Lorsque nous utilisons les termes « CV Sciences », « Société », « nous », « notre » et « notre », nous entendons CV Sciences, Inc.un Delaware société, prise dans son ensemble, ainsi que toute entité remplacée, à moins que le contexte n’indique le contraire.
The following discussion of our financial condition and results of operations for the three months ended March 31, 2022 and 2021, respectively, should be read in conjunction with our condensed financial statements and the notes to those statements that are included elsewhere in this Quarterly Report on Form 10-Q. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. We use words such as "anticipate", "estimate", "plan", "project", "continuing", "ongoing", "expect", "believe", "intend", "may", "will", "should", "could", and similar expressions to identify forward-looking statements.
We operate two distinct business segments. Our consumer products segment is focused on developing, manufacturing, marketing and selling plant-based dietary supplements and hemp-based CBD products to a range of market sectors. Our specialty pharmaceutical segment is focused on developing and commercializing novel therapeutics utilizing CBD. Shares of our common stock are traded on the OTC:QB, and our trading symbol is CVSI. Our consumer products business segment develops, manufactures, markets and sells consumer products containing hemp-based CBD under our PlusCBD™ brand in a range of market sectors including nutraceutical, beauty care and specialty foods.
Notre secteur d’activité pharmaceutique spécialisé développe des cannabinoïdes pour traiter une gamme d’indications médicales. Nos produits candidats sont basés sur des formulations, des processus et une technologie exclusifs qui, selon nous, sont protégeables par un brevet, et nous prévoyons de poursuivre vigoureusement la poursuite des brevets sur nos candidats médicaments. Sur 19 mai 2020l’USPTO a délivré un brevet relatif à CVSI-007.
We expect to realize revenue from our consumer products business segment to fund our working capital needs. However, in order to fund our pharmaceutical product development efforts, we will need to raise additional capital either through the issuance of equity and/or the issuance of debt. In the event we are unable to fund our drug development efforts, we may need to curtail, partner or delay such activity. We continue to work with A.G.P./Alliance Global Partners to assist the Company with the strategic review, which includes consideration of inbound and outbound merger, sale, acquisition or other options for the Company as a whole or for any business segment. Results of Operations Revenues and gross profit Three months ended March 31, Change 2022 2021 Amount % (in thousands) Product sales, net $ 4,447 $ 4,844 $ (397) (8) % Cost of goods sold 3,291 2,486 805 32 % Gross profit $ 1,156 $ 2,358 $ (1,202) (51) % Gross margin 26.0 % 48.7 % 18
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Table of Contents First Quarter 2022 vs. 2021 Three months ended March 31, 2022 Three months ended March 31, 2021 % of product % of product Amount sales, net Amount sales, net (in thousands) (in thousands) Retail sales (B2B) $ 2,559 57.5 % $ 2,975 61.4 % E-commerce sales (B2C) 1,888 42.5 % 1,869 38.6 % Product sales, net $ 4,447 100.0 % $ 4,844 100.0 % We had net product sales of $4.4 million and gross profit of $1.2 million, representing a gross margin of 26.0% in the first quarter of 2022 compared with net product sales of $4.8 million and gross profit of $2.4 million, representing a gross margin of 48.7% in the first quarter of 2021. Our net product sales decreased by $0.4 million or 8% in the first quarter of 2022 when compared to first quarter 2021 results. The decline is primarily due to lower sales in our retail channel, mostly to independent natural product retailers and food, drug and mass ("FDM") accounts. The total number of units sold during the first quarter 2022 increased by 3% compared to the first quarter 2021. The volume increase was offset by higher discounts and changes in our sales mix in the first quarter of 2022. The overall market continues to be fragmented and highly competitive, which we believe is largely due to the lack of a clear regulatory framework. Cost of goods sold consists primarily of raw materials, packaging, manufacturing overhead (including payroll, employee benefits, stock-based compensation, facilities, depreciation, supplies and quality assurance costs), merchant card fees and shipping. Cost of goods sold in the first quarter of 2022 increased as a percentage of revenue compared to the first quarter of 2021, mostly due to increased product cost with our contract manufacturers and shipping costs. The gross margin decline in the first quarter 2022 compared with 2021 is primarily due to changes in our sales mix, additional discounts and the impact of increased product cost.
