Update 01/21/21 Note* Following a name and symbol change Level Brands is now cbdMD, Inc. (AMEX: YCBD)
Level Brands, Inc. (NYSE: LEVB) is an innovative marketing and licensing company that provides bold, unconventional, and socially responsible branding for leading businesses.
On October 2nd, the company announced the closing of its previously announced underwritten public offering for total gross proceeds of $6,899,998. The Company sold an aggregate of 1,971,428 shares of its common stock at a purchase price of $3.50 per share in this offering. The Company intends to use the net proceeds from the offering for brand development and expansion, acquisitions and general working capital. This financial closure brings significant financial flexibility and enhances the overall liquidity for LEVB.
On the financial performance front, the company reported excellent numbers in its Q3 results on August 14th, 2018. The Company’ performance reflected the strong foundation that Level has laid. By leveraging the expertise and talent of the Kathy Ireland® Worldwide executive team, Level Brands has a distinct competitive advantage in securing strategic licenses and joint venture partnerships for its clients, positively impacting its ability to continue to grow the portfolio of brands it manages and represent. Moreover, the company also continues to be at the forefront of the CBD industry. On September 21st, the company announced the online launch of five new cannabidiol (CBD) products under the Kathy ireland® Health & Wellness brand.
Highlights of quarterly performance:
- Total Net Sales up 105% for the nine months ended June 30 compared to same period 2017
- Gross Profit as a Percentage of Net Sales was 65.4% in Q3 and 73.3% for the nine months ended June 30
- Net Income of $206,074 in Q3 and $477,542 for the nine months ended June 30 vs. losses in year-ago periods
Additionally, it’s important to note the royalty components of many of the licensing deals signed this year have yet to be generated and therefore are not reflected in the aforesaid reported numbers. As LEVB execute on these agreements and continue to sign more clients, its pipeline of potential future royalties grows exponentially, and with no inventory and tight cost controls, it believes that the high margin operation should see much of this reach its bottom line, which should lead to significant shareholder value creation.
Industry Potential: The management believes that the CBD industry will see enormous growth over the next decade on a global scale. Recently, the Brightfield Group reported that the global market for CBD could top $22 billion in the next four years. If passed, the 2018 Farm Bill which includes the Hemp Farming Act of 2018, will remove hemp as a designated controlled substance thereby legalizing the crop under federal law, which will allow CBD to be legally sold in all 50 states. The passage of the 2018 Farm Bill, which would replace the 2017 Farm Bill which expires on September 30, 2018, would be a significant positive development for the industry.
Analyst tracking the stock are excited for what the future holds and believe that LEVB is ideally positioned to capitalize on multi-billion-dollar opportunities in millennial men’s lifestyle markets and the health and wellness arena for women and their families at every age.
About the Company: Level Brands is an innovative marketing and licensing company that provides bold, unconventional, and socially responsible branding for leading businesses. The focus of LEVB is licensing and corporate brand management for consumer products, including art, beauty, fashion, the beverage space, health and wellness, and entertainment. License brand marketing is at the core of the Level Brands businesses: Kathy ireland® Health & Wellness; Ireland Men One (I’M1), a men’s lifestyle brand established to capitalize on potentially lucrative licensing and co-branding opportunities with brands focused on millennials; Encore Endeavor One (EE1), a provider of corporate brand-management services and producer of experiential entertainment events and products across multiple platforms.
Business Model:
- LEVB provide instant brand recognition, creating bold, socially-responsible branding for leading businesses through its Kathy ireland®Health & Wellness and Ireland Men One (I’M1) brands.
- The company’ brand management business helps companies develop strategies that create brand awareness, access new markets, and sell products.
- Consumer-products focused, targeting health & wellness, fashion, beauty, and entertainment.
- LEVB is building a strong and consistent (recurring) royalty stream from its services and product sales.
Recent performance highlights:
- Signed 10-year, multimillion-dollar cannabidiol (CBD) products license deal with Isodiol International Inc. (CSE: ISOL) (OTCQB: ISOLF) (FSE: LB6A.F)
- Isodiol launched first five new CBD kathy ireland® Health & Wellness branded products as part of an Isodiol license agreement
- Brought together Isodiol and SG Blocks, another Level Brands’ client, to roll-out KURE Corp.’s specialty Vape Pod™ stores
- Signed five-year licensing agreement with Gravocore fitness system, launched in 2017 in an exclusive partnership with Amazon
- Partnered with BMG, a multinational record label, and the world’s fourth-largest music-publishing company, to launch a new record label with three project agreements
- Signed seven-year licensing agreement with Boston Therapeutics to market its diabetes supplement, Sugardown®; deal generates $850,000 in upfront fees plus royalties on gross sales
- Party to a three-year licensing agreement with Lamps Plus to showcase the artwork of world-renowned neo-pop artist Romero Britto
- Damiva launched 100% natural women’s personal care products into health food stores with Kathy ireland® Worldwide
- Signed a five-year licensing deal with Dynasty Group USA, one of the largest American-owned manufacturers of high-quality, cruelty-free cosmetic brushes
- Signed a licensing agreement with Society Hill Spirits for new Beauty & Pin-Ups vodka line
Opened corporate office and design studio in Los Angeles
Financials
LEVB has a fiscal year end of September 30
- Revenue – Total net sales increased 79% and 105% to $3.2 million and $7.0 million, respectively, for the three and nine-month periods ended June 30, 2018, from the comparable periods in fiscal 2017.
- Gross profit – as a percentage of net sales was 65.4% for the three months ended June 30, 2018. For the nine-month period, gross profit as a percentage of net sales was 73.3%.
- Net income – attributable to common shareholders improved 197.8% to $206,074 in the three months ended June 30, 2018, from the comparable period in fiscal 2017. For the nine-month period, net income improved 134.1% to $477,542, up from a loss of $1.4 million in the prior-year comparable period.
Key risk factors and potential stock drivers:
- Analysts expect that revenue and earnings will be the critical catalyst for Canopy Growth over the near to medium term and the company is expected to grow significantly especially as a result of their operations within Canada which is a month from legalizing marijuana federally.
- Notwithstanding CGC’ unique and differentiating factors, the company is still exposed to risk related to competition and peer pressure. There are other highly diversified cannabis companies in the industry. Additionally, there’s a cannabis ETF that recently launched for even more diversification.
- Company’ ability to grow revenue while significantly improving its profitability will continue to remain a critical price sensitivity for the company
- The company continues to face significant regulatory risks and uncertainty, while at the same time additional states legalize cannabis.
- The cannabis industry is, in many respects, still in the early stages of its development and only time would differentiate between real winners and laggards. As far as choosing an option with a relative advantage is concerned, CGC is preferred choice with upside potential.
Stock Chart:
Comments:
- On Monday, October 15th, 2018, LEVB was at $4.81, on volume of 305K shares exchanging hands. Market capitalization is $50.376 million. The current RSI is 52.71
- In the past 52 weeks, shares of LEVB have traded as low as $2.74 and as high as $24.91
- At $4.81, shares of LEVB are trading above its 50-day moving average (MA) at $3.88 and above its 200-day moving average (MA) at $4.19
- The present support and resistance levels for the stock are at $4.50 & $5.32 respectively.
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