cbdMD, Inc. Announces Notification of Noncompliance with Additional NYSE American Continued Listing Standard

Rhea-AI Summary

cbdMD (NYSE American: YCBD) has received a notice of noncompliance from NYSE American dated December 31, 2024, for failing to maintain stockholders' equity of $2 million or more. The company reported stockholders' equity of $1,963,417 as of September 30, 2024, and losses in four of its five most recent fiscal years.

The company remains under a previously accepted compliance plan from August 20, 2024, addressing noncompliance with the $4 million stockholders' equity requirement. cbdMD must regain compliance by December 5, 2025, or face potential delisting. During this period, both common stock (YCBD) and preferred stock (YCBD-PA) will continue trading with a 'BC' (below compliance) designation.

The company has reduced cash consumption from $4.9 million in fiscal 2023 to approximately $0.7 million in fiscal 2024. To achieve compliance, cbdMD is considering converting preferred stock and its accrued dividend ($4.67 million as of September 30, 2024) into common stock, subject to shareholder approval.

Positive

• Reduced cash consumption from $4.9M to $0.7M between fiscal 2023 and 2024
• Potential to increase stockholders' equity through preferred stock conversion

Negative

• Stockholders' equity below $2M requirement at $1.96M
• Reported losses in 4 of 5 most recent fiscal years
• Risk of NYSE American delisting if compliance not achieved by December 5, 2025
• $4.67M liability from preferred stock and accrued dividends

Insights

Financial Analyst

The notification of noncompliance from NYSE American represents a critical financial challenge for cbdMD. With stockholders' equity of $1.96 million falling below the required $2 million threshold, combined with continued operational losses, the company's listing status is at serious risk. The reduction in cash burn from $4.9 million to $0.7 million in fiscal 2024 shows improved cost management but isn't sufficient to address the core issue.

The proposed conversion of $4.67 million in preferred stock and accrued dividends to common stock could temporarily boost stockholders' equity above the minimum threshold. However, this financial engineering doesn't address the fundamental problem of recurring losses. The company has until December 5, 2025, to meet compliance requirements, but without achieving sustainable profitability, any equity improvements may be short-lived. The 'BC' designation will likely impact trading sentiment and could restrict institutional investment due to compliance-based investment mandates.

Market Research Analyst

The CBD industry context makes this noncompliance particularly concerning. In a saturated market with increasing competition and regulatory uncertainties, cbdMD's struggle to maintain basic listing requirements signals deeper operational challenges. The company's multi-brand strategy across cbdMD, Paw CBD and ATRx Labs hasn't translated into sufficient market traction to achieve profitability. The consecutive years of losses in an expanding CBD market suggest structural issues in the business model.

Think of this situation like a retail store that's cutting costs by reducing staff and inventory - it might look better on paper temporarily, but it doesn't solve the fundamental problem of needing more customers and sales. The market typically views these types of noncompliance notices as red flags, often leading to decreased investor confidence and potential liquidity challenges.

Charlotte, North Carolina--(Newsfile Corp. - January 3, 2025) - cbdMD, Inc. (NYSE American: YCBD) (NYSE American: YCBD-PA) ,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 new functional mushroom brand ATRx Labs, today announced that it received a notice (the "Notice") from the NYSE American LLC (the "NYSE American") dated December 31, 2024, notifying the Company that it is no longer in compliance with an additional NYSE American continued listing standard. Specifically, the letter states that the Company is not in compliance with the continued listing standard set forth in Section 1003(a)(i) of the NYSE American Company Guide (the "Company Guide"). Section 1003(a)(i) requires a listed company to have stockholders' equity of $2 million or more if the listed company has reported losses from continuing operations and/or net losses in two if its three most recent fiscal years then ended. The Company reported stockholders equity of $1,963,417 as of September 30, 2024, and losses from continuing operations and/or net losses in four of its five most recent fiscal years then ended.

