UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended September 30, 2020 or ☐ TRANSITION REPORT UNDER 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 47-3414576 (State ...

cbdMD, Inc. (NYSE:YCBD) Q3 2020 Results Earnings Conference Call August 12, 2020 4:15 PM ET Company Participants Mark Elliott - CFO and COO Marty Sumichrast - Chairman and Co CEO Ken Cohn - Chief Marketing Officer Lance Blundell - General Counsel Conference Call Participants Paul Cooney - Joseph Gunnar Aaron Grey - Alliance Global Partners Scott Fortune - Roth Capital Partners Gerald Pascarelli - Cowen Operator Good afternoon. And welcome to the cbdMD Third Quarter Fiscal 2020 Earnings Call and Update. Th ...

PART I - FINANCIAL INFORMATION [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited condensed consolidated financial statements for Q3 2020 and 2019, including balance sheets, income statements, cash flows, and equity statements with detailed notes [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to **$111.3 million** from **$94.5 million**, while total liabilities decreased to **$27.7 million** from **$56.9 million**, significantly boosting shareholders' equity to **$83.6 million** Balance Sheet Highlights | Balance Sheet Highlights | June 30, 2020 (Unaudited) | September 30, 2019 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $15,006,319 | $4,689,966 | | Inventory | $6,397,326 | $4,301,586 | | Total current assets | $24,111,750 | $15,743,035 | | Goodwill | $54,669,997 | $54,669,997 | | Total assets | $111,310,797 | $94,518,122 | | **Liabilities & Equity** | | | | Total current liabilities | $4,386,423 | $3,709,878 | | Contingent liability | $15,400,000 | $50,600,000 | | Total liabilities | $27,730,659 | $56,914,138 | | Total shareholders' equity | $83,580,138 | $37,603,984 | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q3 2020 net sales rose to **$10.6 million**, with net loss improving to **$9.1 million** from **$27.7 million**; nine-month net income reached **$18.6 million** due to a **$30.6 million** decrease in contingent liability Income Statement Highlights (in thousands) | Income Statement Highlights (in thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Nine Months Ended June 30, 2020 | Nine Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Total Net Sales | $10,637 | $8,005 | $30,184 | $14,107 | | Gross Profit | $6,889 | $5,076 | $20,003 | $9,098 | | Income (Loss) from operations | $(1,338) | $(6,467) | $(13,051) | $(9,586) | | (Increase) Decrease of contingent liability | $(7,580) | $(21,548) | $30,580 | $(52,462) | | Net Income (Loss) attributable to common shareholders | $(9,053) | $(27,699) | $18,594 | $(61,601) | | Basic EPS | $(0.18) | $(1.19) | $0.45 | $(4.22) | [Condensed Consolidated Statement of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) Net cash used in operations was **$10.3 million**, offset by **$22.4 million** from financing activities, leading to a **$10.3 million** net cash increase and a **$15.0 million** cash balance Cash Flow Summary (Nine Months Ended June 30) | Cash Flow Summary (Nine Months Ended June 30) | 2020 | 2019 | | :--- | :--- | :--- | | Net cash used by operating activities | $(10,277,081) | $(9,055,308) | | Net cash used by investing activities | $(1,851,746) | $(1,606,715) | | Net cash provided by financing activities | $22,445,180 | $18,012,683 | | **Net increase in cash** | **$10,316,353** | **$7,350,660** | | **Cash and cash equivalents, end of period** | **$15,006,319** | **$11,633,213** | - Financing activities were the primary source of cash, with **$16.8 million** from the issuance of common stock, **$4.4 million** from preferred stock, and a **$1.46 million** PPP loan[26](index=26&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=14&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Detailed notes explain accounting policies, the 2018 merger, revenue recognition, contingent liability, stock issuances, business segment discontinuation, and the PPP loan - The company's business is focused on producing and distributing CBD products under the cbdMD and Paw CBD brands; operations of four former subsidiaries (EE1, IM1, BPU, Level H&W) were discontinued effective September 30, 2019[35](index=35&type=chunk)[36](index=36&type=chunk)[37](index=37&type=chunk) Disaggregated Revenue by Channel (Nine Months Ended June 30) | Disaggregated Revenue by Channel (Nine Months Ended June 30) | 2020 | % of Total | 2019 | % of Total | | :--- | :--- | :--- | :--- | :--- | | Wholesale product sales | $8,238,832 | 27.3% | $4,741,900 | 33.6% | | Consumer product sales | $21,944,985 | 72.7% | $9,365,514 | 66.4% | | **Total net sales** | **$30,183,817** | **100.0%** | **$14,107,414** | **100.0%** | - On April 27, 2020, the company received a Paycheck Protection Program (PPP) loan of **$1,456,100** under the CARES Act to support payroll and other specified expenses during the COVID-19 pandemic[60](index=60&type=chunk)[152](index=152&type=chunk) - The contingent liability related to the Cure Based Development merger was valued at **$15.4 million** as of June 30, 2020; its fair value is remeasured quarterly, with changes impacting the statement of operations, and the increase of **$7.6 million** in Q3 2020 was primarily driven by the rise in the company's stock price[57](index=57&type=chunk)[59](index=59&type=chunk)[116](index=116&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) Management discusses business operations, financial performance, and strategic outlook, covering COVID-19 impacts, growth strategies, detailed financial results, and liquidity management [The Impact of the COVID-19 Pandemic](index=40&type=section&id=The%20Impact%20of%20the%20COVID-19%20Pandemic) The pandemic led to operational changes, a shift to online sales offsetting wholesale declines, and liquidity measures including a **$1.46 million** PPP loan and cost controls - The pandemic caused a decline in wholesale sales to brick-and-mortar customers, but this was offset by a substantial increase in online sales to consumers[178](index=178&type=chunk) - Liquidity measures taken in response to the pandemic include securing a **$1.456 million** PPP loan, negotiating rent and vendor payment deferrals, and suspending or renegotiating sponsorship agreements[179](index=179&type=chunk)[180](index=180&type=chunk) [Growth Strategies and Outlook](index=42&type=section&id=Growth%20Strategies%20and%20Outlook) Growth strategies include product expansion, broader sales channels, Paw CBD growth, targeted sponsorships, potential acquisitions, and maintaining GMP-compliant manufacturing standards - Key growth strategies include: - Increasing the base of product offerings - Expanding sales channels, including big-box retailers and international markets - Growing the Paw CBD animal health division - Leveraging targeted sponsorships and influencers - Evaluating potential acquisitions[185](index=185&type=chunk) - The company emphasizes its commitment to quality, with its manufacturing facility being fully GMP compliant and NSF GMP registered, and is also seeking certification from the U.S. Hemp Authority[185](index=185&type=chunk) [Results of Operations](index=43&type=section&id=Results%20of%20Operations) Q3 2020 net sales grew **33%** to **$10.6 million**, driven by **77%** consumer sales growth, with gross profit margin improving to **64.7%** and operating expenses decreasing **28.7%** to **$8.2 million** Financial Performance (Three