OTHER PERTINENT INFORMATION

 

Unless the context otherwise indicates, when used in this report, the terms the “Company,” “cbdMD, “we,” “us, “our” and similar terms refer to cbdMD, Inc., a North Carolina corporation formerly known as Level Brands, Inc., and our subsidiaries CBD Industries LLC, a North Carolina limited liability company formerly known as cbdMD LLC, which we refer to as “CBDI”, Paw CBD, Inc., a North Carolina corporation which we refer to as “Paw CBD” and cbdMD Therapeutics LLC, a North Carolina limited liability company which we refer to as “Therapeutics” and Proline Global, LLC a North Carolina limited liability company which we refer to as "Proline Global". In addition, "fiscal 2024" refers to the year ended September 30, 2024, and “fiscal 2025” refers to the year ended September 30, 2025.

 

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

 

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

 

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

 

●

material risks associated with our overall business, including:

	●	our history of losses, potential liquidity concerns, need to raise additional capital to fund our business in the future, and our ability to continue as a going concern;
	●	our current capitalization limits our ability to make strategic or accretive acquisitions or attract new investors;
	●	our reliance to market in key digital channels;
	●	our ability to acquire new customers at a profitable rate;
	●	our ability to bring new and compelling dietary ingredients to market;
	●	our reliance on third party raw material suppliers and manufacturers; and
	●	our reliance on third party compliance with our supplier verification program and testing protocols.

●

material risks associated with regulatory environment for dietary ingredients including but not limited to CBD, including:

	●	federal laws as well as FDA, FTC, and DEA interpretation of existing regulation and pending amendments thereto and/or new laws;
	●	state and local laws pertaining to regulated dietary ingredients (such as industrial hemp) and their derivatives;
	●	costs to us for compliance with laws and the risks of increased litigation; and
	●	possible changes in the use of dietary ingredients such as CBD.

●

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

	●	the risks for failing to comply with the continued listing standards of the NYSE American;
	●	availability of sufficient liquidity;
	●	the designations, rights and preferences of our Series B Convertible Preferred Stock; and
	●	dilution upon the issuance of shares of common stock underlying outstanding warrants, options and the Series B Convertible Preferred Stock.

 

Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements and readers should carefully review this report in its entirety, including the risk factors contained herein. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events.

 

PART 1

 

ITEM 1. DESCRIPTION OF BUSINESS

 

 

Our Company

 

General

 

cbdMD, Inc. is a consumer wellness company focused on the development, manufacturing, marketing, and sale of supplement brands powered by natural compounds.  The majority of our products are anchored by hemp-derived cannabinoids, including broad-spectrum and full-spectrum CBD formulations, hemp-derived Delta-9 THC products (where permitted by law), and a range of functional products designed to address key wellness needs such as sleep, recovery, mood, discomfort, mobility, cognitive function, and stress management. Our approach centers on combining scientific rigor with high manufacturing standards to produce consistent, safe, and reliable products that meet both consumer expectations and evolving regulatory requirements.

 

We operate a multi-brand portfolio anchored by our flagship cbdMD® line, which offers oils, gummies, capsules, soft-gels, topicals, functional formulations, and hemp-derived compliant Delta-9 THC products. Complementing this portfolio is Paw CBD®, our dedicated pet-wellness brand, which provides tinctures, chews, and topicals for dogs and cats and reflects our long-standing emphasis on safety and quality in the animal health category.

Our Herbal Oasis (“Oasis”) brand is a premium hemp-derived THC-infused social seltzer that blends cannabinoids and nootropic mushrooms to deliver a fast-acting, functional beverage made for presence and connection.

 

 

Our products are sold through a diversified distribution network that includes direct-to-consumer e-commerce platforms, online marketplaces, wholesale distribution to national and regional retailers, specialty health and pet channels, and emerging international markets. This multi-channel strategy allows us to reach a broad and diverse consumer base, reduce reliance on any single distribution partner, and quickly introduce new products which reflect scientific findings, consumer trends, and regulatory dynamics.

 

Recent Developments

 

Management’s efforts to drive shareholder value during 2025 were focused in 2 areas: (i) deliver positive earnings through a combination of optimizing our product portfolio, rationalizing our cost structure, and growing revenue; and, (ii) simplifying our capital structure.

 

During fiscal 2025 we made progress on strengthening the business.  We were able to essentially maintain our revenue base and we continued to reduce our GAAP operating loss from a $3.3 million loss during fiscal 2024 to $2.1 million during fiscal 2025.  We accomplished this while still focusing on disciplined cost control, rebuilding our marketing team and launching into the exciting hemp derived THC beverage category with our brand Oasis.

 

During fiscal 2025 we were successful in cleaning up our capital structure and at our annual meeting in April 2025 we secured sufficient votes to convert our Series A Convertible Preferred and outstanding accrued preferred dividends into approximately 91% of the Company’s outstanding common stock.  This vote was critical to regaining compliance with NYSE American continued listing standards and maintaining our American listing as well as make the Company more attractive for merger and acquisition activity.  We are now back in compliance with the NYSE American’s continued listing standards and our non-compliance status has been removed.

 

During the fiscal fourth quarter of 2025 the Company continued to make progress on building momentum with sequential and fourth quarter fiscal 2025 increases in revenue. We continue to make progress with our Oasis brand, which continues to grow quarterly as we added distributors and improved our sell-through at retailers. We are now available throughout the Southeast in Texas, Alabama, Georgia, Florida, North Carolina, Tennessee and several other states outside the Southeast. To date, Oasis has been a P&L earnings drag on the Company as we invest in a scaling, high-growth category.  We made changes during the first fiscal quarter 2026 to reduce certain Oasis brand overhead expenses, add sales staff and are starting to see some benefits of scale as revenues continue to grow.

 

cbdMD believes trends from late 2025 are continuing in the first quarter of 2026.  We are seeing momentum in our direct-to-consumer business, wholesale is trending up and we added additional Oasis distribution during the quarter.  In addition, we have identified nearly $200,000 in corporate overhead savings that will be implemented during early 2026 with insurance renewals and professional fees leading the way.

 

During calendar 2025, we have faced a notable uptick in both state and federal regulatory activity.  While most of the state level action to restrict the hemp category occurred, the industry built sufficient support to limit many restrictions on our industry. Unfortunately federal action in November 2025 poses a significant threat to the industry and our revenue bases, with approximately 40-45% of the Company's revenue derived from full spectrum SKUs that may be impacted.

 

 

 

Growth Strategies

 

We continued to pursue many strategies to grow our revenues and expand the scope of our business in fiscal 2025 and beyond:

 

	●	Product Innovation: Our goal is to provide our customers superior functional based products with greater efficacy claims and absorption. We constantly assess and evaluate our product portfolio, and devote resources to ongoing research and development processes with the goal of improving our product offerings. During the first quarter of fiscal 2025, we launched reformulations on several sleep products to enhance their effectiveness and improve taste. In addition, we launched ready-to-drink beverage product under our new Oasis brand. We have a pipeline of cannabinoid and non-cannabinoid products and formulation upgrades that are in the queue for ongoing innovation and product portfolio improvement.
	●	Expand our revenue channels: We continued to pursue relationships with traditional retail accounts and distributors and believe our top brand awareness and effective marketing position us as a preferred CBD partner for key traditional retail accounts as this channel has continued to normalize. During the first quarter of fiscal 2024 we launched several SKUs into Sprouts retail footprint. In April 2024, we added Door Dash as a customer. We expanded our ATRx Labs product in GNC during 2024. In 2025, we began developing relationships with beer and alcohol distributors for our Oasis beverage line and have added several large beer distributors to support our brand. Oasis can now be found in Total Wine, Winn-Dixie, Piggly Wiggly and a growing number of national and regional grocery and c-store chains.
	●	International Expansion: We continue to explore sales in markets outside of the United States. We generally partner with local wholesalers and local legal counsel who can help navigate the laws and regulatory requirements within their jurisdiction. We continue to pursue key wholesale accounts in a number of international markets and are gaining market share in Central and South America through our sanitary registration approvals.

 

 

	●	Cultivate Additional Brands: We continue to operate and attempt to grow the Paw CBD business. During fiscal 2024 we launched our nootropic mushroom line under the ATRx brand. During the first quarter of fiscal 2025 we launched a new line of hemp derived and nootropic beverages under the Oasis brand. We believe there are ongoing opportunities with these brands to focus on education, cross-selling and customer retention
	●	Acquisitions: We evaluate acquisitions where we believe there is an accretive customer base that can lower our cost of customer acquisitions through either a complementary direct to consumer base or wholesale channels, or the target has a profitable business or easily attainable cost synergies that can quickly help contribute and accelerate revenue and profitability of our Company.

 

Marketing

 

cbdMD and its brands are primarily direct to consumer brands and our focus is to grow our base of customers by profitably acquiring new customers while minimizing churn.  We employ a multi-channel media approach that allows us to market our brand and products through various distribution efforts, including professional partnerships, social media engagement, podcasts, digital and television advertising, affiliate marketing, search engine optimization, and influencer endorsements. In addition, we work with our retail partners on various marketing efforts to focus on shelf velocity.

 

During fiscal years 2025 and 2024 we spent approximately $4.4 million and $4.2 million, respectively, on brand development, sponsorships and marketing. 

 

Moving forward, we remain committed to thoughtful, data-driven investments to expand our well-established brand. We are placing greater emphasis on consumer, retailer, and regulatory education to build awareness of our superior science, safety, and clinical efficacy. By refining our messaging and outreach, we aim to attract more consumers, engage more retailers, and foster broader regulatory acceptance, always working in the best interests of the company.

 

 

Sales

 

We distribute our products both through our online sales channel as well as through a number of wholesalers and retailers that resell our products both in brick and mortar locations as well as via their online websites. Sales of our products primarily come from online sales at our websites www.cbdmd.com, www.pawcbd.com, www.atrxlabs.com, www.herbaloasis.com,and www.directcbdonline.com and through our inside sales department.  For our core cbdMD brand, we employ an inside sales team that concentrates on B2B niche specialty retailers as well as wholesale distributors, including international distributors, who we believe can help expand the reach of cbdMD products and brand recognition at physical retail locations.  For our Oasis brand, we employ as second team focused on building relationships with beverage distributors and mass retailers that sell ready to drink ("RTD") beverages.

 

During fiscal year 2025, our e-commerce business experienced continued growth, with year over year increases in new e-commerce customers. For fiscal 2025 and fiscal 2024, approximately 77% and 80% of sales were e-commerce, respectively. Our wholesale continues to expand with the additional growth of international distributors and the addition of the Oasis distribution network. 

 

Product Development and Manufacturing

 

cbdMD’s manufacturing, supply chain, and quality systems are designed to support rigorous standards of quality, safety, consistency, and regulatory compliance across all stages of product development. We utilize a hybrid manufacturing model that integrates internal specification design and oversight with both in-house manufacturing and use of experienced third-party contract manufacturers, allowing us to maintain flexibility in production, align with evolving regulatory expectations, and efficiently scale as demand fluctuates. All hemp-derived cannabinoids used in our products are sourced from U.S.-grown hemp cultivated under federal and state hemp programs. Our suppliers are evaluated for Good Manufacturing Practice ("GMP") compliance, traceability, contaminant controls, and cannabinoid profile consistency, and all raw materials undergo comprehensive testing for potency, residual solvents, pesticides, microbials, mycotoxins, and heavy metals. 

 

Our contract manufacturing partners operate under GMP-aligned procedures that include strict documentation practices, validated processes, and batch-level traceability. Critical manufacturing relationships are governed by master manufacturing agreements and, where applicable, a quality assurance agreement that defines, among other things, specifications, testing obligations, deviation handling, and corrective action measures. These partners perform blending, homogenization, encapsulation, filling, packaging, and stability testing for a wide array of formats including oils, gummies, capsules, soft-gels, topicals, and pet chews. Finished goods are subjected to multiple levels of testing by ISO-17025 accredited laboratories to confirm cannabinoid content, purity, and compliance with the 0.3% Delta-9 THC limit imposed by the 2018 Farm Bill.

 

Warehousing and fulfillment operations are conducted in our 80,000-square-foot GMP-aligned facility, which manages incoming components, packaging, finished goods storage, and order fulfillment. We maintain environmental controls, FEFO-based inventory rotation, product-level traceability, and documented recall protocols. Our warehouse processes are designed to support a high volume of direct-to-consumer shipments as well as large retail distribution orders while maintaining product integrity and compliance. 

 

Research and development activities play a central role in our competitive strategy. Through cbdMD Therapeutics, our scientific and clinical research arm, we have conducted controlled human and companion-animal clinical trials, biomarker and biometric studies, and toxicology evaluations to better understand the safety and efficacy of our formulations. Completed randomized, double-blind, placebo-controlled human studies have indicated improvements in pain, inflammation, mood, and general well-being, while our veterinary trials have shown mobility and gait improvements in dogs with osteoarthritis. A biometric sleep study conducted with WHOOP confirmed measurable improvements in sleep performance within seven days of product use. We use this data to refine formulations, substantiate claims, inform our patent pending, and generate regulatory dossiers for international approvals. Published peer-reviewed findings enhance credibility among consumers, retailers, and regulatory authorities. To date, our published study results have been cited multiple times in reputable peer-reviewed journals.

