UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the Quarterly Period Ended
or
For the Transition Period from _________ to _________
Commission
file number:
YERBAÉ BRANDS CORP.
(Exact name of registrant as specified in its charter)
(State or other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
(Address of Principal Executive Offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading symbol(s) | Name of exchange on which registered | ||
None | N/A | N/A |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a small reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
Emerging growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act:
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of May 19, 2025, there were shares of the registrant’s common stock outstanding.
YERBAÉ BRANDS CORP.
FORM 10-Q
FOR THE THREE MONTHS ENDED MARCH 31, 2025
TABLE OF CONTENTS
2 |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
YERBAÉ BRANDS CORP.
UNAUDITED CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS
(In United States dollars, except share data)
March 31, | December 31, | |||||||
2025 | 2024 | |||||||
CURRENT ASSETS | ||||||||
Cash | $ | $ | ||||||
Accounts receivable | ||||||||
Inventory | ||||||||
Prepaid expenses | ||||||||
Other current assets | ||||||||
Total current assets | $ | $ | ||||||
NONCURRENT ASSETS | ||||||||
Property, plant and equipment, net | ||||||||
Right of use asset | ||||||||
Total noncurrent assets | $ | $ | ||||||
Total assets | $ | $ | ||||||
CURRENT LIABILITIES | ||||||||
Accounts payable | $ | $ | ||||||
Accrued expenses | ||||||||
Notes payable, current portion | ||||||||
Note payable, related party | ||||||||
Lease liability, current portion | ||||||||
Advances | ||||||||
Total current liabilities | $ | $ | ||||||
NONCURRENT LIABILITIES | ||||||||
Notes payable, non-current portion | ||||||||
Lease liability, non-current portion | ||||||||
Total noncurrent liabilities | $ | $ | ||||||
Total liabilities | $ | $ | ||||||
EQUITY | ||||||||
Preferred shares - authorized, issued and outstanding as of both March 31, 2025 and December 31, 2024. | $ | $ | ||||||
Common shares - without par value, and shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively. | ||||||||
Additional paid-in capital | ||||||||
Accumulated deficit | ( | ) | ( | ) | ||||
Total deficiency | $ | ( | ) | $ | ( | ) | ||
Total Liabilities & shareholders’ deficiency | $ | $ |
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
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YERBAÉ BRANDS CORP.
UNAUDITED CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
(In United States dollars, except share data)
For the Three Months Ended March 31, | ||||||||
2025 | 2024 | |||||||
Revenues | $ | $ | ||||||
Cost of sales | ||||||||
Gross profit | $ | $ | ||||||
General and administrative | $ | $ | ||||||
Sales, advertising and marketing | ||||||||
Total expenses | $ | $ | ||||||
Net loss before other income (expense) | ( | ) | ( | ) | ||||
Other (expense) income | ||||||||
Interest income | ||||||||
Interest expense | ( | ) | ( | ) | ||||
Total other (expense) income | ( | ) | ( | ) | ||||
Net loss before income taxes | ( | ) | ( | ) | ||||
Income tax expense | ||||||||
Net loss and comprehensive loss | $ | ( | ) | $ | ( | ) | ||
Basic and diluted loss per share | $ | ) | $ | ) | ||||
Basic and diluted weighted average shares outstanding |
The accompanying notes are an integral part of these consolidated interim financial statements.
4 |
YERBAÉ BRANDS CORP.
UNAUDITED CONDENSED INTERIM STATEMENT OF SHAREHOLDERS’ DEFICIENCY
FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND MARCH 31, 2024
(In United States dollars, except share data)
Common Stock | Additional Paid-In | Accumulated | ||||||||||||||||||
Shares | Amount | Capital | Deficit | Total | ||||||||||||||||
Balance, December 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
Exercise of warrants | ||||||||||||||||||||
Stock compensation expense | ||||||||||||||||||||
Net loss | - | ( | ) | ( | ) | |||||||||||||||
Balance, March 31, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
Balance, December 31, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
Stock compensation expense | 2,837,641 | |||||||||||||||||||
Net loss | - | ( | ) | ( | ) | |||||||||||||||
Balance, March 31, 2025 | $ | $ | $ | ( | ) | $ | ( | ) |
The accompanying notes are an integral part of these consolidated interim financial statements.
5 |
YERBAÉ BRANDS CORP.
UNAUDITED CONDENSED INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
(In United States dollars)
For the Three Months Ended March 31, | ||||||||
2025 | 2024 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | ( | ) | $ | ( | ) | ||
Adjustment to reconcile net loss to net cash used in operating activities: | ||||||||
Share-based compensation | ||||||||
Performance shares granted upon consummation of RTO | ||||||||
Depreciation and amortization | ||||||||
Gain on sale of equipment | ( | ) | ||||||
Interest expense | ||||||||
Lease expense | ( | ) | ( | ) | ||||
Accretion expense | ||||||||
Change in operating assets and liabilities: | ||||||||
Accounts receivable | ||||||||
Inventory | ( | ) | ( | ) | ||||
Prepaid expenses | ||||||||
Accounts payable | ( | ) | ||||||
Accrued interest | ||||||||
Accrued expenses | ( | ) | ||||||
Net cash used in operating activities | ( | ) | ( | ) | ||||
Cash flows from investing activities: | ||||||||
Proceeds from the sale of equipment | ( | ) | ||||||
Net cash flows provided by investing activities: | ( | ) | ||||||
Cash flows from financing activities: | ||||||||
Proceeds from debt instruments and notes payable | ||||||||
Payments on debt instruments and notes payable | ( | ) | ( | ) | ||||
Proceeds from note - related party | ||||||||
Warrants exercised | ||||||||
Advances from Safety Shot | ||||||||
Fees on Convertible note | ||||||||
Proceeds from issuance of common stock and warrants | ||||||||
Net cash flows provided by (used in) financing activities: | ||||||||
Net change in cash | ( | ) | ||||||
Cash, beginning of period | ||||||||
Cash, end of period | $ | $ | ||||||
Supplemental disclosure of cash flow information | ||||||||
Cash paid for interest | $ | ( | ) | $ | ( | ) |
The accompanying notes are an integral part of these consolidated interim financial statements.
6 |
YERBAÉ BRANDS CORP.
