SEC Info  
    Home      Search      My Interests      Help      Sign In      Please Sign In

Iconic Brands, Inc. – ‘10-Q’ for 3/31/21

On:  Monday, 5/24/21, at 4:30pm ET   ·   For:  3/31/21   ·   Accession #:  1477932-21-3568   ·   File #:  0-53162

Previous ‘10-Q’:  ‘10-Q’ on 11/16/20 for 9/30/20   ·   Next:  ‘10-Q’ on 8/16/21 for 6/30/21   ·   Latest:  ‘10-Q’ on 6/29/23 for 3/31/23   ·   1 Reference:  By:  Iconic Brands, Inc. – ‘S-8’ on 1/11/22

Find Words in Filings emoji
 
  in    Show  and   Hints

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

 5/24/21  Iconic Brands, Inc.               10-Q        3/31/21   59:3.7M                                   Discount Edgar/FA

Quarterly Report   —   Form 10-Q

Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                    HTML    391K 
 2: EX-10.1     Promissory Note                                     HTML     35K 
 3: EX-31.1     Certification -- §302 - SOA'02                      HTML     21K 
 4: EX-32.1     Certification -- §906 - SOA'02                      HTML     17K 
11: R1          Cover                                               HTML     48K 
12: R2          Consolidated Balance Sheets                         HTML     91K 
13: R3          Consolidated Balance Sheets (Parenthetical)         HTML     51K 
14: R4          Consolidated Statements of Operations (Unaudited)   HTML     69K 
15: R5          Consolidated Statements of Changes in               HTML     60K 
                Stockholders' Equity (Unaudited)                                 
16: R6          Consolidated Statements of Cash Flows (Unaudited)   HTML     83K 
17: R7          Organization and Nature of Business                 HTML     20K 
18: R8          Summary of Significant Accounting Policies          HTML     32K 
19: R9          Discontinued Operations                             HTML     20K 
20: R10         Investment in Bivi Llc                              HTML     19K 
21: R11         Investment in Bellissima Spirits Llc                HTML     20K 
22: R12         United Spirits, Inc.                                HTML     37K 
23: R13         Inventories                                         HTML     27K 
24: R14         Accounts Payable and Accrued Expenses               HTML     23K 
25: R15         Notes Payable                                       HTML     21K 
26: R16         Capital Stock                                       HTML     62K 
27: R17         Income Taxes                                        HTML     33K 
28: R18         Commitments and Contingencies                       HTML     43K 
29: R19         Subsequent Events                                   HTML     19K 
30: R20         Summary of Significant Accounting Policies          HTML     65K 
                (Policies)                                                       
31: R21         United Spirits, Inc. (Tables)                       HTML     38K 
32: R22         Inventories (Tables)                                HTML     27K 
33: R23         Accounts Payable and Accrued Expenses (Tables)      HTML     23K 
34: R24         Notes Payable (Tables)                              HTML     20K 
35: R25         Capital Stock (Tables)                              HTML     41K 
36: R26         Income Taxes (Tables)                               HTML     33K 
37: R27         Commitments and Contingencies (Tables)              HTML     31K 
38: R28         Organization and Nature of Business (Details        HTML     23K 
                Narrative)                                                       
39: R29         Summary of Significant Accounting Policies          HTML     31K 
                (Details Narrative)                                              
40: R30         Discontinued Operations (Details Narrative)         HTML     47K 
41: R31         Investment in Bivi Llc (Details Narrative)          HTML     25K 
42: R32         Investment in Bellissima Spirits Llc (Details       HTML     27K 
                Narrative)                                                       
43: R33         United Spirits Inc (Details)                        HTML     72K 
44: R34         Inventories (Details)                               HTML     29K 
45: R35         Accounts Payable and Accrued Expenses (Details)     HTML     28K 
46: R36         Notes Payable (Details)                             HTML     18K 
47: R37         Capital Stock (Details)                             HTML     28K 
48: R38         Capital Stock (Details 1)                           HTML     42K 
49: R39         Capital Stock (Details Narrative)                   HTML    409K 
50: R40         Income Taxes (Details)                              HTML     25K 
51: R41         Income Taxes (Details 1)                            HTML     23K 
52: R42         Income Taxes (Details Narrative)                    HTML     17K 
53: R43         Commitments and Contingencies (Details)             HTML     20K 
54: R44         Commitments and Contingencies (Details 1)           HTML     25K 
55: R45         Commitments and Contingencies (Details Narrative)   HTML    107K 
56: R46         Subsequent Event (Details Narrative)                HTML     23K 
58: XML         IDEA XML File -- Filing Summary                      XML    102K 
57: EXCEL       IDEA Workbook of Financial Reports                  XLSX     71K 
 5: EX-101.INS  XBRL Instance -- icnb-20210331                       XML   1.02M 
 8: EX-101.CAL  XBRL Calculations -- icnb-20210331_cal               XML    109K 
10: EX-101.DEF  XBRL Definitions -- icnb-20210331_def                XML    521K 
 7: EX-101.LAB  XBRL Labels -- icnb-20210331_lab                     XML    766K 
 9: EX-101.PRE  XBRL Presentations -- icnb-20210331_pre              XML    669K 
 6: EX-101.SCH  XBRL Schema -- icnb-20210331                         XSD    172K 
59: ZIP         XBRL Zipped Folder -- 0001477932-21-003568-xbrl      Zip    109K 


‘10-Q’   —   Quarterly Report

Document Table of Contents

Page (sequential)   (alphabetic) Top
 
11st Page  –  Filing Submission
"Table of Contents
"Part I -- Financial Information
"Item 1
"Financial Statements
"Consolidated Balance Sheets as of March 31, 2021, and December 31, 2020
"Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020
"Consolidated Statements of Changes in Stockholders' Equity for the three months ended March 31, 2021 and 2020
"Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020
"Notes to Consolidated Financial Statements
"Item 2
"Management's Discussion and Analysis of Financial Condition and Results of Operations
"Item 3
"Quantitative and Qualitative Disclosures About Market Risk
"Item 4
"Controls and Procedures
"Part Ii -- Other Information
"Legal Proceedings
"Item 1A
"Risk Factors
"Unregistered Sales of Equity Securities and Use of Proceeds
"Defaults Upon Senior Securities
"Mine Safety Disclosures
"Item 5
"Item 6
"Exhibits
"Signatures

This is an HTML Document rendered as filed.  [ Alternative Formats ]



 C: 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10‑Q

 

(Mark One)

 

☒     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2021

 

or

 

☐     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ________________ to ________________

 

Commission File Number: 333-227420

 

ICONIC BRANDS, INC.

(Exact name of registrant as specified in its charter)

 

Nevada

13-4362274

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

44 Seabro Avenue

Amityville, NY

11701

(Address of principal executive offices)

(Zip Code)

 

(866) 219-8112

(Registrant’s telephone number, including area code)

 

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

 

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

 

Title of each class

Trading Symbol(s)

Name of each exchange

on which registered

N/A

N/A

N/A

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒     No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒     No ☐

 

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

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐     No ☒

 

As of May 21, 2021, the registrant had 18,250,551 shares of common stock, $0.001 par value per share, issued and outstanding.

 

 

 

  

ICONIC BRANDS, INC.

TABLE OF CONTENTS

 

PART I - FINANCIAL INFORMATION

ITEM 1

Financial Statements

F-1

ITEM 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

4

ITEM 3

Quantitative and Qualitative Disclosures About Market Risk

9

ITEM 4

Controls and Procedures

9

PART II - OTHER INFORMATION

ITEM 1

Legal Proceedings

10

ITEM 1A

Risk Factors

10

ITEM 2

Unregistered Sales of Equity Securities and Use of Proceeds

20

ITEM 3

Defaults Upon Senior Securities

20

ITEM 4

Mine Safety Disclosures

20

ITEM 5

Other Information

20

ITEM 6

Exhibits

21

Signatures

22

 

 
2

 

  

FORWARD-LOOKING STATEMENTS

 

Statements in this Quarterly Report on Form 10-Q may be “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934.

 

Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are often, but not always, made through the use of words or phrases such as “believe,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” and “would.” These statements are based on current expectations, estimates and projections about our business based in part on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may, and are likely to, differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors, including those set forth in “Item 1A. Risk Factors” in our Annual Report on Form 10-K, and our other filings with the U.S. Securities and Exchange Commission.

 

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. Any forward-looking statements speak only as of the date on which they are made, and we disclaim any obligation to publicly update or release any revisions to these forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this Quarterly Report on Form 10-Q or to reflect the occurrence of unanticipated events, except as required by applicable law.

 

 
3

Table of Contents

 

PART I - FINANCIAL INFORMATION

 

ITEM 1. Financial Statements

 

ICONIC BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

Three Months Ended March 31, 2021 and 2020

 

CONTENTS

 

FINANCIAL STATEMENTS

Page(s)

Consolidated Balance Sheets as of March 31, 2021, and December 31, 2020

F-2

Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020

F-3

Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2021 and 2020

F-4

Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020

F-5

Notes to Consolidated Financial Statements

F-6 to F-22

 

 
F-1

Table of Contents

 

Iconic Brands, Inc. and Subsidiaries

Consolidated Balance Sheets

 

 

March 31,

 

 

  December 31,

 

 

 

2021

 

 

2020

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$ 343,820

 

 

$ 457,041

 

Accounts receivable (less allowance for doubtful accounts of $97,542 and $83,617, respectively)

 

 

227,518

 

 

 

334,458

 

Inventory

 

 

590,982

 

 

 

507,500

 

 

 

 

 

 

 

 

 

 

Total current assets

 

 

1,162,320

 

 

 

1,298,999

 

 

 

 

 

 

 

 

 

 

Right-of-use assets

 

 

33,943

 

 

 

45,381

 

Leasehold improvements, furniture, and equipment (less accumulated depreciation and amortization of $32,742 and $29,196, respectively)

 

 

6,966

 

 

 

10,512

 

 

 

 

 

 

 

 

 

 

Total assets

 

$ 1,203,229

 

 

$ 1,354,892

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity (Deficiency)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current portion of operating lease liability

 

$ 33,943

 

 

$ 49,147

 

Accounts payable and accrued expenses

 

 

3,463,721

 

 

 

3,089,773

 

Loans payable to officer and affiliated entity

 

 

 

 

 

 

 

 

-noninterest bearing and due on demand

 

 

3,716

 

 

 

15,637

 

Notes payable

 

 

-

 

 

 

28,458

 

 

 

 

 

 

 

 

 

 

Total current liabilities

 

 

3,501,380

 

 

 

3,183,015

 

 

 

 

 

 

 

 

 

 

Non-current portion of operating lease liability

 

 

-

 

 

 

-

 

Total liabilities

 

 

3,501,380

 

 

 

3,183,015

 

Commitments and contingencies (Note 12)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity (deficiency):

 

 

 

 

 

 

 

 

Preferred stock, $.001 par value; authorized 100,000,000 shares:

 

 

 

 

 

 

 

 

Series A, 1 and 1 share issued and outstanding, respectively

 

 

1

 

 

 

1

 

Series E, 2,115,224 and 2,115,224 shares issued and outstanding, respectively

 

 

2,115

 

 

 

2,115

 

Series F ($1,000 per share stated value), 2,413.75 and 2,413.75 shares issued and outstanding, respectively

 

 

2,413,750

 

 

 

2,413,750

 

Series G ($1,000 per share stated value), 1,475 and 1,475 shares issued and outstanding, respectively

 

 

1,475,000

 

 

 

1,475,000

 

Common stock, $.001 par value; authorized 200,000,000 shares,

 

 

 

 

 

 

 

 

16,670,551 and 17,268,881 shares issued and outstanding respectively

 

 

16,671

 

 

 

17,269

 

 

 

 

 

 

 

 

 

 

Treasury stock, at cost – 0 and 1,000,000 shares common stock respectively

 

 

-

 

 

 

(516,528 )

 

 

 

 

 

 

 

 

 

Additional paid-in capital

 

 

22,095,252

 

 

 

22,430,430

 

 

 

 

 

 

 

 

 

 

Accumulated deficit

 

 

(27,164,304 )

 

 

(26,497,350 )

 

 

 

 

 

 

 

 

 

Total Iconic Brands, Inc. stockholders’ equity (deficiency)

 

 

(1,161,515 )

 

 

(675,313 )

 

 

 

 

 

 

 

 

 

Noncontrolling interests in subsidiaries and variable interest entity

 

 

(1,136,636 )

 

 

(1,152,810 )

 

 

 

 

 

 

 

 

 

Total stockholders' equity (deficiency)

 

 

(2,298,151 )

 

 

(1,828,123 )

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders' equity (deficiency)

 

$ 1,203,229

 

 

$ 1,354,892

 

 

 

 

 

 

 

 

 

 

See notes to consolidated financial statements.

 

 
F-2

Table of Contents

 

Iconic Brands, Inc. and Subsidiaries

Consolidated Statements of Operations

(Unaudited)

 

 

 

Three Months Ended March 31, 2021

 

 

Three Months Ended March 31, 2020

 

 

 

 

 

 

 

 

Sales

 

$ 634,533

 

 

$ 405,886

 

Cost of Sales

 

 

318,633

 

 

 

252,426

 

Gross profit

 

 

315,900

 

 

 

153,460

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Officers compensation

 

 

103,750

 

 

 

103,750

 

Professional and consulting fees

 

 

158,903

 

 

 

186,789

 

Royalties

 

 

99,128

 

 

 

15,964

 

Fulfillment

 

 

140,000

 

 

 

50,000

 

Marketing and advertising

 

 

121,168

 

 

 

128,645

 

Occupancy costs

 

 

25,508

 

 

 

22,251

 

Travel and entertainment

 

 

12,843

 

 

 

19,469

 

Investor relations

 

 

180,752

 

 

 

361,689

 

Provision for doubtful accounts

 

 

13,925

 

 

 

-

 

Other

 

 

139,161

 

 

 

177,001

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

 

995,138

 

 

 

1,065,558

 

 

 

 

 

 

 

 

 

 

Operating loss

 

 

(679,238 )

 

 

(912,098 )

Other income (expense):

 

 

 

 

 

 

 

 

Forgiveness of Small Business Administration Paycheck Protection Program loan

 

 

28,458

 

 

 

-

 

Total other income (expense) - net

 

 

28,458

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

(650,780 )

 

 

(912,098 )

 

 

 

 

 

 

 

 

 

Net loss (income) attributable to noncontrolling interests in subsidiaries and variable interest entity

 

 

(16,174 )

 

 

74,178

 

 

 

 

 

 

 

 

 

 

Net loss attributable to Iconic Brands, Inc.

