UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended ~~June 30, 2022~~March 31, 2023

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from __________________ to _______________

Commission file number 001-38299

cbdMD, INC.

(Exact Name of Registrant as Specified in its Charter)

North Carolina		47-3414576
State or Other Jurisdiction of Incorporation or Organization		I.R.S. Employer Identification No.

8845 Red Oak Blvd, Charlotte, NC		28217
Address of Principal Executive Offices		Zip Code

704-445-3060

Registrant’s Telephone Number, Including Area Code

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
common	YCBD	NYSE American
8% Series A Cumulative Convertible Preferred Stock	YCBDpA	NYSE American

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of

1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.

See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated Filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

~~60,555,595~~2,855,117 shares of common stock are issued and outstanding as of ~~August 11, 2022.~~May 2, 2023.

Table of Contents

Unless the context otherwise indicates, when used in this report, the terms the “Company,” “cbdMD, “we,” “us, “our” and similar terms refer to cbdMD, Inc., a North Carolina corporation formerly known as Level Brands, Inc., and our subsidiaries CBD Industries LLC, a North Carolina limited liability company formerly known as cbdMD LLC, which we refer to as “CBDI”, Paw CBD, Inc., a North Carolina corporation which we refer to as “Paw CBD” and cbdMD Therapeutics LLC, a North Carolina limited liability company which we refer to as “Therapeutics”. In addition, “fiscal ~~2021”~~2022” refers to the year ended September 30, ~~2021,~~2022, “fiscal ~~2022”~~2023” refers to the fiscal year ending September 30, ~~2022, “first quarter of 2021” refers to the three months ended December 31, 2020,~~2023, “first quarter of 2022” refers to the three months ended December 31, 2021, ~~“second~~“first quarter of ~~2021”~~2023” refers to the three months ended ~~March~~December 31, ~~2021,~~2022, “second quarter of 2022” refers to the three months ended March 31, 2022, ~~“third~~and “second quarter of ~~2021”~~2023” refers to the three months ended ~~June 30, 2021,~~March 31, 2023.

On February 16, 2023, 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 ~~“third quarter~~outstanding shares of ~~2022” refers~~common stock by a ratio of between one-for-twenty to one-for-fifty, 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 February 16, 2024. On April 12, 2023, the board effected a reverse stock split at a ratio of one-for-forty-five, effective as of April 24, 2023 (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 ~~three months ended June 30, 2022.~~Reverse Stock Split.

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

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

Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward- looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements and readers should carefully review this report in its entirety, including the risks described in Part II, Item 1A. Risk Factors appearing later in this report, Part I, Item 1A. - Risk Factors appearing in our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2021~~2022 as filed with the Securities and Exchange Commission (the “SEC”) on December ~~17, 2021~~15, 2022 and as amended on December 20, 2022 and May 2, 2023 (the ~~“2021~~“2022 10-K”), as well as our other filings with the SEC. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events.

	*Three months*			*Three months*			*Nine Months*			*Nine Months*			*Three months*			*Three months*			*Six Months*			*Six Months*
	*Ended*			*Ended*			*Ended*			*Ended*			*Ended*			*Ended*			*Ended*			*Ended*
	*June 30,*			*June 30,*			*June 30,*			*June 30,*			*March 31,*			*March 31,*			*March 31,*			*March 31,*
	*2022*			*2021*			*2022*			*2021*			*2023*			*2022*			*2023*			*2022*

Gross Sales	$	8,868,093		$	11,352,585		$	28,673,718		$	36,941,917		$	6,584,666		$	9,948,858		$	12,825,191		$	19,805,625
Allowances		(275,200	)		(792,062	)		(1,130,117	)		(2,254,481	)		(344,646	)		(319,972	)		(499,954	)		(854,917	)
Total Net Sales		8,592,893			10,560,523			27,543,601			34,687,436			6,240,020			9,628,886			12,325,237			18,950,708
Cost of sales		2,660,185			3,370,952			10,176,085			10,444,353			2,224,512			3,186,564			4,741,964			7,514,874
Gross Profit		5,932,708			7,189,571			17,367,516			24,243,083			4,015,508			6,442,322			7,583,273			11,435,834

Operating expenses		8,282,931			13,865,191			31,690,915			36,846,371			5,416,151			11,452,700			13,030,097			23,407,984
Impairment of goodwill and other intangible assets		30,776,436			0			48,959,721			0			-			-			-			18,183,285
Loss from operations		(33,126,659	)		(6,675,620	)		(63,283,120	)		(12,603,288	)		(1,400,643	)		(5,010,378	)		(5,446,824	)		(30,155,435	)
Realized and Unrealized (loss) gain on marketable and other securities, including impairments		-			(18,623	)		(33,352	)		526,940
Gain (loss) on extinguishment of debt		0			1,466,113			0			1,466,113
Decrease (increase) of contingent liability		1,943,000			6,871,000			8,246,000			(10,500,000	)
Gain (loss) on sale of assets		88,769			0			88,769			0
Restructuring expense		(602,092	)		0			(602,092	)		0
Realized and Unrealized loss on marketable and other securities														-			-			-			(33,352	)
Decrease of contingent liability														48,000			353,000			109,000			6,303,000
Other income		64,390			0			137,377			0			17,787			2,249			49,543			72,987
Interest expense		(1,551	)		(2,582	)		(6,871	)		(23,573	)		(1,946	)		(2,086	)		(4,583	)		(5,320	)
Loss before provision for income taxes		(31,634,143	)		1,640,288			(55,453,289	)		(21,133,808	)		(1,336,802	)		(4,657,215	)		(5,292,864	)		(23,818,120	)

Benefit for income taxes		0			(103,000	)		0			765,000			-			-			-			-
Net (Loss) Income		(31,634,143	)		1,537,288			(55,453,289	)		(20,368,808	)

Net Loss														(1,336,802	)		(4,657,215	)		(5,292,864	)		(23,818,120	)
Preferred dividends		1,000,501			560,281			3,001,503			1,220,610			1,000,500			1,000,502			2,001,002			2,001,002

Net (Loss) Income attributable to cbdMD, Inc. common shareholders	$	(32,634,644	)	$	977,007		$	(58,454,792	)	$	(21,589,418	)
Net Loss attributable to cbdMD, Inc. common shareholders													$	(2,337,302	)	$	(5,657,717	)	$	(7,293,866	)	$	(25,819,122	)

Net (Loss) Income per share:
Net Loss per share:
Basic earnings per share		(0.55	)		0.02			(0.99	)		(0.40	)		(1.74	)		(4.32	)		(5.43	)		(19.67	)
Diluted earnings per share		(0.55	)		0.02			(0.99	)		(0.40	)		(1.74	)		(4.32	)		(5.43	)		(19.67	)
Weighted average number of shares Basic:		59,316,762			56,676,326			59,229,208			54,089,263			1,345,589			1,310,378			1,343,394			1,312,755
Weighted average number of shares Diluted:		59,316,762			61,431,643			59,229,208			54,089,263			1,345,589			1,310,378			1,343,394			1,312,755

	*Nine Months*			*Nine Months*			*Six Months*			*Six Months*
	*Ended*			*Ended*			*Ended*			*Ended*
	*June 30,*			*June 30,*			*March 31,*			*March 31,*
	*2022*			*2021*			*2023*			*2022*
Cash flows from operating activities:
Net Loss	$	(55,453,289	)	$	(20,368,808	)	$	(5,292,864	)	$	(23,818,120	)
Adjustments to reconcile net loss to net cash used by operating activities:
Stock based compensation		424,455			807,523			96,216			797,096
Restricted stock expense		504,650			1,137,583			100,249			837,267
Write off of prepaid assets due to termination of contractual obligation								884,892			-
Issuance of stock for services								1,459,193			-
Marketing stock amortization		717,174			660,232			-			339,520
Issuance of stock / warrants for service		0			98,605
Inventory and materials impairment		878,142			0			-			878,142
Intangibles Amortization		607,025			0			554,709			329,671
Depreciation		770,335			719,856			100,112			600,750
Impairment of goodwill and other intangible assets		48,959,721			0			-			18,183,285
Increase/(Decrease) in contingent liability		(8,246,000	)		10,500,000			(109,000	)		(6,303,000	)
Realized and unrealized loss of marketable and other securities		33,350			(526,939	)
Termination benefit		0			495,568
Extinguishment of Paycheck Protection Program Loan		0			(1,466,113	)
Realized and unrealized loss (gain) on of Marketable and other securities								-			33,352
Amortization of operating lease asset		863,768			922,057			556,646			589,291
Changes in operating assets and liabilities:
Accounts receivable		(116,861	)		(556,116	)		286,278			(932,230	)
Deposits		284,977			261,125			105,898			390,875
Inventory		(174,479	)		(135,058	)		135,176			(569,316	)
Prepaid inventory		2,939			(385,410	)		100,307			32,392
Prepaid expenses and other current assets		(1,088,579	)		(141,393	)		(1,544,308	)		354,752
Accounts payable and accrued expenses		(1,149,456	)		(603,216	)		(855,872	)		(1,129,614	)
Operating lease liability		(872,656	)		(846,914	)		(580,325	)		(595,457	)
Deferred revenue / customer deposits		3,723			4,478			203,341			10,723
Collection on discontinued operations accounts receivable		9,592			428,667			1,375			9,592
Deferred tax liability		0			(765,000	)
Cash used by operating activities		(13,041,469	)		(9,759,273	)		(3,797,977	)		(10,670,537	)
Cash flows from investing activities:
Proceeds from sale of other investment securities		0			540,000
Purchase of other investment securities		0			(750,000	)
Proceeds from sale of assets		(322,017	)		0
Purchase of property and equipment		(462,221	)		(311,572	)		(74,980	)		(373,795	)
Cash provided (used) by investing activities		(784,238	)		(521,572	)
Other Securities								1,000,000			-
Cash flows from investing activities								925,020			(373,795	)
Cash flows from financing activities:
Proceeds from issuance of preferred stock		0			15,798,115
Note payable		(31,044	)		(137,292	)		(127,725	)		(29,240	)
Preferred dividend distribution		(3,001,003	)		(1,220,610	)		(2,001,000	)		(2,001,002	)
Cash provided by financing activities		(3,032,047	)		14,440,213
Cash flows from financing activities								(2,128,725	)		(2,030,242	)
Net increase (decrease) in cash		(16,857,754	)		4,159,368			(5,001,682	)		(13,074,574	)
Cash and cash equivalents, beginning of period		26,411,424			14,824,644			6,720,234			26,411,424
Cash and cash equivalents, end of period	$	9,553,670		$	18,984,012		$	1,718,552		$	13,336,850

									*Additional*																	*Additional*
	*Common Stock*				*Preferred Stock*				*Paid in*			*Accumulated*						*Common Stock*				*Preferred Stock*				*Paid in*			*Accumulated*
	*Shares*		*Amount*		*Shares*		*Amount*		*Capital*			*Deficit*			*Total*			*Shares*		*Amount*		*Shares*		*Amount*		*Capital*			*Deficit*			*Total*
Balance, September 30, 2021		57,783,340	$	57,783		5,000,000		5,000	$	176,417,269		$	(73,337,865	)	$	103,142,187
Balance, September 30, 2022																			1,348,125	$	1,348		5,000,000		5,000	$	178,841,646		$	(147,423,563	)	$	31,424,431
Issuance of Common stock		494,630		495		0		0		404,505			0			405,000			1,038		1		-		-		(1	)		-			-
Issuance of options for share based compensation		-		0		-		0		505,466			0			505,466			-		-		-		-		79,446			-			79,446
Issuance of restricted stock for share based compensation		-		0		-		0		508,754			0			508,754			-		-		-		-		43,449			-			43,448
Preferred dividend		-		0		-		0		0			(1,000,502	)		(1,000,502	)		-		-		-		-		-			(1,000,502	)		(1,000,502	)
Net Loss		-		0		-		0		0			(19,160,904	)		(19,160,904	)		-		-		-		-		-			(3,956,062	)		(3,956,062	)
Balance, December 31, 2021		58,277,970	$	58,278		5,000,000		5,000	$	177,835,993		$	(93,499,271	)	$	84,400,000
Balance, December 31, 2022																			1,349,163	$	1,349		5,000,000		5,000	$	178,964,539		$	(152,380,127	)	$	26,590,761
Issuance of Common stock		1,074,240		1,074		0		0		659,926			0			661,000			8,417		8		-		-		(8	)		-			0
Issuance of options for share based compensation		-		0		-		0		291,630			0			291,630			-		-		-		-		16,770			-			16,770
Issuance of restricted stock for share based compensation		-		0		-		0		328,514			0			328,514			-		-		-		-		56,801			-			56,801
Issuance of Common stock - A360																			94,277		94		-		-		1,399,906			-			1,400,000
Issuance of Common stock - DCO																			2,223		2		-		-		29,998			-			30,000
Issuance of Common stock - Keystone																			2,616		3		-		-		29,190			-			29,193
True up of fractional shares resulting from reverse split																			-		1		-		-		-			-			-
Preferred dividend		-		0		-		0		0			(1,000,500	)		(1,000,500	)		-		-		-		-		-			(1,000,500	)		(1,000,500	)
Net Loss		-		0		-		0		0			(4,657,215	)		(4,657,216	)		-		-		-		-		-			(1,336,802	)		(1,336,802	)
Balance, March 31, 2022		59,352,210	$	59,352		5,000,000		5,000	$	179,116,064		$	(99,156,986	)	$	80,023,429
Issuance of Common stock		593,880		594		0		0		177,406			0			178,000
Issuance of options for share based compensation		-		0		-		0		(373,168	)		0			(373,168	)
Issuance of restricted stock for share based compensation		-		0		-		0		(593,617	)		0			(593,617	)
Preferred dividend		-		0		-		0		0			(1,000,501	)		(1,000,501	)
Net Loss		-		0		-		0		0			(31,634,143	)		(31,634,143	)
Balance, June 30, 2022		59,946,090	$	59,946		5,000,000		5,000	$	178,326,685		$	(131,791,631	)	$	46,600,000
Balance, March 31, 2023																			1,456,696	$	1,457		5,000,000		5,000	$	180,497,196		$	(154,717,429	)	$	25,786,224

									Additional																*Additional*
	Common Stock				Preferred Stock				Paid in		Accumulated						*Common Stock*				*Preferred Stock*				*Paid in*		*Accumulated*
	Shares		Amount		Shares		Amount		Capital		Deficit			Total			*Shares*		*Amount*		*Shares*		*Amount*		*Capital*		*Deficit*			*Total*
Balance, September 30, 2020		52,130,870	$	52,131		500,000	$	500	$	126,517,784	$	(47,388,367	)	$	79,182,048
Issuance of Preferred Stock		0		0		2,300,000		2,300		15,795,815		0			15,795,815
Balance, September 30, 2021																		1,284,075	$	1,285		5,000,000	$	500	$	176,478,267	$	(73,337,865	)	$	103,142,187
Issuance of Common Stock																		10,992		11		-		-		404,989		-			405,000
Issuance of options for share based compensation		-		0		-		0		219,875		0			219,875			-		-		-		-		505,466		-			505,466
Issuance of restricted stock for share based compensation		-		0		-		0		15,279		0			15,279			-		-		-		-		508,754		-			508,754
Preferred dividend		-		0		-		0		0		(100,050	)		(100,050	)		-		-		-		-		-		(1,000,502	)		(1,000,502	)
Net Loss		-		0		-		0		0		(9,395,621	)		(9,395,621	)		-		-		-		-		-		(19,160,904	)		(19,160,904	)
Balance, December 31, 2020		52,130,870	$	52,131		2,800,000	$	2,800	$	142,548,753	$	(56,884,038	)	$	85,719,646
Balance, December 31, 2021																		1,295,067	$	1,296		5,000,000	$	500	$	177,897,475	$	(93,499,271	)	$	84,400,000
Issuance of Common Stock		3,711,964		3,712		0		0		11,422,488		0			15,795,815			23,873		24		-		-		660,976		-			661,000
Exercise of options for share based compensation		147,953		148		0		0		627,500		0			627,648			-		-		-		-		291,630		-			291,630
Issuance of restricted stock for share based compensation		347,000		347		0		0		1,181,481		0			1,181,828			-		-		-		-		328,515		-			328,515
Preferred dividend		-		0		-		0		0		(560,279	)		(560,279	)		-		-		-		-		-		(1,000,500	)		(1,000,500	)
Net Loss		-		0		-		0		0		(12,510,474	)		(12,510,474	)		-		-		-		-		-		(4,657,215	)		(4,657,215	)
Balance, March 31, 2021		56,337,787	$	56,338		2,800,000	$	2,800	$	155,780,222	$	(69,954,791	)	$	85,884,569
Issuance of Common stock		608,528		609		0		0		1,471,991		0			1,472,600
Exercise of options for share based compensation		-		0		-		0		355,565		0			355,565
Issuance of restricted stock for share based compensation		27,500		28		0		0		590,264		0			590,291
Preferred dividend		-		0		-		0		0		(560,281	)		(560,281	)
Net Income		-		0		-		0		0		1,537,288			1,537,288
Balance, June 30, 2021		56,973,815	$	56,975		2,800,000		2,800	$	158,198,042	$	(68,977,784	)	$	89,280,032
Balance, March 31, 2022																		1,318,940	$	1,320		5,000,000	$	500	$	179,178,596	$	(99,156,986	)	$	80,023,429

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE three and ~~nine~~six months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~(unaudited)

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.