NOTES TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2025
(Unaudited)
NOTE 1 - NATURE AND DESCRIPTION OF BUSINESS
Yerbaé
Brands Corp. (“Yerbaé” and, together with its subsidiary, the “Company”, “we”, or “us”)
is a corporation existing under the Business Corporations Act (British Columbia) (“BCBCA”). Yerbaé’s
principal subsidiaries are Yerbaé Brands Co. (“Yerbaé USA”) and Yerbaé LLC of which Yerbaé owns
On May 19, 2022, Yerbaé (formerly Kona Bay Technologies Inc. (“Kona Bay”)) entered into a definitive arrangement agreement and plan of merger, as amended on August 31, 2022 and February 8, 2023, with Yerbaé USA, Kona Bay Technologies (Delaware) Inc. (“Merger Sub”), a wholly-owned Delaware subsidiary of the Company, 1362283 B.C. Ltd. (“FinCo”), a wholly-owned British Columbia subsidiary of Kona Bay, Todd Gibson and Karrie Gibson, pursuant to which Kona Bay proposed to complete a business combination with Yerbaé USA via the acquisition of all of the issued and outstanding securities of Yerbaé USA from the securityholders (collectively, the “Original Yerbaé Securityholders”) of Yerbaé USA (the “Kona Bay Transaction”). The Kona Bay Transaction was subject to the approval of the TSX Venture Exchange (“TSXV”) and constituted a reverse takeover of Kona Bay by Yerbaé USA as defined in TSXV Policy 5.2 – Change of Business and Reverse Takeovers.
On February 8, 2023, Yerbaé completed the Kona Bay Transaction with Yerbaé USA by way of a reverse merger conducted pursuant to: (i) the provisions of the Delaware General Corporations Law (“DGCL”) in which Merger Sub merged with and into Yerbaé USA, and (ii) a plan of arrangement conducted pursuant to the provisions of the BCBCA, which resulted in the amalgamation of Kona Bay with FinCo. In connection with the closing of the Kona Bay Transaction, Yerbaé (formerly, Kona Bay Technologies Inc.) consolidated its issued and outstanding common shares (each, a “Common Share”) on the basis of 5.8 pre-consolidation Common Shares every one post-consolidation Common Share and changed its name from “Kona Bay Technologies Inc.” to “Yerbaé Brands Corp.”
On January 7, 2025, Yerbaé entered into a definitive Arrangement Agreement with Safety Shot, pursuant to which, among other things, Safety Shot will acquire all of the issued and outstanding common shares of Yerbaé. The Arrangement will be implemented by way of a plan of arrangement in accordance with the Business Corporations Act and is subject to approval by the Supreme Court of British Columbia, the stockholders of Safety Shot and the shareholders of Yerbaé, and subject to other customary closing conditions for a transaction of this nature and size. The Arrangement has not been consummated as May 20, 2025.
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and include Yerbaé and its subsidiaries and include the accounts of all majority owned subsidiaries over which the Company exercises control and, when applicable, entities in which the Company has a controlling financial interest. All intercompany balances and transactions have been eliminated in consolidation. The Company had the following wholly owned consolidated subsidiaries as of March 31, 2025:
Subsidiary | Date of Incorporation | Jurisdiction of Incorporation | Ownership Percentage | Direct or Indirect Ownership | ||||
Yerbaé Brands Co. | ||||||||
Yerbaé LLC(1) |
(1) |
These unaudited condensed interim consolidated financial statements should be read in conjunction with the company’s latest consolidated annual financial statements for the period ended December 31, 2024 that was filed with the SEC on March 10, 2025. In general, disclosure provided in these unaudited condensed interim consolidated financial statements do not repeat the disclosure provided in the Company’s most recent audited consolidated annual financial statements. However, these unaudited condensed interim consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim period presented.
7 |
Going Concern
Yerbaé’s evaluation of its ability to continue as a going concern requires evaluation of future sources and uses of cash and whether it is sufficient to fund its currently expected operations in conducting business activities one year from the date its consolidated financial statements are issued. Yerbaé evaluates the probability associated with each source and use of cash resources in making its going concern determination.
Management believes that it is probable that the Company will be unable to meet its obligations as they come due within one year after the date that the financial statements are issued. As described above, on January 7, 2025, Yerbaé entered into a definitive Arrangement Agreement with Safety Shot, pursuant to which, among other things, Safety Shot will acquire all of the issued and outstanding common shares of Yerbaé. The arrangement was not yet consummated as of the date of this filing.
However, as a result of the Company’s recurring losses from operations, and the need for additional financing to fund its operating and capital requirements within one year after the date that the financial statements are issued, there is uncertainty regarding the Company’s ability to maintain liquidity sufficient to operate its business effectively, which raises substantial doubt as to the Company’s ability to continue as a going concern.
Management Estimates
The preparation of consolidated financial statements in accordance with U.S. GAAP requires the use of estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates are based on historical experience and various other assumptions that management believes to be reasonable under the circumstances, including the potential future effects of macroeconomic trends and events, such as inflation and interest rate levels; supply chain disruptions; uncertainty from potential recessionary effects; climate-related matters; market, industry and regulatory factors, including permitting issues; global events, such as the ongoing military conflicts in Ukraine and Palestine; and public health matters. These estimates form the basis for making judgments about the Company’s operating results and the carrying values of assets and liabilities that are not readily apparent from other sources. While management believes that such estimates are reasonable when considered in conjunction with the Company’s consolidated financial position and results of operations taken as a whole, actual results could differ materially from these estimates.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General Note
In accordance with Rule 10-01(a)(5) of Regulation S-X, the Company has not provided summary of significant accounting policy disclosure which would substantially duplicate the disclosure contained in our most recent annual report included in our Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 10, 2025.
8 |
Fair Value Measurement
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
Level 1: Observable inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets and liabilities in active markets, or quoted prices for identical assets and liabilities in markets that are not active.
Level 3: Unobservable inputs that reflect our own assumptions. While the Company does not have any financial instruments that are measured to fair value on a recurring or non-recurring basis, it does have financial instruments, such as cash, notes payable (current, non-current portion, and related party), accounts payable, and lease liability ( current and non-current portion) as of both March 31, 2025, and December 31, 2024. The fair value of the cash is equal to its carrying value due to the short-term nature and liquidity of the instrument. Similarly, the fair value of the notes payable (current portion, and related party), advance, lease liability (current portion), and accounts payable, which are categorized as level 3 instruments, are also equal to their carrying value due to their short-term nature.
