Charlotte NC-based, Level Brands, Inc. (NYSE American: LEVB), a brand management and licensing company owned by Kathy Ireland and focused on wellness, fashion, fitness and beauty consumer products, bought Cure Based Development, LLC, owner of consumer wellness brand cbdMD, in an all-stock transaction in late December 2018.
Since then, its stock has jumped 71% to $4.57.
Isodiol, another maker of CBD products, had been under contract with Level Brands for the previous year for brand management of its CBD products. But it cancelled its contract recently, likely prompting LB’s purchase of cbdMD. In cancelling, Isodiol spoke highly of the Ireland brand, but said the terms had become too expensive and dilutive to its shares, given its share price of $1.12 was down 50% from Sept 2017.
Level Brands was started and is led by Kathy Ireland, former supermodel, and investment banker Martin Sumichrast. It had roughly $8 million in annual revenue as of August 2018, and a market cap of $45 million. It has contracts with fitness and eyewear brands, and a vape lounge, among others.
It’s newly-purchased CBD product line, cbdMD, offers a large selection of US-grown, hemp-based, organic CBD wellness products, including gummies, tinctures, topicals, bath bombs, oils, and pet products, through its ecommerce website, www.cbdMD.com, and through 700 third party retail locations. It is manufactured in Charlotte, NC using all-natural CBD extracted from non-GMO, vegan, and gluten-free industrial hemp.
Level Brands will issue 15 million shares of common stock now, and up to 15 million shares more during the first 5 years if revenue milestones of $300 million are met.
“The cbdMD brand has shown consistent month-over-month double-digit growth rates and, with the capital we have available, we can significantly accelerate the revenue growth… said Martin Sumichrast, Chairman and CEO of Level Brands.
The revenue milestones which will trigger additional payments from Level Brands are: $20 million in the first year, $40 million in the next year, $80 million in the next 18 months and $160 million in the final 18 months.
Level Brands reported 8 million shares outstanding in August. This purchase more than doubles that to 23 million, not including the 15 million additional shares that could be issued over the next 5 years.
“Now that the Farm Bill has been approved…the CBD market should drastically expand. CBD products will now have access to retailers nationwide, as well as online channels…(and) should gain mainstream consumer acceptance. We believe cbdMD will significantly gain market share…I believe Level Brands now becomes one of the leading CBD consumer companies in America, said Sumichrast.
Scott Coffman, the Founder and CEO of cbdMD added, “We have built a reputation as a premier manufacturer of high-quality products at a very affordable price… Now with the passage of the Farm Bill, we expect…our business will expand as major retail chains start to carry CBD, (which) will encourage a larger customer base…to try our products. In addition, our access to athletes and the sporting world should enhance the marketability of our products”.
Coffman also founded Blu-Ecig, which he sold to Lorillard Tobacco for $135 million. Coffman will continue as CEO of cbdMD, and will be a significant shareholder of Level Brands.
“…We also believe in growing our e-commerce channel,” said Caryn Dunayer, President of cbdMD. “We will separate ourselves from our competitors through our unique online marketing campaigns…Our online re-order programs provide an easy, cost effective way to get our products to our customers.”
Source Level Brands press release