 

Our innovation pipeline includes proprietary formulations designed for sleep, stress, pain, inflammation reduction, recovery, mood, and mobility, as well as novel ingredient combinations that integrate cannabinoids with other clinically supported functional compounds. We continually evaluate new delivery systems—including improved edible formats, beverages, and bioavailability-enhancing technologies—to expand consumer access to safe and effective cannabinoid products, and our expanding portfolio of other functional ingredients.

 

Intellectual property protection remains an important component of our strategy. We maintain an extensive trademark portfolio covering cbdMD®, Paw CBD®, ATRX®, and related brands in the United States and internationally. We also rely on trade secrets and proprietary processes involving formulation techniques, cannabinoid ratios, clinical methodologies, and data analytics. Our pending U.S. patent application seeks to protect certain cannabinoid-based formulations developed through our clinical research program. To safeguard confidential information, we employ confidentiality agreements, controlled access systems, and internal data governance protocols. 

 

Together, our manufacturing, quality, research, and intellectual property programs form the foundation of cbdMD’s ability to produce safe, compliant, scientifically credible, and commercially differentiated cannabinoid and other wellness products.

 

 

 

 

Intellectual property

 

We hold a portfolio of U.S. trademark applications which are held for current and future product offerings and extended branding capability. The portfolio, includes but is not limited to, the trademarks set forth below:

 

 

Mark		US Serial No.		US Registration No.		Filing date		Description of Mark Usage
DIRECT CBD ONLINE		88424644		6324509		5/10/2019		Service mark
DIRECT CBD ONLINE		88424628		6399287		5/10/2019		Service mark
CBD MD		86914580		5173264		2/21/2016		Standard word mark
cbdMD		88451429				5/29/2019		Stylized word mark (logo in color)
cbdMD		88451502				5/29/2019		Standard word mark
Paw CBD		88697605				10/19/2019		Standard word mark
CBDMD		88944504				6/2/2020		Standard word mark
hempMD		88109782				6/29/2021		Standard word mark
ATRX		98209919				10/04/2023		Standard word mark

 

 

We currently have filed multiple foreign trademark applications for CBDMD and Paw CBD and have secured marks in the following countries: Chile, Costa Rica, Argentina, Peru, Ecuador, European Union, United Kingdom, Czech Republic, New Zealand, Columbia, Australia, and Switzerland. We continue to prosecute the CBDMD and PAWCBD trademarks in the following countries: Brazil, Canada, China, Spain, Mexico, Norway, and South Africa. Additionally, a growing number of our products hold sanitary registrations in certain Central and South American countries.

 

The Company’s U.S. Patent Application No.: 17/359,193 is currently under examination. In Q4 of fiscal year 2024 the Company filed a response to an office action making several amendments to its claims based on data from the Company’s clinical studies. This patent, if granted, is expected to provide protection in several key areas, including novel formulations for the treatment of mood and sleep disorders.

 

In addition to our trademarks and our patent filing, we rely on a combination of trade secret laws and restrictions on disclosure to protect our intellectual property rights. Our success depends on the protection of the proprietary aspects of our product development, formulation and knowhow, as well as our ability to operate without infringing on the proprietary rights of others. We also enter into proprietary information and confidentiality agreements with our employees, consultants and commercial partners and control access to, and distribution of, our formulas and other proprietary information.

 

In addition to www.cbdmd.com, www.pawcbdmd.com, www.atrxlabs.com, and www.directcbdonline.com, we own multiple domain names that we may or may not operate in the future. However, as with phone numbers, we do not have and cannot acquire any property rights in an Internet address. The regulation of domain names in the United States and in other countries is subject to change. Regulatory bodies could establish additional top-level domains, appoint additional domain name registers or modify the requirements for holding domain names. As a result, we might not be able to maintain our domain names or obtain comparable domain names, which could harm our business.

 

Competition

 

The dietary supplement market is highly competitive, with new products and new brands entering frequently. The Company is attempting to distinguish itself by focusing on hemp derived cannabinoids and seeking to identify new, emerging ingredients with functional efficacy for key consumer need states such as sleep, mood, focus and energy. Specifically, the hemp derived cannabinoid market has remained fragmented with over 2,000 brands in the category and no clear dominant brand in the US. Our competitors of hemp derived cannabinoid products include a combination of public and private companies who operate as combination of e-commerce and wholesale brands as well as brick and mortar retail operations. In addition to cbdMD’s hemp derived CBD and Delta 9 products, there are several other synthetic compounds including, but not limited to delta-8; delta 10 and HHC, that do not have long market history or safety data which have taken market share over the last 2 years. The launch of ATRx and Oasis, the Company’s functional mushroom line and beverage line, respectively, also faces significant competitive pressure as functional mushrooms have emerged as a fast growing segment of the overall dietary supplement market and beverages have emerged as the fastest growing segment of the overall CBD market. By focusing on specific functional formulas to address consumer need states, the Company believes it can differentiate itself in the market. While the pending changes in Federal law discussed below may negatively affect our industry, we do believe it will reduce competition, as smaller competitors, poorly capitalized competitors and competitors that can not comply with Federal law changes may cease operating. 

 

 

Government Regulations

 

Government regulation of hemp-derived cannabinoids remains dynamic, multi-layered, and complex. Our operations are influenced by federal law, state legislation, and international regulatory frameworks, each of which shapes the permissible scope of manufacturing, marketing, labeling, distribution, and sale of our products. We devote significant resources to monitoring regulatory developments and adjusting our operations accordingly. 

 

At the federal level, the 2018 Farm Bill established the modern legal framework for hemp, removing hemp and hemp-derived cannabinoids from the Controlled Substances Act so long as the material contains no more than 0.3% Delta-9 THC on a dry-weight basis. Although this statute legalized the cultivation and interstate transport of hemp, it left the regulation of ingestible and topical cannabinoids to the U.S. Food and Drug Administration ("FDA"). As a result, the FDA continues to assert that CBD cannot be lawfully marketed as a dietary supplement or added to human food under existing statutory authorities due to CBD’s prior investigation as an approved drug. The FDA has repeatedly highlighted concerns involving product safety, labeling accuracy, and potential risks to vulnerable populations. Enforcement has included warning letters for unapproved drug claims, mislabeling, inadequate testing, and non-compliant animal products. The agency has also emphasized cGMP expectations, contaminant testing, adverse event reporting, and the need for well-controlled studies to establish safety for long-term use.

 

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. 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. During December 2025, Senator Wyden introduced the Cannabinoid Safety and Regulation Act (“CSRA”) which has received strong support from industry and a number of legislators, and would mitigate damaging impact for the Act, should this be ultimately signed into law.  As of the date of this filing there are no assurances the CSRA will be enacted.

 

The Federal Trade Commission ("FTC") regulates advertising and marketing practices and continues to take enforcement actions against companies that make unsubstantiated health claims, misleading endorsements, or unsupported performance representations. All claims made by cbdMD—whether digital, print, social media, or influencer-based—must be supported by competent and reliable scientific evidence. Our investment in clinical trials, peer-reviewed publications, and biometric data (e.g., the WHOOP sleep study) strengthens our ability to meet substantiation standards. 

 

The U.S. Department of Agriculture ("USDA") regulates hemp cultivation and approves state and tribal hemp programs. While it does not regulate finished products, all hemp used in cbdMD products must originate from producers operating under USDA-approved or state-approved hemp plans. These requirements ensure that our raw materials originate from legal sources subject to THC compliance, standardized sampling protocols, and production oversight.

 

The Drug Enforcement Administration ("DEA") retains jurisdiction over controlled substances and continues to regulate cannabis containing more than 0.3% Delta-9 THC. DEA has also expressed concerns about synthetic and semi-synthetic cannabinoids, including isomers produced from chemical conversion processes. These compounds may be considered controlled substances under the Federal Analogue Act, and products containing them may trigger enforcement actions. While cbdMD does not rely on synthetic cannabinoids, evolving DEA views continue to influence market dynamics and state-level legislative activity.

 

At the state level, the regulatory environment for hemp-derived products is highly fragmented. States have adopted different definitions of allowable cannabinoids, potency limits, serving sizes, packaging and labeling requirements, testing mandates, age restrictions, and sales channel limitations. Several states have enacted specific rules governing hemp-derived Delta-9 THC products, including potency caps and restrictions on intoxicating formulations. Others have banned certain forms of hemp-derived cannabinoids altogether, citing public health concerns. These divergent laws require ongoing reformulation, labeling adjustments, packaging updates, and market-specific strategies. Certain products may not be legal for sale in particular states, and our distribution decisions must account for these differences. We continue to monitor regulatory changes and adjust our operations, product formulations, and distribution pathways as needed. 

 

Internationally, we navigate a similarly varied regulatory landscape. In the United Kingdom, the Food Standards Agency requires Novel Foods authorization for ingestible CBD products. The European Union applies similar Novel Foods rules, although specific requirements vary by member state. cbdMD has submitted a Novel Foods dossier to both the UK Food Standards Agency and the European Food Safety Authority which includes comprehensive safety, toxicology, stability, and manufacturing evidence. In Latin America, distribution often depends on obtaining sanitary registrations or import permits, each requiring product specifications, stability evidence, cannabinoid data, and documentation of manufacturing practices. cbdMD has obtained sanitary registrations or is in the process of securing registrations in countries including Brazil and Costa Rica. Other global markets maintain strict prohibitions or complex regulatory pathways for cannabinoid products, requiring careful evaluation before entry.

 

Advertising, labeling, and marketing regulations overlap across multiple agencies. All labeling must accurately represent cannabinoid content and include required disclosures, QR codes, batch information, and warnings. Claims must avoid disease-related statements and must be substantiated under both FDA and FTC standards. Pet products face further scrutiny under FDA’s Center for Veterinary Medicine ("CVM"), which considers ingestible cannabinoid pet products unapproved animal drugs absent explicit authorization.

 

The interplay of these federal, state, and international frameworks creates a dynamic and often uncertain regulatory environment. We expect continued evolution in the laws governing hemp-derived cannabinoids, including potential congressional action, FDA rulemaking, state legislative amendments, and international shifts. Our strategic planning, product development, distribution, and compliance systems are structured to adapt to these changes while prioritizing safety, transparency, and regulatory conformity.

 

Human Capital

 

At December 1, 2025 we had approximately 42 full-time employees and employ additional contractors to support the organization’s efforts. There are no collective bargaining agreements covering any of our employees.

 

We believe that cbdMD’s success depends on our ability to attract, develop and retain key personnel. We believe that the skills, experience and industry knowledge of our key employees significantly benefit our operations and performance.

 

Employee levels and expertise are assessed and reviewed on a regular basis and management believes it has sufficient human capital to operate its business successfully.

 

 

Additional information

 

Information on the history of our company can be found in Note 1 to the notes to our consolidated financial statements appearing in this annual report on Form 10-K.

 

We file annual, quarterly and other reports, proxy statements and other information with the SEC. The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers such as our company that file electronically with the SEC.

 

Our corporate website address is www.cbdmd.com. We make available free of charge, through the Investor section of our website, annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The information which appears on our corporate website is not part of this report.

 

ITEM 1A. RISK FACTORS.

 

Investing in our securities involves risks. You should carefully consider the risks described below in addition to the other information set forth in this Annual Report on Form 10-K, including the Management’s Discussion and Analysis of Financial Conditions and Results of Operations section and the consolidated financial statements and related notes. 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. Moreover, the risks below are not the only risks we face and additional risks not currently known to us or that we presently deem immaterial may emerge or become material at any time and may negatively impact our business, reputation, financial condition, results of operations or the trading price of our securities.

 

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. Until such time, if ever, that we are successful in generating gross profits which are sufficient to pay our operating expenses it is likely we will continue to report losses from operations in future periods.

 

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. The Company’s working capital position may not be sufficient to support the Company’s daily operations for the twelve months subsequent to the issuance of these annual financial statements. The Company’s ability to continue as a going concern is dependent upon its ability to improve profitability and cash flow and the ability to acquire additional funding. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern within twelve months after the date that the annual financial statements are issued. These financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result in the Company not being able to continue as a going concern.

 

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. A potential financing may include shares of common stock, shares of preferred stock, warrants to purchase shares of common stock or preferred stock, debt securities, units consisting of the foregoing securities, equity investments from strategic development partners or some combination of each. 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.

 

 

 

Our recent negative growth rates may continue.

 

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. 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. We believe that our revenue growth will depend upon, among other factors:

 

	●	Increasing U.S. brand awareness;
	●	Our ability to obtain adequate protections for our intellectual property;
	●	Product innovation to expand our total addressable market; and
	●	International expansion.

