Blueprint
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14f-1
Information Statement Pursuant to Section 14(f) of
the
Securities Exchange Act of 1934 and Rule 14f-1
Thereunder
TRUE DRINKS HOLDINGS, INC.
(Exact
Name of Registrant as Specified in its Charter)
000-50875
(Commission
File Number)
Nevada
|
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84-1575085
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(State
of Incorporation)
|
|
(I.R.S.
Employer Identification No.)
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1007 Brioso Drive
Costa Mesa, CA 92627
(Address of Principal Executive Offices)
(949) 531-6855
(Issuer’s Telephone Number)
TRUE DRINKS HOLDINGS, INC., DBA CHARLIE’S HOLDINGS,
INC.
1007 Brioso Drive
Costa Mesa, CA 92627
INFORMATION STATEMENT PURSUANT TO SECTION 14(F)
OF
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,
AND RULE 14f-1 PROMULGATED THEREUNDER
Notice of Change in the Majority of the Board of
Directors
THIS INFORMATION STATEMENT IS BEING PROVIDED SOLELY FOR
INFORMATIONAL PURPOSES AND NOT IN CONNECTION WITH ANY VOTE OF THE
STOCKHOLDERS OF TRUE DRINKS HOLDINGS, INC., DBA CHARLIE'S HOLDINGS,
INC. NO PROXIES ARE BEING SOLICITED AND YOU ARE NOT REQUESTED TO
SEND A PROXY.
INTRODUCTION
This
Information Statement is being mailed on or about May 28, 2019 to
holders of record of shares of common stock, par value $0.001 per
share (“Common
Stock”), Series A Convertible Preferred Stock, par
value $0.001 per share (“Series A Preferred”), and Series
B Convertible Preferred Stock, par value $0.001 per share
(“Series B
Preferred”), of True Drinks Holdings, Inc., dba
Charlie’s Holdings, Inc., a Nevada Corporation (the
“Company”), as
of the close of business on May 10, 2019 (the “Record Date”) in accordance with
the requirements of Section 14(f) of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), and Rule 14f-l
promulgated thereunder, in connection
with an anticipated change in a majority of the members of our
Board of Directors (the “Board”) other than by a meeting of stockholders.
Section 14(f) of the Exchange Act (“Section
14(f)”) and Rule 14f-1
require the mailing to our stockholders of record the information
set forth in this Information Statement at least ten days prior to
the date that a change in a majority of our directors occurs
(otherwise than at a meeting of our stockholders). Accordingly, the
change in a majority of our directors pursuant to the exchange
transaction described below will not occur until at least ten days
following the mailing of this Information
Statement.
On April 26, 2019 (the “Closing
Date”), the Company
entered into a Securities Exchange Agreement (the
“Exchange
Agreement”), with each of
the members (“Members”) of Charlie’s Chalk Dust, LLC, a
Delaware limited liability company (“CCD”), and certain direct investors
(“Direct
Investors”), pursuant to
which the Company acquired all outstanding membership interests of
CCD beneficially owned by the Members in exchange for the issuance
by the Company of units of the Company’s securities,
consisting of shares of the Company’s Common Stock, newly
designated Series A Preferred and newly designated Series B
Preferred (the “Exchange”). As a result of the Exchange, CCD became
a wholly owned subsidiary of the Company. In connection with, and
as a condition to, the Exchange, (i) three of the five members of
the Board resigned, effective upon closing of the Exchange, and a
fourth member agreed to continue to serve as a director until such
time that the Company has complied with the Section 14(f) and Rule
14f-1 requirements, and to resign immediately thereafter; (ii) CCD
appointed two new individuals as directors on the Board, effective
upon closing of the Exchange, (iii) CCD was provided with the right
to appoint one additional member to the Board, subject to the
Company’s compliance with Section 14(f) and Rule 14f-1; and
(iv) holders of shares of the Company’s Series A Preferred
were provided with the right to appoint an additional member to the
Board, subject to the Company’s compliance with Section 14(f)
and Rule 14f-1.
For
additional information concerning the transactions relating to the
Exchange and the related transactions, see our Current Report on
Form 8-K filed with the SEC on April 30, 2019, as amended on May 1,
2019.
Currently, the Board consists of two individuals
who served as directors prior to the Exchange (the
“Old
Directors”), and two
individuals who were appointed as directors upon consummation of
the Exchange. Therefore, the newly appointed directors do not
currently constitute a majority of the directors on the Board.
However, upon the resignation of one of the Old Directors, and
appointment of two additional new directors, one by CCD and one by
the holders of the outstanding shares of Series A Preferred (all of
which was agreed to in connection with the Exchange), newly
appointed directors will constitute a majority of the Board,
thereby requiring the filing of this Information Statement. There
will not be any changes to the composition of the current Board
prior to the tenth day following the Company’s mailing of
this Information Statement to its stockholders, which mailing is
anticipated to occur on or about May 28, 2019.
THIS INFORMATION STATEMENT IS REQUIRED BY SECTION 14(F) OF THE
EXCHANGE ACT AND RULE 14F-1 PROMULGATED THEREUNDER IN CONNECTION
WITH THE APPOINTMENT OF DIRECTOR DESIGNEES TO THE BOARD. NO ACTION
IS REQUIRED BY OUR STOCKHOLDERS IN CONNECTION WITH THE RESIGNATION
AND APPOINTMENT OF ANY DIRECTOR.
DIRECTORS AND OFFICERS PRIOR TO THE EXCHANGE
The
following table sets forth information regarding the
Company’s executive officers and directors prior to the
Exchange.
Name
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Age
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Position
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Robert Van Boerum (1)
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42
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Principal Executive Officer and Principal Accounting
Officer
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Ramona Cappello (2)
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59
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Chairman
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James J. Greco (2)
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61
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Director
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Kevin Sherman (4)
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48
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|
Director
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50
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Director
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Neil LeVecke (2)
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51
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Director
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(1)
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Mr. Van Boerum was appointed to serve as the Company’s
Principal Executive Officer and Principal Financial Officer
effective May 15, 2018, and resigned from such positions on April
26, 2019, effective upon consummation of the Exchange. Mr. Van
Boerum currently provides consulting services to the Company in
order to aid in the transition of the Company and its management as
a result of the Exchange.
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(2)
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Ms.
Cappello, as well as Messrs. Greco and LeVecke, each resigned from
his or her position as a director on the Board on April 26, 2019, effective upon consummation of the
Exchange.
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(3)
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Messrs.
Sherman and Cohen continue to serve as directors on the Board;
however, Mr. Sherman has agreed to
continue to serve as a director until such time that the Company
has complied with the Section 14(f) and Rule 14f-1 requirements,
and to resign immediately thereafter.
|
The
following biographical information regarding the foregoing
directors and officers of the Company prior to the Exchange is
presented below:
Robert Van
Boerum, Principal Executive and Principal Financial
Officer. Mr.
Van Boerum was appointed to serve as the Company’s Principal
Executive and Principal Financial Officer in May 2018. Mr. Van
Boerum served as the Company’s Chief Operations Officer from
September 2015 to April 2019, and served as an employee of the
Company since 2012, handling a wide range of responsibilities,
including marketing, operations, and information technology. Prior
to his time with the Company, Mr. Van Boerum served as Chief
Information Officer for Regeneca International, Inc. from 2011 to
2012, and as Vice President of Corporate Strategy for AL
International (JCOF) from 2009 to 2011. Mr. Van Boerum holds a B.S.
in Management Information Systems form the University of Nevada,
Las Vegas and an MBA from San Diego State
University.
Ramona
Cappello, Chairman. Ms.
Cappello was appointed to the Board in July 2015 and as Chairman of
the Board in November 2015. Ms. Cappello is currently the Chief
Executive Officer of Sun Harvest Salt, LLC, a company she founded
in 2014. Prior to Sun Harvest Salt, Ms. Cappello served as Chief
Executive Officer and co-founder of Corazonas Foods from 2006 until
the sale of Corazonas Foods in 2012, departing in 2013 at the end
of her contract. Ms. Cappello was also a senior executive with
Mauna Loa Macadamia Nut Company until its sale to Hershey Foods and
has served in various positions for other food and beverage
companies, including Nestle, Celestial Seasonings and
Kendall-Jackson Wineries. In addition to her responsibilities with
Sun Harvest Salt, Ms. Cappello has served on the University of
Southern California Board of Trustees since 2014, is a member of
the USC Associates and Marshall Partners, and serves on the board
of Catholic Big Brothers and Big Sisters of Los Angeles.
Additionally, she currently serves on the Board of Directors for
Nielsen Massey Vanillas, Inc. and Mercury Insurance Group (NYSE:
MCY). Ms. Cappello holds a bachelor’s degree in business from
the University of Southern California Marshall School of Business,
where she graduated a class valedictorian.
The
Board of Directors believed Ms. Cappello’s experience in
executive roles with consumer products companies and her experience
in corporate governance provided the Board with invaluable insight,
experience and guidance given the industry in which the Company
participated.
James J.
Greco, Director. Mr. Greco
served as the Company’s Chief Executive Officer from April
2017 to May 2018, and as a director on the Company’s Board
from February 2017 to April 2019. Mr. Greco is President and Chief
Executive Officer of Pilgrim Holdings, LLC, a position he has held
since October 2001. Mr. Greco previously served as Chief Operating
Officer of Newk’s Franchise Company, LLC from July 2014 until
October 2016, as well as President from January 2016 until October
2016. Prior to his time with Newk’s Franchise Company, Mr.
Greco served as the Chief Executive Officer and President of Sbarro
LLC from January 2012 until October 2013, and as the Chief
Executive Officer of Bruegger’s Enterprises, Inc. from August
2003 to December 2011. Mr. Greco currently serves as a director of
the Palm Beach County Food Bank, as well as an operating advisor
for Lincoln Road Global Management. Mr. Greco is a member of the
Connecticut and Florida bars. He earned a B.A. in Economics from
Georgetown University and a J.D. from the University of Miami,
School of Law. He has also completed International Studies at City
University, London, England.
The
Board of Directors believed Mr. Greco’s extensive management
experience in the food industry assisted the Company in the
execution of its business plan.
Kevin
Sherman,
Director.
