UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10‑Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019March 31, 2020
or
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
Commission File Number: 333-227420
ICONIC BRANDS, INC. |
(Exact name of registrant as specified in its charter) |
Nevada |
| 13-4362274 |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
| ||
44 Seabro Avenue Amityville, NY |
11701 | |
(Address of principal executive offices) |
| (Zip Code) |
(866) 219-8112
(Registrant’s telephone number, including area code)
N/A
Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report
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. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or 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 | ¨ |
Non-accelerated filer | x | Smaller reporting company | x |
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 x
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
N/A |
| N/A |
| N/A |
As of August 16, 2019,May 15, 2020, the registrant had 12,353,87416,440,681 shares of common stock, $0.001 par value per share, issued and outstanding.
ICONIC BRANDS, INC.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Certifications |
FORWARD-LOOKING STATEMENTS
Statements in this Quarterly Report on Form 10-Q may be “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934.
Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are often, but not always, made through the use of words or phrases such as “believe,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” and “would.” These statements are based on current expectations, estimates and projections about our business based in part on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may, and are likely to, differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors, including those set forth in “Item 1A. Risk Factors” in our Annual Report on Form 10-K, and our other filings with the U.S. Securities and Exchange Commission.
You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. Any forward-looking statements speak only as of the date on which they are made, and we disclaim any obligation to publicly update or release any revisions to these forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this Quarterly Report on Form 10-Q or to reflect the occurrence of unanticipated events, except as required by applicable law.
Table of Contents |
PART I – FINANCIAL INFORMATION
ICONIC BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
Six monthsThree Months Ended June 30,March 31, 2020 and 2019 and 2018
Table of Contents |
Iconic Brands, Inc. and Subsidiaries | ||||||||
| ||||||||
|
| March 31, |
|
| December 31, |
| ||
|
| 2020 |
|
| 2019 |
| ||
|
| (Unaudited) |
|
|
| |||
Assets |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
Current assets: |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 916,686 |
|
| $ | 263,638 |
|
Accounts receivable (less allowance for doubtful accounts of $26,513 and $26,513, respectively) |
|
| 247,965 |
|
|
| 573,747 |
|
Inventories |
|
| 638,144 |
|
|
| 573,800 |
|
Prepaid expenses |
|
| 126,005 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
| 1,928,800 |
|
|
| 1,411,185 |
|
|
|
|
|
|
|
|
|
|
Right-of-use assets, less accumulated amortization of $148,317 and $125,921, respectively |
|
| 114,440 |
|
|
| 136,836 |
|
Leasehold improvements, furniture, and equipment (less accumulated depreciation and amortization of $4,615 and $0, respectively) |
|
| 24,093 |
|
|
| 20,000 |
|
Investment in and receivable from Can B Corp |
|
| 1,000,000 |
|
|
| 1,000,000 |
|
|
|
|
|
|
|
|
|
|
Total assets |
| $ | 3,067,333 |
|
| $ | 2,568,021 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Current portion of operating lease liabilities |
| $ | 84,286 |
|
| $ | 90,982 |
|
Accounts payable and accrued expenses |
|
| 1,698,492 |
|
|
| 1,852,563 |
|
Loans payable to officer and affiliated entity-noninterest bearing and due on demand |
|
| 29,744 |
|
|
| 45,131 |
|
Note payable |
|
| 15,000 |
|
|
| 40,000 |
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
| 1,827,522 |
|
|
| 2,028,676 |
|
|
|
|
|
|
|
|
|
|
Non-current portion of operating lease liabilities |
|
| 33,943 |
|
|
| 49,147 |
|
Total liabilities |
|
| 1,861,465 |
|
|
| 2,077,823 |
|
Commitments and contingencies (Note 13) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity: |
|
|
|
|
|
|
|
|
Preferred stock, $.001 par value; authorized 100,000,000 shares: |
|
|
|
|
|
|
|
|
Series A, 1 and 1 share issued and outstanding, respectively |
|
| 1 |
|
|
| 1 |
|
Series E, 2,115,244 and 2,790,244 shares issued and outstanding, respectively |
|
| 2,115 |
|
|
| 2,790 |
|
Series F ($1,000 per share stated value), 2965.75 and 3155.75 shares issued and outstanding, respectively |
|
| 2,965,750 |
|
|
| 3,155,750 |
|
Series G ($1,000 per share stated value), 1475 and 0 shares issued and outstanding, respectively |
|
| 1,475,000 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
Common stock, $.001 par value; authorized 200,000,000 shares, 15,985,681 and 14,576,681 shares issued and outstanding respectively |
|
| 15,986 |
|
|
| 14,577 |
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital |
|
| 21,624,713 |
|
|
| 21,282,679 |
|
|
|
|
|
|
|
|
|
|
Accumulated deficit |
|
| (23,763,668 | ) |
|
| (22,925,748 | ) |
|
|
|
|
|
|
|
|
|
Total Iconic Brands, Inc. stockholders’ equity |
|
| 2,319,897 |
|
|
| 1,530,049 |
|
|
|
|
|
|
|
|
|
|
Noncontrolling interests in subsidiaries and variable interest entity |
|
| (1,114,029 | ) |
|
| (1,039,851 | ) |
|
|
|
|
|
|
|
|
|
Total stockholders' equity |
|
| 1,205,868 |
|
|
| 490,198 |
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity |
| $ | 3,067,333 |
|
| $ | 2,568,021 |
|
Iconic Brands, Inc. and Subsidiaries
|
| June 30, |
|
| December 31, |
| ||
|
| 2019 |
|
| 2018 |
| ||
|
| (Unaudited) |
|
|
|
| ||
Assets |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
Current assets: |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 298,520 |
|
| $ | 191,463 |
|
Accounts receivable |
|
| 82,263 |
|
|
| 113,506 |
|
Inventory |
|
| 192,486 |
|
|
| 258,270 |
|
Prepaid expenses |
|
| 2,266 |
|
|
| - |
|
Total current assets |
|
| 575,535 |
|
|
| 563,239 |
|
|
|
|
|
|
|
|
|
|
Right-of-use asset |
|
| 78,387 |
|
|
| - |
|
Leasehold improvements |
|
| 5,000 |
|
|
| - |
|
Goodwill |
|
| 1,450,000 |
|
|
|
|
|
Total assets |
| $ | 2,108,922 |
|
| $ | 563,239 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity (Deficiency) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Current portion of operating lease liability |
| $ | 48,060 |
|
| $ | - |
|
Accounts payable and accrued expenses |
|
| 1,447,781 |
|
|
| 1,311,475 |
|
Loans payable to officer and affiliated entities-non interest bearing and due on demand |
|
| 28,669 |
|
|
| 28,091 |
|
Notes payable |
|
| 250,000 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
| 1,774,510 |
|
|
| 1,339,566 |
|
|
|
|
|
|
|
|
|
|
Non-current portion of operating lease liability |
|
| 30,327 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
Derivative liability on warrants |
|
| - |
|
|
| 2,261,039 |
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
| 1,804,837 |
|
|
| 3,600,605 |
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 12) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity (deficiency): |
|
|
|
|
|
|
|
|
Preferred stock, $.001 par value; authorized 100,000,000 shares: |
|
|
|
|
|
|
|
|
Series A, 1 and 1 share issued and outstanding, respectively |
|
| 1 |
|
|
| 1 |
|
Series C, 0 and 1,000 shares issued and outstanding, respectively |
|
| - |
|
|
| 1 |
|
Series D, 0 and 10 shares issued and outstanding, respectively |
|
| - |
|
|
| - |
|
Series E, 7,167,116 and 6,602,994 shares issued and outstanding, respectively |
|
| 7,167 |
|
|
| 6,603 |
|
|
|
|
|
|
|
|
|
|
Common stock, $.001 par value; authorized 2,000,000,000 shares, 12,093,874 and 5,440,312 shares issued and outstanding respectively |
|
| 12,094 |
|
|
| 5,440 |
|
|
|
|
|
|
|
|
|
|
Common stock to be issued to Escrow Agent, $.001 par value; 0 and 534,203 shares, respectively |
|
| - |
|
|
| 534 |
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital |
|
| 21,634,034 |
|
|
| 18,798,438 |
|
|
|
|
|
|
|
|
|
|
Accumulated deficit |
|
| (20,333,818 | ) |
|
| (21,233,083 | ) |
|
|
|
|
|
|
|
|
|
Total Iconic Brands, Inc. stockholders’ equity (deficiency) |
|
| 1,319,478 |
|
|
| (2,422,066 | ) |
|
|
|
|
|
|
|
|
|
Noncontrolling interests in subsidiaries and variable interest |
|
| (1,015,393 | ) |
|
| (615,300 | ) |
|
|
|
|
|
|
|
|
|
Total stockholders’ equity (deficiency) |
|
| 304,085 |
|
|
| (3,037,366 | ) |
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity (deficiency) |
| $ | 2,108,922 |
|
| $ | 563,239 |
|
See notes to consolidated financial statements.
Table of Contents |
Iconic Brands, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
|
| Three Months |
|
| Three Months |
|
| Six Months |
|
| Six Months |
| ||||
|
| Ended June 30, |
|
| Ended June 30, |
|
| Ended June 30, |
|
| Ended June 30, |
| ||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Sales |
| $ | 145,294 |
|
| $ | 143,551 |
|
| $ | 267,207 |
|
| $ | 205270 |
|
Cost of Sales |
|
| 68,806 |
|
|
| 81,844 |
|
|
| 150,241 |
|
|
| 119,252 |
|
Gross profit |
|
| 76,488 |
|
|
| 61,707 |
|
|
| 116,966 |
|
|
| 86,018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officers compensation |
|
| 103,750 |
|
|
| 3,207 |
|
|
| 289,500 |
|
|
| 3,207 |
|
Professional and consulting fees |
|
| 418,566 |
|
|
| 59,121 |
|
|
| 867,085 |
|
|
| 71,407 |
|
Royalties |
|
| 78,279 |
|
|
| (75,002 | ) |
|
| 153,467 |
|
|
| (68,412 | ) |
Special promotion program with customer |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 597,138 |
|
Marketing and advertising |
|
| 37,414 |
|
|
| 192,740 |
|
|
| 83,881 |
|
|
| 252,055 |
|
Occupancy costs |
|
| 27,932 |
|
|
| 36,696 |
|
|
| 55,555 |
|
|
| 80,494 |
|
Travel and entertainment |
|
| 79,445 |
|
|
| 68,986 |
|
|
| 143,714 |
|
|
| 109,301 |
|
Other |
|
| 110,605 |
|
|
| 73,309 |
|
|
| 285,631 |
|
|
| 103,562 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
| 855,991 |
|
|
| 359,057 |
|
|
| 1,878,833 |
|
|
| 1,148,752 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
| (779,503 | ) |
|
| (297,350 | ) |
|
| (1,761,867 | ) |
|
| (1,062,734 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
| |||||||||
Income (expense) from derivative liability |
|
| - |
|
|
| (321,017 | ) |
|
| - |
|
|
| 405,848 |
|
Interest expense |
|
| - |
|
|
| (10,139 | ) |
|
| - |
|
|
| (19,560 | ) |
Amortization of debt discounts |
|
| - |
|
|
| (50,055 | ) |
|
| - |
|
|
| (101,711 | ) |
Other expense |
|
| - |
|
|
| (1,119 | ) |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense) - net |
|
| - |
|
|
| (382,330 | ) |
|
| - |
|
|
| 284,577 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
| (779,503 | ) |
|
| (679,680 | ) |
|
| (1,761,867 | ) |
|
| (778,157 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss (income) attributable to noncontrolling interests in subsidiaries and variable interest entity |
|
| 90,396 |
|
|
| 91,352 |
|
|
| 400,093 |
|
|
| 439,099 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Iconic Brands, Inc. |
| $ | (689,107 | ) |
| $ | (588,328 | ) |
| $ | (1,361,774 | ) |
| $ | (339,058 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted |
| $ | (0.07 | ) |
| $ | (0.10 | ) |
| $ | (0.16 | ) |
| $ | (0.05 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding and to be issued to Escrow Agent: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted |
|
| 10,543,700 |
|
|
| 6,118,124 |
|
|
| 8,351,552 |
|
|
| 6,224,791 |
|
|
| Three Months Ended March 31, 2020 |
|
| Three Months Ended March 31, 2019 |
| ||
|
|
|
|
|
|
| ||
Sales |
| $ | 405,886 |
|
| $ | 121,913 |
|
Cost of Sales |
|
| 252,426 |
|
|
| 81,435 |
|
Gross profit |
|
| 153,460 |
|
|
| 40,478 |
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
Officers compensation |
|
| 103,750 |
|
|
| 185,750 |
|
Professional and consulting fees |
|
| 186,789 |
|
|
| 448,519 |
|
Royalties |
|
| 15,964 |
|
|
| 75,188 |
|
Marketing and advertising |
|
| 128,645 |
|
|
| 46,467 |
|
Occupancy costs |
|
| 22,251 |
|
|
| 27,623 |
|
Travel and entertainment |
|
| 19,469 |
|
|
| 64,269 |
|
Investor relations |
|
| 361,689 |
|
|
| 84,003 |
|
Other |
|
| 227,001 |
|
|
| 91,023 |
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
| 1,065,558 |
|
|
| 1,022,842 |
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
| (912,098 | ) |
|
| (982,364 | ) |
|
|
|
|
|
|
|
|
|
Net loss attributable to noncontrolling interests in subsidiaries and variable interest entity |
|
| 74,178 |
|
|
| 309,697 |
|
|
|
|
|
|
|
|
|
|
Net loss attributable to Iconic Brands, Inc. |
| $ | (837,920 | ) |
| $ | (672,667 | ) |
|
|
|
|
|
|
|
|
|
Net loss per common share – basic and diluted: |
| $ | (0.05 | ) |
| $ | (0.11 | ) |
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding and to be issued to Escrow Agent: |
|
|
|
|
|
|
|
|
Basic and diluted |
|
| 15,416,710 |
|
|
| 6,159,404 |
|
See notes to consolidated financial statements.
F-3 |
Table of Contents |
Iconic Brands, Inc. and Subsidiaries
Consolidated Statements of Cash FlowsChanges in Stockholders’ Equity
(Unaudited)
|
| Six Months Ended June 30, |
| |||||
|
| 2019 |
|
| 2018 |
| ||
Operating Activities: |
|
|
|
|
|
| ||
Net income (loss) attributable to Iconic Brands, Inc. |
| $ | (1,361,774 | ) |
| $ | (339,058 | ) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
Net income (loss) attributable to noncontrolling interests in subsidiaries and variable interest entity |
|
| (400,093 | ) |
|
| (439,099 | ) |
Note payable to consultant issued February 7, 2019 and charged to consulting fees |
|
| 50,000 |
|
|
| - |
|
Stock-based consulting fees |
|
| 775,700 |
|
|
| 23,250 |
|
Expense (income) from derivative liability |
|
| - |
|
|
| (405,848 | ) |
Amortization of debt discounts |
|
| - |
|
|
| 101,711 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| 31,243 |
|
|
| 117,381 |
|
Inventory |
|
| 65,784 |
|
|
| (146,940 | ) |
Prepaid expenses |
|
| (2,266 | ) |
|
| 5,000 |
|
Accounts payable and accrued expenses |
|
| 136,385 |
|
|
| (241,029 | ) |
Accrued interest payable |
|
| - |
|
|
| 19,560 |
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
| (705,021 | ) |
|
| (1,305,072 | ) |
|
|
|
|
|
|
|
|
|
Investing Activities: |
|
|
|
|
|
|
|
|
Leasehold improvements |
|
| (5,000 | ) |
|
| - |
|
Net cash used in investting activities |
|
| (5,000 | ) |
|
| - |
|
|
|
|
|
|
|
|
|
|
Financing Activities : |
|
|
|
|
|
|
|
|
Proceeds from sale of Series E Preferred Stock and warrants |
|
| 509,300 |
|
|
| 300,000 |
|
Proceeds from exercise of warrants |
|
| 307,200 |
|
|
|
|
|
Loans payable to officer and affiliated entity |
|
| 578 |
|
|
| 62,107 |
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
| 817,078 |
|
|
| 362,107 |
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents |
|
| 107,057 |
|
|
| (942,965 | ) |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of period |
|
| 191,463 |
|
|
| 1,237,432 |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
| $ | 298,520 |
|
| $ | 294,467 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW INFORMATION: |
|
|
|
|
|
|
|
|
Income taxes paid |
| $ | - |
|
| $ | - |
|
Interest paid |
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
NON-CASH INVESTING AND FINANCING |
|
|
|
|
|
|
|
|
ACTIVITIES: | ||||||||
|
|
|
|
|
|
|
|
|
Issuance of common stock to Escrow Agent in connection with Settlement Agreement and Amended Settlement Agreement |
| $ | 534 |
|
| $ | 344,922 |
|
|
|
|
|
|
|
|
|
|
Series E Preferred Stock to be issued in exchange for common stock pursuant to Share Exchange Agreement dated May 21, 2018 |
| $ | - |
|
| $ | 120,000 |
|
|
|
|
|
|
|
|
|
|
Issuance of common stock in exchange for surrender of Series C and Series D Preferred Stock |
| $ | 2,000 |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
Issuance of common stock in exchange for Series E Preferred Stock on April 23, 2019 and May 17, 2019 |
| $ | 589 |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
Issuance of common stock and note payable in connection with acquisition of 51% of Green Grow Farms, Inc. |
| $ | 1,450,000 |
|
| $ | - |
|
|
|
Series A Stock, |
|
|
Series C Stock, |
|
|
Series D Stock, |
|
|
Series E Stock, |
|
| Series F Stock, stated value per share |
|
| Series G Stock, stated value per share |
|
|
Common Stock, |
|
| Common Stock issued to Escrow Agent, $0.001 par |
|
| Additional |
|
| Noncontrolling Interests in Sub- sidiaries and Variable Interest |
|
| Accumulated |
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Entity |
|
| Deficit |
|
| Total |
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Three Months Ended March 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Balance at January 1, 2020 |
|
| 1 |
|
| $ | 1 |
|
|
| - |
|
| $ | - |
|
|
| - |
|
| $ | - |
|
|
| 2,790,224 |
|
| $ | 2,790 |
|
|
| 3,156 |
|
| $ | 3,155,750 |
|
|
| - |
|
| $ | - |
|
|
| 14,576,681 |
|
| $ | 14,577 |
|
|
| - |
|
|
| - |
|
| $ | 21,282,679 |
|
| $ | (1,039,851 | ) |
| $ | (22,925,748 | ) |
| $ | 490,198 |
|
Sale of Series G Preferred Stock and warrants |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,475 |
|
|
| 1,475,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,475,000 |
|
Placement agent fees and stock-based compensation |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 375,000 |
|
|
| 375 |
|
|
| - |
|
|
| - |
|
|
| (150,375 | ) |
|
| - |
|
|
| - |
|
|
| (150,000 | ) |
Issuance of common stock in exchange for Series E Preferred Stock |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (675,000 | ) |
|
| (675 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 270,000 |
|
|
| 270 |
|
|
| - |
|
|
| - |
|
|
| 405 |
|
|
| - |
|
|
| - |
|
|
| - |
|
Issuance of common stock in exchange for Series F Preferred Stock |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (190 | ) |
|
| (190,000 | ) |
|
| - |
|
|
| - |
|
|
| 304,000 |
|
|
| 304 |
|
|
| - |
|
|
| - |
|
|
| 189,696 |
|
|
| - |
|
|
| - |
|
|
| - |
|
Issuance of common stock in exchange for services rendered and to be rendered |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 460,000 |
|
|
| 460 |
|
|
| - |
|
|
| - |
|
|
| 302,308 |
|
|
| - |
|
|
| - |
|
|
| 302,768 |
|
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (74,178 | ) |
|
| (837,920 | ) |
|
| (912,098 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2020 |
|
| 1 |
|
| $ | 1 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 2,115,224 |
|
| $ | 2,115 |
|
|
| 2,966 |
|
| $ | 2,965,750 |
|
|
| 1,475 |
|
| $ | 1,475,000 |
|
|
| 15,985,681 |
|
| $ | 15,986 |
|
|
| - |
|
|
| - |
|
| $ | 21,624,713 |
|
|
| (1,114,029 | ) |
| $ | (23,763,668 | ) |
| $ | 1,205,868 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2019 (as previously reported) |
|
| 1 |
|
| $ | 1 |
|
|
| 1,000 |
|
| $ | 1 |
|
|
| 10 |
|
| $ | - |
|
|
| 6,602,994 |
|
| $ | 6,603 |
|
|
| - |
|
| $ | - |
|
|
| - |
|
| $ | - |
|
|
| 5,440,312 |
|
| $ | 5,440 |
|
|
| 534,203 |
|
| $ | 534 |
|
| $ | 18,798,438 |
|
| $ | (615,300 | ) |
| $ | (21,233,083 | ) |
| $ | (3,037,366 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative effect adjustment relating to reduction of derivative liability on warrants, pursuant to ASU 2017-11 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 2,261,039 |
|
|
| 2,261,039 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2019 (as adjusted) |
|
| 1 |
|
|
| 1 |
|
|
| 1,000 |
|
|
| 1 |
|
|
| 10 |
|
|
| - |
|
|
| 6,602,994 |
|
|
| 6,603 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 5,440,312 |
|
|
| 5,440 |
|
|
| 534,203 |
|
|
| 534 |
|
|
| 18,798,438 |
|
|
| (615,300 | ) |
|
| (18,972,044 | ) |
|
| (776,327 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued to Escrow Agent |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 534,203 |
|
|
| 534 |
|
|
| (534,203 | ) |
|
| (534 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Sale of Series E Preferred Stock and warrants in connection with Securities Purchase Agreement dated September 27, 2018 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,362,520 |
|
|
| 1,363 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 339,267 |
|
|
| - |
|
|
| - |
|
|
| 340,630 |
|
Issuance of common stock in connection with Settlement and Release Agreement dated February 7, 2019 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 120,000 |
|
|
| 120 |
|
|
| - |
|
|
| - |
|
|
| 91,080 |
|
|
| - |
|
|
| - |
|
|
| 91,200 |
|
Issuance of common stock in connection with Business Development Agreement dated March 15, 2019 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 150,000 |
|
|
| 150 |
|
|
| - |
|
|
| - |
|
|
| 199,350 |
|
|
| - |
|
|
| - |
|
|
| 199,500 |
|
Issuance of common stock in exchange for the surrender of Series C Preferred Stock on March 27, 2019 |
|
| - |
|
|
| - |
|
|
| (1,000 | ) |
|
| (1 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,000,000 |
|
|
| 1,000 |
|
|
| - |
|
|
| - |
|
|
| (999 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
Issuance of common stock in exchange for the surrender of Series D Preferred Stock on March 27, 2019 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (10 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,000,000 |
|
|
| 1,000 |
|
|
| - |
|
|
| - |
|
|
| (1,000 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
Adjustment |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (1 | ) |
|
| - |
|
|
| 258 |
|
|
| 257 |
|
Net income (loss) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (309,697 | ) |
|
| (672,667 | ) |
|
| (982,364 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2019 |
|
| 1 |
|
| $ | 1 |
|
|
| - |
|
| $ | - |
|
|
| - |
|
| $ | - |
|
|
| 7,965,514 |
|
| $ | 7,966 |
|
|
| - |
|
| $ | - |
|
|
| - |
|
| $ | - |
|
|
| 8,244,515 |
|
| $ | 8,244 |
|
|
| - |
|
| $ | - |
|
| $ | 19,426,135 |
|
| $ | (924,997 | ) |
| $ | (19,644,453 | ) |
| $ | (1,127,104 | ) |
See notes to consolidated financial statementsstatements.