Months Ended June 30) | Financial Performance (Three Months Ended June 30) | 2020 | 2019 | Change | | :--- | :--- | :--- | :--- | | Total net sales | $10,636,545 | $8,005,149 | +32.9% | | Gross profit | $6,888,521 | $5,075,989 | +35.7% | | Gross profit as a % of net sales | 64.7% | 63.4% | +1.3 ppt | | Operating expenses | $8,226,029 | $11,542,628 | -28.7% | - The shift in sales mix was significant in Q3 2020, with consumer sales accounting for **77.3%** of total net sales, up from **57.9%** in Q3 2019[188](index=188&type=chunk) - The Paw CBD product line demonstrated strong growth, with net sales increasing to **$1.23 million** in Q3 2020 from **$0.59 million** in Q3 2019[188](index=188&type=chunk) [Liquidity and Capital Resources](index=47&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2020, cash and equivalents were **$15.0 million** and working capital **$19.7 million**; **$10.3 million** cash used in operations was offset by **$4.5 million** preferred stock, **$16.9 million** common stock, and **$1.46 million** PPP loan funding Liquidity Metrics | Liquidity Metrics | June 30, 2020 | September 30, 2019 | | :--- | :--- | :--- | | Cash and cash equivalents | $15,006,319 | $4,689,966 | | Working capital | $19,725,327 | $12,033,157 | - Cash flow from operations was a net use of **$10.3 million** for the nine months ended June 30, 2020[208](index=208&type=chunk) - The company secured significant funding through public offerings, receiving net proceeds of **$4.5 million** from a preferred stock offering in October 2019 and **$16.9 million** from a common stock offering in January 2020[209](index=209&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=49&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This disclosure is not required as the company qualifies as a smaller reporting company - This disclosure is not applicable as the company qualifies as a smaller reporting company[215](index=215&type=chunk) [Item 4. Controls and Procedures](index=49&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of June 30, 2020, with no material changes to internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[216](index=216&type=chunk) - There were no material changes in internal control over financial reporting during the most recent fiscal quarter[217](index=217&type=chunk) PART II - OTHER INFORMATION [Item 1. Legal Proceedings](index=50&type=section&id=Item%201.%20Legal%20Proceedings) The company reported no legal proceedings during the reporting period - The company reports no legal proceedings[220](index=220&type=chunk) [Item 1A. Risk Factors](index=50&type=section&id=Item%201A.%20Risk%20Factors) This section highlights material risks, incorporating 2019 Form 10-K factors and adding new risks related to the COVID-19 pandemic's potential impact on commerce, logistics, and economic conditions - The company explicitly adds new risk factors related to the COVID-19 pandemic, including: - Significant disruption in retail commerce - Potential disruptions to logistics and key vendors/customers - The risk of a recession or long-term market correction impacting business and access to capital[222](index=222&type=chunk)[223](index=223&type=chunk)[224](index=224&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=50&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company issued **700,000** common shares on July 1, 2020, to a professional athlete for an endorsement, exempt from registration under Section 4(a)(2) - On July 1, 2020, the company issued **700,000** shares of common stock to a professional athlete for an endorsement agreement; the transaction was exempt from registration[225](index=225&type=chunk) [Item 5. Other Information](index=51&type=section&id=Item%205.%20Other%20Information) Details of a new Endorsement Agreement effective July 1, 2020, with a professional athlete, outlining compensation up to **$2.87 million** in stock and cash through December 2022 - An endorsement agreement with a professional athlete was superseded and amended effective July 1, 2020; the new payment structure includes a mix of common stock (starting with **700,000** shares) and escalating monthly cash payments through December 2022[229](index=229&type=chunk)[230](index=230&type=chunk) [Item 6. Exhibits](index=52&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including merger agreements, corporate documents, officer certifications, and the new Endorsement Agreement - A list of exhibits filed with the report is provided, including the new Endorsement Agreement effective July 1, 2020, and required CEO/CFO certifications[232](index=232&type=chunk)

cbdMD, Inc. (NYSE:YCBD) Q2 2020 Earnings Conference Call May 18, 2020 1:45 PM ET Company Participants Marty Sumichrast - Chairman and Co CEO Mark Elliott - CFO and COO Conference Call Participants Scott Fortune - Roth Capital Partners Paul Cooney - Joseph Gunnar Michael Lavery - Piper Sandler Pablo Zuanic - Cantor Fitzgerald Bill Sutherland - Benchmark Paul Bornstein - Black Diamond Daby Carreras - Spartan Capital Steve Emerson - Emerson Investments Operator Good afternoon. And welcome to the cbdMD Secon ...

[PART I - FINANCIAL INFORMATION](index=5&type=section&id=PART%20I-FINANCIAL%20INFORMATION) This section provides unaudited condensed consolidated financial statements and management's discussion for cbdMD, Inc [ITEM 1. Financial Statements](index=5&type=section&id=ITEM%201.%20Financial%20Statements.) This section presents cbdMD, Inc.'s unaudited condensed consolidated financial statements and detailed notes for specified periods [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the company's financial position, highlighting changes in assets, liabilities, and equity Condensed Consolidated Balance Sheet Highlights (March 31, 2020 vs. September 30, 2019) | Metric | March 31, 2020 | September 30, 2019 | Change (%) | | :-------------------------- | :------------- | :----------------- | :--------- | | Cash and cash equivalents | $14,835,699 | $4,689,966 | +216.3% | | Total current assets | $24,885,267 | $15,743,035 | +58.1% | | Total assets | $112,583,349 | $94,518,122 | +19.1% | | Total current liabilities | $5,792,420 | $3,709,878 | +56.1% | | Contingent liability | $7,820,000 | $50,600,000 | -84.5% | | Total liabilities | $20,425,705 | $56,914,138 | -64.1% | | Total shareholders' equity | $92,157,644 | $37,603,984 | +145.1% | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section details the company's revenues, expenses, and net income or loss for the reporting periods Condensed Consolidated Statements of Operations Highlights (Three Months Ended March 31) | Metric | 2020 | 2019 | Change (YoY) | | :------------------------------------------ | :----------- | :------------- | :----------- | | Total Net Sales | $9,399,036 | $5,636,578 | +66.7% | | Gross Profit | $6,666,960 | $3,721,862 | +79.1% | | Income (Loss) from operations | $(5,600,677) | $(2,027,601) | -176.2% | | (Increase) decrease on contingent liability | $21,261,994 | $(30,914,074) | +168.8% | | Net Income (Loss) | $14,883,772 | $(31,850,274) | +146.7% | | Net Income (Loss) attributable to common shareholders | $14,783,756 | $(31,791,738) | +146.5% | | Basic earnings per share | $0.41 | $(3.13) | +113.1% | | Diluted earnings per share | $0.40 | $- | N/A | Condensed Consolidated Statements of Operations Highlights (Six Months Ended March 31) | Metric | 2020 | 2019 | Change (YoY) | | :------------------------------------------ | :----------- | :------------- | :----------- | | Total Net Sales | $19,547,272 | $6,102,265 | +220.3% | | Gross Profit | $13,114,659 | $4,022,238 | +226.1% | | Income (Loss) from operations | $(11,713,275) | $(3,119,036) | -275.6% | | (Increase) decrease on contingent liability | $38,160,000 | $(30,914,074) | +223.4% | | Net Income (Loss) | $27,813,536 | $(34,039,136) | +181.7% | | Net Income (Loss) attributable to common shareholders | $27,646,786 | $(33,901,451) | +181.5% | | Basic earnings per share | $0.76 | $(3.35) | +122.7% | | Diluted earnings per share | $0.74 | $- | N/A | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) This section reports the company's net income or loss and other comprehensive income or loss components Comprehensive Income (Loss) Highlights (Three & Six Months Ended March 31) | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | Six Months Ended March 31, 2020 | Six Months Ended March 31, 2019 | | :---------------------------------------------------- | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Net Income (Loss) | $14,883,772 | $(31,850,274) | $27,813,536 | $(34,039,136) | | Comprehensive Income (Loss) attributable to common shareholders | $14,783,756 | $(31,791,738) | $27,646,786 | $(33,901,451) | [Condensed Consolidated Statement of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) This section outlines the company's cash inflows and outflows from operating, investing, and financing activities Cash Flow Highlights (Six Months Ended March 31) | Metric | 2020 | 2019 | | :-------------------------------- | :----------- | :------------- | | Net income (loss) | $27,813,536 | $(34,039,136) | | Cash used by operating activities | $(9,147,052) | $(4,462,372) | | Cash used by investing activities | $(1,796,346) | $(1,360,070) | | Cash provided by financing activities | $21,089,131 | $6,179,476 | | Net increase (decrease) in cash | $10,145,733 | $357,034 | | Cash and cash equivalents, end of period | $14,835,699 | $4,639,587 | [Consolidated Statement of Shareholders' (Deficit) Equity](index=12&type=section&id=Consolidated%20Statement%20of%20Shareholders'%20(Deficit)%20Equity) This section details changes in the company's shareholders' equity over the reporting period Shareholders' Equity Changes (September 30, 2019 to March 31, 2020) | Metric | September 30, 2019 | March 31, 2020 | Change | | :-------------------------- | :----------------- | :------------- | :----- | | Common Stock Shares | 27,720,356 | 51,335,648 | +23,615,292 | | Common Stock Amount | $27,720 | $51,336 | +$23,616 | | Preferred Stock Shares | - | 500,000 | +500,000 | | Preferred Stock Amount | $- | $500 | +$500 | | Additional Paid in Capital | $97,186,524 | $124,082,811 | +$26,896,287 | | Accumulated Deficit | $(59,610,260) | $(31,977,003) | +$27,633,257 | | Total Shareholders' Equity | $37,603,984 | $92,157,644 | +$54,553,660 | [Notes to Condensed Consolidated Financial Statements](index=14&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements [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 cbdMD, Inc.'s business, subsidiaries, and key accounting policies - cbdMD, Inc. (formerly Level Brands, Inc.) operates primarily through its wholly-owned subsidiaries CBDI (CBD products) and Paw CBD (CBD pet products), following a strategic shift to the CBD business after the merger with Cure Based Development in December 2018[37](index=37&type=chunk)[38](index=38&type=chunk)[39](index=39&type=chunk) - The company discontinued four non-CBD business subsidiaries (Encore Endeavor 1, I'M1, Beauty and Pin Ups, and Level H&W) effective September 30, 2019[40](index=40&type=chunk) - The company adopted ASU No. 2016-02, Leases, on October 1, 2019, recognizing operating lease assets of **$7,704,109** and operating lease liabilities of **$7,950,803**, with a **$13,528** reduction in retained earnings, without restating prior periods[88](index=88&type=chunk) - The company incurred approximately **$3,398,777** and **$5,809,498** in advertising and related marketing costs for the three and six months ended March 31, 2020, respectively, a significant increase from the prior year[77](index=77&type=chunk) Disaggregated Revenue by Sales Channel (Three Months Ended March 31) | Sales Channel | 2020 Net Sales | % of Total 2020 | 2019 Net Sales | % of Total 2019 | | :-------------------- | :------------- | :-------------- | :------------- | :-------------- | | Wholesale product sales | $2,617,860 | 27.9% | $1,375,045 | 24.4% | | Consumer product sales | $6,781,176 | 72.1% | $4,261,533 | 75.6% | | Service related sales | $- | 0% | $- | 0% | | **Total Net Sales** | **$9,399,036** | **100%** | **$5,636,578** | **100%** | Disaggregated Revenue by Sales Channel (Six Months Ended March 31) | Sales Channel | 2020 Net Sales | % of Total 2020 | 2019 Net Sales | % of Total 2019 | | :-------------------- | :------------- | :-------------- | :------------- | :-------------- | | Wholesale product sales | $5,885,981 | 30.1% | $1,375,045 | 22.5% | | Consumer product sales | $13,661,291 | 69.9% | $4,727,220 | 77.5% | | Service related sales | $- | 0% | $- | 0% | | **Total Net Sales** | **$19,547,272** | **100%** | **$6,102,265** | **100%** | [NOTE 2 – Acquisitions](index=22&type=section&id=NOTE%202%20%E2%80%93%20ACQUISITIONS) This note details the acquisition of Cure Based Development, LLC, including purchase price allocation and earn-out terms - On December 20, 2018, cbdMD, Inc. completed a two-step merger with Cure Based Development, LLC, acquiring its CBD business, with consideration including **15,250,000** common shares and an additional **15,250,000** earn-out shares contingent on revenue targets[91](index=91&type=chunk) - The final purchase price allocation included **$54,669,997** in goodwill, attributed to expected growth strategies, and a deferred tax liability of approximately **$4,644,000** related to acquired indefinite-lived intangible assets[93](index=93&type=chunk)[94](index=94&type=chunk) [NOTE 3 – Marketable Securities and Investment Other Securities](index=23&type=section&id=NOTE%203%20%E2%80%93%20MARKETABLE%20SECURITIES%20AND%20INVESTMENT%20OTHER%20SECURITIES) This note provides information on the company's marketable and other investment securities, including impairment details - The company recorded a full impairment of **$600,000** on an investment in other securities and a full impairment of **$160,000** against other accounts receivable related to Kure Corp stock due to unlikelihood of realizing a return and difficulties in the vaping industry[97](index=97&type=chunk)[98](index=98&type=chunk) Fair Value of Marketable and Other Securities (March 31, 2020 vs. September 30, 2019) | Metric | March 31, 2020 | September 30, 2019 | | :-------------------------- | :------------- | :----------------- | | Marketable securities | $83,375 | $198,538 | | Investment other securities | $- | $600,000 | | **Total Fair Value** | **$83,375** | **$798,538** | [NOTE 4 – Inventory](index=24&type=section&id=NOTE%204%20%E2%80%93%20INVENTORY) This note details the breakdown of the company's inventory, including finished goods and components Inventory Breakdown (March 31, 2020 vs. September 30, 2019) | Category | March 31, 2020 | September 30, 2019 | | :---------------- | :------------- | :----------------- | | Finished goods | $2,518,633 | $3,050,120 | | Inventory components | $4,053,063 | $1,251,466 | | Inventory prepaid | $517,309 | $903,458 | | **Total Inventory** | **$7,089,005** | **$5,205,044** | [NOTE 