Mr. Sherman managed the brand
development of AquaBall® Naturally Flavored Water from the
time he joined the Company in 2012 until the Company decided to
cease production of AquaBall® in early 2018. During his time
at the Company, Mr. Sherman has served as President, Chief
Marketing Officer and Chief Executive Officer during different
periods, and he joined the Company’s Board of Directors in
September 2015. Prior to joining the Company, Mr. Sherman was the
Vice President Strategy and Network Development and President of
Retail for Bazi, Inc. He was instrumental in the development of
Bazi’s All-Natural formula and spearheaded the concept of
all-natural energy. Prior to Bazi, Mr. Sherman served as the Senior
Manager of Network Development of Product Partners LLC from May
2008 to May 2009, Chief Operating Officer of Hand & Associates
from January 2008 to May 2008, and as the director of development
and principal of Holy Innocents School from August 2007 to December
2007. Mr. Sherman also served as the principal of Saints Peter and
Paul School from January 2004 to August 2007. Mr. Sherman holds a
B.A. from Gordon College and an M.A. from Loyola Marymount
University.
The Board of Directors believes Mr.
Sherman’s long-standing service to the Company and its
predecessor, Bazi, Inc., provide the Board with the guidance
necessary to continue to expand the Company’s distribution
networks, and promote brand awareness of its
products.
Scot
Cohen, Director. Mr.
Cohen was appointed to the Board in March 2013 and is the Founder
and Managing Partner of V3 Capital Partners, a private investment
firm focused on early-stage companies primarily in the consumer
products industry, and Co-Manager of Red Fortune Fund, a private
equity fund based in Hong Kong. Mr. Cohen also is the Founder of
Petro River Oil, LLC and Chairman of Petro River Oil Corp. (OTCBB:
PTRC), a publicly traded oil and gas producer with assets in Kansas
and Oklahoma, and Petro Spring, a global oil and gas technology
solutions provider. Prior to creating V3 Capital Partners, Mr.
Cohen was the Founder and Managing Partner at Iroquois Capital
Opportunity Fund, a special situations private equity investment
fund, and a Co-Founder of Iroquois Capital, a hedge fund with
investments in small and micro-cap private and public companies.
Mr. Cohen currently serves as a director on the Board of Directors
of Wrap Technologies, Inc. (NASDAQ: WRTC), and is active in
philanthropic activities with numerous charities including the
Jewish Enrichment Council. Mr. Cohen received a Bachelor of Science
degree from Ohio University in 1991.
The
Board of Directors believes Mr. Cohen’s success with multiple
private investment firms, his extensive contacts within the
investment community, and his financial expertise will assist the
Company’s efforts to expand and to implement its business
plan.
Neil
LeVecke, Director. Mr. LeVecke is the President of LeVecke
Corporation, a wholesale distributor and bottler of spirits and
wine products. Representing a third generation in the family
business, he has worked every position in the company since
starting in 1993. Mr. LeVecke graduated from Loyola Marymount
University in 1990.
The
Board of Directors believed Mr. LeVecke’s 22 years in the
wholesale beverage distributing and bottling industry provided the
Board with relevant and valuable insight and guidance.
There
have been no events under any bankruptcy act, no criminal
proceedings and no judgments or injunctions material to the
evaluation of the ability and integrity of any director or nominee
set forth above during the past ten years.
DIRECTORS AND OFFICERS FOLLOWING THE EXCHANGE AND FILING OF THIS
INFORMATION STATEMENT
The
following table sets forth information regarding the
Company’s executive officers and directors following the
Exchange, including those directors and officers who have already
been appointed, as well as one of the directors who will be
appointed on or after ten days following the mailing of this
Information Statement to the Company’s
stockholders.
Holders
of the Series A Preferred have not yet determined who they will
appoint as a director; accordingly, information regarding such
individual has not been included in the below table. The Company
will file a Current Report on Form 8-K to disclose the appointment
of such individual at such time that the holders of the Series A
Preferred have exercised their right to appoint an additional
director. In addition, although Kevin Sherman currently continues
to serve as a director on the Board, as noted above, he has agreed
to resign from such position on or after ten days following the
mailing of this Information Statement to the Company’s
stockholders; therefore, he has also been omitted from the below
table.
Name
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Age
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Position
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Brandon Stump (1)
|
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33
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Chief Executive Officer and Chairman (Principal Executive
Officer)
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David Allen (2)
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64
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Chief Financial Officer and Secretary
(Principal Financial Officer)
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Ryan Stump (3)
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30
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Chief Operating Officer and Director
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Mitchell Brantley III (4)
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57
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Chief Marketing Officer
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Adam Mirkovich (5)
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34
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Chief Information Officer
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Scot Cohen
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|
50
|
|
Director
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Keith Stump (6)
|
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58
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Director
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(1)
|
Brandon
Stump was appointed to serve as the Company’s Chief Executive
Officer and as a director on the Board on April 26, 2019 in
connection with the Exchange, effective immediately following Mr.
Van Boerum’s resignation as Principal Executive Officer. The
Company’s Board appointed Brandon Stump as Chairman on May 8,
2019.
|
(2)
|
Mr.
Allen was appointed to serve as the Company’s Chief Financial
Officer on April 26, 2019 in connection with the Exchange,
effective immediately following Mr. Van Boerum’s resignation
as Principal Financial Officer.
|
(3)
|
Ryan
Stump was appointed to serve as the Company’s Chief Operating
Officer and as a director on the Board on April 26, 2019 in
connection with the Exchange.
|
(4)
|
Mr.
Brantley was appointed to serve as the Company’s Chief
Marketing Officer on May 8, 2019.
|
(5)
|
Mr.
Mirkovich was appointed to serve as the Company’s Chief
Information Officer on May 20, 2019.
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(6)
|
Keith
Stump will be appointed as a director on the Board on or about ten
days following the mailing of this
Information Statement to the Company’s stockholders. CCD
exercised its right to designate Keith Stump as the additional CCD
appointed director in connection with the Exchange, subject to the
Company’s compliance with Section 14(f) Rule
14f-1.
|
Brandon
Stump and Ryan Stump are brothers, and Keith Stump is their father.
Other than with the respect to the Stumps, there are no familial
relationships between any of the Company’s executive officers
and directors listed above.
The
following biographical information regarding the foregoing
directors and officers of the Company following the Exchange and
the filing of this Information Statement is presented
below:
Brandon Stump, Chief
Executive Officer and Chairman. Brandon Stump was appointed as Chief Executive
Officer of the Company on April 26, 2019 in connection with the
Exchange. Mr. Stump is a co-founder of CCD, and has served as
CCD’s Chief Executive Officer since its inception in
2014. Prior to co-founding CCD, Mr. Stump co-founded his first
business, the Ohio House in 2011, with his brother Ryan Stump.
Since then, he has gone on to co-found both The Chadwick House and
Buckeye Recovery Network, both established in 2017, as well as The
Mend California, established in 2018. These programs provide a
continuum of care and services to men and women from the country
promoting emotional, physical and spiritual
development.
As
a co-founder of CCD, the Board of Directors believes that Mr.
Stump’s substantial entrepreneurial, marketing, sales and
industry experience provide the Board with valuable expertise that
will assist the Company in continuing to grow its revenue and to
enter into new markets for its products.
David Allen, Chief
Financial Officer and Secretary. David Allen was appointed as the
Company’s Chief Financial Officer on April 26, 2019, upon
consummation of the Exchange. Mr. Allen brings over 22 years of
experience as the Chief Financial Officer of public companies. From
September 2018 to May 2019, Mr. Allen served as Chief Financial
Officer of Iconic Brands, Inc. (OTCQB: ICNB). Prior to that, from
December 2014 to January 2018, Mr. Allen served as the Chief
Financial Officer of WPCS International, Inc., a design-build
engineering firm focused on the deployment of wireless networks and
related services. WPCS International was listed on Nasdaq, and Mr.
Allen oversaw its financial reporting obligations and SEC
compliance. From 2004 to 2017, Mr. Allen served as Chief Financial
Officer of Bailey’s Express, Inc., a privately held trucking
corporation, which filed for Chapter 11 bankruptcy in July 2017.
Mr. Allen currently serves as the Chapter 11 Plan Administrator for
the bankruptcy case. From June 2006 to June 2013, Mr. Allen served
as the Chief Financial Officer and Executive Vice President of
Administration at Converted Organics, Inc., a company organized to
convert food waste into organic fertilizer. At Converted Organics,
he was responsible for SEC reporting, audit, insurance and taxes.
Mr. Allen is currently an Assistant Professor of Accounting at
Southern Connecticut State University, a position he has held since
2017, and for the 12 years prior to that he was an Adjunct
Professor of Accounting at SCSU and Western Connecticut State
University. Mr. Allen is a licensed CPA and holds a
Bachelor’s Degree in Accounting and a Master’s Degree
in Taxation from Bentley College.
Ryan Stump, Chief Operating
Officer and Director. Ryan Stump was appointed as the
Company’s Chief Marketing Officer on April 26, 2019 in
connection with the Exchange. Mr. Stump has served as CCD’s Chief Operating Officer
since 2014, during which time he has been responsible for all
global operations of CCD. Prior to joining CCD, Mr. Stump worked as
an Associate Territory Manager and then as a Territory Manager for
ConMed, a medical sales device company, from 2010 to 2013. Mr.
Stump also co-founded and continues to be engaged with multiple
companies, including The Ohio House since 2011, the Buckeye
Recovery Network since 2017, and The Mend California since 2018.
Mr. Stump earned a B.S. and B.A. in Sports Marketing and Marketing
from Duquesne University.
The
Board of Directors believes that Mr. Stump’s experience
operating high growth companies, as well as entrepreneurial
experience, will be valuable to the Board as it manages the
Company’s anticipated continued growth.
Mitchell Brantley III,
Chief Marketing Officer. Mitchell Brantley III was appointed as the
Company’s Chief Marketing Officer on May 8, 2019. Mr.
Brantley currently serves as an Advisor to Spudsy, a privately held
company focused on developing and selling certain healthy snacks,
where he also served as President from August 2018 to December
2018. Prior to joining Spudsy in August 2018, Mr. Brantley served
as Interim President for Goldthreads Herbs, a company focused on
the development and sale of plant-based tonics, from March 2018 to
July 2018. In addition, starting in November 2017, Mr. Brantley
worked as a consultant to companies in the fast moving consumer
goods space, providing strategic and marketing advice. From April
2013 until November 2017, Mr. Brantley served as the General
Manager of BioNutritonal Research Group, Inc. – Power Crunch,
a producer of smart nutrition bars, drinks and powders. From
September 2011 until April 2013, Mr. Brantley served as Vice
President of Coast Brands, LLC, which provided brand representation
and secured regional and national distribution for underdeveloped
and emerging beverage and snack brands. Mr. Brantley has also held
leadership positions for distributors of Quaker Oats, Cadbury
Schweppes and Snapple brand products. Mr. Brantley holds a B.S. in
Business and Marketing from California State University,
Fullerton.
