The following discussion of our financial condition and results of operations
for the three and nine months ended June 30, 2020 and 2019 should be read in
conjunction with the condensed consolidated financial statements and the notes
to those statements that are included elsewhere in this report. Our discussion
includes forward-looking statements based upon current expectations that involve
risks and uncertainties, such as our plans, objectives, expectations and
intentions. Actual results and the timing of events could differ materially from
those anticipated in these forward-looking statements because of several
factors, including those set forth under the Part I, Item 1A, Risk Factors and
Business sections in our 2019 10-K, this report, and our other filings with the
Securities and Exchange Commission. We use words such as "anticipate,"
"estimate," "plan," "project," "continuing," "ongoing," "expect," "believe,"
"intend," "may," "will," "should," "could," and similar expressions to identify
forward-looking statements. In addition, any statements that refer to
projections of our future financial performance, our anticipated growth and
trends in our businesses, and other characterizations of future events or
circumstances are forward-looking statements. Such statements are based on our
current expectations and could be affected by the uncertainties and risk factors
described throughout this report.

Overview
                               [[Image Removed]]


Business

Through our subsidiary, CBDI, we produceand distribute various high-grade,
premium CBD products, including tinctures, capsules, gummies, bath bombs and
topical creams. In the third quarter of fiscal 2019, we launched a line of pet
related CBD products under our Paw CBD brand which includes tinctures, treats,
and balms, with additional products under development. In October 2019,
following the initial positive response to the Paw CBD brand from retailers and
consumers, we organized Paw CBD as a separate wholly-owned subsidiary in an
effort to take advantage of its early mover status in the CBD animal health
industry. With over 40 SKU's of premium pet CBD products for dogs, cats and
horses, we are seeking to grow Paw CBD into a leading brand.


                                       34


We either manufacture our premium line of products at our Charlotte, NC facility
or work with third party manufacturers.  We only source cannabinoids, including
CBD, which are extracted from non-GMO hemp grown on farms in the United
States. We utilize a manufacturing process which creates hybrid broad-spectrum
concentrations including CBD, other cannabinoids, and various other compounds,
which we believe creates a superior product, while
eliminating tetrahydrocannabinol (THC) content. In July 2020, we filed a new
patent application with the U.S. Patent and Trademark Office which will allow us
to pursue patented protection in several key areas, including novel formulations
and delivery systems, as well as methods of manufacturing and use.

Since December 2018, we have significantly increased the number of locations
cbdMD products are available in, and with the building momentum of retailer
acceptance subsequent to the passage of the Farm Bill, we continue to pursue
multiple opportunities to expand our product distribution via both online and in
brick and mortar stores as we continue to work to build cbdMD brand recognition.
We also continue to utilize partnerships and sponsorships with professional
athletes as a way to gain brand recognition.

The Impact of the COVID-19 Pandemic on our Company



On March 11, 2020, the World Health Organization declared the current
coronavirus ("COVID-19") outbreak to be a global pandemic. In response to this
declaration and the rapid spread of COVID-19 within the United States, federal,
state and local governments throughout the country have imposed varying degrees
of restrictions on social and commercial activity to promote social distancing
in an effort to slow the spread of the illness. These measures have had a
significant adverse impact upon many sectors of the economy, including retail
commerce.