On December 20, 2018 (the “Closing Date”), the Company, and its newly organized wholly owned subsidiaries AcqCo, LLC and cbdMD LLC (“CBDI”), completed a two-step merger (the “Mergers”) with Cure Based Development, LLC, a Nevada limited liability company (“Cure Based Development”). Upon completion of the Mergers, CBDI survived and operates the prior business of Cure Based Development. As consideration for the Mergers in April of 2019, the Company issued ~~15,250,000~~338,889 shares of our common stock to the members of Cure Based Development, of which unrestricted voting rights to ~~8,750,000~~194,445 of the shares vest over a five-year period ~~and 4,338,302~~of which 48,612 shares remain subject to a voting proxy agreement as of ~~June~~December 31, 2022, ~~30,2022,~~as well as to issue another ~~15,250,000~~338,889 shares of our common stock (the “Earnout Shares”) in the future upon certain earnout goals (the “Earnout Rights”) being achieved within five years from the closing of the Mergers.

The Company owns and operates the nationally recognized CBD (cannabidiol) brands cbdMD, Paw CBD and cbdMD Botanicals. The Company sources cannabinoids, including CBD, which are extracted from non-GMO hemp grown on farms in the United States. CBD is a natural substance produced from the hemp plant. The products manufactured by and for the Company comply with the 2018 Farm Bill - our full spectrum products contain trace amounts of ~~THC~~tetrahydrocannabinol ("THC") under the 0.3% by dry weight limit in the 2018 Farm Act while our broad spectrum products are non-psychoactive as they do not contain detectable levels of ~~tetrahydrocannabinol (THC).~~THC.

In the third quarter of fiscal 2019 cbdMD launched its new CBD pet brand, Paw CBD. Following the initial positive response to the brand from retailers and consumers, cbdMD, Inc. organized Paw CBD, Inc. (“Paw CBD”) as a separate wholly owned subsidiary on October 22, 2019, to take advantage of its early mover status in the CBD animal health industry. On March 15, 2021 cbdMD formed a new wholly owned subsidiary, cbdMD Therapeutics, LLC (“Therapeutics”) for the purposes of isolating and quantifying the Company’s ongoing investments in science related to its existing and future products, including research and development activities for therapeutic applications.

In July 2021, the Company acquired the assets of Twenty Two Capital, LLC (“Twenty Two”) d/b/a directcbdonline.com (“DCO”). This business operates a CBD marketplace through directcbdonline.com. ~~In addition to the revenue contribution from the business the Company believes this acquisition will provide additional insight on consumer data and industry trends.~~

The accompanying unaudited interim condensed consolidated financial statements of cbdMD have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and the rules of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the ~~2021~~2022 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of consolidated financial position and the consolidated results of operations for the interim periods presented have been reflected herein. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited consolidated financial statements for fiscal ~~2021~~2022 as reported in the ~~2021~~2022 10-K have been omitted.

On April 12, 2023, the board effected a reverse stock split at a ratio of one-for-forty-five, effective as of April 24, 2023. 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. See "Subsequent Events" below.

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries CBDI, Paw CBD and Therapeutics. All material intercompany transactions and balances have been eliminated in consolidation.

The Company’s condensed consolidated financial statements have been prepared in accordance with US GAAP and requires management to make estimates and assumptions that affect the 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 condensed consolidated financial statements include, but are not limited to, allowances for doubtful accounts, inventory valuation reserves, expected sales returns and allowances, certain assumptions related to the valuation of investments other securities, acquired intangibles and long-lived assets and the recoverability of intangible and long-lived assets and income taxes, including deferred tax valuation allowances and reserves for estimated tax liabilities, contingent liability and, hence consideration for the Mergers is a material estimate. Actual results could differ from these estimates.

~~While the Company has been relatively successful in navigating the impact of COVID-~~~~19,~~ it had previously been affected by temporary manufacturing closures, changes in product distribution and employment and compensation adjustments. There are also ongoing related risks to the Company’s business depending on any resurgence of the pandemic. The Company continues to monitor macroeconomic conditions to remain flexible and to optimize and evolve its business as appropriate.

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 are stated at cost less an allowance for doubtful accounts, 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 doubtful accounts is based on an evaluation of the receivables, past experience, current economic conditions, and other risks inherent in the receivables portfolio. As of ~~June 30, 2022~~March 31, 2023 and September 30, ~~2021~~2022, we had an allowance for doubtful accounts of ~~$18,156~~$19,292 and ~~$3,633,~~$36,980, respectively.

The Company primarily sells its products through the internet and has an arrangement to process customer payments with third-party payment processors and negotiate the fee based on the market. The arrangement with the payment processors requires that the Company pay a fee between 2.6% and 5.0% of the transaction amounts processed. Pursuant to this agreement, 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 ~~June~~March 31, 2023 and September 30, 2022,, the receivable from payment processors included approximately ~~$298,659~~$338,502 and $273,451, respectively, for the waiting period amount and is recorded as accounts receivable in the accompanying condensed consolidated balance sheet.

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

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 the remaining economic life of the asset, whichever is shorter. 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.

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

Goodwill represents the excess of cost of an acquired business over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed in a business combination. Identifiable intangible assets acquired in business combinations are recorded based on their fair values at the date of acquisition. Goodwill is ~~not~~ ~~subject to amortization but must be evaluated for impairment annually. The Company tests for goodwill impairment annually or whenever events occur or circumstances change that would more likely than~~ ~~not~~ ~~reduce the fair value of a reporting unit below its carrying amount.~~

In performing a goodwill test, the Company performs a qualitative evaluation and if necessary, a quantitative evaluation. Factors considered in the qualitative test include specific operating results as well as new events and circumstances. For the quantitative test, the Company assesses goodwill for impairment by comparing the carrying value of the business to the respective fair value. The Company determines the fair value of the business using a combination of income- based and market-based approaches and incorporates assumptions it believes market participants would utilize. The income-based approach utilizes discounted cash flows while the market-based approach utilizes market multiples. These approaches are dependent upon internally developed forecasts that are based upon annual budgets and longer-range strategic plans. The Company uses discount rates that are commensurate with the risks and uncertainty inherent in the respective acquired business and in the internally developed forecasts. The Company has analyzed a variety of factors on its business to determine if a circumstance could trigger an impairment loss. See Note 5 ~~for further information on the impairment testing procedures performed.~~

The Company’s intangible assets consist of definite-lived trademarks and other intellectual ~~property, all of which are accounted for in accordance with Accounting Standards Codification (ASC) Topic~~ ~~350,~~~~Intangibles~~ – ~~Goodwill and Other~~.property. Prior to December 31, 2021, the Company employed the non-amortization approach to account for purchased intangible assets having indefinite lives. Under the non-amortization approach, intangible assets having indefinite lives are not amortized into the results of operations, but instead are reviewed annually or more frequently if events or changes in circumstances indicate that the assets might be impaired, to assess whether their fair value exceeds their carrying value. ~~The Company performed an annual impairment analysis as of~~ ~~August 1~~ ~~of each fiscal year on the indefinite-lived intangible assets following the steps laid out in ASC~~ ~~350~~-30-35-~~18.~~ The annual impairment analysis included a qualitative assessment to determine if it is necessary to perform the quantitative impairment test. In performing a qualitative assessment, the Company reviewed events and circumstances that could affect the significant inputs used to determine if the fair value is less than the carrying value of the intangible assets. If a quantitative analysis is necessary, the Company would analyze various aspects including revenues from the business, associated with the intangible assets. In addition, intangible assets were tested on an interim basis if an event or circumstance indicates that it is more likely than ~~not~~ that an impairment loss has been incurred. The Company analyzed a variety of factors on its business to determine if a circumstance could trigger an impairment loss, and, at this time and based on the information presently known, has determined that is it more likely than ~~not~~ ~~that an impairment loss has occurred. See Note~~ 5 ~~more further information on the impairment testing procedures performed at~~ ~~December 31, 2021~~ ~~and the Company’s decision to change from indefinite to definite lived status for its trademarks.~~ The Company now accounts for its trademarks in accordance with Accounting Standards Codification (ASC) Topic 360, Property, Plant and Equipment. The Company began amortizing its trademarks over 20 years beginning January 1, 2022 and will perform impairment tests as prescribed by ASC 360, which states that impairment testing should be completed whenever events or changes in circumstances indicate that the asset’s carrying value may not be recoverable. If there are indications that the asset’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. ~~The Company notes that there are~~ no ~~indications of impairment related to its trademarks as of~~ ~~June 30, 2022~~.

A significant component of the purchase price consideration for the Company’s acquisition of Cure Based Development includes a fixed number of future shares to be issued as well as a variable number of future shares to be issued based upon the post-acquisition entity reaching certain specified future revenue targets, as further described in Note 6. The Company made a determination of the fair value of the contingent liabilities as part of the valuation of the assets acquired and liabilities assumed in the business combination.

On ~~April 27, 2020,~~ we received a loan in the principal amount of $1,456,100 (the “SBA Loan”) in consideration of a Promissory Note, under the Paycheck Protection Program (“PPP”), which was established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) administered by the U.S. Small Business Administration (the “SBA”). The Company used the SBA Loan for qualifying expenses and on ~~May 17, 2021~~ ~~it received notice from the SBA that the loan had been forgiven. The Company subsequently booked a $1,466,113 gain for unpaid principal and accrued interest.~~

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.

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 to the customer. The Company has reviewed its various revenue streams for its other contracts under the five-step approach. At ~~June 30, 2022~~March 31, 2023, the Company has no unfulfilled performance obligations.

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.

The Company records revenue from the sale of its products when its customer obtains control, which is upon shipping (and is typically FOB shipping) 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, a loyalty program as well as a subscription program.

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:

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

~~The~~Other than account receivable, Company has no material contract assets nor contract liabilities at ~~June 30, 2022~~March 31, 2023.

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

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

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

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 $8,644,186~~a $791,000 uninsured balance at ~~June 30, 2022~~March 31, 2023 and a ~~$23,508,953~~$5.8 million uninsured balance at September 30, ~~2021~~2022.

Concentration of credit risk with respect to receivables is principally limited to trade receivables with corporate customers that meet specific credit policies. Management considers these customer receivables to represent normal business risk. The Company did not have any customers that represented a significant amount of our sales for the three and ~~nine~~six months ended ~~June 30, 2022~~March 31, 2023.

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.

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 February 16, 2023, 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-twenty to one-for-fifty, 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 February 16, 2024. On April 12, 2023, the board effected a reverse stock split at a ratio of one-for-forty-five, effective as of April 24, 2023 (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.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company experienced a loss of ~~$59,939,934~~$1,336,802 and $5,292,864 for the ~~nine~~three and six months ended ~~June 30, 2022.~~March ~~Excluding~~ ~~one~~31, ~~time non-cash goodwill and intangibles impairment charges of $48,959,721, the Company's loss was $10,980,213,~~2023, resulting in working capital of ~~$14,133,054.~~$5,466,788.

~~While the Company is taking strong action, believes in the viability of its strategy and path to profitability, and in its~~Management has concluded that substantial doubt exists about our ability to ~~raise additional funds, there can be~~continue as a going concern for the next notwelve ~~assurances to that effect. The Company’s working~~months from the date hereof. Our current capital ~~position~~resources, including our equity line of credit with Keystone Capital Partners, LLC may not be sufficient to support ~~the Company’s daily~~our planned operations for the next twelve months ~~subsequent~~from the date hereof. We believe that upon receipt of approximately $2.5 million in net proceeds pursuant to the ~~issuance~~underwritten public offering completed on May 3, 2023 (see "Subsequent Event" below), after deducting the underwriting fees and estimated offering expenses payable by us, that our cash and cash equivalents on hand should be sufficient to fund operations through the end of ~~these quarterly financial statements. The Company’s~~the fiscal year if not longer. However, depending upon our operating results and cash burn over the next four months, we may be required to raise additional capital to fund operations or scale back our operations or dividends. We expect to continue to incur losses for the foreseeable future as we continue our efforts to increase sales, develop additional products, seek acquisitions and mergers, continue research and development, reduce operating expenses and attempt to achieve profitability. Furthermore, in the event we identify an acquisition candidate, such acquisition may require immediate capital to close such acquisition. These factors, individually and collectively, raise substantial doubt about our ability to continue as a going concern, ~~is dependent upon its~~and therefore, could materially limit our ability to ~~improve profitability and the ability to acquire~~raise additional ~~funding. These and other factors raise potential concern about the Company’s ability to continue as a going concern within~~ ~~twelve~~ ~~months after the date that the quarterly financial statements are issued. These financial statements do~~ ~~not~~ ~~include any adjustments to reflect the possible future effects on the recoverability and classification~~funds through an issuance of ~~assets~~debt or ~~the amounts and classification of liabilities that~~ ~~may~~ ~~result in the Company~~ ~~not~~ ~~being able to continue as a going concern~~

In ~~December 2019,~~ None.~~the FASB issued ASU~~ ~~2019~~-~~12,~~ ~~Income Taxes, Simplifying the Accounting for Income Taxes (Topic~~ ~~740~~~~). The ASU eliminates certain exceptions to the guidance in Accounting Standards Codification (ASC or Codification)~~ ~~740~~ related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The guidance also clarifies that single-member limited liability companies and similar disregarded entities that are ~~not~~ ~~subject to income tax are~~ ~~not~~ ~~required to recognize an allocation of consolidated income tax expense in their separate financial statements, but they could elect to do so. ASU~~ ~~2019~~-12 ~~is effective for fiscal years beginning after~~ ~~December 15, 2020,~~ ~~including interim periods within those fiscal years. The adoption of this standard had~~ no ~~material impact on the Company's consolidated financial statements and disclosures.~~

The Company has, from time to time, entered into contracts where a portion of the consideration provided by the customer in exchange for the Company’s services was common stock, options or warrants (an equity position). In these situations, upon invoicing the customer for the stock or other instruments, the Company recorded the receivable as accounts receivable other, and used the value of the stock or other instrument upon invoicing to determine the value. If there is insufficient data to support the valuation of the security directly, the Company will value it, and the underlying revenue, on the estimated fair value of the services provided. In determining fair value of marketable securities and investment other securities, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and consider counterparty credit risk in our assessment of fair value. The Company determines the fair value of marketable securities and investment other securities based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

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

For the ~~three~~six months ended ~~June 30, 2022~~March 31, 2023 and ~~2021~~2022, the Company recorded $0 and ~~$2,852, respectively, and for the~~ ~~nine~~ ~~months ended~~ ~~June 30, 2022~~ ~~and~~ ~~2021~~ ~~the Company recorded~~ $(33,350) ~~and $545,562~~ respectively, of realized and unrealized gain (loss) on marketable and other securities, including impairments. ~~The realized loss in the~~ ~~first~~ ~~quarter of fiscal~~ ~~2022~~ ~~was a result of marking the Company’s holdings of 1,042,193 shares of Isodiol International, Inc. (“Isodiol”) down to~~ ~~zero~~ ~~after Isodiol was delisted from the TSX during~~ ~~December 2021.~~ ~~The gain in the prior year was driven by the sale of our investment in Formula Four Beverages, Inc. that was previously written to~~ ~~zero~~ ~~based on prior information related to the company’s performance and COVID-~~19 ~~impacts.~~

In September 2020, the Company purchased a membership interest in Adara Sponsor LLC for $250,000, which along with proceeds from other investors was utilized as an investment in Adara Acquisition Corporation (“Adara”), a newly organized blank check company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination (a “SPAC”). On January 13, 2021, the Company executed second tranche subscriptions agreements and funded the remaining ~~$750,000 commitment into Adara Sponsor, LLC. Certain affiliates of the Company have also invested in Adara Sponsor, LLC. On~~ ~~February 9, 2021,~~ ~~the public shares of Adara began trading on the NYSE. Commencing~~ ~~March 24, 2021,~~ holders of the 11,500,000 units sold in the Adara’s initial public offering could elect to separately trade shares of the Adara Class A common stock and warrants included in the units. The shares of Class A common stock and warrants that were separated now trade on NYSE American LLC under the symbols “ADRA” and “ADRA WS”, respectively. On ~~June 30, 2022~~~~, the Company’s implied, indirect ownership in Adara represented 4.4% (633,988 shares) and 10.1% (1 million) of the warrants. As of~~ ~~June 30, 2022~~~~, ADRA stock closed at $9.89 while ADRA WS closed at $0.18.~~$750,000. On June 22, 2022, the Company executed a transfer agreement with affiliates of Adara Sponsor, LLC whereby the Company's interest would be transferred to the affiliates of Adara Sponsor, LLC upon Adara's acquisition of Allliance Entertainment, Inc. (the "Target") in consideration of the Company's original purchase price. As a result of the SEC litigation against our former CEO, the Target provided a demand to Adara that it required cbdMD and Mr. Sumichrast to dispose of our interests in Adara Sponsor, LLC as a condition of proceeding with any business combination. OnIn ~~June 23,~~December 2022, Adara ~~announced it had entered into business combination agreements~~filed its definitive proxy to approve the acquisition and query shareholders redemption. Effective February 10, 2023, the Company completed the Membership Interest Transfer Agreement with Blystone & Donaldson, LLC, and Mr. Thomas Finke (collectively, the ~~Target subject~~“Transferees”) dated June 22, 2022. Pursuant to ~~a number~~the terms of ~~conditions to closing, including shareholder SEC approval. There are~~ no ~~assurances~~ the ~~business combination will be completed. If~~agreement, the ~~business combination is~~ ~~not~~ ~~completed, Adara will continue to pursue other targets for a potential business combination.~~

Adara’s focus of targets to pursue for the business combination are expected to be in the consumer products industry including business in the health and wellness, ecommerce, discretionary spending, information technology sectors and related channels of distribution. While Adara is currently a listed company, the Company’s investment isCompany sold its entire ownership interest in Adara Sponsor, LLC, ~~and consequently~~to the ~~Company has classified this investment as Level~~ 3Transferees for ~~fair value measurement purposes as there are~~ no ~~observable inputs.~~the total purchase price of $1,000,000 which constitutes the Company’s original purchase price of the interest.