Adam Mirkovich, Chief
Information Officer. Adam Mirkovich was appointed as the
Company’s Chief Information Officer on May 20, 2019. Mr.
Mirkovich has over a decade of
experience managing supply chains for consumer products. Mr.
Mirkovich has served as an independent management
consultant specializing in building and optimizing value
chains for startups and growth stage companies in the beverage,
nicotine vape, and nutritional supplements industries since 2013.
Prior to joining the Company, Mr. Mirkovich served as the Chief
Operating Officer of Orchid Ventures, Inc. (CSE:ORCD), a
multi-state premium cannabis vape company, from September 2018 to
April 2019. From December 2014 to February 2016, Mr. Mirkovich
served as the Director of Supply Chain and Operations at Space Jam
Juice, LLC, a distributor of premium vapor products. From November
2010 to April 2013, Mr. Mirkovich served as the Product Lifecycle
Management (“PLM”) Program Manager for Niagara Bottling,
LLC, a leading bottled water manufacturer. While there, he led the
product revision, introduction, and discontinuance practices for
customers’ private labeled water, flavored, and carbonated
beverages. Prior to his role in PLM Management, Mr. Mirkovich
served as a member of the Supply Chain Logistics team at Niagara
Bottling, providing strategic support of company expansion
activities and tactical support of purchasing, production
planning, and multi-region logistics in North American
operations. Mr. Mirkovich earned a Bachelor of Science degree in
Business Administration and Economics from Chapman
University.
Keith Stump,
Director. Keith Stump has over 35 years of sales and
management experience. He joined CCD in January 2018 as a Strategic
Advisor, where he has predominantly focused on sales, marketing and
scaling the business, including through organizational alignments,
process improvement, leadership/management training and
development. Prior to joining CCD, Mr. Stump served as a partner
and Vice President of Sales in Blue Technologies, Inc., an office
technology and Managed IT Service provider headquartered in
Cleveland, Ohio, which he co-founded in 1995. While at Blue
Technologies, Inc., Mr. Stump was responsible for the sales
performance of the company’s five divisions, along with
operational oversight. His duties included P&L responsibility
for all product divisions, leadership training and development, new
product and service offerings, enterprise account selling, amongst
other duties. Mr. Stump was instrumental in helping Blue
Technologies, Inc. become one of the Top 10 Konica Minolta
providers in the country, as well as one of the Top 75 Office
Technologies Dealers in the United States. Mr. Stump serves on
several not-for-profit boards, which serve those in recovery from
addiction and developmental disabilities.
The
Board of Directors believes that Mr. Stump’s sales,
marketing, management experience and industry experience, as well
as entrepreneurial experience, will be valuable to the Board as it
manages the Company’s anticipated continued
growth.
Other
than as described above, there have been no events under any
bankruptcy act, no criminal proceedings and no judgments or
injunctions material to the evaluation of the ability and integrity
of any director or nominee set forth above during the past ten
years.
CORPORATE GOVERNANCE
As
discussed above, subsequent to the year ended December 31, 2018,
and effective April 26, 2019 upon consummation of the Exchange, Ms.
Cappello and Messrs. Greco and LeVecke (collectively, the
“Former
Directors”) resigned from their positions as directors
on the Company’s Board, leaving Messrs. Sherman and Cohen as
the remaining directors. In addition, Ryan and Brandon Stump were
appointed as new directors immediately after the resignations of
the Former Directors. Certain
disclosure which follows regarding corporate governance refers to
the Company’s Board and corporate governance policies and
procedures prior to the resignation of the Former Directors, and
does not reflect the Company’s corporate governance policies
and procedures subsequent to such resignations.
Board of Directors; Attendance at
Meetings
The Board held four meetings
and acted by unanimous written consent five times
during the year ended December 31, 2018. Each director attended at
least 75% of Board meetings during the year ended December 31,
2018. We have no formal policy with respect to the attendance of
Board members at annual meetings of shareholders, but encourage all
incumbent directors and director nominees to attend each annual
meeting of shareholders.
Independent Directors
Prior
to the resignations of the Former Directors, the Board determined
that Ms. Cappello and Mr. LeVecke were independent directors as
defined by the rules and regulations of the Nasdaq Stock
Market.
The
Board has determined that Mr. Cohen satisfies the definition of an
“audit committee financial expert” under SEC rules and
regulations. This designation does not impose any duties,
obligations or liabilities on Mr. Cohen that are greater than
those generally imposed on them as members of the Audit Committee
and the Board, and his designation as an audit committee financial
expert does not affect the duties, obligations or liability of any
other member of the Audit Committee or the Board.
Board Committees and Charters
As of December 31, 2018, the Board had a standing
Audit Committee, Compensation Committee and Nominating and
Corporate Governance Committee. The Board appointed the members and
chairpersons of these committees. The majority of the members of
these committees had been determined by the Board to be
independent. Each committee had a written charter approved by the
Board. Copies of each committee charter were available on the
Company’s website at www.truedrinks.com/investor-relations/
and by clicking on the “Corporate
Governance”
tab.
Effective
April 26, 2019, as a result of the resignations of the Former
Directors, the Board no longer has an active Audit Committee,
Compensation Committee and Nominating and Corporate Governance
Committee. Instead, the full Board currently administers the duties
of each of these committees, and will likely do so for the
foreseeable future.
Audit Committee
As of
December 31, 2018, the Audit Committee consisted of Messrs. Scot
Cohen (Chair) and Neil LeVecke and Ms.
Cappello.
The
Audit Committee assisted the Board in fulfilling its legal and
fiduciary obligations in matters involving the Company’s
accounting, auditing, financial reporting, internal control and
legal compliance functions by approving the services performed by
the Company’s independent accountants and reviewing their
reports regarding the Company’s accounting practices and
systems of internal accounting controls. The Audit Committee was
responsible for the appointment, compensation, retention and
oversight of the independent accountants and for ensuring that the
accountants are independent of management.
Compensation Committee
As of
December 31, 2018, the Compensation
Committee consisted of Ms. Cappello (Chair) and Mr. Scot
Cohen.
The
Compensation Committee determined the Company’s general
compensation policies and practices. The Compensation Committee
also reviewed and approved compensation packages for the
Company’s officers and, based upon such review, recommended
overall compensation packages for the officers to the Board. This
committee also reviewed and determined equity-based compensation
for the Company’s directors, officers, employees and
consultants and administered the Company’s 2013 Stock
Incentive Plan.
Nominating and Corporate Governance Committee
As of
December 31, 2018, the Nominating and Corporate Governance
Committee consisted of Mr. LeVecke (Chair) and Ms. Cappello. The Nominating and Corporate
Governance Committee was responsible for making recommendations to
the Board regarding candidates for directorships and the size and
composition of the Board and for overseeing the Company’s
corporate governance guidelines and reporting and making
recommendations to the Board concerning corporate governance
matters.
Board Leadership Structure
As of
December 31, 2018, the Board separated
the roles of Principal Executive Officer and Chairman of the Board
in recognition of the differences between the two roles. The
Principal Executive Officer is responsible for setting the
strategic direction of the Company and the day-to-day leadership
and performance of the Company, while the Chair of the Board
provides guidance to the Principal Executive Officer and sets the
agenda for the Board meetings and presides over meetings of the
Board. However, the Board believes it should be able to freely
select the Chairman of the Board based on criteria that it deems to
be in the best interest of the Company and its
stockholders.
Upon
consummation of the Exchange, Brandon Stump was appointed as the
Company’s Principal Executive Officer, and shortly thereafter
was appointed as Chairman of the Board. The Board felt that this
was in the Company’s and its stockholder’s best
interests under the circumstances due to Brandon Stump’s
knowledge and experience in the vapor market and due to the fact
that he is the co-founder and Chief Executive Officer of
CCD.
Board Role in Risk Assessment
Management,
in consultation with outside professionals, as applicable,
identifies risks associated with the Company’s operations,
strategies and financial statements. Prior to April 26, 2019, risk
assessment was also performed through periodic reports received by
the Audit Committee from management, counsel and the
Company’s independent registered public accountants relating
to risk assessment and management. Audit Committee members met
privately in executive sessions with representatives of the
Company’s independent registered public accountants during
and prior to the year ended December 31, 2018. The Board also
provides risk oversight through its periodic reviews of the
financial and operational performance of the Company.
Code of Ethics
We
have adopted a Code of Ethics that applies to all of our directors,
officers and employees, a copy of which was attached as an exhibit
to our Annual Report on Form 10-K, filed with the SEC on April 1,
2019.
EXECUTIVE COMPENSATION
Summary Compensation Table
The
following table sets forth the compensation paid to the following
persons for our fiscal years ended December 31, 2018 and
2017:
(a)
|
our principal executive officer;
|
|
|
(b)
|
our most highly compensated executive officers who were serving as
an executive officer at the end of the fiscal year ended December
31, 2018 who had total compensation exceeding $100,000 (together,
with the principal executive officer, the
“Named
Executive Officers”);
and
|
|
|
(c)
|
any additional individuals who would have been considered Named
Executive Officers, but for the fact that they were not serving in
such capacity at the end of our most recently completed fiscal
year.
|
Name and
Principal Position
|
|
Year
|
|
|
|
|
Non-Equity Incentive Plan Compensation ($)
|
All Other Compensation ($)
|
|
|
|
|
|
|
|
|
|
|
|
Robert Van Boerum (1)
|
|
2018
|
$103,654
|
$-
|
$-
|
$9,517
|
$-
|
$-
|
$113,171
|
Former Principal Executive Officer and Principal Financial
Officer
|
|
2017
|
$170,108
|
$-
|
$-
|
$118,131
|
$-
|
$-
|
$288,239
|
James J. Greco, (2)
|
|
2018
|
$109,495
|
$-
|
$-
|
$37,935
|
$-
|
$-
|
$147,430
|
Former Director and Former Chief Executive Officer
|
|
2017
|
$63,462
|
$-
|
$125,000
|
$189,009
|
$-
|
$-
|
$377,471
|
Kevin Sherman, (3)
|
|
2018
|
$67,832
|
$-
|
$-
|
$107,916
|
$-
|
$-
|
$175,748
|
Director and Former President and Chief Executive
Officer
|
|
2017
|
$268,621
|
$-
|
$-
|
$307,140
|
$-
|
$36,000
|
$611,761
|
(1)
|
Mr. Van Boerum was appointed to serve as the Company’s
Principal Executive Officer and Principal Financial Officer
effective May 15, 2018, and resigned from such positions on April
26, 2019, effective upon consummation of the Exchange. Mr. Van
Boerum currently provides consulting services to the Company in
order to aid in the transition of the Company and its management as
a result of the Exchange.
