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What changed in cbdMD, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of cbdMD, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+210 added−263 removedSource: 10-K (2023-12-22) vs 10-K (2022-12-15)

Top changes in cbdMD, Inc.'s 2023 10-K

210 paragraphs added · 263 removed · 150 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

115 edited+47 added−91 removed92 unchanged
Biggest changeFuture minimum aggregate lease payments under operating leases as of September 30, 2022 are summarized as follows: For the year ended September 30, 2023 1,380,204 2024 1,421,610 2025 1,159,949 Thereafter 1,372,862 Total future lease payments 5,334,625 Less interest (475,567 ) Total lease liabilities $ 4,859,058 51 Table of Contents Future minimum lease payments (including interest) under non-cancelable operating leases as of September 30, 2021 are summarized as follows: For the year ended September 30, 2022 $ 1,405,887 2023 1,380,204 2024 1,421,610 2025 1,159,949 Thereafter 1,372,862 Total futrue lease payments 6,740,512 Less interest (730,304 ) Total lease liabilities $ 6,010,208 NOTE 15 – LOSS PER SHARE The following table sets forth the computation of basic and diluted earnings per share for the following periods: Year Ended September 30, September 30, 2022 2021 Basic: Net income (loss) $ (70,083,693 ) $ (23,394,889 ) Preferred dividends paid 4,002,005 2,554,609 Net income (loss) continuing operations adjusted for preferred dividend (74,085,698 ) (25,949,498 ) Net income (loss) attributable to cbdMD Inc. common shareholders (74,085,698 ) (25,949,498 ) Diluted: Net income (loss) (74,085,698 ) (25,949,498 ) Net income (loss) (74,085,698 ) (25,949,498 ) Shares used in computing basic earnings per share 59,750,301 54,938,128 Effect of dilutive securities: Options - - Warrants - - Convertible preferred shares - - Shares used in computing diluted earnings per share 59,750,301 54,938,128 Earnings per share Basic: Continued operations (1.24 ) (0.47 ) Discontinued operations - - Basic earnings per share (1.24 ) (0.47 ) Earnings per share Dliuted: Continued operations (1.24 ) (0.47 ) Discontinued operations - - Diluted earnings per share (1.24 ) (0.47 ) At the year ended September 30, 2022 , 3,335,750 potential shares underlying options, unvested RSUs and warrants as well as 8,335,000 convertible preferred shares were excluded from the shares used to calculate diluted loss per share as their inclusion would reduce net loss per share. 52 Table of Contents NOTE 16 – INCOME TAXES The Company generated operating losses for the years ended September 30, 2022 and 2021 on which it has recognized a full valuation allowance.
Biggest changeFuture minimum aggregate lease payments under operating leases as of September 30, 2023 are summarized as follows: For the year ended September 30, 2024 $ 1,421,610 2025 1,159,949 2026 1,372,862 2027 280,565 Total future lease payments 4,234,986 Less interest 274,046 Total lease liabilities $ 3,960,940 52 Table of Contents Future minimum lease payments (including interest) under non-cancelable operating leases as of September 30, 2022 are summarized as follows: For the year ended September 30, 2024 $ 1,421,610 2025 1,159,949 2026 1,372,862 2027 280,565 Total future lease payments 4,234,986 Less interest 274,046 Total lease liabilities $ 3,960,940 NOTE 14 – LOSS PER SHARE The following table sets forth the computation of basic and diluted earnings per share for the following periods: Year Ended September 30, September 30, 2023 2022 Basic: Net loss $ (22,938,209 ) $ (70,083,693 ) Preferred dividends paid or accrued 4,002,000 4,002,005 Net income loss attributable to cbdMD Inc. common shareholders (26,940,209 ) (74,085,698 ) Shares used in computing basic earnings per share 2,022,320 1,327,784 Shares used in computing diluted earnings per share 2,022,320 1,327,784 Earnings per share Basic: Basic earnings per share (13.32 ) (55.80 ) Earnings per share Diluted: Diluted earnings per share (13.32 ) (55.80 ) At the year ended September 30, 2023, 93,222 potential shares underlying options, unvested RSUs and warrants as well as 185,223 shares issuable upon conversion of our Series A Preferred stock and 40,404 a360 shares subject to certain vesting requirements, as well as a total 872 remaining commitment shares under the Keystone Purchase Agreement were related to the a360 transaction which are excluded from the shares used to calculate diluted loss per share as their inclusion would reduce net loss per share. 53 Table of Contents NOTE 15 – INCOME TAXES The Company generated operating losses for the years ended September 30, 2023 and 2022 on which it has recognized a full valuation allowance.
The Company has recorded this impairment charge as a reduction in the carrying value of the intangible assets on its condensed consolidated balance sheets with the corresponding impairment expense recorded on its condensed consolidated statements of operations. The Company began amortizing the trademarks over their useful lives of 20 years as of January 2022.
The Company has recorded this impairment charge as a reduction in the carrying value of the intangible assets on its consolidated balance sheets with the corresponding impairment expense recorded on its consolidated statements of operations. The Company began amortizing the trademarks over their useful lives of 20 years as of January 2022.
As of December 31, 2021, the Company has re-assessed the “cbdMD” and “HempMD” trademarks and have determined that the trademarks should be classified as definite lived intangible assets with useful lives of 20 years versus indefinite lived intangible assets.
As of December 31, 2021, the Company has re-assessed the “cbdMD” and “hempMD” trademarks and determined that the trademarks should be classified as definite lived intangible assets with useful lives of 20 years versus indefinite lived intangible assets.
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. 41 Table of Contents US GAAP requires management to evaluate tax positions taken by the Company and recognize a tax liability (or asset) if the Company has taken an uncertain tax position that more likely than not would not be sustained upon examination by the Internal Revenue Service.
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. 42 Table of Contents US GAAP requires management to evaluate tax positions taken by the Company and recognize a tax liability (or asset) if the Company has taken an uncertain tax position that more likely than not would not be sustained upon examination by the Internal Revenue Service.
The Company has reviewed its various revenue streams for its other contracts under the five -step approach. 40 Table of Contents Allocation of Transaction Price In the Company’s current business model, it does not have contracts with customers which have multiple elements as revenue is driven purely by online product sales or purchase order-based product sales.
The Company has reviewed its various revenue streams for its other contracts under the five -step approach. 41 Table of Contents Allocation of Transaction Price In the Company’s current business model, it does not have contracts with customers which have multiple elements as revenue is driven purely by online product sales or purchase order-based product sales.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED September 30, 2022 and 2021 NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization and Nature of Business cbdMD, Inc. ("cbdMD", "we", "us", “our”, or the “Company”) is a North Carolina corporation formed on March 17, 2015 as Level Beauty Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED September 30, 2023 and 2022 NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization and Nature of Business cbdMD, Inc. ("cbdMD", "we", "us", “our”, or the “Company”) is a North Carolina corporation formed on March 17, 2015 as Level Beauty Group, Inc.
Management considers these customer receivables to represent normal business risk. The Company did not have any customers that represented a significant amount of our sales for the year ended September 30, 2022 . Stock-Based Compensation The Company accounts for its stock compensation under the ASC 718 - 10 - 30, Compensation - Stock Compensation using the fair value-based method.
Management considers these customer receivables to represent normal business risk. The Company did not have any customers that represented a significant amount of our sales for the year ended September 30, 2023 . Stock-Based Compensation The Company accounts for its stock compensation under the ASC 718 - 10 - 30, Compensation - Stock Compensation using the fair value-based method.
The Company pay a fee between 2.5% and 5.0% of the transaction amounts processed. Pursuant to these agreements, there can be a waiting period between 2 to 5 days prior to reimbursement to the Company, as well as a calculated reserve which some payment processors hold back. Fees and reserves can change periodically with notice from the processors.
The Company pays a fee between 2.5% and 5.0% of the transaction amounts processed. Pursuant to these agreements, there can be a waiting period between 2 to 5 days prior to reimbursement to the Company, as well as a calculated reserve which some payment processors hold back. Fees and reserves can change periodically with notice from the processors.
During the year ended September 30, 2021 , the Company determined that a change in ownership under IRC had occurred during the year ending September 30, 2019. As a result of these ownership changes, the pre-ownership change NOL carryforwards would be limited and approximately $11.4 million of such NOLs will expire before being utilized.
During the year ended September 30, 2020, the Company determined that a change in ownership under IRC had occurred during the year ending September 30, 2019. As a result of these ownership changes, the pre-ownership change NOL carryforwards would be limited and approximately $11.4 million of such NOLs will expire before being utilized.
Under the non-amortization approach, intangible assets having indefinite lives are not amortized into the results of operations, but instead are reviewed annually or more frequently if events or changes in circumstances indicate that the assets might be impaired, to assess whether their fair value exceeds their carrying value.
Under the non-amortization approach, intangible assets having indefinite lives were not amortized into the results of operations, but instead were reviewed annually or more frequently if events or changes in circumstances indicate that the assets might be impaired, to assess whether their fair value exceeds their carrying value.
Intangible Assets The Company's intangible assets consist of trademarks and other intellectual property, all of which were previously accounted for in accordance with Accounting Standards Codification (ASC) Topic 350, Intangibles – Goodwill and Other . The Company employs the non-amortization approach to account for purchased intangible assets having indefinite lives.
Intangible Assets The Company's intangible assets consist of trademarks and other intellectual property, all of which were previously accounted for in accordance with Accounting Standards Codification (ASC) Topic 350, Intangibles – Goodwill and Other . The Company employed the non-amortization approach to account for purchased intangible assets having indefinite lives.
If there are indications that the asset’s carrying value may not be recoverable, there are two further steps involved in long-lived asset impairment testing. Step I of the impairment test, as per ASC 360, involves estimating the Recoverable Amount of the Asset Group and determining the potential for impairment.