5 – Property and Equipment](index=24&type=section&id=NOTE%205%20%E2%80%93%20PROPERTY%20AND%20EQUIPMENT) This note presents the company's property and equipment, net of accumulated depreciation Property and Equipment, Net (March 31, 2020 vs. September 30, 2019) | Category | March 31, 2020 | September 30, 2019 | | :-------------------------- | :------------- | :----------------- | | Computers, furniture and equipment | $280,925 | $131,077 | | Manufacturing equipment | $2,591,440 | $1,375,986 | | Leasehold improvements | $806,998 | $375,954 | | Automobiles | $24,892 | $24,892 | | Less accumulated depreciation | $(479,809) | $(192,352) | | **Net property and equipment** | **$3,224,446** | **$1,715,557** | - Depreciation expense for continuing operations increased significantly, from **$49,936** to **$174,206** for the three months ended March 31, 2020, and from **$54,039** to **$287,457** for the six months ended March 31, 2020, reflecting an increased asset base[102](index=102&type=chunk) [NOTE 6 – Intangible Assets](index=25&type=section&id=NOTE%206%20%E2%80%93%20INTANGIBLE%20ASSETS) This note describes the company's intangible assets, primarily trademarks, and their valuation Intangible Assets (March 31, 2020 vs. September 30, 2019) | Category | March 31, 2020 | September 30, 2019 | | :-------------------- | :------------- | :----------------- | | Trademark related to cbdMD | $21,585,000 | $21,585,000 | | Trademark for HempMD | $50,000 | $50,000 | | **Total** | **$21,635,000** | **$21,635,000** | - The company's intangible assets primarily consist of the 'cbdMD' trademark (acquired in the Cure Based Development merger) and the 'HempMD' trademark (purchased in September 2019), both identified as indefinite-lived assets due to their expected long-term contribution to cash flows[105](index=105&type=chunk)[106](index=106&type=chunk) [NOTE 7 – Pro Forma Financial Information (Unaudited)](index=25&type=section&id=NOTE%207%20%E2%80%93%20PRO%20FORMA%20FINANCIAL%20INFORMATION%20(UNAUDITED)) This note provides unaudited pro-forma financial information assuming the Cure Based Development merger occurred earlier - Pro-forma financial information is presented for informational purposes, assuming the merger with Cure Based Development was completed on October 1, 2017[108](index=108&type=chunk) - For the six months ended March 31, 2019, pro-forma net revenues were **$9,185,693** and net loss was **$(35,298,514)**, with a basic and diluted net loss per share of **$(1.39)**[109](index=109&type=chunk) [NOTE 8 – Contingent Liability](index=26&type=section&id=NOTE%208%20%E2%80%93%20CONTINGENT%20LIABILITY) This note explains the contingent liability related to earn-out shares and its valuation changes - The contingent liability, primarily related to **15,250,000** Earnout Shares from the Cure Based Development merger, decreased by **$21,261,994** for the three months ended March 31, 2020[117](index=117&type=chunk) - This decrease was mainly driven by a decline in the company's common stock price (from **$2.26** on December 31, 2019, to **$0.93** on March 31, 2020) and the issuance of **5,127,792** Earnout Shares on February 27, 2020[117](index=117&type=chunk) - The Earnout Shares are valued using a Monte Carlo Simulation, incorporating inputs such as stock price, volatility, interest rates, and revenue projections[116](index=116&type=chunk) - The remaining contingent liability for future Earnout Shares was valued at **$7,820,000** as of March 31, 2020[117](index=117&type=chunk) [NOTE 9 – Related Party Transactions](index=27&type=section&id=NOTE%209%20%E2%80%93%20RELATED%20PARTY%20TRANSACTIONS) This note details transactions and arrangements with related parties, including customer deposits and leases - Related party transactions include a customer deposit from Verdure Holdings LLC, which decreased from **$7,339** at September 30, 2019, to **$0** at March 31, 2020[118](index=118&type=chunk)[119](index=119&type=chunk) - Cure Based Development leased office and manufacturing facilities from affiliates, with the manufacturing lease extending to December 2021[120](index=120&type=chunk) [NOTE 10 – Shareholders' Equity](index=27&type=section&id=NOTE%2010%20%E2%80%93%20SHAREHOLDERS'%20EQUITY) This note outlines changes in shareholders' equity, including stock issuances and preferred dividends - The company issued **500,000** shares of 8.0% Series A Cumulative Convertible Preferred Stock in October 2019, generating approximately **$4.5 million** in net proceeds[121](index=121&type=chunk)[122](index=122&type=chunk) - Total preferred dividends declared and paid were **$100,016** for the three months and **$166,750** for the six months ended March 31, 2020[123](index=123&type=chunk) - Common stock outstanding increased from **27,720,356** shares at September 30, 2019, to **51,335,648** shares at March 31, 2020[122](index=122&type=chunk) - This includes **18,400,000** shares issued in a January 2020 public offering, yielding **$16.9 million** in net proceeds, and **25,000** shares issued for investor relations services[125](index=125&type=chunk)[126](index=126&type=chunk) [NOTE 11 – Stock-Based Compensation](index=28&type=section&id=NOTE%2011%20%E2%80%93%20STOCK-BASED%20COMPENSATION) This note describes the company's stock option and restricted stock award programs and related expenses - The company granted **310,000** common stock options during the six months ended March 31, 2020, with exercise prices of **$3.15** per share and terms of five years[130](index=130&type=chunk) - Total unrecognized compensation cost related to non-vested stock options was approximately **$1,171,704** as of March 31, 2020, vesting over approximately 2.0 years[142](index=142&type=chunk) - Restricted stock awards issued in May 2019, valued at **$368,000**, vested on January 1, 2020, resulting in **$138,000** of stock-based compensation expense for the six months ended March 31, 2020[143](index=143&type=chunk) [NOTE 12 – Warrants](index=30&type=section&id=NOTE%2012%20%E2%80%93%20WARRANTS) This note provides information on the company's outstanding warrants, including issuances related to offerings - The number of outstanding warrants increased from **423,605** at September 30, 2019, to **951,528** at March 31, 2020[135](index=135&type=chunk) - This includes **47,923** warrants issued in October 2019 (related to preferred stock offering) and **480,000** warrants issued in January 2020 (related to common stock offering) to underwriters[136](index=136&type=chunk)[144](index=144&type=chunk) [NOTE 13 – Commitments and Contingencies](index=31&type=section&id=NOTE%2013%20%E2%80%93%20COMMITMENTS%20AND%20CONTINGENCIES) This note details the company's endorsement agreements and the impact of COVID-19 on these commitments - The company has endorsement and sponsorship agreements with professional athletes, Life Time, Inc., and Feld Motor Sports, with aggregate potential payments totaling **$11.55 million** through 2022[146](index=146&type=chunk) - Due to COVID-19, payments for these agreements have been suspended or agreements terminated, with contract amendments being evaluated[147](index=147&type=chunk)[148](index=148&type=chunk) - Expenses recorded for these agreements were **$1,173,000** for the six months ended March 31, 2020, including **$528,625** for the Feld Motor Sports agreement which was terminated[147](index=147&type=chunk)[148](index=148&type=chunk) [NOTE 14 – Note