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, ~~2021~~2022

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

	or

☐	~~TRANSITION~~~~REPORT~~~~PURSUANT~~TO~~SECTION~~13OR~~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~~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.

~~57,273,815~~60,555,595 shares of common stock are issued and outstanding as of August ~~12, 2021.~~11, 2022.

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 ~~2019”~~2021” refers to the year ended September 30, ~~2019,~~2021, “fiscal ~~2020” refers to the year ended September 30, 2020, “fiscal 2021”~~2022” refers to the fiscal year ending September 30, ~~2021, “first quarter of 2020” refers to the three months ended December 31, 2019,~~2022, “first quarter of 2021” refers to the three months ended December 31, 2020, ~~“second~~“first quarter of ~~2020”~~2022” refers to the three months ended ~~March~~December 31, ~~2020,~~2021, “second quarter of 2021” refers to the three months ended March 31, 2021, “second quarter of 2022” refers to the three months ended March 31, 2022, “third quarter of ~~2020”~~2021” refers to the three months ended June 30, 2021, and “third quarter of ~~2021”~~2022” refers to the three months ended June 30, ~~2021.~~2022.

We maintain a corporate website at ~~www.cbdmd.com~~.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~~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, ~~2020~~2021 as filed with the Securities and Exchange Commission (the “SEC”) on December ~~22, 2020~~17, 2021 (the ~~“2020~~“2021 10-K”), our Quarterly Report on Form 10-Q for the period ended December 31, 2020 as filed with the SEC on February 9, 2021, and our Quarterly Report on Form 10-Q for the period ended March 31, 2021 as filed with the SEC on May 12, 2021 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*
	*Ended*			*Ended*			*Ended*			*Ended*
	*June 30,*			*June 30,*			*June 30,*			*June 30,*
	*2022*			*2021*			*2022*			*2021*

Gross Sales	$	8,868,093		$	11,352,585		$	28,673,718		$	36,941,917
Allowances		(275,200	)		(792,062	)		(1,130,117	)		(2,254,481	)
Total Net Sales		8,592,893			10,560,523			27,543,601			34,687,436
Cost of sales		2,660,185			3,370,952			10,176,085			10,444,353
Gross Profit		5,932,708			7,189,571			17,367,516			24,243,083

Operating expenses		8,282,931			13,865,191			31,690,915			36,846,371
Impairment of goodwill and other intangible assets		30,776,436			0			48,959,721			0
Loss from operations		(33,126,659	)		(6,675,620	)		(63,283,120	)		(12,603,288	)
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
Other income		64,390			0			137,377			0
Interest expense		(1,551	)		(2,582	)		(6,871	)		(23,573	)
Loss before provision for income taxes		(31,634,143	)		1,640,288			(55,453,289	)		(21,133,808	)

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	)

Preferred dividends		1,000,501			560,281			3,001,503			1,220,610

Net (Loss) Income attributable to cbdMD, Inc. common shareholders	$	(32,634,644	)	$	977,007		$	(58,454,792	)	$	(21,589,418	)

Net (Loss) Income per share:
Basic earnings per share		(0.55	)		0.02			(0.99	)		(0.40	)
Diluted earnings per share		(0.55	)		0.02			(0.99	)		(0.40	)
Weighted average number of shares Basic:		59,316,762			56,676,326			59,229,208			54,089,263
Weighted average number of shares Diluted:		59,316,762			61,431,643			59,229,208			54,089,263

	*Nine Months*			*Nine Months*
	*Ended*			*Ended*
	*June 30,*			*June 30,*
	*2022*			*2021*
Cash flows from operating activities:
Net Loss	$	(55,453,289	)	$	(20,368,808	)
Adjustments to reconcile net loss to net cash used by operating activities:
Stock based compensation		424,455			807,523
Restricted stock expense		504,650			1,137,583
Marketing stock amortization		717,174			660,232
Issuance of stock / warrants for service		0			98,605
Inventory and materials impairment		878,142			0
Intangibles Amortization		607,025			0
Depreciation		770,335			719,856
Impairment of goodwill and other intangible assets		48,959,721			0
Increase/(Decrease) in contingent liability		(8,246,000	)		10,500,000
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	)
Amortization of operating lease asset		863,768			922,057
Changes in operating assets and liabilities:
Accounts receivable		(116,861	)		(556,116	)
Deposits		284,977			261,125
Inventory		(174,479	)		(135,058	)
Prepaid inventory		2,939			(385,410	)
Prepaid expenses and other current assets		(1,088,579	)		(141,393	)
Accounts payable and accrued expenses		(1,149,456	)		(603,216	)
Operating lease liability		(872,656	)		(846,914	)
Deferred revenue / customer deposits		3,723			4,478
Collection on discontinued operations accounts receivable		9,592			428,667
Deferred tax liability		0			(765,000	)
Cash used by operating activities		(13,041,469	)		(9,759,273	)
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	)
Cash provided (used) by investing activities		(784,238	)		(521,572	)
Cash flows from financing activities:
Proceeds from issuance of preferred stock		0			15,798,115
Note payable		(31,044	)		(137,292	)
Preferred dividend distribution		(3,001,003	)		(1,220,610	)
Cash provided by financing activities		(3,032,047	)		14,440,213
Net increase (decrease) in cash		(16,857,754	)		4,159,368
Cash and cash equivalents, beginning of period		26,411,424			14,824,644
Cash and cash equivalents, end of period	$	9,553,670		$	18,984,012

									*Additional*
	*Common Stock*				*Preferred Stock*				*Paid in*			*Accumulated*
	*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
Issuance of Common stock		494,630		495		0		0		404,505			0			405,000
Issuance of options for share based compensation		-		0		-		0		505,466			0			505,466
Issuance of restricted stock for share based compensation		-		0		-		0		508,754			0			508,754
Preferred dividend		-		0		-		0		0			(1,000,502	)		(1,000,502	)
Net Loss		-		0		-		0		0			(19,160,904	)		(19,160,904	)
Balance, December 31, 2021		58,277,970	$	58,278		5,000,000		5,000	$	177,835,993		$	(93,499,271	)	$	84,400,000
Issuance of Common stock		1,074,240		1,074		0		0		659,926			0			661,000
Issuance of options for share based compensation		-		0		-		0		291,630			0			291,630
Issuance of restricted stock for share based compensation		-		0		-		0		328,514			0			328,514
Preferred dividend		-		0		-		0		0			(1,000,500	)		(1,000,500	)
Net Loss		-		0		-		0		0			(4,657,215	)		(4,657,216	)
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

									Additional
	Common Stock				Preferred Stock				Paid in		Accumulated
	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
Issuance of options for share based compensation		-		0		-		0		219,875		0			219,875
Issuance of restricted stock for share based compensation		-		0		-		0		15,279		0			15,279
Preferred dividend		-		0		-		0		0		(100,050	)		(100,050	)
Net Loss		-		0		-		0		0		(9,395,621	)		(9,395,621	)
Balance, December 31, 2020		52,130,870	$	52,131		2,800,000	$	2,800	$	142,548,753	$	(56,884,038	)	$	85,719,646
Issuance of Common Stock		3,711,964		3,712		0		0		11,422,488		0			15,795,815
Exercise of options for share based compensation		147,953		148		0		0		627,500		0			627,648
Issuance of restricted stock for share based compensation		347,000		347		0		0		1,181,481		0			1,181,828
Preferred dividend		-		0		-		0		0		(560,279	)		(560,279	)
Net Loss		-		0		-		0		0		(12,510,474	)		(12,510,474	)
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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSFOR THE ~~THREE AND NINE MONTHS ENDED JUNE~~three and nine months ended June 30, 2022 and 2021 ~~AND 2020~~(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~~(the “Closing Date”),the Company, and its newly organized wholly owned subsidiaries AcqCo, LLC and cbdMD LLC (“CBDI”), completed a ~~two-step~~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 ~~had a contractual obligation, after approval by our shareholders, to issue~~issued 15,250,000 shares of our common stock to the members of Cure Based Development, of which unrestricted voting rights to 8,750,000 of the shares vest over a ~~five-year~~five-year period and ~~are~~4,338,302 shares remain subject to a voting proxy agreement as of June 30,2022, as well as to issue another 15,250,000 shares of our common stock (the “Earnout Shares”) in the future upon certain earnout goals (the “Earnout Rights”) being achieved within five years from the closing of the Mergers. The Company’s shareholders approved the issuance of the 15,250,000 shares of common stock in April 2019 and these shares were issued to members of Cure Based Development on April 19, 2019. In April 2019, our shareholders also approved the possible issuance of the Earnout Shares. The first marking period for the earnout was December 31, 2019 and based on measurement criteria, 5,127,792 Earnout Shares had been earned and were issued on February 27, 2020. The sole member of Cure Based Development at the closing of the Mergers was CBD Holding LLC (“CBDH”). In February 2020, in connection with its liquidation, CBDH distributed the rights to the Earnout Shares (the “Earnout Rights”) to its members based upon the members’ pro pro-rata ownership interest in CBDH. Members of CBDH at the time of its liquidation and this distribution included affiliates of Martin A. Sumichrast and R. Scott Coffman, directors and executive officers of cbdMD. A second marking period for the earnout ended December 31, 2020 and based on measurement criteria an additional 3,348,520 Earnout Shares had been earned and were issued on March 8, 2021. The first quarter of the third marking period ended on March 31, 2021 and based on the measurement criteria an additional 562,278 Earnout Shares had been earned and issued in May of 2021.

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 and the~~plant. The products manufactured by and for the Company comply with the 2018 Farm Bill - our full spectrum products contain trace amounts of 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).

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 ~~Company’s Annual Report filed with the SEC on Form 10-K for the year ended September 30, 2020 (“2020 10-K”) as filed with the SEC on December 22, 2020.~~202110-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 ~~2020~~2021 as reported in the ~~2020 10-K~~202110-K have been omitted.

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 ~~intangible~~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.

~~On March 11, 2020,~~While the ~~World Health Organization declared~~Company has been relatively successful in navigating the ~~COVID-19 outbreak~~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 ~~be a global pandemic. In response to this declaration and~~ the ~~rapid spread of COVID-19 within the United States, federal, state and local governments throughout the country have imposed varying degrees of restriction~~Company’s business depending on ~~social and commercial activity to promote social distancing in an effort to slow the spread~~any resurgence of the ~~illness. We are monitoring the trends on infection rates~~pandemic. The Company continues to monitor macroeconomic conditions to remain flexible and ~~governmental restrictions~~to optimize and ~~are cautiously optimistic impacts to the~~evolve its business ~~environment will be minimal.~~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, ~~2021~~2022 and September 30, ~~2020,~~2021, we had an allowance for doubtful accounts of ~~$29,629~~$18,156 and ~~$20,664,~~$3,633, respectively.

The Company primarily sells its products through the internet and has an arrangement to process customer payments with ~~third-party~~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 ~~3.0%~~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 30, ~~2021,~~2022, the receivable from payment processors included approximately ~~$342,713~~$298,659 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.

~~Customer deposits consist of payments received in advance of revenue recognition. Revenue is recognized as revenue recognition criteria are met.~~

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.~~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 impacting the operations or cash flows of the business acquired.~~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 ~~its acquired~~the business using a combination of ~~income-based~~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 ~~in light of the known impact to date of the COVID-19 pandemic~~ on its business to determine if a circumstance could trigger an impairment ~~loss, and, at this time and based~~loss. See Note 5 for further information on the ~~information presently known, does not believe that it is more likely than not that an~~ impairment ~~loss has been incurred.~~testing procedures performed.

The Company’s intangible assets consist of trademarks and other intellectual property, all of which are accounted for in accordance with Accounting Standards Codification (ASC) Topic 350,Intangibles – Goodwill and Other. ~~The~~Prior to December 31, 2021, the Company ~~employs~~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. ~~We perform~~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. Our~~350-30-35-18. The annual impairment analysis ~~includes~~included a qualitative assessment to determine if it is necessary to perform the quantitative impairment test. In performing a qualitative assessment, ~~we review~~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, wethe Company would analyze various aspects including revenues from the business, associated with the intangible assets. In addition, intangible assets ~~will be~~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. ~~In addition, the~~The Company ~~has~~ analyzed a variety of factors ~~in light of the known impact to date of the COVID-19 pandemic~~ 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 ~~have been no events identified~~are indications that ~~would trigger an~~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.

The Company recognized both the fixed number of shares to be issued, and the variable number of shares to be potentially issued, as contingent liabilities on its consolidated balance sheets. These contingent liabilities were recorded at fair value upon the acquisition date and are remeasured quarterly based on the reassessed fair value as of the end of that quarterly reporting period. Additionally, as the fixed shares were issued on April 19, 2019, the value of the shares at that time, in the amount of $53,215,163, was reclassified from contingent liability to additional paid in capital on the consolidated balance sheet. The first marking period for the Earnout Shares was December 31, 2019 and based on measurement criteria, 5,127,792 shares were issued on February 27, 2020. The value of the issued Earnout Shares as of February 27, 2020 was $4,620,000 and the decrease in value of $6,924,503 from December 31, 2019 related to those shares was recorded in the Statement of Operations for the three months ended March 31, 2020. Additionally, as the 5,127,792 Earnout Shares were issued on February 27, 2020, the value of the shares in the amount of $4,620,000 was reclassified from the contingent liability to additional paid in capital on the consolidated balance sheet. The second marking period for the Earnout Shares ended December 31, 2020 and based on measurement criteria, 3,348,520 Earnout Shares were issued on March 8, 2021. The second marking period shares increased in value by $3,100,012 during the quarter through the time of issuance and had a value of $11,271,000, which was reclassified from the contingent liability to additional paid in capital on the consolidated balance sheet. The first quarter of the third marking period ended on March 31, 2021 and based on the measurement criteria an additional 562,278 Earnout Shares had been earned and issued in May of 2021. These shares deceased in value by $522,104 during the quarter through the time of issuance and had a value of $1,329,000 which was reclassified from the contingent liability to additional paid in capital on the consolidated balance sheet.

