CBDMD, INC.
SCHEDULE 14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934
(Amendment
No. )
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by the Registrant
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by a party other than the Registrant
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Check
the appropriate box:
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permitted by Rule 14a-6(e)(2))
☒
Definitive Proxy Statement
☐
Definitive Additional Materials
☐
Soliciting Material Under Rule
14(a)(12)
cbdMD, Inc.
(Name
of Registrant as Specified in Its Charter)
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(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
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of Filing Fee (Check the appropriate box):
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14a-6(i)(4) and 0-11.
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applies:
3. Per
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which
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Check box if any part of the fee is offset as
provided by Exchange Act Rule 0-11(a)(2) and identify the filing
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previous filing by registration statement number, or the Form or
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Filed:
NOTICE OF 2020 ANNUAL MEETING OF SHAREHOLDERS
____________________
TO BE HELD ON APRIL 23, 2020
We will
hold the 2020 annual meeting of shareholders of cbdMD, Inc. on
Thursday, April 23, 2020 at 8845 Red Oak Boulevard, Charlotte, NC
28217 beginning at 1:00 p.m. local time. At the annual meeting you
will be asked to vote on the following matters:
●
the election of six
directors;
●
the ratification of
the appointment of
Cherry Bekaert
LLP
as our independent registered public accounting firm;
and
●
any other business
as my properly come before the meeting.
The
board of directors has fixed the close of business on March 10,
2020 as the record date for determining the common shareholders
that are entitled to notice of and to vote at the 2020 annual
meeting of shareholders and any adjournments thereof.
All
common shareholders are invited to attend the annual meeting in
person. Your vote is important regardless of the number of shares
you own. Please vote your shares by proxy over the Internet or by
mail, by telephone or by facsimile.
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By
order of the board of directors
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Charlotte,
NC
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/s/
Martin A. Sumichrast
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March
11, 2020
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Martin
A. Sumichrast
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Chairman
and co-Chief Executive Officer
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Important Notice Regarding the
Availability of Proxy Materials for the Annual Meeting to be Held
on April 23, 2020
: This proxy statement, along with our
Annual Report on Form 10-K for the fiscal year ended September 30,
2019, as amended, are available free of charge on our website
www.cbdmd.com
and through the SEC’s website
www.sec.gov
.
i
CBDMD, INC.
PROXY STATEMENT
2020 ANNUAL MEETING OF SHAREHOLDERS
TABLE OF CONTENTS
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Page No.
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General
Information
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1
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Proposal
1 - Election of directors
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3
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Proposal
2 - Ratification of appointment of
Cherry Bekaert LLP
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5
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Other
Matters
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6
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Dissenter’s
Rights
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6
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Corporate
Governance
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6
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Executive
Compensation
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12
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Principal
Shareholders
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17
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Certain
Relationships and Related Transactions
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18
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Shareholder
Proposals to be Presented at the Next Annual Meeting
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19
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Availability
of Annual Report on Form 10-K
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19
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Shareholders
Sharing the Same Last Name and Address
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19
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Where
You Can Find More Information
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20
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
This proxy statement contains
“forward-looking statements” within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. These
statements are based on our current expectations and involve risks
and uncertainties which may cause results to differ materially from
those set forth in the statements. The forward-looking statements
may include statements regarding actions to be taken in the future.
We undertake no obligation to publicly update any forward-looking
statement, whether as a result of new information, future events or
otherwise. Forward-looking statements should be evaluated together
with the many uncertainties that affect our business, particularly
those set forth in the section on forward-looking statements and in
the risk factors in Item 1.A of our Annual Report on Form 10-K for
the fiscal year ended September 30, 2019 as filed with the
Securities and Exchange Commission on December 18, 2019, as amended
on January 24, 2020 (collectively, the “
2019
10-K
”).