 

$ (666,954 )

 

$ (837,920 )

 

 

 

 

 

 

 

 

 

Net loss per common share – basic and diluted:

 

$ (0.04 )

 

$ (0.05 )

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

Basic and diluted

 

 

16,309,048

 

 

 

15,416,710

 

 

 

 

 

 

 

 

 

 

See notes to consolidated financial statements.

 

 

 

 

 

 

 

 

 

 
F-3

Table of Contents

 

Iconic Brands, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

 

 

 

Series A
Preferred Stock,
$.001 par

 

 

Series E
Preferred Stock,
$.001 par

 

 

Series F
Preferred Stock,
$1,000 stated value per share

 

 

Series G
Preferred Stock,
$1,000 stated value per share

 

 

Common Stock,
$.001 par

 

 

Treasury Stock

 

 

Additional
Paid-in

 

 

Noncontrolling

Interests in

Subsidiaries and

Variable Interest

 

 

Accumulated

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Entity

 

 

Deficit

 

 

Total

 

Three Months Ended March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2021

 

 

1

 

 

$ 1

 

 

 

2,115,224

 

 

$ 2,115

 

 

 

2,414

 

 

$ 2,413,750

 

 

 

1,475

 

 

$ 1,475,000

 

 

 

17,268,881

 

 

$ 17,269

 

 

 

(1,000,000 )

 

$ (516,528 )

 

$ 22,430,430

 

 

$ (1,152,820 )

 

$ (26,497,350 )

 

$ (1,828,123 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for services

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

401,670

 

 

 

402

 

 

 

-

 

 

 

-

 

 

 

180,350

 

 

 

-

 

 

 

-

 

 

 

180,752

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retirement of treasury stock

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,000,000 )

 

 

(1,000 )

 

 

1,000,000

 

 

 

516,528

 

 

 

(515,528 )

 

 

-

 

 

 

-

 

 

 

-

 

Net income (loss)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

16,174

 

 

 

(666,954 )

 

 

(650,780 )

Balance, March 31, 2021

 

 

1

 

 

$ 1

 

 

 

2,115,224

 

 

$ 2,115

 

 

 

2,414

 

 

$ 2,413,750

 

 

 

1,475

 

 

$ 1,475,000

 

 

 

16,670,551

 

 

$ 16,671

 

 

 

-

 

 

$ -

 

 

$ 22,095,252

 

 

$ (1,136,636 )

 

$ (27,164,304 )

 

$ (2,298,151 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2020

 

 

1

 

 

$ 1

 

 

 

2,790,224

 

 

$ 2,790

 

 

 

3,156

 

 

$ 3,155,750

 

 

 

-

 

 

$ -

 

 

 

14,576,681

 

 

$ 14,577

 

 

 

-

 

 

 

-

 

 

$ 21,282,679

 

 

$ (1,039,851 )

 

$ (22,925,748 )

 

$ 490,198

 

Sale of Series G Preferred Stock and warrants

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,475

 

 

 

1,475,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,475,000

 

Placement agent fees and stock-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

375,000

 

 

 

375

 

 

 

-

 

 

 

-

 

 

 

(150,375 )

 

 

-

 

 

 

-

 

 

 

(150,000 )

Issuance of common stock in exchange for Series E Preferred Stock

 

 

-

 

 

 

-

 

 

 

(675,000 )

 

 

(675 )

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

270,000

 

 

 

270

 

 

 

-

 

 

 

-

 

 

 

405

 

 

 

-

 

 

 

-

 

 

 

-

 

Issuance of common stock in exchange for Series F Preferred Stock

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(190 )

 

 

(190,000 )

 

 

-

 

 

 

-

 

 

 

304,000

 

 

 

304

 

 

 

-

 

 

 

-

 

 

 

189,696

 

 

 

-

 

 

 

-

 

 

 

-

 

Issuance of common stock in exchange for services rendered and to be rendered

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

460,000

 

 

 

460

 

 

 

-

 

 

 

-

 

 

 

302,308

 

 

 

-

 

 

 

-

 

 

 

302,768

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(74,178 )

 

 

(837,920 )

 

 

(912,098 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2020 

 

 

1

 

 

$ 1

 

 

 

2,115,224

 

 

$ 2,115

 

 

 

2,966

 

 

$ 2,965,750

 

 

 

1,475

 

 

$ 1,475,000

 

 

 

15,985,681

 

 

$ 15,986

 

 

 

-

 

 

 

-

 

 

$ 21,624,713

 

 

$ (1,114,029 )

 

$ (23,763,668 )

 

$ 1,205,868

 

 

See notes to consolidated financial statements.

 

 
F-4

Table of Contents

 

Iconic Brands, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Three Months Ended March 31,  

 

 

 

2021

 

 

2020

 

Operating Activities:

 

 

 

 

 

 

Net loss income (loss) attributable to Iconic Brands, Inc.

 

$ (666,954 )

 

$ (837,920 )

Adjustments to reconcile net income (loss) to net cash provided

 

 

 

 

 

 

 

 

by (used in) operating activities:

 

 

 

 

 

 

 

 

Net income (loss) attributable to noncontrolling interests in subsidiaries and variable interest entity

 

 

16,174

 

 

 

(74,178 )

Forgiveness of SBA PPP loan income

 

 

(28,458 )

 

 

-

 

Stock-based compensation

 

 

180,752

 

 

 

243,081

 

Depreciation and amortization

 

 

3,546

 

 

 

4,615

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

106,940

 

 

 

325,782

 

Inventories

 

 

(83,482 )

 

 

(64,344 )

Prepaid expenses

 

 

-

 

 

 

(66,318 )

Accounts payable and accrued expenses

 

 

370,182

 

 

 

(153,575 )

 

 

 

 

 

 

 

 

 

Net cash used in operating activities

 

 

(101,300 )

 

 

(622,857 )

 

 

 

 

 

 

 

 

 

Investing Activities:

 

 

 

 

 

 

 

 

Leasehold improvements

 

 

-

 

 

 

-

 

Furniture and equipment

 

 

-

 

 

 

(8,708 )

 

 

 

 

 

 

 

 

 

Net cash used in investing activities

 

 

-

 

 

 

(8,708 )

 

 

 

 

 

 

 

 

 

Financing Activities:

 

 

 

 

 

 

 

 

Proceeds from sale of Series G Preferred Stock and warrants (net of placement agent fees of $150,000)

 

 

-

 

 

 

1,325,000

 

Repayment of note payable

 

 

-

 

 

 

(25,000 )

Loans payable to officer and affiliated entity

 

 

(11,921 )

 

 

(15,387 )

 

 

 

 

 

 

 

 

 

Net cash provided by financing activities

 

 

(11,921 )

 

 

1,284,613

 

 

 

 

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

 

(113,221 )

 

 

653,048

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, beginning of period

 

 

457,041

 

 

 

263,638

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, end of period

 

$ 343,820

 

 

$ 916,686

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Income taxes paid

 

$ -

 

 

$ -

 

Interest paid

 

$ -

 

 

$ -

 

 

 

 

 

 

 

 

 

 

NON-CASH INVESTING AND FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Retirement of 1,000,000 shares of common stock (treasury stock)  acquired in exchange of 543,714 shares of CANB Corp stock on July 29, 2020

 

$

516,528

 

 

$

-

 

Issuance of common stock in exchange for Series E

 

 

 

 

 

 

 

 

Preferred Stock

 

$ -

 

 

$ 270

 

 

 

 

 

 

 

 

 

 

Issuance of common stock in exchange for Series F Preferred

 

 

 

 

 

 

 

 

Stock

 

$ -

 

 

$ 304

 

 

 

 

 

 

 

 

 

 

See notes to consolidated financial statements.

 

 

 

 

 

 

 

 

 

 
F-5

Table of Contents

 

Iconic Brands, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Three months ended March 31, 2021 and 2020

 

1. ORGANIZATION AND NATURE OF BUSINESS

 

Iconic Brands, Inc., formerly Paw Spa, Inc. (“Iconic Brands” or “Iconic”), was incorporated in the State of Nevada on October 21, 2005. Effective December 31, 2016, Iconic closed on a May 15, 2015 agreement to acquire a 51% interest in BiVi LLC (“BiVi”), the brand owner of “BiVi 100 percent Sicilian Vodka,” and closed on a December 13, 2016 agreement to acquire a 51% interest in Bellissima Spirits LLC (“Bellissima”), the brand owner of Bellissima sparkling wines. These transactions involved entities under common control of the Company’s chief executive officer and represented a change in reporting entity. The financial statements of the Company have been retrospectively adjusted to reflect the operations at BiVi and Bellissima from their inception.

 

BiVi was organized in Nevada on May 4, 2015. Bellissima was organized in Nevada on November 23, 2015.

 

Effective May 9, 2019, Iconic closed on a Share Exchange Agreement to acquire a 51% interest in Green Grow Farms, Inc. (“Green Grow”), an entity organized on February 28, 2019 to grow hemp for CBD extraction. Effective December 31, 2019, Iconic sold its 51% interest in Green Grow Farms, Inc. to Can B Corp (see Note 3).

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

(a) Principles of Consolidation

 

The consolidated financial statements include the accounts of Iconic, its two 51% owned subsidiaries BiVi and Bellissima, and United Spirits, Inc., a variable interest entity of Iconic (see Note 6) (collectively, the “Company”). All inter-company balances and transactions have been eliminated in consolidation.

 

(b) Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

 

(c) Fair Value of Financial Instruments

 

Generally accepted accounting principles require disclosing the fair value of financial instruments to the extent practicable for financial instruments which are recognized or unrecognized in the balance sheet. The fair value of the financial instruments disclosed herein is not necessarily representative of the amount that could be realized or settled, nor does the fair value amount consider the tax consequences of realization or settlement.

 

In assessing the fair value of financial instruments, the Company uses a variety of methods and assumptions, which are based on estimates of market conditions and risks existing at the time. For certain instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, and loans payable to officer and affiliated entity, it was estimated that the carrying amount approximated fair value because of the short maturities of these instruments.

 

 
F-6

Table of Contents

 

Iconic Brands, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Three months ended March 31, 2021 and 2020

 

(d) Cash and Cash Equivalents

 

The Company considers all liquid investments purchased with original maturities of ninety days or less to be cash equivalents.

 

(e) Accounts Receivable, Net of Allowance for Doubtful Accounts

 

The Company extends unsecured credit to customers in the ordinary course of business but mitigates risk by performing credit checks and by actively pursuing past due accounts. The allowance for doubtful accounts is based on customer historical experience and the aging of the related accounts receivable. At March 31, 2021 and December 31, 2020, the allowance for doubtful accounts was $97,542 and $83,617, respectively.

 

(f) Inventories

 

Inventories are stated at the lower of cost (first-in, first-out method) or market, with due consideration given to obsolescence and to slow moving items. Inventories at March 31, 2021 and December 31, 2020 consist of cases of BiVi Vodka and cases of Bellissima sparkling wines purchased from our Italian suppliers and cases of alcoholic beverages and packaging materials relating to our Hooters line of products introduced in August 2019.

 

(g) Revenue Recognition

 

In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers” (Topic 606) which establishes revenue recognition standards. ASU 2014-19 was effective for annual reporting periods beginning after December 15, 2017. We adopted ASU 2014-09 effective January 1, 2018. ASU 2014-09 has not had a significant effect on the Company’s financial position and results of operations.

 

Our revenue (referred to in our financial statements as “sales”) consists primarily of the sale of wine and spirits imported for cash or otherwise agreed-upon credit terms. Our customers consist primarily of retailers. Our revenue generating activities have a single performance obligation and are recognized at the point in time when control transfers and our obligation has been fulfilled, which is when the related goods are shipped or delivered to the customer, depending upon the method of distribution, and shipping terms. We have elected to treat shipping as a fulfillment activity. Revenue is measured as the amount of consideration we expect to receive in exchange for the sale of our product. The Company has no obligation to accept the return of products sold other than for replacement of damaged products. Other than quantity price discounts negotiated with customers prior to billing and delivery (which are reflected as a reduction in sales), the Company does not offer any sales incentives or other rebate arrangements to customers.

 

(h) Shipping and Handling Costs

 

Shipping and handling costs to deliver product to customers are reported as operating expenses in the accompanying statements of operations. Shipping and handling costs to purchase inventory are capitalized and expensed to cost of sales when revenue is recognized on the sale of product to customers.

 

 
F-7

Table of Contents

 

Iconic Brands, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Three months ended March 31, 2021 and 2020

 

(i) Stock-Based Compensation

 

Stock-based compensation is accounted for at fair value in accordance with Accounting Standards Codification (“ASC”) Topic 718, “Compensation-Stock Compensation”. For the three months ended March 31, 2021 and 2020, stock-based compensation was $180,752 and $243,081, respectively.

 

(j) Income Taxes

 

Income taxes are accounted for under the assets and liability method. Current income taxes are provided in accordance with the laws of the respective taxing authorities. Deferred income taxes are provided for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is not more likely than not that some portion or all of the deferred tax assets will be realized.

 

(k) Net Income (Loss) per Share

 

Basic net income (loss) per common share is computed on the basis of the weighted average number of common shares outstanding during the period of the financial statements.

 

Diluted net income (loss) per common share is computed on the basis of the weighted average number of common shares and dilutive securities (such as stock options, warrants, and convertible securities) outstanding.  Dilutive securities having an anti-dilutive effect on diluted net income (loss) per share are excluded from the calculation.

 

(l) Recently Issued Accounting Pronouncements

 

Effective January 1, 2019, we adopted ASU 2016-2 (Topic 842) which establishes a new lease accounting model for lessees. Under the new guidance, lessees are required to recognize right of use assets and liabilities for most leases having terms of 12 months or more. We adopted this new accounting guidance using the effective date transition method, which permits entities to apply the new lease standards using a modified retrospective transition approach at the date of adoption. As such, historical periods were continued to be measured and presented under the previous guidance while current and future periods are subject to this new accounting guidance. Upon adoption we recorded a total of $223,503 for right-of-use assets related to our two operating leases (see Note 12g) and a total of $223,503 for lease liabilities.

 

Certain other accounting pronouncements have been issued by the FASB and other standard setting organizations which are not yet effective and have not yet been adopted by the Company.  The impact on the Company’s financial position and results of operations from adoption of these standards is not expected to be material.

 

 
F-8

Table of Contents

 

Iconic Brands, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Three months ended March 31, 2021 and 2020

 

(m) Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.  The Company has sustained significant net losses which have resulted in an accumulated deficit at March 31, 2021 of $27,164,304 and has experienced periodic cash flow difficulties, all of which raise substantial doubt regarding the Company’s ability to continue as a going concern.

