Attached files
| file | filename |
|---|---|
| EX-31.1 - Marani Brands, Inc. | ex31-1.htm |
| EX-32.1 - Marani Brands, Inc. | ex32-1.htm |
| EX-31.2 - Marani Brands, Inc. | ex31-2.htm |
| EX-10.7 - Marani Brands, Inc. | ex10-7.htm |
| EX-10.5 - Marani Brands, Inc. | ex10-5.htm |
| EX-10.8 - Marani Brands, Inc. | ex10-8.htm |
| EX-32.2 - Marani Brands, Inc. | ex32-2.htm |
| EX-10.6 - Marani Brands, Inc. | ex10-6.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-KSB / A
(Amendment
No. 1)
x ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended
June 30,
2008
rTRANSITION REPORT UNDER
SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For
the transition period from __________ to __________
333-123176
(Commission
file number)
Marani
Brands, Inc.
(Exact
name of small business issuer as specified in its charter)
|
Nevada
|
20-2008579
|
|
(State
or other jurisdiction of incorporation or organization)
|
(IRS
Employer Identification No.)
|
13152
Raymer Street, Suite 1A
North Hollywood,
CA 91605
(Address
of principal executive offices)
(818)
503-5200
(Issuer's
telephone number)
Securities
registered under Section 12(b) of the Exchange Act: None
Securities
registered under Section 12(g) of the Exchange Act:
Common Stock, par value
$.001
(Title of
class)
Check
whether the issuer is not required to file reports pursuant to Section 13 or
15(d) of the Exchange Act r
Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the preceding 12 months (or for such shorter
period that the issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. xYes rNo
Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained herein, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. r
Indicate
by check mark whether the issuer is a shell company as defined in Rule 12b-2 of
the Exchange Act. r
Yes x No
The
issuer had revenues of $168,058 for the fiscal year ended June 30,
2008.
The
aggregate market value of the voting stock held by non-affiliates of the issuer
on October 10, 2008 was $85,524,448, based on the price at which the common
stock was sold on that date.
As of
March 24, 2008, the issuer had 174,506,796 shares of common stock
outstanding.
AMENDMENT
TO THIS FORM 10-KSB
FOR THE
YEAR ENDED JUNE 30, 2008
Management
of the Company has amended our Form 10-KSB after our determination that the
following amendments are appropriate for our Form 10-KSB for the year ended June
30, 2008, filed October 14, 2008:
|
•
We amended Item 1 (Description of Business) to restate the April 2008
merger transaction between the Company and Margrit Enterprises
International, Inc. to apply reverse merger accounting, rather than the
purchase method, and to clarify our disclosure of the merger transaction
and our pre and post merger business activities.
|
|
|
•
We have amended Item 5 (Recent Sales of Unregistered Securities) to
clarify and reclassify the total number of shares of common stock the
Company issued during the year ended June 30, 2008 The total
aggregate of shares of common stock issued by the Company during this
period has not been changed.
|
|
•
We have amended Item 6 (Management’s Discussion and Analysis) to disclose
the effects of the differences for the change in accounting treatments
from the purchase method to reverse merger accounting as a result of a
correction of an error, with respect to our disclosure of revenues, other
income or expense, net loss, loss per share applicable to holders of our
common stock, and cash flows.
|
|
|
•
We have amended our financial reporting to apply reverse merger
accounting, rather than purchase method accounting, to the April 2008
merger transaction.
|
|
•
We have amended Note 4 to our financial statements to describe the April
2008 merger transaction between the Company and Margrit Enterprises
International, Inc. as a reverse merger, rather than as an asset purchase,
and to disclose the simultaneous sale of our subsidiary FFB Australia to
our former CEO.
|
|
•
We have amended Note 12 to our financial statements to disclose our change
of accounting treatment from transactional costs related to the merger
transaction from capitalization to a charge to earnings as a result of a
correction of an error.
|
|
|
•
We have added Note 15 (Restatement) to our restated financial statements
for the year ended June 30, 2008 to present the adjustments that have been
made to our original Form 10-KSB for this period, as filed on October 14,
2008, as a result of the reverse merger accounting treatment of the merger
transaction.
|
|
•
In addition, we have made the following changes to correct (i) the
inclusion of a beneficial holder of our common stock based upon a
miscalculation of shares beneficially held by that holder, and (ii) the
non-inclusion of a beneficial owner of our common stock based upon the
computation of shares beneficially held as a group:
|
Section
16(a) compliance disclosure on page 19 and
Beneficial
Owners disclosure on page 21.
We
have amended Note 14 (Subsequent Events) to restate and expand our
disclosure.
DOCUMENTS
INCORPORATED BY REFERENCE: See Exhibits
FORWARD-LOOKING
STATEMENTS
Statements
that are not historical facts, including statements about our prospects and
strategies and our expectations about growth contained in this report, are
"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,
as amended. These forward-looking statements represent our present
expectations or beliefs concerning future events. We caution that
such forward-looking statements involve known and unknown risks, uncertainties
and other factors which may cause our actual results, performance or
achievements to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among other things, the uncertainty as to our future
profitability; the accuracy of our performance projections; and our ability to
obtain financing on acceptable terms to finance our operations until
profitability.
TABLE OF CONTENTS
|
PART
I
|
PAGE
|
|
|
Item
1.
|
5
|
|
|
Item
2.
|
8
|
|
|
Item
3
|
8
|
|
|
Item
4
|
8
|
|
|
PART
II
|
||
|
Item
5.
|
9
|
|
|
Item
6.
|
12
|
|
|
Item
7
|
16
|
|
|
Item
8
|
17
|
|
|
Item
8A(T)
|
17
|
|
|
Item
8B
|
18
|
|
|
PART
III
|
||
|
Item
9
|
19
|
|
|
Item
10.
|
20
|
|
|
Item
11
|
21
|
|
|
Item
12.
|
22
|
|
|
Item
13
|
23
|
|
|
Item
14.
|
23
|
|
|
24
|
||
|
Item
7
|
||
PART
I
Formation
and Merger
The
Company was incorporated in Nevada on May 30, 2001, under the name Elli Tsab,
Inc., which was subsequently changed to Patient Data Corporation, and thereafter
to Fit for Business, Inc. On March 10, 2008, the Company changed its
name from Fit for Business, Inc. to Marani Brands, Inc. On March 31,
2008, our common stock underwent a 1-for-250 reverse stock split, and commenced
trading on the Over the Counter Bulletin Board under the new symbol
“MRIB”. The only business of the Company on March 31, 2008 was that
of its wholly owned subsidiary, Fit For Business (Australia) Pty
Limited.
On March
11, 2008, the Company formed FFBI Merger Sub Corp., a California corporation, as
its wholly-owned subsidiary. FFBI Merger Sub Corp. was formed by the
Company for purpose of effectuating a merger transaction by and among the
Company and FFBI Merger Sub Corp., on the one hand, and a California corporation
known as Margrit Enterprises International, Inc. “(MEI”), on the other
hand.
MEI was
incorporated in December 2001 and, since its inception, has been an ongoing
business engaged in the importation and sale of alcoholic beverage products,
primarily Marani® Vodka Spirit, its flagship product.
On April
4, 2008, the Company, FFBI Merger Sub Corp. and MEI executed, and on April 7,
2008 the parties closed, a three party Merger Agreement, which the parties
implemented follows:
Merger of
FFBI Merger Sub Corp. and MEI
|
• By
virtue of this statutory merger, the separate corporate existence of FFBI
Merger Sub Corp. ceased, with MEI remaining as the surviving
corporation.
|
|
• The
shares of FFBI Merger Sub Corp. held by the Company pre merger were
converted into the shares of MEI and, post merger, the conversion shares
remain outstanding and continue to be held by the Company as shares of
MEI
|
|
• Since
MEI was a company with an ongoing business, and since FFBI Merger Sub
Corp. had no business operations and ceased to exist as a separate
corporate entity, this merger transaction constituted a “forward
merger”
|
Merger
MEI and Marani Brands, Inc.
|
• By
virtue of this “subsidiary merger,” both companies continue to have a
separate existence, with MEI becoming a wholly owned subsidiary of the
Company.
|
|
• Each
share of MEI held by its stockholders pre merger was automatically
exchanged for that number of shares of the Company, determined by dividing
100,0000,000 by the 10,000,000 issued and outstanding shares of MEI
existing before either merger, effecting a 10 for 1 exchange
ratio
|
|
• On
April 7, 2008, the Company issued 100,000,000 shares of its common stock
to the pre merger stockholders of MEI, and the 10,0000,000 shares of MEI
held by MEI’s stockholders pre merger were
cancelled
|
|
• The
Company thereby holds 100% of the shares of MEI by virtue of (i) the
cancellation of the MEI shares held pre subsidiary merger by MEI
stockholders that were exchanged for 100,000,000 of the Company’s shares
and (ii) the MEI shares that were converted from FFBI Merger Sub Corp.
shares held by the Company pre forward merger, which remain outstanding
and continue to be held by the Company, as the total issued and
outstanding shares of MEI, post
merger
|
|
• Since
MEI operated an ongoing business and since the Company had pre merger
business operations that were not pursued by the Company post merger, this
subsidiary merger transaction constituted a “reverse
merger”
|
The
acquisition of MEI by the Company was completed by the merger of the Company’s
wholly-owned subsidiary, FFBI Merger Sub Corp. with and into MEI, with MEI
remaining as the surviving entity and wholly-owned subsidiary of the
Company. The net effect of these transactions was a
reverse merger of the Company with MEI. MEI subsequently changed its
name to Marani Spirits, Inc., and continues to be the operational arm of the
Company.
On March
31, 2008, in anticipation of the merger transaction, the Company amended its
Articles of Incorporation to increase its authorized shares of common stock to
300,000,000. On April 7, 2008, in connection with the merger, we
issued an aggregate of 43,138,825 shares of our common stock as compensation for
direct offering services.
On April
7, 2008, after management decided that the business of FFB Australia could not
be effectively managed from the United States, and was no longer related to the
Company’s core business and, simultaneous with the merger transaction, the
Company exercised its option to sell FFB Australia to former Chief Executive
Officer, Mark Poulsen. Mr. Poulsen complied with his obligations
under the Subsidiary Acquisition Option Agreement and acquired all of the
Company’s interest in FFB Australia on or about May 15,
2008.
Our
Business and Products
Prior to
the Company’s merger with MEI, our only business was that of its wholly-owned
subsidiary, Fit for Business (Australia) Pty Limited, which is engaged in the
development of overall wellness programs for the workplace in
Australia.
Subsequent
to the merger transaction with MEI, the Company’s primary business is the
business of MEI in the distribution of wine and spirit products manufactured in
Armenia. In the future the Company may add alcohol beverage products
manufactured in other countries.
The
Company’s signature product is Marani Vodka Spirit, a premium vodka which is
manufactured exclusively for us in Armenia. Marani Vodka Spirit is made from
winter wheat harvested in Armenia, distilled three times, aged in oak barrels
lined with honey and skimmed dried milk, then filtered twenty-five times.
Bottling of the product occurs at the Eraskh distillery in Armenia. Marani Vodka
Spirit was awarded the gold medal in the International Spirit Competition, held
in San Francisco, California, in both 2004 and 2007, and the 5 Diamond Award by
the American Academy of Hospitality and Sciences in March
2008.
In
addition to the Company’s premium vodka, in the future we intend to distribute
the following products:
|
·
|
Various
premium brandy products manufactured by
Eraskh.
|
|
·
|
A
line of sweet dessert wines manufactured by
Eraskh.
|
|
·
|
Marani Black, a
super-premium vodka. This product has an even more refined distillation
formula and will be bottled in a distinct bottle and command a premium
retail price.
|
To
compete in the highly competitive market for premium alcoholic beverages, Marani
Brand’s marketing and business plan is focused on maintaining and expanding its
channels of distribution and enhancing brand recognition for Marani Brand’s
premium vodka product through its recent rebranding, advertising, promotional
and distributor relations efforts. Some of these efforts include:
|
·
|
The
engagement of Paul Fuegner, formerly of Skyy Vodka, to head our marketing
efforts
|
|
·
|
The
engagement of Juggernaut Advertising
Agency
|
|
·
|
The
engagement of surveying firms to obtain data on product
placement
|
|
·
|
Major
redesign and rebranding of Marani Vodka Spirit, including a new
bottle
|
|
·
|
Major
redesign of the company’s web presence
|
|
·
|
Primary
production and preparation for the upcoming launch of a new advertising
campaign
|
|
·
|
An
effort to trademark the Marani name
worldwide
|
These
efforts have incurred significant expense, but management believes that they are
necessary to the continued growth of the Company.
Sources
and Availability of Products and supplies
The
Company purchases all of its products from a single supplier, Eraskh Winery,
Ltd., under an Exclusive Distribution Agreement with Eraskh, an Armenian
manufacturer of wine and other spirits. Marani Brands have been
granted exclusive rights for defined territories, including the United States,
Mexico and the Caribbean, with a right of first refusal for any other
territories where Eraskh desires to promote and sell its
products. The Exclusive Distribution Agreement, which was renewed
this year, will expire in 2012 but is subject to automatic five (5) year
renewals. Upon termination or non-renewal of the Exclusive
Distribution Agreement, the Agreement provides for compensation from Eraskh
equal to ten percent (10%) of the gross sales of Eraskh’s products in the
defined territories, in U.S. dollars, for period of seven (7) years subsequent
to such termination or non-renewal. While the Company has entered
into a Letter of Intent to acquire Eraskh, there can be no assurance that we
will enter into a definitive agreement to acquire the distillery as contemplated
or that the distillery will be acquired.
The
bottles for Marani Vodka Spirit are currently manufactured in China by Universal
Group Co., Ltd. and shipped to Armenia to be filled at Eraskh. Other suppliers
of bottles are available to the Company at competitive market rates, should we
need additional quantities or should our arrangement with Universal Group Co.,
Ltd. no longer be available.
Distribution
and Dependence on Limited Customers
The
Company is a client of Southern Wine & Spirits of America, Inc.
("Southern"), the largest alcoholic beverage distributor in the United States.
Through Southern, the Company’s Marani Vodka Spirit is in retailers such as
Ralphs, Safeway, Vons, Pavilions, and Dominicks, and in Southern California
locations such as Ritz-Carlton Hotels, Marriott Hotels, Spago Restaurants and
Lawry's Restaurants. We intend to enter into arrangements with other
distributors to maximize its coverage in the United States. The Company also is
in the process of identifying appropriate distributors of Marani Vodka Spirit in
Italy, Switzerland, Monaco, Germany, Mexico, the Middle East and parts of
Asia.
The
Company currently sells its products principally to wholesalers for resale to
retail outlets including grocery stores, package liquor stores, chain and
boutique hotels, bars and restaurants. In the future, in addition to
selling our products to wholesalers, we may sell our products directly to major
retailers and chains. Our results of operations and financial
condition are dependent on the performance of our major wholesalers, retailers
or chains and our inability to collect accounts receivable from a limited number
of them. We monitor performance and collections to determine the need, if any,
to seek other customers for existing levels of product production.
Competition
and Trends
The
Company is in a highly competitive industry with the need continually to monitor
factors such as: the dollar amount and unit volume of our sales as affected by
our ability to maintain or increase prices; changes in geographic or product
mix; and changes in alcoholic beverage consumption or the decision of
wholesalers, retailers or consumers to purchase competitive
products. Wholesaler, retailer and consumer purchasing decisions are
influenced by, among other things, the perceived absolute or relative overall
value of our products, including their quality or pricing, compared to
competitive products. Unit volume and dollar sales can be affected by
pricing, purchasing, financing, operational, advertising or promotional
decisions made by wholesalers, state and provincial agencies, and retailers
which can affect their supply of, or consumer demand for, our
products.
In
spirits, the major global competitors are Diageo, Pernod Ricard, Bacardi and
Brown-Forman, each of which has many brands in many market segments, including
vodka, which give them the ability to leverage their marketing
relationship. In addition, the Company faces competition from local
and regional companies in the United States and world-wide. Nearly all of the
Company’s significant competitors have greater market presence, marketing
capabilities as well as greater financial, technological and personnel resources
than the Company.
As
outlined above, the Company has engaged in a systematic marketing plan in order
to expand our distribution channels and brand recognition. These efforts include
significant advertising and distributor relations initiatives anticipated to
begin during the next quarter.
The
beverage alcohol distribution industry is being affected by the trend toward
consolidation in the wholesale and retail distribution channels, particularly in
Europe and the U.S. Our revenues, share of sales and volume growth is
dependent partially upon our continuing adaptation to this changing
environment. In addition, wholesalers and retailers of our products
offer products of other companies that compete directly with our products for
retail shelf space and consumer purchases.
Since
1995, there have been modest increases in consumption of beverage alcohol in
most geographic markets. A change in consumption in one or more of
our product categories could occur in the future due to a variety of factors,
including:
|
·
|
A
general decline in economic conditions;
|
|
·
|
Increased
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;
|
|
·
|
A
trend toward a healthier diet including lighter, lower calorie beverages
such as diet soft drinks, juices, energy and vitamin drinks and water
products;
|
|
·
|
The
increased activity of anti-alcohol groups; and
|
|
·
|
Increased
federal, state or foreign excise or other taxes on alcoholic
beverages.
|
Taxes and
Governmental Regulation
The U.S.
and certain other countries in which the Company operates impose excise and
other taxes on beverage alcohol products in varying amounts that are subject to
change. In addition, federal, state, local and foreign governmental
agencies extensively regulate the alcoholic beverage industry concerning such
matters as licensing, trade and pricing practices, permitted and required
labeling, advertising and relations with wholesalers and
retailers. Certain federal, state and foreign regulations also
require warning labels and disclosures. Management believes the
Company is in compliance with all applicable regulatory requirements for our
products where we current have sales.
