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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURUTIES EXCHANGE ACT OF 1934
For the fiscal year ended November 30, 2015
Commission file number 000-53707
TRIDENT BRANDS INCORPORATED
(Exact Name of Registrant as Specified in Its Charter)
Nevada 26-1367322
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
200 South Executive Drive, Suite 101
Brookfield, WI 53005
(Address of Principal Executive Offices & Zip Code)
(262) 789-6689
(Telephone Number)
Resident Agents of Nevada
711 S. Carson Street, Suite 4
Carson City, NV 89701
(Name and Address of Agent for Service)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to section 12(g) of the Act:
Common Stock, $.001 par value
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act Yes [ ] No [X]
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not 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-K or any amendment to this
Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Non-accelerated filer [ ] Accelerated filer [ ]
Large accelerated filer [ ] Smaller reporting company [X]
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
As of March 11, 2016, the registrant had 31,000,000 shares of common stock
issued and outstanding. No market value has been computed based upon the fact
that no active trading market had been established as of March 11, 2016.
TRIDENT BRANDS INCORPORATED
FORM 10-K
For the year ended November 30, 2015
TABLE OF CONTENTS
Page
----
Basis of Presentation 3
Forward Looking Statements 3
Part I
Item 1. Business 5
Item 1A. Risk Factors 13
Item 1B. Unresolved Staff Comments 23
Item 2. Properties 23
Item 3. Legal Proceedings 23
Item 4. Mining Safety Disclosures 23
Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities 23
Item 6. Selected Financial Data 26
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 26
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 31
Item 8. Financial Statements 31
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 31
Item 9A(T). Controls and Procedures 31
Item 9B. Other Information 33
Part III
Item 10. Directors, Executive Officers and Corporate Governance 33
Item 11. Executive Compensation 38
Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters 39
Item 13. Certain Relationships and Related Transactions, and
Director Independence 40
Item 14. Principal Accountant Fees and Services 42
Part IV
Item 15. Exhibits 42
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BASIS OF PRESENTATION
Except where the context otherwise requires, all references in this Annual
Report on Form 10-K for the fiscal year ended November 30, 2015("Form 10-K") to
the "Company", "we", "us", "our", "Trident" and "Trident Brands" or similar
words and phrases are to Trident Brands Incorporated . and its subsidiaries,
taken together.
In this report, all currency amounts are expressed in thousands of United States
("U.S.") dollars ("$"), except per share data, unless otherwise stated. Amounts
expressed in other than U.S. dollars are noted accordingly. For example, amounts
if expressed in Canadian dollars are expressed in thousands of Canadian dollars
and preceded by the symbol "Cdn $".
FORWARD-LOOKING STATEMENTS
This Form 10-K contains forward-looking statements which are based on our
current expectations and assumptions and involve a number of risks and
uncertainties. Generally, forward-looking statements do not relate strictly to
historical or current facts and are typically accompanied by words such as
"anticipate", "estimate", "intend", "project", "potential", "continue",
"believe", "expect", "could", "would", "should", "might", "plan", "will", "may",
"predict", the negatives of such terms, and words and phrases of similar impact
and include, but are not limited to references to expected increases in revenues
and margins, growth opportunities, the success of new product launches and line
extensions, our ability to finance our business, potential strategic
investments, business strategies, competitive strengths, goals, references to
key markets where we operate and the market for our securities. These
forward-looking statements are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. These forward-looking
statements are based on certain assumptions and analyses we make in light of our
experience and our interpretation of current conditions, historical trends and
expected future developments, as well as other factors that we believe are
appropriate in the circumstance.
Whether actual results and developments will agree with our expectations and
predictions is subject to many risks and uncertainties. Accordingly, there are
or will be important factors that could cause our actual results to differ
materially from our expectations and predictions. We believe these factors
include, but are not limited to, the following:
* we have a limited operating history with significant losses and expect
losses to continue for the foreseeable future;
* there is doubt about our ability to continue as a going concern due to
recurring losses from operations, accumulated deficit and insufficient
cash resources to meet our business objectives, all of which means
that we may not be able to continue operations;
* we could face intense competition, which could result in lower
revenues and higher expenditures and could adversely affect our
results of operations;
* we are governed by only three persons serving as directors and
officers which may lead to faulty corporate governance;
* we must attract and maintain key personnel or our business may fail;
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* we may not be able to secure additional financing to meet our future
capital needs due to changes in general economic conditions;
* our business and operating results could be harmed if we fail to
manage our growth or change;
* we have a limited operating history and if we are not successful in
growing our business, then we may have to scale back or even cease our
ongoing business operations;
* if our intellectual property is not adequately protected, then we may
not be able to compete effectively and we may not be profitable;
* if we are the subject of an intellectual property infringement claim,
the cost of participating in any litigation could impact our ability
to stay in business;
* we could lose our competitive advantages if we are not able to protect
any of our food and nutritional products and intellectual property
rights against infringement, and any related litigation could be
time-consuming and costly;
* if we fail to effectively manage our growth our future business
results could be harmed and our managerial and operational resources
may be strained;
* if we fail to effectively manage our growth our future business
results could be harmed and our managerial and operational resources
may be strained;
* our services may become obsolete and unmarketable if we are unable to
respond adequately to rapidly changing technology and customer
demands;
* our failure to appropriately respond to changing consumer preferences
and demand for new products or product enhancements could
significantly harm product sales and harm our financial condition and
operating results;
* if we do not introduce new products or make enhancements to adequately
meet the changing needs of our customers, some of our products could
fail in the marketplace, which could negatively impact our revenues,
financial condition and operating results.
* we are affected by laws and governmental regulations with potential
penalties or claims, which could harm our financial condition and
operating results;
* since we rely on independent third parties for the manufacture and
supply of certain of our products, if these third parties fail to
reliably supply products to us at required levels of quality and which
are manufactured in compliance with applicable laws, then our
financial condition and operating results would be harmed;
* we may incur material product liability claims, which could increase
our costs and harm our financial condition and operating results;
* unless we can generate sufficient cash from operations or additional
raise funds, we may not be able to meet our debt obligations;
* our customers generally are not obligated to continue purchasing
products from us;
* if we do not manage our supply chain effectively, our operating
results may be adversely affected;
* our stock price may be volatile, which may result in losses to our
shareholders;
* our common shares are thinly traded and our shareholders may be unable
to sell at or near ask prices, or at all;
* the market price for our common stock is particularly volatile given
our status as a relatively small and developing company, which could
lead to wide fluctuations in our share price. Our shareholders may be
unable to sell your common stock at or above your purchase price if at
all, which may result in substantial losses to you;
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* we do not anticipate paying any cash dividends to our common
shareholders and as a result shareholders may only realize a return
when the shares are sold;
* we are listed on the OTCQB quotation system and our common stock is
subject to "penny stock" rules which could negatively impact our
liquidity and our shareholders' ability to sell their shares;
* volatility in our common share price may subject us to securities
litigation;
* the elimination of monetary liability against our directors, officers
and employees under Nevada law and the existence of indemnification
rights of our directors, officers and employees may result in
substantial expenditures by our company and may discourage lawsuits
against our directors, officers and employees;
* our business is subject to changing regulations related to corporate
governance and public disclosure that have increased both our costs
and the risk of noncompliance.
Consequently all forward-looking statements made herein are qualified by these
cautionary statements and there can be no assurance that our actual results or
the developments we anticipate will be realized. The foregoing factors should
not be construed as exhaustive and should be read in conjunction with the other
cautionary statements that are included in this report. For a more detailed
discussion of the principal factors that could cause actual results to be
materially different, you should read our risk factors in Item 1A, Risk Factors,
included elsewhere in this report.
PART I
ITEM 1. BUSINESS
BUSINESS DESCRIPTION
Trident Brands Incorporated (f/k/a Sandfield Ventures Corp.) was incorporated
under the laws of the State of Nevada on November 5, 2007. The Company was
initially formed to engage in the acquisition, exploration and development of
natural resource properties, but has since transitioned and is now focused on
branded consumer products and food ingredients. The Company is in the early
growth stage and has commenced commercial activities following a period of
organization and development of its business plan.
The Company maintains a compelling portfolio of branded consumer products
including nutritional products and supplements under the Everlast(R) and Brain
Armor(R) brands, and functional food ingredients under the Oceans Omega brand.
These brands are focused on the fast growing supplements and nutritional product
and heart and brain health categories, supported by an established contract
manufacturing, supply chain and research and development infrastructure, and a
solid and proactive management team, board of directors and advisors with many
years of experience in related categories.
CORPORATE LEGAL STRUCTURE AND RELATED MATTERS
Trident Brands Incorporated has three legal subsidiaries, as detailed below.
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Trident Brands Incorporated
/ | \
/ | \
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100% 100% 85.5%
Trident Brands Sports Nutrition Brain Armor Inc.
Canada Ltd. Products Inc.
Trident Brands Canada Ltd. is 100% owned by Trident Brands and holds various
banking facilities, Sports Nutrition Product Inc. is 100% owned by Trident
Brands and holds the license to market and sell products in the nutritional
foods and supplemetns categories under the Everlast(R) brand, and Brain Armor
Inc. is 85.5% owned by Trident Brands and holds the trademark related to the
Brain Armor(R) brand.
The Company's administrative office is located at 200 South Executive Drive,
Suite 101, Brookfield, Wisconsin, 53005 and its fiscal year end is November
30th.
The Company has authorized capital of 300,000,000 common shares with a par value
of $0.001 per share. 28,000,000 common shares were issued and outstanding as of
November 30, 2015 and 31,000,000 common shares were issued and outstanding as of
March 11, 2016.
HISTORY OF TRIDENT BRANDS
Trident Brands Incorporated was incorporated in the State of Nevada on November
5, 2007 as Sandfield Ventures Corp. Its primary business was resource
exploration in that state but after a period of time management of the Company
decided to take a new direction for the business and focus on consumer goods -
primarily branded nutrition products and ingredients. We are currently in the
product introduction and commercialization phase of our new business focus.
On June 12, 2013 the Board of Directors approved an agreement and plan of merger
with a wholly-owned subsidiary called Trident Brands Incorporated. At that point
we changed our name from Sandfield Ventures Corp. to Trident Brands Incorporated
and Mark Holcombe assumed the role of Chief Executive Officer, President,
Secretary and Treasurer.
Following that, on July 9, 2013, our Board of Directors approved a resolution to
affect a 4 for 1 forward stock split. Upon effect of the forward split, our
authorized capital increased from 75,000,000 to 300,000,000 shares of common
stock and correspondingly, our issued and outstanding shares of common stock
increased from 7,000,000 to 28,000,000 shares of common stock, all with a par
value of $0.001
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On August 1, 2013, our directors approved the adoption of our 2013 Stock Option
Plan which permits us to issue up to 4,200,000 shares of our common stock to
directors, officers, employees and consultants of our company upon the exercise
of stock options granted under the 2013 Stock Option Plan.
On December 23, 2013, we signed a 15 year license agreement (including a ten
year extension option) with Everlast(R) World's Boxing Headquarters Corp.,
International Brand Management & Licensing, to market and sell products in the
nutritional foods and supplements category under the Everlast(R) brand. This
licensing agreement enables us to introduce a portfolio of nutritional products
in categories such as supplements and functional foods using this brand mark.
Effective March 21, 2014, we appointed the following individuals as officers and
directors:
* Donald MacPhee was appointed to our Board of Directors, Chair of the
Audit Committee and as a member of the Corporate Governance Committee.
* Scott Chapman was appointed to our Board of Directors, Chair of the
Corporate Governance Committee, member of the Audit Committee and
member of the Compensation Committee.
* Michael Browne was appointed as our President, Chief Financial
Officer, Treasurer and Secretary.
* Peter Salvo was appointed as our Controller.
At the same time Mark Holcombe resigned as Chief Executive Officer, President,
Secretary and Treasurer, and was appointed as Chair of the Board of Directors
and Chair of the Compensation Committee. Mr. Holcombe's resignation as Chief
Executive Officer, President, Secretary and Treasurer was not the result of any
disagreement with our Company regarding its operations, policies, practices or
otherwise.
On May 5, 2014, we entered into a Product Development Agreement with Continental
Ingredients Canada Inc. in support of our plan to commercialize nutritional
supplements and functional food and beverage products for sales in North
America. Under the Agreement, we engaged Continental Ingredients on an exclusive
basis to provide services for the development, manufacturing and supply of our
products for a period of five years commencing on May 5, 2014 and ending on May
4, 2019, such term to renew automatically for a further 12 months unless either
party delivers a written termination notice six months prior to the expiration
of the initial term or renewal period. This agreement has subsequently been
revised effective December 9, 2015 and details are provided in the Key
Developments in Fiscal 2015 section of this Form 10-K.
On May 5, 2014, we appointed Robert Campbell and Karen Arseneault as Special
Advisors.
Also on May 5, 2014, we granted an aggregate of 2,875,000 stock options to
directors, officers, and consultants of our company pursuant to our 2013 Stock
Plan. The stock options are exercisable for five years from the date of grant at
exercise prices of $0.75 per share for shares vesting 12 months from the date of
issuance, $1.00 per share for shares vesting 24 months from the date of issuance
and $1.50 for shares vesting 36 months from the date of issuance. Of the
2,875,000 stock options granted, we granted:
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1. 1,125,000 stock options to our then President, Chief Financial
Officer, Treasurer and Secretary, Michael Browne;
2. 300,000 stock options to each of our directors, Donald MacPhee, Scott
Chapman, Mark Holcombe;
3. 150,000 stock options to our controller, Peter Salvo; and
4. 350,000 stock options to each of our special advisors, Robert Campbell
and Karen Arseneault.
We subsequently transitioned out of our shell status with a Super-8 filing at
the end of August, 2014.
KEY DEVELOPMENTS IN FISCAL 2015 AND FISCAL 2016 TO THE DATE OF THIS REPORT
On January 29, 2015, we entered into a securities purchase agreement with a
non-US institutional investor whereby we agreed to sell an aggregate principal
amount of $2,300,000 of senior secured convertible debentures, convertible into
shares of the Company's common stock. We received the funds from the transaction
in two traunches, $1,800,000 on February 5, 2015 and $500,000 on May 14, 2015.
The convertible debentures are convertible into shares of the Company's common
stock at an initial conversion price of $.71 per share, for an aggregate of up
to 3,239,437 shares. The debentures bear interest at 6% per annum, payable in
cash each quarter. We used the net proceeds from this transaction for working
capital and general corporate purposes.
