September 30, 2021.
We had cash and cash equivalents of approximately $19 6 million and working capital of approximately $22 9 million on December 31, 2021, compared to cash and cash equivalents of approximately $26 4 million and working capital of $29 6 million as of September 32021.
Speaker 2: Our current assets as of December 31st, 2021 decreased approximately 18% from September to 29.7%.
Our current assets as of December 31, 2021 decreased approximately 18% from September to $29 $7 million.
Speaker 2: As of December 31st, 2021, the company's total current liabilities were $6.7 million, of which approximately $3.6 million is accounts payable and $1.9 million is accrued expense.
As of December 31, 2021, the company's total current liabilities were $6 7 million of which approximately $3 6 million as accounts payable and $1 9 million of accrued expenses. The company has approximately 153000 financing notes on equipment for our manufacturing facility.
Speaker 2: The company has approximately 153,000 financing notes on equipment for manufacturing.
Speaker 2: As Marty alluded to earlier, we can't cut our way to prosperity, but we must take the necessary steps to right size or cost structure to our current
As Marty alluded to earlier, we can't cut our way to prosperity, but we must take the necessary steps to rightsize our cost structure to our current revenue base several of our marketing initiatives did not generate their anticipated return. So we have taken steps to eliminate and or not renew several underperforming marketing investments and are changing the way we measure our mono PERC.
Speaker 2: Several of our marketing initiatives did not generate their anticipated return, so we have taken steps to eliminate and or not renew several underperforming marketing investments and are changing the way we measure our monitor.
Florence, we've reduced head count by over 20% since November rationalized, several nonperforming skus have strategy strategically.
Speaker 2: We've reduced headcount by over 20% since November , rationalized several non-performing SKUs, have strategically expanded our top-selling categories such as gummies. We've identified additional operating cost opportunities and are taking swift action.
Spanning our top selling categories, such as Cummins, we've identified additional operating cost opportunities and are taking swift action.
Speaker 2: In total, we've identified approximately 10 million in annual run rate cost savings that we believe we can attain over the next 60 to 90.
In total we've identified approximately $10 million in annual run rate cost savings that we believe we can attain over the next 60 to 90 days. These changes will have a significant impact to our P&L has returned to positive revenue growth.
Speaker 2: These changes will have a significant impact to our P&L as we return to positive revenue.
Speaker 2: We believe CBDMD is the brand of choice for consumers and are committed to be the CBD brand of choice for our shareholders. With that, I'd like to now turn.
We believe CVD AMD as the brand of choice for consumers and are committed to be the CBD brand of choice for our shareholders.
With that I'd like to now turn the call back over to Marty.
Speaker 3: Thank you, Ronan. With that, Catherine, I'd like to open up the line for Q&A.
Thank you Ronan.
That Kathryn.
I'd like to open up the line for Q&A.
Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments. Please press star one on your phone now we ask that while posing your question. Please pickup your handset if a say on speaker phone to provide optimal sound quality. Once again, if you have any questions or comments. Please press star one on your phone now please hold a moment.
Speaker 1: If you have any questions or comments, please press star 1 on your phone now. We ask that while posing your question, you please pick up your handset if listening on speakerphone to provide optimum sound quality.
Speaker 1: Once again, if you have any questions or comments, please press star 1 on your phone now. Please hold a moment while we poll for questions.
While we poll for questions.
You have a question coming from Mike Fifer with Oppenheimer.
Your line is live.
Speaker 5: Hi, this question is for Dr. Swift. With regard to the citizen's petition you guys will be filing, can you talk about how long this process will take and the hopeful outcome? And then the second part to the question is with regard to the announced cost reduction measures that you're implementing, how does this fit into that in terms of cost of legal expenses of accomplishing this? Thanks.
Hi. This question is for Doctor Swift.
With regard to the citizens petition.
You guys will be filing.
Can you talk about how long this process will take in the hopeful outcome and then the second part to the question is in with regard to the announced cost reduction measures that you're implementing.
How does this fit into that in terms of cost of legal expenses of accomplishing this.
Speaker 4: Absolutely. The process for a citizen petition typically takes
Absolutely the process for a citizen petition typically takes about 150 to 180 days from the data filing the petition it could go quicker.
Speaker 4: about 150 to 180 days from the date of filing the petition. It could go quicker.
Speaker 4: but we do not expect the agency to act quickly in this case. As I stated in my discussion, the hopeful outcome is that the Commissioner of Food and Drugs determines that CBD is not excluded from the definition of a dietary supplement or any alternative that a regulation is issued after notice and comment, finding that CBD would be lawful under the Act.
But we do not expect the agency to act quickly in this case.
As I stated in my discussion the hopeful outcome is that the commissioner food and drugs determined that CBD is not excluded from the definition of the dietary supplement Randy.
And the alternative.
The regulations issued after notice and comment finding that CBD would be lawful under the act.
Speaker 4: As a member and a board member of the NPA, we will have the full support of the trade association and do not expect to incur any costs for the citizens petition or any required responses.
As a member and a board member of the NPA, We will have the full support of the trade Association and do not expect to incur any costs for the citizens petition or any required responses.
Thank you.
Speaker 1: With no further questions in the queue, that does conclude our conference call for today. Thank you so much for your patience.
With no further questions in the queue that does conclude our conference call for today. Thank you so much for your participation.