On April 7, 2022, CBD Industries, LLC entered into an asset sale agreement to sell substantially all its manufacturing assets to a subsidiary of Steady State, LLC ("Steady State"). The equipment sale is initially valued at approximately $1.8 million for accounting purposes, the sale price consisting of products to be provided to the Company under the manufacturing and supply agreement and $1.4 million of which the Company invested into Steady State in the form of an equity investment consistent with the terms of Steady State's recently completed series C financing. The Company has classified this investment as Level 3 for fair value measurement purposes as there are no observable inputs and has included in ~~noncurrent~~non-current assets on the accompanying condensed consolidated balance sheets as the ~~company intends to hold~~Company holds this investment for longer than a year.

In valuing both investments, the Company used the value paid, which was the price offered to all third-party investors. ~~The Company also assessed the common stock of Adara and determined there was~~ ~~not~~ ~~an impairment for the period ended~~ ~~June 30, 2022~~~~.The table below summarized the assets valued at fair value as of~~ ~~June 30, 2022~~:

Inventory at ~~June 30, 2022~~March 31, 2023 and September 30, ~~2021~~2022 consists of the following:

Abnormal amounts of idle facility expense, freight, handling costs, scrap and wasted material (spoilage) are expensed in the period they are in incurred and no material expenses related to these items occurred in the three months ended ~~June 30, 2022~~March 31, 2023.

Major classes of property and equipment at ~~June 30, 2022~~March 31, 2023 and September 30, ~~2021~~2022 consist of the following:

Depreciation expense related to property and equipment was ~~$158,555~~$102,390 and ~~$246,532~~$508,299 for the three months ended ~~June 30, 2022~~March 31, 2023 and ~~2021~~~~, respectively and was $770,335 and $719,856 for the~~ ~~nine~~ ~~months ended~~ ~~June 30,~~ 2022~~and~~ ~~2021~~, respectively. During the quarter, the Company sold substantially all the assets of its manufacturing facility and as a result the gross investment and accumulated depreciation was removed from the balance sheet, reducing net PP&E.

The Company had goodwill at ~~December~~March 31, ~~2021~~2022 of ~~$56,670,970.~~$42,772,685. The Company ~~performs a Step~~impaired goodwill in subsequent reporting periods of fiscal 02022 ~~goodwill impairment analysis at least annually following the steps laid out in ASC~~ ~~350~~-20-35-~~3C.~~ ~~Our annual impairment analysis includes a qualitative assessment to determine if it is necessary to perform the quantitative impairment test. In performing a qualitative assessment, we review events~~ and circumstances that could affect the significant inputs used to determine if the fair value is less than the carrying value of goodwill. From time to time the Company also evaluates goodwill impairment on a quarterly basis if any triggering events have occurred that would require such analysis. For the ~~three~~ ~~months ended~~ ~~December 31, 2021,~~ ~~the Company performed a Step~~ 0 goodwill impairment analysis on consolidated goodwill and determined that a triggering event had occurred to necessitate performing the quantitative impairment test. After performing the quantitative impairment test in accordance with ASC ~~350~~-20-35-~~3C,~~ ~~the Company determined that~~ goodwill was fully impaired by $13,898,285. The Company has recorded this impairment to reduce total goodwill on its condensed consolidated balance sheets and has recorded the corresponding impairment expense on its condensed consolidated statement of operations as of ~~December 31, 2021.~~ ~~The Company performed the same analysis as of~~ ~~June 30, 2022~~ and determined that goodwill was impaired by $30,776,436. The Company has recorded this impairment to reduce total goodwill on its condensed consolidated balance sheets and has recorded the corresponding impairment expense on its condensed consolidated statement of operations as of ~~June~~September 30, 2022.

On December 20, 2018, the Company completed the Mergers with Cure Based Development and acquired certain assets, including the trademark “cbdMD” and its variants and certain other intellectual property. The trademark is the cornerstone of this subsidiary and is key as the Company creates and distributes products and continue to build this brand. The Company believed the trademark did not have limits on the time it would contribute to the generation of cash flows and therefore identified these as indefinite lived intangible assets.

In ~~September 2019,~~ the Company purchased the rights to the trademark name HempMD for $50,000. This trademark will be used in the marketing and branding of certain products to be released under this brand name. At the time of acquisition, the Company believes the trademark does ~~not~~ ~~have limits on the time it will contribute to the generation of cash flows and therefore has identified these as indefinite-lived intangible assets.~~

In July 2021, the Company completed the acquisition of DCO and acquired certain assets, including the trade name, domains and certain other intellectual property. The tradename will be used in marketing and branding of the website. The Company believes the trade name has a 10 year life. In addition to the trade name, DCO has a technology platform used to market to its customer and the Company believes it has a 4 year life.

As of December 31, 2021, the Company ~~has~~ re-assessed the “cbdMD” and “HempMD” trademarks and ~~have~~ determined that the trademarks should be classified as definite lived intangible assets with useful lives of 20 years versus indefinite lived intangible assets. The Company used a variety of factors in determining the reclassifications and have made the reclassifications following guidance prescribed by ASC 350,-30-35-~~17,~~ which states that when a reporting entity subsequently determines that in indefinite-lived intangible asset has a finite useful life, the reporting entity should test the asset for impairment as an indefinite lived asset prior to commencing amortization. As of December 31, 2021, the Company ~~has~~ prepared a tradename impairment analysis in accordance with ASC 350 and ~~has~~ determined that the “cbdMD” trademark was impaired by $4,285,000. The Company has recorded this impairment charge as a reduction in the carrying value of the intangible assets on its condensed consolidated balance sheets with the corresponding impairment expense recorded on its condensed consolidated statements of operations. The Company began amortizing the trademarks over their useful lives of 20 years as of January 2022.

Intangible assets as of ~~June 30, 2022~~March 31, 2023 and September 30, ~~2021~~2022 consisted of the following:

Amortization expense related to definite lived intangible assets was $277,354 and $0$277,354 for the three months ended ~~June 30, 2022~~March 31, 2023 and ~~2021~~~~, respectively and was $607,025 and~~ ~~$0for the~~ ~~nine~~ ~~months ended~~ ~~June 30,~~ 2022~~and~~ ~~2021~~, respectively. No triggering events were identified at March 31, 2023 that suggested a quantitative impairment analysis under ASC 360 was necessary.

As consideration for the Mergers, described in Note 1, the Company had a contractual obligation to issue ~~15,250,000~~338,889 shares of its common stock, after approval by its shareholders, to the members of Cure Based Development, issued in two tranches ~~6,500,000~~144,445 shares and ~~8,750,000~~194,945 shares, both of which are subject to leak out provisions, and the unrestricted voting rights to ~~8,750,000~~194,445 tranche of shares ~~will also~~ vest over a five year period and are subject to a voting proxy agreement. The Merger Agreement also provides that an additional ~~15,250,000~~338,889 Earnout Shares can be issued upon the satisfaction of certain aggregate net revenue criteria by cbdMD within 60 months following the Closing Date.

The contractual obligations and earn out provision are accounted for as a contingent liability and fair value is determined using Level 3 inputs, as estimating the fair value of these contingent liabilities require the use of significant and subjective inputs that may and are likely to change over the duration of the liabilities with related changes in internal and external market factors.

The initial two tranches totaling ~~15,250,000~~338,889 shares were valued using a market approach method and included the use of the following inputs: share price upon contractual obligation, discount for lack of marketability to address leak out restrictions, and probability of shareholder disapproval. In addition, the ~~8,750,000~~194,445 shares in the second tranche also included an input for a discount for lack of voting rights during the vest periods.

The Merger Agreement also provides that an additional ~~15,250,000~~338,889 Earnout Shares would be issued as part of the consideration for the Mergers, upon the satisfaction of certain aggregate net revenue criteria by cbdMD within 60 months following the Closing Date as follows, as measured at four intervals (each a “marking period”): the completion of 12, 24, 42, and 59 calendar months from the Closing Date, and based upon the ratios set forth below:

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

~~The issuance of the initial 15,250,000 shares and the 15,250,000 Earnout Shares were approved by the Company’s shareholders in~~ ~~April 2019.~~ ~~The initial shares were issued upon shareholder approval on~~ ~~April 19, 2019~~ and had a carrying value of $ 53,215,163. Additionally, as the 15,250,000 initial shares were issued, the value of the shares in the amount of $53,215,163 was reclassified from the contingent liability to additional paid in capital on the consolidated balance sheet.The ~~third~~ ~~quarter of the~~ ~~third~~ ~~marketing period ended on~~ ~~September 30, 2021~~ ~~and based on the measurement criteria an additional 466,713 Earnout Shares were earned and issued in~~ ~~December 2021.~~ These shares decreased in value by $366,841 during the quarter through the time of issuance and had a value of $405,000, which was reclassified from the contingent liability to additional paid in capital on the consolidated balance sheet. The ~~fourth~~ ~~quarter of the~~ ~~third~~ ~~marketing period ended on~~ ~~December 31, 2021~~ ~~and based on the measurement criteria an additional 444,243 Earnout Shares were earned and issued in~~ ~~March 2022.~~ These shares increased in value by $41,914 during the quarter through the time of issuance and had a value of $325,000, which was reclassified from the contingent liability to additional paid in capital on the consolidated balance sheet. The ~~fifth~~ ~~quarter of the~~ ~~third~~ ~~marketing period ended on~~ ~~March 31, 2022~~ ~~and based on the measurement criteria an additional 458,877 Earnout Shares were earned and issued in~~ ~~May 2022.~~ These shares decreased in value by $90,792during the quarter through the time of issuance and had a value of $178,000, which was reclassified from the contingent liability to additional paid in capital on the consolidated balance sheet.

The third marking period was originally an 18 month period commencing on January 1, 2021 and ending on June 30, 2022 (the “Third Marking Period End Date”), after which time the determination of the issuance of any remaining Earnout Shares would be made pursuant to the terms of the Merger Agreement. On March 31, 2021 the Company entered into Addendum No. 1 to the Merger Agreement (“Addendum No. 1”) with the holders of the remaining Earnout Rights which amended the measurement periods within the third marking period to change the determination of the aggregate net revenues within the third marking period to a quarterly basis for each of the six fiscal quarters within the third marking period, beginning with the quarter ended March 31, 2021, instead of following Third Marking Period End Date. This change in the measurement date, however, has no effect on the number of remaining Earnout Shares issuable under the Earnout Rights and no effect on the earnout targets; Addendum No. 1 simply changes the physical issuance date(s) of the remaining Earnout Shares, if in fact, such shares are earned pursuant to the terms of the Merger Agreement. Addendum No. 1 did not change any of the terms of the fourth marking period (as that term is defined in the Merger Agreement). This change did not impact the fair value of the contingent liability. The value of the contingent liability was ~~$702,000~~$167,000 and ~~$9,440,000~~$276,000 at ~~June 30, 2022~~March 31, 2023 and September 30, ~~2021~~2022, respectively.

The fourth marketing period began on July 1, 2022 and ends in November 2023. At ~~June 30, 2022,~~March 31, 2023, up to ~~4,338,302~~87,307 remaining Earnout Shares are subject to issuance by the Company. Based on the remaining share ratios, the Company would have to generate over $162 million in revenue during the fourth marking period to issue the full balance of the shares.

As part of the Twenty Two acquisition in July 2021, the Company has a contractual obligation to issue up to an additional ~~200,000~~4,445 shares of its common stock as additional consideration, dependent upon the acquisition entity meeting future revenue targets. Under US GAAP the Company is required to record a non-cash contingent liability associated with the Twenty Two Earnout Shares and at the date of the acquisition, recorded a total contingent liability of $488,561. Under US GAAP the Company is obligated to reassess the obligations associated with the Twenty Two Earnout Shares on a quarterly basis and, in the event its estimate of the fair value of the contingent consideration changes, the Company will record increases or decreases in the fair value as an adjustment to earnings. In particular, changes in the market price of the Company’s common stock, which is one of the inputs used in determining the amount of the non-cash contingent liability, will result in increases or decreases in this liability and positively or negatively impact the Company’s net loss or profit for the period. At September 30, 2021,, the Company recorded a decrease in value of the contingent liability of $73,561 related to a decrease in the market price of our common stock, which adjusted the total contingent liability related to the Twenty Two Earnout Shares to $416,000. At December 31, 2021, the Company recorded a decrease in value of the contingent liability of $255,000 related to a decrease in the market price of our common stock, which adjusted the total contingent liability related to the Twenty Two Earnout Shares to $161,000. At ~~March~~June 30, 2022, the Company recorded a decrease in value of the contingent liability of ~~$148,000~~$13,000 related to a decrease in the market price of our common stock, which adjusted the total contingent liability related to the Twenty Two Earnout Shares to ~~$13,000. At~~$0. As of ~~June 30,~~September 2022, the ~~Company recorded a decrease in value of the contingent liability of $13,000~~ ~~related~~measurement period ended and there is no further obligation with respect to ~~a decrease in the market price of our common stock, which adjusted the total contingent liability related to the Twenty Two Earnout Shares to $0.~~this earnout.

In ~~November~~ of ~~2021~~ ~~the Company entered into a contractual obligation to issue up to 120,000 RSUs to an employee. During the~~ ~~twelve~~ ~~month period ending~~ December ~~31, 2022,~~ the employee shall receive RSUs that are dependent upon a minimum $3 million and up to $8 million of net sales generated by the employee through accounts established and opened by the employee. The shares will be subject to meeting the minimum $3 million of net sales as well as to calculations including volume-weighted average stock price minimum and maximum. As of ~~December 31, 2021~~ ~~the estimated revenue target to be met by the employee through~~ ~~December 31, 2022~~ ~~was below the minimum threshold for earning RSUs, and therefore, the Company recorded a~~ ~~zero~~ ~~liability related to this contingent liability at~~ ~~December 31, 2021.~~ ~~During the~~ ~~three~~ ~~months ended~~ ~~March31,~~~~2022,~~~~the employee resigned their position with the Company. As such, this contractual obligation was terminated.~~

In ~~April~~ 2022, the Company entered into a contractual obligation to issue up to ~~100,000~~556 options and 556 RSUs to an employee. The shares are subject to meeting a minimum direct to consumer revenue of ~~$12.0~~$45 million for ~~the~~any four consecutive quarters before December ~~2022~~31, 2024. ~~calendar quarter. The~~Based on the present revenue run rate, the Company is ~~not~~ ~~expecting to meet this revenue metric for the~~ ~~December 2022~~ ~~calendar quarter and~~ has ~~therefore~~ valued ~~this liability~~these obligations at $0 ~~as of~~for ~~June 30, 2022.~~ March 31, 2023.

As ~~noted~~mentioned in Note 2,6, a counterparty in the ~~Company, and~~earnout arrangement is a ~~number of its affiliates have invested into Adara through Adara Sponsor.~~related party.

Preferred Stock – The Company is authorized to issue 50,000,000 shares of preferred stock, par value $0.001 per share. In October 2019, the Company designated 5,000,000 of these shares as 8.0% Series A Cumulative Convertible Preferred Stock. Our 8.0% Series A Cumulative Convertible Preferred Stock ranks senior to our common stock for liquidation or dividend provisions and holders are entitled to receive cumulative cash dividends at an annual rate of 8.0% payable monthly in arrears for the prior month. The Company reviewed ASC 480 – Distinguishing Liabilities from Equity in order to determine the appropriate accounting treatment for the preferred stock and determined that the preferred stock should be treated as equity. There were 5,000,000 shares of 8.0% Series A Cumulative Convertible Preferred Stock issued and outstanding at ~~June 30, 2022~~March 31, 2023 and September 30, ~~2021~~2022.

The total amount of preferred dividends declared and paid were ~~$1,000,501~~$1,000,500 and ~~$560,281,~~$1,000,502, respectively, for the three months ended ~~June 30, 2022~~March 31, 2023 and ~~2021~~2022. ~~The total amount of dividends declared and paid were~~ ~~$3,001,503 and $1,220,610 for the~~ ~~nine~~ ~~months ended~~ ~~June 30, 2022~~ ~~and~~ ~~June 30, 2021~~~~, respectively.~~

Common Stock – The Company is authorized to issue 150,000,000 shares of common stock, par value $0.001 per share. There were ~~59,946,090~~1,456,693 and ~~57,783,340~~1,348,125 shares of common stock issued and outstanding at ~~June 30, 2022~~March 31, 2023 and September 30, ~~2021~~2022, respectively.

