EDGAR 10-K Filing

Company CIK: 1644903
Filing Year: 2025
Filename: 1644903_10-K_2025_0001437749-25-038435.json

---

ITEM 1. BUSINESS
ITEM 1. DESCRIPTION OF BUSINESS
Our Company
General
cbdMD, Inc. is a consumer wellness company focused on the development, manufacturing, marketing, and sale of supplement brands powered by natural compounds. The majority of our products are anchored by hemp-derived cannabinoids, including broad-spectrum and full-spectrum CBD formulations, hemp-derived Delta-9 THC products (where permitted by law), and a range of functional products designed to address key wellness needs such as sleep, recovery, mood, discomfort, mobility, cognitive function, and stress management. Our approach centers on combining scientific rigor with high manufacturing standards to produce consistent, safe, and reliable products that meet both consumer expectations and evolving regulatory requirements.
We operate a multi-brand portfolio anchored by our flagship cbdMD® line, which offers oils, gummies, capsules, soft-gels, topicals, functional formulations, and hemp-derived compliant Delta-9 THC products. Complementing this portfolio is Paw CBD®, our dedicated pet-wellness brand, which provides tinctures, chews, and topicals for dogs and cats and reflects our long-standing emphasis on safety and quality in the animal health category.
Our ATRX® platform offers cutting edge, emerging and novel non-cannabinoid functional ingredients such as functional mushrooms and supports future expansion into performance-driven nutraceutical and nootropic categories utilizing synergistic ingredient combinations.
Our Herbal Oasis (“Oasis”) brand is a premium hemp-derived THC-infused social seltzer that blends cannabinoids and nootropic mushrooms to deliver a fast-acting, functional beverage made for presence and connection.
Our products are sold through a diversified distribution network that includes direct-to-consumer e-commerce platforms, online marketplaces, wholesale distribution to national and regional retailers, specialty health and pet channels, and emerging international markets. This multi-channel strategy allows us to reach a broad and diverse consumer base, reduce reliance on any single distribution partner, and quickly introduce new products which reflect scientific findings, consumer trends, and regulatory dynamics.
Recent Developments
Management’s efforts to drive shareholder value during 2025 were focused in 2 areas: (i) deliver positive earnings through a combination of optimizing our product portfolio, rationalizing our cost structure, and growing revenue; and, (ii) simplifying our capital structure.
During fiscal 2025 we made progress on strengthening the business. We were able to essentially maintain our revenue base and we continued to reduce our GAAP operating loss from a $3.3 million loss during fiscal 2024 to $2.1 million during fiscal 2025. We accomplished this while still focusing on disciplined cost control, rebuilding our marketing team and launching into the exciting hemp derived THC beverage category with our brand Oasis.
During fiscal 2025 we were successful in cleaning up our capital structure and at our annual meeting in April 2025 we secured sufficient votes to convert our Series A Convertible Preferred and outstanding accrued preferred dividends into approximately 91% of the Company’s outstanding common stock. This vote was critical to regaining compliance with NYSE American continued listing standards and maintaining our American listing as well as make the Company more attractive for merger and acquisition activity. We are now back in compliance with the NYSE American’s continued listing standards and our non-compliance status has been removed.
During the fiscal fourth quarter of 2025 the Company continued to make progress on building momentum with sequential and fourth quarter fiscal 2025 increases in revenue. We continue to make progress with our Oasis brand, which continues to grow quarterly as we added distributors and improved our sell-through at retailers. We are now available throughout the Southeast in Texas, Alabama, Georgia, Florida, North Carolina, Tennessee and several other states outside the Southeast. To date, Oasis has been a P&L earnings drag on the Company as we invest in a scaling, high-growth category. We made changes during the first fiscal quarter 2026 to reduce certain Oasis brand overhead expenses, add sales staff and are starting to see some benefits of scale as revenues continue to grow.
cbdMD believes trends from late 2025 are continuing in the first quarter of 2026. We are seeing momentum in our direct-to-consumer business, wholesale is trending up and we added additional Oasis distribution during the quarter. In addition, we have identified nearly $200,000 in corporate overhead savings that will be implemented during early 2026 with insurance renewals and professional fees leading the way.
During calendar 2025, we have faced a notable uptick in both state and federal regulatory activity. While most of the state level action to restrict the hemp category occurred, the industry built sufficient support to limit many restrictions on our industry. Unfortunately federal action in November 2025 poses a significant threat to the industry and our revenue bases, with approximately 40-45% of the Company's revenue derived from full spectrum SKUs that may be impacted.
Growth Strategies
We continued to pursue many strategies to grow our revenues and expand the scope of our business in fiscal 2025 and beyond:
●
Product Innovation: Our goal is to provide our customers superior functional based products with greater efficacy claims and absorption. We constantly assess and evaluate our product portfolio, and devote resources to ongoing research and development processes with the goal of improving our product offerings. During the first quarter of fiscal 2025, we launched reformulations on several sleep products to enhance their effectiveness and improve taste. In addition, we launched ready-to-drink beverage product under our new Oasis brand. We have a pipeline of cannabinoid and non-cannabinoid products and formulation upgrades that are in the queue for ongoing innovation and product portfolio improvement.
●
Expand our revenue channels: We continued to pursue relationships with traditional retail accounts and distributors and believe our top brand awareness and effective marketing position us as a preferred CBD partner for key traditional retail accounts as this channel has continued to normalize. During the first quarter of fiscal 2024 we launched several SKUs into Sprouts retail footprint. In April 2024, we added Door Dash as a customer. We expanded our ATRx Labs product in GNC during 2024. In 2025, we began developing relationships with beer and alcohol distributors for our Oasis beverage line and have added several large beer distributors to support our brand. Oasis can now be found in Total Wine, Winn-Dixie, Piggly Wiggly and a growing number of national and regional grocery and c-store chains.
●
International Expansion: We continue to explore sales in markets outside of the United States. 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 gaining market share in Central and South America through our sanitary registration approvals.
●
Cultivate Additional Brands: We continue to operate and attempt to grow the Paw CBD business. During fiscal 2024 we launched our nootropic mushroom line under the ATRx brand. During the first quarter of fiscal 2025 we launched a new line of hemp derived and nootropic beverages under the Oasis brand. We believe there are ongoing opportunities with these brands to focus on education, cross-selling and customer retention
●
Acquisitions: We evaluate acquisitions where we believe there is an accretive customer base that can lower our cost of customer acquisitions through either a complementary direct to consumer base or wholesale channels, or the target has a profitable business or easily attainable cost synergies that can quickly help contribute and accelerate revenue and profitability of our Company.
Marketing
cbdMD and its brands are primarily direct to consumer brands and our focus is to grow our base of customers by profitably acquiring new customers while minimizing churn. We employ a multi-channel media approach that allows us to market our brand and products through various distribution efforts, including professional partnerships, social media engagement, podcasts, digital and television advertising, affiliate marketing, search engine optimization, and influencer endorsements. In addition, we work with our retail partners on various marketing efforts to focus on shelf velocity.
During fiscal years 2025 and 2024 we spent approximately $4.4 million and $4.2 million, respectively, on brand development, sponsorships and marketing.
Moving forward, we remain committed to thoughtful, data-driven investments to expand our well-established brand. We are placing greater emphasis on consumer, retailer, and regulatory education to build awareness of our superior science, safety, and clinical efficacy. By refining our messaging and outreach, we aim to attract more consumers, engage more retailers, and foster broader regulatory acceptance, always working in the best interests of the company.
Sales
We distribute our products both through our online sales channel as well as through a number of wholesalers and retailers that resell our products both in brick and mortar locations as well as via their online websites. Sales of our products primarily come from online sales at our websites www.cbdmd.com, www.pawcbd.com, www.atrxlabs.com, www.herbaloasis.com,and www.directcbdonline.com and through our inside sales department. For our core cbdMD brand, we employ an inside sales team that concentrates on B2B niche specialty retailers as well as wholesale distributors, including international distributors, who we believe can help expand the reach of cbdMD products and brand recognition at physical retail locations. For our Oasis brand, we employ as second team focused on building relationships with beverage distributors and mass retailers that sell ready to drink ("RTD") beverages.
During fiscal year 2025, our e-commerce business experienced continued growth, with year over year increases in new e-commerce customers. For fiscal 2025 and fiscal 2024, approximately 77% and 80% of sales were e-commerce, respectively. Our wholesale continues to expand with the additional growth of international distributors and the addition of the Oasis distribution network.
Product Development and Manufacturing
cbdMD’s manufacturing, supply chain, and quality systems are designed to support rigorous standards of quality, safety, consistency, and regulatory compliance across all stages of product development. We utilize a hybrid manufacturing model that integrates internal specification design and oversight with both in-house manufacturing and use of experienced third-party contract manufacturers, allowing us to maintain flexibility in production, align with evolving regulatory expectations, and efficiently scale as demand fluctuates. All hemp-derived cannabinoids used in our products are sourced from U.S.-grown hemp cultivated under federal and state hemp programs. Our suppliers are evaluated for Good Manufacturing Practice ("GMP") compliance, traceability, contaminant controls, and cannabinoid profile consistency, and all raw materials undergo comprehensive testing for potency, residual solvents, pesticides, microbials, mycotoxins, and heavy metals.
Our contract manufacturing partners operate under GMP-aligned procedures that include strict documentation practices, validated processes, and batch-level traceability. Critical manufacturing relationships are governed by master manufacturing agreements and, where applicable, a quality assurance agreement that defines, among other things, specifications, testing obligations, deviation handling, and corrective action measures. These partners perform blending, homogenization, encapsulation, filling, packaging, and stability testing for a wide array of formats including oils, gummies, capsules, soft-gels, topicals, and pet chews. Finished goods are subjected to multiple levels of testing by ISO-17025 accredited laboratories to confirm cannabinoid content, purity, and compliance with the 0.3% Delta-9 THC limit imposed by the 2018 Farm Bill.
Warehousing and fulfillment operations are conducted in our 80,000-square-foot GMP-aligned facility, which manages incoming components, packaging, finished goods storage, and order fulfillment. We maintain environmental controls, FEFO-based inventory rotation, product-level traceability, and documented recall protocols. Our warehouse processes are designed to support a high volume of direct-to-consumer shipments as well as large retail distribution orders while maintaining product integrity and compliance.
Research and development activities play a central role in our competitive strategy. Through cbdMD Therapeutics, our scientific and clinical research arm, we have conducted controlled human and companion-animal clinical trials, biomarker and biometric studies, and toxicology evaluations to better understand the safety and efficacy of our formulations. Completed randomized, double-blind, placebo-controlled human studies have indicated improvements in pain, inflammation, mood, and general well-being, while our veterinary trials have shown mobility and gait improvements in dogs with osteoarthritis. A biometric sleep study conducted with WHOOP confirmed measurable improvements in sleep performance within seven days of product use. We use this data to refine formulations, substantiate claims, inform our patent pending, and generate regulatory dossiers for international approvals. Published peer-reviewed findings enhance credibility among consumers, retailers, and regulatory authorities. To date, our published study results have been cited multiple times in reputable peer-reviewed journals.
Our innovation pipeline includes proprietary formulations designed for sleep, stress, pain, inflammation reduction, recovery, mood, and mobility, as well as novel ingredient combinations that integrate cannabinoids with other clinically supported functional compounds. We continually evaluate new delivery systems-including improved edible formats, beverages, and bioavailability-enhancing technologies-to expand consumer access to safe and effective cannabinoid products, and our expanding portfolio of other functional ingredients.
