Company Overview - cbdMD, Inc. is a leading and highly 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 [2] - The product range includes CBD tinctures, gummies, topicals, capsules, bath bombs, sleep aids, drink mixes, and pet products under the Paw CBD brand, as well as natural functional mushroom products under the ATRx brand [2] Leadership and Strategic Developments - T. Ronan Kennedy, the CEO and CFO of cbdMD, has been appointed to the Board of Directors, effective December 18, 2024, expanding the board to five members [7] - Under Kennedy's leadership, cbdMD has implemented a turnaround strategy that has resulted in substantial cost savings, improved profitability metrics, and established a foundation for future growth [1][8] - The company has made significant progress in optimizing its cost structure and enhancing operational fundamentals, positioning itself for long-term success as it enters 2025 with a stronger cash position and growth opportunities [8]

cbdMD Generates $19.1 Million in Year Over Year Reduction in Net Loss ImprovementFinishes the year with a stronger cash position.December 18, 2024 4:08 PM EST | Source: cbdMDCharlotte, North Carolina--(Newsfile Corp. - December 18, 2024) - cbdMD, Inc. (NYSE American: YCBD) (NYSE American: YCBDpA), 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 new functional mushroom brand ATRx Labs toda ...

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 ...

Part I [ITEM 1. Condensed Consolidated Financial Statements](index=6&type=section&id=ITEM%201.%20Condensed%20Consolidated%20Financial%20Statements.) Presents cbdMD, Inc.'s unaudited condensed consolidated financial statements for Q1 2024 and 2023, including balance sheets, statements of operations, comprehensive loss, cash flows, shareholders' equity, and detailed notes [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased, liabilities increased, and shareholders' equity significantly declined from September 30 to December 31, 2023 Condensed Consolidated Balance Sheet Highlights | Metric | December 31, 2023 | September 30, 2023 | Change | | :----------------------------- | :------------------ | :------------------- | :------------------- | | Total Assets | $15,095,168 | $16,195,283 | -$1,100,115 | | Total Liabilities | $8,058,425 | $7,163,999 | +$894,426 | | Total Shareholders' Equity | $7,036,743 | $9,031,284 | -$1,994,541 | | Cash and Cash Equivalents | $1,504,844 | $1,797,860 | -$293,016 | | Current Liabilities | $5,971,764 | $4,670,341 | +$1,301,423 | [Condensed Consolidated Statements of Operations](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Net loss significantly improved in Q1 2024 due to stable gross profit and reduced operating expenses, despite an 11.7% decrease in net sales Condensed Consolidated Statements of Operations Highlights | Metric | 3 Months Ended Dec 31, 2023 | 3 Months Ended Dec 31, 2022 | Change (YoY) | | :------------------------------------- | :-------------------------- | :-------------------------- | :--------------------------- | | Net Sales | $5,375,405 | $6,085,218 | -$709,813 (11.7% decrease) | | Gross Profit | $3,557,498 | $3,567,766 | -$10,268 (0.3% decrease) | | Operating Expenses | $4,623,333 | $7,613,947 | -$2,990,614 (39.3% decrease) | | Net Loss | $(996,501) | $(3,956,062) | +$2,959,561 (74.8% improvement) | | Net Loss per share (Basic and Diluted) | $(0.67) | $(3.70) | +$3.03 (Improvement) | [Condensed Consolidated Statements of Comprehensive Loss](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) Comprehensive loss attributable to common shareholders significantly improved by **60%** to **$(1.99 million)** in Q1 2024, driven by reduced net loss Condensed Consolidated Statements of Comprehensive Loss Highlights | Metric | 3 Months Ended Dec 31, 2023 | 3 Months Ended Dec 31, 2022 | Change (YoY) | | :------------------------------------------------------- | :-------------------------- | :-------------------------- | :--------------------------- | | Comprehensive Loss attributable to cbdMD, Inc. common shareholders | $(1,997,002) | $(4,956,564) | +$2,959,562 (60% improvement) | [Condensed Consolidated