The Company’s financial instruments as of March 31, 2025 included cash, accounts receivable, accounts payable, related party notes payable and notes payable. The stated amounts of cash, accounts receivable and accounts payable represent fair value due to the short-term nature of the instruments. Further, the stated amount of the related party notes payable and notes payable, which are classified as level 3 instruments, also represent fair value due to the notes being issued at currently prevailing market rates.
Notes Payable
The Company recognizes its note payables in accordance with the guidance in ASC 470, Debt. When there is no stated interest rate on the note payable, or the note payable includes an original issue discount, the Company determines the interest rate utilizing the interest method outlined in ASC 835, Interest. In accordance with the ASC topic, original issue discounts are recognized as a debt discount and amortized to interest expense over the estimated life of the loan. Finally, note payables are classified as either current or non-current in accordance with the guidance in ASC 210 Balance Sheet and ASC 470 Debt.
9 |
Segment Reporting
The Company’s operating segments are reported in a manner consistent with internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Executive Officer (“CEO”). In addition to requiring certain information about operating segments, ASC 280 also requires that entities report certain information about their products and services, the geographic areas in which they operate, and their major customers.
Currently, the Company conducts its business within a single operating segment. Further, the Company does not have any long-lived assets located outside of the United States.
Recent Accounting Pronouncements
Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures-In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. Additionally, it requires a public entity to disclose the title and position of the Chief Operating Decision Maker (“CODM”). The ASU does not change how a public entity identifies its operating segments, aggregates them, or applies the quantitative thresholds to determine its reportable segments. The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. A public entity should apply the amendments in this ASU retrospectively to all prior periods presented in the financial statements. Yerbaé adopted the ASU beginning with its Form 10-K for the year ended December 31, 2024. However, the adoption of the new standard did not have a material impact on the requisite disclosure in its financial statements.
Income Taxes (Topic 740): Improvements to Income Tax Disclosures-In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which focuses on the reconciliation rate and income taxes paid. ASU No. 2023-09 requires a public business entity (“PBE”) to disclose, on an annual basis, a tabular rate reconciliation using both percentages and currency amounts, broken out into specified categories with certain reconciling items further broken out by nature and jurisdiction to the extent those items exceed a specified threshold. In addition, all entities are required to disclose income taxes paid, net of refunds received disaggregated by federal, state/local, and foreign and by jurisdiction if the amount is at least 5% of total income tax payments, net of refunds received. For PBEs, the new standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted. An entity may apply the amendments in this ASU prospectively by providing the revised disclosures for the period ending December 31, 2025, and continuing to provide the pre-ASU disclosures for the prior periods or may apply the amendments retrospectively by providing the revised disclosures for all period presented. Yerbaé expects this ASU to only impact its disclosures with no impact to the Company’s results of operations, cash flows, and financial condition.
Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40). The amendments in this Update require a public business entity to disclose specific information about certain costs and expenses in the notes to its financial statements for interim and annual reporting periods. The objective of the disclosure requirements is to provide disaggregated information about a public business entity’s expenses to help investors (a) better understand the entity’s performance, (b) better assess the entity’s prospects for future cash flows, and (c) compare an entity’s performance over time and with that of other entities. Public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. The Company is still assessing the new standard but does not believe it will have a material impact on its financial statements.
NOTE 3 - REVENUE FROM CONTRACTS WITH CUSTOMERS
The Company is in the business of manufacturing plant-based beverages and derives its revenues from one primary source-product sales. Revenue from contracts with customers is recognized when control of the goods are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods.
10 |
The Company recognizes revenue in accordance with the five-step model outlined in ASC 606-Revenue from Contracts with Customers. Specifically, the Company recognizes revenue from the sale of Yerbaé product to our customers by applying the following steps:
1. | Identify the contract(s) with a customer | |
2. | Identify the performance obligations in the contract | |
3. | Determine the transaction price | |
4. | Allocate the transaction price to the performance obligations in the contract | |
5. | Recognize revenue when (or as) the entity satisfies a performance obligation |
The Company’s contracts with customers contain a single performance obligation consisting of providing Yerbaé energy drinks. As it pertains to the single performance obligation, the Company does not recognize any contract assets or contract liabilities as it does not: (1) have a right to consideration in exchange for goods or services that the entity has transferred to a customer when the right is conditioned on something other than the passage or (2) receive payment prior to performing.
The Company typically satisfies its performance obligations at a point in time upon the occurrence of delivery of the product to the customer. Further, payment is typically received within 60 days after product delivery and does not include a significant financing component.
The Company’s contracts with customers include variable consideration including customer rebates and quick-pay discounts. The Company estimates variable consideration, which it does not consider to be constrained, using either the most likely amount or expected value methods depending on the type of variable consideration.
The Company only provides refunds for products that are damaged during delivery to the customer. However, instances of refunds are rare and have not historically had a material impact on the Company’s results of operations. Finally, Yerbaé has made an accounting policy election to exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the entity from a customer.
In addition to variable consideration, the Company also provides payments to certain customers for slotting fees. In accordance with the guidance in ASC 606-10-32, the Company determined that the payment is not in exchange for a distinct good or service and it is therefore recognized as a reduction to the transaction price. As the slotting fee payment covers the life of the contract with a customer, the initial payment is recognized as an asset and is amortized as a reduction to revenue on a rational and reasonable basis over the estimated life of the contract.
Costs to Obtain a Contract with a Customer
The Company does not recognize any assets related to either costs to obtain or fulfill a contract with a customer. We incur certain delivery costs prior to transferring control of Yerbaé product to the customers (i.e. outbound freight). In accordance with the guidance in ASC 606-10-25, those costs are recognized as a fulfillment cost as they are provided prior to transferring control of the Yerbaé product to the customer (i.e. akin to shipping and handling). Further, the costs are classified in general and administrative within the consolidated statement of operations and comprehensive loss.
11 |
NOTE 4 - INVENTORY
Inventory consisted of the following as of:
March 31, 2025 | December 31, 2024 | |||||||
Raw material | $ | $ | ||||||
Finished goods | ||||||||
Reserve for shrinkage | ( | ) | ( | ) | ||||
TOTAL | $ | $ |
NOTE 5 – PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and consist primarily of vehicles. Depreciation is computed on a straight-line method over an estimated useful life of the asset of approximately five years.