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

On ~~December 8, 2020,~~ the Company completed a follow-on firm commitment underwritten public offering of 2,300,000 shares of its 8.0% Series A Cumulative Convertible Preferred Stock for aggregate gross proceeds of $17.25 million. The Company received approximately $15.8 million in net proceeds after deducting underwriting discounts and commissions. The Company also issued to the representative of the underwriters warrants to purchase in aggregate 150,502 shares of common stock with an exercise price of $3.74. The warrants were valued at $254,950 and expire on ~~December 8, 2025.~~2022.

In ~~May~~March 2, 2023, we entered into a Purchase Agreement (the "Purchase Agreement") with Keystone Capital Partners, LLC (“Keystone”), pursuant to which Keystone has committed to purchase up to 281,934 of shares of our common stock. Upon the execution of the Purchase Agreement, we issued 2,616 shares of common stock as "Commitment Shares" to Keystone as consideration for its commitment to purchase shares of our common stock under the Purchase Agreement. Additional Commitment Shares (6,104) will be issued over 180 days from March 2, 2023. The 281,934 shares of our common stock were registered for resale and may be issued under the Purchase Agreement or sold by us to Keystone at our discretion from time to time over a 12-month period commencing April 1, 2023, subject tp a 75 day blackout period commencing April 30,2023. The purchase price for the shares that we may sell to Keystone under the Purchase Agreement will fluctuate based on the price of our common stock. Depending on market liquidity at the time, sales of such shares may cause the trading price of our common stock to fall. See "Subsequent Events" below.

On February 1, 2023, the Company entered into an Agreement for Advertising Placement with a360 Media, LLC (“a360”) in which a360 will provide professional media support and advertising placement in exchange for up to 134,681 shares of the Company’s common stock valued at $14.85 per share. A360 will receive the shares by providing the Company with a credit in the amount of $2,000,000 to be used for media support and advertising placement to the Company. The shares are 70% fully vested; 15% of the Shares shall vest upon each advertising placement accrue pro-rata as percentage of the total advertising placement; and 15% of the shares shall vest provided there are no restrictions in product categories that the Company is able to market with a360 while the Company utilizes the advertising placement. Any shares which do not vest within the term of the agreement shall be forfeited. The Advertising Placement must be used by the Company prior to December 30, 2023, unless otherwise agreed in writing by both parties.

In January of 2023, the Company issued 2,223 shares of common stock to Twenty Two Capital as the final obligation under the 2021 acquisition agreement upon the expiration of the indemnification period.

In March 2022 the Company issued ~~458,887~~9,873 shares of restricted common stock in connection with the Earnout Shares as referenced in Note 6.

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

In ~~January 2022,~~ ~~the Company issued 30,000 shares of restricted stock awards to~~ ~~six~~ ~~employees. The stock awards were valued at the fair market price of $29,250 and vested at the grant date.~~

In ~~January 2022,~~ ~~the Company issued 320,000 shares to a professional athlete in conjunction with an amendment to the athlete’s sponsorship agreement as referenced in Note~~ ~~11.~~ ~~The stock grant was valuated at the fair market price of $336,000 upon issuance and will be amortized over the remaining term of the agreement.~~

On December 28, 2021 the Company issued ~~466,713~~10,372 shares of restricted common stock in connection with the Earnout Shares as referenced in Note 6.

In October 2021, the Company issued ~~25,000~~556 shares of restricted common stock to an executive officer of the Company, subject to ~~vesting on~~a January 1, ~~2022.~~2022 vest.

In ~~June 2021,~~ the Company issued 25,000 shares of restricted stock awards in connection with a consulting arrangement with an industry professional. The Company recorded a total prepaid expense of $80,500 in conjunction with the issuance of shares and intends to amortize this over the term of the agreement.

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

In ~~April 2021,~~ the Company entered into an endorsement agreement with a professional athlete. As part of the endorsement agreement, the Company issued 40,000 common shares of restricted common stock. The Company recorded $143,600 prepaid expense and amortized over the term of the agreement.

In ~~March 2021,~~ ~~the Company issued 180,000 shares of restricted common stock to a professional athlete to completely satisfy a $800,000 obligation due between~~ ~~July~~ ~~and~~ ~~December~~ of ~~2021.~~ ~~The Company recorded a total prepaid expense of $649,800 in conjunction with the issuances of shares and intends to amortize this over the term of the athlete’s agreement.~~

In ~~March 2021,~~ ~~the Company issued 27,000 of restricted stock awards to the Company’s board of directors. Two thousand of the shares vested at the time of the grant, while the balance vest~~ ~~one~~~~fourth~~ on ~~June 30, 2021,~~ ~~one~~ ~~fourth, on~~ ~~September 30, 2021,~~ ~~one~~~~fourth~~ on ~~December 31, 2021,~~ ~~and~~ ~~one~~~~fourth~~ on ~~March 31, 2022.~~ ~~The stock awards were valued at the fair market price of $118,800 upon issuance and will amortize over the individual vesting periods.~~

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

In ~~February 2021~~ as partial compensation pursuant to the terms of a Personal Services Agreement for the endorsement of the Company’s products, the Company issued 40,000 common shares. The Company recorded a total prepaid expense of $155,200 in conjunction with the issuance of shares.

In ~~January 2021~~ ~~the Company issued 167,500 of restricted stock awards to an aggregate of~~ 15 ~~employees. A majority vested immediately with the balance vesting by~~ ~~April 6, 2021.~~ ~~The stock awards were valued at the fair market price of $494,125 upon issuance and amortized over the individual vesting periods.~~

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

In ~~May 2022,~~February of 2023,the Company granted ~~a new executive~~its board of directors an aggregate of ~~405,000~~2,667 common stock options. The options ~~vest equally over~~ 1,2, ~~and~~ 3 ~~years from the grant date. The options~~vested immediately, have a strike price ~~$0.84~~of $12.60 and a five-year term. The Company has recorded a total prepaid expense of $21,120 and intends to amortize the expense over the 12-month board term.

In January 2023, the Company issued 2,334 options to a group of employees. The stock options awards vested at issuance, had a strike price of $10.53, five-year term and a fair market value upon issuance of $15,225

In December 2022, the Company issued 2,223 options to an employee. 1,667 options vest equally at each anniversary for the next 3 years, have a strike price of $11.25 and a five year term. The total expense of these options ~~totaled $176,985~~is $13,150 and will be amortized over the term of the vesting periods.

In ~~April 2022,~~ ~~the Company issued 200,000~~ 556 options ~~to a consultant as part of an advisory agreement under the Company's Equity Compensation Plan. Fifty thousand of the shares vested upon the grant, 50,000~~ vest ~~and~~ 6 ~~months from the effective date and 100,000 upon renewal of the consulting agreement in~~ ~~March 2023.~~ ~~The options have a strike price of $1 and~~ ~~five~~ ~~year term. The total expense of these options totaled $131,300 and will be amortized over the term of the vesting periods.~~

In ~~April 2022,~~ ~~the Company issued 100,000 common stock options to an employee that vest upon the Company achieving~~based on meeting certain direct to consumer revenue ~~growth targets for~~requirements by the ~~quarter~~end of December 2024.

In the six months ended ~~December 2022.~~ March 31, 2022:~~The options have a $1 strike price. The Company performs analysis on these options and as of~~ ~~June 30, 2020~~ ~~0 expense was ascribed to these options.~~

In March of 2022,the Company granted its board of directors an aggregate of ~~120,000~~2,667 common stock options. The options vested immediately, have a strike price of ~~$0.818~~$36.81 and a five-year term. The Company has recorded a total prepaid expense of $57,000 and intends to amortize the expense over the 12-month board term.

In January of 2022,the Company granted an aggregate of ~~130,000~~2,889 common stock options to a group of 9 employees. These options vest upon grant and the Company has recorded an expense for these options of $79,500 for the three months ended ~~June 30,~~March 31, 2022

In October 2021, the Company granted an aggregate of ~~75,000~~1,667 common stock options to an executive officer. These options vest on October 1, 2022. The Company has recorded an expense for these options of $23,025 and $46,050 for the three and ~~nine~~six months ended ~~June 30, 2022~~.

In ~~June 2021,~~ the Company entered into a consulting arrangement with an industry professional. As part of the agreement, the Company issued 50,000 options and recorded total prepaid expenses of $125,250 and intends to amortize over the 12-month vesting term.

In ~~April 2021,~~ ~~the Company issued 750,000 common stock options to an executive officer in conjunction with an Amended and Restated Executive Employment Agreement. The common stock options vest in~~ ~~three~~ ~~equal tranches, the~~ ~~first~~ ~~of which vests on~~ ~~January 1, 2022;~~ ~~the~~ ~~second~~ on ~~January 1, 2023;~~ ~~and the~~ ~~third~~ on ~~January 1, 2024,~~ ~~both under the Corporations~~ ~~2021~~ ~~Equity Compensation Plan. The Company has recorded an expense of $195,346 for the~~ ~~three~~ ~~months ended~~ ~~June 30, 2021~~ ~~for these options.~~

In March ~~2021,~~ ~~the Company granted its board of directors an aggregate of 150,000 common stock options. The options vested immediately, have a strike price of $4.40 and a~~ ~~five-year term. The Company has recorded a total prepaid expense of $395,850 and intends to amortize the expense over the~~ 12~~-month board term.~~

In ~~January 2021,~~ ~~the Company granted an aggregate of 80,000 common stock options to~~ ~~three~~ ~~employees. The options vest in~~ ~~three~~ ~~equal tranches, the~~ ~~first~~ on ~~April 15, 2021,~~ ~~the~~ ~~second~~ on ~~April 15, 2022~~ ~~and the~~ ~~third~~ on ~~April 14, 2023~~ ~~and have an exercise price of $3.10 per share and a term of 10 years. The Company has recorded an expense of $66,967 for the~~ ~~three~~ ~~months ended~~ ~~June 30, 2021~~ ~~for these options.~~

In ~~October 2020,~~ ~~the Company granted an aggregate of 350,000 common stock options to an executive officer. The options vest in~~ ~~three~~ ~~equal tranches, the~~ ~~first~~ on ~~October 1, 2021,~~ ~~the~~ ~~second~~ on ~~October 1, 2022~~ ~~and the~~ ~~third~~ on ~~October 1, 2023,~~ ~~and have an exercise price of~~ ~~$3,50,~~ ~~$5.00, and $6.50 per share and a term of~~ 5 ~~years. The Company has recorded an expense for these options of $31,054 for both the~~ ~~three~~ ~~months ended~~ ~~December~~ 31, ~~2021~~ 2022.~~and~~ ~~2020,~~ ~~respectively.~~

The expected volatility rate for the Company's stock options was estimated based on a weighted average mix of the volatilities of the Company 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 ~~three~~six months ended ~~June 30, 2022~~March 31, 2023 and ~~2021~~2022:

The Company has no warrant transactions during the three and ~~nine~~six months ended ~~June 30, 2022~~March 31, 2023.

In ~~December 2020~~ in relation to the follow-on firm commitment underwritten public offering of the 8.0% Series A Cumulative Convertible Preferred Stock, the Company issued to the representative of the underwriters warrants to purchase in aggregate 150,502 shares of common stock with an exercise price of $3.74. The warrants expire on ~~December 8, 2025.~~

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

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 initially made ~~1,175,000~~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 October each calendar 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 ~~100,000~~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 ~~2,000,000~~45,445 and retained the annual evergreen increase provision of the plan.

On January 8, 2021, the Company’s Board of Directors approved the 2021 Equity Compensation Plan (the “2021 Plan”) and it was subsequently approved 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 ~~5,000,000~~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 ~~250,000~~5,556 shares.

The Company accounts for stock-based compensation using the provisions of ASC 718. ASC 718 codification 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.

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.

The following table summarizes stock option activity under both plans for the ~~nine~~six months ended ~~June 30, 2022~~March 31, 2023:

As of ~~June 30, 2022~~March 31, 2023, there was approximately ~~$419,241~~$155,742 of total unrecognized compensation cost related to non-vested stock options which vest over a period of approximately ~~2.8~~2.7 years.

In February of 2023, the Company issued 445 of restricted stock awards to the Company’s board of directors. The shares vest quarterly onefourth on June 30, 2023, one fourth, on September 30, 2023, onefourth on December 31, 2023, and onefourth on March 31, 2024. The stock awards were valued at the fair market price of $5,660 upon issuance and will amortize over the individual vesting periods.

In January 2023, the Company issued 3,889 shares to a group of employees. The shares vested upon issuance, having a fair market value upon issuance of $40,950.

In December 2022, the Company issued 400,000 shares of restricted common stock in connection with the Separation Agreement with a former executive officer in which the former employee forfeited 500,000 shares of unvested restricted stock awards and 500,000 unvested options. These shares are subject to vest ~~one~~~~-half on~~ ~~July 1, 2022~~ ~~and the balance~~ ~~January 1, 2023.~~ The fair market value of these shares totaled $172,000 and will be amortized over the vesting periods. The forfeited RSUs and options had an unrecognized value of $799,572 and $555,286, respectively. The Company recognized contra-expense of $880,428 and $604,714 for the forfeited RSUs and options, respectively, related to the previously amortized expense for these RSUs and options.

In ~~May 2022~~ ~~the Company issued 125,000~~1,112 shares of restricted common stock to an ~~executive office of~~employee. 556 shares vested upon issuance and the Company ~~as part~~recorded a total expense of ~~a new hire compensation package.~~$6,250. 556 shares vest based on meeting certain direct to consumer revenue performance hurdles prior to December 2024.

In ~~May 2022~~ the ~~Company issued 5,000 of restricted common stock to an employee of the Company. The stock award was valued at the fair market price $3,350 of and expensed upon issuance.~~six months ended March 31, 2022:

In March of 2022,the Company issued ~~20,000~~445 of restricted stock awards to the Company’s board of directors. The shares vest quarterly one fourth on June 30, 2022, one fourth, on September 30, 2022, one fourth on December 31, 2022, and one fourth on March 31, 2023. The stock awards were valued at the fair market price of $16,360 upon issuance and will amortize over the individual vesting periods.

In January 2022, the Company issued ~~30,000~~667 shares of restricted stock awards to six employees. The stock awards were valued at the fair market price of $29,250 and vested at the grant date.

In January of 2022,the Company issued ~~320,000~~7,112 shares to a professional athlete in conjunction with an amendment to the athlete’s sponsorship agreement as referenced in Note 11. The stock grant was valuated at the fair market price of $336,000 upon issuance and will be amortized over the remaining term of the agreement.

In November 2021, the Company issued ~~120,000~~2,667 shares of restricted stock awards to an employee, subject to certain revenue performances metrics through December 2022, as referenced in Note 6. These shares were forfeited during January 2022.

In October 2021 the Company issued ~~5,000~~112 shares of restricted stock awards to an employee, which vested immediately upon issuance.

In October 2021 the Company issued ~~25,000~~556 shares of restricted stock awards to an executive officer, subject to a four-month vesting schedule.

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

In ~~October 2020,~~ ~~the Company issued 50,000 of restricted stock awards to an executive officer. The restricted stock vests in~~ ~~three~~ ~~equal tranches, the~~ ~~first~~ ~~of which vests on~~ ~~October 1, 2021,~~ ~~on the~~ ~~second~~ on ~~October 1, 2022~~ ~~and the~~ ~~third~~ on ~~October 1, 2023~~ ~~and were valued at fair market value upon issuance at $100,000 which will be amortized over the vesting period.~~

~~The Company recognized $(593,617) and $641,267 of restricted stock compensation expense for the~~ ~~three~~ ~~months ended~~ ~~June 30, 2022~~ ~~and~~ ~~2021~~~~, respectively. The Company recognized $242,382 and $1,218,110 of restricted stock compensation expense for the~~ ~~nine~~ ~~months ended~~ ~~June 30, 2022~~ ~~and~~ ~~2021,~~ ~~respectively.~~

Transactions involving the Company equity-classified warrants for the ~~nine~~six months ended ~~June 30, 2022~~March 31, 2023 and ~~2021~~2022 are summarized as follows:

During the three month period ended December 31, 2022, 2,223 warrants expired and as a result were forfeited.

