SEC Info℠

Home

Search

My Interests

Help

Sign In

Please Sign In

Yerbae Brands Corp. – ‘10-12G’ on 4/23/24

On:  Tuesday, 4/23/24, at 5:29pm ET   ·   Accession #:  1493152-24-15729   ·   File #:  0-56654

in

this entire Filing. an “Entity” Search.

Show

Documents searched

and

each “hit”. the 1st “hit”.

↓↑Hints

 Text Wildcards:  ? (any letter/digit),  * (many).  Search Logic:  for Documents:  & (and),  | (or);  for Text:  | (anywhere),  "(&)" (near).  Details... 

  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 4/23/24  Yerbae Brands Corp.               10-12G                 1:1.6M                                   M2 Compliance LLC/FA

Document/Exhibit                   Description                      Pages   Size 

 1: 10-12G      Registration Statement                              HTML   1.40M 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10

GENERAL FORM FOR REGISTRATION OF SECURITIES

PURSUANT TO SECTION 12(b) OR 12(g) OF

THE SECURITIES EXCHANGE ACT OF 1934

YERBAÉ BRANDS CORP.

(Exact Name of Registrant As Specified In Its Charter)

Registrant’s telephone number, including area code: (480) 471-8391

Please send copies of all correspondence to:

Yerbaé Brands Corp.

18801 N Thompson Peak Pkwy

Suite 380 Scottsdale AZ, 85255

Securities to be registered under Section 12(b) of the Act:

None.

Securities to be registered under Section 12(g) of the Act:

Common Shares, without par value

(Title of Class)

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the Company 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 ☐

Table of Contents

In this Form 10, the term “Yerbaé”, “we”, “us”, “our”, or “the Company” refers to Yerbaé Brands Corp.

THIS FILING MAY CONTAIN FORWARD-LOOKING STATEMENTS AND INFORMATION RELATING TO, AMONG OTHER THINGS, THE COMPANY, ITS BUSINESS PLAN AND STRATEGY, AND ITS INDUSTRY. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON THE BELIEFS OF, ASSUMPTIONS MADE BY, AND INFORMATION CURRENTLY AVAILABLE TO THE COMPANY’S MANAGEMENT. WHEN USED IN THE FORM 10, THE WORDS “ESTIMATE,” “PROJECT,” “BELIEVE,” “ANTICIPATE,” “INTEND,” “EXPECT” AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS, WHICH CONSTITUTE FORWARD-LOOKING STATEMENTS. THESE STATEMENTS REFLECT MANAGEMENT’S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE THE COMPANY’S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN THE FORWARD-LOOKING STATEMENTS. INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE ON WHICH THEY ARE MADE. THE COMPANY DOES NOT UNDERTAKE ANY OBLIGATION TO REVISE OR UPDATE THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER SUCH DATE OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS, EXCEPT AS REQUIRED BY APPLICABLE SECURITIES LAWS. PLEASE ALSO REFER TO ITEM 1A. RISK FACTORS FOR A LIST OF RISK FACTORS APPLICABLE TO THE COMPANY.

Unless otherwise indicated, all reference to “dollars”, “$”, “USD” or “US$” are to United States dollars.

ITEM 1. BUSINESS

General

Yerbaé develops plant-based energy drinks that contain no added sugar or artificial ingredients. Yerbaé was founded by Todd Gibson and Karrie Gibson in 2016 to create plant-based energy drinks containing yerba mate, a South American herb and a natural source of caffeine. Yerbaé’s first beverage was launched in the first quarter of 2017.

Yerbaé is engaged in the development, marketing, sale, and distribution of plant-based energy beverages that do not contain calories, carbohydrates, or sugar. Yerbaé’s line of beverages are blended with non-GMO plant-based ingredients, and offer the benefits of yerba mate and white tea; sustainably sourced from Brazil and other growing regions in South America.

Yerbaé beverages are created to provide products targeted at consumers focused on health, wellness and fitness and seeking healthier beverages as an alternative to existing energy drinks. The products are formulated to provide a more refreshing taste than coffee, with additional benefits to existing sodas and sparkling waters, along with healthier ingredients than traditional energy drinks. Yerbaé’s products complement a variety of healthy lifestyles, such as non-GMO, Keto, Vegan, Kosher, Paleo and gluten-free diets.

Corporate History

Kona Bay Technologies Inc. (“Kona Bay”) (now renamed Yerbaé Brands Corp.), Yerbaé prior to the closing of the Transaction (as defined below), was incorporated pursuant to the laws of British Columbia on June 13, 2000 under the name “Nova Canada Enterprises Ltd.”.

On June 30, 2003, Nova Canada Enterprises Ltd. and Stepstone Enterprises Ltd. amalgamated as one company under the name “Stepstone Enterprises Ltd.” (“Stepstone”) pursuant to the Business Corporations Act (British Columbia)(“BCBCA”). As a result of the amalgamation, the outstanding common shares of Nova and outstanding common shares of Stepstone were exchanged for common shares of Stepstone on a one-for-one basis to result in 6,000,000 common shares issued and outstanding at that time.

On May 21, 2004, Stepstone signed an agreement dated May 21, 2004 for the acquisition of 100% of the outstanding shares of ACT360 Media Ltd. (“ACT360”), a private software development company based in Richmond, British Columbia. On August 31, 2004, Stepstone completed its acquisition of ACT360. As consideration for the acquisition, the Company issued 9,789,467 common shares to the former shareholders of ACT360 at a deemed price of $0.13 per common share. Stepstone changed its name to “ACT360 Solutions Ltd.” (“ACT360 Solutions”).

On June 2, 2016, ACT360 Solutions changed its name from “ACT360 Solutions Ltd.” to “Kona Bay Technologies Inc.” and consolidated its issued and outstanding common shares on the basis of 10 pre-consolidation common shares for one post-consolidation common share.

On February 28, 2019, Kona Bay entered into an arrangement agreement with ACT360 Media Ltd., Bexar Ventures Inc. and Hapuna Ventures Inc. for the purposes of carrying out a corporate restructuring by way of a plan of arrangement. On December 13, 2017, the plan of arrangement closed, the software-as-a-service assets were transferred to Bexar Ventures Inc., the online advertising assets were transferred to Hapuna Ventures Inc., and 4,761,199 of the common shares of each of the companies were issued to the Company.

During the year ended September 30, 2020, Kona Bay dissolved its two wholly-owned U.S. subsidiaries, ACT360 USA Inc. and Kopiena Holdings LLC.

On July 27, 2021, Kona Bay entered into a share purchase agreement with Radames Bernath to sell all of the shares that the Company owns in the capital of its subsidiary, ACT360 Media Ltd., in exchange for a cash payment of $1 and Mr. Bernath agreeing to indemnify the Company for all liabilities associated with ACT360 Media Ltd. Kona Bay had continued to incur losses in its operations in ACT360 Media Ltd. and was not optimistic that the operations would become profitable in the future. On September 3, 2021, Kona Bay received approval from a majority of the shareholders to complete the transaction.

Reverse Takeover with Kona Bay Technologies Inc. and Yerbaé Brands Co.

The Transaction

On May 19, 2022, Kona Bay entered into an arrangement agreement and plan of merger dated May 19, 2022 (the “Arrangement Agreement”) with Yerbaé Brands Co. (“Yerbaé USA”), a company incorporated under the Delaware General Corporations Law (“DGCL”), Kona Bay Technologies (Delaware) Inc. (“Merger Sub”), a company incorporated under the DGCL, 1362283 B.C. Ltd. (“FinCo”), a company incorporated under the BCBCA, Todd Gibson and Karrie Gibson, pursuant to which Kona Bay proposed to acquire all of the issued and outstanding securities of Yerbaé USA from the securityholders (collectively, the “Original Yerbaé Securityholders”) of Yerbaé USA (the “Transaction”).

Arrangement Agreement

Pursuant to the terms of the Arrangement Agreement, Kona Bay proposed to acquire all of the issued and outstanding securities of Yerbaé USA from the Original Yerbaé Securityholders in exchange for the right to receive common shares (each, a “Common Share”) in the capital of the Company at an exchange ratio of one post-Consolidation (as defined below) Common Share for each one share of common stock (each, a “Yerbaé USA Share”) of Yerbaé USA prior to the closing of the Transaction (the “Closing”). Accordingly, the Transaction was to be completed by way of a reverse triangular merger conducted pursuant to: (i) the provisions of DGCL in which Merger Sub was to merge with and into Yerbaé USA; and (ii) the arrangement under Part 9, Division 5 of the BCBCA as approved by the Supreme Court of British Columbia in the Final Order dated January 24, 2023, which included the amalgamation of Kona Bay with FinCo (the “Amalgamation”). The Transaction was completed on February 8, 2023.

In connection with Closing, the Company (formerly, Kona Bay Technologies Inc.) consolidated its outstanding Common Shares on the basis of 5.8 pre-consolidation Common Shares for every one post-consolidation Common Share prior to the completion of the Amalgamation (the “Consolidation”).

At the time of Closing, an aggregate of 54,493,953 Common Shares were issued and outstanding, of which: 4,969,092 Common Shares were issued to former shareholders of Kona Bay; 35,848,290 Common Shares were issued to the Original Yerbaé Securityholders (inclusive of an aggregate of 5,631,276 Common Shares issued to former holders of an aggregate of $4,500,000 in convertible promissory notes of Yerbaé USA converted immediately prior to Closing); 8,000,000 performance-based Common Shares (each, a “Performance Share”) were issued to certain individuals (as set forth below); 3,153,746 Common Shares were issued to the former holders of common share purchase warrants of Kona Bay exercised in connection with the Closing; and 2,015,163 post-Consolidation Common Shares were issued to former holders of the subscription receipts of FinCo in connection with a non-brokered financing which closed concurrent to the Closing. The Company also issued 507,662 Common Shares to Roth Canada, ULC, an eligible arm’s length third party finder, in consideration for the Roth Canada, ULC’s services in facilitating the identification, negotiation and implementation of the Transaction.

The Performance Shares were issued at Closing as follows: as to 3,000,000 Performance Shares to Klutch Financial Corp. (“Klutch”), a former insider of and arm’s length party to Kona Bay and Yerbaé USA, and 2,500,000 Performance Shares to each of Todd Gibson and Karrie Gibson, which Performance Shares were to be held in escrow and released upon the completion of certain performance-based incentives (each, a “Milestone”) related to the listing of the Shares on the TSXV, future equity financings, and certain trailing gross revenue targets. To date, an aggregate of 5,500,000 Performance Shares were entitled to be released upon achievement of certain Milestones.

The Milestones set out in the Arrangement Agreement included the following:

As of the date hereof, 2,500,000 Performance Shares remain subject to the escrow restrictions as of the date hereof.

In connection with the closing of the Transaction, an aggregate of 1,087,752 options to purchase Yerbaé USA Shares which were outstanding immediately prior to Closing, were cancelled and the holders thereof were granted an aggregate of 1,087,752 Options.

In connection with the Closing, an aggregate of, 7,385,740 warrants to purchase Yerbaé USA Shares, which were outstanding immediately prior to Closing, were cancelled and the holders thereof were granted an aggregate of 7,385,740 replacement Common Share purchase warrants of the Company, with each warrant exercisable into one Common Share at an exercise price of US0.95 until August 8, 2023, and 2,015,163 share purchase warrants, which were outstanding immediately prior to Closing, were cancelled and the holders thereof were granted an aggregate of 2,015,163 replacement warrants of the Company, with each warrant exercisable into one Common Share at an exercise price of US1.50 until August 8, 2024. The Company also issued 308,823 share purchase warrants (each, a “Roth Canada Warrant”) to Roth Canada, ULC, an eligible arm’s length third party finder, in consideration for the Roth Canada, ULC’s services in facilitating the identification, negotiation and implementation of the Transaction. Each Roth Canada Warrant exercisable into one Common Share at an exercise price of US1.37 until February 8, 2025.