For the three months ended June 30, 2021, the remaining contingent liabilities associated with the business combination, after the issuance of the first quarter third marking period Earnout Shares, were decreased by $6,348,896 to reflect their reassessed fair values as of June 30, 2021. This decrease is reflective of a change in value of the variable number of shares from March 31, 2021. In aggregate, the Company recorded income of $6,871,000 for the three months ended June 30, 2021 between the decrease in the value of the third marking period Earnout Shares and the decrease in value of the remaining contingent liabilities. In May 2020, and subsequently in June 2021, the Company updated the forecasts for performance of the post-acquisition entity based on current trends and performance that would impact the estimated likelihood that the revenue targets disclosed in Note 7 would be met. The primary catalyst for the $2,100,000 decrease in contingent liabilities is the change in the Company’s common share price between March 31, 2021 to June 30, 2021 from $4.14 per share to $2.90 per share. These increases or decreases to the contingent liabilities are reflected within Other Income (Expenses) on the condensed consolidated statements of operations.

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 intent and purpose of the PPP is to support companies, during the COVID-19 pandemic, by providing funds for certain specified business expenses, with a focus on payroll. As a qualifying business as defined by the SBA, the Company is using the proceeds from this loan to primarily help maintain its payroll as it navigates its business with a focus on returning to normal operations. The term of the Promissory Note is two years, though it may be payable sooner in connection with an event of default under the Promissory Note. The SBA Loan carries a fixed interest rate of one percent per year, with the first payment due seven months from the date of initial cash receipt. Under the CARES Act and the PPP, certain amounts of loans made under the PPP may be forgiven if the recipients use the loan proceeds for eligible purposes, including payroll costs and certain rent or utility costs, and meet other requirements regarding, among other things, the maintenance of employment and compensation levels. The Company used the SBA Loan for qualifying expenses and ~~has applied for forgiveness of the SBA Loan in accordance with the terms of the CARES Act. The Company filed for forgiveness under the terms of the SBA loan 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. ~~This gain is reflected within Other Income (Expenses) on the condensed consolidated statements of operations.~~

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~~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~~five-step approach. At June 30, ~~2021,~~2022, the Company has no ~~future~~ 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. However, at times in the past, the Company has entered into contracts with customers wherein there were multiple elements that may have disparate revenue recognition patterns. In such instances, the Company must allocate the total transaction price to these various elements. This is achieved by estimating the standalone selling price of each element, which is the price at which we sell a promised good or service separately to a customer.

The Company records revenue from the sale of its products when ~~risk of loss and title to the product are transferred to the~~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,~~60-day, money back ~~guarantee.~~guarantee

Regarding sales for services provided, the Company records revenue when the customer has accepted services and the Company has a right to payment. Based on the contracted services, revenue is recognized when the Company invoices customers for completed services at agreed upon rates or revenue is recognized over a fixed period of time during which the service is performed.

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:

~~The following table represents a disaggregation of revenue by sales channel:~~

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

The Company has no material contract assets nor contract liabilities at June 30, ~~2021.~~2022.

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

The Company’s cost of sales includes costs associated with distribution, fill and labor expense, components, manufacturing overhead, ~~third-party~~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 Taxestopic 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 ~~a $18,440,072~~an $8,644,186 uninsured balance at June 30, ~~2021~~2022 and a ~~$14,287,810~~$23,508,953 uninsured balance at September 30, ~~2020.~~2021.

Concentration of credit risk with respect to receivables is principally limited to trade receivables with corporate customers that meet specific credit policies. Management considers these customer receivables to represent normal business risk. The Company did not have any customers that represented a significant amount of our sales for the three and nine months ended June 30, ~~2021.~~2022.

The Company accounts for its stock compensation under the ASC ~~718-10-30,~~ 718-10-30,Compensation - Stock Compensationusing 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,~~ 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.

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

While the Company is taking strong action, believes in the viability of its strategy and path to profitability, and in its ability to raise additional funds, there can be no assurances to that effect. The Company’s working capital position may not be sufficient to support the Company’s daily operations for the twelve months subsequent to the issuance of these quarterly financial statements. The Company’s ability to continue as a going concern is dependent upon its ability to improve profitability and the ability to acquire additional funding. These and other factors raise potential concern about the Company’s ability to continue as a going concern within twelve months after the date that the quarterly financial statements are issued. These 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

In ~~August 2018,~~ December 2019, the FASB issued ASU ~~No. 2018-13,~~ ~~Fair Value Measurement (Topic 820).~~ 2019The ASU modifies, removes, and adds several disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement. The ASU 2018-13 is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The Company adopted ASU 2018-13 on October 1, 2020. The adoption of this standard had no material impact on the Company’s consolidated financial statements and disclosures.

~~In December 2019, the FASB issued ASU 2019-12,~~-12, Income Taxes, Simplifying the Accounting for Income Taxes (Topic ~~740)~~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~~2019-12 is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The ~~Company is currently in the process~~adoption of ~~evaluating~~ this standard ~~update.~~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 ~~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 months ended June 30, ~~2021~~ 2022 and ~~June 30, 2020~~2021, the Company recorded ~~$(18,623)~~$0 and ~~$(30,849),~~$2,852, respectively, and for the nine months ended June 30, ~~2021~~ 2022 and ~~June 30, 2020~~2021 the Company recorded ~~$526,940~~$(33,350) and ~~$(906,011),~~$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, while the loss in the prior year was driven by the impairment from its investment in Formula Four Beverages, Inc. and Kure Corp.~~

On December 30, 2017, the Company entered into an agreement with Isodiol International, Inc., whereby the Company provided pharmaceutical grade phytochemical compound development services. As payment for these services, the Company has received 1,226,435 shares of Isodiol’s common stock between December 31, 2017 and January 2019. The Company also received 38,095 shares of Isodiol’s common stock upon Isodiol’s acquisition of Kure Corp., giving the Company a total of 1,264,530 shares. At June 30, 2021, the Company had 1,042,193 shares valued at $13,412.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, ~~2021,~~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, ~~2021,~~2022, ADRA stock closed at ~~$10.00~~$9.89 while ADRA WS closed at ~~$0.67.~~$0.18. 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. On June 23, 2022, Adara announced it had entered into business combination agreements with the Target subject to a number of conditions to closing, including shareholder SEC approval. There are no assurances the business combination will be completed. If the business combination is not completed, Adara will continue to pursue other targets for a potential business combination.

Adara’s focus of targets to pursue for the business combination are expected to be in the consumer products industry including business in the health and wellness, ecommerce, discretionary spending, information technology sectors and related channels of distribution. While Adara is currently a listed company, the Company’s investment is in Adara Sponsor, LLC and consequently the Company has classified this investment as Level 3 for fair value measurement purposes as there are no observable inputs.

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

In valuing ~~the investment,~~both investments, the Company used the value paid, which was the price offered to all ~~third-party~~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, ~~2021.~~

~~The~~2022.The table below ~~summarizes~~summarized the assets valued at fair value as of June 30, ~~2021:~~2022:

	In Active										*In Active*
	Markets for			Significant Other		Significant					*Markets for*			*Significant Other*		*Significant*
	Identical Assets			Observable		Unobservable		Total Fair Value			*Identical Assets*			*Observable*		*Unobservable*
	and Liabilities			Inputs		Inputs		at June 30,			*and Liabilities*			*Inputs*		*Inputs*
	(Level 1)			(Level 2)		(Level 3)		2021			*(Level 1)*			*(Level 2)*		*(Level 3)*		*Total*
Marketable Securities	$	13,412		$	0	$	0	$	13,412
Investment other securities	$	0		$	0	$	1,000,000	$	1,000,000		$	-		$	-	$	1,000,000	$	1,000,000

	(Level 1)			(Level 2)		(Level 3)		2021
Balance at September 30, 2020	$	26,472		$	0	$	250,000	$	276,472
Change in value of equities		2,710			0		0		2,710
Balance at December 31, 2020		29,182			0		250,000		279,182
Balance at September 30, 2021												33,351			0		1,000,000		1,033,351
Change in value of equities		2,853							2,853			(33,351	)		0		0		(33,351	)
Additional Investment		0					750,000		750,000			-			-		-		-
Balance at March 31, 2021	$	32,035		$	0	$	1,000,000	$	1,032,035
Balance at December 31, 2021											$	0		$	0	$	1,000,000	$	1,000,000
Change in value of equities		(18,623	)						(18,623	)		-			-		-		-
Additional Investment		0					0		0			-			-		-
Balance at June 30, 2021	$	13,412		$	0	$	1,000,000	$	1,013,412
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

Inventory at June 30, ~~2021~~2022 and September 30, ~~2020~~2021 consists of the following:

	June 30			September 30,			*June 30,*			*September 30,*
	2021			2020			*2022*			*2021*
Finished Goods	$	3,309,127		$	2,706,518		$	3,083,043		$	3,362,897
Inventory Components		1,630,056			1,982,021			1,314,646			1,729,176
Inventory Reserve		(200,765	)		(85,179	)		(79,485	)		(70,206	)
Inventory prepaid		673,588			288,178			548,580			551,519
Total Inventory	$	5,412,006		$	4,891,538		$	4,866,783		$	5,573,386

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

Major classes of property and equipment at June 30, ~~2021~~2022 and September 30, ~~2020~~2021 consist of the following:

	June 30,			September 30,			*June 30,*			*September 30,*
	2021			2020			*2022*			*2021*
Computers, furniture and equipment	$	532,460		$	365,638		$	861,731		$	549,910
Manufacturing equipment		2,968,838			2,873,598			284,275			2,968,838
Leasehold improvements		852,630			832,465			487,081			870,621
Automobiles		35,979			24,892			35,979			35,979
		4,389,907			4,096,593			1,669,066			4,425,348
Less accumulated depreciation		(1,614,704	)		(913,106	)		(893,589	)		(1,863,774	)
Property and equipment, net	$	2,775,203		$	3,183,487		$	775,477		$	2,561,574

Depreciation expense related to property and equipment was ~~$246,533~~$158,555 and ~~$211,937~~$246,532 for the three months ended June 30, ~~2021~~ 2022 and ~~2020,~~2021, respectively and was ~~$719,856~~$770,335 and ~~$111,913~~$719,856 for the nine months ended June 30, ~~2021~~ 2022 and ~~2020,~~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 31, 2021 of $56,670,970. The Company performs a Step 0 goodwill impairment analysis at least annually following the steps laid out in ASC 350-20-35-3C. Our annual impairment analysis includes a qualitative assessment to determine if it is necessary to perform the quantitative impairment test. In performing a qualitative assessment, we review events and circumstances that could affect the significant inputs used to determine if the fair value is less than the carrying value of goodwill. From time to time the Company also evaluates goodwill impairment on a quarterly basis if any triggering events have occurred that would require such analysis. For the three months ended December 31, 2021, the Company performed a Step 0 goodwill impairment analysis on consolidated goodwill and determined that a triggering event had occurred to necessitate performing the quantitative impairment test. After performing the quantitative impairment test in accordance with ASC 350-20-35-3C, the Company determined that goodwill was impaired by $13,898,285. The Company has recorded this impairment to reduce total goodwill on its condensed consolidated balance sheets and has recorded the corresponding impairment expense on its condensed consolidated statement of operations as of December 31, 2021. The Company performed the same analysis as of June 30, 2022 and determined that goodwill was impaired by $30,776,436. The Company 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.

