UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| For the quarterly period ended |
or
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| For the transition period from __________________ to _______________ |
Commission file number
| cbdMD, INC. |
| (Exact Name of Registrant as Specified in its Charter) |
| | | |
| State or Other Jurisdiction of Incorporation or Organization | I.R.S. Employer Identification No. | |
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| Address of Principal Executive Offices | Zip Code |
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 |
| | | |
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.
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).
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 | ☐ |
| | ☒ | 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
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.
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| Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
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| Unregistered Sales of Equity Securities and Use of Proceeds. |
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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”, Proline Global, LLC, a North Carolina limited liability company which we refer to as "Proline", and cbdMD Therapeutics LLC, a North Carolina limited liability company which we refer to as “Therapeutics”. In addition, “fiscal 2024” refers to the year ended September 30, 2024, “fiscal 2025” refers to the fiscal year ending September 30, 2025, “first quarter of 2024” refers to the three months ended December 31, 2023 and “first quarter of 2025” refers to the three months ended December 31, 2024, "second quarter of 2024" refers to the three months ended March 31, 2024, "second quarter of 2025" refers to the three months ended March 31, 2025, "third quarter of 2024" refers to the three months ended June 30, 2024, and "third quarter of 2025" refers to the three months ended June 30, 2025.
We maintain a corporate website at www.cbdmd.com. The information contained on our corporate website and our various social media platforms is not part of this report.
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:
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material risks associated with our overall business, including: |
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our history of losses, potential liquidity concerns, need to raise additional capital and our ability to continue as a going concern; |
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our current capitalization limits our ability to make strategic or accretive acquisitions or attract new investors; |
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our reliance to market to key digital channels; |
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our ability to acquire new customers at a profitable rate; |
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our ability to bring new and compelling dietary ingredients to market; |
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our reliance on third party raw material suppliers and manufacturers; |
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| ● | potential impact of tariffs; and | |
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our reliance on third party compliance with our supplier verification program and testing protocols. |
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material risks associated with regulatory environment for dietary ingredients, including but not limited to CBD, including: |
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federal laws as well as FDA, FTC or DEA interpretation of existing regulation; |
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state and local laws pertaining to regulated dietary ingredients (such as industrial hemp), beverages and their derivatives; | |
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costs to us for compliance with laws and the risks of increased litigation; and |
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possible changes in the use of dietary ingredients such as CBD. |
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material risks associated with the ownership of our securities, including; |
| ● | the risks for failing to regain compliance with the continued listing standards of the NYSE American pursuant to our Plan for continued listing of our Common Stock. |
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, 2024 as filed with the Securities and Exchange Commission (the “SEC”) on December 18, 2024 (the “2024 10-K”), 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.
PART 1 – FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
cbdMD, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2025 AND SEPTEMBER 30, 2024
(Unaudited)
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| June 30, | September 30, | |||||||
| 2025 | 2024 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventory, net | ||||||||
| Inventory prepaid | ||||||||
| Prepaid sponsorship | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Other assets: | ||||||||
| Property and equipment, net | ||||||||
| Operating lease assets | ||||||||
| Deposits for facilities | ||||||||
| Intangible assets | ||||||||
| Investment in other securities, noncurrent | ||||||||
| Total other assets | ||||||||
| Total assets | $ | $ | ||||||
| See Notes to Condensed Consolidated Financial Statements |
cbdMD, INC.
| CONDENSED CONSOLIDATED BALANCE SHEETS |
| June 30, 2025 AND SEPTEMBER 30, 2024 |
| (Unaudited) |
| (continued) |
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| June 30, | September 30, | |||||||
| 2025 | 2024 | |||||||
| Liabilities and shareholders' equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Accrued dividends | ||||||||
| Deferred revenue | ||||||||
| Operating leases – current portion | ||||||||
| Convertible notes, at fair value | ||||||||
| Total current liabilities | ||||||||
| Long term liabilities: | ||||||||
| Operating leases - long term portion | ||||||||
| Total long term liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies (Note 11) | ||||||||
| cbdMD, Inc. shareholders' equity: | ||||||||
| Preferred stock, authorized shares, $ | ||||||||
| par value, and shares issued and outstanding, respectively | - | | ||||||
| Common stock, authorized shares, $ | ||||||||
| par value, and shares issued and outstanding, respectively | ||||||||
| Additional paid in capital | ||||||||
| Comprehensive other expense | ( | ) | ||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total cbdMD, Inc. shareholders' equity | ||||||||
| Total liabilities and shareholders' equity | $ | $ | ||||||
See Notes to Condensed Consolidated Financial Statements
| cbdMD, INC. |
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
| FOR THE THREE AND Nine MONTHS ENDED June 30, 2025 and 2024 |
| (Unaudited) |
| Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Gross Sales | $ | $ | $ | $ | ||||||||||||
| Allowances | ( | ) | ||||||||||||||
| Total Net Sales | ||||||||||||||||
| Cost of sales | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| Operating expenses | | |||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Decrease of contingent liability | ||||||||||||||||
| Decrease (increase) in fair value of convertible debt | ( | ) | ||||||||||||||
| Interest expense (income) | ( | ) | ( | ) | ||||||||||||
| Loss before provision for income taxes | ( | ) | ( | ) | ( | ) | ||||||||||
| Net Loss (income) | ( | ) | ( | ) | ( | ) | ||||||||||
| Preferred dividends | ||||||||||||||||
| Net Loss attributable to cbdMD, Inc. common shareholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net Loss per share: | ||||||||||||||||
| Basic and Diluted earnings per share | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Weighted average number of shares Basic and Diluted: | ||||||||||||||||
See Notes to Condensed Consolidated Financial Statements
| cbdMD, INC. |
| CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS |
| FOR THE THREE AND Nine MONTHS ENDED June 30, 2025 and 2024 |
| (Unaudited) |
| Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Net (Loss) income | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Comprehensive (Loss) income | ( | ) | ( | ) | ( | ) | ||||||||||
| Other Comprehensive income (loss) | $ | $ | $ | $ | ( | ) | ||||||||||
| Preferred dividends | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Comprehensive Loss attributable to cbdMD, Inc. common shareholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
See Notes to Condensed Consolidated Financial Statements
| cbdMD, INC. |
| CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS |
| FOR THE Nine MONTHS ENDED June 30, 2025 and 2024 |
| (Unaudited) |
| Nine Months Ended | ||||||||
| June 30, | ||||||||
| 2025 | 2024 | |||||||
| Cash flows from operating activities: | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used by operating activities: | ||||||||
| Stock based compensation | ||||||||
| Restricted stock expense | ||||||||
| Issuance of stock for services | ||||||||
| Intangibles amortization | ||||||||
| Depreciation | ||||||||
| Decrease in contingent liability | ( | ) | ||||||
| (Decrease) increase in fair value of convertible debt | ( | ) | ||||||
| Amortization of operating lease asset | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Deposits | ||||||||
| Inventory | ( | ) | ||||||
| Prepaid inventory | ( | ) | ||||||
| Prepaid expenses and other current assets | ||||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Operating lease liability | ( | ) | ( | ) | ||||
| Deferred revenue / customer deposits | ( | ) | ||||||
| Cash used by operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Cash flows from investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of common stock | ||||||||
| Proceeds from borrowing on note payable | ||||||||
| Cash flows from financing activities | ||||||||
| Net (decrease) increase in cash | ( | ) | ||||||
| Cash and cash equivalents, beginning of period | ||||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||
Supplemental Disclosures of Cash Flow Information:
| Cash paid for interest | $ | $ | ||||||
| Non-cash financial/investing activities: | ||||||||
| Issuance of shares for conversion of debt and accrued interest | $ | $ | ||||||
| Change in lease asset related to extinguishment of HQ lease and new warehouse lease | $ | ( | ) | $ | ||||