|
|
|
(2)
|
James J. Greco served as Chief Executive Officer of the Company
from April 2017 to May 15, 2018, and resigned from his role as a
member of the Company’s Board of Directors on April 26, 2019,
effective upon consummation of the Exchange.
|
|
|
(3)
|
Kevin Sherman served as President and Chief Marketing Officer of
the Company through April 25, 2018.
|
Employment Agreements
Robert Van
Boerum. Mr. Van Boerum was
employed as the Company’s Chief Operations Officer pursuant
to a two-year employment agreement, dated September 11, 2015 (the
“Van
Boerum Agreement”). Under
the terms and conditions of the Van Boerum Agreement, Mr. Van
Boerum received a base salary of $14,583.33 per month. Mr. Van
Boerum was also eligible for an annual bonus equal to 30% of his
salary, which bonus was to be awarded at the sole discretion of the
Company’s Compensation Committee and was eligible to earn
stock option compensation at the discretion of the Compensation
Committee. During the year ended December 31, 2017, the
Compensation Committee did not award a bonus to Mr. Van Boerum for
the period through December 31, 2016.
Pursuant
to its terms, the Van Boerum Agreement could be terminated for
“Cause,” if Mr. Van Boerum (a) was convicted of any
fraud or embezzlement, (b) after written notice, willfully breached
or habitually neglected his duties and responsibilities, (c)
committed acts of dishonesty, gross negligence or willful
misconduct, or (d) violated any law or regulation relating to the
business operations of the Company that may have a material adverse
effect on the Company. If the Company terminated Mr. Van
Boerum’s employment for reasons other than for Cause, the
Company would have been required to pay a severance in an amount
equal to six months of Mr. Van Boerum’s base
salary.
Mr.
Van Boerum was appointed to serve as the Company’s Principal
Executive Officer and Principal Financial Officer upon Mr.
Greco’s resignation, and did not enter into a new employment
agreement in connection with such appointments. As stated above,
Mr. Van Boerum resigned from these positions on April 26, 2019,
effective upon consummation of the Exchange.
James J. Greco.
Mr. Greco was employed as the
Company’s Chief Executive Officer pursuant to an Employment
Agreement, dated April 13, 2017 (the “Greco
Agreement”), under which
Mr. Greco was entitled to an annual base salary of $250,000,
payable in accordance with the Company’s existing payroll
practices beginning in October 2017. Under the terms and conditions
of the Greco Agreement, Mr. Greco received: (i) a guaranteed bonus
in the form of 1,302,084 shares of the Company’s restricted
Common Stock (the “Bonus Award”), which Bonus Award vested in full on
December 31, 2017; (ii) stock options to purchase up to 6,300,315
shares of the Company’s Common Stock, an amount equal to 2%
of the Company’s issued and outstanding shares of Common
Stock (including preferred stock on an as-converted basis), which
options will vest annually over a four-year period beginning on the
date of the Greco Agreement, or in full upon a Change of Control
(as defined in the Greco Agreement); and (iii) stock options to
purchase up to 9,450,474 shares of the Company’s Common
Stock, vesting of which will begin in 2018 and vest annually over
three years, conditioned on the Company’s achievement of
certain performance goals.
Pursuant
to the Greco Agreement, Mr. Greco’s employment could have
been terminated for “Cause,” if Mr. Greco (a) was
convicted of any fraud or embezzlement, (b) after written notice,
willfully breached or habitually neglected his duties and
responsibilities, (c) committed acts of dishonesty, gross
negligence or willful misconduct or (d) violated any law or
regulation relating to the business operations of the Company that
may have had a material adverse effect on the Company. If the
Company terminated Mr. Greco’s employment for reasons other
than for Cause, the Company would have been required to pay a
severance in an amount equal to three times Mr. Greco’s
monthly base salary per year of service, capped at a maximum amount
equal to Mr. Greco’s annual salary.
As
stated above, Mr. Greco resigned from his position as Chief
Executive Officer on May 15, 2018.
Kevin
Sherman. Mr. Sherman was
employed as the Company’s President pursuant to a two-year
employment agreement, dated November 25, 2015 (the
“Sherman
Agreement”). Under
the terms and conditions of the Sherman Agreement, Mr. Sherman
receives: (i) a base salary of $22,917 per month, subject to
certain adjustments in the event the Company achieved certain
monthly sales objectives (“Target
Objectives”); (ii) a
$3,000 per month housing allowance, subject to termination in the
event the Company achieved any of the Target Objectives; (iii) a
‘retention bonus’ of $100,000, of which $50,000 was
paid to Mr. Sherman in November 2015 and the remaining $50,000 was
paid in March, 2016; and (iv) an aggregate total of approximately
3.8 million shares of restricted Common Stock, subject to certain
vesting conditions (“Restricted
Shares”), which
Restricted Shares represented approximately 1.7% of the issued and
outstanding shares of the Company’s Common Stock, including
shares of Common Stock issuable upon conversion of the
Company’s outstanding shares of preferred
stock.
During
the second half of 2016, Mr. Sherman deferred a portion of his
monthly salary equivalent to a total of $100,000 annually. The
deferment began at the end of July 2016 and ended as of July
2017.
Mr.
Sherman was also eligible for an annual bonus equal to 30% of his
base salary, payable in restricted shares of the Company’s
Common Stock, which bonus was to be awarded at the sole discretion
of the Company’s Compensation Committee. During the year
ended December 31, 2017, the Compensation Committee did not award a
bonus to Mr. Sherman for the period through December 31,
2016.
In
addition to the annual bonus, in the event of a change in control
transaction, as defined in the Sherman Employment Agreement, Mr.
Sherman was to be entitled to a bonus equal to 3.25% of the value
of the transaction resulting in a change in control, minus the fair
market value of all Restricted Shares issued to Mr. Sherman prior
to the date of the change in control transaction.
Pursuant
to the Sherman Agreement, Mr. Sherman’s employment could be
terminated for “Cause,” if Mr. Sherman (a) was
convicted of any fraud or embezzlement, (b) after written notice,
willfully breached or habitually neglected his duties and
responsibilities, (c) committed acts of dishonesty, gross
negligence or willful misconduct or (d) violated any law or
regulation relating to the business operations of the Company that
may have had a material adverse effect on the Company. If the
Company terminated Mr. Sherman’s employment for reasons other
than for Cause, the Company would have been required to pay a
severance in an amount equal to six months of Mr. Sherman’s
base salary.
As
stated above, Mr. Sherman resigned from his position as President
and Chief Marketing Officer on April 25, 2018.
Other
than as set forth above, there were no arrangements or
understandings between our Named Executive Officers and any other
person pursuant to which they were appointed as officers as of
December 31, 2018. None of our Named Executive Officers as of
December 31, 2018 had a family relationship that is required to be
disclosed under Item 401(d) of Regulation S-K.
DIRECTOR COMPENSATION
In previous years, pursuant to the Company’s
Director Compensation Plan, non-employee directors
(“Outside
Directors”) received (a)
a $30,000 annual retainer, payable in equal quarterly installments
in either cash or shares of Common Stock, (b) additional committee
retainers as determined by the Board, and (c) reimbursement for
expenses related to Board meeting attendance and committee
participation. Directors that were also employees of the Company
did not receive additional compensation for serving on the Board.
In September 2017, non-employee directors were issued options as
payment for outstanding board fees. Since that time, the Company is
no longer accruing expense pursuant to the Director Compensation
Plan, and has not yet adopted a new Director Compensation Plan
since the consummation of the Exchange.
The
following table discloses certain information concerning the
compensation of the Company’s non-employee directors for the
year ended December 31, 2018:
Name
|
Fees earned or
Paid in Cash
($)
|
|
|
|
Ramona Cappello (1)
|
$-
|
$-
|
$-
|
$-
|
Neil LeVecke (1)
|
$-
|
$-
|
$-
|
$-
|
Scot Cohen (2)
|
$-
|
$21,344
|
$-
|
$21,344
|
James Greco (1)
|
$-
|
$-
|
$-
|
$-
|
Kevin
Sherman
|
$-
|
$-
|
$-
|
$-
|
(1)
|
As stated above, Ms. Cappello and Messrs. LeVecke and Greco
resigned from their positions as member of the Company’s
Board on April 26, 2019, effective upon consummation of the
Exchange.
|
(2)
|
During the year ended December 31, 2018, Scot Cohen was granted
options to purchase 7,114,826 shares of Common Stock, which options
had a value on grant date of $21,344, as a Director of the Board of
Directors.
|
Outstanding Equity Awards as of December 31, 2018
The
following table sets forth all equity awards held by our Named
Executive Officers at December 31, 2018:
|
|
Name
|
Number of shares or units of stock that have not
vested
(#)
|
|
Market Value of shares or units of stock that have not
vested
($)
|
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 ($)
|
Robert
Van Boerum
|
4,329,219
|
(1)
|
$-
|
-
|
$-
|
James
J. Greco
|
12,644,921
|
(2)
|
$-
|
-
|
$-
|
Kevin
Sherman
|
35,971,988
|
(3)
|
$-
|
-
|
$-
|
(1)
|
Non-vested shares were scheduled to vest as follows: 818,925 on
September 30, 2019, 338,000 on September 30, 2020, and 3,172,294
upon a change of control transaction. In connection with the
Exchange, which resulted in a change of control of the Company, all
as such shares vested on April 26, 2019. Mr. Van Boerum was
appointed to serve as the Company’s Principal Executive
Officer and Principal Financial Officer effective May 15, 2018,
following Mr. Greco’s resignation as Chief Executive Officer.
