What changed in this filing

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Item 1. Financial Statements

2023-02-13 compared with 2022-08-11 · 210 added, 686 removed, 779 unchanged (53% of the section changed)

1 unchanged sentence

CONDENSED CONSOLIDATED BALANCE SHEETS

June 30, 2022 AND September 30, 2021

December 31, 2022 AND September 30, 2022

September 30,

1 unchanged sentence

Cash and cash equivalents

$ 9,553,670  

$ 26,411,424  

Accounts receivable

1,630,233  

1,113,372  

Accounts receivable –

discontinued operations

10,967  

Marketable securities

33,351  

Investment other securities

1,000,000  

4,318,204  

5,021,867  

Inventory prepaid

548,580  

551,519  

Prepaid sponsorship

1,749,083  

1,212,682  

Prepaid expenses and other current assets

1,057,183  

1,147,178  

Total current assets

19,858,328  

36,502,360  

Other assets:

Property and equipment, net

775,477  

2,561,574  

Operating lease assets

4,751,192  

5,614,960  

Deposits for facilities

244,606  

529,583  

Intangible assets

18,111,903  

23,003,929  

11,996,249  

56,670,970  

Investment other securities, noncurrent

1,400,000  

Investment in other securities, noncurrent

Total other assets

37,279,427  

88,381,016  

$ 57,137,755  

$ 124,883,376  

See Notes to Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEETS

June 30, 2022 AND September 30, 2021

December 31, 2022 AND September 30, 2022

September 30,

11 unchanged sentences

1,178,683  

59,470  

Total current liabilities

4 unchanged sentences

125,491  

108,985  

Operating leases - long term portion

10 unchanged sentences

9,367,478  

Commitments and Contingencies (Note 11)

shareholders' equity:

20 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE three and nine months ended June 30, 2022 and 2021

FOR THE three months ended December 31, 2022 and 2021

Total Net Sales

3 unchanged sentences

Loss from operations

Realized and Unrealized (loss) gain on marketable and other securities, including impairments

Gain (loss) on extinguishment of debt

Decrease (increase) of contingent liability

Gain (loss) on sale of assets

Restructuring expense

Realized and Unrealized loss on marketable and other securities, including impairments

Decrease of contingent liability

Other income (expense)

Interest expense

3 unchanged sentences

Preferred dividends

Net (Loss) Income attributable to cbdMD, Inc.

Net Loss attributable to cbdMD, Inc.

common shareholders

Net (Loss) Income per share:

Net Loss per share:

Basic earnings per share

4 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE three and nine months ended June 30, 2022 and 2021

FOR THE three months ended December 31, 2022 and 2021

Net (Loss) Income

5 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE nine months ended June 30, 2022 and 2021

FOR THE three months ended December 31, 2022 and 2021

Cash flows from operating activities:

$ ( 55,453,289 )  

$ ( 20,368,808 )

Adjustments to reconcile net loss to net cash used by operating activities:

Stock based compensation

424,455  

807,523  

Restricted stock expense

504,650  

1,137,583  

Write off of prepaid assets due to termination of contractual obligation

Marketing stock amortization

717,174  

660,232  

Issuance of stock / warrants for service

98,605  

Inventory and materials impairment

878,142  

Intangibles Amortization

607,025  

770,335  

719,856  

Impairment of goodwill and other intangible assets

48,959,721  

Increase/(Decrease) in contingent liability

( 8,246,000 )  

10,500,000  

Realized and unrealized loss of marketable and other securities

33,350  

Termination benefit

495,568  

Extinguishment of Paycheck Protection Program Loan

( 1,466,113 )

Realized and unrealized loss (gain) on of Marketable and other securities

Amortization of operating lease asset

863,768  

922,057  

Changes in operating assets and liabilities:

Accounts receivable

( 116,861 )  

284,977  

261,125  

( 174,479 )  

Prepaid inventory

Prepaid expenses and other current assets

( 1,088,579 )  

Accounts payable and accrued expenses

( 1,149,456 )  

Operating lease liability

( 872,656 )  

Deferred revenue / customer deposits

Collection on discontinued operations accounts receivable

428,667  

Deferred tax liability

Cash used by operating activities

( 13,041,469 )  

( 9,759,273 )

Cash flows from investing activities:

Proceeds from sale of other investment securities

540,000  

Purchase of other investment securities

Proceeds from sale of assets

( 322,017 )  

Purchase of property and equipment

( 462,221 )  

Cash provided (used) by investing activities

( 784,238 )  

Cash flows from investing activities

Cash flows from financing activities:

Proceeds from issuance of preferred stock

15,798,115  

( 31,044 )  

Preferred dividend distribution

( 3,001,003 )  

( 1,220,610 )

Cash provided by financing activities

( 3,032,047 )  

14,440,213  

Cash flows from financing activities

Net increase (decrease) in cash

( 16,857,754 )  

4,159,368  

Cash and cash equivalents, beginning of period

26,411,424  

14,824,644  

Cash and cash equivalents, end of period

$ 9,553,670  

$ 18,984,012  

Supplemental Disclosures of Cash Flow Information:

4 unchanged sentences

Issuance of Contingent earnout shares:

Warrants issued to representative

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' (DEFICIT) EQUITY

FOR THE nine months ended June 30, 2022

FOR THE three months ended December 31, 2022

Preferred Stock

Balance, September 30, 2022

( 147,423,563

Issuance of Common stock

3 unchanged sentences

Balance, December 31, 2022

Issuance of Common stock

Issuance of options for share based compensation

Issuance of restricted stock for share based compensation

Preferred dividend

Balance, March 31, 2022

Issuance of Common stock

Issuance of options for share based compensation

Issuance of restricted stock for share based compensation

Preferred dividend

Balance, June 30, 2022

( 152,380,127

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' (DEFICIT) EQUITY

FOR THE nine months ended June 30, 2021

FOR THE three months ended December 31, 2021

Preferred Stock

Balance, September 30, 2021

Issuance of Preferred Stock

Issuance of Common Stock

Issuance of options for share based compensation

2 unchanged sentences

Balance, December 31, 2021

Issuance of Common Stock

Exercise of options for share based compensation

Issuance of restricted stock for share based compensation

Preferred dividend

Balance, March 31, 2021

Issuance of Common stock

Exercise of options for share based compensation

Issuance of restricted stock for share based compensation

Preferred dividend

Balance, June 30, 2021

See Notes to Condensed Consolidated Financial Statements  

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE three and nine months ended June 30, 2022 and 2021 (unaudited)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE three months ended December 31, 2022 and 2021 (unaudited)

NOTE 1 –

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Upon completion of the Mergers, CBDI survived and operates the prior business of Cure Based Development.