If there are indications that the asset group's carrying value may not be recoverable, there are two further steps involved in long-lived asset impairment testing. Step I of the impairment test, as per ASC 360, involves estimating the recoverable amount of the asset group and determining the potential for impairment.
Management has analyzed the tax positions taken by the Company, and has concluded that as of September 30, 2022 and 2021 , there were no uncertain tax positions taken or expected to be taken that would require recognition of a liability (or asset) or disclosure in the consolidated financial statements.
Management has analyzed the tax positions taken by the Company, and has concluded that as of September 30, 2023 and 2022 , there were no uncertain tax positions taken or expected to be taken that would require recognition of a liability (or asset) or disclosure in the consolidated financial statements.
The equipment sale is initially valued at approximately $1.8 million for accounting purposes, the sale price consisting of a trade credit for products to be provided to the Company under the manufacturing and supply agreement and $1.4 million of which the Company invested into Steady State in the form of an equity investment consistent with the terms of Steady State's recently completed Series C financing.
The equipment sale was initially valued at approximately $1.8 million for accounting purposes, the sale price consisting of a trade credit for products to be provided to the Company under the manufacturing and supply agreement and $1.4 million of which the Company invested into Steady State in the form of an equity investment consistent with the terms of Steady State's completed Series C financing.
At September 30, 2021, the Company recorded a decrease in value of the contingent liability of $73,561 related to a decrease in the market price of our common stock, which adjusted the total contingent liability related to the Twenty Two Earnout Shares to $416,000.
At September 30, 2022, the Company recorded a decrease in value of the contingent liability of $73,561 related to a decrease in the market price of our common stock, which adjusted the total contingent liability related to the Twenty Two Earnout Shares to $416,000.
The Company reviewed ASC 480 – Distinguishing Liabilities from Equity in order to determine the appropriate accounting treatment for the preferred stock and determined that the preferred stock should be treated as equity. There were 5,000,000 and 500,000 shares of 8.0% Series A Cumulative Convertible Preferred Stock issued and outstanding at September 30, 2022 and September 30, 2021 , respectively.
The Company reviewed ASC 480 – Distinguishing Liabilities from Equity in order to determine the appropriate accounting treatment for the preferred stock and determined that the preferred stock should be treated as equity. There were 5,000,000 and 5,000,000 shares of 8.0% Series A Cumulative Convertible Preferred Stock issued and outstanding at September 30, 2023 and September 30, 2022 , respectively.
The Company began amortizing its trademarks over 20 years beginning January 1, 2022 and will perform impairment tests as prescribed by ASC 360, which states that impairment testing should be completed whenever events or changes in circumstances indicate that the asset’s carrying value may not be recoverable.
The Company began amortizing its trademarks over 20 years beginning January 1, 2022 and will perform impairment tests as prescribed by ASC 360, which states that impairment testing should be completed whenever events or changes in circumstances indicate that the asset group's carrying value may not be recoverable.
In January 2022, the Company issued 320,000 shares to a professional athlete in conjunction with an amendment to the athlete’s sponsorship agreement as referenced in Note 11. The stock grant was valuated at the fair market price of $336,000 upon issuance and will be amortized over the remaining term of the agreement.
In January 2022, the Company issued 7,112 shares to a professional athlete in conjunction with an amendment to the athlete’s sponsorship agreement as referenced in Note 11. The stock grant was valuated at the fair market price of $336,000 upon issuance and will be amortized over the remaining term of the agreement.
In addition, intangible assets will be tested on an interim basis if an event or circumstance indicates that it is more likely than not that an impairment loss has been incurred.
In addition, intangible assets would be tested on an interim basis if an event or circumstance indicates that it is more likely than not that an impairment loss has been incurred.
In January 2020, the Company entered into a loan arrangement for $35,660 for equipment, of which $3,000 is a long term note payable at September 30, 2022.
In January 2020, the Company entered into a loan arrangement for $35,660 for equipment, of which $3,000 is a long term note payable at September 30, 2023.
The number of shares of common stock available for issuance under the 2015 Plan shall automatically increase on the first trading day of our fiscal year during the term of the 2015 Plan, beginning with calendar year 2016, by an amount equal to one percent (1%) of the total number of shares of common stock outstanding on the last trading day in September of the immediately preceding fiscal year, but in no event shall any such annual increase exceed 100,000 shares of common stock.
The number of shares of common stock available for issuance under the 2015 Plan shall automatically increase on the first trading day of our fiscal year during the term of the 2015 Plan, beginning with calendar year 2016, by an amount equal to one percent (1%) of the total number of shares of common stock outstanding on the last trading day in September of the immediately preceding fiscal year, but in no event shall any such annual increase exceed 2,223 shares of common stock.
In August 2022, the Company issued 100,000 of restricted common stock to a consultant as part of an advisory agreement under the Company's Equity Compensation Plan. The stock awards were valued at the fair market price of $41,000 and vested at the grant date.
In August 2022, the Company issued 2,223 of restricted common stock to a consultant as part of an advisory agreement under the Company's Equity Compensation Plan. The stock awards were valued at the fair market price of $41,000 and vested at the grant date.
The stock awards were valued at the fair market price of $16,360 upon issuance and will amortize over the individual vesting periods. In January 2022, the Company issued 30,000 shares of restricted stock awards to six employees. The stock awards were valued at the fair market price of $29,250 and vested at the grant date.
The stock awards were valued at the fair market price of $16,360 upon issuance and will amortize over the individual vesting periods. In January 2022, the Company issued 667 shares of restricted stock awards to six employees. The stock awards were valued at the fair market price of $29,250 and vested at the grant date.
The options have a strike price of $1 and five year term. The total expense of these options totaled $131,300 and will be amortized over the term of the vesting periods.
The options have a strike price of $45 and five -year term. The total expense of these options totaled $131,300 and will be amortized over the term of the vesting periods.
The 2021 Plan also contains an “evergreen formula” pursuant to which the number of shares of common stock available for issuance under the 2021 Plan will automatically increase on October 1 of each calendar year during the term of the 2021 Plan, beginning with calendar year 2022, by an amount equal to 1.0% of the total number of shares of common stock outstanding on September 30 of such calendar year, up to a maximum of 250,000 shares.
The 2021 Plan also contains an “evergreen formula” pursuant to which the number of shares of common stock available for issuance under the 2021 Plan will automatically increase on October 1 of each calendar year during the term of the 2021 Plan, beginning with calendar year 2022, by an amount equal to 1.0% of the total number of shares of common stock outstanding on September 30 of such calendar year, up to a maximum of 5,556 shares.
These options vest upon grant and the Company has recorded an expense for these options of $79,500 for the three months ended June 30, 2022 In October 2021, the Company granted an aggregate of 75,000 common stock options to an executive officer. These options vest on October 1, 2022.
These options vest upon grant and the Company has recorded an expense for these options of $79,500 for the three months ended June 30, 2022 In October 2021, the Company granted an aggregate of 1,667 common stock options to an executive officer. These options vest on October 1, 2022.
The options vest equally over 1, 2, and 3 years from the grant date. The options have a strike price $0.84 and a five year term. The total expense of these options totaled $176,985 and will be amortized over the term of the vesting periods.
The options vest equally over 1, 2, and 3 years from the grant date. The options have a strike price $38 and a five -year term. The total expense of these options totaled $176,985 and will be amortized over the term of the vesting periods.
In performing a qualitative assessment, we review events and circumstances that could affect the significant inputs used to determine if the fair value is less than the carrying value of the intangible assets. If a quantitative analysis is necessary, we would analyze various aspects including revenues from the business, associated with the intangible assets.
In performing a qualitative assessment, we reviewed events and circumstances that could affect the significant inputs used to determine if the fair value was less than the carrying value of the intangible assets. If a quantitative analysis was necessary, we would analyze various aspects including revenues from the business, associated with the intangible assets.
In March 2022, the Company issued 20,000 of restricted stock awards to the Company’s board of directors. The shares vest quarterly one fourth on June 30, 2022, one fourth, on September 30, 2022, one fourth on December 31, 2022, and one fourth on March 31, 2023.
In March 2022, the Company issued 448 of restricted stock awards to the Company’s board of directors. The shares vest quarterly one fourth on June 30, 2022, one fourth, on September 30, 2022, one fourth on December 31, 2022, and one fourth on March 31, 2023.
Restricted Stock Award transactions: In the twelve months ended September 30, 2022: In August 2022, the Company issued 5,000 shares of restricted common stock to a newly appointed board member. The stock award was valued at the fair market price of $2,854 and vested at the grant date.
In the twelve months ended September 30, 2022: In August 2022, the Company issued 112 shares of restricted common stock to a newly appointed board member. The stock award was valued at the fair market price of $2,854 and vested at the grant date.
The initial two tranches totaling 15,250,000 shares have been valued using a market approach method and included the use of the following inputs: share price upon contractual obligation, discount for lack of marketability to address leak out restrictions, and probability of shareholder disapproval.
The initial two tranches totaling 338,889 shares have been valued using a market approach method and included the use of the following inputs: share price upon contractual obligation, discount for lack of marketability to address leak out restrictions, and probability of shareholder disapproval.
In June 2022, an former executive officer of the company forfeited 750,000 common stock options. The forfeited options had an unrecognized value of $555,286. The Company recognized contra-expense of $604,714 for the forfeited options related to the previously amortized expense for these options. In May 2022, the Company granted a new executive an aggregate of 405,000 common stock options.
In June 2022, a former executive officer of the company forfeited 16,667 common stock options. The forfeited options had an unrecognized value of $555,286. The Company recognized contra-expense of $604,714 for the forfeited options related to the previously amortized expense for these options. In May 2022, the Company granted a new executive an aggregate of 9,000 common stock options.