March 31, 2025 | December 31, 2024 | |||||||
Vehicles, gross | $ | $ | ||||||
Vehicles, accumulated depreciation | ( | ) | ( | ) | ||||
Vehicles, net | $ | $ |
Depreciation
expense totaled $
NOTE 6 – ACCRUED EXPENSES
Accrued expenses consisted of the following as of:
March 31, 2025 | December 31, 2024 | |||||||
Accrued employee bonuses and payroll | $ | $ | ||||||
Accrued retention bonuses | ||||||||
Accrued credit card expenses | ||||||||
Accrued interest | ||||||||
Other accrued expenses | ||||||||
TOTAL | $ | $ |
12 |
NOTE 7 – NOTES PAYABLE
Notes payable consisted of the following:
March 31, 2025 | December 31, 2024 | |||||||
Convertible notes payable to
multiple investors in the amount of $ | ||||||||
Various notes payable in | ||||||||
Note payable to MaximCash Solutions for
$ | ||||||||
Note payable to MaximCash Solutions for
$ | ||||||||
Note payable to an investor for $ | ||||||||
Note payable to an investor for $ | ||||||||
Note payable to an investor for $ | ||||||||
Related party note payable to a director
of the Company for $ | ||||||||
Related party note
payable to a director of the Company for $ | ||||||||
Total notes payable | ||||||||
Less current maturities | ( | ) | ( | ) | ||||
Total notes payable, non-current portion | $ | $ |
Loans Issued During the Three Months Ended March 31, 2025
On
January 29, 2025, the Company entered into a loan agreement with MaximCash Solutions (“MaximCash”) for $
Loans Issued Prior to 2025
Convertible Notes
On
April 13, 2023, Yerbaé closed the first tranche (the “First Tranche”) of its brokered debenture unit (each, a “Debenture
Unit”) offering which consisted of
13 |
Each
Debenture Unit consisted of: (i) one (1) convertible debenture (each, a “Debenture”) in the principal amount of $
In
accounting for the Debentures, the Company concluded the conversion option should not be bi-furcated from the debt host as it was
considered indexed to the company’s stock in accordance with ASC 815-40. Further, the Company also concluded that the
detachable warrants should be classified in equity as they: (1) were not within the scope of ASC 480-10; and (2) should be
considered indexed to the Company’s Common Shares. In accordance with ASC 470-20, the Company recognized both the Debentures
and detachable warrants at their relative fair values. This resulted in the recognition of a debt discount that is being amortized
to interest expense over the life of the Debenture Units. During the three months ended March 31, 2025 and 2024, the Company
recorded accretion expense of $
Motor Vehicle Loan
During
2023, the Company entered into various notes payable related to vehicles with monthly instalments ranging from $
Unrelated Third-Party Loans
On
September 16, 2024, the Company entered into an agreement with a private lender whereby the lender originally agreed to loan an aggregate
of up to $
On
August 26, 2024, the Company entered into an agreement with a lender whereby the lender agreed to loan an aggregate of up to $
On
July 5, 2024, the Company entered into a loan agreement with MaximCash solutions for $
The
loan was to mature on
14 |
During
June of 2024, the Company entered into a loan agreement with Parafin for $
Future principal maturities of notes payable at March 31, 2025 were as follows:
2025 remainder | $ | |||
2026 | ||||
Total payments | $ | |||
Debt discount | ( | ) | ||
Balance | $ |
Advances
Pursuant
to the Arrangement Agreement with Safety Shot, short-term operating cash advances are to be made available to the Company. During the
three months ended March 31, 2025, the Company received short-term operating cash totaling $
Related Party Loans
These loans are described in Note 10.
Yerbaé is authorized to issue an number of Common Shares without par value and preferred shares (each, a “Preferred Share”) without par value.
For the interim period ended March 31, 2025, and annual period ended December 31, 2024, the Company had the following equity transactions:
On
January 16, 2024, the Company issued, in connection with the exercise by one eligible warrant holder (the “Eligible Holder”)
who participated in the Company’s warrant exercise incentive program an aggregate of
On
January 22, 2024, the Company issued, in connection with the exercise by one eligible warrant holder, an aggregate of
On
January 30, 2024, the Company issued, in connection with the exercise by one eligible warrant holder, an aggregate of
15 |
On March 12, 2024, the Company issued an aggregate of Common Shares at a deemed issue price of $ pursuant to the vesting of certain performance share units (each, a “PSU”) and restricted share units (each, a “RSU”), as to PSUs and RSUs.
On
April 8, 2024, the Company issued an aggregate of
On October 3, 2024, the Company issued common shares at a fair value of $ per common share pursuant to a loan agreement with Maximcash solutions (see Note 7).
During the three months ended March 31, 2025, there were no warrant issuances, expirations or exercises.
During the three months ended March 31, 2025, common shares were issued for the vesting of various stock awards granted.
During the three months ended March 31, 2025 and 2024, the Company recognized share-based compensation of $
and $ , respectively.
Equity Awards
On
February 13, 2025, the Company granted
Performance Shares
During the three months ended March 31, 2023, the Company granted an aggregate 5 million Performance Shares to the CEO and COO upon consummation of the Transaction. These Performance Shares are held in escrow and are to be released upon the completion of certain performance-based incentives related to the listing of the Common Shares on the TSX Venture Exchange (“TSXV”), future equity financings, and certain trailing gross revenue targets. As of March 31, 2025, million performance shares have been released and the remainder are still in escrow as not all of the performance criteria have been achieved.
For the Three Months Ended March 31, | ||||||||
2025 | 2024 | |||||||
Net loss | $ | ( | ) | $ | ( | ) | ||
Basic and diluted weighted average number of Common Shares in issue | ||||||||
Basic and diluted loss per share | $ | ) | $ | ) |
As At | ||||
March 31, 2025 | ||||
Restricted stock units outstanding(1) | ||||
Performance share units outstanding(1) | ||||
Performance shares | ||||
Stock options outstanding | ||||
Warrants outstanding | ||||
Convertible debt |
(1) |
16 |
NOTE 10 – RELATED PARTIES
On
July 1, 2024, the Company entered into a loan agreement with a director of the Company, whereby the director loaned the Company $
On
August 26, 2024, the Company entered into a loan agreement with a director of the Company, whereby the director loaned the Company $
NOTE 11 - INCOME TAXES
The Company recognized pre-tax accounting losses for the three months ended March 31, 2025 and 2024. As of March 31, 2025, any deferred tax assets, which have been recognized primarily as a result of loss carry forwards, have been fully offset by a valuation allowance. As such, for the three months ended March 31, 2025, there were no significant variations in the relationship between income tax expense and pretax accounting income.
