cbdMD Inc
For the period ended Dec 31, 2024. Filed Feb 13, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Dec 31, 2024 · Filed Feb 13, 2025
YCBD$0.42+7.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-14.
0001437749-24-026784
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-12-31; filed 2025-02-13.
0001437749-25-003752
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 63 previous paragraphs and 54 current paragraphs.
35 unchanged; 12 reworded; 7 added; 15 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 12 previous and 9 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (7)
Current report
During the first fiscal quarter cbdMD took a bigger step into the beverage category and launched our line of hemp derived, ready-to-drink beverages under the Herbal Oasis (“Oasis”) line. We see this as currently the fastest growing category in the hemp industry.
Current report
We remain focused on growing the Company in a smart, profitable manner along with appropriate cost controls.
Current report
On December 31, 2024, we received notification (the “Notice”) from the NYSE American NYSE American that the Company is no longer in compliance with an additional NYSE American continued listing standard. Specifically, the letter states that the Company is not in compliance with the continued listing standard set forth in Section 1003(a)(i) of the NYSE American Company Guide (the “Company Guide”). Section 1003(a)(i) requires a listed company to have stockholders’ equity of $2 million or more if the listed company has reported losses from continuing operations and/or net losses in two of its three most recent fiscal years then ended. The Company reported stockholders equity of $1,963,417 as of September 30, 2024, and losses from continuing operations and/or net losses in four of its five most recent fiscal years then ended. The Notice further provided that the Company remains subject to the conditions set forth in the NYSE American’s initial non compliance notification dated June 5, 2024 and its compliance plan that was accepted by the NYSE American on August 20, 2024 for noncompliance under Section 1003(a)(ii) of the Company Guide due to stockholders’ equity under $4 million which addressed how the Company intends to regain compliance with the continued listing standards by December 5, 2025 (the “Plan”). If the Company is not in compliance with the continued listing standards by December 5, 2025 or if the Company does not make progress consistent with the Plan during the Plan period, the Company will be subject to delisting procedures as set forth in the Company Guide.
Current report
As previously disclosed, the Company is committed to undertaking a transaction or transactions in the future to achieve compliance with the NYSE American’s requirements, including but not limited to seeking shareholder approval to convert its outstanding Series A Preferred Stock and accrued dividends, a liability totaling $5.7 million on December 31, 2024, into shares of Common Stock. Under certain Series A Preferred Stock conversion proposals, the accrued dividend would move to equity and increase the Company’s stockholder equity. However, there can be no assurance that the Company will be able to achieve compliance with the NYSE American’s continued listing standards within the required timeframe.
Current report
While the Notice has no immediate impact on the listing of the Company’s shares of common stock or Series A Preferred Stock, which will continue to be listed and traded on the NYSE American during this period, subject to the Company’s compliance with the other listing requirements of the NYSE American, if the Common Stock and Series A Preferred Stock ultimately were to be delisted for any reason, it could negatively impact the Company by (i) reducing the liquidity and market price of the Company’s Common Stock and Series A Preferred Stock; (ii) reducing the number of investors willing to hold or acquire the Common Stock and Series A Preferred Stock, which could negatively impact the Company’s ability to raise equity financing; and (iii) limiting the Company’s ability to use a registration statement to offer and sell freely tradable securities, thereby preventing the Company from accessing the public capital markets.
Current report
Our goal from a liquidity perspective is to use operating cash flows to fund day to day operations. We continue to improve the Company’s operating performance, we have been able to stabilize our cash position over the last few quarters, and we believe we are getting closer to long-term sustainable cash flow production. The conversion of the Notes provides the Company additional cash for working purposes during fiscal 2025. Management continues to focus on profitability growing the Company in order to strengthen its balance sheet.
Current report
(1) Represents depreciation of property, plant and equipment and amortization of the Company's intangible assets.
Removed paragraphs (15)
Previous report
The Company remained very focused on revenue improvements during the third quarter. While year over year its revenue was down, we gained 18 % sequentially and grew both direct to consumer and wholesale revenue. Management continues to focus on growing revenue and operating with lean infrastructure costs.
