Edible Garden Enters Into Warrant Exercise Transaction for $3.0 Million in Gross Proceeds

Rhea-AI Summary

Edible Garden (Nasdaq: EDBL) has entered into a warrant exercise agreement with an institutional investor for $3.0 million in gross proceeds. The transaction involves the exercise of 8,330,000 Class B Warrants at $0.36 per share, expected to generate net proceeds of approximately $2.8 million after fees.

In exchange for the immediate cash exercise, the investor will receive new Class A and B Warrants to purchase up to 8,330,000 shares each. The new warrants will have an exercise price of $0.36 per share, with Class A Warrants expiring in five years and Class B Warrants in eighteen months. Maxim Group served as the warrant inducement agent and financial advisor.

Positive

• Secured immediate cash injection of $2.8 million net proceeds
• Successful warrant exercise transaction at $0.36 per share, showing investor confidence

Negative

• Potential future dilution from new warrants totaling 16,660,000 shares
• Additional warrant issuance may put downward pressure on stock price

Insights

Financial Analyst

The warrant exercise transaction represents a critical financial maneuver for Edible Garden, providing an immediate $2.8 million in net proceeds. This capital injection is substantial given the company's micro-cap status with a market cap of just $2.76 million. The deal structure is complex but strategic - the company induces the exercise of existing warrants at $0.36 per share while issuing new warrants with the same strike price but different expiration terms.

The transaction effectively doubles the potential dilution with 16.66 million new warrants (8.33M Class A and 8.33M Class B) being issued in exchange for exercising 8.33 million existing warrants. The different expiration periods (5 years for Class A and 18 months for Class B) create a tiered approach to potential future capital raises. While the immediate cash infusion strengthens the balance sheet, the warrant structure suggests ongoing capital needs and potential future dilution risks.

For retail investors, this type of transaction typically indicates a company needing immediate capital while being willing to accept significant future dilution. The $0.36 strike price on all warrants creates a clear price level to watch, as it represents both a potential support and resistance point in future trading.

Legal Expert

The private placement structure under Section 4(a)(2) of the Securities Act highlights important regulatory compliance aspects of this transaction. By limiting the offering to accredited investors and committing to file a registration statement for the underlying shares, the company maintains regulatory compliance while executing a complex securities transaction. The inclusion of both immediate registration requirements and resale restrictions demonstrates a balanced approach to securities law compliance.

The warrant structure, particularly the bifurcation between Class A and Class B warrants with different expiration terms, creates distinct legal frameworks for future potential exercises. This approach provides flexibility while maintaining regulatory compliance through proper disclosures and restrictions. The commitment to file a registration statement for the underlying shares indicates proactive compliance management and consideration for future liquidity needs of warrant holders.

BELVIDERE, N.J., Dec. 23, 2024 (GLOBE NEWSWIRE) -- Edible Garden AG Incorporated (“Edible Garden” or the “Company”) (Nasdaq: EDBL, EDBLW), a leader in controlled environment agriculture (CEA), locally grown, organic, and sustainable produce and products, announced today that it has entered into an agreement with a single institutional investor that is an existing holder of its warrants wherein the investor agreed to exercise 8,330,000 outstanding Class B Warrants (the “Existing Warrants”) to purchase an aggregate of 8,330,000 shares of common stock for cash at the exercise price of $0.36 per share. These warrants were previously issued in a public offering which closed in September 2024.

The net proceeds of the exercise of the Existing Warrants to the Company, after deducting estimated expenses and fees, are expected to be approximately $2.8 million.   

Maxim Group LLC acted as warrant inducement agent and financial advisor in connection with the transaction.

In consideration for the immediate exercise of the Existing Warrants for cash, the exercising holder will receive new Class A Warrants to purchase up to an aggregate of 8,330,000 shares of common stock and new Class B Warrants to purchase up to an aggregate of 8,330,000 shares of common stock in a private placement pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. The new Class A and B Warrants will be immediately exercisable for one share of common stock at an exercise price of $0.36 per share. The new Class A Warrants will expire five years from the issuance date and the new Class B Warrants will expire eighteen months from the issuance date.

The New Warrants described above were offered in a private placement pursuant to an applicable exemption from the registration requirements of the Securities Act and, along with the shares of common stock issuable upon their exercise, have not been registered under the Securities Act, and may not be offered or sold in the United States absent registration with the SEC or an applicable exemption from such registration requirements. The securities were offered only to accredited investors. The Company has agreed to file a registration statement with the SEC covering the resale of the shares of common stock issuable upon exercise of the New Warrants.

This press release shall not constitute an offer to sell or a solicitation of an offer to buy these securities, nor shall there be any sale of these securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

About Edible Garden®
Edible Garden AG Incorporated is a leader in controlled environment agriculture (CEA), locally grown, organic and sustainable produce and products backed by Zero-Waste Inspired® next generation farming. Offered at over 5,000 stores in the US, Edible Garden is disrupting the CEA and sustainability technology movement with its safety-in-farming protocols, use of sustainable packaging, patented GreenThumb software and self-watering in-store displays. The Company currently operates its own state-of-the-art greenhouses and processing facilities in Belvidere, New Jersey and Grand Rapids, Michigan, and has a network of contract growers, all strategically located near major markets in the U.S. Its proprietary GreenThumb 2.0 patented (US Nos.: US 11,158,006 B1, US 11,410,249 B2 and US 11,830, 088 B2) software optimizes growing in vertical and traditional greenhouses while seeking to reduce pollution-generating food miles. Its proprietary patented (U.S. Patent No. D1,010,365) Self-watering display is designed to increase plant shelf life and provide an enhanced in-store plant display experience. Edible Garden is also a developer of ingredients and proteins, providing an accessible line of plant and whey protein powders under the Vitamin Way® and Vitamin Whey® brands. In addition, the Company offers a line of sustainable food flavoring products such as Pulp gourmet sauces and chili-based products. For more information on Edible Garden go to https://ediblegardenag.com/.

Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks, uncertainties and assumptions that are difficult to predict including the timing of closing the offering. The words “expect,” “may,” “seeking,” “will,” and similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including market and other conditions, the Company’s ability to achieve its growth objectives, and other factors set forth in the Company’s filings with the Securities and Exchange Act Commission, including the Company’s annual report on Form 10-K for the year ended December 31, 2023 and subsequent quarterly reports. Actual results might differ materially from those explicit or implicit in the forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. The Company undertakes no obligation to update any such forward-looking statements after the date hereof to conform to actual results or changes in expectations, except as required by law.

Investor Relations Contact:
Crescendo Communications, LLC
212-671-1020
EDBL@crescendo-ir.com

FAQ

How much did Edible Garden (EDBL) raise through the warrant exercise transaction?

Edible Garden raised $3.0 million in gross proceeds, with expected net proceeds of approximately $2.8 million after deducting fees and expenses.

What is the exercise price of the new warrants issued by EDBL in December 2023?

The new Class A and B Warrants have an exercise price of $0.36 per share.

How many new warrants did EDBL issue in the December 2023 transaction?

EDBL issued new Class A Warrants for 8,330,000 shares and Class B Warrants for 8,330,000 shares, totaling 16,660,000 potential shares.

What are the expiration terms for EDBL's new warrant classes?

The new Class A Warrants expire five years from issuance, while the new Class B Warrants expire eighteen months from issuance.