UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended:
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT |
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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
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Indicate
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| ☒ | Smaller reporting company | ||
| Emerging growth company |
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As of November 20, 2023, the registrant had shares of its common stock issued and outstanding.
NETBRANDS CORP.
QUARTERLY REPORT ON FORM 10-Q
September 30, 2023
TABLE OF CONTENTS
| Page | ||
| PART I - FINANCIAL INFORMATION | 3 | |
| Item 1. | Condensed Financial Statements | 3 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 4 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 7 |
| Item 4. | Controls and Procedures | 8 |
| PART II - OTHER INFORMATION | 9 | |
| Item 1. | Legal Proceedings | 9 |
| Item 1A. | Risk Factors | 9 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 9 |
| Item 3. | Defaults Upon Senior Securities | 9 |
| Item 4. | Mine Safety Disclosure | 9 |
| Item 5. | Other Information | 9 |
| Item 6. | Exhibits | 9 |
| SIGNATURES | 10 | |
| 2 |
PART I – FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
The following unaudited interim condensed consolidated financial statements of NetBrands Corp. (referred to herein as the “Company,” “we,” “us” or “our”) are included in this Quarterly Report on Form 10-Q (the “Quarterly Report”).
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States and the rules of the Securities and Exchange Commission (the “SEC”), and should be read in conjunction with the audited consolidated financial statements and notes thereto contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which we filed with the SEC on March 23, 2023 (the “Annual Report”), as updated in subsequent filings we have made with the SEC. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the periods presented have been reflected herein. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year.
| 3 |
NETBRANDS CORP.
Condensed Consolidated Financial Statements for the Nine Months Ended September 30, 2023
Index to the Unaudited Condensed Consolidated Financial Statements
| F-1 |
NetBrands Corp.
Formerly Known as Global Diversified Marketing Group Inc.
Condensed Consolidated Balance Sheets
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Prepaid expenses | ||||||||
| Inventory | ||||||||
| Other assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right of use assets | ||||||||
| Other assets-security deposit | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Cash overdraft | $ | $ | ||||||
| Accounts payable and accrued expense | ||||||||
| Current portion of operating lease payable | ||||||||
| Notes payable -related party | ||||||||
| Loans payable | ||||||||
| Total current liabilities | ||||||||
| Government loans payable | ||||||||
| Lease liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders’ (Deficit): | ||||||||
| Preferred stock, Series A $ par value, shares authorized, issued and outstanding | ||||||||
| Common stock, $ par value, shares authorized; and issued and outstanding as of September 30, 2023 and December 31, 2022, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| Total stockholders’ (deficit) | ( | ) | ( | ) | ||||
| Total liabilities and (deficit) | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
| F-2 |
NetBrands Corp.
Formerly Known as Global Diversified Marketing Group Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
| Three Months Ended | Three Months Ended | Nine Months Ended | Nine Months Ended |
|||||||||||||
| September 30, | September 30, | September 30, | September 30, | |||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Sales, net | $ | $ | $ | |||||||||||||
| Cost of goods sold | ||||||||||||||||
| Gross margin | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Payroll and taxes | ||||||||||||||||
| Legal and professional fees | ||||||||||||||||
| Rent | ||||||||||||||||
| Selling, general and administrative and expenses | ||||||||||||||||
| Impairment of intangible assets | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Income (loss) from operations | ( | ) | ( | ) | ( | ) | ( |
) | ||||||||
| Other (expense) | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( |
) | ||||||||
| Total other (expense) | ( | ) | ( | ) | ( | ) | ( |
) | ||||||||
| Income (loss) before income taxes | ( | ) | ( | ) | ( | ) | ( |
) | ||||||||
| Provision for income taxes (benefit) | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ( | ) | $ | ( |
) | |||||
| Basic and diluted earnings (loss) per common share | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted-average number of common shares outstanding: | ||||||||||||||||
| Basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
| F-3 |
NetBrands Corp.