On February 27, 2015, we engaged Malone Bailey LLP as our new independent
registered public accounting firm. On March 6, 2015, we formally informed George
Stewart, CPA of their dismissal as the Company's independent registered public
accounting firm. The reports of George Stewart, CPA on the Company's financial
statements as of and for the fiscal years ended November 30, 2014 and 2013
contained no adverse opinion or disclaimer of opinion and were not qualified or
modified as to uncertainty, audit scope or accounting principle except to
indicate that there was substantial doubt about the Company's ability to
continue as a going concern. There had been no disagreements with George
Stewart, CPA on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure, which disagreements if not
resolved to the satisfaction of George Stewart, CPA would have caused them to
make reference thereto in connection with their report on the financial
statements for such years. Our Board of Directors participated in and approved
the decision to change independent registered public accounting firms.
On March 1, 2015, we acquired, through a licensing agreement with DSM
Nutritional Products LLC ("DNP"), the exclusive global rights to Brain Armor(R)
dietary supplements, a plant-based DHA supplement designed specifically for the
needs of athletes. At the same time, a wholly-owned subsidiary, Brain Armor
Incorporated was registered to hold the trademark license and all costs and
revenue associated with commercial development of the Brain Armor(R) brand. As
per the agreement, DNP shall be the sole source of the Company's omega-3 oil
requirements which will be DNP's life's DHATM oil and will supply the soft gel
capsules in finished form to us. In order to maintain exclusivity to the
license, we are required to meet certain targets with respect to product
launches and sales volume. Also under the terms of the agreement we have the
opportunity to exercise an option to purchase the Brain Armor(R) dietary
supplement brand. The term of the Agreement and the license rights is for five
(5) years and shall be subject to successive one (1) year automatic renewal
periods, assuming all performance milestones have been met.
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On June 29, 2015, we appointed Dr. Neilank K. Jha, MD, FRCS (C) as a Special
Advisor to its Brain Armor(R) subsidiary. On September 29, 2015 the Board of
Directors of Brain Armor Inc. allotted 100,000 shares of common stock
representing 10% of the issued and outstanding capital of Brain Armor Inc. to
KONKUSSION Inc., a company controlled by Dr. Jha. Dr. Jha is a board certified
Neurosurgeon FRCS(C) and a fellowship trained Spine Surgeon. Dr. Jha is one of
North America's foremost concussion experts, with published articles, papers and
book chapters, as well as presenting various abstracts at scientific meetings in
Canada and the United States. Dr. Jha is the Founder and Chairman of the
KONKUSSION program. His vision is to revolutionize and redefine the management
of concussions.
On November 1, 2015, we entered into a consulting agreement with Dr. Julian
Bailes wherein Dr. Bailes has agreed to provide consulting services as a Special
Advisor to our Company and/or our subsidiary, Brain Armor Inc. for a period of
12 months. Pursuant to the consulting agreement, we agreed to issue to Dr.
Bailes 5% of the issued and outstanding shares of Brain Armor Inc. effective
November 30, 2015. As a result, our company now holds 85.5% of the issued and
outstanding shares of Brain Armor Inc. Dr. Bailes is a nationally recognized
leader in the field of neurosurgery and conducts research on the impact of brain
injury on neurological function. Dr. Bailes is the Chairman of the Department of
Neurosurgery at North Shore University Health System, Co-Director of the North
Shore Neurological Institute, and a Clinical Professor of Neurosurgery at the
University of Chicago Pritzker School of Medicine. The Company is working with
both Dr. Jha and Dr. Bailes to research and develop line extensions and new
products that support active lifestyles and sports participation under the Brain
Armor(R) brand.
On November 30, 2015, Michael Browne signed a service contract with the company
to serve as Brand Director of Trident Brands Inc. At that time his stock options
were amended from a total of 1,125,000 which were issued May 5, 2014 to 625,000.
As a result, total stock options outstanding as of November 30, 2015 are now
2,375,000.
On December 8, 2015, a Letter of Intent ("LOI") was signed confirming the
intention of Trident Brands Inc. and Continental Ingredients Canada Inc. to
enter into negotiations regarding the acquisition by Trident of up to 43% of the
voting securities of Continental with an option to acquire the balance of all
remaining issued and outstanding voting securities at the time of the closing of
the transaction. Approval of any subsequent agreement, if any, is subject to
approval by a Special Committee of the Board by April 15, 2016.
On December 9, 2015, we entered into a revised Product Development Agreement
("PDA") with Continental Ingredients Canada Inc. ("CIC") pursuant to which we
engaged CIC on an exclusive basis to provide services for the development,
manufacturing, and supply of our Everlast Nutrition(R) and Brain Armor(TM) brand
nutritional supplements, and functional food and beverage products. CIC's
services will include research and development, design, ingredient sourcing,
production, distribution, and inventory management of our planned portfolio of
branded products. In addition, CIC will manage all third party suppliers and
manufacturers, and provide us with office space at their Oakville, Ontario,
facility. The term of the PDA is for 5 years, expiring on December 9, 2020. The
term will renew automatically for successive 12 month periods unless terminated
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by either party with 6 months' notice. This PDA replaced our previous agreement
with CIC dated May 5, 2014 regarding our Everlast Nutrition(R) products. On
March 1st 2016, the PDA was further amended to clarify that while neither party
to the agreement can assign its interests or obligations without the prior
written consent of the other party, a change of control in CIC shall not be
considered an assignment of CIC's rights and obligations.
Effective December 15, 2015, Michael Browne resigned as President of our Company
to focus on his Brand Director, Chief Financial Officer, Secretary and Treasurer
responsibilities. Mr. Browne's resignation was not the result of any
disagreement with our Company regarding our operations, policies, practices or
otherwise.
Also, effective December 15, 2015, Donald MacPhee, one of our board members, was
appointed as President and Chief Executive Officer of our Company.
On January 28, 2016, we issued 3,000,000 common shares pursuant to a Deed of
Assignment dated effective January 20, 2015 among our Company, Oceans Omega LLC,
and the assignor 2298107 Ontario Inc., pursuant to which the assignor assigned
to our Company the assignor's non-exclusive rights to purchase, market, sell and
distribute certain Omega 3 nutritional emulsions produced by Oceans Omega LLC to
the food and beverage industries and exclusive rights to purchase, market, sell
and distribute to the global meat industry.
On January 29, 2016, we entered into a Securities Purchase Agreement with one
investor whereby we received proceeds of $250,000 in return for a $250,000
secured promissory note due 12 months from the issuance date, bearing interest
at the rate of 10% per annum, and 125,000 warrants to purchase common shares of
our Company at an exercise price of $1.35 per share for three years from the
date of issue.
On February 29, 2016, we entered into a Securities Purchase Agreement with CIC
whereby we received proceeds of $200,000 in return for a $200,000 secured
promissory note due 12 months from the issuance date, bearing interest at the
rate of 10% per annum, and 100,000 warrants to purchase common shares of our
Company at an exercise price of $1.35 per share for three years from the date of
issue.
BUSINESS OBJECTIVES AND STRATEGIES
Our business brings together many years of seasoned expertise in branded
consumer products, supply chain, product development and corporate finance. Our
team has experience in developing and commercializing consumer products, in both
global companies and specialty markets. Our purpose is to apply these
capabilities in starting new product lines with specific competitive advantage.
Our product development is focused on:
* Extending established brands with existing equity that can be
leveraged;
* Delivering consumer benefit with unique technology or intellectual
properties; and
* Targeting dynamic growth segments.
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Coupled with strategic capital investment, our focus is on investments within
the fast growing nutritional product and functional food segments/sectors. Our
goal is to provide our shareholders with outstanding ROI through a portfolio of
branded platforms via an asset light business model when and where appropriate.
As part of our long-term strategy we are targeting the following growth
opportunities:
* Brand licenses in fast growing categories;
* Consumer goods with focus on supplements, functional foods &
beverages;
* Life science technology that has applications in consumer products
with a focus on nutritional, brain and heart health products; and
* Intellectual property and/or licenses in recognized brand platforms.
In addition to investments in brands and technology, we will seek to acquire
positions in businesses to support our strategy through the use of common and/or
preferred equity, senior secured, unsecured, and convertible debt in
organizations who meet our investment goals. Through our management and
directors vast expertise in both the consumer branded segment and strategic
investment experience, we seek to provide our shareholders a sound return on
their investment.
The Company's strategic objective is to:
* Build and grow strategic brands organically;
* Make strategic investments in high growth companies;
* Develop and then merge brands/business lines into larger
multi-national Companies; and
* Mitigate risk by creating a diverse portfolio of brands/operations in
the growth sectors listed above.
BRANDS
EVERLAST(R)
We have a long term license, with a 10 year extension option, to market and sell
products in the nutritional foods and supplements category under the Everlast(R)
brand. The US Dietary Supplement Segment continues to experience dynamic growth
driven by favorable demographic trends, increased media coverage of dietary
issues and greater emphasis on preventive health/wellness practices in the
healthcare industry, and the Everlast(R) line of products are designed to
capitalize on this dynamic.
BRAIN ARMOR(R)
In March 2015, we acquired, through a licensing agreement, the exclusive global
rights to Brain Armor(R), a plant-based DHA supplement designed specifically for
the needs of athletes. Brain Armor(R) helps optimize cognitive and visual
performance by supplying a meaningful amount of DHA, an important Omega-3 shown
to support brain, eye and heart health. Brain Armor(R) is powered by Life's
DHA(R), a patented plant source of DHA grown in a FDA inspected facility.
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OCEANS OMEGA
In January 2016 we obtained the rights to purchase, market, sell and distribute
certain patented Omega 3 products produced by Oceans Omega LLC. The products
have application as a functional food ingredient and include breakthrough
technology for omega 3 fortification of food and beverages. Prior to acquiring
these rights we acted as a distributor for the then rights owner.
PRODUCT SUPPLY
We procure our products utilizing a series of ingredient suppliers and strategic
contract manufacturers. We also have a strategic agreement with Continental
Ingredients Canada ("CIC") whereby they provide services for the development,
manufacturing, and supply of our Everlast Nutrition(R) and Brain Armor(TM) brand
nutritional supplements, and functional food and beverage products. CIC's
services include research and development, design, ingredient sourcing,
production, distribution, and inventory management of our planned portfolio of
branded products. In addition, CIC manages all third party suppliers and
manufacturers, and provides us with office space at their Oakville, Ontario,
facility.
COMPETITION
We compete in the highly competitive branded nutritional products and functional
foods market segments. These markets are highly competitive with many companies,
large and small, competing for market share. The nutritional products market is
one of the fastest growing markets in the world producing close to 32 billion
dollars in revenue in 2012, and is projected to double, producing revenues
exceeding 60 billion dollars by 2021 according to the Nutritional Business
Journal. With the combination of high quality, scientifically designed and cost
competitive products, and the equity in our brands, we believe we will be able
to gain market share in rapidly growing markets.
COMPLIANCE WITH GOVERNMENT REGULATION
Our operations, supply chain and products are subject to a wide range of
governmental regulations and policies in various regions where we operate,
including the U.S. and Canada. These laws, regulations and policies are
implemented, as applicable in each jurisdiction, on the national, federal,
state, provincial and local levels. We believe we have processes and systems in
place throughout our supply chain to meet the requirements of these regulations.
PATENTS, TRADEMARKS, FRANCHISES, CONCESSIONS, ROYALTY AGREEMENTS, OR LABOR
CONTRACTS
We currently do not directly own any material patents, trademarks, copyrights,
franchises or concessions as these are currently owned by our licensing
partners. We will assess the need for any copyright, trademark or patent
applications on an ongoing basis as our business develops.
HUMAN RESOURCES, CONTRACT SERVICE PROVIDERS, EMPLOYEES
We operate our business via resources that provide services to the Company on a
contractual basis. We feel this is most prudent as we can cost effectively meet
our needs and leverage capabilities of talented individuals without employing on
a full time basis. As the business grows we expect to add a number of full-time
12
employees. We presently do not have pension, health, annuity, insurance, profit
sharing or similar benefit plans; however, we may adopt such plans in the
future. Except for our stock option plan, there are presently no personal
benefits available to our officers and directors.
REPORTS TO SECURITIES HOLDERS
We provide an annual report that includes audited financial information to our
shareholders. We will make our financial information equally available to any
interested parties or investors through compliance with the disclosure rules of
Regulation S-K for a small business issuer under the Securities Exchange Act of
1934. We are subject to disclosure filing requirements, including filing Form
10K annually and Form 10Q quarterly. In addition, we will file Form 8K and other
proxy and information statements from time to time as required. We do not intend
to voluntarily file the above reports in the event that our obligation to file
such reports is suspended under the Exchange Act. The public may read and copy
any materials that we file with the Securities and Exchange Commission, ("SEC"),
at the SEC's Public Reference Room at 100 F Street NE, Washington, DC 20549. The
public may obtain information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site
(http://www.sec.gov) that contains reports, proxy and information statements,
and other information regarding issuers that file electronically with the SEC.
ITEM 1A. RISK FACTORS
RISKS RELATED TO OUR BUSINESS
You should carefully consider the risks described below together with all of the
other information included in this report before making an investment decision
with regard to our securities. The statements contained in or incorporated into
this current report on Form 10-K that are not historic facts are forward-looking
statements that are subject to risks and uncertainties that could cause actual
results to differ materially from those set forth in or implied by
forward-looking statements. If any of the following risks actually occur, our
business, financial condition or results of operations could be harmed. In that
case, the trading price of our common stock could decline, and you may lose all
or part of your investment.
WE HAVE A LIMITED OPERATING HISTORY WITH SIGNIFICANT LOSSES AND EXPECT LOSSES TO
CONTINUE FOR THE FORESEEABLE FUTURE.
We have yet to establish a history of profitable operations and, as at November
30, 2015, have an accumulated deficit of $3,800,118, realized since our
inception on November 5, 2007. We have generated only nominal revenues since our
inception and thus have incurred operating losses. Our profitability will
require the successful commercialization and sales of our planned products at
acceptable margins. We may not be able to successfully achieve any of these
requirements or ever become profitable.
13
THERE IS SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN DUE
TO RECURRING LOSSES FROM OPERATIONS, ACCUMULATED DEFICIT AND INSUFFICIENT CASH
RESOURCES TO MEET OUR BUSINESS OBJECTIVES, ALL OF WHICH MEANS THAT WE MAY NOT BE
ABLE TO CONTINUE OPERATIONS.
Our independent auditors have added an explanatory paragraph to their audit
opinion issued in connection with the financial statements for the years ended
November 30, 2015 and 2014 with respect to their substantial doubt about our
ability to continue as a going concern. As discussed in Note 3 to our financial
statements for the years ended November 30, 2015, we have generated operating
losses since inception, and our cash resources are currently insufficient to
meet our planned business objectives, which together raises substantial doubt
about our ability to continue as a going concern.
WE COULD FACE INTENSE COMPETITION, WHICH COULD RESULT IN LOWER REVENUES AND
HIGHER EXPENDITURES AND COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.
Unless we keep pace with changing market demands, we could lose existing
customers and more importantly fail to win new and retain any future customers.
