SCHEDULE 14A
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                     INFORMATION REQUIRED IN PROXY STATEMENT
                            SCHEDULE 14A INFORMATION
           PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
                   EXCHANGE ACT OF 1934 (AMENDMENT NO. _____)

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  |_|   Preliminary Proxy Statement       |_|   Confidential, For Use of the
  |X|   Definitive Proxy Statement              Commission Only (as permitted by
  |_|   Definitive Additional Materials         Rule 14a-6(e)(2)
  |_|   Soliciting Material Pursuant to
        ss.240.14a-12


                            PEOPLE'S LIBERATION, INC.
================================================================================
                (Name of Registrant as Specified in Its Charter)

================================================================================
    (Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

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                  applies:

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                            PEOPLE'S LIBERATION, INC.

              -----------------------------------------------------

                    NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
              -----------------------------------------------------




TIME.....................................         9:00  a.m.   Pacific  Time  on
                                                  Monday, June 18, 2007


PLACE....................................         Sheraton Los Angeles Downtown,
                                                  711 Hope Street,
                                                  Los Angeles, CA 90017


ITEMS OF BUSINESS........................         (1)      To elect five members
                                                           of   the   Board   of
                                                           Directors.

                                                  (2)      To   transact    such
                                                           other business as may
                                                           properly  come before
                                                           the  Meeting  and any
                                                           adjournment        or
                                                           postponement.

RECORD DATE..............................         You can  vote if at the  close
                                                  of business  on May 14,  2007,
                                                  you were a stockholder  of the
                                                  Company.

PROXY VOTING.............................         All stockholders are cordially
                                                  invited  to attend  the Annual
                                                  Meeting in person. However, to
                                                  ensure your  representation at
                                                  the  Annual  Meeting,  you are
                                                  urged  to  vote   promptly  by
                                                  signing  and   returning   the
                                                  enclosed Proxy card.





May 28, 2007
                                          /S/ COLIN DYNE
                                          ------------------------------------
                                          COLIN DYNE, CO-CHAIRMAN OF THE BOARD
                                          AND CHIEF EXECUTIVE OFFICER





                                                       PEOPLE'S LIBERATION, INC.
                                                    150 WEST JEFFERSON BOULEVARD
                                                           LOS ANGELES, CA 90007
                                                                  (213) 745-2123
PROXY STATEMENT
- --------------------------------------------------------------------------------


         These Proxy materials are delivered in connection with the solicitation
by the Board of Directors of People's  Liberation,  Inc., a Delaware corporation
("People's Liberation", the "Company", "we", or "us"), of Proxies to be voted at
our  2007  Annual  Meeting  of   Stockholders   and  at  any   adjournments   or
postponements.

         You are invited to attend our Annual Meeting of Stockholders on Monday,
June 18, 2007,  beginning at 9:00 a.m. Pacific Time. The meeting will be held at
Sheraton Los Angeles Downtown, 711 Hope Street, Los Angeles, CA 90017.

         It is anticipated  that the 2006 Annual Report and this Proxy Statement
and the  accompanying  Proxy will be mailed to  stockholders on or about June 4,
2007.

         STOCKHOLDERS ENTITLED TO VOTE. Holders of our common stock at the close
of  business on May 14,  2007 are  entitled  to receive  this notice and to vote
their shares at the Annual  Meeting.  As of May 14, 2007,  there were 34,942,563
shares of common stock outstanding, our only class of voting securities.

         PROXIES. Your vote is important.  If your shares are registered in your
name,  you are a stockholder  of record.  If your shares are in the name of your
broker or bank, your shares are held in street name. We encourage you to vote by
Proxy so that your shares will be  represented  and voted at the meeting even if
you cannot  attend.  All  stockholders  can vote by  written  Proxy  card.  Your
submission of the enclosed Proxy will not limit your right to vote at the Annual
Meeting  if you later  decide to attend in  person.  IF YOUR  SHARES ARE HELD IN
STREET NAME, YOU MUST OBTAIN A PROXY, EXECUTED IN YOUR FAVOR, FROM THE HOLDER OF
RECORD IN ORDER TO BE ABLE TO VOTE AT THE MEETING.  If you are a stockholder  of
record,  you may revoke  your Proxy at any time  before  the  meeting  either by
filing with the Secretary of the Company,  at its principal executive offices, a
written  notice of revocation or a duly executed  Proxy bearing a later date, or
by attending the Annual  Meeting and  expressing a desire to vote your shares in
person. All shares entitled to vote and represented by properly executed Proxies
received  prior to the Annual  Meeting,  and not  revoked,  will be voted at the
Annual Meeting in accordance with the  instructions  indicated on those Proxies.
If no  instructions  are  indicated  on a properly  executed  Proxy,  the shares
represented  by  that  Proxy  will be  voted  as  recommended  by the  Board  of
Directors.

         QUORUM. The presence, in person or by Proxy, of a majority of the votes
entitled to be cast by the  stockholders  entitled to vote at the Annual Meeting
is necessary to constitute a quorum.  Abstentions  and broker  non-votes will be
included in the number of shares present at the Annual  Meeting for  determining
the presence of a quorum.  Broker non-votes occur when a broker holding customer
securities in street name has not received voting instructions from the customer
on certain  non-routine  matters and,  therefore,  is barred by the rules of the
applicable securities exchange from exercising  discretionary  authority to vote
those securities.

         VOTING.  Each share of our common stock is entitled to one vote on each
matter properly  brought before the meeting.  Abstentions will be counted toward
the  tabulation of votes cast on proposals  submitted to  stockholders  and will
have the same effect as  negative  votes,  while  broker  non-votes  will not be
counted as votes cast for or against such matters.

         ELECTION OF DIRECTORS.  Our Certificate of  Incorporation,  as amended,
does not authorize  cumulative  voting.  In the election of directors,  the four
candidates  receiving the highest  number of votes at the Annual Meeting will be
elected.  If any  nominee is unable or  unwilling  to serve as a director at the
time of the Annual Meeting,  the Proxies will be voted for such other nominee(s)
as shall be designated by the current Board of Directors to fill any vacancy. We
have no reason to believe  that any nominee will be unable or unwilling to serve
if elected as a director.

         OTHER MATTERS.  At the date this Proxy  Statement went to press,  we do
not know of any other matter to be raised at the Annual Meeting.


                                       1



         In the event a  stockholder  proposal was not  submitted to us prior to
the date of this Proxy  Statement,  the enclosed Proxy will confer  authority on
the  Proxyholders  to vote the shares in accordance with their best judgment and
discretion  if the proposal is presented at the Meeting.  As of the date hereof,
no stockholder proposal has been submitted to us, and management is not aware of
any other  matters to be presented  for action at the Meeting.  However,  if any
other matters  properly come before the Meeting,  the Proxies  solicited  hereby
will be voted by the Proxyholders in accordance with the  recommendations of the
Board  of  Directors.   Such  authorization  includes  authority  to  appoint  a
substitute  nominee for any Board of Directors'  nominee identified herein where
death,  illness or other  circumstance  arises which  prevents such nominee from
serving in such position and to vote such Proxy for such substitute nominee.


