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What changed in cbdMD, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of cbdMD, Inc.'s 2024 and 2025 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 2025 report.

+226 added−304 removedSource: 10-K (2025-12-19) vs 10-K (2024-12-18)

Top changes in cbdMD, Inc.'s 2025 10-K

226 paragraphs added · 304 removed · 143 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

67 edited+66 added−83 removed63 unchanged
Biggest changeCONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED September 30, 2024 and 2023 Other Additional Common Stock Preferred Stock Comprehensive Paid in Accumulated Shares Amount Shares Amount Income Capital Deficit Total Balance, September 30, 2023 2,960,573 $ 2,961 5,000,000 $ 5,000 $ - $ 183,387,095 $ (174,363,772 ) $ 9,031,284 Issuance of Common stock 483 - - - - - - - Issuance of options for share based compensation - - - - - 1,772 - 1,772 Issuance of restricted stock for share based compensation - - - - - 689 - 689 Preferred dividend declared, not paid - - - - - - (1,000,501 ) (1,000,501 ) Net Loss - - - - - - (996,501 ) (996,501 ) Balance, December 31, 2023 2,961,056 2,961 5,000,000 5,000 - 183,389,556 (176,360,774 ) 7,036,743 Issuance of Common stock 19,930 20 - - - 15,763 - 15,783 Issuance of options for share based compensation - - - - - 1,080 - 1,080 Issuance of restricted stock for share based compensation - - - - - 303 - 303 Change in far value of debt related to credit risk - - - - (6,000 ) - - (6,000 ) Issuance of Common stock - Keystone 64,218 64 - - - 49,936 - 50,000 Preferred dividend declared, not paid - - - - - - (1,000,500 ) (1,000,500 ) Net Income (loss) - - - - - - (3,010,562 ) (3,010,562 ) Balance, March 31, 2024 3,045,204 3,045 5,000,000 5,000 (6,000 ) 183,456,639 (180,371,836 ) 3,086,847 Issuance of options for share based compensation, net - - - - - 5,376 - 5.376 Issuance of restricted stock for share based compensation, net - - - - - 7,167 - 7.167 Change in far value of debt related to credit risk - - - - 4,800 - - 4,800 Issuance of Common Stock, Convertible Notes 714,229 714 - - - 463,980 - 464,694 Preferred dividend declared, not paid - - - - - - (1,000,500 ) (1,000,500 ) Net Income - - - - - - 459,737 459,737 Balance, June 30, 2024 3,759,433 3,759 5,000,000 5,000 (1,200 ) 183,933,162 (180,912,600 ) 3,028,121 Issuance of Common stock 4,000 4 - - - (4 ) - - Issuance of options for share based compensation - - - - - 1,080 - 1.080 Issuance of restricted stock for share based compensation - - - - - 3,727 - 3.727 Change in far value of debt related to credit risk - - - - (5,989 ) - - (5,989 ) Issuance of Common Stock, Majik Settlement 75,000 75 40,725 40,800 Issuance of Common Stock, Convertible Notes 100,624 101 - - - 50,875 - 50,976 Preferred dividend declared, not paid - - - - - - (1,002,500 ) (1,002,500 ) Net Loss - - - - - - (152,798 ) (152,798 ) Balance, Balance at September 30, 2024 3,939,057 $ 3,939 5,000,000 $ 5,000 $ (7,189 ) $ 184,029,565 $ (182,067,898 ) $ 1,963,417 See Notes to Condensed Consolidated Financial Statements 38 Table of Contents cbdMD, INC.
Biggest changeCONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED September 30, 2025 and 2024 Other Additional Common Stock Preferred Stock Comprehensive Paid in Accumulated Shares Amount Shares Amount Income Capital Deficit Total Balance, September 30, 2023 370,072 $ 370 5,000,000 $ 5,000 $ - $ 183,389,686 $ (174,363,772 ) $ 9,031,284 Issuance of Common stock 3,051 3 - - - 15,780 - 15,783 Issuance of options for share based compensation - - - - - 9,308 - 9,308 Issuance of restricted stock for share based compensation - - - - - 11,886 - 11,886 Change in fair value of debt related to credit risk - - - - (7,189 ) - - (7,189 ) Issuance of Common stock - Keystone 8,027 8 - - - 49,992 - 50,000 Issuance of Common Stock, Convertible Notes 101,857 102 - - - 515,568 - 515,670 Issuance of Common Stock, Majik Settlement 9,376 9 - - - 40,792 - 40,801 Preferred dividend - - - - - - (4,004,001 ) (4,004,001 ) Net Loss - - - - - - (3,700,126 ) (3,700,126 ) Balance at September 30, 2024 492,383 492 5,000,000 5,000 (7,189 ) 184,033,012 (182,067,898 ) 1,963,417 See Notes to Condensed Consolidated Financial Statements 40 Table of Contents cbdMD, INC.
ASC 842 requires the recognition of leasing arrangements on the consolidated balance sheet as right-of-use assets and liabilities pertaining to the rights and obligations created by the leased assets. The Company determines whether an arrangement is a lease at inception and classify it as finance or operating. All of the Company’s leases are classified as operating leases.
ASC 842, Leases, requires the recognition of leasing arrangements on the consolidated balance sheet as right-of-use assets and liabilities pertaining to the rights and obligations created by the leased asset. The Company determines whether an arrangement is a lease at inception and classify it as finance or operating. All of the Company’s leases are classified as operating leases.
As such we believe it was prudent to reassess the carrying value of this non-liquid security. The Company performed an additional valuation analysis as of September 30, 2024 and determined that no further impairment was needed based on factors such as Steady State's financial performance and re-alignment of the business.
As such we believe it was prudent to reassess the carrying value of this non-liquid security. The Company performed an additional valuation analysis as of September 30, 2025 and September 30, 2024 and determined that no further impairment was needed based on factors such as Steady State's financial performance and re-alignment of the business.
The Company accounts for stock-based compensation using the provisions of ASC 718. ASC 718 codification requires companies to recognize the fair value of stock-based compensation expense in the financial statements based on the grant date fair value of the options. All options are approved by the Compensation, Corporate Governance and Nominating Committee of the Board of Directors.
The Company accounts for stock-based compensation using the provisions of ASC 718. ASC 718, Stock Compensation, requires companies to recognize the fair value of stock-based compensation expense in the financial statements based on the grant date fair value of the options. All options are approved by the Compensation, Corporate Governance and Nominating Committee of the Board of Directors.
The Company’s leases do not contain any residual value guarantees. Right-of-use lease assets and corresponding lease liabilities are recognized at commencement date based on the present value of lease payments over the expected lease term.
The Company’s lease do not contain any residual value guarantees. Right-of-use lease assets and corresponding lease liabilities are recognized at commencement date based on the present value of lease payments over the expected lease term.
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. 43 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. 44 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. 42 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. 43 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, 2024 and 2023 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, 2025 and 2024 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.
At September 30, 2024 , the Company has utilizable NOL carryforwards of approximately $69.1 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, 2025 , the Company has utilizable NOL carryforwards of approximately $69.1 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.
In March 2024, the company issued 16,000 of restricted stock awards to the Company’s board of directors. The shares vest quarterly on June 30, 2024, September 30, 2024, December 31, 2024, and March 31, 2025. The stock awards were valued at the fair market price of $13,760 and will amortize over the individual vesting periods.
In March 2024, the Company issued 2,000 restricted stock awards to the Company’s board of directors. The shares vest quarterly on June 30, 2024, September 30, 2024, December 31, 2024, and March 31, 2025. The stock awards were valued at the fair market price of $13,760 and will amortize over the individual vesting periods.
Management has analyzed the tax positions taken by the Company, and has concluded that as of September 30, 2024 and 2023 , 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, 2025 and 2024 , 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.
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, 2024 and 2023 .
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, 2025 and 2024 .
The Company believes driving its advertising aids in brand awareness and is critical to maintain brand recognition. We are constantly evaluating advertising methods and costs and working to drive down our cost of customer acquisition. Income Taxes The Company is a North Carolina corporation that is treated as a corporation for federal and state income tax purposes.
The Company believes driving its advertising aids brand awareness and is critical to maintain brand recognition and acquiring customers. We are constantly evaluating advertising methods and costs and working to drive down our cost of customer acquisition. Income Taxes The Company is a North Carolina corporation that is treated as a corporation for federal and state income tax purposes.
At September 30, 2024, the receivable from payment processors included $621,678 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, 2025 and 2024, the receivable from payment processors included $786,449 and $621,678, respectively, 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.
The Company is using the proceeds from the issuance of the Notes for working capital and general corporate purposes. The Company elected the fair value option under ASC 825 Fair Value Measurements for the Notes. The Notes were initially recognized at fair value on the balance sheet.
The Company used the proceeds from the issuance of the notes for working capital and general corporate purposes. The Company elected the fair value option under ASC 825 Fair Value Measurements for the notes. The notes were initially recognized at fair value on the balance sheet.
NOTE 12 – NOTE PAYABLE Effective February 1, 2024 ( the “Effective Date”), the Company entered into a Securities Purchase Agreement dated January 30, 2024 ( the “Purchase Agreement”) with five institutional investors (the “Investors”) whereby the Investors advanced the Company an aggregate of $1,250,000 gross proceeds and the Company issued each Investor an 8% Senior Secured Original Issue 20% Discount Convertible Promissory Note, in the aggregate principal amount of $1,541,666 (the “Notes”).
NOTE 12 – NOTE PAYABLE Effective February 1, 2024, the Company entered into a Securities Purchase Agreement dated January 30, 2024, with five institutional investors whereby the Investors advanced the Company an aggregate of $1,250,000 gross proceeds and the Company issued each Investor an 8% Senior Secured Original Issue 20% Discount Convertible Promissory Note, in the aggregate principal amount of $1,541,666.
Convertible Notes Effective February 1, 2024 ( the “Effective Date”), the Company entered into a Securities Purchase Agreement dated January 30, 2024 ( the “Purchase Agreement”) with five institutional investors (the “Investors”) whereby the Investors advanced the Company an aggregate of $1,250,000 gross proceeds and the Company issued each Investor an 8% Senior Secured Original Issue 20% Discount Convertible Promissory Note, in the aggregate principal amount of $1,541,666 (the “Notes”).
Convertible Notes Effective February 1, 2024, the Company entered into a Securities Purchase Agreement dated January 30, 2024 with five institutional investors whereby the Investors advanced the Company an aggregate of $1,250,000 gross proceeds and the Company issued each Investor an 8% Senior Secured Original Issue 20% Discount Convertible Promissory Note, in the aggregate principal amount of $1,541,666.
Advertising Costs The Company expenses all costs of advertising and related marketing and promotional costs as incurred. The Company incurred $4.2 million and $6.0 million in advertising and marketing and promotional costs included in operating expenses during the years ended September 30, 2024 and 2023 respectively.
Advertising Costs The Company expenses all costs of advertising and related marketing and promotional costs as incurred. The Company incurred $4.4 million and $4.2 million in advertising and marketing and promotional costs included in operating expenses during the years ended September 30, 2025 and 2024 respectively.
Failure to make the additional payments would reassign the trademark to Majik. Additionally, the Company entered a five -year consulting agreement with Majik, granting a 15% commission on increased sales from Licensed Practitioners, a new customer base. This acquisition strengthens the Company’s IP portfolio, avoids litigation costs, and expedites trademark issuance.
Additionally, the Company entered a five -year consulting agreement with Majik, granting a 15% commission on increased sales from licensed practitioners, a new customer base. This acquisition strengthens the Company’s IP portfolio, avoids litigation costs, and expedites trademark issuance.
At the annual meeting, our stockholders approved an amendment to our articles of incorporation, as amended, to effect a reverse stock split of our issued and outstanding shares of common stock by a ratio of between one -for- twenty to one -for-fifty, inclusive, with the exact ratio to be set at the discretion of our board of directors, at any time after approval of the amendment and prior to February 16, 2024.
At the annual meeting, our stockholders approved an amendment to our articles of incorporation, as amended, to effect a reverse stock split of our issued and outstanding shares of common stock by a ratio of between one -for-three to one -for- ten , inclusive, with the exact ratio to be set at the discretion of our board of directors, at any time after approval of the amendment and prior to the one year anniversary of the meeting.
Components of operating lease costs are summarized as follows: Year Ended September 30, 2024 Total Operating Lease Costs $ 1,328,497 Supplemental cash flow information related to operating leases is summarized as follows: Year Ended September 30, 2024 Cash paid for amounts included in the measurement of operating lease liabilities $ 1,421,610 As of September 30, 2024 , our operating leases had a weighted average remaining lease term of 2.99 years and a weighted average discount rate of 4.66%.
Components of operating lease costs are summarized as follows: Year Ended Year Ended September 30, September 30, 2025 2024 Total Operating Lease Costs $ 663,570 $ 1,328,4970 Supplemental cash flow information related to operating leases is summarized as follows: Year Ended Year Ended September September 30, 2025 2024 Cash paid for amounts included in the measurement of operating lease liabilities $ 589,264 $ 1,421,610 As of September 30, 2025, our operating leases had a weighted average remaining lease term of 1 year and a weighted average discount rate of 4.66%.
Revenue Recognition The Company records revenue from the sale of its products when risk of loss and title to the product are transferred to the customer, which is upon shipping (and is typically FOB shipping) which is when our performance obligation is met.
Revenue Recognition The Company records revenue from the sale of its products when risk of loss and title to the product are transferred to the customer, which is upon shipping under standard sales terms, which is when our performance obligation is met.
The following table summarizes the inputs used for the Black-Scholes pricing model on the options issued in the years ended September 30, 2024 and 2023 : 2024 2023 Weighted average exercise price $ 0.54 10.35 - 12.60 Risk free interest rate 4% 3.93% - 4.71% Volatility 107% 106.48% - 106.51% Expected term (in years) 2.5 2.5 - 4 Dividend yield None None 50 Table of Contents Warrant transactions: The Company had no warrant transactions during the twelve months ended September 30, 2024.
The following table summarizes the inputs used for the Black-Scholes pricing model on the options issued in the years ended September 30, 2025 and 2024 : 2025 2024 Weighted average exercise price $ - $ 0.54 Risk free interest rate - 4% Volatility - 107% Expected term (in years) - 2.5 Dividend yield None None 51 Table of Contents Warrant transactions: The Company had no warrant transactions during the twelve months ended September 30, 2025 and 2024.
Treasury securities. The pre-vesting forfeiture rate of zero is based upon the experience of the Company. As required under ASC 718, the Company will adjust the estimated forfeiture rate to its actual experience. Management will continue to assess the assumptions and methodologies used to calculate estimated fair value of share-based compensation.
As required under ASC 718, the Company will adjust the estimated forfeiture rate to its actual experience. Management will continue to assess the assumptions and methodologies used to calculate estimated fair value of share-based compensation.
In August 2024, the Company issued 75,000 shares of common stock pursuant to the settlement agreement with Majik Medicine. In April 2024, the Company issued an aggregate of 714,229 shares of common stock pursuant to the partial conversion of certain principal and interest related to the Notes.
In August 2024, the Company issued 9,375 shares of common stock pursuant to the settlement agreement with Majik Medicine. In April 2024, the Company issued an aggregate of 89,279 shares of common stock pursuant to the partial conversion of certain principal and interest related to the Notes.
