cbdMD, Inc. 10-K

ITEM 3. LEGAL PROCEEDINGS. In December 2019, Cynthia Davis filed a purported collective and class action lawsuit in the United States District Court for the Central District of California against cbdMD and certain of our competitors alleging violations of the California’s Unfair Competition Law, California’s False Advertising Law and California’s Consumer Legal Remedies Act, as well as claims for Breach of Express Warranties, Breach of Implied Warranty of Merchantability and Declaratory Relief. The plaintiff alleges that the defendants violated the California laws by unlawfully selling and marketing mislabeled products which have not been approved by the FDA. The plaintiff is seeking compensatory, statutory, nominal and punitive damages, in an amount to be determined by the court, as well as equitable relief requiring restitution and disgorgement of revenues. The complaint was brought as a nationwide “collective action,” and, alternatively, as a “class action” under the laws of the State of California. We intend to vigorously defend this action and in April 2020 we filed a motion for dismissal which remains pending. In April 2019 our wholly owned subsidiary, CBDI, filed a cancellation proceeding before the U.S. Patent and Trademark Office Trademark Trial and Appeal Board (TTAB) against Majik Medicine, LLC to cancel its issued trademark for "CBD MD" on multiple grounds. The TTAB recently rejected a motion to dismiss by the defendant and the matter is proceeding. In October 2020, Michael Warshawsky and Michael Steinhauser filed a purported collective and class action lawsuit in the United States District Court for the Western District of North Carolina against cbdMD alleging the personal identifiable information of customers was compromised due to our negligent and/or careless acts and omissions and failure to protect customer’s data. The complaint was brought as a nationwide “collective action,” and, alternatively, as a “class action” under the laws of the State of North Carolina. The Company reached a global settlement with the plaintiffs within our policy limits which was executed by both parties on April 30, 2021 and the settlement is now with the court for final approval. Once approved by the court, the Company anticipates the case will be dismissed during the fiscal year of 2022. On February 12, 2021 CBDI filed a complaint against Majik Medicine in Federal Court in North Carolina seeking, among other things, the cancellation of Majik Medicine’s CBD MD mark on various grounds (the “Civil Action”). On April 28, 2021 the TTAB ruled in favor of a motions filed by CBDI to suspend the cancellation proceeding pending final determination in the Civil Action. Subsequent to filing the Civil Action, Majik Medicine brought counter claims against CBDI and the Company has filed a Motion to Dismiss the counter claims. The parties have fully briefed the court and the Motion to Dismiss counter claims of Majik Medicine is under consideration for a ruling. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable to our company. 17 Table of Contents PART II