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Item 1.01
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Entry into a Material Definitive Agreement.
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On May 13, 2019, cbdMD, Inc. (“cbdMD” or the
“Company”) entered into an underwriting agreement (the
“Underwriting Agreement”) with
ThinkEquity, a
division of Fordham Financial Management, Inc., as representative
of the underwriters
(the
“Representative”), pursuant to which the Company agreed
to sell to the underwriters in a firm commitment underwritten
public offering (the “Offering”) an aggregate of
2,000,000 shares of common stock, par value $0.001 per share (the
“Common Stock”), at an Offering price of $6.00 per
share. Pursuant to the Underwriting Agreement, the Company granted
the Representative a 45-day option to purchase up to an additional
300,000 shares of Common Stock to cover over-allotments, if
any.
The net proceeds to the Company from the Offering are expected to
be approximately $10.9 million before the over-allotment option,
after deducting underwriting discounts and commissions and
estimated Offering expenses payable by the Company. The
transactions contemplated by the Underwriting Agreement are
expected to close on May 15, 2019.
The Offering was registered pursuant to the Company’s
effective shelf registration statement on Form S-3 (File No.
333-228773) (the “Registration Statement”) and the
related base prospectus included in the Registration Statement, as
supplemented by the preliminary prospectus supplement dated May 13,
2019 (the “Preliminary Prospectus Supplement”) and the
final prospectus supplement dated May 13, 2019 (the “Final
Prospectus Supplement”). The legal opinion and consent of
Pearlman Law Group LLP addressing the validity of the
Company’s securities sold in the Offering is filed as Exhibit
5.1 hereto and is incorporated into the Registration Statement, and
the legal opinion and consent of the Law Offices of Jason H. Scott
related to certain matters under North Carolina law is filed as
Exhibit 5.2 hereto and is incorporated by reference into the
Registration Statement.
The Underwriting Agreement contains customary representations,
warranties and agreements by the Company, customary conditions to
closing, indemnification obligations of the Company and the
underwriters, including for liabilities under the Securities Act of
1933, as amended, other obligations of the parties and termination
provisions.
The underwriters will receive discounts and commissions of 7.75% of
the gross cash proceeds received by the Company from the sale of
the shares of Common Stock in the Offering. The Company will issue
the Representative a warrant (the “Representative’s
Warrant”) to purchase 60,000 shares of Common Stock (equal to
3% of the shares of Common Stock sold in the Offering excluding the
over-allotment option) exercisable at $7.50 per share, and
reimburse it up to $80,000 for its out of pocket expenses, which
includes fees of counsel to the Representative, subject to
compliance with FINRA Rule 5110(f)(2)(D). The Company estimates the
total expenses of this Offering, which will be payable by us,
excluding the underwriters’ discounts and commissions, will
be approximately $130,000. The Company
intends to use the net proceeds for general
working capital.
The Company’s executive officers, directors and 5% or greater
shareholders (collectively, the “Affiliates”) have
entered into 90 day Lock-Up Agreements with the Representative
pursuant to which they have agreed not to sell, transfer, assign or
otherwise dispose of the shares of the Company’s Common Stock
owned by them, subject to certain exclusions as set forth therein.
Joseph Gunnar & Co., LLC, a broker-dealer and member of FINRA
(the “FINRA Member”) who participated in the Offering,
also entered into a 180 day Lock-Up Agreement with the
Representative covering shares of our Common Stock which had been
previously issued to it in January 2019 as compensation under the
terms of an advisory agreement. The forms of Lock-Up Agreements
executed by the Company’s executive officers, directors and
5% or greater shareholders, as well as by Joseph Gunnar & Co.,
LLC, are filed as Exhibit 10.1 and 10.2, respectively, to this
Current Report on Form 8-K and are incorporated herein by
reference.
A copy of the Underwriting Agreement is filed as Exhibit 1.1 to
this Current Report on Form 8-K and is incorporated herein by
reference. The Underwriting Agreement has been included to provide
investors and security holders with information regarding its
terms. It is not intended to provide any other factual information
about the Company. The representations, warranties and covenants
contained in the Underwriting Agreement were made only for purposes
of such agreement and as of specific dates, were solely for the
benefit of the parties to such agreement, and may be subject to
limitations agreed upon by the contracting parties, including being
qualified by confidential disclosures exchanged between the parties
in connection with the execution of the Underwriting Agreement. The
representations and warranties may have been made for the purposes
of allocating contractual risk between the parties to the agreement
instead of establishing these matters as facts, and may be subject
to standards of materiality applicable to the contracting parties
that differ from those applicable to investors. The foregoing
description of the terms of the Underwriting Agreement does not
purport to be complete and is qualified in its entirety by
reference to the Underwriting Agreement. Investors should review
that document as well as the Registration Statement and Prospectus
Supplement for a complete understanding of the terms and conditions
associated with the Offering.
The form of Representative’s Warrant is filed as Exhibit 4.1
to this Current Report on Form 8-K and is incorporated herein by
reference.
This Current Report contains forward-looking statements that
involve risk and uncertainties, such as statements related to the
amount of net proceeds expected from the Offering. The risks and
uncertainties involved include various risks detailed in the
Company’s SEC filings from time to time.