In order to compete effectively in the food and nutritional products industry,
we must continually design, develop implement and market new and/or enhanced
products and strategies. Our future success will depend, in part, upon our
ability to address the changing and sophisticated needs of the marketplace. Our
strategy of expanding our food and nutrition business may not be successful and
could adversely affect our business operations and financial condition.
Further, our plan to pursue sales of our product in international markets may be
limited by risks related to conditions in such markets.
WE ARE GOVERNED BY ONLY THREE PERSONS SERVING AS DIRECTORS AND OFFICERS WHICH
MAY LEAD TO FAULTY CORPORATE GOVERNANCE.
Currently our board does not include any independent directors and as a result
we do not have any independent committees. This could lead to less than
preferable governance practices due to this lack of independence.
WE MUST ATTRACT AND MAINTAIN KEY PERSONNEL OR OUR BUSINESS MAY FAIL.
Success depends on the acquisition of key personnel. We will have to compete
with other companies both within and outside the food and nutritional products
industry to recruit and retain competent employees and contract resources. If we
cannot maintain qualified resources to meet the needs of our anticipated growth,
this could have a material adverse effect on our business and financial
condition.
WE MAY NOT BE ABLE TO SECURE ADDITIONAL FINANCING TO MEET OUR FUTURE CAPITAL
NEEDS DUE TO CHANGES IN GENERAL ECONOMIC CONDITIONS.
We anticipate requiring additional capital to fulfill our contractual
obligations (as noted in our audited financial statements), continue development
of our planned products to meet market evolution, and execute our business plan.
We may use capital more rapidly than currently anticipated and incur higher
14
operating expenses than currently expected, and we may be required to depend on
external financing to satisfy our operating and capital needs. We may need new
or additional financing in the future to conduct our operations or expand our
business. Any sustained weakness in the general economic conditions and/or
financial markets in the United States or globally could adversely affect our
ability to raise capital on favorable terms or at all.
From time to time we have relied, and may also rely in the future, on access to
financial markets as a source of liquidity to satisfy working capital
requirements and for general corporate purposes. We may be unable to secure debt
or equity financing on terms acceptable to us, or at all, at the time when we
need such funding.
If we do raise funds by issuing additional equity or convertible debt
securities, the ownership percentages of existing stockholders would be reduced,
and the securities that we issue may have rights, preferences or privileges
senior to those of the holders of our common stock or may be issued at a
discount to the market price of our common stock which would result in dilution
to our existing stockholders.
If we raise additional funds by issuing debt, we may be subject to debt
covenants, which could place limitations on our operations including our ability
to declare and pay dividends. Our inability to raise additional funds on a
timely basis would make it difficult for us to achieve our business objectives
and would have a negative impact on our business, financial condition and
results of operations.
OUR BUSINESS AND OPERATING RESULTS COULD BE HARMED IF WE FAIL TO MANAGE OUR
GROWTH OR CHANGE.
Our business may experience periods of rapid change and/or growth that could
place significant demands on our personnel, operating and financial resources.
To manage possible growth and change, we must continue to locate skilled
professionals in the food and nutritional products industries and adequate funds
in a timely manner.
WE HAVE A LIMITED OPERATING HISTORY AND IF WE ARE NOT SUCCESSFUL IN GROWING OUR
BUSINESS, THEN WE MAY HAVE TO SCALE BACK OR EVEN CEASE OUR ONGOING BUSINESS
OPERATIONS.
We have achieved minimal revenues to date and have limited assets. There can be
no assurance that we will ever operate profitably. We have a limited operating
history. Our success is significantly dependent on the successful marketing and
sales of our food and nutritional products, which cannot be guaranteed. Our
operations will be subject to all the risks inherent in the uncertainties
arising from the absence of a significant operating history. We may be unable
profitably sell our food and nutritional products and thus operate on a
profitable basis. Potential investors should be aware of the difficulties
normally encountered by enterprises in the development stage. If our business
plan is not successful, and we are not able to operate profitably, investors may
lose some or all of their investment in our company.
IF OUR INTELLECTUAL PROPERTY IS NOT ADEQUATELY PROTECTED, THEN WE MAY NOT BE
ABLE TO COMPETE EFFECTIVELY AND WE MAY NOT BE PROFITABLE.
15
Our commercial success may depend, in part, on obtaining and maintaining patent
protection, trade secret protection and regulatory protection of our
technologies and products as well as successfully defending third-party
challenges to such technologies and products. We will be able to protect our
technologies and product from use by third parties only to the extent that valid
and enforceable patents, trade secrets or regulatory protection cover them and
we have exclusive rights to use them. The ability of our licensors,
collaborators and suppliers to maintain their patent rights against third-party
challenges to their validity, scope or enforceability will also play an
important role in determining our future.
The patent positions of technology related companies can be highly uncertain and
involve complex legal and factual questions that include unresolved principles
and issues. No consistent policy regarding the breadth of claims allowed
regarding such companies' patents has emerged to date in the United States, and
the patent situation outside the United States is even more uncertain. Changes
in either the patent laws or in interpretations of patent laws in the United
States or other countries may diminish the value of our intellectual property.
Accordingly, we cannot predict with any certainty the range of claims that may
be allowed or enforced concerning our patents.
We may also rely on trade secrets to protect our technologies, especially where
we do not believe patent protection is appropriate or obtainable. However, trade
secrets are difficult to protect. While we seek to protect confidential
information, in part, through confidentiality agreements with our employees,
consultants and scientific and other advisors, they may unintentionally or
willfully disclose our information to competitors. Enforcing a claim against a
third party related to the illegal acquisition and use of trade secrets can be
expensive and time consuming, and the outcome is often unpredictable. If we are
not able to maintain patent or trade secret protection on our technologies and
products, then we may not be able to exclude competitors from developing or
marketing competing products, and we may not be able to operate profitability.
IF WE ARE THE SUBJECT OF AN INTELLECTUAL PROPERTY INFRINGEMENT CLAIM, THE COST
OF PARTICIPATING IN ANY LITIGATION COULD IMPACT OUR ABILITY TO STAY IN BUSINESS.
There has been, and we believe that there will continue to be, significant
litigation and demands for licenses in our industry regarding patent and other
intellectual property rights. Although we anticipate having a valid defense to
any allegation that our current products, production methods and other
activities infringe the valid and enforceable intellectual property rights of
any third parties, we cannot be certain that a third party will not challenge
our position in the future. Other parties may own patent rights that we might
infringe with our products or other activities, and our competitors or other
patent holders may assert that our products and the methods we employ are
covered by their patents. These parties could bring claims against us that would
cause us to incur substantial litigation expenses and, if successful, may
require us to pay substantial damages. Some of our potential competitors may be
better able to sustain the costs of complex patent litigation, and depending on
the circumstances, we could be forced to stop or delay our research,
development, manufacturing or sales activities. The impact of this could impact
our ability to stay in business.
16
WE COULD LOSE OUR COMPETITIVE ADVANTAGES IF WE ARE NOT ABLE TO PROTECT ANY OF
OUR FOOD AND NUTRITIONAL PRODUCTS AND INTELLECTUAL PROPERTY RIGHTS AGAINST
INFRINGEMENT, AND ANY RELATED LITIGATION COULD BE TIME-CONSUMING AND COSTLY.
Our success and ability to compete depends to a significant degree on our
licenses and the ability to use our food and nutritional products. If any of our
competitor's copies or otherwise gains access to any of our competitive
advantages or develops similar products independently, our ability to compete
would be negatively impacted.
We also consider our assigned trademarks invaluable to our ability to continue
to develop and maintain the goodwill and recognition associated with our brands.
These and any other measures that we may take to protect our intellectual
property rights, which presently are based upon a combination of copyright,
trade secret and trademark laws, may not be adequate to prevent their
unauthorized use.
Further, the laws of foreign countries may provide inadequate protection of such
intellectual property rights. We may need to bring legal claims to enforce or
protect such intellectual property rights. Any litigation, whether successful or
unsuccessful, could result in substantial costs and diversions of resources. In
addition, notwithstanding any rights we have secured in our intellectual
property, other persons may bring claims against us that we have infringed on
their intellectual property rights, including claims based upon the content we
license from third parties or claims that our intellectual property right
interests are not valid. Any claims against us, with or without merit, could be
time consuming and costly to defend or litigate, divert our attention and
resources, result in the loss of goodwill associated with our service marks or
require us to make changes to our website or other of our technologies.
IF WE FAIL TO EFFECTIVELY MANAGE OUR GROWTH OUR FUTURE BUSINESS RESULTS COULD BE
HARMED AND OUR MANAGERIAL AND OPERATIONAL RESOURCES MAY BE STRAINED.
As we proceed with the commercialization of our portfolio, we expect to
experience significant and rapid growth in the scope and complexity of our
business. We will need to add resources to market our services, manage
operations, handle sales and marketing efforts and perform finance and
accounting functions. We will be required to hire a broad range of additional
personnel in order to successfully advance our operations. This growth is likely
to place a strain on our management and operational resources. The failure to
develop and implement effective systems, or to hire and retain sufficient
personnel for the performance of all of the functions necessary to effectively
service and manage our potential business, or the failure to manage growth
effectively, could have a materially adverse effect on our business and
financial condition.
OUR SERVICES MAY BECOME OBSOLETE AND UNMARKETABLE IF WE ARE UNABLE TO RESPOND
ADEQUATELY TO RAPIDLY CHANGING TECHNOLOGY AND CUSTOMER DEMANDS.
Our industry is characterized by rapid changes in market demands. As a result,
our products may quickly become obsolete and unmarketable. Our future success
will depend on our ability to adapt to and anticipate market demands, develop
new products and enhance our current products on a timely and cost-effective
basis. Further, our products must remain competitive with those of other
17
companies with substantially greater resources. We may experience technical or
other difficulties that could delay or prevent the development, introduction or
marketing of new products or enhanced versions of existing products. Also, we
may not be able to adapt new or enhanced services to comply with emerging
industry or governmental standards.
OUR FAILURE TO APPROPRIATELY RESPOND TO CHANGING CONSUMER PREFERENCES AND DEMAND
FOR NEW PRODUCTS OR PRODUCT ENHANCEMENTS COULD SIGNIFICANTLY HARM PRODUCT SALES
AND HARM OUR FINANCIAL CONDITION AND OPERATING RESULTS.
Our business is subject to changing consumer trends and preferences. Our success
depends on our ability to anticipate and respond to these changes, and we may
not respond in a timely or commercially appropriate manner to such changes. The
nutritional supplement industry is characterized by rapid and frequent changes
in demand new product introductions and enhancements. Our failure to predict
these trends could negatively impact consumer opinion of our products and thus
commercial success.
IF WE DO NOT INTRODUCE NEW PRODUCTS OR MAKE ENHANCEMENTS TO ADEQUATELY MEET THE
CHANGING NEEDS OF OUR CUSTOMERS, SOME OF OUR PRODUCTS COULD FAIL IN THE
MARKETPLACE, WHICH COULD NEGATIVELY IMPACT OUR REVENUES, FINANCIAL CONDITION AND
OPERATING RESULTS.
The business of marketing of food and nutritional products is highly competitive
and sensitive to the introduction of new products, including various
prescription drugs, which may rapidly capture a significant share of the market.
These market segments include numerous manufacturers, distributors, marketers,
retailers and physicians that actively compete for the business of consumers. We
must continually adapt to marketplace demands in order to avoid negatively
impacting our results.
WE ARE AFFECTED BY LAWS AND GOVERNMENTAL REGULATIONS WITH POTENTIAL PENALTIES OR
CLAIMS, WHICH COULD HARM OUR FINANCIAL CONDITION AND OPERATING RESULTS.
The formulation, manufacturing, packaging, labeling, distribution, advertising,
licensing, sale and storage of our products are affected by laws and
governmental regulations.
New regulations or changes in the interpretations of existing regulations may
result in significant compliance costs or discontinuation of product sales and
may negatively impact the marketing of our products, resulting in loss of
revenues. We are subject to FDA rules for current good manufacturing practices,
or GMPs, for the manufacture, packing, labeling and holding of nutritional
products distributed in the United States. We have retained supply partners that
maintain a comprehensive quality assurance program designed to address these
regulations.
If these supply partners fail to comply with the GMPs and regulations, this
could negatively impact our reputation and ability to sell products even though
we are not directly liable under the GMPs and regulations for such compliance.
SINCE WE RELY ON INDEPENDENT THIRD PARTIES FOR THE MANUFACTURE AND SUPPLY OF
CERTAIN OF OUR PRODUCTS, IF THESE THIRD PARTIES FAIL TO RELIABLY SUPPLY PRODUCTS
TO US AT REQUIRED LEVELS OF QUALITY AND WHICH ARE MANUFACTURED IN COMPLIANCE
18
WITH APPLICABLE LAWS, THEN OUR FINANCIAL CONDITION AND OPERATING RESULTS WOULD
BE HARMED.
We cannot be assured that our outside contract manufacturers will continuously,
reliably supply products to us at the levels of quality, or the quantities, we
require, and in compliance with applicable laws, including under the FDA's GMP
regulations. Additionally, while we are not presently aware of any current
liquidity issues with our suppliers, we cannot be assured we will not experience
financial hardship or capacity constraints in future that could interrupt supply
and thus our ability to profitably market our products.
WE MAY INCUR MATERIAL PRODUCT LIABILITY CLAIMS, WHICH COULD INCREASE OUR COSTS
AND HARM OUR FINANCIAL CONDITION AND OPERATING RESULTS.
We rely upon published and unpublished safety information including clinical
studies on ingredients used in our products. Previously unknown adverse
reactions resulting from human consumption of these ingredients could occur. As
a marketer of dietary and nutritional supplements and other products that are
ingested by consumers or applied to their bodies, we may be subjected to various
product liability claims, including that the products contain contaminants, the
products include inadequate instructions as to their uses, or the products
include inadequate warnings concerning side effects and interactions with other
substances. It is possible that widespread product liability claims could
increase our costs, and adversely affect our revenues and operating income.
Moreover, liability claims arising from a serious adverse event may increase our
costs through higher insurance premiums and deductibles, and may make it more
difficult to secure adequate insurance coverage in the future.