Mr. Van Boerum resigned from his position as Principal Executive
Officer and Principal Financial Officer on April 26,
2019.
|
|
|
(2)
|
Non-vested shares were scheduled to vest as follows: 12,644,921
upon a change of control transaction. In connection with the
Exchange, which resulted in a change of control of the Company, all
as such shares vested on April 26, 2019. Mr. Greco resigned from
his position as Chief Executive Officer on May 15, 2018, and
resigned from his position as a director on the Company’s
Board on April 26, 2019.
|
|
|
(3)
|
Non-vested shares were scheduled to vest as follows: 35,971,988
upon a change of control transaction. In connection with the
Exchange, which resulted in a change of control of the Company, all
as such shares vested on April 26, 2019. Mr. Sherman resigned from
his position as President and Chief Marketing Officer on April 25,
2018, but continues to serve on the Company’s Board of
Directors.
|
Equity Compensation Plan Information
The following table includes information as of December 31, 2018
for our equity compensation plans:
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
(a))
|
|
|
|
|
Equity
compensation plans approved by security holders
|
20,000,000
|
$0.030
|
-
|
|
|
|
|
Equity
compensation plans not approved by security holders
|
71,759,826
|
$0.015
|
-
|
|
|
|
|
Total
|
91,759,826
|
$0.018
|
-
|
2013 Stock Incentive
Plan. The 2013 Stock Incentive
Plan (the “2013 Plan”) was adopted by the Company’s Board
on December 31, 2013. The 2013 Plan initially reserved for issuance
20.0 million shares of Common Stock for issuance to all employees
(including, without limitation, officers and directors who are also
employees) of the Company or any subsidiary of the Company (each a
“Subsidiary”), any non-employee director, consultants
and independent contractors of the Company or any Subsidiary, and
any joint venture partners (including, without limitation,
officers, directors and partners thereof) of the Company or any
Subsidiary. Awards under the 2013 Plan may be made in the form of:
(i) incentive stock options within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended, once the 2013 Plan
has been approved by a majority of the Company’s
stockholders; (ii) stock options that do not qualify as incentive
stock options; and/or (iii) awards of shares that are subject to
certain restrictions specified in the 2013 Plan. On September 29,
2017, the Board of Directors increased the number of shares
reserved for issuance under the plan to a total of 65.0 million
shares of Common Stock.
During
the year ended December 31, 2018, the Company did not issue any
restricted stock awards pursuant to the 2013 Plan; however, the
Company issued an aggregate total of 34,652,903 stock option awards
pursuant to the 2013 Plan during the 2018 fiscal year.
Subsequent to the
year ended December 31, 2018, on May 16, 2019, the Board approved
an amendment to all of the outstanding stock options held by Mr.
Sherman that were issued under the 2013 Plan, in the aggregate
amount of 35,971,988, to extend the expiration date of such stock
options by five years.
Post-Employment Compensation, Pension Benefits, Nonqualified
Deferred Compensation
There
were no post-employment compensation, pension or nonqualified
deferred compensation benefits earned by the Named Executive
Officers during the year ended December 31, 2018.
DESCRIPTION OF VOTING SECURITIES
Shares Outstanding
The Company’s authorized capital stock
currently consists of 7.0 billion million shares of Common Stock,
and 5.0 million shares of preferred stock, $0.001 par value
per share, of which 300,000
shares have been designated as Series A Preferred and 1.5 million
shares have been designated as Series B Preferred. As of the Record
Date, there were issued and outstanding: (i) 4,972,698,672 shares
of Common Stock; (ii) 206,249 shares of Series A Preferred; and
(iii) 1,396,305 shares of Series B Preferred. Holders of the
Company’s securities are entitled to vote on each matter that
may come before a meeting of the stockholders as follows: (i)
holders of Common Stock are entitled to one vote for each share of
Common Stock held; (ii) holders of Series A Preferred are entitled
to 22,566.7 votes for each share of Series A Preferred held;
provided,
however, that the number of
votes that any holder, together with its affiliates, may exercise
in connection with all of the Company’s securities held by
such holder shall not exceed 9.99% of the voting power of the
Company; and (iii) holders of Series B Preferred are entitled to
10,000 votes for each share of Series B Preferred
held.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Prior to the Exchange
As of
April 25, 2019, we had four classes of voting stock outstanding:
(i) Common Stock; (ii) Series B Convertible Preferred Stock; (iii)
Series C Convertible Preferred Stock; and (iv) Series D Convertible
Preferred Stock (the Series B Convertible Preferred Stock, Series C
Convertible Preferred Stock and Series D Convertible Preferred
Stock are collectively referred to as the "Old Preferred"). In connection with the
Exchange, all of the issued and outstanding shares of each of the
Old Preferred were converted into shares of Common Stock, and the
Certificates of Designation for each of the series of Old Preferred
were withdrawn on April 26, 2019. For additional information
concerning the transactions relating to the Exchange and the
related transactions, including the conversion of all issued and
outstanding shares of the Company’s Old Preferred into Common
Stock in connection with the Exchange, see our Current Report on
Form 8-K filed with the SEC on April 30, 2019, as amended on May 1,
2019.
The
following tables set forth information regarding shares of Series B
Convertible Preferred Stock, Series C Convertible Preferred Stock,
Series D Convertible Preferred Stock and Common Stock
beneficially owned as of April 25, 2019:
|
(i)
|
Each of our officers and directors;
|
|
(ii)
|
All officer and directors as a group; and
|
|
(iii)
|
Each person known by us to beneficially own five percent or more of
the outstanding shares of our Series B Convertible Preferred Stock,
Series C Convertible Preferred Stock, Series D Convertible
Preferred Stock and Common Stock.
|
Percent
ownership is calculated based on 1,285,585 shares of Series B
Convertible Preferred Stock, 105,704 shares of Series C Convertible
Preferred Stock, 34,250 shares of Series D Convertible Preferred
Stock and 262,851,691 shares Common Stock outstanding at April 25,
2019.
Beneficial Ownership of Series B Convertible Preferred
Stock
Name and Address (1)
|
Series B Convertible Preferred Stock
|
|
Executive Officers and Directors
|
|
|
|
|
|
Scot Cohen (3)
Director
|
135,000
|
10.50%
|
Total Officers and Directors (1)
|
135,000
|
10.50%
|
|
|
|
Greater Than 5% Stockholders
|
|
|
|
|
|
First Bank & Trust as custodian of Ronald L. Chez
IRA
820
Church Street
Evanston
Illinois, 60201
|
425,000
|
33.06%
|
Wolfson Equities LLC
1
State Street Plaza, 29th Floor
New
York, NY 10004
|
187,500
|
14.58%
|
Joe Kolling
58
Beacon Bay
Newport
Beach, CA 92660
|
155,556
|
12.10%
|
V3 Capital Partners LLC
20
East 20th Street, Apt. 6
New
York, NY 10003
|
118,750
|
9.24%
|
(1)
|
Each of the Company’s officers and directors who did not hold
shares of Series B Convertible Preferred Stock as of April 25, 2019
were excluded from this table. Unless otherwise indicated, the
address for each stockholder was 2 Park Plaza, Suite 1200, Irvine,
CA 92614.
|
|
|
(2)
|
Beneficial ownership is determined in accordance with the rules of
the SEC and generally includes voting or investment power with
respect to securities.
|
|
|
(3)
|
Includes 3,750 shares held directly by Mr. Cohen, 118,750 shares
held by V3 Capital Partners and 12,500 shares held by the Scot
Jason Cohen Foundation. Mr. Cohen is the Managing Partner of V3
Capital Partners and is an officer of the Scot Jason Cohen
Foundation.
|
Beneficial Ownership of Series C Convertible Preferred
Stock
Name and Address (1)
|
Series C Convertible Preferred Stock
|
|
Greater Than 5% Stockholders
|
|
|
|
|
|
Red Beard Holdings, LLC
2560
East Chapman Avenue #173
Orange,
CA 92869
|
102,871
|
97.32%
|
(1)
|
Each of the Company’s directors and officers was excluded
from this table, as none of our officers or directors held shares
of Series C Convertible Preferred Stock as of April 25,
2019.
|
|
|
(2)
|
Beneficial ownership is determined in accordance with the rules of
the SEC and generally includes voting or investment power with
respect to securities.
|
Beneficial Ownership of Series D Convertible Preferred
Stock
Name and Address (1)
|
Series D
Convertible Preferred Stock
|
|
Executive Officers and Directors
|
|
|
|
|
|
Scot Cohen
Director
|
4,000
|
11.68%
|
James Greco (3)
Director
|
500
|
1.46%
|
Total Officers and Directors (1)
|
4,500
|
13.14%
|
|
|
|
Greater Than 5% Stockholders
|
|
|
|
|
|
Red Beard Holdings, LLC
2560
East Chapman Avenue #173
Orange,
CA 92869
|
10,000
|
29.20%
|
Baker Court, LLC
P.O.
Box 6923
Incline
Village, NV 89450
|
3,000
|
8.76%
|
First Bank & Trust as custodian of Ronald L. Chez
IRA
820
Church Street
Evanston
Illinois, 60201
|
2,000
|
5.84%
|
(1)
|
Each of the Company’s officers and directors who did not hold
shares of Series D Convertible Preferred Stock as of April 25, 2019
were excluded from this table. Unless otherwise indicated, the
address for each stockholder was 2 Park Plaza, Suite 1200, Irvine,
CA 92614.
|
|
|
(2)
|
Beneficial ownership is determined in accordance with the rules of
the SEC and generally includes voting or investment power with
respect to securities.
|
|
|
(3)
|
Includes securities held by Pilgrim Holdings, LLC. Mr. Greco is the
President and Chief Executive Officer of Pilgrim Holdings, LLC, and
has dispositive and/or voting power over these
shares.
|
Beneficial Ownership of Common Stock
Name, Address and Title (if applicable)
(1)
|
Shares of Common Stock (2)
|
Shares Issuable Upon Conversion of Preferred
Stock (3)
|
Shares
Issuable upon Exercise of Vested Stock Options
|
Total
Number of Shares Beneficially Owned
|
% Ownership of Class (4)(5)
|
Executive Officers and Directors
|
|
|
|
|
|
|
|
|
|
|
|
James Greco (6)
Director
|
6,635,418
|
2,000,000
|
1,575,079
|
10,210,497
|
3.83%
|
Kevin Sherman
Director
|
532,999
|
-
|
10,238,012
|
10,771,011
|
3.94%
|
Robert Van Boerum
Principal Executive Officer and Principal Financial
Officer
|
-
|
-
|
2,780,781
|
2,780,781
|
1.05%
|
Ramona Cappello
Chairman
|
-
|
-
|
543,334
|
543,334
|
0.21%
|
Scot Cohen (7)
Director
|
7,699,315
|
18,160,000
|
43,334
|
25,902,649
|
9.22%
|
Neil LeVecke
Director
|
-
|
-
|
543,334
|
543,334
|
0.21%
|
Total Officers and Directors
|
14,867,732
|
20,160,000
|
15,723,874
|
50,751,606
|
16.99%
|
|
|
|
|
|
|
Greater Than 5% Stockholders
|
|
|
|
|
|
|
|
|
|
|
|
Vincent C.
