cbdMD, Inc 10-K/A, filed Jan 24, 2020
cbdMD, Inc. (YCBD)
10-K/A
2020-01-24
For: 2019-09-30
View Original
Added on
April 08, 2026
About this 10-K/A
cbdMD, Inc filed this 10-K/A on January 24, 2020, covering the fiscal year ended September 30, 2019.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 10-K/A
(Amendment No. 1)
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(Mark
One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For
the fiscal year ended
September 30, 2019
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or
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☐
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TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For
the transition period
from _______________ to _______________
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Commission
file number:
001-38299
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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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47-3414576
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(State or other jurisdiction of incorporation or
organization)
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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
Securities
registered under Section 12(b) of the Act:
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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 stock
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YCBD
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NYSE American
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8% Series A Cumulative Convertible Preferred Stock
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YCBD PR A
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NYSE American
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Securities
registered under Section 12(g) of the Act:
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None
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(Title
of class)
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Indicate
by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities
Act. ☐ Yes ☑ No
Indicate
by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the
Act. ☐ Yes ☑ No
Indicate
by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days. ☑
Yes ☐ No
Indicate
by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§232.4.05 of this chapter) during
the preceding 12 months (or for such shorter period that the
registrant was required to submit such
files). ☑ Yes ☐ No
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,”
“accelerated filer,” “smaller reporting
company,” and “emerging growth company” in Rule
12b-2 of the Exchange Act.
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Large
accelerated filer
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☐
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Accelerated
filer
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☐
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Non-accelerated
filer
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☑
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Smaller
reporting company
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☑
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Emerging
growth company
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☑
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If an emerging growth company, indicate by check mark 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.
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☐
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Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange
Act) ☐ Yes ☑ No
State
the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at
which the common equity was sold, or the average bid and asked
prices of such common equity, as of the last business day of the
registrant's most recently completed second fiscal quarter.
$42,356,785 on March 31, 2019.
Indicate
the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
27,720,356 shares of common stock are issued and outstanding as of
December 01, 2019.
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the
following documents if incorporated by reference and the Part of
the Form 10-K (e.g., Part I, Part II, etc.) into which the document
is incorporated: (1) Any annual report to security holders; (2) Any
proxy or information statement; and (3) Any prospectus filed
pursuant to Rule 424(b) or (c) under the Securities Act of 1933.
The listed documents should be clearly described for identification
purposes (e.g., annual report to security holders for fiscal year
ended December 24, 1980). None.
EXPLANATORY
NOTE
This Amendment No.
1 on Form 10-K/A (the “Amendment”) amends our Annual
Report on Form 10-K for the fiscal year ended September 30, 2019
(the “2019 10-K”), originally filed with the Securities
and Exchange Commission on December 18, 2019 (the “Original
Filing”). We are filing this Amendment to amend Part III of
the Original Filing to include the information required by and not
included in Part III of the Original Filing because we no longer
intend to file a definitive proxy statement which involves the
election of directors within 120 days of the end of our fiscal year
ended September 30, 2019. The information required by Part III was
previously omitted from the Original Filing in reliance on General
Instruction G(3) to Form 10-K, which permits the information in
Part III to be incorporated in the Form 10-K by reference from a
definitive proxy statement which involves the election of directors
if such statement is filed no later than 120 days after the end of
our fiscal year.
Part IV of the
Original Filing is being amended solely to add as exhibits certain
new certifications by our co-principal executive officers and our
principal financial officer in accordance with Rule 13a-14(a)
promulgated by the SEC under the Securities Exchange Act of 1934.
Because no financial statements have been included in this
Amendment and this Amendment does not contain or amend any
disclosure with respect to Items 307 or 308 of Regulation S-K,
paragraphs 3, 4 and 5 of the certifications have been omitted. We
are not including the certificate under Section 906 of the
Sarbanes-Oxley Act of 2002 because no financial statements have
been included in this Amendment.
Except as described
above, no other changes have been made to the Original Filing. The
Original Filing continues to speak as of the date of the Original
Filing, and we have not updated the disclosures contained therein
to reflect any events which occurred at a date subsequent to the
filing of the Original Filing other than as expressly indicated in
this Amendment. Accordingly, this Amendment should be read in
conjunction with the Original Filing and our other filings made
with the SEC on or subsequent to December 18,
2019.
TABLE OF CONTENTS
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Page No.
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Part III
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Item 10.
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Directors, Executive Officers and Corporate
Governance.
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4
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Item 11.
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Executive Compensation.
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11
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Item 12.
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Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.
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16
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Item 13.
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Certain Relationships and Related Transactions, and Director
Independence.
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18
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Item 14.
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Principal Accounting Fees and Services.
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19
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Part IV
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Item 15.
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Exhibits, Financial Statement Schedules.
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20
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Item
16.
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Form
10-K Summary.
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20
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Unless
the context otherwise indicates, when used in this report, the
terms the “Company,” “cbdMD, “we,”
“us, “our” and similar terms refer to cbdMD,
Inc., a North Carolina corporation formerly known as Level Brands,
Inc., and our subsidiaries CBD Industries LLC, a North Carolina
limited liability company formerly known as cbdMD LLC, which we
refer to as “CBDI,” and Paw CBD, Inc., a
North Carolina corporation which we refer to as “Paw
CBD.” In addition, "fiscal 2018" refers to the year ended
September 30, 2018, “fiscal 2019” refers to the year
ended September 30, 2019, and “fiscal 2020” refers to
the year ending September 30, 2020.
We maintain a corporate website at
www.cbdmd.com.
The information contained on our corporate website and our various
social media platforms are not part of this
report.
PART III
ITEM
10.
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The
following table provides information on our executive officers and
directors:
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Name
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Age
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Positions
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Martin
A. Sumichrast
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53
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Chairman
of the board of directors, co-Chief Executive
Officer
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R. Scott
Coffman
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58
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Director and
co-Chief Executive Officer
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Mark S.
Elliott
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58
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Chief Financial
Officer, Chief Operating Officer
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Caryn
Dunayer
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35
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President
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Anthony
K. Shriver
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54
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Director
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Seymour
G. Siegel
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77
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Director
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Gregory
C. Morris
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58
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Director
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Bakari
Sellers
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35
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Director
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Peter J.
Ghiloni
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69
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Director
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Scott G.
Stephen
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54
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Director
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William F. Raines,
III
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60
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Director
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Martin A.
Sumichrast. Mr. Sumichrast has
served as a member of the board of directors since April 2015. Mr.
Sumichrast served as our Chief Executive Officer from September
2016 until July 2019 and as our co-Chief Executive Officer since
July 2019. Since 2012, Mr. Sumichrast has served as Managing
Director of Washington Capital, LLC, a family
office. In addition, since 2018 he has been the Managing Director
over SFT1, LLC, a private investment company owned by a family
trust. Since September 2013 he
has been a Managing Member of Stone Street Capital, LLC, a
Charlotte, North Carolina-based private investment company.. Mr.
Sumichrast serves as a Trustee and Chairman of the Nominating and
Governance Committees of the Barings Global Short Duration High
Yield Fund, Inc. (NYSE: BGH) and the Barings Capital Funds Trust,
Inc. From January 2015 until January 2016, he was also a member of
the board of directors of Social Reality, Inc. (NASDAQ:SRAX) and
served as a member of the Audit Committee. We selected Mr.
Sumichrast to serve on our board of directors based upon his
significant experience both as an investor and advisor, as well as
his experience as a member of a board of directors of a listed
company.
R. Scott
Coffman. Mr. Coffman has been a member of our board of
directors since December 2018. He served as Chief Executive Officer
of our CBDI subsidiary from December 2018 until July 2019 and has
served as our co-Chief Executive Officer since July 2019. Mr.
Coffman has over 25 years of business experience in which he
founded several businesses in the internet services, manufacturing
and e-commerce sectors. As an executive or partner in these
entities, Mr. Coffman oversaw the strategic direction, developed
the business plan and oversaw the operation of the companies. Mr.