The following table summarizes outstanding common stock purchase warrants as of ~~June 30, 2022~~March 31, 2023:

In May 2019, the Company entered into an endorsement agreement with a professional athlete. ~~The term of the agreement is through~~On ~~December 31,~~November 4, 2022, ~~and is tied to performance of the athlete in so many professional events annually, and also includes promotion of~~ the Company via social media, wearing of logo during competition, requirements to provide production days for advertising creation and attendance of meet and greets. The potential payments, if all services are provided, in aggregate is $4,900,000 and is paid based on the services above for the period ending: ~~December 2019 -~~ ~~$400,000,~~ ~~December 2020 -~~ ~~$800,000,~~ ~~December 2021 -~~ ~~$1,800,000, and~~ ~~December 2022 -~~ ~~$1,900,000. In light of the impact of COVID-~~19 ~~on events, the Company and professional athlete mutually agreed to suspend payments from~~ ~~March 2020~~ ~~through~~ ~~June 2020.~~ ~~Effective~~ ~~July 1, 2020,~~ ~~the parties~~ entered into a ~~new endorsement~~separation agreement ~~amending certain of~~with the ~~contract terms which superseded the original agreement. Under the current endorsement agreement potential payments to the professional~~ athlete ~~are as follows from~~ ~~July 2020~~ to ~~December 2022 –~~ ~~up to $2,867,000 to be paid in common stock in~~ ~~three~~ ~~issuances, based on~~that required a ~~Volume Weighed Average Price (“VWAP”) calculation, of which the last~~ ~~two~~ ~~issuances can be paid in cash at~~final payment truing up the Company’s ~~option - $1,400,000 paid in~~cash obligation through ~~July 2020,~~ ~~$800,000 paid between~~ ~~July 2021~~ ~~and~~ ~~December 2021,~~ ~~and $667,000 paid between~~ ~~July 2022~~ ~~and~~ ~~December~~November 2022. No further obligations exist between the parties. The Company ~~will make monthly cash payments as follows from:~~recorded a ~~July 2020~~ oneto ~~December 2020 -~~ ~~$40,000, from~~ ~~January 2021~~ to ~~June 2021 -~~ ~~$50,000, from~~ ~~July 2021~~ to ~~December 2021 -~~ ~~$75,000, from~~ ~~January 2022~~ to ~~June 2022 -~~ ~~$85,000, and from~~ ~~July 2022~~ to ~~December 2022 -~~ ~~$100,000. In~~ ~~March 2021,~~ the parties entered into an additional amendment to the endorsement agreement whereby the Company issued the professional athlete 180,000 common shares to completely satisfy the $800,000 payment options between ~~July 2021~~ ~~and~~ ~~December 2021.~~ ~~The Company has recorded~~-time non-cash expense of ~~$422,309 and $253,700 for~~approximately $885,000 associated with the ~~three~~ ~~months ended~~ ~~December 31, 2021~~ ~~and~~ ~~2020,~~ ~~respectively. In~~ ~~January~~ outstanding un-expensed portion of ~~2022,~~ the parties entered into an additional amendment to the endorsement agreement, whereby the Company has foregone certain rights to logo wearing during events while retaining other performance of the athlete through ~~December 2024.~~ ~~In exchange for change in obligations and term, the parties re-amortized the balance owed during~~ ~~2022~~ ~~through~~ ~~2024,~~ ~~including issuing 320,000 of the Company’s common~~ stock ~~as part of the total compensation.~~compensation expense from previously issued stock at higher stock prices.

In April 2022, effective February 2022, the Company entered into an endorsement agreement with a professional athlete. The term of the agreement is through February 2025 and is tied to performance of the athlete in so many professional events annually, and also includes promotion of the Company via social media, wearing of logo during competition, requirement to provide production days for advertising creation and attendance at meet and greets. The potential base payments, if all services are provided is $1,500,000 over the term of the agreement, in addition to some incentives for sales directly influenced by the athlete.

As previously disclosed, during June of 2022, the Company's CEO resigned from the board of directors and his role as an executive for the Company in June of 2022 under the terms of a separation agreement with the Company.

In July 2019, the Company entered into a loan arrangement in the amount of $249,100 for a line of equipment, as part of the sale of manufacturing equipment during April 2022, the balance of this loan was paid off resulting in a balance of $0 as of ~~June 30,~~December 31, 2022. In January 2020, the Company entered into a loan arrangement for $35,660 for equipment, of which ~~$5,051~~$7,375 is a ~~long~~short term note payable at ~~June 30, 2022.~~March 31, 2023. Payments are for 48 months and have a financing rate of 6.2%, which requires a monthly payment of $841.

In ~~April 2020,~~ ~~the Company applied for an unsecured loan pursuant to the PPP administered by and authorized by the CARES Act. Section~~ ~~1106~~ ~~of the Act provides for forgiveness of up to the full principal amount of qualifying loans guaranteed under the Paycheck Protection Program. On~~ ~~April 27, 2020,~~ ~~the Company received the loan from Truist Bank (the “Lender”) in the principal amount of $1,456,100. The SBA Loan is evidenced by a promissory note issued by the Company to the Lender. During~~ ~~May~~ of ~~2021,~~ ~~the Company received notice from the SBA the loan principal and any accrued interest was completely forgiven.~~

The Company has lease agreements for its corporate offices and warehouse with lease periods expiring between ~~2021~~2024 and 2026. ASC 842 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 assets. 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 leases do not contain any residual value guarantees. During the June 2022 quarter, the Company exited its laboratory facility as all R&D is conducted in its corporate offices. This lease expired in December 2022, and as a result we incurred an exit fee of $80,000 tied to the landlord's right to holdover rent which was booked as an offset to gain on the sold assets for the quarter ending June 30, 2022.

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 condensed consolidated statements of operations.

Supplemental cash flow information related to operating leases is summarized as follows:

As of ~~June 30, 2022~~March 31, 2023, our operating leases had a weighted average remaining lease term of ~~4.38~~3.44 years and a weighted average discount rate of 4.66%.

Future minimum aggregate lease payments under operating leases as of ~~June 30, 2022~~March 31, 2023 are summarized as follows:

The following table sets forth the computation of basic and diluted earnings per share for the following periods:

At ~~June 30, 2022~~March 31, 2023, ~~4,888,667potential~~52,202 potential shares underlying options, unvested RSUs and warrants as well as ~~8,335,000~~185,223 convertible preferred share, and 40,404 a360shares subject to certain vesting requirement as well as total 288,038 of available shares and remaining commitment share under the Keystone agreement were excluded from the shares used to calculate diluted loss per share as their inclusion would reduce net loss per share.

On November 17, 2017, the Company completed an IPO of its common stock. The Company conducted a Section 382 analysis and determined an ownership change occurred upon the IPO. On October 2, 2018, the Company completed a follow-on firm commitment underwritten public offering of its common stock. On May 16, 2019, the Company completed an additional follow-on firm commitment underwritten public offering of its common stock. On October 16, 2019, the Company completed a follow-on firm commitment underwritten public offering of its 8.0% Series A Cumulative Convertible Preferred Stock. On January 14, 2020, the Company completed a follow-on firm commitment underwritten public offering of its common stock. Management has determined that an ownership change has occurred under Internal Revenue Code (IRC) Section 382 resulting in limitations on the utilization of Company’s federal and state NOL carryovers.

On December 20, 2018, the Company completed a two-step merger with Cure Based Development (see Note 1). As a result of the Mergers the Company established as part of the purchase price allocation a net deferred tax liability related to the book-tax basis of certain assets and liabilities of approximately $4.6 million.

The Company has a valuation allowance against the net deferred tax assets, with the exception of the deferred tax liabilities that result from indefinite-life intangibles (“naked credits”). The Company has determined that using the general methodology for calculating income taxes during an interim period for the quarters ending December 31, 2019, March 31, 2020, and June 30, 2020, provided for a wide range of potential annual effective rates. ~~Therefore, the Company had calculated the tax provision on a discrete basis under ASC~~ ~~740~~-~~270~~-30- 36~~(b) for the quarters ending~~ ~~December 31, 2019,~~ ~~March 31, 2020,~~ ~~and~~ ~~June 30, 2020.~~ At September 30, ~~2021~~2022 the Company recorded a net deferred tax asset of zero as the cumulative net deferred tax asset had a full valuation on it and there was not enough positive evidence that would warrant recognizing the benefit of the net deferred tax asset. In addition, the net indefinite lived deferred tax items were a deferred tax asset so there was not any recognition of a deferred tax liability related to indefinite lived deferred tax liabilities. At ~~June 30, 2022~~March 31, 2023, the Company determined the same circumstances to be true and therefore recorded a net deferred tax asset of zero.

On ~~August 1, 2022,~~February 16, 2023, we held an annual meeting of stockholders. At the ~~Company successfully made~~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-twenty to one-for-fifty, inclusive, with the ~~transition from Oracle Netsuite~~exact ratio to ~~Acumatica for its ERP system. During~~be set at the ~~past year, Oracle terminated~~discretion our ~~license agreement and requested we find an alternative ERP solution.~~

On ~~August 9, 2022,~~ ~~T. Ronan Kennedy, our Chief Financial Officer and Chief Operating Officer, was appointed interim principal executive officer.~~

~~Effective~~ ~~August 9, 2022,~~ ~~Dr. Sybil Swift, a key employee of the Company, was appointed to serve on the~~ board of directors, ~~filling a vacancy on~~ at any time after approval of the amendment and prior to February 16, 2024. On April 12, 2023, the board ~~in accordance with the bylaws of the Company. Dr. Swift has served as the Company’s Vice President for Scientific & Regulatory Affairs and the co-chair of cbdMD Therapeutics, LLC, since~~ ~~March~~ effected a reverse stock split at a ratio of ~~2021.~~one ~~She initially joined~~ -for-forty-five, effective as of April 24, 2023 (the ~~Company as a Regulatory Consultant~~“Reverse Stock Split”). Unless otherwise indicated, all share numbers in ~~Jan 2021.~~ ~~Prior~~this filing, including shares of common stock and all securities convertible into, or exercisable for, shares of common stock, give effect to ~~joining~~ the ~~Company, from~~Reverse Stock Split. All fractional shares were rounded up when effectuating the reverse stock split. A total of 39,455 shares of common stock were issued to account for rounding up of fractional shares.

Subsequent to the period covered by this report, commencing on ~~Jan 2020~~April 19, 2023 toand through ~~Dec 2020,~~April 25, 2023, ~~Dr. Swift was the Senior Vice President for Scientific & Regulatory Affairs at the Natural Products Association. Dr. Swift served in multiple roles during her~~ 5 ~~years within the U.S. Food and Drug Administration's Office~~we received aggregate proceeds of Dietary Supplement Programs; the last role was the Associate Director for Research and Strategy. As Associate Director, Dr. Swift directed the office’s research portfolio and was responsible for ensuring alignment between its science, research, compliance, enforcement, and policy initiatives. Dr. Swift was also the co-chairapproximately $36,000 from sales of the Botanical Safety Consortium, a collaboration between scientists from government agencies, academia and industry. Dr. Swift earned her Ph.D. in Nutrition has and M.S. in Kinesiology at Texas A&M University. She is currently a member of the American Society for Nutrition, the Global Retailer & Manufacturer Alliance (GRMA), the Natural Products Association (NPA) ComPLI Committee, the Council for Federal Cannabis Regulation's (CFCR) SRAC. Dr. Swift is ~~not~~ ~~considered an “independent director” within the meaning of Section~~ ~~803~~ ~~of the NYSE American Company Guide. As an employee director, she will~~ ~~not~~ ~~be appointed to any committee of our board of directors. She shall receive a restricted stock grant of 5,000~~8,888 shares of our common stock to Keystone. We paid Keystone $35,000 to cover expenses under the terms of the Purchase Agreement.

On May 3, 2023, the Company completed an underwritten public offering of 1,350,000 shares of its common stock at a public offering price of $2.10 per share. Gross proceeds from the offering before deducting underwriting discounts and commissions and offering expenses were approximately $2.8 million. Under the terms of the Underwriting Agreement, the Company granted the Underwriter an option, exercisable for ~~five~~45 ~~options~~days, to purchase ~~30,000~~up to an additional 202,500 shares of ~~our~~common stock. The net proceeds to the Company from the Offering were approximately $2.5 million, after deducting underwriting discounts and commissions and estimated Offering expenses payable by the Company, and does not take into account the exercise by the Underwriter of its option to purchase additional shares of common stock. The Company also issued the Underwriter a warrant to purchase up to 40,500 shares of its common stock exercisable at ~~$0.568~~$2.52 per share. The restricted stock grant and options vest on the date of issuance. In keeping with the Company’s stated commitment to increase diversity on the board which it believes supports the Company’s core values and is an essential measure of sound governance and critical to a well-functioning board, the board of directors recognizes that Dr. Swift is a minority.

~~As previously reported, on~~ ~~December 20, 2018~~ we closed that certain Merger Agreement, as amended, by and among our company, our subsidiaries and Cure Based Development, LLC (“Cure Based Development”). Pursuant to the terms of the Merger Agreement, as partial merger consideration CBD Holding, LLC (“CBDH”), the then sole member of Cure Based Development, was entitled to receive (the “Earnout Rights”) up to 15,250,000 additional shares of our common stock (the “~~Earnout Shares”) upon the satisfaction of certain aggregate net revenue criteria within~~ 60 ~~months (marking periods) following the Closing Date. The possible issuance of the Earnout Shares was approved by our shareholders in~~ ~~April 2019.~~ In ~~February 2020~~ CBDH distributed the Earnout Rights to its members which included affiliates of Martin A. Sumichrast (our former officer and director) and R. Scott Coffman (a current member of our board of directors and former officer). Following the completion of the ~~June 30, 2022~~ ~~quarter within the~~ ~~third~~ ~~marking period, and in accordance with the terms of the Merger Agreement, as amended, we determined that the net revenues for the~~ ~~June 30, 2022~~ ~~quarter within the~~ ~~third~~ ~~marking period were $8,592,893 and on~~ ~~August 9, 2022~~ ~~we issued the members an aggregate of 409,505 shares of our common stock. The recipients were accredited investors and the issuances were exempt from registration under the Securities Act of~~ ~~1933,~~ ~~as amended, in reliance on an exemption provided by Section~~ 4~~(a)(~~2~~) of that act.~~

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion of our financial condition and results of operations for the three and ~~nine~~six months ended ~~June 30, 2022~~March 31, 2023 and the three and ~~nine~~six months ended ~~June 30, 2021~~March 31, 2022 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.

Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements because of several factors, including those set forth under the Part I, Item 1A, Risk Factors and Business sections in our ~~2021~~2022 10-K, this report, and our other filings with the Securities and Exchange Commission. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements. Such statements are based on our current expectations and could be affected by the uncertainties and risk factors described throughout this report.

We own and operate the nationally recognized CBD (cannabidiol) brands cbdMD, Paw CBD and cbdMD Botanicals. We believe that we are an industry leader producing and distributing broad spectrum CBD products and now full spectrum CBD products. Our mission is to enhance our customer’s overall quality of life while bringing CBD education, awareness and accessibility of high quality and effective products to all. We source cannabinoids, including CBD, which are extracted from non-GMO hemp grown on farms in the United States. Our innovative broad spectrum formula utilizes one of the purest hemp extracts, containing CBD, CBG and CBN, while eliminating the presence of tetrahydrocannabinol (THC). Non-THC is defined as below the level of detection using validated scientific analytical methods. Our full spectrum products contain a variety of cannabinoids and terpenes in addition to CBD while maintaining trace amounts of THC that falls within the limits set in the 2018 Farm Bill. In addition to our core brands, we also operate cbdMD Therapeutics, LLC to capture the Company’s ongoing investments in science related to its existing and future products, including research and development activities for therapeutic applications

Our cbdMD brand of products includes high-grade, premium CBD products, including CBD tinctures, CBD gummies, CBD topicals, CBD capsules, CBD bath bombs, and CBD sleep aids.

Our Paw CBD brand of products includes veterinarian-formulated products including tinctures, chews, topicals products in varying strengths and formulas. Paw CBD products have undergone the National Animal Safety Council’s rigorous audit and meet their Quality Seal standard.

Our cbdMD Botanicals brand of beauty and skincare products features facial oil and serum, toners, moisturizers, clear skin, facial masks, exfoliants and body care. cbdMD Botanicals is dedicated to creating clean CBD skin care products combining the best of Mother Nature with the precision of scientific innovation. All of our products are 100% cruelty-free and have no parabens, sulfates, or gluten – just pure botanical ingredients carefully crafted into gentle beauty products for all skin types.

cbdMD, Paw CBD and cbdMD Botanicals products are distributed through our e-commerce websites, third party e-commerce sites, select distributors and marketing partners as well as a variety of brick-and-mortar retailers. In addition, we operate a CBD marketplace through directcbdonline.com, our own e-commerce website.

In March 2021 we formed a new wholly owned subsidiary, cbdMD Therapeutics, for the purposes of isolating and quantifying our ongoing investments in science related to our existing and future products, including research and development activities for therapeutic applications and to explore potential cannabinoid-based medicines.

In August of 2022 the Company concluded a randomized, double blind, placebo controlled clinical study in dogs performed in conjunction with Colorado’s State University’s veterinary program. Preliminary results indicate that our proprietary broad spectrum hemp extract improved mobility, gait, and quality of life in dogs with osteoarthritis. These results are expected to provide claims related to our proprietary broad spectrum blend’s efficacy and drive new product development to address the needs of the nearly $2 Billion canine arthritis treatment market according to Expert Market Research.

In September of 2022 the Company concluded a multi-year randomized, double blind, placebo controlled clinical study in healthy adults utilizing its proprietary hemp extract blend which demonstrated significant benefits in many areas, including reduction of pain, reduced inflammation, improvements to several immunity markets, and improved mood, and these results are further driving the refinement of current products and the development of new products which utilize the same proprietary blend of hemp extracted cannabinoids.

We believe the results from both of the clinical studies provide us a unique and differentiated competitive marketing advantage for certain of our products and has already started creating additional B2B wholesale opportunities for our organization. In addition, these results will inform near term product development efforts, and serve as preliminary data for future clinical studies.

The formation of Therapeutics has also led to the identification of a novel cannabinoid that will be patented and utilized in future formulations for cbdMD. We believe the Company’s investments into therapeutics R&D will continue to benefit current products and dietary supplement development.