Statement of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) Cash used in operating activities decreased substantially from **$2.06 million** in Q1 2023 to **$0.11 million** in Q1 2024, reflecting improved operational efficiency Condensed Consolidated Statement of Cash Flows Highlights | Metric | 3 Months Ended Dec 31, 2023 | 3 Months Ended Dec 31, 2022 | Change (YoY) | | :-------------------------------- | :-------------------------- | :-------------------------- | :--------------------------- | | Cash used by operating activities | $(105,880) | $(2,064,357) | +$1,958,477 (Significant reduction in cash burn) | | Net increase (decrease) in cash | $(293,016) | $(3,367,570) | +$3,074,554 (Reduced cash outflow) | | Cash and cash equivalents, end of period | $1,504,844 | $3,352,664 | -$1,847,820 | [Condensed Consolidated Statements of Shareholders' Equity](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity) Total shareholders' equity decreased from **$9.03 million** to **$7.04 million** QoQ, primarily due to net loss and accrued preferred dividends Condensed Consolidated Statements of Shareholders' Equity Highlights | Metric | December 31, 2023 | September 30, 2023 | Change (QoQ) | | :-------------------------------- | :------------------ | :------------------- | :------------------- | | Total cbdMD, Inc. shareholders' equity | $7,036,743 | $9,031,284 | -$1,994,541 | | Accumulated Deficit | $(176,360,774) | $(174,363,772) | $(1,997,002) | [NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS](index=13&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section provides detailed information on the company's organization, significant accounting policies, liquidity, and various financial statement line items [NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=13&type=section&id=NOTE%201%20%E2%80%93%20ORGANIZATION%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the company's business, key accounting policies, and highlights significant going concern risk due to continued losses and liquidity concerns - cbdMD, Inc. operates nationally recognized CBD brands (cbdMD, Paw CBD, cbdMD Botanicals) from US-grown non-GMO hemp, complying with the 2018 Farm Bill[37](index=37&type=chunk) - The company effected a **one-for-forty-five reverse stock split** on April 12, 2023, effective April 24, 2023[15](index=15&type=chunk)[76](index=76&type=chunk) - The company's working capital may not be sufficient for the next twelve months, raising substantial doubt about its ability to continue as a **going concern**[77](index=77&type=chunk)[78](index=78&type=chunk) [NOTE 2 – MARKETABLE SECURITIES AND INVESTMENT OTHER SECURITIES](index=21&type=section&id=NOTE%202%20%E2%80%93%20MARKETABLE%20SECURITIES%20AND%20INVESTMENT%20OTHER%20SECURITIES) The company's investment in Steady State, LLC was impaired by **$700,000** as of September 30, 2023, and it previously sold its interest in Adara Sponsor, LLC for **$1 million** - The company's **$1.4 million** equity investment in Steady State, LLC was impaired by **$700,000** as of September 30, 2023, and is classified as Level 3 for fair value measurement[83](index=83&type=chunk) - The company sold its entire ownership interest in Adara Sponsor, LLC for **$1,000,000** (original purchase price) effective February 10, 2023[82](index=82&type=chunk) [NOTE 3 - INVENTORY](index=23&type=section&id=NOTE%203%20-%20INVENTORY) Inventory decreased from **$4.24 million** to **$3.74 million** QoQ, primarily due to reduced finished goods, with an increased inventory reserve Inventory Breakdown | Metric | December 31, 2023 | September 30, 2023 | Change (QoQ) | | :---------------- | :------------------ | :------------------- | :------------------- | | Total Inventory | $3,742,645 | $4,235,647 | -$493,002 (11.6% decrease) | | Finished Goods | $2,384,087 | $2,782,680 | -$398,593 (14.3% decrease) | | Inventory Reserve | $(187,701) | $(126,742) | -$60,959 (Increase in reserve) | [NOTE 4 – PROPERTY AND EQUIPMENT](index=23&type=section&id=NOTE%204%20%E2%80%93%20PROPERTY%20AND%20EQUIPMENT) Net property and equipment increased from **$716,579** to **$790,349** QoQ, with