As filed with the Securities and Exchange Commission
on September 26, 2018
Registration No. 333-_______
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933
Level Brands, Inc.
(Exact name of registrant as specified in its charter)
North Carolina
(State or other jurisdiction of incorporation or
organization)
2300
(Primary Standard Industrial Classification Code
Number)
47-3414576
(I.R.S. Employer Identification Number)
4521 Sharon Road, Suite 450
Charlotte, NC 28211
Telephone (704) 445-5800
(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive
offices)
Mr. Mark S. Elliott
Chief Financial Officer / Chief Operating Officer
Level Brands, Inc.
4521 Sharon Road, Suite 450
Charlotte, NC 28211
Telephone (704) 362-6345
(Name, address, including zip code, and telephone
number,
including
area code, of agent for service)
———————
with copies to:
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Brian A. Pearlman, Esq.
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Leslie Marlow, Esq.
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Charles B. Pearlman, Esq.
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Hank Gracin, Esq.
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Pearlman Law Group LLP
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Patrick J. Egan, Esq.
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200 South Andrews Avenue, Suite 901
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Gracin & Marlow, LLP
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Fort Lauderdale, FL 33301
Telephone (954) 880-9484
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The Chrysler Building
405 Lexington Avenue, 26th Floor
New York, NY 10174
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Telephone (212) 907-6457
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Approximate date of commencement of proposed sale to the
public:
As soon as practicable after the effective date of this
registration statement.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, check the following box:
☒
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please
check the following box, and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering.
☐
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box, and list
the Securities Act registration statement number of the earlier
effective registration statement for the same
offering.
☐
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box, and list
the Securities Act registration statement number of the earlier
effective registration statement for the same
offering.
☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,”
“accelerated filer,” “smaller reporting
company” and “emerging growth company” in Rule
12b-2 of the Exchange Act.
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Large accelerated filer
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☐
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Accelerated filer
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☐
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Non-accelerated filer
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☐
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Smaller reporting company
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☑
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Emerging growth company
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☑
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If
an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 7(a)(2)(B) of the Securities
Act.
☐
CALCULATION OF REGISTRATION FEE
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Title of Each Class of Securities to be Registered
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Proposed
Maximum
Aggregate
Offering
Price
(1)
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Amount of
Registration
Fee
(2)
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Common stock, par value $0.001 per share
(2)(3)
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$
6,900,000
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$
859.05
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Representative’s Warrants
(4)
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Shares of common stock underlying
Representative’s Warrants
(2)(5)
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225,000
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28.02
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Total
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$
7,125,000
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$
887.07
(6)
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———————
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(1)
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Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(o) of the Securities Act of
1933, as amended (the “Securities Act”).
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(2)
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Pursuant to Rule 416 of the Securities Act, the shares of common
stock registered hereby also includes an indeterminable number of
additional shares of common stock as may from time to time become
issuable by reason of stock splits, stock dividends,
recapitalizations or other similar transactions.
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(3)
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Includes offering price of shares that the underwriter has the
option to purchase to cover over-allotments, if any.
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(4)
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No fee required pursuant to Rule 457(g) under the Securities
Act.
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(5)
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Estimated solely for the purpose of calculating the registration
fee pursuant to Rule 457(g) under the Securities Act. The
representative’s warrants are exercisable at a per share
exercise price equal to 125% of the public offering price per share
of the common stock offered hereby. As estimated solely for the
purpose of calculating the registration fee pursuant to Rule 457(g)
under the Securities Act, the proposed maximum aggregate offering
price of the representative’s warrants is $225,000, which is
equal to 125% of $180,000 (3% of $6,000,000).
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(6)
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Pursuant to Rule
457(p) Level Brands, Inc. (the "Registrant") is offsetting $887.07
of the filing fee previously paid with respect to the registration
statement on Form S-3 (File Number 333-226854) filed by the
Registrant with the Securities and Exchange Commission on August
15, 2018 against the entire filing fee of $887.07 due under this
registration statement.
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The registrant hereby amends this registration statement on such
date or dates as may be necessary to delay its effective date until
the registrant shall file a further amendment that specifically
states that this registration statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of
1933, as amended, or until the registration statement shall become
effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may
determine.
The information in this preliminary prospectus is not complete and
may be changed. These securities may not be sold until the
registration statement filed with the Securities and Exchange
Commission is effective. This preliminary prospectus is not an
offer to sell these securities, nor does it seek an offer to buy
these securities in any jurisdiction where the offer or sale is not
permitted.
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PRELIMINARY PROSPECTUS
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SUBJECT
TO COMPLETION
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DATED
SEPTEMBER 26, 2018
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1,149,425
Shares
Common Stock
Level Brands,
Inc.
We are offering 1,149,425 shares of our common stock
pursuant to this prospectus
at
an assumed offering price of $5.22 per share (which was the last
reported sale price of our common stock on September 24,
2018)
.
Our common stock is currently listed on the NYSE American under the
symbol “LEVB.” The last reported sale price of our
common stock on September 24, 2018 was
$5.22 per share.
Investing in our common stock involves a high degree of risk. See
“Risk Factors” beginning on page 5 of this prospectus
for a discussion of information that you should consider before
investing in our securities.
Neither the Securities and Exchange Commission, or the SEC, nor any
state securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
We are an “emerging growth company” as that term is
used in the Jumpstart Our Business Startups Act of 2012 (the
“JOBS Act”) and, as such, have elected to comply with
certain reduced public company reporting requirements. See
“Prospectus Summary—Implications of Being an Emerging
Growth Company.”
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Per
Share
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Total
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Public offering
price
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$
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$
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Underwriting
discounts and commissions
(1)
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$
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$
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Proceeds, before
expenses, to us
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$
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$
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(1)
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The
underwriters will receive compensation in addition to the discounts
and commissions. The registration statement, of which this
prospectus is a part, also registers for sale warrants to purchase
34,483 shares of our common stock to be issued to the
representative of the underwriters (based on the assumed
offering price of $5.22 per share, which was the last reported sale
price of our common stock on September 24, 2018). We have
agreed to issue the warrants to the representative of the
underwriters as a portion of the underwriting compensation payable
to the underwriters in connection with this offering. See
“Underwriting” for a description of compensation
payable to the underwriters.
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We have
granted the representative of the underwriters an option to
purchase up to an additional 172,414 shares of common
stock from us (based on the assumed offering price of $5.22
per share, which was the last reported sale price of our common
stock on September 24, 2018) at the public offering price,
less the underwriting discounts and commissions, within 45 days
from the date of this prospectus to cover over-allotments, if any.
If the representative of the underwriters exercises the option in
full, the total underwriting discounts and commissions payable will
be $ , and
the total proceeds to us, before expenses, will be
$
.
The
underwriters expect to deliver our shares to purchasers in the
offering on or
about
, 2018.
ThinkEquity
a division of Fordham Financial Management, Inc.
The
date of this prospectus is
,
2018
TABLE OF CONTENTS
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Page
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PROSPECTUS SUMMARY
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1
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THE OFFERING
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3
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SUMMARY CONSOLIDATED FINANCIAL DATA
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4
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RISK FACTORS
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5
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
INFORMATION
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17
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USE OF PROCEEDS
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18
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CAPITALIZATION
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19
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DILUTION
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20
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MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
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21
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DIVIDEND POLICY
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21
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DESCRIPTION OF CAPITAL STOCK
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DESCRIPTION OF SECURITIES WE ARE OFFERING
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UNDERWRITING
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24
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LEGAL MATTERS
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29
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EXPERTS
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29
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WHERE YOU CAN FIND ADDITIONAL INFORMATION
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29
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
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29
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You should rely only on the information contained in this
prospectus
and any free
writing prospectus that we have authorized for use in connection
with this offering. Neither we nor the underwriters have authorized
anyone to provide you with information that is different. We are
offering to sell, and seeking offers to buy, the securities covered
hereby only in jurisdictions where offers and sales are permitted.
The information in this prospectus is accurate only as of the date
of this prospectus, regardless of the time of delivery of this
prospectus or any sale of the securities covered hereby. Our
business, financial condition, results of operations and prospects
may have changed since that date. We are not, and the underwriters
are not, making an offer of these securities in any jurisdiction
where the offer is not permitted. You should also read and consider
the information in the documents to which we have referred you
under the caption “Where You Can Find Additional
Information” in the prospectus. In addition, this prospectus
contains summaries of certain provisions contained in some of the
documents described herein, but reference is made to the actual
documents for complete information. All of the summaries are
qualified in their entirety by the actual documents. Copies of some
of the documents referred to herein have been filed, will be filed
or will be incorporated by reference as exhibits to the
registration statement of which this prospectus is a part, and you
may obtain copies of those documents as described below under the
heading “Where You Can Find Additional
Information.”
For investors outside the United States: Neither we nor any of the
underwriters have taken any action that would permit this offering
or possession or distribution of this prospectus in any
jurisdiction where action for that purpose is required, other than
in the United States. Persons outside the United States who come
into possession of this prospectus must inform themselves about,
and observe any restrictions relating to, the offering of the
securities covered hereby and the distribution of this prospectus
outside of the United States.
Unless otherwise indicated, information in this prospectus
concerning economic conditions, our industry, our markets and our
competitive position is based on a variety of sources, including
information from independent industry analysts and publications, as
well as our own estimates and research. Our estimates are derived
from industry and general publications, studies and surveys
conducted by third-parties, as well as data from our own internal
research. Industry publications, studies and surveys generally
state that they have been obtained from sources believed to be
reliable.
Unless the context otherwise indicates, when used herein, the terms
Level Brands,” “we,” “us, “our”
and similar terms refer to Level Brands, Inc., a North Carolina
corporation formerly known as Level Beauty Group, Inc., and our
subsidiaries Beauty and Pinups, LLC, a North Carolina limited
liability company which we refer to as “Beauty &
Pin-Ups”, I | M 1, LLC, a California limited liability
company, which we refer to as “I’M1”, Encore
Endeavor 1 LLC, a California limited liability company which we
refer to as “EE1” and Level H&W, LLC, a North
Carolina limited liability company which we refer to as
“Health & Wellness.”
The information contained on our websites at
www.levelbrands.com
and
www.beautyandpinups.com
is
not part of this prospectus.
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Implications
of being an emerging growth company
We
qualify as an “emerging growth company” as defined in
the JOBS Act. As an emerging growth company, we intend to take
advantage of specified reduced disclosure and other requirements
that are otherwise applicable generally to public companies. These
provisions include:
●
allowance to
provide only two years of audited financial statements in addition
to any required unaudited interim financial statements with
correspondingly reduced “Management’s Discussion and
Analysis of Financial Condition and Results of Operations”
disclosures;
●
reduced disclosure
about our executive compensation arrangements;
●
no non-binding
advisory votes on executive compensation or golden parachute
arrangements; and
●
exemption from
auditor attestation requirements in the assessment of our internal
control over financial reporting.
We may
take advantage of these provisions for up to five years or such
earlier time that we are no longer an emerging growth company. We
would cease to be an emerging growth company on the date that is
the earliest of: (i) the last day of the fiscal year in which we
have total annual gross revenues of $1.07 billion or more; (ii) the
last day of our fiscal year following the fifth anniversary of the
date of the completion of our initial public offering; (iii) the
date on which we have issued more than $1.0 billion in
nonconvertible debt during the previous three years; or (iv) the
date on which we are deemed to be a large accelerated filer under
the rules of the SEC. We have taken advantage of reduced reporting
requirements in this prospectus. Accordingly, the information
contained herein may be different than the information you receive
from other public companies in which you have beneficial
ownership.
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SUMMARY CONSOLIDATED FINANCIAL DATA
The tables below summarize our consolidated financial information
for the periods indicated. We derived the consolidated financial
information for fiscal 2017 and fiscal 2016 from our audited
consolidated financial statements incorporated by reference in this
prospectus, and the financial information for the first nine months
of fiscal 2018 and fiscal 2017 from the unaudited condensed
consolidated financial statements incorporated by reference in this
prospectus.
The historical financial data presented below is
not necessarily indicative of our financial results in future
periods. You should read the summary consolidated financial data
together with our consolidated financial statements and the related
notes and “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and other
information included elsewhere in this prospectus or otherwise
incorporated by reference. Our consolidated financial statements
are prepared and presented in accordance with U.S. generally
accepted accounting principles.
Selected income statement data
:
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Selected
balance sheet data:
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(1)
Pro
forma information discussed above is unaudited and illustrative
only. Pro forma gives effect to the sale by us of
1,149,425 shares of common stock in this offering at
an assumed public offering price of $5.22 per share
(which was the last reported sale price of our common stock on the
NYSE American on September 24, 2018), after deducting
the estimated underwriting discounts and commissions and estimated
offering expenses.
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RISK FACTORS
An investment in our securities involves a high degree of risk. You
should carefully consider the risks and uncertainties described
below together with all of the other information contained or
incorporated by reference in this prospectus, including our
consolidated financial statements and the related notes, before
making a decision to invest in our securities. You should also
consider the risks, uncertainties and assumptions discussed under
Item 1A, “Risk Factors,” in Part I of our Annual Report
on Form 10-K for the year ended September 30, 2017 and Item 1A,
“Risk Factors,” in our Quarterly Report on Form 10-Q
for the period ended June 30, 2018 together with any updates or
other risks contained in other filings that we may make with the
SEC after the date of this prospectus, all of which are
incorporated herein by reference, and may be amended, supplemented
or superseded from time to time by other reports we file with the
SEC in the future and any additional prospectus supplement. If any
of these risks actually occur, our business, results of operations
and financial condition could suffer. In that case, the market
price of our common stock could decline, and you may lose all or
part of your investment.
RISKS RELATED TO THIS OFFERING
You will experience immediate and
substantial dilution in the book value per share of the common
stock you purchase
.
The
public offering price per share of our common stock will be
substantially higher than the net tangible book value per share of
our common stock immediately prior to the offering. After giving
effect to the sale of 1,149,425 shares of our common
stock, at an assumed public offering price of
$5.22 per share (which was the last reported
sale price of our common stock on September 24, 2018) and
after deducting the estimated underwriting discounts and estimated
offering expenses payable by us, purchasers of our common stock in
this offering will incur immediate dilution of $3.41
per share in the net tangible book value of the common stock they
acquire. In addition, to the extent that outstanding stock options
or warrants have been or may be exercised or other shares issued,
you may experience further dilution. For a further description of
the dilution that investors in this offering will experience, see
“Dilution.”
Our management will have broad discretion over the use and
investment of the net proceeds received in this offering and might
not apply the proceeds in ways that increase the value of your
investment in our common stock.
Our management will have broad discretion over the use and
investment of the net proceeds received from this offering, and you
will be relying on, and may not agree with, the judgment of
management regarding the application of these net proceeds.
Management intends to use the net proceeds received from this
offering as described in the section entitled “Use of
Proceeds.” While we may use a portion of the proceeds for
strategic acquisitions, we are not presently a party to any
agreements and there are no assurances we will ever acquire any
additional companies. The failure by management to apply these
funds effectively may result in financial losses that could have a
material adverse effect on our business and cause the price of our
common stock to decline. Management may invest the net proceeds
received from this offering in a manner that does not produce
income or increase value, which could have a material adverse
effect on our business and cause the price of our common stock to
decline.
RISKS RELATED TO OUR COMPANY
Kathy Ireland is not an officer or director of our company. We are
materially dependent upon our relationships with kathy
ireland® Worldwide and certain of its affiliates. If these
advisory agreements or license rights should be terminated or
expire, we would be deprived of the services and our business could
be materially adversely impacted.
While
affiliates of
kathy
ireland
® Worldwide are minority owners of both
I’M1 and EE1, the terms of the operating agreements for those
subsidiaries do not require them to provide any services to us. We
have entered into a non-exclusive advisory agreement with
kathy ireland
®
Worldwide, as amended, which expires in February 2025 under which
we engaged it to provide various consulting and advisory services
to us. Ms. Ireland serves in the non-executive role of Chairman
Emeritus and Chief Brand Strategist to us under this agreement. Ms.
Ireland is not a member of our management or board of directors,
the title Chairman Emeritus is an honorary title and she is not a
founder or co-founder of our company. Ms. Ireland provides services
to us solely under the terms of the non-exclusive advisory
agreement. We have also entered into advisory agreements with
additional affiliates of
kathy
ireland
® Worldwide, including Messrs. Roseberry,
Carrasco, Meharey and Mendoza, pursuant to which they provide
various management and advisory services to us, including key
operational roles at I’M1 and EE1. The initial terms of these
agreements expire in March 2019 and, if not renewed, thereafter are
on a month to month basis until terminated by either party. None of
these services are provided on an exclusive basis, each of these
individuals may have a conflict of interest in that they have a
long term relationship with Kathy Ireland and have derived
substantial income from
kathy
ireland
® Worldwide and there is no minimum number of
hours which are required to be devoted to us. In addition we have
obtained a royalty free right to license the intellectual property
related to
kathy
ireland
® Health & Wellness. Our business model is
materially dependent upon our continued relationship with
kathy ireland
®
Worldwide, Ms. Ireland and her affiliates, including Messrs.
Roseberry, Carrasco, Meharey and Mendoza. If we should lose access
to those relationships or if the reputation of Ms. Ireland and/or
kathy ireland
®
Worldwide were to be damaged, our results would suffer and there
are no assurances we would be able to continue to operate our
company and develop our brands as presently planned.
Our limited operating history does not afford investors a
sufficient history on which to base an investment
decision.
Level Brands was formed in March 2015. During fiscal 2016 and
fiscal 2015 our net sales were solely from our professional
products division. We began reporting revenues from our licensing
division and our entertainment division during the second
quarter of fiscal 2017. In September 2017, we entered into
wholesale license agreements for three new brands, including
kathy
ireland
® Health &
Wellness, a newly created brand. There are no assurances we will be
successful in generating net sales in future periods based upon
these new agreements. Our operations are subject to all the risks
inherent in the establishment of a new business enterprise. The
likelihood of success must be considered in light of the problems,
expenses, difficulties, complications and delays that are
frequently encountered in a
newly-formed company. There can be no assurance
that at this time that we will successfully implement our business
plan, operate profitably or will have adequate working capital to
meet our obligations as they become due. Prospective investors must
consider the risks and difficulties frequently encountered by early
stage companies, particularly in rapidly evolving markets. We
cannot be certain that our business strategy will be successful or
that we will successfully address these risks. In the event that we
do not successfully address these risks, our business, prospects,
financial condition, and results of operations could be materially
and adversely affected and we may not have the resources to
continue or expand our business operations.
