cbdMD, Inc. 10-K

ITEM 9A. CONTROLS AND PROCEDURES. Evaluation of Disclosure Controls and Procedures. We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed pursuant to the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Commission’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal accounting officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. As required by Exchange Act Rule 13a-15(e), we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and our principal accounting officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our principal executive officer and principal accounting officer concluded that our disclosure controls were effective at September 30, 2025. Management ’ s Report on Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that: ● pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; ● provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and ● provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. 26 Table of Contents Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Our management, including our principal executive officer and principal accounting officer assessed the effectiveness of our internal control over financial reporting as of September 30, 2025. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the 2013 Treadway Commission (“COSO”) in Internal Control-Integrated Framework. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were effective. Changes in Internal Control over Financial Reporting There have been no changes in our internal control over financial reporting during our last quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION. ELOC On December 15, 2025, the Company entered into a Securities Purchase Agreement, as amneded (the “ELOC Agreement”) with C/M Capital Master Fund, LP, an accredited investor (the “ELOC Purchaser”). Pursuant to the ELOC Agreement, the Company agreed to sell, and the ELOC Purchaser agreed to purchase, up to $10 million (the “Available Amount”) of the Company’s common stock (the “Purchase Shares”), subject to a sale limit of 19.99% of the outstanding shares of the Company’s common stock in accordance with the rules of the NYSE American. The transactions contemplated by the ELOC Agreement are subject to the Company registering the ELOC Purchaser’s resale of the Purchase Shares on a registration statement to be filed with the SEC. Concurrent with the execution of the ELOC Agreement, the Company entered into a registration rights agreement with the ELOC Purchaser. Pursuant to the Registration Rights Agreement, the Company agreed to file a registration statement on Form S- 1 with the SEC covering the resale of the shares of common stock sold under the ELOC, on or before the 30th calendar day following the date of the Registration Rights Agreement and to use its commercially reasonable efforts to cause such registration statement to be declared effective by the SEC at the earliest practicable date, subject to limited exceptions described therein. The registration rights granted under the Registration Rights Agreement are subject to certain conditions and limitations and are subject to customary indemnification and contribution provisions. In connection with entering into the ELOC Agreement, the Company agreed to immediately issue to the ELOC Purchaser, 8,000,000 shares of common stock as commitment shares and, thereafter an amount of shares equal to 0.5% of the Available Amount, which shall be issued in a pro rated fashion simultaneously with the delivery of any and all Purchase Shares purchased under the ELOC Agreement. The Company does not have a right to commence any sales of common stock to the ELOC Purchaser under the ELOC Agreement until the time when all of the conditions to the Company’s right to commence sales of Purchase Shares to the ELOC Purchaser set forth in the ELOC Agreement have been satisfied, including that a registration statement covering the resale of the Purchase Shares is declared effective by the SEC and the final form of prospectus contained therein is filed with the SEC (the “Commencement Date”). At any time from and after the Commencement Date, on any business day on which the previous business day’s closing sale price of common stock was equal to or greater than $0.50 (the “Purchase Date”), the Company may direct the ELOC Purchaser to purchase a specified number of shares of common stock (a “Fixed Purchase”) not to exceed on any single business day the lesser of (i) $500,000 of shares of common stock or (ii) $10,000,000 in the aggregate of Fixed Purchases (as defined in the ELOC Agreement), at a purchase price equal to the lesser of 95% of (i) the lowest sale price of the common stock on the trading day immediately prior to such applicable Purchase Date or (ii) the daily volume weighted average price of the common stock for the five trading days immediately preceding the applicable Purchase Date for such Fixed Purchase. In addition, at any time from and after the Commencement Date, on any business day on which the previous business day’s closing sale price of the common stock is equal to or greater than $0.50 and such business day is also the Purchase Date for a Fixed Purchase of an amount of shares of common stock not less than the applicable Fixed Purchase Share Limit (as defined in the ELOC Agreement) (the “VWAP Purchase Date”), the Company may also direct the ELOC Purchaser to purchase an additional number of shares of common stock (a “VWAP Purchase”) at a purchase price equal to the lesser of 95% of (i) the closing price of a share of common stock on the trading day immediately prior to such applicable Purchase Date and (ii) the lowest sale price on the VWAP Purchase date. If the Company makes certain issuances of its securities within a specified period of time after a Purchase Date and such securities are issued at prices (the “New Issuance Price”) less than the prices to be paid by the ELOC Purchaser in such Fixed Purchase or VWAP Purchase, the purchase price for such applicable Fixed Purchase or VWAP Purchase would be reduced to the New Issuance Price, subject to the terms and conditions set forth in the ELOC Agreement. Under the ELOC Agreement, in no event may the aggregate amount of Purchase Shares submitted in any single or combination of VWAP Purchase notices on a particular date require a payment from the ELOC Purchaser to us that exceeds $10,000,000, unless such limitation is waived by the ELOC Purchaser. Series C Preferred Effective December 18, 2025, the Company entered into Securities Purchase Agreements dated December 18, 2025 ( “Series C Purchase Agreements”) with two institutional investors whereby the investors were issued an aggregate of 1,000,000 shares of Series C Convertible Preferred Stock (“Series C Preferred Stock”) for aggregate gross proceeds of $2.25 million. The Company received net proceeds of $2.21 million which shall be used for working capital purposes. In addition, pursuant to the Purchase Agreements, the Company entered into a Registration Rights Agreement with each of the Investors pursuant to which the shares of common stock issuable upon conversion of the Series C Preferred Stock to the Investors are entitled to registration under the Securities Act. Pursuant to the Registration Rights Agreement, the Company is required to file a registration statement to register the shares underlying the Series C Preferred Stock within 30 days following the closing date. On December 18, 2025, the Company filed a Certificate of Amendment to the Certificate of Incorporation (the “Certificate of Designation”) designating 1,000,000 shares of the Company’s authorized preferred stock as Series C Convertible Preferred Stock, par value $0.001 per share. Except for differences in the stated value, floor price and conversion price, the Series C Preferred Stock has terms and conditions that are substantially similar to those of the Company’s Series B Convertible Preferred Stock. Each share of the Series C Preferred Stock is convertible into common stock at a conversion price of $2.25, subject to anti-dilution adjustments and Alternate Conversion rights (as defined in the Certificate of Designation). The Series C Preferred Stock accrues dividends at a rate of 10% per annum which are payable quarterly in shares of common stock, subject to the satisfaction of all Equity Conditions (as defined in the Certificate of Designation), or in cash. If the Company fails to satisfy an Equity Condition, dividends shall be paid in cash. However, if North Carolina law prohibits the payment of dividends in cash, then the then Stated Value (as defined in the Certificate of Designation) shall be increased by the dividends as reasonably determined by the Company and the holders of the Series C Preferred Stock. With respect to dividends, distributions, liquidation, dissolution and winding up of the Company, the Series C Preferred Stock ranks pari passu with the Series B Convertible Preferred Stock and is senior to all other shares of the Company’s capital stock unless otherwise consented to by the holders of the Series C Preferred Stock. The holders of Series C Preferred Stock have no voting power and no right to vote, except as required by the North Carolina Business Corporations Act or with respect to matters affecting the preferences, rights, privileges or powers relating to the Series C Preferred Stock. In addition, the Series C Preferred Stock is subject to a beneficial ownership limitation which prohibits any holder from beneficially owning more than 4.99% of the shares of the Company’s common stock outstanding immediately following such conversion. The Certificate of Designation is filed as an exhibit to this annual report. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. None. 27 Table of Contents PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. The information required by this Item will be contained in our proxy statement for our 2025 Annual Meeting of shareholders to be filed on or prior to January 28, 2026 ( the “Proxy Statement”) and is incorporated herein by this reference. ITEM 11. EXECUTIVE COMPENSATION. The information required by this item will be contained in our Proxy Statement and is incorporated herein by this reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. The information required by this item will be contained in our Proxy Statement and is incorporated herein by this reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. The information required by this item will be contained in our Proxy Statement and is incorporated herein by this reference. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES. The information required by this item will be contained in our Proxy Statement and is incorporated herein by this reference. 