The combined company resulting from the completion of the Transaction was renamed “Yerbaé Brands Corp.” and the Common Shares began trading on the TSXV under the trading symbol “YERB.U” on February 13, 2023. At the time of Closing, Yerbaé had an aggregate of 54,493,953 Common Shares (including 4,969,092 Common Shares issued to former shareholders of Kona Bay), 1,087,752 Options and 9,833,290 warrants (including 123,564 unexercised warrants of Kona Bay) outstanding on a post-Consolidation basis.

Corporate Structure

As of the date of the filing, the Company has the following wholly-owned subsidiaries:

Principal Products and Services

Yerbaé is an innovative and health-focused beverage company that creates clean functional plant-based products promoting a healthy lifestyle. Yerbaé was the first to mix plant-based ingredients and sparkling water with zero sugar, calories and carbohydrates to produce an energy seltzer that performs without compromise.

Yerbaé was founded in 2016 to create a plant-based energy beverage containing non-GMO white tea and yerba mate, a South American herb and a natural source of caffeine that is sustainably sourced from South America. Yerbaé’s first beverage was launched in 2017 and in stores by the fall of 2017. Yerbaé is engaged in the development, marketing, sale, and distribution of plant-based energy beverages.

Yerbaé beverages are created to provide products targeted at consumers focused on health, wellness, and fitness and seeking healthier beverages as an alternative to traditional energy drinks. The products are formulated to provide a more refreshing taste than coffee, with additional benefits to existing sodas and sparkling waters, along with healthier ingredients compared to traditional energy drinks. Yerbaé’s products complement a variety of healthy lifestyles and diets, such as non-GMO, Keto, Vegan, Kosher, Paleo, and gluten-free diets. As of March 31, 2024, Yerbaé’s products are sold and available on Amazon.com, www.YERBAÉ.com and sold in over 14,000 retail locations in the United States marketplace. Yerbaé offers two primary beverage lines with a total of fourteen flavors. Yerbaé’s two primary product lines are the 12oz Plant-Based Energy Seltzer Water and 16oz Plant-Based Energy Drink.

12 oz Energy Seltzer Water

Yerbaé’s unsweetened Energy Seltzer Water line is served in a 12 oz can with zero sugar and zero calories. The beverage offers a lighter flavor than the 16 oz Energy Drink line and contains 100 mg of caffeine.

16 oz Energy Drink

Yerbaé’s zero calorie 16oz Energy Drink line was introduced to the market in 2020 to provide consumers with a greater energy boost. The flavor is more full-bodied than the 12oz Energy Seltzer Water and uses non-GMO stevia as the sweetener.

Products are generally packaged and sold in 12 and 15 can packs for all its flavors as well as variety packs which include an assortment of three flavors. The Company’s website also offers a subscription service.

Yerbaé is consistently optimizing its product portfolio and innovating new flavors to continuously deliver a new and fresh flavor profile for the ever-changing taste buds of consumers. Yerbaé also intends to continue to build sales and distribution throughout the United States through its distribution channels and increasing consumer brand awareness through its marketing efforts.

The Market

Yerbaé competes in a large and fast-growing market that is driven by an increased demand for energy drinks with a diverse nutritional profile and an increased adoption of healthy lifestyles since the COVID-19 pandemic. The U.S. energy-drink industry is estimated to be a $15 billion industry and it represents the fastest growing category within the non-alcoholic beverage space, rapidly gaining share from soft drinks and juices. Over the last year, the energy drink category has seen 8% sales growth compared to 2.8% for all beverages. The U.S. energy drink industry is estimated to reach $21 billion in sales by 2026, reflecting a 7% compound annual growth rate (see table below).

Source: United States Energy Drink Market Competition Forecast & Opportunities, 2028 (researchandmarkets.com)

The Market Opportunity

Many consumers are looking for functional beverages with cleaner ingredients and zero sugar, and Yerbaé believes it is uniquely positioned to be a player in this large addressable market and fastest growing non-alcoholic beverage category.

Strategy

Yerbaé is a naturally caffeinated beverage that is clean, simple, and delicious and gives the body energy from its plant-based functional ingredients. Yerbaé has successfully sold over 31 million cans of product.

Every part of Yerbaé was created to fit today’s modern diets and serve consumers focused on wellness.

Yerbaé’s products were formulated with five key pillars in mind:

To support those 5 key pillars, Yerbaé has undertaken significant marketing efforts aimed at building brand awareness, including digital, social media, sponsorships, TV, and podcasts. Yerbaé also undertakes various promotions at the retail level such as display activity, coupons and other in-store incentives and sampling.

The energy drink market is expected to experience significant growth through 2031, as reported by Research and Markets in 2022. The North American market is currently dominated by two legacy brands that share about 82% of the market, as reported by Information Resources, Inc. in 2021. However, emerging brands like Yerbaé have started to impact that market share lead with new products aimed at solving the industry’s biggest problem: its ingredients list.

Yerbaé’s consumers are estimated to be 56% male and 44% female with the average age range of 24 to 45 years of age. Yerbaé’s consumers are engaged in active lifestyles and are looking for healthier energy drink alternatives for their mind and body.

Distribution Channels

Since the initial product launch in 2017, Yerbaé has sold over 31 million cans of Yerbaé. Yerbaé’s line of products are currently available in over 14,000 retail locations in the U.S. marketplace. Yerbaé sells across many retail segments that include wholesale club stores, convenience stores, drug stores, grocery stores, natural food stores, mass merchants, food services, and direct to consumer, as well as health clubs, gyms, yoga studios, and quick serve restaurants.

Yerbaé uses four main distribution channels to deliver its products to retailers and consumers in the United States:

Manufacturing

The Company engages with third-party bottling service providers. Through these relationships, the Company provides the concentrate, blending and batching instructions as well as quality guidance, carbonation requirement and settlement times for the bottling process. The bottling service providers extend various services and 30-day payment terms for all finished goods.

Competitive Conditions

The functional energy drink industry is highly competitive. The principal areas of competition are pricing, packaging, distribution channel penetration, development of new products and flavors, product positioning as well as promotion and marketing strategies. Yerbaé’s products compete with a wide range of drinks produced by a relatively large number of manufacturers, most of which have substantially greater financial, marketing and distribution resources and name recognition.

Important factors affecting Yerbaé’s ability to compete successfully include the efficacy, taste and flavor of Yerbaé’s products, trade and customer promotions, rapid and effective development of new, unique cutting-edge products, attractive and different packaging, branded product advertising and pricing. The success of Yerbaé’s social media and other general marketing endeavors may impact Yerbaé’s business, financial condition, and results of operation. Yerbaé’s products compete with all liquid refreshments and with products of much larger and substantially better financed competitors, including the products of numerous nationally and internationally known producers, such as The Coca Cola Company, Dr. Pepper Snapple Group, PepsiCo, Inc., Nestle, Waters North America, Inc., Monster Energy and Red Bull. Yerbaé also competes with companies that are smaller or primarily local in operation. Yerbaé’s products also compete with private label brands such as those carried by supermarket chains, convenience store chains, drug store chains, mass merchants and club warehouses. New competitors continue to emerge, some of which target specific markets as well as the health and wellness space. This may require additional marketing expenditures on Yerbaé’s part to remain competitive.

Information about Raw Materials

The primary raw materials and ingredients used to make the Company’s beverages are sourced both from domestic and international suppliers like Argentina and Brazil. The principal raw materials used in the manufacturing of Yerbaé’s products are water, flavors, yerba mate, white tea, caffeine and stevia, as well as, aluminum cans and cardboard boxes for packaging. The Company’s functional energy beverages are bottled by established third-party bottling service providers strategically located across the United States. This allows Yerbaé to efficiently produce and distribute its products.

Major Customers

Yerbaé’s revenues are highly dependent on a limited number of customers and the loss of any one of the Company’s major customers could materially and adversely affect its growth and revenues. During the fiscal years ended December 31, 2023 and 2022, Yerbaé’s five largest customers contributed 95% and 80% of its revenues, respectively.

Proprietary Protection

Yerbaé owns domestic trademarks and other proprietary rights that are important to Yerbaé’s business, including Yerbaé’s main trademark, the Yerbaé® LOGO, which is a registered trademark in the United States. Depending upon the jurisdiction, trademarks are valid as long as they are used in the regular course of trade and/or their registrations are properly maintained. All of Yerbaé’s material trademarks are registered with the U.S. Patent and Trademark Office.

Yerbaé’s trademarks are as follows:

Trademark		Country		Date of Registration		Register		Registration Number		Expiration Date
		United States		February 13, 2018		Supplemental Register		5,403,553		February 13, 2028
		United States		November 7, 2017		Principal Register		5,328,481		November 7, 2027
		United States		December 20, 2019		Principal Register		7,286,651		December 20, 2029

Pursuant to a trademark license agreement dated May 4, 2017 between the Non-GMO Project and Yerbaé LLC as the licensee, the Non-GMO Project has granted to Yerbaé LLC a non-exclusive, non-transferable, non-assignable, revocable license in the United States and Canada in and to certain of trademarks owned by the Non-GMO Project for use on or in relation to the products of Yerbaé LLC.

Business Cycles

Yerbaé’s business is not cyclical. Accordingly, the U.S. market, the sole market in which Yerbaé operates, generally does not see the same type of seasonal sales trend as other jurisdictions in North America. Yerbaé produces and sells energy drinks throughout the entire year.

Environmental Protection

As of the date of this filing, there are no financial and/or operational impacts in relation to environmental protection requirements on the capital expenditures, earnings and competitive position of Yerbaé.

Employees

As of the date of this filing, Yerbaé employs approximately 18 employees, all of which are full time, with the majority at its corporate headquarters in Scottsdale, Arizona.

ITEM 1A. RISK FACTORS

An investment in the securities of the Company is speculative and subject to risks and uncertainties. The occurrence of any one or more of these risks or uncertainties could have a material adverse effect on the value of any investment in the Company and the business, prospects, financial position, financial condition or operating results of the Company. Additional risks and uncertainties not presently known to the Company or that the Company currently deems immaterial may also impair the Company’s business operations.

Risks Related to the Business of Yerbaé

The Company may have difficulty realizing consistent and meaningful revenues and achieving profitability.

Yerbaé’s ability to successfully develop its products and to realize consistent and meaningful revenues and to achieve profitability cannot be assured. For the Company to realize consistent, meaningful revenues and to achieve profitability, its products must receive broad market acceptance by consumers. Without this market acceptance, the Company will not be able to generate sufficient revenue to continue its business operations. If Yerbaé’s products are not widely accepted by the market, the business may fail.

Yerbaé’s ability to achieve and maintain profitability and positive cash flow is dependent upon the Company’s ability to generate revenues, manage operational and marketing costs and expenses, and compete successfully with its direct and indirect competitors. The Company anticipates operating losses in upcoming future periods. This will occur because there are expenses associated with the development, production, marketing, and sales of the Company’s products.

Yerbaé’s continued operating losses express substantial doubt about the Company’s ability to continue as a going concern.