UNLESS WE CAN GENERATE SUFFICIENT CASH FROM OPERATIONS OR RAISE ADDITIONAL
FUNDS, WE MAY NOT BE ABLE TO MEET OUR DEBT OBLIGATIONS;
On May 1, 2014, the Company obtained a short term loan of $200,000 from Rene
Arseneault. The loan bears interest at the rate of 8.0% per annum, payable on
maturity, calculated on the principle amount of the loan outstanding. The loan
was due on April 30, 2015, was extended to October 31, 2105 and while now
technically in default, the parties to the obligation are working co-operatively
to finalize the terms of repayment. On July 21, 2014, the Company obtained
another short term loan of $100,000 from 1169822 Ontario Limited. The loan bears
interest at the rate of 8.0% per annum, payable on maturity, calculated on the
principle amount of the loan outstanding. The loan and accrued and unpaid
interest was extended to May 31, 2016. And on November 2, 2015, the company
obtained another short term loan of $180,000 from Continental Ingredients
Incorporated. The loan bears interest at the rate of 8% per annum, payable on
maturity, calculated on the principle amount of the loan outstanding. Unless
paid earlier, the loan and accrued and unpaid interest shall be payable in full
on November 2, 2016. As of November 30, 2015, all three short term loans are
still outstanding. The accrued interest expense is $37,415 ($25,333, $10,882 and
$1,200 respectively). As noted in the section entitled Key Developments in
Fiscal 2015 and Fiscal 2016 to the Date of this Report, in addition to the debts
noted above, we entered into Securities Purchase Agreements Dated January 29,
2016 and February 29, 2016 for proceeds of $250,000 and $200,000, on the terms
as described.
19
Our company had $187,886 in cash at the end of November 30, 2015. Unless we are
able to generate cash from the sale of product or obtain long term financing, we
may not be able to fulfill our obligation to pay off the loans.
OUR CUSTOMERS GENERALLY ARE NOT OBLIGATED TO CONTINUE PURCHASING PRODUCTS FROM
US
Many of our customers buy from us under purchase orders, and we generally do not
have long-term agreements with or commitments from these customers for the
purchase of products. We cannot provide assurance that our customers will
maintain or increase their sales volumes or orders for the products supplied by
us or that we will be able to maintain or add to our existing customer base.
Decreases in our customers' sales volumes or orders for products supplied by us
may have a material adverse effect on our business, financial condition or
results of operations.
IF WE DO NOT MANAGE OUR SUPPLY CHAIN EFFECTIVELY, OUR OPERATING RESULTS MAY BE
ADVERSELY AFFECTED
Our supply chain is complex. We rely on suppliers for our raw materials and for
the manufacturing, processing, packaging and distribution of many of our
products. The inability of any of these suppliers to deliver or perform for us
in a timely or cost-effective manner could cause our operating costs to rise and
our margins to fall. We must continuously monitor our inventory and product mix
against forecasted demand or risk having inadequate supplies to meet consumer
demand as well as having too much inventory that may reach its expiration date.
If we are unable to manage our supply chain efficiently and ensure that our
products are available to meet consumer demand, our operating costs could
increase and our margins could fall.
RISKS RELATING TO OWNERSHIP OF OUR SECURITIES
OUR STOCK PRICE MAY BE VOLATILE, WHICH MAY RESULT IN LOSSES TO OUR SHAREHOLDERS.
The stock markets have experienced significant price and trading volume
fluctuations, and the market prices of companies listed on the OTCQB quotation
system in which shares of our common stock are listed, have been volatile in the
past and have experienced sharp share price and trading volume changes. The
trading price of our common stock is likely to be volatile and could fluctuate
widely in response to many factors, including the following, some of which are
beyond our control:
* variations in our operating results;
* changes in expectations of our future financial performance, including
financial estimates by securities analysts and investors;
* changes in operating and stock price performance of other companies in
our industry;
* additions or departures of key personnel; and
* future sales of our common stock.
Domestic and international stock markets often experience significant price and
volume fluctuations. These fluctuations, as well as general economic and
political conditions unrelated to our performance, may adversely affect the
price of our common stock.
20
OUR COMMON SHARES ARE THINLY TRADED AND OUR SHAREHOLDERS MAY BE UNABLE TO SELL
AT OR NEAR ASK PRICES, OR AT ALL.
We cannot predict the extent to which an active public market for trading our
common stock will be sustained. Our shares have historically been sporadically
or "thinly-traded" meaning that the number of persons interested in purchasing
our common shares at or near bid prices at certain given time may be relatively
small or non-existent.
This situation is attributable to a number of factors, including the fact that
we are a small company in its development phase which is relatively unknown to
stock analysts, stock brokers, institutional investors and others in the
investment community who generate or influence sales volume. Even if we came to
the attention of such persons, those persons may be reluctant to follow,
purchase, or recommend the purchase of shares of an unproven company such as
ours until such time as we become more seasoned and viable. As a consequence,
there may be periods of several days or more when trading activity in our shares
is minimal or non-existent, as compared to a seasoned issuer which has a large
and steady volume of trading activity that will generally support continuous
trades without an adverse effect on share price. We cannot be assured that a
broader or more active public trading market for our common stock will develop
or be sustained, or that current trading levels will be sustained.
THE MARKET PRICE FOR OUR COMMON STOCK IS PARTICULARLY VOLATILE GIVEN OUR STATUS
AS A RELATIVELY SMALL AND DEVELOPING COMPANY, WHICH COULD LEAD TO WIDE
FLUCTUATIONS IN OUR SHARE PRICE. OUR SHAREHOLDERS MAY BE UNABLE TO SELL YOUR
COMMON STOCK AT OR ABOVE YOUR PURCHASE PRICE IF AT ALL, WHICH MAY RESULT IN
SUBSTANTIAL LOSSES TO YOU.
Shareholders should be aware that, according to SEC Release No. 34-29093, the
market for penny stock/over the counter stocks has suffered in recent years from
patterns of fraud and abuse. Such patterns include (1) control of the market for
the security by one or a few broker-dealers that are often related to the
promoter or issuer; (2) manipulation of prices through prearranged matching of
purchases and sales and false and misleading press releases; (3) boiler room
practices involving high-pressure sales tactics and unrealistic price
projections by inexperienced sales persons; (4) excessive and undisclosed
bid-ask differential and markups by selling broker-dealers; and (5) the
wholesale dumping of the same securities by promoters and broker-dealers after
prices have been manipulated to a desired level, along with the resulting
inevitable collapse of those prices and with consequent investor losses. The
occurrence of these patterns or practices could increase the volatility of our
share price and there can be no assurance that our shares could not be impacted
by these practices.
WE DO NOT ANTICIPATE PAYING ANY CASH DIVIDENDS TO OUR COMMON SHAREHOLDERS AND AS
A RESULT SHAREHOLDERS MAY ONLY REALIZE A RETURN WHEN THE SHARES ARE SOLD.
We presently do not anticipate that we will pay dividends on any of our common
stock in the foreseeable future. If payment of dividends does occur at some
point in the future, it would be contingent upon our revenues and earnings, if
any, capital requirements, and general financial condition. The payment of any
common stock dividends will be within the discretion of our Board of Directors.
We presently intend to retain all earnings to implement our business plan;
21
accordingly, we do not anticipate the declaration of any dividends for common
stock in the foreseeable future.
WE ARE LISTED ON THE OTCQB QUOTATION SYSTEM AND OUR COMMON STOCK IS SUBJECT TO
"PENNY STOCK" RULES WHICH COULD NEGATIVELY IMPACT OUR LIQUIDITY AND OUR
SHAREHOLDERS' ABILITY TO SELL THEIR SHARES.
Our common stock is currently quoted on the OTCQB. We must comply with numerous
NASDAQ MarketPlace rules in order to maintain the listing of our common stock on
the OTCQB. There can be no assurance that we can continue to meet the
requirements to maintain the quotation on the OTCQB listing of our common stock.
If we are unable to maintain our listing on the OTCQB, the market liquidity of
our common stock may be severely limited.
VOLATILITY IN OUR COMMON SHARE PRICE MAY SUBJECT US TO SECURITIES LITIGATION.
The market for our common stock is characterized by significant price volatility
as compared to seasoned issuers, and we expect that our share price will
continue to be more volatile than a seasoned issuer for the indefinite future.
In the past, plaintiffs have often initiated securities class action litigation
against a company following periods of volatility in the market price of its
securities. We may, in the future, be the target of similar litigation.
Securities litigation could result in substantial costs and liabilities and
could divert management's attention and resources and impact our ability to
operate as a going concern.
THE ELIMINATION OF MONETARY LIABILITY AGAINST OUR DIRECTORS, OFFICERS AND
EMPLOYEES UNDER NEVADA LAW AND THE EXISTENCE OF INDEMNIFICATION RIGHTS OF OUR
DIRECTORS, OFFICERS AND EMPLOYEES MAY RESULT IN SUBSTANTIAL EXPENDITURES BY OUR
COMPANY AND MAY DISCOURAGE LAWSUITS AGAINST OUR DIRECTORS, OFFICERS AND
EMPLOYEES.
Our Articles of Incorporation contains a specific provision that eliminates the
liability of our directors and officers for monetary damages to our company and
shareholders. Further, we are prepared to give such indemnification to our
directors and officers to the extent provided for by Nevada law. We may also
have contractual indemnification obligations under our employment agreements
with our officers. The foregoing indemnification obligations could result in our
company incurring substantial expenditures to cover the cost of settlement or
damage awards against directors and officers, which we may be unable to recoup.
These provisions and resultant costs may also discourage our company from
bringing a lawsuit against directors and officers for breaches of their
fiduciary duties, and may similarly discourage the filing of derivative
litigation by our shareholders against our directors and officers even though
such actions, if successful, might otherwise benefit our company and
shareholders.
OUR BUSINESS IS SUBJECT TO CHANGING REGULATIONS RELATED TO CORPORATE GOVERNANCE
AND PUBLIC DISCLOSURE THAT HAVE INCREASED BOTH OUR COSTS AND THE RISK OF
NONCOMPLIANCE.
Because our common stock is publicly traded, we are subject to certain rules and
regulations of federal, state and financial market exchange entities charged
with the protection of investors and the oversight of companies whose securities
are publicly traded. These entities, including the Public Company Accounting
Oversight Board, the SEC and FINRA, have issued requirements and regulations and
22
continue to develop additional regulations and requirements in response to
corporate scandals and laws enacted by Congress, most notably the Sarbanes-Oxley
Act of 2002. Our efforts to comply with these regulations have resulted in, and
are likely to continue resulting in, increased general and administrative
expenses and diversion of management time and attention from revenue-generating
activities to compliance activities. Because new and modified laws, regulations
and standards are subject to varying interpretations in many cases due to their
lack of specificity, their application in practice may evolve over time as new
guidance is provided by regulatory and governing bodies. This evolution may
result in continuing uncertainty regarding compliance matters and additional
costs necessitated by ongoing revisions to our disclosure and governance
practices.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
We do not currently own any property and we currently have no investment
policies as they pertain to real estate, real estate interests or real estate
mortgages.
ITEM 3. LEGAL PROCEEDINGS
We are not currently involved in any legal proceedings and we are not aware of
any pending or potential legal actions.
ITEM 4. MINING SAFETY DISCLOSURES
None.
PART II
ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
Since July 8, 2013 our shares have been approved for trading under the symbol
"TDNT". As of the date of this filing, there has been no active trading of our
securities, and, therefore, no high and low bid pricing.
The OTCQB is a regulated quotation service that displays real-time quotes, last
sale prices and volume information in over-the-counter (OTC) securities. The
OTCBB is not an issuer listing service, market or exchange. Although the OTCBB
does not have any listing requirements per se, to be eligible for quotation on
the OTCBB, issuers must remain current in their filings with the SEC or
applicable regulatory authority. Market Makers are not permitted to begin
quotation of a security whose issuer does not meet this filing requirement.
Securities already quoted on the OTCBB that become delinquent in their required
filings will be removed following a 30 or 60 day grace period if they do not
make their required filing during that time.
23
As of November 30, 2015, we had 28,000,000 Shares of $0.001 par value common
stock issued and outstanding held by 35 shareholders of record.
Of the 28,000,000 shares of common stock outstanding as of November 30, 2015,
10,000,000 shares are owned by Mark Holcombe, a former officer and current
director, and may only be resold in compliance with Rule 144 of the Securities
Act of 1933.
The stock transfer agent for our securities is Action Stock Transfer.
DIVIDENDS
We have never declared or paid any cash dividends on our common stock. For the
foreseeable future, we intend to retain any earnings to finance the development
and expansion of our business, and we do not anticipate paying any cash
dividends on our common stock. Any future determination to pay dividends will be
at the discretion of the Board of Directors and will be dependent upon then
existing conditions, including our financial condition and results of
operations, capital requirements, contractual restrictions, business prospects,
and other factors that the Board of Directors considers relevant.
SECTION RULE 15(g) OF THE SECURITIES EXCHANGE ACT OF 1934
The Company's shares are covered by Section 15(g) of the Securities Exchange Act
of 1934, as amended that imposes additional sales practice requirements on
broker/dealers who sell such securities to persons other than established
customers and accredited investors (generally institutions with assets in excess
of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual
income exceeding $200,000 or $300,000 jointly with their spouses). For
transactions covered by the Rule, the broker/dealer must make a special
suitability determination for the purchase and have received the purchaser's
written agreement to the transaction prior to the sale. Consequently, the Rule
may affect the ability of broker/dealers to sell our securities and also may
affect your ability to sell your shares in the secondary market.
Section 15(g) also imposes additional sales practice requirements on
broker/dealers who sell penny securities. These rules require a one page summary
of certain essential items. The items include the risk of investing in penny
stocks in both public offerings and secondary marketing; terms important to in
understanding of the function of the penny stock market, such as "bid" and
"offer" quotes, a dealers "spread" and broker/dealer compensation; the
broker/dealer compensation, the broker/dealers duties to its customers,
including the disclosures required by any other penny stock disclosure rules;
and the customers rights and remedies in causes of fraud in penny stock
transactions.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
As of November 30, 2015, we have issued the following securities under our 2013
Stock Option Plan:
24
Number of Exercise Vesting from
Name and Position Options Date of Grant Price Expiration Date of Grant
----------------- ------- ------------- ----- ---------- -------------
1. Michael Browne 375,000 May 5, 2014 $0.75 May 5, 2019 12 months
(former 125,000 May 5, 2014 $1.00 May 5, 2019 August 2016
President), Brand 125,000 May 5, 2014 $1.50 May 5, 2019 August 2017
Director, Chief
Financial Officer,
Treasurer and
Secretary
2. Donald MacPhee 100,000 May 5, 2014 $0.75 May 5, 2019 12 months
President & CEO, 100,000 May 5, 2014 $1.00 May 5, 2019 24 months
Director, Chair of 100,000 May 5, 2014 $1.50 May 5, 2019 36 months
the Audit Committee
and member of the
Corporate Governance
Committee
3. Scott Chapman 100,000 May 5, 2014 $0.75 May 5, 2019 12 months
Director, Chair of 100,000 May 5, 2014 $1.00 May 5, 2019 24 months
Corporate Governance 100,000 May 5, 2014 $1.50 May 5, 2019 36 months
Committee
4. Mark Holcombe 100,000 May 5, 2014 $0.75 May 5, 2019 12 months
Director, Chairman 100,000 May 5, 2014 $1.00 May 5, 2019 24 months
of the Board of 100,000 May 5, 2014 $1.50 May 5, 2019 36 months
Directors and Chairman
of the Compensation
Committee
5. Peter Salvo 50,000 May 5, 2014 $0.75 May 5, 2019 12 months
Controller 50,000 May 5, 2014 $1.00 May 5, 2019 24 months
50,000 May 5, 2014 $1.50 May 5, 2019 36 months
6. Robert Campbell 116,666 May 5, 2014 $0.75 May 5, 2019 12 months
Special Advisor 116,666 May 5, 2014 $1.00 May 5, 2019 24 months
116,667 May 5, 2014 $1.50 May 5, 2019 36 months
7. Karen Arseneault 116,666 May 5, 2014 $0.75 May 5, 2019 12 months
Special Advisor 116,666 May 5, 2014 $1.00 May 5, 2019 24 months
116,667 May 5, 2014 $1.50 May 5, 2019 36 months
TOTAL: 2,375,000
SECTION 16(a)
Based solely upon a review of Forms 3 and 4 furnished by us under Rule 16a-3(d)
of the Securities Exchange Act of 1934, we are not aware of any individual who
failed to file a required report on a timely basis required by Section 16(a) of
the Securities Exchange Act of 1934.