Frais de recherche et développement
Three months ended March 31, Change 2022 2021 Amount % (in thousands) Research and development expense $ 121 $ 186 $ (65) (35) % Percentage of product sales, net 2.7 % 3.8 % First quarter 2022 vs. 2021 Research and development ("R&D") expense decreased to $0.1 million in the first quarter of 2022 compared to $0.2 million in the first quarter of 2021. The decrease is mostly related to lower R&D spend in our specialty pharmaceutical segment. 19
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Frais de vente, généraux et administratifs mutuelle de santé what is
Three months ended March 31, Change 2022 2021 Amount % (in thousands) Sales expense $ 990 $ 1,257 $ (267) (21) % Marketing expense 1,343 1,620 (277) (17) % General & administrative expense 217 2,408 (2,191) (91) % Selling, general and administrative $ 2,550 $ 5,285 $ (2,735) (52) % Percentage of product sales, net 57.3 % 109.1 % First quarter 2022 vs. 2021 Selling, general and administrative ("SG&A") expenses decreased to $2.6 million in the first quarter of 2022 compared to $5.3 million in the first quarter of 2021, which was a result of the following: •Sales expense decreased due to lower payroll and outside services fees. •Marketing expense decreased due to lower payroll and stock-based compensation expense. •General and administrative ("G&A") expenses decreased as a result of the recognition of the employee retention credit of $2.0 million. G&A expenses also decreased due to lower outside services, legal fees and insurance cost, partially offset by increased depreciation expense.
Mesures financières non conformes aux PCGR
We use Adjusted EBITDA 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. Adjusted EBITDA is defined by us as EBITDA (net loss plus depreciation and interest expense), further adjusted to exclude certain non-cash expenses and other adjustments as set forth below. We use Adjusted EBITDA because we believe it also 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 Quarterly Report on Form 10-Q, 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. Adjusted EBITDA is not presented in accordance with, or as an alternative to, GAAP financial measures and may be different from non-GAAP measures used by other companies. We encourage investors to review the GAAP financial measures included in this Quarterly Report, including our condensed financial statements, to aid in their analysis and understanding of our performance and in making comparisons. 20
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Un rapprochement entre notre perte nette et le BAIIA ajusté, une mesure non conforme aux PCGR, pour les trois mois clos 31 mars 2022 et 2021 est détaillé ci-dessous :
Three months ended March 31, 2022 Three months ended March 31, 2021 Consumer Consumer Products Specialty Pharma Total Products Specialty Pharma Total (in thousands) Net loss $ (2,182) $ (35) $ (2,217) $ (3,054) $ (73) $ (3,127) Depreciation expense 517 - 517 204 - 204 Interest expense 702 - 702 14 - 14 EBITDA (963) (35) (998) (2,836) (73) (2,909) Stock-based compensation (1) 516 - 516 656 1 657 Employee retention credit benefit (2) (1,993) - (1,993) - - - Adjusted EBITDA $ (2,440) $ (35) $ (2,475) $ (2,180) $ (72) $ (2,252) _________________ (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. For more information, please see Note 6, Stock-Based Compensation, to our condensed financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. (2)Represents benefit related to employee retention credit. For more information, please see Note 1, Organization and Business, to our condensed financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Liquidités et ressources en capital
During the three months ended March 31, 2022 and the year ended December 31, 2021, our primary sources of capital came from (i) cash flows from our operations, predominantly from the sale of our CBD products, (ii) existing cash, (iii) government loans, and (iv) proceeds from third-party financings, including the sale of shares of our common stock and preferred stock, as well as convertible promissory notes, to certain investors. As of March 31, 2022, we had approximately $2.4 million of cash and working capital of approximately $0.9 million. During the three months ended March 31, 2022 and year ended December 31, 2021, we used cash in operating activities of approximately $0.4 million and $7.5 million, respectively. We believe that a combination of factors, mainly consisting of the highly competitive environment and the continued effects of the COVID-19 pandemic, have adversely impacted our business operations for the three months ended March 31, 2022 and the year ended December 31, 2021. Due to a low barrier entry market with a lack of a clear regulatory framework, we face intense competition from both licensed and illicit market operators that may also sell plant-based dietary supplements and hemp-based CBD consumer products. Because we operate in a market that is rapidly evolving and expanding globally, our customers may choose to obtain CBD products from our competitors, and our success depends on our ability to attract and retain our customers from purchasing CBD products elsewhere. To remain competitive, we intend to continue to innovate new products, build