The Notice further provides that the Company remains subject to the conditions set forth in the NYSE American's initial non compliance notification dated June 5, 2024 and its compliance plan that was accepted by the NYSE American on August 20, 2024 for noncompliance under Section 1003(a)(ii) of the Company Guide due to stockholders' equity under $4 million which address how the Company intends to regain compliance with the continued listing standards by December 5, 2025 (the "Plan"). If the Company is not in compliance with the continued listing standards by December 5, 2025 or if the Company does not make progress consistent with the Plan during the Plan period, the Company will be subject to delisting procedures as set forth in the NYSE American Company Guide.

The Notice has no immediate impact on the listing of the Company's shares of common stock (the "Common Stock") or Series A Preferred Stock (the "Preferred Stock"), which will continue to be listed and traded on the NYSE American during the Plan period, subject to the Company's compliance with the other listing requirements of the NYSE American. The Common Stock and Preferred Stock will continue to trade under the symbol "YCBD" and "YCBD-PA", respectively, with the designation of "BC" to indicate the status of the Common Stock and Preferred Stock as "below compliance". The Notice does not affect the Company's ongoing business operations or its reporting requirements with the Securities and Exchange Commission.

The Company is focused on achieving positive net income and we recently announced we reduced cash consumed from $4.9 million in fiscal 2023 to approximately $0.7 million during fiscal 2024, including a significantly lower amount during the second half of fiscal 2024. The Company is committed to undertaking a transaction or transactions in the future to achieve compliance with the NYSE American's requirements, including but not limited to seeking shareholder approval to convert the Preferred Stock and its accrued dividend, a liability totaling $4.67 million on September 30, 2024, into shares of Common Stock. Under certain Preferred Stock conversion proposals, the accrued dividend would move to equity and increase the Company's stockholder equity. However, there can be no assurance that the Company will be able to achieve compliance with the NYSE American's continued listing standards within the required timeframe.

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-free¹ CBD products, including NSF Certified for Sport® products, as well as a wide array of Full Spectrum products. Our cbdMD brand currently includes high-grade, premium CBD products including CBD tinctures, CBD gummies, CBD topicals, CBD capsules, CBD sleep aids, and a growing collection of Farm Act compliant Delta 9 products. Our Paw CBD brand of pet products includes veterinarian-formulated products including tinctures and chews in varying strengths, and our ATRx Labs 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 retailers nationwide that carry cbdMD's products.

Forward-Looking Statements

This communication contains "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, including with regard to the Company ability to timely submit its Plan to the NYSE American, the acceptance of its Plan by the NYSE American and the Company's ability to regain compliance with the NYSE American's continued listing standards by December 5, 2025. These forward-looking statements are based on management's beliefs and assumptions and information currently available. The words "believe," "expect," "anticipate," "intend," "estimate," "project" and similar expressions that do not relate solely to historical matters identify forward-looking statements. Investors should be cautious in relying on forward-looking statements because they are subject to a variety of risks, uncertainties, and other factors that could cause actual results to differ materially from those expressed in any such forward-looking statements. These factors include, but are not limited to those described in our Form 10-K and other filings with the U.S. Securities and Exchange Commission. All information set forth in this press release is as of the date hereof. You should consider these factors in evaluating the forward-looking statements included in this press release and not place undue reliance on such statements. We do not assume any obligation to publicly provide revisions or updates to any forward-looking statements, whether as a result of new information, future developments or otherwise, should circumstances change, except as otherwise required by law.

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

Contact Information:

cbdMD, Inc.
Ronan Kennedy, CEO & CFO
+1 (704) 445-3064
IR@cbdmd.com

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/235992

FAQ

What is the current stockholders' equity of YCBD as of September 30, 2024?

YCBD reported stockholders' equity of $1,963,417 as of September 30, 2024.

When must YCBD regain compliance with NYSE American listing standards?

YCBD must regain compliance with NYSE American listing standards by December 5, 2025.

How much did YCBD reduce its cash consumption in fiscal 2024?

YCBD reduced its cash consumption from $4.9 million in fiscal 2023 to approximately $0.7 million in fiscal 2024.

What is YCBD's plan to regain NYSE American compliance?

YCBD is considering converting preferred stock and its accrued dividend of $4.67 million into common stock, subject to shareholder approval.

Will YCBD stock continue trading during the compliance period?

Yes, YCBD and YCBD-PA will continue trading on NYSE American with a 'BC' (below compliance) designation during the compliance period.