Previous report
cbdMD expanded its retail reach in December 2023 by launching several products throughout Sprouts Supermarkets and more recently added to Door Dash as a customer.
Previous report
During December 2023, the Company launched its new functional mushroom line of products with its Super Gummy under the ATRx brand on ATRxlabs.com. At our core, we are committed to natural health and wellness solutions, recognizing the benefits of functional mushrooms alongside hemp. During late April 2024 we launched our 4 SKU ATRx Platinum line into GNC. Management made a strategic decision to work with GNC on an exclusive initial launch of the Platinum line to help offset some legacy inventory issues tied to a $1 million cbdMD product order from March of 2022. Working with GNC on this launch provides the brand a springboard into national distribution and we believe helped accelerate ATRx brand awareness. Additionally, we have a wider store distribution footprint as ATRx products do not have the same geographic limitations as CBD products within the GNC footprint.
Previous report
During March 2024 we added personnel to our wholesale team, bringing in a VP of Wholesale with significant CBD industry experience. We are seeing wholesale opportunities begin to pick up and we are optimistic a number of international opportunities we have been working on for the last several quarters will generate revenues by the end of the calendar year. At the end of the quarter, we made additional performance marketing hire to help reinvigorate our direct-to-consumer business and deepen our performance driven culture.
Previous report
During March 2024, we attempted to automatically convert the Series A Preferred stock to common stock through a shareholder vote to amend our Series A Preferred Stock designation. We were unable to get the required votes needed to approve the amendment. We believe the combined market capitalization of both our common and Series A Preferred is being impacted due to our current capital structure. Our goal is to simplify our capital structure and we believe it will help unlock additional equity value and open up more strategic activity for the Company.
Previous report
During March 2024, we entered into agreements with our sub-landlord for the Red Oak Sublease. As a result of these agreements, we anticipate an estimated $20,000 reduction monthly operating costs in utilities and maintenance related to the Red Oak Sublease that will roll off by the end of the third fiscal quarter and we fulfilled the obligation of the agreements in July 2024, terminating future obligations under the lease, saving approximately a further $85,000 in rent on a monthly basis. While we satisfied this agreement and no longer have a future lease obligation, we continue to negotiate with the landlord on back rent due.
Previous report
We continue to make headway on our infrastructure costs and efficiencies, critical to the endeavor of an EBITDA profitable business. Early during the third fiscal quarter we enacted certain cost savings initiatives and as of August 2024, believe we have achieved over $200,000 in monthly savings over our March 2024. This includes shedding our legacy Red Oak executive office lease effective August 1, 2024, headcount reductions, vendor consolidation and replacement, and other initiatives to lower product and overhead costs. We do anticipate increasing marketing spend during the fourth fiscal quarter to offset some of these savings.
Previous report
For the nine months ending June 2024, year to date operating expenses decreased by $6.1 million as management continues to focus on operational efficiencies across the board.
Previous report
Other income and other non-operating expenses
Previous report
We also record income and expenses associated with non-operating items. The material components of those are set forth below.
Previous report
Decrease in contingent liability
Previous report
As described in Note 6 to the notes to the consolidated financial statements appearing elsewhere in this report, the earn-out provision for the Earnout Shares is accounted for and recorded as a contingent liability with increases in the liability recorded as non-cash other expense and decreases in the liability recorded as non- cash other income. The value of the non-cash contingent liability was $90,363 at September 30, 2023 , respectively. The fourth and final marking period ended and the final issuance of shares occurred in January 2024, therefore there is no ongoing liability recorded.
Previous report
We entered into a securities Purchase Agreement dated January 30, 2024 with five 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 intends to use the proceeds from the issuance of the Notes for working capital and general corporate purposes, including, but not limited to inventory investment to assist with orders and funding proxy expenses.
Previous report
Our goal from a liquidity perspective is to use operating cash flows to fund day to day operations and, while improving, we have not met this goal as cash flow from operations has been a net use of $0.1 million three months ended June 30, 2024. Management believes the quarterly cash consumption should continue to improve in subsequent quarters.
Previous report
(3) Represents non-cash expense incurred as a credit provided to GNC to replace expired product.
