SAN DIEGO, Aug. 06, 2020 (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 quarter ended June 30, 2020.

Second Quarter 2020 and Recent Operating Highlights

  • Revenue of $5.4 million for the second quarter of 2020;

  • E-commerce sales of $2.0 million for the second quarter of 2020;

  • Gross margin of 43.0% for the second quarter of 2020;

  • Maintained strong total cash balance of $8.1 million at quarter end;

  • Received formal notice of patent issuance from USPTO for proprietary CBD and nicotine formulation and treatment of smokeless tobacco addiction;

  • Launched CV™ Acute, a clinically researched wide spectrum proprietary plant-based formula which supports immune system and respiratory health;

  • Launched Happy Lane™, a new THC-free CBD brand and product line for the convenience store channel; and

  • Announced publication of two research studies demonstrating the safety and health benefits of PlusCBD™ products.

“We continue to effectively navigate the challenging industry and COVID-19 environment by controlling costs and accelerating new product and category development, while continuing to drive distribution growth for our PlusCBD™ brand. During the quarter, we expanded distribution of our topical products with a leading southeast supermarket retailer and two national supermarket retailers, driving further growth of our store count to 6,325 stores nationwide, up from 5,799 at the end of the first quarter. We remain highly confident in the long-term outlook for the hemp-derived CBD category and will continue to position ourselves for the future of CBD as the regulatory environment continues to develop,” stated Joseph Dowling, Chief Executive Officer of CV Sciences. “We are excited to expand our high-quality product development expertise into the immunity category with the recent launch of CV™ Acute, our first entry into the immunity category with additional products to follow. The immunity category for dietary supplements is a promising and growing category with strong consumer demand as consumers focus on their health and well-being during this pandemic. We are leveraging our years of product development expertise to deliver a superior solution for consumers. The product not only broadens our category exposure, but will also expand our distribution footprint. Additionally, earlier this week we announced the launch of our new Happy Lane™ product line, expanding our hemp-derived CBD portfolio that significantly broadens our channel opportunities, providing an attractive entry point to consumers. With these new and further planned product and brand launches, we see significant opportunity to broaden our national footprint and expand our market share in the CBD category. Beyond these recent new product and brand innovations, we continue to have a pipeline of new product innovation lined up for the 2nd half of 2020. We will continue to focus on expanding our distribution, products, categories and opportunity with a focus on driving growth and long-term shareholder value.”

Operating Results - Second Quarter 2020 Compared to Second Quarter 2019
Sales for the second quarter of 2020 were $5.4 million, a decrease of 68% from $16.9 million in the second quarter of 2019. Second quarter sales were impacted by the current COVID-19 pandemic and increased market competition, which is largely due to the uncertain regulatory environment for CBD. The Company's retail store count increased to 6,325 stores nationwide as of June 30, 2020, up from 4,591 stores as of June 30, 2019.

The Company recognized an operating loss of $4.7 million in the second quarter of 2020, compared to an operating income of $1.3 million in the prior year.

The Company had negative adjusted EBITDA for the second quarter of 2020 of $3.2 million, compared to adjusted EBITDA of$3.6 million for the second quarter of 2019.

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 web site at https://ir.cvsciences.com/news-events or directly http://public.viavid.com/index.php?id=140785. Investors interested in participating in the live call can also dial (888) 317-6003, passcode: 6531425 from the U.S. or international callers can dial (412) 317-6061, passcode: 6531425. A telephone replay will be available approximately two hours after the call concludes, and will be available through Thursday, August 13, 2020, by dialing (844) 512-2921 from the U.S. or (412) 317-6671 from international locations, and entering confirmation code 10146370.

