cbdMD(YCBD)2024-08-14 20:05Financial Performance - Total net sales for the three months ended June 30, 2024, were $5.17 million, a decrease of $0.95 million or 16% compared to $6.12 million in the same period of 2023[113] - For the nine months ended June 30, 2024, total net sales were $14.93 million, down $3.52 million or 19.1% from $18.44 million in the same period of 2023[113] - The company reported a net loss attributable to common shareholders of $(540,763) for Q2 2024, a substantial improvement from $(2,770,904) in Q2 2023[113] Sales Channels - E-commerce sales accounted for 76.1% of total net sales in Q2 2024, down from 81.7% in Q2 2023, while wholesale sales increased to 23.9% from 18.3%[114] Profitability and Margins - The company achieved a gross profit margin of 65.8% for Q2 2024, an increase of 2.9% from 62.8% in Q2 2023[113] - Adjusted EBITDA for the three months ended June 30, 2024, was $(84,953), compared to $(608,354) for the same period in 2023, indicating an improvement in core operating results[134] Operating Costs and Expenses - Operating loss from operations improved to $(382,028) in Q2 2024, a significant reduction of $1.44 million compared to $(1,823,652) in Q2 2023[113] - Total operating expenses decreased by approximately $1.9 million or 24% for the three months ended June 30, 2024, compared to the same period in 2023, driven by reductions in staff-related expenses and advertising[120] - Year-to-date operating expenses for the nine months ending June 30, 2024, decreased by $6.1 million, reflecting management's focus on operational efficiencies[121] - Cost of sales as a percentage of net sales remained stable at 35% for both the three months ended June 30, 2024, and 2023, attributed to ongoing cost-saving initiatives[117] Cash Flow and Capital Management - The company had cash and cash equivalents of $2.3 million and negative working capital of $567,610 as of September 30, 2023[124] - The company entered into a securities purchase agreement on January 30, 2024, raising $1,250,000 in gross proceeds for working capital and general corporate purposes[126] - Management believes that quarterly cash consumption should continue to improve in subsequent quarters, despite a net cash use of $0.1 million for the three months ended June 30, 2024[128] - The company has suspended cash dividend payments and is accruing dividends on a monthly basis, with an annual rate of 8% payable to preferred shareholders[126] Strategic Initiatives - The company launched a new functional mushroom product line under the ATRx brand in December 2023, expanding its product offerings[102] - The company is focused on reducing operating costs, achieving over $200,000 in monthly savings as of August 2024 through various cost-saving initiatives[107] - The company plans to increase marketing spend in Q4 2024 to support revenue growth despite ongoing cost reductions[107] - The company is exploring international expansion opportunities, particularly in Central and South America, and has gained market share through sanitary registration approvals[110] Financial Reporting and Compliance - The value of the non-cash contingent liability was $90,363 at September 30, 2023, with no ongoing liability recorded after the final issuance of shares in January 2024[123] - The company has no undisclosed off-balance sheet arrangements that could materially affect its financial condition or results of operations[139] - The term "off-balance sheet arrangement" refers to transactions or agreements with unconsolidated entities that may involve guarantees or contingent interests[139] - The company is classified as a smaller reporting company, thus quantitative and qualitative disclosures about market risk are not applicable[140]