cbdMD, Inc. Announces Automatic Conversion Date of Series A Preferred Stock and One for Eight Reverse Split of its Common Stock Immediately Following the Automatic Conversion

Rhea-AI Summary

cbdMD (YCBD) has announced two significant corporate actions effective May 6, 2025: the automatic conversion of its 8% Series A Cumulative Convertible Preferred Stock into Common Stock, and a one-for-eight reverse stock split.

The preferred stock conversion will convert each preferred share into thirteen common shares, eliminating approximately $6.7 million in accrued dividend liabilities and $4.0 million in perpetual annual obligations. The last trading day for preferred stock will be May 5, 2025.

Following both corporate actions, YCBD's outstanding common shares will consolidate from approximately 71.26 million to 8.91 million shares. The reverse split will be effective after market close on May 6, 2025, with post-split trading beginning May 7, 2025. The company will maintain its NYSE American listing under the YCBD symbol with a new CUSIP number.

Positive

• Elimination of $6.7M in accrued dividend liabilities
• Removal of $4.0M in perpetual annual obligations
• Improved capital structure and balance sheet strength
• Enhanced compliance with NYSE American listing standards
• Increased strategic flexibility for M&A opportunities

Negative

• Significant share dilution from preferred stock conversion
• Substantial reduction in outstanding shares through reverse split may impact stock liquidity

Insights

Financial Restructuring Analyst

cbdMD eliminates $10.7M in dividend obligations through preferred conversion while reverse split consolidates shares 8:1 to maintain NYSE listing.

cbdMD's dual corporate action represents a significant financial restructuring designed to address multiple objectives simultaneously. The Series A Preferred Stock conversion will automatically transform each preferred share into 13 common shares on May 6, eliminating $6.7 million in accrued dividend liabilities and $4.0 million in perpetual annual obligations. This meaningfully strengthens the balance sheet by removing recurring financial burdens that had been constraining capital allocation flexibility.

The 1-for-8 reverse stock split, occurring immediately after the preferred conversion, will consolidate the company's shares from approximately 71.26 million to 8.91 million. This technical adjustment is explicitly designed to achieve NYSE American continued listing compliance, which typically involves minimum share price requirements. While reverse splits don't inherently change company fundamentals, they're often implemented when share prices have declined below exchange thresholds.

The sequential timing of these actions—executing both on May 6 with just one minute separation—demonstrates careful financial engineering to minimize market disruption. The fractional share treatment (rounding up to nearest whole share) slightly benefits small shareholders. For existing common shareholders, the net effect combines dilution from the preferred conversion with consolidation from the reverse split, resulting in a complex adjustment to ownership percentages.

Management frames this restructuring as the "critical final step" in addressing historical capital structure issues, positioning the company for strategic flexibility including potential M&A activities. By eliminating preferred dividend obligations and simplifying the equity structure, cbdMD has removed significant financial constraints while addressing listing requirements.

Corporate Governance Specialist

cbdMD's capital restructuring represents strategic reset, eliminating preferred dividend burden while addressing NYSE listing requirements through share consolidation.

This coordinated corporate action package reveals a comprehensive strategic reset for cbdMD following shareholder approval at their April 10 annual meeting. The company contextualizes these moves within a broader improvement narrative, referencing "strong December results" and a March beverage distribution deal for their Oasis product line, suggesting the financial restructuring builds upon operational progress.

The elimination of the Series A Preferred shares addresses what appears to be a problematic legacy capital structure. By removing $10.7 million in current and future dividend obligations, the company significantly improves its financial flexibility and simplified equity profile. The specific mechanics—converting preferred shares before implementing the reverse split—creates a carefully sequenced transition designed to achieve multiple strategic objectives while minimizing disruption.

The governance context is notable, with the company having recently strengthened its board through the additions of Mr. Porter and Mr. Roe. This leadership enhancement, coupled with the capital restructuring, signals a multi-faceted renewal strategy rather than merely tactical financial engineering.

The explicit focus on achieving "full compliance with NYSE American continued listing standards" indicates these actions address specific exchange requirements, likely related to minimum share price thresholds. By consolidating shares 8:1, the company attempts to sustainably meet these standards while maintaining its NYSE American listing—a crucial factor for institutional investor accessibility and market visibility.