                                       2



ITEM 1:  ELECTION OF DIRECTORS
- --------------------------------------------------------------------------------


         Item 1 is the  election  of five (5)  directors  to hold  office  for a
period of one year or until their  respective  successors have been duly elected
and  qualified.  Our Restated  Certificate  of  Incorporation  provides that the
number of directors of the Company shall be fixed from time to time  exclusively
by the  Board of  Directors,  but  shall  not be less than two (2) nor more than
fifteen  (15).  The Board of Directors has fixed the number of directors at five
(5).

         Unless  otherwise  instructed,  the Proxy holders will vote the Proxies
received by them for the nominees  named  below.  If any nominee is unwilling to
serve as a director at the time of the Annual Meeting, the Proxies will be voted
for such other  nominee(s)  as shall be  designated by the then current Board of
Directors  to fill any  vacancy.  We have no reason to believe  that any nominee
will be unable or unwilling to serve if elected as a director.

         The Board of Directors  proposes the election of the following nominees
as directors:

                                 Daniel S. Guez
                                   Colin Dyne
                                   Dean Oakey
                                  Susan White
                                  Troy Carter

        If elected,  the foregoing five nominees are expected to serve until the
2008 Annual Meeting of Stockholders.

THE BOARD OF DIRECTORS  UNANIMOUSLY  RECOMMENDS A VOTE "FOR" THE ELECTION OF THE
NOMINEES LISTED ABOVE.

         The  principal  occupation  and  certain  other  information  about the
nominees and certain executive officers are set forth on the following pages.


                                       3



CURRENT DIRECTORS/DIRECTOR NOMINEES

         The  following  table sets forth the name,  age and position of each of
our directors and nominees as of May 28, 2007.

NAME                     AGE             POSITION HELD
- ----                     ---             -------------
Colin Dyne               44              Chief Executive Officer and Co-Chairman
                                           of the Board of Directors
Daniel Guez              30              Creative Director, Secretary and Co-
                                           Chairman of the Board of Directors
Dean Oakey               49              Director
Susan White              57              Director
Troy Carter              34              Director

         COLIN DYNE has served as our Chief Executive  Officer and Co-Chaiman of
the Board of Directors since May 21, 2007. Mr. Dyne is a significant stockholder
of People's  Liberation,  and has served as a  consultant  to the company  since
December 2005, advising on strategic sales initiatives.  Mr. Dyne also serves as
Vice Chairman of the Board of Directors of Tag-It  Pacific,  Inc.  (AMEX:  TAG),
owner of  Talon(TM)  zippers and a full  service  trim  management  supplier for
manufacturers of fashion apparel. Mr. Dyne founded Tag-It, Inc., a subsidiary of
Tag-It  Pacific,  in 1991.  Mr. Dyne served as Tag-It  Pacific's  President from
inception and as its Chief Executive Officer from 1997 to 2005.

         DANIEL  GUEZ,  the founder of Versatile  Entertainment,  Inc. and Bella
Rose, LLC, our wholly-owned  subsidiaries,  became our Chief Executive  Officer,
President  and  Secretary  and a director on November 22, 2005. In July 2006 Mr.
Guez  resigned  as our  President,  and on May 21, 2007 he resigned as our Chief
Exective Officer. Mr. Guez currently serves as Creative Director and Co-Chairman
of the Board of  Directors  of People's  Liberation,  and Manager of our William
Rast(TM)   apparel  line.  Mr.  Guez  also  serves  as  President  of  Versatile
Entertainment,  Inc.,  a position he has held since  April 2001,  and manager of
Bella Rose, a position he has held since May 2005.  Prior to July 2004, Mr. Guez
managed  several  private  label  divisions  of Innovo  Group,  Inc.  and Azteca
Production  International,  Inc.,  Los  Angeles  based  manufacturers  of  denim
apparel. Mr. Guez started his career in the apparel industry in 1995.

         DEAN OAKEY has served as a director since November 22, 2005.  From June
1997 to present,  Mr.  Oakey has served as the  Managing  Director of  Corporate
Finance  and Capital  Markets at Sanders  Morris  Harris,  Inc.,  an  investment
banking  firm. In this  capacity,  Mr. Oakey has been  responsible  for business
development and management duties, with a focus on the apparel industry.

         SUSAN WHITE has served as a director  since May 21, 2007. Ms. White has
served as Chief  Executive  Officer and President of Brand  Identity  Solutions,
LLC, a branding,  marketing and licensing  consulting  company,  since 1987. Ms.
White also is the CEO and  president  of  Whitespeed,  LLC, an internet  design,
branding and  marketing  company.  Ms. White serves on the Board of Directors of
Tag-It Pacific,  Inc. (AMEX: TAG), owner of Talon(TM) zippers and a full service
trim management  supplier for  manufacturers of fashion apparel.  Ms. White also
previously served as Director of Marketing and Advertising Worldwide for Warnaco
from November 1997 through August 1999.

         TROY CARTER has served as a director  since May 21, 2007. Mr. Carter is
the Founder,  Chairman and CEO of the urban talent  management and  full-service
film and  television  production  entity,  The  Coalition,  Inc. Mr.  Carter has
managed  and built  careers  for some of the  hottest  acts on the  urban  scene
including hip-hop artists Eve, Beanie Siegel,  and Fat Joe and hot newcomer acts
such  as Ya Boy.  Prior  to  establishing  The  Coalition,  Mr.  Carter  was the
co-founder of Erving Wonder,  a management firm purchased by Sanctuary Group UK,
the largest urban talent  manager in the world with clients  including  Beyonce,
Destiny's  Child,  Nelly,  Eve and D-12.  Mr.  Carter  began  his  entertainment
industry  career at Bad Boy Records  working for Sean "Diddy"  Combs and also at
Overbrook Entertainment, Will Smith's management/production company.


                                       4



OTHER EXECUTIVE OFFICERS

         DARRYN BARBER has served as our Chief Financial  Officer since November
22, 2005. Prior to joining us, Mr. Barber spent five years as a senior associate
at  Europlay  Capital  Advisors,  LLC and its  affiliates.  Mr.  Barber has been
successful  in  evaluating,   developing,   and  operating   businesses  in  the
entertainment  and  technology  fields.  Mr.  Barber  has been  responsible  for
preparing   business  models,   financial   planning,   evaluating  and  valuing
businesses,  providing  corporate and strategic advice and preparing  businesses
for strategic transactions. Mr. Barber brings over 10 years experience in owning
and operating  businesses.  Prior to Europlay Capital  Advisors,  Mr. Barber was
Director  of  Operations  of  Trademark  Cosmetics,  a  private  label  cosmetic
manufacturing company. Mr. Barber earned an MBA from California State University
Northridge  and a BA in business  economics  from the  University  of California
Santa Barbara.

