CBDMD, INC.
SCHEDULE 14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934
(Amendment
No. ___)
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Level Brands, Inc.
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NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS
____________________
TO BE HELD ON MARCH 22, 2018
We will
hold the 2018 annual meeting of shareholders of Level Brands, Inc.
on Thursday, March 22, 2018 at 4521 Sharon Road, Suite 450,
Charlotte, NC 28211 beginning at 1:00 p.m. local time. At the
annual meeting you will be asked to vote on the following
matters:
•
the election of
seven directors;
•
the ratification
of the appointment of
Cherry
Bekaert LLP
as our independent registered public accounting
firm;
•
a non-binding
advisory vote on the frequency of an advisory vote on executive
compensation;
•
a non-binding
advisory vote on executive compensation; and
•
any other business
as my properly come before the meeting.
The
board of directors has fixed the close of business on January 26,
2018 as the record date for determining the shareholders that are
entitled to notice of and to vote at the 2018 annual meeting and
any adjournments thereof.
All
shareholders are invited to attend the annual meeting in person.
Your vote is important regardless of the number of shares you own.
Please vote your shares by proxy over the Internet by following the
instructions provided in the Notice of Internet Availability of
Proxy Materials, or, if you request printed copies of the proxy
materials by mail, you can also vote by mail, by telephone or by
facsimile.
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By order of the
board of directors
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/s/
Martin
A. Sumichrast
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Charlotte,
NC
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Martin A.
Sumichrast
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| February 5, 2018 |
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Chairman and Chief
Executive Officer
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Important Notice Regarding the Availability of Proxy Materials for
the Annual Meeting to be Held on March 22, 2018
: This proxy statement, along with our Annual
Report on Form 10-K for the fiscal year ended September 30, 2017,
are available free of charge on our website
www.levelbrands.com
and through the SEC’s website
(
www.sec.gov
).
LEVEL BRANDS, INC.
PROXY STATEMENT
2018 ANNUAL MEETING OF SHAREHOLDERS
TABLE OF CONTENTS
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Page No.
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General
Information
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1
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Proposal
1 - Election of directors
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3
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Proposal
2 - Ratification of appointment of
Cherry Bekaert LLP
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6
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Proposal
3 -
Advisory vote on the frequency of
an advisory vote on executive compensation
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7
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Proposal
4 – Advisory vote on executive compensation
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8
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Other
Matters
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9
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Dissenter’s
Rights
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9
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Corporate
Governance
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9
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Executive
Compensation
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14
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Principal
Shareholders
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16
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Certain
Relationships and Related Transactions
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19
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Shareholder
Proposals to be Presented at the Next Annual Meeting
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22
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Availability
of Annual Report on Form 10-K
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22
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Shareholders
Sharing the Same Last Name and Address
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22
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Where
You Can Find More Information
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22
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FORWARD-LOOKING STATEMENTS
This proxy statement contains
“forward-looking statements” within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. These
statements are based on our current expectations and involve risks
and uncertainties which may cause results to differ materially from
those set forth in the statements. The forward-looking statements
may include statements regarding actions to be taken in the future.
We undertake no obligation to publicly update any forward-looking
statement, whether as a result of new information, future events or
otherwise. Forward-looking statements should be evaluated together
with the many uncertainties that affect our business, particularly
those set forth in the section on forward-looking statements and in
the risk factors in Item 1.A of 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 (the
“
2017
10-K
”).
Unless
the context otherwise indicates, when used in this proxy statement,
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 newly
formed North Carolina limited liability company.
Shareholders Should Read the Entire Proxy Statement
Carefully Prior to Returning Their Proxies
PROXY STATEMENT
FOR
2018 ANNUAL MEETING OF SHAREHOLDERS
General Information
The
accompanying proxy is solicited by the board of directors of Level
Brands, Inc. for use at our 2018 annual meeting of shareholders to
be held on Thursday, March 22, 2018 at 1:00 p.m., or any
adjournment or postponement thereof, for the purposes set forth in
the accompanying notice of 2018 annual meeting of shareholders. The
date of this proxy statement is February 5, 2018, the approximate
date on which this proxy statement and the enclosed proxy were
first sent or made available to our shareholders.
This
proxy statement and the accompanying proxy card are being mailed to
owners of shares of our common stock in connection with the
solicitation of proxies by the board of directors for the 2018
annual meeting of shareholders. This proxy procedure is necessary
to permit all common shareholders, many of whom live throughout the
United States and are unable to attend the 2018 annual meeting in
person, to vote. We will pay the entire cost of preparing,
assembling, printing, mailing and distributing these proxy
materials and soliciting votes.
Electronic
access
.
To access
our proxy statement and 2017 10-K electronically, please visit our
corporate website at
www.levelbrands.com
. The
information which appears on our website is not part of this proxy
statement.
Voting
securities
.
Only our
common shareholders of record as of the close of business on
January 26, 2018, the record date for the 2018 annual meeting, will
be entitled to vote at the meeting and any adjournment thereof. As
of that date, there were 8,028,928
shares of our common stock issued
and outstanding, all of which are entitled to vote with respect to
all matters to be acted upon at the 2018 annual meeting. Each
holder of record as of that date is entitled to one vote for each
share held. In accordance with our bylaws, the presence of at least
33 1/3% of the voting power, regardless of whether the proxy has
authority to vote on all matters, constitutes a quorum which is
required in order to hold 2018 annual meeting and conduct business.
Presence may be in person or by proxy. You will be considered part
of the quorum if you voted on the Internet, by telephone, by
facsimile or by properly submitting a proxy card or voting
instruction form by mail, or if you are present and vote at the
2018 annual meeting. Votes for and against, abstentions and
“broker non-votes” will each be counted as present for
purposes of determining the presence of a quorum.
Broker
non-votes
.
If you
are a beneficial owner whose shares are held of record by a broker,
bank or other nominee, you must instruct the broker, bank or other
nominee how to vote your shares. If you do not provide voting
instructions, your shares will not be voted on any proposal on
which the broker, bank or other nominee does not have discretionary
authority to vote. This is called a “broker non-vote.”
In these cases, the broker, bank or other nominee can register your
shares as being present at the 2018 annual meeting for purposes of
determining the presence of a quorum, but will not be able to vote
on those matters for which specific authorization is required. Your
broker, bank or other nominee does not have discretionary authority
to vote on the election of the directors
(proposal 1) or the advisory votes on
compensation matters (proposals 3 and 4) without instructions from
you, in which case a broker non-vote will occur and your shares
will not be voted on this matter. Your broker, bank or other
nominee does have discretionary voting authority to vote your
shares on the ratification of Cherry Bekaert LLP as our independent
registered public accounting firm (proposal 2) even if the broker,
bank or other nominee does not receive voting instructions from
you.
In any event, it is
particularly important that you instruct your broker as to how you
wish to vote your shares.
Voting of
proxies
.
All valid
proxies received prior to the meeting will be exercised. All shares
represented by a proxy will be voted, and where a proxy specifies a
shareholder’s choice with respect to any matter to be acted
upon, the shares will be voted in accordance with that
specification. If no choice is indicated on the proxy, the shares
will be voted by the individuals named on the proxy card as
recommended by the board of directors. A shareholder giving a proxy
has the power to revoke his or her proxy, at any time prior to the
time it is exercised, by delivering to our Corporate Secretary a
written instrument revoking the proxy or a duly executed proxy with
a later date, or by attending the meeting and voting in person. A
shareholder wanting to vote in person at the 2018 annual meeting
and holding shares of our common stock in street name must obtain a
proxy card from his or her broker and bring that proxy card to the
2018 annual meeting, together with a copy of a brokerage statement
reflecting such share ownership as of the record date.
-1-
Vote required.
The
seven nominees receiving the greatest numbers of votes at the
meeting, assuming a quorum is present, will be elected to the seven
director positions to serve until their terms expire or until their
successors have been duly elected and qualified. Because directors
are elected by plurality, abstentions from voting and broker
non-votes will be entirely excluded from the vote and will have no
effect on its outcome. Assuming a quorum is present, proposals 2
and 4 must be approved by the affirmative vote of a majority of the
shares of common stock present in person or by proxy at the annual
meeting and entitled to vote. Abstentions will be counted in
tabulations of the votes cast on each such proposal and will have
the same effect as a vote against the proposal, whereas broker
non-votes will be excluded from the vote and will have no effect on
the outcome. A plurality of votes cast for proposal 3 will be
considered the shareholders' preferred frequency for holding a vote
on say on pay.
Board of directors
recommendations
.
The
board of directors recommends a vote FOR proposals 1, 2 and 4 and a
frequency of three years for proposal 3.
Attendance at the
meeting
. You are invited to attend the annual meeting only
if you were a Level Brands shareholder or joint holder as of the
close of business on January 26, 2018, the record date, or if you
hold a valid proxy for the 2018 annual meeting. In addition, if you
are a shareholder of record (owning shares in your own name), your
name will be verified against the list of registered shareholders
on the record date prior to your being admitted to the annual
meeting. If you are not a shareholder of record but hold shares
through a broker or nominee (in street name), you should provide
proof of beneficial ownership on the record date, such as a recent
account statement or a copy of the voting instruction card provided
by your broker or nominee. The meeting will begin at 1:00 p.m.
local time. Check-in will begin at 12:30 p.m. local
time.
Communications with our
board of directors.
You may contact any of our directors by
writing to them c/o Level Brands, Inc., 4521 Sharon Road, Suite
450, Charlotte, NC 28211. Each communication should specify the
applicable director or directors to be contacted as well as the
general topic of the communication. We may initially receive and
process communications before forwarding them to the applicable
director. We generally will not forward to the directors a
shareholder communication that is determined to be primarily
commercial in nature, that relates to an improper or irrelevant
topic, or that requests general information about Level Brands.
Concerns about accounting or auditing matters or communications
intended for non-management directors should be sent to the
attention of the Chairman of the Audit Committee at the address
above. Our directors may at any time review a log of all
correspondence received by Level Brands that is addressed to the
independent members of the board and request copies of any such
correspondence.