Our subsidiaries I’M1 and EE1 have a limited operating
history and we recently entered into a license agreement licensing
the rights to certain intellectual property related to kathy
ireland ® Health & Wellness, a newly created brand with no
operating history, which does not afford investors a sufficient
history on our company which to base an investment
decision.
I’M1 and EE1 are entities formed in September 2016 and March
2016, respectively. We acquired membership interests in each of
these entities in January 2017. Both entities are in the early
stages of their businesses and we began reporting revenues from
each of these subsidiaries operations in the second quarter of
fiscal 2017. In September 2017 we entered into an exclusive license
agreement to license the trademark and intellectual property rights
for
kathy
ireland
® Health &
Wellness, a newly created brand with no operations. We began
generating revenues from this business unit in the first quarter of
fiscal 2018. Our operations are subject to all the risks inherent
in the establishment of a new business enterprise. The likelihood
of success must be considered in light of the problems, expenses,
difficulties, complications and delays that are frequently
encountered in a newly-formed company. There can be no assurance at
this time that we will operate profitably or will have adequate
working capital to meet our obligations as they become due.
Prospective investors must consider the risks and difficulties
frequently encountered by early stage companies, particularly in
rapidly evolving markets. We cannot be certain that our business
strategy will be successful or that we will successfully address
these risks. In the event that we do not successfully address these
risks, our business, prospects, financial condition, and results of
operations could be materially and adversely affected and we may
not have the resources to continue or expand our business
operations.
While we have been reporting net income to our shareholders in
fiscal 2018, we have a history of losses and there are no
assurances we will continue report profitable operations in future
periods.
We reported net losses to common shareholders of $1,738,734 and
$3,356,489 for fiscal 2017 and fiscal 2016, respectively. For the
first nine months of fiscal 2018, however, we reported net income
to common shareholders of $477,542. There are no assurances we will
generate substantial revenues from the new businesses, or that we
will be able to control our operating expenses in future periods to
a level that we will be able to continue to report profitable
operations or a net profit.
The terms of the various agreements between our company and kathy
ireland® Worldwide contain termination provisions which may
impact management's ability to make certain decisions regarding the
operation of our company
.
The
master advisory and consulting agreement with
kathy ireland
® Worldwide on which
we are materially dependent provides that the
agreement is immediately terminable by
kathy
ireland
® Worldwide if any
officers are terminated or resign, including Mr. Roseberry in his
role as President and co-Managing Director of I'M1 and EE1, or if
additional officers are appointed for each I'M1 and EE1 without the
consent of kathy ireland® Worldwide. The wholesale license
agreement for
kathy
ireland
® Health &
Wellness™ contains the right of
kathy
ireland
® Worldwide to
immediately terminate it
if any officers are terminated or
removed or additional officers are appointed with respect to either
I'M1 or EE1, or if we compete with or invest in a business that
competes with
kathy
ireland® Worldwide. We believe our relationship with
kathy ireland
®
Worldwide and its affiliates is good. It is possible, however, that
our management's ability to make certain operational decisions
which it believes are otherwise in the best interests of our
company could be restricted in future periods if these decisions
could result in triggering the rights of
kathy ireland
® Worldwide to
terminate any agreement.
Our business
depends on consumer spending patterns
.
Our business is sensitive to a number of factors that influence the
levels of consumer spending, including political and economic
conditions such as recessionary environments, the levels of
disposable consumer income, consumer debt, interest rates and
consumer confidence. Reduced consumer spending on beauty products
could have an adverse effect on our operating results in future
periods.
Substantially all of our net sales have been to a limited
number of customers, the loss of any of which would be materially
adverse to our company.
Substantially all of our net sales in the first nine months of
fiscal 2018, as well as in fiscal 2017 and 2016, were attributable
to sales to a limited number of customers. There are no assurances
sales to these customers will continue. While we expect to add
additional customers to our distribution network in the future for
our professional products division, and expand our licensing and
consulting clients in our other divisions, until such time as we
are successful in these efforts, of which there is no assurance,
any significant decrease in sales to any of our customers would
have a material adverse financial effect on our
company.
A significant amount of our net sales were from customers who are
identified as related parties, the loss of any of which would be
materially adverse to our company.
A significant amount of our net sales for the first nine months of
fiscal 2018 and fiscal 2017, totaling $1,550,000 and $1,731,238,
respectively, or approximately 22% and 39%, respectively, were from
customers who are identified as related parties. There are no
assurances sales to these customers will continue. While we expect
to add additional customers in all of our businesses as we expand
our licensing and consulting clients, until such time as we are
successful in these efforts, of which there is no assurance, any
significant decrease in sales to any of our customers would have a
material adverse financial effect on our company.
If we fail to promote and maintain our brands in the market, our
businesses, operating results, financial condition, and our ability
to attract customers will be materially adversely
affected.
Our success depends on our ability to create and maintain brand
awareness for our product offerings. This may require a significant
amount of capital to allow us to market our products and establish
brand recognition and customer loyalty. Additionally, many of the
companies offering similar products have already established their
brand identity within the marketplace. We can offer no assurances
that we will be successful in establishing awareness of our brands
allowing us to compete in this market. The importance of brand
recognition will continue to increase because low barriers of entry
to the industries in which we operate may result in an increased
number of direct competitors. To promote our brands, we may be
required to continue to increase our financial commitment to
creating and maintaining brand awareness. We may not generate a
corresponding increase in revenue to justify these
costs.
If we are unable to identify and successfully acquire additional
brands and trademarks, our growth may be limited, and, even if
additional trademarks are acquired, we may not realize anticipated
benefits due to integration or licensing difficulties.
A component of our growth strategy is the acquisition of additional
brands and trademarks. We generally compete with traditional
apparel and consumer brand companies, other brand management
companies and private equity groups for brand acquisitions.
However, as more of our competitors continue to pursue our brand
management model, competition for specific acquisition targets may
become more acute, acquisitions may become more expensive and
suitable acquisition candidates could become more difficult to
find. In addition, even if we successfully acquire additional
trademarks or the rights to use additional trademarks, we may not
be able to achieve or maintain profitability levels that justify
our investment in, or realize planned benefits with respect to,
those additional brands.
Although we seek to temper our acquisition risks by following
acquisition guidelines relating to the existing strength of the
brand, its diversification benefits to us, its potential licensing
scale and credit worthiness of the licensee base, acquisitions,
whether they be of additional intellectual property, or
“IP”, assets or of the companies that own them, entail
numerous risks, any of which could detrimentally affect our results
of operations.
Acquisition of brands or trademarks transactions involve a number
of risks and present financial, managerial and operational
challenges, including: diversion of management’s attention
from running our existing business; unanticipated costs associated
with the target acquisition, appropriately valuing the target
acquisition and analyzing its marketability, increased expenses,
including legal and administrative expenses; integration costs
related to the customer base and business practices of the acquired
company with our own; and adverse effects on our reported operating
results due to possible write-down of goodwill associated with
acquisitions.
When we acquire IP assets or the companies that own them, our due
diligence reviews are subject to inherent uncertainties and may not
reveal all potential risks. Although we generally attempt to
seek contractual protections through representations, warranties
and indemnities, we cannot be sure that we will obtain such
provisions in our acquisitions or that such provisions will fully
protect us from all unknown, contingent or other liabilities or
costs. Finally, claims against us relating to any acquisition
may necessitate our seeking claims against the seller for which the
seller may not, or may not be able to, indemnify us or that
may exceed the scope, duration or amount of the seller’s
indemnification obligations.
No assurance can be given with respect to the timing, likelihood or
financial or business effect of any possible transaction. As a
result, there is no guarantee that our shareholders will achieve
greater returns as a result of any future acquisitions we
complete.
Each of our I'M1 and EE1 subsidiaries are governed by operating
agreements that require us to distribute amounts to minority
members in certain circumstances. These distributions could reduce
the amount of operating capital we have in future
periods.
Under the terms of the operating agreements for each of I’M1
and EE1, Level Brands as the manager of these entities is
responsible for the operations, including the payment of the
operating costs. These costs are then deducted from the
“profits” of the entity and a portion of those amounts,
as determined by the particular operating agreement, will then be
distributed to the members. We own all of the voting interests
in I'M1 and EE1. During fiscal 2017 EE1 made a distribution to its
members. Distributions to the members of I'M1 and EE1 will reduce
the amount of working capital available to us and could adversely
impact our liquidity in future periods.
The value of the equity securities we may accept as compensation
under consulting, licensing and advisory agreements will be subject
to adjustment which could result in losses to us in future periods.
By accepting equity securities as partial compensation for our
services, we may be adversely impacting our working capital in
future periods.
In March 2017 I'M1 entered into a consulting agreement with a third
party under which we accepted shares of its common stock as partial
compensation for the services to be provided. In May 2017 as
compensation under the terms of an advisory agreement I'M1 and EE1
received a warrant to purchase shares of the third party’s
stock which was exercised in June 2017. Since then we have entered
into similar agreements with additional clients and it is possible
we may enter into similar arrangements with other third parties. By
accepting equity securities as partial compensation for our
services in lieu of cash, we will be incurring expenses to deliver
the services without the corresponding cash payments from our
clients. As such, we will be utilizing a greater portion of our
working capital to provide services with the hope that we may
benefit from an increase in the market value of the equity
securities we have received in future periods. In addition, these
securities will be reflected on our balance sheets in future
periods as “marketable securities” or “investment
other securities”. At the end of each quarter, we will
evaluate the carrying value of the marketable securities or
investment other securities for a decrease in value. We will
evaluate the company underlying these marketable securities or
investment other securities to determine whether a decline in fair
value below the amortized cost basis is other than temporary. If
the decline in fair value is judged to be “other- than-
temporary”, the cost basis of the individual security will be
written down to fair value as a new cost basis and the amount of
the write-down is charged to earnings. As a result of these
policies, it is possible that we may recognize impairments on the
carrying value of these securities in future periods. Any future
impairments would adversely affect our operating results for the
corresponding periods in that we would be required to reduce the
carrying value of these investments.
We may be unable to liquidate securities we accept as partial
compensation under consulting, licensing and advisory agreements
which could adversely impact our liquidity in future
periods.
Our ability to sell any securities we accept as partial
compensation is dependent upon a number of factors, including the
existence of a liquid market for the securities and our compliance
with the resale provisions of Federal securities laws which require
us to hold the shares for at least six months, among other factors.
While we expect to generally accept securities from issuers who are
publicly traded or who are expecting to become a publicly traded
company, there are no assurances a liquid market will exist in such
securities at such time as we are able to resell the shares, or
that the price we may receive will be commensurate with the value
of the services we are providing. In that event, we would not
benefit from the expected rise in the market price of the
securities we own as a result of our efforts on behalf of the
client company. In addition, depending upon the terms of our
business relationship with the issuer of the securities, it is
possible that from time to time we could be in possession of
non-public information regarding the issuer which could prohibit us
from disposing of the shares at a time when it is advantageous to
us to do so. If we are unable to readily liquidate any securities
we accept as compensation, we would be deprived of the cash value
of those services and we would be required to write-off the
carrying value of the securities which could adversely impact our
results of operations in future periods.
The Investment Company Act of 1940 will limit the value of
securities we can accept as payment for our business consulting
services which may limit our future revenues and, in the event we
are deemed an investment company, the cost and expense to comply
with ‘40 Act regulations could be material.
The Investment Company Act of 1940, or the
“40
Act,” regulates certain companies that invest in, hold or
trade securities.
Although we do not believe we are engaged
in the business of investing, reinvesting or trading in securities,
and we do not currently hold ourselves out to the public as being
engaged in those activities, i
n the
past we have accepted securities of our client companies as partial
compensation. The ’40 Act and the rules thereunder set forth
certain asset and revenue thresholds, which, if exceeded, may
require us to register as an investment company under the ’40
Act. As a result, and principally related to the value of the
securities received by us as part of our compensation by Isodiol
International, Inc. under the terms of the license agreement we
entered into with it in December 2017, at March 31, 2018 we
exceeded the exemptive asset and revenue
thresholds under
the ’40 Act. Therefore, at March 31, 2018 we could be deemed
an inadvertent investment company under the ’40 Act. While as
of June 30, 2018 we reduced our assets so that we no longer
exceeded the thresholds, as a part of our agreement with Isodiol we
are entitled to receive additional shares of Isodiol’s
securities on a quarterly basis in an amount equal to $750,000. As
it has never been our intention to be an investment company, we are
taking certain actions to maintain our assets and revenues under
the exemptive thresholds.
In
particular, we will limit the amount of equity we accept as part of
our compensation for services so as to stay under the asset and
revenue thresholds as imposed by the ’40 Act. We may
therefore structure transactions in a less advantageous manner than
if we did not have ’40 Act concerns, or we may avoid
otherwise economically desirable transactions due to those
concerns. If we are unable to maintain our assets and revenues
below the exemptive levels, or if it were otherwise established
that we were an unregistered investment company at any period of
time, there would be a risk, among other material adverse
consequences, that we could become subject to monetary penalties or
injunctive relief, or both, in an action by the SEC. In addition,
in the event we continue to fall under ’40 Act regulation, we
will have significant ongoing ’40 Act public reporting
requirements and regulation that would increase our administrative
and operating costs and expenses. Further, under certain
circumstances the ’40 Act provides that a contract that is
made or whose performance involves a violation of the ’40 Act
is unenforceable by either party unless a court finds that under
the circumstances enforcement would produce a more equitable result
than non-enforcement. As a result, we would no longer be able to
conduct our business as it is presently conducted which would have
a material adverse impact on our results of operations in future
periods.
We may require additional capital to finance the acquisition of
additional brands and if we are unable to raise such capital on
beneficial terms or at all this could restrict our
growth.
We may, in the future, require additional capital to help fund all
or part of potential acquisitions. If, at the time required, we do
not have sufficient cash to finance those additional capital needs,
we will need to raise additional funds through equity and/or debt
financing. We cannot guarantee that, if and when needed, additional
financing will be available to us on acceptable terms or at all.
Further, if additional capital is needed and is either unavailable
or cost prohibitive, our growth may be limited as we may need to
change our business strategy to slow the rate of our expansion
plans. In addition, any additional financing we undertake could
impose additional covenants upon us that restrict our operating
flexibility, and, if we issue equity securities to raise capital or
as acquisition consideration, our existing shareholders may
experience dilution or the new securities may have rights senior to
those of our common stock.
RISKS RELATED TO OUR LICENSING AND ENTERTAINMENT
DIVISIONS
AND OUR HEALTH & WELLNESS BRAND
We are materially dependent upon the wholesale license agreement
with kathy ireland® Worldwide. If this agreement were to be
terminated, we would be unable to continue to operate
I’M1.
In January 2017, I’M1 entered into a 10 year wholesale
license agreement with
kathy
ireland
® Worldwide under
which we were granted exclusive royalty free rights to certain
marks and tradenames associated with the I’M1 brand. This
agreement may be immediately terminated upon notice to us if
I’M1 terminates, removes or replaces officers, if we cease to
be the manager of I’M1 or if we compete with or invest in a
business that competes with
kathy
ireland
® Worldwide. The
restriction on competition against
kathy
ireland
® Worldwide may
limit our ability to enter into licensing agreements in the future
for products which could impact our revenues in future periods.
If
kathy
ireland
® Worldwide should
terminate this wholesale license agreement, our ability to operate
I’M1 under that brand name would cease and, depending upon
the amount of revenues we are then recognizing from that brand, our
results of operations and liquidity in future periods could be
materially adversely impacted.
The failure of our licensees to adequately produce, market, import
and sell products bearing our brand names in their license
categories, continue their operations, renew their license
agreements or pay their obligations under their license agreements
could result in a decline in our results of
operations.
Our future revenues from our licensing division will be
substantially dependent on royalty payments made to us under our
license agreements, in addition to compensation under any
consulting agreements we may enter into with the third parties for
services by either our licensing division, our entertainment
division, or both. The failure of our licensees to satisfy their
obligations under these agreements, or their inability to operate
successfully or at all, could result in their breach and/or the
early termination of such agreements, their non-renewal of such
agreements or our decision to amend such, thereby eliminating some
or all of that stream of revenue. It is possible that the
milestones to be met under the terms of licensing agreements may
never be achieved which also could deprive us of additional
revenues. There can be no assurances that we will not lose the
licensees under our license agreements due to their failure to
exercise the option to renew or extend the term of those agreements
or the cessation of their business operations (as a result of their
financial difficulties or otherwise) without equivalent options for
replacement. Any of such failures could reduce the anticipated
revenue stream to be generated by the license agreements. In
addition, the failure of our licensees to meet their production,
manufacturing and distribution requirements, or to be able to
continue to import goods (including, without limitation, as a
result of labor strikes or unrest), could cause a decline in their
sales and potentially decrease the amount of royalty payments (over
and above any guaranteed minimums) due to us. Further,
the failure of our licensees and/or their third party
manufacturers, which we do not control, to adhere to local laws,
industry standards and practices generally accepted in the United
States in areas of worker safety, worker rights of association,
social compliance, and general health and welfare, could result in
accidents and practices that cause disruptions or delays in
production and/or substantial harm to the reputation of our brands,
any of which could have a material adverse effect on our business,
financial position, results of operations and cash
flows. A weak economy or softness in certain sectors
including apparel, consumer products, retail and entertainment
could exacerbate this risk. This, in turn, could decrease our
potential revenues and cash flows.
From time to time we may compete with kathy ireland Worldwide®
in securing advisory or representation agreements with potential
clients for EE1 which may create a conflict of interests for the
managing directors of EE1.
kathy ireland®
Worldwide is an established company
which has significant experience in assisting companies in the
promotion and management of their brands through licensing and
advisory agreements. Affiliates of
kathy ireland
® Worldwide are
responsible for the day to day operations of both EE1 and
kathy ireland
®
Worldwide. Part of EE1's business competes with
kathy ireland
®Worldwide in
identifying and securing clients for its advisory services. For
example, both EE1 and
kathy
ireland
®Worldwide are parties to substantial identical
representation agreements with Dada Media, Inc. and David Tutera.