         EDWARD HOUSTON has served as our President  since July 20, 2006.  Prior
to joining us, Mr.  Houston was most  recently the Chief  Operating  Officer for
Rock & Republic,  a premium  denim  company  based in Los Angeles.  Prior to his
position at Rock & Republic,  Mr. Houston was the Chief Operating Officer of C&C
California and Dickies Girl, both California based apparel companies,  from 2003
through 2005 and held other  management  positions in the apparel  industry from
2000 to 2003.  Mr.  Houston has also served as a management  consultant for Moss
Adams, LLP from 1997 to 2000.

         THOMAS NIELDS has served as our Chief Operating  Officer since November
8, 2006.  Prior to joining  us, Mr.  Nields  held  various  positions  at Tag-It
Pacific,  Inc., a full service trim  management  supplier for  manufacturers  of
fashion apparel,  from November 1994 to October 2006.  These positions  included
Director  of  Global  Operations,  President  of  Talon,  Inc.  (a  wholly-owned
subsidiary of Tag-It Pacific, Inc.) and Vice President of Production. During his
employment with Tag-It, Mr. Nields was responsible for implementing and managing
production  facilities in eight  countries  including the U.S.,  Mexico and Hong
Kong.

FURTHER INFORMATION CONCERNING THE BOARD OF DIRECTORS

         MEETINGS  AND  COMMITTEES.  The Board of  Directors  held six  meetings
during fiscal 2006.  All directors  then serving  attended 75% or more of all of
the meetings of the Board of Directors in fiscal 2006. While directors generally
attend annual stockholder  meetings,  the Company has not established a specific
policy  with  respect  to  members of the Board of  Directors  attending  annual
stockholder meetings.

         Currently, we do not have any committees, including an audit committee,
compensation  committee,  or nominating and corporate governance  committee.  In
addition, we do not have any charters that relate to the functions traditionally
performed by these committees.

         The functions  customarily  delegated to the  nominating  committee are
performed by our full board of  directors.  Our full board of directors  reviews
those  Board  members  who  are  candidates  for  re-election  to our  Board  of
Directors,  and makes the determination to nominate a candidate who is a current
member of the Board of Directors for  re-election for the next term. The Board's
methods for identifying candidates for election to the Board of Directors (other
than those  proposed  by our  stockholders,  as  discussed  below)  include  the
solicitation of ideas for possible  candidates from a number of sources--members
of the Board of Directors;  our executives;  individuals personally known to the
members of the Board of Directors;  and other research. We may also from time to
time  retain  one  or  more  third-party   search  firms  to  identify  suitable
candidates.  The Board also  nominates  outside  candidates for inclusion on the
Board of Directors.

         A People's Liberation  stockholder may nominate one or more persons for
election as a director at an annual meeting of  stockholders  if the stockholder
complies with the notice,  information and consent  provisions  contained in our
Bylaws. In addition, the notice must be made in writing and set forth as to each
proposed nominee who is not an incumbent  Director (i) their name, age, business
address and, if known,  residence  address,  (ii) their principal  occupation or
employment,  (iii) the  number of  shares of stock of the  Company  beneficially
owned  and (iv) any  other  information  concerning  the  nominee  that  must be
disclosed  respecting nominees in proxy solicitations  pursuant to Rule 14(a) of
the  Exchange  Act of  1934.  The  recommendation  should  be  addressed  to our
Secretary.


                                       5



        Among other  matters,  our full board of  directors  which serves as the
nominating and governance committee:

         o        Reviews  the  desired  experience,  mix of  skills  and  other
                  qualities to assure appropriate Board composition, taking into
                  account the current  Board  members and the specific  needs of
                  People's Liberation and the Board;

         o        Conducts candidate searches, interviews prospective candidates
                  and  conducts   programs  to  introduce   candidates   to  our
                  management and operations,  and confirms the appropriate level
                  of interest of such candidates;

         o        Recommends  qualified  candidates  who bring  the  background,
                  knowledge, experience,  independence, skill sets and expertise
                  that would strengthen and increase the diversity of the Board;
                  and

         o        Conducts   appropriate   inquiries  into  the  background  and
                  qualifications of potential nominees.

         Based on the foregoing,  the Board of Directors  nominated Daniel Guez,
Colin Dyne, Dean Oakey, Susan White and Troy Carter for re-election as directors
on the Board of Directors,  subject to stockholder approval, for a one-year term
ending on or around the date of the 2008 Annual Meeting of Stockholders.


         COMPENSATION  COMMITTEE  INTERLOCKS  AND  INSIDER  PARTICIPATION.   Our
Compensation  Committee  consists of our entire Board of  Directors.  No current
executive  officer  of the  Company  has  served  as a  member  of the  board of
directors  or  compensation  committee  of any  entity for which a member of our
Board of Directors has served as an executive officer.

         STOCKHOLDER  COMMUNICATIONS.  Holders of the Company's  securities  can
send communications to the Board of Directors via email to  board@peopleslib.com
or by telephoning the Secretary at the Company's  principal  executive  offices,
who will then relay the communications to the Board of Directors.

         CODE OF  ETHICS.  We have  adopted a Code of  Ethical  Conduct  that is
applicable  to all of our  officers,  directors  and  employees,  including  our
principal executive officer,  principal financial officer,  principal accounting
officer and persons performing similar functions.  A copy of our Code of Ethical
Conduct is filed as an exhibit to our 2006 Annual Report on Form 10-KSB.

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

         The following table sets forth information  concerning all compensation
paid to persons serving as our Chief Executive Officer,  Chief Financial Officer
and  President  (our "Named  Executive  Officers")  during our fiscal year ended
December 31, 2006 for services rendered to us during such fiscal year.