At September 30, 2022 , the Company has utilizable NOL carryforwards of approximately $57.7 million which for federal purposes will carryforward indefinitely. The Company accounts for its state franchise and minimum taxes as a component of its general and administrative expenses. The Company files income tax returns in the United States, and various state jurisdictions.
At September 30, 2023 , the Company has utilizable NOL carryforwards of approximately $65.9 million which for federal purposes will carryforward indefinitely. The Company accounts for its state franchise and minimum taxes as a component of its general and administrative expenses. The Company files income tax returns in the United States, and various state jurisdictions.
As a result of the SEC litigation against our former CEO, the Target provided a demand to Adara that it required cbdMD and Mr. Sumichrast to dispose of our interests in Adara Sponsor, LLC as a condition of proceeding with any business combination.
(the "Target") in consideration of the Company's original purchase price. As a result of the SEC litigation against our former CEO, the Target provided a demand to Adara that it required cbdMD and Mr. Sumichrast to dispose of our interests in Adara Sponsor, LLC as a condition of proceeding with any business combination.
The Company’s policy is to recognize interest expense and penalties related to income tax matters as tax expense. At September 30, 2021 and 2020 , there are no unrecognized tax benefits, and there are no significant accruals for interest related to unrecognized tax benefits or tax penalties.
The Company’s policy is to recognize interest expense and penalties related to income tax matters as tax expense. At September 30, 2023 and 2022, there are no unrecognized tax benefits, and there are no significant accruals for interest related to unrecognized tax benefits or tax penalties.
At September 30, 2022, the receivable from payment processors included $273,451 for the waiting period amount and is recorded as accounts receivable in the accompanying consolidated balance sheet. Inventory Inventory is stated at the lower of cost or net realizable value with cost being determined on a weighted average basis.
At September 30, 2023 , the receivable from payment processors included $585,345 for the waiting period amount and is recorded as accounts receivable in the accompanying consolidated balance sheet. Inventory Inventory is stated at the lower of cost or net realizable value with cost being determined on a weighted average basis.
In April 2022, the Company issued 200,000 options to a consultant as part of an advisory agreement under the Company's Equity Compensation Plan. Fifty thousand of the shares vested upon the grant, 50,000 vest and 6 months from the effective date and 100,000 upon renewal of the consulting agreement in March 2023.
In April 2022, the Company issued 4,445 options to a consultant as part of an advisory agreement under the Company's Equity Compensation Plan. Fifty thousand of the shares vested upon the grant, 50,000 vest and 6 months from the effective date and 2,223 upon renewal of the consulting agreement in March 2023.
The fourth quarter of the third marketing period ended on December 31, 2021 and based on the measurement criteria an additional 444,243 Earnout Shares were earned and issued in March 2022.
The fourth quarter of the third marketing period ended on December 31, 2021 and based on the measurement criteria an additional 9,873 Earnout Shares were earned and issued in March 2022.
On April 19, 2019, shareholders approved an amendment to the 2015 Plan and increased the number of shares available for issuance under the 2015 Plan to 2,000,000 and retained the annual evergreen increase provision of the plan.
On April 19, 2019, shareholders approved an amendment to the 2015 Plan and increased the number of shares available for issuance under the 2015 Plan to 45,445 and retained the annual evergreen increase provision of the plan.
The fifth quarter of the third marketing period ended on March 31, 2022 and based on the measurement criteria an additional 458,877 Earnout Shares were earned and issued in May 2022.
The fifth quarter of the third marketing period ended on March 31, 2022 and based on the measurement criteria an additional 10,198 Earnout Shares were earned and issued in May 2022.
The sixth quarter of the third marketing period ended on June 30, 2022 and based on the measurement criteria an additional 409,505 Earnout Shares were earned and issued in August 2022.
The sixth quarter of the third marketing period ended on June 30, 2022 and based on the measurement criteria an additional 9,101 Earnout Shares were earned and issued in August 2022.
The 2021 Plan made 5,000,000 common shares, either unissued or reacquired by the Company, available for awards of options, restricted stocks, other stock grants, or any combination thereof.
The 2021 Plan made 111,112 common shares, either unissued or reacquired by the Company, available for awards of options, restricted stocks, other stock grants, or any combination thereof.
In November 2021, the Company issued 120,000 shares of restricted stock awards to an employee, subject to certain revenue performances metrics through December 2022, as referenced in Note 6. These shares were forfeited during January 2022. In October 2021 the Company issued 5,000 shares of restricted stock awards to an employee, which vested immediately upon issuance.
In November 2021, the Company issued 2,667 shares of restricted stock awards to an employee, subject to certain revenue performances metrics through December 2022, as referenced in Note 6. These shares were forfeited during January 2022. In October 2021 the Company issued 112 shares of restricted stock awards to an employee, which vested immediately upon issuance.
These shares increased in value by $17,718 during the quarter through the time of issuance and had a value of $198,000 at the time of issuance, which was reclassified from the contingent liability to additional paid in capital on the consolidated balance sheet. At September 30, 2022, up to 3,928,797 remaining Earnout Shares are subject to issuance by the Company.
These shares increased in value by $17,718 during the quarter through the time of issuance and had a value of $198,000 at the time of issuance, which was reclassified from the contingent liability to additional paid in capital on the consolidated balance sheet. At September 30, 2023, up to 87,307 remaining Earnout Shares are subject to issuance by the Company.
In April 2022, the Company issued 100,000 common stock options to an employee that vest upon the Company achieving certain direct to consumer revenue growth targets for the quarter ended December 2022. The options have a $1 strike price. The Company performs analysis on these options and as of September 30, 2022 no expense was ascribed to these options.
In April 2022, the Company issued 2,223 common stock options to an employee that vest upon the Company achieving certain direct to consumer revenue growth targets for the quarter ended December 2022. The options have a $45 strike price. The Company performs analysis on these options and as of September 30, 2023 no expense was ascribed to these options.
The third quarter of the third marketing period ended on September 30, 2021 and based on the measurement criteria an additional 466,713 Earnout Shares were earned and issued in December 2021.
The third quarter of the third marketing period ended on September 30, 2021 and based on the measurement criteria an additional 10,372 Earnout Shares were earned and issued in December 2021.
In May 2022 the Company issued 125,000 shares of restricted common stock to an executive office of the Company as part of a new hire compensation package. In May 2022 the Company issued 5,000 of restricted common stock to an employee of the Company. The stock award was valued at the fair market price $3,350 of and expensed upon issuance.
In May 2022 the Company issued 2,778 shares of restricted common stock to an executive office of the Company as part of a new hire compensation package. In May 2022 the Company issued 112 of restricted common stock to an employee of the Company. The stock award was valued at the fair market price $3,350 of and expensed upon issuance.
The Merger Agreement provides that an additional 15,250,000 Earnout Shares would be issued as part of the consideration for the Mergers, upon the satisfaction of certain aggregate net revenue criteria by cbdMD within 60 months following the Closing Date as follows, as measured at four intervals (each a “marking period”): the completion of 12, 24, 42, and 59 calendar months from the Closing Date, and based upon the ratios set forth below: Aggregate Net Revenues Shares Issued/ Each $ of Aggregate Net Revenue Ratio $1 - $20,000,000 .190625 $20,000,001 - $60,000,000 .0953125 $60,000,001 - $140,000,000 .04765625 $140,000,001 - $300,000,000 .23828125 For clarification purposes, the Aggregate Net Revenues during a Marking Period shall be multiplied by the applicable Shares Issued/Each $ of Aggregate Net Revenue Ratio, minus, the number of shares issued as a result of Aggregate Net Revenues during the prior marking periods.
The Merger Agreement provides that an additional 338,889 Earnout Shares would be issued as part of the consideration for the Mergers, upon the satisfaction of certain aggregate net revenue criteria by cbdMD within 60 months following the Closing Date as follows, as measured at four intervals (each a “marking period”): the completion of 12, 24, 42, and 59 calendar months from the Closing Date, and based upon the ratios set forth below: Aggregate Net Revenues Shares Issued/ Each $ of Aggregate Net Revenue Ratio $1 - $20,000,000 0.004236111 $20,000,001 - $60,000,000 0.002118056 $60,000,001 - $140,000,000 0.001059028 $140,000,001 - $300,000,000 0.005295139 For clarification purposes, the Aggregate Net Revenues during a Marking Period shall be multiplied by the applicable Shares Issued/Each $ of Aggregate Net Revenue Ratio, minus, the number of shares issued as a result of Aggregate Net Revenues during the prior marking periods.
The Merger Agreement also provided that an additional 15,250,000 Earnout Shares can be issued upon the satisfaction of certain aggregate net revenue criteria by cbdMD within 60 months following the closing date.
The Merger Agreement also provided that an additional 338,889 Earnout Shares can be issued upon the satisfaction of certain aggregate net revenue criteria by cbdMD within 60 months following the closing date.
The Company analyzed a variety of factors on its business to determine if a circumstance could trigger an impairment loss, and, at this time and based on the information presently known, has determined that is it more likely than not that an impairment loss has occurred.
The Company analyzed a variety of factors on its business to determine if a circumstance could trigger an impairment loss, and, at the time and based on the information then known, had determined that is it was more likely than not that an impairment loss had occurred.
In June 2022, the Company issued 400,000 shares of restricted common stock in connection with the Separation Agreement with a former executive officer in which the former employee forfeited 500,000 shares of unvested restricted stock awards and 500,000 unvested options. These shares are subject to vest one -half on July 1, 2022 and the balance January 1, 2023.