Reworded paragraphs (12)
Previous wording
The following discussion of our financial condition and results of operations for the three and nine months ended June 30, 2024 and the three and nine months ended June 30, 2023 should be read in conjunction with the unaudited condensed consolidated financial statements and the notes to those statements that are included elsewhere in this report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties such as our plans, objectives, expectations and intentions.
Current wording
The following discussion of our financial condition and results of operations for the three months ended December 31, 2024 and the three months ended December 31, 2023 should be read in conjunction with the unaudited condensed consolidated financial statements and the notes to those statements that are included elsewhere in this report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties such as our plans, objectives, expectations and intentions.
Previous wording
Management continues to be very focused on our goal of delivering positive earnings through a combination of optimizing our product portfolio, right-sizing our cost structure and investing in marketing that will provide positive return on customer acquisition. During fiscal 2023 we made significant changes to our marketing and overall operations including re-platforming our website to significantly reduce our operating costs. Ongoing revenue decreases offset a majority of the infrastructure savings, however we significantly reduce the Company’s cash burn during the year.
Current wording
Management continues to be very focused on our goal of delivering positive earnings through a combination of optimizing our product portfolio, right-sizing our cost structure and investing in marketing that will provide positive return on customer acquisition. During fiscal 2024 we continue to make sweeping changes that have had a very positive impact to the business. The first quarter of fiscal 2025 is the first quarter in Company’s history as a public company that revenues increased from a prior sequential quarter, the Company achieved Net Income (before the preferred dividend accrual) and the Company achieved positive EBITDA on a Non GAAP basis.
Previous wording
We had total net sales of $5.2 million and $6.1 million for the three months ended June 30, 2024 and 2023, respectively, resulting in a decrease in net sales of $0.9 million or 16% quarter over quarter. This decrease is partially attributable to a decrease of $1.0 million in e-commerce sales year over year while wholesale sales increased by $0.1 million. Sequentially, revenue grew by 15.4%. Our team continues to focus on all areas of driving revenue improvement. Despite the overall category facing challenges, we remain optimistic about our product's market positioning in fiscal 2024 and into 2025. Revenues appear to be holding and with continued cost reductions, we are designing the Company to be profitable at significantly lower revenue levels than in the past.
Current wording
We had total net sales of $5.1 million and $5.4 million for the three months ended December 31, 2024 and 2023, respectively, resulting in a decrease in net sales of $0.3 million or 4.9% quarter over quarter. This decrease is partially attributable to a decrease of $0.5 million in e-commerce sales year over year while wholesale sales increased by $0.2 million. The decrease was primarily due to a reduction in marketing spend and ongoing market changes. However, wholesale sales have recently seen a positive impact related to changes in our team and product portfolio year over year. Sequentially, revenue grew by 12%. Our team continues to focus on all areas of driving revenue improvement. Despite the overall category facing challenges, we remain optimistic about our market positioning in fiscal 2025.
Previous wording
Our cost of sales includes costs associated with distribution, fill and labor expense, components, manufacturing overhead, third party providers, and freight for our product sales. Our cost of sales as a percentage of net sales was 35% and 35% for three months ended June 30, 2024 and 2023, respectively. This decrease in cost of sales is mostly attributed to ongoing cost saving initiatives. We anticipate future cost of sales to be in line with our historical averages prior to the March 2024 quarter.
Current wording
Our cost of sales includes costs associated with distribution, fill and labor expense, components, manufacturing overhead, third party providers, and freight for our product sales. Our cost of sales as a percentage of net sales was 33.5% and 33.8% for three months ended December 31, 2024 and 2023, respectively. This slight decrease in cost of sales is mostly attributed to ongoing cost saving initiatives.
Previous wording
The following tables provide information on our operating expenses for the three and nine months ended June 30, 2024 and 2023:
Current wording
The following tables provide information on our operating expenses for the three months ended December 31, 2024 and 2023:
Previous wording
Our overall operating expenses decreased by approximately $1.9 million or 24% for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. The year over year decrease was primarily driven by management's continued ongoing efforts to reduce our cost structure including decreases in staff related expenses, advertising, marketing, sponsorships and affiliate commission expenses, professional, accounting and legal expenses, and a reduction of intangibles amortization. As previously discussed, we have a number of initiatives in place with a target to further reduce G&A costs, including the elimination of the Red Oak Lease. While we are working to reduced fixed overhead costs, we do anticipate an increase in our advertising and marketing expenses for the fourth fiscal quarter.