| Preferred dividends accrued but not paid | $ | $ | ||||||
| Conversion of accrued preferred dividends to preferred stock | $ | $ |
See Notes to Condensed Consolidated Financial Statements
| cbdMD, INC. |
| CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY |
| FOR THE nine months ended June 30, 2025 |
| (Unaudited) |
| Other | Additional | |||||||||||||||||||||||||||||||
| Common Stock | Preferred Stock | Comprehensive | Paid in | Accumulated | ||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Income | Capital | Deficit | Total | |||||||||||||||||||||||||
| Balance, September 30, 2024 | $ | | $ | | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||||
| Issuance of Common stock | ( | ) | - | |||||||||||||||||||||||||||||
| Issuance of restricted stock for share based compensation | - | - | ||||||||||||||||||||||||||||||
| Change in fair value of debt related to credit risk | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Issuance of Common Stock, Convertible Notes | - | |||||||||||||||||||||||||||||||
| Issuance of Common Stock, GSS Agreement | ||||||||||||||||||||||||||||||||
| Preferred dividend declared, not paid | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net Income | - | - | ||||||||||||||||||||||||||||||
| Balance, December 31, 2024 | $ | $ | | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Issuance of Common stock | ( | ) | ||||||||||||||||||||||||||||||
| Issuance of restricted stock for share based compensation | - | - | ||||||||||||||||||||||||||||||
| Change in fair value of debt related to credit risk | - | - | ||||||||||||||||||||||||||||||
| Issuance of Common Stock, Convertible Notes | - | |||||||||||||||||||||||||||||||
| Preferred dividend declared, not paid | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net Loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, March 31, 2025 | $ | $ |
| $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||
| Issuance of restricted stock for share based compensation | - | - | ||||||||||||||||||||||||||||||
| Preferred dividend declared, not paid | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Conversion of preferred stock and accrued dividends to common stock | | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Shares issued for fractional shares in reverse stock split | - | - | - | - | - | - | - | |||||||||||||||||||||||||
| Net Loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, June 30, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
See Notes to Condensed Consolidated Financial Statements
| cbdMD, INC. |
| CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY |
| FOR THE nine months ended June 30, 2024 |
| (Unaudited) |
| Other | Additional | |||||||||||||||||||||||||||||||
| Common Stock | Preferred Stock | Comprehensive | Paid in | Accumulated | ||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Income | Capital | Deficit | Total | |||||||||||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
| Issuance of Common Stock | ||||||||||||||||||||||||||||||||
| Issuance of options for share based compensation | - | - | ||||||||||||||||||||||||||||||
| Issuance of restricted stock for share based compensation | - | - | ||||||||||||||||||||||||||||||
| Preferred dividend | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net Loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
| Issuance of Common Stock | ||||||||||||||||||||||||||||||||
| Issuance of options for share based compensation | - | - | ||||||||||||||||||||||||||||||
| Issuance of restricted stock for share based compensation | - | - | ||||||||||||||||||||||||||||||
| Change in fair value of debt related to credit risk | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Issuance of Common stock - Keystone | ||||||||||||||||||||||||||||||||
| Preferred dividend | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net Loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, March 31, 2024 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||||||
| Issuance of restricted stock for share based compensation |
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| Issuance of options for share based compensation | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Change in fair value of debt related to credit risk | - | - | ||||||||||||||||||||||||||||||
| Issuance of Common stock - Convertible Notes | ||||||||||||||||||||||||||||||||
| Preferred dividend | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net Income | - | - | ||||||||||||||||||||||||||||||
| Balance, June 30, 2024 | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||
See Notes to Condensed Consolidated Financial Statements
cbdMD, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
cbdMD, Inc. (“cbdMD”, “we”, “us”, “our”, or the “Company”) is a North Carolina corporation formed on March 17, 2015 as Level Beauty Group, Inc. In November 2016 we changed the name of the Company to Level Brands, Inc. and on May 1, 2019 we changed the name of our Company to cbdMD, Inc. We operate from offices located in Charlotte, North Carolina. Our fiscal year end is established as September 30.
There have been no material changes in the Company's significant accounting policies from those previously disclosed in the Annual Report as of and for the fiscal year ended September 30, 2024 as filed on Form 10-K (the "2024 10-K").
The accompanying unaudited interim condensed consolidated financial statements of cbdMD have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and the rules of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the 2024 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of consolidated financial position and the consolidated results of operations for the interim periods presented have been reflected herein.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries CBDI, Paw CBD, Proline and Therapeutics. All material intercompany transactions and balances have been eliminated in consolidation.
Reverse Stock Split
On April 17, 2025, the board effected a reverse stock split at a ratio of one-for-, effective as of May 6, 2025. Unless otherwise indicated, all share numbers in this filing, including shares of common stock and all securities convertible into, or exercisable for, shares of common stock, give effect to the reverse stock split (the "Reverse Stock Split").
Use of Estimates
The Company’s condensed consolidated financial statements have been prepared in accordance with US GAAP and requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and reported amounts of revenues and expenses during the periods presented. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary. Significant estimates made in the accompanying condensed consolidated financial statements include, but are not limited to, allowances for credit losses, inventory valuation reserves, expected sales returns and allowances, certain assumptions related to the valuation of investments other securities, acquired intangibles and long-lived assets and the recoverability of intangible and long-lived assets and income taxes, including deferred tax valuation allowances and reserves for estimated tax liabilities is a material estimate. Actual results could differ from these estimates. The Company continues to monitor macroeconomic conditions to remain flexible and to optimize and evolve its business as appropriate.
Cash and Cash Equivalents
For financial statements purposes, the Company considers all highly liquid investments with a maturity of less than three months when purchased to be cash equivalents.
Accounts Receivable
Accounts receivable are stated at cost less an allowance for credit losses, if applicable. Credit is extended to customers after an evaluation of the customer’s financial condition, and generally collateral is not required as a condition of credit extension. Management’s determination of the allowance for credit losses is based on an evaluation of the receivables, past experience, current economic conditions, and other risks inherent in the receivables portfolio. The balance for allowance for credit losses was $
The following table represents a summary of the allowance for credit losses for the periods ended June 30, 2025 and September 30, 2024:
| June 30, 2025 | September 30, 2024 | |||||||
| Credit loss allowance - beginning of period | $ | $ | ||||||
| Credit loss provision | ||||||||
| Write offs | ( | ) | ( | ) | ||||
| Recoveries | - | |||||||
| Credit loss allowance - end of period | $ | $ | ||||||
Merchant Receivable and Reserve
The Company primarily sells its products through the internet and has an arrangement to process customer payments with third-party payment processors and negotiate the fee based on the market. The arrangement with the payment processors requires that the Company pay a fee between
Inventory
Inventory is stated at the lower of cost or net realizable value with cost being determined on a weighted average basis. The cost of inventory includes product cost, freight-in, and production fill and labor (portions of which we outsource to third party manufacturers). Write-offs of potentially slow moving or damaged inventory are recorded based on management’s analysis of inventory levels, forecasted future sales volume and pricing and through specific identification of obsolete or damaged products. We assess inventory quarterly for slow moving products and potential impairments and at a minimum perform a physical inventory count annually near fiscal year end. The reserve for inventory was $
Property and Equipment
Property and equipment items are stated at cost less accumulated depreciation. Expenditures for routine maintenance and repairs are charged to operations as incurred. Depreciation is charged to expense over the estimated useful lives of the assets using the straight-line method. Generally, the useful lives are years for manufacturing equipment and automobiles and years for software, computer, and furniture and equipment. The useful life for leasehold improvements are over the term of the lease, or the remaining economic life of the asset, whichever is shorter. The cost and accumulated depreciation of property are eliminated from the accounts upon disposal, and any resulting gain or loss is included in the consolidated statements of operations for the applicable period. Long-lived assets held and used by the Company are reviewed for impairment whenever changes in circumstance indicate the carrying value of an asset may not be recoverable.