 

Continuation of the Company as a going concern is dependent upon obtaining additional working capital and attaining profitable operations. The management of the Company has developed a strategy which it believes will accomplish these objectives and which will enable the Company to continue operations for the coming year. However, there is no assurance that these objectives will be met. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from the outcome of this uncertainty.

 

3. DISCONTINUED OPERATIONS

 

Effective December 31, 2019, the Company sold its 51% equity interest in Green Grow Farms, Inc. (“Green Grow”) to Can B Corp. (“CANB”) in exchange for 37,500,000 shares of CANB common stock and a CANB obligation to issue additional shares (“Additional Purchases Shares”) of CANB common stock to the Company on June 30, 2020 in such number so that the aggregate value of the aggregate shares issued to the Company equaled $1,000,000. We acquired this equity interest on May 9, 2019 in exchange for a $200,000 note payable to NY Farms Group Inc. and 2,000,000 shares of Company common stock valued at $1,250,000.

 

Effective March 6, 2020, CANB effected a 1 share for 300 shares reverse stock split resulting in a reduction of the number of the Company’s shares of CANB common stock from 37,500,000 shares to 125,000 shares. On July 8, 2020, CANB delivered 418,714 additional shares of CANB common stock required under the December 31, 2019 agreement. The fair value of the 543,714 shares of CANB common stock at June 30, 2020 was $1,073,835 and the Company recognized an unrealized gain of $73,835 in the quarterly period ended June 30, 2020.

 

On July 29, 2020, the Company executed an exchange agreement with CANB and delivered the 543,714 shares of CANB common stock to CANB in exchange for CANB’s delivery of 1,000,000 shares of CANB common stock to the Company. The July 29, 2020 closing price of CANB common stock was $0.95 per share. In the balance sheet as of September 30, 2020, the Company recorded treasury stock in the amount of $516,528. The Company recognized a loss of $557,307 from the Company’s investment in CANB common stock in the quarterly period ended September 30, 2020.

 

4. INVESTMENT IN BIVI LLC

 

On May 15, 2015, Iconic entered into a Securities Exchange Agreement by and among the members of BiVi LLC, a Nevada limited liability company (“BiVi”), under which Iconic acquired a 51% majority interest in BiVi in exchange for the issuance of (a) 1,000,000 shares of restricted common stock and (b)  1,000 shares of newly created Series C Convertible Preferred Stock.

 

Prior to May 15, 2015, BiVi was beneficially owned and controlled by Richard DeCicco, the controlling shareholder, President, CEO and Director of Iconic Brands, Inc.

 

 
F-9

Table of Contents

 

Iconic Brands, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Three months ended March 31, 2021 and 2020

 

5. INVESTMENT IN BELLISSIMA SPIRITS LLC

 

On December 13, 2016, Iconic entered into a Securities Purchase Agreement with Bellissima Spirits LLC (“Bellissima”) and Bellissima’s members under which Iconic acquired a 51% majority interest in Bellissima in exchange for the issuance of a total of 10 shares of newly designated Iconic Series D Convertible Preferred Stock. Each share of Iconic Series D Convertible Preferred Stock is convertible into the equivalent of 5.1% of Iconic common stock issued and outstanding at the time of conversion.

 

Prior to December 13, 2016, Bellissima was controlled by Richard DeCicco, the controlling shareholder, President, CEO and Director of Iconic.

 

6. UNITED SPIRITS, INC.

 

United Spirits, Inc. (“United”) is owned and managed by Richard DeCicco, the controlling shareholder, President, CEO, and Director of Iconic. United provides distribution services for BiVi and Bellissima (see Note 12d) and is considered a variable interest entity (“VIE”) of Iconic. Since Iconic has been determined to be the primary beneficiary of United, we have included United’s assets, liabilities, and operations in the accompanying consolidated financial statements of Iconic. Summarized financial information of United follows:

 

Balance Sheets:

 

March 31,

2021

 

 

December 31,

2020

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$ 340,271

 

 

$ 448,254

 

Intercompany receivable from Iconic (A)

 

 

2,113,716

 

 

 

1,693,012

 

Right-of-use asset

 

 

-

 

 

 

4,441

 

Total assets

 

$ 2,453,987

 

 

$ 2,145,707

 

 

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$ 192,012

 

 

$ 210,693

 

Loans payable to officer and affiliated entity

 

 

46,702

 

 

 

58,582

 

SBA Paycheck Protection Program loan

 

 

-

 

 

 

28,458

 

Intercompany payable to Bellissima (A)

 

 

2,582,604

 

 

 

2,242,243

 

Intercompany payable to BiVi (A)

 

 

66,876

 

 

 

66,876

 

Operating lease liability

 

 

-

 

 

 

4,441

 

Total Liabilities

 

 

2,888,194

 

 

 

2,611,293

 

Noncontrolling interest in VIE

 

 

(434,207 )

 

 

(465,586 )

Total liabilities and stockholders’ deficiency

 

$ 2,453,987

 

 

$ 2,145,707

 

 

 

 

Three months ended March 31,

 

Statements of operations:

 

2021

 

 

2020

 

Intercompany distribution income (A)

 

$ 3,777

 

 

$ 3,125

 

Forgiveness of SBA PPP loan income

 

 

28,458

 

 

 

-

 

Total income

 

 

32,235

 

 

 

3,125

 

Royalty expense

 

 

-

 

 

 

-

 

Officers’ compensation

 

 

-

 

 

 

-

 

Other operating expenses – net

 

 

856

 

 

 

9,245

 

Total operating expenses

 

 

856

 

 

 

9,245

 

Net income (loss)

 

$ 31,379

 

 

$ (6,120 )

 

 

 

 

 

 

 

 

 

(A) Eliminated in consolidation

 

 

 

 

 

 

 

 

 

 
F-10

Table of Contents

 

Iconic Brands, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Three months ended March 31, 2021 and 2020

 

7. INVENTORIES

 

Inventories consist of:

 

 

 

March 31,

2021

 

 

December 31,

2020

 

Finished goods:

 

 

 

 

 

 

Hooters brands

 

$ 261,709

 

 

$ 259,837

 

Bellissima brands

 

 

244,868

 

 

 

163,258

 

BiVi brands

 

 

47,439

 

 

 

47,439

 

Total finished goods

 

 

554,016

 

 

 

470,534

 

 

 

 

 

 

 

 

 

 

Raw materials:

 

 

 

 

 

 

 

 

Hooters brands

 

 

36,966

 

 

 

36,966

 

Total raw materials

 

 

36,966

 

 

 

36,966

 

 

 

 

 

 

 

 

 

 

Total

 

$ 590,982

 

 

$ 507,500

 

 

8. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

Accounts payable and accrued expenses consist of:

 

 

 

March 31,

2021

 

 

December 31,

2020

 

Accounts payable

 

$ 1,719,253

 

 

$ 1,444,213

 

Accrued officers compensation

 

 

850,800

 

 

 

843,050

 

Accrued royalties

 

 

871,423

 

 

 

792,295

 

Other

 

 

22,245

 

 

 

10,215

 

Total

 

$ 3,463,721

 

 

$ 3,089,773

 

 

9. NOTE PAYABLE

 

Note payable consists of:

 

 

 

March 31,

2021

 

 

December 31,

2020

 

Small Business Administration Paycheck Protection Program forgivable loan payable

 

$

-

 

 

$ 28,458

 

Total

 

$

-

 

 

$ 28,458

 

 

 
F-11

Table of Contents

 

Iconic Brands, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Three months ended March 31, 2021 and 2020

 

10. CAPITAL STOCK

 

Preferred Stock

 

The one share of Series A Preferred Stock, which was issued to Richard DeCicco on September 10, 2009, entitles the holder to two votes for every share of Common Stock Deemed Outstanding and has no conversion or dividend rights.

 

The 1000 shares of Series C Preferred Stock, which were issued to Richard DeCicco on May 15, 2015 pursuant to the Securities Exchange Agreement (see Note 4) for the Company’s 51% investment in BiVi, entitled the holder in the event of a Sale (as defined) to receive out of the proceeds of such Sale (in whatever form, be it cash, securities, or other assets), a distribution from the Company equal to 76.93% of all such proceeds received by the Company prior to any distribution of such proceeds to all other classes of equity securities, including any series of preferred stock designated subsequent to this Series C Preferred Stock. Effective March 27, 2019, pursuant to a Preferred Stock Exchange Agreement, Mr. DeCicco exchanged the 1,000 shares of Series C Preferred Stock for 1,000,000 shares of Company common stock.

 

The 10 shares of Series D Preferred Stock, which were issued to Richard DeCicco and Roseann Faltings (5 shares each) on December 13, 2016 pursuant to the Securities Purchase Agreement (See Note 5) for the Company’s 51% investment in Bellissima, entitled the holders to convert each share of Series D Preferred Stock to the equivalent of 5.1% of the common stock issued and outstanding at the time of conversion.  Effective March 27, 2019, pursuant to a Preferred Stock Exchange Agreement, Mr. DeCicco and Ms. Faltings exchanged the 10 shares of Series D Preferred Stock for 1,000,000 shares of Company common stock (500,000 shares each).

 

Effective May 21, 2018, the Company entered into a Share Purchase Agreement with the four investors who purchased 480,000 shares of common stock pursuant to a Securities Purchase Agreement dated October 27, 2017. The Exchange Agreement provided for the exchange of the 480,000 shares of common stock for 1,200,000 shares of Series E Preferred Stock. Each share of Series E Preferred Stock is convertible into 0.4 shares of common stock, is entitled to 0.4 votes on all matters to come before the common stockholders or shareholders generally, is entitled to dividends on an as-converted-to-common stock basis, is entitled to a distribution preference of $0.25 upon liquidation, and is not redeemable.

 

Also effective May 21, 2018, the Company sold a total of 1,200,000 shares of Series E Preferred Stock and 480,000 warrants to the four investors referred to in the preceding paragraph for $300,000 cash pursuant to an Amendment No. 1 to Securities Purchase Agreement.

 

Effective October 4, 2018, the Company closed on the first tranche of the Securities Purchase Agreement dated September 27, 2018 with nine (9) accredited investors for the sale of an aggregate of 4,650,000 shares of our Series E convertible preferred stock and warrants to acquire 1,860,000 shares of our common stock (at an exercise price of $1.25 per share for a period of five years) for gross proceeds of $1,162,500. The first tranche sale was for 1,550,000 shares of our Series E Preferred stock and warrants to acquire 620,000 shares of our common stock for gross proceeds of $387,500.

 

 
F-12

Table of Contents

 

Iconic Brands, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Three months ended March 31, 2021 and 2020

 

As a condition to the closing of the first tranche, the Company entered into Securities Exchange Agreements with holders of convertible notes totaling $519,499 who exchanged their convertible notes for an aggregate of 2,077,994 shares of our Series E Preferred stock plus warrants to acquire 831,198 shares of our common stock. Also, holders of convertible notes totaling $76,569 exchanged their notes for an aggregate of 122,510 shares of our common stock and holders of convertible notes totaling $90,296 were paid off with cash.

 

On November 30, 2018 and December 20, 2018, the Company received two payments of $71,875 and $71,875 respectively (totaling $143,750) in exchange for 287,500 and 287,500 shares of Series E Preferred Stock (totaling 575,000 shares) respectively at $0.25 per share. These payments represented advance payments in connection with the second tranche of the Securities Purchase Agreement dated September 27, 2018 which closed on February 7, 2019.

 

Effective February 7, 2019, the Company closed on the second tranche of the Securities Purchase Agreement dated September 27, 2018The Company received the remaining $243,750 (of the $387,500 total second tranche proceeds) and issued the investors the remaining total of 975,000 shares of Series E Preferred Stock (of the 1,550,000 total second tranche shares) and warrants to acquire 620,000 shares of our common stock.

 

On February 12, 2019 and March 18, 2019, the Company received two payments of $71,880 and $25,000 respectively (totaling $96,880) in exchange for 287,520 and 100,000 shares of Series E Preferred Stock (totaling 387,520 shares) respectively at $0.25 per share.  These payments represent advance payments in connection with the third tranche of the Securities Purchase Agreement dated September 27, 2018. Closing of the third tranche of $387,500 has not occurred.

 

On April 25, 2019 and September 4, 2019, the Company received payments of $71,875 and $96,875 respectively (totaling $168,750) in exchange for 287,500 and 387,500 shares of Series E Preferred Stock (totaling 675,000 shares) respectively at $0.25 per share. These payments represent advance payments in connection with the third tranche of the Securities Purchase Agreement dated September 27, 2018. Closing of the third tranche of $387,500 has not occurred.

 

On April 23, 2019, a holder converted 673,398 shares of Series E Preferred Stock into 269,359 shares of Iconic common stock.

 

On May 17, 2019, a holder converted 800,000 shares of Series E Preferred Stock into 320,000 shares of Iconic common stock.

 

On July 18, 2019, Iconic entered into Securities Purchase Agreements with certain accredited investors (the “Investors”) for the sale of an aggregate of 3,125 shares of newly designated Series F Convertible Preferred Stock plus 5,000,000 warrants at a price of $1,000 per share of Series F Convertible Preferred Stock or for a total of $3,125,000 (which was collected in full from July 18, 2019 to August 2, 2019). On August 2, 2019, Iconic paid $322,500 in commissions and expenses to the placement agent of this offering. Each share of Series F Convertible Preferred Stock has a stated value of $1,000, is convertible into 1,600 shares of common stock (subject to adjustment under certain circumstances), has no voting rights, is entitled to dividends on an as-converted-to common stock basis, is entitled to a distribution preference of $1,000 upon liquidation, and is not redeemable. Each warrant is exercisable into one share of common stock at an exercise price of $0.625 per share (subject to adjustment under certain circumstances) for a period of five years from the date of issuance.

 

 
F-13

Table of Contents

 

Iconic Brands, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Three months ended March 31, 2021 and 2020

 

We also entered into separate Registration Rights Agreements with the purchasers of the Series F Preferred Stock, pursuant to which the Company agreed to file a registration statement to register the resale of the shares underlying the Series F Convertible Preferred Stock and Warrants within thirty (30) days following the closing date (the “Filing Date”), to cause such registration statement to be declared effective within 60 days following the earlier of (i) the date that the registration statement is filed with the Securities and Exchange Commission (the “SEC”) and (ii) the Filing Date, and to maintain the effectiveness of the registration statement until all of such shares of Common Stock have been sold or are otherwise able to be sold pursuant to Rule 144 under the Securities Act, without any restrictions. We filed the Form S-1 registration statement on September 9, 2019 which was declared effective by the SEC on September 18, 2019. If we fail to maintain the effectiveness of the registration statement for the required time period, the Company is obligated to pay liquidated damages in the amount of 1% of their subscription amount, per month, until such event is satisfied.