NOTE 12 - COST OF SALES
Cost of sales is primarily comprised of materials, including in-bound freight, and rent related to the Company’s manufacturing facilities. The breakdown for the items within costs of sales was the following for the periods presented:
For the Three Months Ended March 31, | ||||||||
2025 | 2024 | |||||||
Materials | $ | $ | ||||||
Warehouse rent (non-lease) | ||||||||
Cost of goods sold | $ | $ |
NOTE 13 – GENERAL AND ADMINISTRATIVE
General and administrative consisted of the following expenses during the periods presented:
For the Three Months Ended March 31, | ||||||||
2025 | 2024 | |||||||
Share-based compensation | $ | $ | ||||||
Outbound freight | ||||||||
Employee benefits | ||||||||
Professional fees | ||||||||
Office expenses | ||||||||
Other | ||||||||
Total general and administrative expenses | $ | $ |
NOTE 14 - COMMITMENTS & CONTINGENCIES
Litigation
During the ordinary course of the Company’s business, it is subject to various claims and litigation. Management believes that the outcome of such claims or litigation will not have a material adverse effect on the Company’s unaudited condensed interim consolidated financial position, results of operations or cash flow.
Commitments
The Company has unconditional purchase obligations for certain raw materials, such as ingredients and bottles. However, none of the contracts related to the purchase obligations are entered into for a period greater than one year.
NOTE 15 - SUBSEQUENT EVENTS
On January 7, 2025, the Company entered into the Arrangement Agreement with Safety Shot, a Delaware corporation, pursuant to which, among other things, Safety Shot will acquire all of the issued and outstanding common shares of Yerbaé. The Arrangement will be implemented by way of a plan of arrangement in accordance with the Business Corporations Act (British Columbia) and is subject to approval by the Supreme Court of British Columbia, the stockholders of Safety Shot and the shareholders of Yerbaé, and subject to other customary closing conditions for a transaction of this nature and size. The merger between the two entities was not yet consummated as of the date of this filing. The company has set a formal meeting and proxy voting date of June the 12th 2025, at 10:00 am PST for a meeting to be held at the corporate office address of 18801 n Thompson peak parkway, Suite 380, Scottsdale AZ 85255. The meeting will also be conducted in a virtual format via the Zoom application to enhance accessibility for shareholders. Additional information regarding the Arrangement was included in the Company’s Form 8-K filed with the SEC on January 8, 2025.
17 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes a number of forward-looking statements that reflect management’s current views with respect to future events and financial performance. Forward-looking statements are projections in respect of future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology. These statements include statements regarding the intent, belief or current expectations of us and members of our management team, as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks set forth in the section entitled “Risk Factors” in our Form 10-K, as filed with the U.S. SEC on March 10, 2025, any of which may cause our Company’s or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied in our forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, or performance. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Readers should carefully review and consider the various disclosures made by us in the Form 10-K filed with the SEC on March 10, 2025, this report and in our other reports filed with the SEC. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in the future operating results over time except as required by law. We believe that our assumptions are based upon reasonable data derived from and known about our business and operations. No assurances are made that actual results of operations or the results of our future activities will not differ materially from our assumptions.
Use of United States Generally Accepted Accounting Principles (“GAAP”) Financial Measures
We use United States GAAP financial measures, unless otherwise noted. All of the GAAP financial measures used by us in this report relate to the inclusion of financial information. This discussion and analysis should be read in conjunction with our financial statements and the notes thereto included elsewhere in this quarterly report. All references to dollar amount in this section are in United States dollars, unless expressly stated otherwise.
Overview
Yerbaé is engaged in the development, marketing, sale, and distribution of plant-based energy beverages that do not contain calories, carbohydrates, or sugar. Yerbaé’s line of beverages are blended with non-GMO plant-based ingredients and offer the benefits of yerba mate and white tea; sustainably sourced from Brazil and other growing regions in South America.
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Yerbaé beverages are created to provide products targeted at consumers focused on health, wellness, and fitness and seeking healthier beverages as an alternative to existing energy drinks. The products are formulated to provide a more refreshing taste than coffee, with additional benefits to existing sodas and sparkling waters, along with healthier ingredients than traditional energy drinks. Yerbaé’s products complement a variety of healthy lifestyles, such as non-GMO, Keto, Vegan, Kosher, Paleo and gluten-free diets.
The accompanying interim consolidated financial statements have been prepared on the basis that assumes that we will continue as a going concern and that contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. We had an accumulated deficit of $48.4 million and $45.1 million as of March 31, 2025, and December 31, 2024, respectively. Further, we had cash and cash equivalents of approximately $0.5 million and $0.1 million as of March 31, 2025, and December 31, 2024, respectively. Our primary focus in recent months has been and will continue to be supporting the manufacturing of its products which requires capital and resources. We expect that our operating losses and negative cash flows will continue for the foreseeable future. Based on our company’s currently available cash resources, current and forecasted level of operations, and forecasted cash flows for the 12-month period subsequent to the date of issuance of these interim consolidated financial statements, we will require additional funding to continue to progress its operational obligations as they come due. These factors raise substantial doubt about our company’s ability to continue as a going concern.
Our ability to continue as a going concern is dependent upon our ability to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due, and to generate profitable operations in the future. Management plans to provide for our company’s capital requirements through financing, operations, or other transactions, including third party loans.
Management’s discussion and analysis of financial condition and results of operations
Liquidity and Capital Resources
As of March 31, 2025, and December 31, 2024, we had a working capital deficit of $8.0 million and $6.4 million, respectively. We have incurred losses since inception and as of March 31, 2025 and December 31, 2024, had an accumulated deficit of approximately $48.4 million and $45.1 million, respectively. Our objective in managing our capital is to ensure that there is sufficient liquidity to finance and grow our operations, maximize the preservation of capital, provide adequate capital to fund our business objectives, and deliver competitive returns on invested capital. To fund our activities, we have primarily relied on private placement financing, warrant exercises, loans and other forms of debt. The material debt financing and loan transactions were as follows:
Notes Payable
Convertible Notes
During 2023, convertible notes payable were issued in the amount of $3,802,000 with a stated interest rate of 6.00%. The convertible notes were unsecured and are due on April 30, 2025. The balance, net of debt discount, of the convertible notes as of March 31, 2025, and December 31, 2024, was $3,153,614 and $2,937,805, respectively. Subsequent to the end of the reporting period, the original maturity date of April 30, 2025 was extended by ninety days to July 30, 2025.