The affiliates of
kathy
ireland
®Worldwide who are also responsible for day to
day operations at EE1 are able to determine which entity, either
kathy ireland
®
Worldwide or EE1, is referred to the potential client.
kathy ireland
® Worldwide has more
experience and resources and there are no assurances that conflicts
of interest which may arise will be resolved in our favor. As a
result, it is possible that we may lose out on potential business
opportunities.
We could become a party to litigation involving our licensed
products which could result in additional costs to us. Certain
licensed products may be more likely to lead to product liability
lawsuits than others, which could expose us to additional unknown
risks.
Although we are not responsible for the manufacturing, sale or
distribution of licensed products, it is possible our company could
be named as a defendant in litigation related to licensed products.
Certain licensed products may, by virtue of the industry in which
they are sold and the governmental regulations to which they are
subject, such as vaping products and cannabidiol product
categories, could be more likely to be the subject of litigation
than others. Notwithstanding that our standard form of license
agreements requires the licensee to indemnify us against ligation
involving the licensed products and to maintain product liability
insurance policies, it is possible that a licensee may fail to
maintain this coverage during the term of the license agreement.
While we would then have a right to terminate the license agreement
as a result of this breach of its terms, there are no assurances we
would not be required to expend significant funds and management
time defending our company in any potential product liability
insurance claim. There are no assurances that we would prevail in
any such litigation, which could subject us to judgments and costs
of settlements which could adversely impact our liquidity and
results of operations in future periods.
As a result of the intense competition within our targeted
licensees’ markets and the strength of some of their
competitors, we and our licensees may not be able to compete
successfully.
Many of our targeted trademark licenses are for products in the
apparel, fashion accessories, footwear, beauty and fragrance, home
products and décor, consumer electronics and entertainment
industries in which licensees face intense competition from third
party brands and licensees. In general, competitive factors include
quality, price, style, name recognition and service. In addition,
various fads and the limited availability of shelf space could
affect competition for our licensees’ products. Many of our
licensees’ competitors have greater financial, importation,
distribution, marketing and other resources than our licensees and
have achieved significant name recognition for their brand names.
Our licensees may be unable to compete successfully in the markets
for their products, and we may not be able to compete successfully
with respect to our licensing arrangements.
Our business is dependent on market acceptance of our brands and
the potential future products of our licensees bearing these
brands.
Although some of our targeted licensees might have guaranteed
minimum net sales and minimum royalties to us, a failure of our
brands or of products bearing our brands to achieve or maintain
market acceptance could cause a reduction of our licensing revenue
and could further cause existing licensees not to renew their
agreements. Such failure could also cause the devaluation of our
trademarks, which are our primary IP assets, making it more
difficult for us to renew our current licenses upon their
expiration or enter into new or additional licenses for our
trademarks. In addition, if such devaluation of our trademarks
were to occur, a material impairment in the carrying value of one
or more of our trademarks could also occur and be charged as an
expense to our operating results.
The industries in which we target to compete, including the apparel
industry, are subject to rapidly evolving trends and competition.
In addition, consumer tastes change rapidly. The licensees under
our licensing agreements may not be able to anticipate, gauge or
respond to such changes in a timely manner. Failure of our
licensees to anticipate, identify and capitalize on evolving trends
could result in declining sales of our brands and devaluation of
our trademarks. Continued and substantial marketing efforts, which
may, from time to time, also include our expenditure of significant
additional funds to keep pace with changing consumer demands, are
required to maintain market acceptance of the licensees’
products and to create market acceptance of new products and
categories of products bearing our trademarks; however, these
expenditures may not result in either increased market acceptance
of, or licenses for, our trademarks or increased market acceptance,
or sales, of our licensees’ products. Furthermore, while we
believe that we currently maintain sufficient control over the
products our licensees’ produce under our brand names through
the provision of trend direction and our right to preview and
approve a majority of such products, including their presentation
and packaging, we do not actually design or manufacture products
bearing our marks, and therefore, have more limited control over
such products’ quality and design than would a traditional
product manufacturer.
RISKS RELATED TO OUR PROFESSIONAL PRODUCTS DIVISION
The majority of our net sales to date in our professional products
division are generated on the basis of purchase orders, rather than
long term purchase commitments; which could adversely affect our
financial position and results of operations.
Our operating history is not long enough to evaluate the likelihood
of future cancellations or deferments of customer orders related to
product sales in our professional products division. Manufacturers
and distributors are currently contracted on a per order basis. The
lack of long-term purchase commitments creates a risk that product
demand may be reduced if orders are canceled or deferred or, in the
event of unanticipated demand, an inability to timely produce and
deliver our products. We do not have long-term agreements with our
distributors, manufacturers or suppliers and these parties may
disrupt or cancel a purchase order or defer or delay shipments of
our products at any time. Furthermore, because of our inability to
rely on enforceable purchase contracts, and our limited visibility
into future customer demand, actual net sales may be different from
our forecasts, which could adversely affect our financial position
and results of operations.
The beauty products business is highly competitive, and if we are
unable to compete effectively our results will suffer.
We face vigorous competition from companies much larger than ours
throughout the world, including multinational consumer product
companies. Almost all of these competitors have much greater
resources than we do and may be able to respond to changing
business and economic conditions more quickly than us. Competition
in the beauty business is based on pricing of products, innovation,
perceived value, service to the consumer, promotional activities,
advertising, special events, new product introductions, e-commerce
and m-commerce initiatives and other activities. It is difficult
for us to predict the timing and scale of our competitors’
actions in these areas. Our ability to compete also depends on the
continued strength of our brands, our ability to attract and retain
key talent and other personnel, the efficiency of our manufacturing
facilities and distribution network, and our ability to maintain
and protect our intellectual property and those other rights used
in our business. As a new company with limited brand recognition,
there are no assurances we will ever be able to effectively compete
in our target markets.
We may be unable to protect our intellectual property rights and/or
intellectual property rights licensed to us, and may be subject to
intellectual property litigation and infringement claims by third
parties.
We intend to protect our intellectual property through limited
patents and our unpatented trade secrets and know-how through
confidentiality or license agreements with third parties, employees
and consultants, and by controlling access to and distribution of
our proprietary information. However, this method may not afford
complete protection, particularly in foreign countries where the
laws may not protect our proprietary rights as fully as in the
United States and unauthorized parties may copy or otherwise obtain
and use our products, processes or technology. Additionally, there
can be no assurance that others will not independently develop
similar know-how and trade secrets. We are also dependent upon the
owners of intellectual property rights licensed to us under various
wholesale license agreements to protect and defend those rights
against third party claims. If third parties take actions that
affect our rights, the value of our intellectual property, similar
proprietary rights or reputation or the licensors who have granted
us certain rights under wholesale license agreements, or we are
unable to protect the intellectual property from infringement or
misappropriation, other companies may be able to offer competitive
products at lower prices, and we may not be able to effectively
compete against these companies. We also face the risk of claims
that we have infringed third parties’ intellectual property
rights. Any claims of intellectual property infringement, even
those without merit, may require us to:
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defend against infringement claims which are expensive and time
consuming;
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cease making, licensing or using products that incorporate the
challenged intellectual property;
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re-design, re-engineer or re-brand our products or packaging;
or
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enter into royalty or licensing agreements in order to obtain the
right to use a third party’s intellectual
property.
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In the
event of claims by third parties for infringement of intellectual
property rights we license from third parties under wholesale
license agreements, we could be liable for costs of defending
allegations of infringement and there are no assurances the
licensors will either adequately defend the licensed intellectual
property rights or that they would prevail in the related
litigation. In that event, we would incur additional costs and may
deprived from generating royalties from these
agreements.
A disruption in operations or our supply chain could adversely
affect our business and financial results.
We are subject to the risks inherent in manufacturing our products,
including industrial accidents, environmental events, strikes and
other labor disputes, disruptions in supply chain or information
systems, loss or impairment of key manufacturing sites or
suppliers, product quality control, safety, increase in commodity
prices and energy costs, licensing requirements and other
regulatory issues, as well as natural disasters and other external
factors over which we have no control. If such an event were to
occur, it could have an adverse effect on our business and
financial results.
We are dependent upon suppliers for our raw materials which we
purchase on a per order basis without long term contracts and our
suppliers are dependent on the continued availability and pricing
of raw materials, either of which could negatively affect our
ability to manage costs and maintain profitable operating
margins.
We currently purchase our raw materials from suppliers with whom we
have no written purchase contracts. Any supplier and any order may
be terminated or rejected by any supplier at any time. Our reliance
on open orders, no preference or assurances from suppliers, and our
reliance on these suppliers, creates a risk that our supply of raw
materials may be interrupted at any time. We may not be able to
timely source another supplier, resulting in delays and decreased
sales. There are no assurances that we will be able to maintain
adequate stockpiles or that we will be able to acquire and
stockpile raw materials at reasonable costs. Our failure to ensure
a steady supply of raw material or any significant interruption in
the supply of raw materials could have a material adverse effect on
our operations and ability to timely fulfill orders, resulting in
lost orders and revenue.
We rely on third-parties to manufacture and to compound our
products, and we have no control over these manufactures and may
not be able to obtain quality products on a timely basis or in
sufficient quantity.
All of our products are manufactured or compounded by unaffiliated
third parties. We do not have any long-term contracts with any of
these third parties, and we expect to compete with other companies
for raw materials, production and import capacity. If we experience
significant increased demand, or need to replace an existing
manufacturer, there can be no assurance that additional
manufacturing capacity will be available when required on terms
that are acceptable to us, or at all, or that any manufacturer or
compounder would allocate sufficient capacity to us in order to
meet our requirements. In addition, even if we are able to expand
existing or find new sources, we may encounter delays in production
and added costs as a result of the time it takes to engage third
parties. Any delays, interruption or increased costs in the
manufacturing or compounding of our products could have an adverse
effect on our ability to meet retail customer and consumer demand
for our products and result in lower revenues and net income both
in the short and long-term.
Adverse changes in political and economic policies of the
People’s Republic of China government could negatively affect
the production and cost of certain of our products and damage our
business.
Certain of our products are currently manufactured in China.
Accordingly, our business, financial condition, results of
operations and prospects are affected significantly by economic,
political and legal developments in China and relationships with
the United States. The PRC economy differs from the economies of
most developed countries in many respects, including:
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the higher level of government involvement and
regulation;
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the early stage of development of the market-oriented sector of the
economy;
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the rapid growth rate;
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the higher rate of inflation;
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tariffs and the higher level of control over foreign exchange;
and
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government control over the allocation of many
resources.
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Although the PRC government has in recent years implemented
measures emphasizing the utilization of market forces for economic
reform, the PRC government continues to exercise significant
control over economic growth in China through the allocation of
resources, controlling payment of foreign currency-denominated
obligations, setting monetary policy and imposing policies that
impact particular industries or companies in different ways. Any
adverse change in the economic conditions or government policies in
China or relationship with the United States could have a material
adverse effect on tariffs and the cost or availability of our
products and consequently have a material adverse effect on our
business and prospects.
Like other distributors and manufacturers of beauty products, we
face an inherent risk of exposure to product liability claims in
the event that the use of the products that we sell results in
injury.
While we believe we are currently materially compliant with
regulations covering our products, we may be subjected to various
product liability claims, including claims that the products we
sell contain contaminants, are improperly labeled or include
inadequate instructions as to use or inadequate warnings concerning
side effects and interactions with other substances. In addition,
we may be forced to defend lawsuits. While to date we have never
been subject to any product liability claim, given our limited
operating history we cannot predict whether product liability
claims will be brought against us in the future or predict the
effect of any resulting adverse publicity on our business.
Moreover, we may not have adequate resources in the event of a
successful claim against us. If our insurance protection is
inadequate and our third-party vendors do not indemnify us, the
successful assertion of product liability claims against us could
result in potentially significant monetary damages. In addition,
interactions of our products with other similar products,
prescription medicines and over-the-counter drugs have not been
fully explored. We may also be exposed to claims relating to
product advertising or product quality. People may purchase our
products expecting certain physical results, unique to beauty
products. If they do not perceive expected results to occur, such
individuals may seek monetary retribution.
Our business may be adversely affected by unfavorable publicity
within the beauty products market.
We believe that the beauty products market is significantly
affected by national media attention. As with any retail provider,
future scientific research or publicity may not be favorable to the
industry or to any particular product, and may not be consistent
with earlier favorable research or publicity. Because of our
dependence on consumers’ perceptions, adverse publicity
associated with illness or other adverse effects resulting from the
use of our products or any similar products distributed by other
companies and future reports of research that are perceived as less
favorable or that question earlier research, could have a material
adverse effect on our business, financial condition and results of
operations. We are highly dependent upon consumers’
perceptions of the safety and quality of our products as well as
similar products distributed by other companies. Thus, the mere
publication of reports asserting that beauty products may be
harmful or questioning their efficacy could have a material adverse
effect on our business, financial condition and results of
operations, regardless of whether such reports are scientifically
supported or whether the claimed harmful effects would be present
at the dosages recommended for such products.
Our success is dependent upon the successful introduction of our
new products and success in expanding the demand for existing
brands.
We believe the growth of our net sales is substantially dependent
upon our ability to introduce our products to the public. Our
ability to meet future obligations is dependent in large measure on
the success of our product sales. Subject to the availability of
sufficient capital and the further establishment of effective
distribution channels, we expect to introduce additional products.
The success of new products is dependent upon a number of factors,
including our ability to formulate products that will appeal to
consumers and respond to market trends in a timely manner. There
can be no assurance that our efforts to formulate new products will
be successful or that consumers will accept our new products. In
addition, products experiencing strong popularity and rapid growth
may not maintain their sales volumes over time.
RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK
There may never be an active market for our common stock, which is
listed on the NYSE American.
Following
our initial public offering in November 2017, there currently is a
limited market for our common stock. Although our common stock is
listed on the NYSE American, trading of our common stock is limited
and sporadic and generally at very low volumes. Further, the price
at which our common stock has traded has been below its initial
public offering price. We expect that the price will continue to
fluctuate significantly in response to various factors, many of
which are beyond our control. The stock market in general, and
securities of small-cap companies in our industry in particular,
has experienced extreme price and volume fluctuations in recent
years. Continued market fluctuations could result in further
volatility in the price at which our common stock may trade, which
could cause its value to decline. A more active market for our
common stock may never develop. As a result, investors must bear
the economic risk of holding their shares of our common stock for
an indefinite period of time.
We are subject to the continued
listing standards of the NYSE American and our failure to satisfy
these criteria may result in delisting of our common
stock
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Our
common stock is listed on the NYSE American. In order to maintain
this listing, we must maintain certain share prices, financial and
share distribution targets, including maintaining a minimum amount
of shareholders’ equity and a minimum number of public
shareholders. In addition to these objective standards, the NYSE
American may delist the securities of any issuer (i) if, in its
opinion, the issuer’s financial condition and/or operating
results appear unsatisfactory; (ii) if it appears that the extent
of public distribution or the aggregate market value of the
security has become so reduced as to make continued listing on the
NYSE American inadvisable; (iii) if the issuer sells or disposes of
principal operating assets or ceases to be an operating company;
(iv) if an issuer fails to comply with the NYSE American’s
listing requirements; (v) if an issuer’s common stock sells
at what the NYSE American considers a “low selling
price” and the issuer fails to correct this via a reverse
split of shares after notification by the NYSE American; or (vi) if
any other event occurs or any condition exists which makes
continued listing on the NYSE American, in its opinion,
inadvisable. If the NYSE American delists our common stock,
investors may face material adverse consequences, including, but
not limited to, a lack of trading market for our securities,
reduced liquidity, decreased analyst coverage of our securities,
and an inability for us to obtain additional financing to fund our
operations.
The price of our common stock may be volatile, and you could lose
all or part of your investment.
Stock markets have experienced extreme volatility that has often
been unrelated to the operating performance of particular
companies. These broad market fluctuations may adversely affect the
trading price of our common stock. In addition, limited trading
volume of our stock may contribute to its future volatility. Price
declines in our common stock could result from general market and
economic conditions, some of which are beyond our control, and a
variety of other factors, including any of the risk factors
described in this prospectus. These broad market and industry
factors may harm the market price of our common stock, regardless
of our operating performance, and could cause you to lose all or
part of your investment in our common stock since you might be
unable to sell your shares at or above the price you paid. Factors
that could cause fluctuations in the market price of our common
stock include the following:
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price and volume fluctuations in the overall stock market from time
to time;
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changes in operating performance and stock market valuations of
other hair care products companies generally;
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sales of shares of our common stock by us or our
shareholders;
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failure of securities analysts to initiate or maintain coverage of
us, changes in financial estimates by securities analysts who
follow our company, or our failure to meet these estimates or the
expectations of investors;
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the financial projections we may provide to the public, any changes
in those projections or our failure to meet those
projections;
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rumors and market speculation involving us or other companies in
our industry;
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actual or anticipated changes in our results of operations or
fluctuations in our results of operations;
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actual or anticipated developments in our business, our
competitors’ businesses or the competitive landscape
generally;
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litigation involving us, our industry or both, or investigations by
regulators into our operations or those of our
competitors;
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developments or disputes concerning our intellectual property or
other proprietary rights;
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announced or completed acquisitions of businesses or brands by us
or our competitors;
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new laws or regulations or new interpretations of existing laws or
regulations applicable to our business;
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changes in accounting standards, policies, guidelines,
interpretations or principles;
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any significant change in our management; and
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general economic conditions and slow or negative growth of our
markets.
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In addition, in the past, following periods of volatility in the
overall market and the market price of a particular company’s
securities, securities class action litigation has often been
instituted against these companies. This litigation, if instituted
against us, could result in substantial costs and a diversion of
our management’s attention and resources.
We are an “emerging growth company,” and the reduced
reporting requirements applicable to emerging growth companies may
make our common stock less attractive to investors.
We are an “emerging growth company,” as defined in the
JOBS Act. For as long as we continue to be an emerging growth
company, we may take advantage of exemptions from various reporting
requirements that are applicable to other public companies but not
to “emerging growth companies,” including, but not
limited to:
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being permitted to provide only two years of audited financial
statements, in addition to any required unaudited interim financial
statements, with correspondingly reduced “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations” disclosures;
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not being required to comply with the auditor attestation
requirements in the assessment of our internal control over
financial reporting under Section 404 of the Sarbanes-Oxley Act of
2002, or “Sarbanes-Oxley Act”;
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not being required to comply with any requirement that may be
adopted by the Public Company Accounting Oversight Board regarding
mandatory audit firm rotation or a supplement to the
auditor’s report providing additional information about the
audit and the financial statements;
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reduced disclosure obligations regarding executive compensation in
our periodic reports and proxy statements; and
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exemptions from the requirements of holding a nonbinding advisory
vote on executive compensation and shareholder approval of any
golden parachute payments not previously approved.