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 6,300 retail locations throughout the U.S. and it is the top-selling brand 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
Scott Van Winkle
617-956-6736
scott.vanwinkle@icrinc.com

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

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

 Three Months ended
June 30,
 Six Months ended
June 30,
 2020 2019 2020 2019
Product sales, net$5,396  $16,854  $13,666  $31,765 
Cost of goods sold 3,074   4,903   7,336   9,255 
Gross Profit 2,322   11,951   6,330   22,510 
                
Operating expenses:               
Research and development746  1,688  2,255  3,030 
Selling, general and administrative 6,233   9,009   14,052   27,604 
  6,979   10,697   16,307   30,634 
                
Operating Income (Loss)(4,657) 1,254  (9,977) (8,124)
        
Interest (income) expense, net4  (1) (6)  5 
Income (loss) before income taxes(4,661) 1,255  (9,971) (8,129)
Income tax expense (benefit)20  26  (138) 26 
Net Income (Loss)$(4,681) $1,229  $(9,833) $(8,155)
        
Weighted average common shares outstanding       
Basic99,863  98,633  99,771  98,557 
Diluted99,863  120,929  99,771  98,557 
Net loss per common share, basic and diluted       
Basic$(0.05) $0.01  $(0.10) $(0.08)
Diluted$(0.05) $0.01  $(0.10) $(0.08)

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

 June 30,
 2020
 December 31,
 2019
Assets   
Current assets:   
Cash and cash equivalents$7,576  $9,107 
Restricted cash501  501 
Accounts receivable, net1,145  2,177 
Inventory8,418  9,971 
Prepaid expenses and other8,809  10,611 
Total current assets26,449  32,367 
    
Property & equipment, net3,039  3,615 
Operating lease assets8,147  8,709 
Intangibles, net3,748  3,766 
Goodwill2,788  2,788 
Other assets1,524  1,442 
Total assets$45,695  $52,687 
    
Liabilities and stockholders' equity   
Current liabilities:   
Accounts payable$743  $1,617 
Accrued expenses10,132  10,856 
Operating lease liability - current837  723 
Total current liabilities11,712  13,196 
    
Debt2,906   
Operating lease liability8,826  9,517 
Deferred tax liability263  421 
Other liabilities  406 
Total liabilities23,707  23,540 
    
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, 99,886 and 99,416 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively10  10 
Additional paid-in capital73,448  70,774 
Accumulated deficit(51,470) (41,637)
Total stockholders' equity21,988  29,147 
    
Total liabilities and stockholders' equity$45,695  $52,687 

CV SCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
(in thousands)

 Six Months ended June 30,
 2020 2019
OPERATING ACTIVITIES   
Net loss$(9,833) $(8,155)
Adjustments to reconcile net loss to net cash flows provided by (used in) operating activities:   
Depreciation and amortization389  354 
Stock-based compensation2,501  4,216 
Stock-based compensation associated with founders employment settlement  7,857 
Deferred taxes(158)  
Non-cash lease expense562  251 
Loss on sale of property and equipment176   
Other99  32 
Change in operating assets and liabilities:   
Accounts receivable1,032  (1,380)
Inventory1,738  (557)
Prepaid expenses and other2,208  (622)
Accounts payable and accrued expenses(2,818) 1,461 
Net cash provided by (used in) operating activities(4,104) 3,457 
    
INVESTING ACTIVITIES   
Purchase of property and equipment(506) (504)
Net cash flows used in investing activities(506) (504)
    
FINANCING ACTIVITIES   
Proceeds from debt2,906   
Repayment of unsecured debt  (405)
Proceeds from exercise of stock options173  254 
Net cash flows provided by (used in) financing activities3,079  (151)
    
Net increase (decrease) in cash, cash equivalents and restricted cash(1,531) 2,802 
Cash, cash equivalents and restricted cash, beginning of period9,608  12,935 
Cash, cash equivalents and restricted cash, end of period$8,077  $15,737 
    
Supplemental cash flow disclosures:   
Interest paid$  $9 
Income taxes paid$18  $54 
Supplemental disclosure of non-cash transactions:   
Purchase of property and equipment in accounts payable and accrued expenses$327  $50 
Sale of property and equipment in exchange for note receivable (recorded in prepaid expenses and other) and inventory$675  $ 