Intellectual property protection remains an important component of our strategy. We maintain an extensive trademark portfolio covering cbdMD®, Paw CBD®, ATRX®, and related brands in the United States and internationally. We also rely on trade secrets and proprietary processes involving formulation techniques, cannabinoid ratios, clinical methodologies, and data analytics. Our pending U.S. patent application seeks to protect certain cannabinoid-based formulations developed through our clinical research program. To safeguard confidential information, we employ confidentiality agreements, controlled access systems, and internal data governance protocols.
Together, our manufacturing, quality, research, and intellectual property programs form the foundation of cbdMD’s ability to produce safe, compliant, scientifically credible, and commercially differentiated cannabinoid and other wellness products.
Intellectual property
We hold a portfolio of U.S. trademark applications which are held for current and future product offerings and extended branding capability. The portfolio, includes but is not limited to, the trademarks set forth below:
Mark
US Serial No.
US Registration No.
Filing date
Description of Mark Usage
DIRECT CBD ONLINE
5/10/2019
Service mark
DIRECT CBD ONLINE
5/10/2019
Service mark
CBD MD
2/21/2016
Standard word mark
cbdMD
5/29/2019
Stylized word mark (logo in color)
cbdMD
5/29/2019
Standard word mark
Paw CBD
10/19/2019
Standard word mark
CBDMD
6/2/2020
Standard word mark
hempMD
6/29/2021
Standard word mark
ATRX
10/04/2023
Standard word mark
We currently have filed multiple foreign trademark applications for CBDMD and Paw CBD and have secured marks in the following countries: Chile, Costa Rica, Argentina, Peru, Ecuador, European Union, United Kingdom, Czech Republic, New Zealand, Columbia, Australia, and Switzerland. We continue to prosecute the CBDMD and PAWCBD trademarks in the following countries: Brazil, Canada, China, Spain, Mexico, Norway, and South Africa. Additionally, a growing number of our products hold sanitary registrations in certain Central and South American countries.
The Company’s U.S. Patent Application No.: 17/359,193 is currently under examination. In Q4 of fiscal year 2024 the Company filed a response to an office action making several amendments to its claims based on data from the Company’s clinical studies. This patent, if granted, is expected to provide protection in several key areas, including novel formulations for the treatment of mood and sleep disorders.
In addition to our trademarks and our patent filing, we rely on a combination of trade secret laws and restrictions on disclosure to protect our intellectual property rights. Our success depends on the protection of the proprietary aspects of our product development, formulation and knowhow, as well as our ability to operate without infringing on the proprietary rights of others. We also enter into proprietary information and confidentiality agreements with our employees, consultants and commercial partners and control access to, and distribution of, our formulas and other proprietary information.
In addition to www.cbdmd.com, www.pawcbdmd.com, www.atrxlabs.com, and www.directcbdonline.com, we own multiple domain names that we may or may not operate in the future. However, as with phone numbers, we do not have and cannot acquire any property rights in an Internet address. The regulation of domain names in the United States and in other countries is subject to change. Regulatory bodies could establish additional top-level domains, appoint additional domain name registers or modify the requirements for holding domain names. As a result, we might not be able to maintain our domain names or obtain comparable domain names, which could harm our business.
Competition
The dietary supplement market is highly competitive, with new products and new brands entering frequently. The Company is attempting to distinguish itself by focusing on hemp derived cannabinoids and seeking to identify new, emerging ingredients with functional efficacy for key consumer need states such as sleep, mood, focus and energy. Specifically, the hemp derived cannabinoid market has remained fragmented with over 2,000 brands in the category and no clear dominant brand in the US. Our competitors of hemp derived cannabinoid products include a combination of public and private companies who operate as combination of e-commerce and wholesale brands as well as brick and mortar retail operations. In addition to cbdMD’s hemp derived CBD and Delta 9 products, there are several other synthetic compounds including, but not limited to delta-8; delta 10 and HHC, that do not have long market history or safety data which have taken market share over the last 2 years. The launch of ATRx and Oasis, the Company’s functional mushroom line and beverage line, respectively, also faces significant competitive pressure as functional mushrooms have emerged as a fast growing segment of the overall dietary supplement market and beverages have emerged as the fastest growing segment of the overall CBD market. By focusing on specific functional formulas to address consumer need states, the Company believes it can differentiate itself in the market. While the pending changes in Federal law discussed below may negatively affect our industry, we do believe it will reduce competition, as smaller competitors, poorly capitalized competitors and competitors that can not comply with Federal law changes may cease operating.
Government Regulations
Government regulation of hemp-derived cannabinoids remains dynamic, multi-layered, and complex. Our operations are influenced by federal law, state legislation, and international regulatory frameworks, each of which shapes the permissible scope of manufacturing, marketing, labeling, distribution, and sale of our products. We devote significant resources to monitoring regulatory developments and adjusting our operations accordingly.
At the federal level, the 2018 Farm Bill established the modern legal framework for hemp, removing hemp and hemp-derived cannabinoids from the Controlled Substances Act so long as the material contains no more than 0.3% Delta-9 THC on a dry-weight basis. Although this statute legalized the cultivation and interstate transport of hemp, it left the regulation of ingestible and topical cannabinoids to the U.S. Food and Drug Administration ("FDA"). As a result, the FDA continues to assert that CBD cannot be lawfully marketed as a dietary supplement or added to human food under existing statutory authorities due to CBD’s prior investigation as an approved drug. The FDA has repeatedly highlighted concerns involving product safety, labeling accuracy, and potential risks to vulnerable populations. Enforcement has included warning letters for unapproved drug claims, mislabeling, inadequate testing, and non-compliant animal products. The agency has also emphasized cGMP expectations, contaminant testing, adverse event reporting, and the need for well-controlled studies to establish safety for long-term use.
On November 12, 2025, President Trump signed into law H.R. 5371, the “Continuing Appropriations, Agriculture, Legislative Branch, Military Construction and Veterans Affairs, and Extensions Act, 2026” (the “Act”), which makes continuing appropriations and extensions for fiscal year 2026, and which also limits any THC content to 0.4mg per container for hemp-derived consumable products nationally on November 12, 2026. It is unknown to the Company whether or not the sections of the Act that impact the hemp industry will ultimately go into effect on November 12, 2026, or if those sections will be replaced, impacted or amended by subsequent acts of Congress. cbdMD was founded using THC-free broad spectrum, however a significant amount of our revenues are from products that contain low-dose hemp-derived THC that complies with the original Farm Bill and the Act in all likelihood will have a harmful impact on the industry and Company if further legislation is not enacted to mitigate the current language. During December 2025, Senator Wyden introduced the Cannabinoid Safety and Regulation Act (“CSRA”) which has received strong support from industry and a number of legislators, and would mitigate damaging impact for the Act, should this be ultimately signed into law. As of the date of this filing there are no assurances the CSRA will be enacted.
The Federal Trade Commission ("FTC") regulates advertising and marketing practices and continues to take enforcement actions against companies that make unsubstantiated health claims, misleading endorsements, or unsupported performance representations. All claims made by cbdMD-whether digital, print, social media, or influencer-based-must be supported by competent and reliable scientific evidence. Our investment in clinical trials, peer-reviewed publications, and biometric data (e.g., the WHOOP sleep study) strengthens our ability to meet substantiation standards.
The U.S. Department of Agriculture ("USDA") regulates hemp cultivation and approves state and tribal hemp programs. While it does not regulate finished products, all hemp used in cbdMD products must originate from producers operating under USDA-approved or state-approved hemp plans. These requirements ensure that our raw materials originate from legal sources subject to THC compliance, standardized sampling protocols, and production oversight.
The Drug Enforcement Administration ("DEA") retains jurisdiction over controlled substances and continues to regulate cannabis containing more than 0.3% Delta-9 THC. DEA has also expressed concerns about synthetic and semi-synthetic cannabinoids, including isomers produced from chemical conversion processes. These compounds may be considered controlled substances under the Federal Analogue Act, and products containing them may trigger enforcement actions. While cbdMD does not rely on synthetic cannabinoids, evolving DEA views continue to influence market dynamics and state-level legislative activity.
At the state level, the regulatory environment for hemp-derived products is highly fragmented. States have adopted different definitions of allowable cannabinoids, potency limits, serving sizes, packaging and labeling requirements, testing mandates, age restrictions, and sales channel limitations. Several states have enacted specific rules governing hemp-derived Delta-9 THC products, including potency caps and restrictions on intoxicating formulations. Others have banned certain forms of hemp-derived cannabinoids altogether, citing public health concerns. These divergent laws require ongoing reformulation, labeling adjustments, packaging updates, and market-specific strategies. Certain products may not be legal for sale in particular states, and our distribution decisions must account for these differences. We continue to monitor regulatory changes and adjust our operations, product formulations, and distribution pathways as needed.
Internationally, we navigate a similarly varied regulatory landscape. In the United Kingdom, the Food Standards Agency requires Novel Foods authorization for ingestible CBD products. The European Union applies similar Novel Foods rules, although specific requirements vary by member state. cbdMD has submitted a Novel Foods dossier to both the UK Food Standards Agency and the European Food Safety Authority which includes comprehensive safety, toxicology, stability, and manufacturing evidence. In Latin America, distribution often depends on obtaining sanitary registrations or import permits, each requiring product specifications, stability evidence, cannabinoid data, and documentation of manufacturing practices. cbdMD has obtained sanitary registrations or is in the process of securing registrations in countries including Brazil and Costa Rica. Other global markets maintain strict prohibitions or complex regulatory pathways for cannabinoid products, requiring careful evaluation before entry.
Advertising, labeling, and marketing regulations overlap across multiple agencies. All labeling must accurately represent cannabinoid content and include required disclosures, QR codes, batch information, and warnings. Claims must avoid disease-related statements and must be substantiated under both FDA and FTC standards. Pet products face further scrutiny under FDA’s Center for Veterinary Medicine ("CVM"), which considers ingestible cannabinoid pet products unapproved animal drugs absent explicit authorization.
The interplay of these federal, state, and international frameworks creates a dynamic and often uncertain regulatory environment. We expect continued evolution in the laws governing hemp-derived cannabinoids, including potential congressional action, FDA rulemaking, state legislative amendments, and international shifts. Our strategic planning, product development, distribution, and compliance systems are structured to adapt to these changes while prioritizing safety, transparency, and regulatory conformity.
Human Capital
At December 1, 2025 we had approximately 42 full-time employees and employ additional contractors to support the organization’s efforts. There are no collective bargaining agreements covering any of our employees.
We believe that cbdMD’s success depends on our ability to attract, develop and retain key personnel. We believe that the skills, experience and industry knowledge of our key employees significantly benefit our operations and performance.
Employee levels and expertise are assessed and reviewed on a regular basis and management believes it has sufficient human capital to operate its business successfully.
Additional information
Information on the history of our company can be found in Note 1 to the notes to our consolidated financial statements appearing in this annual report on Form 10-K.
We file annual, quarterly and other reports, proxy statements and other information with the SEC. The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers such as our company that file electronically with the SEC.
Our corporate website address is www.cbdmd.com. We make available free of charge, through the Investor section of our website, annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The information which appears on our corporate website is not part of this report.