Q1 2024 depreciation expense at **$110,864** Property and Equipment, Net | Metric | December 31, 2023 | September 30, 2023 | Change (QoQ) | | :------------------------ | :------------------ | :------------------- | :------------------- | | Property and equipment, net | $790,349 | $716,579 | +$73,770 (10.3% increase) | Depreciation Expense | Metric | 3 Months Ended Dec 31, 2023 | 3 Months Ended Dec 31, 2022 | | :------------------ | :-------------------------- | :-------------------------- | | Depreciation expense | $110,864 | $100,112 | [NOTE 5 – INTANGIBLE ASSETS](index=24&type=section&id=NOTE%205%20%E2%80%93%20INTANGIBLE%20ASSETS) Total intangible assets decreased from **$3.22 million** to **$3.05 million** QoQ due to amortization, following significant impairment charges in fiscal 2023 Total Intangible Assets | Metric | December 31, 2023 | September 30, 2023 | Change (QoQ) | | :------------------ | :------------------ | :------------------- | :------------------- | | Total Intangible Assets | $3,046,248 | $3,219,090 | -$172,842 (5.4% decrease) | Amortization Expense | Metric | 3 Months Ended Dec 31, 2023 | 3 Months Ended Dec 31, 2022 | | :------------------------------------ | :-------------------------- | :-------------------------- | | Amortization expense (definite lived intangible assets) | $172,842 | $277,354 | - The company recorded significant impairment charges in fiscal 2023 due to changes in amortization periods for trademarks and a decline in market capitalization[53](index=53&type=chunk)[88](index=88&type=chunk) [NOTE 6 – CONTINGENT CONSIDERATION](index=25&type=section&id=NOTE%206%20%E2%80%93%20CONTINGENT%20CONSIDERATION) Contingent liability for earnout shares decreased to **$20,611** at December 31, 2023, with final shares issued in January 2024, concluding the obligation Contingent Liability Value | Metric | December 31, 2023 | September 30, 2023 | Change (QoQ) | | :-------------------- | :------------------ | :------------------- | :------------------- | | Contingent Liability | $20,611 | $90,363 | -$69,752 | - The final **19,818 Earnout Shares** were issued on January 11, 2024, concluding the earnout obligation from the Cure Based Development merger[92](index=92&type=chunk) - A contractual obligation to issue up to **556 options** and **556 RSUs** to an employee was valued at **$0** as of September 30, 2023, based on the present revenue run rate[93](index=93&type=chunk) [NOTE 7 – RELATED PARTY TRANSACTIONS](index=25&type=section&id=NOTE%207%20%E2%80%93%20RELATED%20PARTY%20TRANSACTIONS) No related party transactions were reported for the period - No related party transactions were reported[94](index=94&type=chunk) [NOTE 8 – SHAREHOLDERS' EQUITY](index=25&type=section&id=NOTE%208%20%E2%80%93%20SHAREHOLDERS'%20EQUITY) The company has **5 million** shares of 8.0% Series A Cumulative Convertible Preferred Stock outstanding, with **$1 million** in preferred dividends accrued for Q1 2024 - **5,000,000 shares** of 8.0% Series A Cumulative Convertible Preferred Stock were issued and outstanding at December 31, 2023[95](index=95&type=chunk) Preferred Dividends | Metric | 3 Months Ended Dec 31, 2023 | 3 Months Ended Dec 31, 2022 | | :------------------------------------ | :-------------------------- | :-------------------------- | | Preferred dividends declared and accrued | $1,000,501 | $1,000,502 | Common Stock Outstanding | Metric | December 31, 2023 | September 30, 2023 | | :---------------------- | :------------------ | :------------------- | | Common stock outstanding | 2,961,056 shares | 2,960,573 shares | - Keystone Capital Partners, LLC committed to purchase up to **281,934 shares** of common stock, with **180,955 shares** purchased as of the filing date[97](index=97&type=chunk) [NOTE 9 – STOCK BASED COMPENSATION](index=27&type=section&id=NOTE%209%20%E2%80%93%20STOCK%20BASED%20COMPENSATION) As of December 31, 2023, approximately **$6,086** of unrecognized compensation cost for non-vested stock options remained, vesting over **1.9 years**, with no Q1 2024 activity - As of December 31, 2023, total unrecognized compensation cost related to non-vested stock options