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 ~~believes~~believed the trademark ~~does~~ did not have limits on the time it ~~will~~would contribute to the generation of cash flows and therefore ~~has~~ identified these as ~~indefinite-lived~~indefinite lived intangible ~~assets (see Note 1 for more information).~~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. ~~The~~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, ~~2021~~2022 and September 30, ~~2020~~2021 consisted of the following:

	June 30,		September 30,		*June 30,*			*September 30,*
	2021		2020		*2022*			*2021*
Trademark related to cbdMD	$	21,585,000	$	21,585,000	$	17,300,000		$	21,585,000
Trademark for HempMD		50,000		50,000		50,000			50,000
Technology Relief from Royalty related to DirectCBDOnline.com						667,844			667,844
Tradename related to DirectCBDOnline.com						749,567			749,567
Amortization of definite lived intangible assets:						(655,508	)		(48,482	)
Total	$	21,635,000	$	21,635,000	$	18,111,903		$	23,003,929

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

As consideration for the Mergers, described in Note 1, the Company had a contractual obligation to issue 15,250,000 shares of its common stock, after approval by its shareholders, to the members of Cure Based Development, issued in two tranches 6,500,000 shares and 8,750,000 shares, both of which are subject to leak out provisions, and the unrestricted voting rights to 8,750,000 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 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 shares ~~have been~~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 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 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 ~~$53,215,163.~~$ 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. In addition,~~sheet.The third quarter of the ~~first marking~~third marketing period ~~for the Earnout Shares was December 31, 2019~~ ended on September 30, 2021 and based on the measurement criteria ~~5,127,792~~an additional 466,713 Earnout Shares were earned and issued ~~on February 27, 2020~~in December 2021. These shares decreased in value by $366,841 during the quarter through the time of issuance and had a value of ~~$4,620,000~~$405,000, which was reclassified from the contingent liability to additional paid in capital on the consolidated balance sheet. The ~~second marking~~fourth quarter of the third marketing period ~~for the Earnout Shares was~~ ended on December 31, ~~2020~~ 2021 and based on the measurement criteria ~~3,348,520~~an additional 444,243 Earnout Shares were earned and issued on in March ~~8, 2021~~2022. These shares increased in value by $41,914 during the quarter through the time of issuance and had a value of ~~$11,271,000~~$325,000, which was reclassified from the contingent liability to additional paid in capital on the consolidated balance sheet. The ~~first~~fifth quarter of the third ~~marking~~ marketing period ended on March 31, ~~2021~~ 2022 and based on the measurement criteria an additional ~~562,278~~458,877 Earnout Shares ~~had been~~were earned and issued in May ~~of 2021.~~ 2022. These shares ~~deceased~~decreased in value by ~~$522,104 during~~$90,792during the quarter through the time of issuance and had a value of ~~$1,329,000~~$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~~(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 ~~$14,100,000~~$702,000 and ~~$16,200,000~~$9,440,000 at June 30, ~~2020~~2022 and September 30, ~~2020, respectively, and represents the Earnout Shares. During the first quarter of~~ 2021 ~~the company recorded an increase in value of $8,500,000 which was primarily driven by change in stock price between December 31, 2020 and September~~, respectively. At June 30, ~~2020. The second marking period shares were valued at $11,271,000 on March 8, 2021 as compared~~2022, up to $8,170,988 on December 31, 2020. This increase in value of $3,100,012 was recorded as an expense in the condensed consolidated statement of operations for the three months ended March 31, 2021 prior to these shares being reclassified to additional paid in capital. After the issuance of the Second Marking Period shares, the4,338,302 remaining Earnout Shares are subject to issuance by the Company.

As part of the Twenty Two acquisition in July 2021, the Company has a contractual obligation to issue up to an additional 200,000 shares of its common stock as additional consideration, dependent upon the acquisition entity meeting future revenue targets. Under GAAP the Company is required to record a non-cash contingent liability associated with the Twenty Two Earnout Shares and at the date of the acquisition, recorded a total contingent liability of $488,561. Under GAAP the Company is obligated to reassess the obligations associated with the Twenty Two Earnout Shares on a quarterly basis and, in the event its estimate of the fair value of the contingent consideration changes, the Company will record increases or decreases in the fair value as an adjustment to earnings. 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 ~~potential future issuance were valued at $22,300,000 at March 31,~~the period. At September 30, 2021 ~~as compared to $16,529,012 at December 31, 2020. The increase~~, the Company recorded a decrease in value of the contingent liability of ~~$5,770,988 is recorded~~ $73,561 related to a decrease in ~~consolidated statement~~the market price of ~~operations for~~our common stock, which adjusted the ~~three months ended March~~total contingent liability related to the Twenty Two Earnout Shares to $416,000. At December 31, 2021, ~~and represents~~ the ~~change in value of the remaining Earnout Shares. During the third quarter of fiscal 2021 the company~~Company recorded a decrease in value of ~~$6,872,206 to~~ the contingent liability ~~which is recorded as other expense~~of $255,000 related to a decrease in the ~~consolidated statement~~market price of ~~operations for~~our common stock, which adjusted the ~~third quarter of fiscal year 2021. The~~total contingent liability related to the Twenty Two Earnout Shares to $161,000. At March 30, 2022 the Company recorded a decrease in value ~~is comprised of $522,104 associated with the decrease~~ of the contingent liability of $148,000 related to a decrease in the market price of our common stock, which adjusted the total contingent liability related to the Twenty Two Earnout Shares to $13,000. At June 30, 2022, the Company recorded a decrease in value of the ~~Third Marking Period shares prior~~contingent liability of $13,000 related to ~~their issuance in May 2021, while the remaining $6,348,896 is associated with the~~a decrease in the ~~remaining~~market price of our common stock, which adjusted the total contingent liability related to the Twenty Two Earnout Shares to $0.

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

In April 2022, the Company entered into a contractual obligation to issue up to 100,000 options to an employee. The shares are subject to meeting a minimum direct to consumer revenue of $12.0 million for the December 2022 calendar quarter. The Company is not expecting to meet this revenue metric for the December 2022 calendar quarter and has therefore valued this liability at $0 as of June 30, 2021. The Company utilized 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 stock price. The main driver of the change in the value of the Earnout Shares within the contingent liability was the increase of the Company’s stock price, which was $2.90 at June 30, 2021 as compared to $4.14 at March 31, 2021, $2.95 on December 31, 2020 and $2.00 on September 30, 2020.2022.

~~The Company, as~~As noted in Note 2, the Company, and a number of its affiliates have invested into Adara through Adara Sponsor. ~~Martin Sumichrast, the Company’s co-CEO, is also CEO of Adara.~~

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 Equityin order to determine the appropriate accounting treatment for the preferred stock and determined that the preferred stock should be treated as equity. There were ~~2,800,000 and 500,000~~5,000,000 shares of 8.0% Series A Cumulative Convertible Preferred Stock issued and outstanding at June 30, ~~2021~~2022 and September 30, ~~2020, respectively.~~2021.

The total amount of preferred dividends declared and paid were $1,000,501 and $560,281, respectively, for the three months ended June 30, 2022 and 2021. The total amount of dividends declared and paid were ~~$560,281~~$3,001,503 and ~~$100,050, respectively, for~~$1,220,610 for the ~~three~~nine months ended June 30, 2022 and June 30, 2021 ~~and 2020. The total amount of dividends declared and paid were $1,220,610 and $266,800 for the nine months ended June 30, 2021 and 2020.~~, respectively.

Common Stock – The Company is authorized to issue 150,000,000 shares of common stock, par value $0.001 per share. There were ~~56,973,815~~59,946,090 and ~~52,130,870~~57,783,340 shares of common stock issued and outstanding at June 30, ~~2021~~2022 and September 30, ~~2020,~~2021, respectively.

~~Preferred~~The Company had no preferred stock~~transactions:~~ transactions in the three and nine 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.

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

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

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

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

On ~~October 16, 2019,~~ December 28, 2021, the Company ~~completed a firm commitment underwritten public offering of 500,000~~issued 466,713 shares of its 8.0% Series A Cumulative Convertible Preferred Stock for aggregate gross proceeds of $5,000,000. The Company received approximately $4.5 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 47,923 shares ofrestricted common stock in connection with ~~an exercise price of $3.9125. The warrants were valued at $178,513 and expire on October 10, 2024.~~

~~Common~~~~stock~~~~transactions:~~the Earnout Shares as referenced in Note 6.

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

On In June 8, 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.

On In May ~~14,~~ 2021, the Company issued 562,278 common shares in connection with the Earnout Shares as referenced in Note 6.

On In April 9, 2021, the Company entered into an endorsement agreement with a professional athlete. AAs part of the endorsement agreement, the Company issued 40,000 common shares of restricted common stock. The Company recorded $143,600 prepaid expense and ~~intends to amortize~~amortized over the term of the agreement.

~~On April 19,2021, 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 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 onefourth on June 30, 2021, one fourth, on September 30, 2021, onefourth on December 31, 2021, and onefourth 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 ~~restricted~~ 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.

On January 14, 2020, the Company completed a follow-on firm commitment underwritten public offering of 18,400,000 shares of its common stock for aggregate gross proceeds at $18,400,000. The Company received approximately $16.9 million in net proceeds after deducting underwriting discounts and commissions. The Company also issued to the selling agent warrants to purchase in aggregate 480,000 shares of common stock with an exercise price of $1.25. The warrants were valued at $345,600 and expire on January 14, 2025.2022:

In ~~February 2020,~~ May 2022, the Company ~~issued 25,000 shares~~granted a new executive an aggregate of ~~our~~405,000 common stock ~~to an investor relations firm for services.~~options. The ~~shares were valued at $28,250, based on~~options vest equally over 1,2, and 3 years from the ~~trading~~grant date. The options have a strike price ~~upon issuance,~~$0.84 and ~~is being~~a five year term. The total expense of these options totaled $176,985 and will be amortized ~~and expensed as professional services~~ over the ~~service period ending January 2021.~~term of the vesting periods.

In ~~February 2020,~~ April 2022, the Company issued ~~5,000~~200,000 options to a consultant as part of an advisory agreement under the Company's Equity Compensation Plan. Fifty thousand of the shares vested upon the grant, 50,000 vest and 6 months from the effective date and 100,000 upon renewal of ~~our~~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.~~ employee that vest upon the Company achieving certain direct to consumer revenue growth targets for the quarter ended December 2022. The ~~shares were valued at $5,650, based~~options have a $1 strike price. The Company performs analysis on ~~the trading price upon issuance,~~these options and as of June 30, 2020 0 expense was ~~expensed as stock based compensation expense.~~ascribed to these options.

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

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

In 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 ~~expense~~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,~~ 2022; the second on January 1, ~~2023~~ 2023; and the third on January 1, 2024, both under the ~~Corporation’s~~ 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~~five-year term. The Company has recorded a total prepaid expense of $395,850 and intends to amortize the expense over the ~~12-month~~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 ~~$35,247 and $102,215~~$66,967 for the three ~~and nine~~ months ended June 30, 2021 ~~respectively,~~ 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,~~$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 ~~and $93,163~~ for both the three ~~and nine~~ months ended ~~June 30,~~December 31, 2021and 2020, respectively.

The expected volatility rate was estimated based on ~~comparison to~~a weighted average mix of the ~~volatility~~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 ~~nine~~three months ended June 30, ~~2021~~ 2022 and ~~2020:~~2021:

							*June 30,*			*June 30,*
	2021			2020			*2022*			*2021*
Weighted average exercise price	$	3.91		$	3.15		0.844 -1.0000			$	3.91
Risk free interest rate	0.16% - 0.85		%	0.69% - 1.64		%		2.56% - 2.83%			0.16% - 0.85%
Volatility	100.72% - 105.43		%	95.96% - 111.31		%		101.23	% - 102.00		100.72% - 105.43%
Expected term	2.5 - 6.2 years			5 - 10 years
Divident yield	None			None
Expected term (in years)								2.5 - 4			2.5 - 6.2
Dividend yield							None			None

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

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.

In October 2019 in relation to the 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 47,923 shares of common stock with an exercise price of $3.9125. The warrants expire on October 10, 2024.

In January of 2020 in relation to the follow-on firm commitment underwritten public offering of the Company’s common stock, the Company issued to the representative of the underwriters warrants to purchase in aggregate 480,000 shares of common stock with an exercise price of $1.25. The warrants expire on January 14, 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, ~~2021~~ 2022 and ~~2020:~~2021:

						June 30,
	2021			2020		2021
Weighted average exercise price	$	3.74		$1.25-$3.9125		$	3.74
Risk free interest rate		0.39	%	1.48%-1.63	%		0.39	%
Volatility		103.42	%	95.36%-96.85	%		103.42	%
Expected term	2.75 years			5 years
Divident yield	None			None
Expected term (in years)							2.8
Dividend yield						None

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 common stock shares, either unissued or reacquired by the Company, available for awards of options, restricted stocks, other stock grants, or any combination thereof. The number of shares of common stock available for issuance under the 2015 Plan shall automatically increase on the first trading day of ~~our fiscal~~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 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 and retained the annual evergreen increase provision of the plan. Subsequent thereto, on August 7, 2019 the Company’s Board of Directors approved an amendment to the 2015 Plan changing the date the automatic evergreen increase is determined to the first trading day of October each calendar year during the term of the 2015 Plan to coincide with the Company’s fiscal year.

On January 8, 2021, the Company’s Board of Directors approved the 2021 Equity Compensation Plan (the ~~“2021~~“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 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 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~~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:~~plans for the nine months ended June 30, 2022:

						Weighted-average									*Weighted-average*
						remaining		Aggregate							*remaining*		*Aggregate*
	Number of			Weighted-average		contractual term		intrinsic value					*Weighted-average*		*contractual term*		*intrinsic value*
	shares			exercise price		(in years)		(in thousands)		*Number of shares*			*exercise price*		*(in years)*		*(in thousands)*
Outstanding at September 30, 2020		1,750,000		$	4.68			$	0
Outstanding at September 30, 2021											2,702,500		$	4.42		5.13	$	-
Granted		1,380,000			3.91				0		1,030,000			0.99				-
Exercised		(147,953	)		2.60						-			-
Forfeited		(167,047	)		3.04						(930,000	)		3.59
Outstanding at June 30, 2021		2,815,000			4.51		5.53		0
Outstanding at June 30, 2022											2,802,500			3.43		3.39		-

Exercisable at June 30, 2021		1,508,335		$	5.11		5.98	$	0
Exercisable at June 30, 2022											1,822,500		$	4.19		4.63	$	-

As of June 30, ~~2021,~~2022, there was approximately ~~$2,837,548~~$419,241 of total unrecognized compensation cost related to non-vested stock options which vest over a period of approximately ~~2.6~~2.8 years.