 

We made significant changes to our headcount to rationalize our expenses.  We are continuing to implement policies and procedures that we believe are appropriate for a company of our size. We may continue to experience difficulties as we continue to implement changes to our business and related policies and procedures to manage our business to positive cash flow.  This process may increase the strain on our resources, and we could experience operating difficulties, including without limitations, difficulties in sourcing, logistics, recruiting, maintaining internal controls, marketing, designing innovative products, and meeting consumer needs. If we do not adapt to meet these evolving challenges, the strength of our brand may erode, the quality of our products may suffer, we may not be able to deliver products on a timely basis to our customers, and our corporate culture may be harmed.

 

In addition, we may make investments in our research and development and sales and marketing organizations, expand our operations and infrastructure both domestically and internationally, design and develop new products, and enhance our existing products with newly developed products and through acquisitions. If our sales do not increase at a sufficient rate to offset our operating expenses, our losses may increase in future periods.

 

Our business depends on maintaining and strengthening our brand and generating and maintaining ongoing demand for our products, and a significant reduction in such demand could harm our results of operations.

 

We have developed a strong and trusted brand that we believe has contributed significantly to the success of our business, and we believe our continued success depends on our ability to maintain and grow the value and reputation of cbdMD. Maintaining, promoting and positioning our brand and reputation will depend on, among other factors, the success of our product offerings, quality assurance, marketing and merchandising efforts, the reliability and reputation of our supply chain, our ability to grow and capture share of the CBD category, and our ability to provide a consistent, high-quality consumer experience. We have made substantial investments in these areas in order to maintain and enhance our brand and these experiences, but such investments may not be successful. Any negative publicity, regardless of its accuracy, could materially adversely affect our business. For example, our business depends in part on our ability to maintain a strong community of engaged customers and social media and influencers. We may not be able to maintain and enhance a loyal customer base if we receive customer complaints, negative publicity or otherwise fail to live up to consumers’ expectations, which could materially adversely affect our business, operating results and growth prospects.

 

The growing use of social and digital media by us, our consumers and third parties increases the speed and extent that information or misinformation and opinions can be shared. Negative publicity about us, our brand or our products on social or digital media could seriously damage our brand and reputation. For example, consumer perception could be influenced by negative media attention regarding any consumer complaints about our products, our management team, ownership structure, sourcing practices and supply chain partners, employment practices, ability to execute against our mission and values, and our products or brand, such as any advertising campaigns or media allegations that challenge the sustainability of our products and our supply chain, or that challenge our marketing efforts regarding the quality of our products, which could have an adverse effect on our business, brand and reputation. Similar factors or events could impact the success of any brands or products we introduce in the future.

 

Our company image and brands are very important to our vision and growth strategies, particularly our focus on being a “good company” and operating consistent with our mission and values. We will need to continue to invest in actions that support our mission and values and adjust our offerings to appeal to a broader audience in the future in order to sustain our business and to achieve growth, and there can be no assurance that we will be able to do so. If we do not maintain the favorable perception of our company and our brand, our sales and results of operations could be negatively impacted. 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.

 

 

If we fail to attract new customers in a cost-effective manner, our business may be harmed.

 

A large part of our success depends on our ability to attract new customers in a cost-effective manner. We have made, and may continue to make, significant investments in attracting new customers through advertising spends on social media, radio, podcasts, targeted email communications, other media and events, sponsorships, and influencer sponsorships. Marketing campaigns can be expensive and may not result in the cost-effective acquisition of customers. Further, as our brand becomes more widely known, future marketing campaigns may not attract new customers at the same rate as past campaigns and the cost of acquiring new customers may increase over time. Additionally, regulation, algorithms, or participants in the digital marketing ecosystem may change rules for our industry or access to available demographics which may result in significant changes in the ability to target key demographic pools, impacting our ability to target our customers effectively. If we are unable to attract new customers, or fail to do so in a cost-effective manner, our business may be harmed.

 

Our growth depends, in part, on expanding into additional consumer markets, and we may not be successful in doing so.

 

We believe that our future growth depends not only on continuing to provide our current customers with new products, but also continuing to enlarge our customer base. The growth of our business will depend, in part, on our ability to continue to expand in the United States, as well as into international markets. We are investing significant resources in these areas, and although we hope that our products will gain popularity, we may face challenges that are different from those we currently encounter, including competitive, merchandising, distribution, hiring, and other difficulties. We may also encounter difficulties in attracting customers due to a lack of consumer familiarity with or acceptance of our brand, or a resistance to paying for premium products, particularly in international markets. In addition, although we are investing in sales and marketing activities to further penetrate newer regions, including expansion of our dedicated sales force, we may not be successful. If we are not successful, our business and results of operations may be harmed.

 

Our plans for international expansion may not be successful.

 

Continued expansion into markets outside the United States is one of our key long-term strategies for the future growth of our business. This expansion requires significant investment of capital and human resources, new business processes and marketing platforms, legal compliance, and the attention of many managers and other employees who would otherwise be focused on other aspects of our business. 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.

 

These and other factors could harm our international operations and, consequently, harm our business, results of operations, and financial condition. Further, we may incur significant operating expenses as a result of our planned international expansion, and it may not be successful. We have limited experience with regulatory environments and market practices internationally, and we may not be able to penetrate or successfully operate in new markets. We may also encounter difficulty expanding into international markets because of limited brand recognition, leading to delayed or limited acceptance of our products by customers in these markets, and increased marketing and customer acquisition costs to establish our brand. Accordingly, if we are unable to successfully expand internationally or manage the complexity of our global operations, we may not achieve the expected benefits of this expansion and our financial condition and results of operations could be harmed.

 

Fluctuations in the cost and availability of raw materials, equipment, labor, and transportation could cause manufacturing delays or increase our costs.

 

The price and availability of key components used to manufacture our products has been increasing and may continue to fluctuate significantly. In addition, the cost of labor within our company or at our third-party manufacturers could increase significantly due to regulation or inflationary pressures. Additionally, the cost of logistics and transportation fluctuates in large part due to the price of oil, and availability can be limited due to political and economic issues. Any fluctuations in the cost and availability of any of our raw materials, packaging, or other sourcing or transportation costs could harm our gross margins and our ability to meet customer demand. If we are unable to successfully mitigate a significant portion of these product cost increases or fluctuations, our results of operations could be harmed.

 

We rely on third-parties for raw materials and to manufacture and compound our products. 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.

 

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 do not have any long-term committed contracts with any of these third parties, and we expect to compete with other companies for raw materials, production and imported materials. If we experience significant increased demand or need to replace an existing raw material supplier or third-party manufacturer, there can be no assurances that replacements for these third-party vendors will be available when required on terms that are acceptable to us, or at all, or that any manufacturer or compounder would allocate sufficient capacity to us in order to meet our requirements. In addition, even if we are able to expand existing or find new sources, we may encounter delays in production and added costs as a result of the time it takes to engage third parties. 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.

 

 

Failures in our third-party verification and testing protocols may have an adverse impact on our brands which could suppress sales.

 

The quality of our products is essential to our business strategy. We require our raw material suppliers and farms to participate in our supplier verification program and to certify that their source material was grown using strict standards of cultivation. We also employ third-party testing procedures and all incoming cannabinoid ingredients are first tested by an independent, third-party laboratory before they reach our production facilities and then re-tested in-house throughout the production process before sending the ingredients off for final verification by an independent accredited third-party laboratories. We are reliant on these third parties to adhere to our supplier verification program and properly perform the third-party testing procedures. Any intentional or unintentional failure of any of these parties to perform the functions for which we have engaged them would adversely impact the quality of our products and could result in delays in meeting consumer demand or a decline in our sales.

 

Failures to comply with applicable laws, including hemp laws, by our third-party suppliers could create disruptions in the supply chain and adversely impact our ability to manufacture products effectively.

 

The Company’s suppliers and manufacturers must comply with the hemp production and manufacturing laws of their respective states. Since these laws can vary significantly between states, the Company relies on its partners to adhere to both state-specific regulations and USDA requirements. If any supplier or manufacturer fails to comply with local laws or loses their permits or licenses, their ability to continue operations may be jeopardized, which could, in turn, disrupt the Company’s supply chain and manufacturing processes. Such disruptions may negatively impact the Company’s ability to conduct its business as planned.

 

Product inventory may expire prior to sale due to limited shelf life.

 

While the Company actively manages its inventory, it is possible that products could reach their expiration date and remain unsold. In such cases, the Company may need to write down the value of the expired inventory, which could negatively impact its business, financial position, and operational outcomes.

 

Consumers of the Company’s products may face adverse consequences should they test positive for THC which could negatively impact the Company’s reputation, lead to litigation, or other potentially negative impacts to the Company.

 

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. As a result, there is a potential risk for end users who test positive for THC due to consumption of the Company’s products. This may be of particular concern in the case of full-spectrum hemp products, which contain not only CBD but also trace levels of THC and other cannabinoids. These trace amounts could lead to false positives on drug tests, especially with certain testing methods that do not differentiate between THC from hemp and that from other sources. There is also the possibility that certain approved tests for THC may not properly differentiate between the metabolites of THC and the metabolites of CBD, thus leading to a false positive for THC consumption. Additionally, metabolic processes in the body may cause CBD and its metabolites to convert into forms that could affect drug test results. Positive test results, even from trace amounts of THC, can have significant consequences for individuals, potentially affecting their reputation, employment, or participation in specific activities, including professional sports. Furthermore, a claim or regulatory action based on such positive test results could damage the Company’s reputation and adversely affect its operations, potentially leading to legal or regulatory challenges.

 

We could be harmed by data loss or other security breaches.

 

Like all companies that utilize technology, we are subject to threats of breaches of our technology systems and cybersecurity risks. Some of our systems have experienced past security incidents, including an incident that compromised some customers' personal and payment information. We conducted a forensic examination, made all notices to customers, governments, banks and card associations as required under local, state and federal laws, merchant agreements and card association rules. We also offered free credit monitoring and reporting to all affected customers and are maintaining a call center to handle any customer issues. We have implemented all remedial measures advised by the forensic examiner engaged by us, and, although we do not believe that any of these incidents have had a material adverse effect on our operating results, there can be no assurance the remedial measures will be effective or of a similar result in the future which could materially and adversely impact our business and operations in future periods.

 

We face risks related to system interruption and lack of redundancy.

 

From time to time we experience system interruptions and delays that make our websites and product sales unavailable or slow to respond and prevent us from efficiently fulfilling orders which could adversely impact our net sales and the attractiveness of our products. If we are unable to add software and hardware as needed, effectively upgrade our systems and network infrastructure, and take other steps to improve the efficiency of our systems, these failures could cause system interruptions or delays and adversely affect our operating results in future periods. In addition, our computer and communications systems and operations could be damaged or interrupted by fire, flood, power loss, telecommunications failure, earthquakes, acts of war or terrorism, acts of God, computer viruses, physical or electronic break-ins, and similar events or disruptions. Any of these events could cause system interruption, delays, and loss of critical data, and could prevent us from accepting and fulfilling customer orders which could make our product offerings less attractive and subject us to liability. Our systems are not fully redundant, and our disaster recovery planning may not be sufficient. In addition, we may have inadequate insurance coverage to compensate for any related losses. Any of these events could damage our reputation and be expensive to remedy.

 

Our future success depends on the continuing efforts of our management and key employees, and on our ability to attract and retain highly skilled personnel and senior management.

 

We depend on the talents and continued efforts of our senior management and key employees. We currently do not have any long-term employment agreements with our executive officers. The loss of members of our management or key employees may disrupt our business and harm our results of operations. Furthermore, our ability to manage further expansion will require us to continue to attract, motivate, and retain additional qualified personnel. Competition for this type of personnel is intense, and we may not be successful in attracting, integrating, and retaining the personnel required to grow and operate our business effectively. 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.

 

 

If our other intangible assets, or fixed assets become impaired, we may be required to record a charge to our earnings.

 

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. Estimates used for future sales growth rates, gross profit performance, and other assumptions used to estimate fair value could cause us to record material non-cash impairment charges, which could harm our results of operations and financial condition.

 

RISKS RELATED TO THE REGULATORY ENVIRONMENT FOR CBD

 

Lack of clarity and changes to Federal or state laws pertaining to industrial hemp could slow the use of industrial hemp which would materially impact our revenues in future periods.

 

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. 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. 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. Any one of these factors could slow or halt use of industrial hemp, which could negatively impact the business up to possibly causing us to discontinue operations as a whole. In addition, changes in Federal or state laws could require us to alter the way we conduct our business in order to remain compliant with applicable state laws in ways we are presently unable to foresee. These possible changes, if necessary, could be costly and may adversely impact our results of operations in future periods.