Coffman was a manager and Chief Executive Officer of Cure Based
Development, LLC from the founding of the company in September 2017
until the mergers with CBDI in December 2018. Prior to that, from
2012 to 2017, he was an Operating Partner in a regional
restaurant group and also had day to day executive
oversight of DataTech Global LLC, a privately held technology
company which focuses on online sales and marketing. In 2009 he founded Blu, an E-cigarette manufacturer
which he built into a leading brand and subsequently sold it to
Lorillard Tobacco in 2012. In 1999, Mr. Coffman founded DataTech
Global LLC and served as its Chief Executive Officer until 2012.
Mr. Coffman is the managing member of Edge of Business LLC, he is
also the managing member of CBD Holdings LLC which was a majority
owner of Cure Based Development LLC and is also the managing member
of Coffman Management LLC, an entity he uses for investments in
other businesses. Mr. Coffman received a Bachelor of Arts degree in
Economics from Marshall University. We selected Mr. Coffman as a
member of our board of directors as a result of his extensive
executive level experience and his role as the founder of Cure
Based Development, LLC.
Mark S.
Elliott. Mr. Elliott has been
our Chief Financial Officer since October 2016 and our Chief
Operating Officer since January 2017. He has over 30 years of
business experience spanning the financial, retail, consulting and
government sectors and includes time at Fortune 500 and regional
firms. Mr. Elliott began his career in the technology arena and
worked with such Fortune 500 companies as JCPenney and First Union
National Bank within their corporate headquarters. Mr. Elliott
moved into the consulting arena as a regional technology specialist
and eventually moved into senior management as a Director for
Contract Data Services (acquired by Inacom Information Systems).
This position involved all aspects of the business including staff
management, business development, strategy, and managing the
profitability of multiple divisions. Mr. Elliott was a founder and
partner of Premier Alliance Group (now named root9B Holdings, Inc.)
(NASDAQ:RTNB) and was the Chairman and CEO of the company from 2004
to 2013 where he oversaw the strategic direction and operation of
the company. He directed the transformation of the company to a
public market company and successfully oversaw and integrated six
merger and acquisition transactions that strategically positioned
the company. Mr. Elliott has had compliance, financial reporting,
and strategic responsibilities within the company (serving as the
CFO also from 2004 to 2010 and as the Chief Administrative Officer
of the company from 2014 to 2015). Mr. Elliott received a Bachelor
of Science degree with a concentration in Computer Science and
Management from Marshall University.
Caryn Dunayer. Ms.
Dunayer has served as our President since July 2019, and served as
President of our CBDI subsidiary from December 2018 until July
2019. Ms. Dunayer was the President of Cure Based Development, LLC
from 2017 until the mergers with CBDI In December 2018. Prior to
venturing into the CBD space, she gained over 15 years of
experience in the sales, marketing, advertising, and digital
industries. After receiving her Bachelors of Arts degree in 2007
from University of North Carolina at Wilmington, Ms. Dunayer began
her professional career at Hewlett Packard. She became proficient
in IT, including various hardware and software solutions. In 2005,
Ms. Dunayer transitioned into the marketing and advertising fields
working for a New York Times company, the Star News. In 2011, Ms.
Dunayer joined Hearst Corporation as a Digital Marketing and Major
Accounts Executive. In 2013, she co-founded American Ecig Supply
where she managed the entire sales force, marketing, and
advertising aspects while helping build the
business.
4
Anthony K.
Shriver. Mr. Shriver has been a member of our board
of directors since June 2015. Mr. Shriver is the Chairman of Best
Buddies® International, a nonprofit 501(c)(3)
organization he founded in 1989 which is dedicated to establishing
a global volunteer movement that creates opportunities for
one-to-one friendships, integrated employment and leadership
development for people with intellectual and developmental
disabilities (IDD). Best Buddies® International has grown from
one original chapter to almost 1,900 middle school, high school,
and college chapters worldwide, engaging participants programs in
each of the 50 United States, and over 50 countries around the
world. Mr. Shriver, who graduated from Georgetown University, has
been recognized for his work on behalf of Best Buddies®
International with diverse international accolades and honorary
degrees. Mr.
Shriver currently serves on the Compensation Committee of our board
of directors. We
selected Mr. Shriver to serve on our board of directors based upon
his lifelong commitment to charitable efforts and his dedication to
the principles upon which our company seeks to
operate.
Seymour G.
Siegel. Mr. Siegel has
been a member of our board of directors since March 2017. Mr.
Siegel, a certified public accountant no longer in practice, has
over 35 years of experience in public accounting and SEC regulatory
matters and has a strong background in mergers and acquisitions,
start-ups, SEC reporting, cost cutting initiatives, profit
enhancements and business operations. Since 2014 he has been
President of Siegel Rich, Inc., a consulting firm. From April 2000
until July 2014, Mr. Siegel was a principal emeritus at Rothstein
Kass & Company, P.C. (now KPMG), an international firm of
accountants and consultants. Mr. Siegel was a founder of Siegel
Rich & Co., CPAs, which eventually merged with what is now
known as WeiserMazars LLP, where he was a senior partner until
selling his interest and co-founding a business advisory firm which
later became a part of Rothstein Kass. He received his Bachelor of
Business Administration from the Baruch School of The City College
of New York. He has been a director and officer of numerous
business, philanthropic and civic organizations. As a professional
director, he has served on the boards of approximately a dozen
public companies over the last 25 years. He was previously a member
of the board of directors and chairman of the audit committees of
Air Industries Group, Inc. (NYSE American: AIRI), root9B Holdings,
Inc. (NASDAQ:RTNB), Hauppauge Digital, Inc., Emerging Vision. Inc.,
Oak Hall Capital Fund, Prime Motor Inns Limited Partnership, and
Noise Cancellation Technologies, Inc. Mr. Siegel currently serves
as chairman of the Audit Committee of our board of directors and is
also a member of the Compensation Committee of our board of
directors. We selected Mr. Siegel as a member of our board of
directors as a result of his extensive experience in mergers and
acquisitions, public companies and boards, financial reporting and
business advisory services.
Gregory C.
Morris. Mr. Morris has been a member of our board of
directors since March 2017. Mr. Morris has worked in positions
involving finance, investments, benefits, risk management, legal
and human resources for more than 30 years. Since June 2015 he has
served as the Vice President of Human Resources for Healthstat,
Inc., a privately held company providing onsite health clinics and
workplace wellness programs. Prior to that, from January 2013 until
June 2015, he was the Vice President of Administration and
Corporate Secretary at Swisher Hygiene (at that time a
NASDAQ-listed company), leading the human resources, risk
management and legal functions. He was employed by
Snyder’s-Lance, Inc. (NASDAQ: LNCE) for 15 years prior to
joining Swisher Hygiene, Inc., holding the positions of Vice
President-Human Resources and Senior Director – Benefits and
Risk Management. At Snyder’s-Lance, Mr. Morris chaired the
Business Continuity Plan Steering Committee and was a member of the
Corporate Mergers & Acquisitions team. Prior to joining
Snyder’s-Lance, he held various positions with Belk Stores,
Collins & Aikman and Laporte plc. Mr. Morris also served as a
board member for root9B Holdings, Inc. (NASDAQ:RTNB) from 2008
through April, 2017 where he chaired the Compensation Committee and
also served on the Audit Committee. Mr. Morris also served as a
board member for the Second Harvest Food Bank of Metrolina from
2001 to 2016. Mr. Morris received a Bachelor of Science degree in
Accounting from West Virginia University. Mr. Morris
currently serves as chairman of the Compensation Committee of our
board of directors and is also a member of the Audit Committee and
Corporate Governance and Nominating Committee of our board of
directors. We selected Mr. Morris as a member of our board of
directors as a result of his extensive executive level experience
in public companies regarding human resources, accounting,
compliance and compensation matters as well as public board
experience.