Table of Contents |
Iconic Brands, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
|
| Three Months Ended March 31, |
| |||||
|
| 2020 |
|
| 2019 |
| ||
Operating Activities: |
|
|
|
|
|
| ||
Net loss attributable to Iconic Brands, Inc. |
| $ | (837,920 | ) |
| $ | (672,667 | ) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
Net loss attributable to noncontrolling interests in subsidiaries and variable interest entity |
|
| (74,178 | ) |
|
| (309,697 |
|
Issuance of note payable to consultant |
|
| - |
|
|
| 50,000 |
|
Stock-based compensation |
|
| 243,081 |
|
|
| 290,700 |
|
Depreciation and amortization |
|
| 4,615 |
|
|
| - |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| 325,782 |
|
|
| 9,566 |
|
Inventories |
|
| (64,344 | ) |
|
| 41,768 |
|
Prepaid expenses |
|
| (66,318 | ) |
|
| - |
|
Accounts payable and accrued expenses |
|
| (153,575 | ) |
|
| 220,754 |
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
| (622,857 | ) |
|
| (369,576 | ) |
|
|
|
|
|
|
|
|
|
Investing Activities: |
|
|
|
|
|
|
|
|
Leasehold improvements |
|
| - |
|
|
| - |
|
Furniture and equipment |
|
| (8,708 | ) |
|
| - |
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
| (8,708 | ) |
|
| - |
|
|
|
|
|
|
|
|
|
|
Financing Activities: |
|
|
|
|
|
|
|
|
Proceeds from sale of Series G Preferred Stock and warrants (net of placement agent fees of $150,000) |
|
| 1,325,000 |
|
|
| - |
|
Proceeds from sale of Series E Preferred Stock and warrants |
|
| - |
|
|
| 340,630 |
|
Repayment of note payable |
|
| (25,000 | ) |
|
| - |
|
Loans payable to officer and affiliated entity |
|
| (15,387 | ) |
|
| - |
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
| 1,284,613 |
|
|
| 340,630 |
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents |
|
| 653,048 |
|
|
| (28,946 | ) |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of period |
|
| 263,638 |
|
|
| 191,463 |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
| $ | 916,686 |
|
| $ | 162,517 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW INFORMATION: |
|
|
|
|
|
|
|
|
Income taxes paid |
| $ | - |
|
| $ | - |
|
Interest paid |
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock in exchange for the surrender of Series C Preferred Stock and Series D Preferred Stock |
| $ | - |
|
| $ | 2,000 |
|
|
|
|
|
|
|
|
|
|
Issuance of common stock in exchange for Series E Preferred Stock |
| $ | 270 |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
Issuance of common stock in exchange for Series F Preferred Stock |
| $ | 304 |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
Issuance of common stock to Escrow Agent in connection with Settlement Agreement and Amended Settlement Agreement |
| $ | - |
|
| $ | 534 |
|
See notes to consolidated financial statements.
F-5 |
Table of Contents |
Iconic Brands, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders Equity (Deficiency)
(Unaudited)
Series A Preferred Stock$.001 par Series C Series D Series E Common Stock Common Stock Additional Paid-in Noncontrolling Interests in Subsidiaries and Variable Interest Accumulated Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Capital Entity Deficit Total Six Months Ended June 30, 2019 Balances, January 1, 2019 (as previously reported) Cumulative effect adjustment relating to reduction of derivative liability on warrants, pursuant to ASU 2017-11 Balance, January 1, 2019 (as adjusted) Common stock issued to Escrow Agent Sale of Series E Preferred Stock and warrants in connection with Securities Purchase Agreement dated September 27, 2018 Issuance of common stock in connection with Settlement and Release Agreement dated Febuary 7, 2019 Issuance of common stock in connection with Business Development Agreement dated March 15, 2019 Issuance of common stock in exchange for the surrender of Series C Preferred Stock on March 27, 2019 Issuance of common stock in exchange for the surrender of Series D Preferred Stock on March 27, 2019 Adjustment Net income (loss) �� Balance, March 31, 2019 Sale of Series E Preferred Stock and warrants in connection with Securities Purchase Agreement dated September 27, 2018 - - - - - - 675,000 675 - - - - 168,075 - - 168,750
Preferred Stock
$.001 par
Preferred Stock
$.001 par
Preferred Stock
$.001 par
$.001 par
to be issued to Escrow Agent
$0.001 par 1 $ 1 1,000 $ 1 10 $ - 6,602,994 $ 6,603 5,440,312 $ 5,440 534,203 $ 534 $ 18,798,438 $ (615,300 ) $ (21,233,083 ) $ (3,037,366 ) - - - - - - - - - - - - - - 2,261,039 2,261,039 1 1 1,000 1 10 - 6,602,994 6,603 5,440,312 5,440 534,203 534 18,798,438 (615,300 ) (18,972,044 ) (776,327 ) - - - - - - - - 534,203 534 (534,203 ) (534 ) - - - - - - - - - - 1,362,520 1,363 - - - - 339,267 - - 340,630 - - - - - - - - 120,000 120 - - 91,080 - - 91,200 - - - - - - - - 150,000 150 - - 199,350 - - 199,500 - - (1,000 ) (1 ) - - - - 1,000,000 1,000 - - (999 ) - - - - - - (10 ) - - - 1,000,000 1,000 - - (1,000 ) - - - (1 ) 258 257 - - - - - - - - - - - - - (309,697 ) (672,667 ) (982,364 ) 1 1 - - - - 7,965,514 7,966 8,244,515 8,244 - - 19,426,135 (924,997 ) (19,644,453 ) (1,127,104 )
|
|
Series A Preferred |
|
Series C |
|
Series D |
|
Series E |
|
Common Stock |
| Common Stock |
| Additional Paid-in |
| Noncontrolling Interests in Subsidiaries and Variable Interest |
| Accumulated |
|
|
| |||||||||||||||||||||||||||
|
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Entity |
| Deficit |
| Total |
| |||||||||||||||
Issuance of common stock in exchange for Series E Preferred Stock on April 23, 2019 and May 17, 2019 |
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| (1,473,398 | ) |
| (1,473 | ) |
| 589,359 |
|
| 589 |
|
| - |
|
| - |
|
| 884 |
|
| - |
|
| - |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of warrants at $0.32 per share pursuant to Warrant Exercise Agreements dated May 9, 2019 |
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 960,000 |
|
| 960 |
|
| - |
|
| - |
|
| 306,240 |
|
| - |
|
| - |
|
| 307,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock in connection with Share Exchange Agreement dated April 17, 2019 |
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 2,000,000 |
|
| 2,000 |
|
| - |
|
| - |
|
| 1,248,000 |
|
| - |
|
| - |
|
| 1,250,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock in connection with Consulting Agreement dated April 15, 2019 |
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 50,000 |
|
| 50 |
|
| - |
|
| - |
|
| 94,950 |
|
| - |
|
| - |
|
| 95,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock in connection with Consulting Agreement dated May 23, 2019 |
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 250,000 |
|
| 250 |
|
| - |
|
| - |
|
| 389,750 |
|
| - |
|
| - |
|
| 390,000 |
|
Adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| �� |
|
|
|
|
|
|
|
| (258 | ) |
| (258 | ) |
Net income (loss) |
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| (90,396 | ) |
| (689,107 | ) |
| (779,503 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2019 |
| 1 |
| $ | 1 |
|
| - |
| $ | - |
|
| - |
| $ | - |
|
| 7,167,116 |
| $ | 7,167 |
|
| 12,093,874 |
| $ | 12,094 |
|
| - |
| $ | - |
| $ | 21,634,034 |
| $ | (1,015,393 | ) | $ | (20,333,818 | ) | $ | 304,085 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2018 |
| 1 |
| $ | 1 |
|
| 1,000 |
| $ | 1 |
|
| 10 |
| $ | - |
|
| - |
| $ | - |
|
| 4,417,567 |
| $ | 4,417 |
|
| 1,913,890 |
| $ | 1,914 |
| $ | 15,760,206 |
| $ | 78,064 |
| $ | (17,075,829 | ) | $ | (1,231,226 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued to Escrow Agent |
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 446,240 |
|
| 446 |
|
| (446,240 | ) |
| (446 | ) |
| - |
|
| - |
|
| - |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| (347,747 | ) |
| 349,602 |
|
| 1,855 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance , March 31, 2018 |
| 1 |
|
| 1 |
|
| 1,000 |
|
| 1 |
|
| 10 |
|
| - |
|
| - |
|
| - |
|
| 4,863,807 |
|
| 4,863 |
|
| 1,467,650 |
|
| 1,468 |
|
| 15,760,206 |
|
| (269,683 | ) |
| (16,726,227 | ) |
| (1,229,371 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued to Escrow Agent |
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 933,447 |
|
| 934 |
|
| (933,447 | ) |
| (934 | ) |
| - |
|
| - |
|
| - |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of Series E Preferred Stock and warrants |
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 1,200,000 |
|
| 1,200 |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 298,800 |
|
| - |
|
| - |
|
| 300,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share Exchange Agreement dated May 21, 2018 |
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 1,200,000 |
|
| 1,200 |
|
| (480,000 | ) |
| (480 | ) |
| - |
|
| - |
|
| (720 | ) |
| - |
|
| - |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants issued to law firm for services |
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 23,250 |
|
| - |
|
| - |
|
| 23,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| (91,352 | ) |
| (688,660 | ) |
| (780,012 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2018 |
| 1 |
| $ | 1 |
|
| 1,000 |
| $ | 1 |
|
| 10 |
| $ | - |
|
| 2,400,000 |
| $ | 2,400 |
|
| 5,317,254 |
| $ | 5,317 |
|
| 534,203 |
| $ | 534 |
| $ | 16,081,536 |
| $ | (361,035 | ) | $ | (17,414,887 | ) | $ | (1,686,133 | ) |
See Notes to consolidated financial statements
Iconic Brands, Inc.
Notes to Consolidated Financial Statements
SixThree months ended June 30,March 31, 2020 and 2019 and 2018
(Unaudited)
1. ORGANIZATION AND NATURE OF BUSINESS
Iconic Brands, Inc., formerly Paw Spa, Inc. (“Iconic Brands” or “Iconic”), was incorporated in the State of Nevada on October 21, 2005. Effective December 31, 2016, Iconic closed on a May 15, 2015 agreement to acquire a 51% interest in BiVi LLC (“BiVi”), the brand owner of “BiVi 100 percent Sicilian Vodka,” and closed on a December 13, 2016 agreement to acquire a 51% interest in Bellissima Spirits LLC (“Bellissima”), the brand owner of Bellissima sparkling wines. These transactions involved entities under common control of the Company’s chief executive officer and represented a change in reporting entity. The financial statements of the Company have been retrospectively adjusted to reflect the operations atof BiVi and Bellissima from their inception.
BiVi was organized in Nevada on May 4, 2015. Bellissima was organized in Nevada on November 23, 2015.
Effective May 9, 2019, Iconic closed on a May 9, 2019 Share Exchange Agreement to acquire a 51% interest in Green Grow Farms, Inc. (“Green Grow”), an entity organized on February 28, 2019 to grow hemp for CBD extraction. Effective December 31, 2019, Iconic sold its 51% interest in Green Grow Farms, Inc. to Can B Corp (see Note 3).
Reverse Stock Split
Effective January 18, 2019, the Company effectuated a 1 share for 250 shares reverse stock split which reduced the issued and outstanding shares of common stock at December 31, 2018 from 1,359,941,153 shares to 5,440,3125,439,765 shares. The accompanying financial statements have been retrospectively adjusted to reflect this reverse stock split.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of Consolidation
The consolidated financial statements include the accounts of Iconic, its threetwo 51% owned subsidiaries BiVi Bellissima, and Green Grow Farms Inc. (“Green Grow”),Bellissima, and United Spirits, Inc., a variable interest entity of Iconic (see Note 5)6) (collectively, the “Company”). All inter-company balances and transactions have been eliminated in consolidation.
(b) Interim Financial Statements
The interim financial statements as of March 31, 2020 and for the three months ended March 31, 2020 and 2019 are unaudited and have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. These statements reflect all normal and recurring adjustments that, in the opinion of management, are necessary for a fair presentation of the information contained herein. Operating results for the three months ended March 31, 2020 are not necessarily indicative of results that may be expected for the year ending December 31, 2020.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the Unites States have been condensed or omitted pursuant to the Securities and Exchange Commission's rules and regulations. These unaudited financial statements should be read in conjunction with our audited financial statements and notes thereto for the year ended December 31, 2019 as included in our report on Form 10-K.
F-6 |
Table of Contents |
Iconic Brands, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Three months ended March 31, 2020 and 2019
(c) Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
(c)(d) Fair Value of Financial Instruments
Generally accepted accounting principles require disclosing the fair value of financial instruments to the extent practicable for financial instruments which are recognized or unrecognized in the balance sheet. The fair value of the financial instruments disclosed herein is not necessarily representative of the amount that could be realized or settled, nor does the fair value amount consider the tax consequences of realization or settlement.
In assessing the fair value of financial instruments, the Company uses a variety of methods and assumptions, which are based on estimates of market conditions and risks existing at the time. For certain instruments, including cash and cash equivalents, accounts receivable, and accounts payable and accrued expenses, loans payable to officer and affiliated entity, and note payable, it was estimated that the carrying amount approximated fair value because of the short maturities of these instruments. All debt is carried at face value less any unamortized debt discounts.
Iconic Brands, Inc.
Notes to Consolidated Financial Statements
Six months ended June 30, 2019 and 2018
(Unaudited)
(d)(e) Cash and Cash Equivalents
The Company considers all liquid investments purchased with original maturities of ninety days or less to be cash equivalents.
(e)(f) Accounts Receivable, Net of Allowance for Doubtful Accounts
The Company extends unsecured credit to customers in the ordinary course of business but mitigates risk by performing credit checks and by actively pursuing past due accounts. The allowance for doubtful accounts is based on customer historical experience and the aging of the related accounts receivable. At June 30, 2019March 31, 2020 and December 31, 2018,2019, the allowance for doubtful accounts was $18,168$26,513 and $0,$26,513, respectively.
(f)(g) Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or market, with due consideration given to obsolescence and to slow moving items. Inventory at June 30, 2019March 31, 2020 and December 31, 20182019 consists of cases of BiVi Vodka and cases of Bellissima sparkling wines purchased from our Italian suppliers.suppliers, and cases of alcoholic beverages and packaging materials relating to our Hooters line of products introduced in August 2019.