As consideration for the Mergers in April of 2019, the Company issued 15,250,000 shares of our common stock to the members of Cure Based Development, of which unrestricted voting rights to 8,750,000 of the shares vest over a five -year period and 4,338,302 shares remain subject to a voting proxy agreement as of June 30,2022, as well as to issue another 15,250,000 shares of our common stock (the “Earnout Shares”) in the future upon certain earnout goals (the “Earnout Rights”) being achieved within five years from the closing of the Mergers.

As consideration for the Mergers in April of 2019, the Company issued 15,250,000 shares of our common stock to the members of Cure Based Development, of which unrestricted voting rights to 8,750,000 of the shares vest over a five -year period of which 2,187,500 shares remain subject to a voting proxy agreement as of December 31,2022, as well as to issue another 15,250,000 shares of our common stock (the “Earnout Shares”) in the future upon certain earnout goals (the “Earnout Rights”) being achieved within five years from the closing of the Mergers.

The Company owns and operates the nationally recognized CBD (cannabidiol) brands cbdMD, Paw CBD and cbdMD Botanicals.

6 unchanged sentences

(“Paw CBD”) as a separate wholly owned subsidiary on October 22, 2019, to take advantage of its early mover status in the CBD animal health industry.

On March 15, 2021 cbdMD formed a new wholly owned subsidiary, cbdMD Therapeutics, LLC (“Therapeutics”) for the purposes of isolating and quantifying the Company’s ongoing investments in science related to its existing and future products, including research and development activities for therapeutic applications.

In July 2021, the Company acquired the assets of Twenty Two Capital, LLC (“Twenty Two”) d/b/a directcbdonline.com (“DCO”).

This business operates a CBD marketplace through directcbdonline.com.

In addition to the revenue contribution from the business the Company believes this acquisition will provide additional insight on consumer data and industry trends.

The accompanying unaudited interim condensed consolidated financial statements of cbdMD have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and the rules of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the 2022 10 -K.

13 unchanged sentences

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 and Accounts Receivable Other

Accounts Receivable

Accounts receivable are stated at cost less an allowance for doubtful accounts, if applicable.

1 unchanged sentence

Management’s determination of the allowance for doubtful accounts is based on an evaluation of the receivables, past experience, current economic conditions, and other risks inherent in the receivables portfolio.

As of June 30, 2022 and September 30, 2021 , we had an allowance for doubtful accounts of $ 18,156 and $ 3,633 , respectively.

As of December 31, 2022 and September 30, 2022 , we had an allowance for doubtful accounts of $ 2,047 and $ 36,980 , respectively.

Merchant Receivable and Reserve

3 unchanged sentences

Fees and reserves can change periodically with notice from the processors.

At June 30, 2022 , the receivable from payment processors included approximately $ 298,659 for the waiting period amount and is recorded as accounts receivable in the accompanying condensed consolidated balance sheet.

At December 31, 2022  and September 30, 2022, the receivable from payment processors included approximately $ 265,477 and $ 273,451 , respectively, for the waiting period amount and is recorded as accounts receivable in the accompanying condensed consolidated balance sheet.

Inventory is stated at the lower of cost or net realizable value with cost being determined on a weighted average basis.

24 unchanged sentences

For investment other securities without a readily determinable fair value, the Company may elect to estimate its fair value at cost less impairment plus or minus changes resulting from observable price changes.

Goodwill represents the excess of cost of an acquired business over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed in a business combination.

Identifiable intangible assets acquired in business combinations are recorded based on their fair values at the date of acquisition.

Goodwill is not subject to amortization but must be evaluated for impairment annually.

The Company tests for goodwill impairment annually or whenever events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

In performing a goodwill test, the Company performs a qualitative evaluation and if necessary, a quantitative evaluation.

Factors considered in the qualitative test include specific operating results as well as new events and circumstances.

For the quantitative test, the Company assesses goodwill for impairment by comparing the carrying value of the business to the respective fair value.

The Company determines the fair value of the business using a combination of income- based and market-based approaches and incorporates assumptions it believes market participants would utilize.

The income-based approach utilizes discounted cash flows while the market-based approach utilizes market multiples.

These approaches are dependent upon internally developed forecasts that are based upon annual budgets and longer-range strategic plans.

The Company uses discount rates that are commensurate with the risks and uncertainty inherent in the respective acquired business and in the internally developed forecasts.

The Company has analyzed a variety of factors on its business to determine if a circumstance could trigger an impairment loss.

See Note 5 for further information on the impairment testing procedures performed.

Intangible Assets

The Company’s intangible assets consist of trademarks and other intellectual property, all of which are accounted for in accordance with Accounting Standards Codification (ASC) Topic 350, Intangibles –

Goodwill and Other .

Prior to December 31, 2021, the Company employed the non-amortization approach to account for purchased intangible assets having indefinite lives.

The Company’s intangible assets consist of 

definite-lived trademarks and other intellectual property. Prior to December 31, 2021, the Company employed the non-amortization approach to account for purchased intangible assets having indefinite lives.

Under the non-amortization approach, intangible assets having indefinite lives are not amortized into the results of operations, but instead are reviewed annually or more frequently if events or changes in circumstances indicate that the assets might be impaired, to assess whether their fair value exceeds their carrying value.

The Company performed an annual impairment analysis as of August 1 of each fiscal year on the indefinite-lived intangible assets following the steps laid out in ASC 350 - 30 - 35 - 18.

The annual impairment analysis included a qualitative assessment to determine if it is necessary to perform the quantitative impairment test.

In performing a qualitative assessment, the Company reviewed events and circumstances that could affect the significant inputs used to determine if the fair value is less than the carrying value of the intangible assets.

If a quantitative analysis is necessary, the Company would analyze various aspects including revenues from the business, associated with the intangible assets.