In response to these measures, the "stay at home" order issued by the Governor
of the State of North Carolina where our business is located, and for the
protection of our employees and customers, we had temporarily closed our
corporate office and altered work schedules at our manufacturing and warehouse
facilities. Beginning in June 2020 we implemented return to work policies
following CDC guidelines and we have re-opened our corporate office with
staggered work schedules for all departments. To date these actions have not
adversely impacted our ability to operate our company. In mid March 2020 we took
steps to increase production to build up our finished goods inventory as well as
purchased additional raw material inventory items thereby allowing us to
maintain production if supply chain interruptions were to happen. At this time
we have not had any impact on our supply chain. Since the pandemic we have
experienced an impact and decline on our wholesale sales to our brick and mortar
customers as many of the stores have been temporarily closed. In response, we
have increased our efforts regarding campaigns and marketing reach to support
our online sales efforts by upping our initiatives with associated relevant
messaging to connect with our consumer base as well as increased website content
and various offerings and changes to make online ordering more effective (auto
reorder capability, giveaways, free shipping, etc.). This effort has allowed us
to continue to increase sales by offsetting the decline in wholesales sales with
substantial increase in our online sales to consumers. We continue to assess the
situation on a daily basis and adjust our business, priorities, and processes to
enable us to continue to operate effectively until we are able to resume regular
operations.

During this time, we have implemented several measures that we believe will continue to ensure sufficient liquidity and support the business for the next several months. Specific measures, among other things, include the following:



?
Negotiating with our landlords to receive temporary rent deferrals on our
facilities while utilizing security deposits for April;
?
Negotiating with our vendors to defer payments as needed;
?
Suspending sponsorship and affiliate agreements as well as renegotiating various
agreements based on current events, activities, and trends;
?
Shifting sales focus efforts to our online consumer sales while the wholesale
sales environment is impacted, this focus continues and has been successful in
allowing for continued sales growth to this point;
?
Implementation of various cost control measures across the company with a focus
on supporting the business growth while reaching a positive cash flow operation
and adjusted our budget for the balance of 2020 to reflect the changes;
?
Ensuring we had sufficient inventory levels, (both raw and finished goods)
allowing us to continue to fulfill orders in the event we must shut down our
manufacturing facility or supply chains were impacted; and
?
Prioritizing our technology initiatives to align with an online sales focus.

To further bolster our working capital, on April 27, 2020, we received a loan in
the principal amount of $1,456,100 (the "SBA Loan"), under the Paycheck
Protection Program ("PPP"), which was established under the recently enacted
Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act")
administered by the U.S. Small Business Administration (the "SBA"). The intent
and purpose of the PPP is to support companies, during the COVID-19 pandemic, by
providing funds for certain specified business expenses, with a focus on
payroll. As a qualifying business as defined by the SBA, we are using the
proceeds from this loan to primarily help maintain our payroll as we navigate
our business with a focus on returning to normal operations. The term of the
Note is two years, though it may be payable sooner in connection with an event
of default under the Note. The SBA Loan carries a fixed interest rate of one
percent per year, with the first payment due seven months from the date of
initial cash receipt. Under the CARES Act and the PPP, certain amounts of loans
made under the PPP may be forgiven if the recipients use the loan proceeds for
eligible purposes, including payroll costs and certain rent or utility costs,
and meet other requirements regarding, among other things, the maintenance of
employment and compensation levels. We intend to use the SBA Loan for qualifying
expenses and to apply for forgiveness of the SBA Loan in accordance with the
terms of the CARES Act.


                                       35


As the adverse impact of COVID-19 on our company, industry, and country
continues, our ability to meet customer demands for products may be impaired or,
similarly, our customers may experience adverse business consequences due to the
COVID-19 pandemic. Reduced demand for products or impaired ability to meet
customer demand (including as a result of disruptions at our transportation
service providers, third-party manufacturing partners or vendors) could have a
material adverse effect on our business, operations and financial performance.

While we are not able to estimate the ultimate impact of the COVID-19 pandemic
on our financial condition and future results of operations, depending on the
prolonged impact of the COVID-19 outbreak, this situation could have a
significant adverse effect on our future reported results of operations. As
indicated, we have implemented several initiatives allowing us to increase our
online direct to consumer sales to date, which we will continue to use as we
evaluate changes in the wholesale channel. The extent to which the coronavirus
impacts our results and financial condition, however, will depend on future
developments, which are highly uncertain and cannot be predicted, including new
information that may emerge and the actions to contain and treat its impacts,
among others.