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

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

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

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

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

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

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

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

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

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

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

In April 2021, the Company issued 750,000 RSUs to an executive officer. The restricted stock vests 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. The stock awards were valued at the fair market price of $2,520,000 upon issuance and amortized over the individual vesting periods.

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

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 as a marketing expense.

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

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.

In June 2020, the Company issued 10,000 restricted stock awards to a Company sponsor. The restricted stock awards vested June 30, 2020. The stock awards were valued at fair market upon issuance at $56,200 and amortized over the vesting period and were expensed to sponsorship expense.

In May 2019, the Company issued 57,500 restricted stock awards in aggregate to eleven employees. The restricted stock awards vested January 1, 2020. The stock awards were valued at fair market upon issuance at $368,000 and amortized over the vesting period.

The Company recognized ~~$641,267~~$(593,617) and $0$641,267 of restricted stock compensation expense for the three months ended June 30, ~~2021~~ 2022 and ~~2020,~~2021, respectively. The Company recognized ~~$1,218,110~~$242,382 and ~~$138,000~~$1,218,110 of restricted stock compensation expense for the nine months ended June 30, ~~2021~~ 2022 and ~~2020,~~2021, respectively.

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

						Weighted-average								*Weighted-average*
						remaining		Aggregate						*remaining*		*Aggregate*
	Number of			Weighted-average		contractual term		intrinsic value				*Weighted-average*		*contractual term*		*intrinsic value*
	shares			exercise price		(in years)		(in thousands)		*Number of shares*		*exercise price*		*(in years)*		*(in thousands)*
Outstanding at September 30, 2020		914,184		$	3.88			$	0
Outstanding at September 30, 2021											660,417	$	4.60		3.05	$	-
Granted		150,502			3.74				0		-		-				-
Exercised		(323,444	)		1.25						-		-
Forfeited		(82,631	)		1.25						-		-
Outstanding at June, 2021		658,611			5.48		2.27		0
Outstanding at June 30, 2022											660,417		4.60		2.79		-

Exercisable at June, 2021		658,611		$	5.99		1.26	$	0
Exercisable at June 30, 2022											660,417	$	4.60		-	$	-

The following table summarizes outstanding common stock purchase warrants as of June 30, ~~2021:~~2022:

	Number of		Weighted-average					Weighted-average
	shares		exercise price		Expiration	Number of shares		exercise price		Expiration
Exercisable at $7.80 per share		141,676	$	7.80	September 2021
Exercisable at $4.00 per share		70,500		4.00	September 2022		70,500		4.00	September 2022
Exercisable at $7.50 per share		100,000		7.50	October 2022		100,000		7.50	October 2022
Exercisable at $4.375 per share		51,429		4.375	September 2023		51,429		4.375	September 2023
Exercisable at $7.50 per share		60,000		7.50	May 2024		60,000		7.50	May 2024
Exercisable at $3.9125 per share		47,822		3.9125	October 2024		47,822		3.9125	October 2024
Exercisable at $1.25 per share		36,682		1.25	January 2025		36,682		1.25	January 2025
Exercisable at $3.74 per share		150,502		3.74	December 2025		150,502		3.74	December 2025
Exercisable at $3.75 per share							143,482		3.75	June 2026
		658,611	$	5.48			660,417	$	4.60

In May 2019, the Company entered into an endorsement agreement with a professional athlete. The term of the agreement is through December 31, 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,~~ $400,000, December 2020 - ~~$800,000,~~ $800,000, December 2021 - ~~$1,800,000,~~$1,800,000, and December 2022 - ~~$1,900,000.~~$1,900,000. In light of the impact of ~~COVID-19~~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 agreement amending certain of 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 a Volume Weighed Average Price (“VWAP”) calculation, of which the last two issuances can be paid in cash at the Company’s option - $1,400,000 paid in July 2020, ~~$800,000~~$800,000 paid between July 2021 and December 2021, and $667,000 paid between July 2022 and December 2022. The Company will make monthly cash payments as follows from: July 2020 to December 2020 - ~~$40,000,~~$40,000, from January 2021 to June 2021 - ~~$50,000,~~$50,000, from July 2021 to December 2021 - ~~$75,000,~~$75,000, from January 2022 to June 2022 - ~~$85,000,~~$85,000, and from July 2022 to December 2022 - ~~$100,000.~~$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 expense of ~~$222,309~~$422,309 and $0$253,700 for the three months ended ~~June 30,~~December 31, 2021 and 2020, ~~respectively~~ respectively. In January 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 ~~$749,245 and $283,334 for~~term, the ~~nine months ended June 30, 2021 and 2020.~~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.

In ~~October 2019,~~ April 2022, effective February 2022, the Company entered into ~~a sponsorship~~an endorsement agreement with ~~Feld Motor Sports to be an official sponsor~~a professional athlete. The term of the ~~Monster Energy Cup events, the United States AMA Supercross, the FIM World Championship events~~ agreement is through February 2025 and ~~US Supercross Futures event through 2021. The sponsorship includes various media, marketing, and promotion activities. The payments in aggregate are $1,750,000 and are~~is tied to ~~be paid for the periods ending: December 2019 - $150,000, December 2020 -$800,000 and December 2021 - $800,000. In light~~performance of the ~~impact~~athlete in so many professional events annually, and also includes promotion of ~~COVID-19 on these events, both parties entered into an amendment~~the Company via social media, wearing of logo during competition, requirement to ~~the sponsorship agreement during October 2020.~~provide production days for advertising creation and attendance at meet and greets. The ~~revised total aggregate~~potential base payments, if all services are ~~$1,013,625 during~~provided is $1,500,000 over the term of the ~~contract, ending May 2021,~~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 ~~are to be paid for periods ending: 2019 Season - $150,000, 2020 Season - $503,625 and December 2021 - $360,000. The Company has recorded expenses related to this agreement of $257,145 and $298,957~~his role as an executive for the ~~three months ended~~ Company in June ~~30, 2021 and 2020, respectively and $360,003 and $528,831 for~~of 2022 under the ~~nine months ended June 30, 2021 and 2020, respectively.~~terms of a separation agreement with the Company.

In ~~May 2021, cbdMD signed an exclusive sponsorship agreement to be the Official CBD Partner of the NOBULL CrossFit Games in 2021.~~

In July 2019, the Company entered into a loan arrangement in the amount of $249,100 for a line of equipment, as part of ~~which $109,810~~the sale of manufacturing equipment during April 2022, the balance of this loan was paid off resulting in a ~~long term note payable at~~ balance of $0 as of June 30, ~~2021.Payments are for 60 months and have a financing rate of 7.01 %, which requires a monthly payment of $4,905.~~ 2022. In January 2020, the Company entered into a loan arrangement for $35,660 for equipment, of which ~~$14,416~~$5,051 is a long term note payable at June 30, ~~2021.~~ 2022. Payments are for 48 months and have a financing rate of 6.2%, which requires a monthly payment of $841.

In April 2020, ~~The~~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 ~~(the “Promissory Note”)~~ to the Lender. During May of 2021, the Company received notice from the SBA the loan principal and any accrued interest was completely forgiven.

Effective September 30, 2019, the Company ceased operations of four business subsidiaries: EE1, IM1, BPU and Level H&W. These subsidiaries accounted for our licensing, entertainment, and products segments prior to fiscal 2019 and the Company determined that these business units are not able to provide support or value to the CBD business, which the Company is now strategically focused on. Therefore, the Company classified the operating results of these subsidiaries as discontinued operations, net of tax in the Consolidated Statements of Operations.

At September 30, 2020 the balance in accounts receivable related to discontinued operations was $447,134, which reflects payments made and an impairment of $45,783. At June 30, 2021 the balance in accounts receivable related to discontinued operations totaled $18,467.

The Company has lease agreements for its corporate ~~warehouse~~offices and ~~laboratory offices~~warehouse with lease periods expiring between 2021 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, ~~2021,~~2022, our operating leases had a weighted average remaining lease term of ~~5.01~~4.38 years and a weighted average discount rate of 4.66%.

Future minimum aggregate lease payments under operating leases as of June 30, ~~2021~~2022 are summarized as follows:

~~Future minimum lease payments (including interest) under non-cancelable operating leases as of September 30,2020 are summarized as follows:~~

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

	Three Months Ended					Nine Months Ended						Three Months Ended					Nine Months Ended
	June 30,		June 30,			June 30,			June 30,			June 30,			June 30,		June 30,			June 30,
	2021		2020			2021			2020			2022			2021		2022			2021
Basic:
Net income (loss) continuing operations	$	1,537,288	$	(8,944,921	)	$	(20,368,808	)	$	18,909,818
Net loss continuing operations												$	(31,634,143	)	$	1,537,288	$	(55,453,289	)	$	(20,368,808	)
Preferred dividends paid		560,281		100,050			1,220,610			266,800			1,000,501			560,281		3,001,503			1,220,610
Net income (loss) continuing operations adjusted for preferred dividend		977,007		(9,044,971	)		(21,589,418	)		18,643,018
Net income (loss) discontinued operations		0		(7,781	)		0			(48,983	)
Net income (loss) attributable to cbdMD Inc. common shareholders		977,007		(9,052,752	)		(21,589,418	)		18,594,035
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 income (loss) continuing operations		977,007		(9,044,971	)		(21,589,418	)		18,643,018
Net income (loss) discontinued operations		-		(7,781	)		-			(48,983	)
Net income (loss)		977,007		(9,052,752	)		(21,589,418	)		18,594,035
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		56,676,326		51,335,548			54,089,263			41,411,261			59,316,762			56,676,326		59,229,208			54,089,263
Effect of dilutive securities:
Options		64,833		-			-			33,222			0			64,833		0			0
Warrants		22,884		-			-			256,536			0			22,884		0			0
Convertible preferred shares		4,667,600		833,500			-			833,500			0			4,667,600		0			0
Shares used in computing diluted earnings per share		61,431,643		52,169,048			54,089,263			42,534,519			59,316,762			61,431,643		59,229,208			54,089,263

Earnings per share Basic:
Continued operations		0.02		(0.18	)		(0.40	)		0.45			(0.55	)		0.02		(0.99	)		(0.40	)
Discontinued operations		0		0			0			0
Basic earnings per share		0.02		(0.18	)		(0.40	)		0.45			(0.55	)		0.02		(0.99	)		(0.40	)

Earnings per share Dliuted:
Earnings per share Diluted:																-		-
Continued operations		0.02		-			0			0.44			(0.55	)		0.02		(0.99	)		(0.40	)
Discontinued operations		0		0			0			0
Diluted earnings per share		0.02		0			0			0.44			(0.55	)		0.02		(0.99	)		(0.40	)

At ~~the three and nine months ended~~ June 30, ~~2021, 4,292,361 potential~~2022, 4,888,667potential shares underlying options, unvested RSUs and warrants as well as ~~4,667,600~~8,335,000 convertible preferred shares 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~~two-step merger with Cure Based Development (see Note 1)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 ~~had~~ 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)~~740-270-30- 36(b) for the quarters ending December 31, 2019, March 31, 2020, and June 30, 2020. ~~For~~At September 30, 2021 the ~~nine months ended June 31, 2021 the Company’s expectation is that it will generate enough indefinite life~~Company recorded a net deferred tax ~~assets from post-merger NOLs to reduce~~asset of zero as the ~~naked credits from $895,000 to $130,000~~cumulative net deferred tax asset had a full valuation on it and ~~resulted in~~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 ~~provision benefit~~asset so there was not any recognition of ~~$765,000 for~~a deferred tax liability related to indefinite lived deferred tax liabilities. At June 30, 2022, the ~~9 month period.~~Company determined the same circumstances to be true and therefore recorded a net deferred tax asset of zero.

~~The Company has analyzed its operations subsequent to June 30, 2021 to the date these unaudited condensed consolidated financial statements were issued.~~

On ~~July~~August 1, ~~2021,~~ 2022, the Company ~~completed a follow-on firm commitment underwritten public offering of 2,200,000 shares of~~successfully made the transition from Oracle Netsuite to Acumatica for its 8.0% Series A Cumulative Convertible Preferred Stock for aggregate gross proceeds of $16.50 million. The Company received approximately $15.3 million in net proceeds after deducting underwriting discountsERP system. During the past year, Oracle terminated our license agreement and ~~commissions. The Company also issued to the representative of the underwriters warrants to purchase in aggregate 143,382 shares of common stock with~~requested we find an ~~exercise price of $3.75. The warrants were valued at $244,637 and expire on June 30, 2026.~~alternative ERP solution.