Who can help answer your
questions?
If you have additional questions after reading
this proxy statement, you may seek answers to your questions by
writing, calling or emailing:
Mark S.
Elliott
Chief
Financial Officer and
Chief
Operating Officer
Level
Brands, Inc.
4521
Sharon Road
Suite
450
Charlotte,
NC 28211
Telephone:
(704) 362-6345 (direct)
email:mark@levelbrands.com
-2-
PROPOSAL 1
ELECTION OF DIRECTORS
The
board, upon recommendation by the Corporate Governance and
Nominating Committee, has nominated the following seven individuals
for election as directors, each to hold office until the 2019
annual meeting of shareholders or until his successor has been duly
elected and qualified. The nominees include our current directors,
all of whom are standing for re-election, and a seventh individual
also nominated by our board to fill a vacancy created by the
expansion of our board.
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Name
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Age
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Positions
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Director
Since
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Martin A. Sumichrast
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50
|
Chairman of the board of directors, Chief Executive Officer and
President
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2015
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Erik Sterling
|
63
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Director
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2015
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Anthony K. Shriver
|
52
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Director
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2015
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Seymour G. Siegel
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74
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Director
|
2017
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Bakari Sellers
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32
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Director
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2017
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Gregory C. Morris
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56
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Director
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2017
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G. Tyler Runnels
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61
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Director
nominee
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-
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The
following is biographical information for the director
nominees:
Martin A.
Sumichrast.
Mr. Sumichrast has served as a member of the
board of directors since April 2015, and has served as our Chief
Executive Officer and President since September 2016. Since 2012,
Mr. Sumichrast has served as Managing Director of a family office,
managing family wealth, which he formed in March 2012 and
subsequently incorporated into Washington Capital, LLC in December
2012. Since September 2013 he has been a Managing Member of Stone
Street Capital, LLC, a Charlotte, North Carolina-based private
investment company. Stone Street Capital, LLC manages specific
purpose investment entities, as well as traditional private equity
funds. Mr. Sumichrast serves as a Trustee and Chairman of the
Nominating and Governance Committees of the Barings Global Short
Duration High Yield Fund, Inc. (NYSE: BGH) and the Barings Capital
Funds Trust, Inc. From January 2015 until January 2016, he was also
a member of the board of directors of Social Reality, Inc.
(NADASQ:SRAX) and served as a member of the Audit Committee. From
its formation in 2014 until March 1, 2017 he served as Chairman of
the board of directors of Kure Corp., a privately-held company
which is a related party to our company. We selected Mr. Sumichrast
to serve on our board of directors based upon his significant
experience both as an investor and advisor, as well as his
experience as a member of a board of directors of a listed
company.
Erik
Sterling
. Mr. Sterling has
served as a member of our board of directors since April 2015. Mr.
Sterling is the founder of Sterling/Winters Company, a brand
building, marketing and management firm established 1978 and now a
wholly-owned subsidiary of
kathy ireland®
Worldwide. Today the efforts of
Sterling/Winters Company encompass branded merchandise development,
licensing and entertainment programming. Mr. Sterling also serves
as Vice Chairman and Chief Financial Officer of
kathy ireland®
Worldwide. Over the past 22 years,
the
kathy
ireland
brand has included
leading manufacturers of furniture, flooring, lighting, bedding,
decorative accessories, wall art, tabletop, window coverings,
precious jewelry, watches, sewing patterns, fashion accessories,
sportswear, women and girls swimwear, active wear, maternity,
intimate apparel, sleepwear, shoes, golf wear, fitness equipment,
publishing, made-for-television movies and specials. Mr. Sterling
serves on the national board of directors for Project Inform, an
HIV/AIDS treatment advocacy group which provides free treatment
information to its subscribers, and holds memberships in the
American Film Institute, Academy of Television Arts & Sciences
and the Hollywood Radio & Television Society. Mr. Sterling
currently serves on the Corporate Governance and Nominating
Committee of our board of directors. We selected Mr. Sterling to
serve on our board of directors because he brings to the board
extensive branding and marketing company experience, and brings to
the board significant executive leadership and operational
experience.
-3-
Anthony K.
Shriver
.
Mr. Shriver has been a member of our board of
directors since June 2015. Mr. Shriver is the Chairman of Best
Buddies®
International, a
nonprofit 501(c)(3) organization he founded in 1989 which is
dedicated to establishing a global volunteer movement that creates
opportunities for one-to-one friendships, integrated employment and
leadership development for people with intellectual and
developmental disabilities (IDD). Best Buddies® International
has grown from one original chapter to almost 1,900 middle school,
high school, and college chapters worldwide, engaging participants
programs in each of the 50 United States, and over 50 countries
around the world. Mr. Shriver, who graduated from Georgetown
University, has been recognized for his work on behalf of Best
Buddies® International with diverse international accolades
and honorary degrees.
Mr.
Shriver currently serves on the Compensation Committee of our board
of directors.
We
selected Mr. Shriver to serve on our board of directors based upon
his lifelong commitment to charitable efforts and his dedication to
the principles upon which our company seeks to
operate.
Seymour G.
Siegel.
Mr. Siegel has been a
member of our board of directors since March 2017. Mr. Siegel, a
certified public accountant no longer in practice, has over 35
years of experience in public accounting and SEC regulatory matters
and has a strong background in mergers and acquisitions, start-ups,
SEC reporting, cost cutting initiatives, profit enhancements and
business operations. Since 2014 he has been President of Siegel
Rich, Inc., a consulting firm. From April 2000 until July 2014, Mr.
Siegel was a principal emeritus at Rothstein Kass & Company,
P.C. (now KPMG), an international firm of accountants and
consultants. Mr. Siegel was a founder of Siegel Rich & Co.,
CPAs, which eventually merged with what is now known as
WeiserMazars LLP, where he was a senior partner until selling his
interest and co-founding a business advisory firm which later
became a part of Rothstein Kass. He received his Bachelor of
Business Administration from the Baruch School of The City College
of New York. He has been a director and officer of numerous
business, philanthropic and civic organizations. As a professional
director, he has served on the boards of approximately a dozen
public companies over the last 25 years. He was previously a member
of the board of directors and chairman of the audit committees of
Air Industries Group, Inc. (NYSE American: AIRI), root9B
Holdings, Inc. (NASDAQ:RTNB), Hauppauge Digital, Inc.,
Emerging Vision. Inc., Oak Hall Capital Fund, Prime Motor Inns
Limited Partnership, and Noise Cancellation Technologies, Inc. Mr.
Siegel currently serves as chairman of the Audit Committee of our
board of directors and is also a member of the Compensation
Committee of our board of directors. We selected
Mr.
Siegel as a member of our board of
directors as a result of his extensive experience in mergers and
acquisitions, public companies and boards, financial reporting and
business advisory services.
Bakari
Sellers
. Mr. Sellers has been a
member of our board of directors since March 2017. Mr. Sellers, an
attorney, has been a member of the Strom Law Firm, LLC, in
Columbia, South Carolina since 2007. Mr. Sellers is a former member
of the South Carolina House of Representative, where he represented
the 90th District beginning in 2006, making history as the youngest
member of the South Carolina state legislature and the youngest
African American elected official in the nation. In 2014, he ran as
the Democratic nominee for Lt. Governor of South Carolina. He has
worked for United States Congressman James Clyburn and former
Atlanta Mayor Shirley Franklin. Earning his undergraduate degree
from Morehouse College, where he served as student body president,
and his law degree from the University of South Carolina, Mr.
Sellers has followed in the footsteps of his father, civil rights
leader Cleveland Sellers, in his tireless commitment to service
taking championing progressive policies to address issues ranging
from education and poverty to preventing domestic violence and
childhood obesity. He has served as a featured speaker at events
for the National Education Association, College Democrats of
America National Convention, the 2008 Democratic National
Convention and, in 2007, delivered the opening keynote address to
the AIPAC Policy Conference in Washington, DC. Mr. Sellers is also
a political commentator at CNN. Mr. Sellers currently serves as
chairman of the Corporate Governance and Nominating Committee of
our board of directors and is also a member of the Audit Committee
of our board of directors. We selected Mr. Sellers as a result of
his leadership experience, commitment to public policy and legal
background.
Gregory C.
Morris
.
Mr. Morris has been a member of our board of
directors since March 2017.
Mr. Morris has worked in
positions involving finance, investments, benefits, risk
management, legal and human resources for more than 30 years. Since
June 2015 he has served as the Vice President of Human Resources
for Healthstat, Inc., a privately held company providing onsite
health clinics and workplace wellness programs. Prior to that, from
January 2013 until June 2015, he was the Vice President of
Administration and Corporate Secretary at Swisher Hygiene (at that
time a NASDAQ-listed company), leading the human resources, risk
management and legal functions. He was employed by
Snyder’s-Lance, Inc. (NASDAQ: LNCE) for 15 years prior to
joining Swisher Hygiene, Inc., holding the positions of Vice
President-Human Resources and Senior Director – Benefits and
Risk Management. At Snyder’s-Lance, Mr. Morris chaired the
Business Continuity Plan Steering Committee and was a member of the
Corporate Mergers & Acquisitions team. Prior to joining
Snyder’s-Lance, he held various positions with Belk Stores,
Collins & Aikman and Laporte plc. Mr. Morris also served as a
board member for root9B Holdings, Inc. (NASDAQ:RTNB) from 2008
through April, 2017 where he chaired the Compensation Committee and
also served on the Audit Committee. Mr. Morris also served as a
board member for the Second Harvest Food Bank of Metrolina from
2001 to 2016. Mr. Morris received a Bachelor of Science degree in
Accounting from West Virginia University.
Mr.
Morris currently serves as chairman of
the Compensation Committee of our board of directors and is also a
member of the Audit Committee and Corporate Governance and
Nominating Committee of our board of directors.
We selected Mr. Morris as a member of our board of
directors as a result of his extensive executive level experience
in public companies regarding human resources, accounting,
compliance and compensation matters as well as public board
experience.
-4-
G.
Tyler Runnels
. Mr.
Runnels has been nominated by our board to be elected as a director
at the 2018 annual meeting to fill a vacancy created by the
expansion of our board. Mr. Runnels has nearly 30 years of
investment banking experience including debt and equity financings,
private placements, mergers and acquisitions, initial public
offerings, bridge financings, and financial restructurings. Since
2003 Mr. Runnels has been the Chairman and Chief Executive Officer
of T.R. Winston & Company, LLC, an investment bank and member
of FINRA, where he began working in 1990. Mr. Runnels was an early
stage investor in our company and T.R. Winston & Company, LLC
has served as our exclusive placement agent in several private
placements raising early rounds of capital for our company, and was
a member of the selling group in our recently completed initial
public offering. Mr. Runnels has successfully completed and advised
on numerous transactions for clients in a variety of industries,
including healthcare, oil and gas, business services,
manufacturing, and technology. Mr. Runnels is also responsible for
working with high net worth clients seeking to diversify their
portfolios to include real estate products through established
relationships with real estate brokers, accountants, attorneys,
qualified intermediaries and financial advisors. Prior to joining
T.R. Winston & Co., LLC, Mr. Runnels held the position of
Senior Vice President of Corporate Finance for H.J. Meyers &
Company, a regional investment bank. Mr. Runnels is a member of the
board of directors of Lilis Energy, Inc. (NYSE American: LLEX) and
serves on the Pepperdine University President’s Campaign
Cabinet. Mr. Runnels received a B.S. and MBA from Pepperdine
University. Mr. Runnels holds FINRA Series 7, 24, 55, 63 and 79
licenses. We selected Mr. Runnels to serve on our board of
directors based upon his significant experience both as an investor
and advisor, as well as his experience as a member of a board of
directors of a listed company
There
are no family relationships between any of the executive officers
and directors. The board of directors has determined that each of
Messrs. Shriver, Siegel, Sellers, Morris and Runnels will be
independent directors within the meaning of Rule 803 of the NYSE
American Company Guide.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
ELECTION
OF THE DIRECTOR NOMINEES.
-5-
PROPOSAL 2
RATIFICATION OF THE APPOINTMENT OF
CHERRY BEKAERT LLP
Cherry
Bekaert LLP is the second largest public accounting firm in the
south and is in the top 30 nationally. Cherry Bekaert LLP has a
significant presence in Charlotte, NC our corporate base of
operations, and has strong practice experience not only as it
relates to financial audit and reporting but with mergers and
acquisitions as well as strategic planning. By selecting Cherry
Bekaert LLP as our independent registered public accounting firm,
our board of directors believes we are positioned with a firm that
has the expertise and capability to support us through our
growth.
The
Audit Committee has appointed
Cherry
Bekaert LLP
as our independent registered public accounting
firm to audit our consolidated financial statements for the fiscal
year ending September 30, 2018. We have invited representatives of
Cherry Bekaert LLP to attend the 2018 annual meeting. Although
shareholder ratification of the appointment of our independent
auditor is not required by our bylaws or otherwise, we are
submitting the selection of
Cherry
Bekaert LLP
to our shareholders for ratification to permit
shareholders to participate in this important corporate decision.
If not ratified, the Audit Committee will reconsider the selection,
although the Audit Committee will not be required to select a
different independent auditor for our company. Even if the
appointment is ratified, the Audit Committee, in its discretion,
may direct the appointment of a different independent registered
public accounting firm at any time during the fiscal year if the
Audit Committee determines that such a change would be in our best
interests.
Fees
and services
The
following table shows the fees that were billed for the audit and
other services provided for the fiscal years ended September 30,
2017 and 2016:
|
|
2017
|
2016
|
|
|
|
|
|
Audit
Fees
|
$
151,300
|
$
110,700
|
|
Audit-Related
Fees
|
-
|
-
|
|
Tax
Fees
|
9,675
|
10,100
|
|
All Other
Fees
|
97,370
|
-
|
|
Total
|
$
258,345
|
$
120,800
|
Audit Fees
— This category
includes the audit of our annual financial statements and services
that are normally provided by the independent registered public
accounting firm in connection with engagements for those fiscal
years. This category also includes advice on audit and accounting
matters that arose during, or as a result of, the audit or the
review of interim financial statements.
Audit-Related Fees
— This
category consists of assurance and related services by the
independent registered public accounting firm that are reasonably
related to the performance of the audit or review of our financial
statements and are not reported above under “Audit
Fees.” The services for the fees disclosed under this
category include consultation regarding our correspondence with the
Securities and Exchange Commission and other accounting
consulting.
Tax Fees
— This category consists
of professional services rendered by our independent registered
public accounting firm for tax compliance and tax advice. The
services for the fees disclosed under this category include tax
return preparation and technical tax advice.
All Other Fees
— This category
consists of fees for other miscellaneous items. During fiscal 2017,
these fees were related to professional services associated with
the initial public offering.
Our
board of directors has adopted a procedure for pre-approval of all
fees charged by our independent registered public accounting firm.
Under the procedure, the Audit Committee of the board approves the
engagement letter with respect to audit, tax and review services.
Other fees are subject to pre-approval by the Audit Committee of
the doard. The audit and tax fees paid to the auditors with respect
to the fiscal year ended September 30, 2017 were approved by the
Audit Committee of the board of directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
RATIFICATION
OF THE APPOINTMENT OF
CHERRY
BEKAERT LLP.
-6-
PROPOSAL 3
ADVISORY VOTE ON THE FREQUENCY OF AN ADVISORY VOTE ON EXECUTIVE
COMPENSATION
We
are seeking the input of our shareholders on the frequency with
which we will hold a non-binding advisory vote on the compensation
of our named executive officers. In voting on this Proposal 3,
shareholders may indicate their preference as to whether the
advisory vote on the compensation of our named executive officers
should occur:
•
once every three years,
•
once every two years, or
•
once every year.
It
is the opinion of the board of directors that the frequency of the
shareholder vote on the compensation of our named executive
officers should be once every three years. The board views the way
it compensates our named executive officers as an essential part of
our strategy to maximize our performance. The board believes that a
vote every three years will permit us to focus on developing
compensation practices that are in the best long-term interests of
our company and our shareholders. The board also believes that a
more frequent advisory vote may cause us to focus on the short-term
impact of our compensation practices to the possible detriment of
our long-term performance.
You
may cast your vote on your preferred voting frequency by choosing
the option of one year, two years, three years or abstain from
voting when you vote in response to the resolution set forth
below.
“RESOLVED,
that the option of once every one year, two years, or three years
that receives the highest number of votes cast for this resolution
will be determined to be the preferred frequency with which Level
Brands, Inc. is to hold a shareholder vote to approve the
compensation of the named executive officers, as disclosed pursuant
to the Securities and Exchange Commission’s compensation
disclosure rules.”
The
option of one year, two years or three years that receives the
highest number of votes cast by our shareholders will be the
frequency for the advisory vote on executive compensation that has
been approved by shareholders. Although the results of this vote
may impact how frequently we hold an advisory vote on executive
compensation, this vote is not binding on us. The board of
directors may decide, after considering the results of this vote,
that it is in the best interests of our shareholders to hold the
advisory vote on executive compensation on a different schedule
than the option approved by our shareholders.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE “FOR” A FREQUENCY OF THREE YEARS.
-7-
PROPOSAL 4
ADVISORY VOTE ON EXECUTIVE COMPENSATION
We
are providing our shareholders with the opportunity to cast an
advisory vote on the compensation of our named executive officers,
as disclosed in the Executive Compensation section beginning on
page 14 of this proxy statement.
Our
goals for our executive compensation program are to:
•
attract, motivate and retain outstanding individual named executive
officers;
•
reward named executive officers for attaining desired levels of
revenue, and earnings before income taxes, depreciation and
amortization, or EBITDA; and
•
align the financial interests of each named executive officer with
the interests of our shareholders to encourage each named executive
officer to contribute to our long-term performance and
success.
Our
board believes that our executive compensation program achieves
these goals. For a more detailed description of our financial
results for the fiscal year ended September 30, 2017, please see
Part II, Item 7. “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” in our 2017
Form 10-K.
We
are asking our shareholders to indicate their support for our named
executive officer compensation as described in this proxy
statement. This proposal, commonly known as a
“say-on-pay” proposal, gives our shareholders the
opportunity to express their views on our named executive
officers’ compensation. This vote is not intended to address
any specific item of compensation, but rather the overall
compensation of our named executive officers and the philosophy,
policies and practices described in this proxy statement.
Accordingly, we will ask our shareholders to vote “FOR”
the following resolution at the annual meeting:
“RESOLVED,
that the Level Brands, Inc. shareholders approve, on an advisory
basis, the compensation of the named executive officers, as
disclosed in the company’s proxy statement for the 2018
annual meeting of shareholders pursuant to the compensation
disclosure rules of the Securities and Exchange Commission,
including the Summary Compensation Table and the other related
tables and disclosure.”
As
an advisory vote, this proposal is not binding upon us. However, to
the extent that a significant percentage of votes are cast against
the compensation of our named executive officers, the board of
directors will determine whether any actions are necessary to
address the concerns reflected in such votes.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE “FOR” THE NON-BINDING RESOLUTION APPROVING
EXECUTIVE COMPENSATION.
-8-
OTHER MATTERS
As of
the date hereof, there are no other matters that we intend to
present, or have reason to believe others will present, at the 2018
annual meeting. If, however, other matters properly come before the
2018 annual meeting, the accompanying proxy authorizes the person
named as proxy or his substitute to vote on such matters as he
determines appropriate.
DISSENTER'S RIGHTS
Under
North Carolina law there are no dissenter's rights available to our
shareholders in connection with any matter submitted to a vote of
our shareholders at the 2018 annual meeting.
CORPORATE GOVERNANCE
We are
committed to maintaining the highest standards of honest and
ethical conduct in running our business efficiently, serving our
shareholders interests and maintaining our integrity in the
marketplace. To further this commitment, we have adopted our Code
of Conduct and Business Code of Ethics, which applies to all our
directors, officers and employees. To assist in its governance, our
board has formed three standing committees composed entirely of
independent directors, Audit, Compensation and Corporate Governance
and Nominating committees. A discussion of each committee’s
function is set forth below.
We have
implemented a Whistleblower Policy and provide multiple ways in
which perceived unethical conduct can be anonymously reported. The
Code of Ethics and the Whistleblower Policy are posted on our
Internet website at
www.levelbrands.com
,
under the “Investor Relations—Corporate
Governance” tab.
Our
bylaws, the charters of each board committee, the independent
status of a majority of our board of directors, and our Code of
Conduct and Business Code of Ethics provide the framework for our
corporate governance. Copies of our bylaws, committee charters,
Code of Conduct and Business Code of Ethics may be found on our
website at
www.levelbrands.com
. Copies of
these materials also are available without charge upon written
request to our Corporate Secretary.
Board of directors
The
board of directors oversees our business affairs and monitors the
performance of management. In accordance with our corporate
governance principles, the board of directors does not involve
itself in day-to-day operations. The directors keep themselves
informed through discussions with the Chairman and Chief Executive
Officer and our Chief Financial Officer/Chief Operating Officer and
by reading the reports and other materials that we send them and by
participating in board of directors and committee meetings.
Directors are elected for a term of one year. Our directors hold
office until their successors have been elected and duly qualified
unless the director resigns or by reason of death or other cause is
unable to serve in the capacity of director. If any director
resigns, dies or is otherwise unable to serve out his or her term,
or if the board increases the number of directors, the board may
fill any vacancy by a vote of a majority of the directors then in
office, although less than a quorum exists. A director elected to
fill a vacancy shall serve for the unexpired term of his or her
predecessor. Vacancies occurring by reason of the removal of
directors without cause may only be filled by vote of the
shareholders.
Board leadership structure and board’s role in risk
oversight
Mr.
Martin A. Sumichrast serves as both our Chief Executive Officer and
Chairman of our board of directors. Messrs. Shriver, Siegel,
Sellers and Morris are each considered an independent director
within the meaning of Section 803 of the NYSE American LLC Company
Guide. We do not have a “lead” independent
director.
Risk
is inherent with every business, and how well a business manages
risk can ultimately determine its success. We face a number of
risks, including credit risk, interest rate risk, liquidity risk,
operational risk, strategic risk and reputation risk. Management is
responsible for the day-to-day management of risks we face, while
the board, as a whole and through its committees, has
responsibility for the oversight of risk management. In its risk
oversight role, the board of directors has the responsibility to
satisfy itself that the risk management process designed and
implemented by management are adequate and functioning as designed.
To do this, the chairman of the board meets regularly with
management to discuss strategy and the risks facing our company.
The Chief Financial Officer attends the board meetings and is
available to address any questions or concerns raised by the board
on risk management and any other matters. The chairman of the board
and independent members of the board work together to provide
strong, independent oversight of our company’s management and
affairs through its standing committees and, when necessary,
special meetings of independent directors.
-9-
Board committees
The
board of directors has standing Audit, Compensation, Compensation
and Corporate Governance and Nominating committees. Each committee
has a written charter. The charters are available on our website at
www.levelbrands.com
. All
committee members are independent directors. Information concerning
the current membership and function of each committee is as
follows:
|
Director
|
Audit Committee
Member
|
|
Compensation
Committee Member
|
Corporate
Governance and Nominating Committee Member
|
|
Anthony
K. Shriver
|
|
|
✓
|
|
|
Erik
Sterling
|
|
|
|
✓
|
|
Seymour
G. Siegel
|
✓
*
|
|
✓
|
|
|
Bakari
Sellers
|
✓
|
|
|
✓
*
|
|
Gregory
C. Morris
|
✓
|
|
✓
*
|
✓
|
*
denotes
chairperson.
Audit Committee
The
Audit Committee assists the board in fulfilling its oversight
responsibility relating to:
●
the integrity of our financial statements;
●
our compliance with legal and regulatory requirements;
and
●
the qualifications and independence of our independent registered
public accountants.
The
Audit Committee has the ultimate authority to select, evaluate and,
where appropriate, replace the independent auditor, approve all
audit engagement fees and terms, and engage outside advisors,
including its own counsel, as it deems necessary to carry out its
duties. The Audit Committee is also be responsible for performing
other related responsibilities set forth in its
charter.
The
Audit Committee is composed of three directors, Messrs. Siegel,
Sellers and Morris, each of whom has been determined by the board
of directors to be independent within the meaning of Section 803 of
the NYSE American LLC Company Guide. In addition, Mr. Siegel meets
the definition of “audit committee financial expert”
under applicable SEC rules. The Audit Committee met two times
during the fiscal year ended September 30, 2017.
Compensation Committee
The
Compensation Committee assists the board in:
●
determining, in executive session at which our chief executive
officer is not present, the compensation for our CEO or president,
if such person is acting as the CEO;
●
discharging its responsibilities for approving and evaluating our
officer compensation plans, policies and programs;
●
reviewing and recommending to the board regarding compensation to
be provided to our employees and directors; and
●
administering our equity compensation plan.
The
Compensation Committee is charged with ensuring that our
compensation programs are competitive, designed to attract and
retain highly qualified directors, officers and employees,
encourage high performance, promote accountability and assure that
employee interests are aligned with the interests of our
shareholders. The Compensation Committee is composed of three
directors, Messrs. Morris, Shriver and Siegel, each of whom has
been determined by the board of directors to be independent within
the meaning of Section 803 of the NYSE American LLC Company Guide.
The Compensation Committee met one time during the fiscal year
ended September 30, 2017.
-10-
Corporate Governance and Nominating Committee
The
Corporate Governance and Nominating Committee:
●
assists the board in selecting nominees for election to the
board;
●
monitor the composition of the board;
●
develops and recommends to the board, and annually reviews, a set
of effective corporate governance policies and procedures
applicable to our company; and
●
regularly review the overall corporate governance of our company
and recommends improvements to the board as necessary.
The
purpose of the Corporate Governance and Nominating Committee is to
assess the performance of the board and to make recommendations to
the board from time to time, or whenever it shall be called upon to
do so, regarding nominees for the board and to ensure our
compliance with appropriate corporate governance policies and
procedures. The Corporate Governance and Nominating Committee is
composed of three directors, two of whom (Messrs. Sellers and
Morris) have been determined by the board of directors to be
independent within the meaning of Section 803 of the NYSE American
LLC Company Guide. The Corporate Governance and Nominating
Committee met one time during the fiscal year ended September 30,
2017.
Shareholder nominations
Shareholders
who would like to propose a candidate to serve as a member of our
board of directors may do so by submitting the candidate’s
name, resume and biographical information to the attention of our
Corporate Secretary. All proposals for nomination received by the
Corporate Secretary will be presented to the Corporate Governance
and Nominating Committee for appropriate consideration. It is the
policy of the Corporate Governance and Nominating Committee to
consider director candidates recommended by shareholders who appear
to be qualified to serve on our board of directors. The Corporate
Governance and Nominating Committee may choose not to consider an
unsolicited recommendation if no vacancy exists on the board of
directors and the committee does not perceive a need to increase
the size of the board of directors. In order to avoid the
unnecessary use of the Corporate Governance and Nominating
Committee’s resources, the committee will consider only those
director candidates recommended in accordance with the procedures
set forth below. To submit a recommendation of a director candidate
to the Corporate Governance and Nominating Committee, a shareholder
should submit the following information in writing, addressed to
the Corporate Secretary of Level Brands at our main
office:
●
the name and address of the person recommended as a director
candidate;
●
all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors
pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended;
●
the written consent of the person being recommended as a director
candidate to be named in the proxy statement as a nominee and to
serve as a director if elected;
●
as to the person making the recommendation,
the name and address, as they appear on our books, of such person,
and number of shares of our common stock owned by such
person;
provided,
however
, that if the
person is not a registered holder of our common stock, the person
should submit his or her name and address along with a current
written statement from the record holder of the shares that
reflects the recommending person’s beneficial ownership of
our common stock; and
●
a statement disclosing whether the person making the recommendation
is acting with or on behalf of any other person and, if applicable,
the identity of such person.
-11-
Code of Ethics and Conduct and Insider Trading Policy
In
January 2017 we adopted a Code of Ethics and Conduct which applies
to our board of directors, our executive officers and our
employees. The Code of Ethics and Conduct outlines the broad
principles of ethical business conduct we adopted, covering subject
areas such as:
●
conflicts of interest;
●
corporate opportunities;
●
public disclosure reporting;
●
confidentiality;
●
protection of company assets;
●
health and safety;
●
conflicts of interest; and
●
compliance with applicable laws.
A copy
of our Code of Ethics and Conduct is available on our website at
www.levelbrands.com
.
Additionally,
all of our directors, officers, employees and consultants are
subject to our Insider Trading Policy. Our Insider Trading Policy
prohibits the purchase, sale or trade of our securities with the
knowledge of material nonpublic information. In addition, our
Insider Trading Policy prohibits our employees, officers,
directors, and consultants from trading on a short-term basis,
engaging in a short sale of our securities, engaging in
transactions in puts, call or other derivatives tied to our
securities, engaging in hedging transactions, holding any of our
securities in a margin account or otherwise pledging our securities
as collateral for a loan. Any transactions by our directors,
officers, employees and consultants must be first pre-cleared by
our Chief Executive Officer or our Chief Financial Officer in an
effort to assist these individuals from inadvertently violating our
Insider Trading Policy. Our Insider Trading Policy also fixes
certain quarterly and event specific blackout periods.
Compensation of directors
Prior
to December 2016, none of our directors received compensation for
services performed as directors. In December 2016, the board of
directors adopted a formal compensation plan for our independent
directors which was amended by the board in January 2017.
Currently, our board compensation plan effective for non-management
directors includes:
●
annual retainer of $10,000 upon joining the board for the first
time, paid with the issuance of stock;
●
annual retainer for committee chairpersons as follows: $15,000 for
the Audit Committee Chairman; $5,000 for the Compensation Committee
Chairman; and $2,500 for the Corporate Governance and Nominating
Committee Chairman;
●
annual retainer for committee members as follows: $6,000 for
service on the Audit Committee; $2,000 for service on the
Compensation Committee; and $1,000 for service on the Corporate
Governance and Nominating Committee; and
●
$1,500 for each scheduled board meeting attended.
In
addition board members are reimbursed for out-of-pocket expenses
related to participation in board and committee
meetings.
-12-
The
following table provides information concerning the compensation
paid to our independent directors for their services as members of
our board of directors for the fiscal year ended September 30,
2017. The information in the following table excludes any
reimbursement of out-of-pocket travel and lodging expenses which we
may have paid:
|
Name
|
Fees
earned
or
paid
in
cash
($)
|
Stock
awards
($)
|
Option
awards
($)
|
Non-equity
incentive
plan
compensation
($)
|
Nonqualified
deferred
compensation
earnings
($)
|
All
other
compensation
($)
|
Total
($)
|
|
Erik
Sterling
|
5,500
|
34,000
|
-
|
-
|
-
|
-
|
39,500
|
|
Anthony K.
Shriver
|
2,000
|
34,000
|
-
|
-
|
-
|
-
|
36,000
|
|
Seymour G.
Siegel
|
21,500
|
10,000
|
-
|
-
|
-
|
-
|
31,500
|
|
Bakari
Sellers
|
11,500
|
10,000
|
-
|
-
|
-
|
-
|
21,500
|
|
Gregory C.
Morris
|
16,500
|
10,000
|
-
|
-
|
-
|
-
|
26,500
|
Audit Committee Report
Report of the Audit Committee of the Board of
Directors
The primary function of the Audit Committee is to assist the board
of directors in its oversight of our financial reporting processes.
Management is responsible for the preparation, presentation and
integrity of the financial statements, including establishing
accounting and financial reporting principles and designing systems
of internal control over financial reporting. Our independent
auditors are responsible for expressing an opinion as to the
conformity of our consolidated financial statements with generally
accepted accounting principles and auditing management’s
assessment of the effectiveness of internal control over financial
reporting.
With
respect to the fiscal year ended September 30, 2017, in addition to
its other work, the Audit Committee:
●
reviewed and
discussed with management and
Cherry Bekaert LLP
, our independent
registered public accounting firm, our audited consolidated
financial statements as of September 30, 2017 and the fiscal year
then ended;
●
discussed with
Cherry Bekaert LLP
the
matters required to be discussed by Statement on Auditing Standards
No. 61, “
Communication with
Audit Committees
,” as amended, with respect to its
review of the findings of the independent registered public
accounting firm during its examination of our financial statements;
and
●
received from
Cherry Bekaert LLP
written affirmation of its independence as required by the
Independence Standards Board Standard No. 1, “
Independence Discussions with Audit
Committees
.” In addition, the Audit Committee
discussed with
Cherry Bekaert
LLP
, its independence and determined that the provision of
non-audit services was compatible with maintaining auditor
independence.
The
Audit Committee recommended, based on the review and discussion
summarized above, that the board of directors include the audited
consolidated financial statements in the 2017 10-K for filing with
the SEC.
|
Dated
December 21, 2017
|
|
Audit
Committee of the board of directors of Level Brands,
Inc.
|
|
|
|
|
|
|
|
/s/ Seymour G. Siegel, Chairman
|
|
|
|
/s/ Bakari Sellers
|
|
|
|
/s/ Gregory C. Morris
|
Compliance with Section 16(a) of the Exchange Act
We were
not subject to the reporting obligations of Section 12(b) of the
Securities Exchange Act of 1934, as amended, at September 30,
2017.
-13-
EXECUTIVE COMPENSATION
Executive officers
|
Name
|
|
Positions
|
|
Martin
A. Sumichrast
|
|
Chairman
of the Board, Chief Executive Officer and President
|
|
Mark S.
Elliott
|
|
Chief
Financial Officer and Chief Operating Officer
|
Executive officers
of our company are appointed by the board of directors and serve at
the pleasure of the board.
Martin A.
Sumichrast.
For information regarding Mr. Sumichrast, please
see Proposal 1 which appears earlier in this proxy
statement.
Mark S.
Elliott
. Mr. Elliott has been
our Chief Financial Officer since October 2016 and our Chief
Operating Officer since January 2017. He has over 30 years of
business experience spanning the financial, retail, consulting and
government sectors and includes time at Fortune 500 and regional
firms. Mr. Elliott began his career in the technology arena and
worked with such Fortune 500 companies as JCPenney and First Union
National Bank within their corporate headquarters. Mr. Elliott
moved into the consulting arena as a regional technology specialist
and eventually moved into senior management as a Director for
Contract Data Services (acquired by Inacom Information Systems).
This position involved all aspects of the business including staff
management, business development, strategy, and managing the
profitability of multiple divisions. Mr. Elliott was a founder and
partner of Premier Alliance Group (now named root9B Holdings, Inc.)
( NASDAQ:RTNB) and was the Chairman and CEO of the company from
2004 to 2013 where he oversaw the strategic direction and operation
of the company. He directed the transformation of the company to a
public market company and successfully oversaw and integrated six
merger and acquisition transactions that strategically positioned
the company. Mr. Elliott has had compliance, financial reporting,
and strategic responsibilities within the company (serving as the
CFO also from 2004 to 2010 and as the Chief Administrative Officer
of the company from 2014 to 2015). Mr. Elliott is also an
independent advisor for Malidan Capital Group a firm specializing
in business restructuring and turn around management consulting.
Mr. Elliott received a Bachelor of Science degree with a
concentration in Computer Science and Management from Marshall
University.
Summary Compensation Table
The
following table summarizes all compensation recorded by us in each
of the last two completed fiscal years for:
|
|
•
|
all
individuals serving as our principal executive officer or acting in
a similar capacity during the fiscal year ended September 30,
2017;
|
|
|
•
|
our two
most highly compensated named executive officers at September 30,
2017 whose annual compensation exceeded $100,000; and
|
|
|
•
|
up to
two additional individuals for whom disclosure would have been made
in this table but for the fact that the individual was not serving
as a named executive officer of our company at September 30,
2017.
|
The
value attributable to any option awards is computed in accordance
with FASB ASC Topic 718. The assumptions made in the valuations of
the option awards are included in Note 10 of the notes to our
consolidated financial statements for the fiscal year ended
September 30, 2017 appearing in our 2017 10-K.
|
Name and
principal position
|
|
Year
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($)
|
|
|
Option
Awards
($)
(1)
|
|
|
No
equity
incentive
plan
compensation
($)
|
|
|
Non-qualified
deferred
compensation
earnings
($)
|
|
|
All
other
compensation
($)(2)
|
|
|
Total
($)
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Martin
A. Sumichrast
|
|
2017
|
|
|
90,000
|
|
|
|
0
|
|
|
|
102,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
192,000
|
|
|
Chief
Executive Officer
|
|
2016
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark S.
Elliott
|
|
2017
|
|
|
90,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
28,669
|
|
|
|
0
|
|
|
|
0
|
|
|
|
18,000
|
|
|
|
136,669
|
|
|
Chief
Financial Officer and Chief Operating Officer
|
|
2016
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
———————
|
(1)
|
Mr.
Sumichrast has served as our Chief Executive Officer since
September 2016 and a member of our board of directors since
inception. He initially served without compensation. In October
2016 the board of directors awarded him a restricted stock grant of
150,000 shares of our common stock valued at $127,500 as incentive
compensation for his continued service to our company which vested
on January 1, 2018. In January 2017 we entered into an employment
agreement with Mr. Sumichrast which is described below. The amount
of compensation paid to Mr. Sumichrast excludes amounts paid to
Stone Street Partners, LLP. See “Certain Relationships and
Related Party Transactions” appearing later in this proxy
statement.
|
-14-
|
(2)
|
On October 1, 2016 we entered into a letter agreement with Mr.
Elliott under which we engaged him to serve as our Chief Financial
Officer. Under the terms of the agreement, we paid him initial base
monthly compensation of $6,000. The agreement further provided that
on January 1, 2017 we would issue him 20,000 shares of our common
stock valued at $17,000; and grant him option to purchase an
additional 100,000 shares of our common stock with an exercise
price of $7.50 per share which vested on January 1, 2018. In
January 2017 we entered into an employment agreement with Mr.
Elliott which is described below. In May 2017, the board of
directors awarded him options to purchase 100,000 shares of our
common stock valued at $21,500, of which options to purchase 50,000
shares vested immediately and options to purchase the remaining
50,000 shares vested in January 2018.
|
Employment agreements
In
January 2017 we entered into employment agreements with each of Mr.
Sumichrast and Mr. Elliott, the terms of which are substantially
similar, including:
●
the term of each agreement is for one year and it may be extended
for additional one year periods at our option upon 60 days’
notice;
●
the executive is entitled to an annual base salary of $120,000. The
agreement initially provided that the compensation due Mr.
Sumichrast is would accrue until the completion of our initial
public offering, after which time all accrued compensation was to
be paid to him. In April 2017 the employment agreement with Mr.
Sumichrast was amended to provide that we begin paying Mr.
Sumichrast his compensation on a current basis;
●
the executive is entitled to a discretion bonus as determined by
our board of directors;
●
the executive is entitled to participate in all benefit programs we
offer our employees, and such amount of paid vacation as is
consistent with his position and length of service to
us;
●
the agreement will terminate upon his death or disability, and may
be terminated by us with or without cause, subject to cure periods,
or by the executive at his discretion. The executive is not
entitled to any severance or similar benefits upon a termination of
the agreement; and
●
the agreement contains customary non-compete, confidentiality and
indemnification provisions.
We are
presently negotiating the terms of new employment agreements with
each of Messrs. Sumichrast and Elliott who continue to provide
services to us under the agreements which expired in January 2018.
Pending the finalization of the agreement with Mr. Sumichrast, in
January 2018, we made the following compensation changes with Mr.
Sumichrast:
●
annual base salary of $270,000 effective January 1, 2018;
and
●
a discretionary bonus award of $240,000 was set based on the prior
year accomplishments.
In
addition, pending the finalization of the agreement with Mr.
Elliott, in January 2018, we made the following compensation
changes with Mr. Elliott:
●
annual base salary of $180,000 effective January 1, 2018;
and
●
a discretionary bonus award of $100,000 was set based on the prior
year accomplishments.
-15-
Outstanding equity awards at year end
The
following table provides information concerning unexercised
options, stock that has not vested and equity incentive plan awards
for each named executive officer outstanding as of September 30,
2017.
|
OPTION
AWARDS
|
STOCK
AWARDS
|
||||||||
|
Name
|
Number of
securities underlying unexercised options
(#)
exercisable
|
Number of
securities underlying unexercised options
(#)
unexercisable
|
Equity incentive
plan awards: Number of securities underlying unexercised unearned
options
(#)
|
Option exercise
price
($)
|
Option
expiration date
|
Number of shares
or units of stock that have not vested (#)
|
Market value of
shares or units of stock that have not vested ($)
|
Equity incentive
plan awards: Number of unearned shares, units or other rights that
have not vested (#)
|
Equity incentive
plan awards: Market or payout value of unearned shares, units or
other rights that have not vested (#)
|
|
Martin A.
Sumichrast
|
-
|
-
|
-
|
-
|
-
|
150,000
|
592,500
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark S.
Elliott
|
50,000
|
50,000
|
-
|
4.00
|
5/1/24
|
-
|
-
|
-
|
-
|
|
|
-
|
100,000
|
-
|
7.50
|
1/1/23
|
-
|
-
|
-
|
-
|
Our equity compensation plans
Information
regarding the material terms of our equity compensation plans is
contained in Note 11 to the notes to the audited consolidated
financial statements appearing in the 2017 10-K.
PRINCIPAL SHAREHOLDERS
At
January 26, 2018, we had 8,028,928 shares of our common stock
issued and outstanding. The following table sets forth information
known to us as of January 26, 2018 relating to the beneficial
ownership of shares of our common stock by:
●
each person who is
known by us to be the beneficial owner of more than 5% of our
outstanding common stock;
●
each director and
nominee;
●
each named
executive officer; and
●
all named
executive officers and directors as a group.
Unless
otherwise indicated, the address of each beneficial owner in the
table set forth below is care of 4521 Sharon Road, Suite 450,
Charlotte, NC 28211. We believe that all persons, unless otherwise
noted, named in the table have sole voting and investment power
with respect to all shares of our common stock shown as being owned
by them. Under securities laws, a person is considered to be the
beneficial owner of securities owned by him (or certain persons
whose ownership is attributed to him) and that can be acquired by
him within 60 days from January 26, 2018, including upon the
exercise of options, warrants or convertible securities. We
determine a beneficial owner’s percentage ownership by
assuming that options, warrants or convertible securities that are
held by him, but not those held by any other person, and which are
exercisable within 60 days of the that date, have been exercised or
converted.
-16-
|
Name of
Beneficial Owner
|
No. of Shares
Beneficially Owned
|
% of
Class
|
|
|
|
|
|
Martin A.
Sumichrast
(1)(5)
|
746,434
|
9.3
%
|
|
Mark S. Elliott
(2)(5)
|
231,680
|
2.8
%
|
|
Erik Sterling
(3)(5)
|
1,072,667
|
13.4
%
|
|
Anthony K. Shriver
(4)(5)
|
127,500
|
1.6
%
|
|
Seymour G. Siegel
(5)
|
2,531
|
*
|
|
Bakari Sellers
(5)
|
2,531
|
*
|
|
Gregory C. Morris
(5)
|
2,531
|
*
|
|
All officers and
directors as a group (seven persons)
(1)(2)(3)(4)(5)
|
1,985,874
|
24.1
%
|
|
Jason Winters
(5)(6)
|
1,032,667
|
12.9
%
|
|
The Runnels Family
Trust
(7)
|
600,000
|
7.5
%
|
*
Less than
1%
|
(1)
|
The number of shares of our common stock owned by Mr. Sumichrast
includes:
|
|
|
|
|
|
|
|
•
|
325,834 shares owned of record by Stone Street Partners, LLC;
and
|
|
|
|
|
|
|
•
|
270,600 shares owned of record by Washington Capital,
LLC.
|
|
|
|
|
|
|
Mr.
Sumichrast in his position at Stone Street Partners, LLC has the
right to direct the vote and disposition of securities owned by
Stone Street Partners, LLC.
Mr.
Sumichrast has voting and dispositive control over securities owned
by Washington Capital LLC. Mr. Sumichrast disclaims beneficial
ownership of the securities held of record by each of these
entities except to the extent of his pecuniary interest
therein.
|
|
|
|
|
|
|
(2)
|
The number of shares of our common stock beneficially owned by Mr.
Elliott includes:
|
|
|
|
|
|
|
|
•
|
1,680 shares held of record by his spouse's retirement account;
and
|
|
|
|
|
|
|
•
|
200,000
shares underlying vested stock options.
|
|
|
|
|
|
(3)
|
The
number of shares of our common stock beneficially owned by Mr.
Sterling includes:
|
|
|
|
|
|
|
|
•
|
166,667
shares owned of record by the Sterling Winters Living Trust u/t/d/
December 10, 1993 (the "
Trust
");
|
|
|
|
|
|
|
•
|
583,000
shares owned of record by IM1 Holdings, LLC, a California limited
liability company ("
IM1
Holdings
"); and
|
|
|
|
|
|
|
•
|
283,000
shares owned of record by EE1 Holdings, LLC, a California limited
liability company ("
EE1
Holdings
").
|
|
|
|
|
|
|
Mr.
Sterling and Mr. Jason Winters are co-Trustees of the Trust and
have shared voting and dispositive control over securities held by
the Trust. The Trust is the manager and a member of each of IM1
Holdings and EE1 Holdings and as manager has voting and dispositive
control over securities held of record by IM1 Holdings and EE1
Holdings. Mr. Sterling disclaims beneficial ownership of the
securities held of record by the Trust, IM1 Holdings and EE1
Holdings except to the extent of his pecuniary interest therein.
See footnote 6.
|
|
|
|
|
|
|
(4)
|
The
number of shares of our common stock beneficially owned by Mr.
Shriver includes 50,000 shares held of record by Best Buddies®
International. Mr. Shriver has voting and dispositive control over
securities held of record by Best Buddies® International. He
disclaims beneficial ownership of such securities except to the
extent of his pecuniary interest therein.
|
|
-17-
|
(5)
|
In
connection with our initial public offering which closed in
November 2017, our officers and directors and their affiliated
entities entered into lock-up agreements with Joseph Gunnar &
Co., LLC, the sole book running manager for the offering (the
"
Representative
"),
pursuant to which they each agreed until October 27, 2018 (the
"
Lock-Up Period
"),
without the prior written consent of the Representative, to not:
(i) offer, pledge, sell, contract to sell, grant, lend, or
otherwise transfer or dispose of, directly or indirectly, any
shares of our common stock or any securities convertible into or
exercisable or exchangeable for shares, whether now owned or
hereafter acquired by the them or with respect to which they have
or hereafter acquire the power of disposition (collectively, the
“
Lock-Up
Securities
”); (ii) enter into any swap or other
arrangement that transfers to another, in whole or in part, any of
the economic consequences of ownership of the Lock-Up Securities,
whether any such transaction described in clause (1) or (2) above
is to be settled by delivery of Lock-Up Securities, in cash or
otherwise; (iii) make any demand for or exercise any right with
respect to the registration of any Lock-Up Securities; or (iv)
publicly disclose the intention to make any offer, sale, pledge or
disposition, or to enter into any transaction, swap, hedge or other
arrangement relating to any Lock-Up Securities. Notwithstanding the
foregoing, and subject to the conditions below, during the Lock-Up
Period the holder may transfer Lock-Up Securities without the prior
written consent of the Representative in connection with: (a)
transactions relating to Lock-Up Securities acquired in open market
transactions after the completion of the offering;
provided that no filing under
Section 16(a) of the Securities Exchange Act of 1934, as amended,
is required or voluntarily made in connection with subsequent sales
of Lock-Up Securities acquired in such open market transactions;
(b) transfers of Lock-Up Securities as a
bona fide
gift, by will or intestacy or
to a family member or trust for the benefit of a family member
(which includes any relationship by blood, marriage or adoption,
not more remote than first cousin); (c) transfers of Lock-Up
Securities to a charity or educational institution; or (d) if the
holder, directly or indirectly, controls a corporation,
partnership, limited liability company or other business entity,
any transfers of Lock-Up Securities to any shareholder, partner or
member of, or owner of similar equity interests in;
provided
that in the case of any
transfer pursuant to the foregoing clauses (b), (c) or (d), (i) any
such transfer does not involve a disposition for value; (ii) each
transferee signs and delivers to the Representative a lock-up
agreement substantially in the form of the original lock-up
agreement; and (iii) no filing under Section 16(a) of the
Securities Exchange Act of 1934, as amended, is required or
voluntarily made.
|
|
|
|
|
|
|
(6)
|
Mr.
Winters is co-Trustee of the Trust. The number of shares of our
common stock beneficially owned by Mr. Winters
includes:
|
|
|
|
|
|
|
|
•
|
166,667
shares owned of record by the Trust;
|
|
|
|
|
|
|
•
|
583,000
shares owned of record by IM1 Holdings; and
|
|
|
|
|
|
|
•
|
283,000
shares owned of record by EE1 Holdings.
|
|
|
|
|
|
|
Mr.
Winters disclaims beneficial ownership of the securities held of
record by the Trust, IM1 Holdings and EE1 Holdings except to the
extent of his pecuniary interest therein. Mr. Winters address is 39
Princeton Drive, Rancho Mirage, CA 92270. See footnote
3.
|
|
|
(7)
|
Mr.
Runnels, a director nominee, is co-Trustee of The Runnels Family
Trust. Mr. Runnels disclaims beneficial ownership of the securities
held of record by The Runnels Family Trust except to the extent of
his pecuniary interest therein. Mr. Runnels' address is 2049
Century Park East, Suite 320, Los Angeles, CA 90067.
|
Securities Authorized for Issuance under Equity Compensation
Plans
The
following table sets forth securities authorized for issuance under
any equity compensation plans approved by our shareholders as well
as any equity compensation plans not approved by our shareholders
as of September 30, 2017.
|
Plan
category
|
Number of
securities to be issued upon exercise of outstanding options,
warrants and rights
|
Weighted average
exercise price of outstanding options, warrants and rights
($)
|
Number of
securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in
column
|
|
|
|
|
|
|
Plans approved by
our shareholders:
|
|
|
|
|
2015 Equity
Compensation Plan
|
333,300
|
5.83
|
903,816
|
|
Plans not approved
by shareholders
|
-
|
-
|
-
|
Please
see Note 11 of the notes to our audited consolidated financial
statements appearing in our 2017 10-K for more information on our
2015 Equity Compensation Plan.
-18-
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Our
Audit Committee will review any transaction in which we or any of
our directors, nominees for director, executive officers or holders
of more than 5% of our common stock or any of their immediate
family members, is, was or is proposed to be a participant and the
amount involved exceeds the lesser of $120,000 or 1% of our average
total assets at year-end for our last two completed fiscal years.
Our management is responsible for determining whether a transaction
contains the characteristics described above requiring review by
the Audit Committee of our board of directors.
Since
our inception in March 2015 we have engaged in the following
transactions with our directors, executive officers, and owners of
10% or more of our common stock. A number of these transactions
related to loans providing working capital to us or transactions
involving the provision of management advisory services while in
our early stage of development. The following transactions are in
addition to compensatory issuances to our directors and executive
officers which are described earlier in this proxy statement. Set
forth below are all related party transactions with our directors,
executive officers and 10% or greater shareholders since
inception:
Transactions with affiliates of Mr. Sumichrast
|
●
|
in March 2015 we borrowed $150,000 from Stone Street Partners, LLC,
an affiliate of Mr. Sumichrast, under the terms of a promissory
note. We used these proceeds for general working capital. In April
2015 we entered into a conversion agreement with Stone Street
Partners, LLC under which this note, plus an additional $850,000
lent to us, was converted into 1,000,000 shares of our common
stock;
|
|
●
|
in April 2015, we entered into an advisory services agreement with
Stone Street Partners, LLC pursuant to which it agreed to provide
us certain management services for a monthly fee of $10,000,
payable at the earlier of such time as we had sufficient capital to
satisfy this obligation or upon the closing of an offering
resulting in gross proceeds to us of at least $5 million. In
October 2016 we entered into a termination agreement of this
advisory services agreement under which we paid Stone Street
Partners, LLC $50,000 and issued it 36,000 shares of our common
stock, valued at $270,000, in full satisfaction of all obligations.
In addition, we issued 40,000 shares of our common stock for
additional consulting services which were outside the original
scope of service, which were valued at $300,000;
|
|
●
|
in August 2015, we entered into a revolving line of credit for up
to $1 million with LBGLOC LLC. Stone Street Partners Opportunity
Fund II, LLC, a former affiliate of Mr. Sumichrast, was a member of
LBGLOC LLC at the time we entered into the revolving credit
facility. Amounts drawn by us under the credit line bore interest
at 10% per annum and we granted LBGLOC LLC a security interest in
our assets to secure our obligations under this credit line. Stone
Street Partners Opportunity Fund II, LLC provided $300,000 under
this credit line which were used for inventory related expense. In
November 2015 the fund exited the line of credit and we repaid the
principal with interest of $8,750. In June 2017 the lender
converted $879,380 due under the line of credit, representing
outstanding principal and accrued but unpaid interest, into 222,627
shares of our common stock at a conversion price of $3.95 per share
in full satisfaction of these obligations. Upon this conversion,
the security interest we had previously granted in our assets was
released;
|
|
●
|
from time to time Stone Street Partners, LLC advanced funds to us
for working capital under the terms of a promissory note dated July
20, 2016. Between July 2016 and August 2016 we borrowed $303,966
under this note. Between September 2016 and December 2016 we repaid
the advances together with interest in the amount of
$3,352;
|
|
|
|
|
●
|
in March 2017 I'M1 entered into a consulting agreement and a
license agreement with Kure Corp. Mr. Sumichrast served as Chairman
of the Board of Kure Corp. from its formation in 2014 until March
1, 2017 and he currently beneficially owns approximately 9% of Kure
Corp. We sub-lease offices for our Beauty & Pin-Ups subsidiary
from a subsidiary of Kure Corp.;
|
|
|
|
|
●
|
in July 2017 we sold Stone Street Partners, LLC the 65 shares of
NuGene International, Inc.'s Series B Convertible Preferred Stock
which was issued to us as partial compensation under the terms of
the consulting agreement between NuGene International, Inc. and
I'M1 for $475,000. At closing, Stone Street Partners, LLC tendered
$200,000 in cash to us together with a $275,000 principal amount 3%
promissory note due July 31, 2018. To secure the payment of this
note, 38 of these shares were deposited into escrow with our
counsel. Upon the payment of the note, the shares will be released
to Stone Street Partners, LLC. If the note is not timely paid, the
shares will be returned to us by the escrow
agent;
|
-19-
|
●
|
in December 2017, we entered into a service agreement with Kure
Corp. to facilitate the “Vape Pod” transaction with the
modular building systems vendor, SG Blocks, Inc., which is also a
client of our company. Under the terms of this agreement we also
agreed to facilitate the introduction to third parties in
connection with Kure Corp.'s initiative to establish Vape Pod's at
U.S. military base retail locations and advising and aid in site
selection for Kure Corp. retail stores on military bases and
adjoining convenience stores, gas stations, and other similar
retail properties utilizing Kure Corp.'s retail Vape Pod concept,
among other services. As compensation for this recent agreement, we
were issued 400,000 shares of Kure Corp.'s common stock which was
valued at $200,000;
|
|
●
|
in December 2017 we also entered into a Revolving Line of Credit
Loan Agreement with Kure Corp., pursuant to which we agreed to lend
Kure Corp. up to $500,000 to be used for the purchase of
prefabricated intermodal container building systems. This credit
line was provided in connection with Kure Corp.'s recent Master
Purchase Agreement with SG Blocks, Inc. for the purchase of 100
repurposed shipping containers for its Kure Vape Pod™
initiative. Under the terms of the Revolving Line of Credit Loan
Agreement, Kure Corp. issued us a $500,000 principal amount secured
promissory note, which bears interest at 8% per annum, and which
matures on the earlier of one year from the issuance date or when
Kure Corp. receives gross proceeds of at least $2,000,000 from the
sale of its equity securities. As collateral for the repayment of
the loan, pursuant to a Security Agreement we were granted a first
position security interest in Kure Corp.'s inventory, accounts and
accounts receivable; and
|
|
●
|
in December 21, 2017, we entered into a sublease agreement with
Kure Corp. for office space for our Beauty & Pin-Ups
subsidiary. The lease is for six months initially and then changes
to a month to month lease at that point. The space includes office
and warehouse space and will cost $3,000 per month.
|
Transactions with affiliates of Mr. Sterling
|
●
|
in April 2015, we sold
kathy
ireland
® Worldwide, an
affiliate of Mr. Sterling, a five-year warrant to purchase 500,000
shares of our common stock at an exercise price of $1.25 per share
for $25,000. Subsequent to this transaction,
kathy
ireland
® Worldwide
transferred a portion of the warrant to a third-party. These
warrants were exercised on a cashless basis in March
2016;
|
|
●
|
in April 2015, we also entered into a management services agreement
with
kathy
ireland
® Worldwide
pursuant to which it agreed to provide
management
certain
creative and marketing services. As compensation, we paid
kathy
ireland
® Worldwide
$100,000 upon the execution of the agreement and agreed to pay it a
deferred monthly fee of $10,000, to the extent
kathy
ireland
® Worldwide was
providing services to us, an annual fee of 10% of the gross margins
of our company after the first $10 million in revenues; and a
$750,000 royalty fee. In October 2016 we entered into a termination
of management services agreement with
kathy
ireland
® Worldwide under
which the management services agreement was terminated upon the
payment to it of $50,000;
|
|
|
|
|
●
|
in February 2017, we entered into a master advisory and consulting
agreement with
kathy
ireland
® Worldwide, as
amended in September 2017, pursuant to which we have engaged the
company to provide non-exclusive strategic advisory services to us
under a term expiring in February 2025. As compensation under the
agreement we agreed to pay
kathy
ireland
® Worldwide a
nominal monthly fee. We are also responsible for the payment of
expenses incurred by Ms. Ireland or
kathy
ireland
® Worldwide in
providing these services to us. In September 2017, we entered into
an amendment to the agreement, under which the parties also granted
each other certain rights for opportunities introduced by one party
to the other, including rights of first refusal and the payment of
referral fees;
|
|
|
|
|
●
|
in February 2017 EE1 arranged, coordinated and booked for Sandbox
LLC its first travel related event, arranging for travel and
concierge related services. Under the terms of the oral agreement,
EE1 was paid $68,550 for its services. Mr. Sterling is a minority
owner of Sandbox LLC and Sandbox LLC has a prior business
relationship with
kathy
ireland
®
Worldwide;
|
|
|
|
|
●
|
in
September 2017, we entered into a license agreement with
kathy ireland
®
Worldwide under which it granted us a non-transferrable license to
use the
kathy ireland
®
trademark, as well as Ms. Ireland's likeness, videos, photographs
and other visual representations in connection with our initial
public offering, including the associated road shows, subject to
its prior approval. Under the terms of the agreement, which expired
on October 31, 2017, we agreed to pay
kathy ireland
® Worldwide
$100,000;
|
|
|
|
|
●
|
in
September 2017, we also entered into a wholesale license agreement
with
kathy ireland
®
Worldwide under which we were granted an exclusive, royalty free
right to license, assign and use the
kathy ireland
® Health &
Wellness™ trademark, and all trade names, trademarks and
service marks related to the intellectual property including any
derivatives or modifications, goodwill associated with this
intellectual property when used in conjunction with health and
wellness as well as Ms. Ireland's likeness, videos, photographs and
other visual representations connected with
kathy ireland
® Health &
Wellness™. As compensation under this agreement, we agreed to
pay
kathy ireland
®
Worldwide a marketing fee of $840,000, of which $480,000 has been
paid and the balance is payable in equal annual installments
beginning January 1, 2019, subject to acceleration. Under the terms
of this agreement, we also agreed to pay
kathy ireland
® Worldwide a royalty
of 33 1/3% of our net proceeds under any sublicense agreements we
may enter into for this intellectual property;
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in
September 2017 EE1 arranged, coordinated and booked for Sandbox LLC
a travel related event, arranging for travel and concierge related
services. Under the terms of the oral agreement, EE1 was paid
$64,475 for its services, which were recorded as
consulting/advisory revenue. EE1 engaged Sterling Winters Company,
an affiliate of Mr. Sterling, to assist with this service and
incurred a cost of sales for that service of $35,421 which was
recorded as of September 30, 2017; and
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in
September 2017 EE1 created a marketing campaign for a customer and
worked through their approved vendor, Sandbox LLC, to deliver
services. Under the terms of the oral agreement, EE1 was paid
$550,000 for its services from Sandbox. At September 30, 2017, this
entire amount was recorded in accounts receivable related party.
EE1 engaged Sterling Winters Company to assist with this campaign
and incurred accrued expenses of $250,000 as of September 30,
2017.
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Transactions with affiliates of Mr. Shriver
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in January 2016 Beauty & Pin-Up's entered into a charitable
agreement, as amended, with Best Buddies® International
pursuant we issued 30,000 shares of our common stock valued at
$225,000 as a charitable contribution. Under the terms of this
agreement which expires in December 2021 we agreed to recognize
Best Buddies® International as Beauty & Pin-Up's official
charity partner and include its logo on our products. The
agreement also provides that we make a mandatory annual charitable
cash contribution to Best Buddies® International of ½ of
1% of Beauty & Pin-Up's annual net sales (after discounts and
returns) for all sales of Beauty & Pin-Up's branded products up
to $10 million, which increases to 1% of annual net sales in excess
of $10 million. These cash contributions totaled $10,157 in the
fiscal year ended September 30, 2016 and $4,726 in the fiscal year
ended September 30, 2017;
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in October 2016 we issued Best Buddies® International an
additional 20,000 shares of our common stock valued at $17,000 as a
charitable contribution; and
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in August 2017 EE1 entered into a representation agreement with
Romero Britto and Britto Central, Inc. Alina Shriver, Mr. Shriver's
wife, is President of Britto Licensing, an affiliate of the
licensor. She also serves as Vice President of Art and Merchandise
of Best Buddies® International.
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Transactions with affiliates of G. Tyler Runnels, principal
shareholder and director nominee.
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in April 2015, we sold Mr. Runnels 500,000 shares of our common
stock in a private transaction at a purchase price of $1.00 per
share;
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in June 2015, we engaged T.R. Winston & Co., LLC, a
broker-dealer and member of FINRA that is an affiliate of Mr.
Runnels, to serve as our exclusive placement agent in a private
placement of our securities which resulted in gross proceeds to us
of $1,000,000. In this offering, we paid T.R. Winston & Co.,
LLC cash commissions of $60,000 and issued its affiliates five year
placement agent warrants to purchase 50,000 shares of our common
stock at an exercise price of $2.75 per share, which are
exercisable on a cashless basis;
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in December 2015, we engaged T.R Winston & Co., LLC to serve as
our exclusive placement agent in a private placement of our
securities which resulted in gross proceeds to us of $2,150,000 in
February 2016. In this offering, we paid T.R. Winston & Co.,
LLC cash commissions of $150,500 and issued its affiliates four
year placement agent warrants to purchase 20,067 shares of our
common stock at an exercise price of $8.75 per share, which are
exercisable on a cashless basis. In February 2016 we reduced the
exercise price of these warrants to $5.00 per share. These warrants
and the warrants associated with the June 2015 placement were
exercised on a cashless basis in October 2016; and
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in November 2017 T.R. Winston & Co., LLC was a member of the
selling group in our initial public offering. For its services, it
received sales commissions of approximately $144,000.
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-21-
SHAREHOLDER PROPOSALS TO BE PRESENTED AT THE NEXT ANNUAL
MEETING
As of
the date of this proxy statement, we had not received notice of any
shareholder proposals for the 2018 annual meeting described herein
and proposals received subsequent to the date of this proxy
statement will be considered untimely. For a shareholder proposal
to be considered for inclusion in our proxy statement for the 2019
annual meeting, the Corporate Secretary must receive the written
proposal at our principal executive offices no later than the
deadline stated below. Such proposals must comply with SEC
regulations under Rule 14a-8 regarding the inclusion of shareholder
proposals in company-sponsored proxy materials. Proposals should be
addressed to:
Level
Brands, Inc.
Attention:
Corporate Secretary
4521
Sharon Road, Suite 450
Charlotte,
NC 28211
Under
Rule 14a-8, to be timely, a shareholder’s notice must be
received at our principal executive offices not less than 120
calendar days before the date of our proxy statement release to
shareholders in connection with the previous year’s annual
meeting. However, if we did not hold an annual meeting in the
previous year or if the date of this year’s annual meeting
has been changed by more than 30 days from the date of the previous
year’s annual meeting, then the deadline is a reasonable time
before we begin to print and send our proxy materials. Therefore,
shareholder proposals intended to be presented at the 2019 annual
meeting must be received by us at our principal executive office no
later than November 22, 2018 in order to be eligible for inclusion
in our 2019 proxy statement and proxy relating to that meeting.
Upon receipt of any proposal, we will determine whether to include
such proposal in accordance with regulations governing the
solicitation of proxies.
You may
propose director candidates for consideration by the board’s
Corporate Governance and Nominating Committee. Any such
recommendations should include the nominee’s name and
qualifications for board membership, information regarding the
candidate as would be required to be included in a proxy statement
filed pursuant to SEC regulations, and a written indication by the
recommended candidate of her or his willingness to serve, and
should be directed to the Corporate Secretary of Level Brands, Inc.
at our principal executive offices at 4521 Sharon Road, Suite 450,
Charlotte, NC 28211 within the time period described above for
proposals other than matters brought under SEC Rule
14a-8.
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K
As
required, we have filed our 2017 10-K with the SEC. Shareholders
may obtain, free of charge, a copy of the 2017 10-K by writing to
us at 4521 Sharon Road, Suite 450, Charlotte, NC 28211, Attention:
Corporate Secretary, or from our website,
www.levelbrands.com
.
SHAREHOLDERS SHARING THE SAME LAST NAME AND ADDRESS
The SEC
has adopted rules that permit companies and intermediaries such as
brokers to satisfy delivery requirements for proxy statements with
respect to two or more shareholders sharing the same address by
delivering a single proxy statement addressed to those
shareholders. This process, which is commonly referred to as
“householding,” potentially provides extra convenience
for shareholders and cost savings for companies. We and some
brokers household proxy materials, delivering a single proxy
statement to multiple shareholders sharing an address unless
contrary instructions have been received from the affected
shareholders. Once you have received notice from your broker or us
that they are or we will be householding materials to your address,
householding will continue until you are notified otherwise or
until you revoke your consent. If, at any time, you no longer wish
to participate in householding and would prefer to receive a
separate proxy statement, or if you currently receive multiple
proxy statements and would prefer to participate in householding,
please notify your broker if your shares are held in a brokerage
account or us if you hold registered shares. You can notify us by
sending a written request to Level Brands, Inc., Attention:
Corporate Secretary, 4521 Sharon Road, Suite 450, Charlotte, NC
28211.
WHERE YOU CAN FIND MORE INFORMATION
This
proxy statement refers to certain documents that are not presented
herein or delivered herewith. Such documents are available to any
person, including any beneficial owner of our shares, to whom this
proxy statement is delivered upon oral or written request, without
charge. Requests for such documents should be directed to Corporate
Secretary, Level Brands, Inc., 4521 Sharon Road, Suite 450,
Charlotte, NC 28211. Please note that additional information can be
obtained from our website at
www.levelbrands.com
.
-22-
We file
annual and special reports and other information with the SEC.
Certain of our SEC filings are available over the Internet at the
SEC's web site at http://www.sec.gov. You may also read and copy
any document we file with the SEC at its public reference
facilities:
Public
Reference Room Office
100 F
Street, N.E.
Room
1580
Washington,
D.C. 20549
You may
also obtain copies of the documents at prescribed rates by writing
to the Public Reference Section of the SEC at 100 F Street, N.E.,
Room 1580, Washington, D.C. 20549. Callers in the United States can
also call 1-202-551-8090 for further information on the operations
of the public reference facilities.
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BY ORDER OF THE
BOARD OF DIRECTORS
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By:
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By: /s/
Martin
A. Sumichrast
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Martin A.
Sumichrast,
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Chairman and Chief
Executive Officer
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Charlotte, NC
28211
February
5, 2018
-23-
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