28 Table of Contents PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) (1) Financial statements. The consolidated financial statements and Report of Independent Registered Accounting Firm begin on page 33. (2) Financial statement schedules All schedules for which provision is made in the applicable accounting regulations of the SEC are either not required under the related instructions, are not applicable (and therefore have been omitted), or the required disclosures are contained in the consolidated financial statements herein. (3) Exhibits. The exhibits that are required to be filed or incorporated by reference herein are listed in the Exhibit Index. ITEM 16. FORM 10-K SUMMARY. None 29 Table of Contents EXHIBIT INDEX Incorporated by Reference Exhibit No. Exhibit Description Form Filing Date Exhibit No. Filing or Furnished Herewith 2.1 Merger Agreement dated December 3, 2018 by and among Level Brands, Inc., AcqCo, LLC, cbdMD LLC and Cure Based Development, LLC 8-K 12/3/18 2.1 2.2 Articles of Merger dated December 20, 2018 as filed with the Secretary of State of Nevada merging AcqCo, LLC with and into Cure Based Development, LLC 10-Q 2/14/19 2.2 2.3 Articles of Merger dated December 20, 2018 as filed with the Secretary of State of North Carolina merging AcqCo, LLC with and into Cure Based Development, LLC 10-Q 2/14/19 2.3 2.4 Articles of Merger dated December 20, 2018 as filed with the Secretary of State of Nevada merging Cure Based Development, LLC with and into cbdMD LLC 10-Q 2/14/19 2.4 2.5 Articles of Merger dated December 20, 2018 as filed with the Secretary of State of North Carolina merging Cure Based Development, LLC with and into cbdMD LLC 10-Q 2/14/19 2.5 2.6 Addendum No. 1 to Agreement and Plan of Merger dated March 31, 2021 8-K 4/1/21 10.1 3.1 Articles of Incorporation 1-A 9/18/17 2.1 3.2 Articles of Amendment to the Articles of Incorporation - filed April 22, 2015 1-A 9/18/17 2.2 3.3 Articles of Amendment to the Articles of Incorporation - filed June 22, 2015 1-A 9/18/17 2.3 3.4 Articles of Amendment to the Articles of Incorporation - filed November 17, 2016 1-A 9/18/17 2.4 3.5 Articles of Amendment to the Articles of Incorporation - filed December 5, 2016 1-A 9/18/17 2.5 3.6 Articles of Amendment to Articles of Incorporation 8-K 4/29/19 3.7 3.7 Articles of Amendment to Articles of Incorporation including the Certificate of Designations, Rights and Preferences of the 8.0% Series A Cumulative Convertible Preferred Stock 8-K 10/11/19 3.1(f) 3.8 Articles of Amendment of Articles of Incorporation, as amended, of cbdMD, Inc. effective April 24, 2023 8-K 4/27/23 3.1 3.9 Articles of Amendment Automatic Conversion of Series A Preferred Stock effective May 6, 2025 8-K 5/7/25 3.1 3.10 Articles of Amendment to the Articles of Incorporation 8 to 1 reverse split effective May 6, 2025 8-K 5/7/25 3.2 3.11 Certificate of Designation of Series B Convertible Preferred Stock filed September 29, 2025 8-K 10/6/25 3.1 3.12 Certificate of Designation of Series C Convertible Preferred Stock filed December 19, 2025 Filed 3.13 Bylaws, as amended 1-A 9/18/17 2.6 4.1 2015 Equity Compensation Plan+ 1-A 9/18/17 3.8 4.2 Form of Stock Option Award under 2015 Equity Compensation Plan* 1-A 9/18/17 3.9 4.3 2021 Equity Compensation Plan* 8-K 1/14/21 10.1 4.4 Form of Representative’ s Warrant dated December 11, 2020 8-K 12/9/20 4.1 4.5 Form of Representative’ s Warrant dated June 28, 2021 8-K 6/30/21 4.1 4.6 Form of Representative’ s Warrant dated May 3, 2023 8-K 5/3/23 4.1 4.7 Convertible Promissory Note dated January 30, 2024 8-K 2/2/24 4.1 4.8 2025 Equity Compensation Plan+ 8-K 11/28/25 10.2 10.1 Form of Indemnification Agreement 1-A 9/18/17 6.21 10.2 Office Lease dated July 11, 2019 10-Q 8/14/19 10.1 10.3 Warehouse Lease dated August 27, 2019 10-Q 2/13/20 10.1 10.4 Asset Purchase Agreement by and among Twenty Two Capital, LLC, cbdMD, Inc., John J. Wiesehan III, Vieo Design, LLC and Bradley D. Trawick dated June 22, 2021 8-K 7/27/21 10.1 30 Table of Contents 10.5 Executive Employment Agreement dated October 1, 2021 between cbdMD, Inc. and T. Ronan Kennedy* + 8-K 10/5/21 10.1 10.6 Equipment Purchase Agreement effective April 7, 2022 by and between cbd Industries, LLC and Old Belts Extracts LLC 10-Q 4/7/22 10.21 10.7 Membership Interest Transfer Agreement dated June 22, 2022 10-Q 8/11/22 10.22 10.8 Agreement for Advertising Placement dated February 1, 2023+ S-1 3/13/23 10.17 10.9 Side Letter - Keystone Capital Partners, LLC S-1 3/13/23 10.20 10.10 Common Stock Purchase Agreement dated March 2, 2023 by and among cbdMD, Inc. and Keystone Capital Partners, LLC 8-K 3/2/23 10.1 10.11 Registration Rights Agreement dated March 2, 2023 by and among cbdMD, Inc. and Keystone Capital Partners, LLC 8-K 3/2/23 10.2 10.12 Security Agreement, dated as of January 30, 2024, by and between cbdMD, Inc. and the Investors* 8-K 2/2/24 10.2 10.13 Registration Rights Agreement, dated January 30, 2024, by and between cbdMD, Inc. and the Investors 8-K 2/2/24 10.3 10.14 License Agreement, effective as of March 20, 2024, by and between cbdMD, Inc. and HSKL, Inc. 8-K 3/18/24 10.1 10.15 Lease Forbearance Agreement, dated as of March 14, 2024, by and between cbdMD, Inc. and HSKL, Inc. 8-K 3/18/24 10.2 10.16 Amendment to Extend Westinghouse Boulevard Lease dated November 26, 2024 8-K 11/27/24 10.1 10.17 Form of Preferred Stock Purchase Agreement between cbdMD, Inc. and the Selling Shareholders * 8-K 10/6/25 10.1 10.18 Form of Registration Rights Agreement between cbdMD, Inc. and the Selling Shareholders 8-K 10/6/25 10.2 10.19 Executive Employment Agreement dated November 28, 2025 between cbdMD, Inc. and T. Ronan Kennedy*+ 8-K 11/28/25 10.1 10.20 Securities Purchase Agreement by and between cbdMD, Inc. and C/M Capital Master Fund, LP, dated December 15, 2025, as amended Filed 10.21 Registration Rights Agreement by and between cbdMD, Inc. and C/M Capital Master Fund, LP, dated December 15, 2025 Filed 10.22 Form of Series C Preferred Stock Securities Purchase Agreement dated December 19, 2025 Filed 10.23 Form of Registration Rights Agreement date December 19, 2025 Filed 14.1 Code of Business Conduct and Ethics 1-A 9/18/17 15.1 19.1 Insider Trading Policy 10-K 12/22/23 19.1 21.1 List of Subsidiaries S-1 2/16/24 21.1 23.1 Consent of Cherry Bekaert LLP Filed 24.1 Power of attorney (included on signature page of this report) Filed 31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer Filed 31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer Filed 32.1 Section 1350 Certification of Chief Executive Officer and Chief Financial Officer Filed 97.1 Clawback Policy 10-K 12/22/23 97.1 101 INS Inline XBRL Instance Document Filed 101 SCH Inline XBRL Taxonomy Extension Schema Filed 101 CAL Inline XBRL Taxonomy Extension Calculation Linkbase Filed 101 LAB Inline XBRL Taxonomy Extension Label Linkbase Filed 101 PRE Inline XBRL Taxonomy Extension Presentation Linkbase Filed 101 DEF Inline XBRL Taxonomy Extension Definition Linkbase 104 Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101) + Indicates management contract or compensatory plan. * Certain exhibits and schedules have been omitted in accordance with Item 601(a)(5) of Regulation S-K. The registrant agrees to furnish supplementary a copy of any omitted exhibit or schedule to the Commission upon its request. 31 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: December 19, 2025 cbdMD, Inc. By: /s/ T. Ronan Kennedy T. Ronan Kennedy Chief Executive Officer (Principal Executive Officer) Date: December 19, 2025 cbdMD, Inc. By: /s/ T. Ronan Kennedy T. Ronan Kennedy Chief Financial Officer (Principal Financial Officer) Date: December 19, 2025 cbdMD, Inc. By: /s/ Brad Whitford Brad Whitford Chief Accounting Officer POWER OF ATTORNEY KNOW ALL BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Ronan Kennedy his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments and supplements to this report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to such attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Name Positions Date /s/ Scott Stephen Chairman of the Board of Directors December 19, 2025 Scott Stephen /s/ Bakari Sellers Director December 19, 2025 Bakari Sellers /s/ William Raines III Director December 19, 2025 William Raines III /s/ Sibyl Swift Director December 19, 2025 Sibyl Swift, PhD /s/ Kevin Roe Director December 19, 2025 Kevin Roe /s/ Jeffery Porter Director December 19, 2025 Jeffery Porter 32 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders cbdMD, Inc. and subsidiaries Charlotte, North Carolina Opinion on the Financial Statements We have audited the accompanying balance sheets of cbdMD, Inc. and subsidiaries (the “Company”) as of September 30, 2025 and 2024, and the related statements of operations, comprehensive loss, stockholders’ (deficit) equity, and cash flows for each of the years in the two-year period ended September 30, 2025, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the two-year period ended September 30, 2025, in conformity with accounting principles generally accepted in the United States of America. Substantial Doubt about the Company ’ s Ability to Continue as a Going Concern The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the accompanying financial statements, the Company has historically incurred losses, including a net loss of approximately $2 million in the current year, resulting in an accumulated deficit of approximately $179 million as of September 30, 2025. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s evaluations of the events and conditions and management’s plans regarding those matters are also described in Note 1 to the accompanying financial statements. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. Critical Audit Matters Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there were no critical audit matters. /s/ Cherry Bekaert LLP We have served as the Company’s auditor since 2016. Charlotte, North Carolina December 19, 2025 33 Table of Contents PART 1 – FINANCIAL INFORMATION ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS. cbdMD, INC. CONSOLIDATED BALANCE SHEETS September 30, 2025 and 2024 September 30, September 30, 2025 2024 Assets Current assets: Cash and cash equivalents $ 2,261,242 $ 2,452,553 Accounts receivable, net 1,040,887 983,910 Inventory, net 2,732,127 2,365,187 Inventory prepaid 214,795 159,006 Prepaid sponsorship 25,231 21,754 Prepaid expenses and other current assets 277,147 406,674 Total current assets 6,551,429 6,389,084 Other assets: Property and equipment, net 277,377 454,268 Operating lease assets 703,934 85,817 Deposits for facilities 62,708 62,708 Intangible assets, net 2,124,502 2,889,580 Investment in other securities, noncurrent 700,000 700,000 Total other assets 3,868,521 4,192,373 Total assets $ 10,419,950 $ 10,581,457 See Notes to Consolidated Financial Statements 34 Table of Contents CONSOLIDATED BALANCE SHEETS September 30, 2025 and 2024 (continued) September 30, September 30, 2025 2024 Liabilities and shareholders' equity Current liabilities: Accounts payable $ 1,173,642 $ 1,541,108 Accrued expenses 735,672 632,674 Accrued dividends - 4,671,000 Deferred Revenue 506,289 503,254 Operating leases – current portion 778,240 98,696 Convertible notes, at fair value - 1,171,308 Total current liabilities 3,193,843 8,618,040 Long term liabilities: Operating leases - long term portion - - Total long term liabilities - - Total liabilities 3,193,843 8,618,040 Commitments and Contingencies (Note 11) cbdMD, Inc. shareholders' equity: Preferred stock, authorized 50,000,000 shares, $ 0.001 par value, 1,700,000 and 5,000,000 shares issued and outstanding, respectively 1,700 5,000 Common stock, authorized 150,000,000 shares, $ 0.001 par value, 8,917,054 and 492,383 shares issued and outstanding, respectively 8,917 492 Additional paid in capital 186,650,640 184,033,012 Comprehensive other expense - ( 7,189 ) Accumulated deficit ( 179,435,150 ) ( 182,067,898 ) Total cbdMD, Inc. shareholders' equity 7,226,107 1,963,417 Total liabilities and shareholders' equity $ 10,419,950 $ 10,581,457 See Notes to Consolidated Financial Statements 35 Table of Contents cbdMD, INC. CONSOLIDATED STATEMENTS OF OPERATIONS September 30, 2025 and 2024 2025 2024 Gross Sales $ 19,190,678 $ 19,922,319 Allowances ( 210 ) ( 440,152 ) Total Net Sales 19,190,468 19,482,167 Cost of sales 7,222,213 7,486,626 Gross Profit 11,968,255 