On ~~July 22, 2021,~~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, ~~entered into an asset purchase agreement~~was appointed to serve on the board of directors, filling a vacancy on the board, in accordance with ~~Twenty Two Capital, LLC ("Twenty Two") to acquire substantially all~~ the ~~assets~~bylaws of the ~~business operating~~Company. Dr. Swift has served as ~~directcbdonline.com. The~~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 ~~acquired~~as a Regulatory Consultant in Jan 2021. Prior to joining the ~~assets~~Company, from Jan 2020 to Dec 2020, Dr. Swift was the Senior Vice President for Scientific & Regulatory Affairs at the ~~consideration~~Natural Products Association. Dr. Swift served in multiple roles during her 5 years within the U.S. Food and Drug Administration's Office of ~~$2,000,000~~Dietary Supplement Programs; the last role was the Associate Director for Research and upStrategy. 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. 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 ~~600,000~~any committee of our board of directors. She shall receive a restricted stock grant of 5,000 shares of the Company’s restricted common stock. At the Closing, the $200,000 of the cash purchase price was deposited into escrow pending possible post-closing adjustments and indemnity provisions. At the closing, the Company issued Twenty Two 300,000 shares of the Company’sour common stock and ~~100,000~~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 ~~Common Stock shall be~~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 ~~to Twenty Two on or before January 31, 2023, less any amounts setoff against such~~the members an aggregate of 409,505 shares ~~for indemnification claims pending against or paid by~~of our common stock. The recipients were accredited investors and the ~~Company~~issuances were exempt from registration under the ~~asset purchase agreement and the remaining 200,000 shares shall be issued to Twenty Two~~Securities Act of 1933, as amended, in reliance on ~~or before 60th day following the first year anniversary~~an exemption provided by Section 4(a)(2) of the Closing subject to certain earn out provisions provided under the asset purchase agreement. The shares are subject to a 180 day lock up agreement subject to certain limited transfers which will also be subject to the lock up.that act.

ITEM 2. ~~MANAGEMENT’S~~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 months ended June 30, ~~2021~~2022 and the three and nine months ended June 30, ~~2020~~2021 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 ~~2020~~2021 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 in 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 ~~cbdMD brand of~~full spectrum products includes over 130 SKUs of high-grade, premium CBD products, including CBD tinctures, CBD gummies, CBD topicals, CBD capsules, CBD bath bombs, CBD bath salts, and CBD sleep aids. Our cbdMD Botanicals brand of beauty and skincare products features 15 SKUs, including facial oil and serum, toners, moisturizers, clear skin, facial masks, exfoliants and body care.

~~Our Paw CBD brand of products includes over 45 SKUs of veterinarian-formulated products including tinctures, chews, topicals products in varying strengths and formulas.~~

~~cbdMD, Paw CBD and cbdMD Botanicals products are distributed through our e-commerce websites, third party ecommerce sites, select distributors and marketing partners as well as~~contain a variety of ~~brick~~cannabinoids and ~~mortar retailers.~~

Atterpenes in addition to CBD while maintaining trace amounts of THC that falls within the end of December 2020, we announced the expansion of our direct-to-consumer operations into the United Kingdom (U.K.) which allows U.K. consumers to shop for our products online, with all orders shipping directly from a U.K.-based warehouse In March 2021, we officially filed our Novel Food Application with the United Kingdom’s Food Standards Agency (“FSA”). The Application included all of the requisite data to allow for a validated submission and thorough scientific assessment. A similar submission was simultaneously made to the European Food Safety Authority (EFSA) to ensure compliance for the European markets. During the remainder of fiscal 2021 we will be accelerating our efforts to increase revenuelimits set in the ~~U.K.~~

2018 Farm Bill. In ~~January 2021 we announced the launch of cbdMD Botanicals,~~addition to our new beauty and skincare line featuring 15 luxury products, including facial oil and serum, toners, moisturizers, clear skin, facial masks, exfoliants and body care. We continue to invest in the line of products and have a number of additional SKUs launching during the balance of fiscal 2021.

~~In January 2021~~core brands, we also ~~announced that we renewed our partnership with Ken Block, professional rally and rallycross driver currently with the Hoonigan Racing division. Through this renewed sponsorship with~~operate cbdMD ~~the brand is set~~Therapeutics, LLC to become synonymous with Mr. Block’s rally car races, with the cbdMD logo to appear on his official fire suit and rally car. The extended sponsorship deal will also include a wide range of additional integrated marketing opportunities to promote the cbdMD brand.

~~In February 2021, we migrated our ERP system to NetSuite in an effort to obtain more-robust, real-time visibility into our operation.~~

In February 2021, two of cbdMD’s products were awarded 2021 Product of the Year Awards by a national survey organized by Kantar, a global leader in research. cbdMD serves as the first CBD company to win Product of the Year in consecutive years, earning 2021 top honors in “CBD Ingestible” for its CBD Gummies, while its Paw CBD brand secures category first “CBD Pet” award with its CBD Hard Chews for Dogs.

~~In March 2021, we announced the formation of Therapeutics for the purposes of isolating and quantifying~~capture the Company’s ongoing investments in science related to its existing and future products, including research and development activities for therapeutic ~~applications.~~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 ~~April 2021,~~addition, we ~~announced cbdMD signed an exclusive~~operate a CBD ~~sponsorship with highly decorated professional golfer,~~marketplace through directcbdonline.com, our own e-commerce website.

During the first quarter of 2022 we eliminated a number of product lines and ~~9-time PGA TOUR winner, Patrick Reed,~~SKUs as we work to ~~become~~streamline line our offering to higher velocity products and eliminate slow moving and aging SKUs.

During January 2022 we completed a renewal of our NSF cGMP quality certification and are now NSF 455 cGMP certified. Additionally, we earned the ~~latest high profile member of Team cbdMD.~~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.

During the second quarter of ~~2021~~2022 we took steps to right size our ~~Pet brand, Paw CBD, debuted its first-ever national TV advertising campaign~~cost structure to our current revenue base and worked to remove over $10 million 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 ~~live broadcast~~second quarter resulting in sequential reductions in operating costs in both the second and third quarters of ~~Puppy Bowl XVII, which aired on Sunday, February 7, 2021 before a national audience on Discovery+ and Animal Planet. In addition,~~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 ~~developed a second commercial that debuted April 1, 2021 for our core cbdMD brand.~~

~~In May 2021, cbdMD signed an exclusive sponsorship agreement to be the Official CBD Partner of the NOBULL CrossFit Games to be held during 2021.~~are working on.

During ~~the second quarter~~April 2022, in an effort to reduce costs, we ~~renewed~~sold our ~~NSF certification~~manufacturing equipment and ~~underwent the US Hemp Authority audit, receiving~~outsourced certain products previously produced in-house. This change had a significant reduction in our ~~seal~~fixed labor and overhead, positively impacting cost of ~~approval on May 10, 2021.~~goods sold, and increased flexibility in our supply chain and was part of our overall cost structure rationalization plan.

~~In June 2021,~~During May 2022 our Co-CEO and cbdMD Therapeutics announced Launch Of Animal Health Study In Collaboration With Colorado State University’s Veterinary Program to explore the effects of cbdMD’s proprietary cannabinoid blend on pets who suffer from osteoarthritis.brand Founder retired and we hired a new President.

~~In July 2021, cbdMD announced~~The Company's management mandate is to achieve profitability and increase revenue by the ~~renewal of its exclusive CBD partnership with Bellator MMA, a leading mixed martial arts and kickboxing organization featuring the best fighters in the world. As part~~end of the ~~partnership, cbdMD will~~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 ~~receive a depth of integrated partnership assets, including category exclusive branding inside the Bellator cage,~~reassess our marketing costs and make improvements to ~~promote cbdMD.~~

~~In July 2021, cbdMD acquired the assets of Twenty Two Capital, LLC d/b/a directcbdonline.com. This business operates a CBD marketplace through directcbdonline.com.~~our product portfolio. In addition to ~~the revenue and contribution from this business we believe this will provide~~these efforts, the Company ~~with additional insight on consumer data and industry trends.~~continues to invest in a strong pipeline of accretive revenue opportunities.

~~During the last two quarters we underwent the National Animal Supplement Counsel ("NASC") Audit for our pet products and earned their prestigious Quality Seal Award.~~

We ~~continue~~continued to pursue many strategies to grow our revenues and expand the scope of our business in fiscal ~~2021~~2022 and beyond:

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

	Three Months Ended June 30,
	2021			2020						Three Months Ended June 30,
	(unaudited)			(unaudited)			Change			2022			2021			Change
Total net sales	$	10,560,523		$	10,636,545		$	(76,022	)	$	8,592,893		$	10,560,523		$	(1,967,630	)
Cost of sales		3,370,952			3,748,024			(377,072	)		2,660,185			3,370,952			(710,767	)
Gross profit as a percentage of net sales		68.1	%		64.8	%		3.3	%		69.0	%		68.1	%		1.0	%
Operating expenses		13,865,191			8,226,029			5,639,162			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		(6,675,620	)		(1,337,508	)		(5,338,112	)		(33,126,659	)		(6,675,620	)		(26,451,039	)
(Increase) decrease on contingent liability		6,871,000			(7,580,000	)		14,451,000			1,943,000			6,871,000			(4,928,000	)
Net income (loss) before taxes		1,640,288			(8,944,921	)		10,585,209
Net income (loss) attributable to cbdMD Inc. common shareholders	$	977,007		$	(9,052,752	)	$	10,029,759

	Nine Months Ended June 30,
	2021			2020
	(unaudited)			(unaudited)			Change
Total net sales	$	34,687,436		$	30,183,817		$	4,503,619
Cost of sales		10,444,353			10,180,637			263,716
Gross profit as a percentage of net sales		69.9	%		66.3	%		3.6	%
Operating expenses		36,846,371			33,053,962			3,792,409
Operating income from operations		(12,603,288	)		(13,050,782	)		447,494
(Increase) decrease on contingent liability		(10,500,000	)		30,580,000			(41,080,000	)
Net income (loss) before taxes		(21,133,808	)		16,669,518			(37,803,326	)
Net income (loss) attributable to cbdMD Inc. common shareholders	$	(21,589,418	)	$	18,594,035		$	(40,183,453	)
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	)

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.

	Three Months Ended June 30,
	2021		% of total			2020		% of total
Wholesale sales	$	2,740,523		26.0	%	$	2,410,719		22.7	%
E-commerce sales		7,820,000		74.0	%		8,225,826		77.3	%
Total Net Sales	$	10,560,523				$	10,636,545
											Three Months					Three Months
	Nine Months Ended June 30,										Ended					Ended
	2021		% of total			2020		% of total			June 30,					June 30,
											2022		% of total			2021		% of total
Wholesale sales	$	9,049,068		26.1	%	$	8,238,832		27.3	%	$	2,079,592		24.2	%	$	2,740,523		26.0	%
E-commerce sales		25,638,368		73.9	%		21,944,985		72.7	%		6,513,301		75.8	%		7,820,000		74.0	%
Total Net Sales	$	34,687,436				$	30,183,817				$	8,592,893				$	10,560,523

We had total net sales of $8,592,893 and $10,560,523 for the ~~third~~three months ended June 30, 2022 and 2021, respectively, resulting in a quarter ~~of 2021 nominally decreased as compared to the third~~over quarter of 2020. E-commerce net sales for the third quarter of fiscal 2021 decreased 4.9% year over year. We are continuing to see increases in our wholesale business and sales to our brick and mortar retail customers experienced a 13.7% increasedecrease in net sales of $1,967,631 or 18.6%. This decrease is attributable to a decrease of $1.3 million in e-commerce sales and a decrease of $0.66 million in wholesale sales quarter over quarter. While management is disappointed with the year over year ~~for the quarter despite a 20% sequential quarterly~~ net sales ~~decrease.~~decrease, the revenue is generally in line with macro competitive trends in the overall CBD industry. Sequentially, the Company's revenue declined 11%. Our Wholesale ~~volume remains stronger year over year~~declined approximately $661,000, in-part related to revenue associated with a pipeline fill during the ~~reduction of lockdowns and increased confidence and economic outlook when compared to significant uncertainty brought about by~~second quarter, as well as additional orders on the ~~onset~~books that were delayed at the end of the ~~COVID-19 pandemic~~quarter. We have successfully implemented a $1.0 million reduction in marketing expenses, while e-commerce remained consistent with our previous calendar quarter. We believe the current macro inflationary environment is impacting discretionary spending with consumers as well as wholesale customers. We continue to work on a pipeline of opportunities both domestically and internationally and believe we will see revenue growth in the ~~prior year period. For~~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 overall net sales increased 14.9%, while net sales from of our E-commerce and wholesale grew 16.8% and 9.8% respectively. Overall, we believe the ongoing brand and market efforts continue to build momentum and traction with consumers and an increaserespectively, resulting in ~~activity from our wholesale business has contributed to our~~a year over year ~~growth.~~

~~Of our total net sales as indicated above, during the three months ended June 30, 2021 and 2020 our Paw CBD line accounted for~~decrease in net sales of ~~$1,547,687~~$7.1 million, primarily attributable to a $1.7 million, or 20.4% reduction in wholesale sales and ~~$1,228,860, respectively. In addition, during the nine months ended June 30, 2021 and 2020 our Paw CBD line accounted for net~~reduction in e-commerce sales of ~~$4,430,336~~$5.5 million. We continue to invest in new channels and ~~$2,818,414, respectively. The year over year growth in~~sales relationships and work to expand the life time value of our ~~Paw CBD brand is due to the expansion of products, increase in marketing efforts specific to the brand, including TV, as well as further adoptions from our wholesale~~ customers.