In addition, intangible assets were tested on an interim basis if an event or circumstance indicates that it is more likely than not that an impairment loss has been incurred.

The Company analyzed a variety of factors on its business to determine if a circumstance could trigger an impairment loss, and, at this time and based on the information presently known, has determined that is it more likely than not that an impairment loss has occurred.

See Note 5 more further information on the impairment testing procedures performed at December 31, 2021 and the Company’s decision to change from indefinite to definite lived status for its trademarks.

The Company now accounts for its trademarks in accordance with Accounting Standards Codification (ASC) Topic 360, Property, Plant and Equipment.

3 unchanged sentences

Step II of the impairment test, as per ASC 360, if necessary, involves quantifying the fair value of the asset group. 

The Company notes that there are no indications of impairment related to its trademarks as of June 30, 2022 .

Contingent Liability

1 unchanged sentence

The Company made a determination of the fair value of the contingent liabilities as part of the valuation of the assets acquired and liabilities assumed in the business combination.

Paycheck Protection Program Loan

On April 27, 2020, we received a loan in the principal amount of $ 1,456,100 (the “SBA Loan”) in consideration of a Promissory Note, under the Paycheck Protection Program (“PPP”), which was established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) administered by the U.S.

Small Business Administration (the “SBA”).

The Company used the SBA Loan for qualifying expenses and on May 17, 2021 it received notice from the SBA that the loan had been forgiven.

The Company subsequently booked a $ 1,466,113 gain for unpaid principal and accrued interest.

Revenue Recognition

10 unchanged sentences

The Company has reviewed its various revenue streams for its other contracts under the five -step approach.

At June 30, 2022 , the Company has no unfulfilled performance obligations.

At December 31, 2022 , the Company has no unfulfilled performance obligations.

Allocation of Transaction Price

4 unchanged sentences

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

The Company currently offers a 60 -day, money back guarantee, a loyalty program as well as a subscription program.

Disaggregated Revenue

9 unchanged sentences

Contract liabilities represent unearned revenues and are presented as deferred revenue or customer deposits on the condensed consolidated balance sheets.

The Company has no material contract assets nor contract liabilities at June 30, 2022 .

Other than account receivable, Company has no material contract assets nor contract liabilities at December 31, 2022 .

The following tables represent a disaggregation of revenue by sales channel:

Wholesale sales

$ 2,079,592  

24.2 %  

$ 2,740,523  

E-commerce sales

2 unchanged sentences

$ 7,116,087  

Total Net Sales

$ 8,592,893  

100.0 %  

$ 10,560,523  

Wholesale sales

2 unchanged sentences

2,205,735  

E-commerce sales

20,160,721  

73.2 %  

25,638,368  

Total Net Sales

3 unchanged sentences

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, and includes labor for its service sales.

The Company’s cost of sales includes costs associated with distribution, fill and labor expense, components, third -party providers, and outbound freight for the Company’s products sales, and includes labor for its service 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.

2 unchanged sentences

As of October 1, 2019, CBDI and Paw CBD were wholly owned subsidiaries and are disregarded entities for tax purposes and their entire share of taxable income or loss is included in the tax return of the Company and as of March 15, 2021, Therapeutics is also a wholly owned subsidiary and is a disregarded entity for tax purposes and its entire share of taxable income or loss is included in the tax return of the Company.

The Company accounts for income taxes pursuant to the provisions of the Accounting for Income Taxes topic of the FASB ASC 740 which requires, among other things, an asset and liability approach to calculating deferred income taxes.

The Company accounts for income taxes pursuant to the provisions of the Accounting for Income Taxes topic of 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.

6 unchanged sentences

The Company from time to time may have amounts on deposit in excess of the insured limits.

The Company had an $ 8,644,186 uninsured balance at June 30, 2022 and a $ 23,508,953 uninsured balance at September 30, 2021 .

The Company had a $ 2.7 million uninsured balance at December 31, 2022 and a $ 5.8 million uninsured balance at September 30, 2022 .

Concentration of credit risk with respect to receivables is principally limited to trade receivables with corporate customers that meet specific credit policies.

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 three and nine months ended June 30, 2022 .

The Company did not have any customers that represented a significant amount of our sales for the three months ended December 31, 2022 .

Stock-Based Compensation

12 unchanged sentences

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

The Company experienced a loss of $ 59,939,934 for the nine months ended June 30, 2022.

Excluding one time non-cash goodwill and intangibles impairment charges of $ 48,959,721 , the Company's loss was $ 10,980,213 , resulting in working capital of $ 14,133,054 .

The Company experienced a loss of $ 3,956,062 for the three months ended December 31, 2022, resulting in working capital of $ 5,977,801 .

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 quarterly 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 potential concern about the Company’s ability to continue as a going concern within twelve months after the date that the quarterly financial statements are issued.

These and other factors raise substantial doubt about the Company’s ability to continue as a going concern within twelve months after the date that the quarterly 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.

New Accounting Standards

In December 2019, the FASB issued ASU 2019 - 12, Income Taxes, Simplifying the Accounting for Income Taxes (Topic 740 ).

The ASU eliminates certain exceptions to the guidance in Accounting Standards Codification (ASC or Codification) 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.

The guidance also clarifies that single-member limited liability companies and similar disregarded entities that are not subject to income tax are not required to recognize an allocation of consolidated income tax expense in their separate financial statements, but they could elect to do so.

ASU 2019 - 12 is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.

The adoption of this standard had no material impact on the Company's consolidated financial statements and disclosures.

NOTE 2 –

13 unchanged sentences

Where an accounts receivable other is settled with the receipt of the common stock or other instrument, the common stock or other instrument was classified as an asset on the consolidated balance sheet as either an investment marketable security (when the customer is a public entity) or as an investment other security (when the customer is a privately held entity).

For the three months ended June 30, 2022 and 2021 , the Company recorded $ 0 and $ 2,852 , respectively, and for the 

nine months ended June 30, 2022 and 2021 the Company recorded $( 33,350 ) and $ 545,562 respectively, of realized and unrealized gain (loss) on marketable and other securities, including impairments.

For the three months ended December 31, 2022 and 2021 the Company recorded $ 0  and $( 33,350 ) respectively, of realized and unrealized gain (loss) on marketable and other securities, including impairments.