Payable](index=31&type=section&id=NOTE%2014%20%E2%80%93%20NOTE%20PAYABLE) This note describes the company's equipment loan arrangements and their outstanding balances - The company entered into two loan arrangements for equipment in July 2019 (**$249,100** at 7.01% interest) and January 2020 (**$35,660** at 6.2% interest), with long-term note payables of **$172,051** and **$25,448**, respectively, as of March 31, 2020[149](index=149&type=chunk) [NOTE 15 – Discontinued Operations](index=32&type=section&id=NOTE%2015%20%E2%80%93%20DISCONTINUED%20OPERATIONS) This note reports the operating results and assets of subsidiaries whose operations were discontinued - Effective September 30, 2019, the company ceased operations of four subsidiaries (EE1, IM1, BPU, and Level H&W) that previously accounted for licensing, entertainment, and products segments, reclassifying their results as discontinued operations[150](index=150&type=chunk) Summary Operating Results of Discontinued Operations (Six Months Ended March 31) | Metric | 2020 | 2019 | | :------------------------------------------ | :--- | :------------- | | Total Net Sales | $- | $820,115 | | Gross Profit | $- | $274,473 | | Income (Loss) from operations | $(41,202) | $(68,526) | | Net Income (Loss) | $(41,202) | $(1,193,345) | - As of March 31, 2020, discontinued operations had accounts receivable of **$791,998**, down from **$1,080,000** at September 30, 2019[153](index=153&type=chunk) - A lawsuit was filed in April 2020 to collect a **$750,000** balance from Sandbox Properties LLC, which breached its payment agreement[153](index=153&type=chunk) [NOTE 16 – Leases](index=33&type=section&id=NOTE%2016%20%E2%80%93%20LEASES) This note details the company's lease accounting under ASC 842, including lease assets and liabilities - The company adopted ASC 842, recognizing operating lease assets and liabilities[155](index=155&type=chunk) - As of March 31, 2020, operating lease costs were **$408,224** for the three months and **$813,757** for the six months, with a weighted average remaining lease term of **6.13 years** and a discount rate of **4.66%**[158](index=158&type=chunk) Future Minimum Aggregate Lease Payments (as of March 31, 2020) | Year Ended September 30, | Amount | | :----------------------- | :------------- | | 2020 (remaining six months) | $718,122 | | 2021 | $1,452,434 | | 2022 | $1,392,837 | | 2023 | $1,380,204 | | 2024 | $1,421,610 | | Thereafter | $2,532,811 | | **Total future lease payments** | **$8,898,018** | | Less interest | $(1,213,558) | | **Total lease liabilities** | **$7,684,460** | [NOTE 17 – Earnings Per Share](index=35&type=section&id=NOTE%2017%20%E2%80%93%20EARNINGS%20PER%20SHARE) This note presents the basic and diluted earnings per share calculations for the reporting periods Earnings Per Share (Three & Six Months Ended March 31) | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | Six Months Ended March 31, 2020 | Six Months Ended March 31, 2019 | | :-------------------------- | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Basic earnings per share | $0.41 | $(3.13) | $0.76 | $(3.35) | | Diluted earnings per share | $0.40 | $- | $0.74 | $- | | Weighted average shares Basic | 36,503,005 | 10,160,947 | 36,503,005 | 10,107,144 | | Weighted average shares Diluted | 37,336,505 | 10,160,947 | 37,336,505 | 10,107,144 | [NOTE 18 – Income Taxes](index=35&type=section&id=NOTE%2018%20%E2%80%93%20INCOME%20TAXES) This note discusses the company's income tax provisions, including NOLs and deferred tax liabilities - The company's federal and state Net Operating Loss (NOL) carryovers may be subject to annual limitations due to multiple ownership changes from public offerings[161](index=161&type=chunk) - A deferred tax liability of approximately **$4.6 million** was established from the Cure Based Development merger[163](index=163&type=chunk) - The company recorded a deferred tax benefit of **$2,240,300** for the quarter ended December 31, 2019, by reducing the deferred tax liability to zero, based on the expectation of generating sufficient post-merger NOLs[164](index=164&type=chunk) [NOTE 19 – Subsequent Events](index=36&type=section&id=NOTE%2019%20%E2%80%93%20SUBSEQUENT%20EVENTS) This note discloses significant events occurring after the balance sheet date, including the COVID-19 impact and PPP loan - The COVID-19 pandemic's impact on the company's financial condition, liquidity, and operations is currently unknown but being monitored[165](index=165&type=chunk) - In April 2020, the company received an unsecured loan of approximately **$1.5 million** under the Paycheck Protection Program (PPP) of the CARES Act, intending to use proceeds for qualifying expenses and apply for loan forgiveness[166](index=166&type=chunk)[167](index=167&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=37&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) This section provides management's analysis of cbdMD, Inc.'s financial performance, liquidity, and operational results [Overview](index=37&type=section&id=Overview) This section provides a business description, product details, and the initial impact of the COVID-19 pandemic - cbdMD, Inc. produces and distributes high-grade, premium CBD products under the cbdMD brand and pet-related CBD products under the Paw CBD brand, launched in fiscal 2019 and organized as a separate subsidiary in October 2019[170](index=170&type=chunk) - The company sources cannabinoids from non-GMO hemp grown in the U.S. and utilizes a manufacturing process that creates broad-spectrum concentrations while eliminating THC content[171](index=171&type=chunk) - The COVID-19 pandemic led to temporary corporate office closures, altered work schedules, and a shift in sales focus to online channels due to declining wholesale sales[173](index=173&type=chunk) - The company increased production and raw material inventory to mitigate supply chain risks[174](index=174&type=chunk) - To ensure liquidity, the company negotiated rent deferrals, vendor payment deferrals, suspended sponsorship agreements, furloughed employees, and secured a **$1.46 million** PPP loan in April 2020[175](index=175&type=chunk)[179](index=179&type=chunk) [Growth Strategies and Outlook](index=39&type=section&id=Growth%20Strategies%20and%20Outlook) This section outlines the company's plans for product expansion, sales channels, and quality assurance - The company's growth strategies include increasing product offerings (e.g., hand sanitizers, new CBD products), expanding sales channels (wholesale, retail, veterinary), growing the Paw CBD animal health division, expanding targeted sponsorships, and pursuing strategic acquisitions or joint ventures[181](index=181&type=chunk) - cbdMD emphasizes GMP compliance, with its manufacturing facility and warehouse operations NSF GMP registered and an application pending for U.S. Hemp Authority certification, also utilizing independently GMP certified third-party contract manufacturers[180](index=180&type=chunk)[182](index=182&type=chunk) [Results of Operations](index=40&type=section&id=Results%20of%20operations) This section analyzes the company's net sales, cost of sales, gross profit, and operating expenses Key Financial Performance Indicators (Three Months Ended March 31) | Metric | 2020 | 2019 | Change | | :------------------------------------------ | :----------- | :------------- | :----- | | Total net sales | $9,399,036 | $5,636,578 | +$3,762,458 | | Cost of sales | $2,732,076 | $1,914,716 | +$817,360 | | Gross profit as a percentage of net sales | 70.9% | 66.0% | +4.9% | | Operating expenses | $12,267,637 | $5,749,464 | +$6,518,173 | | (Increase) decrease on contingent liability | $21,261,994 | $(30,914,074) | +168.8% | | Net income (loss) before taxes | $14,883,772 | $(32,925,877) | +145.2% | | Net income (loss) attributable to common shareholders | $14,783,756 | $(31,791,738) | +146.5% | Key Financial Performance Indicators (Six Months Ended March 31) | Metric | 2020 | 2019 | Change | | :------------------------------------------ | :----------- | :------------- | :----- | | Total net sales | $19,547,272 | $6,102,265 | +$13,445,007 | | Cost of sales | $6,432,613 | $2,080,027 | +$4,352,586 | | Gross profit as a percentage of net sales | 67.0% | 65.9% | +1.1% | | Operating expenses | $24,827,934 | $7,141,276 | +$17,686,658 | | (Increase) decrease on contingent liability | $38,160,000 | $(30,914,074) | +223.4% | | Net income (loss) before taxes | $25,614,438 | $(33,978,793) | +175.4% | | Net income (loss) attributable to common shareholders | $27,646,786 | $(33,901,451) | +181.5% | - Total net sales increased significantly, driven by growth in both wholesale (up **90.4%** for three months, **328.0%** for six months) and consumer sales (up **59.1%** for three months, **189.0%** for six months)[185](index=185&type=chunk) - Consumer sales remained the dominant channel, accounting for **72.1%** and **69.9%** of total net sales for the three and six months ended March 31, 2020, respectively[185](index=185&type=chunk) - Cost of sales as a percentage of sales decreased to **29.0%** (3 months) and **32.9%** (6 months) in 2020, down from **33.9%** and **34.0%** in 2019, reflecting business maturation and manufacturing process improvements[186](index=186&type=chunk)[187](index=187&type=chunk) - Operating expenses surged by **110%** (3 months) and **245%** (6 months) due to the Cure Based Development merger and business ramp-up, including increased staff, advertising, sponsorships, and technology[190](index=190&type=chunk) [Other Income and Other Non-Operating Expenses](index=45&type=section&id=Other%20income%20and%20other%20non-operating%20expenses) This section details non-operating income and expenses, including interest and contingent liability changes - Interest income increased to **$35,607** for the three months ended March 31, 2020, from **$6,274** in the prior year[196](index=196&type=chunk) - The contingent liability decreased by **$21,261,994** for the three months ended March 31, 2020, primarily due to a decline in the company's stock price and the issuance of Earnout Shares[199](index=199&type=chunk) - The company recorded impairments of **$600,000** on other securities and **$160,000** against other accounts receivable for the three and six months ended March 31, 2020[201](index=201&type=chunk) [Liquidity and Capital Resources](index=46&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash position, working capital, and financing activities - Cash and cash equivalents increased significantly to **$14,835,699** at March 31, 2020, from **$4,689,966** at September 30, 2019, with working capital rising to **$19,092,846** from **$12,033,157**[202](index=202&type=chunk) - Operating activities used **$9,147,052** in cash for the six months ended March 31, 2020[205](index=205&type=chunk) - The company raised **$4,525,100** net from a preferred stock offering in October 2019 and **$16,928,100** net from a common stock offering in January 2020, in addition to a **$1,456,100** PPP loan in April 2020, to fund operations, brand development, and working capital[206](index=206&type=chunk) [Critical Accounting Policies](index=46&type=section&id=Critical%20accounting%20policies) This section highlights key accounting policies requiring significant management judgment and estimates - Management's discussion highlights the importance of judgments, assumptions, and estimates in preparing financial statements, particularly concerning allowances for doubtful accounts, inventory valuation, sales returns, investment valuations, intangible assets, income taxes, and contingent liabilities[208](index=208&type=chunk)[44](index=44&type=chunk) [Recent Accounting Pronouncements](index=46&type=section&id=Recent%20accounting%20pronouncements) This section discusses the adoption and evaluation of recent accounting standards - The company adopted ASU No. 2016-02, Leases, on October 1, 2019, and is currently evaluating the impact of ASU No. 2018-13, Fair Value Measurement, which is effective for fiscal years beginning after December 15, 2019[88](index=88&type=chunk)[89](index=89&type=chunk) [Off Balance Sheet Arrangements](index=47&type=section&id=Off%20balance%20sheet%20arrangements) This section confirms the absence of material off-balance sheet arrangements - As of the report date, cbdMD, Inc. does not have any material off-balance sheet arrangements that would significantly affect its financial condition, revenues, expenses, results of operations, liquidity, capital expenditures, or capital resources[211](index=211&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures About Market Risk](index=48&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) As a smaller reporting company, cbdMD, Inc. is exempt from market risk disclosures - The company is exempt from providing quantitative and qualitative disclosures about market risk due to its status as a smaller reporting company[213](index=213&type=chunk) [ITEM 4. Controls and Procedures](index=48&type=section&id=ITEM%204.%20Controls%20and%20Procedures.) Management concluded that disclosure controls were effective, with no material changes in internal control over financial reporting - The co-Chief Executive Officers and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2020, ensuring timely and accurate reporting of information[214](index=214&type=chunk) - No material changes in internal control over financial reporting occurred during the most recent fiscal quarter[215](index=215&type=chunk) [PART II - OTHER INFORMATION](index=49&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity sales, defaults, and other corporate information [ITEM 1. Legal Proceedings](index=49&type=section&id=ITEM%201.%20Legal%20Proceedings.) This section details a lawsuit filed by cbdMD, Inc. against Sandbox Properties, LLC, for breach of contract - The company filed a lawsuit on April 29, 2020, against Sandbox Properties, LLC, and other kiWW Parties in California Superior Court, asserting claims including fraud and breach of contract[220](index=220&type=chunk) - The lawsuit stems from a default on a Settlement Agreement where Sandbox was obligated to pay **$1,000,000**, with a remaining balance of **$750,000** at March 31, 2020, which Sandbox failed to pay[218](index=218&type=chunk)[153](index=153&type=chunk) [ITEM 1A. Risk Factors](index=49&type=section&id=ITEM%201A.