Fair Value Accounting
The Company utilizes accounting standards for fair value, which include the definition of fair value, the framework for measuring fair value, and disclosures about fair value measurements. Fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, fair value accounting standards establish a hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).
Level 1 inputs utilize quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are directly or indirectly observable for the asset or liability. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability. Level 3 inputs are unobservable inputs for the asset or liability, which are based on an entity’s own assumptions, as there is little, if any, observable market activity. In instances where the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
When the Company records an investment in marketable securities the carrying value is assigned at fair value. Any changes in fair value for marketable securities during a given period will be recorded as an unrealized gain or loss in the consolidated statement of operations. For investment other securities without a readily determinable fair value, the Company may elect to estimate its fair value at cost less impairment plus or minus changes resulting from observable price changes.
The Company elected the fair value option for its Convertible notes. The convertible notes were initially recognized at fair value on the balance sheet. All subsequent changes in fair value, excluding the impact of the change in fair value related to instrument-specific credit risk are recorded in non-operating income. The changes in fair value related to instrument-specific credit risk is recorded through other comprehensive loss. See Note 11 for more information related to the convertible notes.
Intangible Assets
Trademarks are amortized over an estimated useful life of 5-10 years. The Company performs impairment tests whenever events or changes in circumstances indicate that the asset group's carrying value may not be recoverable.
Revenue Recognition
The Company recognizes revenues when its customer obtains control of promised goods or services, in an amount that reflects the consideration which it expects to receive in exchange for those goods. The Company recognizes revenues following the five-step model including: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) we satisfy the performance obligation.
Performance Obligations
Contract liabilities represent unearned revenues and are presented as deferred revenue or customer deposits on the condensed consolidated balance sheets.
Other than account receivable, the Company has material contract assets nor contract liabilities at June 30, 2025.
The following tables represent a disaggregation of revenue by sales channel:
| Three Months Ended June 30, | ||||||||||||||||
| 2025 | % of total | 2024 | % of total | |||||||||||||
| E-commerce sales | $ | % | $ | % | ||||||||||||
| Wholesale sales | % | % | ||||||||||||||
| Total Net Sales | $ | % | $ | % | ||||||||||||
| Nine Months Ended June 30, | ||||||||||||||||
| 2025 | % of total | 2024 | % of total | |||||||||||||
| E-commerce sales | $ | % | $ | % | ||||||||||||
| Wholesale sales | % | % | ||||||||||||||
| Total Net Sales | $ | % | $ | % | ||||||||||||
Cost of Sales
The Company’s cost of sales includes costs associated with distribution, fill and labor expense, components, manufacturing overhead, third-party providers, and outbound freight for the Company’s products sales. For the Company’s product sales, cost of sales also includes the cost of refurbishing products returned by customers that will be offered for resale, if any, and the cost of inventory write-downs associated with adjustments of held inventories to their net realizable value. These expenses are reflected in the Company’s consolidated statements of operations when the product is sold and net sales revenues are recognized or, in the case of inventory write-downs, when circumstances indicate that the carrying value of inventories is in excess of their net realizable value.
Income Taxes
The Company is a North Carolina corporation that is treated as a corporation for federal and state income tax purposes. CBDI, Therapeutics, Proline Global, and Paw CBD are wholly owned subsidiaries and are disregarded entities for tax purposes and their entire share of taxable income or loss is included in the tax return of the Company.
The Company accounts for income taxes utilizing the asset and liability approach which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. The Company uses the inside basis approach to determine deferred tax assets and liabilities associated with its investment in a consolidated pass-through entity. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will not be realized.
Concentrations
Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents, accounts receivable, and securities.
The Company places its cash and cash equivalents on deposit with financial institutions in the United States. The Federal Deposit Insurance Corporation (“FDIC”) covers $250,000 for substantially all depository accounts. The Company from time to time may have amounts on deposit in excess of the insured limits.
Concentration of credit risk with respect to receivables is principally limited to trade receivables with corporate customers that meet specific credit policies. Management considers these customer receivables to represent normal business risk. The Company did have any customers that represented a significant amount of our sales for the three and nine months ended June 30, 2025.
Stock-Based Compensation
Stock-based compensation cost is measured at the grant date fair value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity's equity instruments or that may be settled by the issuance of those equity instruments.
The Company uses the Black-Scholes model for measuring the fair value of options and warrants. The fair value compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods. The Company recognizes forfeitures when they occur.
Earnings (Loss) Per Share
The Company computes basic loss per share by dividing net loss and net loss attributable to common shareholders, after deducting preferred stock dividends, by the weighted average number of common shares outstanding. Common equivalent shares are excluded from the computation of net loss per share if their effect is anti-dilutive.
Liquidity and Going Concern Considerations
The accompanying consolidated condensed financial statements have been prepared assuming that the Company will continue as a going concern. The Company experienced a loss of $
While the Company believes in the viability of its strategy and path to profitability, and in its ability to raise additional funds, there can be no assurances these actions will be successful. The Company’s ability to continue as a going concern is dependent upon its ability to improve profitability and the ability to acquire additional funding on commercially reasonable terms, if required. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern for twelve months after the date that the accompanying condensed consolidated financial statements are issued. These condensed consolidated financial statements and notes do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result in the Company's inability to continue as a going concern.
Convertible Notes
Effective February 1, 2024, the Company entered into a Securities Purchase Agreement dated January 30, 2024 with five institutional investors (the “Investors”) whereby the Investors advanced the Company an aggregate of $
| Balance at September 30, 2024 | $ | |||
| Conversion of convertible notes | ( | ) | ||
| Change in fair value of convertible notes | ( | ) | ||
| Balance at June 30, 2025 | $ |
New Accounting Standards
On December 14, 2023 the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This standard went into effect for fiscal years beginning after December 31, 2024 and will go into effect for the company beginning with it's fiscal year ending September 30, 2025. The Company is currently evaluating the impacts of this standard on the consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03 – Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures, which enhances the disclosures for various types of expenses. The standard is effective for public companies for annual periods beginning after December 15, 2026. Early adoption is available. The Company is currently evaluating the impacts of this standard on the consolidated financial statements.
The Company adopted ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures Measurement. This standard went into effect for fiscal years beginning after December 13, 2023. This standard enhances segment reporting under Topic 280 by expanding the breadth and frequency of segment disclosures.
NOTE 2 – MARKETABLE SECURITIES AND INVESTMENT OTHER SECURITIES
The Company has, from time to time, entered into contracts where a portion of the consideration provided by the counterparty in exchange for the Company’s services was common stock, options or warrants (an equity position). In these situations, upon invoicing the customer for the stock or other instruments, the Company recorded the receivable as accounts receivable other, and used the value of the stock or other instrument upon invoicing to determine the value. In determining fair value of marketable securities and investment other securities, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and consider counterparty credit risk in our assessment of fair value. The Company determines the fair value of marketable securities and investment other securities based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the fair value hierarchy distinguishes between observable and unobservable inputs.
