LAS VEGAS, Feb. 12, 2018 /PRNewswire/ — Digipath, Inc. (OTCQB: DIGP) (“DIGP” or the “Company”), a service oriented independent testing laboratory and media firm focused on the developing cannabis market, today announced financial and operating results for the three months ended December 31, 2017.

First Fiscal Quarter 2018 Company Highlights

  • Record first quarter sales of $1,118,785 increased by $516,728, quarter-over-quarter growth of approximately 86% from the previous quarter’s net sales of $602,057, and a 173% increase on a year-over-year basis
  • Realized positive net cash flow from operating activities of $182,156 for the first fiscal quarter, an increase of approximately $152,000, or 506%, from the comparative three months ended December 31, 2016, and utilized $143,008 of proceeds from financing activities to purchase $142,514 of lab equipment to support our increased demand
  • Adjusted EBITDA was $371,753, compared to Adjusted EBITDA of $(86,637) for the comparative three months ended December 31, 2016, an improvement of approximately $458,390 on a year over year basis
  • The gross margin increased to 66.3%, from 50.2% in the prior year’s first fiscal quarter
  • Further strengthened our debt free balance sheet with a $337,007 increase in working capital over the previous quarter, resulting in $717,196 of working capital on hand as of December 31, 2017, including $360,827 of cash
  • Non-cash expenses of $377,947 increased during the quarter, consisting of allowance for bad debts, depreciation and stock-based compensation, as reflected in the Reconciliation of Adjusted EBITDA to Net Loss impacted our net loss, which increased by $52,857, or 42%, over the comparative quarter, a loss of $179,017 for the three months ended December 31, 2017, compared to a loss of $126,160 for the comparative fiscal quarter

Conference Call

Management will be holding a conference call to review its results for the fiscal first quarter of 2018. The conference call will take place at 4:15pm Eastern Time on Wednesday, February 14, 2018.

The dial-in information for the conference call is as follows:
Dedicated Dial-In: (310) 372-7549
Toll-Free (U.S. & Canada): (800) 719-7514
Conference Code: 348812

On the call from Digipath will be Mr. Joseph Bianco, CEO, Mr. Todd Denkin, President/COO, Dr. Cindy Orser, Chief Science Officer and Todd Peterson, CFO.

There will be a Q&A session towards the end of the conference call. Interested parties that want to submit questions must do so prior to the call by sending an email to hphillips@viridianca.com.

The complete quarterly filing can be found on our website:

Digipath SEC Filings

Management Comment

Todd Denkin, Digipath’s President and COO, commented, “Our first fiscal quarter of 2018 results far exceeded all of our previous quarters as demand for our cannabis testing, continued to grow as Nevada rolled out its recreational program last July. This new demand in the first fiscal quarter was also due in part to a short term increase in market share as three of our competitors’ operations in Nevada were temporarily suspended. The dramatic increase in sales, combined with an improvement in our gross margin, drove increased net cash flows and a turn to positive EBITDA. Our balance sheet is strong, with no debt and we expect things to continue to improve in a more stable fashion as the industry matures. We are still extremely bullish on our growth potential, despite becoming the fourth lab in the state to be sanctioned. Our positive cash flows from operating activities and solid balance sheet helped us utilize the eight days in January in which our license was suspended to augment our quality management staffing and formalize ISO 17025 lab practices, which will help us better manage our continued growth.”

The table below shows the interim results and key metrics:

Key Performance Metrics

Quarterly Data

Q1

Q1

2018

2017

Revenues (Thousands)

$   1,119

$       410

Lab Revenue Growth (%YOY)

173.0%

301.2%

Gross Profit Margins (%)

66.3%

50.2%

Quick Ratio (%)

461.3%

142.8%

Adjusted EBITDA Return on Assets (%)

18.6%

-6.1%

 

Digipath, Inc. Historical Revenue

Adjusted EBITDA

We define Adjusted EBITDA as net earnings (loss) before (i) other income (expense), (ii) interest income, (iii) interest expense, (iv) bad debts, (v) depreciation and amortization, (vi) impairment of development costs, (vii) non-cash expenses relating to share based payments recognized under ASC Topic 718, (viii) gain on early extinguishment of debt, and (ix) equity in losses of unconsolidated entity. We believe the use of this non-GAAP financial measure provides useful information to investors regarding our current financial performance; however, Adjusted EBITDA does not represent, and should not be considered an alternative to GAAP measurements. Specifically, we believe Adjusted EBITDA results provide useful information to both management and investors by excluding certain income and expenses that our management believes are not indicative of our core operating results, we believe that non-GAAP financial measures have limitations and do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP and that Adjusted EBITDA should only be used to evaluate our results of operations in conjunction with the corresponding GAAP financial measures. A reconciliation of Adjusted EBITDA to net loss is included below:

DIGIPATH, INC. AND SUBSIDIARIES

RECONCILIATION OF ADJUSTED EBITDA TO NET LOSS

(Unaudited)

For the Three Months Ended

December 31,

2017

2016

Net loss

$    (179,017)

$    (126,160)

Add back:

Other income

(20,700)

(154,000)

Bad debts expense

55,940

16,950

Depreciation and amortization

69,091

61,653

Stock based compensation

446,439

117,420

Adjusted EBITDA

$      371,753

$      (86,637)

About Digipath, Inc. (OTCQB: DIGP)

Digipath, Inc., supports the cannabis industry’s best practices for reliable testing, cannabis education and training, and brings unbiased cannabis news coverage to the cannabis industry.

Digipath Labs provides pharmaceutical-grade analysis and testing to the cannabis industry to ensure producers, consumers and patients know exactly what is in the cannabis they ingest and to help maximize the quality of its client’s products through analysis, research, development, and standardization.

Information about Forward-Looking Statements

This press release contains “forward-looking statements” that include information relating to future events. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which that performance or those results will be achieved. Forward-looking statements are based on information available at the time they are made and/or management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in, or suggested by, the forward-looking statements. Important factors that could cause these differences include, but are not limited to: the Company’s need for additional funding, the demand for the Company’s products, governmental regulation of the cannabis industry, the Company’s ability to maintain customer and strategic business relationships, the impact of competitive products and pricing, growth in targeted markets, the adequacy of the Company’s liquidity and financial strength to support its growth, and other risks that may be detailed from time-to-time in the Company’s filings with the United States Securities and Exchange Commission. For a more detailed description of the risk factors and uncertainties affecting Digipath, please refer to the Company’s recent Securities and Exchange Commission filings, which are available at www.sec.gov. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Contact
Harrison Phillips
Viridian Capital Advisors, LLC
(212) 209-3086
hphillips@viridianca.com

 

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SOURCE Digipath, Inc.