Motor Vehicle Loan
During 2023, the Company entered into various notes payable related to vehicles with monthly instalments ranging from $543 to $652, including interest ranging from 2.90% to 5.49%, due October 2026. The notes are secured by vehicles. There were no changes to the terms of these loans. During the three months ended March 31, 2025, the Company sold a vehicle for $16,000 the net book value of the asset was $12,398 resulting in a gain on the sale of $3,602 which was recorded in general and administrative in the condensed interim consolidated statement of operations. All other changes to the balance was due to repayment.
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Unrelated Third-Party Loans
On September 16, 2024, the Company entered into an agreement with a private lender whereby the lender originally agreed to loan an aggregate of up to $540,000. The loan matures on August 16, 2025. The balance of the loan was $520,000 net of discounts and repayments as of March 31, 2025 and had an effective interest rate of approximately 8.0%.
On August 26, 2024, the Company entered into an agreement with a lender whereby the lender agreed to loan an aggregate of up to $60,000. The loan matured on February 26, 2025. The balance of the loan was $60,000 as of March 31, 2025 and had an effective interest rate of approximately 16.7%. Subsequent to the end of the reporting period, the maturity date of loan was extended from Feb 2025 to June 15, 2025.
On July 5, 2024, the Company entered into a loan agreement with MaximCash Solutions (“MaximCash”) for $750,000. The loan included origination costs of $22,500. In addition, the Company agreed to issue the lender common stock with a fair value of $64,285 of the Company for a total discount of $86,786. The loan had an effective interest rate of 42%. The loan was to mature on July 5, 2025. During the three months ended March 31, 2025, the Company entered into a new facility agreement with the lender resulting in the payoff of this facility.
On January 29, 2025, the Company entered into a loan agreement with MaximCash for $1,000,000. The loan included an origination cost of $30,000. The loan matures on January 29, 2026. A portion of the proceeds from this loan in the amount of $407,392 was used to pay down the existing facility with MaximCash that was set to mature on June 11, 2025. In accordance with ASC 470-50, Modification and Extinguishments, the Company concluded that the exchange should be considered a debt extinguishment as the original and new loan were made on substantially different terms. In accordance with the ASC subtopic, the Company recognized a $30,000 loss on the exchange. The balance of the loan was $874,708 net of discounts and repayments as of March 31, 2025 and had an effective interest rate of 27%.
During June of 2024, the Company entered into a loan agreement with Parafin for $230,000 and stated fee of $30,000; of which $59,523 was paid during period. This stated fee is treated as interest and amortized over the term of the loan. The loan agreement includes a payment rate of 15% of the Company’s weekly sales over an 8-month period. The balance of the loan was $20,478, net of discounts and repayments as of March 31, 2025.
Advances
Pursuant to the Arrangement Agreement with Safety Shot, short-term operating cash advances are to be made available to the Company. During the three months ended March 31, 2025, the Company received short-term operating cash totaling $300,000. The Company received advances totaling $225,000 during the year ended December 31, 2024, resulting in total advances of $525,000 as of March 31, 2025.
Related Party Loans
On July 1, 2024, the Company entered into a loan agreement with a director of the Company, whereby the director loaned the Company $330,000. The loan matures on June 15, 2025 and had an effective interest rate 10%. The net balance of the loan as of March 31, 2025, was $322,500 which includes accrued interest to the end of the period.
On August 26, 2024, the Company entered into a loan agreement with a director of the Company, whereby the director loaned the Company $24,000 with an effective rate of 16.7%. The loan matured on February 26, 2025. The balance of the loan as of March 31, 2025, was $24,000. Subsequent to the end of the reporting period, the maturity date of loan was extended from Feb 2025 to June 15, 2025.
Warrant Exercise and Expiration
On January 16, 2024, the Company issued, in connection with the exercise by one eligible warrant holder (the “Eligible Holder”) who participated in the Company’s warrant exercise incentive program an aggregate of 835,000 Warrants for aggregate proceeds to the Company of $1,002,000, and an aggregate of 835,000 warrants (each, an “Incentive Warrant”) to the Eligible Holder. The Incentive Warrants are exercisable into the same number of common shares of the Company at an exercise price of $1.50 per common share until December 14, 2025, subject to an acceleration provision whereby, if for any thirty (30) consecutive trading days (the “Premium Trading Days”) following the repricing the closing price of the common shares exceeds $2.50 per common share, the Incentive Warrants’ expiry date will be accelerated such that holders will have thirty (30) calendar days to exercise the Incentive Warrants (if they have not first expired in the normal course) (the “Acceleration Clause”). In accordance with the guidance in ASC 815-40-35, the Company determined that the exchange was related to equity financing (i.e. the inducement of the existing warrants) and therefore recognized the $133,600 excess in fair value of the exchanged instrument over the fair value of the instrument immediately before it was exchanged as an equity issuance cost.
20 |
On January 22, 2024, the Company issued, in connection with the exercise by one eligible warrant holder, an aggregate of 263,157 Common Shares for aggregate proceeds to the Company of $249,980.
On January 30, 2024, the Company issued, in connection with the exercise by one eligible warrant holder, an aggregate of 352,941 Common Shares for aggregate proceeds to the Company of $300,000.
On March 12, 2024, the Company issued an aggregate of 1,493,908 Common Shares at a deemed issue price of $0.74 pursuant to the vesting of certain performance share units (each, a “PSU”) and restricted share units (each, a “RSU”), as to 685,867 PSUs and 808,041 RSUs.
On April 8, 2024, the Company issued an aggregate of 1,103,811 common shares and 1,103,811 share purchase warrants pursuant to the exercise and terms of 1,003,468 special warrants originally issued pursuant to the closing of a special warrants offering which closed on December 6, 2023. The proceeds of the special warrants of approximately $1.5 million were received on December 6, 2023 and no proceeds were received upon the exercise of the special warrants.
