Level Brands, Inc. (NYSE:LEVB), the marketing and branding company behind the “kathy ireland® Health & Wellness” line of CBD products, recently announced that it closed its acquisition of Cure Based Development, LLC, the owner of cbdMD, in an all-stock transaction. Given the vertically-integrated nature of Cure Based Development, LLC’s operations, many investors are left wondering what will happen to Level Brands’ licensing agreement with CBD giant Isodiol International Inc. (CSE:ISOL) (OTC:ISOLF).
Level Brands’ Deal with Isodiol
Back in January 2018, Level Brands and Isodiol International announced an amendment to the license agreement that they entered into in December 2017. The amendment to the agreement extended the term from 5 years to 10 years, as well as expanded the territorial coverage from North America to worldwide.
On the surface, this term extension sounded like great news for Isodiol. To the contrary, the licensing agreement was actually more favorable to Level Brands.
“Under the License Agreement, Isodiol will work with Level Brands to develop consumer products for its kathy ireland® Health & Wellness brand, and for Level Brands subsidiary I’M1, the company’s lifestyle brand for men, as well as products under the Chef Andre Carthen and Nicholas Walker brands, which are licensed by Level Brands. Encore Endeavor One (EE1), Level Brands’ corporate brand management subsidiary and producer of experiential entertainment events, will provide strategic advisory services for the new product lines. Level Brands will receive an initial US$2 million payment in the form of Isodiol shares and initial cash payments of US$62,500 due at execution of the licensing agreement and on June 30, 2018. During the term of the agreement Level will also receive US$750,000 per quarter in the form of Isodiol shares and a 3% royalty on all gross sales of branded products. No additional consideration was issued for the expanded territorial coverage from North America to worldwide.”
Cure Based Development
Cure Based Development’s brand, cbdMD offers a consumer-focused selection of cannabidiol, a.k.a. CBD, products primarily through its e-commerce website, as well as through 700+ third-party locations. Aside from Cure Based Development’s impressive network of retailers, the company has complete control over its supply chain as a vertically integrated company.
First, all of cbdMD’s industrial hemp is grown using organic practices on their farms in Kentucky and Colorado, before being sent to its Charlotte, North Carolina-based manufacturing facility. Here, cbdMD extracts cannabidiol using a CO2 extraction process to produce 100%, all-natural, non-GMO, vegan, and gluten-free CBD oil which is used as the basis for its extensive product line.
With seed-to-sale production in place, and current product offerings including CBD gummies, CBD tinctures, CBD topical, CBD bath bombs, CBD oils, and CBD pet products, cbdMD seemingly provides Level Brands with all of the infrastructure it needs to leave Isodiol out of the equation.
Beyond that, cbdMD was founded by Scott Coffman, the founder of Blu-Ecig. Coffman not only started Blu, but also sold it to Lorillard Tobacco for $135 million in cash. Rather than using this opportunity to successfully exit another business, Coffman will join the Level Brands Board of Directors as a significant shareholder, and will also continue as CEO of cbdMD.
Since the licensing agreement above only covers specific brand names like “kathy ireland® Health & Wellness,” what is stopping Level Brands from leaving Isodiol out of the cbdMD narrative?
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