brand awareness, and make significant investments in our business strategy by introducing new products into the markets in which we operate, adopt quality assurance protocols and procedures, build our market presence, and undertake further research and development. Furthermore, COVID-19 still continues to have an impact on worldwide economic activity, and the ongoing effects of the COVID-19 pandemic has adversely impacted, and may continue to adversely impact, many aspects of our business. Management implemented, and continues to make and implement, strategic cost reductions, including reductions in employee headcount, vendor spending, and the delaying certain expenses related to our drug development activities. To the extent that we feel it is necessary and in the best interest of the Company and our shareholders, we may also take further actions that alter our operations in order to ensure the success of our business. On April 15, 2020, we applied for a loan from JPMorgan Chase Bank, N.A., as lender, pursuant to the Paycheck Protection Program (the "PPP") of the CARES Act as administered by the U.S. Small Business Administration (the "SBA"). On April 17, 2020, the loan was approved, and we received proceeds in the amount of $2.9 million (the "PPP Loan"). On September 8, 2021, we received confirmation from the Lender that the SBA approved our PPP Loan forgiveness application for the entire PPP Loan, including all accrued interest to date. The forgiveness of the PPP Loan was recognized as a gain on debt extinguishment in our financial results for the year ended December 31, 2021. The CARES Act also provides an employee retention credit, which is a refundable tax credit against certain employment taxes of up to 70% of qualified wages up to $10,000 paid to employees during each of the quarters ended March 31, 2021, June 30, 21
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2021 and September 30, 2021. We determined that we qualify for the tax credit under the CARES Act and filed our amended tax returns in March 2022. We expect to receive $2.0 million of tax credits under the relief provisions.
Dans Octobre 2020nous avons conclu un accord de financement avec Premier financement d’assurance afin de financer une partie de nos polices d’assurance. Le montant financé a été 0,7 million de dollars et encouru des intérêts au taux de 3,60 %. Nous devions effectuer des versements mensuels de 0,1 million de dollars depuis novembre 2020 par
juillet 2021. Il n’y avait pas de solde impayé au 31 mars 2022.
Dans mutuelle santé ipsec Octobre 2021nous avons conclu un accord de financement avec Premier financement d’assurance afin de financer une partie de nos polices d’assurance. Le montant financé est 0,4 million de dollars et porte intérêt au taux de 4,17 %. Nous sommes tenus d’effectuer des versements mensuels de 45 000 $ depuis novembre 2021 par juillet 2022.
On December 8, 2020, we entered into a Common Stock Purchase Agreement ("SPA") with Tumim Stone Capital, LLC ("Tumim"), pursuant to which Tumim committed to purchase up to $10.0 million in shares of our common stock from time to time. The SPA provides, among other things, that we may direct, every three trading days, Tumim to purchase a number of shares of our common stock not to exceed an amount determined based upon the trading volume and stock price of our shares. Effective November 15, 2021, the Company and Tumim mutually agreed to terminate the SPA. During the year ended December 31, 2021, we sold 10,021,804 shares of common stock pursuant to the SPA and recognized proceeds of $4.4 million. In November 2021, we entered into a Securities Purchase Agreement (the "November 2021 SPA"), in addition to certain other agreements, with an institutional investor providing for the sale and issuance in series of registered direct offerings of convertible promissory notes (each a "Note", and collectively, the "Notes") in the aggregate original principal amount of up to $5.3 million. At the initial closing of the offering, we sold and issued Notes in the aggregate original principal amount of $1.06 million, which Notes mature on May 17, 2022. The Notes had an original issue discount ("OID") of 6%, resulting in gross proceeds to the Company of $1.0 million at the initial closing. On March 25, 2022, we sold and issued additional Notes in the aggregate principal amount of $1.06 million (the "Second Tranche"), which Notes were offered pursuant to a prospectus supplement to the Company's shelf registration statement Form S-3 (Registration No. 333-237772). The Notes issued in the Second Tranche also have an OID of 6%, resulting in gross proceeds of the Company of $1.0 million. The Notes issued in the Second Tranche mature on September 25, 2022. The Notes bear no interest except upon the occurrence of an event of default. After the occurrence of an event of default, the Notes will accrue interest at the rate of 15% per annum; provided, however, that in the event that such event of default is subsequently cured (and no other event of default then exists (including, without limitation, for the Company's failure to timely pay such interest at the default rate)), interest shall cease to accrue as of the day immediately following the date of such cure. Holders of certain of