Source: CV Sciences, Inc.
Continues Strong Performance From Consumer Products Division
With Reported Sales of $2.5 Million for Q2 2016; Company Initiates
Preclinical Drug Development Program to Address $5.3 Billion Market
Opportunity in Cessation of Smokeless Tobacco
CV Sciences, Inc. (OTCBB:
CVSI)
(the "Company", "CV Sciences", "our" or "we") announced today its
financial results for the second quarter and six months ended June 30,
2016.
Second Quarter 2016 - Business Highlights
- Drug Development Program. Following
the CanX Acquisition in December 2015, CV Sciences commenced its
preclinical drug development program during the second quarter of 2016.
The Company's drug development efforts include pursuing synthetic-based
Cannabidiol ("CBD") drug candidates in areas that have potential to
provide significant improvements in therapeutic patient treatments with
sizable addressable markets.
- Natural Products Sales Channel Expands. The
Company expanded its education program and marketing efforts in
partnership with broker relationships and physician educators to
increase this sales channel, addressing the $35 billion U.S. Natural
Products industry. As of June 30, 2016, the Company continued its
expansion in the Natural Products sales channel with placement into 705
stores.
- Company Rebranding Continues. In June
2016, CV Sciences announced that Financial Industry Regulatory Authority
("FINRA") had approved a change in the trading symbol for the Company's
common stock to "CVSI." The Company's common stock formerly traded
under the symbol "CANV."
"During the second quarter, we
continued to generate strong performance from our consumer products
division, as the distribution of our branded consumer products increased
to 705 retail locations as of June 30, 2016, compared to the 120 retail
locations a year ago," said Michael Mona, Jr., chairman and CEO of CV
Sciences. "We have seen a strong market acceptance and an increase in
demand for our consumer products with sales of $2.5 million during the
three months ended June 30, 2016, up from sales of $2.4 million for the
same period last year. Given our established position as a market leader
in CBD consumer products, we have pivoted our corporate strategy to
include the development and commercialization of innovative medicines.
During the second quarter of 2016, we initiated our preclinical drug
development program following the acquisition of CanX, Inc. ("CanX
Acquisition") in December 2015. The remainder of 2016 will be focused on
laying the groundwork for our development of novel therapeutics,
utilizing synthetic CBD as the active pharmaceutical ingredient aimed at
significant improvements in patient treatment for unmet medical needs.
We have assembled a strong and experienced team to advance our clinical
efforts and look forward to providing updates to our investors on the
progress made in our drug development program. We remain focused on
delivering innovative solutions to health care issues while creating
value for our shareholders."
Operating Results for the Three Months Ended June 30, 2016
The
Company's net loss for the three months ended June 30, 2016 was
$2,226,902 or ($0.04) per share (basic and diluted), compared to net
loss of $2,003,068 or ($0.06) per share (basic and diluted) for the
three months ended June 30, 2015. There were significant non-cash
transactions that caused the year-over-year difference which are
explained in the Non-GAAP Financial Measures below. Revenues for the
second quarter of 2016 increased as a result of the company's expansion
in sales and distribution channels for its CBD consumer product
category.
Selling, general and administrative ("SG&A")
expenses for the three months ended June 30, 2016 was $3,385,726
compared to $2,850,053 for the same period in 2015. Stock-based
compensation, which is a non-cash expense, was $670,682 and $857,846 for
the three months ended June 30, 2016 and 2015, respectively. SG&A
expenses also include $263,040 and $254,818 of depreciation and
amortization expense for the three months ended June 30, 2016 and 2015,
respectively. After adjusting for non-cash stock-based compensation and
depreciation and amortization for the three months ended June 30, 2016
and 2015, SG&A costs increased by $714,615 in the second quarter of
2016 compared to the second quarter of 2015. This increase resulted from
$122,809 of expense related to the Company's specialty pharmaceutical
segment, which began operations during the second quarter of 2016 and
increased headcount, legal, commissions, marketing and employee benefits
expenses.