Unless the context otherwise indicates, when used
in this proxy statement, the terms "cbdMD,” “we,”
“us, “our” and similar terms refer to cbdMD,
Inc., a North Carolina corporation, and our subsidiaries CBD
Industries LLC, a North Carolina limited liability company formerly
known as cbdMD LLC (“
CBDI
”)
and Paw CBD, Inc., a North Carolina corporation
(“
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 fiscal year ending
September 30, 2020.
ii
Shareholders Should Read the Entire Proxy Statement
Carefully Prior to Returning Their Proxies
PROXY STATEMENT
FOR
2020 ANNUAL MEETING OF SHAREHOLDERS
GENERAL INFORMATION
The
accompanying proxy is solicited by the board of directors of cbdMD,
Inc. for use at our 2020 annual meeting of shareholders to be held
on Thursday, April 23 at 1:00 p.m., or any adjournment or
postponement thereof, for the purposes set forth in the
accompanying notice of 2020 annual meeting of shareholders. The
date of this proxy statement is March 11, 2020, the approximate
date on which this proxy statement and the enclosed proxy were
first sent or made available to our common
shareholders.
This
proxy statement and the accompanying proxy card are being mailed to
owners of shares of our common stock, which is our only class of
voting securities, in connection with the solicitation of proxies
by the board of directors for the 2020 annual meeting of
shareholders. This proxy procedure is necessary to permit all
common shareholders, many of whom live throughout the United States
and are unable to attend the 2020 annual meeting in person, to
vote. We will pay the entire cost of preparing, assembling,
printing, mailing and distributing these proxy materials and
soliciting votes.
Electronic
access
.
To access
our proxy statement and 2019 10-K electronically, please visit our
corporate website at
www.cbdmd.com
. The information
which appears on our website is not part of this proxy
statement.
Voting
securities
.
Only our
common shareholders of record as of the close of business on March
10, 2020, the record date for the 2020 annual meeting, will be
entitled to vote at the meeting and any adjournment thereof.
Holder’s of our 8.0% Series A Cumulative Convertible
Preferred Stock do not have voting rights except in certain limited
circumstances and will not be entitled to vote at the 2020 annual
meeting or any adjournment thereof. As of that date, there were
51,335,648 shares of our common stock issued and outstanding, all
of which are entitled to vote with respect to all matters to be
acted upon at the 2020 annual meeting. Each holder of record as of
that date is entitled to one vote for each share held. In
accordance with our bylaws, the presence of at least 33 1/3% of the
voting power, regardless of whether the proxy has authority to vote
on all matters, constitutes a quorum which is required in order to
hold 2020 annual meeting and conduct business. Presence may be in
person or by proxy. You will be considered part of the quorum if
you voted on the Internet, by telephone, by facsimile or by
properly submitting a proxy card or voting instruction form by
mail, or if you are present and vote at the 2020 annual meeting.
Votes for and against, abstentions and “broker
non-votes” will each be counted as present for purposes of
determining the presence of a quorum.
Broker
non-votes
.
If you
are a beneficial owner whose shares are held of record by a broker,
bank or other nominee, you must instruct the broker, bank or other
nominee how to vote your shares. If you do not provide voting
instructions, your shares will not be voted on any proposal on
which the broker, bank or other nominee does not have discretionary
authority to vote. This is called a “broker non-vote.”
In these cases, the broker, bank or other nominee can register your
shares as being present at the 2020 annual meeting for purposes of
determining the presence of a quorum, but will not be able to vote
on those matters for which specific authorization is required. Your
broker, bank or other nominee does not have discretionary authority
to vote on the election of the directors (Proposal 1) without
instructions from you, in which case a broker non-vote will occur
and your shares will not be voted on this matter. Your broker, bank
or other nominee does have discretionary voting authority to vote
your shares on the ratification of Cherry Bekaert LLP as our
independent registered public accounting firm (Proposal 2) even if
the broker, bank or other nominee does not receive voting
instructions from you.
In any
event, it is particularly important that you instruct your broker
as to how you wish to vote your shares.
1
Voting of
proxies
.
All valid
proxies received prior to the meeting will be exercised. All shares
represented by a proxy will be voted, and where a proxy specifies a
common shareholder’s choice with respect to any matter to be
acted upon, the shares will be voted in accordance with that
specification. If no choice is indicated on the proxy, the shares
will be voted by the individual named on the proxy card as
recommended by the board of directors. A shareholder giving a proxy
has the power to revoke his or her proxy, at any time prior to the
time it is exercised, by delivering to our corporate secretary a
written instrument revoking the proxy or a duly executed proxy with
a later date, or by attending the meeting and voting in person. A
common shareholder wanting to vote in person at the 2020 annual
meeting and holding shares of our common stock in street name must
obtain a proxy card from his or her broker and bring that proxy
card to the 2020 annual meeting, together with a copy of a
brokerage statement reflecting such share ownership as of the
record date.