was approximately **$6,086**, vesting over an estimated **1.9 years**[113](index=113&type=chunk) - No stock option or restricted stock transactions occurred in the three months ended December 31, 2023[102](index=102&type=chunk)[114](index=114&type=chunk) [NOTE 10 - WARRANTS](index=30&type=section&id=NOTE%2010%20-%20WARRANTS) The company had **50,309 warrants** outstanding at December 31, 2023, with a weighted average exercise price of **$37.75** and **3.82 years** remaining term, with no Q1 2024 transactions Warrants Outstanding | Metric | December 31, 2023 | | :-------------------------- | :------------------ | | Warrants Outstanding | 50,309 | | Weighted average exercise price | $37.75 | | Weighted average remaining contractual term | 3.82 years | - No warrant transactions occurred in the three months ended December 31, 2023[106](index=106&type=chunk) [NOTE 11 – COMMITMENTS AND CONTINGENCIES](index=30&type=section&id=NOTE%2011%20%E2%80%93%20COMMITMENTS%20AND%20CONTINGENCIES) A one-time non-cash expense of approximately **$885,000** was recorded in November 2022 due to stock compensation from a terminated contractual obligation - A one-time non-cash expense of approximately **$885,000** was recorded in November 2022 due to outstanding un-expensed stock compensation from a terminated contractual obligation with a professional athlete[119](index=119&type=chunk) [NOTE 12 – NOTE PAYABLE](index=30&type=section&id=NOTE%2012%20%E2%80%93%20NOTE%20PAYABLE) A **$35,660** equipment loan from January 2020 was fully paid off by December 31, 2023 - A **$35,660** equipment loan from January 2020 was fully paid off by December 31, 2023[120](index=120&type=chunk) [NOTE 13 – LEASES](index=31&type=section&id=NOTE%2013%20%E2%80%93%20LEASES) Operating lease costs for Q1 2024 were **$332,124**, with a weighted average remaining lease term of **2.77 years** for leases expiring between 2024 and 2026 Operating Lease Costs | Metric | 3 Months Ended Dec 31, 2023 | | :------------------------ | :-------------------------- | | Total Operating Lease Costs | $332,124 | - As of December 31, 2023, operating leases had a weighted average remaining lease term of **2.77 years** and a weighted average discount rate of **4.66%**[125](index=125&type=chunk) Future Minimum Aggregate Lease Payments | Year Ended September 30, | Future Minimum Aggregate Lease Payments | | :----------------------- | :-------------------------------------- | | 2024 | $1,068,284 | | 2025 | $1,159,949 | | 2026 | $1,092,297 | | Thereafter | $280,565 | | Total future lease payments | $3,601,095 | [NOTE 14 – LOSS PER SHARE](index=32&type=section&id=NOTE%2014%20%E2%80%93%20LOSS%20PER%20SHARE) Basic and diluted loss per share improved to **$(0.67)** for Q1 2024 from **$(3.70)** in the prior year, with potential dilutive shares excluded as anti-dilutive Loss Per Share | Metric | 3 Months Ended Dec 31, 2023 | 3 Months Ended Dec 31, 2022 | | :-------------------------- | :-------------------------- | :-------------------------- | | Basic and diluted earnings per share | $(0.67) | $(3.70) | - **93,113 potential shares** underlying options, unvested RSUs, and warrants, as well as **185,223 convertible preferred shares**, were excluded from diluted loss per share calculation due to their anti-dilutive effect[126](index=126&type=chunk) [NOTE 15 – INCOME TAXES](index=33&type=section&id=NOTE%2015%20%E2%80%93%20INCOME%20TAXES) A full valuation allowance results in zero net deferred tax assets, and an IRC Section 382 ownership change limits NOL carryover utilization - A full valuation allowance is maintained against net deferred tax assets, resulting in a net deferred tax asset of **zero** at December 31, 2023, due to insufficient positive evidence for realization[129](index=129&type=chunk) - An ownership change under Internal Revenue Code (IRC) Section 382 has occurred, limiting the utilization of the company's federal and state NOL carryovers[127](index=127&type=chunk) [NOTE 16 – SUBSEQUENT EVENTS](index=33&type=section&id=NOTE%2016%20%E2%80%93%20SUBSEQUENT%20EVENTS) Subsequent to the period, the company issued **64,218 common shares** to Keystone