 

Concurrently with the closing of the financing transaction described above, we entered into Securities Exchange Agreements with certain holders of our Series E Convertible Preferred Stock and exchanged their 2,725,000 shares of Series E Convertible Preferred Stock for an aggregate of 681.25 shares of our Series F Convertible Preferred Stock.

 

From July 26, 2019 to August 28, 2019, three holders converted a total of 1,000,000 shares of Series E Preferred Stock into a total of 400,000 shares of Iconic common stock.

 

From September 19, 2019 to September 27, 2019, three holders converted a total of 14.20 shares of Series E Preferred Stock into a total of 227,200 shares of Iconic common stock.

 

On October 25, 2019 and December 28, 2019, two holders converted a total of 651,892 shares of Series E Preferred Stock into a total of 260,757 shares of Iconic common stock.

 

From October 2, 2019 to December 31, 2019, six holders converted a total of 508.50 shares of Series F Preferred Stock into a total of 813,600 shares of Iconic common stock.

 

On January 12, 2020, the Company entered into securities purchase agreements with certain accredited investors for the sale of a total of 1,500 shares of Series G Convertible Preferred Stock and warrants o purchase 1,200,000 shares of our common stock for gross proceeds of $1,500,000 (of which $1,475,000 was collected on January 13, 2020 and January 14, 2020). Each share of Series G Convertible Preferred Stock (designated on January 13, 2020) has a stated value of $1,000, is convertible into shares of common stock at a price of $1.25 per share (subject to adjustment under certain circumstances), has no voting rights, is entitled to dividends on an as-converted-to common stock basis, is entitled to a distribution preference of $1,000 upon liquidation, and is not redeemable. Each warrant is exercisable into one share of common stock at an exercise price of $1.25 per share (subject to adjustment under certain circumstances) for a period of five years from the date of issuance.

 

 
F-14

Table of Contents

 

Iconic Brands, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Three months ended March 31, 2021 and 2020

 

On February 12, 2020, February 13, 2020, and February 14, 2020, three holders converted a total of 675,000 shares of Series E Preferred Stock into a total of 270,000 shares of Iconic common stock.

 

From January 16, 2020 to February 24, 2020, two holders converted a total of 190 shares of Series F Preferred Stock into a total of 304,000 shares of Iconic common stock.

 

On May 29, 2020 and June 5, 2020, four holders converted a total of 552 shares of Series F Preferred Stock into a total of 883,200 shares of Iconic common stock.

 

Common Stock

 

On January 22, 2020, the Company issued a total of 375,000 shares of its common stock to the placement agent and four associated individuals for services relating to the offering of 1,500 shares of Series G Preferred Stock that concluded on January 14, 2020 (see Preferred Stock above).

 

On January 22, 2020, and February 27, 2020, the Company issued a total of 160,000 shares of its common stock to an investor relations firm for services rendered to the Company. The $101,018 total fair value of the 160,000 shares of Iconic common stock on the respective dates of issuance was expensed as investor relations in the three months ended March 31, 2020.

 

On January 26, 2020, the Company issued 150,000 shares of its common stock to a consulting firm for services rendered to the Company. The $100,500 fair value of the 150,000 shares of Iconic common stock was expensed as consulting fees in the three months ended March 31, 2020.

 

On February 24, 2020, the Company issued 100,000 shares of its common stock to William Clyde Elliot II pursuant to an Endorsement Agreement dated February 15, 2020 (see Note 12h). The $67,500 fair value of the 100,000 shares of Iconic common stock was charged to prepaid expenses and was expensed over the term of the Endorsement Agreement.

 

On February 24, 2020, the Company issued 50,000 shares of its common stock to a consulting firm for services rendered to the Company. The $33,750 fair value of the 50,000 shares of Iconic common stock was expensed as consulting fees in the three months ended March 31, 2020.

 

On February 12, 2020, February 13, 2020, and February 14, 2020, three holders converted a total of 675,000 shares of Series E Preferred Stock into a total of 270,000 shares of Iconic common stock.

 

From January 16, 2020 to February 24, 2020, two holders converted a total of 190 shares of Series F Preferred Stock into a total of 304,000 shares of Iconic common stock.

 

On May 1, 2020, the Company issued 275,000 shares of its common stock to an investor relations firm for services rendered to the Company. The $167,750 fair value of the 275,000 shares of Iconic common stock was expensed as investor relations in the three months ended June 30, 2020.

 

On June 1, 2020, the Company issued 75,000 shares of its common stock to a consultant for services rendered to the Company. The $51,750 fair value of the 75,000 shares of Iconic common stock was expensed as consulting fees in the three months ended June 30, 2020.

 

 
F-15

Table of Contents

 

Iconic Brands, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Three months ended March 31, 2021 and 2020

 

On June 2, 2020, the Company issued 50,000 shares of its common stock to a consulting firm entity for services rendered to the Company. The $35,500 fair value of the 50,000 shares of Iconic common stock was expensed as consulting fees in the three months ended June 30, 2020.

 

On May 29, 2020 and June 5, 2020, four holders converted a total of 552 shares of Series F Preferred Stock into a total of 883,200 shares of Iconic common stock.

 

On March 23, 2021, the Company issued 401,670 shares of its common stock to an investors relations firm for services rendered to the Company. The $180,752 fair value of the 401,670 shares of Iconic common stock was expensed as investors relations in the three months ended March 31, 2021.

 

Warrants

 

A summary of warrants activity for the period January 1, 2019 to March 31, 2021 follows:

 

 

 

 

Common shares Equivalent

 

 

 

 

 

 

Balance, January 1, 2019

 

 

2,895,198

 

Issued in the three months ended March 31, 2019

 

 

620,000

 

 

 

 

 

 

Balance, March 31, 2019

 

 

3,515,198

 

 

 

 

 

 

Exercise of warrants in connection with Warrant

 

 

 

 

Exercise Agreements dated May 8, 2019

 

 

(960,000 )

 

 

 

 

 

Issuance of New Warrants in connection with

 

 

 

 

Warrant Exercise Agreements dated May 8, 2019

 

 

1,920,000

 

 

 

 

 

 

Balance, June 30, 2019

 

 

4,475,198

 

Issued in the three months ended September 30, 2019

 

 

5,000,000

 

 

 

 

 

 

Balance, September 30, 2019 and December 31, 2019

 

 

9,475,198

 

Issued in the three months ended March 31, 2020

 

 

1,180,000

 

 

 

 

 

 

Balance, March 31, 2020, June 30, 2020, September 30,

 

 

 

 

2020, and December 31, 2020

 

 

10,655,198

 

 

 

 

 

 

Expired in the three months ended March 31, 2021

 

 

(400,000 )

 

 

 

 

 

Balance, March 31, 2021

 

 

10,255,198

 

 

 
F-16

Table of Contents

 

Iconic Brands, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Three months ended March 31, 2021 and 2020

 

Issued and outstanding warrants at March 31, 2021 consist of:

 

Year Granted

 

Number Common Shares Equivalent

 

 

Exercise Price Per Share

 

 

Expiration Date

 

2017

 

 

54,000

 

 

$ 2.50

 

 

June 22, 2022 to June 30, 2022

 

2018

 

 

30,000

 

 

$ 2.50

 

 

May 21, 2023

 

2018

 

 

831,198

 

 

$ 1.25

 

 

September 20, 2023

 

2018

 

 

620,000

 

 

$ 1.25 *

 

September 20, 2023

 

2019

 

 

620,000

 

 

$ 1.25 *

 

February 7, 2024

 

2019

 

 

1,920,000

 

 

$ 2.25 *

 

May 8, 2024

 

2019

 

 

5,000,000

 

 

$ 0.625

 

 

August 2, 2024

 

2020

 

 

1,180,000

 

 

$ 1.25

 

 

January 12, 2025

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

10,255,198

 

 

 

 

 

 

 

 

 

* These warrants contain a “down round” provision and thus the exercise price is reduceable to $0.625 per share  as a result of the Series F Preferred Stock financing that closed on August 2, 2019.

 

Effective October 4, 2018, the Company closed on the first tranche of the Securities Purchase Agreement dated September 27, 2018 with nine (9) accredited investors for the sale of an aggregate of 4,650,000 shares of our Series E convertible preferred stock and warrants to acquire 1,860,000 shares of our common stock (at an exercise price of $1.25 per share for a period of five years) for gross proceeds of $1,162,500. The first tranche sale was for 1,550,000 shares of our Series E convertible preferred stock and warrants to acquire 620,000 shares of our common stock for gross proceeds of $387,500. The second tranche of $387,500 closed on February 7, 2019 and also was for 1,550,000 shares of our Series E convertible preferred stock and warrants to acquire 620,000 shares of our common stock.

 

On May 8, 2019, Iconic executed Warrant Exercise Agreements with four holders of Company warrants.  The holders exercised a total of 960,000 warrants (which were acquired from September 2017 to November 2017 and on May 21, 2018) at an agreed price of $0.32 per share and paid the Company a total of $307,200.  Pursuant to the Warrant Exercise Agreements, the holders were issued a total of 1,920,000 New Warrants that are exercisable into Company common stock at a price of $2.25 per share for a period of five years and contain “down round” price protection.

 

As discussed in Preferred Stock above, the Company issued a total of 5,000,000 warrants to investors as part of the offering of 3,125 shares of Series F Preferred Stock that concluded on August 2, 2019. Each warrant is exercisable into one share of common stock at an exercise price of $0.625 per share for a period of five years from the date of issuance and contains “down round” price protection.

 

As also discussed in Preferred Stock above, the Company issued a total of 1,180,000 warrants to investors as part of the offering of 1,500 shares of Series G Preferred Stock that concluded on January 14, 2020. Each warrant is exercisable into one share of common stock at an exercise price of $1.25 per share for a period of five years from the date of issuance and contains “down round” price protection.

 

 
F-17

Table of Contents

 

Iconic Brands, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Three months ended March 31, 2021 and 2020

 

11. INCOME TAXES

 

No income taxes were recorded in the periods presented since the Company had taxable losses in these periods.

 

The provision for (benefit from) income taxes differs from the amount computed by applying the statutory United States federal income tax rate of 21% for the periods presented to income (loss) before income taxes. The sources of the difference are as follows:

 

 

 

Three months ended

March 31,

 

 

 

2021

 

 

2020

 

Expected tax at 21%

 

$ (136,664 )

 

$ (191,541 )

 

 

 

 

 

 

 

 

 

Nontaxable gain on forgiveness of SBA PPP loan

 

 

5,976

 

 

 

-

 

Nondeductible stock-based compensation

 

 

37,958

 

 

 

51,047

 

Increase (decrease) in valuation allowance

 

 

104,682

 

 

 

140,494

 

 

 

 

 

 

 

 

 

 

Income tax provision

 

$ -

 

 

$ -

 

 

Significant components of the Company's deferred income tax assets are as follows:

 

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

Net operating loss carryforward

 

$ 4,954,233

 

 

$ 4,849,551

 

 

 

 

 

 

 

 

 

 

Less valuation allowance

 

 

(4,954,233 )

 

 

(4,849,551 )

 

 

 

 

 

 

 

 

 

Deferred income tax assets - net

 

$ -

 

 

$ -

 

 

Based on management’s present assessment, the Company has not yet determined that a deferred tax asset attributable to the future utilization of the net operating loss carryforward as of March 31, 2021 and December 31, 2020 will be realized. Accordingly, the Company has maintained a 100% valuation allowance against the deferred tax asset in the financial statements at March 31, 2021 and December 31, 2020. The Company will continue to review this valuation allowance and make adjustments as appropriate.

 

Current United States income tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited.

 

All tax years remain subject to examination by major taxing jurisdictions.

 

 
F-18

Table of Contents

 

Iconic Brands, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Three months ended March 31, 2021 and 2020

 

12. COMMITMENTS AND CONTINGENCIES

 

a.  Iconic Guarantees

 

On May 26, 2015, BiVi LLC (“BiVi”) entered into a License Agreement with Neighborhood Licensing, LLC (the “BiVi Licensor”), an entity owned by Chazz Palminteri (“Palminteri”), to use Palminteri’s endorsement, signature and other intellectual property owned by the BiVi Licensor. Iconic has agreed to guarantee and act as surety for BiVi’s obligations under certain sections of the License Agreement and to indemnify the BiVi Licensor and Palminteri against third party claims.

 

On November 12, 2015, Bellissima Spirits LLC (“Bellissima”) entered into a License Agreement with Christie Brinkley, Inc. (the “Bellissima Licensor”), an entity owned by Christie Brinkley (“Brinkley”), to use Brinkley’s endorsement, signature, and other intellectual property owned by the Bellissima Licensor. Iconic has agreed to guarantee and act as surety for Bellissima’s obligations under certain sections of the License Agreement and to indemnify the Bellissima Licensor and Brinkley against third party claims.

 

b.  Royalty Obligations of BiVi and Bellissima

 

Pursuant to the License Agreement with the Bivi Licensor (see Note 12a. above), BiVi is obligated to pay the BiVi Licensor a Royalty Fee equal to 5% of monthly gross sales of BiVi Brand products payable monthly subject to an annual Minimum Royalty Fee of $100,000 in year 1, $150,000 in year 2, $165,000 in year 3, $181,500 in year 4, $199,650 in year 5, and $219,615 in year 6 and each subsequent year. The Minimum Royalty Fee has been waived until such time as the parties agree to reinstate the Minimum Royalty Fee.

 

Pursuant to the License Agreement and Amendment No. 1 to the License Agreement effective September 30, 2017 with the Bellissima Licensor (see Note 12a. above), Bellissima is obligated to pay the Bellissima Licensor a Royalty Fee equal to 10% of monthly gross sales (12.5% for sales in excess of defined Case Break Points) of Bellissima Brand products payable monthly. The Bellissima Licensor has the right to terminate the endorsement if Bellissima fails to sell 10,000 cases of Bellissima Brand products in year 1, 15,000 cases in year 2, or 20,000 cases in year 3 and each subsequent year.

 

c. Brand Licensing Agreement relating to Hooters Marks

 

On July 23, 2018, United Spirits, Inc. (“United”) executed a Brand Licensing Agreement (the “Hooters Agreement”) with HI Limited Partnership (“the Licensor”). The Hooters Agreement provides United a license to use certain “Hooters” Marks to manufacture, market, distribute, and sell alcoholic products.