Vote required.
The
six nominees receiving the greatest numbers of votes at the
meeting, assuming a quorum is present, will be elected to the six
director positions to serve until their terms expire or until their
successors have been duly elected and qualified. Because directors
are elected by plurality, abstentions from voting and broker
non-votes will be entirely excluded from the vote and will have no
effect on its outcome. Assuming a quorum is present, Proposal 2
must be approved by the affirmative vote of a majority of the
shares of common stock present in person or by proxy at the annual
meeting and entitled to vote. Abstentions will be counted in
tabulations of the votes cast on each such proposal and will have
the same effect as a vote against the proposal, whereas broker
non-votes will be excluded from the vote and will have no effect on
the outcome.
Board of directors
recommendations
.
The
board of directors recommends a vote FOR Proposals 1 and
2.
Attendance at the
meeting
. You are invited to attend the annual meeting only
if you were a cbdMD common shareholder or joint holder as of the
close of business on March 10, 2020, the record date, or if you
hold a valid proxy for the 2020 annual meeting. In addition, if you
are a common shareholder of record (owning shares in your own
name), your name will be verified against the list of registered
common shareholders on the record date prior to your being admitted
to the annual meeting. If you are not a common shareholder of
record but hold shares through a broker or nominee (in street
name), you should provide proof of beneficial ownership on the
record date, such as a recent account statement or a copy of the
voting instruction card provided by your broker or nominee. The
meeting will begin at 1:00 p.m. local time. Check-in will begin at
12:30 p.m. local time.
Communications with our
board of directors.
You may contact any of our directors by
writing to them c/o cbdMD, Inc., 8845 Red Oak Boulevard, Charlotte,
NC 28217. Each communication should specify the applicable director
or directors to be contacted as well as the general topic of the
communication. We may initially receive and process communications
before forwarding them to the applicable director. We generally
will not forward to the directors a shareholder communication that
is determined to be primarily commercial in nature, that relates to
an improper or irrelevant topic, or that requests general
information about cbdMD. Concerns about accounting or auditing
matters or communications intended for non-management directors
should be sent to the attention of the Chairman of the Audit
Committee at the address above. Our directors may at any time
review a log of all correspondence received by cbdMD that is
addressed to the independent members of the board and request
copies of any such correspondence.
Who can help answer your
questions?
If you have additional questions after reading
this proxy statement, you may seek answers to your questions by
writing, calling or emailing:
Mark S.
Elliott
Chief
Financial Officer and
Chief
Operating Officer
cbdMD,
Inc.
8845
Red Oak Boulevard
Charlotte,
NC 28217
Telephone:
(704) 445-3051 (direct)
email:
mark.elliott@cbdmd.com
2
PROPOSAL 1
ELECTION OF DIRECTORS
The
board, upon recommendation by the Corporate Governance and
Nominating Committee, has nominated the following six individuals
for election as directors, each to hold office until the 2021
annual meeting of shareholders or until his successor has been duly
elected and qualified. The nominees include six of our current
directors, all of whom are standing for re-election. In its
recommendations to our board, the Corporate Governance and
Nominating Committee recommended reducing the number of our board
seats by three, and as a result, Messrs. Anthony K. Shriver,
Seymour G. Siegel and Gregory C. Morris are not standing for
re-election.
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Name
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Age
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Positions
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Director Since
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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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2015
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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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2018
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Bakari Sellers
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35
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Director
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2017
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Peter
J. Ghiloni
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69
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Director
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2019
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Scott
G. Stephen
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54
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Director
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2019
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William
F. Raines, III
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60
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Director
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2019
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The
following is biographical information for the director
nominees:
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. I
n 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 Coffman Management, LLC,
which is the manager of both Coffman Family Office, LLC, and CBD
Holdings LLC which was a majority owner of Cure Based Development
LLC. Coffman Management LLC is a privately held company which makes
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.
3
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.
