cbdMD, Inc. to Host Conference Call to Discuss September 30, 2024 Fourth Quarter and Fiscal Year 2024 ResultsDecember 18, 2024 11:04 AM EST | Source: cbdMDCharlotte, North Carolina--(Newsfile Corp. - December 18, 2024) - cbdMD, Inc. (NYSE American: YCBD) (NYSE American: YCBDpA), one of the nation's leading, highly trusted and widely recognized CBD companies, today announces that it will host a conference call at 4:20 p.m., Eastern Time, on Wednesday, December 18, 2024, to discuss the company's ...

Company Announcement - cbdMD, Inc. has postponed the release of its financial results and conference call for the fourth quarter and fiscal year ended September 30, 2024, which was originally scheduled for December 17, 2024 [2] - The new expected date for the financial results release is after market close on December 18, 2024, with the conference call scheduled for the same day at 4:20 PM EST [2] Company Overview - cbdMD, Inc. is a leading and trusted cannabidiol (CBD) brand, offering a comprehensive line of U.S. produced, THC-free CBD products, including NSF Certified for Sport® products and new Full Spectrum products [3] - The product range includes CBD tinctures, gummies, topicals, capsules, bath bombs, sleep aids, and Delta 9 products, as well as veterinarian-formulated pet products under the Paw CBD brand [3]

Group 1 - cbdMD, Inc. will host a conference call on December 17, 2024, at 4:20 p.m. Eastern Time to discuss its financial results for the fourth quarter and fiscal year 2024 [2][3] - The conference call will provide insights into the company's business progress and financial performance as of September 30, 2024 [2] - The call can be accessed via specific dial-in numbers for USA/Canada and international participants, with a replay option available [3] Group 2 - cbdMD, Inc. is recognized as a leading brand in the hemp-derived cannabidiol (CBD) market, offering a wide range of THC-free and Full Spectrum products [4] - The company's product line includes tinctures, gummies, topicals, capsules, and pet products under the Paw CBD brand, as well as functional mushroom supplements through ATRx Labs [4] - cbdMD emphasizes its commitment to quality and trust, with products produced in the U.S. and a focus on consumer accessibility through various retail outlets [4]

. ● . cbdMD, Inc. Announces Acceptance of Compliance Plan by NYSE American August 26, 2024 4:25 PM EDT | Source: cbdMD Charlotte, North Carolina--(Newsfile Corp. - August 26, 2024) - cbdMD, Inc. (NYSE American: YCBD) (NYSE American: YCBD-PA), one of the nation's leading and most highly trusted and recognized CBD companies, and operator of the leading CBD brands cbdMD and Paw CBD, along with its functional mushroom brand ATRx Labs, today announced that it received notice from the NYSE American LLC that it ha ...

Core Insights - cbdMD reported sequential revenue growth and positive net income for Q3 2024, achieving significant operational improvements and a reduction in operating losses [2][3][4]. Financial Performance - Net sales for Q3 2024 totaled $5.1 million, a decrease of 15% year-over-year from $6.1 million, but an increase of 18% sequentially [5]. - Direct to consumer (DTC) net sales were $3.9 million, accounting for 76% of total net sales, down from $4.9 million year-over-year but up 9% sequentially [6]. - Wholesale net sales increased to $1.2 million, a 10% increase from the previous year [6]. - Gross profit margin improved to 65% in Q3 2024 compared to 63% in Q2 2023 [7]. - The company reported a net income of approximately $0.46 million for Q3 2024, compared to a net loss of approximately $1.7 million in Q3 2023 [9]. Operational Efficiency - The operational loss decreased significantly from $1.8 million in Q3 2023 to $0.38 million in Q3 2024 [3][7]. - Non-GAAP adjusted loss from operations was approximately $0.08 million, down from $0.60 million in the same quarter last year, marking the lowest non-GAAP adjusted EBITDA loss since going public [8]. - The company achieved over $200,000 in monthly operating cost savings as of August 2024 [15]. Compliance and Business Updates - cbdMD received a notification from NYSE American regarding non-compliance with continued listing standards and submitted a compliance plan [12]. - The company terminated its former executive office lease effective August 1, 2024, which will eliminate future lease liabilities [14]. - During the quarter, 714,229 common shares were issued due to the conversion of convertible promissory notes [13]. Cash and Working Capital - As of June 30, 2024, the company had negative working capital of approximately $567,000, reduced by $3.7 million in accrued dividend payments [11]. - Cash on hand increased to approximately $2.3 million from $1.8 million at the end of September 2023 [11].

Financial Performance - Total net sales for the three months ended June 30, 2024, were $5.17 million, a decrease of $0.95 million or 16% compared to $6.12 million in the same period of 2023[113] - For the nine months ended June 30, 2024, total net sales were $14.93 million, down $3.52 million or 19.1% from $18.44 million in the same period of 2023[113] - The company reported a net loss attributable to common shareholders of $(540,763) for Q2 2024, a substantial improvement from $(2,770,904) in Q2 2023[113] Sales Channels - E-commerce sales accounted for 76.1% of total net sales in Q2 2024, down from 81.7% in Q2 2023, while wholesale sales increased to 23.9% from 18.3%[114] Profitability and Margins - The company achieved a gross profit margin of 65.8% for Q2 2024, an increase of 2.9% from 62.8% in Q2 2023[113] - Adjusted EBITDA for the three months ended June 30, 2024, was $(84,953), compared to $(608,354) for the same period in 2023, indicating an improvement in core operating results[134] Operating Costs and Expenses - Operating loss from operations improved to $(382,028) in Q2 2024, a significant reduction of $1.44 million compared to $(1,823,652) in Q2 2023[113] - Total operating expenses decreased by approximately $1.9 million or 24% for the three months ended June 30, 2024, compared to the same period in 2023, driven by reductions in staff-related expenses and advertising[120] - Year-to-date operating expenses for the nine months ending June 30, 2024, decreased by $6.1 million, reflecting management's focus on operational efficiencies[121] - Cost of sales as a percentage of net sales remained stable at 35% for both the three months ended June 30, 2024, and 2023, attributed to ongoing cost-saving initiatives[117] Cash Flow and Capital Management - The company had cash and cash equivalents of $2.3 million and negative working capital of $567,610 as of September 30, 2023[124] - The company entered into a securities purchase agreement on January 30, 2024, raising $1,250,000 in gross proceeds for working capital and general corporate purposes[126] - Management believes that quarterly cash consumption should continue to improve in subsequent quarters, despite a net cash use of $0.1 million for the three months ended June 30, 2024[128] - The company has suspended cash dividend payments and is accruing dividends on a monthly basis, with an annual rate of 8% payable to preferred shareholders[126] Strategic Initiatives - The company launched a new functional mushroom product line under the ATRx brand in December 2023, expanding its product offerings[102] - The company is focused on reducing operating costs, achieving over $200,000 in monthly savings as of August 2024 through various cost-saving initiatives[107] - The company plans to increase marketing spend in Q4 2024 to support revenue growth despite ongoing cost reductions[107] - The company is exploring international expansion opportunities, particularly in Central and South America, and has gained market share through sanitary registration approvals[110] Financial Reporting and Compliance - The value of the non-cash contingent liability was $90,363 at September 30, 2023, with no ongoing liability recorded after the final issuance of shares in January 2024[123] - The company has no undisclosed off-balance sheet arrangements that could materially affect its financial condition or results of operations[139] - The term "off-balance sheet arrangement" refers to transactions or agreements with unconsolidated entities that may involve guarantees or contingent interests[139] - The company is classified as a smaller reporting company, thus quantitative and qualitative disclosures about market risk are not applicable[140]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2024 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________________ to _______________ Commission file number 001-38299 cbdMD, INC. (Exact Name of Registrant as Specified in its Charter) North Carolina 47-34 ...