---

ITEM 1A. RISK FACTORS
ITEM 1A. RISK FACTORS.
Investing in our securities involves risks. You should carefully consider the risks described below in addition to the other information set forth in this Annual Report on Form 10-K, including the Management’s Discussion and Analysis of Financial Conditions and Results of Operations section and the consolidated financial statements and related notes. If any of the risks and uncertainties described in the cautionary factors described below actually occur or continue to occur, our business, financial condition and results of operations and the trading price of our common stock and could be materially and adversely affected. Moreover, the risks below are not the only risks we face and additional risks not currently known to us or that we presently deem immaterial may emerge or become material at any time and may negatively impact our business, reputation, financial condition, results of operations or the trading price of our securities.
RISKS RELATED TO OUR OVERALL BUSINESS
We have a history of losses from operations and there are no assurances we will report profitable operations in future periods or continue as a going concern.
We reported losses from operations of $2.1 million and $3.3 million fiscal year 2025 and fiscal year 2024, respectively. Until such time, if ever, that we are successful in generating gross profits which are sufficient to pay our operating expenses it is likely we will continue to report losses from operations in future periods.
While the Company is taking strong action and believes that it can execute its strategy and path to profitability within its balance sheet, and in its ability to raise additional funds, there can be no assurances to that effect. The Company’s working capital position may not be sufficient to support the Company’s daily operations for the twelve months subsequent to the issuance of these annual financial statements. The Company’s ability to continue as a going concern is dependent upon its ability to improve profitability and cash flow and the ability to acquire additional funding. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern within twelve months after the date that the annual financial statements are issued. These financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result in the Company not being able to continue as a going concern.
In the event our revenues do not increase, we will need to raise additional capital to fund our operations in furtherance of our business plan.
Until we are profitable, we may need to raise additional capital during the current fiscal year in order to fund our operations in furtherance of our business plan. A potential financing may include shares of common stock, shares of preferred stock, warrants to purchase shares of common stock or preferred stock, debt securities, units consisting of the foregoing securities, equity investments from strategic development partners or some combination of each. Any additional equity financings may be financially dilutive to, and will be dilutive from an ownership perspective to, our stockholders, and such dilution may be significant based upon the size of such financing. Additionally, we cannot assure that such funding will be available on a timely basis, in needed quantities, or on terms favorable to us, if at all.
Our recent negative growth rates may continue.
Although we have made consistent and significant reductions in marketing spend as we rationalize expenses, we had consecutive fiscal years of revenue declines as the industry and Company have faced numerous headwinds. Net sales decreased to $19.5 million in fiscal 2024 and $19.2 million in fiscal 2025. This decrease was primarily driven by a decrease in total orders year over year in both our direct to consumer and wholesale divisions and we believe associate with (i) changes in social algorithms and IOS that affect effectiveness and cost of marketing and acquiring new customers, (ii) access to certain channels, (iii) ongoing competitive environment, (iv) statements from the FDA that negatively impacted retailer interest in the category, (v) significant inflationary pressures on consumers and businesses alike. We believe that our revenue growth will depend upon, among other factors:
●
Increasing U.S. brand awareness;
●
Our ability to obtain adequate protections for our intellectual property;
●
Product innovation to expand our total addressable market; and
●
International expansion.
We made significant changes to our headcount to rationalize our expenses. We are continuing to implement policies and procedures that we believe are appropriate for a company of our size. We may continue to experience difficulties as we continue to implement changes to our business and related policies and procedures to manage our business to positive cash flow. This process may increase the strain on our resources, and we could experience operating difficulties, including without limitations, difficulties in sourcing, logistics, recruiting, maintaining internal controls, marketing, designing innovative products, and meeting consumer needs. If we do not adapt to meet these evolving challenges, the strength of our brand may erode, the quality of our products may suffer, we may not be able to deliver products on a timely basis to our customers, and our corporate culture may be harmed.
In addition, we may make investments in our research and development and sales and marketing organizations, expand our operations and infrastructure both domestically and internationally, design and develop new products, and enhance our existing products with newly developed products and through acquisitions. If our sales do not increase at a sufficient rate to offset our operating expenses, our losses may increase in future periods.
Our business depends on maintaining and strengthening our brand and generating and maintaining ongoing demand for our products, and a significant reduction in such demand could harm our results of operations.
We have developed a strong and trusted brand that we believe has contributed significantly to the success of our business, and we believe our continued success depends on our ability to maintain and grow the value and reputation of cbdMD. Maintaining, promoting and positioning our brand and reputation will depend on, among other factors, the success of our product offerings, quality assurance, marketing and merchandising efforts, the reliability and reputation of our supply chain, our ability to grow and capture share of the CBD category, and our ability to provide a consistent, high-quality consumer experience. We have made substantial investments in these areas in order to maintain and enhance our brand and these experiences, but such investments may not be successful. Any negative publicity, regardless of its accuracy, could materially adversely affect our business. For example, our business depends in part on our ability to maintain a strong community of engaged customers and social media and influencers. We may not be able to maintain and enhance a loyal customer base if we receive customer complaints, negative publicity or otherwise fail to live up to consumers’ expectations, which could materially adversely affect our business, operating results and growth prospects.
The growing use of social and digital media by us, our consumers and third parties increases the speed and extent that information or misinformation and opinions can be shared. Negative publicity about us, our brand or our products on social or digital media could seriously damage our brand and reputation. For example, consumer perception could be influenced by negative media attention regarding any consumer complaints about our products, our management team, ownership structure, sourcing practices and supply chain partners, employment practices, ability to execute against our mission and values, and our products or brand, such as any advertising campaigns or media allegations that challenge the sustainability of our products and our supply chain, or that challenge our marketing efforts regarding the quality of our products, which could have an adverse effect on our business, brand and reputation. Similar factors or events could impact the success of any brands or products we introduce in the future.
Our company image and brands are very important to our vision and growth strategies, particularly our focus on being a “good company” and operating consistent with our mission and values. We will need to continue to invest in actions that support our mission and values and adjust our offerings to appeal to a broader audience in the future in order to sustain our business and to achieve growth, and there can be no assurance that we will be able to do so. If we do not maintain the favorable perception of our company and our brand, our sales and results of operations could be negatively impacted. Our brand and company image is based on perceptions of subjective qualities, and any incident that erodes the loyalty of our consumers, customers, suppliers or manufacturers, including adverse publicity or a governmental investigation or litigation, could significantly reduce the value of our brand and significantly damage our business, which would have a material adverse effect on our business, financial condition, results of operations and cash flows.
If we fail to attract new customers in a cost-effective manner, our business may be harmed.
A large part of our success depends on our ability to attract new customers in a cost-effective manner. We have made, and may continue to make, significant investments in attracting new customers through advertising spends on social media, radio, podcasts, targeted email communications, other media and events, sponsorships, and influencer sponsorships. Marketing campaigns can be expensive and may not result in the cost-effective acquisition of customers. Further, as our brand becomes more widely known, future marketing campaigns may not attract new customers at the same rate as past campaigns and the cost of acquiring new customers may increase over time. Additionally, regulation, algorithms, or participants in the digital marketing ecosystem may change rules for our industry or access to available demographics which may result in significant changes in the ability to target key demographic pools, impacting our ability to target our customers effectively. If we are unable to attract new customers, or fail to do so in a cost-effective manner, our business may be harmed.
Our growth depends, in part, on expanding into additional consumer markets, and we may not be successful in doing so.
We believe that our future growth depends not only on continuing to provide our current customers with new products, but also continuing to enlarge our customer base. The growth of our business will depend, in part, on our ability to continue to expand in the United States, as well as into international markets. We are investing significant resources in these areas, and although we hope that our products will gain popularity, we may face challenges that are different from those we currently encounter, including competitive, merchandising, distribution, hiring, and other difficulties. We may also encounter difficulties in attracting customers due to a lack of consumer familiarity with or acceptance of our brand, or a resistance to paying for premium products, particularly in international markets. In addition, although we are investing in sales and marketing activities to further penetrate newer regions, including expansion of our dedicated sales force, we may not be successful. If we are not successful, our business and results of operations may be harmed.
Our plans for international expansion may not be successful.
Continued expansion into markets outside the United States is one of our key long-term strategies for the future growth of our business. This expansion requires significant investment of capital and human resources, new business processes and marketing platforms, legal compliance, and the attention of many managers and other employees who would otherwise be focused on other aspects of our business. There are significant costs and risks inherent in selling our products in international markets, including: (i) failure to effectively establish our core brand identity; (ii) increased employment costs; (iii) increased shipping and distribution costs, which could increase our expenses and reduce our margins; (iv) potentially lower margins in some regions; (v) longer collection cycles in some regions; (vi) increased competition from local providers of similar products; (vii) compliance with foreign laws and regulations, including but not limited to product registrations/approvals, taxes and duties, laws governing the marketing and use of e-commerce websites and enhanced data privacy laws and security, rules, and regulations; (viii) establishing and maintaining effective internal controls at foreign locations and the associated increased costs; (ix) increased counterfeiting and the uncertainty of protection for intellectual property rights in some countries and practical difficulties of enforcing rights abroad; (x) compliance with anti-bribery, anti-corruption, and anti-money laundering laws, such as the FCPA, the Bribery Act, and OFAC regulations, by us, our employees, and our business partners; (xi) currency exchange rate fluctuations and related effects on our results of operations; (xii) economic weakness, including inflation, or political instability in foreign economies and markets; (xiii) compliance with tax, employment, immigration, and labor laws for employees living or traveling abroad; (xiv) workforce uncertainty in countries where labor unrest is more common than in the United States; (xv) business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters, including earthquakes, typhoons, floods, fires, and public health issues, including the outbreak of a pandemic or contagious disease, such as COVID-19, or xenophobia resulting therefrom; (xvi) the imposition of tariffs on products that we import into international markets that could make such products more expensive compared to those of our competitors; (xvii) that our ability to expand internationally could be impacted by the intellectual property rights of third parties that conflict with or are superior to ours; (xviii) difficulty developing retail relationships; and (xix) other costs and risks of doing business internationally.
These and other factors could harm our international operations and, consequently, harm our business, results of operations, and financial condition. Further, we may incur significant operating expenses as a result of our planned international expansion, and it may not be successful. We have limited experience with regulatory environments and market practices internationally, and we may not be able to penetrate or successfully operate in new markets. We may also encounter difficulty expanding into international markets because of limited brand recognition, leading to delayed or limited acceptance of our products by customers in these markets, and increased marketing and customer acquisition costs to establish our brand. Accordingly, if we are unable to successfully expand internationally or manage the complexity of our global operations, we may not achieve the expected benefits of this expansion and our financial condition and results of operations could be harmed.