Option All Other Name and Principal Awards Compensa- Position Year Salary Bonus (1) tion (5) Total - ----------------------- ---- ---------- ---------- ---------- ---------- ---------- Daniel Guez ........... 2006 $ 300,000 $ 175,000 $ 0 $ 22,182 $ 497,182 Founder and Creative Director (2) Darryn Barber ......... 2006 $ 203,278 $ 40,000 $ 87,771 $ 0 $ 331,049 Chief Financial Officer (3) Edward Houston ........ 2006 $ 131,591 $ 25,000 $ 103,239 $ 8,000 $ 267,830 President (4)
(1) Assumptions relating to the estimated fair value of stock options granted to Darryn Barber, which we are accounting for in accordance with SFAS 123(R) are as follows: risk-free interest rate of 5.1%; expected dividend yield 0%; expected option life of 5.1 years; and volatility of 60.3%. Assumptions relating to the estimated fair value of stock options granted to Edward Houston, which we are accounting for in accordance with SFAS 123(R) are as 6 follows: risk-free interest rate of 5.0%; expected dividend yield 0%; expected option life of 6.0 years; and volatility of 60.3%. Please see Note 2 to our financial statements for further discussion of our assumptions relating to the estimated fair value of these stock options. (2) Mr. Guez became our President and Chief Executive Officer on November 22, 2005 in connection with the consummation of an exchange transaction and our reverse mergers of Versatile Entertainment, Inc., a California corporation, and Bella Rose, LLC, a California limited liability company. In July 2006, Mr. Guez resigned as President and on May 21, 2007, Mr. Guez resigned as our Chief Exective Officer. Mr. Guez currently serves as Creative Director and Co-Chairman of the Board of Directors of People's Liberation, and Manager of our William Rast(TM) apparel line. Mr. Guez is subject to an employment agreement the terms of which are described hereafter. (3) Mr. Barber became our Chief Financial Officer on November 22, 2005. Mr. Barber is subject to an employment agreement the terms of which are described hereafter. Mr. Barber was granted an option to purchase 300,000 shares of our common stock at a per share price of $1.25, which option terminates on July 7, 2016 and is now fully vested. Mr. Barber is subject to an employment agreement the terms of which are described hereafter. (4) Mr. Houston was named our President effective July 20, 2006. Mr. Houston is subject to an employment agreement the terms of which are described hereafter. Mr. Houston was granted an option to purchase 1,000,000 shares of our common stock at a per share price of $1.25, which option terminates on July 31, 2016. These options vest and become exercisable in quarterly installments of 83,333 shares each (other than in the last quarter, in which 83,337 shares shall vest), with the first installment vesting on October 1, 2006, and on the first day of each fiscal quarter thereafter. (5) Other compensation indicated in the above table consists of car expenses and allowances. NARRATIVE DISCLOSURE TO SUMMARY COMPENSATION TABLE We compensate our executive officers through a combination of a base salary, a cash bonus, and options to purchase shares of our common stock. In addition, we provide other perquisites to some of our executive officers, which primarily consist of car expenses and allowances. The bonuses paid to our executive officers in 2006 were determined by our Board of Directors, and were based on the performance of the executive officer and the company. We do not have a formal plan for determining the compensation of our executive officers. Instead, each executive officer negotiates their respective employment agreement with us. All agreements with our named executive officers that provide for payments to such named executive officers at, following or in connection with the resignation, retirement or other termination of such named executive officers, or a change in control of our company or a change in the responsibilities of such named executive officers following a change in control are set forth in the following description of their respective employment agreements. DANIEL GUEZ On January 12, 2007, we entered into an Employment Agreement with Daniel Guez, pursuant to which he will serve as our Chief Executive Officer and/or Creative Director, and Chairman of the Board of Directors. The agreement is for an initial term of three years and is automatically extended for additional one year terms unless we or Mr. Guez elect not to extend the term of the agreement. Under the agreement, Mr. Guez will receive the following compensation: o Base salary of $400,000 per annum, subject to upward adjustment; o Annual performance bonus in the amount equal to the sum of (i) ten percent (10%) of the first three million dollars ($3,000,000) of the Company's consolidated EBITDA for such fiscal year, and (ii) five percent (5%) of the amount of the Company's consolidated EBITDA, if any, in excess of three million dollars ($3,000,000) for such fiscal year; and o Automobile and related expense allowance of $2,300 per month. If during the employment period, (a) we terminate Mr. Guez's employment without cause or if Mr. Guez terminates his employment for good reason, or (b) if (i) we fail to extend the period of the employment period as provided above, and (ii) at any time within six months following expiration of the employment period, we terminate 7 Mr. Guez's employment without cause or Mr. Guez terminates his employment for good reason or without good reason, Mr. Guez will be paid severance in an amount equal to one and one-half times the sum of Mr. Guez's base salary in effect on the date of termination plus the average annual bonus received by Mr. Guez for the two complete fiscal years immediately prior to the termination date, and all of his outstanding stock options, restricted stock and other equity awards will accelerate and become fully vested on the date of termination. If Mr. Guez's employment is terminated by reason of his death or disability during the employment period, Mr. Guez, his estate or beneficiaries, as applicable, will be entitled to be paid a lump sum payment of one-hundred percent (100%) of Mr. Guez's then current annual base salary, and all outstanding stock options, restricted stock and other equity awards granted to Mr. Guez will accelerate and become fully vested on the date of termination. In addition, for a period of 18 months following the date of termination, we will continue to provide Mr. Guez and his eligible family members with group health insurance coverage. On May 21, 2007, Mr. Guez resigned as Chief Executive Officer, and currently serves as Creative Director of People's Liberation. On May 21, 2007, Colin Dyne was appointed Chief Executive Director of People's Liberation. Pursuant to an oral agreement between the Company and Mr. Dyne, Mr. Dyne will be paid an annual salary of $200,000, and will receive an automobile expense allowance of $1,200 per month. EDWARD HOUSTON On July 13, 2006, we entered into an Employment Agreement with Edward Houston pursuant to which he serves as the Company's President effective July 20, 2006. Mr. Houston is employed on an "at will" basis and will receive an annual salary of $300,000, which is subject to adjustment pursuant to our employee compensation policies in effect from time to time. In addition to his base salary, commencing with fiscal year 2006 and for each fiscal year thereafter during which Mr. Houston is performing services for us, we will maintain a Management Incentive Program pursuant to which we will set aside during each fiscal year for payment to Mr. Houston an amount equal to three percent (3%) of our earnings before interest and taxes for such fiscal year. Mr. Houston was also granted a non-qualified stock option to purchase up to 1,000,000 shares of our common stock at an exercise price of $1.25. In the event Mr. Houston is terminated without cause prior to the third anniversary of the commencement of his employment with us, we shall pay to Mr. Houston the equivalent of six months of his base salary, or if lesser, the base salary Mr. Houston would have earned had he remained employed with us through such third anniversary of commencement of his employment at his then applicable rate of pay. DARRYN BARBER On January 3, 2006, we entered into an Employment Agreement with Darryn Barber pursuant to which he serves our