 

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. First, concerns about CBD as an impermissible adulterant persist due to the FDA's position that cannabinoids cannot legally be added to food or beverages. The FDA has consistently objected to such uses, asserting that CBD-containing products may be adulterated and subject to enforcement action. Second, under the FD&C Act, unless a product was in the food supply and marketed to the public prior to October 15, 1994, manufacturers must notify the FDA before marketing dietary supplements containing NDIs, providing evidence that the ingredient is expected to be safe. However, there is ongoing uncertainty regarding whether hemp-derived cannabinoids were in the food supply and marketed to the public before October 15, 1994, as required to avoid classification as an NDI. As of the end of fiscal 2024, the FDA has uniformly objected to several New Dietary Ingredient Notifications ("NDIN") submitted to the Agency by competitors, asserting it does not meet the definition of a dietary supplement due to the FDA's stance that CBD was not marketed as a dietary ingredient before its investigation as a new drug. The Company disagrees with this position and believes there are counterarguments. The FDA has consistently taken the position that CBD cannot be marketed as a dietary supplement or added to food because it was investigated as a new drug before its inclusion in the food supply, known as IND Preclusion. This position has been outlined in the majority of Warning Letters the FDA has sent to CBD companies since the enactment of the Farm Bill. Any enforcement of the IND Preclusion could require the Company to allocate significant resources to defend its position, adversely affecting its business and operations. Without changes in federal law, regulation, or judicial interpretation, the FDA’s current stance could materially and adversely impact the Company’s ability to operate.

 

Failure or inability to secure required state or federal regulatory approvals and permits could negatively impact the Company’s ability to conduct business.

 

The Company must secure and maintain specific approvals and permits in many jurisdictions where its products are sold, and failure to do so could delay or inhibit its operations. Regulatory approval and permit requirements are subject to change without notice. There is no guarantee that the Company will be able to acquire or retain these essential approvals. Any substantial delays or inability to obtain the required permits or licenses would negatively impact the Company’s ability to conduct its business, potentially leading to material adverse effects on its financial condition and operations.

 

Costs associated with compliance with numerous laws and regulations could impact our financial results. In addition, we could become subject to increased litigation risks associated with the CBD industry and the overall Dietary Supplement Industry.

 

The manufacture, labeling and distribution by us of the products in our portfolio are regulated by various federal, state and local agencies. These governmental authorities may commence regulatory or legal proceedings, which could restrict the permissible scope of our product claims or the ability to sell products in the future. We are subject to regulation by the federal government and other state and local agencies as a result of our product offering, including but not limited to hemp-based cannabinoid products and other natural health products. The shifting compliance environment and the need to build and maintain robust systems to comply with different compliance in multiple jurisdictions increases the possibility that we may violate one or more of the requirements. If our operations are found to be in violation of any of such laws or any other governmental regulations that apply to our company, we may be subject to penalties, including, without limitation, civil and criminal penalties, damages, fines, the curtailment or restructuring of our operations, any of which could adversely affect the ability to operate our business and our financial results. Failure to comply with the various federal, state and local requirements may result in, among other things, injunctions, product withdrawals, recalls, product seizures, fines and criminal prosecutions. We are seeing increasing state-level potency, labeling and package size requirements that may increase our costs with respect to monitoring and adhering to unique requirements in addition to potential product and packaging obsolescence costs as well as stop sales or product withdrawals. 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. Additionally, some states also permit advertising and labeling laws to be enforced by private attorneys general who may seek relief for consumers, seek class-action certifications, seek class-wide damages and product withdrawals of products sold by us. Any actions against our company by governmental authorities or private litigants could be time consuming, costly to defend and could have a material adverse effect on our business, financial condition, and results of operations.

 

Uncertainty caused by potential changes to legal regulations could impact the use of the Company’s products.

 

There is substantial uncertainty and different interpretations among federal, state and local regulatory agencies, legislators, academics and businesses as to the scope of operation of Farm Bill-compliant hemp programs relative to the emerging regulation of cannabinoids. These different opinions include, but are not limited to, the regulation of cannabinoids by the U.S. Drug Enforcement Administration and/or the FDA, various administrative determinations and court decisions, all of which impact the extent to which manufacturers and processors of products containing Farm Bill-compliant cannabinoids may engage in interstate commerce. There are currently no consistent regulations applicable to hemp derived cannabinoids in the United States or globally. There is no assurance the Company will remain compliant with all of these laws, rules and regulations as changes to such laws, rules and regulations are promulgated and this may have a negative impact on the Company’s operations. 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. The uncertainties, conflicts and lack of uniformity cannot be resolved without further federal, and perhaps even state-level, legislation, regulation or a definitive judicial interpretation of existing legislation and rules. If these uncertainties continue, they may have an adverse effect upon the introduction of our products in different markets.

 

 

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 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. Although the FTC has primarily issued warning letters, it initiated its first law enforcement administrative action in December 2020, taking action against six CBD companies for allegedly making unsupported health claims, resulting in settlement agreements requiring cessation of such claims and monetary penalties. The FTC further heightened its scrutiny in May 2021 and, more recently, issued its April 2023 Notice of Penalty Offenses, which stresses the need for rigorous substantiation of health-related product claims. This notice emphasizes that companies must provide scientific evidence, including high-quality, randomized, placebo-controlled human clinical trials, to substantiate claims. Failure to comply with these standards could result in significant penalties under Section 5 of the FTC Act. The FTC’s actions, along with the potential for increased enforcement in the future, present additional risks to companies in the CBD industry. The Company must be cautious in making health claims, ensuring all advertising is adequately supported by scientific evidence, as any violations could result in penalties, corrective measures, and reputational damage.

 

Risks associated with international regulations.

 

The Company faces significant regulatory challenges and risks in expanding its operations internationally, which could materially impact its business. As the Company conducts sales and expands into new markets, it must adhere to the laws and regulations of each jurisdiction, as well as any relevant international treaties. Non-compliance with these regulations could result in civil or criminal penalties, fines, operational restructuring, asset seizures, or the denial of regulatory applications. Moreover, international authorities could determine that past or current operations violated local regulations, exposing the Company to potential enforcement actions. The evolving legal landscape in certain jurisdictions, including proposed legislative changes, may present opportunities for portfolio expansion but also introduces undetermined compliance risks. Additionally, cannabis-related financial transactions are governed by complex and unsettled laws that vary by jurisdiction, and financial benefits derived from activities deemed unlawful in certain regions could expose the Company, its investors, or affiliates to liability. Increased regulation of natural health products and heightened scrutiny of nutritional supplements and advertising claims further compound these challenges. Anticipated regulatory changes may require the Company to adapt its products or marketing strategies, and any delays or failures to comply could disrupt operations. These risks underscore the need for prospective investors to consult legal counsel to assess potential liabilities associated with the Company's activities in specific jurisdictions.

 

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. 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. 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. 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. 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.

 

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. In order to maintain these listings, we must maintain certain share prices, financial and share distribution targets, including maintaining a minimum amount of shareholders’ equity and a minimum number of public shareholders. 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. 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”). Section 1003(a)(i) requires a listed company to have stockholders’ equity of $2.0 million or more if the listed company has reported losses from continuing operations and/or net losses in two of its three most recent fiscal years then ended 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. 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. 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. 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.

 

 

The Series B Convertible Preferred Stock ranks senior to our Common Stock all indebtedness and other liabilities of our subsidiaries.

 

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. 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.

 

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.

 

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. 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.

 

 

 

ITEM 1B. UNRESOLVED STAFF COMMENTS.

 

Not applicable to a smaller reporting company.

 

ITEM 1C. CYBERSECURITY

 

Like all companies that utilize technology, we are subject to threats of breaches of our technology systems. To mitigate the threat to our business, we take a comprehensive approach to cybersecurity risk management. Our IT department and our management actively oversee our risk management program, including the management of cybersecurity risks. We have contracted cybersecurity and risk assessment experts to help test our systems and guide the ongoing development of best practices policies. We have established policies, standards, processes and practices for assessing, identifying, and managing material risks from cybersecurity threats, including those discussed in our Risk Factors.   We have devoted resources to implement and maintain security measures to meet regulatory requirements and shareholder expectations, and we intend to continue to make investments to maintain the security of our data and cybersecurity infrastructure. While there can be no guarantee that our policies and procedures will be properly followed in every instance or that those policies and procedures will be effective, we believe that our company’s sustained investment in these efforts and technologies have put the Company in a position to protect against potential compromises, and we do not believe that risks from prior cybersecurity threats have materially affected our business to date. We can provide no assurance that there will not be incidents in the future or that past or future attacks will not materially affect us, including our business strategy, results of operations, or financial condition.

 

Risk management and strategy.

 

We employ a multi-layered cybersecurity defense strategy that includes:

 

	●	Network and endpoint protection: Utilizing firewalls, intrusion detection systems, antivirus software, and advanced encryption protocols to safeguard sensitive data and systems.
	●	Multi-factor authentication, security and principle of least privileged (PoLP)
	●	Employee training and awareness programs: Educating employees on cybersecurity best practices and conducting phishing simulations to promote vigilance against social engineering attacks.
	●	Incident detection and response plans: Maintaining real-time monitoring and implementing a structured incident response plan that allows us to quickly detect, respond to, and recover from cyber incidents.
	●	Third-party risk management: Vetting the cybersecurity controls of vendors and partners to ensure that their practices align with our standards for protecting sensitive information.
	●	While we have not experienced a cybersecurity incident that has had a material impact to date, the threat of potential incidents remains high. We continually evaluate our exposure to risks such as:
		○	Operational disruption from ransomware or other cyberattacks.
		○	Data breaches that could compromise customer or proprietary information.
		○	Regulatory and legal exposure arising from cybersecurity failures.

 

---

 

As part of our risk management framework, we regularly assess whether any cybersecurity incidents, or the likelihood of such incidents, could materially affect our business. We are also committed to continuous improvements to address emerging threats.

 

Governance.

 

Our board of directors plays an active role in overseeing the company’s approach to managing cybersecurity risks. The board receives regular updates from senior management regarding the company's cybersecurity strategy, potential risks, and any incidents that may arise. These updates ensure that the board remains informed and able to provide guidance on cybersecurity matters.

 

The board is also regularly briefed by management on the Company’s cybersecurity policies, risk assessments, and mitigation strategies. This reporting structure allows the board to remain engaged with the company’s efforts to address and manage evolving cyber threats, ensuring that cybersecurity is aligned with our overall risk management framework.

 

Management, led by the IT department, plays a critical role in assessing and managing material risks related to cybersecurity. This includes implementing day-to-day cybersecurity measures, conducting regular risk assessments, and ensuring the timely response to any cyber threats or incidents. The IT department is responsible for ensuring that cybersecurity is integrated into our company’s broader risk management strategy, with direct reporting lines to both senior executives and the board of directors. 

 

ITEM 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. 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 provides for the monthly base rent of $65,000, with an annual base rent of $9.75 per square feet from March 1, 2025 through February 28, 2026, and $67,600 with an annual base rent of $10.14 per square feet from March 1, 2026 through September 30, 2026. The Company shall also continue to pay additional rent and all other amounts (other than “Monthly Base Rent”) in accordance with the terms of the lease, except the “Controllable CAM Charges" provision have been deleted. Furthermore, the landlord has approved certain subleases entered into by and between the Company and sub tenants for portions of the facility. 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.

 

In December 2019, Cynthia Davis filed a purported collective and class action lawsuit in the United States District Court for the Central District of California against cbdMD and certain of our competitors alleging violations of the California’s Unfair Competition Law, California’s False Advertising Law and California’s Consumer Legal Remedies Act, as well as claims for Breach of Express Warranties, Breach of Implied Warranty of Merchantability and Declaratory Relief. On March 4, 2021 the Court granted cbdMD’s motion to stay the case until the FDA or Congress takes definitive action on the regulatory status of CBD and the case remains in this status as of this filing. The Company believes this matter will eventually be dismissed but there is no timeline on when the FDA or Congress will take action so the case is expected to be stayed indefinitely.

 

ITEM 4. MINE SAFETY DISCLOSURES.

 

Not applicable to our company.

 

 

PART II

 

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. These amounts do not reflect persons or entities that hold our securities in nominee or “street” name through various brokerage firms.

 

Dividend policy

 

Common Stock

 

We do not currently intend to pay dividends on our common stock. 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.

 

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 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. If the Company fails to satisfy an Equity Condition, dividends shall be paid in cash. 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.

 

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. 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 6. [Reserved]

  

 

ITEM 7.

 

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

The following discussion of our financial condition and results of operations should be read in conjunction with the audited consolidated financial statements and the notes to those statements that are included elsewhere in this report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements because of several factors, including those set forth under the Part I, Item 1A, Risk Factors and Business sections in this report, and our other filings with the Securities and Exchange Commission. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements. Such statements are based on our current expectations and could be affected by the uncertainties and risk factors described throughout this report.

 

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. 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. Our innovative broad spectrum formula utilizes one of the purest hemp extracts, containing CBD, CBG and CBN, while eliminating the presence of tetrahydrocannabinol (THC). Non-THC is defined as below the level of detection using validated scientific analytical methods. Our full spectrum products contain a variety of cannabinoids and terpenes in addition to CBD while maintaining trace amounts of THC that fall within the limits set in the 2018 Farm Bill. 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. 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. 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. 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.

 

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

 

 

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. 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. 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. 

 

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.  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.

 

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. The year over year decline in our Paw CBD brand is due to increasing competition in the pet product industry and a rationalization in marketing efforts specific to the brand.

