Business Context and Reporting Period
This Form 8-K is a current report filed by Level Brands, Inc. (not Cbdmd, Inc.) on January 7, 2019. The registrant is an emerging growth company incorporated in North Carolina. The filing primarily addresses the termination of a material definitive agreement and the furnishing of an updated investor relations presentation.
Key Financial Metrics
The filing does not provide standard financial statements, revenue, profit, cash flow, or liquidity metrics for the reporting period. However, it details specific financial terms related to a terminated licensing agreement:
- Original Agreement Consideration: Included a $125,000 licensing fee, 1,679,321 shares of Isodiol International common stock (valued at $2 million at execution), quarterly share issuances valued at $750,000, and a 3% royalty on gross sales.
- Termination Consideration: Isodiol International agreed to issue 500,000 shares of its common stock to Level Brands, valued at the closing price on the date of the agreement.
Material Changes
The primary material change reported is the mutual termination of the License Agreement between Level Brands and Isodiol International, Inc., effective October 1, 2018. Key changes include:
- Cessation of Isodiol's obligation to pay royalties and issue additional quarterly shares under the original agreement.
- Issuance of 500,000 restricted shares of Isodiol stock to Level Brands as part of the termination settlement.
- Implementation of a lock-up period for the termination shares, to be released in six equal installments over six months.
- Inclusion of mutual releases, non-disclosure, and non-disparagement provisions.
Guidance, Outlook, and Risks
Management Commentary and Disclosure: On January 11, 2019, Level Brands released an updated investor relations presentation (Exhibit 99.1). The filing explicitly states that this presentation is furnished and not "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, meaning it is not subject to the liabilities of that section nor incorporated by reference into other filings.
Risks and Contingencies: The filing notes the termination of the CBD-related licensing arrangement, which may impact future royalty streams from that specific partner. The 500,000 shares received are subject to a lock-up period, creating a liquidity constraint on that specific asset until the installments are released.
Investor Verification Checklist
- Verify the closing price of Isodiol International stock on January 7, 2019, to determine the fair value of the 500,000 shares received.
- Review the full text of the Mutual Termination of License Agreement (Exhibit 10.1) for specific conditions regarding the lock-up release schedule.
- Examine the furnished Investor Relations Presentation (Exhibit 99.1) for updated strategic direction, noting it is not legally "filed" data.
- Confirm the impact of the terminated CBD license on Level Brands' overall royalty revenue projections.