The realized loss in the 

1 unchanged sentence

(“Isodiol”) down to zero after Isodiol was delisted from the TSX during December 2021.

The gain in the prior year was driven by the sale of our investment in Formula Four Beverages, Inc.

that was previously written to zero based on prior information related to the company’s performance and COVID- 19 impacts.

In September 2020, the Company purchased a membership interest in Adara Sponsor LLC for $ 250,000 , which along with proceeds from other investors was utilized as an investment in Adara Acquisition Corporation (“Adara”), a newly organized blank check company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination (a “SPAC”).

4 unchanged sentences

and “ADRA WS”, respectively.

On June 30, 2022 , the Company’s implied, indirect ownership in Adara represented 4.4 % ( 633,988 shares) and 10.1 % ( 1 million) of the warrants.

As of June 30, 2022 , ADRA stock closed at $ 9.89 while ADRA WS closed at $ 0.18 . 

On December 31, 2022 , the Company’s implied, indirect ownership in Adara represented 4.4 % ( 633,988 shares) and 10.1 % ( 1 million) of the warrants.

As of December 31, 2022 , ADRA stock closed at $ 10.18 while ADRA WS closed at $ 0.07 . 

On June 22, 2022, the Company executed a transfer agreement with affiliates of Adara Sponsor, LLC whereby the Company's interest would be transferred to the affiliates of Adara Sponsor, LLC upon Adara's acquisition of Allliance Entertainment, Inc.

3 unchanged sentences

On June 23, 2022, Adara announced it had entered into business combination agreements with the Target subject to a number of conditions to closing, including shareholder SEC approval.

In December 2022, Adara filed its definitive proxy to approve the acquisition and query shareholders redemption. 

There are no assurances the business combination will be completed.

If the business combination is not completed, Adara will continue to pursue other targets for a potential business combination.

Adara’s focus of targets to pursue for the business combination are expected to be in the consumer products industry including business in the health and wellness, ecommerce, discretionary spending, information technology sectors and related channels of distribution.

While Adara is currently a listed company, the Company’s investment is in Adara Sponsor, LLC and consequently the Company has classified this investment as Level 3 for fair value measurement purposes as there are no observable inputs.

If the business combination is not completed, Adara faces a potential redemption from its shareholders during February 2023.

Should this business combination not be effectuated, the Company risks losing it's $ 1 million investment in Adara Sponsor LLC.

Adara’s focus of targets to pursue for the business combination are expected to be in the consumer products industry including business in the health and wellness, e-commerce, discretionary spending, information technology sectors and related channels of distribution.

On April 7, 2022, CBD Industries, LLC entered into an asset sale agreement to sell substantially all its manufacturing assets to a subsidiary of Steady State, LLC ("Steady State").

The equipment sale is initially valued at approximately $ 1.8 million for accounting purposes, the sale price consisting of products to be provided to the Company under the manufacturing and supply agreement and $ 1.4 million of which the Company invested into Steady State in the form of an equity investment consistent with the terms of Steady State's recently completed series C financing.

The Company has classified this investment as Level 3 for fair value measurement purposes as there are no observable inputs and has included in noncurrent assets on the accompanying condensed consolidated balance sheets as the company intends to hold this investment for longer than a year.

The Company has classified this investment as Level 3 for fair value measurement purposes as there are no observable inputs and has included in non-current assets on the accompanying condensed consolidated balance sheets as the company intends to hold this investment for longer than a year.

In valuing both investments, the Company used the value paid, which was the price offered to all third -party investors.

The Company also assessed the common stock of Adara and determined there was not an impairment for the period ended June 30, 2022 .The table below summarized the assets valued at fair value as of June 30, 2022 :

Significant Other

Identical Assets  

Observable  

Unobservable  

and Liabilities  

Inputs  

Investment other securities

$ 1,000,000  

Balance at September 30, 2021

33,351  

1,000,000  

1,033,351  

Change in value of equities

( 33,351 )  

Additional Investment

Balance at December 31, 2021

$ 1,000,000  

Change in value of equities

Additional Investment

Balance at March 31, 2022

$ 1,000,000  

Change in value of equities

Additional Investment

1,400,000  

Balance at June 30, 2022

$ 2,400,000  

NOTE 3 - INVENTORY

Inventory at June 30, 2022 and September 30, 2021 consists of the following:

Inventory at December 31, 2022 and September 30, 2022 consists of the following:

September 30,

13 unchanged sentences

$ 4,767,373  

Abnormal amounts of idle facility expense, freight, handling costs, scrap and wasted material (spoilage) are expensed in the period they are in incurred and no material expenses related to these items occurred in the three months ended June 30, 2022 .

At the end of the quarter ended December 31, 2021, the Company wrote down inventory of $ 878,142 , primarily related to a rationalization of a number of product lines and stock keeping units ("SKUs") at the end of the quarter, as we are working to streamline our offering to higher velocity products and eliminate slow-moving and aging SKUs.

NOTE 4 –

PROPERTY AND EQUIPMENT

Major classes of property and equipment at June 30, 2022 and September 30, 2021 consist of the following:

Major classes of property and equipment at December 31, 2022 and September 30, 2022 consist of the following:

September 30,

18 unchanged sentences

$ 823,310  

Depreciation expense related to property and equipment was $ 158,555 and $ 246,532 for the three months ended June 30, 2022 and 2021 , respectively and was $ 770,335 and $ 719,856 for the nine months ended June 30, 2022 and 2021 , respectively. 

During the quarter, the Company sold substantially all the assets of its manufacturing facility and as a result the gross investment and accumulated depreciation was removed from the balance sheet, reducing net PP&E.

Depreciation expense related to property and equipment was $ 100,112 and $ 288,384 for the three months ended December 31, 2022 and 2021 , respectively. 

NOTE 5 –

GOODWILL AND INTANGIBLE ASSETS

The Company had goodwill at December 31, 2021 of $ 56,670,970 .

The Company performs a Step 0 goodwill impairment analysis at least annually following the steps laid out in ASC 350 - 20 - 35 - 3C.

Our annual impairment analysis includes a qualitative assessment to determine if it is necessary to perform the quantitative impairment test.

In performing a qualitative assessment, we review events and circumstances that could affect the significant inputs used to determine if the fair value is less than the carrying value of goodwill.