11,995,541 Operating expenses 14,130,845 15,310,951 Loss from operations ( 2,162,590 ) ( 3,315,410 ) Decrease of contingent liability - 74,580 Increase in fair value of convertible debt 87,380 ( 429,789 ) Interest income (expense) 34,308 ( 29,507 ) Loss before provision for income taxes ( 2,040,902 ) ( 3,700,126 ) Benefit (expense) for income taxes - - Net Loss ( 2,040,902 ) ( 3,700,126 ) Preferred dividends 2,334,501 4,004,001 Net Loss attributable to common shareholders $ ( 4,375,403 ) $ ( 7,704,127 ) Net Loss per share: Basic and Diluted earnings per share ( 1.09 ) ( 14.29 ) Weighted average number of shares Basic and Diluted: 4,022,629 539,069 See Notes to Consolidated Financial Statements 36 Table of Contents cbdMD, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS FOR THE YEARS ENDED September 30, 2025 and 2024 2025 2024 Net Loss $ ( 2,040,902 ) $ ( 3,700,126 ) Comprehensive Loss ( 2,040,902 ) ( 3,700,126 ) Other Comprehensive income (loss) $ 7,189 $ ( 7,189 ) Preferred dividends ( 2,334,501 ) ( 4,004,001 ) Comprehensive Loss available to common shareholders $ ( 4,368,214 ) $ ( 7,711,316 ) See Notes to Consolidated Financial Statements 37 Table of Contents cbdMD, INC. CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS ENDED September 30, 2025 and 2024 2025 2024 Cash flows from operating activities: Net Loss $ ( 2,040,902 ) $ ( 3,700,126 ) Adjustments to reconcile net loss to net cash used by operating activities: Stock based compensation - 5,015 Restricted stock expense 14,121 11,885 Issuance of stock for services 86,657 - Inventory and materials impairment 365,979 921,314 Intangibles amortization 765,078 697,510 Depreciation 361,063 452,326 Credit losses 382,588 54,322 Increase/(Decrease) in contingent liability - ( 74,580 ) (Decrease) increase in fair value of convertible debt ( 87,380 ) 429,789 Gain on termination of operating lease - 696,280 Amortization of operating lease asset 669,781 670,621 Changes in operating assets and liabilities: Accounts receivable ( 439,565 ) 177,858 Deposits - 76,000 Inventory ( 732,919 ) 766,472 Prepaid inventory ( 55,789 ) 23,670 Prepaid expenses and other current assets 126,051 396,311 Accounts payable and accrued expenses ( 261,883 ) ( 1,124,141 ) Operating lease liability ( 608,354 ) ( 1,151,326 ) Deferred revenue / customer deposits 3,099 318,008 Cash used by operating activities ( 1,452,375 ) ( 352,792 ) Cash flows from investing activities: Purchase of intangible assets - ( 100,000 ) Purchase of property and equipment ( 184,172 ) ( 190,015 ) Cash used by investing activities ( 184,172 ) ( 290,015 ) Cash flows from financing activities: Proceeds from issuance of common stock - 50,001 Note payable - 1,247,499 Proceeds from issuance of preferred stock 1,445,236 - Cash provided by financing activities 1,445,236 1,297,500 Net (decrease) increase in cash ( 191,311 ) 654,693 Cash and cash equivalents, beginning of year 2,452,553 1,797,860 Cash and cash equivalents, end of year $ 2,261,242 $ 2,452,553 Supplemental Disclosures of Cash Flow Information: 2025 2024 Cash Payments for: Interest expense $ - $ 74,638 Non-cash financial/investing activities: Issuance of shares for conversion of debt and accrued interest $ 1,079,639 $ 515,601 Change in lease asset related to extinguishment of HQ lease and new warehouse lease $ ( 1,723,544 ) $ - Issuance of shares for intangible asset $ - $ 40,725 Conversion of accrued preferred dividends to preferred stock $ 7,008,151 $ - Preferred dividends accrued but not paid $ 2,334,501 $ 4,004,001 See Notes to Consolidated Financial Statements 38 Table of Contents cbdMD, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED September 30, 2025 and 2024 Other Additional Common Stock Preferred Stock Comprehensive Paid in Accumulated Shares Amount Shares Amount Income Capital Deficit Total Balance, September 30, 2024 492,383 $ 492 5,000,000 $ 5,000 $ ( 7,189 ) $ 184,033,012 $ ( 182,067,898 ) $ 1,963,417 Issuance of Common stock 3,860 4 - - - 8,956 - 8,960 Issuance of restricted stock for share based compensation - - - - - 5,163 - 5,163 Change in fair value of debt related to credit risk - - - - 7,189 - - 7,189 Issuance of Common Stock, Convertible Notes 267,597 268 - - - 1,076,470 - 1,076,738 Issuance of Common Stock, GSS Agreement 21,875 22 - - - 82,228 - 82,250 Issuance of Common Stock, Majik Settlement #2 6,250 6 - - - 4,400 - 4,406 Conversion of preferred stock and accrued dividends to common stock 8,125,000 8,125 ( 5,000,000 ) ( 5,000 ) ( 3,125 ) 7,008,151 7,008,151 Shares issued for fractional shares in reverse stock split 89 - - - - - - - Preferred stock issuance - - 1,700,000 1,700 1,443,536 1,445,236 Preferred dividend declared, not paid - - - - - - ( 2,334,501 ) ( 2,334,501 ) Net Loss - - - - - - ( 2,040,902 ) ( 2,040,902 ) Balance, Balance at September 30, 2025 8,917,054 8,917 1,700,000 1,700 - 186,650,640 ( 179,435,150 ) 7,226,107 See Notes to Condensed Consolidated Financial Statements 39 Table of Contents cbdMD, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED September 30, 2025 and 2024 Other Additional Common Stock Preferred Stock Comprehensive Paid in Accumulated Shares Amount Shares Amount Income Capital Deficit Total Balance, September 30, 2023 370,072 $ 370 5,000,000 $ 5,000 $ - $ 183,389,686 $ ( 174,363,772 ) $ 9,031,284 Issuance of Common stock 3,051 3 - - - 15,780 - 15,783 Issuance of options for share based compensation - - - - - 9,308 - 9,308 Issuance of restricted stock for share based compensation - - - - - 11,886 - 11,886 Change in fair value of debt related to credit risk - - - - ( 7,189 ) - - ( 7,189 ) Issuance of Common stock - Keystone 8,027 8 - - - 49,992 - 50,000 Issuance of Common Stock, Convertible Notes 101,857 102 - - - 515,568 - 515,670 Issuance of Common Stock, Majik Settlement 9,376 9 - - - 40,792 - 40,801 Preferred dividend - - - - - - ( 4,004,001 ) ( 4,004,001 ) Net Loss - - - - - - ( 3,700,126 ) ( 3,700,126 ) Balance at September 30, 2024 492,383 492 5,000,000 5,000 ( 7,189 ) 184,033,012 ( 182,067,898 ) 1,963,417 See Notes to Condensed Consolidated Financial Statements 40 Table of Contents cbdMD, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED September 30, 2025 and 2024 NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization and Nature of Business cbdMD, Inc. ("cbdMD", "we", "us", “our”, or the “Company”) is a North Carolina corporation formed on March 17, 2015 as Level Beauty Group, Inc. In November 2016 we changed the name of the Company to Level Brands, Inc. and on May 1, 2019 we changed the name of our Company to cbdMD, Inc. We operate from our offices located in Charlotte, North Carolina. Our fiscal year end is established as September 30. Reverse Stock Split The board of directors effected a reverse stock split at a ratio of one -for-eight, effective as of May 6, 2025. Unless otherwise indicated, all share numbers in this filing, including shares of common stock and all securities convertible into, or exercisable for, shares of common stock, give effect to the reverse stock split. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries CBDI, Paw CBD, Proline Global, Oasis, and Therapeutics. All material intercompany transactions and balances have been eliminated in consolidation. Use of Estimates The Company's consolidated financial statements have been prepared in accordance with US GAAP and requires management to make estimates and assumptions that affect amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and reported amounts of revenues and expenses during the periods presented. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary. Significant estimates made in the accompanying consolidated financial statements include, but are not limited to, allowances for doubtful accounts, inventory valuation reserves, certain assumptions related to the valuation of investments other securities, and acquired intangible and long-lived assets and the recoverability of intangible and long-lived assets. Actual results could differ from these estimates. Cash and Cash Equivalents For financial statements purposes, the Company considers all highly liquid investments with a maturity of less than three months when purchased to be cash equivalents. Accounts Receivable Accounts receivables are stated at cost less an allowance for credit losses, if applicable. Credit is extended to customers after an evaluation of the customer’s financial condition, and generally collateral is not required as a condition of credit extension. Management’s determination of the allowance for credit losses is based on an evaluation of the receivables, past experience, current economic conditions, and other risks inherent in the receivables portfolio. As of September 30, 2025 and September 30, 2024, we had an allowance for credit losses of $ 599,521 and $ 346,197 , respectively. September 30, September 30, 2025 2024 Credit Loss allowance - beginning of period $ 346,197 $ 42,180 Credit loss provision 635,912 358,339 Write offs ( 382,588 ) ( 54,322 ) Recoveries - - Credit loss allowance - end of period $ 599,521 $ 346,197 41 Table of Contents Merchant Receivable The Company primarily sells its products through the internet and has an arrangement to process customer payments with multiple third -party payment processors. The Company pays a fee between 2.5 % and 4.0 % of the transaction amounts processed. Pursuant to these agreements, there can be a waiting period between 2 to 5 days prior to reimbursement to the Company, as well as a calculated reserve which some payment processors hold back. Fees and reserves can change periodically with notice from the processors. At September 30, 2025 and 2024, the receivable from payment processors included $ 786,449 and $ 621,678 , respectively, for the waiting period amount and is recorded as accounts receivable in the accompanying consolidated balance sheet. Inventory Inventory is stated at the lower of cost or net realizable value with cost being determined on a weighted average basis. The cost of inventory includes product cost, freight-in, and production fill and labor (portions of which we outsource to third party manufacturers). Write-offs of potentially slow moving or damaged inventory are recorded based on management’s analysis of inventory levels, forecasted future sales volume and pricing and through specific identification of obsolete or damaged products. We assess inventory quarterly for slow moving products and potential impairments and at a minimum perform a physical inventory count annually near fiscal year end. Customer Deposits Customer deposits consist of payments received in advance of revenue recognition. Revenue is recognized as revenue recognition criteria are met. Property and Equipment Property and equipment items are stated at cost less accumulated depreciation. Expenditures for routine maintenance and repairs are charged to operations as incurred. Depreciation is charged to expense over the estimated useful lives of the assets using the straight-line method. Generally, the useful lives are five years for manufacturing equipment and automobiles and three years for software, computer, and furniture and equipment. The useful life for leasehold improvements are over the term of the lease or expected life of the asset, whichever is less. The cost and accumulated depreciation of property are eliminated from the accounts upon disposal, and any resulting gain or loss is included in the consolidated statements of operations for the applicable period. Long-lived assets held and used by the Company are reviewed for impairment whenever changes in circumstance indicate the carrying value of an asset may not be recoverable. Fair Value Accounting The Company utilizes accounting standards for fair value, which include the definition of fair value, the framework for measuring fair value, and disclosures about fair value measurements. Fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, fair value accounting standards establish a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy). Level 1 inputs utilize quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are directly or indirectly observable for the asset or liability. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability. Level 3 inputs are unobservable inputs for the asset or liability, which are based on an entity’s own assumptions, as there is little, if any, observable market activity. In instances where the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. When the Company records an investment in marketable securities the carrying value is recorded at fair value. Any changes in fair value for marketable securities during a given period will be recorded as an unrealized gain or loss in the consolidated statement of operations. For investments other securities without a readily determinable fair value, the Company has elected to estimate fair value at cost less impairment plus or minus changes from observable price changes. 42 Table of Contents Intangible Assets The Company test for impairment in accordance with ASC Topic 360, Property, Plant and Equipment ("ASC 360" ), which states that impairment testing should be completed whenever events or changes in circumstances indicate that the asset group's carrying value may not be recoverable. If there are indications that the asset group's carrying value may not be recoverable, there are two further steps involved in long-lived asset impairment testing. Step I of the impairment test, as per ASC 360, involves estimating the recoverable amount of the asset group and determining the potential for impairment. Step II of the impairment test, as per ASC 360, if necessary, involves quantifying the fair value of the asset group. Revenue Recognition Under ASC 606, Revenue from Contracts with Customers, the Company recognizes revenues when its customer obtains control of promised goods or services, in an amount that reflects the consideration which it expects to receive in exchange for those goods. The Company recognizes revenues following the five -step model prescribed under ASC 606: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) we satisfy the performance obligation. Performance Obligations A performance obligation is a promise in a contract to transfer a distinct good or service to a customer. The Company meets that obligation when it has shipped products which have been ordered by the customer. The Company has reviewed its various revenue streams for its other contracts under the five -step approach. 43 Table of Contents Allocation of Transaction Price In the Company’s current business model, it does not have contracts with customers which have multiple elements as revenue is driven purely by online product sales or purchase order-based product sales. Revenue Recognition The Company records revenue from the sale of its products when risk of loss and title to the product are transferred to the customer, which is upon shipping under standard sales terms, which is when our performance obligation is met. Net sales are comprised of gross revenues less product returns, trade discounts and customer allowances, which include costs associated with off-invoice mark-downs and other price reductions, as well as trade promotions. These incentive costs are recognized at the later of the date on which the Company recognizes the related revenue or the date on which the Company offers the incentive. The Company currently offers a 60 -day, money-back guarantee. Disaggregated Revenue The Company’s product revenue is generated primarily through two sales channels, E-commerce sales (formerly referred to as consumer sales) and wholesale sales. The Company believes that these categories appropriately reflect how the nature, amount, timing and uncertainty of revenue and cash flows are impacted by economic factors. A description of the Company’s principal revenue generating activities are as follows: - E-commerce sales - consumer products sold through the Company’s online and telephonic channels. Revenue is recognized when control of the merchandise is transferred to the customer, which generally occurs upon shipment. Payment is typically due prior to the date of shipment; and - Wholesale sales - products sold to the Company’s wholesale customers for subsequent resale. Revenue is recognized when control of the goods is transferred to the customer, in accordance with the terms of the applicable agreement. Payment terms vary and can typically be 30 days from the date control over the product is transferred to the customer The following table represents a disaggregation of revenue by sales channel: Fiscal 2025 % of total Fiscal 2024 % of total E-commerce sales $ 14,715,582 76.7 % $ 15,655,337 80.4 % Wholesale sales $ 4,475,096 23.3 % $ 3,826,830 19.6 % Total Net Sales $ 19,190,468 $ 19,482,167 Contract assets represent unbilled receivables and are presented within accounts receivable, net on the consolidated balance sheets. Contract liabilities represent unearned revenues and are presented as deferred revenue or customer deposits on the consolidated balance sheets. The Company had no material contract assets or liabilities at the beginning or ending of September 30, 2025 and 2024 . Cost of Sales The Company’s cost of sales includes costs associated with distribution, fill and labor expense, components, manufacturing overhead, third -party providers, and outbound freight for the Company’s products sales. For the Company’s product sales, cost of sales also includes the cost of refurbishing products returned by customers that will be offered for resale, if any, and the cost of inventory write-downs associated with adjustments of held inventories to their net realizable value. These expenses are reflected in the Company’s consolidated statements of operations when the product is sold and net sales revenues are recognized or, in the case of inventory write-downs, when circumstances indicate that the carrying value of inventories is in excess of their net realizable value. Advertising Costs The Company expenses all costs of advertising and related marketing and promotional costs as incurred. The Company incurred $ 4.4 million and $ 4.2 million in advertising and marketing and promotional costs included in operating expenses during the years ended September 30, 2025 and 2024 respectively. The Company believes driving its advertising aids brand awareness and is critical to maintain brand recognition and acquiring customers. We are constantly evaluating advertising methods and costs and working to drive down our cost of customer acquisition. Income Taxes The Company is a North Carolina corporation that is treated as a corporation for federal and state income tax purposes. All wholly owned subsidiaries are disregarded entities for tax purposes and their entire share of taxable income or loss is included in the tax return of the Company. The Company accounts for income taxes pursuant to the provisions of the Accounting for Income Taxes topic of the Financial Accounting Standards Board ("FASB") ASC 740 which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. The Company uses the inside basis approach to determine deferred tax assets and liabilities associated with its investment in a consolidated pass-through entity. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will not be realized. 44 Table of Contents US GAAP requires management to evaluate tax positions taken by the Company and recognize a tax liability (or asset) if the Company has taken an uncertain tax position that more likely than not would not be sustained upon examination by the Internal Revenue Service. Management has analyzed the tax positions taken by the Company, and has concluded that as of September 30, 2025 and 2024 , there were no uncertain tax positions taken or expected to be taken that would require recognition of a liability (or asset) or disclosure in the consolidated financial statements. Concentrations Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents, accounts receivable, and securities. The Company places its cash and cash equivalents on deposit with financial institutions in the United States. The Federal Deposit Insurance Corporation (“FDIC”) covers $250,000 for substantially all depository accounts. The Company from time to time may have amounts on deposit in excess of the insured limits. The Company had an approximate $ 1.5 million uninsured balance at September 30, 2025 and an approximate $ 1.9 million uninsured balance at September 30, 2024. Concentration of credit risk with respect to receivables is principally limited to trade receivables with corporate customers that meet specific credit policies. Management considers these customer receivables to represent normal business risk. The Company did not have any customers that represented a significant amount of our sales for the years ended September 30, 2025 and 2024. Stock-Based Compensation The Company accounts for its stock compensation under the ASC 718 - 10 - 30, Compensation - Stock Compensation using the fair value-based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity's equity instruments or that may be settled by the issuance of those equity instruments. The Company uses the Black-Scholes model for measuring the fair value of options and warrants. The stock based fair value compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods. The Company recognizes forfeitures when they occur. Liquidity and Going Concern Considerations The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company experienced a loss from operations of $ 2.1 million for the fiscal year ended September 30, 2025, and has net working capital of $ 3.1 million at September 30, 2025. While the Company is taking strong action, believes in the viability of its strategy and path to profitability, and in its ability to raise additional funds, there can be no assurances to that effect. The Company’s working capital position may not be sufficient to support the Company’s daily operations for the twelve months subsequent to the issuance of these annual financial statements. The Company’s ability to continue as a going concern is dependent upon its ability to improve profitability and the ability to acquire additional funding. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern within twelve months after the date that the annual financial statements are issued. These financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result in the Company not being able to continue as a going concern. Convertible Notes Effective February 1, 2024, the Company entered into a Securities Purchase Agreement dated January 30, 2024 with five institutional investors whereby the Investors advanced the Company an aggregate of $ 1,250,000 gross proceeds and the Company issued each Investor an 8 % Senior Secured Original Issue 20 % Discount Convertible Promissory Note, in the aggregate principal amount of $ 1,541,666 . The Company used the proceeds from the issuance of the notes for working capital and general corporate purposes. The Company elected the fair value option under ASC 825 Fair Value Measurements for the notes. The notes were initially recognized at fair value on the balance sheet. All subsequent changes in fair value, excluding the impact of the change in fair value related to instrument-specific credit risk are recorded in non-operating income. The changes in fair value related to instrument-specific credit risk is recorded through other comprehensive income (loss). These notes were fully converted during fiscal year 2025. See Note 12 for more information related to the notes. Earnings (Loss) Per Share The Company uses ASC 260 - 10, Earnings Per Share for calculating the basic and diluted income (loss) per share. The Company computes basic income (loss) per share by dividing net income (loss) and net income (loss) attributable to common shareholders, after deducting preferred stock dividends, by the weighted average number of common shares outstanding. Common equivalent shares are excluded from the computation of net loss per share if their effect is anti-dilutive. On April 10, 2025, we held an annual meeting of stockholders. At the annual meeting, our stockholders approved an amendment to our articles of incorporation, as amended, to effect a reverse stock split of our issued and outstanding shares of common stock by a ratio of between one -for- three to one -for- ten , inclusive, with the exact ratio to be set at the discretion of our board of directors, at any time after approval of the amendment and prior to the one year anniversary of the meeting. On May 6, 2025, the board effected a reverse stock split at a ratio of one -for- eight , effective as of May 7, 2025 ( the "Reverse Stock Split"). Unless otherwise indicated, all share numbers in this report, including shares of common stock and all securities convertible into, or exercisable for, shares of common stock, give effect to the Reverse Stock Split. New Accounting Standards In November 2023, the FASB issued guidance that updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance on an annual and interim basis. The Company adopted this guidance for its annual period ending September 30, 2025. While the adoption of this standard did not have a material impact on the Company’s Consolidated Financial Statements, the new guidance resulted in increased disclosures on reportable segments in Note 16 of the Notes to the Consolidated Financial Statements. In November 2024, the FASB issued guidance that requires disaggregation of specific expense categories in disclosures within the footnotes to the financial statements on an annual and interim basis. The Company is required to adopt this guidance for its annual period ending September 30, 2028 and all interim periods thereafter on a prospective basis. Early adoption is permitted. The Company is currently evaluating the impact of this guidance on its disclosures. In December 2023, the FASB issued guidance that enhances the transparency of income tax disclosures by expanding annual disclosure requirements related to the rate reconciliation and income taxes paid. The Company is required to adopt this guidance for its annual period ending September 30, 2026, which will result in increased disclosures in the Notes to its Consolidated Financial Statements. 45 Table of Contents NOTE 2 – MARKETABLE SECURITIES AND INVESTMENT OTHER SECURITIES On April 7, 2022, the Company entered into an asset sale agreement to sell substantially all its manufacturing assets to a subsidiary of Steady State, LLC ("Steady State"). The equipment sale was initially valued at approximately $ 1.8 million for accounting purposes, the sale price consisting of a trade credit for products to be provided to the Company under the manufacturing and supply agreement and $ 1.4 million of which the Company invested into Steady State in the form of an equity investment consistent with the terms of Steady State's completed Series C financing. The Company performed a valuation analysis and as of September 30, 2023 determined a $ 700,000 impairment was needed on the carrying value of this investment. The determination was based on a number of factors, including Steady State’s financial performance, our experience with production and cbdMD’s determination to re-source production to other suppliers. As such we believe it was prudent to reassess the carrying value of this non-liquid security. The Company performed an additional valuation analysis as of September 30, 2025 and September 30, 2024 and determined that no further impairment was needed based on factors such as Steady State's financial performance and re-alignment of the business. For the year ended September 30, 2025 and September 30, 2024 the Company recorded $ 0 realized and unrealized loss on marketable and other securities, including impairments. The table below summarizes the assets and liabilities related to marketable and other securities valued at fair value as of September 30, 2025 : In Active Markets for Significant Other Significant Identical Assets Observable Unobservable and Liabilities Inputs Inputs (Level 1) (Level 2) (Level 3) Balance at September 30, 2023 $ - $ - $ ( 90,362 ) Change in value of contingent liability - - 90,362 Fair value of convertible notes - 1,171,308 Balance at September 30, 2024 - - 1,171,308 Fair value of convertible notes - - ( 1,171,308 ) Balance at September 30, 2025 $ - $ - $ - NOTE 3 – INVENTORY Inventory at September 30, 2025 and 2024 consists of the following: September 30, September 30, 2025 2024 Finished Goods $ 1,577,309 $ 1,534,718 Inventory Components 1,203,556 830,469 Inventory Reserve ( 48,738 ) - Inventory prepaid 214,795 159,006 Total Inventory $ 2,946,922 $ 2,524,193 46 Table of Contents Abnormal amounts of idle facility expense, freight, handling costs, scrap, and wasted material (spoilage) are expensed in the period they are incurred and no material expenses related to these items occurred in the year ended September 30, 2025. The Company wrote down inventory of $ 365,979 and $ 921,314 during the fourth quarters of fiscal years ended September 30, 2025 and 2024, respectively, primarily related to obsolete and expired stock keeping units (“SKU”s). We work hard to minimize inventory write-downs and slow moving and aging SKUs and work, as we work to streamline our offerings to higher velocity products and eliminate slow-moving and aging SKUs. NOTE 4 – PROPERTY AND EQUIPMENT Major classes of property and equipment at September 30, 2025 and 2024 consist of the following: September 30, September 30, 2025 2024 Computers, furniture and equipment $ 1,758,805 $ 1,587,411 Manufacturing equipment 288,554 284,275 Leasehold improvements 495,581 487,081 2,542,940 2,358,767 Less accumulated depreciation ( 2,265,563 ) ( 1,904,499 ) Property and equipment, net $ 277,377 $ 454,268 Depreciation expense related to property and equipment was $ 361,063 and $ 452,326 for the years ended September 30, 2025 and 2024, respectively. NOTE 5 – INTANGIBLE ASSETS Amortization expense for the years ended September 30, 2025 and 2024 was $ 765,078 and $ 697,510 , respectively and was recorded on the consolidated statements of operations. At September 30, 2025 and 2024, the Company prepared a tradename impairment analysis in accordance with ASC 360 and has determined that no impairment existed. In 2019, Company’s subsidiary, CBD Industries, LLC, initiated a trademark cancellation proceeding against Majik Medicine, LLC (“Majik”) regarding Majik’s “CBD MD” trademark. In a Settlement, Purchase, and Release Agreement that occurred in August of 2024, the Company acquired the trademark, resolving all related legal claims. The agreement included a $ 100,000 initial payment, four additional annual payments of $ 50,000 , the issuance of 9,375 shares of common stock, and 6,250 additional shares on the one -year anniversary. Failure to make the additional payments would reassign the trademark to Majik. Additionally, the Company entered a five -year consulting agreement with Majik, granting a 15 % commission on increased sales from licensed practitioners, a new customer base. This acquisition strengthens the Company’s IP portfolio, avoids litigation costs, and expedites trademark issuance. The Company issued the 6,250 additional shares of common stock in the fourth quarter of fiscal 2025 pursuant to the settlement agreement with Majik Medicine. Intangible assets as of September 30, 2025 and 2024 consisted of the following: September 30, September 30, 2025 2024 Trademark related to cbdMD $ 21,585,000 $ 21,585,000 Trademark for HempMD 50,000 50,000 Technology Relief from Royalty related to DirectCBDOnline.com 667,844 667,844 Tradename related to CBD MD limited mark 368,000 368,000 Tradename related to DirectCBDOnline.com 749,567 749,567 Impairment of definite lived intangible assets: ( 17,504,000 ) ( 17,504,000 ) Amortization of definite lived intangible assets: ( 3,791,909 ) ( 3,026,831 ) Total $ 2,124,502 $ 2,889,580 47 Table of Contents Future amortization of intangible assets as of September 30, 2025 is as follow: For the year ended September 30, 2026 733,740 2027 733,740 2028 569,923 2029 87,099 Total future intangibles amortization $ 2,124,502 NOTE 6 – CONTINGENT LIABILITY The Company previously as a contractual obligation to issue certain shares which was fully settles by the issuance of final Earnout shares of 19,818 and were issued on January 11, 2024. There is no further Earnout obligation. 48 Table of Contents NOTE 7 – RELATED PARTY TRANSACTIONS None. NOTE 8 – SHAREHOLDERS ’ EQUITY Preferred Stock Conversion and Reverse Stock Split In October 2019, the Company designated 5,000,000 of its 50,000,000 authorized shares of preferred stock as 8.0% Series A Cumulative Convertible Preferred Stock (the “Series A Preferred Stock”). Series A Preferred Stock ranked senior to common stock for liquidation or dividend and holders were entitled to receive cumulative cash dividends at an annual rate of 8.0% payable monthly in arrears for the prior month. There were 5,000,000 shares of Series A Preferred Stock issued and outstanding at September 30, 2024. Among other matters, during the Company's annual meeting held on April 10, 2025, the shareholders of the Company approved: i. an amendment the Certificate of Designation of the Company’s Series A Preferred Stock to include an automatic conversion provision whereby each outstanding share of Series A Preferred Stock, together with accrued and unpaid dividends, would automatically convert into thirteen shares of Common Stock, at an effective date determined by of the Board of Directors (the ”Automatic Preferred Conversion”); and ii. an amendment to the Company’s Articles of Incorporation to authorize the Board of Directors to effect a reverse stock split of the then outstanding shares of Common stock at a specific ratio, ranging from one -for- three to one -for- ten , to be determined by the Board of Directors at a date and time to be determined by the Board of Directors. The Board of Directors elected to effectuate the Automatic Preferred Conversion on May 6, 2025 at 4:01 p.m. Eastern Time (the “Mandatory Exchange Date”). On the Mandatory Exchange Date, all Series A Preferred Stock, together with accrued and unpaid dividends, was converted into 65,000,000 shares (pre-split) of Common Stock, dividends on converted shares ceased to accrue, and the Series A Preferred Stock ceased trading. The Board of Directors elected to implement a one -for- eight ( 1:8 ) reverse stock split of the Company’s common stock (the “Reverse Stock Split”) on May 6, 2025, effective at 4:02 p.m. Eastern Time, immediately following and therefore inclusive of shares of common stock issued in connection with the Automatic Preferred Conversion. Following the Reverse Stock Split holders of fractional shares received, in lieu of a fractional share, the number of shares rounded up to the next whole number (“Round Up Shares”). 