Fluctuations in the cost and availability of raw materials, equipment, labor, and transportation could cause manufacturing delays or increase our costs.
The price and availability of key components used to manufacture our products has been increasing and may continue to fluctuate significantly. In addition, the cost of labor within our company or at our third-party manufacturers could increase significantly due to regulation or inflationary pressures. Additionally, the cost of logistics and transportation fluctuates in large part due to the price of oil, and availability can be limited due to political and economic issues. Any fluctuations in the cost and availability of any of our raw materials, packaging, or other sourcing or transportation costs could harm our gross margins and our ability to meet customer demand. If we are unable to successfully mitigate a significant portion of these product cost increases or fluctuations, our results of operations could be harmed.
We rely on third-parties for raw materials and to manufacture and compound our products. We have no control over these third parties and if these relationships are disrupted our results of operations in future periods will be adversely impacted.
Many of our products are manufactured, compounded, and packaged by unaffiliated third parties, of which we hold short-term supply and manufacturing agreements with and the use of these third-parties changes from time to time due to customer demand and the composition of our product mix and product portfolio. We do not have any long-term committed contracts with any of these third parties, and we expect to compete with other companies for raw materials, production and imported materials. If we experience significant increased demand or need to replace an existing raw material supplier or third-party manufacturer, there can be no assurances that replacements for these third-party vendors will be available when required on terms that are acceptable to us, or at all, or that any manufacturer or compounder would allocate sufficient capacity to us in order to meet our requirements. In addition, even if we are able to expand existing or find new sources, we may encounter delays in production and added costs as a result of the time it takes to engage third parties. Any delays, interruption or increased costs in raw materials and/or the manufacturing or compounding of our products could have an adverse effect on our ability to meet retail customer and consumer demand for our products and result in lower revenues and net income both in the short and long-term.
Failures in our third-party verification and testing protocols may have an adverse impact on our brands which could suppress sales.
The quality of our products is essential to our business strategy. We require our raw material suppliers and farms to participate in our supplier verification program and to certify that their source material was grown using strict standards of cultivation. We also employ third-party testing procedures and all incoming cannabinoid ingredients are first tested by an independent, third-party laboratory before they reach our production facilities and then re-tested in-house throughout the production process before sending the ingredients off for final verification by an independent accredited third-party laboratories. We are reliant on these third parties to adhere to our supplier verification program and properly perform the third-party testing procedures. Any intentional or unintentional failure of any of these parties to perform the functions for which we have engaged them would adversely impact the quality of our products and could result in delays in meeting consumer demand or a decline in our sales.
Failures to comply with applicable laws, including hemp laws, by our third-party suppliers could create disruptions in the supply chain and adversely impact our ability to manufacture products effectively.
The Company’s suppliers and manufacturers must comply with the hemp production and manufacturing laws of their respective states. Since these laws can vary significantly between states, the Company relies on its partners to adhere to both state-specific regulations and USDA requirements. If any supplier or manufacturer fails to comply with local laws or loses their permits or licenses, their ability to continue operations may be jeopardized, which could, in turn, disrupt the Company’s supply chain and manufacturing processes. Such disruptions may negatively impact the Company’s ability to conduct its business as planned.
Product inventory may expire prior to sale due to limited shelf life.
While the Company actively manages its inventory, it is possible that products could reach their expiration date and remain unsold. In such cases, the Company may need to write down the value of the expired inventory, which could negatively impact its business, financial position, and operational outcomes.
Consumers of the Company’s products may face adverse consequences should they test positive for THC which could negatively impact the Company’s reputation, lead to litigation, or other potentially negative impacts to the Company.
Many of the Company’s products are derived from cannabis and may contain trace amounts of THC, which may be below the level of detection but could build up in a regular consumer’s system. Although these levels are generally low, historically THC has been a banned substance in many jurisdictions, and regulations regarding permissible THC limits are continually evolving. As a result, there is a potential risk for end users who test positive for THC due to consumption of the Company’s products. This may be of particular concern in the case of full-spectrum hemp products, which contain not only CBD but also trace levels of THC and other cannabinoids. These trace amounts could lead to false positives on drug tests, especially with certain testing methods that do not differentiate between THC from hemp and that from other sources. There is also the possibility that certain approved tests for THC may not properly differentiate between the metabolites of THC and the metabolites of CBD, thus leading to a false positive for THC consumption. Additionally, metabolic processes in the body may cause CBD and its metabolites to convert into forms that could affect drug test results. Positive test results, even from trace amounts of THC, can have significant consequences for individuals, potentially affecting their reputation, employment, or participation in specific activities, including professional sports. Furthermore, a claim or regulatory action based on such positive test results could damage the Company’s reputation and adversely affect its operations, potentially leading to legal or regulatory challenges.
We could be harmed by data loss or other security breaches.
Like all companies that utilize technology, we are subject to threats of breaches of our technology systems and cybersecurity risks. Some of our systems have experienced past security incidents, including an incident that compromised some customers' personal and payment information. We conducted a forensic examination, made all notices to customers, governments, banks and card associations as required under local, state and federal laws, merchant agreements and card association rules. We also offered free credit monitoring and reporting to all affected customers and are maintaining a call center to handle any customer issues. We have implemented all remedial measures advised by the forensic examiner engaged by us, and, although we do not believe that any of these incidents have had a material adverse effect on our operating results, there can be no assurance the remedial measures will be effective or of a similar result in the future which could materially and adversely impact our business and operations in future periods.
We face risks related to system interruption and lack of redundancy.
From time to time we experience system interruptions and delays that make our websites and product sales unavailable or slow to respond and prevent us from efficiently fulfilling orders which could adversely impact our net sales and the attractiveness of our products. If we are unable to add software and hardware as needed, effectively upgrade our systems and network infrastructure, and take other steps to improve the efficiency of our systems, these failures could cause system interruptions or delays and adversely affect our operating results in future periods. In addition, our computer and communications systems and operations could be damaged or interrupted by fire, flood, power loss, telecommunications failure, earthquakes, acts of war or terrorism, acts of God, computer viruses, physical or electronic break-ins, and similar events or disruptions. Any of these events could cause system interruption, delays, and loss of critical data, and could prevent us from accepting and fulfilling customer orders which could make our product offerings less attractive and subject us to liability. Our systems are not fully redundant, and our disaster recovery planning may not be sufficient. In addition, we may have inadequate insurance coverage to compensate for any related losses. Any of these events could damage our reputation and be expensive to remedy.
Our future success depends on the continuing efforts of our management and key employees, and on our ability to attract and retain highly skilled personnel and senior management.
We depend on the talents and continued efforts of our senior management and key employees. We currently do not have any long-term employment agreements with our executive officers. The loss of members of our management or key employees may disrupt our business and harm our results of operations. Furthermore, our ability to manage further expansion will require us to continue to attract, motivate, and retain additional qualified personnel. Competition for this type of personnel is intense, and we may not be successful in attracting, integrating, and retaining the personnel required to grow and operate our business effectively. There can be no assurance that our current management team, or any new members of our management team, will be able to successfully execute our business and operating strategies.
If our other intangible assets, or fixed assets become impaired, we may be required to record a charge to our earnings.
We may be required to record future impairments of other intangible assets, or fixed assets to the extent the fair value of these assets falls below their book value. Our estimates of fair value are based on assumptions regarding future cash flows, gross margins, expenses, discount rates applied to these cash flows, and current market estimates of value. Estimates used for future sales growth rates, gross profit performance, and other assumptions used to estimate fair value could cause us to record material non-cash impairment charges, which could harm our results of operations and financial condition.
RISKS RELATED TO THE REGULATORY ENVIRONMENT FOR CBD
Lack of clarity and changes to Federal or state laws pertaining to industrial hemp could slow the use of industrial hemp which would materially impact our revenues in future periods.
On November 12, 2025, President Trump signed into law H.R. 5371, the “Continuing Appropriations, Agriculture, Legislative Branch, Military Construction and Veterans Affairs, and Extensions Act, 2026” (the “Act”), which makes continuing appropriations and extensions for fiscal year 2026, and which also limits any THC content to 0.4mg per container for hemp-derived consumable products nationally on November 12, 2026. It is unknown to the Company whether or not the sections of the Act that impact the hemp industry will ultimately go into effect on November 12, 2026, or if those sections will be replaced, impacted or amended by subsequent acts of Congress. cbdMD was founded using THC-free broad spectrum, however a significant amount of our revenues are from products that contain low-dose hemp-derived THC that complies with the original Farm Bill and the Act in all likelihood will have a harmful impact on the industry and Company if further legislation is not enacted to mitigate the current language. While there appears to be ample public support for favorable legislative action, including the Cannabinoid Safeety and Regulation Act (CSRA) proposed in December 2025, numerous factors may impact or negatively affect the legislative process(es) within the various states where we have business interests. Any one of these factors could slow or halt use of industrial hemp, which could negatively impact the business up to possibly causing us to discontinue operations as a whole. In addition, changes in Federal or state laws could require us to alter the way we conduct our business in order to remain compliant with applicable state laws in ways we are presently unable to foresee. These possible changes, if necessary, could be costly and may adversely impact our results of operations in future periods.
Final designation of hemp derived cannabinoids as impermissible adulterants, FDAs refusal to accept hemp derived cannabinoids as New Dietary Ingredients ("NDI") or FDAs interpretation of Investigational New Drug ("IND") Preclusion could negatively impact the Company’s operations.
The regulatory framework surrounding cannabinoids, particularly CBD, raises significant challenges for the Company. First, concerns about CBD as an impermissible adulterant persist due to the FDA's position that cannabinoids cannot legally be added to food or beverages. The FDA has consistently objected to such uses, asserting that CBD-containing products may be adulterated and subject to enforcement action. Second, under the FD&C Act, unless a product was in the food supply and marketed to the public prior to October 15, 1994, manufacturers must notify the FDA before marketing dietary supplements containing NDIs, providing evidence that the ingredient is expected to be safe. However, there is ongoing uncertainty regarding whether hemp-derived cannabinoids were in the food supply and marketed to the public before October 15, 1994, as required to avoid classification as an NDI. As of the end of fiscal 2024, the FDA has uniformly objected to several New Dietary Ingredient Notifications ("NDIN") submitted to the Agency by competitors, asserting it does not meet the definition of a dietary supplement due to the FDA's stance that CBD was not marketed as a dietary ingredient before its investigation as a new drug. The Company disagrees with this position and believes there are counterarguments. The FDA has consistently taken the position that CBD cannot be marketed as a dietary supplement or added to food because it was investigated as a new drug before its inclusion in the food supply, known as IND Preclusion. This position has been outlined in the majority of Warning Letters the FDA has sent to CBD companies since the enactment of the Farm Bill. Any enforcement of the IND Preclusion could require the Company to allocate significant resources to defend its position, adversely affecting its business and operations. Without changes in federal law, regulation, or judicial interpretation, the FDA’s current stance could materially and adversely impact the Company’s ability to operate.
