ycbd_10q

10-Q 1 ycbd_10q.htm QUARTERLY REPORT ycbd_10q

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, 2021

☐

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.

56,418,287 shares of common stock are issued and outstanding as of May 12, 2021.

TABLE OF CONTENTS

		Page
		No

	PART I-FINANCIAL INFORMATION

ITEM 1.	Financial Statements.	4

ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	31

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk.	39

ITEM 4.	Controls and Procedures.	39

	PART II - OTHER INFORMATION

ITEM 1.	Legal Proceedings.	40

ITEM 1A.	Risk Factors.	40

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	40

ITEM 3.	Defaults Upon Senior Securities.	40

ITEM 4.	Mine Safety Disclosures.	40

ITEM 5.	Other Information.	40

ITEM 6.	Exhibits.	41

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”, and 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 2019" refers to the year ended September 30, 2019, “fiscal 2020” refers to the year ended September 30, 2020, “fiscal 2021” refers to the fiscal year ending September 30, 2021, "first quarter of 2020" refers to the three months ended December 31, 2019, "first quarter of 2021" refers to the three months ended December 31, 2020, "second quarter of 2020" refers to the three months ended March 31, 2020 and "second quarter of 2021" refers to the three months ended March 31, 2021.

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.

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 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 Oracle NetSuite.
●	material risks associated with regulatory environment for CBD, including:
	●	change in state laws pertaining to industrial hemp;
	●	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, 2020 as filed with the Securities and Exchange Commission (the “SEC”) on December 22, 2020 (the "2020 10-K"), and Quarterly Report on Form 10-Q for the period ended December 31, 2020 as filed with the SEC on February 9, 2021 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.

FINANCIAL STATEMENTS.

cbdMD, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

MARCH 31, 2021 AND SEPTEMBER 30, 2020

	(Unaudited)
	March 31,	September 30,
	2021	2020
Assets

Current assets:
Cash and cash equivalents	$23,711,600	$14,824,644
Accounts receivable, net	1,848,465	911,482
Accounts receivable – discontinued operations	22,217	447,134
Marketable securities	32,034	26,472
Investment other securities	1,000,000	250,000
Inventory	4,331,545	4,603,360
Inventory prepaid	478,629	288,178
Prepaid software	-	174,308
Prepaid sponsorship	1,777,304	1,203,300
Prepaid expenses and other current assets	1,544,541	983,374
Total current assets	34,746,335	23,712,252

Other assets:
Property and equipment, net	2,976,904	3,183,487
Operating lease assets	6,240,059	6,851,357
Deposits for facilities	789,583	790,708
Intangible assets, net	21,635,000	21,635,000
Goodwill	54,669,997	54,669,997
Total other assets	86,311,543	87,130,549

Total assets	$121,057,878	$110,842,801

See Notes to Condensed Consolidated Financial Statements

cbdMD, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

MARCH 31, 2021 AND SEPTEMBER 30, 2020

(continued)

	(Unaudited)
	March 31,	September 30,
	2021	2020
Liabilities and shareholders' equity

Current liabilities:
Accounts payable	$2,835,236	$2,850,421
Accrued expenses	1,729,594	2,769,920
Operating leases – short term liabilities	1,213,891	1,159,098
Paycheck Protection Program loan, current portion	1,027,403	854,000
Note payable	57,522	55,639
Total current liabilities	6,863,646	7,689,078

Long term liabilities:
Long term liabilities	-	264,367
Note payable	139,215	-
Paycheck Protection Program loan, net of current portion	428,697	602,100
Operating leases - long term liabilities	5,414,751	6,010,208
Contingent liability	22,300,000	16,200,000
Deferred tax liability	27,000	895,000
Total long term liabilities	28,309,663	23,971,675

Total liabilities	35,173,309	31,660,753

cbdMD, Inc. shareholders' equity:
Preferred stock, authorized 50,000,000 shares, $0.001 par value, 2,800,000 and 500,000 shares issued and outstanding, respectively	2,800	500
Common stock, authorized 150,000,000 shares, $0.001 par value,
56,337,787 and 52,130,870 shares issued and outstanding, respectively	56,338	52,131
Additional paid in capital	155,780,222	126,517,784
Accumulated deficit	(69,954,791)	(47,388,367)
Total cbdMD, Inc. shareholders' equity	85,884,569	79,182,048


Total liabilities and shareholders' equity	$121,057,878	$110,842,801

See Notes to Condensed Consolidated Financial Statements

cbdMD, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 2021 AND 2020

	Three months	Three months	Six Months	Six Months
	Ended	Ended	Ended	Ended
	March 31, 2021	March 31, 2020	March 31, 2021	March 31, 2020

Gross Sales	$12,457,386	$9,703,800	$25,520,568	$20,116,291
Allowances	(658,775)	(304,764)	(1,393,654)	(569,019)
Total Net Sales	11,798,611	9,399,036	24,126,914	19,547,272
Cost of sales	3,643,127	2,732,076	7,073,402	6,432,613
Gross Profit	8,155,484	6,666,960	17,053,512	13,114,659

Operating expenses	12,323,207	12,267,637	22,981,180	24,827,934
Loss from operations	(4,167,723)	(5,600,677)	(5,927,668)	(11,713,275)
Realized and Unrealized gain (loss) on marketable and other securities, including impairments	2,852	(813,152)	545,562	(875,162)
(Increase) decrease of contingent liability	(8,871,000)	21,261,994	(17,371,000)	38,160,000
Interest (expense) income	(10,603)	35,607	(20,990)	42,875
(Loss) Income before provision for income taxes	(13,046,474)	14,883,772	(22,774,096)	25,614,438

Benefit for income taxes	536,000	-	868,000	2,240,300
Net (Loss) Income from continuing operations	(12,510,474)	14,883,772	(21,906,096)	27,854,738
Net (Loss) from discontinued operations, net of tax (Note 14)	-	-	-	(41,202)
Net (Loss) Income	(12,510,474)	14,883,772	(21,906,096)	27,813,536
Preferred dividends	560,280	100,016	660,330	166,750

Net (Loss) Income attributable to cbdMD, Inc. common shareholders	$(13,070,754)	$14,783,756	$(22,566,426)	$27,646,786

Net Income (Loss) per share:
Basic earnings per share	$(0.24)	$0.41	$(0.43)	$0.76
Diluted earnings per share	(0.24)	0.40	(0.43)	0.74
Weighted average number of shares Basic:	53,471,607	36,503,005	52,793,872	36,503,005
Weighted average number of shares Diluted:	53,471,607	37,336,505	52,793,872	37,336,505

See Notes to Condensed Consolidated Financial Statements

cbdMD, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 2021 AND 2020

(Unaudited)

	Three months	Three months	Six months	Six months
	Ended	Ended	Ended

SEC Form 10-Q filed by cbdMD, Inc.