25
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
There were no shares of common stock or other securities issued to the issuer or
affiliated purchasers during the year ended November 30, 2015.
ITEM 6. SELECTED FINANCIAL DATA
As a smaller reporting company we are not required to provide this information.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING FINANCIAL INFORMATION
This Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") section provides analysis of our operations and financial
position for the fiscal year ended November 30, 2015 and includes information
available to March 11, 2015, unless otherwise indicated herein. It is
supplementary information and should be read in conjunction with the
Consolidated Financial Statements included elsewhere in this report.
Certain statements contained in this MD&A may constitute forward-looking
statements as defined under securities laws. Forward-looking statements may
relate to our future outlook and anticipated events or results and may include
statements regarding our future financial position, business strategy, budgets,
litigation, projected costs, capital expenditures, financial results, taxes,
plans and objectives. In some cases, forward-looking statements can be
identified by terms such as "anticipate", "estimate", "intend", "project",
"potential", "continue", "believe", "expect", "could", "would", "should",
"might", "plan", "will", "may", "predict", or other similar expressions
concerning matters that are not historical facts. To the extent any
forward-looking statements contain future-oriented financial information or
financial outlooks, such information is being provided to enable a reader to
assess our financial condition, material changes in our financial condition, our
results of operations, and our liquidity and capital resources. Readers are
cautioned that this information may not be appropriate for any other purpose,
including investment decisions.
Forward-looking statements contained in this MD&A are based on certain factors
and assumptions regarding expected growth, results of operations, performance,
and business prospects and opportunities. While we consider these assumptions to
be reasonable, based on information currently available, they may prove to be
incorrect. Forward-looking statements are also subject to certain factors,
including risks and uncertainties that could cause actual results to differ
materially from what we currently expect. These factors are more fully described
in the "Risk Factors" section at Item 1A of this Form 10-K.
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles ("U.S. GAAP") requires management to make certain
estimates and assumptions that affect the reported amounts of assets and
liabilities, related revenues and expenses, and disclosure of gain and loss
26
contingencies at the date of the financial statements. The estimates and
assumptions made require us to exercise our judgment and are based on our
experience and various other factors that we believe to be reasonable under the
circumstances. We continually evaluate the information that forms the basis of
our estimates and assumptions as our business and the business environment
generally changes. The following are the accounting estimates which we believe
to be most important to our business.
REVENUE RECOGNITION
We recognize revenue at the time of delivery of the product and when all of the
following have occurred: a sales agreement is in place; price is fixed or
determinable; and collection is reasonably assured. Consideration given to
customers such as value incentives, rebates, early payment discounts and other
discounts are recorded as reductions to revenues at the time of sale.
INVENTORY
Inventory is our largest current asset other than Cash and consists primarily of
raw materials and finished goods held for sale. Inventories are valued at the
lower of cost, measured on a first-in, first out basis, or estimated net
realizable value. In order to determine the value of inventory at the balance
sheet date, we evaluate a number of factors to determine the adequacy of
provisions for inventory. These factors include the age of inventory, the amount
of inventory held by type, future demand for products, and the expected future
selling price we expect to realize by selling the inventory. Our estimates are
judgmental in nature and are made at a point in time, using available
information, expected business plans, and expected market conditions. As a
result, the actual amount received on sale could differ from our estimated value
of inventory.
INCOME TAXES
We are liable for income taxes in jurisdictions where we operate. Our effective
tax rate may differ from the statutory tax rate and will vary from year to year
primarily as a result of any permanent differences, investment and other tax
credits, as well as the provision for income taxes at different rates in various
jurisdictions. In making an estimate of our income tax liability, we first
assess which items of income and expense are taxable in a particular
jurisdiction. This process involves a determination of the amount of taxes
currently payable as well as the assessment of the effect of temporary timing
differences resulting from different treatment of items for accounting and tax
purposes. These differences in the timing of the recognition of income or the
deductibility of expenses may result in deferred income tax balances that are
recorded as assets or liabilities as the case may be on our balance sheet. We
also estimate the amount of valuation allowance to maintain relating to loss
carry forwards and other balances that can be used to reduce future taxes
payable. We assess the likelihood of the ultimate realization of these tax
assets by looking at the relative size of the tax assets in relation to the
profitability of the businesses and the jurisdiction to which they can be
applied, the number of years based on management's estimate it will take to use
the tax assets and any other special circumstances. Given our history of
operating losses we have taken a valuation allowance to offset the potential
future value of loss carry-forwards.
27
STOCK-BASED COMPENSATION
We maintain a stock incentive plan under which stock options and other
stock-based awards may be granted to selected officer, directors and service
providers. For grants of stock options, we are required to estimate a number of
inputs at each grant date, such as the estimated life of the option, future
stock price volatility, and the forfeiture rate used in the Black-Scholes
option-pricing model to determine a fair value for the options granted to
employees or non-employee directors. Once determined at the grant date, the fair
value of the stock option award is recorded over the vesting period of the
options granted.
RESULTS OF OPERATIONS FOR THE FISCAL YEARS ENDED NOVEMBER 30, 2015 AND NOVEMBER
30, 2014
The following summary of our results of operations should be read in conjunction
with our audited financial statements for the three month periods ended November
30 2015 and 2014, and the fiscal years ended November 30, 2015 and 2014.
Our operating results for twelve month periods ended November 30, 2015 and 2014
are summarized as follows:
Twelve Months Twelve Months
Ended Ended
Nov 30, Nov 30,
2015 2014
------------ ------------
Revenues $ 16,569 $ 479
Cost of Goods $ 9,951 $ 305
Operating Expenses $ 2,286,348 $ 387,158
Other Expenses $ 890,094 $ 122,215
Net Income (Loss) $ (3,169,824) $ (509,199)
REVENUES
We have generated very limited revenues since our inception on November 5, 2007.
Revenues increased in 2015 as we commenced commercialization of our product
offering and we expect this to continue in 2016 and beyond as we ramp-up the
commercialization of our Everlast(R), Brain Armor(R) and Oceans Omega branded
product offerings.
OPERATING EXPENSES
Our operating expenses twelve month periods ended November 30, 2015 and 2014 are
outlined in the table below:
Twelve Months Twelve Months
Ended Ended
Nov 30, Nov 30,
2015 2014
------------ ------------
Professional Fees $ 270,781 $ 130,383
General & Administrative Expenses $ 981,211 $ 36,617
Marketing, Selling & Warehousing Expenses $ 878,479 $ 108,265
Management Salary $ 75,000 $ 56,000
Director's Fees $ 72,000 $ 48,000
Rent $ 8,877 $ 7,893
28
Operating expenses for the twelve month period ended November 30, 2015 were
$2,286,348 as compared to $387,158 for the comparative period in 2014, an
increase of approximately 590%. The increase in our operating expenses is
primarily due to an increased marketing and promotional expenses, professional
fees and general and administrative costs as we build and roll-out our product
offerings, as well as increased stock option compensation expense related to
options issued in 2014. These costs are expected to continue to increase
throughout 2016 as we continue to develop and commercialize our product
offerings.
OTHER EXPENSES
Other expenses for the twelve month period ended November 30, 2015 increased to
$890,094 versus $122,215 in the comparative period in 2014. The increase was due
to increased interest expense of approximately $650,000 due to higher debt
levels and the impact of the beneficial conversion feature related to the
convertible note entered into in 2015, plus an increase in royalties as per the
terms of the Everlast(R) License Agreement.
LIQUIDITY AND CAPITAL RESOURCES
Our cash balance at November 30, 2015 was $187,886. Management believes the
current funds available to the company will not be sufficient to fund our
operations for the next twelve months. We are an early growth stage company and
generated only $16,569 in revenue in 2015.
On January 29, 2015, we entered into a securities purchase agreement with a
non-US institutional investor whereby it agreed to sell an aggregate principal
amount of $2,300,000 of senior secured convertible debentures, convertible into
shares of the company's common stock. We received $1,800,000 of the funds from
the transaction on February 5, 2015 and the balance of $500,000 on May 14, 2015.
The convertible debentures are convertible into shares of the Company's common
stock at an initial conversion price of $.71 per share, for an aggregate of up
to 3,239,437 shares. The debentures bear interest at 6% per annum. The
applicable portion of the Principal Amount and the Interest outstanding shall be
due and payable on the date that is 12 months from the applicable issuance date
or such other time as the parties agree upon. The accrued interest expense is
$104,442.
Subsequent to year end on January 29, 2016 and February 29, 2016, we entered
into Securities Purchase Agreements whereby we received proceeds of $250,000 and
$200,000 in return for secured promissory notes of $250,000 and $200,000 due 12
months from the issuance date, bearing interest at the rate of 10% per annum,
and 125,000 and 100,000 warrants respectively to purchase common shares of our
Company at an exercise price of $1.35 per share for three years from the date of
issue.
Going forward we expect to continue to need to raise funds via both debt and
equity offerings to support the anticipated growth of our business.
29
PLAN OF OPERATION
CASH REQUIREMENTS
Over the next 12 months we intend to carry on business as a food and nutritional
products company. We anticipate that we will incur the following cash operating
expenses during this period:
ESTIMATED FUNDING REQUIRED DURING THE NEXT 12 MONTHS
Expense Amount ($)
------- ----------
Professional fees 260,000
Consulting/Advisor fees 480,000
Rent 30,000
Sales, Travel and Marketing 1,015,000
Other general administrative expenses 520,000
Royalty obligations (1) 415,000
---------
TOTAL 2,720,000
=========
----------
(1) Due in part to the Trade Mark License Agreement of June 4, 2013 that was
assigned to us in the assignment Agreement dated December 23, 2013.
We will require funds of approximately $2,720,000 over the next twelve months to
operate our business. We do not anticipate the purchase or sale of any plant or
significant equipment during the next 12 months.
These funds may be raised through equity financing, debt financing, or other
sources, which may result in further dilution in the equity ownership of our
shares. There is no assurance that we will be able to maintain operations at a
level sufficient for an investor to obtain a return on their investment in our
common stock. Further, we may continue to be unprofitable.
GOING CONCERN
The accompanying financial statements included in this Form 10-K are presented
on a going concern basis. There is substantial doubt about our ability to
continue as a going concern.
As shown in the accompanying financial statements, we have incurred net losses
of $3,800,118 since inception. This condition raises substantial doubt as to our
ability to continue as a going concern. In response to these conditions, we may
raise additional capital through the sale of equity securities, through an
offering of debt securities or through borrowings from financial institutions or
individuals. The financial statements do not include any adjustments that might
be necessary if we are unable to continue as a going concern.
30
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that is material to investors.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company we are not required to provide this information.
ITEM 8. FINANCIAL STATEMENTS
Our Consolidated Financial Statements required by this item are set forth
immediately following the signature page to this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON FINANCIAL DISCLOSURE
None.
ITEM 9A (T). CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management, including
our principal executive officer and the principal financial officer, we have
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 and Exchange Act of 1934, as of the end of the period
covered by this report. Based on this evaluation, our principal executive
officer and principal financial officer concluded as of the evaluation date that
our disclosure controls and procedures were effective such that the material
information required to be included in our Securities and Exchange Commission
reports is accumulated and communicated to our management, including our
principal executive and financial officer, recorded, processed, summarized and
reported within the time periods specified in SEC rules and forms relating to
our company, particularly during the period when this report was being prepared.
MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act, for the Company. Internal control over
financial reporting includes those policies and procedures that: (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of our assets; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting
principles, and that our receipts and expenditures are being made only in
accordance with authorizations of its management and directors; and (3) provide
31
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of our assets that could have a material effect
on the financial statements.
Management recognizes that there are inherent limitations in the effectiveness
of any system of internal control, and accordingly, even effective internal
control can provide only reasonable assurance with respect to financial
statement preparation and may not prevent or detect material misstatements. In
addition, effective internal control at a point in time may become ineffective
in future periods because of changes in conditions or due to deterioration in
the degree of compliance with our established policies and procedures.
A material weakness is a significant deficiency, or combination of significant
deficiencies, that results in there being a more than remote likelihood that a
material misstatement of the annual or interim financial statements will not be
prevented or detected.
Under the supervision and with the participation of our Chief Executive Officer
and Chief Financial Officer, management conducted an evaluation of the
effectiveness of our internal control over financial reporting, as of the
Evaluation Date, based on the framework set forth in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Based on its evaluation under this framework, management
concluded that our internal control over financial reporting was not effective
as of the Evaluation Date and identified the following material weaknesses:
INSUFFICIENT RESOURCES: We have an inadequate number of personnel with requisite
expertise in the key functional areas of finance and accounting.
INADEQUATE SEGREGATION OF DUTIES: We have an inadequate number of personnel to
properly implement control procedures.
LACK OF AUDIT COMMITTEE & OUTSIDE DIRECTORS ON THE COMPANY'S BOARD OF DIRECTORS:
We do not have a functioning audit committee or outside directors on the
Company's Board of Directors, resulting in ineffective oversight in the
establishment and monitoring of required internal controls and procedures.
Management is committed to improving its internal controls and will (1) continue
to use third party specialists to address shortfalls in staffing and to assist
the Company with accounting and finance responsibilities, (2) increase the
frequency of independent reconciliations of significant accounts which will
mitigate the lack of segregation of duties until there are sufficient personnel
and (3) may consider appointing outside directors and audit committee members in
the future.
Management has discussed the material weakness noted above with our independent
registered public accounting firm. Due to the nature of this material weakness,
there is a more than remote likelihood that misstatements which could be
material to the annual or interim financial statements could occur that would
not be prevented or detected.
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 the our registered public
32
accounting firm pursuant to temporary rules of the SEC that permit us to provide
only management's report in this annual report.
