cbdMD (NYSE:YCBD), Inc. (NYSE American:YCBD), a North Carolina-based company specializing in perfumes, cosmetics, and other toilet preparations, announced on Thursday significant developments impacting its intellectual property and financial agreements. On August 23, 2024, the company entered into a settlement and acquired the "CBD MD" trademark from Majik Medicine, LLC, which was previously contested.
The acquisition of the trademark is part of a broader agreement that includes a $100,000 payment to Majik on the date of the agreement and subsequent $50,000 payments annually for four years. Failure to meet these payments would result in the reassignment of the trademark back to Majik. Additionally, cbdMD issued 75,000 shares of common stock to Majik and will issue another 50,000 shares on the first anniversary of the agreement.
The company also committed to a five-year consulting agreement with Majik, which will involve the latter referring a specific business vertical wholesale customer base of Licensed Practitioners, with a 15% commission on new sales increases to such practitioners. This agreement is expected to open up a customer base previously untapped by cbdMD.
Furthermore, the company amended its existing financial agreements with its institutional investors. The amendments include the inclusion of the newly acquired trademark as a permitted lien and the additional payments as permitted indebtedness under its 8% Senior Secured Original Issue 20% Discount Convertible Promissory Notes and related Security Agreement.
cbdMD anticipates that securing the trademark will enhance its intellectual property portfolio and remove procedural barriers at the U.S. Patent and Trademark Office Trademark Trial and Appeal Board. This move is also expected to facilitate the issuance of additional marks for the company's brands and avoid further costly litigation.
This news is based on a press release statement.
In other recent news, North Carolina-based cbdMD, Inc. has settled its lease obligations for its former executive offices. The company made a final payment of $255,000, thereby fulfilling all outstanding payments due under the previous lease agreement.
This settlement is anticipated to result in an approximate gain of $550,000 for cbdMD, offsetting a related non-cash expense of approximately $230,000. The company has confirmed that there are no further obligations owed to the landlord under any of the previous agreements.
In financial developments, cbdMD reported a 15% decrease in total net sales to $5.1 million in its Q3 results. Despite the sales decline, the company highlighted improvements in gross margins and operational efficiencies. The direct-to-consumer segment saw incremental gains, attributed to a revamped sales strategy and the hiring of new sales personnel.
The company reported a loss from operations of approximately $400,000 but generated about $200,000 in cash during the quarter.
cbdMD is also awaiting UK FSA approval for its submission on higher daily CBD levels than proposed. These are recent developments for the company.
InvestingPro Insights
In light of cbdMD's recent strategic moves to enhance its intellectual property and financial agreements, a look at the company's financial health and market performance via InvestingPro provides additional context. As of the last twelve months leading up to Q3 2024, cbdMD has a market capitalization of 1.96 million USD, indicating a relatively small scale in the financial markets. The company's revenue has seen a decline of 21.55%, which aligns with analysts' expectations for a sales decline in the current year. This is a crucial metric for investors considering the company's future revenue streams and growth potential.
Moreover, with a negative P/E ratio of -0.07, reflecting the company's lack of profitability over the last twelve months, and an adjusted P/E ratio of -0.21, cbdMD's financial performance raises concerns about its ability to generate profit. These figures are particularly relevant given that analysts do not anticipate the company will be profitable this year, as per InvestingPro Tips. Additionally, the price has fallen significantly over the last five years, with a year-to-date price total return of -49.95%, underscoring the stock's volatility and the challenges faced in the market.
Investors considering cbdMD as a potential investment should be aware that the company is trading at a low revenue valuation multiple and does not pay a dividend to shareholders, which may influence investment decisions. For those looking for more in-depth analysis, InvestingPro offers a total of 10 InvestingPro Tips to further evaluate the company's financial health and market position.
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