F-7 |
Table of Contents |
Iconic Brands, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Three months ended March 31, 2020 and 2019
(gh) Marketable Equity Securities
Marketable equity securities are recorded at fair value with unrealized gains and losses included in income. The Company has classified its investment in Can B Corp (see Note 3) as trading securities.
(i) Revenue Recognition
In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers” (Topic 606) which establishes revenue recognition standards. ASU 2014-19 was effective for annual reporting periods beginning after December 15, 2017. We adopted ASU 2014-09 effective January 1, 2018. ASU 2014-09 has not had a significant effect on the Company’s financial position and results of operations.
Revenue from product sales is recognized when all of the following criteria are met: (1) persuasive evidence of an arrangement exists, (2) the price is fixed or determinable, (3) collectability is reasonably assured, and (4) delivery has occurred. Persuasive evidence of an arrangement and fixed price criteria are satisfied through purchase orders. Collectability criteria are satisfied through credit approvals. Delivery criteria are satisfied when the products are shipped to a customer and title and risk of loss passes to the customer in accordance with the terms of sale. The Company has no obligation to accept the return of products sold other than for replacement of damaged products. Other than quantity price discounts negotiated with customers prior to billing and delivery (which are reflected as a reduction in sales), the Company does not offer any sales incentives or other rebate arrangements to customers.
(h)j) Shipping and Handling Costs
Shipping and handling costs to deliver product to customers are reported as operating expenses in the accompanying statements of operations. Shipping and handling costs to purchase inventory are capitalized and expensed to cost of sales when revenue is recognized on the sale of product to customers.
Iconic Brands, Inc.
Notes to Consolidated Financial Statements
Six months ended June 30, 2019 and 2018
(Unaudited)
(i(k) Stock-Based Compensation
Stock-based compensation is accounted for at fair value in accordance with Accounting Standards Codification (“ASC”) Topic 718, “Compensation-Stock Compensation”. For the sixthree months ended June 30,March 31, 2020 and 2019, and 2018, stock-based compensation was $775,700$243,081 and $23,250,$290,700, respectively.
(j)l) Income Taxes
Income taxes are accounted for under the assets and liability method. Current income taxes are provided in accordance with the laws of the respective taxing authorities. Deferred income taxes are provided for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is not more likely than not that some portion or all of the deferred tax assets will be realized.
F-8 |
Table of Contents |
(k
Iconic Brands, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Three months ended March 31, 2020 and 2019
(m) Net Income (Loss) per Share
Basic net income (loss) per common share is computed on the basis of the weighted average number of common shares outstanding and to be issued to Escrow Agent (see Note 10)11) during the period of the financial statements.periods presented.
Diluted net income (loss) per common share is computed on the basis of the weighted average number of common shares and to be issued to Escrow Agent (see Note 10)11) and dilutive securities (such as stock options, warrants, and convertible securities) outstanding. Dilutive securities having an anti-dilutive effect on diluted net income (loss) per share are excluded from the calculation.
(l)(n) Recently Issued Accounting Pronouncements
Effective January 1, 2019, we adopted ASU 2016-2 (Topic 842) which establishes a new lease accounting model for lessees. Under the new guidance, lessees are required to recognize right of use assets and liabilities for most leases having terms of 12 months or more. We adopted this new accounting guidance using the effective date transition method, which permits entities to apply the new lease standards using a modified retrospective transition approach at the date of adoption. As such, historical periods will continue to be measured and presented under the previous guidance while current and future periods are subject to this new accounting guidance. Upon adoption we recorded a $100,681total of $223,503 for right-of-use assetassets related to our onetwo operating leaseleases (see Note 12 F)13g) and a $100,681total of $223,503 for lease liability.
Iconic Brands, Inc.
Notes to Consolidated Financial Statements
Six months ended June 30, 2019 and 2018
(Unaudited)liabilities.
On July 13, 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (“ASU”) 2017-11. Among other things, ASU 2017-11 provides guidance that eliminates the requirement to consider “down round” features when determining whether certain financial instruments or embedded features are indexed to an entity’s stock and need to be classified as liabilities. ASU 2017-11 provides for entities to recognize the effect of a down round feature only when it is triggered and then as a dividend and a reduction to income available to common stockholders in basic earnings per share. The guidance is effective for annual periods beginning after December 15, 2018; early adoption is permitted. Accordingly, effective January 1, 2019, the Company has reflected a $2,261,039 reduction of the derivative liability on warrants (see Note 9)10) and a $2,261,039 cumulative effect adjustment reduction of accumulated deficit.
Certain other accounting pronouncements have been issued by the FASB and other standard setting organizations which are not yet effective and have not yet been adopted by the Company. The impact on the Company’s financial position and results of operations from adoption of these standards is not expected to be material.
(m)(o) Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has sustained significant net losses which have resulted in an accumulated deficit at June 30, 2019March 31, 2020 of $20,333,818$23,763,668 and has experienced periodic cash flow difficulties, all of which raise substantial doubt regarding the Company’s ability to continue as a going concern.
Continuation of the Company as a going concern is dependent upon obtaining additional working capital.capital and attaining profitable operations. The management of the Company has developed a strategy which it believes will accomplish this objective through additional equity investmentsthese objectives and which will enable the Company to continue operations for the coming year. However, there is no assurance that these objectives will be met. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from the outcome of this uncertainty.
F-9 |
Table of Contents |
Iconic Brands, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Three months ended March 31, 2020 and 2019
3. DISCONTINUED OPERATIONS
Effective December 31, 2019, the Company sold its 51% equity interest in Green Grow Farms, Inc. (“Green Grow”) to Can B Corp. in exchange for 37,500,000 shares of Can B Corp. common stock and a Can B Corp. obligation to issue additional shares (“Additional Purchases Shares”) of Can B Corp. common stock to the Company on June 30, 2020 in such number so that the aggregate value of the aggregate shares issued to the Company equals $1,000,000. We acquired this equity interest on May 9, 2019 in exchange for a $200,000 note payable to NY Farms Group Inc. and 2,000,000 shares of Company common stock valued at $1,250,000.
4. INVESTMENT IN BIVI LLC
On May 15, 2015, Iconic entered into a Securities Exchange Agreement by and among the members of BiVi LLC, a Nevada limited liability company (“BiVi”), under which Iconic acquired a 51% majority interest in BiVi in exchange for the issuance of (a) 4,000 shares of restricted common stock and (b) 1,000 shares of newly created Series C Convertible Preferred Stock.
Prior to May 15, 2015, BiVi was beneficially owned and controlled by Richard DeCicco, the controlling shareholder and chief executive officer of Iconic Brands, Inc.
4.5. INVESTMENT IN BELLISSIMA SPIRITS LLC
On December 13, 2016, Iconic entered into a Securities Purchase Agreement with Bellissima Spirits LLC (“Bellissima”) and Bellissima’s members under which Iconic acquired a 51% majority interest
in Bellissima in exchange for the issuance of a total of 10 shares of newly designated Iconic Series D Convertible Preferred Stock. Each share of Iconic Series D Convertible Preferred Stock was convertible into the equivalent of 5.1% of Iconic common stock issued and outstanding at the time of conversion.
Prior to December 13, 2016, Bellissima was controlled by Richard DeCicco, the controlling shareholder and chief executive officer of Iconic.
Table of Contents |
Iconic Brands, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
SixThree months ended June 30,March 31, 2020 and 2019 and 2018
(Unaudited)
5.6. UNITED SPIRITS, INC.
United Spirits, Inc. (“United”) is owned and managed by Richard DeCicco, the controlling shareholder and chief executive officer of Iconic. United provides distribution services for Iconic, BiVi and Bellissima (see Note 12)13e) and is considered a variable interest entity (“VIE”) of Iconic. Since Iconic has been determined to be the primary beneficiary of United, we have included United’s assets, liabilities, and operations in the accompanying consolidated financial statements of Iconic. Summarized financial information of United follows:
Balance Sheets: |
| March 31, 2020 |
|
| December 31, 2019 |
| ||
Cash and cash equivalents |
| $ | 647,742 |
|
| $ | 130,454 |
|
Intercompany receivable from Iconic (A) |
|
| - |
|
|
| 56,495 |
|
Right-of-use asset |
|
| 42,794 |
|
|
| 54,955 |
|
Total assets |
| $ | 690,536 |
|
| $ | 241,904 |
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expense |
| $ | 190,321 |
|
| $ | 187,658 |
|
Loans payable to officer and affiliated entity |
|
| 72,692 |
|
|
| 88,077 |
|
Intercompany payable to Iconic (A) |
|
| 3,200 |
|
|
| - |
|
Intercompany payable to Bellissima (A) |
|
| 794,156 |
|
|
| 317,722 |
|
Intercompany payable to BiVi (A) |
|
| 66,876 |
|
|
| 66,876 |
|
Operating lease liability |
|
| 42,794 |
|
|
| 54,955 |
|
Total Liabilities |
|
| 1,170,039 |
|
|
| 715,288 |
|
Noncontrolling interest in VIE |
|
| (479,503 | ) |
|
| (473,384 | ) |
Total liabilities and stockholders’ deficiency |
| $ | 690,536 |
|
| $ | 241,904 |
|
June 30, December 31, 2019 Balance Sheets: Cash and cash equivalents Intercompany receivable from Iconic (A) Right-of-use asset Total assets Accounts payable and accrued expense Loans payable to officer and affiliated entity Intercompany payable to Bellissima (A) Intercompany payable to BiVi (A) Operating lease liability Total Liabilities Noncontrolling interest in VIE Total liabilities and stockholders’ deficiency 2018 $ 26,694 $ 38,793 133,394 204,461 78,387 - $ 238,475 $ 243,254 $ 196,950 $ 11,338 71,115 71,037 297,787 335,257 66,876 56,854 78,387 - 711,115 474,487 (472,640 ) (231,333 ) $ 238,475 $ 243,153
|
| Six months ended June 30, |
|
| Three months ended March 31, |
| ||||||||||
Statements of operations: |
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
| ||||
|
|
|
|
|
| |||||||||||
Intercompany distribution income (A) |
| $ | 4,542 |
|
| $ | 3,619 |
|
| $ | 3,125 |
|
| $ | 2,075 |
|
|
|
|
|
|
|
| ||||||||||
Royalty expense |
| 127,500 |
| - |
|
| - |
| 63,750 |
| ||||||
Officers' compensation |
| 82,000 |
| - |
| |||||||||||
Other operating expenses- net |
|
| 36,450 |
|
|
| 9,044 |
| ||||||||
Officers’ compensation |
| - |
| 82,000 |
| |||||||||||
Other operating expenses – net |
|
| 9,245 |
|
|
| 9,028 |
| ||||||||
Total operating expenses |
|
| 245,950 |
|
|
| 9,044 |
|
|
| 9,245 |
|
|
| 154,778 |
|
Net income (loss) |
| $ | (241,408 | ) |
| $ | (5,425 | ) |
| $ | (6,120 | ) |
| $ | (152,703 | ) |
_______
(A) Eliminated in consolidation
Table of Contents |
Iconic Brands, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
SixThree months ended June 30,March 31, 2020 and 2019 and 2018
(Unaudited)
6. GOODWILL AND ACQUISITION OF 51% OF GREEN GROW FARMS, INC.7. INVENTORIES
On May 9, 2019, Iconic closed on a Share Exchange Agreement (the “Agreement”) with Green Grow Farms, Inc. (“Green Grow”) and NY Farms Group Inc. (“NY Farms”). Pursuant to the Agreement, Iconic acquired a 51% equity interest in Green Grow in exchange for (i) cash consideration of $200,000 (which was paid on July 24, 2019), and (ii) 2,000,000 shares of Company common stock. In addition, the Company has agreed to issue up to an additional 6,000,000 shares based upon gross revenues reached by Green Grow (at a rate of 120,000 shares per $1,000,000 of gross revenues up to a maximum of $50,000,000) within 36 months of the Closing. The $1,450,000 total consideration (i.e., the $200,000 note payable plus the $1,250,000 fair value of the 2,000,000 shares of Iconic common stock) of the acquisition over the $0 identifiable net assets of Green Grow at May 9, 2019 has been recognized as goodwill.Inventories consist of:
| March 31, 2020 |
|
| December 31, 2019 |
| |||
Finished goods: |
|
|
|
|
|
| ||
Hooters brands |
| $ | 318,968 |
|
| $ | 286,123 |
|
Bellissima brands |
|
| 234,330 |
|
|
| 199,580 |
|
BiVi brands |
|
| 47,880 |
|
|
| 48,132 |
|
Total finished goods |
|
| 601,178 |
|
|
| 533,835 |
|
|
|
|
|
|
|
|
|
|
Raw materials: |
|
|
|
|
|
|
|
|
Hooters brands |
|
| 36,966 |
|
|
| 39,965 |
|
Total raw materials |
|
| 36,966 |
|
|
| 39,965 |
|
|
|
|
|
|
|
|
|
|
Total |
| $ | 638,144 |
|
| $ | 573,800 |
|
Green Grow was incorporated in New York on February 28, 2019 and has had no revenues since inception. On June 6, 2019, Green Grow was granted a license by New York State to grow hemp. On June 11, 2019, Green Grow signed a Sublease Agreement and Operating Agreement with Romanski Farms, Inc. to use certain real property in Baiting Hollow, New York to plant and grow hemp for CBD extraction. The lease has a term of one year and provides for monthly rent of $1,133 to be paid by Green Grow.
7. 8. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of:
|
| June 30, |
|
| December 31, 2018 |
|
| March 31, 2020 |
|
| December 31, 2019 |
| ||||
Accounts payable |
| $ | 81,822 |
| $ | 175,405 |
|
| $ | 539,260 |
| $ | 737,850 |
| ||
Accrued officers compensation |
| 1,018,750 |
| 811,250 |
|
| 837,800 |
| 813,050 |
| ||||||
Accrued royalties |
| 300,508 |
| 174,985 |
|
| 311,006 |
| 295,042 |
| ||||||
Other |
|
| 46,701 |
|
|
| 149,835 |
|
|
| 10,426 |
|
|
| 6,621 |
|
Total |
| $ | 1,447,781 |
|
| $ | 1,311,475 |
|
| $ | 1,698,492 |
|
| $ | 1,852,563 |
|
Iconic Brands, Inc.Note payable consists of:
Notes to Consolidated Financial Statements
|
| March 31, 2020 |
|
| December 31, 2019 |
| ||
Amount due to a former Bellissima consultant pursuant to a Settlement and Release Agreement dated February 7, 2019, due December 31, 2019 |
| $ | 15,000 |
|
| $ | 40,000 |
|
Total |
| $ | 15,000 |
|
| $ | 40,000 |
|
Six months ended June 30, 2019 and 2018
(Unaudited)
8. DEBT
Effective October 4, 2018, the then remaining debt and accrued interest thereon was satisfied through (1) the issuance of a total of 2,077,994 shares of our Series E convertible preferred stock (which are convertible into a total of 831,198 shares of common stock) plus warrants to acquire 831,198 shares of our common stock (for $519,499 debt and accrued interest), (2) the issuance of a total of 122,510 shares of our common stock (for $76,569 debt and accrued interest), and (3) cash (for $90,296 debt and accrued interest).
At June 30, 2019, notes payable consist of:
Amount due New York Farms Group Inc. pursuant to Share Exchange Agreement dated April 17, 2019 (closed May 9, 2019) relating to the acquisition of 51% of Green Grow Farms, Inc. (paid July 24, 2019) |
| $ | 200,000 |
|
Amount due to a former Bellissima consultant pursuant to a Settlement and Release Agreement dated February 7, 2019, due December 31, 2019 |
|
| 50,000 |
|
Total |
| $ | 250,000 |
|
9.10. DERIVATIVE LIABILITY ON CONVERTIBLE DEBTWARRANTS
In September 2018, the then Company entered into Securities Exchange Agreements and other agreements with holders of all convertible debt then outstanding to have such debt satisfied (which occurred effective October 4, 2018 – see Note 8). Accordingly, the Company reduced the then derivative liability from $255,294 at September 30, 2018 to $0.
10. DERIVATIVE LIABILITY ON WARRANTS
From September 2017 to November 2017, in connection with the sale of a total of 480,000 shares of common stock, (see Note 11), the Company issued a total of 480,000 Common Stock Purchase Warrants (the “Warrants”) to the respective investors. The Warrants were exercisable into ICNB common stock at a price of $2.50 per share, were to expire five years from date of issuance, and contained “down round” price protection.
Effective May 21, 2018, in connection with the sale of a total of 120,000 shares of Series E Preferred Stock, (see Note 11), the Company issued a total of 480,000 Warrants to four investors. These warrants were exercisable into ICNB common stock at a price of $2.50 per share, were to expire five years from date of issuance, and contained “down round” price protection.
The down round provision of the above Warrants required a reduction in the exercise price if there were future issuances of common stock equivalents at a lower price than the $2.50 exercise price of the Warrants. Accordingly, we recorded the $2,261,039 fair value of the Warrants at December 31, 2018 as a derivative liability. The $1,565,039 increase in the fair value of the derivative liability from $696,000 at December 31, 2017 to $2,261,039 at December 31, 2018 was charged to expense from derivative liability.
Iconic Brands, Inc.
Notes to Consolidated Financial Statements
Six months ended June 30, 2019 and 2018
(Unaudited)
Assumptions used to calculate the fair value of the Warrants at December 31, 2018 include (1) stock price of $0.95 per share, (2) exercise prices from $0.625 to $2.50 per share, (3) terms ranging from 2.25 years to 4.5 years, (4) expected volatility of 148%, and (5) risk free interest rates range from 2.46% to 2.51%.
Effective January 1, 2019 (see Note 2), the Company adopted ASU 2017-11 and reduced the $2,261,039 derivative liability on warrants at December 31, 2018 to $0 and recognized a $2,261,039 cumulative effect adjustment reduction of accumulated deficit.
F-12 |
Table of Contents |
11. CAPITAL STOCK
Iconic Brands, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Three months ended March 31, 2020 and 2019
11. CAPITAL STOCK
Preferred Stock
The one share of Series A Preferred Stock, which was issued to Richard DeCicco on JuneSeptember 10, 2009, entitles the holder to two votes for every share of Common Stock Deemed Outstanding and has no conversion or dividend rights.
The 1000 shares of Series C Preferred Stock, which were issued to Richard DeCicco on May 15, 2015 pursuant to the Securities Exchange Agreement (see Note 3)4) for the Company’s 51% investment in BiVi, entitled the holder in the event of a Sale (as defined) to receive out of the proceeds of such Sale (in whatever form, be it cash, securities, or other assets), a distribution from the Company equal to 76.93% of all such proceeds received by the Company prior to any distribution of such proceeds to all other classes of equity securities, including any series of preferred stock designated subsequent to this Series C Preferred Stock. Effective March 27, 2019, pursuant to a Preferred Stock Exchange Agreement, Mr. DeCicco exchanged the 1,000 shares of Series C Preferred Stock for 1,000,000 shares of Company common stock.