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Investors may find our common stock less attractive if we choose to
rely on these exemptions. If some investors find our common stock
less attractive as a result of any choices to reduce future
disclosure, there may be a less active trading market for our
common stock and the price of our common stock may be more
volatile.
Our executive officers, directors and their affiliates may exert
control over us and may exercise influence over matters subject to
shareholder approval.
Our executive officers and directors, together with their
respective affiliates, beneficially own approximately 23.9% of our
outstanding common stock as of August 31, 2018. Accordingly, these
shareholders, if they act together, may exercise substantial
influence over matters requiring shareholder approval, including
the election of directors and approval of corporate transactions,
such as a merger. This concentration of ownership could have the
effect of delaying or preventing a change in control or otherwise
discourage a potential acquirer from attempting to obtain control
over us, which in turn could have a material adverse effect on the
market value of our common stock.
Future sales of our common stock by our existing shareholders could
cause our stock price to decline.
On
August 31, 2018, we had 8,123,928 shares of our common stock
outstanding, 6,203,067 of which are currently eligible for sale in
the public market, subject, in certain circumstances to the volume,
manner of sale and other limitations under Rule 144 promulgated
under the Securities Act of 1933, as amended, or “Securities
Act.” It is conceivable that shareholders may wish to sell
some or all of their shares. If our shareholders sell substantial
amounts of our common stock in the public market at the same time,
the market price of our common stock could decrease significantly
due to an imbalance in the supply and demand of our common stock.
Even if they do not actually sell the stock, the perception in the
public market that our shareholders might sell significant shares
of our common stock could also depress the market price of our
common stock. A decline in the price of shares of our common stock
might impede our ability to raise capital through the issuance of
additional shares of our common stock or other equity securities,
and may cause shareholders to lose part or all of their investment
in our shares of common stock.
If we fail to maintain an effective system of internal control over
financial reporting, we may not be able to accurately report our
financial results. As a result, current and potential shareholders
could lose confidence in our financial reporting, which would harm
our business and the trading price of our stock.
As described in our Annual Report on Form 10-K for the year ended
September 30, 2017, our management determined that, as of September
30, 2017, we did not maintain effective internal controls over
financial reporting based on criteria set forth by the Committee of
Sponsoring Organizations of the 2013 Treadway Commission in
Internal Control-Integrated Framework as a result of identified
material weaknesses in our internal control over financial
reporting. A material weakness is a deficiency, or a combination of
deficiencies, in internal control over financial reporting such
that there is a reasonable possibility that a material misstatement
of the company's annual or interim financial statements will not be
prevented or detected on a timely basis. While we have never been
required to restate our consolidated financial statements and
during fiscal 2018 we have taken steps necessary to remediate those
material weakness, if our actions are not sufficient, the existence
of any continuing material weaknesses in our internal control over
financial reporting increases the risk that a future restatement of
our consolidated financials is possible.
If securities or industry analysts do not publish research or
publish unfavorable or inaccurate research about our business, our
common stock share price and trading volume could
decline.
An active trading market for our common stock will depend, in part,
on the research and reports that securities or industry analysts
publish about us or our business. We may be unable to attract or
sustain coverage by well-regarded securities and industry analysts.
If either none or only a limited number of securities or industry
analysts cover us or our business, or if these securities or
industry analysts are not widely respected within the general
investment community, the trading price for our common stock would
be materially and negatively impacted. In the event we obtain
securities or industry analyst coverage, if one or more of the
analysts who cover us or our business downgrade our common stock or
publish inaccurate or unfavorable research about us or our
business, the price of our common stock would likely decline. If
one or more of these analysts cease coverage of us or our business,
or fail to publish reports on us or our business regularly, demand
for our common stock could decrease, which might cause the price of
our common stock and trading volume to decline.
Some provisions of our charter documents and North Carolina law may
have anti-takeover effects that could discourage an acquisition of
us by others, even if an acquisition would be beneficial to our
shareholders and may prevent attempts by our shareholders to
replace or remove our current management.
Provisions in our articles of incorporation and bylaws, as well as
provisions of North Carolina law, could make it more difficult for
a third party to acquire us or increase the cost of acquiring us,
even if doing so would benefit our shareholders, or remove our
current management. These include provisions that:
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permit our board of directors to issue up to 50,000,000 shares of
preferred stock, with any rights,
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preferences and privileges as they may designate;
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provide that all vacancies on our board of directors, including as
a result of newly created directorships, may, except as otherwise
required by law, be filled by the affirmative vote of a majority of
directors then in office, even if less than a quorum;
and
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do not provide for cumulative voting rights, thereby allowing the
holders of a majority of the shares of common stock entitled to
vote in any election of directors to elect all of the directors
standing for election.
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These provisions may frustrate or prevent any attempts by our
shareholders to replace or remove our current management by making
it more difficult for shareholders to replace members of our board
of directors, who are responsible for appointing the members of our
management. In addition, North Carolina has two primary
anti-takeover statutes, the Shareholder Protection Act and the
Control Share Acquisition Act, which govern the shareholder
approval required for certain business combinations. As permitted
by North Carolina law, we have opted out of both these provisions.
Accordingly, we are not subject to any anti-takeover effects of the
North Carolina Shareholder Protection Act or Control Share
Acquisition Act. Any provision of our articles of incorporation,
bylaws or North Carolina law that has the effect of delaying or
deterring a change in control could limit the opportunity for our
shareholders to receive a premium for their shares of common stock,
and could also affect the price that some investors are willing to
pay for our shares of common stock.
Sales of additional shares of common stock, including by us or our
directors and officers following expiration or early release of the
lock-up periods, could cause the price of our common stock to
decline.
Sales
of substantial amounts of our common stock in the public market, or
the availability of such shares for sale, by us or by others,
including the issuance of shares of common stock upon the exercise
of outstanding options and warrants, could adversely affect the
price of our common stock. In connection with this offering,
we and our directors and officers have entered into lock-up
agreements for a period of 90 days following this offering.
We and our directors and officers may be released from the
lock-up prior to its expiration period at the sole discretion of
the representative of the underwriters. See
“Underwriting.” Upon expiration or earlier
release of the lock-up, we and our directors and officers may sell
shares of our common stock into the market, which could adversely
affect the market price of our common stock.
We have additional securities available for issuance, which, if
issued, could adversely affect the rights of the holders of our
common stock.
In addition, the
issuance of shares upon exercise of our outstanding options and
warrants and/or future grants under our 2015 Equity Compensation
Plan may cause immediate and substantial dilution to our existing
shareholders.
Our
articles of incorporation, as amended, authorizes the issuance of
150,000,000 shares of our common stock and 50,000,000 shares of
preferred stock. In certain circumstances, the common stock, as
well as the awards available for issuance under our equity
incentive plans, can be issued by our board of directors, without
stockholder approval. Any future issuances of such stock would
further dilute the percentage ownership of us held by holders of
common stock. In addition, the issuance of certain securities,
including pursuant to the terms of our stockholder rights plan, may
be used as an “anti-takeover” device without further
action on the part of our stockholders, and may adversely affect
the holders of the common stock.
In
addition, the issuance of preferred stock may be used as an
“anti-takeover” device, and may adversely affect the
holders of the common stock. If our board of directors and
stockholders approved the use of “blank check”
preferred stock, our board of directors would be authorized to
create and issue from time to time, without further stockholder
approval, a certain number of shares of preferred stock, in one or
more series and to establish the number of shares of any series of
preferred stock and to fix the designations, powers, preferences
and rights of the shares of each series and any qualifications,
limitations or restrictions of the shares of each series. The
authority to designate preferred stock may be used to issue series
of preferred stock, or rights to acquire preferred stock, that
could dilute the interest of, or impair the voting power of,
holders of the common stock or could also be used as a method of
determining, delaying or preventing a change of
control.
Lastly,
w
e presently have options and warrants
that, if exercised, would result in the issuance of an additional
781,826 shares of our common stock, and we presently have an
additional 845,455 shares of our common stock reserved for future
grants under our 2015 Equity Compensation Plan. The issuance of
shares upon exercise of warrants and options, including future
grants under our 2105 Equity Compensation Plan, may result in
dilution to the interests of other shareholders including
purchasers of shares in this offering.
We have never paid dividends and have no plans to pay dividends in
the future.
Holders
of shares of our common stock are entitled to receive such
dividends as may be declared by our board of directors. To date, we
have paid no cash dividends on our shares of our preferred or
common stock and we do not expect to pay cash dividends in the
foreseeable future. We intend to retain future earnings, if any, to
provide funds for operations of our business. Therefore, any return
investors in our preferred or common stock may have will be in the
form of appreciation, if any, in the market value of their shares
of common stock.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
INFORMATION
This
prospectus contains forward-looking statements within the meaning
of Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act of 1934, as amended, or “Exchange
Act.” These forward-looking statements are subject to known
and unknown risks, uncertainties and other factors which may cause
actual results, performance or achievements to be materially
different from any future results, performance or achievements
expressed or implied by such forward-looking statements. These
forward-looking statements were based on various factors and were
derived utilizing numerous assumptions and other factors that could
cause our actual results to differ materially from those in the
forward-looking statements. These factors include, but are not
limited to:
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dilution
to purchasers of shares of common stock in this
offering;
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our
management’s broad discretion as to the use of proceeds from
this offering;
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our
material dependence on our relationships with
kathy ireland®
Worldwide and
certain of its affiliates;
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our
limited operating history;
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the
limited operating histories of our subsidiaries;
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our
history of losses;
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risks
associated with any failure by us to maintain an effective system
of internal control over financial reporting;
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the
terms of various agreements with
kathy ireland®
Worldwide and
possible impacts on our management's abilities to make certain
decisions regarding the operations of our company;
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our
dependence on consumer spending patterns;
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our
history on reliance on sales from a limited number of customers,
including related parties;
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risks
associated with our failure to effectively promote our
brands;
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our
ability to identify and successfully acquire additional brands and
trademarks;
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the
operating agreements of our I'M1 and EE1 subsidiaries;
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the
accounting treatment of securities we accept as partial
compensation for services;
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our
ability to liquidate securities we accept as partial compensation
for services and the possible impact of the 40 Act;
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the
possible need to raise additional capital in the
future;
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terms
of the contracts with third parties in each of our
divisions;
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possible
conflicts of interest with
kathy
ireland®
Worldwide;
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possible
litigation involving our licensed products;
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our
ability to effectively compete and our dependence on market
acceptance of our brands;
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the
lack of long-term contracts for the purchase of products from our
professional products division;
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our
ability to protect our intellectual property;
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additional
operational risks associated with our professional products
division;
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risks
associated with developing a liquid market for our common stock and
possible future volatility in its trading price;
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risks
associated with any future failure to satisfy the NYSE American LLC
continued listing standards;
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dilution
to our shareholders from the issuance of additional shares of
common stock by us and/or the exercise of outstanding options and
warrants;
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risks
associated with our status as an emerging growth
company;
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risks
associated with control by our executive officers, directors and
affiliates;
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risks
associated with future sales of our common stock by existing
shareholders;
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our
failure to maintain an effective system of internal control over
financial reporting;
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risks
associated with unfavorable research reports; and
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risks
associated with our articles of incorporation, bylaws and North
Carolina law.
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Most of
these factors are difficult to predict accurately and are generally
beyond our control. You should consider the areas of risk described
in connection with any forward-looking statements that may be made
herein. Readers are cautioned not to place undue reliance on these
forward-looking statements and readers should carefully review our
Annual Report on Form 10-K for the fiscal year ended September 30,
2017 as filed with the Securities and Exchange Commission on
December 26, 2017, including the risk factors described therein, as
well as our other filings with the Securities and Exchange
Commission. Except for our ongoing obligations to disclose material
information under the Federal securities laws, we undertake no
obligation to release publicly any revisions to any forward-looking
statements, to report events or to report the occurrence of
unanticipated events. These forward-looking statements speak only
as of the date of this prospectus, and you should not rely on these
statements without also considering the risks and uncertainties
associated with these statements and our business.
USE OF PROCEEDS
We
estimate that the net proceeds of this offering will be
approximately $5,029,337, assuming the sale of
1,149,425 shares of our common stock or approximately
$5,866,337 if the underwriters exercise in full their
option to purchase additional shares of common stock, at the
assumed public offering price of $5.22 per share for
the common stock (which was the last reported sale price of our
common stock on the NYSE American on September 24,
2018), after deducting the estimated underwriting discount and
estimated offering expenses payable by us. The public offering
price per common share will be determined between us, the
underwriter and investors based on market conditions at the time of
pricing, and may be at a discount to the current market price of
our common stock.
Except
where indicated, the foregoing discussion assumes no exercise of
the underwriters’ option to purchase up to
172,414 additional shares of common
stock.
A $0.25
increase in the assumed public offering price of $5.22
per share of common stock would increase the expected net proceeds
of the offering to us to approximately
$5,296,578, assuming that the number of shares sold by
us remains the same.
A
$0.25 decrease in the assumed public offering price of
$5.22 per share of common stock would decrease the expected
net proceeds of the offering to us to approximately $4,762,094,
assuming that the number of shares sold by us remains the
same.
We may also increase or decrease the number of
shares of our common stock we are offering. An increase of 250,000
in the number of shares sold in this offering would increase the
expected net proceeds of the offering to us to
approximately $6,242,986, assuming that the assumed
public offering price per share remains the same.
A decrease of 250,000 in the number of shares sold in this offering
would decrease the expected net proceeds of the offering to us to
approximately $3,815,686, assuming that the assumed public offering
price per share remains the same.
We
intend to use the net proceeds from this offering
for brand development and expansion, acquisitions
and general working capital. We are not, however, a party to any
agreements with respect to any potential future acquisitions and
there are no assurances we will acquire any additional companies.
As such, w
e have broad discretion in determining how the
proceeds of this offering will be used, and our discretion is not
limited by the aforementioned possible uses. Our board of directors
believes the flexibility in application of the net proceeds is
prudent.
Our expected use of net proceeds from this offering represents our
current intentions based upon our plans and business condition. As
of the date of this prospectus, we cannot predict with certainty
all of the particular uses for the net proceeds to be received upon
the completion of this offering or the amounts that we will
actually spend on the uses set forth above. The amounts and timing
of our actual use of the net proceeds will vary depending on
numerous factors, including the factors described under the heading
“Risk Factors” in this prospectus. As a result,
management will have broad discretion in its application of the net
proceeds, and investors will be relying on our judgment in such
application.
Pending use of the net proceeds from this offering, we may invest
in short- and intermediate-term interest-bearing obligations,
certificates of deposit or direct or guaranteed obligations of the
U.S. government will adjust based on the actual initial public
offering price and other terms of this offering determined at
pricing.
CAPITALIZATION
The
following table sets forth our capitalization as of June 30, 2018
and on an as adjusted basis to give effect to the sale of
1,149,425 shares of common stock in this offering at
the assumed public offering price of
$5.22 per share, after deducting underwriting
discounts and commissions and other estimated offering expenses
payable by us. This capitalization table should be read in
conjunction with “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” and our
historical consolidated financial statements and notes to those
consolidated financial statements that are incorporated by
reference in this prospectus.
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As
of June 30, 2018
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Actual
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As
adjusted(1)
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(unaudited)
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Cash and cash
equivalents
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$
5,423,862
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10,453,199
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Long-term
liability
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$
8,004
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$
8,004
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Preferred stock,
authorized 50,000,000 shares, $0.001 par value, no shares issued
and outstanding
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|
Common stock,
authorized 150,000,000 shares, $0.001 par value, 8,118,928 shares
issued and outstanding
|
8,119
|
9,268
|
|
Additional paid in
capital
|
21,509,688
|
26,537,876
|
|
Accumulated other
comprehensive income (loss)
|
(1,923,304
)
|
(1,923,304
)
|
|
Accumulated
deficit
|
(5,779,879
)
|
(5,779,879
)
|
|
Total Level Brands,
Inc. shareholders’ equity
|
13,814,624
|
18,843,961
|
|
Non-controlling
interest
|
1,402,911
|
1,402,911
|
|
Total
shareholders’ equity (deficit)
|
$
15,217,535
|
20,246,872
|
|
Total
capitalization
|
$
15,225,539
|
20,254,876
|
————————
|
(1)
|
On an
as adjusted basis to give effect to the sale of
1,149,425 shares of common stock in this offering at
the assumed public offering price of
$5.22 per share (which was the last reported
sale price of our common stock on September 24, 2018), after
deducting underwriting discounts and commissions and other
estimated offering expenses payable by us.
|
Each
increase (decrease) of 250,000 shares of common stock to be
purchased at the assumed offering price of
$5.22 per share would increase or (decrease)
additional paid-in capital, total shareholders’ equity
(deficit) and total capitalization by approximately
$1,213,400, assuming the assumed offering
price remains at $5.22 and after deducting estimated
underwriters’ discounts and commissions and estimated
offering expenses payable by us.
A $0.25
increase (decrease) in the assumed public offering price of
$5.22 per share of common stock would result in an
incremental increase (decrease) in each of our additional paid-in
capital, total shareholders’ equity (deficit) and total
capitalization on a as adjusted basis by approximately
$267,241, assuming that the number of shares of our
common stock sold by us as set forth on the cover page of this
prospect remains the same and after deducting the underwriting
discounts and commissions and estimated offering expenses payable
by us.
Unless
we indicate otherwise, all information in this Capitalization
section:
|
●
|
presents all share and per share information contained
herein with the pro forma effect to the 1:5 reverse stock split of
our common stock, which was effective December 5,
2016;
|
|
|
|
|
●
|
assumes
no exercise by the underwriters of the over-allotment
option;
|
|
|
|
|
●
|
excludes
the exercise of the representative’s warrants to be issued to
the representative of the underwriters in this
offering;
|
|
|
|
|
●
|
excludes
469,650 shares of our common stock reserved for issuance upon the
exercise of presently outstanding options with a weighted average
exercise price of $5.23 per share;
|
|
|
|
|
●
|
excludes
an additional 845,455 shares of our common stock reserved for
future grants under our 2015 Equity Compensation Plan;
and
|
|
|
|
|
●
|
excludes
312,176 shares of our common stock reserved for issuance upon the
exercise of presently outstanding warrants with a weighted average
exercise price of $6.84 per share.
|
DILUTION
If you
purchase shares of our securities in this offering, you will
experience dilution to the extent of the difference between the
public offering price per share and our as adjusted net tangible
book value per share immediately after this offering. Net tangible
book value per share is equal to the amount of our total tangible
assets, less total liabilities, divided by the number of
outstanding shares of our common stock. As of June 30, 2018, our
net tangible book value was approximately $11,757,529, or
approximately $1.45 per share.