Formerly Known as Global Diversified Marketing Group Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
| Accumulated | ||||||||||||||||||||||||||||||||
| Additional | Other | Total | ||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in | Accumulated | Comprehensive | Stockholders’ | |||||||||||||||||||||||||||
| Shares | Value | Shares | Value | Capital | Deficit | Income(Loss) | Equity | |||||||||||||||||||||||||
| Balance, December 31, 2021 | $ | $ | | $ | | $ | ( | ) | $ | $ | | |||||||||||||||||||||
| Common stock issued for services | ||||||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance, March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||
| Common stock issued for services | ||||||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance, June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||
| Common stock issued for services | ||||||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance, September 30, 2022 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||
| Accumulated | ||||||||||||||||||||||||||||||||
| Additional | Other | Total | ||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in | Accumulated | Comprehensive | Stockholders’ | |||||||||||||||||||||||||||
| Shares | Value | Shares | Value | Capital | Deficit | Income(Loss) | Equity | |||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | | $ | | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||
| Common stock issued for services | ||||||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||
| Common stock issued for services | ||||||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
| F-4 |
NetBrands Corp.
Formerly Known as Global Diversified Marketing Group Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Nine Months Ended | Nine Months Ended | |||||||
| September 30, | September 30, | |||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities | ||||||||
| Net (loss) | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to cash used in operating activities: | ||||||||
| Depreciation | ||||||||
| Stock based compensation | ||||||||
| Impairment of intangible assets | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Prepaid expenses | ||||||||
| Inventory | ||||||||
| Right of use assets-net | ( | ) | ||||||
| Cash overdraft | ||||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Net cash provided by (used in) operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of intangible assets | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash flows from financing activities | ||||||||
| Notes payable related parties | ||||||||
| Proceeds from notes payable | ||||||||
| Payments on government loans | ( | ) | ||||||
| Net cash provided by investing activities | ||||||||
| Net increase (decrease) in cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | |||||||
| Cash paid for income taxes | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
| F-5 |
NETBRANDS CORP.
(Formerly Known as Global Diversified Marketing Group Inc.)
Notes To Unaudited Condensed Financial Statements For The Periods
Ended September 30, 2023 and 2022
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
NetBrands
Corp., formerly known as Global Diversified Marketing Group Inc. (“NetBrands” or the “Company”), was incorporated
as Dense Forest Acquisition Corporation, in
On November 26, 2018, the Company effected the acquisition of Global Diversified Holdings, Inc. (“GDHI”), a private New York company owned by the Company’s president, with the issuance of shares of the Company’s common stock in exchange for all of the outstanding shares of GDHI. GDHI became a wholly-owned subsidiary of the Company, and its activity for the years 2022 and 2021 is reflected in these condensed financial statements along with the expenses of the Company.
Prior to the acquisition of GDHI, the Company had no business and no operations. Pursuant to the acquisition, the Company acquired the operations and business plan of GDHI, which imports and sells snack food products. For accounting purposes, GDHI is considered to be the acquirer, and the equity is presented as if the business combination had occurred on January 1, 2017.
On
August 31, 2022, the Company entered into an Asset Purchase Agreement with InPlay Capital Inc., a Delaware corporation (“InPlay”),
pursuant to which, on the same date, the Company purchased from InPlay all of the assets used in the operation and conduct of its business
relating to the online home fitness store known as “The Hula Fit”, including the Shopify Store and the TikTok, Facebook and
Google ad accounts, for a purchase price of $
On March 29, 2023, the Company filed an Amendment to its Certificate of Incorporation effecting the change of the Company’s name to NetBrands Corp., a name that reflects the planned expansion of the Company’s digital business. On July 31, 2023, the Company’s common stock began trading on the OTC Pink marketplace under its new name, NetBrands Corp., and its new trading symbol “NBND.”
Basis of Presentation
The condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars. Certain prior year amounts have been reclassified to conform to the presentation in the current year. The Company has adopted a December 31 year-end.
Management’s Representation of Interim Condensed Financial Statements
The accompanying unaudited consolidated condensed financial statements have been prepared by the Company without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The Company uses the same accounting policies in preparing quarterly and annual condensed financial statements. Certain information and footnote disclosures normally included in condensed financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted as allowed by such rules and regulations, and management believes that the disclosures are adequate to make the information presented not misleading. These condensed consolidated condensed financial statements include all of the adjustments, which in the opinion of management are necessary for a fair presentation of financial position and results of operations. All such adjustments are of a normal and recurring nature. Interim results are not necessarily indicative of results for a full year.
Principles of Consolidation
The accompanying consolidated condensed financial statements include the accounts of the Company and its wholly-owned subsidiary, Global Diversified Holdings, Inc. All intercompany accounts and transactions have been eliminated in consolidation.
| F-6 |
Fair Value of Financial Instruments
The Company’s financial instruments consist of cash, accounts receivable from customers, accounts payable, and loans payable. The carrying amounts of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these condensed financial statements.