The Company’s financial statements are prepared using generally accepted accounting principles in the U.S. applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. Yerbaé has not yet established an ongoing source of revenues sufficient to cover its operating costs and to allow the Company to continue as a going concern. As of December 31, 2023, the Company had an accumulated deficit of $34.5 million. Yerbaé’s ability to continue as a going concern is dependent on obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to significantly curtail or cease operations.

Yerbaé management has concluded that its historical recurring losses from operations and negative cash flows from operations as well as its dependence on financings raise substantial doubt about the Company’s ability to continue as a going concern and the Company’s auditor has included an explanatory paragraph relating to Yerbaé’s ability to continue as a going concern in its audit report for the fiscal year ended December 31, 2023.

Yerbaé will need additional funds to continue producing, marketing, and distributing its products.

Yerbaé will have to spend additional funds to continue producing, marketing and distributing its products. If the Company cannot raise sufficient capital, it may have to curtail or cease operations. Accordingly, the Company will need additional funds to continue to produce its products for distribution in its target markets.

There is no guarantee that sufficient sale levels will be achieved.

There is no guarantee that the expenditure of money on distribution and marketing efforts will translate into sufficient sales to cover the Company’s expenses and result in profits. Consequently, there is a risk that investors may lose all of their investment.

Yerbaé’s development, marketing, and sales activities are limited by its size.

Because of Yerbaé’s relative size, the Company must limit its product development, marketing, and sales activities to the amount of capital it raises. As such, Yerbaé may not be able to complete its production and business development program in a manner that is as thorough as the Company would like. The Company may not ever generate sufficient revenues to cover its operating and expansion costs.

A failure to introduce new products or product extensions into new marketplaces successfully could prevent Yerbaé from achieving long-term profitability.

Yerbaé competes in an industry characterized by rapid changes in consumer preferences, so the Company’s ability to continue developing new products to satisfy our consumers’ changing preferences will determine its long-term success. A failure to introduce new products or product extensions into new marketplaces successfully could prevent the Company from achieving long-term profitability. In addition, customer preferences are also affected by factors other than taste, such as publicity and marketing campaigns. If the Company does not adjust to respond to these and other changes in customer preferences, Yerbaé’s sales may be adversely affected.

Yerbaé’s growth and profitability depends on the performance of third-party distributors and on the Company’s ongoing relationships with them.

Yerbaé’s distribution network is essential for the Company’s success and relies on the performance of various third-parties. This includes wholesalers, direct store delivery distributors, direct distribution channels, and e-commerce platforms. Any failure or inadequate performance by these distribution parties could impact the Company’s operations, profitability, and pose risks to any investment in the securities of the Company.

Yerbaé’s distribution model involves a diverse network of wholesalers, distributors, and retailers. Wholesalers purchase our products in bulk and distribute them to retailers or directly to consumers. Distributors handle direct store delivery distribution, ensuring Yerbaé’s products reach retail shelves efficiently. Additionally, the Company’s direct distribution channels and e-commerce platform enable it to reach customers directly.

There are several potential risks associated with these various arrangements:

Overall, the performance of third-party distribution parties and Yerbaé’s relationships with them are crucial factors that could affect the business outcomes of the Company and returns for investors.

Yerbaé’s business is sensitive to public perception. If any product proves to be harmful to consumers or if scientific studies provide unfavorable findings regarding their safety or effectiveness of caffeinated beverages, then the Company’s image in the marketplace would be negatively impacted.

Yerbaé’s results of operations may be significantly affected by the public’s perception of the Company and similar companies. Accordingly, the business of the Company could be adversely affected if any of Yerbaé’s products or similar products distributed by other companies proves to be harmful to consumers or if scientific studies provide unfavorable findings regarding the safety or effectiveness of the Company’s products or any similar products. If Yerbaé’s products suffer from negative consumer perception, it is likely to adversely affect the Company’s business and results of operations.

Increases in the cost, disruption of supply or shortage of ingredients, other raw materials or packaging materials could harm the business of Yerbaé.

Yerbaé and its third-party bottlers will use water, flavors, yerba mate, white tea, caffeine and stevia and packaging materials for bottles such as aluminum and paper products. The prices for these ingredients, other raw materials and packaging materials fluctuate depending on market conditions. Substantial increases in the prices of the Company’s or its bottler’s ingredients, other raw materials and packaging materials, to the extent they cannot be recouped through increases in the prices of finished beverage products, could increase the operating costs of the Company and could reduce profitability.

Increases in the prices of Yerbaé’s finished products resulting from a higher cost of ingredients, other raw materials and packaging materials could affect the affordability of the Company’s products and reduce sales.

An increase in the cost, a sustained interruption in the supply, or a shortage of some of the ingredients used in the Company’s products, other raw materials, or packaging materials and containers that may be caused by a deterioration of Yerbaé’s or its third-party bottlers’ relationships with suppliers; by supplier quality and reliability issues; or by events such as natural disasters, power outages, labor strikes, political uncertainties or governmental instability, or the like, could negatively impact the Company’s net revenues and profits.

Yerbaé relies on third-parties to produce and bottle its products, which creates additional risk.

Yerbaé does not own or operate bottling or co-packing facilities used for the production of the various products in its portfolio. The Company relies on certain third-parties to ensure the quality, safety and integrity of Yerbaé’s products. If the third-parties that the Company engages to produce and bottle its products fail to meet Yerbaé’s demands or are found by government agencies to be out of compliance with applicable regulatory requirements, the supply of those products and the future profit margins of the Company could be adversely affected.

Product contamination or tampering or issues or concerns with respect to product quality, safety and integrity could adversely affect Yerbaé’s business, reputation, financial condition or results of operations.

Product contamination or tampering, the failure to maintain high standards for product quality, safety and integrity, including with respect to raw materials and ingredients obtained from suppliers, or allegations (whether or not valid) of product quality issues, mislabeling, misbranding, spoilage, allergens, adulteration or contamination with respect to products in Yerbaé’s portfolio may reduce demand for such products, and cause production and delivery disruptions or increase costs, each of which could adversely affect the business, reputation, financial condition or results of operations of the Company. If any of the products in Yerbaé’s portfolio are mislabeled or become unfit for consumption or cause injury, illness or death, or if appropriate resources are not devoted to product quality and safety or to comply with changing food safety requirements, the Company could decide to, or be required to, recall products or withdraw from the marketplace and/or it may be subject to liability or government action, which could result in payment of damages or fines, cause certain products in the Company’s portfolio to be unavailable for a period of time, result in destruction of product inventory, or result in adverse publicity (whether or not valid), which could reduce consumer demand and brand equity. Moreover, even if allegations of product contamination or tampering or suggestions that Yerbaé’s products were not fit for consumption are meritless, the negative publicity surrounding assertions against the Company or its products or processes could adversely affect Yerbaé’s reputation or brand. The business of the Company could also be adversely affected if consumers lose confidence in product quality, safety and integrity generally, even if such loss of confidence is unrelated to products in Yerbaé’s portfolio. Any of the foregoing could adversely affect the business, reputation, financial condition or results of operations of the Company. In addition, if Yerbaé does not have adequate insurance, if it does not have enforceable indemnification from suppliers, bottlers, distributors or other third-parties or if indemnification is not available, the liability relating to such product claims or disruption as a result of recall efforts could materially adversely affect the business, financial condition or results of operations of the Company.

Yerbaé will compete in an industry that is brand-conscious, so brand name recognition and acceptance of its products are critical to its success and significant marketing and advertising could be needed to achieve and sustain brand recognition.

Yerbaé’s business is substantially dependent upon awareness and market acceptance of its products and brands by its targeted consumers. Its business also depends on acceptance by independent distributors of the Yerbaé brand as one that has the potential to provide incremental sales growth rather than reduce distributors’ existing functional energy drinks. The development of brand awareness and market acceptance is likely to require significant marketing and advertising expenditures. There can be no assurance that Yerbaé will achieve and maintain satisfactory levels of acceptance by independent distributors and retail customers. Any failure of the Yerbaé brand to maintain or increase acceptance or market penetration would likely have a material adverse effect on business, financial condition and results of operations.

If Yerbaé is unable to successfully manage new product launches, its business and financial results could be adversely affected.

Due to the highly competitive nature of the global functional energy drink sector, Yerbaé expects and intends to continue to introduce new products and evolve existing products to better match consumer demand. The success of new and evolved products depends on several factors, including timely and successful development and consumer acceptance. Such endeavors may also involve significant risks and uncertainties, including distraction of management from current operations, greater than expected liabilities and expenses, inadequate return on capital, exposure to additional regulations and reliance on the performance of third-parties.

Alternative non-commercial beverages or processes could hurt Yerbaé’s business.

The availability of non-commercial beverages, such as tap water, and machines capable of producing naturally caffeinated, plant-based energy beverages at the consumer’s home could hurt Yerbaé’s business, market share, and profitability.

Water scarcity and poor quality could negatively impact Yerbaé’s production costs and capacity.

Water is an ingredient in the product. It is also a limited resource, facing unprecedented challenges from overexploitation, increasing pollution, poor management, and climate change. As demand for water continues to increase, as water becomes scarcer, and as the quality of available water deteriorates, Yerbaé may incur increasing production costs or face capacity constraints that could adversely affect its profitability or net operating revenues in the long run.

Climate change and natural disasters may affect Yerbaé’s business.

There is concern that a gradual increase in global average temperatures due to increased carbon dioxide and other greenhouse gases in the atmosphere could cause significant changes in weather patterns around the globe and an increase in the frequency and severity of natural disasters. Changing weather patterns could result in decreased agricultural productivity in certain regions, and/or outbreaks of diseases or other health issues, which may limit availability and/or increase the cost of certain ingredients used in Yerbaé’s products and could impact the food security of communities around the world. Increased frequency or duration of extreme weather conditions could also impair production capabilities, disrupt Yerbaé’s supply chain and/or impact demand for its products.

Natural disasters and extreme weather conditions, such as hurricanes, wildfires, earthquakes or floods, and outbreaks of diseases (such as the COVID-19 pandemic) or other health issues may affect Yerbaé’s operations and the operation of its supply chain, impact the operations of its distributors and unfavorably impact Yerbaé’s consumers’ ability to purchase its products. In addition, public expectations for reductions in greenhouse gas emissions could result in increased energy, transportation, and raw material costs, and may require Yerbaé to make additional investments in facilities and equipment. Changes in applicable laws, regulations, standards or practices related to greenhouse gas emissions, packaging and water scarcity, as well as initiatives by advocacy groups in favor of certain climate change-related laws, regulations, standards or practices, may result in increased compliance costs, capital expenditures and other financial obligations, which could affect Yerbaé’s business, financial condition and results of operations. Sales of Yerbaé’s products may also be influenced to some extent by weather conditions in the markets in which it operates. Yerbaé’s third-party co-packers use a number of key ingredients in the manufacturing of its products and powder packets that are derived from agricultural commodities. Increased demand for food products and decreased agricultural productivity in certain regions of the world as a result of changing weather patterns and other factors may limit the availability or increase the cost of such agricultural commodities and could impact the food security of communities around the world. Weather conditions may influence consumer demand for certain of Yerbaé’s products, which could have an effect on its operations, either positively or negatively.

Because Yerbaé has a limited operating history, Yerbaé’s ability to fully and successfully develop the business is unknown.

Yerbaé has only recently begun producing and distributing energy beverages and does not have a significant operating history with which investors can evaluate Yerbaé’s business. Yerbaé’s ability to successfully develop its products, and to realize consistent, meaningful revenues and profit has not been established and cannot be assured. For Yerbaé to achieve success, the products must receive broad market acceptance by consumers. Without this market acceptance, Yerbaé will not be able to generate sufficient revenue to continue Yerbaé’s business operations. If Yerbaé’s products are not widely accepted by the market, the business may fail.