The following table presents the components of the provision for income taxes from continuing operations for the fiscal years ended September 30, 2024 and 2023 : Year Ended September 30, 2024 2023 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, 2024 2023 Federal statutory income tax rate 21.0 % 21.0 % State income taxes, net of federal benefit 2.1 1.4 Permanent differences 11.9 (1.5 ) Contingent derivative expense 0.5 0.2 Change in value of convertible debt (2.5 ) 0.0 Change in valuation allowance (33.0 ) (21.1 ) Provision for income taxes 0.0 % 0.0 % Significant components of the Company’s deferred income taxes are shown below: Year Ended September 30, 2024 2023 Deferred tax assets: Net operating loss carryforwards $ 15,478,000 $ 14,784,000 ROU - Liability 22,000 824,000 Capital loss carryforward 702,000 702,000 Allowance for doubtful accounts 77,000 9,000 Stock compensation 481,000 521,000 Intangibles 176,000 105,000 Investments 573,000 180,000 Accrued expenses 101,000 87,000 Fixed Assets 57,000 45,000 Inventory reserve 0 28,000 Capitalized expenses 146,000 43,000 Charitable contributions 13,000 39,000 Total deferred tax assets 17,826,000 17,367,000 Deferred tax liabilities: Prepaid Expenses (76,000 ) (107,000 ) ROU - Assets (19,000 ) (750,000 ) Intangibles - - Total deferred tax liabilities (95,000 ) (857,000 ) Net deferred tax assets 17,731,000 16,510,000 Valuation allowance (17,731,000 ) (16,510,000 ) Net deferred tax liability $ - $ - 57 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, 2025 and 2024 : Year Ended September 30, 2025 2024 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, 2025 2024 Federal statutory income tax rate 21.0 % 21.0 % State income taxes, net of federal benefit (0.8 ) 2.1 Permanent differences (4.3 ) 11.9 Contingent derivative expense 0.0 0.5 Change in value of convertible debt (1.0 ) (2.5 ) Expiration of tax carryovers (28.9 ) - Change in valuation allowance 14.0 (33.0 ) Provision for income taxes 0.0 % 0.0 % Significant components of the Company’s deferred income taxes are shown below: Year Ended September 30, 2025 2024 Deferred tax assets: Net operating loss carryforwards $ 15,651,000 $ 15,478,000 ROU - Liability 174,000 22,000 Capital loss carryforward 112,000 702,000 Allowance for doubtful accounts 134,000 77,000 Stock compensation 483,000 481,000 Intangibles 244,000 176,000 Investments 551,000 573,000 Accrued expenses 113,000 101,000 Inventory reserve 11,000 - Fixed Assets 46,000 57,000 Capitalized expenses 159,000 146,000 Charitable contributions 8,000 13,000 Total deferred tax assets 17,686,000 17,826,000 Deferred tax liabilities: Prepaid Expenses (68,000 ) (76,000 ) ROU - Assets (157,000 ) (19,000 ) Intangibles - - Total deferred tax liabilities (225,000 ) (95,000 ) Net deferred tax assets 17,461,000 17,731,000 Valuation allowance (17,461,000) (17,731,000 ) Net deferred tax liability $ - $ - 57 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.
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 2024 % of total Fiscal 2023 % of total E-commerce sales $ 15,655,337 80.4 % $ 19,436,124 80.5 % Wholesale sales $ 3,826,830 19.6 % $ 4,719,238 19.5 % Total Net Sales $ 19,482,167 $ 24,155,362 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 2025 % of total Fiscal 2024 % of total E-commerce sales $ 14,715,582 76.7 % $ 15,655,337 80.4 % Wholesale sales $ 4,475,096 23.3 % $ 3,826,830 19.6 % Total Net Sales $ 19,190,468 $ 19,482,167 Contract assets represent unbilled receivables and are presented within accounts receivable, net on the consolidated balance sheets.
Liquidity and Going Concern Considerations The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company experienced a loss of $3.7 million for the fiscal year ended September 30, 2024 , resulting in a working capital deficit of $1.1 million at September 30, 2024.
Liquidity and Going Concern Considerations The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company experienced a loss from operations of $2.1 million for the fiscal year ended September 30, 2025, and has net working capital of $3.1 million at September 30, 2025.
For the year ended September 30, 2024 and September 30, 2023 the Company recorded $0 and an unrealized loss of $700,000, respectively of realized and unrealized loss on marketable and other securities, including impairments.
For the year ended September 30, 2025 and September 30, 2024 the Company recorded $0 realized and unrealized loss on marketable and other securities, including impairments.
The table below summarizes the assets and liabilities related to marketable and other securities valued at fair value as of September 30, 2024 : 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, 2022 $ - $ - $ (276,000 ) Change in value of equities - - - Change in value of contingent liability - - - Additional Investment - - 185,638 Balance at September 30, 2023 - - (90,362 ) Change in value of contingent liability - - 90,362 Fair value of convertible notes 1,171,308 Balance at September 30, 2024 $ - $ - $ 1,171,308 NOTE 3 – INVENTORY Inventory at September 30, 2024 and 2023 consists of the following: September 30, September 30, 2024 2023 Finished Goods $ 1,534,718 $ 2,782,680 Inventory Components 830,469 1,397,034 Inventory Reserve - (126,742 ) Inventory prepaid 159,006 182,675 Total Inventory $ 2,524,193 $ 4,235,647 45 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, 2024 .
The table below summarizes the assets and liabilities related to marketable and other securities valued at fair value as of September 30, 2025 : 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, 2023 $ - $ - $ (90,362 ) Change in value of contingent liability - - 90,362 Fair value of convertible notes - 1,171,308 Balance at September 30, 2024 - - 1,171,308 Fair value of convertible notes - - (1,171,308 ) Balance at September 30, 2025 $ - $ - $ - NOTE 3 – INVENTORY Inventory at September 30, 2025 and 2024 consists of the following: September 30, September 30, 2025 2024 Finished Goods $ 1,577,309 $ 1,534,718 Inventory Components 1,203,556 830,469 Inventory Reserve (48,738 ) - Inventory prepaid 214,795 159,006 Total Inventory $ 2,946,922 $ 2,524,193 46 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, 2025.
Restricted Stock Award transactions: The Company issued 16,000 of restricted stock awards to the Company’s board of directors. The shares vest quarterly on June 30, 2024, September 30, 2024, December 31, 2024, and March 31, 2025. The stock awards were valued at the fair market price of $4,296 upon issuance and will amortize over the individual vesting periods.
Restricted Stock Award transactions: In April 2025 the Company issued 9,432 shares of restricted stock awards to the Company’s board of directors. The shares vest quarterly on June 30, 2025, September 30, 2025, December 31, 2025, and March 31, 2026. The stock awards were valued at the fair market price of $8,964 and will amortize over the individual vesting periods.
Future minimum aggregate lease payments under operating leases as of September 30, 2024 are summarized as follows: For the year ended September 30, 2024 $ 99,467 Total future lease payments 99,467 Less interest 771 Total lease liabilities $ 98,696 55 Table of Contents 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, 2024 2023 Basic: Net loss $ (3,700,126 ) $ (22,938,209 ) Preferred dividends paid or accrued 4,004,001 4,002,000 Net income loss attributable to cbdMD Inc. common shareholders (7,704,127 ) (26,940,209 ) Shares used in computing basic earnings per share 4,312,546 2,022,320 Shares used in computing diluted earnings per share 4,312,546 2,022,320 Earnings per share Basic: - Basic earnings per share $ (1.79 ) $ (13.32 ) Earnings per share Diluted: Diluted earnings per share $ (1.79 ) $ (13.32 ) At the year ended September 30, 2024 , 100,993 potential shares underlying options, unvested RSUs and warrants as well as 185,223 shares issuable upon conversion of our Series A Preferred stock which are excluded from the shares used to calculate diluted loss per share as their inclusion would reduce net loss per share. 56 Table of Contents NOTE 15 – INCOME TAXES The Company generated operating losses for the years ended September 30, 2024 and 2023 on which it has recognized a full valuation allowance.
Future minimum aggregate lease payments under operating leases as of September 30, 2025 are summarized as follows: For the year ended September 30, 2026 798,200 Total future lease payments 798,200 Less interest 19,960 Total lease liabilities $ 778,240 55 Table of Contents NOTE 14 – LOSS PER SHARE The following table sets forth the computation of basic and diluted loss per share for the following periods: Year Ended September 30, September 30, 2025 2024 Basic: Net loss $ (2,040,902 ) $ (3,700,126 ) Preferred dividends paid or accrued 2,334,501 4,004,001 Net income loss attributable to cbdMD Inc. common shareholders (4,375,403 ) (7,704,127 ) Shares used in computing basic earnings per share 4,022,629 539,069 Shares used in computing diluted earnings per share 4,022,629 539,069 Earnings per share Basic: - Basic earnings per share (1.09 ) (14.29 ) Earnings per share Diluted: Diluted earnings per share (1.09 ) (14.29 ) At the year ended September 30, 2025, 100,993 potential shares underlying options, unvested RSUs and warrants as well as 1.7 million shares issuable upon conversion of our Series B Preferred stock which are excluded from the shares used to calculate diluted loss per share as their inclusion would reduce net loss per share. 56 Table of Contents NOTE 15 – INCOME TAXES The Company generated operating losses for the years ended September 30, 2025 and 2024 on which it has recognized a full valuation allowance.
The Company’s policy is to recognize interest expense and penalties related to income tax matters as tax expense. At September 30, 2024 and 2023 , 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, 2025 and 2024 , there are no unrecognized tax benefits, and there are no significant accruals for interest related to unrecognized tax benefits or tax penalties. NOTE 16 - SEGMENT INFORMATION The Company operates as a single reportable segment.
There is no further Earnout obligation. 47 Table of Contents NOTE 7 – RELATED PARTY TRANSACTIONS None. 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.
There is no further Earnout obligation. 48 Table of Contents NOTE 7 – RELATED PARTY TRANSACTIONS None. NOTE 8 – SHAREHOLDERS ’ EQUITY Preferred Stock Conversion and Reverse Stock Split In October 2019, the Company designated 5,000,000 of its 50,000,000 authorized shares of preferred stock as 8.0% Series A Cumulative Convertible Preferred Stock (the “Series A Preferred Stock”).
In the year ended September 30, 2023: In February of 2023, the Company granted its board of directors an aggregate of 2,667 common stock options. The options vested immediately, have a strike price of $12.60 and a five -year term.
In the year ended September 30, 2024: The Company granted its board of directors an aggregate of 1,000 common stock options in April 2024. The options vested immediately, have a strike price of $0.86 and a five -year term.
All subsequent changes in fair value, excluding the impact of the change in fair value related to instrument-specific credit risk are recorded in non-operating income. The changes in fair value related to instrument-specific credit risk is recorded through other comprehensive income (loss). See Note 12 for more information related to the Notes.
All subsequent changes in fair value, excluding the impact of the change in fair value related to instrument-specific credit risk are recorded in non-operating income. The changes in fair value related to instrument-specific credit risk is recorded through other comprehensive income (loss). These notes were fully converted during fiscal year 2025.
Our 8.0% Series A Cumulative Convertible Preferred Stock ranks senior to our common stock for liquidation or dividend provisions and holders are entitled to receive cumulative cash dividends at an annual rate of 8.0% payable monthly in arrears for the prior month.
Series A Preferred Stock ranked senior to common stock for liquidation or dividend and holders were entitled to receive cumulative cash dividends at an annual rate of 8.0% payable monthly in arrears for the prior month. There were 5,000,000 shares of Series A Preferred Stock issued and outstanding at September 30, 2024.
The Notes were initially recognized at a fair value of $2,702,000 on the balance sheet as of March 31,2024. All subsequent changes in fair value, excluding the impact of the change in fair value related to instrument-specific credit risk are recorded in non-operating income.
The notes were initially recognized at a fair value of $2,702,000. Excluding the impact of the change in fair value related to instrument-specific credit risk, which was recorded in other comprehensive income, subsequent changes in fair value were recorded in earnings at each reporting period. recorded in non-operating income.
NOTE 4 – PROPERTY AND EQUIPMENT Major classes of property and equipment at September 30, 2024 and 2023 consist of the following: September 30, September 30, 2024 2023 Computers, furniture and equipment $ 1,587,411 $ 1,392,776 Manufacturing equipment 284,275 284,275 Leasehold improvements 487,081 487,081 Automobiles - 11,087 2,358,767 2,175,219 Less accumulated depreciation (1,904,499 ) (1,458,640 ) Property and equipment, net $ 454,268 $ 716,579 Depreciation expense related to property and equipment was $452,326 and $404,280 for the year ended September 30, 2024 and 2023 , respectively.
NOTE 4 – PROPERTY AND EQUIPMENT Major classes of property and equipment at September 30, 2025 and 2024 consist of the following: September 30, September 30, 2025 2024 Computers, furniture and equipment $ 1,758,805 $ 1,587,411 Manufacturing equipment 288,554 284,275 Leasehold improvements 495,581 487,081 2,542,940 2,358,767 Less accumulated depreciation (2,265,563 ) (1,904,499 ) Property and equipment, net $ 277,377 $ 454,268 Depreciation expense related to property and equipment was $361,063 and $452,326 for the years ended September 30, 2025 and 2024, respectively.
The adoption of this standard had no material impact on the consolidated financial statements. 44 Table of Contents NOTE 2 – MARKETABLE SECURITIES AND INVESTMENT OTHER SECURITIES On April 7, 2022, the Company entered into an asset sale agreement to sell substantially all its manufacturing assets to a subsidiary of Steady State, LLC ("Steady State").
The Company is required to adopt this guidance for its annual period ending September 30, 2026, which will result in increased disclosures in the Notes to its Consolidated Financial Statements. 45 Table of Contents NOTE 2 – MARKETABLE SECURITIES AND INVESTMENT OTHER SECURITIES On April 7, 2022, the Company entered into an asset sale agreement to sell substantially all its manufacturing assets to a subsidiary of Steady State, LLC ("Steady State").
CONSOLIDATED BALANCE SHEETS September 30, 2024 and 2023 September 30, September 30, 2024 2023 Assets Current assets: Cash and cash equivalents $ 2,452,553 $ 1,797,860 Accounts receivable 983,910 1,216,090 Inventory 2,365,187 4,052,972 Inventory prepaid 159,006 182,675 Prepaid sponsorship 21,754 70,061 Prepaid expenses and other current assets 406,674 750,383 Total current assets 6,389,084 8,070,041 Other assets: Property and equipment, net 454,268 716,579 Operating lease assets 85,817 3,350,865 Deposits for facilities 62,708 138,708 Intangible assets 2,889,580 3,219,090 Investment in other securities, noncurrent 700,000 700,000 Total other assets 4,192,373 8,125,242 Total assets $ 10,581,457 $ 16,195,283 See Notes to Consolidated Financial Statements 33 Table of Contents CONSOLIDATED BALANCE SHEETS September 30, 2024 and 2023 (continued) September 30, September 30, 2024 2023 Liabilities and shareholders' equity Current liabilities: Accounts payable $ 1,541,108 $ 1,906,319 Accrued expenses 632,674 632,195 Accrued dividends 4,671,000 667,000 Deferred Revenue 503,254 185,246 Operating leases – current portion 98,696 1,277,089 Convertible notes, at fair value 1,171,308 - Note payable - 2,492 Total current liabilities 8,618,040 4,670,341 Long term liabilities: Long term liabilities - 9 Operating leases - long term portion - 2,403,286 Contingent liability - 90,363 Total long term liabilities - 2,493,658 Total liabilities 8,618,040 7,163,999 Commitments and Contingencies (Note 11) cbdMD, Inc. shareholders' equity: Preferred stock, authorized 50,000,000 shares, $ 0.001 par value, 5,000,000 and 5,000,000 shares issued and outstanding, respectively 5,000 5,000 Common stock, authorized 150,000,000 shares, $ 0.001 par value, 3,939,057 and 2,960,573 shares issued and outstanding, respectively 3,939 2,961 Additional paid in capital 184,029,565 183,387,095 Comprehensive other expense (7,189 ) - Accumulated deficit (182,067,898 ) (174,363,772 ) Total cbdMD, Inc. shareholders' equity 1,963,417 9,031,284 Total liabilities and shareholders' equity $ 10,581,457 $ 16,195,283 See Notes to Consolidated Financial Statements 34 Table of Contents cbdMD, INC.