Use of Estimates
The preparation of condensed financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the balance sheet. Actual results could differ from those estimates.
Stock-Based Compensation
The Company accounts for stock-based compensation using the fair value method following the guidance outlined in Section 718-10 of the FASB Accounting Standards Codification for disclosure about Stock-Based Compensation. This Section requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award- the requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service. During the nine months ended September 30, 2023 and September 30, 2022, stock-based compensation was $ and $, respectively.
Cash and Cash Equivalents
The
Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. On September
30, 2023, and December 31, 2022, the Company had a cash overdraft of $(
Accounts Receivable
Accounts receivable are generated from sales of snack food products to retail outlets throughout the United States. The Company performs ongoing credit evaluations of its customers and adjusts credit limits based on customer payment and current creditworthiness, as determined by review of their current credit information. The Company continuously monitors credit limits for its customers and maintains a provision for estimated credit losses based on its historical experience and any specific customer issues that have been identified. An allowance for doubtful accounts are provided against accounts receivable for amounts management believes may be uncollectible. The Company historically has not had issues collecting on its accounts receivable from its customers. The Company factors certain of its receivables to improve its cash flow.
Bad
debt expense for the three months ended September 30, 2023 and 2022, was $-
Inventory
Inventory, which is comprised of snack food products and packaging supplies is charged to inventory when purchased, is stated at the lower of cost or net realizable value with cost determined under the first-in, first-out (“FIFO”) method. The Company does not carry any raw materials.
The Company evaluates inventory levels quarterly value based upon assumptions about future demand and market conditions. Any inventory that has a cost basis in excess of its expected net realizable value, inventory that becomes obsolete, inventory in excess of expected sales requirements, inventory that fails to meet commercial sale specifications or is otherwise impaired are written down with a corresponding charge to the statement of operations in the period that the impairment is first identified. The Company performed its evaluation on September 30, 2023 and December 30, 2022, and determined that no write-down was required.
Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful life of the assets. Maintenance, repairs, and renewals that do not materially add to the value of the equipment nor appreciably prolong its useful life are charged to expense as incurred.
Revenue Recognition
The Company recognizes revenue from product sales when control of the promised goods are transferred to our clients in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods and services. To achieve this core principle, the Company applies the following five steps: identify the contract with the client, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to performance obligations in the contract and recognize revenues when or as the Company satisfies a performance obligation. Typically, the Company receives a detailed purchase order from large retailers that specify the goods ordered, their price, payment terms and the required delivery date. Once the delivery of items on the purchase order is made to the client and title passes, the Company has met its performance obligation and recognizes revenue.
| F-7 |
Advertising and Marketing Costs
The
Company’s policy regarding advertising and marketing is to record the expense when incurred. The Company incurred advertising and
marketing expenses of $
Impairment of Long-Lived Assets
The Company continually monitors events and changes in circumstances that could indicate the carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell.
Intangible Assets
Intangible assets have either an identifiable or indefinite useful life. Intangible assets with identifiable useful lives are amortized on a straight-line basis over their economic or legal life, whichever is shorter.
The Company performs an annual impairment assessment for intangible assets during the fourth quarter of each year and more frequently whenever events or changes in circumstances indicate that the fair value of the asset may be less than the carrying amount.
Determining the fair value of intangible assets is judgmental in nature and requires the use of significant estimates and assumptions.
On
September 30, 2022, the Company conducted an impairment analysis and determined that our purchase of Hula Fit was fully impaired. As
a result, the Company recorded an impairment loss of $
Income Taxes
Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
The Company’s income tax returns are open for examination for up to the past three years under the statute of limitations. There are no tax returns currently under examination.
Leases
The majority of our lease obligations are real estate operating leases from which the Company conducts its business. For any lease with an initial term in excess of 12 months, the related lease assets and liabilities are recognized on the Consolidated Balance Sheets as either operating or finance leases at the inception of an agreement where it is determined that a lease exists. Leases with an initial term of 12 months or less are not recorded on our Consolidated Balance Sheets. The Company recognizes lease expense for these leases on a straight-line basis over the lease term.
