NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 1 – DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS ACTIVITY – Regional
Brands Inc. (Formerly 4net Software, Inc.), was incorporated under the laws of the State of Delaware in 1986. During the year ended
September 30, 2015 and the six months ended March 31, 2016, the Company focused its efforts on pursuing a strategy of growth by
acquiring businesses with established revenues and earnings, which the Company believes are undervalued. The Company utilized several
criteria to evaluate prospective acquisitions including whether the business to be acquired (1) is an established business with
viable services and/or products, (2) has an experienced management team, (3) has room for growth and/or expansion into other markets,
(4) is accretive to earnings, (5) offers the opportunity to achieve and/or enhance profitability and (6) increases stockholder
value.
On April 8, 2016, the Company entered into and closed
a Securities Purchase Agreement (the “SPA”) among the Company and Merlin Partners LP, Ancora Catalyst Fund LP,
and Steven N. Bronson (collectively the “Purchasers”), whereby the Company sold to the Purchasers the aggregate amount
of 370,440,680 shares of common stock, par value $0.00001, for the aggregate purchase price of $5,000,000. The transactions contemplated
by the SPA resulted in a change of control of the Company from Steven N. Bronson to Merlin Partners LP, which purchased 240,786,442
shares of Common Stock of the Company for the aggregate purchase price of $3,250,000.00, and Ancora Catalyst Fund LP, which purchased
92,610,170 shares of Common Stock of the Company for the aggregate purchase price of $1,250,000.00. As a result of Merlin Partners
LP’s and Ancora Catalyst Fund LP’s purchase of Common Stock from the Company pursuant to the SPA, Merlin Partners LP
and Ancora Catalyst Fund LP collectively beneficially own 87.8% of the total issued and outstanding shares of Common Stock of the
Company.
The accompanying condensed interim financial statements
of Regional Brands Inc. (the "Company") are unaudited. In the opinion of management, the interim data includes all normally
recurring adjustments, necessary for a fair presentation of the results for the interim period. The results of operations for the
three months and six months ended March 31, 2016 are not necessarily indicative of the operating results for the entire year.
The unaudited condensed interim financial
statements included herein are prepared pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosure normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America has been condensed or omitted pursuant to such rules and
regulations. In the opinion of management, the disclosures made are adequate to make the information not misleading. These
unaudited condensed interim financial statements should be read in conjunction with the financial statements and notes
included in the Company's Form 10-K for the year ended September 30, 2015.
USE OF ESTIMATES - The preparation of financial statements
in conformity with accounting principles generally accepted in the United States of America 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 reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
CASH – The Company has cash balance of $351
and $1,495 as of March 31, 2016 and September 30, 2015. At March 31, 2016, the Company had no cash equivalents.
REGIONAL BRANDS INC.
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
NOTE 2 - CONTROL
As of March 31, 2016 Mr. Bronson beneficially owned
5,800,210 shares of the Company's common stock. Mr. Bronson's beneficial ownership represented approximately 62.65% of the Company's
issued and outstanding shares of common stock. Accordingly, Mr. Bronson has effective control of the Company. In the election of
directors, stockholders are not entitled to cumulate their votes for nominees. Accordingly, as a practical matter, Mr. Bronson
may be able to elect all of the Company's directors and otherwise direct the affairs of the Company. Effective April 7, 2016, the
Company changed its name from 4Net Software, Inc. to Regional Brands Inc. Effective as of April 8, 2016, there was a change of
control of the Company from Steven N. Bronson to Merlin Partners LP and Ancora Catalyst Fund LP, as more fully described in Note
5 below.
NOTE 3 - DUE TO RELATED PARTY
Since February 3, 2009, the Company's president and
principal executive officer has loaned the Company money to fund working capital needs to pay operating expenses. The loans are
repayable upon demand and accrue interest at the rate of 10% per annum. As of March 31, 2016, the aggregate principal loan balance
amounted to $186,196 and such loans have accrued interest of $65,464 through March 31, 2016. On April 8, 2016, the Company issued
to Mr. Bronson 18,522,034 shares of the Company’s Common Stock in full satisfaction for Mr. Bronson’s loans to the
Company.
Note 4 - New Accounting
Standards
In August 2014, the FASB issued ASU No. 2014-15 ("ASU
2014-15"), Presentation of Financial Statements-Going Concern (Subtopic 205-40) – Disclosure of Uncertainties about
an Entity's Ability to Continue as a Going Concern. ASU 2014-15 requires a Company's management to evaluate, at each reporting
period, whether there are conditions or events that raise substantial doubt about the entity's ability to continue as a going concern
within one year after the date the financial statements are issued and provide related disclosures. ASU 2014-15 is effective for
the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. The Company is currently
evaluating the impact of the adoption of ASU 2014-15 on its consolidated financial statements.
Note 5 – Subsequent
Event
On April 8, 2016, the Company entered into and closed
a Securities Purchase Agreement (the “SPA”) among the Company and Merlin Partners LP, Ancora Catalyst Fund LP,
and Steven N. Bronson (collectively the “Purchasers”), whereby the Company sold to the Purchasers the aggregate amount
of 370,440,680 shares of common stock, par value $0.00001 (the “Shares” or the “Common Stock”), for the
aggregate purchase price of $5,000,000 (including the cancellation of all indebtedness that had been loaned to the Company by Steven
N. Bronson to fund operating expenses). In connection with the SPA, the Company changed its name from 4Net Software, Inc. to Regional
Brands Inc. The transactions contemplated by the SPA also resulted in a change of control of the Company from Steven N. Bronson
to Merlin Partners LP, which purchased 240,786,442 shares of Common Stock of the Company for the aggregate purchase price of $3,250,000.00,
and Ancora Catalyst Fund LP, which purchased 92,610,170 shares of Common Stock of the Company for the aggregate purchase price
of $1,250,000.00. As a result of Merlin Partners LP’s and Ancora Catalyst Fund LP’s purchase of Common Stock from the
Company pursuant to the SPA, Merlin Partners LP and Ancora Catalyst Fund LP collectively beneficially own 87.8% of the total issued
and outstanding shares of Common Stock of the Company.
Effective May 12, 2016, the Company relocated its
principal offices to c/o Ancora Advisors LLC, 6060 Parkland Boulevard, Cleveland, OH 44124. The Company pays no rent for the use
of the offices.
Prior to May 12, 2016, the Company occupied a portion
of the offices occupied by BKF Capital Group, Inc. 31248 Oak Crest Drive, Suite 110, Westlake Village, California 91361 on a month
to month basis for a monthly fee of $50 per month paid to BKF Capital Group, Inc. Steven N. Bronson, the Company's former Chairman
and CEO, is also the Chairman, CEO and controlling shareholder of BKF Capital Group, Inc.