Smith (8)
2560
East Chapman Avenue #173
Orange,
CA 92869
|
89,591,623
|
451,484,000
|
-
|
541,075,623
|
75.75%
|
Vincent C. Smith Annuity Trust
2015-1 (9)
2560
East Chapman Avenue #173
Orange,
CA 92869
|
44,666,667
|
-
|
-
|
44,666,667
|
16.99%
|
Red Beard Holdings,
LLC (10)
2560
East Chapman Avenue #173
Orange,
CA 92869
|
28,358,289
|
451,484,000
|
-
|
479,842,289
|
67.17%
|
First Bank & Trust as
custodian of Ronald L. Chez IRA (11)
820
Church Street
Evanston
Illinois, 60201
|
8,275,134
|
14,800,000
|
-
|
23,075,134
|
8.31%
|
*
|
Less than 1%
|
(1)
|
Unless otherwise indicated, the address for each stockholder was 2
Park Plaza, Suite 1200, Irvine, CA 92614.
|
(2)
|
Beneficial ownership is determined in accordance with the rules of
the SEC and generally includes voting or investment power with
respect to securities.
|
(3)
|
Includes shares of Common Stock issuable upon conversion of shares
of Series B Convertible Preferred Stock, Series C Convertible
Preferred Stock and/or Series D Convertible Preferred Stock within
60 days of April 25, 2019.
|
(4)
|
Percentages are rounded to nearest one-hundredth of one percent.
Percentages are based on 262,851,691 shares of Common Stock
outstanding as of April 25, 2019. Options or other derivative
securities that were exercisable or exercisable within 60 days are
deemed to be beneficially owned by the person holding the options
for the purpose of computing the percentage ownership of that
person but are not treated as outstanding for the purpose of
computing the percentage of any other person.
|
(5)
|
The Certificate of Designation of the Series B Convertible
Preferred Stock entitled each share of Series B Convertible
Preferred Stock to vote, on an as converted basis, along with the
Common Stock; provided,
however, that the Series B
Convertible Preferred Stock could not be voted to the extent that
the holder and its affiliates would control more than 9.99% of the
Company’s voting power.
Pursuant to Section 5 of the Third Amended and Restated Certificate
of Designations, Preferences, Rights and Limitations of the Series
C Convertible Preferred Stock (the “Series C Certificate of
Designation”), no holder
of Series C Convertible Preferred could exercise the voting rights
otherwise attributable to the Series C Convertible Preferred Stock
if such holder, together with any
“affiliate” of such Holder (as such term is defined in
Rule 144 under the Securities Act of 1933, as amended) or any
person or entity deemed to be part of a “group” with
such holder (as such term is used in Section 13(d) of the Exchange)
would control in excess of 50% of the total voting power of the
outstanding shares of capital stock of the Company at the time of
such vote (the “Voting
Limitation”); provided, however,
that any holder of shares of Series C Convertible Preferred Stock could waive the Voting
Limitation upon 60 days written notice to the
Company.
Ownership percentages in this table were calculated in accordance
with Section 13(d) of the Exchange Act, and do not reflect any
adjustments due to the Voting Limitation.
|
(6)
|
Includes securities held by Pilgrim Holdings, LLC. Mr. Greco is the
President and Chief Executive Officer of Pilgrim Holdings, LLC, and
has dispositive and/or voting power over these shares.
|
(7)
|
Includes securities held by V3 Capital Partners and the Scot Jason
Cohen Foundation. Mr. Cohen is the Managing Partner of V3 Capital
Partners and an officer of the Scot Jason Cohen Foundation, and has
dispositive and/or voting power over these shares.
|
(8)
|
Based on Company records and ownership information from Amendment
No. 5 to Schedule 13D filed by Vincent C. Smith on April 25, 2016.
Mr. Smith is the trustee for the Vincent C. Smith Annuity Trust
2015-1 (the “Smith Trust”) and manager of Red Beard Holdings, LLC
(“Red
Beard”). As such, Mr.
Smith has dispositive power, and, subject to certain limitations in
the Series C Certificate of Designation, voting power over, and may
be deemed to be the beneficial owner of the securities held by each
of these entities.
|
(9)
|
Based on Company records and ownership information from Amendment
No. 5 to Schedule 13D filed by Vincent C. Smith on April 25, 2016.
Mr. Vincent C. Smith is the trustee of the Smith Trust, and has
dispositive and/or voting power over the shares.
|
(10)
|
Based on ownership information from Amendment No. 5 to Schedule 13D
filed by Vincent C. Smith on April 25, 2016. Mr. Vincent C.
Smith is a manager of Red Beard Holdings, LLC, and has dispositive
power, and, subject to certain limitations in the Series C
Certificate of Designation (as described in Note 5 above), voting
power over the shares.
|
(11)
|
Based on ownership information from Amendment No. 2 to Schedule 13D
filed by Individual Retirement Accounts for the benefit of Ronald
L. Chez, Ronald L. Chez Individually and the Chez Family Foundation
on December 8, 2014.
|
Following the Exchange and Filing of This Information
Statement
The
Company currently has three classes of securities issued and
outstanding: (i) Common Stock; (ii) Series A Preferred; and (iii)
Series B Preferred. In connection with the Exchange, after the
conversion of all of the issued and outstanding shares of the Old
Preferred into shares of Common Stock, and the withdrawal of each
of the Certificates of Designation of the Old Preferred on April
26, 2019, the Company designated two new series of preferred stock:
the Series A Preferred and Series B Preferred. Shares of Series A
Preferred and Series B Preferred were issued to certain members of
CCD in connection with the Exchange. For additional information
concerning the transactions relating to the Exchange and the
related transactions, including the conversion of all issued and
outstanding shares of the Company’s Old Preferred into Common
Stock in connection with the Exchange and the designation of the
Series A Preferred and Series B Preferred, see our Current Report
on Form 8-K filed with the SEC on April 30, 2019, as amended on May
1, 2019.
The
following tables contain the anticipated beneficial ownership of
our outstanding securities, on a pro forma basis, following the
Exchange and filing of this Information Statement, including after
the appointment of the new director and resignation of Mr. Sherman,
including shares of Series A Preferred, Series B Preferred, and
Common Stock beneficially owned by:
|
(i)
|
Each of our officers and directors;
|
|
(ii)
|
All officer and directors as a group; and
|
|
(iii)
|
Each person known by us to beneficially own five percent or more of
the outstanding shares of our Series A Preferred, Series B
Preferred and Common Stock.
|
Percent ownership is calculated based on
206,249 shares of Series A Preferred, 1,396,305 shares of Series B Preferred and 4,972,698,672
shares Common Stock outstanding as of May 24,
2019.
For
purposes of this section, beneficial ownership is determined in
accordance with the rules of the SEC. In computing the number of
shares beneficially owned by a person and the percentage of
ownership by that person in each table below, shares of voting
Common Stock subject to rights held by that person to acquire such
shares currently or within 60 days are deemed outstanding. Such
shares are not deemed outstanding for the purpose of computing the
percentage of ownership by any other person.
Beneficial Ownership of Series A Preferred
Name and Address (1)
|
Series A
Convertible Preferred Stock
|
|
Executive Officers and Directors
|
Scot Cohen
|
|
|
Director
|
3,750
|
1.8%
|
Keith Stump (2)
|
|
|
Director
|
3,000
|
1.5%
|
Total Officers and Directors
|
6,750
|
3.3%
|
Greater Than 5% Stockholders
|
Red Beard Holdings, LLC
(3)
|
|
|
17595
Harvard Avenue, Suite C511
|
|
|
Irvine,
California 92614
|
33,750
|
16.4%
|
Iroquois Capital Management,
LLC (4)
|
|
|
125
Park Avenue, 25th Floor
|
|
|
New
York, New York 10017
|
32,813
|
15.9%
|
Hudson Bay Capital Management,
LP (5)
|
|
|
777
Third Avenue, 30th Floor
|
|
|
New
York, New York 10017
|
11,250
|
5.5%
|
SDS Capital Partners II,
LLC (6)
|
|
|
500
Summer Street, Suite 405
|
|
|
Stamford,
Connecticut 06901
|
11,250
|
5.5%
|
Altium Growth Fund,
LP (7)
|
|
|
551
Fifth Avenue, 19th Floor
|
|
|
New
York, New York 10176
|
11,025
|
5.3%
|
(1)
|
Each of the Company’s officers and directors who will not
hold shares of Series A Preferred were excluded from this table.
Unless otherwise indicated, the address for each stockholder is
1007 Brioso Drive, Costa Mesa, California 92627.
|
(2)
|
As noted above, Mr. Stump will be appointed to the Board on or
after ten days after the mailing of this Information Statement to
stockholders.
|
(3)
|
Based on Company records as of May 24, 2019. Mr. Smith is a manager
of Red Beard, and has dispositive power and voting power over the
securities reported herein.
|
(4)
|
Based on Company records and ownership information from Schedule
13G filed by Iroquois Capital Management, LLC
(“Iroquois Capital
Management”), Mr. Richard
Abbe and Ms. Kimberly Page on May 24, 2019. Mr. Abbe shares
authority and responsibility for the investments made on behalf of
Iroquois Master Fund with Ms. Kimberly Page, each of whom is a
director of the Iroquois Master Fund. As such, Mr. Abbe and Ms.