Growth Strategies and Outlook

While we continue to assess the COVID-19 pandemic and adjust our day to day business, we continue to pursue the following strategies to grow our revenues and expand our business and operations in the balance of fiscal 2020 and beyond:



?
Increase our base of product offerings : We currently have a broad offering of
CBD products, including topicals, tinctures, gummies, bath bombs, vape oils,
capsules, and pet products and continue to evaluate additional offerings within
these categories as well as new ways to provide CBD in a manner that meets
consumer demands. To that end we are devoting resources to ongoing research and
development processes with the goal of expanding our product offerings to meet
these expanding consumer demands. In May 2020 we rolled out lip and body balms
and new bundled packages. We have several products in the research and
development phase with targeted roll-outs during the balance of 2020;
?
Expand our sales channels : As the market continues to evolve, we are expanding
our sales channels. During fiscal 2019, we moved from a 100% online sales
channel to working with wholesalers and retail channels. Big box retailers are
beginning to explore CBD products and we believe this will provide another
significant opportunity at some point in the future. In addition, sales channels
for the pet line include expanding online to not only retail stores but
veterinary and pet care professionals. In addition, we have expanded into
international sales and continue to position for increasing international
territories and sales;
?
Expand our recently formed CBD animal health division : With the formation in
October 2019 of Paw CBD as a separate wholly-owned subsidiary, we have committed
resources to branding and marketing the Paw CBD product line, which we believe
will enable us to more effectively expand sales channels as well as utilize our
marketing efforts in a more targeted manner;
?
Expand our sponsorships toward targeted segments: We have had significant
success with attracting high profile sponsors and influencers and expect to
continue to assess the segments we have covered with a focus on activation of
the sponsorships and influencers which are producing the largest visibility and
responsiveness; and
?
Acquisitions.We may also choose to further build and maintain our brand
portfolio by acquiring additional brands directly or through joint ventures if
opportunities arise that we believe are in our best interests. As we are in an
emerging market, opportunities could be present as companies establish strong
brands and begin to obtain large market share. In assessing potential
acquisitions or investments, we expect to utilize our internal resources to
primarily evaluate growth potential, the strength of the target brand, offerings
of the target, as well as possible efficiencies to gain. We believe that this
approach will allow us to effectively screen consumer brand candidates and
strategically evaluate acquisition targets and efficiently complete due
diligence for potential acquisitions. We are not a party, however at this time,
to any agreements or understandings regarding the acquisition of additional
brands or companies and there are no assurances we will be successful in
expanding our brand portfolio.

As a consumer goods manufacturer, we strive to meet or exceed the FDAs Good
Manufacturing Practice (GMP) guidelines. Good Manufacturing Practices (GMPs) are
guidelines that provide a system of processes, procedures and documentation to
assure a product has the identity, strength, composition, quality and purity
that appear on its label. These GMP requirements are listed in Section 8 of
NSF/ANSI 173 which is the only American National Standard in the dietary
supplement industry developed in accordance with the FDA's 21 CFR part 111.

With our growth and evolution, challenges could exist and we must continue to
review processes and controls and adapt our day to day GMP policies and
practices as our manufacturing volume increases.  We are dedicated to providing
the highest quality CBD consumer goods on the market and therefore will continue
to focus substantial efforts on GMP compliance. Our manufacturing facility and
warehouse operations are fully GMP compliant and NSF GMP registered. NSF GMP
registration verifies that the facility is audited twice annually for quality
and safety in compliance with Federal Regulations for dietary supplements good
manufacturing practices.  We have applied for an additional third-party
certification from the U.S. Hemp Authority and are awaiting scheduling of the
audit.  Additionally, we have secured third party contract manufacturing from
FDA registered facilities which are independently GMP certified and subject to
continuing independent audit and certification, to handle our increased
manufacturing needs.


