February 27, 2019
Mark S. Elliott
Chief Financial Officer and Chief Operating Officer
Level Brands, Inc.
4521 Sharon Road, Suite 450
Charlotte, NC 28211
Re: Level Brands, Inc.
Registration Statement on Form S-3
Filed December 13, 2018
File No. 333-228773
Dear Mr. Elliott:
We have limited our review of your registration statement to those
issues we have
addressed in our comments. In some of our comments, we may ask you to provide
us with
information so we may better understand your disclosure.
Please respond to this letter by amending your registration statement
and providing the
requested information. If you do not believe our comments apply to your facts
and
circumstances or do not believe an amendment is appropriate, please tell us why
in your
response.
After reviewing any amendment to your registration statement and the
information you
provide in response to these comments, we may have additional comments.
Form S-3 filed December 13, 2018
Form 8-K/A filed February 22, 2019 Exhibit 99.3
1. - Basis of Pro Forma Presentation, page F-6
1. You disclosed in your Item 2.01 Form 8-K dated December 20, 2018 that
the merger
transaction will be accounted for as a reverse merger. Please address
how you determined
the appropriateness of this accounting. In this regard, we note that in
the First Tranche
you will issue 6,500,000 shares of common stock to the preferred
membership interest
owners of Cure Based Development and in the Second Tranche you will
issue 8,750,000
shares of your common stock to CBD Holding, LLC, a member of Cure Based
Development which is controlled by Mr. Scott Coffman, CEO and one of the
managers of
Cure Based Development. In light of the vesting provisions of the Second
Tranche and
guidance set forth in ASC 805-10-25-20 through 21 and ASC 805-10-55-24
through 55-
Mark S. Elliott
FirstName LastNameMark S. Elliott
Level Brands, Inc.
Comapany NameLevel Brands, Inc.
February 27, 2019
February 27, 2019 Page 2
Page 2
FirstName LastName
26, please address why the 8,750,000 shares are not accounted for as a
separate
transaction and therefore not included in applying the acquisition
method of accounting,
including the determination of the purchase price. Specify whether the
vesting terms
include a condition of employment.
2. To the extent reverse merger accounting is appropriate, please expand
your disclosures to
clarify this is your basis of accounting and identify the accounting
acquirer (Cure Based
Development) and the accounting acquiree (Legal Brands).
3. - Preliminary Purchase Price allocation and Pro Forma Adjustments, page F-7
3. To the extent reverse merger accounting is appropriate, please address
the following
comments:
With reference to ASC 805-40-30-2 and ASC 805-40-55-9 and 10, please
revise your
determination of the preliminary purchase price. Based on this
guidance, the
consideration effectively transferred should be equal to the
acquisition date fair value
of the legal acquirer (Level Brands). Please also note that Legal
Brand's payment of
cash to the shareholders of Cure Based Development should be
considered a
distribution of capital and, accordingly reflected as a reduction
of shareholder's equity;
and
Please reflect the assets and liabilities of Legal Brands in
accordance with ASC 805-
20-25. In this regard, we note that goodwill is measured as the
excess of the fair value
of the consideration effectively transferred (i.e. the acquisition
date fair value of Level
Brands) over the net amount of Level Brands recognized identifiable
assets and
liabilities. Refer to ASC 805-40-55-11 and 12.
Form 10-Q for the Quarter Ended December 31, 2018
Note 2. Acquisitions, page 18
4. With reference to ASC 805-10-25-6 and 7, please tell us how you
determined the
acquisition date for your merger with Cure Based Development. Ensure
your response
fully addresses the fact that you have not transferred the equity
consideration and that,
based on your disclosures, you cannot issue such shares until after
you receive the
approval of your shareholders.
5. If you have appropriately determined the acquisition date, please
address the above
comments as they relate to your accounting for the Cure Based
Development business
combination and revise your financial statements accordingly.
6. To the extent reverse merger accounting is appropriate, please ensure
that your financial
statements for periods subsequent to the acquisition date fully comply
with the accounting
and disclosure requirements set forth in ASC 805-40. Specifically,
ensure your
accounting addresses our pro forma comments above regarding your
determination of the
preliminary purchase price allocation. Also, please note the
following:
Mark S. Elliott
Level Brands, Inc.
February 27, 2019
Page 3
Prior to the date of the reverse merger, the historical financial
statements presented in
your filing become those of Cure Based Development and should only
include their
historical results and operations;
The historical financial statements of Cure Based Development are
required to reflect
the shares issued by Level Brands ``to acquire Cure Based
Development as
outstanding for all periods presented in a manner similar to a stock
split. This may
require a recalculation of the weighted average shares outstanding
for EPS purposes.
Differences in par value should be offset to additional paid-in
capital;
Cure Based Development financial statements are required to reflect
the reverse
merger of Level Brands on the acquisition date. On this date, Level
Brand's
outstanding shares should be reflected as being issued by Cure Based
Development to
acquire Level Brands; and
Subsequent to the date of the reverse merger, the historical
financial statements are
required to be those of the Cure Based Development and Level Brands
on a
consolidated basis.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
Refer to Rules 460 and 461 regarding requests for acceleration. Please
allow adequate
time for us to review any amendment prior to the requested effective date of
the registration
statement.
Please contact Sergio Chinos, Staff Attorney, at (202) 551-7844 or Jay
Ingram, Legal
Branch Chief, at (202) 551-3397 with any questions.
Sincerely,
FirstName LastNameMark S. Elliott Division of
Corporation Finance
Office of
Manufacturing and
Comapany NameLevel Brands, Inc.
Construction
February 27, 2019 Page 3
cc: Brian Pearlman
FirstName LastName