Page may each be deemed to be the beneficial owner of the shares of
Series A Preferred reported herein.
|
(5)
|
Based on Company records as of May 24, 2019. Sander Gerber,
Authorized Signor for Hudson Bay Capital Management, LP may be
deemed to be the beneficial owner of all shares of Common Stock
underlying the Common Stock held by Hudson Bay Capital Management,
LP.
|
(6)
|
Based on Company records as of May 24, 2019. Steve Derby, Managing
Member of SDS Capital Partners II, LLC may be deemed to be the
beneficial owner of all shares of Common Stock underlying the
Common Stock held by SDS Capital Partners II, LLC.
|
(7)
|
Based on Company records as of May 24, 2019. Jacob Gottlieb, Chief
Executive Officer of Altium Growth Fund, LP may be deemed to be the
beneficial owner of all shares of Common Stock underlying the
Common Stock held by Altium Growth Fund, LP.
|
Beneficial Ownership of Series B Preferred
Name and Address (1)
|
Series B
Convertible Preferred Stock
|
|
Executive Officers and Directors
|
Brandon Stump
|
|
|
Chief Executive Officer and Director
|
928,543
|
66.5%
|
Ryan Stump
|
|
|
Chief Operating Officer and Director
|
397,947
|
28.5%
|
Keith Stump (2)
|
|
|
Director
|
6,982
|
0.5%
|
Total Officers and Directors
|
1,333,472
|
95.5%
|
(1)
|
Each of the Company’s officers and directors who do not hold
shares of Series B Preferred were excluded from this table. Unless
otherwise indicated, the address for each stockholder is 1007
Brioso Drive, Costa Mesa, California 92627.
|
(2)
|
As noted above, Mr. Stump will be appointed to the Board on or
after ten days after the mailing of this Information Statement to
stockholders.
|
Beneficial Ownership of Common Stock
Name, Address and Title (if applicable)
(1)
|
|
Shares Issuable Upon Conversion of Preferred A
Stock (2)
|
Shares Issuable
Upon Conversion of Preferred B Stock
|
Shares Issuable upon Exercise of
Warrants (3)
|
Shares Issuable
upon Exercise of Vested Stock Options
|
Total Number of
Shares Beneficially Owned
|
|
Executive
Officers and Directors
|
Brandon Stump
|
|
|
|
|
|
|
|
Chief Executive Officer and Director
|
93,792,189
|
-
|
9,285,426,700
|
-
|
-
|
9,379,218,889
|
65.8%
|
Ryan Stump
|
|
|
|
|
|
|
|
Chief Operating Officer and Director
|
40,196,653
|
|
3,979,468,700
|
|
|
4,019,665,353
|
44.9%
|
David Allen
|
|
|
|
|
|
|
|
Chief Financial Officer
|
-
|
-
|
-
|
-
|
-
|
-
|
0.0%
|
Mitch Brantley
|
|
|
|
|
|
|
|
Chief Marketing Officer
|
-
|
-
|
-
|
-
|
-
|
-
|
0.0%
|
Adam Mirkovich
Chief Information Officer
|
-
|
-
|
-
|
-
|
-
|
-
|
0.0%
|
Scot Cohen (4)
|
|
|
|
|
|
|
|
Director
|
200,950,015
|
84,625,280
|
-
|
56,416,355
|
7,244,826
|
349,236,476
|
6.8%
|
Keith Stump (5)
|
|
|
|
|
|
|
|
Director
|
23,271,746
|
67,700,224
|
69,815,200
|
45,133,084
|
-
|
205,920,254
|
4.0%
|
Total Officers and Directors
|
358,010,603
|
152,324,756
|
13,419,335,132
|
101,549,439
|
43,334
|
14,031,263,264
|
74.8%
|
Greater Than 5% Stockholders
|
Vincent C. Smith
(6)
|
|
|
|
|
|
|
|
17595
Harvard Avenue, Suite C511
|
|
|
|
|
|
|
|
Irvine,
California 92614
|
2,214,058,642
|
761,627,520
|
-
|
513,130,526
|
-
|
3,488,816,688
|
55.8%
|
Red Beard Holdings, LLC
(7)
|
|
|
|
|
|
|
|
17595
Harvard Avenue, Suite C511
|
|
|
|
|
|
|
|
Irvine,
California 92614
|
2,152,825,308
|
761,627,520
|
-
|
513,130,526
|
-
|
3,427,583,354
|
54.9%
|
Iroquois Capital Management,
LLC (8)
|
|
|
|
|
|
|
|
125
Park Avenue, 25th Floor
|
|
|
|
|
|
|
|
New
York, New York 10017
|
500,232,693
|
740,471,200
|
-
|
493,643,101
|
-
|
1,734,346,994
|
27.9%
|
Katalyst Securities, LLC
(9)
|
|
|
|
|
|
|
|
630
Third Avenue
|
|
|
|
|
|
|
|
New
York, New York 10017
|
-
|
-
|
-
|
855,043,815
|
-
|
855,043,815
|
14.7%
|
Empery Asset Management,
LP (10)
|
|
|
|
|
|
|
|
One
Rockefeller Plaza, Suite 1205
|
|
|
|
|
|
|
|
New
York, New York 10020
|
126,936,799
|
380,813,760
|
-
|
253,873,596
|
-
|
761,624,155
|
13.6%
|
Hudson Bay Capital Management,
LP (11)
|
|
|
|
|
|
|
|
777
Third Avenue, 30th Floor
|
|
|
|
|
|
|
|
New
York, New York 10017
|
84,624,532
|
253,875,840
|
-
|
169,249,063
|
-
|
507,749,435
|
9.2%
|
SDS Capital Partners II,
LLC (12)
|
|
|
|
|
|
|
|
500
Summer Street, Suite 405
|
|
|
|
|
|
|
|
Stamford,
Connecticut 06901
|
84,624,532
|
253,875,840
|
-
|
169,249,063
|
-
|
507,749,435
|
9.4%
|
Altium Growth Fund, LP
(13)
|
|
|
|
|
|
|
|
551
Fifth Avenue, 19th Floor
|
|
|
|
|
|
|
|
New
York, New York 10176
|
82,932,041
|
248,798,323
|
-
|
165,864,082
|
-
|
497,594,446
|
9.2%
|
Conner Raisin
|
4,231,227
|
|
418,891,400
|
|
-
|
423,122,627
|
7.8%
|
(1)
|
Unless otherwise indicated, the address for each stockholder is
1007 Brioso Drive, Costa Mesa, California 92627.
|
(2)
|
Pursuant to the Certificate of Designation of the Series A
Preferred (“Series A
COD”),
shares of Series A Preferred may not be converted or
exercised, as applicable, to the extent that the holder and its
affiliates would own more than 4.99% (or 9.99% upon the election of
any holder of Series A Preferred) of the Company’s outstanding Common Stock
after such conversion (the “Series A Ownership
Limitation”);
provided, however,
that any holder of shares of Series A Preferred may waive the
Conversion Limitation upon 61 days written notice to the
Company.
|
|
The Series A COD also entitles each share of Series A
Preferred to vote, on an as converted basis, along with the Common
Stock; provided,
however, that the Series A
Preferred may not be voted to the extent that the holder and its
affiliates would control more than 9.99% of the Company’s
voting power (the “Series A Voting
Limitation”).
Ownership percentages in this table were calculated in accordance
with Section 13(d) of the Exchange Act, and do not reflect any
adjustments due to the Series A Ownership Limitation or the Series
A Voting Limitation.
|
(3)
|
Certain of the warrants included in this table are subject to
blockers that prevent a holder from exercising Investor Warrants or
Placement Agent Warrants in the event that such exercise would
result in the holder and its affiliates beneficially owning in
excess of 4.99% of the Company’s issued and outstanding
Common Stock immediately thereafter, which limit may be increased
to 9.99% at the election of the holder (the
“Warrant Exercise
Limitation”).
Ownership percentages in this table were calculated in accordance
with Section 13(d) of the Exchange Act, and do not reflect any
adjustments due to the Warrant Exercise Limitation.
|
(4)
|
Includes securities held by V3 Capital Partners and the Scot Jason
Cohen Foundation. Mr. Cohen is the Managing Partner of V3 Capital
Partners and an officer of the Scot Jason Cohen Foundation, and has
dispositive and/or voting power over these shares.
|
(5)
|
As noted above, Mr. Stump will be appointed to the Board on or
after ten days after the mailing of this Information Statement to
stockholders.
|
(6)
|
Includes securities held by Vincent C. Smith Annuity Trust 2015-1
(the “Smith Trust”), and LB 2, LLC
(“LB
2”) and Red Beard
Holdings, LLC (“Red Beard”), based on Company records and ownership
information from Amendment No. 5 to Schedule 13D filed by Vincent
C. Smith on April 25, 2016. Mr. Smith is the trustee for the Smith
Trust, and manager of LB 2 and Red Beard. As such, Mr. Smith has
dispositive power and voting power over, and may be deemed to be
the beneficial owner of the securities held by each of these
entities.
|
(7)
|
Based on Company records and ownership information from Amendment
No. 5 to Schedule 13D filed by Vincent C. Smith on April 25,
2016. Mr. Smith is a manager of Red Beard, and has dispositive
power and voting power over the securities reported
herein.
|
(8)
|
Based on Company records and ownership information from Schedule
13G filed by Iroquois Capital Management, LLC
(“Iroquois Capital
Management”), Mr. Richard
Abbe and Ms. Kimberly Page on May 24, 2019. Mr. Abbe shares
authority and responsibility for the investments made on behalf of
Iroquois Master Fund with Ms. Kimberly Page, each of whom is a
director of the Iroquois Master Fund. As such, Mr. Abbe and Ms.
Page may each be deemed to be the beneficial owner of all shares of
Common Stock underlying the Common Stock held by Iroquois Master
Fund.
|
(9)
|
Based on Company records as of May 24, 2019. Michael Silverman,
Managing Member of Katalyst Securities, LLC may be deemed to be the
beneficial owner of all shares of Common Stock underlying the
Common Stock held by Katalyst Securities, LLC.
|
(10)
|
Based on Company records as of May 24, 2019. Ryan M. Lane, Managing
Member of Empery Asset Management, LP may be deemed to be the
beneficial owner of all shares of Common Stock underlying the
Common Stock held by Empery Asset Management, LP.
|
(11)
|
Based on Company records as of May 24, 2019. Sander Gerber,
Authorized Signor for Hudson Bay Capital Management, LP may be
deemed to be the beneficial owner of all shares of Common Stock
underlying the Common Stock held by Hudson Bay Capital Management,
LP.
|
(12)
|
Based on Company records as of May 24, 2019. Steve Derby, Managing
Member of SDS Capital Partners II, LLC may be deemed to be the
beneficial owner of all shares of Common Stock underlying the
Common Stock held by SDS Capital Partners II, LLC.
|
(13)
|
Based on Company records as of May 24, 2019. Jacob Gottlieb, Chief
Executive Officer of Altium Growth Fund, LP may be deemed to be the
beneficial owner of all shares of Common Stock underlying the
Common Stock held by Altium Growth Fund, LP.
|
CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS
Food Labs Promissory Note
On September 18, 2018, the Company and Food Labs,
Inc. (“Food Labs”) entered into an agreement, pursuant to
which the Company sold and issued to Food Labs a promissory note in
the principal amount of $50,000 (the “Food Labs
Note”). The Food Labs
Note (i) accrued interest at a rate of 5% per annum, (ii) included
an additional lender’s fee equal to $500, or 1% of the
principal amount, and (iii) was scheduled to mature on December 31,
2019. Food Labs is controlled by Red Beard. In connection with the
Exchange, the Food Labs Note was sold to Red Beard, and all amounts
due under the Food Labs Note were converted into shares of Common
Stock on April 26, 2019, thereby terminating the Food Labs
Note.