CONSOLIDATED BALANCE SHEETS September 30, 2025 and 2024 September 30, September 30, 2025 2024 Assets Current assets: Cash and cash equivalents $ 2,261,242 $ 2,452,553 Accounts receivable, net 1,040,887 983,910 Inventory, net 2,732,127 2,365,187 Inventory prepaid 214,795 159,006 Prepaid sponsorship 25,231 21,754 Prepaid expenses and other current assets 277,147 406,674 Total current assets 6,551,429 6,389,084 Other assets: Property and equipment, net 277,377 454,268 Operating lease assets 703,934 85,817 Deposits for facilities 62,708 62,708 Intangible assets, net 2,124,502 2,889,580 Investment in other securities, noncurrent 700,000 700,000 Total other assets 3,868,521 4,192,373 Total assets $ 10,419,950 $ 10,581,457 See Notes to Consolidated Financial Statements 34 Table of Contents CONSOLIDATED BALANCE SHEETS September 30, 2025 and 2024 (continued) September 30, September 30, 2025 2024 Liabilities and shareholders' equity Current liabilities: Accounts payable $ 1,173,642 $ 1,541,108 Accrued expenses 735,672 632,674 Accrued dividends - 4,671,000 Deferred Revenue 506,289 503,254 Operating leases – current portion 778,240 98,696 Convertible notes, at fair value - 1,171,308 Total current liabilities 3,193,843 8,618,040 Long term liabilities: Operating leases - long term portion - - Total long term liabilities - - Total liabilities 3,193,843 8,618,040 Commitments and Contingencies (Note 11) cbdMD, Inc. shareholders' equity: Preferred stock, authorized 50,000,000 shares, $ 0.001 par value, 1,700,000 and 5,000,000 shares issued and outstanding, respectively 1,700 5,000 Common stock, authorized 150,000,000 shares, $ 0.001 par value, 8,917,054 and 492,383 shares issued and outstanding, respectively 8,917 492 Additional paid in capital 186,650,640 184,033,012 Comprehensive other expense - (7,189 ) Accumulated deficit (179,435,150 ) (182,067,898 ) Total cbdMD, Inc. shareholders' equity 7,226,107 1,963,417 Total liabilities and shareholders' equity $ 10,419,950 $ 10,581,457 See Notes to Consolidated Financial Statements 35 Table of Contents cbdMD, INC.
In the twelve months ended September 30, 2023: In February of 2023, the Company issued 448 restricted stock awards to the Company’s board of directors. The shares vest quarterly one fourth on June 30, 2023, one fourth, on September 30, 2023, one fourth on December 31, 2023, and one fourth on March 31, 2024.
The Company issued 2,000 of restricted stock awards to the Company’s board of directors during the fiscal year ended September 30, 2024. The shares vested quarterly on June 30, 2024, September 30, 2024, December 31, 2024, and March 31, 2025.
Earnings (Loss) Per Share The Company uses ASC 260 - 10, Earnings Per Share for calculating the basic and diluted income (loss) per share. The Company computes basic income (loss) per share by dividing net income (loss) and net income (loss) attributable to common shareholders, after deducting preferred stock dividends, by the weighted average number of common shares outstanding.
The Company computes basic income (loss) per share by dividing net income (loss) and net income (loss) attributable to common shareholders, after deducting preferred stock dividends, by the weighted average number of common shares outstanding. Common equivalent shares are excluded from the computation of net loss per share if their effect is anti-dilutive.
Our weighted-average assumptions used in the Black-Scholes valuation model for equity awards with time-based vesting provisions granted during the year. 51 Table of Contents The following table summarizes stock option activity under both plans for the fiscal years ended September 30, 2024 and 2023 : Weighted-average remaining Aggregate Weighted-average contractual term intrinsic value Number of shares exercise price (in years) (in thousands) Outstanding at September 30, 2022 55,656 $ 151.10 4.55 $ - Granted 7,233 11.51 - Exercised - - Forfeited (21,124 ) 88.12 Outstanding at September 30, 2023 41,765 144.43 3.65 - Granted 8,000 0.86 - Exercised - - Forfeited (5,730 ) 117.35 Outstanding at September 30, 2024 44,035 123.58 3.14 - Exercisable at September 30, 2024 44,035 $ 123.58 3.14 $ - As of September 30, 2024 , there was approximately $7,858 of total unrecognized compensation cost related to non-vested stock options which vest over a period of approximately 2.3 years.
Our weighted-average assumptions used in the Black-Scholes valuation model for equity awards with time-based vesting provisions granted during the year. 52 Table of Contents The following table summarizes stock option activity under both plans for the fiscal years ended September 30, 2025 and 2024 : Weighted-average remaining Aggregate Weighted-average contractual term intrinsic value Number of shares exercise price (in years) (in thousands) Outstanding at September 30, 2024 5,531 989.72 3.65 - Granted - - - - Exercised - - - - Forfeited (14 ) 82.80 - - Outstanding at September 30, 2025 5,517 991.71 3.14 - Exercisable at September 30, 2025 5,517 $ 991.71 3.14 $ - As of September 30, 2025, there was no unrecognized compensation cost related to non-vested stock options which all are fully vested.
Reverse Stock Split On April 12, 2023, the board effected a reverse stock split at a ratio of one -for- forty -five, effective as of April 24, 2023.
On May 6, 2025, the board effected a reverse stock split at a ratio of one -for- eight , effective as of May 7, 2025 ( the "Reverse Stock Split").
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS FOR THE YEARS ENDED September 30, 2024 and 2023 2024 2023 Net Loss $ (3,700,126 ) $ (22,938,209 ) Comprehensive Loss (3,700,126 ) (22,938,209 ) Preferred dividends (4,004,001 ) (4,002,000 ) Comprehensive Loss available to common shareholders $ (7,704,127 ) $ (26,940,209 ) See Notes to Consolidated Financial Statements 36 Table of Contents cbdMD, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS FOR THE YEARS ENDED September 30, 2025 and 2024 2025 2024 Net Loss $ (2,040,902 ) $ (3,700,126 ) Comprehensive Loss (2,040,902 ) (3,700,126 ) Other Comprehensive income (loss) $ 7,189 $ (7,189 ) Preferred dividends (2,334,501 ) (4,004,001 ) Comprehensive Loss available to common shareholders $ (4,368,214 ) $ (7,711,316 ) See Notes to Consolidated Financial Statements 37 Table of Contents cbdMD, INC.
As of October 1, 2019, CBDI and Paw CBD were wholly owned subsidiaries and are disregarded entities for tax purposes and their entire share of taxable income or loss is included in the tax return of the Company and as of March 15, 2021, Therapeutics is also a wholly owned subsidiary and is a disregarded entity for tax purposes and its entire share of taxable income or loss is included in the tax return of the Company.
All wholly owned subsidiaries are disregarded entities for tax purposes and their entire share of taxable income or loss is included in the tax return of the Company.
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS ENDED September 30, 2024 and 2023 2024 2023 Cash flows from operating activities: Net Loss $ (3,700,126 ) $ (22,938,209 ) Adjustments to reconcile net loss to net cash used by operating activities: Stock based compensation 5,015 233,666 Restricted stock expense 11,885 109,202 Write off of prepaid assets due to termination of contractual obligation - 884,892 Inventory and materials impairment 921,314 175,499 Intangibles amortization 697,510 1,396,459 Depreciation 452,326 404,280 Impairment of goodwill and other intangible assets - 13,219,000 Increase/(Decrease) in contingent liability (74,580 ) (185,638 ) Increase in fair value of convertible debt 429,789 - Other-than-temporary impairment on other investments - 700,000 Gain on termination of operating lease 696,280 - Amortization of operating lease asset 670,621 1,126,976 Changes in operating assets and liabilities: Accounts receivable 232,180 278,482 Deposits 76,000 105,898 Inventory 766,472 27,443 Prepaid inventory 23,670 328,784 Prepaid expenses and other current assets 396,311 2,095,323 Accounts payable and accrued expenses (1,124,141 ) (1,290,141 ) Operating lease liability (1,151,326 ) (1,178,683 ) Deferred revenue / customer deposits 318,008 203,341 Collection on discontinued operations accounts receivable - 1,375 Cash used by operating activities (352,792 ) (4,302,051 ) Cash flows from investing activities: Proceeds from sale of other investment securities - 1,000,000 Purchase of intangible assets (100,000 ) - Purchase of property and equipment (190,015 ) (297,549 ) Cash (used) provided by investing activities (290,015 ) 702,451 Cash flows from financing activities: Proceeds from issuance of common stock 50,001 2,478,325 Note payable 1,247,499 (132,599 ) Preferred dividend distribution - (3,668,500 ) Cash provided (used) by financing activities 1,297,500 (1,322,774 ) Net increase (decrease) in cash 654,693 (4,922,374 ) Cash and cash equivalents, beginning of year 1,797,860 6,720,234 Cash and cash equivalents, end of year $ 2,452,553 $ 1,797,860 Supplemental Disclosures of Cash Flow Information: 2024 2023 Cash Payments for: Interest expense $ 74,638 $ 6,399 Non-cash financial/investing activities: Issuance of shares for conversion of debt and accrued interest $ 515,601 $ - Issuance of shares for intangible asset $ 40,725 $ - Preferred dividends accrued but not paid $ 4,004,001 $ 667,000 See Notes to Consolidated Financial Statements 37 Table of Contents cbdMD, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS ENDED September 30, 2025 and 2024 2025 2024 Cash flows from operating activities: Net Loss $ (2,040,902 ) $ (3,700,126 ) Adjustments to reconcile net loss to net cash used by operating activities: Stock based compensation - 5,015 Restricted stock expense 14,121 11,885 Issuance of stock for services 86,657 - Inventory and materials impairment 365,979 921,314 Intangibles amortization 765,078 697,510 Depreciation 361,063 452,326 Credit losses 382,588 54,322 Increase/(Decrease) in contingent liability - (74,580 ) (Decrease) increase in fair value of convertible debt (87,380 ) 429,789 Gain on termination of operating lease - 696,280 Amortization of operating lease asset 669,781 670,621 Changes in operating assets and liabilities: Accounts receivable (439,565 ) 177,858 Deposits - 76,000 Inventory (732,919 ) 766,472 Prepaid inventory (55,789 ) 23,670 Prepaid expenses and other current assets 126,051 396,311 Accounts payable and accrued expenses (261,883 ) (1,124,141 ) Operating lease liability (608,354 ) (1,151,326 ) Deferred revenue / customer deposits 3,099 318,008 Cash used by operating activities (1,452,375 ) (352,792 ) Cash flows from investing activities: Purchase of intangible assets - (100,000 ) Purchase of property and equipment (184,172 ) (190,015 ) Cash used by investing activities (184,172 ) (290,015 ) Cash flows from financing activities: Proceeds from issuance of common stock - 50,001 Note payable - 1,247,499 Proceeds from issuance of preferred stock 1,445,236 - Cash provided by financing activities 1,445,236 1,297,500 Net (decrease) increase in cash (191,311 ) 654,693 Cash and cash equivalents, beginning of year 2,452,553 1,797,860 Cash and cash equivalents, end of year $ 2,261,242 $ 2,452,553 Supplemental Disclosures of Cash Flow Information: 2025 2024 Cash Payments for: Interest expense $ - $ 74,638 Non-cash financial/investing activities: Issuance of shares for conversion of debt and accrued interest $ 1,079,639 $ 515,601 Change in lease asset related to extinguishment of HQ lease and new warehouse lease $ (1,723,544 ) $ - Issuance of shares for intangible asset $ - $ 40,725 Conversion of accrued preferred dividends to preferred stock $ 7,008,151 $ - Preferred dividends accrued but not paid $ 2,334,501 $ 4,004,001 See Notes to Consolidated Financial Statements 38 Table of Contents cbdMD, INC.
As of September 30, 2024 and September 30, 2023 , we had an allowance for credit losses of $346,197 and $42,180, respectively. 40 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.
September 30, September 30, 2025 2024 Credit Loss allowance - beginning of period $ 346,197 $ 42,180 Credit loss provision 635,912 358,339 Write offs (382,588 ) (54,322 ) Recoveries - - Credit loss allowance - end of period $ 599,521 $ 346,197 41 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.
Preferred stock transactions: The Company had no preferred stock transactions in the year ended September 30, 2024 and 2023 . Common stock transactions: In the year ended September 30, 2024 : In September 2024, the Company issued 100,624 shares of common stock pursuant to the partial conversion of certain principal and interest related to the Notes.
In August 2025, the Company issued 6,250 shares of common stock pursuant to the settlement agreement with Majik Medicine. In the year ended September 30, 2024: In September 2024, the Company issued 12,578 shares of common stock pursuant to the partial conversion of certain principal and interest related to the Notes.
Any changes in fair value for marketable securities during a given period will be recorded as an unrealized gain or loss in the consolidated statement of operations. For investments other securities without a readily determinable fair value, the Company may elect to estimate its fair value at cost less impairment plus or minus changes resulting from observable price changes.
Any changes in fair value for marketable securities during a given period will be recorded as an unrealized gain or loss in the consolidated statement of operations.
CONSOLIDATED STATEMENTS OF OPERATIONS September 30, 2024 and 2023 2024 2023 Gross Sales $ 19,922,319 $ 25,053,857 Allowances (440,152 ) (898,495 ) Total Net Sales 19,482,167 24,155,362 Cost of sales 7,486,626 9,177,703 Gross Profit 11,995,541 14,977,659 Operating expenses 15,310,951 24,246,208 Impairment of goodwill and other intangible assets - 13,219,000 Loss from operations (3,315,410 ) (22,487,549 ) Realized and unrealized loss on marketable and other securities, including impairments - (700,000 ) Decrease of contingent liability 74,580 185,638 Increase in fair value of convertible debt (429,789 ) - Interest (expense) income (29,507 ) 63,702 Loss before provision for income taxes (3,700,126 ) (22,938,209 ) Benefit (expense) for income taxes - - Net Loss (3,700,126 ) (22,938,209 ) Preferred dividends 4,004,001 4,002,000 Net Loss attributable to common shareholders $ (7,704,127 ) $ (26,940,209 ) Net Loss per share: Basic and Diluted loss per share (1.79 ) (13.32 ) Weighted average number of shares Basic and Diluted: 4,312,546 2,022,320 See Notes to Consolidated Financial Statements 35 Table of Contents cbdMD, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS September 30, 2025 and 2024 2025 2024 Gross Sales $ 19,190,678 $ 19,922,319 Allowances (210 ) (440,152 ) Total Net Sales 19,190,468 19,482,167 Cost of sales 7,222,213 7,486,626 Gross Profit 11,968,255 11,995,541 Operating expenses 14,130,845 15,310,951 Loss from operations (2,162,590 ) (3,315,410 ) Decrease of contingent liability - 74,580 Increase in fair value of convertible debt 87,380 (429,789 ) Interest income (expense) 34,308 (29,507 ) Loss before provision for income taxes (2,040,902 ) (3,700,126 ) Benefit (expense) for income taxes - - Net Loss (2,040,902 ) (3,700,126 ) Preferred dividends 2,334,501 4,004,001 Net Loss attributable to common shareholders $ (4,375,403 ) $ (7,704,127 ) Net Loss per share: Basic and Diluted earnings per share (1.09 ) (14.29 ) Weighted average number of shares Basic and Diluted: 4,022,629 539,069 See Notes to Consolidated Financial Statements 36 Table of Contents cbdMD, INC.
Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services.
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. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period.
Intangible assets as of September 30, 2024 and 2023 consisted of the following: September 30, September 30, 2024 2023 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 CBD MD limited mark 368,000 - Tradename related to DirectCBDOnline.com 749,567 749,567 Impairment of definite lived intangible assets: (17,504,000 ) (17,504,000 ) Amortization of definite lived intangible assets: (3,026,831 ) (2,329,321 ) Total $ 2,889,580 $ 3,219,090 46 Table of Contents Future amortization of intangible assets as of September 30, 2024 is as follow: For the year ended September 30, 2025 $ 762,457 2026 733,740 2027 733,740 2028 569,923 Thereafter 89,720 Total future intangibles amortization $ 2,889,580 NOTE 6 – CONTINGENT LIABILITY Pursuant to a merger agreement entered into in 2018, 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 144,445 shares and 194,945 shares, both of which were subject to leak out provisions, and the unrestricted voting rights to 194,445 tranche of shares which vested over a five year period and were subject to a voting proxy agreement.