Table of Contents ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________________ to _______________ Commission file number 001-38299 cbdMD, INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) (Exact Name of Registrant as Specified in its Charter) ...

Part I [Item 1. Business](index=5&type=section&id=ITEM%201.%20Business.) cbdMD, Inc. operates nationally recognized CBD brands, focusing on profitability through cost optimization, e-commerce re-platforming, and new product launches - The company owns and operates nationally recognized CBD brands including **cbdMD**, **Paw CBD**, and **hempMD**[24](index=24&type=chunk)[25](index=25&type=chunk)[26](index=26&type=chunk) - Recent strategic shifts focus on achieving positive earnings through cost optimization, website re-platforming, and launching new brands like **hempMD** and **ATRx**[28](index=28&type=chunk)[32](index=32&type=chunk)[35](index=35&type=chunk) - Growth strategies include product innovation (e.g., **NSF for Sport**, **Delta 9 gummies**, **ATRx**), expanding retail channels (e.g., **Sprouts Supermarkets**), and international expansion across **31 countries**[36](index=36&type=chunk)[37](index=37&type=chunk) Marketing & Sponsorships Spend | Fiscal Year | Marketing & Sponsorships Spend (Millions USD) | | :--- | :--- | | 2023 | $6.9 million | | 2022 | $16.4 million | - Sales are primarily driven by e-commerce, accounting for approximately **80% of sales in fiscal 2023**, up from **75% in 2022**[44](index=44&type=chunk) - Manufacturing is fully outsourced to third-party **cGMP certified manufacturers** following the sale of manufacturing assets in fiscal 2022 to reduce fixed overhead[46](index=46&type=chunk)[47](index=47&type=chunk) - The company completed two clinical studies in fiscal 2023, demonstrating benefits in humans for pain and mood, and improved mobility in dogs with osteoarthritis in collaboration with **Colorado State University**[50](index=50&type=chunk)[51](index=51&type=chunk) - As of December 1, 2023, the company had approximately **52 full-time employees**[68](index=68&type=chunk) [Item 1A. Risk Factors](index=14&type=section&id=ITEM%201A.%20Risk%20Factors.) The company faces significant risks including substantial operating losses, liquidity concerns, capital structure limitations, declining revenue, and an uncertain regulatory environment - The company has a history of losses, reporting an operating loss of **$24.2 million in fiscal 2023** and **$78.3 million in fiscal 2022**, raising substantial doubt about its ability to continue as a going concern[75](index=75&type=chunk)[76](index=76&type=chunk) - The outstanding **Series A Preferred Stock**, with its **$50 million liquidation preference**, significantly limits the company's ability to pursue strategic investments or M&A activities[79](index=79&type=chunk) - Net sales have declined for two consecutive years, decreasing by **32% to $24.2 million in fiscal 2023**, following a **20% decrease in 2022**[80](index=80&type=chunk) - The lack of a clear regulatory framework for CBD from the **FDA** and varying state laws creates significant uncertainty, potential compliance costs, and could slow market growth[100](index=100&type=chunk)[103](index=103&type=chunk) - The company is subject to **NYSE American's** continued listing standards, and failure to meet them could result in the delisting of its securities[105](index=105&type=chunk) - In August 2023, the board of directors suspended dividend payments on the **Series A Convertible Preferred Stock** to conserve cash[107](index=107&type=chunk) [Item 1B. Unresolved Staff Comments](index=24&type=section&id=ITEM%201B.%20Unresolved%20Staff%20Comments.) This item is not applicable as the company is a smaller reporting company - Not applicable to a smaller reporting company[118](index=118&type=chunk) [Item 2. Properties](index=24&type=section&id=ITEM%202.%20Properties.) The company leases a 50,000 sq ft headquarters and an 80,000 sq ft warehouse in Charlotte, NC, with the headquarters lease currently in default - The company's headquarters is a leased **50,000 sq ft facility** in Charlotte, NC, with the company behind on lease payments and having received a default notice as of September 2023[119](index=119&type=chunk) - An **80,000 sq ft warehouse** is also leased in Charlotte, NC, with a portion of the space being sublet to offset expenses[119](index=119&type=chunk) [Item 3. Legal Proceedings](index=25&type=section&id=ITEM%203.%20Legal%20Proceedings.) The company is involved in a class action lawsuit stayed pending FDA clarity and a trademark cancellation proceeding against Majik Medicine, LLC - A class action lawsuit filed by **Cynthia Davis** in California against the company has been stayed until the **FDA** or Congress provides definitive action on CBD's regulatory status[120](index=120&type=chunk) - The company's subsidiary, **CBDI**, is in a legal dispute with **Majik Medicine, LLC** to cancel their trademark for "**CBD MD**", with the case currently in discovery[121](index=121&type=chunk) [Item 4. Mine Safety Disclosures](index=25&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures.) This item is not applicable to the company - Not applicable to our company[123](index=123&type=chunk) Part II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=26&type=section&id=ITEM%205.%20Market%20for%20Registrants%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities.) The company's common stock and Series A Preferred Stock are listed on NYSE American, with common stock dividends not intended and preferred stock dividends suspended in August 2023 to conserve cash - The company's common stock (**YCBD**) and **Series A Convertible Preferred Stock** (**YCBDpA**) trade on the **NYSE American** exchange[126](index=126&type=chunk) - On August 22, 2023, the Board of Directors suspended the monthly cash dividend payment on the **8.0% Series A Cumulative Convertible Preferred Stock** to conserve cash[128](index=128&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=ITEM%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operation.) In fiscal 2023, cbdMD experienced a 32% decrease in net sales to $24.2 million, driven by market softness and reduced marketing, leading to tightened liquidity and substantial doubt about its going concern ability [Results of Operations](index=27&type=section&id=Results%20of%20operations) Fiscal 2023 saw total net sales decrease 32% to $24.2 million, driven by declines in both e-commerce and wholesale, while operating expenses were significantly reduced despite a $13.2 million intangible asset impairment | Metric | Fiscal 2023 (USD) | Fiscal 2022 (USD) | | :--- | :--- | :--- | | Total Net Sales | $24,155,362 | $35,403,224 | | Gross Profit % | 62.0% | 63.1% | | Loss from Operations | $(22,487,549) | $(78,266,515) | | Impairment of Intangibles | $13,219,000 | $60,955,970 | | Net Loss to Common Shareholders | $(26,940,209) | $(74,085,698) | | Sales Channel | Fiscal 2023 (USD) | % of Total | Fiscal 2022 (USD) | % of Total | | :--- | :--- | :--- | :--- | :--- | | E-commerce sales | $19,436,124 | 80.5% | $26,435,203 | 74.7% | | Wholesale sales | $4,719,238 | 19.5% | $8,968,021 | 25.3% | - The **32% decrease in net sales** was attributed to broader CBD category softness, macro inflationary pressures, and reduced unprofitable marketing expenses[138](index=138&type=chunk) - Operating expenses (excluding impairments) decreased by approximately **$15.1 million (37.5%) in FY2023**, primarily due to a **$5.3 million reduction in payroll** and an **$8.3 million reduction in marketing expenses**[141](index=141&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) The company's financial position weakened, with cash decreasing to $1.8 million and working capital declining, raising substantial doubt about its going concern