From time to time the Company also evaluates goodwill impairment on a quarterly basis if any triggering events have occurred that would require such analysis.

For the three months ended December 31, 2021, the Company performed a Step 0 goodwill impairment analysis on consolidated goodwill and determined that a triggering event had occurred to necessitate performing the quantitative impairment test.

After performing the quantitative impairment test in accordance with ASC 350 - 20 - 35 - 3C, the Company determined that goodwill was impaired by $ 13,898,285 .

The Company has recorded this impairment to reduce total goodwill on its condensed consolidated balance sheets and has recorded the corresponding impairment expense on its condensed consolidated statement of operations as of December 31, 2021.

The Company performed the same analysis as of June 30, 2022 and determined that goodwill was impaired by $ 30,776,436 .

The Company had goodwill at December 31, 2021 was $ 42,772,685 .

The Company impaired goodwill in subsequent reporting periods of fiscal 2022  and goodwill was fully impaired by September 30, 2022.

Intangible Assets

3 unchanged sentences

The Company believed the trademark did not have limits on the time it would contribute to the generation of cash flows and therefore identified these as indefinite lived intangible assets.

In September 2019, the Company purchased the rights to the trademark name HempMD for $ 50,000 .

This trademark will be used in the marketing and branding of certain products to be released under this brand name.

At the time of acquisition, the Company believes the trademark does not have limits on the time it will contribute to the generation of cash flows and therefore has identified these as indefinite-lived intangible assets.

In July 2021, the Company completed the acquisition of DCO and acquired certain assets, including the trade name, domains and certain other intellectual property.

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In addition to the trade name, DCO has a technology platform used to market to its customer and the Company believes it has a 4 year life.

As of December 31, 2021, the Company has re-assessed the “cbdMD”

As of December 31, 2021, the Company re-assessed the “cbdMD”

and “HempMD”

trademarks and have determined that the trademarks should be classified as definite lived intangible assets with useful lives of 20 years versus indefinite lived intangible assets.

trademarks and determined that the trademarks should be classified as definite lived intangible assets with useful lives of 20 years versus indefinite lived intangible assets.

The Company used a variety of factors in determining the reclassifications and have made the reclassifications following guidance prescribed by ASC 350, which states that when a reporting entity subsequently determines that in indefinite-lived intangible asset has a finite useful life, the reporting entity should test the asset for impairment as an indefinite lived asset prior to commencing amortization.

As of December 31, 2021, the Company has prepared a tradename impairment analysis in accordance with ASC 350 and has determined that the “cbdMD”

As of December 31, 2021, the Company prepared a tradename impairment analysis in accordance with ASC 350 and determined that the “cbdMD”

trademark was impaired by $ 4,285,000 .

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The Company began amortizing the trademarks over their useful lives of 20 years as of January 2022.

Intangible assets as of June 30, 2022 and September 30, 2021 consisted of the following:

Intangible assets as of December 31, 2022 and September 30, 2022 consisted of the following:

September 30,

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749,567  

Impairment of definite live intangible assets:

( 4,285,000 )

Amortization of definite lived intangible assets:

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Amortization

expense related to definite lived intangible assets was $ 277,354 and $ 0 for the three months ended June 30, 2022 and 2021 , respectively and was $ 607,025 and $0

for the nine months ended June 30, 2022 and 2021 , respectively. 

expense related to definite lived intangible assets was $ 277,354 and $ 100,799  for the three months ended December 31, 2022 and 2021 , respectively.

No triggering events were identified at December 31, 2022 that suggested a quantitative impairment analysis under ASC 360 was necessary.

NOTE 6 –

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For clarification purposes, the Aggregate Net Revenues during a Marking Period shall be multiplied by the applicable Shares Issued/Each $ of Aggregate Net Revenue Ratio, minus, the number of shares issued as a result of Aggregate Net Revenues during the prior marking periods.

The issuance of the initial 15,250,000 shares and the 15,250,000 Earnout Shares were approved by the Company’s shareholders in April 2019.

The initial shares were issued upon shareholder approval on April 19, 2019 and had a carrying value of $ 53,215,163 .

Additionally, as the 15,250,000 initial shares were issued, the value of the shares in the amount of $ 53,215,163 was reclassified from the contingent liability to additional paid in capital on the consolidated balance sheet.The third quarter of the third marketing period ended on September 30, 2021 and based on the measurement criteria an additional 466,713 Earnout Shares were earned and issued in December 2021.

These shares decreased in value by $ 366,841 during the quarter through the time of issuance and had a value of $ 405,000 , which was reclassified from the contingent liability to additional paid in capital on the consolidated balance sheet.

The fourth quarter of the third marketing period ended on December 31, 2021 and based on the measurement criteria an additional 444,243 Earnout Shares were earned and issued in March 2022.

These shares increased in value by $ 41,914 during the quarter through the time of issuance and had a value of $ 325,000 , which was reclassified from the contingent liability to additional paid in capital on the consolidated balance sheet.

The fifth quarter of the third marketing period ended on March 31, 2022 and based on the measurement criteria an additional 458,877 Earnout Shares were earned and issued in May 2022.

These shares decreased in value by $ 90,792 during the quarter through the time of issuance and had a value of $ 178,000 , which was reclassified from the contingent liability to additional paid in capital on the consolidated balance sheet.

The third marking period was originally an 18 month period commencing on January 1, 2021 and ending on June 30, 2022 ( the “Third Marking Period End Date”), after which time the determination of the issuance of any remaining Earnout Shares would be made pursuant to the terms of the Merger Agreement.

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This change did not impact the fair value of the contingent liability.

The value of the contingent liability was $ 702,000 and $ 9,440,000 at June 30, 2022 and September 30, 2021 , respectively.

At June 30, 2022, up to 4,338,302 remaining Earnout Shares are subject to issuance by the Company.

The value of the contingent liability was $ 215,000  and $ 276,000 at December 31, 2022 and September 30, 2022  respectively.

The fourth marketing period began on July 1, 2022 and ends in November 2023. 

At December 31, 2022, up to 3,928,797 remaining Earnout Shares are subject to issuance by the Company. 

Based on the remaining share ratios, the Company would have to generate over $ 162 million in revenue during the fourth marking period to issue the full balance of the shares. 