Trademarks
The
Company’s presence in the marketplace depends on our ability to protect our
current brand and future brands and products, to the extent developed, and to
defend our intellectual property rights. We have registered the
trademark Marani® in the United States for distilled spirits and brandy and we
have filed trademark applications seeking to protect the Marani trademark in
certain countries outside the United States. We are aware that a
third-party that markets and sells wine products has trademarked the Marani name
in numerous countries outside of the United States and has registered the name
Marani in a number of countries. We are in the process of negotiating an
agreement with that third party which would, if entered into, allow to each
company to use the Marani trademark in connection with its respective products
on a world-wide basis.
Employees
The
Company currently employs nine full time employees at our North Hollywood
location; four employees are in management positions, including sales with one
in an administrative staff position, three employees in sales and one performing
warehouse and shipping duties.
Item
2. Description of Property
The
Company leases 2100 sq ft of corporate office space in North Hollywood,
California. This lease is currently on a month-to-month basis at a monthly
rental of $1,800 per month.
Item
3. Legal Proceedings
Our
former subsidiary, Fit For Business (Australia) Pty. Ltd. is plaintiff in legal
proceedings against one of our licensees, L.R. Global Marketing Pty. Ltd, for
outstanding licensing fees owed in the amount of $443,263. The subsidiary was
recently sold, as detailed in Item 1 above, and to the knowledge of management,
Marani Brands has no further interests or liabilities stemming from this
proceeding as of the time of this filing.
Other
than this claim, neither our parent company nor our subsidiary, or any of their
properties, is a party to any pending legal proceeding. We are not aware of any
contemplated proceeding by a governmental authority. Also, we do not believe
that any director, officer, or affiliate, any owner of record or beneficially of
more than five per cent (5%) of the outstanding common stock, or security
holder, is a party to any proceeding in which he or she is a part adverse to us
or has a material interest adverse to us.
None
PART
II
Market
Price for Common Stock
Our
common stock is traded on the OTC Electronic Bulletin Board (ticker symbol
MRIB.OB). At October 7, 2008, we had approximately fifty holders of record
holders of the our common stock.
The
following quarterly quotations for common stock transactions on the OTC Bulletin
Board reflect inter-dealer prices, without retail mark-up, markdown or
commissions and may not represent actual transactions.
|
QUARTER
|
HIGH
BID PRICE
|
LOW
BID PRICE
|
|||||||
|
2006
-2007 (start date November 29,2006 )
|
|||||||||
|
Second
Quarter (ended12-31-06)
|
$
|
0.04
|
$
|
0.02
|
|||||
|
Third
Quarter (ended 3-31-07)
|
$
|
0.70
|
$
|
0.02
|
|||||
|
Fourth
Quarter (ended 6-30-07)
|
$
|
0.06
|
$
|
0.02
|
|||||
|
$
|
0.07
|
$
|
0.01
|
||||||
|
2007-2008
|
|||||||||
|
First
Quarter (ended 9-30-07)
|
$
|
0.05
|
$
|
0.01
|
|||||
|
Second
Quarter (ended12-31-07)
|
$
|
0.07
|
$
|
0.01
|
|||||
|
Third
Quarter (ended 3-31-08)*
|
$
|
4.00
|
$
|
0.01
|
|||||
|
Fourth
Quarter (ended 6-30-08)
|
$
|
6.00
|
$
|
0.65
|
|||||
|
*adjusted
for reverse stock split
|
|||||||||
Dividends
The
Company has not paid dividends on our common stock and do not presently
anticipate paying dividends. Management currently intends to retain
future earnings, if any, to finance working capital and to expand our
operations.
The
holders of common stock are entitled to receive, pro rata, such dividends and
other distributions as and when declared by our board of directors out of the
assets and funds legally available therefore. The Company do not
expect to pay dividends to holders of our common stock in the foreseeable
future.
Recent
Sales of Unregistered Securities
On April
4, 2008, we entered into an Agreement and Plan of Merger (the "Merger
Agreement") by and among FFBI Merger Sub Corp., a California corporation and our
wholly-owned subsidiary which we formed for purposes of the merger (the "Merger
Sub"), and Margrit Enterprises International, Inc., a California corporation
("MEI"). On April 7, 2008, the transactions contemplated by the Merger Agreement
closed (the "Closing"). Pursuant to the Merger Agreement, Merger Sub merged with
and into MEI, with MEI being the surviving corporation (the "Merger"). The
shareholders representing 100% of MEI's issued and outstanding shares of common
stock exchanged their shares of MEI common stock for shares of our common stock
on the basis of 10 shares of our common stock for each share of MEI common
stock.
During
the year ended June 30, 2008, the Company issued 98,223,752 shares of our common
stock, as set forth below. The issuances were exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933, and each of
the investors was either accredited or sophisticated and familiar with our
operations.
|
•
41,179,121 shares to private
investors for cash totaling $7,814,000;
|
|
|
•
937,339 shares to existing Marani shareholders for the MEI
reverse merger, at a recorded value of $0;
|
|
•
11,686,670 shares to Officers for services totaling $140,240;
|
|
|
•
1,281,797 shares to unaffiliated parties
services totaling $82,449;
|
|
•
43,138,825 shares for direct offering costs totaling
$10,648,654.
|
Equity
Compensation Plan Information
The
equity compensation reported in this section has been issued pursuant to our
2008 Stock Option Plan as well as individual compensation contracts and
arrangements with employees, directors, consultants, advisors, vendors,
suppliers, lenders and service providers. The equity is reported on
an aggregate basis as of June 30, 2008. Our security holders have not
approved any compensation plan, contracts or arrangements underlying the
equity reported.
|
Compensation
Plan Category
|
Number
of securities to be issued upon exercise of options, warrants and rights
(a)
|
Weighted
average price of outstanding options, warrants and
rights
|
Number
of securities remaining for future issuance under equity compensation
plans (b)
|
|||||||||
|
Equity
compensation plans approved by security holders
|
0
|
0
|
0
|
|||||||||
|
Equity
compensation plans not approved by security holders
(b)
|
39,620,000
|
$
|
0.265
|
20,000,000
|
||||||||
|
Total
|
39,620,000
|
$
|
0.265
|
20,000,000
|
||||||||
|
(a)
|
Warrants
Issued Pursuant to Individual
Agreements.
|
Includes
warrants for 10,000,000 shares of common stock at $0.10 per share, issued to an
advisor retained by us in connection with the MEI reverse merger, and warrants
for 29,620,000 shares of common stock at a weighted average price of $0.32 per
share, issued to investors in connection with private
financings.
(b) Options
to be Issued Pursuant to our 2008 Stock of Plan
On May
21, 2008, our Board of Directors adopted our 2008 Stock Option Plan, which is
designed to provide an incentive to employees, including directors and officers
who are employees, and to consultants and directors who are not our employees,
and to offer an additional inducement in obtaining the services of such
persons. The Plan provides for the grant of qualified Incentive Stock
Options (”ISO”) within the meaning of Section 422 of the Internal Revenue Code
and Non-Qualified Stock Options (“NQSO”). As of June 30, 2008, no
equity has been issued pursuant to this Plan.
We have
reserved 20,000,000 million shares of common stock for equity awards granted
under the Plan. The Plan shall be administered by the Board of
Directors or a committee of the Board of Directors (the “Plan Administrator”)
consisting of not less than two directors, all of whom shall be a “non-employee
director,” within the meaning of Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended, that shall have the authority to determine the
employees, officers, consultants and directors who shall be granted equity
awards; the type of equity awards to be granted; the times when an equity awards
shall be granted; the number of shares of our common stock to be subject to each
equity awards; and other terms and conditions of the equity awards, including
whether to restrict the sale or other disposition of an equity awards and, if
so, to determine whether such contingencies and restrictions have been met and
whether and under what conditions to waive any such contingency or
restriction.
Eligibility
Our
officers, directors, employees, and other persons that provide consulting
services to us and our subsidiaries are eligible to participate in the
Plan.
Award
of Incentive Stock Options
The Plan
Administrator may grant Incentive Stock Options to eligible participants, as the
Plan Administrator may determine, in its sole discretion. The Plan
Administrator may not grant options to any employee during any calendar year
under the Plan for the aggregate fair market value (determined at the time the
option is granted) of the underlying shares of common stock that may be
exercised for the first time in a particular calendar in excess of
$100,000. Exercise prices for such options granted shall be at least
the fair market value of a share of our common stock on the grant date of the
options, with a term not to exceed 10 years; provided, that exercise price of
any options granted to a person that owns more than 10% of the combined voting
power of all our classes of stock shall be at least 110% of the fair market
value of a share of common stock on the grant date, with a term not to exceed
five years.
Amendment
of Plan
The Board
of Directors, without further approval of the our stockholders, may amend the
Plan from time to time in such respects as it may deem advisable, including,
without limitation, in order that ISOs granted meet the requirements for
“incentive stock options” under the Code or any change in applicable law,
regulations, rulings or interpretations of any governmental agency or regulatory
body. No amendment shall be effective without the requisite
prior or subsequent stockholder approval which would, with certain exceptions,
increase the maximum number of shares of our common stock for which equity
awards can be granted under the Plan, change the eligibility requirements to
receive equity awards, or make any change for which applicable law, regulation,
ruling or interpretation by the applicable governmental agency or regulatory
authority requires stockholder approval. No termination, suspension
or amendment of the Plan shall adversely affect the rights of any equity awards
holder under an equity awards without his prior consent.
Termination
No awards
may be granted under the Plan after the tenth anniversary of the adoption of the
Plan. The Board of Directors may suspend or terminate the Plan at any
time. No termination of the Plan will affect a recipient’s rights
under outstanding awards without the recipient’s consent.
Federal
Income Tax Aspects of the Plan
The
following is a brief summary of the federal income tax aspects of awards that
may be made under the Plan based on existing U.S. federal income tax laws. This
summary provides only the basic tax rules and does not describe a number of
special tax rules, including the alternative minimum tax and various elections
that may be applicable under certain circumstances. It also does not reflect
provisions of the income tax laws of any municipality, state or foreign country
in which a holder may reside, nor does it reflect the tax consequences of a
holder’s death. The tax consequences of awards under the Plan depend upon the
type of award and if the award is to an executive officer, whether the award
qualifies as performance-based compensation under Section 162(m) of the
Code.
Incentive
Stock Options
The
recipient of an incentive stock option generally will not be taxed upon grant of
the option. Federal income taxes are generally imposed only when the shares of
stock from exercised incentive stock options are disposed of, by sale or
otherwise. The amount by which the fair market value of the stock on the date of
exercise exceeds the exercise price is, however, included in determining the
option recipient’s liability for the alternative minimum tax. If the incentive
stock option recipient does not sell or dispose of the stock until more than one
year after the receipt of the stock and two years after the option was granted,
then, upon sale or disposition of the stock, the difference between the exercise
price and the market value of the stock as of the date of exercise will be
treated as a capital gain, and not ordinary income. If a recipient fails to hold
the stock for the minimum required time, at the time of the disposition of the
stock, the recipient will recognize ordinary income in the year of disposition
generally in an amount equal to any excess of the market value of the common
stock on the date of exercise (or, if less, the amount realized or disposition
of the shares) over the exercise price paid for the shares. Any further gain (or
loss) realized by the recipient generally will be taxed as short-term or
long-term gain (or loss) depending on the holding period. We will generally be
entitled to a tax deduction at the same time and in the same amount as ordinary
income is recognized by the option recipient.
Nonqualified
Stock Options
The
recipient of stock options not qualifying as incentive stock options generally
will not be taxed upon the grant of the option. Federal income taxes are
generally due from a recipient of nonqualified stock options when the stock
options are exercised. The difference between the exercise price of the option
and the fair market value of the stock purchased on such date is taxed as
ordinary income. Thereafter, the tax basis for the acquired stock is equal to
the amount paid for the stock plus the amount of ordinary income recognized by
the recipient. We will generally be entitled to a tax deduction at the same time
and in the same amount as ordinary income is recognized by the option recipient
by reason of the exercise of the option.
Section 162(m)
Section 162(m)
of the Code would render non-deductible to us certain compensation in excess of
$1,000,000 received in any year by certain executive officers unless such excess
is “performance-based compensation” or is otherwise exempt from
Section 162(m), such as under the transition rule described
above. Assuming stockholder approval, grants of options and stock
appreciation rights, and grants of restricted shares and stock units conditioned
on attainment of one or more performance goals set forth in the Plan, may
qualify as performance-based compensation and be exempt from
Section 162(m).
Section 409A
Any
deferrals made under the Plan, including awards granted under the Plan that are
considered to be deferred compensation, must satisfy the requirements of
Section 409A of the Code to avoid adverse tax consequences to participating
employees. These requirements include limitations on election timing,
acceleration of payments, and distributions. We intend to structure any
deferrals and awards under the Plan to meet the applicable tax law
requirements.
Stockholder
Approval
The Plan
shall be subject to approval by our stockholders within 12 months before or
after the date the Plan is adopted. The Board or Committee may grant
ISOs under the Plan prior to approval of the Plan by the stockholders, but until
such approval is obtained, no such Incentive Stock Options shall be
exercisable. In the event that stockholder approval of the Plan is
not obtained within the twelve (12) month period provided above, all Incentive
Stock Options previously granted under the Plan shall be exercisable as non
Qualified Stock Options.
The
following discussion and analysis provides information which management believes
is relevant to an assessment and understanding of our financial condition. The
discussion should be read in conjunction with our financial statements and notes
thereto appearing in this prospectus. The following discussion and analysis
contains forward-looking statements, which involve risks and uncertainties. Our
actual results may differ significantly from the results, expectations and plans
discussed in these forward-looking statements.
Forward-Looking
Statements
The
following discussion and analysis provides information which management believes
is relevant to an assessment and understanding of our results of operations and
financial condition. The discussion should be read in conjunction with our
financial statements and notes thereto appearing in this prospectus. The
following discussion and analysis contains forward-looking statements, which
involve risks and uncertainties. Our actual results may differ significantly
from the results, expectations and plans discussed in these forward-looking
statements.
Overview
Our
current business is the distribution of wine and spirit products manufactured in
Armenia. In the future we may add alcohol beverage products
manufactured in other countries.
Our
signature product is Marani Vodka Spirit, a premium vodka which is manufactured
exclusively for us in Armenia. Marani Vodka Spirit is made from winter wheat
harvested in Armenia, distilled three times, aged in oak barrels lined with
honey and skimmed dried milk, then filtered twenty-five times. Bottling of the
product occurs at the Eraskh distillery in Armenia. Our vodka was awarded the
gold medal in the International Spirit Competition, held in San Francisco,
California, in both 2004 and 2007, the 5 Diamond Award by the American Academy
of Hospitality and Sciences in March 2008, and was officially launched in August
2006.
At this
time, and management believes for the foreseeable future, all of the Company’s
products will come from a single supplier, Erashk Winery, Ltd. The Company has
an Exclusive Distribution Agreement with Erashk Winery Ltd., an Armenian
manufacturer of wine and other spirits, to purchase, inventory, promote, and
resell any of its products world-wide. The agreement was renewed on May 3, 2007,
and continues until November 26, 2012 and is subject to automatic five (5) year
renewals.
The
Company is a client of Southern Wine & Spirits of America, Inc.
("Southern"), the largest alcoholic beverage distributor in the United States.
Through Southern, the Company’s Marani Vodka Spirit is in retailers such as
Ralphs, Safeway, Vons, Pavilions, and Dominicks, and in Southern California
locations such as Ritz-Carlton Hotels, Marriott Hotels, Spago Restaurants and
Lawry's Restaurants.
The
Company intends to, and is currently in negotiations with, other
distributors to reach arrangements to maximize distribution of its
products in the United States. The Company also is in the process of identifying
appropriate distributors of Marani Vodka Spirit in Italy, Switzerland, Monaco,
Germany, Mexico, and parts of Asia.
Critical
Accounting Policies
Our
financial statements are prepared in accordance with accounting principles
generally accepted in the United States of America ("US GAAP"). In connection
with the preparation of the financial statements, we are required to make
assumptions and estimates about future events, and apply judgments that affect
the reported amounts of assets, liabilities, revenues, expenses and the related
disclosure. We base our assumptions, estimates and judgments on historical
experience, current trends and other factors that management believes to be
relevant at the time the financial statements are prepared. On a regular basis,
management reviews our accounting policies, assumptions, estimates and judgments
to ensure that our financial statements are presented fairly and in accordance
with U.S. GAAP. However, because future events and their effects cannot be
determined with certainty, actual results could differ from our assumptions and
estimates, and such differences could be material.
Our
significant accounting policies are discussed in Note 3 of the notes to
financial statements. Certain critical policies are presented
below.
Stock Based
Compensation
In
December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No.
123(R), Share-Based Payment. This pronouncement amends SFAS No. 123, Accounting
for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for
Stock Issued to Employees. SFAS No. 123(R) requires that companies account for
awards of equity instruments issued to employees under the fair value method of
accounting and recognize such amounts in their statements of operations. Under
SFAS No. 123(R), we are required to measure compensation cost for all
stock-based awards at fair value on the date of grant and recognize compensation
expense in our consolidated statements of operations over the service period
that the awards are expected to vest.
The
Company accounts for stock-based compensation issued to non-employees and
consultants in accordance with the provisions of SFAS 123(R) and the Emerging
Issues Task Force consensus in Issue No. 96-18 ("EITF 96-18"), "Accounting for
Equity Instruments that are Issued to Other Than Employees for Acquiring or in
Conjunction with Selling, Goods or Services". Common stock issued to
non-employees in exchange for services is accounted for based on the fair value
of the services received.
Fair Value of Financial
Instruments
Statement
of Financial Accounting Standard No. 107, Disclosures about Fair Value of
Financial Instruments, requires that the Company disclose estimated fair values
of financial instruments. The carrying amounts reported in the statements of
financial position for current assets and current liabilities qualifying as
financial instruments are a reasonable estimate of fair value.