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. The board of directors has determined that each of
Messrs. Sellers, Ghiloni, Stephen and Raines will be independent
directors within the meaning of Rule 803 of the NYSE American
Company Guide.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
ELECTION
OF THE DIRECTOR NOMINEES.
4
PROPOSAL 2
RATIFICATION OF THE APPOINTMENT OF
CHERRY BEKAERT LLP
The
Audit Committee has appointed
Cherry
Bekaert LLP
as our independent registered public accounting
firm to audit our consolidated financial statements for fiscal
2020. We have invited representatives of Cherry Bekaert LLP to
attend the 2020 annual meeting. Although shareholder ratification
of the appointment of our independent auditor is not required by
our bylaws or otherwise, we are submitting the selection of
Cherry Bekaert LLP
to our
common shareholders for ratification to permit our common
shareholders to participate in this important corporate decision.
If not ratified, the Audit Committee will reconsider the selection,
although the Audit Committee will not be required to select a
different independent auditor for our company. Even if the
appointment is ratified, the Audit Committee, in its discretion,
may direct the appointment of a different independent registered
public accounting firm at any time during the fiscal year if the
Audit Committee determines that such a change would be in our best
interests.
Fees
and services
The
following table shows the fees that were billed for the audit and
other services provided for fiscal 2019 and fiscal
2018:
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|
Fiscal
2019
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Fiscal
2018
|
|
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Audit
Fees
|
$
276,250
|
$
136,750
|
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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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
RATIFICATION
OF THE APPOINTMENT OF
CHERRY
BEKAERT LLP.
5
OTHER MATTERS
As of
the date hereof, there are no other matters that we intend to
present, or have reason to believe others will present, at the 2020
annual meeting. If, however, other matters properly come before the
2020 annual meeting, the accompanying proxy authorizes the person
named as proxy or his substitute to vote on such matters as he
determines appropriate.
DISSENTER'S RIGHTS
Under
North Carolina law there are no dissenter's rights available to our
common shareholders in connection with any matter submitted to a
vote of our common shareholders at the 2020 annual
meeting.
CORPORATE GOVERNANCE
We are
committed to maintaining the highest standards of honest and
ethical conduct in running our business efficiently, serving our
shareholders interests and maintaining our integrity in the
marketplace. To further this commitment, we have adopted our Code
of Conduct and Business Code of Ethics, which applies to all our
directors, officers and employees. To assist in its governance, our
board has formed three standing committees composed entirely of
independent directors, Audit, Compensation and Corporate Governance
and Nominating committees. A discussion of each committee’s
function is set forth below.
We have
implemented a Whistleblower Policy and provide multiple ways in
which perceived unethical conduct can be anonymously reported. The
Code of Ethics and the Whistleblower Policy are posted on our
Internet website at
www.cbdmd.com
,
under the “Investor Relations—Corporate
Governance” link at the bottom of the landing
page.
Our
bylaws, the charters of each board committee, the independent
status of a majority of our board of directors, and our Code of
Conduct and Business Code of Ethics provide the framework for our
corporate governance. Copies of our committee charters, Code of
Conduct and Business Code of Ethics may be found on our website at
www.cbdmd.com
.
Copies of these materials also are available without charge upon
written request to our Corporate Secretary.
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. Sellers, 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.
6
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
(1)
|
|
|
|
✓
|
|
|
|
Seymour
G. Siegel
(1)
|
|
✓
*
|
|
✓
|
|
|
|
Bakari
Sellers
|
|
✓
|
|
|
|
✓
*
|
|
Gregory
C. Morris
(1)
|
|
✓
|
|
|
|
✓
|
|
Scott
G. Stephen
|
|
|
|
✓
*
|
|
|
|
Peter
J. Ghiloni
|
|
|
|
|
|
✓
|
*
denotes
chairperson.
(1)
Messrs. Shriver,
Siegel and Morris did not stand for re-election at our 2020 annual
meeting of shareholders.
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 was 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 fiscal 2019.
7
Audit Committee Report
Report of the Audit Committee of the Board of
Directors
The primary function of the Audit Committee is to assist the board
of directors in its oversight of our financial reporting processes.
Management is responsible for the preparation, presentation and
integrity of the financial statements, including establishing
accounting and financial reporting principles and designing systems
of internal control over financial reporting. Our independent
auditors are responsible for expressing an opinion as to the
conformity of our consolidated financial statements with generally
accepted accounting principles.