On April 7, 2022, CBD Industries, LLC entered into an asset sale agreement to sell substantially all its manufacturing assets to a subsidiary of Steady State, LLC ("Steady State"). The equipment sale is initially valued at approximately $
In valuing the investments, the Company used the value paid, which was the price offered to all third-party investors.
NOTE 3 - INVENTORY
Inventory at June 30, 2025 and September 30, 2024 consists of the following:
| June 30, | September 30, | |||||||
| 2025 | 2024 | |||||||
| Finished Goods | $ | $ | ||||||
| Inventory Components | ||||||||
| Inventory Reserve | ( | ) | ||||||
| Inventory prepaid | ||||||||
| Total Inventory | $ | $ | ||||||
Abnormal amounts of idle facility expense, freight, handling costs, scrap and wasted material (spoilage) are expensed in the period they are incurred and no material expenses related to these items occurred in the three or nine months ended June 30, 2025.
NOTE 4 – PROPERTY AND EQUIPMENT
Property and equipment consisted of the following as of:
| June 30, | September 30, | |||||||
| 2025 | 2024 | |||||||
| Computers, furniture and equipment | $ | $ | ||||||
| Manufacturing equipment | ||||||||
| Leasehold improvements | ||||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Depreciation expense related to property and equipment was $
NOTE 5 – INTANGIBLE ASSETS
Intangible Assets
Intangible assets consisted of the following as of:
| June 30, | September 30, | |||||||
| 2025 | 2024 | |||||||
| Trademark related to cbdMD | $ | $ | ||||||
| Trademark for HempMD | ||||||||
| Technology Relief from Royalty related to DirectCBDOnline.com | ||||||||
| Tradename related to CBD MD limited mark | ||||||||
| Tradename related to DirectCBDOnline.com | ||||||||
| Impairment of intangible assets | ( | ) | ( | ) | ||||
| Amortization of definite lived intangible assets | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
Amortization expense related to definite lived intangible assets was $
NOTE 6 – RELATED PARTY TRANSACTIONS
None.
NOTE 7 – SHAREHOLDERS’ EQUITY
Preferred Stock Conversion and Reverse Stock Split
In October 2019, the Company designated
Among other matters, during the Company's annual meeting held on April 10, 2025, the shareholders of the Company approved:
| i. | an amendment the Certificate of Designation of the Company’s Preferred Stock to include an automatic conversion provision whereby each outstanding share of Preferred Stock, together with accrued and unpaid dividends, would automatically convert into |
| ii. | an amendment to the Company’s Articles of Incorporation to authorize the Board of Directors to effect a reverse stock split of the then outstanding shares of Common stock at a specific ratio, ranging from one-for- to one-for-, to be determined by the Board of Directors at a date and time to be determined by the Board of Directors. |
The Board of Directors elected to effectuate the Automatic Preferred Conversion on May 6, 2025 at 4:01 p.m. Eastern Time (the “Mandatory Exchange Date”). On the Mandatory Exchange Date, all Preferred Stock, together with accrued and unpaid dividends, was converted in to
The Board of Directors elected to implement a one-for-eight () reverse stock split of the Company’s common stock (the “Reverse Stock Split”) on May 6, 2025, effective at 4:02 p.m. Eastern Time, immediately following and therefore inclusive of shares of common stock issued in connection with the Automatic Preferred Conversion. Following the Reverse Stock Split holders of fractional shares received, in lieu of a fractional share, the number of shares rounded up to the next whole number (“Round Up Shares”).
Common Stock Transactions
During the nine months ended June 30, 2025, the Company (i) issued
During the nine months ended June 30, 2024, the Company (i) issued
NOTE 8 – STOCK BASED COMPENSATION
The following table summarizes stock option activity for the nine months ended June 30, 2025:
| Number of shares | Weighted-average exercise price | Weighted-average remaining contractual term (in years) | Aggregate intrinsic value (in thousands) | |||||||||||||
| Outstanding at September 30, 2024 | $ | $ | - | |||||||||||||
| Granted | - | - | ||||||||||||||
| Exercised | - | - | ||||||||||||||
| Forfeited | ( | ) | - | - | ||||||||||||
| Outstanding at June 30, 2025 | - | |||||||||||||||
| Exercisable at June 30, 2025 | $ | $ | - | |||||||||||||
As of June 30, 2025, there was
NOTE 9 - WARRANTS
Transactions involving the Company equity-classified warrants for the nine months ended June 30, 2025 are summarized as follows:
| Number of shares | Weighted-average exercise price | Weighted-average remaining contractual term (in years) | Aggregate intrinsic value (in thousands) | |||||||||||||
| Outstanding at September 30, 2024 | $ | $ | - | |||||||||||||
| Granted | - | - | ||||||||||||||
| Exercised | - | - | ||||||||||||||
| Forfeited | ( | ) | - | - | ||||||||||||
| Outstanding at June 30, 2025 | - | |||||||||||||||
| Exercisable at June 30, 2025 | $ | 2.54 | $ | - | ||||||||||||
The following table summarizes outstanding common stock purchase warrants as of June 30, 2025:
| Number of shares | Weighted-average exercise price | Expiration | |||||||
| Exercisable at $1,346.40 per share | December 2025 | ||||||||
| Exercisable at $1,350.00 per share | June 2026 | ||||||||
| Exercisable at $20.16 per share | April 2028 | ||||||||
| $ | |||||||||
NOTE 10 – COMMITMENTS AND CONTINGENCIES
The Company may, from time to time, become a party to various legal proceedings arising in the ordinary course of business. The Company is not currently the subject of any material pending or threatened litigation or other legal proceedings.
NOTE 11 – NOTE PAYABLE
Effective February 1, 2024, the Company entered into a Securities Purchase Agreement dated January 30, 2024, with five institutional investors (the “Investors”) whereby the Investors advanced the Company an aggregate of $
Each Note bore interest of
During the nine months ending June 30, 2025, the Company issued an aggregate of
NOTE 12 – LEASES
The Company has lease agreements for its warehouse and executive office the lease periods expiring in September 2026. The Company recognizes leasing arrangements on the consolidated balance sheet as right-of-use assets and liabilities pertaining to the rights and obligations created by the leased assets. The Company determines whether an arrangement is a lease at inception and classify it as finance or operating. The Company’s lease is classified as an operating lease. The Company’s lease does not contain any residual value guarantees.
Right-of-use lease assets and corresponding lease liabilities are recognized at commencement date based on the present value of lease payments over the expected lease term. Since the interest rate implicit in our lease arrangements is not readily determinable, the Company determined an incremental borrowing rate for its lease based on the approximate interest rate on a collateralized basis with similar remaining terms and payments as of the lease commencement date to determine the present value of future lease payments. The Company’s lease terms may include options to extend or terminate the lease.
In addition to the monthly base amounts in the lease agreement, the Company is required to pay real estate taxes, insurance and common area maintenance expenses during the lease term.
Lease costs on operating leases are recognized on a straight-line basis over the lease term and included as a selling, general and administrative expense in the condensed consolidated statements of operations.