Changes in Internal Controls Over Financial Reporting
There have been no changes in our internal control over financial reporting that
occurred during the last fiscal quarter for our fiscal year ended November 30,
2015 that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following sets forth information about our directors and executive officers
as of the date of this report:
Name Age Position
---- --- --------
Mark Holcombe (1) 44 Director, Chair of the Board of Directors and
Chair of the Compensation Committee.
Donald MacPhee (2) 54 President & CEO (effective December 15, 2015),
Director, Chair of the Audit Committee and member
of the Corporate Governance Committee.
Scott Chapman (3) 52 Director, member of the Audit Committee and Chair
of the Corporate Governance Committee
Michael Browne (4) 54 Brand Director, Chief Financial Officer, Treasurer
and Secretary, (served as President through
December 15, 2015).
Peter Salvo (5) 61 Controller.
----------
(1) Mark Holcombe was appointed as a Director of our company on November 5,
2007 and served as Chief Executive Officer, President, Secretary and
Treasurer through March 21, 2014. H also serves as Chair of the Board of
Directors and as Chair of the Compensation Committee.
(2) Donald MacPhee was appointed as President and CEO on December 15, 2015 and
as a Director and to his other roles with our Company on March 21, 2014.
(3) Scott Chapman was appointed as a Director and Chair of the Governance
Committee of our company on March 21, 2014.
(4) Michael Browne was appointed Brand Director on November 30, 2015 and as
Chief Financial Officer, Treasurer and Secretary of our company on March
21, 2014. He resigned as President of the Company on December 15, 2015.
(5) Peter Salvo was appointed as a Controller of our company on March 21, 2014.
33
Our directors will serve in that capacity until our next annual shareholder
meeting or until their successor is elected or appointed and qualified. Officers
hold their positions at the will of our Board of Directors. There are no
arrangements, agreements or understandings between non-management security
holders and management under which non-management security holders may directly
or indirectly participate in or influence the management of our affairs.
MARK HOLCOMBE, DIRECTOR, CHAIR OF THE BOARD OF DIRECTORS AND CHAIR OF THE
COMPENSATION COMMITTEE.
Mr. Mark Holcombe is experienced in corporate and investment banking, corporate
development and asset management. Mr. Holcombe has over 23 years of banking and
corporate finance experience. He has significant experience in M&A advisory,
corporate restructurings and public and private debt and equity financings.
Formerly, Mr. Holcombe was Managing Partner of Stirling Partners (Bahamas) Ltd.
Formerly, he was a Senior Advisor to Providence Advisors Limited, Managing
Director and Head of Asset Management for Madison Williams Holdings, LLC in New
York City and Head of Corporate Development/Private Equity of GEM Global
Equities Management S.A. Also, He has worked as a senior investment banker at
Global Hunter Securities, Donaldson, Lufkin and Jenrette, Gleacher
NatWest/NatWest Markets, and ING Capital. Mr. Holcombe presently serves as a
Director of Asante Gold Corporation.
Mr. Holcombe holds a B.A. from Colgate University and graduated from the
Chemical Bank Corporate Finance Analyst Training Program.
DONALD MACPHEE, PRESIDENT & CEO, DIRECTOR, CHAIR OF THE AUDIT COMMITTEE
Donald MacPhee assumed the President and CEO role effective December 15, 2015.
Mr. MacPhee co-founded Continental Ingredients in 1994 and played a major role
in taking the company from $650,000 in revenue to over $50 million today. He has
over 30 years of experience in the food and beverage ingredient industry. Don
has worked closely with major North American food and beverage manufacturers to
develop new products for their portfolios.
Mr. MacPhee holds a business administration and marketing degree from St.
Lawrence College.
SCOTT CHAPMAN, DIRECTOR, CHAIR OF THE CORPORATE GOVERNANCE COMMITTEE
Scott Chapman is an investment professional with over 20 years of experience
both in Canada and internationally. Mr. Chapman has acted as senior vice
president with Verdmont Capital (Panama City, Panama); senior partner with Lines
Overseas Management (Bermuda, Bahamas); and in institutional, retail sales with
Midland Walwyn (Montreal, Quebec).
34
Across numerous financial sectors, Mr. Chapman's responsibilities have included
corporate finance, venture capital, institutional and retail sales.
From April 2009 to present, Mr. Chapman has been the owner of Hyperion
Management. Hyperion is in the business of venture capital, marketing, corporate
governance and sports management. From Jun 2007 to August 2009, Mr. Chapman was
the Senior Vice President of Verdmont Capital. While at Verdmont, he traded a
$300m client asset base for the full-service securities and investment
management firm, including all U.S., Canadian, European and Asian markets, in
addition to raising capital for numerous private and public companies.
Mr. Chapman is a native of Montreal, Quebec educated at Concordia University and
has recently returned to Montreal after 10 years of working in Bermuda, the
Bahamas and Panama.
MICHAEL BROWNE, BRAND DIRECTOR, CHIEF FINANCIAL OFFICER, TREASURER AND SECRETARY
Michael Browne is a sales and marketing professional with a leadership resume in
industry-leading consumer products companies: Kellogg, Frito-Lay, Mars Inc.,
MillerCoors LLC. Mr. Browne has managed power brands in the categories of: ready
to eat cereal, salty snacks, confectionery, mainstream and specialty beer. He
has over 25 years' business experience spanning both North American and
international markets.
From September 2003 to November 2010, Mr. Browne was employed by MillerCoors in
various positions. Most recently, he was the Vice President of Marketing for the
above premium portfolio from August 2008 to November 2010. As Vice President of
Marketing, Mr. Browne lead the above premium portfolio including key brands that
included Blue Moon, Leinenkugel, Molson, and SAB international imports (Peroni,
Pilsner Urquell, Grolsch), and super premium brands (Sparks, Miller Chill). Mr.
Browne drove craft beer share growth and increases in value of key franchises.
Further, his broad range of commercial responsibilities included sales execution
planning, cultivating key distributor relationships, collaborating with global
trademark owners, and capability development for professional marketing staff of
24.
PETER SALVO, CONTROLLER
Peter Salvo is a professional accountant with over 25 years of experience in
manufacturing, most notably in the automotive industry. Mr. Salvo has served in
many capacities, most recently as controller and finance manager with Meritor
Suspension Systems Company for 14 years. He has also worked for Rockwell
International for 11 years as Manager of Financial Analysis. Mr. Salvo has
extensive financial management experience and served as a key member of various
management teams. His experience includes development of business operating
plans, preparation of sales and profit projections, preparation of monthly
financial statements and variance analysis, cash flow forecasts, standard
costing and inventory controls, capital expenditure and cost benefit analysis,
implementation of internal controls and safeguarding of assets.
35
Mr. Salvo is a Chartered Professional Accountant (CPA), received his Certified
Management Accountant designation in 1985 and holds a bachelor degree in
commerce from McMaster University.
EXECUTIVE MANAGEMENT AND BOARD OF DIRECTORS
Our executive management team represents a significant depth of experience in
public companies, food and nutritional products, marketing, and domestic and
international business development. The team represents a cross-disciplinary
approach to management and business development.
We believe that all of our directors' respective educational background,
operational and business experience give them the qualifications and skills
necessary to serve as directors of our company. Our board of directors consists
solely of Mr. Holcombe, Mr. D. MacPhee and Mr. Chapman.
FAMILY RELATIONSHIPS
There are no family relationships between any of our directors and officers.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
To the best of our knowledge, none of our directors or executive officers has,
during the past ten years:
1. been convicted in a criminal proceeding or been subject to a pending
criminal proceeding (excluding traffic violations and other minor
offences);
2. had any bankruptcy petition filed by or against the business or
property of the person, or of any partnership, corporation or business
association of which he was a general partner or executive officer,
either at the time of the bankruptcy filing or within two years prior
to that time;
3. been subject to any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction
or federal or state authority, permanently or temporarily enjoining,
barring, suspending or otherwise limiting, his involvement in any type
of business, securities, futures, commodities, investment, banking,
savings and loan, or insurance activities, or to be associated with
persons engaged in any such activity;
4. been found by a court of competent jurisdiction in a civil action or
by the SEC or the Commodity Futures Trading Commission to have
violated a federal or state securities or commodities law, and the
judgment has not been reversed, suspended, or vacated;
5. been the subject of, or a party to, any federal or state judicial or
administrative order, judgment, decree, or finding, not subsequently
reversed, suspended or vacated (not including any settlement of a
civil proceeding among private litigants), relating to an alleged
violation of any federal or state securities or commodities law or
regulation, any law or regulation respecting financial institutions or
36
insurance companies including, but not limited to, a temporary or
permanent injunction, order of disgorgement or restitution, civil
money penalty or temporary or permanent cease-and-desist order, or
removal or prohibition order, or any law or regulation prohibiting
mail or wire fraud or fraud in connection with any business entity; or
6. been the subject of, or a party to, any sanction or order, not
subsequently reversed, suspended or vacated, of any self-regulatory
organization (as defined in Section 3(a)(26) of the Exchange Act (15
U.S.C. 78c(a)(26))), any registered entity (as defined in Section
1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any
equivalent exchange, association, entity or organization that has
disciplinary authority over its members or persons associated with a
member.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our
executive officers and directors and persons who own more than 10% of a
registered class of our equity securities to file with the SEC initial
statements of beneficial ownership, reports of changes in ownership and annual
reports concerning their ownership of our shares of common stock and other
equity securities, on Forms 3, 4 and 5, respectively. Executive officers,
directors and greater than 10% shareholders are required by the SEC regulations
to furnish us with copies of all Section 16(a) reports they file.
Based solely on our review of the copies of such forms received by us, or
written representations from certain reporting persons, we believe that during
fiscal year ended November 30, 2015, all filing requirements applicable to our
officers, directors and greater than 10% percent beneficial owners were complied
with.
CODE OF ETHICS
We have not adopted a code of ethics that applies to our officers, directors and
employees. When we do adopt a code of ethics, we will disclose it in a Current
Report on Form 8-K.
AUDIT COMMITTEE AND AUDIT COMMITTEE FINANCIAL EXPERT
Our board of directors has determined that it does not have a member of its
audit committee that qualifies as an "audit committee financial expert" as
defined in Item 407(d)(5)(ii) of Regulation S-K, and is "independent" as the
term is used in Item 7(d)(3)(iv) of Schedule 14A under the Securities Exchange
Act of 1934, as amended.
We believe that our board of directors is capable of analyzing and evaluating
our financial statements and understanding internal controls and procedures for
financial reporting. We believe that retaining an independent director who would
qualify as an "audit committee financial expert" would be overly costly and
burdensome and is not warranted in our circumstances given the early stages of
our development and the fact that we have not generated any material revenues to
date
37
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
Change in
Pension
Value and
Non-Equity Nonqualified
Incentive Deferred All
Name and Plan Compen- Other
Principal Stock Option Compen- sation Compen-
Position Year Salary Bonus Awards Awards sation Earnings sation Total
------------ ---- ------ ----- ------ ------ ------ -------- ------ -----
Michael 2015 0 0 0 0 0 0 $46,500 $46,500
Browne, 2014 0 0 0 0 0 0 $40,000 $40,000
Brand
Director &
CFO, (Former
President)
Peter Salvo, 2015 0 0 0 0 0 0 $25,000 $25,000
Controller 2014 0 0 0 0 0 0 $16,000 $16,000
Mark 2015 0 0 0 0 0 0 $99,000 $99,000
Holcombe, 2014 0 0 0 0 0 0 $16,000 $16,000
Director,
Donald 2015 0 0 0 0 0 0 $24,000 $24,000
MacPhee, 2014 0 0 0 0 0 0 $16,000 $16,000
Pres & CEO,
Director
Scott 2015 0 0 0 0 0 0 $24,000 $24,000
Chapman, 2014 0 0 0 0 0 0 $16,000 $16,000
Director
Our officers and directors have written service contracts with us. We presently
do not have pension, health, annuity, insurance, profit sharing or similar
benefit plans; however, we may adopt plans in the future. Except for our stock
option plan, of which no options were issued in 2015, there are presently no
personal benefits available to our officers and directors.
On November 30, 2015, Michael Browne signed a service contract with the company
to serve as Brand Director of Trident Brands Inc. At that time his stock options
were amended from a total of 1,125,000 to 625,000. As a result, total stock
options outstanding as of November 30, 2015 are now 2,375,000.
38
DIRECTOR COMPENSATION
Change in
Pension
Value and
Fees Non-Equity Nonqualified
Earned Incentive Deferred
Paid in Stock Option Plan Compensation All Other
Name Cash Awards Awards Compensation Earnings Compensation Total
---- ---- ------ ------ ------------ -------- ------------ -----
Mark Holcombe $24,000 0 0 0 0 $75,000 $99,000
Donald MacPhee $24,000 0 0 0 0 0 $24,000
Scott Chapman $24,000 0 0 0 0 0 $24,000
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The following table sets forth information regarding beneficial ownership of our
common stock as of August 22, 2014 (i) by each person who is known by us to
beneficially own more than 5% of our common stock; (ii) by each of our officers
and directors; and (iii) by all of our officers and directors as a group.
Amount and
Nature of
Name and Address Beneficial Percent
of Beneficial Owner Office, If Any Title of Class Ownership (1) of Class (2)
------------------- -------------- -------------- ------------- ------------
OFFICERS AND DIRECTORS
Mark Holcombe Director and Chair of Common Stock 10,000,000 32.26%
the Board and
Compensation Committee
Donald MacPhee President & CEO, Common Stock 188,000 0.61%
Director - Chair of
the Audit Committee
and member of the
Corporate Governance
Committee
ALL OFFICERS AND DIRECTORS AS A GROUP Common stock, 10,188,000 32.87%
$0.001 par value
5%+ SECURITY HOLDERS
None. n/a n/a n/a n/a
ALL 5%+ SECURITY HOLDERS Common stock, 0 0.00%
$0.001 par value
39
----------
(1) Beneficial Ownership is determined in accordance with the rules of the SEC
and generally includes voting or investment power with respect to
securities. Each of the beneficial owners listed above has direct ownership
of and sole voting power and investment power with respect to the shares of
our common stock.
(2) Percentage of shares outstanding is calculated based on total shares
outstanding as at March 11, 2016 of 31,000,000. This total does not include
outstanding warrants or options of the Company.
(3) Continental Ingredients of Canada Inc. holds 400,000 common shares of our
company and Donald MacPhee is a former Managing Partner and now Strategic
Advisor of Continental Ingredients with 47.0% ownership share in
Continental Ingredients.
CHANGES IN CONTROL
We do not currently have any arrangements which if consummated may result in a
change of control of our company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The following includes a summary of transactions since the beginning of the
November 30, 2015 fiscal year, or any currently proposed transaction, in which
our company was or is to be a participant and the amount involved exceeded or
exceeds the lesser of $120,000 or one percent of the average of our total assets
at year end for the last two completed fiscal years, and in which any related
person had or will have a direct or indirect material interest (other than
compensation described under "Executive Compensation"). We believe the terms
obtained or consideration that we paid or received, as applicable, in connection
with the transactions described below were comparable to terms available or the
amounts that would be paid or received, as applicable, in arm's-length
transactions.
