cbdMD, Inc. (YCBD) Earnings Call Transcript & Summary

Greetings. Welcome to the cbdMD, Inc. 2024 Annual Meeting of Shareholders Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Scott Stephen, Chairman of the Board of Directors at cbdMD, Inc. Scott, please go ahead.

It is now 1:00 p.m. Eastern time on March 29, 2024. Will the meeting please come to order? I am Scott Stephen, Chairman of the Board of Directors of cbdMD, Inc. Along with my fellow Directors and executive officers of cbdMD, I would like to welcome you to our 2024 Annual Meeting of the Shareholders. We appreciate your attendance, your interest and, most importantly, your support of cbdMD. This annual meeting of the shareholders is held pursuant to the bylaws of cbdMD and the notice of the Annual Meeting of Shareholders. You are participating in the meeting virtually. We are pleased to again hold our Annual Shareholders Meeting virtually as we aim to increase access and participation. On the left-hand side of the registration page for the virtual annual meeting, you will see links to the notice of the Annual Meeting of Shareholders and the 2024 proxy statement for the 2024 Annual Meeting, as previously filed with the SEC on February 14, 2024, an agenda and the meeting conduct, standards and procedures. If you are a registered shareholder of cbdMD and would like to view the list of shareholders on the record date for this meeting, please submit your request after you have entered the meeting. We will take care of the formal business of the 2024 Annual Meeting first. Then we will then adjourn the formal portion of the 2024 Annual Meeting. After dealing with a few procedural matters, we will take up the items to be acted upon. If a technical disruption occurs that prevents us from continuing the meeting and the polls have been opened, but the meeting is not adjourned, the polls will close immediately. Votes received prior to the time the polls were closed will be counted. The meeting will not be reconvened, and the results will be announced publicly. I will act as Chairman of the meeting, and Brad Whitford, the company's Vice President of Finance, will serve as the Secretary of the meeting and take the minutes. I'd like to introduce the Directors and executive officers of cbdMD who are in attendance today. Joining me are Bakari Sellers, Billy Raines, and Dr. Sibyl Swift, members of the Board; and Ronan Kennedy, cbdMD's Interim CEO and CFO. In addition, the Board of Directors has previously appointed Ronan Kennedy to serve as the inspector of the election for this meeting. I request that he file his oath of office with the Secretary of the meeting for inclusion in the minutes of the meeting. Will the Secretary please report on the proof of mailing of the Notice of Annual Meeting of Shareholders?

I have an affidavit of mailing from Issuer Direct Proxy Services certifying as to the giving of notice of this meeting and the sending to shareholders of record as of January 30, 2024, the notice of Internet availability of proxy material, which Issuer Direct Proxy Services commenced distributing to shareholders on or about February 14, 2024.

The notice of meeting and the affidavit of mailing will be filed with the minutes of this meeting. The Secretary has the list of the holders of record of common stock of cbdMD at the close of business on January 30, 2024, the record date for this 2024 Annual Meeting. The list of shareholders has been opened for examination at the company's executive offices for any purposes relevant to this meeting during ordinary business hours beginning 2 days after the giving of notice of the 2024 Annual Meeting of Shareholders. This list is available for inspection during this meeting by any registered shareholder. If you wish to inspect the list, please post a request in the questions portion of the registration page. The Secretary will please file a copy of the list of shareholders with the records of cbdMD for this 2024 Annual Meeting of Shareholders. Ronan, will you please present your report of attendance at this meeting, so that we can determine whether a quorum is present?

Mr. Chairman, on January 30, 2024, the record date for this 2024 Annual Meeting, there were outstanding and entitled to vote a total of 3,045,092 shares of common stock and 5 million shares of the company's Series A preferred stock. There are at least 33.4% of such shares of common stock represented by proxy and in excess of 50% of such shares of the company's Series A preferred stock, thus constituting a quorum for the shares of common stock and Series A preferred stock. We have a quorum for all proposals at this 2024 Annual Meeting of Shareholders.