 

Cost of sales

 

Our cost of sales includes costs associated with distribution, fill and labor expense, components, manufacturing overhead, third-party providers, and freight for our product sales. Our cost of sales as a percentage of net sales was 37% and 38% for fiscal years ended September 30, 2025 and 2024, respectively. 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. 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. 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 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. 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. All other expenses includes a $0.7 million gain related to the settlement of our former executive office (“HQ”) lease in 2024.

 

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	)

 

 

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.

 

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 corporate operating expenses are primarily related to the ongoing public company related activities.

 

Other income and other non-operating expenses

 

We also record income and expenses associated with non-operating items. The material components of those are set forth below.

 

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 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. 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. 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.

 

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 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.
 
We do not have any commitments for capital expenditures. 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.

 

 

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. The Company’s working capital position may not be sufficient to support the Company’s daily operations for the twelve months subsequent to the issuance this report. The Company’s ability to continue as a going concern is dependent upon its ability to improve profitability and cash flow and the ability to acquire additional funding. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern within twelve months after the date that our annual financial statements are issued. These financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result in the Company not being able to continue as a going concern.

 

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. 

 

 

Non-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.

(2) Represents an operating expense related to inventory loss related to regulatory changes impacting labels and packaging and obsolete/expired inventory.

(3) Represents non-cash expense incurred as a credit provided to GNC to replace expired product.

 

 

Critical accounting policies

 

The preparation of financial statements and related disclosures in conformity with US GAAP and our discussion and analysis of our financial condition and operating results require our management to make judgments, assumptions and estimates that affect the amounts reported in our consolidated financial statements and accompanying notes. Note 1, “Organization and Summary of Significant Accounting Policies,” of the Notes to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K describes the significant accounting policies and methods used in the preparation of our consolidated financial statements. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates, and such differences may be material.

 

We believe that the following critical accounting policies involve the more significant judgments and estimates used in the preparation of our consolidated financial statements and are the most critical to aid you in fully understanding and evaluating our reported financial results. Management considers these policies critical because they are both important to the portrayal of our financial condition and operating results, and they require management to make judgments and estimates about inherently uncertain matters.

 

Inventory

 

Inventory is stated at the lower of cost or net realizable value with cost being determined on a weighted average basis. The cost of inventory includes product cost, freight-in, and production fill and labor (portions of which we outsource to third party manufacturers). Write-offs of potentially slow moving or damaged inventory are recorded based on management’s analysis of inventory levels, forecasted future sales volume and pricing and through specific identification of obsolete or damaged products. We assess inventory quarterly for slow moving products and potential impairments and at a minimum perform a physical inventory count annually near fiscal year end.

 

Revenue Recognition

 

The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customer (“ASC 606”). The Company performs the following five steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company applies the five-step model to arrangements that meet the definition of a contract under the standard, including when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of revenue accounting, the Company evaluates the goods or services promised within each contract related performance obligation and assesses whether each promised good or service is distinct. The Company recognizes as revenue, the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

 

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. Net sales are comprised of gross revenues less product returns, trade discounts and customer allowances, which include costs associated with off-invoice mark-downs and other price reductions, as well as trade promotions. These incentive costs are recognized at the later of the date on which the Company recognizes the related revenue or the date on which the Company offers the incentive. The Company currently offers a 60-day, money back guarantee.

 

Impairment of Long Lived Assets

 

The Company reviews all intangible assets for impairment whenever events or changes in circumstances indicate the carrying amount of the assets may not be recoverable. Long-lived assets, such as property and equipment and intangible assets subject to depreciation and amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable or that the useful life is shorter than the Company had originally estimated. Recoverability of these assets is measured by comparison of the carrying amount of each asset or asset group to the future undiscounted cash flows the asset or asset group is expected to generate over their remaining lives. If the asset or asset group is considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset or asset group. If the useful life is shorter than originally estimated, the Company amortizes the remaining carrying value over the new shorter useful life. 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. 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. 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. 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 note was repaid in full during the second quarter of fiscal 2025.

 

 

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.

 

Off balance sheet arrangements

 

As of the date of this report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term "off-balance sheet arrangement" generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with us is a party, under which we have any obligation arising under a guarantee contract, derivative instrument or variable interest or a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

Not applicable for a smaller reporting company.

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

 

Please see our Financial Statements beginning on page 33 of this annual report.

The Auditor Firm ID for our external auditors, Cherry Bekaert LLP, is 677.

 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

 

None.

 

ITEM 9A. CONTROLS AND PROCEDURES.

 

Evaluation of Disclosure Controls and Procedures.

 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed pursuant to the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Commission’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal accounting officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

 

As required by Exchange Act Rule 13a-15(e), we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and our principal accounting officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our principal executive officer and principal accounting officer concluded that our disclosure controls were effective at September 30, 2025.

 

Management’s Report on Internal Control over Financial Reporting.

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:

 

	●	pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
	●	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
	●	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

 

 

Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk. 

 

Our management, including our principal executive officer and principal accounting officer assessed the effectiveness of our internal control over financial reporting as of September 30, 2025. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the 2013 Treadway Commission (“COSO”) in Internal Control-Integrated Framework. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were effective.

 

Changes in Internal Control over Financial Reporting

 

There have been no changes in our internal control over financial reporting during our last quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 ITEM 9B. OTHER INFORMATION.

 

ELOC

 

On December 15, 2025, the Company entered into a Securities Purchase Agreement, as amneded (the “ELOC Agreement”) with C/M Capital Master Fund, LP, an accredited investor (the “ELOC Purchaser”). Pursuant to the ELOC Agreement, the Company agreed to sell, and the ELOC Purchaser agreed to purchase, up to $10 million (the “Available Amount”) of the Company’s common stock (the “Purchase Shares”), subject to a sale limit of 19.99% of the outstanding shares of the Company’s common stock in accordance with the rules of the NYSE American. The transactions contemplated by the ELOC Agreement are subject to the Company registering the ELOC Purchaser’s resale of the Purchase Shares on a registration statement to be filed with the SEC. Concurrent with the execution of the ELOC Agreement, the Company entered into a registration rights agreement with the ELOC Purchaser. Pursuant to the Registration Rights Agreement, the Company agreed to file a registration statement on Form S-1 with the SEC covering the resale of the shares of common stock sold under the ELOC, on or before the 30th calendar day following the date of the Registration Rights Agreement and to use its commercially reasonable efforts to cause such registration statement to be declared effective by the SEC at the earliest practicable date, subject to limited exceptions described therein. The registration rights granted under the Registration Rights Agreement are subject to certain conditions and limitations and are subject to customary indemnification and contribution provisions.  In connection with entering into the ELOC Agreement, the Company agreed to immediately issue to the ELOC Purchaser, 8,000,000 shares of common stock as commitment shares and, thereafter an amount of shares equal to 0.5% of the Available Amount, which shall be issued in a pro rated fashion simultaneously with the delivery of any and all Purchase Shares purchased under the ELOC Agreement. The Company does not have a right to commence any sales of common stock to the ELOC Purchaser under the ELOC Agreement until the time when all of the conditions to the Company’s right to commence sales of Purchase Shares to the ELOC Purchaser set forth in the ELOC Agreement have been satisfied, including that a registration statement covering the resale of the Purchase Shares is declared effective by the SEC and the final form of prospectus contained therein is filed with the SEC (the “Commencement Date”). At any time from and after the Commencement Date, on any business day on which the previous business day’s closing sale price of common stock was equal to or greater than $0.50 (the “Purchase Date”), the Company may direct the ELOC Purchaser to purchase a specified number of shares of common stock (a “Fixed Purchase”) not to exceed on any single business day the lesser of (i) $500,000 of shares of common stock or (ii) $10,000,000 in the aggregate of Fixed Purchases (as defined in the ELOC Agreement), at a purchase price equal to the lesser of 95% of (i) the lowest sale price of the common stock on the trading day immediately prior to such applicable Purchase Date or (ii) the daily volume weighted average price of the common stock for the five trading days immediately preceding the applicable Purchase Date for such Fixed Purchase.

 

In addition, at any time from and after the Commencement Date, on any business day on which the previous business day’s closing sale price of the common stock is equal to or greater than $0.50 and such business day is also the Purchase Date for a Fixed Purchase of an amount of shares of common stock not less than the applicable Fixed Purchase Share Limit (as defined in the ELOC Agreement) (the “VWAP Purchase Date”), the Company may also direct the ELOC Purchaser to purchase an additional number of shares of common stock (a “VWAP Purchase”) at a purchase price equal to the lesser of 95% of (i) the closing price of a share of common stock on the trading day immediately prior to such applicable Purchase Date and (ii) the lowest sale price on the VWAP Purchase date.  If the Company makes certain issuances of its securities within a specified period of time after a Purchase Date and such securities are issued at prices (the “New Issuance Price”) less than the prices to be paid by the ELOC Purchaser in such Fixed Purchase or VWAP Purchase, the purchase price for such applicable Fixed Purchase or VWAP Purchase would be reduced to the New Issuance Price, subject to the terms and conditions set forth in the ELOC Agreement. Under the ELOC Agreement, in no event may the aggregate amount of Purchase Shares submitted in any single or combination of VWAP Purchase notices on a particular date require a payment from the ELOC Purchaser to us that exceeds $10,000,000, unless such limitation is waived by the ELOC Purchaser.

 

Series C Preferred

 

Effective December 18, 2025, the Company entered into Securities Purchase Agreements dated December 18, 2025 (“Series C Purchase Agreements”) with two institutional investors whereby the investors were issued an aggregate of 1,000,000 shares of Series C Convertible Preferred Stock (“Series C Preferred Stock”) for aggregate gross proceeds of $2.25 million. The Company received net proceeds of $2.21 million which shall be used for working capital purposes.

 

In addition, pursuant to the Purchase Agreements, the Company entered into a Registration Rights Agreement with each of the Investors pursuant to which the shares of common stock issuable upon conversion of the Series C Preferred Stock to the Investors are entitled to registration under the Securities Act. Pursuant to the Registration Rights Agreement, the Company is required to file a registration statement to register the shares underlying the Series C Preferred Stock within 30 days following the closing date.

 

On December 18, 2025, the Company filed a Certificate of Amendment to the Certificate of Incorporation (the “Certificate of Designation”) designating 1,000,000 shares of the Company’s authorized preferred stock as Series C Convertible Preferred Stock, par value $0.001 per share. Except for differences in the stated value, floor price and conversion price, the Series C Preferred Stock has terms and conditions that are substantially similar to those of the Company’s Series B Convertible Preferred Stock. Each share of the Series C Preferred Stock is convertible into common stock at a conversion price of $2.25, subject to anti-dilution adjustments and Alternate Conversion rights (as defined in the Certificate of Designation). The Series C Preferred Stock accrues 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 Certificate of Designation), or in cash. If the Company fails to satisfy an Equity Condition, dividends shall be paid in cash. However, if North Carolina law prohibits the payment of dividends in cash, then the then Stated Value (as defined in the Certificate of Designation) shall be increased by the dividends as reasonably determined by the Company and the holders of the Series C Preferred Stock.

 

With respect to dividends, distributions, liquidation, dissolution and winding up of the Company, the Series C Preferred Stock ranks pari passu with the Series B Convertible Preferred Stock and is senior to all other shares of the Company’s capital stock unless otherwise consented to by the holders of the Series C Preferred Stock. The holders of Series C Preferred Stock have no voting power and no right to vote, except as required by the North Carolina Business Corporations Act or with respect to matters affecting the preferences, rights, privileges or powers relating to the Series C Preferred Stock. In addition, the Series C Preferred Stock is subject to a beneficial ownership limitation which prohibits any holder from beneficially owning more than 4.99% of the shares of the Company’s common stock outstanding immediately following such conversion. The Certificate of Designation is filed as an exhibit to this annual report.

 

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

 

None.

 

 

PART III

 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

 

The information required by this item will be contained in our Proxy Statement and is incorporated herein by this reference.

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

 

The information required by this item will be contained in our Proxy Statement and is incorporated herein by this reference.

 

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

 

The information required by this item will be contained in our Proxy Statement and is incorporated herein by this reference.

 

 

PART IV

 

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

 

(a)	(1) Financial statements.

 

The consolidated financial statements and Report of Independent Registered Accounting Firm begin on page 33.

 

(2) Financial statement schedules

 

All schedules for which provision is made in the applicable accounting regulations of the SEC are either not required under the related instructions, are not applicable (and therefore have been omitted), or the required disclosures are contained in the consolidated financial statements herein.

 

(3) Exhibits.

 

The exhibits that are required to be filed or incorporated by reference herein are listed in the Exhibit Index.

 

ITEM 16. FORM 10-K SUMMARY.