Research and development ("R&D") expense for the
three months ended June 30, 2016 and 2015 were $341,547 and $433,544,
respectively. The decrease in the second quarter of 2016 compared to
2015 relates primarily to the Company's transitioning R&D activities
into production of inventory products. R&D expenses during the
three months ended June 30, 2016 and 2015 includes stock-based
compensation, a non-cash expense, of $0 and $8,846, respectively.
Financial highlights for the three and six months ended June 30, 2016 are presented below:
Balance Sheet and Liquidity Highlights
As
of June 30, 2016, the Company had cash of approximately $1.4 million.
The Company has sufficient cash reserves and access to capital to meet
its working capital requirements. Stockholders' equity amounted to
approximately $21.8 million as of June 30, 2016.
Non-GAAP Financial Measures
The
Company reports EBITDA and Adjusted EBITDA to present information about
its operating performance and financial position. The Company currently
focuses on EBITDA and Adjusted EBITDA to evaluate its business
relationships and resulting operating performance. EBITDA and Adjusted
EBITDA are defined as net income (loss) plus interest expense, income
tax expense, depreciation and amortization, further adjusted to exclude
certain non-cash expenses and other adjustments as set forth below. The
Company presents Adjusted EBITDA because it considers that an important
measure of its performance and it is a meaningful financial metric in
assessing operating performance from period-to-period by excluding
certain items that management believes are not representative of its
core business, such as certain non-cash items and other adjustments. The
Company believes that EBITDA and Adjusted EBITDA, viewed in addition
to, and not in lieu of, its reported results in accordance with
accounting principles generally accepted in the United States ("GAAP"),
provides useful information to investors regarding its performance for
the following reasons:
- because
non-cash equity grants made to employees and non-employees at a certain
price and point in time do not necessarily reflect how the business is
performing at any particular time, therefore stock-based compensation
expense is not a key measure of our operating performance; and
- revenues
and expenses associated with acquisitions, dispositions, equity
issuance and related offering costs can vary from period to period and
transaction to transaction and are not considered a key measure of
operating performance.
The reconciliation from net loss to EBITDA and Adjusted EBITDA, both non-GAAP measures, are presented below:
EBITDA
and Adjusted EBITDA are non-GAAP measures and do not purport to be an
alternative to net income (loss) as a measure of operating performance
or to cash flows from operating activities as a measure of liquidity.
The terms EBITDA and Adjusted EBITDA are not defined under GAAP, and
EBITDA and Adjusted EBITDA are not measures of net income (loss),
operating income (loss) or any other performance measure derived in
accordance with GAAP.
EBITDA and Adjusted EBITDA have limitations
as analytical tools and should not be considered in isolation or as a
substitute for analysis of our results as reported under GAAP. Some of
these limitations are:
- EBITDA
and Adjusted EBITDA do not reflect all cash expenditures, future
requirements for capital expenditures or contractual requirements;
- EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, working capital needs; and
- EBITDA
and Adjusted EBITDA can differ significantly from company to company
depending on strategic decisions regarding capital structure, the tax
jurisdictions in which companies operate, the level of capital
investment, thus, limiting their usefulness as comparative measures.
EBITDA
and Adjusted EBITDA should not be considered as measures of
discretionary cash available to the Company for investment in its
business. The Company compensates for these limitations by relying
primarily on GAAP results and using EBITDA and Adjusted EBITDA as
supplemental information.
For further discussion of the Company's
financial results for the three and six months ended June 30, 2016,
please refer to the Company's consolidated financial statements and
related Management Discussion and Analysis, which can be found at
www.cvsciences.com or EDGAR at
www.sec.gov/edgar/searchedgar/webusers.htm in the Company's Quarterly Report on Form 10-Q as filed with the U.S. Securities and Exchange Commission on August 12, 2016.
About CV Sciences, Inc.
CV Sciences, Inc. (OTCBB:
CVSI)
operates two distinct business segments: a drug development division
focused on developing and commercializing novel therapeutics utilizing
synthetic CBD; and, a consumer product division focused on
manufacturing, marketing and selling plant-based CBD products to a range
of market sectors. CV Sciences, Inc. has primary offices and facilities
in Las Vegas, Nevada and San Diego, California. Additional information
is available from OTCMarkets.com or by visiting
www.cvsciences.com.