This comprehensive approach to restructuring encompasses governance refresh, capital structure simplification, and exchange compliance, positioning cbdMD to potentially capitalize on the operational improvements mentioned briefly in the announcement.

Charlotte, North Carolina--(Newsfile Corp. - April 21, 2025) - cbdMD, Inc. (NYSE American: YCBD) (NYSE American: YCBD PRA) (the "Company") one of the nation's leading and most highly trusted and recognized CBD companies, and operator of the leading CBD brands cbdMD and Paw CBD, along with its functional mushroom brand ATRx Labs, announced today that the automatic conversion (the "Conversion") of shares of its 8% Series A Cumulative Convertible Preferred Stock (the "Preferred Stock"), into the Company's Common Stock, $0.001 par value per share (the "Common Stock") will be effective at 4:01 p.m. Eastern Time on May 6, 2025 (the "Mandatory Exchange Date"). The last day of trading of the Preferred Stock is May 5, 2025 and the security will be suspended effective before the open on the Mandatory Exchange Date.

Following shareholder approval at the Company's annual meeting held on April 10, 2025 for the Conversion, the Board of Directors elected to effectuate the automatic conversion (the "Automatic Preferred Conversion"), which provides for the conversion of each share of Preferred Stock into thirteen shares of Common Stock, inclusive of all accumulated and unpaid dividends on the Mandatory Exchange Date. Dividends on converted shares will cease to accrue on the Mandatory Exchange Date and the Preferred Stock will cease trading on the Mandatory Exchange Date. Shareholders who hold Preferred Stock electronically in book-entry form will not need to take action (the Conversion will be automatic) to receive shares of Common Stock on the Mandatory Exchange Date.

In addition, the Company also announced today that its Board of Directors on April 17, 2025 approved a ratio of one-for-eight reverse stock split of the Company's issued and outstanding shares of Common Stock. The Company's shareholders previously approved the reverse stock split at the Company's annual meeting and granted the board the authority to determine a final reverse split ratio. The reverse stock split will effective after the market closes at 4:02 p.m. Eastern Time on May 6, 2025 immediately following the Automatic Preferred Conversion, following the filing and effectiveness of an amendment to the Company's articles of incorporation, as amended, with the Common Stock trading on a post-split basis when the market opens on the May 7, 2025. The Company's Common Stock will continue to trade on the NYSE American under the existing trading symbol "YCBD" with a new CUSIP number 12482W 408.

As a result of the reverse stock split, every eight pre-split shares of Common Stock outstanding (including shares issued pursuant to the Automatic Preferred Conversion) will automatically combine into one new share of Common Stock without any action on the part of holders. There will be no interim rounding between the Automatic Conversion and the reverse stock split, and the corporate actions will take place as a single event. Following the Automatic Conversion and reverse stock split the number of issued and outstanding shares of Common Stock will be consolidated from approximately 71.26 million shares to approximately 8.91 million shares. Any fractional shares resulting from the reverse stock split will be rounded up to the nearest whole share on a per shareholder basis. Proportionate adjustments will be made to (i) shares of Common Stock issuable upon exercise or conversion of all issued and outstanding options and warrants, and (ii) shares outstanding and authorized for issuance under the Company's equity incentive plans. The reverse stock split will not impact any shareholder's percentage ownership of the Company or voting power, except for the minimal effects resulting from the treatment of fractional shares. The reverse stock split will neither affect the par value of the Common Stock nor will it affect the Company's authorized stock.

"As previously stated, we are pleased with the outcome of the annual meeting. The past few months have marked a meaningful turning point for cbdMD. We had strong December results, launched our first beverage distribution deal for Oasis in March and have strengthened our marketing capabilities. Now as a result of the proposals approved at our annual meeting we have deepened our board with the additions of Mr. Porter and Mr. Roe and have improved our capital structure. We believe we are laying the groundwork for a stronger, more agile company," said Ronan Kennedy, Chief Executive Officer and Chief Financial Officer of cbdMD.

"The vote to convert the Series A Preferred and authorize the reverse stock split represents a critical final step in cleaning up historical capital structure issues. This reset positions us for strategic flexibility, including future M&A and growth opportunities, while eliminating approximately $6.7 million in accrued dividend liabilities and $4.0 million in perpetual annual obligations. We believe these actions significantly strengthen our balance sheet and clear the path for full compliance with NYSE American continued listing standards."