Components of operating lease costs are summarized as follows:
| Three Months | Nine Months | |||||||
| Ended | Ended | |||||||
| June 30, | June 30, | |||||||
| 2025 | 2025 | |||||||
| Total Operating Lease Costs | $ | $ | ||||||
Supplemental cash flow information related to operating leases is summarized as follows:
| Three Months | Nine Months | |||||||
| Ended | Ended | |||||||
| June 30, | June 30, | |||||||
| 2025 | 2025 | |||||||
| Cash paid for amounts included in the measurement of operating lease liabilities | $ | $ | ||||||
As of June 30, 2025, our operating lease had a weighted average remaining lease term of
Future minimum aggregate lease payments under operating leases as of June 30, 2025 are summarized as follows:
| For the year ended September 30, | ||||
| 2025 | $ | |||
| 2026 | ||||
| Total future lease payments | ||||
| Less interest | ( | ) | ||
| Total lease liabilities | $ |
NOTE 13 – LOSS PER SHARE
At June 30, 2025,
NOTE 14 – INCOME TAXES
The Company has a valuation allowance against the net deferred tax assets, with the exception of the deferred tax liabilities that result from indefinite-life intangibles (“naked credits”). The Company has determined that using the general methodology for calculating income taxes during an interim period for the quarters ending December 31, 2019, March 31, 2020, and June 30, 2020, provided for a wide range of potential annual effective rates. At September 30, 2023 the Company recorded a net deferred tax asset of
NOTE 15 – SUBSEQUENT EVENTS
On July 4, 2025, the President of the United States signed the One Big Beautiful Bill Act (“OBBBA”) into law. This act introduces significant changes to tax law and other areas affecting company operations, including items such as extensions of Tax Cuts and Jobs Act provisions, changes to business interest deductions, and modifications to depreciation deductions. While the effects of these tax law changes will not be reflected for the period ended June 30, 2025, the Company is evaluating the impact of the OBBBA on its financial position, results of operations, and cash flows for future periods.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion of our financial condition and results of operations for the three and nine months ended June 30, 2025 and the three and nine months ended June 30, 2024 should be read in conjunction with the unaudited condensed consolidated financial statements and the notes to those statements that are included elsewhere in this report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties such as our plans, objectives, expectations and intentions.
Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements because of several factors, including those set forth under the Part I, Item 1A, Risk Factors and Business sections in our 2024 10-K, this report, and our other filings with the Securities and Exchange Commission. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements. Such statements are based on our current expectations and could be affected by the uncertainties and risk factors described throughout this report.
Our Company
General
We own and operate the nationally recognized CBD (cannabidiol) brands cbdMD, Paw CBD and functional mushroom brand ATRx Labs, and Herbal Oasis, our line of THC beverages, We believe that we are an industry leader producing and distributing hemp derived solutions including broad spectrum CBD products and full spectrum CBD products. Our mission is to enhance our customer’s overall quality of life while bringing powerful natural plant education, awareness and accessibility of high quality and effective products to all. We source hemp-derived cannabinoids, which are extracted from non-GMO hemp grown on farms in the United States. Our innovative broad spectrum formula utilizes one of the purest hemp extracts, containing CBD, CBG and CBN, while eliminating the presence of tetrahydrocannabinol (THC). Non-THC is defined as below the level of detection using validated scientific analytical methods. Our full spectrum and Delta 9 products contain a variety of cannabinoids and terpenes in addition to CBD while maintaining small amounts of THC that fall below the level of detection and are within the limits set in the 2018 Farm Act. In addition to our core brands, we also operate (1) cbdMD Therapeutics to capture the Company’s ongoing investments in science related to its existing and future products, including research and development activities for therapeutic applications.
Our cbdMD brand of products includes an array of high-grade, premium every day and functional CBD products, including tinctures; gummies; topicals; capsules; and sleep, focus and calming aids. In addition, we have clinical based claims and industry leading strength and concentrations to drive product efficacy.
Our Paw CBD brand of products includes veterinarian-formulated products including tinctures, chews, topicals products in varying strengths and formulas. Paw CBD products have undergone the National Animal Safety Council’s rigorous audit and meet their Quality Seal standard.
Our ATRx brand was developed using the power of functional mushrooms to provide consumers a complementary natural ingredient solution for immunity, focus, digestive health, and cognitive and mood benefits.
Herbal Oasis (“Oasis”) is a premium hemp-derived THC-infused social seltzer that blends cannabinoids and nootropic mushrooms to deliver a fast-acting, functional beverage made for presence and connection.
Recent Developments
Management continues to be very focused on our goal of delivering positive earnings through a combination of optimizing our product portfolio, right-sizing our cost structure and investing in marketing that will provide positive return on customer acquisition. During fiscal 2024 we made sweeping changes that have had a very positive impact to the business. The first quarter of fiscal 2025 was the first quarter in the Company’s history as a public company that revenues increased from a prior sequential quarter, the Company achieved Non GAAP Net Income (before the preferred dividend accrual) and the Company achieved positive EBITDA on a Non GAAP basis.
While we aimed to maintain our revenue levels during the third fiscal quarter, we experienced a decline driven by several identifiable factors. Our top priority for the quarter was securing shareholder approval to amend our articles of incorporation and convert the Series A Preferred stock. This strategic move was essential to improving stockholders’ equity, and our plan to regain compliance with NYSE American continued listing standards and preserve our Common Stock listing on the NYSE American. We were successful in obtaining shareholder approval to convert our Series A Preferred Stock; however, the process required significant management attention and temporarily diverted executive management focus from core business operations.
In parallel, we identified and addressed weaknesses within our marketing team, which led to the implementation of leadership changes late in the second quarter to strengthen customer acquisition efforts and restore profitability momentum. During the third quarter we rebuilt our marketing team and agency base. During the third quarter we reconstructed our marketing and creative systems and processes along with our customer acquisition funnels and performed significant channel testing. This resulted in a growing new customer base in July and key metrics of our direct to consumer business trending in the right direction. Our conservative cash management in the second quarter led to inventory levels dropping below optimal thresholds. Coupled with delays in product testing, this resulted in intermittent stock shortages across several SKUs. To correct this, we have since increased inventory investments to ensure better product availability and to support revenue recovery moving forward.
During this fiscal year, we have faced a notable uptick in both state and federal regulatory activity that, if enacted, would limit consumer choice and significantly impact market access. Legislative actions in states like Georgia and Florida introduced new labeling requirements, which led to delays in product availability and required us to allocate additional resources toward packaging updates to remain compliant. At the federal and state levels, proposals such as HB 1 in Texas, HB 328 in North Carolina, and changes to the definition of hemp in the federal appropriations bill sought to fundamentally alter the definition of sellable hemp-derived products. If passed, these measures could have materially affected both our future revenue and the broader industry's viability.
While many of these proposals were ultimately defeated or delayed, the trend is clear: there is a growing and coordinated effort to restrict the hemp and cannabinoid wellness category. In response, management has had to dedicate increased time and capital this quarter to regulatory engagement—including updating packaging, mobilizing grassroots customer advocacy, lobbying efforts across multiple state capitals, and working closely with national trade organizations. We expect this regulatory pressure to persist, requiring continued strategic investment to protect market access and consumer choice. Increased regulation may also negatively affect our smaller competitors and potential reduce competition.
In the first fiscal quarter, cbdMD entered the rapidly expanding hemp-derived beverage market with the launch of Oasis, our ready-to-drink THC-infused seltzer. According to Euromonitor International, sales of hemp-derived THC beverages more than doubled in 2024 and are projected to grow to $4.1 billion by 2028—making this one of the fastest-growing segments in the hemp industry. Early consumer response to Oasis has been highly encouraging. In April 2025, the brand earned multiple medals at the prestigious LA Spirits Awards, a strong indicator of product acceptance and brand potential.
