Business Context and Reporting Period
This Form 8-K is a current report filed by cbdMD, Inc. on May 14, 2021. The filing addresses Item 3.02 regarding unregistered sales of equity securities. The company is an emerging growth company incorporated in North Carolina, with its principal executive offices in Charlotte, NC.
Key Financial Metrics and Transaction Details
The filing does not provide comprehensive financial statements (revenue, profit, cash flow, or debt) for the reporting period. However, it discloses specific transaction metrics related to an earnout agreement:
- Triggering Revenue: Net revenues for the quarter ended March 31, 2021, were $11,798,611.
- Shares Issued: An aggregate of 562,278 shares of common stock were issued on May 14, 2021.
- Recipients: Shares were issued to members of CBD Holding, LLC (CBDH), including affiliates of executive officers Martin A. Sumichrast and R. Scott Coffman.
- Regulatory Status: The issuance was exempt from registration under Section 4(a)(2) of the Securities Act of 1933.
Material Changes and Context
The issuance stems from the 2018 Merger Agreement with Cure Based Development, LLC. Key developments include:
- Amendment to Earnout Terms: On March 31, 2021, the company entered into Addendum No. 1 to the Merger Agreement. This changed the measurement period for the third earnout marking period from a cumulative 18-month basis to a quarterly basis for each of the six fiscal quarters within that period.
- Historical Issuances: Prior to this filing, the company issued 5,127,792 shares in February 2020 and 3,348,520 shares in March 2021 based on previous earnout periods.
- Total Potential Earnout: The original agreement allowed for up to 15,250,000 additional shares based on aggregate net revenue criteria over 60 months.
Guidance, Outlook, and Risks
The filing does not contain forward-looking guidance, management commentary on future operations, or specific risk factors beyond the standard disclosure of the equity issuance. The primary contingency noted is the satisfaction of future quarterly net revenue targets within the amended third marking period to trigger further share issuances.
Investor Verification Checklist
- Verify the impact of the 562,278 share issuance on total outstanding shares and potential dilution.
- Confirm the specific quarterly net revenue targets required for the remaining five quarters of the third marking period under Addendum No. 1.
- Review the total number of earnout shares issued to date versus the 15,250,000 share cap.
- Check subsequent filings for the actual net revenue figures for the quarters following March 31, 2021, to determine if further earnout shares will be issued.