The 10 shares of Series D Preferred Stock, which were issued to Richard DeCicco and Roseann Faltings (5 shares each) on December 13, 2016 pursuant to the Securities Purchase Agreement (See Note 4)5) for the Company’s 51% investment in Bellissima, entitled the holders to convert each share of Series D Preferred Stock to the equivalent of 5.1% of the common stock issued and outstanding at the time of conversion. Effective March 27, 2019, pursuant to a Preferred Stock Exchange Agreement, Mr. DeCicco and Ms. Faltings exchanged the 10 shares of Series D Preferred Stock for 1,000,000 shares of Company common stock (500,000 shares each).
Effective May 21, 2018, the Company entered into a Share Purchase Agreement with the four investors who purchased 480,000 shares of common stock pursuant to a Securities Purchase Agreement dated October 27, 2017. The Exchange Agreement provided for the exchange of the 480,000 shares of common stock for 1,200,000 shares of Series E Preferred stock.Stock. Each share of Series E Preferred Stock is convertible into 0.4 shares of common stock, is entitled to 0.4 votes on all matters to come before the common stockholders or shareholders generally, is entitled to dividends on an as-converted-to-common stock basis, is entitled to a distribution preference of $0.25 upon liquidation, and is not redeemable.
Also effective May 21, 2018, the Company sold a total of 1,200,000 shares of Series E Preferred Stock and 480,000 warrants to the four investors referred to in the preceding paragraph for $300,000 cash pursuant to an Amendment No. 1 to Securities Purchase Agreement.
Effective October 4, 2018, the Company closed on the first tranche of the Securities Purchase Agreement dated September 27, 2018 with nine (9) accredited investors for the sale of an aggregate of 4,650,000 shares of our Series E convertible preferred stock and warrants to acquire 1,860,000 shares of our common stock (at an exercise price of $1.25 per share for a period of five years) for gross proceeds of $1,162,500. The first tranche sale was for 1,550,000 shares of our Series E Preferred stock and warrants to acquire 620,000 shares of our common stock for gross proceeds of $387,500.
Iconic Brands, Inc.
Notes to Consolidated Financial Statements
Six months ended June 30, 2019 and 2018
(Unaudited)
As a condition to the closing atof the first tranche, the Company entered into Securities Exchange Agreements with holders of convertible notes totaling $519,499 who exchanged their convertible notes for an aggregate of 2,077,994 shares of our Series E Preferred stock plus warrants to acquire 831,198 shares of our common stock. Also, holders of convertible notes totaling $76,569 exchanged their notes for an aggregate of 122,510 shares of our common stock and holders of convertible notes totaling $90,296 were paid off with cash.
On November 30, 2018 and December 20, 2018, the Company received two payments of $71,875 and $71,875 respectively (totaling $143,750) in exchange for 287,500 and 287,500 shares of Series E Preferred Stock (totaling 575,000 shares) respectively at $0.25 per share. These payments represented advance payments in connection with the second tranche of the Securities Purchase Agreement dated September 27, 2018 which closed February 7, 2019.
F-13 |
Table of Contents |
Iconic Brands, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Three months ended March 31, 2020 and 2019
Effective February 7, 2019, the Company closed on the second tranche of the Securities Purchase Agreement dated September 27, 2018. The Company received the remaining $243,750 (of the $387,500 total second tranche proceeds) and issued the investors the remaining total of 975,000 shares of Series E Preferred Stock (of the 1,550,000 total second tranche shares) and warrants to acquire 620,000 shares of our common stock.
On February 12, 2019 and March 18, 2019, the Company received two payments of $71,880 and $25,000 respectively (totaling $96,880) in exchange for 287,520 and 100,000 shares of Series E Preferred Stock (totaling 387,520 shares) respectively at $0.25 per share. These payments represent advance payments in connection with the third tranche of the Securities Purchase Agreement dated September 27, 2018. TheClosing of the third tranche of $387,500 is expected to occur when certain closing conditions are satisfied.has not occurred.
On April 25, 2019 and JuneSeptember 4, 2019, the Company received payments of $71,875 and $96,875 respectively (totaling $168,750) in exchange for 287,500 and 387,500 shares of Series E Preferred Stock (totaling 675,000 shares) respectively at $0.25 per share. These payments represent advance payments in connection with the third tranche of the Securities Purchase Agreement dated September 27, 2018. TheClosing of the third tranche of $387,500 is expected to occur when certain closing conditions are satisfied.has not occurred.
On April 23, 2019, a stockholderholder converted 673,398 shares of Series E Preferred Stock into 269,359 shares of Iconic common stock.
On May 17, 2019, a stockholderholder converted 800,000 shares of Series E Preferred Stock into 320,000 shares of Iconic common stock.
Common Stock
On March 28, 2017, the Company executed a Settlement Agreement and Release (the “Settlement Agreement”) with 4 holders of convertible notes payable. Notes payable and accrued interest totaling $892,721 were satisfied through the Company’s agreement to irrevocably reserve a total of 1,931,707 shares of its common stock and to deliver such shares in separate tranches to the Escrow Agent upon receipt of a conversion notice delivered by the Escrow Agent to the Company.
Iconic Brands, Inc.
Notes to Consolidated Financial Statements
Six months ended June 30, 2019 and 2018
(Unaudited)
On May 5, 2017, the Company executed an Amended Settlement Agreement and Release (the “Amended Settlement Agreement”) replacing the Settlement Agreement and Release dated March 28, 2017 (see preceding paragraph). The Amended Settlement Agreement is with 5 holders of convertible notes payable (the 4 holders who were parties to the Settlement Agreement and Release dated March 28, 2017 and one additional holder) and provided for the satisfaction of notes payable and accrued interest totaling $1,099,094 (a $206,373 increase from the $892,721 amount per the Settlement Agreement and Release dated March 28, 2017) through the Company’s agreement to irrevocably reserve a total of 2,452,000 shares of its common stock (a 520,293 shares increase from the 1,931,707 shares per the Settlement Agreement and Release dated March 28, 2017) and deliver such shares in separate tranches to the Escrow Agent upon receipt of a conversion notice delivered by the Escrow Agent to the Company.
In the quarterly period ended June 30, 2017, the Company issued an aggregate of 284,777 shares of its common stock to the Escrow Agent pursuant to the Amended Settlement Agreement. In the quarterly period ended September 30, 2017, the Company issued an aggregate of 253,333 shares of its common stock to the Escrow Agent pursuant to the Amended Settlement Agreement.
From September 2017 to November 2017, pursuant to a Securities Purchase Agreement dated October 27, 2017 (the “SPA”), the Company issued a total of 480,000 shares of its common stock and 480,000 warrants to four investors for a total of $300,000 cash. The Warrants are exercisable into ICNB common stock at a price of $2.50 per share, expire five years from date of issuance, and contain “down round” price protection (see Note 10).
On January 2, 2018, the Company issued 103,447 shares of its common stock to the Escrow Agent pursuant to the Amended Settlement Agreement.
On January 19, 2018, the Company issued 216,127 shares of its common stock to the Escrow Agent pursuant to the Amended Settlement Agreement.
On March 14, 2018, the Company issued 126,667 shares of its common stock to the Escrow Agent pursuant to the Amended Settlement Agreement.
On April 5, 2018, the Company issued 172,000 shares of its common stock to the Escrow Agent pursuant to the Amended Settlement Agreement.
On April 9, 2018, the Company issued 280,296 shares of its common stock to the Escrow Agent pursuant to the Amended Settlement Agreement.
On April 12, 2018, the Company issued 481,151 shares of its common stock to the Escrow Agent pursuant to the Amended Settlement Agreement.
On August 14, 2018, the Company issued 51,938 shares of its common stock in settlement of convertible notes payable and accrued interest payable totaling $32,461.
Iconic Brands, Inc.
Notes to Consolidated Financial Statements
Six months ended June 30, 2019 and 2018
(Unaudited)
On September 7, 2018, the Company issued 70,572 shares of its common stock in settlement of convertible notes payable and accrued interest payable totaling $44,108.
Effective May 21, 2018, the Company entered into a Share Purchase Agreement with the four investors who purchased 480,000 shares of common stock pursuant to a Securities Purchase Agreement dated October 27, 2017. The Exchange Agreement provided for the exchange of the 480,000 shares of common stock for 1,200,000 shares of Series E Preferred stock. Each share of Series E Preferred Stock is convertible into 0.4 shares of common stock, is entitled to 0.4 votes on all matters to come before the common stockholders or shareholders generally, is entitled to dividends on an as-converted-to-common stock basis, is entitled to a distribution preference of $0.25 upon liquidation, and is not redeemable.
On January 16, 2019, the Company issued 436,125 shares of its common stock to the Escrow Agent pursuant to the Amended Settlement Agreement.
On January 24, 2019, the Company issued 98,078 shares of its common stock to the Escrow Agent pursuant to the Amended Settlement Agreement. This issuance completed the Company’s obligation to deliver shares of our common stock to the Escrow Agent.
On February 7, 2019, the Company agreed to issue 120,000 shares of its common stock (issued April 18, 2019) and a $50,000 note payable due December 31, 2019 to a former Bellissima consultant pursuant to a Settlement and Release Agreement. The $141,200 total fair value of the note ($50,000) and the 120,000 shares of common stock ($91,200) was expensed as consulting fees in the three months ended June 30, 2019.
On March 15, 2019, the Company agreed to issue 150,000 shares of its common stock (issued April 8, 2019) to a consulting firm entity pursuant to a Business Development Agreement. The $199,500 fair value of the 150,000 shares of common stock was expensed as consulting fees in the three months ended June 30, 2019.
On March 27, 2019, the Company issued 1,000,000 shares of its common stock to Chief Executive Officer Richard DeCicco in exchange for the surrender of the 1,000 shares of Series C Preferred Stock owned by Mr. DeCicco.
On March 27, 2019, the Company issued a total of 1,000,000 shares of its common stock (500,000 shares to Chief Executive Officer Richard DeCicco; 500,000 shares to Vice President Roseann Faltings) in exchange for the surrender of the 5 shares each of Series D Preferred Stock owned by Mr. DeCicco and Ms. Faltings.
Effective April 15, 2019 the Company issued 50,000 shares of its common stock to a consulting firm entity pursuant to a Consulting Agreement. The $95,000 fair value of the 50,000 shares of Iconic common stock was expensed as consulting fees in the three months ended June 30, 2019.
On April 23, 2019, a stockholder converted 673,398 shares of Series E Preferred Stock into 269,359 shares of Iconic common stock.
On May 8, 2019, Iconic executed Warrant Exercise Agreements with four holders of Company warrants. The holders exercised a total of 960,000 warrants at an agreed price of $0.32 per share and paid the Company a total of $307,200. Pursuant to the Warrant Exercise Agreements, the holders were issued a total of 1,920,000 New Warrants which are exercisable into Company common stock at a price of $2.25 per share for a period of five years.
Iconic Brands, Inc.
Notes to Consolidated Financial Statements
Six months ended June 30, 2019 and 2018
(Unaudited)
On May 9, 2019, Iconic closed on a Share Exchange Agreement (the “Agreement”) with Green Grow Farms, Inc. (“Green Grow”) and NY Farms Group Inc. (“NY Farms”). Pursuant to the Agreement, Iconic acquired a 51% equity interest in Green Grow in exchange for (i) cash consideration of $200,000 (which was paid on July 24, 2019), and (ii) 2,000,000 shares of Company common stock. In addition, the Company has agreed to issue up to an additional 6,000,000 shares based upon gross revenues reached by Green Grow (at a rate of 120,000 shares per $1,000,000 of gross revenues up to a maximum of $50,000,000) within 36 months of the Closing. The $1,450,000 total consideration (i.e., the $200,000 note payable plus the $1,250,000 fair value of the 2,000,000 shares of Iconic common stock) of the acquisition over the $0 identifiable net assets of Green Grow at May9, 2019 has been recognized as goodwill (see Note 6).
On May 17, 2019, a stockholder converted 800,000 shares of Series E Preferred Stock into 320,000 shares of Iconic common stock.
Effective May 23, 2019, the Company issued 250,000 shares of its common stock to a consulting firm entity pursuant to a Consulting Agreement. The $390,000 fair value of the 250,000 shares of Iconic common stock was expensed as consulting fees in the three months ended June 30, 2019.
Warrants
A summary of warrants activity for the period January 1, 2017 to June 30, 2019 follows:
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Iconic Brands, Inc.
Notes to Consolidated Financial Statements
Six months ended June 30, 2019 and 2018
(Unaudited)
Issued and outstanding warrants at June 30, 2019 consist of:
Year Granted |
| Number Common Shares Equivalent |
|
| Exercise Price |
|
| Consist of Expiration Date | |||
2017 |
|
| 54,000 |
|
| $ | 2.50 |
|
| June 22, 2022 to June 30, 2022 | |
2018 |
|
| 400,000 |
|
| $ | 0.625 |
|
| March 28, 2021 | |
2018 |
|
| 30,000 |
|
| $ | 2.50 |
|
| May 21, 2023 | |
2018 |
|
| 831,198 |
|
| $ | 1.25 |
|
| September 20, 2023 | |
2018 |
|
| 620,000 |
|
| $ | 1.25 |
|
| September 20, 2023 | |
2019 |
|
| 620,000 |
|
| $ | 1.25 |
|
| February 7, 2024 | |
2019 |
|
| 1,920,000 |
|
| $ | 2.25 |
|
| May 8,2024 | |
|
|
|
|
|
|
|
|
|
|
| |
Total |
|
| 4,475,198 |
|
|
|
|
|
|
|
* - Substantially all of the warrants will be repriced to $0.625 per share as a result of the Series F Preferred Stock financing, which closed on August 2, 2019 (see Note 14).
In connection with the Company’s issuance of a total of $135,019 convertible notes payable in the three months ended June 30, 2017, the Company issued a total of 54,000 Common Stock Purchase Warrants (the ‘Warrants”) to the respective lenders. The Warrants are exercisable into ICNB common stock at a price of $2.50 per share and expire at dates ranging from June 22, 2022 to June 30, 2022.
As discussed in Note 9, the Company issued a total of 480,000 warrants to four investors from September 2017 to November 2017. The Warrants were exercisable into ICNB common stock at a price of $2.50 per share and were to expire five years from date of issuance.
Effective March 28, 2018, the Company issued 400,000 warrants to a lawyer for services rendered. The warrants are exercisable into ICNB common stock at a price of $0.625 per share and expire three years from date of issuance. The $250,000 fair value of the warrants was expensed in the three months ended June 30, 2018.
Effective May 21, 2018, the Company issued 30,000 warrants to a law firm for services rendered. The warrants are exercisable into ICNB common stock at a price of $2.50 per share and expire five years from date of issuance. The $23,250 fair value of the warrants was expensed in the three months ended June 30, 2018.
As discussed in Preferred Stock above, the Company issued a total of 480,000 warrants to four investors effective May 21, 2018 in connection with the sale of 1,200,000 shares of Series E Preferred stock for $300,000 cash. These warrants were exercisable into ICNB common stock at a price of $2.50 per share and were to expire five years from date of issuance.
Effective October 4, 2018, the remaining debt (see Note 8) and accrued interest thereon was satisfied through (1) the issuance of a total of 2,077,994 shares of our Series E convertible preferred stock (which are convertible into a total of 831,198 shares of common stock) plus warrants to acquire 831,198 shares of our common stock (for $519,499 debt and accrued interest), (2) the issuance of a total of 122,510 shares of our common stock (for $76,569 debt and accrued interest), and (3) cash (for $90,296 debt and accrued interest).
Iconic Brands, Inc.
Notes to Consolidated Financial Statements
Six months ended June 30, 2019 and 2018
(Unaudited)
Effective October 4, 2018, the Company closed on the first tranche of the Securities Purchase Agreement dated September 27, 2018 with nine (9) accredited investors for the sale of an aggregate of 4,650,000 shares of our Series E convertible preferred stock and warrants to acquire 1,860,000 shares of our common stock (at an exercise price of $1.25 per share for a period of five years) for gross proceeds of $1,162,500. The first tranche sale was for 1,550,000 shares of our Series E convertible preferred stock and warrants to acquire 620,000 shares of our common stock for gross proceeds of $387,500. The second tranche of $387,500 closed on February 7, 2019 and also was for 1,550,000 shares of our Series E convertible preferred stock and warrants to acquire 620,000 shares of our common stock.
On May 8, 2019, Iconic executed Warrant Exercise Agreements with four holders of Company warrants. The holders exercised a total of 960,000 warrants (which were acquired from September 2017 to November 2017 and on May 21, 2018) at an agreed price of $0.32 per share and paid the Company a total of $307,200. Pursuant to the Warrant Exercise Agreements, the holders were issued a total of 1,920,000 New Warrants which are exercisable into Company common stock at a price of $2.25 per share for a period of five years.
12. INCOME TAXES
No income taxes were recorded in the periods presented since the Company had taxable losses in these periods.
The provision for (benefit from) income taxes differs from the amount computed by applying the statutory United States federal income tax rate of 21% for the periods presented to income (loss) before income taxes. The sources of the difference are as follows:
|
| Six months ended June 30, |
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|
| 2019 |
|
| 2018 |
| ||
Expected tax at 21% |
| $ | (369,992 | ) |
| $ | (163,413 | ) |
Nondeductible stock-based compensation |
|
| 162,897 |
|
|
| - |
|
Nondeductible expense (nontaxable income) from derivative liability |
|
| - |
|
|
| (85,228 | ) |
Nondeductible amortization of debt discount |
|
| - |
|
|
| 21,359 |
|
Increase (decrease) in valuation allowance |
|
| 207,095 |
|
|
| 227,282 |
|
|
|
|
|
|
|
|
|
|
Income tax provision |
| $ | - |
|
| $ | - |
|
Iconic Brands, Inc.
Notes to Consolidated Financial Statements
Six months ended June 30, 2019 and 2018
(Unaudited)
Significant components of the Company’s deferred income tax assets are as follows:
June 30, 2019 December 31, 2018 Net operating loss carry forward Less valuation allowance Deferred income tax assets - net $ 3,965,503 $ 3,758,408 (3,965,503 ) (3,758,408 ) $ - $ -
Based on management’s present assessment, the Company has not yet determined that a deferred tax asset attributable to the future utilization of the net operating loss carryforward as of June 30, 2019 will be realized. Accordingly, the Company has maintained a 100% valuation allowance against the deferred tax asset in the financial statements at June 30, 2019. The Company will continue to review this valuation allowance and make adjustments as appropriate.
Current United States income tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited.
All tax years remain subject to examination by major taxing jurisdictions.
13. COMMITMENTS AND CONTINGENCIES
a. Iconic Guarantees
On May 26, 2015, BiVi LLC (“BiVi”) entered into a License Agreement with Neighborhood Licensing, LLC (the “BiVi Licensor”), an entity owned by Chazz Palminteri (“Palminteri”), to use Palminteri’s endorsement, signature and other intellectual property owned by the BiVi Licensor. Iconic has agreed to guarantee and act as surety for BiVi’s obligations under certain sections of the License Agreement and to indemnify the BiVi Licensor and Palminteri against third party claims.