Dependence on personnel.

Due to the specialized nature of Yerbaé’s business, Yerbaé’s success depends on its ability to attract and retain qualified personnel and management. In particular, Yerbaé’s future success will depend in part on the continued services of its executive officers and other key employees. Competition for qualified personnel in the industry in which Yerbaé operates is intense. Yerbaé believes that there are only a limited number of people with the requisite skills to serve in many key positions and it is difficult to hire and retain these people. The loss of one or more of these key personnel may have a significant adverse effect on Yerbaé or its sales, operations and profits.

Conflicts of Interest.

Certain of the directors and officers of Yerbaé are also directors and officers of other companies. In addition, they may devote time to other outside business interests, so long as such activities do not materially or adversely interfere with their duties to Yerbaé. The interests of these persons could conflict with those of Yerbaé. Conflicts of interest, if any, will be subject to the procedures and remedies provided under applicable laws, including the requirements of the BCBCA. In particular, in the event that such a conflict of interest arises at a meeting of Yerbaé’s Board of Directors (the “Board”), a director who has such a conflict will abstain from voting for or against the approval of such participation or such terms. In accordance with applicable laws, the directors of Yerbaé will be required to act honestly, in good faith and in the best interests of Yerbaé.

Yerbaé’s growth and profitability depends on the performance of third-parties and its relationship with them.

Yerbaé and its distribution network and its success depend on the performance of third-parties, such as third-party co-packers and distribution partners. Any non-performance or deficient performance by such parties may undermine Yerbaé’s operations, profitability, and result in total loss to your investment. To manufacture products, Yerbaé will rely on third-party co-packers. These third-party co-packers may not be able to fulfill Yerbaé’s demand, or such third-parties could begin to charge rates that make using their services cost inefficient. In such a case, Yerbaé’s business, financial condition, and results of operation would be adversely affected. To distribute product, Yerbaé will use a broker-distributor-retailer network whereby brokers represent products to distributors and retailers who will in turn sell product to consumers. The success of this network will depend on the performance of the brokers, distributors and retailers of this network. There is a risk that a broker, distributor, or retailer may refuse to or cease to market or carry Yerbaé’s products. There is a risk that the mentioned entities may not adequately perform their functions within the network by, without limitation, failing to distribute to sufficient retailers or positioning Yerbaé’s products in localities that may not be receptive to it. Furthermore, such third-parties’ financial position or market share may deteriorate, which could adversely affect Yerbaé’s distribution, marketing and sale activities. Yerbaé must maintain good commercial relationships with third-party brokers, distributors and retails so that they will promote and carry its product. Any adverse consequences resulting from the performance of third-parties or Yerbaé’s relationship with them could undermine Yerbaé’s operations, profitability and may result in total loss of your investment.

Risks Related to Regulations Applicable to Yerbaé’s Industry

Changes in the caffeinated energy beverage business environment and retail landscape could adversely impact the Company’s financial results.

The caffeinated energy beverage business environment is rapidly evolving as a result of, among other things, changes in consumer preferences, including changes based on health and nutrition considerations and obesity concerns; shifting consumer tastes and needs; changes in consumer lifestyles; and competitive product and pricing pressures. In addition, the caffeinated energy beverage retail landscape is very dynamic and constantly evolving, not only in emerging and developing markets, where modern trade is growing at a faster pace than traditional trade outlets, but also in developed markets, where discounters and value stores, as well as the volume of transactions through e-commerce, are growing at a rapid pace. If Yerbaé is unable to successfully adapt to the rapidly changing environment and retail landscape, its share of sales, volume growth and overall financial results could be negatively affected.

Increase in the cost, disruption of supply or shortage of ingredients, other raw materials or packaging materials could harm Yerbaé’s business.

Yerbaé’s bottling partners will use water, yerba mate, guarana, white tea, stevia, flavoring and packaging materials for bottles such as aluminum, plastic and paper products. The prices for these ingredients, other raw materials and packaging materials fluctuate depending on market conditions. Substantial increases in the prices of Yerbaé’s or its bottling partners’ ingredients, other raw materials and packaging materials, to the extent they cannot be recouped through increases in the prices of finished beverage products, would increase Yerbaé’s operating costs and could reduce its profitability. Increases in the prices of Yerbaé’s finished products resulting from a higher cost of ingredients, other raw materials and packaging materials could affect the affordability of its products and reduce sales.

An increase in the cost, a sustained interruption in the supply, or a shortage of some of these ingredients, other raw materials, or packaging materials and containers that may be caused by a deterioration of Yerbaé’s or its bottling partners’ relationships with suppliers; by supplier quality and reliability issues; or by events such as natural disasters, power outages, labor strikes, political uncertainties or governmental instability, or the like, could negatively impact Yerbaé’s net revenues and profits.

Intense competition and increasing competition in the commercial beverage market could hurt Yerbaé’s business.

The commercial retail beverage industry, and in particular its functional caffeinated energy beverage segment is highly competitive. Market participants are of various sizes, with various market shares and geographical reach, some of whom have access to substantially more sources of capital.

Yerbaé will compete generally with all commercial beverages, including specialty beverages, such functional energy drinks. Yerbaé will compete indirectly with major international beverage companies including, but not limited to: the Coca Cola Company, Dr. Pepper Snapple Group, PepsiCo, Inc., Nestle, Waters North America, Inc., Hansen Natural Corp. and Red Bull. These companies have established market presence in the United States, and offer a variety of beverages that are substitutes to Yerbaé’s products. Yerbaé faces potential direct competition from such companies, because they have the financial resources, and access to manufacturing and distribution channels to rapidly enter the energy beverage market.

Yerbaé also competes with companies that are smaller or primarily local in operation as well as with private label brands such as those carried by supermarket chains, convenience store chains, drug store chains, mass merchants and club warehouses. These companies could bolster their position in the caffeinated plant-based energy beverage market through additional expenditure and promotion.

As a result of both direct and indirect competition, Yerbaé’s ability to successfully distribute, market and sell its products, and to gain sufficient market share in the United States to realize profits may be limited, greatly diminished, or totally diminished, which may lead to partial or total loss of your investments in Yerbaé.

Changes in consumer product and shopping preferences may reduce demand for Yerbaé’s products.

The functional energy drink and supplement categories are subject to changing consumer preferences and shifts in consumer preferences may adversely affect Yerbaé. There is increasing awareness of and concern for health, wellness, and nutrition considerations, including concerns regarding caloric intake associated with sugar-sweetened drinks and the perceived undesirability of artificial ingredients. Yerbaé’s products do not contain the artificial preservatives often found in many energy drinks and sodas. Yerbaé has no artificial preservatives, aspartame or high fructose corn syrup and is very low in sodium. Yerbaé has sweetened line of products that are sweetened with stevia, a composite herb native to South America whose leaves are the source of a noncaloric sweetener. However, consumer preferences may shift away from the trend towards healthier options that Yerbaé has observed, and as such, there can be no assurance that Yerbaé’s current products and product lines will maintain their current levels of demand. There are also changes in demand for different packages, sizes, and configurations. This may reduce demand for Yerbaé’s products, which could reduce Yerbaé’s revenues and adversely affect Yerbaé’s results of operations.

Consumers are seeking greater variety in their functional energy drinks. Yerbaé’s success will depend, in part, upon its continued ability to develop and introduce different and innovative drinks and supplements that appeal to consumers. In order to retain and expand Yerbaé’s market share, Yerbaé must continue to develop and introduce different and innovative supplements and be competitive in the areas of efficacy, taste, quality, and price, although there can be no assurance of its ability to do so. There is no assurance that consumers will continue to purchase Yerbaé products in the future. Product lifecycles for some functional energy drink brands, products and/or packages may be limited to a few years before consumers’ preferences change. The functional energy drinks that Yerbaé currently markets are in varying stages of their product lifecycles, and there can be no assurance that such products will become or remain profitable for Yerbaé. Yerbaé may be unable to achieve volume growth through product and packaging initiatives. Yerbaé may also be unable to penetrate new markets.

Expansion of the naturally caffeinated, plant-based energy beverage market or sufficiency of consumer demand in that market for operations to be profitable are not guaranteed.

The naturally caffeinated, plant-based energy beverage market is an emerging market and there is no guarantee that this market will expand or that consumer demand will be sufficiently high to allow Yerbaé to successfully market, distribute and sell its products, or to successfully compete with current or future competition, all of which may result in total loss of your investment.

Health benefits of caffeinated energy beverages are not guaranteed or proven, rather it is perceived by consumers.

Health benefits of caffeinated energy beverages are not guaranteed and have not been proven. There is a perception that consuming naturally caffeinated, plant-based energy beverages have beneficial health effects. Consequently, negative changes in consumers’ perception of the benefits of such beverages or negative publicity surrounding them may result in loss of market share or potential market share and hence loss of your investment.

The U.S. Food and Drug Administration has not passed on the efficacy of Yerbaé’s products or the accuracy of any claim made related to its products. The FTC regulates advertising and may review the truthfulness of and substantiation for any claim Yerbaé makes related to its products.

Yerbaé’s advertising activities within the United States are subject to regulation by the United States Federal Trade Commission (“FTC”) under the Federal Trade Commission Act. In recent years, the FTC and state attorneys general have initiated numerous investigations of dietary and nutritional supplement companies and products. Any actions or investigations initiated against the Company by governmental authorities or private litigants could have a material adverse effect on Yerbaé’s business, financial condition, and results of operations.

The shifting regulatory environment through the various jurisdictions in which are products are sold necessitates building and maintaining robust systems to achieve and maintain compliance in multiple jurisdictions and increases the possibility that Yerbaé may violate one or more of the legal requirements. If its operations are found to be in violation of any applicable laws or regulations, Yerbaé may be subject to, without limitation, civil and criminal penalties, damages, fines, the curtailment or restructuring of its operations, injunctions, or product withdrawals, recalls or seizures, any of which could adversely affect its ability to operate its business, its financial condition and results of operations.

Risks Related to Yerbaé’s Intellectual Property

Dependence on trademarks and proprietary rights.

Yerbaé’s success depends, in large part, on its ability to protect its brands and products and to defend its intellectual property rights. Yerbaé currently has registered both the name “Yerbaé” and Yerbaé’s frog logo as trademarks with the United States Patent and Trademark Office. Yerbaé cannot be sure that trademarks will be issued with respect to any future trademark applications or that its competitors will not challenge, invalidate or circumvent any existing or future trademarks issued to, or licensed by, Yerbaé. Additionally, Yerbaé’s products will be manufactured using proprietary blends of ingredients created by third-party suppliers and then supplied to co-packers. Although the third-parties in Yerbaé’s supply and manufacturing chain will execute confidentiality agreements, there can be no assurances that trade secrets, such as the proprietary ingredient blends, will not become known to competitors.

Yerbaé may face intellectual property infringement claims that could be time-consuming and costly to defend, and could result in loss of significant rights and the assessment of treble damages.

From time to time the Company may face intellectual property claims from third-parties. Some of these claims may lead to litigation. The outcome of any such litigation can never be guaranteed, and an adverse outcome could affect Yerbaé negatively. For example, were a third-party to succeed on an infringement claim against the Company, Yerbaé may be required to pay substantial damages (including up to treble damages if such infringement were found to be willful). In addition, the Company could face an injunction, barring it from conducting the allegedly infringing activity. The outcome of the litigation could require Yerbaé to enter into a license agreement which may not be under acceptable, commercially reasonable, or practical terms or the Company may be precluded from obtaining a license at all. It is also possible that an adverse finding of infringement against the Company may require Yerbaé to dedicate substantial resources and time in developing non-infringing alternatives, which may or may not be possible.