With
respect to fiscal 2019, in addition to its other work, the Audit
Committee:
●
reviewed and
discussed with management and
Cherry
Bekaert LLP
, our independent registered public accounting
firm, our audited consolidated financial statements as of September
30, 2019 and the fiscal year then ended;
●
discussed with
Cherry Bekaert LLP
the matters
required to be discussed by Statement on Auditing Standards No. 61,
“
Communication with Audit
Committees
,” as amended, with respect to its review of
the findings of the independent registered public accounting firm
during its examination of our financial statements;
and
●
received from
Cherry Bekaert LLP
written
affirmation of its independence as required by the Independence
Standards Board Standard No. 1, “
Independence Discussions with Audit
Committees
.” In addition, the Audit Committee
discussed with
Cherry Bekaert
LLP
, its independence and determined that the provision of
non-audit services was compatible with maintaining auditor
independence.
The
Audit Committee recommended, based on the review and discussion
summarized above, that the board of directors include the audited
consolidated financial statements in the 2019 10-K for filing with
the SEC.
|
Dated:
December 17, 2019
|
Audit
Committee of the board of directors of cbdMD, Inc.
|
|
|
|
|
|
/s/ Seymour G. Siegel, Chairman
|
|
|
/s/ Bakari Sellers
|
|
|
/s/ Gregory C. Morris
|
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 was
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 fiscal
2019.
8
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.
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 was 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
Common
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
common 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 common 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.
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 than10% 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) ofthe Securities Exchange Act of 1934, as
amended, during fiscal 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.
11
EXECUTIVE COMPENSATION
Executive officers
|
Name
|
|
Positions
|
|
Martin
A. Sumichrast
|
|
Chairman
of the Board, co-Chief Executive Officer
|
|
Raymond
S. Coffman
|
|
Co-Chief
Executive Officer
|
|
Mark S.
Elliott
|
|
Chief
Financial Officer and Chief Operating Officer
|
|
Caryn
Dunayer
|
|
President
|
Executive officers
of our company are appointed by the board of directors and serve at
the pleasure of the board.
Martin A.
Sumichrast.
For information regarding Mr. Sumichrast, please
see Proposal 1 which appears earlier in this proxy
statement.
Raymond S. Coffman.
For information regarding Mr. Coffman, please see Proposal 1 which
appears earlier in this proxy statement.
Mark S.
Elliott
. Mr. Elliott, 59, 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 (renamed 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, 35, 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.
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 fiscal 2019;
●
our two most highly
compensated named executive officers at September 30, 2019 whose
annual compensation exceeded $100,000; and
●
up to two
additional individuals for whom disclosure would have been made in
this table but for the fact that the individual was not serving as
a named executive officer of our company at September 30,
2019.
12
The
value attributable to any option awards is computed in accordance
with FASB ASC Topic 718. The assumptions made in the valuations of
the option awards are included in Note 10 of the notes to our
consolidated financial statements appearing in our 2019
10-K.
|
Name and
principal position
|
Year
|
Salary
($)
|
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
|
2019
|
132,231
(2)
|
-
|
-
|
-
|
-
|
-
|
-
|
132,231
|
|
co-CEO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Caryn
Dunayer
|
2019
|
101,154
(2)
|
40,000
|
-
|
-
|
-
|
-
|
-
|
141,154
|
|
President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
13
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.
14
●
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
$125,000 and she is entitled to a discretionary bonus at the sole
determination of the Compensation Committee of our board of
directors, as well as participation in benefit programs we offer
our employees and paid vacation. The agreement may be terminated by
us in the event of her death or disability, for cause (as defined
in the agreement), or by Ms. Dunayer without cause. The agreement
contains customary confidentiality, non-compete, and
indemnification provisions.
15
Outstanding equity awards at year end
The
following table provides information concerning unexercised
options, stock that has not vested and equity incentive plan awards
for each named executive officer outstanding as of September 30,
2019.
|
|
OPTION
AWARDS
|
STOCK
AWARDS
|
|||||||
|
Name
|
Number of
securities underlying unexercised options
(#)
exercisable
|
Number of
securities underlying unexercised options
(#)
unexercisable
|
Equity incentive
plan awards: Number of securities underlying unexercised unearned
options
(#)
|
Option exercise
price
($)
|
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.
