LAS VEGAS, May 15, 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 and six months ended March 31, 2018.

Second Fiscal Quarter 2018 Company Highlights

  • Second quarter sales of $583,073 increased by $86,024, year-over-year growth of approximately 17% from the previous year’s net sales of $497,049, and a 47.9% decrease on a quarter-over-quarter basis
  • Realized positive net cash flow from operating activities of $101,547 through the second fiscal quarter, an increase of approximately $207,000, or 197%, from the comparative six months ended March 31, 2017, and utilized $143,008 of proceeds from financing activities, which in part, financed $186,370 of lab equipment to support our increased demand
  • Adjusted EBITDA was $(43,961), compared to Adjusted EBITDA of $(145,065) for the comparative six months ended March 31, 2017, an improvement of approximately $101,104 on a year over year basis
  • The gross margin decreased to 38.7%, from 53.1% in the prior year’s second fiscal quarter, as we upgraded instrumentation and developed new assays to comply with Nevada regulations and improve processes to become more efficient
  • Maintained our debt free balance sheet with a $237,525 of working capital on hand as of March 31, 2018, including $236,362 of cash
  • Net loss for the second quarter was impacted by non-cash expenses of $306,882, which improved by $101,104, or 70%, over the comparative period in the prior year, consisting of allowance for bad debts, depreciation and stock-based compensation, as reflected in the Reconciliation of Adjusted EBITDA to Net Loss

The complete quarterly filing can be found on our website:
Digipath SEC Filings

Management Comment

Todd Denkin, Digipath’s President and COO, commented, “Digipath’s second fiscal quarter of 2018 ending March 31st showed a 17% increase year-over-year in revenue as demand for our cannabis testing continued to grow in Nevada. The second quarter revenues were overshadowed due to the stronger than expected first fiscal quarter revenues reflecting a short term uptick in our cannabis testing volume resulting from the interruption of three of our competitors’ operations in Nevada, followed by our own brief suspension during the start of our second fiscal quarter.  During this time, we used the opportunity to service and upgrade instrumentation, develop and validate new state mandated assays and to prepare for ISO 17025 accreditation as we continue to manage growth in this heavily regulated frontier.”

The table below shows the interim results and key metrics:

Quarterly Data

Quarterly Data

FYE September 30, 2018

FYE September 30, 2017

Q2 2018

Q1 2018

Q2 2017

Q1 2017

Revenues (Thousands)

$      583

$     1,119

$      497

$       410

Lab Revenue Growth (%YOY)

17.0%

173.0%

252.2%

301.2%

Gross Profit Margins (%)

-14.2%

66.3%

55.5%

50.2%

Quick Ratio (%)

171.2%

461.3%

605.6%

142.8%

Adjusted EBITDA Return on Assets (%)

-25.3%

18.6%

-3.8%

-6.1%

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, and (viii) gain on early extinguishment of debt. 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

For the Six Months Ended

March 31,

March 31,

2018

2017

2018

2017

Net loss

$       (700,396)

$       (223,600)

$       (879,413)

$       (349,760)

Add back:

Other income

(22,200)

(106,000)

(42,900)

(260,000)

Bad debts expense

42,301

4,304

98,241

18,754

Depreciation and amortization

72,605

61,420

141,696

123,073

Stock based compensation

191,976

205,448

638,415

322,868

Adjusted EBITDA

$       (415,714)

$       (58,428)

$       (43,961)

$       (145,065)

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.