Item 5. Market for Registrant’s Common Equity
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]
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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
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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
)
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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.
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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.
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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.
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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.