In June 2022, the Company issued 8,889 shares of restricted common stock in connection with the Separation Agreement with a former executive officer in which the former employee forfeited 11,112 shares of unvested restricted stock awards and 11,112 unvested options. These shares are subject to vest one -half on July 1, 2022 and the balance January 1, 2023.
During the third quarter, the Company sold substantially all the assets of its manufacturing facility and as a result the gross investment and accumulated depreciation was removed from the balance sheet, reducing net PP&E. NOTE 5 – GOODWILL AND INTANGIBLE ASSETS Goodwill The Company had goodwill at September 30, 2021 of $56,670,970.
During the third quarter, the Company sold substantially all the assets of its manufacturing facility and as a result the gross investment and accumulated depreciation was removed from the balance sheet, reducing net PP&E NOTE 5 – GOODWILL AND INTANGIBLE ASSETS Goodwill The Company had goodwill at September 30, 2023 and September 2022 of $0.
In March 2022, the Company granted its board of directors an aggregate of 120,000 common stock options. The options vested immediately, have a strike price of $0.818 and a five -year term. The Company has recorded a total prepaid expense of $57,000 and intends to amortize the expense over the 12 -month board term.
In March 2022, the Company granted its board of directors an aggregate of 2,667 common stock options. The options vested immediately, have a strike price of $36.81 and a five -year term. The Company has recorded a total prepaid expense of $57,000 and intends to amortize the expense over the 12 -month board term.
The Company from time to time may have amounts on deposit in excess of the insured limits. The Company had a $5,752,550 uninsured balance at September 30, 2022 and a $23,508,953 uninsured balance at September 30, 2021 . Concentration of credit risk with respect to receivables is principally limited to trade receivables with corporate customers that meet specific credit policies.
The Company from time to time may have amounts on deposit in excess of the insured limits. The Company had a $1,163,360 uninsured balance at September 30, 2023 and a $5,752,550 uninsured balance at September 30, 2022. Concentration of credit risk with respect to receivables is principally limited to trade receivables with corporate customers that meet specific credit policies.
During the year ended September 30, 2021 , the Company generated enough indefinite life deferred tax assets from post-merger NOLs to reduce the naked credits to zero during the year and continue to record a valuation allowance on remaining deferred tax assets.
During the year ended September 30, 2021, the Company generated enough indefinite life deferred tax assets from post-merger NOLs to reduce the naked credits to zero during the year and continue to record a valuation allowance on remaining deferred tax assets. NOTE 16 – SUBSEQUENT EVENTS None. 55
As of September 30, 2022 and September 30, 2021, we had an allowance for doubtful accounts of $36,980 and $3,633, respectively. 38 Table of Contents Merchant Receivable The Company primarily sells its products through the internet and has an arrangement to process customer payments with multiple third -party payment processors.
As of September 30, 2023 and September 30, 2022 , we had an allowance for doubtful accounts of $42,180 and $36,980, respectively. 39 Table of Contents Merchant Receivable The Company primarily sells its products through the internet and has an arrangement to process customer payments with multiple third -party payment processors.
Stock option transactions: In the year ended September 30, 2022 : In August 2022, the Company granted a new board member an aggregate of 30,000 common stock options. The options vested immediately, have a strike price of $0.568 and a five -year term. The Company has recorded a total prepaid expense of $10,290 and were expensed at the issuance date.
In the year ended September 30, 2022: In August 2022, the Company granted a new board member an aggregate of 667 common stock options. The options vested immediately, have a strike price of $25.56 and a five -year term. The Company has recorded a total prepaid expense of $10,290 and were expensed at the issuance date.
The 2015 Plan made 1,175,000 common stock shares, either unissued or reacquired by the Company, available for awards of options, restricted stocks, other stock grants, or any combination thereof.
The 2015 Plan made 26,112 common stock shares, either unissued or reacquired by the Company, available for awards of options, restricted stocks, other stock grants, or any combination thereof.
As mentioned in Note 6, the counterparty in the earnout arrangement is a related party. NOTE 8 – SHAREHOLDERS ’ EQUITY Preferred Stock – The Company is authorized to issue 50,000,000 shares of preferred stock, par value $0.001 per share. In October 2019, the Company designated 5,000,000 of these shares as 8.0% Series A Cumulative Convertible Preferred Stock.
NOTE 8 – SHAREHOLDERS ’ EQUITY Preferred Stock – The Company is authorized to issue 50,000,000 shares of preferred stock, par value $0.001 per share. In October 2019, the Company designated 5,000,000 of these shares as 8.0% Series A Cumulative Convertible Preferred Stock.
As of September 2022 the measurement period has ended and there is no further obligation with respect to this earnout. In November of 2021 the Company entered into a contractual obligation to issue up to 120,000 RSUs to an employee.
As of September 2022 the measurement period has ended and there is no further obligation with respect to this earnout. In December 2022, the Company entered into a contractual obligation to issue up to 556 options and 556 RSUs to an employee.
In January 2022, the Company granted an aggregate of 130,000 common stock options to a group of 9 employees.
In January 2022, the Company granted an aggregate of 2,889 common stock options to a group of 9 employees.
In addition, the 8,750,000 shares in the second tranche also included an input for a discount for lack of voting rights during the vest periods.
In addition, the 194,945 shares in the second tranche also included an input for a discount for lack of voting rights during the vest periods.
Contract liabilities represent unearned revenues and are presented as deferred revenue or customer deposits on the consolidated balance sheets. The Company has no material contract assets nor contract liabilities at September 30, 2022 .
Contract liabilities represent unearned revenues and are presented as deferred revenue or customer deposits on the consolidated balance sheets. The Company had no material contract assets or liabilities at the beginning or ending of September 30, 2023 and 2022.
The Company recorded a one time non-cash expense of approximately $850,000 associated with the outstanding un-expensed portion of stock compensation expense previously issued under a higher stock price. In April 2022, effective February 2022, the Company entered into an endorsement agreement with a professional athlete.
The Company recorded a one -time non-cash expense of approximately $885,000 associated with the outstanding un-expensed portion of stock compensation expense from previously issued stock at higher stock prices. Effective February 2022, the Company entered into an endorsement agreement with a professional athlete.
We perform an annual impairment analysis as of August 1 of each fiscal year on the indefinite-lived intangible assets following the steps laid out in ASC 350 - 30 - 35 - 18. Our annual impairment analysis includes a qualitative assessment to determine if it is necessary to perform the quantitative impairment test.
We previously performed an annual impairment analysis each fiscal year on the indefinite-lived intangible assets following the steps laid out in ASC 350 - 30 - 35 - 18. Our annual impairment analysis included a qualitative assessment to determine if it was necessary to perform the quantitative impairment test.
The following table presents the components of the provision for income taxes from continuing operations for the fiscal years ended September 30, 2022 and 2021 : Year Ended September 30, 2022 2021 Current Federal $ - $ - State - - Total current - - Deferred Federal - (895,000 ) State - - Total deferred - (895,000 ) Total provision $ - $ (895,000 ) A reconciliation for the federal statutory income tax rate to the Company’s effective income tax rate is as follows: Year Ended September 30, 2022 2021 Federal statutory income tax rate 21.0 % 21.0 % State income taxes, net of federal benefit 0.4 0.8 Permanent differences (17.1 ) 1.5 Contingent derivative expense 2.5 (5.8 ) Limitation on net operating losses - - Change in valuation allowance (6.8 ) (13.8 ) Benefit from (provision for) income taxes 0.0 % 3.7 % Significant components of the Company’s deferred income taxes are shown below: Year Ended September 30, 2022 2021 Deferred tax assets: Net operating loss carryforwards $ 12,909,000 $ 9,160,000 ROU - Liability 1,087,000 1,342,000 Capital loss carryforward 702,000 716,000 Allowance for doubtful accounts 8,000 1,000 Stock compensation 833,000 1,107,000 Investments 452,000 444,000 Accrued expenses 214,000 165,000 Fixed Assets 40,000 - Inventory reserve 35,000 16,000 Capitalized expenses 48,000 52,000 Charitable contributions 45,000 43,000 Total deferred tax assets 16,373,000 13,046,000 Deferred tax liabilities: Prepaid Expenses (257,000 ) (219,000 ) ROU - Assets (1,002,000 ) (1,254,000 ) Intangibles (3,426,000 ) (4,481,000 ) Fixed assets - (162,000 ) Total deferred tax liabilities (4,685,000 ) (6,116,000 ) Net deferred tax assets 11,688,000 6,930,000 Valuation allowance (11,688,000 ) (6,930,000 ) Net deferred tax liability $ - $ - 53 Table of Contents Net deferred tax liability The Company has established a valuation allowance against net deferred tax assets due to the uncertainty that such assets will be realized.
The following table presents the components of the provision for income taxes from continuing operations for the fiscal years ended September 30, 2023 and 2022 : Year Ended September 30, 2023 2022 Current Federal $ - $ - State - - Total current - - Deferred Federal - - State - - Total deferred - - Total provision $ - $ - A reconciliation for the federal statutory income tax rate to the Company’s effective income tax rate is as follows: Year Ended September 30, 2023 2022 Federal statutory income tax rate 21.0 % 21.0 % State income taxes, net of federal benefit 1.4 0.4 Permanent differences (1.5 ) (17.1 ) Contingent derivative expense 0.2 2.5 Change in valuation allowance (21.1 ) (6.8 ) Provision for income taxes 0.0 % 0.0 % Significant components of the Company’s deferred income taxes are shown below: Year Ended September 30, 2023 2022 Deferred tax assets: Net operating loss carryforwards $ 14,784,000 $ 12,909,000 ROU - Liability 824,000 1,087,000 Capital loss carryforward 702,000 702,000 Allowance for doubtful accounts 9,000 8,000 Stock compensation 521,000 833,000 Intangibles 105,000 - Investments 180,000 452,000 Accrued expenses 87,000 214,000 Fixed Assets 45,000 40,000 Inventory reserve 28,000 35,000 Capitalized expenses 43,000 48,000 Charitable contributions 39,000 45,000 Total deferred tax assets 17,367,000 16,373,000 Deferred tax liabilities: Prepaid Expenses (107,000 ) (257,000 ) ROU - Assets (750,000 ) (1,002,000 ) Intangibles - (3,426,000 ) Total deferred tax liabilities (857,000 ) (4,685,000 ) Net deferred tax assets 16,510,000 11,688,000 Valuation allowance (16,510,000 ) (11,688,000 ) Net deferred tax liability $ - $ - 54 Table of Contents Net deferred tax liability The Company has established a valuation allowance against net deferred tax assets due to the uncertainty that such assets will be realized.