Our cost of sales includes costs associated with distribution, fill and labor expense, components, manufacturing overhead, ~~third-party~~third party providers, and ~~outbound~~ freight for our product ~~sales, and includes labor for our service~~ sales. Our cost of sales as a percentage of net sales was ~~31.9%~~31.0% and ~~35.2%~~31.9% for three months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively and ~~30.1%~~36.9% and ~~33.7%~~30.1% for the nine months ended June ~~31,~~30, 2022 and 2021, ~~and 2020,~~ respectively. ~~The change reflects~~Year over year, the ~~increasing revenue percentage of E-commerce sales, growth and maturation of the business and its manufacturing process, changes~~reduction in ~~the~~our cost of ~~raw materials, evaluating key vendors, negotiating volume pricing,~~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 ~~additional~~a one-time charge of $878,142 related to the rationalization of a number of SKUs and product ~~offerings which continue to impact~~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 ~~production. We expect product sales will maintain a normal cost of sales as a percentage of net sales, between 30% and 35% for cbdMd product, as~~sale more variable in nature we ~~continue to manage our overall cost for manufacturing and production during the balance of fiscal 2021.~~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. Our operating expenses on a consolidated basis increased approximately 68% for the third quarter of fiscal 2021 from the same period in fiscal 2020 and increased approximately 11% for the nine months ended June 30, 2021 as compared to the nine months ended June 30, 2020. The increase can be attributed to an increase in advertising and marketing expenses, and increase in payroll, increase in R&D and regulatory expenses (mostly due to cbdMD Therapeutics, LLC) as well as an increase in non-cash stock compensation the implementation of various cost control measures while supporting continued revenue growth and driving the business to a positive cash flow operation.

The following tables provide information on our ~~approximate~~ operating expenses for the three and nine months ended June 30, ~~2021~~2022 and ~~2020:~~2021:

								Three Months			Three Months
	Three Months Ended June 30,							Ended			Ended
	2021		2020					June 30,			June 30,
	(unaudited)		(unaudited)		Change			2022			2021		Change
Staff related expense	$	4,455,640	$	3,290,812	$	1,164,828		$	2,874,938		$	4,455,640	$	(1,580,702	)
Accounting/legal expense		237,357		212,766		24,591			262,307			237,357		24,950
Preofessional outside services		304,570		120,303		184,267
Professional outside services									237,877			304,570		(66,693	)
Advertising/marketing/social media/events/tradeshows		4,796,929		1,699,262		3,097,667			3,415,575			4,796,929		(1,381,354	)
Sponsorships		520,208		588,059		(67,851	)		227,084			520,208		(293,124	)
Affiliate commissions		482,026		504,440		(22,414	)		287,026			482,026		(195,000	)
Merchant fees		496,963		522,374		(25,411	)		255,956			496,963		(241,007	)
R&D and regulatory		674,874		21,632		653,242			113,751			674,874		(561,123	)
Non-cash stock compensation		959,319		331,985		627,334			(938,285	)		959,319		(1,897,604	)
Intangibles Amortization									277,354			-		277,354
Depreciation		246,533		211,937		34,596			158,556			246,533		(87,977	)
All other expenses		690,772		722,459		(31,687	)		1,110,792			690,772		420,020
Totals	$	13,865,191	$	8,226,029	$	5,639,162		$	8,282,931		$	13,865,191	$	(5,582,260	)

	Nine Months Ended June 30,
	2021		2020
	(unaudited)		(unaudited)		Change
Staff related expense	$	12,076,025	$	11,193,791	$	882,234
Accounting/legal expense		772,921		938,859		(165,938	)
Preofessional outside services		899,195		962,407		(63,212	)
Advertising/marketing/social media/events/tradeshows		11,856,233		7,534,488		4,321,745
Sponsorships		1,629,637		4,160,366		(2,530,729	)
Affiliate commissions		1,354,102		1,434,048		(79,946	)
Merchant fees		1,618,100		1,937,836		(319,736	)
R&D and regulatory		1,060,605		32,094		1,028,511
Non-cash stock compensation		2,049,326		1,447,860		601,466
Depreciation		719,856		499,394		220,462
All other expenses		2,810,371		2,912,819		(102,448	)
Totals	$	36,846,371	$	33,053,962	$	3,792,409

~~For~~Our overall operating expenses decreased by $5,582,260 or 40% three months ended June 30, 2022 over the three months ended June 30, 2021 and decreased $5,155,456 or 14% for the ~~overall operating expenses increased by $5,639,162 or 68.6% year~~nine months ended June 30, 2022 versus the nine months ended June 30, 2021. The quarter over ~~year,~~quarter decrease was primarily driven by management's ongoing efforts to reduce our cost structure including decreases in staff related expenses ($1.58 million), advertising, marketing, sponsorships and affiliate commission expenses ($1.89 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 related to forfeited RSUs and options, 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 ($1.9 million), advertising, marketing, ~~spend of $3,097,667 to drive increases~~sponsorships and affiliate commission expenses ($1.13 million), merchant fees ($867,000), and R&D and Regulatory ($510,000), partially offset by increase in ~~brand awareness,~~stock compensation ($287,000) as well as ~~a $1,164,828 increase in staff related expenses, a $653,242 increase in R&D~~depreciation and ~~Regulatory expense related to Therapeutics~~amortization ($862,000).

Excluding non-cash depreciation, intangible amortization, and ~~an increase of $627,334 in~~ non-cash stock ~~compensation expense.~~

~~For~~expenses, we reduced our adjusted operating expenses from $12.7 million to $8.8 million for the three months ended June 30, 2021 and June 30, 2022 respectively and from $34.1 million to $29.2 million the nine months ended June 30, 2021 ~~we made progress reducing many of~~and June 30, 2022 respectively.

While our operation expenses while increasing our spend on R&D and marketing expenses to help drive revenue. We believe that we have built a strong business foundation and infrastructure, and we are now focused on activation of our assetsgoal is to continue to ~~build~~improve year-over-year performance, management is also very much focused on improving the sequential performance and cash flow of the business. Excluding the stock compensation expense reversal of $1,485,142 related to forfeited RSUs and stock options, sequentially we reduced our ~~brand~~expenses by $1.68 million. We reduced marketing expense by over $1.0 million while increasing traffic 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 steps to reduce our overall ~~execution~~headcount, including the outsourcing 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 of fiscal 2022 resulted in over $608,000 in sequential payroll cost savings. Since 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 ~~profitability.~~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.

Corporateoverhead~~and~~~~allocation~~of~~management~~~~fees~~~~to our segments~~

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

The following tables provide information on our approximate corporate overhead for the three and nine months ended June 30, ~~2021~~2022 and ~~2020:~~2021:

	Three Months Ended June 30,
	2021		2020
	(unaudited)		(unaudited)		Change
Staff related expense	$	432,844	$	276,490	$	156,354
Accounting/Legal expense		190,199		81,198		109,001
Professional outside services		100,370		45,566		54,804
Travel expense		6,972		-		6,972
Business insurance		155,838		99,875		55,963
Non-cash stock compensation		959,319		331,985		627,334
Totals	$	1,845,542	$	835,114	$	1,010,428
								Three Months			Three Months
	Nine Months Ended June 30,							Ended			Ended
	2021		2020					June 30,			June 30,
	(unaudited)		(unaudited)		Change			2022			2021		Change
Staff related expense	$	1,283,240	$	986,731	$	296,509		$	288,570		$	432,844	$	(144,274	)
Accounting/Legal expense		655,939		517,090		138,849			195,056			190,199		4,857
Professional outside services		272,055		365,596		(93,541	)		119,330			100,370		18,960
Travel expense		6,974		22,342		(15,368	)		2,526			6,972		(4,446	)
Business insurance		425,704		282,339		143,365			167,387			155,838		11,549
Non-cash stock compensation		2,049,326		1,447,860		601,466			(938,285	)		959,319		(1,897,604	)
Totals	$	4,693,238	$	3,621,958	$	1,071,280		$	(165,417	)	$	1,845,542	$	(2,010,959	)

~~The increase in corporate related expenses~~Excluding the $1,485,142 contra-expense for ~~the three and nine months ended June 2021 over prior year is primarily due to the increase in non-cash~~ stock compensation related to ~~employees~~forfeited RSUs and ~~directors~~stock options, our corporate operating expenses are down quarter over quarter and ~~increases in staffing related expenses.~~year over year as a result of our ongoing efforts to reduce our cost structure across the board.

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 ~~which are not allocated to the operating business unit,~~ including ~~(i)~~ 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 months ended June 30, ~~2021. We did not incur expenses related to Therapeutics in 2020 as this subsidiary was not formed until March 15, 2021.~~2022 and 2021:

	Three Months Ended June 30,
	2021		2020
	(unaudited)		(unaudited)		Change
Staff related expense	$	90,041	$	-	$	90,041
R&D and Regulatory		615,497		-		615,497
Totals	$	705,538	$	-	$	705,538
							Three Months		Three Months
	Nine Months Ended June 30,						Ended		Ended
	2021		2020				June 30,		June 30,
	(unaudited)		(unaudited)		Change		2022		2021		Change
Staff related expense	$	90,041	$	-	$	90,041	$	80,346	$	90,041	$	(9,695	)
Accounting/legal expense								3,119	$	-		3,119
R&D and Regulatory		615,497		-		615,497		112,364		615,497		(503,133	)
Totals	$	705,538	$	-	$	705,538	$	195,829	$	705,538	$	(509,709	)

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.

We had goodwill at December 31, 2021 of $56,670,970. We perform a Step 0 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 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 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 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 June 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, ~~2021~~2022 and ~~2020,~~2021, we recorded ~~$(18,623)~~$0 and ~~$(30,849),~~$2,852, respectively, and for the nine months ended June 30, ~~2021~~2022 and ~~2020~~2021 we recorded ~~$526,940~~$(33,350) and ~~$(906,011),~~$545,562, respectively, ~~of realized and unrealized gain (loss) on marketable and other securities,~~ 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. ~~The loss in the prior year was driven by the impairment from its investment in Formula Four Beverages, Inc.~~

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~~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 ~~$14,100,000~~$702,000 at June 30, ~~2021,~~2022, as compared to $16,200,000 at September 30, ~~2020,~~2021, respectively. ~~During~~First quarter adjustment to the ~~third quarter of fiscal 2021 we had a decrease in value of $6,871,000 to~~ the contingent liability ~~which is recorded as other expense in our consolidated statement of operations for the third quarter of fiscal year 2021. The decrease in value is~~ comprised of ~~$522,104~~$366,841 associated with the decrease of the value of the Third Marking Period shares prior to their issuance in ~~May~~December 2021, while the remaining ~~$6,348,896~~$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, ~~2021.~~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 ~~stock~~stock price. The main driver of the change in the value of the contingent liability was the ~~increase~~decrease of our common stock price, which was ~~$2.90~~$0.44 at June 30, ~~2021~~2022 as compared to ~~$4.14~~$2.08 at ~~March 31,~~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 earn-out provision for the Twenty Two 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 $0 at June 30, 2022 as compared to $416,000 at September 30, 2021 respectively.

We had cash and cash equivalents on hand of ~~$18,984,012~~$9,553,670 and working capital of ~~$23,232,727~~$14,133,054 at June 30, ~~2021~~2022 as compared to cash and cash equivalents on hand of ~~$14,824,644~~$26,411,424 and working capital of ~~$16,023,174~~$29,595,214 at September 30, ~~2020.~~2021. Our current assets ~~increased~~decreased approximately ~~26.4%~~45.6% at June 30, ~~2021~~2022 from September 30, ~~2020,~~2021, which is primarily attributable to an increase in cash received under the public offering of our shares of our 8.0% Series A Convertible Preferred Stock in December 2020 Our current liabilities decreased approximately 12.2% at June 30, 2021 from September 30, 2020. This decrease is primarily attributable to a decrease in ~~accrued expenses as well as the forgiveness of our Paycheck Protect Program Loan, partially offset~~cash used to fund operations. Our current liabilities decreased by ~~increases~~17.2% at June 30, 2022 from September 30, 2021, and is primarily attributable to decreases in accounts ~~payable.~~

On July 1, 2021 we closed a follow-on firm commitment underwritten public offering of shares of our 8.0% Series A Convertible Preferred Stock resulting in total net proceeds to us of approximately $15.3 million.payable and accrued expenses.

During the three and nine months ended June 30, ~~2021~~2022 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 endorsement or sponsorship agreements for varying time periods up through December 2022 and provide for financial commitments from the Company based on performance/participation (see Note 11 Commitments and Contingencies). ~~We have sufficient~~

While the Company is taking strong action and believes that it can execute it's strategy and path to profitability within it's balance sheet, and in its ability to raise additional funds, there can be no assurances to that effect. The Company’s working capital position may not be sufficient to ~~fund our operations.~~support the Company’s daily operations for the twelve months subsequent to the issuance of these quarterly financial statements. The Company’s ability to continue as a going concern is dependent upon its ability to improve profitability and the ability to acquire additional funding. These and other factors raise potential concern about the Company’s ability to continue as a going concern within twelve months after the date that the quarterly financial statements are issued. These financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result in the Company not being able to continue as a going concern

Our goal from a liquidity perspective is to use operating cash flows to fund day to day operations and we have not met this goal as cash flow from operations has been a net use of ~~$4,608,254~~$3.7 million and ~~$1,130,029~~$4.6 million (excluding the reclassification of $939,826 of the SBA loan to short term liabilities) for the three months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively and ~~$8,293,160 (excluding the extinguishment of the PPP loan totaling $1,466,113)~~$16.8 million and ~~$10,277,081~~$8.3 million for the nine months ended June 30, 2022 and 2021, respectively. Management believes the quarterly cash consumption will continue to improve in subsequent quarters and ~~2020, respectively.~~we have sufficient capital to execute our plan to profitability.

