CV Sciences Inc (CVSI)

[Det_Robert_Thorne]

Better than it looks, but big 2015 loss

2015 Revenues, at $11.5M, were a little lighter than the $12M I expected, but not bad.

The Gross Profit was $7.1M

Gross margin was a pretty good 61.7%

The killer appears to be the net profit/loss, which is a loss of $12.2M, caused by $17.76M of SG&A expenses, but per the filing, a lot of these expenses were non-cash, like the share compensation, and they also spent quite a bit on legal due to the lawsuits with MJNA and wrote down $2.65M in notes receivable:

For the year ended December 31, 2015, the Company incurred selling, general and administrative (the “SG&A”) expenses in the amount of $17,754,598 compared with $13,357,633 for the year ended December 31, 2014. This increase is driven primarily by an increase in non-cash expenses, including the write-down of notes receivable totaling $2,654,836 and the amortization of debt issuance cost of $264,699. For the year ended December 31, 2015, increases in cash-based SG&A expenses included higher employee headcount, greater marketing and legal expenses and information technology expense. Non-cash, SG&A expenses during the year ended December 31, 2015 included $6,048,191 of stock-based compensation. SG&A expense during 2014 includes $7,851,685 of stock-based compensation, a non-cash expense. Our legal expenses have increased due to various matters that we are vigorously defending and the CanX Acquisition. The SG&A expenses include $822,000 and $821,500 of amortization expense of intangible assets acquired through the Agreement for Purchase and Sale of Assets (the “PhytoSPHERE Agreement”) entered into by the Company with PhytoSPHERE for the years ended December 31, 2015 and 2014, respectively.

I don't know if they would have made a 2015 profit with all of these expenses removed (non-GAAP), but the would have been close.

The Balance Sheet shows the $882K of convertible notes on the books as of the end of December, but as the Subsequent Events section of the report states, that convertible debt was replaced with a regular Promissory note.

https://www.sec.gov/Archives/edgar/data/1510964/000101968716005892/cv_10k-123115.htm

The stock price may not take too kindly to this, but the report does seem to show a light at the end of the tunnel, and the OS as of today is about 51.5M shares.