In August 2022, the Company issued 100,000 of restricted common stock to a consultant as part of an advisory agreement under the Company's Equity Compensation Plan. The stock awards were valued at the fair market price of $41,000 and vested at the grant date.
The stock award was valued at the fair market price of $2,854 and vested at the grant date. In August 2022, the Company issued 2,223 of restricted common stock to a consultant as part of an advisory agreement under the Company's Equity Compensation Plan.
The potential base payments, if all services are provided is $1,500,000 over the term of the agreement, in addition to some incentives for sales directly influenced by the athlete.
The potential base payments, if all services are provided is $1,500,000 over the term of the agreement, in addition to some incentives for sales directly influenced by the athlete. During May 2023, the Company exercised its rights to terminate the contract.
The following table summarizes the inputs used for the Black-Scholes pricing model on the warrants issued in the year ended September 30, 2022 and 2021 : 2022 2021 Weighted average exercise price $ - $3.74 Risk free interest rate 0.00 % 0.39% - 0.89% Volatility 0.00 % 103.42 % Expected term (in years) - 2.75 Divident yield - None NOTE 9 -STOCK-BASED COMPENSATION Equity Compensation Plan – On June 2, 2015, the Board of Directors of the Company approved the 2015 Equity Compensation Plan ( “2015 Plan”).
The following table summarizes the inputs used for the Black-Scholes pricing model on the warrants issued in the year ended September 30, 2023: 2023 Weighted average exercise price $ 2.52 Risk free interest rate 3.37 % Volatility 113.12 % Expected term (in years) 2.75 Dividend yield None NOTE 9 -STOCK-BASED COMPENSATION Equity Compensation Plan – On June 2, 2015, the Board of Directors of the Company approved the 2015 Equity Compensation Plan ( “2015 Plan”).
The Company has recorded an expense for these options of $124,217 for the year ended September 30, 2022 . The expected volatility rate was estimated based on comparison to the volatility of a blend of the Company's own stock and a peer group of companies in similar industries.
The Company has recorded an expense for these options of $23,025 and $46,050 for the three and twelve months ended September 30, 2023. The expected volatility rate was estimated based on comparison to the volatility of a blend of the Company's own stock and a peer group of companies in similar industries.
In addition to the trade name, DCO has a technology platform used to market to its customer and the Company believes it has a 4 year life.
The tradename will be used in marketing and branding of the website. The Company believes the trade name has a 10 year life. In addition to the trade name, DCO has a technology platform used to market to its customer and the Company believes it has a 4 year life.
Payment terms vary and can typically be 30 days from the date control over the product is transferred to the customer The following table represents a disaggregation of revenue by sales channel: Fiscal 2022 % of total Fiscal 2021 % of total E-commerce sales $ 26,435,203 74.7 % $ 32,907,956 74.0 % Wholesale sales 8,968,021 25.3 % 11,572,807 26.0 % Total Net Sales $ 35,403,224 $ 44,480,763 Contract assets represent unbilled receivables and are presented within accounts receivable, net on the consolidated balance sheets.
Payment terms vary and can typically be 30 days from the date control over the product is transferred to the customer The following table represents a disaggregation of revenue by sales channel: Fiscal 2023 % of total Fiscal 2022 % of total E-commerce sales $ 19,436,124 80.5 % $ 26,435,203 74.7 % Wholesale sales $ 4,719,238 19.5 % $ 8,968,021 25.3 % Total Net Sales $ 24,155,362 $ 35,403,224 Contract assets represent unbilled receivables and are presented within accounts receivable, net on the consolidated balance sheets.
As consideration for the Mergers in April of 2019, the Company issued 15,250,000 shares of our common stock to the members of Cure Based Development, of which unrestricted voting rights to 8,750,000 of the shares vested over a five -year period and 2,187,500 shares remain subject to a voting proxy agreement as of September 30, 2022, as well as to issue another 15,250,000 shares of our common stock (the “Earnout Shares”) in the future upon certain earnout goals (the “Earnout Rights”) being achieved within five years from the closing of the Mergers, and 3,928,792 Earnout Shares remain subject to Earnout Rights at September 30,2022.
As consideration for the Mergers in April of 2019, the Company issued 338,889 shares of our common stock to the members of Cure Based Development, of which unrestricted voting rights to 194,945 of the shares vested over a five -year period and 48,612 shares remain subject to a voting proxy agreement as of September 30, 2023, as well as to issue another 338,889 shares of our common stock (the “Earnout Shares”) in the future upon certain earnout goals (the “Earnout Rights”) being achieved within five years from the closing of the Mergers.
Components of operating lease costs are summarized as follows: Year Ended September 30, 2022 Total Operating Lease Costs $ 1,391,856 Supplemental cash flow information related to operating leases is summarized as follows: Year Ended September 30, 2022 Cash paid for amounts included in the measnurement of operating lease liabilities $ 1,405,887 As of September 30, 2022 , our operating leases had a weighted average remaining lease term of 3.91 years and a weighted average discount rate of 4.66%.
Components of operating lease costs are summarized as follows: Year Ended September 30, 2023 Total Operating Lease Costs $ 1,328,497 Supplemental cash flow information related to operating leases is summarized as follows: Year Ended September 30, 2023 Cash paid for amounts included in the measurement of operating lease liabilities $ 1,380,204 As of September 30, 2023 , our operating leases had a weighted average remaining lease term of 2.99 years and a weighted average discount rate of 4.66%.
Addendum No. 1 did not change any of the terms of the fourth marking period (as that term is defined in the Merger Agreement). This change did not impact the fair value of the contingent liability.
Addendum No. 1 did not change any of the terms of the fourth marking period (as that term is defined in the Merger Agreement). This change did not impact the fair value of the contingent liability. The value of the contingent liability was $90,362 and $276,000 at September 30, 2023 and September 30, 2022, respectively.
As previously disclosed, during June of 2022, the Company's CEO resigned from the board of directors and his role as an executive for the Company in June 2022 under the terms of a separation agreement with the Company. This resignation was associated with the SEC action taken against this former executive and the Company was not named in the action.
As previously disclosed, during June of 2022, the Company's CEO resigned from the board of directors and his role as an executive of the Company in June 2022 under the terms of a separation agreement with the Company.
Advertising Costs The Company expenses all costs of advertising and related marketing and promotional costs as incurred. The Company incurred $14,332,235 and $15,835,139 in advertising and marketing and promotional costs included in operating expenses during the years ended September 30, 2022 and 2021 respectively.
Advertising Costs The Company expenses all costs of advertising and related marketing and promotional costs as incurred. The Company incurred $6.0 million and $14.3 million in advertising and marketing and promotional costs included in operating expenses during the years ended September 30, 2023 and 2022 respectively.
The table below summarizes the assets valued at fair value as of September 30, 2022 : In Active Markets for Significant Other Identical Assets Observable Total Fair Value and Liabilities Inputs at September 30, (Level 1) (Level 2) 2022 Balance at September 30, 2020 $ 26,472 $ - $ 26,472 Change in value of equities 6,879 - 6,879 Additional Investment - - - Balance at September 30, 2021 33,351 - 33,351 Change in value of equities (33,351 ) (33,351 ) Additional Investment - - Balance at September 30, 2022 $ - $ - $ - 43 Table of Contents NOTE 3 – INVENTORY Inventory at September 30, 2022 and 2021 consists of the following: Septmeber 30 September 30, 2022 2021 Finished Goods $ 3,198,488 $ 3,362,897 Inventory Components 1,213,724 1,729,176 Inventory Reserve (156,298 ) (70,206 ) Inventory prepaid 511,459 551,519 Total Inventory $ 4,767,373 $ 5,573,386 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 year ended September 30, 2022 .
The table below summarizes the assets and liabilities valued at fair value as of September 30, 2023 : In Active Markets for Significant Other Significant Identical Assets Observable Unobservable and Liabilities Inputs Inputs (Level 1) (Level 2) (Level 3) Balance at September 30, 2021 $ 33,351 $ - $ (9,856,000 ) Change in value of equities (33,351 ) - - Change in value of contingent liability - - 9,580,000 Additional Investment - - - Balance at September 30, 2022 - - (276,000 ) Change in value of contingent liability - - 185,638 Additional Investment - - - Balance at September 30, 2023 $ - $ - $ (90,362 ) NOTE 3 – INVENTORY Inventory at September 30, 2023 and 2022 consists of the following: September 30, September 30, 2023 2022 Finished Goods $ 2,782,680 $ 3,198,488 Inventory Components 1,397,034 1,213,724 Inventory Reserve (126,742 ) (156,298 ) Inventory prepaid 182,675 511,459 Total Inventory $ 4,235,647 $ 4,767,373 44 Table of Contents 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 year ended September 30, 2023.
In March 2022 the Company issued 444,243 shares of restricted common stock in connection with the Earnout Shares as referenced in Note 6. In January 2022, the Company issued 30,000 shares of restricted stock awards to six employees. The stock awards were valued at the fair market price of $29,250 and vested at the grant date.
