cbdMD(YCBD) - 2023 Q3 - Quarterly Report

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