 

The Initial Term of the Hooters Agreement is from July 23, 2018 through December 31, 2020. Provided that United is not in breach of any terms of the Hooters Agreement, United may extend the Term for an additional 3 years through December 31, 2023.

 

The Hooters Agreement provides for United’s payment of Royalty Fees (payable quarterly) to the Licensor equal to 6% of the net sales of the licensed products subject to a minimum royalty fee of $65,000 for Hooters Agreement year 1 (ending December 31, 2018), $255,000 for Hooters Agreement year 2, $315,000 for Hooters Agreement year 3 and 4, $360,000 for Hooters Agreement year 5, and $420,000 for Hooters Agreement year 6.

 

The Hooters Agreement also provided for United’s payment of an advance payment of $30,000 to the Licensor to be credited towards royalty fees payable to Licensor. On September 6, 2018, the $30,000 advance payment was paid to the Licensor. The Hooters Agreement also provides for United’s payment of a marketing contribution equal to 2% of the prior year’s net sales of the Licensed Products. If United fails to spend the required marketing contribution in any calendar year, the deficiency will be paid to Licensor.

 

For the three months ended March 31, 2021 and 2020, royalties expense under the Hooters Agreement was $78,750 and $4,406, respectively.

 

 
F-19

Table of Contents

 

Iconic Brands, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Three months ended March 31, 2021 and 2020

 

d. Marketing and Order Processing Services Agreement

 

During October 2019, United executed a Marketing and Order Processing Services Agreement (the “QVC Agreement”) with QVC, Inc. (“QVC”). Among other things, the QVC Agreement provides for United’s grant to QVC of an exclusive worldwide right to promote the Bellissima products through direct response television programs.

 

The Initial License Period commenced October 2019 and expires in December 2021 (i.e., two years after first airing of a Bellissima product). Unless either party notifies the other party in writing at least 30 days prior to the end of the Initial License Period or any Renewal License Period of its intent to terminate the QVC Agreement, the License continually renews for additional two-year periods.

 

The QVC Agreement provides for United’s payment of “Marketing Fees” (payable no less than monthly) to QVC in amounts agreed to between United and QVC from time to time. For the three months ended March 31, 2021 and 2020, the Marketing Fees expense (payable to QVC) was $81,102 and $53,724, respectively, and the direct response sales generated from QVC programs was $405,510 and $252,340, respectively.

 

e. Distribution Agreements

 

On May 1, 2015, BiVi entered into a Distribution Agreement with United (the “Distribution Agreement”) for United to distribute and wholesale BiVi’s product and to act as the licensed importer and wholesaler. The Distribution Agreement provides United the exclusive right for a term of ten years to sell BiVi’s product for an agreed distribution fee equal to $1.00 per case of product sold.

 

In November 2015, Bellissima and United agreed to have United distribute and wholesale Bellissima’s products under the same terms contained in the Distribution Agreement.

 

Effective April 1, 2019, the Company and United agreed to have United distribute and wholesale Hooters brand products under the same terms contained in the Distribution Agreement.

 

f. Compensation Arrangements

 

Effective April 1, 2018, the Company executed Employment Agreements with its Chief Executive Officer Richard DeCicco (the “DeCicco Employment Agreement”) and its Vice President of Sales and Marketing Roseann Faltings (the “Faltings Employment Agreement” and together with the DeCicco Employment Agreement, the “Employment Agreements”). Both agreements had a term of 24 months (to June 30, 2020) and have continued thereafter under the same terms. The DeCicco Employment Agreement provides for a base salary at the rate of $265,000 per annum. The Faltings Employment Agreement provides for a base salary at the rate of $150,000 per annum. For the year ended December 31, 2019, we accrued a total of $415,000 officers compensation pursuant to the Employment Agreements which was allocated 50% to Iconic ($207,500), 40% to Bellissima ($166,000), and 10% to BiVi ($41,500). For the year ended December 31, 2020, we accrued a total of $415,000 officers compensation pursuant to the Employment Agreements which was allocated 50% to Iconic ($207,500) and 50% to Bellissima ($207,500). For the three months ended March 31, 2021, we accrued a total of $103,750 officers compensation pursuant to the Employment Agreements which were allocated 50% to Iconic ($51,875) and 50% to Bellissima ($51,875).

 

As of March 31, 2021 and December 31, 2020, accrued officers compensation was $850,800 and $843,050, respectively.

 

 
F-20

Table of Contents

 

Iconic Brands, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Three months ended March 31, 2021 and 2020

 

g. Lease Agreements

 

On March 27, 2018, United Spirits, Inc. executed a lease extension for the Company’s office and warehouse space in North Amityville New York. The extension had a term of three years from February 1, 2018 to January 31, 2021 and provided for monthly rent of $4,478.

 

On January 1, 2021, Iconic Brands, Inc. executed a cancellable Lease Agreement with Dan Kay International (an entity controlled by Richard DeCicco) (the “Dan Kay Agreement”) for the lease of the Company’s office and warehouse space in North Amityville New York. The Dan Kay Agreement has a term of three years from January 1, 2021 to January 1, 2024 and provides for monthly rent of $4,893.

 

On January 1, 2019, United Spirits, Inc. executed a lease agreement with the two officers of the Company to use part of their residence in Copiague, New York for Company office space. The agreement has a term of three years from January 1, 2019 to December 31, 2021 and provides for monthly rent of $3,930.

 

At March 31, 2021, the future minimum lease payments under the one remaining non-cancellable operating lease were:

 

Year ending December 31, 2021

 

$ 35,370

 

 

 

 

 

 

Total

 

$ 35,370

 

 

The operating lease liabilities totaling $33,943 at March 31, 2021 as presented in the Consolidated Balance Sheets represents the discounted (at our 10% estimated incremental borrowing rate) value of the future lease payments of $35,370 at March 31, 2021.

 

h. Endorsement Agreement

 

In February 2020, Iconic executed an Endorsement Agreement with an entity (“CEE”) controlled by Chase Elliott (“Elliott”), driver of the Hendrick Motorsports Number 9 NAPA/Hooter’s Chevrolet in races of the NASCAR Cup Series. The agreement, which has a term ending on December 31, 2021, provides Iconic the right to utilize Elliott’s name in connection with the promotion and distribution of Hooters brand products and requires CEE and Elliott to perform certain specified services for Iconic including certain promotional appearances. The agreement provides for compensation payable to CEE of (1) Initial Share Award of 100,000 shares of Iconic common stock (which was issued on February 24, 2020); (2) $75,000 year 2020 cash compensation (which was paid March 6, 2020); (3) $75,000 year 2021 cash compensation payable on or before February 15, 2021 (which has not yet been paid); and (4) Year 2021 Second Share Award of that number of shares of Iconic common stock equal to $75,000 based upon the average closing price of the common stock for the five trading days immediately preceding February 15, 2021 (which has not yet been issued).

 

For the year ended December 31, 2020, we expensed $142,500 in license fees relating to this Endorsement Agreement.

 

 
F-21

Table of Contents

 

Iconic Brands, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Three months ended March 31, 2021 and 2020

 

i. Concentration of sales

 

For the three months ended March 31, 2021 and 2020, sales consisted of:

 

 

 

2021

 

 

2020

 

Bellissima product line:

 

 

 

 

 

 

 

 

 

 

 

 

 

QVC direct response sales

 

$ 405,510

 

 

$ 252,340

 

Other

 

 

206,733

 

 

 

80,105

 

Total Bellissima

 

 

612,242

 

 

 

332,445

 

BiVi product line

 

 

-

 

 

 

-

 

Hooters product line

 

 

22,291

 

 

 

73,441

 

 

 

 

 

 

 

 

 

 

Total

 

$ 634,533

 

 

$ 405,886

 

 

13. SUBSEQUENT EVENTS

 

On April 16, 2021 the Company signed an Original Issue Discount Promissory Note in the amount of $330,000 due July 16, 2021.

 

During May 2021 the Company issued 1,500,000 shares of its restricted common stock to consultants and employees of the Company.

 

 
F-22

Table of Contents

 

ITEM 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Our Management’s Discussion and Analysis contains not only statements that are historical facts, but also statements that are forward-looking (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). Forward-looking statements are, by their very nature, uncertain and risky. These risks and uncertainties include international, national and local general economic and market conditions; demographic changes; our ability to sustain, manage, or forecast growth; our ability to successfully make and integrate acquisitions; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; and other risks that might be detailed from time to time in our filings with the Securities and Exchange Commission.

 

Although the forward-looking statements in this Quarterly Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report and in our other reports as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects.

 

You should read the following discussion and analysis of our financial condition and plan of operations together with and our consolidated financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included elsewhere in this Quarterly Report on Form 10-Q. All amounts in this report are in U.S. dollars, unless otherwise noted.

 

Summary Overview

 

Overview

 

We are a lifestyle branding company with expertise in developing, from inception to completion, and branding alcoholic beverages for ourselves and third parties. We market and place products into national distribution through long-standing industry relationships. We believe we are a leader in “Celebrity Branding” of beverages in which we procure superior and unique products from around the world and brand such products with internationally-recognized celebrities. We currently market and sell the following products:

 

·

Bellissima Prosecco - these products comprise a line of all-natural and Vegan Prosecco and Sparkling Wine made with organic grapes, including a Zero Sugar, Zero Carb option, a DOC Brut and a Sparkling Rose;

·

Bella Sprizz Apertifs - these products comprise a line of aperitifs consisting of three different expressions, a classic Italian aperitif an all-natural elderflower aperitif and a classic Italian bitter; and

·

Hooters Spirits - these products comprise a line of private-label premium spirits that are sold under the Hooters brand. The full line of Hooters Spirits includes Vodka, Gin, Rum (Dark & Light), Tequila (Silver & Gold), American Whiskey and Hooters Heat Cinnamon Whiskey.

 

In addition, we also develop private label spirits for established domestic and international chains. Our mission is to be an industry leader in brand development, marketing, and sales of alcoholic beverages by capitalizing on our ability to procure products from around the world. We plan to leverage our relationships with internationally-recognized celebrities to add value to products and create brand awareness in unbranded niche categories.

 

 
4

Table of Contents

 

We market and sell a line of line of all-natural and Vegan Prosecco and Sparkling Wine made with organic grapes, including a Zero Sugar, Zero Carb option, a DOC Brut and a Sparkling Rose, pursuant to a License Agreement entered into between our majority-owned (51%) subsidiary, Bellissima Spirits LLC and Christie Brinkley, Inc., an entity owned by supermodel and entrepreneur Christie Brinkley.

 

We also market and sell a Vodka product, under the brand “BiVi 100 percent Sicilian Vodka,” pursuant to a License Agreement entered into between our majority-owned (51%) subsidiary, BiVi LLC and Neighborhood Licensing, LLC, an entity owned by Chazz Palminteri.

 

In addition, we market and sell a line of private-label premium spirits under the Hooters brand, including Vodka, Gin, Rum (Dark & Light), Tequila (Silver & Gold), American Whiskey and Hooters Heat Cinnamon Whiskey, pursuant to a Marketing and Distribution Agreement entered into between us and United Spirits, Inc., a company owned and managed by Richard DeCicco, the controlling shareholder, President, Chief Executive Officer, Chief Financial Officer and Director of the Company, which we treat as a variable interest entity.

 

Recent Developments

 

As a result of COVID-19, we have seen a shift away from the traditional brick-and-mortar business to a direct-to-consumer business. Although we expect brick-and-mortar to rebound, we also expect the director-to-consumer model to stay post-COVID-19, as consumers embrace the convenience of having their alcoholic beverages delivered to their doorstep. As we expand our relationship with QVC and our own direct-to-consumer platform through our website, we believe we are well positioned to execute on this opportunity.

 

Series G Preferred Stock Financing

 

On January 12, 2020, we entered into securities purchase agreements with certain accredited investors for the sale of an aggregate of 1,500 shares of our Series G Preferred Stock and warrants to purchase up to 1,200,000 shares of our common stock for gross proceeds of $1,500,000, before deducting placement agent and other offering expenses.

 

Going Concern

 

As a result of our current financial condition, we have received a report from our independent registered public accounting firm for our financial statements for the years ended December 31, 2020 and 2019 that includes an explanatory paragraph describing the uncertainty as to our ability to continue as a going concern. In order to continue as a going concern, we must effectively balance many factors and generate more revenue so that we can fund our operations from our sales and revenues. If we are not able to do this, we may not be able to continue as an operating company. Until we can grow revenues sufficient to meet our operating expenses, we must continue to raise capital by issuing debt or through the sale of our stock. There is no assurance that our cash flow will be adequate to satisfy our operating expenses and capital requirements.

 

Results of Operations for the Three months Ended March 31, 2021 and 2020

 

Introduction

 

We had sales of $634,533 for the three months ended March 31, 2021 and $405,886 for the three months ended March 31, 2020, an increase of $248,647. Our operating expenses were $995,138 for the three months ended March 31, 2021, compared to $1,065,558 for the three months ended March 31, 2020, a decrease of $70,420 or approximately 6.7%. Our net operating (loss) was ($679,238) for the three months ended March 31, 2021, compared to ($912,098) for the three months ended March 31, 2020, a decrease of $232,860 or approximately 26%.

 

 
5

Table of Contents

 

Revenues and Net Operating Loss

 

Our operations for the three months ended March 31, 2021 and 2020 were as follows:

 

 

 

March 31,

 

 

March 31,

 

 

Increase /

 

 

 

2021

 

 

2020

 

 

(Decrease)

 

 

 

 

 

 

 

 

 

 

 

Sales

 

$ 634,533

 

 

$ 405,886

 

 

$ 228,647

 

Cost of Sales

 

 

318,633

 

 

 

252,426

 

 

 

66,207

 

Gross Profit

 

 

315,900

 

 

 

153,460

 

 

 

162,440

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Officers compensation

 

 

103,750

 

 

 

103,750

 

 

 

-

 

Professional and consulting

 

 

158,903

 

 

 

186,789

 

 

 

(27,886 )

Royalties

 

 

99,128

 

 

 

15,964

 

 

 

83,164

 

Investor relations

 

 

180,752

 

 

 

361,689

 

 

 

(180,937 )

Marketing and advertising

 

 

121,168

 

 

 

128,645

 

 

 

(7,477 )

Travel and entertainment

 

 

12,843

 

 

 

19,469

 

 

 

(6,626 )

Other operating expenses, including occupancy

 

 

318,594

 

 

 

249,252

 

 

 

69,342

 

Total operating expenses

 

 

995,138

 

 

 

1,065,558

 

 

 

(70,420 )

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating income (loss)

 

 

(679,238 )

 

 

(912,098 )

 

 

(232,860 )

Other income (expense)

 

 

28,458

 

 

 

-

 

 

 

28,458

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss (income) attributable to noncontrolling interests in subsidiaries and variable interest entity

 

 

(16,174 )

 

 

74,178

 

 

 

(90,352 )

Net income (loss) attributable to Iconic Brands, Inc

 

 

(666,954 )

 

 

(837,920 )

 

 

(170,966 )

 

Sales

 

Our sales are comprised of sales of BiVi Sicilian Vodka, Bellissima Prosecco and Sparkling Wine, and the line of Hooters brand products introduced in August 2019. Sales were $634,533 for the three months ended March 31, 2021 and $405,886 for the three months ended March 31, 2020, an increase of $228,647 or approximately 56%. The increase is due to higher sales to distributors of the Bellissima products.