Finally, Yerbaé may initiate claims to assert or defend its intellectual property against third-parties. Any intellectual property litigation, irrespective of whether the Company is the plaintiff or the defendant, and regardless of the outcome, is expensive and time-consuming, and could divert management’s attention from Yerbaé’s business and negatively affect the operating results or financial condition of the Company.

Yerbaé may be subject to claims by third-parties asserting that its employees or the Company has misappropriated their intellectual property, or claiming ownership of what the Company regard as its own intellectual property.

Although Yerbaé tries to ensure that the Company, its employees, and independent contractors (suppliers/vendors/distributors) do not use the proprietary information or know-how of others in their work, Yerbaé may be subject to claims that the Company, its employees, or independent contractors (suppliers/vendors/distributors) have used or disclosed intellectual property in violation of others’ rights. These claims may cover a range of matters, such as challenges to Yerbaé’s trademarks, as well as claims that its employees or independent contractors are using trade secrets or other proprietary information of any such employee’s former employer or independent contractors. As a result, the Company may be forced to bring claims against third-parties, or defend claims brought against Yerbaé, to determine the ownership of what the Company regard as its intellectual property. If Yerbaé fails in prosecuting or defending any such claims, in addition to paying monetary damages, the Company may lose valuable intellectual property rights or personnel. Even if successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to management of the Company.

Risks Related to Yerbaé’s Common Shares

Market price of Common Shares

The market price of the Common Shares may be volatile and subject to wide fluctuations in response to ‎numerous factors, many of which are beyond Yerbaé’s control. This volatility may affect the ‎ability of holders of Common Shares to sell their securities at an advantageous price. Market price ‎fluctuations in the Common Shares may be due to Yerbaé’s operating results failing to meet ‎expectations of securities analysts or investors in any period, downward revision in securities analysts’ ‎estimates, adverse changes in general market conditions or economic trends, acquisitions, dispositions or ‎other material public announcements by Yerbaé or its competitors, along with a variety of additional ‎factors. These broad market fluctuations may adversely affect the market price of the Common Shares.‎

Financial markets have historically at times experienced significant price and volume fluctuations that ‎have particularly affected the market prices of equity securities of companies and have often been ‎unrelated to the operating performance, underlying asset values or prospects of such companies. ‎Accordingly, the market price of the Common Shares may decline even if Yerbaé’s operating results, ‎underlying asset values or prospects have not changed. Additionally, these factors, as well as other ‎related factors, may cause decreases in asset values that are deemed to be other than temporary, which ‎may result in impairment losses. There can be no assurance that continuing fluctuations in price and ‎volume will not occur. If such increased levels of volatility and market turmoil continue, Yerbaé’s ‎operations could be adversely impacted and the trading price of the Common Shares may be ‎materially adversely affected.‎

Additional Financing

The continued development of Yerbaé will require additional financing. There is no guarantee that Yerbaé will be able to achieve its business objectives, including with respect to the expansion of its product offerings and entering into new markets. Yerbaé intends to fund its business objectives by way of additional offerings of equity and/or debt financing as well as through anticipated positive cash flow from operations in the future. The failure to raise or procure such additional funds or the failure to achieve positive cash flow could result in the delay or indefinite postponement of current business objectives. There can be no assurance that additional capital or other types of financing will be available if needed or that, if available, will be on terms acceptable to the Company.

Given Yerbaé’s plans and expectations that additional capital and personnel will be needed, the Company may need to issue additional debt or equity securities. Yerbaé cannot predict the size of future sales and issuances of debt or equity securities or the effect, if any, that future sales and issuances of debt or equity securities will have on the market price of the Common Shares. Sales or issuances of a substantial number of equity securities, or the perception that such sales could occur, may adversely affect prevailing market prices for the Common Shares. With any additional sale or issuance of equity securities, investors will suffer dilution of their voting power and may experience dilution in Yerbaé’s earnings per share.

Liquidity

Shareholders may be unable to sell significant quantities of Common Shares into the public trading markets without a significant reduction in the price of their Common Shares, or at all. There can be no assurance that there will be sufficient liquidity of the Common Shares on the trading market, and that Yerbaé will continue to meet the listing requirements of the TSXV, OTCQX^® or other public listing exchanges.

History of negative cash flows

Yerbaé has a history of negative cash flow from operating activities. To the extent that the Company has negative cash flow in future periods, Yerbaé may need to allocate a portion of the net proceeds from the sale of securities to fund such negative cash flow. There can be no assurance that additional capital or other types of financing will be available when need or that these financings will be on terms at least as favorable to Yerbaé as those previously obtained, or at all.

Yerbaé derives virtually all of its revenues from functional energy drinks, and competitive pressure in the functional energy drink category could adversely affect Yerbaé’s business and operating results.

Yerbaé’s focus is in the functional energy category, and its business is vulnerable to adverse changes impacting the fitness supplement category and business, which could adversely impact Yerbaé’s business and the trading price of its Common Shares.

Virtually all of Yerbaé’s sales are derived from its functional energy beverage product lines. Any decrease in the sales of its functional energy drinks could significantly adversely affect Yerbaé’s future revenues and net income. Historically, Yerbaé have experienced substantial competition from new entrants in the functional energy drink category. The increasing number of competitive products and limited amount of shelf space, including in coolers, in retail stores may adversely impact Yerbaé’s ability to gain or maintain a share of sales in the marketplace. In addition, certain actions of competitors, including unsubstantiated and/or misleading claims, false advertising claims and tortious interference in Yerbaé’s business, as well as competitors selling misbranded products, could impact Yerbaé’s sales. Competitive pressures in the functional energy drink and supplement categories could impact Yerbaé’s revenues, cause price erosion and/or lower market share, any of which could have a material adverse effect on its business and results of operations.

Because Yerbaé does not intend to pay any cash dividends on its Common Shares in the near future, shareholders will not be able to receive a return on their Common Shares unless they sell them.

Yerbaé intends to retain any future earnings to finance the development and expansion of its business. Accordingly, the Company does not anticipate paying any cash dividends on the Common Shares in the near future. The declaration, payment and amount of any future dividends will be made at the discretion of the Board, and will depend upon, among other things, the results of operations, cash flows and financial condition, operating and capital requirements, and other factors as the Board considers relevant. There is no assurance that future dividends will be paid, and if dividends are paid, there is no assurance with respect to the amount of any such dividend. Unless Yerbaé pays dividends, shareholders of the Company will not be able to receive a return on their Common Shares unless they sell them.

ITEM 2. FINANCIAL INFORMATION

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and the related notes included elsewhere herein and in our consolidated financial statements.

In addition to our consolidated financial statements, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements.

Overview

Yerbaé was founded by Todd Gibson and Karrie Gibson in 2016 to create plant-based energy drinks containing yerba mate, a South American herb and a natural source of caffeine. Yerbaé’s first beverage was launched in the first quarter of 2017.

Yerbaé is engaged in the development, marketing, sale, and distribution of plant-based energy beverages that do not contain calories, carbohydrates, or sugar. Yerbaé’s line of beverages are blended with non-GMO plant-based ingredients, and offer the benefits of yerba mate and white tea; sustainably sourced from Brazil and other growing regions in South America.

Yerbaé beverages are created to provide products targeted at consumers focused on health, wellness, and fitness and seeking healthier beverages as an alternative to existing energy drinks. The products are formulated to provide a more refreshing taste than coffee, with additional benefits to existing sodas and sparkling waters, along with healthier ingredients than traditional energy drinks. Yerbaé’s products complement a variety of healthy lifestyles, such as non-GMO, Keto, Vegan, Kosher, Paleo and gluten-free diets.

The accompanying consolidated financial statements have been prepared on a basis that assumes that the Company will continue as a going concern and that contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. The Company had an accumulated deficit of $34.5 million and $13.7 million as of December 31, 2023 and December 31, 2022, respectively. Further, the Company had cash and cash equivalents of approximately $1.0 million and $0.9 million as of December 31, 2023 and December 31, 2022, respectively. The Company’s primary focus in recent months has been and will continue to be supporting and manufacture of its products which requires capital and resources. The Company expects that its operating losses and negative cash flows will continue for the foreseeable future. Based on the Company’s currently available cash resources, current and forecasted level of operations, and forecasted cash flows for the12-month period subsequent to the date of issuance of these consolidated financial statements, the Company will require additional funding to continue to progress its operational obligations as they come due. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

The Company’s ability to continue as a going concern is dependent upon its ability to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due, and to generate profitable operations in the future. Management plans to provide for the Company’s capital requirements through financing, operations, or other transactions, including drawing the line of credit (see Note 9, Line of Credit).

Management’s discussion and analysis of financial condition and results of operations

Liquidity and Capital Resources

As of December 31, 2023, the Company had a working capital surplus of $843,478 compared to a working capital deficit of $4,562,980 as of December 31, 2022. The Company has incurred losses since inception and as of December 31, 2023, had an accumulated deficit of approximately $34.5 million, compared to approximately $13.7 million as of December 31, 2022. The Company’s objective in managing its capital is to ensure that there is sufficient liquidity to finance and grow its operations, maximize the preservation of capital, provide adequate capital to fund its business objectives, and deliver competitive returns on invested capital. To fund its activities, the Company has primarily relied on private placement financings, lines of credit, and other forms of debt. The material debt financing transactions were as follows:

Notes Payable

During 2022, convertible notes payable were issued in the amount of $4,500,000 with a stated interest rate of 8.00%. The convertible notes were secured by substantially all the assets of the Company and were due on the earlier of 12 months from issue date or upon completion of a liquidation event as defined in the agreements. The notes were converted during February 2023 in connection with the Closing of the Transaction with Kona Bay and Yerbaé USA. The outstanding balance of the convertible notes as of December 31, 2023 and December 31, 2022 was $0 and $3,257,051, respectively. During 2023, the Company also paid off $650,000 of notes payable.

During 2023, convertible notes payable were issued in the amount of $3,802,000 with a stated interest rate of 6.00%. The convertible notes were unsecured and are due on April 30, 2025. The outstanding balance of the convertible notes as of December 31, 2023 and December 31, 2022 was $2,196,302 and $0, respectively.

During 2023, the Company entered into a short-term note payable with Amazon lending in the amount of $0.3 million. The note payable matures during December 2024, has an interest rate of 14.49% and is secured by the Company’s inventories.

Line of Credit

On May 16, 2023, Yerbaé’s Delaware subsidiary, Yerbaé LLC, replaced its line of credit provider Ampla LLC (“Ampla”) and secured a new accounts receivable and inventory revolving line of credit of $2,500,000 (the “Debt Facility”) from Oxford Commercial Finance, a Michigan banking corporation. The Company can draw down funds as needed, and only pay interest on the amount borrowed. The Debt Facility is secured by a security interest in all assets of Yerbaé, including a first security interest in Yerbaé’s accounts receivable and inventory. The outstanding balance due to Oxford Commercial Finance was $0 at December 31, 2023 and the outstanding balance due to Ampla was $879,555 at December 31, 2022.