                                       36


Results of operations

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


                                     Three Months Ended June 30,               Nine Months Ended June 30,


                                     2020          2019           change       2020          2019           change


                                     (unaudited)   (unaudited)                 (unaudited)   (unaudited)

Total net sales                       $10,636,545   $8,005,149     2,631,396    $30,183,817   $14,107,414    16,076,403
Cost of sales                         3,748,024     2,929,160      818,864      10,180,637    5,009,187      5,171,450
Gross profit as a percentage of net
sales                                 64.7%         63.4%          1.3%         66.3%         64.5%          1.8%
Operating expenses                    8,226,029     11,542,628     

(3,316,599) 33,053,962 18,683,905 14,370,057 (Increase) decrease on contingent liability

                             (7,580,000)   (21,547,606)   64.8%        30,580,000    (52,461,680)   158.3%
Net income (loss) before taxes        (8,944,921)   (28,021,178)   68.1%        16,669,518    (62,074,970)   126.9%
Net income (loss) attributable to
cbdMD, Inc. common shareholders       $(9,052,752)  $(27,699,249)  67.3%   
$18,594,035   $(61,600,703)  130.2%



Sales

We record product sales primarily through two main delivery channels, direct to
consumers via online capabilities (E-commerce) and direct to wholesalers
utilizing our internal sales team. In addition, we record revenue upon delivery
of services (consulting, marketing and brand strategy). The following table
provides information on the contribution of net sales by type of sale to our
total net sales.



                       Three months ended            Three months ended
                       June 30, 2020      % of total June 30, 2019      % of total




Wholesale sales         $2,410,719         22.7%      $3,366,807         42.1%
Consumer sales          8,225,826          77.3%      4,638,342          57.9%

Service oriented sales  -                  0%         -                  0%

Total net sales         $10,636,545                   $8,005,149





                       Nine months ended            Nine months ended
                       June 30, 2020     % of total June 30, 2019     % of total




Wholesale sales         $8,238,832        27.3%      $4,741,900        33.6%
Consumer sales          21,944,985        72.7%      9,365,514         66.4%
Service oriented sales  -                 0%         -                 0%
Total net sales         $30,183,817                  $14,107,414



Of our total net sales as indicated above, during the three months ended June
30, 2020 and 2019 our Paw CBD line accounted for net sales of $1,228,860 and
$593,718, respectively and for the nine months ended June 30, 2020 and 2019
accounted for net sales of $2,818,414 and $1,211,999, respectively.


                                       37


Cost of sales

Our cost of sales includes costs associated with distribution, fill and labor
expense, components, manufacturing overhead, third-party providers, and outbound
freight for our product sales (consumer and wholesale sales), and includes labor
for our service sales. The following table provides information on the cost of
sales to our net sales for the three and nine months ended June 30, 2020 and
2019:


                      Three months ended Three months ended
                      June 30, 2020      June 30, 2019      change



Product sales $3,748,024 $2,915,300 $832,724 Service related sales -

                  13,860             (13,860)
Total cost of sales    $3,748,024         $2,929,160         $818,864





                      Nine months ended Nine months ended
                      June 30, 2020     June 30, 2019     change



Product sales $10,180,637 $4,956,067 $5,224,570 Service related sales -

                 53,120            (53,120)

Total cost of sales $10,180,637 $5,009,187 $5,171,450






Our cost of sales as a percentage of sales was 35.2% and 36.6% for the three
months ended June 30, 2020 and 2019, respectively, and was 33.7% and 35.5% for
the nine months ended June 30, 2020 ad 2019, respectively. The change reflects
the growth and maturation of the business and its manufacturing process, and
changes in the cost of raw materials as we continue to evaluate key vendors to
work with and leverage volume purchasing as we grow as well as additional
product offerings which continue to impact our cost of production. We expect
product sales will maintain cost of sales as a percentage of net sales, between
30% and 37%, as we continue to manage our overall cost for manufacturing and
production.