 

None

 

 

EXHIBIT INDEX

 

 

				Incorporated by Reference
Exhibit No.		Exhibit Description		Form		Filing Date		Exhibit No.		Filing or Furnished Herewith
2.1		Merger Agreement dated December 3, 2018 by and among Level Brands, Inc., AcqCo, LLC, cbdMD LLC and Cure Based Development, LLC		8-K		12/3/18		2.1
2.2		Articles of Merger dated December 20, 2018 as filed with the Secretary of State of Nevada merging AcqCo, LLC with and into Cure Based Development, LLC		10-Q		2/14/19		2.2
2.3		Articles of Merger dated December 20, 2018 as filed with the Secretary of State of North Carolina merging AcqCo, LLC with and into Cure Based Development, LLC		10-Q		2/14/19		2.3
2.4		Articles of Merger dated December 20, 2018 as filed with the Secretary of State of Nevada merging Cure Based Development, LLC with and into cbdMD LLC		10-Q		2/14/19		2.4
2.5		Articles of Merger dated December 20, 2018 as filed with the Secretary of State of North Carolina merging Cure Based Development, LLC with and into cbdMD LLC		10-Q		2/14/19		2.5
2.6		Addendum No. 1 to Agreement and Plan of Merger dated March 31, 2021		8-K		4/1/21		10.1
3.1		Articles of Incorporation		1-A		9/18/17		2.1
3.2		Articles of Amendment to the Articles of Incorporation - filed April 22, 2015		1-A		9/18/17		2.2
3.3		Articles of Amendment to the Articles of Incorporation - filed June 22, 2015		1-A		9/18/17		2.3
3.4		Articles of Amendment to the Articles of Incorporation - filed November 17, 2016		1-A		9/18/17		2.4
3.5		Articles of Amendment to the Articles of Incorporation - filed December 5, 2016		1-A		9/18/17		2.5
3.6		Articles of Amendment to Articles of Incorporation		8-K		4/29/19		3.7
3.7		Articles of Amendment to Articles of Incorporation including the Certificate of Designations, Rights and Preferences of the 8.0% Series A Cumulative Convertible Preferred Stock		8-K		10/11/19		3.1(f)
3.8		Articles of Amendment of Articles of Incorporation, as amended, of cbdMD, Inc. effective April 24, 2023		8-K		4/27/23		3.1
3.9		Articles of Amendment Automatic Conversion of Series A Preferred Stock effective May 6, 2025		8-K		5/7/25		3.1
3.10		Articles of Amendment to the Articles of Incorporation 8 to 1 reverse split effective May 6, 2025		8-K		5/7/25		3.2
3.11		Certificate of Designation of Series B Convertible Preferred Stock filed September 29, 2025		8-K		10/6/25		3.1
3.12		Certificate of Designation of Series C Convertible Preferred Stock filed December 19, 2025								Filed
3.13		Bylaws, as amended		1-A		9/18/17		2.6
4.1		2015 Equity Compensation Plan+		1-A		9/18/17		3.8
4.2		Form of Stock Option Award under 2015 Equity Compensation Plan*		1-A		9/18/17		3.9
4.3		2021 Equity Compensation Plan*		8-K		1/14/21		10.1
4.4		Form of Representative’s Warrant dated December 11, 2020		8-K		12/9/20		4.1
4.5		Form of Representative’s Warrant dated June 28, 2021		8-K		6/30/21		4.1
4.6		Form of Representative’s Warrant dated May 3, 2023		8-K		5/3/23		4.1
4.7		Convertible Promissory Note dated January 30, 2024		8-K		2/2/24		4.1
4.8		2025 Equity Compensation Plan+		8-K		11/28/25		10.2
10.1		Form of Indemnification Agreement		1-A		9/18/17		6.21
10.2		Office Lease dated July 11, 2019		10-Q		8/14/19		10.1
10.3		Warehouse Lease dated August 27, 2019		10-Q		2/13/20		10.1
10.4		Asset Purchase Agreement by and among Twenty Two Capital, LLC, cbdMD, Inc., John J. Wiesehan III, Vieo Design, LLC and Bradley D. Trawick dated June 22, 2021		8-K		7/27/21		10.1

 

 

10.5		Executive Employment Agreement dated October 1, 2021 between cbdMD, Inc. and T. Ronan Kennedy*+		8-K		10/5/21		10.1
10.6		Equipment Purchase Agreement effective April 7, 2022 by and between cbd Industries, LLC and Old Belts Extracts LLC		10-Q		4/7/22		10.21
10.7		Membership Interest Transfer Agreement dated June 22, 2022		10-Q		8/11/22		10.22
10.8		Agreement for Advertising Placement dated February 1, 2023+		S-1		3/13/23		10.17
10.9		Side Letter - Keystone Capital Partners, LLC		S-1		3/13/23		10.20
10.10		Common Stock Purchase Agreement dated March 2, 2023 by and among cbdMD, Inc. and Keystone Capital Partners, LLC		8-K		3/2/23		10.1
10.11		Registration Rights Agreement dated March 2, 2023 by and among cbdMD, Inc. and Keystone Capital Partners, LLC		8-K		3/2/23		10.2
10.12		Security Agreement, dated as of January 30, 2024, by and between cbdMD, Inc. and the Investors*		8-K		2/2/24		10.2
10.13		Registration Rights Agreement, dated January 30, 2024, by and between cbdMD, Inc. and the Investors		8-K		2/2/24		10.3
10.14		License Agreement, effective as of March 20, 2024, by and between cbdMD, Inc. and HSKL, Inc.		8-K		3/18/24		10.1
10.15		Lease Forbearance Agreement, dated as of March 14, 2024, by and between cbdMD, Inc. and HSKL, Inc.		8-K		3/18/24		10.2
10.16		Amendment to Extend Westinghouse Boulevard Lease dated November 26, 2024		8-K		11/27/24		10.1
10.17		Form of Preferred Stock Purchase Agreement between cbdMD, Inc. and the Selling Shareholders*		8-K		10/6/25		10.1
10.18		Form of Registration Rights Agreement between cbdMD, Inc. and the Selling Shareholders		8-K		10/6/25		10.2
10.19		Executive Employment Agreement dated November 28, 2025 between cbdMD, Inc. and T. Ronan Kennedy*+		8-K		11/28/25		10.1
10.20		Securities Purchase Agreement by and between cbdMD, Inc. and C/M Capital Master Fund, LP, dated December 15, 2025, as amended								Filed
10.21		Registration Rights Agreement by and between cbdMD, Inc. and C/M Capital Master Fund, LP, dated December 15, 2025								Filed
10.22		Form of Series C Preferred Stock Securities Purchase Agreement dated December 19, 2025								Filed
10.23		Form of Registration Rights Agreement date December 19, 2025								Filed
14.1		Code of Business Conduct and Ethics		1-A		9/18/17		15.1
19.1		Insider Trading Policy		10-K		12/22/23		19.1
21.1		List of Subsidiaries		S-1		2/16/24		21.1
23.1		Consent of Cherry Bekaert LLP								Filed
24.1		Power of attorney (included on signature page of this report)								Filed
31.1		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer								Filed
31.2		Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer								Filed
32.1		Section 1350 Certification of Chief Executive Officer and Chief Financial Officer								Filed
97.1		Clawback Policy		10-K		12/22/23		97.1
101 INS		Inline XBRL Instance Document								Filed
101 SCH		Inline XBRL Taxonomy Extension Schema								Filed
101 CAL		Inline XBRL Taxonomy Extension Calculation Linkbase								Filed
101 LAB		Inline XBRL Taxonomy Extension Label Linkbase								Filed
101 PRE		Inline XBRL Taxonomy Extension Presentation Linkbase								Filed
101 DEF		Inline XBRL Taxonomy Extension Definition Linkbase
104		Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101)

 

	+	Indicates management contract or compensatory plan.
	*	Certain exhibits and schedules have been omitted in accordance with Item 601(a)(5) of Regulation S-K. The registrant agrees to furnish supplementary a copy of any omitted exhibit or schedule to the Commission upon its request.

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: December 19, 2025	cbdMD, Inc.
	By:	/s/ T. Ronan Kennedy
		T. Ronan Kennedy
		Chief Executive Officer (Principal Executive Officer)
Date: December 19, 2025	cbdMD, Inc.
	By:	/s/ T. Ronan Kennedy
		T. Ronan Kennedy
		Chief Financial Officer (Principal Financial Officer)
Date: December 19, 2025	cbdMD, Inc.
	By:	/s/ Brad Whitford
		Brad Whitford
		Chief Accounting Officer

 

POWER OF ATTORNEY

 

KNOW ALL BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Ronan Kennedy his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments and supplements to this report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to such attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Name		Positions		Date
/s/ Scott Stephen		Chairman of the Board of Directors		December 19, 2025
Scott Stephen
/s/ Bakari Sellers		Director		December 19, 2025
Bakari Sellers
/s/ William Raines III		Director		December 19, 2025
William Raines III
/s/ Sibyl Swift		Director		December 19, 2025
Sibyl Swift, PhD
/s/ Kevin Roe		Director		December 19, 2025
Kevin Roe
/s/ Jeffery Porter		Director		December 19, 2025
Jeffery Porter

 

 

 

PART 1 – FINANCIAL INFORMATION

 

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS.

 

cbdMD, INC.

CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2025 AND 2024

 

 

See Notes to Consolidated Financial Statements

 

 

CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2025 AND 2024

(continued)

 

 

See Notes to Consolidated Financial Statements

 

  

cbdMD, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

SEPTEMBER 30, 2025 AND 2024

 

 

See Notes to Consolidated Financial Statements

 

  

cbdMD, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

FOR THE YEARS ENDED SEPTEMBER 30, 2025 AND 2024

 

 

See Notes to Consolidated Financial Statements

 

  

cbdMD, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEARS ENDED SEPTEMBER 30, 2025 AND 2024

 

 

Supplemental Disclosures of Cash Flow Information:

 

 

See Notes to Consolidated Financial Statements

 

  

cbdMD, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

FOR THE YEARS ENDED SEPTEMBER 30, 2025 AND 2024

 

 

See Notes to Condensed Consolidated Financial Statements

 

  

cbdMD, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

FOR THE YEARS ENDED SEPTEMBER 30, 2025 AND 2024

 

 

See Notes to Condensed Consolidated Financial Statements

 

  

cbdMD, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDEDSEPTEMBER 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. In November 2016 we changed the name of the Company to Level Brands, Inc. and on May 1, 2019 we changed the name of our Company to cbdMD, Inc. We operate from our offices located in Charlotte, North Carolina. Our fiscal year end is established as September 30.

 

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.

 

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.

 

Use of Estimates

 

The Company's consolidated financial statements have been prepared in accordance with US GAAP and requires management to make estimates and assumptions that affect amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and reported amounts of revenues and expenses during the periods presented. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary. Significant estimates made in the accompanying consolidated financial statements include, but are not limited to, allowances for doubtful accounts, inventory valuation reserves, certain assumptions related to the valuation of investments other securities, and acquired intangible and long-lived assets and the recoverability of intangible and long-lived assets. Actual results could differ from these estimates.

 

Cash and Cash Equivalents

 

For financial statements purposes, the Company considers all highly liquid investments with a maturity of less than three months when purchased to be cash equivalents.

 

Accounts Receivable

 

Accounts receivables are stated at cost less an allowance for credit losses, if applicable. Credit is extended to customers after an evaluation of the customer’s financial condition, and generally collateral is not required as a condition of credit extension. Management’s determination of the allowance for credit losses is based on an evaluation of the receivables, past experience, current economic conditions, and other risks inherent in the receivables portfolio. As of September 30, 2025 and September 30, 2024, we had an allowance for credit losses of $599,521 and $346,197, respectively.

 

		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

 

---

 

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. The Company pays a fee between 2.5% and 4.0% of the transaction amounts processed. Pursuant to these agreements, there can be a waiting period between 2 to 5 days prior to reimbursement to the Company, as well as a calculated reserve which some payment processors hold back. Fees and reserves can change periodically with notice from the processors. 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 cost of inventory includes product cost, freight-in, and production fill and labor (portions of which we outsource to third party manufacturers). Write-offs of potentially slow moving or damaged inventory are recorded based on management’s analysis of inventory levels, forecasted future sales volume and pricing and through specific identification of obsolete or damaged products. We assess inventory quarterly for slow moving products and potential impairments and at a minimum perform a physical inventory count annually near fiscal year end.

 

Customer Deposits

 

Customer deposits consist of payments received in advance of revenue recognition. Revenue is recognized as revenue recognition criteria are met.

 

Property and Equipment

 

Property and equipment items are stated at cost less accumulated depreciation. Expenditures for routine maintenance and repairs are charged to operations as incurred. Depreciation is charged to expense over the estimated useful lives of the assets using the straight-line method. Generally, the useful lives are five years for manufacturing equipment and automobiles and three years for software, computer, and furniture and equipment. The useful life for leasehold improvements are over the term of the lease or expected life of the asset, whichever is less. The cost and accumulated depreciation of property are eliminated from the accounts upon disposal, and any resulting gain or loss is included in the consolidated statements of operations for the applicable period. Long-lived assets held and used by the Company are reviewed for impairment whenever changes in circumstance indicate the carrying value of an asset may not be recoverable.