 

Cost of Sales

 

Cost of sales was $318,633, or approximately 50% of sales, for the three months ended March 31, 2021 and $252,426, or approximately 62% of sales, for the three months ended March 31, 2020. Cost of sales includes the cost of the products purchased from our suppliers, freight-in costs and import duties. The decrease in cost of sales as a percentage of sales was due to higher sales in 2021 to distributors which have a higher selling price than sales through other channels.

 

Officers Compensation

 

Officers compensation was $103,750 for the three months ended March 31, 2021 and $103,750 for the three months ended March 31, 2020.

 

Effective April 1, 2018, we executed Employment Agreements with our Chief Executive Officer Richard DeCicco (“DeCicco”) and its Vice President of Sales and Marketing Roseann Faltings (“Faltings”). Both agreements have a term of 24 months (to March 31, 2020). The DeCicco Employment Agreement provides for a base salary at the rate of $265,000 per annum and a compensation stock award of 300,000 shares of Iconic common stock (the “DeCicco Award”) issuable upon the effective date of the planned reverse stock split. The DeCicco Award has been issued as of the date of this Quarterly Report. The Faltings Employment Agreement provides for a base salary at the rate of $150,000 per annum and a compensation stock award of 100,000 shares of Iconic common stock (the “Faltings Award”) issuable upon the effective date of the planned reverse stock split. The Faltings Award has been issued as of the date of this Quarterly Report. As of December 31, 2019, we accrued a total of $415,000 officers’ compensation pursuant to these two Employment Agreements that had not been paid.

 

 
6

Table of Contents

 

Fulfillment Costs

 

We had fulfillment costs of $140,000 for the three months ended March 31, 2021 compared to $50,000 for the three months ended March 31, 2020, an increase of $90,000, The increase is due to costs associated with the QVC sales channel and also increased costs associated with increased sales to our distributors.

 

Professional and Consulting Fees

 

Professional and consulting fees were $158,903 for the three months ended March 31, 2021 and $186,789 for the three months ended March 31, 2020, a decrease of $27,886. Professional and consulting fees consist primarily of legal and, accounting and auditing services. The decrease of approximately $27,886 from 2020 to 2021 was related to lower legal costs as a result of closing a financing transaction in 2020.

  

Royalties

 

We expensed royalties of $99,128 for the three months ended March 31, 2021 compared to $15,964 for the three months ended March 31, 2020, an increase of $83,164, or 520%. Royalties increased due to primarily to minimum royalties associated with the Hooters product brand.

  

Investor relations

 

Investor relation expenses were $180,752 for the three months ended March 31, 2021 and $361,689 for the three months ended March 31, 2020, a decrease of $180,937 or approximately 50%. The decrease was primarily related to significant investor relations activity in January 2020, including a national presentation in numerous cities that did not occur in 2021.

  

Marketing and Advertising

 

Marketing and advertising expenses were $121,168 for the three months ended March 31, 2021 and $128,645 for the three months ended March 31, 2020, a decrease of $7,477 or approximately 6%. No significant item account for the decrease.

 

Travel and Entertainment

 

Travel and entertainment expenses were $12,843 for the three months ended March 31, 2021 and $19,469 for the three months ended March 31, 2020, a decrease of $6,626 or approximately 34%. The decrease was a result of limited travel during the three months ended March 31, 2021 due to the COVID-19 environment.

 

Other Operating Expenses

  

Other operating expenses were $318,594 for the three months ended March 31, 2021 and $249,252 for the three months ended March 31, 2020, an increase of $69,342 or approximately 28%. The increase was primarily related to warehouse and office related costs.

 

Net Operating Income/Loss

 

We had a (loss) from operations of ($679,238) for the three months ended March 31, 2021 and ($912,098) for the three months ended March 31, 2020, an decrease of $232,860 or approximately 26%. Net operating (loss) decreased, as set forth above, primarily because sales increased, offset by increases in the various expense categories.

 

 
7

Table of Contents

  

Net (income) Loss attributable to Noncontrolling Interests in Subsidiaries and Variable Interest Entity

 

Net income attributable to noncontrolling interests in subsidiaries and variable interest entity represented 49% of the net loss of Bellissima and BiVi (of which we own 51%) and 100% of United Spirits (of which we own 0%) and is accounted for as a reduction in the net loss attributable to our company. Net income for the three months ended March 31, 2021 was $16,174 compared to a net loss of $74,178 for the three months ended March 31, 2020, a decrease in the loss of $90,352.

 

Net Loss Attributable to Iconic Brands, Inc.

 

The net loss attributable to Iconic Brands, Inc. was $(666,954) for the three months ended March 31, 2021 and ($837,920) for the three months ended March 31, 2020, a decrease of $170,966 or approximately 20%. The net loss from Iconic Brands decreased primarily as a result of increased sales, lower operating costs and income generated from non-controlling interests.

 

Liquidity and Capital Resources

 

Introduction

 

During the three months ended March 31, 2021 and March 31, 2020, we had negative operating cash flows. Our cash on hand as of March 31, 2021 was $343,820.. Our monthly cash flow burn rate for 2021 was approximately $200,000, and our monthly burn rate through the three months ended March 31, 2021 was approximately $200,000. We have strong medium to long term cash needs. We anticipate that these needs will be satisfied through the issuance of debt or the sale of our securities until such time as our cash flows from operations will satisfy our cash flow needs.

 

Our cash, current assets, total assets, current liabilities, and total liabilities as of March 31, 2021 and December 31, 2020, respectively, were as follows:

 

 

 

March 31,

 

 

December 31,

 

 

 

 

 

 

2021

 

 

2020

 

 

Change

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$ 343,820

 

 

$ 457,041

 

 

$ (113,221 )

Total Current Assets

 

 

1,162,320

 

 

 

1,298,999

 

 

 

(136,598 )

Total Assets

 

 

1,203,229

 

 

 

1,354,892

 

 

 

(151,663 )

Total Current Liabilities

 

 

3,501,380

 

 

 

3,183,015

 

 

 

318,365

 

Total Liabilities

 

$ 3,501,380

 

 

$ 3,183,015

 

 

$ 318,365

 

 

Our cash decreased $113,221 and total current assets decreased $136,598. Our total current liabilities increased $318,365 as our accounts payable and accrued expenses increased. Our total liabilities increased $318,365. Our stockholders’ equity decreased from $(1,828,123) to $(2,298,151) due primarily to the operating loss in the quarter.

 

In order to repay our obligations in full or in part when due, we will be required to raise significant capital from other sources. There is no assurance, however, that we will be successful in these efforts. Please see the Risk Factors beginning on page 10.

 

Cash Requirements

 

Our cash on hand as of March 31, 2021 was $343,820. We anticipate that the funding from financing activities and product sales will be enough to sustain us for the next 12 months.

 

 
8

Table of Contents

 

Sources and Uses of Cash

 

Operations

 

Our net cash (used in) operating activities for the three months ended March 31, 2021 and 2020 was $101,300 and $622,857, respectively, a decrease of $521,557. The decrease in cash used in operations was primarily due to a decrease in accounts receivable and an increase in accounts payable.

 

Investments

 

For the three months ended March 31, 2021 we used cash for investing activities of $0 for $8,708. For the three months ended March 31, 2020, we used cash in 2020 for the purchase of furniture and equipment.

 

Financing

 

Our net cash used for financing activities for the three months ended March 31, 2021 was $11,921 (repayment of loans) compared to $1,284,613 of cash provided by financing activities for the three months ended March 31, 2020, which consisted principally of issuance of Preferred Series G stock.

 

Off-Balance Sheet Arrangements; Commitments and Contractual Obligations

 

As of March 31, 2021,we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments or contractual obligations.

 

ITEM 3 Quantitative and Qualitative Disclosures About Market Risk

 

As a smaller reporting company, we are not required to provide the information required by this Item.

 

ITEM 4 Controls and Procedures

 

(a) Disclosure Controls and Procedures

 

We carried out an evaluation, under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined) in Exchange Act Rules 13a - 15(c) and 15d - 15(e). Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

 

Our Principal Executive Officer and Principal Financial Officer does not expect that our disclosure controls or internal controls will prevent all error and all fraud. Although our disclosure controls and procedures were designed to provide reasonable assurance of achieving their objectives and our Principal Executive Officer and Principal Financial Officer has determined that our disclosure controls and procedures are effective at doing so, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute assurance that the objectives of the system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented if there exists in an individual a desire to do so. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

 

Furthermore, smaller reporting companies face additional limitations. Smaller reporting companies employ fewer individuals and find it difficult to properly segregate duties. Often, one or two individuals control every aspect of the company's operation and are in a position to override any system of internal control. Additionally, smaller reporting companies tend to utilize general accounting software packages that lack a rigorous set of software controls.

 

(b) Changes in Internal Control over Financial Reporting

 

No change in our system of internal control over financial reporting occurred during the period covered by this report, the three month period ended March 31, 2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 
9

Table of Contents

 

PART II - OTHER INFORMATION

 

ITEM 1 Legal Proceedings

 

From time to time, we may be subject to litigation and claims arising in the ordinary course of business. We are not currently a party to any material legal proceedings and we are not aware of any pending or threatened legal proceeding against us that we believe could have a material adverse effect on our business, operating results, cash flows or financial condition.

 

ITEM 1A Risk Factors

 

An investment in our common stock involves a high degree of risk. You should carefully consider the following risk factors and the other information in this Quarterly Report on Form 10-Q before investing in our common stock. Our business and results of operations could be seriously harmed by any of the following risks. The risks set out below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. If any of the following events occur, our business, financial condition and results of operations could be materially adversely affected. In such case, the value and trading price of our common stock could decline, and you may lose all or part of your investment.

 

Risk Factors Related to the Business of the Company

 

We have a history of losses, and may not achieve or maintain profitability in the future.

 

We have had a limited number of quarters or years of profitability and have historically raised capital to meet our needs. Our net losses for the year ended December 31, 2020 and 2019 were $3,571,602 and $3,953,911, respectively, and our accumulated deficit as of December 31, 2020 was $1,828,123 and we had positive equity of $490,198, as of December 31, 2019. In addition we had a loss of $664,954 in the first quarter of 2021 and our equity at March 31, 2021 was negative $2,298,151. We may sustain losses in the future as we implement our business plan, and there can be no assurance that we will ever generate revenues or maintain profitability in the future.

 

Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern, which may hinder our ability to obtain future financing.

 

Our financial statements as of December 31, 2020 have been prepared under the assumption that we will continue as a going concern for the next twelve months. Our independent registered public accounting firm included in its opinion for the year ended December 31, 2020 an explanatory paragraph referring to our recurring losses from operations and expressing substantial doubt in our ability to continue as a going concern without additional capital becoming available. Our ability to continue as a going concern is dependent upon our ability to obtain additional equity or debt financing, reduce expenditures and to generate significant revenue. Our financial statements as of December 31, 2020 did not include any adjustments that might result from the outcome of this uncertainty. The reaction of investors to the inclusion of a going concern statement by our auditors, and our potential inability to continue as a going concern, in future years could materially adversely affect our share price and our ability to raise new capital or enter into strategic alliances. Furthermore, we also could be required to seek funds through arrangements with collaborative partners or otherwise that may require us to relinquish rights to some of our technologies or product candidates or otherwise agree to terms unfavorable to us.

 

 
10

Table of Contents

 

If we fail to obtain the capital necessary to fund our operations, we will be unable to continue our operations and you will likely lose your entire investment.

 

We will need to continue to seek capital from time to time to continue to execute our business plan. Our business or operations may change in a manner that would consume available funds more rapidly than anticipated and substantial additional funding may be required to maintain operations, fund expansion, develop new or enhanced products, acquire complementary products, business or technologies or otherwise respond to competitive pressures and opportunities. In addition, we may need to accelerate the growth of our sales capabilities and distribution beyond what is currently envisioned, and this would require additional capital. However, we may not be able to secure funding when we need it or on favorable terms.

 

If we cannot raise adequate funds to satisfy our capital requirements, we will have to curtail or cease our operations.

 

Even if we can raise additional funding, we may be required to do so on terms that are dilutive to you.

 

The capital markets have been unpredictable in the recent past. The amount of capital that a company such as ours is able to raise often depends on variables that are beyond our control. As a result, we may not be able to secure financing on terms attractive to us, or at all. If we are able to consummate a financing arrangement, the amount raised may not be sufficient to meet our future needs. If adequate funds are not available on acceptable terms, or at all, our business, including our results of operations, financial condition and our continued viability will be materially adversely affected.

  

Widespread health developments, including the recent global COVID-19 pandemic, could materially and adversely affect our business, financial condition and results of operations.

 

Our business has been, and may continue to be, impacted by the fear of exposure to or actual effects of the COVID-19 pandemic in countries where we operate or our customers are located, such as recommendations or mandates from governmental authorities to close businesses, limit travel, avoid large gatherings or to self-quarantine, as well as temporary closures or decreased operations of the facilities of our customers, distributors or suppliers. These impacts include, but are not limited to:

 

·

Significant reductions in demand or significant volatility in demand for one or more of our products, which may be caused by, among other things: the temporary inability of consumers to purchase our products due to illness, quarantine or other restrictions, store or restaurant closures, or financial hardship, shifts in demand away from one or more of our higher priced products to lower priced products, or stockpiling or similar activity, reduced options for marketing and promotion of products or other restrictions in connection with the COVID-19 pandemic; if prolonged, such impacts can further increase the difficulty of operating our business, including accurately planning and forecasting;

·

Inability to meet our consumers' and customers' needs and achieve costs targets due to disruptions in our manufacturing and supply arrangements caused by the loss or disruption of essential manufacturing and supply elements such as raw materials or purchased finished goods, logistics, reduction or loss of workforce due to the insufficiency or failure of our safety protocols, or other manufacturing and supply capability;

·

Failure of third parties on which we rely, including our suppliers, bottlers, distributors, contract manufacturers, contractors, commercial banks and external business partners, to meet their obligations to us or to timely meet those obligations, or significant disruptions in their ability to do so, which may be caused by their own financial or operational difficulties; or

·

Significant changes in the conditions in markets in which we manufacture, sell or distribute our products, including quarantines, governmental or regulatory actions, closures or other restrictions that limit or close our operating and manufacturing facilities, restrict our employees' ability to perform necessary business functions, restrict or prevent consumers from having access to our products, or otherwise prevent our third-party bottlers, distributors, partners, suppliers, or customers from sufficiently staffing operations, including operations necessary for the production, distribution, sale, and support of our products.