After
giving effect to the assumed sale by us of 1,149,425
shares of our common stock in this offering at an
assumed public offering price of $5.22 per
share (which was the last reported sale price of our common
stock on September 24, 2018), and after deducting the
estimated underwriting discount and estimated offering expenses
payable by us, our as adjusted net tangible book value as of June
30, 2018 would have been approximately $16,786,866, or
approximately $1.81 per share. This represents
an immediate increase in as adjusted net tangible book value of
$0.36 per share to existing shareholders and an
immediate dilution of $3.41 per share to new investors
purchasing shares of our common stock in this offering. The
following table illustrates this per share dilution:
|
Assumed public
offering price per share of common stock
|
|
$
5.22
|
|
Net tangible book
value per share as of June 30, 2018
|
$
1.45
|
|
|
Increase in net
tangible book value per share after this offering
|
$
0.36
|
|
|
|
|
|
|
As adjusted net
tangible book value per share after giving effect to this
offering
|
|
1.81
|
|
|
|
|
|
Dilution per share
to new investors
|
|
$
3.41
|
The information above assumes that the underwriters do not exercise
their over-allotment option. If the underwriters exercise their
over-allotment option in full, the pro forma net tangible book
value will increase to $1.87 per share, representing
an immediate increase to existing shareholders of
$0.42 per share and an immediate dilution of
$3.35 per share to new investors.
A $0.25
increase in the assumed public offering price of $5.22
per share would result in an increase in our pro forma net tangible
book value to $17,054,107 million or
$1.84 per share, and would result in the dilution to
new investors of approximately $3.63 per share,
assuming that the number of shares of our common stock sold by us
remains the same and after deducting the underwriting discounts and
commissions and estimated offering expenses payable by us.
A
$0.25 decrease in the assumed public offering price of
$5.22 per share would result in an increase in our pro forma
net tangible book value to 16,519,623 or $1.78 per
share, and would result in the dilution to new investors of
$3.19 per share, assuming that the number of shares of our
common stock sold by us remains the same and after deducting the
underwriting discounts and commissions and estimated offering
expenses payable by us.
We may
also increase or decrease the number of shares of common stock we
are offering from the assumed number of shares of common stock set
forth above. An increase of 250,000 in the assumed number of shares
of common stock sold by us in this offering would result in an
incremental increase in our pro forma net tangible book value
to $18,000,514 or $1.89 per
share, and would result in an incremental increase in the dilution
to new investors of $3.33 per share, assuming that the
assumed public offering price remains the same and after deducting
the estimated underwriting discount and estimated offering expenses
payable by us. A decrease of 250,000 in the assumed number of
shares of common stock sold by us in this offering would result in
an increase in our pro forma net tangible book value
to $15,573,214 or $1.73 per
share, and would result in an incremental decrease in the dilution
to new investors of $3.49 per share, assuming that the
assumed public offering price remains the same and after deducting
the estimated underwriting discount and estimated offering expenses
payable by us. The information discussed above is
illustrative only and will adjust based on the actual public
offering price, the actual number of shares sold in this offering
and other terms of this offering determined at
pricing.
The
foregoing discussion and table do not take into account further
dilution to new investors that could occur upon the exercise of
outstanding options or warrants having a per share exercise price
less than the assumed per share offering price to the
public in this offering. In addition, we may choose to raise
additional capital due to market conditions or strategic
considerations even if we believe we have sufficient funds for our
current or future operating plans. To the extent that additional
capital is raised through the sale of equity or convertible debt
securities, the issuance of these securities could result in
further dilution to our shareholders.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Since
November 17, 2017 our common stock has been listed on the NYSE
American under the symbol "LEVB." Prior thereto, there was no
market for our common stock. The reported high and low last bid
prices for the common stock are shown below for the periods
indicated. The quotations reflect inter-dealer prices, without
retail mark-up, markdown or commission, and may not represent
actual transactions.
The
last sale price of our common stock as reported on the NYSE
American on September 24, 2018 was $5.22
per share. As of September 24, 2018, there were
approximately 144 record owners of our common stock.
This number does not include beneficial owners from whom shares are
held by nominees in street name.
DIVIDEND POLICY
We do not currently intend to pay dividends on our common stock.
The declaration, amount and payment of any future dividends on
shares of our common stock, if any, will be at the sole discretion
of our board of directors, which may take into account general and
economic conditions, our financial condition and results of
operations, our available cash and current and anticipated cash
needs, capital requirements, contractual, legal, tax and regulatory
restrictions, the implications of the payment of dividends by us to
our shareholders or by our subsidiaries to us, and any other
factors that our board of directors may deem relevant.
DESCRIPTION OF CAPITAL STOCK
Our authorized capital is 150,000,000 shares of common stock, par
value $0.001 per share, and 50,000,000 shares of blank check
preferred stock, par value $0.001 per share. At September
24, 2018, there were 8,123,928 shares of common stock
and no shares of preferred stock issued and
outstanding.
Common stock
Holders of common stock are entitled to one vote for each share on
all matters submitted to a shareholder vote. Holders of common
stock do not have cumulative voting rights. Holders of common stock
are entitled to share in all dividends that the board of directors,
in its discretion, declares from legally available funds. In the
event of our liquidation, dissolution or winding up, subject to the
preferences of any shares of our preferred stock which may then be
outstanding, each outstanding share entitles its holder to
participate in all assets that remain after payment of liabilities
and after providing for each class of stock, if any, having
preference over the common stock.
Holders of common stock have no conversion, preemptive or other
subscription rights, and there are no redemption provisions for the
common stock. The rights of the holders of common stock are subject
to any rights that may be fixed for holders of preferred stock,
when and if any preferred stock is authorized and issued. All
outstanding shares of common stock are duly authorized, validly
issued, fully paid and non-assessable.
Preferred stock
Our board of directors, without further shareholder approval, may
issue preferred stock in one or more series from time to time and
fix or alter the designations, relative rights, priorities,
preferences, qualifications, limitations and restrictions of the
shares of each series. The rights, preferences, limitations and
restrictions of different series of preferred stock may differ with
respect to dividend rates, amounts payable on liquidation, voting
rights, conversion rights, redemption provisions, sinking fund
provisions and other matters. Our board of directors may authorize
the issuance of preferred stock, which ranks senior to our common
stock for the payment of dividends and the distribution of assets
on liquidation. In addition, our board of directors can fix
limitations and restrictions, if any, upon the payment of dividends
on both classes of our common stock to be effective while any
shares of preferred stock are outstanding.
Common stock purchase warrants
We have outstanding warrants to purchase 312,176 shares of common
stock with exercise prices ranging from $6.53 to $7.50 per share
expiring between September 2021 and October 2022.
2015 Equity Compensation Plan
In June 2015, our board of directors and our shareholders approved
our 2015 Equity Compensation Plan. The plan initially reserved
1,175,000 common stock shares for awards of options, restricted
stock, other stock grants, or any combination thereof. The number
of shares of common stock available for issuance under the plan
automatically increase on the first trading day of January each
calendar year during the term of the plan, beginning with calendar
year 2016, by an amount equal to 1% of the total number of shares
of common stock outstanding on the last trading day in December of
the immediately preceding calendar year, up to a maximum annual
increase of 100,000 shares of common stock. As of June 30, 2018 we
had 1,315,1054,565 shares available for awards under the plan. At
June 30, 2018 we had outstanding options to purchase 434,650 shares
of our common stock with a weighted average exercise price of
$5.27. Subsequent to that date, we have granted options for an
additional 35,000 shares of our common stock. As of the date of
this prospectus, we presently have outstanding options to purchase
469,650 shares of our common stock with a weighted average exercise
price of $5.23 per share.
Transfer Agent
The transfer agent and registrar for our common stock is VStock
Transfer, LLC, 18 Lafayette Place, Woodmere, NY 11598.
Listing
Our common stock is listed on the NYSE American under the symbol
“LEVB.”
DESCRIPTION OF SECURITIES WE ARE OFFERING
We are
offering up to 1,149,425 shares of our common stock.
The material terms and provisions of our common stock and
each other class of our securities which qualifies or limits our
common stock are described under the caption “Description of
Capital Stock” in this prospectus.
Representative’s Warrants
Please
see “Underwriting — Representative’s
Warrants” for a description of the warrants we have agreed to
issue to the representative of the underwriters in this offering,
subject to the completion of the offering. We expect to enter into
a warrant agreement in respect of the representative’s
warrants prior to the closing of this offering.
UNDERWRITING
ThinkEquity,
a division of Fordham Financial Management, Inc., is acting as the
representative of the underwriters of this offering, or the
Representative. We have entered into an underwriting agreement
dated __________, 2018 with the Representative. Subject to the
terms and conditions of the underwriting agreement, we have agreed
to sell to each underwriter named below and each underwriter named
below has severally and not jointly agreed to purchase from us, at
the public offering price per share less the underwriting discounts
set forth on the cover page of this prospectus, the number of
shares of common stock listed next to its name in the following
table:
|
Underwriters
|
Number of
Shares
|
|
ThinkEquity, a
division of Fordham Financial Management, Inc.
|
|
|
Total
|
|
All of
the shares to be purchased by the underwriters will be purchased
from us.
The
underwriting agreement provides that the obligations of the
underwriters to pay for and accept delivery of the shares of common
stock offered by this prospectus are subject to various conditions
and representations and warranties, including the approval of
certain legal matters by their counsel and other conditions
specified in the underwriting agreement. The shares of common stock
are offered by the underwriters, subject to prior sale, when, as
and if issued to and accepted by them. The underwriters reserve the
right to withdraw, cancel or modify the offer to the public and to
reject orders in whole or in part. The underwriters are obligated
to take and pay for all of the shares of common stock offered by
this prospectus if any such shares of common stock are taken, other
than those shares of common stock covered by the over-allotment
option described below.
Over-Allotment Option
We have
granted to the underwriters an option, exercisable no later than 45
calendar days after the closing of this offering, to purchase up to
an additional 172,414 shares of common stock (15% of
the shares of common stock sold in this offering) from us to cover
over-allotments, if any, at a price per share of common stock equal
to the public offering price, less the underwriting discounts and
commissions (based on an assumed public offering price of
$5.22 per share, which was the last reported sale price of our
common stock on September 24, 2018). The underwriters may
exercise this option only to cover over-allotments made in
connection with this offering. If the underwriters exercise this
option in whole or in part, then the underwriters will be severally
committed, subject to the conditions described in the underwriting
agreement, to purchase these additional shares of common stock. If
any additional shares of common stock are purchased, the
underwriters will offer the additional shares of common stock on
the same terms as those on which the shares of common stock are
being offered hereby.
Discounts and Commissions
The Representative has advised us that the underwriters propose to
offer the shares of common stock to the public at the public
offering price per share set forth on the cover page of this
prospectus. The underwriters may offer shares to securities dealers
at that price less a concession of not more than
$ per share, of
which up to
$ per
share may be re-allowed to other dealers. After the initial
offering to the public, the public offering price and other selling
terms may be changed by the Representative.
The
following table summarizes the public offering price, underwriting
discounts and commissions and proceeds before expenses to us
assuming both no exercise and full exercise by the underwriters of
their over-allotment option:
|
|
Per
Share
|
Total Without
Over-allotment Option
|
Total With
Over-allotment Option
|
|
Public offering
price
|
$
|
$
|
$
|
|
Underwriting
discounts and commissions (7%)
|
$
|
$
|
$
|
|
Proceeds, before
expenses, to us
|
$
|
$
|
$
|
We
have agreed to reimburse the Representative for all
reasonable out-of-pocket accountable fees and costs incurred by the
Representative in connection with this offering up to a maximum of
$80,000 in the aggregate, including: (a) all filing fees and
communication expenses associated with the review of this offering
by the Financial Industry Regulatory Authority
(“FINRA”); (b) all fees and expenses relating to the
listing of the shares of our common stock on the NYSE American,
including any fees charged by the Depositary Trust Company for new
securities; (c) all fees, expenses and disbursements relating to
the registration, qualification or exemption of the shares of our
common stock offered hereby under the “blue sky”
securities laws of such states and other jurisdictions as the
Representative may reasonably designate, including, without
limitation, all filing and registration fees; (d) all fees,
expenses and disbursements relating to the registration,
qualification or exemption of securities offered under the
securities laws of foreign jurisdictions designated by the
Representative; (e) the costs of all mailing and printing of the
underwriting documents (including, without limitation, the
underwriting agreement, any blue sky surveys and, if appropriate,
any agreement among underwriters, selected dealers’
agreement, and underwriters’ questionnaire), and as many
preliminary and final prospectuses as the Representative may
reasonably deem necessary; (f) stock transfer and/or stamp taxes,
if any, payable upon the transfer of securities from us to the
underwriters; (g) the costs associated with bound volumes of the
public offering materials as well as commemorative mementos and
Lucite tombstones in such quantities as the Representative may
reasonably request; and (h) the Representative’s other
out-of-pocket fees and expenses together with the fees and expenses
of the underwriters’ legal counsel.
We have paid an expense deposit of
$20,000 to the Representative, which will be applied against these
out-of-pocket accountable fees and expenses that will be paid by us
to the underwriters in connection with this offering, and will be
reimbursed to us to the extent not incurred.
We
estimate the expenses of this offering payable by us, not including
underwriting discounts and commissions, will be approximately
$550,663.
Representative’s Warrants
Upon
closing of this offering, we have agreed to issue to the
Representative as compensation warrants to purchase a number of
shares of common stock equal to 3% of the aggregate number of
shares of common stock sold in this offering, or the
Representative’s Warrants. The Representative’s
Warrants will be exercisable at a per share exercise price equal to
125% of the public offering price per share in this offering
(excluding the over-allotment option). The Representative’s
Warrants are exercisable at any time and from time to time, in
whole or in part, during the four and one half year period
commencing 180 days from the effective date of the registration
statement of which this prospectus is a part.
The
Representative’s Warrants have been deemed compensation by
FINRA and are therefore subject to a 180-day lock-up pursuant to
Rule 5110(g)(1) of FINRA. The Representative (or permitted
assignees under Rule 5110(g)(1)) will not sell, transfer, assign,
pledge, or hypothecate these warrants or the securities underlying
these warrants, nor will they engage in any hedging, short sale,
derivative, put, or call transaction that would result in the
effective economic disposition of the warrants or the underlying
securities for a period of 180 days from the effective date of the
registration statement. In addition, the warrants provide for
registration rights upon request, in certain cases. The demand
registration right provided will not be greater than five years
from the effective date of the registration statement in compliance
with FINRA Rule 5110(f)(2)(G)(iv). The piggyback registration right
provided will not be greater than seven years from the effective
date of the registration statement in compliance with FINRA Rule
5110(f)(2)(G)(v). We will bear all fees and expenses attendant to
registering the securities issuable on exercise of the warrants
other than underwriting commissions incurred and payable by the
holders. The exercise price and number of shares issuable upon
exercise of the warrants may be adjusted in certain circumstances
including in the event of a stock dividend or our recapitalization,
reorganization, merger or consolidation. However, the warrant
exercise price or underlying shares will not be adjusted for
issuances of shares of common stock at a price below the warrant
exercise price.
Right of First Refusal
Until
six months after the closing date of this offering, the
Representative will have, subject to certain exceptions, an
irrevocable right of first refusal to act as sole investment
banker, sole book-runner and/or sole placement agent, at the
Representative’s discretion, for each and every future public
equity and debt offering, including all equity linked financings,
during such six months, for us, or any successor to or any
subsidiary of us, on terms customary for the Representative. The
Representative will have the sole right to determine whether or not
any other broker-dealer shall have the right to participate in any
such offering and the economic terms of any such participation. The
Representative will not have more than one opportunity to waive or
terminate the right of first refusal in consideration of any
payment or fee.
Discretionary Accounts
The
underwriters do not intend to confirm sales of the securities
offered hereby to any accounts over which they have discretionary
authority.
Other
From time to time, certain of the underwriters and/or their
affiliates have provided, and may in the future provide, various
investment banking and other financial services for us for
which
services
they have
received and, may in the future receive, customary fees. In
the course of their businesses, the underwriters and their
affiliates may actively trade our securities or loans for their own
account or for the accounts of customers, and, accordingly, the
underwriters and their affiliates may at any time hold long or
short positions in such securities or loans. Except for services
provided in connection with this offering, no underwriter has
provided any investment banking or other financial services to us
during the 180-day period preceding the date of this prospectus and
we do not expect to retain any underwriter to perform any
investment banking or other financial services for at least 90 days
after the date of this prospectus.
Lock-Up Agreements
Pursuant
to “lock-up” agreements, we and our executive officers
and directors have agreed, subject to limited exceptions, without
the prior written consent of the Representative not to directly or
indirectly, offer to sell, sell, pledge or otherwise transfer or
dispose of any of shares of (or enter into any transaction or
device that is designed to, or could be expected to, result in the
transfer or disposition by any person at any time in the future of)
our common stock, enter into any swap or other derivatives
transaction that transfers to another, in whole or in part, any of
the economic benefits or risks of ownership of shares of our common
stock, make any demand for or exercise any right or cause to be
filed a registration statement, including any amendments thereto,
with respect to the registration of any shares of common stock or
securities convertible into or exercisable or exchangeable for
common stock or any of our other securities or publicly disclose
the intention to do any of the foregoing, subject to customary
exceptions, for a period of 90 days from the date of this
prospectus.
Listing
Our
common stock is listed on the NYSE American under the symbol
“LEVB.”
Price Stabilization, Short Positions and Penalty Bids
In
connection with this offering, the underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price
of our common stock. Specifically, the underwriters may over-allot
in connection with this offering by selling more shares than are
set forth on the cover page of this prospectus supplement. This
creates a short position in our common stock for its own account.