MARK HOLCOMBE
During the quarter ended February 28, 2015, the company paid off the balance of
the loan payable that was non-interest bearing with no specific repayment terms
of $53,820.
In addition, our company rents office space from Mr. Holcombe for $500 per
month.
DONALD MACPHEE
On December 9, 2015, we entered into a Product Development Agreement with
Continental Ingredients Canada Inc. with respect to our plan to commercialize
nutritional supplements and functional food and beverage products under our
Everlast(R) Nutrition and Brain Armor(R) brands for sales in the North America.
This agreement supersedes the previous agreements entered in to by the Parties
and was subsequently amended effective March 1, 2016 as detailed previously..
Under the Agreement, our company has exclusively engaged Continental Ingredients
to provide services with respect to the development, manufacture and supply of
the Products for a period of five years commencing on December 9, 2015 and
ending on December 19, 2020, such term to renew automatically for a further 12
months unless either party delivers written termination notice six months prior
to the expiration of the initial term or renewal period.
40
Continental Ingredients will submit for approval from our company, proposals for
the production of any products. Once product specifications have been approved
by us, the parties will enter into separate production agreements for the
manufacturing, pricing and distribution of the products (the "PRODUCTION
AGREEMENTS"). The pricing of the products under any Production Agreements will
result in a gross margin to Continental Ingredients of 8 percent, as more
particularly described in the Product Agreement.
On February 29, 2016, we entered into a Securities Purchase Agreement with CIC
whereby we received proceeds of $200,000 in return for a $200,000 secured
promissory note due 12 months from the issuance date, bearing interest at the
rate of 10% per annum, and 100,000 warrants to purchase common shares of our
Company at an exercise price of $1.35 per share for three years from the date of
issue.
Donald MacPhee is a former Managing Partner and now Strategic Advisor of
Continental Ingredients with 47.0% ownership share in Continental Ingredients
and a director of our Company as of March 21, 2014. Continental Ingredients owns
400,000 common shares of our Company, which is approximately 1.29% of our issued
and outstanding common stock as of March 11, 2016.
PROMOTERS AND CERTAIN CONTROL PERSONS
Mark Holcombe, who is one of three directors of our company, was our only
promoter in the past five fiscal years. Mr. Holcombe has not received, nor will
he receive, anything of value from us, directly or indirectly in his capacity as
promoter. However, he holds 10,000,000 or approximately 32.26% of our issued and
outstanding common shares. Additionally, Mr. Holcombe receives fees for his
service on our Board of Directors plus fees as a contracted service provider for
the Company. As of March 11, 2016 Mr. Holcombe also has the following options:
Number of Exercise Vesting from
Options Date of Grant Price Expiration Date of Grant
------- ------------- ----- ---------- -------------
100,000 May 5, 2014 $0.75 May 5, 2019 12 months
100,000 May 5, 2014 $1.00 May 5, 2019 24 months
100,000 May 5, 2014 $1.50 May 5, 2019 36 months
CORPORATE GOVERNANCE
We currently act with three directors, consisting of Mark Holcombe, Donald
MacPhee and Scott Chapman. Only Scott Chapman is independent.
We have an Audit Committee, Compensation Committee and Corporate Governance
Committee.
However, all of the members of the committees are not independent. We believe
that our board of directors is capable of analyzing and evaluating our financial
statements and understanding internal controls and procedures for financial
41
reporting. The board of directors of our company does not believe that it is
necessary to have a completely independent audit, compensation or corporate
governance committee at this time because we believe that the functions of such
committees can be adequately performed by the board of directors. Additionally,
we believe that retaining independent directors would be overly costly and
burdensome and is not warranted in our circumstances given the early stages of
our development.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The total fees charged to the company for audit services were $16,500 and for
other services were $Nil during the year ended November 30, 2015. Malone Bailey
LLP, our new independent registered public accounting firm, completed the 2015
audit.
The total fees charged to the company for audit services were $10,700 and for
other services were $Nil during the year ended November 30, 2014. The 2014 audit
was completed by our previous independent registered accounting firm, George
Stewart, CPA.
PART IV
ITEM 15. EXHIBITS
The following exhibits are included with this filing:
Exhibit Description
------- -----------
3(i) Articles of Incorporation*
3(ii) Bylaws*
31.1 Sec. 302 Certification of CEO
31.2 Sec. 302 Certification of CFO
32.1 Sec. 906 Certification of CEO
32.2 Sec. 906 Certification of CFO
101 Interactive Data Files pursuant to Rule 405 of Regulation S-T.
----------
* Included in our original Registration Statement on Form SB-2 (subsequently
amended utilizing Form S-1) under Commission File Number 333-148710.
42
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
March 11, 2016 Trident Brands Incorporated
/s/ Donald MacPhee
----------------------------------------------
By: Donald MacPhee
(President, Chief Executive Officer, Director)
/s/ Peter Salvo
----------------------------------------------
By: Peter Salvo
(Controller)
/s/ Mark Holcombe
----------------------------------------------
By: Mark Holcombe
(Director & Chair of the Board)
/s/ Scott Chapman
----------------------------------------------
By: Scott Chapman
(Director)
43
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Trident Brands Incorporated
Brookfield, Wisconsin
We have audited the accompanying consolidated balance sheet of Trident Brands
Incorporated and its subsidiaries (collectively the "Company") as of November
30, 2015, and the related consolidated statements of operations, stockholders'
deficit and cash flows for the year 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 an 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Trident Brands
Incorporated and its subsidiaries as of November 30, 2015, and the results of
their operations and their cash flows for the year then ended, in conformity
with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company has suffered losses from operation and has a
working capital deficit as of November 30, 2015. These conditions raise
significant doubt about the Company's ability to continue as a going concern.
Management's plans in this regard are described in Note 3. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ MaloneBailey, LLP
-----------------------------------
www.malonebailey.com
Houston, Texas
March 11, 2016
F-1
GEORGE STEWART, CPA
316 17TH AVENUE SOUTH
SEATTLE, WASHINGTON 98144
(206) 328-8554 FAX(206) 328-0383
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Trident Brands Inc.
I have audited the accompanying balance sheet of Trident Brands Inc. as of
November 30, 2014, and the related statements of operations, stockholders'
equity and cash flows for the years ended November 30, 2014. These financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that I plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. 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. I believe that my audit provides a reasonable
basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Trident Brands Inc.,as of November
30, 2014, and the results of its operations and cash flows for the years ended
November 30, 2014 in conformity with generally accepted accounting principles in
the United States of America.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note # 4 to the financial
statements, the Company has had no operations and has no established source of
revenue. This raises substantial doubt about its ability to continue as a going
concern. Management's plan in regard to these matters is also described in Note
# 4. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
/s/ George Stewart
--------------------------------
Seattle, Washington
February 24, 2015
March 10, 2016
F-2
TRIDENT BRANDS INCORPORATED
Consolidated Balance Sheets
--------------------------------------------------------------------------------
As of As of
November 30, November 30,
2015 2014
------------ ------------
ASSETS
CURRENT ASSETS
Cash $ 187,886 $ 352
Inventory 145,480 --
Prepaid 55,887 1,049
------------ ------------
TOTAL CURRENT ASSETS 389,253 1,401
------------ ------------
TOTAL ASSETS $ 389,253 $ 1,401
============ ============
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts Payable $ 184,680 $ 134,758
Accrued Liability 181,024 82,760
Loan Payable - Related Party 180,000 53,820
Loan Payable - Third Party 300,000 300,000
Convertible Debt, net of discount $147,230 2,152,770 --
------------ ------------
TOTAL CURRENT LIABILITIES 2,998,474 571,338
------------ ------------
TOTAL LIABILITIES 2,998,474 571,338
------------ ------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, ($0.001 par value, 300,000,000 shares
authorized; 28,000,000 shares issued and outstanding
as of November 30, 2015 and November 30, 2014 28,000 28,000
Additional paid-in capital 1,177,540 47,000
Non-Controlling Interest in Subsidiary (14,643) --
Accumulated Deficit (3,800,118) (644,937)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (2,609,221) (569,937)
------------ ------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT) $ 389,253 $ 1,401
============ ============
See Notes to Financial Statements
F-3
TRIDENT BRANDS INCORPORATED
Consolidated Statement of Operations
--------------------------------------------------------------------------------
Twelve Months Twelve Months
Ended Ended
November 30, November 30,
2015 2014
------------ ------------
REVENUES $ 16,569 $ 479
Cost of Sales 9,951 305
------------ ------------
GROSS PROFIT 6,618 174
GENERAL & ADMINISTRATIVE EXPENSES (2,286,348) (387,158)
OTHER EXPENSES
Royalty Fees (225,545) (110,000)
Interest Expense (664,549) (12,215)
------------ ------------
TOTAL OTHER EXPENSES (890,094) (122,215)
------------ ------------
NET LOSS $ (3,169,824) $ (509,199)
============ ============
NET LOSS ATTRIBUTABLE TO TRIDENT (3,155,181) (509,199)
NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTERESTS (14,643) --
------------ ------------
BASIC EARNING (LOSS) PER SHARE $ (0.11) $ (0.02)
============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 28,000,000 28,000,000
============ ============
See Notes to Financial Statements
F-4
TRIDENT BRANDS INCORPORATED
Consolidated Statement of Changes in Stockholders' Equity
From the year ended November 30, 2015 and 2014
--------------------------------------------------------------------------------
Common Additional
Common Stock Paid-in Accumulated Non-Conrolling
Stock Amount Capital Deficit Interest Total
----- ------ ------- ------- -------- -----
BALANCE, NOVEMBER 30, 2013 28,000,000 $ 28,000 $ 47,000 $ (135,738) $ -- $ (60,738)
Net loss, November 30, 2014 (509,200) (509,200)
----------- -------- ----------- ----------- --------- -----------
BALANCE, NOVEMBER 30, 2014 28,000,000 28,000 47,000 (644,937) -- (569,937)
Beneficial Conversion Feature 647,887 647,887
Stock Options Expenses 482,653 482,653
Net loss, November 30, 2015 (3,155,181) (14,643) (3,169,824)
----------- -------- ----------- ----------- --------- -----------
BALANCE, NOVEMBER 30, 2015 28,000,000 $ 28,000 $ 1,177,540 $(3,800,118) $ (14,643) $(2,609,221)
=========== ======== =========== =========== ========= ===========
See Notes to Financial Statements
F-5
TRIDENT BRANDS INCORPORATED
Consolidated Statement of Cash Flows
--------------------------------------------------------------------------------
Twelve Months Twelve Months
Ended Ended
November 30, November 30,
2015 2014
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (3,169,824) $ (509,199)
Adjustments to reconcile net loss to net cash
used in operating activities:
Debt issuance cost 34,250 --
Amortization of debt discount 500,657 --
Compensation-Options 482,653 --
Changes in operating assets and liabilities:
Prepaid expenses (54,838) (1,049)
Inventory (145,480)
Accounts payable and accrued liabilities 148,186 206,133
------------ ------------
CASH USED IN OPERATING ACTIVITIES (2,204,396) (304,114)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on loan payable - related party (140,070) --
Proceeds on loan payable - related party 255,000 4,337
Principal payments on loan payable - third party (123,000) --
Proceeds on loan payable - third party 100,000 300,000
Proceeds on convertible debt 2,300,000 --
------------ ------------
CASH PROVIDED BY FINANCING ACTIVITIES 2,391,930 304,337
------------ ------------
NET INCREASE IN CASH 187,534 223
CASH AT BEGINNING OF PERIOD 352 131
------------ ------------
CASH AT END OF PERIOD $ 187,886 $ 353
============ ============
NON-CASH TRANSACTIONS
Beneficial conversion features $ 647,887 $ --
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
CASH PAID DURING THE YEAR ENDED NOVEMBER 30:
INCOME TAXES $ -- $ --
============ ============
INTEREST $ -- $ --
============ ============
See Notes to Financial Statements
F-6
TRIDENT BRANDS INCORPORATED
Notes to Consolidated Financial Statements
November 30, 2015
--------------------------------------------------------------------------------
NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS
Trident Brands Incorporated (f/k/a Sandfield Ventures Corp.) (the Company) was
incorporated under the laws of the State of Nevada on November 5, 2007. The
Company was formed to engage in the acquisition, exploration and development of
natural resource properties.
The Company is now focused on consumer products. The objective is investment in
and development of high growth consumer brands and ingredients businesses. The
Company is in the early growth stage and has transitioned out of their shell
status with the Super-8 filing at the end of August, 2014. Its activities to
date have been limited to capital formation, organization, development of its
business plan and development of an array of products for sale.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The Company's financial statements are prepared using the accrual method of
accounting. The Company has elected a November 30, year-end.
PRINCIPAL OF CONSOLIDATION
The Company consolidated financial statements as of November 30, 2015 include
the accounts of Trident Brands Incorporated and its subsidiaries: Trident Brands
Canada Ltd, Sports Nutrition Products, Inc, and Brain Armor Inc.
BASIC EARNINGS (LOSS) PER SHARE
ASC No. 260, "Earnings Per Share", specifies the computation, presentation and
disclosure requirements for earnings (loss) per share for entities with publicly
held common stock. The Company has adopted the provisions of ASC No. 260.
Basic net earnings (loss) per share amounts is computed by dividing the net
earnings (loss) by the weighted average number of common shares outstanding.
Diluted earnings (loss) per share are the same as basic earnings (loss) per
share due to the lack of dilutive items in the Company.
CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
INVENTORY
Inventories are stated at the lower of cost or market. Cost is principally
determined using the first-in, first-out (FIFO) method.
F-7
TRIDENT BRANDS INCORPORATED
Notes to Consolidated Financial Statements
November 30, 2015
--------------------------------------------------------------------------------
BENEFICIAL CONVERSION FEATURES
The intrinsic value of a beneficial conversion feature inherent to a convertible
note payable, which is not bifurcated and accounted for separately from the
convertible note payable and may not be settled in cash upon conversion, is
treated as a discount to the convertible note payable. This discount is
amortized over the period from the date of issuance to the date the note is due
using the effective interest method. If the note payable is retired prior to the
end of its contractual term,
the unamortized discount is expensed in the period of retirement to interest
expense. In general, the beneficial conversion feature is measured by comparing
the effective conversion price, after considering the relative fair value of
detachable instruments included in the financing transaction, if any, to the
fair value of the common shares at the commitment date to be received upon
conversion.