Bakari
Sellers. Mr. Sellers has been a
member of our board of directors since March 2017. Mr. Sellers, an
attorney, has been a member of the Strom Law Firm, LLC, in
Columbia, South Carolina since 2007. Mr. Sellers is a former member
of the South Carolina House of Representative, where he represented
the 90th District beginning in 2006, making history as the youngest
member of the South Carolina state legislature and the youngest
African American elected official in the nation. In 2014, he ran as
the Democratic nominee for Lt. Governor of South Carolina. He has
worked for United States Congressman James Clyburn and former
Atlanta Mayor Shirley Franklin. Earning his undergraduate degree
from Morehouse College, where he served as student body president,
and his law degree from the University of South Carolina, Mr.
Sellers has followed in the footsteps of his father, civil rights
leader Cleveland Sellers, in his tireless commitment to service
taking championing progressive policies to address issues ranging
from education and poverty to preventing domestic violence and
childhood obesity. He has served as a featured speaker at events
for the National Education Association, College Democrats of
America National Convention, the 2008 Democratic National
Convention and, in 2007, delivered the opening keynote address to
the AIPAC Policy Conference in Washington, DC. Mr. Sellers is also
a political commentator at CNN. Mr. Sellers currently serves as
chairman of the Corporate Governance and Nominating Committee of
our board of directors and is also a member of the Audit Committee
of our board of directors. We selected Mr. Sellers as a result of
his leadership experience, commitment to public policy and legal
background.
Peter J. Ghiloni.
Mr. Ghiloni has been a member of our board of directors since April
2019. In 2018 Mr. Ghiloni retired as Chief Executive Officer of
Swisher International, Inc., North America’s largest producer
of cigars. Mr. Ghiloni began his career in the tobacco business
with the United States Tobacco Company in 1972 after graduating
from Fordham University with a Bachelor of Science degree in
Marketing. In 1983, he moved to The Helme Tobacco Company as Vice
President of Marketing and in 1991, he was promoted to Senior Vice
President of Sales and Marketing. Following the merger of Swisher
International, Inc. and The Helme Tobacco Company, Mr. Ghiloni
assumed the role of Senior Vice President of Marketing for the
combined company. In 2013, Mr. Ghiloni was promoted to the position
of President and Chief Executive Officer. Mr. Ghiloni serves on a
variety of boards including the Board of Swisher International,
Inc., the Board of Jacksonville University and the Board of the
Baptist Beaches Hospital. We selected Mr. Ghiloni to serve on the
board of directors as a result of his executive leadership
positions, his position as President, Chief Executive Officer and a
member of the Board of Directors of Swisher International, Inc.,
his service on additional boards and extensive business
background.
5
Scott G. Stephen.
Mr. Stephen has been a member of our board of directors since April
2019. Mr. Stephen has served as Chief Growth Officer of Guaranteed
Rate Inc., a U.S. residential mortgage company headquartered in
Chicago, IL, since February 2012. Mr. Stephen also serves as
President of Guaranteed Rate Insurance and Ravenswood Title,
affiliates of Guaranteed Rate Inc. From 2003 until 2012, he was
employed by Playboy Enterprises, Inc., a leading men’s global
entertainment and lifestyle company, serving in a variety of
positions including Chief Operations Officer, Executive Vice
President, Playboy Print/Digital Group and Executive Vice President
and General Manger of Playboy Digital Media. From 1999 to 2003 Mr.
Stephen was employed by Yesmail, Inc., an online relationship
marketing company, serving as Chief Operating Officer and Vice
President of Client Services and Operations. Mr. Stephen received a
Bachelor of Business Administration in Finance from the University
of Notre Dame and a Master of Management in Marketing and
Organizational Behavior from the Kellogg School of Management at
Northwestern University. We selected Mr. Stephen to serve on the
board of directors as a result of his executive leadership
positions, his positions with Guaranteed Rate Inc. and Playboy
Enterprises and his extensive business
background.
William F. Raines,
III. Mr. Raines has been a member of our board of directors
since April 2019. Since 2008 Mr. Raines has been employed by
DataTech Global, LLC, a privately held technology company
affiliated with Mr. Coffman which focuses on online sales and
marketing, serving as Chief Financial Officer from 2008 to 2012 and
Chief Executive Officer since 2012. Mr. Raines has over 35 years of
accounting and financial experience with a primary focus on
financial control of operations, financial reporting, acquisitions
and implementation of acquisition plans. Earlier in his career,
from 1991 until 2006 Mr. Raines served in various capacities from
Corporate Controller of Speedway Motorsports, Inc. (NYSE:TRK) to
General Manager of SMI Properties, Inc., a subsidiary of Speedway
Motorsports, Inc.,, and from 2009 until 2012 he was Chief Executive
Officer and Chief Financial Officer of Intermark Brands, LLC, the
manufacturer of Blu, an e-cigarette, and its related entities BLEC,
LLC and QSN Technologies, LLC, which were subsequently sold to Lorillard Tobacco in
2012. Mr. Raines received a B.S. in Accounting from the University
of Maryland in 1981. We selected Mr. Raines to serve on the board
as a result of his extensive technology, accounting and
mergers and acquisitions experience.
There are no family
relationships between any of the executive officers and
directors.
Key
employees
While not executive
officers or directors of our company, the following individuals are
expected to make significant contributions to
us.
Paul DiBrito. Mr.
DiBrito joined cbdMD in January 2019 as our Chief Revenue Officer,
initially heading up manufacturing, procurement, fulfillment and
warehouse operations. In April 2019, he was tasked with creating
cbdMD’s PAW division, which we launched in July 2019. He has
over 35 years of executive management experience with extensive
experience in corporate strategy, operations, merchandising,
logistics, procurement, cost containment, marketing, development
and company growth. Prior to joining cbdMD, Mr. Dibrito spent four
years in the vapor industry where he was the president of Saffire
Vapor LLC and Kure Corp. Previously he also spent 14 years in
corporate executive positions, with Dollar General, A&P Stores
and Fleming Foods. Mr. DiBrito was one of the original employees of
PetSmart, where he spent 13 years during which time the company
grew to approximately 500 stores.
Ken
Cohn. Mr. Cohn
joined cbdMD in January 2019 as our
Chief Marketing Officer where he oversees a team responsible for
advertising, affiliate program, email campaigns, website, industry
research, press releases, content, design, sponsorships, events,
athlete program, digital, radio/podcasts, and video. He has
been involved in the marketing industry for over 25 years with
roles encompassing business, account and brand development and has
expertise in strategy, sponsorships, media, public relations,
advertising, experiential, events, merchandising, contract
negotiation, research, measurement and analytics. Prior to
joining cbdMD, he was a senior vice president at Breaking
Limits, an integrated marketing
agency, where he was responsible for overseeing business
development, operations, client management, public relations, event
management, and sponsorships. Over his career he has worked on a variety
of business sectors including consumer packaged goods, retail,
automotive, technology, oil & gas, insurance and spirits,
across such blue chip brands as Armour, Arrow Electronics,
AutoZone, Don Julio, Duralast, Elizabeth Arden, Gatorade, General
Motors, Hertz, M&M’s, Mountain Dew, Nabisco,
Nathan’s, Pepsi, Progresso, Sherwin Williams, Sirius XM,
State Farm, Sunoco, Sylvania, and True Value. Mr. Cohn received a
Bachelor's degree in business from Indiana
University.
Consultant
While not an
employee of our company, Mr. Todd Justice provides various
management advisory services as directed by Mr. Coffman. Under the
terms of this oral agreement, since February 2019 we pay Mr.
Justice a monthly consulting fee of $10,833 and he maintains an
office at our principal executive offices at no cost to Mr.
Justice. We have been advised Mr. Justice provided similar
consulting and advisory services to Cure Based Development, LLC
prior to the closing of the mergers. See Item. 12. Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
6
Board
of directors
The board of
directors oversees our business affairs and monitors the
performance of management. In accordance with our corporate
governance principles, the board of directors does not involve
itself in day-to-day operations. The directors keep themselves
informed through discussions with the Chairman and co-Chief
Executive Officers and our Chief Financial Officer/Chief Operating
Officer and by reading the reports and other materials that we send
them and by participating in board of directors and committee
meetings. Directors are elected for a term of one year, serving
until our next annual meeting. Our directors hold office until
their successors have been elected and duly qualified unless the
director resigns or by reason of death or other cause is unable to
serve in the capacity of director. If any director resigns, dies or
is otherwise unable to serve out his or her term, or if the board
increases the number of directors, the board may fill any vacancy
by a vote of a majority of the directors then in office, although
less than a quorum of directors then exists. A director elected to
fill a vacancy shall serve for the unexpired term of his or her
predecessor. Vacancies occurring by reason of the removal of
directors without cause may only be filled by vote of the
shareholders.