16
PRINCIPAL SHAREHOLDERS
At
March 10, 2020, we had 51,335,648 shares of our common stock issued
and outstanding. The following table sets forth information known
to us as of March 10, 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 Oak Boulevard, 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 March 10, 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)
|
1,691,267
|
3.3
%
|
|
R. Scott Coffman
(2)(9)
|
12,966,436
|
25.2
%
|
|
Caryn Dunayer
(3)(9)
|
993,890
|
1.9
%
|
|
Mark S. Elliott
(4)
|
401,680
|
*
|
|
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
|
*
|
|
All officers and
directors as a group (eleven persons)
(1)(2)(3)(4)(5)(6)(7)(8)(9)
|
16,791,342
|
32.3
%
|
|
Justice Family
Office, LLC
(9)(10)
|
3,020,753
|
5.9
%
|
*
Less than
1%
(1)
The number of shares of our common stock owned by Mr. Sumichrast
includes (a) 395,600 shares owned of record by SFT1, LLC, (b)
1,249,001 shares owned of record by the Sumichrast 2017 Family
Trust, and (c) 46,666 shares underlying a vested restricted stock
award. Mr. Sumichrast has voting and dispositive control over
securities held of record by each of SFT1, LLC and the Sumichrast
2017 Family Trust. Mr. Sumichrast disclaims beneficial ownership of
the securities held of record by SFT1, LLC and the Sumichrast 2017
Family Trust 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.
(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
of record by Edge of Business, LLC, (c) 9,110,770 shares owned of
record by Coffman Family Office, LLC, and (d) 46,666 shares
underlying a vested restricted stock award. Mr. Coffman holds
voting and dispositive control over securities held of record by
each of Edge of Business LLC and Coffman Family Office, 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.
(3)
The
number of shares of our common stock beneficially owned by Ms.
Dunayer represents shares owned of record 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.
(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)
Pursuant
to the terms of the Agreement and Plan of Merger (the “Merger
Agreement”) dated December 3, 2018 by and between cbdMD, our
wholly owned subsidiaries, and Cure Based Development, LLC which
closed on December 20, 2018, an aggregate of 8,570,000 shares of
our common stock (the “Second Tranche Shares”) issued
to CBD Holding, LLC (“CBDH”) in April 2019 as partial
consideration under the terms of the Merger Agreement were subject
to a Voting Proxy Agreement pending the vesting of unrestricted
voting rights under the terms of the Merger Agreement. Of this
amount,
unrestricted voting
rights to 2,187,500 shares have vested and unrestricted voting
rights to the balance of 6,562,500 Second Tranche Shares vest in
equal thirds between December 20, 2020 and December 20, 2023. When
the Second Tranche Shares were initially issued Mr. Coffman held
dispositive control over such securities. In February 2020, in
connection with its dissolution and liquidation, CBDH distributed
the Second Tranche Shares on a pro rata basis to its members and
those members entered into similar Voting Proxy Agreements with us.
The members of CBDH included, either directly or through their
affiliates, Mr. Sumichrast, Mr. Coffman, Ms. Dunayer and the
Justice Family Office, LLC. Pursuant to the Voting Proxy Agreement,
the voting rights to the shares of our common stock for which
unrestricted voting rights have not yet vested are held by the
independent chairman of the Audit Committee of our board of
directors pursuant. Currently, Mr. Siegel holds this position and
he will vote such shares on any matter brought before our
shareholders in accordance with the recommendation of our board of
directors. Accordingly, Mr. Siegel will vote those shares FOR
Proposal 1 and Proposal 2. Mr. Siegel disclaims beneficial
ownership of any of the Second Tranche Shares over which he has
voting rights.
(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, and the subsequent distribution of shares of our common stock
held of record by CBDH to its members, including the Justice Family
Office, LLC. Mrs. Shannon L. 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
appearing in the 2019 10-K. Justice Family Office, LLC’s
address is 8712 Longview Club Drive, Waxhaw, NC 28173 pursuant to
the Schedule 13G/A.