The short position may be either a covered short position or a
naked short position. In a covered short position, the number of
shares of common stock over-allotted by the underwriters is not
greater than the number of shares of common stock that they may
purchase in the over-allotment option. In a naked short position,
the number of shares of common stock involved is greater than the
number of shares common stock in the over-allotment option. To
close out a short position, the underwriters may elect to exercise
all or part of the over-allotment option. The underwriters may also
elect to stabilize the price of our common stock or reduce any
short position by bidding for, and purchasing, common stock in the
open market.
The
underwriters may also impose a penalty bid. This occurs when a
particular underwriter or dealer repays selling concessions allowed
to it for distributing shares of common stock in this offering
because the underwriter repurchases the shares of common stock in
stabilizing or short covering transactions.
Finally,
the underwriters may bid for, and purchase, shares of our common
stock in market making transactions, including
“passive” market making transactions as described
below.
These
activities may stabilize or maintain the market price of our common
stock at a price that is higher than the price that might otherwise
exist in the absence of these activities. The underwriters are not
required to engage in these activities, and may discontinue any of
these activities at any time without notice. These transactions may
be effected on the national securities exchange on which our shares
of common stock are traded, in the over-the-counter market, or
otherwise.
Indemnification
We have
agreed to indemnify the underwriters against liabilities relating
to this offering arising under the Securities Act and the Exchange
Act, liabilities arising from breaches of some or all of the
representations and warranties contained in the underwriting
agreement, and to contribute to payments that the underwriters may
be required to make for these liabilities.
Electronic Distribution
This prospectus in electronic format may be made
availa
b
le on websites or
through other online services maintained by one or more of the
underwriters, or by their affiliates. Other than this
prospectus in electronic format, the information on any
underwriter’s website and any information contained in any
other website maintained by an underwriter is not part of this
prospectus or the registration statement of which this prospectus
forms a part, has not been approved and/or endorsed by us or any
underwriter in its capacity as underwriter, and should not be
relied upon by investors.
Selling Restrictions
No
action has been taken in any jurisdiction (except in the United
States) that would permit a public offering of our common stock, or
the possession, circulation or distribution of this prospectus
supplement, the accompanying prospectus or any other material
relating to us or our common stock in any jurisdiction where action
for that purpose is required. Accordingly, our common stock may not
be offered or sold, directly or indirectly, and none of this
prospectus supplement, the accompanying prospectus or any other
offering material or advertisements in connection with our common
stock may be distributed or published, in or from any country or
jurisdiction, except in compliance with any applicable rules and
regulations of any such country or jurisdiction.
European Economic Area
In
relation to each Member State of the European Economic Area which
has implemented the Prospectus Directive, each a “Relevant
Member State”, with effect from and including the date on
which the Prospectus Directive is implemented in that Relevant
Member State, or the “Relevant Implementation Date”,
our securities will not be offered to the public in that Relevant
Member State prior to the publication of a prospectus in relation
to our securities that has been approved by the competent authority
in that Relevant Member State or, where appropriate, approved in
another Relevant Member State and notified to the competent
authority in that Relevant Member State, all in accordance with the
Prospectus Directive, except that, with effect from and including
the Relevant Implementation Date, an offer of our securities may be
made to the public in that Relevant Member State at any
time:
●
to any legal entity
that is a qualified investor as defined in the Prospectus
Directive;
●
to fewer than 100
or, if the Relevant Member State has implemented the relevant
provision of the 2010 PD Amending Directive, 150 natural or legal
persons (other than qualified investors as defined in the
Prospectus Directive), as permitted under the Prospectus Directive,
subject to obtaining the prior consent of the manager for any such
offer; or
●
in any other
circumstances which do not require the publication by the issuer of
a prospectus pursuant to Article 3(2) of the Prospectus Directive,
provided that no such offer of the securities shall require the
issuer or any underwriter to publish a prospectus pursuant to
Article 3 of the Prospectus Directive.
For the
purposes of this provision, the expression an “offer of
securities to the public” in relation to any securities in
any Relevant Member State means the communication in any form and
by any means of sufficient information on the terms of the offer
and securities to be offered so as to enable an investor to decide
to purchase or subscribe securities, as the same may be varied in
that Relevant Member State by any measure implementing the
Prospectus Directive in that Relevant Member State and the
expression “Prospectus Directive” means Directive
2003/71/EC (and amendments thereto, including the 2010 PD Amending
Directive, to the extent implemented in the Relevant Member State),
and includes any relevant implementing measure in each Relevant
Member State and the expression “2010 PD Amending
Directive” means Directive 2010/73/EU.
United Kingdom
In the
United Kingdom, this document is being distributed only to, and is
directed only at, and any offer subsequently made may only be
directed at persons who are “qualified investors” (as
defined in the Prospectus Directive) (i) who have professional
experience in matters relating to investments falling within
Article 19 (5) of the Financial Services and Markets Act 2000
(Financial Promotion) Order 2005, as amended (the Order), and/or
(ii) who are high net worth companies (or persons to whom it may
otherwise be lawfully communicated) falling within Article 49(2)(a)
to (d) of the Order (all such persons together, the relevant
persons). This document must not be acted on or relied on in the
United Kingdom by persons who are not relevant persons. In the
United Kingdom, any investment or investment activity to which this
document relates is only available to, and will be engaged in with,
relevant persons.
Canada
The
offering of our common stock in Canada is being made on a private
placement basis in reliance on exemptions from the prospectus
requirements under the securities laws of each applicable Canadian
province and territory where our common stock may be offered and
sold, and therein may only be made with investors that are
purchasing, or deemed to be purchasing, as principal and that
qualify as both an “accredited investor” as such term
is defined in National Instrument 45-106
Prospectus Exemptions
or subsection
73.3(1) of the
Securities
Act
(Ontario) and as a “permitted client” as
such term is defined in National Instrument 31-103
Registration Requirements, Exemptions and
Ongoing Registrant Obligations.
Any offer and sale of our
common stock in any province or territory of Canada may only be
made through a dealer that is properly registered under the
securities legislation of the applicable province or territory
wherein our common stock is offered and/or sold or, alternatively,
where such registration is not required.
Any
resale of our common stock by an investor resident in Canada must
be made in accordance with applicable Canadian securities laws,
which require resales to be made in accordance with an exemption
from, or in a transaction not subject to, prospectus requirements
under applicable Canadian securities laws. These resale
restrictions may under certain circumstances apply to resales of
the common stock outside of Canada.
Securities
legislation in certain provinces or territories of Canada may
provide a purchaser with remedies for rescission or damages if this
prospectus (including any amendment thereto) contains a
misrepresentation, provided that the remedies for rescission or
damages are exercised by the purchaser within the time limit
prescribed by the securities legislation of the purchaser’s
province or territory. The purchaser should refer to any applicable
provisions of the securities legislation of the purchaser’s
province or territory for particulars of these rights or consult
with a legal advisor.
Pursuant
to section 3A.3 (or, in the case of securities issued or guaranteed
by the government of a non-Canadian jurisdiction, section 3A.4) of
National Instrument 33-105
Underwriting Conflicts
(“NI
33-105”), the underwriters are not required to comply with
the disclosure requirements of NI 33-105 regarding underwriter
conflicts of interest in connection with this
offering.
Upon
receipt of this prospectus, each Québec investor hereby
confirms that it has expressly requested that all documents
evidencing or relating in any way to the sale of the securities
described herein (including for greater certainty any purchase
confirmation or any notice) be drawn up in the English language
only.
Par la réception de ce
document, chaque investisseur québecois confirme par les
présentes qu’il a expressément exigé que tous
les documents faisant foi ou se rapportant de quelque manière
que ce soit à la vente des valeurs mobilières
décrites aux présentes (incluant, pour plus de certitude,
toute confirmation d’achat ou tout avis) soient
rédigés en anglais seulement
.
LEGAL MATTERS
The validity of the securities offered by this prospectus has been
passed upon for us by Pearlman Law Group LLP, Fort Lauderdale,
Florida. Certain matters under North Carolina law have been passed
upon for us by the Law Offices of Jason H. Scott. The underwriter
is represented by Gracin & Marlow, LLP, New York, New
York.
EXPERTS
Our consolidated balance sheets as of September 30, 2017 and 2016
and the related consolidated statements of operations,
shareholders’ deficit and cash flows for the fiscal years
ended September 30, 2017 and 2016 incorporated by reference in this
prospectus and in the registration statement have been so
incorporated in reliance on the report of Cherry Bekaert LLP,
independent registered public accounting firm, given on their
authority as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have
filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act with respect to the
securities offered by this prospectus. This prospectus, which is
part of the registration statement, omits certain information,
exhibits, schedules and undertakings set forth in the registration
statement. For further information pertaining to us and the
securities offered hereby, reference is made to the registration
statement and the exhibits and schedules to the registration
statement. Statements contained in this prospectus as to the
contents or provisions of any documents referred to in this
prospectus are not necessarily complete, and in each instance where
a copy of the document has been filed as an exhibit to the
registration statement, reference is made to the exhibit for a more
complete description of the matters involved.
You may
read and copy all or any portion of the registration statement
without charge at the public reference room of the Securities and
Exchange Commission at 100 F Street, N.E., Washington, D.C. 20549.
Copies of the registration statement may be obtained from the
Securities and Exchange Commission at prescribed rates from the
public reference room of the Securities and Exchange Commission at
such address. You may obtain information regarding the operation of
the public reference room by calling 1-800-SEC-0330. In addition,
registration statements and certain other filings made with the
Securities and Exchange Commission electronically are publicly
available through the Securities and Exchange Commission’s
website at
www.sec.gov
. The
registration statement, including all exhibits and amendments to
the registration statement, has been filed electronically with the
Securities and Exchange Commission. You may also read all or any
portion of the registration statement and certain other filings
made with the Securities and Exchange Commission on our website at
www.levelbrands.com
. The
information contained in, and that can be accessed through, our
website is not incorporated into and is not part of this
prospectus.
We are
subject to the information and periodic reporting requirements of
the Exchange Act and, accordingly, are required to file annual
reports containing financial statements audited by an independent
public accounting firm, quarterly reports containing unaudited
financial data, current reports, proxy statements and other
information with the Securities and Exchange Commission. You will
be able to inspect and copy such periodic reports, proxy statements
and other information at the Securities and Exchange
Commission’s public reference room, the website of the
Securities and Exchange Commission referred to above, and our
website at
www.levelbrands.com
. Except for the
specific incorporated reports and documents listed above, no
information available on or through our website shall be deemed to
be incorporated in this prospectus or the registration statement of
which it forms a part.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC
allows us to “incorporate by reference” certain
information that we will file with it which means that we can
disclose important information to you by referring you to those
documents instead of having to repeat the information in this
prospectus. The later information that we file with the SEC will
automatically update and supersede this information. We incorporate
by reference the documents listed below and any future filings made
with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act (Commission File No. 001-38299)) after (i) the
date of this initial registration statement and prior to
effectiveness of this registration statement and (ii) the date
of this prospectus and before the completion of the offering of the
securities included in this prospectus, however, we will not
incorporate by reference any documents or portions thereof that are
not deemed “filed” with the SEC, or any information
furnished pursuant to Items 2.02 or 7.01 of Form 8-K or related
exhibits furnished pursuant to Item 9.01 of Form 8-K:
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our Annual Report on Form 10-K for the fiscal year ended September
30, 2017 as filed with the SEC on December 26, 2017;
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our Quarterly Reports on Form 10-Q for the periods ended December
31, 2017 (as filed with the SEC on February 14, 2018), March 31,
2018 (as filed with the SEC on May 15, 2018) and June 30, 2018 (as
filed with the SEC on August 14, 2018);
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our Definitive Proxy Statement on Schedule 14A as filed with the
SEC on January 29, 2018;
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our Current Reports on Form 8-K as filed with the SEC on November
17, 2017, December 12, 2017, January 5, 2018, January 22, 2018,
January 25, 2018, March 22, 2018, June 1, 2018, June 27, 2018 and
September 7, 2018; and
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the description of our common stock contained in our Registration
Statement on Form 8-A as filed with the SEC on November 15, 2017
and any further amendment or report filed hereafter for the purpose
of updating such description.
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We will
provide to each person, including any beneficial owner, to whom a
prospectus is delivered, a copy of any or all of the reports or
documents that we incorporate by reference in this prospectus
contained in the registration statement (except exhibits to the
documents that are not specifically incorporated by reference) at
no cost to you, by writing or calling us at the following address
and telephone number:
Level Brands, Inc.
4521 Sharon Road
Suite 450
Charlotte, NC 28211
Attention: Investor Relations
Information
about us is available at our website at
www.levelbrands.com.
Except for
the specific incorporated reports and documents listed above, no
information available on or through our website shall be deemed to
be incorporated in this prospectus or the registration statement of
which it forms a part. Any statement contained in this registration
statement or in a document incorporated or deemed to be
incorporated by reference in this registration statement shall be
deemed to be modified or superseded for purposes of this
registration statement to the extent that a statement contained in
this registration statement or in any other subsequently filed
document which also is or is deemed to be incorporated by reference
in this registration statement modifies or supersedes that
statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part
of this registration statement.
1,149,425 Shares
Common Stock
____________________________
PROSPECTUS
____________________________
ThinkEquity
a division of Fordham Financial Management, Inc.
Through and including ___________, 2018 (25 days after
commencement of this offering), all dealers that effect
transactions in these securities, whether or not participating in
this offering, may be required to deliver a prospectus. This is in
addition to the dealers’ obligation to deliver a prospectus
when acting as underwriters and with respect to their unsold
allotments or subscriptions.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13.
Other Expenses
of Issuance and Distribution.
We
estimate that expenses in connection with the distribution
described in this registration statement (other than fees and
commissions charged by the underwriters) will be as set forth
below. We will pay all of the expenses with respect to the
distribution, and such amounts, with the exception of the SEC
registration fee and the Financial Industry Regulatory Authority,
Inc. (“FINRA”) filing fee, are estimates.
|
SEC
registration and filing fee
|
$
887.07
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|
FINRA
filing fee
|
1,568.75
|
|
NYSE
American listing fee
|
28,288.00
|
|
Legal
fees and expenses
|
200,000.00
*
|
|
Accounting
fees and expenses
|
100,000.00
*
|
|
Underwriters’
out-of-pocket expenses
|
80,000.00
*
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Printing
costs
|
20,000.00
*
|
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Miscellaneous
(including transfer agent fees)
|
119,919.00
*
|
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TOTAL
|
$
550,663.00
*
|
*
estimated.
Item 14.
Indemnification of
Directors and Officers.
Sections 55-8-50 through 55-8-58 of the North Carolina General
Statutes permit a corporation to indemnify its directors, officers,
employees or agents under either or both a statutory or
non-statutory scheme of indemnification. Under the statutory
scheme, a corporation may, with certain exceptions, indemnify a
director, officer, employee or agent of the corporation who was,
is, or is threatened to be made, a party to any threatened, pending
or completed legal action, suit or proceeding, whether civil,
criminal, administrative, or investigative, because of the fact
that such person was a director, officer, agent or employee of the
corporation, or is or was serving at the request of such
corporation as a director, officer, employee or agent of another
corporation or enterprise. This indemnity may include the
obligation to pay any judgment, settlement, penalty, fine
(including an excise tax assessed with respect to an employee
benefit plan) and reasonable expenses incurred in connection with a
proceeding (including counsel fees), but no such indemnification
may be granted unless such director, officer, agent or employee (i)
conducted himself in good faith, (ii) reasonably believed (a) that
any action taken in his official capacity with the corporation was
in the best interest of the corporation or (b) that in all other
cases his conduct at least was not opposed to the
corporation’s best interest, and (iii) in the case of any
criminal proceeding, had no reasonable cause to believe his conduct
was unlawful. Whether a director has met the requisite standard of
conduct for the type of indemnification set forth above is
determined by the board of directors, a committee of directors,
special legal counsel or the shareholders in accordance with
Section 55-8-55. A corporation may not indemnify a director under
the statutory scheme in connection with a proceeding by or in the
right of the corporation in which the director was adjudged liable
to the corporation or in connection with a proceeding in which a
director was adjudged liable on the basis of having received an
improper personal benefit.
In addition to, and separate and apart from the indemnification
described above under the statutory scheme, Section 55-8-57 of
the North Carolina General Statutes permits a corporation to
indemnify or agree to indemnify any of its directors, officers,
employees or agents against liability and expenses (including
attorney’s fees) in any proceeding (including proceedings
brought by or on behalf of the corporation) arising out of their
status as such or their activities in such capacities, except for
any liabilities or expenses incurred on account of activities that
were, at the time taken, known or believed by the person to be
clearly in conflict with the best interests of the corporation. Our
bylaws provide for indemnification to the fullest extent permitted
by law for persons who serve as a director, officer, agent or
employee of Level Brands or at the request of Level Brands serve as
a director, officer, agent or employee for any other corporation,
partnership, joint venture, trust or other enterprise, or as a
trustee or administrator under an employee benefit plan.
Accordingly, we may indemnify our directors, officers, agents or
employees in accordance with either the statutory or non-statutory
standards.
Sections 55-8-52 and 55-8-56 of the North Carolina General Statutes
require a corporation, unless its articles of incorporation provide
otherwise, to indemnify a director or officer who has been wholly
successful, on the merits or otherwise, in the defense of any
proceeding to which such director or officer was a party. Unless
prohibited by the articles of incorporation, a director or officer
also may make application and obtain court-ordered indemnification
if the court determines that such director or officer is fairly and
reasonably entitled to such indemnification as provided in Sections
55-8-54 and 55-8-56.
Finally, Section 55-8-57 of the North Carolina General Statutes
provides that a corporation may purchase and maintain insurance on
behalf of an individual who is or was a director, officer, employee
or agent of the corporation against certain liabilities incurred by
such persons, whether or not the corporation is otherwise
authorized by the North Carolina Business Corporation Act to
indemnify such party. We have purchased a standard directors’
and officers’ liability policy which will, subject to certain
limitations, indemnify us and our officers and directors for
damages they become legally obligated to pay as a result of any
negligent act, error, or omission committed by directors or
officers while acting in their capacity as such.
As permitted by North Carolina law, Article 6 of our Articles of
Incorporation limits the personal liability of directors for
monetary damages for breaches of duty as a director arising out of
any legal action for breach of duty as a director.
In any underwriting agreement we enter into in connection with the
sale of common stock being registered hereby, the underwriters will
agree to indemnify, under certain conditions, us, our directors,
our officers and persons who control us, within the meaning of the
Securities Act of 1933, as amended (the “Securities
Act”), against certain liabilities.