 

Fair Value Accounting

 

The Company utilizes accounting standards for fair value, which include the definition of fair value, the framework for measuring fair value, and disclosures about fair value measurements. Fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, fair value accounting standards establish a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

 

Level 1 inputs utilize quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are directly or indirectly observable for the asset or liability. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability. Level 3 inputs are unobservable inputs for the asset or liability, which are based on an entity’s own assumptions, as there is little, if any, observable market activity. In instances where the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

 

When the Company records an investment in marketable securities the carrying value is recorded at fair value. Any changes in fair value for marketable securities during a given period will be recorded as an unrealized gain or loss in the consolidated statement of operations. For 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.

 

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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. If there are indications that the asset group's carrying value may not be recoverable, there are two further steps involved in long-lived asset impairment testing. Step I of the impairment test, as per ASC 360, involves estimating the recoverable amount of the asset group and determining the potential for impairment. Step II of the impairment test, as per ASC 360, if necessary, involves quantifying the fair value of the asset group.

 

Revenue Recognition

 

Under ASC 606, Revenue from Contracts with Customers, the Company recognizes revenues when its customer obtains control of promised goods or services, in an amount that reflects the consideration which it expects to receive in exchange for those goods. The Company recognizes revenues following the five-step model prescribed under ASC 606: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) we satisfy the performance obligation.

 

Performance Obligations

 

A performance obligation is a promise in a contract to transfer a distinct good or service to a customer. The Company meets that obligation when it has shipped products which have been ordered by the customer. The Company has reviewed its various revenue streams for its other contracts under the five-step approach.

 

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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.

 

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. Net sales are comprised of gross revenues less product returns, trade discounts and customer allowances, which include costs associated with off-invoice mark-downs and other price reductions, as well as trade promotions. These incentive costs are recognized at the later of the date on which the Company recognizes the related revenue or the date on which the Company offers the incentive. The Company currently offers a 60-day, money-back guarantee.

 

Disaggregated Revenue

 

The Company’s product revenue is generated primarily through two sales channels, E-commerce sales (formerly referred to as consumer sales) and wholesale sales. The Company believes that these categories appropriately reflect how the nature, amount, timing and uncertainty of revenue and cash flows are impacted by economic factors.

 

A description of the Company’s principal revenue generating activities are as follows:

 

	-	E-commerce sales - consumer products sold through the Company’s online and telephonic channels. Revenue is recognized when control of the merchandise is transferred to the customer, which generally occurs upon shipment. Payment is typically due prior to the date of shipment; and
	-	Wholesale sales - products sold to the Company’s wholesale customers for subsequent resale. Revenue is recognized when control of the goods is transferred to the customer, in accordance with the terms of the applicable agreement. 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. 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.

 

Cost of Sales

 

The Company’s cost of sales includes costs associated with distribution, fill and labor expense, components, manufacturing overhead, third-party providers, and outbound freight for the Company’s products sales. For the Company’s product sales, cost of sales also includes the cost of refurbishing products returned by customers that will be offered for resale, if any, and the cost of inventory write-downs associated with adjustments of held inventories to their net realizable value. These expenses are reflected in the Company’s consolidated statements of operations when the product is sold and net sales revenues are recognized or, in the case of inventory write-downs, when circumstances indicate that the carrying value of inventories is in excess of their net realizable value.

 

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. 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. 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.

 

The Company accounts for income taxes pursuant to the provisions of the Accounting for Income Taxes topic of the Financial Accounting Standards Board ("FASB") ASC 740 which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. The Company uses the inside basis approach to determine deferred tax assets and liabilities associated with its investment in a consolidated pass-through entity. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will not be realized.

 

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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. 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.

 

Concentrations

 

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents, accounts receivable, and securities.

 

The Company places its cash and cash equivalents on deposit with financial institutions in the United States. The Federal Deposit Insurance Corporation (“FDIC”) covers $250,000 for substantially all depository accounts. The Company from time to time may have amounts on deposit in excess of the insured limits. 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.

 

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.

 

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. This guidance establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity's equity instruments or that may be settled by the issuance of those equity instruments.

 

The Company uses the Black-Scholes model for measuring the fair value of options and warrants. The stock based fair value compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods. The Company recognizes forfeitures when they occur.

 

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.

 

While the Company is taking strong action, believes in the viability of its strategy and path to profitability, and in its ability to raise additional funds, there can be no assurances to that effect.  The Company’s working capital position may not be sufficient to support the Company’s daily operations for the twelve months subsequent to the issuance of these annual financial statements. The Company’s ability to continue as a going concern is dependent upon its ability to improve profitability and the ability to acquire additional funding. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern within twelve months after the date that the annual financial statements are issued. These financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result in the Company not being able to continue as a going concern.

 

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. 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. 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. 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. 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.

 

On April 10, 2025, we held an annual meeting of stockholders. 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. 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"). Unless otherwise indicated, all share numbers in this report, including shares of common stock and all securities convertible into, or exercisable for, shares of common stock, give effect to the Reverse Stock Split.

 

New Accounting Standards

 

In November 2023, the FASB issued guidance that updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance on an annual and interim basis. The Company adopted this guidance for its annual period ending September 30, 2025. While the adoption of this standard did not have a material impact on the Company’s Consolidated Financial Statements, the new guidance resulted in increased disclosures on reportable segments in Note 16 of the Notes to the Consolidated Financial Statements.

 

In November 2024, the FASB issued guidance that requires disaggregation of specific expense categories in disclosures within the footnotes to the financial statements on an annual and interim basis. The Company is required to adopt this guidance for its annual period ending September 30, 2028 and all interim periods thereafter on a prospective basis. Early adoption is permitted. The Company is currently evaluating the impact of this guidance on its disclosures.

 

In December 2023, the FASB issued guidance that enhances the transparency of income tax disclosures by expanding annual disclosure requirements related to the rate reconciliation and income taxes paid. 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.

    

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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 equipment sale was initially valued at approximately $1.8 million for accounting purposes, the sale price consisting of a trade credit for products to be provided to the Company under the manufacturing and supply agreement and $1.4 million of which the Company invested into Steady State in the form of an equity investment consistent with the terms of Steady State's completed Series C financing.   The Company performed a valuation analysis and as of September 30, 2023 determined a $700,000 impairment was needed on the carrying value of this investment. The determination was based on a number of factors, including Steady State’s financial performance, our experience with production and cbdMD’s determination to re-source production to other suppliers. 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.

 

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, 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

 

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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. 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).  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.

 

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.

 

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.

 

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. 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. 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. The Company issued the 6,250 additional shares of common stock in the fourth quarter of fiscal 2025 pursuant to the settlement agreement with Majik Medicine. 

 

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

 

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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. There is no further Earnout obligation.

   

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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”). 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. 

 

Among other matters, during the Company's annual meeting held on April 10, 2025, the shareholders of the Company approved:

 

i.

an amendment the Certificate of Designation of the Company’s Series A Preferred Stock to include an automatic conversion provision whereby each outstanding share of Series A Preferred Stock, together with accrued and unpaid dividends, would automatically convert into thirteen shares of Common Stock, at an effective date determined by of the Board of Directors (the ”Automatic Preferred Conversion”); and

 

ii.

an amendment to the Company’s Articles of Incorporation to authorize the Board of Directors to effect a reverse stock split of the then outstanding shares of Common stock at a specific ratio,  ranging from one-for-three to one-for-ten, to be determined by the Board of Directors at a date and time to be determined by the Board of Directors.

 

The Board of Directors elected to effectuate the Automatic Preferred Conversion on May 6, 2025 at 4:01 p.m. Eastern Time (the “Mandatory Exchange Date”). On the Mandatory Exchange Date, all Series A Preferred Stock, together with accrued and unpaid dividends, was converted into 65,000,000 shares (pre-split) of Common Stock, dividends on converted shares ceased to accrue, and the Series A Preferred Stock ceased trading.

 

The Board of Directors elected to implement a one-for-eight (1:8) reverse stock split of the Company’s common stock (the “Reverse Stock Split”) on May 6, 2025, effective at 4:02 p.m. Eastern Time, immediately following and therefore inclusive of shares of common stock issued in connection with the Automatic Preferred Conversion. Following the Reverse Stock Split holders of fractional shares received, in lieu of a fractional share, the number of shares rounded up to the next whole number (“Round Up Shares”). 89 Round Up Shares were issued as a result of the Reverse Stock Split.

 

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.

 

Preferred stock transactions:

 

On September 29, 2025, the Company filed a Certificate of Amendment to the Certificate of Incorporation (the “Certificate of Designation”) designating 1,700,000 shares of the Company’s authorized preferred stock as Series B Convertible Preferred Stock, par value $0.001 per share. Each share of the Series B Preferred Stock is convertible into common stock at a conversion price of $1.00, subject to anti-dilution adjustments and Alternative Conversion rights (as defined in the Certificate of Designation). The Series B Preferred Stock accrues 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 Certificate of Designation), or in cash. If the Company fails to satisfy an Equity Condition, dividends shall be paid in cash. However, if North Carolina law prohibits the payment of dividends in cash, then the then Stated Value (as defined in the Certificate of Designation) shall be increased by the dividends as reasonably determined by the Company and the holders of the Series B Preferred Stock.

 

With respect to liquidation, dissolution and winding up of the Company, the Series B Preferred Stock ranks senior to all shares of the Company’s capital stock unless otherwise consented to by the holders of the Series B Preferred Stock. The holders of Series B Preferred Stock have no voting power and no right to vote, except as required by the North Carolina Business Corporations Act or with respect to matters affecting the preferences, rights, privileges or powers relating to the Series B Preferred Stock. In addition, the Series B Preferred Stock is subject to a beneficial ownership limitation which prohibits any holder from beneficially owning more than 4.99% of the shares of the Company’s common stock outstanding immediately following such conversion.

 

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Common stock transactions:

 

In the year ended September 30, 2025:

 

During the year the Company (i) issued 1,875 shares of restricted stock under the Company's 2015 equity incentive plan to a new employee; (ii) issued 267,597 shares of common stock for conversions of notes payable; and (iii) issued 21,875 shares of common stock to a consultant for advisory services, issued

 

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.

 

In May 2025, the company issued 8.125 million shares of common stock pursuant to the conversion of the Series A Perfered Stock.

 

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.

 

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.

 

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.

 

In January 2024, the Company issued 8,027 shares under our ELOC.

 

In January 2024, the Company issued 2,478 shares as part of the final Earnout.

 

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Stock option transactions:

 

No options were issued during fiscal 2025.

 

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. 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 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. 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. Circumstances may change and additional data may become available over time, which could result in changes to these assumptions and methodologies, and thereby materially impact our fair value determination.

 

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

 

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Warrant transactions:

 

The Company had no warrant transactions during the twelve months ended September 30, 2025 and 2024.

  

NOTE 9 -STOCK-BASED COMPENSATION

 

Equity Compensation Plan – On June 2, 2015, the Board of Directors of the Company approved the 2015 Equity Compensation Plan (“2015 Plan”). The 2015 Plan made 26,112 common stock shares, either unissued or reacquired by the Company, available for awards of options, restricted stocks, other stock grants, or any combination thereof. The number of shares of common stock available for issuance under the 2015 Plan shall automatically increase on the first trading day of our fiscal year during the term of the 2015 Plan, beginning with calendar year 2016, by an amount equal to one percent (1%) of the total number of shares of common stock outstanding on the last trading day in September of the immediately preceding fiscal year, but in no event shall any such annual increase exceed 2,223 shares of common stock. On April 19, 2019, shareholders approved an amendment to the 2015 Plan and increased the number of shares available for issuance under the 2015 Plan to 45,445 and retained the annual evergreen increase provision of the plan. Subsequent thereto, on August 7, 2019 the Company’s Board of Directors approved an amendment to the 2015 Plan changing the date the automatic evergreen increase is determined to the first trading day of October each calendar year during the term of the 2015 Plan to coincide with the Company’s fiscal year.

 

On January 8, 2021, the Company’s Board of Directors approved the 2021 Equity Compensation Plan (the “2021 Plan”) and it was subsequently ratified by its shareholders at its annual meeting held on March 12, 2021. The purpose of the 2021 Plan is to advance the interests of the Company by providing an incentive to attract, retain and motivate highly qualified and competent persons who are important to it and upon whose efforts and judgment the success of the Company is largely dependent. The 2021 Plan made 111,112 common shares, either unissued or reacquired by the Company, available for awards of options, restricted stocks, other stock grants, or any combination thereof. The 2021 Plan also contains an “evergreen formula” pursuant to which the number of shares of common stock available for issuance under the 2021 Plan will automatically increase on October 1 of each calendar year during the term of the 2021 Plan, beginning with calendar year 2022, by an amount equal to 1.0% of the total number of shares of common stock outstanding on September 30 of such calendar year, up to a maximum of 5,556 shares.

 

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. Restricted stock awards that vest in accordance with service conditions are amortized over their applicable vesting period using the straight-line method. The fair value of the Company’s stock option awards or modifications is estimated at the date of grant using the Black-Scholes option pricing model.