89 Round Up Shares were issued as a result of the Reverse Stock Split. Common Stock – The Company is authorized to issue 150,000,000 shares of common stock, par value $ 0.001 per share. There were 8,917,054 and 492,383 shares of common stock issued and outstanding at September 30, 2025 and 2024, respectively. Preferred stock transactions: On September 29, 2025, the Company filed a Certificate of Amendment to the Certificate of Incorporation (the “Certificate of Designation”) designating 1,700,000 shares of the Company’s authorized preferred stock as Series B Convertible Preferred Stock, par value $ 0.001 per share. Each share of the Series B Preferred Stock is convertible into common stock at a conversion price of $ 1.00 , subject to anti-dilution adjustments and Alternative Conversion rights (as defined in the Certificate of Designation). The Series B Preferred Stock accrues dividends at a rate of 10 % per annum which are payable quarterly in shares of common stock, subject to the satisfaction of all Equity Conditions (as defined in the Certificate of Designation), or in cash. If the Company fails to satisfy an Equity Condition, dividends shall be paid in cash. However, if North Carolina law prohibits the payment of dividends in cash, then the then Stated Value (as defined in the Certificate of Designation) shall be increased by the dividends as reasonably determined by the Company and the holders of the Series B Preferred Stock. With respect to liquidation, dissolution and winding up of the Company, the Series B Preferred Stock ranks senior to all shares of the Company’s capital stock unless otherwise consented to by the holders of the Series B Preferred Stock. The holders of Series B Preferred Stock have no voting power and no right to vote, except as required by the North Carolina Business Corporations Act or with respect to matters affecting the preferences, rights, privileges or powers relating to the Series B Preferred Stock. In addition, the Series B Preferred Stock is subject to a beneficial ownership limitation which prohibits any holder from beneficially owning more than 4.99 % of the shares of the Company’s common stock outstanding immediately following such conversion. 49 Table of Contents Common stock transactions: In the year ended September 30, 2025 : During the year the Company (i) issued 1,875 shares of restricted stock under the Company's 2015 equity incentive plan to a new employee; (ii) issued 267,597 shares of common stock for conversions of notes payable; and (iii) issued 21,875 shares of common stock to a consultant for advisory services, issued In April 2025 the Company issued 9,432 shares of restricted stock awards to the Company’s board of directors. The shares vest quarterly on June 30, 2025, September 30, 2025, December 31, 2025, and March 31, 2026. The stock awards were valued at the fair market price of $ 8,964 and will amortize over the individual vesting periods. In May 2025, the company issued 8.125 million shares of common stock pursuant to the conversion of the Series A Perfered Stock. In August 2025, the Company issued 6,250 shares of common stock pursuant to the settlement agreement with Majik Medicine. In the year ended September 30, 2024: In September 2024, the Company issued 12,578 shares of common stock pursuant to the partial conversion of certain principal and interest related to the Notes. In August 2024, the Company issued 9,375 shares of common stock pursuant to the settlement agreement with Majik Medicine. In April 2024, the Company issued an aggregate of 89,279 shares of common stock pursuant to the partial conversion of certain principal and interest related to the Notes. In March 2024, the Company issued 2,000 restricted stock awards to the Company’s board of directors. The shares vest quarterly on June 30, 2024, September 30, 2024, December 31, 2024, and March 31, 2025. The stock awards were valued at the fair market price of $ 13,760 and will amortize over the individual vesting periods. In January 2024, the Company issued 8,027 shares under our ELOC. In January 2024, the Company issued 2,478 shares as part of the final Earnout. 50 Table of Contents Stock option transactions: No options were issued during fiscal 2025. In the year ended September 30, 2024: The Company granted its board of directors an aggregate of 1,000 common stock options in April 2024. The options vested immediately, have a strike price of $ 0.86 and a five -year term. The Company has recorded a total prepaid expense of approximately $ 4,300 and intends to amortize the expense over the 12 -month board term. The expected volatility rate was estimated based on comparison to the volatility of a blend of the Company's own stock and a peer group of companies in similar industries. The expected term used was the full term of the contract for the issuances. The risk-free interest rate for periods within the contractual life of the option is based on U.S. Treasury securities. The pre-vesting forfeiture rate of zero is based upon the experience of the Company. As required under ASC 718, the Company will adjust the estimated forfeiture rate to its actual experience. Management will continue to assess the assumptions and methodologies used to calculate estimated fair value of share-based compensation. Circumstances may change and additional data may become available over time, which could result in changes to these assumptions and methodologies, and thereby materially impact our fair value determination. The following table summarizes the inputs used for the Black-Scholes pricing model on the options issued in the years ended September 30, 2025 and 2024 : 2025 2024 Weighted average exercise price $ - $ 0.54 Risk free interest rate - 4 % Volatility - 107 % Expected term (in years) - 2.5 Dividend yield None None 51 Table of Contents Warrant transactions: The Company had no warrant transactions during the twelve months ended September 30, 2025 and 2024. NOTE 9 -STOCK-BASED COMPENSATION Equity Compensation Plan – On June 2, 2015, the Board of Directors of the Company approved the 2015 Equity Compensation Plan ( “2015 Plan”). The 2015 Plan made 26,112 common stock shares, either unissued or reacquired by the Company, available for awards of options, restricted stocks, other stock grants, or any combination thereof. The number of shares of common stock available for issuance under the 2015 Plan shall automatically increase on the first trading day of our fiscal year during the term of the 2015 Plan, beginning with calendar year 2016, by an amount equal to one percent ( 1 %) of the total number of shares of common stock outstanding on the last trading day in September of the immediately preceding fiscal year, but in no event shall any such annual increase exceed 2,223 shares of common stock. On April 19, 2019, shareholders approved an amendment to the 2015 Plan and increased the number of shares available for issuance under the 2015 Plan to 45,445 and retained the annual evergreen increase provision of the plan. Subsequent thereto, on August 7, 2019 the Company’s Board of Directors approved an amendment to the 2015 Plan changing the date the automatic evergreen increase is determined to the first trading day of October each calendar year during the term of the 2015 Plan to coincide with the Company’s fiscal year. On January 8, 2021, the Company’s Board of Directors approved the 2021 Equity Compensation Plan (the “2021 Plan”) and it was subsequently ratified by its shareholders at its annual meeting held on March 12, 2021. The purpose of the 2021 Plan is to advance the interests of the Company by providing an incentive to attract, retain and motivate highly qualified and competent persons who are important to it and upon whose efforts and judgment the success of the Company is largely dependent. The 2021 Plan made 111,112 common shares, either unissued or reacquired by the Company, available for awards of options, restricted stocks, other stock grants, or any combination thereof. The 2021 Plan also contains an “evergreen formula” pursuant to which the number of shares of common stock available for issuance under the 2021 Plan will automatically increase on October 1 of each calendar year during the term of the 2021 Plan, beginning with calendar year 2022, by an amount equal to 1.0 % of the total number of shares of common stock outstanding on September 30 of such calendar year, up to a maximum of 5,556 shares. The Company accounts for stock-based compensation using the provisions of ASC 718. ASC 718, Stock Compensation, requires companies to recognize the fair value of stock-based compensation expense in the financial statements based on the grant date fair value of the options. All options are approved by the Compensation, Corporate Governance and Nominating Committee of the Board of Directors. Restricted stock awards that vest in accordance with service conditions are amortized over their applicable vesting period using the straight-line method. The fair value of the Company’s stock option awards or modifications is estimated at the date of grant using the Black-Scholes option pricing model. Eligible recipients include employees, officers, directors and consultants who are deemed to have rendered or to be able to render significant services to the Company or its subsidiaries and who are deemed to have contributed or to have the potential to contribute to the success of the Company. Options granted generally have a five -to- ten -year term and have vesting terms that cover one to three years from the date of grant. Certain of the stock options granted under the plan have been granted pursuant to various stock option agreements. Each stock option agreement contains specific terms. Stock Options: The Company currently has awards outstanding with service conditions and graded-vesting features. We recognize compensation cost on a straight-line basis over the requisite service period. The fair value of each time-based award is estimated on the date of grant using the Black-Scholes option valuation model. Our weighted-average assumptions used in the Black-Scholes valuation model for equity awards with time-based vesting provisions granted during the year. 52 Table of Contents The following table summarizes stock option activity under both plans for the fiscal years ended September 30, 2025 and 2024 : Weighted-average remaining Aggregate Weighted-average contractual term intrinsic value Number of shares exercise price (in years) (in thousands) Outstanding at September 30, 2024 5,531 989.72 3.65 - Granted - - - - Exercised - - - - Forfeited ( 14 ) 82.80 - - Outstanding at September 30, 2025 5,517 991.71 3.14 - Exercisable at September 30, 2025 5,517 $ 991.71 3.14 $ - As of September 30, 2025, there was no unrecognized compensation cost related to non-vested stock options which all are fully vested. Restricted Stock Award transactions: In April 2025 the Company issued 9,432 shares of restricted stock awards to the Company’s board of directors. The shares vest quarterly on June 30, 2025, September 30, 2025, December 31, 2025, and March 31, 2026. The stock awards were valued at the fair market price of $ 8,964 and will amortize over the individual vesting periods. The Company issued 2,000 of restricted stock awards to the Company’s board of directors during the fiscal year ended September 30, 2024. The shares vested quarterly on June 30, 2024, September 30, 2024, December 31, 2024, and March 31, 2025. The stock awards were valued at the fair market price of $ 4,296 upon issuance and were amortized over the individual vesting periods. 