Intangible assets as of September 30, 2025 and 2024 consisted of the following: September 30, September 30, 2025 2024 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 CBD MD limited mark 368,000 368,000 Tradename related to DirectCBDOnline.com 749,567 749,567 Impairment of definite lived intangible assets: (17,504,000 ) (17,504,000 ) Amortization of definite lived intangible assets: (3,791,909 ) (3,026,831 ) Total $ 2,124,502 $ 2,889,580 47 Table of Contents Future amortization of intangible assets as of September 30, 2025 is as follow: For the year ended September 30, 2026 733,740 2027 733,740 2028 569,923 2029 87,099 Total future intangibles amortization $ 2,124,502 NOTE 6 – CONTINGENT LIABILITY The Company previously as a contractual obligation to issue certain shares which was fully settles by the issuance of final Earnout shares of 19,818 and were issued on January 11, 2024.
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, 2024 . 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.
Concentration of credit risk with respect to receivables is principally limited to trade receivables with corporate customers that meet specific credit policies. Management considers these customer receivables to represent normal business risk. The Company did not have any customers that represented a significant amount of our sales for the years ended September 30, 2025 and 2024.
At September 30, 2024, the Company prepared a tradename impairment analysis in accordance with ASC 360 and has determined that no impairment existed.
NOTE 5 – INTANGIBLE ASSETS Amortization expense for the years ended September 30, 2025 and 2024 was $765,078 and $697,510, respectively and was recorded on the consolidated statements of operations. At September 30, 2025 and 2024, the Company prepared a tradename impairment analysis in accordance with ASC 360 and has determined that no impairment existed.
The Company wrote down inventory of $921,314 during the fourth quarter of fiscal year ended September 30, 2024 primarily related to obsolete and expired stock keeping units (“SKU”s). We work hard to minimize inventory write-downs and slow moving and aging SKUs and work, as we work to streamline our offerings to higher velocity products and eliminate slow-moving and aging SKUs.
The Company wrote down inventory of $365,979 and $921,314 during the fourth quarters of fiscal years ended September 30, 2025 and 2024, respectively, primarily related to obsolete and expired stock keeping units (“SKU”s).
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 expected term used was the full term of the contract for the issuances. The risk-free interest rate for periods within the contractual life of the option is based on U.S.
The expected term used was the full term of the contract for the issuances. The risk-free interest rate for periods within the contractual life of the option is based on U.S. Treasury securities. The pre-vesting forfeiture rate of zero is based upon the experience of the Company.
At September 30, 2024, the Company prepared a tradename impairment analysis in accordance with ASC 360 and has determined that no impairment existed. In 2019, Company’s subsidiary, CBD Industries, LLC, initiated a trademark cancellation proceeding against Majik Medicine, LLC (“Majik”) regarding Majik’s “CBD MD” trademark.
In 2019, Company’s subsidiary, CBD Industries, LLC, initiated a trademark cancellation proceeding against Majik Medicine, LLC (“Majik”) regarding Majik’s “CBD MD” trademark. In a Settlement, Purchase, and Release Agreement that occurred in August of 2024, the Company acquired the trademark, resolving all related legal claims.
Unless otherwise indicated, all share numbers in this filing, including shares of common stock and all securities convertible into, or exercisable for, shares of common stock, give effect to the reverse stock split. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries CBDI, Paw CBD, Proline Global, and Therapeutics.
Reverse Stock Split The board of directors effected a reverse stock split at a ratio of one -for-eight, effective as of May 6, 2025. Unless otherwise indicated, all share numbers in this filing, including shares of common stock and all securities convertible into, or exercisable for, shares of common stock, give effect to the reverse stock split.
The Company from time to time may have amounts on deposit in excess of the insured limits. The Company had a $1,893,606 uninsured balance at September 30, 2024 and a $1,163,360 uninsured balance at September 30, 2023 . 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 an approximate $1.5 million uninsured balance at September 30, 2025 and an approximate $1.9 million uninsured balance at September 30, 2024.
In a Settlement, Purchase, and Release Agreement that occurred in August of 2024, the Company acquired the trademark, resolving all related legal claims. The agreement included a $100,000 initial payment, four additional annual payments of $50,000, the issuance of 75,000 shares of common stock (the “Initial Shares”), and 50,000 more shares on the one -year anniversary.
The agreement included a $100,000 initial payment, four additional annual payments of $50,000, the issuance of 9,375 shares of common stock, and 6,250 additional shares on the one -year anniversary. Failure to make the additional payments would reassign the trademark to Majik.
As of September 30, 2024, the Accrued liability for the dividends declared but not paid totaled $4,669,000 and continues to grow at approximately $1 million per quarter. Common Stock – The Company is authorized to issue 150,000,000 shares of common stock, par value $0.001 per share.
Common Stock – The Company is authorized to issue 150,000,000 shares of common stock, par value $0.001 per share. There were 8,917,054 and 492,383 shares of common stock issued and outstanding at September 30, 2025 and 2024, respectively.
The options vested immediately, have a strike price of $0.86 and a five -year term. The Company has recorded a total prepaid expense of approximately $4,300 and intends to amortize the expense over the 12 -month board term.
The Company has recorded a total prepaid expense of approximately $4,300 and intends to amortize the expense over the 12 -month board term. 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 stock awards were valued at the fair market price of $5,660 upon issuance and will amortize over the individual vesting periods. In January 2023, the Company issued 3,889 shares to a group of employees. The shares vested upon issuance, having a fair market value upon issuance of $40,950.
The shares vest quarterly on June 30, 2025, September 30, 2025, December 31, 2025, and March 31, 2026. The stock awards were valued at the fair market price of $8,964 and will amortize over the individual vesting periods. In May 2025, the company issued 8.125 million shares of common stock pursuant to the conversion of the Series A Perfered Stock.
In December 2022, the Company issued 1,112 shares of restricted common stock to an employee. 556 shares vested upon issuance and the Company recorded a total expense of $6,250. 556 shares vest based on meeting certain direct to consumer revenue performance hurdles prior to December 2024. 52 Table of Contents NOTE 10 – WARRANTS Transactions involving the Company equity-classified warrants for the fiscal years ended September 30, 2024 and 2023 are summarized as follows: Number of shares Weighted-average exercise price Weighted-average remaining contractual term (in years) Aggregate intrinsic value (in thousands) Outstanding at September 30, 2022 13,204 $ 210.45 2.30 $ - Granted 40,500 2.52 - Exercised - - Forfeited (3,395 ) 242.55 Outstanding at September 30, 2023 50,309 37.75 2.30 - Granted - - - Exercised - - Forfeited (1,352 ) 337.50 Outstanding at September 30, 2024 48,957 337.50 4.07 - Exercisable at September 30, 2024 48,957 $ 29.48 - $ - The following table summarizes outstanding common stock purchase warrants as of September 30, 2024 : Number of shares Weighted-average exercise price Expiration Exercisable at $176.06 per share 1,079 176.06 October 2024 Exercisable at $56.25 per share 822 56.25 January 2025 Exercisable at $168.30 per share 3,357 168.30 December 2025 Exercisable at $168.75 per share 3,199 168.75 June 2026 Exercisable at $2.52 per share 40,500 2.52 April 2028 48,957 $ 37.75 NOTE 11 – COMMITMENTS AND CONTINGENCIES Commencing August 2019, the Company’s executive offices were located at 8845 Red Oak Blvd, Charlotte, NC (the “Red Oak Facilities”) which we sub-leased under a sublease agreement dated July 11, 2019 which expires December 2026 ( the “Red Oak Sublease”).
The stock awards were valued at the fair market price of $4,296 upon issuance and were amortized over the individual vesting periods. 53 Table of Contents NOTE 10 – WARRANTS Transactions involving the Company equity-classified warrants for the fiscal years ended September 30, 2025 and 2024 are summarized as follows: Number of shares Weighted-average exercise price Weighted-average remaining contractual term (in years) Aggregate intrinsic value (in thousands) Outstanding at September 30, 2024 6,168 244.06 2.30 - Granted - - - - Exercised - - - - Forfeited (267 ) 1,024.38 - - Outstanding at September 30, 2025 5,901 208.75 4.07 - Exercisable at September 30, 2025 5,901 $ 208.75 - $ - The following table summarizes outstanding common stock purchase warrants as of September 30, 2025 : Number of shares Weighted-average exercise price Expiration Exercisable at $1346.40 per share 429 1,346.40 December 2025 Exercisable at $1350 per share 409 1,350.00 June 2026 Exercisable at $20.16 per share 5,063 20.16 April 2028 5,901 $ 208.75 NOTE 11 – COMMITMENTS AND CONTINGENCIES From time to time, the Company is involved in legal proceedings and subject to various claims that arise in the ordinary course of business.
All material intercompany transactions and balances have been eliminated in consolidation.
Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries CBDI, Paw CBD, Proline Global, Oasis, and Therapeutics. All material intercompany transactions and balances have been eliminated in consolidation.
Removed
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED September 30, 2024 and 2023 Other Additional Common Stock Preferred Stock Comprehensive Paid in Accumulated Shares Amount Shares Amount Income Capital Deficit Total Balance, September 30, 2022 1,348,125 $ 1,348 5,000,000 $ 5,000 $ - $ 178,841,646 $ (147,423,563 ) $ 31,424,431 Issuance of Common stock 1,038 1 - - - (1 ) - - Issuance of options for share based compensation - - - - - 79,446 - 79,446 Issuance of restricted stock for share based compensation - - - - - 43,449 - 43,449 Preferred dividend - - - - - - (1,000,502 ) (1,000,502 ) Net Income (loss) - - - - - - (3,956,062 ) (3,956,062 ) Balance, December 31, 2022 1,349,163 1,349 5,000,000 5,000 - 178,964,539 (152,380,127 ) 26,590,761 Issuance of Common stock 8,417 8 - - - (8 ) - - Issuance of options for share based compensation - - - - - 16,770 - 16,770 Issuance of restricted stock for share based compensation - - - - - 56,801 - 56,801 Issuance of Common stock - A360 94,277 94 - - - 1,399,906 - 1,400,000 Issuance of Common stock - DCO 2,223 2 - - - 29,998 - 30,000 Issuance of Common stock - Keystone 2,616 3 - - - 29,190 - 29,193 Roundup fractional shares resulting from reverse split - 1 - - - - - 1 Preferred dividend - - - - - - (1,000,500 ) (1,000,500 ) Net Income (loss) - - - - - - (1,336,802 ) (1,336,802 ) Balance, March 31, 2023 1,456,696 1,457 5,000,000 5,000 - 180,497,196 (154,717,429 ) 25,786,224 Issuance of Common stock 9,000 9 - - - 69,606 - 69,615 Issuance of options for share based compensation, net - - - - - 34,663 - 34,663 Issuance of restricted stock for share based compensation, net - - - - - 4,845 - 4,845 Issuance of Common stock - A360 - - - - - 133,200 - 133,200 Issuance of Common stock - Maxim 1,350,000 1,350 - - - 2,472,730 - 2,474,080 Fractional share true-up 39,533 39 - - - (39 ) - - Preferred dividend - - - - - - (1,000,501 ) (1,000,501 ) Net Income (loss) - - - - - - (1,770,404 ) (1,770,404 ) Balance, June 30, 2023 2,855,229 2,855 5,000,000 5,000 - 183,212,202 (157,488,334 ) 25,731,723 Issuance of Common stock 112 0 - - - (112 ) - (112 ) Issuance of options for share based compensation - - - - - 33,171 - 33,171 Issuance of restricted stock for share based compensation - - - - - 3,996 - 3,996 Issuance of Common stock - Keystone 105,232 105 - - - 97,338 - 97,443 Maxim transaction expenses - - - - - 40,500 - 40,500 Preferred dividend - - - - - - (1,000,497 ) (1,000,497 ) Net Income (loss) - - - - - - (15,874,941 ) (15,874,941 ) Balance, Balance at September 30, 2023 2,960,573 $ 2,961 5,000,000 $ 5,000 $ - $ 183,387,095 $ (174,363,772 ) $ 9,031,284 See Notes to Condensed Consolidated Financial Statements 39 Table of Contents cbdMD, INC.
Added
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED September 30, 2025 and 2024 Other Additional Common Stock Preferred Stock Comprehensive Paid in Accumulated Shares Amount Shares Amount Income Capital Deficit Total Balance, September 30, 2024 492,383 $ 492 5,000,000 $ 5,000 $ (7,189 ) $ 184,033,012 $ (182,067,898 ) $ 1,963,417 Issuance of Common stock 3,860 4 - - - 8,956 - 8,960 Issuance of restricted stock for share based compensation - - - - - 5,163 - 5,163 Change in fair value of debt related to credit risk - - - - 7,189 - - 7,189 Issuance of Common Stock, Convertible Notes 267,597 268 - - - 1,076,470 - 1,076,738 Issuance of Common Stock, GSS Agreement 21,875 22 - - - 82,228 - 82,250 Issuance of Common Stock, Majik Settlement #2 6,250 6 - - - 4,400 - 4,406 Conversion of preferred stock and accrued dividends to common stock 8,125,000 8,125 (5,000,000 ) (5,000 ) (3,125 ) 7,008,151 7,008,151 Shares issued for fractional shares in reverse stock split 89 - - - - - - - Preferred stock issuance - - 1,700,000 1,700 1,443,536 1,445,236 Preferred dividend declared, not paid - - - - - - (2,334,501 ) (2,334,501 ) Net Loss - - - - - - (2,040,902 ) (2,040,902 ) Balance, Balance at September 30, 2025 8,917,054 8,917 1,700,000 1,700 - 186,650,640 (179,435,150 ) 7,226,107 See Notes to Condensed Consolidated Financial Statements 39 Table of Contents cbdMD, INC.
Removed
There have been no material changes in the Company's significant accounting policies from those previously disclosed in the 2023 10 -K.
Added
As of September 30, 2025 and September 30, 2024, we had an allowance for credit losses of $599,521 and $346,197, respectively.
Removed
The accompanying unaudited interim condensed consolidated financial statements of cbdMD have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and the rules of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the 2024 10 -K.
Added
For investments other securities without a readily determinable fair value, the Company has elected to estimate fair value at cost less impairment plus or minus changes from observable price changes. 42 Table of Contents Intangible Assets The Company test for impairment in accordance with ASC Topic 360, Property, Plant and Equipment ("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.
Removed
In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of consolidated financial position and the consolidated results of operations for the interim periods presented have been reflected herein.
Added
This guidance establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services.
Removed
The Company has elected the fair value method and will make individual determinations on and instrument by instrument basis. 41 Table of Contents 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 .
Added
See Note 12 for more information related to the notes. Earnings (Loss) Per Share The Company uses ASC 260 - 10, Earnings Per Share for calculating the basic and diluted income (loss) per share.
Removed
The Company employed the non-amortization approach to account for purchased intangible assets having indefinite lives.
Added
On April 10, 2025, we held an annual meeting of stockholders.
Removed
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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

30 edited+10 added−55 removed101 unchanged
Biggest changeSection 1003(a)(ii) requires a listed company to have stockholders’ equity of $4 million or more if the listed company has reported losses from continuing operations and/or net losses in three of its four most recent fiscal years.
Biggest changeSection 1003(a)(i) requires a listed company to have stockholders’ equity of $2.0 million or more if the listed company has reported losses from continuing operations and/or net losses in two of its three most recent fiscal years then ended and Section 1003(a)(ii) of the Company Guide requires a listed company to have stockholders’ equity of $4.0 million if the listed company has reported losses from continuing operations and/or net losses in three of its four most recent fiscal years then ended.