Chief Financial Officer and Chief Operating Officer. The agreement is for a term of 2 years commencing as of November 22, 2005 and terminating on November 21, 2007. Mr. Barber received a base salary of $212,000 through the first anniversary of his appointment, and currently receives $232,000 through the second year of his contract. In addition to his base salary, Mr. Barber will receive an annual bonus of not less than $25,000 and no more than $100,000 based on objectives determined by our Board of Directors. On July 7, 2006, in accordance with the Employment Agreement, Mr. Barber was granted a stock option to purchase 300,000 shares of our common stock at an exercise price of $1.25 per share. One-third of the options vest in monthly installments of 25,000 beginning August 7, 2006 and the balance vested immediately. In the event Mr. Barber is terminated without cause, we will continue to pay Mr. Barber's then current base salary for the remaining term of the agreement, without regard to any employment of Mr. Barber by a third party. On November 8, 2006, we entered into an amendment to Mr. Barber's employment agreement. Pursuant to the amendment, Mr. Barber resigned from his position as Chief Operating Officer, effective November 8, 2006. Mr. Barber will continue to serve as our Chief Financial Officer. The amendment also extends the exercise period of Mr. Barber's option to purchase 300,000 shares of our common stock to a period of one year following termination of Mr. Barber's service for any reason other than for cause (as defined in the employment agreement). Previously, Mr. Barber's option was to remain exercisable for a period of at least six months following termination of his service with us for any reason other than for cause. Mr. Barber's annual bonus amounted to $40,000 for the year ended December 31, 2006. 8 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE The following table presents information regarding outstanding options held by our named executive officers as of the end of our fiscal year ended December 31, 2006. None of the named executive officers exercised options during the fiscal year ended December 31, 2006.
Number of Securities Underlying Unexercised Options (#) -------------------------------- Option Option Exercise Expiration Name Exercisable Unexercisable Price ($) Date - -------------------------- ------------- ------------- ------------- ------------- Daniel Guez .............. -- -- -- -- Darryn Barber (1) ........ 300,000(1) -- $ 1.25 July 7, 2016 Edward Houston (2) ....... 83,333(2) 916,667(2) $ 1.25 July 31, 2016
(1) On July 7, 2006, Mr. Barber was granted an option to purchase 300,000 shares of our common stock at a per share exercise price of $1.25. As of December 31, 2006, this option was fully vested. (2) On July 31, 2006, Mr. Houston was granted an option to purchase 1,000,000 shares of our common stock at a per share exercise price of $1.25. This option vests in twelve equal quarterly installments beginning October 2006 through July 2009. This option terminates on July 31, 2016. DIRECTOR COMPENSATION AND INDEPENDENCE The following table presents information regarding compensation paid to persons serving as our non-employee directors during the fiscal year ended December 31, 2006.
Fees Earned or Paid Option All Other Name in Cash Awards (3) Compensation Total - ------------------------- ------------ ------------ ------------ ------------ Dean Oakey (1) .......... $ 10,000 $ 14,724 $ -- $ 24,724 Kevin Keating (2) ....... $ 10,000 $ 14,724 $ -- $ 24,724
(1) On June 22, 2006, Mr. Oakey was granted an option to purchase 36,000 shares of our common stock at a per share exercise price of $1.25. This option vested 18,000 shares on the date of grant and 1,500 shares monthly thereafter through July 2007. This option terminates on June 22, 2016. Mr. Oakey did not exercise any of his option awards during the fiscal year ended December 31, 2006. (2) On June 22, 2006, Mr. Keating was granted an option to purchase 36,000 shares of our common stock at a per share exercise price of $1.25. This option vested 18,000 shares on the date of grant and 1,500 shares monthly thereafter through July 2007. This option terminates on August 19, 2007. Mr. Keating did not exercise any of his option awards during the fiscal year ended December 31, 2006. Mr. Keating resigned as a director on May 21, 2007. (3) Assumptions relating to the estimated fair value of these stock options, which we are accounting for in accordance with SFAS 123(R) are as follows: risk-free interest rate of 5.2%; expected dividend yield 0%; expected option life of 5.3 years; and volatility of 60.3%. Please see Note 2 to our financial statements for further discussion of our assumptions relating to the estimated fair value of these stock options. We currently pay non-employee directors an annual fee of $10,000. Non-employee directors, Mr. Keating and Mr. Oakey, also received 36,000 options each to purchase shares of our common stock in June 2006 and $10,000 each in payment for service on the Board of directors from July 2006 through June 2007. Our directors are 9 also reimbursed for travel expenses associated with attendance at Board meetings. There were no reimbursements for travel expenses for the fiscal year ended December 31, 2006. REPORT OF BOARD OF DIRECTORS ON AUDIT COMMITTEE FUNCTIONS We do not have an Audit Committee. For the fiscal year ended December 31, 2006, the Company's Board of Directors has performed the duties of an Audit Committee and is responsible for providing objective oversight of the Company's internal controls and financial reporting process. In fulfilling its responsibilities for the financial statements for fiscal year 2006, the Board of Directors: o Reviewed and discussed the audited financial statements for the year ended December 31, 2006 with management and Grobstein, Horwath & Company, LLP (the "Auditors"), the Company's independent auditors; and o Received written disclosures and the letter from the Auditors regarding its independence as required by Independence Standards Board Standard No. 1. The Board discussed with the Auditors their independence. In fulfilling its responsibilities for the financial statements for fiscal year 2006, the Board of Directors discussed with the Auditors the matters required to be discussed by Statement on Auditing Standards No. 61 relating to the conduct of the audit. Based on the Board of Directors' review of the audited financial statements and discussions with management and the Auditors, the Board of Directors approved the inclusion of the audited financial statements in the Corporation's Annual Report on Form 10-KSB for the year ended December 31, 2006 for filing with the SEC. The Board of Directors also considered the status of pending litigation and other areas of oversight relating to the financial reporting and audit process that the Board determined appropriate. The Board of Directors has considered whether the provision of non-audit services is compatible with maintaining the principal accountant's independence. BOARD OF DIRECTORS Daniel Guez Dean Oakey Kevin Keating The information in this Report of Board of Directors shall not be deemed to be "soliciting material," or to be "filed" with the Securities and Exchange Commission or to be subject to Regulation 14A or 14C as promulgated by the Securities and Exchange Commission, or to the liabilities of Section 18 of the Exchange Act. 10 INDEPENDENT PUBLIC ACCOUNTANTS Effective as of November 30, 2005, we engaged Grobstein, Horwath & Company LLP as our principal independent accounting firm. Prior to November 30, 2005, Grobstein, Horwath & Company LLP acted as the accountant for our wholly-owned subsidiaries Versatile Entertainment, Inc. and Bella Rose, LLC. The appointment of Grobstein, Horwath & Co. was approved by the unanimous written consent of our Board of Directors. All audit work for the year ended December 31, 2006 was performed by the full time employees of Grobstein, Horwath & Company LLP. Representatives of Grobstein, Horwath & Company, LLP are expected to be present at our Annual Meeting and will have the opportunity to make a statement if they desire to do so. In addition, at the Annual Meeting, Grobstein, Horwath & Company, LLP is expected to be available to respond to appropriate questions posed by our stockholders. Also effective