Operating expenses

Our principal operating expenses include staff related expense, advertising
(which includes expenses related to industry distribution and trade shows),
sponsorships, affiliate commissions, merchant fees, technology, travel, rent,
professional service fees, and business insurance expense. Our operating
expenses on a consolidated basis decreased approximately 28.7% for the three
months ended June 30, 2020 from the same period ended June 30, 2019. The
decrease can be attributed to the implementation of cost controls as we have set
our eyes on continued growth and positive cash flow as well as additional cost
reductions as a result of the COVID pandemic. Our operating expense on a
consolidated basis increased approximately 76.9% for the nine months ended June
30, 2020 from the same periods ended June 30, 2019, respectively, and is
directly related to the Mergers on December 20, 2018 and the significant growth
and ramp up of our CBD business to build the brand.


                                       38


The following table provides information on our approximate operating expenses for the three and nine months ended June 30, 2020 and 2019:




                                                     Three months
                                                     ended
                                                     June 30,     Three months ended
                                                     2020         June 30, 2019      change




Staff related expense                                 $3,290,812   $2,952,018         $338,794
Accounting/legal expense                              212,766      132,507            80,259

Professional outside services                         120,303      684,389 

(564,086)


Advertising/marketing/social media/events/tradeshows  1,699,262    2,582,685          (883,423)
Sponsorships                                          588,059      780,939            (192,880)
Affiliate commissions                                 504,440      574,361            (69,921)
Merchant fees                                         522,374      626,330            (103,956)
Technology                                            363,936      174,077            189,859
Travel expense                                        10,916       283,786            (272,870)
Rent expense                                          401,231      100,289            300,942
Business insurance                                    125,450      87,869             37,581
Non-cash stock compensation                           331,985      1,389,224          (1,057.239)
All other expenses                                    54,495       1,174,155          (1,119,660)
Totals                                                $8,226,029   $11,542,629        $(3,316,600)



During the three months ended June 30, 2020, the Company implemented various
cost control measures with a focus on supporting the business growth while
reaching a positive cash flow operation and in addition adjusted other expenses
in relation to the COVID-19 pandemic. As a result, we have reduced our merchant
fee expense, sponsorships, outside services, and other general expenses. As many
events and tradeshows have been canceled during COVID-19 we have had a reduction
in overall advertising/marketing expense and in addition have adjusted and
focused key marketing/advertising expenses in our ongoing budget for this
significant category.


                                                     Nine months ended Nine months ended
                                                     June 30, 2020     June 30, 2019     change




Staff related expense                                 $11,193,791       $5,467,349        $5,726,442
Accounting/legal expense                              938,859           670,329           268,530
Professional outside services                         962,407           1,366,025         (403,618)
Advertising/marketing/social media/events/tradeshows  7,534,488         4,174,166         3,360,322
Sponsorships                                          4,160,366         780,939           3,379,427
Affiliate commissions                                 1,434,048         1,052,200         381,848
Merchant fees                                         1,937,836         1,030,138         907,698
Technology                                            904,994           225,936           679,058
Travel expense                                        379,959           420,137           (40,178)
Rent expense                                          1,145,422         274,504           870,918
Business insurance                                    391,113           245,231           145,882
Non-cash stock compensation                           1,447,860         1,552,372         (104,512)
All other expenses                                    622,819           1,424,579         (801,760)
Totals                                                $33,053,962       $18,683,905       $14,370,057




                                       39


During the nine months ended June 30, 2020 and 2019, the increase in staff
related expense is a direct result of the build out of the CBDI team. The
decrease in professional outside services is related to the use of outside
agencies and firms to support the growth while we built our infrastructure and
added staff to handle certain functions. The increase in advertising/marketing,
sponsorships, affiliate commissions, and technology are a result of execution on
the business strategy and building of the CBD brand while increasing market
share. The increase in merchant fees is a direct result of increased business
through our E-commerce site. The non-cash stock compensation expense reflects
the value of restricted stock awards and options as they vest.

