Item
1.01
Entry into a Material Definitive
Agreement.
On October 10, 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
500,000 shares of its 8.0% Series A Cumulative Convertible
Preferred Stock, par value $0.001 per share (the “Series A
Convertible Preferred Stock”), at an Offering price of $10.00
per share. Pursuant to the Underwriting Agreement, the Company
granted the Representative a 45-day option to purchase up to an
additional 75,000 shares of Series A Convertible Preferred Stock to
cover over-allotments, if any.
The Series A Convertible Preferred Stock has been approved for
listing on the NYSE American under the symbol “YCBD PR
A,” and trading of the Series A Convertible Preferred Stock
on the NYSE American is expected to commence on October 21,
2019.
The Offering closed on October 16, 2019. The net proceeds to the
Company from the Offering were approximately $4.27 million after
deducting underwriting discounts and commissions and estimated
Offering expenses payable by the Company.
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 October
10, 2019 (the “Preliminary Prospectus Supplement”) and
the final prospectus supplements dated October 11, 2019, each filed
with the SEC on October 11, 2019 and October 15, 2019
(collectively, 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
Timothy B. Gavigan, PLLC 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 received discounts and commissions of 7.5% of the
gross cash proceeds received by the Company from the sale of the
shares of Series A Convertible Preferred Stock in the Offering. The
Company issued the Representative a warrant (the
“Representative’s Warrant”) to purchase 47,923
shares of its common stock exercisable at $3.9125
per share, and reimbursed it $100,000 for its out of pocket
expenses, which included fees of counsel to the Representative,
subject to compliance with FINRA Rule 5110(f)(2)(D).
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.
The Company estimates the total expenses of this Offering, which
will be payable by us, excluding the underwriters’ discounts
and commissions, will be approximately $347,000. 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.
The forms of Lock-Up Agreements executed by the Company’s
executive officers, directors and 5% or greater shareholders is
filed as Exhibit 10.1 to this Current Report on Form 8-K and is
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.
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.