 

 
11

Table of Contents

  

All of these impacts could place limitations on our ability to execute on our business plan and materially and adversely affect our business, financial condition and results of operations. We continue to monitor the situation, have actively implemented policies and procedures to address the situation, and may adjust our current policies and procedures as more information and guidance become available to address the evolving situation. The impact of COVID-19 may also exacerbate other risks discussed in this Report, any of which could have a material effect on us. This situation is changing rapidly and additional impacts may arise that we are not aware of currently.

 

We face risks related to our inventory, and if we fail to accurately predict demand for products, we may face write-downs or other charges.

 

We are exposed to inventory risks that may adversely affect operating results as a result of new product launches, changes in product cycles and pricing, limited shelf-life of certain of our products, changes in consumer demand, and other factors. Demand for products can change significantly between the time of production and the date of sale. If we are unable to accurately prediction demand for our products, we may face write-downs or other charges.

 

Disruptions in our supply chain could have a substantial adverse impact on our ability to produce our wines and the cost of our raw materials.

 

We are exposed to production risks, especially in the case of Bellissima Prosecco and Sparking Wines, due to weather conditions. The growing and harvesting of the grapes that we need to make our wines are directly affected by the weather conditions. Adverse weather conditions may decrease the availability of grapes thereby increasing the cost of grapes which would have a material adverse effect on our business and operations.

 

In addition, we produce our wines at two production facilities located in Sicily, Italy and Treviso, Italy. A disruption from fire or other catastrophic event at either of these facilities could halt production and have a material adverse effect on our financial condition.

 

Contamination and degradation of product quality from diseases, pests and weather conditions may have a material adverse effect on our business and results of operation.

 

Our success depends upon the positive image that consumers have of our brands and of the safety and quality of our products. Contamination, whether arising accidentally or through deliberate third-party action, or other events that harm the integrity or consumer support for our brands, could adversely affect their sales. Various diseases, pests, fungi, viruses, drought, frosts and certain other weather conditions could affect the quality and quantity of grapes and other agricultural raw materials available, decreasing the supply and quality of our products. We cannot guarantee that our grape suppliers or our suppliers of other agricultural raw materials will succeed in preventing contamination in existing vineyards or fields or that we will succeed in preventing contamination in our existing vineyards or future vineyards we may acquire. Future government restrictions regarding the use of certain materials used in growing grapes or other agricultural raw materials may increase vineyard costs and/or reduce production of grapes or other crops. It is also possible that a supplier may not provide materials or product components which meet our required standards or may falsify documentation associated with the fulfillment of those requirements.

 

Product contamination or tampering or the failure to maintain our standards for product quality, safety and integrity, including with respect to raw materials, naturally occurring compounds, packaging materials or product components obtained from suppliers, may also reduce demand for our products or cause production and delivery disruptions. Contaminants or other defects in raw materials, packaging materials or product components purchased from third parties and used in the production of our wine or spirits products could lead to low beverage quality as well as illness among, or injury to, consumers of our products and may result in reduced sales of the affected brand or all our brands.

 

 
12

Table of Contents

 

If any of our products become unsafe or unfit for consumption, are misbranded, or cause injury, we may have to engage in a product recall and/or be subject to liability and incur additional costs. A widespread product recall, multiple product recalls, or a significant product liability judgment could cause our products to be unavailable for a period, which could further reduce consumer demand and brand equity thereby adversely affecting our business and results of operations.

 

Climate change and environmental regulatory compliance may have an adverse effect on our operations.

 

Our business depends upon agricultural activity and natural resources. There has been much public discussion related to concerns that carbon dioxide and other greenhouse gases in the atmosphere may have an adverse impact on global temperatures, weather patterns and the frequency and severity of extreme weather and natural disasters. Decreased availability of our raw materials may increase the cost of goods for our products. Severe weather events or changes in the frequency or intensity of weather events can also disrupt our supply chain, which may affect production operations, insurance cost and coverage, as well as delivery of our products to wholesalers, retailers and consumers. Natural disasters such as floods and earthquakes may also negatively impact the ability of consumers to purchase our products.

 

We may experience significant future increases in the costs associated with environmental regulatory compliance, including fees, licenses, and the cost of capital improvements for our operating facilities to meet environmental regulatory requirements. In addition, we may be party to various environmental remediation obligations arising in the normal course of our business or relating to historical activities of businesses we acquire. Due to regulatory complexities, uncertainties inherent in litigation and the risk of unidentified contaminants in our current and former properties, the potential exists for remediation, liability and indemnification costs to differ materially from the costs that we have estimated. We may incur costs associated with environmental compliance arising from events we cannot control, such as unusually severe floods, hurricanes, earthquakes or fires. We cannot assure you that our costs in relation to these matters will not exceed our projections or otherwise have a material adverse effect upon our business, liquidity, financial condition or results of operations.

 

A potential decline in the consumption of the products we sell could have a material adverse effect on our business.

 

Our business depends upon consumers’ consumption of our wine and spirits brands. Consumer preferences and tastes may shift due to, among other reasons, changing taste preferences, demographics or perceived value. Consequently, any material shift in consumer preferences and taste away from our, wine and spirits brands could have a negative impact on our business, liquidity, financial condition and/or results of operations. Consumer preferences may shift due to a variety of factors, including changes in demographic or social trends, public health policies, and changes in leisure, dining and beverage consumption patterns. A limited or general decline in consumption of our products could occur in the future due to a variety of factors, including:

 

·

a general decline in economic or geopolitical conditions;

·

concern about the health consequences of consuming beverage alcohol products and about drinking and driving;

·

a general decline in the consumption of beverage alcohol products in on-premise establishments, such as may result from stricter laws relating to driving while under the influence of alcohol;

·

the increased activity of anti-alcohol groups;

·

increased federal, state, provincial and foreign excise or other taxes on beverage alcohol products and possible restrictions on beverage alcohol advertising and marketing;

·

inflation; and

·

wars, pandemics, weather and natural or man-made disasters.

 

 
13

Table of Contents

 

We face significant competition which could adversely affect our business.

 

The wine industry is highly competitive. Our wines compete in several super-premium and ultra-premium wine market segments with many other domestic and foreign wines. Our wines also compete with other alcoholic and, to a lesser degree, non-alcoholic beverages, for shelf space in retail stores and for marketing focus by independent distributors, many of which carry extensive brand portfolios. In addition, the wine industry has experienced significant consolidation. Many competitors have greater financial, technical, marketing and public relations resources.

 

Our sales could be negatively affected by numerous factors including:

 

·

our inability to maintain or increase prices;

·

new entrants in our market or categories;

·

the decision of wholesalers, retailers or consumers to purchase competitors’ products instead of ours; or

·

a general decline in beverage alcohol consumption due to consumer dietary preference changes or consumers substituting legalized marijuana or other similar products in lieu of beverage alcohol.

 

Furthermore, sales could also be affected by pricing, purchasing, financing, operational, advertising or promotional decisions made by wholesalers, state and other local agencies, and retailers which could affect their supply of, or consumer demand for, our products. We could also experience higher than expected selling, general and administrative expenses if we find it necessary to increase the number of our personnel or our advertising or marketing expenditures to maintain our competitive position or for other reasons. We cannot guarantee that we will be able to increase our prices to pass along to our customers any increased costs we incur. Our sales may be harmed to the extent we are not able to compete successfully against wine or alternative beverage producers.

 

Our business depends on the effectiveness of our advertising and marketing programs, including the strength of our social media presence, to attract and retain members and subscribers.

 

Our business success depends on our ability to attract and retain consumers which depends significantly on the effectiveness of our advertising and marketing practices. In addition, from time-to-time, we use brand ambassadors, spokespersons and social media influencers in our advertising and marketing programs to communicate with consumers. Actions taken by these individuals that harm their personal reputation or image, or include the cessation of using our products, could have an adverse impact on the advertising and marketing campaigns in which they are featured. We and our brand ambassadors, spokespersons and social media influencers also use social media channels as a means of communicating with consumers. Unauthorized or inappropriate use of these channels could result in harmful publicity or negative consumer experiences, which could have an adverse impact on the effectiveness of our marketing in these channels. In addition, substantial negative commentary by others on social media platforms could have an adverse impact on our reputation and ability to attract and retain members and subscribers. If our advertising and marketing campaigns do not generate a sufficient number of consumers, our business, financial condition and results of operations could be adversely affected.

 

The loss of one or more of our current customers could adversely affect our results of operations.

 

Our business is dependent not only on securing new customers but also on maintaining current customers. We had one customer, QVC, Inc., that accounted for approximately 68% of our sales for the year ended December 31, 2020. At December 31, 2020, one customer, QVC, Inc., accounted for an aggregate of approximately 60% of our accounts receivable. Unless we are able to retain our existing customers, or secure new customers if we lose one or more of our significant customers, our revenue and results of operations would be adversely affected. In addition, the default on payments by one or more of these significant customers may negatively impact our cash flow and current assets.

 

 
14

Table of Contents

 

Any changes to our relation with QVC or retail outlets may have a material adverse effect on our business.

 

For the year ended December 31, 2020, we had direct response sales of approximately $2.0 million, which represented almost all of our direct to consumer sales for the year. These sales were made pursuant to the Marketing Agreement between United and with QVC, which currently extends through December 4, 2021. Our agreements with other direct retail partners are informal and therefore subject to change. If the Marketing Agreement is terminated, one or more of the direct retail partners chose to purchase fewer products, or we are forced to reduce the prices at which we currently sell our products, our sales and profits would be reduced and the business would be harmed.

 

We may engage in strategic transactions that fail to enhance shareholder value.

 

From time to time, we may consider possible strategic transactions, including the potential acquisitions or licensing of products or technologies or acquisition of companies, and other alternatives with the goal of maximizing shareholder value. We may never complete a strategic transaction, and in the event that we do complete a strategic transaction, implementation of such transactions may impair shareholder value or otherwise adversely affect our business. There can be no assurance that our acquisitions will perform as expected in the future. For example, we may be unable to successfully integrate the operations of and/or the acquired assets of the businesses we acquire into our operations and we may not realize the anticipated efficiencies and synergies of such acquisitions. In addition, acquisitions require significant managerial attention, which may be diverted from our other operations. If the businesses or products we acquire do not achieve their intended results, our business, financial condition, and results of operations could be materially and adversely affected.

 

We may not be successful in hiring and retaining key employees, including executive officers.

 

Our future operations and successes depend in large part upon the strength of our management team. We rely heavily on the continued service of Richard DeCicco, our Chief Executive Officer, Chief Financial Officer, President and member of our board of directors. Accordingly, if Mr. DeCicco terminates his employment with us, such a departure may have a material adverse effect on our business, and our future success depends on our ability to identify, attract, hire or engage, retain and motivate other well-qualified personnel. There can be no assurance that these professionals will be available in the market, or that we will be able to retain existing professionals or to meet or to continue to meet their compensation requirements. Furthermore, the cost base in relation to such compensation, which may include equity compensation, may increase significantly, which could have a material adverse effect on us. Failure to establish and maintain an effective management team and work force could adversely affect our ability to operate, grow and manage our business.

 

Our operations may be adversely affected by our failure to maintain or renegotiate distribution, supply, manufacturing or license agreements on favorable terms.

 

Our business involves a number of distribution, supply, manufacturing or license agreements for brands owned by us or by other companies. For example, we entered into the Distribution Agreement with United, a company which is owned and managed by Richard DeCicco, our Chief Executive Officer, Chief Financial Officer, President and member of our board of directors. There can be no assurance that we will be able to renegotiate our rights on favorable terms when these agreements expire or that they will not be terminated. Failure to renew such agreements could have an adverse impact on our business and financial results.

 

Class action or other litigation relating to alcohol abuse or the misuse of alcohol could adversely affect our business.

 

There has been increased public attention directed at the beverage alcohol industry, which we believe is due to concern over problems related to alcohol abuse, including drinking and driving, underage drinking and health consequences from the misuse of alcohol. Several beverage alcohol producers have been sued in several courts regarding alleged advertising practices relating to underage consumers. Adverse developments in these or similar lawsuits or a significant decline in the social acceptability of beverage alcohol products that results from these lawsuits could materially adversely affect our business.

 

 
15

Table of Contents

 

Regulatory decisions and changes in the legal, and regulatory environment could increase our costs and liabilities or limit our business activities.

 

Our operations are subject to extensive regulatory requirements relating to production, distribution, importation, marketing, advertising, sales, pricing, labelling, packaging, product liability, antitrust, labor, pensions, compliance and control systems, and environmental issues. Changes in any such applicable laws, regulations or governmental or regulatory policies and/or practices could cause us to incur material additional costs or liabilities that could adversely affect our business. In particular, governmental bodies in jurisdictions where we operate may impose new labelling, product or production requirements, limitations on the marketing, advertising and/or promotion activities used to market beverage alcohol, restrictions on retail outlets, restrictions on importation and distribution or other restrictions on the locations or occasions where beverage alcohol is sold which directly or indirectly limit the sales of our products. Regulatory authorities may also have enforcement power that can subject us to actions such as product recalls, product seizures or other sanctions which could have an adverse effect on our sales or damage our reputation. Any changes to the regulatory environment in which we operate could also cause us to incur material additional costs or liabilities, which could adversely affect our performance.

 

In addition, most states in which our wines and spirits are sold impose varying excise taxes on the sale of alcoholic beverages. Prompted by growing government budget shortfalls and public reaction against alcohol abuse, government entities often consider legislation that could potentially affect the taxation of alcoholic beverages. Excise tax rates being considered are often substantial. The ultimate effects of such legislation, if passed, cannot be assessed accurately. Any increase in the taxes imposed on wines and spirits can be expected to have a potentially adverse impact on overall sales of such products. However, the impact may not be proportionate to that experienced by distributors of other alcoholic beverages and may not be the same in every state.