On October 3, 2024, the Company issued 214,835 common shares at a fair value of $0.30 per common share pursuant to a loan agreement with Maximcash solutions (see Note 7).
During the three months ended March 31, 2025, there were no warrant issuances, expirations or exercises.
Commitments
As discussed in our consolidated financial statements for the annual period ended December 31, 2024, the Company entered into an office lease agreement during December of 2022. The ongoing monthly payments are not expected to have a material impact on the Company’s financial condition.
The Company enters into unconditional purchase obligations for inventory items such as cans and product ingredients. However, these obligations are not entered into for a period greater than one year. The Company has not entered into any off-balance sheet arrangements.
Going Concern
Yerbaé’s evaluation of its ability to continue as a going concern requires it to evaluate its future sources and uses of cash sufficient to fund its currently expected operations in conducting business activities one year from the date the financial statements are issued. Yerbaé evaluates the probability associated with each source and use of cash resources in making its going concern determination.
Due to our recurring losses, the ongoing challenging market conditions for beverage companies and our limited cash balance as of March 31, 2025, management believes that it is probable that we will be unable to meet our obligations as they come due within one year after the date that the audited consolidated financial statements are issued. While we are attempting to plan additional financing, which are intended to mitigate conditions or events that raise substantial doubt about our ability to continue as a going concern, those financings may not occur. If the financing does not occur, management will try and implement alternative arrangements, and such arrangements could have a potentially significant negative impact on the current net asset value of our company. These alternatives include: (1) raising additional capital by means other than those planned through equity and/or debt financing; and/or (2) entering into new commercial relationships to help fund future expenses.
As a result of our company’s recurring losses from operations, and the need for additional financing to fund its operating and capital requirements within one year after the date that the financial statements are issued, there is uncertainty regarding our ability to maintain liquidity sufficient to operate our business effectively, which raises substantial doubt as to our company’s ability to continue as a going concern.
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Cash Flows
The following tables summarize the results of the Company’s cash flows for the below respective periods:
For the Three Months Ended March 31, | ||||||||
2025 | 2024 | |||||||
Net cash provided by (used in): | ||||||||
Operating activities | $ | (212,062 | ) | $ | (1,846,228 | ) | ||
Investing activities | 16,000 | (857 | ) | |||||
Financing activities | 598,035 | 1,479,476 | ||||||
Net change in cash | $ | 401,973 | $ | (367,609 | ) |
Operating Activities
Net cash used in operating activities was approximately $0.2 million for the three months ended March 31, 2025, and was comprised of the net loss of $3.3 million and had net non-cash items totaling $2.1 million, consisting primarily of $1.7 million in share-based compensation expense, $0.2 million in accretion expense and $0.1 million in interest expense. Changes in operating assets and liabilities was $1.0 million, primarily consisting of a change in accounts receivable of $0.1 million, inventory of ($0.1) million, accounts payable of $0.7 million and accrued expenses of $0.2 million.
Net cash used in operating activities was approximately $1.8 million for the three months ended March 31, 2024 and was comprised of the net loss of $2.8 million and was primarily offset by net non-cash items totaling $1.1 million, consisting primarily of $0.9 million in share-based compensation expense and $0.2 million in accretion expense. Changes in operating assets and liabilities was ($0.2 million), primarily consisting of a change in accounts receivable of $0.4 million, inventory of ($0.4 million) and accounts payable of ($0.3 million).
Investing Activities
During the three months ended March 31, 2025, the Company sold a vehicle for $16,000.
The Company did not engage in any material investing activities during the three months ended March 31, 2024.
Financing Activities
Net cash provided by financing activities was $0.6 million for the three months ended March 31, 2025. For the three months ended March 31, 2025, these amounts consisted of net proceeds from debt instruments and advances of $1.3 million, partially offset by net payments on debt instruments and notes payable of $0.7 million.
Net cash provided by financing activities was $1.5 million for the three months ended March 31, 2024. For the three months ended March 31, 2024, these amounts consisted of net proceeds from the exercise of warrants of $1.6 million, proceeds from debt instruments and notes payable of $0.3 million and net payments on debt instruments and notes payable of $0.3 million.
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Results of Operations
Three months ended March 31, 2025, compared to three months ended March 31, 2024
The following tables set forth the Company’s results of operations for the periods presented. The comparison of financial results is not necessarily indicative of future results.
For the Three Months Ended March 31, | ||||||||
2025 | 2024 | |||||||
Revenues | $ | 1,213,883 | $ | 1,434,971 | ||||
Cost of sales | 703,684 | 620,262 | ||||||
Gross profit | $ | 510,199 | $ | 814,709 | ||||
General and administrative | $ | 3,192,573 | $ | 2,892,274 | ||||
Sales, advertising and marketing | 213,443 | 457,807 | ||||||
Total expenses | $ | 3,406,016 | $ | 3,350,081 | ||||
Net loss before other income (expense) | (2,895,817 | ) | (2,535,372 | ) | ||||
Other expense | (435,965 | ) | (258,337 | ) | ||||
Net loss before income taxes | (3,331,782 | ) | (2,793,709 | ) | ||||
Income tax expense | - | - | ||||||
Net loss and comprehensive loss | $ | (3,331,782 | ) | $ | (2,793,709 | ) |
Revenues
For the Three Months Ended March 31, | Change | |||||||||||||||
2025 | 2024 | $ | % | |||||||||||||
Revenues | $ | 1,213,883 | $ | 1,434,971 | $ | (221,088 | ) | -15 | % |
Yerbaé’s revenues declined by $0.2 million, or 15%, for the three months ended March 31, 2025, compared to the prior year. During the three months ended March 31, 2025, the Company adjusted its customer portfolio by discontinuing less profitable accounts, including previously announced exits from unprofitable and other high-slotting, low-volume retailers. This strategic shift contributed to the decrease in revenue for three-month period.
In 2024, the Company focused on developing retail partnerships aimed at improving gross margins and increasing shareholder value. Progress was made in key distribution channels, providing a foundation for future growth. Additionally, the Direct-to-Consumer segment was expanded with the introduction of new variety packs and increased brand visibility through social media influencers and digital advertising. The Company also strengthened its distributor network, adding 14 new distributors in the third quarter of 2024 to support growth initiatives for 2025 and beyond.