Results of Operations for the Year
Ended June 30, 2008 Compared to Year ended June 30 2007
Revenues
|
2008
|
2007
|
$
Change
|
%
Change
|
|||||||||||||
|
Revenues
|
$
|
168,058
|
$
|
173,663
|
$
|
(5,605
|
)
|
(3.2
|
%)
|
|||||||
The
decrease in our revenues reflects a major rebranding of the Marani Vodka Spirit
product including a major new advertising campaign. We plan to
increase our revenues during 2008 - 2009 by developing and augmenting our
internal sales force, securing additional distributors, expanding our product
offering, increasing our volume per outlet and driving further penetration of
our products into our current customer base.
Cost of
Sales
|
2008
|
%
of Revenues
|
2007
|
%
of Revenues
|
$Change
|
%
Change
|
|||||||||||||||||||
|
Product
costs
|
$
|
48,809
|
29.0
|
%
|
$
|
57,838
|
33.3
|
%
|
$
|
(9,029
|
)
|
(15.6
|
%)
|
|||||||||||
The
decreases in cost of sales and cost of sales as a percentage of revenues are the
result of business efficiencies in the branding, marketing and distribution of
wine and spirit products manufactured in Armenia.
Operating
Expenses
|
2008
|
%
of Revenues
|
2007
|
%
of Revenues
|
$
Change
|
%
Change
|
|||||||||||||||||||
|
Marketing
& Advertising
|
$
|
812,704
|
483.6
|
%
|
$
|
311,300
|
179.3
|
%
|
$
|
501,404
|
161.1
|
%
|
||||||||||||
|
General
and administrative (Restated)
|
$
|
2,624,566
|
1,561.7
|
%
|
$
|
298,956
|
172.1
|
%
|
$
|
2,325,610
|
777.9
|
%
|
||||||||||||
|
Stock
Based Compensation (Restated)
|
$
|
222,689
|
132.5
|
%
|
$
|
0
|
0.0
|
%
|
$
|
222,689
|
||||||||||||||
|
Total
(Restated)
|
$
|
3,659,959
|
2,177.8
|
%
|
$
|
610,256
|
351.40
|
%
|
$
|
3,049,703
|
499.7
|
%
|
||||||||||||
Marketing
and Advertising
The
increase in marketing and advertising expenses is the result of a major
rebranding of the Marani Vodka Spirit product including a major new advertising
campaign. As a percentage of revenues, the high cost of marketing and
expenses reflects our aggressive efforts to increase market share for our
products in the United States from a small sales base. We expect
marketing and advertising expenses to increase as we continue to build the
company infrastructure. We anticipate, however, that the expense as a percentage
of revenue will be reduced due to revenue growth.
General
and Administrative
Included
in our general and administrative expenses are the addition of five employees,
increased travel for market development and financing activities, increased
compensation for our new executive management, increased accounts payable,
accrued expenses and legal fees associated with the April 2008 merger
transaction. Total general and administrative expenses are expected to increase
as we continue to build the company infrastructure. Subsequent to the
changes caused by the 2008 merger transaction, however, we do not anticipate
increased costs associated with management and expect a reduction in legal fees
associated with routine business and compliance matters. As such,
management expects that our general and administrative expenses as a percentage
of revenue will be reduced due to revenue growth, cost cutting efforts and the
refinement of business operations.
Stock
Based Compensation
The
increase in stock based compensation is the result of our necessity to pay for
services rendered to us with equity owing to cash flow
constraints. As revenues increase, we expect that the necessity for
stock based compensation will decrease.
Other Income
(Expense)
The
direct offering expenses were booked in connection with the $1,130,923 cash
paid, and $10,648,654 value of the common stock issued in payment of these
expenses in connection with the merger transaction.
The
increase in interest expense is primarily the result of our obligations under a
long term SBA loan having a balance due at June 30, 2008 of $249,816, having an
interest rate of 8.25%, and our accrual of interest on a short term note in the
amount $80,495 having an interest rate of 15%.
Net
Loss
We
reported a net loss in 2008 of $15,336,813 compared with a net loss of $536,109
in 2007. There were several factors that gave rise to our losses in 2008 and
2007. Most significant is the 11,779,577 that we booked as direct offering
expenses. In addition, we had a significant increase in operating
expenses in developing our administrative and operating infrastructure,
developing new and existing sales channels and for our for marketing
programs. Marketing expenses included a major rebranding of our
primary product, Marani Vodka Spirit, the costs of retention of an advertising
agency, Juggernaut, and preparation and primary shooting of a major advertising
campaign, a complete redesign of the Company’s web presence, hiring of a
surveying firm to generate marketing data regarding the placement of our
product, and other major expenses involved in the enhancement and positioning of
the Marani brand. As a result, our current revenue volume has not been
sufficient to recover all of our operating expenses. We anticipate that our
operating expenses as a percentage of our sales will decrease in future periods
as our revenues increase and our costs stabilize.
Loss per
Common Share Applicable to Common Stockholders
Our basic
loss per common share applicable to common stockholders in 2008 was $(0.12)
compared with a basic loss per common share applicable to common stockholders in
2007 of $(0.01). Because
we experienced net losses in 2008 and 2007, all potential common share issuances
resulting from the exercise of options and warrants would have an antidilutive
impact on earnings per share; therefore, diluted loss per common share equals
basic loss per common share for both years.
The
weighted average common shares outstanding increased from 60,491,610 for the
year ended 2007 to 130,290,491 for the year ended June 30, 2008. The
increase is attributed primarily to the issuance of our common stock in
connection with (i) the MEI reverse merger, including the shares issued by the
accounting acquiree to the accounting acquirer, (ii) additional equity financing
activities contemporaneous with and subsequent to the merger, and (iii) the
issuance of common stock for direct offering services.
Liquidity
and Capital Resources
Working
Capital Needs and Major Cash Expenditures
Our
footnotes contain an explanatory paragraph that indicates that we have
continuing losses from operations, and our working capital is insufficient to
meet our planned business objectives. This report also states that, because of
these losses, there is substantial doubt about our ability to continue as a
going concern. This report and the existence of these recurring losses from
operations may make it more difficult for us to raise additional debt or equity
financing needed to run our business, and are not viewed favorably by analysts
or investors. Furthermore, if we are unable to raise a significant amount of
proceeds from private placements, public offerings or other financings, this may
cause our cessation of business resulting in investors losing the value of their
investment in us.
A major
factor in the Company’s net losses, as set forth above, was the recent
investments by the Company in expanded operations and a marketing campaign
relating to its primary product, Marani Vodka Spirit. Management believes that
these expenses are necessary to expand the business of the
Company.
We
currently have monthly working capital needs of approximately
$156,000. This amount is expected to increase in 2008-2009, primarily
due to the following factors:
|
•
continued expansion of our administrative and operational infrastructure
in connection with anticipated increase in our business activities,
and
|
|
•
continued expansion of our marketing and sales
programs.
|
External
Sources of Liquidity:
During
the year ended June 30, 2008, we received proceeds of $7,814,000 from the sale
of common stock. In addition, we issued shares of our common stock in payment
of
• $82,449
for services rendered by third parties,
•
$140,240 for services rendered by Officers,
•
$10,648,654 for direct offering services.
The
balance of our cash and cash equivalents as of June 30, 2008 was
$2,460,553.
To date,
we have relied on funding from investors, our officers and directors, and our
limited sales to fund operations. To date, we have generated little revenue and
have extremely limited cash liquidity and capital resources. Our future capital
requirements will depend on many factors, including our ability to market our
products successfully, cash flow from operations, and our ability to obtain
financing in the capital markets. Our business plan requires additional funding
beyond our anticipated cash flow from operations. Consequently, although we
currently have no specific plans or arrangements for financing, we intend to
raise funds through private placements, public offerings or other financings.
Any equity financings would result in dilution to our then-existing
stockholders. Sources of debt financing may result in higher interest expense
and may expose the Company to liquidity problems. Any financing, if available,
may be on unfavorable terms. If adequate funds are not obtained, we may be
required to reduce or curtail operations. We anticipate that our existing
capital resources will be adequate to satisfy our operating expenses and capital
requirements for approximately 6 months. However, this estimate of expenses and
capital requirements may prove to be inaccurate.
Information
about Our Cash Flows
|
Cash
provided by (used in):
|
2008
|
2007
|
$
Change
|
%
Change
|
||||||||||||
|
Operating
activities (Restated)
|
$
|
(4,790,236
|
)
|
$
|
(502,773
|
)
|
$
|
(4,287,463
|
)
|
852.8
|
%
|
|||||
|
Investing
activities (Restated)
|
$
|
(2,329
|
)
|
$
|
-
|
$
|
(2,329
|
)
|
||||||||
|
Financing
activities (Restated)
|
$
|
7,217,617
|
$
|
536,590
|
$
|
(6,681,027
|
)
|
1,245.1
|
%
|
|||||||
Cash
provided by or used in our operating, investing and financing activities is the
result of increased operating costs after the April 2008 merger
transaction. The net increase in cash used in operating activities of
$4,790,236 is due primarily to the increase in our net loss in 2008, which
included $11,779,577 in direct offering costs associated with the merger
transaction. In addition, the net loss was attributable to a change
in core business, and increased spending for marketing and operations by the
Company, as set forth above. In addition, cash used by our operating activities
increased as a result of changes in stock based compensation during 2008 by
$222,689, compared to $0 for the same period in 2007. Changes in
accounts payable contributed to an increase in cash used by operating activities
of $59,645 in 2008, as compared to contributing to an increase of $42,660 for
2007. Changes in accrued expenses contributed to a decrease in cash
used by operating activities of $214,046 for 2008, as compared to contributing
to a decrease of $50,149 for 2007. Cash flows generated by our
operating activities were inadequate to cover our cash disbursement needs for
the year ended June 30, 2008, and we had to rely on private placement financing
to cover operating expenses.
Cash used
in the year ended June 30, 2008 in our investing activities was $2,329 for
purchase of property and equipment, compared to $0 for the same period in
2007.
Net cash
provided by our financing activities for the year ended June 30, 2008 was
$7,217,617. Net cash provided by financing activities for the same
period in 2007 was $536,590, for a net increase of $6,681,027. The
increase in 2008 is mainly attributable to proceeds received from the sale of
our common stock of $7,814,000.
These
financial numbers as reported include both the pre-merger and the post-merger
operations of Marani Spirits, Inc.
Off
Balance Sheet Arrangements
We have
no off-balance sheet arrangements.
Effects
of Inflation
We
believe that inflation has not had any material effect on our net sales and
results of operations.
The
consolidated financial statements for the years ended June 30, 2008 and 2006 are
contained on Pages F-1 to F-25 that follow.
None
Item
8A(T). Controls and Procedures
Evaluation
of Disclosure Controls and Procedures
Under the
supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, we conducted an evaluation of the
effectiveness of the design and operation of our disclosure controls and
procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended (“Exchange Act”), as of June 30, 2008.
Disclosure controls and procedures are those controls and procedures designed to
provide reasonable assurance that the information required to be disclosed in
our Exchange Act filings is (1) recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission’s rules
and forms, and (2) accumulated and communicated to management, including our
Chief Executive Officer and Chief Financial Officer, as appropriate, to allow
timely decisions regarding required disclosure.
We have
conducted a re-review Items 307 and 308(a) of Regulation S-K, and Rule 13a-15,
as well as the Commission’s Final Rule “Management's Report on Internal Control
Over Financial Reporting and Certification of Disclosure in Exchange Act
Periodic Reports” in connection with the effectiveness of our Disclosure
Controls and Procedures and Internal Controls over Financial Reporting as of the
end of the 2008 fiscal year and any remediation plans that have or will be
initiated, as applicable.
Based on
that evaluation and review, the Chief Executive Officer and Chief Financial
Officer concluded that, as of June 30, 2008, our disclosure controls and
procedures were not effective.
Management’s
Annual Report on Internal Control over Financial Reporting
Management,
including our Chief Executive Officer and Chief Financial Officer, is
responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Exchange Act Rule 13a –
15(f). Management conducted an assessment as of June 30, 2008 of the
effectiveness of our internal control over financial reporting based on the
framework in Internal Control
– Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”). Based on that
evaluation, management concluded that our internal controls over financial
reporting were not effective as of June 30, 2008, based on criteria in Internal Control – Integrated
Framework issued by the COSO.
For the
year ended June 30, 2008, we identified certain material weaknesses of the
effectiveness of our internal controls over financial reporting for which we are
implementing remedial procedures, as follows:
Material
Weakness
We have
examined our financial and transactional information collection processes, and
have determined that, where events during the reporting period have delayed the
collection process and the immediate “closing” of our financial position for the
reporting period, we have not had appropriate time to make effective decisions
regarding the accuracy of our required disclosures. Specifically, the
Form 10-KSB for the year ended June 30, 2008 was our first report subsequent to
the April 2008 merger transaction, which transaction represented a change for
the Company and its management in the acquiring company’s fiscal year from a
calendar year to a June 30 fiscal year. The proximity of the merger transaction
to our new fiscal year end resulted in insufficient time to close our fourth
quarter books or to enable management to fully analyze the transaction and its
impact on the Company’s financial reporting and disclosures. The
impact of the foregoing resulted in management’s incorrect view that the
accounting treatment of the merger transaction in our Form 10-KSB for the June
30, 2008 year end was appropriate.
Remediation
Based on
the review and analysis set forth above, we have concluded that our controls and
procedures needed to be revised to ensure that the information required to be
disclosed by us in the reports we file is timely accumulated and communicated to
management to allow for considered and appropriate decisions regarding both the
collection of information and an analysis of the accounting treatment afforded
the information collected. . In response to this conclusion, we have
designed and implemented processes of collecting financial and transactional
information on a more expeditious and priority basis, with the goal of “closing”
our quarterly and annual financial positions to allow for the timely analysis,
review and audits by our auditors, and management’s decisions regarding our
required informational and accounting treatment disclosures.
These
processes include the calendaring of target dates for the
following:
•
collection of financial information
•
analysis of the completeness of information collected
• review
and analysis of debt
• review
and analysis of assets
• review
and analysis of revenues
• review
and analysis of expenses, by category
• review
and analysis of our statement of equity
•
finalization of general ledger and subsidiary reports for the reporting
period
•
reconciliation of reports
• review
and analysis of events subsequent to the closing of the last reporting period,
and
•
preparation of preliminary and final financial statements for review or audit by
our auditors
These
processes will also include where appropriate the increased and early
utilization of accounting and legal service providers to resolve any matters
concerning disclosure or accounting issues.
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements should they occur. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions or that the
degree of compliance with the control procedure may
deteriorate.
This
Annual Report does not include an attestation report of our registered public
accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by our registered public
accounting firm pursuant to temporary rules of the Securities and Exchange
Commission that permit us to provide only management’s report in this Annual
Report.
Changes
in internal controls
We have
designed and implemented processes of collecting financial and transactional
information on a more expeditious basis with the goal of “closing” our quarterly
and annual financial positions to allow for timely analysis, review and audits
by our auditors and management decisions regarding our required
disclosure..
None
PART
II
The
directors, executive officers and significant employees as of June 30, 2008, are
as follows. Our directors are elected at each annual meeting and serve until
their successors are elected.
|
Name
|
Age
|
Position
with Company
|
Year
Appointed
|
|||
|
Margrit
Eyraud
|
46
|
Chief
Executive Officer and Director
|
2008
|
|||
|
Ani
Kevorkian
|
44
|
Chief
Financial Officer and Director
|
2008
|
|||
|
Ara
Zartarian
|
39
|
Chief
Operating and Director
|
2008
|
The
experience and background of our directors, executive officers and significant
employees follows:
Margrit
Eyraud served as our Chairman of the Board, President, and Chief Executive
Officer. She commenced her employment as the Chief Executive Officer of MEI
since its formation in 2001. Previously, she was an Assistant Controller at
Superba, Inc. (1996 to 2002), Controller at Rampage Closing and Vice President
of Credit at Authentic Fitness Warnaco, Inc. (1992 to 1996), and Chief Financial
Officer at Aheam Machine Distribution (1989 to 1992). Ms. Eyraud earned
Bachelors in Business Administration at the University of
LaVerne. Ms. Eyraud resigned as our chief Executive Officer and
President, effective October 1, 2008.
Ara
Zartarian currently serves as our Chief Executive Officer, President, Chief
Operating Officer, and Secretary. He has been an officer and director of MEI
since its formation in 2001. Previously, he was a partner in the collections
firm of Zartarian & Ginocchio Collections. Mr. Zartarian earned his
Bachelors degree from Loyola Marymount University (Los Angeles) and his Juris
Doctorate from Western State University College of Law.
Ani
Kevorkian serves as our Executive Vice President, Chief Financial Officer, and
Treasurer. She has been an officer and director of MEI since its formation in
2001. Previously, she was an Assistant Director at the International Institute
for Municipal Clerks (1994 to 2002) and an Operations Manager at the Michelin
Tire Company (1988 to 1993). Ms. Kevorkian earned her Bachelor in Business
Management from the University of Phoenix.
Significant
Employees
We have
not identified any employee who is not an executive who is expected to make a
significant contribution to the business.
Family
Relationships
All three
of our executive officers named above are siblings.
Legal
Proceedings
We are
not involved in any legal proceedings. To the knowledge of management, no
federal, state or local governmental agency is presently contemplating any
proceeding against the Company.
None of
our directors, executive officers or nominees for such office have been involved
in any legal proceedings related to bankruptcy of an entity where they held such
positions; nor charged or convicted in any criminal proceedings; nor subject to
any order, judgment, or decree permanently or temporarily enjoining, barring,
suspending or otherwise limiting their involvement in any type of business,
securities or banking activities; nor found in any manner whatsoever to have
violated a federal or state securities or commodities law.