Going Concern

As discussed in Yerbaé’s consolidated financial statements, management believes that it is probable that the Company will be unable to meet its obligations as they come due within one year after the date that the financial statements are issued. Should the additional planned financings not occur as expected, management will implement alternative arrangements and such arrangements could have a potentially significant negative impact on the current net asset value of the Company. These alternatives include: (1) raising additional capital by means other than those planned through equity and/or debt financings; and/or (2) entering into new commercial relationships to help fund future expenses.

As a result of the Company’s recurring losses from operations, and the need for additional financing to fund its operating and capital requirements within one year after the date that the financial statements are issued, there is uncertainty regarding the Company’s ability to maintain liquidity sufficient to operate its business effectively, which raises substantial doubt as to the Company’s ability to continue as a going concern.

Cash Flows

The following tables summarize the results of the Company’s cash flows for the below respective periods:

Operating Activities

Net cash used in operating activities was approximately $12.7 million for the year ended December 31, 2023 and was comprised of the net loss of $20.8 million and was primarily offset by net non-cash items totaling $9.3 million, consisting primarily of $6.1 million in Performance Share compensation expense, $2.7 million in share-based compensation expense and $0.4 million in accretion expense. Changes in operating assets and liabilities was ($1.2 million), primarily consisting of a change in accounts payable of ($1.1 million) and prepaid expenses of ($0.2 million).

Net cash used in operating activities was $6.1 million for the year ended December 31, 2022. The net loss for the year ended December 31, 2022 was $8.3 million, which was primarily offset by net noncash items of $1.9 million, primarily consisting of accretion of $1.2 million and stock-based compensation of $0.6 million. Changes in operating assets and liabilities was $0.4 million, primarily consisting of a $1.7 million change in accounts payable offset by accounts receivable of ($0.6 million), prepaid expenses ($0.5 million) and inventory of ($0.5 million). 

Investing Activities

Net cash used in investing activities was $0.7 million and $0 for the years ended December 31, 2023 and 2022, respectively. The $0.7 million amount for the year ended December 31, 2023 was comprised primarily of $0.6 million of cash acquired as part of the Transaction with Kona Bay and Yerbaé USA and $0.1 million proceeds from the sale of equipment.

Financing Activities

Net cash provided by financing activities was $12.1 million and $6.6 million for the years ended December 31, 2023 and 2022, respectively. For the year ended December 31, 2023, these amounts consisted of net proceeds from the issuance of common shares of $8.4 million, warrant exercises of $1.2 million and proceeds from debt instruments of $6.9 million offset by payments on debt instruments of ($4.4 million). For the year ended December 31, 2022, these amounts consisted of net proceeds from the issuance of common shares of $1.0 million and proceeds from debt instruments of $7.7 million offset by the repayment of debt instruments of ($2.2 million).

Results of Operations

The following tables set forth the Company’s results of operations for the fiscal years presented. The year-on-year comparison of financial results is not necessarily indicative of future results.

Revenues

Yerbaé successfully grew its net revenue 69% for the year ended December 31, 2023. Revenue increased to $12.0 million for the year ended December 31, 2023, compared to $7.1 million for same period in 2022. This growth was mainly driven through same store sales increase as well as expansion of new stores during the period and the introduction and launch of new flavors such as Lemonade and Yuzu lime.

Cost of Sales

Cost of sales is primarily comprised of product materials, ingredient costs, bottling, inbound freight, and other related expenses. Costs of sales increased to approximately $6.0 million for the year ended December 31, 2023, compared to $3.0 million for the comparative period in 2022. The increase in cost of goods sold was directly related to the large sales growth in 2023, as well as inflationary pressure on raw materials, and increased bottling fees.

General and Administrative

General and administrative expense included operational and administrative costs as detailed in the following table:

During the year ended December 31, 2023, the Company completed a reverse takeover transaction and listing on the TSXV and saw significant operational and revenue growth. General and administrative expenses increased to $19.3 million for the year ended December 31, 2023. The increase was primarily due to an increase in share-based compensation expense of approximately $2.2 million, including RSUs, PSUs and stock options, approximately $6.1 million of Performance Shares issued in connection with the Transaction, an increase in outbound freight of approximately $0.4 million to support operational growth, an increase in professional fees of approximately $2.5 million mainly due to the Transaction, TSXV listing and financings completed during 2023, and an increase in employee benefits of approximately $0.4 million to support operational growth.

Sales, Advertising and Marketing

Sales, advertising and marketing increased to $6.9 million for the year ended December 31, 2023 compared to $4.0 million for the prior year period. The increase primarily related to increased advertising and marketing initiatives in 2023 to fuel sales growth. The Company also increased field marketing staff.

Total Other Expense

Total other expense decreased to $0.7 million for the year ended December 31, 2023 compared to $1.4 million during the prior year. The decrease was primarily related to a decrease in accretion expense by $0.8 million due to settlement of convertible notes upon consummation of the Transaction which caused the remaining debt discount of $1.2 million (at the time of the transaction) to be recorded as an offset to additional paid-in capital during 2023 as compared to the same period in 2022 including $1.2 million of accretion expense on the convertible notes. The Company also incurred higher interest expense during 2023 mainly related to the 2023 convertible notes.

Critical Accounting Estimates

Revenue Recognition

The Company is in the business of manufacturing plant-based beverages and derives its revenues from one primary source being product sales. Revenue from contracts with customers is recognized when control of the goods are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods.

The Company recognizes revenue in accordance with the five-step model outlined in ASC 606-Revenue from Contracts with Customers. Specifically, the Company recognizes revenue from the sale of Yerbaé products to its customers by applying the following steps:

The Company typically satisfies its performance obligations at a point time upon the occurrence of delivery of the product to the customer. Further, payment is typically received within 60 days after product delivery and does not include a significant financing component. Also, the Company’s contracts with customers include variable consideration including customer rebates and quick pay discounts. The Company estimates variable consideration, which it does not consider to be constrained, using either the most likely amount or expected value methods depending on the type of variable consideration. The Company only provides refunds for products that are damaged during delivery to the customer. However, instances of refunds are rare and have not historically had a material impact on the Company’s results of operations. Finally, Yerbaé has made an accounting policy election to exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the entity from a customer.

In addition to variable consideration, the Company also provides payments to certain customers for slotting fees. In accordance with the guidance in ASC 606-10-32, the Company determined that the payment is not in exchange for a distinct good or service and it is therefore recognized as a reduction to the transaction price. As the slotting fee payment covers the life of the contract with a customer, the initial payment is recognized as an asset and is amortized as a reduction to revenue on a rational and reasonable basis over the estimated life of the contract.

Costs to Obtain a Contract with a Customer

The Company does not recognize any assets related to either costs to obtain or fulfill a contract with a customer. We incur certain delivery costs prior to transferring control of Yerbaé product to its customers (i.e. outbound freight). In accordance with the guidance in ASC 606-10-25, those costs are recognized as a fulfillment cost as they are provided prior to transferring control of the product to the customer (i.e. akin to shipping and handling). The costs are classified in selling, general and administrative within our statement of operations and comprehensive loss.

Fair Value Measurement

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Yerbaé utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

Level 1: Observable inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets and liabilities in active markets, or quoted prices for identical assets and liabilities in markets that are not active.

Level 3: Unobservable inputs that reflect our own assumptions. While the Company does not have any financial instruments that are measured to fair value on a recurring or non-recurring basis, it does have financial instruments, such as cash, notes payable and the line of credit as of both December 31, 2023, and December 31, 2022. The fair value of the cash and the line of credit is equal to its carrying value due to the short-term nature and liquidity of the instrument. Similarly, the fair value of the notes payable, which are categorized as level 3 instruments, are also equal to their carrying value due to their recent issuance at interest rates that are prevalent in the market for a smaller company as of the reporting date.

Share-Based Compensation

The Company measures fair value of employee share-based compensation awards on the date of grant and allocates the related expense over the requisite service period. The fair value of restricted share units (each, a “RSU”) and performance share units (each, a “PSU”) is equal to the market price of the Common Shares on the date of grant. The fair value of stock options are measured using the Black-Scholes-Merton valuation model. The expected volatility is based on the implied volatilities for comparable companies and the expected life of the award is based on the simplified method. When awards include a performance condition that impacts the vesting of the award, the Company records compensation cost when it becomes probable that the performance condition will be met and the expense will be attributed over the explicit or implicit service period. The Company accounts for forfeitures as they occur. Any previously recognized expense related to the forfeited awards will be reversed during the period of forfeiture.

Income Taxes

The Company uses the asset and liability method of accounting for income taxes. Temporary differences arising between the tax basis of an asset or liability and its carrying amount on the consolidated statement of financial position are used to calculate future income tax assets and liabilities. This method also requires the recognition of deferred tax benefits, such as net operating loss carryforwards. Valuation allowances are recorded as appropriate to reduce deferred tax assets to the amount considered likely to be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to the taxable income (losses) in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment of the change. A tax benefit from an uncertain tax position is recognized only if we believe it is more likely than not that the position will be sustained on its technical merits. If the recognition threshold for the tax position is met, only the portion of the tax benefit that we believe is greater than 50 percent likely to be realized is recorded.

Convertible Debt

To support its ongoing financing needs, the Company may issue debt with certain embedded options, such as a conversion option, and detachable warrants. In accounting for the convertible debt, the Company follows the guidance in ASC 815-15 to determine whether the embedded conversion option should be considered an embedded derivative. If Yerbaé determines that the conversion option should be considered an embedded derivative, it then assesses the guidance in ASC 815-40 to determine if the embedded derivative is considered indexed to the Company’s stock. If the embedded derivative is not considered indexed to the Company’s stock, Yerbaé would separate the embedded derivative from its debt host (based on its estimated fair value) and recognize it as a derivate liability to be re-measured to fair value at the end of each reporting period. For convertible debt issued during the fiscal year ended December 31, 2023 and December 31, 2022, Yerbaé determined that the embedded conversion option was indexed to the Company’s stock and should therefore not be bi-furcated from the debt host and recognized as a derivative liability.

Detachable Warrants

In addition to convertible debt, the Company may also issue detachable warrants in connection with future financings. In accounting for the warrants, the Company will first determine whether they are in the scope of ASC 480 and therefore whether they are to be recognized as a liability and re-measured to fair value at the end of each reporting period. If the warrants are not within the scope of ASC 480, the Company will then determine if they satisfy the derivative criteria outlined in ASC 815-10. If the warrants satisfy the criteria outlined in in the ASC subtopic, Yerbaé will then determine if they are indexed to the Company’s Common Shares. If the warrants are not considered indexed to the Company’s Common Shares, they will be recognized as a derivative liability and re-measured to fair value at the end of each reporting period. For warrants issued during either the year ended December 31, 2023 or December 31, 2022, the Company determined that they are indexed to the Company’s Common Shares and should therefore be classified in equity.

Allocation of Proceeds

In situations where the Company issues convertible debt with detachable warrants, Yerbaé determines the allocation of proceeds based on the guidance in ASC 470-20 (assuming the conversion option is not bi-furcated from the debt host and the warrants are equity classified). Specifically, the Company will allocate the proceeds between the convertible debt and detachable warrants based on their relative fair value. The portion allocated to the detachable warrants is then recognized as a debt discount and amortized to interest expense over the estimated life of the debt. If the debt is either paid down or converted to equity prior to its maturity date we will immediately recognize the remaining debt discount to interest expense.

Recent Accounting Pronouncements

Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures- In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. Additionally, it requires a public entity to disclose the title and position of the Chief Operating Decision Maker (“CODM”). The ASU does not change how a public entity identifies its operating segments, aggregates them, or applies the quantitative thresholds to determine its reportable segments. The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. A public entity should apply the amendments in this ASU retrospectively to all prior periods presented in the financial statements. Yerbaé expects this ASU to only impact its disclosures with no impacts to the Company’s results of operations, cash flows and financial condition.