Leases with an initial term of 12 months or less, or that are on a month-to-month basis are not recorded on our Consolidated Balance Sheets. The Company recognizes lease expense for these leases on a straight-line basis over the lease term.
Operating lease assets represent the right to use an underlying asset for the lease term, and operating lease liabilities represent the obligation to make lease payments arising from the lease. These assets and liabilities are recognized based on the present value of future payments over the lease term at commencement date. The Company uses a collateralized incremental borrowing rate based on the information available at commencement date, including lease term, in determining the present value of future payments. Our lease terms generally do not include options to extend or terminate the lease unless it is reasonably certain that the option will be exercised. Fixed payments may contain predetermined fixed rent escalations. The Company recognizes the related rent expense on a straight-line basis from the commencement date to the end of the lease term.
As
of September 30, 2023, the Company had $
Comprehensive Income
The
Company has established standards for reporting and displaying comprehensive income, its components, and accumulated balances. If applicable,
the Company would disclose this information on its Statement of Stockholders’ Equity. Comprehensive income comprises equity except
those resulting from investments by owners and distributions to owners. During the periods ended September 30, 2023 and December 31,
2022, the Company had a balance of $
| F-8 |
Basic income (loss) per share has been calculated based on the weighted average number of shares of common stock outstanding during the period. As of September 30, 2023, the Company had no dilutive instruments that could increase the number of shares if exercised or converted.
Recent Accounting Pronouncements
The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position, or cash flow.
NOTE 2 – GOING CONCERN
As
of September 30, 2023, the Company had cash and cash equivalents of $,
negative working capital of $
NOTE 3 – CAPITAL STOCK
The Company has authorized shares of common stock, $ par value per share. The Company had and shares of common stock issued and outstanding as of September 30, 2023 and December 31, 2022, respectively.
2023 Common Stock Issuances for Services
During
the nine months ended September 30, 2023, the Company issued shares for services valued at $
2022 Common Stock Issuances for Services
During
the three months ended March 31, 2022, the Company issued shares of its common stock for services, which were valued at $
During the three months ended September 30, 2022, the Company issued an aggregate of (a) shares of common stock to the members of the Company’s board of directors, valued at $ per share, and (b) shares of common stock to the members of its board of directors in lieu of cash payments, valued at $ per share. The Company also issued shares of common stock to a service provider, valued at $ per share.
During the three months ended September 30, 2022, the Company issued an aggregate of shares of common stock to consultants and to an investor relations firm, valued at an average of approximately $ per share.
During the three months ended December 31, 2022, the Company issued shares of common stock to a member of the Company’s board of directors valued at $ per share.
Preferred Stock
The
Company has shares of $ par value preferred stock authorized. On February 24, 2020, the Company filed a Certificate of
Designation for a class of preferred stock designated Class A Super Voting Preferred Stock (“A Stock”). There are
shares of A Stock designated. Each share of such stock shall vote with the common stock and have
As
a result of
Warrants
On November 14, 2022 (the “Execution Date”), the “Company, entered into an engagement agreement (“Engagement Agreement”) with Spencer Clarke, LLC (“Spencer Clarke”), pursuant to which the Company engaged Spencer Clarke to serve as its exclusive investment banking firm (the “Services”).
In
consideration for Spencer Clarke providing the Services, (a) upon execution of the Engagement Agreement, the Company issued Spencer Clarke
warrants to purchase
The
| F-9 |
NOTE 4 – RELATED PARTY TRANSACTIONS
On
August 31, 2022, the Company entered into an Asset Purchase Agreement with InPlay Capital Inc., a Delaware corporation (“InPlay”),
pursuant to which the Company purchased from InPlay all of the assets used in the operation its business relating to the online home
fitness store known as “The Hula Fit”, including the Shopify Store and the TikTok, Facebook and Google ad accounts, for a
purchase price of $
On
April 10, 2023, Paul Adler, the President and a director of the Company, made a loan to the Company in the amount of $
NOTE 5 – COMMITMENTS AND CONTINGENCIES
The
Company has two primary leases. The Company leases approximately
In
March 2022,
Future minimum lease payments due under these operating leases, including renewal periods, are as follows:
| December 31, 2023 | ||||
| December 31, 2024 | ||||
| December 31, 2025 | ||||
| December 31, 2026 | ||||
| December 31, 2027 | ||||
| Total | $ |
NOTE 6 – LOANS PAYABLE
The Company had various loans outstanding on September 30, 2023 and December 31, 2022. All of these loans were short-term in nature, with varying rates of interest and fees, and no set minimum monthly payments, as follows:
| Fund box (c) | $ | $ | ||||||
| Diagonal Lending (e) | ||||||||
| Can Capital (d) | ||||||||
| Credit Line – Loan Builder(b) | ||||||||
| Credit Line – Webster Bank(a) | ||||||||
| Total loans payable | $ | $ |
| (a) | ||
| (b) | ||
| (c) | ||
| (d) | ||
| (e) |
| F-10 |
The
Note has a principal balance of $
This Note was treated as a Promissory Note and no derivative liability was recorded because the conversion feature of the Note only is effective in the event of a default. Since the Company has never defaulted on a liability that conversion was not deemed to probable.