Board
leadership structure and board’s role in risk
oversight
Mr.
Martin A. Sumichrast serves as both our co-Chief Executive Officer
and Chairman of our board of directors. Mr. R. Scott Coffman serves
as our co-Chief Executive Officer. Messrs. Shriver, Siegel,
Sellers, Morris, Stephen, Ghiloni and Raines are each considered an
independent director within the meaning of Section 803 of the NYSE
American LLC Company Guide. We do not have a “lead”
independent director.
Risk
is inherent with every business, and how well a business manages
risk can ultimately determine its success. We face a number of
risks, including credit risk, interest rate risk, liquidity risk,
operational risk, regulatory risk, strategic risk and reputation
risk. Management is responsible for the day-to-day management of
risks we face, while the board, as a whole and through its
committees, has responsibility for the oversight of risk
management. In its risk oversight role, the board of directors has
the responsibility to satisfy itself that the risk management
process designed and implemented by management are adequate and
functioning as designed. Our co-Chief Executive Officers are both
members of our board of directors. Our Chief Financial Officer
attends the board meetings and is available to address any
questions or concerns raised by the board on risk management and
any other matters. Our co-Chief Executive Officers and the
independent members of the board work together to provide strong,
independent oversight of our company’s management and affairs
through its standing committees and, when necessary, special
meetings of independent directors.
Board
committees
The board of
directors has standing Audit, Compensation, Compensation and
Corporate Governance and Nominating committees. Each committee has
a written charter. The charters are available on our website at
www.cbdmd.com. All
committee members are independent directors. Information concerning
the current membership and function of each committee is as
follows:
|
Director
|
Audit
Committee Member
|
|
Compensation
Committee Member
|
Corporate
Governance and Nominating Committee Member
|
|
Anthony K.
Shriver
|
|
|
✓
|
|
|
Seymour G.
Siegel
|
✓*
|
|
✓
|
|
|
Bakari
Sellers
|
✓
|
|
|
✓*
|
|
Gregory C.
Morris
|
✓
|
|
|
✓
|
|
Scott G.
Stephen
|
|
|
✓*
|
|
|
Peter J.
Ghiloni
|
|
|
|
✓
|
|
*
denotes
chairperson.
|
|
|
|
7
Audit Committee
The
Audit Committee assists the board in fulfilling its oversight
responsibility relating to:
●
the
integrity of our financial statements;
●
our
compliance with legal and regulatory requirements;
and
●
the
qualifications and independence of our independent registered
public accountants.
The
Audit Committee has the ultimate authority to select, evaluate and,
where appropriate, replace the independent auditor, approve all
audit engagement fees and terms, and engage outside advisors,
including its own counsel, as it deems necessary to carry out its
duties. The Audit Committee is also responsible for performing
other related responsibilities set forth in its
charter.
The
Audit Committee is composed of three directors, Messrs. Siegel,
Sellers and Morris, each of whom has been determined by the board
of directors to be independent within the meaning of Section 803 of
the NYSE American LLC Company Guide. In addition, Mr. Siegel meets
the definition of “audit committee financial expert”
under applicable SEC rules. The Audit Committee met four times
during the fiscal year ended September 30,
2019.
Compensation Committee
The
Compensation Committee assists the board in:
●
determining,
in executive session at which our chief executive officer is not
present, the compensation for our co-Chief Executive Officers and
our Chief Financial Officer;
●
discharging
its responsibilities for approving and evaluating our officer
compensation plans, policies and programs;
●
reviewing
and recommending to the board regarding compensation to be provided
to our employees and directors; and
●
administering
our equity compensation plan.
The
Compensation Committee is charged with ensuring that our
compensation programs are competitive, designed to attract and
retain highly qualified directors, officers and employees,
encourage high performance, promote accountability and assure that
employee interests are aligned with the interests of our
shareholders. The Compensation Committee is composed of three
directors, Messrs. Stephen, Shriver and Siegel, each of whom has
been determined by the board of directors to be independent within
the meaning of Section 803 of the NYSE American LLC Company Guide.
The Compensation Committee met three times during the fiscal year
ended September 30, 2019.
Use of Outside
Advisors. All compensation
decisions are made with consideration of the committee’s
guiding principles to provide competitive compensation for the
purpose of attracting and retaining talented executives and of
motivating our executives to achieve improved cbdMD executive
performance, which ultimately benefits our shareholders. The
committee has the sole authority to retain and terminate any advisors, including
independent counsel, compensation consultants and other advisors to
assist as needed, and has sole authority to approve the
advisors’ fees, which will be paid by us, and the other terms
and conditions of their engagement. The committee considers input
and recommendations from management, including our co-Chief
Executive Officers (who are not present during any committee
deliberations with respect to compensation) in connection with its
review of our compensation programs and its annual review of the
performance of the other executive officers. During fiscal 2019 the
committee engaged the services of an independent compensation
consultant, Willis Towers Watson, to provide it with an executive
pay review. The committee takes into consideration the
recommendations of the outside compensation consultant and our
co-Chief Executive Officers, but retains absolute discretion as to
whether to adopt such recommendations in whole or in part, as it
deems appropriate.
8
Corporate Governance and Nominating Committee
The
Corporate Governance and Nominating Committee:
●
assists
the board in selecting nominees for election to the
board;
●
monitor
the composition of the board;
●
develops
and recommends to the board, and annually reviews, a set of
effective corporate governance policies and procedures applicable
to our company; and
●
regularly
review the overall corporate governance of our company and
recommends improvements to the board as
necessary.
The
purpose of the Corporate Governance and Nominating Committee is to
assess the performance of the board and to make recommendations to
the board from time to time, or whenever it shall be called upon to
do so, regarding nominees for the board and to ensure our
compliance with appropriate corporate governance policies and
procedures. The Corporate Governance and Nominating Committee is
comprised of three directors, Messrs. Sellers, Ghiloni, and Morris,
each of whom have been determined by the board of directors to be
independent within the meaning of Section 803 of the NYSE American
LLC Company Guide. The Corporate Governance and Nominating
Committee met one time during fiscal 2019.
Shareholder nominations
Shareholders
who would like to propose a candidate to serve as a member of our
board of directors may do so by submitting the candidate’s
name, resume and biographical information to the attention of our
Corporate Secretary. All proposals for nomination received by the
Corporate Secretary will be presented to the Corporate Governance
and Nominating Committee for appropriate consideration. It is the
policy of the Corporate Governance and Nominating Committee to
consider director candidates recommended by shareholders who appear
to be qualified to serve on our board of directors. The Corporate
Governance and Nominating Committee may choose not to consider an
unsolicited recommendation if no vacancy exists on the board of
directors and the committee does not perceive a need to increase
the size of the board of directors. In order to avoid the
unnecessary use of the Corporate Governance and Nominating
Committee’s resources, the committee will consider only those
director candidates recommended in accordance with the procedures
set forth below. To submit a recommendation of a director candidate
to the Corporate Governance and Nominating Committee, a shareholder
should submit the following information in writing, addressed to
the Corporate Secretary of cbdMD at our main
office:
●
the
name and address of the person recommended as a director
candidate;
●
all
information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors
pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended;
●
the
written consent of the person being recommended as a director
candidate to be named in the proxy statement as a nominee and to
serve as a director if elected;
●
as to the person making the recommendation, the
name and address, as they appear on our books, of such person, and
number of shares of our common stock owned by such person;
provided,
however, that if the person is
not a registered holder of our common stock, the person should
submit his or her name and address along with a current written
statement from the record holder of the shares that reflects the
recommending person’s beneficial ownership of our common
stock; and
●
a
statement disclosing whether the person making the recommendation
is acting with or on behalf of any other person and, if applicable,
the identity of such person.