Income Taxes (Topic 740): Improvements to Income Tax Disclosures- In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which focuses on the rate reconciliation and income taxes paid. ASU No. 2023-09 requires a public business entity (“PBE”) to disclose, on an annual basis, a tabular rate reconciliation using both percentages and currency amounts, broken out into specified categories with certain reconciling items further broken out by nature and jurisdiction to the extent those items exceed a specified threshold. In addition, all entities are required to disclose income taxes paid, net of refunds received disaggregated by federal, state/local, and foreign and by jurisdiction if the amount is at least 5% of total income tax payments, net of refunds received. For PBEs, the new standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted. An entity may apply the amendments in this ASU prospectively by providing the revised disclosures for the period ending December 31, 2025 and continuing to provide the pre-ASU disclosures for the prior periods, or may apply the amendments retrospectively by providing the revised disclosures for all period presented. Yerbaé expects this ASU to only impact its disclosures with no impacts to the Company’s results of operations, cash flows, and financial condition.

Quantitative and Qualitative Disclosures About Market Risk

Pursuant to Item 305(e) of Regulation S-K, the Company, as a SRC, is not required to provide information regarding quantitative and qualitative disclosures about market risk.

ITEM 3. PROPERTIES

Yerbaé currently maintains its executive offices at 18801 N. Thompson Peak Parkway, Scottsdale, Arizona 85255, Suite D-380, pursuant to an operating lease that expires in 2026. Yerbaé considers its current office space adequate to meet the Company’s ongoing needs.

The Company used third-party bottling service provides to produce its beverage products, which are produced on premises operated by the third-party bottling service provides.

ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 

Pursuant to the requirements of Item 403 of Regulation S-K, the Company has provided the security ownership information of certain beneficial owners and management as of March 31, 2024 as follows:

Security Ownership of Certain Beneficial Owners 

Security Ownership of Management

Changes in Control

As described in Item 403(c) of Regulation S-K, Yerbaé is not aware of any arrangements which may at a subsequent date result in a change of control of the Company.

ITEM 5. DIRECTORS AND OFFICERS

The directors an officers of the Company are as follows:

Business Experience

Todd Gibson – Mr. Gibson is an accomplished beverage industry entrepreneur with over 24 years of experience as an innovator, business builder, and sales leader. Mr. Gibson is regarded as an execution leader in the beverage industry. Mr. Gibson was distribution manager at Hansen’s Energy, better known as Monster Energy, who sold the first energy drinks in the U.S. marketplace. Mr. Gibson served in various roles at South Beach Beverage Company (SoBe) prior to the sale of the brand to Pepsi Co. After the sale of SoBe to Pepsi Co., Mr. Gibson served as EVP of Sales at Fuze and Nos Beverage company. During his tenure, from 2001 to 2007, Fuze and Nos Energy brands were listed and sold to Coca Cola. After guiding Fuze and Nos Beverage company to a successful sale to the Coca Cola Company, from 2007 to 2010, Mr. Gibson assumed the role of Division VP and General Manager for the Still Beverage group, a newly formed organization within Coca Cola. In this role, Mr. Gibson’s responsibilities included distributor, marketing and retailer relations. Additionally, he led the sales and field marketing teams to provide thought leadership, brand marketing and P&L responsibilities for a significant portfolio, within Coca Cola, exceeding $1.5 Billion in revenue for the company. He managed a team of over 500 field managers and 112 distribution partners. Following the sale of his beverage businesses and his time at Coca Cola, Mr. Gibson joined Vintage Tech Recyclers in 2010, a private company founded by Karrie Gibson in 2005, and served as the Executive VP of Sales and Marketing and a member of Vintage Tech Recyclers’ board of directors until 2015.

Karrie Gibson – Ms. Gibson is an award-winning entrepreneur with over fifteen years of experience as founder and CEO of Vintage Tech Recyclers, a private company. Vintage Tech Recyclers was an award-winning, certified woman-owned asset recovery and electronics recycling firm that services were offered nationwide. The company became the third largest electronic recycling company in the U.S. by the time Ms. Gibson sold the company in 2015. As CEO, from 2005 to 2015, she built and led a talented and dedicated team of over 300 employees, successfully wrote and won seven grants to fund the business, served as an advisor and lobbied for new e-scrap legislation in several states, created over 1,000 government hosted consumer collection sites, implemented a full service fleet, managed 1,000’s of staged trailers, chosen by the Federal Environmental Protection Agency to host the launch of the new Sustainable Material Management Electronics Challenge at Vintage Tech Recyclers’ HQ, recycled over one billion pounds of materials, and became an expert in the e-scrap recycling industry creating a positive impact for the team and the environment. Ms. Gibson previously served as Vice Chairman of the Board and Member of the Executive Committee- The BBB of Chicago, from 2010 to 2018, and served as a member of the board of Vintage Tech Recyclers, VTKK LLC, Illinois Recycling Association from 2019 to 2013, and The Habitat for Humanity of Illinois from 2010 to 2012.

Renata Kubicek – Ms. Kubicek is the current Corporate Secretary of Trillion Energy International Inc., a Canadian Securities Exchange listed oil and gas producing company with multiple assets throughout Turkey and Bulgaria. She has over 30 years’ experience in the corporate and securities industry and has worked at several boutique law firms specializing in corporate securities. Ms. Kubicek has extensive knowledge and expertise in corporate governance continuous disclosure requirements and stock exchange compliance. She is the founder and principal of ArtemisWest Corporate Services Inc., a corporate services company based in Burnaby, British Columbia.

Seth Smith – Mr. Smith delivers a proven track record of very high level, entrepreneurial leadership having led several start-up organizations to acquisition within the last eight years. His tactical approach to relationship building has paved incredible sales growth, and brand development over the course of his prior 14 year sales career. His experience in combining both sales and operations with his incredible ability to provide a partnership approach to all customer interactions makes him the ideal leader to continue Yerbaé’s growth. Mr. Smith current holds the position of Vice President of Sales Yerbaé after spending more than a decade in global reclaimed IT Distribution within organizations such as Vintage Tech Recyclers and Diamond Assets, both of which were acquired during his tenure. Since 2018, Mr. Smith has achieved some of the most notable authorizations within the industry, including Albertsons, Sprouts, Publix and 7-Eleven. With extensive knowledge of business operations, retail programming, distribution management and field execution, Mr. Smith has a unique ability to merge all components into a best in class, service minded sales leader that will continue pioneering heavy expansion plans for years to come.

Over the course of his career, Mr. Smith has demonstrated an incredible record of success in developing companies and brands from launch to final acquisition, creating sales procedures and plans, building collaborative working relationships and creating a culture of personnel, inspired to win, learn and grow. His adaptive, open minded and customer first leadership has helped him build some of the most powerful relationships within the beverage industry and will continue his rigorous strategy in building Yerbaé to become a household brand. He will be responsible for connecting both marketing and sales programs, deployment of sales and executional plans nationally, and the continued retail development and distribution expansions.

Rose Zanic – Ms. Zanic has over 25 years’ experience in the capital markets. She is self-employed as president of RCF Advisors Ltd., a private company that provides corporate finance consulting services to public and private companies. From January 1997 until July 2016, Ms. Zanic worked with Wolverton Securities Ltd., where she was Senior Vice President, Corporate Finance in charge of the firm’s corporate finance and syndication department. She is currently a director or officer of several public companies. Ms. Zanic holds a Chartered Professional Accountant designation from the Chartered Professional Accountants of British Columbia. Since September 2016, Ms. Zanic has been a member of the TSXV’s Vancouver Local Advisory Committee.

Andrew Dratt – Mr. Dratt is an experienced food industry executive and leader of commercial and technical teams, with a proven track record of building teams, designing go-to-market strategies, identifying and exploiting meaningful points of differentiation, and growing the businesses he’s worked for. From 2010 to present, Mr. Dratt has served as Chief Commercial Officer of Imbibe, a private industry-leading beverage development company in Chicago. For the last 2 years, Mr. Dratt has served as an Operating Partner for Shore Capital Partners, a Chicago-based private equity firm. He also sits on the board of directors for Old World Spice, and is the lead independent director for BevSource, both Shore Capital portfolio companies. Mr. Dratt has an MBA in management – earned in French – from Ecole Superieure de Commerce de Paris while working for Slim Fast in Paris, and has an undergraduate degree in Economics and Business French from the University of Illinois. Mr. Dratt is a frequent speaker at food industry events, including Supply Side West, Research Chefs Association, Beverage Forum, and the Prepared Foods New Products Conference.

Maruf Raza – Mr. Raza is the Senior Vice President of Assurance in the Toronto office of MNP LLP. Mr. Raza serves as an advisor to public companies, and private companies planning on going public through direct initial public offerings or reverse mergers. Regarded as a thought leader on International Financial Accounting Standards (“IFRS”), Mr. Raza has conducted technical research on IFRS and U.S. accounting standards, including being part of the CPA Canada’s IFRS Discussion Group and various committees at the Ontario Securities Commission. Mr. Raza has worked in many countries around the globe and specializes in helping finance these companies in Canada, either through public or private transactions. Mr. Raza has extensive experience working with clients in the technology, mining and gaming sectors. He is also involved with investment funds and exempt market dealers. Mr. Raza is a graduate of Ryerson University and earned his Chartered Professional Accountant and Chartered Accountant designations in 2001. Mr. Raza currently serves on the PDAC-CPA Canada joint Mining Task Force in addition to serving as a director to a Toronto Stock Exchange and TSXV listed companies.

Involvement in Certain Legal Proceedings

N/A

ITEM 6. EXECUTIVE COMPENSATION

The following discussion and analysis of compensation arrangements should be read with the compensation tables and related disclosures set forth below. This discussion contains forward-looking statements that are based on the Company’s current plans and expectations regarding future compensation programs. The actual compensation programs that Yerbaé adopts may differ materially from the programs summarized in this discussion.

Summary Compensation Table

The particulars of compensation paid to the following persons:

who the Company will collectively refer to as the named executive officers, for all services rendered in all capacities to the Company and its subsidiaries for the years ended December 31, 2023 and 2022 are set out in the following summary compensation table:

Narrative Disclosure to Summary Compensation Table

Base Salary

Each executive officer is entitled to a fixed annual salary based on their respective employment agreements and are not entitled to compensation for overtime. All executive officer positions are considered “at-will” and either the officer or the Company may terminate employment at any time, with or without cause and with or without notice.

Todd Gibson

On December 21, 2023, the Company entered into an employment agreement with Todd Gibson, the CEO and a director of Yerbaé, pursuant to which, as of the effective date of January 1, 2024, the Company agreed to employ Mr. Gibson and Mr. Gibson agreed to perform such duties as are regularly and customarily performed by CEO of a corporation, and any other duties consistent with Mr. Gibson’s positions with the Company. Pursuant to the terms of the employment agreement, the Company agreed to pay Mr. Gibson $350,000, commencing on the effective date. Mr. Gibson is also eligible for a 40% annual bonus which will be evaluated based on performance and company sales goals set out in the employment agreement.