ability despite improved cash used in operations | Metric | Sept 30, 2023 (Millions USD) | Sept 30, 2022 (Millions USD) | | :--- | :--- | :--- | | Cash and cash equivalents | $1.8 million | $6.7 million | | Working capital | $3.4 million | $10.7 million | - The company's ability to continue as a going concern is in substantial doubt due to its history of losses, current working capital, and the need for improved profitability or additional funding[156](index=156&type=chunk) - Net cash used by operating activities significantly improved, decreasing to **$4.3 million for FY2023** compared to **$15.0 million for FY2022**[157](index=157&type=chunk) [Critical Accounting Policies](index=34&type=section&id=Critical%20accounting%20policies) Management identifies critical accounting policies including inventory valuation, revenue recognition upon shipment, and impairment of long-lived assets, with a **$13.2 million impairment loss** recognized in fiscal 2023 - Inventory is valued at the lower of cost or net realizable value, with write-offs based on analyses of inventory levels and forecasted sales[163](index=163&type=chunk) - Revenue is recognized when the performance obligation is met, which occurs upon shipment of the product to the customer (**FOB shipping**)[165](index=165&type=chunk) - Long-lived assets are reviewed for impairment when events indicate the carrying value may not be recoverable, with impairment losses of **$13,219,000 in fiscal 2023** and **$4,285,000 in fiscal 2022**[166](index=166&type=chunk)[167](index=167&type=chunk) [Item 8. Consolidated Financial Statements and Supplementary Data](index=36&type=section&id=ITEM%208.%20Consolidated%20Financial%20Statements%20and%20Supplementary%20Data.) Audited consolidated financial statements show a decline in assets and a significant net loss, with the auditor expressing substantial doubt about the company's going concern ability due to recurring losses and a **$174 million accumulated deficit** [Report of Independent Registered Public Accounting Firm](index=44&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) The auditor, **Cherry Bekaert LLP**, expressed substantial doubt about the company's going concern ability due to historical losses and a significant accumulated deficit, identifying intangible asset impairment as a Critical Audit Matter - The auditor's report contains a paragraph expressing "**Substantial Doubt about the Company's Ability to Continue as a Going Concern**"[212](index=212&type=chunk) - The going concern doubt stems from the company's history of losses, including a net loss of approximately **$23 million in the current year**, and an accumulated deficit of approximately **$174 million as of September 30, 2023**[212](index=212&type=chunk) - The audit identified "**Intangible Asset Impairment**" as a Critical Audit Matter due to significant estimates and subjective judgments in determining asset fair value[217](index=217&type=chunk)[219](index=219&type=chunk) [Consolidated Financial Statements](index=46&type=section&id=Consolidated%20Financial%20Statements) Consolidated financial statements reflect a challenging fiscal year with total assets decreasing to **$16.2 million**, a net loss of **$22.9 million**, and a net cash use of **$4.9 million**, resulting in an ending cash balance of **$1.8 million** Balance Sheet Highlights | Balance Sheet Highlights | Sept 30, 2023 (USD) | Sept 30, 2022 (USD) | | :--- | :--- | :--- | | Cash and cash equivalents | $1,797,860 | $6,720,234 | | Total current assets | $8,070,041 | $16,011,603 | | Intangible assets | $3,219,090 | $17,834,549 | | Total assets | $16,195,283 | $40,791,909 | | Total liabilities | $7,163,999 | $9,367,478 | | Total shareholders' equity | $9,031,284 | $31,424,431 | Statement of Operations Highlights | Statement of Operations Highlights | Fiscal 2023 (USD) | Fiscal 2022 (USD) | | :--- | :--- | :--- | | Total Net Sales | $24,155,362 | $35,403,224 | | Gross Profit | $14,977,659 | $22,336,585 | | Loss from operations | $(22,487,549) | $(78,266,515) | | Net Loss | $(22,938,209) | $(70,083,693) | | Net Loss per share (Basic) | $(13.32) | $(55.80) | Cash Flow Highlights | Cash Flow Highlights | Fiscal 2023 (USD) | Fiscal 2022 (USD) | | :--- | :--- | :--- | | Cash used by operating activities | $(4,302,051) | $(14,967,150) | | Cash provided by (used) by investing activities | $702,451 | $(688,680) | | Cash provided by financing activities | $(1,322,774) | $(4,035,360) | | Net decrease in cash | $(4,922,374) | $(19,691,190) | [Notes to Consolidated Financial Statements](index=54&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes to financial statements detail substantial doubt about going concern, **$13.2 million intangible asset impairment**, suspension of preferred stock dividends, **$2.5 million** from a public offering, and a full valuation allowance against deferred tax assets - A **1-for-45 reverse stock split** was effected on April 24, 2023, with all share numbers in the report reflecting this split[242](index=242&type=chunk) - Note 5: The company recorded a total impairment charge of **$13,219,000** for its definite-lived intangible assets (tradenames and technology) during fiscal year 2023 due to market conditions and a decline in market capitalization[299](index=299&type=chunk) - Note 8: In May 2023, the company completed a public offering of **1,350,000 shares of common stock**, raising net proceeds of approximately **$2.5 million**[319](index=319&type=chunk) - Note 15: The company has established a full valuation allowance of **$16.5 million** against its net deferred tax assets due to the uncertainty of their realization[376](index=376&type=chunk)[377](index=377&type=chunk) [Item 9A. Controls and Procedures](index=36&type=section&id=ITEM%209A.%20Controls%20and%20Procedures.) Management, including the Interim CEO and CFO, concluded that the company's disclosure controls and internal control over financial reporting were effective as of September 30, 2023, based on the **COSO 2013 framework** - Based on an evaluation as of September 30, 2023, the **Interim Chief Executive Officer** and **Chief Financial Officer** concluded that the company's disclosure controls and procedures were effective[174](index=174&type=chunk) - Management assessed the effectiveness of internal control over financial reporting using the **COSO 2013 framework** and concluded such controls were effective as of September 30, 2023[179](index=179&type=chunk) Part III [Item 10. Directors, Executive Officers and Corporate Governance](index=39&type=section&id=ITEM%2010.%20Directors,%20Executive%20Officers%20and%20Corporate%20Governance.) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's definitive Proxy Statement for its 2024 Annual Meeting of Shareholders - The information required by this Item is incorporated by reference from the company's proxy statement for its **2024 Annual Meeting of Shareholders**[185](index=185&type=chunk) [Item 11. Executive Compensation](index=39&type=section&id=ITEM%2011.%20Executive%20Compensation.) Information regarding executive compensation is incorporated by reference from the company's definitive Proxy Statement for its 2024 Annual Meeting of Shareholders - The information required by this item is incorporated by reference from the Proxy Statement[186](index=186&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters](index=39&type=section&id=ITEM%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Shareholder%20Matters.) Information regarding security ownership of certain beneficial owners, management, and related shareholder matters is incorporated by reference from the company's definitive Proxy Statement - The information required by this item is incorporated by reference from the Proxy Statement[187](index=187&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=39&type=section&id=ITEM%2013.