 

Eligible recipients include employees, officers, directors and consultants who are deemed to have rendered or to be able to render significant services to the Company or its subsidiaries and who are deemed to have contributed or to have the potential to contribute to the success of the Company. Options granted generally have a five-to-ten-year term and have vesting terms that cover one to three years from the date of grant. Certain of the stock options granted under the plan have been granted pursuant to various stock option agreements. Each stock option agreement contains specific terms.

 

Stock Options:

 

The Company currently has awards outstanding with service conditions and graded-vesting features. We recognize compensation cost on a straight-line basis over the requisite service period.

 

The fair value of each time-based award is estimated on the date of grant using the Black-Scholes option valuation model. Our weighted-average assumptions used in the Black-Scholes valuation model for equity awards with time-based vesting provisions granted during the year.

 

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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.

 

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.

 

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. The stock awards were valued at the fair market price of $4,296 upon issuance and were amortized over the individual vesting periods.

 

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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. Although the results of litigation and claims cannot be predicted with certainty, the Company is not currently a party to any legal proceedings the outcome of which, the Company believes, if determined adversely, would individually or in the aggregate have a material adverse effect on the Company’s Consolidated Financial Statements.

 

During 2025, the Company continued to expand distribution of our hemp-derived beverage products. We have entered into agreements with various distributors providing for the distribution of certain of our hemp-derived beverage products, subject to certain terms and conditions, which may vary depending on the form of the agreement. Such agreements remain in effect for their then-current term as long as our products are being distributed but are subject to specified termination rights held by each party. Additionally, we are entitled to terminate certain distribution agreements at any time without cause upon payment of a termination fee, which may be material depending on the agreement, depending on the sell through of the product set.

 

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.

 

Each note bore interest of 8% per annum and was to mature on July 30, 2025.  Further, the notes were convertible, at the option of the holder, into shares of common stock at conversion price which was adjusted for certain down-round provisions, as defined.   At issuance, the Company elected the fair value option to account for the notes. 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.  

 

During the nine months ending June 30, 2025, the Company issued an aggregate of 267,597 shares of common stock upon the partial conversion of the remaining balance outstanding on the notes.

 

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NOTE 13 – LEASES

 

The Company has a lease agreement for its warehouse with the lease period expiring September 2026. 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. 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. Since the interest rate implicit in our lease arrangements is not readily determinable, the Company determined an incremental borrowing rate for each lease based on the approximate interest rate on a collateralized basis with similar remaining terms and payments as of the lease commencement date to determine the present value of future lease payments. The Company’s lease terms may include options to extend or terminate the lease.

 

In addition to the monthly base amounts in the lease agreements, the Company is required to pay real estate taxes, insurance and common area maintenance expenses during the lease terms.

 

Lease costs on operating leases are recognized on a straight-line basis over the lease term and included as a selling, general and administrative expense in the consolidated statements of operations.

 

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%. 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

   

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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.

 

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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 accounts for is state franchise and minimum taxes as a component of its general and administrative expenses.

 

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		$	-			$	-

 

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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 deferred tax liabilities that result from indefinite life intangibles cannot be offset by deferred tax assets. The Company periodically evaluates the recoverability of the deferred tax assets. At such time as it is determined that it is more likely than not that deferred tax assets will be realizable, the valuation allowance will be reduced. Under Internal Revenue Code (IRC) Section 382, the use of net operating loss (“NOL”) carryforwards may be limited if a change in ownership of a company occurs. During the year ending September 30, 2018, the company determined that a change of ownership under IRC Section 382 had occurred during the years ending September 30, 2017 and 2015. As a result of these ownership changes, the pre-ownership change NOL carryforwards would be limited and approximately $2.1 million of such NOLs will expire before being utilized. Therefore, at September 30, 2018 the Company reduced the deferred tax asset and related valuation allowance associated with these NOLs by approximately $0.5 million due to IRC Section 382.

 

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. 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. Our chief operating decision maker (CODM) is the Chief Executive Officer, who reviews financial information on a consolidated basis for purposes of assessing performance and allocating resources. Accordingly, all of the Company's operations are considered a single operating segment under the criteria of ASC 280, Segment Reporting. 

 

Because we have a single reportable segment, the segment information presented herein is consistent with the consolidated financial statements. The required segment information for revenue, profit or loss, assets, and specified expenses (such as depreciation and amortization) can be found on the face of the Consolidated Income Statement and Consolidated Balance Sheet.

      

NOTE 17 – SUBSEQUENT EVENTS

 

H.R. 5371 - Continuing Appropriations, Agriculture, Legislative Branch, Military Construction and Veterans Affairs, and Extensions Act, 2026

 

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. 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, but would be limited by the Act. Further clarification on the definition of THC will be due within 90 days of the Act’s effectiveness.

 

Executive Employment

 

On November 28, 2025, the Company entered into an Executive Employment Agreement with T. Ronan Kennedy, the Company’s Chief Executive Officer and Chief Financial Officer.  The term of the Agreement commenced on November 28, 2025 and expires three years thereafter and may be extended for additional one-year periods unless terminated. The Company will pay Mr. Kennedy a base salary of $340,000. The Company also granted Mr. Kennedy a restricted stock award for 445,000 shares of the Company’s common stock pursuant to the Company’s 2025 Equity Compensation Plan (the “2025 Plan”). The vesting and issuance of the shares is subject to shareholder approval.

 

Equity Compensation Plan

 

On November 28, 2025, the board of directors of the Company approved the 2025 Plan, as the Company’s 2015 Equity Compensation Plan has expired and there is a nominal number of shares available under the Company’s 2021 Equity Compensation Plan. The Company’s board of directors will recommend that the 2025 Plan be approved by its shareholders at the Company’s upcoming 2026 annual meeting. The purpose of the 2025 Plan is to enable the Company to offer to its employees, officers, directors and consultants whose past, present and/or potential contributions to the Company and its subsidiaries have been, are or will be important to the success of the Company, an opportunity to acquire a proprietary interest in the Company. The 2025 Plan reserves 891,316 shares of our common stock for issuance pursuant to the terms of the plan upon the grant of plan options, restricted stock awards, or other stock-based awards granted under the 2025 Plan. The 2025 Plan also contains an “evergreen formula” pursuant to which the number of shares of common stock available for issuance under the 2025 Plan will automatically increase on October 1 of each calendar year during the term of the 2025 Plan, beginning with calendar year 2026, (i) by an amount equal to 2% of the total number of shares of common stock outstanding on September 30 of the such calendar year, up to a maximum of 300,000 shares or (ii) to no more than 10% of the then number of issued and outstanding shares of the Company’s common stock as of the date of such increase.

 

ELOC

 

On December 15, 2025, the Company entered into a Securities Purchase Agreement (the “ELOC Agreement”) with C/M Capital Master Fund, LP, an accredited investor (the “ELOC Purchaser”). Pursuant to the ELOC Agreement, the Company agreed to sell, and the ELOC Purchaser agreed to purchase, up to $10 million (the “Available Amount”) of the Company’s common stock (the “Purchase Shares”), subject to a sale limit of 19.99% of the outstanding shares of the Company’s common stock in accordance with the rules of the NYSE American. The transactions contemplated by the ELOC Agreement are subject to the Company registering the ELOC Purchaser’s resale of the Purchase Shares on a registration statement to be filed with the SEC. Concurrent with the execution of the ELOC Agreement, the Company entered into a registration rights agreement with the ELOC Purchaser. Pursuant to the Registration Rights Agreement, the Company agreed to file a registration statement on Form S-1 with the SEC covering the resale of the shares of common stock sold under the ELOC, on or before the 30th calendar day following the date of the Registration Rights Agreement and to use its commercially reasonable efforts to cause such registration statement to be declared effective by the SEC at the earliest practicable date, subject to limited exceptions described therein. The registration rights granted under the Registration Rights Agreement are subject to certain conditions and limitations and are subject to customary indemnification and contribution provisions.  In connection with entering into the ELOC Agreement, the Company agreed to immediately issue to the ELOC Purchaser, 40,000 shares of common stock as commitment shares and, thereafter an amount of shares equal to 0.5% of the Available Amount, which shall be issued in a pro rated fashion simultaneously with the delivery of any and all Purchase Shares purchased under the ELOC Agreement. The Company does not have a right to commence any sales of common stock to the ELOC Purchaser under the ELOC Agreement until the time when all of the conditions to the Company’s right to commence sales of Purchase Shares to the ELOC Purchaser set forth in the ELOC Agreement have been satisfied, including that a registration statement covering the resale of the Purchase Shares is declared effective by the SEC and the final form of prospectus contained therein is filed with the SEC (the “Commencement Date”). At any time from and after the Commencement Date, on any business day on which the previous business day’s closing sale price of common stock was equal to or greater than $0.50 (the “Purchase Date”), the Company may direct the ELOC Purchaser to purchase a specified number of shares of common stock (a “Fixed Purchase”) not to exceed on any single business day the lesser of (i) $500,000 of shares of common stock or (ii) $10,000,000 in the aggregate of Fixed Purchases (as defined in the ELOC Agreement), at a purchase price equal to the lesser of 95% of (i) the lowest sale price of the common stock on the trading day immediately prior to such applicable Purchase Date or (ii) the daily volume weighted average price of the common stock for the five trading days immediately preceding the applicable Purchase Date for such Fixed Purchase.

 

In addition, at any time from and after the Commencement Date, on any business day on which the previous business day’s closing sale price of the common stock is equal to or greater than $0.50 and such business day is also the Purchase Date for a Fixed Purchase of an amount of shares of common stock not less than the applicable Fixed Purchase Share Limit (as defined in the ELOC Agreement) (the “VWAP Purchase Date”), the Company may also direct the ELOC Purchaser to purchase an additional number of shares of common stock (a “VWAP Purchase”) at a purchase price equal to the lesser of 95% of (i) the closing price of a share of common stock on the trading day immediately prior to such applicable Purchase Date and (ii) the lowest sale price on the VWAP Purchase date.  If the Company makes certain issuances of its securities within a specified period of time after a Purchase Date and such securities are issued at prices (the “New Issuance Price”) less than the prices to be paid by the ELOC Purchaser in such Fixed Purchase or VWAP Purchase, the purchase price for such applicable Fixed Purchase or VWAP Purchase would be reduced to the New Issuance Price, subject to the terms and conditions set forth in the ELOC Agreement. Under the ELOC Agreement, in no event may the aggregate amount of Purchase Shares submitted in any single or combination of VWAP Purchase notices on a particular date require a payment from the ELOC Purchaser to us that exceeds $10,000,000, unless such limitation is waived by the ELOC Purchaser.

 

Series C Preferred

 

Effective December 18, 2025, the Company entered into Securities Purchase Agreements dated December 18, 2025 (“Series C Purchase Agreements”) with two institutional investors whereby the investors were issued an aggregate of 1,000,000 shares of Series C Convertible Preferred Stock (“Series C Preferred Stock”) for aggregate gross proceeds of $2,250,000. The Company received net proceeds of $2,100,000 which shall be used for working capital purposes.

 

In addition, pursuant to the Purchase Agreements, the Company entered into a Registration Rights Agreement with each of the Investors pursuant to which the shares of common stock issuable upon conversion of the Series C Preferred Stock to the Investors are entitled to registration under the Securities Act. Pursuant to the Registration Rights Agreement, the Company is required to file a registration statement to register the shares underlying the Series C Preferred Stock within 30 days following the closing date.

 

On December 18, 2025, the Company filed a Certificate of Amendment to the Certificate of Incorporation (the “Certificate of Designation”) designating 1,000,000 shares of the Company’s authorized preferred stock as Series C Convertible Preferred Stock, par value $0.001 per share. Except for differences in the stated value, floor price and conversion price, the Series C Preferred Stock has terms and conditions that are substantially similar to those of the Company’s Series B Convertible Preferred Stock. Each share of the Series C Preferred Stock is convertible into common stock at a conversion price of $2.25, subject to anti-dilution adjustments and Alternate Conversion rights (as defined in the Certificate of Designation). The Series C Preferred Stock accrues 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 Certificate of Designation), or in cash. If the Company fails to satisfy an Equity Condition, dividends shall be paid in cash. However, if North Carolina law prohibits the payment of dividends in cash, then the then Stated Value (as defined in the Certificate of Designation) shall be increased by the dividends as reasonably determined by the Company and the holders of the Series C Preferred Stock.

 

With respect to dividends, distributions, liquidation, dissolution and winding up of the Company, the Series C Preferred Stock ranks pari passu with the Series B Convertible Preferred Stock and is senior to all other shares of the Company’s capital stock unless otherwise consented to by the holders of the Series C Preferred Stock. The holders of Series C Preferred Stock have no voting power and no right to vote, except as required by the North Carolina Business Corporations Act or with respect to matters affecting the preferences, rights, privileges or powers relating to the Series C Preferred Stock. In addition, the Series C Preferred Stock is subject to a beneficial ownership limitation which prohibits any holder from beneficially owning more than 4.99% of the shares of the Company’s common stock outstanding immediately following such conversion.