None of
our officers or directors has:
|
•
had any bankruptcy petition filed by or against any business of which such
person was a general partner or executive officer at the time of the
bankruptcy or within two years prior to that
time;
|
|
•
been convicted in a criminal proceeding or is subject to a pending
criminal proceeding (excluding traffic violations and other minor
offenses);
|
|
•
been subject to any order, judgment, or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring,
suspending or otherwise limiting his involvement in any type of business,
securities or banking activities;
or
|
|
•
been found by a court of competent jurisdiction (in a civil action), the
Securities and Exchange Commission to have violated a federal or state
securities or commodities law, where the judgment has not been reversed,
suspended or vacated.
|
Material
Changes to Nomination Procedures
We have
not adopted procedures by which security holders may recommend nominees to our
Board of Directors.
Audit
Committee and Audit Committee Financial Expert
We do not
have a separately constituted standing audit committee or a committee performing
similar functions. Our entire Board of Directors acts as our audit
committee.
We do not
have an audit committee financial expert serving on our audit
committee. We are a small company with limited revenues for the year
ended June 30, 2008. In these circumstances, we have had difficulty
attracting a qualified director that could serve as our audit committee
financial expert.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934 requires our directors and
executive officers and persons who beneficially own more than ten percent of a
registered class of our equity securities to file with the SEC initial reports
of ownership and reports of change in ownership of common stock and other equity
securities of our Company. Officers, directors and greater than ten percent
stockholders are required by SEC regulations to furnish us with copies of all
Section 16(a) forms they file. To our knowledge, the following persons
have failed to file, on a timely basis, the identified reports required by
Section 16(a) of the Exchange Act during our fiscal
year ended June 30, 2008:
|
Purrell
Partners LLC
2224
Main Street
Santa
Monica, CA 90405
|
Beneficial
Owner of more than ten percent of our common stock registered under
Section 12 of the Exchange Act
|
Failed
to file Form 13
|
Item
10. Executive Compensation
Summary
Compensation Table
The
following table sets forth the compensation earned during the last fiscal year
by our top three highest paid executive officers:
|
Principal
Position
|
**All
Other Compensation
|
||||
|
Name
|
Year
Ended
|
*Salary
$
|
***Total
|
||
|
Margrit
Eyraud
|
CEO
|
6-30-2008
|
180,000
|
12,144
|
192,144
|
|
Ani
Kevorkian
|
CFO
|
6-30-2008
|
177,000
|
12,144
|
189,144
|
|
Ara
Zartarian
|
COO
|
6-30-2008
|
178,000
|
16,008
|
194,008
|
|
*
|
Salary
reported on an annualized
basis.
|
|
**
|
Includes,
on an annualized basis, a monthly allowance for (i) automobile: $650.00
for each officer listed in this table, (ii) medical insurance: $362 each
for Margrit Eyraud and Ani Kevorkian, and (iii) medical insurance: $684
for Ara Zartarian.
|
|
***
|
No
employee received a bonus, stock awards, option awards or deferred
compensation earnings.
|
Outstanding
Equity Awards
We did
not grant or issue any equity awards or rights to equity awards to any of our
officers or employees during our fiscal year ended June 30, 2008.
The
following table sets forth the beneficial ownership of our company’s common
stock, and the relationship of each owner to the Company, as of June 30, 2008 as
to:
· each person known
to beneficially own more than 5% of our issued and outstanding common
stock
· each of our
directors
· each executive
officer
· all directors and
officers as a group
The
following conditions apply to all of the following tables:
|
· except as
otherwise noted, the named beneficial owners have direct ownership of the
stock and have sole voting and investment power with respect to
the shares shown
|
|
|
· the class
listed as "common" includes the shares of common stock underlying the
Company’s issued convertible preferred stock, options and
warrants
|
Beneficial
Owners
|
Title
of Class
|
Name
and Address of Beneficial Owner (1)
|
Amount
and Nature of Beneficial Ownership
|
Percent
of Class
|
|
Common
|
Purrell
Partners LLC
2224
Main Street
Santa
Monica, CA 90405
|
42,594,616(2)
|
25%
(4)
|
|
Common
|
Margrit
Eyraud
c/o
13152 Raymer Street, Suite 1A
North
Hollywood, CA 91605
Officer
and Director
|
35,333,330
(3)
|
20.81%
(4)
|
|
Common
|
RBC
Dexia Investor Services Bank S.A. Luxembourg
c/o
Bank Julius Baer & Co. Ltd
Hohlstrasse
602,
Zurich,
Switzerland, CH-8010
Investor
|
14,000,000
|
8.24%(4)
|
|
Common
|
Ani
Kevorkian
c/o
13152 Raymer Street, Suite 1A
North
Hollywood, CA 91605
Officer
and Director
|
18,203,340
(3)
|
10.72%
(4)
|
|
Common
|
Ara
Zartarian
c/o
13152 Raymer Street, Suite 1A
North
Hollywood, CA 91605
Officer
and Director
|
10,843,330
(3)
|
6.39%
(4)
|
|
(1)
|
Beneficial
Ownership is determined in accordance with the rules of the Securities and
Exchange Commission and generally includes voting or investment power with
respect to securities. Shares of common stock subject to options or
warrants currently exercisable or convertible, or exercisable or
convertible within 60 days of June 30, 2008 are deemed outstanding for
computing the percentage of the person holding such option or warrant but
are not deemed outstanding for computing the percentage of any other
person.
|
|
(2)
|
As
a group including Zoltar Investments Ltd; Dojo Enterprises, LLC; Parkway,
LLC; Grecian, LLC; Ford Group, LLC; Route 32 LLC; Purrell Partners
LLC
|
|
(3)
|
Common
Stock shares issued in connection with merger April
2008.
|
|
(4)
|
Percentage
calculated based on 169,743,752 shares of common stock issued and
outstanding
|
Management
Owners
|
Title
of Class
|
Name and Address of Management Owner | Amount and Nature of Ownership (1) | Percent of Class (3) | |||||||
|
Common
|
Margrit
Eyraud
c/o
13152 Raymer Street
North
Hollywood, CA 91605
|
35,333,330
|
(2)
|
20.81
|
%
|
|||||
|
Common
|
Ani
Kevorkian
c/o
13152 Raymer Street
North
Hollywood, CA 91605
|
18,203,340
|
(2)
|
10.72
|
%
|
|||||
|
Common
|
Ara
Zartarian
c/o
13152 Raymer Street
North
Hollywood, CA 91605
|
10,843,330
|
(2)
|
6.39
|
%
|
|||||
|
Total
|
64,380,000
|
(2)
|
37.92
|
%
|
||||||
|
(1)
|
Beneficial
Ownership is determined in accordance with the rules of the Securities and
Exchange Commission and generally includes voting or investment power with
respect to securities. Shares of common stock subject to options or
warrants currently exercisable or convertible, or exercisable or
convertible within 60 days of June 30, 2008 are deemed outstanding for
computing the percentage of the person holding such option or warrant but
are not deemed outstanding for computing the percentage of any other
person.
|
|
(2)
|
Common
Stock shares issued in connection with merger April
2008.
|
|
(3)
|
Percentage
calculated from base of 169,743,752 shares of common stock issued and
outstanding.
|
There
currently are no arrangements that may result in a change of ownership or
control.
Certain
Relationships and Related Party Transactions
We did
not engage in any business relationship or activities with employees, officers,
directors or affiliates during our fiscal year ended June 30, 2008, other that
with respect to their employment positions and duties performed on our behalf;
nor, to the best of our knowledge do any our employees, officers, directors or
affiliates have an interest in any person, entity or third party with which we
conduct business activities.
Director
Independence
Our board
has positions for three (3) directors that are elected annual meetings of our
shareholders. Our Board of Directors does not meet appropriate
standards of independence. In determining independence, the board
will consider the definition of “independent director” in the listing standards
of the Nasdaq Stock Market. Under this definition, none of our
current directors is considered independent.
Item
13. Exhibits
|
Exhibit
Number
|
DESCRIPTION
|
|
|
2.1
|
Agreement
and Plan of Merger dated April 4, 2008, filed with the SEC on April 14,
2008 in our Form 8-K, incorporated herein by reference.
|
|
|
3.1
|
Articles
of Incorporation of Elli Tsab, Inc. filed July 31, 2001, filed with the
SEC on April 14, 2008 in our Form 8-K, incorporated herein by
reference.
|
|
|
3.2
|
Certificate
of Amendment of Articles of Incorporation filed April 15, 2004, changing
name to Patient Data Corporation, filed with the SEC on April 14, 2008 in
our Form 8-K, incorporated herein by reference.
|
|
|
3.3
|
Certificate
of Amendment of Articles of Incorporation filed January 13, 2005, changing
name to Fit for Business International, Inc. , filed with the SEC on April
14, 2008 in our Form 8-K, incorporated herein by
reference.
|
|
|
3.4
|
Certificate
of Amendment of Articles of Incorporation filed March 10, 2008, changing
name to Marani Brands, Inc. and effectuating reverse stock split , filed
with the SEC on April 14, 2008 in our Form 8-K, incorporated herein by
reference.
|
|
|
3.5
|
By-Laws
filed on August 1, 2005with Amendment No. 3 to Form SB-2 registration
statement, incorporated herein by reference.
|
|
|
4.1
|
Form
of Warrant Agreement for Investors, filed with the SEC on April 14, 2008
in our Form 8-K, incorporated herein by reference.
|
|
|
10.1
|
Employment
Agreement for Margrit Eyraud, filed with the SEC on April 14, 2008 as an
exhibit to Form 8-K, incorporated herein by reference.
|
|
|
10.2
|
Employment
Agreement for Ara Zartarian, filed with the SEC on April 14, 2008 as an
exhibit to Form 8-K, incorporated herein by reference.
|
|
|
10.3
|
Employment
Agreement for Ani Kevorkian, filed with the SEC on April 14, 2008 as an
exhibit to Form 8-K, incorporated herein by reference.
|
|
|
10.4
|
2008
Stock Option Plan filed with the SEC on May 21, 2008 as an exhibit to Form
S-8, incorporated herein by reference.
|
|
|
10.5
|
Exclusive
Distribution Agreement with Eraskh Winery Ltd., dated November 27, 2002,
filed with the SEC on April 14, 2008 as an exhibit to Form 8-K,
incorporated herein by reference.
|
|
|
10.6
|
Amendment
to Exclusive Distribution Agreement with Eraskh Winery Ltd., dated
November 13, 2007, filed herewith.
|
|
|
10.7
|
Letter
of Intent to Purchase Eraskh Winery Ltd., dated December 15, 2007, filed
herewith.
|
|
|
10.8
|
Credit
Line Agreement
|
|
|
31.1
|
Certification
of CEO, Rules 13a-14(a) & 15d-14(a), filed herewith
|
|
|
31.2
|
Certification
of CAO, Rules 13a-14(a) & 15d-14(a) filed herewith
|
|
|
32.1
|
Certifications
of CEO, 18 U.S.C. Sec. 1350, filed herewith
|
|
|
32.2
|
Certifications
of CFO, 18 U.S.C. Sec. 1350, filed herewith
|
|
|
99.1
|
Current
Report on Form 8-K, re: Management Changes, as filed with the SEC on
October 7, 2008, incorporated herein by
reference
|
Audit Fees and Audit Related
Fees
The
aggregate fees billed for each of the last two fiscal years for professional
services rendered by the principal accountant for the audit of our annual
financial statements and review of financial statements included in our Forms
10-KSB were $39,850 and $25,503, respectively, for the years ended June 30, 2008
and 2007. There were no audit related fees for these
periods.
Audit Committee Pre-Approval
Policies
Our Board
of directors, functioning as our audit committee, makes reasonable inquiry as to
the independence of our principal auditors based upon the considerations set
forth in Rule 2-01 of Regulation S-B, including the examination of
representation letters furnished by the principal accountant. The
audit committee has not approved any services beyond those required for the
audit of our annual financial statements, review of financial statements
included in our Forms 10-KSB and preparation of corporate tax
returns.
In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, there unto duly
authorized.
MARANI
BRANDS, INC.
Date:
November 2,
2009
By: /s/
Margrit
Eyraud
Margrit
Eyraud
Chief
Executive Officer, President
Chairman
Date:
November 2, 2009
By: /s/ Ani
Kevorkian
Ani
Kevorkian
Chief
Financial Officer
Principal
Accounting Officer
Director
THE BOARD OF MARANI BRANDS,
INC.
We have
audited the accompanying consolidated balance sheet of Marani Brands, Inc. and
Subsidiaries as of June 30, 2008 and 2007, and the related consolidated
statements of operations, stockholders equity and cash flows for the periods
then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform our audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Marani Brands, Inc.
and Subsidiaries at June 30, 2008 and 2007 and the results of its’ consolidated
operations and its’ consolidated stockholders equity and consolidated cash flows
for the periods then ended in conformity with accounting principles generally
accepted in the United States of America.
As
referred to in Note 15 to the financial statements, the company has restated
these financial statements for a correction of an error.