9
Code of Ethics and Conduct and Insider Trading
Policy
In
January 2017 we adopted a Code of Ethics and Conduct which applies
to our board of directors, our executive officers and our
employees. The Code of Ethics and Conduct outlines the broad
principles of ethical business conduct we adopted, covering subject
areas such as:
●
conflicts
of interest;
●
corporate
opportunities;
●
public
disclosure reporting;
●
confidentiality;
●
protection
of company assets;
●
health
and safety;
●
conflicts
of interest; and
●
compliance
with applicable laws.
A copy of our Code of Ethics and Conduct is
available on our website at www.cbdmd.com.
Additionally,
all of our directors, officers, employees and consultants are
subject to our Insider Trading Policy. Our Insider Trading Policy
prohibits the purchase, sale or trade of our securities with the
knowledge of material nonpublic information. In addition, our
Insider Trading Policy prohibits our employees, officers,
directors, and consultants from trading on a short-term basis,
engaging in a short sale of our securities, engaging in
transactions in puts, call or other derivatives tied to our
securities, engaging in hedging transactions, holding any of our
securities in a margin account or otherwise pledging our securities
as collateral for a loan. Any transactions by our directors,
officers, employees and consultants must be first pre-cleared by
Mr. Sumichrast, our co-Chief Executive Officer, or our Chief
Financial Officer in an effort to assist these individuals from
inadvertently violating our Insider Trading Policy. Our Insider
Trading Policy also fixes certain quarterly and event specific
blackout periods.
Compensation
of directors
Our management
directors do not receive separate compensation for their services
as members of our board of directors.
Independent Director Compensation Program
In
May 2019, after reviewing the results of an independent
compensation study on public company executive and board
compensation and upon recommendation of the Compensation Committee
of our board of directors, the board of directors adopted a new
compensation program for our independent directors and
non-management directors for the 2019 board term which began in
April 2019. The compensation plan provided that our independent
directors would be compensated as follows:
●
an
annual retainer of $35,000 and an option grant of 20,000
options;
●
an annual retainer for committee chairpersons of
$17,000 for the Audit Committee Chairman, $7,000 for the
Compensation Committee Chairman and $5,000 for the Corporate
Governance and Nominating
Committee Chairman; and
●
an
annual retainer for committee members of $8,500 for service on the
Audit Committee, $4,000 for service on the Compensation Committee
and $3,000 for service on the Corporate Governance and Nominating
Committee.
10
Fiscal 2019 Director Compensation
The
following table sets forth the compensation paid or earned for
fiscal 2019 by our directors.
|
Name
|
Fees
earned
or
paid
in
cash
($)
|
Stock
awards
($)
|
Option
awards
($)
(1)
|
Non-equity
incentive
plan
compensation
($)
|
Nonqualified
deferred
compensation
earnings
($)
|
All
other
compensation
($)
|
Total
($)
|
|
Scott G.
Stephen
|
38,500
|
-
|
93,740
|
-
|
-
|
-
|
132,240
|
|
Anthony K.
Shriver
|
37,000
|
-
|
93,740
|
-
|
-
|
-
|
130,740
|
|
Seymour G.
Siegel
|
45,500
|
-
|
93,740
|
-
|
-
|
-
|
139,240
|
|
Bakari
Sellers
|
41,750
|
-
|
93,740
|
-
|
-
|
-
|
135,490
|
|
Gregory C.
Morris
|
40,750
|
-
|
93,740
|
-
|
-
|
-
|
134,490
|
|
Peter J.
Ghiloni
|
36,500
|
-
|
93,740
|
-
|
-
|
-
|
130,340
|
|
William Raines
III
|
35,000
|
-
|
83,920
|
-
|
-
|
-
|
118,920
|
|
(1)
|
Represents
the grant date value of the options granted during the year,
determined in accordance with FASB ASC Topic 718. The assumptions
made in the valuations of the option awards are included in Note 10
of the notes to our consolidated financial statements appearing in
our 2019 10-K.
|
Compliance
with Section 16(a) of the Securities Exchange Act of
1934
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires
our executive officers and directors, and persons who beneficially
own more than 10% of a registered class of our equity securities to
file with the Securities and Exchange Commission initial statements
of beneficial ownership, reports of changes in ownership and annual
reports concerning their ownership of our common shares and other
equity securities, on Forms 3, 4 and 5 respectively. Executive
officers, directors and greater than 10% stockholders are required
by the Securities and Exchange Commission regulations to furnish us
with copies of all Section 16(a) reports they file. Based solely
upon a review of Forms 3 and 4 and amendments thereto furnished to
us under Rule 16a-3(d) of the Securities Exchange Act of 1934, as
amended, during 2019 and Forms 5 and amendments thereto furnished
to us with respect to fiscal 2019, as well as any written
representation from a reporting person that no Form 5 is required,
we are not aware that any officer, director or 10% or greater
shareholder failed to file on a timely basis, as disclosed in the
aforementioned forms, reports required by Section 16(a) of the
Securities Exchange Act of 1934, as amended, during fiscal
2019.
ITEM
11.
EXECUTIVE
COMPENSATION.
Summary
Compensation Table
The following table
summarizes all compensation recorded by us in each of the last two
completed fiscal years for:
●
all
individuals serving as our principal executive officer or acting in
a similar capacity during the fiscal year ended September 30,
2019;
●
our two
most highly compensated named executive officers at September 30,
2019 whose annual compensation exceeded $100,000;
and
●
up to
two additional individuals for whom disclosure would have been made
in this table but for the fact that the individual was not serving
as a named executive officer of our company at September 30,
2019.
11
The value
attributable to any option awards is computed in accordance with
FASB ASC Topic 718. The assumptions made in the valuations of the
option awards are included in Note 10 of the notes to our
consolidated financial statements appearing in our 2019
10-K.
|
Name
and principal position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
(1)
|
Option
Awards
($)
(1)
|
No
equity
incentive
plan
compensation
($)
|
Non-qualified
deferred
compensation
earnings
($)
|
All
other
compensation
($)
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
Martin A.
Sumichrast
|
2019
|
279,115
|
225,000
|
-
|
-
|
-
|
-
|
-
|
504,115
|
|
co-CEO
|
2018
|
232,500
|
240,000
|
-
|
-
|
-
|
-
|
-
|
472,500
|
|
|
|
|
|
|
|
|
|
|
|
|
R. Scott
Coffman
co-CEO
|
2019
|
132,231(2)
|
-
|
-
|
-
|
-
|
-
|
-
|
132,231
|
|
|
|
|
|
|
|
|
|
|
|
|
Caryn
Dunayer
President
|
2019
|
105,000(2)
|
40,000
|
-
|
-
|
-
|
-
|
-
|
145,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark S.
Elliott
|
2019
|
207,345
|
112,500
|
-
|
-
|
-
|
-
|
-
|
319,845
|
|
CFO and
COO
|
2018
|
165,000
|
100,000
|
-
|
519,000
|
-
|
-
|
-
|
784,000
|
———————
|
(1)
|
Represents
the grant date value of the options and awards granted during the
years presented, determined in accordance with FASB ASC Topic 718.
The assumptions made in the valuations of the awards are included
in Notes 10 and 11 of the notes to our consolidated financial
statements appearing in our 2019 10-K.
|
|
|
|
|
(2)
|
Represents
compensation from December 18, 2018 following the closing of the
mergers with Cure Based Development, LLC through September 30,
2019.
|
Executive Employment Agreements
In
January 2018 we entered into employment agreements with each of Mr.
Sumichrast and Mr. Elliott, the terms of which are substantially
similar, including:
●
the
term of each agreement is for one year and it may be extended for
additional one year periods at our option upon 60 days’
notice;
●
the
executive is entitled to a discretion bonus as determined by our
board of directors;
●
the
executive is entitled to participate in all benefit programs we
offer our employees, and such amount of paid vacation as is
consistent with his position and length of service to
us;
●
the
agreement will terminate upon his death or disability and may be
terminated by us with or without cause, subject to cure periods, or
by the executive at his discretion. The executive is not entitled
to any severance or similar benefits upon a termination of the
agreement; and
●
the
agreement contains customary non-compete, confidentiality and
indemnification provisions.
