ycbd_8k
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date of Report (Date of earliest event reported)
March 31,
2021
cbdMD, INC.
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(Exact name of registrant as specified in its charter)
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North Carolina
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001-38299
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47-3414576
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(State or other jurisdiction of incorporation or
organization)
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(Commission File Number)
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(I.R.S. Employer Identification No.)
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8845 Red Oak Blvd, Charlotte, NC 28217
(Address of principal
executive offices)(Zip Code)
Registrant's
telephone number, including area code: (704) 445-3060
________________________________
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(Former name or former address, if changed since last
report)
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Check
the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant
under any of the following provisions (see General Instruction A.2.
below):
☐
Written
communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
☐
Soliciting material
pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
☐
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b))
☐
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c))
Securities
registered pursuant to Section 12(b) of the Act:
Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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common
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YCBD
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NYSE
American
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8.0%
Series A Cumulative Convertible Preferred Stock
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YCBDpA
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NYSE
American
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Indicate by check mark whether the registrant is an emerging growth
company as defined in in Rule 405 of the Securities Act of 1933
(§230.405 of this chapter) or Rule 12b-2 of the
Securities Exchange Act of 1934 (§240.12b-2 of this
chapter).
Emerging
growth company ☑
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If an
emerging growth company, indicate by checkmark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange
Act. ☐
Item
8.01 Other
Events.
As
previously disclosed, on December 3, 2018 cbdMD, Inc.
(“cbdMD”) entered into that
certain Agreement and Plan of Merger (the “Merger Agreement”) by and
among cbdMD, its wholly-owned subsidiaries and Cure Based
Development, LLC pursuant to which it acquired all of the
membership interests of Cure Based Development, LLC from its then
sole member CBD Holding, LLC (“CBDH”). The transaction
closed on December 21, 2018. As partial consideration for such
transaction, CBDH received contractual rights (the
“Earnout
Rights”) to receive up to 15,250,000 additional shares
of cbdMD’s common stock (the “Earnout Shares”) based
upon the achievement of certain earnout targets as set forth in the
Merger Agreement. In February 2020, in connection with its
liquidation, CBDH distributed the Earnout Rights to its members
based upon the members’ pro pro-rata ownership interest in
CBDH. Members of CBDH at the time of its liquidation and this
distribution included affiliates of Martin A. Sumichrast and R.
Scott Coffman, directors and executive officers of cbdMD. In
February 2020 and March 2021 cbdMD issued Earnout Shares to the
CBDH members representing the shares earned in the first and second
marking periods based upon their pro-rata ownership interest in
CBDH. Following these issuances, there remain Earnout Rights to an
aggregate of 6,773,953 Earnout Shares which may be issued upon the
achievement of the revenue targets in the Merger Agreement during
the third and fourth marking periods.
The
third marking period (“Third Marking Period”)
was originally an 18 month period commencing on January 1, 2021 and
ending on June 30, 2022 (the “Third Marking Period End
Date”), after which time the determination of the
issuance of any remaining Earnout Shares would be made pursuant to
the terms of the Merger Agreement. On March 31, 2021 cbdMD entered
into Addendum No. 1 to the Merger Agreement (“Addendum No. 1”) with the
holders of the remaining Earnout Rights which amended the
measurement periods within the Third Marking Period to change the
determination of the aggregate net revenues within the Third
Marking Period to a quarterly basis for each of the six fiscal
quarters within the Third Marking Period, beginning with the
quarter ended March 31, 2021, instead of following Third Marking
Period End Date. This change in the measurement date, however, has
no effect on the number of remaining Earnout Shares issuable under
the Earnout Rights and no effect on the earnout targets; Addendum
No. 1 simply changes the physical issuance date(s) of the remaining
Earnout Shares, if in fact, such shares are earned pursuant to the
terms of the Merger Agreement. Addendum No. 1 did not change any of
the terms of the Fourth Marking Period (as that term is defined in
the Merger Agreement).
By way
of background, under U.S. generally
accepted accounting principles (“U.S.
GAAP”) cbdMD is required
to account for the Earnout Shares as a non-cash contingent
liability and each quarter cbdMD records increases or decreases in
the fair value as an adjustment to earnings, which has had a
material impact on cbdMD’s results of operations. Changes in
the market price of its common stock, which is one of the inputs
used in determining the amount of the non-cash contingent
liability, results in increases or decreases in this non-cash
liability, and positively or negatively impacts cbdMD’s net
loss or profit to common shareholders for the period. cbdMD entered
into the Amendment No. 1 to the Merger Agreement in an
effort to mitigate the U.S. GAAP impact of this non-cash liability
on cbdMD’s financial statements during such 18 month
period.
While not changing the ultimate number of Earnout Shares which
cbdMD will issue during the Third Marking Period, which such number
is presently unknown as it is based upon the achievement of the
revenue targets in the Merger Agreement, such change in the
measurement periods within the Third Marking Period will reduce the
number Earnout Shares used to calculate the non-cash liability on a
quarterly basis, thereby reducing the quarterly impact on
cbdMD’s financial statements of the non-cash changes in the
contingent liability.
The
foregoing description is qualified in its entirety by reference to
Addendum No. 1, a copy of which is filed as Exhibit 10.1 to this
report.
Item
9.01 Financial
Statements and Exhibits.
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Incorporated by Reference
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Filed or
Furnished
Herewith
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No.
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Exhibit Description
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Form
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Date Filed
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Number
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Addendum
No. 1 to Agreement and Plan of Merger dated March 31,
2021
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Filed
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SIGNATURES
Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
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cbdMD,
Inc.
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Date:
April 1, 2021
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By:
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/s/ T.
Ronan Kennedy
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T.
Ronan Kennedy, Chief Financial Officer and Chief Operating
Officer
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