The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. The Company's viability is
dependent upon its ability to obtain future financing and the success of its
future operations. These factors raise substantial doubt as to the Company's
ability to continue as a going concern. Management's plan in regard to these
matters is described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
Gruber
& Company, LLC Saint Louis, Missouri
October
12, 2009 (Restated)
|
Marani
Brands, Inc. and Subsidiaries
|
|
Consolidated
Balance Sheet
|
|
RESTATED
|
|
June
30,
|
||||||||
|
2008
|
2007
|
|||||||
|
Assets
|
||||||||
|
Current
Assets
|
||||||||
|
Cash
& Equivalents
|
$
|
2,460,663
|
$
|
35,611
|
||||
|
Accounts
Receivable
|
29,661
|
16,261
|
||||||
|
Inventory
|
77,307
|
78,018
|
||||||
|
Total
Current Assets
|
2,567,631
|
129,890
|
||||||
|
Property
& Equipment, Net
|
5,510
|
4,640
|
||||||
|
Deposits
|
35,255
|
10,255
|
||||||
|
Total
Assets
|
$
|
2,608,396
|
$
|
144,785
|
||||
|
Liabilities
& Stockholders' Equity (Deficit)
|
||||||||
|
Current
Liabilities
|
||||||||
|
Accounts
Payable
|
$
|
260,894
|
$
|
178,961
|
||||
|
Accrued
Expenses
|
94,063
|
38,036
|
||||||
|
Accrued
Derivative Liability
|
-
|
104,135
|
||||||
|
Notes
Payable
|
80,495
|
204,355
|
||||||
|
Notes
Payable Related Party
|
-
|
251,160
|
||||||
|
Total
Current Liabilities
|
435,452
|
776,647
|
||||||
|
Non-Current
Liabilities
|
||||||||
|
Notes
Payable
|
249,816
|
249,816
|
||||||
|
Total
Non-Current Liabilities
|
249,816
|
249,816
|
||||||
|
Total
Liabilities
|
$
|
685,268
|
1,026,463
|
|||||
|
Commitments
& Contingencies
|
-
|
-
|
||||||
|
Stockholders'
Equity (Deficit)
|
||||||||
|
Common
Stock, $0.001 par value, 300,000,000 shares
|
||||||||
|
authorized;
169,743,752 and 71,520,000 shares issued and outstanding,
respectively
|
$
|
169,744
|
$
|
71,520
|
||||
|
Additional
Paid-in Capital
|
19,427,799
|
840,680
|
||||||
|
Accumulated
Deficit
|
(17,674,415
|
)
|
(1,793,878
|
)
|
||||
|
Total
Stockholders' Equity (Deficit)
|
1,923,128
|
(881,678
|
)
|
|||||
|
Total
Liabilities & Stockholders' Equity (Deficit)
|
$
|
2,608,396
|
$
|
144,785
|
||||
|
The
accompanying notes are an integral part of these financial
statements
|
||||||||
|
Marani
Brands, Inc. and Subsidiaries
|
|
Consolidated
Statements of Operations
|
|
RESTATED
|
|
For
the Twelve Months Ended
|
||||||||
|
June
30,
|
||||||||
|
2008
|
2007
|
|||||||
|
Sales
|
$
|
168,058
|
$
|
173,663
|
||||
|
Cost
of Sales
|
48,809
|
57,838
|
||||||
|
Gross
Profit
|
119,249
|
115,825
|
||||||
|
Operating
Expenses
|
||||||||
|
Marketing
and Sales Promotion
|
812,704
|
311,300
|
||||||
|
General
& Administrative
|
2,847,255
|
298,956
|
||||||
|
Total
Operating Expenses
|
3,659,959
|
610,256
|
||||||
|
Operating
Income (Loss)
|
$
|
(3,540,710
|
)
|
$
|
(494,431
|
)
|
||
|
Other
Income (Expense)
|
||||||||
|
Other
Income
|
-
|
4,040
|
||||||
|
Direct
Offering Costs
|
(11,779,577
|
)
|
-
|
|||||
|
Interest
Income
|
10,471
|
-
|
||||||
|
Interest
Expense
|
(161,132
|
)
|
(45,718
|
)
|
||||
|
Derivative
Expense
|
104,135
|
-
|
||||||
|
Total
Other Income (Expense)
|
(11,826,103
|
)
|
(41,678
|
)
|
||||
|
Net
Income (Loss) Before Income Taxes
|
$
|
(15,366,813
|
)
|
$
|
(536,109
|
)
|
||
|
Provision
for Income Taxes
|
-
|
-
|
||||||
|
Net
Income (Loss)
|
$
|
(15,366,813
|
)
|
$
|
(536,109
|
)
|
||
|
Net
Income per Share
|
||||||||
|
Basic
|
$
|
(0.12
|
)
|
$
|
(0.01
|
)
|
||
|
Diluted
|
$
|
(0.12
|
)
|
$
|
(0.01
|
)
|
||
|
Number
of Shares Used in Per Share Calculations
|
||||||||
|
Basic
|
130,290,491
|
60,491,610
|
||||||
|
Diluted
|
130,290,491
|
60,491,610
|
||||||
|
The
accompanying notes are an integral part of these financial
statements
|
||||||||
|
Marani
Brands, Inc. and Subsidiaries
|
|
Consolidated
Statements of Stockholders' Equity (Deficit)
|
|
RESTATED
|
|
Common
Stock
|
||||||||||||||||||||
|
Number
of Shares
|
Par
Value ($0.001) Amount
|
Additional
Paid-In-Capital
|
Accumulated
Deficit
|
Total
Stockholders' Equity (Deficit)
|
||||||||||||||||
|
Balance
at June 30, 2006
|
55,160,000
|
$
|
55,160
|
$
|
448,040
|
$
|
(1,257,769
|
)
|
(754,569
|
)
|
||||||||||
|
Common
Stock Issued to Investors for Cash
|
16,360,000
|
16,360
|
392,640
|
-
|
409,000
|
|||||||||||||||
|
Net
Loss
|
-
|
-
|
-
|
(536,109
|
)
|
(536,109
|
)
|
|||||||||||||
|
Balance
at June 30, 2007
|
71,520,000
|
$
|
71,520
|
$
|
840,680
|
$
|
(1,793,878
|
)
|
$
|
(881,678
|
)
|
|||||||||
|
Common
Stock Issued to Investors for Cash
|
41,179,121
|
41,179
|
7,772,821
|
-
|
7,814,000
|
|||||||||||||||
|
Common
Stock Issued to Officers for Services
|
11,686,670
|
11,687
|
128,553
|
-
|
140,240
|
|||||||||||||||
|
Common
Stock Issued for Services
|
1,281,797
|
1,282
|
81,167
|
-
|
82,449
|
|||||||||||||||
|
Recapitalization
for Reverse Merger-FFBI Shares
|
937,339
|
937
|
(937
|
)
|
-
|
-
|
||||||||||||||
|
Common
Stock Issued for Direct Offering Costs
|
43,138,825
|
43,139
|
10,605,515
|
-
|
10,648,654
|
|||||||||||||||
|
Negative
Equity of FFBI charged to Retained Earnings
|
-
|
-
|
-
|
(513,724
|
)
|
(513,724
|
)
|
|||||||||||||
|
Net
Loss
|
-
|
-
|
-
|
(15,366,813
|
)
|
(15,366,813
|
)
|
|||||||||||||
|
Balance
at June 30, 2008
|
169,743,752
|
$
|
169,744
|
$
|
19,427,799
|
$
|
(17,674,415
|
)
|
$
|
1,923,128
|
||||||||||
|
The
accompanying notes are an integral part of these financial
statements
|
||||||||||||||||||||
|
Marani
Brands, Inc. and Subsidiaries
|
|
Consolidated
Statements of Cash Flows
|
|
RESTATED
|
|
For
the Year Ended June 30,
|
||||||||
|
2008
|
2007
|
|||||||
|
Cash
Flows from Operating Activities
|
||||||||
|
Net
Income (Loss)
|
$
|
(15,366,813
|
)
|
$
|
(536,109
|
)
|
||
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||
|
Stock
Based Compensation
|
222,689
|
-
|
||||||
|
Derivative
Expense
|
(104,135
|
)
|
3,236
|
|||||
|
Common
Stock Issued for Direct Offering Costs
|
10,648,654
|
-
|
||||||
|
Depreciation
& Amortization
|
1,459
|
1,459
|
||||||
|
Changes
in operating assets and liabilities:
|
||||||||
|
Accounts
Receivable
|
(13,400
|
)
|
3,274
|
|||||
|
Inventory
|
711
|
32,856
|
||||||
|
Deposits
|
(25,000
|
)
|
-
|
|||||
|
Other
|
-
|
-
|
||||||
|
Accounts
Payable
|
59,645
|
42,660
|
||||||
|
Accrued
Expenses
|
(214,046
|
)
|
(50,149
|
)
|
||||
|
Net
Cash Used in Operating Activities
|
(4,790,236
|
)
|
(502,773
|
)
|
||||
|
Cash
Flows from Investing Activities
|
||||||||
|
Property
and Equipment
|
(2,329
|
)
|
-
|
|||||
|
Net
Cash Used in Investing Activities
|
(2,329
|
)
|
-
|
|||||
|
Cash
Flows from Financing Activities
|
||||||||
|
Notes
Payable
|
(327,739
|
)
|
102,860
|
|||||
|
Notes
Payable Related Parties
|
(268,644
|
)
|
24,730
|
|||||
|
Common
Stock Issued for Cash
|
7,814,000
|
409,000
|
||||||
|
Net
Cash Provided by Financing Activities
|
7,217,617
|
536,590
|
||||||
|
Net
Increase (Decrease) in Cash
|
2,425,052
|
33,817
|
||||||
|
Cash
Beginning of Period
|
35,611
|
1,794
|
||||||
|
Cash
End of Year
|
$
|
2,460,663
|
$
|
35,611
|
||||
|
Supplemental
Disclosure of Cash Flow Information:
|
||||||||
|
Cash
Paid during the period for interest
|
$
|
161,132
|
$
|
45,718
|
||||
|
Cash
Paid during the period for income taxes
|
800
|
800
|
||||||
|
The
accompanying notes are an integral part of these financial
statements
|
||||||||
Marani
Brands Inc. and Subsidiaries
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
RESTATED
Note
1 – Organization, Business & Operations
History
The
Company was incorporated in Nevada on May 30, 2001, under the name Elli Tsab,
Inc., which was subsequently changed to Patient Data Corporation, and thereafter
to Fit for Business, Inc. On March 10, 2008, the Company changed its
name from Fit for Business, Inc. to Marani Brands, Inc. On March 31,
2008, the common stock underwent a 1-for-250 reverse stock split, and commenced
trading on the Over the Counter Bulletin Board under the new symbol
“MRIB”.
Merger
(see Note 4)
On March
11, 2008, the Company formed FFBI Merger Sub Corp., a California corporation, as
its wholly-owned subsidiary. FFBI Merger Sub Corp. was formed by the
Company for purpose of effectuating a merger transaction by and among the
Company and FFBI Merger Sub Corp., on the one hand, and a California corporation
known as Margrit Enterprises International, Inc. “(MEI”), on the other
hand.
On April
4, 2008, the Company, FFBI Merger Sub Corp. and MEI executed, and on April 7,
2008 the parties closed, a three party Merger Agreement.
The
acquisition of MEI by the Company was completed by the merger of the Company’s
wholly-owned subsidiary, FFBI Merger Sub Corp. with and into MEI, with MEI
remaining as the surviving entity and wholly-owned subsidiary of the
Company. The net effect of these transactions is a
reverse merger of the Company with MEI. MEI subsequently changed its
name to Marani Spirits, Inc., and continues to be the operational arm of the
Company.
Business
and Products
Prior to
the Company’s acquisition of MEI, our only business was that of its wholly-owned
subsidiary, Fit for Business (Australia) Pty Limited, which is engaged in the
development of overall wellness programs for the workplace in
Australia.
Subsequent
to the merger transaction with MEI, the Company’s primary business is the
distribution of wine and spirit products manufactured in Armenia. In the future
the Company may add alcohol beverage products manufactured in other
countries.
Reverse
Stock Split
Effective
March 31, 2008, the Company’s common stock underwent a 1-for-250 reverse stock
split. The Company retained the current par value of $0.001 per share for all
shares of common stock. All references in the financial statements to the number
of shares outstanding, per share amounts, and stock options data of the
Company’s common stock have been restated to reflect the effect of the reverse
stock split for all periods presented.
Note
2 - Going Concern and Management's Plans
The
accompanying consolidated financial statements have been prepared in conformity
with generally accepted accounting principles which contemplate
continuation of the Company as a going concern. However, as of June 30, 2008,
the Company has an accumulated deficit of $17,674,415 and incurred a net loss
for the year ended June 30, 2008 of $15,366,813. The Company’s current business
plan requires additional funding beyond its anticipated cash flows from
operations. These and other factors raise substantial doubt about the Company's
ability to continue as a going concern.
The
ability of the Company to continue as a going concern is dependent upon its
ability to raise additional capital and achieve profitable operations. The
accompanying consolidated financial statements do not include any adjustments
that might be necessary if the Company is unable to continue as a going
concern.
Marani
Brands Inc. and Subsidiaries
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
RESTATED
Note
3 - Summary of Significant Accounting Policies
Recapitalization
The
capital structure of the consolidated enterprise is that of MEI due to reverse
recapitalization accounting. The financial statements presented are a
continuation of MEI, the accounting acquirer, and not FFBI, the accounting
acquiree. The recapitalization and capital structure is now different than that
appearing in historical financial statements for FFBI.
Principles
of Consolidation
The
accompanying consolidated financial statements include the accounts of Marani
Brands, Inc. and its wholly subsidiaries Marani Spirits, Inc. and Great Hawk,
Inc. (collectively the “Company”). All significant inter-company accounts and
transactions have been eliminated in consolidation.
Cash
and cash equivalents
The
Company considers all liquid investments with a maturity of three months or less
from the date of purchase that are readily convertible into cash to be cash
equivalents.
Inventories
Inventories
are stated at the lower of cost or market. Cost is computed on a
weighted-average basis, which approximates the first-in, first-out method;
market is based upon estimated replacement costs. Costs included in inventory
primarily include finished spirit products and packaging.
Use
of estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles 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 date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates
Property
& equipment
Property
and equipment are recorded at cost. Depreciation is computed using the
straight-line method over useful lives of 3 to 10 years. The cost of assets sold
or retired and the related amounts of accumulated depreciation are removed from
the accounts in the year of disposal. Any resulting gain or loss is reflected in
current operations. Assets held under capital leases are recorded at the lesser
of the present value of the future minimum lease payments or the fair value of
the leased property. Expenditures for maintenance and repairs are charged to
operations as incurred.
Impairment
of long-lived assets
Effective
January 1, 2002, the Company adopted Statement of Financial Accounting Standards
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS
144"), which addresses financial accounting and reporting for the impairment or
disposal of long-lived assets and supersedes SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,"
and the accounting and reporting provisions of APB Opinion No. 30, "Reporting
the Results of Operations for a Disposal of a Segment of a Business." The
Company periodically evaluates the carrying value of long-lived assets to be
held and used in accordance with SFAS 144. SFAS 144 requires impairment losses
to be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets' carrying amounts. In that event, a
loss is recognized based on the amount by which the carrying amount exceeds the
fair market value of the long-lived assets. Loss on long-lived assets to be
disposed of is determined in a similar manner, except that fair market values
are reduced for the cost of disposal.
Marani
Brands Inc. and Subsidiaries
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
RESTATED
Basic
and Diluted Net Income per Share
Basic
earnings per share is calculated using the weighted-average number of common
shares outstanding during the period without consideration of the dilutive
effect of stock warrants and convertible notes. Diluted earnings per share is
calculated using the weighted-average number of common shares outstanding during
the period after consideration of the dilutive effect of stock warrants and
convertible notes.
Due to
the reverse recapitalization transaction, for purposes of computing earnings per
share:
|
·
|
For
the year ended June 30, 2008, the number of shares outstanding from July
1, 2007 to April 4, 2008 (the period from the beginning of the fiscal year
to the date of the recapitalization) was 100,000,000 shares (the number of
shares issued by the shell company to the operating entity). From April 5,
2008 to June 30, 2008 (the period from the date of the recapitalization to
the end of the most recent fiscal year) the number of shares used in the
calculation of earnings per share were the actual weighted number of
shares of the combined entity outstanding during that
period.
|
|
·
|
For
the year ended June 30, 2007, the number of shares outstanding was the
income of the legal acquiree (MEI) attributable to common shareholders
(100%), multiplied by the legal acquiree’s historical weighted average
number of common shares outstanding (6,049,161), multiplied by
the exchange ratio established in the acquisition agreement
(10:1).
|
Stock-based
compensation
In
December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No.
123(R), Share-Based Payment. This pronouncement amends SFAS No. 123, Accounting
for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for
Stock Issued to Employees. SFAS No. 123(R) requires that companies account for
awards of equity instruments issued to employees under the fair value method of
accounting and recognize such amounts in their statements of operations. Under
SFAS No. 123(R), we are required to measure compensation cost for all
stock-based awards at fair value on the date of grant and recognize compensation
expense in our consolidated statements of operations over the service period
that the awards are expected to vest.
The
Company accounts for stock-based compensation issued to non-employees and
consultants in accordance with the provisions of SFAS 123(R) and the Emerging
Issues Task Force consensus in Issue No. 96-18 ("EITF 96-18"), "Accounting for
Equity Instruments that are Issued to Other Than Employees for Acquiring or in
Conjunction with Selling, Goods or Services". Common stock issued to
non-employees in exchange for services is accounted for based on the fair value
of the services received.
Fair
value of financial instruments
Statement
of Financial Accounting Standard No. 107, Disclosures about Fair Value of
Financial Instruments, requires that the Company disclose estimated fair values
of financial instruments. The carrying amounts reported in the statements of
financial position for current assets and current liabilities qualifying as
financial instruments are a reasonable estimate of fair
value.
Revenue
recognition
Sales of
products and related costs of products sold are recognized when (i) persuasive
evidence of an arrangement exists, (ii) delivery has occurred, (iii) the price
is fixed or determinable and (iv) collectability is reasonably assured. These
terms are typically met upon shipment of finished spirit products to the
customer.
Marani
Brands Inc. and Subsidiaries
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
RESTATED
Shipping
and Handling
In
accordance with Emerging Issues Task Force (EITF) Issue No. 00-10, Accounting
for Shipping and Handling Fees and Costs, we include shipping fees billed to
customers in net revenues and do not bill customers for handling. Amounts
incurred by us for freight are included in cost of goods
sold.
Allowance
for doubtful accounts
We
provide an allowance for estimated uncollectible accounts receivable balances
based on historical experience and the aging of the related accounts receivable.
As of June 30, 2008 the Company has reserved $0 for doubtful
accounts.
Advertising
The
Company expenses advertising costs as incurred. Advertising costs for the year
ended June 30, 2008 and 2007 was $180,071 and $41,344,
respectively.
Income
Taxes
The
Company accounts for income taxes using the liability method as required by
Statement of Financial Accounting Standards ("FASB") No. 109, Accounting for
Income Taxes ("SFAS 109"). Under this method, deferred tax assets and
liabilities are determined based on differences between their financial
reporting and tax basis of assets and liabilities. The Company was not required
to provide for a provision for income taxes for the periods ended June 30, 2008
and 2007, as a result of net operating losses incurred during the periods. As of
June 30, 2008, the Company has available approximately $17,700,000 of net
operating losses ("NOL") available for income tax purposes that may be carried
forward to offset future taxable income, if any. These carryforwards expire in
various years through 2026. At June 30, 2008, the Company has a deferred tax
asset of approximately $7,000,000 relating to the Company's net operating
losses. The Company's deferred tax asset has been fully reserved by a valuation
allowance since realization of its benefit is uncertain. The Company's ability
to utilize its NOL carryforwards may be subject to an annual limitation in
future periods pursuant to Section 382 of the Internal Revenue Code of 1986, as
amended. In addition, other limitations may be imposed by the Code by virtue of
the merger outlined in Note 4.
The
provision for income taxes using the federal and state tax rates as compared to
the Company's effective tax rate is summarized as follows:
|
June
30,
|
||||||||
|
2008
|
2007
|
|||||||
|
Statutory
Federal Tax (Benefit) Rate
|
-34.00
|
%
|
-34.00
|
%
|
||||
|
Statutory
State Tax (Benefit) Rate
|
-5.83
|
%
|
-5.83
|
%
|
||||
|
Effective
Tax (Benefit) Rate
|
-39.83
|
%
|
-39.83
|
%
|
||||
|
Valuation
Allowance
|
39.83
|
%
|
39.83
|
%
|
||||
|
Effective
Income Tax
|
0.00
|
%
|
0.00
|
%
|
||||
Marani
Brands Inc. and Subsidiaries
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
RESTATED
Significant
components of the Company's deferred tax assets at June 30, 2008 and 2007, are
as follows:
|
June
30,
|
||||||||
|
2008
|
2007
|
|||||||
|
Net
Operating Loss Carryforward
|
$
|
7,039,719
|
$
|
714,502
|
||||
|
Valuation
Allowance
|
(7,039,719
|
)
|
(714,502
|
)
|
||||
|
Net
Deferred Tax Asset
|
$
|
-
|
$
|
-
|
||||
Research
and development costs
Expenditures
for research & development are expensed as incurred. Such costs are required
to be expensed until the point that technological feasibility is established.
The Company incurred no research and development costs for the years ended June
30, 2008 and 2007.
Reclassifications
Certain
items in the prior year financial statements have been reclassified for
comparative purposes to conform to the presentation in the current period’s
presentation. These reclassifications have no effect on the previously reported
income (loss).
Recently
Issued Accounting Pronouncements
In
December 2007, the FASB issued SFAS No. 141(R), Business Combinations (FAS
141(R)). This statement provides greater consistency in the accounting and
financial reporting of business combinations. It requires the acquiring entity
in a business combination to recognize all assets acquired and liabilities
assumed in the transaction, establishes the acquisition-date fair value as the
measurement objective for all assets acquired and liabilities assumed, and
requires the acquirer to disclose the nature and financial effect of the
business combination. FAS 141(R) is effective for fiscal years beginning after
December 15, 2008. We will adopt FAS 141(R) no later than the first quarter of
fiscal 2010 and are currently assessing the impact the adoption will have on our
financial position and results of operations.
In
December 2007, the FASB issued SFAS No. 160. Noncontrolling Interests in
Consolidated Financial Statements (FAS 160). This Statement amends Accounting
Research Bulletin No. 51, Consolidated Financial Statements, to establish
accounting and reporting standards for the noncontrolling interest in a
subsidiary and for the deconsolidation of a subsidiary. FAS 160 is effective for
fiscal years beginning after December 15, 2008. We will adopt FAS 160 no later
than the first quarter of fiscal 2010 and are currently assessing the impact the
adoption will have on our financial position and results of
operations.