12
On
September 6, 2018 we entered into new employment agreements with
each of Mr. Sumichrast and Mr. Elliott. In October 2018, after
completion of a third party public company executive review, the
board adjusted the base compensation of the agreements. In February
2019, the board also approved discretionary bonuses related to
successful merger activity for the executives. The changes were as
follows:
Mr.
Sumichrast:
●
annual
base salary changed from $270,000 to $280,000;
and
●
a
discretionary bonus award up to $385,000 based on future revenue
targets.
Mr.
Elliott:
●
annual
base salary changed from $180,000 to $210,000;
and
●
a
discretionary bonus award of $175,000 based on future revenue
targets.
In
December 2018 we entered into an employment agreement with Mr.
Coffman.
All
executive agreements have base terms of which are substantially
similar, described below:
●
the initial term of each agreement is for three years, except for
Mr. Coffman which is for five years, and they may be extended for
additional one year terms by written notice by us at least 60 days
before the expiration of the then current term;
●
Annual base salary for Mr. Coffman set at
$180,000;
●
each executive is eligible for a performance bonus, payable in a
combination of cash and awards of common stock, and the performance
bonus will be based upon his relative achievement of annual
performance goals established by our board of directors upon
recommendation of the compensation committee, with input from
senior executive management. As of the date of this prospectus the
board of directors has not established the performance goals. Any
performance bonus stock award will be granted to the executive
pursuant to the terms and conditions of our 2015 Equity
Compensation Plan or such other compensation plan as may be adopted
by our company and our shareholders. In addition, the compensation
committee of the board of directors will review each executive's
performance on an annual basis, and in connection with such annual
review, the executive may be entitled to receive an annual
discretionary bonus in such amount as may be determined by the
board of directors, upon recommendation of the compensation
committee, in its sole discretion;
●
each executive is also entitled to participate in all benefit
programs we offer our employees, reimbursement for business
expenses and such amount of paid vacation as is consistent with his
position and length of service to us;
●
we may terminate each agreement for "cause", upon
the executive's death or disability, or without cause, and the
executive may terminate the agreement without cause. In each of the
employment agreements, “cause” is defined to
mean:
●
committing
or participating in an injurious and intentional act of fraud,
gross neglect, misrepresentation, embezzlement or dishonesty
against us;
●
committing
or participating in any other injurious act or omission wantonly,
willfully, recklessly or in a manner which was grossly negligent
against us;
●
engaging
in a criminal enterprise involving moral
turpitude;
●
conviction
for a felony under the laws of the United States or any
state;
●
violation
of any Federal or state securities laws, rules or regulations, or
any rules or regulations of any stock exchange or other market on
which our securities may be listed or quoted for
trading;
●
violation
of our corporate governance policies which have been formally
adopted by the board of directors; or
●
any
assignment of the agreement in violation of the terms of the
agreement.
13
●
If we terminate the agreement for cause, or if it terminates upon
the executive’s death, or if the executive voluntarily
terminates the agreement, neither the executive nor his estate (as
the case may be) is entitled to any severance or other benefits
following the date of termination. If the agreement is terminated
upon his disability, we are obligated to pay him his base salary
for three months. If we terminate the agreement without cause or by
a "constructive termination" of the agreement, we are obligated to
pay him his base salary and provide the benefits he would have
otherwise been entitled to for the balance of the then current term
of the agreement. Constructive termination is defined under the
agreement as the occurrence of one or more of the following events
without the express written consent of the executive: (1) a
material breach of the agreement by our company; (2) failure by a
successor company to assume the obligations under the agreement;
and/or (3) a material change in the executive's duties and
responsibilities as described under the
agreement.
●
in the event of a “change of control” of our company,
if the executive's employment is terminated by us without cause
within two years of the date of the change of control, or in the 90
days prior to the change of control at the request of the acquiror,
we are obligated to pay the executive a lump sum payment equal to
the greater of (1) 1.5 times his base salary or (2) all of his base
salary remaining to be paid during the initial term, plus all
unvested stock options and restricted stock grants will immediately
vest and remain exercisable for twelve months from the date of
termination. “ Change of control” is defined as
mean a change of control
of a nature that would be required to
be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934, as
amended, whether or not we are in fact required to comply with that
regulation, provided that, without limitation, such a change in
control shall be deemed to have occurred if:
●
any
person, other than a trustee or other fiduciary holding securities
under an employee benefit plan of our company or a corporation
owned, directly or indirectly, by our shareholders in substantially
the same proportions as their ownership of our stock, is or becomes
the beneficial owner, directly or indirectly, of our securities
representing more than 50% of the combined voting power of our then
outstanding securities;
●
during
any period of two consecutive years (not including any period prior
to the execution of the employment agreement), individuals who at
the beginning of such period constitute the board of directors and
any new director (other than a director designated by a person who
has entered into an agreement with us to effect a certain
transactions) whose election by the board of directors or
nomination for election by our shareholder’s was approved by
a vote of at least two-thirds of the directors then still in office
who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved,
cease for any reason to constitute a majority;
●
we
enter into an agreement, the consummation of which would result in
the occurrence of a change in control of our
company;
●
our
shareholders approve a merger or consolidation of our company with
any other corporation, other than a merger or consolidation which
would result in our voting securities outstanding immediately prior
to it continuing to represent (either by remaining outstanding or
by being converted into voting securities of the surviving entity)
of more than 50% of the combined voting power of the voting
securities our company or such surviving entity outstanding
immediately after such merger or consolidation;
or
●
our
shareholders approve a plan of complete liquidation of our company
or an agreement for the sale or disposition by us of all or
substantially all of our assets.
●
the
agreement contains customary non-compete, confidentiality and
indemnification provisions; provided, however, that in the event we
terminate the agreement without cause or if it terminates upon a
change of control, the executive is no longer subject to the
non-compete provisions of the agreement.
In December 2018
our CBDI subsidiary entered into a three year employment agreement
with Ms. Dunayer. Under the terms of the agreement, we agreed to
pay her an initial annual base salary of $125,000 and she is
entitled to a discretionary bonus at the sole determination of the
Compensation Committee of our board of directors, as well as
participation in benefit programs we offer our employees and paid
vacation. The agreement may be terminated by us in the event of her
death or disability, for cause (as defined in the agreement), or by
Ms. Dunayer without cause. The agreement contains customary
confidentiality, non-compete, and indemnification
provisions.
14
Outstanding
equity awards at year end
The following table
provides information concerning unexercised options, stock that has
not vested and equity incentive plan awards for each named
executive officer outstanding as of September 30,
2019.
|
|
OPTION
AWARDS
|
|
STOCK
AWARDS
|
|||||||
|
Name
|
Number
of securities underlying unexercised options
(#)
exercisable
|
Number
of securities underlying unexercised options
(#)
unexercisable
|
Equity
incentive plan awards: Number of securities underlying unexercised
unearned options
(#)
|
Option
exercise price
($)
|
Option
expiration date
|
Number
of shares or units of stock that have not vested
(#)
|
Market
value of shares or units of stock that have not vested
($)
|
Equity
incentive plan awards: Number of unearned shares, units or other
rights that have not vested (#)
|
Equity
incentive plan awards: Market or payout value of unearned shares,
units or other rights that have not vested (#)
|
|
|
Martin A.
Sumichrast
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R. Scott
Coffman
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark S.
Elliott
|
100,000
|
|
|
7.50
|
|
1/1/23
|
|
|
|
|
|
|
100,000
|
|
|
4.00
|
|
5/1/24
|
|
|
|
|
|
|
150,000
|
|
|
4.78
|
|
5/29/28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Caryn
Dunayer
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Our
equity compensation plans
Information
regarding the material terms of our equity compensation plans is
contained in Note 11 to the notes to the audited consolidated
financial statements appearing in the 2019
10-K.
15
ITEM
12.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS.