Red Beard Note
In April 2018, the Company sold its remaining
AquaBall® inventory to Red Beard for an aggregate purchase
price of approximately $1.44 million (the
“Purchase
Price”). As payment for
the Purchase Price, the principal amount of the senior secured
convertible promissory note issued to Red Beard by the Company in
the principal amount of $2.25 million (the
“Red
Beard Note”) was reduced
by the Purchase Price, resulting in approximately $814,000 owed to
Red Beard under the terms of the Red Beard Note as of April 5,
2018. As of March 31, 2019, the Company owed Red Beard $569,741 in
principal and accrued but unpaid interest pursuant to the Red Beard
Note. In connection with the
Exchange, all amounts due under the Red Beard Note were converted
into shares of Common Stock on April 26, 2019, thereby terminating
the Red Beard Note.
Red Beard Line-of-Credit
On November 19, 2018, the Company entered into a
line-of-credit with Red Beard, effective October 25, 2018, pursuant
to which the Company could borrow up to $250,000 (the
“Red
Beard LOC”);
provided,
however, that Red Beard could,
in its sole discretion, decline to provide additional advances
under the Red Beard LOC upon written notice the Company of its
intent to decline to make such advances. Interest accrued on the
outstanding principal of amount of the Red Beard LOC at a rate of
8% per annum; provided,
however, that upon the
occurrence of an Event of Default, as defined in the Red Beard LOC,
the accrual of interest would have increased to a rate of 10% per
annum. Prior to December 31, 2019 (the “Maturity Date”), Red Beard had the right, at its sole
option, to convert the outstanding principal balance, plus all
accrued but unpaid interest due under the Red Beard LOC (the
“Outstanding
Balance”) into that
number of shares of Common Stock equal to the Outstanding Balance
divided by $0.005. As of March 31, 2019, the Company had borrowed a
total of $605,000 under the Red Beard LOC, which was increased to
$655,000 as of April 11, 2019. On April 26, 2019, in connection
with the Exchange, Red Beard converted all amounts due under the
Red Beard LOC into shares of Common Stock, thereby terminating the
Red Beard LOC.
Assignment and Assumption Agreement
On January 14, 2019, the Company and True Drinks
entered into an Assignment and Assumption Agreement with Red Beard,
pursuant to which the Company and True Drinks assigned, and Red
Beard assumed, all outstanding rights and obligations of the
Company and True Drinks due under the terms of a secured promissory
Note in the principal amount of $4,644,906 (the
“Note”), which was originally issued by the
Company, True Drinks and Red Beard jointly to Niagara Bottling, LLC
on April 5, 2018. Pursuant to the Assignment and Assumption
Agreement, all obligations of the Company and True under the terms
of the Note, including for the payment of amounts due thereunder,
are assigned to Red Beard.
Transactions Related to the Exchange
On
April 26, 2019, immediately prior to, and in connection with the
Exchange, CCD consummated a private offering of membership
interests in CCD, which resulted in net proceeds to CCD of
approximately $27.5 million (the “CCD Financing”). Out of such net
proceeds, Brandon and Ryan Stump, together, received an aggregate
of $17.0. In addition, in exchange for their membership interests
in CCD, upon consummation of the Exchange, Brandon received an
aggregate of 93,792,189 shares of Common Stock and 928,543 shares
of Series B Preferred, and Ryan received an aggregate of 40,196,653
shares of Common Stock and 397,947 shares of Series B
Preferred.
On
April 26, 2019, Keith Stump purchased $400,000 of membership units
in CCD immediately prior to the Exchange, which membership units
were exchanged for an aggregate of approximately 22,566,542 shares
of Common Stock, 3,000 shares of Series A Preferred, and warrants
to purchase 45,133,084 shares of Common Stock. The warrants have a
five-year term, and are exercisable at a price of $0.0044313 per
share. In addition, in connection with the Exchange Mr. Stump
received 705,204 shares of Common Stock and 6,982 shares of Series
B Preferred as consideration for services rendered to CCD prior to
the Exchange.
On
April 26, 2019, in connection with the Exchange, Red Beard
converted certain indebtedness of the Company, in the aggregate
amount of $4,227,250, into 1,070,741,474 shares of Common Stock
(the “Debt
Conversion”). As a result of the Debt Conversion, all
indebtedness, liabilities and other obligations of the Company held
by and owed to Red Beard were cancelled and deemed satisfied in
full. In addition, Red Beard purchased $4,500,000 of membership
units in CCD immediately prior to the Exchange, which membership
units were exchanged for an aggregate of approximately 253,873,594
shares of Common Stock, 33,750 shares of Series A Preferred, and
warrants to purchase 507,747,190 shares of Common Stock. The
warrants have a five-year term, and are exercisable at a price of
$0.0044313 per share.
On
April 26, 2019, Scot Cohen, a director of the Company, purchased
$500,000 of membership units in CCD immediately prior to the
Exchange, which membership units were exchanged for an aggregate of
approximately 28,208,178 shares of Common Stock, 3,750 shares of
Series A Preferred, and warrants to purchase 56,416,355 shares of
Common Stock. The warrants have a five-year term, and are
exercisable at a price of $0.0044313 per share. In addition, Mr.
Cohen received $325,000 of Common Stock, amounting to 73,341,261
shares of Common Stock, as consideration for advisory services
provided by Mr. Cohen in connection with the CCD Financing and
Exchange.
LEGAL PROCEEDINGS
To the
best of the Company’s knowledge, there is no material
proceeding to which any director, nominated director or executive
officer or affiliate of the Company, any owner of record or
beneficially of more than five percent of any class of voting
securities of the Company, or any associate of such director,
nominated director, officer, affiliate of the Company, or security
holder is a party adverse to the Company or any of its subsidiaries
or has a material interest adverse to the Company or any of its
subsidiaries.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section 16(a) of the Securities Exchange Act of
1934, as amended (the “Exchange
Act”) requires our
officers, directors, and persons who beneficially own more than ten
percent of our Common Stock to file reports of ownership and
changes in ownership with the SEC. Officers, directors, and
greater-than-ten-percent shareholders are also required by the SEC
to furnish us with copies of all Section 16(a) forms that they
file.
Based
solely upon a review of these forms that were furnished to us, we
believe that our officers and directors timely filed all reports
due under Section 16(a) during the year ended December 31, 2018
except the following:
●
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James
Greco, a member of the Company’s Board of Directors, filed a
Form 5 disclosing one late transaction.
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STOCKHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS
Any
stockholder may contact any of our directors directly by writing to
them, by mail, at our principal executive offices, the address of
which appears on page 1 hereof. In addition, any shareholder may
report to the Board any complaints regarding accounting, internal
accounting controls or auditing matters. Any shareholder
who wishes to so contact the Board should send such complaints to
the Chairman of the Audit Committee at our principal executive
offices.
Our
Chief Executive Officer will review, summarize and, if appropriate,
investigate the complaint and draft a response to the communication
in a timely manner. A member of the Audit Committee, or
the Audit Committee as a whole, will then review the summary of the
communication, the results of the investigation, if any, and the
draft response. The summary and response will be in the
form of a memorandum, which will become part of the
shareholders’ communications log that the Company maintains
with respect to all shareholder communications.
DISTRIBUTION AND COSTS
We
will pay the cost of preparing, printing and distributing this
Information Statement. Only one Information Statement will be
delivered to multiple stockholders sharing an address, unless
contrary instructions are received from one or more of such
stockholders. Upon receipt of a written request at the address
noted above, we will deliver a single copy of this Information
Statement and future stockholder communication documents to any
stockholders sharing an address to which multiple copies are now
delivered.
WHERE YOU CAN FIND MORE INFORMATION
We
file annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K and other information with the SEC.
You may obtain such SEC filings from the Securities and
Exchange Commission’s website at http://www.sec.gov.
You can also read and copy these materials at the Securities
and Exchange Commission’s public reference room at 100 F
Street, N.E., Washington, D.C. 20549. You can obtain
information about the operation of the Securities and Exchange
Commission’s public reference room by calling the SEC at
1-800-SEC-0330.
DELIVERY OF DOCUMENTS TO SECURITY HOLDERS SHARING AN
ADDRESS
If
hard copies of the materials are requested, we will send only one
Information Statement and other corporate mailings to stockholders
who share a single address unless we received contrary instructions
from any stockholder at that address. This practice, known as
“householding,” is designed to reduce our printing and
postage costs. However, we will deliver promptly upon written
or oral request a separate copy of the Information Statement to a
stockholder at a shared address to which a single copy of the
Information Statement was delivered. You may make such a
written or oral request by sending a written notification stating
(i) your name, (ii) your shared address and (iii) the address to
which we should direct the additional copy of the Information
Statement, to us at True Drinks Holdings, Inc., 1007 Brioso Drive,
Costa Mesa, California 92627.
If
multiple stockholders sharing an address have received one copy of
this Information Statement or any other corporate mailing and would
prefer us to mail each stockholder a separate copy of future
mailings, you may send notification to or call our principal
executive offices. Additionally, if current stockholders with
a shared address received multiple copies of this Information
Statement or other corporate mailings and would prefer us to mail
one copy of future mailings to stockholders at the shared address,
notification of such request may also be made by mail or telephone
to our principal executive offices.
SIGNATURES
In
accordance with Section 14(f) of the Exchange Act, the Registrant
has caused this Information Statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
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True
Drinks Holdings, Inc.
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Date:
May 28, 2019
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By:
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/s/
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Brandon
Stump
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Name:
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Brandon
Stump
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Title:
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Chief
Executive Officer, Chairman
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Date:
May 28, 2019
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By:
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/s/
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David
Allen
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Name:
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David
Allen
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Title:
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Chief
Financial Officer
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