During the second quarter the Company launched its third National Sanitation Foundation ("NSF") for sport product, our 1500mg broad spectrum gummy. Not only was cbdMD the first ~~quarter~~to commercialize NSF for Sport CBD product it is the only certified gummy product on the market, has the highest concentration on the market and largest portfolio of ~~2022 we eliminated~~NSF for Sport offering. We believe this certification is important to a ~~number~~large customer based that continues to as well as build credibility with retailers.

The Company also recently launched its first products on Amazon in the UK. cbdMD is one of ~~product lines~~only a handful of companies approved to sell CBD products in the Amazon UK CBD pilot program due to its validated Novel Foods application. Brands approved to sell CBD through Amazon UK are required to pass compliance checks by Amazon and ~~SKUs as we~~now must have a credible application for Novel Foods Authorization which has been validated by the United Kingdom's Food Standards Agency. The Company is continuing to work to ~~streamline line~~expand our ~~offering to higher velocity products~~product listing on Amazon UK and ~~eliminate slow moving and aging SKUs.~~accelerate its revenue on the platform.

~~During January 2022 we completed a renewal of our NSF cGMP quality certification~~In February 2023, the Company’s President resigned to pursue other interest and ~~are now NSF 455 cGMP certified. Additionally, we earned~~ the ~~prestigious NSF product certification for our soft gel products and received the NSF certified for Sport for our 500mg and 1000mg sleep softgels and 1500mg and 3000mg soft gels.~~Company’s CFO was named Interim CEO.

During the second fiscal quarter we continued to make headway to improve the overall operation of ~~2022 we took steps~~our business. We further reduced payroll, have sublet a portion of our warehouse, have engaged brokers to ~~right size~~market and seek options on our ~~cost structure~~corporate office lease, cut un-product services, and continuing to assess alternatives to our ~~current revenue base and worked~~operating infrastructure to ~~remove over $10 million~~reduce our costs.

Since the beginning of annualized costs. We achieved this through a combination of reductions in payroll, renegotiating freight rates, rationalizing marketing expenses, reducing regulatory spend, exited our lab and overall tightening of all expenditures. We started enacting these steps during the second quarter, ~~resulting~~we have onboard new agencies, fine-tuned go-to-market strategies and communication with customers as well as pricing, are successfully ramping profitable Meta advertising, and are encouraged with our direct-to-consumer revenue trends in ~~sequential reductions in operating costs in both~~March and April as a result of the second and third quarters of 2022. We expect continued roll off of expenses during the fourth quarter from the full quarter benefit of adjustments made during the third quarter coupled with additional rationalization we are working on.

~~During April 2022, in an effort to reduce costs, we sold our manufacturing equipment and outsourced certain products previously produced in-house. This change had~~steps taken. Profitability remains a significant reduction in our fixed labor and overhead, positively impacting cost of goods sold, and increased flexibility in our supply chain and was part of our overall cost structure rationalization plan.

~~During May 2022 our Co-CEO and cbdMD brand Founder retired~~paramount focus and we ~~hired a new President.~~

The Company's management mandate is to achieve profitability and increase revenue by the end of the calendar year. Significant headway was made on cost controls over the last two quarter and we believe additional opportunities to improve our cost structure exist: we are working to lower our facility costs, we are taking further opportunities to improve freight rates, and we continue ~~to reassess our marketing costs and make improvements to our product portfolio. In addition to these efforts, the Company continues~~ to invest in a strong pipeline of accretive revenue opportunities.

We continued to pursue many strategies to grow our revenues and expand the scope of our business in fiscal ~~2022~~2023 and beyond:

● Direct to Consumer: The last several quarters we pulled back on sponsorships, expensive influencers and high acquisition cost marketing spend that resulted in low lifetime value customers. As a result, overall revenues have declined, but we believe we are in a better position to improve profitability and are now investing carefully in efforts with strong measurable return on spend to drive traffic and conversion rates.

● Wholesale: We continue to focus on the right product at the right price for the right channel and adding channel specific distributors and brokers to help us scale in the food drug and mass channel (“FDM”). During the last 12 months we successfully expanded throughout GNC’s retail footprint, added Wegmans and are working with several national and regional chains. We continue to build relationships with key retailers and have expanded our sales organization to include deep channel-specific experience, focused on developing a pipeline of opportunities we believe are strategic to the category and our brand.

The following tables provide certain selected consolidated financial information for the periods presented:

We record product sales primarily through two main delivery channels, direct to consumers via our E-commerce sales and direct to wholesalers utilizing our internal sales team. The following table provides information on the contribution of net sales by type of sale to our total net sales.

We had total net sales of ~~$8,592,893~~$6.2 million and ~~$10,560,523~~$9.6 million for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively, resulting in a ~~quarter over quarter~~ decrease in net sales of ~~$1,967,631~~$3.4 million or ~~18.6%.~~35.4% year over year. This decrease is attributable to a decrease of ~~$1.3~~$1.7 million in e-commerce sales ~~and a~~as we continue to reduce marketing spend as part of our continued efforts to improve profitability. Wholesale sales decrease of ~~$0.66~~$1.7 million in ~~wholesale sales quarter over~~mainly attributed to our lower price structure and some larger orders that occurred during the March 2022 quarter. ~~While management is disappointed with~~Despite the year over year ~~net~~decrease, management is very encouraged by the sequential revenue trends. Our E-commerce business remained relatively flat while we made significant changes to our market team and infrastructure while wholesale sales ~~decrease,~~increased approximately 14% for the ~~revenue is generally~~three months ended March 31, 2023 from the three months ended December 31, 2022, resulting in ~~line with macro competitive trends in the overall CBD industry. Sequentially, the Company's revenue declined 11%. Our Wholesale declined~~a combined increase of approximately ~~$661,000, in-part related to revenue associated with a pipeline fill~~2.5% during the second quarter, as well as additional orders on the books that were delayed at the end of the quarter. We have successfully implemented a $1.0 million reduction in marketing expenses, while e-commerce remained consistent with our previous calendar quarter.same period. We believe the current macro inflationary environment ~~is impacting~~continues to impact discretionary spending with consumers as well as wholesale customers. We ~~continue to work~~remain cautiously optimistic on a pipeline of opportunities both domestically and internationally and believe we will see revenue growth in the coming quarters.

We had total net sales of $27,543,599 and $34,687,436 for the nine months ended June 30, 2022 and 2021 respectively, resulting in a year over year decrease in net sales of $7.1 million, primarily attributable to a $1.7 million, or 20.4% reduction in wholesale sales and reduction in e-commerce sales of $5.5 million. We continue to invest in new channels and sales relationships and work to expand the life time value of our customers.

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 ~~31.0%~~38.5% and ~~31.9%~~33.1% for three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021, respectively and 36.9% and 30.1% for the nine months ended June 30, 2022 and 2021,~~ respectively. Year over year, the reduction in our cost of sales for the June 30, 2022 quarter is a result of operational gains from the elimination of overhead and lower freight costs that were partially offset by increase in unabsorbed overhead resulting from the $1.9 million drop in revenues. The decrease in our cost of sales for the nine months ended June 30, 2022 over prior year is also the result of operational gains from the elimination of overhead and lower freight costs, partially offset by an increase in unabsorbed overhead resulting from the $7.4 million drop in revenues, as well as a one-time charge of $878,142 related to the rationalization of a number of SKUs and product lines during the first quarter of fiscal 2022.

The changes made during the last quarters have eliminated significant fixed overhead and were aimed at lowering overall costs and making our cost of sale more variable in nature we believe ultimately more predictable.

Our principal operating expenses include staff related expenses, advertising (which includes expenses related to industry distribution and trade shows), sponsorships, affiliate commissions, merchant fees, technology, travel, rent, professional service fees, and business insurance expenses.

The following tables provide information on our operating expenses for the three and ~~nine~~six months ended ~~June 30, 2022~~March 31, 2023 and ~~2021:~~2022:

Our overall operating expenses decreased by ~~$5,582,260~~$6.0 million or ~~40%~~52.7% three months ended ~~June 30, 2022~~March 31, 2023 over the three months ended ~~June 30, 2021 and decreased $5,155,456 or 14% for the nine months ended June 30, 2022 versus the nine months ended June 30, 2021.~~March 31, 2022. The ~~quarter~~year over ~~quarter~~year decrease was primarily driven by management's ongoing efforts to reduce our cost structure including decreases in staff related expenses ($~~1.58~~1.5 million), advertising, marketing, sponsorships and affiliate commission expenses ($~~1.89~~3.6 million) ~~well as a merchant processing fees ($241,000) attributable to (i) on boarding new processors during the third quarter of 2021 at much lower rates as well as (ii) lower volume,~~, reduction in stock expense ($~~1,897,142) which includes $1,485,142 of contra-expense for stock compensation~~0.5 million), reduction in depreciation expense ($0.4 million) related to ~~forfeited RSUs~~the closure of our lab and ~~options,~~manufacturing facility in fiscal 2022, and R&D and regulatory spend ($561,000). These decreases were offset by an increase in other expenses ($420,000) and an increase in the amortization of intangibles ($277,000) that increased this quarter as we began amortizing our trade names as referenced in Note 5. The reduction of $3.67 million for the nine months ended June 30, 2022 versus June 30, 2021 is due to an reduction in compensation ($1.90.1 million), advertising, marketing, sponsorships and affiliate commission expenses ($1.13 million), merchant fees ($867,000), and R&D and Regulatory ($510,000), partially offset by increase in stock compensation ($287,000) as well as depreciation and amortization ($862,000).

Excluding non-cash depreciation, intangible amortization, and non-cash stock expenses, we reduced our cash adjusted operating expenses from ~~$12.7~~$10.1 million to ~~$8.8~~$4.9 million for the three months ended ~~June 30, 2021~~March 31, 2022 and ~~June 30, 2022 respectively and from $34.1 million to $29.2 million the nine months ended June 30, 2021 and June 30, 2022~~March 31, 2023 respectively.

~~While~~Our overall operating expenses, excluding goodwill and intangibles impairment, decreased by $10.4 million or 44.4% for the six months ended March 31, 2023 over the six months ended March 31, 2022. The year over year decrease was primarily driven by management's ongoing efforts to reduce our ~~goal is~~cost structure including decreases in staff related expenses ($2.9 million), advertising, marketing, sponsorships and affiliate commission expenses ($6.5 million), reduction in stock expense ($1.5 million), reduction in depreciation expense ($0.6 million) related to the closure of our lab and manufacturing facility in fiscal 2022, and R&D and regulatory spend ($0.3 million), partially offset by an increase in all other expenses ($0.5 million) and an increase of ($0.9 million) non-cash expense related to accelerated stock compensation amortization tied the termination of a contractual obligation, and an increase in intangible amortization expense.

Excluding non-cash depreciation, intangible amortization, and non-cash stock expenses, and we reduced our cash adjusted operating expenses, excluding goodwill and intangibles impairment, from $22.3 million to $11.1 million for the three months ended March 31, 2022 and March 31, 2023 respectively.

We continue to ~~improve year-over-year performance, management is also~~show strong year over year improvements operating a more disciplined SG&A cost structure. We are very ~~much~~ focused on ~~improving the~~our sequential performance and ~~cash flow~~trends as we are fixated on delivering a profitable quarter. We made significant headway on our cost structure during the second fiscal quarter and were able to stabilize our revenue base while reducing our sequential SG&A costs by $2.2 million, resulting in a sequential reduction of operating losses; from a $4.0 million operating loss in the ~~business. Excluding~~first fiscal quarter to $1.4 million for the ~~stock compensation expense reversal~~second fiscal quarter. We continue to fine tune our operating costs, have sublet a portion of ~~$1,485,142 related~~our warehouse, have engaged brokers to ~~forfeited RSUs~~market and ~~stock~~seek options ~~sequentially we reduced~~on our ~~expenses by $1.68 million. We reduced marketing expense by over $1.0 million while increasing traffic~~corporate office lease, cut un-product services, and continuing to assess alternatives to our websites. Marketing costs will continue to come down during the fourth quarter as we rationalize expiring influencer contracts and focus on the most profitable customer acquisition and retention activities. In the third quarter of 2022, we took further stepsoperating infrastructure to reduce our ~~overall headcount, including~~costs. Since the ~~outsourcing~~beginning of ~~our production facility, resulting in a reduction of of 16 positions (105 employees by June 30, 2022). These steps coupled with the full quarter benefit of reductions during~~ the second quarter, we have onboard new agencies and, fine-tuned some go-to-market strategies, pricing and, been successful ramping profitable Meta advertising and have an exciting line up of new products in the pipeline to launch during the balance of fiscal ~~2022 resulted in over $608,000 in sequential payroll cost savings. Since~~2023. In addition, we have engaged third parties to review and assess strategic alternatives for the reductions occurred over the course of the quarter, we expect to realize additional savings during the fourth quarter of fiscal 2022 as we benefit from a full quarter of savings. We are active in working to rightsize our corporate office and warehouse and believe significant additional savings exist should we be successful in our efforts. We continue to pursue all avenues that will help lower our costs while maintaining our quality, efficacy and service for our customers; position us for revenue growth; and promote a culture of performance and success.Company.

Included in our consolidated operating expenses are expenses associated with our corporate overhead which are not allocated to the operating business unit, including (i) staff related expenses; (ii) accounting and legal expenses; (iii) professional outside services; (iv) travel and entertainment expenses; (v) rent; (vi) business insurance; and (vii) non-cash stock compensation expense.

The following tables provide information on our ~~approximate~~ corporate overhead for the three and ~~nine~~six months ended ~~June 30, 2022~~March 31, 2023 and ~~2021:~~2022:

~~Excluding the $1,485,142 contra-expense for stock compensation related to forfeited RSUs and stock options, our~~Our corporate operating expenses are down quarter over quarter and year over year as a result of our ongoing efforts to reduce our cost structure across the ~~board.~~board as well as a significant reduction in the amount of non-cash stock compensation expense that has been issued year over year.

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

Included in our consolidated operating expenses are expenses associated with Therapeutics including staff related expenses and R&D and regulatory expenses. The Therapeutic operating expenses include research and development activities for therapeutic applications.

The following tables provide information on our approximate corporate overhead for the three and ~~nine~~six months ended ~~June 30, 2022~~March 31, 2023 and ~~2021:~~2022:

The Therapeutic operating expenses include research and development activities for therapeutic applications. This division was formed during the third quarter of fiscal 2021. Our human and pet clinical studies ~~remain underway and we anticipate initial results during the fourth quarter of 2022 and the first quarter of 2023.~~have concluded.

WeThe Company had goodwill at ~~December~~March 31, ~~2021~~2022 of ~~$56,670,970. We perform a Step 0~~$42,772,685. The Company impaired goodwill ~~impairment analysis annually following the steps laid out~~ in ASC 350-20-35-3C. Our annual impairment analysis includes a qualitative assessment to determine if it is necessary to perform the quantitative impairment test. In performing a qualitative assessment, we review eventssubsequent reporting periods of fiscal 2022 and circumstances that could affect the significant inputs used to determine if the fair value is less than the carrying value of goodwill. From time to time we also evaluate goodwill impairment on a quarterly basis if any triggering events have occurred that would require such analysis. For the three months ended December 31, 2021, we performed a Step 0 goodwill impairment analysis on consolidated goodwill and determined that a triggering event had occurred to necessitate performing the quantitative impairment test. After performing the quantitative impairment test in accordance with ASC 350-20-35-3C, we determined that goodwill was fully impaired by $13,898,285. We recorded this impairment to reduce total goodwill on its condensed consolidated balance sheets and has recorded the corresponding impairment expense on its condensed consolidated statement of operations as of December 31, 2021. We performed the same analysis as of JuneSeptember 30, 2022 and determined that goodwill was impaired by $30,776,436. We has recorded this impairment to reduce total goodwill on its condensed consolidated balance sheets and has recorded the corresponding impairment expense on its condensed consolidated statement of operations as of June 30, 2022.

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

We value investments in marketable securities at fair value and record a gain or loss upon sale at each period in realized and unrealized gain (loss) on marketable securities. For the three months ended June 30, 2022 and 2021, we recorded $0 and $2,852, respectively, and for the nine months ended June 30, 2022 and 2021 we recorded $(33,350) and $545,562, respectively, including impairments. The realized loss in 2022 was a result of our shares in Isodiol being delisted while the realized gain in 2021 was driven by the sale of our investment in Formula Four Beverages, Inc. that was previously written to zero in the prior year based on prior information related to the company’s performance and COVID-19 impacts.

During the quarter the Company entered into a separating agreement with its former CEO. The Company booked a onetime restructuring charge of $602,000 related to the cash payments required by separation agreement. This expense was booked as outside of operating expenses and included in a one of our other expenses outside of operating income.

As mentioned in Note 2, the Company sold it manufacturing assets during the quarter for a total value of $1.8 million. The Company realized a net book gain of $88,000 after the net depreciated value and expenses associated with the sale.