The stock awards were valued at the fair market price of $41,000 and vested at the grant date. In August 2022, the Company issued 9,101 shares of restricted common stock in connection with the Earnout Shares as referenced in Note 6.
Intangible assets as of September 30, 2022 and 2021 consisted of the following: September 30, September 30, 2022 2021 Trademark related to cbdMD $ 21,585,000 $ 21,585,000 Trademark for HempMD 50,000 50,000 Technology Relief from Royalty related to DirectCBDOnline.com 667,844 667,844 Tradename related to DirectCBDOnline.com 749,567 749,567 Impairment of definite lived intanigble assets: (4,285,000 ) - Amortization of definite lived intangible assets: (932,862 ) (48,482 ) Total $ 17,834,549 $ 23,003,929 44 Table of Contents Future amortization of intangible assets as of September 30, 2022 is as follow: For the year ended September 30, 2023 1,109,418 2024 1,109,418 2025 1,074,634 2026 942,457 2027 942,457 Thereafter 12,656,165 Total future intangibles amortization $ 17,834,549 Goodwill as of September 30, 2022 and 2021 consisted of the following: Goodwill at September 30, 2021 $ 56,670,970 Impairment of goodwill (56,670,970 ) Goodwill at September 30, 2022 $ - NOTE 6 – CONTINGENT LIABILITY As consideration for the Mergers, described in Note 1, the Company had a contractual obligation to issue 15,250,000 shares of its common stock, after approval by its shareholders, to the members of Cure Based Development, issued in two tranches 6,500,000 shares and 8,750,000 shares, both of which are subject to leak out provisions, and the unrestricted voting rights to 8,750,000 tranche of shares vesting over a five year period and are subject to a voting proxy agreement.
Intangible assets as of September 30, 2023 and 2022 consisted of the following: September 30, September 30, 2023 2022 Trademark related to cbdMD $ 21,585,000 $ 21,585,000 Trademark for HempMD 50,000 50,000 Technology Relief from Royalty related to DirectCBDOnline.com 667,844 667,844 Tradename related to DirectCBDOnline.com 749,567 749,567 Impairment of definite lived intangible assets: (17,504,000 ) (4,285,000 ) Amortization of definite lived intangible assets: (2,329,321 ) (932,862 ) Total $ 3,219,090 $ 17,834,549 45 Table of Contents Future amortization of intangible assets as of September 30, 2023 is as follow: For the year ended September 30, 2024 $ 691,368 2025 688,757 2026 660,040 2027 660,040 2028 496,223 Thereafter 22,662 Total future intangibles amortization $ 3,219,090 NOTE 6 – CONTINGENT LIABILITY As consideration for the Mergers, described in Note 1, the Company had a contractual obligation to issue 338,889 shares of its common stock, after approval by its shareholders, to the members of Cure Based Development, issued in two tranches of 144,445 shares and 194,945 shares, both of which are subject to leak out provisions, and the unrestricted voting rights to 194,945 tranche of shares vesting over a five year period and are subject to a voting proxy agreement.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf we do not adapt to meet these evolving challenges, the strength of our brand may erode, the quality of our products may suffer, we may not be able to deliver products on a timely basis to our customers, and our corporate culture may be harmed.
Biggest changeIf we do not adapt to meet these evolving challenges, the strength of our brand may erode, the quality of our products may suffer, we may not be able to deliver products on a timely basis to our customers, and our corporate culture may be harmed. 10 Table of Contents In addition, we may make investments in our research and development and sales and marketing organizations, expand our operations and infrastructure both domestically and internationally, design and develop new products, and enhance our existing products with newly developed products and through acquisitions.
A large part of our success depends on our ability to attract new customers in a cost-effective manner. We have made, and may continue to make, significant investments in attracting new customers through increased advertising spends on social media, radio, podcasts, and targeted email communications, other media and events, sponsorships, and influencer sponsorships.
A large part of our success depends on our ability to attract new customers in a cost-effective manner. We have made, and may continue to make, significant investments in attracting new customers through advertising spends on social media, radio, podcasts, targeted email communications, other media and events, sponsorships, and influencer sponsorships.
We may be required to record future impairments of goodwill, other intangible assets, or fixed assets to the extent the fair value of these assets falls below their book value. Our estimates of fair value are based on assumptions regarding future cash flows, gross margins, expenses, discount rates applied to these cash flows, and current market estimates of value.
We may be required to record future impairments of other intangible assets, or fixed assets to the extent the fair value of these assets falls below their book value. Our estimates of fair value are based on assumptions regarding future cash flows, gross margins, expenses, discount rates applied to these cash flows, and current market estimates of value.
We do not have any long-term contracts with any of these third parties, and we expect to compete with other companies for raw materials, production and imported packaging material capacity.
We do not have any long-term committed contracts with any of these third parties, and we expect to compete with other companies for raw materials, production and imported packaging material capacity.
Also, payment of our dividends depends upon our financial condition and other factors as our board of directors may deem relevant from time to time.
Payment of our dividends depends upon our financial condition and other factors as our board of directors may deem relevant from time to time.
Continued development of the industrial hemp industry will be dependent upon new legislative authorization of industrial hemp at the state level, expansion of current state approvals for hemp products, and further amendment or supplementation of legislation at the federal level, including re-authorization and expansion of the hemp language in the upcoming 2023 Farm Act.
Continued development of the industrial hemp industry will be dependent upon new legislative authorization of industrial hemp at the state level, expansion of current state approvals for hemp products, and further amendment or supplementation of legislation at the federal level, including re-authorization and expansion of the hemp language in the upcoming 2024 Farm Act.
The consent of the holders of a majority of the Series A Convertible Preferred Stock, voting as a class, is required if we were to seek to adopt any amendment to our articles of incorporation or bylaws that would materially affect existing terms of the Series A Convertible Preferred Stock, or increase the number of authorized shares of that series, other than in connection with the anti-dilution provisions, or if we seek to create a series or class which ranks pari passu with the Series A Convertible Preferred Stock.
The consent of the holders of two thirds of the Series A Convertible Preferred Stock, voting as a class, is required if we were to seek to adopt any amendment to our articles of incorporation or bylaws that would materially affect existing terms of the Series A Convertible Preferred Stock, or increase the number of authorized shares of that series, other than in connection with the anti-dilution provisions, or if we seek to create a series or class which ranks pari passu with the Series A Convertible Preferred Stock.
We have no control over these third parties and if these relationships are disrupted our results of operations in future periods will be adversely impacted. We currently hold short term supply contracts with unaffiliated third-party vendors for our critical raw materials.
We have no control over these third parties and if these relationships are disrupted our results of operations in future periods will be adversely impacted. We currently hold short-term supply and manufacturing agreements with unaffiliated third-party vendors for our critical raw materials.
RISKS RELATED TO THE REGULATORY ENVIRONMENT FOR CBD Changes to Federal or state laws pertaining to industrial hemp could slow the use of industrial hemp which would materially impact our revenues in future periods.
RISKS RELATED TO THE REGULATORY ENVIRONMENT FOR CBD Lack of clarity and changes to Federal or state laws pertaining to industrial hemp could slow the use of industrial hemp which would materially impact our revenues in future periods.
These and other factors raise potential concern about the Company’s ability to continue as a going concern within twelve months after the date that the annual financial statements are issued.
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 the annual financial statements are issued.
Continued growth may increase the strain on our resources, and we could experience operating difficulties, including without limitations, difficulties in sourcing, logistics, recruiting, maintaining internal controls, marketing, designing innovative products, and meeting consumer needs.
This process may increase the strain on our resources, and we could experience operating difficulties, including without limitations, difficulties in sourcing, logistics, recruiting, maintaining internal controls, marketing, designing innovative products, and meeting consumer needs.
If we are forced to liquidate our assets to pay our creditors, we may not have sufficient assets to pay amounts due on any or all of the Series A Convertible Preferred Stock then outstanding. We may not be able to pay dividends on the Series A Convertible Preferred Stock.
If we are forced to liquidate our assets to pay our creditors, we may not have sufficient assets to pay amounts due on any or all of the Series A Convertible Preferred Stock then outstanding. We are currently unable to pay dividends on the Series A Convertible Preferred Stock.
If our sales do not increase at a sufficient rate to offset our operating expenses, our profitability may decline in future periods. 10 Table of Contents Our business depends on maintaining and strengthening our brand and generating and maintaining ongoing demand for our products, and a significant reduction in such demand could harm our results of operations.
If our sales do not increase at a sufficient rate to offset our operating expenses, our losses may increase in future periods. Our business depends on maintaining and strengthening our brand and generating and maintaining ongoing demand for our products, and a significant reduction in such demand could harm our results of operations.
In May of 2022, our former Co-CEO was indicted civily by the SEC for activities prior to 2019. While the Company was not named as a defendant and we strongly believe no improprieties occurred by the Company, his ongoing legal proceedings and any association could impact customers and investors perception of the Company.
In May of 2022, our former Co-CEO was indicted civilly by the SEC for activities prior to 2019. While the Company was not named as a defendant and we strongly believe no improprieties occurred by the Company, his ongoing legal proceedings and any association could impact customers and investors perception of the Company. ITEM 1B. UNRESOLVED STAFF COMMENTS.
We believe that our revenue growth will depend upon, among other factors: ● Increasing U.S. brand awareness; ● Our ability to obtain adequate protections for our intellectual property; ● Product innovation to expand our total addressable market; and ● International expansion.
We believe that our revenue growth will depend upon, among other factors: ● Increasing U.S. brand awareness; ● Our ability to obtain adequate protections for our intellectual property; ● Product innovation to expand our total addressable market; and ● International expansion. We made significant changes to our headcount to rationalize our expenses.