Failure or inability to secure required state or federal regulatory approvals and permits could negatively impact the Company’s ability to conduct business.
The Company must secure and maintain specific approvals and permits in many jurisdictions where its products are sold, and failure to do so could delay or inhibit its operations. Regulatory approval and permit requirements are subject to change without notice. There is no guarantee that the Company will be able to acquire or retain these essential approvals. Any substantial delays or inability to obtain the required permits or licenses would negatively impact the Company’s ability to conduct its business, potentially leading to material adverse effects on its financial condition and operations.
Costs associated with compliance with numerous laws and regulations could impact our financial results. In addition, we could become subject to increased litigation risks associated with the CBD industry and the overall Dietary Supplement Industry.
The manufacture, labeling and distribution by us of the products in our portfolio are regulated by various federal, state and local agencies. These governmental authorities may commence regulatory or legal proceedings, which could restrict the permissible scope of our product claims or the ability to sell products in the future. We are subject to regulation by the federal government and other state and local agencies as a result of our product offering, including but not limited to hemp-based cannabinoid products and other natural health products. The shifting compliance environment and the need to build and maintain robust systems to comply with different compliance in multiple jurisdictions increases the possibility that we may violate one or more of the requirements. If our operations are found to be in violation of any of such laws or any other governmental regulations that apply to our company, we may be subject to penalties, including, without limitation, civil and criminal penalties, damages, fines, the curtailment or restructuring of our operations, any of which could adversely affect the ability to operate our business and our financial results. Failure to comply with the various federal, state and local requirements may result in, among other things, injunctions, product withdrawals, recalls, product seizures, fines and criminal prosecutions. We are seeing increasing state-level potency, labeling and package size requirements that may increase our costs with respect to monitoring and adhering to unique requirements in addition to potential product and packaging obsolescence costs as well as stop sales or product withdrawals. Our advertising is subject to regulation by, among others, the FDA under the Federal Food, Drug & Cosmetics Act, and the FTC, under the Federal Trade Commission Act, and is also subject to various state regulations enforced by state agencies and state attorneys general. Additionally, some states also permit advertising and labeling laws to be enforced by private attorneys general who may seek relief for consumers, seek class-action certifications, seek class-wide damages and product withdrawals of products sold by us. Any actions against our company by governmental authorities or private litigants could be time consuming, costly to defend and could have a material adverse effect on our business, financial condition, and results of operations.
Uncertainty caused by potential changes to legal regulations could impact the use of the Company’s products.
There is substantial uncertainty and different interpretations among federal, state and local regulatory agencies, legislators, academics and businesses as to the scope of operation of Farm Bill-compliant hemp programs relative to the emerging regulation of cannabinoids. These different opinions include, but are not limited to, the regulation of cannabinoids by the U.S. Drug Enforcement Administration and/or the FDA, various administrative determinations and court decisions, all of which impact the extent to which manufacturers and processors of products containing Farm Bill-compliant cannabinoids may engage in interstate commerce. There are currently no consistent regulations applicable to hemp derived cannabinoids in the United States or globally. There is no assurance the Company will remain compliant with all of these laws, rules and regulations as changes to such laws, rules and regulations are promulgated and this may have a negative impact on the Company’s operations. By way of example, through the end of Fiscal 2025, multiple states including Alaska, Florida, Maryland, Minnesota, New York, Utah, Texas and Virginia had implemented new regulations which impact the Company’s ability to sell some of its products as they exist now in formulation and packaging. The uncertainties, conflicts and lack of uniformity cannot be resolved without further federal, and perhaps even state-level, legislation, regulation or a definitive judicial interpretation of existing legislation and rules. If these uncertainties continue, they may have an adverse effect upon the introduction of our products in different markets.
The FTC may seek to pursue enforcement actions against companies selling hemp derived cannabinoids, including the Company.
The FTC has increasingly focused on the regulation of advertising, labeling, and promotion of CBD and other health-related products. In the CBD product marketplace, the FTC has collaborated with the FDA to issue warnings about advertisements lacking competent and reliable scientific evidence, which violates the FTC Act. In addition, the FTC has independently issued warning letters to companies marketing CBD products with exaggerated or unsupported health claims. Although the FTC has primarily issued warning letters, it initiated its first law enforcement administrative action in December 2020, taking action against six CBD companies for allegedly making unsupported health claims, resulting in settlement agreements requiring cessation of such claims and monetary penalties. The FTC further heightened its scrutiny in May 2021 and, more recently, issued its April 2023 Notice of Penalty Offenses, which stresses the need for rigorous substantiation of health-related product claims. This notice emphasizes that companies must provide scientific evidence, including high-quality, randomized, placebo-controlled human clinical trials, to substantiate claims. Failure to comply with these standards could result in significant penalties under Section 5 of the FTC Act. The FTC’s actions, along with the potential for increased enforcement in the future, present additional risks to companies in the CBD industry. The Company must be cautious in making health claims, ensuring all advertising is adequately supported by scientific evidence, as any violations could result in penalties, corrective measures, and reputational damage.
Risks associated with international regulations.
The Company faces significant regulatory challenges and risks in expanding its operations internationally, which could materially impact its business. As the Company conducts sales and expands into new markets, it must adhere to the laws and regulations of each jurisdiction, as well as any relevant international treaties. Non-compliance with these regulations could result in civil or criminal penalties, fines, operational restructuring, asset seizures, or the denial of regulatory applications. Moreover, international authorities could determine that past or current operations violated local regulations, exposing the Company to potential enforcement actions. The evolving legal landscape in certain jurisdictions, including proposed legislative changes, may present opportunities for portfolio expansion but also introduces undetermined compliance risks. Additionally, cannabis-related financial transactions are governed by complex and unsettled laws that vary by jurisdiction, and financial benefits derived from activities deemed unlawful in certain regions could expose the Company, its investors, or affiliates to liability. Increased regulation of natural health products and heightened scrutiny of nutritional supplements and advertising claims further compound these challenges. Anticipated regulatory changes may require the Company to adapt its products or marketing strategies, and any delays or failures to comply could disrupt operations. These risks underscore the need for prospective investors to consult legal counsel to assess potential liabilities associated with the Company's activities in specific jurisdictions.
Tariffs on imported packaging materials could increase our costs and negatively affect our business, results of operations, and financial condition.
While our raw materials and products are produced in the U.S., we rely on certain packaging materials for our products that are sourced from U.S. and foreign suppliers. In March and April 2025, the Trump Administration announced a series of additional special tariffs, some of which have been temporarily paused. The additional special tariffs already in effect as of the date of this report are tariffs of 10% on most products from all countries worldwide. Although we believe we have alternative U.S. sources for our packaging materials, as a result of the increases in the U.S. tariffs, we may experience higher costs that we may not be able to pass on to consumers, which could result in the loss of customers, harm to our operating performance, and a negative impact on our profit margins. Additionally, the imposition of tariffs could disrupt our supply chain, result in delays or shortages of packaging materials, or require us to seek alternative suppliers at potentially higher costs. The increase or continued imposition of tariffs, potential trade restrictions between countries as a result of tariffs, and similar constraints could result in a material adverse effect on our business, operations, and financial condition.
RISKS RELATED TO OWNERSHIP OF OUR SECURITIES
We are subject to the continued listing standards of the NYSE American and our failure to satisfy these criteria may result in de-listing of our common stock.
Our common stock is listed on the NYSE American. In order to maintain these listings, we must maintain certain share prices, financial and share distribution targets, including maintaining a minimum amount of shareholders’ equity and a minimum number of public shareholders. In addition to these objective standards, the NYSE American may delist the securities of any issuer (i) if, in its opinion, the issuer’s financial condition and/or operating results appear unsatisfactory; (ii) if it appears that the extent of public distribution or the aggregate market value of the security has become so reduced as to make continued listing on the NYSE American inadvisable; (iii) if the issuer sells or disposes of principal operating assets or ceases to be an operating company; (iv) if an issuer fails to comply with the NYSE American’s listing requirements; (v) if an issuer’s securities sell at what the NYSE American considers a “low selling price” and the issuer fails to correct this via a reverse split of shares after notification by the NYSE American; or (vi) if any other event occurs or any condition exists which, in the opinion of the NYSE American, makes continued listing inadvisable. On June 5, 2024 and December 31, 2024, we received notifications from the NYSE American that the Company was no longer in compliance with an NYSE American continued listing standards, specifically, the continued listing standards set forth in Section 1003(a)(i) and 1003(a)(ii) of the NYSE American Company Guide (the “Company Guide”). Section 1003(a)(i) requires a listed company to have stockholders’ equity of $2.0 million or more if the listed company has reported losses from continuing operations and/or net losses in two of its three most recent fiscal years then ended and Section 1003(a)(ii) of the Company Guide requires a listed company to have stockholders’ equity of $4.0 million if the listed company has reported losses from continuing operations and/or net losses in three of its four most recent fiscal years then ended. As previously disclosed, all previously outstanding shares of our Series A Preferred Stock were converted to common stock on May 6, 2025 and all accrued dividends were eliminated. As part of this conversion, $6.7 million of accrued and unpaid dividends as of June 30, 2025 were converted to equity upon the Series A Preferred conversion which brought us into compliance with the NYSE American’s continued listing standards, and we maintained the continued listing standards for two fiscal quarters and complied with other provisions of Section 1003 of the Company Guide, including increased stockholders’ equity requirements of a minimum of $6,000,000, as we continued to incur annual losses from continuing operations and/or net losses for the fiscal year ended September 30, 2025. If we fail to maintain continued listing standards and the NYSE American delists our common stock, investors may face material adverse consequences, including, but not limited to, a lack of trading market for our securities, reduced liquidity, decreased analyst coverage of our securities, and an inability for us to obtain any additional financing to fund our operations that we may need.
The Series B Convertible Preferred Stock ranks senior to our Common Stock all indebtedness and other liabilities of our subsidiaries.
In the event of our bankruptcy, liquidation, dissolution or winding-up of our affairs, the rights of holders of the Series B Convertible Preferred Stock to participate in the distribution of our assets will rank senior to the Common Stock. If we are forced to liquidate our assets to pay our creditors, our outstanding Series B Preferred Stock has a preference senior to our Common Stock.
Change of Control rights of the Series B Convertible Preferred Stock may make it more difficult for a party to acquire us or discourage a party from acquiring us.
The Change of Control rights of the Series B Convertible Preferred Stock may have the effect of discouraging a third party from making an acquisition proposal for our company or of delaying, deferring or preventing certain of change of control transactions under circumstances that otherwise could provide the holders of our common stock and Series B Convertible Preferred Stock with the opportunity to realize a premium over the then-current market price of such stock or that shareholders may otherwise believe is in their best interests.
The liquidation preference of the shares of our Series B Convertible Preferred Stock would reduce the amount available to our common shareholders in the event of our liquidation or winding up.
Holders of our Series B Convertible Preferred Stock have a liquidation preference of $1.00 per share in the event of our liquidation or winding up. This means that those holders are entitled to receive the liquidation preference before any payment or other distribution of assets to our common shareholders, and the amount of any such payment or other distribution will be reduced by that amount.

