Wade Brooks and Andrew Beldin, former company management at Liv Foods, Inc. (LivBar) allegedly defrauded investors of $3,385,000 over a 4-year period.
On 06/28/2022, Case No. 22CV21577 was brought before The Circuit Court of The State of Oregon for The County of Marion. The complaint specified that Mr. Beldin materially aided Mr. Brooks in the unlawful sale of securities to Paul Kerley by reviewing, approving, and editing certain marketing material provided to LivBar’s investors, which included its shareholder letters, valuation, investor slide decks, and Cap Table.
Mr. Beldin was a director on LivBar’s board and acted as the company’s secretary, and Mr. Brooks was LivBar’s chief executive officer and a director of the board.
Livbar, based in Salem, produced and sold an organic nutrition bar throughout the United States. At various times, its bars were distributed to major groceries and cafés, including Whole Foods, Costco, New Seasons, and Roths. Despite operating for a decade, LivBar never had sufficient annual sales revenue to pay its full operating costs. Instead, LivBar relied on outside investors to sustain and grow its business.
In meetings, Mr. Brooks touted the company’s substantial growth. He also told Mr. Kerley that he would receive preferred stock in exchange for these investments. Owners of preferred stock are generally entitled to income or dividends and have a higher priority to be paid in a liquidation or bankruptcy, unlike holders of common stock. In connection with seeking these early investments from Mr. Kerley, Mr. Brooks failed to disclose that LivBar was not authorized to issue preferred stock.
Mr. Brooks also later solicited Mr. Kerley to invest in a convertible note. In doing so, Mr. Brooks omitted that LivBar was not authorized to issue convertible notes, and in fact, had not issued a note.
Around February of 2022 Mr. Brooks and Mr. Beldin met with Mr. Kerley to solicit an additional $1 million investment. They told Mr. Kerley that LivBar had secured a Costco order but that it did not have the money to fulfill it. They represented that Costco was a significant opportunity that could take LivBar to the next level. They told Mr. Kerley that the company would fail if it did not complete the Costco order. Mr. Beldin, himself, declined to invest more money because he represented to Mr. Kerley that he had too many other deals pending.
The Costco order was significant, but it was obtained by Mr. Brooks’ false statement to Costco about LivBar’s annual revenue. Costco required its vendors to have at least $5 million in annual sales. Around January 18, 2022, Mr. Brooks signed a Costco purchase document that falsely stated LivBar had $5 million in annual sales. During Mr. Brook’s tenure as CEO, LivBar never had annual sales of $5 million.
LivBar disclosed that its trailing 12-month average retail sales was only $11,000 per month.
In March 2022, Mr. Beldin and Mr. Brooks resigned after a majority of its common shareholders made an inspection demand. Thereafter, new management reviewed LivBar’s actual financial condition. In a shareholder letter dated June 13, 2022, LivBar announced it needed to close. In particular, the company found, “LivBar production capacity, costs of goods sold, retail store count, gross revenues, sell through rates and chargebacks were grossly misrepresented. We estimate the company is losing money on every bar sold and we have generated only a fraction of the sales that had been reported in the past.”
As directors and officers of the seller, LivBar, Mr. Beldin and Mr. Brooks were deemed by investors to be liable as control persons. Mr. Beldin and Mr. Brooks also participated or materially aided in the sale of securities to Investors. Their actions influenced the closure of Liv Foods, Inc., and unprotected loss of substantial investment.
The case was settled on 07/18/2023.
*Summary based on the official legal complaint for Case No. 22CV21577, as filed on 06/28/2022 before The Circuit Court of The State of Oregon for The County of Marion.
Paul Kerley (Salem, Oregon) 