In addition to these objective standards, the NYSE American may delist the securities of any issuer (i) if, in its opinion, the issuer’s financial condition and/or operating results appear unsatisfactory; (ii) if it appears that the extent of public distribution or the aggregate market value of the security has become so reduced as to make continued listing on the NYSE American inadvisable; (iii) if the issuer sells or disposes of principal operating assets or ceases to be an operating company; (iv) if an issuer fails to comply with the NYSE American’s listing requirements; (v) if an issuer’s securities sell at what the NYSE American considers a “low selling price” and the issuer fails to correct this via a reverse split of shares after notification by the NYSE American; or (vi) if any other event occurs or any condition exists which makes continued listing on the NYSE American, in its opinion, inadvisable.
In addition to these objective standards, the NYSE American may delist the securities of any issuer (i) if, in its opinion, the issuer’s financial condition and/or operating results appear unsatisfactory; (ii) if it appears that the extent of public distribution or the aggregate market value of the security has become so reduced as to make continued listing on the NYSE American inadvisable; (iii) if the issuer sells or disposes of principal operating assets or ceases to be an operating company; (iv) if an issuer fails to comply with the NYSE American’s listing requirements; (v) if an issuer’s securities sell at what the NYSE American considers a “low selling price” and the issuer fails to correct this via a reverse split of shares after notification by the NYSE American; or (vi) if any other event occurs or any condition exists which, in the opinion of the NYSE American, makes continued listing inadvisable.
Many of the Company’s products are derived from cannabis and may contain trace amounts of tetrahydrocannabinol (THC), which may be below the level of detection but could build up in a regular consumer’s system. Although these levels are generally low, historically THC has been a banned substance in many jurisdictions, and regulations regarding permissible THC limits are continually evolving.
Many of the Company’s products are derived from cannabis and may contain trace amounts of THC, which may be below the level of detection but could build up in a regular consumer’s system. Although these levels are generally low, historically THC has been a banned substance in many jurisdictions, and regulations regarding permissible THC limits are continually evolving.
Our brand and company image is based on perceptions of subjective qualities, and any incident that erodes the loyalty of our consumers, customers, suppliers or manufacturers, including adverse publicity or a governmental investigation or litigation, could significantly reduce the value of our brand and significantly damage our business, which would have a material adverse effect on our business, financial condition, results of operations and cash flows. 11 Table of Contents If we fail to attract new customers in a cost-effective manner, our business may be harmed.
Our brand and company image is based on perceptions of subjective qualities, and any incident that erodes the loyalty of our consumers, customers, suppliers or manufacturers, including adverse publicity or a governmental investigation or litigation, could significantly reduce the value of our brand and significantly damage our business, which would have a material adverse effect on our business, financial condition, results of operations and cash flows. 12 Table of Contents If we fail to attract new customers in a cost-effective manner, our business may be harmed.
Any delays, interruption or increased costs in raw materials and/or the manufacturing or compounding of our products could have an adverse effect on our ability to meet retail customer and consumer demand for our products and result in lower revenues and net income both in the short and long-term. 12 Table of Contents Failures in our third-party verification and testing protocols may have an adverse impact on our brands which could suppress sales.
Any delays, interruption or increased costs in raw materials and/or the manufacturing or compounding of our products could have an adverse effect on our ability to meet retail customer and consumer demand for our products and result in lower revenues and net income both in the short and long-term. 13 Table of Contents Failures in our third-party verification and testing protocols may have an adverse impact on our brands which could suppress sales.
There can be no assurance that our current management team, or any new members of our management team, will be able to successfully execute our business and operating strategies. 13 Table of Contents If our other intangible assets, or fixed assets become impaired, we may be required to record a charge to our earnings.
There can be no assurance that our current management team, or any new members of our management team, will be able to successfully execute our business and operating strategies. 14 Table of Contents If our other intangible assets, or fixed assets become impaired, we may be required to record a charge to our earnings.
Final designation of hemp derived cannabinoids as impermissible adulterants, FDAs refusal to accept hemp derived cannabinoids as New Dietary Ingredients (NDI) or FDAs interpretation of IND Preclusion could negatively impact the Company ’ s operations. The regulatory framework surrounding cannabinoids, particularly CBD, raises significant challenges for the Company.
Final designation of hemp derived cannabinoids as impermissible adulterants, FDAs refusal to accept hemp derived cannabinoids as New Dietary Ingredients ("NDI") or FDAs interpretation of Investigational New Drug ("IND") Preclusion could negatively impact the Company ’ s operations. The regulatory framework surrounding cannabinoids, particularly CBD, raises significant challenges for the Company.
The Change of Control redemption feature of the Series A Convertible Preferred Stock may have the effect of discouraging a third party from making an acquisition proposal for our company or of delaying, deferring or preventing certain of change of control transactions under circumstances that otherwise could provide the holders of our common stock and Series A Convertible Preferred Stock with the opportunity to realize a premium over the then-current market price of such stock or that shareholders may otherwise believe is in their best interests.
The Change of Control rights of the Series B Convertible Preferred Stock may have the effect of discouraging a third party from making an acquisition proposal for our company or of delaying, deferring or preventing certain of change of control transactions under circumstances that otherwise could provide the holders of our common stock and Series B Convertible Preferred Stock with the opportunity to realize a premium over the then-current market price of such stock or that shareholders may otherwise believe is in their best interests.
By way of example, through the end of Fiscal 2024, multiple states including Alaska, Florida, Maryland, Minnesota, New York, Utah and Virginia had implemented new regulations which impact the Company’s ability to sell some of its products as they exist now in formulation and packaging.
By way of example, through the end of Fiscal 2025, multiple states including Alaska, Florida, Maryland, Minnesota, New York, Utah, Texas and Virginia had implemented new regulations which impact the Company’s ability to sell some of its products as they exist now in formulation and packaging.
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 may need to raise additional capital during the current fiscal year in order to fund our operations in furtherance of our business plan and repay the Notes.
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 may need to raise additional capital during the current fiscal year in order to fund our operations in furtherance of our business plan.
This means that those holders are entitled to receive the liquidation preference before any payment or other distribution of assets to our common shareholders, and the amount of any such payment or other distribution will be reduced by that amount.
This means that those holders are entitled to receive the liquidation preference before any payment or other distribution of assets to our common shareholders, and the amount of any such payment or other distribution will be reduced by that amount. 17 Table of Contents
Our advertising is subject to regulation by, among others, the FDA under the Federal Food, Drug & Cosmetics Act, and the U.S. Federal Trade Commission, or FTC, under the Federal Trade Commission Act, and is also subject to various state regulations enforced by state agencies and state attorneys general.
Our advertising is subject to regulation by, among others, the FDA under the Federal Food, Drug & Cosmetics Act, and the FTC, under the Federal Trade Commission Act, and is also subject to various state regulations enforced by state agencies and state attorneys general.
The liquidation preference of the shares of our Series A Convertible Preferred Stock would reduce the amount available to our common shareholders in the event of our liquidation or winding up. Holders of our Series A Convertible Preferred Stock have a liquidation preference of $10.00 per share in the event of our liquidation or winding up.
The liquidation preference of the shares of our Series B Convertible Preferred Stock would reduce the amount available to our common shareholders in the event of our liquidation or winding up. Holders of our Series B Convertible Preferred Stock have a liquidation preference of $1.00 per share in the event of our liquidation or winding up.
If any of the risks and uncertainties described in the cautionary factors described below actually occur or continue to occur, our business, financial condition and results of operations and the trading price of our common stock and our Series A Convertible Preferred Stock could be materially and adversely affected.
If any of the risks and uncertainties described in the cautionary factors described below actually occur or continue to occur, our business, financial condition and results of operations and the trading price of our common stock and could be materially and adversely affected.
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 $3.3 million and $22.5 million fiscal year 2024 and fiscal year 2023, 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 $2.1 million and $3.3 million fiscal year 2025 and fiscal year 2024, respectively.
There are significant costs and risks inherent in selling our products in international markets, including: (a) failure to effectively establish our core brand identity; (b) increased employment costs; (c) increased shipping and distribution costs, which could increase our expenses and reduce our margins; (d) potentially lower margins in some regions; (e) longer collection cycles in some regions; (f) increased competition from local providers of similar products; (g) compliance with foreign laws and regulations, including but not limited to product registrations/approvals, taxes and duties, laws governing the marketing and use of e-commerce websites and enhanced data privacy laws and security, rules, and regulations; (h) establishing and maintaining effective internal controls at foreign locations and the associated increased costs; (i) increased counterfeiting and the uncertainty of protection for intellectual property rights in some countries and practical difficulties of enforcing rights abroad; (j) compliance with anti-bribery, anti-corruption, and anti-money laundering laws, such as the FCPA, the Bribery Act, and OFAC regulations, by us, our employees, and our business partners; (k) currency exchange rate fluctuations and related effects on our results of operations; (l) economic weakness, including inflation, or political instability in foreign economies and markets; (m) compliance with tax, employment, immigration, and labor laws for employees living or traveling abroad; (n) workforce uncertainty in countries where labor unrest is more common than in the United States; (o) business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters, including earthquakes, typhoons, floods, fires, and public health issues, including the outbreak of a pandemic or contagious disease, such as COVID-19, or xenophobia resulting therefrom; (p) the imposition of tariffs on products that we import into international markets that could make such products more expensive compared to those of our competitors; (q) that our ability to expand internationally could be impacted by the intellectual property rights of third parties that conflict with or are superior to ours; (r) difficulty developing retail relationships; and (s) other costs and risks of doing business internationally.
There are significant costs and risks inherent in selling our products in international markets, including: (i) failure to effectively establish our core brand identity; (ii) increased employment costs; (iii) increased shipping and distribution costs, which could increase our expenses and reduce our margins; (iv) potentially lower margins in some regions; (v) longer collection cycles in some regions; (vi) increased competition from local providers of similar products; (vii) compliance with foreign laws and regulations, including but not limited to product registrations/approvals, taxes and duties, laws governing the marketing and use of e-commerce websites and enhanced data privacy laws and security, rules, and regulations; (viii) establishing and maintaining effective internal controls at foreign locations and the associated increased costs; (ix) increased counterfeiting and the uncertainty of protection for intellectual property rights in some countries and practical difficulties of enforcing rights abroad; (x) compliance with anti-bribery, anti-corruption, and anti-money laundering laws, such as the FCPA, the Bribery Act, and OFAC regulations, by us, our employees, and our business partners; (xi) currency exchange rate fluctuations and related effects on our results of operations; (xii) economic weakness, including inflation, or political instability in foreign economies and markets; (xiii) compliance with tax, employment, immigration, and labor laws for employees living or traveling abroad; (xiv) workforce uncertainty in countries where labor unrest is more common than in the United States; (xv) business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters, including earthquakes, typhoons, floods, fires, and public health issues, including the outbreak of a pandemic or contagious disease, such as COVID-19, or xenophobia resulting therefrom; (xvi) the imposition of tariffs on products that we import into international markets that could make such products more expensive compared to those of our competitors; (xvii) that our ability to expand internationally could be impacted by the intellectual property rights of third parties that conflict with or are superior to ours; (xviii) difficulty developing retail relationships; and (xix) other costs and risks of doing business internationally.
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) we have reduced advertising and marketing as we have made consistent reduction of cash consumed by advertising and marketing over this 2 year period.
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.
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. Both our common stock and our Series A Convertible Preferred Stock are listed on the NYSE American.
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 common stock. Our common stock is listed on the NYSE American.
While there appears to be ample public support for favorable legislative action, numerous factors may impact or negatively affect the legislative process(es) within the various states where we have business interests.
While there appears to be ample public support for favorable legislative action, including the Cannabinoid Safeety and Regulation Act (CSRA) proposed in December 2025, numerous factors may impact or negatively affect the legislative process(es) within the various states where we have business interests.
Although we have made consistent and significant reductions in marketing spend as we rationalize expenses, we had consecutive fiscal years of revenue declines as the industry and Company have faced numerous headwinds.
Although we have made consistent and significant reductions in marketing spend as we rationalize expenses, we had consecutive fiscal years of revenue declines as the industry and Company have faced numerous headwinds. Net sales decreased to $19.5 million in fiscal 2024 and $19.2 million in fiscal 2025.
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 we fail to maintain continued listing standards and the NYSE American delists our common 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. 16 Table of Contents The Series B Convertible Preferred Stock ranks senior to our Common Stock all indebtedness and other liabilities of our subsidiaries.
If these uncertainties continue, they may have an adverse effect upon the introduction of our products in different markets. 14 Table of Contents The FTC may seek to pursue enforcement actions against companies selling hemp derived cannabinoids, including the Company.
If these uncertainties continue, they may have an adverse effect upon the introduction of our products in different markets. 15 Table of Contents The FTC may seek to pursue enforcement actions against companies selling hemp derived cannabinoids, including the Company. The FTC has increasingly focused on the regulation of advertising, labeling, and promotion of CBD and other health-related products.
In addition, our products are manufactured, compounded, and packaged by unaffiliated third parties and the use of these third-parties changes from time to time due to customer demand and the composition of our product mix and product portfolio.
Many of our products are manufactured, compounded, and packaged by unaffiliated third parties, of which we hold short-term supply and manufacturing agreements with and the use of these third-parties changes from time to time due to customer demand and the composition of our product mix and product portfolio.
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.
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.
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.
Change of Control redemption obligations of the Series A Convertible Preferred Stock may make it more difficult for a party to acquire us or discourage a party from acquiring us.
If we are forced to liquidate our assets to pay our creditors, our outstanding Series B Preferred Stock has a preference senior to our Common Stock. Change of Control rights of the Series B Convertible Preferred Stock may make it more difficult for a party to acquire us or discourage a party from acquiring us.
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.
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.
As previously disclosed on June 5, 2024, the Company received a letter from the NYSE American LLC stating that the Company was not in compliance with the continued listing standards set forth in Sections 1003(a)(ii) of the NYSE American Company Guide.
On June 5, 2024 and December 31, 2024, we received notifications from the NYSE American that the Company was no longer in compliance with an NYSE American continued listing standards, specifically, the continued listing standards set forth in Section 1003(a)(i) and 1003(a)(ii) of the NYSE American Company Guide (the “Company Guide”).
In addition, the FTC has independently issued warning letters to companies marketing CBD products with exaggerated or unsupported health claims.
In the CBD product marketplace, the FTC has collaborated with the FDA to issue warnings about advertisements lacking competent and reliable scientific evidence, which violates the FTC Act. In addition, the FTC has independently issued warning letters to companies marketing CBD products with exaggerated or unsupported health claims.
In the event of our bankruptcy, liquidation, dissolution or winding-up of our affairs, our assets will be available to pay obligations on the Series A Convertible Preferred Stock only after all of our indebtedness and other liabilities have been paid.
In the event of our bankruptcy, liquidation, dissolution or winding-up of our affairs, the rights of holders of the Series B Convertible Preferred Stock to participate in the distribution of our assets will rank senior to the Common Stock.
Removed
Included in our loss from operation in fiscal 2023 is an impairment of $13.2 on our trade name for fiscal 2023. Not included in our loss from operations for fiscal 2024 is a $0.4 increase in the valuation on the convertible Notes.
Added
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. 11 Table of Contents Our recent negative growth rates may continue.
Removed
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 $0.09 million and $0.19 million for fiscal 2024 and fiscal 2023, respectively, reflecting a change in value of the contingent liability associated with the Earnout Shares.
Added
On November 12, 2025, President Trump signed into law H.R. 5371, the “Continuing Appropriations, Agriculture, Legislative Branch, Military Construction and Veterans Affairs, and Extensions Act, 2026” (the “Act”), which makes continuing appropriations and extensions for fiscal year 2026, and which also limits any THC content to 0.4mg per container for hemp-derived consumable products nationally on November 12, 2026.