"After consultation with our advisors and regulators, we determined that executing the reverse split in conjunction with the preferred conversion is the most prudent path forward. This milestone is not just about compliance-it's about unlocking our ability to build value and pursue strategic opportunities from a position of strength." vStock Transfer LLC, the Company's transfer agent, will act as the exchange agent for the reverse stock split. Please contact vStock Transfer LLC for further information at (212) 828-8436. Shareholders holding their shares in book entry form or brokerage accounts need not take any action in connection with the reverse stock split.

Additional information regarding the Conversion and reverse stock split can be found in the Company's Proxy Statement filed with the Securities and Exchange Commission on February 25, 2025, which is available on the website of the Securities and Exchange Commission.

About cbdMD

cbdMD, Inc. is one of the leading and most highly trusted and most recognized cannabidiol (CBD) brands with a comprehensive line of U.S. produced, THC-free⁽¹⁾ CBD products, including NSF Certified for Sport® products, as well as our new Full Spectrum products. Our cbdMD brand currently includes high-grade, premium CBD products including CBD tinctures, CBD gummies, CBD topicals, CBD capsules, CBD bath bombs, CBD sleep aids and CBD drink mixes and an array of Farm Act compliant Delta 9 products. Our Paw CBD brand of pet products includes veterinarian-formulated products including tinctures, chews, topicals products in varying strengths, and our ATRx brand of natural functional mushroom support. To learn more about cbdMD and our comprehensive line of U.S. grown, THC-free¹ CBD oil and Full Spectrum products as well as our other brands, please visit www.cbdmd.com, www.pawcbd.com, or ATRxlabs.com, follow cbdMD on Instagram and Facebook, or visit one of the thousands of retail outlets that carry cbdMD's products.

Forward-Looking Statements

This press release contains various forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, including statements regarding potential growth, opportunities from our new capital structure and improved balance sheet, creating value to our shareholders and satisfying our shareholders' equity requirements for continued listing on the NYSE American. These statements relate to anticipated future events, future results of operations or future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "might," "will," "shall," "should," "could," "intends," "expects," "plans," "goals," "projects," "anticipates," "believes," "seeks," "estimates," "forecasts," "predicts," "possible," "potential," "target," or "continue" or the negative of these terms or other comparable terminology.

These forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are only predictions, are uncertain and involve substantial known and unknown risks, uncertainties and other factors which may cause our (or our industry's) actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all of the risks and uncertainties that could have an impact on the forward-looking statements, including without limitation, risks and uncertainties relating to our continued listing on the NYSE American, failure to develop and sell new products, market impact and dilutive effects on our stock price and other disclosures and other important risks and uncertainties referenced and discussed under the heading titled "Risk Factors" in the Company's filings with the Securities and Exchange Commission.

The statements in this press release are made as of the date of this press release, even if subsequently made available by the Company on its website or otherwise. The Company does not assume any obligations to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made.

Contacts:

Investors:
cbdMD, Inc.
Ronan Kennedy
Chief Executive Officer and Chief Financial Officer
IR@cbdmd.com
(704) 445-3064
SOURCE: cbdMD

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¹ THC-free is defined as below the level of detection using validated scientific analytical methods.

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/249298

FAQ

When will YCBD's reverse stock split and preferred stock conversion take effect?

The preferred stock conversion will occur at 4:01 PM ET on May 6, 2025, followed by the reverse stock split at 4:02 PM ET. The stock will trade on a post-split basis on May 7, 2025.

What is the conversion ratio for YCBD's Series A Preferred Stock?

Each share of Series A Preferred Stock will convert into thirteen shares of Common Stock, including all accumulated and unpaid dividends.

How will YCBD's reverse stock split affect shareholders' ownership?

Every eight pre-split shares will combine into one new share. The split won't affect shareholders' percentage ownership or voting power, except for minimal effects from fractional share rounding.

What financial impact will the preferred stock conversion have on YCBD?

The conversion will eliminate $6.7 million in accrued dividend liabilities and $4.0 million in perpetual annual obligations, strengthening the company's balance sheet.