Level Brands (LEVB): Positioned for Profitable Growth

Level Brands (NYSE American: LEVB), a licensing and brand management company tied to super-mogul Kathy Ireland® (Chairman Emeritus and Chief Brand Strategist), issued preliminary results for its third quarter of fiscal 2018 on July 24, with total net sales expected to be up 68%-79% year-over-year to $3.0 million to $3.2 million.

The Company also expects positive operating income before tax for the quarter in the range of $500,000 to $600,000, a significant improvement compared to an operating loss of $178,000 in the year-ago period.

The preliminary third quarter results build on what was already an impressive start to fiscal year 2018. In the second quarter LEVB reported $0.17 per share in earnings.

The Company is expected to report final results for Q3 by mid-August.

“Our anticipated results for the third quarter reflect the strong foundation that we’ve laid and the strength of our team. Looking ahead, we expect a strong finish to the year, and an even stronger performance in 2019 as royalty streams from many of the licensing and brand management agreements signed in recent months begin to grow,” stated Chairman and CEO Martin A. Sumichrast. “With the benefit of low overhead and no inventory, creating highly attractive margins, we anticipate strong bottom line results both in the near-term and beyond.”

Super-Mogul Kathy Ireland® a Key Player in LEVB

The involvement of licensing powerhouse and former supermodel Kathy Ireland® (Chief Brand Strategist and Chairman Emeritus of Level Brands) provides Level Brands a distinct competitive advantage in the market that simply can’t be replicated.

Ireland has built a self-made multi-billion-dollar licensing empire that ranks 27^th globally in size.

LEVB high-profile partnerships include:

• Exclusive 10-year partnership with kathy ireland® Worldwide (kiWW®)
• $32 million value, 10-year cannabidiol (CBD) products deal with Isodiol International (OTCQB: ISOLF)
• 7-year licensing agreement with Boston Therapeutics
• $9 million TV contract for production of two Kathy Ireland TV series
• Level Brands (I’M1) in 5-year licensing agreement with Gravocore Fitness System

Compelling Business Model

LEVB generates both upfront fees (marketing, brand management, etc.) and ongoing royalties from the various licensing agreements it signs.

Much of the Company’s performance to-date has been strictly from upfront fees. It typically takes up to 120-180 days post-contract signing before rebranded products reach market.

Based on the large volume of sizeable licensing deals signed over the past six months alone, LEVB could generate impressive growth over the next several quarters.

Strong Fundamentals Position LEVB for Continued Growth

A recent start and an influx of cash from its IPO positions Level Brands with a strong balance sheet with zero long-term debt and approximately $6.7 million cash at March 31, 2018.

By virtue of its low-overhead, high-margin (licensing gross margins expected in the 70%-80% range) business model, combined with an impressive and growing list of licensing deals and distribution channels, Level Brands is well-positioned for solid growth in the quarters ahead.

With a combination of upfront fees, in the form of cash or equity, as well as ongoing royalties on sales for each of its licensing deals, over time, there is potential for significant exponential growth, which would command a much higher valuation.

Low Valuation Relative to Peers

Despite its strong foundation and recent successes, LEVB is still relatively unknown on Wall Street. The company just went public last November, raising $12 million at $6 per share in a Reg A+ initial public offering. Currently, the stock trades for a nearly 40% discount to this level, and based on its peer group multiples, the stock should trade significantly higher.

Based on forward earnings projections for the next 12-months, the average price-to-earnings multiples of LEVB’s peer group is more than 30x.

Bottom-line, RedChip analysts believe Level Brands provides investors a great opportunity for a diversified investment in beauty, fashion, and wellness products with significant potential upside and great timing.

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Level Brands (NYSE: LEVB) is a client of RedChip Companies. LEVB agreed to pay RedChip a monthly cash fee and 5,000 shares of Rule 144 stock for four months of RedChip investor awareness services.

Investor awareness services and programs are designed to help small-cap companies communicate their investment characteristics. RedChip investor awareness services include the preparation of a research profile(s), multimedia marketing, and other awareness services.