%20Certain%20Relationships%20and%20Related%20Transactions,%20and%20Director%20Independence.) Information concerning certain relationships, related transactions, and director independence is incorporated by reference from the company's definitive Proxy Statement - The information required by this item is incorporated by reference from the Proxy Statement[188](index=188&type=chunk) [Item 14. Principal Accounting Fees and Services](index=39&type=section&id=ITEM%2014.%20Principal%20Accounting%20Fees%20and%20Services.) Details regarding principal accounting fees and services are incorporated by reference from the company's definitive Proxy Statement for its 2024 Annual Meeting of Shareholders - The information required by this item is incorporated by reference from the Proxy Statement[189](index=189&type=chunk) Part IV [Item 15. Exhibits and Financial Statement Schedules](index=40&type=section&id=ITEM%2015.%20Exhibits%20and%20Consolidated%20Financial%20Statement%20Schedules.) This section lists the financial statements, schedules, and exhibits filed as part of the Form 10-K report, including various agreements and certifications - This item provides an index of all exhibits filed with or incorporated by reference into the annual report, including agreements, bylaws, and certifications[196](index=196&type=chunk)[199](index=199&type=chunk) [Item 16. Form 10-K Summary](index=40&type=section&id=ITEM%2016.%20Form%2010-K%20Summary.) No summary is provided under this item - None[197](index=197&type=chunk)

[General Information and Filing Details](index=1&type=section&id=General%20Information%20and%20Filing%20Details) This section provides foundational details about the company's legal status, reporting compliance, and key definitions relevant to the financial statements [Filing Information](index=1&type=section&id=Filing%20Information) This section provides the company's legal and filing details, including its name, jurisdiction, and confirmation of compliance with SEC reporting requirements - cbdMD, INC. is a North Carolina corporation, with its principal executive offices in Charlotte, NC[3](index=3&type=chunk)[4](index=4&type=chunk) - The registrant has filed all required reports during the preceding 12 months and has been subject to filing requirements for the past 90 days, and has submitted all required Interactive Data Files[4](index=4&type=chunk) - As of August 10, 2023, **2,855,230 shares of common stock** are issued and outstanding[9](index=9&type=chunk) Securities Registered Pursuant to Section 12(b) of the Act | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | :------------------ | :---------------- | :---------------------------------------- | | common | YCBD | NYSE American | | 8% Series A Cumulative Convertible Preferred Stock | YCBDpA | NYSE American | Registrant Filer Status | Filer Status | Selection | | :---------------------- | :-------- | | Large accelerated filer | ☐ | | Accelerated filer | ☐ | | Non-accelerated Filer | ☒ | | Smaller reporting company | ☒ | | Emerging growth company | ☒ | [Other Pertinent Information](index=4&type=section&id=Other%20Pertinent%20Information) This section defines key terms used in the report, specifies fiscal periods, and details a significant corporate action: a reverse stock split, which impacts all share numbers presented - The terms 'Company,' 'cbdMD,' 'we,' 'us,' 'our' refer to cbdMD, Inc. and its subsidiaries CBD Industries LLC (CBDI), Paw CBD, Inc., and cbdMD Therapeutics LLC (Therapeutics)[13](index=13&type=chunk) - A reverse stock split at a ratio of **one-for-forty-five** was effected on April 12, 2023, effective April 24, 2023, with all share numbers in this report giving effect to this split[14](index=14&type=chunk) - The company maintains a corporate website at www.cbdmd.com, but information on it is not part of this report[15](index=15&type=chunk) [Cautionary Statement Regarding Forward-Looking Information](index=5&type=section&id=Cautionary%20Statement%20Regarding%20Forward-Looking%20Information) This statement alerts readers that the report contains forward-looking statements, emphasizing that actual results may differ materially due to various risks and uncertainties, and advises caution against undue reliance - The report contains forward-looking statements that involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially[17](index=17&type=chunk) - Key risks include the company's history of losses, potential liquidity concerns, ability to continue as a going concern, reliance on digital marketing channels, ability to acquire new customers profitably, reliance on third-party suppliers, and risks associated with the CBD regulatory environment[19](index=19&type=chunk) - Readers are cautioned not to place undue reliance on these statements and should review the risk factors detailed in Part II, Item 1A of this report and the 2022 10-K[18](index=18&type=chunk) [PART I - FINANCIAL INFORMATION](index=6&type=section&id=PART%20I-FINANCIAL%20INFORMATION) This section provides the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations [ITEM 1. Financial Statements](index=6&type=section&id=ITEM%201.%20Financial%20Statements.) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive loss, cash flows, and shareholders' equity, along with detailed notes explaining significant accounting policies and specific financial items [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position at specific dates, detailing assets, liabilities, and shareholders' equity - Total assets decreased by approximately **$7.8 million**, and total liabilities decreased by approximately **$2.1 million** from September 30, 2022, to June 30, 2023[22](index=22&type=chunk)[24](index=24&type=chunk) Condensed Consolidated Balance Sheets Summary | Item | June 30, 2023 ($) | September 30, 2022 ($) | | :------------------------ | :---------------- | :--------------------- | | Cash and cash equivalents | 2,846,739 | 6,720,234 | | Total current assets | 10,090,884 | 16,011,603 | | Total assets | 32,969,791 | 40,791,909 | | Total current liabilities | 4,384,474 | 5,285,612 | | Total liabilities | 7,238,068 | 9,367,478 | | Total shareholders' equity| 25,731,723 | 31,424,431 | [Condensed Consolidated Statements of Operations](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section details the company's revenues, expenses, and net loss over specific periods, highlighting operational performance and profitability trends - Net sales decreased by **28.8%** for the three months and **33.0%** for the nine months ended June 30, 2023, compared to the prior year periods[25](index=25&type=chunk) - Loss from operations significantly improved, decreasing from **$(33.1) million to $(1.8) million** for the three months and from **$(63.3) million to $(7.3) million** for the nine months ended June 30, 2023, primarily due to the absence of goodwill and intangible asset impairment charges in 2023[25](index=25&type=chunk) Condensed Consolidated Statements of Operations Summary | Item | Three Months Ended June 30, 2023 ($) | Three Months Ended June 30, 2022 ($) | Nine Months Ended June 30, 2023 ($) | Nine Months Ended June 30, 2022 ($) | | :---------------------------------------- | :----------------------------------- | :----------------------------------- | :---------------------------------- | :---------------------------------- | | Total Net Sales | 6,119,380 | 8,592,893 | 18,444,617 | 27,543,601 | | Gross Profit | 3,845,541 | 5,932,708 | 11,428,814 | 17,367,516 | | Loss from operations | (1,823,653) | (33,126,659) | (7,270,479) | (63,283,120) | | Net Loss | (1,770,404) | (31,634,143) | (7,063,270) | (55,453,289) | | Net Loss attributable to common shareholders | (2,770,904) | (32,634,644) | (10,064,773) | (58,454,792) | | Basic earnings per share | (1.16) | (24.81) | (4.26) | (44.41) | [Condensed