The significant increase in operating expenses is related to the continued
ramping up of the CBDI business, which included increased staff hiring, a full
blown sales, advertising and marketing process and expenses related to
infrastructure expansion. With an established business foundation and
infrastructure, we are now focused on activation of our assets to continue to
build our brand while we transition with a focus on overall execution and
profitability.

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 table provides information on our approximate corporate overhead for three and nine months ended June 30, 2020 and 2019:




                              Three months ended Three months ended
                              June 30, 2020      June 30, 2019      change




Staff related expense          $276,490           $186,532           $89,958
Accounting/legal expense       81,198             130,152            (48,954)
Professional outside services  45,566             307,181            (261,615)
Travel expense                 -                  36,323             (36,323)
Business insurance             99,875             58,131             41,744
Non-cash stock compensation    331,985            1,389,224          (1,057,239)
Totals                         $835,114           $2,107,543         $(1,272,429)




                              Nine months ended Nine months ended
                              June 30, 2020     June 30, 2019     change




Staff related expense          $986,731          $952,333          $34,398
Accounting/legal expense       517,090           665,680           (148,590)
Professional outside services  365,596           793,323           (427,727)
Travel expense                 22,342            80,279            (57,937)
Business insurance             282,339           198,945           83,394
Non-cash stock compensation    1,447,860         1,552,372         (104,512)
Totals                         $3,621,958        $4,242,932        $(620,974)

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




                                       40


Other income and other non-operating expenses

Interest income (expense)



Our interest income (expense) was $3,436 and $6,229 for the three months ended
June 30, 2020 and 2019, respectively. For the nine months ended June 30, 2020
and 2019, our interest income (expense) was $46,311 and $50,189, respectively.

Contingent liability


As consideration for the Mergers, under the terms of the Merger Agreement, we
had a contractual obligation to issue 15,250,000 initial shares of our common
stock (the "Initial Shares"), after approval by our shareholders, to the members
of Cure Based Development, to be issued in two tranches 6,500,000 shares and
8,750,000 shares, both of which are subject to leak out provisions. The
unrestricted voting rights to 8,750,000 tranche of shares vest over a five year
period and until those voting rights vest are subject to voting proxy
agreements. As of June 30, 2020, unrestricted voting rights to 2,187,500 shares
have vested and those shares are no longer subject to voting proxy agreements.
The Merger Agreement also provided that an additional 15,250,000 Earnout Shares
of our common stock can be issued upon the satisfaction of certain aggregate net
revenue criteria by cbdMD within 60 months following the closing date of the
Mergers.

The Initial Shares and Earnout Shares were approved by our shareholders and the
Initial Shares were issued on April 19, 2019. The Initial Shares value at April
19, 2019 was $53,215,163, and with the issuance of the Initial Shares, the
contingent liability related to the Initial Shares was reclassified to
shareholders' equity by $53,215,163. In addition, the first marking period for
the Earnout Shares was December 31, 2019 and based on measurement criteria,
5,127,792 shares were issued on February 27, 2020 and had a value of $4,620,000.
Additionally, as the 5,127,792 Earnout Shares were issued on February 27, 2020,
the value of the shares in the amount of $4,620,000 was reclassified from the
contingent liability to additional paid in capital on the balance sheet.

The earn out provision is accounted for and recorded as a contingent liability
with increases in the liability recorded as a non cash other expense and
decreases in the liability recorded as a non cash other income. The value of the
contingent liability was $15,400,000 and $7,820,000 at June 30, 2020 and March
31, 2020, respectively, and represents the balance of Earnout Shares not issued
in the first marking period. The increase in value of $7,580,000 is recorded in
the Statement of Operations for the three months ended June 30, 2020. The
Company utilized both a market approach and a Monte Carlo simulation in valuing
the contingent liability and a key input in both of those methods is the stock
price. The main driver of the change in the value of the Earnout Shares within
the contingent liability was the increase of the Company's stock price, which
was $1.91 at June 30, 2020 as compared to $0.93 on March 31, 2020.