If the NYSE American delists either our common stock and/or our Series A Convertible Preferred Stock, investors may face material adverse consequences, including, but not limited to, a lack of trading market for our securities, reduced liquidity, decreased analyst coverage of our securities, and an inability for us to obtain any additional financing to fund our operations that we may need.
If the NYSE American delists either our common stock and/or our Series A Convertible Preferred Stock, investors may face material adverse consequences, including, but not limited to, a lack of trading market for our securities, reduced liquidity, decreased analyst coverage of our securities, and an inability for us to obtain any additional financing to fund our operations that we may need. 14 Table of Contents The Series A Convertible Preferred Stock ranks junior to all of our indebtedness and other liabilities and is effectively junior to all indebtedness and other liabilities of our subsidiaries.
Our ability to pay cash dividends on the Series A Convertible Preferred Stock requires us to (i) either be able to pay our debts as they become due in the usual course of business, or (ii) have total assets that are greater than the sum of our total liabilities plus the amount that would be needed if we were to be dissolved at the time of the distribution to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the distribution.
In order for us to be eligible to pay the dividend, state law requires us to (i) either be able to pay our debts as they become due in the usual course of business, or (ii) have total assets that are greater than the sum of our total liabilities plus the amount that would be needed if we were to be dissolved at the time of the distribution to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the distribution.
RISKS RELATED TO OUR OVERALL BUSINESS We have a history of losses from operations and there are no assurances we will report profitable operations in future periods or continue as a going concern. We reported losses from operations of $78,177,746 and $19,615,990 for fiscal 2022 and fiscal 2021, respectively.
RISKS RELATED TO OUR OVERALL BUSINESS We have a history of losses from operations and there are no assurances we will report profitable operations in future periods or continue as a going concern. We reported losses from operations of $24.2 million and $78.3 million for fiscal year 2023 and fiscal year 2022, respectively.
If our goodwill, other intangible assets, or fixed assets become impaired, we may be required to record a charge to our earnings. During fiscal 2022, we incurred $56,670,970 of Goodwill impairment and $4,285,000 of Intangible impairment as noted in Note 5 of our financial statements.
If our other intangible assets, or fixed assets become impaired, we may be required to record a charge to our earnings. During fiscal year 2023 and 2022, we incurred $0 and $56.67 million, respectively of goodwill impairment and $13.22 and $4.29 million, respectively, of intangible impairment as noted in Note 5 of our financial statements.
This decrease was primarily driven by a decrease in total orders year over year in both our direct to consumer and wholesale divisions and we believe associate with (i) changes in social algorithms and IOS that affect effectiveness and cost of marketing and acquiring new customers (ii) access to certain channels (iii) significant inflationary pressures on consumers and businesses alike.
This decrease was primarily driven by a decrease in total orders year over year in both our direct to consumer and wholesale divisions and we believe associate with (i) changes in social algorithms and IOS that affect effectiveness and cost of marketing and acquiring new customers, (ii) access to certain channels, (iii) ongoing competitive environment, (iv) statements from the FDA that negatively impacted retailer interest in the category, (v) significant inflationary pressures on consumers and businesses alike and (vi) a significant reduction in marketing spend as we rationalize expenses.
Included in our loss from operation is a non-cash $56,670,970 and $0 impairment of goodwill for fiscal 2022 and fiscal 2021, respectively as well as an impairment of $4,285,000 and $0 on our trade names for fiscal 2022 and 2021, respectively.
Included in our loss from operation is a non-cash $0 and $56.6 million impairment of goodwill for fiscal year 2023 and fiscal year 2022, respectively as well as an impairment of $13.2 and $4.3 million on our trade names for fiscal 2023 and 2022, respectively.
In order to maintain these listings, we must maintain certain share prices, financial and share distribution targets, including maintaining a minimum amount of shareholders’ equity and a minimum number of public shareholders.
Both our common stock and our Series A Convertible Preferred Stock are listed on the NYSE American. In order to maintain these listings, we must maintain certain share prices, financial and share distribution targets, including maintaining a minimum amount of shareholders’ equity and a minimum number of public shareholders.
Not included in our loss from operations for fiscal 2022 and fiscal 2021 is non-cash income of $8,473,999 and non-cash expense of $6,687,439 for fiscal 2022 and fiscal 2021, respectively, reflecting a change in value of the contingent liability associated with the Earnout Shares (as hereinafter defined) primarily as a result of the change in the market price of our common stock.
Not included in our loss from operations for fiscal 2023 is a $0.70 million impairment non-cash charge pertaining to our ownership interest in Steady State, LLC as well as a non-cash income of $0.19 million and non-cash expense of $8.47 million for fiscal 2023 and fiscal 2022, respectively, reflecting a change in value of the contingent liability associated with the Earnout Shares (as hereinafter defined) primarily as a result of the change in the market price of our common stock.
In addition to our obligation to issue the Earnout Shares if the goals are met, we presently have options, unvested restricted stock awards and warrants that if exercised would result in the issuance of an additional 4,175,417 shares of our common stock, and our Series A Convertible Preferred Stock is presently convertible into an additional 8,335,000 shares of common stock.
We presently have options, unvested restricted stock awards and warrants that if exercised would result in the issuance of an additional 93,222 shares of our common stock, and our Series A Convertible Preferred Stock is presently convertible into an additional 185,223 shares of common stock.
We are subject to the continued listing standards of the NYSE American and our failure to satisfy these criteria may result in de-listing of our securities. Both our common stock and our Series A Convertible Preferred Stock are listed on the NYSE American.
If these uncertainties continue, they may have an adverse effect upon the introduction of our products in different markets. RISKS RELATED TO OWNERSHIP OF OUR SECURITIES We are subject to the continued listing standards of the NYSE American and our failure to satisfy these criteria may result in de-listing of our securities.
We have a limited history operating our business at its current scale. As a result of our growth, our employee headcount and the scope and complexity of our business have increased substantially, and we are continuing to implement policies and procedures that we believe are appropriate for a company of our size.
We are continuing to implement policies and procedures that we believe are appropriate for a company of our size. We may continue to experience difficulties as we continue to implement changes to our business and related policies and procedures to manage our business to positive cash flow.
Our historical growth rates may not be sustainable or indicative of future growth and we may not be able to effectively manage our growth. Historically we expanded our operations rapidly, however in the last year we have seen challenges maintaining revenue. Net sales decreased $9 million, or 20%, to $35.4 million in 2022, as compared to $44.5 million in 2021.
Our recent negative growth rates may continue. We have now had 2 consecutive fiscal years of revenue declines as the industry and Company have faced numerous headwinds. Net sales decreased $11.2 million or 32% to $24.2 million in fiscal 2023 and $9.0 million, or 20%, to $35.4 million in 2022, as compared to $44.5 million in 2021.
Removed
With ongoing COVID variants, we continue to assess the situation on a regular basis and adjust our business, priorities, and processes to enable us to continue to operate effectively. We are unable to predict the future impact of COVID-19 and any subsequent variant and when, or if, our sales to B2B brick and mortar customers will return to prior levels.
Added
In the event our revenues do not increase, we will need to raise additional capital to fund our operations in furtherance of our business plan. Until we are profitable, we will need to raise additional capital during the current fiscal year in order to fund our operations in furtherance of our business plan.
Removed
We may continue to experience difficulties as we continue to implement changes to our business and related policies and procedures to keep pace with our recent growth and, if our operations continue to grow at a rapid pace, in managing such growth and building the appropriate processes and controls in the future.
Added
A potential financing may include shares of common stock, shares of preferred stock, warrants to purchase shares of common stock or preferred stock, debt securities, units consisting of the foregoing securities, equity investments from strategic development partners or some combination of each.
Removed
In addition, we may make investments in our research and development and sales and marketing organizations, expand our operations and infrastructure both domestically and internationally, design and develop new products, and enhance our existing products with newly developed products and through acquisitions.
Added
Any additional equity financings may be financially dilutive to, and will be dilutive from an ownership perspective to, our stockholders, and such dilution may be significant based upon the size of such financing. Additionally, we cannot assure that such funding will be available on a timely basis, in needed quantities, or on terms favorable to us, if at all.
Removed
If these uncertainties continue, they may have an adverse effect upon the introduction of our products in different markets. RISKS RELATED TO OWNERSHIP OF OUR SECURITIES The impact of changes in the fair value of our non-cash contingent liabilities associated with the Earnout Shares has, and may continue to, materially impact our results of operations in future periods.
Added
Our current capitalization limits our ability to make strategic or accretive acquisitions or attract new investors . Our management has engaged in several strategic discussions for both soliciting strategic investment as well as mergers and acquisitions (“M&A”). Our outstanding shares of Series A Preferred Stock continues to substantially limit opportunities to negotiate strategic investment or M&A.
Removed
As described in Note 6 to the notes to our consolidated financial statements appearing later in this report, at September 30, 2022, we have a contractual obligation to issue up to an additional 3,928,797 shares of our common stock (the “Earnout Shares”) as additional consideration for our acquisition of Cure Based Development LLC in December 2018.
Added
Potential investors and merger candidates view both the dividend obligation as well as the $50 million in Series A Preferred Stock liquidation preference a challenging burden, which impacts management’s ability to negotiate potential opportunities at reasonable terms and conditions.
Removed
Under U.S. generally accepted accounting principles (“GAAP”) we are required to record a non-cash contingent liability associated with the Earnout Shares and at September 30, 2022, the total of this contingent liability was $276,000.
Added
Additionally, the change of control rights of the Series A Preferred, which provide for a $55 million redemption right, effectively prevents any future third party from making a bona fide offering to acquire our company or our assets which could provide value to our shareholders.
Removed
Under GAAP we are obligated to reassess the obligations associated with the Earnout Shares on a quarterly basis and, in the event our estimate of the fair value of the contingent consideration changes, we will record increases or decreases in the fair value as an adjustment to earnings.
Added
As we continue to act on our plan to rebuild revenues and seek accretive acquisition opportunities and working capital (although as of the date of this report we currently do not have any pending or potential acquisitions or financing alternatives), our outstanding shares of Series A Preferred Stock negatively affect our ability to seek, engage and conduct strategic transactions or raise capital that could have a significant positive impact for its shareholders.
Removed
In particular, changes in the market price of our common stock, which is one of the inputs used in determining the amount of the non-cash contingent liability, will result in increases or decreases in this liability and positively or negatively impact our net loss or profit for the period.
Added
Despite this reduction in revenue, we have made consistent reduction of quarterly cash consumed by the business over this 2 year period.
Removed
The application of the accounting treatment for the fair valuing of the Earnout Shares, in addition to the issuance of earnout shares for the first, second, third and fourth marking periods, at September 30, 2022 resulted in a decrease in the amount of this non-cash contingent liability of $8,473,999 for fiscal 2022 as compared to an increase of $6,6,87,439 for fiscal 2021.
Added
During August 2023, the Company’s board of directors suspended dividend payment on the Series A Convertible Preferred Stock. We do not anticipate paying any accrued or future dividends on our Series A Convertible Preferred Stock in the future.
Removed
While we do not believe investors should place undue reliance on the impact of these non-cash changes when evaluating our results of operations in future periods, as they have no impact on the operations of the business, we expect that the fair valuing of the Earnout Shares will continue to have a material impact on our results of operations and our shareholders’ equity in future periods, which may materially impact the market price of our securities.
Removed
We are currently in the Fourth Marking Period which runs from July 2022 through November 2023. Based on the net revenue multipliers, the Company would need to generate over $162 million in net revenue for all the remaining Earnout Shares to vest during this final marking period.
Removed
The issuances of the Earnout Shares will significantly dilute our existing shareholders. The possible issuance of the remaining Earnout Shares will increase our issued and outstanding shares of common stock by approximately 6.5%.
Removed
In addition, assuming the possible issuance of all of the additional remaining 3,928,797 Earnout Shares but giving effect to no other change to the number of shares of our common stock issued and outstanding, the members of Cure Based Development from the merger, which includes our former Co-CEO and current board member, Mr. R.
Removed
Scott Coffman and together with other members of our board of directors and management, would own approximately 32% of our then outstanding shares of common stock.
Removed
The issuance of all or a portion of the Earnout Shares will dilute the ownership interests of our common shareholders and may adversely impact the market price of our common stock. 14 Table of Contents The Series A Convertible Preferred Stock ranks junior to all of our indebtedness and other liabilities and is effectively junior to all indebtedness and other liabilities of our subsidiaries.
Removed
Further, notwithstanding these factors, we may not have sufficient cash to pay dividends on the Series A Convertible Preferred Stock. Our ability to pay dividends may be impaired if any of the risks described in this report were to occur.
Removed
Our executive officers, directors and their affiliates may exert control over us and may exercise influence over matters subject to shareholder approval. Our executive officers and directors, together with their respective affiliates, beneficially own approximately 31% of our outstanding common stock as of December 1, 2022.
Removed
Accordingly, these shareholders, if they act together, may exercise substantial influence over matters requiring shareholder approval, including the election of directors and approval of corporate transactions, such as a merger.
Removed
This concentration of ownership could have the effect of delaying or preventing a change in control or otherwise discourage a potential acquirer from attempting to obtain control over us, which in turn could have a material adverse effect on the market value of our common stock. ITEM 1B. UNRESOLVED STAFF COMMENTS. Not applicable to a smaller reporting company.

Item 2. Properties

Properties — owned and leased real estate

1 edited+2 added−0 removed1 unchanged
Biggest changeWe also have an 80,000 square foot warehouse in Charlotte, North Carolina under an agreement which began November 2019 and goes through December 2024. The agreement calls for an annual base monthly rent of $34,766, inclusive of monthly TICAM for the first year and the rent escalates 3% annually. 16 Table of Contents
Biggest changeWe also have an 80,000 square foot warehouse in Charlotte, North Carolina under an agreement which began November 2019 and goes through December 2024. The agreement calls for an annual base monthly rent of $34,766, inclusive of monthly TICAM for the first year and the rent escalates 3% annually.
Added
We are currently behind in lease payments on our headquarter facility, received a default notice from the landlord in September 2023, and are attempting to renegotiate with the landlord and find another party to sublet or assume our lease.
Added
We currently sublet a portion of our warehouse to offset its expense. 16 Table of Contents

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

4 edited+1 added−3 removed2 unchanged
Biggest changeOn March 4, 2021 the Court granted cbdMD’s motion to stay the case until the FDA or Congress takes definitive action on the regulatory status of CBD. The Company believes this matter will eventually be dismissed but there is no timeline on when the FDA or Congress will take action so the case is expected to be stayed indefinitely.
Biggest changeOn March 4, 2021 the Court granted cbdMD’s motion to stay the case until the FDA or Congress takes definitive action on the regulatory status of CBD and the case remains in this status as of this filing.
In April 2019 our wholly owned subsidiary, CBDI, filed a cancellation proceeding before the U.S. Patent and Trademark Office Trademark Trial and Appeal Board (TTAB) against Majik Medicine, LLC to cancel its issued supplemental register trademark for “CBD MD” on multiple grounds.
Patent and Trademark Office Trademark Trial and Appeal Board (TTAB) against Majik Medicine, LLC to cancel its issued supplemental register trademark for “CBD MD” on multiple grounds.
On April 28, 2021 the TTAB ruled in favor of a motion filed by CBDI to suspend the cancellation proceedings pending final determination in the Civil Action. Subsequent to filing the Civil Action, Majik Medicine brought counter claims and the Company filed a Motion to Dismiss the counter claims.
On April 28, 2021 the TTAB ruled in favor of a motion filed by CBDI to suspend the cancellation proceedings pending final determination in the Civil Action. The case is currently in the discovery phase. The Company will continue to vigorously pursue its rights and protect the cbdMD brand.
The settlement is expected to be fully consummated and the case dismissed with prejudice sometime in the second quarter of calendar 2023. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable to our company. 17 Table of Contents PART II
In 2022 the global settlement between Company and Plaintiffs in the matter of Warshawsky et al v. cbdMD was approved by the court and the case was dismissed with prejudice. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable to our company. 17 Table of Contents PART II
Removed
On October 19, 2022 the Court denied the Company’s Motion to Dismiss and granted time in which to object to the ruling. The Company has objected to the ruling and is awaiting the final decision of the District Court Judge. The Company will continue to vigorously pursue its rights and protect the cbdMD brand.
Added
The Company believes this matter will eventually be dismissed but there is no timeline on when the FDA or Congress will take action so the case is expected to be stayed indefinitely. In April 2019 our wholly owned subsidiary, CBDI, filed a cancellation proceeding before the U.S.
Removed
In October 2020, Michael Warshawsky and Michael Steinhauser filed a purported collective and class action lawsuit in the United States District Court for the Western District of North Carolina against cbdMD alleging the personal identifiable information of customers was compromised due to a failure to protect customer’s data.
Removed
The complaint was brought as a nationwide “collective action,” and, alternatively, as a “class action” under the laws of the State of North Carolina. The Company reached a global settlement with the plaintiffs within our policy limits which was executed by both parties on April 30, 2021 and the settlement was approved by the Court on August 9, 2022.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+1 added−0 removed6 unchanged
Biggest changeWe expect that our board of directors will continue to declare and pay monthly cash dividends on our Series A Convertible Preferred Stock, subject to the limitations to do so under North Carolina law. Recent sales of unregistered securities None, except as previously reported. Purchases of equity securities by the issuer and affiliated purchasers None.
Biggest changeSee “Risk Factors”. Recent sales of unregistered securities None, except as previously reported. Purchases of equity securities by the issuer and affiliated purchasers None.
Every month since November 1, 2019 the Audit Committee of our board of directors has declared a cash dividend of $0.0667 per share of Series A Convertible Preferred Stock payable on or around the 15th of each month to holders of record on the first of each month.
From November 1, 2019 until August 1, 2023 the Audit Committee of our board of directors declared a cash dividend of $0.0667 per share of Series A Convertible Preferred Stock payable on or around the 15th of each month to holders of record on the first of each month.
Since May 1, 2019, commensurate with our name change, our common stock has been listed on the NYSE American under the symbol “YCBD” and prior to that, since November 17, 2017 was listed on the NYSE American under the symbol “LEVB.” Our Series A Convertible Preferred Stock has been listed on the NYSE American since October 21, 2019 under the symbol “YCBDpA.” As of December 9, 2022, there were approximately 104 record owners of our common stock and one record holder of our Series A Convertible Preferred Stock.
Since May 1, 2019, commensurate with our name change, our common stock has been listed on the NYSE American under the symbol “YCBD” and from November 17, 2017 through May 1, 20219 our common stock was listed on the NYSE American under the symbol “LEVB.” Our Series A Convertible Preferred Stock has been listed on the NYSE American since October 21, 2019 under the symbol “YCBDpA.” As of December 9, 2023, there were approximately 11,419 street owners of our common stock and 1,462 street holder of our Series A Convertible Preferred Stock.
Added
On August 22, 2023 the Board of Directors suspended the monthly cash dividend payment on the Company’s 8.0% Series A Cumulative Convertible Preferred Stock beginning with the month ending August 31, 2023 as the Company conserves cash in order to continue its efforts to increase sales, develop additional products, continue research and development, reduce operating expenses and attempt to achieve profitability.

Other YCBD 10-K year-over-year comparisons