Revenues for the three months ended March 31, 2025 were further influenced by broader market conditions in the U.S. consumer packaged goods sector, including inflationary pressures.
Cost of Sales
For the Three Months Ended March 31, | Change | |||||||||||||||
2025 | 2024 | $ | % | |||||||||||||
Cost of sales | $ | 703,684 | $ | 620,262 | 83,422 | 13 | % |
23 |
Cost of sales is primarily comprised of product materials, ingredient costs, bottling, inbound freight, and other related expenses. Costs of sales increased by $0.1 million, or 13%, as compared to the same period in the prior year. The increase in cost of goods sold was primarily attributable to broad increases to material and production costs. The company participated in discounted promotional activity during the quarter that would have an impact on the company’s gross margin as well as the sale of short dated inventory to a liquidation company.
General and Administrative
For the Three Months Ended March 31, | Change | |||||||||||||||
2025 | 2024 | $ | % | |||||||||||||
General and administrative | $ | 3,192,573 | $ | 2,892,274 | 300,299 | 10 | % |
General and administrative expense included operational and administrative costs as detailed in the following table:
For the Three Months Ended March 31, | ||||||||
2025 | 2024 | |||||||
Share-based compensation | $ | 1,730,476 | $ | 944,865 | ||||
Outbound freight | 394,822 | 424,150 | ||||||
Employee benefits | 364,289 | 756,224 | ||||||
Professional fees | 417,166 | 260,742 | ||||||
Office expenses | 237,265 | 302,611 | ||||||
Other | 48,555 | 203,682 | ||||||
Total general and administrative expenses | $ | 3,192,573 | $ | 2,892,274 |
General and administrative expenses increased to $3.2 million for the three months ended March 31, 2025, as compared to $2.9 million for the prior comparable period. The increase was primarily due to increases in share-based compensation of $0.8 and professional fees of $0.2 million. These increases were partially offset by decreases in employee benefits of $0.4 million, office expenses of $0.1 million and other expense of $0.2 million.
Sales, Advertising and Marketing
For the Three Months Ended March 31, | Change | |||||||||||||||
2025 | 2024 | $ | % | |||||||||||||
Sales, advertising and marketing | $ | 213,443 | $ | 457,807 | (244,364 | ) | -53 | % |
Sales, advertising, and marketing expenses decreased to $0.2 million for the three months ended March 31, 2025, compared to $0.5 million for the three months ended March 31, 2024. The decrease was driven by a strategic evaluation of retailer performance, promotions, and growth initiatives. The Company reduced the number of promotions and discontinued programs that did not meet performance expectations, including paid pallet positions, slotting fees, and other sales initiatives. Additionally, the Company focused on optimizing digital targeting in its eCommerce channels, which has contributed to improved efficiency and performance.
Other Expense
For the Three Months Ended March 31, | Change | |||||||||||||||
2025 | 2024 | $ | % | |||||||||||||
Other expense | $ | 435,965 | $ | 258,337 | 177,628 | 69 | % |
Other expense includes interest income, interest expense and accretion expense related to. During the three months ended March 31, 2025, other expense totaled $0.4 million, comprised of accretion expense of $0.2 million related to the discount on the principal amount of $3,802,000 convertible debentures issued in 2023, $0.3 million of interest expense on various notes payable, partially offset by interest income of $0.1 million. During the three months ended March 31, 2024, other expense totaled $0.3 million, comprised of accretion expense of $0.2 million related to the discount on the principal amount of $3,802,000 convertible debentures issued in 2023 and $0.1 million of interest expense on various notes payable.
24 |
Critical Accounting Estimates
Refer to the Company’s critical accounting estimates section provided in its consolidated annual financial statements for the period ended December 31, 2024. There were no material updates or changes to the disclosure for the three-month period ended March 31, 2025.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not Applicable. As a smaller reporting company, we are not required to provide the information required by this Item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain a system of disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to provide reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures.
In designing and evaluating our disclosure controls and procedures, management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
The Company’s management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, as of the end of the period covered by this Report.
Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of March 31, 2025, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended March 31, 2025 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings
We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our Company or any of our subsidiaries, threatened against or affecting our Company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect. The Company has resolved all outstanding litigation involving the Company and there are no suits or cases pending in which the Company is a party.
On May 16, 2025, the Company initiated a civil action in the United States District Court for the District of Arizona against Mr. Carl Sweat, his affiliate Elite NIL Solutions LLC, and Classic City Collective, Inc. The complaint alleges breach of contract, tortious interference, and infringement of the Company's intellectual property rights. The Company seeks injunctive relief to prevent the use or disclosure of its property, monetary damages, and other appropriate remedies.
Item 1A. Risk Factors
Not Applicable. As a smaller reporting company, we are not required to provide the information required by this Item.
Item 2. Unregistered Sales of Equity Securities and Use Of Proceeds
There were no unregistered sales of the Company’s equity securities during the three months ended March 31, 2025.
Item 3. Defaults upon Senior Securities
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
None.
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Item 6. Exhibits
EXHIBIT INDEX
Exhibit | Incorporated by Reference | |||||
Number | Exhibit Description | Form | Exhibit | |||
10.1 | Gibson Loan Agreement | |||||
10.2 | Maximcash Solutions Loan Agreement | |||||
10.3*** | Private Lender Loan Agreement | |||||
10.4 | BEA Investment Loan Agreement | |||||
10.5 | Dratt Loan Agreement | |||||
10.6 | ||||||
31.1* | Rule 13a-14(a) / 15d-14(a) Certification of Chief Executive Officer. | |||||
31.2* | Rule 13a-14(a) / 15d-14(a) Certification of Chief Financial Officer. | |||||
32.1** | Section 1350 Certification of Chief Executive Officer. | |||||
32.2** | Section 1350 Certification of Chief Financial Officer. | |||||
101.INS* | Inline XBRL Instance Document | |||||
101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |||||
101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||||
101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | |||||
101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | |||||
101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |||||
104 | Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101) |
* Filed herewith.
** Furnished herewith.
*** Portions of the exhibit have been omitted
27 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
YERBAÉ BRANDS CORP.
By: | /s/ Todd Gibson | |
Todd Gibson | ||
Chief Executive Officer | ||
Date: | May 20, 2025 |
By: | /s/ Karrie Gibson | |
Karrie Gibson | ||
Interim Chief Financial Officer | ||
Date: | May 20, 2025 |
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