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Note 5 - Intangible Assets

12 Months Ended

Sep. 30, 2024

Notes to Financial Statements

Intangible Assets Disclosure [Text Block]

NOTE 5 – INTANGIBLE ASSETS

Intangible Assets

As of July 1, 2023 the Company determined that based on market forces and the Company’s outlook it was prudent to adjust the useful lives of cbdMD’s and DCO intangibles to 5 year useful lives and hempMD’s trademark to 10 year amortization to better reflect the outlook of the brands. This re-evaluation of the tradenames became a triggering event for a valuation test under ASC 360. As a result of a multi-step approach under ASC 360 we determined that the “cbdMD,” “DirectCBDOnline” tradenames and the technology relieve asset was impaired by $6,027,000, and as a result, the amortization was adjusted to account for any changes in the value and estimated useful life of each asset. Amortization expense for the year ended September 30, 2024 was $697,510 and was recorded on the consolidated statements of operations.

At September 30, 2023, the Company prepared a tradename impairment analysis in accordance with ASC 360 and has determined that based on market sentiment and the sharp decline in combined market capitalization of the common stock and Series A Preferred as a result of the ongoing proxy vote, a triggering event occurred. The Company prepared an impairment analysis and as a result of a multi-step approach under ASC 360 we determined that the “cbdMD” DirectCBDOnline” tradenames and technology relieve were further impaired by $7,192,000 in fiscal year 2023, resulting in a total impairment charge of $13,219,000 for the fiscal year ended September 30, 2023.

At September 30, 2024, the Company prepared a tradename impairment analysis in accordance with ASC 360 and has determined that no impairment existed.

In 2019, Company’s subsidiary, CBD Industries, LLC, initiated a trademark cancellation proceeding against Majik Medicine, LLC (“Majik”) regarding Majik’s “CBD MD” trademark. In a Settlement, Purchase, and Release Agreement that occurred in August of 2024, the Company acquired the trademark, resolving all related legal claims. The agreement included a $100,000 initial payment, four additional annual payments of $50,000, the issuance of 75,000 shares of common stock (the “Initial Shares”), and 50,000 more shares on the one-year anniversary. Failure to make the additional payments would reassign the trademark to Majik. Additionally, the Company entered a five-year consulting agreement with Majik, granting a 15% commission on increased sales from Licensed Practitioners, a new customer base. This acquisition strengthens the Company’s IP portfolio, avoids litigation costs, and expedites trademark issuance. Majik also appointed board member William Raines III as a proxy for the Initial Shares for 12 months. The Company used the Black Scholes method to determine the fair value of the remaining shares to be paid on the one-year anniversary.

At September 30, 2024, the Company prepared a tradename impairment analysis in accordance with ASC 360 and has determined that no impairment existed.

Intangible assets as of September 30, 2024 and 2023 consisted of the following:

		*September 30,*				*September 30,*
		*2024*				*2023*
Trademark related to cbdMD		$	21,585,000			$	21,585,000
Trademark for HempMD			50,000				50,000
Technology Relief from Royalty related to DirectCBDOnline.com			667,844				667,844
Tradename related to CBD MD limited mark			368,000				-
Tradename related to DirectCBDOnline.com			749,567				749,567
Impairment of definite lived intangible assets:			(17,504,000	)			(17,504,000	)
Amortization of definite lived intangible assets:			(3,026,831	)			(2,329,321	)
Total		$	2,889,580			$	3,219,090

Future amortization of intangible assets as of September 30, 2024 is as follow:

For the year ended September 30,
2025		$	762,457
2026			733,740
2027			733,740
2028			569,923
Thereafter			89,720
Total future intangibles amortization		$	2,889,580