At
January 20, 2020, we had 46,177,856 shares of our common stock
issued and outstanding. The following table sets forth information
known to us as of January 20, 2020 relating to the beneficial
ownership of shares of our common stock by:
●
each
person who is known by us to be the beneficial owner of more than
5% of our outstanding common stock;
●
each
director and nominee;
●
each
named executive officer; and
●
all
named executive officers and directors as a
group.
Unless otherwise
indicated, the address of each beneficial owner in the table set
forth below is care of 8845 Red Pak Blvd, Charlotte, NC 28217. We
believe that all persons, unless otherwise noted, named in the
table have sole voting and investment power with respect to all
shares of our common stock shown as being owned by them. Under
securities laws, a person is considered to be the beneficial owner
of securities owned by him (or certain persons whose ownership is
attributed to him) and that can be acquired by him within 60 days
from January 20, 2020, including upon the exercise of options,
warrants or convertible securities. We determine a beneficial
owner’s percentage ownership by assuming that options,
warrants or convertible securities that are held by him, but not
those held by any other person, and which are exercisable within 60
days of the that date, have been exercised or
converted.
|
Name
of Beneficial Owner
|
No.
of Shares Beneficially Owned
|
% of Class
|
|
|
|
|
|
Martin A.
Sumichrast (1)(9)
|
442,266
|
*
|
|
R. Scott Coffman
(2)(9)
|
3,855,666
|
8.3%
|
|
Caryn Dunayer
(3)(9)
|
300,000
|
*
|
|
Mark S. Elliott
(4)
|
396,680
|
*
|
|
Anthony K. Shriver
(5)(6)
|
154,500
|
*
|
|
Seymour G. Siegel
(6)(9)
|
29,531
|
*
|
|
Bakari Sellers
(6)
|
39,531
|
*
|
|
Gregory C. Morris
(6)
|
44,531
|
*
|
|
Peter J. Ghiloni
(7)
|
295,000
|
*
|
|
Scott G. Stephen
(7)
|
41,052
|
*
|
|
William F. Raines,
III (7)(8)
|
133,924
|
*
|
|
CBD Holding, LLC
(9)
|
8,750,000
|
19.0%
|
|
All officers and
directors as a group (eleven persons)
(1)(2)(3)(4)(5)(6)(7)(8)(9)
|
14,482,681
|
31.0%
|
|
Justice Family
Office, LLC (9)(10)
|
1,516,400
|
3.3%
|
|
*
Less
than 1%
|
16
|
(1)
|
The
number of shares of our common stock owned by Mr. Sumichrast
includes (a) 395,600 shares owned of record by SFT1, LLC, and (b)
46,666 shares underlying a vested restricted stock award Mr.
Sumichrast has voting and dispositive control over securities held
of record by SFT1, LLC. Mr. Sumichrast disclaims beneficial
ownership of the securities held of record by this entitiy except
to the extent of his pecuniary interest therein. The number of
shares of our common stock owned by Mr. Sumichrast excludes 93,334
shares underlying an unvested restricted stock award. See footnote
9.
|
|
|
|
|
|
|
(2)
|
The number of
shares of our common stock owned by Mr. Coffman includes (a)
125,000 shares held directly by him, (b) 3,684,000 shares owned by
Edge of Business, LLC, and (c) 46,666 shares underlying a vested
restricted stock award. Mr. Coffman holds voting and dispositive
control over securities held of record by Edge of Business LLC. Mr.
Coffman disclaims beneficial ownership of the securities held of
record by each of these entities except to the extent of his
pecuniary interest therein. The number of shares owned by Mr.
Coffman excludes 93,334 shares underlying an unvested restricted
stock award. See footnote 9.
|
|
|
|
|
|
|
(3)
|
The number of
shares of our common stock beneficially owned by Ms. Dunayer
includes 300,000 shares owned by BCEZ Investments, LLC. Ms. Dunayer
holds voting and dispositive control over securities held of record
by BCEZ Investments LLC. Ms. Dunayer disclaims beneficial ownership
of such securities except to the extent of her pecuniary interest
therein. See footnote 9.
|
|
|
|
|
|
|
(4)
|
The
number of shares of our common stock beneficially owned by Mr.
Elliott includes (a) 1,680 shares owned of record by his
spouse’s retirement account and (b) 350,000 shares underlying
vested stock options.
|
|
|
|
|
|
|
(5)
|
The number of
shares of our common stock beneficially owned by Mr. Shriver
includes 50,000 shares held of record by Best Buddies®
International. Mr. Shriver has voting and dispositive control over
securities held of record by Best Buddies® International. He
disclaims beneficial ownership of such securities except to the
extent of his pecuniary interest therein.
|
|
|
|
|
|
|
(6)
|
The number of
shares of our common stock beneficially owned includes 27,000
shares underlying a vested option.
|
|
|
|
|
|
|
(7)
|
The number of
shares of our common stock beneficially owned includes 20,000
shares underlying a vested option.
|
|
|
|
|
|
|
(8)
|
The number of
shares of our common stock beneficially owned by Mr. Raines
includes his pecuniary interest in shares owned of record by Board
Investor Group II LLC.
|
|
|
|
|
|
|
(9)
|
The number of shares owned of our
common stock owned of record by CBD Holding LLC
(“CBDH”) includes 8,570,000 shares issued to it in
April 2019 as partial compensation under the terms of the mergers
with Cure Based Development, LLC which closed in December 2018. Of
this amount, CBDH has unrestricted voting rights to 2,187,500
shares. The remaining 6,562,500 shares of common stock held by CBDH
are subject to a Voting Proxy Agreement dated December 20, 2018
(the "Proxy Agreement") held by the independent chairman of the
Audit Committee of our board of directors pursuant to which he
holds voting rights over those shares until the unrestricted voting
rights vest and will vote such shares on any matter brought before
the our shareholders in accordance with the recommendation of our
board of directors. Currently Mr. Siegel serves as the independent
chairman of the Audit Committee. The unrestricted voting rights to
those shares vest as follows: (i) 2,187,500 shares will vest on
December 20, 2020; (ii) an additional 2,187,500 shares will vest on
June 30, 2022; and (iii) the remaining 2,187,500 shares will vest
on December 20, 2023. The number of shares owned by CBDH excludes
up to 15,250,000 shares which may be issued to it upon the
achievement of the revenue thresholds under the earnout provisions
of the Merger Agreement for the mergers with Cure Based
Development, LLC. Coffman Management LLC is the manager of CBDH and
Mr. R. Scott Coffman is the manager of Coffman Management LLC. In
such position, Mr. Coffman holds voting and dispositive control
over securities held of record by CBDH except to the extent limited
by the Proxy Agreement. CBDH’s members include, through their
affiliates, Mr. Coffman (65.65%), Mr. Sumichrast (9.0%), Ms.
Dunayer (5%) and Mrs. Shannon Justice (10.84%), among others. Mrs.
Shannon Justice is the spouse of Mr. Todd Justice. Mr. Coffman
disclaims beneficial ownership of the securities held of record by
CBDH except to the extent of his pecuniary interest therein. See
footnote 10.
|
|
|
|
|
|
|
(10)
|
The number of
shares of our common stock owned by the Justice Family Office, LLC
is based upon the Schedule 13G/A filed by it on May 1, 2019. Mrs.
Shannon Justice has disclosed to us that she has voting and
dispositive control over securities held of record by Justice
Family Office, LLC. Mr. Todd Justice, a consultant to our company,
is Mrs. Justice’s spouse. See Item 10. Directors, Officers
and Corporate Governance – Consultant. Justice Family Office,
LLC’s address is 8712 Longview Club Drive, Waxhaw, NC 28173
pursuant to the Schedule 13G/A. See footnote 9.
|
|
17
Securities
Authorized for Issuance under Equity Compensation
Plans
The following table
sets forth securities authorized for issuance under any equity
compensation plans approved by our shareholders as well as any
equity compensation plans not approved by our shareholders as of
September 30, 2019.
|
Plan
category
|
Number
of securities to be issued upon exercise of outstanding options,
warrants and rights
|
Weighted
average exercise price of outstanding options, warrants and rights
($)
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in
column
|
|
|
|
|
|
|
Plans approved by
our shareholders:
|
|
|
|
|
2015 Equity
Compensation Plan
|
1,219,650
|
6.07
|
962,955
|
|
Plans not approved
by shareholders
|
-
|
-
|
-
|
Please see Note 11
of the notes to our audited consolidated financial statements
appearing in our 2019 10-K for more information on our 2015 Equity
Compensation Plan.
