GlobeNewswire Inc | Aug 12, 2021 04:05PM EDT

August 12, 2021

SAN DIEGO, Aug. 12, 2021 (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, 2021.

Second Quarter 2021 and Recent Financial and Operating Highlights

-- Revenue of $5.1 million for second quarter of 2021, compared to $5.4 million for the second quarter of 2020; -- Gross margin of 44.7% for second quarter of 2021, improved from 43.0% for the second quarter of 2020; -- Total cash balance of $3.0 million at quarter end, compared to $4.5 million at year end; -- Total retail distribution of more than 7,800 stores as of June 30, 2021, an increase from 6,325 stores as of June 30, 2020; -- Launched PlusCBDCalm and Sleep, two flavorful gummies that meet the primary needs of our target customers to manage stress and improve sleep as they manage day-to-day challenges; -- Received NutraIngredients-USA 2021 Product of the Year: Immune Support Award for our new and highly innovative CV Defense product; -- Published study of cannabidiol efficacy in treating nicotine dependence in Journal of Psychopharmacology in collaboration with the University of California, San Diego; and -- CV Sciences PlusCBD hemp oil used as reference standard to develop Cannabis Quality Assurance Program Exercise 1 Final Report - published by National Institute for Standards and Technology (NIST), further establishing Company as the industry leader for science, technology and regulatory compliance.

Second quarter execution was solid as we continued to focus on targeted growth opportunities, product innovation and cost efficiency initiatives. We delivered sequential growth for the first time in two quarters as revenues increased 6% compared to the first quarter, said Joseph Dowling, Chief Executive Officer. In addition, gross margins increased by 170 basis points versus last year reflecting product mix factors as well as ongoing efforts to drive productivity. From a new product standpoint, consumers and key retail partners are responding positively to the PlusCBDSleep and Calm gummies. Our new Sleep and Calm products, along with other planned new product launches during the second half of 2021, give us confidence in the success of our strong innovation pipeline to generate future incremental revenue. In our drug development division, we recently announced results from our collaborative study with UC San Diego validating the efficacy of CBD treatment in reducing nicotine dependence. This is a significant step toward CV Sciences' efforts to develop and commercialize the only FDA-approved treatment for smokeless tobacco addiction. Finally, we remain committed to working with government and industry association stakeholders to fill scientific and regulatory gaps necessary for full FDA regulation of CBD as a dietary supplement and remain optimistic that the Company is well positioned financially and strategically to deliver long-term value for our shareholders."

Operating Results - Second Quarter 2021 Compared to Second Quarter 2020Sales for second quarter of 2021 were $5.1 million, a decrease of 5% from $5.4 million in the second quarter of 2020. Current quarter 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 7,800 retail stores nationwide as of June 30, 2021, up from over 6,300 stores as of June 30, 2020.

The Company recognized an operating loss of $3.5 million in the second quarter of 2021, compared to an operating loss of $4.7 million in the second quarter of 2020.

The Company had negative adjusted EBITDA for the second quarter of 2021 of $2.4 million, compared to negative adjusted EBITDA of $3.2 million in the second quarter of 2020.

Conference Call and WebcastThe 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 http://public.viavid.com/index.php?id=145430. Investors interested in participating in the live call can also dial (877) 407-0784 from the U.S. or international callers can dial (201) 689-8560. A telephone replay will be available approximately two hours after the call concludes, and will be available through Thursday, August 19, 2021, by dialing (844) 512-2921 from the U.S. or (412) 317-6671 from international locations, and entering confirmation code 13720919.

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 Companys PlusCBD products are sold at more than 7,800 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 Companys 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 StatementsThis 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:ICRReed Anderson646-277-1260reed.anderson@icrinc.com

Media Contact:ICRCory Ziskind646-277-1232cory.ziskind@icrinc.com

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

Three months ended Six months ended June 30, June 30, 2021 2020 2021 2020Product sales, net $ 5,128 $ 5,396 $ 9,972 $ 13,666 Cost of goods sold 2,838 3,074 5,324 7,336 Gross Profit 2,290 2,322 4,648 6,330 Operating expenses: Research and 225 746 411 2,255 developmentSelling, general and 5,575 6,233 10,860 14,052 administrative 5,800 6,979 11,271 16,307 Operating Loss (3,510 ) (4,657 ) (6,623 ) (9,977 ) Interest expense 9 4 23 (6 )(income), netLoss before income (3,519 ) (4,661 ) (6,646 ) (9,971 )taxesIncome tax expense 11 20 11 (138 )(benefit)Net Loss $ (3,530 ) $ (4,681 ) $ (6,657 ) $ (9,833 ) Weighted averagecommon shares 107,623 99,863 106,074 99,771 outstanding, basic anddilutedNet loss per commonshare, basic and $ (0.03 ) $ (0.05 ) $ (0.06 ) $ (0.10 )diluted