for **$50,000** and secured **$1.25 million** in gross proceeds from convertible promissory notes - On January 11, 2024, **64,218 shares** of common stock were issued to Keystone for an aggregate purchase price of **$50,000** (**$0.7786 per share**)[130](index=130&type=chunk)[178](index=178&type=chunk) - Effective February 1, 2024, the company secured **$1,250,000** gross proceeds from five institutional investors by issuing 8% Senior Secured Original Issue 20% Discount Convertible Promissory Notes, with an aggregate principal amount of **$1,541,666**[131](index=131&type=chunk) - The Notes bear **8% interest**, mature on July 30, 2025, and are convertible into common stock at an initial price of **$0.684 per share**, subject to adjustments and a **$0.30 floor price**[132](index=132&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) Management discusses the company's financial condition and operational results for Q1 2024, covering business overview, recent developments, growth strategies, financial performance, liquidity, and accounting policies [Our Company](index=35&type=section&id=Our%20Company) cbdMD, Inc. leads in hemp-derived CBD products under brands like cbdMD and Paw CBD, focusing on quality and efficacy, distributed through e-commerce and retail channels - cbdMD, Inc. owns and operates nationally recognized CBD brands (cbdMD, Paw CBD, hempMD) producing broad and full spectrum CBD products from US-grown non-GMO hemp[142](index=142&type=chunk) - Product lines include cbdMD (tinctures, gummies, topicals, capsules, drink mixes, sleep/focus/calming aids) and Paw CBD (veterinarian-formulated products for pets)[143](index=143&type=chunk)[144](index=144&type=chunk) - Products are distributed through e-commerce websites, third-party e-commerce sites, select distributors, marketing partners, and brick-and-mortar retailers[146](index=146&type=chunk) [Recent Developments](index=37&type=section&id=Recent%20Developments) Management focuses on profitability through product optimization, cost reduction, and marketing, with initiatives including website re-platforming, capital structure simplification, and new product launches like hempMD and ATRx - Management is focused on optimizing the product portfolio, right-sizing the cost structure, and investing in marketing to improve profitability[147](index=147&type=chunk) - The company re-platformed its website in Q3 fiscal 2023, launching a site refresh in November 2023, which has led to a strong increase in subscribers[148](index=148&type=chunk) - New product lines, hempMD and ATRx functional mushrooms, were launched in October and December 2023, respectively, and cbdMD products expanded into Sprouts Supermarkets[151](index=151&type=chunk)[152](index=152&type=chunk)[154](index=154&type=chunk) [Growth Strategies](index=38&type=section&id=Growth%20Strategies) Growth strategies include continuous product innovation, expanding revenue channels into traditional retail and international markets, cultivating additional brands, and evaluating accretive acquisitions - Product innovation focuses on superior functional products with greater efficacy and absorption, including the launch of a CBG tincture (Nov 2023) and a nootropic mushroom line under the ATRx brand (Q1 fiscal 2024)[155](index=155&type=chunk) - Revenue channel expansion includes pursuing traditional retail accounts (e.g., Sprouts) and international markets (products available in **31 countries**, UK e-commerce via Amazon, Central America sanitary registration approvals)[155](index=155&type=chunk) - The company continues to cultivate additional brands, launching hempMD as a separate brand and the ATRx nootropic mushroom line in December 2023[155](index=155&type=chunk) [Results of Operations](index=39&type=section&id=Results%20of%20operations) Net sales decreased by **12%** YoY, but gross profit percentage improved to **66.2%** due to reduced cost of sales, and operating expenses decreased by **39.3%**, significantly improving operating loss Results of Operations Summary | Metric | 3 Months Ended Dec 31, 2023 | 3 Months Ended Dec 31, 2022 | Change (YoY) | | :-------------------------------- | :-------------------------- | :-------------------------- | :--------------------------- | | Total Net Sales | $5,375,405 | $6,085,218 | -$709,813 (12% decrease) | | Gross Profit as a percentage of net sales | 66.2% | 58.6% | +7.6% (Improvement) | | Operating Loss from operations | $(1,065,835) | $(4,046,181) | +$2,980,346 (Significant improvement) | [Net Sales](index=39&type=section&id=Net%20Sales) Total net sales decreased by **$0.7 million** (**12%**) YoY, primarily due to reduced e-commerce sales (**$0.5 million**) and wholesale sales (**$0.2 million**) Net Sales by Channel | Sales Channel | 3 Months Ended Dec 31, 2023 | % of Total | 3 Months Ended Dec 31, 2022 | % of Total | Change (YoY) | | :-------------- | :-------------------------- | :--------- | :-------------------------- | :--------- | :--------------------------- | | E-commerce sales | $4,424,006 | 82.3% | $4,906,205 | 80.6% | -$482,199 | | Wholesale sales | $951,399 | 17.7% | $1,179,013 | 19.4% | -$227,614 | | Total Net Sales | $5,375,405 | 100.0% | $6,085,218 | 100.0% | -$709,813 (12% decrease) | [Cost of Sales](index=40&type=section&id=Cost%20of%20sales) Cost of sales as a percentage of net sales decreased to **33.8%** from **41.4%** YoY, driven by reduced overhead allocation and lower freight costs Cost of Sales Percentage | Metric | 3 Months Ended Dec 31, 2023 | 3 Months Ended Dec 31, 2022 | Change (YoY) | | :-------------------------------- | :-------------------------- | :-------------------------- | :--------------------------- | | Cost of sales as a percentage of net sales | 33.8% | 41.4% | -7.6% (Improvement) | - The decrease in cost of sales percentage is primarily attributable to decreased overhead allocation (~**$80,000**) from headcount reductions and decreased freight charges (~**$230,000**) due to a new cost-effective provider[160](index=160&type=chunk) [Operating Expenses](index=40&type=section&id=Operating%20expenses) Overall operating expenses decreased by **$3.0 million** (**39.3%**) YoY, mainly due to reductions in staff, advertising, and a prior-year non-cash stock compensation expense Operating Expenses Breakdown | Expense Category | 3 Months Ended Dec 31, 2023 | 3 Months Ended Dec 31, 2022 | Change (YoY) | | :---------------------------------------------------------------- | :-------------------------- | :-------------------------- | :--------------------------- | | Staff related expense | $1,386,866 | $2,331,030 | -$944,164 | | Advertising/marketing/social media/events/tradeshows/sponsorships/affiliate commissions | $1,392,996 | $1,926,118 | -$533,122 | | Non-cash stock compensation related to terminated contractual obligation | $- | $884,892 | -$884,892 | | Intangibles Amortization | $172,842 | $277,354 | -$104,512 | | Totals | $4,623,334 | $7,613,947 | -$2,990,613 (39.3% decrease) | [Corporate Overhead and Allocation of Management Fees to Our Segments](index=41&type=section&id=Corporate%20overhead%20and%20allocation%20of%20management%20fees%20to%20our%20segments) Corporate operating expenses decreased by **$90,088** (**12.4%**) YoY, driven by reduced headcount and non-cash stock compensation, partially offset by increased professional services Corporate Overhead Expenses | Expense Category | 3 Months Ended Dec 31, 2023 | 3 Months Ended Dec 31, 2022 | Change (YoY) | | :------------------------ | :-------------------------- | :-------------------------- | :--------------------------- | | Staff related expense | $102,608 | $152,526 | -$49,918 | | Non-cash stock compensation | $16,542 | $137,144 | -$120,602 | | Accounting/Legal expense | $217,007 | $197,863 | +$19,144 | | Professional outside services | $118,211 | $58,942 | +$59,269 | | Totals | $636,561 | $726,649 | -$90,088 (12.4% decrease) | [Therapeutics Overhead](index=42&type=section&id=Therapeutics%20Overhead) Therapeutics operating expenses decreased by **$70,158** YoY, primarily due to the completion of clinical studies, with R&D and regulatory expenses at zero for Q1 2024 Therapeutics Operating Expenses | Expense Category | 3 Months Ended Dec 31, 2023 | 3 Months Ended Dec 31, 2022 | Change (YoY) | | :---------------- | :-------------------------- | :-------------------------- | :--------------------------- | | R&D and Regulatory | $- | $75,213 | -$75,213 | | Totals | $92,253 | $162,411 | -$70,158 | - The decline in Therapeutics operating expenses is primarily driven by the finishing of clinical studies[168](index=168&type=chunk) [Other Income and Other Non-Operating Expenses](index=42&type=section&id=Other%20income%20and%20other%20non-operating%20expenses) This section covers non-operating income and expenses, with the material component being the decrease in contingent liability - This section details income and expenses associated with non-operating items[170](index=170&type=chunk) [Decrease in Contingent Liability](index=43&type=section&id=Decrease%20in%20contingent%20liability) Contingent liability decreased by **$69,752** to **$20,611** at December 31, 2023, with the earn-out provision finalized by share issuance in January 2024 Contingent Liability Value | Metric | December 31, 2023 | September 30, 2023 | Change (QoQ) | | :-------------------- | :------------------ | :------------------- | :------------------- | | Contingent Liability | $20,611 | $90,363 | -$69,752 | - The fourth and final marking period for the earn-out provision ended, and the final issuance of shares occurred in January 2024[172](index=172&type=chunk) [Liquidity and Capital Resources](index=43&type=section&id=Liquidity%20and%20Capital%20Resources) Cash and cash equivalents decreased to **$1.5 million**, working capital to **$1.4 million**, and current liabilities increased due to accrued preferred dividends, with **$1.25 million** secured from convertible notes Liquidity Position | Metric | December 31, 2023 | September 30, 2023 | | :------------------------ | :------------------ | :------------------- | | Cash and cash equivalents | $1.5 million | $1.8 million | | Working capital | $1.4 million | $3.4 million | - Current liabilities increased by **27.9%** primarily due to dividends on preferred stock that have been accrued but not paid[173](index=173&type=chunk) - The company's working capital position may not be sufficient for the next twelve months, raising substantial doubt about its ability to continue as a **going concern**[175](index=175&type=chunk) - Subsequent to the period, the company secured **$1.25 million** in gross proceeds from 8% Senior Secured Original Issue 20% Discount Convertible Promissory Notes for working capital and general corporate purposes[177](index=177&type=chunk) [Adjusted EBITDA](index=44&type=section&id=Adjusted%20EBITDA) Adjusted EBITDA, a non-GAAP measure, improved significantly to **$(697,988)** for Q1 2024 from **$(2,646,678)** in the prior year, reflecting reduced operating losses Adjusted EBITDA | Metric | 3 Months Ended Dec 31, 2023 | 3 Months Ended Dec 31, 2022 | Change (YoY) | | :------------------------ | :-------------------------- | :-------------------------- | :--------------------------- | | Non-GAAP Adjusted EBITDA | $(697,988) | $(2,646,678) | +$1,948,690 (Significant improvement) | - Adjusted EBITDA is defined as Earnings Before Interest, Taxes, Depreciation and Amortization, excluding stock-based compensation, one-time inventory adjustments, impairment of goodwill/intangibles, severance accruals, non-cash trade credits, discretionary bonuses, and other one-time M&A/corporate expenses[180](index=180&type=chunk) [Critical Accounting Policies](index=44&type=section&id=Critical%20accounting%20policies) Management refers to Note 1 of the financial statements and the 2022 10-K for detailed critical accounting policies, emphasizing judgments and estimates - The company refers to Note 1 of the consolidated financial statements and Part II, Item 7 of its 2022 10-K for critical accounting policies[185](index=185&type=chunk)[186](index=186&type=chunk) [Recent Accounting Pronouncements](index=45&type=section&id=Recent%20accounting%20pronouncements) The company refers to Note 1 – Organization and Summary of Significant Accounting Policies for information on recent accounting pronouncements - Information on recent accounting pronouncements is provided in Note 1 – Organization