As part of the Twenty Two acquisition in July 2021, the Company has a contractual obligation to issue up to an additional 200,000 shares of its common stock as additional consideration, dependent upon the acquisition entity meeting future revenue targets.

Under GAAP the Company is required to record a non-cash contingent liability associated with the Twenty Two Earnout Shares and at the date of the acquisition, recorded a total contingent liability of $ 488,561 .

Under GAAP the Company is obligated to reassess the obligations associated with the Twenty Two Earnout Shares on a quarterly basis and, in the event its estimate of the fair value of the contingent consideration changes, the Company will record increases or decreases in the fair value as an adjustment to earnings.

Under US GAAP the Company is required to record a non-cash contingent liability associated with the Twenty Two Earnout Shares and at the date of the acquisition, recorded a total contingent liability of $ 488,561 .

Under US GAAP the Company is obligated to reassess the obligations associated with the Twenty Two Earnout Shares on a quarterly basis and, in the event its estimate of the fair value of the contingent consideration changes, the Company will record increases or decreases in the fair value as an adjustment to earnings.

In particular, changes in the market price of the Company’s common stock, which is one of the inputs used in determining the amount of the non-cash contingent liability, will result in increases or decreases in this liability and positively or negatively impact the Company’s net loss or profit for the period.

At September 30, 2022 , the Company recorded a decrease in value of the contingent liability of $ 73,561 rel ated to a decrease in the market price of our common stock, which adjusted the total contingent liability related to the Twenty Two Earnout Shares to $ 416,000 .

At December 31, 2021, the Company recorded a decrease in value of the contingent liability of $ 255,000 related to a decrease in the market price of our common stock, which adjusted the total contingent liability related to the Twenty Two Earnout Shares to $ 161,000 .

At March 30, 2022 the Company recorded a decrease in value of the contingent liability of $ 148,000 related to a decrease in the market price of our common stock, which adjusted the total contingent liability related to the Twenty Two Earnout Shares to $ 13,000 .

At June 30, 2022, the Company recorded a decrease in value of the contingent liability of $ 13,000 related to a decrease in the market price of our common stock, which adjusted the total contingent liability related to the Twenty Two Earnout Shares to $ 0 .

In November of 2021 the Company entered into a contractual obligation to issue up to 120,000 RSUs to an employee.

During the twelve month period ending December 31, 2022, the employee shall receive RSUs that are dependent upon a minimum $ 3 million and up to $ 8 million of net sales generated by the employee through accounts established and opened by the employee.

The shares will be subject to meeting the minimum $ 3 million of net sales as well as to calculations including volume-weighted average stock price minimum and maximum.

As of December 31, 2021 the estimated revenue target to be met by the employee through December 31, 2022 was below the minimum threshold for earning RSUs, and therefore, the Company recorded a zero liability related to this contingent liability at December 31, 2021.

During the three months ended March31, 2022, the employee resigned their position with the Company.

As such, this contractual obligation was terminated. 

As of September 2022 the measurement period ended and there is no further obligation with respect to this earnout. 

In April 2022, the Company entered into a contractual obligation to issue up to 100,000 options to an employee. 

The shares are subject to meeting a minimum direct to consumer revenue of $ 12.0 million for the December 2022 calendar quarter. The Company is not expecting to meet this revenue metric for the December 2022 calendar quarter and has therefore valued this liability at $ 0 as of June 30, 2022. 

The shares are subject to meeting a minimum direct to consumer revenue of $ 12.0 million for the December 2022 calendar quarter. This requirement was not satisfied and no further obligation exists as of December 31, 2022.

In December 2022, the Company entered into a contractual obligation to issue up to 25,000 options and 25,000 RSUs to an employee. 

The shares are subject to meeting a minimum direct to consumer revenue of $ 45 million for any four consecutive quarters before December 31, 2024. 

Based on the present revenue run rate, the Company has valued these obligations at $ 0 for December 31, 2022.

NOTE 7 –

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As noted in Note 2, the Company, and a number of its affiliates have invested into Adara through Adara Sponsor.

As mentioned in Note 6, a counterparty in the earnout arrangement is a related party.

NOTE 8 –

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Distinguishing Liabilities from Equity in order to determine the appropriate accounting treatment for the preferred stock and determined that the preferred stock should be treated as equity.

There were 5,000,000 shares of 8.0 % Series A Cumulative Convertible Preferred Stock issued and outstanding at June 30, 2022 and September 30, 2021 .

The total amount of preferred dividends declared and paid were $ 1,000,501  and $ 560,281 , re spectively, for the three months ended June 30, 2022 and 2021 .

The total amount of dividends declared and paid were $ 3,001,503 and $ 1,220,610 f or the nine months ended June 30, 2022 and June 30, 2021 , respectively.

There were 5,000,000 shares of 8.0 % Series A Cumulative Convertible Preferred Stock issued and outstanding at December 31, 2022 and September 30, 2022 .

The total amount of preferred dividends declared and paid were $ 1,000,502  and $ 1,000,502 , re spectively, for the three months ended December 31, 2022 and 2021 . 

Common Stock –

The Company is authorized to issue 150,000,000 shares of common stock, par value $ 0.001 per share.

There were 59,946,090 and 57,783,340 shares of common stock issued and outstanding at June 30, 2022 and September 30, 2021 , respectively.

There were 60,712,262 and 60,665,595 shares of common stock issued and outstanding at December 31, 2022 and September 30, 2022 , respectively. 

Preferred stock transactions:

The Company had no preferred stock transactions in the three and nine months ended June 30, 2022 .

In the nine months ended June 30, 2021 :

On December 8, 2020, the Company completed a follow-on firm commitment underwritten public offering of 2,300,000 shares of its 8.0 % Series A Cumulative Convertible Preferred Stock for aggregate gross proceeds of $ 17.25 million.

The Company received approximately $ 15.8 million in net proceeds after deducting underwriting discounts and commissions.

The Company also issued to the representative of the underwriters warrants to purchase in aggregate 150,502 shares of common stock with an exercise price of $ 3.74 .

The warrants were valued at $ 254,950 and expire on December 8, 2025.

The Company had no preferred stock transactions in the three months ended December 31, 2022  and 2021.