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 ~~$702,000~~ $167,000 at ~~June 30, 2022~~March 31, 2023, as compared to ~~$16,200,000~~$276,000 at September 30, ~~2021~~2022, respectively. First quarter adjustment to the the contingent liability comprised of $366,841 associated with the decrease of the value of the Third Marking Period shares prior to their issuance in December 2021, while the remaining $5,329,159 is associated with the decrease in the remaining contingent shares as of December 31, 2021. Second quarter adjustment to the contingent liability comprised of $41,916 associated with the decrease of the value of the Third Marking Period shares prior to their issuance in March 2022, while the remaining $246,915 is associated with the decrease in the remaining contingent shares as of March 31, 2022.During the ~~third~~ ~~quarter of fiscal 2022 we had a decrease in value of $1,943,000 to the contingent liability which is recorded as other income in our consolidated statement of operations for the~~ ~~third~~ quarter of fiscal year 2022. The decrease in value is comprised of $90,792 associated with an increase of the value of the Fourth Marking Period shares prior to their issuance in May 2022, while the remaining $1,839,2072 is associated with the decrease in the remaining contingent shares as of ~~June 30, 2022. We utilize both a market approach and a Monte Carlo simulation in valuing the contingent liability and a key input in both of those methods is the st~~ock price. The main driver of the change in the value of the contingent liability was the decrease of our common stock price, which was $0.44 at June 30, 2022 as compared to $2.08 at September 30, 2021. We expect to continue to record changes in the non-cash contingent liability through the balance of the earnout period.

As described in Note 6 to the notes to the consolidated financial statements appearing elsewhere in the report, the requirement for the earn-out provision for the Twenty Two Earnout Shares ~~is accounted for~~was never met 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 $0 at June 30, 2022 as compared to $416,000 at September 30, ~~2021 respectively.~~2022 the balance of this obligation was zero.

We had cash and cash equivalents on hand of ~~$9,553,670~~$1.7 million and working capital of ~~$14,133,054~~$5.5 million at ~~June 30, 2022~~March 31, 2023 as compared to cash and cash equivalents on hand of ~~$26,411,424~~$6.7 million and working capital of ~~$29,595,214~~$10.7 million at September 30, ~~2021.~~2022. Our current assets decreased approximately ~~45.6%~~12.0% at ~~June 30, 2022~~March 31, 2023 from September 30, ~~2021,~~2022, which is primarily attributable to a decrease in cash used to fund ~~operations.~~operations as well as a one-time non-cash expenses of approximately $885,000 related to previously un-expensed stock amortization related to an terminated contractual obligation, in addition to receiving our $1.0 million investment in Adara back in full. Our current liabilities decreased by ~~17.2%~~15.7% at ~~June 30, 2022~~March 31, 2023 from September 30, ~~2021,~~2022, and is primarily attributable to decreases in accrued expenses and accounts payable.

On March 2, 2023, we entered into a purchase agreement with Keystone Capital Partners, LLC, which provides that subject to the terms and conditions set forth therein, we may sell to Keystone up to 281,934 shares of our common stock, from time to time during the term of the purchase agreement. Under the terms and subject to the satisfaction of the conditions set forth in the purchase agreement for a period of 12 months, subject to a blackout period from April 30, 2023 through July 14, 2023 under the terms of our recent underwritten public offering. the Company has the right, but not the obligation, to sell to Keystone, and Keystone is obligated to purchase, up to 281,934 shares of common stock. Upon entering into the Purchase Agreement the Company agreed to issue to Keystone 392,282 shares of common stock of the Company as the Commitment Shares as consideration for Keystone’s commitment to purchase shares of common stock upon the Company’s direction under the purchase agreement. Subsequent to the period covered by this report, commencing on April 19, 2023 and through April 25, 2023, we received gross proceeds of approximately $36,000 from sales of 8,888 shares of our common stock to Keystone. In addition, subsequent to the period covered by this report, on May 3, 2023 we closed an underwritten public offering of 30,000 shares of our common stock at a public offering price of $2.10 per share. Net proceeds from the offering after deducting underwriting discounts and commissions and offering expenses were approximately $2.5 million.

As of May 11, 2023, the Company had approximately $4.2 million of cash. The Company has nominal debt. As of May 12, 2023, the Company also has up to 273,044 shares available to be sold under its agreement with Keystone, which it may drawdown on such agreement, subject to trading volume requirements of our common stock and further subject to the blackout period referenced above.

Management has concluded that substantial doubt exists about our ability to continue as a going concern for the next twelve months from the date hereof. Our current capital resources, including our equity line of credit with Keystone may not be sufficient to support our planned operations for the next twelve months from the date hereof. We believe that upon receipt of approximately $2.5 million in net proceeds pursuant to the underwritten public offering completed on May 3, 2023 (see Note 16 of the accompanying financials statement for more information), after deducting the underwriting fees and estimated offering expenses payable by us, that our cash and ~~accrued expenses.~~cash equivalents on hand should be sufficient to fund operations through the end of the fiscal year if not longer. However, depending upon our operating results and cash burn over the next four months, we may be required to raise additional capital to fund operations or scale back our operations or dividends. We expect to continue to incur losses for the foreseeable future as we continue our efforts to increase sales, develop additional products, seek acquisitions and mergers, continue research and development, reduce operating expenses and attempt to achieve profitability. Furthermore, in the event we identify an acquisition candidate, such acquisition may require immediate capital to close such acquisition. These factors, individually and collectively, raise substantial doubt about our ability to continue as a going concern, and therefore, could materially limit our ability to raise additional funds through an issuance of debt or equity securities or otherwise.

During the three and ~~nine~~six months ended ~~June 30, 2022~~March 31, 2023 we used cash primarily to fund our operations.

We do not have any commitments for capital expenditures. We have a commitment for cumulative cash dividends at an annual rate of 8% payable monthly in arrears for the prior month to our preferred shareholders. We have ~~multiple~~one endorsement ~~or sponsorship agreements for varying time periods up~~agreement that runs through ~~December 2022 and provide~~February 2025 that provides for financial commitments from the Company based on performance/participation (see Note 11 Commitments and Contingencies).

~~While the~~The Company is taking strong action and believes that it can execute ~~it's~~its strategy and path to profitability ~~within it's balance sheet, and in~~as well as its ability to raise additional funds, but 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~~through the ~~twelve months subsequent to the issuance~~end of ~~these quarterly financial statements.~~fiscal 2023. The Company’s ability to continue as a going concern is dependent upon its ability to improve profitability and the ability to acquire additional funding. These and other factors raise potential concern about the Company’s ability to continue as a going concern within twelve months after the date that the quarterly financial statements are issued. These 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~~concern.

Our goal from a liquidity perspective is to use operating cash flows to fund day to day operations and we have not met this goal as cash flow from operations has been a net use of ~~$3.7~~$1.7 million and ~~$4.6 million (excluding the reclassification of $939,826 of the SBA loan to short term liabilities) for the three months ended June 30, 2022 and 2021, respectively and $16.8 million and $8.3~~$5.3 million for the ~~nine~~six months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. Management believes the quarterly cash consumption ~~will~~should continue to improve in subsequent ~~quarters and we have sufficient capital to execute our plan to profitability.~~

Adjusted EBITDA for the three and ~~nine~~six months ended ~~June 30,~~March 31, 2023 and March 31, 2022 ~~and June 30, 2021~~ is as follows:

Adjusted EBITDA for the quarter ending June 2022 improved by over $2.5 million over prior year as a result of over $4.0 million in improvement operating costs that were partially offset by a reduction in revenue and corresponding gross profit. Year to date Adjusted EBITDA declined by $2.5 million mostly related to a reduction in gross profit that was partially offset by reduction in operating costs. This is the fourth consecutive quarter of Adjusted EBITDA improvement and a $1 million improvement over the prior sequential quarter. Management expects continuous improvement in future quarters as a result of ongoing improvements in operating costs and improving revenue.

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

Please see Part II, Item 7 – Critical Accounting Policies appearing in our ~~2021~~2022 10-K for the critical accounting policies we believe involve the more significant judgments and estimates used in the preparation of our consolidated financial statements and are the most critical to aid you in fully understanding and evaluating our reported financial results. Management considers these policies critical because they are both important to the portrayal of our financial condition and operating results, and they require management to make judgments and estimates about inherently uncertain matters.

Please see Note 1 – Organization and Summary of Significant Accounting Policies appearing in the consolidated financial statements included in this report for information on accounting pronouncements.

As of the date of this report, we have no undisclosed off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term “off-balance sheet arrangement” generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with us is a party, under which we have any obligation arising under a guarantee contract, derivative instrument or variable interest or a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.

Evaluation of Disclosure Controls and Procedures. We maintain “disclosure controls and procedures” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934. In designing and evaluating our disclosure controls and procedures, our management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Based on their evaluation as of the end of the period covered by this report, our interim principal executive officer and Chief Financial Officer has concluded that our disclosure controls and procedures were effective to ensure that the information relating to our company, required to be disclosed in our SEC reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our interim principal executive officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

We desire to take advantage of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Accordingly, we incorporate by reference the risk factors disclosed in Part I, Item 1A of our ~~2021~~2022 10-K.

Except for those unregistered securities previously disclosed in reports filed with the SEC during the period covered by this report and provided below, we have not sold any securities without registration under the Securities Act during the period covered by this report. The issuances below were exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. The shares contain legends restricting their transferability absent registration or applicable exemption.

In January of 2023, the Company issued 2,223 shares of common stock to Twenty Two Capital as the final obligation under the 2021 acquisition agreement upon the expiration of the indemnification period.

~~On August 9, 2022, T. Ronan Kennedy,~~The Auditor Firm ID for our ~~Chief Financial Officer and Chief Operating Officer, was appointed interim principal executive officer.~~

Effective August 9, 2022, Dr. Sybil Swift, a key employee of the Company, was appointed to serve on the board of directors, filling a vacancy on the board, in accordance with the bylaws of the Company. Dr. Swift has served as the Company’s Vice President for Scientific & Regulatory Affairs and the co-chair of cbdMD Therapeutics, LLC, since March of 2021. She initially joined the Company as a Regulatory Consultant in Jan 2021. Prior to joining the Company, from Jan 2020 to Dec 2020, Dr. Swift was the Senior Vice President for Scientific & Regulatory Affairs at the Natural Products Association. Dr. Swift served in multiple roles during her 5 years within the U.S. Food and Drug Administration's Office of Dietary Supplement Programs; the last role was the Associate Director for Research and Strategy. As Associate Director, Dr. Swift directed the office’s research portfolio and was responsible for ensuring alignment between its science, research, compliance, enforcement, and policy initiatives. Dr. Swift was also the co-chair of the Botanical Safety Consortium, a collaboration between scientists from government agencies, academia and industry. Dr. Swift earned her Ph.D. in Nutrition has and M.S. in Kinesiology at Texas A&M University. Sheexternal auditors, Cherry Bekaert LLP, is currently a member of the American Society for Nutrition, the Global Retailer & Manufacturer Alliance (GRMA), the Natural Products Association (NPA) ComPLI Committee, the Council for Federal Cannabis Regulation's (CFCR) SRAC. Dr. Swift is not considered an “independent director” within the meaning of Section 803 of the NYSE American Company Guide. As an employee director, she will not be appointed to any committee of our board of directors. She shall receive a restricted stock grant of 5,000 shares of our common stock and five options to purchase 30,000 shares of our common stock, exercisable at $0.568 per share. The restricted stock grant and options vest on the date of issuance. In keeping with the Company’s stated commitment to increase diversity on the board which it believes supports the Company’s core values and is an essential measure of sound governance and critical to a well-functioning board, the board of directors recognizes that Dr. Swift is a minority.

As previously reported, on December 20, 2018 we closed that certain Merger Agreement, as amended, by and among our company, our subsidiaries and Cure Based Development, LLC (“Cure Based Development”). Pursuant to the terms of the Merger Agreement, as partial merger consideration CBD Holding, LLC (“CBDH”), the then sole member of Cure Based Development, was entitled to receive (the “Earnout Rights”) up to 15,250,000 additional shares of our common stock (the “~~Earnout Shares~~”) upon the satisfaction of certain aggregate net revenue criteria within 60 months (marking periods) following the Closing Date. The possible issuance of the Earnout Shares was approved by our shareholders in April 2019. In February 2020 CBDH distributed the Earnout Rights to its members which included affiliates of Martin A. Sumichrast (our former officer and director) and R. Scott Coffman (a current member of our board of directors and former officer). Following the completion of the June 30, 2022 quarter within the third marking period, and in accordance with the terms of the Merger Agreement, as amended, we determined that the net revenues for the June 30, 2022 quarter within the third marking period were $8,592,892 and on August 9, 2022 we issued the members an aggregate of 409,505 shares of our common stock. The recipients were accredited investors and the issuances were exempt from registration under the Securities Act of 1933, as amended, in reliance on an exemption provided by Section 4(a)(2) of that act.

+ Exhibits and/or schedules have been omitted. The Company hereby agrees to furnish to the staff of the Securities and Exchange Commission upon request any omitted information.

* This exhibit is being furnished rather than filed and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S-K.

Copies of this report (including the financial statements) and any of the exhibits referred to above will be furnished at no cost to our stockholders who make a written request to our Corporate Secretary at cbdMD, Inc. 8845 Red Oak Boulevard, Charlotte, NC 28217.

Pursuant to the requirements 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.

		Page No

PART I-FINANCIAL INFORMATION

ITEM 1.	Financial Statements.	5

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	29

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk.	3637

ITEM 4.	Controls and Procedures.	3637

PART II - OTHER INFORMATION

ITEM 1.	Legal Proceedings.	3738

ITEM 1A.	Risk Factors.	3738

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	3738

ITEM 3.	Defaults Upon Senior Securities.	3738

ITEM 4.	Mine Safety Disclosures.	3738

ITEM 5.	Other Information.	3738

ITEM 6.	Exhibits.	3839

	(Unaudited)				(Unaudited)
	*June 30,*		*September 30,*		*March 31,*		*September 30,*
	*2022*		*2021*		*2023*		*2022*
Assets

Current assets:
Cash and cash equivalents	$	9,553,670	$	26,411,424	$	1,718,552	$	6,720,234
Accounts receivable		1,630,233		1,113,372		1,161,553		1,447,831
Accounts receivable – discontinued operations		1,375		10,967		-		1,375
Marketable securities	��	0		33,351
Investment other securities		1,000,000		1,000,000		-		1,000,000
Inventory		4,318,204		5,021,867		4,531,890		4,767,373
Inventory prepaid		548,580		551,519
Prepaid sponsorship		1,749,083		1,212,682		92,755		1,372,845
Prepaid expenses and other current assets		1,057,183		1,147,178		2,641,452		701,945
Total current assets		19,858,328		36,502,360		10,146,202		16,011,603

Other assets:
Property and equipment, net		775,477		2,561,574		798,177		823,310
Operating lease assets		4,751,192		5,614,960		3,921,195		4,477,841
Deposits for facilities		244,606		529,583		138,708		244,606
Intangible assets		18,111,903		23,003,929		17,279,840		17,834,549
Goodwill		11,996,249		56,670,970
Investment other securities, noncurrent		1,400,000		0
Investment in other securities, noncurrent						1,400,000		1,400,000
Total other assets		37,279,427		88,381,016		23,537,920		24,780,306

Total assets	$	57,137,755	$	124,883,376	$	33,684,122	$	40,791,909

	(Unaudited)						(Unaudited)
	*June 30,*			*September 30,*			*March 31,*			*September 30,*
	*2022*			*2021*			*2023*			*2022*
Liabilities and shareholders' equity

Current liabilities:
Accounts payable	$	2,310,244		$	2,978,914		$	1,337,611		$	2,036,558
Accrued expenses		2,250,549			2,727,612			2,107,179			2,060,762
Operating leases – current portion		1,155,020			1,151,150			1,227,249			1,178,683
Note payable		9,461			59,470			7,375			9,609
Total current liabilities		5,725,274			6,917,146			4,679,414			5,285,612

Long term liabilities:
Long term liabilities		127,949			108,985			-			125,491
Operating leases - long term portion		3,982,532			4,859,058			3,051,484			3,680,375
Contingent liability		702,000			9,856,000			167,000			276,000
Total long term liabilities		4,812,481			14,824,043			3,218,484			4,081,866

Total liabilities		10,537,755			21,741,189			7,897,898			9,367,478

Commitments and Contingencies (Note 11)

cbdMD, Inc. shareholders' equity:
Preferred stock, authorized 50,000,000 shares, $0.001
par value, 5,000,000 and 5,000,000 shares issued and outstanding, respectively		5,000			5,000			5,000			5,000
Common stock, authorized 150,000,000 shares, $0.001
par value, 59,946,090 and 57,783,340 shares issued and outstanding, respectively		59,946			57,783
par value, 1,456,693 and 1,348,125 shares issued and outstanding, respectively								1,457			1,348
Additional paid in capital		178,326,685			176,417,269			180,497,196			178,841,646
Accumulated deficit		(131,791,631	)		(73,337,865	)		(154,717,429	)		(147,423,563	)
Total cbdMD, Inc. shareholders' equity		46,600,000			103,142,187			25,786,224			31,424,431

Total liabilities and shareholders' equity	$	57,137,755		$	124,883,376		$	33,684,122		$	40,791,909

	*2022*		*2021*		*2023*		*2022*

Cash Payments for:
Interest expense	$	6,817	$	23,573	$	2,638	$	4,173

Non-cash financial/investing activities:
Issuance of Contingent earnout shares:	$	908,000	$	12,596,089	$	-	$	730,000
Warrants issued to representative	$	0	$	254,950

	*Three Months*					*Three Months*					*Three Months*					*Three Months*
	*Ended*					*Ended*					*Ended*					*Ended*
	*June 30,*					*June 30,*					*March 31,*					*March 31,*
	*2022*		*% of total*			*2021*		*% of total*			*2023*		*% of total*			*2022*		*% of total*

E-commerce sales											$	4,889,860		78.4	%	$	6,580,554		68.3	%
Wholesale sales	$	2,079,592		24.2	%	$	2,740,523		26.0	%		1,350,160		21.6	%		3,048,332		31.7	%
E-commerce sales		6,513,301		75.8	%		7,820,000		74.0	%
Total Net Sales	$	8,592,893		100.0	%	$	10,560,523		100.0	%	$	6,240,020		100.0	%	$	9,628,886		100.0	%

	●	our history of ~~losses;~~losses, potential liquidity concerns, and our ability to continue as a going concern;

	●	~~the continuing impact of COVID-19 on our company;~~

	●	our ability to acquire new customers at a profitable rate;

	●	our reliance on third party raw material suppliers and manufacturers and compounders;

	●	our reliance on third party compliance with our supplier verification program and testing protocols; and

	●	federal laws as well as FDA or DEA interpretation of existing regulation;

	●	state laws pertaining to industrial hemp and their derivatives;

	●	costs to us for compliance with laws and the risks of increased litigation; and

	●	the ~~impact of changes in the fair value of our contingent liabilities associated~~risks for failing to comply with the ~~Earnout Shares;~~continued listing standards of the NYSE American;

	●	~~dilution to our shareholders upon the issuance~~availability of ~~the Earnout Shares;~~sufficient liquidity;

	●	the designations, rights and preferences of our 8% Series A Cumulative Convertible Preferred Stock;

	●	dilution upon the issuance of shares of common stock underlying outstanding warrants, options and the Series A Convertible Preferred Stock; and

	●	~~voting control held by our directors and their affiliates.~~

	-	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.

