10-K: CV Sciences Reports Mixed Results in 2024 Annual Filing, Focuses on Strategic Acquisitions and Cost Reductions

CV Sciences' 2024 10-K filing reveals a year of strategic acquisitions, cost management, and mixed financial performance in the competitive consumer wellness market.

Summary

• CV Sciences, Inc., a consumer wellness company specializing in nutraceuticals and plant-based foods, filed its annual report on Form 10-K for the fiscal year ended December 31, 2024.
• The company reported net product sales of $15.705 million in 2024, a slight decrease of 1.9% compared to $16.004 million in 2023, primarily due to lower B2B sales.
• Gross profit increased by 1.2% to $7.168 million, with gross margins improving from 44.3% in 2023 to 45.6% in 2024.
• Selling, general, and administrative expenses decreased by 5.2% to $9.240 million.
• The company experienced a net loss of $2.394 million in 2024, compared to a net income of $3.102 million in 2023, largely due to a one-time benefit in 2023 from the reversal of accrued payroll taxes.
• CV Sciences acquired Cultured Foods Sp. z.o.o. in December 2023 and Elevated Softgels, LLC in May 2024 to expand its product offerings and manufacturing capabilities.
• The company engaged Maxim Group, LLC as a financial advisor to explore strategic opportunities.
• As of December 31, 2024, CV Sciences had approximately $0.5 million in cash and a working capital of approximately $0.1 million.
• The company is pursuing additional investment capital and strategic cost reductions to fund operations and growth initiatives.
• In February 2025, CV Sciences entered into a securities purchase agreement for net proceeds of $1,200,000.

Sentiment

Score: 5

Explanation: The document presents a mixed picture. While there are positives such as improved gross margins and strategic acquisitions, the net loss and dependence on additional capital raise concerns. The sentiment is neutral.

Positives

• Gross profit margins improved from 44.3% to 45.6% due to reduced discounts, product and channel mix, lower shipping and fulfillment cost, lower payroll, lower inventory losses and other production cost savings.
• The company launched new product lines (+PlusHLTH and Lunar Fox) and acquired Elevated Softgels to expand its offerings.
• Selling, general and administrative expenses decreased by $0.5 million, or 5.2%, to $9.2 million in 2024, from $9.7 million in 2023.
• The company derecognized a contingent liability of $6.2 million during the year ended December 31, 2023, due to the expiration of the statute of limitations for federal payroll tax withholding.

Negatives

• Net product sales decreased slightly by 1.9% compared to the previous year.
• The company experienced a net loss of $2.394 million in 2024, compared to a net income of $3.102 million in 2023.
• The CVSI-007 program for smokeless tobacco addiction treatment remains dormant.
• The company had an accumulated deficit of $87.0 million as of December 31, 2024.
• The company generated negative cash flows from operations of $0.9 million for the year ended December 31, 2024.

Risks

• The company faces intense competition in the CBD-based consumer product industry.
• The lack of a clear regulatory framework and a patchwork of state regulations pose challenges.
• The company's ability to continue as a going concern is dependent on securing additional investment capital.
• Rising inflation and high Federal Reserve interest rates may adversely impact the business.
• Several states have adopted new regulations that will impact the Company's ability to sell certain products as currently formulated or packaged in these states.

Future Outlook

The company anticipates dependence on additional investment capital to fund operations and growth initiatives and will continue to make and implement strategic cost reductions.

Management Comments

• Management implemented, and continues to make and implement, strategic cost reductions, including reductions in employee headcount, vendor spending, and the delaying of 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.

Industry Context

The CBD-based consumer product industry is highly competitive and fragmented with numerous companies, consisting of publiclyand privately-owned companies, such as Charlotte's Web Holdings Inc., cbdMD, Inc., Medterra CBD, Inc., and many others.

Comparison to Industry Standards

• The document does not provide enough information to make a detailed comparison to industry standards.
• To perform a comparison to industry standards, specific benchmarks for revenue growth, profitability, and operational efficiency would be needed for comparable companies in the nutraceutical and plant-based food sectors.
• Comparable companies could include those with similar product lines, distribution channels, and market focus, such as publicly traded competitors in the CBD and plant-based food industries.

Legal Proceedings

• The company is involved in ongoing legal proceedings, including a shareholder derivative suit and a putative class action complaint.
• On February 12, 2025, the Company initiated an arbitration with JAMS asserting claims against its long-time legal counsel, Procopio, Cory, Hargreaves & Savitch LLP, and a former partner of that firm, who the Company had regarded as its general counsel (together Procopio).

Related Party Transactions

• The company previously recorded accrued payroll taxes associated with the RSU release to Michael Mona Jr. (Mona) in 2019.
• On April 15, 2023, the statute of limitations for federal payroll tax withholding expired.
• As a result of the expiration of the relevant statutes of limitations, the Company believes that neither the IRS nor the State of California have the rights to assess and collect the $6.2 million of income taxes from CV Sciences and we have made a change in accounting estimate and no longer expect to incur a loss with respect to this matter.

Stakeholder Impact

• Shareholders face uncertainty due to the company's financial performance and dependence on additional capital.
• Employees may be affected by strategic cost reductions, including potential reductions in employee headcount.
• Customers may benefit from the company's expanded product offerings through acquisitions.
• Suppliers and creditors face potential risks due to the company's financial situation.

Next Steps

• 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 in order to continue its operations.
• The Company will continue to work towards increasing revenue and operating cash flows to meet its future liquidity requirements.

Key Dates

Keywords

CBD, hemp, nutraceuticals, plant-based foods, acquisitions, financial results, consumer wellness, CV Sciences, Elevated Softgels, Cultured Foods