cbdMD Announces Financing of $1,250,000

Rhea-AI Summary

cbdMD, Inc. (YCBD) has entered into a securities purchase agreement with five institutional investors, raising $1,250,000 in gross proceeds. The company issued Senior Secured Original Issue Discount Convertible Promissory Notes to the investors, with an aggregate principal amount of $1,541,666. The Notes mature in 18 months and are convertible into common stock at an initial conversion price of $0.684 per share. The company plans to use the proceeds for working capital and to fund the national rollout of its ATRx Labs functional mushroom products, which have been nominated for seven awards at the 2024 WholeFoods Magazine Natural Choice Awards. Additionally, the company aims to strengthen its revenue-focused staff and utilize the remaining proceeds for general working capital and administrative purposes.

Financial Analyst

The transaction described involves a strategic capital infusion through a securities purchase agreement, which is a significant event for cbdMD, Inc., as it raises $1,250,000 in gross proceeds. The issuance of Senior Secured Original Issue Discount Convertible Promissory Notes indicates a leveraged approach to finance, which can have a dilutive effect on current shareholders due to the convertible nature of the notes. The initial conversion price of $0.684 per share will be a key figure for investors to monitor, as it will determine the potential impact on equity value upon conversion.

The secured position of the notes, backed by a first priority security interest, provides the investors with a degree of protection, which is a critical aspect of the agreement. However, the 18-month maturity period is relatively short, suggesting a near-term liquidity event or refinancing will be necessary, which could affect the company's financial flexibility.

Investors should also consider the intended use of the proceeds, which includes working capital for a national rollout of new ATRx Labs functional mushroom products. This rollout, coupled with the nominations at the 2024 WholeFoods Magazine Natural Choice Awards, could signal potential growth opportunities and brand recognition, but also implies significant capital requirements and execution risk.

Market Research Analyst

The functional mushroom market has been gaining traction and cbdMD's entry via ATRx Labs could position the company in a niche but growing segment. The timing of the capital raise coincides with the planned national rollout of these products, which indicates an aggressive expansion strategy. The market will be watching the performance of these new products closely, as success could lead to increased market share and revenue growth.

The seven nominations at the 2024 WholeFoods Magazine Natural Choice Awards also suggest that the products have been well-received in pre-launch evaluations, potentially enhancing the brand's credibility and consumer appeal. However, the competitive landscape of the wellness and supplements market is fierce and consumer trends can be fickle. The company's ability to effectively utilize the raised capital to bolster its revenue-focused staff and manage working capital will be crucial in determining the success of this strategic move.

Legal Expert

The stipulation of a Registration Rights Agreement, which mandates the filing of a registration statement with the SEC for the shares issuable upon conversion of the notes, is a standard regulatory requirement. It ensures that the securities, once converted, are freely tradable and comply with securities laws. This is an important consideration for the investors, as it affects the liquidity and marketability of their potential equity stake in the company.

Furthermore, the press release's disclaimer regarding the offer and sale of securities is a necessary legal precaution to comply with securities regulations. It highlights the limitations and conditions under which such transactions can occur, which is pertinent information for potential investors and current shareholders alike. The company's adherence to these legal requirements reflects on its governance practices and risk management.

Charlotte, North Carolina--(Newsfile Corp. - February 2, 2024) - cbdMD, Inc. (NYSE American: YCBD) (NYSE American: YCBD-PA) (the "Company"), a premier provider of high-quality CBD products and functional mushroom supplements under ATRx Labs today announced that it has entered into a securities purchase agreement (the "SPA") with five institutional investors (the "Investors") whereby the Investors advanced the Company an aggregate of $1,250,000 gross proceeds and the Company issued each Investor a Senior Secured Original Issue Discount Convertible Promissory Note (collectively, the "Notes") in the aggregate principal amount of $1,541,666. The Company intends to use the proceeds from the issuance of the Notes for working capital general corporate purposes. The Notes mature 18 months from the date of issuance. The Notes are convertible at the option of each investor into shares of the Company's common stock at an initial conversion price of $0.684 per share, subject to certain adjustments. The Notes are secured by a first priority security interest.

Pursuant to a Registration Rights Agreement, the Company is required to file a registration statement with the SEC covering shares of common stock issuable upon conversion of the Notes.

The Company intends to use the net proceeds from the private placement to help fund working capital, including capital needed for a national rollout of its new ATRx Labs functional mushroom products. ATRx Labs products have been nominated for a combined total of seven nominations at the 2024 WholeFoods Magazine Natural Choice Awards ahead of a launch with a national retailer. In addition, the Company intends to bolster its revenue focused staff and utilize the rest of the proceeds for general working capital and administrative purposes.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy any of the securities described herein, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

About cbdMD:
cbdMD, Inc. is one of the leading and most highly trusted and recognized hemp-derived cannabidiol (CBD) brands with a comprehensive line of U.S. produced, THC-free¹ CBD products as well as Full Spectrum and Delta 9 THC products. The cbdMD brand currently includes high-quality, premium CBD products including tinctures, gummies, topicals, capsules, sleep aids and more. The Company's Paw CBD brand includes formulated pet products including tinctures, chews and topicals in varying strengths. cbdMD also operates ATRx Labs, a line of functional mushroom supplements. To learn more about cbdMD and the complete line of products, please visit www.cbdmd.com, follow cbdMD on Instagram and Facebook or visit one of the thousands of retail outlets that carry cbdMD products.

Forward-Looking Statements:
This press release contains certain forward-looking statements that are based upon current expectations and involve certain risks and uncertainties within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements can be identified using words such as ''should,'' ''may,'' ''intends,'' ''anticipates,'' ''believes,'' ''estimates,'' ''projects,'' ''forecasts,'' ''expects,'' ''plans,'' and ''proposes.'' These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict. You are urged to carefully review and consider any cautionary statements, including but not limited to federal and state CBD regulation, and other disclosures, including the statements made under the heading "Risk Factors" in cbdMD, Inc.'s Annual Report on Form 10-K for the fiscal year ended September 30, 2023, as amended, as filed with the Securities and Exchange Commission (the "SEC") and our other filings with the SEC. All forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, many of which are generally outside the control of cbdMD, Inc. and are difficult to predict. cbdMD, Inc. does not undertake any duty to update any forward-looking statements except as may be required by law. The information which appears on our websites and our social media platforms, including, but not limited to, Instagram and Facebook, is not part of this press release.

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

Contact Information:
cbdMD, Inc.
Ronan Kennedy, Interim 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/196733

What is the recent securities purchase agreement announced by cbdMD, Inc. (YCBD)?

cbdMD, Inc. (YCBD) entered into a securities purchase agreement with five institutional investors, raising $1,250,000 in gross proceeds.

What are the details of the Senior Secured Original Issue Discount Convertible Promissory Notes issued by cbdMD, Inc. (YCBD)?

The company issued Senior Secured Original Issue Discount Convertible Promissory Notes to the investors, with an aggregate principal amount of $1,541,666. The Notes mature in 18 months and are convertible into common stock at an initial conversion price of $0.684 per share.

How does cbdMD, Inc. (YCBD) plan to use the proceeds from the securities purchase agreement?

The company plans to use the proceeds for working capital and to fund the national rollout of its ATRx Labs functional mushroom products, which have been nominated for seven awards at the 2024 WholeFoods Magazine Natural Choice Awards. Additionally, the company aims to strengthen its revenue-focused staff and utilize the remaining proceeds for general working capital and administrative purposes.