Good afternoon, and welcome to cbdMD, Inc.'s March 31, 2022, Second Quarter of Fiscal 2022 Earnings Call and Update. This afternoon, the company issued a press release that provided an overview of its second quarter of fiscal year 2022 results, which followed the filing of its quarterly report on Form 10-Q. Today's conference call is being recorded and will be available online, along with its earnings press release covering our financial results and non-GAAP presentation at cbdmd.com, in accordance with cbdMD's retention policies [Operator Instructions]. At this time, I would now like to turn the conference over to Ronan Kennedy, the company's Chief Financial Officer and Chief Operating Officer. Ronan, please go ahead.

Thank you, Java, and thank you all for joining the cbdMD's March 31 2022, second quarter of fiscal 2022 earnings call and update. On the call today, we also have our Chairman and Co-CEO, Marty Sumichrast; as well as Dr. Sibyl Swift, our Vice President of Scientific and Regulatory Affairs. Following the Safe Harbor statement, Marty will provide an overview of our business. Then Dr. Swift will provide an update on the current regulatory climate for CBD as well as an update from our cbdMD Therapeutics division. And finally, I'll provide a summary of the quarterly financial results. Following that, we'll open up the call for questions. We'd like to remind everyone that various remarks about future expectations, plans and prospects constitute forward-looking statements for purpose of Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. cbdMD cautions that these forward-looking statements are subject to risks and uncertainties that may cause our actual results to differ materially from those indicated, including risks described in the company's quarterly report on Form 10-Q for the quarter ended March 31, 2022, and our other filings with the SEC, all of which can be reviewed on the company's website at www.cbdmd.com or on the SEC's website at www.sec.gov. Any forward-looking statements made on this conference call speak only as of today's date, Friday, May 13, 2022 and cbdMD does not intend to update any of these forward-looking statements to reflect events or circumstances that would occur after today's date, except as may be required by Federal Securities Laws. With that, I'd like to turn the call back over to cbdMD's Chairman and Co-CEO, Marty Sumichrast.

Thank you very much, Ronan, and good afternoon, everyone. We appreciate you joining us today. As we entered calendar 2022, the CBD industry had just experienced its first negative revenue growth. And here at cbdMD, we too experienced four quarters of net sales decline. So our goal coming into calendar 2022 was to reverse the decline and turn the sales trend back to positive. We're pleased to report that we accomplished this goal and net sales rebounded for the sequential quarter. We also made a lot of hard choices regarding our cost structure. We reduced our payroll significantly during the quarter, which meant we had to part with many team members. We also had to take a hard look at our marketing spend, which has always been our largest expenditure. We challenged our marketing team to find ways to reach new customers in a more cost-effective manner. And furthermore, to find ways to better our customer experience so we can retain our existing customers longer. Operationally, we embarked on an overall cost savings program that gets us to cash flow breakeven at revenue rates that we achieved only a few quarters ago. Our goal is to achieve cash flow breakeven during calendar 2022. To those of you that may be learning about cbdMD for the first time, let me take a few minutes to explain what we've accomplished over the past three years. We've built a diversified sales channel that's generated over $125 million in net sales. We have one of the largest direct-to-consumer engines in the CBD industry. And in retail, we have placed our products in over 6,000 outlets. And just last quarter, we added over 850 GNC stores to our distribution list. We have filled over 1.5 million customer orders since inception, have one of the industry's…

Thank you, Marty. And it's a pleasure to be able to talk with everyone on the call today. On our last call, we spoke about our decision to send a Citizen's Petition to FDA. That petition was mailed on February 21, 2022. In it, we requested several types of relief including removing CBD from the Drug Preclusion List. We believe we have well-founded arguments why CBD should not be drug precluded. We do not expect the FDA to provide a substantive reply before the 180-day response time line, which is approximately August 22, 2022. Instead, we expect them to state they need additional time to reply or claim delay due to other agency priorities. We will determine our next steps at that time. Our novel food applications are now validated in the UK and the EU, which means we are now in the risk assessment phase, and the governments are analyzing our dossiers. This is expected to take 9 to 12 months. We anticipate a full novel foods approval after completion of the risk assessment, which can take up to an additional six months for the administrative processes. In the UK, our products can be legally pulled during the entire process until final approval. In EU, we will be seeking opportunities as they may emerge during the risk assessment phase. Approximately 40 of our products have been approved by MINSA, the Costa Rican Health Ministry. We have an additional approximately 40 products submitted for MINSA approval. We are actively engaged in the process to obtain sanitary registrations in several other Latin American countries. And we are working on deal terms to enter Mexico with one of our two currently authorized distributors before the laws change to allow us to register ourselves. Our clinical study with Colorado State University performed on…

Thank you, Sibyl, and welcome, everyone. Total GAAP net sales for the second quarter of fiscal 2022 were $9.6 million versus net sales of $9.3 million for the quarter ending December 31, 2021, or a sequential growth of 3.3%. Our net sales for the March 31, 2022 quarter were down 18% compared to the prior year comparative quarter. Our quarterly e-commerce direct-to-consumer business generated sales of $6.6 million versus $7.1 million for our quarter ending December 31, 2021, or a sequential decline of 7.5%. Our e-commerce sales were down 24% compared to the quarter a year ago. E-commerce represented 68% of our total net sales during the second quarter of fiscal 2022. Our wholesale business, including brick-and-mortar retail customers, was $3 million versus $2.2 million for the quarter ending December 31, 2021, or a sequential increase of 38.2%. Wholesale net sales were down 11.3% compared to the year ago quarter of March 31, 2021. Our GAAP gross profit margin decreased to 67% in the second quarter of fiscal 2022 from 69% in the second quarter of fiscal 2021. This decline is primarily based on lower manufacturing and operating leverage because of the year-over-year decline in sales. We've implemented numerous cost-saving initiatives to offset and improve gross profit margins and expect to realize these in the third quarter. Our operating expenses for the second quarter of fiscal 2022 totaled $11.4 million, down from $12.3 million in the prior year and down $500,000 sequentially. This drop was led by a reduction in payroll, professional fees, marketing expenses, merchant processing fees, noncash stock expense and other expenses were offset by an increase in depreciation, amortization of intangibles as well as R&D and regulatory expenses. As mentioned in our prior 10-Q, we started amortizing our intangibles beginning with the current quarter. Excluding noncash depreciation,…

Thanks, Ronan. And with that, I'd like to open the line for Q&A.

Thank you. [Operator Instructions] With no questions in the queue, that does conclude our conference call for today. Thank you so much for your participation, and have a pleasant rest of your day. : :