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.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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 Merger Agreement. 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 in our 2019 10-K. 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 Principal Shareholders appearing earlier in this proxy
statement and Item 10. Directors, Executive Officers and Corporate
Governance appearing in our 2019 10-K.
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.
18
SHAREHOLDER PROPOSALS TO BE PRESENTED AT THE NEXT ANNUAL
MEETING
As of
the date of this proxy statement, we had not received notice of any
shareholder proposals for the 2020 annual meeting described herein
and proposals received subsequent to the date of this proxy
statement will be considered untimely. For a shareholder proposal
to be considered for inclusion in our proxy statement for the 2021
annual meeting, the corporate secretary must receive the written
proposal at our principal executive offices no later than the
deadline stated below. Such proposals must comply with SEC
regulations under Rule 14a-8 regarding the inclusion of shareholder
proposals in company-sponsored proxy materials. Proposals should be
addressed to:
cbdMD,
Inc.
Attention:
Corporate Secretary
8845
Red Oak Boulevard
Charlotte,
NC 28217
Under
Rule 14a-8, to be timely, a shareholder’s notice must be
received at our principal executive offices not less than 120
calendar days before the date of our proxy statement release to
shareholders in connection with the previous year’s annual
meeting. However, if we did not hold an annual meeting in the
previous year or if the date of this year’s annual meeting
has been changed by more than 30 days from the date of the previous
year’s annual meeting, then the deadline is a reasonable time
before we begin to print and send our proxy materials. Therefore,
shareholder proposals intended to be presented at the 2021 annual
meeting must be received by us at our principal executive office no
later than December 31, 2020 in order to be eligible for inclusion
in our 2021 proxy statement and proxy relating to that meeting.
Upon receipt of any proposal, we will determine whether to include
such proposal in accordance with regulations governing the
solicitation of proxies.
You may
propose director candidates for consideration by the board’s
Corporate Governance and Nominating Committee. Any such
recommendations should include the nominee’s name and
qualifications for board membership, information regarding the
candidate as would be required to be included in a proxy statement
filed pursuant to SEC regulations, and a written indication by the
recommended candidate of her or his willingness to serve, and
should be directed to the Corporate Secretary of cbdMD, Inc. at our
principal executive offices at 8845 Red Oak Boulevard, Charlotte,
NC 28217 within the time period described above for proposals other
than matters brought under SEC Rule 14a-8.
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K
As
required, we have filed our 2019 10-K with the SEC. Shareholders
may obtain, free of charge, a copy of the 2019 10-K by writing to
us at 8845 Red Oak Boulevard, Charlotte, NC 28217, Attention:
Corporate Secretary, or from our website,
www.cbdmd.com
.
SHAREHOLDERS SHARING THE SAME LAST NAME AND ADDRESS
The SEC
has adopted rules that permit companies and intermediaries such as
brokers to satisfy delivery requirements for proxy statements with
respect to two or more shareholders sharing the same address by
delivering a single proxy statement addressed to those
shareholders. This process, which is commonly referred to as
“householding,” potentially provides extra convenience
for shareholders and cost savings for companies. We and some
brokers household proxy materials, delivering a single proxy
statement to multiple shareholders sharing an address unless
contrary instructions have been received from the affected
shareholders. Once you have received notice from your broker or us
that they are or we will be householding materials to your address,
householding will continue until you are notified otherwise or
until you revoke your consent. If, at any time, you no longer wish
to participate in householding and would prefer to receive a
separate proxy statement, or if you currently receive multiple
proxy statements and would prefer to participate in householding,
please notify your broker if your shares are held in a brokerage
account or us if you hold registered shares. You can notify us by
sending a written request to cbdMD, Inc., Attention: Corporate
Secretary, 8845 Red Oak Boulevard, Charlotte, NC
28217.
19
WHERE YOU CAN FIND MORE INFORMATION
We file annual and special reports and other
information with the SEC. Certain of our SEC filings are available
on our corporate website at
www.cbdmd.com
and on SEC's web site at
http://www.sec.gov. This proxy statement refers to certain
documents that are not presented herein or delivered herewith. Such
documents are available to any person, including any beneficial
owner of our shares, to whom this proxy statement is delivered upon
oral or written request, without charge. Requests for such
documents should be directed to Corporate Secretary, cbdMD, Inc.,
8845 Red Oak Boulevard, Charlotte, NC 28217. Please note that
additional information can be obtained from our website at
www.cbdmd.com
.
