Business Context and Reporting Period
Company: cbdMD, Inc. (formerly Level Brands, Inc.)
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: June 30, 2026 (Third Quarter of Fiscal 2026)
Business Overview: cbdMD operates nationally recognized CBD brands including cbdMD, Paw CBD, and Bluebird Botanicals, alongside functional mushroom brand ATRx Labs and THC beverage brand Herbal Oasis. The company sources hemp-derived cannabinoids and distributes products via e-commerce and wholesale channels.
Key Financial Metrics
| Metric | Three Months Ended June 30, 2026 | Nine Months Ended June 30, 2026 |
|---|---|---|
| Total Net Sales | $5,553,738 | $16,210,701 |
| Gross Profit | $3,037,534 (54.7% Margin) | $9,295,746 (57.3% Margin) |
| Operating Loss | $(1,130,477) | $(2,217,553) |
| Net Loss | $(1,127,202) | $(2,208,315) |
| Net Loss Attributable to Common Shareholders | $(1,198,233) | $(2,399,622) |
| Cash and Cash Equivalents (End of Period) | $2,118,339 | |
| Working Capital | $4,616,953 | |
| Accumulated Deficit | $(181,834,770) |
Liquidity & Debt: The company maintains an Equity Line of Credit (ELOC) with C/M Capital Master Fund, LP, with up to $20 million available. As of June 30, 2026, the company had drawn $61,990 under the ELOC. There are no material senior debt defaults. The company has outstanding Series B and Series C Convertible Preferred Stock with quarterly dividend obligations.
Material Changes vs. Prior Period
- Revenue Growth: Net sales increased 20.6% quarter-over-quarter (QoQ) to $5.55 million and 12.0% year-over-year (YoY) for the nine-month period to $16.21 million. Growth was driven by the Bluebird acquisition and expansion of the Oasis brand in wholesale channels.
- Margin Compression: Gross margin decreased from 61.5% in Q3 2025 to 54.7% in Q3 2026. This was attributed to a shift in sales mix toward lower-margin wholesale business, increased warehouse labor for regulatory repacking, and a $187,437 increase in inventory reserves.
- Operating Expenses: Operating expenses rose 11.6% QoQ to $4.17 million. Increases were driven by staff-related expenses (including Bluebird integration), professional fees for M&A and regulatory matters, and stock-based compensation.
- Acquisition Impact: The acquisition of Bluebird Botanicals in January 2026 contributed over $550,000 in revenue for the quarter but incurred approximately $75,000 in integration costs and $24,000 in accounting valuation costs.
Guidance, Outlook, and Risks
Management Commentary: Management is focused on revenue maximization, cost control, and innovation. A cost-reduction plan targeting $100,000–$150,000 in monthly savings (approx. $1.2M–$1.8M annualized) was implemented in Q4 2026. The company is diversifying into non-CBD products like Kava to mitigate regulatory risks.
Regulatory Risks: The "Continuing Appropriations Act of 2026" (H.R. 5371) is scheduled to take effect November 12, 2026, potentially limiting hemp-derived consumable products to 0.4 mg of total THC per container. Approximately 36% of revenue for the nine months ended June 30, 2026, comes from products that may not comply with these restrictions if enacted as written. Management is evaluating reformulation and channel diversification.
Going Concern: The filing states there is "substantial doubt" about the company's ability to continue as a going concern for twelve months following the report date due to a history of losses, an accumulated deficit of $181.8 million, and reliance on additional funding.
Unusual Items: The company recorded a $120,000 inventory reserve adjustment in Q3 2026 in preparation for pending regulatory changes. Additionally, the company incurred significant M&A and legal fees related to the Bluebird acquisition and other potential transactions.
Investor Verification Checklist
- Regulatory Impact: Verify the final status of H.R. 5371 and the specific impact of the 0.4 mg THC limit on the company's product portfolio and revenue mix.
- Liquidity Runway: Assess the sufficiency of current cash ($2.1M) against the quarterly preferred dividend obligations (~$70k) and operating burn rate, considering the "substantial doubt" disclosure.
- Bluebird Integration: Monitor the realization of synergies and the performance of the Bluebird brand beyond the initial revenue contribution.
- Cost Reduction Execution: Track the implementation of the $100k–$150k monthly cost-saving plan and its effect on operating margins in subsequent quarters.
- Preferred Stock Dilution: Review the terms of Series B and Series C Preferred Stock, specifically the conversion triggers and potential dilution to common shareholders.