---

ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B. UNRESOLVED STAFF COMMENTS.
Not applicable to a smaller reporting company.

---

ITEM 2. PROPERTIES
ITEM 2. DESCRIPTION OF PROPERTY.
We operate our executive offices and warehouse from an 80,000 square foot facility in Charlotte, North Carolina under a lease agreement which commenced in November 2019. Effective November 26, 2024 we entered into a Second Amendment to Lease to extend the lease. The amendment extends the term of the lease for a period of nineteen months beginning on March 1, 2025 with a new expiration date of September 30, 2026. The Company has no further rights to extend or renew the terms of the lease. The amendment provides for the monthly base rent of $65,000, with an annual base rent of $9.75 per square feet from March 1, 2025 through February 28, 2026, and $67,600 with an annual base rent of $10.14 per square feet from March 1, 2026 through September 30, 2026. The Company shall also continue to pay additional rent and all other amounts (other than “Monthly Base Rent”) in accordance with the terms of the lease, except the “Controllable CAM Charges" provision have been deleted. Furthermore, the landlord has approved certain subleases entered into by and between the Company and sub tenants for portions of the facility. This facility is sufficient for our current and anticipated operations through September 2026. The Company expects to downsize its lease in the next year either with our existing landlord or at another facility.

---

ITEM 3. LEGAL PROCEEDINGS
ITEM 3. LEGAL PROCEEDINGS.
In December 2019, Cynthia Davis filed a purported collective and class action lawsuit in the United States District Court for the Central District of California against cbdMD and certain of our competitors alleging violations of the California’s Unfair Competition Law, California’s False Advertising Law and California’s Consumer Legal Remedies Act, as well as claims for Breach of Express Warranties, Breach of Implied Warranty of Merchantability and Declaratory Relief. On March 4, 2021 the Court granted cbdMD’s motion to stay the case until the FDA or Congress takes definitive action on the regulatory status of CBD and the case remains in this status as of this filing. The Company believes this matter will eventually be dismissed but there is no timeline on when the FDA or Congress will take action so the case is expected to be stayed indefinitely.

---

ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable to our company.
PART II

---

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Our common stock is listed on the NYSE American under the symbol “YCBD.”
As of December 16, 2025, there were approximately 13,000 street owners of our common stock. These amounts do not reflect persons or entities that hold our securities in nominee or “street” name through various brokerage firms.
Dividend policy
Common Stock
We do not currently intend to pay dividends on our common stock. The declaration, amount and payment of any future dividends on shares of our common stock, if any, is subject to the designations, rights and preferences of the Series B Convertible Preferred Stock and will be at the sole discretion of our Board, which may take into account general and economic conditions, our financial condition and results of operations, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax and regulatory restrictions, the implications of the payment of dividends by us to our shareholders or by our subsidiaries to us, and any other factors that our Board may deem relevant.
Series B Convertible Preferred Stock
As of the date of this filing, there are 1.7 million shares of our Series B Convertible Preferred Stock outstanding. The designations, rights and preferences of our Series B Convertible Preferred Stock provide that we will pay, when, as and if declared by our board of directors, dividends at a rate of 10% per annum which are payable quarterly in shares of common stock, subject to the satisfaction of all Equity Conditions (as defined in the Series B Convertible Preferred Certificate of Designation), or in cash. If the Company fails to satisfy an Equity Condition, dividends shall be paid in cash. However, if North Carolina law prohibits the payment of dividends in cash, then the then Stated Value (as defined in the Series B Convertible Preferred Stock Certificate of Designation) shall be increased by the dividends as reasonably determined by the Company and the holders of the Series B Convertible Preferred Stock.
Recent sales of unregistered securities
In addition to those unregistered securities previously disclosed in reports filed with the SEC during the period covered by this report, we have sold the securities disclosed below without registration under the Securities Act of 1933, as amended, during the period covered by this report, except as provided below. The issuances were exempt from registration pursuant to Section 4(a)(2) of the Securities Act. The securities contain a legend restricting their transferability absent registration or applicable exemption.
In August 2025, the Company issued 6,250 shares of common stock pursuant to the Company’s August 2024 agreement with Majik Medicine, LLC.
Purchases of equity securities by the issuer and affiliated purchasers
None.

---

ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. [Reserved]