To support market momentum, we expanded our sales team mid-third quarter, initiated discussions with major retail chains, and ramped up in-person brand activation efforts. By the end of the third quarter, we have secured distribution for Oasis across Alabama, Georgia, North Carolina, parts of South Carolina, and the Florida Panhandle. Sell-through has continued to accelerate in the fourth quarter. Most recently, we signed new distribution agreements in Tennessee, Minnesota, with other distributors in the pipleeine, and we anticipate revenue from these market launches to begin contributing in the remainder of the fourth quarter.
We remain focused on growing the Company in a smart, profitable manner along with appropriate cost controls.
Growth Strategies
We continued to pursue many strategies to grow our revenues and expand the scope of our business in fiscal 2025 and beyond:
| ● |
Product Innovation: Our goal is to provide our customers superior functional based products with greater efficacy claims and absorption. We constantly assess and evaluate our product portfolio, and devote resources to ongoing research and development processes with the goal of improving our product offerings. During the first quarter of fiscal 2025, we launched reformulations on several sleep products to enhance their effectiveness and improve taste. In addition, we launched ready-to-drink beverage product under our new Oasis brand. We have a pipeline of cannabinoid and non-cannabinoid products and formulation upgrades that are in the queue for ongoing innovation and product portfolio improvement. |
| ● |
Expand our revenue channels: We continued to pursue relationships with traditional retail accounts and distributors and believe our top brand awareness and effective marketing position us as a preferred CBD partner for key traditional retail accounts as this channel has continued to normalize. During the first quarter of fiscal 2024 we launched several SKUs into Sprouts retail footprint. In April 2024, we added Door Dash as a customer. We expanded our ATRx Labs product in GNC during 2024. In 2025, we began developing relationships with beer and alcohol distributors for our Oasis beverage line and have added several large beer distributors to support our brand. Oasis can now be found in Total Wine, Winn-Dixie, Piggly Wiggly and a growing number of national and regional grocery and c-store chains. |
| ● |
International Expansion: We continue to explore sales in markets outside of the United States. We generally partner with local wholesalers and local legal counsel who can help navigate the laws and regulatory requirements within their jurisdiction. We continue to pursue key wholesale accounts in a number of international markets and are gaining market share in Central and South America through our sanitary registration approvals. |
| ● |
Cultivate Additional Brands: We continue to operate and attempt to grow the Paw CBD business. During fiscal 2024 we launched our nootropic mushroom line under the ATRx brand. During the first quarter of fiscal 2025 we launched a new line of hemp derived and nootropic beverages under the Oasis brand. We believe there are ongoing opportunities with these brands to focus on education, cross-selling and customer retention. |
| ● |
Acquisitions: We evaluate acquisitions (M&A) where we believe (i) there is an accretive customer base that can lower our cost of customer acquisitions through either a complementary direct to consumer base or wholesale channels, or (ii) the target has a profitable business or easily attainable cost synergies that can quickly help contribute and accelerate profitability of our Company. Since the elimination of our Series A Preferred Stock we have seen an increase in M&A opportunities and will continue to evaluate opportunities that we believe are accretive to the business and for our shareholders. |
Results of operations
The following tables provide certain selected consolidated financial information for the periods presented:
| Three Months Ended June 30, |
||||||||||||
| 2025 |
2024 |
Change |
||||||||||
| Total net sales |
$ | 4,606,796 | $ | 5,173,878 | $ | (567,082 | ) | |||||
| Cost of sales |
1,775,709 | 1,770,364 | 5,345 | |||||||||
| Gross profit as a percentage of net sales |
61.5 | % | 65.8 | % | -4.3 | % | ||||||
| Operating expenses |
3,735,773 | 3,785,542 | (49,769 | ) | ||||||||
| Operating loss from operations |
(904,686 | ) | (382,028 | ) | (522,658 | ) | ||||||
| Decrease on contingent liability |
- | - | - | |||||||||
| Net loss before taxes |
(895,272 | ) | 459,737 | (1,354,964 | ) | |||||||
| Net loss attributable to cbdMD Inc. common shareholders |
$ | (1,228,772 | ) | $ | (540,763 | ) | $ | (687,964 | ) | |||
| Nine Months Ended June 30, |
||||||||||||
| 2025 |
2024 |
Change |
||||||||||
| Total net sales |
$ | 14,469,698 | $ | 14,925,801 | $ | (456,103 | ) | |||||
| Cost of sales |
5,278,638 | 5,384,061 | (105,423 | ) | ||||||||
| Gross profit as a percentage of net sales |
63.5 | % | 63.9 | % | -0.4 | % | ||||||
| Operating expenses |
10,667,834 | 12,540,595 | (1,872,761 | ) | ||||||||
| Operating loss from operations |
(1,476,774 | ) | (2,998,855 | ) | 1,522,081 | |||||||
| Decrease on contingent liability |
- | 74,580 | (74,580 | ) | ||||||||
| Net loss before taxes |
(1,360,934 | ) | (3,547,327 | ) | 2,186,393 | |||||||
| Net loss attributable to cbdMD Inc. common shareholders |
$ | (3,695,435 | ) | $ | (6,548,828 | ) | $ | 2,853,393 | ||||
We record product sales primarily through two main delivery channels, direct to consumers via our E-commerce sales and direct to wholesalers utilizing our internal sales team. The following table provides information on the contribution of net sales by type of sale to our total net sales.
| Three Months Ended June 30, |
||||||||||||||||
| 2025 |
% of total |
2024 |
% of total |
|||||||||||||
| E-commerce sales |
$ | 3,579,635 | 77.7 | % | $ | 3,937,930 | 76.1 | % | ||||||||
| Wholesale sales |
1,027,161 | 22.3 | % | $ | 1,235,948 | 23.9 | % | |||||||||
| Total Net Sales |
$ | 4,606,796 | 100 | % | $ | 5,173,878 | 100 | % | ||||||||
| Nine Months Ended June 30, 2025 |
||||||||||||||||
| 2025 |
% of total |
2024 |
% of total |
|||||||||||||
| E-commerce sales |
$ | 11,167,158 | 77.2 | % | $ | 11,987,654 | 80.3 | % | ||||||||
| Wholesale sales |
$ | 3,302,540 | 22.8 | % | 2,938,147 | 19.7 | % | |||||||||
| Total Net Sales |
$ | 14,469,698 | 100 | % | $ | 14,925,801 | 100 | % | ||||||||
Net Sales
We had total net sales of $4.6 million and $5.2 million for the three months ended June 30, 2025 and 2024, respectively, resulting in a decrease in net sales of $0.6 million or 12% quarter over quarter. This decrease is primarily due to declining performance of our direct-to-consumer business as well as regulatory uncertainty which impacted many of our wholesale accounts during recent months. For the nine months ended June 30, 2025, revenues were down 3%, which is driven by the decrease in revenue in the third quarter, which offset the previously reported 1% increase year over year through March 31, 2025. Our team continues to focus on all areas of driving revenue improvement, and during the third quarter made significant changes to our marketing team and strategy to combat recent trends; although through June 30, 2025 we did not see the benefits of these changes. We are seeing signs of success from our marketing changes and strategy commencing in July and through the fourth quarter, as we have secured distribution agreements for Oasis in multiple states. Despite the pervasive, industry wide challenges which we too are facing, we remain optimistic about our market positioning in fiscal 2025.