%20Risk%20Factors.) This section outlines new and existing risks, particularly those related to the COVID-19 pandemic - The COVID-19 pandemic poses significant risks, including disruptions in retail commerce, potential adverse impacts on financial condition and operations, and challenges to logistics and supply chains[222](index=222&type=chunk)[223](index=223&type=chunk) - A potential recession or long-term market correction resulting from COVID-19 could materially impact the company's stock value, access to capital, and overall business performance[224](index=224&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=50&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) No unregistered sales of equity securities or use of proceeds were reported during the period - No unregistered sales of equity securities or use of proceeds occurred during the reporting period[225](index=225&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=50&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities.) No defaults upon senior securities were reported during the period - No defaults upon senior securities occurred during the reporting period[225](index=225&type=chunk) [ITEM 4. Mine Safety Disclosures](index=50&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures.) Mine safety disclosures are not applicable to the company's operations - Mine safety disclosures are not applicable to the company's operations[226](index=226&type=chunk) [ITEM 5. Other Information](index=50&type=section&id=ITEM%205.%20Other%20Information.) The Board of Directors consolidated the Compensation Committee and Nominating and Corporate Governance Committee - The Board of Directors consolidated the Compensation Committee and the Nominating and Corporate Governance Committee into a single Compensation, Nominating and Corporate Governance Committee in April 2020[227](index=227&type=chunk) - A new committee charter was adopted, and independent directors Bakari Sellers, Peter J. Ghiloni, Scott G. Stephen, and William F. Raines, III were appointed to the committee[227](index=227&type=chunk) [ITEM 6. Exhibits](index=51&type=section&id=ITEM%206.%20Exhibits.) This section lists all exhibits filed with the Form 10-Q, including corporate documents and XBRL files - The exhibits include various corporate documents such as merger agreements, certificates of incorporation, bylaws, and certifications (Section 302 and 906)[228](index=228&type=chunk) - XBRL taxonomy extension documents (Instance, Schema, Calculation, Label, Presentation, Definition Linkbase) are also filed[228](index=228&type=chunk)

cbdMD, Inc. (NYSE:YCBD) Q1 2020 Earnings Conference Call February 13, 2020 4:15 PM ET Company Participants Mark Elliott – Chief Financial Officer Marty Sumichrast – Chairman and Co-Chief Executive Officer Conference Call Participants Bill Sutherland – Benchmark Scott Rothbaum – Joseph Gunnar Barry Rubin – Private Investor Operator Good afternoon. Welcome to the cbdMD First Quarter Fiscal 2020 Earnings Call and Update. This afternoon, the company issued a press release that provided an overview of its first ...

PART I - FINANCIAL INFORMATION [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) Q4 2019 financials show net sales of $10.1 million and net income of $12.9 million, primarily due to the CBD merger [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets grew to $101.8 million, liabilities decreased to $46.3 million, and shareholders' equity increased to $55.5 million Condensed Consolidated Balance Sheet Highlights (Unaudited) | Balance Sheet Item | Dec 31, 2019 | Sep 30, 2019 | | :--- | :--- | :--- | | **Total Current Assets** | $14,874,171 | $15,743,035 | | **Total Assets** | **$101,796,640** | **$94,518,122** | | **Total Current Liabilities** | $5,481,248 | $3,709,878 | | Contingent Liability | $33,701,994 | $50,600,000 | | **Total Liabilities** | **$46,272,410** | **$56,914,138** | | **Total Shareholders' Equity** | **$55,524,230** | **$37,603,984** | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Net sales surged to $10.1 million, resulting in a net income of $12.9 million, primarily due to a $16.9 million non-cash gain from contingent liability decrease Statement of Operations Summary (Unaudited) | Metric | Three Months Ended Dec 31, 2019 | Three Months Ended Dec 31, 2018 | | :--- | :--- | :--- | | **Total Net Sales** | **$10,148,236** | **$465,687** | | Gross Profit | $6,447,699 | $300,196 | | Loss from Operations | ($6,112,598) | ($1,091,617) | | Decrease of contingent liability | $16,898,006 | - | | **Net Income (Loss)** | **$12,929,763** | **($2,189,042)** | | **Basic EPS** | **$0.46** | **($0.21)** | [Condensed Consolidated Statement of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) Operating activities used $4.9 million cash, financing provided $4.4 million, resulting in a $1.0 million decrease in cash and equivalents Cash Flow Summary (Unaudited) | Cash Flow Activity | Three Months Ended Dec 31, 2019 | Three Months Ended Dec 31, 2018 | | :--- | :--- | :--- | | Net Cash Used by Operating Activities | ($4,873,544) | ($1,162,902) | | Net Cash Used by Investing Activities | ($555,674) | ($1,267,593) | | Net Cash Provided by Financing Activities | $4,400,562 | $6,179,476 | | **Net (Decrease) in Cash** | **($1,028,656)** | **$3,748,981** | | **Cash at End of Period** | **$3,661,310** | **$8,031,534** | [Notes to Condensed Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail accounting policies, the CBD merger, contingent liability revaluation, discontinued operations, stock offerings, and new commitments - On December 20, 2018, the company completed a merger with Cure Based Development, acquiring its CBD business, which is the primary driver of strategic shift and financial performance[39](index=39&type=chunk) - Effective September 30, 2019, the company discontinued operations of four legacy subsidiaries (EE1, IM1, BPU, Level H&W) to focus strategically on the CBD business[41](index=41&type=chunk)[144](index=144&type=chunk) - The company adopted the new lease accounting standard (ASU No. 2016-02) on October 1, 2019, recognizing a **$7.7 million operating lease asset** and a **$8.0 million operating lease liability** on the balance sheet[90](index=90&type=chunk) - A significant subsequent event occurred on January 14, 2020, when the company completed a follow-on public offering of common stock, raising approximately **$16.9 million in net proceeds**[161](index=161&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 attributes revenue growth to CBD business expansion, with increased operating expenses and net income from a non-cash contingent liability gain [Overview and Growth Strategies](index=35&type=section&id=Overview%20and%20Growth%20Strategies) The company focuses on premium CBD product distribution for humans and pets, with strategies including product expansion, channel growth, sponsorships, and acquisitions - The company's core business is producing and distributing high-grade CBD products, including a dedicated pet line under the **Paw CBD brand**, organized as a separate subsidiary in October 2019[164](index=164&type=chunk) - Growth strategies include: Increasing product offerings and expanding sales channels from online to wholesale and retail; Expanding the Paw CBD animal health division; Continuing high-profile sponsorships to build brand recognition; Evaluating potential acquisitions in the emerging CBD market[169](index=169&type=chunk) [Results of Operations](index=36&type=section&id=Results%20of%20Operations) Net sales surged to $10.1 million, driven by the CBD business, with operating expenses increasing over 800% to $12.6 million due to scaling investments Net Sales by Channel (Q1 FY2020 vs Q1 FY2019) | Sales Channel | Q1 2020 | % of Total | Q1 2019 | % of Total | | :--- | :--- | :--- | :--- | :--- | | Wholesale sales | $3,284,459 | 32.4% | $ - | 0% | | Consumer sales | $6,863,777 | 67.6% | $465,687 | 100% | | **Total net sales** | **$10,148,236** | | **$465,687** | | Operating Expense Breakdown (Q1 