Government loans payable
As
of June 30, 2022 and December 31, 2022, the Company had $
NOTE 7 – CONCENTRATIONS
The
Company does substantially all of its business with five customers. These customers accounted for
| September 30, 2023 | September 30, 2022 | |||||||
| Customer A | % | % | ||||||
| Customer B | % | % | ||||||
| Customer C | % | % | ||||||
| Customer D | % | % | ||||||
| Customer E | % | |||||||
| Total | % | % | ||||||
NOTE 8 – SUBSEQUENT EVENTS
In accordance with ASC 855-10, the Company has analyzed its operations subsequent to September 30, 2023, to the date these condensed financial statements were issued, and has determined that it does not have any other material subsequent events to disclose in these condensed financial statements except as follows:
On
July 9, 2023, Paul Adler, the Company’s President, extended the July 9, 2023 repayment date of the $
| F-11 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The information set forth in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, including, among others (I) increase in our revenue and profitability, (ii) prospective business opportunities and (iii) our strategy for financing our business. Forward-looking statements are statements other than historical information or statements of current condition. Some forward-looking statements may be identified by use of terms such as “believes”, “anticipates”, “intends” or “expects”. These forward-looking statements relate to our plans, liquidity, ability to complete financing, to enter into future agreements with companies, and plans to successfully expand our business operations and the sale of our products. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs.
Although we believe that our expectations with respect to the forward-looking statements are based upon reasonable assumptions within the bounds of our knowledge of our business and operations, in light of the risks and uncertainties inherent in all future projections, the inclusion of forward-looking statements in this Quarterly Report should not be regarded as a representation by us or any other person that our objectives or plans will be achieved. All forward-looking statements speak only as of the date of this Quarterly Report. Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, or other information contained herein, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise. We caution you therefore that you should not rely on any of these forward-looking statements as statements of historical fact or as guarantees or assurances of future performance.
Basis of Presentation
The following discussion highlights our results of operations and the principal factors that have affected our financial condition as well as our liquidity and capital resources for the periods described and provides information that management believes is relevant for an assessment and understanding of the statements of financial condition and results of operations presented herein. The following discussion and analysis are based on our unaudited condensed financial statements contained in this Quarterly Report, which we have prepared in accordance with United States generally accepted accounting principles. You should read the discussion and analysis together with such condensed financial statements and the related notes thereto.
The audited condensed financial statements for our fiscal year ended December 31, 2022, contained in our Annual Report, include a summary of our significant accounting policies and should be read in conjunction with the discussion below. In the opinion of management, all material adjustments necessary to present fairly the results of operations for such periods have been included in these audited condensed financial statements. All such adjustments are of a normal recurring nature.
References in this section to “NetBrands,” “we,” “us,” “our,” “the Company” and “our Company” refer to NetBrands Corp. (formerly known as Global Diversified Marketing Group Inc.), and its consolidated subsidiary.
Overview
The Company was incorporated in the State of Delaware on December 1, 2017, under the name “Dense Forest Acquisition Corporation.”
On June 13, 2018, in anticipation of its acquisition of Global Diversified Holdings, Inc., a private New York snack and gourmet food company (“GDHI”), the Company changed its to “Global Diversified Marketing Group Inc.”
On November 26, 2018, the Company consummated the acquisition of GDHI. As a result of the acquisition, GDHI became our wholly owned operating subsidiary, and we changed our business focus to the business of GDHI, which was to develop and market healthy snack foods.