You may
also read and copy any document we file with the SEC at its public
reference facilities:
Public
Reference Room Office
100 F
Street, N.E.
Room
1580
Washington,
D.C. 20549
BY
ORDER OF THE BOARD OF DIRECTORS
By:
/s/ Martin A.
Sumichrast
Martin
A. Sumichrast,
Chairman and
co-Chief Executive Officer
Charlotte,
NC 28217
March
11, 2020
20
|
cbdMD,
INC.
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
2020 ANNUAL MEETING
OF SHAREHOLDERS –THURSDAY, APRIL 23, 2020 AT 1:00
P.M
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CONTROL
ID:
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REQUEST
ID:
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| The undersigned, a shareholder of cbdMD, Inc. (the " Company ") hereby revoking any proxy heretofore given, does hereby appoint Mark S. Elliott, with power of substitution, for and in the name of the undersigned to attend the 2020 annual meeting of shareholders of the Company to be held at 8834 Red Oak Boulevard, Charlotte, NC 28217, on Thursday, April 23, 2020 beginning at 1:00 p.m., local time, or any adjournment or postponement thereof, and there to vote, as designated below. | ||||||
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(CONTINUED
AND TO BE SIGNED ON REVERSE SIDE.)
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VOTING
INSTRUCTIONS
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If
you vote by phone, fax or internet, please DO NOT mail your proxy
card.
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MAIL:
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Please mark, sign,
date, and return this Proxy Card promptly using the enclosed
envelope.
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FAX:
|
Complete the
reverse portion of this Proxy Card and Fax to
202-521-3464.
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INTERNET:
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https://www.iproxydirect.com/
YCBD
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PHONE:
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1-866-752-VOTE(8683)
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2020 ANNUAL MEETING OF THE SHAREHOLDERS OF
cbdMD, INC.
|
PLEASE
COMPLETE, DATE, SIGN AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
PLEASE
MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE:
☒
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PROXY SOLICITED ON
BEHALF OF THE BOARD OF DIRECTORS
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Proposal
1
|
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FOR
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|
WITHHOLD |
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To elect six
members to the board of directors
|
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Martin A.
Sumichrast
|
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☐
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☐
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CONTROL
ID:
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R. Scott
Coffman
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☐
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☐
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REQUEST
ID:
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Bakari
Sellers
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☐
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☐
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Peter J.
Ghiloni
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☐
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☐
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Scott G.
Stephen
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☐
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☐
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William F. Raines,
III
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☐
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☐
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Proposal
2
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FOR
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AGAINST
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ABSTAIN
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The ratification of
the appointment of
Cherry Bekaert
LLP
as the Company's independent registered public
accounting firm
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◻
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◻
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◻
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MARK
“X” HERE IF YOU PLAN TO ATTEND THE MEETING:
◻
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The board of directors unanimously recommends that the shareholders
vote "FOR" proposals 1 and 2.
THIS PROXY WILL BE VOTED AS DIRECTED. IF NO CONTRARY INSTRUCTION IS
INDICATED, THE VOTE OF THE UNDERSIGNED WILL BE CAST
“FOR” PROPOSALS 1 AND 2. IF ANY OTHER BUSINESS IS
PRESENTED AT THE ANNUAL MEETING, THIS PROXY WILL BE VOTED BY THOSE
NAMED IN THIS PROXY IN THEIR BEST JUDGMENT. AT THE PRESENT TIME,
THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED
AT THE ANNUAL MEETING.
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MARK HERE FOR
ADDRESS CHANGE ◻ New Address (if
applicable):
____________________________
____________________________
____________________________
IMPORTANT:
Please sign exactly as your
name or names appear on this Proxy. When shares are held jointly,
each holder should sign. When signing as executor, administrator,
attorney, trustee or guardian, please give full title as such. If
the signer is a corporation, please sign full corporate name by
duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized
person.
Dated:
________________________, 2020
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(Print Name of
Stockholder and/or Joint Tenant)
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(Signature of
Stockholder)
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(Second Signature
if held jointly)
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