as of November 30, 2005, we dismissed Shelley International CPA ("Shelley International") as our independent certified public accountants. The decision was approved by our Board of Directors. The reports of Shelley International on our financial statements for the fiscal years ended September 30, 2005 and 2004 did not contain an adverse opinion or disclaimer of opinion and were not modified as to uncertainty, audit scope, or accounting principles, except the 2005 report did contain an explanatory paragraph related to our ability to continue as a going concern. During our fiscal years ended September 30, 2005 and 2004, and through November 30, 2005 (the effective date of Shelley International's dismissal), there were no disagreements with Shelley International on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Shelley International would have caused Shelley International to make reference to the subject matter of the disagreements in connection with its reports. We furnished Shelley International with a copy of our report on Form 8-K/A prior to our filing the report with the Securities and Exchange Commission on December 9, 2005. We also requested that Shelley International furnish us with a letter addressed to the Securities and Exchange Commission stating whether or not it agreed with our statements in the 8-K/A. A copy of the letter furnished by Shelley International in response to that request, dated December 8, 2005, is filed as Exhibit 16.1 to our report on Form 8-K/A. AUDIT FEES Fees for audit and review services provided by Grobstein, Horwath & Company, LLP totaled approximately $117,000 during the year ended December 31, 2006, including fees associated with the December 31, 2005 audit, and the reviews of our quarterly financial statements for the periods ended March 31, 2006, June 30, 2006 and September 30, 2006. Fees for audit and review services provided by Grobstein, Horwath & Company, LLP totaled approximately $74,000 during the year ended December 31, 2005, including fees associated with the December 31, 2004 and 2003 audits, and the review of our nine-month period ended September 30, 2005. Fees for audit services provided by Shelley International, CPA totaled approximately $12,000 for the fiscal year ended September 30, 2005. AUDIT-RELATED FEES There were no audit-related services provided for the years ended December 31, 2006 and 2005. TAX FEES Fees for tax services provided by Grobstein, Horwath & Company, LLP during the year ended December 31, 2006 amounted to approximately $29,000. Tax services provided during the year ended December 31, 2006 primarily consisted of the preparation of the Federal and State tax returns for the Company and its subsidiaries and other tax compliance services. There were no material tax services provided for the years ended December 31, 2005 and 2004. ALL OTHER FEES No other fees were incurred during the years ended December 31, 2006 and 2005 for services provided by Grobstein, Horwath & Company, LLP or Shelley International, CPA, except as described above. 11 POLICY ON PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT SERVICES OF INDEPENDENT AUDITORS Consistent with policies of the Securities and Exchange Commission regarding auditor independence, our Board of Directors has responsibility for appointing, setting compensation and overseeing the work of the independent auditor. In recognition of this responsibility, our Board of Directors has established a policy to pre-approve all audit and permissible non-audit services provided by the independent auditor. Our Board of Directors has considered whether the provision of non-audit services is compatible with maintaining the independent accountant's independence, and has approved any such services. TRANSACTIONS WITH RELATED PERSONS, PROMORTERS OR CERTAIN CONTROL PERSONS Other than the employment arrangements described above in "Executive Compensation" and the transactions described below, since January 1, 2005, there has not been, nor is there currently proposed, any transaction or series of similar transactions to which we were or will be a party: o in which the amount involved exceeds the lessor of $120,000 or 1% of the average of our assets at year-end for the last three completed fiscal years; and o in which any director, nominee, executive officer, shareholder who beneficially owns 5% or more of our common stock or any member of their immediate family had or will have a direct or indirect material interest. TRANSACTIONS WITH OFFICERS, DIRECTORS, NOMINEES FOR DIRECTOR AND 5% SHAREHOLDERS On November 23, 2005, we received gross proceeds of approximately $7.8 million in a private placement transaction with institutional investors and other high net worth individuals. In conjunction with the private placement transaction, we issued warrants to purchase an aggregate of 625,000 shares of common stock to Sanders Morris Harris, Inc., the placement agent, and its employees Dean Oakey and Jonah Sulak. Dean Oakey, who received 262,500 of the placement agent warrants, became a director of the company upon completion of the exchange transaction with Versatile Entertainment, Inc. and Bella Rose, LLC on November 22, 2005. The warrants are fully vested and have a per share exercise price of $1.25. From June 1997 to the present date, Mr. Oakey has served as the Managing Director of Corporate Finance and Capital Markets at Sanders Morris Harris, Inc. In addition, please see the section below entitled "Promoters and Control Persons." During 2004, Tag-It Pacific, Inc. loaned an aggregate of $293,989 to Versatile Entertainment, Inc., which loan was unsecured, and due on demand. On May 16, 2005, the then outstanding balance of $300,000 due to Tag-It Pacific, Inc. was repaid with borrowings from an unrelated entity. On May 16, 2005, Colin Dyne, CEO of Tag-It Pacific, Inc., assumed Versatile's obligation to the unrelated entity in exchange for the issuance of 45 shares of Versatile's common stock. After giving 9.546 shares of his Versatile common stock to various parties, the remaining 35.454 shares of common stock held by Mr. Dyne were exchanged for 775,294.3 shares of our series A convertible preferred stock on November 22, 2005, the closing of the exchange transaction with Versatile Entertainment and Bella Rose. The Company paid $259,000 and $10,000 in consulting fees to this stockholder during the years ended December 31, 2006 and 2005. During the years ended December 31, 2006 and 2005, we purchased trim products from Tag-It Pacific, Inc., a related entity, amounting to approximately $152,000 and $75,000, respectively. Colin Dyne and Susan White are directors of Tag-It Pacific, Inc. During 2006 and in the first quarter of 2007, Ms. White provided consulting services to the People's Liberation, Inc., advising on branding issues. For these services, we paid Ms. White an aggregate of $16,300 in consulting fees. Ms. White ceased providing services in April 2007. PROMOTERS AND CONTROL PERSONS On December 15, 2004, Keating Reverse Merger Fund, LLC, a Delaware limited liability company, David L. Hadley (our former chief executive officer) and Natural Technologies, Inc., an Arizona corporation entered into a 12 purchase agreement pursuant to which certain shareholders of the company sold 5,625,287 shares (on a pre-reverse stock split basis) of the common stock of the company, representing approximately 70.99% of the outstanding shares of common stock of the company, to Keating Reverse Merger Fund, LLC, for an aggregate purchase price of $375,000. On January 31, 2005, we entered into an Assumption Agreement with Global Medical Technologies, Inc., Natural Technologies, Inc. and Mr. Hadley pursuant to which we contributed all of the shares of common stock of our inactive subsidiaries, Century Pacific Financial Corp. and Century Pacific Investment Management Corporation, to Global Medical Technologies, Inc. Global Medical Technologies, Inc. agreed to assume all of our liabilities and to indemnify us for any loss we incur with respect to such assumed liabilities. Global Medical, Natural Technologies, and Mr. Hadley also released us from all obligations and claims. In February 2005, we distributed all of the outstanding shares of common stock of Global Medical Technologies, Inc. on a pro rata basis to our stockholders. Following the distribution, Global Medical