In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities , which permits entities to choose to measure
at fair value eligible financial instruments and certain other items that are
not currently required to be measured at fair value. This statement requires
that unrealized gains and losses on items for which the fair value option has
been elected be reported in earnings at each subsequent reporting date. SFAS No.
159 is effective for fiscal years beginning after November 15, 2007. We will
adopt SFAS No. 159 no later than the first quarter of fiscal 2009. We are
currently assessing the impact the adoption of SFAS No. 159 will have on our
financial position and results of operations.
In
September 2006, the FASB issued SFAS No. 158, Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements
No. 87, 88, 106, and 132(R) . SFAS No. 158 requires company plan sponsors to
display the net over or under-funded position of a defined benefit
postretirement plan as an asset or liability, with any unrecognized prior
service costs, transition obligations or actuarial gains/losses reported as a
component of other comprehensive income in shareholders’ equity. SFAS No. 158 is
effective for fiscal years ending after December 15, 2006. We adopted the
recognition provisions of SFAS No. 158 as of the end of fiscal 2007. The
adoption of SFAS No. 158 did not have an effect on the Company’s financial
position or results of operations.
Marani
Brands Inc. and Subsidiaries
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
RESTATED
In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements . SFAS No.
157 establishes a framework for measuring fair value in generally accepted
accounting principles, clarifies the definition of fair value and expands
disclosures about fair value measurements. SFAS No. 157 does not require any new
fair value measurements. However, the application of SFAS No. 157 may change
current practice for some entities. SFAS No. 157 is effective for financial
statements issued for fiscal years beginning after November 15, 2007, and
interim periods within those fiscal years. We will adopt SFAS No. 157 in the
first quarter of fiscal 2009. We are currently assessing the impact that the
adoption of SFAS No. 157 will have on our financial position and results of
operations.
In July
2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in
Income Taxes — an interpretation of FASB Statement No. 109 (FIN 48). This
interpretation clarifies the application of SFAS No. 109, Accounting for Income
Taxes , by defining a criterion that an individual tax position must meet for
any part of the benefit of that position to be recognized in an enterprise’s
financial statements and also provides guidance on measurement, derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure and transition. FIN 48 is effective for fiscal years beginning after
December 15, 2006, but earlier adoption is permitted. The Company is in the
process of evaluating the impact of the application of the Interpretation to its
financial statements.
Note
4 – Merger
On March
11, 2008, the Company formed FFBI Merger Sub Corp., a California corporation, as
its wholly-owned subsidiary. FFBI Merger Sub Corp. was formed by the
Company for purpose of effectuating a merger transaction by and among the
Company and FFBI Merger Sub Corp., on the one hand, and a California corporation
known as Margrit Enterprises International, Inc. “(MEI”), on the other
hand.
On April
4, 2008, the Company, FFBI Merger Sub Corp. and MEI executed, and on April 7,
2008 the parties closed, a three party Merger Agreement, which the parties
implemented follows:
Merger of
FFBI Merger Sub Corp. and MEI
|
·
|
By
virtue of this statutory merger, the separate corporate existence of FFBI
Merger Sub Corp. ceased, with MEI remaining as the surviving
corporation.
|
|
·
|
The
shares of FFBI Merger Sub Corp. held by the Company pre merger were
converted into the shares of MEI and, post merger, the MEI conversion
shares remain outstanding and continue to be held by the Company as shares
of MEI
|
|
·
|
Since
MEI was a company with an ongoing business, and since FFBI Merger Sub
Corp. had no business operations and ceased to exist as a separate
corporate entity, this merger transaction constituted a “forward
merger”
|
Reverse
Merger MEI and Marani Brands, Inc. (the Company)
|
·
|
Contemporaneous
with the MEI – FFBI Merger Sub merger described above, MEI merged with the
Company in a reverse merger. In this reverse merger, each share
of MEI common stock held by its stockholders was automatically exchanged
for shares of the Company, determined by a 10 for 1 exchange
ratio
|
|
·
|
The
Company issued 100,000,000 shares of its common stock to the stockholders
of MEI in the exchange transaction set for the above, and the 10,000,000
shares of MEI then held by the Company as a result of the exchange
transaction were cancelled.
|
|
·
|
The
Company thereby holds 100% of the shares of MEI by virtue of the Company’s
ownership of the MEI shares that it obtained as part of the merger of FFBI
Merger Sub Corp. and MEI, which shares now represent all of the issued and
outstanding shares of MEI.
|
|
·
|
On
April 7, 2008, the Company sold its entire interest in its subsidiary, Fit
For Business (Australia) Pty Limited ("FFB Australia"), to its former
Chief Executive Officer.
|
|
·
|
Since
MEI operated an ongoing business and since the Company had pre merger
business operations that were not pursued by the Company post merger, this
merger transaction constituted a “reverse
merger”.
|
|
·
|
By
virtue of this “reverse merger,” both MEI and the Company continue to have
a separate existence, with MEI becoming a wholly owned subsidiary of the
Company.
|
Marani
Brands Inc. and Subsidiaries
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
RESTATED
Under the
Merger Agreement, as additional consideration for the merger transactions, the
Company issued, at Closing, the following: (i) 42,594,616 shares of the
Company’s common stock to Purrell Partners, LLC, or its assigns (the "Purrell
Group") and (ii) a Warrant to purchase 10,000,000 shares of the Company’s common
stock at an exercise price of $0.10 per share to the Purrell
Group.
Following
the Closing, the Company, in a private placement to investors, issued an
aggregate of 15,120,000 shares of common stock, along with warrants to purchase
an additional 15,120,000 shares of common stock at $0.35 per
share.
On April
7, 2008, the Company exercised its option under the Subsidiary Acquisition
Option Agreement, that was entered into in connection with the December 31, 2007
Stock Purchase Agreement, to sell its entire interest in its subsidiary, Fit For
Business (Australia) Pty Limited ("FFB Australia"), to its former Chief
Executive Officer, Mark Poulsen. Under the terms of this Agreement, if Mr.
Poulsen complied with certain information and document requirements then no
later than May 15, 2008, Mr. Poulsen will receive the Company’s entire interest
in FFB Australia in exchange for Mr. Poulsen forfeiting his right to 250,000
shares of the Company’s common stock that he was otherwise entitled to receive
in the event of a restructuring transaction and merger occurring prior to
February 2009. Pursuant to the exercise of the Company’s options, FFB Australia
was sold to Mr. Poulsen. As the FFB Australia subsidiary was not operational and
had no tangible assets or liabilities at the time this agreement was exercised,
and the exchange was for the forfeiture of Mr. Poulsen's right to receive
250,000 common shares, it was determined that no gain on this nonmonetary
exchange should be recorded.
Recapitalization
The
capital structure of the consolidated enterprise is that of MEI due to reverse
recapitalization accounting. The financial statements presented are a
continuation of MEI, the accounting acquirer, and not FFBI, the accounting
acquiree. The recapitalization and capital structure is now different than that
appearing in historical financial statements for
FFBI.
Note
5 - Inventories
At June
30, 2008 and 2007, inventories are comprised of bottles/cases of Marani Vodka,
and other various spirits, available for resale totaled $77,307 and $79.502,
respectively.
Note
6 - Property and Equipment
At June
30, 2008 and 2007, property and equipment is comprised of the
following:
|
June
30,
|
||||||||
|
2008
|
2007
|
|||||||
|
Property
& Equipment
|
$
|
6,969
|
$
|
64,666
|
||||
|
Less:
Accumulated Depreciation
|
(1,459
|
)
|
(31,804
|
)
|
||||
|
Net
Property & Equipment
|
$
|
5,510
|
$
|
4,640
|
||||
During
the years ended June 30, 2008 and 2007, the Company recorded depreciation and
amortization expense of $1,459 and $1,459, respectively.
Note
7 – Accrued Expenses
At June
30, 2008 and 2007, accrued expenses consist of the
following:
|
June
30,
|
||||||||
|
2008
|
2007
|
|||||||
|
Accrued
Payroll and Taxes
|
$
|
31,266
|
17,855
|
|||||
|
Credit
Cards Payable
|
6,318
|
20,181
|
||||||
|
Accrued
Audit Fees
|
15,000
|
-
|
||||||
|
Accrued
Legal Fees
|
25,000
|
-
|
||||||
|
Other
Accrued Expenses
|
16,479
|
-
|
||||||
|
Total
Accounts Payable and Accrued Expenses
|
$
|
94,063
|
$
|
38,036
|
||||
Marani
Brands Inc. and Subsidiaries
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
RESTATED
Note
8 – Notes Payable
The
Company is obligated to a bank for an SBA loan. Terms indicate that the balance
of $249,816 is due and payable in full in September of 2010. Interest is accrued
and paid monthly at 8.25%. This note is classified as long
term.
The
Company is also obligated to Searchlight Financial for a short term note
totaling $80,495. This obligation is in dispute, but is being recorded with
interest at 15%.
Note
9 – Convertible Debentures
On
December 18, 2007, MEI issued a one year Convertible Debentures to investors in
a private placement, in the aggregate amount of $3,500,000. Upon the completion
of the merger the entire principal balance of the Convertible Debenture, by
their terms, automatically converted into 14,000,000 shares of the Company’s
common stock.
Note
10 – Warrants
During
the period ended June 30, 2008, the company issued warrants to pre-merger bridge
note holders. The following is a summary of share purchase warrants for the year
ended June 30, 2008:
|
Number
of Warrants
|
Weighted
Average
Exercise
Price
|
|||||||
|
Outstanding
June 30, 2006
|
-
|
$
|
-
|
|||||
|
Granted
|
-
|
$
|
-
|
|||||
|
Forfeited
|
-
|
$
|
-
|
|||||
|
Exercised
|
-
|
$
|
-
|
|||||
|
Outstanding
June 30, 2007
|
-
|
$
|
-
|
|||||
|
Granted
|
39,720,000
|
$
|
0.32
|
|||||
|
Forfeited
|
-
|
$
|
-
|
|||||
|
Exercised
|
(10,100,000
|
)
|
$
|
0.35
|
||||
|
Outstanding
June 30, 2008
|
29,620,000
|
$
|
0.32
|
|||||
|
Number
of
|
||||||||
|
Expiry
|
Warrants
|
Exercise
Price
|
||||||
|
September
30, 2010
|
10,000,000
|
$
|
0.10
|
|||||
|
November
11, 2010
|
4,700,000
|
$
|
0.35
|
|||||
|
November
29, 2010
|
160,000
|
$
|
0.35
|
|||||
|
April
2, 2011
|
520,000
|
$
|
0.35
|
|||||
|
April
15, 2011
|
250,000
|
$
|
1.00
|
|||||
|
May
1, 2011
|
2,375,000
|
$
|
0.25
|
|||||
|
June
1, 2011
|
10,000,000
|
$
|
0.50
|
|||||
|
June
4, 2011
|
100,000
|
$
|
1.00
|
|||||
|
June
11, 2011
|
1,515,000
|
$
|
0.35
|
|||||
|
29,620,000
|
$
|
0.32
|
||||||
Marani
Brands Inc. and Subsidiaries
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
RESTATED
The fair
value of the share purchase warrants as of June 30, 2008 was $0, which was
determined using the Black-Scholes option value model with the following
assumptions:
|
Expected
Dividend Yield
|
0.00
|
%
|
||
|
Risk
Free Interest Rate
|
2.75
|
%
|
||
|
Expected
Volatility
|
60.00
|
%
|
||
|
Expected
Life (in years average)
|
4.00
|
Note
11 – Derivative Liability and Expense
The
owners of MEI originally had a beneficial rate, 50% of market, with respect to
stock conversions. This derivative liability was eliminated as part
of the Merger which totaled $104,135.
Note
12 - Stockholders’ Equity
Common
Stock
Effective
March 31, 2008, the Company’s common stock underwent a 1-for-250 reverse stock
split. All references in the financial statements to the number of shares
outstanding, per share amounts, and stock options data of the Company’s common
stock have been restated to reflect the effect of the stock split for all
periods presented.
Following
the reverse stock split, the Company has authorized the issuance of up to
300,000,000 shares of Common Stock, at $0.001 par value. As of June 30, 2008,
the Company had 169,743,752 shares of Common Stock issued and
outstanding.
During
the year ended June 30, 2008, the Company issued a total of 98,223,752 shares of
which 41,179,121 shares were issued for cash totaling
$7,814,000; 11,686,670 shares were issued to Officers for services totaling
$140,240; 1,281,797 shares were issued for to non-affiliated parties for
services totaling $82,449; 937,339 shares were issued to Marani shareholders in
the reverse merger totaling $0; and 43,138,825 shares were issued for direct
offering costs totaling $10,648,654.
Direct
Offering Costs
The
Company defers as other assets the direct incremental costs of raising capital
until such time as the offering is completed. At the time of the completion of
the offering, the costs are charged against the capital raised. Should the
offering be terminated, deferred offering costs are charged to operations during
the period in which the offering is terminated. As of June 30, 2008, the Company
had incurred ($1,130,923) in cash direct offering costs and issued 43,138,825
shares for direct offering costs totaling ($10,648,654). These costs
were associated with follow on financing agreements with Continental Advisors
and Purrell Partners detailed in Note 13. These shares were valued at
market value.
Note
13– Commitments & Contingencies
Leases
The
Company leases its corporate office space in North Hollywood, California. This
lease is currently on a month-to-month basis at a monthly rental of $1,800 per
month.
Agreements
On
November 1, 2007, the Company entered into a consulting agreement with Purell
Partners, LLC. to provide various strategic and other services. This
agreement provides for the payment of a monthly retainer of $20,000 per month;
the payment of commissions upon the completion of financing transactions and
mergers and acquisitions, and revenue sharing with respect to sales of product
introduced by Purell Partners. This consulting agreement has a term ending on
October 31, 2010 subject to earlier termination as provided for therein. For the
period ended June 30, 2008, the Company paid $140,000 to Purell Partners, LLC
under this agreement.
On
October 12, 2007, the Company entered into a consulting agreement with
Continental Advisors, SA. to provide placement agent services in connection with
a contemplated $10,000,000 financing through private placements. This agreement
provides for the payment of commissions and provides warrant coverage upon the
Company completing the private placements with investors introduced by
Continental Advisors. For the period ended June 30, 2008, the Company paid
$1,130,923 to Continental Advisors, SA under this agreement.
Marani
Brands Inc. and Subsidiaries
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
RESTATED
Note
14 - Subsequent Events
Line of
Credit
In
October 2008, the Company obtained a $1,000,000 credit line from Citibank
collateralized by the cash in the Company’s money market
account.
Notes
Payable
In
February 2009, the Company received a $200,000 loan from an investor payable
based upon the Company receiving financing of $1,000,000 or in the event that
the Company breaches one of the default provisions. This note carries an 8%
annual interest with both principle and accrued interest payable at
maturity.
In June
2009, the Company received a $50,000 loan from an investor payable based upon
the Company receiving financing of $1,000,000 or in the event that the Company
breaches one of the default provisions. This note carries an 8% annual interest
with both principle and accrued interest payable at
maturity.
Secured Note
Payable
On July
28, 2009, the Company obtained a short term loan in the principal amount of
$200,000 from an individual lender. The loan is secured by all the
Company's unsecured assets. The loan term matures on November 24, 2009, and the
principal amount of the loan accrues simple interest at the rate of eight (8%)
percent per annum. Interest is payable monthly in arrears and
principal is payable in three monthly installments of five thousand ($5,000)
dollars with a final payment of one hundred eighty five thousand ($185,000)
dollars at maturity.
Equity
Subsequent
to June 30, 2008 the Company issued a total of 14,15,000 common shares of which
2,700,000 shares were issued for cash totaling $70,000; 5,038,044 shares were
issued to Officers for services totaling $2,085,652; and 6,420,000 shares were
issued for to non-affiliated parties for services totaling $1,304,100. In
addition, on June 17, 2009, the Company received $60,000 under a
stock purchase agreement under which a total of 461,539 shares are to be issued
to an accredited investor.
Severance
Agreement
On
October 1, 2008, Margit Eyraud notified the Company of her intent to resign as
Chief Executive Officer and President of the Company, effective October 1, 2008,
while remaining Chairman of the Board of Directors. Ms. Eyraud served as Chief
Executive Officer and President of the Company under an Employment Agreement,
the term of which expires December 31, 2010. Contemporaneous with her
resignation as reported above, the Company and Ms. Eyraud have agreed to an
early expiration of the Employment Agreement, and have agreed to a severance
package in connection with that early expiration. Under the terms of the
severance package Ms. Eyraud shall receive a cash payment of four hundred five
thousand dollars ($405,000), payable by the Company as
follows:
|
·
|
One
hundred fifty thousand dollars ($150,000) on October 1,
2008;
|
|
·
|
Seventy
five thousand dollars ($75,000) on January 30,
2009;
|
|
·
|
Seventy
five thousand dollars ($75,000) on March 31, 2009;
and
|
|
·
|
One
hundred five thousand dollars ($105,000) on June 30,
2009
|
In
addition:
|
·
|
The
Company shall pay all unreimbursed business expenses, upon submission by
Ms. Eyraud;
|
|
·
|
Continuation
of Ms. Eyraud’s health and life insurance coverage until December 31, 2010
at levels in place as of September 15,
2008;
|
|
·
|
The
ten year stock options to purchase 5,000,000 shares of the Company’s
common stock at $0.25 per share, granted to Ms. Eyraud pursuant to the
Employment Agreement, are deemed fully vested
immediately;
|
|
·
|
The
existing Lock-up agreement governing the shares of the Company’s common
stock beneficially owned by Ms. Eyraud shall continue pursuant to its
terms, subject to revision, waiver or modification consistent with any
revision, waiver or modification of other similar Lock-up agreements
existing between the Company and third parties, including its management
and affiliates;
|
|
·
|
The
Company shall obtain releases of any guarantees Ms. Eyraud has executed to
the favor of the Company;
and
|
|
·
|
All
indemnification agreements running in favor of Ms. Eyraud shall be
maintained for a period of six (6) years, commencing October 2, 2008, and
the Company shall assume the indemnification of Ms. Eyraud with respect to
the activities of its wholly owned subsidiary, Marani Spirits, Inc., for a
like period.
|
Marani
Brands Inc. and Subsidiaries
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
RESTATED
Employment
Agreement
In
connection with the reappointment of Ms. Eyraud as CEO and President (see Note
11 for previous severance agreement), Ms. Eyraud and the Company entered into an
Employment Agreement dated as of August 1, 2009. The Employment
Agreement provides for a four-year employment term and an initial base salary of
$180,000 per annum, subject to upward adjustment annually based on the consumer
price index. Under the Employment Agreement, the Board of Directors
of the Company is to consider and propose to Ms. Eyraud a bonus compensation
arrangement which will provide for an incentive bonus payable to Ms. Eyraud
based upon the attainment by the Company of mutually agreeable
criteria.