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Historically, the Company has been focused on developing and marketing products in the United States, Canada, and Europe that appeal to consumers’ growing preference for healthy snack food. The Company operates through snacks segments offering Italian Wafers, French Madeleines, Italian Croissants, Macaron Cookies, Wafer Pralines, and other wholesome snacks. The Company sells its food and snack products through various distribution channels comprising specialty, grocery retailers, food-service distributors and direct store delivery, as well as the vending, pantry, and micro-market segment. Our buyers typically represent recognized large retail chain stores. The products are then distributed by the chains to their local outlets. We intend to develop additional gourmet foods and snack products under our trademarked brands and to expand the Company’s offering portfolio by identifying, producing and marketing new products.
The Company’s management believes that the strategy of acquiring small brands regional distribution brands and acquiring more e-commerce brand assets will diversify its current business and increase its business operation results.
On March 29, 2023, the Company filed an Amendment to its Certificate of Incorporation with the Secretary of State of Delaware effecting the change of the Company’s name to “NetBrands Corp.,” a name that reflects the planned expansion of the Company’s digital business.
Recent Developments
Loan from President
On April 10, 2023, Paul Adler, the President and a director of the Company, made a loan to the Company in the amount of $124,000, at an interest rate of 14.9% per annum. The principal amount of the loan, and any accrued and unpaid interest thereon, were due and payable on July 9. 2023, in cash or shares of the Company’s common stock, at Mr. Adler’s sole discretion. If repaid in shares of common stock, the number of shares to be issued were to be calculated using the closing sale price of the Company’s common stock on the OTC Pink marketplace on the payment date. The due date of this loan, which was extended to October 9, 2023, has been further extended to [April] 9, 2023.
[Any other recent developments?]
Results of Operations
The information set forth below should be read in conjunction with the financial statements and accompanying notes elsewhere in this Quarterly Report.
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Comparison of Results of Operations for the Nine Months Ended September 30, 2023 and 2022
Revenue and Cost of Sales
During the three months ended September 30, 2023 we generated $70,938 in revenues compared to $394,924 during the same period ended September 30, 2022. Currently we do not have any source of supply for our major products due to our lack of liquidity.
During the nine months ended September 30, 2023, our revenues were $584,004 compared to $1,288,532 during the period ended September 30, 2022, a decrease of $704,528. or approximately 54.6%. The primary reason for this decrease was due to the Company’s lack of liquidity necessary to purchase inventory in advance of shipping dates. We are in the process of seeking new financing and believe we will be successful in obtaining this financing which will enable us to generate revenues at historical levels. However, there can be no assurance that we will be successful in raising this financing, and if we are successful that we can generate revenues at a historical level. If we fail to obtain this financing it could have a material negative impact on the Company.
Cost of sales was $382,765 compared to $981,024 for the nine months ended September 30, 2022, a decrease of $598,259, or approximately 61%. The decrease in cost of sales is due to lower sales volumes. Gross profit margin for the nine months ended September 30, 2023 was 34.5% compared to 23.9% during the same nine-month period in 2022.
For the nine months ended September 30, 2023, we had five customers that represented 98% of our business, compared to five customers that represented 91% of our business during the nine months ended September 30, 2022. The loss of any of these customers could have a material adverse impact on our business.
Operating expenses
During the nine months ended September 30, 2023, our operating expenses were $933,818 compared to $1,158,399 during the nine months ended September 30, 2022, a decrease of $224,581, or 24%. Excluding stock-based compensation in both periods operating expenses were $769,318 and $946,140 respectively for the nine-month periods ended September 30, 2023 and September 30, 2022, respectively. The primary reasons for the decrease in operating expenses excluding stock-based compensation in both periods is a decrease in payroll, legal fees and selling general and administrative expenses. In order to improve our liquidity our CEO has not taken any salary for approximately seven months.
Other Income (Expense)
Other expenses were comprised solely of interest expense, which amounted to $407,987 during the nine-month period ended September 30, 2023, compared to $9,268 during the nine-month period ended September 30, 2022. The increase of $398,719 in interest expenses is due to our financing instruments.
Net loss
As a result of the foregoing the net loss for the nine months ended September 30, 2023 was $1,140,566 compared to a net loss of $860,159 for the nine months ended September 30, 2022.
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Liquidity and Capital Resources
As of September 30, 2023, we had a cash overdraft of $17,340, compared to $177,679 in cash as of September 30, 2022.
Net cash used in operating activities was $384,447 in the nine months ended September 30, 2023, compared to $197,805 net cash provided by operations during the same period in 2022. The increase in cash used in operating is primarily due to our increased operating losses.