Current wording
Our overall operating expenses decreased by approximately $1.2 million or 26% for the three months ended December 31, 2024 as compared to the three months ended December 31, 2023. The year over year decrease was primarily driven by management's continued ongoing efforts to reduce our cost structure including decreases in staff related expenses, marketing expenses, and professional, accounting and legal expenses. Our team continues to pursue cost saving initiatives, however after significant progress in 2023 and 2024, larger saving opportunities are harder to identify and implement. We are closely watching marketing expenses and anticipate seeing some increases in future quarters with the goal of positively impacting (increasing) revenues.
Previous wording
We had cash and cash equivalents on hand of $2.3 million and negative working capital of of $567,610.
Current wording
We had cash and cash equivalents on hand of approximately $2.0 million and a working capital deficit of $2.8 million. Our working capital is reduced by approximately $5.7 million of accrued dividend payments as of December 31, 2024. At September 30, 2024 we had cash and cash equivalents of $2.4 million and working capital of negative $1.1 million. Our working capital was reduced by approximately $4.7 million for accrued dividends payments as of September 30, 2024. Excluding the accrued dividend payments, we had adjusted working capital of $2.8 million as of December 31, 2024 and $2.4 million as of September 30, 2024. See non GAAP Adjusted EBITDA disclosure below.
Previous wording
We do not have any commitments for capital expenditures. We have a commitment for cumulative dividends at an annual rate of 8% payable monthly in arrears for the prior month to our preferred shareholders. As of August 2023, we have suspended paying the dividend in cash and are accruing this dividend on a monthly basis.
Current wording
We do not have any commitments for material capital expenditures. We have a commitment for cumulative dividends at an annual rate of 8% payable monthly in arrears for the prior month to our preferred shareholders. As of August 2023, we suspended paying the dividend in cash and are accruing this dividend on a monthly basis.
Previous wording
While the Company is taking strong action and believes that it can execute its strategy and path to profitability within its balance sheet, and in its ability to raise additional funds, there can be no assurances to that effect. The Company’s working capital position may not be sufficient to support the Company’s daily operations for the twelve months subsequent to the issuance this report. The Company’s ability to continue as a going concern is dependent upon its ability to improve profitability and cash flow and the ability to acquire additional funding. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern within twelve months after the date that these 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.
Current wording
While the Company is taking strong action and believes that it can execute 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 filing of this quarterly report. The Company’s ability to continue as a going concern is dependent upon its ability to improve profitability and cash flow and the ability to acquire additional funding. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern within twelve months after the date that these 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.
Previous wording
cbdMD defines Adjusted EBITDA as Earnings Before Interest, Taxes, Depreciation and Amortization excluding (1) stock based compensation; (2) one time inventory adjustments; (3) mergers and acquisitions and financing transaction expenses; (4) one-time severance accruals; (5) non-cash trade credits; and (6) non-cash accelerated amortization of expense related to terminated IT contracts.
Current wording
cbdMD defines Adjusted EBITDA as Earnings Before Interest, Taxes, Depreciation and Amortization excluding stock based compensation and mergers and acquisitions and financing transaction expenses.
Previous wording
Adjusted EBITDA for the three and nine months ended June 30, 2024 and June 30, 2023 is as follows:
Current wording
Adjusted EBITDA for the three months ended December 31, 2024 and December 31, 2023 is as follows:
Previous wording
(2) Represents expenses incurred in relation to M&A and financing activities during the nine months ended June 30, 2024.
Current wording
(3) Represents expenses incurred in relation to M&A and financing activities during the quarter ended December 31, 2023.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Our working capital is reduced by approximately $3.7 million of accrued dividend payments. At September 30, 2023 we had working capital of approximately $3.4 million, which was reduced by approximately $0.7 million for accrued dividends payable.