Cost of sales
Our cost of sales includes costs associated with distribution, fill and labor expense, components, manufacturing overhead, third party providers, and freight for our product sales. Our cost of sales as a percentage of net sales was 38.5% and 34.2% for three months ended June 30, 2025 and 2024, respectively. This slight increase in cost of sales is mostly attributed to year over year increase in our warehouse lease cost and lower overhead absorption tied to revenue. Ongoing state-level regulatory action have the potential to increase our product costs through new labeling and packaging requirements in particular jurisdictions.
Operating expenses
Our principal operating expenses include staff related expenses, advertising (which includes expenses related to industry distribution and trade shows), sponsorships, affiliate commissions, merchant fees, technology, travel, rent, professional service fees, and business insurance expenses.
Consolidated Operating Expenses
The following tables provide information on our operating expenses for the three and nine months ended June 30, 2025 and 2024:
| Three Months Ended June 30, |
||||||||||||
| 2025 |
2024 |
Change |
||||||||||
| Staff related expense |
$ | 1,287,626 | $ | 1,443,800 | $ | (156,174 | ) | |||||
| Accounting/legal expense/professional outside services |
273,760 | 306,362 | (32,602 | ) | ||||||||
| Marketing |
1,250,901 | 903,490 | 347,411 | |||||||||
| Merchant fees |
130,967 | 171,993 | (41,026 | ) | ||||||||
| R&D and regulatory |
9,564 | 10,108 | (544 | ) | ||||||||
| Rent and utilities |
179,168 |
361,083 | (181,915 | ) | ||||||||
| Non-cash stock compensation |
825 | 9,321 | (8,496 | ) | ||||||||
| Intangibles Amortization |
191,267 | 172,842 | 18,425 | |||||||||
| Depreciation |
88,905 | 114,912 | (26,007 | ) | ||||||||
| All other expenses |
322,790 | 290,631 | 32,159 | |||||||||
| Totals |
$ | 3,735,773 | $ | 3,784,542 | $ | (48,769 | ) | |||||
| Nine Months Ended June 30, |
||||||||||||
| 2025 |
2024 |
Change |
||||||||||
| Staff related expense |
$ | 3,776,944 | $ | 4,215,224 | $ | (438,280 | ) | |||||
| Accounting/legal expense/Professional outside services |
906,173 | 1,187,217 | (281,044 | ) | ||||||||
| Marketing |
3,376,388 | 3,276,111 | 100,277 | |||||||||
| Merchant fees |
415,104 | 515,096 | (99,992 | ) | ||||||||
| R&D and regulatory |
18,834 | 16,835 | 1,999 | |||||||||
| Rent and utilities |
542,678 | 1,165,289 | (622,611 | ) | ||||||||
| Non-cash stock compensation |
5,841 | 16,835 | (10,994 | ) | ||||||||
| Intangibles Amortization |
573,801 | 518,526 | 55,275 | |||||||||
| Depreciation |
290,275 | 343,527 | (53,252 | ) | ||||||||
| All other expenses |
761,796 | 1,285,935 | (524,139 | ) | ||||||||
| Totals |
$ | 10,667,834 | $ | 12,540,595 | $ | (1,872,761 | ) | |||||
Our overall operating expenses were flat for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024. Payroll and other operating expense savings were offset by an increase in marketing expenses. For the nine months ended June 30, 2025 operating expenses decreased $1.9 million. The year over year decrease was primarily driven by management's continued ongoing efforts to reduce our cost structure including rental related decreases as our HQ office was eliminated, as well as reduction in professional, accounting and legal expenses. Our team continues to pursue cost saving initiatives, however after significant progress in 2023 and 2024, larger saving opportunities are harder to identify and implement. We are closely watching marketing expenses and working to improve spend efficiency with the goal of positively impacting (increasing) revenues.
Liquidity and Capital Resources
We had cash and cash equivalents on hand of approximately $1.1 million, working capital of $2.0 million and an accumulated deficit of approximately $179.1 million at June 30,2025. At September 30, 2024 we had cash and cash equivalents of $2.4 million, working capital of negative $2.2 million and an accumulated deficit of approximately $182.1 million. As of September 30, 2024, our working capital was reduced by approximately $4.7 million for accrued dividends payments. Excluding the accrued dividend payments, we had adjusted working capital of $2.4 million as of September 30, 2024.
We do not have any commitments for material capital expenditures. We no longer have a commitment for cumulative dividends at an annual rate of 8% payable monthly in arrears to our preferred shareholders. As of August 2023, we suspended paying the dividend in cash and we were accruing this dividend on a monthly basis. On April 10, 2025, shareholders approved the conversion of each share of Series A Preferred Stock into 13 shares of Common Stock and the elimination of accrued dividends, which was effective on May 6, 2025.
While the Company is taking strong action and believes that it can execute its strategy and path to profitability, and in its ability to raise additional funds, there can be no assurances to that effect. The Company’s working capital position may not be sufficient to support the Company’s daily operations for the twelve months subsequent to the filing of this quarterly report. The Company’s ability to continue as a going concern is dependent upon its ability to improve profitability and cash flow and the ability to acquire additional funding. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern within twelve months after the date that these financial statements are issued. These financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result in the Company not being able to continue as a going concern.
On December 31, 2024, we received notification (the “Notice”) from the NYSE American that the Company is no longer in compliance with an additional NYSE American continued listing standard. Specifically, the letter states that the Company is not in compliance with the continued listing standard set forth in Section 1003(a)(i) of the NYSE American Company Guide (the “Company Guide”). Section 1003(a)(i) requires a listed company to have stockholders’ equity of $2.0 million or more if the listed company has reported losses from continuing operations and/or net losses in two of its three most recent fiscal years then ended. The Company reported stockholders equity of $1.9 million as of September 30, 2024, and losses from continuing operations and/or net losses in four of its five most recent fiscal years then ended. The Notice further provided that the Company remains subject to the conditions set forth in the NYSE American’s initial non compliance notification dated June 5, 2024 and its compliance plan that was accepted by the NYSE American on August 20, 2024 for noncompliance under Section 1003(a)(ii) of the Company Guide due to stockholders’ equity under $4.0 million which addressed how the Company intends to regain compliance with the continued listing standards by December 5, 2025 (the “Plan”). If the Company is not in compliance with the continued listing standards by December 5, 2025 or if the Company does not make progress consistent with the Plan during the Plan period, the Company will be subject to delisting procedures as set forth in the Company Guide.
As previously disclosed, following the period covered by this report, all outstanding shares of Series A Preferred Stock were converted to Common Stock on May 6, 2025 and all accrued dividends were eliminated. As part of this conversion, $6.7 million of accrued and unpaid dividends as of June 30, 2025 were converted to equity upon the Series A Preferred conversion which we believe will bring us into compliance with the NYSE American’s continued listing standards within the Plan period, assuming we maintain the continued listing standards for two quarters.
While the Notice has no immediate impact on the listing of the Company’s shares of common stock which will continue to be listed and traded on the NYSE American during this period, subject to the Company’s compliance with the other listing requirements of the NYSE American, if the Common Stock ultimately were to be delisted for any reason, it could negatively impact the Company by (i) reducing the liquidity and market price of the Company’s Common Stock; (ii) reducing the number of investors willing to hold or acquire the Common Stock, which could negatively impact the Company’s ability to raise equity financing; and (iii) limiting the Company’s ability to use a registration statement to offer and sell freely tradable securities, thereby preventing the Company from accessing the public capital markets.