Removed
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.
Added
It is unknown to the Company whether or not the sections of the Act that impact the hemp industry will ultimately go into effect on November 12, 2026, or if those sections will be replaced, impacted or amended by subsequent acts of Congress. cbdMD was founded using THC-free broad spectrum, however a significant amount of our revenues are from products that contain low-dose hemp-derived THC that complies with the original Farm Bill and the Act in all likelihood will have a harmful impact on the industry and Company if further legislation is not enacted to mitigate the current language.
Removed
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.
Added
Tariffs on imported packaging materials could increase our costs and negatively affect our business, results of operations, and financial condition. While our raw materials and products are produced in the U.S., we rely on certain packaging materials for our products that are sourced from U.S. and foreign suppliers.
Removed
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.
Added
In March and April 2025, the Trump Administration announced a series of additional special tariffs, some of which have been temporarily paused. The additional special tariffs already in effect as of the date of this report are tariffs of 10% on most products from all countries worldwide.
Removed
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.
Added
Although we believe we have alternative U.S. sources for our packaging materials, as a result of the increases in the U.S. tariffs, we may experience higher costs that we may not be able to pass on to consumers, which could result in the loss of customers, harm to our operating performance, and a negative impact on our profit margins.
Removed
In the event the holders of our Notes do not convert the Notes, our ability to repay our Notes upon their maturity in July 2025 is uncertain, and we will face additional risks if we are unable to repay the Notes. As of December 16, 2024, we had approximately $364,000 of Notes due on July 30, 2025 outstanding.
Added
Additionally, the imposition of tariffs could disrupt our supply chain, result in delays or shortages of packaging materials, or require us to seek alternative suppliers at potentially higher costs.
Removed
The Notes are secured by our assets. Our ability to repay the Notes, in whole or in part, upon their maturity, is uncertain. In addition, the Notes impose certain customary affirmative and negative covenants upon us.
Added
The increase or continued imposition of tariffs, potential trade restrictions between countries as a result of tariffs, and similar constraints could result in a material adverse effect on our business, operations, and financial condition.
Removed
If we are not in compliance with certain of these covenants or we are unable to repay the Notes on or before July 30, 2025, in addition to other actions the note holders may require, the amounts outstanding under the Notes to become immediately due and payable.
Added
As previously disclosed, all previously outstanding shares of our Series A Preferred Stock were converted to common stock on May 6, 2025 and all accrued dividends were eliminated.
Removed
In addition, the Notes and the preferences of our outstanding Series A Preferred likely harm our ability to incur additional indebtedness on acceptable terms.
Added
As part of this conversion, $6.7 million of accrued and unpaid dividends as of June 30, 2025 were converted to equity upon the Series A Preferred conversion which brought us into compliance with the NYSE American’s continued listing standards, and we maintained the continued listing standards for two fiscal quarters and complied with other provisions of Section 1003 of the Company Guide, including increased stockholders’ equity requirements of a minimum of $6,000,000, as we continued to incur annual losses from continuing operations and/or net losses for the fiscal year ended September 30, 2025.
Removed
Our cash flow and capital resources may be insufficient to pay interest and principal on the Notes in the future, in which case we would have to extend such maturity date, or otherwise repay, refinance, and/or restructure the obligations under the Notes, including with proceeds from the sale of assets, and additional equity or debt capital.
Removed
If we are unsuccessful in obtaining such extension, or entering into such repayment, refinance, or restructure prior to maturity, or any other default existed under the Notes, the holders could accelerate the indebtedness under the Notes, foreclose against its collateral, or seek other remedies, which would jeopardize our ability to continue our current operations. 10 Table of Contents Our recent negative growth rates may continue.
Removed
Net sales decreased $4.7 million or 19% to $19.5 million in fiscal 2024 and $11.2 million or 32% to $24.2 million in fiscal 2023 as compared to $35.4 million in 2022.
Removed
During fiscal year 2023, we incurred $13.22 million of intangible impairment as noted in Note 5 of our financial statements. 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.
Removed
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 authorization, amendment or supplementation of legislation at the federal level, including re-authorization and expansion of the hemp language in the next Agriculture Improvement Act.
Removed
Any number of events or occurrences could slow or halt progress all together in this space. While progress within the industrial hemp industry is currently encouraging, growth is not assured.
Removed
The Federal Trade Commission (FTC) has increasingly focused on the regulation of advertising, labeling, and promotion of CBD and other health-related products. In the CBD product marketplace, the FTC has collaborated with the FDA to issue warnings about advertisements lacking competent and reliable scientific evidence, which violates the FTC Act.
Removed
The Company has received notification from the NYSE American LLC that the Company is no longer in compliance with NYSE American ’ s continued listing standards and in the event we do not ultimately regain compliance, our securities could ultimately be delisted from the NYSE American.
Removed
On June 5, 2024, we received notification (the “Notice”) from the NYSE American that the Company is no longer in compliance with NYSE American’s continued listing standards.
Removed
On August 20, 2024, we received notice from the NYSE American LLC that it had accepted the Company’s plan to regain compliance with the NYSE American continued listing standards and granted a plan period through December 5, 2025 (“Deadline Date”).
Removed
The Company reported stockholders’ equity of $3.1 million as of March 31, 2024 ($1.96 million as of September 30, 2024), and has had losses from continuing operations and/or net losses in three of its four most recent fiscal years ended September 30, 2023 (and September 30,2024).
Removed
While the Company’s preferred stock and common stock will continue to be listed on the NYSE American during the plan period pursuant to an extension and the Company's receipt of such notification from the NYSE American does not affect the Company's business, operations or reporting requirements with the U.S.
Removed
Securities and Exchange Commission, during the plan period, the Company will be subject to quarterly review to determine if it is making progress consistent with the plan.
Removed
If the Company does not regain compliance with the NYSE American listing standards by the Deadline Date, or if the Company does not make sufficient progress consistent with its plan, then the NYSE American may initiate delisting proceedings.
Removed
The Company can provide no assurances that it will be able to make progress with respect to its plan that NYSE American will determine to be satisfactory, that it will regain compliance with Section 1003(a)(ii) of the Company Guide on or before the Deadline Date, or that developments and events occurring subsequent to the Company’s formulation of the plan or its acceptance by the NYSE American will not adversely affect the Company’s ability to make sufficient progress and/or regain compliance with Section 1003(a)(ii) of the Company Guide on or before the Deadline Date or result in the Company’s failure to be in compliance with other NYSE American continued listing standards.
Removed
While the Notice has no immediate impact on the listing of the Company’s shares of common stock or Series A Preferred Stock, which will continue to be listed and traded on the NYSE American during this period, subject to the Company’s compliance with the other listing requirements of the NYSE American, if the Common Stock and Preferred Stock ultimately were to be delisted for any reason, it could negatively impact the Company by (i) reducing the liquidity and market price of the Company’s Common Stock and Preferred Stock; (ii) reducing the number of investors willing to hold or acquire the Common Stock and Preferred Stock, which could negatively impact the Company’s ability to raise equity financing; (iii) limiting the Company’s ability to use a registration statement to offer and sell freely tradable securities, thereby preventing the Company from accessing the public capital markets; and (iv) triggering an event of default under the Company’s outstanding Notes.
Removed
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
The rights of holders of the Series A Convertible Preferred Stock to participate in the distribution of our assets will rank junior to the prior claims of our current and future creditors and any future series or class of preferred stock we may issue (subject to Series A Convertible Preferred Stockholder approval) that ranks senior to the Series A Convertible Preferred Stock.
Removed
In addition, the Series A Convertible Preferred Stock effectively ranks junior to all existing and future indebtedness and other liabilities of our existing subsidiaries and any future subsidiaries.
Removed
Our existing subsidiaries are, and any future subsidiaries would be, separate legal entities and have no legal obligation to pay any amounts to us in respect of dividends due on the Series A Convertible Preferred Stock.
Removed
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.
Removed
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
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.
Removed
Payment of our dividends depends upon our financial condition and other factors as our board of directors may deem relevant from time to time.
Removed
We cannot assure you that our businesses will generate sufficient cash flow from operations in an amount sufficient to enable us to make distributions on our common stock and preferred stock, including the Series A Convertible Preferred Stock, or to fund our other liquidity needs. 15 Table of Contents Holders of the Series A Convertible Preferred Stock may be unable to use the dividends-received deduction and may not be eligible for the preferential tax rates applicable to “ qualified dividend income. ” Distributions paid to corporate U.S. holders of the Series A Convertible Preferred Stock may be eligible for the dividends-received deduction, and distributions paid to non-corporate U.S. holders of the Series A Convertible Preferred Stock may be subject to tax at the preferential tax rates applicable to “qualified dividend income,” if we have current or accumulated earnings and profits, as determined for U.S. federal income tax purposes.
Removed
We do not currently have any accumulated earnings and profits. Additionally, we may not have sufficient current earnings and profits during future fiscal years for the distributions on the Series A Convertible Preferred Stock to qualify as dividends for U.S. federal income tax purposes.
Removed
If the distributions fail to qualify as dividends, U.S. holders would be unable to use the dividends-received deduction and may not be eligible for the preferential tax rates applicable to “qualified dividend income.” If any distributions on the Series A Convertible Preferred Stock with respect to any fiscal year are not eligible for the dividends-received deduction or preferential tax rates applicable to “qualified dividend income” because of insufficient current or accumulated earnings and profits, it is possible that the market value of the Series A Convertible Preferred Stock might decline.
Removed
The Series A Convertible Preferred Stock represents perpetual equity interests in us, and investors should not expect us to redeem or convert the Series A Convertible Preferred Stock on the date the Series A Convertible Preferred Stock becomes redeemable or convertible by us or on any particular date afterwards.
Removed
The Series A Convertible Preferred Stock represents perpetual equity interests in our company, and it has no maturity or mandatory redemption except upon a Change of Control, and is not redeemable at the option of investors under any other circumstances.
Removed
A “Change of Control” will generally be deemed to occur when, after the original issuance of the Series A Convertible Preferred Stock, the acquisition by any person, including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the Exchange Act, of beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of purchases, mergers or other acquisition transactions which were pre-approved by our board of directors of our stock entitling that person to exercise more than 50% of the total voting power of all of our stock entitled to vote generally in the election of the our directors, subject to certain exclusions.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. DESCRIPTION OF PROPERTY. We operate our executive offices and warehouse from an 80,000 square foot facility in Charlotte, North Carolina under a lease agreement which commenced in November 2019. Through February 2025 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.
Biggest changeITEM 2. DESCRIPTION OF PROPERTY. We operate our executive offices and warehouse from an 80,000 square foot facility in Charlotte, North Carolina under a lease agreement which commenced in November 2019. Effective November 26, 2024 we entered into a Second Amendment to Lease to extend the lease.
Effective November 26, 2024 we entered into a Second Amendment to Lease to extend the lease. The amendment extends the term of the lease for a period of nineteen months beginning on March 1, 2025 with a new expiration date of September 30, 2026. The Company has no further rights to extend or renew the terms of the lease.
The amendment extends the term of the lease for a period of nineteen months beginning on March 1, 2025 with a new expiration date of September 30, 2026. The Company has no further rights to extend or renew the terms of the lease.
Removed
This facility is sufficient for our current and anticipated operations through September 2026. See footnote 11 to our financial statements including with this annual report for a discussion on the termination of our former executive office lease pursuant to agreements entered into in March 2024.
Added
This facility is sufficient for our current and anticipated operations through September 2026. The Company expects to downsize its lease in the next year either with our existing landlord or at another facility.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeThe 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. As previously disclosed, the Company’s subsidiary, CBD Industries, LLC, initiated a trademark cancellation proceeding in 2019 against Majik Medicine, LLC regarding Majik Medicine’s “CBD MD” trademark.
Biggest changeThe 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. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable to our company. 19 Table of Contents PART II
Removed
In a Settlement, Purchase, and Release Agreement, effective August 23, 2024, the Company acquired the trademark, resolving all related legal claims. The agreement included a $100,000 initial payment, four additional annual payments of $50,000, the issuance of 75,000 shares of common stock, and 50,000 more shares on the one-year anniversary.
Removed
Failure to make the additional payments would reassign the trademark to Majik Medicine. We believe that this acquisition strengthens the Company’s IP portfolio, avoids litigation costs, and expedites trademark issuance. Majik Medicine also appointed board member William Raines III as a voting proxy for the Initial Shares for a period of 12 months. ITEM 4. MINE SAFETY DISCLOSURES.
Removed
Not applicable to our company. 18 Table of Contents PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeITEM 4. Mine Safety Disclosures. 18 PART II ITEM 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. 19 ITEM 6. [Reserved] 19 ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operation. 20
Biggest changeITEM 4. Mine Safety Disclosures. 19 PART II ITEM 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. 20 ITEM 6. [Reserved] 20 ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operation. 21

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe designations, rights and preferences of our Series A Convertible Preferred Stock provide that we will pay, when, as and if declared by our board of directors, monthly cumulative cash dividends at an annual rate of 8.0%, which is equivalent to $0.80 per annum per share, based on the $10.00 liquidation preference.
Biggest changeThe designations, rights and preferences of our Series B Convertible Preferred Stock provide that we will pay, when, as and if declared by our board of directors, dividends at a rate of 10% per annum which are payable quarterly in shares of common stock, subject to the satisfaction of all Equity Conditions (as defined in the Series B Convertible Preferred Certificate of Designation), or in cash.
The declaration, amount and payment of any future dividends on shares of our common stock, if any, is subject to the designations, rights and preferences of the Series A Convertible Preferred Stock and will be at the sole discretion of our Board, which may take into account general and economic conditions, our financial condition and results of operations, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax and regulatory restrictions, the implications of the payment of dividends by us to our shareholders or by our subsidiaries to us, and any other factors that our Board may deem relevant.
The declaration, amount and payment of any future dividends on shares of our common stock, if any, is subject to the designations, rights and preferences of the Series B Convertible Preferred Stock and will be at the sole discretion of our Board, which may take into account general and economic conditions, our financial condition and results of operations, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax and regulatory restrictions, the implications of the payment of dividends by us to our shareholders or by our subsidiaries to us, and any other factors that our Board may deem relevant.
See “Risk Factors”. Recent sales of unregistered securities In addition to those unregistered securities previously disclosed in reports filed with the SEC during the period covered by this report, we have sold the securities disclosed below without registration under the Securities Act of 1933, as amended, during the period covered by this report, except as provided below.
Recent sales of unregistered securities In addition to those unregistered securities previously disclosed in reports filed with the SEC during the period covered by this report, we have sold the securities disclosed below without registration under the Securities Act of 1933, as amended, during the period covered by this report, except as provided below.
Series A Convertible Preferred Stock As of the date of this filing, there are 5 million shares of our Series A Convertible Preferred Stock outstanding.
Series B Convertible Preferred Stock As of the date of this filing, there are 1.7 million shares of our Series B Convertible Preferred Stock outstanding.
The issuances were exempt from registration pursuant to Section 4(a)(2) of the Securities Act. The securities contain a legend restricting their transferability absent registration or applicable exemption. In November 2024, the Company issued 175,000 shares of common stock to a consultant for advisory services. Purchases of equity securities by the issuer and affiliated purchasers None.
The issuances were exempt from registration pursuant to Section 4(a)(2) of the Securities Act. The securities contain a legend restricting their transferability absent registration or applicable exemption. In August 2025, the Company issued 6,250 shares of common stock pursuant to the Company’s August 2024 agreement with Majik Medicine, LLC. Purchases of equity securities by the issuer and affiliated purchasers None.
ITEM 5. MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
ITEM 5. MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Our common stock is listed on the NYSE American under the symbol “YCBD.” As of December 16, 2025, there were approximately 13,000 street owners of our common stock.
Removed
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, 2019 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 16, 2024, there were approximately 13,308 street owners of our common stock and 995 street holders of our Series A Convertible Preferred Stock.