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

June 30, December 2021 31, 2020Assets Current assets: Cash and cash equivalents $ 2,460 $ 4,024 Restricted cash 501 501 Accounts receivable, net 1,119 1,126 Inventory 9,176 8,840 Prepaid expenses and other 1,771 2,372 Total current assets 15,027 16,863 Property & equipment, net 2,493 2,877 Operating lease assets 2,789 3,057 Intangibles, net 3,730 3,730 Goodwill 2,788 2,788 Other assets 983 1,310 Total assets $ 27,810 $ 30,625 Liabilities and stockholders' equity Current liabilities: Accounts payable $ 646 $ 1,677 Accrued expenses 10,233 9,805 Current portion of operating lease liability 686 680 Current portion of long-term debt 2,998 2,174 Total current liabilities 14,563 14,336 Debt ? 1,453 Operating lease liability 3,113 3,467 Deferred tax liability 157 157 Total liabilities 17,833 19,413 Commitments and contingencies Stockholders' equity Preferred stock, par value $0.0001; 10,000 shares ? ? authorized; no shares issued and outstandingCommon stock, par value $0.0001; 190,000 sharesauthorized, 108,462 and 100,664 shares issued and 11 10 outstanding as of June 30, 2021 and December 31, 2020,respectivelyAdditional paid-in capital 80,544 75,123 Accumulated deficit (70,578 ) (63,921 )Total stockholders' equity 9,977 11,212 Total liabilities and stockholders' equity $ 27,810 $ 30,625

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

Six months ended June 30, 2021 2020OPERATING ACTIVITIES Net loss $ (6,657 ) $ (9,833 )Adjustments to reconcile net loss to net cash flows used in operating activities:Depreciation and amortization 402 389 Stock-based compensation 1,569 2,501 Deferred taxes ? (158 )Non-cash lease expense 268 562 Loss on sale of property and equipment ? 176 Other 211 99 Change in operating assets and liabilities: Accounts receivable (85 ) 1,032 Inventory (336 ) 1,738 Prepaid expenses and other 822 2,208 Accounts payable and accrued expenses (947 ) (2,818 )Net cash used in operating activities (4,753 ) (4,104 ) INVESTING ACTIVITIES Purchase of property and equipment (35 ) (506 )Net cash flows used in investing activities (35 ) (506 ) FINANCING ACTIVITIES Proceeds from debt ? 2,906 Repayment of unsecured debt (629 ) ? Proceeds from issuance of common stock 3,853 ? Proceeds from exercise of stock options ? 173 Net cash flows provided by financing activities 3,224 3,079 Net decrease in cash, cash equivalents and restricted (1,564 ) (1,531 )cashCash, cash equivalents and restricted cash, beginning 4,525 9,608 of periodCash, cash equivalents and restricted cash, end of $ 2,961 $ 8,077 period Supplemental cash flow disclosures: Income taxes paid ? 18 Supplemental disclosure of non-cash transactions: Purchase of property and equipment in accounts payable $ ? $ 327 and accrued expensesSale of property and equipment in exchange for notereceivable (recorded in prepaid expenses and other) and $ ? $ 675 inventory

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

We prepare our condensed 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. 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, and interest expense, minus income tax benefit and interest income), 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 three and six months ended June 30, 2021 and 2020 is detailed below (in thousands, except per share data):

Three months ended Six months ended June 30, June 30, 2021 2020 2021 2020Net loss - GAAP $ (3,530 ) $ (4,681 ) $ (6,657 ) $ (9,833 )Stock-based 912 1,243 1,569 2,501 compensation (1)Net loss - non-GAAP $ (2,618 ) $ (3,438 ) $ (5,088 ) $ (7,332 ) Diluted EPS - GAAP $ (0.03 ) $ (0.05 ) $ (0.06 ) $ (0.10 )Stock-based 0.01 0.02 0.01 0.03 compensation (1)Diluted EPS - non-GAAP $ (0.02 ) $ (0.03 ) $ (0.05 ) $ (0.07 ) Shares used tocalculate diluted EPS 107,623 99,863 106,074 99,771 - GAAP and non-GAAP

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(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.

A reconciliation from our net loss to Adjusted EBITDA, a non-GAAP measure, for the three months ended June30, 2021 and 2020 is detailed below (in thousands):

Three months ended June 30, 2021 Three months ended June 30, 2020 Consumer Specialty Total Consumer Specialty Total Products Pharma Products PharmaNet loss $ (3,421 ) $ (109 ) $ (3,530 ) $ (4,034 ) $ (647 ) $ (4,681 )Depreciation 198 ? 198 195 ? 195 Amortization ? ? ? ? 9 9 Interest 9 ? 9 4 ? 4 expenseIncome tax 11 ? 11 20 ? 20 expenseEBITDA (3,203 ) (109 ) (3,312 ) (3,815 ) (638 ) (4,453 )Stock-basedcompensation 912 ? 912 1,209 34 1,243 (1)Adjusted $ (2,291 ) $ (109 ) $ (2,400 ) $ (2,606 ) $ (604 ) $ (3,210 )EBITDA

A reconciliation from our net loss to Adjusted EBITDA, a non-GAAP measure, for the six months ended June30, 2021 and 2020 is detailed below (in thousands):

Six months ended June 30, 2021 Six months ended June 30, 2020 Consumer Specialty Total Consumer Specialty Total Products Pharma Products PharmaNet loss $ (6,475 ) $ (182 ) $ (6,657 ) $ (7,973 ) $ (1,860 ) $ (9,833 )Depreciation 402 ? 402 371 ? 371 Amortization ? ? ? ? 18 18 Interestexpense 23 ? 23 (6 ) ? (6 )(income)Income taxexpense 11 ? 11 (138 ) ? (138 )(benefit)EBITDA (6,039 ) (182 ) (6,221 ) (7,746 ) (1,842 ) (9,588 )Stock-basedcompensation 1,568 1 1,569 2,467 34 2,501 (1)Adjusted $ (4,471 ) $ (181 ) $ (4,652 ) $ (5,279 ) $ (1,808 ) $ (7,087 )EBITDA

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(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.