and Summary of Significant Accounting Policies[187](index=187&type=chunk) [Off Balance Sheet Arrangements](index=45&type=section&id=Off%20balance%20sheet%20arrangements) The company reported no undisclosed off-balance sheet arrangements that are material to its financial condition or results of operations - As of the report date, the company has no undisclosed off-balance sheet arrangements that are material to investors[188](index=188&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures About Market Risk](index=45&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) This item is not applicable for cbdMD, Inc. as it is a smaller reporting company - This item is not applicable for a smaller reporting company[189](index=189&type=chunk) [ITEM 4. Controls and Procedures](index=45&type=section&id=ITEM%204.%20Controls%20and%20Procedures.) Management concluded that disclosure controls and procedures were effective, with no material changes in internal control over financial reporting during the most recent fiscal quarter - The company's disclosure controls and procedures were deemed effective by management as of the end of the period covered by this report[190](index=190&type=chunk) - There were no material changes in internal control over financial reporting during the most recent fiscal quarter[191](index=191&type=chunk) Part II [ITEM 1. Legal Proceedings](index=46&type=section&id=ITEM%201.%20Legal%20Proceedings.) No legal proceedings were reported for the period - No legal proceedings were reported[193](index=193&type=chunk) [ITEM 1A. Risk Factors](index=46&type=section&id=ITEM%201A.%20Risk%20Factors.) The company incorporates risk factors from its 2023 10-K and highlights potential immediate and substantial dilution to existing shareholders from various equity instruments - The company incorporates by reference the risk factors disclosed in Part I, Item 1A of its 2023 10-K[194](index=194&type=chunk) - Potential for immediate and substantial dilution to existing shareholders from the exercise of **93,222 shares** underlying options/RSUs/warrants, **185,223 convertible preferred shares**, and approximately **2,253,900 shares** from convertible Notes (currently limited to **608,714 shares** pending shareholder approval)[195](index=195&type=chunk) - Shareholder approval is being sought for an amendment to convert all Series A Preferred Stock on a **1 to 6 basis**, which would result in the issuance of an additional **30,000,000 common shares**[195](index=195&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=46&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) No unregistered sales of equity securities were reported during the period, other than those previously disclosed in SEC filings - No unregistered sales of equity securities occurred during the period covered by this report, except for those previously disclosed[196](index=196&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=46&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities.) No defaults upon senior securities were reported for the period - No defaults upon senior securities were reported[197](index=197&type=chunk) [ITEM 4. Mine Safety Disclosures](index=46&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures.) This item is not applicable to the company's operations - This item is not applicable to the company's operations[198](index=198&type=chunk) [ITEM 5. Other Information](index=46&type=section&id=ITEM%205.%20Other%20Information.) The Auditor Firm ID for the company's external auditors, Cherry Bekaert LLP, is 677 - The Auditor Firm ID for Cherry Bekaert LLP, the company's external auditors, is **677**[199](index=199&type=chunk) [ITEM 6. Exhibits](index=47&type=section&id=ITEM%206.%20Exhibits.) This section lists the exhibits filed with the 10-Q report, including underwriting agreements, merger agreements, articles of incorporation, certifications, and Inline XBRL documents - The exhibits include underwriting agreements, merger agreements, articles of incorporation, certifications (Section 302 and 906), and Inline XBRL documents[200](index=200&type=chunk)[201](index=201&type=chunk)