Business Context and Reporting Period
This Form 8-K Current Report was filed by cbdMD, Inc. on April 19, 2021. The filing reports on the execution of amended executive employment agreements with the company's co-Chief Executive Officers. The company is incorporated in North Carolina and trades on the NYSE American under the symbols YCBD and YCBDpA.
Key Financial Metrics
This filing does not report revenue, profit, cash flow, margins, debt, or liquidity metrics. It focuses exclusively on executive compensation terms and performance targets.
Material Changes and Executive Compensation
On April 19, 2021, the company entered into Amended and Restated Executive Employment Agreements with Martin A. Sumichrast (Chairman and co-CEO) and R. Scott Coffman (co-CEO and President). Key changes include:
- Term Extension: Both agreements extended through December 31, 2023.
- Base Salary Increases:
- Through Dec 31, 2021: Increased from $335,000 to $370,000 annually.
- Jan 1, 2022 through Dec 31, 2022: Increased to $425,000 annually.
- Jan 1, 2023 through Dec 31, 2023: Increased to $500,000 annually.
- Equity Grants (Sumichrast Only):
- Restricted Stock: 750,000 shares vesting 250,000 annually on Jan 1, 2022, 2023, and 2024.
- Stock Options: 750,000 options at an exercise price of $3.39 per share, vesting 250,000 annually on Jan 1, 2022, 2023, and 2024.
- Performance Bonus: Both executives are eligible for an annual cash bonus of up to 50% of base salary contingent on Total Net Sales targets.
- Key Man Insurance (Sumichrast Only): The company will maintain $10,000,000 in life insurance coverage. The company is the beneficiary for the first $3,000,000; the estate is the beneficiary for the remaining $7,000,000.
Performance Targets and Outlook
The amended agreements establish specific Total Net Sales thresholds required to trigger the annual performance bonuses:
| Performance Period | Minimum Total Net Sales Required |
|---|---|
| October 1, 2020 through September 30, 2021 | $60,000,000 |
| October 1, 2021 through September 30, 2022 | $80,000,000 |
| October 1, 2022 through September 30, 2023 | $100,000,000 |
These targets serve as implicit management guidance for the company's revenue growth expectations over the next three fiscal periods.
Investor Verification Checklist
- Verify the actual Total Net Sales reported for the period ending September 30, 2021, to determine if the $60 million bonus threshold was met.
- Review the full text of Exhibits 10.1 and 10.2 for specific definitions of "Total Net Sales" and any clawback provisions.
- Monitor future filings to confirm the vesting of the 750,000 restricted shares and stock options granted to Martin Sumichrast.
- Assess the impact of the increased fixed salary costs ($170,000 annual increase per executive by 2023) on the company's operating expenses.