Net cash provided by financing activities was $330,262 during the nine months ended September 30, 2023, compared to $112,911 during the nine-month period ended September 30, 2022. The increase in net cash provided by financing activities in 2023 is primarily due to an increase in notes payable.
The Company has historically financed its operations through the cash flow generated from operations, capital investment, notes payable and factoring, and has recently financed its operations through SBA COVID-19 loans, capital investment, notes payable, and factoring.
In the event continuing decreased sales and profits continue, our ability to obtain additional financing or factoring for our receivables could be negatively impacted which could have a material adverse impact on our liquidity or our ability to remain as a going concern.
Going Concern
The accompanying consolidated condensed financial statements have been prepared assuming we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business for the twelve-month period following the date of these condensed financial statements. On a consolidated basis, we have incurred significant operating losses since inception. The consolidated financials have been prepared assuming that the Company will continue as a going concern and, accordingly, do not include any adjustments that might result from the outcome of this uncertainty. The Company is seeking new sources of financing to fund its operations. There can be no assurance that the Company will be able secure financing. If the Company is unable to secure financing it will have a material adverse impact and may not enable the Company to continue as a going concern. As a result the shareholders may lose some or all of their investment in the Company.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Critical Accounting Estimates
Our condensed financial statements and accompanying notes have been prepared in accordance with GAAP. The preparation of these condensed financial statements requires management to make estimates, judgments, and assumptions that affect reported amounts of assets, liabilities, revenues and expenses. We continually evaluate the accounting policies and estimates used to prepare our condensed financial statements. The estimates are based on historical experience and assumptions believed to be reasonable under current facts and circumstances. Actual amounts and results could differ from these estimates made by management. Certain accounting policies that require significant management estimates and are deemed critical to our results of our operations or financial position. Our critical accounting estimates are more fully discussed in Note 2 to our unaudited condensed financial statements contained herein.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not applicable because we are an emerging growth company.
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Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our President (principal executive officer) and Chief Financial Officer (principal financial and accounting officer), who is directly involved in the day-to-day operations of the Company, as of September 30, 2023, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our principal executive officer and principal financial and accounting officer concluded that our disclosure controls and procedures were effective as of September 30, 2023 to ensure that information required to be disclosed by us in reports filed or submitted under the Securities Exchange Act were recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Act Commission’s rules and forms and that our disclosure controls are effectively designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Our management, including our President and Chief Financial Officer, does not expect that our disclosure controls and procedures will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdown can occur because of simple error or mistake. In particular, many of our current processes rely upon manual reviews and processes to ensure that neither human error nor system weakness has resulted in erroneous reporting of financial data.
As of September 30, 2023, our disclosure controls and procedures were [determined to be effective.]
Changes in Internal Control over Financial Reporting
During the period covered by this Quarterly Report, there were no changes in our internal controls over financial reporting that have materially affected, or 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 know of no active or pending legal proceedings against us, nor are we involved as a plaintiff in any proceedings or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any beneficial shareholder, are an adverse party or have a material interest adverse to us.
Item 1A. Risk Factors.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Except as set forth below, there were no sales of equity securities sold during the period covered by this Report that were not registered under the Securities Act and were not previously reported in a Current Report on Form 8-K filed by the Company.
On September 26, 2023, the Company issued 300,000 shares of common stock to its legal counsel in consideration for legal services provided to the Company.
On September, 2023, the Company issued 200,000 shares of common stock to David Natan, an independent director of the Corporation, in consideration for services Mr. Natan provided the Company.
These issuances were exempt from registration under Section 4(a)(2) of the Securities Act as not involving any public offering.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits.
| Exhibit No. | Description | |
| 31.1/31.2* | ||
| 32.1/32.2* | Certification Of Principal Executive Officer and Principal Financial and Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS* | Inline XBRL Instance Document | |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Link base Document | |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Link base Document | |
| 101.LAB* | Inline XBRL Taxonomy Extension Label Link base Document | |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Link base Document | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
*Filed herewith
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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.
| NETBRANDS CORP | ||
| Date: November 20, 2023 | By: | /s/ Paul Adler |
| Name: | Paul Adler | |
| Title: | Chief Financial Officer, President, Secretary and Treasurer | |
| (Principal Executive Officer and Principal Financial and Accounting Officer) | ||
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