On November 12, 2015, Bellissima Spirits LLC (“Bellissima”) entered into a License Agreement with Christie Brinkley, Inc. (the “Bellissima Licensor”), an entity owned by Christie Brinkley (“Brinkley”), to use Brinkley’s endorsement, signature, and other intellectual property owned by the Bellissima Licensor. Iconic has agreed to guarantee and act as surety for Bellissima’s obligations under certain sections of the License Agreement and to indemnify the Bellissima Licensor and Brinkley against third party claims. Also, Brinkley was granted a 24 month option to purchase 1% of the outstanding shares of Iconic common stock on a fully diluted basis (as of the date of Brinkley’s exercise of the option) at an exercise price of $0.001 per share.
Iconic Brands, Inc.
Notes to Consolidated Financial Statements
Six months ended June 30, 2019 and 2018
(Unaudited)
b. Royalty Obligations of BiVi and Bellissima
Pursuant to the License Agreement with the Bivi Licensor (see Note 13a. above), BiVi is obligated to pay the BiVi Licensor a Royalty Fee equal to 5% of monthly gross sales of BiVi Brand products payable monthly subject to an annual Minimum Royalty Fee of $100,000 in year 1, $150,000 in year 2, $165,000 in year 3, $181,500 in year 4, $199,650 in year 5, and $219,615 in year 6 and each subsequent year.
Pursuant to the License Agreement and Amendment No. 1 to the License Agreement effective June 30, 2017 with the Bellissima Licensor (see Note 13a. above), Bellissima is obligated to pay the Bellissima Licensor a Royalty Fee equal to 10% of monthly gross sales (12.5% for sales in excess of defined Case Break Points) of Bellissima Brand products payable monthly. The Bellissima Licensor has the right to terminate the endorsement if Bellissima fails to sell 10,000 cases of Bellissima Brand products in year 1, 15,000 cases in year 2, or 20,000 cases in year 3 and each subsequent year.
c. Brand Licensing Agreement relating to Hooters Marks
On July 23, 2018, United Spirits, Inc. (“United”) executed a Brand Licensing Agreement (the “Agreement”) with HI Limited Partnership (“the Licensor”). The Agreement provides United a license to use certain “Hooters” Marks to manufacture, market, distribute, and sell alcoholic products.
The Initial Term of the Agreement is from July 23, 2018 through December 31, 2020. Provided that United is not in breach of any terms of the Agreement, United may extend the Term for an additional 3 years through December 31, 2023.
The Agreement provides for United’s payment of Royalty Fees (payable quarterly) to the Licensor equal to 6% of the net sales of the licensed products subject to a minimum royalty fee of $65,000 for Agreement year 1 (ending December 31, 2018), $255,000 for Agreement year 2, $315,000 for Agreement year 3 and 4, $360,000 for Agreement year 5, and $420,000 for Agreement year 6.
The Agreement also provided for United’s payment of an advance payment of $30,000 to the Licensor to be credited towards royalty fees payable to Licensor. On September 6, 2018, the $30,000 advance payment was paid to the Licensor. The Agreement also provides for United’s payment of a marketing contribution equal to 2% of the prior year’s net sales of the Licensed Products. If United fails to spend the required marketing contribution in any calendar year, the deficiency will be paid to Licensor.
For the three and six months ended June 30, 2019, royalties expense under this Agreement was $63,750 and $127,500, respectively (equal to 25% and 50%, respectively, of the year 2019 minimum royalty fee).
d. Distribution Agreements
On May 1, 2015, BiVi entered into a Distribution Agreement with United Spirits, Inc. (“United”) for United to distribute and wholesale BiVi’s product and to act as the licensed importer and wholesaler. The Distribution Agreement provides United the exclusive right for a term of ten years to sell BiVi’s product for an agreed distribution fee equal to $1.00 per case of product sold. United is owned and managed by Richard DeCicco, the controlling shareholder and chief executive officer of Iconic.
In November 2015, Bellissima and United agreed to have United distribute and wholesale Bellissima’s Products under the same terms contained in the Distribution Agreement with BiVi described in the preceding paragraph.
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Iconic Brands, Inc.
Notes to Consolidated Financial Statements
Six months ended June 30, 2019 and 2018
(Unaudited)
e. Compensation Arrangements
Effective April 1, 2018, the Company executed Employment Agreements with its Chief Executive Officer Richard DeCicco (“DeCicco”) and its Vice President of Sales and Marketing Roseann Faltings (“Faltings”). Both agreements have a term of 24 months (to June 30, 2020). The DeCicco Employment Agreement provides for a base salary at the rate of $265,000 per annum and a compensation stock award of 300,000 shares of Iconic common stock issuable upon the effective date of the planned reverse stock split. The Faltings Employment Agreement provides for a base salary at the rate of $150,000 per annum and a compensation stock award of 100,000 shares of Iconic common stock issuable upon the effective date of the planned reverse stock split. For the year ended December 31, 2018, we accrued a total of $311,250 officers compensation pursuant to these two Employment Agreements. In 2018, the accrued compensation was allocated 50% to Iconic ($155,625), 40% to Bellissima ($124,500), and 10% to BiVi ($31,125). For the six months ended June 30, 2019, we accrued a total of $207,500 officers compensation pursuant to these two Employment Agreements which was allocated 50% to Iconic ($103,750), 40% to Bellissima ($83,000), and 10% to BiVi ($20,750).
Prior to April 1, 2018, the Company used the services of its chief executive officer Richard DeCicco and its assistant secretary Roseann Faltings under informal compensation arrangements (without any employment agreements).
As of June 30, 2019 and December 31, 2018, accrued officers compensation was $1,018,750 and $811,250, respectively.
f. Lease Agreements
On March 27, 2018, United Spirits, Inc. executed a lease extension for the Company’s office and warehouse space in North Amityville New York. The extension has a term of three years from February 1, 2018 to January 31, 2021 and provides for monthly rent of $4,478.
At June 30, 2019, the future minimum lease payments under this non-cancellable operating lease were:
Year ending December 31, 2019 Year ending December 31, 2020 Year ending December 31, 2021 Total $ 26,868 53,736 4,478 $ 85,082
The operating lease liability of $78,387 at June 30, 2019 as presented in the Consolidated Balance Sheet represents the discounted (at our 10% estimated incremental borrowing rate) value of the future lease payments of $85,082 at June 30, 2019.
Green Grow signed a Sublease Agreement and Operating Agreement with Romanski Farms, Inc. to use certain real property in Baiting Hollow, New York to plant and grow hemp for CBD extraction. The lease has a term of one year and provides for monthly rent of $1,133 to be paid by Green Grow.
g. Major customers.
For the six months ended June 30, 2019, three customers accounted for 21%, 21% and 14%, respectively of sales.
Iconic Brands, Inc.
Notes to Consolidated Financial Statements
Six months ended June 30, 2019 and 2018
(Unaudited)
14. SUBSEQUENT EVENTS
On July 18, 2019, Iconic entered into Securities Purchase Agreements with certain accredited investors (the “Investors”) for the sale of an aggregate of 3,125 shares of newly designated Series F Convertible Preferred Stock plus 5,000,000 warrants at a price of $1,000 per share of Series F Convertible Preferred Stock or for a total of $3,125,000 (which was collected in full from July 18, 2019 to August 2, 2019). On August 2, 2019, Iconic paid $322,500 in commissions and expenses to the placement agent of this offering. Each share of Series F Convertible Preferred Stock has a stated value of $1,000, is convertible into 1,600 shares of common stock (subject to adjustment under certain circumstances), has no voting rights, is entitled to dividends on an as-converted-to common stock basis, is entitled to a distribution preference of $1,000 upon liquidation, and is not redeemable. Each warrant is exercisable into one share of common stock at an exercise price of $0.625 per share (subject to adjustment under certain circumstances) for a period of five years from the date of issuance.
We also entered into separate Registration Rights Agreements with the Investors, pursuant to which the Company agreed to undertake to file a registration statement to register the resale of the shares underlying the Series F Convertible Preferred Stock and Warrants within thirty (30) days following the closing date (the “Filing Date”), to cause such registration statement to be declared effective within 60 days following the earlier of (i) the date that the registration statement is filed with the Securities and Exchange Commission (the “SEC”) and (ii) the Filing Date, and to maintain the effectiveness of the registration statement until all of such shares of Common Stock have been sold or are otherwise able to be sold pursuant to Rule 144 under the Securities Act, without any restrictions. We filed the Form S-1 registration statement on September 9, 2019 which was declared effective by the SEC on September 18, 2019. If we fail to filemaintain the effectiveness of the registration statement or have it declared effective byfor the dates set forth above, among other things,required time period, the Company is obligated to pay the Investors liquidated damages in the amount of 1% of their subscription amount, per month, until such events areevent is satisfied.
F-14 |
Table of Contents |
Iconic Brands, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Three months ended March 31, 2020 and 2019
Concurrently with the closing of the financing transaction described above, we entered into Securities Exchange Agreements with certain holders of our Series E Convertible Preferred Stock to exchangeand exchanged their 2,725,000 shares of Series E Convertible Preferred Stock for an aggregate of 1,090681.25 shares of our Series F Convertible Preferred Stock. After
From July 26, 2019 to August 28, 2019, three holders converted a total of 1,000,000 shares of Series E Preferred Stock into a total of 400,000 shares of Iconic common stock.
From September 19, 2019 to September 27, 2019, three holders converted a total of 14.20 shares of Series E Preferred Stock into a total of 227,200 shares of Iconic common stock.
On October 25, 2019 and December 28, 2019, two holders converted a total of 651,892 shares of Series E Preferred Stock into a total of 260,757 shares of Iconic common stock.
From October 2, 2019 to December 31, 2019, six holders converted a total of 508.50 shares of Series F Preferred Stock into a total of 813,600 shares of Iconic common stock.
On January 12, 2020, the exchanges, 1,125,000Company entered into securities purchase agreements with certain accredited investors for the sale of a total of 1,500 shares of Series G Convertible Preferred Stock and warrants o purchase 1,200,000 shares of our common stock for gross proceeds of $1,500,000 (of which $1,475,000 was collected on January 13, 2020 and January 14, 2020). Each share of Series G Convertible Preferred Stock (designated on January 13, 2020) has a stated value of $1,000, is convertible into shares of common stock at a price of $1.25 per share (subject to adjustment under certain circumstances), has no voting rights, is entitled to dividends on an as-converted-to common stock basis, is entitled to a distribution preference of $1,000 upon liquidation, and is not redeemable. Each warrant is exercisable into one share of common stock at an exercise price of $1.25 per share (subject to adjustment under certain circumstances) for a period of five years from the date of issuance.
On February 12, 2020, February 13, 2020, and February 14, 2020, three holders converted a total of 675,000 shares of Series E Preferred Stock into a total of 270,000 shares of Iconic common stock.
From January 16, 2020 to February 24, 2020, two holders converted a total of 190 shares of Series F Preferred Stock into a total of 304,000 shares of Iconic common stock.
Common Stock
On March 28, 2017, the Company executed a Settlement Agreement and Release (the “Settlement Agreement”) with 4 holders of convertible notes payable. Notes payable and accrued interest totaling $892,721 were satisfied through the Company’s agreement to irrevocably reserve a total of 1,931,707 shares of its common stock and to deliver such shares in separate tranches to the Escrow Agent upon receipt of a conversion notice delivered by the Escrow Agent to the Company.
F-15 |
Table of Contents |
Iconic Brands, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Three months ended March 31, 2020 and 2019
On May 5, 2017, the Company executed an Amended Settlement Agreement and Release (the “Amended Settlement Agreement”) replacing the Settlement Agreement and Release dated March 28, 2017 (see preceding paragraph). The Amended Settlement Agreement is with 5 holders of convertible notes payable (the 4 holders who were parties to the Settlement Agreement and Release dated March 28, 2017 and one additional holder) and provided for the satisfaction of notes payable and accrued interest totaling $1,099,094 (a $206,373 increase from the $892,721 amount per the Settlement Agreement and Release dated March 28, 2017) through the Company’s agreement to irrevocably reserve a total of 2,452,000 shares of its common stock (a 520,293 shares increase from the 1,931,707 shares per the Settlement Agreement and Release dated March 28, 2017) and deliver such shares in separate tranches to the Escrow Agent upon receipt of a conversion notice delivered by the Escrow Agent to the Company.
In the quarterly period ended June 30, 2017, the Company issued an aggregate of 284,777 shares of its common stock to the Escrow Agent pursuant to the Amended Settlement Agreement. In the quarterly period ended September 30, 2017, the Company issued an aggregate of 253,333 shares of its common stock to the Escrow Agent pursuant to the Amended Settlement Agreement.
From September 2017 to November 2017, pursuant to a Securities Purchase Agreement dated October 27, 2017 (the “SPA”), the Company issued a total of 480,000 shares of its common stock and 480,000 warrants to four investors for a total of $300,000 cash. The Warrants, which were exercised May 8, 2019 pursuant to Warrant Exercise Agreements, were exercisable into ICNB common stock at a price of $2.50 per share, were to expire five years from date of issuance, and contained “down round” price protection (see Note 10).
On January 2, 2018, the Company issued 103,447 shares of its common stock to the Escrow Agent pursuant to the Amended Settlement Agreement.
On January 19, 2018, the Company issued 216,127 shares of its common stock to the Escrow Agent pursuant to the Amended Settlement Agreement.
On March 14, 2018, the Company issued 126,667 shares of its common stock to the Escrow Agent pursuant to the Amended Settlement Agreement.
On April 5, 2018, the Company issued 172,000 shares of its common stock to the Escrow Agent pursuant to the Amended Settlement Agreement.
On April 9, 2018, the Company issued 280,296 shares of its common stock to the Escrow Agent pursuant to the Amended Settlement Agreement.
On April 12, 2018, the Company issued 481,151 shares of its common stock to the Escrow Agent pursuant to the Amended Settlement Agreement.
On August 14, 2018, the Company issued 51,938 shares of its common stock in settlement of convertible notes payable and accrued interest payable totaling $32,461.
F-16 |
Table of Contents |
Iconic Brands, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Three months ended March 31, 2020 and 2019
On September 7, 2018, the Company issued 70,572 shares of its common stock in settlement of convertible notes payable and accrued interest payable totaling $44,108.
Effective May 21, 2018, the Company entered into a Share Purchase Agreement with the four investors who purchased 480,000 shares of common stock pursuant to a Securities Purchase Agreement dated October 27, 2017. The Exchange Agreement provided for the exchange of the 480,000 shares of common stock for 1,200,000 shares of Series E Preferred Stock. Each share of Series E Preferred Stock is convertible into 0.4 shares of common stock, is entitled to 0.4 votes on all matters to come before the common stockholders or shareholders generally, is entitled to dividends on an as-converted-to-common stock basis, is entitled to a distribution preference of $0.25 upon liquidation, and is not redeemable.
On January 16, 2019, the Company issued 436,125 shares of its common stock to the Escrow Agent pursuant to the Amended Settlement Agreement.
On January 24, 2019, the Company issued 98,078 shares of its common stock to the Escrow Agent pursuant to the Amended Settlement Agreement. This issuance completed the Company’s obligation to deliver shares of our common stock to the Escrow Agent.
On February 7, 2019, the Company agreed to issue 120,000 shares of its common stock (issued April 18, 2019) and a $50,000 note payable due December 31, 2019 to a former Bellissima consultant pursuant to a Settlement and Release Agreement. The $141,200 total fair value of the note ($50,000) and the 120,000 shares of common stock ($91,200) was expensed as consulting fees in the three months ended March 31, 2019.
On March 15, 2019, the Company agreed to issue 150,000 shares of its common stock (issued April 8, 2019) to a consulting firm entity pursuant to a Business Development Agreement. The $199,500 fair value of the 150,000 shares of common stock was expensed as consulting fees in the three months ended March 31, 2019.
On March 27, 2019, the Company issued 1,000,000 shares of its common stock to Chief Executive Officer Richard DeCicco in exchange for the surrender of the 1,000 shares of Series C Preferred Stock owned by Mr. DeCicco.
On March 27, 2019, the Company issued a total of 1,000,000 shares of its common stock (500,000 shares to Chief Executive Officer Richard DeCicco; 500,000 shares to Vice President Roseann Faltings) in exchange for the surrender of the 5 shares each of Series D Preferred Stock owned by Mr. DeCicco and Ms. Faltings.
Effective April 15, 2019 the Company issued 50,000 shares of its common stock to a consulting firm entity pursuant to a Consulting Agreement. The $95,000 fair value of the 50,000 shares of Iconic common stock was expensed as consulting fees in the three months ended June 30, 2019.
F-17 |
Table of Contents |
Iconic Brands, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Three months ended March 31, 2020 and 2019
On April 23, 2019, a stockholder converted 673,398 shares of Series E Preferred Stock into 269,359 shares of Iconic common stock.
On May 8, 2019, Iconic executed Warrant Exercise Agreements with four holders of Company warrants. The holders exercised a total of 960,000 warrants at an agreed price of $0.32 per share and paid the Company a total of $307,200. Pursuant to the Warrant Exercise Agreements, the holders were issued a total of 1,920,000 New Warrants which are exercisable into Company common stock at a price of $2.25 per share for a period of five years.
On May 9, 2019, Iconic closed on a Share Exchange Agreement (the “Agreement”) with Green Grow Farms, Inc. (“Green Grow”) and NY Farms Group Inc. (“NY Farms”). Pursuant to the Agreement, Iconic acquired a 51% equity interest in Green Grow in exchange for (i) note payable of $200,000 and (ii) 2,000,000 shares of Company common stock. Effective December 31, 2019, Iconic sold its 51% equity interest in Green Grow (see Note 3).
On May 17, 2019, a stockholder converted 800,000 shares of Series E Preferred Stock into 320,000 shares of Iconic common stock.
Effective May 23, 2019, the Company issued 250,000 shares of its common stock to a consulting firm entity pursuant to a Consulting Agreement. The $390,000 fair value of the 250,000 shares of Iconic common stock was expensed as consulting fees in the three months ended June 30, 2019.
From July 26, 2019 to August 28, 2019, three holders converted a total of 1,000,000 shares of Series E Preferred Stock into a total of 400,000 shares of Iconic common stock.
On September 3, 2019, the Company issued a total of 781,250 shares of common stock to the placement agent and five associated individuals for services relating to the offering of 3,125 shares of Series F Preferred Stock which concluded on August 2, 2019 (see Preferred Stock above).
From September 19, 2019 to September 27, 2019, three holders converted a total of 14.2 shares of Series F Preferred Stock into a total of 227,200 shares of Iconic common stock.
On October 25, 2019 and December 26, 2019, two holders converted a total of 651,892 shares of Series E Preferred Stock into a total of 260,757 shares of Iconic common stock.
From October 2, 2019 to December 31, 2019, six holders converted a total of 508.50 shares of Series F Preferred Stock into a total of 813,600 shares of Iconic common stock.
On January 22, 2020, the Company issued a total of 375,000 shares of its common stock to the placement agent and four associated individuals for services relating to the offering of 1,500 shares of Series G Preferred Stock which concluded on January 14, 2020 (see Preferred Stock above).
On January 22, 2020, and February 27, 2020, the Company issued a total of 160,000 shares of its common stock to an investor relations firm for services rendered to the Company. The $101,018 total fair value of the 160,000 shares of Iconic common stock on the respective dates of issuance was expensed as investor relations in the three months ended March 31, 2020.