Our goal from a liquidity perspective is to use operating cash flows to fund day to day operations. We comply with NYSE American continued listing standards. We remain focused on improving the Company’s operating performance and continue to focus on profitability, and growing the Company in order to strengthen its balance sheet.
Adjusted EBITDA
To supplement the Company's unaudited interim consolidated financial statements presented in accordance with US GAAP, the Company uses certain non-GAAP measures of financial performance. Non-GAAP financial measures are not prepared in accordance with, or as an alternative to US GAAP. Generally, a non-GAAP financial measure is a numerical measure of a company's performance that either excludes or includes amounts, or is subject to adjustment that have such an effect, that are not normally excluded or included in the most directly comparable financial measure that is calculated and presented in accordance with US GAAP. Adjusted EBITDA as presented below is a non-GAAP measure.
cbdMD defines Adjusted EBITDA as Earnings Before Interest, Taxes, Depreciation and Amortization excluding stock based compensation and mergers and acquisitions and financing transaction expenses.
Our management uses and relies on Adjusted EBITDA, which is a non-GAAP financial measure. We believe that management, analysts and shareholders benefit from referring to the following non-GAAP financial measure to evaluate and assess our core operating results from period-to-period after removing the impact of items that affect comparability. Our management recognizes that the non-GAAP financial measures have inherent limitations because of the excluded items described below.
We have included a reconciliation of our non-GAAP financial measure to the most comparable financial measures calculated in accordance with GAAP. We believe that providing the non-GAAP financial measures, together with the reconciliation to GAAP, helps investors make comparisons between cbdMD and other companies. In making any comparisons to other companies, investors need to be aware that companies use different non-GAAP measures to evaluate their financial performance. Investors should pay close attention to the specific definition being used and to the reconciliation between such measure and the corresponding GAAP measure provided by each company under applicable rules of the Securities and Exchange Commission.
| Three Months Ended |
Nine Months Ended |
||||||||||||
| June 30, |
June 30, |
||||||||||||
| 2025 |
2024 |
2025 |
2024 |
||||||||||
| (Unaudited) |
|||||||||||||
| GAAP (loss) from operations |
$ (904,641 |
) | $ (382,028 |
) | $ (1,476,774 |
) | $ (2,998,855 |
) | |||||
| Adjustments: |
|||||||||||||
| Depreciation & Amortization |
280,172 |
287,754 |
864,076 |
862,053 |
|||||||||
| Employee and director stock compensation (1) |
825 |
9,321 |
5,841 |
16,835 |
|||||||||
| Mergers and Acquisitions and financing transaction expense (2) |
- |
- |
- |
58,239 |
|||||||||
| Non-cash expense incurred as a credit (3) |
- |
- |
- |
439,926 |
|||||||||
| Non-cash accelerated amortization of expense related to terminated IT contracts (4) |
- |
- |
- |
72,101 |
|||||||||
| Non-GAAP adjusted EBITDA |
$ (623,644 |
) | $ (84,953 |
) | $ (606,857 |
) | $ (1,549,701 |
) | |||||
| (1) Represents non-cash expense related to options, warrants, restricted stock expenses that have been amortized during the period. |
| (2) Represents expenses incurred in relation to M&A and financing activities during the three and nine months ended June 30, 2024. |
| (3) Represents non-cash expense incurred as a credit provided to GNC to replace expired product. |
Critical accounting policies
The preparation of financial statements and related disclosures in conformity with US GAAP and our discussion and analysis of our financial condition and operating results require our management to make judgments, assumptions and estimates that affect the amounts reported in our consolidated financial statements and accompanying notes. Note 1, “Organization and Summary of Significant Accounting Policies,” of the Notes to our consolidated financial statements appearing elsewhere in this report describes the significant accounting policies and methods used in the preparation of our consolidated financial statements. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates, and such differences may be material.
Please see Part II, Item 7 – Critical Accounting Policies appearing in our 2024 10-K for the critical accounting policies we believe involve the more significant judgments and estimates used in the preparation of our consolidated financial statements and are the most critical to aid you in fully understanding and evaluating our reported financial results. Management considers these policies critical because they are both important to the portrayal of our financial condition and operating results, and they require management to make judgments and estimates about inherently uncertain matters.
Recent accounting pronouncements
Please see Note 1 – Organization and Summary of Significant Accounting Policies appearing in the condensed consolidated financial statements included in this report for information on accounting pronouncements.
Off balance sheet arrangements
As of the date of this report, we have no undisclosed off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term “off-balance sheet arrangement” generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with us is a party, under which we have any obligation arising under a guarantee contract, derivative instrument or variable interest or a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable for a smaller reporting company.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures. We maintain “disclosure controls and procedures” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934. In designing and evaluating our disclosure controls and procedures, our management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Based on their evaluation as of the end of the period covered by this report, our principal executive officer and principal accounting officer has concluded that our disclosure controls and procedures were effective to ensure that the information relating to our company, required to be disclosed in our SEC reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our principal executive officer and principal accounting officer, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
None.
We desire to take advantage of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Accordingly, in addition to the disclosure below, we incorporate by reference the risk factors disclosed in Part I, Item 1A of our 2024 10-K, and Part II, Item 1A of our Form 10-Q for the quarterly period ended March 31, 2025. See also “Liquidity and Capital Resources” above.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Except for those unregistered securities previously disclosed in reports filed with the SEC, we have not sold any securities without registration under the Securities Act during the period covered by this report.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable to our Company’s operations.
The Auditor Firm ID for our external auditors, Cherry Bekaert LLP, is 677.
During the fiscal quarter ended June 30, 2025, officers (as defined in Rule 16a-1(f)) or directors adopted or terminated any “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” (as defined in Item 408 of Regulation S-K).
| 31.1 | Certification of Principal Executive Officer and Principal Financial Officer (Section 302) | Filed | ||||||||
|
Certification of Principal Executive Officer and Principal Financial Officer (Section 906) |
Furnished* | |||||||||
| 101.INS |
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
Filed | ||||||||
| 101.SCH |
Inline XBRL Taxonomy Extension Schema Document |
Filed | ||||||||
| 101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
Filed | ||||||||
| 101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase Document |
Filed | ||||||||
| 101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document |
Filed | ||||||||
| 101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
Filed | ||||||||
| 104 |
Cover Page Interactive Data File (embedded within the Inline XBRL Document and include in Exhibit 101) |
Filed |
+ Exhibits and/or schedules have been omitted. The Company hereby agrees to furnish to the staff of the Securities and Exchange Commission upon request any omitted information.
* This exhibit is being furnished rather than filed and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S-K.
Copies of this report (including the financial statements) and any of the exhibits referred to above will be furnished at no cost to our stockholders who make a written request to our Corporate Secretary at cbdMD, Inc. 2101 Westinghouse Blvd, Suite A, Charlotte, NC 28273.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf signed on the registrant’s behalf by a duly authorized officer of the registrant and by the principal financial or chief accounting officer of the registrant.
| cbdMD, INC. |
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| August 14, 2025 | By: |
/s/ T. Ronan Kennedy | |
| T. Ronan Kennedy, Chief Executive Officer and principal executive officer | |||
| August 14, 2025 | By: |
/s/ T. Ronan Kennedy |
|
| T. Ronan Kennedy, Chief Financial Officer and principal financial officer |
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| August 14, 2025 | /s/ Brad Whitford | ||
| Brad Whitford, Chief Accounting Officer | |||