Technologies, Inc. continued to operate its medical equipment reconditioning business as an independent company. After this distribution, we existed as a "shell company" under the name of Century Pacific Financial Corporation with nominal assets whose sole business was to identify, evaluate and investigate various companies to acquire or with which to merge. On February 16, 2005, we received a non-interest bearing, unsecured demand loan from Keating Reverse Merger Fund in the amount of $50,000 to provide working capital for operating expenses. On June 28, 2005 we issued 5,000,000 restricted common shares (on a pre-reverse stock split basis) in full payment of the $50,000 note payable to Keating Reverse Merger Fund. We granted Keating Reverse Merger Fund piggyback registration rights with respect to these shares. On November 22, 2005, we consummated an exchange transaction in which we acquired all of the outstanding ownership interests of Bella Rose, LLC, a California limited liability company ("Bella Rose") and Versatile Entertainment, Inc., a California corporation ("Versatile") from their respective shareholders and members, in exchange for an aggregate of 2,460,106.34 shares of our series A convertible preferred stock which, on January 5, 2006, converted into 26,595,751 shares of our common stock on a post reverse stock split basis. At the closing of the exchange transaction, Versatile and Bella Rose became our wholly-owned subsidiaries. The exchange transaction was accounted for as a reverse merger (recapitalization) with Versatile and Bella Rose deemed to be the accounting acquirers, and People's Liberation, Inc. the legal acquirer. On November 22, 2005, we entered into a certain financial advisory agreement with Keating Securities, LLC under which Keating Securities, LLC was compensated by us for its advisory services rendered to us in connection with the closing of the exchange transaction with Versatile Entertainment, Inc. and Bella Rose, LLC. The transaction advisory fee was $350,000, with the payment thereof made at the closing of the exchange transaction. Kevin R. Keating, is the father of the principal member of Keating Investments, LLC. Keating Investments, LLC is the managing member of Keating Reverse Merger Fund and is also the managing member and 90% owner of Keating Securities, LLC, a registered broker-dealer. Kevin R. Keating is not affiliated with and has no equity interest in Keating Investments, LLC, Keating Reverse Merger Fund or Keating Securities, LLC and disclaims any beneficial interest in the shares of our common stock owned by Keating Reverse Merger Fund. Similarly, Keating Investments, LLC, Keating Reverse Merger Fund and Keating Securities, LLC disclaim any beneficial interest in the shares of our common stock currently owned by Kevin R. Keating. DIRECTOR INDEPENDENCE Our board of directors currently consists of five members: Daniel Guez (our Creative Director and Co-Chairman of the Board of Directors), Colin Dyne (Chief Executive Officer and Co-Chairman of the Board of Directors), Dean Oakey, Susan White and Troy Carter. Daniel Guez and Dean Oakey were elected at a meeting of shareholders. Colin Dyne, Susan White and Troy Carter were appointed by the Board of Directors and will serve until our next annual meeting or until his or her successor is duly elected and qualified. We do not have a separately designated audit, compensation or nominating committee of our board of directors and the functions customarily delegated to these committees are performed by our full board of directors. We are not a "listed company" under SEC rules and are therefore not required to have separate committees 13 comprised of independent directors. We have, however, determined that Ms. White and Mr. Carter are "independent" as that term is defined in Section 4200 of the Marketplace Rules as required by the NASDAQ Stock Market. As we do not maintain an audit committee, we do not have an audit committee "financial expert" within the meaning of Item 401(d) of Regulation S-B. We intend to establish an audit committee, compensation committee, and nominating and corporate governance committee following the expansion of our board to include at least three directors who are independent under the applicable rules of the SEC and NASDAQ. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The following table presents information regarding the beneficial ownership of our common stock as of May 28, 2007 by: o each of the named executive officers listed in the summary compensation table; o each of our directors and director nominees; o all of our directors and executive officers as a group; and o each shareholder known to us to be the beneficial owner of more than 5% of our common stock. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares beneficially owned, subject to community property laws where applicable. Shares of our common stock subject to options from the Company that are currently exercisable or exercisable within 60 days of May 21, 2007 are deemed to be outstanding and 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 ownership of any other person. The information presented in this table is based on 34,942,563 shares of our common stock outstanding on May 28, 2007. Unless otherwise indicated, the address of each of the executive officers and directors and 5% or more shareholders named below is c/o People's Liberation, Inc., 150 West Jefferson Boulevard, Los Angeles, CA 90007.
NUMBER OF SHARES PERCENTAGE BENEFICIALLY OF SHARES NAME OF BENEFICIAL OWNER OWNED OUTSTANDING - -------------------------------------------------- ---------------- ------------- EXECUTIVE OFFICERS AND DIRECTORS: Daniel S. Guez (1)................................ 14,198,387 40.6% Creative Director, Vice Chairman and Secretary Colin Dyne (2).................................... 7,731,560 22.1% Chief Executive Officer and Vice Chairman Darryn Barber (3)................................. 432,560 1.2% Chief Financial Officer Edward Houston (4)................................ 333,332 * President Dean Oakey (5).................................... 514,383 1.5% Director Susan White....................................... -- -- Director
14
NUMBER OF SHARES PERCENTAGE BENEFICIALLY OF SHARES NAME OF BENEFICIAL OWNER OWNED OUTSTANDING - -------------------------------------------------- ---------------- ------------- Troy Carter....................................... -- -- Director Directors and officers as a group (8 persons) (6). 23,365,246 65.0% 5% SHAREHOLDERS: Microcapital Fund LP and Microcapital Fund Ltd (7) 2,800,000 7.9%
- ---------- * Less than 1% (1) Consists of 13,098,387 shares of common stock beneficially held by Mr. Guez and 1,100,000 shares of common stock held by Daniel S. Guez as Custodian for Isabella Guez UTMA of CA. (2) Consists of 7,731,560 shares of common stock. (3) Consists of 132,560 shares of common stock and 300,000 options to purchase common stock. (4) Consists of 333,332 options to purchase common stock. (5) Consists of 199,883 shares of common stock, warrants to purchase 278,500 shares of common stock and options to purchase 36,000 shares of common stock. (6) Consists of 22,392,414 shares of common stock, warrants to purchase 278,500 shares of common stock and options to purchase 694,332 shares of common stock. (7) Consists of 1,333,600 shares of common stock and warrants to purchase 533,440 shares of common stock at an exercise price of $2.00 owned by Microcapital Fund LP and 666,400 shares of common stock and warrants to purchase 266,560 shares of common stock at an exercise price of $2.00 owned by Microcapital Fund Ltd. Ian P. Ellis, the general partner of MicroCapital Fund LP and the President of Advisor, and Director of Fund of Microcapital Fund Ltd. exercises voting and investment authority over the shares held by these selling stockholders. CHANGE OF CONTROL On October 28, 2005, we entered into an Exchange Agreement with Versatile Entertainment, Inc., a California corporation ("Versatile"), each of the stockholders of Versatile ("Stockholders"), Bella Rose, LLC, a California limited liability company ("Bella Rose"), each of the members of Bella Rose ("Members"), and Keating Reverse Merger Fund, LLC ("KRM Fund"). The closing of the transactions contemplated by the Exchange Agreement (the "Closing") occurred on November 22, 2005. At the Closing, pursuant to