Common stock transactions:

In the nine months ended June 30, 2022 :

In May 2022, the Company issued 458,887 shares of restricted common stock in connection with the Earnout Shares as referenced in Note 6.

In March 2022 the Company issued 444,243 shares of restricted common stock in connection with the Earnout Shares as referenced in Note 6.

In January 2022, the Company issued 30,000 shares of restricted stock awards to six employees.

The stock awards were valued at the fair market price of $ 29,250 and vested at the grant date.

In January 2022, the Company issued 320,000 shares to a professional athlete in conjunction with an amendment to the athlete’s sponsorship agreement as referenced in Note 11.

The stock grant was valuated at the fair market price of $ 336,000 upon issuance and will be amortized over the remaining term of the agreement.

In the three months ended December 31, 2022 :

In December 2022, the Company issued 50,000 shares of restricted common stock to an employee. 

25,000 shares vested upon issuance and the Company recorded a total expense of $ 6,250 . 

25,000 shares vest based on meeting certain direct to consumer revenue performance hurdles prior to December 2024.

In the three months ended December 31, 2021:

On December 28, 2021, the Company issued 466,713 shares of restricted common stock in connection with the Earnout Shares as referenced in Note 6.

In October 2021, the Company issued 25,000 shares of restricted common stock to an executive officer of the Company, subject to vesting on January 1, 2022.

In the nine months ended June 30, 2021 :

In June 2021, the Company issued 25,000 shares of restricted stock awards in connection with a consulting arrangement with an industry professional.

The Company recorded a total prepaid expense of $ 80,500 in conjunction with the issuance of shares and intends to amortize this over the term of the agreement.

In May 2021, the Company issued 562,278 common shares in connection with the Earnout Shares as referenced in Note 6.

In April 2021, the Company entered into an endorsement agreement with a professional athlete.

As part of the endorsement agreement, the Company issued 40,000 common shares of restricted common stock.

The Company recorded $ 143,600 prepaid expense and amortized over the term of the agreement.

In March 2021, the Company issued 180,000 shares of restricted common stock to a professional athlete to completely satisfy a $ 800,000 obligation due between July and December of 2021.

The Company recorded a total prepaid expense of $ 649,800 in conjunction with the issuances of shares and intends to amortize this over the term of the athlete’s agreement.

In March 2021, the Company issued 27,000 of restricted stock awards to the Company’s board of directors.

Two thousand of the shares vested at the time of the grant, while the balance vest one fourth on June 30, 2021, one fourth, on September 30, 2021, one fourth on December 31, 2021, and one fourth on March 31, 2022.

The stock awards were valued at the fair market price of $ 118,800 upon issuance and will amortize over the individual vesting periods.

In March 2021, the Company issued 3,348,520 shares of common stock in connection with the Earnout Shares as referenced in Note 6.

In February 2021 as partial compensation pursuant to the terms of a Personal Services Agreement for the endorsement of the Company’s products, the Company issued 40,000 common shares.

The Company recorded a total prepaid expense of $ 155,200 in conjunction with the issuance of shares.

In January 2021 the Company issued 167,500 of restricted stock awards to an aggregate of 15 employees.

A majority vested immediately with the balance vesting by April 6, 2021.

The stock awards were valued at the fair market price of $ 494,125 upon issuance and amortized over the individual vesting periods.

In October 2020 the Company issued 50,000 of restricted stock awards to an executive officer, subject to a multi-year vesting schedule with a minimum one year before the first tranche vests as noted below in Note 9.

Stock option transactions:

In the nine months ended June 30, 2022 :

In May 2022, the Company granted a new executive an aggregate of 405,000 common stock options.

The options vest equally over 1, 2, and 3 years from the grant date.

The options have a strike price $ 0.84 and a five year term.

The total expense of these options totaled $ 176,985 and will be amortized over the term of the vesting periods.

In April 2022, the Company issued 200,000 options to a consultant as part of an advisory agreement under the Company's Equity Compensation Plan.

Fifty thousand of the shares vested upon the grant, 50,000 vest and 6 months from the effective date and 100,000 upon renewal of the consulting agreement in March 2023.

The options have a strike price of $ 1 and five year term.

The total expense of these options totaled $ 131,300 and will be amortized over the term of the vesting periods.

In April 2022, the Company issued 100,000 common stock options to an employee that vest upon the Company achieving certain direct to consumer revenue growth targets for the quarter ended December 2022.

The options have a $ 1 strike price.

The Company performs analysis on these options and as of June 30, 2020 no expense was ascribed to these options.

In March 2022, the Company granted its board of directors an aggregate of 120,000 common stock options.

The options vested immediately, have a strike price of $ 0.818 and a five -year term.

The Company has recorded a total prepaid expense of $ 57,000 and intends to amortize the expense over the 12 -month board term.

In January 2022, the Company granted an aggregate of 130,000 common stock options to a group of 9 employees. 

These options vest upon grant and the Company has recorded an expense for these options of $ 79,500 for the three months ended June 30, 2022

In the three months ended December 31, 2022 :

In December 2022, the Company issued 100,000 options to an employee. 

75,000 options vest equally at each anniversary for the next 3 years, have a strike price of $ 0.25 and a five year term. 

The total expense of these options is $ 13,150 and will be amortized over the term of the vesting periods. 

25,000 options vest based on meeting certain direct to consumer revenue requirements by the end of December 2024.

In the three months ended December 31, 2021:

In October 2021, the Company granted an aggregate of 75,000 common stock options to an executive officer.

These options vest on October 1, 2022.

The Company has recorded an expense for these options of $ 23,025 and $ 46,050 for the three and nine months ended June 30, 2022 .

In the nine months ended June 30, 2021 :

In June 2021, the Company entered into a consulting arrangement with an industry professional.

As part of the agreement, the Company issued 50,000 options and recorded total prepaid expenses of $ 125,250 and intends to amortize over the 12 -month vesting term.

In April 2021, the Company issued 750,000 common stock options to an executive officer in conjunction with an Amended and Restated Executive Employment Agreement.

The common stock options vest in three equal tranches, the first of which vests on January 1, 2022;

the second on January 1, 2023;

and the third on January 1, 2024, both under the Corporations 2021 Equity Compensation Plan.