Realized and unrealized gain (loss) on marketable and other securities



We value investments in marketable securities at fair value and record a gain or
loss upon sale at each period in realized and unrealized gain (loss) on
marketable securities. For the three months ended June 30, 2020 and 2019 we
recorded $(30,849) and $(13,162) of realized and unrealized gain (loss) on
marketable and other securities. For the nine months ended June 30, 2020 and
2019 we recorded $(146,011) and $(77,802) of realized and unrealized gain (loss)
on marketable and other securities. The discontinued operations recorded a
realized and unrealized gain (loss) of $(484,289) and $(1,627,266), for the
three and nine months ended June 30, 2019, which is included in the net income
(loss) from discontinued operations on the statement of operations.

For the three and nine months ended June 30, 2020 we had an impairment on other
securities of $0 and $600,000, respectively as well as an impairment of $0 and
$160,000, respectively, against other account receivable representing an
investment other security that was to be received.

Liquidity and Capital Resources



 We had cash and cash equivalents on hand of $15,006,319 and working capital of
$19,725,327 at June 30, 2020 as compared to cash on hand of $4,689,966 and
working capital of $12,033,157 at September 30, 2019. Our current assets
increased approximately 53.1% at June 30, 2020 from September 30, 2019, and is
primarily attributable to an increase in cash and inventory, offset by a
decrease in accounts receivable, marketable and other securities, merchant
reserve, prepaid expenses, and assets from discontinued operations. Our current
liabilities increased approximately 18.2% at June 30, 2020 from September 30,
2019. This increase is primarily attributable to increases in accrued expenses,
note payable and operating lease short term liability offset by decreases in
accounts payable.


                                       41

During the three and nine months ended June 30, 2020 we used cash primarily to fund our operations.



We do not have any commitments for capital expenditures. We have a commitment
for cumulative cash dividends at an annual rate of 8% payable monthly in arrears
for the prior month to our preferred shareholders. We have multiple endorsement
or sponsorship agreements for varying time periods up through December 2022 and
provide for financial commitments from the Company based on
performance/participation (see Note 13 Commitments and Contingencies). We have
sufficient working capital to fund our operations.

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 $10,277,081 and $9,055,308 for the nine months ended June 30,
2020 and 2019, respectively.

On October 16, 2019 we closed a follow-on firm commitment underwritten public
offering of shares of our 8.0% Series A Convertible Preferred Stock resulting in
total net proceeds to us of $4,525,100. On January 15, 2020, we closed a
follow-on firm underwritten public offering of shares of our common stock
resulting in total net proceeds to us of $16,928,100. We are using the net
proceeds from the offerings for brand development and expansion, advertising,
marketing, and general working capital. In addition, as described earlier in
this report, in April 2020 we received a PPP Loan of $1,456,100.

Related Parties

As described in Note 9 in notes to our consolidated financial statements appearing elsewhere in this report, we have engaged in related party transactions. We have reported transactions with related parties within the consolidated financial statements as well as within the notes to the consolidated financial statements.

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 report describes the significant
accounting policies and methods used in the preparation of our consolidated
financial statements. Management bases its estimates on historical experience
and on various other assumptions it believes to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities. Actual results may differ from
these estimates, and such differences may be material.

Please see Part II, Item 7 - Critical Accounting Policies appearing in our 2019
10-K for the critical accounting policies we believe involve the more
significant judgments and estimates used in the preparation of our consolidated
financial statements and are the most critical to aid you in fully understanding
and evaluating our reported financial results. Management considers these
policies critical because they are both important to the portrayal of our
financial condition and operating results, and they require management to make
judgments and estimates about inherently uncertain matters.

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.


                                       42


ITEM 3.

© Edgar Online, source Glimpses