Added
If the Company fails to satisfy an Equity Condition, dividends shall be paid in cash.
Removed
Dividends on the Series A Convertible Preferred Stock will accrue daily and be cumulative from, and including, the first day of the calendar month in which the shares are issued and will be payable monthly in arrears approximately on the 15 th day of each calendar month.
Added
However, if North Carolina law prohibits the payment of dividends in cash, then the then Stated Value (as defined in the Series B Convertible Preferred Stock Certificate of Designation) shall be increased by the dividends as reasonably determined by the Company and the holders of the Series B Convertible Preferred Stock.
Removed
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.
Removed
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.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeNon-GAAP Adjusted Operating Income The non-GAAP Adjusted Income (loss) for the three and twelve months ended September 30, 2024 and September 30, 2023 is as follows: Three Months Year Ended September 30, September 30, September 30, September 30, 2024 2023 2024 2023 (Unaudited) GAAP (loss) from operations $ (316,553 ) $ (15,217,070 ) $ (3,315,410 ) $ (22,487,549 ) Adjustments: Depreciation & Amortization 287,783 667,950 1,149,836 1,800,739 Employee and director stock compensation (1) 5,881 33,263 43,688 349,245 Inventory adjustment(2) 588,160 70,000 588,160 70,000 Impairment of Goodwill and other intangible assets (3) - 13,219,000 - 13,219,000 Incremental bad debt - 45,000 - 45,000 Non-cash expense incurred as a credit (4) - - 439,926 - Non-cash accelerated amortization of expense related to terminated IT contracts - - 72,101 - Termination of HQ lease (696,280 ) - (696,280 ) - Mergers and acquisitions expense - - 125,838 - a360 non-cash trade credit - 609,732 - 1,476,967 Non-GAAP adjusted (loss) from operations $ (131,009 ) $ (572,125 ) $ (1,592,141 ) $ (5,526,598 ) (1) Represents non-cash expense related to options, warrants, restricted stock expenses that have been amortized during the period.
Biggest changeNon-GAAP Adjusted Operating Loss The non-GAAP Adjusted Income (loss) for the three and twelve months ended September 30, 2025 and September 30, 2024 is as follows: Three Months (Unaudited) Year Ended (Unaudited) September 30, September 30, September 30, September 30, 2025 2024 2025 2024 Revenue $ 4,720,770 $ 4,556,367 $ 19,190,468 $ 19,482,167 Gross profit 2,777,135 2,453,803 11,968,255 11,995,541 Gross margin 58.8 % 53.9 % 62.4 % 61.6 % Operating Expenses 3,461,458 2,770,356 14,130,845 15,310,951 Operating loss from operations (684,323 ) (316,553 ) (2,162,590 ) (3,315,410 ) Corporate overhead operating expenses (1) 399,501 462,068 1,816,563 1,978,953 Non-GAAP adjusted (loss) income from operations $ (284,822 ) $ 145,515 $ (346,027 ) $ (1,336,457 ) (1) Represents corporate overhead operating expenses GAAP (loss) from operations $ (684,323 ) $ (316,553 ) $ (2,162,590 ) $ (3,315,410 ) Adjustments: Depreciation & Amortization 262,065 287,783 1,126,141 1,149,836 Employee and director stock compensation (1) 7,754 5,881 13,595 43,688 Inventory adjustment(2) 113,008 588,160 113,008 588,160 Non-cash expense incurred as a credit (3) - - - 439,926 Non-cash accelerated amortization of expense related to terminated IT contracts - - - 72,101 Termination of HQ lease - (696,280 ) - (696,280 ) Mergers and acquisitions expense - - - 125,838 Non-GAAP adjusted (loss) from operations $ (301,496 ) $ (131,009 ) $ (909,846 ) $ (1,592,141 ) Public Company Costs Staff related expense $ 70,698 $ 119,975 $ 310,647 $ 288,602 Accounting/legal expense 103,532 125,874 524,352 710,188 Professional outside services 41,496 73,843 291,455 310,448 Business Insurance 176,021 136,495 676,514 626,027 Non-GAAP adjusted (loss) from operations, excluding public company costs $ 90,251 $ 325,178 $ 893,122 $ 343,124 (1) Represents non-cash expense related to options, warrants, restricted stock expenses that have been amortized during the period.
In addition to our core brands, we also operate cbdMD Therapeutics, LLC to capture the Company’s ongoing investments in science related to its existing and future products, including research and development activities for therapeutic applications. During 2024 we continued to focus on our path to profitability by lowering our costs and focusing on the customer experience.
In addition to our core brands, we also operate cbdMD Therapeutics, LLC to capture the Company’s ongoing investments in science related to its existing and future products, including research and development activities for therapeutic applications. During fiscal year 2024 we continued to focus on our path to profitability by lowering our costs and focusing on the customer experience.
During fiscal 2024, we launched 2 important categories to the business (i) our line of ATRx functional mushroom supplements, that launched in GNC and Amazon and (ii) entered into the hemp derived beverage category starting with our Mixer line and followed up in November 2024 by our line of Herbal Oasis Social Tonics.
During fiscal 2024, we launched 2 important categories to the business (i) our line of ATRx functional mushroom supplements, that launched in GNC and Amazon and (ii) entered into the hemp derived beverage category starting with our Mixer line and followed up in early fiscal 2025 by our line of Herbal Oasis Social Tonics.
Our goal from a liquidity perspective is to use operating cash flows to fund day to day operations and we have not met this goal as cash flow from operations has been a net generation of $0.2 million and use of $1.0 for the three months ended September 30, 2024 and 2023, respectively and a use of $0.6 (net of $1.25 million of proceeds from the Notes) and $4.3 million for the twelve months ended September 30, 2024 and 2023, respectively.
Our goal from a liquidity perspective is to use operating cash flows to fund day to day operations and we have not met this goal as cash flow from operations has been a net use of $0.3 million and a net generation of $0.2 million for the three months ended September 30, 2025 and 2024, respectively and a use of $1.5 million and $0.6 (net of $1.25 million of proceeds from the Notes) for the twelve months ended September 30, 2025 and 2024, respectively.
Wholesale sales decreased by approximately $0.9 million, or 19% year over year while E-commerce sales decreased by $3.7 million or 19%. The change in revenue was driven by a combination of broader CBD category softness which we believe is partially attributed to the macro inflationary environment in addition to lower marketing spend.
Wholesale sales grew by approximately $0.7 million, or 17% year over year while E-commerce sales decreased by $0.9 million or 6%. The change in revenue was driven by a combination of broader CBD category softness which we believe is partially attributed to the macro inflationary environment in addition to lower marketing spend.
Such statements are based on our current expectations and could be affected by the uncertainties and risk factors described throughout this report. Overview We own and operate the nationally recognized CBD (cannabidiol) brands cbdMD, Paw CBD as well as the functional mushroom brand ATRx Labs.
Such statements are based on our current expectations and could be affected by the uncertainties and risk factors described throughout this report. Overview We own and operate the nationally recognized CBD (cannabidiol) brands cbdMD, Paw CBD as well as the functional mushroom brand ATRx Labs and emerging THC beverage brand Herbal Oasis.
Decrease in contingent liability As described in Note 6 to the notes to the consolidated financial statements appearing elsewhere in this report, the earn-out provision for the Earnout Shares is accounted for and recorded as a contingent liability with increases in the liability recorded as non-cash other expense and decreases in the liability recorded as non- cash other income.
Decrease in contingent liability As described in Note 6 to the notes to the consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K, the earn-out provision for the Earnout Shares is accounted for and recorded as a contingent liability with increases in the liability recorded as non-cash other expense and decreases in the liability recorded as non- cash other income.
The overall change in fair value of the Notes during the year ended September 30, 2024 was a decrease of $1,357,096. The overall change in principal value related to the conversion of Notes to commons stock during the year ended September 30,2024 was a decrease of $508,757.
The overall change in principal value related to the conversion of Notes to commons stock during the year ended September 30,2024 was a decrease of $508,757.
Note 1, “Organization and Summary of Significant Accounting Policies,” of the Notes to our consolidated financial statements appearing elsewhere in this report describes the significant accounting policies and methods used in the preparation of our consolidated financial statements.
Note 1, “Organization and Summary of Significant Accounting Policies,” of the Notes to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K describes the significant accounting policies and methods used in the preparation of our consolidated financial statements.
The Company records revenue from the sale of its products when risk of loss and title to the product are transferred to the customer, which is upon shipping (and is typically FOB shipping) which is when our performance obligation is met.
The Company records revenue from the sale of its products when risk of loss and title to the product are transferred to the customer, which is upon shipping under typical sales term, which is when our performance obligation is met.
While we made significant strides to reduce our overall fixed overhead cost associated with our cost of goods sold during fiscal 2024, gross margins for the year were impacted by lower overhead absorption based on lower revenue and ongoing product mix change from high-margin tinctures to gummies and functional products.
While we made significant strides to reduce our overall costs associated with our cost of goods sold during fiscal 2025, gross margins for the year were impacted by lower overhead absorption based on lower revenue and ongoing product mix change from high-margin tinctures to gummies, functional products and beverage in addition to higher lease costs for our warehouse facility.
Our cost of sales as a percentage of net sales was 38.4% and 38.0% for fiscal years ended September 30, 2024 and 2023, respectively.
Our cost of sales as a percentage of net sales was 37% and 38% for fiscal years ended September 30, 2025 and 2024, respectively.
Our operating expenses on a consolidated basis decreased approximately $8.9 million, excluding impairment charges, or 36.4% for the fiscal year ended September 30, 2024 versus the fiscal year ended September 30, 2023.
Our operating expenses on a consolidated basis decreased approximately $1.2 million, excluding impairment charges, or 8% for the fiscal year ended September 30, 2025 versus the fiscal year ended September 30, 2024.
All other expenses includes a $0.7 million gain related to the settlement of our former executive office (“HQ”) lease in 2024 while all other expenses in 2023 includes $0.7 million of impairment of the Steady State Holdings investment.
All other expenses includes a $0.7 million gain related to the settlement of our former executive office (“HQ”) lease in 2024.
Of our total net sales as indicated above, during the fiscal years ended September 30, 2024 and 2023 our Paw CBD line accounted for net sales of $1,445,644 and $2,404,787, respectively.
Of our total net sales as indicated above, during the fiscal years ended September 30, 2025 and 2024 our Paw CBD line accounted for net sales of $1.1 million and $1.4 million, respectively.
We source cannabinoids, which are extracted from non-GMO hemp grown on farms in the United States. Our innovative broad spectrum formula utilizes one of the purest hemp extracts, containing CBD, CBG and CBN, while eliminating the presence of tetrahydrocannabinol (THC). Non-THC is defined as below the level of detection using validated scientific analytical methods.
Our innovative broad spectrum formula utilizes one of the purest hemp extracts, containing CBD, CBG and CBN, while eliminating the presence of tetrahydrocannabinol (THC). Non-THC is defined as below the level of detection using validated scientific analytical methods.
On September 30, 2023 we had cash and cash equivalents on hand of $1.8 million and working capital of $3.4 million, which was reduced by approximately $0.7 million for accrued Series A Preferred dividend payments. Our current assets decreased approximately 20% at September 30, 2024 from September 30, 2023, which is primarily attributable to reduction of inventory.
On September 30, 2024 we had cash and cash equivalents on hand of $2.4 million and working capital deficit of $1.1 million, which was reduced by approximately $0.7 million for accrued Series A Preferred dividend payments. Our current assets increased approximately 4% at September 30, 2025 from September 30, 2024.
The Company has used the proceeds from the issuance of the Notes for working capital and general corporate purposes, including, but not limited to inventory investment to assist with orders and administrative and corporate governance costs.
The Company has used the proceeds from the issuance of the Notes for working capital and general corporate purposes, including, but not limited to inventory investment to assist with orders and administrative and corporate governance costs. During the fiscal year ended September 30, 2025 we used cash primarily to fund our operations.
Critical accounting policies The preparation of financial statements and related disclosures in conformity with US GAAP and our discussion and analysis of our financial condition and operating results require our management to make judgments, assumptions and estimates that affect the amounts reported in our consolidated financial statements and accompanying notes.
(3) Represents non-cash expense incurred as a credit provided to GNC to replace expired product. 24 Table of Contents Critical accounting policies The preparation of financial statements and related disclosures in conformity with US GAAP and our discussion and analysis of our financial condition and operating results require our management to make judgments, assumptions and estimates that affect the amounts reported in our consolidated financial statements and accompanying notes.
We entered into a securities Purchase Agreement dated January 30, 2024 with five accredited Investors whereby the Investors advanced the Company an aggregate of $1,250,000 gross proceeds and the Company issued each Investor an 8% Senior Secured Original Issue 20% Discount Convertible Promissory Note (each a “Note” and collectively, the “Notes”), in the aggregate principal amount of $1,541,666.
We entered into a securities Purchase Agreement dated September 30, 2025 with three accredited Investors whereby the Investors advanced the Company an aggregate of $1.5 million gross proceeds and the Company issued each Investor an 10% Series B Convertible Preferred Security Secured Original Issue 20% Discount Convertible Promissory Note (each a “Note” and collectively, the “Notes”), in the aggregate principal amount of $1.7 million.
The change reflects approximately $588,000 one-time non-cash inventory write down related to inventory loss related to regulatory changes impacting labels and packaging and obsolete/expired inventory, with most all of this inventory older than 2 years. Excluding this one-time write down, our non-GAAP adjusted cost of sales would have been 33% for the fourth quarter of fiscal 2024.
The improvement reflects approximately $0.6 million one-time non-cash inventory write down in fiscal 2024 related to inventory loss related to regulatory changes impacting labels and packaging and obsolete/expired inventory, with most all of this inventory older than 2 years.
We believe that we are an industry leader in producing and distributing broad spectrum and full spectrum CBD products. Our mission is to enhance our customer’s overall quality of life while bringing CBD education, awareness and accessibility of high quality and effective products to all.
We believe that we are an industry leader in producing and distributing hemp derived cannabinoid products. Our mission is to enhance our customer’s overall quality of life while bringing cannabinoid education, awareness and accessibility of high quality and effective products to all. We source cannabinoids, which are extracted from non-GMO hemp grown on farms in the United States.
The following tables provide information on our corporate overhead for the fiscal years ended September 30, 2024 and 2023: Fiscal 2024 Fiscal 2023 Change Staff related expense $ 288,602 $ 318,762 $ (30,160 ) Accounting/Legal expense 710,188 704,933 5,255 Professional outside services 310,448 428,923 (118,475 ) Business insurance 626,027 783,781 (157,754 ) Non-cash stock compensation 43,688 349,245 (305,557 ) Totals $ 1,978,953 $ 2,585,644 $ (606,691 ) The 23% decrease in corporate related expenses for the fiscal year ended September 30, 2024 over prior year is primarily due to the decreases in non-cash stock compensation to employees and directors tied to fewer shares issued under our equity incentive plans and at lower prices per share and, decreases in legal, accounting and insurance costs.
The following tables provide information on our corporate overhead for the fiscal years ended September 30, 2025 and 2024: Fiscal 2025 Fiscal 2024 Change Staff related expense $ 310,647 $ 288,602 $ 22,045 Accounting/Legal expense 524,352 710,188 (185,836 ) Professional outside services 291,455 310,448 (18,993 ) Business insurance 676,514 626,027 50,487 Non-cash stock compensation 13,595 43,688 (30,093 ) Totals $ 1,816,563 $ 1,978,953 $ (162,390 ) The 8% decrease in corporate related expenses for the fiscal year ended September 30, 2024 over prior year is primarily due to the decreases in non-cash stock compensation to employees and directors tied to fewer shares issued under our equity incentive plans and at lower prices per share and, decreases in legal, accounting and insurance costs.
The decrease can be attributed to management’s efforts to rationalize and right size our expenses across all areas of our business, especially a $1.9 million reduction in payroll and a $2.8 million reduction of marketing expenses in fiscal 2024.