Consolidated Statements of Comprehensive Loss](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) This section presents the total comprehensive loss, which includes net loss and other comprehensive income or loss items, reflecting the overall change in equity from non-owner sources - The comprehensive loss attributable to common shareholders significantly decreased, reflecting the improved net loss for both the three and nine months ended June 30, 2023, compared to 2022[27](index=27&type=chunk) Condensed Consolidated Statements of Comprehensive Loss Summary | Item | Three Months Ended June 30, 2023 ($) | Three Months Ended June 30, 2022 ($) | Nine Months Ended June 30, 2023 ($) | Nine Months Ended June 30, 2022 ($) | | :---------------------------------------- | :----------------------------------- | :----------------------------------- | :---------------------------------- | :---------------------------------- | | Net (Loss) Income | (1,770,404) | (31,634,143) | (7,063,270) | (55,453,289) | | Comprehensive (Loss) Income | (1,770,404) | (31,634,143) | (7,063,270) | (55,453,289) | | Preferred dividends | (1,000,501) | (1,000,501) | (3,001,503) | (3,001,503) | | Comprehensive (Loss) Income attributable to cbdMD, Inc. common shareholders | (2,770,904) | (32,634,644) | (10,064,773) | (58,454,792) | [Condensed Consolidated Statement of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) This section details the cash inflows and outflows from operating, investing, and financing activities, providing insight into the company's liquidity and solvency - Cash used by operating activities decreased significantly from **$(13.0) million in 2022 to $(4.0) million in 2023**, primarily due to the absence of goodwill impairment and a smaller decrease in contingent liability[29](index=29&type=chunk) - Investing activities generated cash of **$822,631 in 2023**, a positive change from cash used of **$(784,238) in 2022**, partly due to **$1.0 million** from other securities[29](index=29&type=chunk) Condensed Consolidated Statement of Cash Flows Summary (Nine Months Ended June 30) | Cash Flow Activity | 2023 ($) | 2022 ($) | | :------------------------------ | :----------- | :----------- | | Net Loss | (7,063,270) | (55,453,289) | | Cash used by operating activities | (4,038,550) | (13,041,469) | | Cash flows from investing activities | 822,631 | (784,238) | | Cash flows from financing activities | (657,576) | (3,032,047) | | Net increase (decrease) in cash | (3,873,495) | (16,857,754) | | Cash and cash equivalents, end of period | 2,846,739 | 9,553,670 | [Condensed Consolidated Statements of Shareholders' (Deficit) Equity](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20(Deficit)%20Equity) This section outlines changes in the company's equity accounts, including common stock, additional paid-in capital, and accumulated deficit, reflecting capital transactions and retained earnings - Common stock shares outstanding increased from **1,348,125 to 2,855,230**, reflecting issuances from a public offering and agreements with A360 Media and Keystone Capital Partners[32](index=32&type=chunk) - Total shareholders' equity decreased from **$31.4 million to $25.7 million**, primarily due to net losses and preferred dividends, partially offset by capital raised through common stock issuances[32](index=32&type=chunk) Shareholders' Equity Changes (Nine Months Ended June 30, 2023) | Item | Shares (Common) | Amount (Common) ($) | Additional Paid in Capital ($) | Accumulated Deficit ($) | Total ($) | | :------------------------ | :-------------- | :------------------ | :----------------------------- | :---------------------- | :------------- | | Balance, Sept 30, 2022 | 1,348,125 | 1,348 | 178,841,646 | (147,423,563) | 31,424,431 | | Issuance of Common stock | 1,350,000 | 1,350 | 2,472,730 | - | 2,474,080 | | Issuance of Common stock - A360 | 94,277 | 94 | 1,399,906 | - | 1,400,000 | | Preferred dividend | - | - | - | (3,001,503) | (3,001,503) | | Net Loss | - | - | - | (7,063,270) | (7,063,270) | | Balance, June 30, 2023 | 2,855,230 | 2,855 | 183,212,202 | (157,488,334) | 25,731,723 | [NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=14&type=section&id=NOTE%201%20%E2%80%93%20ORGANIZATION%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note describes the company's business operations, its subsidiaries, and the key accounting principles applied in preparing the financial statements - cbdMD, Inc. operates nationally recognized CBD brands: cbdMD, Paw CBD, and cbdMD Botanicals, sourcing cannabinoids from non-GMO hemp grown in the US, compliant with the 2018 Farm Bill[37](index=37&type=chunk) - The company's wholly-owned subsidiaries include CBD Industries LLC, Paw CBD, Inc., and cbdMD Therapeutics LLC, with DirectCBDOnline.com also acquired in July 2021[38](index=38&type=chunk)[41](index=41&type=chunk) - A **one-for-forty-five reverse stock split** was effective April 24, 2023, with all share numbers in the filing reflecting this change[40](index=40&type=chunk) [NOTE 2 – MARKETABLE SECURITIES AND INVESTMENT OTHER SECURITIES](index=22&type=section&id=NOTE%202%20%E2%80%93%20MARKETABLE%20SECURITIES%20AND%20INVESTMENT%20OTHER%20SECURITIES) This note details the company's investments in marketable and other securities, including fair value measurements and significant transactions - The company recorded **$0** in realized and unrealized gain (loss) on marketable and other securities for the nine months ended June 30, 2023, compared to **$(33,350)** in 2022[83](index=83&type=chunk) - The company sold its entire ownership interest in Adara Sponsor, LLC for **$1,000,000**, which was its original purchase price, effective February 10, 2023[85](index=85&type=chunk) - An equity investment of **$1.4 million** was made in Steady State, LLC in April 2022, classified as Level 3 for fair value measurement and included in non-current assets[86](index=86&type=chunk) [NOTE 3 - INVENTORY](index=24&type=section&id=NOTE%203%20-%20INVENTORY) This note provides a breakdown of inventory components, valuation methods, and changes in inventory levels - Total inventory decreased by approximately **$0.49 million** from September 30, 2022, to June 30, 2023[88](index=88&type=chunk) - Inventory is stated at the lower of cost or net realizable value, with cost determined on a weighted average basis[49](index=49&type=chunk) Inventory Breakdown | Category | June 30, 2023 ($) | September 30, 2022 ($) | | :----------------- | :---------------- | :--------------------- | | Finished Goods | 2,682,694 | 3,198,488 | | Inventory Components | 1,350,720 | 1,213,724 | | Inventory Reserve | (201,578) | (156,298) | | Inventory prepaid | 445,121 | 511,459 | | **Total Inventory**| **4,276,957** | **4,767,373** | [NOTE 4 – PROPERTY AND EQUIPMENT](index=24&type=section&id=NOTE%204%20%E2%80%93%20PROPERTY%20AND%20EQUIPMENT) This note details the company's property and equipment, including categories, accumulated depreciation, and depreciation expense for the periods presented - Net property and equipment decreased by approximately **$123,000** from September 30, 2022, to June 30, 2023[89](index=89&type=chunk) Property and Equipment, Net | Item | June 30, 2023 ($) | September 30, 2022 ($) | | :------------------------ | :---------------- | :--------------------- | | Computers, furniture and equipment | 1,272,596 | 1,095,228 | | Manufacturing equipment | 284,275 | 284,275 | | Leasehold improvements | 487,081 | 487,081 | | Automobiles | 11,087 | 11,087 | | Less accumulated depreciation | (1,355,086) | (1,054,361) | | **Property and equipment, net** | **699,953** | **823,310** | Depreciation Expense | Period | 2023 ($) | 2022 ($) | | :---------------------- | :------- | :------- | | Three Months Ended June 30 | 98,225 | 158,555 | | Nine Months Ended June 30 | 300,726 | 770,335 | [NOTE 5 – GOODWILL AND INTANGIBLE ASSETS](index=25&type=section&id=NOTE%205%20%E2%80%93%20GOODWILL%20AND%20INTANGIBLE%20ASSETS) This note provides information on the company's goodwill and intangible assets, including impairment charges and amortization details - Goodwill of **$42,772,685** at March 31, 2022, was fully impaired by September 30, 2022[91](index=91&type=chunk) - The 'cbdMD' and 'HempMD' trademarks were reclassified as definite-lived intangible assets with **20-year useful lives** as of December 31, 2021, and the 'cbdMD' trademark was impaired by **$4,285,000**[94](index=94&type=chunk) Intangible Assets Breakdown | Category | June 30, 2023 ($) | September 30, 2022 ($) | | :---------------------------------------- | :---------------- | :--------------------- | | Trademark related to cbdMD | 17,300,000 | 21,585,000 | | Technology Relief from Royalty related to DirectCBDOnline.com | 667,844 | 667,844 | | Tradename related to DirectCBDOnline.com | 749,567 | 749,567 | | Amortization of definite lived intangible assets | (1,764,926) | (932,862) | | **Total** | **17,002,485** | **17,834,549** | [NOTE 6 – CONTINGENT CONSIDERATION](index=26&type=section&id=NOTE%206%20%E2%80%93%20CONTINGENT%20CONSIDERATION) This note describes the company's contingent liabilities arising from acquisitions, including earnout provisions and their fair value measurement - The contingent liability for the Cure Based Development earnout was **$122,230** at June 30, 2023, down from **$276,000** at September 30, 2022, valued using Level 3 inputs[101](index=101&type=chunk) - Up to **87,307 remaining Earnout Shares** are subject to issuance, requiring over **$162 million** in revenue during the fourth marking period (July 1, 2022 - November 2023)[102](index=102&type=chunk) - The earnout provision for the Twenty Two Capital acquisition was never met, and the obligation balance was zero at September 30, 2022[104](index=104&type=chunk) [NOTE 7 – RELATED PARTY TRANSACTIONS](index=27&type=section&id=NOTE%207%20%E2%80%93%20RELATED%20PARTY%20TRANSACTIONS) This note discloses transactions with related parties, specifically identifying a counterparty in an earnout arrangement - A counterparty in the earnout arrangement (as described in Note 6) is identified as a related party[106](index=106&type=chunk) [NOTE 8 – SHAREHOLDERS' EQUITY](index=27&type=section&id=NOTE%208%20%E2%80%93%20SHAREHOLDERS'%20EQUITY) This note details the components of shareholders' equity, including preferred and common stock, and significant changes such as stock issuances and a reverse stock split - The company has **5,000,000 shares of 8.0% Series A Cumulative Convertible Preferred Stock** outstanding, which ranks senior to common stock for liquidation and dividends[107](index=107&type=chunk) - Common stock outstanding increased from **1,348,125 shares** at September 30, 2022, to **2,855,230 shares** at June 30, 2023, reflecting a **one-for-forty-five reverse stock split** effective April 24, 2023, and subsequent issuances[108](index=108&type=chunk)[109](index=109&type=chunk) - In May 2023, the company completed a public offering of **1,350,000 common shares at $2.10 per share**, generating approximately **$2.5 million** in net proceeds[112](index=112&type=chunk) - The company entered into agreements with Keystone Capital Partners, LLC and a360 Media, LLC, involving the issuance of common stock for commitment and advertising services, respectively[114](index=114&type=chunk)[116](index=116&type=chunk) [NOTE 9 – STOCK BASED COMPENSATION](index=29&type=section&id=NOTE%209%20%E2%80%93%20STOCK%20BASED%20COMPENSATION) This note describes the company's equity compensation plans, accounting policies for stock-based awards, and activity related to stock options - The company operates under the **2015 and 2021 Equity Compensation Plans**, which provide for awards of options, restricted stocks, and other stock grants to eligible recipients[131](index=131&type=chunk)[132](index=132&type=chunk) - Stock-based compensation is accounted for using ASC 718, recognizing fair value at the grant date over the service period, with the Black-Scholes model used for options and warrants[133](index=133&type=chunk)[137](index=137&type=chunk) - As of June 30, 2023, there was approximately **$41,031** of total unrecognized compensation cost related to non-vested stock options, vesting over approximately **2.7 years**[138](index=138&type=chunk) Stock Option Activity (Nine Months Ended June 30, 2023) | Item | Number of shares | Weighted average exercise price ($) | | :--------------------------------- | :--------------- | :---------------------------------- | | Outstanding at September 30, 2022 | 55,656 | 151.10 | | Granted | 7,233 | 11.51 | | Forfeited | (20,678) | 89.79 | | Outstanding at June 30, 2023 | 42,211 | 143.02 | | Exercisable at June 30, 2023 | 40,402 | 157.02 | [NOTE 10 - WARRANTS](index=34&type=section&id=NOTE%2010%20-%20WARRANTS) This note provides details on the company's outstanding warrants, including activity during the period and their exercise terms - The company issued a warrant to its underwriter to purchase up to **40,500 shares of common stock at $2.52 per share** as part of a public offering[130](index=130&type=chunk)[149](index=149&type=chunk) Warrant Activity (Nine Months Ended June 30, 2023) | Item | Number of shares | Weighted average exercise price ($) | | :--------------------------------- | :--------------- | :---------------------------------- | | Outstanding at September 30, 2022 | 13,204 | 210.45 | | Granted | 40,500 | 2.52 | | Forfeited | (2,226) | 337.50 | | Outstanding at June 30, 2023 | 51,478 | 41.37 | | Exercisable at June 30, 2023 | 10,978 | 41.37 | Outstanding Common Stock Purchase Warrants (June 30, 2023) | Exercise Price ($) | Number of shares | Expiration | | :----------------- | :--------------- | :------------- | | 196.88 | 1,169 | September 2023 | | 337.50 | 1,352 | May 2024 | | 176.06 | 1,079 | October 2024 | | 56.25 | 822 | January 2025 | | 2.52 | 40,500 | April 2028 | | 168.30 | 3,357 | December 2025 | | 168.75 | 3,199 | June 2026 | | **Total** | **51,478** | | [NOTE 11 – COMMITMENTS AND CONTINGENCIES](index=34&type=section&id=NOTE%2011%20%E2%80%93%20COMMITMENTS%20AND%20CONTINGENCIES) This note outlines the company's significant commitments and contingent liabilities, including separation agreements and terminated endorsement contracts - The company entered into a separation agreement with a professional athlete in November 2022, resulting in a **one-time non-cash expense of approximately $885,000** related to outstanding un-expensed stock compensation[151](index=151&type=chunk) - An endorsement agreement with another professional athlete, valued at **$1,500,000** over its term, was terminated by the company in May 2023[152](index=152&type=chunk) - The company's CEO resigned in June 2022 under a separation agreement[153](index=153&type=chunk) [NOTE 12 – NOTE PAYABLE](index=34&type=section&id=NOTE%2012%20%E2%80%93%20NOTE%20PAYABLE) This note provides details on the company's outstanding notes payable, including loan amounts, repayment status, and interest rates - A **$249,100 loan** for equipment from July 2019 was paid off in April 2022, resulting in a **$0 balance** as of December 31, 2022[154](index=154&type=chunk) - A **$35,660 loan** for equipment from January 2020 has a remaining short-term note payable of **$4,135** at June 30, 2023, with monthly payments of **$841** at a **6.2% financing rate**[154](index=154&type=chunk) [NOTE 13 – LEASES](index=36&type=section&id=NOTE%2013%20%E2%80%93%20LEASES) This note describes the company's lease agreements, including their classification, remaining terms, discount rates, and future payment obligations - All of the company's lease agreements for corporate offices and warehouses are classified