---

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion of our financial condition and results of operations should be read in conjunction with the audited consolidated financial statements and the notes to those statements that are included elsewhere in this report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements because of several factors, including those set forth under the Part I, Item 1A, Risk Factors and Business sections in this report, and our other filings with the Securities and Exchange Commission. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements. Such statements are based on our current expectations and could be affected by the uncertainties and risk factors described throughout this report.
Overview
We own and operate the nationally recognized CBD (cannabidiol) brands cbdMD, Paw CBD as well as the functional mushroom brand ATRx Labs and emerging THC beverage brand Herbal Oasis. We believe that we are an industry leader in producing and distributing hemp derived cannabinoid products. Our mission is to enhance our customer’s overall quality of life while bringing cannabinoid education, awareness and accessibility of high quality and effective products to all. We source cannabinoids, which are extracted from non-GMO hemp grown on farms in the United States. Our innovative broad spectrum formula utilizes one of the purest hemp extracts, containing CBD, CBG and CBN, while eliminating the presence of tetrahydrocannabinol (THC). Non-THC is defined as below the level of detection using validated scientific analytical methods. Our full spectrum products contain a variety of cannabinoids and terpenes in addition to CBD while maintaining trace amounts of THC that fall within the limits set in the 2018 Farm Bill. In addition to our core brands, we also operate cbdMD Therapeutics, LLC to capture the Company’s ongoing investments in science related to its existing and future products, including research and development activities for therapeutic applications.
During fiscal year 2024 we continued to focus on our path to profitability by lowering our costs and focusing on the customer experience. We transitioned a significant part of our organization during the first half of the year in addition to our ecommerce platform at the end of the third quarter. While we have not yet achieved positive operating income, management has worked hard to rationalize cost structure during fiscal 2024. During fiscal 2024, we launched 2 important categories to the business (i) our line of ATRx functional mushroom supplements, that launched in GNC and Amazon and (ii) entered into the hemp derived beverage category starting with our Mixer line and followed up in early fiscal 2025 by our line of Herbal Oasis Social Tonics. With our leaner cost structure and some exciting new categories, we began seeing positive year over year growth during the fourth fiscal quarter of 2025.
Results of operations
The following tables provide certain selected consolidated financial information for the fiscal years ended September 30, 2025 and 2024:
September
September
Change
Total net sales
$ 19,190,468
$ 19,482,167
$ (291,699 )
Cost of sales
7,222,213
7,486,626
(264,413 )
Gross profit as a percentage of net sales
63.0 %
61.6 %
1.4 %
Operating expenses
14,130,845
15,310,951
(1,180,106 )
Operating loss from operations
(2,162,590 )
(3,315,410 )
1,152,820
(Increase) decrease on contingent liability
-
74,580
(74,580 )
Net loss before taxes
(2,040,902 )
(3,700,126 )
1,659,224
Net loss attributable to cbdMD Inc. common shareholders
$ (2,040,902 )
$ (7,702,127 )
$ 5,661,225
The following tables provide certain selected unaudited condensed consolidated financial information for the three months ended September 30, 2025 and 2024:
September
September
Change
Total net sales
$ 4,720,770
$ 4,556,367
$ 164,403
Cost of sales
1,943,635
2,102,564
(158,929 )
Gross profit as a percentage of net sales
58.8 %
53.9 %
5.0 %
Operating expenses
3,461,458
2,770,356
691,102
Impairment of goodwill and other intangible assets
-
-
-
Operating income from operations
(684,323 )
(316,553 )
(367,770 )
(Increase) decrease on contingent liability
-
15,523
15,523
Net loss before taxes
(679,968 )
(152,798 )
(527,170 )
Net loss attributable to cbdMD Inc. common shareholders
$ (679,968 )
$ (1,155,298 )
$ 587,923
Sales
We record product sales primarily through two main delivery channels, direct to consumers via our E-commerce sales and direct to wholesalers utilizing our internal sales team. The following table provides information on the contribution of net sales by type of sale to our total net sales for the fiscal years ended September 30, 2025 and 2024:
% of total
% of total
E-commerce sales
$ 14,713,380
76.7 %
$ 15,655,337
80.4 %
Wholesale sales
4,477,088
23.3 %
3,826,830
19.6 %
Total Net Sales
$ 19,190,468
$ 19,482,167
In addition, the following table provides information on the contribution of net sales by type of sale to our total net sales for the three months ended September 30, 2025 and 2024 (unaudited):
September 30,
September 30,
% of total
% of total
E-commerce sales
$ 3,546,221
75.1 %
$ 3,667,458
80.5 %
Wholesale sales
1,174,549
24.9 %
888,909
19.5 %
Total Net Sales
$ 4,720,770
$ 4,556,367
Total net sales during the fiscal year ended September 30, 2025 were within $0.3 million of fiscal 2024. Wholesale sales grew by approximately $0.7 million, or 17% year over year while E-commerce sales decreased by $0.9 million or 6%. The change in revenue was driven by a combination of broader CBD category softness which we believe is partially attributed to the macro inflationary environment in addition to lower marketing spend.
Net sales for the fourth quarter grew 4% year over year. Our wholesale business continues to trend upward as a result of strong efforts from our team as well as the addition of Oasis. Year over year, sales from our e-commerce business are stabilizing as we have made significant changes to the organization and are focusing on building out stronger acquisition funnels and working to improve our customers’ life time value.
Of our total net sales as indicated above, during the fiscal years ended September 30, 2025 and 2024 our Paw CBD line accounted for net sales of $1.1 million and $1.4 million, respectively. The year over year decline in our Paw CBD brand is due to increasing competition in the pet product industry and a rationalization in marketing efforts specific to the brand.
Cost of sales
Our cost of sales includes costs associated with distribution, fill and labor expense, components, manufacturing overhead, third-party providers, and freight for our product sales. Our cost of sales as a percentage of net sales was 37% and 38% for fiscal years ended September 30, 2025 and 2024, respectively. The improvement reflects approximately $0.6 million one-time non-cash inventory write down in fiscal 2024 related to inventory loss related to regulatory changes impacting labels and packaging and obsolete/expired inventory, with most all of this inventory older than 2 years. While we made significant strides to reduce our overall costs associated with our cost of goods sold during fiscal 2025, gross margins for the year were impacted by lower overhead absorption based on lower revenue and ongoing product mix change from high-margin tinctures to gummies, functional products and beverage in addition to higher lease costs for our warehouse facility. For the fourth quarter of fiscal 2025 our cost of sales as a percentage of net sales was 39% as compared to 46% in the prior year comparative period.
Operating expenses
Our principal operating expenses include staff related expenses, marketing expense, merchant fees, technology, travel, rent, professional service fees, and business insurance expenses. Our operating expenses on a consolidated basis decreased approximately $1.2 million, excluding impairment charges, or 8% for the fiscal year ended September 30, 2025 versus the fiscal year ended September 30, 2024. The decrease can be attributed to management’s efforts to rationalize and right size our expenses across all areas of our business, especially a $0.5 million reduction in payroll, a $0.3 million reduction in professional expenses, and a $0.6 million reduction in rent expense with the elimination of our former executive offices. All other expenses includes a $0.7 million gain related to the settlement of our former executive office (“HQ”) lease in 2024.
Consolidated Operating Expenses
The following tables provide information on our operating expenses for the fiscal years ended September 30, 2025 and 2024:
Change
Staff related expense
$ 5,046,802
$ 5,521,869
$ (475,067 )
Accounting/Legal/Professional outside expense
1,218,050
1,527,456
(309,406 )
Marketing
4,430,639
4,181,026
249,613
Merchant Fees
557,824
642,102
(84,278 )
R&D and regulatory
33,856
39,021
(5,165 )
Non-cash stock compensation
13,595
43,688
(30,093 )
Intangibles amortization
765,078
697,510
67,568
Rent and Utilities
725,118
1,349,284
(624,166 )
Depreciation
361,063
452,326
(91,263 )
All other expenses
978,820
856,669
122,151
Totals
$ 14,130,845
$ 15,310,951
$ (1,180,106 )
Corporate overhead and allocation of management fees to our segments
Included in our consolidated operating expenses are expenses associated with our corporate overhead which are not allocated to the operating business unit, including (i) staff related expenses; (ii) accounting and legal expenses; (iii) professional outside services; (iv) travel and entertainment expenses; (v) rent; (vi) business insurance; and (vii) non-cash stock compensation expense.
The following tables provide information on our corporate overhead for the fiscal years ended September 30, 2025 and 2024:
Fiscal 2025
Fiscal 2024
Change
Staff related expense
$ 310,647
$ 288,602
$ 22,045
Accounting/Legal expense
524,352
710,188
(185,836 )
Professional outside services
291,455
310,448
(18,993 )
Business insurance
676,514
626,027
50,487
Non-cash stock compensation
13,595
43,688
(30,093 )
Totals
$ 1,816,563
$ 1,978,953
$ (162,390 )
The 8% decrease in corporate related expenses for the fiscal year ended September 30, 2024 over prior year is primarily due to the decreases in non-cash stock compensation to employees and directors tied to fewer shares issued under our equity incentive plans and at lower prices per share and, decreases in legal, accounting and insurance costs.
The corporate operating expenses are primarily related to the ongoing public company related activities.
Other income and other non-operating expenses
We also record income and expenses associated with non-operating items. The material components of those are set forth below.
Decrease in contingent liability
As described in Note 6 to the notes to the consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K, the earn-out provision for the Earnout Shares is accounted for and recorded as a contingent liability with increases in the liability recorded as non-cash other expense and decreases in the liability recorded as non- cash other income. The earnout ended November 2023 and we recorded a final change in the non-cash contingent liability in the first quarter of fiscal 2024.
Liquidity and Capital Resources
We had cash and cash equivalents on hand of $2.2 million and working capital of $3.1 million at September 30, 2025. On September 30, 2024 we had cash and cash equivalents on hand of $2.4 million and working capital deficit of $1.1 million, which was reduced by approximately $0.7 million for accrued Series A Preferred dividend payments. Our current assets increased approximately 4% at September 30, 2025 from September 30, 2024. Our current liabilities decreased approximately 53% at September 30, 2025 from September 30, 2024. This decrease is primarily attributable to a $4.7 million decrease in dividend payable as well as an approximate $0.4 million reduction in accounts payable.
We entered into a securities Purchase Agreement dated September 30, 2025 with three accredited Investors whereby the Investors advanced the Company an aggregate of $1.5 million gross proceeds and the Company issued each Investor an 10% Series B Convertible Preferred Security Secured Original Issue 20% Discount Convertible Promissory Note (each a “Note” and collectively, the “Notes”), in the aggregate principal amount of $1.7 million. The Company has used the proceeds from the issuance of the Notes for working capital and general corporate purposes, including, but not limited to inventory investment to assist with orders and administrative and corporate governance costs.
During the fiscal year ended September 30, 2025 we used cash primarily to fund our operations.
We do not have any commitments for capital expenditures. We have a commitment for cumulative dividends at an annual rate of 10% payable quarterly in arrears for the prior quarter to our preferred shareholders.
While the Company is taking strong action and believes that it can execute its strategy and path to profitability within its balance sheet, and in its ability to raise additional funds, there can be no assurances to that effect. The Company’s working capital position may not be sufficient to support the Company’s daily operations for the twelve months subsequent to the issuance this report. The Company’s ability to continue as a going concern is dependent upon its ability to improve profitability and cash flow and the ability to acquire additional funding. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern within twelve months after the date that our annual financial statements are issued. These financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result in the Company not being able to continue as a going concern.
Our goal from a liquidity perspective is to use operating cash flows to fund day to day operations and we have not met this goal as cash flow from operations has been a net use of $0.3 million and a net generation of $0.2 million for the three months ended September 30, 2025 and 2024, respectively and a use of $1.5 million and $0.6 (net of $1.25 million of proceeds from the Notes) for the twelve months ended September 30, 2025 and 2024, respectively.
Non-GAAP Adjusted Operating Loss
The non-GAAP Adjusted Income (loss) for the three and twelve months ended September 30, 2025 and September 30, 2024 is as follows:
Three Months
(Unaudited)
Year Ended
(Unaudited)
September 30,
September 30,
September 30,
September 30,
Revenue
$ 4,720,770
$ 4,556,367
$ 19,190,468
$ 19,482,167
Gross profit
2,777,135
2,453,803
11,968,255
11,995,541
Gross margin
58.8 %
53.9 %
62.4 %
61.6 %
Operating Expenses
3,461,458
2,770,356
14,130,845
15,310,951
Operating loss from operations
(684,323 )
(316,553 )
(2,162,590 )
(3,315,410 )
Corporate overhead operating expenses (1)
399,501
462,068
1,816,563
1,978,953
Non-GAAP adjusted (loss) income from operations
$ (284,822 )
$ 145,515
$ (346,027 )
$ (1,336,457 )
(1) Represents corporate overhead operating expenses
GAAP (loss) from operations
$ (684,323 )
$ (316,553 )
$ (2,162,590 )
$ (3,315,410 )
Adjustments:
Depreciation & Amortization
262,065
287,783
1,126,141
1,149,836
Employee and director stock compensation (1)
7,754
5,881
13,595
43,688
Inventory adjustment(2)
113,008
588,160
113,008
588,160
Non-cash expense incurred as a credit (3)
-
-
-
439,926
Non-cash accelerated amortization of expense related to terminated IT contracts
-
-
-
72,101
Termination of HQ lease
-
(696,280 )
-
(696,280 )
Mergers and acquisitions expense
-
-
-
125,838
Non-GAAP adjusted (loss) from operations
$ (301,496 )
$ (131,009 )
$ (909,846 )
$ (1,592,141 )
Public Company Costs
Staff related expense
$ 70,698
$ 119,975
$ 310,647
$ 288,602
Accounting/legal expense
103,532
125,874
524,352
710,188
Professional outside services
41,496
73,843
291,455
310,448
Business Insurance
176,021
136,495
676,514
626,027
Non-GAAP adjusted (loss) from operations, excluding public company costs
$ 90,251
$ 325,178
$ 893,122
$ 343,124
(1) Represents non-cash expense related to options, warrants, restricted stock expenses that have been amortized during the period.
(2) Represents an operating expense related to inventory loss related to regulatory changes impacting labels and packaging and obsolete/expired inventory.
(3) Represents non-cash expense incurred as a credit provided to GNC to replace expired product.
Critical accounting policies
The preparation of financial statements and related disclosures in conformity with US GAAP and our discussion and analysis of our financial condition and operating results require our management to make judgments, assumptions and estimates that affect the amounts reported in our consolidated financial statements and accompanying notes. Note 1, “Organization and Summary of Significant Accounting Policies,” of the Notes to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K describes the significant accounting policies and methods used in the preparation of our consolidated financial statements. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates, and such differences may be material.
We believe that the following critical accounting policies involve the more significant judgments and estimates used in the preparation of our consolidated financial statements and are the most critical to aid you in fully understanding and evaluating our reported financial results. Management considers these policies critical because they are both important to the portrayal of our financial condition and operating results, and they require management to make judgments and estimates about inherently uncertain matters.
Inventory
Inventory is stated at the lower of cost or net realizable value with cost being determined on a weighted average basis. The cost of inventory includes product cost, freight-in, and production fill and labor (portions of which we outsource to third party manufacturers). Write-offs of potentially slow moving or damaged inventory are recorded based on management’s analysis of inventory levels, forecasted future sales volume and pricing and through specific identification of obsolete or damaged products. We assess inventory quarterly for slow moving products and potential impairments and at a minimum perform a physical inventory count annually near fiscal year end.
Revenue Recognition
The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customer (“ASC 606”). The Company performs the following five steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company applies the five-step model to arrangements that meet the definition of a contract under the standard, including when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of revenue accounting, the Company evaluates the goods or services promised within each contract related performance obligation and assesses whether each promised good or service is distinct. The Company recognizes as revenue, the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
The Company records revenue from the sale of its products when risk of loss and title to the product are transferred to the customer, which is upon shipping under typical sales term, which is when our performance obligation is met. Net sales are comprised of gross revenues less product returns, trade discounts and customer allowances, which include costs associated with off-invoice mark-downs and other price reductions, as well as trade promotions. These incentive costs are recognized at the later of the date on which the Company recognizes the related revenue or the date on which the Company offers the incentive. The Company currently offers a 60-day, money back guarantee.
Impairment of Long Lived Assets
The Company reviews all intangible assets for impairment whenever events or changes in circumstances indicate the carrying amount of the assets may not be recoverable. Long-lived assets, such as property and equipment and intangible assets subject to depreciation and amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable or that the useful life is shorter than the Company had originally estimated. Recoverability of these assets is measured by comparison of the carrying amount of each asset or asset group to the future undiscounted cash flows the asset or asset group is expected to generate over their remaining lives. If the asset or asset group is considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset or asset group. If the useful life is shorter than originally estimated, the Company amortizes the remaining carrying value over the new shorter useful life. Impairment losses are recorded in selling, general, and administrative expense in the consolidated statements of operations. There were no impairment losses recognized related to long-lived assets for the years ended September 30, 2025 and September 30, 2024, respectively.
Fair Value of Convertible Notes
The Company elected the fair value option under ASC 825 Fair Value Measurements for the Notes. The Notes were initially recognized at a fair value of $2.7 million on the balance sheet as of March 31,2024. All subsequent changes in fair value, excluding the impact of the change in fair value related to instrument-specific credit risk are recorded in non-operating income. The changes in fair value related to instrument-specific credit risk is recorded through other comprehensive income (loss).
The overall change in fair value of the Notes during the year ended September 30, 2024 was a decrease of $1,357,096. The overall change in principal value related to the conversion of Notes to commons stock during the year ended September 30,2024 was a decrease of $508,757. The note was repaid in full during the second quarter of fiscal 2025.
Recent accounting pronouncements
Please see Note 1 - Organization and Summary of Significant Accounting Policies appearing in the consolidated financial statements included in this report for information on accounting pronouncements.
Off balance sheet arrangements
As of the date of this report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term "off-balance sheet arrangement" generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with us is a party, under which we have any obligation arising under a guarantee contract, derivative instrument or variable interest or a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.