The decrease can be attributed to management’s efforts to rationalize and right size our expenses across all areas of our business, especially a $0.5 million reduction in payroll, a $0.3 million reduction in professional expenses, and a $0.6 million reduction in rent expense with the elimination of our former executive offices.
The earnout ended November 2023 and we recorded a final change in the non-cash contingent liability in the first quarter of fiscal 2024.
The earnout ended November 2023 and we recorded a final change in the non-cash contingent liability in the first quarter of fiscal 2024. Liquidity and Capital Resources We had cash and cash equivalents on hand of $2.2 million and working capital of $3.1 million at September 30, 2025.
We transitioned a significant part of our organization during the first half of the year in addition to our ecommerce platform at the end of the third quarter.
We transitioned a significant part of our organization during the first half of the year in addition to our ecommerce platform at the end of the third quarter. While we have not yet achieved positive operating income, management has worked hard to rationalize cost structure during fiscal 2024.
Impairment losses are recorded in selling, general, and administrative expense in the consolidated statements of operations. There was $0 and $13,219,000 of impairment losses recognized related to long-lived assets for the year ended September 30, 2024 and September 30, 2023, respectively.
Impairment losses are recorded in selling, general, and administrative expense in the consolidated statements of operations. There were no impairment losses recognized related to long-lived assets for the years ended September 30, 2025 and September 30, 2024, respectively. Fair Value of Convertible Notes The Company elected the fair value option under ASC 825 Fair Value Measurements for the Notes.
Consolidated Operating Expenses The following tables provide information on our operating expenses for the fiscal years ended September 30, 2024 and 2023: Fiscal 2024 Fiscal 2023 Change Staff related expense $ 5,521,869 $ 7,440,687 $ (1,918,818 ) Accounting/Legal/Professional outside expense 1,527,456 1,832,770 (305,314 ) Marketing 4,181,026 6,950,340 (2,769,314 ) Merchant Fees 642,102 791,475 (149,373 ) R&D and regulatory 39,021 173,038 (134,017 ) Non-cash stock compensation 43,688 349,245 (305,557 ) Intangibles amortization 697,510 1,396,459 (698,949 ) Rent and Utilities 1,349,284 1,569,906 (220,622 ) Depreciation 452,326 404,280 48,046 All other expenses 856,669 3,338,008 (2,481,339 ) Totals $ 15,310,951 $ 24,246,208 $ (8,935,257 ) 21 Table of Contents Corporate overhead and allocation of management fees to our segments Included in our consolidated operating expenses are expenses associated with our corporate overhead which are not allocated to the operating business unit, including (i) staff related expenses; (ii) accounting and legal expenses; (iii) professional outside services; (iv) travel and entertainment expenses; (v) rent; (vi) business insurance; and (vii) non-cash stock compensation expense.
Consolidated Operating Expenses The following tables provide information on our operating expenses for the fiscal years ended September 30, 2025 and 2024: 2025 2024 Change Staff related expense $ 5,046,802 $ 5,521,869 $ (475,067 ) Accounting/Legal/Professional outside expense 1,218,050 1,527,456 (309,406 ) Marketing 4,430,639 4,181,026 249,613 Merchant Fees 557,824 642,102 (84,278 ) R&D and regulatory 33,856 39,021 (5,165 ) Non-cash stock compensation 13,595 43,688 (30,093 ) Intangibles amortization 765,078 697,510 67,568 Rent and Utilities 725,118 1,349,284 (624,166 ) Depreciation 361,063 452,326 (91,263 ) All other expenses 978,820 856,669 122,151 Totals $ 14,130,845 $ 15,310,951 $ (1,180,106 ) 22 Table of Contents Corporate overhead and allocation of management fees to our segments Included in our consolidated operating expenses are expenses associated with our corporate overhead which are not allocated to the operating business unit, including (i) staff related expenses; (ii) accounting and legal expenses; (iii) professional outside services; (iv) travel and entertainment expenses; (v) rent; (vi) business insurance; and (vii) non-cash stock compensation expense.
As of September 2023, we have stopped paying the dividends in cash monthly and are accruing this dividend instead. 22 Table of Contents While the Company is taking strong action and believes that it can execute its strategy and path to profitability within its balance sheet, and in its ability to raise additional funds, there can be no assurances to that effect.
We have a commitment for cumulative dividends at an annual rate of 10% payable quarterly in arrears for the prior quarter to our preferred shareholders. 23 Table of Contents While the Company is taking strong action and believes that it can execute its strategy and path to profitability within its balance sheet, and in its ability to raise additional funds, there can be no assurances to that effect.
Fiscal 2024 % of total Fiscal 2023 % of total E-commerce sales $ 15,655,337 80.4 % $ 19,436,124 80.5 % Wholesale sales 3,826,830 19.6 % 4,719,238 19.5 % Total Net Sales $ 19,482,167 $ 24,155,362 In addition, the following table provides information on the contribution of net sales by type of sale to our total net sales for the three months ended September 30, 2024 and 2023 (unaudited): September 30, September 30, 2024 % of total 2023 % of total E-commerce sales $ 3,667,458 80.5 % $ 4,639,651 81.2 % Wholesale sales 888,908 19.5 % 1,070,946 18.8 % Total Net Sales $ 4,556,366 $ 5,710,597 Total net sales during the fiscal year ended September 30, 2024 decreased by approximately $4.7 million, or 19% as compared to fiscal year ended September 30, 2023.
The following table provides information on the contribution of net sales by type of sale to our total net sales for the fiscal years ended September 30, 2025 and 2024: 2025 % of total 2024 % of total E-commerce sales $ 14,713,380 76.7 % $ 15,655,337 80.4 % Wholesale sales 4,477,088 23.3 % 3,826,830 19.6 % Total Net Sales $ 19,190,468 $ 19,482,167 In addition, the following table provides information on the contribution of net sales by type of sale to our total net sales for the three months ended September 30, 2025 and 2024 (unaudited): September 30, September 30, 2025 % of total 2024 % of total E-commerce sales $ 3,546,221 75.1 % $ 3,667,458 80.5 % Wholesale sales 1,174,549 24.9 % 888,909 19.5 % Total Net Sales $ 4,720,770 $ 4,556,367 Total net sales during the fiscal year ended September 30, 2025 were within $0.3 million of fiscal 2024.
Results of operations The following tables provide certain selected consolidated financial information for the fiscal years ended September 30, 2024 and 2023: Fiscal Fiscal 2024 2023 Change Total net sales $ 19,482,167 $ 24,155,362 $ (4,673,195 ) Cost of sales 7,486,626 9,177,703 (1,691,077 ) Gross profit as a percentage of net sales 61.6 % 62.0 % -0.4 % Operating expenses 15,310,951 24,246,208 (8,935,257 ) Impairment of goodwill and other intangible assets - 13,219,000 (13,219,000 ) Operating loss from operations (3,315,410 ) (22,487,549 ) 19,172,139 (Increase) decrease on contingent liability 74,580 185,638 (111,058 ) Net loss before taxes (3,700,126 ) (22,938,209 ) 19,238,083 Net loss attributable to cbdMD Inc. common shareholders $ (7,704,127 ) $ (26,940,209 ) $ 19,236,082 The following tables provide certain selected unaudited consolidated financial information for the three months ended September 30, 2024 and 2023: September September 2024 2023 Change Total net sales $ 4,556,367 $ 5,710,745 $ (1,154,378 ) Cost of sales 2,102,564 2,161,900 (59,336 ) Gross profit as a percentage of net sales 53.9 % 62.1 % -8.3 % Operating expenses 2,770,356 5,546,915 (2,776,559 ) Impairment of goodwill and other intangible assets - 13,219,000 (13,219,000 ) Operating income from operations (316,553 ) (15,217,070 ) 14,900,517 (Increase) decrease on contingent liability 15,573 31,867 (16,294 ) Net loss before taxes (152,798 ) (15,874,941 ) 15,722,143 Net loss attributable to cbdMD Inc. common shareholders $ (1,155,298 ) $ (16,875,436 ) $ 15,720,138 20 Table of Contents Sales We record product sales primarily through two main delivery channels, direct to consumers via our E-commerce sales and direct to wholesalers utilizing our internal sales team.
Results of operations The following tables provide certain selected consolidated financial information for the fiscal years ended September 30, 2025 and 2024: September September 2025 2024 Change Total net sales $ 19,190,468 $ 19,482,167 $ (291,699 ) Cost of sales 7,222,213 7,486,626 (264,413 ) Gross profit as a percentage of net sales 63.0 % 61.6 % 1.4 % Operating expenses 14,130,845 15,310,951 (1,180,106 ) Operating loss from operations (2,162,590 ) (3,315,410 ) 1,152,820 (Increase) decrease on contingent liability - 74,580 (74,580 ) Net loss before taxes (2,040,902 ) (3,700,126 ) 1,659,224 Net loss attributable to cbdMD Inc. common shareholders $ (2,040,902 ) $ (7,702,127 ) $ 5,661,225 The following tables provide certain selected unaudited condensed consolidated financial information for the three months ended September 30, 2025 and 2024: September September 2025 2024 Change Total net sales $ 4,720,770 $ 4,556,367 $ 164,403 Cost of sales 1,943,635 2,102,564 (158,929 ) Gross profit as a percentage of net sales 58.8 % 53.9 % 5.0 % Operating expenses 3,461,458 2,770,356 691,102 Impairment of goodwill and other intangible assets - - - Operating income from operations (684,323 ) (316,553 ) (367,770 ) (Increase) decrease on contingent liability - 15,523 15,523 Net loss before taxes (679,968 ) (152,798 ) (527,170 ) Net loss attributable to cbdMD Inc. common shareholders $ (679,968 ) $ (1,155,298 ) $ 587,923 21 Table of Contents Sales We record product sales primarily through two main delivery channels, direct to consumers via our E-commerce sales and direct to wholesalers utilizing our internal sales team.
All subsequent changes in fair value, excluding the impact of the change in fair value related to instrument-specific credit risk are recorded in non-operating income. The changes in fair value related to instrument-specific credit risk is recorded through other comprehensive income (loss).
The Notes were initially recognized at a fair value of $2.7 million on the balance sheet as of March 31,2024. All subsequent changes in fair value, excluding the impact of the change in fair value related to instrument-specific credit risk are recorded in non-operating income.
As of September 30, 2024, total fair value of the Notes is $1,021,935, of which $1,032,909 represents the total principal outstanding. 24 Table of Contents Recent accounting pronouncements Please see Note 1 – Organization and Summary of Significant Accounting Policies appearing in the consolidated financial statements included in this report for information on accounting pronouncements.
The note was repaid in full during the second quarter of fiscal 2025. 25 Table of Contents Recent accounting pronouncements Please see Note 1 – Organization and Summary of Significant Accounting Policies appearing in the consolidated financial statements included in this report for information on accounting pronouncements.
For the fourth quarter of fiscal 2024 our cost of sales as a percentage of net sales was 46.1% as compared to 37.9% in the prior year comparative period.
For the fourth quarter of fiscal 2025 our cost of sales as a percentage of net sales was 39% as compared to 46% in the prior year comparative period. Operating expenses Our principal operating expenses include staff related expenses, marketing expense, merchant fees, technology, travel, rent, professional service fees, and business insurance expenses.
Our current liabilities increase approximately 55% at September 30, 2024 from September 30, 2023. This increase is primarily attributable to a $4 million increase in dividend payable, partially offset by a $1.1 reduction in the current portion of rent as a result of the elimination the lease liability associated with the HQ lease.
Our current liabilities decreased approximately 53% at September 30, 2025 from September 30, 2024. This decrease is primarily attributable to a $4.7 million decrease in dividend payable as well as an approximate $0.4 million reduction in accounts payable.
With our leaner cost structure and some exciting new categories, we believe we are well positioned to start growing revenue during fiscal 2025.
With our leaner cost structure and some exciting new categories, we began seeing positive year over year growth during the fourth fiscal quarter of 2025.
Removed
While we have not yet achieved positive operating income, management has worked hard to rationalize cost structure during fiscal 2024 and we have successfully achieved 3 sequential years of Non-GAAP Adjusted Operating Income (Loss) improvement, although our revenues were negatively impacted as we tightened our marketing spend and consumers were impacted by inflation trends.
Added
Net sales for the fourth quarter grew 4% year over year. Our wholesale business continues to trend upward as a result of strong efforts from our team as well as the addition of Oasis.
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The following table provides information on the contribution of net sales by type of sale to our total net sales for the fiscal years ended September 30, 2024 and 2023.
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Year over year, sales from our e-commerce business are stabilizing as we have made significant changes to the organization and are focusing on building out stronger acquisition funnels and working to improve our customers’ life time value.
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Net sales for the fourth quarter declined 20% year over year. A few items that impacted the quarter include: (i) During the 2024 fiscal fourth quarter, one of our agencies made a recommendation which resulted in a sharp decline in emails delivered.
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We do not have any commitments for capital expenditures.
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We have reacted accordingly to address the issue and have seen deliverability and metrics rebound during early fiscal 2025, however we believe this had greater than $200,000 impact to our direct-to-consumer revenue during the quarter. (ii) We continued to face ongoing down time on various digital marketing platforms tied to our regulated category.
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The changes in fair value related to instrument-specific credit risk is recorded through other comprehensive income (loss). The overall change in fair value of the Notes during the year ended September 30, 2024 was a decrease of $1,357,096.
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To help offset this ongoing challenge, we made a change to our marketing resources during the summer of 2024. As a result, we have seen our SEO rankings jump significantly and we are now ranking atop a number of key high-traffic, strategic terms resulting in strong gains on high-intent traffic during the first quarter of fiscal 2025.
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(iii) A number of our larger international wholesale clients faced a new regulatory registration requirement which ultimately impacted sales for approximately 100 days, most of which overlapped the fourth quarter. The wholesale demand rebounded in late October and continues to strengthen.
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Un-audited revenues for October and November have rebounded, trending ahead of the fourth fiscal quarter of 2024 and management currently anticipates being able to recapture most of the revenue lost in the September 2024 quarter during the first quarter of fiscal 2025.
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Operating expenses Our principal operating expenses include staff related expenses, advertising (which includes expenses related to industry distribution and trade shows), sponsorships, affiliate commissions, merchant fees, technology, travel, rent, professional service fees, and business insurance expenses.
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For the twelve months ended September 30, 2023, the contingent liability decreased $0.19 million, primarily related to the change in our common stock share price between September 30, 2022 to September 30, 2023 from $10.25 per share to $1.03 per share.
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Liquidity and Capital Resources We had cash and cash equivalents on hand of $2.4 million and working capital of negative $1.1 million at September 30, 2024. Our working capital is reduced by approximately $4.7 million of accrued Series A Preferred dividend payments.
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As of the filing date of this report, the principal balance of the Notes has been reduced to approximately $364,000 and $5,000 of accrued interest. During the three and twelve months ended September 30, 2024 we used cash primarily to fund our operations. We do not have any commitments for capital expenditures.
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We have a commitment for cumulative dividends at an annual rate of 8% payable monthly in arrears for the prior month to our preferred shareholders.
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(3) Represents non-cash impairment of the cbdMD, DCO and Technology Relief from Royalty trademarks of $13.21 million during the fourth quarter of fiscal 2023, non-cash impairment of the cbdMD trademark of $4.28 million during the first quarter of fiscal year 2022 and $56.67 million of goodwill impairment during the fiscal year ended 2022.
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(4) Represents non-cash expense incurred as a credit provided to GNC to replace expired product. 23 Table of Contents Earnout Shares As described in Note 6 in notes to our consolidated financial statements appearing elsewhere in this report, the Earnout Right ran through November 2023. The Earnout period has expired.
Removed
Fair Value of Convertible Notes The Company elected the fair value option under ASC 825 Fair Value Measurements for the Notes. The Notes were initially recognized at a fair value of $2,702,000 on the balance sheet as of March 31,2024.

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