CV SCIENCES, INC.
NON-GAAP FINANCIAL MEASURES (UNAUDITED)

We prepare our condensed consolidated financial statements in accordance with generally accepted accounting principles for the United States (GAAP). The non-GAAP financial measures such as net income and 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 and other non-recurring items. 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 expense, amortization expense, interest and income tax expense (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 income (loss) for the three and six months ended June 30, 2020 and 2019 is detailed below:

 Three Months ended 
June 30,
 Six Months ended 
June 30,
 2020 2019 2020 2019
        
        
 (in thousands, except per share data)
Net income (loss) - GAAP$(4,681) $1,229  $(9,833) $(8,155)
Stock-based compensation (1)1,243  2,125  2,501  4,216 
Stock-based compensation associated with founder employment settlement (2)      7,857 
Payroll expense associated with founder employment settlement (3)      934 
Net income (loss) - non-GAAP$(3,438) $3,354  $(7,332) $4,852 
        
Diluted EPS - GAAP$(0.05) $0.01  $(0.10) $(0.08)
Stock-based compensation (1)0.02  0.02  0.03  0.04 
Stock-based compensation associated with founder employment settlement (2)      0.07 
Payroll expense associated with founder employment settlement (3)      0.01 
Diluted EPS - non-GAAP$(0.03) $0.03  $(0.07) $0.04 
        
Shares used to calculate diluted EPS - GAAP99,863  120,929  99,771  98,557 
Shares used to calculate diluted EPS - non-GAAP99,863  120,929  99,771  120,273 

_____________

(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 stock-based compensation expense related to accelerated vesting of RSU's and the modification of certain stock options associated with the settlement agreements with our founder.

(3) Represents accrued payroll and related benefits associated with the separation of our founder.

A reconciliation from our net loss to Adjusted EBITDA, a non-GAAP measure, for the three months ended June 30, 2020 and 2019 is detailed below:

 Three Months ended June 30, 2020 Three Months ended June 30, 2019
 Consumer
Products
 Specialty
Pharma
 Total Consumer
Products
 Specialty
Pharma
 Total
            
 (in thousands)
Net income (loss)$(4,034) $(647) $(4,681) $2,248  $(1,019) $1,229 
Depreciation195    195  168    168 
Amortization  9  9    9  9 
Interest expense (income)4    4  (1)   (1)
Income tax expense20    20  26    26 
EBITDA(3,815) (638) (4,453) 2,441  (1,010) 1,431 
Stock-based compensation (1)1,209  34  1,243  2,090  35  2,125 
Adjusted EBITDA$(2,606) $(604) $(3,210) $4,531  $(975) $3,556 

A reconciliation from our net loss to Adjusted EBITDA, a non-GAAP measure, for the six months ended June 30, 2020 and 2019 is detailed below:

 Six Months ended June 30, 2020 Six Months ended June 30, 2019
 Consumer
Products
 Specialty
Pharma
 Total Consumer
Products
 Specialty
Pharma
 Total
            
 (in thousands)
Net loss$(7,973) $(1,860) $(9,833) $(6,483) $(1,672) $(8,155)
Depreciation371    371  336    336 
Amortization  18  18    18  18 
Interest expense (income)(6)   (6) 5    5 
Income tax expense (benefit)(138)   (138) 26    26 
EBITDA(7,746) (1,842) (9,588) (6,116) (1,654) (7,770)
Stock-based compensation (1)2,467  34  2,501  4,137  79  4,216 
Stock-based compensation associated with founder employment settlement (2)      7,857    7,857 
Payroll expense associated with founder employment settlement (3)      934    934 
Adjusted EBITDA$(5,279) $(1,808) $(7,087) $6,812  $(1,575) $5,237 

______________

(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 stock-based compensation expense related to accelerated vesting of RSU's and the modification of certain stock options associated with the settlement agreements with our founder.

(3) Represents accrued payroll and related benefits associated with the separation of our founder.