FY2020 vs Q1 FY2019) | Expense Category | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Staff related expense | $3,933,002 | $294,540 | | Advertising/marketing | $2,410,721 | $82,142 | | Sponsorships | $2,129,835 | $ - | | Non-cash stock compensation | $680,574 | $143,673 | | **Total Operating Expenses** | **$12,560,297** | **$1,391,812** | - The significant increase in operating expenses is directly related to the merger and the subsequent ramp-up of the CBDI business, including increased staff, marketing, and infrastructure expansion[174](index=174&type=chunk)[178](index=178&type=chunk) [Contingent Liability](index=39&type=section&id=Contingent%20Liability) A **$16.9 million non-cash gain** resulted from a decrease in contingent liability fair value, driven by the company's stock price decline - The value of the contingent liability for earnout shares decreased by **$16,898,006**, recorded as other income[184](index=184&type=chunk) - The primary driver for the decrease in the liability's value was the decline in the company's stock price to **$2.26** at December 31, 2019, from **$3.96** at September 30, 2019[184](index=184&type=chunk) [Liquidity and Capital Resources](index=40&type=section&id=Liquidity%20and%20Capital%20Resources) The company held **$3.7 million cash** and **$9.4 million working capital**, with **$4.9 million net cash used in operations**, raising capital through stock offerings Liquidity Position | Metric | Dec 31, 2019 | Sep 30, 2019 | | :--- | :--- | :--- | | Cash and cash equivalents | $3,661,310 | $4,689,966 | | Working capital | $9,392,923 | $12,033,157 | - Cash flow from operations was a net use of **$4,873,544** for the three months ended December 31, 2019[189](index=189&type=chunk) - The company raised capital through two offerings: **$4.5 million net from preferred stock** in October 2019 and **$16.9 million net from common stock** in January 2020[190](index=190&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=41&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is not applicable as the company qualifies as a smaller reporting company - Not applicable for a smaller reporting company[196](index=196&type=chunk) [Item 4. Controls and Procedures](index=41&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective, with no material changes to internal control over financial reporting - The company's co-Chief Executive Officers and Chief Financial Officer concluded that disclosure controls and procedures were effective as of December 31, 2019[197](index=197&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[198](index=198&type=chunk) PART II - OTHER INFORMATION [Item 1. Legal Proceedings](index=42&type=section&id=Item%201.%20Legal%20Proceedings) The company reported no legal proceedings during the period - None[201](index=201&type=chunk) [Item 1A. Risk Factors](index=42&type=section&id=Item%201A.%20Risk%20Factors) Risk factors are incorporated by reference from the company's 2019 Form 10-K - Risk factors are incorporated by reference from the 2019 Form 10-K[202](index=202&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=42&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period - None[203](index=203&type=chunk) [Item 6. Exhibits](index=43&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed, including merger agreements, articles of incorporation, a warehouse lease, and officer certifications - A list of exhibits filed with the Form 10-Q is provided, including certifications required by the Sarbanes-Oxley Act (Sections 302 and 906) and XBRL data files[206](index=206&type=chunk)

cbdMD, Inc. (NYSE:YCBD) Q4 2019 Earnings Conference Call December 18, 2019 4:15 PM ET Company Participants Mark Elliott - CFO Martin Sumichrast - CEO Conference Call Participants William Sutherland - The Benchmark Company Paul Cooney - Joseph Gunnar Steven Emerson - Emerson Investment Group Scott Fortune - Roth Capital Partners Operator Good afternoon. Welcome to the cbdMD Fourth Quarter and Fiscal 2019 Earnings Call and Update. This afternoon, the company issued a press release that provided an overview of ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended September 30, 2019 or ☐ TRANSITION REPORT UNDER 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 47-3414576 (State ...

Financial Data and Key Metrics Changes - Total net sales for the third quarter were $8.44 million, up 42% from the previous quarter [10][14] - Year-over-year sales increased over 500%, with comparative sales from the June 2018 quarter at approximately $1.6 million [10] - Gross profit as a percentage of net sales was 63%, consistent with the previous quarter [14] - Operating expenses were approximately $13.3 million, including a $2.1 million non-cash impairment charge [14][16] - The company recorded a net loss of $27.7 million or $1.19 per share for the quarter [17] Business Line Data and Key Metrics Changes - The product segment accounted for 99.5% of total net sales, with gross sales for the quarter at $9.7 million [14] - E-commerce sales contributed 60% of total sales, while retail brick-and-mortar sales accounted for 40% [22] - Approximately 39,000 new e-commerce customers were added, a 31% increase from the previous quarter [22] Market Data and Key Metrics Changes - The company secured placements in over 3,000 retail locations, up from 600 at the beginning of the year [23] - Significant growth in the travel retail market was noted, with partnerships established for distribution in Europe [24] Company Strategy and Development Direction - The company aims to grow into one of the most successful CBD brands in the U.S. [9] - Future revenue guidance estimates annual net sales of $24 million to $26 million for fiscal year 2019 and $80 million to $90 million for fiscal year 2020 [28] - The company plans to reduce marketing investments as a percentage of net sales from 50% to approximately 20% by the end of calendar 2021 [11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving future revenue milestones, citing a strong team and effective marketing strategies [37][39] - The company is optimistic about the pet product line, expecting to expand significantly in retail locations [55] - Regulatory updates include seeking GMP certification and exploring GRAS applications with the FDA [12] Other Important Information - The company raised $13.8 million in equity capital to fund growth initiatives [12] - A significant non-cash contingent liability charge of $21.5 million was recorded due to the increase in the market price of common stock [16][17] Q&A Session Summary Question: How does the company decide on internet sales and sponsorship proposals? - The company evaluates both the overall visibility from sponsorships and the return on investment through analytics [32] Question: What gives the company confidence in its revenue guidance? - Confidence stems from a strong team, effective marketing, and repeat purchases from customers [37] Question: Can the company discuss some of the retailers involved? - The company is in discussions with large national chains but prefers to finalize deals before naming them [42][43] Question: Is the company prepared to supply large retail accounts? - The company has arrangements in place to ensure sufficient supply for large-scale orders [47][51] Question: What is the outlook for the pet product line? - The company leads the industry in the number of SKUs for pet products and anticipates significant growth [55][56]