Thank you, Ronan. On the basis of the report of the Secretary and the inspector of election, I find the proper notice has been given, and quorum is present. Accordingly, this 2024 Annual Meeting of Shareholders has been properly convened. The polls for voting on all matters are open. All cbdMD common and Series A preferred shareholders entitled to vote at this meeting have the ability to do so online. The Series A preferred shareholders are only entitled to vote on the Series A preferred proposal and any adjournment related to such proposal. If you are a shareholder entitled to vote and have not yet voted or if you want to change your previously cast vote, please do so via the Vote My Shares link on the registration page. Please remember that if you have already voted by proxy, it is not necessary to vote again. After voting has been completed on all matters on the agenda, we will close the polls, and the inspector of election will provide his preliminary report. We'll move now to review of the proposals as set forth in the notice of the annual meeting and accompanying 2024 proxy statements. The first proposal to come before the meeting is election of Directors. At this meeting, we will be electing 4 Directors for a term expiring at the 2025 Annual Meeting of Shareholders. The nominees are Scott G. Stephen, Bakari Sellers, William F. Raines, III and Dr. Sibyl Swift. Information concerning their principal occupation, skills and qualifications and other matters which may be of interest are contained in the 2024 proxy statement for the 2024 Annual Meeting, as previously filed with the SEC, a link to which is on the registration page. No other nominees were received prior to the deadline established in our 2024 proxy statement. Therefore, no additional nominations may be made at this meeting, and I declare the nominations to be closed. The next matter to come before the meeting is the ratification of the appointment of Cherry Bekaert LLP as the company's independent registered public accounting firm. The Board of Directors recommend that the ratification of the appointment of the Cherry Bekaert LLP to serve as cbdMD's independent registered public accounting firm and to audit its financial statements for the fiscal year ending September 30, 2024. The next matter to come before the meeting is a resolution for approval of an advisory vote on the frequency of an advisory vote on executive compensation. The Board of Directors recommends that the frequency of the shareholder vote on the compensation of our named executive officers should be once every 3 years. Proposal 4 asks shareholders to approve an advisory resolution on the fiscal year 2024 compensation of the named executive officers, all as described in our 2024 proxy statement. This proposal is advisory. Although nonbinding, the vote will provide information to our compensation, corporate governance and nominating committee and our Board of Directors regarding investor sentiment about our executive compensation philosophy, policies and practice, which are compensation, corporate governance and nominating committee and our Board of Directors will be able to consider when making future executive compensation decisions, as indicated in our 2024 proxy statement. Proposal 5 asks shareholders to approve an amendment to the certification of designation of our Series A preferred stock to provide for the automatic conversion into common stock, all described in our 2024 proxy statement. The Series A certification of designation is proposed to be amended to provide that each share of Series A preferred will be automatically converted into 6 shares of common stock upon effectiveness of the filing of the Series A articles of the amendment with the Secretary of State of the State of North Carolina. The company believes the automatic conversion of the Series A preferred into common stock eliminating the Series A preferred dividend change of control, conversion rights and redemption rights significantly enhances the company's outlook and a significant benefit to both classes of our outstanding stock. The Board of Directors recommends that shareholders of common stock as well as the shareholders of our Series A preferred stock approve of the amendment of certificate of designation of our Series A preferred stock to provide for the automatic conversion into common stock. Proposal 6 asks shareholders to approve of the issuance of shares of our common stock, representing more than 19.9% of our common stock outstanding upon the conversion of the certain convertible notes issued by the company, pursuant to the securities purchase agreement dated January 30, 2024, entered in and between the company and 5 institutional investors, all as described in our 2024 proxy statement. The Board of Directors recommends that shareholders approve the proposal. Proposal 7 asks shareholders to approve allowing the Board of Directors to adjourn the 2024 Annual Meeting to a later date or dates to permit further solicitation of proxies. The Board of Directors recommends that the shareholders approve the adjournment of the 2024 Annual Meeting to a later date or dates, if necessary, to permit further solicitation and vote a proxy if, based upon the tabulation vote at the time of the 2024 Annual Meeting, there are not sufficient votes to approve any proposal. The polls are about to close, so if you have not yet voted, please do so. [Voting]

Since everyone has had the opportunity to vote, the polls are now closed. The inspector of election has delivered the preliminary report, and he will now announce the preliminary results.

Mr. Chairman, based on the inspector of election's preliminary report, each of the nominees for Directors received more than 95% of the votes cast in favor of his election and has been elected as a Director of cbdMD to hold office until the 2025 Annual Meeting of Shareholders or until his or her successor has been duly elected and qualified. The ratification of the appointment of Cherry Bekaert LLP as cbdMD's independent registered public accounting firm received more than 99% of the votes in favor, and the appointment has been ratified. The nonbinding advisory vote on the frequency of an advisory vote on executive compensation has been approved for a frequency of 1 year. The resolution on a nonbinding advisory basis for the compensation of our named executive officers for the fiscal 2024 received more than 93% of the votes cast in favor of the proposal and has been approved. The Series A preferred proposal received more than 98% of the common stock votes cast in favor of the proposal. However, the votes in favor from our Series A preferred stock shareholders was less than 2/3 of the vote of all issued and outstanding Series A preferred shares, which is required for approval of this proposal. For this reason, the proposal was not approved. The share issuance proposal received more than 97% of the votes cast in favor of the proposal and has been approved. The adjournment proposal was moved as there were sufficient votes to approve proposals 1 through 5, and proposal 6 was not approved by our Series A preferred shareholders.

We will file the final report of the inspector of election with the records of this meeting. We expect to report the results of the voting on a Form 8-K to be filed with the SEC within 4 business days of this meeting. A link to this Form 8-K will be -- also be posted on cbdMD's corporate website under the Investment -- Investors tab. That concludes the business for the meeting. The meeting is now adjourned. On behalf of Ronan Kennedy, our Interim CEO and CFO, members of the Board of Directors and our employees, I'd like to thank all of you for the continued interest and support you have shown in cbdMD. We will provide a business update as part of our earnings call for the fiscal quarter ending March 31, 2024. We will announce the specific date and time as we get closer to that date. Ronan Kennedy would like to discuss matters concerning our outstanding Series A preferred stock.

Thank you, Scott. For reasons set forth in our 2024 proxy statement, we are disappointed that our Series A preferred stockholders do not approve the amendment to our articles of incorporation to automatically convert our issued and outstanding shares of Series A preferred stock. As the company continues to believe converting the Series A preferred stock is paramount to future growth and opportunities for the company, along with the continued listings of our security on the NYC American and future value of our shareholders, our management and Board of Directors will continue to consider future shareholder proposal to convert Series A preferred.

That concludes the business for the meeting. The meeting is now adjourned. On behalf of Ronan Kennedy, our Interim CEO and CFO, members of the Board of Directors and our employees, I'd like to thank all of you for your continued interest and support you have shown in cbdMD. Thank you.

This concludes today's conference, and you may now disconnect at this time. Thank you for your participation.