53 Table of Contents NOTE 10 – WARRANTS Transactions involving the Company equity-classified warrants for the fiscal years ended September 30, 2025 and 2024 are summarized as follows: Number of shares Weighted-average exercise price Weighted-average remaining contractual term (in years) Aggregate intrinsic value (in thousands) Outstanding at September 30, 2024 6,168 244.06 2.30 - Granted - - - - Exercised - - - - Forfeited ( 267 ) 1,024.38 - - Outstanding at September 30, 2025 5,901 208.75 4.07 - Exercisable at September 30, 2025 5,901 $ 208.75 - $ - The following table summarizes outstanding common stock purchase warrants as of September 30, 2025 : Number of shares Weighted-average exercise price Expiration Exercisable at $1346.40 per share 429 1,346.40 December 2025 Exercisable at $1350 per share 409 1,350.00 June 2026 Exercisable at $20.16 per share 5,063 20.16 April 2028 5,901 $ 208.75 NOTE 11 – COMMITMENTS AND CONTINGENCIES From time to time, the Company is involved in legal proceedings and subject to various claims that arise in the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, the Company is not currently a party to any legal proceedings the outcome of which, the Company believes, if determined adversely, would individually or in the aggregate have a material adverse effect on the Company’s Consolidated Financial Statements. During 2025, the Company continued to expand distribution of our hemp-derived beverage products. We have entered into agreements with various distributors providing for the distribution of certain of our hemp-derived beverage products, subject to certain terms and conditions, which may vary depending on the form of the agreement. Such agreements remain in effect for their then-current term as long as our products are being distributed but are subject to specified termination rights held by each party. Additionally, we are entitled to terminate certain distribution agreements at any time without cause upon payment of a termination fee, which may be material depending on the agreement, depending on the sell through of the product set. NOTE 12 – NOTE PAYABLE Effective February 1, 2024, the Company entered into a Securities Purchase Agreement dated January 30, 2024, with five institutional investors whereby the Investors advanced the Company an aggregate of $ 1,250,000 gross proceeds and the Company issued each Investor an 8 % Senior Secured Original Issue 20 % Discount Convertible Promissory Note, in the aggregate principal amount of $ 1,541,666 . Each note bore interest of 8 % per annum and was to mature on July 30, 2025. Further, the notes were convertible, at the option of the holder, into shares of common stock at conversion price which was adjusted for certain down-round provisions, as defined. At issuance, the Company elected the fair value option to account for the notes. The notes were initially recognized at a fair value of $ 2,702,000 . Excluding the impact of the change in fair value related to instrument-specific credit risk, which was recorded in other comprehensive income, subsequent changes in fair value were recorded in earnings at each reporting period. recorded in non-operating income. During the nine months ending June 30, 2025, the Company issued an aggregate of 267,597 shares of common stock upon the partial conversion of the remaining balance outstanding on the notes. 54 Table of Contents NOTE 13 – LEASES The Company has a lease agreement for its warehouse with the lease period expiring September 2026. ASC 842, Leases, requires the recognition of leasing arrangements on the consolidated balance sheet as right-of-use assets and liabilities pertaining to the rights and obligations created by the leased asset. The Company determines whether an arrangement is a lease at inception and classify it as finance or operating. All of the Company’s leases are classified as operating leases. The Company’s lease do not contain any residual value guarantees. Right-of-use lease assets and corresponding lease liabilities are recognized at commencement date based on the present value of lease payments over the expected lease term. Since the interest rate implicit in our lease arrangements is not readily determinable, the Company determined an incremental borrowing rate for each lease based on the approximate interest rate on a collateralized basis with similar remaining terms and payments as of the lease commencement date to determine the present value of future lease payments. The Company’s lease terms may include options to extend or terminate the lease. In addition to the monthly base amounts in the lease agreements, the Company is required to pay real estate taxes, insurance and common area maintenance expenses during the lease terms. Lease costs on operating leases are recognized on a straight-line basis over the lease term and included as a selling, general and administrative expense in the consolidated statements of operations. Components of operating lease costs are summarized as follows: Year Ended Year Ended September 30, September 30, 2025 2024 Total Operating Lease Costs $ 663,570 $ 1,328,4970 Supplemental cash flow information related to operating leases is summarized as follows: Year Ended Year Ended September September 30, 2025 2024 Cash paid for amounts included in the measurement of operating lease liabilities $ 589,264 $ 1,421,610 As of September 30, 2025, our operating leases had a weighted average remaining lease term of 1 year and a weighted average discount rate of 4.66 %. Future minimum aggregate lease payments under operating leases as of September 30, 2025 are summarized as follows: For the year ended September 30, 2026 798,200 Total future lease payments 798,200 Less interest 19,960 Total lease liabilities $ 778,240 55 Table of Contents NOTE 14 – LOSS PER SHARE The following table sets forth the computation of basic and diluted loss per share for the following periods: Year Ended September 30, September 30, 2025 2024 Basic: Net loss $ ( 2,040,902 ) $ ( 3,700,126 ) Preferred dividends paid or accrued 2,334,501 4,004,001 Net income loss attributable to cbdMD Inc. common shareholders ( 4,375,403 ) ( 7,704,127 ) Shares used in computing basic earnings per share 4,022,629 539,069 Shares used in computing diluted earnings per share 4,022,629 539,069 Earnings per share Basic: - Basic earnings per share ( 1.09 ) ( 14.29 ) Earnings per share Diluted: Diluted earnings per share ( 1.09 ) ( 14.29 ) At the year ended September 30, 2025, 100,993 potential shares underlying options, unvested RSUs and warrants as well as 1.7 million shares issuable upon conversion of our Series B Preferred stock which are excluded from the shares used to calculate diluted loss per share as their inclusion would reduce net loss per share. 56 Table of Contents NOTE 15 – INCOME TAXES The Company generated operating losses for the years ended September 30, 2025 and 2024 on which it has recognized a full valuation allowance. The Company accounts for is state franchise and minimum taxes as a component of its general and administrative expenses. The following table presents the components of the provision for income taxes from continuing operations for the fiscal years ended September 30, 2025 and 2024 : Year Ended September 30, 2025 2024 Current Federal $ - $ - State - - Total current - - Deferred Federal - - State - - Total deferred - - Total provision $ - $ - A reconciliation for the federal statutory income tax rate to the Company’s effective income tax rate is as follows: Year Ended September 30, 2025 2024 Federal statutory income tax rate 21.0 % 21.0 % State income taxes, net of federal benefit ( 0.8 ) 2.1 Permanent differences ( 4.3 ) 11.9 Contingent derivative expense 0.0 0.5 Change in value of convertible debt ( 1.0 ) ( 2.5 ) Expiration of tax carryovers ( 28.9 ) - Change in valuation allowance 14.0 ( 33.0 ) Provision for income taxes 0.0 % 0.0 % Significant components of the Company’s deferred income taxes are shown below: Year Ended September 30, 2025 2024 Deferred tax assets: Net operating loss carryforwards $ 15,651,000 $ 15,478,000 ROU - Liability 174,000 22,000 Capital loss carryforward 112,000 702,000 Allowance for doubtful accounts 134,000 77,000 Stock compensation 483,000 481,000 Intangibles 244,000 176,000 Investments 551,000 573,000 Accrued expenses 113,000 101,000 Inventory reserve 11,000 - Fixed Assets 46,000 57,000 Capitalized expenses 159,000 146,000 Charitable contributions 8,000 13,000 Total deferred tax assets 17,686,000 17,826,000 Deferred tax liabilities: Prepaid Expenses ( 68,000 ) ( 76,000 ) ROU - Assets ( 157,000 ) ( 19,000 ) Intangibles - - Total deferred tax liabilities ( 225,000 ) ( 95,000 ) Net deferred tax assets 17,461,000 17,731,000 Valuation allowance (17,461,000) ( 17,731,000 ) Net deferred tax liability $ - $ - 57 Table of Contents Net deferred tax liability The Company has established a valuation allowance against net deferred tax assets due to the uncertainty that such assets will be realized. The deferred tax liabilities that result from indefinite life intangibles cannot be offset by deferred tax assets. The Company periodically evaluates the recoverability of the deferred tax assets. At such time as it is determined that it is more likely than not that deferred tax assets will be realizable, the valuation allowance will be reduced. Under Internal Revenue Code (IRC) Section 382, the use of net operating loss (“NOL”) carryforwards may be limited if a change in ownership of a company occurs. During the year ending September 30, 2018, the company determined that a change of ownership under IRC Section 382 had occurred during the years ending September 30, 2017 and 2015. As a result of these ownership changes, the pre-ownership change NOL carryforwards would be limited and approximately $ 2.1 million of such NOLs will expire before being utilized. Therefore, at September 30, 2018 the Company reduced the deferred tax asset and related valuation allowance associated with these NOLs by approximately $ 0.5 million due to IRC Section 382. At September 30, 2025 , the Company has utilizable NOL carryforwards of approximately $ 69.1 million which for federal purposes will carryforward indefinitely. The Company accounts for its state franchise and minimum taxes as a component of its general and administrative expenses. The Company files income tax returns in the United States, and various state jurisdictions. The Company’s policy is to recognize interest expense and penalties related to income tax matters as tax expense. At September 30, 2025 and 2024 , there are no unrecognized tax benefits, and there are no significant accruals for interest related to unrecognized tax benefits or tax penalties. NOTE 16 - SEGMENT INFORMATION The Company operates as a single reportable segment. Our chief operating decision maker (CODM) is the Chief Executive Officer, who reviews financial information on a consolidated basis for purposes of assessing performance and allocating resources. Accordingly, all of the Company's operations are considered a single operating segment under the criteria of ASC 280, Segment Reporting . Because we have a single reportable segment, the segment information presented herein is consistent with the consolidated financial statements. The required segment information