Adjusted EBITDA for the three and nine months ended June 30, 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 ~~Note 6~~improvement operating costs that were partially offset by a reduction in revenue and corresponding gross profit. Year to the unaudited condensed consolidated financial statements appearing earlier in this report, on March 31, 2021 we entered into Addendum No. 1 to the Merger Agreement 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 perioddate Adjusted EBITDA declined by $2.5 million mostly related to a ~~quarterly basis for each~~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 ~~six fiscal~~prior sequential quarter. Management expects continuous improvement in future quarters ~~within the third marking period, beginning with the quarter ended March 31, 2021, instead~~as a result of ~~the initial 18 month period. While this change~~ongoing improvements in the measurement date has no effect on the number of remaining Earnout Shares issuable under the Earnout Rights, nor the revenue targets, it will result in the issuance of the Earnout Shares associated with the third marketing period (assuming the revenue targets are met under the terms of the Merger Agreement) on a quarterly basis instead of at the end of the 18 month period. Because the Earnout Shares are earned based on the Company’s earned revenueoperating costs and by issuing these shares quarterly, as compared to at the end of the eight quarters, we expect that this change has the potential to reduce the volatile impact of the contingent liability on our Net Income results and consequentially its non-cash impact to our financial statements with each subsequent quarter.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 ~~2020~~2021 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 ~~do not~~ have ~~any~~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.

EvaluationofDisclosureControlsandProcedures. We maintain “disclosure controls and procedures” as such term is defined in Rule 13a-15(e) under theSecurities 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 ~~co-Chief Executive Officers~~interim principal executive officer and ~~our~~ Chief Financial Officer ~~have~~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 ~~co-Chief Executive Officers~~interim principal executive officer and ~~our~~ 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 ~~2020 10-K and the risk factor included in our Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2020 as filed with the SEC on February 9, 2021.~~2021 10-K.

~~In addition to~~Except for those unregistered ~~sales~~securities previously ~~reported by~~disclosed in reports filed with the ~~Company~~SEC during the period covered by this report, ~~the Company issued the unregistered equity~~we have not sold any securities ~~disclosed below. The securities were issued pursuant to the exemption provided by Section 4(a)2 of~~without registration under the Securities Act ~~of 1933, as amended. The recipients were accredited investors.~~during the period covered by this report.

~~On April 9, 2021 the Company entered into an endorsement agreement with a professional athlete. A part of the endorsement agreement, the Company issued 40,000 shares of restricted common stock.~~

~~On May 14, 2021, the Company issued 562,278 shares of restricted common stock in connection with the earnout shares.~~

~~On June 8, 2021, the Company issued 25,000 shares of restricted common stock in connection with a services agreement to an industry consultant.~~

~~On July 23, 2021 the Company issued 300,000 shares of its common stock to Twenty Two Capital, LLC as partial consideration for the purchase of substantially all of Twenty Two Capital’s assets.~~

~~None.~~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 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. 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 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.

~~ITEM 6. EXHIBITS.~~+ 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.

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

		~~Page No~~

~~PART I-FINANCIAL INFORMATION~~

ITEM 1.2.	~~Financial Statements.~~	5

~~ITEM 2.~~	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	29	28

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk.	36	34

ITEM 4.	Controls and Procedures.	36	34

●	·	our history of losses;

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

·●	our reliance to market to key digital channels;

●	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
	·	~~risks associated with the implementation of our enterprise resource planning system (ERP) to Oracle NetSuite.~~

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

	·●	~~change in~~ state laws pertaining to industrial ~~hemp;~~hemp and their derivatives;

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

	·●	possible changes in the use of CBD.

●	·	the impact of changes in the fair value of our contingent liabilities associated with the Earnout Shares;

·●	dilution to our shareholders upon the issuance of the Earnout Shares;
		·	~~time devoted to our company by one of our co-Chief Executive Officers;~~
●	·	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.

PART II - OTHER INFORMATION

ITEM 1.	Legal Proceedings.	37	35

ITEM 1A.	Risk Factors.	37	35

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	37	35

ITEM 3.	Defaults Upon Senior Securities.	37	35

ITEM 4.	Mine Safety Disclosures.	37	35

ITEM 5.	Other Information.	37	35

ITEM 6.	Exhibits.	38	36

	(Unaudited)
	*June 30,*		*September 30,*
	*2022*		*2021*
Assets

Current assets:
Cash and cash equivalents	$	9,553,670	$	26,411,424
Accounts receivable		1,630,233		1,113,372
Accounts receivable – discontinued operations		1,375		10,967
Marketable securities	��	0		33,351
Investment other securities		1,000,000		1,000,000
Inventory		4,318,204		5,021,867
Inventory prepaid		548,580		551,519
Prepaid sponsorship		1,749,083		1,212,682
Prepaid expenses and other current assets		1,057,183		1,147,178
Total current assets		19,858,328		36,502,360

Other assets:
Property and equipment, net		775,477		2,561,574
Operating lease assets		4,751,192		5,614,960
Deposits for facilities		244,606		529,583
Intangible assets		18,111,903		23,003,929
Goodwill		11,996,249		56,670,970
Investment other securities, noncurrent		1,400,000		0
Total other assets		37,279,427		88,381,016

Total assets	$	57,137,755	$	124,883,376

cbdMD, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 2021 AND SEPTEMBER 30, 2020

	June 30,		September 30,
	2021		2020
	(Unaudited)
Assets

Current assets:
Cash and cash equivalents	$	18,984,012	$	14,824,644
Accounts receivable, net		1,467,598		911,482
Accounts receivable – discontinued operations		18,467		447,134
Marketable securities		13,412		26,472
Investment other securities		1,000,000		250,000
Inventory		4,738,418		4,603,360
Inventory prepaid		673,588		288,178
Prepaid software		0		174,308
Prepaid sponsorship		1,628,418		1,203,300
Prepaid expenses and other current assets		1,459,300		983,374
Total current assets		29,983,213		23,712,252

Other assets:
Property and equipment, net		2,775,203		3,183,487
Operating lease assets		5,929,300		6,851,357
Deposits for facilities		529,583		790,708
Intangible assets		21,635,000		21,635,000
Goodwill		54,669,997		54,669,997
Total other assets		85,539,083		87,130,549

Total assets	$	115,522,296	$	110,842,801

	*2022*		*2021*

Cash Payments for:
Interest expense	$	6,817	$	23,573

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

CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 2021 AND SEPTEMBER 30, 2020
(continued)

	(Unaudited)
	June 30,			September 30,
	2021			2020
Liabilities and shareholders’ equity

Current liabilities:
Accounts payable	$	3,144,380		$	2,850,421
Deferred revenue		755			0
Accrued expenses		2,362,024			2,769,920
Operating leases – current portion		1,184,839			1,159,098
Paycheck Protection Program Loan, current portion		0			854,000
Note payable		58,488			55,639
Total current liabilities		6,750,486			7,689,078

Long term liabilities:
Long term liabilities		124,226			264,367
Paycheck Protection Program Loan		0			602,100
Operating leases - long term portion		5,137,552			6,010,208
Contingent liability		14,100,000			16,200,000
Deferred tax liability		130,000			895,000
Total long term liabilities		19,491,778			23,971,675

Total liabilities		26,242,264			31,660,753

cbdMD, Inc. shareholders’ equity:
Preferred stock, authorized 50,000,000 shares, $0.001
par value, 2,800,000 and 500,000 shares issued and outstanding, respectively		2,800			500
Common stock, authorized 150,000,000 shares, $0.001
par value, 56,973,815 and 52,130,870 shares issued and outstanding, respectively		56,974			52,131
Additional paid in capital		158,198,042			126,517,784
Accumulated deficit		(68,977,784	)		(47,388,367	)
Total cbdMD, Inc. shareholders’ equity		89,280,032			79,182,048

Total liabilities and shareholders’ equity	$	115,522,296		$	110,842,801

cbdMD, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2021 and 2020

	Three Months			Three Months			Nine Months			Nine Months
	Ended			Ended			Ended			Ended
	June 30,			June 30,			June 30,			June 30,
	2021			2020			2021			2020

Gross Sales	$	11,352,585		$	10,809,387		$	36,941,917		$	30,925,678
Allowances		(792,062	)		(172,842	)		(2,254,481	)		(741,861	)
Total Net Sales		10,560,523			10,636,545			34,687,436			30,183,817
Cost of sales		3,370,952			3,748,024			10,444,353			10,180,637
Gross Profit		7,189,571			6,888,521			24,243,083			20,003,180

Operating expenses		13,865,191			8,226,029			36,846,371			33,053,962
(Loss) from operations		(6,675,620	)		(1,337,508	)		(12,603,288	)		(13,050,782	)
Realized and Unrealized (loss) gain on marketable and other securities, including impairments		(18,623	)		(30,849	)		526,940			(906,011	)
Gain (loss) on extinguishment of debt		1,466,113			0			1,466,113			0
Decrease (increase) of contingent liability		6,871,000			(7,580,000	)		(10,500,000	)		30,580,000
Interest (expense) income		(2,582	)		3,436			(23,573	)		46,311
Income (loss) before provision for income taxes		1,640,288			(8,944,921	)		(21,133,808	)		16,669,518

Benefit for income taxes		(103,000	)		0			765,000			2,240,300
Net Income (Loss) from continuing operations		1,537,288			(8,944,921	)		(20,368,808	)		18,909,818
Net (Loss) from discontinued operations, net of tax (Note 14)		0			(7,781	)		0			(48,983	)
Net Income (Loss)		1,537,288			(8,952,702	)		(20,368,808	)		18,860,835
Preferred dividends		560,281			100,050			1,220,610			266,800

Net Income (Loss) attributable to cbdMD, Inc. common shareholders	$	977,007		$	(9,052,752	)	$	(21,589,418	)	$	18,594,035

Net Income (Loss) per share:
Basic earnings per share		0.02			(0.18	)		(0.40	)		0.45
Diluted earnings per share		0.02			0			0			0.44
Weighted average number of shares Basic:		56,676,326			51,335,648			54,089,263			41,411,261
Weighted average number of shares Diluted:		61,431,643			-			-			42,534,519

cbdMD, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2021 AND 2020
(Unaudited)

	Three Months			Three Months			Nine Months			Nine Months
	Ended			Ended			Ended			Ended
	June 30,			June 30,			June 30,			June 30,
	2021			2020			2021			2020

Net Income (Loss)	$	1,537,288		$	(8,952,702	)	$	(20,368,808	)	$	18,860,835
Comprehensive Income (Loss)		1,537,288			(8,952,702	)		(20,368,808	)		18,860,835

Preferred dividends		(560,281	)		(100,050	)		(1,220,610	)		(266,800	)
Comprehensive Income (Loss) attributable to cbdMD, inc. common shareholders	$	977,007		$	(9,052,752	)	$	(21,589,418	)	$	18,594,035

cbdMD, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 2021 AND 2020
(unaudited)

	Nine Months			Nine Months
	Ended			Ended
	June 30,			June 30,
	2021			2020
Cash flows from operating activities:
Net (Loss) Income		(20,368,808	)	$	18,860,835
Adjustments to reconcile net (income) loss to net cash used by operating activities:
Stock based compensation		807,523			1,391,271
Restricted stock expense		1,137,583			138,001
Marketing stock amortization		660,232			0
Issuance of stock / warrants for service		98,605			84,450
Inventory and materials impairment		0			233,372
Impairment on discontinued operations asset		0			45,783
Depreciation and amortization		719,856			499,394
Other than temporary impairment other securities and other accounts receivable		0			760,000
Increase/(Decrease) in contingent liability		10,500,000			(30,580,000	)
Realized and unrealized loss of Marketable and other securities		(526,939	)		146,011
Merchant reserve settlement		0			132,657
Termination benefit		495,568			0
Extinguishment of Paycheck Protection Program Loan		(1,466,113	)		0
Amortization of operating lease asset		922,057			878,986
Changes in operating assets and liabilities:
Accounts receivable		(556,116	)		710,629
Deposits		261,125			(147,166	)
Merchant reserve		0			386,912
Inventory		(135,058	)		(2,329,112	)
Prepaid inventory		(385,410	)		621,573
Prepaid expenses and other current assets		(141,393	)		1,007,374
Accounts payable and accrued expenses		(603,216	)		(480,424	)
Operating lease liability		(846,914	)		(766,289	)
Note payable		0			42,968
Deferred revenue / customer deposits		4,478			(7,339	)
Collection on discontinued operations accounts receivable		428,667			333,333
Deferred tax liability		(765,000	)		(2,240,300	)
Cash used by operating activities		(9,759,273	)		(10,277,081	)
Cash flows from investing activities:
Proceeds from sale of other investment securities		540,000			0
Purchase of other investment securities		(750,000	)
Purchase of property and equipment		(311,572	)		(1,851,746	)
Cash provided (used) by investing activities		(521,572	)		(1,851,746	)
Cash flows from financing activities:
Proceeds from issuance of common stock		0			16,771,756
Proceeds from issuance of preferred stock		15,798,115			4,421,928
PPP loan		0			1,456,100
Note payable		(137,292	)		0
Preferred dividend distribution		(1,220,610	)		(266,800	)
Deferred Issuance costs		0			62,197
Cash provided by financing activities		14,440,213			22,445,181
Net increase (decrease) in cash		4,159,368			10,316,354
Cash and cash equivalents, beginning of period		14,824,644			4,689,966
Cash and cash equivalents, end of period	$	18,984,012		$	15,006,320

Supplemental Disclosures of Cash Flow Information:
	Nine Months		Nine Months
	Ended		Ended
	June 30,		June 30,
	2021		2020

Cash Payments for:
Interest expense	$	23,573	$	26,126

Non-cash financing activities:
Issuance of Contingent earnout shares:	$	12,596,089	$	0
Warrants issued to representative	$	254,950	$	524,113

	-	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~~customer.