F-18 |
Table of Contents |
Iconic Brands, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Three months ended March 31, 2020 and 2019
On January 26, 2020, the Company issued 150,000 shares of its common stock to a consulting firm for services rendered to the Company. The $100,500 fair value of the 150,000 shares of Iconic common stock was expensed as consulting fees in the three months ended March 31, 2020.
On February 24, 2020, the Company issued 100,000 shares of its common stock to William Clyde Elliot II pursuant to an Endorsement Agreement dated February ___, 2020 (see Note 13h). The $67,500 fair value of the 100,000 shares of Iconic common stock was charged to prepaid expenses and is being expensed over the term of the Endorsement Agreement.
On February 24, 2020, the Company issued 50,000 shares of its common stock to a consulting firm for services rendered to the Company. The $33,750 fair value of the 50,000 shares of Iconic common stock was expensed as consulting fees in the three months ended March 31, 2020.
On February 12, 2020, February 13, 2020, and February 14, 2020, three holders converted a total of 675,000 shares of Series E Preferred Stock into a total of 270,000 shares of Iconic common stock.
From January 16, 2020 to February 24, 2020, two holders converted a total of 190 shares of Series F Preferred Stock into a total of 304,000 shares of Iconic common stock.
Warrants
A summary of warrants activity for the period January 1, 2018 to March 31, 2020 follows:
Common shares Equivalent | ||||
Balance, January 1, 2018 | 534,000 | |||
Issued in the year ended December 31, 2018 | 2,361,198 | |||
Balance, December 31, 2018 | 2,895,198 | |||
Issued in the three months ended March 31, 2019 | 620,000 | |||
Balance, March 31, 2019 | 3,515,198 | |||
Exercise of warrants in connection with Warrant Exercise Agreements dated May 8, 2019 | (960,000 | ) | ||
Issuance of New Warrants in connection with Warrant Exercise Agreements dated May 8, 2019 | 1,920,000 | |||
Balance, June 30, 2019 | 4,475,198 | |||
Issued in the three months ended September 30, 2019 | 5,000,000 | |||
Balance, September 30, 2019 and December 31, 2019 | 9,475,198 | |||
Issued in the three months ended March 31, 2020 | 1,180,000 | |||
Balance, September 30, 2019 and December 31, 2019 | 10,655,198 |
F-19 |
Table of Contents |
Iconic Brands, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Three months ended March 31, 2020 and 2019
Issued and outstanding warrants at March 31, 2020 consist of:
Year Granted |
| Number Common Shares Equivalent |
|
| Exercise Price Per Share |
|
| Expiration Date | |||
2017 |
|
| 54,000 |
|
| $ | 2.50 |
|
| June 22, 2022 to June 30, 2022 | |
2018 |
|
| 400,000 |
|
| $ | 0.625 |
|
| March 28, 2021 | |
2018 |
|
| 30,000 |
|
| $ | 2.50 |
|
| May 21, 2023 | |
2018 |
|
| 831,198 |
|
| $ | 1.25 |
|
| September 20, 2023 | |
2018 |
|
| 620,000 |
|
| $ | 1.25 | * |
| September 20, 2023 | |
2019 |
|
| 620,000 |
|
| $ | 1.25 | * |
| February 7, 2024 | |
2019 |
|
| 1,920,000 |
|
| $ | 2.25 | * |
| May 8, 2024 | |
2019 |
|
| 5,000,000 |
|
| $ | 0.625 |
|
| August 2, 2024 | |
2020 |
|
| 1,180,000 |
|
| $ | 1.25 |
|
| January 12, 2025 | |
|
|
|
|
|
|
|
|
|
|
| |
Total |
|
| 10,655,198 |
|
|
|
|
|
|
|
___________
* These warrants contain a “down round” provision and thus the exercise price is reduceable to $0.625 per share as a result of the Series F Preferred Stock financing which closed on August 2, 2019.
Effective October 4, 2018, the Company closed on the first tranche of the Securities Purchase Agreement dated September 27, 2018 with nine (9) accredited investors for the sale of an aggregate of 4,650,000 shares of our Series E Convertibleconvertible preferred stock and warrants to acquire 1,860,000 shares of our common stock (at an exercise price of $1.25 per share for a period of five years) for gross proceeds of $1,162,500. The first tranche sale was for 1,550,000 shares of our Series E convertible preferred stock and warrants to acquire 620,000 shares of our common stock for gross proceeds of $387,500. The second tranche of $387,500 closed on February 7, 2019 and also was for 1,550,000 shares of our Series E convertible preferred stock and warrants to acquire 620,000 shares of our common stock.
On May 8, 2019, Iconic executed Warrant Exercise Agreements with four holders of Company warrants. The holders exercised a total of 960,000 warrants (which were acquired from September 2017 to November 2017 and on May 21, 2018) at an agreed price of $0.32 per share and paid the Company a total of $307,200. Pursuant to the Warrant Exercise Agreements, the holders were issued a total of 1,920,000 New Warrants which are exercisable into Company common stock at a price of $2.25 per share for a period of five years and contain “down round” price protection.
As discussed in Preferred Stock above, the Company issued a total of 5,000,000 warrants to investors as part of the offering of 3,125 shares of Series F Preferred Stock which concluded on August 2, 2019. Each warrant is exercisable into one share of common stock at an exercise price of $0.625 per share for a period of five years from the date of issuance and contains “down round” price protection.
As also discussed in Preferred Stock above, the Company issued a total of 1,180,000 warrants to investors as part of the offering of 1,500 shares of Series G Preferred Stock which concluded on January 14, 2020. Each warrant is exercisable into one share of common stock at an exercise price of $1.25 per share for a period of five years from the date of issuance and contains “down round” price protection.
F-20 |
Table of Contents |
Iconic Brands, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Three months ended March 31, 2020 and 2019
12. INCOME TAXES
No income taxes were recorded in the periods presented since the Company had taxable losses in these periods.
The provision for (benefit from) income taxes differs from the amount computed by applying the statutory United States federal income tax rate of 21% for the periods presented to income (loss) from continuing operations before income taxes. The sources of the difference are as follows:
|
| Three months ended March 31, |
| |||||
|
| 2020 |
|
| 2019 |
| ||
Expected tax at 21% |
| $ | (191,541 | ) |
| $ | (206,296 | ) |
|
|
|
|
|
|
|
|
|
Nondeductible stock-based compensation |
|
| 51,047 |
|
|
| 61,047 |
|
Increase (decrease) in valuation allowance |
|
| 140,494 |
|
|
| 145,249 |
|
|
|
|
|
|
|
|
|
|
Income tax provision |
| $ | - |
|
| $ | - |
|
Significant components of the Company's deferred income tax assets are as follows:
|
| March 31, |
|
| December 31, |
| ||
|
| 2020 |
|
| 2019 |
| ||
|
|
|
|
|
|
| ||
Net operating loss carryforward |
| $ | 4,435,577 |
|
| $ | 4,295,083 |
|
|
|
|
|
|
|
|
|
|
Less valuation allowance |
|
| (4,435,577 | ) |
|
| (4,295,083 | ) |
|
|
|
|
|
|
|
|
|
Deferred income tax assets - net |
| $ | - |
|
| $ | - |
|
Based on management’s present assessment, the Company has not yet determined that a deferred tax asset attributable to the future utilization of the net operating loss carryforward as of March 31, 2020 and December 31, 2019 will be outstanding.realized. Accordingly, the Company has maintained a 100% valuation allowance against the deferred tax asset in the financial statements at March 31, 2020 and December 31, 2019. The Company will continue to review this valuation allowance and make adjustments as appropriate.
Current United States income tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited.
All tax years remain subject to examination by major taxing jurisdictions.
F-21 |
Table of Contents |
Iconic Brands, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Three months ended March 31, 2020 and 2019
13. COMMITMENTS AND CONTINGENCIES
a. Iconic Guarantees
On May 26, 2015, BiVi LLC (“BiVi”) entered into a License Agreement with Neighborhood Licensing, LLC (the “BiVi Licensor”), an entity owned by Chazz Palminteri (“Palminteri”), to use Palminteri’s endorsement, signature and other intellectual property owned by the BiVi Licensor. Iconic has agreed to guarantee and act as surety for BiVi’s obligations under certain sections of the License Agreement and to indemnify the BiVi Licensor and Palminteri against third party claims.
On November 12, 2015, Bellissima Spirits LLC (“Bellissima”) entered into a License Agreement with Christie Brinkley, Inc. (the “Bellissima Licensor”), an entity owned by Christie Brinkley (“Brinkley”), to use Brinkley’s endorsement, signature, and other intellectual property owned by the Bellissima Licensor. Iconic has agreed to guarantee and act as surety for Bellissima’s obligations under certain sections of the License Agreement and to indemnify the Bellissima Licensor and Brinkley against third party claims.
b. Royalty Obligations of BiVi and Bellissima
Pursuant to the License Agreement with the Bivi Licensor (see Note 13a. above), BiVi is obligated to pay the BiVi Licensor a Royalty Fee equal to 5% of monthly gross sales of BiVi Brand products payable monthly subject to an annual Minimum Royalty Fee of $100,000 in year 1, $150,000 in year 2, $165,000 in year 3, $181,500 in year 4, $199,650 in year 5, and $219,615 in year 6 and each subsequent year.
Pursuant to the License Agreement and Amendment No. 1 to the License Agreement effective September 30, 2017 with the Bellissima Licensor (see Note 13a. above), Bellissima is obligated to pay the Bellissima Licensor a Royalty Fee equal to 10% of monthly gross sales (12.5% for sales in excess of defined Case Break Points) of Bellissima Brand products payable monthly. The Bellissima Licensor has the right to terminate the endorsement if Bellissima fails to sell 10,000 cases of Bellissima Brand products in year 1, 15,000 cases in year 2, or 20,000 cases in year 3 and each subsequent year.
c. Brand Licensing Agreement relating to Hooters Marks
On July 26,23, 2018, United Spirits, Inc. (“United”) executed a Brand Licensing Agreement (the “Agreement”) with HI Limited Partnership (“the Licensor”). The Agreement provides United a license to use certain “Hooters” Marks to manufacture, market, distribute, and sell alcoholic products.
The Initial Term of the Agreement is from July 23, 2018 through December 31, 2020. Provided that United is not in breach of any terms of the Agreement, United may extend the Term for an additional 3 years through December 31, 2023.
The Agreement provides for United’s payment of Royalty Fees (payable quarterly) to the Licensor equal to 6% of the net sales of the licensed products subject to a minimum royalty fee of $65,000 for Agreement year 1 (ending December 31, 2018), $255,000 for Agreement year 2, $315,000 for Agreement year 3 and 4, $360,000 for Agreement year 5, and $420,000 for Agreement year 6.
The Agreement also provided for United’s payment of an advance payment of $30,000 to the Licensor to be credited towards royalty fees payable to Licensor. On September 6, 2018, the $30,000 advance payment was paid to the Licensor. The Agreement also provides for United’s payment of a marketing contribution equal to 2% of the prior year’s net sales of the Licensed Products. If United fails to spend the required marketing contribution in any calendar year, the deficiency will be paid to Licensor.
For the three months ended March 31, 2020 and 2019, our 51% owned subsidiary Green Grow Farms Incroyalties expense under this Agreement was $4,406 and $63,750, respectively.
F-22 |
Table of Contents |
Iconic Brands, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Three months ended March 31, 2020 and 2019
d. Marketing and Order Processing Services Agreement
During October 2019, United Spirits, Inc. (“Green Grow”United”) executed a Marketing and Order Processing Services Agreement (the “Agreement”) with QVC, Inc. (“QVC”). Among other things, the Agreement provides for United’s grant to QVC of an exclusive worldwide right to promote the Bellissima products through direct response television programs.
The Initial License Period commenced October 2019 and expires December 2021 (i.e., two years after first airing of a Bellissima product). Unless either party notifies the other party in writing at least 30 days prior to the end of the Initial License Period or any Renewal License Period of its intent to terminate the Agreement, the License continually renews for additional two-year periods (each, a “Renewal License Period” in perpetuity).
The Agreement provides for United’s payment of “Marketing Fees” (payable no less than monthly) to QVC in amounts agreed to between United and QVC from time to time. For the three months ended March 31, 2020, the Marketing Fees expense (payable to QVC) was $53,724 and the direct response sales generated from QVC programs was $252,340.
e. Distribution Agreement
On May 1, 2015, BiVi entered into a SubleaseDistribution Agreement with United Spirits, Inc. (“United”) for United to distribute and wholesale BiVi’s product and to act as the licensed importer and wholesaler. The Distribution Agreement provides United the exclusive right for a term of ten years to sell BiVi’s product for an agreed distribution fee equal to $1.00 per case of product sold. United is owned and managed by Richard DeCicco, the controlling shareholder and chief executive officer of Iconic.
In November 2015, Bellissima and United agreed to have United distribute and wholesale Bellissima’s products under the same terms contained in the Distribution Agreement with BiVi described in the preceding paragraph.
Effective April 1, 2019, Iconic and United agreed to have United distribute and wholesale Hooters brand products under the same terms contained in the Distribution Agreement with BiVi described in the second preceding paragraph.
F-23 |
Table of Contents |
Iconic Brands, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Three months ended March 31, 2020 and 2019
f. Compensation Arrangements
Effective April 1, 2018, the Company executed Employment Agreements with its Chief Executive Officer Richard DeCicco (“DeCicco”) and its Vice President of Sales and Marketing Roseann Faltings (“Faltings”). Both agreements have a term of 24 months (to June 30, 2020). The DeCicco Employment Agreement provides for a base salary at the rate of $265,000 per annum and a Contract Farmingcompensation stock award of 300,000 shares of Iconic common stock issuable upon the effective date of the planned reverse stock split. The Faltings Employment Agreement withprovides for a third party entity (the “Farmer”)base salary at the rate of $150,000 per annum and a compensation stock award of 100,000 shares of Iconic common stock issuable upon the effective date of the planned reverse stock split.
For the year ended December 31, 2018, we accrued a total of $311,250 officers compensation pursuant to use 5 acresthese two Employment Agreements. In 2018, the accrued compensation was allocated 50% to Iconic ($155,625), 40% to Bellissima ($124,500), and 10% to BiVi ($31,125). For the year ended December 31, 2019, we accrued a total of property located$415,000 officers compensation pursuant to these two Employment Agreements which was allocated 50% to Iconic ($207,500), 40% to Bellissima ($166,000), and 10% to BiVi ($41,500).
For the three months ended March 31, 2020, we accrued a total of $103,750 officers compensation pursuant to these two Employment Agreements which was allocated 50% to Iconic ($51,875) and 50% to Bellissima ($51,875).
As of March 31, 2020 and December 31, 2019, accrued officers compensation was $837,800 and $813,050, respectively.
g. Lease Agreements
On March 27, 2018, United Spirits, Inc. executed a lease extension for the Company’s office and warehouse space in Riverhead,North Amityville New York to plant and grow hemp for CBD Extraction.York. The leaseextension has a term of five monthsthree years from February 1, 2018 to January 31, 2021 and provides for monthly rent of $3,000$4,478.
On January 1, 2019, United Spirits, Inc. executed a lease agreement with the two officers of the Company to be paiduse part of their residence in Copiague, New York for Company office space. The agreement has a term of three years from January 1, 2019 to December 31, 2021 and provides for monthly rent of $3,930.
At March 31, 2020, the future minimum lease payments under these two non-cancellable operating leases were:
Year ended December 31, 2020 |
| $ | 75,672 |
|
Year ended December 31, 2021 |
|
| 51,643 |
|
|
|
|
|
|
Total |
| $ | 127,315 |
|
The operating lease liabilities totaling $118,229 at March 31, 2020 as presented in the Consolidated Balance Sheets represents the discounted (at our 10% estimated incremental borrowing rate) value of the future lease payments of $127,315 at March 31, 2020.
F-24 |
Table of Contents |
Iconic Brands, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Three months ended March 31, 2020 and 2019
h. Endorsement Agreement
In February 2020, Iconic executed an Endorsement Agreement with an entity (“CEE”) controlled by Green Grow.Chase Elliott (“Elliott”), driver of the Hendrick Motorsports Number 9 NAPA/Hooter’s Chevrolet in races of the NASCAR Cup Series. The Contract Farming Agreementagreement, which has a term ending on December 31, 20192021, provides Iconic the right to utilize Elliott’s name in connection with the promotion and distribution of Hooters brand products and requires CEE and Elliott to perform certain specified services for Iconic including certain promotional appearances. The agreement provides for Green Grow paymentscompensation payable to CEE of (1) Initial Share Award of 100,000 shares of Iconic common stock (which was issued on February 24, 2020); (2) $75,000 year 2020 cash compensation (which was paid March 6, 2020); (3) $75,000 year 2021 cash compensation payable on or before February 15, 2021; and (4) Year 2021 Second Share Award of that number of shares of Iconic common stock equal to $75,000 based upon the Farmer of per acre fees based on the potencyaverage closing price of the crop yield.common stock for the five trading days immediately preceding February 15, 2021.
For the three months ended March 31, 2020, we expensed $16,495 in license fees relating to the Endorsement Agreement. As of March 31, 2020, prepaid license fees relating to the Endorsement Agreement was $126,005.
i. Concentration of sales
For the three months ended March 31, 2020 and 2019, sales consisted of:
|
| 2020 |
|
| 2019 |
| ||
Bellissima product line: |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
QVC direct response sales |
| $ | 252,340 |
|
| $ | - |
|
Other |
|
| 80,105 |
|
|
| 118,213 |
|
Total Bellissima |
|
| 332,445 |
|
|
| 118,213 |
|
BiVi product line |
|
| - |
|
|
| 3,700 |
|
Hooters product line |
|
| 73,441 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
Total |
| $ | 405,886 |
|
| $ | 121,913 |
|
j. Coronavirus
In December 2019, a novel strain of coronavirus was reported to have surfaced in China. The spread of this virus began to cause some business disruption in our United States operations in March 2020. While the disruption is currently expected to be temporary, there is considerable uncertainty around the duration. Therefore, the Company expects this matter to negatively impact its operating results. However, the related financial impact and duration cannot be reasonably estimated at this time.
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ITEM 22: Management’s Discussion and Analysis of Financial Condition and Results of Operations
Our Management’s Discussion and Analysis contains not only statements that are historical facts, but also statements that are forward-looking (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). Forward-looking statements are, by their very nature, uncertain and risky. These risks and uncertainties include international, national and local general economic and market conditions; demographic changes; our ability to sustain, manage, or forecast growth; our ability to successfully make and integrate acquisitions; raw material costs and availability; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; and other risks that might be detailed from time to time in our filings with the Securities and Exchange Commission.
Although the forward-looking statements in this Quarterly Statement reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report and in our other reports as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects.
The following discussion and analysis of financial condition and results of operations of the Company is based upon, and should be read in conjunction with, its unaudited financial statements and related notes elsewhere in this Form 10-Q, which have been prepared in accordance with accounting principles generally accepted in the United States.