EMPLOYEE STOCK-BASED COMPENSATION
The company accounts for stock-based compensation in accordance with ASC-718,
"Compensation-Stock Compensation". ASC-718 requires companies to measure the
cost of employee services received in exchange for an award of equity
instruments, including stock options, based on the grant-date fair value of the
award and to recognize it as compensation expense over the period the employee
is required to provide service in exchange for the award, usually the vesting
period.
NON-EMPLOYEE STOCK-BASED COMPENSATION:
The Company accounts for stock-based compensation in accordance with the
provision of ASC 505-50, "Equity Based Payments to Non-Employees" ("ASC
505-50"), which requires that such equity instruments are recorded at their fair
value on the measurement date. The measurement of stock-based compensation is
subject to periodic adjustment as the underlying equity instruments vest.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The company measures its financial assets and liabilities in accordance with the
requirements of FASB ASC 820, "Fair Value Measurements and Disclosures". ASC 820
clarifies the definition of fair value, prescribes methods for measuring fair
value, and establishes a fair value hierarchy to classify the inputs used I
measuring fair value as follows:
Level 1 - Quoted prices are available in active markets for identical
assets or liabilities as of the reporting date. Active markets are those in
which transactions for the asset or liability occur in sufficient frequency
and volume to provide pricing information on an ongoing basis. Level 1
primarily consists of financial instruments such as exchange-traded
derivatives, marketable securities and listed equities.
Level 2 - Pricing inputs are other than quoted prices in active markets
included in level 1, which are either directly or indirectly observable as
of the reported date and includes those financial instruments that are
valued using models or other valuation methodologies. These models are
primarily industry-standard models that consider various assumptions,
including quoted forward prices for commodities, time value, volatility
F-8
TRIDENT BRANDS INCORPORATED
Notes to Consolidated Financial Statements
November 30, 2015
--------------------------------------------------------------------------------
factors, and current market and contractual prices for the underlying
instruments, as well as other relevant economic measures. Substantially all
of these assumptions are observable in the marketplace throughout the full
term of the instrument, can be derived from observable data or are
supported by observable levels at which transactions are executed in the
marketplace. Instruments in this category generally include
non-exchange-traded derivatives such as commodity swaps, interest rate
swaps, options and collars.
Level 3 - Pricing inputs include significant inputs that are generally less
observable from objective sources. These inputs may be used with internally
developed methodologies that result in management's best estimate of fair
value.
USE OF ESTIMATES AND ASSUMPTIONS
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. In accordance with ASC No. 250
all adjustments are normal and recurring.
INCOME TAXES
Income taxes are provided in accordance with ASC No. 740, Accounting for Income
Taxes. A deferred tax asset or liability is recorded for all temporary
differences between financial and tax reporting and net operating loss
carryforwards. Deferred tax expense (benefit) results from the net change during
the year of deferred tax assets and liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion of all of the deferred
tax assets will be realized. Deferred tax assets and liabilities are adjusted
for the effects of changes in tax laws and rates on the date of enactment.
REVENUE
The Company maintains a portfolio of branded consumer products including
nutritional products and supplements under the Everlast(R) and Brain Armor(R)
brands, and functional food ingredients under the Oceans Omega brand.
The Company records revenue based on the following four criteria: collection
probability is reasonably assure, delivery is complete, persuasive evidence of
an arrangement and the price can be determined.
RELATED PARTIES
A party is considered to be related to the Company if the party directly or
indirectly or through one or more intermediaries, controls, is controlled by, or
is under common control with the Company.
F-9
TRIDENT BRANDS INCORPORATED
Notes to Consolidated Financial Statements
November 30, 2015
--------------------------------------------------------------------------------
Related parties also include principal owners of the Company, its management,
members of the immediate families of principal owners of the Company and its
management and other parties with which the Company may deal if one party
controls or can significantly influence the management or operating policies of
the other to an extent that one of the transacting parties might be prevented
from fully pursuing its own separate interests. A party which can significantly
influence the management or operating policies of the transacting parties or if
it has an ownership interest in one of the transacting parties and can
significantly influence the other to an extent that one or more of the
transacting parties might be prevented from fully pursuing its own separate
interests is also a related party.
RECENT ACCOUNTING PRONOUCEMENTS
The Company has evaluated all the recent accounting pronouncements through the
date the financial statements were issued and filed with the Securities and
Exchange Commission and believe that none of them will have a material effect on
the Company's financial statements
NOTE 3. GOING CONCERN
The accompanying financial statements are presented on a going concern basis.
The Company had no significant operations during the period from November 5,
2007 (date of inception) to November 30, 2015 and has a working capital deficit
as of November 30, 2015. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. The Company is currently in
the early growth stage at product introduction phase and expenses are
increasing. They have secured short term bridge loans to cover these expenses.
The current cash of $187,886 is insufficient to cover the expenses they will
incur during the next twelve months. The Company is currently investigating
various financing alternatives in order to address this issue
NOTE 4. WARRANTS AND OPTIONS
On May 5, 2014, Trident granted an aggregate of 2,875,000 stock options to
directors, officers, employees and consultants of the Company pursuant to
Trident's 2013 Stock Plan. The stock options are exercisable for five years from
the date of grant at exercise prices of $0.75 per share for shares vesting 12
months from the date of issuance, $1.00 per share for shares vesting 24 months
from the date of issuance and $1.50 for shares vesting 36 months from the date
of issuance. Of the 2,875,000 stock options granted, Trident granted 1,125,000
stock options to its president, Michael Browne; 300,000 stock options to each of
its directors, Donald MacPhee, Scott Chapman, Mark Holcombe; 150,000 stock
options to its controller, Peter Salvo; and 350,000 stock options to each of its
special advisors, Robert Campbell and Karen Arsenault. The stock options expire
on May 5, 2019.
On November 30, 2015, Michael Browne's stock options were amended to 625,000.
The total outstanding stock options as of November 30, 2015 are 2,375,000.
The company used the Black-Scholes model to value the stock options at $577,054.
As of November 30, 2015, the company expensed $482,653 as compensation expense.
Following are the assumptions used for the shares vested 12, 24 and 36 months
from the date of issuance: Discount rate .9%, 1.29%, 1.29%; Volatility 68.35%,
67.35%, 68.50%; and Term 3.0, 3.5, 4.0.
F-10
TRIDENT BRANDS INCORPORATED
Notes to Consolidated Financial Statements
November 30, 2015
--------------------------------------------------------------------------------
The following table represents stock option activity as of and for the period
ended November 30, 2015:
Number of Weighted Average Contractual Life Intrinsic
Options Exercise Price in Years Value
------- -------------- -------- -----
Outstanding - Nov. 30, 2014 2,875,000 $1.00 4.5
Exercisabele - Nov. 30, 2014 0
Granted 250,000
Exercised or Vested 0
Cancelled or Expired 750,000
Outstanding - Nov. 30, 2015 2,375,000 $1.15 3.5
Exercisable - Nov. 30, 2015 958,334 $2.00 3.4 $354,583
NOTE 5. RELATED PARTY TRANSACTIONS
The Company neither owns nor leases any real or personal property. The company
is paying a director $500 per month rent for use of office space and services.
During the quarter ended February 28, 2015, the company paid off the balance of
the loan payable of $53,820 due to Mark Holcombe, sole officer and director of
the Company.
During the quarter ended February 28, 2015 Michael Browne loaned the Company
$75,000 and the Company paid back $86,250 with $11,250 as a debt issuance cost
which is recognized as interest expense when the loan if paid off.
During the quarter ended November 30, 2015, Continental Ingredients Canada, Inc.
loaned the Company $180,000 bearing interest at the rate of 8% per annum,
payable on maturity, calculated on the principal amount of the loan outstanding.
The $180,000 note was advanced during the year ended November 30, 2015. Unless
paid earlier, the loan and accrued and unpaid interest shall be payable in full
on November 2, 2016. As of November 30, 2015, the full amount of the loan is
outstanding and the accrued interest expense is $1,200.
During the year, the company purchased inventory from Continental Ingredients
Canada, Inc. The total amount of inventory purchased was $291,385.
NOTE 6. LOAN PAYABLE - THIRD PARTY
We have two short term loans. One for $200,000, and the other for $100,000 both
bearing interest at the rate of 8.0% per annum, payable on maturity, calculated
on the principle amount of the loan outstanding. Unless paid earlier, the loan
and accrued and unpaid interest shall be payable in full on April 30, 2015
(payment maturity date extended to October 31, 2015 and while now technically in
default, the parties to the obligation are working co-operatively to finalize
F-11
TRIDENT BRANDS INCORPORATED
Notes to Consolidated Financial Statements
November 30, 2015
--------------------------------------------------------------------------------
the terms of repayment) and July 21, 2015 (payment maturity date extended to
April 30, 2016) respectively. As of
November 30, 2015, the full amount of the loans are outstanding and the accrued
interest expense is $36,215 ($25,333 and $10,882 respectively).
The Company analyzed the modification of the term under ASC 470-60 "Trouble Debt
Restructurings" and ASC 470-50 "Extinguishment of Debt". The Company determined
the modification is not substantial and the Company also determined that the
fair value of the new debt is the same as the fair value of the old debt.
On December 16, 2014, the Company issued 3 promissory notes totalling $100,000
as bridge loans for working capital purposes. The company paid back $123,000
with $23,000 as debt issuance cost which is recognized as interest expense when
the loan is paid off.
NOTE 7. CONVERTIBLE NOTE
On January 29, 2015, Trident Brands Incorporated entered into a securities
purchase agreement with a non-US institutional investor whereby it agreed to
sell an aggregate principal amount of $2,300,000 of senior secured convertible
debentures, convertible into shares of the company's common stock. The Company
received $1,800,000 of the funds from the transaction on February 5, 2015. The
balance of $500,000 was received on May 14, 2015.
The convertible debentures are convertible into shares of the Company's common
stock at an initial conversion price of $.71 per share, for an aggregate of up
to 3,239,437 shares. The debentures bear interest at 6% per annum. The
applicable portion of the Principal Amount and the Interest outstanding shall be
due and payable on the date that is 12 months from the applicable Issuance Date.
The accrued interest expense is $104,442.
The Company intends to use the net proceeds from this transaction for working
capital and general corporate purposes.
Due to the note being convertible to the company common shares, beneficial
conversion features analysis was performed. The intrinsic value is $647,887
which is recognized as debt discount. As of November 30, 2015, $500,657 of the
debt discount is amortized and the unamortized discount is $147,230.
The Company analyzed the embedded conversion option for derivative accounting
consideration under ASC 815-15 "Derivatives and Hedging" and determined that the
conversion option should be classified as equity.
NOTE 8. EVERLAST LICENCE AGREEMENT
On December 23, 2013, the Company entered into a Deed of Assignment Agreement
with Everlast World's Boxing Headquarters Corporation, International Brand
Management Limited, Sports Nutrition Products Incorporated and Manchester
F-12
TRIDENT BRANDS INCORPORATED
Notes to Consolidated Financial Statements
November 30, 2015
--------------------------------------------------------------------------------
Capital Incorporated wherein Everlast, International Brand, Sports Nutrition and
Manchester Capital are parties to a trade mark license and Sports Nutrition, a
New York corporation, has assigned its interest in the trade mark license to the
Company. Pursuant to the terms of the assignment agreement, Sports Nutrition
Products Incorporated, a wholly owned subsidiary of Trident Brands Incorporated,
assigns all of its rights, title, interest and benefit to the trade mark license
to the Company effective December 23, 2013 and the Company will assume all of
the obligations of Sports Nutrition Products Incorporated under the license
agreement. The Company shall remain responsible to Everlast and International
Brand for all acts and omissions of the subsidiary, Sports Nutrition Products
Inc.
The Everlast Licence Agreement includes a clause stating that Manchester Capital
Incorporated will guarantee that the Licensee shall perform all of its
obligations and duties under the Licence Agreement. If the Licensee defaults in
the payment when due of any amount it is obliged to pay to Licensor under the
Licence Agreement, or arising from its termination, Manchester Capital is
unconditionally responsible to pay that amount to Licensor in the manner
prescribed in the Licence Agreement as if it were the Licensee.
The Royalty Calculation, as per the terms of the agreement, are as follows: In
2013, 7% of Net Retail Sales and 7% of 60% of Direct Response Sales Revenue; in
2014, 8% of Net Retail Sales and 8% of 60% of Direct Response Sales Revenue; in
2015, 9% of Net Retail Sales and 9% of 60% of Direct Response Sales Revenue; in
2016 onwards, 10% of Net Retail Sales and 10% of 60% of Direct Response Sales
Revenue. The Annual Minimum Guaranteed Royalty is $120,000 in 2014, $235,000 in
2015, $320,000 in 2016, $345,000 in 2017 and in 2018 onwards, if the Agreement
remains in force, will be 75% of the previous Year's Royalty Calculation or the
previous Year's Annual Minimum Guaranteed Royalty plus 10%, whichever is greater
NOTE 9. INCOME TAXES
As of As of
November 30, November 30,
2015 2014
------------ ------------
Deferred tax assets:
Net operating tax carryforwards $ 2,825,245 $ 644,938
Tax Rate 35% 35%
------------ ------------
Gross deferred tax assets 988,836 225,728
Valuation allowance (988,836) (225,728)
------------ ------------
Net deferred tax assets $ 0 $ 0
============ ============
As of November 30, 2015, the Company has a net operating loss carryforward of
approximately $2.8 million. Net operating loss carryforwards expires twenty
years from the date the loss was incurred.
Realization of deferred tax assets is dependent upon sufficient future taxable
income during the period that deductible temporary differences and carryforwards
are expected to be available to reduce taxable income. As the achievement of
required future taxable income is uncertain, the Company recorded a valuation
allowance.
F-13
TRIDENT BRANDS INCORPORATED
Notes to Consolidated Financial Statements
November 30, 2015
--------------------------------------------------------------------------------
NOTE 10. SUBSEQUENT EVENTS
On January 28, 2016, the company issued 3,000,000 common shares pursuant to a
Deed of Assignment dated effective January 20, 2015 among our Company, Oceans
Omega LLC, and the assignor 2298107 Ontario Inc. pursuant to which the assignor
has assigned to our Company the assignor's non-exclusive rights to purchase,
market, sell and distribute certain Omega 3 nutritional emulsions produced by
Oceans Omega LLC.
On January 29, 2016, the company entered into a securities purchase agreement
with one investor pursuant to which, in consideration for proceeds of $250,000,
and, 125,000 warrants to purchase common shares of our Company. The $250,000
secured promissory note is due 12 months from the issuance date, and bears
interest at the rate of 10% per annum.
On February 29, 2016, we entered into a Securities Purchase Agreement with CIC
whereby we received proceeds of $200,000 in return for a $200,000 secured
promissory note due 12 months from the issuance date, bearing interest at the
rate of 10% per annum, and 100,000 warrants to purchase common shares of our
Company at an exercise price of $1.35 per share for three years from the date of
issue.
F-1