Under the
Employment Agreement, the Company granted to Ms. Eyraud options to purchase
3,000,000 shares of common stock of the Company at a price equal to the closing
price of the Company’s common stock on August 3, 2009. The options
are to be issued pursuant to a stock option plan to be adopted by the Board of
Directors and approved by the shareholders of the Company and shall by subject
to such other terms as provided in the plan. The options vest as to
25% of the underlying shares of common stock on the first anniversary date of
the option grant and ratably each quarter thereafter during the next three years
of the term. The options become fully vested and exercisable upon the
Company’s termination of Ms. Eyraud’s employment under the Employment Agreement
Without Cause, the termination of such employment by Ms. Eyraud For Good Reason,
or the Company’s termination of Ms. Eyraud’s employment due to death or
Disability (as each term is defined in the Employment Agreement, a copy of which
is included in this Current Report as Exhibit 10.1 and incorporated herein by
this reference). The options shall have a term of 10 years and may be
exercised to the extent vested, (i) by Ms. Eyraud at any time during such
10-year period, if Ms. Eyraud’s employment is terminated Without Cause or For
Good Reason or due to Disability or if the employment term expires and Ms.
Eyraud does not continue to be employed by the Company, (ii) by Ms. Eyraud’s
personal representative within one (1) year following the date of Ms. Eyraud’s
death, if Ms. Eyraud’s employment with the Company is terminated due to Ms.
Eyraud’s death, and (iii) by Ms. Eyraud, if Ms. Eyraud’s employment terminates
for any other reason (other than the expiration of the employment term) by Ms.
Eyraud, within ninety (90) days following Ms. Eyraud’s termination of
employment.
Warrant and Share
Cancellation-Purell
Purell
and Margrit International Enterprises, Inc., which is now called Marani Spirits,
Inc., are parties to a Consulting Agreement dated November 1, 2007 (the
"Consulting Agreement"). Warrants (10,000,000) were issued in consideration of
services, purportedly performed by Purell under the Consulting Agreement and
related to the merger of a subsidiary of the Company in and to MEl, pursuant to
which MEl became a wholly-owned subsidiary of the Company and the
Shares were issued in anticipation of Purell assisting the Company with
receiving approximately $10,000,000 of equity financing. However, no equity
financing was arranged by Purell for the Company. Therefore the warrants were
not validly issued since the Company did not receive adequate consideration for
the issuance of those warrants.
In
addition, it has come to the Company's attention that Purell is not a registered
broker-dealer and therefore was not legally permitted to provide certain of the
services set forth in a Consulting Agreement. In particular, since Purell was
not a registered broker-dealer, the various agreements between Purell and the
Company (including the Consulting Agreement) relating to Purell raising
financing for the Company are voidable. The Company has requested its transfer
agent to cancel the 21,297,309 common shares (issued May 30, 2009 valued at
$.25) and 10,000,000 (issued October 1, 2007 at $.10) warrants issued to Purell
pursuant to this agreement.
Warrant
Cancellation-Continental Advisors
Continental
Advisors (CA) acted as the placement agent for a private placement of
Convertible Debentures issued by Margrit Enterprises International, Inc.
pursuant to a Letter Agreement effective as of October 12, 2007. Pursuant to a
merger which occurred a number of months after the day of the placement, a
subsidiary of the Company merged with and into MEl and MEl became a wholly-owned
subsidiary of the Company. As part of the Merger, the Warrants became
exercisable into shares of the Company's Common Stock.
It has
come to the Company's attention that CA was not fully licensed and authorized
under applicable European securities regulations to serve as the placement agent
in the Placement and therefore was not entitled to receive compensation for
serving in that capacity. CA did not disclose those facts to the Company in the
Letter Agreement. CA misrepresented to the Company, CA's authority to serve as
the placement agent for the Placement. The Warrants were issued as compensation
for CA's purported services in the Placement. Therefore, the Warrants should not
have been issued to CA. The Company has requested its transfer agent to cancel
the 3,890,000 warrants issued (2,375,000 issued on May 1, 2008 at $.25 and
1,515,000 at issued on June 4, 2008 at $.35) pursuant to this
agreement.
Marani
Brands Inc. and Subsidiaries
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
RESTATED
Note
15- Restatement
The
previously issued financial statements have been restated to accurately reflect
the combination of FFBI and MEI in April 2008 as a reverse merger (see Note 4).
Management determined that the original application of the purchase method was
not in accordance with U.S. GAAP and that the reverse merger method was the
appropriate method. The following financial statements line items were affected
by the restatement:
|
Marani
Brands, Inc. and Subsidiaries
|
|
Consolidated
Balance Sheet
|
|
June
30, 2008
|
|||||||||||||
|
As
Originally Stated
|
Adjustments
|
As
Restated
|
|||||||||||
|
Assets
|
|||||||||||||
|
Current
Assets
|
|||||||||||||
|
Cash
& Equivalents
|
$
|
2,460,663
|
$
|
-
|
$
|
2,460,663
|
|||||||
|
Accounts
Receivable
|
29,661
|
-
|
29,661
|
||||||||||
|
Inventory
|
77,307
|
-
|
77,307
|
||||||||||
|
Total
Current Assets
|
2,567,631
|
-
|
2,567,631
|
||||||||||
|
Property
& Equipment, Net
|
5,510
|
-
|
5,510
|
||||||||||
|
Deposits
|
35,255
|
-
|
35,255
|
||||||||||
|
Goodwill
and Intangibles
|
3,861,280
|
(3,861,280
|
)
|
A
|
-
|
||||||||
|
Total
Assets
|
$
|
6,469,676
|
$
|
(3,861,280
|
)
|
$
|
2,608,396
|
||||||
|
Liabilities
& Stockholders' Equity (Deficit)
|
|||||||||||||
|
Current
Liabilities
|
|||||||||||||
|
Accounts
Payable
|
$
|
260,894
|
$
|
-
|
$
|
260,894
|
|||||||
|
Accrued
Expenses
|
94,063
|
-
|
94,063
|
||||||||||
|
Notes
Payable
|
80,495
|
-
|
80,495
|
||||||||||
|
Total
Current Liabilities
|
435,452
|
-
|
435,452
|
||||||||||
|
Non-Current
Liabilities
|
|||||||||||||
|
Notes
Payable
|
249,816
|
-
|
249,816
|
||||||||||
|
Total
Non-Current Liabilities
|
249,816
|
-
|
249,816
|
||||||||||
|
Total
Liabilities
|
$
|
685,268
|
$
|
-
|
$
|
685,268
|
|||||||
|
Commitments
& Contingencies
|
-
|
-
|
-
|
||||||||||
|
Stockholders'
Equity (Deficit)
|
|||||||||||||
|
Preferred
Stock
|
|||||||||||||
|
Common
Stock
|
169,744
|
-
|
169,744
|
||||||||||
|
Additional
Paid-in Capital
|
22,629,079
|
(3,201,280
|
)
|
A
|
19,427,799
|
||||||||
|
Direct
Offering Costs
|
(11,779,577
|
)
|
11,779,577
|
B
|
-
|
||||||||
|
Accumulated
Deficit
|
(5,234,838
|
)
|
(12,439,577
|
)
|
A/B/C
|
(17,674,415
|
)
|
||||||
|
Total
Stockholders' Equity (Deficit)
|
5,784,408
|
(3,861,280
|
)
|
1,923,128
|
|||||||||
|
Total
Liabilities & Stockholders' Equity (Deficit)
|
$
|
6,469,676
|
$
|
(3,861,280
|
)
|
$
|
2,608,396
|
||||||
Marani
Brands Inc. and Subsidiaries
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
RESTATED
|
Marani
Brands, Inc. and Subsidiaries
|
|
Consolidated
Statements of Operations
|
|
For
the Twelve Months Ended
|
||||||||||||||||
|
June
30, 2008
|
||||||||||||||||
|
As
Originally Stated
|
Adjustments
|
As
Restated
|
||||||||||||||
|
Sales
|
$
|
168,058
|
$
|
-
|
$
|
168,058
|
||||||||||
|
Cost
of Sales
|
48,809
|
-
|
48,809
|
|||||||||||||
|
Gross
Profit
|
119,249
|
-
|
119,249
|
|||||||||||||
|
Operating
Expenses
|
||||||||||||||||
|
Marketing
and Sales Promotion
|
812,704
|
-
|
812,704
|
|||||||||||||
|
General
& Administrative
|
2,631,530
|
215,725
|
A/C
|
2,847,255
|
||||||||||||
|
Stock
Based Compensation
|
69,449
|
(69,449
|
)
|
C
|
-
|
|||||||||||
|
Total
Operating Expenses
|
3,513,683
|
146,276
|
3,659,959
|
|||||||||||||
|
Operating
Income (Loss)
|
$
|
(3,394,434
|
)
|
$
|
(146,276
|
)
|
$
|
(3,540,710
|
)
|
|||||||
|
Other
Income (Expense)
|
||||||||||||||||
|
Direct
Offering Costs
|
-
|
(11,779,577
|
)
|
B
|
(11,779,577
|
)
|
||||||||||
|
Interest
Income
|
10,471
|
-
|
10,471
|
|||||||||||||
|
Interest
Expense
|
(161,132
|
)
|
-
|
(161,132
|
)
|
|||||||||||
|
Derivative
Expense
|
104,135
|
-
|
104,135
|
|||||||||||||
|
Total
Other Income (Expense)
|
(46,526
|
)
|
(11,779,577
|
)
|
(11,826,103
|
)
|
||||||||||
|
Net
Income (Loss) Before Income Taxes
|
$
|
(3,440,960
|
)
|
$
|
(11,925,853
|
)
|
$
|
(15,366,813
|
)
|
|||||||
|
Provision
for Income Taxes
|
-
|
-
|
-
|
|||||||||||||
|
Net
Income (Loss)
|
$
|
(3,440,960
|
)
|
$
|
(11,925,853
|
)
|
$
|
(15,366,813
|
)
|
|||||||
|
Net
Income per Share
|
||||||||||||||||
|
Basic
|
$
|
(0.11
|
)
|
$
|
(0.01
|
)
|
$
|
(0.12
|
)
|
|||||||
|
Diluted
|
$
|
(0.11
|
)
|
$
|
(0.01
|
)
|
$
|
(0.12
|
)
|
|||||||
|
Number
of Shares Used in Per Share Calculations
|
||||||||||||||||
|
Basic
|
30,922,000
|
99,368,491
|
130,290,491
|
|||||||||||||
|
Diluted
|
30,922,000
|
99,368,491
|
130,290,491
|
|||||||||||||
Marani
Brands Inc. and Subsidiaries
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
RESTATED
|
Marani
Brands, Inc. and Subsidiaries
|
|
Consolidated
Statements of Operations
|
|
For
the Twelve Months Ended
|
||||||||||||||||
|
June
30, 2007
|
||||||||||||||||
|
As
Originally Stated
|
Adjustments
|
As
Restated
|
||||||||||||||
|
Sales
|
$
|
173,663
|
$
|
-
|
$
|
173,663
|
||||||||||
|
Cost
of Sales
|
57,838
|
-
|
57,838
|
|||||||||||||
|
Gross
Profit
|
115,825
|
-
|
115,825
|
|||||||||||||
|
Operating
Expenses
|
||||||||||||||||
|
Marketing
and Sales Promotion
|
311,300
|
-
|
311,300
|
|||||||||||||
|
General
& Administrative
|
294,956
|
4,000
|
C
|
298,956
|
||||||||||||
|
Stock
Based Compensation
|
4,000
|
(4,000
|
)
|
C
|
-
|
|||||||||||
|
Total
Operating Expenses
|
610,256
|
-
|
610,256
|
|||||||||||||
|
Operating
Income (Loss)
|
$
|
(494,431
|
)
|
$
|
-
|
$
|
(494,431
|
)
|
||||||||
|
Other
Income (Expense)
|
||||||||||||||||
|
Other
Income
|
4,040
|
-
|
4,040
|
|||||||||||||
|
Interest
Expense
|
(45,718
|
)
|
-
|
(45,718
|
)
|
|||||||||||
|
Total
Other Income (Expense)
|
(41,678
|
)
|
-
|
(41,678
|
)
|
|||||||||||
|
Net
Income (Loss) Before Income Taxes
|
$
|
(536,109
|
)
|
$
|
-
|
$
|
(536,109
|
)
|
||||||||
|
Provision
for Income Taxes
|
-
|
-
|
-
|
|||||||||||||
|
Net
Income (Loss)
|
$
|
(536,109
|
)
|
$
|
-
|
$
|
(536,109
|
)
|
||||||||
|
Net
Income per Share
|
||||||||||||||||
|
Basic
|
$
|
(5.79
|
)
|
$
|
5.78
|
A
|
$
|
(0.01
|
)
|
|||||||
|
Diluted
|
$
|
(5.79
|
)
|
$
|
5.78
|
A
|
$
|
(0.01
|
)
|
|||||||
|
Number
of Shares Used in Per Share Calculations
|
||||||||||||||||
|
Basic
|
92,539
|
60,399,071
|
A
|
60,491,610
|
||||||||||||
|
Diluted
|
92,539
|
60,399,071
|
A
|
60,491,610
|
||||||||||||
Marani
Brands Inc. and Subsidiaries
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
RESTATED
|
Marani
Brands, Inc. and Subsidiaries
|
|
Consolidated
Statements of Stockholders' Equity
(Deficit)
|
|
As
Originally Stated
|
||||||||||||||||||||||||||||||||||||
|
Preferred
Stock
|
Common
Stock
|
|||||||||||||||||||||||||||||||||||
|
Number
of Shares
|
Par
Value ($0.001) Amount
|
Number
of Shares
|
Par
Value ($0.001) Amount
|
Additional
Paid-In-Capital
|
Subscriptions
Receivable
|
Direct
Offering Costs
|
Accumulated
Deficit
|
Total
Stockholders' Equity (Deficit)
|
||||||||||||||||||||||||||||
|
Balance
at June 30, 2006
|
1,000,000
|
$
|
1,000
|
83,894
|
$
|
83
|
$
|
514,117
|
$
|
(12,000
|
)
|
$
|
-
|
$
|
(1,257,769
|
)
|
$
|
(754,569
|
)
|
|||||||||||||||||
|
Common
Stock Issued to Investors for Cash
|
-
|
-
|
13,500
|
14
|
151,986
|
-
|
-
|
-
|
152,000
|
|||||||||||||||||||||||||||
|
Compensation
for Extending Terms of Stock Options
|
-
|
-
|
-
|
-
|
4,000
|
-
|
-
|
-
|
4,000
|
|||||||||||||||||||||||||||
|
Cash
Received for Stock Subscriptions
|
-
|
-
|
-
|
-
|
-
|
12,000
|
-
|
-
|
12,000
|
|||||||||||||||||||||||||||
|
Effect
of Reverse Merger
|
-
|
-
|
-
|
-
|
241,000
|
-
|
-
|
241,000
|
||||||||||||||||||||||||||||
|
Net
Loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(536,109
|
)
|
(536,109
|
)
|
|||||||||||||||||||||||||
|
Balance
at June 30, 2007
|
1,000,000
|
$
|
1,000
|
97,394
|
$
|
97
|
$
|
911,103
|
$
|
-
|
$
|
-
|
$
|
(1,793,878
|
)
|
$
|
(881,678
|
)
|
||||||||||||||||||
|
Exercise
of Stock Options for partial Settlement of Note Payable to Principal
Stockholder
|
-
|
-
|
5,736
|
6
|
28,674
|
-
|
-
|
-
|
28,680
|
|||||||||||||||||||||||||||
|
Issuance
of Shares to Officer in Settlement of Debt
|
-
|
-
|
90,000
|
90
|
393,446
|
-
|
-
|
-
|
393,536
|
|||||||||||||||||||||||||||
|
Issuance
of Shares to Officer to Restore Voting Rights on Undesignated Preferred
Shares
|
(1,000,000
|
)
|
(1,000
|
)
|
200,000
|
200
|
(200
|
)
|
-
|
-
|
-
|
(1,000
|
)
|
|||||||||||||||||||||||
|
Common
Stock Issued to Investors for Cash
|
-
|
-
|
25,930,000
|
25,930
|
7,476,570