Summary Overview
Overview
We are a beveragelifestyle branding company with the highest expertise inof developing, from inception to completion, alcoholic beverages for ourselves and third parties. We also market and place products into national distribution through long standinglong-standing industry relationships. We engageare a leader in “Celebrity Branding” of beverages, procuring superior and unique products from around the world and branding our products with internationally recognized celebrities. We currently market and sell the following products:
• | Bellissima Prosecco – these products comprise a line of all-natural and Vegan Prosecco and Sparkling Wine made with organic grapes, including a Zero Sugar, Zero Carb option, a DOC Brut and a Sparkling Rose; | |
• | Bella Sprizz Apertifs - these products comprise a line of aperitifs consisting of three different expressions, a classic Italian aperitif an all-natural elderflower aperitif and a classic Italian bitter; | |
• | BiVi Vodka – this product is made from semolina wheat grown out of the rich volcanic soil and pure mountain spring water of Sicily; and | |
• | Hooters Spirits – these products comprise a line of private-label premium spirits that are sold under the Hooters brand. The full line of Hooters Spirits includes Vodka, Gin, Rum (Dark & Light), Tequila (Silver & Gold), American Whiskey and Hooters Heat Cinnamon Whiskey. |
- 4 - |
Table of Contents |
In addition, we also develop private label spirits for domestic and international established chains.
Our mission is to be the industry leader in brand development, marketing, and sales of the alcoholic beverages by capitalizing on our ability to procure products from around the world. Our relationships with internationally recognized celebrities will be leveraged to add value to a product and create brand awareness in unbranded niche categories.
We intend to seek, investigatemarket and if such investigation warrants, acquire an interest in one or more business opportunities presented to it by persons or firms who or which desire to seek the perceived advantages of a publicly held corporation.
Our Products
BiVi LLC, our subsidiary, is made up of BiVi 100 percent Sicilian Vodka. BiVi LLC’s mission is to promote and support the sales endeavors of the distribution network through targeted and national marketing endeavors and working with celebrity partner Chazz Palminteri.
Bellissima Spirits LLC, our subsidiary, entered into a License Agreement with Christie Brinkley, Inc. an entity owned by Christie Brinkley, to use Brinkley’s endorsement, signature, and other intellectual property owned by Bellissima Spirits LLC. Bellissima by Christie Brinkley issell a line of Organic Prosecco. The line includes a DOC Brut,of all-natural and Vegan Prosecco and Sparkling Rose andWine made with organic grapes, including a Zero Sugar, Zero Carb option, which are All Naturala DOC Brut and Gluten Free with all Certified Organica Sparkling Rose, pursuant to a License Agreement entered into between our majority-owned (51%) subsidiary, Bellissima Spirits LLC and Vegan.Christie Brinkley, Inc., an entity owned by supermodel and entrepreneur Christie Brinkley.
Reverse Stock SplitWe also market and sell a Vodka product, under the brand “BiVi 100 percent Sicilian Vodka,” pursuant to a License Agreement entered into between our majority-owned (51%) subsidiary, BiVi LLC and Neighborhood Licensing, LLC, an entity owned by Chazz Palminteri.
EffectiveIn addition, we market and sell a line of private-label premium spirits under the Hooters brand, including Vodka, Gin, Rum (Dark & Light), Tequila (Silver & Gold), American Whiskey and Hooters Heat Cinnamon Whiskey, pursuant to a Marketing and Distribution Agreement entered into between us and United Spirits, Inc., a company owned and managed by Richard DeCicco, the controlling shareholder, President, Chief Executive Officer, Chief Financial Officer and Director of the Company, which we treat as a variable interest entity.
Recent Developments
Series G Preferred Stock Financing
On January 18, 2019,12, 2020, we entered into securities purchase agreements with certain accredited investors for the sale of an aggregate of 1,500 shares of our Series G Preferred Stock and warrants to purchase up to 1,200,000 shares of our common stock were subject to a 1-for-250 reverse stock split which reduced the issuedfor gross proceeds of $1,500,000, before deducting placement agent and outstanding shares of common stock at December 31, 2018 from 1,359,941,153 shares to 5,440,312 shares. The discussion below and the accompanying financial statements have been retrospectively adjusted to reflect this reverse stock split.other offering expenses.
Going Concern
As a result of our current financial condition, we have received a report from our independent registered public accounting firm for our financial statements for the years ended December 31, 20182019 and 20172018 that includes an explanatory paragraph describing the uncertainty as to our ability to continue as a going concern. In order to continue as a going concern, we must effectively balance many factors and generate more revenue so that we can fund our operations from our sales and revenues. If we are not able to do this, we may not be able to continue as an operating company. Until we are able tocan grow revenues sufficient to meet our operating expenses, we must continue to raise capital by issuing debt or through the sale of our stock. There is no assurance that our cash flow will be adequate to satisfy our operating expenses and capital requirements.
- 5 - |
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Results of Operations for the Three months Ended June 30,March 31, 2020 and 2019 and 2018
Introduction
We had sales of $145,294$405,886 for the three months ended June 30, 2019March 31, 2020 and $143,551$121,913 for the three months ended June 30, 2018,March 31, 20219, an increase of $1,743.$283,973. Our operating expenses were $855,991$1,065,558for the three months ended March 31, 2020, compared to $1,022,842 for the three months ended June 30,March 31, 2019, compared to $359,057an increase of $42,716or approximately 4%. Our net operating (loss) was ($912,098) for the three months ended June 30, 2018, an increase of $496,934 or 138%. Our net income (loss) was $(779,503)March 31, 2020, compared to ($982,364) for the three months ended June 30,March 31, 2019, compared to $(679,680) for the three months ended June 30, 2018, an increasea decrease of $99,823.$70,266 or approximately 7%.
Revenues and Net Operating Loss
Our operations for the three months ended June 30,March 31, 2020 and 2019 and 2018 were as follows:
|
| Three months |
|
| Three months |
| ||
|
| June 30, |
|
| June 30, |
| ||
|
| 2019 |
|
| 2018 |
| ||
|
|
|
|
|
|
| ||
Sales |
| $ | 145,294 |
|
| $ | 143,551 |
|
Cost of sales |
|
| 68,806 |
|
|
| 81,844 |
|
Gross profit |
|
| 76,488 |
|
|
| 61,707 |
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
Officers compensation |
|
| 103,750 |
|
|
| 3,207 |
|
Professional and consulting fees |
|
| 418,566 |
|
|
| 59,121 |
|
Royalties |
|
| 78,279 |
|
|
| (75,002 | ) |
Marketing and advertising |
|
| 37,414 |
|
|
| 192,740 |
|
Occupancy costs |
|
| 27,932 |
|
|
| 36,696 |
|
Travel and entertainment |
|
| 79,445 |
|
|
| 68,986 |
|
Other |
|
| 110,605 |
|
|
| 73,309 |
|
Total operating expenses |
|
| 855,991 |
|
|
| 359,057 |
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
| (779,503 | ) |
|
| (297,350 | ) |
|
|
|
|
|
|
|
|
|
Total Other income (expense) - net |
|
| - |
|
|
| (382,330 | ) |
|
|
|
|
|
|
|
|
|
Net Income (loss) |
|
| (779,503 | ) |
|
| (679,680 |
|
|
|
|
|
|
|
|
|
|
Net loss (income) attributable to noncontrolling interests in subsidiaries and variable interest entity |
|
| 90,396 |
|
|
| 91,352 |
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Iconic Brands, Inc. |
| $ | (689,107 | ) |
| $ | (588,328 | ) |
|
| March 31, |
|
| March 31, |
|
| Increase / |
| |||
|
| 2020 |
|
| 2019 |
|
| (Decrease) |
| |||
|
|
|
|
|
|
|
|
|
| |||
Sales |
| $ | 405,886 |
|
| $ | 121,913 |
|
| $ | 283,973 |
|
Cost of Sales |
|
| 252,426 |
|
|
| 81,435 |
|
|
| 170,991 |
|
Gross Profit |
|
| 153,460 |
|
|
| 40,478 |
|
|
| 112,982 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Officers compensation |
|
| 103,750 |
|
|
| 185,750 |
|
|
| (82,000 | ) |
Professional and consulting |
|
| 186,789 |
|
|
| 448,519 |
|
|
| (261,730 | ) |
Royalties |
|
| 15,964 |
|
|
| 75,188 |
|
|
| (59,224 | ) |
Investor relations |
|
| 361,689 |
|
|
| 84,003 |
|
|
| 277,686 |
|
Marketing and advertising |
|
| 128,645 |
|
|
| 46,467 |
|
|
| 82,178 |
|
Travel and entertainment |
|
| 19,469 |
|
|
| 64,269 |
|
|
| (44,800 | ) |
Other operating expenses, including occupancy |
|
| 249,252 |
|
|
| 118,646 |
|
|
| 130,606 |
|
Total operating expenses |
|
| 1,065,558 |
|
|
| 1,022,842 |
|
|
| 42,716 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating income (loss) |
|
| (912,098 | ) |
|
| (982,364 | ) |
|
| (70,266 | ) |
Other income (expense) |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss (income) attributable to noncontrolling interests in subsidiaries and variable interest entity |
|
| 74,178 |
|
|
| 309,367 |
|
|
| (235,189 | ) |
Net income (loss) attributable to Iconic Brands, Inc |
|
| (837,920 | ) |
|
| (672,667 | ) |
|
| 165,253 |
|
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Sales
Our sales are comprised of sales of BiVi Sicilian Vodka, and Bellissima Prosecco and Sparkling Wine.Wine, and the line of Hooters brand products introduced in August 2019. Sales were $145,294$405,886 for the three months ended June 30, 2019March 31, 2020 and $143,551$121,913 for the three months ended June 30, 2018,March 31, 2019, an increase of $1,743.$283,973 or approximately 232%. The increase in sales was a resultprimarily due to continued expansion of 2019 shipments being made at full price, while in 2018 we were fulfilling a promotional offer which accounted for lowerthe OVC Network sales pricing to some customers.of our Bellissima products.
Cost of Sales
Cost of sales was $68,806,$252,426, or 47.4%approximately 62% of sales, for the three months ended June 30, 2019March 31, 2020 and $81,844,$81,435, or 57.0%approximately 67% of sales, for the three months ended June 30, 2018.March 31, 2019. Cost of sales includes the cost of the products purchased from our Italian suppliers, freight-in costs and import duties. The decrease in cost of sales as a percentage of sales is due primarily to product mix and slightly lower production costs.
Officers Compensation
Officers compensation was $103,750 for the three months ended June 30, 2019March 31, 2020 and $3,207$185,750 for the three months ended June 30, 2018, an increaseMarch 31, 2019, a decrease of $100,543.
Effective$82,000. Officers compensation in 2019 includes a catch-up accrual of $82,000 relating to employment agreements executed April 1, 2018 the Company executed Employment Agreements with its Chief Executive Officer Richard DeCicco (“DeCicco”) and its Vice President of Sales and Marketing Roseann Faltings (“Faltings”). Both agreements have a term of 24 months (to June 30, 2020). The DeCicco Employment Agreement provides for a base salary at the rate of $265,000 per annum and a compensation stock award of 300,000 shares of Iconic common stock issuable upon the effective date of the planned reverse stock split. The Faltings Employment Agreement provides for a base salary at the rate of $150,000 per annum and a compensation stock award of 100,000 shares of Iconic common stock issuable upon the effective date of the planned reverse stock split. For the three months ended June 30, 2019, we accrued a total of $103,750 in officers compensation pursuant to theseour two Employment Agreements, which was allocated 50% to Iconic ($51,875), 40% to Bellissima ($41,500), and 10% to BiVi ($10,375).officers.
Professional and Consulting Fees
Professional and consulting fees were $418,566$186,789 for the three months ended June 30, 2019March 31, 2020 and $59,121$448,519 for the three months ended June 30, 2018,March 31, 2019, an increasedecrease of $359,445.$261,730. Professional and consulting fees consist primarily of legal and accounting and auditing services. The increasedecrease was a result of costs associated with getting our financial statements audited, filinglower professional fees as we were engaged in a registration statement, and becoming a fully-reporting issuer.purchase transaction in 2019.
Royalties
Royalties were $153,467,$15,964, or 57.4approximately 4% of sales, for the six months ended June 30, 2019 and $(68,412) for the six months ended June 30, 2018, an increase of $221,879. Royalties increased primarily due to the minimum royalty fees relating to the Hooters agreement signed July 23, 2018 and downward royalty adjustments in the three months ended June 30, 2018 as a result of Bellisima special promotion program expenses incurred in the three months ended March 31, 2018.2020 and $75,188 for the three months ended March 31, 2019, a decrease of $59,224. Royalties decreased primarily due to the sales to QVC in 2020 do not have a royalty associated with them and in 2019 we paid a royalty advance on our Hooters product line.
Marketing and Advertising
Marketing and advertising expenses were $37,414$128,645 for the three months ended June 30, 2019March 31, 2020 and $192,740$46,467 for the three months ended June 30, 2018, a decreaseMarch 31, 2019, an increase of $155,326$82,178 or 80.6%approximately 177%. The decreaseincrease was a result of lower cost marketing efforts in 2019.fees associated with the QVC sales channel.
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Occupancy Costs
Occupancy costs were $27,932$22,251 for the three months ended June 30, 2019March 31, 2020 and $36,696$27,623 for the three months ended June 30, 2018,March 31, 2019, a decrease of $8,764 or 23.9%. The decrease was a result of lower warehouse rental costs.$5,372.
Travel and Entertainment
Travel and entertainment expenses were $79,445$19,469 for the three months ended June 30, 2019March 31, 2020 and $68,986$64,269 for the three months ended June 30, 2018,March 31, 2019, a decrease of $44,800 or approximately 70%. The decrease is a result of timing of product development activity.
Investor relations
Investor relation expenses were $361,689 for the three months ended March 31, 2020 and $84,003 for the three months ended March 31, 2019, an increase of $10,459$277,686 or 15.2%approximately 330%. The increase was a result of travelprimarily related to new product development.cost associated with a large investor relations campaign, including a national road show.
Other Operating Expenses
Other operating expenses were $110,605$227,001 for the three months ended June 30, 2019March 31, 2020 and $73,309$91,023 for the three months ended June 30, 2018,March 31, 2019, an increase of $37,296$135,978 or 50.9%approximately 149%. The increase was a result of salary expense for employees not on the payroll in the same period in 2018. Other operating expenses include salaries, automobile, insurance, office expenses and expenses relatingprimarily related to Christie Brinkley appearances at Bellissima promotions.cost associated with equity financing transactions.
Net Operating Income (Loss) from Operations
We had a net operating loss(loss) from operations of $779,503($912,098) for the three months ended June 30, 2019March 31, 2020 and $297,350($982,364) for the three months ended June 30, 2018,March 31, 2019, an increase of $482,153$70,266 or 162%approximately 7%. Our net operating loss increased,from operations decreased, as set forth above, primarily because certain operating expenses, primarily professionalmarketing and consulting feesadvertising and other operating expenses, increased.increased, offset by an increase in sales.
Other Income/Expense
Total other income was $0 for the six months ended June 30, 2019 and $284,577 for the six months ended June 30, 2018. The decrease was primarily due to reductions of our derivative liability income.
Our previously outstanding convertible notes contained variable conversion features based on the future trading price of our common stock. Therefore, the number of shares of common stock issuable upon conversion of the notes were indeterminate. Accordingly, we recorded the fair value of the embedded conversion features at December 31, 2017 and June 30, 2018 as a derivative liability. The fair value of the derivative liability dropped to zero at December 31, 2018 after we entered into Securities Exchange Agreements with the holders of all convertible debt. For further details, see Note 8 of our consolidated financial statements for the years ended December 31, 2018 and 2017.
Net Loss attributable to Noncontrolling Interests in Subsidiaries and Variable Interest Entity
The net loss attributable to noncontrolling interests in subsidiaries and variable interest entity represents 49% of the net loss of Bellissima, BiVi and Green Grow (which we own 51%) and 100% of United Spirits (which we own 0%) and is accounted for as a reduction in the net loss attributable to the Company. This net loss was $90,396$74,178 for the three months ended June 30, 2019March 31, 2020 and $91,352 for$309,697for the three months ended June 30, 2018, aMarch 31, 2019, an decrease of $956 or 1.1%. The net loss from other entities decreased as a result of all the changes discussed above.$235,519.
Net Loss Attributable to Iconic Brands, Inc.
The net loss attributable to Iconic Brands, Inc. was $689,107($837,920) for the three months ended June 30, 2019 and $588,328 for the three months ended June 30, 2018, an increase of $100,779.
Results of Operations for the Six months Ended June 30, 2019 and 2018
Introduction
We had sales of $267,207 for the six months ended June 30, 2019 and $205,270 for the six months ended June 30, 2018, an increase of $61,937 or 30.2%. Our operating expenses were $1,878,833 for the six months ended June 30, 2019, compared to $1,148,752 for the six months ended June 30, 2018, an increase of $730,081 or 63.6%. Our net loss was $1,761,867 for the six months ended June 30, 2019, compared to $778,157 for the six months ended June 30, 2018, an increase of $983,710.
Revenues and Net Operating Loss
Our operations for the six months ended June 30, 2019 and 2018 were as follows:
|
| Six months |
|
| Six months |
| ||
|
| June 30, |
|
| June 30, |
| ||
|
| 2019 |
|
| 2018 |
| ||
|
|
|
|
|
|
| ||
Sales |
| $ | 267,207 |
|
| $ | 205,270 |
|
Cost of sales |
|
| 150,241 |
|
|
| 119,252 |
|
Gross profit |
|
| 116,966 |
|
|
| 86,018 |
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
Officers compensation |
|
| 289,500 |
|
|
| 3,207 |
|
Professional and consulting fees |
|
| 867,085 |
|
|
| 71,407 |
|
Royalties |
|
| 153,467 |
|
|
| (68,412 | ) |
Special promotion program with customer |
|
| - |
|
|
| 597,138 |
|
Marketing and advertising |
|
| 83,881 |
|
|
| 252,055 |
|
Occupancy costs |
|
| 55,555 |
|
|
| 80,494 |
|
Travel and entertainment |
|
| 143,714 |
|
|
| 109,301 |
|
Other |
|
| 285,631 |
|
|
| 103,562 |
|
Total operating expenses |
|
| 1,878,833 |
|
|
| 1,148,752 |
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
| (1,761,867 | ) |
|
| (1,062,734 | ) |
|
|
|
|
|
|
|
|
|
Total other income (expense) - net |
|
| - |
|
|
| 284,577 |
|
|
|
|
|
|
|
|
|
|
Net Income (loss) |
|
| (1,761,867 | ) |
|
| (778,157 | ) |
|
|
|
|
|
|
|
|
|
Net loss (income) attributable to noncontrolling interests in subsidiaries and variable interest entity |
|
| 400,093 |
|
|
| 439,099 |
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Iconic Brands, Inc. |
| $ | (1,361,774 | ) |
| $ | (339,058 | ) |
Sales
Our sales are comprised of sales of BiVi Sicilian Vodka and Bellissima Prosecco and Sparkling Wine. Sales were $267,207 for the six months ended June 30, 2019 and $205,270 for the six months ended June 30, 2018, an increase of $61,937 or 30.2%. The increase in sales was a result of 2019 shipments being made at full price, while in 2018 we were fulfilling a promotional offer which accounted for lower sales pricing to some customers.