Insofar as the limitation of, or indemnification for, liabilities
arising under the Securities Act may be permitted to directors,
officers, or persons controlling us pursuant to the foregoing, or
otherwise, we have been advised that, in the opinion of the
Securities and Exchange Commission, such limitation or
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
ITEM 15.
RECENT SALES OF UNREGISTERED SECURITIES.
Following are all issuances of securities by the registrant during
the past three years which were not registered under the Securities
Act. In each of these issuances the recipient represented that he,
she or it was acquiring the shares for investment purposes only and
not with a view towards distribution or resale except in compliance
with applicable securities laws and had access to information
concerning our company. No general solicitation or advertising was
used in connection with any transaction, and the certificate
evidencing the securities that were issued contained a legend
restricting their transferability absent registration under the
Securities Act or the availability of an applicable exemption
therefrom. Unless specifically set forth below, no underwriter
participated in the transaction and no commissions were paid in
connection with the transactions.
In December 2015 we issued LBGLOC, LLC 16,000 shares of our common
stock valued at $32,000 as consideration for the granting to us of
a line of credit. The issuance was exempt from registration based
upon an exemption provided by Section 4(a)(2) of the Securities
Act.
Between January 2016 and February 2016 we issued and sold 286,667
shares of our common stock to 21 investors in a private placement
exempt from registration under the Securities Act in reliance on
exemptions provided by Sections 4(a)(2) and 506(b) of Regulation D.
Mr. Elliott, who now serves as an executive officer, as well as
affiliates of Mr. Sumichrast purchased shares in this offering upon
the same terms and conditions as other investors. We received gross
proceeds of $2,150,000 in this offering. T.R. Winston & Company
LLC, a broker-dealer and member of FINRA, acted as placement agent
for us. We paid it a cash commission and reimbursement of
accountable expenses of $157,642 and issued it and its designees
four year placement agent warrants to purchase an aggregate of
20,067 shares of our common stock at an exercise price of $8.75 per
share as additional compensation. We used the net proceeds from
this offering for general working capital.
In March 2016 we issued 83,334 shares of our common stock upon the
cashless exercise of a portion of the warrant originally sold to
kathy ireland® Worldwide. The issuance was exempt from
registration based upon an exemption provided by Section 3(a)(9) of
the Securities Act.
In June 2016 we issued 30,000 shares of our common stock to Best
Buddies International, an affiliate of Mr. Shriver, valued at
$225,000 as a charitable contribution. The issuance was exempt from
registration based upon an exemption provided by Section 4(a)(2) of
the Securities Act.
In June 2016 we also issued an aggregate of 333,333 shares of our
common stock to two entities upon the cashless exercise of the
remaining portions of the warrant originally sold to kathy
ireland® Worldwide. The issuances were exempt from
registration based upon an exemption provided by Section 3(a)(9) of
the Securities Act.
In October 2016 we issued and sold $2,125,000 principal amount 8%
convertible promissory notes to 23 investors in a private placement
exempt from registration under the Securities Act in reliance on
exemptions provided by Sections 4(a)(2) and 506(b) of Regulation D.
As part of this offering we also issued the note purchasers
warrants to purchase an aggregate of 141,676 shares of our common
stock at an exercise price of $7.80 per share. We received gross
proceeds of $2,150,000 in this offering. T.R. Winston & Company
LLC, a broker-dealer and member of FINRA, acted as placement agent
for us. We paid it a cash commission and reimbursement of
accountable expenses of $199,450. We used the net proceeds from
this offering for general working capital.
In October 2016 we also issued 14,667 shares of our common stock
valued at $100,000 to three individuals in connection with our
acquisition of a minority membership interest in Beauty &
Pin-Ups. The issuances were exempt from registration based upon
exemptions provided by Section 4(a)(2) of the Securities
Act.
In October 2016 we also issued 38,358 shares of our stock to six
individuals and entities upon the cashless exercise of a placement
agents warrants previously granted to T.R. Winston & Co LLC and
its affiliates. The issuances were exempt from registration based
upon exemptions provided by Section 3(a)(9) of the Securities
Act.
In
October 2016 we also granted stock options under our 2015 Equity
Compensation Plan to purchase an aggregate of 185,800 shares of
common stock to four employees as additional compensation for their
services. For accounting purposes we recorded an expense of $5,220
through December 31, 2016, related to these grants. The grants were
exempt from registration based upon an exemption provided by
Section 4(a)(2) of the Securities Act.
In November 2016 we issued LBGLOC LLC 14,000 shares of our common
stock valued at $105,000 as consideration for renewal of the line
of credit. The issuance was exempt from registration based upon an
exemption provided by Section 4(a)(2) of the Securities
Act.
In November 2016 we also issued Stone Street Partners, LLC an
aggregate of 76,000 shares of our common stock valued at $570,000
as compensation for services. The issuances were exempt from
registration based upon exemptions provided by Section 4(a)(2) of
the Securities Act.
In November 2016 we issued 20,000 shares of our common stock valued
at $150,000 to Best Buddies International as a charitable
contribution. The issuance was exempt from registration based upon
an exemption provided by Section 4(a)(2) of the Securities
Act.
In January 2017 we issued an aggregate of 26,667 shares of our
common stock valued at $106,668 as additional compensation to two
employees, including our chief financial officer. The issuances
were exempt from registration based upon exemptions provided by
Section 4(a)(2) of the Securities Act.
In January 2017 we issued EE1 Holdings, LLC 283,000 shares of our
common stock as consideration for the purchase of the Class A
membership interests in EE1. The issuance was exempt from
registration based upon an exemption provided by Section 4(a)(2) of
the Securities Act.
In January 2017 we also issued IM1 Holdings, LLC 583,000 shares of
our common stock as consideration for the purchase of the Class A
membership interests in I’M1. The issuance was exempt from
registration based upon an exemption provided by Section 4(a)(2) of
the Securities Act.
In March 2017 we issued 114,745 shares of our common stock valued
at $97,533 to three individuals as additional consideration in
connection with our acquisition of a minority membership interest
in Beauty & Pin-Ups. This issuance, which relates to the
October 2016 purchase of a minority membership interest in Beauty
& Pin-Ups, represented additional shares we agreed to issue to
the sellers as a result of the change in the stock value used for
the purposes of determining the number of shares of our common
stock to be issued as consideration under the agreement. Our
financial statements incorporated by reference into this prospectus
and the registration statement
treat the issuance of these
additional shares of our common stock as if the issuance occurred
in October 2016.
The issuances were
exempt from registration based upon exemptions provided by Section
4(a)(2) of the Securities Act.
In
April 2017 we granted our Chief Financial Officer/Chief Operating
Officer options under our 2015 Equity Compensation Plan, effective
May 1, 2017, to purchase 100,000 shares of our common stock at an
exercise price of $4.00 per share valued at $21,500 as additional
compensation. The grant was exempt from registration based upon an
exemption provided by Section 4(a)(2) of the Securities
Act.
In April 2017 we issued the minority owner in Beauty & Pin-Ups
155,294 shares of our common stock in exchange for the remaining
12% member interest in that subsidiary. The issuance was exempt
from registration based upon an exemption provided by Section
4(a)(2) of the Securities Act.
In June 2017 we issued 195,740 shares of our common stock upon the
conversion of the outstanding principal amount of $593,797 together
with the accrued interest of $179,380 due under a credit line in
full satisfaction of these amounts. The issuance was exempt from
registration based upon an exemption provided by Section 3(a)(9) of
the Securities Act.
In October 2016 we sold an aggregate amount of $2,125,000 of our 8%
convertible promissory notes to accredited investors, and in
connection with the issuance of the notes issued warrants to
purchase 141,676 shares of our common stock at an exercise price of
$7.80 per share. In June 2017 the note holders converted the
principal amount of the notes and all accrued interest into 570,254
shares of our common stock. The issuances were exempt from
registration based upon an exemption provided by Section 3(a)(9) of
the Securities Act.
In June
2017 we issued 5,000 shares of our common stock valued at $19,750
to a third party as partial compensation for services to us under
the terms of a management consulting agreement. The recipient was
an accredited or otherwise sophisticated investor with access to
business and financial information on our company. The issuance was
exempt from registration under the Securities Act based upon an
exemption provided by Section 4(a)(2) of the Securities
Act.
In June
2017 we issued and sold an aggregate of 77,000 shares of our common
stock for proceeds of $304,150 to two accredited investors in a
private offering. We used the proceeds for general working capital.
The issuances were exempt from registration under the Securities
Act based upon exemptions provided by Section 4(a)(2) of the
Securities Act.
In July 2017, we issued and sold 133,000 shares of common stock for
proceeds of $525,350. The purchasers were accredited investors and
affiliates of our Chairman and CEO.
We used the proceeds for
general working capital. The issuances were exempt from
registration under the Securities Act based upon exemptions
provided by Section 4(a)(2) of the Securities Act.
In August, 2017, we issued 19,100 shares of common stock valued at
$75,445 to a firm as compensation for services to us under the
terms of an agreement. The recipient was an accredited or otherwise
sophisticated investor with access to business and financial
information on our company. The issuance was exempt from
registration under the Securities Act in reliance on an exemption
provided by Section 4(a)(2) of the Securities Act.
In August, 2017, we issued 1,500 shares of common stock upon
exercise of options by a past employee. The recipient was an
accredited or otherwise sophisticated investor with access to
business and financial information on our company. The issuance was
exempt from registration under the Securities Act in reliance on an
exemption provided by Section 4(a)(2) of the Securities
Act.
In September 2017, we issued 45,500 shares of our common stock
valued at $179,725 as partial compensation under the terms of a
wholesale license agreement, and issued the licensor warrants to
purchase an additional 45,500 shares of our common stock at a
strike price of $4.00 which were valued at $65,338. The issuance
was exempt from registration under the Securities Act in reliance
on an exemption provided by Section 4(a)(2) of the Securities
Act.
In September 2017, we also issued 25,000 shares of our common stock
valued at $98,750 as partial compensation under the terms of a
wholesale license agreement, and issued the licensor warrants to
purchase an additional 25,000 shares of common stock at a strike
price of $4.00 which were valued at $35,900. The recipient was an
accredited or otherwise sophisticated investor with access to
business and financial information on our company. The issuance was
exempt from registration under the Securities Act in reliance on an
exemption provided by Section 4(a)(2) of the Securities
Act.
In October 2017 we issued an aggregate of 7,593 shares of our
common stock valued at $30,000 to three of our independent
directors as compensation for their services. The recipients were
accredited investors and the issuances were exempt from
registration under the Securities Act in reliance on exemptions
provided by Section 4(a)(2) of the Securities Act.
In November 2017 we issued 6,667 shares of our common stock valued
at $37,002 as compensation for services to us. The recipient was a
sophisticated or otherwise accredited investor with access to
business and financial information on our company. The issuance was
exempt from registration under the Securities Act in reliance on an
exemption provided by Section 4(a)(2) of the Securities
Act.
In January 2018, we issued 230,000 shares of our common stock after
the vesting of restricted stock award, which were issued to our
board of directors in October 2016, valued at $195,500. The
recipients were accredited investors and the issuances were exempt
from registration under the Securities Act in reliance on
exemptions provided by Section 4(a)(2) of the Securities
Act.
In March 2018 we issued 5,000 shares of our common stock valued at
$20,000 as compensation to an investor relations firm. The
recipient was an accredited investor and the issuance was exempt
from registration under the Securities Act in reliance on an
exemption provided by Section 4(a)(2) of the Securities
Act.
In May 2018 we issued 60,000 shares of our common stock valued at
$303,000 as compensation to an investment banking firm for general
financial advisory and investment banking services. The recipient
was an accredited investor and the issuance was exempt from
registration under the Securities Act in reliance on an exemption
provided Section 4(a)(2) of the Securities Act.
In June 2018 we issued 25,000 shares of our common stock valued at
$118,000 as compensation to a broker dealer for business advisory
services. The recipient was an accredited investor and the issuance
was exempt from registration under the Securities Act in reliance
on an exemption provided by Section 4(a)(2) of the Securities
Act.
In July 2018 we issued 5,000 shares of our common stock valued at
$18,500 as compensation to an investor relations firm. The
recipient was an accredited investor and the issuance was exempt
from registration under the Securities Act in reliance on an
exemption provided by Section 4(a)(2) of the Securities
Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES.
|
|
|
|
|
Incorporated by Reference
|
|
|
|||||
|
No.
|
|
Exhibit Description
|
|
Form
|
|
Date
Filed
|
|
Number
|
|
Filed or
Furnished
Herewith
|
|
|
|
Underwriting
Agreement
|
|
|
|
|
|
|
|
Filed
|
||
|
|
Articles
of Incorporation
|
|
1-A
|
|
9/18/17
|
|
2.1
|
|
|
||
|
|
Articles
of Amendment to the Articles of Incorporation filed April 22,
2015
|
|
1-A
|
|
9/18/17
|
|
2.2
|
|
|
||
|
|
Articles
of Amendment to the Articles of Incorporation filed June 22,
2015
|
|
1-A
|
|
9/18/17
|
|
2.3
|
|
|
||
|
|
Articles
of Amendment to the Articles of Incorporation filed November 17,
2016
|
|
1-A
|
|
9/18/17
|
|
2.4
|
|
|
||
|
|
Articles
of Amendment to the Articles of Incorporation filed December 5,
2016
|
|
1-A
|
|
9/18/17
|
|
2.5
|
|
|
||
|
|
Bylaws,
as amended
|
|
1-A
|
|
9/18/17
|
|
2.6
|
|
|
||
|
|
Form of placement agent warrant issued in June 2015 private
placement
|
|
1-A
|
|
9/18/17
|
|
3.3
|
|
|
||
|
|
Form of placement agent warrant issued in December 2015 private
placement
|
|
1-A
|
|
9/18/17
|
|
3.4
|
|
|
||
|
|
Form of warrant issued in 8% convertible promissory note
offering
|
|
1-A
|
|
9/18/17
|
|
3.5
|
|
|
||
|
|
Form of selling agents’ warrant issued in November 2017
initial public offering
|
|
1-A/A
|
|
10/12/17
|
|
3.6
|
|
|
||
|
|
Form of common stock certificate of the registrant
|
|
1-A
|
|
9/18/17
|
|
3.7
|
|
|
||
|
|
2015
Equity Compensation Plan
|
|
1-A
|
|
9/18/17
|
|
3.8
|
|
|
||
|
|
Form of
stock option award under 2015 Equity Compensation Plan
+
|
|
1-A
|
|
9/18/17
|
|
3.9
|
|
|
||
|
|
Form of
warrant issued to Andre Carthen
|
|
1-A
|
|
9/18/17
|
|
3.10
|
|
|
||
|
|
Form of
warrant issued to Nicholas Walker
|
|
1-A
|
|
9/18/17
|
|
3.11
|
|
|
||
|
|
Form of
representative’s warrant
|
|
|
|
|
|
|
|
Filed
|
||
|
|
Opinion
of Pearlman Law Group LLP
|
|
|
|
|
|
|
|
Filed
|
||
|
5.2
|
|
Opinion
of Law Offices of Jason H. Scott
|
|
|
|
|
|
|
|
Filed
|
|
|
|
Contribution Agreement by and between Beauty & Pin-Ups, Inc.
and Beauty and Pin Ups LLC dated April 13, 2015
|
|
1-A
|
|
9/18/17
|
|
7.1
|
|
|
||
|
|
Operating Agreement of Beauty and Pin Ups LLC, as
amended
|
|
1-A
|
|
9/18/17
|
|
6.1
|
|
|
||
|
|
Consulting Agreement dated April 13, 2015 by and between Beauty and
Pin Ups LLC and Priel Maman
|
|
1-A
|
|
9/18/17
|
|
6.2
|
|
|
||
|
|
Management Services Agreement dated April 27, 2015 by and
between
kathy
ireland
® Worldwide and
Level Beauty Group, Inc.
|
|
1-A
|
|
9/18/17
|
|
6.3
|
|
|
||
|
|
Advisory Services Agreement dated April 27, 2015 by and between
Stone Street Partners, LLC and Level Beauty Group,
Inc.
|
|
1-A
|
|
9/18/17
|
|
6.4
|
|
|
||
|
|
Termination Agreement dated October 31, 2016 by and between
kathy
ireland
® Worldwide and
Level Beauty Group, Inc.
|
|
1-A
|
|
9/18/17
|
|
6.5
|
|
|
||
|
|
Termination Agreement dated September 30, 2016 by and between
Siskey Capital, LLC and Level Beauty Group, Inc.
|
|
1-A
|
|
9/18/17
|
|
6.6
|
|
|
||
|
|
Revolving Line of Credit Loan Agreement dated August 7, 2015 from
Level Beauty Group, Inc. to LBGLOC, LLC
|
|
1-A
|
|
9/18/17
|
|
6.7
|
|
|
||
|
|
Promissory Note dated August 7, 2015 from Level Beauty Group, Inc.
to LBGLOC LLC
|
|
1-A
|
|
9/18/17
|
|
6.8
|
|
|
||
|
|
Security Agreement dated August 7, 2015 from Level Beauty Group,
Inc. to LBGLOC LLC
|
|
1-A
|
|
9/18/17
|
|
6.9
|
|
|
||
|
|
Executive Employment Agreement dated January 1, 2017 by and between
Level Brands, Inc. and Martin A. Sumichrast +
|
|
1-A
|
|
9/18/17
|
|
6.10
|
|
|
||
|
|
Executive Employment Agreement dated January 2, 2017 by and between
Level Brands, Inc. and Mark S. Elliott +
|
|
1-A
|
|
9/18/17
|
|
6.11
|
|
|
||
|
|
Master Advisory and Consulting Agreement dated February 8, 2017 by
and between Level Brands, Inc. and
kathy
Ireland
®
Worldwide
|
|
1-A
|
|
9/18/17
|
|
6.12
|
|
|
||
|
|
Advisory Agreement dated February 8, 2017 by and between Level
Brands, Inc. and Stephen Roseberry +
|
|
1-A
|
|
9/18/17
|
|
6.13
|
|
|
||
|
|
Advisory Agreement dated February 8, 2017 by and between Level
Brands, Inc. and Tommy Meharey+
|
|
1-A
|
|
9/18/17
|
|
6.14
|
|
|
||
|
|
Advisory Agreement dated February 8, 2017 by and between Level
Brands, Inc. and Nicolas Mendoza +
|
|
1-A
|
|
9/18/17
|
|
6.15
|
|
|
||
|
|
Sublease dated January 1, 2017 by and between Kure Franchise, LLC
and Level Brands, Inc.