The Company has recorded an expense of $ 195,346 for the three months ended June 30, 2021 for these options.

In March 2021, the Company granted its board of directors an aggregate of 150,000 common stock options.

The options vested immediately, have a strike price of $ 4.40 and a five -year term.

The Company has recorded a total prepaid expense of $ 395,850 and intends to amortize the expense over the 12 -month board term.

In January 2021, the Company granted an aggregate of 80,000 common stock options to three employees.

The options vest in three equal tranches, the first on April 15, 2021, the second on April 15, 2022 and the third on April 14, 2023 and have an exercise price of $ 3.10 per share and a term of 10 years.

The Company has recorded an expense of $ 66,967 for the three months ended June 30, 2021 for these options.

In October 2020, the Company granted an aggregate of 350,000 common stock options to an executive officer.

The options vest in three equal tranches, the first on October 1, 2021, the second on October 1, 2022 and the third on October 1, 2023, and have an exercise price of $3,50, $ 5.00 , and $ 6.50 per share and a term of 5 years.

The Company has recorded an expense for these options of $ 31,054 for both the three months ended December 31, 2021 and 2020, respectively.

The Company has recorded an expense for these options of $ 23,025  for the three months ended December 31, 2021.

These options were fully vested as of September 30,2022.

The expected volatility rate was estimated based on a weighted average mix of the volatilities of the Company and a peer group of companies in similar industries.

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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.

Treasury securities. 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 three months ended June 30, 2022 and 2021 :

The following table summarizes the inputs used for the Black-Scholes pricing model on the options issued in the three months ended December 31, 2022 and 2021 :

Weighted average exercise price

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100.72% - 105.43 %  

100.72 % - 105.43 %  

Expected term (in years)

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Warrant Transactions:

The Company has no warrant transactions during the three and nine months ended June 30, 2022 .

In the nine months ended June 30, 2021 :

In December 2020 in relation to the follow-on firm commitment underwritten public offering of the 8.0 % Series A Cumulative Convertible Preferred Stock, the Company issued to the representative of the underwriters warrants to purchase in aggregate 150,502 shares of common stock with an exercise price of $ 3.74 .

The warrants expire on December 8, 2025.

The following table summarizes the inputs used for the Black-Scholes pricing model on the warrants issued in the nine months ended June 30, 2022 and 2021 :

Weighted average exercise price

$ 3.74  

Risk free interest rate

Expected term (in years)

Dividend yield

The Company has no warrant transactions during the three months ended December 31, 2022 .

NOTE 9 –

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Our weighted-average assumptions used in the Black-Scholes valuation model for equity awards with time-based vesting provisions granted during the year.

The following table summarizes stock option activity under both plans for the nine months ended June 30, 2022 :

The following table summarizes stock option activity under both plans for the three months ended December 31, 2022 :

Weighted-average

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( 340,000 )  

Outstanding at June 30, 2022

Outstanding at December 31, 2022

2,262,500  

Exercisable at June 30, 2022

Exercisable at December 31, 2022

1,740,833  

$ 4.10  

As of June 30, 2022 , there was approximately $ 419,241 of total unrecognized compensation cost related to non-vested stock options which vest over a period of approximately 2.8 years.

As of December 31, 2022 , there was approximately $ 235,361 of total unrecognized compensation cost related to non-vested stock options which vest over a period of approximately 3.0 years.

Restricted Stock Award transactions:

In the nine months ended June 30, 2022 :

In June 2022, the Company issued 400,000 shares of restricted common stock in connection with the Separation Agreement with a former executive officer in which the former employee forfeited 500,000 shares of unvested restricted stock awards and 500,000 unvested options.

These shares are subject to vest one -half on July 1, 2022 and the balance January 1, 2023.

The fair market value of these shares totaled $ 172,000 and will be amortized over the vesting periods.

The forfeited RSUs and options had an unrecognized value of $ 799,572 and $ 555,286 , respectively.

The Company recognized contra-expense of $ 880,428 and $ 604,714 for the forfeited RSUs and options, respectively, related to the previously amortized expense for these RSUs and options.

In May 2022 the Company issued 125,000 shares of restricted common stock to an executive office of the Company as part of a new hire compensation package.

In May 2022 the Company issued 5,000 of restricted common stock to an employee of the Company.

The stock award was valued at the fair market price $ 3,350 of and expensed upon issuance.

In March 2022, the Company issued 20,000 of restricted stock awards to the Company’s board of directors.

The shares vest quarterly one fourth on June 30, 2022, one fourth, on September 30, 2022, one fourth on December 31, 2022, and one fourth on March 31, 2023.

The stock awards were valued at the fair market price of $ 16,360 upon issuance and will amortize over the individual vesting periods.

In January 2022, the Company issued 30,000 shares of restricted stock awards to six employees.

 The stock awards were valued at the fair market price of $ 29,250 and vested at the grant date.

In January 2022, the Company issued 320,000 shares to a professional athlete in conjunction with an amendment to the athlete’s sponsorship agreement as referenced in Note 11.

The stock grant was valuated at the fair market price of $ 336,000 upon issuance and will be amortized over the remaining term of the agreement.

In the three months ended December 31, 2022 :

In December 2022, the Company issued 50,000 shares of restricted common stock to an employee. 

25,000 shares vested upon issuance and the Company recorded a total expense of $ 6,250 . 

25,000 shares vest based on meeting certain direct to consumer revenue performance hurdles prior to December 2024.

During the 

three months ended December 31, 2022, 340,000 options expired due to the termination of certain employees.

In the three months ended December 31, 2021:

In November 2021, the Company issued 120,000 shares of restricted stock awards to an employee, subject to certain revenue performances metrics through December 2022, as referenced in Note 6.

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In October 2021 the Company issued 25,000 shares of restricted stock awards to an executive officer, subject to a four -month vesting schedule.

In the nine months ended June 30, 2021 :

In June 2021, the Company issued 25,000 shares of restricted stock awards in connection with a consulting arrangement with an industry professional.

The Company recorded a total prepaid expense of $ 80,500 in conjunction with the issuance of shares and intends to amortize this over the term of the agreement.

In April 2021, the Company issued 750,000 shares of restricted common stock to an executive officer, subject to a multi-year vesting schedule as noted below in Note 9.