|
-
|
-
|
-
|
7,502,500
|
|||||||||||||||||||||||||||
|
Founder
Shares Issued to Marani Shareholders for Merger
|
-
|
-
|
100,000,000
|
100,000
|
-
|
-
|
-
|
-
|
100,000
|
|||||||||||||||||||||||||||
|
Cash
Paid for Direct Offering Services
|
-
|
-
|
-
|
-
|
-
|
-
|
(1,130,923
|
)
|
-
|
(1,130,923
|
)
|
|||||||||||||||||||||||||
|
Common
Stock Issued for Services
|
-
|
-
|
281,797
|
282
|
70,167
|
-
|
-
|
-
|
70,449
|
|||||||||||||||||||||||||||
|
Common
Stock Issued for Direct Offering Services
|
-
|
-
|
43,138,825
|
43,139
|
10,605,515
|
-
|
(10,648,654
|
)
|
-
|
-
|
||||||||||||||||||||||||||
|
Effect
of Reverse Merger
|
-
|
-
|
-
|
-
|
3,143,804
|
-
|
-
|
-
|
3,143,804
|
|||||||||||||||||||||||||||
|
Net
Loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(3,440,960
|
)
|
(3,440,960
|
)
|
|||||||||||||||||||||||||
|
Balance
at June 30, 2008
|
-
|
$
|
-
|
169,743,752
|
$
|
169,744
|
$
|
22,629,079
|
$
|
-
|
$
|
(11,779,577
|
)
|
$
|
(5,234,838
|
)
|
$
|
5,784,408
|
||||||||||||||||||
Marani
Brands Inc. and Subsidiaries
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
RESTATED
|
Marani
Brands, Inc. and Subsidiaries
|
|
Consolidated
Statements of Stockholders' Equity
(Deficit)
|
|
Adjustments
|
||||||||||||||||||||||||||||||||||||||||
|
Preferred
Stock
|
Common
Stock
|
|||||||||||||||||||||||||||||||||||||||
|
Number
of Shares
|
Par
Value ($0.001) Amount
|
Number
of Shares
|
Par
Value ($0.001) Amount
|
Additional
Paid-In-Capital
|
Subscriptions
Receivable
|
Direct
Offering Costs
|
Accumulated
Deficit
|
Total
Stockholders' Equity (Deficit)
|
||||||||||||||||||||||||||||||||
|
Balance
at June 30, 2006
|
(1,000,000
|
)
|
$
|
(1,000
|
)
|
55,076,106
|
$
|
55,077
|
$
|
(66,077
|
)
|
$
|
12,000
|
$
|
-
|
$
|
-
|
$
|
-
|
A
|
||||||||||||||||||||
|
Common
Stock Issued to Investors for Cash
|
-
|
-
|
16,346,500
|
16,346
|
240,654
|
-
|
-
|
-
|
257,000
|
A
|
||||||||||||||||||||||||||||||
|
Compensation
for Extending Terms of Stock Options
|
-
|
-
|
-
|
-
|
(4,000
|
)
|
-
|
-
|
-
|
(4,000
|
)
|
A
|
||||||||||||||||||||||||||||
|
Cash
Received for Stock Subscriptions
|
-
|
-
|
-
|
-
|
-
|
(12,000
|
)
|
-
|
-
|
(12,000
|
)
|
A
|
||||||||||||||||||||||||||||
|
Effect
of Reverse Merger
|
-
|
-
|
-
|
-
|
(241,000
|
)
|
-
|
-
|
(241,000
|
)
|
A
|
|||||||||||||||||||||||||||||
|
Net
Loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||||||||||
|
Balance
at June 30, 2007
|
(1,000,000
|
)
|
$
|
(1,000
|
)
|
71,422,606
|
$
|
71,423
|
$
|
(70,423
|
)
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
|||||||||||||||||||||
|
Exercise
of Stock Options for partial Settlement of Note Payable to Principal
Stockholder
|
-
|
-
|
(5,736
|
)
|
(6
|
)
|
(28,674
|
)
|
-
|
-
|
-
|
(28,680
|
)
|
A
|
||||||||||||||||||||||||||
|
Issuance
of Shares to Officer in Settlement of Debt
|
-
|
-
|
(90,000
|
)
|
(90
|
)
|
(393,446
|
)
|
-
|
-
|
-
|
(393,536
|
)
|
A
|
||||||||||||||||||||||||||
|
Issuance
of Shares to Officer to Restore Voting Rights on Undesignated Preferred
Shares
|
1,000,000
|
1,000
|
(200,000
|
)
|
(200
|
)
|
200
|
-
|
-
|
-
|
1,000
|
A
|
||||||||||||||||||||||||||||
|
Common
Stock Issued to Investors for Cash
|
-
|
-
|
15,249,121
|
15,249
|
296,251
|
-
|
-
|
-
|
311,500
|
A
|
||||||||||||||||||||||||||||||
|
Founder
Shares Issued to Marani Shareholders for Merger
|
-
|
-
|
(100,000,000
|
)
|
(100,000
|
)
|
-
|
-
|
-
|
-
|
(100,000
|
)
|
A
|
|||||||||||||||||||||||||||
|
Cash
Paid for Direct Offering Services
|
-
|
-
|
-
|
-
|
-
|
-
|
1,130,923
|
-
|
1,130,923
|
B
|
||||||||||||||||||||||||||||||
|
Common
Stock Issued to Officers for Services
|
-
|
-
|
11,686,670
|
11,687
|
128,553
|
-
|
-
|
-
|
140,240
|
A
|
||||||||||||||||||||||||||||||
|
Common
Stock Issued for Services
|
-
|
-
|
1,000,000
|
1,000
|
11,000
|
-
|
-
|
-
|
12,000
|
A
|
||||||||||||||||||||||||||||||
|
Shares
Issued to Marani Shareholders in Reverse Merger
|
-
|
-
|
937,339
|
937
|
(937
|
)
|
-
|
-
|
-
|
-
|
A
|
|||||||||||||||||||||||||||||
|
Common
Stock Issued for Direct Offering Costs
|
-
|
-
|
-
|
-
|
-
|
-
|
10,648,654
|
-
|
10,648,654
|
B
|
||||||||||||||||||||||||||||||
|
Effect
of Reverse Merger
|
-
|
-
|
-
|
-
|
(3,143,804
|
)
|
-
|
-
|
(513,724
|
)
|
(3,657,528
|
)
|
A
|
|||||||||||||||||||||||||||
|
Net
Loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(11,925,853
|
)
|
(11,925,853
|
)
|
A/B/C
|
||||||||||||||||||||||||||||
|
Balance
at June 30, 2008
|
-
|
$
|
-
|
-
|
$
|
-
|
$
|
(3,201,280
|
)
|
$
|
-
|
$
|
11,779,577
|
$
|
(12,439,577
|
)
|
$
|
(3,861,280
|
)
|
|||||||||||||||||||||
Marani
Brands Inc. and Subsidiaries
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
RESTATED
|
Marani
Brands, Inc. and Subsidiaries
|
|
Consolidated
Statements of Stockholders' Equity
(Deficit)
|
|
As
Restated
|
||||||||||||||||||||||||||||||||||||
|
Preferred
Stock
|
Common
Stock
|
|||||||||||||||||||||||||||||||||||
|
Number
of Shares
|
Par
Value ($0.001) Amount
|
Number
of Shares
|
Par
Value ($0.001) Amount
|
Additional
Paid-In-Capital
|
Subscriptions
Receivable
|
Direct
Offering Costs
|
Accumulated
Deficit
|
Total
Stockholders' Equity (Deficit)
|
||||||||||||||||||||||||||||
|
Balance
at June 30, 2006
|
-
|
$
|
-
|
55,160,000
|
$
|
55,160
|
$
|
448,040
|
$
|
-
|
$
|
-
|
$
|
(1,257,769
|
)
|
(754,569
|
)
|
|||||||||||||||||||
|
Common
Stock Issued to Investors for Cash
|
-
|
-
|
16,360,000
|
16,360
|
392,640
|
-
|
-
|
-
|
409,000
|
|||||||||||||||||||||||||||
|
Effect
of Reverse Merger
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||||||||||||||
|
Negative
Equity of FFBI charged to Retained Earnings
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||||||
|
Net
Loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(536,109
|
)
|
(536,109
|
)
|
|||||||||||||||||||||||||
|
Balance
at June 30, 2007
|
-
|
$
|
-
|
71,520,000
|
$
|
71,520
|
$
|
840,680
|
$
|
-
|
$
|
-
|
$
|
(1,793,878
|
)
|
$
|
(881,678
|
)
|
||||||||||||||||||
|
Common
Stock Issued to Investors for Cash
|
-
|
-
|
41,179,121
|
41,179
|
7,772,821
|
-
|
-
|
-
|
7,814,000
|
|||||||||||||||||||||||||||
|
Common
Stock Issued to Officers for Services
|
-
|
-
|
11,686,670
|
11,687
|
128,553
|
-
|
-
|
-
|
140,240
|
|||||||||||||||||||||||||||
|
Common
Stock Issued for Services
|
-
|
-
|
1,281,797
|
1,282
|
81,167
|
-
|
-
|
-
|
82,449
|
|||||||||||||||||||||||||||
|
Shares
Issued to Marani Shareholders in Reverse Merger
|
-
|
-
|
937,339
|
937
|
(937
|
)
|
-
|
-
|
-
|
-
|
||||||||||||||||||||||||||
|
Common
Stock Issued for Direct Offering Costs
|
-
|
-
|
43,138,825
|
43,139
|
10,605,515
|
-
|
-
|
-
|
10,648,654
|
|||||||||||||||||||||||||||
|
Negative
Equity of FFBI charged to Retained Earnings
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(513,724
|
)
|
(513,724
|
)
|
|||||||||||||||||||||||||
|
Net
Loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(15,366,813
|
)
|
(15,366,813
|
)
|
|||||||||||||||||||||||||
|
Balance
at June 30, 2008
|
-
|
$
|
-
|
169,743,752
|
$
|
169,744
|
$
|
19,427,799
|
$
|
-
|
$
|
-
|
$
|
(17,674,415
|
)
|
$
|
1,923,128
|
|||||||||||||||||||
Marani
Brands Inc. and Subsidiaries
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
RESTATED
|
Marani
Brands, Inc. and Subsidiaries
|
|
Consolidated
Statements of Cash Flows
|
|
For
the Year Ended June 30, 2008
|
||||||||||||||||
|
As
Originally Stated
|
Adjustments
|
As
Restated
|
||||||||||||||
|
Cash
Flows from Operating Activities
|
||||||||||||||||
|
Net
Income (Loss)
|
$
|
(3,440,960
|
)
|
$
|
(11,925,853
|
)
|
$
|
(15,366,813
|
)
|
A/B
|
||||||
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||||||||||
|
Stock
Based Compensation
|
69,449
|
153,240
|
222,689
|
A
|
||||||||||||
|
Derivative
Expense
|
(104,135
|
)
|
-
|
(104,135
|
)
|
|||||||||||
|
Common
Stock Issued for Direct Offering Costs
|
-
|
10,648,654
|
10,648,654
|
B
|
||||||||||||
|
Depreciation
& Amortization
|
1,459
|
-
|
1,459
|
|||||||||||||
|
Changes
in operating assets and liabilities:
|
||||||||||||||||
|
Accounts
Receivable
|
(13,400
|
)
|
-
|
(13,400
|
)
|
|||||||||||
|
Inventory
|
711
|
-
|
711
|
|||||||||||||
|
Deposits
|
(25,000
|
)
|
-
|
(25,000
|
)
|
|||||||||||
|
Accounts
Payable
|
81,933
|
(22,288
|
)
|
59,645
|
A
|
|||||||||||
|
Accrued
Expenses
|
56,027
|
(270,073
|
)
|
(214,046
|
)
|
A
|
||||||||||
|
Deferred
Revenue
|
-
|
-
|
-
|
|||||||||||||
|
Net
Cash Used in Operating Activities
|
(3,373,916
|
)
|
(1,416,320
|
)
|
(4,790,236
|
)
|
||||||||||
|
Cash
Flows from Investing Activities
|
||||||||||||||||
|
Property
and Equipment
|
(2,329
|
)
|
-
|
(2,329
|
)
|
|||||||||||
|
Goodwill
and Intangibles
|
(3,861,280
|
)
|
3,861,280
|
-
|
A
|
|||||||||||
|
Net
Cash Used in Investing Activities
|
(3,863,609
|
)
|
3,861,280
|
(2,329
|
)
|
|||||||||||
|
Cash
Flows from Financing Activities
|
||||||||||||||||
|
Notes
Payable
|
398,356
|
(726,095
|
)
|
(327,739
|
)
|
A
|
||||||||||
|
Notes
Payable Related Parties
|
(251,160
|
)
|
(17,484
|
)
|
(268,644
|
)
|
A
|
|||||||||
|
Effect
of Reverse Merger
|
3,143,804
|
(3,143,804
|
)
|
-
|
A
|
|||||||||||
|
Direct
Offering Costs
|
(1,130,923
|
)
|
1,130,923
|
-
|
B
|
|||||||||||
|
Common
Stock Issued for Cash
|
7,502,500
|
311,500
|
7,814,000
|
A
|
||||||||||||
|
Net
Cash Provided by Financing Activities
|
9,662,577
|
(2,444,960
|
)
|
7,217,617
|
||||||||||||
|
Net
Increase (Decrease) in Cash
|
2,425,052
|
-
|
2,425,052
|
|||||||||||||
|
Cash
Beginning of Period
|
35,611
|
-
|
36,751
|
|||||||||||||
|
Cash
End of Year
|
$
|
2,460,663
|
$
|
-
|
$
|
2,461,803
|
||||||||||
|
Supplemental
Disclosure of Cash Flow Information:
|
||||||||||||||||
|
Cash
Paid during the period for interest
|
$
|
161,132
|
$
|
-
|
$
|
161,132
|
||||||||||
|
Cash
Paid during the period for income taxes
|
800
|
-
|
800
|
|||||||||||||
|
Supplemental
Disclosure of Non-Cash Items:
|
||||||||||||||||
|
Exercise
of Stock Options for partial Settlement of Note Payable to Principal
Stockholder
|
28,680
|
(28,680
|
)
|
-
|
A
|
|||||||||||
|
Issuance
of Shares to Officer in Settlement of Debt
|
393,536
|
(393,536
|
)
|
-
|
A
|
|||||||||||
|
Issuance
of Shares to Officer to Restore Voting Rights on Undesignated Preferred
Shares
|
(1,000
|
)
|
1,000
|
-
|
A
|
|||||||||||
|
Founder
Shares Issued to Marani Shareholders for Merger
|
100,000
|
(100,000
|
)
|
-
|
A
|
|||||||||||
Marani
Brands Inc. and Subsidiaries
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
RESTATED
|
Marani
Brands, Inc. and Subsidiaries
|
|
Consolidated
Statements of Cash Flows
|
|
For
the Year Ended June 30, 2007
|
||||||||||||||||
|
As
Originally Stated
|
Adjustments
|
As
Restated
|
||||||||||||||
|
Cash
Flows from Operating Activities
|
||||||||||||||||
|
Net
Income (Loss)
|
$
|
(536,109
|
)
|
$
|
-
|
$
|
(536,109
|
)
|
||||||||
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||||||||||
|
Stock
Based Compensation
|
4,000
|
(4,000
|
)
|
-
|
A
|
|||||||||||
|
Derivative
Expense
|
3,236
|
-
|
3,236
|
|||||||||||||
|
Common
Stock Issued for Direct Offering Costs
|
-
|
-
|
-
|
|||||||||||||
|
Depreciation
& Amortization
|
1,459
|
-
|
1,459
|
|||||||||||||
|
Changes
in operating assets and liabilities:
|
||||||||||||||||
|
Accounts
Receivable
|
3,274
|
-
|
3,274
|
|||||||||||||
|
Inventory
|
32,856
|
-
|
32,856
|
|||||||||||||
|
Accounts
Payable
|
42,660
|
-
|
42,660
|
|||||||||||||
|
Accrued
Expenses
|
(50,149
|
)
|
-
|
(50,149
|
)
|
|||||||||||
|
Deferred
Revenue
|
-
|
-
|
-
|
|||||||||||||
|
Net
Cash Used in Operating Activities
|
(498,773
|
)
|
(4,000
|
)
|
(502,773
|
)
|
||||||||||
|
Cash
Flows from Financing Activities
|
||||||||||||||||
|
Notes
Payable
|
102,860
|
-
|
102,860
|
|||||||||||||
|
Notes
Payable Related Parties
|
24,730
|
-
|
24,730
|
|||||||||||||
|
Effect
of Reverse Merger
|
241,000
|
(241,000
|
)
|
-
|
A
|
|||||||||||
|
Stock
Subscriptions Received
|
12,000
|
(12,000
|
)
|
-
|
A
|
|||||||||||
|
Common
Stock Issued for Cash
|
152,000
|
257,000
|
409,000
|
A
|
||||||||||||
|
Net
Cash Provided by Financing Activities
|
532,590
|
4,000
|
536,590
|
|||||||||||||
|
Net
Increase (Decrease) in Cash
|
33,817
|
-
|
33,817
|
|||||||||||||
|
Cash
Beginning of Period
|
1,794
|
-
|
1,889
|
|||||||||||||
|
Cash
End of Year
|
$
|
35,611
|
$
|
-
|
$
|
35,706
|
||||||||||
|
Supplemental
Disclosure of Cash Flow Information:
|
||||||||||||||||
|
Cash
Paid during the period for interest
|
$
|
45,718
|
$
|
-
|
$
|
45,718
|
||||||||||
|
Cash
Paid during the period for income taxes
|
800
|
-
|
800
|
|||||||||||||
|
Supplemental
Disclosure of Non-Cash Items:
|
||||||||||||||||
|
Compensation
for Extending Terms of Stock Options
|
$
|
4,000
|
$
|
(4,000
|
)
|
$
|
-
|
A
|
||||||||
Marani
Brands Inc. and Subsidiaries
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
RESTATED
Restatement
Adjustments
(A)
Reflects the restatement of the combination of FFBI and MEI in April 2008 as a
reverse merger (see Note 4).
(B)
Reflects the treatment of Direct Offering Costs as an expense versus
a deferral.
(C)
Reflects the reclassification of Stock Based Compensation to General and
Administrative Costs.