Cost of Sales
Cost of sales was $150,241, or 56.2% of sales, for the six months ended June 30, 2019 and $119,252, or 58.1% of sales, for the six months ended June 30, 2018. Cost of sales includes the cost of the products purchased from our Italian suppliers, freight-in costs and import duties.
Officers Compensation
Officers compensation was $289,500 for the six months ended June 30, 2019 and $3,207 for the six months ended June 30, 2018, an increase of $286,293.
Effective April 1, 2018, the Company executed Employment Agreements with its Chief Executive Officer Richard DeCicco (“DeCicco”) and its Vice President of Sales and Marketing Roseann Faltings (“Faltings”). Both agreements have a term of 24 months (to June 30, 2020). The DeCicco Employment Agreement provides for a base salary at the rate of $265,000 per annum and a compensation stock award of 300,000 shares of Iconic common stock issuable upon the effective date of the planned reverse stock split. The Faltings Employment Agreement provides for a base salary at the rate of $150,000 per annum and a compensation stock award of 100,000 shares of Iconic common stock issuable upon the effective date of the planned reverse stock split. For the six months ended June 30, 2019, we accrued a total of $207,500 in officers compensation pursuant to these two Employment Agreements, which was allocated 50% to Iconic ($103,750), 40% to Bellissima ($83,000), and 10% to BiVi ($20,750).
Professional and Consulting Fees
Professional and consulting fees were $867,085 for the six months ended June 30, 2019 and $71,407 for the six months ended June 30, 2018, an increase of $795,678. Professional and consulting fees consist primarily of legal and accounting and auditing services. The increase was a result of costs associated with getting our financial statements audited, filing a registration statement, and becoming a fully-reporting issuer.
Royalties
Royalties were $153,467, or 57.4 of sales, for the six months ended June 30, 2019 and $(68,412) for the six months ended June 30, 2018, an increase of $221,879. Royalties increased primarily due to the minimum royalty fees relating to the Hooters agreement signed July 23, 2018 and downward royalty adjustments in the three months ended June 30, 2018 as a result of Bellisima special promotion program expenses incurred in the three months ended March 31, 2018.
Special Promotion Program with Customer
For2020 and ($672,667) for the sixthree months ended June 30, 2018, we incurredMarch 31, 2019, an expenseincrease of $597,138 in connection with a product promotion with a large customer. We did not have a similar expense for the six months ended June 30, 2019, and do not expect to incur such an expense in the foreseeable future.
Marketing and Advertising
Marketing and advertising expenses were $83,881 for the six months ended June 30, 2019 and $252,055 for the six months ended June 30, 2018, a decrease of $168,174$165,253 or 66.7%approximately 25%. The decrease wasnet loss from Iconic Brands increased primarily as a result of lower cost marketing efforts in 2019.
Occupancy Costs
Occupancy costs were $55,555 for the six months ended June 30, 2019 and $80,494 for the six months ended June 30, 2018, a decrease of $24,939 or 31.0%. The decrease was a result of lower warehouse rental costs.
Travel and Entertainment
Travel and entertainment expenses were $143,714 for the six months ended June 30, 2019 and $109,301 for the six months ended June 30, 2018, an increase of $34,413 or 31.5%. The increase was a result of travel related to new product development.
Other Operating Expenses
Other operating expenses were $285,631 for the six months ended June 30, 2019 and $103,562 for the six months ended June 30, 2018, an increase of $182,069 or 175.8%. The increase was a result of salary expense for employees not on the payroll in the same period in 2018. Other operating expenses include salaries, automobile, insurance, office expenses and expenses relating to Christie Brinkley appearances at Bellissima promotions.
Net Operating Income (Loss)
We had a net operating loss of $1,761,867 for the six months ended June 30, 2019 and $1,062,734 for the six months ended June 30, 2018, an increase of $699,133 or 65.8%. Our net operating loss increased, as set forth above, primarily because certain operating expenses, primarily professional and consulting fees and other operating expenses, increased.
Other Income/Expense
Total other income was $0 for the six months ended June 30, 2019 and $284,577 for the six months ended June 30, 2018. The decrease was primarily due to reductions of our derivative liability income.
Our previously outstanding convertible notes contained variable conversion features based on the future trading price of our common stock. Therefore, the number of shares of common stock issuable upon conversion of the notes were indeterminate. Accordingly, we recorded the fair value of the embedded conversion features at December 31, 2017 and June 30, 2018 as a derivative liability. The fair value of the derivative liability dropped to zero at December 31, 2018 after we entered into Securities Exchange Agreements with the holders of all convertible debt. For further details, see Note 8 of our consolidated financial statements for the years ended December 31, 2018 and 2017.
Net Loss attributable to Noncontrolling Interests in Subsidiaries and Variable Interest Entity
The net loss$253,519 attributable to noncontrolling interests in subsidiaries and variable interest entity represents 49% of the net loss of Bellissima, BiVi and Green Grow (which we own 51%) and 100% of United Spirits (which we own 0%) and is accounted for as a reduction in the net loss attributable to the Company. This net loss was $400,093 for the six months ended June 30, 2019 and $439,099 for the six months ended June 30, 2018, a decrease of $39,006 or 8.9%. The net loss from other entities decreased as a result of all the changes discussed above.entity.
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Net Loss Attributable to Iconic Brands, Inc.
The net loss attributable to Iconic Brands, Inc. was $1,361,774 for the six months ended June 30, 2019 and $339,058 for the six months ended June 30, 2019, an increase of $1,022,716.
Liquidity and Capital Resources
Introduction
During the sixthree months ended June 30,March 31, 2020 and March 31, 2019, and June 30, 2018, we had negative operating cash flows. Our cash on hand as of June 30, 2019March 31, 2020 was $298,520,$916,686, which was derived from the sale of Series EG preferred stock and warrants. Our monthly cash flow burn rate for 20182019 was approximately $146,000,$228,000, and our monthly burn rate through the sixthree months ended June 30, 2019March 31, 2020 was approximately $118,000.$225,000. We have strong medium to long term cash needs. We anticipate that these needs will be satisfied through the issuance of debt or the sale of our securities until such time as our cash flows from operations will satisfy our cash flow needs.
Our cash, current assets, total assets, current liabilities, and total liabilities as of June 30, 2019March 31, 2020 and December 31, 2018,2019, respectively, arewere as follows:
|
| March 31, |
|
| December 31, |
|
|
|
| |||
|
| 2020 |
|
| 2019 |
|
| Change |
| |||
|
|
|
|
|
|
|
|
|
| |||
Cash |
| $ | 916,686 |
|
| $ | 263,638 |
|
| $ | 653,048 |
|
Total Current Assets |
|
| 1,928,800 |
|
|
| 1,411,185 |
|
|
| 517,615 |
|
Total Assets |
|
| 3,067,333 |
|
|
| 2,568,021 |
|
|
| 499,312 |
|
Total Current Liabilities |
|
| 1,827,522 |
|
|
| 2,028,676 |
|
|
| (201,154 | ) |
Total Liabilities |
| $ | 1,861,465 |
|
|
| 2,077,823 |
|
|
| (216,358 | ) |
June 30, December 31, 2019 2018 Change Cash Total Current Assets Total Assets Total Current Liabilities Total Liabilities $ 298,520 $ 191,463 $ 107,057 575,535 563,239 12,296 2,108,922 563,239 1,545,683 1,774,510 1,339,566 434,944 $ 1,804,837 $ 3,600,605 $ (1,795,768 )
Our cash increased $107,057$653,048 and total current assets increased $12,296.$517,615. Our total current liabilities increaseddecreased $201,154 as our accounts payable and accrued expenses increased,decreased, reflecting our increasedecrease in professional and consulting fees. Our total liabilities decreased $1,795,768.$216,358. Our stockholders’ (deficiency) equity increased from ($3,037,366)$490,198 to $304,085 due$1,205,868due primarily to (i)proceeds from the cumulative effect adjustmentsale of $2,261,039 reducing the derivative liability on warrants to $0 effective January 1, 2019 and (ii) the issuance of common stock valued at $1,250,000 in connection with the acquisition of 51% of Green Grow Farms, Inc.preferred stock.
In order to repay our obligations in full or in part when due, we will be required to raise significant capital from other sources. There is no assurance, however, that we will be successful in these efforts.
Cash Requirements
Our cash on hand as of June 30, 2019March 31, 2020 was $289,520.$916,686. Based on our minimal sales and annualized monthly burn rate of approximately $118,000$225,000 per month, we will need to continueraise additional funding through strategic relationships, public or private equity or debt financings. If such funding is not available, or not available on terms acceptable to fundus, our current development plans may be curtailed.
We have funded our operations by raising capitalfrom proceeds from the sale of our stockequity and debt financings.securities. We will require significant additional capital to make the investments we need to execute our longer-term business plan. Our ability to successfully raise sufficient funds through the sale of debt or equity securities when needed is subject to many risks and uncertainties and, even if we are successful, future equity issuances would result in dilution to its existing stockholders and any future debt securities may contain covenants that limit our operations or ability to enter into certain transactions.
Sources and Uses of Cash
Operations
We had net cash used in operating activities for the sixthree months ended June 30, 2019March 31, 2020 of $(705,021)($622,857), compared to $(1,305,072)($369,576) for the sixthree months ended June 30, 2018.March 31, 2019. For the sixthree months ended June 30, 2019,March 31, 2020, the net cash used in operating activities consisted primarily of our net loss of $(1,361,774)($837,920) plus a net loss attributable to non-controlling interests in our subsidiaries of $(400,093)($74,178) and inventories increase of ($64,344), offset primarily by stock-based compensation of $775,700$243,081 and an increase in accounts payable and accrued expenses increase of $136,385. For the six months ended June 30, 2018, the net cash used in operating activities consisted primarily of our net income of $(339,058) plus a net loss attributable to our subsidiaries of $(439,099) and income from derivative liabilities of $(405,848).$153,575.
Investments
Except for $5,000 leasehold improvements incurrec$8,708 of furniture purchased in 2019in 2020, we had no investing activities for the sixthree months ended June 30, 2019March 31, 2020 or June 30, 2018.March 31, 2019.
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Financing
Our net cash provided by financing activities for the sixthree months ended June 30, 2019March 31, 2020 was $817,078,$1,284,613 compared to $362,107$340,630 for the sixthree months ended June 30, 2018,March 31, 2019, which consisted principally of proceeds from the sale of our Series EG preferred stock and warrants.
January 2020 Financing
On January 12, 2020, we entered into securities purchase agreements (collectively, the “Purchase Agreement”) with certain accredited investors for the sale of an aggregate of 1,500 shares of the Company’s series G convertible preferred stock (the “Series G Convertible Preferred Stock”), and warrants (the “Warrants”) to purchase 1,200,000 shares of our common stock for gross proceeds of $1,500,000, before deducting placement agent and other offering expenses. The terms of the Series G Convertible Preferred Stock are set forth under Items 3.02 and 5.03 below.
The Warrants are exercisable for a period of five years from the date of issuance at an exercise price of $1.25 per share (the “Exercise Price”). The Investors may exercise the Warrants on a cashless basis if the shares of common stock underlying the Warrants are not then registered pursuant to an effective registration statement.
The conversion price of the Series G Convertible Preferred Stock and the exercise price of the Warrants are subject to anti-dilution adjustment for subsequent lower price issuances by the Company, as well as customary adjustments provisions for stock splits, stock dividends, recapitalizations and the like.
The Series G Convertible Preferred Stock and the Warrant each contain a beneficial ownership limitation that restricts each of the Investor’s ability to exercise the Warrants and convert the Series G Convertible Preferred Stock such that the number of shares of the Company common stock held by each of them and their affiliates after such conversion or exercise does not exceed 4.99% or 9.99% (at the election of the Investor) of the Company’s then issued and outstanding shares of common stock.
The Purchase Agreement also provides that until the 18 month anniversary of the date of the Purchase Agreement, in the event of a subsequent financing (except for certain exempt issuances as provided in the Purchase Agreement) by the Company, each Investor that invested over $500,000 pursuant to the Purchase Agreement will have the right to participate in such subsequent financing up to an amount equal to the Investor’s proportionate share of the subsequent financing based on such Investor’s participation in this private placement on the same terms, conditions and price provided for in the subsequent financing up to an amount equal to 50% of the subsequent financing. The Purchase Agreements also provide that for as long as the Series G Convertible Preferred Stock or Warrants are outstanding, if the Company effects a subsequent financing, an Investor may elect, in its sole discretion, to exchange all or a portion of the Series G Convertible Preferred Stock then held by such Investor for any securities issued in a subsequent financing on a $1.00 for $1.00 basis, provided such subsequent financing is not a firm commitment underwritten offering.
From the date of the Purchase Agreement until the date that is the earlier of (i) nine (9) months following the date of the Purchase Agreement and (ii) the date that the VWAP for 10 consecutive Trading Days following January 12, 2020 is greater than $1.25, subject to adjustment, the Company shall not issue, enter into any agreement to issue or announce the issuance or proposed issuance of any shares of common stock or Common Stock Equivalents (as defined in the Purchase Agreement).
We also entered into separate Registration Rights Agreements with the Investors, pursuant to which the Company agreed to undertake to file a registration statement to register the resale of the shares underlying the Series G Convertible Preferred Stock and Warrants within ten (10) days following the date of written demand by the lead investor (the “Demand Date”) , and to maintain the effectiveness of the registration statement until all of such shares of Common Stock have been sold or are otherwise able to be sold pursuant to Rule 144 under the Securities Act, without any restrictions. If we fail to file the registration statement or have it declared effective by the dates set forth above, among other things, the Company is obligated to pay the investors liquidated damages in the amount of 1% of their subscription amount, per month, until such events are satisfied.
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Off-Balance Sheet Arrangements; Commitments and Contractual Obligations
As of March 31, 2020, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments or contractual obligations.
ITEM 3 Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, we are not required to provide the information required by this Item.
ITEM 4 Controls and Procedures
(a) Disclosure Controls and Procedures
We conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of June 30, 2019,March 31, 2020, to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities Exchange Commission’s rules and forms, including to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of June 30, 2019,March 31, 2020, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses identified and described in our Annual Report on Internal Control Over Financial Reporting filed in our Annual Report on Form 10-K.
Our principal executive officers do not expect that our disclosure controls or internal controls will prevent all errors and all fraud. Although our disclosure controls and procedures were designed to provide reasonable assurance of achieving their objectives and our principal executive officers are determined to make our disclosure controls and procedures effective at doing so, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute assurance that the objectives of the system are met. 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 the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented if there exists in an individual a desire to do so. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
(b) Changes in Internal Control over Financial Reporting
No change in our system of internal control over financial reporting occurred during the period covered by this report, the three month period ended June 30, 2019,March 31, 2020, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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We are not a partyFrom time to or otherwise involvedtime, we may be subject to litigation and claims arising in any legal proceedings.
In the ordinary course of business,business. We are not currently a party to any material legal proceedings and we are from time to time involved in variousnot aware of any pending or threatened legal actions. The litigation process is inherently uncertain and it is possible that the resolution of such matters might have a material adverse effect upon our financial condition and/or results of operations. However, in the opinion of our management, other than as set forth herein, matters currently pending or threatenedproceeding against us are not expected tothat we believe could have a material adverse effect on our business, operating results, cash flows or financial position or results of operations.condition.
As a smaller reporting company, we areThe Company is not required to provide the information required by this Item.Item as it is a “smaller reporting company,” as defined in Rule 229.10(f)(1).
ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds
Except as set forth below or previously reported on a Current Report on Form 8-K, we had no unregistered sales of equity securities during the three month period ended June 30, 2019.March 31, 2020.
On April 15, 2019, we agreedJanuary 12, 2020, the Company entered into securities purchase agreements with certain accredited investors for the sale of an aggregate of 1,500 shares of the Company’s series G convertible preferred stock, and warrants to issue 50,000purchase 1,200,000 shares of our common stock (issued June 4, 2019)for gross proceeds of $1,500,000
On January 12, 2020, the Company issued an aggregate of 375,000 shares of common stock to a FINRA-registered broker-dealer and certain individuals associated with the broker-dealer for services related to the January 202 Offering of Series G Convertible Preferred Stock.
On January 22, 2020, and February 27, 2020, the Company issued a total of 160,000 shares of its common stock to an investor relations firm for services rendered to the Company.
On January 26, 2020, the Company issued 150,000 shares of its common stock to a consulting firm pursuantfor services rendered to a Consulting Agreement.the Company.
On April 23, 2019,February 12, 2020, February 13, 2020, and February 14, 2020, three holders converted a stockholder converted 673,398total of 675,000 shares of Series E Preferred Stock into 269,359a total of 270,000 shares of Iconic common stock.
From January 16, 2020 to February 24, 2020, two holders converted a total of 190 shares of Series F Preferred Stock into a total of 304,000 shares of Iconic common stock.
On May 8, 2019, we executed Warrant Exercise Agreements with four holders of our warrants. The holders exercised a total of 960,000 warrants at an agreed price of $0.32 per share and paidFebruary 24, 2020, the Company a totalissued 100,000 shares of $307,200. Pursuant to the Warrant Exercise Agreements, the holders were issued a total of 1,920,000 New Warrants which are exercisable into Companyits common stock at a priceto William Clyde Elliot II pursuant to an Endorsement Agreement effective as of $2.25 per share for a period of five years.February 24, 2020.
On May 9, 2019, weFebruary 24, 2020, the Company issued a total of 2,000,00050,000 shares of ourits common stock to NY Farms Group Inc. in connection with the acquisition of a 51% equity interest in Green Grow Farms, Inc. pursuant to a Share Exchange Agreement with Green Grow Farms, Inc. and NY Farms Group Inc.
On May 23, 2019, we agreed to issue 250,000 shares of our common stock (issued June 6, 2019) to a consulting firm pursuantfor services rendered to a Consulting Agreement.the Company.
All of the issuances were exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, there was no solicitation, and the investors were accredited or sophisticated.
ITEM 3 Defaults Upon Senior Securities
There have been no events which are required to be reported under this Item.None.
ITEM 4 Mine Safety Disclosures
Not applicable.
None.
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(a) Exhibits
Exhibit No. |
| Description of Exhibits |
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101.INS |
| XBRL Instance Document |
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101.SCH |
| XBRL Schema Document |
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101.CAL |
| XBRL Calculation Linkbase Document |
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101.DEF |
| XBRL Definition Linkbase Document |
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101.LAB |
| XBRL Labels Linkbase Document |
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101.PRE |
| XBRL Presentation Linkbase Document |
_______________
(1) | Incorporated by reference to Form SB-2 filed on November 30, 2007. |
(2) | Incorporated by reference to our Registration Statement on Form S-1 filed on September 19, 2018 (File No. 333-227420). |
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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.
| Iconic Brands, Inc. | ||
| |||
Dated: | By: | /s/ Richard J. DeCicco | |
| Richard J. DeCicco | ||
| Its: | Chief Executive Officer |