 

We are subject to cybersecurity risks.

 

Cybersecurity risks and attacks continue to increase. Cybersecurity attacks are evolving and not always predictable. Attacks include malicious software, threats to information technology infrastructure, denial-of-service attacks on websites, attempts to gain unauthorized access to data, and other breaches. Data breaches can originate with authorized or unauthorized persons. Authorized persons could inadvertently or intentionally release confidential or proprietary information, and recipients could misuse data. Such events could lead to interruption of our operations or business, unauthorized release or use of information, compromise of data, damage to our reputation, damage to our customers or vendors, and increased costs to prevent, respond to or mitigate any events.

 

Risks Related To Our Common stock

 

The market price of our common stock may be volatile and may be affected by market conditions beyond our control.

 

The market price of our common stock is subject to significant fluctuations in response to, among other factors:

 

·

variations in our operating results and market conditions specific to companies in our industry;

·

changes in financial estimates or recommendations by securities analysts;

·

announcements of innovations or new products or services by us or our competitors;

·

the emergence of new competitors;

·

operating and market price performance of other companies that investors deem comparable;

·

changes in our board or management;

·

sales or purchases of our common stock by insiders;

·

commencement of, or involvement in, litigation;

·

changes in governmental regulations; and

·

general economic conditions and slow or negative growth of related markets.

 

 
16

Table of Contents

  

In addition, if the market for stocks in our industry or the stock market in general, experiences a loss of investor confidence, the market price of our common stock could decline for reasons unrelated to our business, financial condition or results of operations. If any of the foregoing occurs, it could cause the price of our common stock to fall and may expose us to lawsuits that, even if unsuccessful, could be costly to defend and a distraction to the board of directors and management.

 

Future sales and issuances of our securities could result in additional dilution of the percentage ownership of our stockholders and could cause our share price to fall.

 

We expect that significant additional capital will be needed in the future to continue our planned operations, including continuing activities as an operating public company. To the extent we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution. We may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell common stock, convertible securities or other equity securities in more than one transaction, investors may be materially diluted by subsequent sales. Such sales may also result in material dilution to our existing stockholders, and new investors could gain rights superior to our existing stockholders.

 

Financial reporting obligations of being a public company in the United States are expensive and time-consuming, and our management will be required to devote substantial time to compliance matters.

 

As a publicly traded company we incur significant legal, accounting and other expenses. The obligations of being a public company in the United States require significant expenditures and places significant demands on our management and other personnel, including costs resulting from public company reporting obligations under the Securities Exchange Act of 1934 (“Exchange Act”) and the rules and regulations regarding corporate governance practices, including those under the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act. These rules require the establishment and maintenance of effective disclosure and financial controls and procedures, internal control over financial reporting and changes in corporate governance practices, among many other complex rules that are often difficult to implement, monitor and maintain compliance with. In addition, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance. Our management and other personnel will need to devote a substantial amount of time to ensure that we comply with all of these requirements and to keep pace with new regulations, otherwise we may fall out of compliance and risk becoming subject to litigation or being delisted, among other potential problems.

 

If we do not continue to meet the eligibility requirements of the OTCQB, our common stock may be removed from the OTCQB and moved for quotation on the OTC Pink tier of the marketplace maintained by OTC Markets Group, Inc., which may make it more difficult for investors to resell their shares.

 

Our common stock is currently quoted on the OTCQB tier of the marketplace maintained by OTC Markets Group, Inc. The OTCQB requires a minimum bid price of $0.01. If the bid price goes below $0.01, we may be removed from the OTCQB. If we are removed from the OTCQB, our stock will be quoted on the OTC Pink tier. Broker-dealers often decline to trade in over-the-counter stocks that are quoted on the OTC Pink tier given the market for such securities are often limited, the stocks are more volatile, and the risk to investors is greater. These factors may reduce the potential market for our common stock by reducing the number of potential investors. This may make it more difficult for investors in our common stock to dispose of their shares.

 

 
17

Table of Contents

 

Our common stock is subject to the “penny stock” rules of the SEC and the trading market in the securities is limited, which makes transactions in the stock cumbersome and may reduce the value of an investment in the stock.

 

Rule 15g-9 under the Exchange Act establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: (a) that a broker or dealer approve a person’s account for transactions in penny stocks; and (b) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

 

In order to approve a person’s account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information and investment experience objectives of the person and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

 

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form: (a) sets forth the basis on which the broker or dealer made the suitability determination; and (b) confirms that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our common stock.

 

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker or dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

 

We have no independent directors, no board committees. This may hinder our board of directors’ effectiveness in fulfilling the typical functions of a board and of committees thereof.

 

Currently, we have no independent directors, nor do we have an audit committee, compensation committee or nominating and corporate governance committee at this time. An independent board and audit committees, compensation committees and nominating and corporate governance committees with independent directors play a crucial role in the corporate governance process, assessing a company’s processes relating to its risks and control environment, overseeing financial reporting, preventing self-dealing by company executives and evaluating internal and independent audit processes. The lack of an independent board or committees prevents the board of directors from being independent from management in its judgments and decisions and its ability to pursue the board’s responsibilities without undue influence. We may have difficulty attracting and retaining directors with the requisite qualifications. If we are unable to attract and retain qualified, independent directors, the management of our business could be compromised. In addition, our sole director is not a “financial expert”.

 

We do not intend to pay cash dividends on our shares of common stock so any returns will be limited to the value of our shares.

 

We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Any return to stockholders will therefore be limited to the increase, if any, of our share price.

 

 
18

Table of Contents

 

Our Articles of Incorporation, as amended (Articles of Incorporation), our Restated Bylaws, and Nevada law may have anti-takeover effects that could discourage, delay or prevent a change in control, which may cause our stock price to decline.

 

Our Articles of Incorporation, Bylaws, and Nevada law could make it more difficult for a third party to acquire us, even if closing such a transaction would be beneficial to our stockholders. We are authorized to issue up to 100,000,000 shares of preferred stock, of which one share has been designated as Series A Preferred Stock and one share is issued and outstanding; 1,000,000 shares have been designated as Series B Preferred Stock and no shares are issued and outstanding; 1,000 shares have been designated as Series C Preferred Stock and no shares are issued and outstanding; 10 shares have been designated as Series D Preferred Stock and no shares are issued and outstanding; 5,000,000 shares have been designated as Series E Preferred Stock and 356,176 shares are issued and outstanding; 4,500 shares have been designated as Series F Preferred Stock and 3,045 shares are issued and outstanding; and 1,500 shares have been designated as Series G Preferred Stock and 1,500 shares are issued and outstanding. Our authorized but undesignated preferred stock may be issued in one or more series, the terms of which may be determined at the time of issuance by our board of directors without further action by stockholders. The terms of any series of preferred stock may include voting rights (including the right to vote as a series on particular matters), preferences as to dividend, liquidation, conversion and redemption rights and sinking fund provisions. The issuance of any preferred stock could materially adversely affect the rights of the holders of our common stock, and therefore, reduce the value of our common stock. In particular, specific rights granted to future holders of preferred stock could be used to restrict our ability to merge with, or sell our assets to, a third party and thereby preserve control by the present management.

 

Provisions of our Articles of Incorporation, our Bylaws and Nevada law also could have the effect of discouraging potential acquisition proposals or making a tender offer or delaying or preventing a change in control, including changes a stockholder might consider favorable. Such provisions may also prevent or frustrate attempts by our stockholder s to replace or remove our management. In particular, the Articles of Incorporation, our Bylaws and Nevada law, as applicable, among other things:

 

·

provide the board of directors with the ability to alter the Bylaws without stockholder approval; and

·

provide that vacancies on the board of directors may be filled by a majority of directors in office, although less than a quorum.

 

We have identified a material weakness in our internal control over financial reporting that could, if not remediated, result in material misstatements in our financial statements.

 

In connection with the audit of our consolidated financial statements as of and for the year ended December 31, 2020, we have concluded that there is a material weakness relating to our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

 

Specifically, we identified a material weakness relating to the lack of segregation of duties. Although we need to take measures to fully mitigate such material weakness, the measures we have taken, and expect to take, to improve our internal controls may not be sufficient to address the issues identified, to ensure that our internal controls are effective or to ensure that the identified material weakness will not result in a material misstatement of our annual or interim consolidated financial statements. If we are unable to correct material weaknesses or deficiencies in internal controls in a timely manner, our ability to record, process, summarize and report financial information accurately and within the time periods specified in the rules and forms of the SEC, will be adversely affected. This failure could negatively affect the market price and trading liquidity of our common stock, cause investors to lose confidence in our reported financial information, subject us to civil and criminal investigations and penalties, and materially and adversely impact our business and financial condition.

 

Our principal shareholder has the ability to exert significant control in matters requiring shareholder approval and could delay, deter, or prevent a change in control of our Company.

 

Richard DeCicco, our Chief Executive Officer, Chief Financial Officer, President and member of our board of directors, owns one share of our Series A Preferred Stock which gives Mr. DeCicco two votes for every one vote of our outstanding voting securities. As a result, he has a majority of the outstanding votes of common shareholders and the ability to influence matters affecting our shareholders, including the election of our directors, the acquisition or disposition of our assets, and the future issuance of our shares. Because of Mr. DeCicco’s ownership of the Series A Preferred Stock, investors may find it difficult to replace our management if they disagree with the way our business is being operated. Because the influence by Mr. DeCicco could result in management making decisions that are in his best interest and not in the best interest of other shareholders, you may lose some or all of the value of your investment in our common stock.

 

 
19

Table of Contents

 

Our Principal Executive Officer and Principal Financial Officer does not expect that our disclosure controls or internal controls will prevent all error and all fraud.

 

Although our disclosure controls and procedures were designed to provide reasonable assurance of achieving their objectives and our Principal Executive Officer and Principal Financial Officer has determined that our disclosure controls and procedures are effective at doing so, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute assurance that the objectives of the system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented if there exists in an individual a desire to do so. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

 

Furthermore, smaller reporting companies face additional limitations. Smaller reporting companies employ fewer individuals and find it difficult to properly segregate duties. Often, one or two individuals control every aspect of the company's operation and are in a position to override any system of internal control. Additionally, smaller reporting companies tend to utilize general accounting software packages that lack a rigorous set of software controls.

 

ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds

 

Except as set forth below or previously reported on a Current Report on Form 8-K, we had no unregistered sales of equity securities during the period from January 1, 2021 to May 24, 2021.

 

On March 29, 2021 we issued 401,670 shares of restricted common stock to a supplier of services to the Company.

 

On May 10, 2021, we issued 1,100,000 shares of restricted common stock to employees and consultants of the Company.

 

On May 18, 2021, we issued 300,000 shares of restricted common stock to Richard DeCicco, Chairman and CEO of the Company under terms of his employment contract renewal.

 

On May 18, 2021, we issued 100,000 shares of restricted common stock to Roseann Faltings, a VP and affiliate of the Company under the terms of her employment contract renewal.

 

The issuance was exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, there was no solicitation, and the investors were accredited or sophisticated.

 

ITEM 3 Defaults Upon Senior Securities

 

None.

 

ITEM 4 Mine Safety Disclosures

 

Not applicable.

 

ITEM 5 Other Information

 

None.

 

 
20

Table of Contents

 

ITEM 6 Exhibits

 

(a) Exhibits

 

Exhibit No.

Description of Exhibits

10.1

$330,000 Original Issue Discount Promissory Note, dated April 16, 2021, between the Company and The Special Equities Opportunity Fund, LLC.

 

 

 

31.1

 

Certification by Principal Executive Officer and Principal Financial Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

 

32.1

 

Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

 

101.INS

XBRL Instance Document

101.SCH

XBRL Schema Document

101.CAL

XBRL Calculation Linkbase Document

101.DEF

XBRL Definition Linkbase Document

101.LAB

XBRL Labels Linkbase Document

101.PRE

XBRL Presentation Linkbase Document

 

 
21

Table of Contents

  

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Iconic Brands, Inc.

Dated: May 24, 2021

By:

/s/ Richard J. DeCicco

Richard J. DeCicco

Its:

Chief Executive Officer

and Chief Financial Officer

 

 
22

 


Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘10-Q’ Filing    Date    Other Filings
1/12/25
8/2/24
5/8/24
2/7/24
1/1/24
12/31/23
9/20/23
5/21/23
6/30/22
6/22/22
12/31/2110-K,  NT 10-K
12/4/21
7/16/21
Filed on:5/24/21
5/21/21
5/18/21
5/10/21
4/16/21
For Period end:3/31/21NT 10-K,  NT 10-Q
3/29/21
3/23/21
2/15/21
1/31/21
1/1/21
12/31/2010-K,  NT 10-K
9/30/2010-Q
7/29/20
7/8/20
6/30/2010-Q,  NT 10-Q
6/5/20
6/2/20
6/1/208-K
5/29/20
5/1/20
3/31/2010-Q
3/6/20
2/27/20
2/24/20
2/15/20
2/14/20
2/13/20
2/12/20
1/26/20
1/22/20
1/16/20
1/14/20
1/13/208-K
1/12/208-K
1/1/20
12/31/1910-K,  10-K/A,  8-K,  NT 10-K
12/28/19
10/25/19
10/2/19
9/30/1910-Q,  10-Q/A,  NT 10-Q
9/27/19
9/19/19EFFECT
9/18/19424B3,  EFFECT
9/9/19S-1
9/4/19
8/28/19
8/2/19
7/26/19
7/18/198-K
6/30/1910-Q,  NT 10-Q
5/17/19
5/9/198-K
5/8/198-K
4/25/19
4/23/19
4/1/19NT 10-K
3/31/1910-Q,  NT 10-Q
3/27/19
3/18/19
2/28/19
2/12/19
2/7/19
1/1/19
12/31/1810-K,  10-K/A,  NT 10-K
12/20/18
11/30/18S-1/A
10/4/188-K
9/27/188-K
9/6/18
7/23/18
5/21/18
4/1/18
3/27/18
2/1/18
1/1/18
12/15/17
10/27/17
9/30/17
12/31/16
12/13/16
11/23/15
11/12/15
5/26/15
5/15/15
5/4/15
5/1/15
9/10/09
10/21/05
 List all Filings 


1 Subsequent Filing that References this Filing

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

 1/11/22  Iconic Brands, Inc.               S-8         1/11/22    5:157K                                   Discount Edgar/FA
Top
Filing Submission 0001477932-21-003568   –   Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Copyright © 2024 Fran Finnegan & Company LLC – All Rights Reserved.
AboutPrivacyRedactionsHelp — Fri., Mar. 29, 4:16:30.1am ET