DEF 14A: cbdMD Seeks Shareholder Approval for Reverse Stock Split and Preferred Stock Conversion to Regain NYSE Compliance

cbdMD is asking shareholders to vote on proposals including a reverse stock split and the conversion of Series A Preferred Stock to common stock at the upcoming annual meeting to address NYSE American listing requirements and improve the company's financial position.

Summary

• cbdMD is holding its 2025 annual meeting of shareholders virtually on April 10, 2025.
• Shareholders will vote on several proposals, including the election of seven directors, ratification of the appointment of Cherry Bekaert LLP as the independent auditor, and an amendment to the Series A Preferred Stock to automatically convert each share into thirteen shares of common stock.
• Another proposal involves a reverse stock split of common stock, ranging from 1:3 to 1:10, at the board's discretion, to be implemented within one year of the meeting.
• The company is also seeking approval to adjourn the meeting if necessary to solicit more proxies.
• The board has set February 21, 2025, as the record date for determining shareholders eligible to vote.
• The company is facing non-compliance with NYSE American listing standards due to stockholders' equity being below the required thresholds.
• The conversion of Series A Preferred Stock is intended to increase stockholders' equity by approximately $5.7 million, addressing the NYSE American concerns.
• If the Series A Preferred Stock conversion is approved, Series A Preferred shareholders would receive 13 shares of common stock for each share of Series A Preferred Stock, and the Series A Preferred Stock would cease trading on the NYSE American.
• If the reverse stock split is approved, the board will determine the exact ratio within the 1:3 to 1:10 range.
• The company believes the reverse stock split could increase the per share market price of its common stock and help maintain its listing on the NYSE American.
• The company is committed to regaining compliance with NYSE American listing standards by December 5, 2025.
• The company has suspended dividend payments on the Series A Preferred Stock, with accrued dividends totaling approximately $5.7 million as of December 31, 2024.

Sentiment

Score: 5

Explanation: The document is largely factual and procedural, outlining proposals for shareholder vote. The sentiment is neutral, reflecting the need to address financial and listing challenges.

Positives

• Approval of the proposals could help cbdMD regain compliance with NYSE American listing standards.
• Conversion of Series A Preferred Stock would increase stockholders' equity.
• Reverse stock split could increase the per share market price of common stock.
• Eliminating the Series A Preferred dividend and cash payment obligation provides additional working capital.
• The company believes the automatic conversion of the Series A Preferred Stock into common stock positions the company for future growth and share appreciation.
• The company believes the existing capital structure and the rights and preferences of the Series A Preferred has a negative impact and perception on the common shares of the Company.

Negatives

• The company is currently not in compliance with NYSE American listing standards.
• Common shareholders will experience significant dilution if the Series A Preferred Stock conversion is approved.
• The reverse stock split may not increase the price of the common stock or maintain compliance with NYSE American.
• The reverse stock split may decrease the liquidity of the common stock.
• The conversion of Series A Preferred shares into common shares may be a taxable event.

Risks

• There is no guarantee that the proposed actions will maintain compliance with NYSE American.
• The market price of the common stock may decrease after the reverse stock split or the Series A Preferred conversion.
• The reverse stock split may decrease the liquidity of the common stock.
• The company may not be able to pay dividends on the Series A Preferred Stock in the future due to restrictions under the North Carolina Business Corporation Act.
• The company may be unable to retain and attract key talent due to the presence of Series A Preferred shares.

Future Outlook

The company intends to regain compliance with NYSE American continued listing standards by December 5, 2025, through a transaction or transactions, including seeking shareholder approval to convert its outstanding Series A Preferred Stock and accrued dividends into shares of Common Stock.

Industry Context

The document does not provide specific industry context beyond the general need to maintain stock exchange listing compliance, which is a common concern for publicly traded companies.

Related Party Transactions

• Dr. Sibyl Swift, a member of the board of directors, served as our Chief Science Officer and VP Regulatory Affairs and the co-chair of cbdMD Therapeutics, LLC, from March 2021 to August 2024.
• Dr. Swift remains engaged as a consultant to the Company on a month to month basis with a monthly retainer of $8,000.

Stakeholder Impact

• Shareholders: Potential dilution for common shareholders if the Series A Preferred conversion is approved; potential increase in stock price and liquidity if the reverse stock split is successful.
• Series A Preferred Shareholders: Conversion to common stock, waiving rights to accrued dividends, but potentially gaining liquidity.
• Employees: Equity incentive plans may be affected by the Series A Preferred shares.
• Customers: No direct impact mentioned.
• Creditors: No direct impact mentioned.

Next Steps

• Shareholders will vote on the proposals at the annual meeting on April 10, 2025.
• The board will determine the specific ratio for the reverse stock split if approved.
• The company will file the Series A Articles of Amendment if the conversion proposal is approved.
• The company will continue to work towards regaining compliance with NYSE American listing standards.

Key Dates

Keywords

reverse stock split, Series A Preferred Stock, NYSE American, proxy statement, shareholder meeting, compliance, conversion, delisting, dividends, cbdMD