as operating leases, with terms expiring between 2024 and 2026[155](index=155&type=chunk) - As of June 30, 2023, the weighted average remaining lease term was **3.44 years**, and the weighted average discount rate was **4.66%**[159](index=159&type=chunk) Future Minimum Aggregate Lease Payments (as of June 30, 2023) | For the year ended September 30, | Amount ($) | | :------------------------------- | :--------- | | 2023 | 347,385 | | 2024 | 1,421,610 | | 2025 | 1,159,949 | | Thereafter | 1,372,862 | | **Total future lease payments** | **4,301,806** | | Less interest | (319,274) | | **Total lease liabilities** | **3,982,532** | [NOTE 14 – LOSS PER SHARE](index=37&type=section&id=NOTE%2014%20%E2%80%93%20LOSS%20PER%20SHARE) This note presents the basic and diluted loss per share calculations, explaining the factors influencing these metrics and the treatment of anti-dilutive securities - The net loss attributable to common shareholders significantly decreased, leading to a substantial improvement in basic and diluted loss per share for both the three and nine months ended June 30, 2023, compared to 2022[160](index=160&type=chunk) - At June 30, 2023, **94,948 potential shares** underlying options, unvested RSUs, and warrants, along with **185,223 convertible preferred shares** and other commitment shares, were excluded from diluted loss per share calculation due to their anti-dilutive effect[160](index=160&type=chunk) Basic and Diluted Earnings Per Share | Period | Three Months Ended June 30, 2023 ($) | Three Months Ended June 30, 2022 ($) | Nine Months Ended June 30, 2023 ($) | Nine Months Ended June 30, 2022 ($) | | :---------------------- | :----------------------------------- | :----------------------------------- | :---------------------------------- | :---------------------------------- | | Basic earnings per share | (1.16) | (24.81) | (4.26) | (44.41) | | Diluted earnings per share | (1.16) | (24.81) | (4.26) | (44.41) | [NOTE 15 – INCOME TAXES](index=38&type=section&id=NOTE%2015%20%E2%80%93%20INCOME%20TAXES) This note discusses the company's income tax position, including the impact of ownership changes on NOL carryovers and the valuation allowance against deferred tax assets - The company has determined that an ownership change occurred under IRC Section 382, resulting in limitations on the utilization of federal and state Net Operating Loss (NOL) carryovers[162](index=162&type=chunk) - A net deferred tax liability of approximately **$4.6 million** was established as part of the purchase price allocation for the Cure Based Development merger[163](index=163&type=chunk) - A full valuation allowance is provided against net deferred tax assets (excluding 'naked credits') as management believes it is more likely than not that the net deferred asset will not be realized, resulting in a **net deferred tax asset of zero** at June 30, 2023[164](index=164&type=chunk) [NOTE 16 – SUBSEQUENT EVENTS](index=38&type=section&id=NOTE%2016%20%E2%80%93%20SUBSEQUENT%20EVENTS) This note discloses significant events that occurred after the balance sheet date but before the financial statements were issued - In July 2023, the company issued **2,616 shares of common stock** for second tranche commitment shares pursuant to the Purchase Agreement[165](index=165&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=39&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance, condition, and future outlook, analyzing key financial metrics, operational activities, and strategic initiatives for the three and nine months ended June 30, 2023 [Our Company (General Business Overview)](index=39&type=section&id=Our%20Company%20(General%20Business%20Overview)) This section provides an overview of cbdMD, Inc.'s business, including its brands, product offerings, distribution channels, and recent strategic initiatives - cbdMD, Inc. operates nationally recognized CBD brands (cbdMD, Paw CBD, cbdMD Botanicals) offering broad and full spectrum products derived from US-grown hemp, distributed via e-commerce and brick-and-mortar channels[169](index=169&type=chunk)[173](index=173&type=chunk) - cbdMD Therapeutics, a wholly-owned subsidiary, focuses on R&D for therapeutic applications, with recent clinical studies in dogs and healthy adults demonstrating benefits for mobility, pain, inflammation, and mood[174](index=174&type=chunk)[175](index=175&type=chunk)[176](index=176&type=chunk) - Recent developments include migrating to a new e-commerce platform to reduce IT costs and improve agility, engaging in industry advocacy, and launching products on Amazon UK as part of a CBD pilot program[179](index=179&type=chunk)[180](index=180&type=chunk)[181](index=181&type=chunk) [Growth Strategies](index=43&type=section&id=Growth%20Strategies) This section outlines the company's strategic initiatives for revenue growth, including marketing investments, wholesale expansion, product innovation, and international market penetration - The company aims to grow core revenue channels by carefully investing in direct-to-consumer marketing with strong measurable returns and focusing on channel-specific distributors for wholesale expansion in the food, drug, and mass (FDM) channels[184](index=184&type=chunk)[185](index=185&type=chunk) - Product innovation is a key strategy, with recent launches including NSF for Sport products, Delta 9 gummies, high-strength CBD products, and cbdMD Max for Pain, alongside a robust pipeline for H2 2023[186](index=186&type=chunk) - International expansion is pursued through local partnerships, with products available in **31 countries** and recent market share gains in Central America and e-commerce expansion in the UK[186](index=186&type=chunk) - Acquisitions are evaluated based on accretive customer bases, complementary channels, profitability, or cost synergies, though Series A Preferred shares' rights pose M&A challenges[186](index=186&type=chunk) [Results of Operations Analysis](index=44&type=section&id=Results%20of%20Operations%20Analysis) This section analyzes the company's financial performance over the reporting periods, focusing on net sales, gross profit, operating expenses, and other factors impacting profitability - The decrease in net sales is attributed to a **$1.5 million decline** in e-commerce sales due to reduced marketing spend and a **$960,473 decrease** in wholesale sales due to lower price structures, compounded by temporary disruptions from Meta marketing rule changes and e-commerce platform migration[189](index=189&type=chunk) - Operating expenses decreased significantly due to management's cost reduction efforts, including decreases in staff-related expenses (**$1.2 million** for three months, **$4.1 million** for nine months) and advertising/marketing expenses (**$2.0 million** for three months, **$8.6 million** for nine months)[194](index=194&type=chunk)[196](index=196&type=chunk) - Goodwill was fully impaired by September 30, 2022, and the contingent liability decreased from **$276,000 to $122,230**[204](index=204&type=chunk)[207](index=207&type=chunk) Net Sales Performance | Period | 2023 ($) | 2022 ($) | Change ($) | Change (%) | | :---------------------- | :----------- | :----------- | :----------- | :----------- | | Three Months Ended June 30 | 6,119,380 | 8,592,893 | (2,473,513) | (28.8%) | | Nine Months Ended June 30 | 18,444,617 | 27,543,601 | (9,098,984) | (33.0%) | Operating Expenses | Period | 2023 ($) | 2022 ($) | Change ($) | Change (%) | | :---------------------- | :----------- | :----------- | :----------- | :----------- | | Three Months Ended June 30 | 5,669,194 | 8,282,931 | (2,613,737) | (31.6%) | | Nine Months Ended June 30 | 18,699,293 | 31,690,915 | (12,991,622) | (41.0%) | [Liquidity and Capital Resources](index=50&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's ability to meet its short-term