the Notes converted amounts payable under such Notes into an aggregate of 8,598,572 shares of the Company's common stock at a weighted average conversion price of $0.11 per share, resulting in a reduction of the convertible note balance of $0.9 million through March 31, 2022. Subsequent to March 31, 2022, holders of the convertible notes converted amounts payable under such Notes into 1,559,428 shares of the Company's common stock at a weighted average conversion price of $0.08 per share, resulting in a reduction of the convertible note balance of $0.1 million. Subsequent to March 31, 2022, the volume weighted average price ("VWAP") of the Company's common stock was below $0.10 for more than 5 days, which constitutes a price default in accordance with the November 2021 SPA. As a result, from the date of such default and for so long as such default remains uncured, the Notes will accrue interest at a rate of 15% per annum, and the holder now has the right to require the Company to redeem all or any portion of the Notes (including all accrued and unpaid interest and late charges thereon), in cash, at a price not less than the face value of the Notes and a 10% redemption premium, as determined in accordance with the terms of the Notes. The Company is in communications with the holder of the Notes regarding (i) extending the maturity date of those Notes sold and issued in November 2021, and (ii) the price default, and anticipates to come to a mutually agreeable resolution related thereto, although no assurances can be given. On March 30, 2022, we entered into a Securities Purchase Agreement (the "Purchase Agreement") with an institutional investor, pursuant to which we agreed to issue and sell 700 shares of our preferred stock, which has limited voting rights, including "supervoting" rights of 170,000 votes per share of preferred stock on certain stockholder proposals, and warrants to purchase an aggregate of 10,000,000 shares of Company common stock. Shares of the preferred stock have a stated value of $1,000 per share and are convertible at any time into an aggregate of 10,000,000 shares of common stock at a conversion price of $0.07 per share. We received aggregate gross proceeds of $0.7 million before deducting placement agent's fees and other offering expenses in connection with this offering. During the first quarter of 2019, we issued 2,950,000 Restricted Stock Units ("RSU's") to our founder, former President and Chief Executive Officer, Michael Mona Jr. ("Mona Jr."). The vesting of the RSU's is treated as a taxable compensation and thus 22
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subject to income tax withholdings. No amounts were withheld (either in cash or the equivalent of shares of common stock from the vesting of the RSU's) or included in our payroll tax filing at the time of vesting. During the year ended December 31, 2020, we reported the taxable compensation associated with the RSU release to the taxing authorities and included the amount in Mona Jr's W-2 for 2019. Although the primary tax liability is the responsibility of Mona Jr., we are secondarily liable and thus have recorded the liability on our balance sheet as of December 31, 2021. The liability may be relieved once the tax amount is paid by Mona Jr. and the Company has received the required taxing authority documentation from Mona Jr.. As of March 31, 2022, Mona Jr. has not provided us with proof that he filed and paid his taxes for 2019. Refer to Note 11. Related Parties and Note 8. Commitments and Contingencies to our condensed financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. U.S. GAAP requires management to assess a company's ability to continue as a going concern within one year from the financial statement issuance and to provide related note disclosure in certain circumstances. Our financial statements and notes have been prepared assuming the Company will continue as a going concern. For the three months ended March 31, 2022 and year ended December 31, 2021, the Company generated negative cash flows from operations of $0.4 million and $7.5 million, respectively, and had an accumulated deficit of $81.7 million as of March 31, 2022. Management anticipates that the Company will be dependent, for the near future, on additional investment capital to fund our operations and growth initiatives. The Company intends to position itself so that it will be able to raise additional funds through the capital markets, issuance of debt, and/or securing lines of credit. The Company's financial operating results and accumulated deficit, amongst other factors, raise substantial doubt about the Company's ability to continue as a going concern. The Company will continue to pursue the actions outlined above, as well as work towards increasing revenue and operating cash flows to meet its future liquidity requirements. However, there can be no assurance that the Company will be successful in any capital-raising efforts that it may undertake, and the failure of the Company to raise additional capital could adversely affect its future operations and viability.
Un résumé de nos variations de flux de trésorerie pour les trois mois clos 31 mars 2022
et 2021 est fourni ci-dessous :
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