	Three Months Ended June 30,					Three Months Ended June 30,
	2021		% of total			2020		% of total
Wholesale sales	$	2,740,523		26.0	%	$	2,410,719		22.7	%
E-commerce sales		7,820,000		74.0	%		8,225,826		77.3	%
Total Net Sales	$	10,560,523				$	10,636,545

	Nine Months Ended June 30,					Nine Months Ended June 30,
	2021		% of total			2020		% of total

Wholesale sales	$	9,049,068		26.1	%	$	8,238,832		27.3	%
E-commerce sales		25,638,368		73.9	%		21,944,985		72.7	%
Total Net Sales	$	34,687,436				$	30,183,817

●	·	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.

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

$1 - $20,000,000		.190625
$20,000,001 - $60,000,000		.0953125
$60,000,001 - $140,000,000		.04765625
$140,000,001 - $300,000,000		~~.023828125~~ .23828125

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,
2021 (remaining three months)	$	384,626
2022		1,405,887
2023		1,380,204
2024		1,421,610
2025		1,159,949
Thereafter		1,372,862
Total future lease payments		7,125,138
Less interest		(802,747	)
Total lease liabilities	$	6,322,391

For the year ended September 30,
2021	$	1,452,434
2022		1,392,837
2023		1,380,204
2024		1,421,610
2025		1,159,949
Thereafter		1,372,862
Total obligations and commitments	$	8,179,896

●	·Product Innovation:	~~Increase~~Our goal is to provide our ~~base product offering:~~customers superior functional based products with greater efficacy, absorption and claims. Weregularly assess and evaluate our product ~~offering, new products within our existing product categories, additional categories, as well as new~~portfolio, and ~~innovative ways to provide CBD in a manner that meets consumer demands. To that end, we are devoting~~devote resources to ongoing research and development processes with the goal of expanding our product offerings to meet these expanding consumer demands. We have a robust pipeline of products set to launch during fiscal 2022. In ~~fiscal 2020, we created offerings packaged for convenience stores and lip balm and other topicals as well as several unique products for certain customers. During the first quarter of fiscal 2021,~~February 2022 we launched ~~CBD lidocaine products including sprays, a CBD bath salt line, as well as~~ our ~~cbdMD Botanicals~~ line of ~~CBD skin care products. In~~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 ~~2021 we announced~~2022, and our ~~forthcoming 2021 product launches of which included an extension of our award-winning~~mood and ~~best-selling gummies, as well as the first ever, and highly anticipated, cbdMD Drink Mixes. We incurred some minor supply chain delays on new~~focus products ~~due to the current business climate but remain focused on launching during the coming quarters. In June 2021 we launched an additional line of cbdMD sleep tinctures and softgels.~~in May 2022.

●	·	Expand our revenue channels:As the market continues to evolve, we are expanding our sales channels. During fiscal 2020, our wholesale business was impacted as the broader retail industry faced various headwinds tied to quarantining and COVID impacts. Despite this, we continueWe continued to pursue relationships with a number of key traditional retail accounts and believe our top brand awareness, and effective marketing ~~and strong balance sheet~~ position us as the CBD partner ~~for CBD~~ for key traditional retail accounts as this channel ~~continues~~has continued to ~~normalize during~~normalize. During the ~~remainder~~second quarter we added a number of ~~fiscal 2021.~~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.

●	·International Expansion:	~~Expand to markets outside the United States:~~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 international markets and are ~~focused on~~gaining market share in Central America through our sanitary registration approvals. We are also expanding our E-commerce business to consumers in the ~~U.K.~~


·●	Expand ~~PAW CBD:~~our Additional Brands:During fiscal 2020 we saw the direct-to-consumer strength of cbdMD also translate into significant growth for Paw CBD. We continue to add internal resources to enhance this division. As this brand continues to grow, we are focusing on cross-selling, customer retention and education. During the second quarter of fiscal 2021 we ~~began~~took additional steps to grow the Paw CBD business which included advertising on TV, ~~and introduced~~introducing our Paw CBD rewards ~~program. During the third quarter of fiscal 2021 we introduced~~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.

●	·	~~Expand~~Maintain oursponsorshipstowardtargetedsegments:We have had significant success with attracting high profile sponsors and influencers andexpect to continue to assess the segments we have covered with a focus on ~~activation of the~~maintaining key sponsorships and influencers which are producing the largest visibility and responsiveness.

●	·	Acquisitions:~~During fiscal 2021~~We seek to acquire (i) brands that we believe we can optimize through our internal digital marketing agency and ~~beyond we~~fulfillment platform to increase our total addressable market or (ii) technology or intellectual property that will further enhance our product portfolio and create product differentiation. We may ~~also choose to further build and maintain our brand portfolio by acquiring additional~~acquire brands directly or through joint ventures if opportunities arise that we believe are in our best ~~interests. As we are in an emerging market, opportunities could be present as companies establish strong brands and begin to obtain large market share.~~interest. In assessing potential acquisitions or investments, we expect to primarily utilize our internal resources to evaluate growth potential, the strength of the target brand, offerings of the target, as well as possible efficiencies to gain. We believe that this approach will allow us to effectively screen consumer brand candidates and strategically evaluate acquisition targets and efficiently complete due diligence for potential acquisitions. ~~As referenced above, we recently acquired directcbdonline.com and related intellectual property.~~ We are currently not a party to any ~~additional~~ agreements or understandings regarding the acquisition of additional brands or companies and there are no assurances we will be successful in expanding our brand portfolio.

	Nine Months Ended June 30,
	2022			2021			Change
Total net sales	$	27,543,601		$	34,687,436		$	(7,143,835	)
Cost of sales		10,176,085			10,444,353			(268,268	)
Gross profit as a percentage of net sales		63.1	%		69.9	%		-6.8	%
Operating expenses		31,690,915			36,846,371			(5,155,456	)
Impairment of goodwill and other intangible assets		48,959,721			-			48,959,721
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
Net loss before taxes		(55,453,289	)		(21,133,808	)		(34,319,481	)
Net loss attributable to cbdMD Inc. common shareholders	$	(58,454,792	)	$	(21,589,418	)	$	(36,865,374	)

	Nine Months					Nine Months
	Ended					Ended
	June 30,					June 30,
	2022		% of total			2021		% of total

Wholesale sales	$	7,382,880		26.8	%	$	9,049,068		26.1	%
E-commerce sales		20,160,721		73.2	%		25,638,368		73.9	%
Total Net Sales	$	27,543,601				$	34,687,436

		Incorporated by Reference			Filed or Furnished
No.	Exhibit Description	Form	Date Filed	Number	Herewith
2.1	Merger Agreement dated December 3, 2018 by and among Level Brands, Inc., AcqCo, LLC, cbdMD LLC and Cure Based Development, LLC	8-K	12/3/18	2.1

2.2	Articles of Merger dated December 20, 2018 as filed with the Secretary of State of Nevada merging AcqCo, LLC with and into Cure Based Development, LLC	10-Q	2/14/19	2.2

2.3	Articles of Merger dated December 20, 2018 as filed with the Secretary of State of North Carolina merging AcqCo, LLC with and into Cure Based Development, LLC	10-Q	2/14/19	2.3

2.4	Articles of Merger dated December 20, 2018 as filed with the Secretary of State of Nevada merging Cure Based Development, LLC with an into cbdMD LLC	10-Q	2/14/19	2.4

2.5	Articles of Merger dated December 20, 2018 as filed with the Secretary of State of North Carolina merging Cure Based Development, LLC with an into cbdMD LLC	10-Q	2/14/19	2.5

2.6	Addendum No. 1 to Agreement and Plan of Merger dated March 31, 2021	8-K	4/1/21	10.1

3.1	Articles of Incorporation	1-A	9/18/17	2.1

3.2	Articles of Amendment to the Articles of Incorporation – filed April 22, 2015	1-A	9/18/17	2.2

3.3	Articles of Amendment to the Articles of Incorporation – filed June 22, 2015	1-A	9/18/17	2.3

3.4	Articles of Amendment to the Articles of Incorporation – filed November 17, 2016	1-A	9/18/17	2.4

3.5	Articles of Amendment to the Articles of Incorporation – filed December 5, 2016	1-A	9/18/17	2.5

3.6	Articles of Amendment to Articles of Incorporation	8-K	4/29/19	3.7

3.7	Articles of Amendment to the Articles of Incorporation including the Certificate of Designations, Rights and Preferences of the 8.0% Series A Cumulative Convertible Preferred Stock	8-A	10/11/19	3.1(f)

3.8	Bylaws, As amended	1-A	9/18/17	2.6

10.21	Equipment Purchase Agreement dated April 7, 2022 +	10-Q	5/13/22	10.21

10.22	Membership Interest Transfer Agreement effective June 22, 2022				Filed

31.1	Certification of Principal Executive Officer (Section 302)				Filed

31.2	Certification of Principal Financial Officer (Section 302)				Filed

32.1	Certification of Principal Executive Officer and Principal Financial Officer (Section 906)				Filed

101.INS
35	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document	Filed
101.SCH		Inline XBRL Taxonomy Extension Schema Document	Filed
~~Table of Contents~~ 101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document	Filed
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document	Filed
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document	Filed
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document	Filed
104		Cover Page Interactive Data File (embedded within the Inline XBRL Document and include in Exhibit 101)	Filed

No.	Exhibit Description	Form	Date Filed	Number	Herewith
2.1	Merger Agreement dated December 3, 2018 by and among Level Brands, Inc., AcqCo, LLC, cbdMD LLC and Cure Based Development, LLC	8-K	12/3/18	2.1
2.2	Articles of Merger dated December 20, 2018 as filed with the Secretary of State of Nevada merging AcqCo, LLC with and into Cure Based Development, LLC	10-Q	2/14/19	2.2
2.3	Articles of Merger dated December 20, 2018 as filed with the Secretary of State of North Carolina merging AcqCo, LLC with and into Cure Based Development, LLC	10-Q	2/14/19	2.3
2.4	Articles of Merger dated December 20, 2018 as filed with the Secretary of State of Nevada merging Cure Based Development, LLC with an into cbdMD LLC	10-Q	2/14/19	2.4
2.5	Articles of Merger dated December 20, 2018 as filed with the Secretary of State of North Carolina merging Cure Based Development, LLC with an into cbdMD LLC	10-Q	2/14/19	2.5
2.6	Addendum No. 1 to Agreement and Plan of Merger dated March 31, 2021	8-K	4/1/21	10.1
3.1	Articles of Incorporation	1-A	9/18/17	2.1
3.2	Articles of Amendment to the Articles of Incorporation – filed April 22, 2015	1-A	9/18/17	2.2
3.3	Articles of Amendment to the Articles of Incorporation – filed June 22, 2015	1-A	9/18/17	2.3
3.4	Articles of Amendment to the Articles of Incorporation – filed November 17, 2016	1-A	9/18/17	2.4
3.5	Articles of Amendment to the Articles of Incorporation – filed December 5, 2016	1-A	9/18/17	2.5
3.6	Articles of Amendment to Articles of Incorporation	8-K	4/29/19	3.7
3.7	Articles of Amendment to the Articles of Incorporation including the Certificate of Designations, Rights and Preferences of the 8.0% Series A Cumulative Convertible Preferred Stock	8-A	10/11/19	3.1(f)
3.8	Bylaws, As amended	1-A	9/18/17	2.6
10.3	Amended and Restated Executive Employment Agreement dated April 19, 2021 by and between cbdMD, Inc. and Martin A. Sumichrast	8-K	4/21/21	10.1
10.4	Amended and Restated Executive Employment Agreement by and between CBD Industries LLC and R. Scott Coffman	8-K	4/21/21	10.2
31.1	Certification of co-Principal Executive Officer (Section 302)				Filed
31.2	Certification of co-Principal Executive Officer (Section 302)				Filed
31.3	Certification of Principal Financial Officer (Section 302)				Filed
32.1	Certification of Principal Executive Officer and Principal Financial Officer (Section 906)				Filed
101 INS	XBRL Instance Document				Filed
101 SCH	XBRL Taxonomy Extension Schema				Filed
101 CAL	XBRL Taxonomy Extension Calculation Linkbase				Filed
101 LAB	XBRL Taxonomy Extension Label Linkbase				Filed
101 PRE	XBRL Taxonomy Extension Presentation Linkbase				Filed
101 DEF	XBRL Taxonomy Extension Definition Linkbase				Filed

	cbdMD, INC.

~~August 12, 2021~~	~~By:~~	~~/s/ Martin A. Sumichrast~~
		~~Martin A. Sumichrast,~~
			~~Co-Chief Executive Officer,~~
		~~co-principal executive officer~~


August ~~12, 2021~~ 11, 2022	By:	/s/ ~~Raymond S. Coffman~~T. Ronan Kennedy
		T. Ronan Kennedy, interim Principal Executive Officer
			~~Raymond S. Coffman,~~
		~~Co-Chief Executive Officer,~~
		~~co-principal executive officer~~

August ~~12, 2021~~ 11, 2022	By:	/s/ T. Ronan Kennedy
		T. Ronan Kennedy,
		Chief Financial Officer,
		principal financial and accounting officer