---

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable for a smaller reporting company.

---

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Please see our Financial Statements beginning on page 33 of this annual report.
The Auditor Firm ID for our external auditors, Cherry Bekaert LLP, is 677.

---

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.

---

ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures.
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed pursuant to the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Commission’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal accounting officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As required by Exchange Act Rule 13a-15(e), we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and our principal accounting officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our principal executive officer and principal accounting officer concluded that our disclosure controls were effective at September 30, 2025.
Management’s Report on Internal Control over Financial Reporting.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:
●
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
●
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
●
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
Our management, including our principal executive officer and principal accounting officer assessed the effectiveness of our internal control over financial reporting as of September 30, 2025. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the 2013 Treadway Commission (“COSO”) in Internal Control-Integrated Framework. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during our last quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

---

ITEM 9B. OTHER INFORMATION
ITEM 9B. OTHER INFORMATION.
ELOC
On December 15, 2025, the Company entered into a Securities Purchase Agreement, as amneded (the “ELOC Agreement”) with C/M Capital Master Fund, LP, an accredited investor (the “ELOC Purchaser”). Pursuant to the ELOC Agreement, the Company agreed to sell, and the ELOC Purchaser agreed to purchase, up to $10 million (the “Available Amount”) of the Company’s common stock (the “Purchase Shares”), subject to a sale limit of 19.99% of the outstanding shares of the Company’s common stock in accordance with the rules of the NYSE American. The transactions contemplated by the ELOC Agreement are subject to the Company registering the ELOC Purchaser’s resale of the Purchase Shares on a registration statement to be filed with the SEC. Concurrent with the execution of the ELOC Agreement, the Company entered into a registration rights agreement with the ELOC Purchaser. Pursuant to the Registration Rights Agreement, the Company agreed to file a registration statement on Form S-1 with the SEC covering the resale of the shares of common stock sold under the ELOC, on or before the 30th calendar day following the date of the Registration Rights Agreement and to use its commercially reasonable efforts to cause such registration statement to be declared effective by the SEC at the earliest practicable date, subject to limited exceptions described therein. The registration rights granted under the Registration Rights Agreement are subject to certain conditions and limitations and are subject to customary indemnification and contribution provisions. In connection with entering into the ELOC Agreement, the Company agreed to immediately issue to the ELOC Purchaser, 8,000,000 shares of common stock as commitment shares and, thereafter an amount of shares equal to 0.5% of the Available Amount, which shall be issued in a pro rated fashion simultaneously with the delivery of any and all Purchase Shares purchased under the ELOC Agreement. The Company does not have a right to commence any sales of common stock to the ELOC Purchaser under the ELOC Agreement until the time when all of the conditions to the Company’s right to commence sales of Purchase Shares to the ELOC Purchaser set forth in the ELOC Agreement have been satisfied, including that a registration statement covering the resale of the Purchase Shares is declared effective by the SEC and the final form of prospectus contained therein is filed with the SEC (the “Commencement Date”). At any time from and after the Commencement Date, on any business day on which the previous business day’s closing sale price of common stock was equal to or greater than $0.50 (the “Purchase Date”), the Company may direct the ELOC Purchaser to purchase a specified number of shares of common stock (a “Fixed Purchase”) not to exceed on any single business day the lesser of (i) $500,000 of shares of common stock or (ii) $10,000,000 in the aggregate of Fixed Purchases (as defined in the ELOC Agreement), at a purchase price equal to the lesser of 95% of (i) the lowest sale price of the common stock on the trading day immediately prior to such applicable Purchase Date or (ii) the daily volume weighted average price of the common stock for the five trading days immediately preceding the applicable Purchase Date for such Fixed Purchase.
In addition, at any time from and after the Commencement Date, on any business day on which the previous business day’s closing sale price of the common stock is equal to or greater than $0.50 and such business day is also the Purchase Date for a Fixed Purchase of an amount of shares of common stock not less than the applicable Fixed Purchase Share Limit (as defined in the ELOC Agreement) (the “VWAP Purchase Date”), the Company may also direct the ELOC Purchaser to purchase an additional number of shares of common stock (a “VWAP Purchase”) at a purchase price equal to the lesser of 95% of (i) the closing price of a share of common stock on the trading day immediately prior to such applicable Purchase Date and (ii) the lowest sale price on the VWAP Purchase date. If the Company makes certain issuances of its securities within a specified period of time after a Purchase Date and such securities are issued at prices (the “New Issuance Price”) less than the prices to be paid by the ELOC Purchaser in such Fixed Purchase or VWAP Purchase, the purchase price for such applicable Fixed Purchase or VWAP Purchase would be reduced to the New Issuance Price, subject to the terms and conditions set forth in the ELOC Agreement. Under the ELOC Agreement, in no event may the aggregate amount of Purchase Shares submitted in any single or combination of VWAP Purchase notices on a particular date require a payment from the ELOC Purchaser to us that exceeds $10,000,000, unless such limitation is waived by the ELOC Purchaser.
Series C Preferred
Effective December 18, 2025, the Company entered into Securities Purchase Agreements dated December 18, 2025 (“Series C Purchase Agreements”) with two institutional investors whereby the investors were issued an aggregate of 1,000,000 shares of Series C Convertible Preferred Stock (“Series C Preferred Stock”) for aggregate gross proceeds of $2.25 million. The Company received net proceeds of $2.21 million which shall be used for working capital purposes.
In addition, pursuant to the Purchase Agreements, the Company entered into a Registration Rights Agreement with each of the Investors pursuant to which the shares of common stock issuable upon conversion of the Series C Preferred Stock to the Investors are entitled to registration under the Securities Act. Pursuant to the Registration Rights Agreement, the Company is required to file a registration statement to register the shares underlying the Series C Preferred Stock within 30 days following the closing date.
On December 18, 2025, the Company filed a Certificate of Amendment to the Certificate of Incorporation (the “Certificate of Designation”) designating 1,000,000 shares of the Company’s authorized preferred stock as Series C Convertible Preferred Stock, par value $0.001 per share. Except for differences in the stated value, floor price and conversion price, the Series C Preferred Stock has terms and conditions that are substantially similar to those of the Company’s Series B Convertible Preferred Stock. Each share of the Series C Preferred Stock is convertible into common stock at a conversion price of $2.25, subject to anti-dilution adjustments and Alternate Conversion rights (as defined in the Certificate of Designation). The Series C Preferred Stock accrues dividends at a rate of 10% per annum which are payable quarterly in shares of common stock, subject to the satisfaction of all Equity Conditions (as defined in the Certificate of Designation), or in cash. If the Company fails to satisfy an Equity Condition, dividends shall be paid in cash. However, if North Carolina law prohibits the payment of dividends in cash, then the then Stated Value (as defined in the Certificate of Designation) shall be increased by the dividends as reasonably determined by the Company and the holders of the Series C Preferred Stock.
With respect to dividends, distributions, liquidation, dissolution and winding up of the Company, the Series C Preferred Stock ranks pari passu with the Series B Convertible Preferred Stock and is senior to all other shares of the Company’s capital stock unless otherwise consented to by the holders of the Series C Preferred Stock. The holders of Series C Preferred Stock have no voting power and no right to vote, except as required by the North Carolina Business Corporations Act or with respect to matters affecting the preferences, rights, privileges or powers relating to the Series C Preferred Stock. In addition, the Series C Preferred Stock is subject to a beneficial ownership limitation which prohibits any holder from beneficially owning more than 4.99% of the shares of the Company’s common stock outstanding immediately following such conversion. The Certificate of Designation is filed as an exhibit to this annual report.

---

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The information required by this Item will be contained in our proxy statement for our 2025 Annual Meeting of shareholders to be filed on or prior to January 28, 2026 (the “Proxy Statement”) and is incorporated herein by this reference.

---

ITEM 11. EXECUTIVE COMPENSATION
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item will be contained in our Proxy Statement and is incorporated herein by this reference.

---

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The information required by this item will be contained in our Proxy Statement and is incorporated herein by this reference.

---

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
The information required by this item will be contained in our Proxy Statement and is incorporated herein by this reference.

---

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
The information required by this item will be contained in our Proxy Statement and is incorporated herein by this reference.
PART IV

---

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a)
(1) Financial statements.
The consolidated financial statements and Report of Independent Registered Accounting Firm begin on page 33.
(2) Financial statement schedules
All schedules for which provision is made in the applicable accounting regulations of the SEC are either not required under the related instructions, are not applicable (and therefore have been omitted), or the required disclosures are contained in the consolidated financial statements herein.
(3) Exhibits.
The exhibits that are required to be filed or incorporated by reference herein are listed in the Exhibit Index.