ycbd_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended March 31, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from __________________ to _______________

Commission file number 001-38299

cbdMD, INC.

(Exact Name of Registrant as Specified in its Charter)

North Carolina		47-3414576
State or Other Jurisdiction of Incorporation or Organization		I.R.S. Employer Identification No.

8845 Red Oak Blvd, Charlotte, NC		28217
Address of Principal Executive Offices		Zip Code

704-445-3060

Registrant’s Telephone Number, Including Area Code

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report 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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of

1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.

See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated Filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

59,357,213 shares of common stock are issued and outstanding as of May 13, 2022.

TABLE OF CONTENTS

		Page No

PART I-FINANCIAL INFORMATION
ITEM 1.	Financial Statements.	5

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	29

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk.	36

ITEM 4.	Controls and Procedures.	36
PART II - OTHER INFORMATION

ITEM 1.	Legal Proceedings.	37

ITEM 1A.	Risk Factors.	37

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	37

ITEM 3.	Defaults Upon Senior Securities.	37

ITEM 4.	Mine Safety Disclosures.	37

ITEM 5.	Other Information.	37

ITEM 6.	Exhibits.	38

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OTHER PERTINENT INFORMATION

Unless the context otherwise indicates, when used in this report, the terms the “Company,” “cbdMD, “we,” “us, “our” and similar terms refer to cbdMD, Inc., a North Carolina corporation formerly known as Level Brands, Inc., and our subsidiaries CBD Industries LLC, a North Carolina limited liability company formerly known as cbdMD LLC, which we refer to as “CBDI”, Paw CBD, Inc., a North Carolina corporation which we refer to as “Paw CBD” and cbdMD Therapeutics LLC, a North Carolina limited liability company which we refer to as “Therapeutics”. In addition, “fiscal 2021” refers to the year ended September 30, 2021, “fiscal 2022” refers to the fiscal year ending September 30, 2022, “first quarter of 2021” refers to the three months ended December 31, 2020, “first quarter of 2022” refers to the three months ended December 31, 2021, and “second quarter of 2022” refers to the three months ended March 31, 2022.

We maintain a corporate website at www.cbdmd.com. The information contained on our corporate website and our various social media platforms are not part of this report.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements that relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Words such as, but not limited to, “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “targets,” “likely,” “aim,” “will,” “would,” “could,” and similar expressions or phrases identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and future events and financial trends that we believe may affect our financial condition, results of operation, business strategy and financial needs. Forward-looking statements include, but are not limited to, statements about:

material risks associated with our overall business, including:

	·	our history of losses;

	·	the continuing impact of COVID-19 on our company;

	·	our reliance to market to key digital channels;

	·	our ability to acquire new customers at a profitable rate;

	·	our reliance on third party raw material suppliers and manufacturers and compounders;

	·	our reliance on third party compliance with our supplier verification program and testing protocols; and

	·	risks associated with the implementation of our enterprise resource planning system (ERP) to Accumatica.

material risks associated with regulatory environment for CBD, including:

	·	federal laws as well as FDA or DEA interpretation of existing regulation;

	·	state laws pertaining to industrial hemp and their derivatives;

	·	costs to us for compliance with laws and the risks of increased litigation; and

	·	possible changes in the use of CBD.

material risks associated with the ownership of our securities, including;

	·	the impact of changes in the fair value of our contingent liabilities associated with the Earnout Shares;

	·	dilution to our shareholders upon the issuance of the Earnout Shares;

	·	time devoted to our company by one of our co-Chief Executive Officers;

	·	the designations, rights and preferences of our 8% Series A Cumulative Convertible Preferred Stock;

	·	dilution upon the issuance of shares of common stock underlying outstanding warrants, options and the Series A Convertible Preferred Stock; and

	·	voting control held by our directors and their affiliates.

Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward- looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements and readers should carefully review this report in its entirety, including the risks described in Part II, Item 1A. Risk Factors appearing later in this report, Part I, Item 1A. - Risk Factors appearing in our Annual Report on Form 10-K for the fiscal year ended September 30, 2021 as filed with the Securities and Exchange Commission (the “SEC”) on December 17, 2021 (the “2021 10-K”), our Quarterly Report on Form 10-Q for the period ended December 31, 2021 as filed with the SEC on February 10, 2022, as well as our other filings with the SEC. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events.

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PART 1 – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

cbdMD, INC.

CONDENSED CONSOLIDTED BALANCE SHEETS

MARCH 31, 2022 AND SEPTEMBER 30, 2021

	(Unaudited)
	March 31,		September 30,
	2022		2021
Assets

Current assets:
Cash and cash equivalents	$	13,336,850	$	26,411,424
Accounts receivable		2,045,602		1,113,372
Accounts receivable – discontinued operations		1,375		10,967
Marketable securities		-		33,351
Investment other securities		1,000,000		1,000,000
Inventory		4,713,041		5,021,867
Inventory prepaid		519,128		551,519
Prepaid sponsorship		1,474,350		1,212,682
Prepaid expenses and other current assets		1,236,744		1,147,178
Total current assets		24,327,090		36,502,360

Other assets:
Property and equipment, net		2,334,619		2,561,574
Operating lease assets		5,025,669		5,614,960
Deposits for facilities		138,708		529,583
Intangible assets		18,389,258		23,003,929
Goodwill		42,772,685		56,670,970
Total other assets		68,660,939		88,381,016

Total assets	$	92,988,029	$	124,883,376

See Notes to Condensed Consolidated Financial Statements

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CONDENSED CONSOLIDTED BALANCE SHEETS
MARCH 31, 2022 AND SEPTEMBER 30, 2021
(continued)

	(Unaudited)
	March 31,		September 30,
	2022		2021
Liabilities and shareholders' equity

Current liabilities:
Accounts payable	$	2,746,837	$	2,978,914
Accrued expenses		1,840,797		2,727,612
Operating leases – current portion		1,136,018		1,151,150
Note payable		61,483		59,470
Total current liabilities		5,785,135		6,917,146

Long term liabilities:
Long term liabilities		77,732		108,985
Operating leases - long term portion		4,278,733		4,859,058
Contingent liability		2,823,000		9,856,000
Total long term liabilities

SEC Form 10-Q filed by cbdMD Inc.