Business Context and Reporting Period
This Form 8-K filing by cbdMD, Inc. (YCBD) reports a material event occurring on December 31, 2024, with the report filed on January 3, 2025. The Company is incorporated in North Carolina and its securities trade on the NYSE American. The filing addresses a failure to meet specific continued listing standards regarding stockholders' equity.
Key Financial Metrics
- Stockholders' Equity: $1,963,417 as of September 30, 2024.
- Preferred Stock Liability: $4.67 million in outstanding Series A Preferred Stock and accrued dividends as of September 30, 2024.
- Profitability Status: The Company reported losses from continuing operations and/or net losses in four of its five most recent fiscal years ended September 30, 2024.
- Revenue, Cash Flow, and Debt: The filing text does not provide specific values for revenue, operating cash flow, or total debt beyond the preferred stock liability.
Material Changes and Listing Status
On December 31, 2024, the NYSE American notified cbdMD, Inc. that it is no longer in compliance with Section 1003(a)(i) of the Company Guide. This standard requires listed companies with losses in two of their three most recent fiscal years to maintain stockholders' equity of at least $2 million. The Company's equity of approximately $1.96 million falls below this threshold.
Additionally, the Company remains subject to a prior compliance plan (accepted August 20, 2024) to regain compliance with the $4 million equity standard (Section 1003(a)(ii)) by December 5, 2025. Failure to meet these standards or make consistent progress may result in delisting.
Outlook, Risks, and Management Commentary
Management Strategy: The Company intends to achieve compliance through future transactions, specifically seeking shareholder approval to convert its outstanding Series A Preferred Stock and accrued dividends into Common Stock. This conversion would reclassify the $4.67 million liability to equity, potentially increasing stockholders' equity.
Current Trading Status: The Common Stock (YCBD) and Preferred Stock (YCBD-PA) will continue to trade on the NYSE American but will carry a ".BC" designation indicating "below compliance."
Risks and Contingencies:
- Delisting Risk: If compliance is not achieved by December 5, 2025, the Company faces delisting procedures.
- Liquidity and Financing: Delisting could reduce stock liquidity, lower market prices, and limit the ability to raise equity financing or access public capital markets.
- Default Trigger: Delisting could trigger an event of default under the Company's outstanding Senior Secured Convertible Promissory Notes.
- Uncertainty: Management states there can be no assurance that compliance will be achieved within the required timeframe.
Investor Verification Checklist
- Verify the current stockholders' equity balance in the most recent 10-Q or 10-K to confirm the deficit against the $2 million threshold.
- Review the terms of the Senior Secured Convertible Promissory Notes to understand the specific default triggers related to delisting.
- Monitor upcoming shareholder meetings for proposals regarding the conversion of Series A Preferred Stock.
- Check the NYSE American website for updates on the Company's compliance plan progress and any further notices.
- Assess the impact of the ".BC" trading designation on the liquidity and bid-ask spread of YCBD and YCBD-PA.