for revenue, profit or loss, assets, and specified expenses (such as depreciation and amortization) can be found on the face of the Consolidated Income Statement and Consolidated Balance Sheet. NOTE 17 – SUBSEQUENT EVENTS H.R. 5371 - Continuing Appropriations, Agriculture, Legislative Branch, Military Construction and Veterans Affairs, and Extensions Act, 2026 On November 12, 2025, President Trump signed into law H.R. 5371, the “Continuing Appropriations, Agriculture, Legislative Branch, Military Construction and Veterans Affairs, and Extensions Act, 2026” (the “Act”), which makes continuing appropriations and extensions for fiscal year 2026, and which also limits any THC content to 0.4mg per container for hemp-derived consumable products nationally on November 12, 2026. It is unknown to the Company whether or not the sections of the Act that impact the hemp industry will ultimately go into effect on November 12, 2026, or if those sections will be replaced, impacted or amended by subsequent acts of Congress. cbdMD was founded using THC-free broad spectrum, however a significant amount of our revenues are from products that contain low-dose hemp-derived THC that complies with the original Farm-bill, but would be limited by the Act. Further clarification on the definition of THC will be due within 90 days of the Act’s effectiveness. Executive Employment On November 28, 2025, the Company entered into an Executive Employment Agreement with T. Ronan Kennedy, the Company’s Chief Executive Officer and Chief Financial Officer. The term of the Agreement commenced on November 28, 2025 and expires three years thereafter and may be extended for additional one -year periods unless terminated. The Company will pay Mr. Kennedy a base salary of $ 340,000 . The Company also granted Mr. Kennedy a restricted stock award for 445,000 shares of the Company’s common stock pursuant to the Company’s 2025 Equity Compensation Plan (the “2025 Plan”). The vesting and issuance of the shares is subject to shareholder approval. Equity Compensation Plan On November 28, 2025, the board of directors of the Company approved the 2025 Plan, as the Company’s 2015 Equity Compensation Plan has expired and there is a nominal number of shares available under the Company’s 2021 Equity Compensation Plan. The Company’s board of directors will recommend that the 2025 Plan be approved by its shareholders at the Company’s upcoming 2026 annual meeting. The purpose of the 2025 Plan is to enable the Company to offer to its employees, officers, directors and consultants whose past, present and/or potential contributions to the Company and its subsidiaries have been, are or will be important to the success of the Company, an opportunity to acquire a proprietary interest in the Company. The 2025 Plan reserves 891,316 shares of our common stock for issuance pursuant to the terms of the plan upon the grant of plan options, restricted stock awards, or other stock-based awards granted under the 2025 Plan. The 2025 Plan also contains an “evergreen formula” pursuant to which the number of shares of common stock available for issuance under the 2025 Plan will automatically increase on October 1 of each calendar year during the term of the 2025 Plan, beginning with calendar year 2026, (i) by an amount equal to 2 % of the total number of shares of common stock outstanding on September 30 of the such calendar year, up to a maximum of 300,000 shares or (ii) to no more than 10 % of the then number of issued and outstanding shares of the Company’s common stock as of the date of such increase. ELOC On December 15, 2025, the Company entered into a Securities Purchase Agreement (the “ELOC Agreement”) with C/M Capital Master Fund, LP, an accredited investor (the “ELOC Purchaser”). Pursuant to the ELOC Agreement, the Company agreed to sell, and the ELOC Purchaser agreed to purchase, up to $ 10 million (the “Available Amount”) of the Company’s common stock (the “Purchase Shares”), subject to a sale limit of 19.99 % of the outstanding shares of the Company’s common stock in accordance with the rules of the NYSE American. The transactions contemplated by the ELOC Agreement are subject to the Company registering the ELOC Purchaser’s resale of the Purchase Shares on a registration statement to be filed with the SEC. Concurrent with the execution of the ELOC Agreement, the Company entered into a registration rights agreement with the ELOC Purchaser. Pursuant to the Registration Rights Agreement, the Company agreed to file a registration statement on Form S- 1 with the SEC covering the resale of the shares of common stock sold under the ELOC, on or before the 30th calendar day following the date of the Registration Rights Agreement and to use its commercially reasonable efforts to cause such registration statement to be declared effective by the SEC at the earliest practicable date, subject to limited exceptions described therein. The registration rights granted under the Registration Rights Agreement are subject to certain conditions and limitations and are subject to customary indemnification and contribution provisions. In connection with entering into the ELOC Agreement, the Company agreed to immediately issue to the ELOC Purchaser, 40,000 shares of common stock as commitment shares and, thereafter an amount of shares equal to 0.5 % of the Available Amount, which shall be issued in a pro rated fashion simultaneously with the delivery of any and all Purchase Shares purchased under the ELOC Agreement. The Company does not have a right to commence any sales of common stock to the ELOC Purchaser under the ELOC Agreement until the time when all of the conditions to the Company’s right to commence sales of Purchase Shares to the ELOC Purchaser set forth in the ELOC Agreement have been satisfied, including that a registration statement covering the resale of the Purchase Shares is declared effective by the SEC and the final form of prospectus contained therein is filed with the SEC (the “Commencement Date”). At any time from and after the Commencement Date, on any business day on which the previous business day’s closing sale price of common stock was equal to or greater than $ 0.50 (the “Purchase Date”), the Company may direct the ELOC Purchaser to purchase a specified number of shares of common stock (a “Fixed Purchase”) not to exceed on any single business day the lesser of (i) $ 500,000 of shares of common stock or (ii) $ 10,000,000 in the aggregate of Fixed Purchases (as defined in the ELOC Agreement), at a purchase price equal to the lesser of 95 % of (i) the lowest sale price of the common stock on the trading day immediately prior to such applicable Purchase Date or (ii) the daily volume weighted average price of the common stock for the five trading days immediately preceding the applicable Purchase Date for such Fixed Purchase. In addition, at any time from and after the Commencement Date, on any business day on which the previous business day’s closing sale price of the common stock is equal to or greater than $ 0.50 and such business day is also the Purchase Date for a Fixed Purchase of an amount of shares of common stock not less than the applicable Fixed Purchase Share Limit (as defined in the ELOC Agreement) (the “VWAP Purchase Date”), the Company may also direct the ELOC Purchaser to purchase an additional number of shares of common stock (a “VWAP Purchase”) at a purchase price equal to the lesser of 95 % of (i) the closing price of a share of common stock on the trading day immediately prior to such applicable Purchase Date and (ii) the lowest sale price on the VWAP Purchase date. If the Company makes certain issuances of its securities within a specified period of time after a Purchase Date and such securities are issued at prices (the “New Issuance Price”) less than the prices to be paid by the ELOC Purchaser in such Fixed Purchase or VWAP Purchase, the purchase price for such applicable Fixed Purchase or VWAP Purchase would be reduced to the New Issuance Price, subject to the terms and conditions set forth in the ELOC Agreement. Under the ELOC Agreement, in no event may the aggregate amount of Purchase Shares submitted in any single or combination of VWAP Purchase notices on a particular date require a payment from the ELOC Purchaser to us that exceeds $ 10,000,000 , unless such limitation is waived by the ELOC Purchaser. Series C Preferred Effective December 18, 2025, the Company entered into Securities Purchase Agreements dated December 18, 2025 ( “Series C Purchase Agreements”) with two institutional investors whereby the investors were issued an aggregate of 1,000,000 shares of Series C Convertible Preferred Stock (“Series C Preferred Stock”) for aggregate gross proceeds of $ 2,250,000 . The Company received net proceeds of $ 2,100,000 which shall be used for working capital purposes. In addition, pursuant to the Purchase Agreements, the Company entered into a Registration Rights Agreement with each of the Investors pursuant to which the shares of common stock issuable upon conversion of the Series C Preferred Stock to the Investors are entitled to registration under the Securities Act. Pursuant to the Registration Rights Agreement, the Company is required to file a registration statement to register the shares underlying the Series C Preferred Stock within 30 days following the closing date. On December 18, 2025, the Company filed a Certificate of Amendment to the Certificate of Incorporation (the “Certificate of Designation”) designating 1,000,000 shares of the Company’s authorized preferred stock as Series C Convertible Preferred Stock, par value $ 0.001 per share. Except for differences in the stated value, floor price and conversion price, the Series C Preferred Stock has terms and conditions that are substantially similar to those of the Company’s Series B Convertible Preferred Stock. Each share of the Series C Preferred Stock is convertible into common stock at a conversion price of $ 2.25 , subject to anti-dilution adjustments and Alternate Conversion rights (as defined in the Certificate of Designation). The Series C Preferred Stock accrues dividends at a rate of 10% per annum which are payable quarterly in shares of common stock, subject to the satisfaction of all Equity Conditions (as defined in the Certificate of Designation), or in cash. If the Company fails to satisfy an Equity Condition, dividends shall be paid in cash. However, if North Carolina law prohibits the payment of dividends in cash, then the then Stated Value (as defined in the Certificate of Designation) shall be increased by the dividends as reasonably determined by the Company and the holders of the Series C Preferred Stock. With respect to dividends, distributions, liquidation, dissolution and winding up of the Company, the Series C Preferred Stock ranks pari passu with the Series B Convertible Preferred Stock and is senior to all other shares of the Company’s capital stock unless otherwise consented to by the holders of the Series C Preferred Stock. The holders of Series C Preferred Stock have no voting power and no right to vote, except as required by the North Carolina Business Corporations Act or with respect to matters affecting the preferences, rights, privileges or powers relating to the Series C Preferred Stock. In addition, the Series C Preferred Stock is subject to a beneficial ownership limitation which prohibits any holder from beneficially owning more than 4.99 % of the shares of the Company’s common stock outstanding immediately following such conversion. 58