the terms of the Exchange Agreement, we acquired all of the outstanding equity interests of Versatile and Bella Rose (the "Interests") from the Stockholders and Members (collectively, the "Owners"), and the Owners contributed all of their Interests to us. In exchange, the we issued to the Owners 2,460,106.34 shares of our Series A Convertible Preferred Stock, par value $0.001 per share ("Preferred Stock"), which subsequently converted into 26,595,751 shares of our common stock on January 5, 2006 following a mandatory conversion and 1-9.25 reverse stock split of our common stock. Following the exchange transaction, each of Versatile and Bella Rose became our wholly-owned subsidiaries. The exchange transaction was accounted for as a reverse merger (recapitalization) with Versatile and Bella Rose deemed to be the accounting acquirer, and us the legal acquirer. Immediately following the acquisition of Versatile and Bella Rose, we received gross proceeds of approximately $7.8 million in a private placement transaction with institutional investors and other high net worth individuals. Pursuant to subscription agreements entered into with these investors, we sold 578,125.58 shares of our series A convertible preferred stock at a price per share of $13.5135, which subsequently converted into 6,250,000 shares of our common stock on a post reverse stock split basis. We also issued to the investors, five-year warrants to purchase an aggregate of 2,500,000 shares of our common stock with an exercise price of $2.00 per share. After broker commissions and expenses and accounting, legal and other expenses, we received net proceeds of approximately $6.6 million in the capital raise. Following these transactions, the former security holders of Bella 15 Rose and Versatile and the investors in the financing owned 95.6%, and our stockholders immediately prior to these transactions now own approximately 1,525,383 shares of common stock, representing 4.4% of our outstanding common stock on an as converted and post reverse stock split basis. SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934 requires that our executive officers and directors, and persons who own more than ten percent of a registered class of our equity securities, file reports of ownership and changes in ownership with the SEC. Executive officers, directors and greater-than-ten percent stockholders are required by SEC regulations to furnish us with all Section 16(a) forms they file. Based solely on our review of the copies of the forms received by us and written representations from certain reporting persons that they have complied with the relevant filing requirements, we believe that, during the year ended December 31, 2006, all of our executive officers, directors and greater-than-ten percent stockholders complied with all Section 16(a) filing requirements. STOCKHOLDER PROPOSALS Any stockholder who intends to present a proposal at the 2008 Annual Meeting of Stockholders for inclusion in the Company's Proxy Statement and Proxy form relating to such Annual Meeting must submit such proposal to the Company at its principal executive offices by February 5, 2008. In addition, in the event a stockholder proposal is not received by the Company by April 20, 2008, the Proxy to be solicited by the Board of Directors for the 2008 Annual Meeting will confer discretionary authority on the holders of the Proxy to vote the shares if the proposal is presented at the 2008 Annual Meeting without any discussion of the proposal in the Proxy Statement for such meeting. SEC rules and regulations provide that if the date of the Company's 2008 Annual Meeting is advanced or delayed more than 30 days from the date of the 2007 Annual Meeting, stockholder proposals intended to be included in the proxy materials for the 2008 Annual Meeting must be received by the Company within a reasonable time before the Company begins to print and mail the proxy materials for the 2008 Annual Meeting. Upon determination by the Company that the date of the 2008 Annual Meeting will be advanced or delayed by more than 30 days from the date of the 2007 Annual Meeting, the Company will disclose such change in the earliest possible Quarterly Report on Form 10-Q. SOLICITATION OF PROXIES It is expected that the solicitation of Proxies will be by mail. The cost of solicitation by management will be borne by the Company. The Company will reimburse brokerage firms and other persons representing beneficial owners of shares for their reasonable disbursements in forwarding solicitation material to such beneficial owners. Proxies may also be solicited by certain of our directors and officers, without additional compensation, personally or by mail, telephone, telegram or otherwise. ANNUAL REPORT ON FORM 10-KSB THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB, WHICH HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE YEAR ENDED DECEMBER 31, 2006, WILL BE MADE AVAILABLE TO STOCKHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST TO PEOPLE'S LIBERATION, INC., 150 WEST JEFFERSON BOULEVARD, LOS ANGELES, CALIFORNIA 90007 ATTN: DARRYN BARBER. ON BEHALF OF THE BOARD OF DIRECTORS /s/ Colin Dyne ------------------------------------ COLIN DYNE, CO-CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER 150 West Jefferson Boulevard Los Angeles, CA 90007 May 28, 2007 16 PEOPLE'S LIBERATION, INC. PROXY FOR ANNUAL MEETING OF STOCKHOLDERS THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned, a stockholder of PEOPLE'S LIBERATION, INC., a Delaware corporation (the "Company"), hereby nominates, constitutes and appoints Colin Dyne and Darryn Barber, or either one of them, as proxy of the undersigned, each with full power of substitution, to attend, vote and act for the undersigned at the Annual Meeting of Stockholders of the Company, to be held on June 18, 2007, and any postponements or adjournments thereof, and in connection therewith, to vote and represent all of the shares of the Company which the undersigned would be entitled to vote with the same effect as if the undersigned were present, as follows: A VOTE FOR ALL PROPOSALS IS RECOMMENDED BY THE BOARD OF DIRECTORS: Proposal 1. To elect the Board of Directors' five nominees as directors: Daniel Guez Colin Dyne Dean Oakey Susan White Troy Carter |_| FOR ALL NOMINEES LISTED ABOVE (except as marked to the contrary below) |_| WITHHELD for all nominees listed above (INSTRUCTION: To withhold authority to vote for any individual nominee, write that nominee's name in the space below:) ----------------------------------------------------------------------- The undersigned hereby confer(s) upon the proxies and each of them discretionary authority with respect to the election of directors in the event that any of the above nominees is unable or unwilling to serve. The undersigned hereby revokes any other proxy to vote at the Annual Meeting, and hereby ratifies and confirms all that said attorneys and proxies, and each of them, may lawfully do by virtue hereof. With respect to matters not known at the time of the solicitation hereof, said proxies are authorized to vote in accordance with their best judgment. THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS SET FORTH ABOVE OR, TO THE EXTENT NO CONTRARY DIRECTION IS INDICATED, WILL BE TREATED AS A GRANT OF AUTHORITY TO VOTE FOR ALL PROPOSALS. IF ANY OTHER BUSINESS IS PRESENTED AT THE ANNUAL MEETING, THIS PROXY CONFERS AUTHORITY TO AND SHALL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE PROXIES. The undersigned acknowledges receipt of a copy of the Notice of Annual Meeting and accompanying Proxy Statement dated May 28, 2007, relating to the Annual Meeting. Dated:___________________________, 2007 Signature:_____________________________ Signature:_____________________________ Signature(s) of Stockholder(s) (See Instructions Below) The Signature(s) hereon should correspond exactly with the name(s) of the Stockholder(s) appearing on the Share Certificate. If stock is held jointly, all joint owners should sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If signer is a corporation, please sign the full corporation name, and give title of signing officer. |_| Please indicate by checking this box if you anticipate attending the Annual Meeting. PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE OR FAX DIRECTLY TO STALT, INC. AT (650) 321-7113.