	●	Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

	●	Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

	●	Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

	*In Active*
	*Markets for*			*Significant Other*		*Significant*
	*Identical Assets*			*Observable*		*Unobservable*
	*and Liabilities*			*Inputs*		*Inputs*
	*(Level 1)*			*(Level 2)*		*(Level 3)*		*Total*
Investment other securities	$	-		$	-	$	1,000,000	$	1,000,000

Balance at September 30, 2021		33,351			0		1,000,000		1,033,351
Change in value of equities		(33,351	)		0		0		(33,351	)
Additional Investment		-			-		-		-
Balance at December 31, 2021	$	0		$	0	$	1,000,000	$	1,000,000
Change in value of equities		-			-		-		-
Additional Investment		-			-		-
Balance at March 31, 2022	$	0		$	0	$	1,000,000	$	1,000,000
Change in value of equities		-			-		-		-
Additional Investment		0			0		1,400,000		1,400,000
Balance at June 30, 2022	$	0		$	0	$	2,400,000	$	2,400,000

Aggregate Net Revenues		Shares Issued/ Each $ of Aggregate Net Revenue Ratio

$1 - ~~$20,000,000~~$20,000,000		~~.190625~~0.00423615
$20,000,001 - ~~$60,000,000~~$60,000,000		~~.0953125~~0.002118075
$60,000,001 - ~~$140,000,000~~$140,000,000		~~.04765625~~0.001059038
$140,000,001 - ~~$300,000,000~~$300,000,000		~~.23828125~~0.000529519

	June 30,
	2021
Weighted average exercise price	$	3.74
Risk free interest rate		0.39	%
Volatility		103.42	%
Expected term (in years)		2.8
Dividend yield	None

						*Weighted-average*									*Weighted-average*
						*remaining*		*Aggregate*							*remaining*		*Aggregate*
				*Weighted-average*		*contractual term*		*intrinsic value*					*Weighted-average*		*contractual term*		*intrinsic value*
	*Number of shares*			*exercise price*		*(in years)*		*(in thousands)*		*Number of shares*			*exercise price*		*(in years)*		*(in thousands)*
Outstanding at September 30, 2021		2,702,500		$	4.42		5.13	$	-
Outstanding at September 30, 2022											55,612		$	151.20		4.55	$	-
Granted		1,030,000			0.99				-		7,223			11.70		-		-
Exercised		-			-						-			-		-		-
Forfeited		(930,000	)		3.59						(22,889	)		85.50		-		-
Outstanding at June 30, 2022		2,802,500			3.43		3.39		-
Outstanding at March 31, 2023											39,946			148.50		4.15		-

Exercisable at June 30, 2022		1,822,500		$	4.19		4.63	$	-
Exercisable at March 31, 2023											34,389		$	151.20		4.23	$	-

			Weighted-average
	Number of shares		exercise price		Expiration
Exercisable at $4.00 per share		70,500		4.00	September 2022
Exercisable at $7.50 per share		100,000		7.50	October 2022
Exercisable at $4.375 per share		51,429		4.375	September 2023
Exercisable at $7.50 per share		60,000		7.50	May 2024
Exercisable at $3.9125 per share		47,822		3.9125	October 2024
Exercisable at $1.25 per share		36,682		1.25	January 2025
Exercisable at $3.74 per share		150,502		3.74	December 2025
Exercisable at $3.75 per share		143,482		3.75	June 2026
		660,417	$	4.60

For the year ended September 30,
2022	$	337,267
2023		1,380,204
2024		1,421,610
2025		1,159,949
Thereafter		1,372,862
Total future lease payments		5,671,892
Less interest		(534,340	)
Total lease liabilities	$	5,137,552

For the year ended September 30,
2023	$	692,277
2024		1,421,610
2025		1,159,949
Thereafter		1,372,862
Total future lease payments		4,646,698
Less interest		(367,965	)
Total lease liabilities	$	4,278,733

	Three Months Ended					Nine Months Ended
	June 30,			June 30,		June 30,			June 30,
	2022			2021		2022			2021
Basic:
Net loss continuing operations	$	(31,634,143	)	$	1,537,288	$	(55,453,289	)	$	(20,368,808	)
Preferred dividends paid		1,000,501			560,281		3,001,503			1,220,610
Net (loss) income continuing operations adjusted for preferred dividend		(32,634,644	)		977,007		(58,454,792	)		(21,589,418	)
Net (loss) income attributable to cbdMD Inc. common shareholders		(32,634,644	)		977,007		(58,454,792	)		(21,589,418	)

Diluted:
Net (loss) income continuing operations		(32,634,644	)		977,007		(58,454,792	)		(21,589,418	)
Net (loss) income continuing operations		(32,634,644	)		977,007		(58,454,792	)		(21,589,418	)

Shares used in computing basic earnings per share		59,316,762			56,676,326		59,229,208			54,089,263
Effect of dilutive securities:
Options		0			64,833		0			0
Warrants		0			22,884		0			0
Convertible preferred shares		0			4,667,600		0			0
Shares used in computing diluted earnings per share		59,316,762			61,431,643		59,229,208			54,089,263

Earnings per share Basic:
Continued operations		(0.55	)		0.02		(0.99	)		(0.40	)
Basic earnings per share		(0.55	)		0.02		(0.99	)		(0.40	)

Earnings per share Diluted:					-		-
Continued operations		(0.55	)		0.02		(0.99	)		(0.40	)
Diluted earnings per share		(0.55	)		0.02		(0.99	)		(0.40	)

	*Three Months Ended*						*Six Months Ended*
	*March 31,*			*March 31,*			*March 31,*			*March 31,*
	*2023*			*2022*			*2023*			*2022*
Basic and diluted:
Net loss continuing operations	$	(1,336,802	)	$	(4,657,215	)	$	(5,292,864	)	$	(23,818,120	)
Preferred dividends paid		1,000,500			1,000,502			2,001,002			2,001,002
Net loss adjusted for preferred dividend		(2,337,302	)		(5,657,717	)		(7,293,866	)		(25,819,122	)
Net loss attributable to cbdMD Inc. common shareholders		(2,337,302	)		(5,657,717	)		(7,293,866	)		(25,819,122	)

Shares used in computing basic earnings per share		1,345,589			1,310,378			1,343,394			1,312,755
Shares used in computing diluted earnings per share		1,345,589			1,310,378			1,343,394			1,312,755

Earnings per share Basic:
Basic earnings per share		(1.74	)		(4.32	)		(5.43	)		(19.67	)

Earnings per share Diluted:					-			-
Diluted earnings per share		(1.74	)		(4.32	)		(5.43	)		(19.67	)

	●	Product Innovation:~~Our goal~~ We believe innovation is key to ~~provide our customers superior~~the long-term success of any consumer brand. We invest in new product development and brand extension that we believe will (i) give us a competitive advantage in the marketplace; (ii) attract new customers; and (iii) open up additional revenue opportunities. During fiscal 2022 we launched an industry first NSF for Sport product line with World Anti-Doping Association (WADA) level assurance, a line of Delta 9 gummies and microdose products, along with a number of functional ~~based~~gummies and capsules. Based on customer feedback and preliminary clinicals we launched a new line of high-strength CBD products ~~with greater efficacy, absorption~~at the end of September 2022 and ~~claims. Weregularly assess and evaluate our product portfolio, and devote resources to ongoing research and development processes with~~further launched cbdMD Max for Pain at the ~~goal~~end of ~~expanding our product offerings to meet these expanding consumer demands.~~calendar 2022. We have a robust pipeline of products ~~set~~ to launch during fiscal 2022. In February 2022 we launched our line of functional gummies and curcumin capsules, followed by an initial rollout of several full spectrum gummies starting in March 2022 and a 2018 Farm Act compliant hemp extracted Delta 9 product assortment in April 2022, and our mood and focus products in May 2022.

	●	~~Expand our revenue channels:~~We continued to pursue relationships with a number of key traditional retail accounts and believe our top brand awareness, and effective marketing position us as the CBD partner for key traditional retail accounts as this channel has continued to normalize. During the second ~~quarter~~half of 2023 that we ~~added a number of~~believe will open up additional distribution channels as well as grow our top selling ingestible SKUs throughout GNC’s retail footprint. We continue to have discussions with key retailers and have expanded our sales organization to include deep channel-specific experience, and expect to have additional announcement in calendar 2022.addressable market.

	●	International Expansion:We continue to explore sales into markets outside of the United States. Our products are currently available in 31countries. We generally partner with local wholesalers and local legal counsel who can help navigate the laws and regulatory requirements within their jurisdiction. We continue to pursue key wholesale accounts in ~~a number of~~several international markets and are gaining market share in Central America through our sanitary registration approvals. We are also expanding our E-commerce business to consumers in the United Kingdom (U.K.)~~. In March 2021, we officially filed our Novel Food Application with the United Kingdom’s Food Standards Agency (“FSA”)~~ and ~~the European Union’s (“E.U.”) Food Safety Agency (“EFSA”). In~~in March 2022, we received notice that the products we submitted have been validated in the UK as well as in the EU. based warehouse. During August 2021 we signed an exclusive agreement to enter the Israeli Market with IM Cannabis Corp. a multi-country operator in the medical and adult- use recreational cannabis sector with operations in Israel, Germany and Canada. In March 2022, the Israeli Health Ministry announced it has begun the process of exempting CBD from its banned substances list and will be permitting CBD to be included into food and cosmetic products. We ~~anticipate additional international announcements before the end of the calendar year.~~

	●	~~Expand our Additional Brands:~~~~During fiscal 2021 we took additional steps to grow the Paw CBD business which included advertising on TV,~~introducing our Paw CBD rewards program and introducing a Paw CBD subscription program which offers additional savings to customers that enroll in the service. During 2021 we launched cbdMD Botanicals as a separate brand and continue to ~~build out the product portfolio and distribution channels.~~

	●	~~Maintain our sponsorships toward targeted segments:~~~~We have had significant success with attracting high profile sponsors and influencers andexpect~~work on strategies to continue to ~~assess~~expand in the ~~segments~~EU, Israel and other major markets which is primarily driven by the regulatory environment. In late fiscal year 2022, we ~~have covered with a focus on maintaining key sponsorships~~registered and ~~influencers which~~began selling products in Japan and we are ~~producing~~seeing growth during the ~~largest visibility and responsiveness.~~early part of fiscal 2023.

	Three Months Ended June 30,
	2022			2021			Change
Total net sales	$	8,592,893		$	10,560,523		$	(1,967,630	)
Cost of sales		2,660,185			3,370,952			(710,767	)
Gross profit as a percentage of net sales		69.0	%		68.1	%		1.0	%
Operating expenses		8,282,931			13,865,191			(5,582,260	)
Impairment of goodwill and other intangible assets		30,776,436			-			30,776,436
Operating income from operations		(33,126,659	)		(6,675,620	)		(26,451,039	)
(Increase) decrease on contingent liability		1,943,000			6,871,000			(4,928,000	)
Net (loss) income before taxes		(31,634,143	)		1,640,288			(33,274,431	)
Net (loss) income attributable to cbdMD Inc. common shareholders	$	(32,634,644	)	$	977,007		$	(33,611,651	)

	Three Months Ended March 31,
	2023			2022			Change
Total net sales	$	6,240,020		$	9,628,886		$	(3,388,866	)
Cost of sales		2,224,512			3,186,564			(962,052	)
Gross profit as a percentage of net sales		64.4	%		66.9	%		-2.6	%
Operating expenses		5,416,151			11,452,700			(6,036,549	)
Operating loss from operations		(1,400,643	)		(5,010,378	)		3,609,735
Decrease on contingent liability		48,000			353,000			(305,000	)
Net loss before taxes		(1,336,802	)		(4,657,215	)		3,320,413
Net loss attributable to cbdMD Inc. common shareholders	$	(2,337,302	)	$	(5,657,717	)	$	3,320,415

	Nine Months Ended June 30,									Six Months Ended March 31,
	2022			2021			Change			2023			2022			Change
Total net sales	$	27,543,601		$	34,687,436		$	(7,143,835	)	$	12,325,237		$	18,950,708		$	(6,625,471	)
Cost of sales		10,176,085			10,444,353			(268,268	)		4,741,964			7,514,874			(2,772,910	)
Gross profit as a percentage of net sales		63.1	%		69.9	%		-6.8	%		61.5	%		60.3	%		1.2	%
Operating expenses		31,690,915			36,846,371			(5,155,456	)		13,030,097			23,407,984			(10,377,887	)
Impairment of goodwill and other intangible assets		48,959,721			-			48,959,721			-			18,183,285			(18,183,285	)
Operating income from operations		(63,283,120	)		(12,603,288	)		(50,679,832	)
(Increase) decrease on contingent liability		8,246,000			(10,500,000	)		18,746,000
Operating loss from operations											(5,446,824	)		(30,155,435	)		6,525,326
Decrease on contingent liability											109,000			6,303,000			(6,194,000	)
Net loss before taxes		(55,453,289	)		(21,133,808	)		(34,319,481	)		(5,292,864	)		(23,818,120	)		18,491,904
Net loss attributable to cbdMD Inc. common shareholders	$	(58,454,792	)	$	(21,589,418	)	$	(36,865,374	)	$	(7,293,866	)	$	(25,819,122	)	$	18,491,904

	Three Months					Three Months					Three Months					Three Months
	Ended					Ended					Ended					Ended
	June 30,					June 30,					March 31,					March 31,
	2022		% of total			2021		% of total			2023		% of total			2022		% of total
E-commerce sales											$	4,889,860		78.4	%	$	6,580,554		68.3	%
Wholesale sales	$	2,079,592		24.2	%	$	2,740,523		26.0	%		1,350,160		21.6	%		3,048,332		31.7	%
E-commerce sales		6,513,301		75.8	%		7,820,000		74.0	%
Total Net Sales	$	8,592,893				$	10,560,523				$	6,240,020				$	9,628,886

	Nine Months					Nine Months					Six Months					Six Months
	Ended					Ended					Ended					Ended
	June 30,					June 30,					March 31,					March 31,
	2022		% of total			2021		% of total			2023		% of total			2022		% of total

E-commerce sales											$	9,796,064		79.5	%	$	13,696,641		72.3	%
Wholesale sales	$	7,382,880		26.8	%	$	9,049,068		26.1	%	$	2,529,173		20.5	%		5,254,067		27.7	%
E-commerce sales		20,160,721		73.2	%		25,638,368		73.9	%
Total Net Sales	$	27,543,601				$	34,687,436				$	12,325,237				$	18,950,708

	Three months			Three months			Six Months			Six Months
	Ended			Ended			Ended			Ended
	March 31,			March 31,			March 31,			March 31,
	2023			2022			2023			2022
(Unaudited)

GAAP (loss) from operations	$	(1,400,643	)	$	(5,010,378	)	$	(5,446,824	)	$	(30,155,435	)
Adjustments:
Depreciation & Amortization		379,744			600,750			757,210			600,750
Employee and director stock compensation (1)		117,821			754,207			254,965			1,634,363
Other non-cash stock compensation for services (2)					-			884,892			-
Inventory adjustment(3)		-			-			-			878,142
Impairment of Goodwill and other intangible assets (4)		-						-			18,029,000
Accrual for severance		-			22,500			129,761			22,500
a360 non-cash trade credit		107,608			-			107,608			-
Accrual / expenses for discretionary bonus		-			-			-			150,000
Non-GAAP adjusted EBITDA	$	(795,470	)	$	(3,632,921	)	$	(3,312,387	)	$	(8,840,680	)