On March 10, 2023, the Company granted 244,565 stock options and awarded 244,565 restricted share units (each, a “RSU”) and 244,565 performance share units (each, a “PSU”) to Mr. Gibson. Each stock option is exercisable at an exercise price of $1.16 per Common Share until March 10, 2030 and vest as to: (i) 25% 15 months after date of grant, (ii) 25% 18 months following date of grant, (iii) 25% 21 months following date of grant and (iv) 25% 24 months following date of grant. Each RSU vests after 12 months from the date of award. Each PSU vests contingent upon and at the time the Company reaches $12,500,000 in net sales for the fiscal year 2023 and 12 months from the date of award.

On December 29, 2023, the Company awarded, effective January 1, 2024, 888,888 RSUs and 388,888 PSUs to Mr. Gibson. Each RSU vests after 12 months from the date of award. Each PSU vests contingent upon and at the time the Company reaches $18,500,000 in net sales and raises at least $10,000,000 in funds to support working capital needs, subject to at least12 months having lapsed from the date of award.

On April 1, 2024, the Company awarded 186,666 RSUs to Mr. Gibson. Each RSU vests after 12 months from the date of award.

Karrie Gibson

On December 21, 2023, the Company entered into an employment agreement with Karrie Gibson, the COO and a director of Yerbaé, pursuant to which, as of the effective date of January 1, 2024, the Company agreed to employ Ms. Gibson and Ms. Gibson agreed to perform such duties as are regularly and customarily performed by COO of a corporation, and any other duties consistent with Ms. Gibson’s positions with the Company. Pursuant to the terms of the employment agreement, the Company agreed to pay Ms. Gibson $275,000, commencing on the effective date. Ms. Gibson is also eligible for a 40% annual bonus which will be evaluated based on performance and company sales goals set out in the employment agreement.

On March 10, 2023, the Company granted 217,391 stock options and awarded 217,391 RSUs and 217,391 PSUs to Ms. Gibson. Each stock option is exercisable at an exercise price of $1.16 per Common Share until March 10, 2030 and vest as to: (i) 25% 15 months after date of grant, (ii) 25% 18 months following date of grant, (iii) 25% 21 months following date of grant and (iv) 25% 24 months following date of grant. Each RSU vests after 12 months from the date of award. Each PSU vests contingent upon and at the time the Company reaches $12,500,000 in net sales for the fiscal year 2023 and 12 months from the date of award.

On December 29, 2023, the Company awarded, effective January 1, 2024, 722,222 RSUs and 305,555 PSUs to Ms. Gibson. Each RSU vests after 12 months from the date of award. Each PSU vests contingent upon and at the time the Company reaches $18,500,000 in net sales and raises at least $10,000,000 in funds to support working capital needs, subject to at least12 months having lapsed from the date of award.

On April 1, 2024, the Company awarded 186,666 RSUs to Ms. Gibson. Each RSU vests after 12 months from the date of award.

Seth Smith

On December 21, 2023, the Company entered into an employment agreement with Seth Smith, the Vice President of Sales of Yerbaé, pursuant to which, as of the effective date of January 1, 2024, the Company agreed to employ Mr. Smith and Mr. Smith agreed to perform such duties as are regularly and customarily performed by a Vice President of Sales of a corporation, and any other duties consistent with Mr. Smith’s position with the Company. Pursuant to the terms of the employment agreement, the Company agreed to pay Mr. Smith $210,000, commencing on the effective date. Mr. Gibson is also eligible for a 25% annual bonus which will be evaluated based on performance and company sales goals set out in the employment agreement.

On March 10, 2023, the Company granted 217,391 stock options and awarded 108,695 PSUs to Mr. Smith. Each stock option is exercisable at an exercise price of $1.16 per Common Share until March 10, 2030 and vest as to: (i) 25% 15 months after date of grant, (ii) 25% 18 months following date of grant, (iii) 25% 21 months following date of grant and (iv) 25% 24 months following date of grant. Each PSU vests contingent upon and at the time the Company reaches $12,500,000 in net sales for the fiscal year 2023 and 12 months from the date of award.

On December 29, 2023, the Company granted, effective January 1, 2024, 218,750 stock options and awarded 116,666 PSUs to Mr. Smith. Each stock option is exercisable at an exercise price of $0.96 per Common Share until January 1, 2031 and vest as to: (i) 25% 15 months after date of grant, (ii) 25% 18 months following date of grant, (iii) 25% 21 months following date of grant and (iv) 25% 24 months following date of grant. Each PSU vests contingent upon and at the time the Company reaches $18,500,000 in net sales and raises at least $10,000,000 in funds to support working capital needs, subject to at least12 months having lapsed from the date of award.

On April 1, 2024, the Company awarded 133,333 PSUs to Mr. Smith. Each PSU vests after 12 months from the date of award, provided Mr. Smith is tenured by the Company at such time.

Cash Performance Bonus

Each executive officer is entitled to a performance bonus ranging anywhere from 25%-40% of their base salary which is evaluated based on company performance and sales goals.

Equity Bonus

Each executive officer is entitled to stock options, RSUs, PSUs, and deferred share units calculated as a percentage of their base salary as well as upon the achievement of certain Company milestones, as applicable.

Other Compensation

In addition to a base salary and cash and equity bonuses, executive officers are also entitled to other perks including a vehicle stipend, health insurance and participation in 401K plan.

Outstanding Equity Awards

Additional narrative disclosure

The Company offers a 401(k) plan to all of its eligible full-time employees. All eligible full-time employees are able to participate in the plan from their first day of employment. Further, the Company provides a 100% match on up to 4% of an employee’s compensation with immediate vesting.

Compensation of Directors

The particulars of compensation paid to the Company’s directors who are not named executive officers for the fiscal year ended December 31, 2023 are set out in the following director compensation table:

Each of the above noted directors of the Company have entered into a director services agreement with the Company, pursuant to which the Company agreed to retain each director and each director has agreed to perform such duties as are regularly and customarily performed by a director of a corporation, in exchange for the grant of RSUs. Each directors’ individual compensation is noted in the table. The term of each director services agreement commences as of its effective date and continues until such time as the director ceases to be a director of the Company for any reason whatsoever.

Compensation Committee Interlocks and Insider Participation

The Company is not required to provide information regarding compensation committee and interlocks and insider participation pursuant to the exemption for SRCs included in Item 407(g)(1)(ii) of Regulation S-K.

ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Transactions with Related Persons

During 2023, the Company entered into a loan agreement with Todd Gibson, CEO for $100,000. The loan was fully paid down during the year. No interest was paid to Mr. Gibson in connection with the loan.

Director Independence

Yerbaé’s Board currently consists of five members, three of whom are independent: Rose Zanic, Andrew Dratt and Maruf Razaf. Although Yerbaé is not currently seeking to list the Company’s securities on a national securities exchange in the U.S., the Board has undertaken a review of the independence of each of its directors based on the definition of independence under the rules of the NASDAQ (5600 Series). Based on information provided by each director concerning his or her background, employment, and affiliations, the Board has determined that a majority of the Company’s directors are “independent” as that term is defined under NASDAQ rules.

The Company currently has both an audit committee (the “Audit Committee”) and compensation committee. Ms. Gibson is a member of both committees and would not be considered independent (as that term has been defined by NASDAQ independence rules). Yerbaé does not currently have a nomination committee. All other members of the Audit Committee and compensation committee are considered independent based on the relevant NASDAQ independence rules (Rule 5600 Series).

ITEM 8. LEGAL PROCEEDINGS

The Company is not currently involved in any legal proceedings.

ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS

Market Information

The Company’s Common Shares are currently trading in the United States on OTCQX^® Best Market operated by the OTC Markets Group Inc. under the symbol “YERBF”. In addition, the Company’s Common Shares are also currently trading on the TSXV under the trading symbol “YERB.U”. Any market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

Holders

As of April 17, 2024, there were approximately 1,303 holders of record of Yerbaé’s Common Shares.

Rule 144

Approximately 36,355,890 of Yerbaé’s issued and outstanding Common Shares are eligible for sale pursuant to Rule 144 under the United States Securities Act of 1933 (the “1933Act”), as amended.

Dividends

The Company has no intention of paying cash dividends in the future.

Securities authorized for issuance under equity compensation plans

ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES

Recent sales of unregistered securities

In the prior three years, Yerbaé has issued and sold the securities described below without registering the securities under the 1933 Act. The Company believes that each of the following issuances was exempt from registration under the 1933 Act in reliance on Regulation S promulgated under the 1933 Act regarding sales by an issuer in offshore transactions, Regulation D under the 1933 Act, Rule 701 under the 1933 Act or pursuant to Section 4(a)(2) of the 1933 Act regarding transactions not involving a public offering.

ITEM 11. DESCRIPTION OF REGISTRANT’S SECURITIES TO BE REGISTERED

The following is a brief summary of certain general terms and provisions of the Common Shares of Yerbaé being registered on this Form 10. The summary does not purport to be complete and is indicative only.

General

Yerbaé’s authorized share structure consists of an unlimited number of Common Shares without par value and 100,000,000 preferred shares without par value. The rights, privileges and restrictions on the Common Shares and Preferred Shares are contained in the articles of the Company.

Common Shares

The holders of the Common Shares are entitled to receive notice of and to attend and vote at all meetings of the shareholders of the Company and each Common Share shall confer the right to one vote in person or by proxy at all meetings of the shareholders of the Company. The holders of the Common Shares, subject to the prior rights, if any, of any other class of shares of the Company, are entitled to receive such dividends in any financial year as the Board may by resolution determine. In the event of the liquidation, dissolution or winding-up of Yerbaé, whether voluntary or involuntary, the holders of the Common Shares are entitled to receive, subject to the prior rights, if any, of the holders of any other class of shares of the Company, the remaining property and assets of the Company. The Common Shares are not subject to call or assessment rights, redemption rights, rights regarding purchase for cancellation or surrender, or any pre-emptive or conversion rights.

ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Company is subject to the provisions of Part 5, Division 5 of the BCBCA. Under Section 160 of the BCBCA, the Company may, subject to Section 163 of the BCBCA:

Under Section 161 of the BCBCA, and subject to Section 163 of the BCBCA, the Company must, after the final disposition of an eligible proceeding, pay the expenses actually and reasonably incurred by an eligible party in respect of that proceeding if the eligible party (a) has not been reimbursed for those expenses and (b) is wholly successful, on the merits or otherwise, in the outcome of the proceeding or is substantially successful on the merits in the outcome of the proceeding.

Under Section 162 of the BCBCA, and subject to Section 163 of the BCBCA, the Company may pay, as they are incurred in advance of the final disposition of an eligible proceeding, the expenses actually and reasonably incurred by an eligible party in respect of the proceeding, provided that the Company must not make such payments unless it first receives from the eligible party a written undertaking that, if it is ultimately determined that the payment of expenses is prohibited under Section 163 of the BCBCA, the eligible party will repay the amounts advanced.

Under Section 163 of the BCBCA, the Company must not indemnify an eligible party against eligible penalties to which the eligible party is or may be liable or pay the expenses of an eligible party in respect of that proceeding under Sections 160(b), 161 or 162 of the BCBCA, as the case may be, if any of the following circumstances apply:

If an eligible proceeding is brought against an eligible party by or on behalf of the Company or by or on behalf of an associated corporation, the Company must not either indemnify the eligible party under Section 160(a) of the BCBCA against eligible penalties to which the eligible party is or may be liable, or pay the expenses of the eligible party under Sections 160(b), 161 or 162 of the BCBCA, as the case may be, in respect of the proceeding.

Under Section 164 of the BCBCA, and despite any other provision of Part 5, Division 5 of the BCBCA and whether or not payment of expenses or indemnification has been sought, authorized or declined under Part 5, Division 5 of the BCBCA, on application of the Company or an eligible party, the court may do one or more of the following: