Business Context and Reporting Period
This Form 8-K Current Report was filed by Level Brands, Inc. (noting the metadata reference to "Cbdmd, Inc." appears to be a discrepancy as the filing explicitly names Level Brands, Inc.) on January 5, 2018, covering events occurring on December 30, 2017. The registrant is an emerging growth company incorporated in North Carolina.
Key Financial Metrics and Transaction Terms
The filing details a Material Definitive Agreement (License Agreement) entered into with Isodiol International, Inc. regarding the "kathy ireland Health & Wellness" trademark for cannabidiol (CBD) products. The compensation structure includes:
- Licensing Fee: $125,000 total ($62,500 paid upon execution; balance due by June 30, 2018).
- Equity Compensation: 1,679,321 shares of Isodiol International common stock valued at $2 million upon execution.
- Quarterly Equity: Additional shares valued at $750,000 payable quarterly starting March 31, 2018.
- Royalties: 3% of gross licensed marks sales, payable monthly.
The filing text does not provide clear values for the company's overall revenue, profit, cash flow, margins, debt, or liquidity positions as this is a transaction-specific report.
Material Changes and Agreements
The primary material change is the entry into the five-year License Agreement with Isodiol International, Inc., with automatic two-year extensions. The agreement grants Isodiol a non-exclusive, non-transferrable license to market and distribute CBD products in the U.S. and Canada. Additionally, the parties agreed in principle to a future sublicense for "I'M1" trademarks targeting men, though a definitive agreement for this was not yet executed.
Outlook, Risks, and Contingencies
Contingencies: The agreement contains a "go/no-go" provision where parties must mutually decide by January 31, 2018, whether to proceed. If they decide not to move forward, either party may terminate the agreement, and Level Brands will receive no compensation.
Management Obligations: Level Brands must use commercially reasonable efforts to produce up to eight branded videos annually, make marketing teams available (for separate compensation), and ensure Kathy Ireland participates in industry conferences quarterly.
Risks and Indemnification: Isodiol International has indemnified Level Brands against third-party claims related to the licensed products. The agreement allows for termination by either party with 30 days' notice in the event of a material breach, triggering immediate payment of all amounts due.
Investor Verification Checklist
- Verify the January 31, 2018 decision date regarding the continuation of the agreement.
- Confirm the actual closing price of Isodiol International shares to validate the $2 million valuation of the initial equity grant.
- Monitor the execution of the separate definitive agreement for the "I'M1" men's trademark sublicense.
- Review the press release (Exhibit 99.1) for additional marketing commitments or strategic details.
- Assess the financial impact of the $62,500 initial cash payment and the timing of the remaining $62,500 due in June 2018.