|
|
1-A
|
|
9/18/17
|
|
6.16
|
|
|
||
|
|
Form of Filler Supply Agreement for Beauty and Pin Ups
LLC
|
|
1-A
|
|
9/18/17
|
|
6.17
|
|
|
||
|
|
Wholesale License Agreement dated January 12, 2017 by and
between
kathy ireland
®Worldwide and I'M1,
LLC
|
|
1-A
|
|
9/18/17
|
|
6.18
|
|
|
||
|
|
Amended and Restated Limited Liability Company Agreement of I'M1,
LLC effective January 1, 2017
|
|
1-A
|
|
9/18/17
|
|
6.19
|
|
|
||
|
|
Amended and Restated Limited Liability Company Agreement of Encore
Endeavor 1 LLC effective January 1, 2017
|
|
1-A
|
|
9/18/17
|
|
6.20
|
|
|
||
|
|
Amended and Restated Membership Interest Exchange Agreement dated
March 24, 2017, effective January 6, 2017, by and among IM1
Holdings, LLC, I'M1, LLC and Level Brands, Inc.
|
|
1-A
|
|
9/18/17
|
|
7.2
|
|
|
||
|
|
Amended and Restated Membership Interest Exchange Agreement dated
March 24, 2017, effective January 6, 2017, by and among EE1
Holdings, LLC, Encore Endeavor I LLC and Level Brands,
Inc.
|
|
1-A
|
|
9/18/17
|
|
7.3
|
|
|
||
|
|
Form of Indemnification Agreement
|
|
1-A
|
|
9/18/17
|
|
6.21
|
|
|
||
|
|
Charitable Agreement between Beauty & Pin Ups and Best Buddies
International, as amended
|
|
1-A
|
|
9/18/17
|
|
6.22
|
|
|
||
|
|
Amendment No. 1 to Transaction Fee Agreement dated March 27, 2017
by and between Level Brands, Inc. and T.R. Winston & Company
LLC
|
|
1-A
|
|
9/18/17
|
|
6.23
|
|
|
||
|
|
Form of I'M1 License Agreement
|
|
1-A
|
|
9/18/17
|
|
6.24
|
|
|
||
|
|
Consulting Agreement dated March 20, 2017 by and between I'M1, LLC
and Kure Corp.
|
|
1-A
|
|
9/18/17
|
|
6.25
|
|
|
||
|
|
Amended and Restated Consulting Agreement dated March 20, 2017 by
and between I'M1, LLC and NuGene International, Inc.
|
|
1-A
|
|
9/18/17
|
|
6.26
|
|
|
||
|
|
Amendment to Executive Employment Agreement dated April 1, 2017 by
and between Level Brands, Inc. and Martin A. Sumichrast
+
|
|
1-A
|
|
9/18/17
|
|
6.27
|
|
|
||
|
|
Amendment to Swap Agreement dated March 28, 2017 by and among
Beauty and Pin Ups, LLC, Level Brands, Inc. and Dean
Gangbar
|
|
1-A
|
|
9/18/17
|
|
7.4
|
|
|
||
|
|
License Agreement dated March 29, 2017 by and among I'M1, LLC, Kure
Corp. and Kure Franchise, LLC
|
|
1-A
|
|
9/18/17
|
|
6.28
|
|
|
||
|
|
License Agreement dated March 31, 2017 by and between I'M1, LLC and
NuGene International, Inc.
|
|
1-A
|
|
9/18/17
|
|
6.29
|
|
|
||
|
|
Television Series Consulting Agreement dated March 1, 2017 by and
between Multi-Media Productions Inc. and Encore Endeavor 1,
LLC
|
|
1-A
|
|
9/18/17
|
|
6.30
|
|
|
||
|
|
Advisory Agreement dated May 9, 2017 by and between Formula Four
Beverages Inc., I'M1, LLC and Encore Endeavor 1, LLC
|
|
1-A
|
|
9/18/17
|
|
6.31
|
|
|
||
|
|
Termination of License Agreement Ab Initio dated June 8, 2017 by
and between I'M1, LLC and NuGene International, Inc.
|
|
1-A
|
|
9/18/17
|
|
6.32
|
|
|
||
|
|
Membership Interest Sale and Purchase Agreement by and among Priel
Maman, Level Brands, Inc. and Beauty and Pin-Ups, LLC dated April
26, 2017
|
|
1-A
|
|
9/18/17
|
|
6.33
|
|
|
||
|
|
Debt Conversion Agreement dated May 15, 2017 by and between Level
Brands, Inc. and LBGLOC, LLC, as amended
|
|
1-A
|
|
9/18/17
|
|
6.34
|
|
|
||
|
|
License Agreement dated March 29, 2017 by and between I'M1, LLC and
Andre Phillipe, Inc.
|
|
1-A
|
|
9/18/17
|
|
6.35
|
|
|
||
|
|
Recording Master License Agreement dated May 23, 2017 by and
between McCoo & Davis, Inc. and Encore Endeavor 1
LLC
|
|
1-A
|
|
9/18/17
|
|
6.36
|
|
|
||
|
|
Form of note conversion agreement
|
|
1-A
|
|
9/18/17
|
|
6.37
|
|
|
||
|
|
Management Consulting Agreement dated July 1, 2017 by and between
Level Brands, Inc. and Market Development Consulting Group,
Inc.
|
|
1-A
|
|
9/18/17
|
|
6.38
|
|
|
||
|
|
Amendment No. 1 to Amended and Restated Consulting Agreement dated
July 27, 2017 by and between I'M1, LLC and NuGene International,
Inc. and Irrevocable Proxy
|
|
1-A
|
|
9/18/17
|
|
6.39
|
|
|
||
|
|
Stock Purchase and Escrow Agreement dated July 31, 2017 and among
I'M1, LLC, Stone Street Partners, LLC and Pearlman Law Group
LLP
|
|
1-A
|
|
9/18/17
|
|
6.40
|
|
|
||
|
|
Promissory Note dated July 31, 2017 in the principal amount of
$275,000 from Stone Street Partners, LLC
|
|
1-A
|
|
9/18/17
|
|
6.41
|
|
|
||
|
|
License Agreement dated June 27, 2017 by and between I'M1, LLC and
Loose Leaf Eyewear and Accessories LLC.
|
|
1-A
|
|
9/18/17
|
|
6.42
|
|
|
||
|
|
Advisory Agreement dated August 9, 2017 by and among Damiva Inc.,
I'M1, LLC and Encore Endeavor 1, LLC
|
|
1-A
|
|
9/18/17
|
|
6.43
|
|
|
||
|
|
Representation Agreement dated August 1, 2017 by and among Encore
Endeavor 1 LLC, Romero Britto and Britto Central, Inc.
|
|
1-A
|
|
9/18/17
|
|
6.44
|
|
|
||
|
|
Amended and Restated Representation Agreement dated September 12,
2017 by and among Encore Endeavor 1 LLC, Dada Media, Inc. and David
Tutera
|
|
1-A
|
|
9/18/17
|
|
6.45
|
|
|
||
|
|
Amendment dated September 8, 2017 to Master Advisory and Consulting
Agreement by and between Level Brands, Inc. and
kathy
Ireland
®
Worldwide
|
|
1-A
|
|
9/18/17
|
|
6.47
|
|
|
||
|
|
Wholesale License Agreement dated September 8, 2017 by and between
Level Brands, Inc. and
kathy
ireland
®
Worldwide+
|
|
1-A
|
|
9/18/17
|
|
6.48
|
|
|
||
|
|
Wholesale License Agreement dated September 8, 2017 by and between
Level Brands, Inc. and Andre Carthen
|
|
1-A
|
|
9/18/17
|
|
6.49
|
|
|
||
|
|
Wholesale License Agreement dated September 8, 2017 by and between
Level Brands, Inc. and Nicholas Walker
|
|
1-A
|
|
9/18/17
|
|
6.50
|
|
|
||
|
|
Distribution Agreement dated August 29, 2017 by and between Beauty
and Pinups, LLC and East Coast Enterprises, Inc.
|
|
1-A
|
|
9/18/17
|
|
6.51
|
|
|
||
|
|
Advisory Agreement dated September 1, 2017 by and between Level
Brands, Inc. and Jon Carrasco +
|
|
1-A
|
|
9/18/17
|
|
6.52
|
|
|
||
|
|
Production Services Agreement dated September 19, 2017 by and
between Multimedia Productions, Inc. and Encore Endeavor 1,
LLC
|
|
1-A/A
|
|
10/12/17
|
|
6.53
|
|
|
||
|
|
License Agreement dated September 8, 2017 by and between Level
Brands, Inc. and
kathy
ireland
®
Worldwide
|
|
1-A
|
|
9/18/17
|
|
6.54
|
|
|
||
|
|
Advisory Agreement dated September 22, 2017 by and between SG
Blocks, Inc. and Encore Endeavor 1, LLC
|
|
1-A/A
|
|
10/12/17
|
|
6.55
|
|
|
||
|
|
Written description of material terms of oral agreement between
Encore Endeavor 1 LLC and Sandbox LLC
|
|
1-A/A
|
|
10/12/17
|
|
6.56
|
|
|
||
|
|
Agreement
dated August 1, 2017 by and between Level Brands, Inc. and Kure
Corp.
|
|
10-K
|
|
12/26/17
|
|
10.62
|
|
|
||
|
|
Form of
Revolving Line of Credit Loan Agreement dated December 12, 2017 by
and between Level Brands, Inc. and Kure Corp.
|
|
8-K
|
|
12/12/17
|
|
10.64
|
|
|
||
|
|
Form of
Security Agreement dated December 12, 2017 by and between Level
Brands, Inc. and Kure Corp.
|
|
8-K
|
|
12/12/17
|
|
10.65
|
|
|
||
|
|
Form of
Promissory Note in the principal amount of $500,000 dated December
12, 2017 due from Kure Corp.
|
|
8-K
|
|
12/12/17
|
|
10.66
|
|
|
||
|
|
Sublease
dated December 21, 2017 by and between Kure Franchise, LLC and
Level Brands, Inc.
|
|
10-K
|
|
12/26/17
|
|
10.66
|
|
|
||
|
|
License
Agreement dated December 30, 2017 by and between Level Brands, Inc.
and Isodiol International, Inc.
|
|
8-K
|
|
1/5/18
|
|
10.67
|
|
|
||
|
|
Advisory
Agreement dated March 8, 2018 by and between Level Brands, Inc. and
Nic Mendoza
|
|
10-Q
|
|
5/15/18
|
|
10.69
|
|
|
||
|
|
Advisory
Agreement dated March 8, 2018 by and between Level Brands, Inc. and
Tommy Meharey
|
|
10-Q
|
|
5/15/18
|
|
10.70
|
|
|
||
|
|
Advisory
Agreement dated March 8, 2018 by and between Level Brands, Inc. and
Stephen Roseberry
|
|
10-Q
|
|
5/15/18
|
|
10.71
|
|
|
||
|
|
Sublease
effective April 11, 2018 by and between 4
th
Floor Properties
LLC and Level Brands, Inc.
|
|
10-Q
|
|
5/15/18
|
|
10.72
|
|
|
||
|
|
Amendment
to promissory note with Stone Street Partners LLC
|
|
10-Q
|
|
8/14/18
|
|
10.74
|
|
|
||
|
|
License
Agreement
dated June 26, 2018 by and
between Level Brands, Inc. and Boston Therapeutics,
Inc.
|
|
8-K
|
|
6/27/18
|
|
10.73
|
|
|
||
|
|
First
Amendment to License Agreement dated January 19, 2018 by and
between Level Brands, Inc. and Isodiol International,
Inc.
|
|
8-K
|
|
1/22/18
|
|
10.69
|
|
|
||
|
|
Executive
Employment Agreement dated September 6, 2018 by and between Level
Brands, Inc. and Martin A. Sumichrast
|
|
8-K
|
|
9/7/18
|
|
10.75
|
|
|
||
|
|
Executive
Employment Agreement dated September 6, 2018 by and between Level
Brands, Inc. and Mark S. Elliott
|
|
8-K
|
|
9/7/18
|
|
10.76
|
|
|
||
|
|
Code of
Business Conduct and Ethics
|
|
1-A
|
|
|
|
15.1
|
|
|
||
|
|
Subsidiaries
of the registrant
|
|
10-K
|
|
12/26/17
|
|
21.1
|
|
|
||
|
|
Consent
of Cherry Bekaert LLP
|
|
|
|
|
|
|
|
Filed
|
||
|
|
Consent
of Pearlman Law Group LLP (contained in Exhibit 5.1)
|
|
|
|
|
|
|
|
Filed
|
||
|
23.3
|
|
Consent
of the Law Offices of Jason H. Scott (contained in Exhibit
5.2)
|
|
|
|
|
|
|
|
Filed
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24.1
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Power
of attorney (included on signature page of this registration
statement)
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Filed
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+
Indicated
management contract or compensatory plan.
ITEM 17. UNDERTAKINGS
(a)
The undersigned
registrant hereby undertakes:
(1)
To file, during any
period in which offers or sales are being made, a post-effective
amendment to this registration statement:
(i)
To include any
prospectus required by Section 10(a)(3) of the Securities Act of
1933 (the “Securities Act”);
(ii)
To reflect in the
prospectus any facts or events arising after the effective date of
the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more
than 20% change in the maximum aggregate offering price set forth
in the “Calculation of Registration Fee” table in the
effective registration statement.
(iii)
To include any
material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material
change to such information in the registration
statement;
Provided,
however, that Paragraphs (a)(1)(i), (ii), and (iii) of this section
do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in
reports filed with or furnished to the Commission by the registrant
pursuant to section 13 or section 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in the registration
statement.
(2)
That, for the
purpose of determining any liability under the Securities Act, each
such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to
be the initial
bona fide
offering thereof.
(3)
To remove from
registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination
of the offering.
(4)
That, for the
purpose of determining liability under the Securities Act to any
purchaser: If the registrant is subject to Rule 430C
(§230.430C of this chapter), each prospectus filed pursuant to
Rule 424(b) as part of a registration statement relating to an
offering, other than registration statements relying on Rule 430B
or other than prospectuses filed in reliance on Rule 430A
(§230.430A of this chapter), shall be deemed to be part of and
included in the registration statement as of the date it is first
used after effectiveness. Provided, however, that no statement made
in a registration statement or prospectus that is part of the
registration statement or made in a document incorporated or deemed
incorporated by reference into the registration statement or
prospectus that is part of the registration statement will, as to a
purchaser with a time of contract of sale prior to such first use,
supersede or modify any statement that was made in the registration
statement or prospectus that was part of the registration statement
or made in any such document immediately prior to such date of
first use.
(5)
That, for the
purpose of determining liability under the Securities Act to any
purchaser in the initial distribution of the securities, the
undersigned registrant undertakes that in a primary offering of
securities of the undersigned registrant pursuant to this
registration statement, regardless of the underwriting method used
to sell the securities to the purchaser, if the securities are
offered or sold to such purchaser by means of any of the following
communications, the undersigned registrant will be a seller to the
purchaser and will be considered to offer or sell such securities
to such purchaser:
(i)
Any preliminary
prospectus or prospectus of the undersigned registrant relating to
the offering required to be filed pursuant to Rule 424
(§230.424 of this chapter);
(ii)
Any free writing
prospectus relating to the offering prepared by or on behalf of the
undersigned registrant or used or referred to by the undersigned
registrant;
(iii)
The portion of any
other free writing prospectus relating to the offering containing
material information about the undersigned registrant or its
securities provided by or on behalf of the undersigned registrant;
and
(iv)
Any other
communication that is an offer in the offering made by the
undersigned registrant to the purchaser.
(b)
The undersigned
registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the
registrant’s annual report pursuant to section 13(a) or
section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan’s annual
report pursuant to section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c)
The undersigned
registrant hereby undertakes to supplement the prospectus, after
the expiration of the subscription period, to set forth the results
of the subscription offer, the transactions by the underwriters
during the subscription period, the amount of unsubscribed
securities to be purchased by the underwriters, and the terms of
any subsequent reoffering thereof. If any public offering by the
underwriters is to be made on terms differing from those set forth
on the cover page of the prospectus, a post-effective amendment
will be filed to set forth the terms of such offering.
(d)
Insofar as
indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of
the Company pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant
of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final adjudication
of such issue.
(e)
For the purpose of
determining any liability under the Securities Act, the registrant
will treat the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule
430A and contained in a form of prospectus filed by the registrant
under Rule 424(b)(1), or (4), or 497(h) under the Securities Act as
part of this registration statement as of the time the Commission
declared it effective.
(f)
For the purpose of
determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the
City of Charlotte, State of North Carolina on September
26, 2018.
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Level Brands, Inc.
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By:
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/s/
Martin A. Sumichrast
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Martin A. Sumichrast,
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Chief Executive Officer
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POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Mark S. Elliott, as his true
and lawful attorney-in-fact and agent, with the full power of
substitution, for him and in his name, place or stead, in any and
all capacities, to sign any and all amendments to this registration
statement (including post-effective amendments), and to sign any
registration statement for the same offering covered by this
registration statement that is to be effective upon filing pursuant
to Rule 462(b) promulgated under the Securities Act, and all
post-effective amendments thereto, and to file the same, with
exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent, full power and authority to do and
perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his
substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in
the capacities and on the dates indicated.
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Name
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Positions
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Date
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/s/
Martin A. Sumichrast
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Chairman of the Board of Directors, Chief Executive Officer and
President (principal executive officer)
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September
26, 2018
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Martin A.
Sumichrast
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/s/
Mark S. Elliott
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Chief Financial Officer and Chief Operating Officer (principal
financial and accounting officer)
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September
26, 2018
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Mark S.
Elliott
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/s/
Erik Sterling
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Director
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September
26, 2018
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Erik
Sterling
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/s/
Anthony K. Shriver
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Director
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September
26, 2018
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Anthony K.
Shriver
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/s/
Seymour G. Siegel
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Director
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September 26, 2018
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Seymour G.
Siegel
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/s/
Bakari Sellers
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Director
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September
26, 2018
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Bakari
Sellers
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/s/
Gregory C. Morris
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Director
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September
26, 2018
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Gregory
C. Morris
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II-10