and long-term financial obligations, discussing cash position, working capital, and capital-raising activities - Management concluded that substantial doubt exists about the company's ability to continue as a going concern for the next twelve months, citing continued losses and potential need for additional capital[213](index=213&type=chunk) - The company raised approximately **$2.5 million** in net proceeds from a public offering in May 2023 and has an agreement with Keystone Capital Partners, LLC to sell up to **281,934 common shares**[210](index=210&type=chunk)[212](index=212&type=chunk) - Cash flow from operations was a net use of **$4.0 million** for the nine months ended June 30, 2023, and the company faces challenges with preferred dividend payments under North Carolina law[215](index=215&type=chunk)[217](index=217&type=chunk) Liquidity Position | Item | June 30, 2023 ($) | September 30, 2022 ($) | | :------------------------ | :---------------- | :--------------------- | | Cash and cash equivalents | 2,800,000 | 6,700,000 | | Working capital | 5,700,000 | 10,700,000 | [Adjusted EBITDA](index=52&type=section&id=Adjusted%20EBITDA) This section defines Adjusted EBITDA as a non-GAAP financial measure and presents its performance, highlighting its use by management to evaluate core operating results - Adjusted EBITDA is a non-GAAP financial measure used by management to evaluate core operating results, excluding items like stock-based compensation, inventory adjustments, and goodwill impairment[219](index=219&type=chunk)[220](index=220&type=chunk) - Adjusted EBITDA significantly improved, decreasing from **$(2.7) million to $(0.6) million** for the three months and from **$(11.1) million to $(3.9) million** for the nine months ended June 30, 2023, compared to the prior year periods[223](index=223&type=chunk) Adjusted EBITDA Performance | Period | 2023 ($) | 2022 ($) | | :---------------------- | :----------- | :----------- | | Three Months Ended June 30 | (608,354) | (2,745,337) | | Nine Months Ended June 30 | (3,920,016) | (11,090,903) | [Critical Accounting Policies and Recent Accounting Pronouncements](index=52&type=section&id=Critical%20Accounting%20Policies%20and%20Recent%20Accounting%20Pronouncements) This section highlights the critical accounting policies that require significant management judgment and refers to disclosures on recent accounting pronouncements - Management's discussion and analysis of financial condition and operating results require judgments, assumptions, and estimates that affect reported amounts in the financial statements[225](index=225&type=chunk) - Readers are referred to Part II, Item 7 of the 2022 10-K for critical accounting policies and Note 1 of the current report for information on recent accounting pronouncements[227](index=227&type=chunk)[228](index=228&type=chunk) [Off Balance Sheet Arrangements](index=53&type=section&id=Off%20Balance%20Sheet%20Arrangements) This section confirms the absence of any material off-balance sheet arrangements that could significantly impact the company's financial position or results of operations - As of the report date, the company has no undisclosed off-balance sheet arrangements that are material to its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources[229](index=229&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures About Market Risk](index=53&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) This section states that quantitative and qualitative disclosures about market risk are not applicable for the company due to its status as a smaller reporting company - This item is not applicable for a smaller reporting company[230](index=230&type=chunk) [ITEM 4. Controls and Procedures](index=53&type=section&id=ITEM%204.%20Controls%20and%20Procedures.) This section reports on the effectiveness of the company's disclosure controls and procedures and any changes in internal control over financial reporting - The interim principal executive officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2023[231](index=231&type=chunk) - There were no changes in internal control over financial reporting during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[232](index=232&type=chunk) [PART II - OTHER INFORMATION](index=54&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section provides additional information not covered in Part I, including legal proceedings, risk factors, equity sales, defaults, and exhibits [ITEM 1. Legal Proceedings](index=54&type=section&id=ITEM%201.%20Legal%20Proceedings.) This section states that the company has no legal proceedings to report - The company has no legal proceedings to report[235](index=235&type=chunk) [ITEM 1A. Risk Factors](index=54&type=section&id=ITEM%201A.%20Risk%20Factors.) This section incorporates by reference the risk factors previously disclosed in the company's 2022 10-K and refers to the 'Liquidity and Capital Resources' section for additional risk information - The risk factors disclosed in Part I, Item 1A of the company's 2022 10-K are incorporated by reference[236](index=236&type=chunk) - Readers are also directed to the 'Liquidity and Capital Resources' section within this report for further risk considerations[236](index=236&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=54&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) This section confirms that the company has not engaged in any unregistered sales of equity securities during the reporting period, apart from those previously disclosed - The company has not sold any securities without registration under the Securities Act during the period covered by this report, except for those previously disclosed[237](index=237&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=54&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities.) This section reports that the company has not experienced any defaults upon senior securities - The company has no defaults upon senior securities to report[238](index=238&type=chunk) [ITEM 4. Mine Safety Disclosures](index=54&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures.) This section states that mine safety disclosures are not applicable to the company's operations - This item is not applicable to the company's operations[239](index=239&type=chunk) [ITEM 5. Other Information](index=54&type=section&id=ITEM%205.%20Other%20Information.) This section provides the Auditor Firm ID for the company's external auditors - The Auditor Firm ID for the company's external auditors, Cherry Bekaert LLP, is **677**[240](index=240&type=chunk) [ITEM 6. Exhibits](index=55&type=section&id=ITEM%206.%20Exhibits.) This section lists all exhibits filed as part of the 10-Q report, including various agreements, corporate documents, and certifications, and notes that copies are available to stockholders upon request - The report includes various exhibits such as the Underwriting Agreement, Merger Agreement, Articles of Incorporation, and Certifications[242](index=242&type=chunk)[243](index=243&type=chunk) - Copies of this report and any exhibits will be furnished at no cost to stockholders who make a written request[244](index=244&type=chunk) [SIGNATURES](index=57&type=section&id=SIGNATURES) This section contains the required signatures, confirming the due authorization and submission of the report by the company's principal executive and financial officers [Signatures](index=57&type=section&id=Signatures) This section contains the required signatures, confirming the due authorization and submission of the report by the company's principal executive and financial officers - The report was signed on August 10, 2023, by T. Ronan Kennedy, in his capacity as Interim CEO, principal executive officer, and Chief Financial Officer, principal financial and accounting officer[249](index=249&type=chunk)