ITEM
13.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
In
December 20, 2018, with the closing of the mergers with Cure Based
Development, LLC we recognized the following related party
transactions which happened prior to the
mergers:
●
Cure
Based Development, LLC received $90,000 from Verdure Holdings LLC
for future orders of the company’s products. Verdure Holdings
LLC is an affiliate of the Mr. Coffman. This amount was been
adjusted based on sales to Verdure Holdings LLC subsequent to the
mergers and is recorded as customer deposits - related party in our
financial statements for 2019 appearing in our 2019
10-K;
●
Cure
Based Development, LLC entered a lease for office space, which also
provided administrative and IT services, from an affiliate of Mr.
Coffman. The lease was a month to month lease for $9,166 per month
and ended in September 2019; and
●
Cure
Based Development, LLC leased its manufacturing facility from an
entity partially owned by an individual who received shares of our
common stock under the terms of the mergers and now has a
contractual right to receive shares of our common stock under the
earnout terms of the mergers. The current lease was entered into on
December 15, 2018 and ends December 15, 2021 and has been amended
at an annual base rent rate of $199,200 allowing for a 3% annual
increase. In addition, common area maintenance rent is set at
$25,200 annually.
Since February 2019, Mr. Todd Justice has provided
consulting and advisory services to us as disclosed earlier in this
report. We have been advised he provided similar services to Cure
Based Development, LLC prior to the closing of the mergers. An
entity affiliated with Mr. Justice is a shareholder of our company,
and his spouse is a member of CBDH. See Item 10. Directors,
Executive Officers and Corporate Governance and Item 12.
Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.
Our
Audit Committee will review any transaction in which we or any of
our directors, nominees for director, executive officers or holders
of more than 5% of our common stock or any of their immediate
family members, is, was or is proposed to be a participant and the
amount involved exceeds the lesser of $120,000 or 1% of our average
total assets at year-end for our last two completed fiscal years.
Our management is responsible for determining whether a transaction
contains the characteristics described above requiring review by
the Audit Committee of our board of directors.
Director
independence
Messrs.
Shriver, Siegel, Sellers, Morris, Stephen, Ghiloni and Raines are
each considered an independent director within the meaning of
Section 803 of the NYSE American LLC Company
Guide.
18
ITEM
14.
PRINCIPAL
ACCOUNTING FEES AND SERVICES.
The
following table shows the fees that were billed for the audit and
other services provided for the fiscal years ended September 30,
2019 and 2018:
|
|
2019
|
2018
|
|
|
|
|
|
Audit
Fees
|
$276,250
|
$136,750
|
|
Audit-Related
Fees
|
127,306
|
28,800
|
|
Tax
Fees
|
30,650
|
24,525
|
|
All Other
Fees
|
80,272
|
54,850
|
|
Total
|
$514,478
|
$244,925
|
Audit Fees — This category includes the audit of our
annual financial statements and services that are normally provided
by the independent registered public accounting firm in connection
with engagements for those fiscal years. This category also
includes advice on audit and accounting matters that arose during,
or as a result of, the audit or the review of interim financial
statements.
Audit-Related Fees
— This category consists of
assurance and related services by the independent registered public
accounting firm that are reasonably related to the performance of
the audit or review of our financial statements and are not
reported above under “Audit Fees.” The services for the
fees disclosed under this category include consultation regarding
our correspondence with the Securities and Exchange Commission,
other SEC filings and other accounting
consulting.
Tax Fees — This category consists of professional
services rendered by our independent registered public accounting
firm for tax compliance and tax advice. The services for the fees
disclosed under this category include tax return preparation and
technical tax advice.
All Other Fees
— This category consists of fees
for other miscellaneous items.
Our
board of directors has adopted a procedure for pre-approval of all
fees charged by our independent registered public accounting firm.
Under the procedure, the Audit Committee of the board approves the
engagement letter with respect to audit, tax and review services.
Other fees are subject to pre-approval by the Audit Committee of
the board. The audit and tax fees paid to the auditors with respect
to the fiscal 2019 and fiscal 2018 were approved by the Audit
Committee of the board of directors.
19
PART IV
ITEM
15.
EXHIBITS,
FINANCIAL STATEMENT SCHEDULES.
(a)
The following
documents are filed as part of this report:
(3)
Exhibits
|
|
|
Incorporated by Reference
|
Filed or
Furnished
Herewith
|
|
||||
|
No.
|
Exhibit Description
|
Form
|
Date Filed
|
Number
|
|
|||
|
Rule
13a-14(a)/15d-14(a) Certification of co-Chief Executive
Officer
|
|
|
|
Filed
|
|
|||
|
Rule
13a-14(a)/15d-14(a) Certification of co-Chief Executive
Officer
|
|
|
|
Filed
|
|
|||
|
Rule
13a-14(a)/15d-14(a) Certification of Chief Financial
Officer
|
|
|
|
Filed
|
|
|||
ITEM
16. FORM 10-K SUMMARY.
None.
20
SIGNATURES
Pursuant to the
requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly
authorized.
|
|
|
||
|
Date:
January 24, 2020
|
cbdMD, Inc.
|
||
|
|
|
|
|
|
|
By:
|
/s/
Martin A. Sumichrast
|
|
|
|
|
Martin A. Sumichrast
|
|
|
|
|
Co-Chief Executive Officer, (co-Principal Executive
Officer)
|
|
|
|
|
||
|
Date:
January 24, 2020
|
cbdMD, Inc.
|
||
|
|
|
||
|
|
By:
|
/s/
R. Scott Coffman
|
|
|
|
R. Scott Coffman
|
||
|
|
Co-Chief Executive
Officer, (co-Principal Executive Officer)
|
||
|
|
|
||
|
Date:
January 24, 2020
|
cbdMD, Inc.
|
||
|
|
|
|
|
|
|
By:
|
/s/
Mark S. Elliott
|
|
|
|
|
Mark S. Elliott
|
|
|
|
|
Chief
Financial Officer, (Principal Accounting and Financial
Officer)
|
|
21
EXHIBIT 31.4
Rule 13a-14(a)/15d-14(a) Certification
I, Martin A. Sumichrast, certify that:
|
1.
|
I have reviewed this Annual Report on Form 10-K/A for the year
ended September 30, 2019 of cbdMD, Inc.; and
|
|
|||
|
2.
|
Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this report.
|
|
|
||
|
|
|
|
|||
|
Dated: January 24, 2020
|
|
/s/ Martin A.
Sumichrast
Martin A. Sumichrast, co-Chief Executive Officer, co-principal
executive officer
|
|||
EXHIBIT 31.5
Rule 13a-14(a)/15d-14(a) Certification
I, R. Scott Coffman, certify that:
|
1.
|
I have reviewed this Annual Report on Form 10-K/A for the year
ended September 30, 2019 of cbdMD, Inc.; and
|
|
|||
|
2.
|
Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this report.
|
|
|
||
|
|
|
|
|||
|
Dated: January 24, 2020
|
|
/s/ R. Scott
Coffman
R. Scott Coffman, co-Chief Executive Officer, co-principal
executive officer
|
|||
EXHIBIT 31.6
Rule 13a-14(a)/15d-14(a) Certification
I, Mark S. Elliott, certify that:
|
1.
|
I have reviewed this Annual Report on Form 10-K/A for the year
ended September 30, 2019 of cbdMD, Inc.; and
|
|||
|
2.
|
Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this report.
|
|
||
|
|
|
|
|
|
|
Dated: January 24, 2020
|
|
/s/ Mark S.
Elliott
Mark S. Elliott, Chief Financial Officer, principal financial and
accounting officer
|
|
|